Chart Industries, Inc. DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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No. )
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CHART INDUSTRIES, INC.
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than Registrant)
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Form, Schedule or Registration Statement No.:
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CHART
INDUSTRIES, INC.
One Infinity Corporate Centre Drive, Suite 300
Garfield Heights, Ohio
44125-5370
April 8,
2008
To the Stockholders of Chart Industries, Inc.:
This years Annual Meeting of Stockholders of Chart
Industries, Inc. will be held at 9:00 a.m., Central Time,
on Tuesday, May 20, 2008 at the offices of Chart
Energy & Chemicals, Inc., a wholly owned subsidiary of
Chart Industries, Inc., located at 8665 New Trails Drive,
Suite 100, The Woodlands, Texas (the Annual
Meeting). We will be reporting on Chart Industries,
Inc.s activities and you will have an opportunity to ask
questions about our operations.
We hope that you are planning to attend the Annual Meeting
personally and we look forward to seeing you. Whether or not
you expect to attend in person, the return of the enclosed proxy
card as soon as possible or the submission of a proxy by
telephone or the Internet by following the instructions on the
proxy card would be greatly appreciated and will ensure that
your shares will be represented at the Annual Meeting. If you do
attend the Annual Meeting, you may, of course, withdraw your
previously submitted proxy should you wish to vote in person.
On behalf of the Board of Directors and management of Chart
Industries, Inc., I would like to thank you for your continued
support and confidence.
Sincerely yours,
Chairman, Chief Executive Officer and President
TABLE OF CONTENTS
CHART
INDUSTRIES, INC.
One Infinity Corporate Centre
Drive, Suite 300
Garfield Heights, Ohio
44125-5370
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD MAY 20,
2008
To the Stockholders of Chart Industries, Inc.:
The Annual Meeting of Stockholders of Chart Industries, Inc.
will be held at 9:00 a.m., Central Time, on Tuesday,
May 20, 2008 at the offices of Chart Energy &
Chemicals, Inc., a wholly owned subsidiary of Chart Industries,
Inc., located at 8665 New Trails Drive, Suite 100, The
Woodlands, Texas (the Annual Meeting), for the
following purposes:
1. To elect seven Directors for a term of one year; and
2. To transact any other business as may properly come
before the Annual Meeting.
Only holders of the Companys Common Stock of record as of
the close of business on Tuesday, March 25, 2008 are
entitled to vote at the Annual Meeting. It is important that
your shares be represented at the Annual Meeting. For that
reason, we ask that you promptly sign, date and mail the
enclosed proxy card in the return envelope provided or submit a
proxy by telephone or the Internet by following the instructions
on the proxy card. Stockholders who attend the Annual Meeting
may revoke their previously submitted proxy and vote in person.
By Order of the Board of Directors,
Samuel F. Thomas
Chairman, Chief Executive Officer and President
YOUR VOTE IS IMPORTANT
WE URGE YOU TO COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE OR SUBMIT A PROXY BY
TELEPHONE OR THE INTERNET BY FOLLOWING THE INSTRUCTIONS ON
THE PROXY CARD. YOUR PROXY MAY BE REVOKED AT ANY TIME PRIOR TO
THE TIME IT IS VOTED AT THE ANNUAL MEETING.
CHART
INDUSTRIES, INC.
One Infinity Corporate Centre Drive, Suite 300
Garfield Heights, Ohio
44125-5370
PROXY
STATEMENT
ANNUAL MEETING OF
STOCKHOLDERS
Mailed on or about April 8, 2008
Why am I
receiving these materials?
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Chart
Industries, Inc. (the Company, Chart or
we) for use at the Annual Meeting on May 20,
2008 at 9:00 a.m., Central Time, and any adjournments or
postponements thereof. The time, place and purposes of the
Annual Meeting are stated in the Notice of Annual Meeting of
Stockholders accompanying this proxy statement.
Why do
the proxy materials contain additional information regarding the
Internet availability of proxy materials this year?
Pursuant to new rules adopted by the Securities and Exchange
Commission (the SEC), the Company will provide
access to our proxy materials over the Internet. Proxy materials
for the Companys Annual Meeting of Stockholders, including
the 2007 Annual Report and this proxy statement, are now
available over the Internet by accessing
http://ww3.ics.adp.com/streetlink/GTLS.
While the Company elected to mail complete sets of the proxy
materials for this years Annual Meeting, in the future you
may receive only a Notice of Internet Availability of Proxy
Materials and you will have to request to receive a printed set
of the proxy materials. Instructions on how to access the proxy
materials over the Internet or to request an additional printed
copy are available at www.proxyvote.com. You also can obtain a
printed copy of this proxy statement, free of charge, by writing
to: Secretary,
c/o Chart
Industries, Inc., One Infinity Corporate Centre Drive,
Suite 300, Garfield Heights, Ohio, 44125, by submitting a
request via email to matt.klaben@chart-ind.com or by telephone
at
216-626-1216.
Who is
paying for this proxy solicitation?
The expense of soliciting proxies, including the cost of
preparing, assembling and mailing the notice, proxy statement
and proxy, will be borne by us. We may pay persons holding our
common stock for expenses incurred in sending proxy materials to
their principals. In addition to solicitation of proxies by
mail, our Directors, officers and employees, without additional
compensation, may solicit proxies by telephone, electronically
via e-mail
and personal interview. We also may retain a third party to aid
in the solicitation of proxies.
What
voting rights do I have as a Stockholder?
On each matter to be voted on, you have one vote for each
outstanding share of our common stock (Common Stock)
you own as of March 25, 2008, the record date for the
meeting. Only stockholders of record at the close of business on
March 25, 2008 are entitled to receive notice of and to
vote at the Annual Meeting. On this record date, there were
28,318,191 shares of Common Stock outstanding and entitled
to vote. Stockholders do not have the right to vote cumulatively
in the election of Directors.
How do I
vote?
If you are a stockholder of record, you can vote (i) in
person at the Annual Meeting; or (ii) you can vote by
signing and mailing in your proxy card in the enclosed envelope;
or (iii) by submitting a proxy by telephone by calling
1-800-690-6903
or via the Internet at www.proxyvote.com. Stockholders who wish
to attend the Annual Meeting in person may receive directions to
the Annual Meeting location by contacting our Secretary at
216-626-1216.
Proxies submitted via the telephone or Internet must be received
by 11:59 p.m. Eastern Time on May 19, 2008. More
detailed instructions are included on the proxy card. In order
to submit a proxy via the telephone or Internet, you must have
the enclosed proxy card available and follow the instructions on
the proxy card.
If you are a stockholder of record, the proxy holders will vote
your shares based on your directions. If you sign and return
your proxy card, but do not properly direct how your shares of
Common Stock should be voted, the proxy
holders will vote FOR the election of the
seven nominees listed in this proxy statement and will use their
discretion on any other proposals and other matters that may be
brought before the Annual Meeting.
If you hold shares of Common Stock through a broker or nominee,
you may vote in person at the Annual Meeting only if you
have obtained a signed proxy from your broker or nominee giving
you the right to vote your shares.
Can I
revoke or change my vote after I submit a proxy?
Yes. You can revoke your proxy or change your vote at any time
before the proxy is exercised at the Annual Meeting. This can be
done by either submitting another properly completed proxy card
with a later date, sending a written notice to our Secretary (we
must receive your new proxy card before the Annual Meeting
begins), or you may attend the Annual Meeting and vote in
person. You should be aware that simply attending the Annual
Meeting will not automatically revoke your previously submitted
proxy, rather you must notify a Chart representative at the
Annual Meeting of your desire to revoke your proxy and vote in
person.
What vote
is required to approve the election of the seven Directors for a
one-year term ending at the Annual Meeting in 2009?
The nominees receiving the greatest number of votes will be
elected. A proxy card marked Withheld with respect
to the election of one or more Directors will not be voted with
respect to the Director or Directors indicated. Abstentions and
broker non-votes will have no effect on the election of
Directors.
What
constitutes a quorum?
A quorum of stockholders will be present at the Annual Meeting
if at least a majority of the aggregate voting power of Common
Stock outstanding on the record date is represented, in person
or by proxy, at the Annual Meeting. With 28,318,191 shares
outstanding as of the close of business on the record date,
stockholders representing at least 14,159,096 shares will
be required to establish a quorum. Abstentions and broker
non-votes will be counted towards the quorum requirement.
Can
Stockholders make proposals for the 2008 Annual
Meeting?
From time to time, stockholders present proposals that may be
proper subjects for inclusion in the proxy statement and for
consideration at an Annual Meeting. To be included in the proxy
statement for the Annual Meeting, the Company must have received
proposals no later than December 25, 2007.
Pursuant to the Companys By-Laws, stockholders may present
proposals that are proper subjects for consideration at an
annual meeting. The Companys By-Laws require all
stockholders who intend to make proposals at an annual meeting
to submit their proposals to the Company by specific dates in
order to be eligible for consideration at an annual meeting. See
Corporate Governance and Related Matters and
Stockholder Proposals for 2009 Annual Meeting for a
detailed discussion of this By-Laws provision. To be eligible
for consideration at the Annual Meeting for 2008, proposals that
were not submitted by the deadline for inclusion in the proxy
statement must have been received by the Company no later than
January 24, 2008.
2
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table and accompanying footnotes show information
regarding the beneficial ownership of our Common Stock as of
March 25, 2008 by:
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each person who is known by us to own beneficially more than 5%
of our Common Stock;
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each Director and nominee for election as Director and each of
our named executive officers; and
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all members of our Board of Directors and our executive officers
as a group.
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Shares Beneficially Owned(1)
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Percent of
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Name of Beneficial Holder
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Number
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Common Stock
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Neuberger Berman Inc.(2)
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2,024,864
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7.2
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%
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Tontine Overseas Associates, L.L.C.(3)
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1,809,171
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6.4
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%
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Wentworth, Hauser & Violich, Inc.(4)
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1,684,439
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5.9
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%
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SAB Capital Partners, L.P.(5)
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1,608,792
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5.7
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%
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Independence Investments LLC(6)
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1,593,004
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5.6
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%
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Samuel F. Thomas(7)
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782,657
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2.7
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%
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Michael F. Biehl
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47,602
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*
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Matthew J. Klaben(8)
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69,524
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*
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James H. Hoppel, Jr.(9)
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53,716
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*
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Steven W. Krablin(10)
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4,776
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*
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Michael W. Press(11)
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6,768
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*
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Richard E. Goodrich(12)
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6,768
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*
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James M. Tidwell(13)
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323
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*
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W. Douglas Brown(14)
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*
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Thomas L. Williams(15)
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*
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All Directors, Director nominees and officers as a group
(10 persons)(16)
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972,134
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3.4
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%
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(1) |
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In accordance with SEC rules, each beneficial owners
holdings have been calculated assuming full exercise or
conversion of outstanding options and stock rights covering
Common Stock, if any, exercisable by such owner within
60 days after March 25, 2008, but no exercise of
outstanding options or stock rights covering Common Stock held
by any other person. |
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According to a Schedule 13G filed with the SEC on
February 13, 2008 by Neuberger Berman Inc., reporting
beneficial ownership for itself and Neuberger Berman, LLC,
Neuberger Berman Management Inc., and Neuberger Berman Equity
Funds, Neuberger Berman Inc. owns 100% of each of Neuberger
Berman, LLC and Neuberger Berman Management Inc. Neuberger
Berman, LLC and Neuberger Berman Management Inc. serve as
sub-adviser and investment manager, respectively, of Neuberger
Berman Inc.s various mutual funds. The holdings of Lehman
Brothers Asset Management LLC, an affiliate of Neuberger Berman,
LLC, are aggregated in the reported holdings. The
Schedule 13G reported that Neuberger Berman Inc. has sole
voting power over 88,582 shares, shared voting power over
1,644,700 shares and shared dispositive power over
2,024,864 shares; Neuberger Berman, LLC has sole voting
power over 88,582 shares, shared voting power over
1,644,700 shares and shared dispositive power over
2,024,864 shares; Neuberger Berman Management Inc. has
shared voting and dispositive powers over 1,644,700 shares;
and Neuberger Berman Equity Funds has shared voting and
dispositive powers over 1,628,400 shares. Neuberger Berman
Inc. is located at 605 Third Avenue, New York, New York 10158. |
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According to a Schedule 13G filed with the SEC on
January 18, 2008 by Tontine Overseas Associates, L.L.C.
(TOA) reporting beneficial ownership for itself,
Tontine Capital Partners, L.P. (TCP), Tontine
Capital Management, L.L.C. (TCM), the general
partner of TCP, and Jeffrey L. Gendell, the managing member of
TCM and TOA, TOA has shared voting and dispositive power with
respect to 363,210 shares; TCP has shared voting and
dispositive power with respect to 1,445,961 shares; TCM has
shared voting and dispositive power |
3
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with respect to 1,445,961 shares; and Mr. Gendell has
shared voting and dispositive power with respect to
1,809,171 shares. TOA is located at 55 Railroad Avenue,
Greenwich, Connecticut 06830. |
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According to a Schedule 13G filed with the SEC on
February 14, 2008, Wentworth, Hauser & Violich,
Inc. has sole voting and dispositive power over
1,684,439 shares. Wentworth, Hauser & Violich,
Inc. is located at 353 Sacramento Street, Suite 600,
San Francisco, California 94111. |
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(5) |
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According to a Schedule 13G filed with the SEC on
February 11, 2008 by SAB Capital Partners, L.P.
(SAB) reporting beneficial ownership for itself,
SAB Capital Partners II, L.P. (SAB II),
SAB Overseas Master Fund L.P. (the Master
Fund), SAB Capital Advisors, L.L.C. (the
General Partner), SAB Capital Management, L.P.
(the Investment Manager), SAB Capital
Management, L.L.C (IMGP) and Scott A. Bommer,
SAB has shared voting and dispositive power with respect to
1,171,180 shares; SAB II has shared voting and
dispositive power with respect to 22,852 shares; the Master
Fund has shared voting and dispositive power with respect to
414,760 shares; the General Partner has shared voting and
dispositive power with respect to 1,608,792 shares; the
Investment Manager has shared voting and dispositive power with
respect to 1,608,792 shares; IMGP has shared voting and
dispositive power with respect to 1,608,792 shares; and
Mr. Bommer has shared voting and dispositive power with
respect to 1,608,792 shares. SAB is located at
767 Fifth Avenue, 21st Floor, New York, New York 10153. |
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(6) |
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According to a Schedule 13G filed with the SEC on
January 24, 2008, Independence Investments LLC, as of
December 31, 2007, has sole voting and dispositive power
over 1,532,110 shares and 1,593,004 shares,
respectively, and beneficially owns 1,593,004 shares.
Independence Investments LLC is located at 160 Federal Street,
Boston, Massachusetts 02110. |
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(7) |
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Mr. Thomas is a Director and an executive officer of the
Company. Shares beneficially owned by Mr. Thomas include
100,000 shares that were transferred to a trust of which
Mr. Thomas is the grantor and the current beneficiary,
130,000 shares which are owned by his spouse and
451,831 shares which he has the right to acquire within
60 days of March 25, 2008 through the exercise of
stock options. |
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(8) |
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Mr. Klaben is an executive officer of the Company. Shares
beneficially owned by Mr. Klaben include 66,524 shares
which he has the right to acquire within 60 days of
March 25, 2008 through the exercise of stock options. |
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(9) |
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Mr. Hoppel is an executive officer of the Company. Shares
beneficially owned by Mr. Hoppel include 51,216 shares
which he has the right to acquire within 60 days of
March 25, 2008 through the exercise of stock options. |
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(10) |
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Mr. Krablin is a Director of the Company. Shares
beneficially owned by Mr. Krablin include the shares
underlying 1,787 restricted stock units, which will vest within
60 days of March 25, 2008, and 2,666 vested restricted
stock units. |
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(11) |
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Mr. Press is a Director of the Company. Shares beneficially
owned by Mr. Press include the shares underlying 1,787
restricted stock units, which will vest within 60 days of
March 25, 2008. |
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(12) |
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Mr. Goodrich is a Director of the Company. Shares
beneficially owned by Mr. Goodrich include the shares
underlying 1,787 restricted stock units, which will vest within
60 days of March 25, 2008, and 2,658 vested stock
units. |
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(13) |
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Mr. Tidwell is a Director of the Company. In addition to
the shares included in the table above, Mr. Tidwell will
have the right to acquire the shares underlying 1,321 restricted
stock units upon their vesting on July 9, 2008. |
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(14) |
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W. Douglas Brown is a nominee for election as a Director of the
Company. |
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(15) |
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Thomas L. Williams is a nominee for election as a Director of
the Company. |
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(16) |
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The number of shares shown as beneficially owned by the
Companys Directors and executive officers as a group
includes 580,256 shares which the Companys Directors
and executive officers as a group have the right to acquire
within 60 days of March 25, 2008. |
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Less than 1% |
4
ELECTION
OF DIRECTORS
The authorized number of Directors is presently fixed at seven.
The Board of Directors currently consists of five Directors with
each term expiring at the Annual Meeting. There are currently
two vacancies on the Board of Directors resulting from the
resignations of Timothy H. Day and Kenneth W. Moore in August
2007. Upon the recommendation of the Nominations and Corporate
Governance Committee, the Board of Directors nominated W.
Douglas Brown and Thomas L. Williams to stand for election as
Directors at the Annual Meeting to fill these vacancies.
Messrs. Brown and Williams were initially recommended to
the Nominations and Corporate Governance Committee by
non-management Directors. In addition, each of the five current
Directors has also been nominated to stand for re-election.
Each of the nominees has indicated his willingness to serve, if
elected, but if any of the nominees should be unable or
unwilling to serve, the Board may either reduce its size, or
designate or not designate a substitute nominee. If the Board
designates a substitute nominee, proxies that would have been
cast for the original nominee will be cast for the substitute
nominee unless instructions are given to the contrary.
The table below sets forth the names, ages as of March 25,
2008, and existing positions with the Company of each nominee:
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Name
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Age
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Position
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Samuel F. Thomas
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56
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Chairman of the Board of Directors, Chief Executive Officer, and
President
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Richard E. Goodrich
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64
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Director
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Steven W. Krablin
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57
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Director
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Michael W. Press
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60
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Director
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James M. Tidwell
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61
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Director
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W. Douglas Brown
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62
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Director Nominee
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Thomas L. Williams
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49
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Director Nominee
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The following sets forth biographical information for our
nominees.
Samuel F. Thomas was elected Chairman of our Board of
Directors on March 27, 2007 and has served as our Chief
Executive Officer and President and as a member of our Board of
Directors since October 2003. Prior to joining our Company,
Mr. Thomas was Executive Vice President of Global
Consumables at ESAB Holdings Ltd., a provider of welding
consumables and equipment. In addition to his most recent
position at ESAB, Mr. Thomas was responsible for ESAB North
America during his employment at ESAB Holdings Ltd. Prior to
joining ESAB in February 1999, Mr. Thomas was Vice
President of Friction Products for Federal Mogul, Inc. Prior to
its acquisition by Federal Mogul in 1998, Mr. Thomas was
employed by T&N plc from 1976 to 1998, where he served from
1991 as chief executive of several global operating divisions,
including industrial sealing, camshafts and friction products.
Richard E. Goodrich became a Director on August 15,
2006. Mr. Goodrich is a retired Executive Vice President
and Chief Financial Officer of Chicago Bridge & Iron
Company N.V. (CB&I), an engineering,
procurement and construction company that provides services to
customers in the chemicals and energy industries. Prior to
retiring, Mr. Goodrich served as Executive Vice President
and Chief Financial Officer of CB&I from 2001 to 2005, and
until June 2006, as acting Chief Financial Officer.
Mr. Goodrich also serves as a director of Gundle/SLT
Environmental, Inc.
Steven W. Krablin became a Director on July 25,
2006. Mr. Krablin has been Executive Vice
President and Chief Financial Officer of IDM Group Limited, a
provider of drilling equipment and other goods and services to
the oil and gas industry, since April 2008. From January 1996
until April 2005, Mr. Krablin served as Senior Vice
President and Chief Financial Officer of National Oilwell Varco
Inc. or its predecessors, a manufacturer and distributor of oil
and gas drilling equipment and related services. Following his
retirement from National Oilwell Varco in 2005, Mr. Krablin
was active as a private investor. Prior to 1996,
Mr. Krablin served as Senior Vice President and Chief
Financial Officer of Enterra Corporation until its merger with
Weatherford International. Mr. Krablin also serves as a
director of Penn Virginia Corporation and Hornbeck Offshore
Services, Inc.
5
Michael W. Press became a Director on August 15,
2006 and has been designated as our Lead Independent Director.
Mr. Press has been self-employed since 2001. Prior to that,
he spent 27 years in the energy industry in senior
management and executive positions. From 1997 to 2001,
Mr. Press was Chief Executive Officer of KBC Advanced
Technologies plc, an international petroleum consulting firm.
Mr. Press also serves as a director of Petrofac Ltd.
James M. Tidwell became a director on July 9,
2007. Mr. Tidwell is currently the President and
Chief Executive Officer of WEDGE Group Incorporated, a privately
owned investment company with holdings in manufacturing, hotels,
commercial real estate and oilfield services. Mr. Tidwell
served as Executive Vice President and Chief Operating Officer
of WEDGE Group from February 2007 until February 2008 and as
Vice President and Chief Financial Officer from January 2000
through January 2007. From August 1996 through June 1999,
Mr. Tidwell served as Executive Vice President and Chief
Financial Officer of Daniel Industries, Inc., and he served as
President of Daniel Measurement & Control from July
1999 to January 2000. Before then, Mr. Tidwell served as
Vice President and Chief Financial Officer of Hydril Co.
Mr. Tidwell is a director of T-3 Energy Services, Inc. and
the National Multiple Sclerosis Society.
W. Douglas Brown served as Vice President, General
Counsel and Secretary of Air Products and Chemicals, Inc.
(Air Products), a global supplier of industrial
gases, performance materials and equipment and services, from
1999 until his retirement in 2007. Prior to that, Mr. Brown
held General Counsel and various administrative positions with
Air Products and its affiliates, including engineering,
construction and energy-related businesses, from 1975.
Thomas L. Williams is currently Senior Vice
President Operating Officer of Parker Hannifin
Corporation (Parker Hannifin), a manufacturer of
motion and control technologies. Mr. Williams joined Parker
Hannifin in 2003 as Vice President Operations
Hydraulics Group and became President
Instrumentation Group in 2005. Prior to joining Parker Hannifin,
Mr. Williams was employed by General Electric Company from
1981 to 2003, where he held various executive operating
positions for four different business groups: GE Capital,
Aircraft Engines, Lighting and Locomotives.
The Board of Directors unanimously recommends that you vote
FOR the election of the seven candidates for Director.
CORPORATE
GOVERNANCE AND RELATED MATTERS
Director
Independence
The Companys Corporate Governance Guidelines and the
NASDAQ listing standards provide that at least a majority of the
members of the Board of Directors must be independent, i.e.,
free of any material relationship with the Company, other than
his or her relationship as a Director or Board Committee member.
A Director is not independent if he or she fails to satisfy the
standards for independence under the NASDAQ listing standards,
the rules of the SEC, and any other applicable laws, rules and
regulations.
During the Board of Directors annual review of director
independence, the Board of Directors considers transactions,
relationships and arrangements between each Director or an
immediate family member of the Director and the Company. The
Board of Directors also considers transactions, relationships
and arrangements between each Director or an immediate family
member of the Director and the Companys senior management.
In February 2008, the Board of Directors performed its annual
director independence review for 2008.
As part of this review, the Board also evaluated the
independence of the Director nominees, Messrs. Brown and
Williams. In determining the independence of Mr. Brown, the
Board considered Mr. Browns prior employment as an
executive officer with Air Products, a substantial customer of
the Company. In connection with this evaluation, the Board noted
that in his role as General Counsel, Mr. Brown did not have
a relationship with the Company and had no influence over
transactions between his prior employer and the Company. In
determining the independence of Mr. Williams, the Board
considered that Mr. Williams is currently the Senior Vice
President Operating Officer of Parker Hannifin, a
supplier of the Company. The Board does not believe that either
of these relationships impairs the independence of the Director
nominees and that neither individual has any material interest
in any transaction between the Company and Air Products or
Parker Hannifin.
6
As a result of this review, the Board of Directors determined
that four of our five current Directors and both Director
nominees are independent, and all members of the Audit
Committee, the Compensation Committee and the Nominations and
Corporate Governance Committee are independent. The Board of
Directors determined that Messrs. Goodrich, Krablin, Press,
Tidwell, Brown and Williams satisfy the NASDAQ independence
requirements.
Mr. Thomas is not considered to be independent because of
his position as President and Chief Executive Officer of the
Company.
Information
Regarding Meetings and Committees of the Board of
Directors
The Board of Directors held five regular meetings and five
executive sessions at which only the independent Directors
attended during the fiscal year ended December 31, 2007.
Each Director attended at least 75% of the aggregate of
(1) the total number of meetings of the Board of Directors
held during the period he served as a Director and (2) the
total number of meetings held by committees of the Board on
which he served. Board members are expected to attend
Charts Annual Meeting of Stockholders and all attended our
May 2007 Annual Meeting of Stockholders. The non-management
Directors meet in executive sessions in connection with each of
the regularly scheduled Board meetings, which are presided over
by the Lead Independent Director who is identified in the table
below. The Board has the three committees: Nominations and
Corporate Governance Committee; Audit Committee; and
Compensation Committee. Current committee membership is
described in the following table:
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Nominations and
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Corporate
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Compensation
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Governance
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Audit Committee
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Committee
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Committee
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James M. Tidwell
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Member, Financial Expert
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Member
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Member
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Richard E. Goodrich
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Member, Financial Expert
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Member, Chairman
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Member
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Steven W. Krablin
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Member, Chairman, Financial Expert
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Member
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Member
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Michael W. Press
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Member
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Member
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Member, Chairman, Lead Independent Director
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The Committee membership as described above is expected to
change following the 2008 Annual Meeting of Stockholders as a
result of the anticipated addition of the Director nominees.
Nominations
and Corporate Governance Committee
The Companys Nominations and Corporate Governance
Committee consists of four members: Richard E. Goodrich,
Steven W. Krablin, Michael W. Press and James M. Tidwell.
Mr. Press serves as the chairman of the Nominations and
Corporate Governance Committee. The Nominations and Corporate
Governance Committee met six times during fiscal year 2007. The
Nominations and Corporate Governance Committee is governed by
the Nominations and Corporate Governance Committee Charter which
was adopted by the Board of Directors, a copy of which is
available at www.chart-ind.com by clicking on the link for
Investor Relations. You also can obtain a printed copy of this
document, free of charge, by writing to: Secretary,
c/o Chart
Industries, Inc., One Infinity Corporate Centre Drive,
Suite 300, Garfield Heights, Ohio, 44125.
The Nominations and Corporate Governance Committee is
responsible for (1) developing, recommending and reviewing
the adequacy of the corporate governance principles applicable
to us, (2) consulting with our Audit Committee and the
Board of Directors regarding the adoption of codes of conduct
applicable to all employees and Directors when required by the
rules of NASDAQ and adopting procedures for monitoring and
enforcing compliance with such codes of conduct,
(3) reviewing our compliance with state and federal laws
and regulations and with the NASDAQ corporate governance listing
requirements, (4) making recommendations to the Board of
Directors regarding the size and composition of the Board of
Directors, (5) establishing criteria for the selection of
new Directors to serve on the Board of Directors and reviewing
the appropriate skills and characteristics required of
Directors, (6) identifying, screening and recommending
nominees to be proposed by us for election as Directors at the
Annual Meeting of Stockholders, or to fill vacancies,
(7) considering and reviewing the qualifications of any
7
nominations of Director candidates validly made by stockholders,
(8) reviewing the committee structure of the Board of
Directors and recommending Directors to serve as members of each
committee, (9) overseeing the annual evaluation of
management, the Board of Directors, its members and committees
and (10) establishing criteria for and leading the annual
performance self-evaluation of the Board of Directors and each
committee.
Prospective Director nominees are identified through contacts of
the members of the Board of Directors or members of senior
management, through searches conducted by professional search
firms, or through recommendations of potential candidates by
stockholders, employees or others. Once a prospective Director
nominee has been identified, the Nominations and Corporate
Governance Committee makes an initial determination through
information provided to the Nominations and Corporate Governance
Committee and information supplemented by the Nominations and
Corporate Governance Committee through its own inquiries. The
Nominations and Corporate Governance Committee will evaluate
Director nominees, including nominees that are submitted to the
Company by a stockholder. In selecting new Directors of the
Company, consideration is given to each individual
Directors personal qualities and abilities, the collective
Board members skills and aptitudes for conducting
oversight of the Company and its management, and duties imposed
by law and regulation. Important factors include:
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Each Director must, as determined by the Board, be qualified to
perform duties of a Director in accordance with the Delaware
General Corporation Law as evidenced by the Directors
experience, accomplishments, skills and integrity;
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Directors must be persons possessing the highest personal values
and integrity;
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Directors must be able to perform their duties in the best
interests of the Company and its stockholders, without conflicts
of interest;
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The Company will comply fully with all legal and regulatory
requirements concerning the independence and composition of the
Audit, Nominations and Corporate Governance, Compensation and
any other committees of the Board, subject to any exemptions
provided by the Listing Standards of the NASDAQ;
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Collectively, Board members will bring to the Company a broad
range of complementary skills (such as an understanding of
finance, manufacturing, operations, industry, energy markets,
marketing, public company governance and international
background), educational and professional expertise, industry
and regulatory knowledge, and diversity of perspectives to build
a capable, responsive, and effective Board; and
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Directors will have experience in policy-making levels of
business and must have an aptitude for evaluating business
matters and making practical and mature judgments.
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In addition, Directors must have time available to devote to
Board activities and the ability to work collegially. In
determining whether to recommend a Director for re-election, the
Nominations and Corporate Governance Committee also considers
the Directors past attendance at meetings and
participation in and contribution to the activities of the Board
of Directors. At all times, at least one member of the Board
must meet the definition of financial expert as such
term is defined in Item 407(d)(5)(ii) of
Regulation S-K
and serve on the Companys Audit Committee.
The Nominations and Corporate Governance Committee will consider
potential candidates recommended by stockholders, current
Directors, Company officers, employees and others. The
Nominations and Corporate Governance Committee will use the
above enumerated factors to consider potential candidates
regardless of the source of the recommendation. Stockholder
recommendations for Director nominations may be submitted to the
Company pursuant to the requirements described under the caption
Stockholders Communications with the Board below.
Stockholder recommendations for Director nominations will be
forwarded to the Nominations and Corporate Governance Committee
for consideration, provided such recommendations are accompanied
by sufficient information to permit the Nominations and
Corporate Governance Committee to evaluate the qualifications
and experience of the nominees. Recommendations should include,
at a minimum, the following:
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the name, age, business address and residence address of the
proposed nominee;
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the principal occupation or employment of the proposed nominee;
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the number of shares of Common Stock of the Company which are
beneficially owned by such candidate;
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a description of all arrangements or understandings between the
stockholder(s) making such nomination and each candidate and any
other person or persons (naming such person or persons) pursuant
to which nominations are to be made by the stockholder;
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detailed biographical data and qualifications and information
regarding any relationships between the candidate and the
Company within the past three years;
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any other information relating to the proposed nominee that
would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations of
proxies for election of Directors pursuant to Section 14 of
the Securities Exchange Act of 1934 (the Exchange
Act) and the rules and regulations promulgated thereunder;
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any other information the stockholder believes is relevant
concerning the proposed nominee;
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a written consent of the proposed nominee(s) to being named as a
nominee and to serve as a Director if elected;
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the name and record address of the stockholder who is submitting
the notice;
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the number of shares of Common Stock which are owned of record
or beneficially by the stockholder who is submitting the notice
and the date such shares were acquired by the stockholder and if
such person is not a stockholder of record or if such shares are
owned by an entity, reasonable evidence of such persons
ownership of such shares or such persons authority to act
on behalf of such entity; and
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a representation that the stockholder intends to appear in
person or by proxy at the Annual Meeting to nominate the
proposed nominee named in the notice.
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Our By-Laws provide that stockholders seeking to nominate
candidates for election as Directors or to bring business before
an annual meeting of stockholders must provide timely notice of
their proposal in writing to the corporate secretary.
Generally, to be timely, a stockholders notice must be
received at our principal executive offices not less than 90
calendar days nor more than 120 calendar days prior to the first
anniversary of the date on which we first mailed our proxy
materials for the preceding years annual meeting or at
such other time as specified in our By-Laws. Our By-Laws also
specify requirements as to the form and content of a
stockholders notice. You also can obtain a printed copy of
our By-Laws, free of charge, by writing to: Secretary,
c/o Chart
Industries, Inc., One Infinity Corporate Centre Drive,
Suite 300, Garfield Heights, Ohio, 44125.
Audit
Committee
Our Audit Committee consists of Richard E. Goodrich, Steven W.
Krablin, Michael W. Press and James M. Tidwell.
Mr. Krablin serves as the Audit Committee chairman. The
Audit Committee met five times during fiscal year 2007. The
Audit Committee is governed by the Audit Committee Charter which
was adopted by the Board of Directors, a copy of which is
available at www.chart-ind.com by clicking on the link for
Investor Relations. You also can obtain a printed copy of this
document, free of charge, by writing to: Secretary,
c/o Chart
Industries, Inc., One Infinity Corporate Centre Drive,
Suite 300, Garfield Heights, Ohio, 44125.
The Audit Committees responsibilities include
(1) appointing, retaining, compensating, evaluating and
terminating our independent auditors and approving in advance
any audit or non-audit engagement or relationship between us and
such auditor, (2) approving the overall scope of the audit,
(3) assisting the Board in monitoring the integrity of our
financial statements, the independent accountants
qualifications and independence, the performance of the
independent accountants and our internal audit function and our
compliance with legal and regulatory requirements,
(4) annually reviewing an independent auditors report
describing the auditing firms internal quality-control
procedures and any material issues raised by the most recent
internal quality-control review, or peer review, of the auditing
firm, (5) discussing the annual audited financial and
quarterly statements with management and the independent
auditors, (6) discussing earnings press releases, as well
as financial information and earnings guidance provided to
analysts and rating agencies, (7) discussing policies with
respect to risk assessment and risk management, (8) meeting
separately, periodically, with management, internal auditors and
the independent auditor, (9) reviewing with the independent
auditor any audit problems or difficulties and managements
response, (10) setting clear hiring policies for employees
or former employees of the independent auditors,
(11) annually reviewing the adequacy of the Audit
Committees written charter, (12) reviewing with
management any legal matters that may have a material impact on
us and our financial statements and (13) reporting
regularly to the full Board of Directors.
Our Board has determined that each of Messrs. Goodrich,
Krablin, Press and Tidwell satisfies the current independence
standards of NASDAQ and Section 10(A)(m)(3) of the Exchange
Act. Our Board of Directors has
9
determined that each of Messrs. Goodrich, Krablin and
Tidwell qualifies as an Audit Committee financial
expert as such term is defined in Item 407(d)(5)(ii)
of
Regulation S-K
and satisfies the NASDAQ financial knowledge and sophistication
requirements.
Compensation
Committee
Our Compensation Committee consists of Richard E. Goodrich,
Steven W. Krablin, Michael W. Press and
James M. Tidwell. Mr. Goodrich serves as the
Compensation Committee chairman. The Compensation Committee met
nine times during fiscal year 2007. The Compensation Committee
is governed by the Compensation Committee Charter which was
adopted by the Board of Directors, a copy of which is available
at www.chart-ind.com by clicking on the link for Investor
Relations. You also can obtain a printed copy of this document,
free of charge, by writing to: Secretary,
c/o Chart
Industries, Inc., One Infinity Corporate Centre Drive,
Suite 300, Garfield Heights, Ohio, 44125.
The Compensation Committee is responsible for (1) reviewing
key employee compensation policies, plans and programs,
(2) reviewing and approving the compensation of our chief
executive officer and other executive officers,
(3) developing and recommending to the Board of Directors
compensation for Board members, (4) reviewing and approving
employment contracts and other similar arrangements between us
and our executive officers, (5) reviewing and consulting
with the chief executive officer on the selection of officers
and evaluation of executive performance and other related
matters, (6) administration of stock plans and other
incentive compensation plans, (7) overseeing compliance
with any applicable compensation reporting requirements of the
SEC, (8) approving the appointment and removal of trustees
and investment managers for pension fund assets,
(9) retaining consultants to advise the committee on
executive compensation practices and policies,
(10) establishing and periodically reviewing succession
plans for our executive officers and others, and
(11) handling such other matters that are specifically
delegated to the Compensation Committee by the Board of
Directors from time to time.
To further assist it in carrying out its responsibilities, the
Compensation Committee engaged Mercer Human Resources Consulting
(Mercer), an independent, nationally recognized,
compensation consulting firm in February 2007 to assist in the
evaluation of our executive compensation structure and expenses.
In 2007, Mercers duties and responsibilities included:
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Assisting the Compensation Committee in identifying an
appropriate peer group of companies for purposes of comparison
in evaluating our compensation structure and philosophy;
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Providing information on compensation paid by peer companies to
their executive officers;
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Providing information regarding market practices as to executive
employment agreements for public companies;
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Evaluating the competitiveness of the total direct compensation
of the Companys executive officers and other executives
and each of its individual components, including base salary,
annual bonus and long-term incentive awards; and
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Advising the Company on alternative structures, forms of
compensation and allocation considerations.
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See Compensation Committee Report and
Compensation Discussion and Analysis below for
additional information on the Compensation Committee and its
activities.
Role of
Executive Officers in Compensation Decisions
Our Chief Executive Officer annually reviews the performance of
each of the other executive officers. Based on this review and
his analysis of data provided by Mercer as to compensation
practices among our peer group, he makes compensation
recommendations to the Compensation Committee, including
recommendations for salary adjustments, annual cash incentives,
and long-term and short-term awards. Although the Compensation
Committee considers these recommendations when making decisions
regarding executive compensation, it retains full discretion to
set all compensation for the Companys executive officers.
Code of
Ethical Business Conduct and Officer Code of Ethics
The Board of Directors has adopted our Code of Ethical Business
Conduct and also our Officer Code of Ethics which are both
available at www.chart-ind.com by clicking on the link for
Investor Relations. You also can obtain a
10
printed copy of this document, free of charge, by writing to:
Secretary,
c/o Chart
Industries, Inc., One Infinity Corporate Centre Drive,
Suite 300, Garfield Heights, Ohio, 44125.
In order to enhance employee awareness of our already existing
Code of Ethical Business and Conduct, we have launched periodic
ethics and compliance training for all of our employees to
provide them with the knowledge necessary to maintain our high
standards of ethics and compliance. The Board of Directors has
also designated Ethics Representatives and a Chief Compliance
Officer for ethics to assist in the administration of and to
encourage adherence with the Code of Ethical Business Conduct.
Stockholder
Communications with the Board
Stockholders may communicate their concerns directly to the
entire Board or specifically to non-management Directors of the
Board. Such communications may be confidential or anonymous, if
so designated, and may be submitted in writing to the following
address: Secretary,
c/o Chart
Industries, Inc., One Infinity Corporate Centre Drive,
Suite 300, Garfield Heights, Ohio, 44125. The status of all
outstanding concerns addressed to the entire Board or only to
non-management Directors will be reported to the Chairman of the
Board or the Lead Independent Director, respectively, on a
quarterly basis. Mr. Press has been designated as the Lead
Independent Director.
COMPENSATION
COMMITTEE REPORT
Report of
the Compensation Committee on Executive Compensation
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis required by
Item 402(b) of
Regulation S-K
with the Companys management. Based on that review and
discussion, the Committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in the
Companys Annual Report on
Form 10-K
and in the Companys definitive proxy statement prepared in
connection with its 2008 Annual Meeting of Stockholders.
Compensation Committee
Richard E. Goodrich, Chairman
Steven W. Krablin
Michael W. Press
James M. Tidwell
The above Report of the Compensation Committee does not
constitute soliciting material and should not be deemed filed
with the Commission or subject to Regulation 14A or 14C
(other than as provided in Item 407 of
Regulation S-K)
or to the liabilities of Section 18 of the Exchange Act,
except to the extent that the Company specifically requests that
the information in this Report be treated as soliciting material
or specifically incorporates it by reference into a document
filed under the Securities Act of 1933, as amended (the
Securities Act), or the Exchange Act. If this Report
is incorporated by reference into the Companys Annual
Report on
Form 10-K,
such disclosure will be furnished in such Annual Report on
Form 10-K
and will not be deemed incorporated by reference into any filing
under the Securities Act or the Exchange Act as a result of
furnishing the disclosure in this manner.
11
EXECUTIVE
AND DIRECTOR COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Compensation
Philosophy
The primary objectives of the Compensation Committee of our
Board of Directors with respect to the determination and
administration of our Companys executive compensation
programs are to:
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create and enhance stockholder value by attracting and retaining
key executive talent;
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align our executive officers incentives with stockholder
value creation by tying compensation to the achievement of
measurable operational and strategic objectives; and
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award compensation at levels commensurate with each executive
officers performance, experience and responsibilities.
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Background
Historically, our Compensation Committees guiding
philosophy with respect to executive officer compensation has
emphasized performance-based compensation. Accordingly, our
compensation strategy has provided for significant cash
incentive compensation awards and the vesting of a portion of
stock option grants based upon the Companys financial and
stock performance, including, in the case of pre-initial public
offering stock option grants, the return on investment of First
Reserve Fund X, L.P. (First Reserve), an
affiliate of First Reserve Corporation, realized when it
disposed of its remaining ownership interest in us in connection
with a secondary offering of our Common Stock in June 2007.
Traditionally, our executive compensation program has been
intended to provide base salaries generally below the median of
executives at companies considered to be peers, with a total
potential compensation package (including performance-based
compensation) generally above median among such historical peers
if maximum performance levels are achieved. From time to time
the Compensation Committee reviews the companies considered to
be peers for compensation purposes and may make changes to the
group as appropriate.
From the time of the acquisition of the Company by First Reserve
in October 2005 (the Acquisition) until the
secondary offering in June 2007, we were controlled by First
Reserve. All our compensation arrangements in place through the
end of fiscal year 2006 were put in place prior to our initial
public offering, which was completed on July 31, 2006, and
were not modified, except for those modifications necessary to
reflect our Companys public company status, in connection
with the initial public offering. Although our Board of
Directors and Compensation Committee were responsible for the
implementation and administration of all of our benefit and
compensation plans before our initial public offering, all
compensation decisions relating to the Chief Executive Officer
and the other executive officers were subject to the review of
First Reserve directly or through its representatives. Moreover,
the Board of Directors under which our executive compensation
plans were adopted before our initial public offering as well as
the Compensation Committee were comprised of a number of
Directors affiliated with First Reserve.
As part of and subsequent to our initial public offering, we
appointed three additional independent directors to our Board of
Directors and altered the membership of our Compensation
Committee so that since May 2007, all members are independent
directors.
In connection with the Companys continued transition to
public company status following our initial public offering, our
Compensation Committee engaged Mercer, an independent outside
compensation consulting firm, to assist the Compensation
Committee in its review of our entire executive compensation
program. The review included a study to identify companies that
should be considered as peer group companies for executive
compensation purposes, as well as a review of our compensation
objectives and philosophy, and the individual components of our
total compensation package for our executive officers. For
further discussion of the Compensation Committees
engagement of Mercer, see Corporate Governance and Related
Matters Compensation Committee above.
Benchmarking
Methodology
A fundamental step in our progression from private to public
company status required the Compensation Committee to determine
the appropriateness of our current compensation objectives and
philosophy, which were
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largely established while we were a private company, by
comparing Company performance and each element of our executive
officers total compensation to the compensation
information of similarly situated executives at companies that
we consider to be our peers.
With the assistance of Mercer, the Compensation Committee
identified a group of companies with which the Compensation
Committee believes the Company is in a comparable position with
respect to competition for talent and for stockholder
investment, and which are similar in size and business mix to
the Company (the Compensation Peer Group), which
serves as a comparison for purposes of determining appropriate
base salaries, short-term incentives and total overall
compensation for our executives. In connection with the
Compensation Committees evaluation of public company
compensation standards, the Compensation Committee reviewed the
25th percentile, median and 75th percentile data for
the Compensation Peer Group in each element of compensation
(base salary, target annual cash incentive compensation, target
long-term equity based compensation as well as the resulting
total direct compensation). These comparisons are simply a point
of reference for measurement and not the determinative factor in
setting our executives compensation. The Compensation
Committee does not use formulas or rigidly set the compensation
of our executives based on this data. The purpose of the
comparison is not to supplant the Compensation Committees
analysis of various factors considered in making compensation
decisions, such as prior year company and business unit
financial performance, shareholder return, internal pay equity,
compensation history and the individual performance of our
executive officers. The Compensation Committee also considers
the recommendations and input from our Chief Executive Officer
as described under Corporate Governance and Related
Matters Role of Executive Officers in Compensation
Decisions above.
Because the comparative compensation information is just one of
the several analytic tools that are used in setting executive
compensation, the Compensation Committee has discretion in
determining the nature and extent of its use. Further, given the
limitations associated with comparative pay information for
setting individual executive compensation, such as identifying
peer companies within our industry that are substantially
similar in size and business mix, the Compensation Committee may
elect to not use the comparative compensation information at all
in the course of making compensation decisions.
The following 12 companies were identified by the
Compensation Committee as the 2007 Compensation Peer Group:
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Altra Holdings, Inc.
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Columbus McKinnon Corp.
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Kaydon Corp.
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Ampco-Pittsburgh, Corp.
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Enpro Industries, Inc.
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Lufkin Industries, Inc.
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Barnes Group Inc.
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Gorman-Rupp Co.
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Powell Industries, Inc.
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Circor International, Inc.
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Hydril Co.
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Robbins & Myers, Inc.
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Pay
Mix and Total Compensation for Executive Officers
The Company intends to attract and retain talented executives
with competitive salaries and annual cash incentive compensation
opportunities that deliver market-appropriate awards based on
annual performance, balanced by long-term equity-based incentive
compensation awards that also provide market-competitive
opportunities to increase value commensurate with stockholder
gains. Historically, the Company has relied more heavily on
performance based compensation to offset slightly below-median
base salaries, which together with long-term equity-based
incentive compensation, has comprised a total direct
compensation package for our executives above the median of the
Compensation Peer Group when maximum performance levels are
achieved. This variable pay focus is not atypical for a company
such as ours that has historically seen significant fluctuations
in performance based on the cyclical aspects of our business.
Elements
of Compensation
Executive
compensation consists of the following primary
components:
Base Salary. Base salaries are reviewed
annually, and adjusted from time to time to reflect performance,
experience, responsibilities and market conditions. Salary
review is conducted by the Compensation Committee before or
during the early part of the fiscal year for which the base
salary will become effective. The Compensation Committee is
responsible for setting the base salary of the Chief Executive
Officer, and takes into account his individual responsibilities,
performance and experience, and the competitive market
compensation paid by other companies of similar size in a
similar industry. The current base salary for the Chief
Executive Officer, which is
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$500,000 for 2008, an increase from $450,000 for 2007, was
determined based on the experience of the members of the
Compensation Committee after an analysis of market data provided
by Mercer and the Chief Executive Officers individual
responsibilities, performance and experience relative to those
of chief executive officers at companies within the Compensation
Peer Group. Increases in base salary with respect to the other
executive officers are recommended to the Compensation Committee
by the Chief Executive Officer. In making this recommendation,
the Chief Executive Officer considers each executive
officers individual responsibilities, performance and
experience, and market data provided by Mercer, including
compensation paid to other executive officers with similar
levels of experience, scope of responsibilities, performance and
potential in the Compensation Peer Group. However, any increase
in base salary is granted at the sole discretion of the
Compensation Committee. The base salaries for the executive
officers other than the Chief Executive Officer for 2008 are
$262,150 for the Executive Vice President, Chief Financial
Officer and Treasurer (an increase from $245,000 for
2007) and $210,000 for the Vice President, General Counsel
and Secretary (an increase from $200,000 for 2007). Effective
March 1, 2008, the Board of Directors of the Company
appointed James H. Hoppel, Jr., who previously served as
the Companys Chief Accounting Officer, Controller and
Assistant Treasurer, as the Companys Vice
President Corporate Development. The Compensation
Committee has set the base salary for Mr. Hoppel for 2008
at $192,000, an increase from $170,000 received in 2007 as Chief
Accounting Officer. Also effective March 1, 2008, the
Company appointed Kenneth J. Webster as the Companys Chief
Accounting Officer and Controller. The Compensation Committee
has set Mr. Websters base salary for 2008 at $156,000.
Annual and Other Cash Incentive Awards. In
addition to their base salary, executive officers are eligible
to earn an annual cash incentive bonus. Consistent with our
compensation philosophy, the annual cash incentive bonus
represents a significant portion of total compensation. The
purpose of annual cash bonuses is to attract, retain, motivate
and reward participants by providing them with the opportunity
to earn competitive compensation directly linked to our
performance. Our annual incentive plan was designed to provide
our executive officers with incentive compensation based upon
the achievement of pre-established performance goals. The
performance criteria are tied to Company, rather than individual
performance. This approach historically has been taken by our
Company in light of our emphasis on performance-based
compensation tied to Company financial and stock performance,
rather than qualitative individual performance assessments.
Beginning with our 2007 fiscal year and going forward, annual
cash bonuses, if any, will be awarded under the Chart
Industries, Inc. Incentive Compensation Plan (the
Incentive Compensation Plan). Annual cash bonuses
awarded in fiscal year 2006 were awarded under the 2006 Chart
Executive Incentive Compensation Plan (the 2006 Bonus
Plan). The Incentive Compensation Plan provides the
Compensation Committee with significant flexibility to establish
performance criteria and performance periods for which cash
incentive compensation will be awarded. Under the Incentive
Compensation Plan, a performance period may be for a fiscal year
or a multi-year cycle, as determined by the Compensation
Committee, and the performance objectives upon the attainment of
which target incentive bonuses will be awarded may be based on
one or more of certain performance criteria which may relate to
us, one or more of our subsidiaries, our divisions or units, or
any combination of the foregoing, and may be applied on an
absolute basis
and/or be
relative to one or more peer group companies or indices, or any
combination thereof, all as the Compensation Committee
determines. The Compensation Committee may appropriately adjust
any performance evaluation under a performance objective or
objectives to reflect or exclude certain extraordinary events
that may occur during the performance period. If there is a
change in control, as defined in the Incentive Compensation
Plan, the Compensation Committee will determine promptly, in its
discretion, whether and to what extent the performance criteria
have been met or will be deemed to have been met for the year in
which the change in control occurs and for any completed
performance period for which a determination under the plan has
not been made. If the committee determines the criteria have
been met, participants will receive their bonuses as soon as
practicable, but in no event more than 30 days after the
determination.
Pursuant to the terms of the Incentive Compensation Plan, no
executive officer or other participant may receive a bonus, with
respect to any fiscal year, in excess of $5.0 million. The
Compensation Committee has absolute discretion to reduce or
eliminate the amount otherwise payable under the Incentive
Compensation Plan and to establish rules or procedures which
limit the amount payable to a participant to an amount that is
less than the amount otherwise approved as that
participants incentive bonus, except that following a
change in control the Compensation Committee continues to have
such right only in the event that a participant engages in
misconduct or materially fails to fulfill his or her duties, in
each case, as determined by the Compensation Committee.
14
Our Compensation Committee set annual incentive compensation
targets and performance measures for our 2007 fiscal year under
the Incentive Compensation Plan. Under these targets, our
executive officers were eligible to earn a cash incentive bonus
for our 2007 fiscal year if performance exceeded threshold
amounts in an amount up to a pre-determined percentage, ranging
from 97.5% to 165% of the executive officers base salary
(with higher ranked officers being compensated at a higher
percentage of base salary), at maximum performance levels. The
performance measures established under the Incentive
Compensation Plan for the 2007 fiscal year for executive
officers were operating income, net income and working capital,
weighted for purposes of calculating the award at 70%, 15% and
15%, respectively. Working capital as used for awards under the
Incentive Compensation Plan measures the Companys net
working capital use efficiency determined relative to the
Companys rolling average sales. The Compensation Committee
selected these measures in an effort to more closely align
executive officer cash bonus measures to measures that are
believed to be meaningful indications of our performance for our
public stockholders. These performance measures were set at
levels that were believed to represent, when they were set in
early 2007, significant performance that would involve some
difficulty at the threshold levels, increased difficulty at the
100% target levels, and significant difficulty at the maximum
levels, in each case relative to historical trends and future
expectations at the time the levels were set. Actual performance
below the minimum performance threshold for a performance
objective would result in no payment based on that objective.
The table below details the threshold, target and maximum
performance levels for each of the performance measures
established by the Compensation Committee for fiscal 2007
(performance measures for working capital permit awards to be
paid in excess of target based on operating income performance
exceeding target performance):
|
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|
|
|
|
|
|
|
|
|
Performance Measure
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Operating Income
|
|
$
|
77,200,000
|
|
|
$
|
88,700,000
|
|
|
$
|
97,600,000
|
|
Net Income
|
|
$
|
35,600,000
|
|
|
$
|
40,900,000
|
|
|
$
|
45,000,000
|
|
Working Capital
|
|
|
16.2
|
%
|
|
|
14.7
|
%
|
|
|
N/A
|
|
Following the end of the 2007 fiscal year, the Compensation
Committee determined (i) whether and to what extent any of
the established performance objectives were satisfied for 2007,
and (ii) for each executive officer employed as of the last
day of 2007, the actual bonus to which such executive officer is
entitled for 2007. Actual results for each of the performance
measures established for the 2007 fiscal year were as follows:
(i) operating income, $97,300,000; net income, $52,803,000;
and working capital, 14.4%. The following table summarizes the
fiscal 2007 payout opportunities that were available for each of
our executive officers upon satisfaction of the annual incentive
target and annual maximum performance measures and the actual
payout of annual cash incentive bonuses for fiscal 2007:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Actual
|
|
|
|
Annual
|
|
|
Annual
|
|
|
Annual
|
|
|
2007 Annual
|
|
|
|
Threshold Target
|
|
|
Incentive Target
|
|
|
Incentive Maximum
|
|
|
Incentive Payout
|
|
|
|
% of Base
|
|
|
|
|
|
% of Base
|
|
|
|
|
|
% of Base
|
|
|
|
|
|
% of Base
|
|
|
|
|
|
|
Salary
|
|
|
Amount ($)
|
|
|
Salary
|
|
|
Amount ($)
|
|
|
Salary
|
|
|
Amount ($)
|
|
|
Salary
|
|
|
Amount ($)
|
|
|
Samuel F. Thomas
|
|
|
0
|
%
|
|
|
0
|
|
|
|
110
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%
|
|
|
495,000
|
|
|
|
165
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%
|
|
|
742,500
|
|
|
|
163.4
|
%
|
|
$
|
735,431
|
|
Michael F. Biehl
|
|
|
0
|
%
|
|
|
0
|
|
|
|
100
|
%
|
|
|
245,000
|
|
|
|
150
|
%
|
|
|
367,500
|
|
|
|
148.6
|
%
|
|
$
|
364,001
|
|
Matthew J. Klaben
|
|
|
0
|
%
|
|
|
0
|
|
|
|
70
|
%
|
|
|
140,000
|
|
|
|
105
|
%
|
|
|
210,000
|
|
|
|
104.0
|
%
|
|
$
|
208,001
|
|
James H. Hoppel, Jr.
|
|
|
0
|
%
|
|
|
0
|
|
|
|
65
|
%
|
|
|
110,500
|
|
|
|
97.5
|
%
|
|
|
165,750
|
|
|
|
96.6
|
%
|
|
$
|
164,172
|
|
The incentive payments were paid to the executives on
March 7, 2008 and are included in the 2007 Summary
Compensation Table.
Payments made under the Incentive Compensation Plan are intended
to be exempt from the deduction limitations of
Section 162(m) of the Internal Revenue Code under
transition reliance period rules applicable to compensation paid
pursuant to a plan that existed before we became publicly held
and that was disclosed in our initial public offering prospectus.
For fiscal year 2008, each of our executive officers is eligible
to receive an annual bonus of up to 150% of a target amount
designated for each executive, based upon a percentage of such
executives annual base salary (the Base
Target). Base Targets for fiscal year 2008 are as follows:
(i) Mr. Thomas, 110%; (ii) Mr. Biehl, 100%;
(iii) Mr. Hoppel, Jr., 65%;
(iv) Mr. Klaben, 75%; and (v) Mr. Webster,
45%. The same performance measures that were used in fiscal 2007
will be used in fiscal year 2008, but the specific threshold,
target and maximum
15
performance levels will be different. We believe that disclosing
the specific performance levels to be used for determining
annual bonuses would cause us competitive harm by potentially
disrupting our customer relationships and providing competitors
with insight into our Companys business strategy, pricing
margins, capabilities and current compensation for executive
talent. As was the case in fiscal year 2007, we believe the
performance levels used for fiscal year 2008 involve some
difficulty at the threshold levels, increased difficulty at the
100% target levels, and significant difficulty at the maximum
levels, in each case relative to historical trends and future
expectations at the time the levels were set.
Long-Term Incentive Compensation. The third
primary element of the Companys executive compensation
program is comprised of long-term compensation awards, which the
Compensation Committee historically delivered in the form of
non-qualified stock option awards. The Compensation Committee
believes the primary benefit of stock options is to motivate
executives to increase stockholder value as options only produce
rewards to executives if the Companys stock price
increases. During 2007, however, the Compensation Committee also
considered what other forms of equity-related compensation may
align the long-term interests of management and our stockholders
while reducing reliance on stock options alone. Under the
Companys equity incentive plans approved by stockholders,
the Company also may grant awards of stock appreciation rights,
restricted stock, restricted stock units, and other stock-based
grants, including shares of our Common Stock granted in the form
of other equity and performance-based incentives, as may be
deemed appropriate by the Compensation Committee.
Prior to the initial public offering, the Compensation Committee
granted options as non-qualified stock options to our executive
officers under the 2005 Stock Incentive Plan. Approximately 35%
of these options were what we refer to as time
options, which vest and become exercisable over five
years, assuming the holder thereof continues to be employed by
us. The remaining portion of these options, which we refer to as
performance options, vested and became exercisable
(or were forfeited) upon completion of the secondary offering in
June 2007 and the achievement of the Fund X Net
Return, which is the amount received by First Reserve in
respect of its investment in us divided by the amount of the
investment by First Reserve in us, which we refer to as the
Fund X Investment. In connection with the completion of the
secondary offering in which First Reserve determined to dispose
of all of its remaining investment in us and First
Reserves realization of a specific Fund X Net Return
upon completion of the offering, 82% of the performance-based
options held by executive officers and other members of
management vested while the remaining 18% were forfeited. For a
description of the compensation expense we incurred in 2007
related to performance stock options held by executive officers,
and related valuation assumptions, see note (2) to
2007 Summary Compensation Table.
Equity-based compensation remains an important component of the
Companys compensation strategy and an important tool
toward the goal of attracting and retaining executive talent.
This goal has become increasingly more important to the
Compensation Committee as the Company continues to address
fundamental changes in its industry and their effect on the
Companys performance and stock price. To this end, the
Compensation Committee requested that the Companys
independent compensation consultant assist it in designing a new
long-term incentive program for fiscal year 2007 and beyond that
incorporates a more balanced portfolio approach relying not only
on traditional stock options, but that also includes elements
tied to both performance relative to our peers and
internally-established performance goals set over a multi-year
performance period.
In the course of evaluating a new long-term incentive plan, the
Compensation Committee asked Mercer to provide data on the
median value of long term compensation awards to executives in
similar positions. Based on this data, approximately one-third
of this value under the new long-term incentive plan is
delivered as annual grants of stock option awards while the
remaining approximate two-thirds of an executives target
long-term compensation value is delivered in the form of
performance units.
Stock option grants under the new long-term incentive plan are
planned to be made annually at the discretion of the
Compensation Committee and generally vest ratably over a
four-year period, unless otherwise determined by the
Compensation Committee. Continued service of the executive is
required during the vesting period. In our 2007 fiscal year, we
awarded non-qualified stock options covering a total of
29,800 shares of Common Stock, at an exercise price of
$27.74 per share, to executive officers, under our equity
incentive plan. For a description of the compensation expense we
incurred in 2007 related to stock options held by executive
officers, and related valuation assumptions, see note
(2) to 2007 Summary Compensation Table.
16
On January 2, 2008, we awarded the following non-qualified
stock options to executive officers under our equity incentive
plan at an exercise price of $30.95 per share:
(i) Mr. Thomas, 18,950; (ii) Mr. Biehl,
6,500; (iii) Mr. Hoppel, Jr., 2,760;
(iv) Mr. Klaben, 3,020; and (v) Mr. Webster,
2,240.
Long-term performance unit awards, which may be paid in cash or
stock at the Compensation Committees discretion, are
designed to align the interests of the executives with our
longer-term strategic objectives and to reward the achievement
of certain pre-determined objectives. Performance units are
anticipated to be granted annually at the discretion of the
Compensation Committee and vest based on the attainment of
predefined performance goals over three-year overlapping
performance periods (30 months in the case of the initial
grants). Performance units were granted for 2007 to executive
officers as follows: (i) Mr. Thomas, 16,850;
(ii) Mr. Biehl, 5,625;
(iii) Mr. Hoppel, Jr., 2,300; and
(iv) Mr. Klaben, 2,675.
For the long-term performance units granted in 2007 and early
2008, as described below, amounts that may potentially be paid
will depend on two performance measures:
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|
|
|
|
Fifty percent of the potential award depends on our relative
total stockholder return (RTSR) over a three-year
period (30 months in the case of the initial grants). RTSR
is measured against a group of peer companies in the industrial
and energy businesses (the RTSR Peer Group) based on
overlapping three-year performance cycles. The Compensation
Committee believes that this metric represents a prominent
measure of performance from the perspective of our stockholders
and enhances the link between an award payment and value
creation; and
|
|
|
|
Fifty percent of the potential award depends on our EBITDA
(earnings before interest, tax, depreciation and amortization)
growth over a three-year performance period (30 months in
the case of the initial grants). EBITDA growth is measured
relative to the Companys strategic planning process. The
Compensation Committee believes that this metric aligns the
interests of our executives with those of our stockholders by
awarding incentive payments that correspond with the long-term
improvement in the Companys profitability.
|
The RTSR Peer Group for the performance period
2007-2009
consists of those companies which comprise the Compensation Peer
Group plus several additional companies that were chosen for
their comparable industry exposure. The following Companies make
up the RTSR Peer Group:
|
|
|
|
|
Air Products & Chemicals, Inc.
|
|
Circor International, Inc.
|
|
Kaydon Corp.
|
Airgas, Inc.
|
|
Columbus McKinnon Corp.
|
|
Lufkin Industries, Inc.
|
Altra Holdings, Inc.
|
|
Dresser-Rand Group Inc.
|
|
National Oilwell Varco, Inc.
|
Ampco-Pittsburgh Corp.
|
|
Enpro Industries, Inc.
|
|
Powell Industries, Inc.
|
Barnes Group, Inc.
|
|
Exterran Holdings, Inc.
|
|
Praxair Inc.
|
Cameron International Corp.
|
|
Gorman-Rupp Co.
|
|
Robbins & Myers, Inc.
|
Threshold, target and maximum performance levels and
corresponding payout levels for our performance are established
for each performance cycle, with awards interpolated for
performance between threshold and target and between target and
maximum. In addition to performance requirements, the
performance units contain transfer and certain other
restrictions. Each performance unit represents a right to
receive one share or its value in cash, and the units may be
earned in a range equal to 35%, 100% and 150% of the number of
units specified in the grant document, depending on whether
Company performance meets the minimum performance threshold for
each performance measure, meets the 100% target for each
performance measure, or meets or exceeds the maximum target
level for each performance measure for the performance period,
respectively. The performance units are paid in shares or in
cash, as determined by the Compensation Committee, within
60 days of the close of the performance period. We believe
that disclosing the specific performance levels would cause us
competitive harm by potentially disrupting our customer
relationships and providing competitors with insight into our
Companys business strategy, pricing margins, capabilities
and current compensation for executive talent. We believe the
performance levels used involve some difficulty at the threshold
levels, increased difficulty at the 100% target levels, and
significant difficulty at the maximum levels, in each case
relative to historical trends and future expectations at the
time the levels were set.
On January 2, 2008, we awarded performance units to our
executive officers as follows: (i) Mr. Thomas, 17,430;
(ii) Mr. Biehl, 5,990;
(iii) Mr. Hoppel, Jr., 2,540;
(iv) Mr. Klaben, 2,780; and (v) Mr. Webster,
2,060. These
17
performance units vest based on EBITDA and RTSR performance over
a three-year performance period beginning in 2008 and ending on
December 31, 2010.
In connection with the adoption of the new long-term incentive
plan in 2007, the Compensation Committee also implemented stock
ownership guidelines for our senior executives. The guidelines
set guideline levels of ownership of our Common Stock for our
Chief Executive Officer at three times base salary and for other
executive officers at one times base salary. Executives who do
not meet the guidelines are expected to satisfy them within five
years. The ownership guidelines are intended to be administered
and reviewed periodically by the Compensation Committee.
Our stock options and performance units are issued under our
Amended and Restated Chart Industries, Inc. 2005 Stock Incentive
Plan (the 2005 Stock Incentive Plan), which was
initially adopted effective November 23, 2005, in
connection with the Acquisition. The plan, as amended and
restated, was adopted by the Board of Directors and approved by
our stockholders in connection with our initial public offering.
For further discussion of the 2005 Stock Incentive Plan, see
Discussion of Summary Compensation Table and Grants of
Plan-Based Awards Table Equity and Incentive Plan
Awards below.
Option Grant Policies. For stock options
granted under the 2005 Stock Incentive Plan, the exercise price
per share is equal to the fair market value on the applicable
date of grant, which is defined for purposes of this plan as the
average of the closing bid and closing asked price of the Common
Stock quoted on NASDAQ on the date of grant. We have not made
any equity grants in connection with the release or withholding
of material non-public information.
Equity grants in the form of restricted stock units made to our
non-employee Directors, as discussed below under Director
Compensation, were granted and reflected in our
consolidated financial statements, based upon the applicable
accounting guidance, at fair market value of our Common Stock on
the date of grant. Other than with respect to regular annual
grants of restricted stock units or, commencing in 2008,
quarterly stock awards made to our non-employee Directors as
described below, we do not have any program, plan or policy
which requires us to grant equity compensation on specified
dates.
Deferred Compensation. The terms of our
Amended and Restated Voluntary Deferred Income Plan are
described below under 2007 Nonqualified
Deferred Compensation Table. Participation in this plan is
entirely voluntary, and we presently do not offer any matching
monies or contributions. We offered this plan to our executive
officers to defer their compensation to subsequent years to help
with their personal tax planning. Of the executive officers,
only Mr. Thomas elected to participate in this plan in 2007.
Other Benefits. Executive officers are
eligible to participate in all of our employee benefit plans,
including our 401(k) Plan, health, life and disability
insurance, retirement, deferred compensation and fringe
benefits, as well as any equity compensation plans, as in effect
from time to time, on the same basis as those benefits are
generally made available to other senior executives of the
Company. Additionally, all of our executive officers receive
automobile allowances. In accordance with our performance-based
compensation philosophy, we intend to continue to maintain
modest executive benefits and perquisites for officers; however,
the Compensation Committee in its discretion may revise, amend
or add to the officers executive benefits and perquisites
if it deems it advisable, subject to the applicable terms of the
executive employment agreements.
Change
in Control Payments
None of the executive officers respective employment
agreements in place during fiscal year 2007 provided for change
in control payments; however the agreements provided for
severance benefits payable upon an executives involuntary
termination without cause or resignation with good reason,
irrespective of whether it related to a change in control. In
addition, our stock options and performance unit awards provided
for accelerated vesting of outstanding time options and
performance units upon a change in control (as defined in the
2005 Stock Incentive Plan).
During 2007, the Compensation Committee reviewed the
competitiveness of the Companys executive employment
agreements and requested that Mercer provide the Company with
data regarding change in control and employment arrangements for
executives among the Companys Compensation Peer Group. In
addition to its analysis of the data provided by Mercer, the
Compensation Committee considered additional data regarding the
potential costs associated with adopting the new employment
agreements. As a result of its analysis, in February
18
2008, the Compensation Committee approved the implementation of
new employment agreements for the Companys executive
officers which include
change-in-control
provisions. The Compensation Committee believes that the
adoption of the new employment agreements will assist the
Company in attracting and retaining executive talent. The
benefits conferred in these agreements range from one to three
times the individuals base salary plus target annual cash
incentive compensation, and other benefits, and are effective
for termination of employment (including constructive
termination) outside of the change in control context, and in
the event of both a change in control and termination of
employment (including a constructive termination) within two
years following the change of control. The arrangements provide
higher (three and two times base salary and annual compensation
for the CEO and CFO, respectively) multiples of compensation
upon separation following a change in control for the Chief
Executive Officer and Chief Financial Officer only. The
Compensation Committee believes that providing such benefits
only to the Chief Executive and Chief Financial Officers
provides sufficient protection for the Company in retaining its
executive officers. For this purpose, a change in control would
occur in any of the following instances:
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|
|
|
a change in ownership of the Company by which any person, or
more than one person acting as a group, acquires ownership of
stock of the Company (or such an affiliate) constituting more
than 50% of the total fair market value or total voting power of
the Companys outstanding Common Stock;
|
|
|
|
a change in effective control of the Company by which:
(i) any one person, or more than one person acting as a
group, acquires ownership of stock of the Company possessing 30%
or more total voting power of the Companys outstanding
Common Stock; or (ii) a majority of the Board of Directors
is replaced during any
12-month
period by Directors whose appointment or election is not
endorsed by a majority of the members of the Board of Directors
before the appointment or election; or
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|
|
a change in the ownership of a substantial portion of the assets
of the Company by which any one person, or more than one person
acting as a group, acquires assets from the Company that have a
gross fair market value equal to or more than 40% of the total
gross fair market value of all of the assets of the Company
prior to such acquisition.
|
In addition, immediately upon any change in control (as defined
in our Amended and Restated Voluntary Deferred Income Plan)
Mr. Thomas interest in all amounts credited to his
account under this plan will fully and immediately vest and
become nonforfeitable. There currently are no Company
contributions credited to Mr. Thomas account or any
other employees account under this plan. In addition, our
executive officers may receive payments under our Incentive
Compensation Plan following a change in control (as defined in
the Incentive Compensation Plan) if the Compensation Committee
determines the performance criteria have been met, as described
above under Elements of Compensation Annual
and Other Cash Incentive Awards.
For more information on change in control and severance
benefits, see Other Potential Post-Employment
Payments below.
Anticipated
Changes in Executive Compensation
Our executive compensation programs will continue in their
current form until such time as the Compensation Committee
determines in its discretion that revisions to our current plans
or replacement plans are advisable. Such revisions may include
changes in our compensation arrangements and analysis in the
future, including the peers against which our committee measures
executive compensation, changes in equity or other long-term
incentives, and other changes as the committee may determine.
19
2007
SUMMARY COMPENSATION TABLE
The following table and related notes and discussion summarize
compensation earned for our 2006 and 2007 fiscal years by our
four executive officers who served as executive officers during
and at the end of 2007, who we refer to as our named
executive officers, presented in accordance with SEC rules.
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|
|
|
|
Stock
|
|
Option
|
|
Non-Equity
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Incentive Plan
|
|
Compensation
|
|
Total
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)(1)
|
|
($)(2)
|
|
Compensation(3)
|
|
($)(4)
|
|
($)
|
|
Samuel F. Thomas
|
|
|
2007
|
|
|
$
|
450,000
|
|
|
|
|
|
|
$
|
86,783
|
|
|
$
|
1,533,402
|
|
|
$
|
735,431
|
|
|
$
|
33,757
|
|
|
$
|
2,839,373
|
|
(Chairman, Chief Executive Officer and President)
|
|
|
2006
|
|
|
$
|
400,000
|
|
|
|
|
|
|
|
|
|
|
$
|
384,618
|
|
|
$
|
660,000
|
|
|
$
|
30,404
|
|
|
$
|
1,475,022
|
|
Michael F. Biehl
|
|
|
2007
|
|
|
$
|
245,000
|
|
|
|
|
|
|
$
|
28,969
|
|
|
$
|
462,013
|
|
|
$
|
364,001
|
|
|
$
|
33,773
|
|
|
$
|
1,133,756
|
|
(Executive Vice President, Chief Financial Officer and Treasurer)
|
|
|
2006
|
|
|
$
|
235,000
|
|
|
|
|
|
|
|
|
|
|
$
|
115,385
|
|
|
$
|
352,500
|
|
|
$
|
33,089
|
|
|
$
|
735,974
|
|
Matthew J. Klaben
|
|
|
2007
|
|
|
$
|
200,000
|
|
|
|
|
|
|
$
|
13,775
|
|
|
$
|
859,828
|
|
|
$
|
208,001
|
|
|
$
|
32,457
|
|
|
$
|
1,314,061
|
|
(Vice President, General Counsel and Secretary)
|
|
|
2006
|
|
|
$
|
146,977
|
|
|
$
|
25,000
|
(5)
|
|
|
|
|
|
$
|
169,021
|
|
|
$
|
202,650
|
|
|
$
|
10,818
|
|
|
$
|
554,466
|
|
James H. Hoppel, Jr.
|
|
|
2007
|
|
|
$
|
170,000
|
|
|
|
|
|
|
$
|
11,846
|
|
|
$
|
233,314
|
|
|
$
|
164,172
|
|
|
$
|
30,837
|
|
|
$
|
610,169
|
|
(Chief Accounting Officer, Controller and Assistant Treasurer)(6)
|
|
|
2006
|
|
|
$
|
153,000
|
|
|
|
|
|
|
|
|
|
|
$
|
52,178
|
|
|
$
|
138,600
|
|
|
$
|
36,993
|
|
|
$
|
380,771
|
|
|
|
|
(1) |
|
The performance unit awards set forth in the table below were
granted pursuant to a Performance Unit Agreement and are subject
to pre-determined performance requirements, transfer
restrictions and other restrictions specified in the Performance
Unit Agreement. Each performance unit represents a right to
receive one share or its value in cash, and the units may be
earned in a range of 35% to 150% of the number of units
specified in the table below based on Company shareholder return
relative to a peer group of companies and Company earnings
growth, in each case over a performance period ending on
December 31, 2009. The dollar values shown in the table
above are the aggregate dollar amounts recognized for financial
statement reporting purposes for the fiscal year ended
December 31, 2007 in accordance with SFAS 123(R),
Share-Based Payment, and SEC rules for executive
compensation disclosure. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
|
|
|
|
|
Compensation
|
|
|
|
|
Number of
|
|
Expense
|
|
|
Grant Date
|
|
Units(x)
|
|
($)(y)
|
|
Samuel F. Thomas
|
|
|
8/2/2007
|
|
|
|
16,850
|
|
|
$
|
86,783
|
|
Michael F. Biehl
|
|
|
8/2/2007
|
|
|
|
5,625
|
|
|
$
|
28,969
|
|
Matthew J. Klaben
|
|
|
8/2/2007
|
|
|
|
2,675
|
|
|
$
|
13,775
|
|
James H. Hoppel, Jr.
|
|
|
8/2/2007
|
|
|
|
2,300
|
|
|
$
|
11,846
|
|
|
|
|
(x) |
|
None of the performance units have vested and we are unable to
predict if our actual performance will ever meet the performance
requirements for vesting. |
|
(y) |
|
See footnote (2) to the 2007 Grants of Plan-Based Awards
Table for information relating to the methodology used in
calculating the compensation expense for 2007. |
|
|
|
(2) |
|
The option awards and the dollar values included in the option
awards column are set forth in the table below. These awards
were all granted pursuant to the 2005 Stock Incentive Plan and
include awards granted in and prior to 2007. The dollar values
shown in the table above are the aggregate dollar amounts
recognized for financial statement reporting purposes for the
fiscal years ended December 31, 2006 and 2007 in accordance
with SFAS 123(R), Share-Based Payment, and SEC
rules for executive compensation disclosure. The following
assumptions were used in calculating the amounts listed: |
The fair value of the options granted on November 23, 2005
was estimated using the Black-Scholes option pricing model with
the following weighted average assumptions: risk-free interest
rate of 4.80 percent; dividend
20
yields of 0.0 percent; volatility factors of the expected
market price of the Companys Common Stock of
47.0 percent; and a weighted average expected life of
7.5 years for the options.
The fair value of the options granted on March 29, 2006 was
estimated using the Black-Scholes option pricing model with the
following weighted average assumptions: risk-free interest rate
of 5.0 percent; dividend yields of 0.0 percent;
volatility factors of the expected market price of the
Companys Common Stock of 47.0 percent; and a weighted
average expected life of 7.5 years for the options.
The fair value of the options granted on April 27, 2006 was
estimated using the Black-Scholes option pricing model with the
following weighted average assumptions: risk-free interest rate
of 5.3 percent; dividend yields of 0.0 percent;
volatility factors of the expected market price of the
Companys Common Stock of 47.0 percent; and a weighted
average expected life of 7.5 years for the options.
The fair value of the options granted on August 2, 2007 was
estimated using the Black-Scholes option pricing model with the
following weighted average assumptions: risk-free interest rate
of 4.97 percent; dividend yields of 0.0 percent;
volatility factors of the expected market price of the
Companys Common Stock of 48.9 percent; and a weighted
average expected life of 7 years for the options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Options(w)
|
|
Time Options
|
|
|
|
|
|
|
Compensation
|
|
|
|
|
|
Compensation
|
|
|
|
|
Number of
|
|
Expense ($)
|
|
|
|
Number of
|
|
Expenses ($)(x)
|
|
|
Grant Date
|
|
Options
|
|
2006
|
|
2007
|
|
Grant Date
|
|
Options
|
|
2006
|
|
2007
|
|
Samuel F. Thomas
|
|
|
11/23/2005
|
|
|
|
356,876
|
|
|
|
|
|
|
$
|
1,264,541
|
|
|
|
11/23/2005(y
|
)
|
|
|
237,388
|
|
|
$
|
384,618
|
|
|
$
|
208,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/2/07(z
|
)
|
|
|
18,300
|
|
|
|
|
|
|
$
|
59,975
|
|
Michael F. Biehl
|
|
|
11/23/2005
|
|
|
|
107,061
|
|
|
|
|
|
|
$
|
379,356
|
|
|
|
11/23/2005(y
|
)
|
|
|
71,216
|
|
|
$
|
115,385
|
|
|
$
|
62,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/2/07(z
|
)
|
|
|
6,100
|
|
|
|
|
|
|
$
|
19,992
|
|
Matthew J. Klaben
|
|
|
3/29/2006
|
|
|
|
53,082
|
|
|
|
|
|
|
$
|
707,791
|
|
|
|
3/29/2006(y
|
)
|
|
|
34,857
|
|
|
$
|
169,021
|
|
|
$
|
142,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/2/07(z
|
)
|
|
|
2,900
|
|
|
|
|
|
|
$
|
9,504
|
|
James H. Hoppel, Jr.
|
|
|
11/23/2005
|
|
|
|
35,690
|
|
|
|
|
|
|
$
|
126,463
|
|
|
|
11/23/2005(y
|
)
|
|
|
23,738
|
|
|
$
|
38,462
|
|
|
$
|
20,888
|
|
|
|
|
4/27/2006
|
|
|
|
4,777
|
|
|
|
|
|
|
$
|
64,149
|
|
|
|
4/27/2006(y
|
)
|
|
|
3,137
|
|
|
$
|
13,716
|
|
|
$
|
13,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/2/07(z
|
)
|
|
|
2,500
|
|
|
|
|
|
|
$
|
8,193
|
|
|
|
|
(w) |
|
Performance option grants became exercisable during 2007 based
on the amount received by First Reserve in respect of its
investment in us, as described below under Equity and
Incentive Plan Awards Amended and Restated Chart
Industries, Inc. 2005 Stock Incentive Plan. For fiscal
year 2006, none of the performance options vested and we were
unable to predict at that time when or if First Reserves
return on its investment in us would reach a minimum threshold
amount or other events would occur that would result in any
performance option grants ever becoming exercisable.
Accordingly, under applicable accounting rules, we did not
recognize any expense with respect to these options for 2006. In
June 2007, a net return was recognized by First Reserve with
respect to its investment us in connection with the closing of a
secondary offering of the Companys Common Stock, resulting
in the vesting of 82% of the outstanding performance options. As
a result, we recognized the expenses disclosed above with
respect to these options for 2007. |
|
(x) |
|
Aggregate dollar amounts recognized as stock-based compensation
expense for financial statement reporting purposes under
SFAS 123(R) for fiscal years 2006 and 2007. |
|
(y) |
|
Time option grants described below under Equity and
Incentive Plan Awards Amended and Restated Chart
Industries, Inc. 2005 Stock Incentive Plan that become
exercisable annually and ratably over five years after the grant
date. |
|
(z) |
|
Time option grants under the 2005 Stock Incentive Plan that
become exercisable annually and ratably over four years after
the grant date. |
|
|
|
(3) |
|
Reflects amounts of incentive compensation earned under our
Incentive Compensation Plan and 2006 Bonus Plan. Our
Compensation Committee determined that (i) our financial
performance for fiscal year 2006 exceeded the maximum target
levels for each named executive officer performance measure
under the 2006 Bonus Plan; and (ii) our financial
performance for 2007 has achieved a weighted level of 148.57% |
21
|
|
|
|
|
of our 2007 performance measures. We paid the Incentive
Compensation Plan cash payments and the 2006 Bonus Plan cash
payments to our named executive officers on March 7, 2008
and March 15, 2007, respectively. |
|
(4) |
|
All Other Compensation includes the following payments made on
behalf of our executive officers. All amounts are calculated
based on the aggregate incremental actual cost, in dollars, to
us of the benefit listed. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites and
|
|
Company
|
|
|
|
|
|
|
Other Personal
|
|
Contributions to
|
|
Total
|
|
|
Year
|
|
Benefits ($)(x)
|
|
401(k) Plan ($)(y)
|
|
($)
|
|
Samuel F. Thomas
|
|
|
2007
|
|
|
$
|
12,000
|
|
|
$
|
21,757
|
|
|
$
|
33,757
|
|
|
|
|
2006
|
|
|
$
|
12,000
|
|
|
$
|
18,404
|
|
|
$
|
30,404
|
|
Michael F. Biehl
|
|
|
2007
|
|
|
$
|
12,245
|
|
|
$
|
21,528
|
|
|
$
|
33,773
|
|
|
|
|
2006
|
|
|
$
|
12,000
|
|
|
$
|
21,089
|
|
|
$
|
33,089
|
|
Matthew J. Klaben
|
|
|
2007
|
|
|
$
|
9,845
|
|
|
$
|
22,612
|
|
|
$
|
32,457
|
|
|
|
|
2006
|
|
|
$
|
7,200
|
|
|
$
|
3,618
|
|
|
$
|
10,818
|
|
James H. Hoppel, Jr.
|
|
|
2007
|
|
|
$
|
9,845
|
|
|
$
|
20,992
|
|
|
$
|
30,837
|
|
|
|
|
2006
|
|
|
$
|
16,867
|
|
|
$
|
20,126
|
|
|
$
|
36,993
|
|
|
|
|
(x) |
|
In 2006 and 2007, each of the named executive officers received
an automobile allowance. In 2006, in addition to his automobile
allowance in the amount of $9,600, Mr. Hoppel received a
travel allowance in the amount of $7,267 in connection with his
efforts related to our initial public offering. Also includes in
2007 taxable fringe benefit and wellness credit of $245 for
Messrs. Biehl, Hoppel and Klaben. |
|
(y) |
|
Includes 401(k) plan matching contributions made by us and
401(k) plan profit sharing. |
|
|
|
(5) |
|
Mr. Klaben received a $25,000 signing bonus in connection
with commencement of his employment with us in March of 2006. |
|
(6) |
|
Effective March 1, 2008, the Board of Directors of the
Company appointed James H. Hoppel, Jr., who previously served as
the Companys Chief Accounting Officer, Controller and
Assistant Treasurer, as the Companys Vice
President Corporate Development. |
2007
GRANTS OF PLAN-BASED AWARDS TABLE
The following table and related notes and discussion summarize
grants of equity and non-equity incentive compensation awards to
our named executive officers for our 2007 fiscal year, presented
in accordance with SEC rules.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Other
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
Exercise
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
or Base
|
|
Value of
|
|
|
|
|
Estimated Future Payouts Under
|
|
Estimated Future Payouts Under
|
|
Shares of
|
|
Securities
|
|
Price of
|
|
Stock
|
|
|
|
|
Non-Equity Incentive Plan Awards(1)
|
|
Equity Incentive Plan Awards
|
|
Stock or
|
|
Underlying
|
|
Option
|
|
and
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Options
|
|
Awards
|
|
Option
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
($/Sh)
|
|
Awards(2)
|
|
Samuel F. Thomas
|
|
|
8/02/07(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,300
|
|
|
$
|
27.74
|
|
|
$
|
289,995
|
|
|
|
|
8/02/07(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,897
|
|
|
|
16,850
|
|
|
|
25,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
429,591
|
|
|
|
|
|
|
|
|
|
|
|
$
|
495,000
|
|
|
$
|
742,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael F. Biehl
|
|
|
8/02/07(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,100
|
|
|
$
|
27.74
|
|
|
$
|
96,665
|
|
|
|
|
8/02/07(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,968
|
|
|
|
5,625
|
|
|
|
8,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
143,409
|
|
|
|
|
|
|
|
|
|
|
|
$
|
245,000
|
|
|
$
|
367,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew J. Klaben
|
|
|
8/02/07(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,900
|
|
|
$
|
27.74
|
|
|
$
|
45,955
|
|
|
|
|
8/02/07(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
936
|
|
|
|
2,675
|
|
|
|
4,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
68,199
|
|
|
|
|
|
|
|
|
|
|
|
$
|
140,000
|
|
|
$
|
210,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James H. Hoppel, Jr.
|
|
|
8/02/07(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
$
|
27.74
|
|
|
$
|
39,617
|
|
|
|
|
8/02/07(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
805
|
|
|
|
2,300
|
|
|
|
3,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
58,639
|
|
|
|
|
|
|
|
|
|
|
|
$
|
110,500
|
|
|
$
|
165,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These columns show the potential payouts for each named
executive officer under the Incentive Compensation Plan for
fiscal year 2007 based on goals set in February 2007. Detail
regarding the actual awards under the Incentive Compensation
Plan is reported in the 2007 Summary Compensation
Table and is included in the Compensation Discussion and
Analysis above. |
22
|
|
|
(2) |
|
The values included in this column represent the grant date fair
value of stock and option awards computed in accordance with
SFAS 123(R). The grant date fair values of the performance
units are reflected in the table above using two separate grant
date values: (i) the grant date value of one-half of the
award based on RTSR is $23.27 based on market condition
valuation requirements; and (ii) the grant date fair value
of the other one-half of the award based on EBITDA growth is
$27.72, based on Company performance condition valuation
requirements. |
|
(3) |
|
Granted pursuant to the 2005 Stock Incentive Plan as described
in Equity and Incentive Plan Awards Amended
and Restated Chart Industries, Inc. 2005 Stock Incentive
Plan below. These options vest with respect to one-fourth
the total number of common shares underlying the stock options
on each of the first four anniversaries of the grant date. |
|
(4) |
|
Performance units granted pursuant to the 2005 Stock Incentive
Plan. Detail regarding the performance units is reported in the
2007 Summary Compensation Table and is included in
the Compensation Discussion and Analysis. |
Discussion
of Summary Compensation Table and Grants of Plan-Based Awards
Table
Description
of New Employment Agreements
In connection with its review of executive officer compensation
arrangements, the Compensation Committee approved, and the Board
of Directors ratified, new employment agreements entered into
effective February 26, 2008 by each of the Companys
executive officers (the New Employment Agreements).
The New Employment Agreements for Messrs. Thomas, Biehl,
Hoppel and Klaben replace existing employment agreements (the
Old Employment Agreements) with these executive
officers, which were initially put into place prior to the
Companys initial public offering and were in a form more
customary for private equity portfolio companies. The Company
also entered into an employment agreement with Kenneth J.
Webster, who was appointed as the Companys Chief
Accounting Officer and Controller on March 1, 2008.
The New Employment Agreements provide for an initial two year
employment term which automatically renews for additional one
year periods. The Employment Agreements further provide for an
automatic three year extension in the event of a change in
control of the Company (as such term is defined in the
Employment Agreements).
During the employment term, the executive is entitled to receive
at least the base salary in effect as of the effective date of
the New Employment Agreement, together with the right to
participate in the Companys employee benefit plans,
including health, life and disability insurance, retirement,
deferred compensation and fringe benefits, as well as any
incentive and equity compensation plans, as in effect from time
to time, on the same basis as such plans are made available to
other senior executives, and to receive a car allowance. Annual
base salaries of the Companys executive officers under
their respective New Employment Agreements for 2008 are as
follows: (i) Samuel F. Thomas, Chairman, Chief Executive
Officer and President, $500,000; (ii) Michael F. Biehl,
Executive Vice President, Chief Financial Officer and Treasurer,
$262,150; (iii) James H. Hoppel, Jr., Vice
President Corporate Development, $192,000;
(iv) Matthew J. Klaben, Vice President, General Counsel and
Secretary, $210,000; and (v) Kenneth J. Webster, Chief
Accounting Officer and Controller, $156,000.
Pursuant to the New Employment Agreements, during the employment
term, each executive is eligible to receive an annual bonus (an
Annual Bonus) of up to one hundred fifty percent
(150%) of a target amount designated for each executive, based
upon a percentage of such executives annual base salary
(the Base Target). Annual Bonuses are based upon the
achievement of performance targets established by the Board of
Directors, or a duly authorized committee thereof, within the
first three months of each fiscal year during the employment
period. Annual Bonuses, if any, are payable within two and
one-half months after the end of the applicable fiscal year.
Annual Bonuses are determined in accordance with the terms of
the Companys Incentive Compensation Plan, as currently in
effect and as it may be amended from time to time, including any
successor plan. In the event of a change in control, the Annual
Bonus may be pro-rated in accordance with the terms of the
Incentive Compensation Plan. Base Targets of the Companys
executive officers under their respective employment agreements
are as follows: (i) Samuel F. Thomas, Chairman, Chief
Executive Officer and President, 110% of base salary;
(ii) Michael F. Biehl, Executive Vice President, Chief
Financial Officer and Treasurer, 100% of base salary;
(iii) James H. Hoppel, Jr., Vice President
Corporate Development, 65% of base salary; (iv) Matthew J.
Klaben, Vice President,
23
General Counsel and Secretary, 75% of base salary; and
(v) Kenneth J. Webster, Chief Accounting Officer and
Controller, 45% of base salary.
Under the New Employment Agreements, our executive officers are
entitled to receive monthly automobile allowances for 2008 in
the following amounts: (i) Mr. Thomas, $1,000;
(ii) Mr. Biehl, $1,000; (iii) Mr. Klaben,
$800; (iv) Mr. Hoppel, Jr., $800; and
(v) Mr. Webster, $800.
For more terms, including post-termination payments and
restrictive covenants, see Other Potential Post-Employment
Payments.
Description
of Old Employment Agreements
The Old Employment Agreements remained in effect as of
December 31, 2007 and all compensation information
presented above was based on these agreements. The following is
a brief description of the Old Employment Agreements, which are
no longer in effect:
Samuel F. Thomas. On November 23, 2005,
we entered into an employment agreement with Samuel F. Thomas,
pursuant to which Mr. Thomas served as our Chairman, Chief
Executive Officer and President for a three year rolling term.
Under the agreement, Mr. Thomas was entitled to an annual
base salary of $450,000 for 2007 payable in regular installments
in accordance with our usual payroll practices. Mr. Thomas
was also eligible to earn an annual bonus award, for each full
year during the term of his employment agreement, of up to 150%
of his annual bonus target, which target for calendar year 2007
was $495,000 under our Incentive Compensation Plan.
Mr. Thomas was also generally entitled to participate in
our employee benefit plans on the same basis as those benefits
are generally made available to our other senior executives.
Under the employment agreement, Mr. Thomas was entitled to
receive an automobile allowance in the amount of $1,000 per
month.
Michael F. Biehl. On December 1, 2005, we
entered into an employment agreement with Michael F. Biehl,
pursuant to which Mr. Biehl served as our Executive Vice
President, Chief Financial Officer and Treasurer for a two year
rolling term. Under the agreement, Mr. Biehl was entitled
to an annual base salary of $245,000 for 2007 payable in regular
installments in accordance with our usual payroll practices.
Mr. Biehl was also eligible to earn an annual bonus award,
for each full year during the term of his employment agreement,
of up to 150% of his annual base salary, based upon the
achievement of annual performance targets established by our
Board under our Incentive Compensation Plan. Mr. Biehl was
also generally entitled to participate in our employee benefit
plans on the same basis as those benefits are generally made
available to our other senior executives. Under the employment
agreement, Mr. Biehl was entitled to receive an automobile
allowance in the amount of $1,000 per month.
Matthew J. Klaben. On March 29, 2006, we
entered into an employment agreement with Matthew J. Klaben,
pursuant to which Mr. Klaben served as our Vice President
and General Counsel for a rolling one year term. Under the
agreement, Mr. Klaben was entitled to an annual base salary
of $200,000 for 2007, payable in regular installments in
accordance with our usual payroll practices. Mr. Klaben
received a one-time $25,000 signing bonus in 2006, and was
eligible to earn an annual bonus award, for each full year
during the term of his employment agreement, of up to 105% of
his annual base salary, based upon the achievement of annual
performance targets established by our Board under our Incentive
Compensation Plan. Mr. Klaben was also generally entitled
to participate in our employee benefit plans on the same basis
as those benefits are generally made available to our other
senior executives. Under the employment agreement,
Mr. Klaben was entitled to receive an automobile allowance
in the amount of $800 per month.
James H. Hoppel, Jr. On May 5, 2006, we entered
into an employment agreement with James H. Hoppel, Jr.
pursuant to which Mr. Hoppel served as our Chief Accounting
Officer, Controller and Assistant Treasurer for a one year
rolling term. Under the agreement, Mr. Hoppel was entitled
to an annual base salary of $170,000 for 2007, payable in
regular installments in accordance with our usual payroll
practices. Mr. Hoppel was also eligible to earn an annual
bonus award for the 2007 fiscal year and subsequent years during
the term of his employment agreement, of up to 97.5% of his
annual base salary, based upon the achievement of annual
performance targets established by our Board under our Incentive
Compensation Plan. Mr. Hoppel was also generally entitled
to participate in our employee benefit plans on the same terms
as those benefits are generally
24
made available to our other senior executives. Under the
employment agreement, Mr. Hoppel was entitled to receive an
automobile allowance in the amount of $800 per month.
Equity
and Incentive Plan Awards
Chart
Industries, Inc. Incentive Compensation Plan
Cash bonuses payable to the executive officers are payable
pursuant to and in accordance with the Incentive Compensation
Plan, which was adopted by the Board of Directors and approved
by our stockholders on July 17 and July 18, 2006,
respectively. The performance measures established under the
Incentive Compensation Plan for fiscal year 2007 for executive
officers were operating income, net income and working capital.
The Compensation Committee selected these measures in an effort
to more closely align executive officer cash bonus measures to
measures that are believed to be meaningful indications of our
performance for our public stockholders. Under these targets,
our executive officers were eligible to earn a cash incentive
bonus for our 2007 fiscal year if performance exceeded threshold
amounts in an amount up to a pre-determined percentage, ranging
from 97.5% to 165% of the executive officers base salary
(with higher ranked officers being compensated at a higher
percentage of base salary), at maximum performance levels.
Actual performance below the minimum performance threshold for a
performance objective would result in no payment based on that
objective. Our Compensation Committee has determined that our
financial performance for 2007 has achieved a weighted level of
148.57% of our 2007 performance measures. Accordingly, we paid
the cash payments to our named executive officers set forth in
the 2007 Summary Compensation Table under the caption
Non-Equity Incentive Plan Compensation.
2006
Chart Executive Incentive Compensation Plan
Cash bonuses paid in 2006 to the executive officers were paid
pursuant to and in accordance with the 2006 Bonus Plan, which
was adopted March 1, 2006 and approved by our stockholders
on July 18, 2006. The material performance targets under
the 2006 Bonus Plan, as established by the Compensation
Committee of the Board, included working capital and EBITDA
(earnings before interest, tax, depreciation and amortization)
targets. Participants were eligible to earn a bonus of up to a
pre-determined percentage of the participants base salary,
ranging from 90% to 165% of the participants base salary
at maximum performance levels. Our Compensation Committee
determined that our financial performance for 2006 exceeded the
maximum target levels for each named executive officer
performance measure under the 2006 Bonus Plan. Accordingly, we
paid the annual bonuses to our named executive officers set
forth in the 2007 Summary Compensation Table under the caption
Non-Equity Incentive Plan Compensation.
Amended
and Restated Chart Industries, Inc. 2005 Stock Incentive
Plan
The 2005 Stock Incentive Plan was initially adopted effective
November 23, 2005, in connection with the Acquisition. The
plan, as amended and restated, was adopted by the Board of
Directors and approved by our stockholders in connection with
our initial public offering. The 2005 Stock Incentive Plan was
amended and restated at that time to reflect the fact that our
public company status made certain provisions under the original
plan no longer applicable.
The 2005 Stock Incentive Plan provides for the grant of
(1) options that are not incentive stock options,
(2) stock appreciation rights, (3) restricted stock,
(4) restricted stock units, and (5) other stock-based
grants, including shares of our Common Stock awarded to our
non-employee Directors, executive officers, other key employees
and consultants. As of March 25, 2008, there were
2,582,758 shares of Common Stock reserved for issuance
under the 2005 Stock Incentive Plan.
The 2005 Stock Incentive Plan is administered by our Board of
Directors, which has delegated its duties and powers in whole or
in part to our Compensation Committee. The Compensation
Committee has the full power and authority to establish the
terms and conditions of any award consistent with the provisions
of the 2005 Stock Incentive Plan and to waive any such terms and
conditions at any time. The Compensation Committee also has the
authority to grant awards under the 2005 Stock Incentive Plan.
The Compensation Committee is authorized to interpret the 2005
Stock Incentive Plan, to establish, amend and rescind any rules
and regulations relating to the 2005 Stock Incentive Plan and to
make any other determinations that it deems necessary or
desirable for the administration of the 2005 Stock Incentive
Plan. The Compensation Committee is authorized to correct any
defect
25
or supply any omission or reconcile any inconsistency in the
2005 Stock Incentive Plan in the manner and to the extent the
committee deems necessary or desirable.
Prior to the initial public offering, the Compensation Committee
granted to our executive officers under the 2005 Stock Incentive
Plan certain options as non-qualified stock options, which were
granted as follows: approximately 35% vest and become
exercisable over the passage of time, which we refer to as
time options, assuming the holder thereof continues
to be employed by us, and the remaining portion vests and
becomes exercisable based upon the achievement of certain
performance targets, which we refer to as performance
options. These time options generally become exercisable
by the holder of the option in installments of 20% on each of
the first five anniversaries of the grant date. The performance
based stock options vested at 82% based upon the return on
investment that First Reserve realized when it liquidated its
ownership interest in us in connection with the secondary
offering in June 2007.
The exercise price per share for options is equal to the fair
market value on the applicable date of grant, subject to any
adjustments to outstanding options permitted in connection with
significant transactions, such as our initial public offering.
An option holder may exercise an option by written notice and
payment of the exercise price (1) in cash, (2) to the
extent permitted by the Board, by the surrender of a number of
shares of Common Stock already owned by the option holder for at
least six months (or such other period as established from time
to time by the Board to avoid adverse accounting treatment
applying generally accepted accounting principles), (3) in
a combination of cash and shares of Common Stock (as qualified
by clause (2)), (4) through the delivery of irrevocable
instructions to a broker to sell shares obtained upon the
exercise of the option and deliver to us an amount equal to the
exercise price for the shares of Common Stock being purchased or
(5) through such cashless exercise procedures as the Board
may permit. Option holders who are subject to the withholding of
federal and state income tax as a result of exercising an option
may satisfy the income tax withholding obligation through the
withholding of a portion of the shares of Common Stock to be
received upon exercise of the option.
The 2005 Stock Incentive Plan is intended to aid us in
recruiting and retaining key employees, Directors and
consultants of outstanding ability and to motivate such
employees, Directors or consultants to exert their best efforts
on behalf of us and our affiliates by providing incentives
through the granting of awards. Our Compensation Committee
historically has taken the view that providing our executive
officers with a proprietary interest in our success further
aligns the incentives of our executive officers with those of
our stockholders.
26
2007
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
The following table and related notes and discussion present
information about equity awards held by our named executive
officers at December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Unearned
|
|
|
|
|
|
|
|
|
|
|
Unearned
|
|
Shares,
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Shares, Units or
|
|
Units or
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Other
|
|
Other
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Rights
|
|
Rights
|
|
|
Unexercised
|
|
Unexercised
|
|
|
|
|
|
That
|
|
That
|
|
|
Options
|
|
Options
|
|
Option
|
|
Option
|
|
Have
|
|
Have Not
|
|
|
(#)
|
|
(#)
|
|
Exercise
|
|
Expiration
|
|
Not Vested
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable(1)
|
|
Price ($)
|
|
Date
|
|
(#)
|
|
($)(8)
|
|
Samuel F. Thomas
|
|
|
356,876
|
(2)
|
|
|
|
|
|
$
|
6.50
|
|
|
|
11/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
94,955
|
(3)
|
|
|
142,433
|
(3)
|
|
$
|
6.50
|
|
|
|
11/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,300
|
(4)
|
|
$
|
27.74
|
|
|
|
8/02/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,850
|
(7)
|
|
$
|
520,665
|
|
Michael F. Biehl
|
|
|
24,000
|
(2)
|
|
|
|
|
|
$
|
6.50
|
|
|
|
11/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,730
|
(3)
|
|
$
|
6.50
|
|
|
|
11/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,100
|
(4)
|
|
$
|
27.74
|
|
|
|
8/02/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,625
|
(7)
|
|
$
|
173,813
|
|
Matthew J. Klaben
|
|
|
53,082
|
(2)
|
|
|
|
|
|
$
|
12.16
|
|
|
|
3/29/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
6,471
|
(5)
|
|
|
27,884
|
(5)
|
|
$
|
12.16
|
|
|
|
3/29/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,900
|
(4)
|
|
$
|
27.74
|
|
|
|
8/02/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,675
|
(7)
|
|
$
|
82,658
|
|
James H. Hoppel, Jr.
|
|
|
35,690
|
(2)
|
|
|
|
|
|
$
|
6.50
|
|
|
|
11/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
9,496
|
(3)
|
|
|
14,242
|
(3)
|
|
$
|
6.50
|
|
|
|
11/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
4,777
|
(2)
|
|
|
|
|
|
$
|
12.16
|
|
|
|
4/27/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
627
|
(6)
|
|
|
2,510
|
(6)
|
|
$
|
12.16
|
|
|
|
4/27/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
(4)
|
|
$
|
27.74
|
|
|
|
8/02/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,300
|
(7)
|
|
$
|
71,070
|
|
|
|
|
(1) |
|
The securities underlying unexercised options which are
unexercisable are also included in the aggregate dollar amount
recognized for financial statement reporting purposes, in
accordance with SFAS 123(R) and SEC rules for executive
compensation disclosure, in the Option Awards column
of the 2007 Summary Compensation Table. |
|
(2) |
|
These securities underlying unexercised options represent
performance options granted under the 2005 Stock Incentive Plan.
The performance options became exercisable upon the recognition
of a net return by First Reserve with respect to its investment
in the Company in connection with the Companys secondary
offering in June 2007. |
|
(3) |
|
These securities underlying these options represent time options
granted on November 23, 2005 under the 2005 Stock Incentive
Plan and vest annually in equal installments over five years
based on continued service. |
|
(4) |
|
These securities underlying unexercised options represent time
options granted on August 2, 2007 under the 2005 Stock
Incentive Plan and will vest annually in equal installments over
four years based on continued service. These stock options are
also included in the All Other Option Awards column
of the 2007 Grants of Plan-Based Awards Table. |
|
(5) |
|
These securities underlying these options represent time options
granted on March 29, 2006 under the 2005 Stock Incentive
Plan and vest annually in equal installments over five years
based on continued service. |
|
(6) |
|
These securities underlying these options represent time options
granted on April 27, 2006 under the 2005 Stock Incentive
Plan and vest annually in equal installments over five years
based on continued service. |
27
|
|
|
(7) |
|
These performance units were granted on August 2, 2007
pursuant to the 2005 Stock Incentive Plan. Detail regarding the
performance units is reported in the 2007 Summary
Compensation Table and is included in the Compensation
Discussion and Analysis. These performance units are also
included in the Estimated Future Payouts Under Equity
Incentive Plan Awards column of the 2007 Grants of
Plan-Based Awards Table. |
|
(8) |
|
Calculated based on a December 31, 2007 closing price of
$30.90. |
2007
OPTION EXERCISES AND STOCK VESTED TABLE
The following table presents information about the number of
shares issued upon option exercises, and the value realized on
exercise, by our named executive officers in 2007.
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Number of Shares
|
|
Value Realized on
|
Name
|
|
Acquired on Exercise (#)
|
|
Exercise ($)
|
|
Michael F. Biehl
|
|
|
103,347
|
|
|
$
|
2,324,147
|
|
Matthew J. Klaben
|
|
|
500
|
|
|
$
|
8,750
|
|
2007
NONQUALIFIED DEFERRED COMPENSATION TABLE
The following table and related notes and discussion present
information about the amount of compensation deferred, and the
earnings accrued thereon, by our named executive officers in
2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions
|
|
Contributions
|
|
Earnings in
|
|
Withdrawals/
|
|
Balance at Last
|
|
|
in Last FY
|
|
in Last FY
|
|
Last FY
|
|
Distributions
|
|
FYE
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Samuel F. Thomas
|
|
$
|
|
|
|
$
|
|
|
|
$
|
11,011
|
|
|
$
|
|
|
|
$
|
120,965
|
|
Pursuant to the Companys Amended and Restated Chart
Industries, Inc. Voluntary Deferred Income Plan (the
Deferred Income Plan), eligible employees are
entitled to elect to defer up to 100% of their compensation,
consisting of total salary, bonuses and commissions payable in a
calendar year. Regardless of the circumstances under which a
participants relationship with the Company terminates, all
deferrals made pursuant to the plan will be fully vested.
Contributions made by the Company, and any gains or losses on
such contributions, vest as follows: 33% upon completion of one
year of participation; 67% upon completion of two years of
participation; and 100% upon completion of three years of
participation in the plan. Elections are made by participants in
the taxable year immediately prior to the taxable year to which
the deferral pertains, and are effective as of the first day of
such taxable year. The Deferred Income Plan is unfunded and all
benefits under the plan are payable solely from the general
assets of the Company.
Benefits under the Deferred Income Plan are payable upon the
participants reaching his or her normal or early
retirement date or termination of employment. Payments are made
either in a lump sum, or in equal annual installments for a
period of years, as designated by the participant at the time of
deferral. Payments may be accelerated under the Deferred Income
Plan in the event that (1) a participants interest
upon termination does not exceed $10,000; (2) a plan
interest is awarded to a former spouse of a participant under
court order; (3) a change in control (as
defined under the operation of the Deferred Income Plan) occurs;
(4) a participant has an unforeseeable emergency;
(5) a participant becomes disabled; or (6) death
occurs prior or subsequent to commencement or completion of
payment of benefits, respectively. In no event may a participant
receive more than one distribution as a result of an
unforeseeable emergency in any calendar year. A participant may
also elect to receive an in-service distribution at the time of
completing an election of deferral, and such payment is payable
in a lump sum on the in-service withdrawal date. For information
regarding post-termination payments under the plan, see
Other Potential Post-Employment Payments.
Participants in the Deferred Income Plan may direct the
investment of their balance held within the plan among a number
of alternative investment fund options, and earnings and losses
on participants investments are determined based on the
individual performance of the underlying investment options. A
participant may regularly change their investment allocation
within the plan. A rabbi trust has been established under the
plan to hold assets separate from our other assets for the
purpose of paying future participant benefit obligations. Assets
held in the rabbi trust are available to our general creditors
in the event of our insolvency.
28
Notwithstanding anything in the Deferred Income Plan to the
contrary, the Deferred Income Plan is administered in accordance
with the requirements of, or to meet the requirements for
exemption from, Section 409A of the Internal Revenue Code.
OTHER
POTENTIAL POST-EMPLOYMENT PAYMENTS
The tables below reflect the amount of compensation payable to
each of the named executive officers of our Company under both
the Old and New Employment Agreements (a) in the event of
termination of the executives employment due to
retirement, death, disability, voluntary termination and
termination for cause, involuntary termination without cause or
resignation with good reason and not within two years of a
change in control, and involuntary termination without cause or
resignation with good reason within two years of a change in
control, and (b) upon a change in control. The amounts
shown assume that such termination was effective as of
December 31, 2007, the last business day of 2007, and thus
include amounts earned through such time and are estimates of
the amounts which would be paid out to the executives upon their
termination. The actual amounts to be paid out can only be
determined at the time of an executives separation from
our Company.
Payments
made upon Involuntary Termination for Cause or
Resignation without Good Reason
Salary, Bonus and Benefits. Pursuant to the
terms of the Old and New Employment Agreements, in the event
that a named executive officer is terminated by us for
Cause or resigns without Good Reason, he
is entitled to receive his base salary, annual bonus and
benefits, including accrued but unpaid vacation, that are earned
but unpaid as of the date of termination in a lump sum. Under
the terms of the Old and New Employment Agreements,
Cause is defined as the executives willful
failure to perform duties, commission of, or plea of guilty or
no contest to a felony or crime involving moral turpitude,
willful malfeasance or misconduct which is demonstrably
injurious to us or our subsidiaries, material breach of the
material terms of the agreement, commission of an act of gross
negligence, corporate waste, disloyalty or unfaithfulness to us
which adversely affects our business or that of our subsidiaries
or affiliates, or any other act or course of conduct which will
demonstrably have a material adverse effect on us or a
subsidiary or an affiliates business. Under the terms of
the Old Employment Agreements, Good Reason is
defined as any of the following events occurring without the
executives consent: a substantial diminution in the
executives position or duties, material adverse change in
reporting lines or assignment of duties materially inconsistent
with his position, or any reduction in base salary or material
reduction in employee benefits not affecting all other senior
executives. Under the terms of the New Employment Agreements,
Good Reason is defined as: (i) a material
diminution in executives base salary (excluding any
general salary reduction similarly affecting substantially all
other senior executives of the Company as a result of a material
adverse change in the Companys prospects or business);
(ii) a material diminution in executives authority,
duties, or responsibilities; (iii) a material change in the
geographic location at which executive must perform services; or
(iv) any other action or inaction that constitutes a
material breach by the Company of the New Employment Agreement.
Treatment of Nonqualified Stock Options. Under
the terms of the stock option agreements under which the
non-qualified stock options were awarded to the named executive
officers, in the event that a named executive officer is
terminated by us for Cause or resigns without Good Reason, the
unvested portion of all stock options will be cancelled.
Treatment of Performance Units. Under the
terms of the performance unit agreements under which the
performance units were awarded to the named executive officers,
in the event that a named executive officer is terminated by us
for Cause or resigns without Good Reason during the performance
period, all performance units will be cancelled.
Treatment of Deferred Compensation. Under the
terms of the Deferred Income Plan, in the event that a
participants employment is terminated due to
(1) conviction of certain crimes enumerated in the Deferred
Income Plan or (2) any breach of the duty of loyalty to us,
any acts of omission in the performance of a participants
Company duties not in good faith or which involve intentional
misconduct or a knowing violation of law, or any transaction in
the performance of a participants Company duties from
which the participant derived an improper personal benefit
(Cause under the Deferred Income Plan), the
participant will not be entitled to receive any benefits or
payments under the terms of the plan, other than the participant
deferrals, which would be paid in a lump sum.
29
Payments
made upon Involuntary Termination Without Cause or Resignation
for Good Reason
Salary, Bonus and Benefits. Pursuant to the
terms of the Old Employment Agreements, in the event that a
named executive officer is terminated by us without Cause or
resigns for Good Reason, he is entitled to receive his base
salary, annual bonus and benefits, including accrued but unpaid
vacation, that are earned but unpaid as of the date of
termination and, subject to the execution and delivery of a
release of claims against us and compliance with the restrictive
covenants described below under Restrictive
Covenants that Apply During and After Termination of
Employment, (1) the greater of the executives
current base salary or highest base salary paid within the
employment term, payable in installments as follows:
Mr. Thomas, for three years; Mr. Biehl, for two years;
Mr. Klaben and Mr. Hoppel, for one year; and
(2) continued coverage under our group health plans on the
same basis as active employees as follows: Mr. Thomas, for
three years; Mr. Biehl, for two years; Mr. Klaben and
Mr. Hoppel, for one year. To the extent that continued
coverage is not permissible under the terms of such plans beyond
eighteen months, we may instead pay an amount equal to the
premium subsidy we would have otherwise paid on the executive
officers behalf for such coverage.
Pursuant to the terms of the New Employment Agreements, in the
event that a named executive officer is terminated by us without
Cause or resigns for Good Reason not within two years of a
change in control, he is entitled to receive his base salary,
annual bonus and benefits, including accrued but unpaid
vacation, that are earned but unpaid as of the date of
termination and, subject to the execution and delivery of a
release of claims against us and compliance with the restrictive
covenants described below under Restrictive
Covenants that Apply During and After Termination of
Employment, (1) a lump sum payment equal to the
following percentage of the executives base salary and
target annual bonus: Mr. Thomas, 200%; Mr. Biehl, 150%; and all
other officers, 100%; and (2) continued coverage under the
Companys group health plans for the following period,
depending upon the executives position: Mr. Thomas,
24 months; Mr. Biehl, 18 months; and all other
executives, 12 months.
Treatment of Nonqualified Stock Options. Under
the terms of the stock option agreement under which the
non-qualified stock options were awarded to the named executive
officers, in the event that a named executive officer is
terminated by us without Cause or resigns for Good Reason, any
unvested stock options will be cancelled by us without
consideration.
Treatment of Performance Units. Under the
terms of the performance unit agreements under which the
performance units were awarded to the named executive officers,
in the event that a named executive officer is terminated by us
without Cause or resigns for Good Reason during the performance
period, all performance units will be cancelled.
Treatment of Deferred Compensation. Under the
terms of the Deferred Income Plan, in the event that a
participants employment is terminated by us without Cause
under the Deferred Income Plan or by resignation for Good
Reason, the participant will be entitled to receive an amount
equal to the participants vested account, payable as a
lump sum. The payment will be made on or about the first day of
the third month following termination.
Payments
made upon Termination by Reason of Death or Disability
Salary, Bonus and Benefits. Pursuant to the
terms of the Old and New Employment Agreements, in the event
that a named executive officer is terminated by reason of death
or becomes physically or mentally incapacitated and therefore
unable for a period of six consecutive months or an aggregate of
nine months in any twenty-four consecutive month period to
perform his duties (Disability) he will be entitled
to receive his base salary, annual bonus and benefits, including
accrued but unpaid vacation, that are earned but unpaid as of
the date of termination and, a pro rata portion of the annual
bonus, if any, that the executive would have been entitled to
receive for the year in which the termination occurs, based on
our actual results for the year and the percentage of the fiscal
year that has elapsed through the date of the executives
termination of employment.
Treatment of Nonqualified Stock Options. Under
the terms of the stock option agreements under which the
non-qualified stock options were awarded to the executive
officers, in the event that a named executive officer is
terminated due to death or Disability, (x) any stock options
granted before 2007 that would have vested in the calendar
year in which such termination occurs, will become fully vested
and (y) any stock options granted in 2007 will become
immediately vested.
Treatment of Performance Units. Under the
terms of the performance unit agreement under which the
performance units were awarded to the named executive officers,
in the event that a named executive officer is
30
terminated due to retirement upon reaching the age of 60,
provided the executive has completed ten years of service with
us (Retirement), death or Disability during the
performance period, the executive (or his or her beneficiary or
beneficiaries) shall be entitled to a pro-rated number of units
or, if the Compensation Committee so elects, the cash
equivalent, calculated by multiplying (x) by
(y) where: (x) is the number of Shares, if any, that
would have been earned by the executive as the result of the
satisfaction of the performance requirements; and (y) is
the number of months that the executive was employed (rounded up
to the nearest whole number) during the performance period
divided by the number of months in the performance period. No
named executive officer was eligible for Retirement on
December 31, 2007, and accordingly, the tables below do not
present any benefits associated with Retirement.
Treatment of Deferred Compensation. Under the
terms of the Deferred Income Plan, in the event that a
participants employment is terminated due to Disability
(as defined in the Deferred Income Plan), the benefit payable to
the participant under the Deferred Income Plan will vest, as of
the date of the disability determination. In the event that the
participants employment is terminated due to death, we
will distribute the participants account as soon as
practicable following the date of death. In the event that
either death or Disability occurs prior to commencement of the
payment of benefits, payments will be made as a lump sum. In the
event that a participants employment is terminated due to
death following the commencement of the payment of benefits, but
prior to the completion of all such benefits, we will continue
to make installment payments over the remainder of the period,
as though the participant had survived.
Payments
made upon Expiration of Employment Term
Salary, Bonus and Benefits. Pursuant to the
terms of the Old and New Employment Agreements, in the event
that the employment of a named executive officer is terminated
upon expiration of the employment term without renewal, he will
be entitled to receive his base salary, annual bonus and
benefits, including accrued but unpaid vacation, that are earned
but unpaid as of the date of termination. No named executive
officers employment agreement could have terminated on
December 31, 2007, as a result of the rolling term of the
agreement, since we could not have provided the required notice
one, two or three years before expiration under the terms of the
applicable agreement. Accordingly, no benefits are shown in the
table below related to expiration of the employment agreement
term on December 31, 2007.
Treatment of Nonqualified Stock Options. Under
the terms of the stock option agreements under which the
non-qualified stock options were awarded to the executive
officers, in the event that the employment of a named executive
officer is terminated upon expiration of the employment term
without renewal, the unvested portion of all time options and
all performance options will be cancelled by us without
consideration.
Treatment of Performance Units. Under the
terms of the performance unit agreements under which the
performance units were awarded to the named executive officers,
in the event that a named executive officer is terminated upon
expiration of the employment term without renewal during the
performance period, all performance units will be cancelled.
Treatment of Deferred Compensation. Under the
terms of the Deferred Income Plan, in the event that a
participants employment is terminated upon expiration of
the employment term without renewal, the participant will be
entitled to receive an amount equal to the participants
vested account, payable as a lump sum. The payment will be made
on or about the first day of the seventh month following
termination.
Payments
made upon Change in Control
Salary, Bonus and Benefits. The Old Employment
Agreements do not address termination of employment upon a
change in control. Accordingly, any benefits or payments in such
a case would be determined by the nature of the termination of
employment, such as resignation without Good Reason, resignation
with Good Reason, termination by us for Cause, termination by us
without Cause, or otherwise.
Pursuant to the terms of the New Employment Agreements, in the
event that a named executive officer is terminated by us without
Cause or resigns for Good Reason within two years of a change in
control, he is entitled to receive his base salary, annual bonus
and benefits, including accrued but unpaid vacation, that are
earned but unpaid as of the date of termination and, subject to
the execution and delivery of a release of claims against us and
compliance with the restrictive covenants described below
under Restrictive Covenants that Apply During
and After Termination of Employment, (1) a lump sum
payment equal to the following percentage of the
executives
31
base salary and target annual bonus: Mr. Thomas, 300%;
Mr. Biehl, 200%; and all other officers, 100%; and
(2) continued coverage under the Companys group
health plans for the following period: Mr. Thomas,
36 months; Mr. Biehl, 24 months; and all other
executives, 12 months. The severance payments to be paid to
the executive officers upon a termination of employment without
Cause or for Good Reason within two years following a change in
control may be reduced under the New Employment Agreements if
(x) the payments would result in the imposition of a
golden parachute excise tax under the Internal
Revenue Code Section 280G and (y) the reduced payments
would result in the executive officer receiving a greater net
after-tax payment.
Treatment of Nonqualified Stock Options. Under
the terms of the stock option agreements under which the
non-qualified stock options were awarded to the named executive
officers, in the event of the occurrence of any of the following
events: (1) the sale or disposition, in one or a series of
related transactions, of all or substantially all, of our assets
to any person or group; (2) any person or group is or
becomes the beneficial owner of more than 50% of the total
voting power of the our total stock, including by way of merger,
consolidation, tender or exchange offer or otherwise; or
(3) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board
(together with any new Directors whose election by such Board or
whose nomination for election by our stockholders was approved
by a vote of a majority of our Directors, then still in office,
who were either Directors at the beginning of such period or
whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
Board then in office (each, a Change in Control),
the stock options will immediately become fully vested and
exercisable.
Treatment of Performance Units. Under the
terms of the performance unit agreement under which the
performance units were awarded to the named executive officers,
in the event of a Change in Control, (a) the performance
requirements shall be deemed to have been satisfied at the
greater of either: (i) the target level of the performance
requirements as if the entire performance period had elapsed; or
(ii) the level of actual achievement of the performance
requirements as of the date of the Change in Control; and the
appropriate number of Shares, or, if the Committee so elects,
cash, shall be issued or paid to the executive not later than
30 days after the date of the Change in Control.
Treatment of Deferred Compensation. Under the
terms of the Deferred Income Plan, in the event that (1) a
person other than our employee stock ownership trust, becomes
the beneficial owner, directly or indirectly, of our outstanding
Common Stock having 51% or more of the total number of votes
which may be cast for Directors; or (2) during any period
of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors (together with
any new Directors whose election by such Board or whose
nomination for election by the our stockholders was approved by
a vote of two-thirds of the our Directors, then still in office,
who were either Directors at the beginning of such period) cease
for any reason to constitute a majority of the Board, then in
office, a participants interest in all amounts credited to
the participants account under the plan will fully and
immediately vest and become nonforfeitable.
Restrictive
Covenants that Apply During and After Termination of
Employment
Pursuant to the Old Employment Agreements, each of
Messrs. Thomas, Biehl, Klaben and Hoppel was also subject
to a customary covenant not to disclose confidential information
during the term of his employment and at all times thereafter
and to customary covenants not to compete and not to solicit
employees or customers during the employment term and for
(a) three years following termination of employment for any
reason, in the case of Mr. Thomas, (b) two years
following termination of employment for any reason, in the case
of Mr. Biehl, and (c) one year following termination
of employment for any reason, in the case of Messrs. Klaben
and Hoppel.
Under the New Employment Agreements, each executive is required
to comply with certain restrictive covenants during his
employment term and for the following period following the date
of termination: Mr. Thomas, 24 months (extended to
36 months if change in control severance is received);
Mr. Biehl, 18 months (extended to 24 months if
change in control severance is received); and all other
executives, 12 months (the Restricted Period).
During the Restricted Period, the executive shall not, whether
on the executives own behalf or on behalf of or in
conjunction with any person, directly or indirectly compete with
the Company or solicit customers or employees of the Company. In
addition, the executive may not disclose any confidential
information about the Company during or at any time following
the employment period.
32
Potential
Post-Employment Payments under the Old Employment
Agreements
Assuming that the employment of each named executive officer was
terminated under each of the following circumstances on
December 31, 2007, the last business day of 2007, and based
on the terms of the Old Employment Agreements, as described
above, payments made and benefits provided would have the
following estimated values:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Termination for
|
|
|
without
|
|
|
|
|
|
|
|
|
|
Cause/
|
|
|
Cause/
|
|
|
|
|
|
|
|
|
|
Resignation
|
|
|
Resignation
|
|
|
|
|
|
|
|
|
|
by Executive
|
|
|
by Executive
|
|
|
|
|
|
|
|
|
|
without Good
|
|
|
for Good
|
|
|
Disability/
|
|
|
Change in
|
|
|
|
Reason
|
|
|
Reason
|
|
|
Death
|
|
|
Control(7)
|
|
|
Base Salary(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
$
|
|
|
|
$
|
1,350,000
|
|
|
$
|
|
|
|
$
|
1,350,000
|
|
Michael F. Biehl
|
|
$
|
|
|
|
$
|
490,000
|
|
|
$
|
|
|
|
$
|
490,000
|
|
Matthew J. Klaben
|
|
$
|
|
|
|
$
|
200,000
|
|
|
$
|
|
|
|
$
|
200,000
|
|
James H. Hoppel, Jr.
|
|
$
|
|
|
|
$
|
170,000
|
|
|
$
|
|
|
|
$
|
170,000
|
|
Annual Incentive Plan Bonus(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
$
|
735,431
|
|
|
$
|
735,431
|
|
|
$
|
735,431
|
|
|
$
|
735,431
|
|
Michael F. Biehl
|
|
$
|
364,001
|
|
|
$
|
364,001
|
|
|
$
|
364,001
|
|
|
$
|
364,001
|
|
Matthew J. Klaben
|
|
$
|
208,001
|
|
|
$
|
208,001
|
|
|
$
|
208,001
|
|
|
$
|
208,001
|
|
James H. Hoppel, Jr.
|
|
$
|
164,172
|
|
|
$
|
164,172
|
|
|
$
|
164,172
|
|
|
$
|
164,172
|
|
Health and Welfare Benefits(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
$
|
|
|
|
$
|
40,211
|
|
|
$
|
|
|
|
$
|
40,211
|
|
Michael F. Biehl
|
|
$
|
|
|
|
$
|
25,548
|
|
|
$
|
|
|
|
$
|
25,548
|
|
Matthew J. Klaben
|
|
$
|
|
|
|
$
|
12,183
|
|
|
$
|
|
|
|
$
|
12,183
|
|
James H. Hoppel, Jr.
|
|
$
|
|
|
|
$
|
12,183
|
|
|
$
|
|
|
|
$
|
12,183
|
|
Accelerated vesting of time options(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
$
|
|
|
|
$
|
|
|
|
$
|
57,828
|
|
|
$
|
3,533,193
|
|
Michael F. Biehl
|
|
$
|
|
|
|
$
|
|
|
|
$
|
19,276
|
|
|
$
|
1,061,888
|
|
Matthew J. Klaben
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,164
|
|
|
$
|
531,711
|
|
James H. Hoppel, Jr.
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7,900
|
|
|
$
|
402,442
|
|
Accelerated vesting of performance units(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
$
|
|
|
|
$
|
|
|
|
$
|
104,133
|
|
|
$
|
520,665
|
|
Michael F. Biehl
|
|
$
|
|
|
|
$
|
|
|
|
$
|
34,762
|
|
|
$
|
173,813
|
|
Matthew J. Klaben
|
|
$
|
|
|
|
$
|
|
|
|
$
|
16,531
|
|
|
$
|
82,658
|
|
James H. Hoppel, Jr.
|
|
$
|
|
|
|
$
|
|
|
|
$
|
14,214
|
|
|
$
|
71,070
|
|
Deferred Compensation(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
$
|
735,431
|
|
|
$
|
2,125,642
|
|
|
$
|
897,392
|
|
|
$
|
6,179,500
|
|
Michael F. Biehl
|
|
$
|
364,001
|
|
|
$
|
879,549
|
|
|
$
|
418,039
|
|
|
$
|
2,115,250
|
|
Matthew J. Klaben
|
|
$
|
208,001
|
|
|
$
|
420,184
|
|
|
$
|
233,696
|
|
|
$
|
1,034,553
|
|
James H. Hoppel, Jr.
|
|
$
|
164,172
|
|
|
$
|
346,355
|
|
|
$
|
186,286
|
|
|
$
|
819,867
|
|
|
|
|
(1) |
|
The base salary levels of the executive officers under their
employment agreements at December 31, 2007 were as follows:
Mr. Thomas, $450,000; Mr. Biehl, $245,000;
Mr. Klaben, $200,000; and Mr. Hoppel, $170,000. These
2007 amounts were used in calculating the hypothetical payment
shown. The base salary levels of the executive officers have
been adjusted, effective January 1, 2008, as follows:
Mr. Thomas, $500,000; Mr. Biehl, $245,000;
Mr. Klaben, $210,000; and Mr. Hoppel, $192,000. The
amounts in the table do not include accrued |
33
|
|
|
|
|
but unused vacation, since the policy governing vacation for the
executive officers mandates the forfeiture of all accrued
vacation for the current year not used by the end of the year,
and each scenario assumed termination of employment on the last
day of the year. In the event that an executive is terminated
prior to the end of the fiscal year, the executive would be
entitled to compensation for any unused vacation that could be
used prior to the end of the fiscal year. Our executives are
presently entitled to the following vacation benefits:
Mr. Thomas, five weeks; Mr. Biehl, four weeks;
Mr. Klaben, three weeks; and Mr. Hoppel, three weeks. |
|
(2) |
|
Our Incentive Compensation Plan, under which incentive bonuses
were paid for 2007, generally requires a participant to be
employed on the last day of the fiscal year in order to receive
a bonus. Since each executive officer would have been employed
on the last day of the fiscal year, assuming a termination date
of December 31, 2007, bonus amounts would be paid as set
forth above. The bonus amounts payable under the incentive plan
are based on the realization of 148.57% of our 2007 performance
goals, as set forth under the Estimated Future Payouts
Under Non-Equity Incentive Plan Awards portion of the
2007 Grants of Plan-Base Awards table above and in
the 2007 Summary Compensation table above. |
|
(3) |
|
Health and welfare benefits consist of health care and dental.
These benefits after termination of employment for 2008 have
been calculated based on actual cost to us for 2008. For each
year following 2008, costs are approximated based on the actual
cost for 2008 plus an assumed 10% annual increase in medical
benefits cost and an assumed 3% annual increase in dental
benefit cost. |
|
(4) |
|
The value of the stock options that vest upon death or
Disability (2007 grants) or a Change in Control (all grants)
represents the difference between the aggregate market value of
the shares underlying the unvested portion of these options on
December 31, 2007, at $30.90 per share, the closing price
of our Common Stock on that day, and the aggregate exercise
price of the options. |
|
(5) |
|
In the event of termination due to Disability or death, the
executive (or his or her beneficiary) shall be entitled to a
pro-rated number of performance units, or the cash equivalent,
calculated by multiplying (x) by (y) where:
(x) is the number of units, if any, that would have been
earned by the executive as the result of the satisfaction of the
target performance requirements; and (y) is the number of
months that the executive was employed (rounded up to the
nearest whole number) during the performance period divided by
the number of months in the performance period. Assuming a
termination date of December 31, 2007, the
(y) variable (.20) used in the calculation will be the same
for each of the executive officers as all would have been
employed for a period of 6 months out of a 30 month
performance period. |
The value of the performance units upon a Change in Control
represents the product of (i) the total number of units to
be awarded assuming satisfaction of the target level performance
requirements as if the entire performance period had elapsed,
and (ii) $30.90.
|
|
|
(6) |
|
No benefit is shown for deferred compensation because there are
no contributions by us or any above-market returns on any
participant moneys in the Deferred Income Plan for any named
executive officer. All balances in the Deferred Income Plan
represent solely the named executive officers
contributions or market earnings on those contributions. For
more information, see 2007 Nonqualified
Deferred Compensation Table. |
|
(7) |
|
Assumes termination of employment results from resignation for
Good Reason or involuntary termination without Cause. |
34
Potential
Post-Employment Payments under the New Employment
Agreements
Assuming that the employment of each named executive officer was
terminated under each of the following circumstances on
December 31, 2007, the last business day of 2007, and
assuming the New Employment Agreements were in place as of
December 31, 2007, payments made and benefits provided
would have the following estimated values:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Termination for
|
|
|
without
|
|
|
|
|
|
|
|
|
|
Cause/
|
|
|
Cause/
|
|
|
|
|
|
|
|
|
|
Resignation
|
|
|
Resignation
|
|
|
|
|
|
|
|
|
|
by Executive
|
|
|
by Executive
|
|
|
|
|
|
|
|
|
|
without Good
|
|
|
for Good
|
|
|
Disability/
|
|
|
Change in
|
|
|
|
Reason
|
|
|
Reason
|
|
|
Death
|
|
|
Control(7)
|
|
|
Cash Severance(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
$
|
|
|
|
$
|
1,890,000
|
|
|
$
|
|
|
|
$
|
2,835,000
|
|
Michael F. Biehl
|
|
$
|
|
|
|
$
|
735,000
|
|
|
$
|
|
|
|
$
|
980,000
|
|
Matthew J. Klaben
|
|
$
|
|
|
|
$
|
340,000
|
|
|
$
|
|
|
|
$
|
340,000
|
|
James H. Hoppel, Jr.
|
|
$
|
|
|
|
$
|
280,500
|
|
|
$
|
|
|
|
$
|
280,500
|
|
Annual Incentive Plan Bonus(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
$
|
735,431
|
|
|
$
|
735,431
|
|
|
$
|
735,431
|
|
|
$
|
735,431
|
|
Michael F. Biehl
|
|
$
|
364,001
|
|
|
$
|
364,001
|
|
|
$
|
364,001
|
|
|
$
|
364,001
|
|
Matthew J. Klaben
|
|
$
|
208,001
|
|
|
$
|
208,001
|
|
|
$
|
208,001
|
|
|
$
|
208,001
|
|
James H. Hoppel, Jr.
|
|
$
|
164,172
|
|
|
$
|
164,172
|
|
|
$
|
164,172
|
|
|
$
|
164,172
|
|
Health and Welfare Benefits(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
$
|
|
|
|
$
|
25,548
|
|
|
$
|
|
|
|
$
|
40,211
|
|
Michael F. Biehl
|
|
$
|
|
|
|
$
|
18,865
|
|
|
$
|
|
|
|
$
|
25,548
|
|
Matthew J. Klaben
|
|
$
|
|
|
|
$
|
12,183
|
|
|
$
|
|
|
|
$
|
12,183
|
|
James H. Hoppel, Jr.
|
|
$
|
|
|
|
$
|
12,183
|
|
|
$
|
|
|
|
$
|
12,183
|
|
Accelerated vesting of time options(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
$
|
|
|
|
$
|
|
|
|
$
|
57,828
|
|
|
$
|
3,533,193
|
|
Michael F. Biehl
|
|
$
|
|
|
|
$
|
|
|
|
$
|
19,276
|
|
|
$
|
1,061,888
|
|
Matthew J. Klaben
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,164
|
|
|
$
|
531,711
|
|
James H. Hoppel, Jr.
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7,900
|
|
|
$
|
402,442
|
|
Accelerated vesting of performance units(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
$
|
|
|
|
$
|
|
|
|
$
|
104,133
|
|
|
$
|
520,665
|
|
Michael F. Biehl
|
|
$
|
|
|
|
$
|
|
|
|
$
|
34,762
|
|
|
$
|
173,813
|
|
Matthew J. Klaben
|
|
$
|
|
|
|
$
|
|
|
|
$
|
16,531
|
|
|
$
|
82,658
|
|
James H. Hoppel, Jr.
|
|
$
|
|
|
|
$
|
|
|
|
$
|
14,214
|
|
|
$
|
71,070
|
|
Deferred Compensation(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel F. Thomas
|
|
$
|
735,431
|
|
|
$
|
2,650,979
|
|
|
$
|
897,392
|
|
|
$
|
7,664,500
|
|
Michael F. Biehl
|
|
$
|
364,001
|
|
|
$
|
1,117,866
|
|
|
$
|
418,039
|
|
|
$
|
2,605,250
|
|
Matthew J. Klaben
|
|
$
|
208,001
|
|
|
$
|
560,184
|
|
|
$
|
233,696
|
|
|
$
|
1,174,553
|
|
James H. Hoppel, Jr.
|
|
$
|
164,172
|
|
|
$
|
456,855
|
|
|
$
|
186,286
|
|
|
$
|
930,367
|
|
|
|
|
(1) |
|
Cash severance amounts consist of a lump sum payment equal to
the following percentage of the executives base salary and
target annual bonus. Mr. Thomas, 200%; Mr. Biehl,
150%; and all other officers, 100%. The amounts in the table do
not include accrued but unused vacation, since the policy
governing vacation for the executive officers mandates the
forfeiture of all accrued vacation for the current year not used
by the end of the |
35
|
|
|
|
|
year, and each scenario assumed termination of employment on the
last day of the year. In the event that an executive is
terminated prior to the end of the fiscal year, the executive
would be entitled to compensation for any unused vacation that
could be used prior to the end of the fiscal year. Our
executives are presently entitled to the following vacation
benefits: Mr. Thomas, five weeks; Mr. Biehl, four
weeks; Mr. Klaben, three weeks; and Mr. Hoppel, three
weeks. |
|
(2) |
|
Our Incentive Compensation Plan, under which incentive bonuses
were paid for 2007, generally requires a participant to be
employed on the last day of the fiscal year in order to receive
a bonus. Since each executive officer would have been employed
on the last day of the fiscal year, assuming a termination date
of December 31, 2007, bonus amounts would be paid as set
forth above. The bonus amounts payable under the incentive plan
are based on the realization of 148.57% of our 2007 performance
goals, as set forth under the Estimated Future Payouts
Under Non-Equity Incentive Plan Awards portion of the
2007 Grants of Plan-Base Awards table above and in
the 2007 Summary Compensation table above. |
|
(3) |
|
Health and welfare benefits consist of health care and dental.
These benefits after termination of employment for 2008 have
been calculated based on actual cost to us for 2008. For each
year following 2008, costs are approximated based on the actual
cost for 2008 plus an assumed 10% annual increase in medical
benefits cost and an assumed 3% annual increase in dental
benefit cost. |
|
(4) |
|
The value of the stock options that vest upon death or
Disability (2007 grants) or a Change in Control (all grants)
represents the difference between the aggregate market value of
the shares underlying the unvested portion of these options on
December 31, 2007, at $30.90 per share, the closing price
of our Common Stock on that day, and the aggregate exercise
price of the options. |
|
(5) |
|
In the event of termination due to Disability or death, the
executive (or his or her beneficiary) shall be entitled to a
pro-rated number of performance units, or the cash equivalent,
calculated by multiplying (x) by (y) where:
(x) is the number of units, if any, that would have been
earned by the executive as the result of the satisfaction of the
target performance requirements; and (y) is the number of
months that the executive was employed (rounded up to the
nearest whole number) during the performance period divided by
the number of months in the performance period. Assuming a
termination date of December 31, 2007, the
(y) variable (.20) used in the calculation will be the same
for each of the executive officers as all would have been
employed for a period of 6 months out of a 30 month
performance period. |
The value of the performance units upon a Change in Control
represents the product of (i) the total number of units to
be awarded assuming satisfaction of the target level performance
requirements as if the entire performance period had elapsed,
and (ii) $30.90.
|
|
|
(6) |
|
No benefit is shown for deferred compensation because there are
no contributions by us or any above-market returns on any
participant moneys in the Deferred Income Plan for any named
executive officer. All balances in the Deferred Income Plan
represent solely the named executive officers
contributions or market earnings on those contributions. For
more information, see 2007 Nonqualified
Deferred Compensation Table. |
|
(7) |
|
Assumes termination of employment results from resignation for
Good Reason or involuntary termination without Cause within two
years following a change in control. |
36
2007
DIRECTOR COMPENSATION TABLE
The following table and related notes and discussion summarize
compensation paid to our non-employee Directors for our 2007
fiscal year, presented in accordance with SEC rules.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
|
|
|
|
|
|
|
Paid in Cash
|
|
|
Stock Awards
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
Timothy H. Day(2)
|
|
$
|
33,000
|
|
|
$
|
40,000
|
|
|
$
|
73,000
|
|
Richard E. Goodrich
|
|
$
|
62,000
|
|
|
$
|
40,000
|
|
|
$
|
102,000
|
|
Ben A. Guill(3)
|
|
$
|
8,000
|
|
|
|
|
|
|
$
|
8,000
|
|
Steven W. Krablin
|
|
$
|
64,500
|
|
|
$
|
40,000
|
|
|
$
|
104,500
|
|
Kenneth W. Moore(2)
|
|
$
|
30,000
|
|
|
$
|
40,000
|
|
|
$
|
70,000
|
|
Michael W. Press
|
|
$
|
63,500
|
|
|
$
|
40,000
|
|
|
$
|
103,500
|
|
James M. Tidwell
|
|
$
|
29,000
|
|
|
$
|
40,000
|
|
|
$
|
69,000
|
|
|
|
|
(1) |
|
As of December 31, 2007, the Directors held unvested
restricted stock units granted for 2007 service in the following
amounts: Richard E. Goodrich, 1,787 restricted stock units;
Steven W. Krablin, 1,787 restricted stock units; Michael W.
Press, 1,787 restricted stock units; and James M. Tidwell, 1,321
restricted stock units. The grant date fair value of each
restricted stock unit grant reported in this column, calculated
in accordance with SFAS 123(R), is $40,000. Unvested
restricted stock units received by Messrs. Day, Guill and
Moore, former Directors, in the amount of 2,666, 1,787 and
1,787, respectively, were forfeited to us as a result of their
resignations from our Board of Directors during 2007. |
|
(2) |
|
Messrs. Day and Moore resigned from our Board of Directors
effective August 2, 2007. |
|
(3) |
|
Mr. Guill resigned from our Board of Directors effective
March 19, 2007. |
Director
Compensation
Directors who are also employees do not receive any additional
compensation for services performed as a member of our Board of
Directors or any committees thereof. We pay our non-employee
Directors an annual retainer of $32,000, payable in equal
quarterly installments, and grant annually to each non-employee
Director restricted stock units covering a number of shares of
Common Stock with a fair market value of $40,000 on the date of
grant under the 2005 Stock Incentive Plan. The restricted stock
units fully vest on the first anniversary of the date of grant
or earlier, in the event of a change in control (as defined in
the 2005 Stock Incentive Plan) or the Director ceasing to serve
on the board due to death or disability (as defined in the 2005
Stock Incentive Plan). The restricted stock units are expected
to be settled in shares of our Common Stock, the receipt of
which may be deferred by each Director for a period ranging from
the first anniversary of the restricted stock unit vesting date
to the tenth anniversary of the restricted stock unit vesting
date, or, if elected, earlier upon separation of service from
the Board or a change in control, in both cases, to the extent
permitted under Section 409A of the Internal Revenue Code.
Messrs. Day, Goodrich, Krablin, Press and Moore each
received 1,787 restricted stock units in our 2007 fiscal year,
and Mr. Tidwell received 1,321 restricted stock units in
connection with his appointment to our Board of Directors in our
2007 fiscal year.
For 2008, the Compensation Committee has modified the equity
compensation component of Director compensation. As modified,
effective January 1, 2008, the Companys non-employee
Directors receive quarterly stock awards valued at $10,000 on
the date of grant under our 2005 Stock Incentive Plan, which are
fully vested on the date of grant. The receipt of stock may be
deferred by each Director until a later fiscal year after the
grant date, or, if elected, until the earlier of the January
following separation of service from the board or a change in
control, in both cases, to the extent permitted under
Section 409A of the Internal Revenue Code.
In addition to the compensation described above, the chairperson
of our audit committee receives an additional $8,000 annual
retainer, and the chairpersons of our other Board committees
receive an additional $4,000 annual retainer, in each case in
equal quarterly installments. Additionally, we pay our
non-employee Directors a fee of $2,000 for Board meetings
attended in person (up to six meetings and $1,000 per meeting
thereafter) and a fee of $1,000 for Board meetings attended
telephonically. In connection with meetings of the committees of
our Board of Directors, we pay our non-employee Directors who
attend committee meetings in person a fee of $1,000 per
37
meeting and a fee of $500 per meeting for committee meetings
attended telephonically. In addition, our stock ownership
guidelines provide that Directors must accumulate investments of
at least $100,000 in our Common Stock during their first
24 months on our Board. Shares of our Common Stock issuable
upon settlement of restricted stock units or granted as
quarterly stock grants will count towards the $100,000
requirement.
Compensation
Committee Interlocks and Insider Participation
Since August 2, 2007, our Compensation Committee has
consisted of Richard E. Goodrich, Steven W. Krablin, Michael W.
Press and James M. Tidwell. None of Messrs. Goodrich,
Krablin, Press, or Tidwell is a present or past employee or
officer of ours or any of our subsidiaries. None of our
executive officers has served on the Board or Compensation
Committee (or other committee serving an equivalent function) of
any other entity, one of whose executive officers served on our
Board or Compensation Committee.
AUDIT
COMMITTEE REPORT
The primary function of the Audit Committee is to assist the
Board of Directors in fulfilling its oversight of the integrity
of the Companys financial statements, the Companys
compliance with legal and regulatory requirements, the
independent registered public accounting firms
qualifications and independence, and the performance of the
Companys internal audit function and independent
registered public accounting firm. The Audit Committees
activities are governed by a written charter adopted by the
Board of Directors.
In fulfilling its oversight responsibilities, the Audit
Committee has reviewed and discussed the audited financial
statements contained in the 2007 Annual Report on SEC
Form 10-K
with the Companys management and Ernst & Young
LLP, the independent registered public accounting firm for
fiscal 2007.
The Audit Committee has discussed with Ernst & Young
LLP the matters required to be discussed by Statement on
Auditing Standards No. 61, Communication with Audit
Committees, as amended. In addition, the Audit Committee has
discussed with Ernst & Young LLP the firms
independence from the Company and its management, including the
matters in the written disclosures and letter from
Ernst & Young LLP required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit
Committees, which the Company has received.
In reliance on the reviews and discussions referred to above,
the Audit Committee recommended to the Board (and the Board has
approved) that the audited financial statements be included in
the Companys Annual Report on SEC
Form 10-K
for the fiscal year ended December 31, 2007, for filing
with the Securities and Exchange Commission.
The Audit Committee has determined that the rendering of the
non-audit services by Ernst & Young LLP was compatible
with maintaining the registered public accounting firms
independence.
Submitted by the Audit Committee of the Board of Directors as of
February 26, 2008.
Steven W. Krablin, Chairman
Richard E. Goodrich
Michael W. Press
James M. Tidwell
38
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
The Audit Committee has reviewed the audit fees of the
independent registered public accounting firm. For work
performed in regard to fiscal years 2007 and 2006, the Company
paid Ernst & Young LLP the following fees for
services, as categorized below:
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Fiscal Year 2007
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Fiscal Year 2006
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Audit fees(1)
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$
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1,548,136
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$
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1,157,741
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Audit-related fees(2)
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Tax fees(3)
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$
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57,303
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$
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193,502
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All other fees(4)
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$
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6,000
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$
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6,000
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Total fees
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$
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1,611,439
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$
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1,357,243
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(1) |
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Includes fees for audit services principally relating to the
annual audit, quarterly reviews and registration statements. |
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Assurance and related services that are reasonably related to
the performance of the audit or review of the financial
statement and not reported under audit fees. |
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Tax compliance, tax advice and tax planning. |
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(4) |
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All other services not reported under (1) through (3). |
A representative of Ernst & Young LLP is expected to
be present at the Annual Meeting of Stockholders. The
representative will be given an opportunity to make a statement
if desired and to respond to questions regarding
Ernst & Young LLPs examination of our
consolidated financial statements and records for the year ended
December 31, 2007.
Our Board has a policy to assure the independence of its
independent registered public accounting firm. Prior to the
audit of each fiscal year, the Audit Committee receives a
written report from Ernst & Young LLP describing the
elements expected to be performed in the course of its audit of
the Companys financial statements for the coming year. All
audit related services, tax services and other services were
pre-approved for 2007 by the Audit Committee, which concluded
that the provision of such services by Ernst & Young
LLP was compatible with the maintenance of that firms
independence in the conduct of its auditing functions. The Audit
Committee has selected Ernst & Young LLP to audit our
2008 financial statements.
EQUITY
COMPENSATION PLAN INFORMATION
The following table provides information as of December 31,
2007 about our Common Stock that may be issued upon the exercise
of options, warrants and rights granted under all of our
existing equity compensation plans, including our 2005 Stock
Incentive Plan.
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Number of Securities
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Number of Securities
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Remaining Available for
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to be Issued
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Weighted-Average
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Future Issuance Under
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Upon Exercise of
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Exercise Price of
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Equity Compensation Plans
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Outstanding Options,
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Outstanding Options,
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(Excluding Securities
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Plan Category
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Warrants and Rights
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Warrants and Rights
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Reflected In Column(a))
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(a)
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(b)(2)
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(c)
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Equity compensation plans approved by security holders(1)
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1,618,123
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$
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8.93
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1,070,384
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Equity compensation plans not approved by security holders
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Total
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1,618,123
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$
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8.93
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1,070,384
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The amount includes: (i) 1,497,382 shares issuable
upon the exercise of outstanding stock options;
(ii) 12,006 shares subject to restricted stock units
under our 2005 Stock Incentive Plan; and
(iii) 108,735 shares issuable upon achievement of
maximum targets for performance unit awards. |
39
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(2) |
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The weighted average exercise price of outstanding options,
warrants and rights does not take into account restricted stock
unit awards or performance unit awards since these awards do not
have an exercise price. |
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the
Companys officers and Directors and persons who own 10% or
more of a registered class of the Companys equity
securities to file reports of ownership and changes in ownership
on Forms 3, 4 and 5 with the SEC. Officers, Directors and
10% or greater stockholders are required by SEC regulations to
furnish the Company with copies of all Forms 3, 4 and 5
they file.
Based solely on the Companys review of the copies of such
forms it has received, the Company believes that all of its
officers and Directors complied with all filing requirements
applicable to them with respect to transactions during the
fiscal year ended December 31, 2007.
RELATED
PARTY TRANSACTIONS
Management
Stockholders Agreements
In connection with our initial public offering, consummated on
July 31, 2006, we entered into amended and restated
management stockholders agreements, effective as of
April 1, 2006, with certain members of our management,
including Messrs. Thomas, Biehl, Klaben and Hoppel, which
we refer to as the management stockholders, and FR X Chart
Holdings LLC, an affiliate of First Reserve.
Tag-Along Rights. Had FR X Chart Holdings LLC
elected to transfer shares of Common Stock other than pursuant
to a registered offering, a transfer pursuant to Rule 144
under the Securities Act, a transfer with the approval of the
members of the Board not affiliated with FR X Chart Holdings LLC
or a transfer by FR X Chart Holdings LLC to any of its
affiliates or partners or our employees, the management
stockholders agreements provided each management
stockholder with the right to tag-along and participate, on a
pro rata basis, in such transfer of Common Stock. Pursuant to
the management stockholders agreements, the tag-along
rights terminated in 2007 when FR X Chart Holdings LLC and its
affiliates ceased to be the beneficial owner (as defined in
Rule 13d-3
of the Exchange Act) of at least 30% of our outstanding Common
Stock in connection with the completion of our secondary
offering.
Piggyback Registration
Rights. Pursuant to and subject to the terms of
the amended and restated management stockholders
agreements, each management stockholder has the opportunity to
include in registered sales of our Common Stock (other than an
initial public offering or relating to any employee benefit plan
or corporate merger, acquisition or reorganization) and any
shelf registration statement filed by us with respect to our
common stock, all or any part of the registrable
securities (as such term is defined in the amended and
restated management stockholders agreements) then held by
such management stockholder. We will pay all of the expenses
associated with an offering of such shares. Underwriting
discounts will be shared proportionally.
Stockholders
Agreement
In connection with our initial public offering, we and First
Reserve or one of its affiliates entered into a stockholders
agreement pursuant to which First Reserve or its affiliates had
the right to request us to register the sale of securities held
by First Reserve, on their behalf and require us to make
available shelf registration statements permitting sales of
securities into the market from time to time over an extended
period. In addition, First Reserve had the ability to exercise
certain piggyback registration rights in connection with
registered offerings initiated by us.
Pursuant to the terms of the stockholders agreement, during the
period in which First Reserve held (1) less than 50% but at
least 25% of our outstanding Common Stock, it had the right to
designate three Director nominees, (2) less than 25% but
more than 10% of our outstanding Common Stock, it had the right
to designate two Director nominees, and (3) 10% of our
outstanding Common Stock, it had the right to designate one
Director nominee. During any period in which First Reserve held
less than 10% of our outstanding Common Stock, it had no right
to designate Directors pursuant to the stockholders agreement.
In addition, we agreed that neither First Reserve nor any
Director, officer or employee of First Reserve who served as
officer, Director
and/or
employee of ours would be liable to us (i) by reason of any
business decision or transaction undertaken by First Reserve
which may have been
40
adverse to our interests, (ii) by reason of any activity
undertaken by First Reserve or by any other person in which
First Reserve may have an investment or other financial interest
which was in competition with us or (iii) without limiting
the effect of Section 144 of the Delaware General
Corporation Law, by reason of any transaction with First
Reserve, or any transaction in which First Reserve had a
financial interest, unless the party who asserted such liability
proved, by clear and convincing evidence, that such transaction
was not fair to us at the time it was authorized by the Board of
Directors or a committee thereof.
As a result of the consummation of the secondary offering in
June 2007, in which First Reserve disposed of all of its
remaining ownership interest in the Company, First Reserve no
longer has any affirmative rights under the stockholders
agreement.
Related
Party Transaction Policies and Procedures
On March 27, 2007, our Board of Directors adopted written
Related Party Transaction Policies and Procedures (the
Policy), which provides that it is the policy of the
Company not to enter into any Related Party
Transaction (as such term is defined in the Policy) with
one of our executive officers, Directors or Director nominees,
or stockholders known to beneficially own over 5% of a class of
our voting securities or their related persons, unless either
(i) the Audit Committee approves the transaction in
accordance with the guidelines set forth in the Policy or
(ii) the transaction is approved by a majority of the
Companys disinterested Directors. Such Related Party
Transactions shall be disclosed in the Companys SEC
filings as and to the extent required by applicable SEC rules
and regulations.
STOCKHOLDER
PROPOSALS FOR 2009 ANNUAL MEETING
From time to time, stockholders present proposals that may be
proper subjects for inclusion in the proxy statement and for
consideration at an Annual Meeting. To be included in the proxy
for the 2009 Annual Meeting, the Company must receive proposals
no later than December 9, 2008. Proposals for inclusion in
the proxy statement must comply with the Exchange Act including
Rule 14a-8,
as well as with our By-Laws.
Pursuant to the Companys By-Laws, stockholders may present
proposals that are proper subjects for consideration at an
annual meeting of stockholders. Our By-Laws require all
stockholders who intend to make proposals at an annual
stockholders meeting to submit their proposals to the Company
not less than 90 calendar days nor more than the 120 calendar
days prior to the first anniversary of the date on which we
first mailed our proxy materials for the preceding years
annual meeting. To be eligible for consideration at the 2009
Annual Meeting, proposals that have not been submitted by the
deadline for inclusion in the proxy statement must be received
by the Company between December 9, 2008 and January 8,
2009. In the event the date of the 2009 Annual Meeting is
changed by more than 30 calendar days from the first anniversary
of the 2008 Annual Meeting, stockholder notice must be received
not earlier than 120 days prior to the 2009 Annual Meeting
and not later than the later of the 90th calendar day prior
to the 2009 Annual Meeting or the close of business on the
10th calendar day following the date on which the public
announcement of such meeting is first made. These provisions are
intended to allow all stockholders to have an opportunity to
consider business expected to be raised at the meeting.
OTHER
MATTERS TO COME BEFORE THE ANNUAL MEETING
The Board is not aware of any other business to be presented for
a vote of the stockholders at the Annual Meeting. If any other
matters are properly presented for a vote, the people named as
proxies will have discretionary authority, to the extent
permitted by law, to vote on such matters according to their
best judgment.
The chairman of the Annual Meeting may refuse to allow
presentation of a proposal or nominee for the Board if the
proposal or nominee was not properly submitted.
********************
Upon the receipt of a written request from any stockholder
entitled to vote at the forthcoming Annual Meeting, the Company
will mail, at no charge to the stockholder, a copy of the
Companys Annual Report on
Form 10-K,
including the financial statements and schedules required to be
filed with the Commission pursuant to
Rule 13a-1
under the Exchange Act for the Companys most recent fiscal
year. Requests from beneficial owners of the Companys
voting securities must set forth a good-faith representation
that as of the record date for
41
the Annual Meeting, the person making the request was the
beneficial owner of securities entitled to vote at such Annual
Meeting. Written requests for the Annual Report on
Form 10-K
should be directed to our Secretary.
It is important that your shares be represented at the meeting,
regardless of the number of shares that you hold. YOU,
THEREFORE, ARE URGED TO EXECUTE PROMPTLY AND RETURN THE
ACCOMPANYING PROXY IN THE ENVELOPE THAT HAS BEEN ENCLOSED FOR
YOUR CONVENIENCE. Stockholders who are present at the
meeting may revoke their proxies and vote in person or, if they
prefer, may abstain from voting in person and allow their
proxies to be voted.
Samuel F. Thomas
Chairman, Chief Executive Officer
and President
Garfield Heights, Ohio
42
ATTN: CORPORATE SECRETARY
ONE INFINITY CORPORATE CENTRE DRIVE
SUITE 300
GARFIELD HEIGHTS, OH 44125
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the
day before the cut-off date or meeting date.
Have your proxy card in hand when you access the
web site and follow the instructions to obtain
your records and to create an electronic voting
instruction form.
ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred
by Chart Industries, Inc. in mailing proxy
materials, you can consent to receiving all
future proxy statements, proxy cards and annual
reports electronically via e-mail or the
Internet. To sign up for electronic delivery,
please follow the instructions above to vote
using the Internet and, when prompted, indicate
that you agree to receive or access stockholder
communications electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your
voting instructions up until 11:59 P.M. Eastern
Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you call
and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return
it in the postage-paid envelope we have provided
or return it to Chart Industries, Inc., c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, PLEASE |
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MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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CHIND1
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
CHART INDUSTRIES, INC.
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(1) |
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Election of the following nominees to serve on the Board
of Directors of the Company: |
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For |
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Withheld |
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1a. |
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Samuel F. Thomas |
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In their discretion to act on any other matters that may properly come before the meeting. |
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Richard E. Goodrich |
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1c. |
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Steven W. Krablin |
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1d. |
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Michael W. Press |
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1e. |
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James M. Tidwell |
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1f. |
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W. Douglas Brown |
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1g. |
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Thomas L. Williams |
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Yes |
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No |
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Please indicate if you plan to attend this meeting. |
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NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give full
title as such. |
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Signature [PLEASE SIGN WITHIN BOX] |
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Signature (Joint Owners) |
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YOUR VOTE IS IMPORTANT
Regardless of whether you plan to attend the Annual Meeting of
Stockholders, you can be sure your shares of Common Stock are
represented at the meeting by promptly returning your proxy in the
enclosed envelope.
(Continued from reverse side)
Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting:
The Proxy Statement and Annual Report are available at www.proxyvote.com.
ê If you have not voted via the Internet or telephone, please fold and detach card at
perforation and return the bottom portion in the enclosed envelope. ê
CHART INDUSTRIES, INC.
PROXY FOR COMMON STOCK
Proxy Solicited on Behalf of the Board of Directors of
the Company for the Annual Meeting of Stockholders on May 20, 2008
The undersigned hereby (i) appoints Michael F. Biehl and Matthew J. Klaben, and each of them, his
true and lawful agents and proxy holders with full power of substitution in each to appear and vote
all of the Common Stock of Chart Industries, Inc. (the Company) that the undersigned will be
entitled to vote at the Annual Meeting of Stockholders of the Company to be held at the offices of
Chart Energy & Chemicals, Inc., a wholly owned subsidiary of the Company, located at 8665 New
Trails Drive, Suite 100, The Woodlands, Texas on May 20, 2008 at 9:00 a.m., Central Time, and at
any adjournments or postponements thereof, hereby revoking any and all proxies heretofore given,
and (ii) authorizes and directs said proxy holders to vote all of the Common Stock of the Company
represented by this proxy as indicated on the reverse side.
The shares of Common Stock represented by this proxy will be voted as indicated in the spaces on
the reverse. To the extent that no directions are given for the election of the seven nominees to
serve on the Board of Directors of the Company, the shares of Common Stock represented by this
proxy will be voted FOR the election of the seven nominees to serve on the Board of Directors of
the Company. The shares of Common Stock represented by this proxy will be voted in the discretion
of the proxy holders on all other matters properly brought before the Annual Meeting and any
adjournments or postponements thereof.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE. The
proxy holders cannot vote your shares of Common Stock unless you sign and return this card.
Please date, sign and return promptly in the accompanying envelope.