DEF 14A 1 d634599ddef14a.htm DEF 14A DEF 14A
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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

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Check the appropriate box:

    

Preliminary Proxy Statement

    

Confidential for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

    

Definitive Proxy Statement

    

Definitive Additional Materials

    

Soliciting Material Under §240.14a-12

 

Jacobs Engineering Group Inc.

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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LOGO

Notice of 2019

Annual Meeting of Shareholders and Proxy Statement

Jacobs Engineering Group Inc.

 

 

LOGO


Table of Contents

LOGO

 

LETTER TO SHAREHOLDERS

FROM OUR CHAIR & CEO

Dear Fellow Shareholder,

Fiscal 2018 has been a tremendous year at Jacobs. We continue to successfully execute our strategy to transform Jacobs’ culture, capabilities and business portfolio to become a more innovation and technology-driven solutions company – tackling some of the world’s most critical challenges. Our strong performance has created substantial value for our employees, our customers and our shareholders, and provides a solid foundation for continuing our focus on becoming a company unlike any other.

Over a one and three-year period we have delivered total shareholder return of 33% and 108%. These returns to our shareholders place us in the top quartile of our peer group and well above the S&P 500 of 18% and 61%, respectively.

Governance and Compensation Practices

Comprehensive corporate governance oversight, combined with highly talented people executing our profitable growth strategy, is fundamental to building long-term shareholder value. Underpinning our performance is our strong focus on integrity and corporate governance, which includes a continuous review and refinement of our company practices.

Board Structure – The Board is comprised of 11 members from diverse geographic, industry, technical and business backgrounds. These different experiences and viewpoints provide for a robust governance structure which aligns with our strong emphasis on inclusion. In fact, 45% of our board is female or ethnically diverse. Elected on an annual basis under a majority voting standard, the average tenure of our Board is nine years, with four newly appointed directors within the last 5 years, including Barry L. Williams who joined the Board in December 2017 from our acquisition of CH2M HILL Companies, Ltd.

Governance and Oversight Structures – We benefit from a highly engaged Board, facilitated by frequent formal and informal meetings with Executive leadership. The Board’s engagement has expanded and evolved over the past several years in direct alignment with critical areas of importance in the business, including active participation and diligence on acquisition and divestiture opportunities and the formation of a Business Resilience Steering Group focused on Enterprise Risk reporting to the Audit Committee. Our cybersecurity leadership provides quarterly updates to the Board on our corporate wide cyber risk posture. We continue to benefit from our lead independent director Linda Fayne Levinson, ensuring independent leadership in the boardroom.

Executive Compensation – We believe in pay for performance Executive compensation that incentivizes creation and sustainment of long-term shareholder value. In fact, 76% of compensation for our named executive officers is performance-based. In last year’s annual shareholder advisory vote on “say-on-pay” we received a 96% approval. We also continue to evolve our performance-based compensation approach and will introduce non-financial based metrics for executives in fiscal 2019. These include performance and cultural based leadership behaviors such as safety, inclusion and diversity, innovation and talent management.

 

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Value Creation Strategy

We continue to execute against our Corporate Strategy launched in 2016, and our performance through fiscal 2018 has exceeded expectations.

Build a High-Performance Culture – We are excited about the advancement of our high-performance culture this past year – an achievement that we’re particularly proud of given the global integration activities of bringing Jacobs and CH2M together. We believe culture is fundamental to driving superior long-term performance, and there are several highlights worth noting:

 

   

Progress on Inclusion – The diversity of our Executive Leadership Team is now at 50% overall – 40% women and 20% of diverse ethnic background – including the company’s first female Executive Vice President.

 

   

Strong Organizational Health – We completed our second Organizational Health Assessment with results showing an improvement of eight points over the past two years and elevating from the 3rd to 2nd quartile. We will be relentless in driving to achieve 1st quartile cultural performance.

 

   

Embedded Culture of Caring – Building on our BeyondZero® foundation, we have extended our focus beyond safety to a strong culture of caring, including sustainability, inclusion, security and mental health. We launched PlanBeyond, our sustainability framework to deliver on our corporate vision to “provide solutions for a more connected, sustainable world” and achieve our Global Sustainability Commitment.

 

   

Engaged Employee Network Groups – A key part of the integration strategy with CH2M was the engagement and empowerment of our Jacobs employee networks that embrace and reflect communities of gender, ethnicity, sexual orientation, veterans and career stages. These networks of more than 10,000 employees are driving inclusion and change on several levels. In May we held our first global summit where leaders of our network groups and executives collaborated on ways to further our efforts in this crucial area.

Transform the Core – We continue to evolve our operating model to improve business excellence, project delivery and sales effectiveness, with several critical enhancements in fiscal 2018:

 

   

Accountability – Appointment of two chief operating officers provided focus for driving accountability, further supporting our profitable growth strategy.

 

   

Technology Modernization – Significant investments in project delivery and business infrastructure improved efficiency and connectivity of our systems, supporting our employees’ productivity and work environment.

 

   

Performance Excellence – Continued focus on step-change improvement in project delivery resulted in a year-over-year reduction in project write-offs of 22% (or 2-year reduction of 44%).

Grow Profitably – Fiscal 2018 marked strong performance against our balanced strategy of improving our existing businesses and active portfolio management. We are on track to exceed the metrics outlined in our Strategy in December 2016.

 

   

Strong Financial Performance – Pro forma revenue growth of 9% and double digit pro forma operating growth across all lines of business.

 

   

Successful CH2M Integration – Leadership on delivering key metrics provided to our shareholders:

   

Cost synergies exceeding initial outlook

   

Attaining revenue synergies

   

Surpassing EPS accretion targets

   

On track to outperform return/IRR target

 

   

Focus on Innovation – Ongoing incremental investment has resulted in Jacobs Connected Enterprise gaining strong traction in customer solutions over the past two years. Recognizing the critical importance of technology and innovation in driving thought leadership and innovation into the core of our business – as well as increased margins – we named our first Chief Technology & Innovation Officer to ensure singular focus and prioritization globally.

 

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Our recent announcement of the divestiture of our Energy, Chemicals & Resources business demonstrates our commitment to shifting the business to higher-margin, sustained markets, providing greater focus on areas where we can accelerate profitable growth.

In summary, fiscal 2018 was another strong year of delivering against our growth strategy and creating exceptional shareholder value. We appreciate your continued investment in Jacobs and remain confident in our ability to execute against plan while maintaining our high standards of transparency and corporate governance.

We look forward to your attendance at our annual shareholder meeting on January 16, 2019 in Dallas.

 

LOGO
Steven J. Demetriou
Chair and Chief Executive Officer

 

Remembering Noel Watson

Along with his family, we honor the memory of former Jacobs Chairman and CEO Noel Watson, who passed away in August at the age of 82. A great mentor and friend to many, Noel was a larger-than-life leader; a man of character who brought tireless passion, perspective and wisdom to his work. During his tenure as CEO, Noel steered the company’s growth seven-fold, from $1 billion to more than $7 billion in revenues, with corresponding profit increases.

Recruited by company founder Dr. Joseph Jacobs, Noel served the firm for more than 50 years, including more than 25 years at the helm of the company. He became President in 1987, CEO in 1992, was elected Chairman of the Board in 2006 and retired from the board in January 2017.

Foremost, Noel was a dedicated and loving husband, father and grandfather. He is survived by his wife, Phyllis, their two children and five grandchildren.

 

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LOGO

NOTICE OF 2019

ANNUAL MEETING OF SHAREHOLDERS

When: Wednesday, January 16, 2019, at 4:30 p.m., local time

Where: 1999 Bryan Street, First Floor, Dallas, Texas 75201

We are pleased to invite you to join our Board of Directors and senior leadership at Jacobs Engineering Group Inc.’s 2019 Annual Meeting of Shareholders.

 

Items of Business:

  1.

Election of the directors named in the Proxy Statement to hold office until the 2020 annual meeting;

  2.

An advisory vote to approve the Company’s executive compensation;

  3.

Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 27, 2019; and

  4.

Any other business that may properly come before the Annual Meeting.

Record Date:

The shareholders of record at the close of business on November 23, 2018 will be entitled to vote at the Annual Meeting and any adjournment or postponement thereof.

Proxy Voting:

It is important that your shares be represented and voted at the Annual Meeting. You can vote your shares by completing and returning the proxy card or voting instruction card sent to you. You also have the option of voting your shares electronically on the Internet or by telephone. Voting instructions are printed on your proxy card, voting instruction card or Notice of Internet Availability of Proxy Materials. To ensure your shares are represented at the meeting, please cast your vote by mail, telephone or Internet as soon as possible, even if you plan to attend the meeting in person.

 

How to Cast your Vote

Your vote is important. All shareholders who owned common stock of the Company at the close of business on the Record Date of November 23, 2018 may vote. You may vote in one of the following ways:

 

LOGO   

Vote by Internet

www.proxyvote.com

  
LOGO   

Vote by Telephone

1 (800) 690-6903

Or the telephone number on

your proxy card

  
LOGO   

Vote by Mail

Sign, date and return your

proxy or voting instruction card

  
LOGO   

Vote in Person

Attend the meeting in Dallas, Texas on January

16, 2019

 

If your shares are held in a stock brokerage account or by a bank or other record holder, please refer to the instructions from your bank, brokerage account, or other record holder.

 

 

 

 

By order of the Board of Directors,

 

 

LOGO

Michael R. Tyler

Senior Vice President, General Counsel and Corporate Secretary

 

  Important Notice Regarding the Availability of Proxy Materials

  for the Annual Shareholder Meeting to be Held on January 16, 2019

  The Proxy Statement and accompanying 2018 Annual Report to Shareholders are available at http://materials.proxyvote.com/469814

 

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TABLE OF CONTENTS

 

LETTER TO OUR SHAREHOLDERS

     i  

 

NOTICE OF THE 2019 ANNUAL MEETING AND HOW TO VOTE

     iv  

 

PROXY STATEMENT

     1  

 

General

     1  

 

About the Annual Meeting

     1  

 

PROPOSAL NO. 1 – ELECTION OF DIRECTORS

     4  

 

MEMBERS OF THE BOARD OF DIRECTORS

     4  

 

Director Experience Matrix

     5  

 

Director Biographies

     6  

 

CORPORATE GOVERNANCE

     17  

 

Highlights

     17  

 

The Board’s Role in Risk Oversight

     18  

 

Board Leadership Structure

     18  

 

Board Composition

     19  

 

Independence of Directors

     20  

 

Director Nominations

     20  

 

Committees of the Board of Directors

     21  

 

Corporate Governance Guidelines

     22  

 

Director Education

     23  

 

Annual Performance Evaluations

     23  

 

Attendance at Meetings of the Board and its Committees and the Shareholder Meeting

     23  

 

Code of Ethics

     23  

 

Stock Ownership Guidelines

     24  

 

Contacting the Board of Directors

     24  

 

Availability of Documents

     25  

 

Compensation of Directors for Fiscal 2018

     25  

 

Forward-Looking Statements

     27  

 

PROPOSAL NO. 2 – ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

     28  

 

COMPENSATION COMMITTEE REPORT

     29  

 

COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”)

     30  

 

Executive Summary

     30  

 

Our Executive Compensation Philosophy

     31  

 

Our Executive Compensation Program and Practices

     31  

 

The Compensation Decision Process

     33  

 

 

Assessing Compensation Competitiveness

     33  

 

Shareholder Engagement and Say-on-Pay

     34  

 

Compensation Elements

     34  

 

Other Benefits and Policies

     44  

 

EXECUTIVE COMPENSATION

     48  

 

Summary Compensation Table

     48  

 

Narrative Disclosure to Summary Compensation Table

     49  

 

2018 Grants of Plan-Based Awards

     50  

 

Outstanding Equity Awards of NEOs at 2018 Fiscal Year-End

     51  

 

Option Exercises and Stock Vested in Fiscal 2018

     52  

 

Non-qualified Deferred Compensation

     52  

 

Compensation Under Various Termination Scenarios

     54  

 

Equity Compensation Plan Information

     55  

 

Pay Ratio

     55  

 

PROPOSAL NO. 3 – RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP

     57  

 

REPORT OF THE AUDIT COMMITTEE

     58  

 

AUDIT AND NON-AUDIT FEES

     59  

 

SECURITY OWNERSHIP

     60  

 

Security Ownership of Certain Beneficial Owners

     60  

 

Security Ownership of Directors, Nominees and Management

     61  

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     62  

 

EXECUTIVE OFFICERS

     62  

 

SHAREHOLDERS’ PROPOSALS

     62  

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     62  

 

HOUSEHOLDING OF PROXY MATERIALS

     63  

 

ANNUAL REPORT, FINANCIAL AND ADDITIONAL INFORMATION

     64  

 

OTHER BUSINESS

     64  
 

 

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PROXY STATEMENT

We are providing these proxy materials in connection with the 2019 Annual Meeting of Shareholders of Jacobs Engineering Group Inc. (the “Company” or “Jacobs”). This Proxy Statement and the Company’s 2018 Annual Report on Form 10-K were first made available to shareholders and the Notice of Internet Availability of Proxy Materials, proxy card or voting instruction card were first mailed to shareholders on or about December 5, 2018. This Proxy Statement contains important information for you to consider when deciding how to vote on the matters to be brought before the Annual Meeting. Please read it carefully.

GENERAL

 

The 2019 Annual Meeting of Shareholders (the “Annual Meeting”) will be held on Wednesday, January 16, 2019, at 4:30 p.m., local time, in the building where our principal offices are located, 1999 Bryan Street, First Floor, Dallas, Texas 75201, and at any adjournment or postponement thereof.

ABOUT THE ANNUAL MEETING

 

Who is soliciting my vote?

The Board of Directors of the Company (the “Board of Directors” or “Board”) is soliciting your vote in connection with the Annual Meeting.

What is the purpose of the Annual Meeting?

The Annual Meeting will be the Company’s regular, annual meeting of shareholders. You will be voting on the following matters at the Annual Meeting:

 

Proposal

Number

 

Description

  

Board Recommendation

  

Page

Reference 

 

1

 

 

Election of the directors named in this Proxy Statement to hold office until the 2020 annual meeting;

  

 

FOR each nominee

   4

 

2

  An advisory vote to approve the Company’s executive compensation; and    FOR    28

3

 

Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending September 27, 2019.

 

   FOR    57

How many votes can be cast by shareholders?

Each share of common stock is entitled to one vote. There is no cumulative voting. There were 142,335,347 shares of common stock outstanding and entitled to vote on November 23, 2018 (the “Record Date”).

How many votes must be present to hold the Annual Meeting?

A majority of the outstanding shares of common stock as of the Record Date must be present at the Annual Meeting in order to hold the Annual Meeting and conduct business. This is called a “quorum.” Your shares are counted as present at the Annual Meeting if you are present at the Annual Meeting and vote in person, a proxy card or voting instruction card has been properly submitted by you or on your behalf, or you have voted electronically on the Internet or by telephone. Both abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum. A “broker non-vote” is a share of common stock that is beneficially owned by a person or entity and held by a broker or other nominee but for which the broker or other nominee (1) lacks the discretionary authority to vote on certain matters, and (2) has not received voting instructions from the beneficial owner in respect of those specific matters.

 

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How many votes are required to elect directors and approve the other proposals?

Proposal No. 1 (Election of Directors): Each director is elected by a majority of the votes cast with respect to such nominee in uncontested elections (the number of shares voted “for” a director nominee must exceed the number of shares voted “against” that nominee). Abstentions and broker non-votes are not counted for purposes of the election of directors and, therefore, will have no effect on the outcome of such election.

Proposal No. 2 (Advisory Vote to Approve Executive Compensation): The approval of the advisory resolution on the Company’s executive compensation requires the affirmative vote of a majority of the shares of common stock present, in person or by proxy, at the Annual Meeting and entitled to vote. Abstentions have the same effect as a vote against the advisory resolution. Broker non-votes will have no effect on the outcome of the advisory votes. The results of advisory votes are not binding on the Board of Directors.

Proposal No. 3 (Ratification of the Appointment of Ernst & Young LLP as Auditors): The ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm requires the affirmative vote of a majority of the shares of common stock present, in person or by proxy, at the Annual Meeting and entitled to vote. Abstentions have the same effect as a vote against the proposal. This proposal is considered a routine matter with respect to which a broker or other nominee can generally vote in their discretion. Therefore, no broker non-votes are expected in connection with this proposal.

How do I vote by proxy?

You can vote your shares by completing and returning the proxy card or voting instruction card that was sent to you or by voting your shares electronically on the Internet or by telephone. Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, and returned your proxy card or voting instruction card. Voting instructions are printed on your proxy card, voting instruction card or Notice of Internet Availability of Proxy Materials. You are encouraged to vote by proxy as soon as possible, even if you plan to attend the Annual Meeting in person.

What if I don’t vote on some of the proposals?

If you return your signed proxy card or voting instruction card in the envelope provided to you but do not mark selections, your shares will be voted in accordance with the recommendations of the Board of Directors with respect to such selections. Similarly, when you vote electronically on the Internet and do not vote on all matters, your shares will be voted in accordance with the recommendations of the Board of Directors with respect to the matters on which you did not vote. In connection therewith, the Board of Directors has designated Mr. Steven J. Demetriou, Mr. Kevin C. Berryman and Mr. Michael R. Tyler as proxies. Shareholders that vote by telephone must vote on each matter. If you indicate a choice with respect to any matter to be acted upon on your proxy card or voting instruction card, or by Internet or telephone, your shares will be voted in accordance with your instructions.

What if I hold my shares in a brokerage account or through a bank or other nominee?

If you are a beneficial owner and hold your shares in street name through a broker, bank or other nominee and do not return the voting instruction card, the broker, bank or other nominee will vote your shares on each matter at the Annual Meeting for which he or she has the requisite discretionary authority. Under applicable rules, brokers have the discretion to vote on routine matters, such as the ratification of the selection of independent registered public accounting firms, but do not have discretion to vote on the election of directors or on any advisory vote regarding the Company’s executive compensation. You may receive multiple sets of proxy materials if you hold your shares of Company common stock in multiple ways, such as directly as a holder of record or indirectly through a broker, bank or other nominee or through the CH2M 401(k) Plan (as defined below). You are encouraged to vote all proxy cards and voting instruction cards you receive as soon as possible.

What if I hold my shares in the CH2M HILL Retirement and Tax-Deferred Savings Plan?

If your shares of Company common stock are held in the CH2M HILL Retirement and Tax-Deferred Savings Plan (the “CH2M 401(k) Plan”), you will receive a voting instruction card allowing you to instruct the trustee of the

 

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CH2M 401(k) Plan how to vote such shares. The trustee will vote the shares credited to your account in accordance with your instructions, provided the trustee determines it can do so in accordance with the Employee Retirement Income Security Act of 1974 (“ERISA”). Pursuant to ERISA, the trustee would only be prevented from voting the shares credited to your account in accordance with your instructions if the independent fiduciary of the CH2M 401(k) Plan, State Street Global Advisors (“SSGA”), deems that following the instructions would be a violation of the trustee’s fiduciary duties. To allow sufficient time for voting by the trustee of the CH2M 401(k) Plan, your voting instructions must be received by January 11, 2018 at 11:59p.m. eastern time. If you do not send instructions regarding the voting of shares in your CH2M 401(k) Plan account, or if your instructions are not received in a timely manner, SSGA will direct the trustee, in SSGA’s discretion, how to vote your shares. Please follow the instructions on your voting instruction card, which may be different from those provided to other stockholders. For the avoidance of doubt, if you are a participant in the CH2M 401(k) Plan, you may not vote directly at the Annual Meeting. You may receive multiple sets of proxy materials if you hold your shares of Company common stock in multiple ways, such as directly as a holder of record or indirectly through a broker, bank or other nominee or through the CH2M 401(k) Plan. You are encouraged to vote all proxy cards and voting instruction cards you receive as soon as possible.

Who pays for the proxy solicitation and how will the Company solicit votes?

The Company bears the expense of printing and mailing proxy materials and soliciting proxies. In addition to this solicitation of proxies by mail, the Company’s directors, officers, and other employees may solicit proxies by personal interview, telephone, facsimile, or electronic communication. These individuals will not be paid any additional compensation above their regular salaries and wages for any such solicitation. The Company will request brokers and other nominees who hold shares of common stock in their names to furnish proxy materials to the beneficial owners of such shares. The Company will reimburse such brokers and other nominees for their reasonable expenses incurred in forwarding solicitation materials to such beneficial owners. In addition, we have retained MacKenzie Partners, Inc. to assist in the solicitation of proxies for a total fee of up to $20,000 plus reimbursement of expenses. MacKenzie Partners, Inc. may solicit proxies in person, by telephone or electronic communication.

Can I change or revoke my vote?

Yes. Even if you sign and return the proxy card or voting instruction card in the form provided to you, vote by telephone, or vote electronically on the Internet, you retain the power to revoke your proxy or change your vote at any time before it is exercised at the Annual Meeting. You can revoke your proxy or change your vote at any time before that deadline by giving written notice to the Secretary of the Company, specifying such revocation. You may also change your vote by timely delivering a valid, later-dated proxy or voting instruction card or by submitting a later-dated vote by telephone or electronically on the Internet or by voting in person at the Annual Meeting. However, please note that if you would like to vote at the Annual Meeting and you are not the shareholder of record, you must request, complete, and deliver a proxy from your broker, bank or other nominee.

Whom can I contact if I have questions or need assistance in voting my shares?

Please contact MacKenzie Partners, Inc., the firm assisting us in the solicitation of proxies, at:

MacKenzie Partners, Inc.

105 Madison Avenue

New York, New York 10016

proxy@mackenziepartners.com

Call Toll-Free: (800) 322-2885

or

Collect: (212) 929-5500

 

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PROPOSAL NO. 1 — ELECTION OF DIRECTORS

 

What are you voting on?

At the Annual Meeting, shareholders will be asked to elect eleven directors to serve on the Board of Directors. The Board of Directors has nominated Steven J. Demetriou, Linda Fayne Levinson, Joseph R. Bronson, Juan José Suárez Coppel, Robert C. Davidson, Jr., General Ralph E. Eberhart, Dawne S. Hickton, Robert A. McNamara, Peter J. Robertson, Christopher M.T. Thompson and Barry L. Williams for election as directors for one-year terms expiring at the 2020 annual meeting of shareholders. When elected, directors serve until their successors have been duly elected and qualified or until any such director’s earlier resignation or removal.

If any nominee for any reason is unable to serve or will not serve, proxies may be voted for such substitute nominee as the proxy holder may determine. The Company is not aware of any nominee who will be unable to or will not serve as a director.

What is the Vote Required?

Each director is elected by a majority of the votes cast with respect to such director in uncontested elections (the number of shares voted “for” a director nominee must exceed the number of shares voted “against” that nominee). The Company did not receive any shareholder nominations for any director and thus the election of directors at the Annual Meeting will be an uncontested election.

Abstentions and broker non-votes are not counted for purposes of the election of directors and, therefore, will have no effect on the outcome of the election.

 

 

 

The Board of Directors unanimously recommends that you vote FOR the election of each nominee.

 

MEMBERS OF THE BOARD OF DIRECTORS

 

            Committee Memberships
Director Nominees   Independent  

    Director    

Since

          Audit           Human
Resource and
Compensation
  Nominating and
Corporate
Governance

  Steven J. Demetriou (1)

Chair & CEO

      2015            

  Linda Fayne Levinson (2)

Lead Independent Director

    1996            

  Joseph R. Bronson

    2003   Chair        

  Juan José Suárez Coppel

    2013        

  Robert C. Davidson, Jr.

    2001           Chair

  General Ralph E. Eberhart

    2012        

  Dawne S. Hickton

    2015        

  Robert A. McNamara

    2017        

  Peter J. Robertson

    2009       Chair    

  Christopher M.T. Thompson

    2012        

  Barry L. Williams

    2017          

 

(1)

As Chair, Mr. Demetriou is invited to attend each Committee meeting, except to the extent that a Committee requests to meet without Mr. Demetriou present.

(2)

Ms. Fayne Levinson serves as Lead Independent Director and presides over meetings of the independent directors and is invited to attend each Committee meeting.

Summarized in the following pages are the specific experience, qualifications and background information of each director nominee that led the Board of Directors to conclude that each such person should serve on the Board of Directors.

 

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Director Experience Matrix

 

LOGO

Competencies / Attributes Joseph Bronson Juan Jose Suarez Coppel Robert C. Davidson, Jr. Steven J. Demetriou General Ralph E. Eberhart Dawne S. Hickton Linda Fayne Levinson Robert A. McNamara Peter J. Robertson Christopher M.T. Thompson COMPLIANCE CONSIDERATIONS Independent Director Audit Committee Financial Expert (SEC Rules) Financially Literate (NYSE Rules) Security Clearance EXPERIENCE CEO Public Company CEO Private Company CFO Government / Military International Operations STRATEGIC COMPETENCIES Financial (Reporting, Auditing, Internal Controls) Strategy / Business Development / M&A Human Resources / Organizational Development Project Delivery Legal Risk Management / Compliance Public Company / Governance Technology

 

     Our Directors have lived and worked around the world

The Board has a Good Balance of Industry and Sector Experience

    

 

LOGO

Infrastructure

  

Government

  

Aerospace

  

Military

  

Oil & Gas

  

Specialty Chemical

  

Mining & Metals

  

Financial

  

Banking

  

Manufacturing

  

Environmental

 

  

 

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Director Biographies

 

LOGO

Director Since 2015 Age 60 Chairman of the Board

  

Steven J. Demetriou

 

Chair and Chief Executive Officer

 

Mr. Demetriou brings international business perspectives and more than 35 years of experience in leadership and senior management roles to the Board, including over 15 years in the role of chief executive officer. He brings experience in a variety of industries, including metals, specialty chemicals, oil & gas, manufacturing and fertilizers, which he has gained over the course of his career. His breadth of experience is particularly valuable, given the variety of industries in which the Company’s clients operate.

  

 

Business Experience

  Chairman and Chief Executive Officer of Aleris Corporation (2004-2015)

  Chief Executive Officer of Aleris when it filed for Chapter 11 in 2009 and when it successfully emerged from Chapter 11 in June 2010 (2004-2015)

  Chief Executive Officer of Noveon, Inc. (2001-2004)

  Executive Vice President of IMC Global Inc. (1999-2001)

  Various management positions with Cytec Industries Inc. and ExxonMobil Corporation (1981-1999)

 

Education

  BS in chemical engineering from Tufts University

  

 

Public Company Boards

  Director and member of the Compensation and Finance Committees of FirstEnergy Corp. (2017-present)

  Chair of Kraton Performance Polymers’ Compensation Committee and a member of its Nominating and Corporate Governance Committee (2009-2017)

  Non-Executive Chairman of Foster- Wheeler (2011-2014)

  Chair of the Compensation Committee and a member of the Nominating / Corporate Governance Committee of OM Group (2005-2015)

 

Private Boards & Community Involvement

  Co-Chairman of US-Saudi Arabian Business Council

  Board Member of US Chamber of Commerce

  Board Member of Cuyahoga Community College Foundation

  Member of Dallas Citizen’s Council

  Member of Dallas Regional Chamber

 

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LOGO

Director Since 2015 Age 60 Chairman of the Board

  

Linda Fayne Levinson

 

Lead Independent Director

 

Ms. Fayne Levinson’s diverse experience as a consultant, a line executive and a venture investor across a range of industries brings in-depth knowledge of strategy, innovation, technology and operations to the Board of Directors. Her service on the boards of many global companies, including her service as a Chair of a board, a lead director and as Chair of Compensation and Nominating and Governance committees, provides the Board insight regarding compensation strategies and other corporate governance matters, both of which are key areas of focus in today’s corporate environment.

  

 

Business Experience

  Partner of GRP Partners, a venture capital firm (1997-2004)

  President of Fayne Levinson Associates (1994-1997)

  Executive at Creative Artists Agency (1993)

  Partner at Wings Partners (1989-1992)

  Senior Vice President of American Express Travel Related Services Co., Inc. (1984-1987)

  McKinsey & Company (1972-1981; Elected Partner 1978)

 

Education

  BA from Barnard College

  MA from Harvard University

  MBA from New York University, Leonard N. Stern School of Business

  

 

Public Company Boards

  NCR Corporation (Chair of the Compensation Committee) (1997-present)

  Hertz (2012-2017); Chair of the Board (2014-2016); Chair of Nominating and Governance Committee (2014); Chair of the Compensation Committee (2015-2016)

  Member of the Board of Ingram Micro, Inc. (2004-2016); Chair of the Compensation Committee

  Western Union (2006-2016); Chair of Compensation Committee (2006-2012); member of the Audit Committee

  DemandTec (2005-2008)

  Lastminute.com, plc (1999-2002)

  Overture Services Inc. (1998-2003)

  CyberSource Inc. (1997-2001)

  Genentech (1991-1998)

 

Private Boards & Community Involvement

  Director, Kount, Inc. (Fintech)

  Director, ClearPath Robotics, Canada

  Director, Knotel, Inc.

  Director, BitPesa

  Member, McKinsey New Venture Advisory Council

  Member of the U.S. Advisory Board of CVC Capital Partners

  Senior Advisor, RRE Ventures, NY

  Former Trustee at Barnard College and chairs the Investment Committee

 

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LOGO

Independent Director Since 2003 Age 70 Board Committee: Audit (Chair)

  

Joseph R. Bronson

 

Principal and Chief Executive Officer of The Bronson Group, LLC., Strategic Advisor of Cowen and Company

 

Mr. Bronson brings accounting expertise and familiarity with financial statements, financial disclosures, auditing and internal controls to the Board from his prior service as Chief Financial Officer of Applied Materials, Inc. His senior management level experience at large publicly traded companies also brings to the Board additional perspective regarding the day-to-day operations of large organizations as well as corporate best practices.

  

 

Business Experience

  Principal and Chief Executive Officer of The Bronson Group, LLC

  Strategic Advisor of Cowen and Company (2014-present)

  Advisory Director to GCA/Savvian, LLC (2011-2014)

  Chief Executive Officer of Silicon Valley Technology Corporation (2009-2010)

  President and Chief Operating Officer of Sanmina-SCI (2007-2008)

  Co-Chief Executive Officer and Director of Form Factor (2004-2007)

  Executive Vice President and Chief Financial Officer of Applied Materials, Inc. (1998-2005)

  Various executive management and general management positions at Applied Materials, Inc. (1984-1998)

 

Education

  BS from Fairfield University

  MBA from University of Connecticut

  Certified Public Accountant and a member of the American Institute of CPAs

  Registered Investment Advisor and holder of Series 63 and Series 7 credentials from the Financial Industry Regulatory Authority (FINRA) from 2011 to present

  

 

Public Company Boards

  Director of Maxim Integrated Products, Inc. (2007-present)

  Director of PDF Solutions, Inc. (2014- present)

 

Private Boards & Community Involvement

  Trustee of Fairfield University, Fairfield, Connecticut

  Regent of Santa Clara University, Santa Clara, California

  Regent of Loyola Marymount University, Los Angeles, California

  Chair of the Advisory Board at the Leavey School of Business at Santa Clara University, Santa Clara, California

  Trustee of Bellarmine College Preparatory School, San Jose, California and past Chair of the Board of Trustees

  Director of Siltectra, Dresden, Germany

 

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LOGO

Independent Director Since 2013 Age 59 Board Committee: Human Resource and Compensation Nominating and Corporate Governance

  

Juan José Suárez Coppel

 

Former General Director (Chief Executive Officer) of Petróleos Mexicanos

 

Mr. Suárez Coppel provides solid expertise in the oil and gas industry, which is particularly valuable given the Company’s customers in this industry. He also brings extensive knowledge and experience in finance matters and his experience as an executive brings perspective on management and operational matters to the Board. His background in international operations also assists the Board in light of our growing international presence.

  

 

Business Experience

  General Director (Chief Executive Officer) of Petróleos Mexicanos (2009- 2012)

  Chief Financial Officer of Petróleos Mexicanos (2001-2006)

  Chief of Staff of Mexico’s Secretary of Finance and Public Credit (2000-2001)

  Co-Head of Equity Derivative Trading at Banamex (1991-1995)

  Senior leadership positions at Grupo Televisa and Grupo Modelo (1991-1995)

  Consultant for Petroleos Ebano

 

 

  

 

Other Professional Experience

  Served as a professor of economics at Brown University and the Universitat Autónoma de Barcelona

 

Education

  Graduate of the Instituto Tecnológico Autónomo in Mexico City

  Ph.D. in economics from the University of Chicago

 

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LOGO

Independent Director Since 2001 Age 73Board Committee:Nominating and CorporateGovernance (Chair)

  

Robert C. Davidson, Jr.

 

Former Director, Chairman and Chief Executive Officer of Surface Protection Industries, Inc.

 

Mr. Davidson brings strong leadership, knowledge and experience of strategic and financial matters to the Board from his expertise founding and building private companies serving national and international markets during his 30-year career at Surface Protection Industries, Inc., including his service as chief executive officer and chairman. He also brings to the Board important knowledge of public company governance through his service on multiple public company boards, including service on compensation committees.

  

 

Business Experience

  Chairman and Chief Executive Officer of Surface Protection Industries, Inc. (1977-2007)

  President of R Davidson and Associates (2007 to Present)

  Vice President of Urban National Corporation (1972-1974)

  Management Consultant at Cresap, McCormick & Paget (1969-1972)

 

Education

  BA from Morehouse College

  MBA in Marketing and Finance from the University of Chicago

  Honorary Doctorate of Laws from Morehouse College

  

 

Public Company Boards

  Broadway Financial Corporation (2003-present)

  Chair of Compensation Committee

  Chair of Internal Asset Review Committee

  Member of Governance Committee

  Member of Risk & Compliance Committee

 

Private Boards & Community Involvement

  Chairman of the Board of Trustees of the Art Center College of Design, Pasadena, California

  Board of Directors of Cedars-Sinai Medical Center, Los Angeles, California

  Board member of the Smithsonian American Art Museum, Washington, DC

  Board member of The Ray Charles Foundation, Los Angeles, California

  Chairman Emeritus of the Board of Trustees of Morehouse College

  Member of the Advisory Council at the University of Chicago Graduate School of Business

  Previously served on boards of numerous other organizations, including Children’s Hospital, Los Angeles; LA Chamber of Commerce; Weingart Center for the Homeless, L.A.; among others

 

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LOGO

Independent Director Since 2012 Age 71Board Committees:Human Resource and CompensationNominating and Corporate Governance

  

General Ralph E. Eberhart (USAF, Retired)

 

Director, Chairman and President of Armed Forces Benefit Association

 

General Ralph E. Eberhart brings valuable leadership and management skills developed through his military service. His 36-year military career provides the Board with valuable experience and knowledge of government and the military, which is particularly valuable given the Company’s government and military contracts.

  

 

Business & Military Experience

  Former General Officer of the United States Air Force (1997-2005)

  Numerous high-level command and staff positions within the Air Force (1968-2005)

  Former Commander of the North American Aerospace Defense Command (NORAD) (2002-2005)

  Former Commander of Air Combat Command and U.S. Space Command (1999-2002)

 

Education

  United States Air Force Academy

 

 

  

 

Public Company Boards

  Director of Rockwell Collins
(2007-2018)

  Director of Triumph Group, Inc.
(2010-present)

  Director of VSE Corporation
(2007-present)

 

Private Boards & Community Involvement

  Trustee, Air Force Academy Endowment

  Director, Segs4Vets

  Director, Terma North America Inc.

 

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LOGO

Independent Director Since 2015 Age 61Board Committees:AuditNominating and Corporate Governance

  

Dawne S. Hickton

 

Former Director, Vice Chair, President and Chief Executive Officer of RTI International Metals, Inc.

 

Ms. Hickton provides a wealth of proven business leadership experience with a CEO’s perspective, and advanced strengths in project management and engineering expertise. Her background as a senior officer in a publicly traded company for nearly two decades is particularly valuable to the Board, as it lends a contemporary understanding of how to engage with the Company’s stakeholders, in addition to driving a strong growth agenda.

  

 

Business Experience

  President of Cumberland Highstreet Partners (2016-present)

  Chairman of the Federal Reserve Bank of Cleveland (January 2018-present)

  Deputy Chair of the Federal Reserve Bank of Cleveland (2012 to January 2018)

  Chief Executive Officer of RTI International Metals, Inc.
(2007- 2015)

 

Education

  Graduate of the University of Rochester

  JD from the University of Pittsburgh School of Law

  

 

Public Company Boards

  Board member, Chair of the Audit Committee and member of the Nominating & Corporate Governance Committee and Executive Committee of Triumph Group (2015-present)

  Board member and member of the Risk Committee, Strategic Committee and Audit Committee of Haynes International Inc. (2017-present)

  Director of FNB Corporation
(2006-2013)

 

Private Boards & Community Involvement

  Board member of Smithsonian’s National Air and Space Museum

  Board member of The Wings Club

  Director of Corporate Angel Network

  Member of the University of Pittsburgh’s Board of Trustees, serving on the Student Affairs, Technology & Innovation, and Property & Facilities Committees

 

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LOGO

Independent Director Since 2017 Age 64Board Committees:AuditNominating and Corporate Governance

  

Robert A. McNamara

 

Retired Group Chief Risk Officer of Lendlease Corporation (ASX)

 

Mr. McNamara has over 35 years of experience managing global businesses in the development, design and delivery of projects in the government, institutional, infrastructure and industrial sectors in senior management positions. He has been responsible for ensuring Lendlease achieves world’s best practices in risk management and operational excellence. He also oversaw Lendlease’s Building, Engineering, and Services businesses in Australia. Prior to this, Mr. McNamara was Chief Executive Officer Americas of Lendlease.

  

 

Business Experience

  Group Chief Risk Officer, Lendlease Corporation (2014-2017)

  Chief Executive Officer, Americas of Leadlease (2010-2014)

  Chairman and Chief Executive Officer of Penhall/LVI International (PLI) (2006-2010)

  Senior Group President of Fluor Corporation (1996-2006)

  President and Chief Operating Officer of Marshall Contractors (1977-1996)

 

Education

  Bachelor’s degree in Economics from Brown University

  Completed the Consortia 1 Program at Thunderbird International Business School

  Certification as a Public Board Director from the UCLA Anderson School of Management

  

 

Public Company Boards

  Board member of UDR, Inc.
(2014-present)

 

Private Boards & Community Involvement

  Past Board member of the US China Business Council

  Past Chairman for the Construction Industry Institute’s Technology Implementation Task Force

 

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LOGO

Independent Director Since 2009 Age 71Board Committees:Human Resource and Compensation (Chair)

  

Peter J. Robertson

 

Former Director and Vice Chairman of the Board of Directors of Chevron Corporation

 

Mr. Robertson brings vital knowledge and experience to the Board in the oil and gas industry from his 36-year career at Chevron Corporation, which is particularly important given the number of the Company’s customers in the energy and refining sector. He also brings valuable international experience in developed and developing countries, including interactions with governments at the highest levels, from his executive experience and the multiple chairmanship and director positions he has held and currently holds. Mr. Robertson also has extensive experience on the boards of not-for-profit entities with global reach and public company boards as well as important accounting know-how and experience with public company financial statements, disclosures and accounting rules from his service as Chief Financial Officer of Chevron USA.

  

 

Business Experience

  Executive Vice President, Director and Vice Chairman of Chevron Board (2002-2009)

  President of Chevron’s worldwide exploration, production and global gas businesses (2002-2004)

  President of Chevron’s overseas exploration and production businesses (2000-2002)

  President of Chevron’s North America exploration and production businesses (1996-2000)

  President of Chevron’s natural gas processing business (1990-1994)

  Chief Financial Officer of Chevron USA (1985-1990)

 

Education

  BS in Mechanical Engineering from the University of Edinburgh

  MBA from the University of Pennsylvania, Wharton School, where he was a Thouron Scholar

  

 

Public Company Boards

  Vice Chairman of the Board for Chevron Corporation (2002-2009)

  Director of Sasol Limited, chair of Capital Investment Committee, and member of Nomination and Governance Committee and Remuneration Committee (2012-present)

  Director, Dynegy Inc. (1996-2000)

 

Private Boards & Community Involvement

  Director, Sylvan Source, Inc. (2016-present)

  Co-chairman of the US Saudi Arabian Business Council (2009-2018)

  Chairman of the World Affairs Council of Northern California (2009-2018)

  Chairman of the US Energy Association (2006-2008)

 

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LOGO

Independent Director Since 2012 Age 70Board Committees:AuditHuman Resource and Compensation

  

Christopher M.T. Thompson

 

Former Chairman and Chief Executive Officer of Gold Fields Ltd.

 

Mr. Thompson has an extensive background in the mining industry, providing strong knowledge of and management and operational experience in this area to the Board, which is particularly valuable given the Company’s customers in this industry. Mr. Thompson also provides knowledge of the biotechnology industry, which is also important given the Company’s customers in that industry. His international experience brings to the Board additional perspective regarding the day to day operations of large organizations as well as corporate best practices.

  

 

Business Experience

  Director, Chairman and Chief Executive Officer of Gold Fields Ltd. (1998-2005)

  Chairman of the World Gold Council (2002-2005)

  Founder and Chief Executive Officer of Castle Group Ltd. (1992-1998)

 

Education

  Bachelor’s degree in law and economics from Rhodes University, South Africa

  Master’s degree in management studies from Bradford University, U.K.

  

 

Public Company Boards

  Board member of Royal Gold, Inc. (2013-present)

  Board member of Teck Resources Limited (2003-2015)

  Board member of Golden Star Resources Ltd. (2010-2015)

  Board member of various portfolio companies of Castle Group
(1985-1999)

 

Private Boards & Community Involvement

  Board member of The Colorado School of Mines Foundation (2013-2017)

 

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LOGO

Independent Director Since 2017 Age 74Board Committees:Audit

  

Barry L. Williams

 

Retired Managing General Partner of Williams Pacific Ventures, Inc.

 

Mr. Williams brings valuable business and leadership skills to the Board from his career leading an investment and consulting company. He has accounting expertise and experience serving as a member of public and private company boards, including service on audit committees. Mr. Williams understands the engineering industry and provides the Board with a valuable perspective, having served as a board member of recently acquired CH2M HILL Companies, Ltd. for more than 20 years.

  

 

Business Experience

  Managing General Partner of Williams Pacific Ventures (1986-2014)

  President and CEO of American Management Association International (2000-2001)

  Senior Mediator for JAMS/Endispute (1993-2002)

  Visiting Lecturer, University of California (1993-2000)

 

Education

  BA from Harvard University

  MBA from Harvard Business School

  JD from Harvard Law School

  

 

Public Company Boards

  Navient (2000-present)

  PG&E Corporation (1996-2017)

  Simpson Manufacturing Co. (1994-2015)

  R.H. Donnelly Corp. (1998-2010)

  Ameron International Corporation (2010-2011)

 

Private Boards & Community Involvement

  Director, CH2M HILL Companies, Ltd. (1995-2017)

  Trustee, Sutter Health (1992-present)

  Trustee, Northwestern Mutual Life Insurance Company (1986-2016)

  Management Leadership for Tomorrow

 

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CORPORATE GOVERNANCE

Highlights

Jacobs has a strong track record of integrity and corporate governance practices that promote thoughtful management by its officers and Board of Directors to facilitate profitable growth while strategically balancing risk to maximize long-term shareholder value. Below is a summary of certain information about our Board of Directors and governance best practices employed by the Company:

 

 

SIZE OF BOARD  

11  

   

 

AVERAGE  

DIRECTOR  

TENURE IN  

YEARS  

9  

 

   

 

BOARD  

MEETINGS  

HELD IN FISCAL  

2018  

5  

 

 
           
 

NUMBER OF  

INDEPENDENT  

DIRECTORS  

10  

   

 

PERCENT  

FEMALE OR  

ETHNICALLY  

DIVERSE  

45%  

 

   

 

NEW  

DIRECTORS IN  

THE LAST FIVE  

YEARS  

4  

 

 

Corporate Governance Best Practices

 

 

      BoardComprised of 91% Independent Directors

     Commitmentto Board Refreshment (Four New Directors in Past Five Years)

      HighlyEngaged Lead Independent Director

     AnnualElection of Directors

     MajorityVoting for Directors

      MandatoryAnti-Corruption Compliance Training for Directors

     Codeof Ethics for Directors, Officers & Employees

     AnnualSelf-Evaluations by Board and each Committee

  

      RigorousDirector Selection Process

      SubstantialBoard oversight of strategic objectives, including mergers and acquisition activity

     DirectorAttendance at Board & Committee Meetings >99%

      FullyIndependent Committees

      ComprehensiveRisk Oversight by Full Board and Committees

     ExtensiveStockholder Engagement Efforts

     StockOwnership Guidelines for Directors and Executive Officers

      RegularEnterprise Risk Management Reviews by Board and Committees

 

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The Board’s Role in Risk Oversight

The Board of Directors oversees the Company’s risk management function. It oversees a Company-wide approach to risk management, designed to enhance long-term shareholder value, support the achievement of strategic objectives and improve organizational performance. The Board determines the appropriate level of risk for the Company, assesses the specific risks faced by the Company and reviews the steps taken by management to manage those risks. The Board’s involvement in setting the Company’s business strategy also facilitates these assessments and reviews, culminating in the development of a strategy that reflects the consensus of the Board and management as to appropriate levels of risk and the appropriate measures to manage those risks.

Through this framework, risk is assessed throughout the enterprise, focusing on risks arising out of various aspects of the Company’s strategy and the implementation of that strategy, including financial, legal/compliance, operational/strategic, health and safety, and compensation risks. The Board also considers risk when evaluating proposed transactions and other matters presented to the Board, including acquisitions and financial matters. For example, in fiscal 2017, the Board held six special Board meetings in connection with the acquisition of CH2M Hill Companies, Ltd. (“CH2M”) that was completed in the first fiscal quarter of 2018. Following fiscal 2018, the Board held two special meetings and an additional executive session in connection with the pending sale of the Company’s Energy, Chemicals and Resources business announced in the first fiscal quarter of 2019. In addition, the independent directors discuss risk management during executive sessions without management present.

While the Board maintains the ultimate oversight responsibility for the risk management process, its Committees oversee risk in certain specified areas:

 

   

Audit Committee: Addresses financial risk, including internal controls, and discusses the Company’s risk profile with the Company’s independent registered public accounting firm. The Audit Committee also reviews potential violations of the Company’s various codes of ethics and related corporate policies.

 

   

Human Resource and Compensation Committee: Periodically reviews compensation practices and policies to consider whether they encourage excessive risk taking, including an annual review of management’s assessment of the risk associated with the Company’s compensation programs covering its employees, including executives, and discusses the concept of risk as it relates to the Company’s compensation programs.

 

   

Nominating and Corporate Governance Committee: Oversees risks associated with the independence of directors and Board nominees and assists the Board in overseeing the activities with respect to compliance and business practice matters, including the Company’s corporate governance policies.

Pursuant to the Board’s instruction, management regularly reports on applicable risks to the relevant Committee or the Board, as appropriate, including regular reports on significant Company projects, with additional review or reporting on risks being conducted as needed or as requested by the Board and its Committees.

Board Leadership Structure

The Board’s leadership is comprised of:

   

Chair of the Board and CEO: Steven J. Demetriou

   

Lead Independent Director: Linda Fayne Levinson

   

Audit, Human Resource and Compensation and Nominating and Corporate Governance Committees: Composed entirely of independent directors

Currently, the Board is led by Mr. Demetriou as Chair, a position he has held since July 2016, and Ms. Fayne Levinson as Lead Independent Director, a position she has also held since July 2016.

 

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In a process led by the Lead Independent Director and the Chair of the Nominating and Corporate Governance Committee, the Board evaluates the appointment and role of the Chair on an annual basis. The Board has determined that having Mr. Demetriou serve as Chair provides significant advantages to the Board and the Company, as it allows the Board to benefit from his knowledge of the Company’s business and market opportunities and risks and also facilitates communications and relations with other members of senior management. The Board also believes that having Mr. Demetriou serve as Chair is advantageous to the Company when working with clients in certain areas of the world in which the title of Chair is significant.

Because the Board believes that strong independent Board leadership is a critical aspect of effective corporate governance, the Board has established the position of Lead Independent Director. The Board also believes that a Lead Independent Director, who has the responsibilities set forth in the Company’s Corporate Governance Guidelines, provides independent leadership, oversight and benefits for the Company and Board that would be provided by an independent Chair. Responsibilities of the Lead Independent Director include:

 

      Servingas the independent directors’ central point of communication with the Chair and CEO;

 

      Presidingat meetings of the Board at which the Chair and CEO is not present, including executive sessions of independent directors;

 

      Approvingthe schedule of Board meetings and meeting agendas, working with the Chair and CEO;

 

      Attendingmeetings of all Committees of the Board;

 

      Workingwith the Chair of the Nominating and Corporate Governance Committee and Chair and CEO on the Board succession and refreshment process;

 

      Workingwith the Chair of the Nominating and Corporate Governance Committee to conduct the annual Board self-evaluation;

  

      Workingwith the Chair and CEO to support appropriate compliance with Board policies;

 

      Proactivelyengaging with the Chair and CEO as a key advisor on emerging issues and alternative courses of action;

 

      Callingspecial meetings of the Board and/or meetings of the independent directors;

 

      Togetherwith the Chair of the Human Resource and Compensation Committee and Chair of the Nominating and Corporate Governance Committee, evaluating the performance and compensation of the Chair and CEO;

 

     Participatingin shareholder outreach and communications; and

 

      Meetingwith various Company constituencies on behalf of the Board or the Company.

The Nominating and Corporate Governance Committee leads the process of the Board’s evaluation of the selection, role and term of the Lead Independent Director on an annual basis.

Board Composition

The Nominating and Corporate Governance Committee is responsible for reviewing with the Board on an annual basis the appropriate skills and characteristics required of members in the context of the current make-up of the Board. This process enables them to update the skills and experience it seeks in the Board as a whole, and in individual directors, as the Company’s needs evolve. This assessment takes into consideration all factors deemed relevant by the Nominating and Corporate Governance Committee, including the following factors:

 

   

Independence: The Board must be comprised of a majority of independent directors.

 

   

Relevant Skills and Experience: The assessment of skills and characteristics of Board members takes into account all skills and experience deemed relevant by the Committee, including those summarized in the Director Experience Matrix on page 5, among others. For incumbent directors, past performance on the Board of Directors and its Committees is also taken into consideration. For new director candidates, the assessment also takes into account the ability and willingness of the director candidate to serve on the Board for five to seven years.

 

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Diversity: The Board believes it should encompass individuals with diverse backgrounds and perspectives. In accordance with this guideline, the Nominating and Corporate Governance Committee considers the diversity of viewpoints, backgrounds, experience and other demographics in evaluating and considering potential director candidates. Diversity is an important consideration in the director nomination process because the Board believes that people of different genders, experiences, ages, races and ethnic backgrounds can contribute different, useful perspectives, while collaborating effectively to further the Company’s mission. This policy is included in the Company’s Corporate Governance Guidelines.

The Board of Directors and the Nominating and Corporate Governance Committee consider the qualifications and attributes of directors and director candidates individually, as well as in the broader context of the Board’s overall composition and the Company’s current and future needs, to ensure that the Board as a whole possesses the requisite combination of skills, professional experience and diversity of backgrounds and perspectives.

Independence of Directors

The Board of Directors has adopted Board of Directors Guidelines for Determining the Independence of its Members, which are accessible by following the link to “Corporate Governance” on the Company’s website at www.jacobs.com. The Board of Directors has affirmatively determined that each person who served as a member of the Board of Directors during fiscal 2018, other than Mr. Demetriou, is independent under Section 303A.02 of the NYSE listed company manual and the Company’s independence guidelines. Each member of each Committee of the Board is also independent (as defined by the applicable NYSE rules).

In addition, as further required by the NYSE’s listed company manual and the Company’s Independence Guidelines, the Board of Directors has made an affirmative determination that no relationship, whether immaterial or material, exists between any independent director and the Company that would prevent a director from being independent. In making this determination, the Board considered the facts described below.

Mr. Davidson is an officer of Gamma Zeta Boulé Foundation and Sigma Pi Phi Professional Fraternity. The Company has made annual contributions to these organizations during the last three fiscal years. Such amounts did not exceed $7,500 in any fiscal year. During fiscal 2015, Ms. Hickton was Vice Chair, President and CEO of RTI International Metals, Inc. (“RTI”), which has been a client of the Company. The payments by RTI to the Company for any fiscal year were substantially less than two percent of the consolidated gross revenues of RTI. Mr. McNamara was previously Global Chief Risk Officer & COO — Australia businesses of Building, Engineering, and Services of Lendlease Corporation Limited (“Lendlease”), which has been a client of the Company. The payments by Lendlease to the Company for any fiscal year were substantially less than two percent of the consolidated gross revenues of Lendlease.

Until February 2018, Mr. Robertson served as the U.S. co-chairman of the US-Saudi Arabian Business Council, an organization to which the Company makes $20,000 in annual cash contributions and also supports conferences. In February 2018, Mr. Demetriou succeeded Mr. Robertson in this role as the co-chairman. The total amount contributed by the Company to the US-Saudi Arabian Business Counsel over the last five years is approximately $70,000. Mr. Robertson is also on the Board of Sasol Ltd., which is a client of the Company. After a review of the facts, using its business judgment, the Board of Directors determined that these relationships did not compromise the independence of Mssrs. Davidson, McNamara and Robertson or Ms. Hickton.

Director Nominations

The Nominating and Corporate Governance Committee is responsible for recommending the selection of director nominees to the Board. Once potential candidates are identified, including those candidates nominated by shareholders and/or identified by outside advisors or search firms, the Chair of the Nominating and Corporate Governance Committee, the Lead Independent Director and the Chair and CEO review the backgrounds of those candidates with the Nominating and Corporate Governance Committee. Final candidates are then chosen and interviewed by non-management directors and executive management of the Company.

 

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Based on the interviews, the Nominating and Corporate Governance Committee then makes its recommendation to the Board of Directors. If the Board of Directors approves the recommendation, the candidate is nominated for election. With regard to procedures for shareholder nominations of directors for election, please see the requirements described below under “Shareholders’ Proposals.” The Nominating and Corporate Governance Committee will consider director candidates recommended by shareholders in accordance with these procedures.

Mr. Williams was appointed to the Board in December 2017 in connection with the Company’s acquisition of CH2M. Prior to the acquisition, Mr. Williams served on the Board of CH2M and was the chair of its audit committee.

Committees of the Board of Directors

The Board of Directors has three standing committees: the Audit Committee, the Human Resource and Compensation Committee and the Nominating and Corporate Governance Committee.

 

  Audit Committee

 

  Members:*

  - Joseph R. Bronson (Chair)

  - Dawne S. Hickton

  - Robert A. McNamara

  - Christopher M.T. Thompson

  - Barry L. Williams+

 

* Each member is independent and financially literate and qualifies as an audit committee financial expert

 

+ New member appointed to Committee in January 2018

 

Primary responsibilities include monitoring and overseeing the:

       Integrityof the Company’s financial statements

       Independentauditor’s qualifications and independence

       Performanceof the Company’s internal audit function and independent auditors

       Complianceby the Company with legal and regulatory requirements

 

Meetings in

Fiscal 2018: 9

 

Committee

Member

Attendance: 98%

Committee Charter: The Audit Committee’s current charter is available by following the links to “Corporate Governance” on the Company’s website at www.jacobs.com or upon written request, as described below under “Corporate Governance — Availability of Documents.”

 

 

  Human Resource and Compensation Committee

 

  Members:*

  - Peter J. Robertson (Chair)

  - General Ralph E. Eberhart

  - Juan José Suárez Coppel

  - Christopher M.T. Thompson

 

* Each member is independent

 

Primary responsibilities include:

       Establishing,recommending, and governing all compensation and benefits policies for executive officers

       Establishingand overseeing policy and protocol involved in the granting of all equity compensation

       Overseeingthe design and administration of the Company’s employee benefit plans

       Overseeingthe adoption and administration of key human resources processes and programs

 

Meetings in

Fiscal 2018: 5

 

Committee

Member

Attendance: 100%

Committee Charter: The Human Resource and Compensation Committee’s current charter is available by following the links to “Corporate Governance” on the Company’s website at www.jacobs.com or upon written request, as described below under “Corporate Governance — Availability of Documents.”

 

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Compensation Committee Interlocks and Insider Participation: During the last completed fiscal year, no member of the Compensation Committee was an officer or employee of the Company, was a former officer of the Company, nor had a relationship with the Company requiring disclosure as a related party transaction under Item 404 of Regulation S-K. None of the Company’s executive officers served on the compensation committee or board of directors of another entity whose executive officer(s) served as a member of the Company’s Board of Directors or on the Compensation Committee.

 

 

  Nominating and Corporate Governance Committee

 

  Members:*

  -Robert C. Davidson, Jr. (Chair)

  - Juan José Suárez Coppel

  - General Ralph E. Eberhart

  - Dawne S. Hickton

  - Robert A. McNamara+

 

* Each member is independent

 

+ New member appointed to Committee in January 2018

 

Primary responsibilities include:

•     Identifying for the Board of Directors qualified candidates to serve as directors of the Company

•     Establishing for the Board corporate governance policies, principles and guidelines

•     Overseeing the Annual Self-Evaluation of the Board

•     Establishing and recommending to the Board outside director compensation

•     Overseeing the Company’s compliance programs

 

Meetings in

Fiscal 2018: 5

 

Committee Member Attendance: 100%

Committee Charter: The Nominating and Corporate Governance Committee’s current charter is available by following the links to “Corporate Governance” on the Company’s website at www.jacobs.com or upon written request, as described below under “Corporate Governance — Availability of Documents.”

 

 

Corporate Governance Guidelines

The Company monitors developments in the area of corporate governance and routinely reviews its processes and procedures in light of such developments. The Company believes that it has procedures and practices in place which are designed to enhance and protect the interests of its shareholders.

The Board of Directors has approved Corporate Governance Guidelines for the Company, which are reviewed and updated on an annual basis. The Corporate Governance Guidelines are available by following the links to “Corporate Governance” on the Company’s website at www.jacobs.com or upon written request, as described below under “Corporate Governance — Availability of Documents.” The Corporate Governance Guidelines address the following matters:

 

    The role of the Board to provide oversight, counseling and direction to the Company’s management in the interest of the Company and its shareholders;

 

    Frequency of meetings of the Board (5-6 regular meetings per year);

 

    The requirement that the Board of Directors be comprised of a majority of independent directors;

 

    Guidelines for evaluating and nominating director nominees, including relevant skills, experience and diversity;
    Guidelines for determining director independence;

 

    Director and executive officer stock ownership guidelines;

 

    Conflicts of interests;

 

    Majority voting in uncontested elections of directors;

 

    Limits the number of public company boards on which non-management directors may serve to four;

 

    Committees of the Board, including assignment of directors to committees and appointment of committee chairs;
 

 

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    The requirement that the Audit, Human Resource and Compensation, and Nominating and Corporate Governance Committees of the Board of Directors be comprised entirely of independent directors;

 

    The requirement that directors attend in person all regularly scheduled Board and Committee meetings unless required by illness or other extenuating circumstances;

 

    Executive sessions of the Board of Directors wherein non-management directors meet as a group without the presence of management directors;

 

    Orientation for new directors and continuing education for Board members;
    The selection, roles and responsibilities of the Chair and Chief Executive Officer and the Lead Independent Director;

 

    The requirement that the performance of the Chair and Chief Executive Officer be evaluated annually and reviewed by the non-management directors;

 

    Succession planning;

 

    Annual Board self-evaluation; and

 

    Other matters uniquely germane to the work and responsibilities of the Board of Directors.
 

 

Director Education

The Board recognizes the importance of director continuing education and is committed to provide such education in order to enhance both Board and Committee performance. Accordingly, as noted in the Company’s Corporate Governance Guidelines, the Company regularly provides the Board with education programs, presentations and briefings on topics relevant to the Company, its business and risk profile. In addition, each year the Board engages a third-party provider to host an educational program for members of the Board on matters relevant to the Company or relating to duties and responsibilities of directors. Directors are also encouraged to attend at least one outside educational program each year on any subjects pertaining to the directors’ responsibilities such as “directors’ colleges.” Additionally, new directors must participate in the Company’s orientation program for new directors.

Annual Performance Evaluations

The Nominating and Corporate Governance Committee, together with the Lead Independent Director, coordinates annual Board performance evaluations and periodic individual director reviews. The Chairs of each of the Committees coordinate annual performance evaluations of their respective Committees.

Attendance at Meetings of the Board and its Committees and the Shareholder Meeting

Overall director attendance at meetings of the Board and its Committees was 99% during fiscal 2018. Each individual director attended at least 75% of all meetings of the Board and all Committees on which they serve during fiscal 2018. Board members are expected to attend annual meetings of shareholders. All of the members of our Board attended the 2018 annual meeting of shareholders.

Code of Ethics

In addition to the Corporate Governance Guidelines, the Board of Directors has adopted the following other codes, guidelines, and policies:

 

   

Code of Business Conduct and Ethics for Members of the Board of Directors;

 

   

Code of Ethics for the Chief Executive Officer and Senior Financial Officers; and

 

   

Code of Conduct.

These documents, along with the Corporate Governance Guidelines, serve as the foundation for the Company’s system of corporate governance. They provide guidance for maintaining ethical behavior, require that directors and employees comply with applicable laws and regulations, prohibit conflicts of interest, and provide mechanisms for reporting violations of the Company’s policies and procedures.

 

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In the event the Company makes any amendment to, or grants any waiver from, a provision of the code of ethics that applies to the principal executive officer, principal financial officer, or principal accounting officer that requires disclosure under applicable SEC rules, the Company will disclose such amendment or waiver and the reasons therefore on its website at www.jacobs.com.

Stock Ownership Guidelines

In an effort to more closely align the Company’s non-management directors’ financial interests with those of our shareholders, the Board of Directors has established stock ownership guidelines for non-management directors. Under these guidelines, the Company’s non-management directors are expected to own equity in the Company (including common stock, restricted stock or restricted stock units) valued at a minimum of five times their annual cash retainer. Non-management directors are restricted from selling any shares of common stock during any period in which they have not met these ownership guidelines. As of the end of fiscal 2018, all non-management directors exceeded these guidelines or were within the five-year period from their appointment date, at the time of which they are expected to meet the guidelines.

Similarly, the Company has established stock ownership guidelines for senior management. Under these guidelines, the Company’s senior management is expected to own equity in the Company (including common stock, restricted stock or restricted stock units, but excluding unvested performance share units or unexcised options) within 3-5 years of entering their respective positions valued as follows:

 

Position

 

  

    Multiple of    

  Base Salary  

Chair and CEO

   6x

EVP/Presidents of Lines of Business

   3x

Other Senior Management (SVPs)

   2x

Members of senior management are not required to purchase shares of common stock to reach the applicable threshold, but are restricted from selling any shares of common stock during any period in which they have not met these ownership guidelines. This restriction does not apply to the withholding of shares to satisfy tax withholding requirements. As of the end of fiscal 2018, all named executive officers (or NEOs) exceeded their respective guidelines.

Contacting the Board of Directors

Generally — All communications required by law or regulation to be relayed to the Board of Directors are relayed promptly after receipt by the Company. Any communications received by management from shareholders which have not also been sent directly to the Board of Directors will be processed as follows: (1) if the shareholder specifically requests that the communication be sent to the Board, the communication will then be promptly relayed to the Board of Directors; and (2) if the shareholder does not request that the communication be sent to the Board of Directors, then management will promptly relay to the Board all communications that the management of the Company, using its best business judgment, determines should be relayed to the Board.

Contacting the Full Board of Directors — Any shareholder, employee or interested party who desires to communicate with the Board of Directors may do so by writing to The Board of Directors, c/o Corporate Secretary, Jacobs Engineering Group Inc., 1999 Bryan Street, Suite 1200, Dallas, Texas, 75201, in an envelope marked confidential.

Contacting Non-Management Directors — Any shareholder, employee or interested party who desires to communicate with the Company’s non-management directors may do so as follows:

 

   

Confidentially or anonymously through the Company’s Integrity Hotline, +1 (844) 543-8351;

 

   

By writing to Lead Independent Director, c/o Corporate Secretary, Jacobs Engineering Group Inc., 1999 Bryan Street, Suite 1200, Dallas, Texas, 75201, in an envelope marked confidential; or

 

   

By sending an email to LeadIndependent.Director@Jacobs.com.

 

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Contacting the Audit Committee — Any shareholder, employee or interested party may submit at any time a good faith complaint regarding any questionable accounting, internal accounting controls, or auditing matters concerning the Company without fear of dismissal or retaliation of any kind. Employees are encouraged to report their concerns and complaints to the Company’s senior management, to the Vice President, Internal Audit, or to the Audit Committee of the Board of Directors. Confidential, anonymous reports may be made as follows:

 

   

Through the Company’s Integrity Hotline, +1 (844) 543-8351;

 

   

By writing to the Chair of the Audit Committee, c/o Corporate Secretary, Jacobs Engineering Group Inc., 1999 Bryan Street, Suite 1200, Dallas, Texas, 75201, in an envelope marked confidential; or

 

   

By sending an email to Audit.Committee@Jacobs.com.

Availability of Documents

The full text of the Corporate Governance Guidelines, the Code of Business Conduct and Ethics for Members of the Board of Directors, the Code of Ethics for the Chief Executive Officer and Senior Financial Officers, the Code of Conduct, the Committee Charters, the Board of Directors Guidelines for Determining the Independence of its Members, and the other corporate governance materials described in this Proxy Statement are accessible by following the link to “Corporate Governance” on the Company’s website at www.jacobs.com.

The Company will furnish without charge a copy of any of the foregoing documents to any person making such a request in writing and stating that he or she is a beneficial owner of common stock of the Company. Requests should be addressed to: Jacobs Engineering Group Inc., 1999 Bryan Street, Suite 1200, Dallas Texas 75201, Attention: Corporate Secretary.

Compensation of Directors

Determination of Non-Employee Director Compensation

Each year, the Board determines non-employee director compensation based upon the recommendation of the Nominating and Corporate Governance Committee. In making a recommendation, the Nominating and Corporate Governance Committee considers market data for the Company’s peer group, which is the same peer group used for the Company’s executive compensation benchmarking, and input from FW Cook, the independent consultant retained by the Nominating and Corporate Governance Committee regarding market practices for director compensation.

The Nominating and Corporate Governance Committee intends to set non-employee director compensation levels at or near the market median relative to directors at companies of comparable size, industry, and scope of operations. This ensures directors are paid competitively for their time, commitment and responsibilities, which enables us to attract and retain highly qualified directors. During fiscal 2018, the independent consultant conducted a review of director compensation levels relative to the Company’s peer group and recommended certain changes to ensure the program remains aligned with median competitive practices, including increasing the cash retainer from $110,000 to $115,000 and the annual equity value from $135,000 to $150,000. The Board approved these changes effective January 2018. Directors who are employees of the Company or its affiliates do not receive separate compensation for their board activities.

Additional Director Compensation for Periods of Unusually High Activity

Based on the recommendation of the independent consultant, during fiscal 2018 the Board adopted a policy under which non-employee directors may be compensated for periods of unusually high Board or committee activity. The intention of this policy is to provide additional compensation for periods of unusual activity only and not for ordinary course of business. The Corporate Governance Guidelines state that the number of regularly scheduled Board meetings per year will be five or six and the new policy provides that beginning with the ninth meeting in a fiscal year, the Company will pay an additional $2,000 special fee for each additional meeting to the non-employee directors. In the event the Board forms a special committee, the Company will pay the additional

 

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$2,000 special fee beginning with the fifth special committee meeting. During fiscal 2018, the Company did not pay any special fees under this new policy, as the Board and all committees except the Audit Committee held fewer than nine meetings.

Director Compensation During Fiscal 2018

Cash Retainers. The Company paid non-management directors a cash retainer of $110,000 per year through the first fiscal quarter of 2018 and $115,000 per year thereafter. In addition, the Lead Independent Director receives an additional cash retainer of $100,000 per year, and the Chair of each Committee receives an additional cash retainer of $20,000 per year.

Equity. For fiscal 2018, the Board set the annual equity value to be awarded to non-management directors at approximately $150,000 and, accordingly, granted each non-management director an award of 2,162 restricted stock units (“RSUs”) on January 18, 2018. Such grants were made pursuant to the Jacobs Engineering Group Inc. 1999 Outside Director Stock Plan, as amended and restated (the “1999 Outside Director Plan”). Each RSU grant vests upon the earlier of (i) the next annual shareholder meeting or (ii) the one-year anniversary of the grant date. If the Company pays a cash dividend on its outstanding common stock, RSUs will be credited with cash dividend equivalent rights (“Dividend Equivalents”) which are paid to such director upon the vesting of the RSU and distribution of the underlying share of common stock as described below in the section entitled “Executive Compensation—Narrative Disclosure to Summary Compensation Table and Grants of Plan Based Awards Table—Payment of Dividends and Dividend Equivalent Rights”. Each director also receives cash dividends with respect to each outstanding restricted stock award (“RSA”) as and when paid to shareholders of common stock. Additionally, non-management directors are eligible to participate in the Jacobs Director Deferral Plan, pursuant to which each director may defer all or a portion of such director’s cash retainer or RSUs.

The table below sets forth the compensation earned by each of the Company’s non-management directors during fiscal 2018.

 

Name  

Fees Earned or    

Paid in Cash ($)(1)    

 

Stock Awards    

($)(2)    

 

Option    

Awards ($)(3)    

 

All Other    

Compensation    

($)(4)    

 

Total ($)  

  Joseph R. Bronson   133,750       150,021       —       5,856       289,627  
  Juan José Suárez Coppel   113,750       150,021       —       1,056       264,827  
  Robert C. Davidson, Jr.   133,750       150,021       —       8,256       292,027  
  General Ralph E. Eberhart   113,750       150,021       —       1,056       264,827  
  Dawne S. Hickton   113,750       150,021       —       1,056       264,827  
  Linda Fayne Levinson   213,750       150,021       —       9,456       373,227  
  Robert A. McNamara   113,750       150,021       —       1,056       264,827  
  Peter J. Robertson   133,750       150,021       —       1,056       284,827  
  Christopher M.T. Thompson   113,750       150,021       —       1,056       264,827  
  Barry Williams (5)     90,435       150,021       —       —       240,456  

 

(1) Represents fees earned during fiscal 2018.

(2) Represents the grant date fair value of the grants of RSUs under the 1999 Outside Director Plan during fiscal 2018 in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation (“FASB ASC Topic 718”). The aggregate number of shares of restricted stock and restricted stock units outstanding at September 28, 2018, for each non-management director was as follows: J. Bronson — 22,971; J. Suárez Coppel — 7,471, R. Davidson — 26,971; R. Eberhart — 8,971; D. Hickton — 4,471; L. Fayne Levinson — 28,971; R. McNamara — 2,162; P. Robertson — 11,971; C. Thompson — 8,971; and B. Williams — 2,162.

(3) The Company has not granted options to non-management directors since fiscal 2016. The aggregate number of options outstanding at September 28, 2018, for each non-management director was as follows: J. Bronson —

 

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7,875; J. Suárez Coppel — 14,500; R. Davidson — 24,500; R. Eberhart — 18,000; D. Hickton — 7,500; L. Fayne Levinson — 27,000; R. McNamara — 0; P. Robertson — 28,500; C. Thompson — 18,000; and B. Williams — 0.

(4) Represents dividend payments on restricted stock awards (“RSAs”) during fiscal 2018 as well as dividend payments on restricted stock units (“RSUs”) that vested during the fiscal year. These amounts do not include accumulated dividend equivalent rights on vested RSUs, as applicable, that have not yet been distributed for each non-management director as follows: J. Bronson — $11,528; J. Suárez Coppel — $4,778; R. Davidson —$11,528; R. Eberhart — $6,128; D. Hickton — $2,078; L. Fayne Levinson — $11,528; R. McNamara — $0; P. Robertson — $8,828; C. Thompson — $6,128; and B. Williams — $0.

(5) Mr. Williams was appointed to the Board in December 2017.

Forward-Looking Statements

This Proxy Statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that do not directly relate to any historical or current fact. When used herein, words such as “estimates”, “intends”, and “will” and similar words are intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Although such statements are based on management’s current estimates and expectations and/or currently available data, forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause our actual results to differ materially from what may be inferred from the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those listed in Item 1A — Risk Factors in the Company’s 2018 Annual Report on Form 10-K. The Company does not undertake any obligation to release publicly any revisions or updates to any forward-looking statements.

 

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PROPOSAL NO. 2 — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

 

What are you voting on?

As required by Section 14A of the Securities Exchange Act of 1934, as amended, this proposal seeks a shareholder advisory vote to approve the compensation of our named executive officers as disclosed pursuant to Item 402 of Regulation S-K through the following resolution:

“Resolved, that the shareholders approve, on an advisory basis, the compensation paid to the Company’s named executive officers, as disclosed in this Proxy Statement pursuant to the SEC’s executive compensation disclosure rules (which includes the Compensation Discussion and Analysis, the Summary Compensation Table, and the related compensation tables and narrative disclosures).”

As an advisory vote, this proposal is not binding on the Company, the Board of Directors, or the Human Resource and Compensation Committee (the “Compensation Committee”), and will not be construed as overruling a decision by the Company, the Board, or the Compensation Committee or creating or implying any additional fiduciary duty for the Company, the Board, or the Compensation Committee. However, the Board of Directors and the Compensation Committee value the opinions that shareholders express in their votes and will consider the outcome of the vote when making future compensation decisions.

At our 2017 annual meeting of shareholders, our shareholders approved, on an advisory basis, a frequency of every year for casting advisory votes approving our executive compensation. After the Annual Meeting, our next advisory vote on executive compensation will occur at our 2020 annual meeting of shareholders.

What is the Vote Required?

The approval of the advisory resolution on the Company’s executive compensation requires the affirmative vote of a majority of shares of common stock present, in person or by proxy, at the Annual Meeting and entitled to vote. Abstentions have the same effect as a vote against the advisory resolution. Broker non-votes will have no effect of the outcome of the advisory vote.

 

 

 

The Board of Directors unanimously recommends that you vote FOR the advisory resolution
approving the Company’s executive compensation.

 

 

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COMPENSATION COMMITTEE REPORT

The Human Resource and Compensation Committee of the Board of Directors reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with the Company’s management. Based on such review and discussion, the Human Resource and Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Proxy Statement. The Board has approved that recommendation.

 

December 5, 2018

   Peter J. Robertson, Chair
   General Ralph E. Eberhart
   Juan José Suárez Coppel
   Christopher M.T. Thompson

 

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Compensation Discussion and Analysis (“CD&A”)

Executive Summary

 

As one of the world’s largest and most diverse providers of technical professional and construction services, we operate with a pay-for-performance philosophy in a challenging, highly competitive, and rapidly evolving global environment. Our named executive officers (“NEOs”) for fiscal 2018 were:

 

Name

   2018 Position

Mr. Steven J. Demetriou

  

Chair and Chief Executive Officer (“CEO”)

Mr. Kevin C. Berryman

  

Chief Financial Officer (“CFO”)

Mr. Terence D. Hagen*

  

President, Aerospace, Technology, Environmental and Nuclear (ATEN)

Mr. Joseph G. (“Gary”) Mandel**

  

Executive Vice President, Integration Management Office

Mr. Robert V. Pragada*

  

President, Buildings, Infrastructure and Advanced Facilities (BIAF)

* Mr. Hagen and Mr. Pragada were each promoted to Chief Operating Officer effective October 1, 2018.

** Mr. Mandel’s position changed to Special Advisor to the Chair and CEO effective October 1, 2018.

 

How did we
perform?

 

     Our 2018 revenue grew 9% on a pro forma basis and gross margin increased over 100 basis points
  

 

 

 

Successful CH2M integration, exceeding synergy targets

  

 

 

 

Global commitment to Inclusion and Diversity to drive shareholder value

  

 

 

 

Announced sale of ECR business to focus on higher margin, higher growth businesses

 

 

LOGO

    

What did we

change for 2018?

 

     Increased base salaries for NEOs (other than the CEO and CFO) between 3% and 5%, consistent with market data from our peer group and other market survey information
  

 

 

 

Adopted an Executive Severance Plan that provides severance benefits to certain key executives

  

 

 

 

Implemented variable compensation metrics tied to the achievement of cost synergy targets for the NEO overseeing the integration of the CH2M acquisition

  

 

 

 

Fiscal 2018 equity grants provide for accelerated vesting in the event the holder is involuntarily terminated without cause to incentivize senior management during periods of uncertainty leading up to the CH2M acquisition and subsequent integration

 

 

LOGO

    

How do we

determine pay?

 

     Design pay programs to reward executives for positive Company and business unit results, mitigate material risks and align with stockholder interests equity-based long-term incentive awards
  

 

 

 

Set pay levels commensurate with performance and the need to attract and retain high quality talent

  

 

 

 

Consider many factors, including the advice of the Compensation Committee’s independent compensation consultant, internal pay equity among executives and the alignment of total pay opportunity and pay outcomes with performance and with external market data

 

 

LOGO

    

How did we pay

our NEOs?

 

     Payouts aligned with our fiscal 2018 performance
  

 

 

 

Base salaries reflect each NEO’s role, responsibility and experience and the market conditions

  

 

 

 

Annual cash incentive payouts ranged from 119% to 154% of target based on achievement of Company and business area performance objectives; two NEOs earned additional cash incentive payouts for performance related to the acquisition of CH2M

  

 

 

 

Long-term equity incentives granted at target levels using a portfolio of performance-based restricted stock units (“PSUs”) and time-based restricted stock units (“RSUs”). PSUs vest based on our EPS Growth and 50% based on our ROIC over a three-year performance period

  

 

 

 

No off-cycle equity awards or excessive perquisites for any of our NEOs

 

 

LOGO

    

 

How do we address

risk and governance?

 

 

     Provide an appropriate balance of short- and long-term compensation, with payouts based on the Company’s achievement of certain financial metrics and specific business area objectives
  

 

 

 

Follow practices that promote good governance and serve the interests of our stockholders, with maximum payout caps for annual cash incentives and long-term performance awards, and policies on clawbacks, anti-pledging, anti-hedging, insider trading and stock ownership

  

 

 

 

 

Solicit “say-on-pay” shareholder vote annually at shareholder meeting

 

Our Board, through the Human Resource and Compensation Committee, periodically conducts a risk assessment of our compensation policies and practices with the assistance of an independent compensation consultant

 

 

LOGO

    

 

Why you should

approve the

say-on-pay

proposal

 

     Fiscal 2018 performance continued to support long-term stockholder value
     Fiscal 2018 incentive payouts for our NEOs aligned with Company performance
     Our pay program is aligned with stockholder interests, emphasizing achievement of strategic objectives over the long term
    

Our pay practices are tied to robust risk management and corporate governance

 

 

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Our Executive Compensation Philosophy

Our vision is to provide superior customer value through a long-term, relationship-based approach and solid returns to our shareholders through profitable growth. The Compensation Committee has a compensation philosophy that drives this vision by attracting and retaining highly qualified employees and motivating them to deliver value to our customers and shareholders. Accordingly, our executive compensation program is pay-for-performance based, intending to:

 

   

Provide executives with base salary compensation that is competitive with the market;

 

   

Reward executives for superior annual Company performance through our Management Incentive Plan (“MIP”), a short-term cash incentive program that places a substantial component of pay at risk, with specific measures and targets assigned to each participant based on their role in the Company; and

 

   

Incentivize senior management through the use of long-term equity-based awards that align our executives’ interests with those of our shareholders.

Our Executive Compensation Program and Practices

Our Compensation Committee believes that our executive compensation program is appropriately designed to advance shareholder interests. The key components and associated purposes of our compensation program are as follows:

 

 

LOGO

Component Purpose Performance Metric and Description Short-Term/Annual Base Salary Provides the security of a competitive fixed cash payment Reviewed annually by the Compensation Committee and adjusted based on competitive practices and individual performance Management Incentive Plan ("MIP") Encourages superior performance and accountability by tying payouts to achievement of pre-established metrics assigned to participants based on their role in the Company Metrics used for fiscal 2018 include: "Consolidated/Line of Business Operating Profit "DSO* "GM in Backlog* "Achievement of cost synergy targets in connection with the CH2M integration (for one NEO) Long-Term Performance-Based Restricted Stock Units ("PSUs") Aligns interests of executives with long-term shareholder interests. Retains executives and motivates them to build shareholder value over the life of the grants For fiscal 2017 and fiscal 2018 grants, metrics used: "Earnings Per Share ("EPS") Growth - focuses on profitability and financial disciplines "Return on Invested Capital ("ROIC") - aligns with our strategy by motivating managers to focus on increasing efficiency and capturing whether magnitude of profitability is appropriate for investments made Metrics for performance-based awards in fiscal 2016 were EPS Growth and relative total shareholder return ("TSR") compared to the Company's peer group. Awards vest and distribute after three years of performance, if performance targets are met. Time Based Restricted Stock Units ("RSUs") Retains executives and motivates them to build shareholder value over the life of the grants Awards vest ratably, generally over four years.

*See page 38 for DSO and GM in Backlog definitions.

 

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We remain committed to executive compensation practices that drive performance and that align the interests of our leadership team with the interests of our shareholders. Below is a summary of best practices that we have implemented and practices we avoid with respect to the compensation of our NEOs.

 

WHAT WE DO

 

  

WHAT WE DO NOT DO

 

 

 Pay-for-Performance — A significant majority of our executives’ target compensation is at risk, including compensation that is stock based and/or performance based, tied to pre-established performance goals aligned with our short- and long-term objectives.

  

 

 No Tax Gross-Ups — We do not have tax reimbursements or gross-ups on severance payments. See “— Other Benefits and Policies — Perquisites” below.

 

 Compensation Recoupment Policies — We have a clawback policy that applies when inaccurate financial statements have affected incentive award payments to executive officers. This policy is further described under “—Clawback Policy” below.

  

 

 No Pension Plans or Special Retirement Programs for Executive Officers — We do not have a pension plan or supplemental retirement plan for executive officers.

 

 Stock Ownership Guidelines — Our Board has established robust stock ownership guidelines applicable to our Board members and executives as described under “—Stock Ownership Guidelines” below.

  

 

 No Excessive Perquisites — We do not offer excessive executive perquisites such as personal use of airplanes at the Company expense, Company-provided autos or auto allowances (except for expatriates) or payment of club dues.

 

 Thorough Compensation Benchmarking — The Compensation Committee reviews publicly available information to evaluate how our NEOs’ compensation compares to that of executives in comparable positions at other companies as described under “— Assessing Compensation Competitiveness” below.

  

 

 No Speculative Trading — Board members and executive officers are prohibited from short-selling our stock and buying or selling puts and calls of our stock. See “—Insider Trading and Policy on Hedging or Pledging of Stock” below.

 

 Independent Compensation Consultant — The Compensation Committee benefits from its use of an independent compensation consulting firm, which provides no other services to the Company.

  

 

 No Hedging — Board members and executive officers are prohibited from engaging in hedging transactions that could eliminate or limit the risks and rewards of owning our stock. See “—Insider Trading and Policy on Hedging or Pledging of Stock” below.

 

 Annual Pay-for-Performance Review — With the help of its independent compensation consultant, the Compensation Committee annually analyzes the difficulty of meeting our performance goals and the alignment of realizable pay and performance to ensure that our incentive programs are working as intended.

  

 

 No Use of Jacobs Stock as Collateral for Margin Loans — Board members and executive officers are prohibited from using our stock as collateral for any margin loan. See “—Insider Trading and Policy on Hedging or Pledging of Stock” below.

 

 Vesting Conditions on Dividend Equivalents — We impose the same vesting conditions on dividend equivalents as on the underlying RSUs.

  

 

 Executive Severance Plan with “Double Trigger” Change in Control BenefitsRecognizing the prevalence of severance plans among our peers and the need to attract and retain talented executives, in fiscal 2018 we adopted an Executive Severance Plan that provides severance benefits to certain key executives in the event of either (i) a qualifying involuntary termination of employment unrelated to a change in control or (ii) a qualifying termination of employment during the two-year period following a change in control.

  

 

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The Compensation Decision Process

The Compensation Committee directly retains the services of independent consultants and other experts to assist in fulfilling its responsibilities. The Compensation Committee currently engages the services of FW Cook (the “Independent Consultant”), a national executive compensation consulting firm, to review and provide recommendations concerning all of the components of the Company’s compensation programs. The Independent Consultant performs services on behalf of the Compensation Committee and has no relationship with the Company or management except as it may relate to performing such services. the Independent Consultant also advises the Nominating and Corporate Governance Committee on outside director compensation. The Compensation Committee has assessed the independence of the Independent Consultant, pursuant to the rules of the SEC and the NYSE and concluded that the Independent Consultant is independent and no conflict of interest exists with respect to the services provided by the Independent Consultant to the Compensation Committee.

During fiscal 2018, the CEO and other members of our senior executive team worked with the Compensation Committee to help ensure that our executive compensation programs are competitive, ethical, and aligned with the Company’s values. For fiscal 2018, compensation decisions for the NEOs (other than our CEO) were made by the Compensation Committee after consultation with the CEO, and the compensation decision with respect to our CEO was approved by the full Board upon recommendation from the Compensation Committee.

Assessing Compensation Competitiveness

The Compensation Committee, with the help of the Independent Consultant, annually compares each element of compensation to that of an industry peer group. For fiscal 2018, as part of its annual review, the Compensation Committee determined that the peer group should be comprised of (1) construction and engineering firms that are direct competitors with the Company for business and executive management talent or (2) companies that provide consulting or technical services to government and large commercial clients. In addition, to be included, a company would need to be generally within one-third to three times the size of the Company in terms of revenue and market capitalization, evaluated annually.

Similar to prior years, in order to assess compensation competitiveness compared to the peer group, the Independent Consultant utilized comparative data disclosed in publicly available proxy statements, other documents filed with the SEC, and data from a comprehensive database of pay information developed by Willis Towers Watson regarding the industry specific and general industry group in which the Company competes for talent.

The following chart shows our fiscal 2018 industry peer group, including relevant size and performance data to illustrate the Company’s relative position.

 

Most Recently Available Four Quarters ($M)

 

          

Employees

 

   

Market Capitalization

as of 9/30/18 ($M)

 

 

Revenues

 

          

Net Income

 

 

 Northrop Grumman

 

   

 

$26,774

 

 

 

   

 Raytheon

 

   

 

$2,398

 

 

 

     

 

 DXC Technology

 

 

 

   

 

150,000

 

 

 

   

 Raytheon

 

   

 

$58,952

 

 

 

   

 Raytheon

 

   

 

$25,959

 

 

 

   

 Northrop Grumman

 

   

 

$2,238

 

 

 

     

 

 AECOM Tech

 

 

 

   

 

87,000

 

 

 

   

 Northrop Grumman

 

   

 

$55,262

 

 

 

   

 DXC Technology

 

   

 

$24,602

 

 

 

   

 DXC Technology

 

   

 

$1,851

 

 

 

     

 

 Jacobs

 

 

 

   

 

80,000

 

 

 

   

 Hallliburton

 

   

 

$35,662

 

 

 

   

 Hallliburton

 

   

 

$23,271

 

 

 

   

 L-3 Communications

 

   

 

$889

 

 

 

     

 

 Northrop Grumman

 

 

 

   

 

70,000

 

 

 

   

 DXC Technology

 

   

 

$26,294

 

 

 

   

 AECOM Tech

 

   

 

$19,706

 

 

 

   

 Textron

 

   

 

$870

 

 

 

     

 

 Raytheon

 

 

 

   

 

64,000

 

 

 

   

 Textron

 

   

 

$17,754

 

 

 

   

 Fluor

 

   

 

$19,677

 

 

 

   

 KBR

 

   

 

$500

 

 

 

     

 

 Fluor

 

 

 

   

 

56,706

 

 

 

   

 L-3 Communications

 

   

 

$16,654

 

 

 

   

 Textron 

 

   

 

$14,239

 

 

 

   

 Leidos

 

   

 

$442

 

 

 

     

 

 Hallliburton

 

 

 

   

 

55,000

 

 

 

   

 Jacobs

 

   

 

$10,856

 

 

 

   

 Jacobs

 

   

 

$14,985

 

 

 

   

 Booz Allen Hamilton

 

   

 

$339

 

 

 

     

 

 SNC-Lavalin

 

 

 

   

 

52,448

 

 

 

   

 Leidos

 

   

 

$10,408

 

 

 

   

 Quanta Services

 

   

 

$10,162

 

 

 

   

 Quanta Services

 

   

 

$315

 

 

 

     

 

 Textron

 

 

 

   

 

37,000

 

 

 

   

 Fluor

 

   

 

$8,170

 

 

 

   

 Leidos

 

   

 

$9,991

 

 

 

   

 Jacobs

 

   

 

$163

 

 

 

     

 

 Quanta Services

 

 

 

   

 

32,800

 

 

 

   

 SNC-Lavalin

 

   

 

$7,153

 

 

 

   

 L-3 Communications

 

   

 

$9,821

 

 

 

   

 Fluor

 

   

 

$252

 

 

 

     

 

 EMCOR

 

 

 

   

 

32,000

 

 

 

   

 Booz Allen Hamilton

 

   

 

$7,073

 

 

 

   

 SNC-Lavalin

 

   

 

$7,990

 

 

 

   

 EMCOR

 

   

 

$244

 

 

 

     

 

 Leidos

 

 

 

   

 

31,000

 

 

 

   

 AECOM Tech

 

   

 

$5,251

 

 

 

   

 EMCOR

 

   

 

$7,754

 

 

 

   

 SNC-Lavalin

 

   

 

$241

 

 

 

     

 

 L-3 Communications

 

 

 

   

 

31,000

 

 

 

   

 Quanta Services

 

   

 

$4,983

 

 

 

   

 Booz Allen Hamilton

 

   

 

$6,296

 

 

 

   

 AECOM Tech

 

   

 

$141

 

 

 

     

 

 Booz Allen Hamilton

 

 

 

   

 

24,639

 

 

 

   

 EMCOR

 

   

 

$4,370

 

 

 

   

 KBR

 

   

 

$4,276

 

 

 

   

 Hallliburton

 

   

 

$98

 

 

 

     

 

 KBR

 

 

 

   

 

20,000

 

 

 

   

 KBR

 

   

 

$2,973

 

 

 

   

 75th Percentile

 

   

 

$22,380

 

 

 

   

 

 

   

 

$884

 

 

 

     

 

 

 

 

 

   

 

62,177

 

 

 

   

 

 

   

 

$24,159

 

 

 

   

 Median

 

   

 

$12,200

 

 

 

   

 

 

   

 

$390

 

 

 

       

 

44,724

 

 

 

       

 

$9,289

 

 

 

   

 25th Percentile

 

   

 

$8,448

 

 

 

               

 

$246

 

 

 

                   

 

31,250

 

 

 

               

 

$5,707

 

 

 

       

 Jacobs Percentile*

 

   

 

50%

 

 

 

       

 

36%

 

 

 

       

 

86%

 

 

 

       

 

50%

 

 

 

 

 

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* Percentile rank calculation includes Jacobs.

Source: Standard & Poor’s Capital IQ.

For fiscal 2018, as part of its annual review, the Compensation Committee, in consultation with the Independent Consultant, added Halliburton to the peer group and removed CH2M due to its acquisition by Jacobs. For fiscal 2019, the Compensation Committee, in consultation with the Independent Consultant, maintained the current peer selection criteria and group size used in fiscal 2018. Based on that criteria, Cognizant Technology Solutions and Parker-Hannifin were added to the peer group and Chicago Bridge & Iron was removed from the peer group due to its acquisition by McDermott International.

Shareholder Engagement and Say-on-Pay

 

In evaluating the Company’s executive compensation program, the Compensation Committee considers the results of the advisory vote on the “say-on-pay” proposal. At the Company’s 2018 annual meeting, 95.9% of the voting shares approved the proposal. This followed similar results from the Company’s 2017 annual meeting, where 96.4% of the voting shares approved the proposal. The Compensation Committee believes these results, which show a significant improvement over the 80.9% approval received at the Company’s 2016 annual meeting, were due to positive changes made to the Company’s executive compensation program in fiscal 2016 and carried forward.

 

Members of executive leadership and our Board frequently engage with shareholders and host open, ongoing dialogues around corporate governance matters, including executive compensation. Taking into account the positive support received in both 2017 and 2018 after instituting changes to the compensation program in 2016, the Compensation Committee believes the Company provides a competitive pay-for-performance package that effectively incentivizes and retains executives.

  

LOGO

Compensation Elements

During fiscal 2018, the Compensation Committee utilized findings by the Independent Consultant to determine that the Company’s executive compensation program continued to be both reasonable in relation to competitive pay levels and appropriate in supporting business objectives and a positive performance-based culture. As reflected in the charts below, variable/at risk compensation represents the majority of the total target direct compensation of our CEO and other NEOs.

 

LOGO

 

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Total target direct compensation refers to base salary, short-term incentive compensation (measured at target for the fiscal year) and long-term equity incentive compensation based on grant date fair values (measured at target for PSUs and RSUs). In determining the executive’s overall compensation, the Compensation Committee takes into account the absolute and relative value of each component and the overall mix. As with prior years, the Compensation Committee generally allocated the long-term incentive awards with 60% of the values as PSUs and 40% of the values as RSUs.

The above charts represent our fiscal 2018 total target direct compensation arrangements for our CEO and our other NEOs, including Mr. Mandel’s additional bonus opportunity tied to achieving cost synergy targets related to the integration of the CH2M acquisition, but excluding Mr. Pragada’s additional cash incentive payment received in recognition of his leadership role in the due diligence process, negotiations in connection with the CH2M acquisition and its successful closure, as Mr. Pragada’s payment was a special cash bonus and not part of his fiscal 2018 target direct compensation.

Base Salary

In setting the base salaries of our NEOs, the Compensation Committee utilizes information provided by its Independent Consultant to determine the competitiveness of base salaries compared to the industry peer group and market survey data.

The Compensation Committee also considers the fact that the Company provides limited perquisites. This stems from the Compensation Committee’s belief that focusing on the three core elements of compensation (base salary and short- and long-term incentive compensation) results in a more transparent and easier-to-administer pay system and is more consistent with the Company’s culture. For example, the Company’s currently available retirement program in the U.S. consists solely of a tax-qualified 401(k) plan with matching contributions and a non-qualified salary and bonus (including equity compensation) deferral plan that provides non-enhanced market returns. Perquisites are generally limited to financial planning and annual health assessments.

After considering market data from our peer group and other market survey information, the Compensation Committee determined that the base salaries of our CEO and CFO for fiscal 2018 would remain at the same levels as fiscal 2017. Effective December 23, 2017, Messrs. Hagen, Mandel and Pragada received base salary increases of 3.8%, 4.2% and 3.6%, respectively, to reflect their successful performance in fiscal 2017 and increased job responsibilities as a result of the CH2M acquisition.

The following table sets forth the base salaries of each of our NEOs for fiscal 2017 and fiscal 2018.

 

Named Executive  

Officer  

 

 

Fiscal 2017      

Base Salary      

 

 

Fiscal 2018      

Base Salary (1)      

 

 

Percentage      

Increase      

 

Steven J. Demetriou

 

  $1,300,000      

 

  $1,300,000      

 

  0.0%      

 

Kevin C. Berryman

 

  $750,000      

 

  $750,000      

 

  0.0%      

 

Terence D. Hagen

 

  $650,000      

 

  $675,000      

 

  3.8%      

 

Joseph G. Mandel

 

  $720,000      

 

  $750,000      

 

  4.2%      

 

Robert V. Pragada

 

  $695,000      

 

  $720,000      

 

  3.6%      

 

 

 

  (1)

Salary increases effective December 23, 2017

Short-Term Incentives

The Management Incentive Plan (MIP) continues to reinforce our commitment to profitable growth and effective cash management with specific measures and targets assigned to each participant based on his or her respective role in the organization. As described below, this plan provides for bonus payouts to eligible employees when certain Company-wide and business unit-specific target goals are achieved.

 

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For fiscal 2018, select officers and managers of the Company, including the NEOs, were eligible to participate in the MIP. As shown in the following chart, an employee’s target MIP award is calculated by multiplying (i) the employee’s annual base salary as of July 1 of the applicable fiscal year by (ii) his or her target percentage of salary. An employee’s actual MIP award amount is calculated by multiplying (i) the employee’s annual base salary as of July 1 of the applicable fiscal year, by (ii) his or her target percentage of salary, and then by (iii) the performance achievement factor.

 

 

 

Base Salary  

as of July 1,  

2018  

 

    X    

 

Target  

Percentage  

of Salary  

 

    =    

 

2018 Target  

MIP Award  

 

  

 

 

 

Base Salary  

as of July 1,  

2018  

 

    X    

 

Target  

Percentage  

of Salary  

 

    X    

 

Performance  

Achievement  

Factor  

 

    =    

 

2018 Actual  

MIP Award  

 

 

Each year, the Company establishes performance achievement factors for each participant based on his or her role in the Company. For those participants with exclusively corporate level responsibilities, such as the CEO and the CFO, their bonus opportunity for fiscal 2018 was tied entirely to company-wide metrics. For our Executive Vice President, Integration Management Office, his bonus opportunity for fiscal 2018 was tied to Company-wide metrics, with an additional bonus opportunity tied to achieving cost synergy targets related to the integration of the CH2M acquisition. For those participants who are aligned with a business unit or line of business, such as Messrs. Hagen and Pragada, 45% of their bonus opportunity for fiscal 2018 was tied to the operating metrics defined for their business unit or line of business, as applicable. These operational metrics reinforce the direct link between each leader’s contribution to the success of their business unit or line of business and their compensation. The remaining 55% of those participants’ bonus opportunity for fiscal 2018 was tied to Company-wide metrics to encourage collaboration across business unit lines to drive the Company’s overall results. During fiscal 2018, Mr. Pragada received an additional cash incentive payment in recognition of his leadership role in the due diligence process, negotiations in connection with the CH2M acquisition and its successful closure. Refer to the Summary Compensation Table for information on this additional cash incentive payment.

MIP Awards to CEO, the CFO and the Executive Vice President, Integration Management Office

For fiscal 2018, the Compensation Committee established the minimum, target and maximum performance levels under the MIP for Messrs. Demetriou, Berryman and Mandel based on the Company-wide metrics of Consolidated Operating Profit, DSO and GM in Backlog. The corresponding fiscal 2018 actual results, performance levels, relative weighting and actual performance achievement percentages are shown in the chart below. Refer to page 38 for descriptions of how the metrics are calculated.

 

Performance Metrics       

Performance Levels

 

 

2018 Actual
  Performance Level  

Achievement

(% of Payout)

 

 

Relative
  Weighting  

(%)

    
 

  2018 Actual  

Results

 

Minimum

  (25% Payout)  

 

Target

  (100% Payout)  

 

Maximum

  (200% Payout)  

 

  2018 Actual Performance  

Achievement

(% of Target)

 

 

Consolidated Operating Profit

 

 

$906.5M

 

 

$704M

 

 

$829M

 

 

$953M

 

 

162.3%

 

 

70%

 

 

113.6%

 

Consolidated DSO

 

 

62.5

 

 

65.3

 

 

61.3

 

 

59.3

 

 

77.5%

 

 

15%

 

 

11.6%

 

Consolidated GM in Backlog

 

 

$5,123M

 

 

$4,940M

 

 

$5,200M

 

 

$5,460M

 

 

77.8%

 

 

15%

 

 

11.7%

 

Total

                     

 

100.0%

 

 

136.9%

The calculation of Messrs. Demetriou’s Berryman’s and Mandel’s target MIP award and actual MIP award for fiscal 2018 is shown below, based on their target percentage of salaries of 150%, 100% and 100%, respectively.

 

Named Executive

Officer

      Base Salary as of    
July 1,  2018
    Target %    

  2018 Target MIP  

Award

 

 

Performance
Achievement
  Factor (% of Target)  

 

 

    2018 Actual MIP    

Award

 

Steven J. Demetriou

 

 

$1,300,000

 

 

150%

 

 

$1,950,000

 

 

136.9%

 

 

$2,669,990

 

Kevin C. Berryman

 

 

$750,000

 

 

100%

 

 

$750,000

 

 

136.9%

 

 

$1,026,919

 

Gary Mandel

 

 

$750,000

 

 

100%

 

 

$750,000

 

 

136.9%

 

 

$1,026,919

 

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Additional Award to the Executive Vice President, Integration Management Office

For fiscal 2018, the Compensation Committee also established minimum, target and maximum performance levels for Mr. Mandel’s additional bonus opportunity tied to achieving cost synergy targets related to the integration of the CH2M acquisition. The corresponding fiscal 2018 actual results, performance levels, relative weighting and actual performance achievement percentages are shown in the chart below.

 

Performance Metrics  

Performance Levels

 

 

2018 Actual
  Performance Level  

Achievement
(% of Payout)

 

  Relative
  Weighting  
(%)
    
  Minimum
  (25% Payout)  
  Target
  (100% Payout)  
  Maximum
  (200% Payout)  
 

  2018 Actual Performance  
Achievement
(% of  Target)

 

CH2M Net Cost Synergies

 

 

 

$50M

 

 

 

$65M

 

 

 

$80M

 

 

 

200.0%

 

 

 

100%

 

 

 

200.0%

 

The calculation of Mr. Mandel’s additional cost synergies award for fiscal 2018 is shown below. Based upon achieving cost synergies of over $80 million related to the integration of the CH2M acquisition, the maximum payout performance level, he received an additional award of $2,000,000.

 

Named Executive Officer  

Target Cost      

Synergies Award      

  Target %        

 

Performance Level        

Achievement        

(% of Target)        

 

 

  2018 Actual Cost  

  Synergies  

  Award  

 

Joseph G. Mandel

 

 

 

$1,000,000      

 

 

 

100%      

 

 

 

200%        

 

 

 

$2,000,000      

 

Awards to Other NEOs

In light of Mr. Hagen’s oversight of the Company’s Aerospace, Technology, Environmental and Nuclear (ATEN) line of business, as well as his executive role at the Company, the Compensation Committee established the minimum, target and maximum performance levels under the MIP for Mr. Hagen for fiscal 2018 based on the metrics Consolidated Operating Profit and Consolidated DSOs, as well as Operating Profit and GM in Backlog for the ATEN line of business as set forth in the chart below. The corresponding fiscal 2018 actual results, performance levels, relative weighting and actual achievement percentages are shown in the chart below.

 

Performance Metrics       

Performance Levels

 

 

2018 Actual
  Performance Level  

Achievement
(% of Payout)

 

Relative
  Weighting

(%)

    
 

  2018 Actual  

Results

 

Minimum

  (25% Payout)  

 

Target

  (100% Payout)  

 

Maximum

  (200% Payout)  

 

  2018 Actual Performance  

Achievement

(% of Target)

 

Consolidated Operating Profit

 

 

 

$906.5M

 

 

 

$704M

 

 

 

$829M

 

 

 

$953M

 

 

 

162.3%

 

 

 

40%

 

 

 

64.9%

 

 

ATEN Operating Profit

 

 

 

$323.8M

 

 

 

$263M

 

 

 

$309M

 

 

 

$356M

 

 

 

131.9%

 

 

 

30%

 

 

 

39.6%

 

 

Consolidated DSO

 

 

 

62.5

 

 

 

65.3

 

 

 

61.3

 

 

 

59.3

 

 

 

77.5%

 

 

 

15%

 

 

 

11.6%

 

 

ATEN GM in Backlog

 

 

 

$1,306M

 

 

 

$1,216M

 

 

 

$1,280M

 

 

 

$1,344M

 

 

 

140.0%

 

 

 

15%

 

 

 

21.1%

 

 

Total

 

                     

 

100.0%

 

 

 

137.2%

 

The calculation of Mr. Hagen’s target MIP award and actual MIP award for fiscal 2018 is shown below, based on his target incentive percentage of salary of 100%.

 

Named Executive
Officer
 

Base Salary as      

of July 1, 2018      

  Target %        

2018 Target MIP      

Award

 

 

Performance      

Achievement      

Factor (% of Target)      

 

 

2018 Actual MIP      

Award      

 

Terence D. Hagen

 

 

 

$675,000      

 

 

 

100%      

 

 

 

$675,000      

 

 

 

137.2%      

 

 

 

$926,303      

 

 

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In light of Mr. Pragada’s oversight of the Company’s Buildings, Infrastructure and Advanced Facilities (BIAF) line of business, as well as his executive role at the Company, the Compensation Committee established the minimum, target and maximum performance levels under the MIP for Mr. Pragada for fiscal 2018 based on the metrics Consolidated Operating Profit and Consolidated DSOs, as well as Operating Profit and GM in Backlog for the BIAF line of business as set forth in the chart below. The corresponding fiscal 2018 actual results, performance levels, relative weighting and actual achievement percentages are shown in the chart below.

 

Performance Metrics       

Performance Levels

 

 

2018 Actual
  Performance Level  

Achievement

(% of Payout)

 

 

Relative

  Weighting  

(%)

    
 

  2018 Actual  

Results

 

Minimum

  (25% Payout)  

 

Target

  (100% Payout)  

 

Maximum

  (200% Payout)  

 

  2018 Actual Performance  

Achievement

(% of Target)

 

 

Consolidated Operating Profit

 

 

 

$906.5M

 

 

 

$704M

 

 

 

$829M

 

 

 

$953M

 

 

 

162.3%

 

 

 

40%

 

 

 

64.9%

 

 

BIAF Operating Profit

 

 

 

$505.4M

 

 

 

$399M

 

 

 

$470M

 

 

 

$540M

 

 

 

150.2%

 

 

 

30%

 

 

 

45.1%

 

 

Consolidated DSO

 

 

 

62.5

 

 

 

65.3

 

 

 

61.3

 

 

 

59.3

 

 

 

77.5%

 

 

 

15%

 

 

 

11.6%

 

 

BIAF GM in Backlog

 

 

 

$2,933M

 

 

 

$2,787M

 

 

 

$2,934M

 

 

 

$3,080M

 

 

 

99.5%

 

 

 

15%

 

 

 

14.9%

 

 

Total

 

                     

 

100.0%

 

 

 

136.5%

 

The calculation of Mr. Pragada’s target MIP award and actual MIP award for fiscal 2018 is shown below, based on his target incentive percentage of salary of 100%. In addition to this MIP award, Mr. Pragada also received a separate cash incentive payment of $300,000 for his leadership role in the due diligence process, negotiations in connection with the CH2M acquisition and its successful closure.

 

Named Executive

Officer

 

Base Salary as      

of July 1, 2018      

  Target %        

2018 Target MIP      

Award      

 

 

Performance      

Achievement      

Factor (% of Target)      

 

 

2018 Actual MIP      

Award      

 

Robert V. Pragada

 

 

 

 

$720,000      

 

 

 

 

100%      

 

 

 

 

$720,000      

 

 

 

 

136.5%      

 

 

 

 

$983,118      

 

 

For purposes of calculating the payouts for the 2018 MIP awards:

 

   

Consolidated Operating Profit means total gross margin less selling, general and administrative expenses (“SG&A”) of the Company, as adjusted for special items that are unusual, non-recurring or otherwise not indicative of the Company’s normal operations and which were not anticipated in setting the original targets. Any such adjustments must be approved by the Compensation Committee. For example, such adjustments include, without limitation: (i) charges for restructurings; (ii) gains or losses on the disposal of a segment of the business or in connection with discontinued operations; (iii) charges for the impairment of goodwill or other long-lived assets; (iv) gains / losses on the sale of assets; (v) major litigation settlements and/or other judgments; (vi) the effects of changes in accounting principles, laws or regulations affecting reported results; and (vii) costs and expenses relating to acquisitions.

   

Consolidated DSO (Days Sales Outstanding) means the average of the four quarters ended September 28, 2018 of (i) accounts receivable of the Company at the end of each quarter divided by (ii) the daily sales for each quarter.

   

Operating Profit means for each line of business, total gross margin earned by such applicable line of business, as adjusted for unusual or non-recurring items as set forth above, less the SG&A for the applicable line of business and less allocated corporate SG&A expenses, including cash and equity incentive compensation.

   

GM in Backlog means for each line of business, starting Gross Margin in Backlog for such applicable line of business as adjusted for (1) new awards, (2) scope increases of new and existing work, (3) cancellations and corrections of understatements/overstatements, (4) acquisitions, and (5) the foreign exchange effect, less the Gross Margin burn for the fiscal year. Gross Margin in Backlog must follow Jacobs’ backlog rules for various contract types.

In fiscal 2018, the Compensation Committee used its discretion to approve adjustments to the levels of performance metric results to reflect the exclusion of (i) charges associated with an ATEN legal matter initiated in 2013, (ii) benefits associated with a BIAF legal matter initiated in 2009 and (iii) CH2M’s operating profit associated with the “stub period” of CH2M ownership from the date of acquisition on December 18, 2017 through the end of CH2M’s fiscal year on December 31, 2017.

Achieving minimum performance levels result in a payout of 25% of target; target performance levels result in a payout of 100% of target; and maximum performance levels result in a payout of 200% of target. Actual award payments are calculated by linear interpolation for achievement of goals other than those specified.

 

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The payment of bonuses for fiscal 2018 to the NEOs was conditioned upon the Company achieving a performance goal of $100 million of net earnings in an effort to be fully deductible as performance-based compensation under Section 162(m) of the Internal Revenue Code (the “Code”). This goal was met, thus the participating NEOs became entitled to receive a bonus payment equal to 200% of their target bonus, subject to the complete discretion of the Compensation Committee to reduce the bonus payment to a lesser amount. The Compensation Committee exercised its discretion to reduce bonus amounts in accordance with the methodology described above.

Equity-Based Compensation

The Compensation Committee believes that long-term equity incentives should comprise the majority of compensation for the Company’s senior management, including the NEOs. In deciding upon the design and magnitude of long-term incentives, the Compensation Committee is guided by several factors, including alignment with shareholder interests, ease of understanding by participants, and retentiveness. The Compensation Committee also takes into account market data, information and recommendations from the Independent Consultant, and information provided by management, including recommendations by the CEO with respect to the magnitude of equity incentives for executive officers other than himself. Other than off-cycle awards for new hires, promotions or retention grants, the Compensation Committee generally awards equity incentives to NEOs and senior management in the first 90 days of each fiscal year.

To determine the dollar value of awards to be granted to the NEOs and consistent with its prior process for determining the magnitude of awards, the Compensation Committee examined data with respect to competitive grant values at the industry peer group companies. It also considered the size of the awards previously granted to the NEOs, which reflected the Compensation Committee’s previous evaluation of the magnitude of awards considered necessary in order to align the awards with competitive levels. The determination of award levels in fiscal 2018 also took into account the Compensation Committee’s review of the CEO’s performance and that of the other NEOs (and the CEO’s recommendations with respect to the other NEOs), as well as the Company’s overall performance. The Compensation Committee also took into account the increased job responsibilities of the NEOs resulting from the acquisition of CH2M.

In fiscal 2018, our NEOs’ equity-based compensation consisted of the following awards, other than Mr. Mandel who received 100% of his fiscal 2018 equity grant in RSUs:

 

 

Forms of 2018 Long-Term Incentive Grants

 

  

Weight    

 

  

Performance Metrics and Vesting Period             

 

Performance Based Restricted Stock Units (PSUs)    60%   

Performance Metrics:

-  50% EPS Growth over three-year period

-  50% ROIC over three-year period

 

Time-Based Restricted Stock Units (RSUs)

 

 

   40%

 

  

25% annual vesting over four-year period

 

A summary of the equity awards granted in fiscal 2018 to each NEO is provided below:

 

Named Executive Officer   Grant Date     PSUs Awarded (1)    

PSU  

Value  

Awarded  

 

RSUs  

Awarded  

 

RSU Value  

Awarded  

 

 

Total  

Value  

Awarded  

 

Steven J. Demetriou

 

 

11/29/2017  

 

  83,296  

 

  $5,400,080  

 

  55,529  

 

  $3,599,945  

 

  $9,000,025  

 

Kevin C. Berryman

 

 

11/29/2017  

 

  18,510  

 

  $1,200,003  

 

  12,340  

 

  $800,002  

 

  $2,000,006  

 

Terence D. Hagen

 

 

11/29/2017  

 

  15,502  

 

  $1,004,995  

 

  10,335  

 

  $670,018  

 

  $1,675,013  

 

Joseph G. Mandel

 

 

11/29/2017  

 

  0  

 

  $0  

 

  26,223  

 

  $1,700,037  

 

  $1,700,037  

 

Robert V. Pragada

 

 

11/29/2017  

 

  15,734  

 

  $1,020,035  

 

  10,489  

 

  $680,002  

 

  $1,700,037  

 

 

(1)

Represents the target payout shares as described under “Executive Compensation—2018 Grants of Plan Based Awards” below.

 

 

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Fiscal 2018 Equity Awards

Performance Stock Units (PSUs)

Fiscal 2018 PSU awards will vest, following a three-year performance period (starting on the first day of fiscal 2018 and ending on the last day of fiscal 2020), based on the following performance metrics:

 

  -  

50% of the PSUs will vest based on the Company’s achievement of a certain EPS Growth Rate over a three-year performance period (the “EPS Based PSU Awards”); and

  -  

50% of the PSUs will vest based on the Company’s achievement of a certain ROIC during the same three-year performance period (the “ROIC Based PSU Awards”).

Earnings Per Share (EPS) Based PSU Awards:

The Compensation Committee believes that EPS is a key indicator of a company’s performance for shareholders. It is the predominant metric used in performance-based equity awards of the Company’s peers and its use is intended to improve the focus on profitability, growth and financial discipline, while aligning the interests of the Company’s senior executives with the long-term interests of shareholders.

The number of EPS Based PSU Awards that will vest (and the corresponding number of shares that will be issued at the end of the three-year performance period) is based on the Company’s EPS Growth Rate measured at the end of each of fiscal 2018, 2019 and 2020, in each case measured from fiscal 2017 EPS. Amounts are locked in annually but not distributed until after the three-year performance period. This calculation is shown in the following charts:

 

 

1/3 of Target

EPS Based

PSUs

      X      

EPS Growth Performance

Multiplier for EPS

Growth Rate in fiscal

2018 over fiscal 2017

 

      =      

First Year EPS

Locked-In

  

 

 

Average Adjusted

EPS

Growth - Fiscal Year

2017-2018

 

 

EPS Growth Performance

Multiplier

 

  
 

 

Less than 10.7%

 

 

 

0%

 

  
 

10.7%

 

 

50%

 

  
 

15.7%

 

 

100%

 

  
 

20.7%

 

 

200%

 

  

 

 

2/3 of Target

EPS Based PSUs

      X      

 

EPS Growth Performance

Multiplier for Compound

EPS Annual Growth Rate

for fiscal 2019 over fiscal

2017

 

      -      

Number

of First

Year EPS

Shares

Locked-In

 

      =      

Second Year

EPS Shares

Locked-In

  

 

 

Average Adjusted

Compound EPS

Growth - Fiscal Year

2017-2019

 

 

EPS Growth

Performance

Multiplier

 

  
 

Less than 12.1%

 

 

0%

 

  
 

12.1%

 

 

50%

 

  
 

15.6%

 

 

100%

 

  
 

19.1%

 

 

200%

 

  

 

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Target EPS

PSUs

    X    

 

EPS Growth Performance Multiplier for Compound EPS Annual Growth Rate for

fiscal 2020 over fiscal 2017

 

    -    

Number of First

Year EPS Shares

Locked-In and number

of Second Year

EPS Shares

Locked-In

 

    =    

Total number

of Shares

Earned and

to be issued

  

 

 

Average Adjusted

Compound EPS

Growth - Fiscal Year

2017-2020

 

 

EPS Growth

Performance

Multiplier

 

  
 

Less than 11.7%

 

 

0%

 

  
 

11.7%

 

 

50%

 

  
 

13.7%

 

 

100%

 

  
 

15.7%

 

 

200%

 

  

The “EPS Growth Performance Multiplier” is determined by reference to the tables above based upon the Company’s EPS Growth Rate or Compound Annual EPS Growth Rate over the relevant fiscal periods. The Compensation Committee set these metrics based on the Company’s plan at the time of grant.

EPS” for any fiscal period is computed by dividing Adjusted Net Earnings by the weighted average number of shares of the Company’s common stock outstanding during the period.

Adjusted Net Earnings” means the net earnings attributable to the Company as reported in its consolidated financial statements for such period determined in accordance with GAAP (A) as may be adjusted to eliminate the effects of (i) costs associated with restructuring and integration activities, regardless of whether the Company discloses publicly the amount of such restructuring and integration costs or the fact that the Company engaged in restructuring and integration activities during the periods restructuring costs were incurred; and (ii) gains or losses associated with discontinued operations, as determined in accordance with GAAP, but limited to the first reporting period an operation is determined to be discontinued and all subsequent periods (i.e., there will be no retroactive application of the adjustment); and (B) as adjusted for all gains or losses associated with events or transactions that the Compensation Committee has determined are unusual in nature, infrequently occurring and otherwise not indicative of the Company’s normal operations, and therefore, not indicative of the underlying Company performance. For these purposes, such events or transactions could include: (i) settlements of claims and litigation, (ii) disposals of operations including a disposition of a significant amount of the Company’s assets, (iii) losses on sales of investments, (iv) changes in laws and/or regulations, and (v) acquisitions.

Return on Invested Capital (ROIC) Based PSU Awards:

The Compensation Committee believes that ROIC is an effective means of linking executive compensation to value creation that holds management accountable for the efficient use of capital, and has used this performance metric for fiscal 2017 and 2018 awards. Prior to fiscal 2017, the Company granted awards that vested based on the Company’s total shareholder return (or TSR) compared to that of its peer group over a three-year period.

 

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The number of ROIC Based PSU Awards that will vest (and the corresponding number of shares to be issued) is based on the Company’s average ROIC measured at the end of the three-year performance period. The calculation is shown in the following charts:

 

      Target ROIC         

Based    

Awards    

    X    

 

ROIC

Performance

Multiplier for ROIC

  from fiscal 2018 to  

fiscal 2020

    =    

3-Year ROIC

Shares

 

 

   

Average ROIC - Fiscal        

Year 2018-2020        

 

  

ROIC    

Performance    

Multiplier    

 

    
 

 

Less than 7.8%        

 

  

 

0%    

 

  
 

 

7.8%        

 

  

 

50%    

 

  
 

 

8.8%        

 

  

 

100%    

 

  
 

 

9.8%        

 

  

 

200%    

 

  

The “Return on Invested Capital” (or ROIC) for any fiscal period is computed by dividing Adjusted Net Earnings by the average invested capital on the first day of fiscal 2018 and on the last day of fiscal 2020. Invested capital is the sum of equity plus long-term debt less cash and cash equivalents.

Adjusted Net Earnings” means the net earnings attributable to the Company as reported in its consolidated financial statements for such period determined in accordance with GAAP (A) as may be adjusted to eliminate the effects of (i) costs associated with restructuring and integration activities, regardless of whether the Company discloses publicly the amount of such restructuring and integration costs or the fact that the Company engaged in restructuring and integration activities during the periods restructuring costs were incurred; and (ii) gains or losses associated with discontinued operations, as determined in accordance with GAAP, but limited to the first reporting period an operation is determined to be discontinued and all subsequent periods (i.e., there will be no retroactive application of the adjustment); and (B) as adjusted for all gains or losses associated with events or transactions that the Compensation Committee has determined are unusual in nature, infrequently occurring and otherwise not indicative of the Company’s normal operations, and therefore, not indicative of the underlying Company performance. For these purposes, such events or transactions could include: (i) settlements of claims and litigation, (ii) disposals of operations including a disposition of a significant amount of the Company’s assets, (iii) losses on sales of investments, (iv) changes in laws and/or regulations, and (v) acquisitions.

Restricted Stock Unit (RSU) Grants:

The 2018 RSU awards vest ratably over a four-year period, other than RSUs granted to Mr. Mandel, which vest ratably over a two-year period due to the short-term nature of Mr. Mandel’s role overseeing the integration of the CH2M acquisition.

Vesting Provisions Applicable to Fiscal 2018 Equity Grants:

To incentivize senior management during periods of uncertainty leading up to the CH2M acquisition and subsequent integration, all equity awards granted in fiscal 2018, including equity awards granted to the NEOs, provide for accelerated vesting in the event of an involuntarily termination of employment without cause as follows:

For the RSUs, upon an involuntary termination of employment without cause prior to the first annual vesting date, 50% of the RSUs will vest at the time of separation, and upon an involuntary termination of employment without cause on or after the first vesting date, the remaining outstanding and unvested RSUs will vest at the time of separation. For the PSUs, upon an involuntary termination of employment without cause prior to the final vesting date, a pro-rated portion of PSUs (based on the number of days during the performance period that the

 

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employee was employed by the Company) shall remain outstanding and eligible to vest based on the performance vesting criteria through the end of the applicable performance period, and the remainder of the award will be forfeited at the time of separation for no consideration.

Dividend Equivalent Rights

All RSU awards are entitled to accumulated dividend equivalent rights that are subject to the same vesting, payment and other terms and conditions as the underlying award to which the dividend equivalent relates. The crediting of dividend equivalents is intended to treat the equity award holders consistently with shareholders and preserve the equity-based incentives intended by the Company when the awards were granted. The dividend equivalents pay in cash upon the vesting and settlement of the underlying RSUs.

Long-Term Incentive Plan Metrics and Performance Attainment – PSU with Performance Periods Ending in Fiscal 2018

Four of our NEOs served as executive officers of the Company in fiscal 2015 and received grants of PSUs at that time: Messrs. Demetriou, Berryman, Hagen and Mandel (Mr. Pragada was not employed by the Company in fiscal 2015). These awards were based on a three-year performance period that leveraged both short- and long-term goals. If certain thresholds of performance were not attained, then no payout was earned for the award. The performance metrics associated with these PSUs were weighted at 100% Net Earnings Growth (“NEG”), with the performance period beginning on the first day of the third quarter of fiscal 2015 and ending on the last day of the second quarter of fiscal 2018.

2015 Net Earnings Growth (NEG) Based PSU Awards

The method of calculating the number of shares underlying the PSUs based on NEG (the “NEG Based Awards”) granted in fiscal 2015 that vested is summarized below.

The total number of units awarded accumulated over the three-year performance period in three segments:

   

One-third of award is based on NEG in Year 1 (Q3 FY2015 – Q2 FY2016);

 

   

One-third of award is based on average NEG in Years 1 – 2 (Q3 FY2015 – Q2 FY2017); and

 

   

One-third of award is based on average NEG in Years 1 – 3 (Q3 FY2015 – Q2 FY2018).

The first two years of the program are considered a “lock in” period, meaning it was possible to “lock in” vesting of up to two-thirds of the total potential award based on performance during that period. The following NEG performance vesting schedule was approved by the Compensation Committee in fiscal 2015:

 

 

Average NEG

in Each Segment

of Performance Period

  

NEG Performance    

Multiplier    

 

Less than 5%

 

  

 

0%    

 

 

5.0%

 

  

 

50%    

 

 

10.0%

 

  

 

100%    

 

 

15.0%

 

  

 

150%    

 

 

20% or greater

 

  

 

200%    

 

The NEG Performance Multiplier was determined by linear interpolation for growth rates between 5% and 10%, between 10% and 15% and between 15% and 20%.

 

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The following chart summarizes the Company’s NEG during the performance period and the resulting vesting under the approved performance criteria:

 

    

 

Performance Period

 

  

 

Net Earnings

(in thousands)

 

  

 

Cumulative

Avg. NEG
Growth

 

   

 

NEG Performance

Multiplier

 

 

 

 Baseline Earnings

 

 

 

Q3 FY14 - Q2 FY15

 

  

 

$419,960

 

      

 

 Year 1

 

 

 

Q3 FY15 - Q2 FY16

 

  

 

$329,915

 

  

 

 

 

 

-21.4%

 

 

 

 

 

 

 

 

 

0.00%

 

 

 

 

 

 Year 2

 

 

 

Q3 FY16 - Q2 FY17

 

  

 

$366,520

 

  

 

 

 

 

-5.2%

 

 

 

 

 

 

 

 

 

0.00%

 

 

 

 

 

 Year 3

 

 

 

Q3 FY17 - Q2 FY18

 

  

 

$462,469

 

  

 

 

 

 

5.3%

 

 

 

 

 

 

 

 

 

52.8%

 

 

 

 

 

Total NEG   

Based Awards  

Granted   

   X    

 

3 Year Avg. 

NEG 

Performance 

Multiplier 

   =    

52.8% of Shares to

be Distributed

As a result of the NEG performance over the three-year performance period, Messrs. Demetriou, Berryman, Hagen and Mandel received 52.8% of the shares underlying the NEG Based Awards, as shown in the following table:

 

 

Participant Name

 

 

 

Vesting Date  

 

 

 

NEG Based
Awards Granted  

 

 

 

% Target Earned  

 

 

 

Shares Earned  

 

 

 

Shares Not Earned  

 

 Steven J. Demetriou

  06/08/2018     16,065   52.8%   8,482   7,583

 Kevin C. Berryman

  06/08/2018     9,500   52.8%   5,016   4,484

 Terence D. Hagen

  06/08/2018     9,500   52.8%   5,016   4,484

 Joseph G. Mandel

  06/08/2018     9,500   52.8%   5,016   4,484

Grant Process

The Compensation Committee has delegated certain limited authority to the CEO to make equity grants in accordance with the rules established by the Compensation Committee for non-executive officers throughout the year. As soon as administratively practicable after a new hire, promotion, or retention warrants an equity grant, the CEO reviews and approves the award. All awards are granted when the CEO takes action. The Compensation Committee periodically receives reports of the CEO’s actions. In fiscal 2018, no awards were made on a date other than when the Compensation Committee met or following approval by the CEO pursuant to delegated authority.

Other Benefits and Policies

Benefits Programs

With the exception of the Company’s Executive Severance Plan, Executive Deferral Plan (“EDP”), which is generally available to most of senior management, and certain expatriate arrangements, the Company provides executives with the same benefit plans offered to U.S. staff employees.

401(k) Plan: During fiscal 2018, the CEO and other NEOs were eligible to participate in the Company’s 401(k) plan, the same plan offered to the Company’s full-time employees in the United States. The plan provides a match by the Company equal to 50% of the first 6% of eligible pay (currently $275,000). None of the NEOs participated in any defined benefit retirement or supplemental retirement benefit plan.

Employee Stock Purchase Plans: The Company has qualified employee stock purchase plans in which all employees meeting certain minimum eligibility requirements in certain countries are eligible to participate. The Company adopted a safe-harbor plan design in 2006 that provides for a 5% discount from the closing price of a share of common stock at the end of each purchase period. The safe-harbor plan results in no accounting cost to the Company.

 

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Non-qualified Executive Deferral Plan (EDP): Select employees, including the NEOs, meeting certain compensation minimums may elect to participate in the Company’s EDP whereby a portion of salary and bonus (including equity compensation) is deferred and paid to the employees at some future date including upon retirement or death. Participant deferrals are credited with earnings and losses based upon the actual experience of the deemed investments selected by participants with equity compensation deferrals generally being credited with earnings and losses based on the actual experience of the Company’s common stock. See “Executive Compensation—Non-qualified Deferred Compensation” below for a further description of the EDP.

Executive Severance Plan: Recognizing the prevalence of severance plans among our peers and the need to attract and retain talented executives, in fiscal 2018 the Company adopted an Executive Severance Plan that provides severance benefits to certain key executives, including the NEOS, designated by the Compensation Committee from time to time in the event of either (i) a termination of employment by the Company other than for cause that is unrelated to a change of control or (ii) a termination of employment by the Company other than for cause or by the participant for good reason, in each case during the two-year period following a change of control.

Perquisites

Our NEOs are eligible for the same benefits as those offered to staff employees, including relocation benefits. Executives may have spousal travel paid for by the Company only when it is for an approved business purpose, in which case a related tax gross-up is provided. NEOs are also provided with financial planning assistance and annual health assessment benefits.

The Company leases a private aircraft to allow certain executive officers, primarily the CEO, to safely and efficiently travel for business purposes around the world. Use of a private aircraft provides a confidential and highly productive environment for executive officers to conduct business while traveling. We do not allow personal usage of the private aircraft at the Company’s expense. Incidental travel by family members of an executive officer in connection with such executive’s business travel is permitted so long as the executive reimburses the Company for the cost of such travel.

Payments Upon Termination or Change in Control

Executive Severance Plan: As described above, the Company adopted an Executive Severance Plan in fiscal 2018 that provides the following severance benefits to certain key executives, including the NEOs (with certain exceptions for Mr. Mandel, as described below), in the event of either (i) a qualifying involuntary termination of employment that is unrelated to a change in control or (ii) a qualifying termination of employment during the two-year period following a change of control. Payments under this plan are conditioned upon the receipt of a customary waiver and general release of claims from the executive. In addition, the executives will be subject to restrictive covenants, including non-disclosure of confidential information, non-disparagement restrictions and 12-month non-competition and non-solicitation obligations. Payments under this plan do not include any tax gross-ups.

 

   

Non-Change in Control Severance Benefits—In the event of a termination of the participant’s employment by the Company other than for cause (as defined in the plan), the participant will be entitled to receive the following benefits: (i) a cash payment equal to 1.5 times (for the CEO) or 1 times (for the other NEOs with the exception of Mr. Mandel as described below, and covered executives) the sum of the participant’s (x) base salary and (y) target annual incentive award; and (ii) a cash payment equal to 1.5 times (for the CEO) or 1 times (for the other NEOs and covered executives) the sum of (x) the annual COBRA premium for continued participation in the Company’s group health plans and (y) the annual fee for continued receipt of financial advisory services. In addition, the participant’s unvested and outstanding equity awards that are scheduled to vest within the nine month period following the date of termination will continue to vest in accordance with their original vesting schedule.

 

   

Change in Control Severance Benefits—In the event of a termination of the participant’s employment by the Company other than for cause or by the participant for good reason (as defined in the Plan), in each case within the two year period after a change in control (as defined in the Executive Severance Plan), the participant will be entitled to receive the following benefits: (i) a cash payment equal to 2 times (for the CEO) or 1 times (for the other NEOs and covered executives) the sum of the participant’s (x) base

 

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salary and (y) target annual incentive award; and (ii) a cash payment equal to the participant’s target annual incentive award, prorated based on the number of days the participant was employed during the fiscal year of termination; and (iii) a cash payment equal to 2 times (for the CEO) or 1 times (for the other NEOs and covered executives) the sum of (x) the annual COBRA premium for continued participation in the Company’s group health plans and (y) the annual fee for continued receipt of financial advisory services. In the event such termination occurs, unvested and outstanding equity awards are governed by the Stock Incentive Plan as described below.

Employment Agreements: During fiscal 2018, the Company was party to an employment agreement with Mr. Mandel, which was entered into in connection with the completion of a transaction pursuant to which the Company acquired Mr. Mandel’s former employer. This employment agreement provided for benefits in the event of termination of employment that is not in connection with a change in control. Under this employment agreement, Mr. Mandel was entitled to a severance payment equal to 12 months of base salary and the continuation costs of 12 months of COBRA premiums upon a termination by the Company without cause (as defined in the employment agreement), conditioned upon his execution and non-revocation of a general release in favor of the Company. Mr. Mandel participated in the Executive Severance Plan for benefits in the event of termination of employment in connection with a change in control, as described above.

On November 20, 2018, the Company entered into a Retirement Transition Agreement with Mr. Mandel. The Retirement Transition Agreement supersedes and replaces Mr. Mandel’s employment agreement with the Company and terminates his participation in the Executive Severance Plan for benefits in the event of a termination of employment in connection with a change in control. The Retirement Transition Agreement, which contains a general release in favor of the Company, provides that effective April 1, 2019, Mr. Mandel will begin transitioning to his retirement from the Company effective December 31, 2019 (the “Transition Period”). During the Transition Period, Mr. Mandel will continue to serve as a special advisor to Jacobs’ Chief Executive Officer on a modified, full-time basis. During this Transition Period, Mr. Mandel will receive the equivalent of 12 months base salary, plus he will maintain his health and welfare benefits. Provided Mr. Mandel is not involuntarily terminated with cause, as defined in the Retirement Transition Agreement, and he executes a supplemental general release agreement upon his retirement date, Mr. Mandel will also receive a termination payment of $250,000. The Retirement Transition Agreement provides discretion to the Company to increase the termination payment if determined appropriate by the Company, in its sole discretion, based on an evaluation of the services performed by Mr. Mandel during the Transition Period. Under the Retirement Transition Agreement, Mr. Mandel is not eligible to participate in the Company’s fiscal 2019 long term incentive plans or Management Incentive Plan.

Stock Incentive Plan: Consistent with all participants in the 1999 Stock Incentive Plan, as amended, NEOs may be entitled to prorated vesting at retirement of PSUs granted during fiscal 2016 and thereafter. In the case of a participant whose employment is terminated in the event of death or Disability (as defined in the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan), the terms of our stock options and RSA and RSU grants provide for accelerated vesting while PSUs would remain outstanding and eligible to vest, with the final determination of the payout, if any, generally determined at the end of the three-year performance period. Additionally, the terms of stock options, restricted stock, RSUs and PSUs provide for potential double trigger equity acceleration upon certain terminations following a Change in Control (as defined in the Stock Incentive Plan) as a means of focusing executive officers on shareholder interests when considering strategic alternatives. If a Change in Control occurs and certain options, restricted stock, RSUs and PSUs are not assumed and continued by the acquiring or surviving corporation in the transaction (or a parent corporation thereof), then all such awards will vest immediately, with awards of restricted stock that are subject to performance-based vesting criteria and/or PSUs paid at a level based upon the Company’s actual performance as of the date of the Change in Control.

The estimated payments and benefits provided in each of the covered circumstances may be found under “Executive Compensation—Compensation Under Various Termination Scenarios” below.

Stock Ownership Guidelines

The Company has established stock ownership guidelines for its executive officers. The ownership guidelines provide that the Chair and CEO is expected to own Company stock valued at six times his annual base salary and the CFO, Presidents of Lines of Business and Executive Vice Presidents are expected to own Company stock valued at three times their annual base salary. Other senior executives, including Senior Vice

 

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Presidents, are expected to own Company stock valued at two times their annual base salary. Executive officers are restricted from selling any shares of common stock (other than the withholding of shares to satisfy tax withholding requirements) during any period in which they have not satisfied the guidelines. The Compensation Committee reviews each executive officer’s holdings with respect to these ownership guidelines each year. As of the end of fiscal 2018, all NEOs exceeded their respective guidelines. See the discussion under “Corporate Governance — Stock Ownership Guidelines” above for further information.

Insider Trading and Policy on Hedging or Pledging of Stock

The Company’s insider trading policy contains stringent restrictions on transactions in Company stock by executive officers and directors. All trades by executive officers and directors must be pre-cleared. The executive officers and directors are prohibited from any trading in puts or calls of Company stock, from engaging in short sales of Company stock, and from hedging or pledging Company stock or using it as loan collateral or as part of a margin account.

Clawback Policy

The Compensation Committee maintains a clawback policy with respect to incentive awards granted to executive officers. The Company is authorized to recover a portion of incentive awards paid within three years of a financial statement that is inaccurate due to material noncompliance with any financial reporting requirement under the securities laws. Recovery applies to the extent a lesser amount would have been paid under the restated financial statement.

Tax Considerations

Section 162(m) of the Code limits deductions for certain executive compensation in excess of $1,000,000 in any fiscal year, and prior to the recent enactment of the Tax Cuts and Jobs Act of 2017 (the “Act”), compensation that qualified as “performance-based compensation” under Section 162(m) was excluded from this limit. The Act repealed this “performance-based compensation” exclusion effective for fiscal years beginning on January 1, 2018 with limited transition relief. Prior to the Act, the Company structured its compensation arrangements to permit deductibility under Section 162(m) to the extent possible, unless the benefit of such deductibility was outweighed by the need for flexibility or the attainment of other corporate objectives in which case the Compensation Committee was prepared to enter into compensation arrangements under which payments may not be deductible under Section 162(m).

Following the Act, the Company will continue to consider tax deductibility as a factor in determining executive compensation but may not structure its compensation arrangements around deductibility. The Company believes the tax deduction limitation should not compromise its ability to design and maintain executive compensation arrangements that will attract and retain highly qualified employees and motivate them to deliver value to our customers and shareholders.

Compensation Risk Assessment

As part of its oversight, the Compensation Committee considers the impact of the Company’s executive compensation program, and the incentives created by the compensation awards that it administers, on the Company’s risk profile. The Compensation Committee also retains an independent consultant to conduct a risk assessment of the Company’s compensation policies and practices.

In addition, the Company reviews all of its compensation policies and practices, including incentive plan design and factors that may affect the likelihood of excessive risk taking, to determine whether they present a significant risk to the Company. The Company’s pay philosophy provides an effective balance in cash and equity mix, short- and long-term performance periods, financial and non-financial performance, and allows for the Compensation Committee’s discretion to make negative adjustments to payouts under the Company’s compensation plans. Further, policies to mitigate compensation-related risk include stock ownership guidelines, vesting periods on equity, insider-trading prohibitions, and independent Compensation Committee oversight.

Based on this review, both for our executive officers and all other employees, the Company and the independent compensation consultant concluded that the risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. The Compensation Committee reviewed and approved this conclusion.

 

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EXECUTIVE COMPENSATION

Summary Compensation Table

The table below summarizes the total compensation earned by the Company’s named executive officers (or NEOs) in fiscal 2018, 2017 and 2016.

 

Name & Principal

Position

 

  Fiscal  

  Year  

     Salary ($)
  (1)
     Bonus ($) 
(2)
   

Stock
 Awards ($) 

(3)

    Option
 Awards ($) (4) 
   

Non-Equity
Incentive Plan
 Compensation 

($) (5)

   

 Change in Pension 

Value and

Non-qualified
Deferred
Compensation
Earnings  ($)

 

   

All Other
 Compensation 

($) (6)

    Total ($)  

  Steven J. Demetriou

  Chair and Chief Executive

  Officer

 

    2018       1,300,000             9,000,025             2,669,990             73,673       13,043,688  
    2017       1,300,000             7,571,763             2,160,202             113,946       11,145,911  
   

 

2016

 

 

 

   

 

1,300,000

 

 

 

   

 

 

 

 

   

 

5,252,561

 

 

 

   

 

1,274,661

 

 

 

   

 

1,575,600

 

 

 

   

 

 

 

 

   

 

94,591

 

 

 

   

 

9,497,413

 

 

 

  Kevin C. Berryman

  Chief Financial Officer

    2018       750,000             2,000,006             1,026,919             52,589       3,829,514  
    2017       750,000             1,716,332             830,847             104,479       3,401,658  
   

 

2016

 

 

 

   

 

750,000

 

 

 

   

 

875,000

 

 

 

   

 

1,313,194

 

 

 

   

 

318,669

 

 

 

   

 

606,351

 

 

 

   

 

 

 

 

   

 

165,831

 

 

 

   

 

4,029,045

 

 

 

  Terence D. Hagen

  President, Aerospace,

  Technology, Environmental

  and Nuclear (ATEN)

    2018       668,269             1,675,013             926,303             112,164       3,381,749  
    2017       637,711             1,463,947             684,633             19,552       2,805,843  
    2016       620,414       425,000       1,025,914       248,958       615,290             68,941       3,004,517  
                   

  Joseph G. Mandel

  Executive Vice President,

  Integration Management Office 

    2018       745,388             1,700,037             3,026,919             186,690       5,659,035  
    2017       710,988             1,716,332             747,494             12,842       3,187,656  
   

 

2016

 

 

 

   

 

699,996

 

 

 

   

 

375,000

 

 

 

   

 

1,313,194

 

 

 

   

 

318,669

 

 

 

   

 

337,891

 

 

 

   

 

 

 

 

   

 

35,507

 

 

 

   

 

3,080,257

 

 

 

  Robert V. Pragada

  President, Buildings,

  Infrastructure and Advanced

  Facilities (BIAF)

    2018       713,269       300,000       1,700,037             983,118             43,310       3,739,735  
    2017       684,231       350,000       1,463,947             925,361             38,151       3,461,690  
    2016       428,365       500,000       2,068,349       260,000       566,743                   3,823,457  
                                                                       

 

 

  (1)

Consists of base salary earned during the fiscal year including any time off with pay. Mr. Pragada began employment with the Company on February 1, 2016 with a starting annual salary of $675,000. In fiscal 2016, Mr. Pragada earned a pro-rata portion of his salary based on his start date.

  (2)

In fiscal 2018, the $300,000 for Mr. Pragada represents a bonus awarded in recognition of his leadership role in the due diligence process, negotiations in connection with the CH2M acquisition and its successful closure. In fiscal 2017, the $350,000 for Mr. Pragada represents a portion of his hiring bonus in addition to the $500,000 he received in fiscal 2016. In fiscal 2016, Messrs. Berryman, Mandel and Hagen received cash transition bonuses of $375,000, $375,000 and $425,000, respectively, to ensure ongoing stability and continuity of leadership during the CEO transition period that began in fiscal 2015. For Mr. Berryman, the $875,000 also consists of the portion of his hiring bonus received in fiscal 2016 in the amount of $500,000.

  (3)

Represents the grant date fair value of stock awards granted under the Stock Incentive Plan in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation (“FASB ASC Topic 718”). Please refer to Note 2, Significant Accounting Policies, of Notes to Consolidated Financial Statements included in the Company’s 2018 Annual Report on Form 10-K for a discussion of the assumptions used to calculate these amounts. For the fiscal 2018 amounts, this column reflects the combined value of RSUs and PSUs granted in November 2017 (except for Mr. Mandel, who received RSUs only). At the highest level of performance, the value of such fiscal 2018 PSUs on the grant date would be: $10,800,159 for Mr.Demetriou; $2,400,007 for Mr. Berryman; $2,009,989 for Mr. Hagen; and $2,040,070 for Mr. Pragada. At the highest level of performance, the value of such fiscal 2017 PSUs on the grant date would be: $9,000,174 for Mr.Demetriou; $2,040,089 for Mr. Berryman; $1,740,138 for Mr. Hagen; $2,040,089 for Mr. Mandel; and $1,740,138 for Mr. Pragada. At the highest level of performance, the value of such fiscal 2016 PSUs on the grant date would be: $6,918,816 for Mr.Demetriou; $1,729,742 for Mr. Berryman; $1,351,328 for Mr. Hagen; $1,729,742 for Mr. Mandel; and $1,407,491 for Mr. Pragada.

  (4)

Represents the grant date fair value of options granted (adjusted, however, to exclude the effects of estimated forfeitures) under the Stock Incentive Plan in accordance with FASB ASC Topic 718. Please refer to Note 2, Significant Accounting Policies, of Notes to Consolidated Financial Statements included in the Company’s 2018 Annual Report on Form 10-K for a discussion of the assumptions used to calculate these amounts.

  (5)

Represents the annual incentive awards earned in each fiscal year, as determined by the Compensation Committee. Also represents the additional incentive award earned by Mr. Mandel in 2018 for achieving the cost synergy target related to the integration of the CH2M acquisition. See “Compensation Discussion and Analysis—Compensation Elements—Short-Term Incentives” for a description of non-equity incentive plan compensation is determined for the NEOs.

 

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  (6)

In fiscal 2018, all NEO’s received a 401(k) Company match of $7,950. Additionally, for fiscal 2018, Mr. Demetriou received $49,611 in dividend payments on unvested RSAs and RSUs at the time of vesting, $288 for basic life insurance premiums paid for by the Company, $2,140 for Mr. Demetriou’s spouse’s portion of airfare for a business trip and $884 for the associated tax gross-up, as well as $16,000 for financial planning assistance and $4,475 for an annual health assessment. For fiscal 2018, Mr. Berryman received $7,754 in dividend payments on unvested RSAs and RSUs at the time of vesting, $1,080 for basic life insurance premiums paid for by the Company, $12,299 for Mr. Berryman’s spouse’s portion of business travel and meals and $4,187 for the associated tax gross-up as well as $16,000 for financial planning assistance and $5,058 for an annual health assessment. For fiscal 2018, Mr. Hagen received $3,457 in dividend payments on unvested RSAs and RSUs at the time of vesting, $945 for basic life insurance premiums paid for by the Company, $897 for Mr. Hagen’s spouse’s portion of business travel and $289 for the associated tax gross-up, $16,000 for financial planning assistance and $4,000 for an annual health assessment and $80,110 cash-pay-out of accrued time off in excess of the Company’s limit. For fiscal 2018, Mr. Mandel received $4,267 in dividend payments on unvested RSAs and RSUs at the time of vesting, $1,037 for basic life insurance premiums paid for by the Company, $16,000 for financial planning assistance, $752 for Mr. Mandel’s spouse’s portion of airfare for a business trip and $283 for the associated tax gross-up and $75,064 cash-pay-out of accrued time off in excess of the Company’s limit, as well as $83,077 for selling unused paid time off. For fiscal 2018, Mr. Pragada, received $12,352 for dividend payments on unvested RSAs and RSUs at the time of vesting, $1,037 for basic life insurance premiums paid for by the Company, $1,904 for car rental and interim living related to his relocation to Dallas and $716 for the associated tax gross-up, and $16,000 for financial planning assistance and $4,835 for an annual health assessment.

Narrative Disclosure to Summary Compensation Table

Payment of Dividends and Dividend Equivalent Rights

In fiscal 2017, the Company commenced paying a quarterly cash dividend of $0.15 per share and continued this policy through fiscal 2018. Holders of RSAs are entitled to receive such cash dividends unless and until the holder forfeits the shares of common stock underlying the RSAs pursuant to the terms of the relevant award agreement.

With respect to RSUs, if the Company pays a cash dividend on its outstanding common stock, then each holder of RSUs is credited with a dollar amount equal to (i) the per-share cash dividend, multiplied by (ii) the total number of RSUs held by such individual on the record date for that dividend. These are referred to as Dividend Equivalents. Dividend Equivalents vest on the same schedule as the RSU to which they relate and will be paid to the award holder in cash at the same time the share of common stock (or, in the case of cash-settled RSUs, the cash) underlying the RSU is delivered to the award holder.

 

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2018 Grants of Plan Based Awards

The table below summarizes all grants of plan based awards to the NEOs in fiscal 2018:

 

           

 

 Estimated Future Payouts Under Non- 
Equity Incentive Plan Awards  (1)

 

 

 

Estimated Future Payouts Under
Equity Incentive Plan Awards (2)

 

   

All Other
Stock
Awards:
Number of
Shares of
Stock or Units
(#) (3)

 

 

 

All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)

 

 

Exercise
or Base
Price of
Option
Awards
($/sh)

 

 

Grant Date
Fair Value
of Stock
and
Option
Awards (6)

 

Name

 

 

Grant Date

 

   

Threshold
($)

 

 

Target ($)

 

 

Maximum ($)

 

 

Threshold
(#)

 

 

Target (#)

 

   

Maximum
(#)

 

 

 Steven J. Demetriou

    11/29/2017     -   -   -   -   -     -     55,529   -   -   3,599,945
      11/29/2017     -   -   -   20,824   41,648     (4)     83,296     (4)     -   -   -   2,700,040
      11/29/2017     -   -   -   20,824   41,648     (5)     83,296     (5)     -   -   -   2,700,040
      487,500

 

  1,950,000

 

  3,900,000

 

                   

 Kevin C. Berryman

    11/29/2017     -   -   -   -   -     -     12,340   -   -   800,002
      11/29/2017     -   -   -   4,627   9,255     (4)     18,510     (4)     -   -   -   600,002
      11/29/2017     -   -   -   4,627   9,255     (5)     18,510     (5)     -   -   -   600,002
      187,500

 

  750,000

 

  1,500,000

 

                   

 Terence D. Hagen

    11/29/2017     -   -   -   -   -     -     10,335   -   -   670,018
      11/29/2017     -   -   -   3,875   7,751     (4)     15,502     (4)     -   -   -   502,497
      11/29/2017     -   -   -   3,875   7,751     (5)     15,502     (5)     -   -   -   502,497
      168,750

 

  675,000

 

  1,350,000

 

                   

 Joseph G. Mandel

    11/29/2017     -   -   -   -   -     -     26,223   -   -   1,700,037
      187,500   750,000   1,500,000                    
        1,000,000

 

  2,000,000

 

                   

 Robert V. Pragada

    11/29/2017     -   -   -   -   -     -     10,489   -   -   680,002
      11/29/2017     -   -   -   3,933   7,867     (4)     15,734     (4)     -   -   -   510,018
      11/29/2017     -   -   -   3,933   7,867     (5)     15,734     (5)     -   -   -   510,018
            180,000

 

  720,000

 

  1,440,000

 

                                           

 

  (1)

Amounts represent the 2018 projected award under the Management Incentive Plan (or MIP) based on the Company’s internal plan at the start of fiscal 2018. With respect to Mr. Mandel, the amount also includes an incentive arrangement based on the net cost synergies related to the CH2M acquisition. See “Compensation Discussion and Analysis—Compensation Elements—Short-Term Incentives” above for a description of the MIP and the manner in which bonuses are computed as well as Mr. Mandel’s additional incentive arrangement.

  (2)

Amounts represent the threshold, target and maximum payout shares of awards of PSUs granted under the Stock Incentive Plan in fiscal 2018.

  (3)

Represents the RSUs granted under the Stock Incentive Plan.

  (4)

Represents the threshold, target and maximum payout shares of the grants of the EPS Based Awards that each NEO could earn under the Stock Incentive Plan. The number of shares ultimately issued, which could be greater or less than target, will be based on achieving specific performance conditions. Please refer to “Compensation Discussion and Analysis—Compensation Elements—Equity Based Compensation—Fiscal 2018 Equity Awards—EPS Based Awards” for a discussion of how the number of shares ultimately issued will be determined.

  (5)

Represents the threshold, target and maximum payout shares of the grants of the ROIC Based Award that each NEO could earn under the Stock Incentive Plan. number of shares ultimately issued, which could be greater or less than target, will be based on achieving specific performance conditions. Please refer to “Compensation Discussion and Analysis—Compensation Elements—Equity Based Compensation—Fiscal 2018 Equity Awards” for a discussion of how the number of shares ultimately issued will be determined.

  (6)

Represents the grant date fair value of RSUs and PSUs granted (assuming target level of shares) under the Stock Incentive Plan computed in accordance with FASB ASC Topic 718. The grant date fair value for the November 29, 2017, award was $64.83. Please refer to Note 2, Significant Accounting Policies, of Notes to Consolidated Financial Statements included in the Company’s 2018 Annual Report on Form 10-K for a discussion of the assumptions used to calculate these amounts. See “—Narrative Disclosure to Summary Compensation Table and 2018 Grants of Plan Based Awards Table—Payment of Dividends and Dividend Equivalent Rights” below and “Compensation Discussion and Analysis—Compensation Elements—Equity-Based Compensation—Dividend Equivalents” for more information regarding Dividend Equivalents.

 

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Outstanding Equity Awards of NEOs at 2018 Fiscal Year-End

 

           

Option Awards

 

          

Stock Awards

 

 

Name

 

       

 

Number of Securities
Underlying Unexercised
Options(1)

   

Option
Exercise
Price
($)(2)

 

   

Option
Expiration
Date

 

         

Number Of
Shares Or
Units Of
Stock That
Have Not
Vested
(#)(3)

 

   

Market Value
Of Shares Or
Units Of
Stock That
Have  Not
Vested
($)(4)

 

   

Equity Incentive
Plan Awards:
Number Of
Unearned
Shares, Units Or
Other  Rights
That Have Not
Vested
(#)(5)

 

   

Equity Incentive
Plan Awards:
Market Or Payout
Value Of Unearned
Shares, Units  Or
Other Rights That
Have Not Vested
(#)(6)

 

 
 

Grant
Date

 

   

Exercisable
#

 

   

Unexercisable

#

 

 

 Steven J. Demetriou

    8/17/2015       76,694       25,565       43.94       8/17/2025               -  
      11/19/2015       49,369       49,370       42.74       11/19/2025         14,975       1,145,588       44,923       6,873,219  
      11/19/2015                     44,923       5,154,914  
      11/16/2016                 38,377       2,935,841       38,377       5,871,681  
      11/16/2016                     38,377       5,871,681  
      11/29/2017                 55,529       4,247,969       41,648       6,372,144  
     

 

11/29/2017

 

 

 

                 

 

41,648

 

 

 

   

 

6,372,144

 

 

 

 Kevin C. Berryman

    12/30/2014       43,000       6,000       45.16       12/30/2024               -  
      5/28/2015       12,750       4,250       43.34       5/28/2025              
      11/19/2015       12,342       12,343       42.74       11/19/2025         3,744       286,416       11,231       1,718,343  
      11/19/2015                     11,231       1,288,757  
      11/16/2016                 8,700       665,550       8,699       1,330,947  
      11/16/2016                     8,699       1,330,947  
      11/29/2017                 12,340       944,010       9,255       1,416,015  
     

 

11/29/2017

 

 

 

                 

 

9,255

 

 

 

   

 

1,416,015

 

 

 

 Terence D. Hagen

    5/23/2013       12,000         55.00       5/23/2023           -        
      5/22/2014       9,000         53.17       5/22/2024              
      6/8/2015       12,750       4,250       42.65       6/8/2025              
      11/19/2015       9,642       9,643       42.74       11/19/2025         2,925       223,763       8,774       1,342,422  
      11/19/2015                     8,774       1,006,817  
      11/16/2016                 7,420       567,630       7,420       1,135,260  
      11/16/2016                     7,420       1,135,260  
      11/29/2017                 10,335       790,628       7,751       1,185,903  
     

 

11/29/2017

 

 

 

                 

 

7,751

 

 

 

   

 

1,185,903

 

 

 

 Joseph G. Mandel

    3/24/2011       40,000         48.56       3/24/2021              
      5/24/2012       36,000         37.03       5/24/2022              
      5/23/2013       36,000         55.00       5/23/2023              
      5/22/2014       24,000         53.17       5/22/2024              
      12/19/2014       25,000         43.25       12/19/2024              
      5/28/2015       12,750       4,250       43.34       5/28/2025              
      11/19/2015       12,342       12,343       42.74       11/19/2025         3,744       286,416       11,231       1,718,343  
      11/19/2015                     11,231       1,288.757  
      11/16/2016                 8,700       665,550       8,699       1,330,947  
      11/16/2016                     8,699       1,330,947  
     

 

11/29/2017

 

 

 

             

 

26,223

 

 

 

   

 

2,006,060

 

 

 

     

 Robert V. Pragada

    2/1/2016       10,693       10,694       39.13       2/1/2026         16,101       1,231,727       9,967       1,524,951  
      2/1/2016                     9,967       1,143,713  
      11/16/2016                 7,420       567,630       7,420       1,135,260  
      11/16/2016                     7,420       1,135,260  
      11/29/2017                 10,489       802,409       7,867       1,203,651  
     

 

11/29/2017

 

 

 

                                                           

 

7,867

 

 

 

   

 

1,203,651

 

 

 

 

  (1)

All stock options have a total term of ten years from the date of grant and all remaining unvested option grants vest at the rate of 25% per year beginning on the first anniversary of the grant date.

  (2)

All outstanding stock options were granted under the Stock Incentive Plan with an exercise price equal to the closing price of a share of the Company’s common stock as quoted by the NYSE Composite Price History on the grant date.

  (3)

Represents the number of unvested shares of restricted stock and RSUs granted under the Stock Incentive Plan. The RSAs and RSUs vest ratably over four years, except for the RSUs granted to Mr. Mandel in 2018, which vest ratably over two years, beginning on the first anniversary of the grant date. RSU grants are accompanied by dividend equivalent rights, that accumulate and vest on the same schedule as the RSU to which they relate and will be paid to the award holder in cash at the same time the share of common stock underlying the RSU is delivered to the award holder. RSA grants are entitled to receive cash dividends unless and until the holder forfeits the shares of common stock underlying the RSAs, pursuant to the terms of the relevant award agreement.

 

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  (4)

The market value of outstanding awards of restricted stock and RSUs is computed using the closing price of the Company’s common stock as quoted by the NYSE Composite Price History at September 28, 2018, which was $76.50.

  (5)

Represents the number of unvested target shares of PSUs (TSR Based Awards, EPS Based Awards, and ROIC Based Awards) granted under the Stock Incentive Plan. The awards of PSUs vest based on performance at the expiration of three years from the grant date.

  (6)

The market value of outstanding PSUs (TSR Based Awards, EPS Based Awards, Net Earnings Based Awards and ROIC Based Awards) was computed by using $76.50, the closing price of the Company’s common stock as quoted by the NYSE Composite Price History at September 28, 2018.

Option Exercises and Stock Vested in Fiscal 2018

The following table provides information on stock options that were exercised and on restricted stock that vested in fiscal 2018 for our NEOs:

 

Name  

Option Awards

 

   

Stock Awards

 

 
  Number of
Shares
Acquired on
Exercise
(#)
    Value
Realized on
Exercise
($)
    Number of
Shares
Acquired on
Vesting
(#)
    Value
Realized on
Vesting
($)(1)
 

    Steven J. Demetriou

 

   

 

-

 

 

 

   

 

-

 

 

 

   

 

81,808

 

 

 

   

 

5,612,869

 

 

 

    Kevin C. Berryman

 

   

 

-

 

 

 

   

 

-

 

 

 

   

 

33,038

 

 

 

   

 

2,154,600

 

 

 

    Terence D. Hagen

 

   

 

-

 

 

 

   

 

-

 

 

 

   

 

8,952

 

 

 

   

 

567,797

 

 

 

    Joseph G. Mandel

 

   

 

-

 

 

 

   

 

-

 

 

 

   

 

9,787

 

 

 

   

 

617,476

 

 

 

    Robert V. Pragada

 

   

 

-

 

 

 

   

 

-

 

 

 

   

 

10,523

 

 

 

   

 

720,510

 

 

 

 

  (1)

Value is based on the closing price of a share of the Company’s common stock as quoted by the NYSE Composite Price History on the vesting date. Includes the value of dividends paid in cash related to unvested shares of restricted stock and RSUs at the time of vesting.

Non-qualified Deferred Compensation

As described above, employees, including NEOs, meeting certain compensation minimums may elect to participate in the Company’s executive deferral plans (or EDPs) whereby a portion of salary and bonus (including equity compensation) is deferred and paid to the employee at some future date. The EDPs are non-qualified deferred compensation programs that provide benefits payable to directors, officers, and certain key employees or their designated beneficiaries at specified future dates, and upon retirement or death. Participant contributions are credited with earnings and losses based upon the actual experience of the deemed investments selected by participants.

For the EDPs in which the NEOs participate (the “Variable Plans”), accounts are credited (or debited) based on the actual earnings (or losses) of the deemed investments selected by the individual participants. Participation in the EDPs is voluntary. All EDPs operate under a single trust. Although there are certain change in control features within the EDPs, no benefit enhancements occur upon a change in control. The investment options are notional and used for measurement purposes only. The NEOs do not own any units in the actual funds. In general, the investment options consist of a number of mutual and index funds comprising stocks, bonds, and money market accounts.

 

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The following table shows the EDP account activity during fiscal 2018 for the NEOs. Prior to fiscal 2018, executive officers were only permitted to defer salary and cash bonus amounts. Beginning in fiscal 2018, executive officers could also defer equity awards.

 

Name

 

 

Deferred
Compensation
Plan

 

 

Executive
Contributions
During Last
Fiscal Year
($)(1)

 

 

Registrant
Contributions
During Last
Fiscal Year
($)

 

 

Aggregate
Earnings
During
Last
Fiscal
Year ($)(2)

 

 

Aggregate
Withdrawals /
Distributions
During Last
Fiscal Year
($)

 

 

Aggregate
Balance
at Last
Fiscal
Year End
($)(3)

 

 

Steven J. Demetriou

 

 

 

Variable Plans

 

 

 

 

 

 

 

 

 

22,913

 

 

 

 

 

 

345,380

 

 

Kevin C. Berryman

 

 

 

Variable Plans

 

 

 

 

82,211

 

 

 

 

 

 

25,920

 

 

 

 

 

 

454,058

 

 

Terence D. Hagen

 

 

 

Variable Plans

 

 

 

 

   

 

1,052

 

 

 

 

 

 

45,322

 

 

 

Joseph G. Mandel

 

 

Variable Plans

 

 

 

 

 

 

 

 

 

208,027

 

 

 

(50,331)

 

 

 

2,352,142

 

 

Robert V. Pragada

 

 

 

Variable Plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  (1)

All executive contributions are included in the Summary Compensation Table under the “Salary” and “Non-Equity Incentive Plan Compensation” columns.

  (2)

Earnings are included in the Summary Compensation Table to the extent they exceed 120% of the IRS prescribed applicable federal rate.

  (3)

Balances at the end of the fiscal year consist of (i) salary and bonus deferrals made by the executive over time, beginning when the executive first joined the plan, plus (ii) all earnings and losses credited on all deferrals, less (iii) all pre-retirement distributions, if any, taken by the executive since the executive first joined the plan. Mr. Hagen’s aggregate balance includes a value of $19,296 under a deferral plan that was not reflected in last year’s proxy statement due to administrative oversight.

 

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Compensation Under Various Termination Scenarios

The following table quantifies the estimated severance and benefits payable to the NEOs as a result of the following terminations of employment in fiscal 2018: (i) termination in connection with a change in control, (ii) termination due to death or disability, (iii) retirement approved by the Compensation Committee, and (iv) involuntary termination without cause.

 

    

Change In
Control ($)

 

   

Death or
Disability
($)

 

   

Approved
Retirement
($)
(5)

 

   

Involuntary
Termination
Without
Cause ($)

 

 

 

 Steven J. Demetriou

         

Non-Equity Incentive Compensation(1)

    2,669,990       1,950,000          

Unvested In-The-Money Stock Options(2)

    2,499,128       2,499,128          

Unvested Stock Awards(3)

    8,329,397       8,329,397         2,123,984   

Unvested Performance Share Units(4)

    16,036,433       32,817,190         3,520,072   

Severance Benefits(6)

    8,513,514       -         6,864,635   

Total

 

   

 

38,048,461

 

 

 

   

 

45,595,714

 

 

 

     

 

12,508,692 

 

 

 

 

 Kevin C. Berryman

         

Non-Equity Incentive Compensation(1)

    1,026,919       750,000          

Unvested In-The-Money Stock Options(2)

    745,670       745,670          

Unvested Stock Awards(3)

    1,895,976       1,895,976         472,005   

Unvested Performance Share Units(4)

    3,858,775       7,615,265         782,229   

Severance Benefits(6)

    2,280,176       -         2,280,176   

Total

 

   

 

9,807,515

 

 

 

   

 

11,006,911

 

 

 

     

 

3,534,410 

 

 

 

 

 Terence Hagen

         

Non-Equity Incentive Compensation(1)

    926,303       675,000          

Unvested In-The-Money Stock Options(2)

    399,635       399,635          

Unvested Stock Awards(3)

    1,582,020       1,582,020         395,314   

Unvested Performance Share Units(4)

    3,104,778       6,272,465         655,111   

Severance Benefits(6)

    2,061,547       -         2,061,547   

Total

 

   

 

8,074,283

 

 

 

   

 

8,929,120

 

 

 

     

 

3,111,972 

 

 

 

 

 Joseph G. Mandel

         

Non-Equity Incentive Compensation(1)

    3,026,919       1,750,000        

Unvested In-The-Money Stock Options(2)

    557,630       557,630        

Unvested Stock Awards(3)

    2,958,026       2,958,026         1,003,030   

Unvested Performance Share Units(4)

    3,384,410       4,783,235        

Severance and COBRA Benefits(6)

    3,281,757       -         765,757   

Total

 

   

 

13,208,741

 

 

 

   

 

10,048,890

 

 

 

     

 

1,768,787 

 

 

 

 

 Robert V. Pragada

         

Non-Equity Incentive Compensation(1)

    983,118       720,000          

Unvested In-The-Money Stock Options(2)

    399,635       399,635          

Unvested Stock Awards(3)

    2,601,765       2,601,765         401,204   

Unvested Performance Share Units(4)

    3,376,212       6,573,449         664,916   

Severance Benefits(6)

    2,196,547       -         2,196,547   

Total

 

   

 

9,557,277

 

 

 

   

 

10,294,849

 

 

 

           

 

3,262,667 

 

 

 

 

(1)

The amount of unpaid incentive compensation that would be paid as of September 28, 2018.

(2)

The amount that would be earned related to unvested in-the-money options as of September 28, 2018. Value is based on the closing price of a share of the Company’s common stock as quoted by the NYSE Composite Price History at September 28, 2018 of $76.50, minus the cost of the option (i.e., the exercise price).

(3)

The amount that would be earned related to unvested restricted stock awards as of September 28, 2018. Value is computed by using the closing price of a share of the Company’s common stock as quoted by the NYSE Composite Price History at September 28, 2018 of $76.50.

(4)

The amount that would be earned related to unvested shares of PSUs as of September 28, 2018. Upon a change in control, the target shares awarded is based on actual performance as of the last day of the fiscal year. Upon death or disability, the target shares awarded is based upon the projected payment at the end of the vesting period. Upon involuntary termination without cause, the target shares awarded is based upon projected payment at the end of the vesting period but prorated to the last day of the fiscal year. The amount reported is based on multiplying the relevant performance multiplier (described above) of each award by the target shares awarded, multiplied by the closing price of a share of the Company’s common stock as quoted by the NYSE Composite Price History at September 28, 2018 of $76.50.

 

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(5)

None of the NEO’s qualify for “Retirement” benefits.

(6)

In the event of a qualifying involuntary termination of employment unrelated to a change in control, all NEO’s (with the exception of Mr. Mandel who is covered by an employment agreement) receive the following benefits under the Executive Severance Plan: (i) a cash payment equal to 1.5 times (for the CEO) or 1 times (for the other NEOs and covered executives) the sum of the participant’s (x) base salary and (y) target annual incentive award; and (ii) a cash payment equal to 1.5 times (for the CEO) or 1 times (for the other NEOs and covered executives) the sum of (x) the annual COBRA premium for continued participation in the Company’s group health plans and (y) the annual fee for continued receipt of financial advisory services. Their unvested and outstanding equity awards that are scheduled to vest within the nine month period following the date of termination will continue to vest in accordance with their original vesting schedule, but do not recognize any value for these at the time of separation.

Equity Compensation Plan Information

The following table presents certain information about our equity compensation plans as of September 28, 2018:

 

Plan Category

 

 

Number of securities
to be issued upon
exercise of
outstanding  options,
warrants, and rights
(Column A)

 

 

Weighted-average
exercise price of
outstanding
options, warrants,
and  rights
(Column B)

 

 

Number of securities
remaining available
for future issuance
under  equity
compensation plans
(excluding securities

reflected in

Column A)
(Column C)

 

    Equity compensation plans approved by shareholders (1)

 

  1,766,759

 

  $45.53

 

  5,631,371

 

    Equity compensation plans not approved by shareholders

 

 

 

 

 

 

 

    Total

 

  1,766,759

 

  $45.53

 

  5,631,371