Exhibit 10.43

Woodward, Inc.

OUTSIDE DIRECTOR COMPENSATION POLICY

(Effective November 15, 2019)

Woodward, Inc. (the “Company”) believes that the granting of equity and cash
compensation to its members of the Board of Directors (the “Board,” and members
of the Board, the “Directors”) represents an effective tool to attract, retain
and fairly compensate Directors who are not employees of the Company (the
“Outside Directors”). This Outside Director Compensation Policy (the “Policy”)
is intended to formalize the Company’s policy regarding cash compensation and
grants of equity to its Outside Directors.  Unless otherwise defined herein,
capitalized terms used in this Policy will have the meaning given such term in
the Woodward, Inc. 2017 Omnibus Incentive Plan, as amended (the “Plan”).  Each
Outside Director will be solely responsible for any income tax obligations
incurred as a result of the equity and cash payments received under this Policy.

 

1.

CASH COMPENSATION

Annual Cash Retainer

Each Outside Director will be paid an annual cash retainer in such amount as may
be determined by the Board from time to time in accordance with Section 4,
below.  As of the date hereof, the annual cash retainer for each Outside
Director has been established to be $82,500.  If an Outside Director serves for
less than a full fiscal year, the retainer fee will be pro-rated on a monthly
basis based on the full calendar months such Outside Director serves on the
Board for such fiscal year.

Additional Annual Cash Retainers

Each Outside Director who serves as a member of a committee of the Board or as
the Lead Director will be paid additional annual fees as follows:

Lead Director

$25,000

Audit Committee – Chairman

Audit Committee – Non-Chair Members  

$23,000

$13,000

Compensation Committee – Chairman

Compensation Committee – Non-Chair Members

$12,500

$  6,500

Nominating & Governance Committee – Chairman

Nominating & Governance Committee – Non-Chair Members

$12,500

$  6,500

 

Annual, Lead Director, and Committee membership retainers are paid in four equal
quarterly installments.  Directors do not receive additional compensation for
individual Board or Committee meetings held.

The Board in its discretion may change and otherwise revise the terms of the
cash compensation granted under this Policy, including without limitation the
amount of cash compensation to be paid.  

 

 

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Exhibit 10.43

 

2.

EQUITY COMPENSATION

Outside Directors will be entitled to receive all types of Awards (except
Incentive Stock Options) under the Plan (or the applicable equity plan in place
at the time of grant), including discretionary Awards not covered under this
Policy.  All grants of Awards to Outside Directors pursuant to Section 2 of this
Policy (each, a “Policy Grant”) will be automatic and nondiscretionary, except
as otherwise provided herein, and will be made in accordance with the following
provisions:

 

a.

Initial Grant.  Each Outside Director appointed to the Board at any time, other
than (i) as of the beginning of the Company’s fiscal year (thereby entitling
such Outside Director to the Annual Grant (as defined in subsection b. below)),
or (ii) during the last month of the Company’s fiscal year, shall be entitled to
receive an initial, interim grant in the form of Non-Qualified Stock Options
(each Non-Qualified Stock Option, an “option”; such grant, the “Initial Grant”).
The Initial Grant shall have a targeted delivered value equal to the targeted
delivered value of the Annual Grant awarded to Outside Directors as of the
beginning of the then-current fiscal year, pro-rated on the basis of the
remaining full months of service such Outside Director will serve for the
balance of such then-current fiscal year.

 

b.

Annual Grant.  Outside Directors are annually awarded equity compensation on the
first business day of the Company’s fiscal year in the form of options based on
a targeted delivered value of $135,000 (the “Annual Grant”).  The number of
options awarded to each director in the Annual Grant is based on the targeted
delivered value divided by the Black-Scholes value of an option as calculated by
the Company’s compensation consultant for a given year.

 

c.

Delivered Value.  For purposes of this Policy, “delivered value” means the total
Black-Scholes value of the option grant as calculated as of as closely to the
effective date of the grant as practicable.

 

d.

No Discretion.  Unless otherwise determined by the Board, no person will have
any discretion to select which Outside Directors will be granted an Initial
Grant or Annual Grant under this Policy or to determine the number of options to
be covered by such Initial Grant or Annual Grant, as applicable (except as
provided in Sections 7 and 10 below).

 

e.

Terms.  The exercise price of the options will be determined on the effective
grant date and will not be less than (and typically will be equal to) the
closing price of the Company’s stock as quoted on NASDAQ on that day.  Each
Policy Grant will be subject to the terms of the Company’s applicable form Award
Agreement for Outside Directors, as approved by the Compensation Committee from
time to time.  As of the date of adoption of this Policy, such form Award
Agreement provides as follows:

 

i.

Each option tranche will vest at the rate of 25% per year, assuming continued
service on the Board.

 

ii.

For options granted on or after October 1, 2013, upon termination as a Director
due to retirement, any such options will (a) (subject to the death or disability
of the grantee) continue vest in accordance with the original vesting schedule,
and (b) upon vesting, continue to be exercisable until the expiration of the
options. For the foregoing purposes our directors are eligible for retirement
upon attaining age 55.

 

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Exhibit 10.43

 

3.

Non-Qualified Deferred Compensation Plan

Our Outside Directors are eligible to participate in a non-qualified deferred
compensation plan, the Woodward Executive Benefit Plan (“EBP”).  Under the EBP,
our Outside Directors are able to defer up to 100% of their cash compensation,
including retainer fees, and any fees for participation as a committee member,
committee chairman, or Lead Director.

 

 

4.

Evaluation of Board Compensation Program

The Nominating & Governance Committee evaluates the market competitiveness of
the Company’s Board compensation program on a periodic basis, typically every
two years.  As a part of such evaluation, the Nominating & Governance Committee
commissions the Company’s compensation consultant to conduct a competitive
assessment of the Company’s Board compensation program relative to market
practice.  Based on the results of the competitive assessment, the Nominating &
Governance Committee recommends to the Board changes (if any) to the cash and/or
equity compensation granted to Outside Directors, including any additional
compensation paid for service as a member of a committee of the Board or as the
Lead Director.

 

 

5.

EXPENSES

All expenses reasonably incurred by each Outside Director in connection with
such individual’s services on the Board will be reimbursed by the Company.

 

6.

ADDITIONAL PROVISIONS

Except as specifically described in this Policy, all provisions of the Plan will
apply to Awards granted to Outside Directors.

 

7.

ADJUSTMENTS

In accordance with the Plan, in the event that any dividend or other
distribution (whether in the form of cash, Shares, other securities or other
property), recapitalization, stock split, reverse stock split, reorganization,
reincorporation, reclassification, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company or other change in the corporate structure of the Company affecting the
Shares occurs, the Administrator, in order to prevent diminution or enlargement
of the benefits or potential benefits intended to be made available under this
Policy, will adjust the number and class of shares of stock that may be issued
under this Policy and/or the number, class and price of shares of stock covered
by each outstanding Award, and the numerical share limits applicable to Outside
Directors in Sections 3 and 5 of Plan.

 

 

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Exhibit 10.43

 

8.

LIMITATIONS

As of the date of adoption of this Policy, the Plan provides that no Outside
Director may be granted, in any Fiscal Year, Awards (the value of which will be
based on their Grant Date fair value determined in accordance with generally
accepted accounting principles) which, in the aggregate, exceed $300,000,
provided that such amount is increased to $450,000 in the Fiscal Year of his or
her initial service as an Outside Director. Any Awards or other compensation
provided to an individual for his or her services as an Employee, or for his or
her services as a Consultant other than as an Outside Director, will be excluded
for purposes of the limitations in this Section 8.

 

9.

SECTION 409A

Policy Grants and all payments made hereunder will be in accordance with the
Plan, which as of the date of adoption of this Policy provides that they are to
be designed and operated in such a manner that they are either exempt from the
application of, or comply with, the requirements of Section 409A such that the
grant, payment, settlement or deferral thereof, as applicable, will not be
subject to the additional tax or interest applicable under Section 409A, except
as otherwise determined in the sole discretion of the Administrator. This
Policy, the Plan and each Award Agreement is intended to meet the requirements
of Section 409A, to the extent applicable, and will be construed and interpreted
in accordance with such intent, except as otherwise determined in the sole
discretion of the Administrator.  To the extent that a Policy Grant or other
payment, or the settlement or deferral thereof, is subject to Section 409A, such
grant or payment will be granted, paid, settled or deferred in a manner that
will meet the requirements of Section 409A, such that the grant, payment,
settlement or deferral will not be subject to the additional tax or interest
applicable under Section 409A. In no event will the Company or other Employer
have any obligation under this Policy or the Plan to reimburse an Outside
Director for any taxes or other costs that may be imposed on an Outside Director
as a result of Section 409A.

 

10.

REVISIONS

The Board or any committee designated by the Board may amend, alter, suspend or
terminate this Policy at any time and for any reason.  No amendment, alteration,
suspension or termination of this Policy will materially impair the rights of an
Outside Director with respect to compensation that already has been paid or
awarded, unless otherwise mutually agreed between the Outside Director and the
Company.  Termination or modification of this Policy will not affect the Board’s
or the Administrator’s ability to exercise the powers granted to it under the
Plan with respect to Awards granted under the Plan and pursuant to this Policy
prior to the date of such termination or modification.