DEF 14A of Smart Sand, Inc.
Filed Apr 24, 2024 · FY20230001529628-24-000095
PROPOSAL NO. 1: ELECTION OF DIRECTORS
PROPOSAL NO. 1: ELECTION OF DIRECTORS Our board of directors is presently comprised of five members, who are divided into three classes, designated as Class I, Class II and Class III. One class of directors is elected by the stockholders at each annual meeting to serve a three-year term. Class I directors consist of Sharon Spurlin and Timothy J. Pawlenty; Class II directors consist of Andrew Speaker and Frank Porcelli; and our Class III director is Charles E. Young. Class II directors standing for re-election at the Annual Meeting are Andrew Speaker and Frank Porcelli. Class I and Class III directors will stand for election at the 2025 and 2026 annual meetings of stockholders, respectively. Pursuant to the stockholders’ agreement by and among Keystone Cranberry, which is substantially owned by Charles E. Young, our Chief Executive Officer, and Clearlake Capital Partners II (Master), L.P. (“Clearlake”), as described in more detail under the section entitled “Certain Relationships and Transactions with Related Persons ”, we must include certain director nominees for election designated by Clearlake and Keystone Cranberry in the event that either Clearlake or Keystone Cranberry own in excess of 10% of our outstanding stock, as applicable. In the event any board member nominated by such stockholder party resigns or is unable to serve, the stockholder party that nominated such board member will be entitled to nominate a replacement director. After giving effect to the recent acquisition by the Company of all of Clearlake’s shares of the Company’s common stock, Clearlake currently does not have the right to designate any director nominees. Our nominating and corporate governance committee recommended Andrew Speaker and Frank Porcelli as director nominees to our board of directors. Each of the nominees for election to Class II is currently a director of the Company. If elected at the Annual Meeting, each of the nominees would serve for three years and until his or her successor is duly elected and qualified, or until such director’s earlier death, resignation or removal. The nominees have consented to being nominated and have expressed their intention to serve if elected. We believe that the nominees possess the professional and personal qualifications necessary for board service, and have highlighted particularly noteworthy attributes for the nominee in their biographies below. We have no reason to believe that the nominees will be unable to serve if elected to office and, to our knowledge, the nominees intend to serve the entire term for which election is sought. In the event any of the nominees should become unable to serve, or for good cause will not serve, as a director, it is intended that votes will be cast for a substitute nominee designated by the board of directors or the board of directors may elect to reduce its size. Only the nominees or substitute nominees designated by the board will be eligible to stand for election as directors at the meeting. The names of the nominees for election as Class II directors at the Annual Meeting and of the incumbent Class I and Class III directors, and certain information about them, including their ages as of April 15, 2024, are included below.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
| Nominees | Class | Age | Position | Year Appointed | Term Expiration | Expiration of Term for Which Nominated | | Andrew Speaker | II | 61 | Chairman of the Board | 2011 | 2024 | 2027 | | Frank Porcelli (1) | II | 62 | Director | 2021 | 2024 | 2027 | | Continuing Directors | | | | | | | | Charles E. Young | III | 56 | Chief Executive Officer and Director | 2011 | 2025 | | | Sharon S. Spurlin (2) | I | 59 | Director | 2015 | 2026 | | | Timothy J. Pawlenty (3) | I | 63 | Director | 2012 | 2026 | |
PROPOSAL NO. 1: ELECTION OF DIRECTORS
(1)Chairperson of the compensation committee and member of the audit committee and nominating and corporate governance committee (2)Chairperson of the audit committee and member of the compensation committee (3)Chairperson of the nominating and corporate governance committee and member of the audit committee and compensation committee
Nominees for Election as Class II Directors
Nominees for Election as Class II Directors Andrew Speaker was appointed as a member of the board of directors in September 2011, was appointed Co-Chairman of the board of directors in June 2014, and recently was appointed as Chairman of the board on January 1, 2024. Mr. Speaker served as our Chief Executive Officer from April 2011 to June 2014. Since June 2014, Mr. Speaker has continued to be employed by us as a Senior Advisor on Special Projects. Prior to joining Smart Sand, Mr. Speaker was the President and Chief Executive Officer of Mercer Insurance Group, Inc. and its subsidiaries from 2000 to 2011. At Mercer, Mr. Speaker held various offices including Chief Financial Officer and Chief Operating Officer. From June 2015 to January 2019, Mr. Speaker has also served as a director of a privately-held company. Mr. Speaker received a Bachelor of Science in Accounting from LaSalle University. We believe that Mr. Speaker’s industry experience and deep knowledge of our business make him well qualified to serve on our board of directors. Frank Porcelli was appointed as a member of the board of directors in February 2021. Mr. Porcelli has over thirty years of experience in various finance and wealth management roles. He is currently a partner in Convergency Partners, a financial advisory and wealth management firm that he co-founded. Prior to this, from 2006 to 2020, he had various roles with Blackrock, Inc., including as a Managing Director and the Chairman of BlackRock's US Wealth Advisory business. Before joining Blackrock, he served in various leadership positions at Merrill Lynch, Putnam Investments, Goldman Sachs and Smith Barney. Mr. Porcelli earned a Bachelor of Arts degree in Accounting from Pace University. We believe that Mr. Porcelli's extensive financial experience makes him well qualified to serve on our board of directors. This proposal requires the affirmative approval of a plurality of the shares entitled to vote on this proposal and present, either virtually or by proxy, at the Annual Meeting. This means that the two nominees receiving the highest number of affirmative “FOR” votes will be elected as directors. Votes withheld and broker non-votes are not considered to be votes cast and, accordingly, will have no effect on the outcome of the vote on this proposal.
Nominees for Election as Class II Directors
| The board of directors recommends a vote FOR each of the Class II director nominees. |
Continuing Directors
Continuing Directors Charles E. Young was named Chief Executive Officer in July 2014. Mr. Young has also served as a member of the board of directors since September 2011. Mr. Young founded Smart Sand, LLC (our predecessor) and served as its President from November 2009 to August 2011. Mr. Young served as our President and Secretary from September 2011 to July 2014. Mr. Young has over 25 years of executive and entrepreneurial experience in the high-technology, telecommunications and renewable energy industries. He previously served as the President and Founder of Premier Building Systems, a construction, solar, geothermal and energy audit company in Pennsylvania and New Jersey from 2006 to 2011. Mr. Young serves as a director for Gravity Oilfield Services, Inc., a privately-held company. Mr. Young received a Bachelor of Arts in Political Science from Miami University. Mr. Young is the brother of William John Young, our Chief Operating Officer, and James D. Young, our Executive Vice President, General Counsel and Secretary. We believe that Mr. Young’s industry experience and deep knowledge of our business make him well suited to serve as our Chief Executive Officer and on our board of directors. Sharon Spurlin was appointed as a member of our board of directors in February 2015. Ms. Spurlin is a finance executive with more than 25 years of experience leading various finance functions. Ms. Spurlin currently is the Senior Vice President and Treasurer of Plains All American Pipeline, L.P. (“PAA”) and is responsible for debt capital markets, financial planning activities, customer credit functions, insurance risk management, foreign exchange and interest rate management activities and coordination of banking transactions and lending arrangements. Prior to joining PAA in October 2014, Ms. Spurlin was Senior Vice President and Chief Financial Officer of PetroLogistics LP (“PetroLogistics”) from 2012 to 2014 where she held a lead role in PetroLogistics’ initial public offering as a master limited partnership. In addition, Ms. Spurlin held various positions with other privately-owned PetroLogistics entities from 2009 to 2014. Ms. Spurlin was also elected to the board of AdvanSix Inc. in October 2016 in connection with its spin-off from Honeywell International Inc. We believe that Ms. Spurlin’s industry experience, financial expertise and deep knowledge of our business make her well qualified to serve on our board of directors. Timothy J. Pawlenty was appointed as a member of the board of directors in June 2012. Since February 2019, he has been a member of the Executive Advisory Council for New Mountain Capital, L.L.C., a private equity firm. From November 2012 to March 2018, Mr. Pawlenty served as President and Chief Executive Officer of Financial Services Roundtable, a leading advocacy organization for America’s financial services industry. Mr. Pawlenty’s previous experience includes serving as Governor of the State of Minnesota for two terms from 2003 to 2011. During his tenure as Governor, Mr. Pawlenty was responsible for overseeing a $60 billion biennial budget and 30,000 employees and worked closely with state agencies including those dealing with natural resource and transportation issues. Mr. Pawlenty previously served as a director of Digital River, Inc., a company that provides global e-commerce solutions. Mr. Pawlenty served as a member of Digital River’s Audit Committee, Compensation Committee and Nominating and Governance Committee. Mr. Pawlenty also previously served as a Director of ConvergeOne Holdings, Inc., a company that provides IT services. Mr. Pawlenty served as a member of ConvergeOne’s Audit Committee and Governance Committee. Mr. Pawlenty has also served as a director of several privately- held companies. Mr. Pawlenty received a degree in Political Science from University of Minnesota. He also received his law degree from the University of Minnesota. We believe Mr. Pawlenty’s knowledge of our business as well as his legal, regulatory and enterprise oversight experience make him well qualified to serve on our board of directors.
Considerations in Evaluating Director Nominees
Considerations in Evaluating Director Nominees Our nominating and corporate governance committee uses a variety of methods for identifying and evaluating director nominees. In its evaluation of director candidates, our nominating and corporate governance committee may consider, among other things, the current size and composition of our board of directors and the needs of our board of directors and the respective committees of our board of directors. Some of the qualifications that our nominating and corporate governance committee may consider include, without limitation, issues of character, integrity, judgment, diversity of experience, independence, area of expertise, corporate experience, length of service, leadership skills, potential conflicts of interest, and other commitments. Director candidates must have sufficient time available in the judgment of our nominating and corporate governance committee to perform all board of director and committee responsibilities. Notwithstanding the foregoing, we are legally required pursuant to a stockholders agreement discussed under “Certain Relationships and Transactions with Related Persons” to provide Keystone Cranberry with the ability to nominate directors, the selection and nomination of which is not subject to the nominating and corporate governance committee’s review and recommendation process.
Summary Compensation Table
Summary Compensation Table The following table sets forth certain information with respect to the compensation paid to our NEOs for the years ended December 31, 2023 and 2022.
Summary Compensation Table
| Name and principal position | | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | All other Compensation ($) | Total ($) | | Charles E. Young | | 2023 | $567,403 | $645,421(3) | $315,003 | $47,385(4) | $1,575,212 | | | Chief Executive Officer | 2022 | $525,000 | $208,484 | $706,999 | $40,349(5) | $1,480,832 | | Lee E. Beckelman | | 2023 | $409,692 | $258,106(6) | $180,000 | $30,433(7) | $878,231 | | | Chief Financial Officer | 2022 | $400,000 | $85,769 | $404,001 | $38,132(8) | $927,902 | | William John Young | | 2023 | $389,077 | $207,942(9) | $180,000 | $19,118(10) | $796,137 | | | Chief Operating Officer | 2022 | $360,000 | $77,192 | $404,001 | $16,305(11) | $857,498 |
Summary Compensation Table
(1)Amounts shown represent awards paid under our annual bonus plan as determined by the compensation committee. (2)Represents the grant date fair value of restricted stock awards granted, which is computed in accordance with FASB ASC 718. For performance-vesting restricted stock awards, the amount is based on the anticipated probable outcome with respect to attainment of the performance conditions, which is target. If the amounts shown with respect to performance vesting awards were based on the maximum performance level, the amounts in the table for 2023 would be as follows: Mr. Charles E. Young: $460,573; Mr. Beckelman: $263,181; and Mr. William John Young: $263,181. (3)Amount includes $279,634 earned for 2023 and paid in 2024, which amounts were subject to forfeiture if Mr. Young was not employed by the Company on the payment date. (4)Amount shown represents costs associated with providing Mr. Young use of a Company-owned automobile ($3,754), country club membership dues ($28,431) and employer contributions made under our 401(k) Plan ($13,200). (5)Amount shown represents costs associated with providing Mr. Young use of a Company-owned automobile ($4,016), country club membership dues ($29,829) and employer contributions made under our 401(k) Plan ($6,504). (6)Amount includes $132,623 earned for 2023 and paid in 2024, which amounts were subject to forfeiture if Mr. Beckelman was not employed by the Company on the payment date. (7)Amount shown represents costs associated with providing Mr. Beckelman with apartment reimbursement ($15,233) and employer contributions made under our 401(k) Plan ($13,200). (8)Amount shown represents costs associated with providing Mr. Beckelman with apartment reimbursement ($25,932) and employer contributions made under our 401(k) Plan ($12,200). (9)Amount includes $126,485 earned for 2023 and paid in 2024, which amounts were subject to forfeiture if Mr. Young was not employed by the Company on the payment date. (10)Amount shown represents costs associated with providing Mr. Young use of a Company-owned automobile ($3,918) and employer contributions made under our 401(k) Plan ($13,200). (11)Amount shown represents costs associated with providing Mr. Young use of a Company-owned automobile ($4,105) and employer contributions made under our 401(k) Plan ($12,200). ____________________
Outstanding Equity Awards at December 31, 2023
Outstanding Equity Awards at December 31, 2023 The following table sets forth the outstanding equity awards held by our NEOs as of December 31, 2023.
Outstanding Equity Awards at December 31, 2023
| Name | Number of shares that have not vested (#) | Market value of shares that have not vested ($)(4) | Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) | Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)(4) | | Charles E. Young | 259,802(1) | $501,418 | 376,406(5) | $726,464 | | Lee E. Beckelman | 148,457(2) | $286,522 | 215,091(6) | $415,126 | | William John Young | 148,457(3) | $286,522 | 215,091(7) | $415,126 |
Outstanding Equity Awards at December 31, 2023
(1)Consists of: (i) 92,756 restricted shares that vest in equal installments on each of July 30, 2024 and 2025; (ii) 71,591 restricted shares that vest in equal installments on each of June 7, 2024, 2025 and 2026; and (iii) 95,455 restricted shares that vest in equal installments on each of March 17, 2024, 2025, 2026 and 2027. All of the foregoing are subject to Mr. Young’s continued employment on each applicable vesting date. (2)Consists of: (i) 53,003 restricted shares that vest in equal annual installments on each of July 30, 2024 and 2025; (ii) 40,909 restricted shares that vest in equal annual installments on each of June 7, 2024, 2025 and 2026; and (iii) 54,545 restricted shares that vest in equal installments on each of March 17, 2024, 2025, 2026 and 2027. All of the foregoing are subject to Mr. Beckelman’s continued employment on each applicable vesting date. (3)Consists of: (i) 53,003 restricted shares that vest in equal annual installments on each of July 30, 2024 and 2025; (ii) 40,909 restricted shares that vest in equal annual installments on each of June 7, 2024, 2025 and 2026; and (iii) 54,545 restricted shares that vest in equal installments on each of March 17, 2024, 2025, 2026 and 2027. All of the foregoing are subject to Mr. Young’s continued employment on each applicable vesting date. (4)Amount shown is based on the closing price of our common stock on December 31, 2023 of $1.93 per share. (5)Consists of restricted shares that vest based on the achievement of certain company performance conditions through December 31, 2024 and 2025. All of the foregoing are subject to Mr. Young’s continued employment on the applicable vesting date. (6)Consists of restricted shares that vest based on the achievement of certain company performance conditions through December 31, 2024 and 2025. All of the foregoing are subject to Mr. Beckelman’s continued employment on the applicable vesting date. (7)Consists of restricted shares that vest based on the achievement of certain company performance conditions through December 31, 2024 and 2025. All of the foregoing are subject to Mr. Young’s continued employment on the applicable vesting date. ____________________
Pay Versus Performance Table
Pay Versus Performance Table The following table is a demonstration of the relationship between the compensation that the Company has paid to its CEO, Charles Young, the compensation paid to the other named executive officers, and certain financial metrics, for the fiscal years 2023, 2022 and 2021.
Pay Versus Performance Table
| Year | Summary Compensation Table Total for PEO ($) | Compensation Actually Paid to PEO ($) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers ($) | Average Compensation Actually Paid to Non-PEO Named Executive Officers ($) | Value of Initial Fixed $100 Investment on January 1, 2021 Based on Total Shareholder Return ($) | Net Income ($) | | 2023 | $1,585,577 | $1,751,558 | $820,488 | $915,335 | $100 | $4,649,000 | | 2022 | $1,482,832 | $894,576 | $892,700 | $557,806 | $92 | $(703,000) | | 2021 | $1,758,967 | $1,371,349 | $1,143,489 | $960,124 | $93 | $(50,674,000) |
Pay Versus Performance Table
In both 2023 and 2022, Charles Young was our Chief Executive Officer and our remaining NEOs consisted of Lee Beckelman and William John Young. In 2021, Charles Young was our Chief Executive Officer and our remaining NEOs consisted of Lee Beckelman and James Young. The following table sets forth the adjustments made during each year represented in the PVP Table to arrive at compensation actually paid to our PEO.
Pay Versus Performance Table
| Adjustments to Determine Compensation Actually Paid for PEO | 2023 | 2022 | 2021 | | Deduction for amounts reported under the “Stock Awards” column in the Summary Compensation Table. | $(315,003) | $(706,999) | $(1,080,869) | | Increase for fair value of Awards granted during the year that remain unvested as of year-end | 368,458 | 333,772 | 662,250 | | Increase for change in fair value from prior year-end to vesting date of Awards that vested during the year | 761 | 105,860 | 70,229 | | Deduction/increase for change in fair value from prior year-end to current year-end of Awards granted prior to year that remain unvested as of year-end | 111,765 | (56,828) | 13,524 | | Deduction of fair value of Awards granted prior to year that were forfeited during the year. | — | (264,061) | (52,752) | | Total adjustments | $165,981 | $(588,256) | $(387,618) |
Pay Versus Performance Table
The following table sets forth the adjustments made during each year represented in the PVP Table to arrive at the average compensation actually paid to our non-PEO named executive officers.
Pay Versus Performance Table
| Adjustments to Determine Compensation Actually Paid for non-PEO Named Executive Officers | 2023 | 2022 | 2021 | | Deduction for amounts reported under the “Stock Awards” column in the Summary Compensation Table. | $(180,000) | $(404,001) | $(514,701) | | Increase for fair value of Awards granted during the year that remain unvested as of year-end | 210,546 | 190,727 | 315,358 | | Increase for change in fair value from prior year-end to vesting date of Awards that vested during the year | 435 | 61,746 | 35,889 | | Deduction/increase for change in fair value from prior year-end to current year-end of Awards granted prior to year that remain unvested as of year-end | 63,866 | (32,474) | 6,465 | | Deduction of fair value of Awards granted prior to year that were forfeited during the year. | — | (150,892) | (26,376) | | Total adjustments | $94,847 | $(334,894) | $(183,365) |
Compensation Actually Paid Versus Company Performance
Compensation Actually Paid Versus Company Performance The following charts provide a visual depiction of the relationships between “compensation actually paid” to our PEOs, and the average for our non-PEO NEOs, to aspects of Smart Sand’s financial performance. As noted above, our PEO in 2021, 2022 and 2023 was Charles Young. As described in greater detail above, the Company’s executive compensation program reflects a pay-for-performance philosophy. The Company generally seeks to incentivize long-term performance, and therefore does not specifically align the Company’s performance measures with compensation that is actually paid (as computed in accordance with SEC rules) for a particular year. In accordance with SEC rules, the Company is providing the following graphs to illustrate the relationships between information presented in the Pay Versus Performance table. Net Income on a GAAP basis for 2021 included a non-cash bad debt expense of $19.6 million related to accounts receivable that were previously under litigation.
Director Compensation
Director Compensation The table below sets forth the compensation paid to our non-employee directors for their service on our board of directors during 2023. Charles Young is not compensated separately for his service as a director, and his compensation is discussed earlier in this proxy statement.
Director Compensation
| Name | Fees earned or paid in cash ($) | Stock awards ($)(1) | All other compensation ($) | Total ($) | | Frank Porcelli | $60,000 | $29,782 | $— | $89,782 | | Timothy J. Pawlenty | $72,500 | $29,782 | $— | $102,282 | | Sharon Spurlin | $72,500 | $29,782 | $— | $102,282 | | José E. Feliciano(2) | $112,500 | $29,782 | $— | $142,282 | | Andrew Speaker (3) | $100,000 | $29,782 | $4,000 | $133,782 |
Director Compensation
(1)Amounts shown represent the grant date fair value of restricted stock awards granted, which is computed in accordance with FASB ASC 718. Directors were each granted 16,364 shares. The granted shares vest on August 23, 2024. (2)Mr. Feliciano resigned as a member of our board of directors and compensation committee on December 31, 2023. (3)Mr. Speaker is also an employee of the Company and holds the position of Senior Advisor on Special Projects. We paid Mr. Speaker cash compensation of $100,000 and a 401(k) contribution of $4,000 in 2023 in connection with his employment. In November 2016, we adopted a director compensation policy pursuant to which directors who are not officers, employees or paid consultants or advisors of us, may receive a combination of cash and equity-based awards under our 2016 Plan as compensation for their services on our board of directors. Such directors will also receive reimbursement for out-of-pocket expenses associated with attending board or committee meetings and director and officer liability insurance coverage. Other than with respect to Andrew Speaker’s stock awards, any of our officers, employees, paid consultants or advisors who also serve as directors do not receive additional compensation for their service as directors. All directors will be indemnified by us for actions associated with being a director to the fullest extent permitted under Delaware law.