January 1, 2007
Purpose: Ownership Guidelines are intended to align Company executives and shareholders interests through shared financial and market risk. The guidelines provide assurance to the investment community that Curtiss-Wright's executive management has significant personal wealth tied to the performance of the Company.
Affected Employees: All Officers and any senior executive participating in (receiving) Performance Share (PSP) grants or other form of restricted stock under the Corporation's Long Term Incentive Plan.
Requirements: Consistent with guidance from our independent executive compensation consultant and to reflect competitive practice, the following stock ownership guidelines are endorsed and approved by the Executive Compensation Committee (ECC) and the Board of Directors for appropriate Company executives:
CEOFive times annual base salary
All other OfficersThree times annual base salary
Tier II (Operational direct reports to Group President)Two times annual base salary
Tier III (All other participants)One times annual base salary
Ownership timeframe: Consistent with industry practice, and in consideration of the level of at-risk level of compensation, affected individuals receiving equity-based LTI grants are required to hold 50% of all earned/awarded time-based Restricted Stock and Performance-Based Shares until the Ownership Guidelines are fully met. In addition, any exercised (post 2005 grants) Stock Options are also subject to the ownership guidelines and 50% of the net proceeds of an option exercise (market value of shares exercised minus costs of the exercise) must be retained in Company stock. Given the variability of performance-based shares and Options, there is no fixed timeframe to achieve the Guideline. Once the guidelines are fully met and maintained, the holding limits are removed on any and all shares above the guidelines. Shares held outside the Company's LTI Plan are not subject to any similar holding restrictions but would count toward the total amount of equity held. If an Officer leaves the Company for any reason, the Ownership Guidelines immediately lapse on earned shares.
Evaluation Period: Holdings are analyzed annually, beginning with the first vesting period affected by these guidelines, in advance of Fall LTI grants and awards and using then-current base salary. This is then reported to the ECC. Current market value (at the point in time that the ownership level is evaluated) is used rather than paid-in value, consistent with prevailing industry practice per the guidance of our outside executive compensation consultants. For example, if an employee who has not met the Ownership Guidelines earns 1,000 shares of restricted stock and, on the day they are earned, the shares are worth $100, then 50% of the earned grant that is mandatory to the holding obligation is credited to the executive's ownership requirements at $50,000 (1,000 shares x $100 x 50%). If the market value of the shares increases to $65 a share at the next evaluation point, the executive is credited with the increased value of the shares, $65,000. Conversely, if the share value drops to $45, and the value drops to $45,000, additional shares would be required to be held to equal the original value.
Ownership Value All shares in the possession of the executive at the point of disclosure are considered in the evaluation of holding requirements. While only Company-source equity is actually restricted until holding requirements are met, all shares, both Company source and individually owned are used to consider holding levels. In the case of vested, unexercised, in-the-money Options, the in-the-money value of the options would be included in the ownership calculation.