BGG Briggs and Stratton Corp

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Directors consisted of the four directors listed below, each of whom was determined by the Board to be independent under the rules of the NYSE.

Management of the company prepared the following Compensation Discussion and Analysis (“CD&A”) for fiscal 2016. The Committee reviewed and discussed the CD&A with management and the Board of Directors.

Based on the review and discussions with management, the Committee recommended to the Board of Directors that the CD&A be included in this proxy statement.

Brian C. Walker, Chairman

Jeffrey R. Hennion

James E. Humphrey

Charles I. Story

COMPENSATION DISCUSSION AND ANALYSIS

The Compensation Discussion and Analysis that follows is intended to provide shareholders with an understanding of the objectives of the company’s compensation policies and practices applicable to the Chief Executive Officer and other executives named in the Summary Compensation Table (the “named executive officers”). In addition to Mr. Teske (the company’s Chief Executive Officer), the other named executive officers for fiscal 2016 are Mr. Schwertfeger, Mr. Rodgers, Mr. Reitman, Mr. Redman and Ms. Buono.

In August 2015, the Board appointed Mr. Rodgers, who had served as Senior Vice President and Chief Financial Officer since 2010, as Senior Vice President and President – Engines Group and Mr.  Schwertfeger as Senior Vice President and Chief Financial Officer.

Executive Summary

The principal objectives underlying the company’s compensation program for its named executive officers are to:

To accomplish these objectives, the company has developed a program that combines traditional cash compensation with incentive-based and retention-focused elements. Components of the program include:

Driving the decisions of the Compensation Committee is the belief that a significant portion of the named executive officers’ total compensation should be performance-based. Total compensation for this purpose includes the named executive officer’s base salary, annual target cash incentives and long-term incentives. In fiscal 2016, 49% of Mr. Teske’s total compensation was performance-based. The percentages for the other named executive officers were: Mr. Schwertfeger 35%, Mr. Rodgers 47%, Mr. Reitman 29%, Mr. Redman 27% and Ms. Buono 21%.

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The company also recognizes that its compensation package must be in line with “market.” For that reason, the company benchmarks target total compensation for the named executive officers against the compensation practices of a comparator group of companies that generally reflects the industrial and consumer segments with which the company competes for executive talent.

Company Performance

It is important to understand the performance of the company and of the named executive officers during fiscal 2016 in order to assess the appropriateness and effectiveness of the company’s compensation program for that year.

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The adjusted net income and adjusted segment income measures used in the preceding paragraph are financial measures that are not based on Generally Accepted Accounting Principles (“GAAP”), which the company uses to prepare its financial statements. The company believes that the use of these measures when comparing the company’s financial performance for fiscal 2016 to fiscal 2015 aids investors in understanding the magnitude of the change in earnings between fiscal years due to recurring operations. The inclusion of non-GAAP financial measures is intended to supplement, not replace, the presentation of financial results in accordance with GAAP. The following table reconciles the GAAP measure of net income to the non-GAAP measure of adjusted net income.

Executive Performance

Executive performance highlights during fiscal 2016 included the following:

Mr. Teske drove the company’s continued focus on product innovation and diversification in furtherance of the company’s strategy to improve profitability in the Engines business, grow margins, and expand geographically. Through his leadership, the company managed through a year of macro-economic and weather challenges and maintained its disciplined approach of using cash to invest in its business, integrate acquisitions that accelerate the company’s strategy and return cash to shareholders through dividends and share buybacks.

Mr. Schwertfeger refinanced the company’s revolving credit facility to extend its maturity date beyond the maturity of the company’s senior notes and oversaw the ongoing upgrade to the company’s SAP system and execution of the company’s capital strategy, which enabled the company to return $61 million to the shareholders in the form of dividends and share repurchases and increase the dividend by 3.7% in August 2016.

Mr. Rodgers led the Engines Group’s continuing innovation efforts and focused on continued market penetration into higher margin commercial engines.

Mr. Reitman oversaw the company’s strategic investment in Power Distributors, LLC (“PD”), the construction of the company’s new European Distribution Center, the development of the company’s “Internet of Things” strategy, and the introduction to the marketplace of consumable products such as Gas Off™.

Mr. Redman oversaw the continued profit improvement in the company’s turf business, completed the integration of the Billy Goat acquisition and oversaw revenue growth of the Ferris ^®  and Billy Goat ^®  product lines as well as expanded product offerings under the Simplicity ^® , Snapper ^®  and Victa ^®  brands.

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Ms. Buono oversaw the continuing expansion of the company’s Integrity Program, supported the Board of Directors in her role as Secretary, and coordinated the legal services required to support the initiatives and activities of the company.

Executive Compensation Program

At the 2015 annual meeting, shareholders approved an advisory vote on executive compensation. Of the votes cast, 95% approved the compensation awarded to the named executive officers. The Compensation Committee believes the support for the say-on-pay vote affirmed its general approach to executive compensation, which it continued when administrating the company’s compensation programs and making related decisions for fiscal 2016.

Comparator Group

In the course of carrying out its duties, the Compensation Committee reviews a market analysis of executive officer compensation prepared by Meridian every other year that compares the company’s compensation practices to those of selected peer companies, as well as market trend updates periodically provided by Meridian. The comparator group referenced by the Compensation Committee for its fiscal 2016 compensation decisions was composed of the following companies:

These companies represent the consumer durables, industrial equipment, building products, forest and paper products/packaging and other manufacturing segments with which the company believes it competes for executive talent. Annual revenues of the companies within the comparator group at the time it was compiled in June 2014 ranged from $660 million to $6.0 billion, with market capitalizations ranging from $183 million to $12.1 billion. The Committee periodically reviews the composition of the comparator group and will modify it as appropriate based on organizational or business changes at those companies. The Committee evaluates the company’s executive officer compensation levels with reference to the 50 ^th percentile of the comparator group (“market”). It considers an executive officer’s total cash compensation (i.e., base salary plus target annual incentive) within 10% of the 50 ^th percentile to be at market and long-term incentive compensation within 15% of the 50 ^th percentile to be at market.

Annual Salaries

The Compensation Committee determines executive salaries based on the value of the job and the amount required to attract and retain key executives. The Committee generally targets annual salaries for company officers slightly above the 50 ^th percentile of the comparator group, with individual salaries based on the level of responsibility and individual performance. The Committee reviews salaries at the beginning of each fiscal year and normally sets revised salaries effective September 1.

After reviewing and considering the results of Meridian’s August 2014 market analysis and an April 2015 market trends update as well as evaluating the individual performance of each of the named executive officers, the Compensation Committee increased annual salaries for the named executive officers effective September 1, 2015 as follows: Mr. Teske’s annual salary was increased by 3.2% to $935,000; Mr. Schwertfeger’s annual salary was increased by 32.7% to $325,000, which reflected his promotion from Vice President and Corporate Controller to Senior Vice President and Chief Financial Officer; and the salaries for Messrs. Rodgers, Reitman

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and Redman and Ms. Buono were increased by 3.0%, 3.0%, 3.0% and 3.1%, respectively, to $459,380, $386,250, $350,200 and $404,000. As a result of these adjustments, the salaries of Mr. Teske, Mr. Redman and Ms. Buono remained near the 50 ^th percentile of the comparator group and the salaries of Messrs. Rodgers and Reitman exceeded the 75 ^th percentile (a reflection of the market salary of his prior position in the case of Mr. Rodgers and of tenure with the company and scope of responsibilities in the case of Mr. Reitman). The salary of Mr. Schwertfeger fell below the 50 ^th percentile, a reflection of his then-recent promotion, which the Compensation Committee intends to address by positioning Mr. Schwertfeger’s salary to or near the 50 ^th percentile over time.

Cash Incentive Awards

The goal of the company’s Annual Incentive Plan (the “AIP”) is to further connect the named executive officers’ decision-making and rewards with the company’s objectives and strategic initiatives by:

To achieve these objectives, target annual cash incentive awards are tied to results that consist of financial and, in some cases, individual performance metrics. The financial metric, referred to as “Briggs Value Added” or “BVA,” measures operating income minus a capital charge on a company-wide, division and plant basis:

Each named executive officer’s opportunity for an annual cash incentive award is based on the named executive officer’s position, comparator group data and annual salary. Actual annual cash incentive awards can range from 0% to 200% of the named executive officer’s target award, determined by the “performance factor” associated with the level of BVA achieved. There are two caps on each cash award. As noted, one cap limits each cash award to 200% of the named executive officer’s target award. A second cap, stated in the 2014 Omnibus Incentive Plan, is $3.5 million. Once the cash awards are calculated and approved by the Compensation Committee, they are paid to the named executive officers in August.

Target cash incentive awards for the named executive officers were tied solely to company-wide BVA in fiscal 2016 and were intended to be comparable to opportunities customarily provided by other companies to executives having similar responsibilities. The target cash incentive award for Mr. Teske as CEO was 110% of his annual salary, which was at the 50 ^th percentile of the comparator group of companies described above. Target cash incentive awards were 60% of annual salary for the other executives named in the Summary Compensation Table, other than Ms. Buono, whose target cash incentive award was 40% of her annual salary. These targets put Mr. Schwertfeger below the 50 ^th percentile of the comparator group (again reflecting his recent promotion), Mr. Rodgers at the 50 ^th percentile, Mr. Reitman at the 75 ^th percentile, Mr. Redman between the 50 ^th and 75 ^th percentiles, and Ms. Buono below the 50 ^th percentile.

At its August 2015 meeting, the Committee established a company-wide fiscal 2016 BVA target of $45.3 million for purposes of the AIP, which was assigned a performance factor of 1.0 and would have resulted in a payout equal to 100% of the named executive officer’s target award. Company-wide BVA had to be greater than $17.3 million in fiscal 2016 in order for there to be a performance factor greater than zero (i.e., the threshold level). The fiscal 2016 BVA target was $7.1 million greater than the fiscal 2015 BVA target of $38.2 million and $9.3 million greater than actual fiscal 2015 BVA of $36.0 million. The maximum company-wide BVA on which cash awards could have been paid in fiscal 2016 was $73.3 million, which was assigned a performance factor of 2.0 (i.e., a payout equal to 200% of the named executive officer’s target) and was considered a significant stretch.

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The company’s actual BVA for fiscal 2016 was $35.8 million, producing a company performance factor of 0.66 under the AIP. Consistent with past practice, and in accordance with the AIP, the Committee made the following discretionary adjustments to the company’s financial results for purposes of the BVA calculation: a pre-tax pension settlement charge of $20.2 million associated with the company’s limited offer for former employees with vested benefits to elect to receive a lump sum payout was eliminated from the calculation; a pre-tax total of $23.7 million for other expenses and non-cash charges relating to the restructuring of the company’s Engines and Products businesses, acquisition integration activities, litigation, and goodwill and trade name impairments were also excluded; and $1.8 million of earnings from joint venture investments were removed from the calculation following a reclassification thereof from other income to operating income. Cash incentive awards actually paid to the named executive officers for fiscal 2016 performance based on this calculation were as follows: Mr. Teske $675,301, Mr. Schwertfeger $123,420, Mr. Rodgers $181,031, Mr. Reitman $178,943, Mr. Redman $138,006 and Ms. Buono $106,128. If none of the permitted adjustments to BVA under the AIP had been made, the company performance factor would have been (0.91), resulting in no cash bonuses for the named executive officers.

Long-Term Incentive Awards

The goal of the company’s long-term incentive compensation program is to align the most substantial component of executive compensation to the creation of long-term shareholder value and the drivers of that value. In addition, the program is designed to retain key executive talent in a cyclical and competitive industry segment and to appropriately compensate company executives based on market compensation levels. To achieve these goals in fiscal 2016, the company used a combination of stock option, restricted stock (or restricted stock unit (“RSU”)) and performance share unit (“PSU”) awards.

Stock option awards are intended to encourage a high performance focus and alignment of the named executive officers with the company’s shareholders since value is only realized if the stock price increases. A secondary benefit of stock options is that unvested options are generally forfeited if the named executive officer leaves the company. The purpose of restricted stock/RSU awards is also to strengthen the alignment of executives with shareholders, motivate shareholder value creation and preserve the value of the company. Similar to stock options, should the executive terminate his or her employment prior to the vesting of the restricted shares/RSUs, the award is generally forfeited, which provides long-term retention incentives. PSUs represent compensation that is at risk that rewards the named executive officers for superior performance relative to target. The goal of PSUs is to incentivize the named executive officers to make decisions that improve operating income over a longer period of time, providing strong alignment with shareholders and promoting retention because unvested awards are generally forfeited if an executive terminates his or her employment.

The Compensation Committee generally sets the aggregate target value of each named executive officer’s equity awards at approximately the 50 ^th percentile of market for comparable positions. However, the Committee also considers other factors when setting the aggregate target value for the CEO, such as the CEO’s experience and performance, and for the other named executive officers, recommendations by the CEO. The Committee increased each named executive officer’s aggregate target value in fiscal 2016 from the prior year due to the company’s continued focus on aligning the interests of named executive officers with those of shareholders. The increased target values averaged, in aggregate, 11% above the 50 ^th percentile of the comparator group.

To derive the numbers of restricted shares/RSUs, stock options and PSUs each named executive officer received in fiscal 2016, the Compensation Committee apportioned the overall equity incentive target value for each named executive officer among the three types of incentives based in part on market data concerning the mix of equity incentives provided by the companies in the comparator group. For the equity award made in fiscal 2016 to Mr. Teske, 40% of the value was stock options, 30% was restricted stock and 30% was PSUs. For the equity awards made to the other named executive officers, 40% of the value was restricted stock/RSUs, 30% was stock options and 30% was PSUs. The Committee believed this mix of equity would encourage performance and alignment with the interests of shareholders, as awards are based on both absolute stock price growth and the achievement of operating results. Mr. Teske’s equity award was more heavily weighted toward stock options and PSUs to amplify his value creation incentives.

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The table below summarizes the total grant date value of the named executive officers’ fiscal 2016 awards and the apportionment among stock options, restricted stock (or RSUs) and PSUs, which the Committee approved in August 2015.

In addition to the awards included in the table, Mr. Reitman received a grant of RSUs (valued at $52,680) in November 2015 in accordance with his expatriate agreement.

Stock Options . The number of stock options awarded to each named executive officer in fiscal 2016 was determined by dividing (i) the portion of the aggregate target value of the named executive officer’s equity awards allocated to stock options by the (ii) Black-Scholes value of an option on a share of the company’s common stock based on the closing share price of the company’s stock on the grant date. Each stock option had an exercise price of $19.90, which was equal to the fair market value of the company’s stock on the grant date calculated as the reported closing sales price on the NYSE on such date. The options generally vest on the third anniversary of their grant date and expire on the tenth anniversary of their grant date.

Restricted Stock/RSUs . The aggregate number of shares of restricted stock/RSUs awarded to each named executive officer in fiscal 2016 was determined by dividing (i) the portion of the aggregate target value of the named executive officer’s equity awards allocated to restricted stock/RSUs by (ii) the closing share price of the company’s stock on the date of grant. Such awards vest three years after the date of grant, except that the vesting date may be accelerated in the case of death, disability, retirement or a change in control. If a named executive resigns his or her employment prior to the earlier of retirement eligibility or the vesting date, the restricted stock/RSU is forfeited unless forfeiture is waived by the Committee. Cash dividends are paid on restricted stock during the vesting period and holders of RSUs are credited with additional RSUs in lieu of cash dividends.

2016 PSU Grants . The target number of PSUs awarded to each named executive officer in fiscal 2016 was determined by dividing (i) the portion of the aggregate target value of each named executive officer’s equity awards allocated to PSUs by (ii) the closing share price of the company’s stock on the date of grant. The fiscal 2016 grants of PSUs are subject to the attainment of performance goals related to the company’s operating income over a three-year performance period. The final number of earned PSUs can range from 0% to 200% of the target depending on actual performance against pre-set operating income goals.

To achieve a payout at threshold (25% of target), the PSUs granted in fiscal 2016 require operating income over the three-year performance period to be at least $315.2 million. Operating income of $360.5 million over the three-year performance period would achieve a 100% payout and a payout at 200% of target would be achieved if the three-year operating income is equal to or greater than $395.3 million (which the Committee considered to be a significant stretch). Straight line interpolation is used to arrive at the payout percentage if the three-year operating income does not fall squarely at one of the three thresholds.

Dividends declared during the performance period are credited to the participants as additional PSUs subject to the same conditions as the underlying PSU award.

In August 2016, the company adjusted its period-to-date financial results for purposes of its outstanding PSUs to reflect certain unanticipated events that were not taken into account when the PSU targets were established. Similar to the BVA adjustments described above, the PSU adjustments removed charges incurred in fiscal 2016 associated with restructuring expenses, goodwill and trade name impairments, acquisition expenses, and pension and litigation settlements, and also removed certain joint venture earnings. The adjustments also included in operating income a portion of equity in earnings ($1.4 million) from the company’s

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investment in PD which resulted from the company’s loss of margin due to the shift from a dealer-direct model to a distributor model following the company’s contribution of certain distribution rights to PD.

Generally, the number of earned PSUs will vest upon the Compensation Committee’s certification of the company’s performance relative to the pre-set performance goals. However, the Compensation Committee has the discretion to accelerate vesting in the case of death, disability, retirement or a change in control.

See the Outstanding Equity Awards at 2016 Fiscal Year-End table for information regarding performance as of the end of fiscal 2016 of the PSUs granted in fiscal 2016 and fiscal 2015.

In August 2016, the Committee broadened the long-term incentive award mix for fiscal 2017 to include performance unit awards (“PUAs”). PUAs will work the same way as PSUs relative to vesting based on the level of operating income achieved in a three-year performance period; however, PUAs will be paid in cash at a rate of 0% to 200% of a target cash amount rather than in stock at a rate of 0% to 200% of a target stock award . The Committee believes PUAs will be an effective way to continue to drive long-term shareholder value creation and to manage potential dilution.

2014 Performance Share Grants . For performance shares awarded in fiscal 2014 to those of the named executive officers serving on the grant date, the number of performance shares earned was determined by the company’s stock performance relative to a comparator group of public companies over the three-year performance period. The final earned award would have equaled the target award if the TSR on company stock over the three-year performance period was at the 50 ^th percentile of the comparator group companies. The final earned award would have been 200% of the target award if the company’s TSR was at or above the 80 ^th percentile, 50% of the target award if TSR was at the 40 ^th percentile, and zero if TSR was below the 40 ^th percentile after three years.

The comparator group for TSR purposes was composed of public companies that are generally affected by many of the same external factors and operate under broadly similar economic and business circumstances as the company. The comparator group was modified in fiscal 2016 to exclude Pall Corp. (no longer a listed company) and SPX Corp. (engaged in spin-off transaction). For purposes of fiscal 2014 awards, the comparator group was composed of the following companies:

The Compensation Committee evaluated performance of the fiscal 2014 performance share awards in August 2016 and determined that the TSR on the company’s stock over the applicable performance period was at the 43.4 percentile of the comparator group, yielding a payout at 67% of target using straight line interpolation.

Retirement and Deferred Compensation Plans

Named executive officers participate in two retirement plans (a defined benefit pension plan in which benefits were frozen as of the end of 2013 and a supplemental executive retirement plan), two deferred compensation plans (a tax-qualified 401(k) plan and a supplemental defined contribution plan), and an executive life insurance program. The supplemental plans and life insurance program provide enhanced benefits that are considered necessary to retain named executive officers and maintain aggregate compensation at competitive levels. The principal terms of these plans and program are described below.

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Retirement Plans . The company has a defined benefit retirement plan covering officers and certain other employees under which benefits were frozen effective December 31, 2013. Non-bargaining unit employees located in Wisconsin and other regional plant locations receive an annual pension payable on a monthly basis at retirement equal to 1.6% of the employee’s average of the highest five years of compensation in the last 10 calendar years of service prior to retirement multiplied by the number of years of credited service. Compensation taken into account in determining a pension includes salaries and cash awards. The amount of a pension is offset by 50% of Social Security payments. The Social Security offset is prorated if years of credited service are less than 30. Benefits under the plan were frozen on December 31, 2013.

Company officers also participate in an unfunded plan that supplements benefits under the retirement plan. The supplemental plan provides officers with an additional 0.5% of compensation per year of credited service over that presently payable under the retirement plan. In no event will a pension paid under the above-described plans exceed 70% of the employee’s average monthly compensation as calculated in determining pension benefits. A trust has been established for deposit of the aggregate present value of the benefits provided to officers under the supplemental retirement plan upon a change in control of the company.

Though the Summary Compensation Table reflects significant increases in the pension benefits of the named executive officers, those increases did not result from any plan or benefit change. Rather, the present value of each named executive officer’s accumulated benefit increased predominantly due to declining interest rates which reduced the discount rate from 4.55% to 3.75%.

Supplemental Defined Contribution Plan . Officers and key employees are eligible to participate in a nonqualified defined contribution plan that supplements the company’s 401(k) plan. In the 401(k) plan, a participant may defer up to 75% of his or her salary and cash award, subject to Internal Revenue Service limits. The employer matching contribution for such deferrals is 100% of the participant’s first 2% of contributions and 50% of the participant’s next 4% of contributions. Under the supplemental defined contribution plan, the company matching contribution is 50% of the participant’s deferrals or 4% of compensation, whichever is less.

The supplemental plan provides for automatic company contributions on behalf of newly-elected officers in the retirement plans. These company contributions are (i) an annual contribution of 3% of the participant’s salary and cash award and (ii) an annual contribution that increases over 20 years from 3% of the participant’s salary and cash award to 8% of the participant’s salary and cash award. The Board of Directors may also authorize a discretionary lump sum company contribution to the account of a participant.

The same investment elections are available with respect to account balances in the supplemental defined contribution plan as are available in the company’s 401(k) plan. Distributions are made in a single lump sum or 10 annual installments beginning on the later of a participant’s retirement or age 62.

A trust has been established to fund the company’s liabilities to participants in the supplemental defined contribution plan. The assets of this trust as well as the separate trust for the supplemental retirement plan are subject to claims of the creditors of the company.

Employment and Change of Control Agreements and Other Benefits

Employment Agreements . Each named executive officer has a two-year employment agreement with the company. The agreement automatically extends for an additional year each January 1 unless either party gives a 30-day notice that the agreement will not be renewed.

Under each employment agreement, the covered named executive officer agrees to perform the duties that may be assigned by the company from time to time. The named executive officer also agrees for a period of two years following termination of employment for any reason to keep company information confidential, not to compete with the company and not to solicit the company’s employees for employment. The company agrees to pay the named executive officer a salary of not less than that of the previous year and to provide fringe benefits that are provided to all other salaried employees in comparable positions. In the event of a termination other than for cause, the officer’s salary and certain fringe benefits (but not cash awards or long-term incentive compensation) are continued for the remaining term of the agreement.

Change of Control Agreements . Each named executive officer has a change of control agreement with the company. The agreement becomes effective upon a defined change of control of Briggs & Stratton or if the

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officer’s employment is terminated upon or in anticipation of such a change of control, and automatically supersedes any existing employment agreement. A change of control is defined to mean the acquisition of 20% or more of the company’s voting securities by any person in certain circumstances, replacement of a majority of the directors of the company in certain circumstances, shareholder approval and consummation of certain mergers, or a liquidation or sale of the company’s assets.

The purpose of the change of control agreements is to ensure that in contemplating a potential change in ownership of the company the named executive officers are focused on the best interests of shareholders and not the potential impact on their employment. If during the employment term (three years from the change of control) the officer is terminated other than for cause or if the officer voluntarily terminates his or her employment for good reason or during a 30-day window period one year after a change of control, the officer is entitled to specified severance benefits. These benefits consist of:

Change of control agreements executed after October 14, 2009 are different from these agreements in three respects:

With the exception of Mr. Schwertfeger and Ms. Buono, who entered into change of control agreements in 2014 and 2015, respectively, change of control agreements with the officers named in the Summary Compensation Table were executed prior to October 2009.

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Expatriate Agreement with Mr. Reitman . In September 2013, the company entered into an Expatriate Agreement with Mr. Reitman related to his expatriate assignment in Freienbach, Switzerland, which concluded as of May 31, 2016.

Under the agreement, Mr. Reitman received an annual foreign service premium equal to 10% of his base salary and an award of 3,000 shares of restricted stock/RSUs for completion of each full year of the assignment. In addition to the annual incentive award under the company’s cash incentive plan, Mr. Reitman’s foreign service made him eligible for an additional bonus of 5% of his annual salary (if certain performance goals were met), granted in the discretion of Briggs & Stratton International. Mr. Reitman was also entitled to an allowance of $62,000 upon completion of his assignment, prorated based on the actual duration of the assignment versus the agreement’s original expiration date of December 31, 2015. The prorated amount of such allowance that was paid to Mr. Reitman in May 2016 was $67,500. Mr. Reitman continues to be entitled to tax neutralization payments and reimbursement of his tax preparation expenses in relation to assignment-related tax exposures.

While on his international assignment, Mr. Reitman also participated in the company’s compensation and benefit programs available to officers generally, including life insurance, accidental death and personal loss insurance, health insurance coverage, and retirement plan and 401(k) plan participation. The company’s international assignment policy required that the company provide Mr. Reitman with an allowance to cover the amount by which the cost of foreign housing and utilities may exceed U.S. costs. Other benefits included certain relocation and repatriation expenses and household goods storage, a travel related allowance, vacation, arrangement for work and residence visas, and certain medical-related expenses. Mr. Reitman’s existing employment agreement and change of control agreement with the company remained in effect throughout the term of the assignment.

Executive Life Insurance Program . The company provides a death benefit to its named executive officers. The amount of the benefit during employment is two times annual salary, and the amount after retirement, for named executive officers elected before 2010, is $400,000. This coverage is consistent with the level of coverage provided by other companies that offer this benefit. The annual cost to the company for providing the benefit to eligible named executive officers was approximately $89,000. The company will recover this cost from the cash value of the policy on a covered executive when he retires or dies. The benefit will not be provided to future executives, and the amount of the benefit for current executives will not be increased.

Other Benefits . Each elected officer of the company may be reimbursed up to $5,000 annually for expenses incurred for personal financial consulting, estate planning and tax preparation.

Other Aspects of the Executive Compensation Program

Clawback Policy . The company’s incentive awards are subject to clawback rights. Cash and equity awards can be recovered by the company for any plan year in which negligence or misconduct results in a material restatement of the financial statements included in the company’s annual report that is filed with the SEC within three years after payment of the award (and as to any subsequent plan year in which any such award was materially affected by the restatement). Gains on stock options can be recovered by the company if such gains are attributable to options that were exercised within 12 months after any such material restatement.

Tax Policy . The company’s compensation plans are designed generally to ensure tax deductibility of the compensation paid under the plans. This includes compliance with Section 162(m) of the Internal Revenue Code, which limits the company’s tax deduction for a named executive officer’s compensation to $1 million unless certain conditions are met. The Compensation Committee believes, however, that shareholders’ interests are best served by not restricting its discretion and flexibility in structuring compensation programs, even though such programs may result in certain non-deductible compensation expenses. For fiscal 2016, the company believes all compensation provided to all named executive officers was tax deductible to the company. However, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and related regulations, and the fact that such regulations and interpretations may change from time to time (with potentially retroactive effect), there is no certainty that compensation intended by the Committee to satisfy the requirements for deductibility under Section 162(m) will be deductible.

For purposes of qualifying awards of restricted stock (including RSUs) as performance-based compensation under Section
162(m) of the Internal Revenue Code, the Compensation Committee annually establishes a stock pool with respect to each fiscal year. The number of shares in the pool is determined by

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dividing (i) 10% of the company’s adjusted operating income for the previously completed fiscal year by (ii) the fair market value of company stock on the award date determined by the Committee, rounded up or down to the nearest 10 shares. The maximum portion of the stock pool that could have been allocated to a named executive officer in fiscal 2016 (out of the pool created in August 2014 with reference to fiscal 2015 operating income) in order to preserve the deductibility of such awards under Section 162(m) was 50% for the CEO and 10% for each of the other named executive officers. A similar allocation of the pool was made by the Committee in August 2015 to qualify awards of restricted stock and RSUs made to the CEO and the other named executive officers in August 2016, with the CEO limited to a maximum of 50% of the pool and each other elected officer who reports to the CEO limited to their proportionate share of the remaining 50% of the pool.

Stock Ownership Guidelines

The CEO is required to hold five times his annual salary in company stock, senior vice presidents are required to hold three times their annual salary in company stock and other elected officers are required to hold two times their annual salary in company stock. The guidelines also prohibit hedging transactions involving the company’s stock and the pledging of company stock that is held to fulfill the stock ownership guidelines. A copy of the stock ownership guidelines is available in the Investor Relations section of the company’s website. All executives named in the Summary Compensation Table who were executive officers of the company as of June 30, 2016 are in compliance with the guidelines.

Compensation-Related Risk

The company’s internal audit staff conducts an annual assessment of the company’s compensation plans and practices with respect to risk and reviews the assessment with the Compensation Committee. The last such assessment and review occurred in August 2016. The assessment concluded that the company’s compensation plans and practices are not reasonably likely to have a material adverse effect on the company. The reasons for concluding that the company’s compensation plans and practices do not create material risk for the company include that the company (i) sufficiently monitors the appropriateness of the compensation and benefit plans that are available to company employees, (ii) leverages the expertise of third party service providers where necessary to ensure that the company’s compensation and deferred compensation programs are appropriate when compared to the market, and (iii) implements risk mitigation mechanisms such as a combination of short-term and long-term incentives, stock ownership guidelines, clawback provisions and administration of awards to officers and key managers by independent directors serving as members of the Compensation Committee.

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COMPENSATION TABLES

The following table shows salaries, bonuses, incentive awards, changes in the value of retirement benefits, and other compensation relating to fiscal years 2014, 2015 and 2016 for the named executive officers.

Column (a): Effective August 17, 2015, Mr. Rodgers, who previously served as Senior Vice President and Chief Financial Officer, was appointed Senior Vice President and President – Engines Group and Mr. Schwertfeger was appointed Senior Vice President and Chief Financial Officer. Effective September 1, 2016, Mr. Reitman’s title changed from Senior Vice President and President – Global Services to Senior Vice President and President – Global Support.

Column (b): Mr. Schwertfeger has been employed by the Company since 2008 but is a named executive officer for the first time in fiscal 2016. Ms. Buono has been employed by the Company since February 2015 but is also a named executive officer for the first time in fiscal 2016. In accordance with SEC rules and related guidance, information for fiscal years 2015 and 2014 is not required to be presented for Mr. Schwertfeger or Ms. Buono. Mr. Redman has been employed by the company (or a predecessor) since 1995 but was a named executive officer for the first time in fiscal 2015. In accordance with SEC rules and related guidance, information for fiscal year 2014 is not required to be presented for Mr. Redman.

Column (c): Officers received base salary increases for fiscal 2016.

Column (e): Stock awards made in each year included restricted stock (or RSUs), deferred stock, performance shares and PSUs. Restricted stock, RSUs and deferred stock are valued at the grant date value of the award. Performance shares granted in fiscal 2014 are valued based on the probable outcome of performance conditions using the Monte Carlo simulation methodology and PSUs granted in fiscal 2015

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and fiscal 2016 are valued using the fair market value of the company’s common stock on the date of grant, as more fully discussed in Note 14 of the Notes to the Consolidated Financial Statements of the company’s Form 10-K. The value of the performance share and PSU awards at the fiscal 2016, fiscal 2015 and fiscal 2014 grant dates, respectively, assuming the highest level of performance is achieved, would be $1,607,920, $1,559,877 and $1,407,302 for Mr. Teske, $387,254, $369,068 and $320,746 for Mr. Rodgers, and $166,762, $158,925 and $143,501 for Mr. Reitman. The value of the PSUs at the fiscal 2015 and fiscal 2016 grant dates, assuming the highest level of performance is achieved, would be $183,028 and $192,234 for Mr. Redman. The value of the PSUs at the fiscal 2016 grant date, assuming the highest level of performance is achieved, would be $210,144 and $251,934, respectively, for Mr. Schwertfeger and Ms. Buono. As noted in the CD&A, the fiscal 2014 performance shares paid out at 67% of target.

Column (f): The reported amounts are the grant date values of the awards. For the stock option grants made in August 2015, the assumptions made in determining the Black-Scholes value included an exercise price and fair market value of $19.90 per share, an expected life of 5.5 years, an interest rate of 1.69%, a daily stock price volatility of 25.12%, and an expected dividend yield of 2.51%. Assumptions used in valuing fiscal 2015 and fiscal 2014 stock options are stated in Note 14 of the Notes to the Consolidated Financial Statements of the company’s Form 10-K.

Column (h): The reported amounts include changes in the present value of pension benefits for the relevant fiscal year. The increase in present value from fiscal 2015 did not result from any plan or benefit change; rather, it was predominantly attributable to declining interest rates, which reduced the discount rate from 4.55% to 3.75%. Earnings on account balances in the company’s supplemental defined contribution plan are not included because the applicable interest rate is not above-market or preferential.

Column (i): Amounts include professional fees for financial advice, company contributions to 401(k) and nonqualified deferred compensation plans, premiums paid by the company for life insurance, expenses related to an expatriate assignment, and private use of the company plane by the CEO. Of these items, those exceeding $10,000 for fiscal 2016 include company contributions to retirement plans of $250,728 for Mr. Teske, $66,965 for Mr. Schwertfeger, $93,856 for Mr. Rodgers, $104,351 for Mr. Reitman, $80,690 for Mr. Redman and $70,143 for Ms. Buono, life insurance premiums paid by the company totaling $22,162 for Mr. Teske and $12,350 for Mr. Reitman, and expatriate expenses totaling $155,599 for Mr. Reitman. In addition, the amounts include $4,673 for use of the company plane by Mr. Teske. Dividends and dividend equivalents on restricted stock/RSUs and deferred stock were not included in fiscal years 2014, 2015 or 2016.

All of the compensation paid to the named executive officers was calculated and paid pursuant to the company’s compensation and benefit plans rather than the company’s standard change of control agreement.

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Cash and Stock Awards

The following tables show cash and stock awards made to the named executive officers for fiscal 2016, their outstanding equity awards at the end of fiscal 2016, and the gains attributable to stock options they exercised or stock awards that vested during fiscal 2016. The company’s fiscal 2016 financial statements include expenses associated with stock awards granted in August 2015 and cash awards paid in August 2016.

Column (b): The Grant Date is the day when a cash award was paid to a named executive officer or an equity award was granted to a named executive officer.

Column (c): The Approval Date is the day when the Compensation Committee approved an award.

Columns (d) thru (f): The Threshold is the cash award the named executive officer would have received if the performance factor had been 0. The Target is the cash award the named executive officer would have received if the performance factor had been 1. The Maximum is the cash award the named executive officer would have received if the performance factor had been 2 or more.

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Columns (g) thru (i): The vesting of PSUs is based on targets related to the company’s operating income over the three-year performance period (fiscal years 2016, 2017 and 2018). The number of PSUs earned, if any, depends on actual company performance and can range between 0% and 200% of the amount reported in the Target column above plus PSUs attributable to any dividends that are declared on the company’s common stock during the performance period. Any PSUs earned will vest at the end of the three-year performance period, and, upon vesting, will be converted into shares of the company’s common stock.

Column (j): Awards were made in restricted stock, except that the awards to Mr. Reitman were made in RSUs. These awards vest three years from the date of grant, as previously discussed.

Column (b): Options that expired on August 31, 2016 vested on August 16, 2014 and options that expire on August 31, 2017 vested on August 14, 2015.

Column (c): Options that expire on August 31, 2018 vested on August 20, 2016; options that expire on October 21, 2024 vest on October 21, 2017; and options that expire on August 18, 2025 vest on August 18, 2018.

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Column (f): All restricted stock awards and RSUs reported above were granted, in descending order as shown in the table, on August 16, 2011, August 14, 2012, August 20, 2013, August 19, 2014 and August 18, 2015, and vest on August 16, 2016, August 14, 2017, August 20, 2018, August 19, 2019 and August 18, 2018, respectively. In connection with his Expatriate Agreement, Mr. Reitman was granted 3,000 RSUs on December 2, 2013, which will vest on December 2, 2018, and 3,000 RSUs on November 4, 2015, which will vest on November 4, 2018. The amounts above include dividend equivalents on RSUs.

Column (g): Based on the $21.08 per share closing price of a share of the company’s common stock as of the last business day of fiscal 2016.

Column (h) and (i): The amounts in these columns are related to the performance share awards made in fiscal 2014 and to PSUs awarded in fiscal 2015 and 2016. The amounts above include dividend equivalents on performance shares and PSUs. Vesting of performance shares granted in fiscal 2014 depended on performance of the company’s stock price relative to a comparator group of companies over a three-year performance period. Vesting of PSUs granted in fiscal 2015 and fiscal 2016 will depend on the company’s aggregate operating income during fiscal years 2015, 2016 and 2017 for the fiscal 2015 grants and during fiscal years 2016, 2017 and 2018 for the fiscal 2016 grants, in each case relative to a cumulative operating income target for each performance period. For all awards, the final earned award can range from 0% to 200% of the target depending on performance. For the three-year performance period that concluded at the end of fiscal 2016, the performance share awards granted in fiscal 2014 vested at 67% of target. The amounts listed above for the fiscal 2015 and fiscal 2016 PSUs are based on the threshold value of each award (25%) multiplied by the $21.08 per share closing price of a share of the company’s common stock as of last business day of fiscal 2016.

Pensions and Other Benefits

The company provides officers with pension benefits under a defined benefit retirement plan and a supplemental retirement plan. The present value of these benefits and certain other information for each participating named executive officer is shown in the following table.

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Column (a): Mr. Schwertfeger and Ms. Buono were each hired after the January 1, 2008 plan eligibility freeze.

The amounts in the preceding table show the present value of accumulated benefits as of July 1, 2016. The amounts were calculated using the RP2014 mortality table backed off to 2007 projected generationally using projection scale 2007 and a discount rate of 3.75%. Material assumptions used in determining values include that the beneficiaries receive life only annuities at the earliest age at which unreduced benefits are payable (age 62 or 30 years of service), and that no beneficiary dies prior to retirement. For more detailed information about this calculation see “Retirement and Deferred Compensation Plans” in the CD&A.

Mr. Reitman is eligible for early retirement under the company’s Retirement Plan and Supplemental Executive Retirement Plan. Early retirement is available to employees who (1) attain 30 years of service with the company, (2) reach age 55 with 10 or more years of service with the company, or (3) attain age 65. If an employee retires with 30 years of service, there is no reduction in the retirement benefit, and such retiree is eligible to continue medical coverage for up to 10 years but not beyond age 65 as long as the retiree pays the same premiums as active employees. If an employee retires after reaching age 55 and with at least 10 years of service, the benefit is reduced by 4% for each year of age less than age 62 or each year of service less than 30, whichever is less. The benefit is not reduced if the employee is at least age 62 with 10 years of service or age 65.

* * * * *

The following table shows contributions and earnings during fiscal 2016 and fiscal year-end balances in the company’s nonqualified deferred compensation plan for each named executive officer. A named executive officer may defer under the plan up to 75% of his or her salary and bonus, reduced by assumed deferrals of 6% of base salary under the company’s 401(k) plan. Company contributions to a participant’s account are described in “Retirement and Deferred Compensation Plans” in the CD&A. Distributions are made in a single lump sum or 10 annual installments beginning on the later of a participant’s retirement or age 62.

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Column (b): Amounts reported as executive contributions are included in the Salary column of the Summary Compensation Table. These amounts include the following contributions by the named executive officers related to compensation earned in fiscal 2016 and deferred subsequent to the end of fiscal 2016: Mr. Teske $54,024, Mr. Schwertfeger $9,874, Mr. Rodgers $10,862, Mr. Reitman $35,789, Mr. Redman $11,040 and Ms. Buono $10,613.

Column (c): The company contributions include 401(k) plan restoration matching and non-elective contributions equal to 100% of the named executive officer’s first 2% of contributions plus 50% of the named executive officer’s next 4% of contributions plus a non-elective contribution of 3% of each named executive officer’s salary and non-equity incentive compensation. Each officer also receives a contribution ranging from 3% to 8% of salary and non-equity incentive compensation based on years of service as an elected officer. These amounts include the following contributions by the company related to compensation earned in fiscal 2016 and deferred subsequent to the end of fiscal 2016: Mr. Teske $101,955, Mr. Schwertfeger $16,061, Mr. Rodgers $20,649, Mr. Reitman $25,852, Mr. Redman $20,856 and Ms. Buono $13,673.

Columns (d) and (f): The aggregate balances include the following amounts that were previously reported as compensation for the named executive officers in the Summary Compensation Table for previous years: Mr. Teske $1,103,401, Mr. Rodgers $263,402, Mr. Reitman $308,423 and Mr. Redman $97,926. Mr. Schwertfeger and Ms. Buono are named executive officers for the first time in fiscal 2016 and, therefore, they have not been included in the company’s prior Summary Compensation Tables.

AGREEMENTS WITH EXECUTIVES

As described in more detail in the CD&A above, under “Employment and Change of Control Agreements and Other Benefits,” the company has entered into employment agreements and change of control agreements with each of the executives named in the Summary Compensation Table and an Expatriate Agreement with Mr. Reitman.

Assuming the executives named in the Summary Compensation Table were terminated other than for cause on July 1, 2016 (the last business day of fiscal 2016), each named executive officer would have been entitled under his or her employment agreement to continue to receive a base salary through December 31, 2017 and the same medical plan coverage that would have been available to other salaried employees. The aggregate amount of the salary continuation payments that would have been made to each named executive officer are: Mr. Teske $1,403,000, Mr. Schwertfeger $488,000, Mr. Rodgers $689,000, Mr. Reitman $579,000, Mr. Redman $525,000 and Ms. Buono $606,000. The value of continued medical plan coverage for each named executive officer would have been as follows: Mr. Teske $17,249, Mr. Schwertfeger $5,390, Mr. Rodgers $17,249, Mr. Reitman $12,398, Mr. Redman $17,249 and Ms. Buono $12,398.

The employment agreements terminate upon a named executive officer’s death or disability. In the event of an officer’s disability, the officer will continue to receive compensation for six months following termination, reduced by any disability payments which the officer is entitled to receive. The payments that would have been made to each named executive officer, assuming a termination for disability on July 1, 2016, are as follows: Mr.

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Teske $468,000, Mr. Schwertfeger $163,000, Mr. Rodgers $230,000, Mr. Reitman $175,000, Mr. Redman $193,000 and Ms. Buono $202,000.

The named executive officers are not entitled to a death benefit under their employment agreements, but the company’s executive life insurance program provides life insurance equal to two times the named executive officer’s annual base salary if the named executive officer dies while employed by the company. In addition, named executive officers elected prior to 2010 (i.e., Messrs. Teske, Rodgers, Reitman and Redman) are also entitled to a death benefit of $400,000 following retirement. The death benefits that would have been paid with respect to each named executive officer, assuming the named executive officer died on July 1, 2016, are as follows: Mr. Teske $1,870,000, Mr. Schwertfeger $650,000, Mr. Rodgers $919,000, Mr. Reitman $773,000, Mr. Redman $700,000 and Ms. Buono $808,000.

A named executive officer’s termination of employment due to death results in the immediate vesting of all stock options, restricted stock and RSUs. For PSUs, the award is paid on a pro rata basis. A named executive officer’s termination of employment due to disability results in the immediate vesting of all restricted stock and RSUs. Stock options remain subject to vesting in the case of a termination due to disability; provided that the Compensation Committee may elect to accelerate such vesting. For PSUs, the award is paid on a pro rata basis due to disability. Restricted stock and RSUs are not forfeited in the event of a named executive officer’s retirement, but continue to vest in accordance with the terms of the grants to which they relate. An executive who retires may request that the Compensation Committee vest the named executive officer’s stock options upon retirement, and such a request is normally granted. In addition, the Committee may allow performance shares and PSUs to be forfeited on retirement or may authorize payment to the named executive officer at the end of the performance period of all or a portion of the award. The value of the unvested stock options, restricted stock, RSUs, performance shares and PSUs for each named executive officer as of July 1, 2016 was Mr. Teske $6,677,870, Mr. Schwertfeger $589,558, Mr. Rodgers $1,599,997, Mr. Reitman $847,775, Mr. Redman $816,682 and Ms. Buono $431,748, based upon the same assumptions used to calculate change of control payments.

If the change of control agreements had become effective on July 1, 2016, the executives named in the Summary Compensation Table would have been entitled to receive the following amounts:

The Pension Enhancements values in the preceding table show the increase in the present value of each named executive officer’s accumulated retirement benefit under the company’s non-qualified retirement plan if a defined change of control had occurred on July 1, 2016. The valuation assumes a three-year addition to each named executive officer’s credited years of service, survival of each named executive officer until he reaches the earlier of age 62 or 30 years of service, and payment of a life-only annuity. The valuation is based on the RP2014 mortality table backed off to 2007 projected generationally using projection scale 2007 and a discount rate of 3.75%.

In the Early Stock Vesting column, the value of accelerating the exercise date of stock options was determined for options that were not exercisable on July 1, 2016, but were in the money on that date. The number of such options was multiplied by the difference between the market price of the stock on July 1, 2016 and the exercise price of the options. The value of accelerating the vesting date of restricted stock and RSUs was calculated by multiplying the number of such shares that were subject to restrictions on July 1, 2016 by the fair market value of the company’s common stock on that date. The value of performance shares reflects the actual payout of these awards at 67% of target. For PSUs, the value of the award was calculated as if target performance was achieved on July 1, 2016 and the award was paid on a pro rata basis.

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The amounts in the Other Benefits column consist of the following for each of the executives named in the Summary Compensation Table:

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IV. OTHER MATTERS