UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.          )

 

 

 

    

 

 

 

March 29, 2016

Fellow Stockholders:

You are cordially invited to attend the SPX FLOW, Inc. (“SPX FLOW”) Annual Meeting of Stockholders on May 11, 2016 at 8:00 a.m. (Eastern Time), at the offices of SPX FLOW, 13320 Ballantyne Corporate Place, Charlotte, North Carolina, 28277.

All SPX FLOW stockholders of record at the close of business on March 18, 2016 are welcome to attend the Annual Meeting, but it is important that your shares are represented at the Annual Meeting whether or not you plan to attend. To ensure that you will be represented, we ask you to vote by telephone, mail, or over the internet as soon as possible.

Along with the other members of your Board of Directors, I look forward to personally greeting those stockholders who attend this year’s meeting. On behalf of the Board of Directors and our leadership team, I would like to express our appreciation for your continued interest in the business of SPX FLOW.

Sincerely,

Marcus G. Michael
President and Chief Executive Officer

 

 

 

 

Notice of Annual Meeting of Stockholders

 

The principal business of the Annual Meeting will be to:

You can vote at the Annual Meeting in person or by proxy if you were a stockholder of record at the close of business on March 18, 2016. You may revoke your proxy at any time prior to its exercise at the Annual Meeting.

This year, we are again electronically disseminating Annual Meeting materials to some of our stockholders, as permitted under the “Notice and Access” rules approved by the Securities and Exchange Commission. Stockholders for whom Notice and Access applies will receive a Notice of Internet Availability of Proxy Materials containing instructions on how to access Annual Meeting materials via the internet. The Notice also provides instructions on how to obtain paper copies if preferred.

By Order of the Board of Directors,

Stephen A. Tsoris
Vice President, Secretary and General Counsel

Charlotte, North Carolina
March 29, 2016

 

 

 

 

Table of Contents

 

 

 

Questions and Answers

Why am I receiving these materials?

We are mailing or making available these materials to you because we are soliciting your proxy to vote your shares in connection with the SPX FLOW, Inc. Annual Meeting, scheduled to take place on May 11, 2016, or at any adjournments or postponements of this meeting. We are first mailing or making available to stockholders this proxy statement, our Annual Report to Stockholders for the year ended December 31, 2015 and related materials on or about March 29, 2016.

Are the Proxy Materials available electronically?

Our proxy statement and our fiscal 2015 Annual Report to Stockholders are also available at our website at http://www.spxflow.com. Additionally, and in accordance with Securities and Exchange Commission (“SEC”) rules, you may access our proxy statement at http://www.edocumentview.com/FLOW, which does not have “cookies” that identify visitors to the site.

Why did I receive a one‑page Notice of Internet Availability of Proxy Materials rather than a full set of Proxy Materials?

SEC rules allow companies to provide stockholders with access to Proxy Materials over the internet rather than mailing the materials to stockholders. Accordingly, to conserve natural resources and reduce costs, we are sending many of our stockholders a Notice of Internet Availability of Proxy Materials. The Notice provides instructions for accessing the Proxy Materials on the website referred to in the Notice or for requesting printed copies of the Proxy Materials. The Notice also provides instructions for requesting the delivery of the Proxy Materials for future Annual Meetings in printed form.

How can I attend the Annual Meeting?

You may attend the Annual Meeting if you were an SPX FLOW stockholder of record as of the close of business on March 18, 2016 or you hold a valid proxy for the Annual Meeting. You should be prepared to present photo identification for admittance. If you are a stockholder of record or hold your shares through the SPX Corporation or SPX FLOW 401(k) Plan, your name will be verified against the list of stockholders of record or plan participants on the record date prior to your being admitted to the Annual Meeting. If you are not a stockholder of record but hold shares through a broker, trustee or nominee, you should provide proof of beneficial ownership on the record date, such as a recent account statement showing your ownership, a copy of the voting instruction card provided by your broker, trustee or nominee, or other similar evidence of ownership.

What am I voting on?

We are soliciting your vote on:

Who is entitled to vote?

Stockholders at the close of business on March 18, 2016 (the record date) are entitled to vote. On that date, there were 41,551,003 shares of SPX FLOW common stock outstanding.

How many votes do I have?

Each share of SPX FLOW common stock that you own entitles you to one vote.

Can I vote in person at the Annual Meeting?

Yes. If you were a stockholder on the record date, you can vote your shares of common stock in person at the Annual Meeting. If your shares are held through a broker, trustee or nominee, you may vote your shares in person only if you have a legal proxy from the entity that holds your shares giving you the right to vote the shares. A legal proxy is a written document from your brokerage firm, trustee or bank authorizing you to vote the shares it holds for you in its name. If you attend the meeting and vote your shares by ballot, your vote at the meeting will revoke any vote you submitted previously.

Even if you currently plan to attend the meeting, we recommend that you also vote by proxy as described above so that your vote will be counted if you later decide not to attend the meeting.

How do I vote if I don’t attend the Annual Meeting?

If your shares are held through a broker, trustee or nominee, you may vote your shares before the meeting over the internet by following the instructions on the Notice of Internet Availability of Proxy Materials or proxy card you received or, if you received a voting instruction form from your brokerage firm, bank, or other similar entity by mail, by completing, signing, and returning the form you received. You should check your voting instruction form to see if telephone or internet voting is available to you.

If your shares are held in your name, you may vote your shares before the meeting over the internet by following the instructions on the Notice of Internet Availability of Proxy Materials or proxy card you received for that account.

If you received more than one Notice of Internet Availability of Proxy Materials or proxy card, this means you hold shares of our common stock in more than one account. You should complete, sign, date, and return each proxy card or vote all shares over the internet or by telephone for each of your accounts. If you vote over the internet or by telephone, you should not mail back the related proxy card.

How does discretionary voting authority apply?

If you sign, date and return your proxy card, your vote will be cast as you direct. If your proxy card does not indicate how you want to vote, you give authority to Marcus G. Michael and Jeremy W. Smeltser to vote on the items discussed in these Proxy Materials and any other matter properly brought at the Annual Meeting. In such a case, your vote will be cast:

May I revoke my proxy?

You may revoke your proxy in one of four ways at any time before it is exercised:

What constitutes a quorum?

The presence, in person or by proxy, of the holders of one‑third of the total number of shares of SPX FLOW stock issued and outstanding and entitled to vote at the Annual Meeting constitutes a quorum. You will be considered part of the quorum if you return a signed and dated proxy card, if you vote by telephone or internet, or if you attend the Annual Meeting.

Abstentions are counted as “shares present” at the Annual Meeting for purposes of determining whether a quorum exists. Proxies submitted by banks, brokers or other holders of record holding shares for you as a beneficial owner that do not indicate a vote for some of or all the proposals because that holder does not have voting authority and has not received voting instructions from you (so‑called “broker non‑votes”) are also considered “shares present” for purposes of determining whether a quorum exists. If you are a beneficial owner, these holders are permitted to vote your shares on the ratification of the appointment of our independent public accountants, even if they do not receive voting instructions from you.

What vote is required to approve each proposal?

A majority of votes cast means that the number of shares voted for a director or proposal must exceed the number of shares voted against that director or proposal.

Our by-laws provide that each director shall be elected by a majority of votes cast, provided that in a contested election, directors are elected by a plurality of the votes represented in person or by proxy at the meeting. An election is contested if the number of nominees exceeds the number of directors to be elected. Whether or not an election is contested is determined ten days in advance of the date we file our definitive proxy statement with the SEC. In the event a resignation is triggered as a result of a director not receiving a majority vote, the Nominating and Governance Committee will consider the resignation and make a recommendation to the Board on whether to accept or reject it, or whether other action should be taken. The Board will consider the Committee’s recommendation and publicly disclose its decision and the rationale behind it in a Current Report on Form 8-K filed with the SEC within 90 days from the date of the certification of the election results.

Impact of Abstentions or Broker Non‑Votes

An abstention is not considered as a share voted and will not impact the election of directors or the Say on Pay or Say When on Pay vote. However, since an abstention is considered a share present or represented by proxy and entitled to vote, as one less vote for re-approval it will have the effect of a vote against the re-approval of material terms allowing for the granting of certain performance-

based awards under our SPX FLOW Stock Compensation Plan or our SPX FLOW Executive Annual Bonus Plan, the ratification of our independent public accountants and other proposals that may be brought before the Annual Meeting.

A broker non-vote is not considered as a share voted or entitled to vote and will not impact the vote on any of the proposals.

The New York Stock Exchange (the “NYSE”) does not consider the election of directors, matters relating to compensation or the votes to re-approve material terms allowing for the granting of certain performance-based awards under our SPX FLOW Stock Compensation Plan or our SPX FLOW Executive Annual Bonus Plan to be routine. Unless the broker has received instructions from you, any broker holding shares for you will not have the ability to cast votes with respect to those proposals. It is important, therefore, that you provide instructions to your broker if your shares are held by a broker so that your vote with respect to these matters is counted.

How do I submit a stockholder proposal?

For a proposal to be included in our proxy statement for the 2017 Annual Meeting, you must submit it no later than November 29, 2016. Your proposal must be in writing and comply with the proxy rules of the SEC. You should send your proposal to our Corporate Secretary at our address on the cover of this proxy statement.

You also may submit a proposal that you do not want included in the proxy statement but that you want to raise at the 2017 Annual Meeting. We must receive this type of proposal in writing on or after December 12, 2016, but no later than January 11, 2017.

As detailed in our by‑laws, to bring a proposal other than the nomination of a director before an annual meeting, your notice of proposal must include: (1) a brief description of the business you want to bring before the meeting; (2) the reasons for conducting such business at the meeting; (3) your name and address as they appear on our stock records, as well as the name and address of any beneficial owner of the shares; (4) the class and number of shares of SPX FLOW stock owned beneficially and of record by you and any beneficial owner as of the date of the notice (which information must be supplemented as of the record date); (5) a statement that you are a record holder of SPX Flow shares entitled to vote at the meeting and that you plan to appear in person or by proxy at the meeting to present the proposal; (6) a description of certain agreements, arrangements or understandings entered into by you or any beneficial owner with respect to the shares (which information must be supplemented as of the record date); (7) any material interest you or any beneficial owner may have in the business you want to bring before the meeting; (8) a description of all agreements, arrangements and understandings between you or any beneficial owner and any other persons (including their names) in connection with the proposal of the business; and (9) any other information regarding you or any beneficial owner that would be required under the SEC’s proxy rules and regulations.

How do I recommend a director nominee?

If you wish to recommend a nominee for director for the 2017 Annual Meeting, our Corporate Secretary must receive your written nomination between December 12, 2016, and January 11, 2017. You should submit your proposal to our Corporate Secretary at our address on the cover of this proxy statement. As detailed in our by‑laws, for a nomination to be properly brought before an annual meeting, your notice of nomination must include: (1) your name and address, as well as the name and address of any beneficial owner of the shares, and the name and address of the nominee; (2) the class and number of shares of SPX FLOW stock owned beneficially and of record by you and any beneficial owner as of the date of the notice (which information must be supplemented as of the record date); (3) a description of certain agreements, arrangements or understandings entered into by you or any beneficial owner with respect to the shares (which information must be supplemented as of the record date); (4) a statement that you are a record holder of SPX FLOW shares entitled to vote at the meeting and that you plan to appear in person or by proxy at the meeting to make the nomination; (5) any material interest you or any beneficial owner may have in the director nomination; (6) a description of all arrangements or understandings between you and any other persons pursuant to which you are making the nomination; (7) any other information regarding you, any beneficial owner, or the nominee that the rules of the SEC require to be included in a proxy statement; (8) the nominee’s agreement to serve as a director if elected; and (9) a statement as to whether each nominee, if elected, intends to tender, promptly following his or her election or re‑election, an irrevocable resignation effective upon his or her failure to receive the required vote for re‑election at the next meeting at which he or she would face re‑election and the acceptance of such resignation by the Board of Directors, in accordance with our Corporate Governance Guidelines. In addition, any director nominee must provide information we may reasonably request in order for us to determine the eligibility of such nominee to serve as an independent director.

Who pays to prepare, mail, and solicit the proxies?

We will pay all the costs of preparing, mailing and soliciting the proxies. We will ask brokers, banks, voting trustees and other nominees and fiduciaries to forward the Proxy Materials to the beneficial owners of SPX FLOW common stock and to obtain the authority to execute proxies. We will reimburse them for their reasonable expenses upon request. In addition to mailing Proxy Materials, our directors, officers and employees may solicit proxies in person, by telephone or otherwise. These individuals will not be specially

compensated. We have retained D.F. King to assist us in soliciting your proxy and will pay them an estimated fee of $12,500 plus reasonable out‑of‑pocket expenses. D.F. King will ask brokerage houses and other custodians and nominees whether other persons are beneficial owners of SPX FLOW common stock. If so, we will supply them with additional copies of the Proxy Materials for distribution to the beneficial owners. We will also reimburse banks, nominees, fiduciaries, brokers and other custodians for their costs of sending the Proxy Materials to the beneficial owners of SPX FLOW common stock.

 

 

Proposal No. 1 — Election of Directors

Eight directors currently serve on our Board of Directors. The directors are divided into three classes. There are currently three directors in the first class, two directors in the second class, and three directors in the third class.

At this Annual Meeting, you will be asked to elect three directors for the third class, Ms. Altman, Mr. Campbell, and Mr. Michael. Five directors will continue to serve on the Board of Directors as described below.

Each of the director nominees is a current SPX FLOW director and, if elected, will serve for a term of three years, until a qualified successor director has been elected, or until he or she resigns, retires or is removed by the stockholders for cause.

Each nominee has agreed to tender, promptly following his or her election or re‑election, an irrevocable resignation effective upon his or her failure to receive the required vote for re‑election at the next meeting at which he or she would face re‑election and the acceptance of such resignation by the Board of Directors, in accordance with our Corporate Governance Guidelines.

Your shares will be voted as you specify on the enclosed proxy card. If you do not specify how you want your shares voted, we will vote them FOR the election of each of Ms. Altman, Mr. Campbell, and Mr. Michael. If unforeseen circumstances (such as death or disability) make it necessary for the Board of Directors to substitute another person for any of the nominees, your shares will be voted FOR that other person. The Board of Directors does not anticipate that any of the nominees will be unable to serve.

YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE FOR EACH OF THE DIRECTOR NOMINEES

 

 

 

 

 

 

 

 

Corporate Governance

Corporate Governance Guidelines

As part of its ongoing commitment to good corporate governance, the Board of Directors has codified its corporate governance practices into a set of Corporate Governance Guidelines. These guidelines assist the Board of Directors in the exercise of its responsibilities and may be amended by the Board of Directors from time to time. Our Corporate Governance Guidelines comply with the applicable requirements of the listing standards of the NYSE and are available on our website (www.spxflow.com) under the heading Investor Relations—Corporate Governance.

Code of Business Conduct

We have adopted a Code of Business Conduct that applies to all our directors, officers and employees, including our CEO and senior financial and accounting officers. Our Code of Business Conduct requires each director, officer and employee to avoid conflicts of interest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner and otherwise act with integrity and in the best interest of our company and our stockholders. In addition, our Code of Business Conduct acknowledges special ethical obligations for financial reporting. The Code of Business Conduct meets the requirements of a code of business conduct and ethics under the listing standards of the NYSE and the requirement of a “Code of Ethics” as defined in the rules of the SEC. We maintain a current copy of our Code of Business Conduct, and will promptly post any amendments to or waivers of our Code of Business Conduct regarding our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, on our website (www.spxflow.com) under the heading Investor Relations—Corporate Governance—Commitment to Compliance.

Director Independence

Our Corporate Governance Guidelines require that a substantial majority of the Board of Directors meet the independence requirements of the listing standards of the NYSE. Our Board of Directors reviews, at least annually, whether each of our directors is independent. The Board of Directors has adopted categorical Independence Standards to help guide it in this process. Our Independence Standards are available on our website (www.spxflow.com), under the heading Investor Relations—Corporate Governance. Members of the Audit Committee, Compensation Committee and Nominating and Governance Committee must meet all applicable independence tests of the NYSE and SEC. Based on its most recent annual review, the Board of Directors has concluded that Ms. Altman, Mr. Campbell, Mr. Fullwood, Mr. Hull, Mr. Lisenby, and Mr. Singer are independent as defined in our Independence Standards and the listing standards of the NYSE. The Board of Directors has concluded that each of Mr. Michael and Mr. Kearney is not independent as defined in our Independence Standards and the listing standards of the NYSE.

The non‑employee members of the Board of Directors meet in executive session without management at least every regularly scheduled Board meeting. In addition, the non‑employee members of the Board of Directors meet in executive session with the CEO and such other management as the Board of Directors deems appropriate on a regular basis. Meetings of independent directors are chaired by our Lead Director, Mr. Fullwood.

Charitable Contributions

It is the policy of the Board of Directors that no officer or director shall solicit contributions for charities from other officers or directors or directly from SPX FLOW if the director or officer soliciting the contributions personally controls the charity. In addition, no officer or director shall solicit contributions from other officers or directors for charities controlled by SPX FLOW.

From time to time, SPX FLOW may make contributions to charitable organizations for which a member of our Board of Directors or one of our executive officers serves as a director or officer. No contributions in 2015 exceeded the greater of (a) $1 million or (b) 2% of the charitable organization’s consolidated gross revenues.

Risk Oversight

The full Board exercises risk oversight at SPX FLOW. Committees take the lead in discrete areas of risk oversight when appropriate. For example, the Audit Committee is primarily responsible for risk oversight relating to financial statements, the Compensation Committee is primarily responsible for risk oversight relating to executive compensation, and the Nominating and Governance Committee is primarily responsible for risk oversight relating to corporate governance. Committees report to the Board on risk management matters.

Management presents to the full Board its view of the top risks facing SPX FLOW in a dedicated “enterprise risk management” presentation at least once a year. Matters such as risk appetite and management of risk are also discussed at this meeting. In addition, risk is explicitly addressed in a wide range of Board discussions, including those relating to end market or business unit activities, specific corporate functions (such as treasury, intellectual property, tax, capital allocation, etc.), and consideration of extraordinary transactions. As part of these discussions, our directors ask questions, offer insights, and challenge management to continually improve its risk assessment and management. The Board has full access to management, as well as the ability to engage advisors, in order to assist it in its risk oversight role.

We have conducted an in‑depth review of the risks associated with our incentive‑based agreements and practices and determined that the risks were in line with our risk appetite.

See “Executive Compensation -- Risk Analysis” for further discussion.

Communications with Directors

Interested parties may communicate with any of our non‑employee directors by writing to the director in care of our Corporate Secretary at our address shown on the cover of this proxy statement. In accordance with the policy adopted by our non‑employee directors, our Corporate Secretary will promptly relay to the addressee all communications that he determines require prompt attention by a non‑employee director and will regularly provide the non‑employee directors with a summary of all substantive communications.

Board Qualifications and Diversity

The Nominating and Governance Committee selects individuals as director nominees based on their business and professional accomplishments, integrity, demonstrated ability to make independent analytical inquiries, ability to understand our business, absence of conflicts of interest, and willingness to devote the necessary time to Board duties. Neither the Board nor the Nominating and Governance Committee has set minimum requirements with respect to age, education or years of business experience or set specific required skill sets for directors, but each does require that each director has a proven record of success and leadership. The Nominating and Governance Committee seeks to structure the Board of Directors such that it consists of a diverse group of individuals, each with a unique combination of skills, experience, and background. The Nominating and Governance Committee has no set diversity policy or targets, but places what it believes to be appropriate emphasis on certain skills, experience, or background that it determines add or would add value to our Board. Knowledge of our industry and strategic perspective, as well as accounting expertise and experience on other Boards, are examples of attributes that our Board and the Nominating and Governance Committee consider to be key. The Nominating and Governance Committee also considers effective interaction among Board members and between the Board of Directors and management to be crucial factors in considering individuals for nomination.

We believe that each director should bring a wealth of experience, talent, and diverse perspective that, individually and in the aggregate, adds value to our company. As our Corporate Governance Guidelines state, our Nominating and Governance Committee, and ultimately our Board, selects individuals as director nominees based on the totality of their business and professional accomplishments, integrity, demonstrated ability to make independent analytical inquiries, ability to understand our business, absence of conflicts of interest and willingness to devote the necessary time to Board duties. For a better understanding of the qualifications of each of our directors, we encourage you to read their biographies, beginning on p. 6 of this proxy, as well as other publicly available documents discussing their careers and experiences.

Director Nominees

The Nominating and Governance Committee is responsible for proposing director nominees and will consider director nominee recommendations offered by stockholders in accordance with our by‑laws.

At such times as the Board of Directors and the Nominating and Governance Committee determine there is a need to add or replace a director, the Nominating and Governance Committee identifies director candidates through references by its members, other directors, management, or outside search firms, if appropriate.

In considering individuals for nomination, the Nominating and Governance Committee consults with our Chairman and our President and CEO. A director’s qualifications in meeting the criteria discussed above under “Board Qualifications and Diversity” are considered at least each time the director is re‑nominated for Board membership. The Committee applies the same process and standards to the evaluation of each potential director nominee, regardless of whether he or she is recommended by one or more stockholders or is identified by some other method.

Once the Nominating and Governance Committee identifies a director candidate, directors and members of management interview the candidate. Following that process, the Committee and the Board of Directors determine whether to nominate the candidate for

election at an annual meeting of stockholders or, if applicable, to appoint the candidate as a director. Any such nomination or appointment is subject to acceptance by the candidate. Our by‑laws require that any director appointed to the Board of Directors other than at an annual meeting of stockholders be submitted for election by our stockholders at the next annual meeting.

If you wish to recommend a nominee for director for the 2017 Annual Meeting, our Corporate Secretary must receive your written nomination between December 12, 2016 and January 11, 2017. You should submit your proposal to our Corporate Secretary at our address on the cover of this proxy statement. As detailed in our by‑laws, for a nomination to be properly brought before an annual meeting, your notice of nomination must include: (1) your name and address, as well as the name and address of any beneficial owner of the shares, and the name and address of the nominee; (2) the class and number of shares of SPX FLOW stock owned beneficially and of record by you and any beneficial owner as of the date of the notice (which information must be supplemented as of the record date); (3) a description of certain agreements, arrangements or understandings entered into by you or any beneficial owner with respect to the shares (which information must be supplemented as of the record date); (4) a statement that you are a record holder of SPX FLOW shares entitled to vote at the meeting and that you plan to appear in person or by proxy at the meeting to make the nomination; (5) any material interest you or any beneficial owner may have in the director nomination; (6) a description of all arrangements or understandings between you and any other persons pursuant to which you are making the nomination; (7) any other information regarding you, any beneficial owner, or the nominee that the rules of the SEC require to be included in a proxy statement; (8) the nominee’s agreement to serve as a director if elected; and (9) a statement as to whether each nominee, if elected, intends to tender, promptly following his or her election or re‑election, an irrevocable resignation effective upon his or her failure to receive the required vote for re‑election at the next meeting at which he or she would face re‑election and the acceptance of such resignation by the Board of Directors, in accordance with our Corporate Governance Guidelines. In addition, any director nominee must provide information we may reasonably request in order for us to determine the eligibility of such nominee to serve as an independent director.

Director Election

In uncontested elections, we elect directors by majority vote. Under this majority vote standard, each director must be elected by a majority of the votes cast with respect to that director, meaning that the number of shares voted “for” a director exceeds the number of shares voted “against” that director. In a contested election, directors are elected by a plurality of the votes represented in person or by proxy at the meeting. An election is contested if the number of nominees exceeds the number of directors to be elected. Whether or not an election is contested is determined ten days in advance of the date we file our definitive proxy statement with the SEC. This year’s election is uncontested. Accordingly, the majority vote standard will apply.

If a nominee already serving as a director is not elected at an annual meeting, Delaware law provides that the director will continue to serve on the Board as a “holdover director” until his or her successor is elected. Our Nominating and Governance Committee, however, has established procedures requiring directors to tender to the Board advance resignations. As set forth in our Corporate Governance Guidelines, the Board will nominate for election or re‑election as a director only candidates who agree to tender, promptly following each annual meeting of stockholders at which they are elected or re‑elected as a director, irrevocable resignations that will be effective only if (1) the director fails to receive a sufficient number of votes for re‑election at the next annual meeting of stockholders at which he or she faces re‑election and (2) the Board accepts the resignation. In addition, the Board will fill director vacancies and new directorships only with candidates who agree to tender, promptly following their appointment to the Board, the same form of resignation tendered by other directors in accordance with this provision.

In the event a resignation is triggered as a result of a director not receiving a majority vote, the Nominating and Governance Committee will consider the resignation and make a recommendation to the Board on whether to accept or reject it, or whether other action should be taken. The Board will consider the Committee’s recommendation and publicly disclose its decision and the rationale behind it in a Current Report on Form 8‑K filed with the SEC within 90 days from the date of the certification of the election results.

Attendance at Annual Meeting

It is our policy to invite all members of our Board of Directors to attend our Annual Meeting. We expect all our directors to attend the 2016 Annual Meeting.

Compensation Advisor

The Compensation Committee has retained Pearl Meyer as its sole independent compensation advisor. Pearl Meyer does not provide any services to our company other than advice to and services for the Compensation Committee relating to compensation of all executives and the Nominating and Governance Committee relating to compensation of our non‑employee directors. The independent compensation advisor may provide other consulting services to SPX FLOW, with approval from the Compensation Committee or

Nominating and Governance Committee. The Compensation Committee reviews services provided by its independent compensation advisor on at least an annual basis.

The independent compensation advisor:

The Compensation Committee has directed the independent compensation advisor to collaborate with management, including our human resources function, to obtain data, clarify information, and review preliminary recommendations prior to the time they are shared with the relevant Committee.

The Compensation Committee has considered the independence of Pearl Meyer in light of SEC rules and NYSE listing standards. The Compensation Committee requested and received a letter from Pearl Meyer addressing Pearl Meyer and the senior advisor involved in the engagement’s independence, including the following factors: (1) other services provided to us; (2) fees paid by us as a percentage of Pearl Meyer’s total revenue; (3) policies or procedures maintained by Pearl Meyer that are designed to prevent a conflict of interest; (4) any business or personal relationships between the senior advisor and a member of the Compensation Committee; (5) any company stock owned by the senior advisor; and (6) any business or personal relationships between our executive officers and the senior advisor. The Compensation Committee discussed these considerations and concluded that the work performed by Pearl Meyer and Pearl Meyer’s senior advisor involved in the engagement did not raise any conflict of interest, and that Pearl Meyer provides objective and competent advice. The following protocols are designed to help ensure objectivity:

Related‑Party Transactions

Pursuant to its charter and a written related‑party policy, the Audit Committee is charged with reviewing and approving any related‑party transactions. A related‑party transaction is a transaction involving SPX FLOW and any of the following persons: a director, director nominee or executive officer of SPX FLOW or an immediate family member or person sharing the household of any of these persons; a holder of more than 5% of SPX FLOW common stock; and certain other parties with relationships with SPX FLOW. When considering a transaction, the Audit Committee is required to review all relevant factors, including whether the transaction is in the best interest of our company, our company’s rationale for entering into the transaction, alternatives to the transaction, whether the transaction is on terms at least as fair to our company as would be the case were the transaction entered into with a third party, potential for an actual or apparent conflict of interest, and the extent of the related party’s interest in the transaction. Our legal staff is primarily responsible for the development and implementation of procedures and controls to obtain information from our directors and officers relating to related‑party transactions and then determining, based on the facts and circumstances, whether we or a related party has a direct or indirect material interest in the transaction.

In the course of the Board of Directors’ determination regarding the independence of each of the non‑employee directors, the Nominating and Governance Committee and Audit Committee considered any relevant transactions, relationships or arrangements. No member of our Board or management was aware of any transactions that would be required to be disclosed in this section.

Agreements with our Former Parent Prior to the Spin-Off

Prior to our spin-off, SPX Corporation (the “Former Parent”) was our sole stockholder. In connection with the spin-off, we and our Former Parent entered into material agreements that govern our relationship and provide for an orderly transition to our status as an independent, publicly-owned company. Following the spin-off, our Former Parent no longer held any of our stock, and we and our Former Parent operate independently. Following is a summary of the terms of the material agreements we entered into with our Former Parent in connection with the spin-off. Please see the full agreements, filed as exhibits to our periodic reports with the SEC, for additional detail.

Separation and Distribution Agreement

We and our Former Parent (the “Parties”) entered into a Separation and Distribution Agreement that set forth the principal actions to be taken in connection with the spin-off, including the internal reorganization. It also set forth other agreements that govern certain aspects of the Parties’ relationship following the spin-off.

Transfer of Assets and Assumption of Liabilities. The Separation and Distribution Agreement identifies certain assets transferred and liabilities assumed in advance of our separation from our Former Parent so that generally each company retained the assets of, and the liabilities associated with, its respective businesses. To the extent that any such transfer of assets or assumption of liabilities contemplated by the Separation and Distribution Agreement was not consummated at or prior to the distribution, the Parties will cooperate to effect such transfer or assumption as promptly following the distribution as practicable. If any such transfer of assets or assumption of liabilities were consummated at or prior to the distribution, then the party retaining such asset or liability agreed to take such actions as reasonably requested by the party to which such asset or liability is to be transferred or assumed in order to place such party, insofar as reasonably possible, in the same position as if such asset or liability had been transferred or assumed as contemplated by the Separation and Distribution Agreement.

Disclaimer of Representations and Warranties.In general, except as expressly set forth in the Separation and Distribution Agreement or in any ancillary agreement, neither Party will make any representations or warranties about any assets transferred or liabilities assumed; any third-party or governmental consents, waivers or approvals that may be required in connection with such transfers or assumptions; the value or freedom from any security interests of, or any other matter concerning, any assets transferred; the absence of any defenses or right of setoff or freedom from counterclaim with respect to any action or other asset of any party; or the legal sufficiency of any conveyance documents. Except as expressly set forth in the Separation and Distribution Agreement or in any ancillary agreement, all assets were transferred on an ‘‘as is,’’ ‘‘where is’’ basis.

Cash Adjustments.Pursuant to the Separation and Distribution Agreement, our Former Parent contributed to us an amount of cash and cash equivalents, so that, as of the distribution, we had, in the aggregate, an amount of cash and cash equivalents of at least $200 million.

 

The Distribution.The Separation and Distribution Agreement governs the rights and obligations of the Parties regarding the distribution and certain actions occurred prior to the distribution, such as the reorganization, the adoption of the amended and restated articles of incorporation and amended and restated by-laws, and the election of officers and directors. Pursuant to this agreement, as consideration for the transfer to us of the assets that related to our businesses, we issued to our Former Parent (i) such number of shares of our common stock requested by our Former Parent in order to effect the distribution and (ii) physical evidence of our indebtedness under the 2017 Notes (the ‘‘Global Note’’). Our Former Parent (i) caused its agent to distribute all issued and outstanding shares of our common stock to our Former Parent’s shareholders as of the record date, and (ii) exchanged the Global Note for physical evidence of our Former Parent’s indebtedness under the Global Note.

Amendment. The Separation and Distribution Agreement can only be amended by a written agreement signed by the Parties.

Release of Claims.The Parties agreed to broad releases under which we each released the other and its wholly-owned subsidiaries and affiliates, and its respective shareholders, directors, officers, agents and employees (in their respective capacities as such) from any and all liabilities existing or arising from any acts or events occurring or failing to occur or any conditions existing at or prior to the distribution. These releases are subject to certain exceptions set forth in the Separation and Distribution Agreement.

Indemnification. The Parties indemnified each other against certain liabilities in connection with the spin-off and our respective businesses and other matters specified in the Separation and Distribution Agreement. The Separation and Distribution Agreement specifies procedures with respect to claims subject to indemnification and related matters.

Insurance. The Separation and Distribution Agreement provides for the allocation between the Parties of rights and obligations under existing insurance policies and sets forth procedures for the administration of insured claims. In addition, the Separation and

Distribution Agreement allocates between the Parties the right to proceeds and obligations to incur certain deductibles under certain insurance policies.

Dispute Resolution. In the event of any dispute arising out of the Separation and Distribution Agreement, the general counsels of the Parties and such other representatives as the Parties designate will negotiate to resolve the dispute. If the parties are unable to resolve the dispute in this manner within 60 days, then at the request of either Party, the dispute will be resolved through binding arbitration.

Other Matters Governed by the Separation and Distribution Agreement. Other matters governed by the Separation and Distribution Agreement include access to financial and other information, confidentiality, access to and provision of records and treatment of outstanding guarantees and similar credit support.

 

Tax Matters Agreement

The Tax Matters Agreement governs the Parties’ respective rights, responsibilities and obligations with respect to taxes, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and assistance and cooperation in respect of tax matters. Under the Tax Matters Agreement, our Former Parent is generally responsible for all U.S. federal and state income taxes incurred through the effective time of the distribution, and the Parties will each generally be responsible for any other taxes attributable to their businesses.

 

Under the Tax Matters Agreement, certain special rules and indemnities would apply in the event the spin-off were not tax-free. We agreed in the Tax Matters Agreement (i) generally not to enter into certain transactions that could cause the spin-off to be taxable, and (ii) to indemnify our Former Parent for any tax liabilities resulting from such a transaction. For example, during the two-year period following the distribution, among other restrictions, we may not, subject to certain exceptions, enter into or authorize: (1) any transaction resulting in an acquisition of our stock or assets beyond certain thresholds; (2) any merger, consolidation or liquidation; (3) any issuances of equity securities beyond certain thresholds; or (4) any repurchases of our common stock beyond certain thresholds. Our indemnification obligations to our Former Parent under the Tax Matters Agreement will not be limited in amount or subject to any cap. In addition, under certain circumstances, if the spin-off becomes taxable to our Former Parent, we may be required to make payments to our Former Parent in respect of any resulting tax benefits to us, if, as and when such benefits are realized.

Our covenants and obligations under the Tax Matters Agreement may discourage, delay or prevent a change of control otherwise considered favorable. Though valid as between the parties, the Tax Matters Agreement is not binding on the IRS.

Employee Matters Agreement

The Parties entered into an Employee Matters Agreement governing the allocation of employees to us and obligations and responsibilities regarding compensation, benefits and labor matters. Under the Employee Matters Agreement, the Parties allocated all employees of our Former Parent and its affiliates immediately before the spin-off among the Parties based upon whether each employee’s employment duties before the spin-off relate to our business or our Former Parent’s business and upon various other factors as applicable.

 

The Employee Matters Agreement provides that, unless otherwise specified, our Former Parent is responsible for liabilities associated with its employees and all former employees of our Former Parent as of the spin-off, and we are responsible for liabilities associated with our employees.

 

The Employee Matters Agreement provides that, in general, our employees will be eligible to participate in our benefit plans that have terms substantially comparable to those of corresponding Former Parent benefit plans, in most cases only to the extent that our applicable employee participated in the corresponding benefit plan immediately prior to the spin-off. In general, we credited each of our employees with his or her service with our Former Parent prior to the spin-off for all purposes under our benefit plans to the same extent that such service was credited by our Former Parent for similar purposes (except for purposes of benefit accrual under a defined benefit pension plan).

 

The Employee Matters Agreement also includes provisions relating to cooperation between the Parties on matters relating to employees and employee benefits and other administrative provisions.

The Employee Matters Agreement also provides for the mechanics for the conversion, adjustment, cancellation or replacement of equity awards granted under Former Parent equity plans. For more information about the treatment of outstanding stock options and unvested equity awards, see the Employee Matters agreement, filed as an exhibit to our periodic reports with the SEC.

Transition Services Agreement

The Parties entered into a Transition Services Agreement, under which each Party will provide the other with certain services to help ensure an orderly transition following the spin-off.

 

The services we expect our Former Parent to provide us include information technology, human resources, finance and financial reporting and other administrative services. The services we expect to provide to our Former Parent include information technology, human resources, finance and financial reporting, tax compliance, facility access and other administrative services. The charge for these services will be intended to allow the relevant Party to recover the direct and indirect costs incurred in providing such services, in a manner generally consistent with past practice. The Transition Services Agreement contains customary mutual indemnification provisions.

 

The Transition Services Agreement generally provides for a term of services starting at the spin-off and continuing for a period of up to twelve months following the spin-off. Other than with respect to certain fixed-term pass-through services, a Party may terminate any transition services it is receiving upon prior notice to the other Party, upon thirty (30) days’ notice. Any extension or renewal of the Transition Services Agreement or the services provided thereunder would require mutual agreement of the Parties.

Trademark License Agreement

Our Former Parent has transferred all its rights to use the SPX logo and trademark to us as well as certain know-how used in the conduct of our business. The Parties entered into a Trademark License Agreement pursuant to which our Former Parent received a royalty-free exclusive license to use certain names, licensees and trademarks in its business. Our Former Parent will have up to 18 months after the distribution date to cease use of the SPX logo in its business. Our Former Parent may continue to use ‘‘SPX’’ in its marketing materials for three years, and will have perpetual license to use the name ‘‘SPX’’ in its corporate name and in the name of its subsidiaries. Our Former Parent will have the right to use a mark that is substantially distinct from the existing SPX mark and logo, as approved by us, for up to 20 years with the right of automatic renewal.

Board Leadership Structure

Our Board has no fixed policy or position on whether the roles of Chairman and Chief Executive should be separate or combined, but rather makes leadership structure decisions in consideration of then‑current circumstances. Currently, Marcus G. Michael is our President and CEO, Christopher J. Kearney is the Chairman of our Board, and Emerson U. Fullwood is our Lead Director. The Lead Director is elected by and from the independent directors and has clearly delineated duties. These duties, as set forth in our Corporate Governance Guidelines, include acting as principal liaison among the independent directors, the Chairman, and the CEO, chairing meetings of independent directors, developing the Board’s agendas in collaboration with the Chairman and the CEO, and reviewing and advising on the quality of the information provided to the Board.

We believe the leadership structure outlined above is best for our company and our stockholders at this time. We believe it is best to have both a Chairman and a Lead Director, given that Mr. Kearney retired from the roles of President and CEO at the end of 2015. We believe there is good communication between management and non‑employee directors, and that our outside directors are able to carry out their oversight responsibilities effectively.

The small size of our Board and the relationship between management and non‑employee directors put each director in a position to influence agendas, flow of information, and other matters.

Board Committees

The Board of Directors met three times during 2015 following our spin-off from SPX Corporation September 26, 2015. The Board of Directors currently has a standing Audit Committee, Compensation Committee and Nominating and Governance Committee. Each current director attended at least 75% of the meetings of the Board of Directors and of the committees on which he or she served in

2015. Each committee has adopted a charter that specifies the composition and responsibilities of the committee. Each committee charter is posted on our website (www.spxflow.com) under the heading Investor Relations—Corporate Governance.

The table below provides current membership and 2015 meeting information following our spin-off from SPX Corporation on September 26, 2015 for each of the Board Committees.

 

Audit Committee

 

Compensation Committee

 

Nominating and Governance Committee

 

 

 

 

 

Director Compensation

Directors who are SPX FLOW employees receive no compensation for their service as directors.

Cash and Equity Compensation

We compensate our non‑employee directors using a combination of cash and equity granted under the SPX FLOW Stock Compensation Plan (the “Stock Compensation Plan”). The Nominating and Governance Committee reviews non‑employee director compensation from time to time. The Committee compares director compensation to our peer companies when reviewing compensation type and structure.

Our directors are compensated as set forth below:

 

Mr. Kearney received no compensation for his service as a director in 2015. Mr. Kearney is no longer an employee of SPX FLOW and, accordingly, began receiving compensation for his service as a director effective January 1, 2016.

We plan to award shares to our non‑employee directors as of the date of our Annual Meeting, which shares will vest the day prior to the following Annual Meeting, subject to the director’s continued service on our Board as of the vesting date. Time‑vested awards are designed to help ensure engaged directors with interests closely aligned with those of our long‑term stockholders.

Unvested shares of our Former Parent’s stock held by our directors vested immediately prior to our spin-off. These shares were initially scheduled to vest on the day prior to our Former Parent’s next annual meeting. We awarded no shares to any non-employee director in 2015.

Any cash dividends paid with respect to shares of unvested restricted stock are deposited in the director’s name in an escrow or similar account maintained by SPX FLOW for that purpose. These dividends are subject to the same time and performance restrictions as the shares of restricted stock to which they relate and are payable only upon vesting of the underlying stock. We do not currently pay dividends.

Other

The SPX FLOW Foundation (the “Foundation”) will make matching donations for qualified charitable contributions for any director up to a total of $20,000 per annum.

Stock Ownership Guidelines

Non‑employee director stock ownership guidelines are three times the annual cash retainer. Each director is requested to attain the desired level of ownership within five years of the date of appointment as a director of our company. Shares held in family trusts and shares held in retirement plan accounts are deemed to be owned shares for purposes of these guidelines. Unexercised stock options and unvested performance-based equity awards are excluded.

Once a director attains the desired level of share ownership, he or she will continue to be in compliance with these guidelines even if the director later falls below the guideline, provided that he or she retains at least 50% of the net shares acquired upon exercise of stock options and at least 50% of the net shares acquired pursuant to vested restricted equity awards until he or she again meets or exceeds the guidelines.

Each director was in compliance with these requirements as of March 1, 2016.

Director Compensation Table

The following table summarizes the compensation of our directors who served during 2015, and includes amounts received in 2015 from SPX Corporation, our former parent. Mr. Kearney, our Chairman, President and CEO for the period, received no compensation in connection with his service as a director and, accordingly, is omitted from this table.

 

 

 

Ownership of Common Stock

Directors and Officers

The following table shows how much of our common stock our current directors, executive officers listed in the Summary Compensation Table, and all officers and directors as a group beneficially owned as of March 15, 2016.

Beneficial ownership is a technical term broadly defined by the SEC to mean more than ownership in the usual sense. In general, beneficial ownership includes any shares a director or officer can vote or transfer and stock options that are exercisable currently or become exercisable within 60 days. The number of our shares beneficially owned by each of the named executive officers and by all directors and officers as a group includes shares held in the SPX FLOW Retirement Savings and Stock Ownership Plan. Except as otherwise noted, the stockholders named in this table have sole voting and investment power for all shares shown as beneficially owned by them.

The percent of SPX FLOW common stock owned is based on 41,539,971 shares outstanding as of March 15, 2016.

*         Less than 1.0%.

(1)      Mr. Kearney indirectly holds 260,219 shares through a revocable trust of which he is the trustee and he and his family members are beneficiaries. In addition, Mr. Kearney is the successor to 100,340 shares through a revocable family trust of which his wife is the sole trustee and the beneficiary. Mr. Kearney also indirectly holds 59,834 shares through a grantor retained annuity trust.

(2)     Mr. Wilson indirectly holds 12,907 shares through an irrevocable trust of which his wife is the trustee and his minor children are the beneficiaries.

Other Principal SPX FLOW Stockholders

Set forth in the table below is information about beneficial owners of more than five percent of the issued and outstanding shares of our common stock. The percent of class held is based on 41,539,971 shares of our common stock outstanding on March 15, 2016.

 

 

 

 

 

Section 16(A) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires that SPX FLOW’s officers, directors and 10% stockholders file reports of ownership and changes of ownership of SPX FLOW common stock with the SEC and the NYSE. Based on a review of copies of these reports provided to us and written representations from officers and directors, we believe that all filing requirements were met.

 

 

Executive Compensation Philosophy

We follow these guiding principles when designing and setting compensation for our NEOs:

Executive Compensation Practices

We tailor compensation to the business and competitive environment because our success depends on our ability to attract and retain experienced and proven leaders and to motivate them to deliver superior results.

The proportion of incentive‑based pay increases along with responsibility and authority. For our senior‑level management, and in particular for our NEOs, a significant majority of direct compensation (salary, bonus, and equity awards) is incentive‑based.

NEO performance is judged primarily by reference to performance of the company as a whole. Additional, subjective, assessments are made, including direct assessments of performance, formal talent assessment reviews, and assessments of adherence to our values. The Committee also reviews tally sheets setting forth total compensation and walk‑away values at least annually. The Committee establishes and approves all elements of compensation for our CEO based on input from and conversations with management and the Committee’s independent compensation advisor, as well as its own assessments.

Role of Management, the Independent Compensation Advisor

The Committee has retained Pearl Meyer directly as its independent compensation advisor. The independent compensation advisor advises on all aspects of executive officer and director compensation. See “Corporate Governance—Compensation Advisor.”

The most significant aspects of management’s role in the compensation‑setting process are as follows:

SPX FLOW Peer Group

The Committee and its outside compensation advisor have set a group of peer companies for our company. The peer group for our new company for fiscal year 2016  consists of 13 manufacturing companies with annual  revenues between $1.4 billion and $4.8 billion, and market capitalizations between $1.4 billion and $7.3 billion. Our revenues in 2015 were $2.39 billion and our market capitalization at December 31, 2015, was $1.16 billion.  

The peer companies were drawn from a pool of potential peer companies (1) suggested by our management, (2) identified in a peer of peer review conducted by Pearl Meyer, and (3) drawn from historical peers of our Former Parent. Companies suggested by management or drawn from historical Former Parent peers were companies management believed were key competitors with the company for senior talent or had businesses or end markets similar to our company.

Peer companies were selected from the pool based on:

Other factors considered in selecting our peer group included international exposure, number of employees, total-shareholder return profile over various periods, and the GICS industry sub-group.

The range of annual revenues for peer group members was determined so that our size measured in annual revenue would be between the 25th percentile and the median of the peer group. Flowserve, the largest company in our peer group, was selected due to its close similarities to our company in business mix and end-markets and our belief that it competes with us for senior talent. All peers are members of the Industrial Machinery GICs sub-group except for (1) Regal Beloit which, though it is in the Electrical Components and Equipment sub-group, has a similar business mix and end markets to our company, and (2) AO Smith, in the Building Products GICs sub-group, which we included to reflect our exposure to large projects.

The following companies comprise our peer group for determining 2016 compensation:

We consider competitive compensation practices by other companies for comparative purposes. We do not target specific benchmark percentiles. The comparative analysis is just one of several tools we use to set compensation. We award compensation considering factors including market forces, company or individual performance, longevity of contribution to the company, existing contractual obligations, and differing levels of responsibility and value created by officers with the same or similar title. For the peer group used to set 2015 compensation, see “—2015 Compensation.”

2016 Compensation

Responsiveness to Stockholders

Over the last several years, our Former Parent discussed executive compensation with a number of its largest stockholders. Following these discussions, our Former Parent made a number of changes to its executive compensation practices. For example, in 2015 our Former Parent added to the equity plan a double trigger for termination payments in the event of certain terminations following a change of control and instituted a minimum one‑year vesting requirement on new equity grants. We expect to initiate our stockholder outreach program this year.

Pay for Performance/Accountability

2015 was a milestone year for our company. We completed our spin-off from our Former Parent, and continued significant restructuring, which we have accelerated in 2016. Our spin-off was designed to provide both companies greater flexibility to focus on and pursue their respective growth strategies, enabling them to create significant value for shareholders, customers, and employees.

Our Compensation Committee has established our executive compensation program as described below.

2016 Compensation Decisions Made in 2015

Equity -- NEOs, including Mr. Michael, received equal amounts of External Metric Grants and Internal Metric Grants. Below we discuss each component of our new equity program, along with our rationale for adopting it.

 

Internal Metric Grants

Internal Metric Grants are designed to qualify for tax-deductible treatment. Internal Metric Grants made in 2016 vest ratably over three years, except that stock granted to retirement-eligible officers, which group does not include our CEO, vests after one year. Retirement-eligible officers have agreed to not sell or impair such vested equity until it would have vested had they not been retirement-eligible or until retirement, if earlier.

Bonus – In 2016 we are setting bonus levels for all our employees, including our NEOs, based on one set of metrics – that of the performance of our company as a whole. Our Former Parent previously awarded bonuses to non-corporate employees based at least partially on the performance of the employee’s segment or business unit. Beginning in 2016, however, we are effecting significant changes in how we operate and how we measure ourselves. Management and the Compensation Committee believe that setting only one set of metrics in 2016 will encourage all our employees to focus on total company performance and effect these changes in the manner best for our company as a whole and our stockholders.

Pension – Our CEO does not participate in our pension plan. Two of our of our currently-serving NEOs continue to participate in the pension plan we replicated based on our Former Parent’s pension plan, as required by the Employee Matters Agreement.

2015 Compensation

Unless otherwise noted, the following section summarizes how our Former Parent’s Compensation Committee made its decisions about compensation for our NEOs. The decisions made prior to the spin-off by the Former Parent’s Compensation Committee are not necessarily reflective of our current business and approach to executive compensation.

 

In 2015, a significant majority of NEO direct compensation (salary, bonus, and equity awards) was incentive-based. Bonuses were based on operating performance, and equity awards were designed to reward increased stock price and aid in retention. Both cash bonuses and equity awards were also designed to align employee interests with those of stockholders. NEOs also received certain perquisites and post-employment benefits.

 

NEO performance was judged primarily by reference to performance of our Former Parent as a whole. Mr. Wilson’s compensation was judged by a blend of total company performance and the performance of his Segment. Additional, subjective, assessments were made, including direct assessments of performance, formal talent assessment reviews, and assessments of adherence to the values of the former organization. The Former Parent’s Compensation Committee reviewed tally sheets setting forth total compensation and walk-away values at least annually. The Former Parent’s Compensation Committee established and approved all elements of compensation for the CEO based on input from and conversations with members of the Former Parent’s management team and its independent compensation advisor (Pearl Meyer), as well as its own assessments.

 

Prior to the spin-off, the role of management and the Former Parent’s Compensation Committee’s outside advisor were the same as we describe above with respect to the similar roles at our company.

 

The Former Parent’s Compensation Committee also considered the competitive compensation practices by other companies for comparative purposes, though it did not target specific benchmark percentiles. These comparative analyses were just one of several tools used to set compensation. Compensation awarded outside the target levels was based on reasons included, but not limited to, market forces, company, business unit, or individual performance, longevity of contribution to the company, existing contractual obligations, and differing levels of responsibility and value created by officers with the same or similar title. The following companies comprised the peer group for determining 2015 compensation prior to the spin-off: Cameron International Corp., Carlisle Companies, Inc., Chicago Bridge & Iron Company N.V., Colfax Corp., Crane Co., Dover Corp., Dresser-Rand Group Inc., Flowserve Corp., FMC Technologies, Inc., Foster Wheeler AG, Ingersoll-Rand Co. Ltd., Jacobs Engineering Group Inc, KBR, Inc., Pall Corp., Parker-Hannifin Corp., Pentair, Ltd., Rockwell Automation, Inc., Roper Industries, Inc., The Babcock & Wilcox Co., and Xylem Inc.

 

Mr. Kearney’s Compensation

 

Mr. Kearney’s total direct compensation (salary, equity, and bonus) declined in 2015. His salary and equity value stayed relatively flat, and his bonus declined by $1.68 million, due to the decline in our company’s performance, largely due to declining oil and dairy end markets.

 

In addition, Mr. Kearney forfeited $2.69 million in value of equity, due to its failure to vest as a result of our stock performance. We believe the combination of lower bonus and forfeited equity worked as intended by our Former Parent’s Compensation Committee, by tying the portion of Mr. Kearney’s compensation over which it had control to company performance.

 

In contrast to the above, Mr. Kearney’s pension value accrual nearly doubled, increasing from $3.59 million to $6.45 million. The 2015 pension value accrual is largely due to an increase in the average pay on which the pension was calculated. As a result, Mr. Kearney’s total compensation reported in the Summary Compensation Table increased.

 

As disclosed above, Mr. Kearney retired at the end of 2015. His compensation was set by our Former Parent’s Compensation Committee. For an understanding of the NEO compensation levels and philosophy of our company, please see the description of our new President and CEO’s compensation.

 

Base Salary

Base salary was designed to offer competitive base income. In setting base salary, the Former Parent’s Compensation Committee considered the salary and total compensation market data in the context of the NEO’s role and responsibilities, experience and tenure, internal equity considerations, individual performance and contribution to company results.

No NEOs other than Messrs. Smeltser and Wilson received salary increases for 2015. Mr. Smeltser received an increase in salary of 3%, in line with the U.S. merit increase budget for all Former Parent employees. Mr. Wilson received a 7.5% increase in connection with his appointment as an officer.

Bonuses

Targets

The Former Parent’s Compensation Committee set target bonus at a percentage of year‑end salary. This percentage increased as the employee’s responsibilities and authority increased to help ensure that those most able to impact company performance had the greatest percentage of their total compensation tied to company performance.

Target bonuses for most NEOs were unchanged for 2015, with targets of 130% of salary for our former CEO, 100% for Mr. Foreman, and 80% for each of Messrs. Smeltser, Kowalski, and Whitted. Mr. Wilson received an increase in his target to 70% in connection with his appointment as an officer.

Awards

Bonuses to our NEOs are paid under the 162(m) Plan (defined later). Provided that the performance metrics under the 162(m) Plan are met, and subject to the maximum payment amount permitted under the 162(m) Plan, our Compensation Committee has provided that annual incentive payments under the 162(m) Plan shall be paid by reference to the metrics under the Executive Bonus Plan (as further described below), the plan under which other executives were paid.

The Executive Bonus Plan paid bonuses ranging from 0% to 200% of target bonus by reference to one or more metrics. The threshold for at least one metric must have been met in order for any bonus to be paid. If only one metric threshold were met, total potential payout was limited to 50% of target bonus.

In anticipation of the spin-off and to keep all corporate Executive Bonus Plan participants focused on executing on the transaction and facilitating a smooth transition following the spin-off, the Former Parent’s Compensation Committee approved spin-related metrics and a minimum payout opportunity under the Executive Bonus Plan of 85%. Target payout opportunity was 125% and the maximum payout opportunity remained capped at 200%.

The metrics selected for the Executive Bonus Plan were Bank EBITDA (Consolidated EBITDA, as defined in our credit facilities) and revenue. These metrics were selected because our Former Parent’s Compensation Committee believed they are transparent and provide certainty of calculation. Further, these metrics aligned with public communications and internal business goals. In 2015, as it did every year since 2005, the Former Parent’s Compensation Committee required improvement over the prior year’s operating margin performance to receive any bonus based on that metric, and an improvement of 50 basis points over the prior year’s operating margin performance (as restated to reflect acquisitions or dispositions) to reach the target bonus.

Target and Maximum Bank EBITDA were, respectively, $390.0 million and $405.0 million. Target and Maximum revenue were, respectively, $2,628.0 million and $2,691.0 million.

Certain items were excluded to eliminate factors beyond the control of employees in the measurement year to focus employees, including NEOs, on controllable operating performance and to eliminate possible disincentives to act in the best interest of stockholders. For example, the disposition of a non‑core business may be expected to have long‑term benefits, but the loss of profits and cash flow from the business may result in lower bonuses in the year in which the business was sold. Accordingly, these numbers are adjusted in the calculation of bonuses.

The Committee exercised negative discretion and approved an 85% payout under the 162(m) Plan by reference to the Executive Bonus Plan. This below-target payout applied to all our current NEOs, with the exception of Mr. Wilson, whose payout was partially based on results specific to end market.

This table shows the total bonuses earned by our NEOs for 2015. Mr. Whitted was not eligible for a bonus, due to his leaving our company prior to the end of 2015. Please see the Summary Compensation Table for additional information.

 

Equity‑Based Awards

The Former Parent’s Compensation Committee designed equity awards to promote long‑term stock ownership and expose senior‑level management to the risks and rewards faced by long‑term stockholders. Because the equity value awarded in 2015 vests ratably over three years, it also has significant employee retention value and continues to tie the interests of NEOs to those of stockholders even after it is awarded. Grants of performance‑based restricted stock are the most significant component of our NEOs’ direct compensation opportunity.

The Former Parent’s Compensation Committee historically awarded performance-based equity awards as part of the Former Parent’s long-term incentive program. For 2015, the Former Parent’s Compensation Committee determined that, if the spin-off were to be completed, setting meaningful performance targets for a company that did not yet exist would be difficult. Instead, the Former Parent Compensation Committee determined that senior executives (including our NEOs) should receive their 2015 awards in the form of stock options and Internal Metric Grants. Stock options were selected because they would only hold value if the stock price of the post-spin company performed well. We believe the one-time grant of options worked as intended. The options have a strike price of $61.29 (as adjusted following the spin-off), and our stock price was $26.53, giving the options little current value. As discussed above, our Compensation Committee granted equal value of Internal Metric and External Metric Shares at the beginning of this year.

The table below shows the long-term incentive awards values granted for 2015 for each of our NEOs:

 

These awards vest ratably over three years, except that stock granted to retirement-eligible officers vested at the time of the spin-off. Retirement-eligible officers agreed to not sell or impair such vested equity until it would have otherwise vested had they not been retirement-eligible or until retirement, if earlier.

No special grants or bonuses were paid to any of the former SPX Corporation executives in connection with the spin-off.

Internal Metric Grants vest based on the same trigger applicable under the 162(m) Plan (as defined later), which is designed to qualify the stock for performance vesting treatment under IRC Section 162(m). In each of 2014 and 2015, the target was met, qualifying each tranche of internal metric stock granted in that year for vesting, subject to the employee being employed at the vesting date.

In 2013, our Former Parent introduced External Metric Grants that became eligible to vest three years after the grant date measuring total shareholder return against the S&P 1500 Industrials Index. The required performance for the three-year period ending December 31, 2015 was not achieved, and the External Metric Grants issued in 2013 were forfeited. 

Equity awards under Former Parent equity plans held by our NEOs were converted to equity awards under our equity plan at the spin-off and equitably adjusted to preserve value pre- and post-spin-off as provided under the Employee Matters Agreement. The Employee Matters Agreement also provides for the mechanics for the conversion, cancellation or replacement of equity awards granted under Former Parent equity plans. For more information about the treatment of outstanding stock options and unvested equity awards, see the Employee Matters Agreement, filed as an exhibit to our periodic reports with the SEC.

In August 2015, in anticipation of the Spin, outstanding grants of performance-based restricted stock units granted in 2013 and 2014 were modified to guarantee vesting in a minimum of 50% of target, to aid in employee retention. Officers were not granted restricted stock units, but Mr. Wilson received performance based restricted stock units before he was an officer and, accordingly, participated in the modification. No other NEO participated in the modification and, accordingly, all their External Metric Shares due to vest at the beginning of 2015 were forfeited.

   

Mr. Wilson was the only NEO to receive an increase in his equity award amount in 2015. His award value increased to $600,000, in connection with his appointment as an officer.

Equity Awards Practices

A full review of executive compensation, including equity awards, was and is conducted at least annually. In each of the last three years, equity awards were reviewed and approved late in the prior year and granted on the first trading day of the award year.

Dividends with respect to any shares of unvested restricted stock are deposited in the NEO’s name in an escrow or similar account maintained by SPX FLOW for that purpose. The NEO receives these dividends only if and when the related shares of equity vest. Dividends are forfeited if the equity on which those dividends were paid is forfeited.

In the event of retirement, termination by SPX FLOW without “cause” or voluntary termination by the executive for “good reason” (each as defined in the applicable award or employment agreements), unvested restricted stock will remain subject to the original performance requirements and vesting schedule (to the extent provided under such agreements).

Our Committee also may make special grants during the course of the year, primarily for new hires, for promotions, to retain valued employees or to reward exceptional performance. These special grants may be subject to performance or time vesting, and are issued on the date of grant or upon a date certain following the grant date, such as the date on which a new hire commences employment.

Other Benefits and Perquisites

We provide perquisites to attract and retain executives in a competitive marketplace, and believe these benefits are generally consistent with market practices of our peer group and other comparable public industrial manufacturing companies. See the Summary Compensation Table and accompanying footnotes for a full listing of benefits and perquisites. We do not provide tax gross‑up payments for perquisites.

In connection with the relocation of our Former Parent’s headquarters to Charlotte, North Carolina in 2002, all our then‑employees who relocated, including Mr. Foreman, were eligible to receive interest‑free, 20‑year relocation loans to finance the purchase of a principal residence. Mr. Foreman received a loan from our Former Parent in the amount of $1.5 million. We have never made any relocation loans to officers.

Our CEO may utilize our aircraft for personal travel for himself and his family. Other NEOs may be permitted personal use of our aircraft for themselves and their families if approved by our CEO. This benefit enhances security for our officers and allows them to devote more time to SPX FLOW business. We report the value of any personal use of our corporate aircraft by NEOs as ordinary taxable income and as compensation in the Summary Compensation Table.

Retirement and Deferred Compensation Plans

The NEOs, other than Mr. Wilson, participate in the SPX FLOW Supplemental Retirement Plan for Top Management (the “TMP”). Prior to the spin-off, some of the NEOs were also participants in the SPX US Pension Plan (the “USPP”) and the SPX Corporation Supplemental Individual Account Retirement Plan (the “SIARP”).

Accruals under both the USPP and SIARP were frozen prior to the spin-off, and our Former Parent remained the sponsor of both plans following the spin-off.

The TMP has been the most significant element of the executive retirement program and, prior to our replicating it as required by the Employee Matters Agreement, was in place with our Former Parent since October 22, 1985. Messrs. Kearney and Foreman have credited service in the TMP since 1997 and 1999, respectively. In each of 2005 and 2009, in response to changing market conditions

relating to retirement practices, our Former Parent reduced benefits provided by the TMP for new participants. Changes in 2005 included a reduced benefit, longer accrual period, higher early retirement age and reduction factor, and a 50% survivorship benefit. Changes in 2009 included a longer accrual period than required for earlier participants and required five years of service as an officer before vesting. The Summary Compensation Table and the Pension Benefits table and their accompanying footnotes, provide further information concerning the annual increase in benefit value, accrued benefits and other terms of the TMP, USPP and SIARP. Retirement benefits payable upon an NEO’s termination of employment are quantified and described in “Potential Payments Upon Termination or Change‑in‑Control.”

NEOs and other senior‑level management are eligible to participate in the SPX FLOW Retirement Savings Plan (the “401(k) Plan”) and the SPX FLOW Supplemental Retirement Savings Plan (the “SRSP”), a non‑qualified deferred compensation plan that permits voluntary deferrals of base salary and annual bonuses in excess of those permitted under the 401(k) Plan. See the Nonqualified Deferred Compensation in 2015 table and accompanying narrative and footnotes for more information regarding these plans.

Termination and Change‑in‑Control Provisions

We design termination and change‑in‑control contractual provisions to be competitive at the time we enter into an agreement. As a result, our agreements have changed over time, with newer agreements generally offering reduced payments and increased vesting obligations.

Our severance arrangements are designed to protect stockholder interests by stabilizing management during periods of uncertainty. Severance arrangements have unique characteristics and value. For example, it may be necessary to offer severance agreements to prospective executives who forego significant bonuses and equity awards at the companies they are leaving or who face relocation expenses and family disruption in order to accept employment with us. Generally, executives are more willing to accept these risks and costs if they are protected in the event their employment is terminated due to unanticipated changes, including a change in control. Additionally, executives often assign significant value to severance agreements because they provide compensation for lost professional opportunities in the event of a change in control.

Severance agreements also can be a powerful tool to discourage entrenchment of management, in that severance agreements can offset the risk of financial and professional loss that management may face when recommending a sale to or merger with another company. Our severance arrangements are structured to serve the above functions, which differ, and are perceived by recipients to differ, from pay for performance. Accordingly, decisions relating to other elements of compensation have minimal effect on decisions relating to existing severance agreements.

In the case of certain terminations following a change in control, the NEOs become immediately vested in all previously granted unvested SPX FLOW restricted stock, including shares subject to performance vesting at the target level of vesting. This feature is designed to be equitable in the event of dismissal without cause or resignation for good reason, and we believe it is appropriate in the event of termination following a change in control. Additionally, other benefits may be paid in the event the executive is terminated  following a change in control (sometimes called a “double trigger”).

Termination and change‑in‑control agreements are further discussed and quantified in “Potential Payments Upon Termination or Change‑in‑Control.”

Stock Ownership Guidelines

We maintain stock ownership guidelines to emphasize the importance of substantive, long‑term share ownership by senior executives to align their financial interests with those of stockholders. The guidelines are:

Shares held in family trusts and shares held in retirement plan accounts are deemed to be owned shares for purposes of these guidelines. Unvested performance‑based equity awards are excluded. Officers are asked to attain the desired level of stock ownership within five years of becoming an officer.

Once an NEO attains the desired level of share ownership, he or she will continue to be compliant with these guidelines even if the NEO later falls below the guideline, provided that the NEO retains at least 50% of the net shares acquired upon exercise of stock

options and at least 50% of the net shares acquired pursuant to vested restricted equity awards and vested restricted stock unit grants until he or she again meets or exceeds the guidelines.

Each NEO was in compliance with these requirements as of March 1, 2016.

Policy on Hedging

No SPX FLOW employee may trade in derivative securities relating to SPX FLOW securities, such as put and call options or forward transactions.

Tax Matters

We seek to structure executive compensation in a tax efficient manner, and review compensation plans in light of applicable tax provisions, including Section 162(m) of the Internal Revenue Code. To maintain flexibility in structuring executive compensation to achieve its goals and compensation philosophy, the Committee has not adopted a policy requiring all compensation to be tax-deductible. We structure our executive officer bonuses to be tax-deductible, and therefore a separate plan, the Executive Annual Bonus Plan (the “162(m) Plan”) determines whether each NEO qualifies for the payment of bonuses described above, and sets a cap on the amount of bonus that may be awarded and treated as tax‑deductible. The Committee may set the amounts payable under the 162(m) Plan (subject to the maximum amount permitted under the 162(m) Plan and applicable performance metrics being met). While the Committee can exercise its discretion to reduce any bonus payable under the 162(m) Plan, the Committee does not have discretion to increase the bonus payable under the 162(m) Plan.

Internal Metric Grants vest based on the same trigger as under the 162(m) Plan. In 2015, the 162(m) Plan performance goal was met.

Impact on Compensation from Misconduct—Clawbacks

If the Board of Directors were to determine that an NEO had engaged in fraudulent or intentional misconduct, it would take action to remedy the misconduct and impose appropriate discipline. Discipline would vary based on the facts and circumstances, but may include termination of employment or other appropriate actions.

We retroactively adjust compensation in the event of a restatement of financial or other performance results to the extent required by the Sarbanes‑Oxley Act of 2002. The 162(m) Plan, provides for repayment or forfeiture of awards under specified circumstances if the company, as a result of misconduct, is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws. Any awards earned or accrued during the twelve‑month period following the first public issuance or filing with the SEC (whichever first occurred) of the financial document that failed to materially comply with a financial reporting requirement must be paid back to the company. To the extent that the affected award was deferred under a nonqualified deferred compensation plan maintained by the company rather than paid to the executive officer, the deferred amount (and any earnings from it) must be forfeited. Our equity award agreements provide that awards are subject to any compensation recovery policy adopted by us, as amended from time to time.

Notes

The discussion of performance targets in Compensation Discussion and Analysis is exclusively in the context of executive compensation, and you should not use these targets for any other purpose, or regard them as an indication of management’s expectations of future results.

References to “bonuses” are to performance‑based payments as reflected in the Non‑Equity Incentive Plan Compensation column of the Summary Compensation Table.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the SPX FLOW Board of Directors comprises three directors. Each of the Compensation Committee members is independent, as defined under SEC rules and the listing standards of the NYSE. Additionally, each member of the Compensation Committee is an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code. The Compensation Committee reviews SPX FLOW’s “Compensation Discussion and Analysis” on behalf of the Board of Directors.

The Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” with management, and based on the review and discussions, the Compensation Committee recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement and SPX FLOW’s Annual Report on Form 10‑K for the year ended December 31, 2015.

 

SUMMARY COMPENSATION TABLE FOR 2015

This table summarizes the compensation for the named executive officers in 2015. The “named executive officers” are our Chief Executive Officer, our Chief Financial Officer, and our next three most highly compensated officers who were serving as officers as of December 31, 2015, as well as J. Michael Whitted, who would have appeared as a named executive officer had he been serving as an officer as of December 31, 2015. Compensation in this and following tables includes amounts received from SPX Corporation prior to our spin-off in 2015. References to benefit plan amounts in this and the following tables include amounts under the corresponding SPX Corporation plans prior to our spin-off.