Measure (weighting)		Target Goal				Threshold Goal				Threshold Payment				Maximum Goal				Maximum Payment
Sales (as adjusted) (15%)(1)		$592.7 million				$558.2 million					65	%		$652.0 million					250	%
EBITDA (as adjusted) (30%)		$100.4 million				$89.3 million					65	%		$119.3 million					250	%
Working Capital Turns (as adjusted) (25%)			5.2				4.8				20	%			5.7				200	%

_______________________

 

(1)	For both Mr. Roller’s and Dr. Matros’s 2009 annual bonus, company-wide sales represented 10% of the potential bonus.

 

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We do not disclose the specific sales (as adjusted), EBITDA (as adjusted) and working capital turns (as adjusted) targets applicable to the business units overseen by Mr. Roller and Dr. Matros as they are highly confidential to our business. We believe that disclosure of these targets would be competitively harmful to us, as it would provide our competitors with strategic information specific to our regional operations, thus providing our competitors in these regions insight into our plans and projections for the region. The actual achievement of the financial performance targets for fiscal 2009 for Mr. Roller and Dr. Matros was as follows:

 

Mr. Roller		Dr. Matros
·    91% of the sales (as adjusted) target;		·    83% of the sales (as adjusted) target;
·    97% of the EBITDA (as adjusted) target; and		·    66% of the EBITDA (as adjusted) target; and
·    89% of working capital turns (as adjusted)  target.		·    73% of working capital turns (as adjusted) target.

 

Dr. Matros did not meet his threshold goals necessary to achieve the minimum bonus payouts for these metrics.  Mr. Roller achieved his threshold goal for EBITDA but did not meet his threshold goals for sales or working capital turns.

 

For each of the named executive officers other than Mr. Roller and Dr. Matros, results for 2009, which did not meet the threshold goals necessary to achieve the minimum bonus payouts for these metrics, were as follows:

 

·

$523.8 million in sales (as adjusted) (88% of target);

 

·

$80.5 million in EBITDA (as adjusted) (80% of target); and

 

·

4.0  in working capital turns (as adjusted) (78% of target).

 

Individual Performance Objectives.  As stated above, 30% of each named executive officer’s annual bonus (or 25%, with respect to Mr. Roller and Dr. Matros) was determined by achievement of Board-approved individual performance objectives. Individual performance objectives were included as part of the annual cash bonus plan to ensure that more targeted, non-financial company objectives over which the executive has primary control are factored in as part of the individual’s total annual bonus for the year. We do not view these individual performance objectives as material to an understanding of this portion of our annual bonus plan as there are several individual objectives established for each named executive officer and, individually, no one factor materially affects the total potential amount of the bonus award.

 

The actual bonus award paid to each named executive officer under the Annual Incentive Plan in 2009 is disclosed in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table below.

 

Long-Term Incentives.  As noted above, the goal of the long-term incentive plan component of our executive compensation program is to align the rewards of executives with the interests of shareholders by encouraging long-term improvement in operational and financial performance and increase in shareholder value.

 

2008 Omnibus Incentive Plan.  On March 13, 2009, the Compensation Committee granted stock options and performance-based restricted stock units under the 2008 Omnibus Incentive Plan to each of the named executive officers with a targeted aggregate value as follows:

 

		Stock Options				Performance-based Restricted Stock Units				Targeted Aggregate Value  ($)
Mr. Young			151,210				60,484				900,000
Mr. Faison			46,203				18,482				275,000
Mr. O’Brien			33,603				13,441				200,000
Mr. Roller			33,603				13,441				200,000
Dr. Matros			33,603				13,441				200,000

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The Compensation Committee determined these awards by first determining a targeted aggregate value, as set forth above, using its collective experience and business judgment after also considering the competitive review data provided by Watson Wyatt.  These values do not represent what the fair value of these awards actually were at the time of grant, which is calculated pursuant to FASB ASC Topic 718. Each named executive officer then received 50% of his award in the form of stock options and 50% of the award in the form of performance-based restricted stock units in accordance with a formula approved by our Compensation Committee.  For stock options, the actual number of stock options granted to each executive was determined by dividing 50% of the value above (for example, for Mr. Young, $450,000) by 40% of the closing price per share of our common stock on the grant date. Forty percent was determined to approximate the value of the award based on the Black Scholes option-pricing model. While this formula determines the number of options that were subject to the executive’s option grant, in each case the exercise price for the stock option equals 100% of the closing price per share of our common stock on the grant date. For the performance-based restricted stock units, the actual number of restricted stock units granted to each executive was determined by dividing 50% of the value above (for example, for Mr. Young, $450,000) by the closing price per share of our common stock on the grant date.

 

To reinforce retention objectives, the options vest in equal installments over a three year period, contingent upon continued service.  In addition, any performance shares earned upon conclusion of the performance period will vest in two equal installments on the fourth and fifth anniversaries of the grant date.  The performance-based restricted stock units awarded in 2009 would be earned, if at all, based on our adjusted earnings per share for fiscal 2009.  These adjusted earnings per share targets for fiscal year 2009 were set at a range from $1.22 to $1.08, with a sliding scale of vesting for achievement in this range from a maximum of 100% vesting at the $1.22 target to the lowest potential vesting level of 65% at the $1.08 target. If an adjusted earnings per share target of $1.08 was not achieved, no performance-based restricted stock units would be earned.

The Compensation Committee chose adjusted earnings per share as the performance metric due to its belief that earnings per share growth represents a strong indicator of growth in shareholder value.  Adjusted earnings per share is measured for this purpose by excluding from earnings per share the after tax impact of asbestos liability and defense costs, asbestos coverage litigation expense, discontinued operations, the cumulative effect of accounting changes, restructuring costs, asset and goodwill impairment, legacy legal adjustments, costs related to unsuccessful acquisitions and early extinguishment of debt costs.  Based on our actual adjusted earnings per share result for 2009, no performance-based restricted stock units were earned for these awards.

Additional information concerning these awards are included in the “Stock Awards” and “Option Awards” columns of the Summary Compensation Table and the Grants of Plan Based Awards Table below.

 

Employment Agreements.  The Company is a party to employment agreements with all of our executive officers, including our named executive officers. The employment agreements, except with respect to Mr. Kiefaber and Dr. Matros (each as described below), are substantially the same, other than the modification of each officer’s title (as set forth in the Summary Compensation Table below), base salary amounts and Annual Incentive Plan participation. The material terms of the employment agreements, except for Mr. Kiefaber, are summarized under “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” below.

 

With respect to the benefits payable to each executive upon a change in control of Colfax, the benefits are only paid upon a “double trigger,” meaning a change in control event must occur and the executive must either be terminated without cause by Colfax (or its successor) or the executive must resign for good reason. In entering into these arrangements, we wanted to have the continued dedication of these executive officers, notwithstanding the possibility of a change in control, and to retain such officer in our employ after any such transaction. We believe that, should the possibility of a change in control arise, Colfax should be able to receive and rely upon our officers’ advice as to the best interests of the Company and without the concern that such officer might be distracted by the personal uncertainties and risks created by a potential change in control. In the event, however, that such officer is actually terminated during the period beginning three months prior to a change in control event or within a certain period of time following the change in control (or prior to the end of the term of the applicable employment agreement should the change of control not be consummated), which termination may be out of their control (i.e., by the successor company or management), we believe that the officers should be compensated for their efforts in positioning Colfax for the possibility of an acquisition event.

 

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On December 15, 2008 we entered into amendments of these agreements we believed appropriate to reflect guidance on the application of Section 162(m) of the Internal Revenue Code.  These amendments took effect on January 1, 2010 and require that any bonus payment paid in conjunction with the termination of a named executive officer will be based upon the performance of the Company as stipulated in the Company’s Annual Incentive Plan.

 

Retirement Benefits.  Through the Colfax Corporation Excess Benefit Plan, we provide our executive officers, including our named executive officers, with the opportunity to defer a percentage of their compensation without regard to the compensation limits imposed by the Internal Revenue Code for our 401(k) plan. We established the Excess Benefit Plan to allow our senior-level executives to contribute toward retirement on a tax-effective basis in a manner that is consistent with other Colfax employees who are not limited by the Internal Revenue Code limits.

 

In addition, our named executive officers are participants in the Retirement Plan for Salaried U.S. Employees of Imo Industries, Inc. and Affiliates, a plan that was acquired by us in connection with our acquisition of Imo Industries in August 1997 and was subsequently frozen to new participants and benefit accruals in January 1999.

 

For additional details concerning the Excess Benefit Plan and Retirement Plan for Salaried U.S. Employees, please see the Non-Qualified Deferred Compensation Table and the Pension Benefits Table and accompanying narrative disclosure below.

 

Effect of Accounting and Tax Treatment on Compensation Decisions

 

Section 162(m) of the Internal Revenue Code imposes a limit on the amount of compensation that we may deduct in any one year with respect to certain “covered employees,” unless certain specific and detailed criteria are satisfied. Performance-based compensation, as defined in the Internal Revenue Code, is fully deductible if the programs are approved by stockholders and meet other requirements. We believe that future grants of awards under our 2008 Omnibus Incentive Plan will qualify as performance-based for purposes of satisfying the conditions of Section 162(m), thus permitting us to receive a federal income tax deduction in connection with such awards. Also, any bonuses awarded pursuant to our Annual Incentive Plan will qualify as “performance-based” for the purposes of Section 162(m).  However, as part of our current compensation objectives, we seek to maintain flexibility in compensating our executives, as discussed above and, as a result, the Board has not adopted a policy requiring that all compensation be deductible. Our Compensation Committee assesses the impact of Section 162(m) on our compensation practices and determines what further action, if any, is appropriate.

 

Events Occurring Subsequent to the End of 2009

 

Employment Arrangements with Mr. Kiefaber.  On January 9, 2010, the Company, upon the approval of our Board with Mr. Kiefaber abstaining, entered into an employment agreement with Mr. Kiefaber (the “CEO Employment Agreement”). Under the CEO Employment Agreement, Mr. Kiefaber’s employment with the Company may be terminated for any reason by either party upon 60 days notice. The Company may accelerate the termination date under the Employment Agreement so long as payment is made to Mr. Kiefaber of the base salary amount that would have been owed for the full notice period.  The base salary of Mr. Kiefaber is set under the Employment Agreement at $525,000 and may not be reduced below the amount previously in effect without his written agreement. In addition, Mr. Kiefaber is entitled to participate in our Annual Incentive Plan in a target amount equal to 75% of his base salary then in effect. Mr. Kiefaber also received a $50,000 signing bonus.

 

Further, in connection with Mr. Kiefaber’s appointment, our Board approved a grant to him of 102,124 stock options and 40,850 performance restricted stock units, effective on January 11, 2010 (the “Grant Date”)  pursuant to the terms of the 2008 Omnibus Incentive Plan. The stock options vest in three equal annual installments beginning with the first anniversary of their grant (subject to Mr. Kiefaber’s continued employment with the Company on each such anniversary) and have a per share exercise price equal to the closing price of the Company’s common stock on grant date. The performance restricted stock units will be earned if the Company has cumulative adjusted earnings per share (defined as consolidated total diluted earnings per share from continuing operations, adjusted to exclude any amounts that are generally required to be reported separately under U.S. GAAP as extraordinary items and changes in accounting method, as reported in the Company’s audited financial statements and also excludes amounts reported in the Company’s audited financial statements as provision for income taxes occurring after grant date) equal to at least 110% of the adjusted earnings per share for the 2009 fiscal year for any four consecutive fiscal quarters beginning with the first fiscal quarter of 2010 and ending with the last fiscal quarter of 2013, and, if earned, will vest in two equal installments upon the fourth and fifth anniversaries of the Grant Date, subject to Mr. Kiefaber’s continued employment with the Company on each vesting date.

 

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Separation Agreement with Mr. Young.  In connection with Mr. Young’s resignation, we entered into a separation agreement (the “Separation Agreement”) with him on January 9, 2010, which modified the terms of the employment agreement between Mr. Young and the Company dated April 29, 2008, as amended effective as of January 1, 2010.

 

The Separation Agreement provided that Mr. Young received a one-time cash payment of $1,265,842 and will be entitled to receive an additional $300,000 following certain events but in no event later than March 15, 2011. In addition, vesting accelerated in full for (i) 25,000 performance-based restricted stock units held by Mr. Young for which the performance measures associated with such awards had been certified as met by the Compensation Committee on August 25, 2009 but remained subject to an additional service based vesting period, (ii) 20,833 stock options granted to Mr. Young on May 7, 2008 that would have otherwise vested on May 7, 2010, (iii) 50,403 stock options granted to Mr. Young on March 13, 2009 that would have otherwise vested on March 13, 2010, and (iv) 50,403 stock options granted to Mr. Young on March 13, 2009 that would have otherwise vested on March 13, 2011. The term for exercise of these accelerated stock options, as well as 20,834 vested stock options granted in 2008, were amended so that they will remain exercisable until March 31, 2012. In addition, 49,933 shares of Colfax common stock granted to Mr. Young on May 7, 2008 that remained subject to delayed delivery as of the date of his resignation were delivered in full to Mr. Young.

 

 

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COMPENSATION COMMITTEE REPORT

 

The Compensation Committee participated in the preparation of the Compensation Discussion and Analysis, reviewing successive drafts and discussing the drafts with management. Based on its review and discussions with management, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s 2010 Proxy Statement and in the Company’s Annual Report on Form 10-K for 2009 by reference to the Proxy Statement.

 

Compensation Committee of the Board of Directors

 

Rhonda L. Jordan, Compensation Committee Chair

Thomas S. Gayner

Rajiv Vinnakota

 

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EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

Name and Principal Position		Year		Salary  ($)				Stock  Awards ($)(1)				Option Awards ($)(2)				Non-Equity Incentive Plan Compensation ($)(3)				Change in  Pension Value and Nonqualified Deferred Compensation Earnings ($)(4)				All Other Compensation ($)(5)				Total ($)
John A. Young		2009			565,500				450,000				338,710				—				1,881				62,400				1,418,491
President and Chief		2008			560,950				450,000				360,625				5,328,173				484				431,809				7,132,041
Executive Officer		2007			375,000				—				—				326,250				736				59,307				761,293
G. Scott Faison		2009			290,460				137,505				103,495				43,569				1,459				29,402				605,890
Senior Vice President,		2008			278,500				137,502				110,190				2,597,942				426				215,069				3,339,629
Finance and Chief		2007			214,000				—				—				121,552				590				33,158				369,300
Financial Officer
William E. Roller		2009			255,183				100,000				75,271				53,971				—				27,439				511,864
Senior Vice President, General Manager—		2008			244,250				100,000				80,140				2,975,868				—				278,201				3,678,459
Americas
Thomas M. O’Brien		2009			276,946				100,000				75,271				33,649				22,296				28,526				536,688
Senior Vice President,		2008			265,380				100,000				80,140				2,264,633				54,840				208,270				2,973,263
General Counsel and Secretary		2007			247,000				—				—				140,296				22,213				37,169				446,678
Dr. Michael Matros		2009			280,005	(6)			100,000				75,271				29,655				2,643				32,109				519,683
Senior Vice President,		2008			279,106				100,000				80,140				1,275,582				6,976				32,296				1,774,100
General Manager— Allweiler		2007			272,477				—				—				138,283				624				28,276				439,660

 

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(1)

Amounts represent the aggregate grant date fair value of grants made to each named executive officer, as computed in accordance with FASB ASC Topic 718.  Amounts include the probable grant date fair values on the date of grant for awards of performance-based restricted stock units, which equaled the maximum grant date fair value for these awards.  Since the performance criteria for the 2009 stock award grants was not met, no shares will be issued pursuant to these awards for 2009 and their actual value is zero.

 

Amounts for 2008 also include awards of common stock made pursuant to our 2001 Employee Appreciation Rights Plan (the “2001 Plan”).

 

(2)	Amounts represent the aggregate grant date fair value of grants made to each named executive officer, as computed in accordance with FASB ASC Topic 718.

 

(3)	For 2009, amounts represent the payouts pursuant to our Annual Incentive Plan.

 

For a discussion of the performance metrics on which the Annual Incentive Plan was based, including the weighting for each performance metric and the actual percentage achievement of the financial performance targets, see the Compensation Discussion and Analysis above. To determine the actual bonus paid to each named executive officer, the actual financial performance was multiplied by each named executive officer’s 2009 target bonus and the corresponding weighting for the measure. For fiscal 2009, each named executive officer’s target bonus, expressed as a percentage of base salary, was as follows:

 

 

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·	Mr. Young:	75%
·	Mr. Faison:	50%
·	Mr. Roller:	45%
·	Mr. O’Brien:	45%
·	Dr. Matros:	45%

 

For Dr. Matros, amount represents €20,700 or $29,665 in U.S. dollars, calculated based on the conversion rate in effect on December 31, 2009.

 

For 2008, amounts represent payouts pursuant to (i) our 2008 Management Incentive Bonus Plan and (ii) the 2001 Plan and our 2006 Executive Stock Rights Plan that were paid upon the consummation of our initial public offering.

 

For 2007, amounts represent payouts pursuant to our 2007 Management Incentive Bonus Plan.

 

(4)

Amounts represent solely the aggregate change in the actuarial present value of the named executive officer’s accumulated benefit under the respective pension benefit plan from the pension plan measurement date used for financial statement reporting purposes in fiscal 2008 as compared to fiscal 2009.

 

(5)	Amounts set forth in this column for 2009 consist of the following:

 

Name		Supplemental Long-Term Disability Premiums ($)				Company Car  ($)(1)				Company 401(k)/Deferred Compensation Plan Match and Contribution ($)(2)				Accident Insurance ($)(3)
Mr. Young			2,260				—				60,140				—
Mr. Faison			2,838				—				26,564				—
Mr. Roller			2,089				—				25,350				—
Mr. O’Brien			4,287				—				24,239				—
Dr. Matros			5,133				16,801				10,028				147

 

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(1)

Amount represents the annual cost of a car lease, including insurance, maintenance and gas in the amount of €11,728 or $16,801 in U.S. dollars, calculated based on the conversion rate in effect on December 31, 2009.

 

(2)

For each named executive officer other than Dr. Matros, amounts represent the aggregate company match and company contribution made by Colfax during 2009 to such officer’s 401(k) plan account and Excess Benefit Plan (nonqualified deferred compensation) account. See the Nonqualified Deferred Compensation Table and accompanying narrative below for additional information on the Excess Benefit Plan. For Dr. Matros, the amount represents the contribution made by Allweiler AG during 2009 pursuant to a Joint Support Fund Agreement between Allweiler AG and Dr. Matros. The “joint support fund” is similar to a U.S. defined contribution, or 401(k), plan. The aggregate amount required to be contributed to Dr. Matros’ account by Allweiler AG during 2009 was €7,000, or $10,028 in U.S. dollars, calculated based on the conversion rate in effect on December 31, 2009.

 

(3)

Amount represents €102, or $147 in U.S. dollars, calculated based on the conversion rate in effect on December 31, 2009. For additional information on this benefit, see “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—Dr. Matros’ Service Contract” and “Potential Payments upon Termination or Change in Control” below.

 

(6)

For Dr. Matros, amount represents €195,452 or $280,005 in U.S. dollars, calculated based on the conversion rate in effect on December 31, 2009.

 

 

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Grants of Plan-Based Awards

 

The following table sets forth information with respect to grants of plan-based awards to our named executive officers during 2009:

 

								Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1)												Estimated Future Payouts Under Equity Incentive Plan Awards (2)												All Other Option Awards: Number of Securities Underlying				Exercise or Base Price of				Grant Date Fair Value of Stock and Option
Name		Award Type		Grant Date				Threshold ($)				Target ($)				Maximum ($)				Threshold (#)				Target (#)				Maximum (#)				Options (#)(3)				Option Awards ($/Sh)				Awards ($)(4)
John A. Young		Bonus Plan			—				157,987				424,125				880,059
		Performance Restricted Stock Units		3/13/2009																	—				60,484				—												450,000
		Stock Options		3/13/2009																													151,210				7.44				338,710
G. Scott Faison		Bonus Plan			—				54,098				145,230				301,352
		Performance Restricted Stock Units		3/13/2009																	—				18,482				—												137,505
		Stock Options		3/13/2009																													46,203				7.44				103,495
William E. Roller		Bonus Plan			—				45,933				114,832				244,019
		Performance Restricted Stock Units		3/13/2009																	—				13,441				—												100,000
		Stock Options		3/13/2009																													33,603				7.44				75,271
Thomas M. O’Brien		Bonus Plan			—				46,423				124,626				258,598
		Performance Restricted Stock Units		3/13/2009																	—				13,441				—												100,000
		Stock Options		3/13/2009																													33,603				7.44				75,271
Dr. Michael Matros		Bonus Plan			—				51,575				128,937				273,990
		Performance Restricted Stock Units		3/13/2009																	—				13,441				—												100,000
		Stock Options		3/13/2009																													33,603				7.44				75,271

 

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(1)

Amounts represent the possible payouts under our Annual Incentive Plan. For a discussion of the performance metrics and actual results and payouts under the plan for fiscal 2009, see the Compensation Discussion and Analysis and the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above, respectively.

 

(2)

Amounts represent potential shares issued under performance share awards.  The performance-based restricted stock units may have been earned at the end of the one-year performance period upon certification by the Compensation Committee that the performance metric had been met and would have been subject to an additional two-year service based vesting period, pursuant to which vesting would occur in equal amounts on the fourth and fifth anniversaries of the grant date.  The performance metric was not met for 2009 and no shares will be issued pursuant to these awards.  For further discussion of these awards, see “Long-Term Incentives— 2008 Omnibus Incentive Plan” in the Compensation Discussion and Analysis.

 

(3)	Amounts represent stock option awards that vest ratably over three years, beginning on the first anniversary of the grant date, based on continued service.

 

(4)

The amounts shown in this column represent the full grant date fair value of grants made to each named executive officer, as computed in accordance with FASB ASC Topic 718.  Performance-based restricted stock units are valued based upon the probable outcome of the performance conditions associated with the same as of the grant date and such calculation is consistent with the estimate of aggregate compensation cost recognized over the service period determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures.

 

 

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Outstanding Equity Awards at Fiscal Year-End

 

The following table shows, as of December 31, 2009, the number of outstanding stock options and performance-based restricted stock awards held by the named executive officers:

		Option Awards													Stock Awards
Name		Number of Securities Underlying Unexercised Options (#) Exercisable				Number of Securities Underlying Unexercised Options (#)  Unexercisable				Option Exercise Price  ($)			Option  Expiration  Date(1)		Number of Shares or Units of Stock That Have Not Vested (#)(2)				Market Value of Shares or Units of Stock That Have Not Vested ($)(3)				Equity  Incentive  Plan  Awards: Number of Unearned  Shares, Units  or Other  Rights That  Have Not  Vested  (#)(4)				Equity Incentive Plan Awards:  Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5)
John A. Young			20,833				41,667				18.00		05/7/15
			—				151,210				7.44		3/13/16
																25,000				301,000				—				—
																—				—				60,484				728,227
G. Scott Faison			6,366				12,731				18.00		05/7/15
			—				46,203				7.44		3/13/16
																7,639				91,974				—				—
																—				—				18,482				222,523
William E. Roller			4,630				9,259				18.00		05/7/15
			—				33,603				7.44		3/13/16
																5,556				66,894				—				—
																—				—				13,441				161,829
Thomas M. O’Brien			4,630				9,259				18.00		05/7/15
			—				33,603				7.44		3/13/16
																5,556				66,894				—				—
																—				—				13,441				161,829
Dr. Michael Matros			4,630				9,259				18.00		05/7/15
			—				33,603				7.44		3/13/16
																5,556				66,894				—				—
																—				—				13,441				161,829

 

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(1)	The vesting date of unvested stock option awards is set forth beside each option expiration date in the table below. Note that the vesting date provided reflects when the options fully vest. Stock option awards vest ratably over three years beginning on the first anniversary of the grant date.

 

Option Grant Date		Option Expiration Date		Option Vesting Date
5/7/08		05/7/15		5/7/11
3/13/09		3/13/16		3/13/12

 

(2)

The performance-based restricted stock units were earned on August 25, 2009 upon certification by the Compensation Committee that the performance metric had been met.  They are subject to an additional service based vesting period, pursuant to which vesting will occur in equal amounts on the fourth and fifth anniversaries of the grant date.

 

 

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(3)	The amounts shown in this column represent the market value of the performance-based restricted stock units based on the Company’s common stock price on December 31, 2009, which was $12.04 per share, multiplied by the number of units, respectively, for each unvested performance stock award.

 

(4)

The performance-based restricted stock units may have been earned at the end of a one-year performance period upon certification by the Compensation Committee that the performance metric had been met and would have been subject to an additional two-year service based vesting period, pursuant to which vesting would occur in equal amounts on the fourth and fifth anniversaries of the grant date.  The performance metric was not met for 2009 and no shares will be issued pursuant to these awards.  For further discussion of these awards, see “Long-Term Incentives— 2008 Omnibus Incentive Plan” in the Compensation Discussion and Analysis.

 

(5)	The amounts shown in this column represent the market value of the performance-based restricted stock units based on the Company’s common stock price on December 31, 2009, which was $12.04 per share, multiplied by the number of units, respectively, for each unvested performance stock award.

 

Option Exercises and Stock Vested

 

During 2009 no named executive officers exercised stock options or had performance-based restricted stock awards that vested.

 

Employment Agreements

 

As discussed in the Compensation Discussion and Analysis above, we entered into an employment agreement with each of our executive officers, including our named executive officers. The employment agreements are substantially the same except for Mr. Kiefaber (as described in the Compensation Discussion and Analysis) and Dr. Matros (as described below), other than each officer’s title (which is as set forth in the Summary Compensation Table above), base salary amounts and annual incentive plan participation. The material terms of each officer’s employment agreement are set forth below.

 

The initial term of each employment agreement ended December 31, 2009, with automatic two-year term extensions thereafter, unless the Board or the executive provides written notice to terminate the automatic extension provision.  The agreements were amended in December 2008 as described above in Compensation Discussion and Analysis— Employment Agreements, and the terms of these agreements have been extended automatically to December 31, 2010. In addition, in the event we undergo a “change in control” (as described below) during any two-year term of the employment agreement, the agreements will be automatically extended to the second anniversary of the change in control event.

 

Each officer’s base salary may not be reduced below the amount previously in effect without the written agreement of the executive. In addition, each of Messrs. Keifaber, Faison, Roller, O’Brien and Matros is entitled to participate in our annual cash incentive program in a target amount equal to 75%, 50%, 45%, 45% and 45%, respectively, of his base salary then in effect.

 

 

Dr. Matros’ Service Contract

 

Pursuant to a service contract and resolution of the advisory board of Allweiler AG effective November 14, 2006, Dr. Matros was appointed as a member of the management board of Allweiler AG, the German subsidiary of Colfax. Dr. Matros’ appointment was for a term of three years, until December 31, 2009, and was automatically extended for one year, until December 31, 2010.

 

Under the service contract, Dr. Matros is entitled to an annual salary. In addition, Dr. Matros is entitled to receive a performance-related annual bonus. For fiscal 2009, the service contract provided that his annual target bonus was 45% of his annual salary. Dr. Matros’ base salary and target bonus are to be reviewed annually.

 

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Consistent with what we believe to be customary practice for German companies and executives, the service contract further provides that Dr. Matros is entitled to a company car for business and personal use; however, Dr. Matros is required to bear the cost of any tax associated with such personal use. In addition, Dr. Matros is entitled to a medical exam once every two years, with Allweiler required to pay the difference between the actual cost of the exam and any insurance policy maintained by Dr. Matros.

 

The service contract further provides for limited payments and benefits upon certain termination events. In addition, Allweiler is required to maintain an accident insurance policy for the benefit of Dr. Matros providing for coverage in the event of his death or disability. For a discussion of these provisions, and a quantification of the estimated payments to be made to Dr. Matros upon such events, see “Potential Payments upon Termination or Change in Control” below.

 

Pension Benefits

 

Each of our named executive officers, except for Mr. Roller and Dr. Matros, participated in the Retirement Plan for Salaried U.S. Employees of Imo Industries, Inc. and Affiliates (the “Imo Plan”). The Imo Plan was acquired by us in connection with our acquisition of Imo Industries in August 1997 and was subsequently frozen to new participants and benefit accruals in January 1999. At such time, active employees participating in the Imo Plan received a benefit enhancement equal to 20% of their respective “base” benefits Our Board determined to cease participation in the Imo Plan because it was determined that our enhanced defined contribution plan, or 401(k) plan, was more aligned with the company’s strategy.

 

In order to participate in the Imo Plan, the participating named executive officers were required to be at least 21 years of age or have one year of service with Imo Industries (or its affiliates). Normal retirement age under the plan is age 65. Pursuant to the Imo Plan, each officer’s accrued monthly pension benefit is based on the sum of the “base” and “excess” compensation for each year of service under the Imo Plan, as follows:

 

Base		Excess
1.15% of Final Average Salary		0.65% of Final Average Salary above the Covered Compensation Limit

 

“Final Average Salary” is defined under the Imo Plan to mean the average of the highest five consecutive salaries over the prior 10 year period, with “salary” to be comprised of base salary, bonuses and any overtime pay, subject to annual limitations imposed by Section 401(a)(17) of the Internal Revenue Code. The Covered Compensation Limit is determined by the IRS based on an average of Social Security taxable wage bases for certain years. For 1999 (the year in which the Imo Plan was frozen) and prior years, the Covered Compensation limit was $72,600 or less.

 

There is no provision in the Imo Plan for early retirement with unreduced benefits. The Imo Plan does provide for early retirement with reduced benefits subject to the executive’s attainment of age 55 and completion of ten years of service. Only Mr. O’Brien is eligible for early retirement under the Imo Plan. His early retirement benefits, if he were to elect to retire early, are to be calculated based on the “rule of 75” formula within the Imo Plan. Pursuant to this formula, participants with age plus years of service totaling at least 75 may retire early with the reduction in benefits split equally between the “base” and “excess” portions of the benefit formula. Thus, for each full year below age 65, there would be a reduction in the “base” benefit of 3% and the “excess” benefit would be reduced based on the applicable early retirement factor. The “early retirement factor,” which is a specific percentage based on the age at which a participant starts to receive benefit payments, reduces the monthly benefit to account for the additional years during which the participant will receive payments.

 

The normal form of benefits payment pursuant to the Imo Plan is a single life annuity (or, if married, an actuarially equivalent 50% joint and survivor annuity, which entitles the surviving spouse to continue receiving 50% of the monthly benefit after the participant’s death). The Imo Plan also provides for the participating named executive officer to select a single life annuity, a 66  2 / 3 %, 75% or 100% joint and survivor annuity, a 5-, 10-, or 15-year period certain and life annuity (which provides reduced monthly payments for the participant’s life with a guarantee of at least 5, 10 or 15 years of payments, as applicable), or a Social Security adjustment annuity with respect to certain early retirement benefits (which provides increased monthly benefit payments before the participant’s Social Security benefits begin and reduced payments thereafter). No lump sum option is available unless the total value of the accumulated benefit is less than $5,000.

 

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Name		Plan Name(1)		Number of Years Credited Service   (#)(2)				Accumulated Benefit  ($)(3)				Payments During Last Fiscal Year ($)
John A. Young		Retirement Plan for Salaried U.S. Employees of IMO Industries, Inc. and Affiliates			1.083				9,945				—
G. Scott Faison		Retirement Plan for Salaried U.S. Employees of IMO Industries, Inc. and Affiliates			1.25				8,509				—
Thomas M. O’Brien		Retirement Plan for Salaried U.S. Employees of IMO Industries, Inc. and Affiliates			13.75				331,631				—
Dr. Michael Matros		Allweiler AG Company Pension Plan			13.0				47,167	(4)			—

 

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(1)	The Retirement Plan for Salaried U.S. Employees of Imo Industries, Inc. and Affiliates was frozen to new participants or benefit accruals in January 1999.

 

(2)

Represents the number of years of credited service for each applicable named executive officer under the applicable plan, computed as of the same pension plan measurement date used for financial statement reporting purposes with respect to our 2008 financial statements. The number of years of credited service represents each officer’s actual years of credited service.

 

(3)

Amounts represent the actuarial present value of each named executive officer’s accumulated benefit under the applicable plan, computed as of the date used for financial statement reporting purposes with respect to our 2009 financial statements and assuming the normal retirement age as set forth in the plan, or age 65. For a discussion of the assumptions used to determine the accumulated present value, see Note 11 to our Consolidated Financial Statements in our 2009 Annual Report on Form 10-K.

 

(4)	Amount represents €32,924 or $47,167 in U.S. dollars, calculated based on the conversion rate in effect on December 31, 2009

 

Nonqualified Deferred Compensation

 

In 2005, we established the Colfax Corporation Excess Benefit Plan (the “Excess Benefit Plan”) to provide certain senior-level employees, including each of the named executive officers, with an opportunity to defer a stated percentage of their base compensation or their annual incentive compensation without regard to the compensation limits imposed by the Internal Revenue Code for our 401(k) plan. We established the Excess Benefit Plan to allow our senior-level executives to contribute toward retirement on a tax-effective basis in a manner that is consistent with other Colfax employees who are not limited by the Internal Revenue Code limits. The plan is “unfunded,” meaning there is no asset segregated for the exclusive benefit of the named executive officers.

 

The Excess Benefit Plan allows the named executive officers to defer up to 50% of their base salaries and up to 50% of their bonus compensation. These deferral limits are the same as that of other employees who participate in our qualified 401(k) plan. In addition, we match up to 3% of all excess deferrals by the named executive officers and provide a 3% company contribution, each of which are the same percentage match and contribution, respectively, as provided under the 401(k) plan. Each of the participating named executive officers is fully vested in his deferral account, including company match contributions.

 

Deferrals under the Excess Benefit Plan may be invested in 12 different equity and fixed income reference investment funds which are selected periodically by the plan trustee to best match the funds offered in the qualified 401(k) plan. Each participating named executive officer can allocate his deferrals among these fund investment options and may change his election at any time by making a change of election with the plan administrator. Colfax invests its match and contribution amounts in the same investment options in the same amounts and allocations as the reference funds selected by the officer.

 

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Simultaneously with the officer’s election to participate in the Excess Benefit Plan, the executive must elect the time of payment of his account balance upon termination of service. Because each of the named executive officers are likely “key employees” for purposes of Section 409A of the Internal Revenue Code, the executive is generally permitted to choose either (i) the last day of the month in which the six-month anniversary of termination occurs, or (ii) the later of January 31 of any of the five calendar years following the year of termination and the last day of the month in which the six-month anniversary of termination occurs. If no election is made, the benefit will be paid in a lump sum on the last day of the month which occurs six months after the executive’s termination date.

 

In addition, at the time of electing his timing of payment, the executive must also elect the form of payment of his account balance. The executive may select a lump sum payment or annual installments over a period of two to ten years. If no form of payment election is made, the form of payment will be a lump sum. The named executive officer may elect to change his timing or form of payment, provided, generally, that (i) the election may not take effect until 12 months after the election, (ii) the election may not be made less than 12 months prior to the date of the first scheduled payment under the current election and (iii) the first payment with respect to the subsequent election is deferred for a period of not less than five years from the date such payment would otherwise have been made.

 

Upon death or disability, the executive (or his beneficiary) is to be paid a lump sum payment equal to the executive’s account balance within 60 days after the year of death or the last day of the month in which the six-month anniversary of the executive’s disability occurs, respectively.

 

Notwithstanding the above, in the event the executive’s account balance at the time of his termination is less than $10,000, payment of the account balance upon termination will be made in a lump sum on or before the later of (i) December 31 of the calendar year of termination, or (ii) the date 2.5 months after the executive’s termination from service.

 

Name		Executive Contributions in Last FY  ($)(1)				Registrant  Contributions in Last FY  ($)(2)				Aggregate Earnings (Loss) in Last FY ($)				Aggregate Withdrawals/ Distributions ($)				Aggregate Balance at Last FYE  ($)(3)
John A. Young			43,640				45,441				179,719				—				947,822
G. Scott Faison			20,719				11,864				70,966				—				405,933
William E. Roller			8,850				10,650				67,637				—				446,097
Thomas M. O’Brien			2,239				9,540				29,225				—				312,240
Dr. Michael Matros			—				—				—				—				—

 

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(1)	With respect to each applicable named executive officer, amounts represent deferred salary and deferred bonus amounts granted that are reported in the Summary Compensation Table above.

 

(2)	All amounts reported in this column for each applicable named executive officer are reported in the “All Other Compensation” column of the Summary Compensation Table above.

 

(3)	With respect to each applicable named applicable executive officer’s aggregate balance, the following amounts are reported in the Summary Compensation Table above: $89,081, Mr. Young; $32,583, Mr. Faison; $19,500, Mr. Roller; $11,779, Mr. O’Brien, and none for Dr. Matros.

 

Potential Payments Upon Termination or Change in Control

 

Employment Agreements.  Pursuant to the terms of the employment agreements (see “Execution of Employment Agreements” in the Compensation Discussion and Analysis above) with our named executive officers, in the event the employment of any of our named executive officers is terminated by us without “cause” or the executive resigns for “good reason” (each as described below), each executive is entitled to the following severance payments or benefits:

 

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·

a lump sum payment equal to one times the executive’s base salary in effect and his target annual incentive compensation for the year of termination (or, if greater, the average of the two highest actual annual incentive payments made to the executive during the last three years);

 

·

a lump sum payment equal to the executive’s pro rata annual incentive compensation for the year of termination subject to the performance criteria having been met for that year under the annual bonus plan; and

 

·

continuation of health care coverage for the executive and his family for one year after termination.

 

In the event the executive terminates employment without “cause” or for “good reason” within three months prior to a “change in control event” (as described below), or two years after a “change in control”, each executive is entitled to the following severance payments or benefits:

 

·

a lump sum payment equal to two times the executive’s base salary in effect and his target annual incentive compensation for the year of termination (or, if greater, the average of the two highest actual incentive payments made to the executive during the last three years);

 

·

a lump sum payment equal to the executive’s pro rata annual incentive compensation for the year of termination subject to the performance criteria having been met for that year under the annual bonus plan; and

 

·

continuation of health care coverage for the executive and his family for two years after termination; and

 

·

all equity awards will immediately vest, with any performance objectives applicable to performance-based equity awards deemed to have been met at the greater of (i) the target level at the date of termination, and (ii) actual performance at the date of termination.

 

In each case described above, the executive’s right to the severance payments and benefits is conditioned on the executive’s execution of a waiver and release agreement in favor of Colfax. In addition, each employment agreement contains standard confidentiality covenants, non-disparagement covenants, non-competition covenants (for a period of one year following a termination of employment or, if the termination of employment occurs three months prior to a change in control event or two years after a change in control, two years) and non-solicitation covenants (for a period of two years following a termination of employment or, if the termination of employment occurs three months prior to a change in control event or two years after a change in control, three years).

 

In the event that any payment or benefit to the executives pursuant to the employment agreements or otherwise constitute excess parachute payments under Section 280G of the Internal Revenue Code such that they would trigger the excise tax provisions of the Internal Revenue Code, such payments are to be reduced so that the excise tax provisions are not triggered, but only upon determination by the executive that the after-tax value of the termination benefits calculated with the restriction described above exceed the value of those calculated without such restriction.

 

Each agreement further provides that, in the event it is determined that the willful actions of the executive have resulted in a material misstatement or omission in any report or statement filed by Colfax with the Securities and Exchange Commission, or material fraud against Colfax, Colfax is entitled to recover all or any portion of any award or payment made to the executive.

 

For purposes of the employment agreements, the following terms generally have the following meanings:

 

·

“cause” means conviction of a felony or a crime involving moral turpitude, willful commission of any act of theft, fraud, embezzlement or misappropriation against Colfax or its subsidiaries or willful and continued failure of the executive to substantially perform his duties;

 

·

“change in control” means:

 

·

a transaction or series of transactions pursuant to which any person acquires beneficial ownership of more than 50% of the voting power of the common stock of Colfax then outstanding;

 

 

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·

during any two-year consecutive period, individuals who at the beginning of the period constitute the Board (together with any new directors approved by at least two-thirds of the directors at the beginning of the period or subsequently approved) cease to constitute a majority of the Board;

 

·

a merger, sale of all or substantially all of the assets of Colfax or certain acquisitions of the assets or stock by Colfax of another entity in which there is a change in control of Colfax; and

 

·

a liquidation or dissolution of Colfax;

 

·

“change in control event” means the earlier to occur of a “change in control” or the execution of an agreement by Colfax providing for a change in control; and

 

·

“ good reason” means:

 

·

the assignment of duties to the executive which are materially inconsistent with his position with Colfax;

 

·

a reduction in the executive’s base salary, or the setting or payment of the executive’s target annual incentive compensation, in each case in an amount materially less than as required under the employment agreement;

 

·

the requirement for the executive to relocate his principal place of business at least 35 miles from his current place of business;

 

·

Colfax’s failure to obtain agreement from any successor to fully assume its obligations to the executive under the terms of the agreement; and

 

·

any other failure by Colfax to perform its material obligations under, or breach of Colfax of any material provision of, the employment agreement.

 

Equity Awards. The vesting of outstanding equity awards, other than performance awards, accelerates in full upon the death or total and permanent disability of the grantee or upon a “corporate transaction” (as defined below).  The vesting of the outstanding performance-based restricted stock units accelerates in full upon the death or total and permanent disability of the grantee only if and when the performance criteria for such award are achieved as of the end of the performance period upon certification of the same by the Compensation Committee, or immediately if the performance period has already ended and the Compensation Committee has certified that the performance criteria have been achieved.  The outstanding performance-based restricted stock units will terminate and cease to vest upon a “corporate transaction,” unless prior to the corporate transaction the achievement of the performance criteria is certified by the Compensation Committee, in which case the vesting for the award will accelerate in full.  While these benefits are available to all of our equity plan participants equally, pursuant to SEC requirements, we have included these acceleration benefits in the table below.  In addition, in the event of termination of service other than for death, disability or cause, any stock option awards will remain exercisable to the extent vested for ninety days after termination of service.

 

A “corporate transaction” under any outstanding equity awards is generally defined as:

 

·

the dissolution or liquidation of the Company or a merger, consolidation, or reorganization of the Company with one or more other entities in which we are not the surviving entity;

 

·

a sale of substantially all of our assets to another person or entity; or

 

·

any transaction which results in any person or entity, other than persons who are stockholders or affiliates immediately prior to the transaction, owning 50% or more of the combined voting power of all classes of our stock.

 

 

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Accelerated vesting upon a “corporate transaction” will not occur to the extent that provision is made in writing in connection with the corporate transaction for the assumption or continuation of the outstanding awards, or for the substitution of such outstanding awards for similar awards relating to the stock of the successor entity, or a parent or subsidiary of the successor entity, with appropriate adjustments to the number of shares of stock that would be delivered and the exercise price, grant price or purchase price relating to any such award. If an award is assumed or substituted in connection with a corporate transaction and the holder is terminated without cause within a year following a change in control, the award will fully vest and may be exercised in full, to the extent applicable, beginning on the date of such termination and for the one-year period immediately following such termination or for such longer period as the compensation committee shall determine.

 

Dr. Matros’ Service Contract

 

As discussed above, pursuant to a resolution of the advisory board of Allweiler AG and his service contract with Allweiler AG, our German subsidiary, Dr. Matros is entitled to limited payments and benefits from Allweiler AG upon the events described below. We agreed to provide each of these benefits to Dr. Matros as we believe they are customary for German executives and consistent with local standards.

 

In addition to the payments and benefits described below, Dr. Matros is entitled to the accumulated balance under the Allweiler AG pension plan upon retirement, death and, in certain situations, disability, as more fully described in the Pension Benefits Table and accompanying narrative above.

 

The service contract contains customary confidentiality, invention assignment and noncompetition (effective during the term of the contract) provisions.

 

Accident Insurance Policy.    During the term of the service contract, Allweiler is required to maintain an accident insurance policy in favor of Dr. Matros, payable upon his death or disability, as follows:

 

	Ÿ		in the event of death: a lump sum payment equal to his annual base salary then in effect, up to a maximum insurance amount of €300,000; and
	Ÿ		in the event of disability: a lump sum payment equal to two times his annual base salary then in effect, up to a maximum insurance amount of €600,000.

 

Death.    In the event of Dr. Matros’ death during the term of the service contract, his dependent children, if any, are entitled to continued payment of his base salary in effect as of the start of the service contract (€200,000, or $286,520 in U.S. dollars, based on the conversion rate in effect as of December 31, 2009) for the month of death and the three following months. Any claim the children have to Dr. Matros’ pension during this time will be suspended and resumed upon completion of the payment period.

 

Disability.    In the event Dr. Matros is temporarily prevented from carrying out his duties due to sickness or other reasons beyond his control, he is entitled to continued receipt of his base salary in effect as of the start of the service contract (€200,000, or $286,520 in U.S. dollars, based on the conversion rate in effect as of December 31, 2009) for the earlier to occur of six months or the termination of the service contract. The service contract provides that the contract will be terminated three months after it is determined that Dr. Matros has become permanently incapable of performing his duties under the contract. In addition, in the event of sickness or other disability, Dr. Matros will be entitled to a pro rata portion of his annual cash bonus if his inability to work continues for at least three months.

 

Severance Payment.    In the event Allweiler AG does not renew the appointment of Dr. Matros to the management board of Allweiler AG after the end of his three-year term or after the one-year automatic extension, or in the event Allweiler terminates Dr. Matros’ appointment other than for cause (as defined under German law, indicated below), he is entitled to receive a lump sum severance payment equal to six months of his base salary then in effect plus, for each full year of service completed since November 14, 2006 (the date of his appointment), an additional one month of base salary, up to an additional 12 months of salary. This severance payment is in addition to the aggregate compensation otherwise owed to Dr. Matros under the initial three-year term of the service contract (i.e., continued payment of base salary and annual target bonus through December 31, 2009). Dr. Matros is not entitled to the above severance payment if:

 

	Ÿ		his termination is due to cause, as set forth in Section 84(3) sentence 1 and 2 of the German Stock Corporation Act, or Section 626(1) of the German Civil Code (BGB);
	Ÿ		we offer Dr. Matros a renewed appointment to the management board of Allweiler and Dr. Matros does not accept such offer;
	Ÿ		Dr. Matros’ voluntary resigns or terminates the service contract; or

 

 

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Ÿ

the service contract terminates, according to its terms, at the end of the month after Dr. Matros turns 65.

 

Estimate of Payments to Dr. Matros.    The table below sets forth the estimated payments and benefits to Dr. Matros upon the events described above. For purposes of these estimates, we have assumed the following:

	Ÿ		the event occurred on December 31, 2009;
	Ÿ		Dr. Matros’ base salary in effect as of December 31, 2009, €200,000, or $286,520 in U.S. dollars based on the conversion rate in effect as of December 31, 2009; with a monthly base salary rate of €16,667, or $23,877 in U.S. dollars, based on the conversion rate in effect as of December 31, 2009;
	Ÿ		in the event of death, continued payment of Dr. Matros’ base salary for three months (since the triggering event occurred at the end of December 2009);
	Ÿ		in the event of disability/sickness, continued payment of Dr. Matros’ base salary for six months and no pro rata annual bonus payment since the full 2009 annual bonus payment (as disclosed in the Summary Compensation Table above) would be paid; and
	Ÿ		in the event of termination of the service contract without cause or non-renewal of the service contract, in addition to the severance payment described above, continued payment of Dr. Matros’ base salary and target bonus (45% of base salary) through December 31, 2010.

 

		Cash Payment  ($)				Accident Insurance ($)				Total ($)
Disablity/Sickness			143,260				573,040				716,300
Death			71,630				286,520				358,150
Severance Payment and Salary/Bonus Continuation			238,767				—				238,767

 

Estimate of Payments. The tables that follow provide information related to compensation payable to each named executive officer assuming termination of such executive’s employment on December 31, 2009, or assuming a change of control or corporate transaction with corresponding qualifying termination occurred on December 31, 2009. Amounts also assume the price of our common stock was $12.04, the closing price on December 31, 2009.  Information for Dr. Matros is provided below to reflect acceleration of equity awards outside of his Service Contract, which is discussed in the preceding section.

 

Executive		John A. Young				G. Scott Faison				William E. Roller				Thomas M. O’Brien				Dr. Michael Matros
Employment Agreement Benefits:
Without “cause“ or “good reason“
Lump Sum Payment		$	989,625			$	435,690			$	370,015			$	401,572				—
Pro Rata Incentive Compensation		$	424,125			$	145,230			$	114,832			$	124,626				—
Health Care		$	14,552			$	9,534			$	14,552			$	17,033				—
Upon a “change of control”
Lump Sum Payment		$	1,979,250			$	871,380			$	740,031			$	803,143				—
Pro Rata Incentive Compensation		$	424,125			$	145,230			$	114,832			$	124,626				—
Health Care		$	29,105			$	19,068			$	29,105			$	34,066				—
Equity Awards(1):
Accelerated Stock Options		$	695,566			$	212,534			$	154,574			$	154,574			$	154,574
Accelerated PRSUs		$	301,000			$	91,974			$	66,894			$	66,894			$	66,894
Excess Benefit Plan(2)		$	947,823			$	405,933			$	446,097			$	312,240				—
Disability Benefits(3)		$	150,000			$	150,000			$	150,000			$	150,000				—

 

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(1)	Upon death, total and permanent disability and, in certain circumstances, a “corporate transaction” as defined above. See “Equity Awards” above for more details on the vesting of our outstanding equity awards.

 

 

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(2)	Amounts represent the aggregate balance of the named executive officer’s Excess Benefit Plan account as of December 31, 2009.  For more details on our Excess Benefit Plan, see “Nonqualified Deferred Compensation” above.

 

(3)

Amounts represent the aggregate estimated annual benefit that would be paid pursuant to our Group Long-Term Disability Plan (which is available to all of our employees) and our Supplemental Long-Term Disability Plan in the event a named executive officer becomes disabled and is terminated.  The estimated annual benefit for each named executive officer under the General Disability Plan is $60,000 and the estimated annual benefit for each named executive officer under the Supplemental Long-Term Disability Plan is $90,000.

 

Events Occurring Subsequent to the End of 2009.  On January 9, 2010, we entered into the Separation Agreement with Mr. Young.  Please see “Events Occurring Subsequent to the End of 2009—Separation Agreement with Mr. Young” in the Compensation Discussion and Analysis above.

 

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EQUITY COMPENSATION PLAN INFORMATION

 

The following table summarizes the Company’s equity compensation plan information as of December 31, 2009. All equity compensation plans have been approved by Company shareholders.

 

Plan Category		Number of securities to be issued upon exercise of outstanding options  (a)				Weighted- average exercise price of outstanding options  (b)				Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by Company shareholders			1,267,633			$	11.40				3,049,629
Equity compensation plans not approved by Company shareholders			—				—				—

 

 

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BENEFICIAL OWNERSHIP OF OUR COMMON STOCK

 

The following table sets forth certain information as of March 25, 2010 (unless otherwise specified), with respect to the beneficial ownership of our common stock by each person who is known to own beneficially more than 5% of the outstanding shares of common stock, each person currently serving as a director, each nominee for director, each named executive officer (as listed below), and all directors and executive officers as a group:

 

Beneficial Owner		Amount and Nature Of Beneficial Ownership				Percent of Class
5% Holders
Keeley Asset Management Corp.			3,231,590	(1)			7.5	% (1)
401 South LaSalle Street
Chicago, IL 60605
Keeley Small Cap Value Fund			2,460,000	(1)			5.7	% (1)
401 South LaSalle Street
Chicago, IL 60605
T. Rowe Price Associates, Inc.			2,761,800	(2)			6.4	% (2)
100 E. Pratt Street
Baltimore, MD 21202
Steven M. Rales			9,145,610	(3)			21.1	%
2099 Pennsylvania Avenue N.W., 12th Floor
Washington, D.C. 20006
5% Holder and Director
Mitchell P. Rales			9,145,610	(4)			21.1	%
2099 Pennsylvania Avenue N.W., 12th Floor
Washington, D.C. 20006
Directors
Patrick W. Allender			211,480	(5)(6)			*
C. Scott Brannan			6,167	(6)			*
Joseph O. Bunting III			196,971	(6)			*
Thomas S. Gayner			10,124	(6)			*
Rhonda L. Jordan			7,602	(6)			*
Rajiv Vinnakota			6,167	(6)			*
Named Executive Officer and Director
Clay H. Kiefaber			24,917	(6)
Named Executive Officers
G. Scott Faison			79,133	(7)			*
Thomas M. O’Brien			73,101	(7)			*
William E. Roller			74,377	(7)			*
Dr. Michael Matros			20,461	(7)			*
All of our directors and executive officers as a group (15 persons)			10,054,297	(6)(7)(8)			23.2	%

 

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* Represents beneficial ownership of less than 1%

 

(1)

Beneficial ownership amount and nature of ownership as reported on Amendment No. 1 to Schedule 13G filed with the SEC on February 12, 2010 on the behalf of Keeley Asset Management Corp. and Keeley Funds, Inc. Keeley Small Cap Value Fund is a series of Keeley Funds, Inc. Keeley Asset Management Corp. and Keeley Small Cap Value Fund share beneficial ownership over the 2,460,000 shares reported as beneficially owned by Keeley Small Cap Value Fund and these shares are included in the amounts shown as beneficially owned by both entities.

 

(2)

As reported on Schedule 13G filed with the SEC on February 11, 2010 by T. Rowe Price Associates, Inc.  These securities are owned by various individual and institutional investors which T. Rowe Price Associates, Inc. (“Price Associates”) serves as investment adviser with power to direct investments and/or sole power to vote the securities.  For the purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities.

 

 

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(3)	The total number of shares of common stock beneficially owned by Steven M. Rales is 9,145,610. 9,126,222 shares are held directly by Steven M. Rales and 19,388 are held by Capital Yield Corporation, of which Mitchell P. Rales and Steven M. Rales are the sole stockholders.

 

(4)	The total number of shares of common stock beneficially owned by Mitchell P. Rales is 9,145,610. 9,126,222 shares are held directly by Mitchell P. Rales and 19,388 are held by Capital Yield Corporation, of which Mitchell P. Rales and Steven M. Rales are the sole stockholders.

 

(5)	Includes 199,259 shares owned by the John W. Allender Trust, of which Patrick Allender is trustee.  Mr. Allender disclaims beneficial ownership of all shares held by the John W. Allender Trust except to the extent of his pecuniary interest therein.

 

(6)

Beneficial ownership by directors (other than Mitchell P. Rales) includes: (i) for all directors except for Ms. Jordan, 6,167 restricted stock units or DSUs that have vested or will vest within 60 days of March 25, 2010 and will be delivered upon the termination of service on the Board, (ii) for Ms. Jordan, 4,315 restricted stock units or DSUs that have vested or will vest within 60 days of March 25, 2010 and will be delivered upon the termination of service on the Board, and (iii) DSUs received in lieu of annual cash retainers and committee chairperson retainers as follows: Mr. Allender— 5,087, Mr. Gayner— 3,957, Ms. Jordan— 3,287.  For more information on these awards, see Director Compensation above.

 

(7)

Beneficial ownership by named executive officers (other than Clay H. Kiefaber) and our executive officers as a group includes shares that such individuals have the right to acquire upon the exercise of options that will vest within 60 days of March 25, 2010.  The number of shares included in the table as beneficially owned which are subject to such options is as follows: Mr. Faison— 28,133; each other executive officer— 20,461.

 

(8)

Beneficial ownership for executive officers does not reflect performance-based restricted stock units that have been earned but not yet vested due to additional service-based vesting conditions.  However, these performance-based restricted stock units, when earned via certification of the applicable performance criteria by the Compensation Committee, are reflected in Table 1 of Form 4s filed by each executive officer.  This transaction is shown in the Form 4 as an acquisition of the Company’s common stock pursuant to SEC guidance regarding Section 16 reporting for grants of restricted stock awards.

 

 

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PROPOSAL 2

 

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

 

We are asking our stockholders to ratify the Audit Committee’s selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2010. Although stockholder ratification is not required, the appointment of Ernst & Young LLP is being submitted for ratification as a matter of good corporate practice with a view towards soliciting stockholders’ opinions which the Audit Committee will take into consideration in future deliberations. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.

 

Representatives for Ernst & Young LLP will be present at the Annual Meeting with the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

 

Independent Registered Public Accountant Fees and Services

 

The following table sets forth the aggregate fees for services rendered by Ernst & Young LLP for the Company for the fiscal years ended December 31, 2009 and 2008:

 

Fee Category		2009				2008
Audit Fees		$	1,857,900			$	1,537,700
Audit-Related Fees			32,700				—
Tax Fees			288,000			$	327,600
All Other Fees			—				—
Total		$	2,178,600			$	1,865,300

Audit Fees. This category of the table above includes fees for the fiscal years ended December 31, 2009 and 2008 that were for professional services rendered (including reimbursement for out-of-pocket expenses) for the audits of our annual consolidated financial statements, for reviews of the financial statements included in our Quarterly Reports on Form 10-Q, and for statutory audits.  The total for 2009 also includes approximately $0.5 million for the audit of our internal control over financial reporting.

 

Audit-Related Fees. This category of the table above includes the fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.”

 

Tax Fees. This category of the table above includes fees billed for tax compliance, tax advice and tax planning.

 

All Other Fees. This category of the table above includes fees billed for products and services other than those described above under Audit Fees, Audit-Related Fees and Tax Fees.

 

The Audit Committee has considered whether the services rendered by the independent registered public accounting firm with respect to the fees described above are compatible with maintaining their independence and has concluded that such services do not impair their independence.

 

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Audit Committee’s Pre-Approval Policies and Procedures

 

Pursuant to its charter, the Audit Committee must pre-approve all auditing services, internal control related services and non-audit services provided to the Company by the independent registered public accounting firm and all fees payable by the Company to the independent registered public accounting firm for such services.  The Audit Committee has adopted a pre-approval policy to ensure compliance with the NYSE’s Listing Standards and the applicable SEC rules and regulations relating to auditor independence. The Audit Committee reviews with Ernst & Young LLP and management the plan and scope of Ernst & Young LLP’s proposed annual financial audit and quarterly reviews, including the procedures to be utilized and Ernst & Young LLP’s compensation. The Audit Committee also pre-approves all auditing services, internal control related services and permitted non-audit services (including the fees and terms thereof) to be performed for us by Ernst & Young LLP. The Audit Committee may delegate pre-approval authority to one or more members of the Audit Committee consistent with the pre-approval policy, provided that the decisions of such Audit Committee member or members must be presented to the full audit committee at its next scheduled meeting. Pre-approval of permitted non-audit services can only be approved by the full Audit Committee.

 

The Board unanimously recommends that stockholders vote “FOR” the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2010.

 

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AUDIT COMMITTEE REPORT

 

The Audit Committee consists of C. Scott Brannan, Patrick Allender and Thomas Gayner. The Audit Committee operates pursuant to a written charter adopted by the Board of Directors.

 

The Audit Committee has reviewed and discussed the Company’s audited financial statements for the fiscal year ended December 31, 2009 with management and with the Company’s independent registered public accountants. The Audit Committee discussed with the independent registered public accountants the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee has received the written disclosures and the letter from the independent registered public accountants confirming their independence, as required by applicable requirements of Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence. On the basis of the reviews and discussions referenced above, the Audit Committee recommended to the Board of Directors that the audited financial statements for the fiscal year ended December 31, 2009 be included in the Company’s Form 10-K for filing with the Securities and Exchange Commission.

 

Audit Committee of the Board of Directors

 

C. Scott Brannan, Audit Committee Chair

Patrick Allender

Thomas Gayner

 

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires our directors, executive officers and 10% stockholders to file reports of ownership and changes in ownership of our equity securities. To our knowledge, based upon the reports filed and written representations regarding reports required during the fiscal year ended December 31, 2009, all reports required by Section 16(a) were filed on a timely basis except for: (i) a Form 4 for shares purchased by Mr. G. Scott Faison originally filed on March 2, 2009, which inadvertently underreported the number of shares purchased on February 27, 2009 by 50 shares and was corrected via an amended Form 4 filed on March 17, 2009, and (ii) a Form 4 for shares sold by Mr. Michael K. Dywer on August 12, 2009, which was reported in a late Form 4 filing made on August 17, 2009.

 

GENERAL MATTERS

 

Stockholder Proposals and Nominations

 

Requirements for Stockholder Proposals to be Considered for Inclusion in our Proxy Materials.  To be considered for inclusion in next year’s proxy statement, stockholder proposals must be received by our Corporate Secretary at our principal executive offices no later than the close of business on December 13, 2010.

 

Requirements for Stockholder Proposals to be Brought Before an Annual Meeting. Our Bylaws provide that, for stockholder nominations to the Board or other proposals to be considered at an annual meeting, the stockholder must have given timely notice thereof in writing to the Secretary of the Company at Colfax Corporation, 200 American Metro Blvd., Suite 111, Hamilton Township, New Jersey 08619, Attn: Corporate Secretary. To be timely for the 2011 annual meeting, the stockholder’s notice must be delivered to or mailed and received by not less than 90 days nor more than 120 days before the anniversary date of the preceding annual meeting, except that if the annual meeting is set for a date that is more than 30 days before or more than 70 days after such anniversary, the nomination must be received not earlier than the close of business on the 120th day prior to the annual meeting date and not later than the close of business on the later of the 90th day prior to such annual meeting or the tenth day following the day when the Company makes a public announcement of the annual meeting date. Such notice must provide the information required by our Section 2.2 of our Bylaws with respect to each matter other than stockholder nominations the stockholder proposes to bring before the 2011 annual meeting.  Notice of stockholder nominations must provide the information required by Section 3.3 of our Bylaws.

 

Additional Information

 

A copy of the Company’s Annual Report to Stockholders for the fiscal year ended December 31, 2009 has been mailed concurrently with this Proxy Statement to all stockholders entitled to notice of and to vote at the Annual Meeting. The Annual Report is not incorporated into this Proxy Statement and is not considered proxy-soliciting material.

 

The Company filed its Annual Report on Form 10-K with the SEC on February 25, 2010. The Company will mail without charge, upon written request, a copy of its Annual Report on Form 10-K for the fiscal year ended December 31, 2009, excluding exhibits. Exhibits, if requested, will be furnished upon the payment of a fee determined by the Company, such fee to be limited to the Company’s reasonable expenses in furnishing the requested exhibit or exhibits. Please send a written request to Investor Relations, Colfax Corporation, 8730 Stony Point Parkway, Suite 150, Richmond, VA 23235, or access these materials on the Company’s website at www.colfaxcorp.com on the Investors page.

 

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Other Matters

 

As of the date of this Proxy Statement, the Board does not intend to present any matters other than those described herein at the Annual Meeting and is unaware of any matters to be presented by other parties. If other matters are properly brought before the meeting for action by the stockholders, proxies returned to us in the enclosed form will be voted in accordance with the recommendation of the Board or, in the absence of such a recommendation, in accordance with the judgment of the proxy holder.

 

	By Order of the Board of Directors
	Thomas M. O’Brien
	Secretary

 

 

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	VOTE BY INTERNET - www.proxyvote.com
	Use the Internet to transmit your voting instructions and for electronic delivery of
	information up until 11:59 P.M. Eastern Time the day before the cut-off date or
	meeting date. Have your proxy card in hand when you access the web site and
	follow the instructions to obtain your records and to create an electronic voting
	instruction form.
COLFAX CORPORATION
8730 STONY POINT PARKWAY	VOTE BY PHONE - 1-800-690-6903
SUITE 150	Use any touch-tone telephone to transmit your voting instructions up until 11:59
RICHMOND,VA 23235	P.M. Eastern Time the day before the cut-off date or meeting date. Have your
	proxy card in hand when you call and then follow the instructions.
	VOTE BY MAIL
	Mark, sign and date your proxy card and return it in the postage-paid envelope we
	have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way,
	Edgewood, NY 11717.

TO VOTE, MARK BLOCKSBELOW IN BLUE OR BLACK INK AS FOLLOWS:	KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.	DETACH AND RETURN THIS PORTION ONLY

 

The Board of Directors recommends you vote FOR
the following proposal(s):

1.	Election of Directors	For	Against	Abstain
1a	Mitchell P. Rales	¨	¨	¨
1b	Clay H. Kiefaber	¨	¨	¨
1c	Patrick W. Allender	¨	¨	¨
1d	C. Scott Brannan	¨	¨	¨
1e	Joseph O. Bunting III	¨	¨	¨
1f	Thomas S. Gayner	¨	¨	¨
1g	Rhonda L. Jordan	¨	¨	¨
1h	Rajiv Vinnakota	¨	¨	¨

The Board of Directors recommends you vote FOR
the following proposal(s):	For	Against	Abstain

2. To ratify the appointment of Ernst & Young LLP	¨	¨	¨
as Colfax Corporation's independent registered
public accounting firm for the fiscal year
2010.

Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor,

administrator, or other fiduciary, please give full title as such. Joint owners should each sign

personally. All holders must sign. If a corporation or partnership, please sign in full corporate or

partnership name, by authorized officer.

Signature [PLEASE SIGN WITHIN BOX]	Date		Signature (Joint Owners)	Date

 

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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, 10-K Wrap is/are available at  www.proxyvote.com.

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STOCKHOLDERS' PROXY SOLICITED BY THE BOARD OF DIRECTORS OF COLFAX CORPORATION   Mitchell P. Rales and Joseph O. Bunting III , or either of them, each with the power of substitution, are hereby authorized to represent and to vote all of the shares of COLFAX CORPORATION common stock at the Annual Meeting of Stockholders of COLFAX CORPORATION to be held at The Westin Richmond, 6631 West Broad Street, Richmond, VA 23230 on Wednesday, May 19, 2010 at 3:00 p.m., Eastern Daylight Time, and at any adjournment or postponement of the meeting.   My proxies will vote the shares represented by this proxy as directed on the other side of this card, but in the absence of any instructions from me, my proxies will vote "FOR" the election of all the nominees listed under Item 1 and "FOR" Item 2.  My proxies may vote according to their discretion on any other matter which may properly come before the meeting. I may revoke this proxy prior to its exercise.   (Please fill in the appropriate boxes and sign and date on the other side of this card.)   Please fill the appropriate boxes, sign and date on the other side of this card.

 

 

 

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