2018 Guide to Effective Proxies

2.17.6 CEO to median employee pay ratio | 395 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES COMPENSATION OF NAMED EXECUTIVE OFFICERS • an annual bonus of not less than one year’s base salary for the year in which such termination occurs, and • immediate vesting acceleration of all equity awards granted to him. In addition, if Mr. Cannon’s employment terminates because of his death or disability, Mr. Cannon’s employment agreement provides that his estate or designated beneficiary will be entitled to an amount equal to his annual base salary. Lowe Employment Agreement . The employment offer letter for Ms. Lowe provides for the following benefits due to an involuntary termination without cause or a termination for good reason, subject to execution of a release and separation agreement: • continued payments of base salary in effect at the time of such termination for a period of 12 months, • an annual bonus payment for the year in which such termination occurs in an amount not less than 85% of base salary, • payment or reimbursement for the premiums cost of any continued health coverage under COBRA for a period of 12 months following the termination date, and • continued vesting for all equity awards for a period of 12 months following the date of termination. Senior Executive Severance Plan . The severance plan as it applies to Messrs. DuChene, Frank, Harrison, and Merrill provides for the following benefits due to an involuntary termination without cause or a constructive termination, subject to execution of a release and separation agreement and compliance with the non-competition, non-solicitation, and non-disparagement restrictive covenants through the one-year anniversary of the termination date: • continued payments of base salary in effect at the time of such termination for a period of 12 months, • an annual bonus payment for the year in which such termination occurs in an amount equal to the target bonus for the year of termination, and • immediate vesting acceleration of all time-based equity awards and “banked” performance-based equity awards which only depend on additional service for vesting. In addition, the severance plan provides that, if any payment or benefits to a severance plan participant (including the payments and benefits under the severance plan) would constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code and would therefore be subject to an excise tax under Section 4999 of the Internal Revenue Code, then such payments and benefits will be either (1) reduced to the largest portion of the payments and benefits that would result in no portion of the payments and benefits being subject to the excise tax, or (2) not reduced, whichever, after taking into account all applicable federal, state and local income taxes and the excise tax, results in the participant’s receipt, on an after-tax basis, of the greater payments and benefits. CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our CEO, James J. Cannon. For 2017, our last completed fiscal year: • The median of the annual total compensation of all employees of the company (other than the CEO) was $79,263; and • The annual total compensation of our CEO was $11,290,574. This amount equals the CEO’s compensation as reported in the “Summary Compensation Table” plus an additional amount that reflects the annualizing of his base salary, non-equity incentive plan compensation, and annual long-term equity award for 2017 consistent with the applicable U.S. Securities and Exchange Commission guidance. Based on this information, for 2017, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 142 to 1 (the “2017 Pay Ratio”). The provided pay ratio is a reasonable estimate calculated in accordance with Item 402(u) of Regulation S-K. To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of the “median employee,” the methodology and the material assumptions that we used were as follows: • We selected December 1, 2017 (which is a date within the last 3 months of our last completed fiscal year) as the date upon which we would identify the “median employee”. • To identify the “median employee” from our employee population, we use total target cash compensation plus grant date value of equity awards for January 1 through December 31, 2017. In light of the additional one-time cash and equity compensation that we paid to our CEO in 2017 in order to successfully recruit him to our Company, we expect the 2017 Pay Ratio to be significantly higher than the CEO pay ratio in future years when we are not providing compensation to recruit a new Chief Executive Officer. Alternatively, if we were to exclude these one-time cash and equity compensation values, our CEO compensation would have been $4,991,104 and the resulting CEO pay ratio would have been 63 to 1. 2018 PROXY STATEMENT FLIR 45 FLIR SYSTEMS, INC.