DEF 14A of Target Hospitality Corp.
Filed Apr 10, 2024 · FY20230001104659-24-045535
DIRECTOR NOMINEE BIOGRAPHIES
DIRECTOR NOMINEE BIOGRAPHIES Our business and affairs are overseen by our Board, which currently consists of seven members. Set forth below are the biographies of each of our current directors.
DIRECTOR NOMINEE BIOGRAPHIES
| James B. Archer | | | | Director Since: 2019 | Age: 53 | | | Mr. Archer joined Target in 2009 as Chief Operating Officer and has been in his role as CEO of Target since 2014. ■ With 25 years in the specialty rental and hospitality industries, Mr. Archer is a proven leader with a track record of success in executive management. ■ Mr. Archer began with GE Capital Modular Space and then Resun Leasing from 1994 – 2004 where he primarily served in Senior Leadership roles ranging from Senior Vice President, VP of Operations and VP of Sales, before holding COO positions at other specialty rental and manufacturing companies. | | The Board believes that Mr. Archer’s insight into our Company and industry from his role as our president and CEO, together with his leadership and business experience, enable him to provide meaningful guidance to our Board. |
DIRECTOR NOMINEE BIOGRAPHIES
| Key Qualifications and Skills: | | | | | | | | | | | | | | | | | | | | Leadership | Operations | Corporate Governance | Sustainability | Safety | Finance/Risk Management | Financial Expertise/ Literacy | Government | Marketing / Sales | | | | | | | | | | | | Strategy | M&A | Human Resources / Talent Management | Board Expertise | | | | | |
DIRECTOR NOMINEE BIOGRAPHIES
| 2024 proxy statement | 7 |
DIRECTOR NOMINEE BIOGRAPHIES
| John C. Dorman | | | Independent Director Since: February 2024 Age: 73 | Committees: Audit, Nominating & Corporate Governance Other U.S. Public Company Directorships within last five years: loanDepot, Inc., SmartRent, Inc. and CoreLogic, Inc. (former) Other Select Directorships: DeepDyve, Inc., LandGate LLC | | Mr. Dorman is a serial entrepreneur with multiple successes in building software and services companies in the financial technology sector. ■ Mr. Dorman previously served as a director of Online Resources Corporation, a developer and supplier of electronic payment services, from May 2009 until it was sold to ACI Worldwide, Inc. in March 2013, and as its Chair from June 2010 until the sale. Dorman also previously served as Co-Chair of Online Resources Corporation from January 2010 to June 2010, and as Interim Chief Executive Officer from April 2010 to June 2010. ■ From October 1998 to August 2003, he served as Chief Executive Officer of Digital Insight Corporation, a provider of software-as-a-service for online banking and bill payment for financial institutions, and served on the board of directors of Digital Insight until the company was acquired in 2007 by Intuit, Inc. ■ Mr. Dorman served as Senior Vice President of the Global Financial Services Division of Oracle Corporation from August 1997 to October 1998; and Chair and Chief Executive Officer of Treasury Services Corporation, a provider of modeling and analysis software for financial institutions, from 1983 to 1997. ■ Mr. Dorman earned a B.A. in Business Administration and Philosophy from Occidental College and an M.B.A. in Finance from the University of Southern California. | The Board believes that Mr. Dorman’s entrepreneurial spirit and extensive business and financial management experience enable him to provide meaningful guidance in the execution and formulation of the Company’s strategy. |
DIRECTOR NOMINEE BIOGRAPHIES
| Key Qualifications and Skills: | | | | | | | | | | | | | | | | | | Leadership | Operations | Corporate Governance | Sustainability | Finance/Risk Management | Financial Expertise/ Literacy | Government | Marketing / Sales | | | | | | | | | | | Strategy | M&A | Cybersecurity | Human Resources / Talent Management | Board Expertise | | | |
DIRECTOR NOMINEE BIOGRAPHIES
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DIRECTOR NOMINEE BIOGRAPHIES
| Alex Hernandez | | | Independent Director Since: 2023 | Age: 46 Committees: Audit, Compensation | | Mr. Hernandez is an accomplished leader with over 20 years of experience in the power, utilities, renewables, nuclear, industrials and data center infrastructure sectors. ■ From November 2021 through May 2023, Mr. Hernandez served as President, Chief Executive Officer and director Talen Energy Corporation, one of the largest competitive power companies in North America, as well as Chief Executive Officer of Cumulus Data, Inc., Talen Energy Corporation’s data center business which he founded, having previously served in various roles, including Chief Financial Officer of Talen Energy Corporation. ■ From 2014 until 2015, Mr. Hernandez served as Chief Financial Officer, TerraForm Power Inc., which was sold to Brookfield Renewable Partners L.P. ■ Earlier in his career, Mr. Hernandez worked for approximately 10 years, including as a managing director, at Goldman Sachs & Co., having joined the firm in 2005. ■ Mr. Hernandez earned a Bachelor of Arts degree from Rice University, Bachelor of Science degree from the London School of Economics (general course), and a Master of Business Administration degree from Columbia University. | The Board believes that Mr. Hernandez’s experience in finance, financial reporting, strategic planning, forecasting and M&A enable him to provide meaningful guidance to our Board and Audit Committee. |
DIRECTOR NOMINEE BIOGRAPHIES
| Key Qualifications and Skills: | | | | | | | | | | | | | | | | | | | | Leadership | Operations | Corporate Governance | Sustainability | Safety | Finance/Risk Management | Financial Expertise/ Literacy | Strategy | M&A | | | | | | | | | | | | Human Resources / Talent Management | | | | | | | | |
DIRECTOR NOMINEE BIOGRAPHIES
| 2024 proxy statement | 9 |
DIRECTOR NOMINEE BIOGRAPHIES
| Martin L. Jimmerson | | | Independent Director Since: 2019 | Age: 60 Committees: Audit (Chair), Compensation | | Mr. Jimmerson is currently the CEO and CFO of NorAm Drilling Company, which owns and operates rigs for drilling of horizontal wells in the U.S. ■ Mr. Jimmerson joined NorAm Drilling Company in January 2017 as CFO and Interim CEO. Prior to that, he served as the Senior Vice President and CFO and later the Interim CEO and President of RigNet, Inc., from 2006 to June 2016, a global technology company that provides communications services, applications, real-time machine learning, and cybersecurity solutions. ■ Mr. Jimmerson worked for River Oaks Imaging & Diagnostic, LP, a company that provides full modality technical diagnostic services using magnetic resonance imaging and other diagnostic equipment, as their CFO from 2002 to 2005. ■ Mr. Jimmerson received a bachelor’s degree in accounting from Baylor University. | The Board believes that through Mr. Jimmerson’s experience in senior executive positions, he has significant knowledge of accounting, capital structures, finance, financial reporting, strategic planning and forecasting. Further, his experience qualifies him as an “audit committee financial expert.” He currently serves as the chair of the Audit Committee and, as the chair, he contributes significantly to the oversight of the integrity of our financial statements, internal controls and ethics and compliance functions thus enabling him to provide meaningful guidance to our Board. |
DIRECTOR NOMINEE BIOGRAPHIES
| Key Qualifications and Skills: | | | | | | | | | | | | | | | | | | Leadership | Operations | Corporate Governance | Safety | Finance/Risk Management | Financial Expertise/ Literacy | M&A | Board Expertise |
DIRECTOR NOMINEE BIOGRAPHIES
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DIRECTOR NOMINEE BIOGRAPHIES
| Linda Medler | | | Independent Director Since: 2022 Age: 67 | Committees: Audit, Nominating & Corporate Governance Other U.S. Public Company Directorships within last five years: PNC Financial Services Group Other Select Directorships: Transamerica Insurance (AEGON North America), CommonSpirit Health, Arizona Cyber Threat Response Alliance (former), Operation Homefront (former) | | Ms. Medler has more than 20 years of experience managing cutting-edge cyber and technology strategies for highly regulated public and private financial institutions as well as within the highest levels of government. ■ In 2014, Ms. Medler completed 30 years of total military service, including 27 years of service in the U.S. Air Force, retiring as a Brigadier General. Her last position held was Director of Capability and Resource Integration for the United States Cyber Command. ■ She currently is Founder, President and CEO of L A Medler & Associates, LLC, providing cyber strategy and operational consulting services to a variety of commercial clients. ■ Ms. Medler previously served from June 2015 to December 2017 as the Chief Information Security Officer and Director of IT Security for Raytheon Missile Systems, a major business unit of Raytheon company (now Raytheon Technologies), a technology and innovation leader specializing in defense, civil government and cybersecurity solutions. She remained at Raytheon as a Cyber Advisor until 2018. During her Air Force military service, from 1987 to 2014, she served in a myriad of leadership positions, and commanded units at the Squadron, Group and Wing level, as well as serving multiple assignments for the Joint Chiefs of Staff. ■ Ms. Medler currently sits on the board of directors for PNC Financial Services Group, Transamerica Insurance (AEGON North America), and Common Spirit Health, one the largest national non-profit healthcare systems. She previously served as a director for Operation Homefront, a national nonprofit supporting Veterans and their families from 2015 — 2023. ■ Since 2020, she’s chaired the Transamerica Risk Committee, and additionally serves on a number of other board committees for the firms where she is a director, including risk, compliance, technology, audit, and nomination and governance committees. ■ Ms. Medler received a BBA in Management & Computer Information Systems from the University of Arkansas at Little Rock, an MS in National Security & Strategic Studies from the Naval War College, and an MBA in Management Information Systems Concentration from the University of Arizona. | The Board believes that Ms. Medler’s experience in enterprise risk oversight, cyber risk mitigation and serving in critical positions across government, private and non-profit organizations will enhance the Company’s ability to pursue strategic value-added growth opportunities within these segments, while building on the Company’s reputation as a trusted provider of critical support services to the United States Government, and thus provide meaningful guidance to our Board. Further, she is a National Association of Corporate Directors (“NACD”) Certified Director and NACD Leadership Fellow as well as a Certified Technical Expert through the Digital Directors Network. |
DIRECTOR NOMINEE BIOGRAPHIES
| Key Qualifications and Skills: | | | | | | | | | | | | | | | | | | | | Leadership | Operations | Corporate Governance | Safety | Finance/Risk Management | Government | Strategy | Cybersecurity | Human Resources / Talent Management | | | | | | | | | | | | Board Expertise | | | | | | | | |
DIRECTOR NOMINEE BIOGRAPHIES
| 2024 proxy statement | 11 |
DIRECTOR NOMINEE BIOGRAPHIES
| Pamela H. Patenaude | | | Independent Director Since: 2021 Age: 63 | Committees: Compensation (Chair), Nominating & Corporate Governance (Chair) Other U.S. Public Company Directorships within last five years: loanDepot, Inc., CoreLogic, Inc. (former) Other Select Directorships: Home Builders Institute, Habitat for Humanity International, Bipartisan Policy Center, Center Creek’s Social Impact Advisory Board for Center Creek Housing Fund; National Housing Conference | | Ms. Patenaude is an accomplished real estate, housing policy, and disaster recovery expert with a four-decade record of achievement as an executive in government, nonprofit sector, and private industry. ■ Ms. Patenaude is an Independent Director of loanDepot, Inc. and a member of the Audit Committee. ■ Ms. Patenaude is a member of the Social Impact Advisory Board for Center Creek Housing Fund. Ms. Patenaude is also a Trustee and Chair of the Home Builders Institute (HBI). Additionally, she serves on the Board of Directors for Habitat for Humanity International as well as the Board of Directors for the Bipartisan Policy Center and serves on the Board of Governors for the National Housing Conference. ■ Ms. Patenaude is Principal of Granite Housing Strategies, LLC, serving as a strategic advisor for clients engaged in real estate development, affordable housing, and disaster recovery management. Ms. Patenaude served as an Independent Director of CoreLogic, Inc. and was a member of the Audit, Compensation, and Strategic Planning and Acquisition Committees. ■ Ms. Patenaude served as the Deputy Secretary of the U.S. Department of Housing and Urban Development (HUD). As HUD’s Chief Operating Officer, Ms. Patenaude managed the day-to-day operations of the $52 billion cabinet level agency with a diverse portfolio of federal housing and community development programs and 7,000 employees. ■ Prior to rejoining HUD, Ms. Patenaude served as the President of the J. Ronald Terwilliger Foundation for Housing America’s Families. Previously, Ms. Patenaude was the Director of Housing Policy for the Bipartisan Policy Center. Ms. Patenaude also served as Executive Vice President of the Urban Land Institute (ULI) and Founding Executive Director of the ULI Terwilliger Center for Housing. ■ Earlier in her career, Ms. Patenaude served as Assistant Secretary for Community Planning and Development at HUD. ■ Ms. Patenaude earned a Bachelor of Science degree from Saint Anselm College and a Master of Science degree in Community Economic Development from Southern New Hampshire University. | The Board believes that Ms. Patenaude’s experience serving as a senior executive in both the federal government and nonprofit organizations enhances our ability to pursue high economic growth opportunities and builds on the foundation the Company has created as an established provider of essential service offerings to the United States Government. She is NACD “Director Certified”. Her diverse experience and NACD certification will provide meaningful guidance to the Nominating and Corporate Governance Committee as Chair, Compensation Committee as Chair as well as to our Board as the Company executes its growth strategy. |
DIRECTOR NOMINEE BIOGRAPHIES
| Key Qualifications and Skills: | | | | | | | | | | | | | | | | | | Leadership | Operations | Corporate Governance | Finance/Risk Management | Government | Strategy | Human Resources / Talent Management | Board Expertise |
DIRECTOR NOMINEE BIOGRAPHIES
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DIRECTOR NOMINEE BIOGRAPHIES
| Stephen Robertson | | | Chairman of the Board Since: 2019 Director Since: 2019 | Age: 63 Other U.S. Public Company Directorships within last five years: WillScot Mobile Mini Holdings Corp. (former) | | Mr. Robertson co-founded TDR Capital, a London-based private equity firm with more than €8 billion of committed capital and currently serves as a Senior Advisor. ■ As a founding partner of TDR Capital, he has experience in serving on numerous company boards and the firm’s strategic investment decisions, including acquisitions, capitalizations and monetizations. ■ Prior to co-founding TDR in 2002, Mr. Robertson was managing partner at DB Capital Partners, where he helped build the European leveraged buyout arm of Deutsche Bank into a leading buyout firm in Europe. He also previously spent a year as managing director of European Leveraged Finance at Merrill Lynch and nine years as managing director of European Leveraged Finance at Bankers Trust. | The Board believes that Mr. Robertson’s extensive board service and experience with mergers and acquisitions, private equity and leverage finance, together with his broad knowledge of our Company and the industrial services industry, enable him to provide meaningful guidance to our Board. |
DIRECTOR NOMINEE BIOGRAPHIES
| Key Qualifications and Skills: | | | | | | | | | | | | | | | | | | | | Leadership | Operations | Corporate Governance | Sustainability | Safety | Finance/Risk Management | Financial Expertise/ Literacy | Government | Marketing / Sales | | | | | | | | | | | | Strategy | M&A | Cybersecurity | Human Resources / Talent Management | Board Expertise | | | | |
DIRECTOR NOMINEE BIOGRAPHIES
| 2024 proxy statement | 13 |
INDEPENDENCE
| Position | Fees Earned or Paid in Cash | Stock Awards | All Other Compensation | Total | | Joy Berry | $80,000 | $115,000 | — | $195,000 | | Alex Hernandez(1) | $111,668 | $105,256 | — | $216,924 | | Martin L. Jimmerson | $150,806 | $115,000 | — | $265,806 | | Linda Medler | $125,806 | $115,000 | — | $240,806 | | Pamela H. Patenaude | $154,437 | $115,000 | — | $269,437 | | Stephen Robertson(2) | $183,973 | $150,000 | — | $339,973 | | Jeff Sagansky(3) | $90,041 | $115,000 | — | $205,041 | | Barbara Faulkenberry(3) | $37,260 | $115,000 | — | $152,260 |
BOARD OF DIRECTORS
BOARD OF DIRECTORS Over the past year, members of the Nominating and Corporate Governance Committee have continued their outreach to potential director candidates with diversity of personal factors and professional characteristics that could be valuable additions to our Board. Our Board and Nominating and Corporate Governance Committee remain committed to actively seeking out candidates who strengthen the diversity of viewpoints on our Board and have undertaken to include persons of diverse backgrounds in the pool from which we select new director nominees. The Board and Nominating and Corporate Governance Committee are continually actively looking for highly qualified diverse potential candidates.
BOARD OF DIRECTORS
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BOARD OF DIRECTORS
| Board Diversity Matrix (As of March 26, 2024) | | | Total Number of Directors | 7 |
BOARD OF DIRECTORS
| | Female | Male | Non-Binary | Did Not Disclose Gender | | Part I: Gender Identity | | | | | | Directors | 2 | 5 | — | — | | Part II: Demographic Background | | | | | | African American or Black | — | — | — | — | | Alaskan Native or Native American | — | — | — | — | | Asian | — | — | — | — | | Hispanic or Latinx | — | 1 | — | — | | Native Hawaiian or Pacific Islander | — | — | — | — | | White | 2 | 4 | — | — | | Two or More Races or Ethnicities | — | — | — | — | | LGBTQ+ | — | | | | | Did Not Disclose Demographic Background | — | | | |
BOARD OF DIRECTORS
Board Evaluation Process Each year, the Board conducts a rigorous annual self-evaluation to help determine whether the Board and its committees are functioning effectively. The Nominating and Corporate Governance Committee oversees this process. The evaluation process solicits input from the directors regarding the performance and effectiveness of the Board, the Committees and the individual directors, and provides an opportunity for directors to identify areas for improvement. In 2023 and 2024, the evaluation process included one-on-one interviews with our non-voting Board Observer to evaluate individual and overall board and committee performance. The Nominating and Corporate Governance Committee reviews the results and feedback from the evaluation process and makes recommendations for improvements, as appropriate. Director Independence Nasdaq listing rules require a majority of our Board to be independent. An “independent director” is defined as a person other than an officer or employee of the Company or its subsidiaries or any other individual having a relationship which, in the opinion of the Company’s Board, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director.
BOARD OF DIRECTORS
| Our Board annually makes an affirmative determination regarding the independence of each director based upon the recommendation of the Nominating and Corporate Governance Committee and pursuant to the standards in our Corporate Governance Guidelines. Applying these standards, the Board has affirmatively determined that Mses. Medler and Patenaude and Messrs. Dorman, Hernandez and Jimmerson are “independent directors.” | |
BOARD OF DIRECTORS
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BOARD OF DIRECTORS
In making this determination, the Board considered the following factors, among others: the ownership positions and contractual arrangements of our Board members and their affiliates with our Company; the corporate governance and other policies adopted by the Board to help avoid conflicts and potential conflicts of interest; the contractual arrangements and annual payments between our Company and other companies upon which our directors also serve as directors; and, the alignment of the long-term interests of the stockholders that appointed our Board members with the long-term interests of our other stockholders. Mr. Robertson co-founded TDR Capital, the beneficial owner of a majority of the outstanding shares of our common stock. Due to TDR Capital’s majority ownership, the Board believes it cannot affirmatively determine Mr. Robertson is “independent” as defined by the rules and regulations of Nasdaq. Communication with the Board Stockholders, employees and other interested parties may communicate with any of our directors, our Board as a group, our independent directors as a group or any Board committee as a group by sending such communications to the Corporate Secretary to be forwarded to the Chairman of the Board. The Corporate Secretary may respond directly or redirect any such communication to another department of the Company for an appropriate response if, in the discretion of the Corporate Secretary, such a direct response is more appropriate. The Corporate Secretary may also ignore any communication that she determines to be of a commercial or frivolous nature or otherwise inappropriate for Board consideration.
BOARD OF DIRECTORS
| | Corporate Secretary 9320 Lakeside Boulevard, Suite 300 The Woodlands, Texas 77381 |
BOARD OF DIRECTORS
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BOARD OF DIRECTORS
| PROPOSAL 2 SNAPSHOT | The Board seeks an indication from stockholders of their approval or disapproval of the Audit Committee’s appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2024. | | | The Board recommends you vote FOR this proposal. We have a positive working relationship with Ernst & Young who has consistently provided us with service that is on par with the best in the industry. |
BOARD OF DIRECTORS
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Company’s independent auditor. Ernst & Young LLP (“EY”) has been our independent auditor since April 26, 2019. The Audit Committee believes that the retention of EY to serve as the Company’s independent auditor for 2024 is in the best interests of the Company and its stockholders. If the appointment of EY is not approved by our stockholders, the Audit Committee will consider whether it is appropriate to select another independent auditor. EY representatives will be present at the Annual Meeting and will have the opportunity to make a statement and respond to questions. Audit Fees & Approval Process The Audit Committee pre-approves all audit and non-audit services to be performed by the independent auditors in compliance with the Sarbanes-Oxley Act and the SEC rules regarding auditor independence. These services may include audit services, audit-related services, tax services and all other services. Proposed services may either be pre-approved without consideration of specific case-by-case services by the Audit Committee or require the specific pre-approval of the Audit Committee. Unless a type of service has received general pre-approval, it will require specific pre-approval if it is to be provided by EY. Fees for all services to be provided by EY are approved by the Audit Committee. Any proposed fees exceeding these levels or amounts require specific advanced approval by the Audit Committee. The Audit Committee may delegate either type of approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee has delegated to its Chair the authority to approve any permissible non-audit services with a fee of $50,000 or less.
BOARD OF DIRECTORS
| 2024 proxy statement | 27 |
BOARD OF DIRECTORS
Independent Registered Public Accounting Firm Fee Information Fees for professional services provided by our independent auditor included the following:
BOARD OF DIRECTORS
| | Ernst & Young LLP | | | Fees | 2022 | 2023 | | Audit(1) | $1,123,000 | $1,814,000 | | Audit-Related | $0 | $0 | | Tax | $0 | $0 | | All Other | $0 | $0 |
BOARD OF DIRECTORS
(1) Audit fees include, without limitation, fees billed for professional services rendered for the audit of annual financial statements, including the review of interim financial statements registration statements, and comfort letters.
BOARD OF DIRECTORS
| Audit Committee Report The Audit Committee is composed of four directors, all of whom meet the independence standards of Nasdaq, the SEC and our Corporate Governance Guidelines, and operates under a written charter adopted by the Board. Management is responsible for the Company’s internal controls and the financial reporting process. EY, acting as independent auditor of the Company, is responsible for performing an independent audit of the Company’s consolidated financial statements and internal control over financial reporting in accordance with standards established by the Public Company Accounting Oversight Board (“PCAOB”). The Audit Committee discussed with EY the overall scope and execution of the independent audit and reviewed and discussed the audited financial statements with management. The Audit Committee also discussed with EY other matters required by PCAOB auditing standards. EY provided to the Audit Committee the written communications required by applicable standards of the PCAOB regarding EY’s communications with the Audit Committee concerning independence, and the Audit Committee discussed EY’s independence with management and the auditors. The Audit Committee also considered whether the provision of other non-audit services by EY to the Company is compatible with maintaining independence. The Audit Committee concluded that the independent auditors’ independence had not been impaired. Based on the reviews and discussion referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. By the members of the Audit Committee as of March 6, 2024 consisting of: | | | | | Martin L. Jimmerson (Chair) | John C. Dorman | Alex Hernandez | Linda Medler | | The information contained in the “Audit Committee Report” is not considered to be “soliciting material,” “filed” or incorporated by reference in any past or future filing by the Company under the Exchange Act or the Securities Act of 1933, as amended, unless and only to the extent that the Company specifically incorporates it by reference. | | | |
BOARD OF DIRECTORS
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BOARD OF DIRECTORS
PROPOSAL 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION (SAY ON PAY) PROPOSAL 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION (SAY ON PAY)
BOARD OF DIRECTORS
| PROPOSAL 3 SNAPSHOT | The Board seeks an indication from stockholders of their approval or disapproval of the compensation of our named executive officers. | | | The Board recommends you vote FOR this the approval, on an advisory basis, of the compensation of our named executive officers. |
BOARD OF DIRECTORS
As of December 31, 2023, we are no longer an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As a result, and as required under Section 14A of the Exchange Act, we are providing our stockholders with the opportunity to cast an advisory vote on the compensation of our named executive officers as disclosed in this proxy statement. Prior to submitting your vote, we encourage you to read our CD&A and the accompanying executive compensation tables and narrative disclosures, which describe in detail our executive compensation program and decisions made by our Compensation Committee and full board for 2023. We believe that our long-term success depends on our ability to attract, motivate, focus and retain highly talented individuals who are committed to our vision, strategy, and corporate culture. To that end, our executive compensation program is designed to link our executives’ pay to their individual performance, to our Company’s annual and long-term performance, and to successful execution of our business strategies. We also use our executive compensation program to encourage high-performing executives to remain with us over the course of their careers. This vote is advisory only, and our named executive officers’ compensation is not conditional on it. The vote will not be binding upon the Board or the Compensation Committee, and neither the Board nor the Compensation Committee will be required to take any action (or refrain from taking any action) as a result of the outcome of the vote on this proposal. We believe that the information provided in this Proxy Statement demonstrates our commitment and the commitment of our Compensation Committee to our pay-for-performance philosophy. The Board recommends that you approve the compensation of our named executive officers as described in this proxy statement by approving the following, non-binding, resolution: “RESOLVED, that the stockholders approve, on an advisory basis, the compensation of Target Hospitality Corp.’s named executive officers as described pursuant to the rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and any related material disclosed in this proxy statement.” The future frequency of advisory votes on the compensation of the Company’s named executive officers will be determined by the Board following, and in light of, the advisory vote on that topic in Proposal No. 4.
BOARD OF DIRECTORS
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BOARD OF DIRECTORS
| PROPOSAL 4 SNAPSHOT | The Board is asking stockholders to inform us how often we should conduct an advisory vote on the compensation of our named executive officers. | | | The Board recommends you vote to hold a Say-on-Pay Vote EVERY YEAR. |
BOARD OF DIRECTORS
As of December 31, 2023, we are no longer an “emerging growth company” as defined in the JOBS Act. As a result, and as required under Section 14A of the Exchange Act, we are providing our stockholders with the opportunity to cast an advisory, non-binding vote on the future frequency of the advisory vote set forth in Proposal No. 3. Stockholders can indicate their preference on whether we should hold an advisory vote on named executive officer compensation every year, every two years or every three years. Stockholders also have the option to abstain from voting on this matter. We value the opinion of our stockholders and encourage communication regarding our executive compensation policies and practices. Our Board believes that an annual vote on executive compensation will provide us with valuable feedback from our stockholders on our executive compensation policies and practices. In light of the belief of our Board that stockholders of other companies have strongly favored annual votes on executive compensation, we view an annual frequency as a corporate governance best practice. Accordingly, our Board recommends that stockholders vote for “one year” as the frequency for our advisory vote on executive compensation. You are not being asked to vote “for” or “against” this proposal. Instead, this proposal asks stockholders to inform us how often we should conduct an advisory vote on the compensation of our named executive officers. You may cast your vote by choosing the option of every year, every two years or every three years, or abstaining, in response to the following resolution: “RESOLVED, that the option of every year, every two years or every three years that receives the highest number of votes cast for this resolution will be determined to be the preferred frequency with which Target Hospitality Corp. is to hold future advisory votes on named executive officer compensation as disclosed in Target Hospitality Corp.’s annual proxy statement pursuant to the Securities and Exchange Commission’s compensation disclosure rules, including the Compensation Discussion and Analysis and the accompanying executive compensation tables and narrative disclosures.” Because this vote is advisory, it is not binding on our Board, and our Board may decide it is in the best interests of our Company and our stockholders to hold an advisory vote on executive compensation more or less frequently than the frequency that receives the most votes cast by our stockholders. It is expected that the next advisory vote on the frequency of an advisory vote on compensation of our named executive officers will occur at the annual meeting of stockholders for the fiscal year ending December 31, 2026.
BOARD OF DIRECTORS
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BOARD OF DIRECTORS
We will consider the option that receives the affirmative vote of a majority of the votes cast at the Annual Meeting as the frequency choice of the stockholders. In the event that no option receives a majority of the votes cast, we will consider the option that receives the most votes to be the option selected by stockholders. Because this say-on-pay frequency proposal is advisory, it will not be binding. However, our Board values the opinions of our stockholders and will conduct the advisory vote on named executive officer compensation consistent with the outcome of this vote on the frequency of future advisory votes.
BOARD OF DIRECTORS
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BOARD OF DIRECTORS
The following table sets forth information regarding our executive officers as of March 26, 2024:
BOARD OF DIRECTORS
| | | | | | JAMES B. ARCHER, 53 | JASON VLACICH, 46 | TROY C. SCHRENK, 49 | HEIDI D. LEWIS, 51 | | President, Chief Executive Officer, and Director | Chief Financial Officer & Chief Accounting Officer | Senior Executive Vice President & Chief Commercial Officer | Executive Vice President, General Counsel and Secretary |
BOARD OF DIRECTORS
James B. Archer’s biography is set forth under the heading “Our Board” above.
BOARD OF DIRECTORS
| JASON VLACICH has served as our Chief Accounting Officer since 2018 and as our Chief Financial Officer and Chief Accounting Officer since January 2024. In this role, he is responsible for Target’s finance, accounting, IT business applications, tax, and investor relations functions. Mr. Vlacich joined Target in October 2018. | | | ■ He has over twenty years of experience in public accounting, hospitality accounting and finance. ■ Prior to joining Target, he was the Chief Accounting Officer at Highgate Hotels, L.P., a third-party hotel management company, in their Irving, Texas corporate office from 2012, where he oversaw the company’s corporate accounting department and global accounting services platform and led the company’s domestic and European accounting expansion and centralization as well as implementation of global accounting systems. ■ Prior to that, Mr. Vlacich was Senior Audit Manager at PricewaterhouseCoopers, LLP’s Dallas, Texas office, from 2008 to 2012, where he serviced public and private companies across multiple industries with a heavy concentration in the hospitality industry, including hospitality real estate investment trusts (“REIT”s). His experience included leading integrated audits to comply with the Sarbanes Oxley Act, initial public offerings, assisting clients with SEC comment letters and comfort letters, hospitality lead in the Chief Auditor Network influencing audit firm methodology and publishing whitepapers for the audit practice, delivering technical accounting presentations to clients for practice development, inspection of audit firms and audit teams to ensure compliance with professional auditing standards, including pre-clearance reviews and consultations, Rule 3-05 carve-out audits, and acting as a national audit methodology and technical accounting instructor for employees and experienced hires across the practice. | ■ Mr. Vlacich began his professional career in August of 2000 in the assurance practice of PricewaterhouseCoopers, LLP in the Hartford, Connecticut office before relocating to the Orlando, Florida office where he served in a variety of different roles from assurance associate to experienced audit manager servicing both public and private companies in a variety of different industries, including hospitality with a concentration in hospitality REITs. ■ Mr. Vlacich has several years of additional industry experience with General Electric (GE Asset Management) and Siemens in financial reporting, Sarbanes-Oxley compliance, and corporate accounting roles. ■ Mr. Vlacich holds a bachelor’s degree in Accountancy from Bentley University and is a Certified Public Accountant in the State of Texas. |
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| TROY C. SCHRENK has served as our Chief Commercial Officer since 2018 and as Senior Executive Vice President Operations & Chief Commercial Officer since January 2024. In this role, he is responsible for leading the Company’s business and commercial operations, construction, business development, and government relations. Mr. Schrenk joined Target in 2012 as Senior Vice President. | | | ■ With over twenty years of experience in modular manufacturing, specialty rentals, home building and real estate development, Mr. Schrenk is a proven commercial leader with a track record of success in revenue and strategic growth management which began with Fortune 500, Centex Homes (NYSE: CTX) from 2000 — 2005 as Area Sales Manager, Director of Sales and VP of Sales and Marketing before holding similar positions at several other homebuilding, specialty rental and manufacturing companies. | ■ Mr. Schrenk holds an MBA from Boise State University and a bachelor’s degree in sociology from George Fox University. |
BOARD OF DIRECTORS
| HEIDI D. LEWIS serves as our Executive Vice President, General Counsel and Secretary. In this role, she is responsible for leading the Company’s legal, compliance, human resources, and corporate secretary functions. Ms. Lewis joined Target in January 2019. | | | ■ She has over twenty years of legal experience in capital markets and securities, IPOs, mergers and acquisitions, board advisement, corporate governance, and corporate law. ■ Prior to joining Target, she was Corporate and Commercial Counsel and Assistant Secretary at Bristow Group Inc. (NYSE: BRS) from July 2018 to January 2019, where she executed on M&A, governance, capital markets and corporate transactions. ■ Prior to that, Ms. Lewis was the Vice President, Group General Counsel and Assistant Secretary at Dynegy Inc. (NYSE: DYN) (now Vistra Energy Group (NYSE: VST)), from 2013 until June 2018, where she led the company’s corporate legal group with her expertise in SEC and NYSE regulations and requirements. Ms. Lewis joined Dynegy in 2006, as a corporate counsel. | ■ Ms. Lewis began her legal career at King & Spalding LLP and Akin Gump Strauss Hauer & Feld LLP. ■ Ms. Lewis holds a Juris Doctor from the University of Houston Law Center, a master’s degree from Northern Illinois University and a bachelor’s degree from Colorado State University. |
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| 2024 proxy statement | 33 |
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Our prior proxy statements were eligible for reduced SEC reporting rules applicable to “emerging growth companies.” As of December 31, 2023, we ceased to be an emerging growth company, and therefore, this year we have included additional detail regarding executive compensation that was previously not required, including: this Compensation Discussion and Analysis, additional compensation tables for “Grants of Plan-Based Awards,” “Option Exercises and Stock Vested,” and “Potential Payments upon Termination or Change in Control”. This Compensation Discussion and Analysis (CD&A) discusses our compensation policies and determinations that apply to our named executive officers. When we refer to our named executive officers, or NEOs, for 2023 we are referring to the following individuals whose 2023 compensation is set forth below in the Summary Compensation Table and subsequent compensation tables.
BOARD OF DIRECTORS
| Name | Position During 2023(3) | | James B. Archer | President and Chief Executive Officer | | Eric T. Kalamaras(1) | Executive Vice President and Chief Financial Officer | | Troy C. Schrenk(2) | Chief Commercial Officer | | Heidi D. Lewis | Executive Vice President, General Counsel, & Secretary | | Jason Vlacich(1) | Chief Accounting Officer | | J. Travis Kelley(2) | Executive Vice President, Operations |
BOARD OF DIRECTORS
(1) On January 22, 2024, Mr. Kalamaras, the Chief Financial Officer of the Company, was terminated without cause effective as of January 22, 2024. Further, on January 22, 2024, the Board promoted Mr. Vlacich, the Chief Accounting Officer of the Company, to the role of Chief Financial Officer and Chief Accounting Officer, effective as of January 23, 2024. (2) On December 11, 2023, Mr. Kelley, Executive Vice President Operations, resigned from the Company. On January 22, 2024, the Board promoted Mr. Schrenk, Chief Commercial Officer of the Company, to the role of Senior Executive Vice President Operations and Chief Commercial Officer, effective as of January 23, 2024. (3) The above table shows, for the fiscal year ended December 31, 2023, our CEO, CFO and the next three most highly paid individuals and one former executive officer as of December 31, 2023. Key 2023 Performance Highlights Our extraordinary 2023 results illustrate the strength in Target Hospitality’s operating position and commitment to our defined strategic initiatives. Under the leadership of our NEOs, we reported:
BOARD OF DIRECTORS
| $563.6 million TOTAL REVENUE | $344 million ADJ. EBITDA(1) | $22.6 million INTEREST EXPENSE | | $45.3 million CAPITAL EXPENDITURES (excluding acquisitions) | $142.6 million DISCRETIONARY CASH FLOW (“DCF”)(1) | Below 0.2x TOTAL NET LEVERAGE RATIO |
BOARD OF DIRECTORS
Adjusted EBITDA and Discretionary Cash Flow are non-GAAP financial measures. For a discussion of our use of non-GAAP financial measures, including a reconciliation of (i) Adjusted EBITDA to net income (loss) and (ii) Discretionary Cash Flow to net cash provided by operating activities, please see the “Non-GAAP Financial Measures” section beginning on page 61 in Item 7 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
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Key Governance Features of Executive Compensation Program
BOARD OF DIRECTORS
| WHAT WE DO | | WHAT WE DO NOT DO | | | ■ Significant percentage of target annual compensation delivered in the form of variable compensation tied to performance ■ Long-term objectives aligned with creation of stockholder value ■ Independent executive compensation consultant hired by and reporting to the Compensation Committee ■ Robust stock ownership guidelines ■ Conduct a comprehensive annual risk assessment of our compensation program ■ Compensation Recovery Policy ■ Limited perquisites | | ■ No pledging or hedging of our common stock ■ No excise tax gross ups ■ No allowance for repricing of underwater stock options without stockholder approval ■ No single-trigger acceleration of benefits upon CIC and severance ■ No provision for uncapped award opportunities | |
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Key 2023 Compensation Actions The primary elements of our total direct compensation program for the NEOs and a summary of the actions taken by the Compensation Committee during 2023 are set forth below.
BOARD OF DIRECTORS
| Compensation Component | Link to Business and Talent Strategies | 2023 Compensation Actions | Pay at Risk | | Base Salary | ■ Competitive base salaries help attract and retain executive talent. ■ Fixed cash compensation recognizes factors such as individual contribution, time in role, and scope of responsibility. ■ Reviewed annually and adjusted as appropriate | ■ Merit- and cost-of-living increases for 2023, ranging from 3% to 6%. | ■ No | | Annual Short-Term Incentive Compensation | ■ Focus executives on achieving annually established financial targets that are key indicators of ongoing operational performance and support our business strategy. | ■ Annual cash incentive awards were awarded at 100% of target. | ■ Yes; payout based on achievement of pre-established Company goals and potentially individual performance factors; no payout occurs if threshold performance goals are not achieved | | Long-Term Incentive Compensation | ■ Incentivize and reward long-term gains in stockholder value, with vesting terms up to four years to ensure retention while rewarding executives for past performance and future potential growth. ■ Encourages executive ownership and alignment with external shareholders | ■ Executives awarded a combination of RSUs and PSUs in 2023. | ■ RSUs — Yes; value linked to Company’s stock price ■ PSUs — Yes; TSR relative to Russell 2000 & EBITDA goals |
BOARD OF DIRECTORS
The Compensation Committee undertakes a rigorous review and analysis to establish annual performance goals under our annual short-term incentive plan. The performance levels are intended to be aggressive but realistic, to reward prudent decisions without excessive risk-taking, such that achieving threshold levels would represent minimum acceptable performance and achieving maximum levels would represent outstanding performance. The target performance goals align with our annual operating plan. Our Executive Compensation Philosophy The Company requires world-class executive talent with a wide range of skills, experience, and leadership qualities to deliver on our long-term strategy. In order to attract and retain the talent required to promote long-term stockholder value creation, the Compensation Committee’s goal is to implement an executive compensation program that is built upon the following objectives:
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Attracting and Retaining the Right Talent. Executive compensation should be market-competitive in order to attract and retain highly motivated and skilled talent with a performance-driven mindset. The overall program design should support sound compensation principles in alignment with corporate governance and Environmental & Social (E&S) best practices, while also maximizing the financial efficiency of the overall program from tax, accounting, and cash flow perspectives. ■ Pay for Performance. A material portion of an executive’s target compensation should be at risk and realized compensation should be directly tied to changes in shareholder value. Short-term (annual performance-based bonus) and long-term (equity awards) incentive programs should appropriately balance incentives for and drive attainment of short- and long-term financial and strategic objectives that reward for prudent decisions without excessive risk-taking. ■ Alignment with Stockholder Interests. Our executives’ interests should be aligned with stockholder interests, furthered through the encouragement of equity ownership through our annual long-term incentive program. Our Executive Compensation Program The table below outlines each of the principal elements of the Company’s executive compensation program:
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| Performance Period | 1 year | 1 year | 3 years (cliff vesting) | 4 years (ratable annual vesting) | | Payout Determination | Compensation Committee determination | Pre-established formula | Pre-established formula | Stock price at each vesting date | | 2023 Performance Measures | Individual | Adjusted EBITDA | Relative TSR Based Award | | | | | | EBITDA Based Award | |
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Compensation at Risk How We Determine Executive Compensation
USE OF MARKET DATA
USE OF MARKET DATA To obtain a broad view of competitive practices among industry peers and competitors for executive talent, the Compensation Committee reviews market data for peer group companies, as well as general industry survey data. Selection of the peer companies presents certain challenges due to the limited number of directly comparable companies. Given the relatively small number of direct competitors the Compensation Committee has expanded the peer group to include companies comparable in revenue, EBITDA, and market capitalization. The peer group is used as the primary reference point to assess the competitiveness of base salary, incentive targets, and total direct compensation awarded to the NEOs and market practices including incentive design, share utilization, and stock ownership guidelines. With the assistance of the independent compensation consultant, the peer group is evaluated annually by the Compensation Committee, making changes as appropriate, in order to ensure that, as a whole, it remains an appropriate benchmark to inform pay actions. For 2023 compensation decisions, the Compensation Committee utilized the peer group set forth below:
USE OF MARKET DATA
| ■ Black Diamond Group | ■ Bluegreen Vacations | ■ BrightView Holdings | ■ Cavco Industries | | ■ Civeo | ■ Dexterra Group | ■ McGrath RentCorp | ■ Playa Hotels & Resorts | | ■ SP Plus | ■ Summit Hotel Properties | ■ VSE | ■ Wyndham Hotels & Resorts |
USE OF MARKET DATA
Based on data compiled by FW Cook at the time of the peer group review, our revenue, EBITDA, and market capitalization were at the 8th, 92nd and 73rd percentiles, respectively, in relation to the peer group. As there is limited data on positions other than the CEO and CFO in the peer group data, the Compensation Committee also reviews data from national, general industry survey sources when it considers the market competitiveness of NEO compensation levels and/or market practices. The Compensation Committee does not review the specific companies included in these surveys and the data presented to the Compensation Committee is general and not specific to any particular subset of companies. 2023 Named Executive Officer Compensation
ANNUAL SHORT-TERM INCENTIVE PLAN
ANNUAL SHORT-TERM INCENTIVE PLAN For 2023, the Compensation Committee established in January of 2023 the following Adjusted EBITDA goals and payout levels under the annual short-term incentive plan. The decision to utilize Adjusted EBITDA as the core metric for our short-term incentive plan stems from a strategic alignment with our organizational goals, investor expectations, and a comprehensive assessment of key performance indicators. EBITDA is a crucial measure of operating performance that provides a clear and concise view of the company’s profitability, stripping away non-operational factors such as interest, taxes, and non-cash charges. Our Adjusted EBITDA reflects adjustments to exclude the effects of additional items, including certain items that are not reflective of the ongoing operating results of the Company. These adjustments allow us to focus specifically on the core operational efficiency and performance, providing a more accurate representation of the Company’s ability to generate sustainable earnings. Investors and stakeholders increasingly rely on EBITDA as a key metric for evaluating a company’s financial health and operational effectiveness, making it a widely recognized and accepted measure within the investment community. By aligning our short-term incentive plan with this metric, we not only enhance transparency but also demonstrate a commitment to performance metrics that resonate with our investors. Furthermore, Adjusted EBITDA serves as an effective tool for benchmarking and comparative analysis within our industry. By incorporating Adjusted EBITDA into our short-term incentive plan, we are directly linking employee incentives to the Company’s ability to outperform industry standards and deliver sustained operational excellence. The threshold, target, stretch and maximum performance and payout opportunities under the 2023 short term incentive plan (subject to interpolation between points), along with the actual performance achieved and related payout percentage, are set forth below:
ANNUAL SHORT-TERM INCENTIVE PLAN
| | Threshold | Target | Stretch | Maximum | Actual | % of Target Performance Achieved | Payout Factor % (2023) | | Payout % | 50% | 100% | 150% | 200% | | | | | Adjusted EBITDA(1) ($ millions) | $330.0 | $365.0 | $380.0 | $405.0 | $344.02 | 94% | 77% |
ANNUAL SHORT-TERM INCENTIVE PLAN
(1) Adjusted EBITDA is a non-GAAP financial measure. For a discussion of our use of non-GAAP financial measures, including a reconciliation of (i) Adjusted EBITDA to net income (loss), please see the “Non-GAAP Financial Measures” section beginning on page 61 in Item 7 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The Compensation Committee reviews our target annual short-term incentive opportunities each year to ensure they are competitive. The target annual short term incentive opportunity as a percent of annual base salary for each of our NEOs in 2023 was as follows:
ANNUAL SHORT-TERM INCENTIVE PLAN
| Name | 2023 Target Short-Term Incentive (% of Base Salary) | 2023 Target Short-Term Incentive ($) | | James B. Archer | 133% | $1,064,000 | | Eric T. Kalamaras | 85% | $374,233 | | Troy C. Schrenk | 85% | $315,618 | | Heidi D. Lewis | 65% | $234,325 | | Jason Vlacich | 65% | $206,876 | | J. Travis Kelley | 65% | $200,850 |
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ANNUAL SHORT-TERM INCENTIVE PLAN
Based on the achievement of the 2023 Adjusted EBITDA goals and Compensation Committee adjustments, the annual short-term incentive awards earned by our NEOs for 2023 were as follows:
ANNUAL SHORT-TERM INCENTIVE PLAN
| Name | Target Annual Incentive Opportunity | Performance Payout Factor (%) | Annual Short-Term Earned based on Payout Factor | Committee Adjustment | Annual Short-Term Incentive Earned | | James B. Archer | $1,064,000 | 77% | $819,280 | $244,720 | $1,064,000 | | Eric T. Kalamaras | $374,233 | 77% | $288,159 | $86,074 | $374,233 | | Troy C. Schrenk | $315,618 | 77% | $243,026 | $72,592 | $315,618 | | Heidi D. Lewis | $234,325 | 77% | $180,430 | $53,895 | $234,325 | | Jason Vlacich | $206,876 | 77% | $159,295 | $47,581 | $206,876 | | J. Travis Kelley | $200,850 | 77% | $154,654 | $46,196 | $200,850 |
ANNUAL SHORT-TERM INCENTIVE PLAN
For the cash incentive awards, the Compensation Committee exercised discretion to adjust compensation for the fiscal year 2023. Even though actual Adjusted EBITDA performance achieved was 94% of the target, the payout factor equated to 77%. The Compensation Committee made the decision to increase the incentives to 100% for the NEOs as well as 100% for the funding pool for all other employees. This adjustment was made after careful consideration of various factors and reflects the Compensation Committee’s commitment to aligning executive compensation with the Company’s performance and strategic goals. Rationale for the Compensation Committee Adjustment: ■ Exceptional Company Performance: ■ Adjusted EBITDA Growth: The Company demonstrated remarkable financial strength with a 30% year-over-year increase in Adjusted EBITDA. Adjusted EBITDA increased substantially due to growth in the Government segment with an approximately 64% CAGR from 2020 to 2023. This growth is indicative of the executives’ adept management skills, strategic decision-making, and effective cost controls. The Compensation Committee recognizes the executives’ contribution to optimizing operational efficiency and maximizing profitability, leading to this unprecedented financial achievement. Discretionary Cash Flow Strength: The Company exhibited robust discretionary cash flows during the fiscal year, reflecting the executives’ effective management of working capital and operational resources. The Compensation Committee recognizes the importance of strong discretionary cash flows in supporting ongoing business operations, strategic investments, and delivering value to shareholders.
ANNUAL SHORT-TERM INCENTIVE PLAN
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ANNUAL SHORT-TERM INCENTIVE PLAN
■ Debt Reduction: A notable financial achievement was the reduction of debt by $153 million compared to the prior year. The executives’ prudent fiscal management and commitment to deleveraging contributed significantly to improving the Company’s financial position and increasing discretionary cash flows by reducing cash paid for interest. The Compensation Committee values the executives’ efforts in reducing debt, which enhances the Company’s financial flexibility and reduces financial risk. ■ Debt Maturities and Increasing Liquidity: Another notable financial achievement was addressing 2023 and 2024 debt maturities and increasing liquidity with the successful execution of several amendments to the Company’s credit facility, which extended the termination date on the credit facility from September 15, 2023 to February 1, 2028 and increased the capacity of the credit facility from $125 million to $175 million. Additionally, the Company successfully exchanged the 2024 Senior Secured Notes for the 2025 Senior Secured Notes on November 1, 2023, which extended the maturity date of the exchanged Senior Secured Notes from March 15, 2024 to June 15, 2025. The Compensation Committee values the executives’ efforts in increasing liquidity and addressing short-term debt maturities, which reduces financial risk and further enhances the Company’s financial flexibility to allow for, among other things, executing the Company’s diversification strategy. ■ Strategic Government Sub-Contract: Five-Year Performance Period. In addition to the financial accomplishments previously outlined, the Compensation Committee considered a strategic achievement that significantly impacted the Company’s long-term stability and outlook. The executives’ role in securing a new contract (the “Government Sub-Contract”) with the Company’s non-profit government partner, pursuant to an Indefinite Delivery, Indefinite Quantity Task Order between our non-profit partner and the U.S. Government, that became effective on November 16, 2023, with a one year base period through November 15, 2024, with an option to extend for up to four
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ANNUAL SHORT-TERM INCENTIVE PLAN
additional one year periods exemplifies their commitment to strategic decision-making and positioning the Company for sustained success. This strategic move enhances the Company’s revenue predictability, establishes a foundation for long-term stability, and provides a platform for sustained and future growth. ■ Foregoing Short-Term Revenue for Long-Term Stability. The decision to forego some short-term revenue in favor of securing a long-term Government Sub-Contract reflects the executives’ focus on the Company’s long-term strategic goals. The Compensation Committee recognizes the executives’ dedication to making decisions that prioritize the Company’s overall health and resilience over immediate financial gains. This strategic trade-off aligns with the Company’s commitment to long-term sustainability. ■ Enhanced Market Positioning. The Government Sub-contract not only provides a stable revenue stream but also enhances the Company’s market positioning and reputation. The Compensation Committee values the executives’ ability to identify and capitalize on opportunities that contribute to the Company’s advantage and long-term success. ■ Variable Revenue Under the Government Sub-Contract: ■ Variable Revenue Component. In conjunction with the financial and strategic achievements highlighted earlier, the Compensation Committee considered another critical factor influencing the positive discretionary adjustment. This factor pertains to the nature of revenue generated under the Government Sub-Contract as well as its previous contracts with its non-profit government partner, which included and continues to include a variable component beyond the Company’s control. A portion of the revenue generated, which can be material, from these contracts with its non-profit partner is variable and contingent on factors outside the Company’s direct influence. The Compensation Committee recognizes the executives’ prudence in navigating a revenue structure that introduces an element of uncertainty, as the government determines the extent to which it utilizes the facility. This variable revenue component adds complexity to financial forecasting and necessitates careful management. However, despite fluctuations in the variable revenue component during the 2023 fiscal year, the executives adeptly controlled costs to sustain profitability. The Compensation Committee acknowledges the challenge in forecasting and planning due to this external dependency and while certain aspects of revenue are variable and beyond the Company’s control, the executives strategically positioned the Company for long-term success. ■ Long-Term Value Creation: ■ The Compensation Committee believes that the decision to enhance the cash incentive awards reflects a long-term perspective on value creation. By rewarding executives for exceptional performance, the Compensation Committee aims to incentivize sustained efforts that contribute to the Company’s long-term growth and success. ■ Governance and Stockholder Alignment: ■ The Compensation Committee emphasizes its commitment to strong governance principles and stockholder alignment. The positive discretion exercised in this instance is viewed as a strategic and carefully considered decision, with the ultimate goal of ensuring that executive compensation is directly linked to the creation of stockholder value.
EQUITY INCENTIVE PROGRAM
EQUITY INCENTIVE PROGRAM Since 2022, our annual LTI program consists of RSUs and PSUs:
EQUITY INCENTIVE PROGRAM
| Award Type | Link to Business and Talent Strategies | | RSUs (60% of 2023 target value) | ■ Vests in four equal annual installments on each of the first four anniversaries of the grant date ■ Realized value linked to share price while maintaining retentive value during times of volatility | | PSUs (40% of 2023 target value) | ■ Awarded to certain officers, including NEOs, to further drive sustained performance and value creation |
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EQUITY INCENTIVE PROGRAM
| Award Type | Link to Business and Talent Strategies | | | ■ Increased weighting in overall LTI program from 25% in 2022 to 40% in 2023 ■ 50% of the 2023 PSUs may be earned at the end of the three-year performance period (1/1/2023 – 12/31/2025) from 0% – 200% of target shares awarded based on the Company’s relative Total Shareholder Return (“TSR”) performance against TSR of the Comparator Group (the Russell 2000 Index on the grant date) (the “TSR Based Award”). The other 50% of the 2023 PSUs may be earned at the end of the three-year performance period (3/1/2023 – 2/28/2026) from 0 – 200% of target shares awarded based on a diversified amount of Adjusted EBITDA (defined as Qualifying EBITDA in the award agreement, see footnote 1 below for definition) received by the Company on a cumulative basis (the “EBITDA Based Award”, collectively with the TSR Based Award the “2023 PSUs”). |
EQUITY INCENTIVE PROGRAM
(1) For the purposes of the award agreement, “Qualifying EBITDA” is defined as EBITDA received during the Performance Period that is (i) incremental to any EBITDA to determine “Baseline EBITDA” as approved in the budget for 2023 Adjusted EBITDA, and (ii) supported by (a) multi-year contracts or (b) single-year contracts where there is a reasonable expectation of extension, renewal, continuation, or any other increase in duration; provided, however, that Qualifying EBITDA shall not include any amounts accounted for as Variable PCC EBITDA. The table below summarizes the 2023 annual equity awards (both units awarded and grant date fair value) made to our named executive officers:
EQUITY INCENTIVE PROGRAM
| | 2023 Annual Equity Awards | | | | | | RSUs | | PSUs | | | Name | # | Value | # | Value | | James B. Archer | 57,692 | $864,231 | 38,462 | $794,615 | | Eric T. Kalamaras | 23,077 | $345,692 | 15,385 | $317,846 | | Troy C. Schrenk | 15,385 | $230,462 | 10,256 | $211,897 | | Heidi D. Lewis | 7,692 | $115,226 | 5,128 | $105,949 | | Jason Vlacich | 7,692 | $115,226 | 5,128 | $105,949 | | J. Travis Kelley | 9,615 | $144,033 | 6,410 | $132,436 |
EQUITY INCENTIVE PROGRAM
The Compensation Committee carefully considered a range of factors and strategic objectives when deciding to grant the 2023 PSUs based on TSR and the diversification of Adjusted EBITDA for the Company. The rationale for this decision reflects the Compensation Committee’s commitment to aligning executive compensation with the Company’s overall performance and long-term sustainability. ■ Alignment with Shareholder Interests (TSR): ■ TSR as a Key Performance Metric. The Compensation Committee recognizes that TSR is a comprehensive measure of the Company’s performance that directly aligns with shareholder interests. By incorporating TSR into the performance units, executives are incentivized to focus on actions and strategies that enhance shareholder value over the long-term. ■ For the TSR Based Award, the award level will be based on the following table:
EQUITY INCENTIVE PROGRAM
| Level | Percentile Rank vs. Comparator Group | Payout Percentage(1) | | Maximum | 80th Percentile and above | 200% of Target Level | | Target | 50th Percentile | 100% of Target Level | | Threshold | 30th Percentile | 50% of Target Level | | <Threshold | Below 30th Percentile | 0% |
EQUITY INCENTIVE PROGRAM
Any payment will be based on linear interpolation between Threshold, Target, and Maximum Award Levels. Notwithstanding the preceding, if the Company’s absolute TSR over the performance period is negative, the Payout Percentage shall be limited to 100% of Target Level regardless of relative TSR results.
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Strategic EBITDA Diversification: ■ Reducing Business Concentration Risk. The decision to diversify EBITDA reflects the Compensation Committee’s strategic approach to managing risk. By incentivizing executives based on the diversification of Adjusted EBITDA, the Compensation Committee aims to reduce the Company’s dependence on specific revenue streams or business segments. This diversification strategy enhances the Company’s resilience to market fluctuations and industry challenges. ■ Encouraging Portfolio Optimization. Executives are encouraged to explore and invest in areas that contribute to a more diversified Adjusted EBITDA. This may involve inorganic growth as well as organic growth. The Compensation Committee believes that such diversification efforts contribute to the overall health and sustainability of the Company. ■ Balancing Short-Term and Long-Term Objectives: ■ Incentivizing Strategic Decision-Making: The combination of TSR and EBITDA diversification in the performance units strikes a balance between short-term financial performance and long-term strategic objectives. Executives are motivated to make decisions that drive immediate shareholder value while also strategically positioning the Company for sustained growth and success. ■ Holistic Performance Evaluation: The dual focus on TSR and EBITDA diversification ensures a comprehensive evaluation of executive performance. This approach aligns with the Compensation Committee’s commitment to rewarding executives for achieving a well-rounded set of financial and strategic goals that contribute to the Company’s overall success. Other Aspects of Our Executive Compensation Program
EQUITY GRANT PRACTICES
EQUITY GRANT PRACTICES The Compensation Committee or the Board approves the grant of stock-based equity awards, such as PSUs and RSUs, at its regularly scheduled meetings (generally the first regularly scheduled meeting of the year, which is scheduled well in advance). In addition, the Compensation Committee has authorized, subject to various limitations, the CEO to grant stock-based equity awards to certain newly hired and existing employees, excluding executive officers and certain other senior employees. None of the Board, Compensation Committee, or executive management team engage in any market timing with regards to the stock-based equity awards made to executive officers or other award recipients. It is the Company’s practice that any stock option grants, whether made by the Board, the Compensation Committee or the CEO have an exercise price per share equal to the fair market value of our common stock based on the closing market price per share on the grant date.
SEVERANCE — EMPLOYMENT AGREEMENTS AND EQUITY AWARD AGREEMENTS
SEVERANCE — EMPLOYMENT AGREEMENTS AND EQUITY AWARD AGREEMENTS We have entered into employment agreements and equity award agreements with our NEOs that provide certain benefits if such employees are terminated as a result of death, disability, without Cause or Good Reason, and CIC. Additional information regarding the employment arrangements with each of our Named Executive Officers, including, with respect to each of our Named Executive Officers, a quantification of benefits that would have been received by each such Named Executive Officer had his or her employment terminated on December 31, 2023, is provided below under “Potential Payments upon Termination or Change in Control.”
SEVERANCE — EMPLOYMENT AGREEMENTS AND EQUITY AWARD AGREEMENTS
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SEVERANCE — EMPLOYMENT AGREEMENTS AND EQUITY AWARD AGREEMENTS
Risk Mitigation and Other Pay Practices
RISK ASSESSMENT OF COMPENSATION PROGRAM
RISK ASSESSMENT OF COMPENSATION PROGRAM The Compensation Committee believes that its approach to goal setting and setting of targets with payouts at multiple levels of performance assists in mitigating excessive risk-taking that could harm the Company’s value or reward poor judgment by executives. Several features of the Company’s compensation program reflect sound risk management practices. Notably, the Compensation Committee believes compensation has been allocated among cash and equity and short and long-term compensation elements in such a way as to not encourage excessive risk-taking, but rather to reward meeting strategic Company goals that enhance stockholder value. In addition, the Compensation Committee believes that the mix of equity award instruments used under the Company’s long-term incentive program (full value awards as well as the multi-year vesting of the equity awards) also minimize excessive risk-taking that might lead to short-term returns at the expense of long-term value creation. We also set stock ownership guidelines for our NEOs to help mitigate potential compensation risk. In sum, the Compensation Committee believes that the Company’s compensation policies do not create risks that are reasonably likely to have a material adverse effect on the Company.
TAX AND ACCOUNTING IMPLICATIONS OF EXECUTIVE COMPENSATION
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards(1) ($) | Option/SAR Awards(1) ($) | Non-equity Incentive Plan Compensation(2) ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation(3) ($) | Total ($) | | James B Archer President and Chief Executive Officer | 2023 | 794,231 | — | 1,549,619 | — | 1,064,000 | — | 49,637 | 3,457,487 | | | 2022 | 739,615 | — | 2,095,031 | — | 1,995,000 | — | 45,076 | 4,874,722 | | | 2021 | 660,000 | — | 426,190 | 423,913 | 2,045,274 | — | 26,012 | 3,581,389 | | Eric T. Kalamaras Executive Vice President and Chief Financial Officer | 2023 | 438,794 | — | 619,851 | — | 374,233 | — | 57,276 | 1,490,154 | | | 2022 | 426,013 | — | 1,986,021 | — | 726,665 | — | 41,712 | 3,180,411 | | | 2021 | 415,000 | — | 255,714 | 254,348 | 821,908 | — | 30,676 | 1,777,646 | | Troy C. Schrenk Chief Commercial Officer | 2023 | 370,067 | — | 413,229 | — | 315,618 | — | 58,787 | 1,157,701 | | | 2022 | 359,288 | — | 1,788,016 | — | 612,850 | — | 38,245 | 2,798.399 | | | 2021 | 350,000 | — | 170,476 | 169,565 | 693,175 | — | 25,600 | 1,408,816 | | Heidi D. Lewis Executive Vice President, General Counsel and Secretary | 2023 | 361,238 | — | 206,607 | — | 234,325 | — | 40,128 | 842,298 | | | 2022 | — | — | — | — | — | — | — | — | | | 2021 | — | — | — | — | — | — | — | — | | Jason Vlacich Chief Accounting Officer | 2023 | 317,200 | — | 206,607 | — | 206,876 | — | 38,994 | 768,677 | | | 2022 | — | — | — | — | — | — | — | — | | | 2021 | — | — | — | — | — | — | — | — | | J. Travis Kelley Former Executive Vice President, Operations | 2023 | 330,424 | — | 258,259 | — | 200,850 | — | 36,160 | 825,693 | | | 2022 | — | — | — | — | — | — | — | — | | | 2021 | — | — | — | — | — | — | — | — |
Employment Agreement and Equity Award Agreement Provisions Relating to Termination of Employment or Change in Control
| Year | Summary Compensation Table Total for PEO ($)(1) | Compensation Actually Paid to PEO ($)(2) | Average Summary Compensation Table Total for Non-PEO NEOs ($)(3) | Average Compensation Actually Paid to Non- PEO NEOs ($)(4) | Value of Initial Fixed $100 Investment Based On: | | Net Income ($ in 000s)(7) | Adjusted EBITDA ($ in 000s)(8) | | | | | | | Total Shareholder Return ($)(5) | Peer Group Total Shareholder Return ($)(6) | | | | 2023 | 3,457,487 | (3,703,779) | 1,064,708 | (1,049,917) | 616 | 187 | 173,700 | 344,217 | | 2022 | 4,874,722 | 25,669,657 | 2,989,405 | 12,049,682 | 958 | 128 | 73,939 | 264,714 | | 2021 | 3,581,389 | 5,136,429 | 1,593,231 | 2,408,446 | 225 | 153 | (4,576) | 119,176 |
Employment Agreement and Equity Award Agreement Provisions Relating to Termination of Employment or Change in Control
| Compensation Actually Paid to PEO | 2023 | 2022 | 2021 | | Summary Compensation Table Total | 3,457,487 | 4,874,722 | 3,581,389 | | Less, value of “Stock Awards” and “Option Awards” reported in Summary Compensation Table | (1,549,619) | (2,095,031) | (850,103) | | Less, change in pension value and Non-Qualified Deferred Compensation earnings | 0 | 0 | 0 | | Plus, year-end fair value of outstanding and unvested equity awards granted in the year | 840,193 | 11,624,887 | 1,809,574 | | Plus (less), year over year change in fair value of outstanding and unvested equity awards granted in prior years | (7,410,418) | 11,217,181 | 566,716 | | Plus (less), year over year change in fair value of equity awards granted in prior years that vested in the year | 958,578 | 47,898 | 28,853 | | Compensation Actually Paid to Mr. Archer | (3,703,779) | 25,669,657 | 5,136,429 |
Employment Agreement and Equity Award Agreement Provisions Relating to Termination of Employment or Change in Control
| Average Compensation Actually Paid to Non-PEO NEOs | 2023 | 2022 | 2021 | | Average Summary Compensation Table Total | 1,064,708 | 2,989,405 | 1,593,231 | | Less, average value of “Stock Awards” and “Option Awards” reported in Summary Compensation Table | (361,574) | (1,887,019) | (425,052) | | Less, change in pension value and Non-Qualified Deferred Compensation earnings | 0 | 0 | 0 | | Plus, average year-end fair value of outstanding and unvested equity awards granted in the year | 196,044 | 5,152,958 | 904,787 | | Plus (less), average year over year change in fair value of outstanding and unvested equity awards granted in prior years | (2,286,425) | 5,554,520 | 284,110 | | Plus (less), average year over year change in fair value of equity awards granted in prior years that vested in the year | 337,331 | 239,816 | 51,370 | | Average Compensation Actually Paid to Non-PEO NEOs | (1,049,917) | 12,049,682 | 2,408,446 |
Description of Certain Relationships Between Information Presented in the Pay versus Performance Table
Description of Certain Relationships Between Information Presented in the Pay versus Performance Table As described in more detail in the section “Executive Compensation — Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable pay-for-performance philosophy. While the Company utilizes several performance measures to align executive compensation with Company performance, all of those Company measures are not presented in the Pay versus Performance table. In accordance with SEC rules, the Company is providing the following descriptions of the relationships between information presented in the Pay versus Performance table.
Description of Certain Relationships Between Information Presented in the Pay versus Performance Table
| 58 | investors.targethospitality.com |
Description of Certain Relationships Between Information Presented in the Pay versus Performance Table
Compensation Actually Paid vs. Company TSR and Peer Group TSR The following graph provides an illustration of the relationship between Compensation Actually Paid for the PEO and average non-PEO NEO and the Total Shareholder Return of Target Hospitality and the Compensation Peer Group for the fiscal years ended December 31, 2023, 2022, and 2021.
Description of Certain Relationships Between Information Presented in the Pay versus Performance Table
| 2024 proxy statement | 59 |
Description of Certain Relationships Between Information Presented in the Pay versus Performance Table
Compensation Actually Paid and Net Income The following graph provides an illustration of the relationship between Compensation Actually Paid for the PEO and average non-PEO NEO and the Company’s Net Income for the fiscal years ended December 31, 2023, 2022, and 2021. Despite the rise in Net Income from December 31, 2022, to December 31, 2023, the Company experienced a significant decline in its stock price during this period. This downward trend adversely impacted the fair value per share for both vested and unvested stock awards, leading to a negative Compensation Actually Paid to our PEO and non-PEO NEOs.
Description of Certain Relationships Between Information Presented in the Pay versus Performance Table
| 60 | investors.targethospitality.com |
Description of Certain Relationships Between Information Presented in the Pay versus Performance Table
Compensation Actually Paid and Adjusted EBITDA The following graph provides an illustration the relationship between Compensation Actually Paid for the PEO and average non-PEO NEO and the Company’s Adjusted EBITDA for the fiscal years ended December 31, 2023, 2022, and 2021. Despite the rise in Adjusted EBITDA from December 31, 2022, to December 31, 2023, the Company experienced a significant decline in its stock price during this period. This downward trend adversely impacted the fair value per share for both vested and unvested stock awards, leading to a negative Compensation Actually Paid to our PEO and non-PEO NEOs.
Description of Certain Relationships Between Information Presented in the Pay versus Performance Table
| 2024 proxy statement | 61 |
Description of Certain Relationships Between Information Presented in the Pay versus Performance Table
Equity Compensation Plan Information On March 6, 2019, our stockholders approved the Target Hospitality Corp. 2019 Incentive Award Plan (as amended, the “Incentive Plan”). The Incentive Plan is administered by the Compensation Committee. Under the Incentive Plan, the Compensation Committee may grant an aggregate of 4,000,000 shares of common stock in the form of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, RSUs, and performance compensation awards. On May 19, 2022, our stockholders approved an amendment to the Incentive Plan solely to increase the number of shares of common stock authorized for issuance under the Incentive Plan by an additional 4,000,000 shares of common stock in the form of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, RSUs, and performance compensation awards. As of December 31, 2023, 10,082,940 securities had been granted under the Plan, excluding 116,837 RSUs paid in cash, and including 1,578,537 of SARs, which are intended to settle in cash.
Description of Certain Relationships Between Information Presented in the Pay versus Performance Table
| Plan Category | Common Shares to be Issued Upon Exercise of Outstanding Options and RSUs (a) | Weighted Average Exercise Price of Outstanding Options (b) | Common Shares Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Shares Reflected in the first column in this table) (c) | | Equity compensation plans approved by Target Hospitality stockholders(1) | 3,781,513 | $6.55 | 1,207,138 | | Equity compensation plans not approved by stockholders | — | — | — | | Total | 3,781,513 | $6.55 | 1,207,138 |
Description of Certain Relationships Between Information Presented in the Pay versus Performance Table
(1) The number of common shares reported in Column (a) excludes liability-based stock appreciation right awards of 714,539 and shares associated with grants that were withheld for tax liabilities and grants that were forfeited or expired on or before December 31, 2023, as shares associated with grants that were withheld for tax liabilities and forfeited and expired grants are available for reissuance under the Plan. The amounts and values in Column (a) comprise 1,682,206 equity-based RSUs at a weighted average grant price of $4.65, 1,358,868 equity-based PSUs (assumed at a payout of 100% of Target) at a weighted average grant price of $5.23, and 740,439 stock options at a weighted average exercise price of $6.55. For additional information on the awards outstanding under the Plan, see Note 18 in the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. Employment Agreements The employment arrangements we have with our NEOs as of December 31, 2023 are summarized below.