DEF 14A of NN Inc
Filed Apr 4, 2024 · FY20230000918541-24-000056
Director Nominees
Director Nominees The following table provides summary information about each director nominee to be voted on at the Annual Meeting:
Director Nominees
| Name | Age | Director Since | Positions with Company | Committee Memberships | Independent | | Raynard D. Benvenuti | 68 | 2020 | Director | AC, CC | Yes | | Harold C. Bevis | 64 | 2023 | Director, President and Chief Executive Officer | None | No | | Christina E. Carroll | 58 | 2019 | Director | AC, GC | Yes | | João Faria | 59 | 2021 | Director | CC, GC | Yes | | Dr. Rajeev Gautam | 71 | 2021 | Director | AC, CC | Yes | | Jeri J. Harman | 66 | 2019 | Director, Non-Executive Chairman | CC, GC | Yes | | Thomas H. Wilson, Jr. | 62 | 2019 | Director | AC, GC | Yes |
Director Nominees
AC – Audit Committee; CC – Compensation Committee; GC – Governance Committee
PROPOSAL I: ELECTION OF DIRECTORS
PROPOSAL I: ELECTION OF DIRECTORS Seven directors will be elected to the Board at the Annual Meeting to each serve for a term of one year or until his or her successor is elected and qualified, subject to such director’s earlier death, resignation or removal. The Board has nominated for election: Raynard D. Benvenuti, Harold C. Bevis, Christina E. Carroll, João Faria, Dr. Rajeev Gautam, Jeri J. Harman, and Thomas H. Wilson, Jr., each a current director of the Company. Additional information about each of these nominees can be found under “Information about the Directors and Director Nominees” below. The nominees have indicated a willingness to serve as directors if elected, but if any of them should decline or be unable to serve, the persons named as proxies intend to vote all shares in favor of the election of such other persons who may be nominated as replacements by the Board. There are no family relationships among any director, executive officer or person nominated or chosen to be a director or executive officer known to us. THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF ALL NOMINATED DIRECTORS.
Information about the Directors and the Director Nominees
Information about the Directors and the Director Nominees The following table sets forth the names of each current director (including the nominees for election), their age, their years of service as a director, the year in which their current or proposed term expires, and their current positions with the Company. The table is followed by a more detailed biographical description for each director or nominee.
Information about the Directors and the Director Nominees
| Name | Age | Director Since | Term Expires | Positions | | Raynard D. Benvenuti | 68 | 2020 | 2024 | Director Nominee | | Harold C. Bevis | 64 | 2023 | 2024 | Director Nominee, President and Chief Executive Officer | | Christina E. Carroll | 58 | 2019 | 2024 | Director Nominee | | João Faria | 59 | 2021 | 2024 | Director Nominee | | Dr. Rajeev Gautam | 71 | 2021 | 2024 | Director Nominee | | Jeri J. Harman | 66 | 2019 | 2024 | Director Nominee, Non-Executive Chairman | | Thomas H. Wilson, Jr. | 62 | 2019 | 2024 | Director Nominee |
Information about the Directors and the Director Nominees
Raynard D. Benvenuti has been a member of the Board since January 2020 and serves as Chair of the Compensation Committee. Mr. Benvenuti founded Concord Investment Partners, a boutique investment and advisory firm that invests in engineering-centric industries including aerospace, automotive and industrial manufacturing/distribution companies in 1996, and continues to serve as its Managing Director. Mr. Benvenuti currently serves on the Board of Directors of Superior Industries International, Inc. (NYSE: SUP), an international manufacturer of automotive aluminum wheels. From 2007 to 2015, Mr. Benvenuti served as a Managing Partner, Managing Director, and an operational practice leader for the aerospace and automotive/truck sectors at Greenbriar Equity Group, L.P. (“Greenbriar”), a private equity group focused on transportation-related enterprises. While at Greenbriar, Mr. Benvenuti served as a director on five boards, three as Chairman, including as Chairman and interim CEO of Align Aerospace, LLC, an aerospace hardware distribution company. From 2002 until its sale to GKN plc in 2006, Mr. Benvenuti served as the President and CEO of Stellex Aerostructures, Inc., a manufacturer of large structural components for commercial and military aircraft. Prior to 2002, he worked at Forstmann Little & Co., a private equity firm, and McKinsey & Company, a global management consulting firm, where he advised high technology and industrial sector clients in the areas of strategic planning and operational improvement. Mr. Benvenuti brings to the board extensive experience as a senior executive, director and advisor to various aerospace, automotive and manufacturing companies, including in turnaround and highly leveraged situations, as well as valuable strategic, financial, operational and corporate governance expertise. Harold C. Bevis has been a member of the Board and our President and Chief Executive Officer since May 2023. Mr. Bevis has more than 25 years of business leadership, including more than 20 years’ experience in the CEO role at a number of companies. He was previously President and CEO of Commercial Vehicle Group, Inc. (“CVGI”) from March 2020 to May 2023, a publicly traded manufacturer of electrical, mechanical and seating systems for electric and internal combustion engine commercial vehicles, as well as warehouse automation and robotic systems to retailers and ecommerce shippers. At CVGI, Mr. Bevis demonstrated a track record of driving new business wins in the electric vehicle industry and he repositioned CVGI towards electrification, automation and connectivity. Prior to his experience at CVGI, Mr. Bevis was Chairman and CEO of Boxlight from January 2020 to March 2020, a startup company focused on education technology solutions. Previously, Mr. Bevis led a number of companies in the packaging industry, including as President and CEO of Xerium Technologies, Inc., Chairman and CEO of Prolamina, and President and CEO of Pliant Corporation. Mr. Bevis has broad strategic, operational, management and governance experience. He has over 25 years of experience in senior and executive management positions with multi-national corporations including responsibility for determining and executing successful business growth, profit improvement, building high performing teams, and being a responsible corporate citizen. Mr. Bevis has also served on eight Boards of Directors and on Audit, Compensation and Governance Committees of Boards. Mr. Bevis earned a Master of Business Administration degree from Columbia Business School and a Bachelor of Science degree in Industrial Engineering from Iowa State University. Christina E. Carroll has been a member of the Board since December 2019 and serves as the Chair of the Governance Committee. Since 2012, Ms. Carroll has been a managing director at Stout Risius Ross, LLC (“Stout”), a global investment bank and advisory firm, where she has been responsible for advising clients on valuation, fairness opinions, co-investments and other transaction related advice across multiple industries. Prior to joining Stout, Ms. Carroll was a director of financial advisory services at Houlihan Lokey, Inc. She also previously held managerial positions at Ernst & Young LLP, including a partner in valuation and transaction advisory services, and is a Chartered Financial Analyst. Ms. Carroll brings to the board over 35 years of experience in finance, valuation, strategy, capital markets, restructuring, and mergers and acquisitions. This experience, and her prior service as a director of The Chefs’ Warehouse, a publicly traded company, and Stout, a private company, enables her to provide important perspectives to the Board. João Faria was appointed to the Board in April 2021. Until his retirement in March 2023, Mr. Faria served as President of the Vehicle Group/eMobility at Eaton Corporation, a global power management company providing energy-efficient products and services to help customers effectively manage electric, hydraulic, and mechanical power. Previously, in his over three-decade career in engineering and manufacturing, Mr. Faria held a variety of leadership positions at Eaton, including President Corporate Latin America, Vice President Eaton Electric Latin America, Americas Regional President for Hydraulics Group, and President of Eaton Powertrain Specialty Control Operation Worldwide. Mr. Faria brings decades of manufacturing and engineering experience to the Board, with a specific focus on the electric vehicle market. This global leadership experience enables him to bring valuable perspective to our Board. Dr. Rajeev Gautam was appointed to the Board in May 2021. Dr. Gautam served as the President and Chief Executive Officer, Performance Materials and Technologies of Honeywell International, Inc. (NASDAQ: HON), a global provider in developing and manufacturing high-quality performance chemicals and materials, process technologies, and automation solutions, from 2016 until his retirement from Honeywell in September 2021. From 2009 to 2016, Dr. Gautam served as President of Honeywell UOP. He previously served as Vice President of Research and Development, Honeywell UOP, and Vice President and Chief Technology Officer, Performance Materials and Technologies. Dr. Gautam began his career with Union Carbide in 1978, which became part of a joint venture with Honeywell UOP in 1988. Throughout his career, Dr. Gautam has championed innovative solutions for industry needs and has been responsible for the development and commercialization of a broad range of catalytic and separations applications for the refining, petrochemical and gas processing industries. Dr. Gautam brings substantive experience as a senior executive to manufacturing companies, and his current service as a senior executive for a publicly traded company, enables him to bring valuable insight, knowledge and experience to the Board. Jeri J. Harman has been a member of the Board since February 2019. She was appointed Non-Executive Chairman of the Board, effective January 4, 2021. Ms. Harman is a Founder & Chairman of Avante Capital Partners. With over $900 million of capital under management, Avante makes unitranche and subordinated debt and minority equity investments to finance buyouts, minority recaps, acquisitions and growth. In 2018, Avante Capital Partners was named Small Business Investment Company of the Year by the U. S. Small Business Administration. The firm was also named Women-Owned Firm of the Year 2018 by Private Equity Women Investor Network. Prior to founding Avante, Ms. Harman started-up and led the Los Angeles offices for two multi-billion publicly traded private equity and mezzanine investment funds – American Capital and more recently Allied Capital, where she was also a member of Allied’s Investment Committee.
Information about the Directors and the Director Nominees
Ms. Harman has over 40 years of financing experience, involving well over $2 billion in aggregate investments. She has extensive experience in value creation, capital allocation, mergers and acquisitions and financial strategy matters. These skills, along with her broad background in management and organizational development, strategic planning, risk management and balance sheet management, and her service on the boards of a number of private companies, enables her to bring valuable insights to our Board. Thomas H. Wilson, Jr. has been a member of the Board since December 2019 and serves as Chair of the Audit Committee. Mr. Wilson is a Managing Partner at DecisionPoint Advisors, LLC in Charlotte, N.C., a specialized merger and acquisition advisory firm for mid-market technology companies. Prior to joining DecisionPoint in 2008, he served as Chairman and CEO of NuTech Solutions from 2004 to 2008, a business intelligence software company that was acquired by Neteeza. From 1997 to 2004, Mr. Wilson was President of Osprey, a consulting and systems integration firm. Prior to his work at Osprey, Mr. Wilson was employed by IBM for 14 years in a variety of management and sales positions. Mr. Wilson is a member of the board of directors of Jack Henry & Associates, Inc., a financial services technology company, and serves as the Chair of its Audit Committee and a member of the Compensation Committee. Mr. Wilson has over 35 years of business experience and has significant buy-side and sell-side transaction experience. He has a strong background in financial controls, auditing, financial management and accounting, and mergers and acquisitions. Mr. Wilson’s years of senior-level executive management and financial experience, and current service as the chair of the audit committee of a publicly traded company, brings valuable knowledge and experience to the Company’s Audit Committee.
Compensation of Directors
Compensation of Directors In 2023, directors who are not employees of the Company were paid an annual retainer of $230,000, consisting of $80,000 of cash paid quarterly in equal installments and $150,000 of shares of restricted stock, which vests one year from the date of grant. Our Non-Executive Chairman received an additional retainer of $75,000, the Chair of the Audit Committee received an additional retainer of $15,000, the Chair of the Compensation Committee received an additional retainer of $12,500 and the Chairman of the Governance Committee received an additional retainer of $10,000. Mr. Bevis, our current President and Chief Executive Officer, and Mr. Veltman, our former President and Chief Executive Officer, were the only directors who were also employees of the Company. Messrs. Bevis and Veltman did not receive any compensation for their service as directors. We reimburse all directors for out-of-pocket expenses incurred in attending Board and committee meetings. Director compensation is reviewed and approved by the Compensation Committee. The table below provides information about the compensation our non-employee directors received during 2023.
Director Compensation Table For 2023
Director Compensation Table For 2023
Director Compensation Table For 2023
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | | Mr. Benvenuti | $92,500 | $149,999 | $242,499 | | Mr. Brunner (2) | 60,000 | 298,596 | 358,596 | | Ms. Carroll | 90,000 | 149,999 | 239,999 | | Mr. Faria | 80,000 | 149,999 | 229,999 | | Dr. Gautam | 80,000 | 149,999 | 229,999 | | Ms. Harman | 155,000 | 149,999 | 304,999 | | Dr. Kuran (2) | 60,000 | 298,596 | 358,596 | | Mr. Wilson | 95,000 | 149,999 | 244,999 |
Director Compensation Table For 2023
_______________ (1) Amounts represent the aggregate grant date fair value, as computed in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, of 140,186 shares of restricted stock awarded on April 1, 2023 to each director. The restricted stock awards to directors vest in their entirety on the first anniversary of the date of grant. (2) In connection with the retirements of Mr. Brunner and Dr. Kuran effective August 23, 2023, their 2023 stock awards were vested, and in accordance with FASB ASC Topic 718, the value of the awards was adjusted to reflect the stock price on this date.
2023 Pay for Performance
2023 Pay for Performance Our executive compensation programs are based on a strong alignment between pay and performance and are designed to reward both financial and operational successes as well as actions that drive stockholder value creation. We believe our executive compensation programs are acting as intended, to properly incentivize and compensate our executive officers when our financial objectives are met and to hold our executive officers accountable when they are not. Accordingly, we made minimal material changes to our programs in 2023, which included adjusting the mix of awards granted under our long-term incentive compensation program. Specifically, we removed ROIC awards and instead increased the proportion of TSR Awards granted under the program, as we believe TSR is more aligned with shareholder interest when compared to ROIC. See “What We Pay and Why: Elements of Compensation – Long-Term Incentive Compensation” below for more information on our long-term incentive compensation program.
What We Do
What We Do • Align executive pay with Company performance; • Establish performance metrics that correlate to stockholder value creation; • Mitigate undue risk in compensation programs; • Include meaningful vesting periods on equity awards; • Establish a performance gate that must be achieved as a condition to any payout of short-term incentive compensation; • Set maximum payout limits on all variable, performance-based compensation programs; • Utilize an independent compensation consultant; • Provide reasonable post-employment/change in control provisions in employment/separation agreements; • Maintain executive stock ownership guidelines; and • Maintain an incentive compensation recoupment (clawback) policy applicable to all incentive compensation awards granted under our compensation plans, including equity awards.
What We Don’t Do
What We Don’t Do • Reprice underwater stock options; • Exchange underwater stock options for cash; • Grant multi-year guaranteed bonuses; • Provide excessive perquisites; or • Permit hedging, pledging or short-sale transactions by our executive officers and directors.
Compensation Committee
Compensation Committee The Compensation Committee consists of four independent non-employee directors and is supported by our Human Resources department. As discussed below, the Compensation Committee may also retain one or more independent compensation consultants to assist it. The Compensation Committee handles a variety of compensation and organizational matters relating to our executives, including the following: • reviews, approves and administers all of our executive compensation programs; • establishes the performance objectives under our executive incentive compensation and long-term equity compensation programs; • determines the attainment of those performance objectives and the awards to be made under our compensation programs; • sets base salary and incentive opportunities for our CEO and other senior executives; • evaluates the performance of our CEO; and • recommends employment and severance agreements for our CEO and other senior executives to the Board. The Compensation Committee uses its informed judgment to determine the appropriate type and mix of compensation elements; to select performance measures, target levels and payout schedules for incentive compensation; and to determine the level of salary and incentive awards for each executive officer. The Compensation Committee has the authority to engage its own external compensation consultant as needed and engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent consultant. We conducted a conflict of interest assessment prior to the Compensation Committee engaging Meridian (and does so on an annual basis), which verified, in the Compensation Committee’s judgment, Meridian’s independence and that no conflicts of interest existed. The Compensation Committee engaged Meridian to perform a competitive review our executive pay programs in comparison to competitive market practices. Meridian also advised on selecting a peer group of companies for executive compensation benchmarking, provided comparative data for the annual executive compensation review and assisted with other compensation matters as requested. Representatives from Meridian also attend Compensation Committee meetings on request. Our Human Resources department also provides compensation data, research and analysis that the Compensation Committee may request, and our Chief Human Resources Officer, along with our CEO, regularly attends Compensation Committee meetings. However, the Compensation Committee meets in executive session without management present to discuss CEO performance and compensation, as well as any other matters deemed appropriate by the Compensation Committee. The CEO recommends to the Compensation Committee compensation levels for the other executive officers, including salary increases, annual incentive targets and equity award values, based on his assessment of each executive’s performance and level of responsibility.
Peer Group Compensation Analysis
Peer Group Compensation Analysis The Compensation Committee believes it is important to clearly understand the relevant market for executive talent to inform its decision-making and ensure that our executive compensation program supports our recruitment and retention needs and is fair and efficient. As a result, the Compensation Committee worked with Meridian to develop a peer group for purposes of assessing competitive compensation practices, and periodically reviews compensation data for the peer group derived from publicly filed proxy statements. In 2023, the Compensation Committee identified companies in our industry and with a market capitalization and assets in size similar to ours, for our peer selection. The Compensation Committee conducted an analysis of comparable peer compensation as a general frame of reference in considering the appropriateness of our executive compensation programs and to ensure that the compensation of our CEO and other senior executive officers is aligned with that of our peers. Our peer group for our 2023 executive compensation program consists of the companies set forth below:
Peer Group Compensation Analysis
| Allied Motion Technologies Inc. | EnPro Industries, Inc. | Standex International Corporation | | Astronics Corporation | ESCO Technologies Inc. | Stoneridge, Inc. | | CIRCOR International, Inc. | Helios Technologies, Inc. | Strattec Security Corporation | | Columbus McKinnon Corporation | Mayville Engineering Company, Inc. | The Eastern Company | | Commercial Vehicle Group, Inc. | Motorcar Parts of America, Inc. | Twin Disc, Incorporated |
What We Pay and Why: Elements of Compensation
| Weight by Goal | Company Goals | Threshold | Target | Maximum | 2023 Results | | | Payout Level | 50% | 100% | 150% | | | 30% | Adjusted EBITDA (1) | $46.22 | $61.63 | $77.04 | $43.12 | | 30% | Free Cash Flow (2) | $8.56 | $17.03 | $25.50 | $11.73 | | 30% | New Business Wins | $37.50 | $50.00 | $62.50 | $62.62 | | 10% | ESG & External Messaging; People & Culture; Information Systems; Other | 80% | 100% | 120% | 95% |
What We Pay and Why: Elements of Compensation
| Name | EIC Target Bonus (% of Base Salary) | Total EIC Payout Level | Total EIC Award | | Mr. Bevis (1) | 100% | 74.4% | $620,990 | | Mr. Felcher | 50% | 74.4% | $150,599 | | Mr. French | 50% | 74.4% | $162,633 | | Ms. Nixon | 45% | 74.4% | $102,073 | | Mr. Veltman (2) | -- | -- | — | | Mr. Wall (3) | 50% | —% | — |
What We Pay and Why: Elements of Compensation
__________ (1) As part of Mr. Bevis entering into employment with the Company, he was guaranteed a minimum bonus of $835,000, which resulted in a one-time discretionary bonus equal to $214,010. (2) Mr. Veltman did not participate in the 2023 EIC due to his announced retirement effective May 21, 2023. (3) Mr. Wall resigned from the Company effective as of June 30, 2023 and thus was not eligible to receive an EIC award. Long-Term Incentive Compensation. We provide performance-based long-term incentive compensation to certain employees, including our NEOs, to directly tie the interests of these individuals to the interests of our stockholders. In addition, this program allows us to provide competitive pay packages to attract and retain a highly talented management team. Our long-term incentive compensation includes performance stock units, or PSUs, that vest based on our total shareholder return (TSR Awards, relative to the custom subset of the S&P SmallCap 600 Index), over a three-year performance period (Performance Period). In addition, our NEOs receive long-term incentive compensation in the form of shares of restricted stock. Such long-term incentive compensation is based on the NEO’s target opportunity as a percentage of base salary and is allocated two-thirds to TSR Awards and one-third to restricted stock awards. Our long-term incentive compensation is designed to directly align the interests of executives to the interests of our stockholders and to drive long-term stockholder value creation. Mr. Bevis and Mr. French did not participate in our long-term incentive compensation program in 2023 and instead each received inducement grants material to his entering into employment with the Company. Mr. Bevis’ inducement grants consisted of 1,500,000 time-vesting restricted stock units, or RSUs, which will vest ratably in one-fifth increments annually, and 2,500,000 performance stock units, or PSUs, which will be realized incrementally upon certain increases in the price of the Company’s common stock over a five-year performance period. Mr. French’s inducement grants consisted of 330,000 RSUs, which will vest ratably in one fifth increments annually, and 560,000 PSUs, which will be realized incrementally upon certain increases in the price of the Company’s common stock over a five-year performance period. Further, Messrs. Bevis and French will not be eligible to participate until 2028 in our long-term incentive compensation program due to the previously-granted inducement awards. The Compensation Committee chose a custom subset of the S&P SmallCap 600 Index as a relative TSR comparison group because it is a broad and stable index group that is comprised of companies with similar market capitalizations to ours. TSR is calculated by taking a total of share price appreciation plus dividends over the three-year period compared to our share price at the beginning of the period. The performance metrics and corresponding payouts for TSR Awards are based on our ranking within the custom subset of the S&P SmallCap 600 for all performance cycles that are currently outstanding, and for the 2022 Performance Period are as follows:
What We Pay and Why: Elements of Compensation
| Performance | Payout | | Threshold - At 25th percentile | 25% of target | | Target - At 55th percentile | 100% of target | | Maximum - At 75th percentile | 150% of target |
What We Pay and Why: Elements of Compensation
If performance is below the 25th percentile, no award will be earned or paid as it relates to that measure. If the PSUs do not vest at the end of the Performance Period, such PSUs will expire automatically. Upon vesting, the PSUs will be settled by the issuance of shares of common stock, subject to the executive’s continued employment through the vesting date. The actual number of shares of common stock that will be issued to each award recipient at the end of the Performance Period will be interpolated between a threshold and maximum payout amount based on actual performance results. No dividends will be paid on outstanding PSUs during the Performance Period; however, dividend equivalents will be paid based on the number of shares of common stock that are ultimately earned at the end of the Performance Period. The Restricted Stock will vest ratably over three years in accordance with historical compensation practice, subject to continued employment. Dividends will be paid on outstanding Restricted Stock during the vesting period. For 2023, other than Messrs. Bevis and French, the Compensation Committee established a long-term incentive compensation target opportunity for each executive that ranged between 65% and 100% of the respective NEO’s base salary and was intended to approximate the market values of long-term equity awards granted within our peer group. Each NEO’s long-term incentive opportunity award value in 2023, including Messrs. Bevis’ and French’s inducement award value, is shown in the following table:
What We Pay and Why: Elements of Compensation
| Name | Grant Date Fair Value of PSU Awards | Grant Date Fair Value of Restricted Stock | Grant Date Fair Value of Long- Term Incentive Compensation | | Mr. Bevis (1) | $2,571,613 | $1,950,000 | $4,521,613 | | Mr. Felcher | $181,682 | $135,000 | $316,682 | | Mr. French (2) | $1,136,240 | $808,500 | $1,944,740 | | Ms. Nixon | $88,934 | $66,083 | $155,017 | | Mr. Veltman (3) | — | — | — | | Mr. Wall | $133,458 | $99,167 | $232,625 |
What We Pay and Why: Elements of Compensation
____________ (1) As noted above, Mr. Bevis did not participate in our 2023 long-term incentive compensation program in light of the previously-granted inducement awards. (2) As noted above, Mr. French did not participate in our 2023 long-term incentive compensation program in light of the previously-granted inducement awards. (3) Mr. Veltman did not receive any grants of long-term incentive awards due to his announced retirement effective May 21, 2023. TSR and ROIC Metrics and Actual Performance Attainment – 2021-2023 Performance Period. In 2021, the Compensation Committee established the TSR and ROIC performance thresholds to be measured over the 2021-2023 performance period. In March 2024, we certified to the Compensation Committee that during the 2021-2023 performance period Relative TSR was (48.9)% (9th percentile) and ROIC was 3.1%, both of which were below the threshold requirements. As a result of the Relative TSR and ROIC results, no performance shares were earned by our NEOs under the 2021 Long-Term Incentive Compensation Plan. Benefits. In addition to the three elements of total direct compensation (base salary, annual incentive compensation and long-term equity incentive compensation), we provide certain other benefits to our NEOs, including Company-matched contributions under a 401(k) savings plan, health savings accounts, group term life insurance, housing allowance and employee travel allowance. We do not provide our NEOs with excessive perquisites, such as use of a company airplane, club memberships, and tax and financial planning.
Risk Considerations
Risk Considerations We structure our executive compensation arrangements to encourage executives to take appropriate risks designed to enhance performance and increase stockholder value. We believe that providing a balanced mix of stock- and cash-based compensation arrangements tied to both corporate and individual performance goals provides an appropriate balance of incentives for executives and helps to avoid the taking of inappropriate or excessive risks. The Compensation Committee has assessed our compensation objectives, philosophy, policies, procedures and forms of compensation, and has concluded that our compensation program and principles do not create risks that are likely to have a material adverse effect. With respect to specific elements of compensation: • Base salary does not encourage risk-taking as it is a fixed amount and but one component of a balanced, multi-component approach to compensation and rewards. • Our executive incentive compensation for executive officers is designed to reward achievement of performance metrics that take into account the expense of such compensation, which we believe facilitates the creation of stockholder value. Through a combination of plan design, such as a cap on potential payouts, and management procedures, undue risk-taking is mitigated. • Awards under our long-term incentive plans are determined by the Compensation Committee and subject to vesting requirements. We have stock ownership guidelines to ensure that a meaningful portion of an executive officer’s net worth is in our common stock and therefore tied to long-term sustainable performance. We believe this, in addition to a payout cap on performance share units, negates any motivation to take inappropriate risks associated with business performance.
Summary Compensation Table
Summary Compensation Table The following table sets forth for the year ended December 31, 2023 information concerning the compensation paid for services rendered in all capacities by the named executive officers.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($)(5) | Stock Awards ($)(6) | Option Awards ($) | Non-equity Incentive Plan Compen- sation ($)(7) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($)(9) | Total ($) | | Harold C. Bevis (1) | 2023 | 497,789 | 214,010 | 4,521,613 | — | 620,990 | — | 105,655 | 5,960,057 | | President and Chief Executive Officer | | | | | | | | | | | Michael C. Felcher | 2023 | 398,750 | — | 316,682 | — | 150,599 | — | 8,983 | 875,014 | | Senior Vice President and Chief Financial Officer | 2022 | 373,750 | — | 294,985 | — | — | — | 8,497 | 677,232 | | | 2021 | 307,294 | 42,500 | 114,371 | — | 108,195 | — | 7,945 | 580,305 | | Timothy M. French (2) | 2023 | 163,170 | 27,243 | 1,944,740 | — | 162,633 | — | 9,499 | 2,307,285 | | Chief Operating Officer | | | | | | | | | | | D. Gail Nixon | 2023 | 302,500 | — | 155,017 | — | 102,073 | — | 7,567 | 567,157 | | Senior Vice President and Chief Human Resources Officer | 2022 | 293,750 | — | 175,117 | — | — | — | 7,555 | 476,422 | | | 2021 | 288,750 | 82,500 | 187,404 | — | 104,193 | — | 7,919 | 670,766 | | Warren A. Veltman (3) | 2023 | 298,269 | 300,000 | — | — | — | — | 35,015 | 633,284 | | Former President and Chief Executive Officer | 2022 | 700,962 | — | 1,641,849 | — | — | — | 52,887 | 2,395,698 | | | 2021 | 685,962 | 250,000 | 1,749,418 | — | 550,906 | — | 53,165 | 3,289,451 | | J. Andrew Wall (4) | 2023 | 175,481 | — | 232,625 | — | — | — | 21,265 | 429,371 | | Former Senior Vice President and Chief Commercial Officer | 2022 | 312,500 | — | 352,288 | — | — | — | 7,722 | 672,510 |
Summary Compensation Table
__________ (1) Mr. Bevis joined the Company as President and Chief Executive Officer on May 22, 2023. As part of his employment agreement, Mr. Bevis was guaranteed a minimum bonus of $835,000. The amount paid in excess of the amount earned under the Company’s EIC plan is recognized in the Bonus column. (2) Mr. French joined the Company effective as of August 10, 2023 and received a one-time signing bonus. Mr. French is paid in Canadian Dollars with all compensation amounts presented in U.S. Dollars converted at an exchange rate of 0.7363, the average exchange rate for the period during Mr. French’s 2023 employment. (3) Mr. Veltman retired from his positions as Director, President and Chief Executive Officer on May 21, 2023 and received a one-time discretionary bonus of $300,000. (5) Amounts in the Bonus column for 2021 represent the second payment of a retention award approved by the Compensation Committee in October 2020 in connection with the sale of our Life Sciences business. (6) Amounts in the Stock Awards column for 2023 represent the grant date fair values of shares of restricted stock and PSU Awards granted. The grant date fair values were computed in accordance with FASB ASC Topic 718. The grant date fair value of restricted stock was based on the closing price of our stock on the date of grant. The grant date fair value of PSU Awards was determined using a Monte Carlo simulation model. The grant date fair values of PSUs in the table above assumes target performance, but the actual number of performance shares distributed at the end of the performance period is dependent upon the achievement of stated performance goals. The following table reflect the grant date fair value of the PSUs at target, as well as the maximum grant date award value if the highest level of performance is achieved. Additional information regarding the PSU Awards is set forth under Note 16 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 12, 2024.
Summary Compensation Table
| Grant Date Fair Value of PSU Awards | | | | Name | Target Value ($) | Maximum Value ($) | | Mr. Bevis | 2,571,613 | 3,250,000 | | Mr. Felcher | 181,682 | 405,000 | | Mr. French | 1,136,240 | 1,372,000 | | Ms. Nixon | 88,934 | 198,250 | | Mr. Wall | 133,458 | 297,500 |
Summary Compensation Table
(7) Generally, non-equity incentive plan compensation is earned in one fiscal year and paid in the first half of the next year. (8) Reflects all other compensation, as summarized in the following table, for 2023:
Summary Compensation Table
| Name | 401(k) Company Match ($) | Health Savings Account ($) | Excess Group Term Life Insurance Premiums ($) | Housing Reimbursement ($) | Moving Expenses ($) | Other ($) | Total ($) | | Mr. Bevis (1) | 6,600 | — | 2,125 | — | 96,930 | — | 105,655 | | Mr. Felcher (2) | 6,600 | 800 | 1,283 | — | — | 300 | 8,983 | | Mr. French (3) | — | — | — | — | — | 9,499 | 9,499 | | Ms. Nixon | 6,050 | 400 | 1,117 | — | — | — | 7,567 | | Mr. Veltman (4) | 2,000 | 800 | 1,679 | 15,336 | — | 15,200 | 35,015 | | Mr. Wall (5) | 3,833 | 800 | 478 | — | — | 16,154 | 21,265 |
Summary Compensation Table
__________ (1) In connection with his relocation to the Company’s headquarters in Charlotte, NC, Mr. Bevis received home finding travel and relocation benefits. (2) Mr. Felcher received reimbursement for a gym membership. (3) Mr. French is allotted a benefits stipend in lieu of participating in the Company’s benefit programs. (4) Mr. Veltman received a service award of $3,200 and upon his retirement, was provided with $12,000 for benefits continuation. (5) Upon Mr. Wall’s resignation from the Company effective as of June 30, 2023, he received the payout of vested vacation time. The following table sets forth information with respect to plan-based awards granted during 2023 to the named executive officers.
Grants of Plan-Based Awards For 2023
Grants of Plan-Based Awards For 2023
Grants of Plan-Based Awards For 2023
| | | | Estimated Future payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | | | Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold ($) | Target ($) | Maximum ($) | | | | Mr. Bevis | | | | | | | | | | | | | Restricted Stock Inducement Award | 5/22/2023 | — | — | — | — | — | — | 1,500,000 | 1,950,000 | | | PSU Inducement Award | 5/22/2023 | — | — | — | 325,000 | 325,000 | 3,250,000 | | 2,571,613 | | | Non-Equity Incentive Plan Award | | 835,000 | 835,000 | 1,252,500 | — | — | — | — | — | | Mr. Veltman | | | | | | | | | | | | | Non-Equity Incentive Plan Award | | — | — | — | — | — | — | — | — | | Mr. Felcher | | | | | | | | | | | | | Restricted Stock | 4/1/2023 | — | — | — | — | — | — | 126,168 | 135,000 | | | TSR Award | 4/1/2023 | — | — | — | 67,500 | 270,000 | 405,000 | | 181,682 | | | Non-Equity Incentive Plan Award | | 101,250 | 202,500 | 303,750 | — | — | — | — | — | | Mr. French | | | | | | | | | | | | | Restricted Stock Inducement Award | 8/10/2023 | — | — | — | — | — | — | 330,000 | 808,500 | | | PSU Inducement Award | 8/10/2023 | — | — | — | 171,500 | 171,500 | 1,372,000 | | 1,136,240 | | | Non-Equity Incentive Plan Award | | 109,341 | 218,681 | 328,022 | — | — | — | — | — | | Ms. Nixon | | | | | | | | | | | | | Restricted Stock | 4/1/2023 | — | — | — | — | — | — | 61,760 | 66,083 | | | TSR Award | 4/1/2023 | — | — | — | 33,042 | 132,166 | 198,250 | — | 88,934 | | | Non-Equity Incentive Plan Award | | 68,625 | 137,250 | 205,875 | — | — | — | — | — | | Mr. Wall (5) | | | | | | | | | | | | | Restricted Stock | 4/1/2023 | — | — | — | — | — | — | 92,679 | 99,167 | | | TSR Award | 4/1/2023 | — | — | — | 49,583 | 198,333 | 297,500 | — | 133,458 | | | Non-Equity Incentive Plan Award | | 87,500 | 175,000 | 262,500 | — | — | — | — | — |
Grants of Plan-Based Awards For 2023
____________ (1) Estimated Future Payouts Under Non-Equity Incentive Plans represent the threshold, target, and maximum amounts that could be earned under our Non-Equity Incentive Compensation program at targets established for each level. Until the threshold performance is obtained, no incentive is earned. If the maximum performance had been achieved, the named executive officers would have received one and one-half times their target bonus amount. See “Compensation Discussion & Analysis — What We Pay and Why: Elements of Compensation — Non-Equity Incentive Compensation” for more information regarding our bonuses. (2) Amounts represent the number of shares that could vest multiplied by the ending stock price on the grant date. (3) See also “Compensation Discussion & Analysis — What We Pay and Why: Elements of Compensation — Long-Term Incentive Compensation” for additional information regarding our PSUs, including information regarding performance criteria. (4) Amounts represent the grant date fair value, as computed in accordance with FASB ASC Topic 718. The grant date fair value of TSR Awards and PSU Inducement Awards were determined using a Monte Carlo simulation model. The grant date fair value of Restricted Stock Awards was based on the closing price of our stock on the date of grant. Additional information regarding the PSUs are set forth under Note 16 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 12, 2024. (5) Mr. Wall resigned from the Company effective as of June 30, 2023, and as such, the awards were forfeited on the effective date of his resignation. The following table sets forth information with respect to outstanding equity awards as of December 31, 2023.
Outstanding Equity Awards at Fiscal Year-End 2023
Outstanding Equity Awards at Fiscal Year-End 2023
Outstanding Equity Awards at Fiscal Year-End 2023
| | Option Awards | | | | | Stock Awards | | | Grant/ Award Type | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | | Mr. Bevis | | | | | | | | | RS Inducement Award (1) | — | — | — | — | — | 1,500,000 | 6,000,000 | | PSU Inducement Award (2) | — | — | — | — | — | 2,500,000 | 10,000,000 | | Mr. Felcher | | | | | | | | | FY 2019 Option | 5,700 | — | — | 7.93 | 3/14/2029 | — | — | | FY 2020 Option | 4,500 | — | — | 9.44 | 2/18/2030 | — | — | | FY 2021 Restricted Stock (3) | — | — | — | — | — | 5,256 | 21,024 | | FY 2022 Restricted Stock (3) | — | — | — | — | — | 25,009 | 100,036 | | FY 2022 TSR Award (4) | — | — | — | — | — | 35,191 | 140,764 | | FY 2022 ROIC Award (4) | — | — | — | — | — | 37,514 | 150,056 | | FY 2023 Restricted Stock (3) | — | — | — | — | — | 126,168 | 504,672 | | FY 2023 TSR Award (4) | — | — | — | — | — | 252,336 | 1,009,344 | | Mr. French | | | | | | | | | RS Inducement Award (1) | — | — | — | — | — | 330,000 | 1,320,000 | | PSU Inducement Award (2) | — | — | — | — | — | 560,000 | 2,240,000 | | Ms. Nixon | | | | | | | | | FY 2014 Option | 2,000 | — | — | 19.63 | 3/19/2024 | — | — | | FY 2017 Option | 13,200 | — | — | 24.20 | 3/17/2027 | — | — | | FY 2021 Restricted Stock (3) | — | — | — | — | — | 2,908 | 11,632 | | FY 2022 Restricted Stock (3) | — | — | — | — | — | 14,846 | 59,384 | | FY 2022 TSR Award (4) | — | — | — | — | — | 20,891 | 83,564 | | FY 2022 ROIC Award (4) | — | — | — | — | — | 22,270 | 89,080 | | FY 2023 Restricted Stock (3) | — | — | — | — | — | 61,760 | 247,040 | | FY 2023 TSR Award (4) | — | — | — | — | — | 123,520 | 494,080 | | Mr. Veltman | | | | | | | | | FY 2014 Option | 3,000 | — | — | 22.15 | 10/20/2024 | — | — | | FY 2022 TSR Award (4) | — | — | — | — | — | 90,429 | 361,716 | | FY 2022 ROIC Award (4) | — | — | — | — | — | 96,397 | 385,588 | | Mr. Wall (5) | — | — | — | — | — | — | — |
Outstanding Equity Awards at Fiscal Year-End 2023
____________ (1) The Restricted Stock Inducement Awards vest in five equal annual installments beginning on the first anniversary of the date of grant. (2) The Performance Share Inducement Awards will, subject to the achievement of the performance goals applicable thereto, vest on the fifth anniversary of the date of grant. (3) Shares of restricted stock vest in three equal annual installments beginning on the first anniversary of the date of grant. (4) TSR Awards and ROIC Awards granted in 2022 and 2023 will, subject to the achievement of the performance goals applicable thereto, vest on December 31, 2024 and December 31, 2025, respectively. (4) The market value of unvested shares of restricted stock and unvested shares issuable in respect of PSUs is based on the closing price of our common stock on December 29, 2023, which was $4.00 and, with respect to PSUs, assumes target performance. (5) Mr. Wall resigned from the Company effective as of June 30, 2023, and his unvested RSUs and PSUs were forfeited on the effective date of his resignation. The following table sets forth information with respect to option exercises and stock vesting as of December 31, 2023.
Option Exercises and Stock Vested During 2023
Option Exercises and Stock Vested During 2023
Option Exercises and Stock Vested During 2023
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | | Mr. Bevis | — | — | — | — | | Mr. Felcher | — | — | 19,285 | 23,848 | | Mr. French | — | — | — | — | | Ms. Nixon | — | — | 12,513 | 15,369 | | Mr. Veltman | — | — | 283,362 | 351,501 | | Mr. Wall | — | — | 45,538 | 45,538 |
CEO PAY RATIO
CEO PAY RATIO In light of the CEO transition that occurred in 2023, as permitted by SEC rules, we elected to annualize CEO compensation for purposes of the pay ratio based on the compensation of Mr. Bevis, who was serving as CEO on the median employee identification date, December 31, 2023. For 2023, the annualized total compensation of Mr. Bevis as CEO was $6,298,744, and the median of the annual total compensation of all employees, other than the CEO, was $18,247, resulting in a ratio of 345:1, or the Pay Ratio. In determining the median employee, we collected information regarding gross earnings for all 3,160 employees of the Company and its consolidated subsidiaries as of December 31, 2023 for the period beginning January 1, 2023 and ending December 31, 2023. A substantial majority of our employees work outside the United States, including the median employee. Gross earnings generally included an employee’s actual income, including base wages, overtime, bonuses and other cash incentives. We converted earnings paid in local currencies to U.S. dollars by applying the exchange rate at December 31, 2023. We did not utilize the “de minimis” exception, statistical sampling or other similar methods, or any cost-of-living adjustment, as permitted by applicable SEC regulations, in calculating the Pay Ratio. The Pay Ratio disclosed above is a reasonable estimate. Because the SEC rules for identifying the median employee and calculating the pay ratio allow companies to use different methodologies, exemptions, estimates and assumptions, the Pay Ratio may not be comparable to the pay ratio reported by other companies.
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE
Pay Versus Performance Table
Pay Versus Performance Table As required by Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive “compensation actually paid” (as defined by SEC rules) and certain financial performance measures of the Company. For further information about how we align executive compensation with the Company’s performance, see “Compensation Discussion and Analysis” above. The amounts in the table below are calculated in accordance with SEC rules and do not represent amounts actually earned or realized by our NEOs, including with respect to restricted stock and PSUs.
Pay Versus Performance Table
| Year (1) | Summary Compensation Table Total to 1st PEO | Summary Compensation Table Total to 2nd PEO | Compensation Actually Paid to 1st PEO (2) | Compensation Actually Paid to 2nd PEO (2) | Average Summary Compensation Table Total for Non-PEO NEOs | Average Compensation Actually Paid to Non-PEO NEOs (2) | Value of Initial Fixed $100 Investment Based on TSR (3) | Net Income (4) | | 2023 | $633,284 | $5,960,057 | $356,102 | $16,315,937 | $1,044,707 | $1,848,394 | $60.88 | $(50,150,000) | | 2022 | $2,395,698 | N/A | $449,329 | N/A | $757,391 | $420,299 | $22.83 | $(26,098,000) | | 2021 | $3,289,451 | N/A | $1,700,813 | N/A | $1,099,255 | $612,133 | $62.40 | $(13,225,000) |
Pay Versus Performance Table
____________ (1) NEOs included in the above table for each covered year are the following:
Pay Versus Performance Table
| Year | 1st PEO | 2nd PEO | Non-PEO NEOs | | 2023 | Warren A. Veltman | Harold C. Bevis | Michael C. Felcher, Timothy M. French, D. Gail Nixon and J. Andrew Wall | | 2022 | Warren A. Veltman | N/A | Michael C. Felcher, John R. Buchan, Matthew S. Heiter and J. Andrew Wall | | 2021 | Warren A. Veltman | N/A | Michael C. Felcher, John R. Buchan, Matthew S. Heiter, D. Gail Nixon and Thomas D. DeByle |
Pay Versus Performance Table
(2) Adjustments made to calculate “compensation actually paid” pursuant to the SEC rules are as follows:
Pay Versus Performance Table
| PEO | 2023 1st PEO | 2023 2nd PEO | 2022 | 2021 | | Total Compensation in SCT | $633,284 | $5,960,057 | $2,395,698 | $3,289,451 | | Less: Grant date value of stock awards and option awards reported in SCT | — | (4,521,613) | (1,641,850) | (1,749,418) | | Plus: Year-end value of awards granted during the year that are outstanding and unvested as of year-end | — | 14,877,493 | 681,236 | 923,919 | | Plus (less): Change in value, from prior year-end to year-end, of awards granted in a prior year that are outstanding and unvested as of year-end | 143,782 | — | (925,402) | (773,354) | | Plus(less): Fair value as of vesting date for awards that are granted and vest in the same covered fiscal year | — | — | — | — | | Plus (less): Change in value, from prior year-end to vesting date, of awards granted in a prior year that vested during the year | (73,542) | — | (60,353) | 10,215 | | Less: Prior year-end value of awards granted in a prior year that failed to vest during the year | (347,422) | — | — | — | | Total Adjustments | (277,182) | 10,355,880 | (1,946,369) | (1,588,638) | | Compensation Actually Paid | $356,102 | $16,315,937 | $449,329 | $1,700,813 |
Pay Versus Performance Table
| Average of Non-PEO NEOs | 2023 | 2022 | 2021 | | Total Compensation in SCT | $1,044,707 | $757,391 | $1,099,255 | | Less: Grant date value of stock awards and option awards reported in SCT | (662,266) | (357,032) | (412,801) | | Plus: Year-end value of awards granted during the year that are outstanding and unvested as of year-end | 1,466,064 | 150,833 | 120,416 | | Plus (less): Change in value, from prior year-end to year-end, of awards granted in a prior year that are outstanding and unvested as of year-end | 52,304 | (118,028) | (129,717) | | Plus(less): Fair value as of vesting date for awards that are granted and vest in the same covered fiscal year | — | — | 9,930 | | Plus (less): Change in value, from prior year-end to vesting date, of awards granted in a prior year that vested during the year | (7,711) | (12,865) | 10,172 | | Less: Prior year-end value of awards granted in a prior year that failed to vest during the year | (44,704) | — | (85,122) | | Total Adjustments | 803,687 | (337,092) | (487,122) | | Compensation Actually Paid | $1,848,394 | $420,299 | $612,133 |
Pay Versus Performance Table
(3) Pursuant to SEC rules, the TSR figures assume an initial investment of $100 in our stock on December 31, 2020. (4) The dollar amounts reported are the amount of net loss for the covered years as reflected in our consolidated audited financial statement for such fiscal years.
Relationship between “compensation actually paid” and Performance Metrics
Relationship between “compensation actually paid” and Performance Metrics The Company utilizes a number of performance measures to align its compensation scheme with Company performance that are not part of the Pay Versus Performance Table above. Moreover, the Company generally seeks to incentivize long-term performance, and therefore does not specifically align the Company’s performance with “compensation actually paid” (as computed in conformance with SEC rules and guidance). However, in accordance with SEC rules, the Company must provide a description of the relationships between (i) “compensation actually paid” and TSR and (ii) “compensation actually paid” and net income. The “compensation actually paid” to our PEO and the other NEOs significantly increased between 2022 and 2023. The amount of “compensation actually paid” to our PEO and the other NEOs is in sync with the increase in the Company’s positive TSR over 2022 and 2023 in large part because of the significant percentage of “compensation actually paid” being comprised of equity awards. We do not utilize net income in setting compensation for our NEOs because we have been operating at a loss.