Exhibit 10.2

 

 

Esterline Technologies Corporation

 

LONG-TERM INCENTIVE PERFORMANCE SHARE PLAN

1.

Purpose. Esterline Technologies Corporation (“Esterline” or the “Company”) has
established this Long-Term Incentive Performance Share Plan (“PSP” “PSP Plan”,
or “the Plan”) to reward its officers and selected senior managers for effective
leadership that achieves expected and superior results for shareholders over the
long term.

2.

PSP Terms.  The Company established this PSP pursuant to its 2013 Equity
Incentive Plan, as amended (“2013 Plan”).  The terms of the PSP Appointment, the
Award Table, this PSP Plan, and the 2013 Plan together constitute the “PSP
Terms.” Notwithstanding any other provision of the Plan to the contrary, the
Plan shall be administered and its provisions interpreted so that payments made
to Participants who are “covered employees” qualify as “performance-based
compensation,” in each case, within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (“Code”).

 

3.

Participation.  

 

a.

Selection.  The Company’s officers and other senior managers employed by the
Company’s corporate office or by a Company subsidiary are eligible to
participate in this PSP.  Appointments require recommendation by an executive
officer and approval by Esterline’s Board of Directors Compensation Committee
(hereafter “Board” and “Committee”).  In addition, Board approval is also
required for appointments of the Chief Executive Officer (“CEO”) and of all
other executive officers.  The CEO, acting independently, also has authority to
make PSP appointments, provided such appointments comply with the Company’s
Equity Grant Guidelines, and do not appoint employees who report directly to the
CEO.  Employees who are appointed to the PSP are hereafter referred to as
“Participant(s).”

 

b.

Appointment.  Each Participant will receive a written appointment in the form
attached (“PSP Appointment”). Participants are usually appointed to the PSP in
the first fiscal quarter of a performance period.  Nevertheless, Participants
may be appointed at any time.  Participants appointed after the first fiscal
quarter will receive a pro-rata award for the portion of the performance period
following their appointment, calculated as provided in Section 7 below.
Appointment as a Participant in one or more PSP performance periods does not
entitle employees to appointment in subsequent periods.  

 

4.

Performance Periods.  PSP performance periods will be three years in duration,
beginning on the first day of a Company fiscal year and ending on the last day
of the third consecutive fiscal year thereafter.  A new three-year performance
period will start with each new fiscal year, such that there will be three
overlapping PSP performance periods open at any given time, as illustrated
below.  The Committee may establish shorter performance periods as it determines
are reasonable.

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Performance Share Plan

Fiscal Years 2016 – 2018

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5.

Performance Goals.  The PSP has two performance goals: (a) average return on
invested capital (“ROIC”); and (b) earnings per share (“EPS”) (together referred
to as “PSP Goals”).  At the beginning of each performance period, the Board
will: (c) establish minimum threshold, target, and maximum PSP Goals; (d)
determine their respective weighting; and (e) correlate performance achievement
levels to potential award levels for Participants. Such decisions will be
recorded and communicated to Participants in an Award Table, in the form
attached.   

 

Notwithstanding anything to the contrary contained herein, for Participants who
are “covered employees” within the meaning of Section 162(m) of the Code,
payment of awards under the Plan is expressly conditioned on achievement by the
Company of a specified level of [net earnings from continuing operations
attributable to Esterline, as reported in the Company’s consolidated financial
statements], as determined by the Committee within the first ninety (90) days of
the applicable performance period (“Umbrella Goal”), in which case the maximum
number of shares of Company Stock available for issuance under a PSP award to
each such Participant will be as determined by the Committee.  

 

6.

Plan Awards.  The Board, Committee, or CEO will establish a target award for
each Participant in the form of Performance Share Units (“Target Award”), the
value of which will be based on a percentage of the Participant’s base pay at
the time of appointment.  The value of Participants’ actual awards will vary
from their Target Award if the Company performs above or below target PSP
Goals.  Participants will receive no award for performance less than established
minimum threshold performance as shown on the Award Table.  Actual awards for
superior performance are subject to a maximum of 300% of a Participant’s Target
Award.  

7.

Calculations.  The Company will use the following formulas to determine Company
performance on PSP Goals, and to calculate actual awards:

 

 

Average Return

on Invested Capital (ROIC) =

 

 

Net Income (before non-recurring and/or unusual items) + Tax-Adjusted Interest
Expense

Short-term Debt + Long Term Debt – Cash + Shareholders’ Equity

 

averaged over the applicable performance period, and expressed as a
percentage.  The Company will use a long-term planning “most likely” tax rate of
25% in such ROIC calculations.

 

 

Earnings Per Share (EPS) =

 

Fully-diluted earnings per share (net income before non-recurring and/or unusual
items, divided by the monthly average of total common shares and share
equivalents outstanding) (“EPS”), measured as the EPS achieved in the final
fiscal year of the performance period.

 

 

Pro-Rata Awards:

Pro-rata award calculations will be based on results for the full performance
period, pro-rated for the time during which an employee participated in the PSP
Plan. Participation will be measured in full-month increments, rounded up for
months in which a Participant was actively employed under the Plan for 15 days
or more, and rounded down for active employment under the Plan of 14 days or
less. The pro-rata factor will be a fraction, the numerator of which will be the
number of months of participation, and the denominator of which will be 36.

8.

Adjustments.  The Board may exercise its discretion to ensure Participants
receive an equitable award, by adjusting: (a) PSP Goals; (b) Plan calculations
to include or exclude non-recurring and/or unusual items, in whole or in part;
or (c) the factors used to calculate Plan awards.  Such adjustments may be made
if unanticipated events occur, or unusual business conditions develop after the
beginning of a performance period that materially alter earnings or
returns.  Notwithstanding the foregoing, the Board may not adjust the Umbrella
Goal in such a manner that would increase the amount of compensation otherwise
payable to a “covered employee” within the meaning of Section 162(m) of the
Code. The Committee will seek and consider advice from an independent executive
compensation expert and from the Company’s General Counsel before deciding
whether to recommend an adjustment under this Section for Board action.

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Performance Share Plan

Fiscal Years 2016 – 2018

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9.

Settlement of Awards.  Each Performance Share Unit earned will be settled in one
share of fully-vested Company Stock, except as cash settlements are provided in
Sections 11 and 15 below. Subject to other PSP Terms, the Company will settle
PSP awards in January of the calendar year immediately following the conclusion
of the performance period, if and only if: Company auditors have issued an
opinion consistent with the calculations; and the Committee and Board have
approved the awards. If these conditions delay settlement of awards beyond
January, such awards must be settled on the earlier of (i) the date that is 30
days following the satisfaction of these conditions or (ii) December 31 of the
calendar year immediately following the conclusion of the performance period.

 

10.

Continuous Employment.  To be eligible for payment, Participants must be
actively employed by the Company through the end of the performance period and
through the date on which the Company settles PSP awards, except as might
otherwise be provided in PSP Terms.  Subject to other PSP Terms, appointments
will end automatically for Participants who do not satisfy these conditions and
no PSP awards will be earned or due.  The Company considers approved leaves of
absence to be active employment, provided they do not exceed the amount of leave
to which a Participant might be entitled under applicable Company policies, and
under disability, family and medical leave laws.  For approved leaves that
exceed such limits, payment of PSP awards, if any, is subject to Committee
discretion.  

11.

Employment Status Changes.  Except as otherwise determined by the Board,
Committee, or CEO (as appropriate), the following provisions will apply to
employment status changes:

 

a.

Transfers. If during a performance period a Participant transfers within the
Company to a position that is not eligible for PSP participation, his/her Plan
award will be pro-rated for the time in which s/he was a Participant, as
provided in Section 7 above.

 

b.

Suspension, Resignation, or Discharge.  A Participant’s appointment will
automatically end when s/he leaves employment with the Company for any reason,
except as otherwise provided in PSP Terms. All Participant rights under this
Plan will be suspended during any period of suspension from employment. The
Board may immediately cancel a Participant’s appointment and recover any awards
made if it discovers facts that, if known earlier, would have constituted
grounds for termination of employment for cause.

 

c.

Retirement, Disability, or Death.  If a Participant leaves employment with the
Company due to Retirement, Disability, or death, the Company will settle the
Participant’s award for the full performance period in the normal course based
on actual achievement of PSP Goals, provided the Participant completed at least
one year of continuous, active employment during the performance period. If a
Participant does not complete this minimum employment period, his/her
appointment will automatically end, and no PSP award will be earned or due.  

 

 

d.

Subsidiary Divestiture.  In the event a Participant is terminated from
employment due to a sale, transfer, assignment, or other form of transaction by
which Esterline conveys a controlling interest in the shares or in substantially
all the assets of a subsidiary that employs the Participant, the Company will
settle PSP awards in cash, within 60 days following completion of the
transaction, and on a pro rata basis, calculated as follows:

 

Cash settlement value = (# of Performance Share Units at Target) (closing price
of Company Stock on the day the transaction is complete)(a pro rata factor, as
defined in Section 7 above).

 

12.

Employment Terms.  Participants’ terms of employment remain unchanged by
appointment to this PSP, except as specifically provided in the PSP
Terms.  Nothing in the appointment process or in the PSP Terms guarantees
continued employment.  Participants remain subject to usual, applicable Company
and business unit policies and practices, and to any other employment
agreements, service terms, appointments, or mandates to which they are otherwise
subject.

 

13.

No Rights as Stockholder.  Participants will not have voting or other rights as
a stockholder of the Company with respect to a PSP award until the award is
settled and the Participant receives shares of Company Stock.

 

14.

Plan Administration & Interpretation.  The Committee administers this Plan. As
such, it shall consider and decide any issues arising under the Plan, and shall
oversee and approve actual award calculations and settlement.  The Committee’s
decisions concerning PSP administration and interpretation are final and
binding, except as they

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Performance Share Plan

Fiscal Years 2016 – 2018

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might relate to the CEO and other executive officers, in which case the Board
has final decision-making authority. Definitions in the 2013 Plan apply to terms
used in this PSP unless otherwise defined here. All references to the “Company”
include a “Related Company,” as that term is defined in the 2013 Plan. 

 

15.

Plan Modification and Termination.  The Board may modify or terminate this PSP
at any time in its sole discretion.

 

16.

Section 409A.  The Company intends that this PSP and the payments provided
hereunder comply with the requirements of Section 409A of the Code and the
Treasury Regulations thereunder.  Notwithstanding any provision in this PSP, the
2013 Plan or any other agreement to the contrary: (a) this PSP shall be
interpreted, operated, and administered in a manner consistent with such
intentions; and (b) in the event that the settlement of any PSP award is subject
to acceleration upon a change in control or similar event with respect to the
Company, such acceleration shall only occur to the extent that such change in
control or similar event constitutes a change in control event with respect to
the Company within the meaning of Section 409A of the Code and the Treasury
Regulations thereunder.

 

17.

Reimbursement.  PSP participation and awards are subject to the Board’s Policy
on Reimbursement of Incentive Awards, as it might change from time to time.  

 

Approved by the Committee & Board, and issued on their behalf,

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Curtis C. Reusser

Chairman, President & CEO

 

November 18, 2015

 

Attachment:

PSP Appointment

 

 

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Performance Share Plan

Fiscal Years 2016 – 2018

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