2014 Regal-Beloit Proxy

What long‐term incentives were provided to NEOs in 2014? In 2014, as in 2013, the Committee granted stock appreciation rights, or “SARs,” restricted stock units, or “RSUs,” and performance share units, or “PSUs.” The proportion of overall long‐term incentive target value represented by each form of award also remained the same, consisting of 40% SARs, 40% RSUs and 20% PSUs. The Committee granted SARs, RSUs and PSUs to each of our NEOs in 2014 in the amounts indicated in the “Grants of Plan‐Based Awards Table for Fiscal 2014” and the narrative following the table. We value SARs using a Black‐Scholes formula and PSUs using a Monte Carlo methodology. Consistent with our overall compensation philosophy, the Committee, after consultation with Towers Watson, granted long‐term compensation awards in 2014 at levels approximating the median level of these awards granted by the companies in our peer group. The target long‐term incentive levels set by the Committee did not affect decisions regarding other compensation elements.

Award Type

Description

Other

Vesting Period

The right to receive stock in an amount equal to the

The base price per share of all of the SARs is equal to the closing market price of our common stock on the date of grant so that SARs will have value only if the market price of our common stock increases after the grant date. The Committee granted SARs rather than stock options because it views SARs as less dilutive to our shareholders. In addition to providing competitive compensation and an incentive to create shareholder value, these awards are intended to align management and shareholder interests as well as provide a retention incentive for the executive to remain employed by our company. The 2014 grants have a three‐year performance period and will be earned or forfeited based on a performance metric of total shareholder return, or TSR, relative to our peer group over our fiscal years 2014‐2017.

Five years (40% on the second anniversary of the grant date and 20% on each of the third, fourth and fifth anniversaries of the grant date)

SARs

appreciation in value of a share of stock over the base price per share.

The right to have us issue a share of our

Cliff vest on the third anniversary of the grant date

RSUs

common stock upon the vesting date specified in the award, if the participant is still employed by us at the time of vesting. The right to have us issue a share of our common stock upon achievement of the performance conditions specified in the award

For TSR at or below the 25 th percentile of the peer group, no PSUs will be earned. For TSR at the 50 th percentile of the peer group, the target number of PSUs will be earned. For TSR at the 75 th percentile of the peer group, the maximum number of PSUs (which is 200% of the target PSUs) will be earned. For performance between the 50 th and 75 th percentile, the number of PSUs earned is interpolated between target and maximum

PSUs

In 2014, the Committee decided to modify the performance goal related to half of the PSUs to be granted in 2015. In contrast to the PSUs granted in 2014, the 2015 PSUs will have two performance metrics, TSR and adjusted operating profit margin rate. In the aggregate, the 2015 PSUs continue to represent 20% of the overall long‐term incentive target value, with half of the 2015 PSUs being subject

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