DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

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LOGO

A MESSAGE FROM OUR NON-EXECUTIVE CHAIRMAN AND OUR CHIEF EXECUTIVE OFFICER

June 19, 2020

Dear Fellow Stockholders:

As we prepared this year’s letter to our stockholders, we did so with the knowledge that the world is facing some of its greatest health and economic challenges in generations. We are very proud of those on the front lines fighting the pandemic. Our sincere thoughts go out to all of those across the globe who have been impacted by the events and circumstances of the last six months.

Despite the challenges, EnerSys remains strong and well positioned for the future. The company is deemed an essential critical business during a time when many states and countries have enacted stay-at-home orders, and all of our larger plants remain open with supply chains intact. Looking ahead, we are confident in our ability to weather economic headwinds. Our confidence stems from the continued global demand for our products, the strength of our balance sheet, the incredible capabilities and expertise of our employees, our successful track record navigating the prior global recession and our ability to maintain positive cash flows through a range of economic conditions. We are the leader in our industry, and we believe we will emerge from the current environment stronger than ever.

During fiscal year 2020, net sales were $3.1 billion, up 10% from the prior year driven by a 17% increase from the acquisition of NorthStar Battery in our third fiscal quarter and Alpha in December 2018 offset by a 4% decrease in organic volume, a 1% decrease in pricing and a 2% decrease in currency. The acquisition of NorthStar will allow us to double our Thin Plate Pure Lead (TPPL) manufacturing capacity. TPPL is a premium product for EnerSys affording higher performance and gross margins used in telecommunications and broadband networks, data centers, material handling, aerospace and defense, trucking and premium aftermarket transportation.

After being a headwind for several years, we are now seeing a meaningful cost reduction in lead, which remains our most significant raw material. Current prices have declined by as much as 30% from their prior year highs, and while we have cost pass through contracts in place that will reduce our average selling price, we anticipate that the mechanics of the change should result in an increase in gross margin percentage while preserving gross margin dollars.

We were challenged in fiscal year 2020 by an upgrade to our ERP systems, a fire at our Richmond, Kentucky battery manufacturing plant, and COVID-19. However, we remain convinced that our strategic plan for new products and new markets laid out in our October 2019 investor day presentation is the right one, especially in light of the changing market conditions. Our focus and investment plans remain focused on providing complete, maintenance free solutions for the many markets we serve.

In fiscal year 2020, sales doubled for our motive power NexSys® Pure TPPL batteries and demand remains strong. Due to the capacity NorthStar brings and the addition of NexSys® Ion motive power lithium batteries to our suite of maintenance free offerings, we expect this growth to continue. NorthStar also enhances our relationship with the large, over-the-road truck manufacturers that value the award-winning NorthStar ACE® technology. With NorthStar Advanced Connected Energy – NorthStar ACE® – users can retrieve real-time and historical performance data wirelessly. All NorthStar ACE® batteries include a factory embedded sensor, allowing customers to improve battery efficiency at every stage of the process: from warehousing, through installation and operation, to battery replacement. We are expanding upon ACE® technology to use it in other markets we serve. With our industry-leading Odyssey® battery brand we have won significant business with a number of the automotive industry’s largest after-market retailers, which will roll out through fiscal year 2021.

Moreover, we see significant opportunity as the greater use of data from telecommuting, 5G, the internet of things and enhanced video in telecommunications, broadband and data center businesses. While our motive power business may be challenged depending upon how long businesses remain closed due to the pandemic, the long-term value proposition for those products remains sound.

Our first priority will continue to be the health and safety of our employees, and we thank them for their hard work and commitment to delivering the best products and exemplary service to our customers during these challenging times. Each and every day they reinforce our reputation as an industry leader focused on delivering quality and service. We also thank each stockholder for your continued support and confidence in EnerSys as we remain focused on driving long-term value.

 

Sincerely,     
LOGO      LOGO
Arthur T. Katsaros      David M. Shaffer
Non-Executive Chairman of the Board      President and Chief Executive Officer

Please refer to “Management’s Discussion and Analysis” in our Annual Report on Form 10-K attached to this letter for additional information and to a reconciliation of the non-GAAP measures to the comparable GAAP measures contained in Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 1, 2020.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in this letter and proxy statement regarding EnerSys’ business, which are not historical facts, are “forward-looking statements” that involves risks and uncertainties. For a discussion of such risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see EnerSys’ filings with the Securities Exchange Commission, including “Item 1A. Risk Factors” in EnerSys’ Annual Report on Form 10-K attached to this letter. These statements speak only as of the date of this letter and proxy statement, even if subsequently made available by EnerSys on its website or otherwise. EnerSys undertakes no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this letter and proxy statement.


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               ANNUAL MEETING INVITATION                

 

 

 

LOGO

June 19, 2020

Dear Fellow Stockholder:

As a result of the public health threat caused by the global COVID-19 pandemic and to protect the health and safety of EnerSys stockholders and employees, the 2020 Annual Meeting will be held on Thursday, July 30, 2020 at 10:00 a.m. (Eastern Time) solely by remote communication. Stockholders will not be able to attend the Annual Meeting in person.

The Annual Meeting will be accessible only at www.proxydocs.com/ENS (the “Annual Meeting platform”). We encourage you to access the Annual Meeting platform prior to the start time and allow ample time to log into the virtual Annual Meeting and test your computer system. To be admitted to the Annual Meeting, you must register for the meeting no later than 5:00 p.m. (Eastern Time) on July 28, 2020, the registration deadline. You can do so by entering the control number found on the proxy card or voting instruction form that accompanied your previously distributed proxy materials when requested by the Annual Meeting platform. Upon registering for the Annual Meeting, you will receive an email with additional information related to the virtual meeting. You may vote during the Annual Meeting by following the instructions available on the Annual Meeting platform during the meeting.

Your vote is important regardless of the number of shares you own. Whether or not you plan to attend the Annual Meeting virtually, we urge you to read these proxy materials and cast your vote on the matters that will be presented at the Annual Meeting. Stockholders of record have the option of voting by telephone, through the Internet or by completing, signing, dating and returning the enclosed proxy card in the envelope provided. Doing so will not prevent you from voting virtually during your attendance at the Annual Meeting.

Thank you very much for your continued support and interest in EnerSys.

 

Sincerely,

LOGO

Arthur T. Katsaros
Non-Executive Chairman of the Board


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            Notice of 2020 Annual Meeting of Stockholders            

  

 

 

LOGO

 

 

Date and Time:

  

 

Thursday, July 30, 2020, at 10:00 a.m. (Eastern Time)

Place:    www.proxydocs.com/ENS
Items to be voted:   

        elect three (3) Class I director nominees named in this proxy statement;

 

        ratify the appointment of Ernst & Young LLP as the Company’s independent

           registered public accounting firm for fiscal year ending March 31, 2021;

 

        an advisory vote to approve the compensation of EnerSys’ named executive officers;

 

        an advisory vote on the frequency of future advisory votes to approve the compensation of   EnerSys’ named executive officers; and

 

        conduct any other business properly brought before the meeting.

Record date:    Stockholders of record at the close of business on June 8, 2020 may vote at the meeting, and any adjournments or postponements thereof. A list of stockholders will be available at the Annual Meeting.

By Order of the Board of Directors

 

 

LOGO

Joseph G. Lewis

Senior Vice President, General Counsel,

Chief Compliance Officer & Secretary

June 19, 2020

Your vote is important!

Stockholders of record can vote their shares by using the Internet or the telephone or by attending the meeting virtually and voting in accordance with the website’s instructions. Instructions for voting by using the Internet or the telephone are set forth in the Notice of Internet Availability that has been provided to you. Stockholders of record who received a paper copy of the proxy materials also may vote their shares by marking their votes on the proxy card provided, signing and dating it, and mailing it in the envelope provided, or by attending the meeting voting virtually.

 

Important Notice Regarding the Availability

of Proxy Materials for the Annual Meeting to be Held on July 30, 2020

The Proxy Statement and Annual Report to Stockholders are available at www.enersys.com and at

www.proxydocs.com/ENS.


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                                TABLE OF CONTENTS                               

 

 

 

GENERAL INFORMATION

 

    

 

 

 

 

1

 

 

 

 

    

PROPOSAL NO. 1 ELECTION OF THE CLASS I DIRECTOR NOMINEES OF THE BOARD OF DIRECTORS

       4  

General

       4  

Director Nominees of the Board of Directors

       4  

BOARD OF DIRECTORS

       5  
    

CORPORATE GOVERNANCE

       13  

Independence of Directors

       13  

Access to Corporate Governance Documents

       13  

Committees of our Board of Directors

       13  

Process for Selection of Director Nominee Candidates

       15  

Board Leadership Structure

       15  

The Board’s Role in Risk Oversight

       16  

Charters of the Committees of the Board of Directors

       16  

Director Attendance at Board, Committee and Annual Meetings

       16  

Executive Sessions of Non-Management Directors

       16  

Communications with the Board of Directors

       16  

Code of Business Conduct and Ethics

       16  

Corporate Social Responsibility and Sustainability

       17  
    

DIRECTOR COMPENSATION

       18  

Cash Compensation

       18  

Equity Compensation

       18  

Director Deferred Compensation Plan

       18  

Stock Ownership Guidelines

       19  

Hedging Prohibition

       19  
    

NON-EMPLOYEE DIRECTOR COMPENSATION FOR FISCAL YEAR 2020

       20  
    

PROPOSAL NO. 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

       21  
    

AUDIT COMMITTEE REPORT

       21  

Background

       21  

Responsibility

       21  

Process and Recommendation

       21  

Fees of Independent Auditors

       22  

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services by Independent Auditors

       22  

Appointment of Independent Registered Public Accounting Firm for Fiscal Year 2021

       23  
    

EXECUTIVE OFFICERS

       24  
    

EXECUTIVE COMPENSATION

       25  

Compensation Discussion and Analysis

       25  

Overview

       25  

Summary of Other Major Program Elements

       27  

Results of 2019 Advisory Vote on Executive Compensation–Say-on-Pay

       28  

Executive Compensation Policy

       28  

Determination of Compensation

       29  

Components of Executive Compensation

       30  

Other Matters

       35  

Compensation Committee Report

       37  
    

 

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Compensation Tables

    

Summary Compensation Table

       38  

Employment Agreements

       39  

Grants of Plan-Based Awards Table for Fiscal Year 2020

       41  

Outstanding Equity Awards as of March 31, 2020

       42  

Options Exercised and Stock Vested During Fiscal Year 2020

       43  

CEO Pay Ratio

       48  
    

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

       44  
    

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       49  

Related Person Transaction Policy

       49  

Indemnification

       49  

Indemnity and Expense Agreement

       49  
    

DELINQUENT SECTION 16(a) REPORTS

       50  
    

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

       50  
    

PROPOSAL NO. 3 ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

       52  
    

PROPOSAL NO. 4 ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES

       53  
    

OTHER INFORMATION

       54  

Stockholder Proposals or Nominations

       54  

Reduce Duplicate Mailings

       54  

Other Matters

       54  

Proxy Solicitation Costs

       54  

Incorporation by Reference

       55  

Annual Report for Fiscal Year 2020

       55  
    

2020 ANNUAL REPORT ON FORM 10-K

       A-1  

 

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            PROXY STATEMENT            

GENERAL INFORMATION

Solicitation of Proxies

 

The Board of Directors of EnerSys is providing this Proxy Statement to solicit proxies for use at EnerSys’ virtual annual meeting of stockholders to be held on Thursday, July 30, 2020, at 10:00 a.m. (Eastern Time) or any adjournment or postponement thereof (the “Annual Meeting”). EnerSys (the “Company,” “we,” “our,” or “us”) is first delivering this Proxy Statement and the foregoing Notice on or about June 19, 2020.

Purpose of the Meeting

 

At the Annual Meeting, our stockholders will be asked to vote on the following proposals:

 

 Proposals

 

 

Board
Recommendation

 

 

Page      

Reference      

 

1

 

 

To elect the three (3)  Class I director nominees of the Board of Directors of EnerSys, each to serve until the 2023 annual meeting of stockholders, or until the earlier of their resignation or their respective successors shall have been elected and qualified;

 

  FOR   4

2

 

 

To ratify the appointment of Ernst  & Young LLP as EnerSys’ independent registered public accounting firm for the fiscal year ending March 31, 2021; 

 

  FOR   21

3

 

 

An advisory vote to approve EnerSys’ named executive officer compensation; and

 

  FOR   52

4

 

 

An advisory vote on the frequency of future advisory votes on EnerSys’ named executive officer compensation.

 

  EVERY YEAR

(1 YEAR)

  53

Voting and Revocation of Proxies

 

Stockholders of record have a choice of voting by way of traditional proxy card, by telephone or through the Internet.

 

   

LOGO

By Mail

  

 

      Request a proxy card from us by following the instructions on your Notice of Internet Availability.

      When you receive your proxy card, mark your selections on the proxy card.

      Date and sign your name exactly as it appears on the proxy card.

      Mail the proxy card in the postage-paid envelope that’s provided to you with your proxy card.

If you return the signed proxy card but do not mark the boxes showing how you wish to vote, your votes will be cast “FOR” the election of all director nominees; “FOR” the ratification of the appointment of Ernst & Young LLP as EnerSys’ independent registered public accounting firm; “FOR” the approval of executive compensation; and “EVERY YEAR (1 YEAR)” for the frequency of future advisory votes on executive compensation.

   

LOGO

By Telephone

 

   Call toll-free 1-866-284-6730 and follow the voice prompts.
   

LOGO

Through Internet

 

  

Access the website www.proxypush.com/ens and follow the instructions.

 

 

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We encourage each stockholder of record to submit their proxy electronically through the Internet, if that option is available, or by telephone. Delivery of a proxy in any of the three ways listed above will not affect the right of a stockholder of record to attend the Annual Meeting and vote during the virtual meeting. If you hold your shares in “street name” (that is, through a broker, trustee or other holder of record), you will receive a voting instruction card from your broker seeking instructions as to how your shares should be voted. If no voting instructions are given, your broker or nominee has discretionary authority to vote your shares on your behalf on routine matters. A “broker non-vote” results on a matter when your broker or nominee returns a proxy but does not vote on a particular proposal because it does not have discretionary authority to vote on that proposal and has not received voting instructions from you. We believe that your broker or nominee only has discretionary voting power with respect to the proposal regarding the ratification of the appointment of the independent registered public accounting firm. You may not vote shares held in “street name” at the Annual Meeting unless you obtain a legal proxy from your broker or holder of record.

Any stockholder of record giving a proxy may revoke it by doing any of the following:

 

   

delivering a written notice of revocation to the Secretary of EnerSys, dated later than the proxy, before the vote is taken at the Annual Meeting;

 

   

delivering a duly executed proxy to the Secretary of EnerSys, bearing a later date (including proxy by telephone or through the Internet) before the vote is taken at the Annual Meeting; or

 

   

voting virtually at the Annual Meeting (your attendance at the Annual Meeting, in and of itself, will not revoke the proxy).

Any written notice of revocation, or later dated proxy, should be delivered to EnerSys, 2366 Bernville Road, Reading, Pennsylvania 19605, Attention: Joseph G. Lewis, Senior Vice President, General Counsel, Chief Compliance Officer and Secretary.

Record Date

 

Only stockholders of record at the close of business on June 8, 2020 (the “Record Date”) are entitled to notice of, and to vote at, the Annual Meeting. At the close of business on the Record Date, there were 42.452,053 shares of EnerSys common stock outstanding, each of which will be entitled to one vote at the Annual Meeting.

Quorum

 

The presence, virtually or by proxy, of stockholders entitled to cast at least a majority of the votes that all stockholders are entitled to cast will constitute a quorum at the Annual Meeting. Proxies received but marked as abstentions and broker non-votes will be included in the calculation of the number of votes considered to be present at the Annual Meeting for purposes of determining the presence of a quorum.

Tabulation of Votes

 

Our bylaws provide for majority voting procedures for the election of directors in an election where the number of director nominees does not exceed the number of directors to be elected (an “uncontested election”). In an uncontested election, to be elected, a director nominee must receive more “for” than “against” votes cast by the holders of shares of our common stock present virtually or represented by proxy at the meeting and entitled to vote on the election of directors (a “majority vote”). In an election where the number of director nominees exceeds the number of directors to be elected, directors are elected by a plurality vote, which means that the director nominees receiving the most votes cast by the holders of shares of our common stock present virtually or represented by proxy at the meeting and entitled to vote on the election of directors will be elected, regardless of the number of votes cast in favor of each director nominee. The election of directors at this Annual Meeting is an uncontested election. A nominee holding shares in street name does not have discretionary voting power with respect to the election of directors and may not vote shares unless the nominee receives voting instructions from the beneficial owner. If your shares are held by a broker, it is important that you provide instructions to your broker so your vote is counted in the election of directors. Abstentions and broker non-votes will not constitute or be counted as “votes” cast for purposes of Proposal 1.

 

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If an incumbent director receives more “against” than “for” votes, in accordance with our Corporate Governance Guidelines, the Nominating and Corporate Governance Committee of our Board of Directors will consider such director’s contingent resignation and recommend to the Board of Directors the action to be taken. The Board of Directors will act on such recommendation and publicly disclose its decision and the rationale behind such decision within 90 days from the date of the certification of the election results.

The ratification of the appointment of Ernst & Young LLP, as EnerSys’ independent registered public accounting firm for the fiscal year ending March 31, 2021, requires the affirmative vote of the holders of a majority of the shares represented and entitled to vote at the Annual Meeting. With respect to this matter, abstentions will have the same effect as voting against such proposal, and broker non-votes, if any, will not constitute or be counted as “votes” cast for purposes of such proposal.

The affirmative vote of the holders of a majority of shares of our common stock, present virtually or represented by proxy and entitled to vote, is required for approval with respect to the advisory vote to approve our named executive officer compensation. An abstention is treated as present and entitled to vote and therefore has the effect of a vote against the advisory vote on executive compensation. A nominee holding shares in street name does not have discretionary voting power with respect to this proposal and may not vote shares unless the nominee receives voting instructions from the beneficial owner. Additionally, a broker non-vote will not constitute or be counted as “votes” cast for purposes of the advisory vote to approve our named executive officer compensation.

Although the advisory votes to approve our named executive officer compensation and the frequency of future votes to approve executive compensation are non-binding, as provided by law, the Compensation Committee of our Board of Directors will review the results of the vote and take them into account in making a determination concerning executive compensation. For information regarding the Compensation Committee’s views in connection with the results of the 2019 non-binding advisory vote of stockholders to approve executive compensation, see the discussion beginning on page     .

If any other matters are properly presented for consideration at the meeting, including, among other things, consideration of a motion to adjourn the meeting to another time or place, the persons named in the proxy card will have discretion to vote on those matters according to their best judgment to the same extent as the person signing the proxy would be entitled to vote. At the date of this proxy statement, we do not anticipate that any other matters will be raised at the Annual Meeting.

Attendance at the Annual Meeting

 

Admittance to the Annual Meeting will be limited to stockholders as of the Record Date, their authorized representatives and guests of EnerSys. To be admitted to the Annual Meeting, you must register for the meeting no later than 5:00 p.m. (Eastern Time) on July 28, 2020, the registration deadline. Upon registering for the Annual Meeting, you will receive an email with additional information related to the virtual meeting. You can do so by entering the control number found on the proxy card or voting instruction form that accompanied your previously distributed proxy materials when requested by way of the Annual Meeting platform. Additional instructions on how to access the Annual Meeting can be found on our website at investor.enersys.com.

 

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    Proposal No. 1       Election of the Class I Director Nominees of the Board of Directors

General

 

 

Our certificate of incorporation provides that the Board of Directors shall consist of not less than three or more than eleven members, as fixed by the Board of Directors from time to time. The certificate of incorporation also divides the Board into three classes, with each class to be as nearly equal in number as possible. The members of each class will serve for a staggered, three-year term. Upon the expiration of the term of a class of directors, nominees for directors in that class will be considered for election for three-year terms at the annual meeting of stockholders in the year in which the term of directors in that class expires.

Our Board of Directors set its size at 10 members, divided into three classes. The classes are currently composed of the following directors:

 

   

Messrs. Lehman, Marlo and Tufano are Class I directors, whose terms will expire at the 2020 annual meeting of stockholders;

 

   

Mr. Chung, Ms. Connors, Mr. Katsaros, and Gen. Magnus, USMC (Retired) are Class II directors, whose terms will expire at the 2021 annual meeting of stockholders; and

 

   

Messrs. Hoffen, Shaffer and Vargo are Class III directors, whose terms will expire at the 2022 annual meeting of stockholders.

Our Corporate Governance Guidelines prohibit the re-election of a continuing director once such director has reached the age of 75. Both of Messrs. Lehman and Marlo will retire from the Board following the Annual Meeting.

As a result of the vacancies created by the retirement of Messrs. Lehman and Marlo from our Board of Directors, with the assistance of a third party search firm and based upon the recommendation of the Nominating and Corporate Governance Committee, our Board of Directors has appointed and nominated Ms. Caroline Chan and Mr. Steven M. Fludder to the Board of Directors, to serve as Class I directors immediately following the Annual Meeting.

Director Nominees of the Board of Directors

 

 

Based on the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors has unanimously nominated each of Ms. Chan, and Messrs. Fludder and Tufano for election as Class I directors of EnerSys. Mr. Tufano currently serves as a director of EnerSys, and each of Ms. Chan and Messrs. Fludder and Tufano has consented to being named in this Proxy Statement and to serve, if elected. Each of the directors elected at the Annual Meeting will hold office until the 2023 annual meeting of stockholders or until the earlier of their resignation or their successors are duly elected and qualified. If any of the nominees become unable to accept their nomination or election, the persons named in the proxy may vote for a substitute nominee selected by the Board of Directors. Our management, however, has no present reason to believe that any Class I nominee will be unable to serve as a director, if elected.

 

LOGO

   The Board of Directors recommends a vote “FOR
each director nominee

 

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BOARD OF DIRECTORS AND DIRECTOR NOMINEES

The following table sets forth certain information with respect to our directors and our director nominees as of the date of this Proxy Statement:

 

       

Name

  Age        Position with EnerSys   Year First
Became
Director
       Term as
Director
will
Expire(1)
   
           

Arthur T. Katsaros

  72       Non-Executive Chairman   2005       2021  
           

Caroline Chan

  57       Director Nominee       2020(2)       2023  
           

Hwan-yoon F. Chung

  46       Director   2006       2021  
           

Nelda J. Connors

  54       Director   2017       2021  
           

Steven M. Fludder

  60       Director Nominee       2020(2)       2023  
           

Howard I. Hoffen

  56       Director   2004       2022  
           

John F. Lehman

  77       Director   2004       2020  
           

Gen. Robert Magnus, USMC (Retired)

  73       Director   2008       2021  
           

Dennis S. Marlo

  77       Director   2004       2020  
           

David M. Shaffer

  55       Director, President and Chief Executive Officer   2016       2022  
           

Paul J. Tufano

  66       Director   2015       2023  
           

Ronald P. Vargo

  66       Director   2017       2022  

 

(1)

Directors’ terms of office are scheduled to expire at the annual meeting of stockholders to be held in the year indicated, assuming election at the Annual Meeting.

 

(2)

Directors’ terms of office are scheduled to commence immediately following the Annual Meeting.

 

      

 

 

LOGO

 

        

 

CAROLINE CHAN

 

 

 

 

Age 57

     

 

        Director since Nominee

   

Vice President & General Manager, Intel Corporation

 

   

INDEPENDENT DIRECTOR

 

     

           DIRECTOR QUALIFICATION HIGHLIGHTS

     

EnerSys Committees: None

 

Other Public Boards: None.

         

                        Wireless / 5G Infrastructure

 

                        Strategic Planning

 

 

Career Highlights: Since 2018, Ms. Chan has been the Vice President and General Manager of the Network Business Incubator Division at Intel Corporation, whose shares are listed on The NASDAD Stock Market. She has held numerous other positions with Intel, such as Vice President and General Manager of the 5G Infrastructure Division (from 2017 through 2018), Sr. Director of the 5G Infrastructure Division (from 2016 to 2017), Director of Wireless Technology and Strategy (from 2010 to 2016), and Director of Strategy Business Development, Wireless Program Office (from 2009 through 2010).

Board Experience: Since 2017, Ms. Chan has served as a director of Telecom Infra Project, a non-profit membership organization focused on progress and developments in all facets of the telecom industry.

Skills and Qualifications: Ms. Chan received her Bachelor of Science degree in Electrical and Computing Engineering from the University of Texas and her Master of Science degree in Electrical and Computing Engineering from the University of Massachusetts.

 

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LOGO

        

 

 HWAN-YOON F. CHUNG

 

 

 

 

Age 46

     

 

        Director since 2006

     

 Managing Director, DCP Capital

 

     

 INDEPENDENT DIRECTOR

 

     

           DIRECTOR QUALIFICATION  HIGHLIGHTS

       

 EnerSys Committees: Audit

 

 Other Public Boards: None

         

                        Financial Expert

 

                        Private Equity

 

                        Environmental

 

 

Career Highlights: Mr. Chung has been a Director of EnerSys since February 2006. He is the Managing Director of DCP Capital, a private equity firm, since August 2017. From December 2015 to August 2017, he was the Senior Vice President—Corporate Finance of Hudson’s Bay Company, a department store operator. From November 2012 through December 2015, he was President and Chief Executive Officer of Allied Resource Company, a privately held investment company with interests in businesses that deploy proprietary industrial-scale technologies to recycle waste, reduce pollutants and other emissions. Prior thereto, Mr. Chung was a Principal of Metalmark Capital LLC, a private equity firm, since its inception in 2004 until 2012.

Board Experience: Mr. Chung currently serves as a Director of several privately held businesses, including MFS Technology a flexible printed circuit board manufacturer, Shape Technologies Group, a leading ultrahigh-pressure pump manufacturer, and Orgain, Inc., a nutritional foods company. Mr. Chung also served as a Director of PURAGLOBE, a leading used oil recycling technology company, from 2013 to 2017.

Skills and Qualifications: Mr. Chung received his Bachelor of Arts in Philosophy from the College of Arts and Sciences of the University of Pennsylvania, and his Bachelor of Science degree in Economics from the Wharton School of Business of the University of Pennsylvania. The financial acumen that Mr. Chung obtained through his private equity experiences were attributes important in qualifying him for service as a member of the Board of Directors, and a member and financial expert to the Audit Committee.

 

      

 

 

 

 

LOGO

        

 

NELDA J. CONNORS

 

 

 

 

Age 54

     

 

        Director since 2017

     

Founder, Chairwoman and Chief Executive Officer of Pine Grove Holdings, LLC

 

     

INDEPENDENT DIRECTOR

 

     

        DIRECTOR QUALIFICATION HIGHLIGHTS

     

EnerSys Committees: Audit, Compensation

 

Other Public Boards: Baker Hughes Company, Boston Scientific Corporation, Case New Holland Industrial, Delphi Technologies PLC,

         

                        Financial Expert

 

                        Global/ Public Company Experience

 

                        Engineering Operations & Strategy

 

Career Highlights: Ms. Connors has been a Director of EnerSys since August 2017. In 2011, she founded and is Chairwoman and Chief Executive Officer of Pine Grove Holdings, LLC, a woman and minority-owned business that acquires lower middle market companies with a high engineering and service component. The investments are primarily focused in power generation, specialty logistics and transportation, SAAS and advanced materials. From 2008 through 2011, Ms. Connors was the President and Chief Executive Officer of Atkore International, which was formerly a division of Tyco International. Prior to that, she was a senior executive at Eaton Corporation, Ford Motor Company and Chrysler Corporation in various global business leadership and profit and loss management roles. She has lived and worked in the USA, Europe and Asia-Pacific.

Board Experience: Since May 2020, Ms. Connors has served as an independent director of Baker Hughes Company, an international industrial service company and one of the world’s largest oil field service companies whose shares are listed on the New York Stock Exchange. Since April 2020, she serves as non-executive director at the board of Case New Holland Industrial, a global leader in the capital goods sector that produces and sells agricultural and construction equipment, trucks, commercial vehicles, buses and specialty vehicles, and whose shares are traded on the New York Stock Exchange. Since December 2017, she has been an independent director of Delphi Technologies PLC, the powertrain leader of technologies and software to enable next-generation advanced vehicle propulsion systems for global customers, taking advantage of the industry move to electrification whose shares are listed on the New York Stock Exchange. And since December 2009, she has been an independent director of Boston Scientific Corporation, a worldwide developer, manufacturer and marketer of medical devices whose shares are listed on the New York Stock Exchange. Ms. Connors formerly served as a director for Echo Global Logistics, Inc., from April 2013 to February 2020, Atkore from December 2010 to June 2011, Blount International Inc. from March 2012 to April 2016, Clarcor Corporation from April 2016 to February 2017, Vesuvius plc from March 2013 to September 2016, and as a Class B Director of the Federal Reserve Bank of Chicago from 2011 to 2017.

Skills and Qualifications: Ms. Connors holds a Bachelor of Science and a Master of Science degree in Mechanical Engineering from the University of Dayton with post- graduate studies at the University of Tokyo in International Finance and Economics. Her financial acumen and public company experiences, as well as her global experience in areas of operations, quality, engineering and business strategy were attributes important in qualifying her for service as a member of our Board of Directors, as a member of the Compensation Committee, and as a member and financial expert to the Audit Committee.

 

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LOGO

 

        

 

STEVEN M. FLUDDER

 

 

 

 

Age 60

     

 

        Director since Nominee

     

Former Chief Executive Officer, NEC Energy Solutions, Inc.

 

     

INDEPENDENT DIRECTOR

 

     

        DIRECTOR QUALIFICATION HIGHLIGHTS

     

EnerSys Committees: None

 

Other Public Boards: Ocean Power Technologies, Inc.

         

                        Smart Energy Storage

 

                        Electric Grid Experience

 

Career Highlights: From 2017 to June 2020, Mr. Fludder served as the Chief Executive Officer of NEC Energy Solutions, Inc., an electric power grid scale energy storage company wholly owned by NEC Corporation, a Japanese multinational information technology and electronics company whose shares are listed on the Tokyo Stock Exchange. From 2015 to 2017, he was the Chief Executive Officer of alpha-En Corporation, a battery technology company publicly quoted on the OTC stock market. From 2010 to 2014, he was Senior Executive Vice President, Division General Manager and Samsung Group Officer, where he was head of worldwide sales and marketing for Samsung Engineering, a global engineering, procurement and construction (EPC) firm serving a broad range of energy industries, and President of Samsung Techwin Power Systems Division. Prior to Samsung, Mr. Fludder had a 27-year career with General Electric in various roles, including having served as a Vice President and Corporate Officer where he led GE’s companywide environmental business initiative.

Board Experience: Since 2016, Mr. Fludder has served as a director of Ocean Power Technologies Inc., a renewable energy company focused on remote offshore applications, whose shares are listed on The NASDAQ Stock Market.

Skills and Qualifications: Mr. Fludder received a Bachelor of Science degree in Mechanical Engineering from Columbia University and a Bachelor of Science degree from Providence College. He earned a Master of Science degree in Mechanical Engineering from the Massachusetts Institute of Technology.

 

   

 

 

LOGO

 

        

 

HOWARD I. HOFFEN

 

 

 

 

Age 57

     

 

        Director since 2004

   

Chairman, CEO and Managing Director, Metalmark Capital LLC

 

   

INDEPENDENT DIRECTOR

 

     

           DIRECTOR QUALIFICATION  HIGHLIGHTS

     

EnerSys Committees: Nominating & Corporate Governance

 

Other Public Boards: None

 

         

                        Audit & Financial

 

                        Risk Management

 

                        Strategic Planning

 

 

Career Highlights: Mr. Hoffen has been a Director of EnerSys since it became publicly traded in July 2004. He is currently the Chairman, Chief Executive Officer, and a Partner of Metalmark Capital LLC. Mr. Hoffen was a founding member of Metalmark in 2004 and served as Chairman and Chief Executive Officer of Morgan Stanley Capital Partners from 2001 to 2004, after having performed various roles in the private equity group since he joined Morgan Stanley in 1985.

Board Experience: He served as a Director of Pacific Coast Energy Holdings LLC, the general partner of Pacific Coast Oil Trust, whose trust units are listed on The New York Stock Exchange from 2008 to 2019, and as a Director of Jones Energy Inc., an independent oil and gas company whose shares are listed on The New York Stock Exchange, from 2009 to 2017. He is also a Director of several private companies and serves on the Board of Visitors of The Fu Foundation School of Engineering and Applied Sciences at Columbia University.

Skills and Qualifications: Mr. Hoffen received his Master of Business Administration degree from Harvard Business School and his Bachelor of Science degree from Columbia University. Through Mr. Hoffen’s experience in private equity and service on other corporate boards, he has dealt with a wide range of issues including audit and financial reporting, risk management, executive compensation and strategic planning.

 

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LOGO

 

        

 

ARTHUR T. KATSAROS

 

 

 

 

Age 72

     

 

        Director since 2005

     

Former Group Vice President - Development and Technology, Air Products and Chemicals Inc.

 

     

INDEPENDENT NON-EXECUTIVE CHAIRMAN

 

     

        DIRECTOR QUALIFICATION HIGHLIGHTS

     

EnerSys Committees: None

 

Other Public Boards: None

 

         

                        Senior Management Leadership

 

                        International Business

 

                        Global Manufacturing

 

 

Career Highlights: Mr. Katsaros has been a Director of EnerSys since July 2005 and the Non-Executive Chairman of the Board of Directors since May 2016. Mr. Katsaros was most recently the Group Vice President—Development and Technology of Air Products and Chemicals, Inc. from 2002 and until his retirement in April 2007. From 1996 through 2002, he was Group Vice President of Engineered Systems and Operations of Air Products.

Board Experience: Mr. Katsaros serves as the Chairman of CDG Environmental, LLC, a manufacturer of supply systems for water treatment, a position he has held since 2009.

Skills and Qualifications: Mr. Katsaros received a Bachelor of Science degree in Chemical Engineering from Worcester Polytechnic Institute and a Master of Business Administration from Lehigh University. He also completed the Advanced Management Program at Harvard University’s Graduate School of Business. Mr. Katsaros’ experience qualifying him for service as a member of the Board of Directors includes over fifteen years’ experience in executive positions with a global manufacturer, in charge of international business and operations, such as manufacturing, engineering, information technology and research and development. His background and his experience as a member of our Board of Directors qualifies him to serve as Non-Executive Chairman of the Board.

 

    

 

 

 

 

LOGO

 

        

 

JOHN F. LEHMAN

 

 

 

 

Age 77

     

 

        Director since 2004

 

     

Founding Partner and Chairman, J.F. Lehman & Company

 

     

INDEPENDENT DIRECTOR

 

     

        DIRECTOR QUALIFICATION HIGHLIGHTS

     

EnerSys Committees: Compensation (Chair)

 

Other Public Boards: None

 

         

                        Business & Government Experience

 

                        Private Equity

 

                        Senior Management Leadership

 

Career Highlights: Mr. Lehman has been a Director of EnerSys since August 2004. Mr. Lehman is a founding partner of J.F. Lehman & Company, a private equity firm, and has been its Chairman since November 1990. Prior to founding J.F. Lehman & Company, Mr. Lehman was a Managing Director in Corporate Finance at PaineWebber Incorporated, served for six years as U.S. Secretary of the Navy, was a member of the National Security Council Staff, served as a delegate to the Mutual Balanced Force Reductions negotiations and was the Deputy Director of the Arms Control and Disarmament Agency.

Board Experience: Mr. Lehman served as a Director of Ball Corporation, a supplier of metal packaging to the beverage, food, personal care and household products industries which is listed on The New York Stock Exchange, from 1987 until 2015. He previously served as an independent director of Verisk Analytics, Inc., a risk information provider whose shares are listed on The NASDAQ Stock Market, from 1992 to 2018. Mr. Lehman was a member of the National Commission on Terrorist Attacks upon the United States. He is also Chairman of the Princess Grace Foundation.

Skills and Qualifications: Mr. Lehman received his Bachelor of Science degree from St. Joseph’s University, his Bachelor of Arts and Master of Arts degrees from Cambridge University and a Doctorate from the University of Pennsylvania. Mr. Lehman’s business and government experience provide the Board of Directors with valuable insight into social, governmental and economic issues relevant to our business. This experience is important in qualifying him for service as a member of our Board of Directors.

 

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LOGO

 

        

 

GEN. ROBERT MAGNUS, USMC (RETIRED)

 

 

 

 

Age 73

     

 

        Director since 2008

   

Retired Asst. Commandant of the United States Marine Corps

 

   

INDEPENDENT DIRECTOR

 

     

        DIRECTOR QUALIFICATION HIGHLIGHTS

     

EnerSys Committees: Compensation and Nominating &

  Corporate Governance (Chair)

 

Other Public Boards: None

 

 

         

                        Financial Acumen

 

                        Business & Military Experience

Career Highlights: Gen. Magnus has been a Director of EnerSys since July 2008. Gen. Magnus served as the Assistant Commandant of the Marine Corps from 2005 to 2008. He retired from the Marine Corps in 2008 after over 38 years of distinguished service. Gen. Magnus’ operational assignments included Commander, Marine Corps Air Bases Western Area and Deputy Commander, Marine Forces Pacific. Gen. Magnus’ staff assignments included Chief, Logistics Readiness Center, Joint Staff; Executive Assistant to the Director of the Joint Staff; Head, Aviation Plans and Programs Branch; Assistant Deputy Chief of Staff for Aviation; Assistant Deputy Commandant for Plans, Policies, and Operations; and Deputy Commandant for Programs and Resources.

Board Experience: He is the Chairman of the Board of Directors of Elbit Systems of America, LLC, a provider of defense, homeland security, commercial aviation and medical products and solutions, as well as aircraft maintenance, repair and overhaul services, and serves as a Director of All My Sons Moving and Storage, a provider of moving services. He previously served as a Director of Augusta Westland NA, a subsidiary of Italy’s Finmeccanica, a producer of advanced helicopters from June 2009 to March 2016, and a Director of Fairway Group Holdings Corp, which is a provider of specialty grocery products and whose shares were listed on The NASDAQ Stock Market, from February 2014 until July 2016.

Skills and Qualifications: Gen. Magnus received his Bachelor of Arts degree in history from the University of Virginia and his Master of Business Administration degree from Strayer College. His formal military education included Naval Aviator Training, U.S. Marine Corps Command and Staff College, and the National War College. Gen. Magnus’ personal decorations included two Distinguished Service Medal awards, the Defense Superior Service Medal, Legion of Merit, and Navy Achievement Medal. Gen. Magnus’ extensive financial management experience and responsibilities for peacetime and wartime programs and budgets for the US Marine Corps qualifies him for service as a member of our Board of Directors.

 

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LOGO

 

        

 

DENNIS S. MARLO

 

 

 

 

Age 77

     

 

        Director since 2004

     

Managing Director, Sanctuary Group LTD

 

     

INDEPENDENT DIRECTOR

 

     

        DIRECTOR QUALIFICATION HIGHLIGHTS

     

EnerSys Committees: Audit, Compensation, and

  Nominating & Corporate Governance

 

Other Public Boards: None

 

         

                        Financial Expert

 

                        Risk Management

 

                        Strategic Planning

 

Career Highlights: Mr. Marlo has been a Director of EnerSys since August 2004. Mr. Marlo is Managing Director of Sanctuary Group LTD, a financial and executive advisory firm located in Malvern, Pennsylvania and Vero Beach, Florida. Mr. Marlo served as an Executive Vice President of Sovereign Bancorp, Inc. (now Santander Holdings USA, Inc.) from June 2004 through April 2009, and as Chief Risk Management Officer of Sovereign Bancorp, Inc. from April 2001 through June 2004. Mr. Marlo joined Sovereign in February 1998 as the President of the Pennsylvania Division of Sovereign Bank and was appointed Chief Financial Officer and Treasurer of Sovereign in May 1998, serving in that capacity through April 2001. Prior thereto, Mr. Marlo served as President and Chief Executive Officer of ML Bancorp Inc., a predecessor company of Sovereign Bancorp, Inc., and as a partner with KPMG, LLP.

Board Experience: Mr. Marlo served on the Board of Directors of the Federal Home Loan Bank of Pittsburgh, a government sponsored enterprise, from November 2002 through December 2013, serving as its Chairman from January 2010 through December 2011. He is also a member of the Board of Directors of the Lankenau Medical Center Foundation, a foundation supporting a non-profit medical center in Wynnewood, Pennsylvania, and is immediate past Chairman of the Board of Trustees at Harcum College in Bryn Mawr, Pennsylvania and currently continues to serve on the Board of Trustees. Mr. Marlo is also a Director of the United Way Foundation of Indian River County Inc., a nonprofit organization supporting philanthropy, voluntarism and grant making in the County of Indian River, Florida. He was formerly a Director of Main Line Health Real Estate, L.P., an entity which holds certain real estate of the Main Line Health System.

Skills and Qualifications: Mr. Marlo completed the Graduate School of Community Bank Management at the University of Texas at Austin and received his Bachelor of Science degree in Accounting from La Salle University. He is a certified public accountant and a chartered global management accountant. Through Mr. Marlo’s extensive financial experience and other activities, he has dealt with a wide range of issues including audit and financial reporting, risk management, executive compensation and strategic planning. These experiences qualify him as a member of our Board of Directors, a member and financial expert of the Audit Committee, and to serve on each of the Compensation and Nominating and Corporate Governance Committees.

 

   

 

 

LOGO

 

        

 

DAVID M. SHAFFER

 

 

 

Age 55

     

 

        Director since 2016

   

President & Chief Executive Officer, EnerSys

 

   

NON-INDEPENDENT DIRECTOR

 

     

        DIRECTOR QUALIFICATION HIGHLIGHTS

     

EnerSys Committees: None

 

Other Public Boards: None

 

         

                        Global Leadership Experience

 

                        Manufacturing

 

                        Sales

 

Career Highlights: Mr. Shaffer has been a Director of EnerSys and has served as our President and Chief Executive Officer since April 2016. Prior thereto, he served as President and Chief Operating Officer since November 2014. From January 2013 through October 2014 he served as our President—EMEA. From 2008 to 2013, Mr. Shaffer was our President—Asia. Prior thereto he was responsible for our telecommunications sales in the Americas. Mr. Shaffer joined the Company in 2005 and has worked in various roles of increasing responsibility in the industry since 1989.

Board Experience: Mr. Shaffer is a Director of several EnerSys subsidiaries and is presently not a member of any outside boards.

Skills and Qualifications: Mr. Shaffer received his Master of Business Administration degree from Marquette University and his Bachelor of Science degree in Mechanical Engineering from the University of Illinois. Mr. Shaffer’s educational background and broad range of leadership experience in various aspects of our business globally, are attributes that qualify him for service as a member of our Board of Directors.

 

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LOGO

 

        

 

PAUL J. TUFANO

 

 

 

 

Age 66

     

 

        Director since 2015

   

Former President & Chief Executive Officer, Benchmark Electronics, Inc.

 

   

INDEPENDENT DIRECTOR

 

     

        DIRECTOR QUALIFICATION HIGHLIGHTS

     

EnerSys Committees: Audit (Chair) and Compensation

 

Other Public Boards: Teradyne, Inc.

 

         

                        Financial Expert

 

                        Senior Leadership Experience

 

                        Manufacturing

 

Career Highlights: Mr. Tufano has been a Director of EnerSys since April 2015. He was President and Chief Executive Officer of Benchmark Electronics, Inc., a global provider of electronics contract manufacturing services and integrated engineering design and test services, whose shares are listed on The New York Stock Exchange, from September 2016 until March 2019, and a member of its Board of Directors since February 2016. Mr. Tufano served as Chief Financial Officer of the Alcatel-Lucent Group, a telecommunications company, whose shares are listed on The New York Stock Exchange and the Paris Stock Exchange, from 2008 through 2013. In September 2012, in addition to his Chief Financial Officer responsibilities, he was named Chief Operating Officer. Before joining Alcatel-Lucent, Mr. Tufano served as Executive Vice President and Chief Financial Officer of Solectron Corporation, an electronics manufacturing company for original equipment manufacturers, from January 2006 to October 2007 and as Interim Chief Executive Officer from February 2007 to October 2007. Prior to joining Solectron, Mr. Tufano was President and Chief Executive Officer at Maxtor Corporation, a manufacturer of computer hard disks, from February 2003 to November 2004. Previously, he served as Executive Vice President and Chief Operating Officer from April 2001 and as Chief Financial Officer from July 1996 at Maxtor Corporation. From 1979 until he joined Maxtor Corporation in 1996, Mr. Tufano held management positions in finance and operations at International Business Machines Corporation (IBM), a technology and consulting company.

Board Experience: Mr. Tufano has been a Director of Teradyne, Inc., a supplier of automation equipment for test and industrial application whose shares are listed on The New York Stock Exchange, since March 2005, and Benchmark Electronics, Inc., as discussed above.

Skills and Qualifications: Mr. Tufano holds a Bachelor of Science degree in Economics from St. John’s University and a Master of Business Administration, Finance, Accounting and International Business degree from Columbia University. Mr. Tufano’s experience qualifying him for service as a member of our Board of Directors includes expertise garnered from service as a former senior executive, including Chief Financial Officer, of several public manufacturing companies involving complex technologies. This experience qualifies him to serve as Chairperson and a financial expert to the Audit Committee.

 

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LOGO

 

        

 

RONALD P. VARGO

 

 

 

 

Age 66

     

 

        Director since 2017

   

Former Executive Vice President and Chief Financial Officer of ICF International, Inc.

 

   

INDEPENDENT DIRECTOR

 

     

        DIRECTOR QUALIFICATION HIGHLIGHTS

     

EnerSys Committees: Audit and Nominating & Corporate

  Governance

 

Other Public Boards: Ferro Corporation and EPAM

  Systems, Inc.

 

 

         

                        Financial Expert

 

                        Technology & Engineering

 

                        Leadership Experience

 

Career Highlights: Mr. Vargo served as Executive Vice President and Chief Financial Officer of ICF International, Inc., a global consulting and technology services company whose shares are listed on The NASDAQ Stock Market, from April 2010 to May 2011. Prior to joining ICF, he served as the Executive Vice President and Chief Financial Officer of Electronic Data Systems (“EDS”), a global technology services company, and served as a member of the EDS Executive Committee. Mr. Vargo joined EDS as Vice President and Treasurer in 2004 and was promoted to Chief Financial Officer in 2006. Before joining EDS, he was employed from 1991 to 2003 by TRW, Inc., a global manufacturing and service company strategically focused on providing products and services with a high technology or engineering content to the automotive, space and defense markets. While at TRW, Mr. Vargo served in the positions of Vice President of Investor Relations and Treasurer and Vice President of Strategic Planning and Business Development. He began his career with General Electric in 1976 and also served in numerous leadership positions at BP plc and the Standard Oil Company, which was acquired by BP.

Board Experience: Mr. Vargo has served as a Director of Ferro Corporation, a leading supplier of technology based functional coatings and color solutions, whose shares are listed on The New York Stock Exchange, since 2009 and has served as a Director of EPAM Systems, Inc., a global provider of product development and software engineering solutions, whose shares are traded on The New York Stock Exchange, since 2012.

Skills and Qualifications: Mr. Vargo holds a Master of Business Administration degree in Finance and General Management from Stanford University and a Bachelor of Arts degree in Economics from Dartmouth College. Mr. Vargo’s financial acumen and broad experiences in technology and engineering in global markets qualify him for service on the Board of Directors and as a member and financial expert of the Audit Committee and member of the Nominating and Corporate Governance Committee.

 

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               CORPORATE GOVERNANCE                

Independence of Directors

 

Our Board of Directors determined that all directors, with the exception of Mr. Shaffer, are independent from EnerSys and our management under the listing standards of The New York Stock Exchange (“NYSE”). The Board considered the NYSE standards, the fact that there were no transactions or arrangements between the directors and EnerSys, other than the consideration for serving as a director, and all other relevant facts and circumstances in making these independence determinations and concluded that there were no material relationships between any of our directors and EnerSys.

There are no familial relationships among our directors or executive officers.

Access to Corporate Governance Documents

 

Our corporate governance information and materials, including our Corporate Governance Guidelines, charters of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, and Code of Business Conduct and Ethics, are available on the Investors page of our website at www.enersys.com or at investor.enersys.com, and any stockholder may obtain printed copies of these documents by writing to Investor Relations at: EnerSys, 2366 Bernville Road, Reading, Pennsylvania 19605, by e-mail at: investorrelations@enersys.com or by calling Investor Relations at (610) 236-4040. Information contained on the website is not incorporated by reference or otherwise considered part of this Proxy Statement.

Committees of our Board of Directors

 

Our Board of Directors has an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, each of which has the composition and responsibilities described below. The Board of Directors has determined that each committee member is independent under the NYSE listing standards. Our Board of Directors, from time to time, may establish other committees.

Audit Committee

Since August 15, 2017, Messrs. Chung, Marlo, Tufano (Chairperson), and Vargo, and Ms. Connors, have served as members of our Audit Committee. For fiscal year 2020, the Board of Directors appointed each of Messrs. Chung, Marlo, Tufano, and Vargo, and Ms. Connors as an “audit committee financial expert,” as such term is defined in rules promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934 (the “Exchange Act”). The Board of Directors determined that Messrs. Chung, Marlo, Tufano, and Vargo, and Ms. Connors are independent directors under the NYSE listing standards and the SEC rules and regulations applicable to audit committees and financially literate in accordance with the NYSE listing standards.

Our Audit Committee held a total of 6 meetings during the fiscal year ended March 31, 2020.

The Audit Committee is responsible for:

 

   

appointing, compensating and overseeing our independent registered public accounting firm (“independent auditors”);

 

   

overseeing management’s fulfillment of its responsibilities for financial reporting and internal control over financial reporting;

 

   

overseeing the activities of our internal audit function;

 

   

reviewing and discussing policies with respect to risk assessment and risk management; and

 

   

reviewing, discussing and overseeing policies relating to our hedging, swaps and other derivative transactions.

For additional information, see “Audit Committee Report” herein and the Audit Committee Charter, which is available on the Investors page of our website at www.enersys.com or investor.enersys.com.

 

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Compensation Committee

Since August 15, 2017, Messrs. Lehman (Chairperson), Marlo, and Tufano, Gen. Magnus and Ms. Connors have served as members of the Compensation Committee.

This Committee held a total of 4 meetings in the fiscal year ended March 31, 2020.

The Compensation Committee is responsible for:

 

   

reviewing and approving the compensation of our Chief Executive Officer (“CEO”) and the other named executive officers;

 

   

reviewing and recommending to the Board the adoption of non-employee director compensation programs; and

 

   

administering our equity plans and other certain incentive compensation plans.

More specifically, the Compensation Committee has sole authority to set the base salaries and approve equity-based and incentive-based compensation for our named executive officers. It engages its own independent compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”), to review the compensation levels of executives at our peer group companies and assess total compensation and make recommendations about changes in the compensation of our executives, including incentive and equity plan structure and performance goals. The consultant works with management on behalf of the Compensation Committee on matters under the Committee’s purview but provides no services to management or the Company other than its work for the Committee. The Compensation Committee also considers recommendations from our CEO with respect to the base salary of our other named executive officers. The Compensation Committee utilizes a similar methodology, including advice from its consultant on compensation levels and structure, for recommending non-employee director compensation and meeting fees, which are subject to Board approval.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee (i) was, during fiscal year 2020, or had previously been an officer or employee of EnerSys or our subsidiaries nor (ii) had any direct or indirect material interest in a transaction of EnerSys or a business relationship with EnerSys, in each case that would require disclosure under the applicable rules of the SEC. No other interlocking relationship existed between any member of the Compensation Committee or an executive officer of EnerSys, on the one hand, and any member of the compensation committee (or committee performing equivalent functions, or the full board of directors) or an executive officer of any other entity, on the other hand, requiring disclosure pursuant to the applicable rules of the SEC.

Nominating and Corporate Governance Committee

Since August 15, 2017, Gen. Magnus (Chairperson) and Messrs. Hoffen, Marlo and Vargo have served as members of the Nominating and Corporate Governance Committee.

The Committee held a total of 6 meetings in the fiscal year ended March 31, 2020.

The responsibilities of the Nominating and Corporate Governance Committee include the following:

 

   

identifying, reviewing the qualifications of, and recruiting qualified candidates for board membership;

 

   

reviewing the continuation of each director being considered for reelection;

 

   

considering the contingent resignations of directors who do not receive a majority vote in connection with their respective election and recommend to the Board of Directors the action to be taken;

 

   

making recommendations to the Board concerning the structure, composition and function of the board and its committees;

 

   

executive succession planning; and

 

   

reviewing and assessing the adequacy of the Company’s corporate governance documents.

 

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Process for Selection of Director Nominee Candidates

 

The Nominating and Corporate Governance Committee believes that the minimum qualifications for serving as a director of EnerSys are that a candidate demonstrate, by significant accomplishments in his or her field, an ability to make a meaningful contribution to the Board of Directors’ oversight of the business and affairs of EnerSys and have an impeccable record and reputation for honest and ethical conduct in his or her professional and personal activities. In addition, the Nominating and Corporate Governance Committee considers the following characteristics in reviewing director candidates:

 

   

integrity and character;

 

   

sound and independent judgment;

 

   

breadth of experience;

 

   

business acumen;

 

   

leadership skills;

 

   

scientific or technology expertise;

 

   

familiarity with issues affecting global businesses in diverse industries; and

 

   

diversity of backgrounds and experience.

In addition to these requirements, the Nominating and Corporate Governance Committee will also evaluate, in the context of the Board’s needs, whether the nominee’s skills are complementary to the existing Board members’ skills, and assess any material relationships with EnerSys or third parties that might adversely impact independence and objectivity, as well as such other criteria as the Nominating and Corporate Governance Committee determines to be relevant at the time. Except as described above, the Board and the Nominating and Corporate Governance Committee do not maintain a formal diversity policy, however, diversity is one of many factors considered in the nomination of our directors.

The Nominating and Corporate Governance Committee, Committee Chairperson and/or our Chief Executive Officer interview director nominee candidates that meet the criteria, and the Nominating and Corporate Governance Committee selects candidates that best suit the Board’s needs. We may from time to time hire an independent search firm to help identify and facilitate the screening and interview process of director candidates.

Stockholders may recommend qualified persons for consideration by the Nominating and Corporate Governance Committee. Stockholders making a recommendation must submit the same information as that required to be included by us in our Proxy Statement with respect to nominees of the Board of Directors. The stockholder recommendation should be submitted in writing, addressed to EnerSys at 2366 Bernville Road, Reading, Pennsylvania 19605, Attn: Joseph G. Lewis, Senior Vice President, General Counsel, Chief Compliance Officer and Secretary.

The Nominating and Corporate Governance Committee’s evaluation process does not vary based on whether or not a candidate is recommended by a stockholder. The Nominating and Corporate Governance Committee will also review the performance as a director of any person already serving on the Board of Directors of EnerSys in determining whether to recommend that the Director be re-nominated.

Board Leadership Structure

 

For fiscal year 2020, the Board of Directors maintained a leadership structure that separates the Chairman and Chief Executive Officer roles by appointing a Non-Executive Chairman of the Board. Given its governance structure, the Board of Directors determined that the optimal structure for the Company at this time is to leave the role of Lead Director vacant, in lieu of appointing both a Non-Executive Chairman of the Board and a Lead Director (as described below).

The Board had created the position of Lead Director to strengthen Board oversight. The Lead Director must be a non-management director and must be deemed independent by the Board of Directors. The Lead Director works with the Non-Executive Chairman to approve Board agendas and schedules, advises on the quality, quantity and timeliness of information provided by management to the Board, and acts as a liaison between the independent directors and the Non-Executive Chairman of the Board. In the absence of the Non-Executive Chairman, the Lead Director also chairs executive sessions of the independent directors not attended by management. The Board has established procedures for determining which non-management director will serve as the Lead Director. The Lead Director is designated by the Board of Directors.

 

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The Board’s Role in Risk Oversight

 

The Board oversees various risks potentially affecting EnerSys both directly and indirectly through its committees. EnerSys has in place a risk management program that, among other things, is designed to identify risks across EnerSys with input from each business unit and function. Material risks are identified and prioritized by management and its risk committee that reports to the Audit Committee, and each prioritized risk is referred to the appropriate committee of the Board or the full Board for oversight. Members of the Board regularly review information regarding our credit, liquidity, markets, legal, regulatory, compliance and operations, including technology and cyber security risk, as well as the strategic and financial considerations associated with each.

Also, the Compensation Committee periodically reviews the most important risks to EnerSys to ensure that compensation programs do not encourage excessive risk-taking. Senior members of management from across business units and programmatic and functional disciplines within EnerSys make up a risk committee, which meets at least quarterly to identify significant risks to us, coordinate information sharing and mitigation efforts for all types of risks, sometimes working with outside advisors. We also have mandatory training of our workforce around our policies, including our Code of Business Conduct and Ethics. The risk committee reports its results to the Audit Committee periodically.

Charters of the Committees of the Board of Directors

 

The Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee each operate pursuant to a written charter adopted by the Board of Directors. Each Committee reviews its charter at least annually. Copies of the charters are available on the Investors page of our website at investor.enersys.com or in print upon request. See “Corporate Governance–Access to Corporate Governance Documents.”

Director Attendance at Board, Committee and Annual Meetings

 

Our Corporate Governance Guidelines provide that directors are expected to attend meetings of the Board and meetings of the committees on which they serve. During fiscal year 2020, the Board of Directors met a total of 4 times. Each director attended at least 75% of the total number of meetings of the Board and its committees on which the director served during the fiscal year, based on the number of such meetings held during the period for which each person served as a director or on a committee. It is our policy that directors are invited to the Annual Meeting but are not required to attend. Seven (7) members of the Board of Directors attended the 2019 annual meeting of stockholders.

Executive Sessions of Non-Management Directors

 

The Board has established a policy requiring non-management directors to meet in executive session periodically during the course of each year.

Communications with the Board of Directors

 

Stockholders and other interested parties, who desire to communicate directly with any member (or all members) of the Board, any Board committee or any chair of any such committee, should submit such communication in writing addressed to the “Non-Executive Chairman of the Board of Directors” or “Non-Management Directors,” at EnerSys, P.O. Box 14145, Reading, Pennsylvania 19612 or by email to the Non-Executive Chairman of the Board of Directors or Non-Management Directors by going to investor.enersys.com, under the link for Governance and Documents and Charters. Communications intended for the full Board of Directors may be submitted in the same manner.

Stockholders, employees and other interested parties who desire to express a concern relating to accounting or auditing matters should communicate directly with our Audit Committee in writing addressed to the “Audit Committee Chair” at EnerSys, P.O. Box 14145, Reading, Pennsylvania 19612 or by e-mailing the Audit Committee by going to investor.enersys.com, under the link for Governance and Documents and Charters.

Code of Business Conduct and Ethics

 

The Board has adopted a Code of Business Conduct and Ethics that is applicable to our Chief Executive Officer, Chief Financial Officer and Controller, as well as our other officers, directors, employees and contractors of EnerSys. This Code is available on the Investors page of our website at www.enersys.com or investor.enersys.com or in print upon request. See “Corporate Governance–Access to Corporate Governance Documents.” Any amendment to, or waiver from, this Code for such officers will be disclosed on the Investors page of our website at www.enersys.com or investor.enersys.com.

 

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Corporate Social Responsibility and Sustainability

 

The Board of Directors and our CEO administer our Corporate Social Responsibility Program by which EnerSys communicates and monitors our information regarding compliance with our various policies, including those with respect to conflict minerals, environmental responsibility and engagement, supplier diversity, anti-slavery and human trafficking, battery recycling programs and environment and sustainability issues with respect to the life cycle of our products. These various policies are available on our website at www.enersys.com.

 

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           NON-EMPLOYEE DIRECTOR COMPENSATION            

We believe that the amounts and form of compensation and the methods used to determine compensation of our non-employee directors are important in (i) attracting and retaining directors who are independent, interested, diligent and actively involved in overseeing EnerSys’ affairs and (ii) more substantially aligning the interests of our non-employee directors with the interests of our stockholders. We did not separately compensate Mr. Shaffer for his service on the Board for fiscal year 2020.

For fiscal year 2020, our Compensation Committee retained the services of FW Cook, as an independent compensation consultant to the Compensation Committee, to provide competitive data and make recommendations on the compensation of our named executive officers as we describe beginning on page 25, as well as to assist the Compensation Committee in evaluating the compensation of our non-employee directors. The Compensation Committee considers this information, including the applicable peer group data, and ultimately recommends any changes to the non-employee director compensation program to our Board for its approval. In assessing non-employee director compensation, we utilize the same peer group that is used for executive compensation and is described in the Compensation Discussion and Analysis section of this Proxy Statement beginning on page 25. The Compensation Committee reviews the non-employee director compensation program annually.

Cash Compensation

 

The cash elements of the non-employee director compensation program for fiscal year 2020, which the Compensation Committee recommended, and the Board approved, effective immediately following the 2019 annual meeting of stockholders, were as follows:

 

   

Annual retainer—$80,000 per year

 

   

Committee meetings—$1,500 each

 

   

Non-Executive Chairman—additional $150,000 per year (paid 50% in deferred stock units and 50% in cash)

 

   

Audit Committee Chairperson—additional $15,000 per year

 

   

Compensation Committee Chairperson—additional $15,000 per year

 

   

Nominating and Corporate Governance Committee Chairperson—additional $15,000 per year

In reviewing the non-employee director compensation program for fiscal year 2021, the Compensation Committee recommended, and the Board approved, that all elements of the non-employee director cash compensation program remain unchanged. The annual retainer for the Non-Executive Chairman of the Board will continue to be paid 50% in cash and 50% in deferred stock units, which will be treated in accordance with the description below relating to deferred stock units granted to our non-employee directors.

Equity Compensation

 

For fiscal year 2020, each non-employee director received an award of deferred stock units, with a grant date fair market value of $135,000. Deferred stock units are immediately vested on the date of grant and are payable in shares of our common stock six months after termination of service as a director.

Based on the Compensation Committee’s recommendation, the Board approved the same form and amount for the directors’ fiscal year 2021 annual equity grant. The number of shares subject to each award will be determined on August 10, 2020, which is the anticipated date of the grant pursuant to our policy on granting equity awards.

We make all equity awards to non-employee directors under our stockholder-approved equity incentive plan, which we describe on page 32, and in accordance with our policy on granting equity awards, which we described on page 35. As required under their respective award agreements, we credit directors with any dividend equivalents attributable to such equity awards.

Director Deferred Compensation Plan

 

Under the EnerSys Voluntary Deferred Compensation Plan for Non-Employee Directors, which we refer to as the “Director Plan,” each non-employee director may defer receipt of all or a portion of any cash fees that are payable to the director for service on the Board.

 

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Participants may elect to allocate the deferred fees (i) into an investment account, under which investment options are the same as those available to our employees under our 401(k) retirement plan or (ii) into a stock unit account, under which the director will be awarded stock units pursuant to our stockholder-approved equity compensation plan. If the director elects to allocate the deferred fees into the stock unit account, we will make an additional matching contribution in the amount of 20% of the deferred amount. Dividend equivalent units, if any, will be credited to each stock unit account. Each participant is 100% vested with respect to the amounts deferred to the stock unit deferral account. The matching contribution will be in the form of restricted stock units and will vest quarterly over one year from the date the units are credited to the account, except that participants will automatically become 100% vested in their matching contribution upon our change in control. All stock units are payable in shares of our common stock.

Under the Director Plan, our non-employee directors may also defer receipt of all or a portion of shares payable due to vesting of restricted stock units granted pursuant to the matching contribution discussed above. At a director’s election, the shares otherwise payable, together with any dividends thereon, are credited to a hypothetical bookkeeping account in the director’s name and will be paid to the director in a lump sum at the time specified in the election or, if earlier, upon our change in control or the director’s death.

The Director Plan is a nonqualified deferred compensation plan. As such, the rights of all participants to any deferred amounts represent our unsecured promise to pay and the deferred amounts remain subject to the claims of our creditors.

Stock Ownership Guidelines

 

We have implemented stock ownership guidelines under which we expect each non-employee director to beneficially own shares of our common stock with a value equal to five times the annual Board cash retainer, not including meeting or committee chair fees, paid to such director during the previous fiscal year. The Compensation Committee evaluates stock ownership on an annual basis. We expect each director to attain the investment level no later than five years from the date the director first becomes a non-employee director. Each individual serving as a non-employee director during fiscal year 2020 has achieved the investment level established by the stock ownership guidelines. Ms. Chan and Mr. Fludder will each have five years from their appointment to attain this investment level.

Hedging and Pledging Prohibition

 

As with our employees, we do not permit our non-employee directors to hedge their economic exposures to our common stock that they own by engaging in transactions involving puts, calls, or other derivative securities, zero-cost collars, forward sales contracts, or buying on margin or pledging shares as collateral for a loan.

 

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NON-EMPLOYEE DIRECTOR COMPENSATION

FOR FISCAL YEAR 2020

The table set forth below summarizes the compensation that we paid to our non-employee directors for the fiscal year ended March 31, 2020. None of our non-employee directors received option awards, non-equity incentive plan compensation, pension, nonqualified deferred compensation, or any other compensation for the fiscal year ended March 31, 2020.

 

 

Name

 

  

 

 

          Fees Earned           

Paid in Cash

 

 

Stock Awards(1)(2)

 

  

Total

 

Hwan-yoon F. Chung

    

$

89,000

   

$

    134,997        

    

$

      223,997        

Nelda J. Connors

    

$

95,000

   

$

134,997        

    

$

229,997        

Howard I. Hoffen

    

$

86,000

   

$

134,997        

    

$

220,997        

Arthur T. Katsaros

    

$

    155,000

(3)

   

$

241,569        

    

$

 396,569        

John F. Lehman

    

$

101,000

(3)

   

$

155,550        

    

$

 256,550        

Gen. Robert Magnus, USMC (Retired)

    

$

110,000

   

$

134,997        

    

$

244,997        

Dennis S. Marlo

    

$

113,000

(3)

   

$

148,372        

    

$

261,372        

Paul J. Tufano

    

$

101,000

(3)

   

$

157,016        

    

$

258,016        

Ronald P. Vargo

    

$

98,000

(3)

   

$

154,953        

    

$

252,953        

   

 

(1)

On March 31, 2020, Messrs. Katsaros, Lehman, Marlo, Tufano and Vargo each held unvested stock units, including accumulated dividend equivalents with respect to such units, under the Director Plan.

 

Name

 

 

 

    Unvested Stock Units Under the    

Director Plan

 

Arthur T. Katsaros

 

288

John F. Lehman

 

186

Dennis S. Marlo

 

94

Paul J. Tufano

 

199

Ronald P. Vargo

 

176

 

(2)

We calculated these amounts using the provisions of ASC Topic 718. Amounts represent the aggregate grant date fair value of the deferred stock units that we awarded to each non-employee director in fiscal year 2020 as we describe above. Assumptions used in the calculation of these amounts are included in the footnotes to our audited financial statements for the fiscal year ended March 31, 2020, included in our Annual Report on Form 10-K, which we filed on June 1, 2020.

 

(3)

Messrs. Katsaros, Lehman, Marlo, Tufano and Vargo each deferred all or a portion of these amounts into a stock unit deferral account, pursuant to the terms of the Director Plan. They received matching contributions, subject to dividend equivalents, with respect to such stock units. Under the terms of the Director Plan, the restricted stock units comprising the matching contribution vest quarterly over one year from the date of the deferral. All stock units are payable in shares of our common stock.

 

Name

 

 

 

Underlying Stock Units
Added to Director Plan

 

 

    Matching Contribution    

     Added to Director Plan     

 

Arthur T. Katsaros

 

2,483

 

498

John F. Lehman

 

1,616

 

324

Dennis S. Marlo

 

1,100

 

220

Paul J. Tufano

 

1,743

 

348

Ronald P. Vargo

 

1,578

 

316

 

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Proposal No. 2

 

 

Ratification of Appointment of Independent Registered Public

Accounting Firm

The Audit Committee of the Board of Directors of EnerSys has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2021. No determination has been made as to what action the Audit Committee would take if stockholders do not ratify the appointment.

Ernst & Young LLP conducted the audit of the financial statements of EnerSys and its subsidiaries for the fiscal year ended March 31, 2020. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting, will be given an opportunity to make a statement if they desire to do so, and will be available to answer appropriate questions from stockholders.

 

LOGO

    

The Board of Directors recommends a vote “FOR

the ratification of the appointment of

Ernst & Young LLP

 

             AUDIT COMMITTEE REPORT              

Background

 

The members of the Audit Committee are currently Directors Paul J. Tufano (Chairperson), Hwan-yoon F. Chung, Nelda J. Connors, Dennis S. Marlo and Ronald P. Vargo. For additional information relating to the members and responsibilities of the Audit Committee, see “Corporate Governance–Committees of our Board of Directors–Audit Committee.”

Responsibility

 

Management is responsible for the preparation of financial statements and the integrity of the reporting process, including the system of internal and disclosure controls.

The independent auditors are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles in the United States and to express an opinion on the audit of internal control over financial reporting.

The primary responsibilities of the Audit Committee are to select, engage, and compensate our independent auditors and to oversee the financial reporting process on behalf of the Board. It is not the duty of the Audit Committee to prepare financial statements and related disclosures. It is also not the duty of the Audit Committee to plan or conduct audits, or to determine that our financial statements are complete and accurate and in accordance with generally accepted accounting principles in the United States.

Process and Recommendation

 

In fulfilling its responsibilities, the Audit Committee reviewed and discussed the audited financial statements for the fiscal year ended March 31, 2020, with our management and independent auditors, including a discussion of the quality, not just the acceptability, of the accounting principles as applied in our financial reports, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements. The Audit Committee discussed with our internal and independent auditors the overall scope and plans for their respective audits. The Audit Committee meets with management to discuss disclosure controls and procedures and internal control over financial reporting. The Audit Committee also meets with the internal and independent auditors, with and without our management present, to discuss the results of their examinations and overall quality of our financial reporting. The Audit Committee also reviewed with our CEO and CFO their certification relating to their evaluation of our disclosure controls, the completeness and accuracy of the financial statements and other financial information contained in the Form 10-K, and the process followed by the CEO and CFO to assure the truthfulness of such certificate.

 

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The Audit Committee also discussed with the independent auditors, who are responsible for expressing an opinion on the conformity of those financial statements with generally accepted accounting principles, the matters required to be discussed by the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), including PCAOB Auditing Standard No. 1301, Communications with Audit Committees, the rules of the Securities and Exchange Commission, and other applicable regulations. In addition, the Audit Committee has discussed with the independent auditor the firm’s independence from Company management and the Company, including the matters in the letter from the firm required by PCAOB Rule 3526, Communication with Audit Committees Concerning Independence, and considered the compatibility of non-audit services with the independent auditor’s independence.

The Audit Committee also reviewed and discussed together with management and the independent auditor the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2020, and the results of management’s assessment of the effectiveness of the Company’s internal control over financial reporting and the independent auditor’s audit of internal control over financial reporting.

Based on the process referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

Fees of Independent Auditors

 

The following table sets forth the aggregate fees for the fiscal years ended March 31, 2019, and March 31, 2020, incurred for services provided by our independent registered public accounting firm, Ernst & Young LLP.

 

    

 

Year Ended

 

 

 

 Description of Fees

 

  

 

March 31, 2020

 

   

 

March 31, 2019

 

 

 

 Audit Fees, including fees associated with the annual audit of EnerSys and statutory audits required internationally, the reviews of EnerSys’ quarterly reports on Form 10-Q, services provided in connection with the requirements of the Sarbanes-Oxley Act of 2002, and comfort letters

 

   $

 

4,356,400

 

    

 

  $

 

4,141,400

 

    

 

 

 Audit-Related Fees, including fees associated with target mergers and acquisitions, and general accounting research and consultations

 

   $

 

0

 

 

 

  $

 

0

 

 

 

 

 Tax Fees, including fees associated with income tax compliance, advice and planning

 

   $

 

4,300

 

 

 

  $

 

84,000

 

 

 

 

 All Other Fees

 

  

 

$

 

 

2,000

 

 

 

 

 

 

$

 

 

2,000

 

 

 

 

                  

 

Total

 

  

 

$

 

 

        4,362,700

 

 

 

 

 

 

$

 

 

        4,227,400

 

 

 

 

The Audit Committee considered whether the provision of non-audit services by our independent registered public accounting firm for the fiscal year ended March 31, 2020, was compatible with maintaining auditor independence. The Audit Committee pre-approved all fees for non-audit related services paid to our independent registered public accounting firm for fiscal years 2019 and 2020.

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services by Independent Auditors

 

The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has adopted a policy for the pre-approval of services provided by the independent auditors. Under the policy, pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is subject to a specific budget. In addition, the Audit Committee may also pre-approve particular services on a case-by-case basis. For each proposed service, the Audit Committee has received detailed information sufficient to enable the Audit Committee to pre-approve and evaluate such service. The Audit Committee has delegated pre-approval authority to the Chairman of the Committee of up to $100,000, to pre-approve permitted non-audit services. Any pre-approval decisions made under this delegated authority are ratified by the Audit Committee at its next scheduled meeting.

 

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Appointment of Independent Registered Public Accounting Firm for Fiscal Year 2021

 

The Audit Committee has appointed Ernst & Young LLP to conduct the audit of the financial statements of EnerSys and its subsidiaries for the fiscal year ending March 31, 2021. EnerSys stockholders are being asked to ratify the Audit Committee’s appointment of Ernst & Young LLP as our independent registered public accounting firm at the Annual Meeting to which this Proxy Statement relates.

Audit Committee

Paul J. Tufano, Chairperson

Hwan-yoon F. Chung

Nelda J. Connors

Dennis S. Marlo

Ronald P. Vargo

 

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            NAMED EXECUTIVE OFFICERS             

Our current executive officers, who are also our named executive officers for fiscal year 2020, are listed below. Mr. Shaffer’s information is included under “Board of Directors.”

 

LOGO

 

 

Holger P. Aschke, age 51, President, EMEA & APAC. Mr. Aschke has served as President, EMEA & APAC since April 2019. Prior thereto, from January 2016, he was our President–EMEA. From April 2010 to January 2016, Mr. Aschke was the Vice President Sales and Marketing Reserve Power–Europe. Mr. Aschke joined a predecessor company in 1996 and has held a wide range of operational and sales roles of increased responsibility in the Company’s EMEA business. Mr. Aschke completed a commercial IT education and apprenticeship sponsored by the University of Dortmund (Germany) and completed the Advanced Management Program from INSEAD (France).

 

LOGO

 

 

Shawn M. O’Connell, age 47, President, Motive Power–Americas. Mr. O’Connell has served as our President, Motive Power–Americas since April 2019. Prior thereto, he served as our Vice President–Reserve Power Sales and Service for the Americas from February 2017, and Vice President of EnerSys Advanced Systems from December 2015 to January 2017. Mr. O’Connell joined EnerSys in 2011, serving in various sales and marketing capacities in several areas of our business. Mr. O’Connell received his Master of Business Administration degree in International Business from the University of Redlands, CA and his Bachelor of Arts degree in English Literature from the California State University, San Bernardino. Mr. O’Connell is a veteran of the U.S. Army’s 82nd Airborne Division (Paratroopers) where he served as a Signals Intelligence Analyst, Spanish Linguist, and held a Top-Secret security clearance.

 

LOGO

 

 

Michael J. Schmidtlein, age 59, Executive Vice President and Chief Financial Officer. Mr. Schmidtlein has served as Executive Vice President and Chief Financial Officer since January 2016. Prior thereto, since February 2010, he was our Senior Vice President–Finance and Chief Financial Officer. From November 2005 until February 2010, Mr. Schmidtlein was Vice President–Corporate Controller and Chief Accounting Officer. Prior thereto, Mr. Schmidtlein was the Plant Manager of our manufacturing facility in Warrensburg, Missouri. In 1995, he joined the Energy Storage Group of Invensys plc. which EnerSys acquired in 2002. Mr. Schmidtlein is a certified public accountant and received his Bachelor of Science degree in Accounting from the University of Missouri.

 

LOGO

 

 

Andrew M. Zogby, age 60, President, Energy Systems–Americas. Mr. Zogby has served as President, Energy Systems–Americas since April 2019. He joined EnerSys upon completion of the acquisition of Alpha Technologies in December 2018. Mr. Zogby served as President of Alpha Technologies since 2008 and brings over 30 years of experience in global broadband, telecommunications and renewal energy industries. He has held corporate leadership positions with several leading technology firms. Mr. Zogby received his Bachelor of Science degree in Industrial and Labor Relations from LeMoyne College, Syracuse, New York, and his Master of Business Administration degree from Duke University’s Fuqua School of Business. He is active in the US Chamber of Commerce, and serves on the Chamber’s Energy, Clean Air & Natural Resources Committee and the C_TEC, Chamber Technology Engagement Center Committee.

 

 

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            NAMED EXECUTIVE OFFICER COMPENSATION           

Compensation Discussion and Analysis

 

This Compensation Discussion and Analysis includes a description of the compensation provided in fiscal year 2020 to our named executive officers.

Business Overview

EnerSys is the global leader in stored energy solutions for industrial applications. We manufacture and distribute reserve power and motive power batteries, battery chargers, power equipment, battery accessories and outdoor equipment enclosure solutions to customers worldwide.

Motive power batteries and chargers are utilized in electric forklift trucks and other commercial electric powered vehicles. Reserve power batteries are used in the telecommunication and utility industries, uninterruptible power supplies, and numerous applications requiring stored energy solutions including medical, aerospace and defense systems. Outdoor equipment enclosure products are utilized in the telecommunication, cable, utility, transportation industries and by government and defense customers. EnerSys also provides aftermarket and customer support services to customers from over 100 countries through our sales and manufacturing locations around the world.

Our strategy is to continue to develop modern energy systems and expand into new markets though significant investment in research and development (R&D) and acquisitions. Our R&D is focused on improving the efficiency and utilization of our legacy lead-based products, along with our continued evolution into lithium-related products. Our NorthStar acquisition in fiscal year 2020, through our expanded Thin Plate Pure Lead capacity, provides increased opportunities in telecommunications and broadband networks, data centers, material handling, aerospace and defense, trucking and premium aftermarket transportation. The Alpha acquisition in fiscal year 2019 advanced EnerSys into energy storage systems, allowing an expanded product portfolio across the broadband, telecom, renewable and industrial markets.

Fiscal Year 2020 Compensation Actions

Our executive compensation program is structured to support our vision, which is to be the global leader in our chosen markets for stored energy solutions, while maximizing long-term stockholder value. We also design the program to link executive compensation to our financial performance and, through programs that use our common stock as a compensation medium, to more closely align the interests of executive management with those of our stockholders. The Compensation Committee evaluates our overall performance in making decisions on the executive compensation program.

 

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In fiscal year 2020, EnerSys achieved mixed financial results as compared to the previous fiscal year, and we did not fully achieve our pre-established goals, which was reflected in our incentive plan results. Net sales were up 10% year over year and our adjusted operating income was up 7% year over year, driven by increases from the Alpha and NorthStar acquisitions, but offset by slight declines in organic volume, pricing and currency rates. Our results were negatively impacted by an upgrade to our ERP systems, a fire at our battery manufacturing facility in Richmond, Kentucky, and the impact of the COVID-19 pandemic in the fourth quarter. The following chart illustrates the relationship between our Company performance and incentive plan arrangements for fiscal year 2020.

 

LOGO

 

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The following is a summary of the main elements of our compensation programs for our named executive officers for fiscal year 2020, and related compensation actions during the year:

 

Pay Element

   Description    Fiscal Year 2020 Actions

Base Salary

  

Fixed cash compensation determined based on the executive’s skill set and the market value for that skill set.

  

  Increases ranged from 0% to 10%, based on individual performance and relative position versus market, including impact of foreign exchange rates for those located outside of the United States.

Cash Annual Incentives (Management Incentive Plan or MIP)

  

Cash-based annual incentive plan tied to:

 

  Corporate financial goals for senior corporate executives, with goals weighted 85% on an adjusted operating income target and 15% on a primary working capital percentage target; and

 

  For regional or line of business (LOB) presidents, a mix of 42.5% corporate adjusted operating income, 7.5% primary working capital percentage, 42.5% regional or line-of-business adjusted operating income, and 7.5% regional or line-of-business primary working capital percentage.

  

  Target MIP opportunities as a % of salary remained unchanged from the prior year.

Long-Term Incentives

  

  50% Performance Share Units (PSUs)

 

¡  50% of target value based on EnerSys’ relative TSR versus the S&P Small Cap 600 Industrial Index,

 

¡  50% of target value based on cumulative adjusted EPS performance, and

 

¡  The PSUs each have a three-year performance period and additional one-year holding period.

 

  25% stock options, vesting over three years.

 

  25% time-vested restricted stock units (RSUs), vesting over four years.

  

  Target grant values to the named executive officers increased by 2.6% in the aggregate versus fiscal year 2019, while grant values by individual ranged from 0% to +5%.

 

  The Company maintained the same mix of 50% PSUs, 25% stock options, and 25% time vested RSUs for fiscal year 2020.

Summary of Other Major Program Elements

Other significant elements of our compensation program that continue to reinforce stockholder alignment, our long-term pay-for-performance objectives, and what the Compensation Committee considers best practices include the following:

 

   

an independent Compensation Committee makes the compensation decisions for our named executive officers and the Committee engages an independent compensation consultant to assist in making such decisions;

 

   

we require that a majority of pay be at-risk, 85% of fiscal year 2020 target total pay was at-risk for our Chief Executive Officer (74% on average for our other named executive officers);

 

   

we require that a majority of pay be tied to long-term performance, 69% of fiscal year 2020 target total pay was granted in the form of long-term incentives for our Chief Executive Officer (56% on average for our other named executive officers);

 

   

we maintain robust stock ownership guidelines for executives;

 

   

we prohibit hedging and pledging of our stock;

 

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we have a clawback policy designed to recoup excess compensation paid to executive officers in the event of an accounting restatement;

 

   

we have adopted a mandatory holding requirement after vesting for certain equity awards granted to our executive officers;

 

   

equity grant administration procedures are in place to ensure that awards comply with legal, regulatory, and accounting requirements;

 

   

the Compensation Committee conducts an annual risk assessment of our compensation program to confirm that the program does not encourage excessive risk-taking;

 

   

our equity awards generally require a double trigger in order for vesting to be accelerated in the event of a change in control (i.e., a qualifying termination of employment plus the occurrence of a change in control);

 

   

our executive severance arrangements do not provide for excise tax gross-ups; and

 

   

we do not provide excessive perquisite or benefit programs, nor do we offer supplemental retirement plans.

Results of 2019 Advisory Vote on Executive Compensation–Say-on-Pay

At our annual meeting of stockholders held on August 1, 2019, approximately 97.8% of votes cast by stockholders approved the advisory resolution on our executive compensation. The Compensation Committee considered this a high approval rate by the stockholders in establishing the compensation programs for fiscal year 2020 and will continue to consider the outcome of future non-binding advisory stockholder votes on executive compensation in its determinations regarding executive compensation.

At our 2020 Annual Meeting, stockholders will have the opportunity to cast an advisory say-on-pay vote regarding the compensation of our named executive officers as discussed further in Proposal No. 3 beginning on page 52.

Executive Compensation Policy

We generally base our executive compensation program on the same objectives that guide us in establishing compensation programs for all our employees:

 

   

Compensation should align the interests of higher-level employees, including executives, with the long-term interests of our stockholders through award opportunities that result in ownership of our common stock. While our key employees receive a mix of both annual and longer-term incentives, employees at higher levels have an increasing proportion of their compensation tied to longer-term performance because these employees are in a position to have greater influence on longer-term results.

 

   

Compensation should reward teamwork. Because our success depends on our ability to optimize our worldwide business, our compensation programs emphasize our total results in addition to individual geographic or product line results.

 

   

Compensation should be based on the level of job responsibility, as well as individual and corporate performance. As employees progress to higher levels in the organization, an increasing proportion of their pay should be linked to corporate performance and stockholder returns because they are more able to affect corporate results.

 

   

Compensation should reflect the value of the job in the marketplace. To attract and retain a skilled work force, we must remain competitive with the pay of other employers who compete with us for talent.

 

   

To be effective motivation, performance-based compensation programs should enable employees to easily understand how their efforts can affect their pay by contributing to the achievement of our strategic and operational goals.

 

   

The programs and individual pay levels will always reflect differences in job responsibilities, geographies, and marketplace considerations, although the overall structure of compensation and benefit programs should be broadly similar across the organization.

 

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Determination of Compensation

 

The Compensation Committee reviews and approves each named executive officer’s base pay, bonus, and equity incentive compensation annually, with the guidance of the Compensation Committee’s independent compensation consultant, FW Cook. The Compensation Committee considers a number of factors to determine the compensation for the named executive officers and to ensure that our executive compensation program is achieving its objectives. Among those are:

 

   

Assessment of Corporate Performance. The Compensation Committee uses corporate performance measures in two ways. First, in establishing total compensation ranges, the Compensation Committee considers our performance within our industry using various measures, including, but not limited to, sales growth, profitability, balance sheet management, and TSR. Second, as we describe in more detail below, the Compensation Committee has established specific corporate performance measures that determine the size of payments under our MIP, and a portion of our equity incentives, and the payout of our equity awards is based on the value of our common stock.

 

   

Assessment of Individual Performance. Individual performance affects the compensation of all our employees, including the named executive officers. In addition, the Compensation Committee has adopted a formal evaluation process for our CEO. Each member of our Board provides a written, subjective evaluation of our CEO, on an anonymous basis, covering a broad range of criteria. The evaluations are collected and summarized by FW Cook, and the Compensation Committee considers them in setting the CEO’s compensation. For each other named executive officer, the Compensation Committee receives a recommendation from the CEO and also exercises its judgment based on the Committee’s interactions with the executive officer.

 

   

Benchmarking. The Compensation Committee benchmarked our compensation programs for fiscal year 2020 with a peer group consisting of the following companies, which are broadly similar with respect to industry and size, as measured by revenue (peers range from $1.2 billion to $4.6 billion, with a median of $2.7 billion) and 12-month average market capitalization (peers range from $1.6 billion to $10.5 billion, with a median of $3.5 billion). At the time of the study, EnerSys’ revenues were $2.6 billion, and 12-month average market capitalization was $3.1 billion. Our peer group for fiscal year 2020 was comprised of the following companies:

 

Actuant Corporation    Flowserve Corporation
Acuity Brands, Inc.    Hubbell Incorporated
A.O. Smith Corporation    Lincoln Electric Holdings Inc.
AVX Corporation    Regal-Beloit Corporation
Barnes Group Inc.    Rexnord Corporation
Belden Inc.    Timken Company
Brady Corp.    Valmont Industries, Inc.
Carlisle Companies Incorporated    Watts Water Technologies, Inc.
Crane Co    Woodward, Inc.
Donaldson Company, Inc.   

In addition, the Compensation Committee conducted its annual review of the peer group for fiscal year 2021 benchmarking, considering financial size, industry, and the condition of each company in the group. Based on such review, the Compensation Committee made the following changes to the peer group for fiscal year 2021 pay analyses: two peers were eliminated (Actuant Corporation, due to size, and Brady Corporation due to size and industry classification), and two new peers were added, each of which meet the screening criteria (Colfax Corporation and Kennametal Inc.).

The Compensation Committee evaluates our compensation program versus that of the peer companies with respect to both individual pay levels as well as the structure of the program. The Compensation Committee uses this data primarily to ensure that our executive compensation program as a whole is competitive. Market data is one of several factors that is used to evaluate compensation levels. Other factors may include individual and company performance, experience in the role, responsibility level, and internal equity. Target total direct compensation for fiscal year 2020 was 5% above the median on average.

The Compensation Committee believes that this competitive positioning for incentive compensation is appropriate in light of our rigorous goal setting approach under the annual incentive plan and our desire to place a greater emphasis on at-risk pay that is earned over a multi-year period to support long-term stockholder value creation. The Compensation Committee believes this compensation structure is at a level consistent with our executive compensation philosophy.

 

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Components of Executive Compensation

Base Salary

Base salary is the fixed element of our named executive officers’ cash compensation. The Compensation Committee generally considers whether each named executive officer’s base salary should be increased based on individual performance with a view toward ensuring that the base salary is competitive with that of executives in peer companies with comparable roles and responsibilities.

With assistance from the Compensation Committee’s independent compensation consultant, the Compensation Committee annually sets the base salaries of our named executive officers. The Compensation Committee solicits the CEO’s recommendation with respect to the base salaries of our named executive officers, other than the CEO.

For fiscal year 2020, the Compensation Committee considered the aforementioned factors and current responsibilities, performance, success and achievements of the business, as well as the recommendations of its independent compensation consultant, and determined that it was appropriate to increase the base salaries for Messrs. Shaffer, Schmidtlein and Aschke.

The base salaries of each of the named executive officers for fiscal years 2019 and 2020 are shown in the chart below in U.S. Dollars as of the end of the fiscal year.

 

Name

              2020                           2019                     % Change      

David M. Shaffer

   

$

    940,000

   

$

    900,000    

   

 

4.4

%

Michael J. Schmidtlein

   

$

530,000

   

$

515,000    

   

 

3

%

Holger P. Aschke

   

$

389,820

(1)    

   

$

342,000    

   

 

10

%

Shawn M. O’Connell

   

$

365,000

(2)    

   

$

237,106    

   

 

54

%

Andrew M. Zogby

   

$

440,000

(3)    

   

$

440,000    

   

 

0

%

   

 

(1)

Salary determined based on conversion of 376,000 Swiss Francs on March 31, 2020, at a rate of 1 USD = 1.036754 CHF.

 

(2)

Mr. O’Connell’s salary was increased on April 1, 2019, in connection with his promotion to President – Motive Power Americas. He previously served as Vice President – Reserve Power Sales and Service for the Americas.

 

(3)

Mr. Zogby’s salary is based on the terms of his original employment agreement with Alpha Technologies, Inc.

Management Incentive Plan

Under our MIP, our executives and key management personnel, including the named executive officers, may receive an annual cash bonus upon satisfaction of annual financial targets, which the Compensation Committee establishes at the beginning of each year. Consistent with our compensation policy, individuals with greater job responsibilities have a greater portion of their total cash compensation tied to our corporate performance through the MIP.

Under the MIP, each participant has threshold, target, and maximum potential cash bonus payouts, which the Compensation Committee establishes at the beginning of each fiscal year. The Compensation Committee bases the potential payments on each participant’s job responsibilities and position within our organization. The potential payouts are stated as a percentage of base salary. In establishing the targets, the Committee gives significant consideration to our prior year’s performance. Satisfactory individual performance is a condition to payment, and, at the end of each fiscal year, the Committee can, at its discretion, increase or decrease an individual’s payout under the MIP.

For fiscal year 2020, the Compensation Committee selected adjusted operating income and primary working capital percentage as the performance metrics in the MIP because they encourage participants to focus on improving both our core operating earnings and balance sheet strength, respectively. Specific regional and line-of-business metrics, including adjusted operating income and primary working capital percentage, were added to the MIP for our regional and line-of-business presidents (Messrs. Aschke, O’Connell, and Zogby), which we describe in more detail below, to increase the purview in the program for these participants.

The Committee believes these to be effective motivators because they can be readily tracked and are easily understandable by the MIP participants.

Each year, the Committee reviews overall financial performance and adjusts for items that are not reflective of normal operating performance for that year. These adjustments are items that the Committee believes are fair to both participants and stockholders, encourage appropriate actions that foster the long-term health of the business, and are consistent with

 

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the objectives underlying our predetermined performance goals. There are certain automatic adjustments such as expenses related to merger and acquisition activity, such as those relating to the NorthStar acquisition, the impact of restructuring programs, unplanned legal settlements, and the effects of foreign currency fluctuations. The Committee also reserves the right to exercise its judgment outside of this predetermined list of adjustments if there is a valid business rationale. For fiscal year 2020, the Committee did not make any additional adjustments to the performance calculation or payouts to the named executive officers.

Fiscal Year 2020 MIP Targets and Payout

The Compensation Committee considered the following when establishing the potential awards for fiscal year 2020:

 

   

Bonus Targets. For our named executive officers, the threshold, target, and maximum bonus opportunities for fiscal year 2020 were 15%, 100%, and 200% of target, respectively, which were the same as used in fiscal year 2019.

 

   

Company Performance Measures. For all participants in the MIP, including our named executive officers, the Compensation Committee established fiscal year 2020 performance measures based 85% on adjusted operating income and 15% on primary working capital percentage, which we define as a monthly average of trade accounts receivable, plus inventories, minus trade accounts payable with the net amount divided by an annualized trailing three month net sales. The adjusted operating income performance goal for fiscal year 2020 was established at a significantly higher level than actual performance in fiscal year 2019. The Compensation Committee believes that the performance goals for fiscal year 2020 were rigorous and reflected an aggressive business plan for the year.

Adjusted operating income achievement of $292.2 million reflected pre-approved adjustments of $102.0 million from the reported GAAP operating income of $190.2 million. These adjustments consisted of $44.2 million for asset impairment in EMEA and Asian regions, $23.1 million for amortization pertaining to the Alpha and NorthStar acquisitions, $20.8 million for restructuring, $6.8 million related to the recent NorthStar acquisition, $5.3 million for enterprise resource planning (ERP) system implementation costs, and $1.8 million for acquisition-related fees.

For Messrs. Shaffer and Schmidtlein, the executives subject to the corporate financial goals, the financial goal was comprised of 85% corporate adjusted operating income and 15% corporate primary working capital percentage performance. For fiscal year 2020, the total payout as a percentage of target was 0%.

 

Corporate

Measurement

  Financial
Goal
Percentage
    Performance
Goals
Threshold
    Performance
Goals Target
  Performance
Goals Maximum
 

Actual

Results

 

Payout

    % of Target    

Adjusted Operating Income ($ millions)

 

 

85%

 

 

 

  $347

 

 

  $385

 

  $424

 

  $292

 

    0%

Primary Working Capital Percentage

 

 

15%

 

 

 

26.2%

 

 

25.7%

 

25.2%

 

26.8%

 

    0%

                   

Total Payout as % of Target

 

    0%

For the line-of-business presidents, Messrs. O’Connell and Zogby, the financial goal was comprised of 42.5% corporate adjusted operating income, 7.5% corporate primary working capital percentage performance, in addition to 42.5% line-of-business operating income, and 7.5% line-of-business primary working capital percentage performance. The total payout as a percentage of target was 19% for Mr. O’Connell and 0% for Mr. Zogby.

 

Line of Business

Measurement

  Financial
Goal
Percentage
    Performance
Goals
Threshold
    Performance
Goals Target
    Performance
Goals Maximum
   

Actual

Results

   

Payout

% of Target

 

Adjusted Operating Income ($ millions)

 

       

- Corporate

 

 

42.5

 

$

347

 

 

$

385

 

 

$

424

 

 

$

292

 

 

 

0

- Energy Systems – Americas

 

 

42.5

 

$

142

 

 

$

157

 

 

$

173

 

 

$

95

 

 

 

0

- Motive Power – Americas

 

 

42.5

 

$

113

 

 

$

126

 

 

$

138

 

 

$

118

 

 

 

45

Primary Working Capital Percentage

           

- Corporate

 

 

7.5

 

 

26.2

 

 

25.7

 

 

25.2

 

 

26.8

 

 

0

- Energy Systems – Americas

 

 

7.5

 

 

22.3

 

 

21.8

 

 

21.3

 

 

27.0

 

 

0

- Motive Power Americas

 

 

7.5

 

 

26.0

 

 

25.5

 

 

25.0

 

 

26.9

 

 

0

                   

 


Total Payout as % of Target
- Corporate
- Energy Systems – Americas
- Motive Power – Americas




 

 

 


    


0

0

19

 


% 

 

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For the regional president, Mr. Aschke, the financial goal was comprised of 42.5% corporate adjusted operating income, 7.5% corporate primary working capital percentage performance, in addition to 42.5% regional operating income, and 7.5% regional primary working capital percentage performance. For fiscal year 2020, the total payout for our regional president, as a percentage of target was 15%.

 

Regional President

Measurement

  Financial
Goal
Percentage
    Performance
Goals
Threshold
    Performance
Goals Target
    Performance
Goals Maximum
   

Actual

Results

   

Payout

% of Target

 

Adjusted Operating Income ($ millions)

 

   

- Corporate

 

 

42.5

 

$

347

 

 

$

385

 

 

$

424

 

 

$

292

 

 

 

0

- EMEA & APAC

 

 

7.5

 

$

72

 

 

$

80

 

 

$

88

 

 

$

52

 

 

 

0

Primary Working Capital Percentage

           

- Corporate

 

 

42.5

 

 

26.2

 

 

25.7

 

 

25.2

 

 

26.8

 

 

0

- EMEA & APAC

 

 

7.5

 

 

28.4

 

 

27.9

 

 

27.4

 

 

27.0

 

 

200

                   

 

Total Payout as % of Target
- Corporate
- EMEA & APAC



 

 

 


    


0

15

 


% 

Due to the implications of the COVID-19 pandemic, the 2020 MIP payouts will be made on or about July 10, 2020. We set forth the amounts due to each named executive officer for fiscal year 2020 performance under “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table.

Long-Term Equity Incentive Compensation

The Compensation Committee has the ability to make various types of equity awards as long-term incentive compensation to our named executive officers under the 2017 Equity Incentive Plan. For fiscal year 2020, the Committee reviewed the long-term incentive program, and determined to retain the same design and mix as was used in fiscal year 2019, because it provides a strong balance between financial results, absolute TSR, and relative TSR. An overview of the program is as follows:

 

Long-Term Grant Type

   Weighting    Description

Performance Share Units (TSR)

  

25%

  

   Stock units earned based on EnerSys’ relative TSR versus the S&P Small Cap 600 Industrial Index

 

   Payouts may range from 0% to 200% of target

 

   Three-year performance period

 

   Earned shares are subject to an additional one-year holding period

 

   Payouts are capped at four times the grant date fair value

   

Performance Share Units (EPS)

  

25%

  

   Stock units earned based on EnerSys’ three-year cumulative EPS performance

 

   Payouts may range from 0% to 200% of target

 

   Three-year performance period

 

   Earned shares are subject to an additional one-year holding period

   

Stock Options

  

25%

  

   Vesting in annual increments over three years

 

   10-year exercise term

   

Restricted Stock Units

  

25%

  

   Vesting in annual increments over four years

A Performance Share Unit is a grant of stock units that a participant may earn based on performance over a three-year period. Each PSU provides that the participant may, at the end of the three-year performance cycle, receive shares of our common stock ranging from 0% to 200% of the target number of units granted. The PSUs are subject to a mandatory holding period of one year after the vesting period is complete. Therefore, if the PSUs are earned and vested after three years, the participant must still hold the shares earned for an additional one year before they can be sold. The Committee believes that the extra holding period increases the alignment of interests between stockholders and executives, and also serves to mitigate compensation-risk.

The TSR PSUs are based on the percentile ranking of our TSR versus the S&P Small Cap 600 Industrial Index. TSR is calculated based on stock price appreciation/depreciation plus reinvested dividends, during the performance period, where

 

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the starting and ending stock prices are calculated based on the 60-day average closing stock prices immediately preceding the beginning and end of the performance period, respectively. The performance schedule is shown below, where results between the thresholds are interpolated on a straight-line basis. Irrespective of the ultimate payout as a percent of target, the maximum value of TSR PSUs that may be delivered to participants under the plan is four times the average closing stock price at the beginning of the performance period.

 

EnerSys TSR Performance vs.

S&P Small Cap 600 Industrial Index

  Payout Factor

75th Percentile

 

200%

Median

 

100%

25th Percentile

 

50%

Below 25th Percentile

 

0%

 

The EPS PSUs are based on our three-year cumulative adjusted EPS performance. For these purposes, EPS is defined as adjusted net income divided by diluted weighted average common shares outstanding. Adjusted net income is defined as net income, excluding the following extraordinary items: first year results and costs related to acquisitions, divestitures, changes in accounting standards, changes in tax laws, restructuring charges, goodwill and intangible asset impairment charges, legal settlements, and foreign exchange rate fluctuations. Weighted average diluted common shares outstanding excludes any shares issued in a merger or acquisition transaction in the year of completion.

The performance schedule is shown below, where results between the thresholds are interpolated on a straight-line basis.

 

EnerSys Performance   Payout Factor

Maximum

 

200%

Target

 

100%

Threshold

 

50%

Below Threshold

 

0%

Stock options align employee incentives with stockholders because options have value only if the stock price increases over time. The nonqualified stock options that the Compensation Committee approved for fiscal year 2020 each have a 10-year term and vest one-third each year over three years. The options, which we granted at our common stock’s closing price on the date of grant, encourage participants to focus on long-term performance and growth.

Time-vested RSUs support the retention of our executives and also align employee incentives with stockholders since the value of RSUs is dependent on our stock price. RSUs vest in 25% annual increments over four years and have a longer vesting period than the stock options and PSUs because their main purpose is for retention.

On July 26, 2019, the Compensation Committee approved the fiscal year 2020 equity awards, which we granted on August 12, 2019. The fiscal year 2020 equity awards to each of the named executive officers were as follows:

 

Name

Number of
    Stock Options(1)    
Number of
TSR Performance
    Share Units(2)    
Number of EPS
Performance Share
Unit(3)
Number of
Restricted Stock
Units(4)
    Total Value(5)    

David M. Shaffer

 

68,538

 

16,922

 

20,714

 

18,182

$

4,200,000

Michael J. Schmidtlein

 

21,540

 

5,318

 

6,510

 

5,714

$

1,320,000

Holger P. Aschke

 

13,055

 

3,240

 

3,967

 

3,463

$

800,000

Shawn M. O’Connell

 

13,055

 

3,223

 

3,946

 

3,463

$

800,000

Andrew M. Zogby

 

13,055

 

3,223

 

3,946

 

3,463

$

800,000

 

(1)

The value of each stock option was $15.32. We determined the total value of each stock option using a Black-Scholes valuation model.

 

(2)

The value of each TSR performance share unit on the date of grant was $62.05 for grants made to Messrs. Shaffer, Schmidtlein, O’Connell and Zogby. As a result of taxation rules, the value of each TSR Performance Share Unit for Mr. Aschke, who works and lives in Switzerland, was $61.73. We determined the total value of each TSR performance share unit award as of the date of grant using a Monte Carlo Simulation.

 

(3)

The value of each EPS performance share unit on the date of grant was $50.69 for grants made to Messrs. Shaffer, Schmidtlein, O’Connell and Zogby. As a result of taxation rules, the value of each EPS performance share unit for Mr. Aschke, who works and live in Switzerland, was $50.42. We determined the total value of each EPS performance share unit award based on the closing price on the date of grant adjusted for illiquidity.

 

(4)

The value of each restricted stock unit was $57.75, the closing price on August 12, 2019, the date of grant.

 

(5)

The total value is the sum of the value of the stock options, restricted stock units and the performance share units determined as of August 12, 2019, the date of grant. Final award values may vary slightly due to fractional shares and rounding.

 

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These awards are subject to the clawback policy adopted by the Board of Directors, which we discuss in more detail on page 35.

Vesting of Fiscal Year 2018 Performance Share Units

In fiscal year 2018, the Committee granted our named executive officers at that time PSUs that were eligible to be earned based on performance over a three-year period, concluding May 9, 2020, which is three years after the grant date. Each fiscal year 2018 PSU could be earned from 0% to 200% of target depending on the percentile ranking of our TSR versus the S&P Small Cap 600 Industrial Index. The Company’s relative TSR over the three-year performance period was at the 39th percentile versus the S&P Small Cap 600 Industrial Index, resulting in a 78% of target pay to our named executive officers. When further adjusted for our total shareholder return performance during the period of -34%, the actual realized payout was 51% of target. These PSUs are subject to a mandatory holding period of one year after the vesting period.

Deferred Compensation Plan

On May 1, 2008, the Compensation Committee adopted the EnerSys Voluntary Deferred Compensation Plan for Executives, which we refer to as the “Deferred Compensation Plan,” under which participants who are among a select group of management and highly compensated employees may elect to defer receipt of all or a portion of their cash bonus. Under the Deferred Compensation Plan, as amended, each participant must make an irrevocable deferral election before the beginning of the fiscal year to which the cash bonus relates or, in the case of “performance-based compensation,” on or before six months before the end of such fiscal year. Participants can elect to receive distributions of their accounts in the Deferred Compensation Plan, either in a lump sum or in installments, (i) upon their termination of employment, (ii) on a specified date, or (iii) upon our change in control.

A participant may elect to allocate the deferred amounts into an investment account and select among various investment options upon which the rate of return of the deferred amounts will be based. The participants’ investment accounts are adjusted periodically to reflect the deemed gains and losses attributable to the deferred amounts. The specific investment options are the same investment options available to our employees under our 401(k) retirement plan. Each participant is always 100% vested in their investment accounts.

Alternatively, participants may elect to allocate the deferred amounts to a stock unit deferral account or a market share unit deferral account. All amounts allocated to the stock unit account or the market share unit account are invested in restricted stock units or market share units, respectively, awarded under our 2017 Equity Incentive Plan. If a participant elects to allocate the deferred amounts to the restricted stock unit or market share unit account, we will make an additional matching contribution in the amount of 20% of the deferred amount. Dividend equivalent units, if any, will be credited to each stock unit account. Each participant is 100% vested with respect to the amounts deferred to the restricted stock unit or market share unit deferral account. The matching contribution will vest over three years from the last date of the fiscal year to which the amounts relate, except that participants will automatically become 100% vested in their matching contribution upon (i) our change in control where the consideration paid is cash, or (ii) upon their death, disability, voluntary termination for “good reason,” or involuntary termination of employment without cause, provided that such event occurs within two years of any type of change in control. All restricted stock units and market share units are payable in shares of our common stock.

The Deferred Compensation Plan is a nonqualified deferred compensation plan. As such, the rights of all participants to any deferred amounts represent our unsecured promise to pay and the deferred amounts remain subject to the claims of our creditors.

Currently, none of our named executive officers participate in the Deferred Compensation Plan.

Employment and Related Agreements

We maintain a Swiss employment contract with Mr. Aschke in connection with his assignment as President–EMEA & APAC. We maintain severance agreements with Messrs. Schmidtlein, and Shaffer, which provide for severance benefits upon a qualifying termination of employment in connection with a change in control.

We describe these agreements under the heading “Employment Agreements.” We describe the termination and change-in-control provisions of these agreements and our equity awards under the heading “Potential Payments Upon Termination or Change-In-Control.”

 

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Employee Benefits

We generally offer all our eligible non-unionized U.S. employees, including the named executive officers, core employee benefits coverage. The benefits include medical and dental coverage, short-term disability insurance, life insurance, and a discount program for our products. All eligible non-unionized U.S. employees, including the named executive officers, may also obtain at their expense, long-term disability insurance coverage, and participate in a 401(k) retirement plan as a means to save for retirement on a tax-advantaged basis. We provide a matching contribution under the 401(k) plan to all eligible participants.

Each of our employees, including the named executive officers, partially bears the cost of certain employee benefits.

We do not cover our named executive officers under any defined benefit pension or supplemental executive retirement plans.

Perquisites

We provide limited perquisites and personal benefits to our named executive officers, including a company car and spousal travel benefits to business functions, and airline membership dues.

Mr. Aschke receives substantially the same employee benefits as our other named executive officers, except he receives an annual cost of living adjustment, housing allowance and certain additional amounts to compensate him for working and living in Switzerland.

The Compensation Committee has determined that each of these benefits has a valid business purpose. You can find information about these perquisites in the footnotes to the Summary Compensation Table.

Other Matters

Currency Conversions

During the fiscal years described in this proxy statement, Mr. Aschke worked and lived in Switzerland, certain amounts of his compensation were paid in Swiss francs and Euros. For purposes of this proxy statement, we have converted the amounts of compensation that Mr. Aschke received in Swiss francs and Euros to U.S. dollars, using the exchange rate as of the end of the applicable fiscal year.

Clawback Policy

In June 2014, our Board of Directors, upon the recommendation of the Compensation Committee, adopted a clawback policy applicable to each of our executive officers subject to Section 16 of the Securities Exchange of 1934, including each of our named executive officers. Pursuant to this policy, in the event of any restatement of our financial statements, our Board of Directors, or an appropriate committee designated by our Board of Directors, may require reimbursement or forfeiture of any excess payment from any cash or equity-based compensation awarded to or realized by, such executive officer following the adoption of, and subject to, this policy in the event that (i) our financial statements are required to be restated as a result of material non-compliance with any financial reporting requirements under the federal securities laws (other than a restatement due to a change in financial accounting rules), (ii) as a result of such restatement, a performance measure or specified performance target which was a material factor in determining the amount of such bonus, incentive or equity compensation previously earned by such officer is restated, and (iii) our Board of Directors, or an appropriate committee of the Board, determines, in its discretion, that a lower amount of bonus, incentive or equity compensation would have been paid to such officer based upon the restated financial results.

Policy on Granting Equity Awards

We have a written equity award policy that provides the authority and the procedure for granting awards. The Compensation Committee has the authority to make all equity awards to employees of the Company. In addition, within certain limitations, the Compensation Committee may delegate authority to our CEO to make awards to employees below the named executive officer level.

Our policy requires that the exercise price of stock options be no less than the closing price of our stock on the grant date. Subject to applicable local law, the grant date for equity awards to all eligible participants, including our named executive officers, is on the first business day after the grant effective date that our stock trading window is open and that is not otherwise within our stock trading blackout policy. These procedures provide assurance that grant dates are not being manipulated to result in an exercise price that is favorable to us or our employees.

 

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Hedging and Pledging Prohibition

We do not permit our employees to hedge their economic exposures to our common stock that they own by engaging in transactions involving puts, calls, or other derivative securities, zero-cost collars, forward sales contracts, or buying on margin or pledging shares as collateral for a loan.

Stock Ownership Guidelines and Holding Requirement

The Compensation Committee has adopted stock ownership guidelines for both executives and non-employee directors. We intend that the guidelines align the interests of our executives and non-employee directors with those of the stockholders and ensure that the executives and directors responsible for overseeing operations have an ongoing financial stake in our success. The stock ownership guidelines provide that we expect our CEO to attain and maintain an investment level in stock equal to six times his annual base salary. We expect the other named executive officers to attain and maintain an investment level equal to three times their annual base salary. We expect each individual to achieve such investment levels five years from the date a specified ownership level commences. If an executive is promoted and as a result has a higher guideline, an additional three years would be provided to reach such higher level. If the guidelines are not met within the required time frame, the Compensation Committee, at its discretion, may require an executive to hold 100% of the after-tax profit shares acquired through the compensation program until the guideline is met. The Compensation Committee evaluates the ownership levels on an annual basis. All of our named executive officers have achieved, or are on target to achieve, their respective investment level set forth in the guidelines. As mentioned previously, the named executive officers are further subject to a holding requirement after vesting on the Performance Share Units granted starting in fiscal year 2017. Such holding requirement after vesting is mandatory and in accordance with the terms of the underlying grants agreement.

We describe the stock ownership guidelines for our non-employee directors under “Director Compensation.”

Review of Compensation Policies and Practices in Relation to Risk

During fiscal year 2020, the Compensation Committee, with the assistance of FW Cook, conducted a review of our compensation policies and practices to ensure that they do not motivate imprudent risk taking. Included in the review were all of our cash and equity-based incentive plans, including those below the executive level, as well as other compensation-related policies and practices including stock ownership guidelines, mandatory equity holding requirement, insider trading prohibitions, clawback policies, and independent oversight by the Compensation Committee.

We evaluated these compensation policies and practices to ensure that they do not foster risk taking above the level of risk associated with our business model and they were designed to encourage behaviors aligned with the long-term interests of our stockholders. Thus, we considered our growth and return performance, volatility and leverage, and compared them to the performance metrics, leverage, and time horizon of our compensation policies and practices. We also considered the mix of compensation, such as the balance between fixed and variable pay, cash and equity, performance goals on a corporate, business unit, and individual level, financial and non-financial metrics, and determinations based upon formulas and discretion. Based on this assessment, we have concluded that we have a balanced pay and performance program and do not promote excessive risk taking.

Tax Deductibility of Executive Compensation

Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”), disallows a tax deduction to public companies for compensation paid in excess of $1 million to certain current and former executive officers of the Company. Historically, there was an exception to this $1 million limitation for performance-based compensation if certain requirements were met.

As in prior years, the Compensation Committee will continue to take into account tax and accounting implications (including with respect to the lack of deductibility under Section 162(m)) when making compensation decisions, but reserves its right to make compensation decisions based on other factors as well it determines it is in our best interests to do so. Further, taking into account the elimination of the exception for performance-based compensation, the Compensation Committee may determine to make changes or amendments to its existing compensation programs in order to revise elements that were initially designed to comply with Section 162(m) but that may no longer serve as an appropriate incentive measure for our executive officers.

 

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             COMPENSATION COMMITTEE REPORT              

The Compensation Committee evaluates and establishes compensation for our named executive officers and oversees our equity incentive plan, the MIP, and our benefit and perquisite programs. Management has the primary responsibility for our financial statements and reporting process, including the disclosure of executive compensation. With this in mind, we have reviewed and discussed with management the Compensation Discussion and Analysis found on pages 25 to 37. The Compensation Committee is satisfied that the Compensation Discussion and Analysis fairly and completely represents the philosophy, intent, and actions of the Compensation Committee with regard to executive compensation. We recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, for filing with the Securities and Exchange Commission.

Compensation Committee

John F. Lehman, Chairperson

Nelda J. Connors

Dennis S. Marlo

Paul J. Tufano

 

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             SUMMARY COMPENSATION TABLE              

The following table summarizes the compensation earned in fiscal years 2018, 2019, and 2020, by our Chief Executive Officer, our Chief Financial Officer, and our three other most highly compensated executive officers. We collectively refer to these individuals as the “named executive officers.” We did not pay any discretionary bonuses nor did we maintain any defined benefit pension arrangements and none of our named executive officers deferred or accrued amounts under the Deferred Compensation Plan for Executives for fiscal years 2018, 2019, or 2020; accordingly, we have omitted the “Bonus” and “Change in Pension Value and Nonqualified Deferred Compensation Earnings” columns from the table.

 

Name and Principal Position   Year       Salary     Stock
Awards(1)
    Option
Awards(1)
    Non-Equity
Incentive Plan
Compensation(2)
    All Other
Compensation
    Total  

David M. Shaffer

 

2020

   

    $

  940,000

 

 

    $

  3,150,000

 

 

    $

  1,050,000

 

 

    $

0

 

 

    $

70,451

(3)   

 

    $

  5,210.451

 

             

President and Chief
Executive Officer

 

2019

   

    $

900,000

 

 

    $

3,000,009

 

 

    $

1,000,009

 

 

    $

270,000

 

 

    $

38,085

 

 

    $

5,208,103

 

 

2018

   

    $

850,000

 

 

    $

2,925,000

 

 

    $

975,000

 

 

    $

416,500

 

 

    $

46,443

 

 

    $

$5,212,943

 

Michael J. Schmidtlein

 

2020

   

    $

530,000

 

 

    $

990,000

 

 

    $

330,000

 

 

    $

0

 

 

    $

19,787

(4) 

 

    $

1,869,787

 

             

Executive Vice President and Chief Financial Officer

 

2019

   

    $

515,000

 

 

    $

990,004

 

 

    $

329,996

 

 

    $

108,150

 

 

    $

28,572

 

 

    $

1,971,722

 

 

2018

   

    $

500,000

 

 

    $

990,000

 

 

    $

330,000

 

 

    $

171,500

 

 

    $

33,786

 

 

    $

2,025,286

 

Holger P. Aschke

 

2020

   

    $

389,820

 

 

    $

600,000

 

 

    $

200,000

 

 

    $

40,931

 

 

    $

157,479

(5) 

 

    $

1,388,230

 

             

President, EMEA & APAC

 

2019

   

    $

366,000

 

 

    $

600,008

 

 

    $

200,002

 

 

    $

72,145

 

 

    $

100,064

 

 

    $

1,338,219

 

 

2018

   

    $

351,482

 

 

    $

600,000

 

 

    $

200,000

 

 

    $

120,558

 

 

    $

168,546

 

 

    $

1,440,586

 

Shawn O’Connell

 

2020

   

    $

365,000

 

 

    $

600,000

 

 

    $

200,000

 

 

    $

49,348

 

 

    $

67,258

(6) 

 

    $

1,281,606

 

             

President, Motive Power, Americas

               

Andrew M. Zogby

 

2020

   

    $

440,000

 

 

    $

600,000

 

 

    $

200,000

 

 

    $

0

 

 

    $

16,355

(7) 

 

    $

1,256,355

 

             

President, Energy Systems

               
   

 

(1)

We calculated these amounts using the provisions of ASC Topic 718. Amounts represent the aggregate grant date fair value of the applicable awards. See the “Stock-Based Compensation” Note to our consolidated financial statements set forth in our Annual Report on Form 10-K for the fiscal years ended March 31, 2018, March 31, 2018, and March 31, 2020, for the assumptions made in calculating these amounts. See the “Grant of Plan-Based Awards Table for Fiscal Year 2020” for maximum payout of awards.

 

(2)

Represents annual incentive amounts paid to the named individuals under the MIP. We discuss the MIP in further detail in the section entitled “Management Incentive Plan.”

 

(3)

Consists of our 401(k) plan matching contributions in the amount of $20,067; a 2018 tax equalization payment in the amount of $37,963 made in connection with Mr. Shaffer’s former assignment in Switzerland; personal use of company-provided automobile in the amount of $6,066; tax advisory services in the amount of $5,756; and airline membership dues.

 

(4)

Consists of our 401(k) plan matching contributions in the amount of $11,925 and personal use of company-provided automobile in the amount of $7,862.

 

(5)

Consists of contributions in the amount of $33,042 that are required under Swiss law as employer contributions under the Swiss occupational pension scheme; housing allowance of $54,430; cost of living adjustment in the amount of $54,430; and personal use of company-provided automobile in the amount of $15,577. All amounts in Swiss francs have been converted to U.S. dollars at $1.036754 per Swiss franc.

 

(6)

Consists of our 401(k) plan matching contributions in the amount of $13,684; relocation expenses in the amount of $42,002; personal use of company-provided automobile in the amount of $7,486; spousal/family travel expenses of $3,587; and airline membership dues.

 

(7)

Consists of our 401(k) plan matching contributions in the amount of $13,553; personal use of company-provided automobile in the amount of $1,617; in connection with the acquisition of Alpha Technologies, Inc., annual reimbursement for standard healthcare benefit premiums in the amount of $890, and airline membership dues.

 

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Employment Agreements

 

Severance Letter Agreements with Mr. Shaffer

Effective June 7, 2013, as amended effective June 7, 2017, we entered into a severance letter agreement with Mr. Shaffer, which provides for severance benefits upon the executive’s termination of employment in connection with a change in control. The severance letter agreement is for an initial three-year term that is automatically renewed for an additional one-year term thereafter unless either party gives their respective notice of intent not to renew. Each severance letter agreement also provides that Mr. Shaffer may not compete with our business or solicit any of our customers or employees for one year following his termination of employment for any reason. See “Potential Payments upon Termination or Change in Control” for information about our obligations under the severance letter agreement with Mr. Shaffer to provide certain payments to Mr. Shaffer upon his termination of employment in connection with our change in control.

Severance Letter Agreement with Mr. Schmidtlein

We entered into a severance letter agreement with Mr. Schmidtlein on May 26, 2011, as amended effective June 7, 2013, and June 7, 2017, which provides for severance benefits upon his termination of employment in connection with a change in control. The severance letter agreement is for an initial three-year term that is automatically renewed for an additional one-year term thereafter unless either party gives their respective notice of intent not to renew. Mr. Schmidtlein’s severance letter agreement also provides that he may not compete with our business or solicit any of our customers or employees for one year following his termination of employment for any reason. See “Potential Payments upon Termination or Change in Control” for information about our obligations under the severance letter agreement with Mr. Schmidtlein to provide certain payments to him upon his termination of employment in connection with a change in control.

Employment Agreement with Mr. Aschke

We entered into an employment agreement with Mr. Aschke, effective December 21, 2015, in connection with his assignment in Switzerland. The employment agreement sets forth the terms of employment and provides provisions required by Swiss law. Either party can terminate the agreement at any time, subject to the statutory notice requirement applicable to employers in Switzerland, and generally provides that Mr. Aschke may not compete with our business or solicit any of our employees for at least one year following termination of his employment.

Under his employment agreement, Mr. Aschke is entitled to:

 

   

a car allowance;

 

   

reimbursement for certain expenses that Mr. Aschke incurs as a result of being located in Switzerland;

 

   

a housing allowance; and

 

   

certain cost of living adjustments.

Employment Agreement with Mr. O’Connell

We entered into a severance letter agreement with Mr. O’Connell on April 1, 2019, which provides for severance benefits upon his termination of employment in connection with a change in control. The severance letter agreement is for an initial three-year term that is automatically renewed for an additional one-year term thereafter unless either party gives their respective notice of intent not to renew. Mr. O’Connell’s severance letter agreement also provides that he may not compete with our business or solicit any of our customers or employees for one year following his termination of employment for any reason. See “Potential Payments upon Termination or Change in Control” for information about our obligations under the severance letter agreement with Mr. O’Connell to provide certain payments to him upon his termination of employment in connection with a change in control.

Employment Agreement with Mr. Zogby

Alpha Technologies, Inc. (which we refer to as “Alpha”) entered into an employment agreement with Mr. Zogby as of October 6, 2008, in connection with his position as Alpha’s President and Chief Operating Officer. This agreement was renewed effective January 1, 2013, and was amended effective June 27, 2017. We assumed Mr. Zogby’s amended

 

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agreement in connection with our acquisition of Alpha. The term of Mr. Zogby’s amended agreement expires on December 31, 2022. Under his amended agreement, Mr. Zogby is entitled to:

 

   

a base salary of $440,000;

 

   

a performance bonus of $350,000, based on pre-established objectives and goals; and

 

   

participate in our health, accident, and disability insurance benefits as we generally provide to our executives and pension and retirement benefits as we generally provide to our employees.

Mr. Zogby may not compete with our business or solicit any of our employees for at least one year following termination of his employment.

 

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             GRANTS OF PLAN-BASED  AWARDS           
          TABLE FOR FISCAL YEAR 2020          
  

 

          Committee     Estimated Future Payouts Under
Non Equity Incentive Plan
Awards($)(2)
   

Estimated Future

Payouts Under

Equity Incentive
Plan

(#)(3)

    All
Other
Stock
Awards:
Number
of
shares
of stock
    All Other
Option
Awards:
Number of
securities
underlying
    Exercise
or Base
Price
Of
    Grant
Date Fair
Value Of
Stock and
Option
 
    Grant
Date
    Action
Date(1)
    Threshold     Target     Maximum     Threshold     Target     Maximum     or units
(#)(4)
   

options

(#)(5)

    Options
($/Sh)
   

Awards

($)(6)

 

David M.
Shaffer

      $ 141,000     $ 940,000     $ 1,880,000                
    8/12/19       7/26/19             0       0       0         68,538     $ 57.75     $ 15.32  
    8/12/19       7/26/19             0       0       0       16,922       0       $ 62.05  
    8/12/19       7/26/19             0       0       0       20,714       0       $ 50.69  
    8/12/19       7/26/19             0       0       0       18,182       0       $ 57.75  

Michael J.
Schmidtlein

      $ 55,650   $ 371,000     $ 742,000              
    8/12/19       7/26/19             0       0       0         21,540     $ 57.75     $ 15.32  
    8/12/19       7/26/19             0       0       0       5,318       0       $ 62.05  
    8/12/19       7/26/19             0       0       0       6,510       0       $ 50.69  
    8/12/19       7/26/19             0       0       0       5,714       0       $ 57.75  

Holger P.
Aschke

      $ 40,931   $ 272,874     $ 545,747              
    8/12/19       7/26/19             0       0       0         13,055     $ 57.75     $ 15.32  
    8/12/19       7/26/19             0       0       0       3,240       0       $ 61.73  
    8/12/19       7/26/19             0       0       0       3,967       0       $ 50.42  
    8/12/19       7/26/19             0       0       0       3,463       0       $ 57.75  

Shawn M.
O’Connell

      $ 38,325   $ 255,500     $ 51,100              
    8/12/19       7/26/19             0       0       0         13,055     $ 57.75     $ 15.32  
    8/12/19       7/26/19             0       0       0       3,223       0       $ 62.05  
    8/12/19       7/26/19             0       0       0       3,946       0       $ 50.69  
    8/12/19       7/26/19             0       0       0       3,463       0       $ 57.75  

Andrew M. Zogby

      $ 52,907   $ 352,712     $ 705,423              
    8/12/19       7/26/19             0       0       0         13,055     $ 57.75     $ 15.32  
    8/12/19       7/26/19             0       0       0       3,223       0       $ 62.05  
    8/12/19       7/26/19             0       0       0       3,946       0       $ 50.69  
    8/12/19       7/26/19             0       0       0       3,463       0       $ 57.75  
   

 

(1)

We made all equity awards to the named executive officers in fiscal year 2020 in accordance with our policy on granting equity awards, which we describe on page 35.

 

(2)

The amounts shown in the columns are the threshold, target, and stretch goal (maximum) potential amounts that were payable for fiscal year 2020 under the MIP. No amounts were payable if threshold performance was not achieved for at least one performance goal. See the Summary Compensation Table for a discussion of the amounts actually earned under the MIP.

 

(3)

Reflects the target and maximum number of performance share units that are payable as long-term incentive compensation. We describe these awards in the section entitled “Long-Term Incentive Compensation.”

 

(4)

Reflects the number of restricted stock units awarded as long-term incentive compensation. We describe this award in the section entitled “Long-Term Incentive Compensation.”

 

(5)

Reflects the number of stock options awarded as long-term incentive compensation. We describe these awards in the section entitled “Long-Term Incentive Compensation.”

 

(6)

We calculated these amounts using the provisions of ASC Topic 718. Amounts represent the aggregate grant date fair value of the applicable awards. See Note 16. Stock-Based Compensation” to our consolidated financial statements set forth in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, for the assumptions made in calculating these amounts.

 

(7)

All amounts in Swiss francs have been converted to U.S. dollars at $1.036754 per Swiss franc.

 

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             OUTSTANDING EQUITY AWARDS              

          AS OF MARCH 31, 2020          

  

The following table sets forth the outstanding equity awards held by our named executive officers at the end of the 2020 fiscal year. The amounts include additional shares attributable to accumulated dividend equivalents with respect to unvested equity awards, when applicable to such award.

 

   

Option Awards

   

Stock Awards

 

Name

  Number of
Securities
Underlying
Unexercised
Options
Exercisable
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
    Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unearned
Options
    Option
Exercise
Price
($ per
share)
    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
    Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
    Equity
Incentive
Plan
Awards:
Market
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
 

David M. Shaffer

 

 

6,456

 

 

 

0

 

 

 

0

 

 

$

69.85

 

 

 

5/12/2024

 

       
 

 

15,662

 

 

 

0

 

 

 

0

 

 

$

68.40

 

 

 

5/12/2025

 

       
 

 

53,934

 

 

 

0

 

 

 

0

 

 

$

57.60

 

 

 

5/16/2026

 

       
 

 

26,837

 

 

 

13,419

(1) 

 

 

0

 

 

$

83.14

 

 

 

5/9/2027

 

       
 

 

15,672

 

 

 

31,343

(2) 

 

 

0

 

 

$

75.17

 

 

 

8/13/2028

 

       
 

 

0

 

 

 

68,538

(3) 

 

 

0

 

 

$

57.75

 

 

 

8/12/2029

 

       
               

 

19,011

(4) 

 

$

640,152

(5) 

               

 

26,687

(6) 

 

$

1,409,290

(7) 

               

 

37,963

(8) 

 

$

2,226,487

(9) 

           

 

3,840

(10) 

 

$

190,157

 

   
           

 

6,044

(11) 

 

$

299,299

 

   
           

 

10,162

(12) 

 

$

503,222

 

   
           

 

18,340

(13) 

 

$

908,197

 

   

Michael J. Schmidtlein

 

 

8,368

 

 

 

0

 

 

 

0

 

 

$

69.85

 

 

 

5/12/2024

 

       
 

 

15,662

 

 

 

0

 

 

 

0

 

 

$

68.40

 

 

 

5/12/2025

 

       
 

 

6,980

 

 

 

0

 

 

 

0

 

 

$

57.60

 

 

 

5/16/2026

 

       
 

 

9,083

 

 

 

4,542

(1) 

 

 

0

 

 

$

83.14

 

 

 

5/9/2027

 

       
 

 

5,172

 

 

 

10,343

(2) 

 

 

0

 

 

$

75.17

 

 

 

8/13/2028

 

       
 

 

0

 

 

 

21,540

(3) 

 

 

0

 

 

$

57.75

 

 

 

8/12/2029

 

       
               

 

6,435

(4) 

 

$

216,682

(5) 

               

 

8,807

(6) 

 

$

465,066,

(7) 

               

 

11,931

(8) 

 

$

699,723

(9) 

           

 

1,491

(10) 

 

$

73,819

 

   
           

 

2,045

(11) 

 

$

101,282

 

   
           

 

3,353

(12) 

 

$

166,051

 

   
           

 

5,764

(13) 

 

$

285,416

 

   

Holger P. Aschke

 

 

4,230

 

 

 

0

 

 

 

0

 

 

$

57.60

 

 

 

5/16/2026

 

       
 

 

5,505

 

 

 

2,753

(1) 

 

 

0

 

 

$

83.14

 

 

 

5/9/2027

 

       
 

 

3,134

 

 

 

6,269

(2) 

 

 

0

 

 

$

75.17

 

 

 

8/13/2028

 

       
 

 

0

 

 

 

13,055

(3) 

 

 

0

 

 

$

57.75

 

 

 

8/12/2029

 

       
               

 

3,890

(4) 

 

$

131,321

(5) 

               

 

5,357

(6) 

 

$

282,883

(7) 

               

 

7,270

(8) 

 

$

426,350

(9) 

           

 

904

(10) 

 

$

44,745

 

   
           

 

1,240

(11) 

 

$

61,412

 

   
           

 

2,033

(12) 

 

$

100,680

 

   
           

 

3,493

(13) 

 

$

172,978

 

   

Shawn O’Connell

 

 

1,851

 

 

 

0

 

 

 

0

 

 

$

57.60

 

 

 

5/16/2026

 

       
 

 

2,409

 

 

 

1,204

(1) 

 

 

0

 

 

$

83.14

 

 

 

5/9/2027

 

       
 

 

1,371

 

 

 

2,743

(2) 

 

 

0

 

 

$

75.17

 

 

 

8/13/2028

 

       
 

 

0

 

 

 

13,055

(3) 

 

 

0

 

 

$

57.75

 

 

 

8/12/2029

 

       
               

 

854

(4) 

 

$

28,743

(5) 

               

 

1,167

(6) 

 

$

61,642

(7) 

               

 

7,231

(8) 

 

$

424,100

(9) 

           

 

790

(10) 

 

$

39,126

 

   
           

 

1,084

(11) 

 

$

53,704

 

   
           

 

1,778

(12) 

 

$

88,069

 

   
           

 

3,493

(13) 

 

$

172,978

 

   
                 

Andrew M. Zogby

 

 

0

 

 

 

13,055

(3) 

 

 

0

 

 

$

57.75

 

 

 

8/12/2029

 

       
               

 

7,231

 

 

$

424,100

(11) 

           

 

6,257

(14) 

 

$

309,823

 

   
           

 

3,493

(13) 

 

$

172,978

 

   
   

 

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(1)

One-third vested on May 9, 2018 and May 9, 2019. One-third is scheduled to vest on May 9, 2020.

 

(2)

One-third vested on August 13, 2019. One-third is scheduled to vest on August 13, 2020, and August 13, 2021.

 

(3)

One-third scheduled to vest on August 12, 2020, August 12, 2021, and August 12, 2022.

 

(4)

100% are scheduled to vest on May 9, 2020 with the mandatory one-year hold period to settle on May 9, 2021. Includes additional shares attributable to accumulated dividend equivalents with respect to unvested performance share units.

 

(5)

Reflects TSR PSUs granted on May 9, 2017, value based on relative TSR performance calculated using the average of the closing share prices of our common stock during the 60-day periods immediately preceding the date of grant and March 31, 2020, and the resulting shares valued based upon the closing price of our common stock of $49.52 on March 31, 2020, the last trading day of the fiscal year

 

(6)

100% are scheduled to vest on August 13, 2021. Includes additional shares attributable to accumulated dividend equivalents with respect to unvested performance share units.

 

(7)

Reflects TSR and EPS PSU units granted on August 13, 2018, value for TSR PSUs based on relative TSR performance calculated using the average of the closing share prices of our common stock during the 60-day periods immediately preceding the date of grant and March 31, 2020, value for EPS PSUs based on target value, and the resulting shares valued based upon the closing price of our common stock of $49.52 on March 31, 2020, the last trading day of the fiscal year.

 

(8)

100% are scheduled to vest on August 12, 2022. Includes additional shares attributable to accumulated dividend equivalents with respect to unvested performance share units.

 

(9)

Reflects performance share units granted on August 12, 2019, value for TSR PSUs based on relative TSR performance calculated using the average of the closing share prices of our common stock during the 60-day periods immediately preceding the date of grant and March 31, 2020, value for EPS PSUs based on target value, and the resulting shares valued based upon the closing price of our common stock of $49.52 on March 31, 2020, the last trading day of the fiscal year.

 

(10)

One-fourth vested on each of May 16, 2017, May 16, 2018 and May 16, 2019. One-fourth is scheduled to vest on May 16, 2020.

 

(11)

One-fourth vested on each of May 9, 2018 and May 9, 2019. One-fourth is scheduled to vest on May 9, 2020 and May 9, 2021.

 

(12)

One-fourth vested on August 13, 2019. One-fourth is scheduled to vest on August 13, 2020, August 13, 2021, and August 13, 2022.

 

(13)

One-fourth will vest on August 12, 2020, August 12, 2021, August 12, 2022, and August 12, 2023.

 

(14)

One-fourth vested on December 7, 2019. One-fourth is scheduled to vest on December 7, 2020, December 7, 2021, and December 7, 2022.

 

           OPTIONS EXERCISED AND STOCK VESTED         

DURING FISCAL YEAR 2020

  

The following table sets forth the number of shares acquired upon exercising options and the vesting of stock awards by our named executive officers during fiscal year 2020.

 

    

 

Option Awards

 

   

 

Stock Awards

 

 

 

Name

 

 

 

Number of Shares
Acquired on Exercise

 

   

 

Value Realized on
Exercise

 

   

 

Number of Shares
Acquired on Vesting(1)

 

   

 

Value Realized on
Vesting(2)

 

 

 

David M. Shaffer

 

 

 

 

 

 

0

 

 

 

 

 

 

$

 

 

            0

 

 

 

 

 

 

 

 

 

24,870

 

 

 

 

 

 

$

 

 

1,598,603

 

 

 

 

Michael J. Schmidtlein

 

 

 

 

 

 

0

 

 

 

 

 

 

$

 

 

0

 

 

 

 

 

 

 

 

18,047

 

 

 

 

 

 

$

 

 

 1,173,759

 

 

 

 

Holger P. Aschke

 

 

 

 

 

 

0

 

 

 

 

 

 

$

 

 

0

 

 

 

 

 

 

 

 

 

6,262

 

 

 

 

 

 

$

 

 

404,310

 

 

 

 

 

Shawn M. O’Connell

 

 

 

 

 

 

0

 

 

 

 

 

 

$

 

 

0

 

 

 

 

 

 

 

 

 

2,409

 

 

 

 

 

 

$

 

 

154,869

 

 

 

 

Andrew M. Zogby

 

 

 

 

 

0

 

 

 

 

 

 

$

 

 

0

 

 

 

 

 

 

 

 

 

2,073

 

 

 

 

 

 

$

 

 

148,743

 

 

 

 

   

 

(1)

Vesting of TSR performance share units originally granted May 16, 2016 resulted in a payout factor of 0.77.

 

(2)

Values are calculated as the product of (a) the number of shares of our common stock underlying the restricted stock units and the market share units, as applicable, that vested and (b) the closing price of our common stock on the last trading day prior to the date of vesting. For vesting that occurred on May 9, 2019, the applicable closing price was $66.06. For vesting that occurred on May 12, 2019, the applicable closing price was $65.73. For shares that vested on May 16, 2019, the applicable closing price was $63.31. For vesting that occurred on August 13, 2019, the applicable closing price was $57.75. For shares that vested on December 7, 2019, the applicable closing price was $71.74.

 

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         POTENTIAL PAYMENTS UPON TERMINATION      

OR CHANGE IN CONTROL

  

As we describe above, each of Messrs. O’Connell, Schmidtlein and Shaffer have entered into severance agreements with us. Under the conditions described below, each of these agreements provides for certain payments upon termination of employee and a change in control. Mr. Zogby is subject to a historical employment agreement that provides for certain payments upon termination of his employment and a change in control. We describe these payments below.

Messrs. O’Connell, Schmidtlein, and Shaffer

If we were to terminate the employment of Messrs. O’Connell, Schmidtlein or Shaffer without cause, as defined below, or if such executive were to resign for good reason, as defined below, during the six-month period prior to a change in control (and the termination was in connection with the change in control) or during the 24-month period after a change in control, we would be obligated to pay to the terminating executive the following:

 

   

a lump sum cash payment equal to the sum of the executive’s base salary then in effect, and his annual cash bonus at the target level then in effect for Messrs. O’Connell or Schmidtlein (for Mr. Shaffer, the payment is two times this amount);

 

   

for a period of one year for Messrs. O’Connell or Schmidtlein (two years for Mr. Shaffer), payment of cost of coverage in excess of the amount the executive would pay, as an active employee, for continued participation in our medical, dental, and vision programs, but such payments will end when the executive becomes eligible to participate in comparable programs of a subsequent employer;

 

   

full acceleration of vesting of outstanding equity awards; and

 

   

a pro-rata payment from our annual incentive plan for the fiscal year in which the termination occurs.

“Cause” means, with respect to Messrs. O’Connell, Schmidtlein and Shaffer, any of the following:

 

   

breach of fiduciary duty or duty of loyalty to us;

 

   

willful act of material dishonesty with respect to any material matter involving us;

 

   

theft or material misuse of our property;

 

   

failure to conform in any material respect to our code of conduct;

 

   

excessive absenteeism;

 

   

conviction of, or plea of guilty or nolo contendere to, a felony or any criminal charge involving moral turpitude or illegal substance abuse;

 

   

continuing neglect of management duties and responsibilities that has a material adverse effect on us;

 

   

willful failure to timely report information having a material adverse effect on our business operations to the board or the executive’s direct supervisor; or

 

   

failure to meet our reasonable and achievable documented performance expectations (other than any such failure resulting from incapacity due to physical or mental illness).

“Good reason” means, with respect to Messrs. O’Connell, Schmidtlein and Shaffer, any of the following:

 

   

a 10% or more decrease in the executive’s base salary, other than a company-wide reduction in senior management pay;

 

   

a material diminution of the executive’s position, duties, or responsibilities;

 

   

any permanent reassignment of such executive to a location greater than 50 miles from the location of his primary office, unless such new location is closer to his primary residence; or

 

   

a material breach of our obligations under the agreement.

Each of Messrs. O’Connell, Schmidtlein and Shaffer’s severance letter agreements provides that if any amounts payable, when taken together with payments and benefits provided to the executive under any other plans, contracts, or arrangements with us, will be subject to any excise tax imposed under Code Section 4999, then such amounts will be

 

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reduced to the extent necessary so that no portion thereof will be subject to the excise tax, but if the executive would receive in the aggregate greater value (as determined under Code Section 280G) on an after-tax basis if the amounts were not subject to such reduction, then no such reduction will be made.

In the event of the death or termination for disability of a named executive officer, all outstanding unvested equity awards of such named executive officer become vested.

Mr. Zogby

Under Mr. Zogby’s amended employment agreement, if we were to terminate his employment without cause, as defined below, we are required to provide Mr. Zogby with a lump-sum cash payment equal to 100% of his base salary then in effect.

“Cause” means, with respect to Mr. Zogby, termination for gross negligence or willful misconduct in connection with the performance of his services.

In addition, if we were to fail to offer to renew Mr. Zogby’s agreement at the end of its term upon substantially the same terms and conditions as his original agreement, we are required to provide Mr. Zogby with a lump sum cash payment equal to 100% of his base salary then in effect.

 

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Potential Payments Table

The table below reflects the incremental amount of compensation payable to our named executive officers under various termination and change in control scenarios. The amounts shown below assume that such hypothetical termination or change in control is effective as of March 31, 2020. These amounts do not include benefits earned or vested as of March 31, 2020, or benefits provided under insurance or regular programs available to our salaried employees generally. The actual amounts that are payable upon a named executive officer’s termination of employment can be determined only at the time of any such event. Due to the number of factors that affect the nature and amount of any benefits provided upon a termination or change in control, any actual amounts paid or distributed may be higher or lower than the amounts set forth below. Factors that could affect these amounts include, among other things, the time of year the event occurs, our financial performance, and the age of the named executive officer at the time of the event.

 

                           Involuntary Termination
Not For Cause/Voluntary
Termination For Good
Reason(1)
 
        

Change in

Control(8)

    Termination
for Disability
    Death    

Absent
Change in

Control

   

In
connection
with a
Change in

Control

 

David M. Shaffer

   Severance   $ 0     $ 0     $ 0     $ 0     $ 2,420,000  
   Welfare benefits continuation(2)   $ 0     $ 0     $ 0     $ 0     $ 41,488  
   Value of accelerated stock options(3)   $ 0     $ 896,337     $ 896,337     $ 0     $ 896,337  
   Value of accelerated restricted stock units(3)   $ 1,877,353     $ 1,877,353     $ 1,877,353     $ 0     $ 1,877,353  
   Value of accelerated performance share units(4)   $ 4,275,930     $ 4,275,930     $ 4,275,930     $ 0     $ 4,275,930  
     Potential Excise Tax Cut-Back   $ 0     $ N/A     $ N/A       N/A     $ 0  
     Total   $     6,153,282     $     7,049,619     $     7,049,619     $ 0     $ 9,511,107  

Michael J. Schmidtlein

   Severance   $ 0     $ 0     $ 0     $ 0     $ 638,150  
   Welfare benefits continuation(2)   $ 0     $ 0     $ 0     $ 0     $ 13.968  
   Value of accelerated stock options(3)   $ 0     $ 305,585     $ 305,585     $ 0     $ 305,584  
   Value of accelerated restricted stock units(3)   $ 618,653     $ 618,653     $ 618,653     $ 0     $ 618,653  
   Value of accelerated performance share units(4)   $ 1,381,470     $ 1,381,470     $ 1,381,470     $ 0     $ 1,381,470  
     Potential Excise Tax Cut-Back   $ 0       N/A       N/A       N/A     $ 0  
     Total   $ 2,000,123     $ 2,305,708     $ 2,305,708     $ 0     $ 2,957,825  

Holger P. Aschke

   Severance   $ 0     $ 0     $ 0     $ 389,187     $ 389,187  
   Benefit continuation(5)   $ 0     $ 0     $ 0     $ 17,476     $ 157,476  
   Value of accelerated stock options(3)   $ 0     $ 185,204     $ 185,204     $ 0     $ 185,204  
   Value of accelerated restricted stock units(3)   $ 375,857     $ 375,857     $ 375,857     $ 0     $ 375,856  
     Value of accelerated performance share units(4)   $ 840,555     $ 840,554     $ 840,554     $ 0     $ 840,554  
     Total   $ 1,216,411     $ 1,401,615     $ 1,401,615     $     546,663     $     1,948,277  

Shawn M. O’Connell

   Severance   $ 0     $ 0     $ 0     $ 0     $ 436,827  
   Benefit continuation(5)   $ 0     $ 0     $ 0     $ 20,775     $ 20,775  
   Value of accelerated stock options(3)   $ 0     $ 158,138     $ 158,138     $ 0     $ 158,138  
   Value of accelerated restricted stock units(3)   $ 344,511     $ 344,511     $ 344,511     $ 0     $ 344,511  
   Value of accelerated performance share units(4)   $ 514,485     $ 514,485     $ 514,485     $ 0     $ 514,485  
     Potential Excise Tax Cut-Back   $ 0       N/A       N/A       N/A     $ 0  
     Total   $ 858,995     $ 1,017,133     $ 1,017,133     $ 20,775     $ 1,474,735  

Andrew M. Zogby

   Severance   $ 0       c       c     $ 440,174     $ 440,174  
   Benefit continuation(5)   $ 0     $ 0     $ 0     $ 0     $ 0  
   Value of accelerated stock options(3)   $ 0     $ 137,078     $ 137,078     $ 0     $ 137,078  
   Value of accelerated restricted stock units(3)   $ 496,587     $ 496,587     $ 496,587     $ 0     $ 496,586  
     Value of accelerated performance share units(4)   $ 424,100     $ 424,100     $ 424,100     $ 0     $ 424,100  
     Total   $ 920,686     $ 1,057,764     $ 1,057,764     $ 440,174     $ 1,497,938  

 

(1)

For the severance payment calculation, and the time and form of such payment, “Employment Agreements.”

 

(2)

Present value of welfare benefits continuation. Assumes no increase in the cost of welfare benefits.

 

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(3)

Value based on the closing price of our common stock on March 31, 2020, the last trading day of the fiscal year, of $49.52.

 

(4)

Reflects Performance Share Units valued based on stock price performance calculated using the average of the closing share prices of our common stock during the 60 day periods immediately preceding the date of grant and March 31, 2020 and the resulting shares valued based upon the closing price of our common stock of $49.52 on March 31, 2020. Performance share units value based on earnings per share targets are assumed paid at target.

 

(5)

Consists of contributions in the amount of $33,042.34 that are required under Swiss law as employer contributions under the Swiss occupational pension scheme; housing allowance of $54,429.59; cost of living adjustment in the amount of $54,429.59; and personal use of company-provided automobile in the amount of $15,577.23. All amounts in Swiss francs have been converted to U.S. dollars at $1.036754 per Swiss franc.

 

(6)

Represents solely a change in control where the stockholders receive cash consideration. No amounts are payable or vested solely upon a change in control where the stockholders receive other than cash consideration.

 

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          2020 CEO PAY RATIO          

CEO Pay Ratio

 

As required by applicable SEC rules, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. David M. Shaffer, our President and Chief Executive Officer (our “CEO”).

 

For fiscal year 2020:

 

   the median of the annual total compensation of all our employees (other than our CEO) was $42,124; and

 

   the annual total compensation of our CEO, as reported in the Summary Compensation Table on page 38, was $5,210,451.

 

Based on this information for fiscal year 2020, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all other employees was 124:1.

 

Methodology

We took the following steps to identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and our CEO.

 

   

As of March 31, 2020, our global workforce used for determining the pay ratio was estimated to be 4,216 employees in the U.S and 5,380 internationally.

 

   

As permitted by SEC guidelines, we have excluded approximately 539 individuals who became employees as of September 30, 2019, upon the completion of the NorthStar acquisition. It is intended that these employees will be included in the pay ratio calculations for fiscal year 2021. We will be able to evaluate whether a new median employee would need to be identified at that time.

 

   

SEC rules also permit the exclusion of a de minimis number of non-U.S. employees. The exclusions include all employees located in the following countries: Denmark (2), Greece (2), Philippines (3), Chile (4), Morocco (3), United Arab Emirates (6), Norway (1), Japan (6), Kazakhstan (5), Ukraine (10), Finland (9), Hungary (11), Turkey (13), Bulgaria (16), Slovakia (19), Austria (22), Sweden (32), The Netherlands (30), Belgium (42), Russian Federation (45), Switzerland (50), Spain (47), Italy (60), and Argentina (65). In total, we excluded 503 international employees, or approximately 4.98% of our total workforce, from the identification of the median employee as permitted by SEC rules. After exclusions, our global workforce for purposes of calculating the pay ratio was estimated to be 9,596 employees (4,216 in the U.S. and 5,380 internationally). This population consisted of our full-time, part-time, and temporary employees employed with us as of the determination date.

 

   

To identify the “median employee” from our employee population, we used the amount of “gross wages” for the identified employees as reflected in our payroll records for the 12-month period beginning April 1, 2019 and ending March 31, 2020. For gross wages, we generally used the total amount of compensation the employees were paid before taxes, deductions, insurance premiums, and other payroll withholdings. We did not use any statistical sampling techniques.

 

   

For the annual total compensation of our median employee, we identified and calculated the elements of that employee’s compensation for fiscal year 2020 in accordance with the requirements of Item 402(c)(2)(x), resulting in annual total compensation of $42,124.

 

   

For the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2020 Summary Compensation Table on page 38.

The CEO pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on the methodologies and assumptions described. SEC rules for identifying the median employee and determining the CEO pay ratio permit companies to employ a wide range of methodologies, estimates and assumptions. As a result, the CEO pay ratios reported by other companies, which may have employed other permitted methodologies or assumptions and which may have a significantly different work force structure from ours, are likely not comparable to our CEO pay ratio.

 

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    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS     

Review of Related Person Transactions

 

Our Board has adopted a written policy regarding related person transactions. As a general matter, it is our preference to avoid or minimize related person transactions. Under this policy, a director or executive officer must promptly report to the Corporate Secretary or General Counsel any potential transaction in which a Related Person, as defined by Item 404(a) of Regulation S-K, has or will have a direct or indirect material interest. Pursuant to this policy, EnerSys is not permitted to consummate or continue the Related Person transaction without the approval or ratification of the Audit Committee or, in certain situations, by the Chairman of the Audit Committee. Any director interested in a Related Person transaction must recuse himself from any such vote. The Audit Committee will review all relevant information available to it about the potential related person transaction and in its sole discretion, may impose such conditions as it seems appropriate on the Company or the Related Person in connection with the approval of the Related Person Transaction.

Advanced Battery Concepts, LLC

In October 2016, we entered into a non-exclusive license and royalty agreement with Advanced Battery Concepts, LLC (“ABC”) pursuant to which the parties are collaborating to commercialize a battery product using ABC’s proprietary bi-polar lead-acid battery technology. ABC is a U.S.-based battery technology development company that has developed and designed a manufacturing process for lead-acid batteries. Mr. Shaffer’s brother is ABC’s chief executive officer. Based upon public reports, we believe that two other competitors have entered into similar licensing arrangements with ABC. Consistent with our Code of Business Conduct and Ethics and our Related Person Transactions Policy, (a) Mr. Shaffer has not been involved in discussions related to the business terms or the status of the relationship between EnerSys and ABC, and (b) the Board reviewed and approved EnerSys negotiating and ultimately entering into this relationship. During fiscal year 2020, we paid ABC approximately $250,000 as part of this agreement.

Indemnification

 

Delaware law, our certificate of incorporation and our bylaws contain limitation of liability provisions and provisions for indemnification of our directors and officers.

In addition, we have entered into an indemnification agreement with each of our directors and officers. Pursuant to this agreement, we will indemnify, to the fullest extent permitted by the Delaware General Corporation Law, each director or officer who is, or is threatened to be made, a party to any proceeding by virtue of the fact that such person is or was one of our directors or officers. Indemnification will be provided for all costs, judgments, penalties, fines, liabilities and amounts paid in settlement of any such proceeding and for expenses actually and reasonably incurred in connection with any such proceeding.

Directors and officers of EnerSys are also insured against certain liabilities for their actions by insurance policies obtained by EnerSys. The aggregate premium for these policies for the fiscal year ended March 31, 2020, specifically for directors and officers, as individuals, was $521,000.

Indemnity and Expense Agreement

 

Pursuant to a stock subscription agreement dated March 22, 2002 with certain institutional funds (collectively, the “Morgan Stanley Funds”) managed by Metalmark Capital LLC, we have agreed that, to the fullest extent permitted by law, none of such Morgan Stanley Funds as stockholders, or any of their respective partners or other affiliates, or their respective members, stockholders, directors, managers, officers, employees, agents or other affiliates, or any person or entity who serves at the request of any such stockholder on behalf of any person or entity as an officer, director, manager, partner or employee of any person or entity (referred to as indemnified parties), shall be liable to us for any act or omission taken or suffered by such indemnified party in connection with the conduct of our affairs or otherwise in connection with such stockholder’s ownership of shares of our common stock, unless such act or omission resulted from fraud, willful misconduct or gross negligence by such indemnified party or any mistake, negligence, dishonesty or bad faith of any agent of such indemnified party.

We have also agreed with each Morgan Stanley Fund that, to the fullest extent permitted by law, we will indemnify each of such indemnified parties for any and all liabilities and expenses (including amounts paid in satisfaction of judgments, in compromises and settlements, as fines and penalties and legal or other costs and reasonable expenses of investigating or

 

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defending against any claim or alleged claim) of any nature whatsoever, known or unknown, liquidated or unliquidated, that are incurred by such indemnified party and arise out of or in connection with our affairs, or any indemnified party’s ownership of shares of our common stock, including acting as a director, manager or officer or its equivalent; provided that an indemnified party shall be entitled to indemnification only to the extent that such indemnified party’s conduct did not constitute fraud, willful misconduct or gross negligence.

 

    DELINQUENT SECTION16 (a) REPORTS     

Section 16(a) of the Exchange Act requires our officers and directors, and any persons owning more than ten percent of EnerSys common stock, to file reports of ownership and changes in ownership with the SEC and NYSE. Persons filing such reports are required by SEC regulation to furnish EnerSys with copies of all such reports filed with the SEC. Based solely on our review of any copies of such reports received by it, and on written representations from our existing directors and executive officers that no additional annual statements of beneficial ownership were required to be filed by such persons. We believe that all statements were timely filed in fiscal year 2020, except for the Form 4 relating to the issuance of Restricted Stock Units under the deferred compensation plan for non-employee directors for each of Messrs. Katsaros, Lehman, Marlo, Tufano and Vargo on October 16, 2019, which were filed five days late due to a delay in notification that cash payments had been made.

 

             SECURITY OWNERSHIP OF CERTAIN           

          BENEFICIAL OWNERS AND MANAGEMENT           

  

Set forth below is certain information concerning the beneficial ownership of our common stock by each director, each nominee for director, each named executive officer, each holder of more than 5% percent of our common stock and all directors and named executive officers as a group as of June 8, 2020, the Record Date.

 

Name      Number of Shares(1)                  Percent(1)             

BlackRock, Inc.(2)

         4,907,681          11.56 %

Boston Partners(3)

         2,126,386          5.01 %

The Vanguard Group(4)

         3,906,564          9.20 %

Wellington Management Group LLP(5)

         3,367,537          7.93 %

Holger P. Aschke(6)

         17,769          *

Caroline Chan(7)

         0          *

Hwan-yoon F. Chung(8)

         27,473          *

Nelda J. Connors(9)

         9,803          *

Steven M. Fludder(10)

         0          *

Howard I. Hoffen(11)

         32,257          *

Arthur T. Katsaros(12)

         73,930          *

John F. Lehman(13)

         64,693          *

Gen. Robert Magnus, USMC (Retired)(14)

         32,874          *

Dennis S. Marlo(15)