UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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Idex Corporation

(Name of Registrant as Specified In Its Charter)

 

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

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630 Dundee Road, Suite 400

Northbrook, IL 60062

 

March 8, 2010

 

Dear Stockholder:

 

You are cordially invited to attend the Annual Meeting of Stockholders of IDEX Corporation which will be held on Tuesday, April 6, 2010, at 9:00 a.m. Central Time, at the Company’s headquarters building, 630 Dundee Road, Suite 240, Northbrook, Illinois 60062.

 

Details of the business to be conducted at the Annual Meeting are given in the attached Notice of Annual Meeting and Proxy Statement. Included with the Proxy Statement is a copy of the Company’s 2009 Annual Report. We encourage you to read the Annual Report. It includes information on the Company’s operations, markets, products and services, as well as the Company’s audited financial statements.

 

Whether or not you attend the Annual Meeting, it is important that your shares be represented and voted. Therefore, we urge you to sign, date, and promptly return the accompanying proxy card in the enclosed envelope. Alternatively, you can vote over the telephone or the Internet as described on the proxy card. If you decide to attend the Annual Meeting, you will be able to vote in person, even if you have previously submitted your proxy card, or voted by telephone or over the Internet.

 

On behalf of the Board of Directors, I would like to express our appreciation for your continued interest in the affairs of the Company. We look forward to seeing you at the Annual Meeting.

 

Sincerely,

 

Lawrence D. Kingsley

Chairman of the Board, President and
Chief Executive Officer

IDEX CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 6, 2010

 

To the Stockholders:

 

The Annual Meeting of Stockholders of IDEX Corporation (the “Company”) will be held on Tuesday, April 6, 2010, at 9:00 a.m. Central Time, at the Company’s headquarters building, 630 Dundee Road, Suite 240, Northbrook, Illinois 60062, for the following purposes:

 

 

The Board of Directors fixed the close of business on February 19, 2010, as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting.

 

By Order of the Board of Directors

 

Frank J. Notaro
Vice President - General Counsel
and Secretary

 

March 8, 2010

Northbrook, Illinois

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 6, 2010
The Proxy Statement and 2009 Annual Report of IDEX Corporation are available at:
http://ir.idexcorp.com/financials.cfm

 

PROXY STATEMENT

 

 

The Company has prepared this Proxy Statement in connection with the solicitation by the Company’s Board of Directors of proxies for the Annual Meeting of Stockholders to be held on Tuesday, April 6, 2010, at 9:00 a.m. Central Time, at the Company’s headquarters building, 630 Dundee Road, Suite 240, Northbrook, Illinois 60062. The Company commenced distribution of this Proxy Statement and the accompanying materials on March 8, 2010.

 

The Company will bear the costs of preparing and mailing this Proxy Statement and other costs of the proxy solicitation made by the Company’s Board of Directors. Certain of the Company’s officers and employees may solicit the submission of proxies authorizing the voting of shares in accordance with the Board of Directors’ recommendations, but no additional remuneration will be paid by the Company for the solicitation of those proxies. These solicitations may be made by personal interview, telephone, email or facsimile transmission. The Company has made arrangements with brokerage firms and other record holders of the Company’s Common Stock for the forwarding of proxy solicitation materials to the beneficial owners of that stock. The Company will reimburse those brokerage firms and others for their reasonable out-of-pocket expenses in connection with this work. In addition, the Company has engaged Morrow & Co., LLC, 470 West Ave., Stamford, Connecticut to assist in proxy solicitation and collection at a cost of $5,500, plus out-of-pocket expenses.

 

VOTING AT THE MEETING

 

The record of stockholders entitled to notice of, and to vote at, the Annual Meeting was taken as of the close of business on February 19, 2010, and each stockholder will be entitled to vote at the meeting any shares of the Company’s Common Stock held of record on that date. 81,000,451 shares of the Company’s Common Stock were outstanding at the close of business on February 19, 2010. Each share entitles its holder of record to one vote on each matter upon which votes are taken at the Annual Meeting. No other securities are entitled to be voted at the Annual Meeting.

 

A quorum of stockholders is necessary to take action at the Annual Meeting. A majority of outstanding shares of the Company’s Common Stock present in person or represented by proxy will constitute a quorum. The Company will appoint election inspectors for the meeting to determine whether or not a quorum is present, and to tabulate votes cast by proxy or in person at the Annual Meeting. Under certain circumstances, a broker or other nominee may have discretionary authority to vote certain shares of Common Stock if instructions have not been received from the beneficial owner or other person entitled to vote. The election inspectors will treat directions to withhold authority, abstentions and broker non-votes (which occur when a broker or other nominee holding shares for a beneficial owner does not vote on a particular proposal because such broker or other nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner) as present and entitled to vote for purposes of determining the presence of a quorum for the transaction of business at the Annual Meeting. The election of directors requires a plurality vote and the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2010 requires a majority vote, of the shares of the Company’s Common Stock present in person or represented by proxy at the meeting. Approval of the amendment and restatement of the IDEX Corporation Incentive Award Plan requires an affirmative vote of the majority of the votes cast on the proposal, provided that the total votes cast in person or by proxy on the proposal represents more than 50% of all shares of the Company’s Common Stock entitled to vote on the proposal, in accordance with NYSE rules. Directions to withhold authority and broker non-votes will have no effect on the election of directors, because directors are elected by a plurality of votes cast. Abstentions will be treated as shares voted against the approval of the amendment and restatement of the Incentive Award Plan, and broker non-votes will not count toward the total votes cast. Abstentions and broker non-votes will be treated as shares voted against the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2010.

 

The Company requests that you mark the accompanying proxy card to indicate your votes, sign and date it, and return it to the Company in the enclosed envelope, or vote by telephone or over the Internet as described on the proxy card. If you vote by telephone or over the Internet, you should not mail your proxy card. If your completed proxy card or telephone or Internet voting instructions are received prior to the meeting, your shares will be voted in accordance with your voting instructions. If you sign and return your proxy card but do not give voting instructions, your shares will be voted FOR the election of the Company’s nominees as directors, FOR the approval of the amendment and restatement of the Incentive Award Plan, FOR the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2010, and in the discretion of the proxy holders as to any other business which may properly come before the meeting. Any proxy solicited hereby may be revoked by the person or persons giving it at any time before it has been exercised at the Annual Meeting by giving notice of revocation to the Company in writing prior to the meeting. If you decide to attend the Annual Meeting, you will be able to vote in person, even if you have previously submitted your proxy card, or voted by telephone or over the Internet. The Company requests that all such written notices of revocation to the Company be addressed to Frank J. Notaro, Vice President - General Counsel and Secretary, IDEX Corporation, 630 Dundee Road, Suite 400, Northbrook, IL 60062.

 

PROPOSAL 1 — ELECTION OF DIRECTORS

 

The Company’s Restated Certificate of Incorporation, as amended, provides for a three-class Board, with one class being elected each year for a term of three years. The Board of Directors currently consists of eight members, two of whom are Class III directors whose terms will expire at this year’s Annual Meeting, three of whom are Class I directors whose terms will expire at the Annual Meeting to be held in 2011, and three of whom are Class II directors whose terms will expire at the Annual Meeting to be held in 2012.

 

The Company’s Board of Directors has nominated two individuals for election as Class III directors to serve for a three-year term expiring at the Annual Meeting to be held in 2013, or upon the election and qualification of their successors. The nominees of the Board of Directors are Ruby R. Chandy and Neil A. Springer. Ms. Chandy and Mr. Springer are currently serving as directors of the Company. The nominees and the directors serving in Class I and Class II whose terms expire in future years and who will continue to serve after the Annual Meeting are listed below with brief statements setting forth their present principal occupations and other information, including any directorships in other public companies, and particular experiences, qualifications, attributes and skills possessed by the nominees and directors that lead to the conclusion that they should serve as a director.

 

If for any reason any of the nominees for a Class III directorship are unavailable to serve, proxies solicited hereby may be voted for a substitute. The Board, however, expects the nominees to be available.

The Company’s Board of Directors Recommends a Vote FOR
the Nominees in Class III Identified Below.

Nominees for Election

 

Class III: Nominees for Three-Year Term

 

The Dow Chemical Company

 

Ms. Chandy has been Chief Marketing Officer of The Dow Chemical Company since 2010. Ms. Chandy served as Chief Marketing Officer for Rohm and Hass Company from 2007 to 2009, and as Vice President of Marketing and Commercial Excellence, and in various operating roles, at Thermo Fisher Scientific, from prior to 2005 to 2007.

 

Ms. Chandy’s marketing skills, her executive management experience, her relevant experience in life science and technological industries and her extensive engineering and management education led to the conclusion that she should serve on IDEX’s Board of Directors. Ms. Chandy has been working for scientific and engineering organizations since 1992, including Thermo Fisher Scientific, Boston Scientific Corporation, Millipore Corporation and Rohm and Haas Company. Throughout her career, Ms. Chandy has held general management and marketing leadership roles. Ms. Chandy received a bachelor of science degree in material science and engineering from Massachusetts Institute of Technology (MIT), a master of science degree in materials science and engineering from Northwestern University, and a master of business administration degree from Sloan School of Management at MIT.

 

Ms. Chandy is a member of the Audit Committee and Nominating and Corporate Governance Committee of the Board of Directors.

 

Springer & Associates, L.L.C.

 

Mr. Springer has been Managing Director of Springer & Associates, L.L.C. since prior to 2005. Mr. Springer is a director of Mueller Water Products, Inc.

 

Mr. Springer’s entrepreneurial and business leadership skills, his prominent position in the Midwestern business community, his financial reporting expertise and his corporate governance and executive compensation training led to the conclusion that he should serve on IDEX’s Board of Directors. Mr. Springer has over fifty years of commercial experience. During the last twenty years, he has held directorships at several organizations, including Mueller Water Products, Inc., through which he gained a unique understanding of the market for infrastructure and flow control products used in water distribution networks and treatment facilities. His executive experience, board memberships and his company, Springer & Associates, L.L.C., which focuses on board consulting, have provided Mr. Springer with substantial training in corporate governance and executive compensation and knowledge of financial reporting. Mr. Springer received a bachelor of science degree in accounting from Indiana University, a master of business administration degree from the University of Dayton, and a certificate of accountancy from the University of Illinois. Mr. Springer is a certified public accountant.

 

Mr. Springer is a member of the Audit Committee, the Executive Committee and the Nominating and Corporate Governance Committee of the Board of Directors. Mr. Springer is also the Chairman of the Nominating and Corporate Governance Committee until April 6, 2010.

Other Incumbent Directors

 

Class I: Three-Year Term Expires in 2011

 

Nalco Company

 

Mr. Bell has been Executive Vice President and Chief Financial Officer of Nalco Company since prior to 2005. Mr. Bell is a director of Compass Minerals International, Inc.

 

Mr. Bell’s business leadership skills, his knowledge of technology and manufacturing industries, his financial reporting expertise and his corporate governance and executive compensation training led to the conclusion that he should serve on IDEX’s Board of Directors. For over six years, Mr. Bell has served as executive vice president and chief financial officer of Nalco Company. In addition, Mr. Bell has over thirty years combined experience as an executive in the technology and manufacturing industries, including positions at Rohm and Haas Company, Whirlpool Corporation and Bundy Corporation. Through his experience, Mr. Bell has developed valuable financial expertise and experience in mergers and acquisitions, private equity and capital markets transactions. Mr. Bell has a long career in corporate finance, including more than 12 years of experience as chief financial officer of a publicly traded company, during which he obtained significant financial reporting expertise. He has held directorships at publicly traded companies for over 12 years, including the position of chair of the audit committee of Compass Minerals International, Inc. Through his executive experience and board memberships, Mr. Bell has acquired substantial training in corporate governance and executive compensation. Mr. Bell received a bachelor of science degree in finance with high honors from the University of Illinois and a master of business administration degree with distinction from Harvard University.

 

Mr. Bell is a member and, until April 6, 2010, the Chairman of the Audit Committee of the Board of Directors. Mr. Bell will also be a member and the Chairman of the Nominating and Corporate Governance Committee beginning April 6, 2010.

 

IDEX Corporation

 

Mr. Kingsley was appointed Chairman of the Board by the Board of Directors on April 4, 2006. Mr. Kingsley has been President and Chief Executive Officer and a director of the Company since March 22, 2005. From August 2004 to March 2005, Mr. Kingsley served as Chief Operating Officer of the Company. Mr. Kingsley is a director of The Cooper Industries, PLC.

 

Mr. Kingsley’s knowledge of technology and relevant experience with technological industries in general, and with IDEX in particular, together with his executive and board experience, financial reporting expertise and executive compensation training led to the conclusion that he should serve on IDEX’s Board of Directors. Mr. Kingsley’s extensive knowledge and experience with all aspects of the Company’s business and its management and his role as Chief Executive Officer provides a valuable asset to the Board of Directors. Prior to his employment with IDEX, Mr. Kingsley held management positions at Danaher Corporation, Kollmorgen Corporation and Weidmuller Incorporated. Mr. Kingsley has served on the audit and compensation committees of The Cooper Industries PLC board of directors, through which he obtained significant financial reporting and executive compensation expertise. Through his executive experience and board memberships, Mr. Kingsley has gained substantial experience in corporate governance and executive compensation matters. Mr. Kingsley received a bachelor of science degree in industrial engineering and management from Clarkson University and a master of business administration degree from the College of William and Mary. Mr. Kingsley serves on the boards of several philanthropic organizations.

 

Mr. Kingsley is Chairman of the Executive Committee of the Board of Directors.

Barnes Group Inc.

 

Mr. Milzcik has been President and Chief Executive Officer of Barnes Group Inc. since October 2006. In 2006, prior to his appointment as President, Mr. Milzcik served as Executive Vice President and Chief Operating Officer, Barnes Group Inc. He served as President, Barnes Industrial (formerly Associated Spring Group), Barnes Group Inc., from prior to 2005 to 2006. Mr. Milzcik is a director of Barnes Group Inc.

 

Mr. Milzcik’s business leadership skills, his relevant experience in industrial manufacturing, his corporate governance and executive compensation training and his extensive technical and management education led to the conclusion that he should serve on IDEX’s Board of Directors. Through his executive experience at Barnes Group Inc., Mr. Milzcik obtained a unique understanding of the industrial manufacturing business environment and gained exposure to and familiarity with IDEX’s customer base. In addition, Mr. Milzcik gained experience with international commerce, government contracting, complex project management, intellectual property management and industry cyclicality, which enrich his perspective as a director of the Company. Mr. Milzcik has acquired substantial training in corporate governance and executive compensation through his executive experience, board memberships and attendance at the Harvard Directors College, Stanford Directors College and ODX/Columbia Director Education Program. Mr. Milzcik received a bachelor of science degree in applied science and technology from Thomas Edison State College, a master’s degree in management and administration from Cambridge College, a certificate of graduate studies in administration and management from Harvard University and a doctorate from Case Western Reserve University, with research focusing on management systems in cyclical markets. Mr. Milzcik is a Certified Manufacturing Engineer through the Society of Manufacturing Engineers, and has a FAA Airframe and Power Plant License.

 

Mr. Milzcik is a member of the Compensation Committee of the Board of Directors.

 

Class II: Three-Year Term Expires in 2012

 

Donaldson Company, Incorporated

 

Mr. Cook has been Chairman since August 2005, and President and Chief Executive Officer since August 2004, of Donaldson Company, Incorporated. Mr. Cook is a director of Donaldson Company, Incorporated.

 

Mr. Cook’s strong business and organizational leadership skills and his relevant experience in technological industries led to the conclusion that he should serve on IDEX’s Board of Directors. Mr. Cook is a 29-year veteran of Donaldson Company, Incorporated, a technology-driven company that manufactures filtration systems designed to remove contaminants from air and liquids. Throughout his career at Donaldson Company, Mr. Cook has served in several senior executive positions, and was elected as a director in 2004. Mr. Cook received a bachelor of science degree in business administration and a master of business administration degree from Virginia Polytechnic Institute and State University.

 

Mr. Cook is a member and, beginning April 6, 2010, the Chairman of the Audit Committee of the Board of Directors.

AMETEK, Inc.

 

Mr. Hermance has been Chairman and Chief Executive Officer of AMETEK, Inc. since prior to 2005. Mr. Hermance is a director of AMETEK, Inc.

 

Mr. Hermance’s in-depth knowledge of the technology manufacturing industry, his extensive board experience and corporate governance training, his comprehensive engineering education and his prominent position in the engineering business community led to the conclusion that he should serve on IDEX’s Board of Directors. For over ten years, Mr. Hermance has served as a director of Ametek, Inc., a leading global manufacturer of electronic instruments and electromechanical devices. In 2003, he was appointed Chairman and Chief Executive Officer of Ametek. In addition, Mr. Hermance has held directorships with CTB, Intl. and Penn Engineering. Through his board memberships, Mr. Hermance has gained significant experience in corporate matters. Mr. Hermance received a bachelor of science degree in electrical engineering and a master of science degree in electrical engineering from the Rochester Institute of Technology (RIT). He was a member of Phi Kappa Phi National Honor Society and Tau Beta Pi National Honor Society. He has been recognized as an Engineering Distinguished Alumnus of RIT and is a present member of RIT’s board of trustees. He is also a Fellow in ASME, Chairman of the Eastern Technology Council and serves on the boards of several philanthropic organizations.

 

Mr. Hermance is a member of the Compensation Committee of the Board of Directors.

 

The Tokarz Group L.L.C.

 

Mr. Tokarz has been a member of The Tokarz Group L.L.C. since prior to 2005. Mr. Tokarz is a director of Conseco, Inc., Dakota Growers Pasta Companies, Inc. MVC Capital, Inc., Mueller Water Products, Inc., and Walter Industries, Inc.

 

Mr. Tokarz’s knowledge and experience in banking and finance, his entrepreneurial and business leadership skills, his extensive board experience, his corporate governance training and his prominent position in the business community led to the conclusion that he should serve on IDEX’s Board of Directors. Mr. Tokarz is a senior investment professional with over 30 years of lending and investment experience. He has extensive experience in leveraged buyouts, financings, restructurings and dispositions. He is currently the Chairman of The Tokarz Group LLC, a private, New York-based merchant bank founded by Mr. Tokarz in 2002, and Chairman and Portfolio Manager of MVC Capital, Inc., a registered investment company advised by The Tokarz Group. Mr. Tokarz has been on the boards of publicly traded companies for over twenty years and currently serves as a director of Conseco, Inc., Dakota Growers Pasta Companies, Inc., MVC Capital, Mueller Water Products, Inc. and Walter Industries, Inc. Through his executive experience and board memberships, Mr. Tokarz has acquired substantial experience in corporate governance. Mr. Tokarz chairs the board of directors of the Illinois Emerging Technologies Fund and is a member of the Illinois VENTURES board of managers. Mr. Tokarz received a bachelor of arts degree in economics, with high distinction, and a master of business administration degree from the University of Illinois at Urbana-Champaign. Mr. Tokarz is a certified public accountant.

 

Mr. Tokarz is Chairman of the Compensation Committee, and a member of the Executive Committee, of the Board of Directors.

 

CORPORATE GOVERNANCE

 

Information Regarding the Board of Directors and Committees

 

The Board of Directors has the ultimate authority for the management of the Company’s business. In February 2010, the Board affirmed the Company’s Corporate Governance Guidelines which, along with the charters of the Board committees, the Company’s Code of Business Conduct and Ethics, and Standards for Director Independence, provide the framework for the governance of the Company. The Company’s Corporate Governance Guidelines address matters such as composition, size and retirement age of the Board, Board membership criteria, the role and responsibilities of the Board, director compensation, share ownership guidelines, and the frequency of Board meetings (including meetings to be held without the presence of management). The Company’s Code of Business Conduct and Ethics sets forth the guiding principles of business ethics and certain legal requirements applicable to all of the Company’s employees and directors. Copies of the current Corporate Governance Guidelines, the charters of the Board committees, the Code of Business Conduct and Ethics, and Standards for Director Independence are available on the Company’s website at www.idexcorp.com.

 

The Board selects the Company’s executive officers, delegates responsibilities for the conduct of the Company’s operations to those officers, and monitors their performance. Without limiting the generality of the foregoing, the Board of Directors oversees an annual assessment of enterprise risk exposure and the management of such risk, conducted by the Company’s executives. When assessing enterprise risk, the Board focuses on the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and enhance stockholder value. Direct oversight allows the Board to assess management’s inclination for risk, to determine what constitutes an appropriate level of risk for the Company and to discuss with management the means by which to control risk. In addition, while the Board of Directors has the ultimate oversight responsibility for the risk management process, the Audit Committee focuses on financial risk management and exposure. The Audit Committee receives an annual risk assessment report from the Company’s internal auditors and reviews and discusses the Company’s financial risk exposures and the steps management has taken to monitor, control and report such exposures.

 

During 2009, the Board held six meetings. The independent (non-management) directors met in regular executive sessions without management at each in-person meeting of the Board. Generally, the Chairman of the Nominating and Corporate Governance Committee presides at the non-management executive sessions. The Board believes that its current leadership structure provides independent board leadership and engagement while deriving the benefit of having the CEO also serve as Chairman of the Board. Although there is no independent lead director, all of the non-management directors are actively engaged in shaping the Board’s agenda and the Company’s strategy. Our Chief Executive Officer, as the individual with primary responsibility for managing the Company’s day-to-day operations, is best positioned to chair regular Board meetings and to oversee discussion on business and strategic issues. Coupled with the regular executive sessions of the non-management directors, this structure provides independent oversight, including risk oversight, while facilitating the exercise of the Board’s responsibilities.

 

The Board has adopted standards for determining whether a director is independent from management. These standards are based upon the listing standards of the New York Stock Exchange and applicable laws and regulations, and are available on the Company’s website as described above. The Board has affirmatively determined, based on these standards, that the following directors, two of whom are standing for election to the Board, are independent: Mr. Bell, Ms. Chandy, and Messrs. Cook, Hermance, Milzcik, Springer and Tokarz. The Board has also determined that Mr. Kingsley, who is not standing for election to the Board, is not independent. Mr. Kingsley is the Chairman of the Board, President and Chief Executive Officer of the Company. The Board has also determined that all Board standing committees are composed entirely of independent directors.

Important functions of the Board are performed by committees comprised of members of the Board. Subject to applicable provisions of the Company’s By-Laws and based on the recommendations of the Nominating and Corporate Governance Committee, the Board as a whole appoints the members of each committee each year at its first meeting. The Board may, at any time, appoint or remove committee members or change the authority or responsibility delegated to any committee, subject to applicable law and listing standards. There are four standing committees of the Board: the Nominating and Corporate Governance Committee, the Audit Committee, the Compensation Committee, and the Executive Committee. Each committee other than the Executive Committee (whose powers are set forth in enabling resolutions of the Board) has a written charter that is available on the Company’s website as described above.

 

The Nominating and Corporate Governance Committee’s primary purpose and responsibilities are to: develop and recommend to the Board corporate governance principles and a code of business conduct and ethics; develop and recommend criteria for selecting new directors; identify individuals qualified to become directors consistent with criteria approved by the Board, and recommend to the Board such individuals as nominees to the Board for its approval; screen and recommend to the Board individuals qualified to become Chief Executive Officer and any other senior officer whom the committee may wish to approve; and oversee evaluations of the Board, individual Board members and Board committees. The members of the Nominating and Corporate Governance Committee are Ms. Chandy and Mr. Springer. Mr. Bell will be joining the Nominating and Corporate Governance Committee on April 6, 2010. During 2009, the Nominating and Corporate Governance Committee held one meeting.

 

It is the policy of the Nominating and Corporate Governance Committee to consider nominees for the Board recommended by the Company’s stockholders in accordance with the procedures described under STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2011 ANNUAL MEETING. Stockholder nominees who are nominated in accordance with these procedures will be given the same consideration as nominees for director from other sources.

 

The Nominating and Corporate Governance Committee selects nominees for the Board who demonstrate the following qualities:

 

Experience (in one or more of the following):

 

 

Personal attributes:

 

 

Qualified candidates for membership on the Board are identified and considered without regard to race, color, religion, sex, ancestry, national origin or disability. In the past, the Company has hired Russell Reynolds and Crist Associates, executive search firms, to help identify and facilitate the screening and interviewing of director candidates. After conducting an initial evaluation of a candidate, the Nominating

and Corporate Governance Committee will interview that candidate if it believes the candidate might be suitable to be a director. The Committee may also ask the candidate to meet with other members of the Board. If the Committee believes a candidate would be a valuable addition to the Board of Directors, it will recommend to the full Board appointment or election of that candidate. Annually, the Nominating and Corporate Governance Committee reviews the qualifications and backgrounds of the directors, as well as the overall composition of the Board, and recommends to the full Board the slate of directors for nomination for election at the annual meeting of stockholders.

 

The Audit Committee’s primary duties and responsibilities are to: monitor the integrity of the Company’s financial reporting process and systems of internal control regarding finance, accounting and legal compliance; monitor the independence and performance of the Company’s independent registered public accounting firm and monitor the performance of the Company’s internal audit function; hire and fire the Company’s independent registered public accounting firm and approve any audit and non-audit work performed by the independent registered public accounting firm; provide an avenue of communication among the independent registered public accounting firm, management and the Board of Directors; prepare the report that the rules of the Securities and Exchange Commission require to be included in the Company’s annual proxy statement; and administer the Company’s Related Person Transactions Policy (see Transactions With Related Persons). The members of the Audit Committee are Mr. Bell, Ms. Chandy, and Messrs. Cook and Springer. The Board of Directors has determined that Mr. Bell is an “audit committee financial expert,” as defined by the rules of the Securities and Exchange Commission. During 2009, the Audit Committee held 10 meetings.

 

The Compensation Committee’s primary duties and responsibilities are to: establish the Company’s compensation philosophy and structure the Company’s compensation programs to be consistent with that philosophy; establish the compensation of the Chief Executive Officer and other senior officers of the Company; develop and recommend to the Board of Directors compensation for the Board; and prepare the compensation committee report the rules of the Securities and Exchange Commission require to be included in the Company’s annual proxy statement. The members of the Compensation Committee are Messrs. Hermance, Milzcik and Tokarz. During 2009, the Compensation Committee held four meetings.

 

The Executive Committee is empowered to exercise the authority of the Board in the management of the Company between meetings of the Board, except that the Executive Committee may not fill vacancies on the Board, amend the Company’s By-Laws or exercise certain other powers reserved to the Board or delegated to other Board committees. The members of the Executive Committee are Messrs. Kingsley, Springer and Tokarz. During 2009, the Executive Committee did not hold any meetings.

 

During 2009, each member of the Board of Directors attended more than 75% of the aggregate number of meetings of the Board of Directors and of committees of the Board of which he or she was a member. The Company encourages its directors to attend the Annual Meeting of Stockholders but has no formal policy with respect to that attendance. All of the directors attended the 2009 Annual Meeting of Stockholders.

 

Committee Interlocks and Insider Participation

 

During 2009, Messrs. Hermance, Milzcik and Tokarz served as the members of the Compensation Committee. Neither Mr. Hermance, Mr. Milzcik nor Mr. Tokarz (i) was an officer or employee of the Company or any of its subsidiaries during 2009, (ii) was formerly an officer of the Company or any of its subsidiaries, or (iii) had any relationship requiring disclosure by the Company under Item 404 of Regulation S-K under the Securities Act of 1933, as amended. There were no relationships between the Company’s executive officers and the members of the Compensation Committee that require disclosure under Item 407(e)(4) of Regulation S-K.

 

Transactions with Related Persons

 

The Board of Directors has adopted a written Related Person Transactions Policy regarding the review, approval and ratification of transactions with related persons. All related person transactions are

approved by the Audit Committee. If the transaction involves a related person who is a director or immediate family member of a director, that director will not be included in the deliberations. In approving the transaction, the Audit Committee must determine that the transaction is fair and reasonable to the Company.

 

Compensation of Directors

 

The objectives for our non-management director compensation program are to attract highly-qualified individuals to serve on our board of directors and align our directors’ interests with the interests of our stockholders. Our Compensation Committee reviews the program at least annually to ensure that it continues to meet these objectives.

 

The Company believes that to attract and retain qualified directors, pay levels should be targeted at the 50th percentile (or median) of pay levels for directors at comparable companies. From time to time, the Compensation Committee, with the assistance of Towers Watson, evaluates the competitiveness of director compensation. The primary reference point for the determination of market pay practices are pay levels for organizations with revenues, business activities and complexities similar to those of the Company. Market data is derived from pay surveys available to Towers Watson and the Company directly. The Compensation Committee evaluated director compensation in 2009 and determined it was below median, but elected to leave compensation at the existing level owing to the challenging economic environment.

 

Our non-management director compensation for 2009 was based on the following:

 

 

The Compensation Committee evaluated director compensation on February 23, 2010. Consistent with the conclusions of the compensation study conducted by Towers Watson, updated for 2009 data, it was determined that director compensation was below market median. As a result, the Compensation Committee decided to increase director compensation. For 2010, the annual retainer and meeting fees were combined and increased to an aggregate $60,000. Equity compensation was increased to $75,000 annually, with the number of restricted stock and option shares to be determined on the date of grant based upon share price. Committee chair fees were increased as follows: Audit Committee chair to $10,000; and Compensation and Nominating and Governance Committee chairs to $7,000, each.

 

Equity grants upon initial election to the Board of Directors are made on the date of appointment. Annual equity grants are made on the first regularly scheduled meeting of the Board of Directors held each year. All grants are made under the Incentive Award Plan. The exercise price of each option is equal to the closing price of the Company’s Common Stock on the trading day the option is granted. The options become exercisable one year following their date of grant. The restricted stock is non-transferable until the recipient is no longer serving as a director, and is subject to forfeiture if the director terminates service as a director for reasons other than death, disability or retirement prior to vesting. The restricted stock vests in

full on the earlier of the third anniversary of the grant, failure of the director to be re-elected to the Board, or a change in control.

 

Under the Directors Deferred Compensation Plan, directors are permitted to defer their cash compensation into either an interest-bearing account or a deferred compensation units account as of the date that such compensation would otherwise be payable. The deferred compensation credited to the interest-bearing account is adjusted on a quarterly basis with hypothetical earnings for the quarter equal to the Barclays Capital Long Term Bond AAA — Corporate Bond Index as of December 1 of the calendar year preceding the year for which the earnings were credited. Amounts credited to the interest-bearing account are compounded monthly. Deferred compensation credited to the deferred compensation units account is converted into deferred compensation units (DCUs), which are Common Stock equivalents, by dividing the deferred compensation by the closing price of the Company’s Common Stock the day before the date of deferral. In addition, the value of the dividends payable on shares of Common Stock are credited to the deferred compensation units account and converted into DCUs based on the number of DCUs held by the director in his account on the dividend record date, and the closing price of the Common Stock on the dividend payment date. Messrs. Hermance and Tokarz defer all of their director fees into the Directors Deferred Compensation Plan, and have elected to have such fees invested in DCUs.

 

Outside directors are subject to stock ownership guidelines. Outside directors must comply with the guidelines within five years of their initial election to the Board. The guidelines dictate that all outside directors must purchase or acquire the Company’s Common Stock (or DCUs acquired by participation in the Directors Deferred Compensation Plan) having an aggregate value at the time of purchase or acquisition equal to three times the annual retainer upon their election to the Board. As of December 31, 2009, all directors either complied with the ownership guidelines or were proceeding towards meeting the ownership guidelines within the specified five-year period.

 

The following table summarizes the total compensation earned in 2009 for the Company’s non-management directors. Mr. Kingsley receives no additional compensation for his service as a director.

 

2009 Director Compensation

 

 

 

 

 

 

 

 

Communications with the Board of Directors

 

Stockholders and other interested parties may contact the Board, the non-management directors as a group or any of the individual directors, including the presiding director, by writing to Frank J. Notaro, Vice President - General Counsel and Secretary, IDEX Corporation, 630 Dundee Road, Suite 400, Northbrook, Illinois 60062. Inquiries sent by mail will be reviewed, sorted and summarized by Mr. Notaro before they are forwarded to any director.

 

SECURITY OWNERSHIP

 

The following table furnishes information as of February 19, 2010, except as otherwise noted, with respect to shares of the Company’s Common Stock beneficially owned by (i) each director and nominee for director, (ii) each officer named in the Summary Compensation Table, (iii) directors, nominees and executive officers of the Company as a group, and (iv) any person who is known by the Company to be a beneficial owner of more than five percent of the outstanding shares of Common Stock. Except as indicated by the notes to the following table and with respect to DCUs issued under the Directors Deferred Compensation Plan and the IDEX Corporation Deferred Compensation Plan for Officers (the “Officers Deferred Compensation Plan”), the holders listed below have sole voting power and investment power over the shares beneficially held by them. Under Securities and Exchange Commission rules, the number of shares shown as beneficially owned includes shares of Common Stock subject to options that are exercisable currently or will be exercisable within 60 days of February 19, 2010. Shares of Common Stock subject to options that are exercisable within 60 days of February 19, 2010, are considered to be outstanding for the purpose of determining the percentage of the shares held by a holder, but not for the purpose of computing the percentage held by others. An * indicates ownership of less than one percent of the outstanding Common Stock.

 

 

 

 

 

EXECUTIVE COMPENSATION

 

Risk Assessment

 

At the Compensation Committee’s direction, management conducted a risk assessment of the Company’s compensation policies and practices, including its executive compensation programs. The Committee reviewed and discussed the findings of the assessment and concluded that the Company’s compensation policies and practices are designed with the appropriate balance of risk and reward in relation to the Company’s overall business strategy, do not incent executives to take unnecessary or excessive risks, and that any risks arising from the Company’s policies and practices are not reasonably likely to have a material adverse effect on the Company. In the review, management considered the attributes of the Company’s policies and practices, including:

 

 

Compensation Committee Report

 

The Compensation Committee has reviewed the following Compensation Discussion and Analysis and discussed its contents with the Company’s management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

Michael T. Tokarz, Chairman

Frank S. Hermance

Gregory F. Milzcik

 

Compensation Discussion and Analysis

 

Due to economic uncertainty at the time the Compensation Committee was setting compensation in 2009, the Compensation Committee determined to keep salaries and target annual incentives at 2008 levels. Additionally, it generally reduced the value of long-term incentive equity awards by approximately 25% of 2008 levels. These actions are discussed in more detail below.

 

Philosophy and Overview of Compensation

 

The Company’s executive compensation philosophy is to have a compensation program that (1) aligns the interests of management and stockholders, (2) motivates and retains the management team, and (3) results in executives holding meaningful amounts of the Company’s Common Stock.

 

The Company carries out its compensation philosophy by:

 

 

Total Compensation

 

The material elements of 2009 compensation for the named executive officers, or NEOs, in the Summary Compensation Table, including Lawrence D. Kingsley, who is the chief executive officer, or CEO, and Dominic A. Romeo, who is the chief financial officer, or CFO, are outlined below:

 

 

The Compensation Committee targets the following approximate mix of annual compensation for the CEO and other NEOs:

 

 

Role of Compensation Committee and Data Used

 

The Compensation Committee establishes the Company’s compensation philosophy, structures the Company’s compensation programs to be consistent with that philosophy, and approves each element of each executive officer’s compensation. In the case of the CEO, the Board ratifies compensation determinations made by the Compensation Committee.

The Compensation Committee performs periodic reviews of executive pay tally sheets. The tally sheets outline each executive’s annual pay — target and actual — and total accumulated wealth under various performance and employment scenarios. Data from the tally sheets is considered by the Compensation Committee when setting target total compensation. Generally, the Compensation Committee reviews and adjusts target total compensation levels annually. Actual total compensation may vary from target based on Company and individual performance, and changes in stock price over time.

 

Generally, the amount of compensation realized historically, or potentially realizable in the future, from past compensation awards does not directly impact the level at which future pay opportunities are set. When granting equity awards, the Compensation Committee reviews both individual performance and the positioning of previously granted equity awards within established grant ranges.

 

To assist the Compensation Committee in discharging its responsibilities, the Compensation Committee retained Towers Watson to act as an outside consultant. Towers Watson is engaged by, and reports directly to, the Compensation Committee. Towers Watson works with the Compensation Committee, in conjunction with management, to structure the Company’s compensation programs and evaluate the competitiveness of its executive compensation levels. Towers Watson’s primary areas of assistance to the Compensation Committee are:

 

 

Towers Watson periodically provides the Compensation Committee and management market data on a variety of compensation-related topics. The Compensation Committee authorized Towers Watson to interact with the Company’s management, as needed, on behalf of the Compensation Committee, to obtain or confirm information.

 

Market Benchmarking

 

Historically, the Compensation Committee reviewed data from various benchmark groups as one input in determining appropriate target compensation levels, and the targeted compensation to the benchmark data in a range from the 25th to 75th percentiles by each pay element, as well as in the aggregate. Individual pay decisions were made on the basis of individual performance, years of experience, skill set, perceived value of the position (or the individual) to the organization, as well as the market pay data. The Compensation Committee believes that to attract and retain qualified management, pay levels (including base salary, incentive compensation at target, and benefits) should be targeted in a range from the 50th to 75th percentile of pay levels for comparable positions at comparable companies. However, cases may exist where such target pay levels fall outside this range based on the individual factors described above. Of course, actual pay should and does vary from target based on Company and individual performance, and changes in stock price over time.

 

As discussed above, due to the challenging and uncertain economic conditions in late 2008, upon recommendation of management and Towers Watson, the Compensation Committee did not update market benchmarking, and froze salaries and compensation structures at 2008 levels. See the Compensation Discussion and Analysis set forth in our 2008 proxy as to how the 2008 levels were set.

 

Process of Setting Compensation

 

The Compensation Committee sets each NEO’s pay. The CEO’s pay package is set by the Compensation Committee during executive session based on the financial and operating performance of the Company and the Committee’s assessment of the CEO’s individual performance. The pay packages for the other NEOs are based on the recommendations of the CEO to the Compensation Committee. The Compensation Committee considers the CEO’s recommendations, taking into account each NEO’s

individual responsibility, experience and overall performance, as well as internal comparisons of pay within the executive group.

 

In setting compensation, the Compensation Committee reviews the estimated accounting and tax impact of all elements of the executive compensation program. Generally, an accounting expense is accrued over the requisite service period of the particular pay element (generally equal to the performance period) and the Company realizes a tax deduction upon payment to, or realization by, the executive. The Compensation Committee has been advised that, based on current interpretations, stock options awarded under the Incentive Award Plan should satisfy the requirements for performance-based compensation under Internal Revenue Code Section 162(m). In addition, the Compensation Committee has been advised that Mr. Kingsley’s annual incentive compensation under the Incentive Award Plan should satisfy the requirements for performance-based compensation under Section 162(m). The Compensation Committee has been made aware that restricted stock awards (which vest based on continued employment with the Company) do not qualify as performance-based compensation and, therefore, may not be tax-deductible under Section 162(m).

 

A goal of the Compensation Committee is to comply with the requirements of Section 162(m). Section 162(m) limits the tax deductibility by the Company of annual compensation in excess of $1,000,000 paid to the CEO and any of the three other most highly compensated executive officers, other than the CFO. While the tax impact of any compensation arrangement is one factor to be considered, such impact is evaluated in light of the Compensation Committee’s overall compensation philosophy and objectives. The Compensation Committee considers ways to maximize the deductibility of executive compensation, while retaining the discretion it deems necessary to compensate officers in a manner commensurate with performance and the competitive environment for executive talent. From time to time, the Compensation Committee may award compensation to the executive officers which is not fully deductible if it determines that such award is consistent with its philosophy and is in the Company’s and stockholders’ best interests.

 

Base Salary

 

Base salaries are reviewed annually and may be adjusted to reflect market competitiveness, Company operating performance, and individual performance. Factors taken into account to increase or decrease base salary include significant changes in individual job responsibilities and the growth of the Company. For 2009, base salaries were frozen at 2008 levels due to the challenging and uncertain economic climate at the time the salaries were set.

 

Short-Term Incentives — Annual Bonus

 

NEOs other than the CEO

 

All NEOs, other than Mr. Kingsley, participate in the Company’s Management Incentive Compensation Plan (MICP). The MICP provides participants with the opportunity to earn annual cash bonuses. Annual cash bonuses under the MICP historically have been targeted in the 50th to 75th percentile range of market, with higher payouts for above-target performance and lower payouts for below-target performance. Targeted MICP payouts for 2009 were frozen at 2008 levels.

 

The amount of the annual cash bonus paid to each participant under the MICP is determined under the following formula:

 

Annual Bonus = Individual Target Bonus x Business Performance Factor x Personal Performance Multiplier

 

 

 

Due to uncertainty of the business environment in 2009 and the difficulty in predicting revenues, the Compensation Committee and management determined that it was in the best interests of the Company to protect the profitability and cash flow of the business. Therefore, the earnings and cash flow metrics reflected in the tables below were selected as the measurable corporate and business quantitative objectives for 2009. On April 7, 2009, the Compensation Committee amended the MICP to provide that no bonus would be payable under the Plan unless the minimum threshold for adjusted earnings per share (EPS) for 2009 was met. The threshold adjusted EPS for 2009 was established to be $1.40 for NEOs. Adjusted EPS excludes restructuring charges and fair value adjustments to inventory related to acquisitions.

 

The measurable quantitative objectives within the Business Performance Factor, their relative weightings, and actual performance against such objectives for Messrs. Romeo, Notaro and Morgan, were as follows:

 

 

The measurable quantitative objectives within the Business Performance Factor, their relative weightings, and actual performance against such objectives using the applicable business unit results for Mr. McMurray, were as follows:

 

 

For 2009, the internally-assessed business unit quantitative objective was product innovation, weighted at 10%. Product innovation was measured as sales from new products and new markets in the last three years which were accretive to a business unit’s gross margin rate. The goal for an individual business unit is to be at or above the Company median. Actual awards are subjectively determined based on a particular business unit’s performance.

 

The qualitative objectives are behavior-oriented toward business and process leadership. Actual awards are subjectively determined based on a business unit’s performance.

The Compensation Committee may, in its discretion, further adjust the Business Performance Factor to account for environmental conditions and adjust for factors (such as acquisition consummation and integration, and performance in a challenging economic environment) not fully reflected in the quantitative and qualitative objectives. Over the past 10 years, the Business Performance Factor for the NEOs participating in the MICP has been at or above 100% for four years, and below 100% for six years. For 2009, performance against the quantitative and qualitative factors resulted in a recommended Business Performance Factor of 97% for Messrs. Romeo, Notaro and Morgan, and 81% for Mr. McMurray. For the NEOs who received a bonus under the MICP in 2009, the Personal Performance Multipliers for 2009 were 1.20 and 1.15. In view of the economic conditions of 2009, the Compensation Committee determined that the calculated Business Performance Factor for Mr. McMurray did not properly reflect the leadership exhibited by Mr. McMurray in preserving profitability during a 15% decline in revenues for his units. Accordingly, Mr. McMurray’s award was adjusted upward by $100,000.

 

CEO

 

The CEO’s annual incentive bonus takes the form of a cash performance award that is based on achieving a consolidated operating income target. The maximum amount of the performance award that the CEO can receive under the terms of the Company’s Incentive Award Plan for any year is 2% of the Company’s operating income for the year, which is greater than the maximum annual cash bonus he could receive if he were a participant in the MICP. However, the Compensation Committee is allowed to reduce (and historically always has reduced) the amount of the award based on other quantitative and qualitative criteria. The CEO receives a performance cash award rather than an annual cash bonus under the MICP in order that the award will be deductible under Internal Revenue Code Section 162(m). If the CEO was a participant in the MICP (which permits upward adjustments based on qualitative factors instead of only downward adjustments as permitted under the Company’s Incentive Award Plan), the CEO’s annual cash bonus under the MICP would not be deductible under Section 162(m).

 

In 2009, the Compensation Committee granted Mr. Kingsley a performance award with a maximum payment amount of 1% of the Company’s 2009 operating income. Mr. Kingsley would receive no bonus if the Company did not achieve operating income of $141.0 million. The Compensation Committee set Mr. Kingsley’s actual performance award for 2009 at $1,000,000. In setting the actual award, the Compensation Committee considered the actual performance of the Company (based on the same factors described above under the Business Performance Factor for corporate participants), its subjective assessment of Mr. Kingsley’s individual performance and the amount that Mr. Kingsley would have earned as an annual cash bonus if he participated in the MICP on substantially the same terms as the other corporate NEOs.

 

Long-Term Incentives

 

Generally, long-term incentive award guidelines are established such that the value of the awards for a given executive is consistent with the Company’s desire to deliver total compensation in the 50th to 75th percentile range of market. Each NEO’s award level, other than Mr. Kingsley’s, is based on Mr. Kingsley’s recommendation to the Compensation Committee, which is based on his subjective assessment of the individual’s performance and, to a lesser extent, his subjective assessment of the Company’s performance. Mr. Kingsley’s award level is determined by the Compensation Committee’s subjective and discretionary determination of his performance and, to a lesser extent, its subjective view of the Company’s performance. The actual value delivered may vary above or below the target value based on the performance of the Company’s stock over time, and the timing of the executive’s decision to realize such value.

 

Long-term incentive awards for the NEOs are structured to provide approximately 50% of the expected value in the form of stock options and 50% of the expected value in the form of restricted stock awards. The Compensation Committee believes that stock options and restricted stock incent management actions that drive the creation of stockholder value and promote executive stock ownership. However, stock options and restricted stock have different characteristics. Stock options provide value only to the extent that the Company’s stock price appreciates above the stock price on the date of grant. Restricted stock awards provide value regardless of whether the Company’s stock price appreciates, and

help retain executives over the course of business and market cycles that may negatively impact the Company’s operations and stock price in the short term. Because at the time of grant option shares have a lower expected value than restricted stock awards, relatively more option shares are awarded. Stock option and restricted stock awards are approximately equally weighted for all NEOs to reflect the Compensation Committee’s belief that stock price appreciation, retention of executives and executive stock ownership are all important objectives. Stock option and restricted stock awards are generally made on an annual basis, or at the time of a special event (such as upon hiring or promotion). Historically, we have usually made awards on the date of the annual meeting, or the first Compensation Committee meeting of a year. However, we have not adopted specific guidelines as to the timing of such awards but attempt not to make awards during any periods when we have non-public information which could impact our stock price.

 

In 2009, the expected values of the long-term incentive awards were approximately 25% below 2008 levels (exclusive of the special 2008 awards to Messrs. Kingsley and Romeo, and exclusive of the special 2009 awards to Messrs. McMurray and Morgan discussed below) in recognition of the challenging economic environment, to prevent any potential windfall which could result by reason of the Company’s low stock price at the time of the grant, and to prudently manage share usage under the Company’s Incentive Award Plan. In addition to the normal annual long-term incentive stock option and restricted stock grants, in 2009, the Compensation Committee made additional stock option grants to Messrs. McMurray and Morgan in the amount of 20,000 options and 32,500 options, respectively. These grants were intended to improve retention during a period of challenging economic conditions.

 

Stock Ownership

 

Consistent with its executive pay philosophy, the Company requires that all corporate and operating officers maintain minimum ownership levels of the Company’s Common Stock. The following stock ownership guidelines for NEOs were established by the Board of Directors in 2006.

 

 

The CEO, CFO and the other NEOs must comply with these ownership requirements within five years of adoption in 2006, or date of hire, whichever is later. Shares that are counted for purposes of satisfying ownership requirements are shares directly owned, unvested restricted shares, and shares underlying restricted stock units and DCUs. As of December 31, 2009, the CEO, CFO and the other NEOs were proceeding towards meeting the ownership guidelines within the specified five-year period.

 

Currently, the Company has no explicit policy prohibiting the hedging of its stock, although the practice is discouraged.

 

Employee Benefits

 

The NEOs participate in health, welfare and qualified retirement programs available to all U.S.-based non-union employees. The Company also provides executives with nonqualified retirement plans, deferred compensation arrangements and supplemental disability benefits. Participation in these nonqualified plans is intended to provide executives with the opportunity to accumulate benefits and wealth over time. For a more complete explanation of these plans, see the narratives following the 2009 Summary Compensation Table, the Pension Benefits at 2009 Fiscal Year End table, the Nonqualified Deferred Compensation at 2009 Fiscal Year End table, and the discussion under Potential Payments upon Termination or Change in Control.

Severance and Change in Control Benefits

 

Mr. Kingsley is entitled to severance benefits under the terms of his employment agreement if his employment is actually or constructively terminated without cause. Messrs. Morgan and Romeo are entitled to severance benefits under the terms of their employment offer letters with the Company in the event their employment is terminated without cause. In each case, the amount of the benefit, which varies with the individual, depends upon whether or not such termination is in connection with a change in control. Such severance benefits were the subject of negotiations with each individual at the time of their hire and were deemed a necessary condition to hiring. The level of each of Messrs. Kingsley’s, Romeo’s and Morgan’s severance benefits is reflective of the Company’s perception of the market for their positions. Mr. Kingsley’s severance was adjusted upon his promotion in 2005 to include 100% of his bonus, rather than 75% as provided under his original contract. This adjustment was intended to bring his severance in line with severance for chief executive officers in general. Both Messrs. McMurray and Notaro are entitled to severance benefits under the terms of written agreements in the event that their employment is actually or constructively terminated without cause in connection with a change in control, or under the Company’s severance policy in the event their employment is terminated without cause other than in connection with a change in control.

 

2009 Summary Compensation Table

 

The table below summarizes the total compensation earned in 2009, 2008 and 2007 for the Company’s CEO, CFO, and each of the three most highly compensated executive officers other than the CEO and CFO.

 

 

 

 

 

 

Narrative to Summary Compensation Table

 

Perquisites and Supplemental Disability

 

In addition to benefits generally available to all other U.S.-based non-union employees, the CEO and other NEOs receive a car allowance and participate in a supplemental long-term disability program. The supplemental disability benefit is in addition to the group long-term disability benefit generally available to all U.S.-based non-union employees. The group long-term disability plan provides an annual benefit of 60% of the first $200,000 of base salary, or an annual maximum benefit of $120,000 per year. For the NEOs other than the CEO, the supplemental program provides an annual benefit of 60% of their base salary above $200,000, with a maximum supplemental benefit of $36,000 per year. For the CEO, the supplemental program provides an annual benefit of 60% of base salary above $200,000, with a maximum supplemental benefit of $240,000 per year. The NEOs pay the premiums on all such insurance, but the Company provides a year-end allowance to the executives equal to the supplemental program premium costs together with a gross-up on the taxes associated with such year-end allowance. The CEO is also offered the personal use of corporate aircraft (limited to 25 hours per year), and a Company-paid membership at a country club. To date, Mr. Kingsley has elected not to utilize the country club membership.

 

Retirement Benefits

 

The Company maintains three tax-qualified retirement plans for all U.S.-based non-union employees in which the CEO and other NEOs may participate. The IDEX Corporation Retirement Plan (the “Pension Plan”) is a defined benefit pension plan, in which only one NEO actively participates. The CEO and NEOs who are not actively participating in the Pension Plan participate in the IDEX Corporation Defined Contribution Plan (the “Defined Contribution Plan”). Additionally, all NEOs are eligible to participate in the IDEX Corporation Savings Plan (the “401(k) Plan”), which is a 401(k) plan with a prescribed Company matching contribution.

 

Defined Contribution Plan

 

The Defined Contribution Plan is an ongoing, tax-qualified, “defined contribution” plan that provides an annual contribution based on a participant’s compensation for that year and a combination of the participant’s age and years of service as shown below:

 

 

Under the Defined Contribution Plan, participants are entitled to receive the lump sum value of their vested account at termination of employment subject to distribution rules under the law.

 

401(k) Plan

 

The 401(k) Plan is an on-going, tax-qualified, “401(k)” plan that provides a matching contribution based on the employee’s contribution up to 8% of eligible compensation. The maximum matching contribution by the Company is either 2.8% of eligible compensation, if the employee is currently accruing

benefits under the Pension Plan, or 4.0% of eligible compensation, if the employee participates in the Defined Contribution Plan.

 

Pension Plan

 

During 2005, the Company redesigned its retirement plans to eliminate the Pension Plan for employees hired after 2004 and provide them only the Defined Contribution Plan. Employees who participated in the Pension Plan as of December 31, 2005, and who met certain age and service requirements, were given the one-time opportunity to choose:

 

 

Mr. McMurray is the only NEO actively participating in the Pension Plan. Based on their individual elections, Messrs. Kingsley, Romeo and Notaro chose to begin participation in the Defined Contribution Plan and not to accrue benefit credits after December 31, 2005 under the Pension Plan. Each of them still has a frozen benefit under the Pension Plan as of December 31, 2005. Therefore, the monthly accrued benefit for Messrs. Kingsley, Romeo and Notaro under the Pension Plan upon retirement at age 65 will not change, although the present value of such benefit will change from year to year. Mr. Morgan was hired in 2008, and therefore is ineligible for the Pension Plan.

 

2009 Grants of Plan-Based Awards

 

The following table provides information on plan-based awards for all NEOs for 2009.

 

 

 

 

Narrative to 2009 Grants of Plan-Based Awards Table

 

Stock options awarded to the NEOs in 2009 had the following characteristics:

 

 

Restricted stock awards to the NEOs in 2009 had the following characteristics:

 

 

Outstanding Equity Awards at 2009 Fiscal Year End

 

The following table provides information on all restricted stock and stock option awards held by the NEOs and the value of those awards as of December 31, 2009. All outstanding equity awards are in or exercisable for shares of the Company’s Common Stock.

 

 

 

 

 

 

 

2009 Option Exercises and Stock Vested

 

The following table provides information on stock option exercises and stock vesting for all NEOs in 2009.

 

 

 

 

Pension Benefits at 2009 Fiscal Year End

 

The following table provides information related to the potential pension benefits payable to each NEO.

 

 

 

 

Narrative to Pension Benefits at 2009 Fiscal Year End Table

 

Pension Plan

 

The Pension Plan is an on-going, tax-qualified, “career average” retirement plan that provides a level of benefit based on a participant’s compensation for a year with periodic updates to average compensation over a fixed five-year period. Under the Pension Plan, participants are entitled to receive an annual benefit on retirement equal to the sum of the benefit earned through 1995 using the five-year average compensation of a participant through 1995, plus the benefit earned under the then current formula for each year of employment after 1995. For each year of participation through 1995, a participant earned a benefit equal to 1.25% of the first $16,800 of such average compensation through 1995, and 1.65% of such compensation in excess of $16,800. Beginning January 1, 1996, the benefit earned equals the sum of 1.6% of the first $16,800 of each year’s total compensation, and 2.0% for such compensation in excess of $16,800, for each full year of service credited after 1995. As required by law, compensation counted for purposes of determining this benefit is limited. For all participants in the Pension Plan, the normal form of retirement benefit is payable in the form of a life annuity with five years of payments guaranteed. Other optional forms of payment are available.

 

SERP

 

The SERP is an unfunded, nonqualified supplemental employee retirement plan designed to provide deferred compensation for officers and other key employees to compensate them for any benefits lost under the Company’s tax-qualified retirement programs due to limits on compensation and benefits under these tax-qualified plans. Benefits are payable upon separation of service within the meaning of Internal Revenue Code Section 409A; however, no benefits are payable prior to the date that is six months after the

date of separation of service, or the date of death of the employee, if earlier. The SERP has three parts, one of which provides that if the employee participates or had participated in the Pension Plan, then the employee will receive an excess benefit (“DB Excess Benefit”) under a formula equivalent to the tax-qualified Pension Plan formula. Such formula will only consider eligible compensation above the Internal Revenue Code limits and will restore any limits on the maximum amount of benefits which may be accrued under a qualified retirement plan. A DB Excess Benefit will only be accrued for the appropriate period of service that the employee was an active participant in the Pension Plan. For the period of service that the employee accrues a DB Excess Benefit, the employee is not eligible to accrue benefits under the other two parts of the SERP, a DC Excess Benefit or a 401(k) Restoration Benefit, which are more fully described in the narrative to the Nonqualified Deferred Compensation at 2009 Fiscal Year End table below.

 

Nonqualified Deferred Compensation at 2009 Fiscal Year End

 

The following table provides information related to the potential benefits payable to each NEO under the Company’s nonqualified deferred compensation plans:

 

 

 

 

Narrative to the Nonqualified Deferred Compensation at 2009 Fiscal Year End Table

 

As discussed above, the SERP is a nonqualified deferred compensation plan with two defined contribution components, namely the DC Excess Benefit and the 401(k) Restoration Benefit.

 

Defined Contribution Excess Benefit.  If the employee participates in the Defined Contribution Plan, then the employee will receive an excess benefit (“DC Excess Benefit”) under a formula equivalent to the tax-qualified Defined Contribution Plan formula. This formula will only consider eligible compensation above Internal Revenue Code limits and will restore any benefits limited under the Defined Contribution Plan. A DC Excess Benefit will only be accrued for the appropriate period of service that the employee is an active participant in the Defined Contribution Plan. For the period of service that the employee accrues a DC Excess Benefit, the employee is not eligible to accrue a DB Excess Benefit (described in the narrative to the Pension Benefits at 2009 Fiscal Year End table), but is eligible to receive a 401(k) Restoration Benefit (as described below). Any benefits that accrue in the defined contribution portion of the SERP are credited with interest, as determined by the Company, on at least a quarterly basis, based on an interest rate equal to the Barclays Capital Long Term Bond AAA — Corporate Bond Index as determined on the first business day of December prior to the calendar year.

 

401(k) Restoration Benefit.  Beginning in 2006, if an employee participates in the Defined Contribution Plan, then the employee will receive a restoration benefit (“401(k) Restoration Benefit”) equal to 4% of eligible compensation above the limit on compensation under the Defined Contribution Plan and 401(k) Plan without regard to the limit on the maximum amount of tax-deferred contributions a participant can make under such plans. Employees are not required to make any deferrals to any non qualified plan to receive this benefit. A 401(k) Restoration Benefit will only be accrued for the appropriate period of service that the employee was an active participant in the Defined Contribution Plan. For the period of service that

the employee accrues a DB Excess Benefit (described in the narrative to the Pension Benefits at 2009 Fiscal Year End table), the employee is not eligible to receive a 401(k) Restoration Benefit. Any benefits that accrue in the 401(k) Restoration Benefit portion of the SERP are credited with interest, as determined by the Company, on at least a quarterly basis, based on an interest rate equal to the Barclays Capital Long Term Bond AAA — Corporate Bond Index as determined on the first business day of December prior to the calendar year.

 

Officers Deferred Compensation Plan.  The Officers Deferred Compensation Plan allows corporate and operating officers to defer eligible employee compensation above the compensation limits applicable under the tax-qualified plans. Participants can defer their compensation into either an interest-bearing account or a deferred compensation units account as of the date that such compensation would otherwise be payable. The deferred compensation credited to the interest-bearing account is credited with interest, as determined by the Company, on at least a quarterly basis, based on an interest rate equal to the Barclays Capital Long Term Bond AAA — Corporate Bond Index as determined on the first business day of December prior to the calendar year. Deferred compensation credited to the deferred compensation units account is converted into a number of DCUs, which represent equivalent shares of the Company’s Common Stock. The number of DCUs is determined by dividing the amount deferred by the closing price of the Company’s Common Stock the day before the date of deferral. The DCUs are entitled to receive dividend equivalents which are reinvested in DCUs based on the same formula for investment of a participant’s deferral. Both of these accounts are payable upon separation of service within the meaning of Internal Revenue Code Section 409A; however, no benefits are payable prior to the date that is six months after the date of separation of service, or the date of death of the employee, if earlier. Mr. McMurray is the only NEO who is participating in the Officers Deferred Compensation Plan.

 

Potential Payments upon Termination or Change in Control

 

The Company entered into an employment agreement with Mr. Kingsley when he was employed as Chief Operating Officer. This agreement was amended effective March 22, 2005 to reflect his promotion to President and Chief Executive Officer. His agreement was amended in 2008 to comply with the requirements of Section 409A. The employment agreement provides for an initial term of five years and successive twelve-month terms thereafter. If Mr. Kingsley’s employment is terminated by the Company other than for cause, he will receive continuing salary payments and health benefits for 24 months, a bonus equal to a pro-rata portion of 100% of his base salary (based on the portion of the year he was employed), and a payment equal to 200% of his base salary payable over 24 months commencing six months after his termination. If Mr. Kingsley’s employment is terminated because of disability, he will receive a bonus payment equal to a pro-rata portion of 100% of his base salary (based on the portion of the year he was employed). Additionally, if Mr. Kingsley should die during the term of the agreement, Mr. Kingsley’s wife or estate will receive a bonus payment equal to a pro-rata portion of 100% of his base salary (based on the portion of the year he was employed). If his employment is terminated without cause or he terminates it for certain specified reasons following a change in control, Mr. Kingsley will receive his full salary and health insurance for a period of 36 months following termination, a pro-rata portion of his bonus for the year of his termination, and a payment equal to 300% of his base salary, payable over 36 months all commencing six months after his termination.

 

The Company has entered into an employment letter agreement with Mr. Romeo. The agreement does not provide for a fixed term and may be terminated at any time. If Mr. Romeo’s employment is terminated by the Company other than for cause, he will be entitled to receive continuing salary payments for 18 months. In the event Mr. Romeo is terminated within two years following a change in control, the Company will be obligated to continue paying Mr. Romeo his salary and his then target MICP bonus for two years.

 

The Company has entered into letter agreements with each of Messrs. McMurray and Notaro providing for three years of salary and bonus and two years of fringe benefits in the event either is actually or constructively terminated without cause within two years following a change of control.

Otherwise Messrs. McMurray and Notaro are only eligible for severance based on the Company’s general severance policy available to all employees. Historically, the Company has paid severance in excess of the policy amount in the event an executive has been terminated without cause.

 

The Company has entered into an employment letter agreement with Mr. Morgan. The agreement does not provide for a fixed term and may be terminated at any time. If Mr. Morgan’s employment is terminated by the Company other than for cause, he will be entitled to receive continuing salary payments and target MICP for 12 months. In the event Mr. Morgan is terminated within two years following a change in control, the Company will be obligated to continue paying Mr. Morgan his salary and his then target MICP bonus for two years.

 

The following table sets forth the amount each NEO would receive as severance or as a result of accelerated vesting if his employment was terminated without cause or for good reason, in connection with or absent a change in control using the following assumptions:

 

 

 

AUDIT COMMITTEE REPORT

 

For the year ended December 31, 2009, the Audit Committee has reviewed and discussed the audited financial statements with management and the independent registered public accounting firm, Deloitte & Touche LLP. The Committee discussed with Deloitte & Touche LLP the matters required to be discussed by the Statement of Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1 AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T, and reviewed the results of the independent registered public accounting firm’s examination of the financial statements.

 

The Committee also received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding Deloitte & Touche LLP’s communications with the Audit Committee concerning independence, discussed with the auditors their independence, and satisfied itself as to the auditors’ independence.

 

Based on the above reviews and discussions, the Audit Committee recommends to the Board of Directors that the financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2009, for filing with the Securities and Exchange Commission.

 

Notwithstanding anything to the contrary set forth in any of the Company’s previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings made by the Company under those statutes, in whole or in part, this report shall not be deemed to be incorporated by reference into any such filings, nor will this report be incorporated by reference into any future filings made by the Company under those statutes.

 

Bradley J. Bell, Chairman
Ruby R. Chandy
William M. Cook
Neil A. Springer

 

PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The aggregate fees billed to the Company for each of the last two fiscal years for professional services rendered by the Company’s principal accounting firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, the Deloitte Entities), are set forth in the table below. All such fees were pre-approved by the Audit Committee in accordance with the pre-approval policy discussed below.

 

 

 

 

Pre-Approval Policies and Procedures

 

The Audit Committee has adopted a policy that requires the pre-approval of audit and non-audit services rendered by the Deloitte Entities. For audit services, the accounting firm provides the Audit Committee with an audit services plan during the first quarter of each fiscal year outlining the scope of the audit services proposed to be performed for the fiscal year and the associated fees. This audit services plan must be formally accepted by the Audit Committee. For non-audit services, management submits to the Audit Committee for approval during the first quarter of each fiscal year and from time-to-time during the fiscal year a list of non-audit services that it recommends the Audit Committee engage the accounting firm to provide for the current year, along with the associated fees. Company management and the accounting firm each confirm to the Audit Committee that any non-audit service on the list is permissible under all applicable legal requirements. The Audit Committee approves both the list of permissible non-audit services and the budget for such services. The Audit Committee delegates to the Chairman the authority to amend or modify the list of approved permissible non-audit services and fees. The Chairman reports any actions taken to the Audit Committee at a subsequent Audit Committee meeting.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s officers, directors and persons who own more than 10% of the Company’s Common Stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the New York Stock Exchange. Officers, directors and greater than 10% stockholders are required by Securities and Exchange Commission regulations to furnish the Company with copies of all Section 16(a) forms that they file. Based solely on its review of the copies of the forms it received, or written representations from reporting persons, the Company believes that all filing requirements applicable to its officers, directors and greater than 10% stockholders were met during the year ended December 31, 2009.

 

PROPOSAL 2 — APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE
IDEX CORPORATION INCENTIVE AWARD PLAN

 

The Board is submitting for shareholder approval the amendment and restatement of the IDEX Corporation Incentive Award Plan (the Plan) which, among other things, increases the number of shares available for grant under the Plan. As of March 3, 2010 there were approximately 560,000 shares available for future grants under the Plan. The amendment and restatement of the Plan would increase that number by 3,500,000 shares.

 

The Plan provides equity compensation to the Board, employees and consultants and is necessary in order to maintain competitive compensation practices and to align the interests of our Board, employees and consultants with our shareholders, in accordance with our executive compensation philosophy. If the amendment and restatement of the Plan is not approved, our ability to grant awards under the Plan will be limited and we will be limited in the ability to use equity compensation as a tool for aligning our Board’s, employees’ and consultants’ interests with our shareholders’ interests. We believe the Plan properly balances its compensatory design with shareholder interests by having the following characteristics:

 

 

In addition, in order to address potential stockholder concerns regarding the number of options, SARs and other equity awards that the Company intends to grant in a given year, the Compensation Committee commits to the Company’s shareholders that for fiscal years 2010, 2011 and 2012, it will limit the annual “burn rate” for the number of options, SARs and other equity awards that it grants under the Plan to 2.735%, which is the average of the 2009 and the 2010 “burn rate” limit for the Capital Goods segment established by RiskMetrics Group. For purposes of calculating the “burn rate” in a fiscal year, “full value awards,” such as restricted stock, restricted stock units, deferred stock, performance awards, or stock payments where the participant does not pay the intrinsic value for such Award, will count as equivalent to 2.0 option shares and the number of shares of the Company’s common stock will be the amount outstanding at the end of the applicable fiscal year.

 

On February 23, 2010, the Compensation Committee approved and adopted the amended and restated Plan, subject to approval by the Board of Directors. On February 23, 2010, the Board of Directors approved and adopted the amended and restated Plan, subject to approval by our shareholders.

 

The principal features of the Plan are summarized below, but the summary is qualified in its entirety by reference to the Plan itself, which is included as Appendix A.

 

The Plan provides for the grant of incentive stock options (ISOs), as defined in Section 422 of the Code, non-statutory stock options, restricted stock, restricted stock units, SARs, deferred stock, dividend equivalent rights, performance awards and stock payments (collectively referred to as Awards) to our employees, consultants and directors.

 

Under the current terms of the Plan, the aggregate number of shares of Common Stock that may be issued under Awards is 7,100,000 shares, and the number of shares that may be issued under “full value awards,” is 1,500,000. Approximately 1,440,000 shares have been issued as “full value awards” under the Plan to date. The amendment and restatement of the Plan, if approved, would increase the number of

shares that may be issued under Awards by 3,500,000, so that a total of 10,600,000 shares would be available for grant as Awards under the Plan, and would increase the number of shares that may be issued under “full value awards” by 1,000,000, so that a total of 2,500,000 shares would be available for grant as “full value awards” under the Plan. Since approximately 1,440,000 shares have been issued as “full value awards” under the Plan to date, approximately 1,060,000 shares may be granted as “full value awards” going forward, plus any full value awards previously granted which may be forfeited and returned to the plan for future grant.

 

In addition to the increase in the number of shares available under the Plan, other technical and clarifying amendments were included in the amendment and restatement of the Plan. Accordingly, in order to continue providing equity-based compensation to our employees, consultants and directors, we are recommending approval of the amendment and restatement of the Plan. If the amended and restated Plan is not approved, then the Plan will remain as currently in effect.

 

Shares Subject to the Plan

 

Under the Plan as amended and restated, the aggregate number of shares of Common Stock that may be granted is 10,600,000. The Plan provides for specific limits on the number of shares that may be subject to different types of Awards:

 

 

The shares subject to the Plan, the limitations on the number of shares that may be awarded under the Plan, and shares and option prices subject to Awards outstanding under the Plan, will be adjusted as the Plan administrator deems appropriate to reflect stock dividends, stock splits, combinations or exchanges of shares, merger, consolidation, spin-off, recapitalization, or other similar transactions.

 

Notwithstanding any provision in the Plan to the contrary, no option may be awarded to reduce the per share exercise price of the shares subject to the option below the exercise price as of the date the option is granted, and no option may be granted in exchange for, or in connection with, the cancellation or surrender of an option having a higher per share exercise price.

 

Shares subject to Awards that have expired, been forfeited or settled in cash, or otherwise terminated without having been exercised may be added back to the Plan, and may be granted as new Awards. Shares which are used to pay the exercise price for an option or stock appreciation right, shares withheld to pay taxes, and shares repurchased by the Company other than by reason of a forfeiture provision will be cancelled, and will not be added back to the number of shares available for grant under the Plan. Shares granted under the Plan may be previously authorized but unissued shares, or reacquired shares bought on the open market or otherwise.

 

On March 3, 2010, the closing price of a share of Common Stock on the New York Stock Exchange was $31.59.

Administration

 

Generally, the Compensation Committee of our Board (the “Committee”) will administer the Plan. The Committee will consist of at least two members of the Board who are “non-employee” directors for purposes of Rule 16b-3(b)(3) of the Exchange Act, “independent directors” under the rules of the New York Stock Exchange, and “outside directors” under Section 162(m) of the Code. The Committee has the authority to:

 

 

The Committee may delegate its authority to grant or amend Awards with respect to participants other than senior executive officers, employees covered by Section 162(m) of the Code or the officers to whom the authority to grant or amend Awards has been delegated. In addition, the full Board, acting by majority, will conduct the general administration of the Plan with respect to Awards granted to directors who are not employees of the Company.

 

The Committee, with the approval of the Board, may also amend the Plan. Amendments to the Plan are subject to shareholder approval to the extent required by law, or New York Stock Exchange rules or regulations. Additionally, shareholder approval will be specifically required to increase the number of shares available for issuance under the Plan; allow for the grant of options or stock appreciation rights with an exercise price that is below fair market value on the date of grant; extend the term of an option or a stock appreciation right beyond ten years; or otherwise materially increase the benefits or change eligibility requirements.

 

The Board may exercise the rights and duties of the Committee, except with respect to matters which are required to be determined in the sole discretion of the Committee under Rule 16b-3 of the Exchange Act or Section 162(m) of the Code.

 

Eligibility

 

Awards under the Plan may be granted to individuals who are our employees or employees of our subsidiaries, our directors and our consultants. However, options which are intended to qualify as ISOs may only be granted to employees.

 

Awards

 

The following will briefly describe the principal features of the various Awards that may be granted under the Plan.

 

Options.  Options provide for the right to purchase Common Stock at a specified price, and usually will become exercisable in the discretion of the Committee in one or more installments after the grant date, but generally not earlier than three years from the grant date. However, options granted to non-employee directors will not become exercisable before one year from the grant date. The option exercise price may

be paid in cash, by check, shares of Common Stock which have been held by the option holder for such period of time as may be required by the Committee to avoid adverse accounting consequences, other property with value equal to the exercise price, through a broker assisted cashless exercise, a loan, provided such loan does not otherwise violate Section 13(k) of the Securities Exchange Act, or such other methods as the Committee may approve from time to time. The Committee may at any time substitute SARs for options granted under the Plan.

 

Options may be granted for any term specified by the Committee, but shall not exceed ten years. Options may not be granted at an exercise price that is less than the fair market value of our Common Stock on the date of grant. For purposes of the Plan, fair market value is defined as the closing price for Common Stock on the NYSE on the grant date (or, if no sale occurred on such date, then on the first immediately preceding date during which a sale occurred), as reported in the Wall Street Journal (or another similar reliable source). Additionally, the Committee may not without stockholder approval reprice any options, including the cancellation of options in exchange for options with a lower exercise price.

 

Options may take two forms, nonstatutory options (NSOs) and ISOs.

 

ISOs will be designed to comply with the provisions of the Code and will be subject to certain restrictions contained in the Code in order to qualify as ISOs. Among such restrictions, ISOs must:

 

 

If an Award purported to be an ISO fails to meet the requirements of the Code, then the Award will instead by considered to be a NSO.

 

Restricted Stock.  Restricted stock is the grant of shares of Common Stock at a price determined by the Committee (which price may be zero), is nontransferable and, unless otherwise determined by the Committee at the time of award, may be forfeited upon termination of employment or service during a restricted period. The Committee also determines in the Award agreement whether the participant will be entitled to vote the shares of restricted stock and or receive dividends on such shares.

 

Stock Appreciation Rights.  SARs provide for the payment to the holder based upon increases in the price of Common Stock over a set base price, which may not be less than the fair market value of Common Stock on the date of grant. Payment for SARs may be made in cash, Common Stock or any combination of the two. The Committee may not without stockholder approval reprice any SARs, including the cancellation of SARs in exchange for options or SARs with a lower exercise price. SARs become exercisable in the discretion of the Committee in one or more installments after the grant date, but generally not earlier than three years from the grant date. However, SARs granted to non-employee directors will generally become exercisable within one year from the grant date. SARs may be granted for any term specified by the Committee, but shall not exceed ten years.

 

Restricted Stock Units.  Restricted stock units represent the right to receive shares of Common Stock at a specified date in the future, subject to forfeiture of such right. If the restricted stock unit has not been forfeited then, on the date specified in the restricted stock unit award, we shall deliver to the holder of the restricted stock unit unrestricted shares of Common Stock which will be freely transferable. The Committee will specify the purchase price, if any, to be paid by the grantee for the Common Stock.

Dividend Equivalents.  Dividend equivalents represent the value of the dividends per share of Common Stock paid by the Company, calculated with reference to the number of shares covered by an Award (other than a dividend equivalent Award) held by the participant. No dividends or dividend equivalent Awards will be paid on unvested performance Awards.

 

Performance Share Awards.  Performance share awards are denominated in shares of Common Stock and are linked to satisfaction of performance criteria established by the Committee. If the Committee determines that the Award is intended to meet the requirements of “qualified performance based compensation” and therefore be deductible under Section 162(m) of the Code, then the performance criteria on which the Award will be based shall be with reference to any one or more of the following: net earnings (either before or after interest, taxes, depreciation and amortization), economic value-added (as determined by the Committee), sales or revenue, net income (either before or after taxes), operating earnings, cash flow (including, but not limited to, operating cash flow and free cash flow), return on capital, return on assets (net or gross), return on shareholders’ equity, return on sales, gross or net profit margin, productivity, expense margins, operating efficiency, customer satisfaction, working capital, earnings per share, price per share and market share, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group (the Performance Criteria).

 

Performance Stock Units.  Performance stock units are denominated in units equivalent to shares of Common Stock or units of value, including dollar value of shares of Common Stock, and are linked to satisfaction of performance criteria established by the Committee, including the Performance Criteria, on a specified date or dates over any period or periods.

 

Stock Payments.  Payments to participants of bonuses or other compensation may be made under the Plan in the form of Common Stock. The number of shares will be determined by the Committee, and may be based upon performance criteria, including the Performance Criteria.

 

Deferred Stock.  Deferred stock typically is awarded without payment of consideration and is subject to vesting conditions, including satisfaction of performance criteria, including the Performance Criteria. Like restricted stock, deferred stock may not be sold or otherwise transferred until the vesting conditions are removed or expire. Unlike restricted stock, deferred stock is not actually issued until the deferred stock award has vested. Recipients of deferred stock have no voting or dividend rights prior to the time when the vesting conditions are met and the deferred stock is delivered.

 

Performance Award.  Performance awards are payable in cash and are linked to satisfaction of performance criteria, including the Performance Criteria; provided, however, that no performance award may pay compensation in excess of 2% of the Company’s operating income. The Committee has the authority to reduce the amount otherwise payable under a performance award upon attainment of the Performance Criteria.

 

Vesting in Awards Other than Options

 

Awards for which the participant does not pay the intrinsic value of the shares of Common Stock, either directly or by forgoing a right to receive a cash or stock payment from the Company, such as restricted stock, restricted stock units, deferred stock, performance share awards and performance stock units, will vest over a period of not less than three years or, in the case of performance-based vesting for performance share awards and performance stock units, the performance period will be not less than one year.

 

Change in Control

 

Generally options and SARs granted under the Plan will become exercisable in full upon the consummation of a change in control (as defined in the Plan) and all restricted stock, restricted stock units, deferred stock or other performance awards will become payable upon a change in control, unless the Award is assumed by any successor upon such change in control, or the award agreement otherwise

provides. In connection with a change in control, the Committee may cause the Awards to terminate, but will give the holder of the Awards the right to exercise their outstanding Awards or receive their other rights under the Awards outstanding for some period of time prior to the change in control, even though the Awards may not be exercisable or otherwise payable.

 

Adjustments Upon Certain Events

 

The number and kind of securities subject to an Award, terms and conditions (including performance targets or criteria) and the exercise price or base price of outstanding Awards will be proportionately adjusted as the Committee deems appropriate, in its discretion, to reflect any stock dividends, stock split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization or other distribution (other than normal cash dividends) of Company assets to stockholders, or other similar changes affecting the shares other than an equity restructuring. In the event of any other change in the capitalization of the Company, including an equity restructuring, the Committee will make proportionate and equitable adjustments in the number and class of shares and the per share grant or exercise price for outstanding Awards as the Committee deems appropriate in its discretion to prevent dilution or enlargement of rights. In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares or share price of Common Stock, including an equity restructuring, the Company may in its sole discretion refuse to permit the exercise of any Award for a period of 30 days prior to the consummation of any such transaction.

 

Awards Not Transferable

 

Generally, the Awards may not be pledged, assigned or otherwise transferred other than by will or by laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Committee. The Committee may allow Awards other than ISOs to be transferred for estate or tax planning purposes to members of the holder’s family, charitable institutions or trusts for the benefit of family members. In addition, the Committee may allow Awards to be transferred to so-called “blind trusts” by a holder of an Award who is terminating employment in connection with the holder’s service with the government, an educational or other non-profit institution.

 

Miscellaneous

 

As a condition to the issuance or delivery of stock or payment of other compensation pursuant to the exercise or lapse of restrictions on any Award, the Company requires participants to discharge all applicable withholding tax obligations. Shares held by or to be issued to a participant may also be used to discharge tax withholding obligations, subject to the discretion of the Committee to disapprove of such use.

 

The amended and restated Plan will expire and no further Awards may be granted after April 6, 2020, which is the tenth anniversary of its approval by shareholders, assuming it is approved at this meeting.

 

Certain Federal Income Tax Consequences