Preliminary Proxy Statement

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

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Trimble Navigation Limited
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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION

DATED FEBRUARY 29, 2016

TRIMBLE NAVIGATION LIMITED

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

MAY 2, 2016

TO THE SHAREHOLDERS:

NOTICE IS HEREBY GIVEN that the annual meeting of shareholders (“Annual Meeting”) of Trimble Navigation Limited (the “Company”) will be held at 945 Stewart Drive, Sunnyvale, California 94085 in the Orion Conference Room, on Monday, May 2, 2016, at 5:30 p.m. local time, for the following purposes:

 

  1. To elect directors to serve for the ensuing year and until their successors are elected.

 

  2. To hold an advisory vote on approving the compensation for our Named Executive Officers.

 

  3. To ratify the appointment of Ernst & Young LLP as the independent auditor of the Company for the current fiscal year ending December 30, 2016.

 

  4. To approve the reincorporation of the Company from California to Delaware.

The foregoing items of business are more fully described in the Proxy Statement accompanying this notice. Only shareholders of record at the close of business on March 10, 2016 will be entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.

All shareholders are cordially invited to attend the Annual Meeting in person. However, to ensure your representation at the meeting, you are urged to vote via the Internet or by telephone or, if you requested to receive printed proxy materials, by mailing a proxy, in accordance with the detailed instructions on your proxy card. Any shareholder attending the meeting may vote in person even if such shareholder previously voted via the Internet, by telephone or by returning a proxy.

As in prior years, we are using the U.S. Securities and Exchange Commission’s “notice and access” rules that allow companies to furnish proxy materials to their shareholders primarily over the Internet. This means most of our shareholders will receive only a notice containing instructions on how to access the proxy materials over the Internet and vote online. We believe that this process should expedite shareholders’ receipt of proxy materials, lower the costs of our Annual Meeting, and help reduce the environmental impact of our Annual Meeting.

On approximately March [●], 2016, we mailed to our shareholders (other than those who previously requested electronic or paper delivery) a notice of internet availability of proxy materials (“Notice”) containing instructions on how to access our proxy materials, including our proxy statement and our annual report. The Notice also included instructions on how to receive a paper copy of our Annual Meeting materials, including the notice of Annual Meeting, proxy statement and proxy card. If you received your Annual Meeting materials by mail, the notice of Annual Meeting, proxy statement, and proxy card from our Board of Directors were enclosed. If you received your Annual Meeting materials via e-mail, the e-mail contained voting instructions and links to the annual report and the proxy statement on the Internet, which are both available at http://investor.trimble.com/annuals.cfm.

 

Sunnyvale, California

March [●], 2016

     

For the Board of Directors,

Ulf J. Johansson

Chairman of the Board


TRIMBLE NAVIGATION LIMITED

PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS

May 2, 2016

The enclosed proxy is solicited on behalf of the board of directors (“Board of Directors”) of Trimble Navigation Limited, a California corporation (the “Company”), for use at the Company’s annual meeting of shareholders (“Annual Meeting”), to be held at 945 Stewart Drive, Sunnyvale, California 94085 in the Orion Conference Room, on Monday, May 2, 2016, at 5:30 p.m. local time, and at any adjournment(s) or postponement(s) thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting.

The Company’s principal executive offices are located at 935 Stewart Drive, Sunnyvale, California 94085. The telephone number at that address is (408) 481-8000.

A copy of the Company’s annual report on Form 10-K may be obtained by sending a written request to the Company’s Investor Relations Department at 935 Stewart Drive, Sunnyvale, California 94085. Full copies of the Company’s annual report on Form 10-K for the 2015 fiscal year, and proxy statement, each as filed with the Securities and Exchange Commission (“SEC”) are available via the Internet at the Company’s web site at http://investor.trimble.com/annuals.cfm.

Shareholders may obtain directions to attend the Annual Meeting by contacting the Company by phone at (408) 481-8000.

General directions to the Annual Meeting are as follows:

From San Francisco:

Take U.S. Route 101 South toward San Jose; take exit 394 for Lawrence Expressway south; turn right on east Duane Ave; turn left at the traffic signal onto Stewart Drive and proceed to 945 Stewart Drive.

From San Jose:

Take U.S. Route 101 North to Lawrence Expressway; take exit 394 for Lawrence Expressway south; turn right on east Duane Ave; turn left at the traffic signal onto Stewart Drive and proceed to 945 Stewart Drive.

INTERNET AVAILABILITY OF PROXY MATERIALS

Under the “notice and access” rules adopted by the SEC, we are furnishing proxy materials to our shareholders primarily via the Internet, instead of mailing printed copies of those materials to each shareholder. As a result, on or about March [●], 2016, we mailed our shareholders a notice of internet availability of proxy materials (“Notice”) containing instructions on how to access our proxy materials, including our proxy statement and our annual report. The Notice also instructs you on how to access your proxy card to vote through the Internet or by telephone. The Notice is not a proxy card and cannot be used to vote your shares.

This process is designed to expedite shareholders’ receipt of proxy materials, lower the cost of the Annual Meeting, and help minimize the environmental impact of the Annual Meeting. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.

 

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INFORMATION CONCERNING SOLICITATION AND VOTING

Record Date and Shares Outstanding

Shareholders of record at the close of business on March 10, 2016 (the “Record Date”) are entitled to notice of, and to vote at, the Annual Meeting. At the Record Date, the Company had issued and outstanding [●] shares of common stock, without par value (“Common Stock”).

Revocability of Proxies

Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its use by delivering to the Company (Attn: Corporate Secretary) a written notice of revocation or a duly executed proxy bearing a later date (including a proxy by telephone or over the Internet) or by attending the meeting and voting in person. Attendance at the meeting will not, by itself, revoke a proxy.

Voting

Each share of Common Stock outstanding on the Record Date is entitled to one vote on all matters, and shareholders may cumulate such votes in the election of directors, as described below. An automated system administered by the Company’s agent tabulates the votes.

Abstentions and broker non-votes are each included in the determination of the number of shares present and voting at the Annual Meeting and the presence or absence of a quorum. The required quorum is a majority of the shares outstanding on the Record Date. Abstentions and broker non-votes have no effect on Item 1 (Election of Directors). In the case of Item 2 (Advisory Vote on Compensation) and Item 3 (Approval of Auditors), abstentions and broker non-votes have no effect on determining whether the affirmative vote constitutes a majority of the shares present and voting at the Annual Meeting in person or by proxy. Approval of these other items also requires the affirmative vote of a majority of the shares necessary to constitute a quorum, however, and therefore abstentions and broker non-votes could prevent the approval of these other items because they do not count as affirmative votes. In the case of Item 4 (Reincorporation), the affirmative vote of a majority of the outstanding shares of common stock is required to approve the reincorporation of the Company from California to Delaware, and abstentions and broker non-votes will not count as affirmative votes.

A “broker non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular item because the nominee does not have discretionary voting power with respect to that item and has not received instructions with respect to that item from the beneficial owner, despite voting on at least one other item for which it does have discretionary authority or for which it has received instructions. If your shares are held by your broker, bank or other agent as your nominee (that is, in “street name”), you will need to obtain a proxy form from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker, bank or other agent to vote your shares. If you do not give instructions, under the rules that govern brokers who are record owners of shares that are held in street name for the beneficial owners of the shares, brokers who do not receive voting instructions from their clients have the discretion to vote uninstructed shares on routine matters but have no discretion to vote them on non-routine matters. Items 1, 2 and 4 are non-routine matters. Item 3 is a routine matter.

Voting via the Internet or by Telephone

Shareholders may vote by submitting proxies electronically either via the Internet or by telephone or, if they request paper copies of the proxy materials, they may complete and submit a

 

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paper version of the proxy card. Please note that there are separate arrangements for voting via the Internet and by telephone depending on whether shares are registered in the Company’s stock records directly in a shareholder’s name or whether shares are held in the name of a brokerage firm or bank. Detailed electronic voting instructions can be found on the Notice mailed to each shareholder.

In order to allow individual shareholders to vote their shares and to confirm that their instructions have been properly recorded, the Internet and telephone voting procedures have been designed to authenticate each shareholder’s identity. Shareholders voting via the Internet should be aware that there may be costs associated with electronic access, such as usage charges from Internet access providers and telephone companies that will be borne solely by the individual shareholder.

Voting in Person

Registered Shareholders

If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Co., Inc., you are considered to be the registered shareholder with respect to those shares. A Notice for registered shareholders was mailed directly to you by our mailing agent, Broadridge Investor Communications, Inc. Registered shareholders have the right to vote in person at the meeting.

Beneficial Shareholders

If your shares are held in a brokerage account or by another nominee, you are considered to be a beneficial shareholder of those shares. A Notice for beneficial shareholders was forwarded to you together with voting instructions. In order to vote in person at the Annual Meeting, beneficial shareholders must obtain a “legal proxy” from the broker, trustee or nominee that holds their shares. Without a legal proxy, beneficial owners will not be allowed to vote in person at the Annual Meeting.

Solicitation of Proxies

The entire cost of this proxy solicitation will be borne by the Company. The Company has retained the services of Morrow & Co., LLC, 470 West Ave., Stamford, CT 06902, to solicit proxies, for which services the Company has agreed to pay approximately $7,000 as well as a solicitation charge per shareholder in the event individual holders are solicited. In addition, the Company will also reimburse certain out-of-pocket expenses in connection with such proxy solicitation. The Company may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by certain of the Company’s directors, officers, and regular employees, without additional compensation, personally or by telephone, or facsimile.

Deadline for Receipt of Shareholder Proposals for 2017 Annual Meeting

Shareholders are entitled to present proposals for action at future shareholder meetings of the Company if they comply with the requirements of the appropriate proxy rules and regulations promulgated by the SEC.

Proposals of shareholders which are intended to be considered for inclusion in the Company’s proxy statement and form of proxy related to the Company’s 2017 annual meeting of shareholders must be received by the Company at its principal executive offices (Attn: Corporate Secretary—Shareholder Proposals, Trimble Navigation Limited at 935 Stewart Drive, Sunnyvale, California 94085) no later than November [●], 2016. Shareholders interested in submitting such a proposal are

 

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advised to retain knowledgeable legal counsel with regard to the detailed requirements of the applicable securities laws. The timely submission of a shareholder proposal to the Company does not guarantee that it will be included in the Company’s applicable proxy statement.

In addition, if the Company is not notified at its principal executive offices of a shareholder proposal at least 45 days prior to the one year anniversary of the mailing of the Notice, which is February [●], 2017, then such proposal shall be deemed “untimely” and, therefore, the proxy holders for the Company’s 2017 annual meeting of shareholders will have the discretionary authority to vote against any such shareholder proposal if it is properly raised at such annual meeting, even though such shareholder proposal is not discussed in the Company’s proxy statement related to that shareholder meeting.

In the event that Item 4 (Reincorporation) is approved, under the Company’s bylaws that would then be in effect, stockholders who wish to offer proposals to be considered for inclusion in the Company’s proxy statement will be required to send notice to the Company with information concerning the proposal, the stockholder giving such notice, and any beneficial owner on whose behalf the proposal is made, as specified in the bylaws, which notice in order to be timely must be received by the Company not earlier than January 2, 2017 and not later than February 1, 2017, except if the annual meeting for 2017 is called for a date earlier than April 2, 2017 or later than June 2, 2017, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting for 2017 is mailed or the date the Company announces the date of the annual meeting for 2017, whichever occurs first. Stockholders who wish to nominate one or more candidates for election as a director will be required to send notice to the Company with the information and undertakings concerning the nominee, the stockholder giving such notice, and any beneficial owner on whose behalf the nomination is made, as specified in the bylaws, which notice in order to be timely must be received by the Company not earlier than January 2, 2017 and not later than February 1, 2017, except if the annual meeting for 2017 is called for a date earlier than April 7, 2017 or later than May 27, 2017, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting for 2017 is mailed or the date the Company announces the date of the annual meeting for 2017, whichever occurs first.

The proxy card provided in conjunction with this proxy statement, to be used in connection with the 2016 Annual Meeting, grants the proxy holder discretionary authority to vote on any matter otherwise properly raised at such Annual Meeting.

 

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ITEM 1

ELECTION OF DIRECTORS

Nominees

A board of eight directors is to be elected at the Annual Meeting. The Board of Directors of the Company has authorized the nomination at the Annual Meeting of the persons named below as candidates. All nominees currently serve on the Board of Directors. Each of the directors, except for Mr. Berglund, are independent directors as defined by Rule 5605(a)(2) of the NASDAQ Stock Market (“NASDAQ”) Marketplace Rules. Each of the director nominees listed below was elected to be a director at the Company’s 2015 annual meeting of shareholders.

The names of the nominees and certain information about them, as of the Record Date, are set forth below:

 

Name of Nominee   Age     Principal Occupation   Director
Since
 

Steven W. Berglund

    64      President and Chief Executive Officer of the Company     1999   

Börje Ekholm (1)

    53      President and Chief Executive Officer of Patricia Industries     2015   

Merit E. Janow (3)

    57      Dean of the Faculty, School of International and Public Affairs, Columbia University     2008   

Ulf J. Johansson (2) (3)

    70      Business Consultant     1999   

Ronald S. Nersesian (1) (3)

    56      President and Chief Executive Officer, Keysight Technologies     2011   

Mark S. Peek (2)

    58      Chief Financial Officer, Workday, Inc.     2010   

Nickolas W. Vande Steeg (1) (2)

    73      Venture Capital Investor and Business Consultant     2003   

Kaigham (Ken) Gabriel

    60      President and Chief Executive Officer of The Charles Stark Draper Laboratory     2015   
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of the Nominating and Corporate Governance Committee

Steven W. Berglund has served as president and chief executive officer of Trimble since March 1999. Prior to joining Trimble, Mr. Berglund was president at Spectra Precision, a group within Spectra Physics AB. Mr. Berglund’s business experience includes a variety of senior leadership positions with Spectra Physics and manufacturing and planning roles at Varian Associates. He began his career as a process engineer at Eastman Kodak. He attended the University of Oslo and the University of Minnesota where he received a B.S. in chemical engineering. Mr. Berglund received his M.B.A. from the University of Rochester. He is a member of the board of directors of the Silicon Valley Leadership Group and a member of the board of trustees of World Educational Services. He is also a member of the construction sector board of the Association of Equipment Manufacturers. In December 2013, Mr. Berglund was appointed to the board of directors and compensation committee of Belden Inc., a global provider of end-to-end signal transmission solutions.

 

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Mr. Berglund is qualified to serve as director of the Company because of his intimate knowledge and understanding of the Company’s business and operations, resulting from his service as director, president and chief executive officer of the Company since 1999. In addition, Mr. Berglund brings to the Board of Directors extensive industry experience.

Börje Ekholm was appointed to the Board of Directors in 2015. Since May 2015, Mr. Ekholm has served as chief executive officer of Patricia Industries, a unit of Investor AB. Mr. Ekholm was president and chief executive officer of Investor AB from September 2005 to May 2015. Mr. Ekholm joined Investor AB in 1992 as an associate in the company’s corporate finance department. From 1995 to 1997, he founded and managed Novare Kapital, an early stage venture capital company owned by Investor AB. From 1997 until August 2005, he was responsible for all Private Equity Investment activities within Investor AB and was also head of Investor Growth Capital, Investor AB’s wholly owned venture capital arm. Mr. Ekholm was a member of Investor AB’s Management Group from 1997 to 2015. Mr. Ekholm is chairman of the board of Nasdaq and the KTH Royal Institute of Technology. Other board assignments include Alibaba Group and Telefonaktiebolaget LM Ericsson. He also serves on the board of trustees at Choate Rosemary Hall. Mr. Ekholm has a Master of Business Administration from INSEAD, France and holds a Master of Science in Electrical Engineering from the Royal Institute of Technology in Stockholm.

Mr. Ekholm is qualified to serve as director of the Company because he brings a valuable combination of operational and financial management expertise, particularly in the area of venture capital, through his experience serving as president and chief executive officer of Patricia Industries and Investor AB, and manager of Novare Kapital. In addition, Mr. Ekholm brings management expertise from a diverse range of industries and organizations through serving as chairman of the board of Nasdaq OMX and a director of Alibaba Group, Telefonaktiebolaget LM Ericsson and the KTH Royal Institute of Technology.

Merit E. Janow was appointed to the Board of Directors in 2008. Professor Janow has been a professor at Columbia University’s School of International and Public Affairs (SIPA) since 1994. She has had a number of leadership positions at the University and became Dean of the Faculty at SIPA in July 2013. Previously, she directed the program in international finance and economic policy. Professor Janow regularly teaches advanced courses in international trade, World Trade Organization (WTO) law, and comparative antitrust at Columbia Law School, and international economic policy and China in the Global Economy at SIPA. She has published numerous articles and several books on international trade and economic matters. Professor Janow has had several periods of public service: she served as one of seven members of the WTO’s Appellate Body from 2003-2007, she served as the Executive Director of an international antitrust advisory committee to the attorney general from 1997-2000, and Deputy Assistant U.S. Trade Representative for Japan and China from 1990-1993. In May 2005, Professor Janow was elected to the board of directors of the Nasdaq Stock Market, Inc. She now serves on the board of directors of the Nasdaq Stock Markets LLC of the Nasdaq OMX Group. Since 2001, Professor Janow has served on the board of directors of a cluster of the American Funds family comprising the Capital Income Builder (CIB) Fund, the World Growth and Income (WGI) Fund and the New Economy Fund (NEF). In 2007, she joined the board of another fund cluster of the American Funds family, the American Funds Insurance Series (AFIS), the American Fund Target Date Retirement Fund (AFTD) and the Fixed Income (FI) Fund. In June 2014, she joined the Board of Mastercard. Professor Janow holds a B.A. in Asian Studies from the University of Michigan and a J.D. from Columbia Law School where she was a Stone Scholar.

 

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Professor Janow is qualified to serve as director of the Company based on her extensive knowledge and experience in international trade and economics, which provide valuable insight to the Company given the global nature of its business. Professor Janow also brings to the Board of Directors significant investment management expertise through her experience serving on the boards of several mutual funds.

Ulf J. Johansson was appointed chairman of the board in 2007, and has served as a director of the Company since December 1999. Dr. Johansson is a Swedish national with a distinguished career in communications technology. Dr. Johansson currently serves on the board of directors of Telefon AB LM Ericsson, a telecommunications company, and as chairman of Acando AB, a management and IT consultancy company. Since 2012, he has been a member of the Governing Board of the European Institute of Innovation and Technology, an EU entity funding advanced technology development in Europe. From 1990 to 2005, Dr. Johansson served as chairman of Europolitan Vodafone AB, a GSM mobile telephone operator in Sweden. From 1998 to 2005, Dr. Johansson served on the board of directors of Novo Nordisk A/S, a Danish pharmaceutical/life science company, and from 2005 until 2013, he served as chairman of its majority owners, the Novo Nordisk Foundation and Novo A/S. Dr. Johansson also currently serves on the boards of directors of several privately held companies. During 1998 to 2003 Dr. Johansson served as chairman of the University Board of Royal Institute of Technology in Stockholm and formerly also served as president and chief executive officer of Spectra-Physics AB, and executive vice president at Ericsson Radio Systems AB. Dr. Johansson received a Master of Science in Electrical Engineering, and a Doctor of Technology (Communication Theory) from the Royal Institute of Technology in Sweden.

Dr. Johansson is qualified to serve as director of the Company because of his significant industry knowledge and experience resulting from his service on the boards of several telecommunications companies. In addition, Dr. Johansson has considerable knowledge of the Company’s business and operations, having served as a member of the Board of Directors since 1999.

Ronald S. Nersesian was appointed to the Board of Directors in November 2011. Mr. Nersesian is president and chief executive officer of Keysight Technologies, an electronic measurement company. From November 2011 to November 2012, he served as Agilent Technologies’ executive vice president and chief operating officer. From March 2009 to November 2011, Mr. Nersesian served as president of Agilent’s Electronic Measurement group (EMG), and from February 2005 to March 2009, he served as the vice president and general manager of the Wireless Business Unit of EMG. Mr. Nersesian began his career in 1982 with Computer Sciences Corporation as a systems engineer for satellite communications systems. In 1984, he joined Hewlett-Packard’s New Jersey Division, and from 1987 through 1996 served in various management roles in the division, including marketing manager. In 1996, Mr. Nersesian joined LeCroy Corporation as vice president of worldwide marketing and corporate officer. He subsequently took on other senior management roles, including senior vice president and general manager of the company’s digital storage oscilloscope business. Mr. Nersesian rejoined Agilent in 2002 as vice president and general manager of the company’s Design Validation Division. Mr. Nersesian holds a bachelor’s degree in electrical engineering from Lehigh University and an MBA from New York University, Stern School of Business.

Mr. Nersesian is qualified to serve as director of the Company because of his strong business operational experience with technology companies and management expertise developed over three decades. This breadth of experience includes his current position as president and chief executive

 

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officer of Keysight Technologies. Mr. Nersesian has extensive experience in managing and growing international technology enterprises, which is directly relevant and valuable to the Company.

Mark S. Peek was appointed to the Board of Directors on March 9, 2010. Mr. Peek is the co-president of Workday, Inc., a leading provider of enterprise cloud applications for human resources, financial management and analytics. He has held this position since June 2015. Mr. Peek joined Workday in June 2012 as chief financial officer and served in that capacity until June 2015. Prior to joining Workday, Mr. Peek was president, business operations and chief financial officer of VMware, Inc., a provider of business infrastructure virtualization solutions. From 2007 to January 2011, Mr. Peek served as chief financial officer of VMware, Inc. From 2000 to 2007, Mr. Peek was senior vice president and chief accounting officer at Amazon.com. Prior to joining Amazon.com, Mr. Peek spent 19 years at Deloitte, the last ten years as a partner. Mr. Peek received a B.S. in accounting and international finance from Minnesota State University.

Mr. Peek is qualified to serve as director of the Company because of his strong background and years of experience in accounting and financial management, including his current position as chief financial officer at Workday, Inc., as well as his past service as chief financial officer at VMware and chief accounting officer at Amazon.com. In addition, Mr. Peek brings key financial expertise gained through his 19 years of experience at Deloitte.

Nickolas W. Vande Steeg was appointed vice chairman in 2007, and has served as a director of the Company since 2003. Mr. Vande Steeg served as president and chief operating officer of Parker Hannifin Corporation until March 2007, where he began his career in 1971. Mr. Vande Steeg currently is chairman of the board of University College of Azusa Pacific University and serves on the board of directors of Wabtec Corporation, a supplier of products and services to the rail transportation industry. In 2013 Mr. Vande Steeg joined the board of directors of Gardner Denver, Inc. Mr. Vande Steeg began his career at Deere & Company serving as an industrial engineer and industrial relations manager from 1965 to 1970. Mr. Vande Steeg received his B.S. in Industrial Technology from the University of California, Long Beach in 1968 and an M.B.A. from Pepperdine University in Malibu, California in 1985.

Mr. Vande Steeg is qualified to serve as director of the Company because he brings valuable operational and strategic expertise through his experience serving as president and chief operating officer of Parker Hannifin Corporation. In addition, Mr. Vande Steeg has considerable knowledge of the Company’s business and operations resulting from his service as a director of the Company since 2003.

Kaigham (Ken) Gabriel was appointed to the Board of Directors in 2015. Dr. Gabriel was the president and chief executive officer of The Charles Stark Draper Laboratory, an independent not-for-profit research institution that develops innovative technology solutions in the fields of national security, space, biomedical systems and energy. He held that position since October 2014. Prior to that, Dr. Gabriel served as deputy director of the Advanced Technology and Projects (ATAP) group at Google from 2012 to 2014 and as corporate vice president at Google/Motorola Mobility. From 2009 to 2012, he was the deputy director, and then acting director, of the Defense Advanced Research Projects Agency (DARPA) in the Department of Defense. Between 2002 and 2009, Dr. Gabriel was the Co-Founder, Chairman and Chief Technology Officer of Akustica, a fabless semiconductor company that commercialized Micro Electro Mechanical Systems audio devices and sensors. Dr. Gabriel holds SM and ScD degrees in Electrical Engineering and Computer Science from the Massachusetts Institute of Technology.

 

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Dr. Gabriel is qualified to serve as director of the Company because of his strong background and experience in management in technology companies, including in his current position as president and chief executive officer of Draper Laboratory. Dr. Gabriel also brings deep technological expertise and knowledge of the industry to the Company.

Vote Required

The eight nominees receiving the highest number of affirmative votes of the shares entitled to be voted shall be elected as directors. Please note that proxies may not vote for more than eight nominees. Every shareholder voting for the election of directors may cumulate such shareholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of shares held by the shareholder as of the Record Date or distribute such shareholder’s votes on the same principle among as many candidates as the shareholder may select, provided that votes cannot be cast for more than the number of directors to be elected. However, no shareholder shall be entitled to cumulate votes unless the candidate’s name has been placed in nomination prior to the voting and the shareholder has given notice at the meeting of the intention to cumulate the shareholder’s votes in the proxy card or ballot. Beneficial shareholders should direct their broker, trustee or other nominee on how to cumulate such shareholder’s votes. Abstentions and broker non-votes will be counted only for purposes of determining whether a quorum is present, but they will not be taken into account in determining the outcome of the election of directors.

Unless otherwise directed, the proxy holders will vote the proxies received by them for the eight nominees named above. In the event that any such nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by the present Board of Directors to fill the vacancy. In the event that additional persons are nominated for election as directors, the proxy holders intend to vote all proxies received by them in such a manner as will ensure the election of as many of the nominees listed above as possible. In such event, the specific nominees to be voted for will be determined by the proxy holders. As of the date of this proxy statement, the Board of Directors has no reason to believe that any nominee will be unable or will decline to serve as a director. The directors elected will hold office until the next Annual Meeting of Shareholders and until their successors are duly elected and qualified.

Recommendation of the Board of Directors:

The Board of Directors recommends that shareholders vote FOR the election of the above-named persons to the Board of Directors of the Company.

 

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ITEM 2

ADVISORY VOTE ON APPROVING THE COMPENSATION FOR

OUR NAMED EXECUTIVE OFFICERS

This proposal, commonly known as a “Say on Pay” proposal, provides our shareholders with the opportunity to cast an advisory vote on the compensation of the Company’s Named Executive Officers, as disclosed in this proxy statement. This proposal gives the Company’s shareholders the opportunity to approve, reject, or abstain from voting, with respect to our executive compensation programs and policies and the compensation paid to the Named Executive Officers.

The Say on Pay vote is a non-binding advisory vote on the compensation of the Company’s Named Executive Officers, as described in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation, and the accompanying narrative disclosure. The Say on Pay vote on executive compensation is not a vote on the Company’s general compensation policies, compensation of the Company’s Board of Directors, or the Company’s compensation policies as they relate to risk management.

The Say on Pay vote allows our shareholders to express their opinions regarding the decisions of the Compensation Committee with respect to the 2015 compensation of the Named Executive Officers. Because the Say on Pay vote is advisory in nature, it will not affect any compensation already paid or awarded to any Named Executive Officer, nor modify any terms of our existing compensation plans or awards. In addition, the Say on Pay vote will not be binding on or overrule any decisions by the Board of Directors; it will not create or imply any additional fiduciary duty on the part of the Board of Directors.

The Company is providing its shareholders with the opportunity to cast an advisory Say on Pay vote every year, until the next advisory vote on the frequency of such votes.

At the Company’s 2015 Annual Meeting of Shareholders, approximately 89% of the votes cast were in favor of the Say on Pay vote and our executive compensation program. In reviewing our executive compensation policies and practices since the vote, our Board of Directors and Compensation Committee have been mindful of the level of support that our shareholders expressed for our approach to executive compensation. Following their annual review of our executive compensation philosophy, the Board of Directors and Compensation Committee decided to retain our general approach to executive compensation, while introducing new performance based elements in our long term equity incentives.

Your advisory vote will serve as an additional tool to help guide the Board of Directors and the Compensation Committee in continuing to improve the alignment of the Company’s executive compensation programs with the interests of the Company and its shareholders. The Compensation Committee and the Board of Directors take into account the outcome of the vote as a part of their considerations in determining future compensation arrangements for our Named Executive Officers.

The Company and the Board of Directors believe that our compensation policies and practices for our Named Executive Officers are aligned with the long term interests of our shareholders because our policies emphasize pay for performance, and our mix of short and long term incentives provide a

 

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balance between the Company’s short-term goals and long term performance. As such, the Board of Directors recommends a vote “For” the advisory approval of our compensation policies and practices as disclosed in this proxy statement.

Vote Required

Advisory approval of the compensation of our Named Executive Officers requires the affirmative vote of the holders of the majority of the shares represented and voting at the Annual Meeting in person or by proxy, with the number of affirmative votes being at least equal to a majority of the required quorum.

Recommendation of the Board of Directors:

The Company’s Board of Directors recommends a vote FOR the approval of the compensation of our Named Executive Officers, as disclosed in this proxy statement.

 

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************************************

ITEM 3

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Board of Directors intends to appoint Ernst & Young LLP (“EY”) as the Company’s independent auditors, to audit the financial statements of the Company for the current fiscal year ending December 30, 2016. EY has been the Company’s independent auditor since 1986. The Company anticipates that a representative of EY will be present at the Annual Meeting, will have the opportunity to make a statement if he or she desires to do so, and will be available to answer any appropriate questions.

Principal Accounting Fees and Services

Audit Fees and Non-Audit Fees

The following table presents fees billed by EY for professional audit services rendered for the audit of the Company’s annual financial statements for the years ended January 1, 2016 and January 2, 2015, and fees billed by EY for other services rendered during those periods.

 

Category   

Fiscal Year
Ended

January 1,
2016

    

Fiscal Year
Ended

January 2,
2015

 

Audit Fees

   $ 5,779,044       $ 5,028,269   

Audit-Related Fees (1)

   $ 33,476       $ 11,790   

Tax Fees (2)

                 

Tax Compliance

   $ 481,185       $ 383,687   

Tax Planning & Tax Advice

   $ 304,042       $ 201,883   

Total Tax Fees

   $ 785,227       $ 585,570   

All Other Fees (3)

   $ 15,908       $ 16,529   
  (1) Represents compliance program assessment, accounting consultation and advisory services performed by the Company’s auditors.
  (2) Represents various tax compliance and filing services with respect to U.S. and international tax matters, as well as tax planning advice related to acquisitions, integration activities and general matters.
  (3) Represents conflict minerals advisory services and subscription to EY’s accounting research tool.

Audit Committee Pre-Approval of Policies and Procedures

The Audit Committee is responsible for appointing, approving the plan for audit and related services and fees, and overseeing the work of the independent auditor. The Audit Committee has established a pre-approval procedure for all audit and permissible non-audit services to be performed by EY. The pre-approval policy requires that requests for services by the independent auditor be submitted to the Company’s chief financial officer (“CFO”) for review and approval. Any requests that are approved by the CFO are then aggregated and submitted to the Audit Committee for approval of services at a meeting of the Audit Committee. Requests may be made with respect to either specific services or a type of service for predictable or recurring services. All permissible non-audit services performed by EY were approved by the Audit Committee.

 

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The Audit Committee has concluded that the provision of the non-audit services listed above is compatible with maintaining EY’s independence.

Vote Required

Ratification of the appointment of EY as the Company’s independent auditor for the current fiscal year ending December 30, 2016, will require the affirmative vote of the holders of a majority of the shares represented and voting at the Annual Meeting either in person or by proxy, with the number of affirmative votes being at least equal to a majority of the required quorum. In the event that such ratification by the shareholders is not obtained, the Audit Committee and the Board of Directors will reconsider such selection.

Recommendation of the Board of Directors:

The Company’s Board of Directors recommends a vote FOR the ratification of the appointment of EY as the independent auditors for the Company for the current fiscal year ending December 30, 2016.

 

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************************************

ITEM 4

REINCORPORATION OF THE COMPANY FROM CALIFORNIA TO DELAWARE

Our Board of Directors has unanimously approved a change in our state of incorporation from California to Delaware (the “Reincorporation”), subject to the approval of our shareholders.

If approved, the Reincorporation will be effected through the merger of the Company into a newly formed wholly-owned subsidiary of the Company incorporated in the State of Delaware (“Trimble Delaware”). For purposes of the discussion below, the Company as it currently exists as a corporation organized under the laws of the State of California is sometimes referred to as “Trimble California.”

Summary

The principal effects of the Reincorporation will be that:

 

   

The affairs of the Company will cease to be governed by the California laws with respect to corporations, and instead will be governed by Delaware laws with respect to corporations.

 

   

The Company’s existing Articles of Incorporation (the “California Articles”) and bylaws (the “California Bylaws”) will be replaced by a new Certificate of Incorporation (the “Delaware Certificate”) and bylaws (the “Delaware Bylaws”), as more fully described below.

 

   

Each outstanding share of common stock, without par, of Trimble California will automatically be converted into one share of common stock of Trimble Delaware, par value $0.001. All of our employee benefit and incentive compensation plans immediately prior to the Reincorporation will be continued by Trimble Delaware, and each outstanding equity award to purchase or acquire shares of Trimble California’s common stock will be converted into an equity award to purchase or acquire an equivalent number of shares of Trimble Delaware’s common stock on the same terms and subject to the same conditions.

 

   

Other than the change in corporate domicile and common stock par value, the Reincorporation will not result in any change in the business, physical location, management, assets, liabilities, net worth or number of authorized shares of the Company, nor will it result in any change in location of our current employees, including management. Under the Delaware Certificate, each share of our common stock will have a par value of $0.001, whereas under the California Articles our shares of common stock do not have a par value.

 

   

In connection with the Reincorporation, the Company is proposing to adopt a majority voting policy and eliminate cumulative voting.

 

   

Under California law and the California Articles, directors are elected by a plurality of the votes cast unless a shareholder provides notice of his or her intention to cumulate votes for the election of directors, in which case all shareholders are also entitled to cumulate their votes at such election. Under cumulative voting, each share entitles the holder to a number of votes equal to the number of directors to be elected

 

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in the election, and shareholders are allowed to cumulate those votes among the candidates, including casting multiple votes for the same candidate. As a result, cumulative voting allows a nominee that does not have the support of the holders of a majority of the outstanding shares to be elected, and thus is inconsistent with adopting a majority voting policy. The Delaware Certificate does not provide for cumulative voting.

 

   

Under the Delaware Certificate and the majority voting policy, directors will be elected by a plurality of the votes, but our Board of Directors has approved a majority voting policy that would take effect upon the Reincorporation, and under the majority voting policy, if a director fails to receive at least a majority of the votes cast in an uncontested election of directors, that director will be required to tender his or her resignation. The members of the Company’s Nominating and Corporate Governance Committee would then be required to make a recommendation to the Board, and the Board would determine whether such resignation should be accepted or rejected no later than 90 days following the date of the stockholders’ meeting at which the election of directors occurred. The Board would publicly disclose its decision, together with an explanation of the process by which the decision was made and, if applicable and appropriate, the Board’s reason or reasons for rejecting the tendered resignation. No director who is required to tender his or her resignation in accordance with the majority voting policy shall participate in the Committee’s deliberations or recommendation, or in the Board’s deliberations or determination, with respect to accepting or rejecting his or her resignation.

 

   

In a contested election, where there are multiple nominees for the same board seat, directors will be elected by a plurality of the votes.

 

   

In order to take full advantage of one of the primary benefits of the Reincorporation, the Delaware Certificate will generally provide that the Delaware Court of Chancery will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of the corporation; any action asserting a claim of breach of a fiduciary duty owed to the corporation or the corporation’s stockholders by any director, officer, other employee or stockholder of the corporation; any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware (the “DGCL”) or as to which the DGCL confers jurisdiction upon the Delaware Court of Chancery; any action asserting a claim arising pursuant to any provision of our Delaware Certificate or Delaware Bylaws; or any action asserting a claim governed by the internal affairs doctrine.

 

   

Other key substantive rights of shareholders, including the annual election of directors, the right to call a special meeting and the right to act by written consent will remain. See the comparison contained in the chart below under the heading “The Charters and Bylaws of Trimble California and Trimble Delaware Compared and Contrasted and Significant Differences Between the Corporation Laws of California and Delaware” beginning on page 19.

Shareholders are urged to read this proposal carefully, including all of the related exhibits referenced below and attached to this Proxy Statement, before voting on the Reincorporation. The following discussion summarizes the reasons, mechanics and effect of the Reincorporation. This

 

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summary is subject to and qualified in its entirety by the Agreement and Plan of Merger (the Reincorporation Agreement) between Trimble California and Trimble Delaware attached hereto as Exhibit A, the Delaware Certificate, in the form attached hereto as Exhibit B, the Delaware Bylaws in the form attached hereto as Exhibit C, and the proposed majority voting policy in the form attached hereto as Exhibit D. Copies of the California Articles and California Bylaws are filed at the SEC as exhibits to our periodic reports and also are available for inspection at our principal executive offices. Copies will be sent to shareholders free of charge upon written request to the Company (Attn: Corporate Secretary) or at investor.trimble.com/corporate-governance.cfm.

Reasons for the Reincorporation

Because the corporate law of the state of incorporation governs the internal affairs of a corporation, choice of a state domicile is an extremely important decision for a public company. Management and boards of directors of corporations look to state corporate law—and judicial interpretations of state law—to guide their decision-making on many key issues, including determining appropriate governance policies and procedures, ensuring that boards satisfy their fiduciary obligations to shareholders, and evaluating key strategic alternatives for the corporation, including mergers, acquisitions, and divestitures. Our Board of Directors believes that it is essential for us to be able to draw upon well-established principles of corporate governance in making legal and business decisions. The prominence and predictability of Delaware corporate law provide a reliable foundation on which our governance decisions can be based, and we believe that our shareholders will benefit from the responsiveness of Delaware corporate law to their needs. In addition, our Board of Directors believes that any direct benefit that the DGCL provides to a corporation indirectly benefits the shareholders, who are our owners. The principal factors the Board of Directors considered in electing to pursue the Reincorporation are access to specialized courts, a highly developed and predictable body of corporate law in Delaware, and an enhanced ability to attract and retain qualified directors and officers.

Access to Specialized Courts. Delaware has a specialized court of equity called the Court of Chancery that hears corporate law cases. The Delaware Court of Chancery operates under rules that are intended to ensure litigation of disputes in a timely and effective way, keeping in mind the timelines and constraints of business decision-making and market dynamics. The appellate process on decisions emanating from the Court of Chancery is similarly streamlined, and the justices of Delaware appellate courts tend to have substantial experience with corporate cases because of the relatively higher volume of these cases in the Delaware courts. As the leading state of incorporation for both private and public companies, Delaware has developed a vast body of corporate law that helps to promote greater consistency and predictability in judicial rulings. In contrast, California does not have a similar specialized court established to hear only corporate law cases. Rather, disputes involving questions of California corporate law are either heard by the California Superior Court, the general trial court in California that hears all manner of cases, or, if federal jurisdiction exists, a federal district court. These courts hear many different types of cases, and the cases may be heard before judges or juries with limited corporate law experience. As a result, corporate law cases brought in California may not proceed as expeditiously as cases brought in Delaware and the outcomes in such courts may be less consistent and predictable.

Highly Developed and Predictable Corporate Law. Our Board of Directors believes Delaware has one of the most modern statutory corporation codes, which is revised regularly in response to changing legal and business needs of corporations. The Delaware legislature is particularly responsive to developments in modern corporate law and Delaware has proven sensitive to changing needs of

 

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corporations and their shareholders. The Delaware Secretary of State is viewed as particularly flexible and responsive in its administration of the filings required for mergers, acquisitions and other corporate transactions. Delaware has become a preferred domicile for most major American corporations and the DGCL and administrative practices have become comparatively well-known and widely understood. As a result of these factors, it is anticipated that the DGCL will provide greater efficiency, predictability and flexibility in the Company’s legal affairs than is presently available under California law. In addition, Delaware case law provides a well-developed body of law defining the proper duties and decision making processes expected of boards of directors in evaluating potential or proposed extraordinary corporate transactions.

Enhanced Ability to Attract and Retain Directors and Officers. The Board of Directors believes that the Reincorporation will enhance our ability to attract and retain qualified directors and officers, as well as encourage directors and officers to continue to make independent decisions in good faith on behalf of the Company. We are in a competitive industry and compete for talented individuals to serve on our management team and on our Board of Directors. The vast majority of public companies are incorporated in Delaware, including the majority of the companies included in the peer group used by the Company to benchmark executive compensation. Not only is Delaware law more familiar to directors, it also offers greater certainty and stability from the perspective of those who serve as corporate officers and directors. The parameters of director and officer liability are more extensively addressed in Delaware court decisions and are therefore better defined and better understood than under California law. The Board of Directors believes that the Reincorporation will provide appropriate protection for shareholders from possible abuses by directors and officers, while enhancing our ability to recruit and retain directors and officers. In this regard, it should be noted that directors’ personal liability is not, and cannot be, eliminated under Delaware law for intentional misconduct, bad faith conduct, unlawful dividend payments or unlawful stock purchases or redemptions, or any transaction from which the director derives an improper personal benefit. We believe that the better understood and comparatively stable corporate environment afforded by Delaware law will enable us to compete more effectively with other public companies in the recruitment of talented and experienced directors and officers.

Changes to the Business of the Company as a Result of the Reincorporation

Other than the change in corporate domicile, the Reincorporation will not result in any change in the business, physical location, management, assets, liabilities, net worth or number of authorized shares of the Company, nor will it result in any change in location of our current employees, including management. Upon consummation of the Reincorporation, our daily business operations will continue as they are presently conducted at our principal executive offices located at 935 Stewart Drive, Sunnyvale, California 94085, and our telephone number will remain (408) 481-8000. The consolidated financial condition and results of operations of Trimble Delaware immediately after consummation of the Reincorporation will be the same as those of Trimble California immediately prior to the consummation of the Reincorporation. In addition, upon the effectiveness of the Reincorporation, the Board of Directors of Trimble Delaware will consist of those persons elected to the Board of Directors of Trimble California and will continue to serve for the term of their respective elections to our Board of Directors, and the individuals serving as executive officers of Trimble California immediately prior to the Reincorporation will continue to serve as executive officers of Trimble Delaware, without a change in title or responsibilities. Upon effectiveness of the Reincorporation, Trimble Delaware will be the successor in interest to Trimble California, and the shareholders will become stockholders of Trimble Delaware.

 

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The Reincorporation Agreement provides that the Board of Directors may abandon the Reincorporation at any time prior to the effective time of the Reincorporation (the “Effective Time”) if the Board of Directors determines that the Reincorporation is inadvisable for any reason. For example, the DGCL may be changed to reduce the benefits that the Company hopes to achieve through the Reincorporation, or the costs of operating as a Delaware corporation may be increased, although the Company does not know of any such changes under consideration. The Reincorporation Agreement may be amended at any time prior to the Effective Time, either before or after the shareholders have voted to adopt the proposal, subject to applicable law. The Company will re-solicit shareholder approval of the Reincorporation if the terms of the Reincorporation Agreement are changed in any material respect that requires shareholder approval.

Mechanics of the Reincorporation

The Reincorporation will be effected by the merger of Trimble California with and into Trimble Delaware, a wholly-owned subsidiary of the Company that has been recently incorporated under the DGCL for purposes of the Reincorporation. The Company as it currently exists as a California corporation will cease to exist as a result of the merger, and Trimble Delaware will be the surviving corporation and will continue to operate our business as it existed prior to the Reincorporation. The existing holders of our common stock will own all of the outstanding shares of Trimble Delaware common stock, and no change in ownership will result from the Reincorporation. Assuming approval by our shareholders, we currently intend to cause the Reincorporation to become effective as soon as reasonably practicable following the Annual Meeting.

At the Effective Time, we will be governed by the Delaware Certificate, the Delaware Bylaws and the DGCL. Although the Delaware Certificate and the Delaware Bylaws contain many provisions that are similar to the provisions of the California Articles and the California Bylaws, they do include certain provisions that are different from the provisions contained in the California Articles and the California Bylaws or under the California General Corporation Law as described in more detail below.

If the Reincorporation is approved, upon the Effective Time, each outstanding share of common stock of Trimble California will automatically be converted into one share of common stock of Trimble Delaware. All of our employee benefit and incentive compensation plans immediately prior to the Reincorporation will be continued by Trimble Delaware, and each outstanding equity award to purchase or acquire shares of Trimble California’s common stock will be converted into an equity award to purchase or acquire an equivalent number of shares of Trimble Delaware’s common stock on the same terms and subject to the same conditions. The Company’s other employee benefit arrangements including, but not limited to, equity incentive plans with respect to issued unvested restricted stock, will be continued by Trimble Delaware upon the terms and subject to the conditions specified in such plans. The registration statements of Trimble California on file with the SEC immediately prior to the Reincorporation will be assumed by Trimble Delaware, and the shares of Trimble Delaware will continue to be listed on Nasdaq.

CERTIFICATES CURRENTLY ISSUED FOR SHARES IN TRIMBLE CALIFORNIA WILL AUTOMATICALLY REPRESENT SHARES IN TRIMBLE DELAWARE UPON COMPLETION OF THE MERGER, AND SHAREHOLDERS WILL NOT BE REQUIRED TO EXCHANGE STOCK CERTIFICATES AS A RESULT OF THE REINCORPORATION.

We expect that the Reincorporation, if approved, will become effective promptly after the shareholder approval.

 

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Possible Negative Considerations

Notwithstanding the belief of the Board of Directors as to the benefits to our shareholders of the Reincorporation, it should be noted that Delaware law has been criticized by some commentators and institutional shareholders on the grounds that it does not afford minority shareholders the same substantive rights and protections as are available in a number of other states, including California. In addition, because the Delaware Certificate will not provide for cumulative voting, the Reincorporation may make it more difficult for minority shareholders to elect directors and influence our policies. As noted above, however, the Board of Directors has adopted a majority voting policy that would take effect upon the Reincorporation.

It should also be noted that the interests of the Board of Directors and management in voting on the Reincorporation proposal may not be the same as those of shareholders since some substantive provisions of California and Delaware law apply only to directors and officers. See “Interests of Our Directors and Executive Officers in the Reincorporation” below. For a comparison of shareholders’ rights and the material substantive provisions that apply to the Board of Directors and management under Delaware and California law, see “The Charters and Bylaws of Trimble California and Trimble Delaware Compared and Contrasted and Significant Differences Between the Corporation Laws of California and Delaware” below. In addition, franchise taxes payable by us in Delaware are estimated to be approximately $180,000 per year and such taxes are not currently required in California.

The Board of Directors has considered the potential disadvantages of the Reincorporation and has concluded that the potential benefits outweigh the possible disadvantages.

The Charters and Bylaws of Trimble California and Trimble Delaware Compared and Contrasted and Significant Differences Between the Corporation Laws of California and Delaware

The following is a comparison of the provisions in the charters and bylaws of Trimble California and Trimble Delaware, as well as certain provisions of California law and Delaware law. The comparison summarizes the important differences, but is not intended to list all differences, and is qualified in its entirety by reference to such documents and to the respective General Corporation Laws of the States of California and Delaware. Shareholders are encouraged to read the Delaware Certificate, the Delaware Bylaws, the California Articles and the California Bylaws in their entirety. The Delaware Bylaws and Delaware Certificate are attached to this proxy statement, and the California Bylaws and California Articles are filed publicly as exhibits to our periodic reports.

 

Provision   Trimble California   Trimble Delaware

ELECTIONS; VOTING;

PROCEDURAL MATTERS

       

 

Number of Directors

 

 

 

 

 

 

 

Under California law, the number of directors shall be fixed by or in the manner provided in the bylaws, unless the articles of incorporation fixes the number of directors.

 

Under Delaware law, the number of directors shall be fixed by or in the manner provided in the bylaws, unless the certificate of incorporation fixes the number of directors.

 

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Provision   Trimble California   Trimble Delaware
    The exact number of directors shall be fixed, within the limits specified, by approval of the board or by the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which quorum is present (which shares voting affirmatively also constitute at least a majority of the required quorum) or by the written consent of the shareholders, in the manner provided in the bylaws. Specifying or changing a fixed number of directors, or the maximum or minimum number, or changing from a fixed to a variable board or vice versa, requires the affirmative vote of a majority of the outstanding shares entitled to vote. A bylaw or amendment of the articles reducing the fixed number or the minimum number of directors to a number less than five cannot be adopted if the votes cast against its adoption at a meeting, or the shares not consenting in the case of action by written consent, are equal to more than sixteen and two-thirds percent (16 2/3%) of the outstanding shares entitled to vote. No amendment may change the stated maximum number of authorized directors to a number greater than two times the stated minimum number of directors minus one. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.  

The Delaware Bylaws provide that the authorized number of directors of the Company shall not be less than five nor more than nine, with the exact number of directors to be fixed, within the limit specified, by resolution of the Board of Directors.

 

Under the Delaware Bylaws, the indefinite number of directors may be changed, or a definitive number fixed, without provision for an indefinite number, by a duly adopted amendment to the articles of incorporation or by an amendment to the Delaware Bylaws duly adopted by the affirmative vote of the holders of at least a majority in voting power of the outstanding shares entitled to vote.

 

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Provision   Trimble California   Trimble Delaware
    The California Bylaws provide that the number of directors of the Company shall not be less than five nor more than nine, with the exact number of directors to be fixed, within the limit specified, by resolution of the Board of Directors, and are otherwise consistent with California law as described immediately above.    
No Classified Board   The California Articles and California Bylaws do not provide for a classified board.   The Delaware Certificate and Delaware Bylaws do not provide for a classified board.
Filling Vacancies on the Board   Under California law, any vacancy on the board of directors, other than a vacancy created by removal of a director, may be filled by the Board of Directors. If the number of directors is less than a quorum, a vacancy may be filled by the unanimous written consent of the directors then in office, by the affirmative vote of a majority of the directors at a meeting, or by a sole remaining director. A vacancy created by removal of a director may be filled by the board only if authorized by the articles of incorporation or a bylaw approved by the corporation’s shareholders. Each director so elected shall hold office until his or her successor is elected at a meeting of shareholders and until such director’s successor has been elected and qualified. The Company’s shareholders may elect one or more directors at any time to fill any vacancies not filled by the Board of Directors, but any such election,  

Under Delaware law, vacancies and newly created directorships may be filled by a majority of the directors then in office (even though less than a quorum) or by a sole remaining director, unless otherwise provided in the certificate of incorporation or bylaws.

 

Consistent with Delaware law, the Delaware Bylaws provide that any newly created directorship or any vacancy may be filled only by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum, or by a sole remaining director.

 

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Provision   Trimble California   Trimble Delaware
   

other than to fill a vacancy created by removal, if by written consent, shall require the consent of the holders of a majority of the outstanding shares entitled to vote. If the Board of Directors accepts the resignation of a director tendered to take effect at a future time, the Board of Directors may elect a successor to take office when the resignation becomes effective.

 

The California Bylaws are consistent with California law as described immediately above.

   
Cumulative Voting; Vote Required to Elect Director  

California law provides that if any shareholder has given notice of his or her intention to cumulate votes for the election of directors, all other shareholders of the corporation are also entitled to cumulate their votes at such election. In the absence of such notification, directors are elected by a plurality of the votes cast. California law permits a corporation that is listed on a national securities exchange to amend its articles or bylaws to eliminate cumulative voting by approval of the board of directors and of the outstanding shares voting together as a single class.

 

The California Articles and the California Bylaws have not eliminated cumulative voting.

 

 

Under Delaware law, cumulative voting is not permitted unless a corporation provides for cumulative voting rights in its certificate of incorporation. The default voting standard for the election of directors under Delaware law is a plurality vote; however, the certificate of incorporation or bylaws may specify a different vote required for the election of directors.

 

The Delaware Bylaws provide that directors are elected by plurality voting, but directors failing to receive a majority of the votes cast in an uncontested election will be required to tender their resignation for consideration under the Company’s majority voting policy.

 

The Board believes that cumulative voting is incompatible with the objectives of a majority voting standard.

 

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Provision   Trimble California   Trimble Delaware
        Majority voting enables all shareholders to have a greater voice in director elections and facilitates the election of directors who most closely represent the interests of all shareholders. By contrast, cumulative voting gives shareholders the ability to vote all of their shares for a single nominee or to distribute the number of shares that they are entitled to vote among two or more nominees. Cumulative voting thus allows minority shareholders to elect a director not supported by the holders of a majority of the outstanding shares, and the absence of cumulative voting would make it more difficult for a minority stockholder, whose interests may be adverse to a majority of the shareholders, to obtain representation on the Board. As a result, we will not provide for cumulative voting in director elections following the Reincorporation. The vast majority of public companies in the S&P 500 do not provide for cumulative voting, but do provide for the election of directors in uncontested elections by a majority of the votes cast.
Removal of Directors by Shareholders   Under California law, any director, or the entire board, may be removed, with or without cause, with the approval of a majority of the outstanding shares entitled to vote, provided that no individual director may be removed (unless the entire board is removed) if the number of votes cast against such   Under Delaware law, any director, or the entire board, may be removed, with or without cause, with the approval of a majority of the outstanding shares entitled to vote at an election of directors.

 

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Provision   Trimble California   Trimble Delaware
    removal (or not consenting in writing to the removal) would be sufficient to elect the director under cumulative voting rules.    
Restrictions on Transactions with Interested Shareholders   Section 1203 of the California Corporations Code, which applies to mergers or corporate acquisition transactions with interested shareholders (i.e., a transacting party which directly or indirectly controls the corporation, which is or is directly or indirectly controlled by an officer or director of the corporation, or in which the corporation or any of its directors or executive officers holds a material financial interest) or their affiliates, makes it a condition to the consummation of a merger or other acquisition transaction with an interested shareholder that an affirmative opinion be obtained in writing as to the fairness of the consideration to be received by the shareholders of the corporation being acquired.   Section 203 prohibits, subject to certain exceptions, a Delaware corporation from engaging in a business combination with an interested stockholder (i.e., a stockholder acquiring 15% or more of the outstanding voting stock) for three years following the date that such stockholder becomes an interested stockholder without approval from the Board of Directors. Section 203 may make it more difficult for an acquirer to consummate certain types of unfriendly or hostile corporate takeovers or other transactions involving the corporation that have not been approved by the Board of Directors. The Company does not intend to opt out of Section 203 in connection with the Reincorporation.
Vote Required to Approve Merger or Sale of Company   California law requires the affirmative vote of a majority of the outstanding shares entitled to vote in order to approve a merger of the corporation or a sale of all or substantially all the assets of the corporation, including, in the case of a merger, the affirmative vote of each class of outstanding stock, except in limited circumstances.   Delaware law requires the affirmative vote of a majority in voting power of the outstanding shares entitled to vote to approve a merger of the corporation or a sale of all or substantially all the assets of the corporation, except in limited circumstances.
50/90 Rule Restriction on Cash Mergers   Under California law, a merger may not be consummated for cash if the purchaser owns more than 50% but less than 90% of the then-outstanding shares   Delaware law does not have a provision similar to the 50/90 rule in California.

 

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Provision   Trimble California   Trimble Delaware
   

unless either (i) all of the shareholders consent, which is not practical for a public company, or (ii) the Commissioner of Corporations approves the merger.

 

The 50/90 rule may make it more difficult for an acquirer to make an all cash acquisition that is opposed by the Company’s Board of Directors. Specifically, the 50/90 rule encourages an acquirer making an unsolicited tender offer to tender for either less than 50% of the outstanding shares or more than 90% of the outstanding shares. A purchase of less than 50% of the outstanding shares does not allow the acquirer to gain ownership of the majority of the outstanding shares entitled to vote, which is the vote necessary to approve a second step merger that will enable the acquirer to obtain the remainder of the Company’s equity, and therefore creates risk for the acquirer that such vote will not be obtained. A tender offer conditioned upon receipt of tenders from at least 90% of the outstanding shares also creates risk for an acquirer since it may be difficult to obtain tenders from holders of at least 90% of the outstanding shares. It is possible that these risks would discourage some potential acquirers from pursuing an all cash acquisition of the Company that is opposed by the Board of Directors.

   
Shareholder Action by Written Consent   The California Bylaws provide that any action that may be   The Delaware Bylaws provide that any action that may be

 

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Provision   Trimble California   Trimble Delaware
   

taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice if a consent in writing, setting forth the actions so taken, is filed with the Secretary of the Company after having been signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

 

The California Bylaws provide that directors may not be elected by written consent, except with the unanimous written consent of all outstanding shares entitled to vote for the election of directors, and except that shareholders may elect a director to fill a vacancy, other than a vacancy created by removal, by the written consent of a majority of all outstanding shares entitled to vote for the election of directors.

 

taken at any annual or special meeting of stockholders may be taken without a meeting and without prior notice if a consent in writing, setting forth the action so taken, is signed by holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and is delivered to the Company.

 

The Delaware Bylaws provide that directors may not be elected by written consent, except with the unanimous written consent of all outstanding shares entitled to vote for the election of directors.

 

Shareholder Ability to Call Special Shareholders’ Meetings   Under California law, a special meeting of shareholders may be called by the Board of Directors, the Chairman of the Board of Directors, the President, the holders of shares entitled to cast not less than 10% of the votes at such meeting and such persons as are authorized by the articles of incorporation or bylaws. The California Bylaws are consistent with California law as described immediately above.   Under the DGCL, a special meeting of stockholders may be called by the board of directors or by any person authorized to do so in the certificate of incorporation or the bylaws. The Delaware Bylaws are consistent with the California Bylaws in providing that a special meeting of stockholders may be called by the Chairman of the Board, the President, the Board of Directors, or by one or more stockholders owning not less

 

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Provision   Trimble California   Trimble Delaware
        than 10% in voting power of the issued and outstanding shares of capital stock of the corporation entitled to vote at the meeting.
Advance Notice of Shareholder Proposals   Not addressed.   The Delaware Bylaws provide that for nominations or other business to be properly brought before an annual meeting of stockholders by a stockholder, any such proposed business must constitute a proper matter for stockholder action and the stockholder must have given timely notice thereof, including providing certain information regarding the stockholder making such proposal and regarding the nominee or business proposed by the stockholder, in writing to our secretary. To be timely, a stockholder’s notice must be delivered to our secretary at the principal executive offices of the Company not less than ninety (90) days nor more than one hundred and twenty (120) days prior to the first anniversary of the preceding year’s annual meeting of shareholders, provided that if the annual meeting is called for a date that is not within twenty-five (25) days (or for proposals other than nominations of directors, that is not within thirty (30) days) before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of

 

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Provision   Trimble California   Trimble Delaware
        the annual meeting was made, whichever first occurs. The information to be provided with respect to any stockholder putting forward a proposal, and with respect to any nominee for director (if applicable), includes information as to record or beneficial ownership of the Company’s stock, or derivative instruments based on the value of the Company’s stock, by the stockholder (or by the nominee, if applicable) and their respective affiliates and associates, a description of any transactions, arrangement, agreements or undertakings related to the nomination or proposal, information with respect to that person that would be required to be disclosed in a proxy statement relating to the election of directors, and an undertaking to furnish promptly such other information as the Company may reasonably request, including such information with respect to a nominee, if applicable, as may be necessary or appropriate in determining the eligibility of such proposed nominee to serve as an independent director of the Company or that could be material to a reasonable stockholders’ understanding of the independence, or lack thereof of such nominee.
Bylaw Amendments   The California Bylaws may be amended by the Board of Directors or by the holders of a majority of outstanding shares entitled to vote; provided, however, that a Bylaw specifying or changing a fixed   The Delaware Bylaws may be amended by the Board of Directors or by the affirmative vote of the holders of at least a majority in voting power of the outstanding shares entitled to vote.

 

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Provision   Trimble California   Trimble Delaware
    number of directors or the maximum or minimum number of directors or changing from a fixed to a variable number of directors or vice versa, may only be adopted by approval of a majority of the outstanding shares, and provided further, that a Bylaw reducing the fixed number or the minimum or maximum number of directors shall be subject to the provisions described above under “Number of Directors.”    
INDEMNIFICATION; ELIMINATION OF DIRECTOR PERSONAL LIABILITY        
Indemnification  

California law requires indemnification when the indemnitee has defended the action successfully on the merits. Expenses incurred by an officer or director in defending an action may be paid in advance, if the director or officer undertakes to repay such amounts if it is ultimately determined that he or she is not entitled to indemnification. California law authorizes a corporation to purchase indemnity insurance for the benefit of its officers, directors, employees and agents whether or not the corporation would have the power to indemnify against the liability covered by the policy.

 

California law permits a corporation to provide rights to indemnification beyond those provided therein to the extent such additional indemnification

  Delaware law generally permits indemnification of expenses, including attorneys’ fees, actually and reasonably incurred in the defense or settlement of a derivative or third party action, provided there is a determination that the person seeking indemnification acted in good faith and in a manner reasonably believed to be in the best interests of the corporation. Without court approval, however, no indemnification may be made in respect of any derivative action in which such person is adjudged liable for negligence or misconduct in the performance of his or her duty to the corporation. Expenses incurred by an officer or director in defending an action may be paid in advance, if the director or officer undertakes to repay such amounts if it is ultimately determined that he or she is not entitled to

 

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Provision   Trimble California   Trimble Delaware
   

is authorized in the corporation’s articles of incorporation. Thus, if so authorized, rights to indemnification may be provided pursuant to agreements or bylaw provisions which make mandatory the permissive indemnification provided by California law.

 

The California Articles authorize indemnification to the fullest extent permissible under California law.

 

indemnification. Delaware law authorizes a corporation to purchase indemnity insurance for the benefit of its directors, officers, employees and agents whether or not the corporation would have the power to indemnify against the liability covered by the policy. Delaware law permits a Delaware corporation to provide indemnification in excess of that provided by statute.

 

The Delaware Charter and the Delaware Bylaws generally authorize indemnification to the fullest extent permissible under Delaware law.

Elimination of Director Personal Liability for Monetary Damages  

California law permits a corporation to eliminate the personal liability of directors for monetary damages, except where such liability is based on:

 

•  Intentional misconduct or knowing and culpable violation of law;

 

•  Acts or omissions that a director believes to be contrary to the best interests of the corporation or its shareholders or that involve the absence of good faith on the part of the director;

 

•  Receipt of an improper personal benefit;

 

•  Acts or omissions that show reckless disregard for the director’s duty to the corporation or its shareholders, where the director in the ordinary course of performing a

 

The DGCL permits a corporation to eliminate the personal liability of directors for monetary damages, except where such liability is based on:

 

•  Breaches of the director’s duty of loyalty to the corporation or its shareholders;

 

•  Acts or omissions not in good faith or involving intentional misconduct or knowing violations of law;

 

•  The payment of unlawful dividends or unlawful stock repurchases or redemptions; or

 

•  Transactions in which the director received an improper personal benefit.

 

The Delaware Certificate eliminates the liability of directors to the Company for monetary damages to the fullest extent permissible under the

 

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Provision   Trimble California   Trimble Delaware
   

director’s duties should be aware of a risk of serious injury to the corporation or its shareholders;

 

•  Acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the director’s duty to the corporation and its shareholders;

 

•  Transactions between the corporation and a director who has a material financial interest in such transaction; or

 

•  Liability for improper distributions, loans or guarantees.

 

The California Articles eliminate the liability of directors for monetary damages to the fullest extent permissible under California law.

  DGCL. As a result, following the Reincorporation, directors of Trimble Delaware cannot be held liable for monetary damages even for gross negligence or lack of due care in carrying out their fiduciary duties as directors, so long as that gross negligence or lack of due care does not involve bad faith, intentional misconduct or a breach of their duty of loyalty to the Company, unlawful dividends, stock repurchases or redemptions or an improper personal benefit.
DIVIDENDS; DISSOLUTION; FORUM SELECTION        
Dividends and Repurchases of Shares  

Under California law, a corporation may not make any distribution to its shareholders or repurchase its shares unless either:

 

•  The amount of retained earnings of the corporation immediately prior to the distribution or payment of the price of the shares being repurchased equals or exceeds the sum of (i) the amount of the proposed distribution, plus (ii) the preferential dividends arrears amount, if any; or

  The DGCL is more flexible than California law with respect to payment of dividends and implementing share repurchase programs. The DGCL generally provides that a corporation may redeem or repurchase its shares out of its surplus. In addition, the DGCL generally provides that a corporation may declare and pay dividends out of surplus, or if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or for the preceding fiscal year. Surplus is

 

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Provision   Trimble California   Trimble Delaware
   

•  Immediately after the distribution or share repurchase, the value of the corporation’s assets would equal or exceed the sum of its total liabilities, plus the preferential rights amount, if any.

 

For purposes of determining whether a California corporation meets either of these tests, the determination may be based on any of the following:

 

•  The corporation’s financial statements;

 

•  A fair valuation; or

 

•  Any other method that is reasonable under the circumstances.

 

These tests are applied to California corporations on a consolidated basis.

  defined as the excess of a corporation’s net assets (i.e., its total assets minus its total liabilities) over the capital associated with issuances of its common stock. Moreover, the DGCL permits a board of directors to reduce its capital and transfer such amount to its surplus.
Dissolution   Under California law, holders of 50% or more of a corporation’s total voting power may authorize the corporation’s dissolution, with or without approval of the corporation’s board of directors, and this right may not be modified by the articles of incorporation.   Under the DGCL, unless the Board of Directors approves the proposal to dissolve, the dissolution must be unanimously approved by all the stockholders entitled to vote on the matter. Only if the dissolution is initially approved by the Board of Directors may the dissolution be approved by a simple majority of the outstanding shares entitled to vote. The DGCL allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with such a board-initiated dissolution, but the Delaware

 

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Provision   Trimble California   Trimble Delaware
        Certificate contains no such supermajority voting requirement.
Forum Selection   Not addressed.  

Delaware courts have upheld the right of Delaware corporations to include forum selection provisions in their bylaws. Such provisions normally provide that shareholders bringing derivative claims or claims alleging breaches of fiduciary duties arising from the DGCL or otherwise implicating the internal affairs of the corporation be brought exclusively in Delaware state or federal courts.

 

Under the Delaware Certificate, unless we consent in writing to the selection of an alternative forum, the Delaware Court of Chancery will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of the corporation, any action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee or stockholder of the corporation to the corporation or the corporation’s stockholders, any action asserting a claim arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction upon the Delaware Court of Chancery, any action asserting a claim arising pursuant to any provision of our Delaware Certificate or Delaware Bylaws, or any action asserting a claim governed by the internal affairs doctrine.

 

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Interests of Our Directors and Executive Officers in the Reincorporation

In considering the recommendations of the Board of Directors, shareholders should be aware that certain of our directors and executive officers have interests in the transaction that are different from, or in addition to, the interests of the shareholders generally. For instance, the Reincorporation may be of benefit to our directors and officers by reducing their potential personal liability and increasing the scope of permitted indemnification, by strengthening directors’ ability to resist a takeover bid, and in other respects. The Board of Directors was aware of these interests and considered them, among other matters, in reaching its decision to approve the Reincorporation and to recommend that our shareholders vote in favor of this proposal.

U.S. Federal Income Tax Considerations of the Reincorporation

The following discussion is a summary of U.S. federal income tax considerations of the Reincorporation generally applicable to holders of our common stock. The summary is based on and subject to the Internal Revenue Code of 1986, as amended (the “Code”), regulations promulgated under the Code by the U.S. Treasury Department (including proposed and temporary regulations), rulings, current administrative interpretations and official pronouncements of the Internal Revenue Service (the “IRS”), and judicial decisions, all as currently in effect and all of which are subject to change, possibly with retroactive effect, and to differing interpretations. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described herein.

This summary is for general information only and does not address all aspects of U.S. federal income taxation that may be important to a particular holder in light of its investment or tax circumstances, including any tax consequences arising under the Medicare contribution tax on net investment income, or to holders subject to special tax rules, such as partnerships or other entities or arrangements classified as partnerships for U.S. federal income tax purposes, subchapter S corporations, or other pass-through entities (and investments therein); banks, thrifts, mutual funds and other financial institutions; tax-exempt entities or governmental organizations; insurance companies; regulated investment companies and real estate investment trusts; trusts and estates; dealers or brokers in stocks, securities or currencies; traders in securities who elect to apply a mark-to-market method of accounting; persons holding our common stock as part of an integrated transaction, including a “straddle,” “hedge,” “constructive sale,” “conversion transaction,” or other risk reduction transaction; U.S. Holders whose functional currency is not the U.S. dollar; persons subject to the alternative minimum tax; individual retirement and other deferred accounts; U.S. expatriates and former citizens or long-term residents of the United States; “passive foreign investment companies” or “controlled foreign corporations,” and corporations that accumulate earnings to avoid U.S. federal income tax; U.S. Holders who own or are deemed to own 10% or more of our voting stock; persons who purchase or sell their shares as part of a wash sale for tax purposes; and persons who received their shares through the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan. This summary does not include any description of the tax laws of any state or local governments, or of any foreign government, that may be applicable to a particular holder.

This summary is directed solely to holders that hold our common stock as capital assets within the meaning of Section 1221 of the Code, which generally means as property held for investment. In addition, the following summary only addresses “U.S. persons” for U.S. federal income tax purposes, generally defined as beneficial owners of our common stock who are:

 

   

individuals who are citizens or residents of the United States;

 

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corporations (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of any state of the United States or of the District of Columbia;

 

   

estates the income of which is subject to U.S. federal income taxation regardless of its source;

 

   

trusts if (i) a court within the United States is able to exercise primary supervision over the administration of any such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust; or (ii) trusts that have valid elections in effect under applicable U.S. Treasury regulations to be treated as U.S. persons for U.S. federal income tax purposes.

If a partnership, including for this purpose any entity or arrangement that is treated as a partnership for U.S. federal income tax purposes, holds our common stock, the U.S. federal income tax treatment of a partner in the partnership generally will depend on the status of the partner and the activities of the partnership. A holder that is a partnership for U.S. federal income tax purposes and the partners in such partnership should consult their own tax advisors regarding the U.S. federal income tax consequences of the Reincorporation.

THIS SUMMARY IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. THIS SUMMARY IS NOT A COMPREHENSIVE DESCRIPTION OF ALL OF THE U.S. FEDERAL INCOME TAX CONSEQUENCES THAT MAY BE RELEVANT TO HOLDERS. WE URGE YOU TO CONSULT YOUR OWN TAX ADVISORS REGARDING YOUR PARTICULAR CIRCUMSTANCES AND THE U.S. FEDERAL INCOME TAX CONSEQUENCES TO YOU OF THE REINCORPORATION, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE U.S. FEDERAL TAX LAWS OTHER THAN THOSE PERTAINING TO INCOME TAX, INCLUDING ESTATE OR GIFT TAX LAWS, OR UNDER ANY STATE, LOCAL OR NON-U.S. TAX LAWS OR UNDER ANY APPLICABLE INCOME TAX TREATY.

We have not requested a ruling from the IRS or an opinion of counsel regarding the U.S. federal income tax consequences of the Reincorporation. However, we believe that:

 

   

the Reincorporation will constitute a tax-free reorganization under Section 368(a) of the Code;

 

   

no gain or loss will be recognized by holders of Trimble California common stock on receipt of Trimble Delaware common stock, or upon surrender of Trimble California common stock, pursuant to the Reincorporation;

 

   

the aggregate tax basis of the Trimble Delaware common stock received by each holder will equal the aggregate tax basis of the Trimble California common stock surrendered by such holder in exchange therefor; and

 

   

the holding period of the Trimble Delaware common stock received by each holder will include the period during which such holder held the Trimble California common stock surrendered in exchange therefor.

 

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Accounting Consequences

We believe that there will be no material accounting consequences to the Company resulting from the Reincorporation.

Regulatory Approval

To our knowledge, the only required regulatory or governmental approval or filings necessary in connection with the consummation of the Reincorporation would be the filing of articles of merger with the Secretary of State of California and the filing of a certificate of merger with the Secretary of State of the State of Delaware.

Vote Required

To approve this proposal, a majority of the outstanding shares of the Company must vote “FOR” this proposal. Abstentions and broker non-votes will not count as affirmative votes. Unless otherwise indicated on your proxy, the proxyholders will vote your proxy for the Reincorporation.

Recommendation of the Board of Directors:

The Company’s Board of Directors recommends shareholder vote FOR the approval of the Reincorporation.

 

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BOARD MEETINGS AND COMMITTEES; DIRECTOR INDEPENDENCE

The Board of Directors held 6 meetings during the fiscal year ended January 1, 2016. No director attended fewer than 75% of the aggregate of all the meetings of the Board of Directors and the meetings of the committees, if any, upon which such director also served during the fiscal year ended January 1, 2016. It is the Company’s policy to encourage directors to attend the Annual Meeting. All of the current members of the Board of Directors who were existing directors at the time of the 2015 annual meeting attended the annual meeting. Each of the directors, except for Mr. Berglund, are independent directors as defined by Rule 5605(a)(2) of the NASDAQ Marketplace Rules.

Shareholder Communications with Directors

The Board of Directors has established a process to receive communications from shareholders. Shareholders of the Company may communicate with one or more of the Company’s directors (including any board committee or group of directors) by mail in care of Board of Directors, Trimble Navigation Limited, 935 Stewart Drive, Sunnyvale, California 94085. Such communications should specify the intended recipient or recipients. The Corporate Secretary periodically will forward such communications or provide a summary to the Board or the relevant members of the Board.

Board Leadership Structure; Oversight and Risk Management

The Company currently separates the positions of chief executive officer and chairman of the board. Our chairman of the board is responsible for setting the agenda for each Board meeting, in consultation with the chief executive officer, and presiding at executive sessions. The chairman of the board is also responsible for recommending committee assignments to the Nominating Committee. Our chief executive officer is responsible for the day-to-day operations of the Company.

The Board of Directors has overall responsibility for the oversight of risk management for the Company, and it exercises this oversight through committees and regular engagement with the Company’s senior management. The Audit Committee has oversight of the Company’s financial matters, internal controls, financial reporting and internal investigations relating to financial misconduct. The Compensation Committee has oversight of our compensation policies and practices, and our Nominating and Corporate Governance Committee is responsible for the independence and qualification of the board members and the Company’s corporate governance principles. The committees report their activities back to the Board of Directors. In addition, members of the Company’s senior management attend meetings of the Board of Directors to discuss strategic planning and risks and opportunities for the Company’s business areas, in addition to answering any questions that the Board of Directors may raise.

Audit Committee

The Board of Directors has a separately-designated, standing Audit Committee, established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Audit Committee is governed by a charter, a current copy of which is available on our corporate website at http://investor.trimble.com/corporate-governance.cfm.

The current members of the Audit Committee are directors Johansson, Peek, and Vande Steeg, and director Peek currently serves as the committee chairman. The Audit Committee held 8 meetings during the 2015 fiscal year. The purpose of the Audit Committee is to make such examinations as are necessary to monitor the corporate financial reporting and the internal and external audits of the Company, to provide to the Board of Directors the results of its examinations and recommendations

 

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derived therefrom, to outline to the Board of Directors improvements made, or to be made, in internal accounting controls, to nominate independent auditors, and to provide such additional information as the committee may deem necessary to make the Board of Directors aware of significant financial matters which require the Board’s attention.

All Audit Committee members are independent directors as defined by applicable NASDAQ Marketplace Rules and listing standards.

All members of the Audit Committee are financially sophisticated and are able to read and understand fundamental financial statements, including a balance sheet, income statement and cash flow statement. The Board of Directors has determined that director Peek is a “financial expert” as that term is defined in the rules promulgated by the SEC. Mr. Peek has an extensive accounting and financial management background, which includes holding positions as chief financial officer and chief accounting officer with several leading publicly-traded technology companies, and almost two decades of experience with Deloitte.

Compensation Committee

The Board of Directors has a standing Compensation Committee, comprised of directors Nersesian, Vande Steeg and Ekholm. Director Vande Steeg currently serves as the committee chairman. In May 2015, Mr. Ekholm replaced Mr. Goodrich on the Compensation Committee. Mr. Goodrich retired from the Board at the time of the 2015 annual meeting. All Compensation Committee members are independent as defined by applicable NASDAQ Marketplace Rules and listing standards. The Compensation Committee is governed by a charter, a current copy of which is available on our corporate website at http://investor.trimble.com/corporate-governance.cfm. The Compensation Committee held 6 meetings during the 2015 fiscal year. The purpose of the Compensation Committee is to review and make recommendations to the full Board of Directors with respect to all forms of compensation to be paid or provided to the Company’s executive officers. See “Compensation Discussion and Analysis.”

Compensation Committee Interlocks and Insider Participation

None of the Company’s executive officers serve on the board of directors or compensation committee of a company that has an executive officer that serves on our Board of Directors or the Compensation Committee.

Risk Assessment

In setting compensation, our Compensation Committee considers the risks to our shareholders, and the Company as a whole, arising out of our compensation programs. The Company’s management team has assessed the risk profile of our compensation programs. Their review considered risk-determining characteristics of the overall structure and individual components of our Company-wide compensation program, including our base salaries, cash incentive plans and equity plans. The management team provided its report of the findings to the Board of Directors for its review and consideration. Following this assessment, the Board of Directors concurred with management’s conclusions that the Company’s compensation policies were not reasonably likely to have a material adverse effect on the Company. For example:

•  Balance of Compensation: Across the Company, individual elements of our compensation program include base salaries, incentive compensation, and for certain of our employees, equity-based

 

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awards. By providing a mix of different elements of compensation that reward both short-term and long-term performance and that focus on varying performance metrics, the Company’s compensation programs as a whole provide a balanced approach to incentivizing and retaining employees, without placing an inappropriate emphasis on any particular form of compensation.

•  Objective Company Results and Pre-established Performance Measures Dictate Annual Incentives: Under the Company’s cash incentive plans, payments are subject to the satisfaction of specific annual performance targets established by our Board of Directors. These performance targets are directly and specifically tied to revenue and operating income performance for the Company and/or divisions for the applicable fiscal year. Payments are made based on actual achievement of Company performance goals, and not estimated performance.

•  Use of Long Term Incentive Compensation: Equity-based long-term incentive compensation that vests over a period of years is a key component of total compensation of our executive employees. This vesting period encourages our executives to focus on sustaining the Company’s long-term performance. These grants are also made annually, so executives always have unvested awards that could decrease significantly in value if our business is not managed for the long-term. In addition, commencing in 2015, a portion of equity awards granted to our executives includes performance-based vesting. These awards, for which vesting is based upon our total shareholder return relative to the component stocks of the S&P 500 Index, further align the compensation of our executives with the long-term interests of our shareholders.

•  Internal Processes Further Limit Risk: The Company has in place additional processes to limit risk to the Company from our compensation programs. Specifically, payroll programs and financial results upon which incentive compensation payments are based are subject to regular review and audit and our human resources executives meet periodically with our internal audit personnel to review various controls in place with respect to our compensation programs. In addition, the Company engages an external compensation consulting firm for design and review of our compensation programs, as well as external legal counsel to assist with the periodic review of our compensation plans to ensure compliance with applicable laws and regulations.

Nominating and Corporate Governance Committee

In May 2015, the Board of Directors combined its Governance Committee and Nominating Committee into one standing Nominating and Corporate Governance Committee (“Nominating and Governance Committee”). Prior to that, the Board of Directors had maintained separate Governance and Nominating Committees since January 2011. The current members of the Nominating and Governance Committee are directors Janow, Johansson and Nersesian. Director Johansson serves as committee chairman. The Nominating and Governance Committee is governed by a charter that is posted on the Company’s website at http://investor.trimble.com/corporate-governance.cfm. The purpose of the Nominating and Governance Committee is to recommend to the Board of Directors individuals qualified to serve as directors of the Company, and on committees, to advise the Board of Directors with respect to composition, procedures and committees. Additionally, the Nominating and Governance Committee develops and recommends to the Board corporate governance principles applicable to the Company, and oversees the implementation of these principals. The Nominating and Governance Committee met once during the 2015 fiscal year.

The Nominating and Governance Committee will consider director candidates recommended by shareholders. In considering candidates submitted by shareholders, the Nominating and Governance

 

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Committee will take into consideration the needs of the Board of Directors and the qualifications of the candidate. To have a candidate be considered by the Nominating and Governance Committee, a shareholder must submit the recommendation in writing and the recommendation must include the following information:

 

   

The name of the shareholder and evidence of the shareholder’s ownership of Company shares, including the number of shares owned and the length of time of ownership;

 

   

The name of the candidate, the candidate’s resume or a listing of his or her qualifications to be a director of the Company and the candidate’s consent to be named as a director if selected by the Nominating and Governance Committee and nominated by the Board of Directors; and

 

   

If the Reincorporation is approved, the additional information with respect to the nominee, the shareholder(s) and any beneficial owners on whose behalf such nomination is made required by the Delaware Bylaws.

The shareholder recommendation and information described above must be sent to the Committee Chairman in care of the Corporate Secretary at Trimble Navigation Limited, 935 Stewart Drive, Sunnyvale, California 94085 and must be received by the Corporate Secretary not less than 120 days prior to the anniversary date of the Company’s most recent proxy statement issued in connection with the annual meeting of shareholders. In the event that Item 4 (Reincorporation) is approved, under the Company’s bylaws that would then be in effect, the required notice must be received by the Company not earlier than January 2, 2017 and not later than February 1, 2017, except if the annual meeting for 2017 is called for a date earlier than April 7, 2017 or later than May 27, 2017, notice by the shareholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting for 2017 is mailed or the date the Company announces the date of the annual meeting for 2017, whichever occurs first.

The Nominating and Governance Committee believes that the minimum qualifications for serving as a director of the Company are that a nominee demonstrate possession of such knowledge, experience, skills, expertise, international background, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, potential conflicts of interest, and diversity so as to enhance the Board of Directors’ ability to manage and direct the affairs and business of the Company, including, when applicable, to enhance the ability of committees of the Board of Directors to fulfill their duties and/or to satisfy any independence requirements imposed by law, regulation or NASDAQ listing requirement.

The Nominating and Governance Committee identifies potential nominees by asking current directors and executive officers to notify the Committee if they become aware of persons, meeting the criteria described above, who have had a change in circumstances that might make them available to serve on the Board of Directors. The Nominating and Governance Committee also, from time to time, may engage firms that specialize in identifying director candidates and pay any corresponding fees for such services. As described above, the Nominating and Governance Committee will also consider candidates recommended by shareholders.

Once a person has been identified by the Nominating and Governance Committee as a potential candidate, the Committee may collect and review publicly available information regarding the candidate to assess whether the candidate should be considered further. If the Nominating and

 

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Governance Committee determines that the candidate warrants further consideration, the chairman or another member of the Committee contacts the candidate. Generally, if the person expresses a willingness to be considered and to serve on the Board of Directors, the Nominating and Governance Committee requests information from the candidate, reviews the candidate’s accomplishments and qualifications, including in light of any other candidates that the Nominating and Governance Committee might be considering, and conducts one or more interviews with the candidate. In certain instances, Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s accomplishments. The Nominating and Governance Committee’s evaluation process does not vary based on whether or not a candidate is recommended by a shareholder.

 

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NON-EMPLOYEE DIRECTOR COMPENSATION

Our non-employee directors (Outside Directors) receive compensation according to the terms of the Board of Directors Compensation Policy (Board Compensation Policy). The description of the Board Compensation Policy below is qualified in its entirety by the text of the Board Compensation Policy, which was filed as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 11, 2015.

The current Board Compensation Policy was adopted on May 7, 2015. Under the current Board Compensation Policy, each Outside Director receives:

 

   

an annual cash retainer of $60,000, payable on a quarterly basis, for the period starting July 1 and ending June 30 of each year; and

 

   

Upon election or re-election at the annual meeting of shareholders, a restricted stock unit award (RSU) for that number of shares of the Company’s common stock determined by dividing the target dollar amount of $277,000 by the fair market value of a share of common stock on the date of grant.

In addition, our Outside Directors are reimbursed for local travel expenses or paid a fixed travel allowance based on the distance to the meeting, and reimbursed for other necessary business expenses incurred in the performance of their services as directors of the Company. Our Outside Directors are also eligible to participate in the Company’s Non-Qualified Deferred Compensation Plan.

The RSU grants vest in full after one year. If an Outside Director is appointed or elected to the Board at a time other than the annual meeting, the initial RSU grant will be pro-rated based upon the number of months since the last annual meeting divided by twelve. If an Outside Director resigns or voluntarily terminates service as a Board member, any unvested RSU grant shall vest at such time on a pro-rata basis based upon the number of months of service since the last annual meeting of shareholders divided by twelve. The target dollar amount for determining the number of RSU shares may be revised based upon appropriate compensation benchmarks presented to and approved by the Compensation Committee and the Board of Directors.

The prior Board Compensation Policy, which was in place prior to May 7, 2015, provided for the grant of nonstatutory stock options to Outside Directors. Specifically, under the prior policy, each Outside Director was granted an option to purchase 25,000 shares of the Company’s common stock upon his or her initial appointment to the Board. Thereafter, each year, each Outside Director would receive an additional option grant to purchase 25,000 shares, upon re-election at the annual meeting of shareholders. The options had an exercise price equal to the closing price of the Company’s common stock on the date of grant, vested monthly over a period of one year, and had a seven year term.

 

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Non-Employee Director Compensation Table

Except as noted below, the table below shows the compensation earned by each of the Outside Directors in the fiscal year ending January 1, 2016.

 

Director Compensation for the 2015 Fiscal Year (1)  
Name   Fees Earned or
Paid in Cash
(2)
    Stock
Awards
(3)
    Total  

Börje Ekholm

  $ 45,000      $ 274,263      $ 319,263   

Kaigham Gabriel

  $ 45,000      $ 279,192      $ 324,192   

John B. Goodrich (4)

  $ 30,000      $ -      $ 30,000   

Merit E. Janow

  $ 60,000      $ 277,001      $ 337,001   

Ulf J. Johansson

  $ 60,000      $ 277,001      $ 337,001   

Ronald S. Nersesian

  $ 60,000      $ 277,001      $ 337,001   

Mark S. Peek

  $ 60,000      $ 277,001      $ 337,001   

Nickolas W. Vande Steeg

  $ 60,000      $ 277,001      $ 337,001   
  (1) Mr. Berglund, the Company’s president and chief executive officer, receives no additional compensation for his service on the Board of Directors. Mr. Berglund’s compensation for service as president and chief executive officer is reported in the Summary Compensation Table and described in the Compensation Discussion and Analysis.
  (2) For each Outside Director, the fees shown in this column represent a cash retainer, paid quarterly.
  (3) Each Outside Director in the table was granted 10,953 RSUs of the Company’s common stock in connection with such director’s re-election or initial election at the 2015 annual meeting of shareholders, in accordance with the current Board Compensation Policy. The amounts in these columns represent the grant date fair value of the restricted stock unit awards, calculated pursuant to FASB ASC Topic 718. The grant date fair value for the time-based RSUs is estimated using the closing price of our common stock on the date of grant.
  (4) Mr. Goodrich retired from the Board of Directors on May 7, 2015.

The following table shows the number of shares of the Company’s common stock subject to outstanding and unexercised option awards and the number of shares subject to outstanding RSUs held by each of the Outside Directors as of January 1, 2016.

 

Director   Number of Shares
Subject to Outstanding
Options as of 1/1/2016
    Number of Shares
Subject to Outstanding
RSUs as of 1/1/2016
 

Börje Ekholm

    -        10,953   

Kaigham Gabriel

    -        10,953   

John B. Goodrich

    23,750        -   

Merit E. Janow

    143,334        10,953   

Ulf J. Johansson

    240,000        10,953   

Ronald S. Nersesian

    110,000        10,953   

Mark S. Peek

    89,481        10,953   

Nickolas W. Vande Steeg

    110,000        10,953   

 

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Non-Employee Director Stock Ownership Guidelines

In February 2013, we adopted a policy that requires each Outside Director to own a minimum number of shares of the Company’s common stock equal to a value of $200,000 to help align the personal interests of the directors with the interests of shareholders. The shares counted toward the ownership guidelines include shares owned directly and indirectly, provided there is an economic interest in the shares. For current Outside Directors, these ownership levels must be attained within five years from the date the guidelines were adopted. New directors have five years from appointment to meet the minimum stock ownership level. Three of the non-employee directors have met the ownership requirement; the remaining non-employee directors have until February 2018 to achieve the required ownership requirement.

 

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EXECUTIVE COMPENSATION

The executive compensation section of the proxy statement contains information about the Company’s compensation policies and practices, and the application of those policies and practices with respect to our Named Executive Officers. Under the SEC rules, the Company’s “Named Executive Officers” are the Company’s chief executive officer, chief financial officer, and the three other executive officers who received the highest amounts of compensation during the 2015 fiscal year. The following is a brief description of each part of our Executive Compensation section:

Compensation Discussion and Analysis. This section describes the elements of the Company’s compensation policies and the application of those policies to our Named Executive Officers.

Compensation Committee Report. This section contains a report of the Compensation Committee of our Board of Directors regarding the Compensation Discussion and Analysis section of the proxy statement.

Executive Compensation Tables. This section describes the amounts or values and types of compensation earned by our Named Executive Officers.

Post-Employment Compensation. This section describes certain benefits and payments that our Named Executive Officers would be eligible for in the event of a change in control event, upon death, or, in the case of our Non-Qualified Deferred Compensation Plan, payments that a Named Executive Officer may receive following termination of employment.

Compensation Discussion and Analysis

This Compensation Discussion and Analysis describes the compensation program for our Named Executive Officers. During fiscal 2015, these individuals were:

 

   

Steven W. Berglund, our President and Chief Executive Officer (our “CEO”);

 

   

Francois Delepine, our Chief Financial Officer (our “CFO”);

 

   

Bryn A. Fosburgh, our Vice President;

 

   

Christopher W. Gibson, our Vice President; and

 

   

James Veneziano, our Vice President.

This Compensation Discussion and Analysis describes the material elements of our executive compensation program during fiscal 2015. It also provides an overview of our executive compensation philosophy and objectives. Finally, it analyzes how and why the Compensation Committee arrived at the specific compensation decisions for our executive officers, including the Named Executive Officers, for fiscal 2015, including the key factors that the Compensation Committee considered in determining their compensation.

 

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Management Changes

On January 19, 2016, we announced that Mr. Delepine, our CFO, would leave that position effective February 1, 2016 and depart the Company in early March 2016. At that time, we also announced that Robert Painter, our Vice President and General Manager of Trimble Buildings, would become our new Chief Financial Officer effective February 1, 2016.

Executive Summary

Fiscal 2015 Business Performance

Trimble is a leading provider of technology solutions that optimize the work processes of office and mobile field professionals around the world. Our comprehensive work process solutions are used across a range of industries including agriculture, architecture, civil engineering, construction, environmental management, government, natural resources, transportation and utilities. Trimble focuses on integrating its broad technological and application capabilities to create vertically-focused, system-level solutions that transform how work is done within the industries we serve. The integration of sensors, software, connectivity, and information in our portfolio gives us the unique ability to provide an information model and management tools specific to the customer’s workflow.

In 2015, Trimble continued to experience the effects of a strong dollar and relative weakness in several of our key vertical and geographic markets. The Company’s total revenue decreased by $105.1 million, or 4%, to $2.29 billion from $2.40 billion in fiscal 2014. Overall revenue was primarily impacted by foreign currency effects, as well as declines due to oil and gas and agricultural market conditions, partially offset by acquisitions and improved growth in building construction and transportation and logistics.

GAAP operating income was $154.4 million, down 41 percent as compared to fiscal 2014. GAAP operating margin was 6.7 percent of revenue as compared to 10.9 percent of revenue in fiscal 2014. Non-GAAP operating income of $389.9 million was down 19 percent as compared to fiscal 2014, and accordingly non-GAAP operating margin was 17.0 percent of revenue as compared to 20.0 percent of revenue in fiscal 2014.*

GAAP net income was $121.1 million, down 43 percent as compared to fiscal 2014. Diluted GAAP earnings per share were $0.47 as compared to diluted GAAP earnings per share of $0.81 in fiscal 2014. Non-GAAP net income of $291.8 million was down 25 percent as compared to fiscal 2014. Diluted non-GAAP earnings per share were $1.13 as compared to diluted non-GAAP earnings per share of $1.46 in fiscal 2014.*

During fiscal 2015, Trimble repurchased $234.4 million of its common stock, through a combination of open market purchases and an accelerated share repurchase program. Approximately $250 million remains under the current share repurchase authorization.

Management of the Company responded to market conditions with financial discipline and an emphasis on cost control in negatively affected businesses, which positively impacted the second half of the year, while at the same time continuing to invest in businesses that showed growth, including

 

*  A detailed reconciliation of the Company’s GAAP financial measures to each of the non-GAAP financial measures described is included in the Company’s Annual Report on Form 10-K filed on February 24, 2016 under the section titled “Reconciliation of GAAP to Non-GAAP Financial Measures.”

 

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building construction and transportation and logistics. Compensation paid to our Named Executive Officers for 2015 reflects the Company’s overall financial performance, and the fact that the Company did not meet its revenue and operating income targets.

Fiscal 2015 Executive Compensation Highlights

Based on our overall operating environment and these results, the following key compensation actions were taken with respect to the Named Executive Officers for fiscal 2015:

 

   

No Base Salary Increases—Their annual base salaries were maintained at the same levels as those set in May 2014.

 

   

Short-Term Cash Bonuses—Their cash bonuses earned for 2015 ranged from 8% to 42% of their target cash bonus opportunities. Our CEO earned a cash bonus of $173,654, equal to 16% of his target award. Target incentive opportunities for the 2015 fiscal year continued to be 125% of the annual base salary for our CEO, and 80% of the respective base salaries for each of our other Named Executive Officers.

 

   

Introduced Performance Stock Unit Awards in Place of Stock Options—The long-term compensation mix was modified to include performance stock unit (“PSU”) awards for shares of our common stock. These shares will be earned, if at all, based on our total shareholder return compared to the total shareholder return of the component stocks of the S&P 500 Index measured over a three-year performance period. For fiscal 2015, these PSU awards replaced the grant of options to purchase shares of our common stock.

 

   

Modified Vesting Schedule of Restricted Stock Unit Awards—The vesting schedule of our restricted stock unit (“RSU”) awards was modified to change from full vesting at the end of a three-year period to annual vesting of 33.3% of the award each year over a three-year period.

 

   

Long-Term Incentive Compensation—Granted long-term incentive compensation opportunities in the form of time-based RSU awards that may be settled for shares of our common stock, and PSU awards that also may be settled for shares of our common stock subject to achievement of specified performance objectives over a three-year performance period, in amounts ranging from target levels of approximately $1.3 million to $1.7 million for Named Executive Officers other than our CEO and a target level of approximately $7.7 million for our CEO. Approximately 72% of the target long-term incentive value awarded to our CEO was awarded in the form of PSUs.

Pay-for-Performance Discussion

We believe our executive compensation program is reasonable, competitive, and appropriately balances the goals of attracting, motivating, rewarding, and retaining our executive officers with the goal of aligning executive officers’ interests with those of our shareholders. To ensure our executive officers’ interests are aligned with those of our shareholders and to motivate and reward individual initiative and effort, a substantial portion of their target annual total direct compensation opportunity is “at-risk” and will vary above or below target levels commensurate with our performance.

In fiscal 2015, to strengthen the connection between our performance and the compensation of our executive officers, we introduced PSU awards for shares of our common stock into our executive

 

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compensation program, thereby replacing options to purchase shares of our common stock as one of the forms of equity used to deliver long-term incentive compensation opportunities. We believe that PSU awards serve the desired performance orientation of our executive compensation program by appropriately rewarding our executive officers for delivering financial results that meet or exceed our long-term strategic objectives.

The combination of our cash bonus plan and our other performance-based incentive compensation opportunities represented a majority of the target total direct compensation opportunities of our executive officers, including our CEO and the other Named Executive Officers.

 

 

LOGO

We believe that this design provides balanced incentives for our executive officers to drive financial performance and long-term growth. To ensure that we remain faithful to our compensation philosophy, the Compensation Committee regularly evaluates the relationship between the reported values of the equity awards granted to our executive officers, the amount of compensation realizable (and, ultimately, realized) from such awards in subsequent years, and our total shareholder return over this period.

Shareholder Advisory Vote on Executive Compensation

At our 2015 annual meeting of shareholders, we conducted a non-binding shareholder advisory vote on the compensation of our named executive officers (commonly known as a “Say-on-Pay” vote). Our shareholders approved the Say-on-Pay proposal with approximately 89% of the votes cast in favor of the proposal. We believe that this result demonstrates that our shareholders are generally supportive of our executive compensation program.

As the Compensation Committee has reviewed our executive compensation policies and practices since that vote, it has been mindful of the level of support our shareholders have expressed for our approach to executive compensation. As a result, following our annual review of our executive compensation philosophy, the Compensation Committee decided to retain our general approach to executive compensation, while introducing new performance based elements in our long term equity incentives.

We value the opinions of our shareholders and will continue to consider the outcome of future Say-on-Pay votes, as well as feedback received throughout the year, when making compensation decisions for our executive officers.

 

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With regard to the separate non-binding shareholder advisory vote on the frequency of future non-binding stockholder advisory votes on the compensation of our named executive officers (commonly known as a “Say-When-on-Pay” vote) conducted at our 2011 annual meeting of shareholders, our shareholders cast the highest number of votes for voting on an annual basis, compared to every two or three years. In light of this result and other factors considered, our Board of Directors determined that we will hold annual Say-on-Pay votes until the next required Say-When-on-Pay vote, which will occur at our 2017 annual meeting of shareholders.

Executive Compensation Policies and Practices

We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. The Compensation Committee evaluates our executive compensation program on a regular basis to ensure that it is consistent with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for executive talent. The following policies and practices were in effect during fiscal 2015:

 

   

Independent Compensation Committee. The Compensation Committee is comprised solely of independent directors.

 

   

Independent Compensation Committee Advisor. The Compensation Committee engaged its own compensation consultant to assist with its fiscal 2015 compensation reviews. This consultant performed no consulting or other services for the Company in 2015.

 

   

Annual Executive Compensation Review. The Compensation Committee conducts an annual review and approval of our compensation strategy, including a review and determination of our compensation peer group used for comparative purposes and a review of our compensation-related risk profile to ensure that our compensation programs do not encourage excessive or inappropriate risk-taking and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on us.

 

   

Executive Compensation Policies and Practices. Our compensation philosophy and related corporate governance policies and practices are complemented by several specific compensation practices that are designed to align our executive compensation with long-term shareholder interests, including the following:

 

   

Compensation At-Risk. Our executive compensation program is designed so that a significant portion of compensation is “at risk” based on Company performance, as well as short-term cash and long-term equity incentives to align the interests of our executive officers and shareholders;

 

   

No Retirement Plans. We do not currently offer, nor do we have plans to provide, pension arrangements or retirement plans or arrangements to our executive officers that are different from or in addition to those offered to our other employees;

 

   

Limited Perquisites. We provide limited perquisites or other personal benefits to our executive officers;

 

   

No Tax Reimbursements. We do not provide any tax reimbursement payments (including “gross-ups”) on any perquisites or other personal benefits, other than related to standard relocation benefits;

 

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No Special Health or Welfare Benefits. Our executive officers participate in broad-based company-sponsored health and welfare benefits programs on the same basis as our other full-time, salaried employees;

 

   

No Post-Employment Tax Reimbursements. We do not provide any tax reimbursement payments (including “gross-ups”) on any severance or change-in-control payments or benefits;

 

   

Stock Ownership Policy. We maintain a stock ownership policy that requires our CEO to maintain a minimum ownership level of our common stock; and

 

   

Policy Prohibiting Hedging of our Equity Securities. We prohibit our executive officers, directors, and other employees from hedging our securities.

Executive Compensation Philosophy and Program Design

Compensation Philosophy

Our executive compensation program is guided by our overarching philosophy of paying for demonstrable performance. Consistent with this philosophy, we have designed our executive compensation program to achieve the following primary objectives:

 

   

Establish compensation opportunities that are competitive, reward performance, and maintain internal equity;

 

   

Attract, motivate, and retain highly talented executive officers by providing compensation opportunities that are competitive and reward for performance; and

 

   

Align the interests of our executive officers with the interests of our shareholders by creating long-term shareholder value.

Our current practice is to combine a mixture of compensation elements that balance achievement of our short-term goals with our long-term performance. We provide short-term incentive compensation opportunities in the form of an annual cash bonus plan, which focuses on our yearly operating results, and we provide long-term incentive compensation opportunities in the form of equity awards, including PSU awards that are earned only if we deliver meaningful results over a multi-year period relative to the performance of the S&P 500 over that same time period, and RSU awards that derive additional value from increases in our share price over time and that are subject to multi-year vesting requirements. We do not have a specific policy on the percentage allocation between short-term and long-term compensation elements.

We also believe that the compensation of our CEO should be primarily influenced by our overall financial performance and total shareholder return. The Compensation Committee endeavors to set the compensation of our CEO within a range of compensation provided to similarly-situated chief executive officers of the companies in our compensation peer group, as adjusted by its consideration of the particular factors influencing our performance.

 

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Governance of Executive Compensation Program

Role of the Compensation Committee

The Compensation Committee has overall responsibility for overseeing our compensation and benefits policies generally, and overseeing and evaluating the compensation plans, policies, and practices applicable to our CEO as well as our other executive officers. The Compensation Committee makes recommendations to our full Board of Directors regarding the compensation of our CEO and our other executive officers, including the other Named Executive Officers, and our full Board of Directors (with the exception of our CEO) makes all final decisions regarding his compensation and the compensation of our other executive officers. The Compensation Committee retains a compensation consultant (described below under “Role of the Compensation Consultant”) to provide support to the Committee in its review and assessment of our executive compensation program.

The Compensation Committee reviews the base salary levels, cash bonus opportunities, and long-term incentive compensation opportunities of our executive officers, including our CEO and the other Named Executive Officers, each fiscal year at the beginning of the year, or more frequently as warranted. Adjustments are generally effective in May of each fiscal year.

The Compensation Committee does not establish specific targets for the total direct compensation opportunities of our executive officers, including our CEO and the other Named Executive Officers. When selecting and setting the amount of each compensation element, the Compensation Committee considers the following factors:

 

   

the Company’s performance against the financial and operational objectives established by the Compensation Committee and our Board of Directors;

 

   

each individual executive officer’s skills, experience, and qualifications relative to other similarly-situated executives at the companies in our compensation peer group;

 

   

the scope of each executive officer’s role compared to other similarly-situated executives at the companies in our compensation peer group;

 

   

the performance of each individual executive officer, based on a subjective assessment of his or her contributions to our overall performance, ability to lead his or her business unit or function, and work as part of a team, all of which reflect our core values;

 

   

compensation parity among our executive officers;

 

   

our financial performance relative to our peers; and

 

   

the compensation practices of our compensation peer group and the positioning of each executive officer’s compensation in a ranking of peer company compensation levels.

These factors provide the framework for compensation decision-making and final decisions regarding the compensation opportunity for each executive officer. No single factor is determinative in setting pay levels, nor was the impact of any factor on the determination of pay levels quantifiable.

 

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Role of Chief Executive Officer

In discharging its responsibilities, the Compensation Committee works with members of our management, including our CEO. Our management assists the Compensation Committee by providing information on corporate and individual performance, market compensation data, and management’s perspective on compensation matters. The Compensation Committee solicits and reviews our CEO’s recommendations and proposals with respect to adjustments to annual cash compensation, long-term incentive compensation opportunities, program structures, and other compensation-related matters for our executive officers (other than with respect to his own compensation). The Compensation Committee reviews and discusses these recommendations and proposals with our CEO and considers them as one factor in determining and approving the compensation for our Named Executive Officers (other than our CEO) and other executive officers. Our CEO recuses himself from all discussions and recommendations regarding his own compensation.

Role of Compensation Consultant

The Compensation Committee engages an external compensation consultant to assist it by providing information, analysis, and other advice relating to our executive compensation program and the decisions resulting from its annual executive compensation review.

For fiscal 2015, the Compensation Committee engaged Compensia, Inc., a national compensation consulting firm (Compensia), as its compensation consultant to advise on executive compensation matters, including competitive market pay practices for senior executives, and with the data analysis and selection of the compensation peer group. For fiscal 2015, the scope of Compensia’s engagement included:

 

   

the review and analysis of the compensation for our executive officers, including our CEO and the other Named Executive Officers;

 

   

supporting the design and implementation of changes to the executive long term incentive strategy; and

 

   

the research, development, and review of our compensation peer group.

The terms of Compensia’s engagement include reporting directly to the Compensation Committee and to the Compensation Committee chairman. Compensia also coordinates with our management for data collection and job matching for our executive officers.

In fiscal 2015, Compensia did not provide any other services to the Company. The Compensation Committee has evaluated Compensia’s independence pursuant to the listing standards of the NASDAQ and the relevant SEC rules and has determined that no conflict of interest has arisen as a result of the work performed by Compensia.

Competitive Positioning

For purposes of comparing our executive compensation against the competitive market, the Compensation Committee reviews and considers the compensation levels and practices of a group of peer companies. This compensation peer group consists of technology companies that are similar to us in terms of revenue, market capitalization, geographical location, and number of employees. In developing the compensation peer group for fiscal 2015, the following criteria were observed in identifying comparable companies:

 

   

similar industry and competitive market for talent;

 

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within a range of 0.5x to 2.0x of our revenue; and

 

   

within a range of 0.3x to 3.0x of our market capitalization.

At the beginning of fiscal 2015, the Compensation Committee used the following compensation peer group to assist with the determination of compensation for our executive officers, including the Named Executive Officers, which was the same compensation peer group that was used by the Compensation Committee in fiscal 2014. The information in the table below is based on financial data from S&P’s Research Insight and reflects financial data available at that the time the peer group companies were selected.

 

Peer Company  

Last Four

Quarters
Revenue 

(in millions) 1

   

Market
Capitalization 

(in millions) 2

    1-Year
Revenue
Growth 1
    Fiscal Year
End
Headcount 3
 

ARRIS Group

  $ 4,925      $ 4,676        138     6,500   

Atmel

  $ 1,395      $ 3,777        -1     5,000   

Autodesk

  $ 2,296      $ 12,693        0     7,600   

Brocade Communications

  $ 2,197      $ 4,035        -3     4,143   

CA Technologies

  $ 4,456      $ 12,658        -3     12,700   

Cadence Design Systems

  $ 1,501      $ 4,995        7     5,700   

Citrix Systems

  $ 3,048      $ 11,937        9     9,166   

Equinix

  $ 2,293      $ 10,567        13     3,500   

FLIR Systems

  $ 1,479      $ 4,831        2     2,839   

JDS Uniphase

  $ 1,716      $ 2,847        2     4,900   

Juniper Networks

  $ 4,859      $ 11,391        9     9,483   

Linear Technology

  $ 1,388      $ 10,993        8     4,306   

Nuance Communications

  $ 1,888      $ 5,848        4     12,000   

PTC

  $ 1,335      $ 4,509        5     6,000   

Synopsys

  $ 1,984      $ 6,014        6     8,573   

Varian Medical Systems

  $ 3,008      $ 8,749        3     6,400   

75th Percentile

  $ 3,018      $ 11,093        8     8,721   

Median

  $ 2,091      $ 5,931        4     6,200   

25th Percentile

  $ 1,495      $ 4,634        1     4,752   

Trimble Navigation

  $ 2,337      $ 8,710        12     7,086   
(1) Based on the most recent information publicly available as of September 2014. In most cases, including for the Company, this represents trailing four quarter performance as of the June 2014 quarter end.
(2) Market capitalization reflects the 30-day average stock price for each company as of August 1, 2014.
(3) Headcount information based on the most recent fiscal year end for each company prior to October 2014.

In November 2015, with the assistance of its compensation consultant, the Compensation Committee updated the compensation peer group. In identifying potential peer companies at that time, the Compensation Committee relied on the same financial criteria described above and that was used in selecting the compensation peer group at the beginning of 2015. Changes to the compensation peer group included the removal of Atmel, Equinix, Linear Technology, Varian Medical Systems, and JDS

 

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Uniphase and the addition of Keysight Technologies, Motorola Solutions, Roper Technologies, Teledyne Technologies, and Zebra Technologies, with additions and removals based on the above financial criteria.

The Compensation Committee approved the following updated compensation peer group to assist with the determination of compensation for our executive officers at the end of fiscal 2015. The information in the table below is based on financial data from S&P’s Research Insight and reflects financial data available at that the time the peer group companies were selected.

 

Peer Company  

Last Four

Quarters
Revenue 

(in millions) 1

   

Market
Capitalization 

(in millions) 2

    1-Year
Revenue
Growth 1
    Fiscal Year
End
Headcount 3
 

ARRIS Group

  $ 5,144      $ 3,797        5     6,660   

Autodesk

  $ 2,539      $ 10,403        7     8,823   

Brocade Communications

  $ 2,239      $ 4,264        2     4,161   

CA Technologies

  $ 4,170      $ 11,875        -5     11,600   

Cadence Design Systems

  $ 1,651      $ 5,807        10     6,100   

Citrix Systems

  $ 3,168      $ 10,792        4     10,081   

FLIR Systems

  $ 1,547      $ 3,967        5     2,741   

Juniper Networks

  $ 4,517      $ 9,727        -7     8,806   

Keysight Technologies

  $ 2,868      $ 5,381        0     9,600   

Motorola Solutions

  $ 5,850      $ 13,384        -2     15,000   

Nuance Communications

  $ 1,929      $ 5,053        2     14,000   

PTC

  $ 1,309      $ 3,685        -2     6,444   

Roper Technologies

  $ 3,592      $ 15,979        4     10,137   

Synopsys

  $ 2,194      $ 7,221        8     9,436   

Teledyne Technologies

  $ 2,366      $ 3,381        1     9,800   

Zebra Technologies

  $ 2,883      $ 4,202        156     6,800   

75th Percentile

  $ 3,736      $ 10,500        5     10,095   

Median

  $ 2,703      $ 5,594        3     9,129   

25th Percentile

  $ 2,128      $ 4,143        -1     6,606   

Trimble Navigation

  $ 2,317      $ 4,773        -4     8,217   
(1) Based on the most recent information publicly available as of October 2015. In most cases, including for the Company, this represents trailing four quarter performance as of the June 2015 quarter end.
(2) Market capitalization reflects the 30-day average stock price for each company as of August 31, 2015.
(3) Headcount information based on the most recent fiscal year end for each company prior to October 2015.

The Compensation Committee reviews our compensation peer group at least annually and makes adjustments to its composition, taking into account changes in both our business and the businesses of the companies in the peer group.

The Compensation Committee uses data drawn from our compensation peer group, as well as data from the Radford Global Technology executive compensation survey to evaluate the competitive market when determining the total direct compensation packages for our executive officers, including

 

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base salary, target cash bonus opportunities, and long-term incentive compensation. Radford provides compensation market intelligence, and is widely used within the technology industry. In addition, subsets of the Radford Global Technology executive compensation survey were incorporated into the competitive assessment prepared by the Compensation Committee’s compensation consultant and used by the Compensation Committee to evaluate the compensation of our executive officers, including our CEO and the other Named Executive Officers. Specifically, the Compensation Committee received a custom output of survey results reflecting only companies from our compensation peer group in addition to survey results tailored solely based on revenue.

The executive compensation survey data supplements the compensation peer group data and provides additional information for the Named Executive Officers and other vice president positions for which there is less public comparable data available.

Individual Compensation Elements

In fiscal 2015, the principal elements of our executive compensation program, and the purposes for each element, are summarized in the table below.

 

Element   Form of Compensation   Purpose
Base Salary   Cash   Designed to attract and retain highly talented executives by providing pay opportunities that are competitive in the market and reward performance
Short Term Cash Bonus Opportunities   Cash   Designed to motivate our executives to achieve business goals and provide financial incentives when the Company and business areas meet or exceed annual goals and targets established under the incentive plan

Long Term Incentives

(Equity Awards)

  Performance stock unit awards and restricted stock unit awards   Designed to align the interests of our executives with the interests of our shareholders by motivating our executives to achieve long term shareholder value

Base Salary

Base salary represents the fixed portion of the compensation of our executive officers, including our CEO and the other Named Executive Officers, and is an important element of compensation intended to attract and retain highly-talented individuals.

Using the competitive market data provides by its compensation consultant, the Compensation Committee reviews and adjusts the base salaries for each of our executive officers, including our CEO and each of the other Named Executive Officers, as part of its annual executive compensation review. In addition, the base salaries of our executive officers may be adjusted by the Compensation Committee in the event of a promotion or significant change in responsibilities.

Generally, the Compensation Committee sets base salaries with reference to the competitive range of the market median of our compensation peer group and applicable executive compensation

 

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survey data. Although we set base salaries within a competitive range of the market median, the actual positioning will also be based on the Compensation Committee’s assessment of the factors described above.

In May 2015, consistent with the recommendation of management, the Board of Directors and the Compensation Committee determined to maintain the annual base salaries of our executive officers, including our CEO and the other Named Executive Officers, at their fiscal 2014 levels. In making this decision, they considered our performance and percentile rankings compared to the companies in the compensation peer group, the current risks and challenges facing us, as well as the individual qualifications, skills, and past performance of the executive officers.

The base salaries of our CEO and the other Named Executive Officers for fiscal 2015 that were established in May 2015, remained unchanged from the base salaries for fiscal 2014 that were established in May 2014:

 

Named Executive Officer   Fiscal 2014 Base Salary
Rate (1)
    Fiscal 2015 Base Salary
Rate (1)
    Percentage Adjustment  

Mr. Berglund

  $ 860,000      $ 860,000        0

Mr. Delepine

  $ 425,000      $ 425,000        0

Mr. Fosburgh

  $ 425,000      $ 425,000        0

Mr. Gibson

  $ 425,000      $ 425,000        0

Mr. Veneziano

  $ 380,000      $ 380,000        0
(1) Reflects the annual salary rate approved by the Compensation Committee. Annual changes to base salaries, if any, are generally effective in May of each fiscal year.

The salaries paid to our CEO and the other Named Executive Officers in fiscal 2015 are set forth in the “Summary Compensation Table” below.

Short-Term Cash Bonuses

We use a short-term cash bonus plan to motivate our executive officers and other participants to achieve our annual and quarterly business goals. In fiscal 2015, our Board of Directors adopted the Annual Management Incentive Plan for fiscal 2015 (the “2015 MIP”) to provide financial incentives for the Company as a whole and our individual business sectors and divisions to meet or exceed the annual goals and targets established under our fiscal 2015 annual operating plan. Senior-level managers, our executive officers, including our CEO and the other Named Executive Officers, and certain other individual employees were eligible to participate, upon approval by our CEO, or by our Board of Directors with respect to our CEO, in the 2015 MIP.

Target Cash Bonus Opportunities

Cash bonuses under the 2015 MIP were based upon an eligible percentage of each participant’s base salary within a range of target incentive opportunities. The target cash bonus opportunities for our executive officers, including the Named Executive Officers (other than our CEO) are recommended by our CEO to the Compensation Committee, and approved by our Board of Directors. The target cash bonus opportunity for our CEO is recommended by the Compensation Committee and approved by the independent members of our Board of Directors. For fiscal 2015, the target cash bonus opportunities for our executive officers, including our CEO and the other Named Executive Officers, were maintained at their fiscal 2014 levels. Specifically, the target incentive opportunities for the 2015 fiscal year were as follows: for our CEO, 125% of his annual base salary; and for Messrs. Delepine,

 

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Fosburgh, Gibson and Veneziano, 80% of each of their respective annual base salaries. Potential cash bonuses for our executive officers, including our CEO and the other Named Executive Officers, under the 2015 MIP could range from zero to 300% of their target cash bonus opportunity.

Bonus Plan Performance Measure

For purposes of the 2015 MIP, our Board of Directors selected operating income as the corporate performance measure. For this purpose, “operating income” is determined as follows: (i) with respect to a sector or division, operating income for that sector or division; and (ii) with respect to the Company as a whole, operating income for the Company adjusted for restructuring costs, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture costs associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence, integration costs, and litigation expenses. A sector is a grouping of divisions within the Company. Because of these adjustments, the 2015 MIP used a non-GAAP measure of operating income. References to operating income in the context of the 2015 MIP targets refer to this non-GAAP measure, unless otherwise noted.

Bonus Plan Formula

In the case of our CEO and the other Named Executive Officers, actual payments under the 2015 MIP were dependent on our actual operating income results relative to the operating income goals established for him. For our CEO and CFO, payments under the 2015 MIP were dependent upon achievement of pre-established operating income goals for the Company as a whole and, for Messrs. Fosburgh, Gibson, and Veneziano, the achievement of the pre-established revenue and operating income goals for the Company as a whole and for their respective business sectors, each constituting 50% of their respective target bonus amounts. Operating income goals were established for the Company and for each business sector for each quarter and for the full fiscal year.

Each Named Executive Officer was eligible to receive approximately 15% of his target cash bonus opportunity for each quarter if quarterly operating income goals were achieved, and was eligible to receive his full target cash bonus opportunity if full year revenue and operating income goals were achieved. The target cash bonus opportunities based on quarterly and annual performance operated independently. For example, it was possible for a Named Executive Officer to achieve the quarterly goals for revenue and operating income and receive quarterly payments, but not achieve an annual goal for revenue and operating income. Similarly, it was possible for a Named Executive Officer to receive an annual bonus amount if full year revenue and operating income goals were achieved, even if not all prior quarterly income goals had been achieved. The amount of any quarterly cash bonus payments based on the achievement of quarterly goals are deducted from the annual bonus amount, if any.

At the end of the year, an annual bonus amount for each executive was determined based on full year operating income results, and, in the cases of Messrs. Fosburgh, Gibson and Veneziano, on the annual operating income results of their respective business sectors. Additionally, threshold levels of revenue and operating income for the Company and for the sectors applicable to each Named Executive Officer must be met in order for any bonus to be paid based upon annual results. The amount of this annual bonus amount can vary from 0% to 300% of each Named Executive Officer’s bonus target for the full fiscal year, calculated on a sliding scale, as described below.

Named Executive Officers were required to remain continuously employed through a payment date to be entitled to a payment for the applicable period.

 

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The following table sets forth the 2015 MIP operating income goals and the operating income results applicable to the bonus payment for each of the Named Executive Officers (in millions).

 

    Q1     Q2     Q3     Q4     2015     Annual
Thresholds
 
     Target     Actual     Target     Actual     Target     Actual     Target     Actual     Target     Actual     Achieved?1  

Corporate

  $ 97      $ 97      $ 116      $ 97      $ 123      $ 105      $ 134      $ 91      $ 470      $ 390        N   

Sector (Gibson)

  $ 20      $ 9      $ 37      $ 19      $ 42      $ 25      $ 42      $ 16      $ 141      $ 69        N   

Sector (Veneziano)

  $ 28      $ 31      $ 30      $ 28      $ 34      $ 33      $ 37      $ 33      $ 129      $ 125        Y   

Sector (Fosburgh)

  $ 21      $ 13      $ 33      $ 26      $ 40      $ 32      $ 40      $ 24      $ 134      $ 95        N   
(1) Payment of the annual portion of the bonus is contingent upon achievement of threshold revenue and operating income levels for the full fiscal year.

The relationship between the minimum operating income threshold, target and maximum performance, and the bonus earned under the annual portion of the MIP is detailed in the table below. The formula provides for payments based upon partial achievement of operating income goals above the minimum threshold shown below on a linear interpolated basis between 0 and 100% achievement of operating income goals, and on an upward sloping linear interpolated basis between 100 and 300% achievement of operating income goals.

 

      Operating Income Goals (in millions)
Incentive Payout as a % of
Target
   Company    Sector
(Gibson)
   Sector
(Veneziano)
   Sector
(Fosburgh)
0%    $418    $121    $114    $115
100%    $470    $141    $129    $134
200%    $500    $162    $158    $164
300%    $550    $192    $197    $200

Bonus Payments

The actual cash bonus payments earned by our CEO and the other Named Executive Officers under the 2015 MIP ranged from 8% to 42% of their target cash bonus opportunities. The following table sets forth the target cash bonus opportunities, weighting of corporate and sector operating income goals, the actual achievement level relative to these target levels, and the actual cash bonus payment for fiscal 2015 for the Named Executive Officers for fiscal 2015:

 

      Target Bonus      Bonus Weighting     % Achievement     Actual Bonus  
Named Executive Officer    % of
Base
    Value
($K)
     Corporate     Sector     Corporate     Sector     % of
Target
Bonus
    Earned
Value
($K)
 

Steven W. Berglund

     125   $  1,075         100     0     16     N/A        16   $  174   

Francois Delepine

     80   $ 340         100     0     16     N/A        16   $ 55   

Christopher W. Gibson

     80   $ 340         50     50     16     0     8   $ 27   

James Veneziano

     80   $ 304         50     50     16     68     42   $ 128   

Bryn A. Fosburgh

     80   $ 340         50     50     16     0     8   $ 27   

 

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The cash bonus payments made to our CEO and the other Named Executive Officers for fiscal 2015 are set forth in the “Summary Compensation Table” below.

Long-Term Incentive Compensation

The Compensation Committee and the Board of Directors view long-term incentive compensation in the form of equity awards as an important component of our executive compensation program. The realized value of these equity awards bears a direct relationship to our stock price, and, therefore, these awards are an incentive for our executive officers to create value for our shareholders. Equity awards also help us retain qualified executive officers in a competitive market.

Long-term incentive compensation opportunities in the form of equity awards are granted by our Board of Directors, based on the recommendations of the Compensation Committee. The amount and forms of such equity awards are determined by the Compensation Committee after considering factors such as individual performance, future potential, ability to influence our long term growth and profitability, and importance to our success. The amounts of the equity awards are also intended to provide competitively-sized awards and resulting target total direct compensation opportunities within a competitive range of the market median relative to our compensation peer group and Radford survey data for similar roles and positions for each of our executive officers, taking into consideration business results, internal equity, experience, and individual performance.

In June 2015, the Compensation Committee determined that the equity awards to be granted to our executive officers should be in the form of PSU awards and time-based RSU awards for shares of our common stock. The Compensation Committee decided that, to further align the interests of our executive officers and our shareholders, the PSU awards would replace options to purchase shares of our common stock, which had been granted in previous years, and would account for at least 50% of the economic value of long-term incentives awarded to each Named Executive Officer.

We have historically granted equity to our executives on two dates during each fiscal year. In 2015, those grants dates were in July and November. These latter equity awards are granted following completion of an updated competitive market analysis by the Compensation Committee’s compensation consultant. At that time, the Compensation Committee, following receipt of award recommendations by our CEO, reviews this analysis, as well as both Company and individual performance, and recommends to our Board of Directors additional equity awards at levels intended to ensure that our executive officers’ target total direct compensation for the year is both market competitive and an appropriate reflection of their performance.

In July and November 2015, the Compensation Committee recommended, and our Board of Directors approved, the following equity awards for our CEO and the other Named Executive Officers:

 

Named Executive Officer    July Performance
Stock Unit Awards
(# of shares)
    

November
Restricted Stock
Unit Awards

(# of shares)

    

November
Performance
Stock Awards

(# of shares)

    

Aggregate Grant
Date Fair Value of
Equity Awards

($)

 

Mr. Berglund

     100,000         94,430         75,370       $ 7,721,770   

Mr. Delepine

     16,200         25,600         9,400       $ 1,387,950   

Mr. Fosburgh

     23,900         31,950         8,050       $ 1,714,813   

Mr. Gibson

     13,700         24,350         10,650       $ 1,328,263   

Mr. Veneziano

     16,000         25,500         9,500       $ 1,383,175   

 

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PSU awards

The PSU awards granted to our executive officers are designed to link executive compensation with increased stockholder value. For the July grant of PSUs, the actual number of shares of our common stock for which the PSU awards may be settled varies based on our total shareholder return (“TSR”) relative to the total shareholder return of the components of the S&P 500 Index during the performance period, which commences on July 8, 2015 and concludes on March 31, 2018 (the “Performance Period”). The Compensation Committee selected the S&P 500 Index as the most appropriate reference from which to evaluate our performance because it represents a reliable indicator of the general economy and reflects the unique and diverse nature of our operations. While the approved design of the PSU program includes a three year performance period, the initial grant of PSUs in July 2015 featured a shortened performance period based upon the timing of completion of PSU award design.

In November 2015, the Compensation Committee approved equity grants for our Named Executive Officers consisting of a mix of RSUs and PSUs that maintained the target allocation of at least 50% of long-term incentive value in the form of PSUs. The design of the November grants of PSUs included a performance period ending on the same date as the July awards. The design features of the November PSU grants are the same as the July grants in all respects other than the performance period, which begins on November 6, 2015 and ends on March 31, 2018.

For purposes of the PSU awards, the payout range based on our TSR relative to the S&P 500 Index over the Performance Period is as follows:

 

Relative TSR Compared to Percentile Ranking across

S&P 500 Member Companies

  

Payout Percentage of Target.

(# of shares)

Maximum: 80th percentile or above

   200%

Target: 50th percentile

   100%

Threshold: 25th percentile

   50%

Below threshold

   0%

For purposes of the PSU awards, TSR for the Company and the components of the S&P 500 Index will be based on the 30-trading day average stock price through the final day of the Performance Period and the 30-trading day average stock price prior to the commencement of the Performance Period, including the reinvestment of dividends where applicable to S&P 500 Index components.

The design features of the November PSU grant are the same as the July grant in all respects other than the performance period, which begins on November 6, 2015 and ends on March 31, 2018.

RSU Awards

The RSU awards granted to our executive officers in November 2015 vest in equal annual installments over the three-year period from the date of grant, contingent upon an executive officer remaining continuously employed by us through each applicable vesting date. This vesting schedule differs from prior RSU awards which vested in full on the third anniversary of the grant date, contingent upon the executive officer remaining continuously employed by us through the vesting date. Upon vesting, the RSU awards may be settled by issuing the number of shares of our common stock, or by a cash payment equal to the fair market value of the shares on the vesting date, or a combination of shares and cash, at the discretion of the Company.

 

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The equity awards granted to our CEO and the other Named Executive Officers in fiscal 2015 are set forth in the “Summary Compensation Table” and the “Grants of Plan-Based Awards” table below.

Welfare and Health Benefits

Our executive officers, including our CEO and the other Named Executive Officers, are eligible to receive the same employee benefits that are generally available to all our full-time employees, subject to the satisfaction of certain eligibility requirements. These benefits include health and welfare, benefits generally available to all U.S. employees. In addition, employees, including our executive officers, are eligible to participate in our Section 401(k) retirement plan. Participants in the Section 401(k) plan in general may receive up to $2,500 per year in matching Company contributions.

In structuring these benefits, we provide an aggregate level of benefits that are comparable to those provided by similar companies. Certain of the Named Executive Officers participate in our Non-Qualified Deferred Compensation Plan, further discussed below under “Post-Employment Compensation.” In addition, we pay the life insurance premiums on behalf of our CEO and the other Named Executive Officers, as part of our general death benefits for full time employees.

Perquisites and Other Personal Benefits

Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide significant perquisites or other personal benefits to our executive officers, including our CEO and the other Named Executive Officers, except as generally made available to our employees, or in situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment and retention purposes. During fiscal 2015, neither our CEO nor any of the other Named Executive Officers received perquisites or other personal benefits that were, in the aggregate, $10,000 or more for each individual, except for contributions made by the Company on behalf of Mr. Gibson to the Company’s Deferred Compensation Plan, as described below.

In the future, we may provide perquisites or other personal benefits in limited circumstances, such as those described in the preceding paragraph. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee.

Employment Arrangements

We have entered into a written employment agreement with our CEO and have written employment offer letters with each of our other executive officers, including the other Named Executive Officers. In filling each of our executive positions, we recognized the need to develop competitive compensation packages to attract qualified candidates in a dynamic labor market. At the same time, in formulating these compensation packages, we were sensitive to the need to integrate new executive officers into the executive compensation structure that we were seeking to develop, balancing both competitive and internal equity considerations. Each of these arrangements provides for “at will” employment.

In the case of our CEO and CFO, their employment arrangements also provide for certain payments and benefits in the event of certain qualifying terminations of employment regardless of whether a change in control of the Company has occurred. These post-employment compensation terms are discussed in greater detail in the “Post-Employment Compensation” section below.

 

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In connection with Mr. Gibson’s relocation to the United States, the Company entered into a letter of assignment dated June 11, 2008, as amended December 20, 2009, under which the Company agreed to repatriate Mr. Gibson to England at the Company’s expense in the event of Mr. Gibson’s termination of employment by the Company (other than for gross misconduct) at any time or, in the event of Mr. Gibson’s retirement from the Company after 2016. The letter of assignment does not provide for a tax “gross-up” obligation by the Company in the event that any additional taxes become payable by Mr. Gibson under these arrangements. Additionally, the Company agreed to contribute 5% of Mr. Gibson’s annual base salary and MIP earnings to the Company’s Deferred Compensation Plan on Mr. Gibson’s behalf, contingent on Mr. Gibson contributing matching funds.

Post-Employment Arrangements

We have entered into change in control severance agreements (the “Severance Agreements”) with each of our executive officers including our CEO and the other Named Executive Officers. We believe that having in place reasonable and competitive post-employment compensation arrangements are essential to attracting and retaining highly-qualified executive officers. The Severance Agreements are designed to provide reasonable compensation to executive officers who leave the Company under certain circumstances to facilitate their transition to new employment. Further, in some instances we seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing executive officer to sign a separation and release agreement acceptable to us as a condition to receiving post-employment compensation payments or benefits.

The Compensation Committee does not consider the specific amounts payable under the Severance Agreements when establishing annual compensation. We do believe, however, that these arrangements are necessary to offer compensation packages that are competitive.

We believe that these arrangements are designed to align the interests of our executive officers and our shareholders when considering our long-term future. The primary purpose of these arrangements is to keep our most senior executive officers focused on pursuing all corporate transaction activity that is in the best interests of our shareholders regardless of whether those transactions may result in their own job loss. Reasonable post-acquisition payments and benefits should serve the interests of both the executive officer and our shareholders.

For detailed descriptions of the employment arrangements and post-employment arrangements we maintain with our Named Executive Officers referenced above, as well as an estimate of the potential payments and benefits payable under these arrangements, see “Potential Payments on a Change in Control and Upon Qualifying Termination Following a Change in Control” below.

Other Compensation Policies and Practices

Equity Awards Grant Policy

Our Board of Directors may grant equity awards while the directors are in possession of material, non-public information. Due to the fact that our Board of Directors’ regular meetings are timed to coincide with the preparation of our quarterly financial results, equity awards have and will be granted shortly before an earnings release. The Compensation Committee or our Board of Directors may also grant equity awards at a special meeting, or by unanimous written consent, in special circumstances, such as to facilitate the hiring of a key executive officer.

All equity awards are granted to our executive officers pursuant to the Company’s 2002 Stock Plan. Options to purchase shares of our common stock are granted with an exercise price equal to the fair market value of our common stock on the date of grant.

 

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Stock Ownership Policy

We maintain a stock ownership policy for our chief executive officer and the non-employee members of our Board of Directors to further align their respective interests with the interests of our shareholders, and to further promote our commitment to sound corporate governance. This policy requires our chief executive officer to own a minimum number of shares of our common stock equal to a value of five times his or her annualized base salary. The non-employee members of our Board of Directors are required to own a minimum number of shares of our common stock shares equal to a value of $200,000.

The number of shares necessary to meet the minimum ownership level may be accumulated during the first five years following adoption of the guidelines or, if later, during the first five years after becoming chief executive officer or a member of our Board of Directors, as applicable. The shares of our common stock counted toward the ownership guidelines include shares owned directly and indirectly, provided there is an economic interest in the shares. For our CEO, this ownership level must be attained within five years from the date the policy was adopted. As of the end of fiscal 2015, Mr. Berglund had achieved his required ownership level.

Policy Prohibiting Hedging

We have a policy that prohibits all hedging or monetization transactions, which could result in a director, officer or employee to continue to own the covered securities at issue, but without the full risks and rewards of ownership. If that were to occur, the director, officer or employee may no longer have the same objectives as the Company’s other shareholders. The Company considers it improper and inappropriate for its employees, including its Named Executive Officers, to engage in such transactions, and has expressly prohibited such activity under its Insider Trading Policy.

Tax and Accounting Considerations

Deductibility of Executive Compensation

Generally, Section 162(m) of the Code disallows public companies a tax deduction for federal income tax purposes of remuneration in excess of $1 million paid to their chief executive officer and each of the three other most highly-compensated executive officers (other than the chief executive officer and chief financial officer) whose compensation is required to be disclosed to our shareholders under the Exchange Act in any taxable year. Remuneration in excess of $1 million may only be deducted if it is “performance-based compensation” within the meaning of Section 162(m) or qualifies for one of the other exemptions from the deductibility limit. In making compensation decisions, the Compensation Committee considers the potential effects of Section 162(m) on the compensation paid to our CEO and the other Named Executive Officers.

Where reasonably practicable, the Compensation Committee seeks to qualify the performance-based incentive compensation paid or awarded to our CEO and the other Named Executive Officers for the “performance-based compensation” exemption from the deductibility limit of Section 162(m). As such, in approving the amount and form of compensation for the Named Executive Officers, the Compensation Committee considers all elements of our cost of providing such compensation, including the potential impact of Section 162(m). To maintain flexibility in compensating the Named Executive Officers in a manner designed to promote varying corporate goals, however, the Compensation Committee has not adopted a policy that all compensation payable to our CEO and the other Named Executive Officers that is subject to Section 162(m) must be deductible for federal income tax purposes. From time to time, the Compensation Committee may, in its judgment, approve

 

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compensation for our CEO and the other Named Executive Officers that does not comply with an exemption from the deductibility limit when it believes that such compensation is in the best interests of the Company and our shareholders.

Accounting for Stock-Based Compensation

We follow the Financial Accounting Standard Board’s Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”) for our stock-based compensation awards. FASB ASC Topic 718 requires us to measure the compensation expense for all share-based payment awards made to our employees and members of our Board of Directors, including options to purchase shares of our common stock and other stock awards, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the executive compensation tables required by the federal securities laws, even though the recipient of the awards may never realize any value from their awards.

Compensation Committee Report

The information contained in this Compensation Committee Report shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that it is specifically incorporated by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with the Company’s management, and, based on this review and discussion, has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement.

Submitted by the Compensation Committee of the Company’s Board of Directors,

 

Börje Ekholm, Member    Ronald S. Nersesian, Member    Nickolas W. Vande Steeg, Chairman
Compensation Committee    Compensation Committee    Compensation Committee

Also submitted by the Company’s Board of Directors other than with respect to the Tax and Accounting Treatment section of the Compensation Discussion and Analysis,

 

Steven W. Berglund

   Kaigham (Ken) Gabriel    Merit E. Janow    Ulf J. Johansson    Mark S. Peek

 

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Executive Compensation Tables

This section includes the executive compensation tables required by Item 402 of Regulation S-K, promulgated under the Securities Act of 1933, as amended.

Summary Compensation Table

The following table sets forth the compensation information for the 2015, 2014 and 2013 fiscal years, respectively, by: (i) all persons who served as the Company’s chief executive officer during the last completed fiscal year; (ii) all persons who served as the Company’s chief financial officer during the last completed fiscal year; and (iii) the three other most highly compensated executive officers of the Company serving at the end of the last completed fiscal year.

 

SUMMARY COMPENSATION TABLE  
Name and Principal Position   Year     Salary (1)     Stock
Awards (2)
    Option
Awards (2)
   

Non-Equity
Incentive

Plan Comp-

ensation (1)(3)

    

All Other
Comp-

ensation

    Total  

Steven W. Berglund

President & Chief

Executive Officer

   
 
 
2015
2014
2013
  
  
  
  $

$

$

 860,000

838,308

791,250

  

  

  

  $

$

$

 7,721,770

3,149,687

2,753,922

  

  

  

  $

$

$

-

 2,754,808

3,034,898

  

  

  

  $

$

$

  173,654

306,231

714,905

  

  

  

   $

$

$

-

-

-

  

  

  

  $

$

$

 8,755,424

7,049,034

7,294,975

  

  

  

Francois Delepine

Chief Financial Officer

   
 
2015
2014
  
  
  $

$

425,000

416,827

  

  

  $

$

1,387,950

5,028,350

  

  

  $

$

-

160,800

  

  

  $

$

54,923

98,077

  

  

   $

$

2,500 

2,500 

(4) 

(4) 

  $

$

1,870,373

5,706,554

  

  

Bryn A. Fosburgh

Vice President

   
 
 
2015
2014
2013
  
  
  
  $

$

$

425,000

414,853

392,758

  

  

  

  $

$

$

1,714,813

628,168

493,923

  

  

  

  $

$

$

-

549,945

556,800

  

  

  

  $

$

$

27,462

204,070

260,897

  

  

  

   $

$

$

2,500 

2,500 

2,500 

(4) 

(4) 

(4) 

  $

$

$

2,169,775

1,799,536

1,706,878

  

  

  

Chris Gibson

Vice President

   
 
 
2015
2014
2013
  
  
  
  $

$

$

425,000

402,151

391,053

  

  

  

  $

$

$

1,328,263

566,690

556,800

  

  

  

  $

$

$

-

494,490

524,811

  

  

  

  $

$

$

27,462

121,120

101,893

  

  

  

   $

$

$

21,356 

1,641 

 28,005 

(5) 

(5) 

(5) 

  $

$

$

1,802,081

1,586,092

1,602,562

  

  

  

James Veneziano

Vice President

   
 
 
2015
2014
2013
  
  
  
  $

$

$

380,000

361,923

319,500

  

  

  

  $

$

$

1,383,175

541,958

554,772

  

  

  

  $

$

474,390

531,968

  

  

  $

$

$

127,805

253,669

293,251

  

  

  

   $

$

$

2,500 

2,500 

2,500 

(4) 

(4) 

(4) 

  $

$

$

1,893,480

1,634,440

1,701,991

  

  

  

(1) The amounts shown in the columns for Salary and Non-Equity Incentive Plan Compensation include amounts earned in the applicable year but deferred at the election of the Named Executive Officer pursuant to the Company’s Non-Qualified Deferred Compensation Plan. The salary amounts shown are for actual amounts paid in each fiscal year. These may differ from the annual base salaries that are established for such year, which are typically set in May.
(2) The amounts in these columns represent the grant date fair value of stock options and restricted stock unit awards, calculated pursuant to FASB ASC Topic 718, for the year in which the stock option or restricted stock unit award was granted. For a description of the assumptions used in determining the values described in these columns, please refer to “Note 13: Employee Stock Benefit Plans” of the Company’s Annual Report on Form 10-K filed on February 24, 2016. These amounts do not necessarily represent actual value that may be realized. The amounts in this column that relate to PSUs reflect the value based on the probable outcome of the achievement of the applicable performance goals.
(3) The amounts shown consist of cash bonuses earned under the Management Incentive Plan for 2015.
(4) The amount represents the Company matching contributions under the Company’s 401(k) plan for the periods in which they accrued. All full-time employees are eligible to participate in the Company’s 401(k) plan.
(5) The amount represents the Company’s contributions to the Non-Qualified Deferred Compensation Plan on Mr. Gibson’s behalf pursuant to the letter of assignment between the Company and Mr. Gibson dated June 11, 2008, as amended on December 20, 2009.

 

-65-


Grants of Plan-Based Awards

The table below lists the stock option grants, and restricted stock unit awards, and estimated future MIP target incentive opportunities, for each of the Named Executive Officers during the fiscal year ended January 1, 2016.

 

GRANTS OF PLAN-BASED AWARDS  
Name   Award Type   Grant Date   Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards (1)
    Estimated Future Payouts
Under Equity Incentive Plan
Awards (#)
    All Other
Stock
Awards:
Number of
Shares of
Stock or
Units (#)
    Grant Date
Fair Value
of Stock
Awards (2)
 
      Threshold   Target     Maximum     Threshold     Target     Maximum      

Steven W. Berglund

  Cash Incentive           $ 1,075,000      $ 3,225,000                                           
   

PSU Award

  7/8/2015 (3)                         50,000        100,000        200,000              $ 2,977,000   
   

PSU Award

  11/6/2015 (4)                         37,685        75,370        150,740              $ 2,600,265   
    RSU Award   11/6/2015 (5)                                                 94,430      $ 2,144,505   

Francois Delepine

  Cash Incentive           $ 340,000      $ 1,020,000                                           
   

PSU Award

  7/8/2015 (3)                         8,100        16,200        32,400              $ 482,274   
   

PSU Award

  11/6/2015 (4)                         4,700        9,400        18,800              $ 324,300   
    RSU Award   11/6/2015 (5)                                                 25,600      $ 581,376   

Bryn A. Fosburgh

  Cash Incentive           $ 340,000      $ 1,020,000                                           
   

PSU Award

  7/8/2015 (3)                         11,950        23,900        47,800              $ 711,503   
   

PSU Award

  11/6/2015 (4)                         4,025        8,050        16,100              $ 277,725   
    RSU Award   11/6/2015 (5)                                                 31,950      $ 725,585   

Chris Gibson

  Cash Incentive           $ 340,000      $ 1,020,000                                           
   

PSU Award

  7/8/2015 (3)                         6,850        13,700        27,400              $ 407,849   
   

PSU Award

  11/6/2015 (4)                         5,325        10,650        21,300              $ 367,425   
    RSU Award   11/6/2015 (5)                                                 24,350      $ 552,989   

James Veneziano

  Cash Incentive           $ 304,000      $ 912,000                                           
   

PSU Award

  7/8/2015 (3)                         8,000        16,000        32,000              $ 476,320   
   

PSU Award

  11/6/2015 (4)                         4,750        9,500        19,000              $ 327,750   
    RSU Award   11/6/2015 (5)                                                 25,500      $ 579,105   
(1) The annual target cash incentive opportunities under the MIP for the 2015 fiscal year were as follows: Mr. Berglund, 125 % of his annual base salary; and Messrs. Delepine, Fosburgh, Gibson, and Veneziano, 80% of each of their respective annual base salaries.
(2) The grant date fair value for RSUs is measured based on the closing fair market value of our common stock on the date of grant. The grant date fair value for PSUs is calculated based on a Monte-Carlo valuation model as of the date of grant. The fair values were calculated in accordance with FASB ASC 718. For a description of the assumptions used in determining the values described in these columns, please refer to “Note 13: Employee Stock Benefit Plans” of the Company’s Annual Report on Form 10-K filed on February 24, 2016. These amounts do not necessarily represent actual value that may be realized.
(3) The PSUs granted on July 8, 2015 are scheduled to vest on March 31, 2018, subject to each officer’s continued employment with the Company through the vesting date and satisfaction of performance conditions for the performance period beginning on July 8, 2015 and ending on March 31, 2018. As described under “Compensation Discussion and Analysis”, in each case, between 0% and 200% of the target number of PSUs vest depending on the Company’s relative TSR of its common stock as compared to the TSR of the other companies included in the S&P 500 Index over the performance period, with 100% of the target PSUs vesting if the Company’s TSR is at the 50th percentile.
(4) The PSUs granted on November 6, 2015 are scheduled to vest on March 31, 2018, subject to each officer’s continued employment with the Company through the vesting date and satisfaction of performance conditions for the performance period beginning on November 6, 2015 and ending on March 31, 2018. As described under “Compensation Discussion and Analysis”, in each case, between 0% and 200% of the target number of PSUs vest depending on the Company’s relative TSR of its common stock as compared to the TSR of the other companies included in the S&P 500 Index over the performance period, with 100% of the target PSUs vesting if the Company’s TSR is at the 50th percentile.

 

-66-


(5) One third of the time-based RSUs granted on November 6, 2015 vest on each anniversary of the date of the grant such that the restricted stock units become fully vested three years from the date of grant, subject to each Named Executive Officer’s continued employment with the Company through such anniversary date. Upon vesting, the restricted stock units may be settled by issuing the number of shares shown in the table, or by making a cash payment equal to the fair market value of the shares on the vesting date, or a combination of shares and cash, at the discretion of the Company.

 

-67-


Outstanding Equity Awards at Fiscal Year-End

The table below shows the stock options and stock awards outstanding for each of the Named Executive Officers as of the fiscal year ended January 1, 2016.

 

OUTSTANDING EQUITY AWARDS  
Name   Grant Date     Option Awards     Stock Awards  
    Number of
securities
underlying
unexercised
options
exercisable
(#)
    Number of
securities
underlying
unexercised
options
unexercisable
(#)
    Option
exercise
price
    Option
expiration
date
    Number of
shares or
units of
stock that
have not
vested
(#)
    Market
value
of shares
or units of
stock that
have not
vested (8)
    Equity Incentive plan
awards: number of
unearned shares,
units or other rights
that have not vested
(#) (9)
   

Equity Incentive plan
awards: market or

payout value of
unearned shares,
units or other rights
that have not
vested (8)

 

Steven W. Berglund

    5/19/2009 (1)      150,000        -      $     10.01        5/19/2016                 
      10/23/2009 (1)      400,000        -      $ 10.84        10/23/2016                 
      4/27/2010 (1)      200,000        -      $ 15.40        4/27/2017                 
      10/26/2010 (1)      400,000        -      $ 18.10        10/26/2017                 
      5/3/2011 (1)      183,334        16,666      $ 21.53        5/3/2018                 
      10/28/2011 (1)      333,334        66,666      $ 20.64        10/28/2018                 
      5/1/2012 (1)      179,166        70,834      $ 26.98        5/1/2019                 
      10/29/2012 (1)      126,666        73,334      $ 23.53        10/29/2019                 
      5/7/2013 (2)(3)      107,643        59,032      $ 28.08        5/7/2020        27,775      $ 595,774           
      10/29/2013 (2)(3)      116,458        98,542      $ 28.20        10/29/2020        70,000      $ 1,501,500           
      5/9/2014 (2)(3)      -        128,575      $ 35.02        5/9/2021        42,858      $ 919,304           
      11/6/2014 (2)(3)      -        180,000      $ 27.48        11/6/2021        60,000      $ 1,287,000           
      7/8/2015 (5)                        100,000      $ 2,145,000   
      11/6/2015 (6)                        75,370      $ 1,616,687   
      11/6/2015 (7)                  94,430      $ 2,025,524           

Francois Delepine

    1/6/2014 (4)                                      60,161      $ 1,290,453                   
      6/2/2014 (4)                  33,500      $ 718,575           
      11/6/2014 (2)(3)      -        20,000      $ 27.48        11/6/2021        6,700      $ 143,715           
      7/8/2015 (5)                        16,200      $ 347,490   
      11/6/2015 (6)                        9,400      $ 201,630   
      11/6/2015 (7)                  25,600      $ 549,120           

Bryn A. Fosburgh

    5/19/2009 (1)      4,668        -      $ 10.01        5/19/2016                                   
      10/23/2009 (1)      12,000        -      $ 10.84        10/23/2016                 
      4/27/2010 (1)      5,000        -      $ 15.40        4/27/2017                 
      10/26/2010 (1)      28,000        -      $ 18.10        10/26/2017                 
      5/3/2011 (1)      18,336        4,166      $ 21.53        5/3/2018                 
      10/28/2011 (1)      30,666        13,334      $ 20.64        10/28/2018                 
      5/1/2012 (1)      35,834        14,166      $ 26.98        5/1/2019                 
      10/29/2012 (1)      25,332        14,668      $ 23.53        10/29/2019                 
      5/7/2013 (2)(3)      19,375        10,625      $ 28.08        5/7/2020        4,233      $ 90,798           
      10/29/2013 (2)(3)      21,666        18,334      $ 28.20        10/29/2020        13,300      $ 285,285           
      5/9/2014 (2)(3)      -        18,500      $ 35.02        5/9/2021        6,167      $ 132,282           
      11/6/2014 (2)(3)      -        45,000      $ 27.48        11/6/2021        15,000      $ 321,750           
      7/8/2015 (5)                        23,900      $ 512,655   
      11/6/2015 (6)                        8,050      $ 172,673   
      11/6/2015 (7)                  31,950      $ 685,328           

Chris Gibson

    5/19/2009 (1)      2,800        -      $ 10.01        5/19/2016                                   
      10/23/009 (1)      80,000        -      $ 10.84        10/23/2016                 
      4/27/2010 (1)      50,000        -      $ 15.40        4/27/2017                 
      10/26/2010 (1)      80,000        -      $ 18.10        10/26/2017                 
      5/3/2011 (1)      45,834        4,166      $ 21.53        5/3/2018                 
      10/28/2011 (1)      66,666        13,334      $ 20.64        10/28/2018                 
      5/1/2012 (1)      35,834        14,166      $ 26.98        5/1/2019                 
      10/29/2012 (1)      25,332        14,668      $ 23.53        10/29/2019                 
      5/7/2013 (2)(3)      19,375        10,625      $ 28.08        5/7/2020        5,333      $ 114,393           
      10/29/2013 (2)(3)      21,666        18,334      $ 28.20        10/29/2020        13,300      $ 285,285           
      5/9/2014 (2)(3)      -        17,000      $ 35.02        5/9/2021        5,667      $ 121,557           
      11/6/2014 (2)(3)      -        40,000      $ 27.48        11/6/2021        13,400      $ 287,430           
      7/8/2015 (5)                        13,700      $ 293,865   
      11/6/2015 (6)                        10,650      $ 228,443   
      11/6/2015 (7)                  24,350      $ 522,308           

James Veneziano

    5/19/2009 (1)      2,130        -      $ 10.01        5/19/2016                                   
      10/23/2009 (1)      8,000        -      $ 10.84        10/23/2016                 
      4/27/2010 (1)      35,000        -      $ 15.40        4/27/2017                 
      10/26/2010 (1)      60,000        -      $ 18.10        10/26/2017                 
      5/3/2011 (1)      36,666        3,334      $ 21.53        5/3/2018                 
      10/28/2011 (1)      50,000        10,000      $ 20.64        10/28/2018                 
      5/1/2012 (1)      28,666        11,334      $ 26.98        5/1/2019                 
      10/29/2012 (1)      31,666        18,334      $ 23.53        10/29/2019                 
      5/7/2013 (2)(3)      17,308        9,492      $ 28.08        5/7/2020        6,400      $ 137,280           
      10/29/2013 (2)(3)      21,666        18,334      $ 28.20        10/29/2020        13,300      $ 285,285           
      5/9/2014 (2)(3)      -        17,000      $ 35.02        5/9/2021        5,667      $ 121,557           
      11/6/2014 (2)(3)      -        37,500      $ 27.48        11/6/2021        12,500      $ 268,125           
      7/8/2015 (5)                        16,000      $ 343,200   
      11/6/2015 (6)                        9,500      $ 203,775   
      11/6/2015 (7)                                      25,500      $ 546,975                   

 

-68-


(1)

The stock options vest 40% on the second anniversary of the date of the grant and 1/60h each month thereafter such that the stock options become fully vested five years from the date of grant.

(2)

The stock options vest 50% on the second anniversary of the date of the grant and 1/48th each month thereafter such that the stock options become fully vested four years from the date of grant.

(3) The RSUs vest in full on the third anniversary of the grant date, subject to each Named Executive Officer’s continued employment with the Company through such anniversary date. Upon vesting, the restricted stock units may be settled by issuing the number of shares shown in the table, or by making a cash payment equal to the fair market value of the shares on the vesting date, or a combination of shares and cash, at the discretion of the Company.
(4) The RSUs granted to Mr. Delepine vest over a three year period, with 33% vesting on the first anniversary of the grant date, 33% vesting on the second anniversary of the grant date and 34% vesting on the third anniversary of the grant date.
(5) The PSUs granted on July 8, 2015 are scheduled to vest on March 31, 2018, subject to each officer’s continued employment with the Company through the vesting date and satisfaction of performance conditions for the performance period beginning on July 8, 2015 and ending on March 31, 2018. As described under “Compensation Discussion and Analysis”, in each case, between 0% and 200% of the target number of PSUs vest depending on the Company’s relative TSR of its common stock as compared to the TSR of the component stocks of the S&P 500 Index over the performance period, with 100% of the target PSUs vesting if the Company’s TSR is at the 50th percentile.
(6) The PSUs granted on November 6, 2015 are scheduled to vest on March 31, 2018, subject to each officer’s continued employment with the Company through the vesting date and satisfaction of performance conditions for the performance period beginning on November 6, 2015 and ending on March 31, 2018. As described under “Compensation Discussion and Analysis”, in each case, between 0% and 200% of the target number of PSUs vest depending on the Company’s relative TSR of its common stock as compared to the TSR of the component stocks of the S&P 500 Index over the performance period, with 100% of the target PSUs vesting if the Company’s TSR is at the 50th percentile.
(7) One third of the RSUs vest on each anniversary of the date of the grant such that the RSUs become fully vested three years from the date of grant, subject to each Named Executive Officer’s continued employment with the Company through such anniversary date. Upon vesting, the RSUs may be settled by issuing the number of shares shown in the table, or by making a cash payment equal to the fair market value of the shares on the vesting date, or a combination of shares and cash, at the discretion of the Company.
(8) The market value of the unvested portion of the RSUs and PSUs for each Named Executive Officer was calculated by multiplying the number of unvested shares by the closing price of the Company’s Common Stock on January 1, 2016, which was $21.45.
(9) The target number of PSUs is shown. As described under “Executive Compensation—Compensation Discussion and Analysis,” in each case, between 0% and 200% of the PSUs vest depending on our TSR relative to the TSRs of the component stocks of the S&P 500 Index over the relevant performance period.

 

-69-


Option Exercises and Stock Vested

The table below shows the aggregate number of shares subject to stock options that were exercised by each of the Named Executive Officers and the aggregate number of shares acquired through vesting of RSU awards, during the fiscal year ended January 1, 2016.

 

OPTION EXERCISES AND STOCK VESTED  
     Option Awards     Stock Awards  
Name  

Number of shares
acquired on

exercise (#)

    Value realized
on exercise (1)
   

Number of shares
acquired on

vesting (#)

    Value realized
on vesting (2)
 
Steven W. Berglund                     66,660