Audit Committee Report
The Audit Committee oversees Federateds financial reporting process on behalf of the Board. Management has the primary responsibility
for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee has met to review and discuss the audited financial statements in the 2016 Annual
Report with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity and completeness of disclosures in the financial statements.
The Audit Committee discussed with the independent registered public accounting firm, who is responsible for expressing an opinion on the
conformity of those audited financial statements with U.S. generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of Federateds accounting principles as applied to the financial statements and
such other matters as are required to be discussed with the Audit Committee under standards of the Public Company Accounting Oversight Board (United States) (PCAOB). In addition, the Audit Committee has received from the independent
registered public accounting firm the written disclosures and the letter required by Rule 3526 of the PCAOB,
Communication with Audit Committees Concerning Independence,
relating to the independent registered public accounting firms
independence from management and Federated, and has discussed with the independent registered public accounting firm their independence. The Audit Committee has considered whether the provisions of non-audit services by the independent registered
public accounting firm are compatible with maintaining their independence.
The Audit Committee discussed with Federateds internal
auditors and independent registered public accounting firm the overall scope and plans for their respective audits. The Audit Committee meets with the internal auditors and independent registered public accounting firm, with and without management
present, to discuss the results of their examinations, their evaluations of Federateds internal controls, and the overall quality of Federateds financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board has approved) that
the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2016, for filing with the SEC. The Audit Committee also selected Federateds independent registered public accounting firm for
the fiscal year ending December 31, 2017.
Respectfully Submitted:
Michael J. Farrell, Audit Committee Chairman
Joseph C. Bartolacci, Audit Committee Member
David M. Kelly, Audit Committee Member
Marie Milie Jones, Audit Committee Member
7
Compensation Committee
The Compensation Committee, which operates pursuant to a written charter, consists of Messrs. Joseph C. Bartolacci, Michael J. Farrell and
David M. Kelly, and Ms. Marie Milie Jones. Since Mr. Kelly is not being re-nominated for election to the Board, after the 2017 Annual Meeting on April 27, 2017, Mr. Kelly will no longer be a director or member of the Compensation
Committee. Mr. Farrell is Chairman of the Compensation Committee. It is anticipated that, upon the approval of his election to the Board at the Annual Meeting, Mr. Bartolacci will be appointed as Chairman of the Compensation Committee by
the Board at its meeting that immediately follows the Annual Meeting. The Compensation Committee establishes performance measures and certifies achievement, recommends and approves compensation levels of executive officers, awards share-based
compensation, works with senior management on benefit and compensation programs for Federated employees, and monitors local and national compensation trends to ensure that Federateds compensation program is competitive within the mutual fund
industry. The Compensation Committee has delegated its full power and authority under the Annual Incentive Plan to the Chief Executive Officer with respect to all employees other than those subject to Section 16 of the Exchange Act. Currently,
the following persons are subject to Section 16 of the Exchange Act: Gordon J. Ceresino, John F. Donahue, J. Christopher Donahue, Thomas R. Donahue, John B. Fisher, Eugene F. Maloney, John W. McGonigle, Richard A. Novak, Paul A. Uhlman and
Steven Van Meter and non-employee members of the Board. In 2016, the Compensation Committee met on four occasions.
As members of the
Compensation Committee, Messrs. Bartolacci, Farrell and Kelly, and Ms. Jones, are deemed to be outside directors for purposes of Section 162(m) of the Internal Revenue Code and non-employee directors as defined in Rule 16b-3 of the
Exchange Act.
Compensation Risk
The Compensation Committee collaborates with Federateds management in reviewing the material terms of Federateds compensation
policies and programs for all employees, and evaluates the intended behaviors each is designed to incent to ensure that such policies and programs do not encourage excessive risk-taking that could result in a material, adverse impact to the Company.
The Compensation Committee believes that Federateds compensation policies and programs do not give rise to risks reasonably likely to have a material adverse effect on the Company.
Corporate Governance
To address corporate governance matters and communicate its business standards, Federated has adopted Corporate Governance Guidelines and a
Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics applies to directors, officers and employees of Federated. Copies of these materials as well as Charters for the Audit, Compensation, and Compliance Committees are
available on Federateds website at
FederatedInvestors.com
by first clicking on About Federated and then Corporate Governance. The information is also available in print upon written request.
Under Federateds policies, the directors are expected to attend the Annual Meeting. All of the directors on the Board at the time of the
2016 Annual Meeting of Shareholders attended the 2016 Annual Meeting. Since Mr. Bartolacci was not a Board member at the time of the 2016 Annual Meeting of Shareholders, Mr. Bartolacci did not attend.
8
Communications with the Board
Independent members of the Board have regularly scheduled executive sessions without management participation. Mr. David M. Kelly
presides over these meetings. Since Mr. Kelly is not being re-nominated for election to the Board, after the Annual Meeting, Mr. Kelly will no longer serve this role. It is anticipated that, upon the approval of his election to the Board
at the Annual Meeting, Mr. Farrell will be selected to serve as Lead Independent Director. In order that shareholders and other interested parties may make their concerns known to the independent directors as well as to the Audit Committee,
Compliance Committee, and the full Board, the Board has established a telephone messaging system and an internet-based anonymous incident reporting system. All messages will be forwarded to Federateds Chief Compliance Officer (CCO)
for review, who will prepare a summary of such communications for the independent directors, the Audit Committee, the Compliance Committee, or the full Board as appropriate. Information concerning the use of the messaging system and the reporting
system can be obtained on Federateds website at
FederatedInvestors.com
by first clicking on About Federated, Investor Relations and then Corporate Governance.
Board Leadership Structure
In 2016, Mr. J. Christopher Donahue was elected as President and Chief Executive Officer, and Chairman, of the Company. The Board does not
have a policy with respect to whether the Chairman should be an independent director, an affiliated director or a member of Company management. The Companys policy as to whether the role of Chief Executive Officer and Chairman should be
separate is to adopt the practice that best serves the Companys and Shareholders interests at any particular time. Currently, the Board believes that, given Mr. J. Christopher Donahues knowledge, experience and strategic
vision, and the evolving investment management industry, combining the roles of Chairman, President and Chief Executive Officer would best serve the interests of the Company and its Shareholders. Additionally, the Board has currently designated
Mr. David M. Kelly as Lead Independent Director. In that capacity, he chairs all executive sessions of the independent directors and serves as a liaison between the independent directors and management. Since Mr. Kelly is not being
re-nominated for election to the Board, after the Annual Meeting, Mr. Kelly will no longer serve as Lead Independent Director. It is anticipated that, upon the approval of his election to the Board at the Annual Meeting, Mr. Farrell will
be appointed Lead Independent Director by the Board at its meeting that immediately follows the 2017 Annual Meeting. The Board believes this leadership structure is appropriate because it effectively allocates authority, responsibility and oversight
between management and the non-management directors.
Risk Oversight
The Board has oversight responsibility for risk management, focusing on significant risks facing Federated, including operational, financial,
legal, compliance and macro-economic risks. The Board and its committees work closely with management to monitor risk and it is managements responsibility to manage risk and bring to the Boards attention material risks to the Company.
The Board has delegated responsibility to certain Board committees for the oversight of specific risks as follows:
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The Compliance Committee is responsible for monitoring and reviewing significant legal, compliance and regulatory matters involving Federated. It accomplishes this by receiving regular reports from Federateds
Chief Risk Officer (CRO) and CCO, and meeting in executive session with these individuals as necessary.
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The Audit Committee is responsible for monitoring and reviewing Federateds policies and procedures relating to the financial reporting process, including the internal control process. It also monitors the
Companys internal audit function, the work performed by the independent registered public accounting firm and the Companys compliance with related applicable legal and regulatory requirements. It accomplishes these tasks by receiving
regular reports from Federateds Chief Audit Executive (CAE), as well as from Federateds independent registered public accounting firm. It also meets in regular executive sessions with the CAE and the independent registered
public accounting firm.
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9
In addition, the Board as a whole receives regular reports on significant legal and regulatory
matters from Federateds General Counsel.
Federated maintains several departments which focus on risk assessment and mitigation. It
maintains an Enterprise Wide Risk Management department (Risk Management) headed by the CRO. Risk Management implements the processes established to report and monitor material risks to the Company. The CRO reports directly to the
Compliance Committee of the Board on a quarterly basis and the full Board as appropriate. The CRO reports to the Compliance Committee on significant enterprise risks such as regulatory, compliance and business risks as well as top investment-related
risks that could impact the investment products under management by Federated. The CRO also provides the Compliance Committee with regular updates on enterprise risk initiatives being conducted by Risk Management.
Federated also maintains a Compliance Department headed by the CCO. The function of the Compliance Department and the role of the CCO are
intended to operate in a manner consistent with Rule 38a-1 under the Investment Company Act of 1940 and Rule
206(4)-7 of the Investment Advisers Act of 1940, respectively. The Compliance Departments primary responsibility is to assure that
compliance and ethical standards are in place within Federated and that policies and procedures have been adopted and implemented that are reasonably designed to prevent violation of federal securities laws and regulations. The CCO, like the CRO,
reports directly to the Compliance Committee on significant compliance issues and initiatives on a quarterly basis and the full Board as appropriate.
Federated also maintains an Internal Audit Department headed by the CAE. The function of the Internal Audit Department is to provide an
internal assessment of business processes, including assessments of Federateds internal controls over the financial reporting process. It also provides consulting services to Federated business units to better allow such units to assess and
monitor risk relating to their business processes. The CAE reports directly to the Audit Committee on significant internal audit-related issues, as well as on the progress of managements review of the internal controls over financial reporting
on a quarterly basis.
Each of the CCO, CAE, CRO and General Counsel has the authority to contact the Board directly at any time to
discuss risk-related matters if they deem it necessary. In addition, Federated fosters effective communications among its various departments by maintaining an internal compliance committee that meets at least quarterly and consists of the CCO, CAE,
CRO and General Counsel. This committee presents a formal mechanism for these department heads to discuss compliance- and risk-related matters at Federated.
Federated believes that the division of risk management responsibilities described above is an effective approach for addressing the risks
facing Federated and that the Board leadership structure, described above, supports this approach.
Nomination of Directors
Under the NYSE Rules, Federated is not required to have a nominating committee because it is considered a controlled
company for purposes of these rules. In light of this fact, Federated believes that it is appropriate not to have a nominating committee and, therefore, does not have a nominating committee charter in reliance on the NYSE Rules exemption.
Federateds current practice is for the Board as a whole to perform the functions of a nominating committee.
The Board does not
currently consider director candidates recommended by Shareholders and does not have a formal policy with regard to consideration of director candidates recommended by Shareholders. Federated believes that it is appropriate not to have such a policy
because of its status as a controlled company under the NYSE Rules.
The Board seeks candidates who possess the background,
skills, experience, expertise, integrity, and degree of commitment necessary to make a significant contribution to the Board. In connection with its evaluation of a nominee, the Board takes into account all applicable laws, rules, regulations and
listing standards and considers other relevant factors as it deems appropriate, including the current composition of the Board, the balance of management and independent directors, the need for Audit Committee expertise, and its evaluation of other
prospective nominees. Although the Board does not have a formal policy regarding the consideration of diversity in identifying nominees for director, the Board believes directors should be selected so that the Board is a diverse body. In order to
achieve this result, the Board seeks nominees who reflect differences of viewpoint, professional experience, education, skill and other individual qualities and attributes that it believes will strengthen the Board as a whole. Nominees for
directorship are recommended to the Board by Federateds Chief Executive Officer and its other directors. An invitation to join the Board will generally be extended by Federateds Chairman and Chief Executive Officer.
10
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included herein with management. Based on this
review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Information Statement.
Respectfully Submitted:
Michael J. Farrell,
Compensation Committee Chairman
Joseph C. Bartolacci, Compensation Committee Member
David M. Kelly, Compensation Committee Member
Marie Milie Jones, Compensation Committee Member
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Philosophy and Objectives
The investment management business is highly competitive and experienced professionals have significant career mobility. Federateds
ability to attract, retain and properly motivate highly qualified professionals is a critical factor in maintaining Federateds competitive position within the investment management industry and ensuring Federateds future success.
Accordingly, Federateds compensation program is comprised of competitive levels of cash compensation together with equity and other components that are consistent with Shareholder interests. Federateds compensation program is designed to
reward outcomes related to a variety of factors including Federateds revenues, earnings, earnings on a per share basis, and return on equity and payout ratio. Additional consideration is given to Federateds investment and financial
performance as measured against other similar companies within the investment management industry and the performance of Federateds stock. Federateds Chief Executive Officer, Chief Financial Officer and its three other most highly
compensated executive officers are referred to herein as the Named Executive Officers.
Allocation Among Compensation Components
As previously noted, each component of Federateds compensation program is designed to be competitive within the investment management
industry and to align the interests of Federateds executive officers with those of Federateds Shareholders. The final determination on setting compensation for executive officers rests with the Compensation Committee. The Compensation
Committee takes a holistic approach to assessing and determining the components of each executive officers total compensation. The Compensation Committee receives input and recommendations from, and works collaboratively with, Federateds
Chief Executive Officer in analyzing information relating to Company and individual performance. The Compensation Committee not only considers a variety of factors relating to Company performance including Federateds Operating Profits (as
defined hereinafter), revenues, earnings per share and stock performance, but also considers industry compensation trends among companies in Federateds peer group, as discussed below. The Compensation Committee also reviews investment
performance and financial performance on a comparative basis, as well as the effectiveness of marketing and sales efforts. The Compensation Committee subjectively considers a number of different individual and corporate performance factors, but
gives no specific weighting to any such factor. Each component of compensation is reviewed independently each year, taking into consideration both Company and individual results as well as comparative peer group information.
Peer Group.
In 2016, Federated engaged Deloitte Consulting (Deloitte), a nationally recognized consulting firm with
expertise in executive compensation practices and program design, to conduct a study of the compensation of executive officers at Federated and eleven of Federateds peers within the investment management industry. The Compensation Committee
has reviewed Federateds relationships with, and the services provided by, Deloitte and has not identified any conflicts of interest.
Federateds peer group selected for purposes of Deloittes study included Affiliated Managers Group, Inc.; AllianceBernstein Holding
LP; BlackRock, Inc.; Calamos Asset Management, Inc.; Eaton Vance Corp.; Franklin Resources, Inc.; Invesco Ltd.; Janus Capital Group, Inc.; Legg Mason, Inc.; T. Rowe Price Group, Inc.; and Waddell & Reed Financial, Inc. In selecting this
peer group, Federated used the size criteria of approximately one-half to two times Federated in one or more of the following metrics: revenue, assets under management, net income and market capitalization. The peer group data used for purposes of
Deloittes study is generally gathered from publicly disclosed documents of those companies. Therefore, these results will typically only relate to the five most highly compensated executive officers of a given company. Information prepared by
Deloitte was provided to the Compensation Committee to assist it in its efforts to determine
12
appropriate levels of compensation. While the Compensation Committee considers the peer data provided by Deloitte
in setting executive compensation, Federated does not benchmark to a specified percentile of this peer group.
Base Salary.
Base
salaries are intended to form a competitive percentage of total cash compensation. Federateds objective in paying a base salary is to provide its executive officers with a level of assured cash compensation that is commensurate with their
position, expertise and accomplishments. In establishing base salaries, the Compensation Committee considers performance assessments and recommendations provided by Federateds Chief Executive Officer with respect to executive officers other
than himself. The Compensation Committee also gives consideration to Federateds financial results from the prior year as well as the base salaries paid for comparable positions by companies in Federateds peer group. With the exception of
the base salary increase awarded to Mr. Paul A. Uhlman upon his appointment to President, Federated Securities Corp. in June 2016, the Compensation Committee did not increase executive officers 2016 base salaries consistent with
Federateds company-wide effort to control expenses in 2016.
Bonuses.
Bonuses paid under the Annual Incentive Plan are
designed to reward executive officers for the successful attainment of annual results that are consistent with Federateds long-term growth and development. Each year, the Compensation Committee establishes one or more performance goals that
must be attained for bonuses to be awarded under the Annual Incentive Plan. The performance period over which the performance goals are measured may be a calendar year, or other period of 12 months or less, for which a participants performance
is measured as established in the discretion of the Compensation Committee. In 2016, the Compensation Committee required that Federated attain operating profits of $63.75 million for the nine month period ending September 30, 2016 for bonuses
to be awarded. For purposes of the Annual Incentive Plan performance goal, operating profits are defined, for the applicable performance period, as total revenue less distributions to non-controlling (minority) interests and less total expenses
(including net non-operating income/expenses and income taxes and excluding amortization of intangibles, impairment losses and debt expenses) as reflected in Federateds audited or unaudited financial statements (Operating Profits).
Achievement of the performance goal is a condition for payment of a bonus under the Annual Incentive Plan. For the nine-month period ended September 30, 2016, Federated had Operating Profits of approximately $161.16 million. The maximum amount
that may be awarded to each executive officer in a given year under the Annual Incentive Plan is $6 million. Achievement of the performance goal, however, does not serve to ensure the award of a bonus under the Annual Incentive Plan. The
Compensation Committee has the discretion, in appropriate circumstances, to reduce or eliminate a bonus even if a performance goal is achieved. The awards are payable under the Annual Incentive Plan promptly after the Compensation Committee has
determined that the performance goal, and any other material terms, have been achieved (but in no event later than 2
1
⁄
2
months after the close of the fiscal
year in which the performance period ends).
In addition to the Operating Profits threshold for bonuses under the Annual Incentive Plan,
in determining awards for 2016 under the Annual Incentive Plan, the Compensation Committee considered a variety of factors including Federateds Operating Profits, revenues, earnings, earnings on a per share basis and return on equity and
payout ratio. Also taken into consideration by the Compensation Committee was the performance of Federateds stock, Federateds investment and financial performance as measured against other similar companies within the investment
management industry, and the performance assessment and recommendations made by Federateds Chief Executive Officer with respect to executive officers other than himself. The Compensation Committee also considered the Companys relative
performance in challenging market conditions, the Companys effective expense management and the Companys market share.
The
Compensation Committee, as noted above, also considers individual performance factors.
Individual factors the Compensation Committee
considered when determining J. Christopher Donahues 2016 bonus award included executive leadership with respect to overall management of the Company, and executive leadership in responding to current and emerging regulatory issues.
Individual factors the Compensation Committee considered when determining Thomas R. Donahues 2016 bonus award included breadth of
operational responsibility beyond traditional Chief Financial Officer duties, and executive leadership with respect to financial reporting, industry initiatives, and acquisitions.
Individual factors the Compensation Committee considered when determining John B. Fishers 2016 bonus award included executive leadership
with respect to investment management, product performance and depth and breadth of fund knowledge.
Individual factors the Compensation
Committee considered when determining Paul A. Uhlmans 2016 bonus award included his successful transition to President, Federated Securities Corp., and executive leadership with respect to product sales, sales results and communications with
fund shareholders.
13
Individual factors the Compensation Committee considered when determining John W.
McGonigles 2016 bonus award included executive leadership with respect to legal and compliance, and executive leadership in responding to current and emerging regulatory issues.
The Compensation Committee gives no specific weighting to any of the aforementioned individual and corporate performance factors and considers
each of them on a subjective basis. For 2016, consistent with past practice, the Compensation Committee, in the exercise of its discretion under the Annual Incentive Plan, reduced the amount of the bonus award from the maximum amount eligible to be
attained by an executive officer.
Equity Compensation.
For 2016 Annual Incentive Plan bonus awards, executives under the age of
sixty-two on the date of the award generally receive eighty percent of their award amount in cash and twenty percent in the form of restricted stock (Bonus Restricted Stock), and may elect to receive seventy percent in cash and thirty
percent in Bonus Restricted Stock. For 2016, executive officers aged sixty-two or older on the date of the award, who receive bonus awards under the Annual Incentive Plan may elect to receive 100% of such awards in cash, may elect to receive eighty
percent in cash and twenty percent in Bonus Restricted Stock or may elect to receive seventy percent in cash and thirty percent in Bonus Restricted Stock. Bonus Restricted Stock is awarded at eighty-five percent of fair market value, based on the
closing price of Federated Class B Common Stock on the NYSE on the award date and generally vests over a three-year period. Bonus Restricted Stock awards are made at eighty-five percent of fair market value in recognition of the risk of forfeiture
and the delay in receiving awards earned under the Annual Incentive Plan. The Company believes that the Bonus Restricted Stock portion of the award serves to further align the interests of executive officers with those of the Shareholders.
In 2016, the Compensation Committee also granted periodic restricted stock (Periodic Restricted Stock) awards to executive
officers under the Stock Incentive Plan. In determining whether Periodic Restricted Stock awards are appropriate and, if so, the size of such an award, the Compensation Committee holistically considers any outstanding and unvested restricted stock
the executive officer holds as well as the value of equity compensation as a component of total compensation. In making its decision, the Compensation Committee also considers on a subjective basis factors such as the executive officers
performance, changes in his or her responsibilities, promotions and general industry practices. Periodic Restricted Stock awards, for which executive officers pay the Company $3.00 per share, generally vest over a ten-year period, which Federated
believes serves to align the long-term interests of executive officers with those of Federateds Shareholders. The timing of Periodic Restricted Stock grants is driven by the Compensation Committees assessment of the need to compensate
executive officers, not by Federateds stock price. Grants are made only during open periods in which the Company has not implemented trading restrictions. Please refer to footnotes (1) and (2) of the 2016 Summary
Compensation Table and footnotes (2), (3) and (4) of the 2016 Outstanding Equity Awards at Fiscal Year End Table, and the Narrative Disclosure to 2016 Summary Compensation Table and 2016 Grants of Plan-Based Awards Table, for further
information relating to the Companys awards of Bonus Restricted Stock and Periodic Restricted Stock to Named Executive Officers.
Federated does not currently award stock options to its executive officers (or its other employees).
Perquisites and Other Benefits.
Federated provides a limited number of perquisites and other benefits to its executive officers that
are intended to encourage the health and wellness of its executive officers and to reduce the time and attention that they must spend on non-Federated issues.
Certain executive officers are eligible for reimbursement for the initiation fees and dues associated with membership in golf and/or social
clubs that have a business purpose. Such memberships provide executive officers with an appropriate forum for entertaining clients and interacting with the community. During 2016, seven executive officers were provided with on-site parking at
Federateds headquarters. Executive officers are permitted to use Federateds corporate aircraft for a limited amount of personal use when the corporate aircraft is not being utilized for business purposes. Such personal use of the
corporate aircraft must be pre-approved by the Chief Executive Officer or Chief Financial Officer. Personal use of the corporate aircraft by an executive officer results in taxable income to the executive officer determined in accordance with
Internal Revenue Service regulations. For security and efficiency reasons, the Chairman, Chief Executive Officer and Chief Financial Officer are required to use the corporate aircraft for business and personal use to the greatest reasonable extent.
Executive officers are entitled to receive medical, life and disability coverage and other corporate benefits available to most of
Federateds other employees. Executive officers are also provided an annual physical, at their option.
Executive officers are
eligible to participate in the Federated Investors, Inc. Profit Sharing/401(k) Plan, which is made available to substantially all of Federateds employees.
14
Board Process
The Compensation Committee receives input and recommendations from, and works collaboratively with, Federateds Chief Executive Officer in
analyzing information relating to Company and individual performance. As discussed above, the Compensation Committee also considers a variety of factors when determining annual salary and awards of bonuses under the Annual Incentive Plan or awards
of Periodic Restricted Stock under the Stock Incentive Plan. The Compensation Committee not only considers a variety of factors relating to Company performance including Federateds Operating Profits, revenues, earnings per share and stock
performance, but also considers industry compensation trends among companies in Federateds peer group as provided in the aforementioned study conducted by Deloitte. The Compensation Committee also reviews investment performance and financial
performance on a comparative basis, as well as the effectiveness of marketing and sales efforts. Although the Compensation Committee considers a number of different individual and corporate performance factors, no specific weighting is given to any
such factor. Because Federated is a controlled company and does not solicit proxies, consents or authorizations from shareholders relating to the Annual Meeting, Federated is not required to hold, and, therefore, consideration is not
given to the results of, a shareholder advisory vote on executive compensation pursuant to Section 14A of the Exchange Act.
15
Summary Compensation Table
The following table sets forth compensation information for the fiscal years ended December 31, 2016, 2015 and 2014 for Federateds
Named Executive Officers.
2016 SUMMARY COMPENSATION TABLE
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Name & Principal Position
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Year
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Salary
($)
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Stock
Awards
($)
(1)
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Non-Equity
Incentive Plan
Compensation
($)
(2)
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All Other
Compensation
($)
(3)
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Total
($)
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J. Christopher Donahue
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2016
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787,500
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1,023,556
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2,275,000
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504,134
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4,590,190
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President and Chief
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2015
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787,500
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838,243
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2,030,000
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|
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349,584
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4,005,327
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Executive Officer
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2014
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787,500
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847,078
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1,662,500
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361,166
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3,658,244
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Thomas R. Donahue
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2016
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720,000
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1,165,551
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1,610,000
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592,797
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4,088,348
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Chief Financial Officer and President,
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2015
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720,000
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1,163,478
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1,417,500
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385,082
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3,686,060
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FII Holdings, Inc.
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2014
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720,000
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1,189,295
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1,260,000
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363,330
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3,532,625
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John B. Fisher
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2016
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635,000
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1,097,904
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2,170,000
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450,006
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4,352,910
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Vice President and President and Chief
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2015
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635,000
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1,104,671
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2,200,000
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291,427
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4,231,098
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Executive Officer, Federated Advisory
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2014
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635,000
|
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1,106,945
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1,960,000
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281,986
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3,983,931
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Companies
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Paul A. Uhlman (4)
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2016
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375,000
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2,676,844
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800,000
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285,100
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4,136,944
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Vice President and President,
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Federated Securities Corp.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John W. McGonigle (5)
|
|
|
2016
|
|
|
|
720,000
|
|
|
|
564,731
|
|
|
|
1,750,000
|
|
|
|
308,861
|
|
|
|
3,343,592
|
|
Executive Vice President and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Legal Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The amounts in this column reflect the aggregate grant date fair value of restricted stock awards for the fiscal years ended December 31, 2016, 2015 and 2014 (as applicable) calculated in accordance with U.S.
generally accepted accounting principles applicable to stock compensation. Additional information regarding Restricted Stock awards can be found in the 2016 Grants of Plan-Based Awards Table. The calculation methodology for the valuation of Periodic
Restricted Stock and Bonus Restricted Stock awards is set forth in Note 1(p) of Federateds Consolidated Financial Statements contained in Federateds Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
|
(2)
|
The table below is provided to assist the reader in understanding the total bonus earned by each Named Executive Officer under the Annual Incentive Plan (Total Bonus) and the percentage of such Total Bonus
allocated to Bonus Restricted Stock (% BRS) for each of the fiscal years ended December 31, 2016, 2015 and 2014 (as applicable).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Annual Incentive Plan
|
|
|
2015 Annual Incentive Plan
|
|
|
2014 Annual Incentive Plan
|
|
|
|
Total Bonus ($)
|
|
|
% BRS
|
|
|
Total Bonus ($)
|
|
|
% BRS
|
|
|
Total Bonus ($)
|
|
|
% BRS
|
|
J. Christopher Donahue
|
|
|
3,250,000
|
|
|
|
30
|
|
|
|
2,900,000
|
|
|
|
30
|
|
|
|
2,375,000
|
|
|
|
30
|
|
Thomas R. Donahue
|
|
|
2,300,000
|
|
|
|
30
|
|
|
|
2,025,000
|
|
|
|
30
|
|
|
|
1,800,000
|
|
|
|
30
|
|
John B. Fisher
|
|
|
3,100,000
|
|
|
|
30
|
|
|
|
2,750,000
|
|
|
|
20
|
|
|
|
2,450,000
|
|
|
|
20
|
|
Paul A. Uhlman
|
|
|
1,000,000
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John W. McGonigle
|
|
|
1,750,000
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
While the cash portion of the Total Bonus paid in 2017 for fiscal year 2016 is reported in the
Non-Equity Incentive Plan Compensation column of the 2016 Summary Compensation Table, the portion of the fiscal year 2016 Total Bonus received in the form of Bonus Restricted Stock in 2017 is not represented. Rather, the Bonus Restricted
Stock received in 2016 for fiscal year 2015 Total Bonus is included in the Stock Awards column for fiscal year 2016. The grant date fair value of the Bonus Restricted Stock received in 2016, 2015 and 2014 under the Annual Incentive Plan
for fiscal years 2015, 2014 and 2013, respectively, was based on the NYSE closing prices of $28.34, $34.35 and $28.01, respectively, on the relevant grant dates. The closing price of the Class B Common Stock on December 30, 2016, the last day
of trading in 2016, was $28.28. Bonus Restricted Stock is awarded at eighty-five percent of fair market value on the date of grant.
(3)
|
With respect to Mr. J. Christopher Donahue, the amount listed for 2016 reflects matching contributions under Federateds 401(k) Plan, company-provided parking, spousal travel, a corporate gift of nominal value
and an annual physical. In addition, Federated paid the premium for long-term disability insurance. It also includes a life insurance premium of $55,129, medical insurance premium of $88,571, club dues of $25,836, dividends on restricted stock of
$288,103 and $28,970 that reflects the aggregate incremental cost to Federated of personal use of the corporate aircraft. The aggregate incremental cost to Federated of personal use of the corporate aircraft is determined on a per flight basis and
includes cost of fuel, landing and storage fees, crew-related expenses and other miscellaneous variable costs.
|
With respect
to Mr. Thomas R. Donahue, the amount listed for 2016 reflects matching contributions under Federateds 401(k) Plan, company-provided parking, club dues and spousal travel. In addition, Federated paid the premium for long-term
disability insurance. It also includes a life insurance premium of $54,309, a medical insurance premium of $119,547 and dividends on restricted stock of $381,110.
With respect to Mr. Fisher, the amount listed for 2016 reflects matching contributions under Federateds 401(k) Plan,
company-provided parking, club dues, spousal travel and an annual physical. In addition, Federated paid the premium for long-term disability insurance and a portion of the premiums for life, accidental death and medical insurance. It also includes
dividends received on restricted stock of $390,847 and $25,800 that reflects the aggregate incremental cost to Federated of personal use of the corporate aircraft.
With respect to Mr. Uhlman, the amount listed for 2016 reflects matching contributions under Federateds 401(k) Plan,
company-provided parking, spousal travel and a corporate gift of nominal value. In addition, Federated paid premiums for long-term disability and portions of the premiums for life, accidental death and medical insurance. It also includes dividends
received on restricted stock of $179,804 and club dues of $75,959.
With respect to Mr. John W. McGonigle, the amount listed for
2016 reflects matching contributions under Federateds 401(k) Plan, company-provided parking, spousal travel and an annual physical. In addition, Federated paid the premium for long-term disability insurance. It also includes a life insurance
premium of $30,848, a medical insurance premium of $88,571, club dues of $48,976, dividends on restricted stock of $73,133 and $50,658 that reflects the aggregate incremental cost to Federated of personal use of the corporate aircraft.
(4)
|
Mr. Uhlman was not a Named Executive Officer for the fiscal years ended December 31, 2014 and 2015. Therefore, only his 2016 compensation information is included in the Summary Compensation Table.
|
(5)
|
Mr. McGonigle was not a Named Executive Officer for the fiscal years ended December 31, 2014 and 2015. Therefore, only his 2016 compensation information is included in the Summary Compensation Table.
|
17
Grants of Plan-Based Awards
The following table sets forth information concerning cash bonuses and restricted stock awards granted to the Named Executive Officers during
the fiscal year ended December 31, 2016.
2016 GRANTS OF PLAN-BASED AWARDS TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated future payouts under
non-equity incentive plan awards
|
|
|
Estimated future payouts
under equity incentive plan
awards
|
|
|
All other
stock
awards:
number of
shares of
stock or
units
(#)
(4)
|
|
|
Grant date
fair value
of stock
and option
awards
($)
(5)
|
|
Name
|
|
Grant
Date
|
|
|
Approval
Date
(1)
|
|
|
Threshold
($)
|
|
|
Target
($)
(2)
|
|
|
Maximum
($)
|
|
|
Threshold
(#)
|
|
|
Target
(#)
(3)
|
|
|
Maximum
(#)
|
|
|
|
J. Christopher Donahue
|
|
|
3/4/16
|
|
|
|
1/28/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,117
|
|
|
|
1,023,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,275,000
|
|
|
|
6,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas R. Donahue
|
|
|
3/4/16
|
|
|
|
1/28/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,219
|
|
|
|
714,706
|
|
|
|
|
11/18/16
|
|
|
|
10/27/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,500
|
|
|
|
|
|
|
|
|
|
|
|
450,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,610,000
|
|
|
|
6,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John B. Fisher
|
|
|
3/4/16
|
|
|
|
1/28/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,832
|
|
|
|
647,059
|
|
|
|
|
11/18/16
|
|
|
|
10/27/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,500
|
|
|
|
|
|
|
|
|
|
|
|
450,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,170,000
|
|
|
|
6,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul A. Uhlman
|
|
|
3/4/16
|
|
|
|
1/28/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,329
|
|
|
|
94,344
|
|
|
|
|
6/15/16
|
|
|
|
6/1/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
1,364,000
|
|
|
|
|
11/18/16
|
|
|
|
10/27/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
1,218,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
800,000
|
|
|
|
6,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John W. McGonigle
|
|
|
3/4/16
|
|
|
|
1/28/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,927
|
|
|
|
564,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750,000
|
|
|
|
6,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Compensation Committee approval date.
|
(2)
|
With respect to Messrs. J. Christopher Donahue, Thomas R. Donahue and Fisher, the amounts in this column reflect seventy percent of the bonus each received in 2017 under the Annual Incentive Plan for fiscal year 2016.
The remaining thirty percent for 2016 was received in 2017 in the form of Bonus Restricted Stock. With respect to Mr. Uhlman, the amount in this column reflects eighty percent of the bonus he received in 2017 under the Annual Incentive Plan for
fiscal year 2016. The remaining twenty percent for 2016 was received in 2017 in the form of Bonus Restricted Stock. With respect to Mr. McGonigle, the amount in this column reflects one hundred percent of the bonus he received in 2017 under the
Annual Incentive Plan for 2016.
|
(3)
|
The amounts reflected in this column represent Periodic Restricted Stock received in 2016 under the Stock Incentive Plan for a purchase price of $3.00 per share.
|
(4)
|
The amounts reflected in this column represent Bonus Restricted Stock received in 2016 attributed to the allocated portion of the 2015 bonus under the Annual Incentive Plan, which is generally subject to a three-year
vesting period.
|
(5)
|
The calculation methodology for the valuation of Periodic Restricted Stock and Bonus Restricted Stock awards is set forth in Note 1(p) of Federateds Consolidated Financial Statements contained in Federateds
Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Named Executive Officers pay the Company $3.00 per share for Periodic Restricted Stock awards.
|
18
Narrative Disclosure to 2016 Summary Compensation Table and 2016 Grants of Plan-Based Awards Table
Bonus Restricted Stock awards included in the Stock Awards column of the 2016 Summary Compensation Table were granted
in partial payment of the 2015 bonus awards and generally vest in equal one-third amounts over a three-year period. The Bonus Restricted Stock is awarded at eighty-five percent of fair market value. The Bonus Restricted Stock is granted under the
Annual Incentive Plan. See the discussion under the captions Bonuses and Equity Compensation in the Compensation Discussion and Analysis above for further information regarding the terms of the Annual Incentive Plan. The Bonus Restricted Stock grant
date fair value is reflected under the Grant date fair value of stock and option awards column of the 2016 Grants of Plan-Based Awards Table.
On November 18, 2016, each of Messrs. Thomas R. Donahue and Fisher received an award of 18,500, and Mr. Uhlman received an award of
50,000, shares of Periodic Restricted Stock under the Stock Incentive Plan, which awards are reflected in the Estimated future payouts under equity incentive plan awards column of the 2016 Grants of Plan-Based Awards Table. Additionally,
Mr. Uhlman received an award of 50,000 shares of Periodic Restricted Stock on June 15, 2016 in connection with his appointment as President of Federated Securities Corp. Each such award is governed by an accompanying 2016 Restricted Stock
Award Agreement, which specifies that the shares are subject to forfeiture should a certain performance measurement not be attained. In order to satisfy the performance measurement, Federated must have Operating Profits of at least $67.50 million
for the nine-month period ending September 30, 2017. In order to satisfy the performance measurement for Mr. Uhlmans June 15, 2016 award, Federated must have had Operating Profits of at least $42.5 million for the six month
period ending on December 31, 2016. For that period, Federated had Operating Profits of approximately $113.81 million thereby satisfying the performance measure for the June 15, 2016 award. Such awards are also subject to confidentiality
and non-competition obligations. Recipients pay the Company $3.00 per share for Periodic Restricted Stock awards and are entitled to receive dividends on the shares which are the same as those paid on unrestricted Class B Common Stock. Periodic
Restricted Stock awards granted in 2016 vest over a ten-year period with restrictions lapsing fifty percent on each of approximately the awards fifth- and tenth-year anniversaries, except in the case of a recipients death or separation
from employment due to disability, in which case should death or separation from employment due to disability occur prior to the fifth vesting date, the stock vests in accordance with the vesting schedule and all unvested shares at the time of death
or disability are forfeited and sold back to Federated for the purchase price ($3.00/share) or should death or separation from employment due to disability occur on or after the fifth vesting date, all of the unvested shares become vested shares
upon such separation from employment or death.
Federated makes a matching contribution under the Federated Investors, Inc. Profit
Sharing/401(k) Plan in an amount equal to 100% of the first 2% that each participant defers and 50% of the next 4% of deferral contributions, and these amounts are included in the All Other Compensation column of the 2016 Summary
Compensation Table.
19
Outstanding Equity Awards at Fiscal Year End
The following table sets forth information concerning unvested restricted stock awards held by the Named Executive Officers as of
December 31, 2016. The Named Executive Officers held no stock options as of December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
Name
|
|
Grant Date
|
|
|
Number of shares or units of
Stock that have not vested
(#)
|
|
|
Market value of shares or units
of stock that have not vested
($)
(1)
|
|
J. Christopher Donahue
|
|
|
11/18/2009
|
(2)
|
|
|
10,000
|
|
|
|
282,800
|
|
|
|
|
11/18/2010
|
(2)
|
|
|
11,250
|
|
|
|
318,150
|
|
|
|
|
11/18/2011
|
(2)
|
|
|
12,500
|
|
|
|
353,500
|
|
|
|
|
11/16/2012
|
(2)
|
|
|
16,000
|
|
|
|
452,480
|
|
|
|
|
11/18/2013
|
(2)
|
|
|
17,000
|
|
|
|
480,760
|
|
|
|
|
3/7/2014
|
(3)
|
|
|
10,080
|
|
|
|
285,062
|
|
|
|
|
3/6/2015
|
(3)
|
|
|
16,269
|
|
|
|
460,087
|
|
|
|
|
3/4/2016
|
(3)
|
|
|
36,117
|
|
|
|
1,021,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
129,216
|
|
|
|
3,654,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas R. Donahue
|
|
|
8/17/2007
|
(4)
|
|
|
7,500
|
|
|
|
212,100
|
|
|
|
|
11/18/2008
|
(2)
|
|
|
8,750
|
|
|
|
247,450
|
|
|
|
|
11/18/2009
|
(2)
|
|
|
10,000
|
|
|
|
282,800
|
|
|
|
|
11/18/2010
|
(2)
|
|
|
11,250
|
|
|
|
318,150
|
|
|
|
|
11/18/2011
|
(2)
|
|
|
12,500
|
|
|
|
353,500
|
|
|
|
|
11/16/2012
|
(2)
|
|
|
16,000
|
|
|
|
452,480
|
|
|
|
|
11/18/2013
|
(2)
|
|
|
17,000
|
|
|
|
480,760
|
|
|
|
|
3/7/2014
|
(3)
|
|
|
7,560
|
|
|
|
213,797
|
|
|
|
|
11/18/2014
|
(2)
|
|
|
18,000
|
|
|
|
509,040
|
|
|
|
|
3/6/2015
|
(3)
|
|
|
12,330
|
|
|
|
348,692
|
|
|
|
|
11/18/2015
|
(2)
|
|
|
17,575
|
|
|
|
497,021
|
|
|
|
|
3/4/2016
|
(3)
|
|
|
25,219
|
|
|
|
713,193
|
|
|
|
|
11/18/2016
|
(2)
|
|
|
18,500
|
|
|
|
523,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
182,184
|
|
|
|
5,152,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
John B. Fisher
|
|
|
8/17/2007
|
(4)
|
|
|
12,000
|
|
|
|
339,360
|
|
|
|
|
11/18/2008
|
(2)
|
|
|
14,000
|
|
|
|
395,920
|
|
|
|
|
11/18/2009
|
(2)
|
|
|
10,000
|
|
|
|
282,800
|
|
|
|
|
11/18/2010
|
(2)
|
|
|
11,250
|
|
|
|
318,150
|
|
|
|
|
11/18/2011
|
(2)
|
|
|
12,500
|
|
|
|
353,500
|
|
|
|
|
11/16/2012
|
(2)
|
|
|
16,000
|
|
|
|
452,480
|
|
|
|
|
11/18/2013
|
(2)
|
|
|
17,000
|
|
|
|
480,760
|
|
|
|
|
3/7/2014
|
(3)
|
|
|
6,580
|
|
|
|
186,082
|
|
|
|
|
11/18/2014
|
(2)
|
|
|
18,000
|
|
|
|
509,040
|
|
|
|
|
3/6/2015
|
(3)
|
|
|
11,189
|
|
|
|
316,425
|
|
|
|
|
11/18/2015
|
(2)
|
|
|
17,575
|
|
|
|
497,021
|
|
|
|
|
3/4/2016
|
(3)
|
|
|
22,832
|
|
|
|
645,689
|
|
|
|
|
11/18/2016
|
(2)
|
|
|
18,500
|
|
|
|
523,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
187,426
|
|
|
|
5,300,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul A. Uhlman
|
|
|
8/17/2007
|
(4)
|
|
|
2,100
|
|
|
|
59,388
|
|
|
|
|
11/18/2008
|
(2)
|
|
|
2,800
|
|
|
|
79,184
|
|
|
|
|
11/18/2009
|
(2)
|
|
|
4,000
|
|
|
|
113,120
|
|
|
|
|
11/18/2010
|
(2)
|
|
|
4,500
|
|
|
|
127,260
|
|
|
|
|
11/18/2011
|
(2)
|
|
|
3,500
|
|
|
|
98,980
|
|
|
|
|
11/16/2012
|
(2)
|
|
|
8,000
|
|
|
|
226,240
|
|
|
|
|
11/18/2013
|
(2)
|
|
|
4,675
|
|
|
|
132,209
|
|
|
|
|
3/7/2014
|
(3)
|
|
|
1,400
|
|
|
|
39,592
|
|
|
|
|
11/18/2014
|
(2)
|
|
|
4,500
|
|
|
|
127,260
|
|
|
|
|
3/6/2015
|
(3)
|
|
|
1,622
|
|
|
|
45,870
|
|
|
|
|
11/18/2015
|
(2)
|
|
|
3,800
|
|
|
|
107,464
|
|
|
|
|
3/4/2016
|
(3)
|
|
|
3,329
|
|
|
|
94,144
|
|
|
|
|
6/15/2016
|
(4)
|
|
|
50,000
|
|
|
|
1,414,000
|
|
|
|
|
11/18/2016
|
(2)
|
|
|
50,000
|
|
|
|
1,414,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
144,226
|
|
|
|
4,078,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John W. McGonigle
|
|
|
3/7/2014
|
(3)
|
|
|
6,405
|
|
|
|
181,133
|
|
|
|
|
3/6/2015
|
(3)
|
|
|
10,276
|
|
|
|
290,605
|
|
|
|
|
3/4/2016
|
(3)
|
|
|
19,927
|
|
|
|
563,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
36,608
|
|
|
|
1,035,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The amounts in this column reflect a December 30, 2016, the last day of trading in 2016, closing price of $28.28 for Class B Common Stock on the NYSE.
|
(2)
|
These restricted stock awards have 10-year vesting schedules which vest 5% in each of years 1-4 and years 6-9 and 30% in each of years 5 and 10. Vested shares are still considered restricted until they are released -
releases occur in years 5 (first half of shares released) and 10 (second half of shares released). Vesting schedules for the awards shown above are as follows:
|
21
|
|
|
Grant Date:
|
|
Vesting Schedule
(
vesting percentages should be applied to Original Shares Awarded
)
:
|
11/18/2008
|
|
5% on or about November 1, 2017; 30% on November 1, 2018
|
11/18/2009
|
|
5% on or about November 1, 2017 and 2018; 30% on November 1, 2019
|
11/18/2010
|
|
5% on or about November 1, 2017, 2018 and 2019; 30% on November 16, 2020
|
11/18/2011
|
|
5% on or about November 1, 2017, 2018, 2019 and 5% on November 16, 2020; 30% on November 16,
|
|
|
2021
|
11/16/2012
|
|
5% on or about November 1, 2018 and 2019; 5% on November 16, 2020 and 2021; 30% on November 1,
|
|
|
2017 and November 16, 2022
|
11/18/2013
|
|
5% on or about November 1, 2017 and 2019; 5% on or about November 16, 2020, 2021, and 2022; 30%
|
|
|
on November 1, 2018 and on November 17, 2023
|
11/18/2014
|
|
5% on or about November 1, 2017 and 2018; 5% on or about November 16, 2020, 2021, 2022 and 2023; 30%
|
|
|
on November 1, 2019 and November 18, 2024
|
11/18/2015
|
|
5% on or about November 1, 2017, 2018 and 2019; 5% on or about November 16, 2021, 2022, 2023 and
|
|
|
2024; 30% on or about November 16, 2020 and 2025
|
11/18/2016
|
|
5% on or about November 1, 2017, 2018 and 2019; 5% on or about November 16, 2020, 2022, 2023,
|
|
|
2024 and 2025; 30% on or about November 16, 2021 and 2026
|
(3)
|
These restricted stock awards have 3-year vesting schedules vesting 33 1/3% each year for three years. Vested shares under these awards are released upon vesting. Vesting schedules for the awards shown above are as
follows:
|
|
|
|
Grant Date:
|
|
Vesting Schedule
(
vesting percentages should be applied to Original Shares Awarded
):
|
3/7/2014
|
|
Two-thirds of this award have already vested; remaining 1/3 to vest on March 3, 2017
|
3/6/2015
|
|
One-third of this award has already vested; remaining 2/3 to vest on March 3, 2017 (1/3) and March 6,
|
|
|
2018 (1/3)
|
3/4/2016
|
|
Vesting occurs 33 1/3% on each of March 3, 2017, March 6, 2018 and March 4, 2019
|
(4)
|
These restricted stock awards are structured identically to the 10-year November awards described in footnote (2). Vesting schedules for these awards are as follows:
|
|
|
|
Grant Date:
|
|
Vesting Schedule
(
vesting percentages should be applied to Original Shares Awarded
):
|
8/17/2007
|
|
30% on August 1, 2017
|
6/15/2016
|
|
5% on or about June 15, 2017, 2018, 2019, 2020, 2022, 2023, 2024 and 2025; 30% on June 15, 2021
|
|
|
and 2026
|
22
Option Exercises and Stock Vested
The following table sets forth information concerning restricted stock held by the Named Executive Officers that vested during the fiscal year
ended December 31, 2016. No options were exercised by the Named Executive Officers during the fiscal year ended December 31, 2016.
2016 OPTION EXERCISES AND STOCK VESTED TABLE
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
Name
|
|
Number of
shares
acquired on
vesting
(#)
|
|
|
Value realized
on vesting
($)
(1)
|
|
J. Christopher Donahue
|
|
|
43,299
|
|
|
|
1,165,654
|
|
Thomas R. Donahue
|
|
|
39,712
|
|
|
|
1,048,205
|
|
John B. Fisher
|
|
|
68,151
|
|
|
|
1,757,003
|
|
Paul A. Uhlman
|
|
|
12,043
|
|
|
|
306,364
|
|
John W. McGonigle
|
|
|
19,594
|
|
|
|
555,294
|
|
(1)
|
The value realized on vesting of stock awards is equal to the difference between the closing market price of Class B Common Stock on the NYSE on the date of vesting and the purchase price paid by the Named Executive
Officer, if any, multiplied by the number of shares that vested.
|
Employment Agreements and Change-of-Control
Agreement
Federated generally does not have employment agreements or change-of-control agreements with its executive officers. The
only employment agreements Federated currently has in place with Named Executive Officers are those with Mr. John B. Fisher and Mr. Paul A. Uhlman.
On December 28, 1990, Mr. Fisher entered into an employment agreement (the Fisher Employment Agreement) with Federated
Investors, a predecessor of Federated, in connection with his employment by Federated Investors as an officer and employee. The Fisher Employment Agreement is still in effect. Under the terms of the Fisher Employment Agreement, Mr. Fisher is
subject to certain restrictions with regard to confidentiality and competition. Mr. Fisher is not permitted to disclose confidential information that he receives in the course of or as a result of his employment. Additionally, upon termination
of his employment, Mr. Fisher is prohibited from directly or indirectly competing with Federated for a period of two years. Furthermore, upon termination of his employment, Mr. Fisher agrees not to directly or indirectly solicit employees
of Federated to terminate their employment or contractual relations with Federated.
On October 22, 1990, Mr. Uhlman entered
into an employment agreement (the Uhlman Employment Agreement) with Federated Securities Corp., a subsidiary of Federated, in connection with his employment by Federated Securities Corp. as a sales representative. The Uhlman Employment
Agreement is still in effect. Under the terms of the Uhlman Employment Agreement, Mr. Uhlman is subject to certain restrictions with regard to confidentiality and competition. Mr. Uhlman is not permitted to disclose confidential
information he receives in the course of or as a result of his employment. Additionally, upon termination of his employment, Mr. Uhlman is prohibited from directly or indirectly competing with Federated in connection with the sale of shares of
money market funds or any other securities or other products and services which may be competitive for a period of two years. Furthermore, upon termination of his employment, Mr. Uhlman agrees not to directly or indirectly solicit employees of
Federated to terminate their employment or contractual relations with Federated.
The only agreement Federated currently has in place with
a Named Executive Officer that contains a change-of-control provision is a 2016 Restricted Stock Award Agreement entered into with Mr. Paul A. Uhlman on June 15, 2016, under the Stock Incentive Plan pursuant to which Mr. Uhlman
received a total of 50,000 shares of Restricted Stock. Under the terms of the 2016 Restricted Stock Award Agreement, the shares awarded vest over a ten-year period with restrictions lapsing on fifty percent of the award on each of approximately the
awards fifth- and tenth- year anniversaries, respectively. In certain circumstances where there is a change-of-control (as described below), the vesting of the shares is accelerated. For this
23
accelerated vesting to occur: (a) there must be a change in ownership of fifty-one percent or greater of the Class A Common Stock of Federated; and (b) one of the following must
occur (i) Mr. Uhlmans employment agreement is terminated other than for cause (as defined in the Agreements) by Federated or its successor during the six-month period before or the first two-year period following a change
in ownership or (ii) a constructive termination (as defined in the 2016 Restricted Stock Award Agreement) occurs prior to the occurrence of events which would permit a termination for cause during the first two-year period following
a change of ownership. If this double-trigger provision is satisfied, then any portion of the award not vested will fully vest. Assuming that the aforementioned events occurred on December 31, 2016, thereby satisfying the
double-trigger provision, the shares of Restricted Stock awarded to Mr. Uhlman pursuant to the 2016 Restricted Stock Award Agreement that were not vested would have become fully vested with an approximate value of $1,414,000 which
would include $150,000 Mr. Uhlman paid for his shares. Such events, however, did not occur.
24
TRANSACTIONS WITH RELATED PERSONS
During 2016, Mr. Richard B. Fisher, a co-founder of Federated and father of Mr. John B. Fisher, Vice President of
Federated, was employed by Federated as Vice Chairman. Mr. Richard B. Fisher was provided a salary of eight hundred thousand dollars for his services throughout the year. During 2016, Mr. John F. Donahue, a co-founder and
Chairman Emeritus and father of J. Christopher Donahue, President, Chief Executive Officer and Chairman of Federated, and Thomas R. Donahue, Executive Vice President, Chief Financial Officer and Treasurer of Federated, was compensated two million
eight hundred eighty five thousand and six dollars in his position as Chairman through April 28, 2016 and Chairman Emeritus thereafter.
Pursuant to a Shareholder Services Agreement between The Beechwood Company, L.P. (Beechwood) and Federated Securities Corp., a
subsidiary of Federated, as agent for certain Federated Funds (the Funds), Beechwood provides customary shareholder services to its customers that are shareholders of the Funds. In return, Beechwood receives service fees from the Funds.
During the fiscal year ended December 31, 2016, Beechwood received $123,164 from the Funds for its services. Certain members of the Donahue family, including Messrs. John F. Donahue, J. Christopher Donahue and Thomas R. Donahue, have direct and
indirect ownership interests in Beechwood.
CONFLICT OF INTEREST POLICIES AND PROCEDURES
Federated maintains a Code of Business Conduct and Ethics (the Code). The Code applies to each director, officer and employee of
Federated (each a Covered Person). The Code specifically addresses a variety of conflicts of interest, including transactions with related persons. The Code also sets forth guidance for Covered Persons with regard to general conflict of
interest scenarios where an individuals private interests interfere in any way with the interests of Federated as a whole. Federated relies on the integrity and undivided loyalty of Covered Persons to maintain the highest level of objectivity
in performing their duties.
Covered Persons are expected to avoid any situation in which personal interests conflict, or have the
appearance of conflicting, with those of Federated. Covered Persons are responsible for avoiding any misconduct or perceived conflicts of interest. Accordingly, employees are expected to use prudent behavior and discretion in all transactions and
relationships and are required to make prompt and complete disclosure of any possible or probable conflict of interest to their direct supervisor or manager, human resources, or the Internal Compliance Committee, as described below. Non-management
directors are also expected to make appropriate disclosures to the Board and to take appropriate steps to recuse themselves from Board decisions with respect to transactions or other matters involving Federated as to which they are interested
parties or with respect to which a real or apparent conflict of interest exists. As a general rule, Covered Persons should never receive a payment or anything of value in exchange for a decision involving Federateds business, with limited
exceptions for token gifts of nominal value. Additionally, Covered Persons generally may not have any direct or indirect financial interest in, or any business relationship with, a person or entity that does business with Federated or is a
competitor of Federated. This policy does not apply to an arms-length purchase of goods or services for personal or family use or to the ownership of less than five percent of the shares of a publicly traded company. Other arms-length business
relationships with Federated and/or the Federated Funds may be permissible provided such business relationships are disclosed to, reviewed and approved by the Internal Compliance Committee (as detailed below). Furthermore, Covered Persons should not
engage in outside jobs or activities that compete with Federated in any way. Except in certain limited circumstances, any employee who is invited to join the board of directors or to serve as an officer of another organization must obtain the
approval of the Internal Compliance Committee. The Code requires directors who are invited to serve on other boards to promptly notify Federateds Chief Executive Officer and Chairman.
The Code is administered by an Internal Compliance Committee, which consists of Federateds General Counsel, Chief Compliance Officer,
Chief Risk Officer and Chief Audit Executive. As previously discussed, the Code requires Covered Persons to disclose to the Internal Compliance Committee any personal activities or financial interests that could negatively influence, or give the
appearance of negatively influencing, their judgment or decisions. The Internal Compliance Committee then determines if there is a conflict and, if so, how to resolve it without compromising the interests of Federated, the Federated Funds or other
accounts, as applicable. When necessary, the Internal Compliance Committee will bring matters to the Chief Legal Officer, senior staff or the Board for final resolution.
A written copy of the Code is available on Federateds website at
FederatedInvestors.com
by first clicking on About
Federated, Investor Relations and then Corporate Governance.
25
SECURITY OWNERSHIP
Class A Common Stock
The following table sets forth certain information regarding beneficial ownership of Federateds Class A Common Stock by each person
who is known by Federated to own beneficially more than five percent of the outstanding shares of Class A Common Stock as of February 28, 2017.
|
|
|
|
|
|
|
|
|
Name and Address of Beneficial Owner
|
|
Shares
Beneficially
Owned
|
|
|
Percent
of
Class
|
|
Voting Shares Irrevocable Trust
dated May 31, 1989
|
|
|
9,000
|
|
|
|
100.0
|
%
|
c/o The Beechwood Company, L.P.
|
|
|
|
|
|
|
|
|
Suite 850
|
|
|
|
|
|
|
|
|
1001 Liberty Avenue
|
|
|
|
|
|
|
|
|
Pittsburgh, Pennsylvania 15222-3716
|
|
|
|
|
|
|
|
|
All of the outstanding shares of Class A Common Stock are held by the Voting Trust, the trustees of which
are Mr. J. Christopher Donahue, Federateds President and Chief Executive Officer and Chairman of the Board, Thomas R. Donahue, Federateds Vice President, Chief Financial Officer, and Treasurer, and a member of the Board, and Rhodora
J. Donahue, their mother, for the benefit of certain members of the Donahue family. Under the terms of the Voting Trust, the trustees are authorized to vote shares held by the Voting Trust and the trustees additionally may sell, transfer or
otherwise dispose of shares owned by the Voting Trust. The entire voting power of Federated is vested in the holder of the outstanding shares of Class A Common Stock, except as otherwise provided in the Restated Articles of Incorporation of
Federated or as required by applicable law. The address for the trustees of the Voting Trust is the same address shown in the above table.
26
Class B Common Stock
The following table sets forth certain information regarding beneficial ownership of Federateds Class B Common Stock as of
February 28, 2017 by (i) each of the current directors of Federated, (ii) the Named Executive Officers of Federated, and (iii) all executive officers and current directors of Federated as a group. As of February 28, 2017
there were 101,666,183 shares of Class B Common Stock outstanding.
|
|
|
|
|
|
|
|
|
Name of Beneficial Owner
|
|
Shares Beneficially
Owned (1)(2)
|
|
|
Percent of
Class
|
|
J. Christopher Donahue (3)
|
|
|
2,843,439
|
|
|
|
2.7
|
%
|
Thomas R. Donahue (4)
|
|
|
1,865,047
|
|
|
|
1.8
|
%
|
John W. McGonigle (5)
|
|
|
1,534,853
|
|
|
|
1.5
|
%
|
John B. Fisher (6)
|
|
|
527,942
|
|
|
|
*
|
|
Paul A. Uhlman
|
|
|
169,228
|
|
|
|
*
|
|
Michael J. Farrell (7)
|
|
|
78,200
|
|
|
|
*
|
|
David M. Kelly (8)
|
|
|
42,300
|
|
|
|
*
|
|
Marie Milie Jones
|
|
|
5,500
|
|
|
|
*
|
|
All executive officers and current directors as a group (13 persons)
|
|
|
7,350,618
|
|
|
|
7.1
|
%
|
|
|
|
|
|
|
|
|
|
(1)
|
Calculated pursuant to Rule 13d-3(d) of the Exchange Act. Unless stated below, each such person has sole voting and investment power with respect to all such shares.
|
(2)
|
Does not include an aggregate of 30,654 shares of Class B Common Stock allocated to the accounts of directors and executive officers who are participants in the Federated Investors, Inc. Profit Sharing/401(k) Plan.
|
(3)
|
Includes 592,766 shares for which Mr. J. Christopher Donahue has the power to sell, transfer or otherwise dispose under powers of attorney (Mr. J. Christopher Donahue disclaims beneficial ownership of all of the
592,766 shares for which he has powers of attorney); 37,117 shares for which Mr. J. Christopher Donahue is a custodian of shares under the Uniform Transfer for Minors Act (Mr. J. Christopher Donahue disclaims beneficial ownership of all of the
37,117 shares for which he acts as custodian); 341,542 shares owned by The Beechwood Company, L.P., a limited partnership of which Beechmax, Inc. is general partner, Mr. J. Christopher Donahue is a trustee of the Trust for the Benefit of the
Family of J. Christopher Donahue which is a shareholder of Beechmax, Inc. (Mr. J. Christopher Donahue disclaims beneficial ownership of approximately 340,959 shares owned by The Beechwood Company, L.P.); and 82 shares owned by AWOL, Inc., Mr. J.
Christopher Donahue is a trustee of the Trust for the Benefit of the Family of J. Christopher Donahue which is a shareholder of AWOL, Inc. (Mr. J. Christopher Donahue disclaims beneficial ownership of all 82 shares owned by AWOL, Inc.).
|
(4)
|
Includes 4,409 shares owned by Mrs. Thomas R. Donahue; 8,350 shares for which Mr. Thomas R. Donahue is a custodian of shares under the Uniform Transfer for Minors Act (Mr. Thomas R. Donahue disclaims
beneficial ownership of all of the 8,350 shares for which he acts as custodian); 655,550 shares owned by Maxfund Partners, L.P., a limited partnership of which Maxfund, Inc. is the general partner, Mr. Thomas R. Donahue is a shareholder of
Maxfund, Inc. (Mr. Thomas R. Donahue disclaims beneficial ownership of approximately 630,960 shares owned by the Maxfund Partners, L.P.); 341,542 shares owned by The Beechwood Company, L.P., a limited partnership of which Beechmax, Inc. is general
partner, Mr. Thomas R. Donahue is a trustee of the Trust for the Benefit of the Family of Thomas R. Donahue which is a shareholder of Beechmax, Inc. (Mr. Thomas R. Donahue disclaims beneficial ownership of
|
27
|
approximately 335,907 shares owned by The Beechwood Company, L.P.); 190,134 shares owned by immediate family members living in his household (Mr. Thomas R. Donahue disclaims beneficial ownership
of all 190,134 shares); 82 shares owned by AWOL, Inc., Mr. Thomas R. Donahue is a trustee of the Trust for the Benefit of the Family of Thomas R. Donahue which is a shareholder of AWOL, Inc. (Mr. Thomas R. Donahue disclaims beneficial
ownership of all 82 shares owned by AWOL, Inc.); and 50,000 shares owned by a family trust, for which Mr. Thomas R. Donahue is a trustee (Mr. Thomas R. Donahue disclaims beneficial ownership of all 50,000 shares owned by the family trust).
|
(5)
|
Includes 234,873 shares owned by 713 Investment Partners, L.P., a limited partnership of which 713 Investment Corporation is the sole general partner (Mr. McGonigle and his wife are shareholders and directors of 713
Investment Corporation); 942,675 shares owned by the John W. McGonigle Revocable Trust; and 357,305 shares owned by the Mary Ita McGonigle Revocable Trust. Mr. McGonigle disclaims beneficial ownership of all shares in which he does not have a
pecuniary interest.
|
(6)
|
Includes 40,000 shares held by Rosewood Limited Partnership, a limited partnership of which Mr. Fisher is a general partner. Mr. Fisher disclaims beneficial ownership of all shares in which he does not have a
pecuniary interest.
|
(7)
|
Includes 9,000 stock options that are currently exercisable; 20,000 shares owned by the Farrell Family Partnership 2nd, a limited partnership of which Mr. Farrell is the sole owner of the corporate general partner;
and 7,500 shares owned by the Michael J. Farrell Charitable Remainder Unit Trust. Mr. Farrell disclaims beneficial ownership of all shares in which he does not have a pecuniary interest.
|
(8)
|
Includes 9,000 stock options that are currently exercisable.
|
28
Section 16(a) Beneficial Ownership Reporting Compliance
Under the securities laws of the United States, Federateds directors, its executive officers and any persons beneficially owning more
than ten percent of Federateds Class A Common Stock and Class B Common Stock are required to report their ownership of Federateds Class A and Class B Common Stock and any changes in that ownership to the SEC and to the NYSE.
Specific due dates for these reports have been established and Federated is required to report in this Information Statement any failure to file by these dates. Based on a review of any Forms 3 and 4 (and amendments) furnished to Federated during,
and Forms 5 (and amendments) furnished to Federated with respect to, the fiscal year ended December 31, 2016, all reports required by Section 16(a) of the Exchange Act during the fiscal year were timely filed.
29
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP served as the independent registered public accounting firm for 2016 and continues to serve as the independent
registered public accounting firm for Federated. Representatives of Ernst & Young LLP will be present at the Annual Meeting, will have an opportunity to make a statement if they desire to do so, and will be available to respond to
appropriate questions.
The following fees are for services rendered by Ernst & Young LLP for the audit of Federateds
financial statements for the fiscal years ended December 31, 2016 and December 31, 2015, the audit of internal control over financial reporting for the fiscal years ended December 31, 2016 and December 31, 2015, the review of the
financial statements in Federateds Forms 10-Q for the fiscal years ended December 31, 2016 and December 31, 2015, and other billings for services rendered to Federated:
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
|
Audit Fees:
|
|
$
|
2,141,302
|
|
|
$
|
1,996,158
|
|
Audit-Related Fees:
|
|
$
|
101,848
|
|
|
$
|
101,848
|
|
Fees for audit-related services primarily include due diligence, agreed upon procedures, audits of
the employee benefit plan and other attest services
|
|
|
|
|
|
|
|
|
Tax Fees:
|
|
$
|
149,154
|
|
|
$
|
154,106
|
|
Fees for tax services primarily include international tax compliance, tax advice and tax
planning
|
|
|
|
|
|
|
|
|
All Other Fees:
|
|
$
|
322,196
|
|
|
$
|
138,585
|
|
Fees for other services primarily include certain Federated-sponsored product-related tax
assistance, portfolio scanner services and audits, and certain advisory services
|
|
|
|
|
|
|
|
|
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has adopted a policy for pre-approval of all audit, audit-related, tax and other services, classified as All Other
Services, to be performed by Federateds independent registered public accounting firm, subject to the de minimus exception for non-audit services described in Section 10A(i)(1) subparagraph (B) of the Exchange Act. The policy was
adopted in order to ensure that the provision of these services does not impair the auditors independence. The Audit Committee annually, or more frequently (if necessary), reviews and pre-approves the services that may be provided by the
independent registered public accounting firm. Unless a type of service to be provided by the independent registered public accounting firm has received general pre-approval, it will require specific pre-approval by the Audit Committee. The Audit
Committee will revise the list of general pre-approved services from time to time, based upon subsequent determinations. The term of the general pre-approval is twelve months from the date of pre-approval, unless specifically provided otherwise. The
Audit Committee will waive the pre-approval requirement with respect to the provision of non-audit services if: (i) the aggregate amount of all such non-audit services provided constitutes not more than five percent of the total amount of fees
paid by Federated to its independent registered public accounting firm during the fiscal year in which the services are provided; (ii) such services were not recognized by Federated at the time of engagement of the independent registered public
accounting firm to be non-audit services; and (iii) such services are promptly brought to the attention of the Audit Committee (or its delegate) and approved prior to the completion of the audit. The Audit Committee has delegated pre-approval
authority to the Chairman of the Audit Committee. The Chairman of the Audit Committee reports any pre-approval decisions to the Audit Committee at its scheduled meetings. All fees paid to Ernst & Young LLP for the years ended
December 31, 2016 and 2015 were pre-approved by the Audit Committee in accordance with this policy.
APPROVAL OF THE ANNUAL INCENTIVE PLAN
Federated wishes to have its Class A Common Stock shareholders approve the Annual Incentive Plan. At the Boards January 26,
2017 meeting, the Board reviewed the amended Annual Incentive Plan, including the requirement under Section 162(m) of the Internal Revenue Code of 1986 that the Plan be approved by Federateds shareholders at least once every five years
(or whenever there is a material amendment). At the Boards February 23, 2017 meeting, the Board approved the amended Annual Incentive Plan and the submission of the amended Annual Incentive Plan to, and recommended the amended Annual
Incentive Plan for approval by, the shareholders of Federated entitled to vote on such approval at the 2017 Annual Meeting. The Annual Incentive Plan was last approved by Federateds Class A shareholder on April 26, 2012, and the
Annual Incentive Plan was not materially amended since that time.
30
Regarding the amendments to the Annual Incentive Plan that have been approved by the Board, the
proposed changes are intended to better align certain wording in the Annual Incentive Plan with language changes that are being made in Federateds sales incentive plans and communications for its employees. Certain changes are being proposed
for clarification as a matter of good practice. The remaining changes are clean-up in nature.
Under the proposed Annual Incentive Plan,
each executive officer participating in the Annual Incentive Plan would be eligible for a maximum performance bonus of a dollar amount specified by the Compensation Committee. The maximum performance bonus that can be awarded by the Compensation
Committee to a Participant, as defined in the Annual Incentive Plan, for any performance period cannot exceed $6,000,000. Federated wishes to approve the amended Annual Incentive Plan in order to preserve the Companys federal income tax
deduction for incentive compensation paid to our executive officers based on the attainment of established performance goals pursuant to Section 162(m) of the Internal Revenue Code. We generally seek to preserve our ability to claim tax
deductions for compensation paid to executives to the greatest extent practicable. As executive officers, including executive officers who may also be directors, are expected to receive bonuses under the Annual Incentive Plan, such persons may be
deemed to have a direct or indirect interest in this matter.
SUMMARY OF THE PLAN
The following summary of the Annual Incentive Plan is qualified in its entirety by reference to the complete text of the amended Annual
Incentive Plan, a copy of which is provided herein as Exhibit A.
Purpose
The purpose of the Annual Incentive Plan is to advance the success of Federated and to thereby increase shareholder value by promoting the
attainment of significant business objectives by Federated and basing a portion of the annual compensation of selected executive officers on the attainment of such objectives.
Administration
The Annual Incentive Plan
is administered by the Compensation Committee. Subject to the terms of the Annual Incentive Plan, the Compensation Committee, among other things, has full authority and discretion to determine eligibility for participation in the Annual Incentive
Plan, make awards under the Annual Incentive Plan, establish the terms and conditions of such awards, and determine whether certain goals and measures for any award have been achieved. The Compensation Committees determinations under the
Annual Incentive Plan need not be uniform among all Participants, or classes or categories of Participants, and may be applied to such Participants, or classes or categories of Participants, as the Compensation Committee, in its sole and absolute
discretion, considers necessary, appropriate or desirable.
Eligibility and Participation
Participation in the Annual Incentive Plan is limited to executive officers (who may also be members of the Board of Directors) who are
determined by the Compensation Committee to be eligible for participation in the Annual Incentive Plan. Unless otherwise determined by the Compensation Committee, the Chairman of the Board, the Chief Executive Officer, and any executive officer who
is a member of the Board of Directors or is designated as a member of the Chief Executive Officers senior staff are eligible to participate in the Annual Incentive Plan.
Performance Measures
The Compensation
Committee may, in its discretion, from time to time make awards to Participants based upon such methods as may be established by the Compensation Committee. With respect to awards that are intended to be performance-based compensation under
Section 162(m) of the Internal Revenue Code, the Compensation Committee conditions each award upon Federateds achievement of one or more performance goals with respect to one or more performance measures established by the Compensation
Committee. For purposes of the Annual Incentive Plan, Performance Measures means any one or more of the following performance criteria, either individually, alternatively or in any combination, and subject to such modifications or
variations as specified by the Compensation Committee, applied to either Federated as a whole or to a business unit or subsidiary entity thereof, either individually, alternatively or in any combination, and measured over a period of time including
any portion of a year, annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years results or to a designated comparison group, in each case as specified by the Compensation
Committee: (i) revenues; (ii) operating income; (iii) net income; (iv) earnings per share; (v) operating expenses; (vi) assets under management; (vii) product sales or market share; (viii) the performance of
the Common Stock; (ix) the investment performance of Federated products; (x) Operating Profits; (xi) identification of business opportunities; (xii) product completion; and (xiii) satisfaction of operational and/or
management performance objectives including
31
completion and/or integration of acquisitions, dispositions, business expansion, product diversification, new or expanded market penetration and other non-financial operating and management
performance objectives.
Certification and Payment of Awards
Prior to any payment being made under the Annual Incentive Plan, the Compensation Committee certifies in writing the achievement of the
applicable performance goals and any other material terms relating to the award.
The Compensation Committee, in its sole discretion, may
reduce the amount of any award to a Participant if it concludes that such reduction is necessary or appropriate based upon: (i) an evaluation of such Participants performance; (ii) comparisons with compensation received by other
similarly situated individuals working within Federateds industry; (iii) Federateds financial results and conditions; or (iv) such other factors or conditions that the Compensation Committee deems relevant. In distributing
awards made under the Annual Incentive Plan, the Compensation Committee has discretion as to how awards are paid. The Compensation Committee may pay the awards out in cash, which may be in installments, or may pay all or a portion of the award in
stock-based compensation. Additionally, the Compensation Committee may also permit a Participant to elect to receive, in lieu of receiving cash, all or a portion of the award in stock-based compensation.
Maximum Amount Available for Awards
The
maximum amount of an award that may be earned by a Participant under the Annual Incentive Plan for any performance period may not exceed $6,000,000.
Termination of Employment
Unless
otherwise determined by the Compensation Committee, Participants who have terminated their employment with Federated for any reason prior to the actual payment of an award, shall forfeit any and all rights to payment under any awards then
outstanding under the terms of the Annual Incentive Plan and the award. Because such a Participant will not be employed on the payment date, such Participant shall not have earned the award or fulfilled a condition precedent to the receipt of the
award.
Non-Transferability
A
Participants rights under the Annual Incentive Plan, including the right to amounts payable, may not be assigned, pledged or otherwise transferred except in the event of a Participants death, in which case it may be transferred to the
Participants designated beneficiary or, in the absence of such a designator, by will or by the laws of descent and distribution.
Other
Compensation Plans
Nothing contained in the Annual Incentive Plan shall prevent Federated from adopting other or additional
compensation arrangements for employees of Federated, including arrangements that are not intended to comply with Section 162(m) of the Internal Revenue Code.
Amendment and Termination
The Board of
Directors may modify, amend, or terminate the Annual Incentive Plan at any time-provided, however, that no such modification, amendment or termination shall, without the consent of the Participant, materially adversely affect the rights of such
Participant to any payment that has been determined by the Compensation Committee to be due and owing to the Participant under the Annual Incentive Plan but not yet paid.
Notwithstanding the foregoing or any provision of the Annual Incentive Plan to the contrary, the Compensation Committee may at any time
(without the consent of the Participant) modify, amend or terminate any or all of the provisions of this Annual Incentive Plan to the extent necessary to conform to the provisions of the Annual Incentive Plan with Section 409A or
Section 162(m) of the Internal Revenue Code or the regulations promulgated thereunder regardless of whether such modification, amendment, or termination of the Annual Incentive Plan shall adversely affect the rights of a Participant under the
Annual Incentive Plan.
New Plan Benefits
The amount of awards payable under the Annual Incentive Plan, if any, are not determinable. The potential amount payable to any Participant
depends on the performance goals established for the Participant, the determination as to whether the performance goals were met and the discretion of the Compensation Committee. For information regarding awards granted to our Named Executive
Officers during 2016, see the
2016 Grants of Plan-Based Awards
table on page 18.
32
EXHIBIT A
FEDERATED INVESTORS, INC.
ANNUAL INCENTIVE PLAN
Approved by Shareholders April 24, 2002
Amended as of May 13, 2002
Amended as of July 23, 2002
Amended as of February 5, 2004
Amended as of January 25, 2007
Approved by Shareholders April 26, 2012
ARTICLE I - GENERAL PROVISIONS
The purpose of the Federated Investors, Inc. Annual Incentive Plan (the
Plan) is to advance the success of Federated Investors, Inc. and to thereby increase shareholder value by promoting the attainment of significant business objectives by the Company and basing a portion of the annual compensation of
selected officers on the attainment of such objectives. The Plan is designed to: (i) further align the interests of Participants with the interests of the Companys shareholders, (ii) reward Participants for creating shareholder value
as measured by objectively determinable performance goals, and (iii) assist in the attraction and retention of employees vital to the Companys long-term success.
For the purpose of the Plan, the following terms shall have the meanings
indicated:
(a)
|
Board means the Board of Directors of the Company.
|
(b)
|
Code means the Internal Revenue Code of 1986, as amended, including any successor law thereto.
|
(c)
|
Company, means Federated Investors, Inc. and solely for purposes of determining (i) eligibility for participation in the Plan, (ii) employment, and (iii) the calculation of any Performance
Goal or establishment of any Performance Measure, any subsidiary entity or affiliate thereof, including subsidiaries or affiliates which become such after adoption of the Plan. For purposes of this Plan, the term Company shall also
include any successor to Federated Investors, Inc.
|
(d)
|
Committee means the Compensation Committee of the Board, or such other committee as is appointed or designated by the Board to administer the Plan, in each case which shall be comprised solely of two or more
outside directors (as defined under Section 162(m) of the Code and the regulations promulgated thereunder).
|
(e)
|
Common Stock means the Companys Class B Common Stock, no par value per share.
|
(f)
|
Fair Market Value means, on any date, the closing sale price of one share of Common Stock, as reported on the New York Stock Exchange or any national securities exchange on which the Common Stock is then
listed or on the NASDAQ Stock Markets National Market (NNM) if the Common Stock is then quoted thereon, as published in the Wall Street Journal or another newspaper of general circulation, as of such date or, if there were no sales
reported as of such date, as of the last date preceding such date as of which a sale was reported. In the event that the Common Stock is not listed for trading on a national securities exchange or authorized for quotation on NNM, Fair Market Value
shall be the closing bid price as reported by the NASDAQ Stock Market or The NASDAQ SmallCap Market (if applicable), or if no such prices shall have been so reported for such date, on the next preceding date for which such prices were so reported.
In the event that the Common Stock is not listed on the New York Stock Exchange, a national securities exchange or NNM, and is not listed for quotation on The NASDAQ Stock Market or The NASDAQ SmallCap Market, Fair Market Value shall be determined
in good faith by the Committee in its sole discretion, and for this purpose the Committee shall be entitled to rely on the opinion of a qualified appraisal firm with respect to such Fair Market Value, but the Committee shall in no event be obligated
to obtain such an opinion in order to determine Fair Market Value.
|
(g)
|
Forfeit means the loss by a Participant of any and all rights to an award granted under the Plan, including the loss of any opportunity to earn compensation, or the loss of any payment of compensation by the
Company under the Plan or any award granted thereunder.
|
(h)
|
Operating Profits means for the applicable Performance Period, the Companys total revenue less distributions to minority interests and less total expenses (excluding amortization of intangible assets,
impairment losses and debt expenses, including, without limitation, interest and loan fees) as reflected in the Companys audited or unaudited financial statements as filed with the Securities and Exchange Commission.
|
(i)
|
Participant means any person: (1) who has satisfied the eligibility requirements set forth in Section 1.4; (2) to whom an award has been made under the Plan; and (3) whose award remains
outstanding under the Plan.
|
(j)
|
Performance Goal means, in relation to any Performance Period, the level of performance that must be achieved with respect to a Performance Measure.
|
(k)
|
Performance Measures means any one or more of the following performance criteria, either individually, alternatively or in any combination, and subject to such modifications or variations as specified by the
Committee, applied to either the Company as a whole or to a business unit or subsidiary entity thereof, either individually, alternatively or in any combination, and measured over a period of time including any portion of a year, annually or
cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years results or to a designated comparison group, in each case as specified by the Committee: (i) revenues;
(ii) operating income; (iii) net income; (iv) earnings per share; (v) operating expenses; (vi) assets under management; (vii) product sales or market share; (viii) the performance of the Common Stock; (ix) the
investment performance of Company products; (x) Operating Profits; (xi) identification of business opportunities; (xii) product completion; and (xiii) satisfaction of operational and/or management performance objectives including
completion and/or integration of acquisitions, dispositions, business expansion, product diversification, new or expanded market penetration and other non-financial operating and management performance objectives.
|
To the extent consistent with Section 162(m) of the Code and the regulations promulgated thereunder and unless otherwise determined by the
Committee at the time the Performance Goals are established, the Committee, in applying the Performance Goals, shall exclude the effect of any of the following events that occur during a Performance Period: the impairment of tangible or intangible
assets; litigation or claim judgments or settlements; changes in tax law, accounting principles or other such laws or provisions affecting reported results; business combinations, reorganizations and/or restructuring programs that have been approved
by the Board; reductions in force and early retirement incentives; and any extraordinary, unusual, infrequent or non-recurring items separately identified in the financial statements and/or notes thereto in accordance with generally accepted
accounting principles.
(l)
|
Performance Period means, in relation to any award, the calendar year, or other period of 12 months or less for which a Participants performance is being calculated with each such period constituting a
separate Performance Period.
|
(a) The Plan shall be administered by the Committee. Subject to the
terms of the Plan, the Committee shall, among other things, have full authority and discretion to determine eligibility for participation in the Plan, make awards under the Plan, establish the terms and conditions of such awards (including the
Performance Goal(s) and Performance Measure(s) to be utilized) and determine whether the Performance Goals applicable to any Performance Measures for any award have been achieved. The Committees determinations under the Plan need not be
uniform among all Participants, or classes or categories of Participants, and may be applied to such Participants, or classes or categories of Participants, as the Committee, in its sole and absolute discretion, considers necessary, appropriate or
desirable. The Committee is authorized to interpret the Plan, to adopt administrative rules, regulations, and guidelines for the Plan, and may correct any defect, supply any omission or reconcile any inconsistency or conflict in the Plan or in any
award. All determinations by the Committee shall be final, conclusive and binding on the Company, the Participant and any and all interested parties.
(b) Subject to the provisions of the Plan, the Committee will have the authority and discretion
to determine the extent to which awards under the Plan will be structured to conform to the requirements applicable to performance-based compensation as described in Section 162(m) of the Code, and to take such action, establish such
procedures, and impose such restrictions at the time such awards are granted as the Committee determines to be necessary or appropriate to conform to such requirements. The Committee may, with respect to Participants whom the Committee determines
are not likely to be subject to Section 162(m) of the Code, delegate such of its powers and authority under the Plan to the Companys Chairman, President or Chief Executive Officer as it deems appropriate. In the event of such delegation,
all references to the Committee in this Plan shall be deemed references to such officers as it relates to those aspects of the Plan that have been delegated.
(c) Notwithstanding any provision of the Plan to the contrary, if any benefit provided under this Plan is subject to the provisions of
Section 409A of the Code and the regulations issued thereunder, the provisions of the Plan shall be administered, interpreted and construed in a manner necessary to comply with Section 409A, the regulations issued thereunder or an
exception thereto (or disregarded to the extent such provision cannot be so administered, interpreted, or construed.) In no event shall any member of the Board, the Committee or the Company (or its employees, officers or directors) have any
liability to any Participant (or any other Person) due to the failure of an Award to satisfy the requirements of Section 409A.
1.4
|
Eligibility and Participation
|
Participation in the Plan shall be limited to officers
(who may also be members of the Board) who are determined by the Committee to be eligible for participation in the Plan and, unless otherwise determined by the Committee, the Chairman of the Board, the Chief Executive Officer and any executive who
is a member of the Board or is designated as a member of the Chief Executive Officers senior staff shall be eligible to participate in the Plan.
ARTICLE II - AWARD TERMS
The Committee may, in its discretion, from time to time make awards
to persons eligible for participation in the Plan pursuant to which the Participant may earn compensation. The amount of a Participants award may be based on such methods as may be established by the Committee. Each award shall be communicated
to the Participant, and shall specify, among other things, the terms and conditions of the award and the Performance Goals to be achieved. The maximum amount of an award that may be earned under the Plan by any Participant for any Performance Period
shall not exceed USD $6,000,000.
2.2
|
Establishment of Performance Goals
|
With respect to awards that are intended to be
performance-based compensation under Section 162(m) of the Code, each award shall be conditioned upon the Companys achievement of one or more Performance Goals with respect to the Performance Measure(s) established by the Committee. No
later than ninety (90) days after the beginning of the applicable Performance Period, the Committee shall establish in writing the Performance Goals, Performance Measures and the method(s) for computing the amount of compensation which will be
payable under the Plan to each Participant if the Performance Goals established by the Committee are attained; provided, however, that for a Performance Period of less than one year, the Performance Measure must be established prior to the lapse of
25% of the Performance Period. In addition to establishing a minimum performance level below which no compensation shall be payable pursuant to an award, the Committee, in its discretion, may create a performance schedule under which an amount less
than or more than a target award may be paid so long as the Performance Goals have been exceeded.
The Committee, in its sole discretion, may also establish such
additional restrictions or conditions that must be satisfied as a condition precedent to the payment of all or a portion of any awards. Such additional restrictions or conditions need not be performance-based and may include, among other things, the
receipt by a Participant of a specified annual performance rating, the continued employment by the Participant and/or the achievement of specified performance goals by the Company, business unit or Participant. Furthermore and notwithstanding any
provision of this Plan to the contrary, the Committee, in its sole discretion, may reduce the amount of any award to a Participant if it concludes that such reduction is necessary or appropriate based upon: (i) an evaluation of such
Participants performance; (ii) comparisons with compensation
received by other similarly situated individuals working within the Companys industry; (iii) the Companys financial results and conditions; or (iv) such other factors or
conditions that the Committee deems relevant. Notwithstanding any provision of this Plan to the contrary, the Committee shall not use its discretionary authority to increase any award that is intended to be performance-based compensation under
Section 162(m) of the Code.
2.4
|
Certification of Achievement of Performance Goals
|
The Committee shall, prior to any
payment under the Plan, certify in writing the extent, if any, that the Performance Goal(s) and any other material terms have been achieved. For purposes of this provision, and for so long as the Code permits, the approved minutes of the Committee
meeting in which the certification is made may be treated as written certification.
2.5
|
Distribution of Awards
|
Awards shall be paid as promptly as practicable (but in no event
later than 2
1
⁄
2
months after the close of the fiscal year in which the Performance Period ends) after the Committee has certified in writing the extent to
which the applicable Performance Goals and any other material terms have been achieved. Notwithstanding the foregoing, the Committee may, in its sole discretion: (i) determine whether, to what extent, and under what additional circumstances
amounts payable with respect to an award under the Plan shall be deferred either automatically, at the election of the Participant, or by the Committee; (ii) permit a Participant to elect to receive, in lieu of receiving cash, all or a portion
of the total award value in the form of Common Stock, restricted Common Stock, non-qualified stock options to purchase Common Stock, or such other stock-based award as maybe authorized by the Committee; and (iii) satisfy the payment of all or a
portion of the total award value in the form of Common Stock, restricted Common Stock, non-qualified stock options to purchase Common Stock, or such other stock-based award as may be authorized by the Committee. Any stock-based award granted as
payment of an award shall be granted pursuant to the Federated Investors, Inc. Stock Incentive Plan or any successor thereto; provided, however, that any non-qualified stock option to purchase Common Stock shall have an exercise price equal to the
Fair Market Value of the Common Stock on the date of grant. The number of stock options to be granted shall be determined by the Committee and shall be based upon the value of the options as determined under the Black-Scholes option-pricing model or
such other option valuation model or calculation that the Committee, in its sole discretion, shall determine is appropriate. The number of any other stock-based awards to be granted shall be determined by such methods or procedures as the Committee,
in its sole discretion, shall determine is appropriate.
2.6
|
Termination of Employment
|
Unless otherwise determined by the Committee, Participants
who have terminated employment with the Company for any reason prior to the actual payment of an award, shall Forfeit any and all rights to payment under any awards then outstanding under the terms of the Plan and the award. Because such a
Participant will not be employed on the payment date, such Participant shall not have earned the award or fulfilled a condition precedent to the receipt of the award.
ARTICLE III - OTHER PROVISIONS
Whenever the Company is required to satisfy income or employment tax
withholding requirements with respect to an award under the Plan, the Company shall have the right to withhold from the payment of any such award, or require the Participant to remit to the Company prior to or contemporaneous with the payment of any
such award, an amount sufficient to satisfy any applicable governmental withholding tax requirements related thereto and such other deductions as may be authorized by the Participant or as required by applicable law.
Awards may be adjusted by the Committee in the manner and to the extent it
determines to be appropriate to reflect stock dividends, stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges, reclassifications or other relevant changes in capitalization occurring after the date of
the award; provided, however, that the Committee may not make any such adjustment with respect to any award to an individual who is then a covered employee as such term is defined in Regulation 1.162-27(c)(2) promulgated under
Section 162(m) of the Code, or any successor provision, if such adjustment would cause compensation pursuant to such award to cease to be performance-based compensation under Section 162(m).
3.3
|
No Right to Employment
|
Nothing contained in the Plan or in any award shall confer upon
any Participant any right with respect to continued employment with the Company or its subsidiaries or affiliates, nor interfere in any way with the right of the Company or its subsidiaries or affiliates to at any time reassign the Participant to a
different job, change the compensation of the Participant or terminate the Participants employment for any reason.
A Participants rights under the Plan, including the right to
amounts payable may not be assigned, pledged, or otherwise transferred except, in the event of a Participants death, to the Participants designated beneficiary or, in the absence of such a designation, by will or by the laws of descent
and distribution.
The Plan is not funded and all awards payable hereunder shall be paid
from the general assets of the Company. No provision contained in this Plan and no action taken pursuant to the provisions of this Plan shall create a trust of any kind or require the Company to maintain or set aside any specific funds to pay
benefits hereunder. To the extent a Participant acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company.
3.6
|
Foreign Jurisdictions
|
The Committee shall have the authority to adopt, amend, or
terminate such arrangements, not inconsistent with the intent of the Plan, as it may deem necessary or desirable to make available tax or other benefits of the laws of foreign countries in order to promote achievement of the purposes of the Plan.
3.7
|
Other Compensation Plans
|
Nothing contained in this Plan shall prevent the Company from
adopting other or additional compensation arrangements for employees of the Company, including arrangements that are not intended to comply with Section 162(m) of the Code.
The Plan shall be governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, without giving effect to its conflict of law provisions.
ARTICLE IV - AMENDMENT AND TERMINATION
The Board of Directors may modify, amend, or terminate the Plan at any time; provided, however, that no such modification, amendment
or termination shall, without the consent of the Participant, materially adversely affect the rights of such Participant to any payment that has been determined by the Committee to be due and owing to the Participant under the Plan but not yet paid.
Notwithstanding the foregoing or any provision of the Plan to the contrary, the Committee may at any time (without the consent of the
Participant) modify, amend or terminate any or all of the provisions of this Plan to the extent necessary to conform the provisions of the Plan with Section 409A or Section 162(m) of the Code or the regulations promulgated thereunder
regardless of whether such modification, amendment, or termination of the Plan shall adversely affect the rights of a Participant under the Plan.
ARTICLE V - EFFECTIVE DATE
The Plan, as amended, shall become effective immediately upon the approval and adoption thereof by the Board; provided, however, that no award
intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code shall be payable prior to approval of the Plans material terms by the Companys shareholders.
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
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