DEF 14A of 3D Systems Corp
Filed Mar 29, 2019 · FY20180001193125-19-091603
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS At the Annual Meeting, the stockholders will elect eleven directors to serve until the 2020 Annual Meeting and until their successors are elected and qualified. The Board of Directors, based upon the recommendation of the Corporate Governance and Nominating Committee (the “Governance Committee”), has designated as nominees for election the eleven individuals named in the table below, all of whom currently serve as directors. In nominating each of the director nominees, the Governance Committee and the Board considered, among other things, the Board’s Corporate Governance Guidelines, which was adopted in 2004 and most recently amended in March 2018, and the Qualifications for Nomination to the Board, which was adopted in 2004. These documents are posted on our website at www.3DSystems.com. These qualifications include, among other factors, a candidate’s ethical character, experience and diversity of background as well as whether the candidate is independent under applicable listing standards and financially literate. In considering the nomination of these individuals, the Governance Committee and the Board also took into consideration the following additional factors relating to each director since the 2018 Annual Meeting:
ELECTION OF DIRECTORS
| • | such director’s contributions to the Board; |
ELECTION OF DIRECTORS
| • | any material change in such director’s employment or responsibilities with any other organization; |
ELECTION OF DIRECTORS
| • | such director’s attendance at meetings of the Board and the Board committees on which such director serves and such director’s participation in the activities of the Board and such committees; |
ELECTION OF DIRECTORS
| • | the absence of any relationships with the Company or another organization, or any other circumstances that have arisen, that might make it inappropriate for the director to continue serving on the Board; and |
ELECTION OF DIRECTORS
| • | although we have not adopted a retirement policy for directors, the director’s age and length of service on the Board. |
ELECTION OF DIRECTORS
Relevant information regarding the background and experience of each of the nominees for director that the Governance Committee and the Board considered in evaluating each nominee is set forth below their respective names in “Information Concerning Nominees” below. See also “Corporate Governance Matters” below, which discloses additional information about the nominees and our corporate governance policies and practices. The Governance Committee and the Board considered each nominee’s overall business experience, contributions to Board activities during 2018 and independence in their evaluation of each nominee in conjunction with the factors discussed above, but did not otherwise give greater weight to any of the factors cited above compared with any of the others. While the Board considers diversity of background and experience in its nomination decisions, we do not maintain a diversity policy relating to the composition of our Board of Directors. The Board believes that each of the nominees for director is well qualified to continue to serve as a director of the Company and that the nominees provide the mix of experience that is required to enable the Board to perform its functions. If any nominee becomes unavailable for any reason or if a vacancy should occur before the election (which events are not anticipated), the holders of proxies may vote the shares represented by such duly executed proxies in favor of such other person as they may determine. Alternatively, in lieu of designating a substitute, the Board may reduce the number of directors. The Board of Directors unanimously recommends that you vote FOR each of the nominees listed in the table below.
Information Concerning Nominees
Information Concerning Nominees The following table sets forth for each nominee for director, his or her business experience, the year in which he or she first became a director, his or her age as of the record date for the Annual Meeting, and any directorships in publicly owned companies or registered investment companies that such nominee currently holds or has held during the past five years. It also sets forth the particular experiences, qualifications, attributes, and skills of each nominee for director that led to the conclusion of the Governance Committee and the Board that the nominee should serve as a director.
Information Concerning Nominees
| MALISSIA CLINTON, 50 | Director Since: 2019 | | | Board Committees: Compliance |
Information Concerning Nominees
Position, Principal Occupation and Professional Experience: Senior Vice President, General Counsel and Secretary at The Aerospace Corporation. Ms. Clinton has served as Senior Vice President, General Counsel and Secretary at The Aerospace Corporation since 2009. She previously worked at Northrup Grumman from 2002 to 2009 including her role as Senior Counsel for Special Projects beginning in 2007. She joined TRW Space Technology, a division of TRW, Inc., in 1998 as Counsel in its Telecommunication Programs and Avionic Systems division. She began her career as an Associate at Tuttle & Taylor. Other Current Public Directorships: None
Prior Public Company Directorships (within the last five years): None
Prior Public Company Directorships (within the last five years): None Other Directorships, Trusteeships and Memberships: Board of Directors of City of Hope Medical Center and the Arizona State University Foundation. Director Qualifications: The Governance Committee believes that Ms. Clinton’s strong experience in compliance matters and aerospace, a key vertical for our Company, provide clear support for her nomination for election to our Board.
Prior Public Company Directorships (within the last five years): None
| WILLIAM E. CURRAN, 70 | Director Since: 2008 | | | Board Committees: Audit, Compliance and Compensation |
Prior Public Company Directorships (within the last five years): None
Position, Principal Occupation and Professional Experience: Retired President and Chief Executive Officer at Philips Electronics North America Corp. Currently retired, Mr. Curran was the President and Chief Executive Officer at Philips Electronics North America Corp. from July 1999 to August 2002. Prior to that he served as Chief Financial Officer from February 1996 to July 1999. Previously, he served as Chief Operating Officer of Philips Medical North America, a medical device manufacturer, from February 1993 to February 1996. Other Current Public Directorships: Profound Medical, a public company developing a treatment for prostate cancer using ablative ultrasound and guided by magnetic resonance imaging and thermometry (since January 2012).
Prior Public Company Directorships (within the last five years): None
Prior Public Company Directorships (within the last five years): None Other Directorships, Trusteeships and Memberships: Previously served as non-executive Chairman and director of Resonant Medical, an early-stage privately owned company specializing in three-dimensional ultrasound image-guided adaptive radio therapy products, until its acquisition by Elekta A.B., and as a director of Ventracor, a global medical device company which produced an implantable blood pump. Director Qualifications: The Governance Committee believes that Mr. Curran’s wide experience in operations, finance and executive management, both in the United States and abroad, provide clear support for his nomination for election to our Board.
Prior Public Company Directorships (within the last five years): None
| THOMAS W. ERICKSON, 68 | Director Since: 2015 | | | Board Committees: Executive |
Prior Public Company Directorships (within the last five years): None
Position, Principal Occupation and Professional Experience: President and Chief Executive Officer of ECG Ventures, Inc. Mr. Erickson has been President and Chief Executive Officer of ECG Ventures, Inc., an investment firm, since 1987 and serves as a Senior Advisor to Centerbridge Partners, a private equity firm. Mr. Erickson has previously served as Chairman and Interim President and Chief Executive Officer of National Medical Health Card Systems, Inc., a publicly traded pharmacy benefits manager; Chairman of the Board of PathWays, Inc., an operator of post-acute care facilities; Chairman of the Board of TransHealthcare, Inc., a health care services company; Chairman and Interim Chief Executive Officer of LifeCare Holdings, Inc., an operator of long-term acute care hospitals; Interim President and Chief Executive Officer of Luminex Corporation, a publicly traded biotechnology company; Chairman of the Board of Inmar, Inc., a reverse logistics and revenue recovery company; Chairman of the Board and Interim President and Chief Executive Officer of Western Dental Services, Inc., a dental practice management company; and Interim President and Chief Executive Officer of Omega Healthcare Investors, Inc., a publicly traded healthcare focused real estate investment trust. Mr. Erickson was also co-founder, President and Chief Executive Officer of CareSelect Group, Inc., a physician practice management company. Other Current Public Directorships: Luminex Corporation, a publicly traded biotechnology company (since May 2004), and American Renal Associates Holdings, Inc., a publicly traded operator of renal dialysis clinics (since March 2011).
Prior Public Company Directorships (within the last five years): None
Prior Public Company Directorships (within the last five years): None
Other Directorships, Trusteeships and Memberships: None
Other Directorships, Trusteeships and Memberships: None Director Qualifications: The Governance Committee believes that Mr. Erickson’s extensive executive management and operational experience, particularly in the healthcare industry, provide clear support for his nomination for election to our Board.
Other Directorships, Trusteeships and Memberships: None
| CHARLES W. HULL, 79 | Director Since: 1993 | | | Board Committees: Technology |
Other Directorships, Trusteeships and Memberships: None
Position, Principal Occupation and Professional Experience: Executive Vice President and Chief Technology Officer of the Company. Mr. Hull serves as the Executive Vice President and Chief Technology Officer of the Company. He is a founder of the Company and has served as Chief Technology Officer since 1997 and as Executive Vice President since 2000. He has also previously served in various other executive capacities, including Chief Executive Officer, Vice Chairman of the Board of Directors and President and Chief Operating Officer. Other Current Public Directorships: None
Prior Public Company Directorships (within the last five years): None
Prior Public Company Directorships (within the last five years): None Other Directorships, Trusteeships and Memberships: Member of the External Advisory Board of Aerospace Engineering Sciences, University of Colorado Director Qualifications: As one of our founders and a director since 1993, the Governance Committee believes Mr. Hull’s broad understanding of the technologies of our industry as well as a wide-ranging historical perspective on our strategy and growth, provide clear support for his nomination for election to our Board.
Prior Public Company Directorships (within the last five years): None
| WILLIAM D. HUMES, 54 | Director Since: 2014 | | | Board Committees: Audit and Compensation |
Prior Public Company Directorships (within the last five years): None
Position, Principal Occupation and Professional Experience: Chief Financial Officer for Core Scientific. Mr. Humes has been Chief Financial Officer for Core Scientific, a leader in Blockchain and Artificial Intelligence infrastructure hosting, transaction processing and application development, since January 2019. From 2005 until 2016, he served as Chief Financial Officer of Ingram Micro Inc., a Fortune 100 company and the world’s largest wholesale technology distributor and a global leader in supply-chain and mobile device lifecycle services until it was acquired and taken private by HNA Group. Following HNA’s acquisition of Ingram Micro Inc., Mr. Humes transitioned from Chief Financial Officer to the board of directors of the newly acquired subsidiary on which he served until June 2017. While Chief Financial Officer of Ingram Micro, he was responsible for the company’s global finance organization including financial planning and analysis, controllership, internal audit, tax, treasury and risk management. Prior to being named Chief Financial Officer, Mr. Humes held positions of increasing responsibility for Ingram Micro after joining in 1998 as Senior Director, Worldwide Financial Planning, Reporting and Accounting. Before joining Ingram Micro, Mr. Humes was at PricewaterhouseCoopers LLP for nine years, where he took an accelerated path to senior manager. During his tenure at the firm, he was responsible for managing all aspects of professional services to numerous multinational and technology-sector companies. Other Current Public Directorships: None
Prior Public Company Directorships (within the last five years): None
Prior Public Company Directorships (within the last five years): None
Other Directorships, Trusteeships and Memberships: None
Other Directorships, Trusteeships and Memberships: None Director Qualifications: The Governance Committee believes Mr. Humes’ wide experience in finance, operations and executive management provides clear support for his nomination for election to our Board.
Other Directorships, Trusteeships and Memberships: None
| VYOMESH I. JOSHI, 65 | Director Since: 2016 | | | Board Committees: Compliance, Technology and Executive |
Other Directorships, Trusteeships and Memberships: None
Position, Principal Occupation and Professional Experience: President and Chief Executive Officer of the Company. Mr. Joshi has served as the President and Chief Executive Officer of the Company since April 2016. From 2001 to 2012, he was Executive Vice President of Hewlett-Packard’s (“HP”) Imaging and Printing Group, following two decades of research, engineering and management in HP’s imaging and printing systems. Other Current Public Directorships: Harris Corporation, a publicly traded technology company, defense contractor and information technology service provider (since September 2013). Prior Public Company Directorships (within the last five years): Yahoo! Inc., a publicly traded web services provider (from 2005 to 2012), and Wipro Ltd., a publicly traded multinational information technology, consulting and business process services company (from 2012 to 2016). Director Qualifications: The Governance Committee believes Mr. Joshi’s extensive executive management, corporate strategy and international operational experience provides clear support for his nomination for election to our Board. Additionally, Mr. Joshi has significant knowledge of the Company and the competitive environment in which it operates.
Other Directorships, Trusteeships and Memberships: None
| JIM D. KEVER, 66 | Director Since: 1996 |
Other Directorships, Trusteeships and Memberships: None
| Board Committees: Compensation and Corporate Governance & Nominating |
Other Directorships, Trusteeships and Memberships: None
Position, Principal Occupation and Professional Experience: Principal, Voyent Partners, LLC. Mr. Kever has been a Principal in Voyent Partners, LLC, a venture capital firm, since 2001. He previously served as President and Co-Chief Executive Officer of the Transaction Services Division of WebMD Corporation (formerly Envoy Corporation), an internet healthcare services company, from 1995 to 2001. Prior to 1995 he served as Envoy Corporation’s Executive Vice President, Secretary and General Counsel. Other Current Public Directorships: Luminex Corporation, a publicly traded biotechnology company (since December 1996). Prior Public Company Directorships (within the last five years): Tyson Foods, Inc., a publicly traded multinational food processing company (from 1999 to 2014).
Other Directorships, Trusteeships and Memberships: None
Other Directorships, Trusteeships and Memberships: None Director Qualifications: The Governance Committee believes Mr. Kever’s wide experience in operations, finance and executive management provides clear support for his nomination for election to our Board.
Other Directorships, Trusteeships and Memberships: None
| CHARLES G. MCCLURE JR., 65 | Director Since: 2017 | | | Board Committees: Compliance and Executive |
Other Directorships, Trusteeships and Memberships: None
Position, Principal Occupation and Professional Experience: Managing Partner, Michigan Capital Advisors. Mr. McClure has served as Chairman of the Board of Directors of the Company since October 2018. Mr. McClure has served as a Managing Partner of Michigan Capital Advisors since 2014 and has more than 35 years of experience in the transportation industry. Prior to founding Michigan Capital Advisors, Mr. McClure served as Chairman of the Board, Chief Executive Officer and President of Meritor, Inc. from 2004 through 2013. From 2002 through 2004, Mr. McClure served as Chief Executive Officer, President and a member of the Board of Federal Mogul Corp. Mr. McClure joined Federal Mogul in 2001 as president, Chief Operating Officer and a member of the Board. Before joining Federal Mogul, Mr. McClure served as President, Chief Executive Officer and a member of the Board of Detroit Diesel. He joined Detroit Diesel in 1997 after 14 years in a variety of management positions with Johnson Controls. Other Current Public Directorships: DTE Energy, a publicly traded Detroit-based energy company (since 2012), and Crane Corporation, a publicly traded industrial products company (since 2017). Prior Public Company Directorships (within the last five years): Remy International, Inc., a manufacturer and distributor of starters and alternators prior to its acquisition by BorgWarner Inc. (2015). Other Directorships, Trusteeships and Memberships: Member of the Board of Trustees of Henry Ford Health Systems; Member of the Board of Directors of Invest Detroit; and Member of the Business Leaders for Michigan. Director Qualifications: The Governance Committee believes Mr. McClure’s broad experience in operations and executive management and significant expertise in the automotive industry, a key vertical for our Company, provide clear support for his nomination for election to our Board.
Other Directorships, Trusteeships and Memberships: None
| KEVIN S. MOORE, 64 | Director Since: 1999 | | | Board Committees: Audit, Compensation and Executive |
Other Directorships, Trusteeships and Memberships: None
Position, Principal Occupation and Professional Experience: President and Director, The Clark Estates, Inc. Mr. Moore has been with The Clark Estates, Inc., a private investment firm and a major company stockholder, for more than 20 years, where he is currently President and a director. Other Directorships, Trusteeships and Memberships: Aspect Holdings, LLC, The Clark Foundation, the National Baseball Hall of Fame & Museum, Inc., and Vice Chairman of the Board of Trustees of Bassett Healthcare Network. Director Qualifications: The Governance Committee believes Mr. Moore’s wide experience in operations, finance and executive management and, as the president of a major stockholder, perspective on strategy and growth for the benefit of our stockholders, provide clear support for his nomination for election to our Board.
Other Directorships, Trusteeships and Memberships: None
| JOHN J. TRACY, 64 | Director Since: 2017 | | | Board Committees: Compliance and Technology |
Other Directorships, Trusteeships and Memberships: None
Position, Principal Occupation and Professional Experience: Retired Chief Technology Officer and Senior Vice President, Engineering, Operations and Technology at The Boeing Company. Dr. Tracy has more than 37 years of experience in the aerospace industry, most recently as Chief Technology Officer and Senior Vice President, Engineering, Operations and Technology at The Boeing Company. Dr. Tracy has strong leadership in technology, operations, quality and engineering gained from his experience from several aerospace companies, including Hercules Aerospace Company, McDonnell Douglas Corporation and The Boeing Company. From 2006 until 2016, he served as Chief Technology Officer and Senior Vice President, Engineering, Operations and Technology at The Boeing Company. Prior to that he served as Vice President, Engineering and Mission Assurance for Boeing Integrated Defense Systems and Vice President Structural Technologies, Prototyping and Quality of Phantom Works at The Boeing Company, after serving in roles of increasing responsibility at Hercules, McDonnell Douglas and The Boeing Company since 1979. Other Current Public Directorships: None
CORPORATE GOVERNANCE MATTERS
| • | director compensation arrangements where such arrangement has been approved by the Governance Committee (or another committee of independent directors) and the Board; |
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
Director Compensation for 2018
Director Compensation for 2018 The following table sets forth information concerning all compensation of each of our non-employee directors for their services as a director during the year ended December 31, 2018. Ms. Clinton was appointed to the Board in March 2019; therefore, she did not receive any compensation as a director during the year ended December 31, 2018.
Director Compensation for 2018
| | Fees Earned or Paid in Cash ($) | Stock Awards(1) ($) | All Other Compensation ($) | Total ($) | | William E. Curran | 125,733 | 99,998 | — | 225,731 | | Thomas W. Erickson | 188,000 | 99,998 | — | 287,998 | | William D. Humes | 102,958 | 99,998 | — | 202,956 | | Jim D. Kever | 86,500 | 99,998 | — | 186,498 | | G. Walter Loewenbaum, II(2) | 225,000 | 99,998 | — | 324,998 | | Charles G. McClure, Jr.(3) | 157,595 | 99,998 | — | 257,593 | | Kevin S. Moore | 126,458 | 99,998 | — | 226,456 | | John J. Tracy | 100,049 | 99,998 | — | 200,047 | | Daniel S. Van Riper(4) | 37,500 | — | — | 37,500 | | Jeffrey Wadsworth | 90,900 | 99,998 | — | 190,898 |
Director Compensation for 2018
| (1) Represents the aggregate grant date fair value of the restricted stock awards granted in 2018 to each non-employee director computed in accordance with stock-based accounting rules (Financial Standards Accounting Board (“FASB”) ASC Topic 718). The value of the restricted stock awards is determined by multiplying the number of shares awarded by the closing price of our Common Stock on the date of grant. The amounts in this column include awards of 3,000 shares of Common Stock made to directors in office under the Directors Stock Plan on May 15, 2018 minus the $3.00 purchase price for the shares covered by each award paid by the recipients. The amounts in this column also include awards of 4,758 shares of Common Stock made to directors in office under the 2015 Incentive Plan on May 15, 2018. Such awards were valued based on the closing market price of our Common Stock ($12.89 per share) on May 15, 2018, the date of grant. |
Director Compensation for 2018
| (2) Mr. Loewenbaum retired from the Board of Directors on October 3, 2018. The amounts shown reflect prorated fees Mr. Loewenbaum earned for service during the portion of 2018 during which he served as a director and Chairman of the Board. |
Director Compensation for 2018
| (3) Mr. McClure was elected Chairman of the Board on October 3, 2018. The amounts shown reflect prorated fees Mr. McClure earned for service during the portion of 2018 in which he also served as Chairman of the Board. |
Director Compensation for 2018
| (4) Mr. Van Riper did not stand for re-election as a member of the Board at the 2017 Annual Meeting. The amounts shown reflect the fees Mr. Van Riper earned as a Director Emeritus during 2018. Mr. Van Riper’s one-year term as a Director Emeritus expired at the 2018 Annual Meeting. |
Summary of Key 2018 Compensation Actions
| • | Continued engagement of Pearl Meyer as independent compensation consultant for the Compensation Committee. |
Summary of Key 2018 Compensation Actions
| • | Tied 100% of the funding of the 2018 Annual Incentive Plan to the Company’s achievement of pre-determined revenue and operating profit performance targets. |
Summary of Key 2018 Compensation Actions
| • | Created 2018 personal objectives for the purpose of individual performance review to determine allocation of the 2018 Annual Incentive Plan pool, if funded, among eligible Company employees. |
Summary of Key 2018 Compensation Actions
| • | Made no payments to NEOs under the 2018 Annual Incentive Plan. |
Summary of Key 2018 Compensation Actions
| • | Made grants of performance-based restricted stock units to our NEOs tied to achievement of pre-determined revenue and operating profit performance targets in amounts based on the market-based job architecture and the recommendation of the independent compensation consultant. |
Determining Executive Compensation
| • | to determine the amount of any annual incentive compensation to be awarded to each NEO for the preceding calendar year; |
Determining Executive Compensation
| • | to approve our incentive compensation program for the current year and establish target incentive bonuses for the current calendar year for each of the NEOs. |
Determining Executive Compensation
As part of this review, our CEO gives the Compensation Committee a recommendation for incentive compensation awards for the prior year, salary adjustments for the current year and target incentive bonuses for the current year for each other NEO. In 2017, we established a new market-based job architecture for all employees to ensure appropriate levels of pay at each employee classification across the Company. Additionally, concrete personal objectives were established for each NEO by which such executive’s individual performance is measured. Our CEO uses the market-based job architecture and evaluation of each individual NEO’s progress towards assigned strategic imperatives and concrete personal objectives to guide his compensation recommendations to the Compensation Committee. The Compensation Committee reviews those recommendations and modifies them to the extent it considers appropriate. As part of this process, the Compensation Committee approves the amount of any annual incentive compensation to be awarded to each individual with respect to the preceding calendar year, approves the amount of any adjustments to be made to the annual salary of each such individual for the current year, approves the terms of our incentive compensation program for the current calendar year, and establishes target incentive bonuses for the current year for each of our NEOs and each of the other individuals whose compensation it oversees. The Compensation Committee may also approve adjustments to compensation for specific individuals at other times during any year when there are significant changes in the responsibilities of such individuals or under other circumstances that the Compensation Committee considers appropriate. Our CEO’s compensation is determined under similar principles but follows a different process. This process is designed to comply with applicable law and listing requirements under which, after discussing his self-evaluation with him and receiving the views of other independent directors, the Compensation Committee evaluates his performance, reviews the Compensation Committee’s evaluation with him, and, based on that evaluation and review, determines his compensation and personal annual incentive objectives. Our CEO is excused from meetings of the Compensation Committee during voting or deliberations regarding his compensation.
Compensation Consultant and Compensation Peer Group
Compensation Consultant and Compensation Peer Group In 2017, the Compensation Committee directly engaged Pearl Meyer to assist in the performance of a comprehensive review of our executive compensation program and practices and to provide the Compensation Committee guidance in the establishment of the 2018 executive compensation program. Pearl Meyer provides no services to the Company other than to the Compensation Committee, and is therefore independent of the management of the Company. During 2017, Pearl Meyer assisted the Committee in developing a peer group to serve as a market reference for establishing and evaluating fiscal 2018 compensation for our NEOs. Our fiscal 2018 peer group is comprised of 14 publicly-traded, industry-specific companies. These companies were selected after the consideration of various criteria, including:
Compensation Consultant and Compensation Peer Group
| • | quantitative criteria, including revenue size, margins, market cap, headcount and R&D spend; |
Compensation Consultant and Compensation Peer Group
| • | qualitative criteria, including service and product offerings and end markets served; and |
Compensation Consultant and Compensation Peer Group
| • | likely competitors for executive talent. |
Elements of Executive Compensation
| • | when earned, incentive awards under our annual incentive program; and |
Elements of Executive Compensation
| • | long-term equity compensation under our 2015 Incentive Plan. |
Elements of Executive Compensation
In reviewing base annual salaries and target annual incentive awards for each NEO, the Compensation Committee also reviews each executive’s compensation history with the Company and prior equity awards or grants. The Compensation Committee is guided by its own judgment and those sources of information (including, when deemed appropriate, compensation surveys) that the Compensation Committee considers relevant and, in 2017 and 2018, the recommendations of a compensation consultant. The Compensation Committee believes that the prudent use of judgement in determining compensation will generally be in our best interests and those of our stockholders. Accordingly, the Compensation Committee does not rely exclusively upon fixed formulas and, from time to time in exercising its judgement, the Compensation Committee may approve changes in compensation that it considers to be appropriate to award performance or otherwise to provide incentives toward achieving our objectives. The Compensation Committee also seeks to strike a balance that it considers to be appropriate in its discretion between fixed elements of compensation, such as base salaries, and variable performance-based elements represented by annual incentive awards and long-term equity compensation. As a general matter, the Compensation Committee believes that our executive officers should have at least one-third of their annual cash compensation opportunity at risk under variable performance-based elements of our incentive compensation program, including in particular our annual incentive program. In most cases, the portion of our NEOs’ cash compensation opportunity that is at risk in any year exceeds that level. See “—2018 Incentive Compensation Program” below. The following charts show the pay mix for our CEO and other NEOs during 2018.
Elements of Executive Compensation
* No annual incentive awards were paid with respect to 2018. See “2018 Incentive Compensation Program” for further details. **41% of the target 2018 performance based equity awards were earned. Base Salaries We pay annual salaries to provide executives, including the NEOs, with a base level of monthly compensation for services rendered during the year. Salaries are also designed to help achieve our objectives of attracting and retaining executive talent. Adjustments to base salaries are based on the Company’s market-based job architecture, which takes into consideration the responsibilities of the executives, the Compensation Committee’s evaluation of the market demand for executives with similar capability and experience, and each individual NEO’s progress towards assigned strategic imperatives and concrete personal objectives. Annual Incentive Program Our annual incentive compensation program is designed to provide appropriate incentives to reward performance and motivate our executives, including the NEOs, to attain our strategic objectives. This program is adopted annually, is designed with our strategic objectives in mind, and has historically focused partly on the achievement of pre-determined corporate financial objectives and partly, for each executive, on personal objectives. Prior to 2017, 55% of each executive’s annual incentive compensation target was based on the achievement of pre-approved corporate financial objectives with the remaining 45% based on the achievement of personal objectives. In 2017, our Compensation Committee revised our annual incentive compensation program so that the pool available for payout thereunder is based 100% on the achievement of pre-determined corporate financial objectives. Under the new annual incentive compensation program, if the pre-determined corporate financial objectives are achieved and the pool is funded, the allocation of the pool among participants is based on each participant’s progress towards assigned strategic-imperatives and concrete personal objectives. If the pre-determined corporate financial objectives are not achieved, no employees receive awards under our annual incentive compensation program. Even if the pre-determined corporate financial objectives are achieved, our Compensation Committee always retains the discretion to reduce the funding of the Company-wide annual incentive plan pool or any individual participant’s award. As an overriding condition, a failure to perform in accordance with our Code of Conduct or Code of Ethics may serve as a basis for a participant in this program not to receive an incentive award. We consider this aspect of our incentive compensation program to be consistent with sound principles of corporate governance. As part of its goal-setting process, the Compensation Committee establishes current-year target incentive awards for each NEO with the following principles in mind:
Elements of Executive Compensation
| • | Targets are used to determine the amount of any annual incentive that a NEO can expect to receive if we achieve our financial objectives for the year in question and such NEO achieves his personal objectives for that year. In setting these target incentive awards, the Compensation Committee considers each NEO’s level of responsibility and the recommendations of our CEO. |
Elements of Executive Compensation
| • | Target incentive awards are set at levels that are designed to link a substantial portion of each NEO’s total annual compensation opportunity to attaining the corporate objectives and the individual and team objectives established for each NEO for the year in question. In general, at least one-third of each NEO’s annual cash compensation opportunity is at risk. See “—Grants of Plan-Based Awards in 2018” below for a summary of target incentive awards for the NEOs applicable to 2018. |
Elements of Executive Compensation
| • | No minimum incentive awards are guaranteed to NEOs. The pool for the annual incentive plan is not funded unless the Company achieves certain pre-determined financial objectives. |
Elements of Executive Compensation
| • | Base target amounts represent the incentive awards that could be awarded assuming achievement of 100% of the pre-determined financial objectives. Our base target awards for each of the participating NEOs was equal to 50% of their 2018 annual base salaries, except for the CEO, whose base target award was set at 100% of his 2018 annual base salary. |
Elements of Executive Compensation
| • | Maximum amounts represent the maximum amount that may generally be awarded to each NEO under the program for the year in question. Our maximum annual incentive awards were equal to 150% of the target annual incentive awards for each of our NEOs during 2018. |
Elements of Executive Compensation
Financial objectives are determined based on our business plan for the year in question. This business plan is developed by management and approved by the Board of Directors. Concrete personal objectives for all NEOs, other than the CEO, are developed through collaboration between each NEO and the CEO. The CEO’s personal objectives are reviewed and approved by the Compensation Committee. The Compensation Committee maintains the ability to adjust performance objectives for extraordinary items and other items as it deems appropriate. With respect to financial measures, 100% of each NEO’s bonus related to each financial measure would generally be deemed to have been earned if the target for that financial measure is fully achieved. Each NEO’s performance is measured against his personal objectives, and such performance is used to determine the allocation of the bonus pool if, and only if, the pool is funded by the Company’s achievement of the pre-determined corporate financial objectives. For a discussion of the 2018 Annual Incentive Program, see below at “—2018 Incentive Compensation Program.” Long-Term Equity Compensation The Compensation Committee administers our 2015 Incentive Plan. Under the 2015 Incentive Plan, the Compensation Committee is authorized to grant restricted stock awards, restricted stock units, stock options and other awards that are provided for under the 2015 Incentive Plan to such of our employees and employees of our subsidiaries as the Compensation Committee determines to be eligible for awards. Awards granted to a participant are based upon a number of factors, including the recipient’s position, salary and performance as well as our overall corporate performance. The 2015 Incentive Plan is intended to provide an effective method of motivating performance from key employees, including our NEOs, and of creating an alignment of interests in participants with the interests of our stockholders. Awards are made under the 2015 Incentive Plan as long-term incentive compensation to NEOs and other key employees when the Compensation Committee believes such awards are appropriate. The Compensation Committee makes awards under the 2015 Incentive Plan both to reward performance and to motivate the recipient’s long-term performance. Historically, the majority of the equity awards made to our executive officers under the 2015 Incentive Plan have been restricted stock awards with time-based vesting conditions. As mentioned above, the Compensation Committee engaged Pearl Meyer in 2017 to assist the Committee in its review and evaluation of the compensation for the executive officers. Consequent to the Compensation Committee’s comprehensive review, we granted restricted stock awards with time-based vesting conditions to our executive officers, including our NEOs, in December 2017 and performance share units in February 2018. The performance share units were granted in February 2018 so that we could review more current perspectives on our business outlook and budgeting process when establishing revenue and operating income performance targets. These performance share unit awards could only be earned by the NEOs upon our achievement of pre-determined levels of 2018 revenue and operating income. A portion of the performance share unit awards were earned based on 2018 revenue and operating income; such awards vest in three equal annual installments. In 2016, our Compensation Committee granted stock options and restricted stock awards with share price-based vesting conditions under the 2015 Incentive Plan. The equity awards with share price-based vesting conditions granted to our NEOs in 2016 do not vest until the closing price of our Common Stock on each of the trading days during the immediately prior ninety consecutive calendar days is at least $30 or $40, as applicable, representing a significant increase in market capitalization as compared to the closing price of our Common Stock on the date of grant. Restricted stock awards and performance share unit awards issued pursuant to the 2015 Incentive Plan remain subject to forfeiture until the vesting of such shares pursuant to the terms of the applicable award. Stock options made under the 2015 Incentive Plan generally have a 10 year term and an exercise price based on the fair market value of our Common Stock on the date of grant. Shares of restricted stock, performance share units and stock options issued pursuant to the 2015 Incentive Plan may not be sold, transferred or encumbered by the employee prior to vesting (and exercise in the case of stock options). The compensation associated with these awards is expensed over the vesting period. The shares covered by restricted stock awards are considered outstanding upon issuance following the acceptance of each award for the purpose of calculating diluted earnings per common share, and holders of shares issued pursuant to restricted stock awards are entitled to vote such shares and to receive any dividends declared in respect of our Common Stock. Shares covered by performance share units are not considered outstanding until vested and shares covered by stock option awards are not considered outstanding until exercise except, in each case, for the purpose of calculating diluted earnings per common share. The holders of performance share units and stock options are not entitled to vote shares or receive any dividends declared with respect to the shares covered by such awards.
2018 Incentive Compensation Program
2018 Incentive Compensation Program Consistent with the principles discussed above, at its meetings on March 22, 2018, the Compensation Committee approved an annual incentive program for 2018. The 2018 target incentive awards for each the participating NEOs were set at 50% of their 2018 annual base salaries, except for Mr. Joshi, whose 2018 target incentive award was set at 100% of his 2018 annual base salary. The 2018 threshold and maximum annual incentive award for all NEOs were set at 50% and 150%, respectively, of the target annual incentive award. Additionally, the Compensation Committee approved the following performance objectives for the funding of the 2018 annual incentive program:
2018 Incentive Compensation Program
| • | 50% of the funding of 2018 annual incentive program bonus pool based on the achievement of an annual revenue budget; and |
2018 Incentive Compensation Program
| • | 50% of the funding of 2018 annual incentive program bonus pool based on the achievement of an annual budgeted level of non-GAAP earnings per share. |
2018 Incentive Compensation Program
In February 2019, the Compensation Committee determined that, based on 2018 Company performance, the 2018 annual incentive program bonus pool was not to be funded and therefore none of the NEOs received any payments under the 2018 annual incentive plan.
2018 Performance Equity Award
2018 Performance Equity Award At a meeting in February 2018 the Compensation Committee made performance share unit awards under the 2015 Incentive Plan to a number of employees, including the NEOs, to reflect the contributions that those individuals have made to our operations and financial condition, to provide motivation toward achieving our future strategic objectives and to further align the interests of those individuals with our stockholders. The performance share units could only vest if both performance and service-based criteria were met. Performance vesting criteria include threshold, target and maximum performance goals. For achievement of threshold, target and maximum performance goals, 50%, 100%, and 150% of target performance share units were eligible to vest, subject to service-based vesting criteria. If performance is below threshold, no performance share units would vest, and for performance between threshold and target or between target and maximum, vesting is determined on interpolation on a straight-line basis. If earned, the performance share units vest in three equal installments. The target performance share unit awards made to our NEOs in February 2018 were as follows:
2018 Performance Equity Award
| Name | Target Performance Share Units (#) | Aggregate Fair Market Value of Grants ($)(1) | | Vyomesh I. Joshi | 114,026 | 1,165,346 | | John N. McMullen | 34,208 | 349,606 | | Charles W. Hull | 22,806 | 233,077 | | Andrew M. Johnson | 27,081 | 276,768 | | Kevin P. McAlea | 34,208 | 349,606 |
2018 Performance Equity Award
| (1) The amounts represent the aggregate grant date fair value computed in accordance with ASC Topic 718 and are determined by multiplying the target number of units awarded by the closing price of our Common Stock on the date of grant. Assumptions used in the calculation of these amounts are included in Note 14 – Stock-Based Compensation to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2018. |
2018 Performance Equity Award
On March 1, 2019, following the finalization of the Company’s 2018 audited financials, the Compensation Committee determined that, based on the Company’s actual 2018 revenue and operating income, 41% of the target performance share units were earned by each NEO.
Employment Agreements and Other Agreements with NEOs
Employment Agreements and Other Agreements with NEOs In April 2016 and July 2016, Vyomesh I. Joshi and John N. McMullen joined the Company as our President and CEO and Executive Vice President and Chief Financial Officer, respectively. In connection with each of these appointments, we entered into an employment agreement under which we have agreed to certain compensation arrangements and severance benefits. With the purpose of retaining our key executive officers during a significant management transition, we entered into similar employment agreements with each of Messrs. Hull and Johnson in 2016. Mr. McAlea has an existing severance agreement with the Company. Each of these agreements was determined based on negotiations with the applicable NEO and taking into account his background and qualifications and the nature of his position. We believe that these compensation packages are appropriate in light of the intense competition for top executives in our industry and among similarly-situated companies, and that the terms of these arrangements are consistent with our executive compensation goals, including the balancing of short-term and long-term compensation to properly motivate our NEOs. Vyomesh I. Joshi Mr. Joshi’s employment agreement provides for a minimum base annual salary of $925,000 and a minimum target bonus opportunity of 100% of his base salary, with the exact amount of any such bonus to be based upon the achievement of performance goals to be determined by the Compensation Committee. The employment agreement entitles Mr. Joshi to participate in all other benefits generally available to our other executive employees, including participation in the Company’s health benefit plans and equity award programs. Pursuant to the employment agreement entered into in connection with his hiring in April 2016, Mr. Joshi was also granted the following equity awards: (1) 150,000 shares of restricted stock that vest in three equal annual installments; (2) 500,000 stock option awards, comprised half of option awards subject to $30 per share price-based vesting conditions and half of option awards subject to $40 per share price-based vesting conditions; and (3) 75,000 shares of restricted stock, 50,000 of which are subject to $30 per share price-based vesting conditions and 25,000 of which shares are subject to $40 per share price-based vesting conditions. Mr. Joshi is not guaranteed any further equity awards under his employment agreement, but is entitled to participate in our equity compensation plans generally available to our executive officers. Our employment agreement with Mr. Joshi provides for an initial two-year employment term that automatically extends for additional one-year periods unless terminated by Mr. Joshi or us upon at least 30 days’ prior written notice of intention not to renew. The agreement may also be terminated by us or Mr. Joshi for other reasons and, subject to the conditions set forth in the employment agreement, provides for certain payments and benefits in connection with certain termination events or a change of control as described under “Potential Benefits upon Termination or Change of Control” beginning on page 39 below. Mr. Joshi’s employment agreement automatically extended for an additional one-year period in April 2018. John N. McMullen Mr. McMullen’s employment agreement provides for a minimum base annual salary of $500,000 and a minimum target bonus opportunity of 50% of his base salary, with the exact amount of any such bonus to be based upon the achievement of performance goals to be determined by the Compensation Committee. The employment agreement entitles Mr. McMullen to participate in all other benefits generally available to our other executive employees, including participation in the Company’s health benefit plans and equity award programs. Pursuant to the employment agreement entered into in connection with his hiring in July 2016, Mr. McMullen was also granted the following equity awards: (1) 75,000 shares of restricted stock that vest in three equal annual installments; (2) 200,000 stock option awards, comprised half of option awards subject to $30 per share price-based vesting conditions and half of option awards subject to $40 per share price-based vesting conditions; and (3) 50,000 shares of restricted stock, half of which are subject to $30 per share price-based vesting conditions and half of which are subject to $40 per share price-based vesting conditions. Mr. McMullen is not guaranteed any further equity awards under his employment agreement, but is entitled to participate in our equity compensation plans generally available to our executive officers. Our employment agreement with Mr. McMullen provides for an initial two-year employment term that automatically extends for additional one-year periods unless terminated by Mr. McMullen or us upon at least 30 days’ prior written notice of intention not to renew. The agreement may also be terminated by us or Mr. McMullen for other reasons and, subject to the conditions set forth in the employment agreement, provides for certain payments and benefits in connection with certain termination events as described under “Potential Benefits upon Termination or Change of Control” beginning on page 39 below. Mr. McMullen’s employment agreement automatically extended for an additional one-year period in July 2018. On March 13, 2019, Mr. McMullen notified us of his intention to retire effective December 31, 2019 or, if earlier, the date on which his successor is hired. In connection with his decision to retire, we entered into a transition agreement with Mr. McMullen which provides that he will serve as a non-employee consultant for a period of 12 months following his retirement. Charles W. Hull Mr. Hull’s employment agreement provides for a minimum base annual salary of $389,000. Mr. Hull is also entitled to receive cash performance bonuses, with the exact amount of any such bonus to be based upon the achievement of performance goals to be determined by the Compensation Committee. The employment agreement entitles Mr. Hull to participate in all other benefits generally available to our other executive employees, including participation in the Company’s health benefit plans and equity award programs. Our employment agreement with Mr. Hull provides for an initial two-year employment term that automatically extends for additional one-year periods unless terminated by Mr. Hull or us upon at least 30 days’ prior written notice of intention not to renew. The agreement may also be terminated by us or Mr. Hull for other reasons and, subject to the conditions set forth in the employment agreement, provides for certain payments and benefits in connection with certain termination events as described under “Potential Benefits upon Termination or Change of Control” beginning on page 39 below. Mr. Hull’s employment agreement automatically extended for an additional one-year period in June 2018. Andrew M. Johnson Mr. Johnson’s employment agreement provides for a minimum base annual salary of $333,000. Mr. Johnson is also entitled to receive cash performance bonuses, with the exact amount of any such bonus to be based upon the achievement of performance goals to be determined by the Compensation Committee. The employment agreement entitles Mr. Johnson to participate in all other benefits generally available to our other executive employees, including participation in the Company’s health benefit plans and equity award programs
Employment Agreements and Other Agreements with NEOs
Our employment agreement with Mr. Johnson provides for an initial two-year employment term that automatically extends for additional one-year periods unless terminated by Mr. Johnson or us upon at least 30 days’ prior written notice of intention not to renew. The agreement may also be terminated by us or Mr. Johnson for other reasons and, subject to the conditions set forth in the employment agreement, provides for certain payments and benefits in connection with certain termination events as described under “Potential Benefits upon Termination or Change of Control” beginning on page 39 below. Mr. Johnson’s employment agreement automatically extended for an additional one-year period in June 2018. Kevin McAlea The Company and Mr. McAlea are parties to a severance arrangement pursuant to which Mr. McAlea would become entitled to severance payments equal to nine months of his then current salary if his employment is terminated other than for cause.
Change of Control Severance Policy
Change of Control Severance Policy On February 22, 2018, the Compensation Committee adopted the Company’s Change of Control Severance Policy (the “COC Severance Policy”). The COC Severance Policy is intended to provide eligible officers with reasonable financial security in their employment and position with the Company, without distraction from uncertainties regarding their employment created by the possibility of a potential or actual change of control. The COC Severance Policy applies to our Chief Executive Officer and all Executive Vice Presidents and Senior Vice Presidents (each, a “Participant”), which includes all of our NEOs. For a more detailed discussion of the benefits payable to our NEOs under the COC Severance Policy, see “Potential Benefits upon Termination or Change of Control” beginning on page 39 below.
Summary Compensation Table
Summary Compensation Table The following table presents information regarding the compensation of each of the NEOs for services rendered during fiscal 2018, 2017 and 2016.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus(1) ($) | Stock Awards(2) ($) | Option Awards(3) ($) | Non-Equity Incentive Plan Compensation(4) ($) | All Other Compensation(5) ($) | Total ($) | | Vyomesh I. Joshi | 2018 | 953,000 | — | 1,165,346 | — | — | 4,269 | 2,122,615 | | President and Chief Executive | 2017 | 925,000 | — | 1,000,008 | — | — | 8,100 | 1,933,108 | | Officer | 2016 | 661,730 | — | 3,402,000 | 3,842,500 | 277,753 | — | 8,183,984 | | John N. McMullen | 2018 | 515,000 | — | 349,606 | — | — | 4,125 | 868,731 | | Executive Vice President and | 2017 | 500,000 | — | 300,004 | — | — | 7,964 | 807,968 | | Chief Financial Officer | 2016 | 232,692 | — | 1,676,250 | 1,552,000 | 50,137 | — | 3,511,079 | | Charles W. Hull | 2018 | 401,000 | — | 233,077 | — | — | 4,340 | 638,417 | | Executive Vice President and | 2017 | 389,000 | — | 200,009 | — | — | 7,002 | 596,011 | | Chief Technology Officer | 2016 | 386,727 | — | 1,192,500 | 1,228,000 | 77,800 | — | 2,885,027 | | Andrew M. Johnson | 2018 | 346,000 | — | 276,768 | — | — | 78,677 | 701,445 | | Executive Vice President, Chief | 2017 | 333,000 | — | 237,500 | — | — | 42,493 | 612,993 | | Legal Officer and Secretary | 2016 | 329,500 | 102,967 | 1,192,500 | 1,228,000 | 66,600 | — | 2,919,567 | | Kevin P. McAlea | 2018 | 401,000 | — | 349,606 | — | — | 7,234 | 757,840 | | Executive Vice President and | 2017 | 389,000 | — | 300,004 | — | — | 8,100 | 697,104 | | General Manager, Metals & Healthcare | 2016 | 385,231 | — | 1,192,500 | 1,228,000 | 77,800 | 37,966 | 2,921,496 |
Summary Compensation Table
| (1) The amounts are separate and distinct from any awards with respect to Non-Equity Incentive Plan Compensation. For Mr. Johnson, the bonus amount in 2016 is a monthly bonus he received for services through April 2016 in connection with the performance of his duties as Interim President and CEO. |
Summary Compensation Table
| (2) The amounts represent the aggregate grant date fair value computed in accordance with ASC Topic 718 of (i) performance share unit awards granted in fiscal year 2018, of which 41% of the target amount were determined earned on March 1, 2019, (ii) restricted stock awards with time-based vesting conditions granted in each of fiscal years 2017 and 2016 and (iii) restricted stock awards with share price-based vesting conditions granted in fiscal year 2016. The value of the restricted stock awards is determined by multiplying the number of shares awarded by the closing price of our Common Stock on the date of grant. With respect to the restricted stock awards with share price-based vesting conditions granted in 2016, the grant date fair value assumes that both the $30 per share and $40 per share price-based vesting conditions have been met. With respect to performance share unit awards granted in fiscal year 2018, the highest level of performance conditions would have resulted in achievement of 150% of the target amounts. These amounts for each NEOs are as follows: Mr. Joshi, $1,748,019; Mr. McMullen, $524,409; Mr. Johnson, $415,152; Mr. Hull, $349,616; and Mr. McAlea, $524,409. See “-2018 Performance Equity Awards” above. Assumptions used in the calculation of these amounts are included in Note 14 – Stock-Based Compensation to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2018. |
Summary Compensation Table
| (3) The amounts represent the aggregate grant date fair value computed in accordance with ASC Topic 718 of stock options granted to our NEOs in 2016. Assumptions used in the calculation of these amounts are included in Note 14 – Stock-Based Compensation to our consolidated financial statements, which are |
Summary Compensation Table
| included in our Annual Report on Form 10-K for the year ended December 31, 2018. All of the stock option awards granted in 2016 are subject to $30 per share or $40 per share price-based vesting conditions. |
Summary Compensation Table
| (4) The amounts represent the amounts awarded to each NEO under the Company’s annual incentive compensation program for the year concerned. |
Summary Compensation Table
| (5) The amounts represent matching contributions made by the Company in accordance with the terms of the Company’s 401(k) Plan. Additionally, Mr. Johnson’s other compensation in 2018 and 2017 includes $70,577 and $34,393, respectively in tuition and travel reimbursements related to his pursuit of an executive MBA. Mr. McAlea’s other compensation in 2016 includes $37,966 in relocation benefit payments, which includes benefits grossed up by the Company by $13,167. |
Grants of Plan-Based Awards in 2018
Grants of Plan-Based Awards in 2018 The following table sets forth information with respect to plan-based awards granted in 2018, including the amounts of target incentive awards established for each of the NEOs under the 2018 incentive compensation program that the Compensation Committee established at its meetings on March 22, 2018 and the performance share unit awards that the Compensation Committee granted, subject to 2018 revenue and operating income performance targets, under the 2015 Incentive Plan at its meeting on February 15, 2018. The threshold, base target and maximum amounts represent the incentive awards and the performance share unit awards that could have been awarded assuming achievement of the pre-determined financial and/or individual performance objectives for 2018. No annual incentive awards were actually earned by the NEOs with respect to 2018. See “—2018 Incentive Compensation Program” above. In March 2019, following the finalization of the Company’s 2018 audited financial statements, the Compensation Committee determined that, based on the Company’s 2018 revenue and operating income, 41% of the target performance share units were earned by each NEO. See “—2018 Performance Equity Awards” above.
Grants of Plan-Based Awards in 2018
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | Estimated Future Payments Under Equity Incentive Plan Awards(1) | | | | | | | | Threshold ($) | Base Target ($) | Maximum ($) | Threshold (#) | Base Target (#) | Maximum (#) | Grant Date Fair Value of Stock and Option Awards(2) ($) | | Vyomesh I. Joshi | 2018 Incentive Compensation Program | 3/22/2018 | 476,500 | 953,000 | 1,429,500 | | | | | | | 2015 Incentive Plan | 2/15/18 | | | | 57,013 | 114,026 | 171,039 | 1,165,346 | | John N. McMullen | 2018 Incentive Compensation Program | 3/22/2018 | 128,750 | 257,500 | 386,250 | | | | | | | 2015 Incentive Plan | 2/15/18 | | | | 17,104 | 34,208 | 51,312 | 349,606 | | Charles W. Hull | 2018 Incentive Compensation Program | 3/22/2018 | 100,250 | 200,500 | 300,750 | | | | | | | 2015 Incentive Plan | 2/15/18 | | | | 11,403 | 22,806 | 34,209 | 233,077 | | Andrew M. Johnson | 2018 Incentive Compensation Program | 3/22/2018 | 86,500 | 173,000 | 259,500 | | | | | | | 2015 Incentive Plan | 2/15/18 | | | | 13,541 | 27,081 | 40,622 | 276,768 |
Grants of Plan-Based Awards in 2018
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | Estimated Future Payments Under Equity Incentive Plan Awards(1) | | | | | | | | Threshold ($) | Base Target ($) | Maximum ($) | Threshold (#) | Base Target (#) | Maximum (#) | Grant Date Fair Value of Stock and Option Awards(2) ($) | | Kevin P. McAlea | 2018 Incentive Compensation Program | 3/22/2018 | 100,250 | 200,500 | 300,750 | | | | | | | 2015 Incentive Plan | 2/15/18 | | | | 17,104 | 34,208 | 51,312 | 349,606 |
Grants of Plan-Based Awards in 2018
| (1) The amounts in this column represent performance share units that vest based on achievement of certain 2018 performance measures in three equal installments in February 2019, February 2020 and February 2021. As previously noted, it was determined on March 1, 2019 that only 41% of the target 2018 performance share units were earned. |
Grants of Plan-Based Awards in 2018
| (2) The amounts included in the “Grant Date Fair Value of Stock and Option Awards” column represent the aggregate grant date fair value computed in accordance with ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 14 – Stock-Based Compensation to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2018. |
Outstanding Equity Awards at Year-End 2018
Outstanding Equity Awards at Year-End 2018 The following table presents information with respect to equity awards made to each of NEOs that were outstanding on December 31, 2018.
Outstanding Equity Awards at Year-End 2018
| | Option Awards | | | | Stock Awards | | | | | Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options(1) (#) | Option Exercise Price ($) | 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(2) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(3) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(2) ($) | | Vyomesh I. Joshi | — | 500,000 | 15.12 | 4/1/2026 | 50,000(4) | 508,500 | 75,000 | 762,750 | | | | | | | 76,017(5) | 773,093 | | | | John N. McMullen | — | 200,000 | 13.41 | 7/1/2026 | 25,000(6) | 254,250 | 50,000 | 508,500 | | | | | | | 22,805(5) | 231,927 | | | | Charles W. Hull | — | 160,000 | 13.25 | 7/26/2026 | 16,666(7) | 169,493 | 40,000 | 406,800 | | | | | | | 15,204(5) | 154,625 | | | | Andrew M. Johnson | — | 160,000 | 13.25 | 7/26/2026 | 16,666(7) | 169,493 | 40,000 | 406,800 | | | | | | | 18,054(5) | 183,609 | | | | Kevin P. McAlea | — | 160,000 | 13.25 | 7/26/2026 | 16,666(7) | 169,493 | 40,000 | 406,800 | | | | | | | 22,805(5) | 231,927 | | |
Outstanding Equity Awards at Year-End 2018
| (1) Option awards in this column vest upon the satisfaction of certain share price performance conditions. |
Outstanding Equity Awards at Year-End 2018
| (2) Value calculated based on the $10.17 closing price of our stock on December 31, 2018. |
Outstanding Equity Awards at Year-End 2018
| (3) Restricted stock awards in this column vest upon the satisfaction of certain share price and financial performance conditions. |
Outstanding Equity Awards at Year-End 2018
| (4) These restricted stock awards were granted on April 1, 2016 and vest in equal installments on the first, second and third anniversaries of the grant date. |
Outstanding Equity Awards at Year-End 2018
| (5) These restricted stock awards were granted on December 4, 2017 and vest in equal installments on August 15 of 2018, 2019 and 2020. |
Outstanding Equity Awards at Year-End 2018
| (6) These restricted stock awards were granted on July 1, 2016 and vest in equal installments on the first, second and third anniversaries of the grant date. |
Outstanding Equity Awards at Year-End 2018
| (7) These restricted stock awards were granted on July 26, 2016 and vest in equal installments on the first, second and third anniversaries of the grant date. |
Option Exercises and Stock Vested in 2018
Option Exercises and Stock Vested in 2018 No options were exercised by our NEOs in 2018. Shares of restricted Common Stock held by the NEOs vested as follows during 2018:
Option Exercises and Stock Vested in 2018
| | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(1) ($) | | Vyomesh I. Joshi | 88,009 | 1,274,230 | | John N. McMullen | 36,403 | 567,425 | | Charles W. Hull | 40,935 | 573,946 | | Andrew M. Johnson | 102,360 | 1,234,785 | | Kevin P. McAlea | 48,070 | 687,879 |
Option Exercises and Stock Vested in 2018
| (1) Amounts reflect the aggregate market value of our Common Stock based on the closing price of our Common Stock on the applicable vesting date. |
Potential Benefits upon Termination or Change of Control
Potential Benefits upon Termination or Change of Control
CEO Pay Ratio
CEO Pay Ratio As required by applicable SEC rules, we are providing the following information about the relationship of the annual total compensation of our median employee and the annual total compensation of Vyomesh Joshi, our CEO, as of the end of 2018, our last completed fiscal year. For 2018:
CEO Pay Ratio
| ● | the annual total compensation of our CEO, as reported in the Summary Compensation Table included elsewhere in this Proxy Statement, was $2,122,615; and |
CEO Pay Ratio
| ● | the annual total compensation of our median employee (excluding our CEO) was $56,764. |
CEO Pay Ratio
| Based on this information, for 2018 the ratio of the annual total compensation of Mr. Joshi, our CEO, to the annual total compensation of our median employee was 37 to 1. |
CEO Pay Ratio
We took the following steps to identify our median employee, as well as to determine the annual total compensation of our median employee and our CEO.
CEO Pay Ratio
| 1. | As permitted by SEC rules, we have elected to use the same median employee in determining our 2018 CEO pay ratio calculation as was used in determining our 2017 CEO pay ratio calculation. There has been no major change in our employee population or our employee compensation arrangement since the median employee was identified that we believe would significantly impact our pay ratio disclosure. |
CEO Pay Ratio
| 2. | We determined that, as of December 31, 2017, our employee population consisted of approximately 2,923 individuals. This population consisted of our full-time, part-time, and temporary employees employed with us as of the determination date. |
CEO Pay Ratio
| 3. | To identify the “median employee” from our employee population, we used actual base salaries or wages paid, any overtime or commissions paid and any cash bonuses paid during 2017. For permanent employees who did not work the entire 12-month period, we annualized the amounts actually paid with the exception of cash bonuses, which were not annualized. |
CEO Pay Ratio
| 4. | For the annual total compensation of our median employee, we identified and calculated the elements of that employee’s compensation for the 2018 fiscal year in accordance with the requirements of Item 402(c)(2)(x), which are the same requirements we used to determine the annual total compensation of our CEO. |
CEO Pay Ratio
| 5. | For the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2018 Summary Compensation Table included in this Proxy Statement. |
CEO Pay Ratio
The CEO pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on the methodologies and assumptions described above. SEC rules for identifying the median employee and determining the CEO pay ratio permit companies to employ a wide range of methodologies, estimates and assumptions. As a result, the CEO pay ratios reported by other companies, which may have employed other permitted methodologies or assumptions and which may have a significantly different work force structure from ours, are likely not comparable to our CEO pay ratio.