DEF 14A of Advanced Energy Industries Inc
Filed Mar 15, 2024 · FY20230001558370-24-003395
To be held on April 25, 2024
To be held on April 25, 2024 11:00 a.m. Mountain Daylight Time To Our Stockholders: You are cordially invited to attend the 2024 annual meeting of stockholders (the “2024 Annual Meeting”) of Advanced Energy Industries, Inc. (“Advanced Energy” or the “Company”). Please see below for the meeting logistics and business matters to be addressed at the 2024 Annual Meeting.
To be held on April 25, 2024
| Logistics | | Items of Business | | | | Board Recommendation | | | When Thursday, April 25, 2024, at 11:00 a.m. MDT Where Advanced Energy 1595 Wynkoop Street, Suite 800 Denver, CO 80202 Who Can Vote All holders of our common stock at the close of business on March 5, 2024 | | | | | | | | | 1 | Election of ten (10) directors; | | | FOR ALL NOMINEES | | | | 2 | Ratification of the appointment of Ernst & Young LLP as Advanced Energy’s independent registered public accounting firm for 2024; | | | FOR | | | | 3 | Advisory approval of Advanced Energy’s compensation of its named executive officers; | | | FOR | | | | 4 | Approval of Advanced Energy’s Second Amended and Restated Certificate of Incorporation to provide exculpation from personal liability for certain officers as permitted by Delaware law and make certain other minor, non-substantive updates; | | | FOR | | | | 5 | Any other matters of business properly brought before the 2024 Annual Meeting. | | | | | | | Each of matters 1 through 4 is described in detail in the proxy statement accompanying this Notice of the Annual Meeting of Stockholders, dated March 15, 2024. | | | | | | | Your vote is important. All stockholders are cordially invited to attend the 2024 Annual Meeting in person. If you do not plan to attend the 2024 Annual Meeting and vote your shares of common stock in person, please authorize a proxy to vote your shares in one of the below ways. Any proxy may be revoked at any time prior to its exercise at the 2024 Annual Meeting. | | | | | | | | | | | | | | | | Place your vote via internet at www.proxypush.com/AEIS | | | Call toll-free (if US or Canada) 1-866-390-9955 | Mark, date, sign and mail your proxy card in the pre-paid envelope provided | |
To be held on April 25, 2024
| Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on April 25, 2024 | | This notice for the 2024 Annual Meeting, the proxy statement, the proxy card, and the Company’s 2023 Annual Report, which includes the annual report on Form 10-K for the year ended December 31, 2023, are available online at www.proxydocs.com/AEIS. |
To be held on April 25, 2024
| | By Order of the Board of Directors, | | Denver, Colorado | Elizabeth K. Vonne | | March 15, 2024 | Executive Vice President, General Counsel, and Corporate Secretary |
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| | 2024 ANNUAL | | | PROXY STATEMENT |
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Table of Contents
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| A Message from our CEO | i | | Notice of the Annual Meeting of Stockholders | ii | | Table of Contents | 1 | | Proxy Summary | 2 | | Proposal No. 1 - Election of Directors | 5 | | Director Compensation | 16 | | Corporate Governance | 18 | | Proposal No. 2 - Ratification of the Appointment of Ernst & Young LLP as Advanced Energy’s Independent Registered Public Accounting Firm for 2024 | 25 | | Proposal No. 3 - Advisory Approval of the Company’s Named Executive Officer Compensation | 27 | | Security Ownership of Certain Beneficial Owners and Management | 29 | | Executive Compensation | 31 | | Compensation Discussion and Analysis | 31 | | Compensation Risk Assessment | 44 | | Compensation Committee Report | 45 | | Equity Compensation Plan Information | 46 | | Management | 47 | | Summary Compensation Table for 2023 | 49 | | 2023 Grants of Plan-Based Awards | 50 | | 2023 Outstanding Equity Awards at Fiscal Year-End | 51 | | 2023 Option Exercises and Stock Vested | 52 | | Pension Benefits | 52 | | Non-Qualified Deferred Compensation | 52 | | Potential Payments upon Termination or Change in Control | 54 | | Pay versus Performance | 56 | | CEO Pay Ratio | 61 | | Certain Relationships and Related Transactions | 62 | | Proposal No. 4 - Approval of Advanced Energy’s Second Amended and Restated Certificate of Incorporation to Provide Exculpation from Personal Liability for Certain Officers as Permitted by Delaware Law and Make Certain Other Minor, Non-Substantive Updates | 63 | | Conduct and Communications | 66 | | Proposals of Stockholders | 66 | | Form 10-K | 67 | | Delinquent Section 16(a) Reports | 67 | | General Meeting Matters | 67 | | Appendix A - Reconciliation of Non-GAAP Measures | A-1 | | Appendix B - Second Amended and Restated Certificate of Incorporation | B-1 |
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| PRECISION | POWER | PERFORMANCE | 1 |
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| 2024 ANNUAL | | | PROXY STATEMENT | |
To be held on April 25, 2024
Proxy Summary The Board of Directors of Advanced Energy Industries, Inc. (“Advanced Energy” or the “Company”) requests your proxy in connection with the annual meeting of stockholders to be held on April 25, 2024 (the “2024 Annual Meeting”). This proxy statement and the accompanying proxy card and materials are first being sent to stockholders of Advanced Energy or made available electronically on or about March 15, 2024. This summary highlights key information presented elsewhere in this year’s proxy statement. This section does not contain all the information that you should consider, and you should read the entire proxy statement before voting. Our Meeting Agenda
To be held on April 25, 2024
| PROPOSAL | | REFERENCE | BOARD RECOMMENDATION | EFFECT OF BROKER NON-VOTES AND ABSTENTIONS | VOTES REQUIRED FOR APPROVAL | | 1 | Election of ten (10) directors | Page 5 | FOR ALL NOMINEES | No Effect | Plurality of votes of shares present at the 2024 Annual Meeting (by proxy or in person), subject to the resignation policy described on page 15 | | 2 | Ratification of the appointment of Ernst & Young LLP as Advanced Energy’s independent registered public accounting firm for 2024 | Page 25 | FOR | No Effect | Majority of shares present at the 2024 Annual Meeting (by proxy or in person), excluding broker non-votes and abstentions | | 3 | Advisory approval of the compensation of our named executive officers | Page 27 | FOR | No Effect | Majority of shares present at the 2024 Annual Meeting (by proxy or in person), excluding broker non-votes and abstentions | | 4 | Approval of Advanced Energy’s Second Amended and Restated Certificate of Incorporation to provide exculpation from personal liability for certain officers as permitted by Delaware law and make certain other minor, non-substantive updates | Page 63 | FOR | Same Effect as a Vote Against | Sixty-six and two-thirds percent (66 ⅔%) of the outstanding shares of voting stock of the Company |
To be held on April 25, 2024
We do not know of any other matters to be submitted to stockholders at the 2024 Annual Meeting. If any other matters properly come before the 2024 Annual Meeting, the proxy holders intend to vote the shares they represent on such matters as the Board of Directors may recommend. The proposed corporate actions on which the stockholders are being asked to vote at the 2024 Annual Meeting are not corporate actions for which stockholders of a Delaware corporation have the right to exercise appraisal rights under the Delaware General Corporation Law.
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| | 2024 ANNUAL | | | PROXY STATEMENT |
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About Advanced Energy Advanced Energy is a global leader in the design and manufacture of highly engineered, precision power conversion, measurement, and control solutions for mission-critical applications and processes. Advanced Energy’s power solutions enable customer innovation in complex applications for a wide range of industries including semiconductor equipment, industrial production, medical and life sciences, data center computing, networking, and telecommunications.
To be held on April 25, 2024
| Our Mission | Our Vision | Our Strategy | | Enable customer innovation by delivering highly engineered, applications-critical, precision power & control solutions. | Drive sustainable growth as the recognized world leader & trusted partner in precision power technology and applications. | Grow by delivering proprietary products with differentiated performance & delivered value that enable our customers’ success in rewarding markets. |
To be held on April 25, 2024
Advanced Energy’s Environmental, Social, and Governance Initiatives We incorporate environmental, social, and governance (“ESG”) responsibility across our business with the same focus and dedication as we approach all our initiatives. Sustainability is key to our strategy in the products we make, the way we operate, and how we govern as a public company. We believe that our efforts to increase power conversion efficiency and to improve the efficiency of and reduce waste in our operations reflect our commitment to minimizing the environmental impact and carbon emissions that may be linked to the industries we serve. We also aspire to be a premier employer and good corporate citizen and invest in diversity, inclusion, and social responsibility. We recognize that diverse perspectives and collaboration enable us to drive innovation and future growth for our global customers. Our results and ongoing efforts related to ESG are an integral part of our commitment to deliver long-term value to our global stakeholders. This commitment is driven from the highest levels of the Company, including our Chief Executive Officer, executive management team, and Board of Directors. In 2020, we added oversight of the Company’s sustainability program to the Nominating, Governance & Sustainability Committee. As indicated in its charter, the Nominating, Governance & Sustainability Committee is directed to review the Company’s progress towards achieving its sustainability goals, as well as to review ESG trends that could impact the Company’s operations, performance, and reputation. In 2022, we enhanced our ESG governance structure by launching our ESG steering committee and ESG working group. The ESG steering committee is responsible for providing management-level guidance on our ESG approach, while the ESG working group reports to the steering committee and is responsible for the implementation of ESG initiatives that advance our ESG program. We are excited to share certain of our “value driven” ESG initiatives, areas of focus, and accomplishments on the following page. We look forward to making a difference in the markets and communities we serve.
To be held on April 25, 2024
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| 2024 ANNUAL | | | PROXY STATEMENT | |
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| | Environment | | Social & Community | | Energy-Efficient Products. Advanced Energy’s dedicated R&D teams strive to improve power conversion efficiency, balanced with exceptional stability and nimble control and response. Every increase in power conversion efficiency reduces our customers’ power consumption, decreasing their environmental impact and carbon emissions. Advanced Energy’s innovations reduce electricity consumption in a wide range of industries, including semiconductor manufacturing, industrial and medical equipment, as well as data center computing, telecom, and networking. Energy-Efficient Operations. Advanced Energy makes continuous improvements to reduce our energy usage in our global factories. For example, our Philippines factory is a three-time Philippine Economic Zone Authority (PEZA) Hall of Fame Awardee for Outstanding Environmental Performance. By employing novel alternatives, the site reduces the need for thermal testing. We also track our greenhouse gas emissions at several key manufacturing sites. Reducing Waste. Advanced Energy strives to reduce waste and conserve natural resources through efficiency improvements and recycling. Our manufacturing facilities in Asia actively manage and maximize our waste diversion rate, and we have implemented water treatment and wastewater recycling programs. In addition, we are implementing a recycled packaging initiative to reuse packaging material for supplies from our local suppliers. | | Charitable Contributions. Our charitable contributions committee, founded in 2010, is supported and led by our employees. The committee provides financial support for 501(c)(3) corporations, nonprofit institutions, and organizations that improve education, the environment and health and social services across the communities in which we operate and where our employees live. Diversity and Inclusion. We have approximately 10,000 employees located across the globe. Each person’s background and unique skill set are fundamental to our success. The Corporate Diversity & Inclusion Steering Committee provides guidance and direction on diversity, equity, and inclusion while enabling local teams to develop specific, targeted initiatives as appropriate. We also have an active Women’s Leadership Forum focused on career development and internal networking. Volunteerism. We offer each employee eight hours of paid time off to volunteer with self-selected 501(c)(3) organizations or other nonprofit organizations. Community Involvement. We work closely with community organizations, including supporting STEM education in local schools, working with universities around the world to facilitate their innovative research projects, participating in local chambers of commerce and partnering with local nonprofit organizations. Advanced Energy’s STEM Scholarship Program, launched in 2020, aims to develop emerging talent in STEM fields. We accept applications from undergraduate and post-graduate students attending leading institutions in the field of power technologies. | | | | Governance | | Ethical Business Practices | | Commitment. Advanced Energy is firmly committed to strong and effective corporate governance practices and accountability to our stockholders. Continuous Improvement. We routinely review our governance practices against evolving best practices and consider feedback and input from our stockholders. We encourage you to review our Board Governance Guidelines on our website at www.advancedenergy.com/ en-us/about/leadership. Core Values. At all levels of our organization, Advanced Energy delivers results by building a culture grounded in our Core Values: innovation, integrity, empowerment, partnership, accountability, and execution. Transparency. We are committed to transparency in all parts of our business to promote accountability, cultivate trust, and foster open communication. We believe that transparency leads to improvements to our processes and policies, and ultimately contributes to our success. | | Human Rights. Respecting the human rights of our employees and all those involved in our business operations is a core principle for Advanced Energy. Integrity at our Core, Advanced Energy’s Code of Ethical Conduct, specifically prohibits activities involving slave, forced, bonded, or indentured labor, and child labor, and we require our suppliers use no forced labor themselves or in their supply chains. Integrity at our Core can be viewed on our website at www.advancedenergy.com/en-us/about/environment-social-and-governance. Supply Chain. We are committed to responsible sourcing of the materials that make up our products. We annually request our suppliers to confirm that minerals originating within DRC +9 are conflict-free. Employee Training and Helplines. We actively communicate to our employees on ethical business practices and provide a 24-hour anonymous hotline to address ethics issues. | |
To be held on April 25, 2024
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| | 2024 ANNUAL | | | PROXY STATEMENT |
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Proposal No. 1 - Election of Directors
To be held on April 25, 2024
| What am I voting on and how should I vote? | You are being asked to elect ten (10) directors at the 2024 Annual Meeting. Each of the directors elected at the 2024 Annual Meeting will commence their term at the end of the 2024 Annual Meeting until the next annual meeting of the Company’s stockholders, until a successor has been elected and qualified, or until such director’s earlier resignation or removal. We believe that each of the nominees is sufficiently qualified to lead the Company in the best interest of stockholders. The Board of Directors therefore recommends you vote “FOR” each of the nominees set forth below. |
To be held on April 25, 2024
A board of ten (10) directors is to be submitted for election at the Annual Meeting. The Board of Directors has nominated for reelection the persons listed in the Overview of Nominees for Election to the Board on the following page. Each of the nominees is currently a director of Advanced Energy and was recommended for reelection by our Nominating, Governance & Sustainability Committee. In the event that any nominee is unable or declines to serve as a director at the time of the 2024 Annual Meeting, the proxy holders will vote in favor of a nominee designated by the Board of Directors, on recommendation by the Nominating, Governance & Sustainability Committee, to fill the vacancy. We are not aware of any nominee who will be unable or who will decline to serve as a director. The term of office of each person elected as a director at the 2024 Annual Meeting will continue from the end of the 2024 Annual Meeting until the next annual meeting of the Company’s stockholders, until a successor has been elected and qualified, or until such director’s earlier resignation or removal.
To be held on April 25, 2024
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| 2024 ANNUAL | | | PROXY STATEMENT | |
To be held on April 25, 2024
Overview of Nominees for Election to the Board The director nominees presented below represent a broad group of experienced business leaders. The table provides a summary of our nominees’ background and responsibilities as of March 15, 2024.
To be held on April 25, 2024
| | | | | Committee Memberships | | | | Name and Principal Occupation | Age | Director Since | | Audit and Finance | Nominating, Governance & Sustainability | Compensation | | GRANT H. BEARD (Chairman) Currently serves as Sr. Executive Operating Partner for Blue Point Capital, a private equity firm | 63 | 2014 | | | | | | FREDERICK A. BALL Former EVP & Chief Administrative Officer of Marketo Inc. | 61 | 2008 | | | | C | | ANNE T. DELSANTO Currently serves as a Limited Partner at Operator Collective and Stage 2 Capital | 60 | 2020 | | | M | M | | TINA M. DONIKOWSKI Former Vice President, Global Locomotive Business at General Electric Company | 64 | 2018 | | M* | C | | | RONALD C. FOSTER Former Chief Financial Officer of Micron Technology, Inc. | 73 | 2014 | | C* | | | | STEPHEN D. KELLEY Currently serves as President, CEO, and director of Advanced Energy | 61 | 2021 | | | | | | LANESHA T. MINNIX Currently serves as Executive Vice President, General Counsel & Corporate Secretary of Ecolab, Inc. | 48 | 2020 | | M | M | | | DAVID W. REED Currently serves as CEO of Vendanta Resources Ltd.’s semiconductor group | 65 | 2022 | | | | M | | JOHN A. ROUSH Currently serves as Operating Executive Advisor to ACON Investments, LLC, a private equity firm | 58 | 2016 | | | M | M | | BRIAN M. SHIRLEY Former Senior Vice President DRAM and Emerging Memory Engineering of Micron Technology, Inc. | 54 | 2022 | | M* | | | | | | | * Indicates audit committee financial expert | | | |
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Board Nominee Highlights
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| Independence | Tenure | Gender | | | | |
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| | 2024 ANNUAL | | | PROXY STATEMENT |
To be held on April 25, 2024
Nominees
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| Grant H. Beard (Chairman) | | | | Independent Director | Age: 63 | Director Since: 2014 | | Business Experience: | | | | Grant H. Beard currently serves as a Senior Executive Operating Partner for Blue Point Capital, a private equity firm, and as a Senior Advisor to Center Rock Capital, a global alternative investment firm. Mr. Beard served as Chairman and Chief Executive Officer of Wynnchurch Industries, LLC, a diversified holding company investing in engineered product businesses, from January 2016 to June 2017. Mr. Beard also served as a Senior Advisor to Wynnchurch Capital Ltd. Prior to joining Wynnchurch, Mr. Beard served as the Chairman and Chief Executive Officer of Wolverine Advanced Materials LLC, a Wynnchurch company, from July 2012 until October 2015. Mr. Beard served as President and Chief Executive Officer of Constar International, Inc. (formerly Nasdaq: CNST) from 2010 to 2012, where he led the financial and operational restructuring of Constar’s global packaging business that was later sold to Plastipak Corporation. Prior to that, Mr. Beard served as President & CEO of TriMas Corporation, Chairman & CEO of Health Media, and Global Group President of Fluid Management Products at Dana/Echlin Corporation. In addition, Mr. Beard served as a Senior Executive Operating Partner with Blue Point Capital from 2009 to 2014. Mr. Beard also has experience at two private equity/merchant banking groups, Anderson Group and Oxford Investment Group, where he was actively involved in corporate development, strategy and operations management. | | | | Key Skills and Qualifications: | | | | ● Senior Leadership Experience ● Financial Expertise | ● Public Board Experience ● Global Expertise | ● Industry Experience | | Mr. Beard brings to the Board significant senior management and public board experience, together with global expertise in industrial and related markets and in the private equity/merchant banking industry, as well as experience in strategy, operations, and M&A transactions. | | |
To be held on April 25, 2024
| Frederick A. Ball | | | | Independent Director | Age: 61 | Director Since: 2008 | | Committees: Compensation (Chair) | | | | Business Experience: | | | | Frederick A. Ball previously served as Executive Vice President and Chief Administrative Officer of Marketo Inc. (formerly Nasdaq: MKTO), a leading provider of a cloud-based marketing platform, from February 2016 through August 2016. Prior to that, Mr. Ball was Marketo’s Senior Vice President and Chief Financial Officer from May 2011 to February 2016. Prior to joining Marketo, Mr. Ball was the Chief Financial Officer for several private and public technology companies, including Webroot Software, BigBand Networks, Inc., and Borland Software Corporation (formerly Nasdaq: BORL). Mr. Ball also served as Vice President, Mergers and Acquisitions for KLA-Tencor Corporation (now KLA Corp., Nasdaq: KLAC), a manufacturer of semiconductor equipment, and prior to that as its Vice President of Finance. Mr. Ball was with PricewaterhouseCoopers LLC for over 10 years. Mr. Ball previously served as a director of Electro Scientific Industries, Inc. (formerly Nasdaq: ESIO), Sendgrid, Inc. (formerly NYSE: SEND), and FirstMark Horizon Acquisition Corporation (formerly NYSE: FMAC). Mr. Ball has served, and currently serves on other private company boards, including Alchemer, Contentful, and Webgility. | | | | Key Skills and Qualifications: | | | | ● Senior Leadership Experience ● Financial Expertise | ● Public Board Experience ● Global Expertise | ● Industry Experience | | Mr. Ball brings to the Board significant experience in senior management, operations, finance, and auditing, having served as the Chief Financial Officer of a leading provider of cloud-based marketing software, as well as experience in strategy and executive compensation. | | |
To be held on April 25, 2024
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| 2024 ANNUAL | | | PROXY STATEMENT | |
To be held on April 25, 2024
| Anne T. DelSanto | | | | Independent Director | Age: 60 | Director Since: 2020 | | Committees: Compensation and Nominating, Governance & Sustainability | | | | Business Experience: | | | | Anne T. DelSanto currently serves as a Limited Partner at Operator Collective and Stage 2 Capital, both venture capital funds that invest in early-stage companies supporting entrepreneurial efforts aimed at next generation technology and software. From February 2018 to April 2019, Ms. DelSanto served as the Executive Vice President and General Manager of Platform at Salesforce, Inc. (NYSE: CRM), a customer relationship management company, following six years of other senior leadership roles at the company. Prior to Salesforce, Ms. DelSanto served as Group Vice President of Sales Engineering at Oracle Corp. (NYSE: ORCL), an information technology and services company. She began her career as an Account Systems Engineer with International Business Machines Corporation (NYSE: IBM), where she spent several years building solutions for the health care market. Ms. DelSanto serves on the board of Juniper Networks, Inc. (NYSE: JNPR), and New Relic, Inc. (NYSE: NEWR). Ms. DelSanto graduated with a degree in mathematics from St. John’s University and earned a Master of Science in administrative studies from Boston College. | | | | Key Skills and Qualifications: | | | | ● Senior Leadership Experience ● Public Board Experience ● Global Expertise | | ● Technical Expertise ● Financial Expertise | | Ms. DelSanto brings to the Board significant experience as a veteran technology executive with more than three decades driving organizations towards exponential growth and provides valuable insight relative to the Company’s growth strategies in data center computing and telecom networking markets. | | |
To be held on April 25, 2024
| Tina M. Donikowski | | | | Independent Director | Age: 64 | Director Since: 2018 | | Committees: Audit and Finance and Nominating, Governance & Sustainability (Chair) | | | | Business Experience: | | | | Tina M. Donikowski retired from General Electric Company (NYSE: GE), a diversified industrial company, in October 2015 after 38 years with the company. Ms. Donikowski served in a number of senior positions during her career at General Electric Company, including most recently as Vice President, Global Locomotive Business, GE Transportation, from January 2013 until her retirement. Ms. Donikowski currently serves on the board of directors of TopBuild Corp. (NYSE: BLD), a leading installer and distributor of insulation and building material products to the U.S. construction industry based in Florida, and Eriez Magnetics, a privately held manufacturer and designer of magnetic, vibratory, and metal detection applications based in Pennsylvania. Ms. Donikowski also serves as a member of the Board of Trustees of Gannon University. She previously served as a board member of CIRCOR International (formerly NYSE: CIR), a leading provider of flow control solutions and other highly engineered products and subsystems used in energy, aerospace and industrial markets and Atlas Copco AB (Stockholm: ATCO), a world-leading provider of sustainable productivity solutions based in Sweden. Ms. Donikowski holds a Bachelor of Science degree in Industrial Engineering, as well as an Honorary Doctorate, from Gannon University. | | | | Key Skills and Qualifications: | | | | ● Senior Leadership Experience ● Public Board Experience ● Global Expertise | | ● Technical Expertise ● Financial Expertise | | Ms. Donikowski brings to the Board broad senior management, operations, and global experience having served for 38 years in various leadership positions at General Electric Company. Her experience provides the Board with valuable input on strategic, operational, market, and product strategies. | | |
To be held on April 25, 2024
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| | 2024 ANNUAL | | | PROXY STATEMENT |
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| Ronald C. Foster | | | | Independent Director | Age: 73 | Director Since: 2014 | | Committees: Audit and Finance (Chair) | | | | Business Experience: | | | | Ronald C. Foster previously served as Chief Financial Officer and Vice President of Finance of Micron Technology, Inc. (Nasdaq: MU), a global corporation that produces various forms of semiconductor devices, from April 2008 to March 2015. Mr. Foster was appointed to that position in 2008 after serving as a member of Micron’s Board of Directors from June 2004 to April 2005. Before joining Micron, Mr. Foster was the Chief Financial Officer and Senior Vice President of FormFactor, Inc. (Nasdaq: FORM), a semiconductor wafer test equipment company. Prior to joining FormFactor, Mr. Foster served as the Chief Financial Officer for JDS Uniphase, Inc. and Novell, Inc., and served in various financial and operational roles at Applied Materials, Inc. (Nasdaq: AMAT), and Hewlett Packard Company (NYSE: HPE). He previously served as a board member of Everspin Technologies, Inc. (Nasdaq: MRAM), Inotera Memories Inc., a public company on the Taiwan stock exchange, LUXIM Corporation and Aptina Company. | | | | Key Skills and Qualifications: | | | | ● Senior Leadership Experience ● Financial Expertise ● Industry Experience | | ● Public Board Experience ● Global Expertise | | Mr. Foster brings to the Board significant senior management experience in the semiconductor and high-tech industries as well as significant experience in financial management, accounting, and finance issues, having served as Chief Financial Officer for various companies. | | |
To be held on April 25, 2024
| Stephen D. Kelley | | | Age: 61 | Director Since: 2021 | | Business Experience: | | | Stephen D. Kelley currently serves as President & Chief Executive Officer of Advanced Energy, and as a member of our Board of Directors since March 2021. Mr. Kelley served as President & CEO and a board member of Amkor Technology, Inc. (Nasdaq: AMKR), a leading semiconductor package and test company, from May 2013 to June 2020. Prior to joining Amkor, Mr. Kelley served as Senior Advisor to Advanced Technology Investment Company, the Abu Dhabi-sponsored investment company that owns GlobalFoundries, until December 2012. Mr. Kelley served as Executive Vice President and Chief Operating Officer of Cree, Inc. (now Wolfspeed, Inc., NYSE: WOLF) from 2008 to 2011. Previously, Mr. Kelley held executive leadership roles of various businesses at companies including Texas Instruments, Philips Semiconductors, National Semiconductor, and Motorola. Since January 2023, Mr. Kelley has served on the board of directors of ONTO Innovation Inc. (NYSE: ONTO), a leader in the process control for the semiconductor and related industries. Mr. Kelley holds an SB ChE from the Massachusetts Institute of Technology and a JD from Santa Clara University. | | | Key Skills and Qualifications: | | | ● Senior Leadership Experience ● Public Board Experience ● Industry and Technical Expertise | ● Global Operations Expertise ● Financial Expertise | | Mr. Kelley brings more than 30 years of significant senior management experience in the global semiconductor and electronics industry, as well as broad management experience in strategic planning, business development, technology, manufacturing, and operations. | |
To be held on April 25, 2024
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| 2024 ANNUAL | | | PROXY STATEMENT | |
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| Lanesha T. Minnix | | | | Independent Director | Age: 48 | Director Since: 2020 | | Committees: Audit and Finance and Nominating, Governance & Sustainability | | | | Business Experience: | | | | Lanesha T. Minnix is Executive Vice President, General Counsel, and Corporate Secretary for Ecolab Inc. (NYSE: ECL), a global leader in water, hygiene, and infection prevention solutions that protect people, planet, and business health. Ms. Minnix tendered her resignation from Ecolab in February 2024 and expects to join Walgreens Boots Alliance, Inc. (Nasdaq: WBA) as Executive Vice President and Global Chief Legal Officer in April 2024. Prior to joining Ecolab in June 2022, Ms. Minnix served as Senior Vice President, Chief Legal Officer and Corporate Secretary of Flowserve Corporation (NYSE: FLS), a manufacturer of products for a range of industries, including oil and gas, power, chemical, water, pharmaceuticals, and food processing, and was responsible for the company’s legal, compliance, and regulatory matters from June 2018 to June 2022. Previously, Ms. Minnix served as Senior Vice President and General Counsel for BMC Stock Holdings, Inc., a leading provider of diversified building products and services, from June 2017 until June 2018. Earlier in her career, Ms. Minnix held roles with increasing responsibility at ABM Industries, Shell Oil Company, and Sprint Corporation. Ms. Minnix began her career as a Corporate Associate at the law firm of K&L Gates LLP. Ms. Minnix holds a juris doctor and an MBA from the University of Tulsa, and a bachelor’s degree in Marketing from St. Louis University. | | | | Key Skills and Qualifications: | | | | ● Senior Leadership Experience ● Industry Expertise | | ● Global Operations Expertise | | Ms. Minnix brings to the Board leadership and public company experience and has broad exposure to advanced industrial markets for a range of applications. Her legal and business skills add significant value to the Board. | | |
To be held on April 25, 2024
| David W. Reed | | | | Independent Director | Age: 65 | Director Since: 2022 | | Committees: Compensation | | | | Business Experience: | | | | David W. Reed is the Chief Executive Officer of Vendanta Resources Ltd.’s semiconductor group, which position he commenced in February 2023. Prior to that, Mr. Reed retired from NXP Semiconductors N.V. (Nasdaq: NXPI), where he principally served as Executive Vice President – Operations. NXP is a world leader in secure connectivity solutions, and Mr. Reed was responsible for NXP’s internal and external manufacturing operations, supply chain, information technology, total quality, and procurement. Mr. Reed joined NXP in 2015, having served as General Manager at Freescale Semiconductor, Ltd. until its merger with NXP. Mr. Reed has 37 years of extensive international experience with global execution of water fab, assembly/test, packaging, R&D, foundries, and joint ventures for analog, automotive, logic, and wireless customers. Mr. Reed joined Freescale Semiconductor in 2012 as Senior Vice President, Manufacturing Operations. Previously, Mr. Reed was Vice President and General Manager at GLOBALFOUNDRIES and began his career at Texas Instruments in 1984, where he held multiple overseas and leadership assignments. Mr. Reed has served on several private boards, including SSMC Foundry, a joint venture between NXP and TSMC, as its chairman, the Dwight Look College of Engineering at Texas A&M University, and Circle 10 Council of the Boy Scouts of America. Mr. Reed received an undergraduate degree from Austin College, an undergraduate degree in Chemical Engineering from Texas A&M University, and an MBA from the University of Dallas. | | | | Key Skills and Qualifications: | | | | ● Senior Leadership Experience ● International Experience | | ● Global Operations Expertise ● Industry and Technical Expertise | | Mr. Reed brings to the Board significant senior management and operations experience in the semiconductor capital equipment and manufacturing industry, particularly in the areas of global operations and supply chain management. | | |
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| | 2024 ANNUAL | | | PROXY STATEMENT |
To be held on April 25, 2024
| John A. Roush | | | | Independent Director | Age: 58 | Director Since: 2016 | | Committees: Compensation and Nominating, Governance & Sustainability | | | | Business Experience: | | | | John A. Roush currently serves as an Operating Executive Advisor to ACON Investments, LLC, a private equity firm. Mr. Roush serves on the board of two privately held ACON portfolio companies: Pine Environmental LLC, a provider of test equipment and services for environmental consultants; and Novipax LLC, a producer of absorbent pads for the poultry industry. Mr. Roush also serves as a director and member of the audit and compensation committees of Lemaitre Vascular, Inc. (Nasdaq: LMAT), a global provider of medical devices and implants for the treatment of peripheral vascular disease, and as a director of Targan, Inc. (formerly Applied Life Sciences & Systems), a privately held company that is developing automated vaccine delivery technology for the poultry industry. Mr. Roush previously served as Chief Financial Officer and Chairman of ACON S2 Acquisition Corp., a special purpose acquisition company (now ESS Tech, Inc., NYSE: GWH) from September 2020 to October 2021. He also previously served as Chief Executive Officer and a director of Novanta Inc. (Nasdaq: NOVT, formerly GSI Group Inc.), a leading global supplier of precision photonic components and subsystems to original equipment manufacturers in the medical and industrial technology markets, from December 2010 to September 2016. Mr. Roush joined Novanta after a twelve-year career with PerkinElmer, Inc., a provider of technology and services to the diagnostics, research, environmental, safety and security, industrial, and laboratory services markets, where he was a corporate officer and served in several leadership positions. Prior to joining PerkinElmer, Mr. Roush held management positions with Outboard Marine Corporation, AlliedSignal, Inc., (now Honeywell International), McKinsey & Company Inc., and General Electric Company (NYSE: GE). | | | | Key Skills and Qualifications: | | | | ● Senior Leadership Experience ● Public Board Experience ● Technical Expertise | | ● Global Operations Expertise ● Financial Expertise | | Mr. Roush brings to the Board significant senior management level experience and leadership in the medical and advanced industrial markets and applications, as well as significant public board experience and experience in private equity. | | |
To be held on April 25, 2024
| Brian M. Shirley | | | | Independent Director | Age: 54 | Director Since: 2022 | | Committees: Audit and Finance | | | | Business Experience: | | | | Mr. Shirley retired from Micron Technology, Inc. (Nasdaq: MU), a global corporation that produces various forms of semiconductor devices, as Senior Vice President DRAM and Emerging Memory Engineering in December 2019. He joined Micron as a Product Engineer in 1988, and held positions of increasing responsibility across product design, engineering, and business unit management. Mr. Shirley is listed as an inventor on 82 U.S. patents and helped drive Micron’s expansion into specialized memory for servers, mobile and networking solutions, in addition to maintaining a focus on cost leadership and power reduction. After retirement from Micron, Mr. Shirley consults for various U.S. government departments, advising on the semiconductor geopolitical landscape, supply chain resilience, and national security. Mr. Shirley holds a Bachelor of Science degree in electrical engineering from Stanford University. | | | | Key Skills and Qualifications: | | | | ● Senior Leadership Experience ● Industry and Technical Expertise | | ● Global Operations Expertise | | Mr. Shirley brings to the Board significant experience as a veteran technology executive with more than three decades of experience in semiconductor product technologies, including as an inventor on 82 U.S. patents, and an extensive track record of advancing innovation and growth. | | |
To be held on April 25, 2024
| PRECISION | POWER | PERFORMANCE | 11 |
To be held on April 25, 2024
| 2024 ANNUAL | | | PROXY STATEMENT | |
To be held on April 25, 2024
Director Qualifications The Board respects its responsibility to provide oversight, counseling, and direction to the management of the Company in the interest and for the benefit of the stockholders. Accordingly, it seeks to be composed of directors with diverse skills, experience, qualifications, and characteristics. It is critical that directors understand the markets in which the Company operates, specifically the semiconductor capital equipment, industrial and medical, data center, and telecom markets. It is equally important that, collectively, the directors have experience in each of the primary aspects of our business, including engineering, research and development, finance and audit, product strategy and development, customer relations, supply chain management, and sales and marketing. The following are certain qualifications, experience, and skills for Board members that are important to the Company’s business and its future:
To be held on April 25, 2024
| | Directors who have served in senior leadership positions are important to the Company, as they bring experience and perspective in analyzing, shaping, and overseeing the execution of important operational and policy issues at a senior level. These directors’ insights and guidance and their ability to assess and respond to situations encountered in serving on our Board may be enhanced if their leadership experience has been developed at businesses or organizations that operated on a global scale, faced significant competition, and/or involved technology or other rapidly evolving business models. | | Senior Leadership Experience | | | | Directors who have served on other public company boards can offer advice and insights with regard to the dynamics and operation of a board of directors, the relations of a board to the chief executive officer and other management personnel, the importance of particular agenda and oversight matters, and oversight of a changing mix of strategic, operational, and compliance-related matters. | | Public Board Experience | | | | Because the Company is a global leader in innovative power solutions for the semiconductor, data center, telecom, and industrial and medical markets, experience in relevant technology is useful in understanding the Company’s research and development efforts, competing technologies, the various products and processes the Company develops, the manufacturing and assembly-and-test operations, and the market segments in which the Company competes. | | Industry & Technical Expertise | | | | Because the Company is a global organization with research and development, manufacturing, assembly and test facilities, and sales and other offices in many countries, directors with global expertise can provide a useful business and cultural perspective regarding many significant aspects of our business. | | Global Expertise | | | | Knowledge of financial markets, financing and funding operations, and accounting and financial reporting processes is important because it assists the directors in understanding, advising, and overseeing the Company’s capital structure, financing and investing activities, financial reporting, and internal control of such activities. | | Financial Expertise | |
To be held on April 25, 2024
| 12 | PRECISION | POWER | PERFORMANCE |
To be held on April 25, 2024
| | 2024 ANNUAL | | | PROXY STATEMENT |
To be held on April 25, 2024
The following matrix summarizes certain qualifications and skills discussed above that were considered by the Nominating, Governance & Sustainability Committee and the Board in nominating the director candidates for election to the Board. The fact that a particular qualification, skill, or expertise is not listed below does not mean that the nominee does not possess it or that the Nominating, Governance & Sustainability Committee and the Board did not evaluate it.
To be held on April 25, 2024
| PRECISION | POWER | PERFORMANCE | 13 |
To be held on April 25, 2024
| 2024 ANNUAL | | | PROXY STATEMENT | |
To be held on April 25, 2024
The table below provides certain highlights of the composition of our Board members as of February 1, 2024, based on voluntary, self-reported information pursuant to Nasdaq Rule 5606.
To be held on April 25, 2024
| Board Diversity Matrix | | | | | As of February 1, 2024 | | | Total Number of Directors | 10 | | | | Female | Male | | Part I: Gender Identity | | | | Directors | 3 | 7 | | Part II: Demographic Background | | | | African American or Black | 1 | 0 | | White | 2 | 7 |
To be held on April 25, 2024
Independence The Board of Directors has determined that each of the nominees, other than Stephen D. Kelley (i.e., Grant H. Beard, Frederick A. Ball, Anne T. DelSanto, Tina M. Donikowski, Ronald C. Foster, Lanesha T. Minnix, David W. Reed, John A. Roush and Brian M. Shirley), is an “independent director” within the meaning of the Nasdaq Stock Market Rules. Under these rules, to be considered independent, the Board must affirmatively determine, among other things, that neither the director nor any immediate family member of the director has had any direct or indirect material relationship with the Company within the last three years. The Board of Directors has made an affirmative determination that none of the independent directors has had any relationship with Advanced Energy or with another director that would interfere with the exercise of his or her independent judgement in carrying out his or her responsibilities as a director. The independent directors, if all of them are elected at the 2024 Annual Meeting, will constitute a majority of the Board of Directors. There is no family relationship amongst any of the directors and executive officers of the Company. The Company’s executive officers serve at the discretion of the Board. Involvement in Certain Legal Proceedings During the past ten years none of the persons currently serving as executive officers and/or directors of the Company has been the subject matter of any of the following legal proceedings that are required to be disclosed pursuant to Item 401(f) of Regulation S-K, including: (a) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (b) any criminal convictions; (c) any order, judgment, or decree permanently or temporarily enjoining, barring, suspending or otherwise limiting their involvement in any type of business, securities or banking activities; (d) any finding by a court, the Securities and Exchange Commission (the “SEC”) or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud; or (e) any sanction or order of any self-regulatory organization or registered entity or equivalent exchange, association or entity. Nor are any such legal proceedings believed to be contemplated by governmental authorities against any director or executive officer. Further, no executive officers, directors, beneficial owners of more than five percent of the Company’s stock, or any other actor mentioned in Item 103(c)(2) of Regulation S-K is a party adverse to the Company in a material proceeding or has a material interest adverse to the Company.
To be held on April 25, 2024
| 14 | PRECISION | POWER | PERFORMANCE |
To be held on April 25, 2024
| | 2024 ANNUAL | | | PROXY STATEMENT |
To be held on April 25, 2024
Our Board has adopted a director resignation policy (the “Policy”), which is included in the Company’s Board Governance Guidelines. The Policy applies to uncontested elections of directors, in other words, an election of directors where the number of nominees for election does not exceed the number of directors to be elected. A copy of the Policy is available on the Company’s website at www.advancedenergy.com/en-us/about/leadership within the Company’s Board Governance Guidelines. Under the Policy, any nominee for director in an uncontested election who does not receive a majority vote “FOR” that director’s election to the Board relative to the number of votes cast with respect to that director’s election (excluding broker non-votes, abstentions, and failures to vote with respect to that director’s election) will promptly tender a written offer of resignation to the Board. The Policy provides that the Nominating, Governance & Sustainability Committee of the Board will promptly consider the director’s offer of resignation and make a recommendation to the Board. Pursuant to the Policy, the Board would then act on that recommendation within 90 days of receipt. When deciding what action to recommend or take regarding the director’s resignation, the Policy permits each of the Nominating, Governance & Sustainability Committee and the Board to consider any factors they deem relevant, including the best interests of the Company and its stockholders. Under Delaware law, a nominee who receives a plurality of the votes cast at the 2024 Annual Meeting will be elected as a director (subject to the Policy described above). The “plurality” standard means the nominees who receive the largest number of “FOR” votes cast are elected as directors of the Company. Thus, the number of shares not voted for the election of a nominee (and the number of “withhold” votes cast with respect to that nominee) will not affect the determination of whether that nominee has received the necessary votes for election under Delaware law. However, the number of “withhold” votes with respect to a nominee will affect whether or not our Policy will apply to that individual. If any nominee is unable or declines to serve, proxies will be voted for the balance of those named and for such person as shall be designated by the Board, on recommendation by the Nominating, Governance & Sustainability Committee, to replace any such nominee. However, the Board does not anticipate that this will occur. Stockholders do not have the right to cumulate their votes for the election of directors. Unless otherwise instructed, the proxy holders will vote the proxies received by them “FOR” each of the ten (10) nominees. Votes withheld from a nominee will be counted for purposes of determining whether a quorum is present, but will not be counted as an affirmative vote for such nominee. The Board of Directors recommends a vote “FOR” the election of each of the nominees named above.
To be held on April 25, 2024
| PRECISION | POWER | PERFORMANCE | 15 |
To be held on April 25, 2024
| 2024 ANNUAL | | | PROXY STATEMENT | |
To be held on April 25, 2024
Director Compensation The compensation policy for non-employee directors for the fiscal year ended December 31, 2023, was as follows:
To be held on April 25, 2024
| Compensation Elements for Non-Employee Directors | | | Compensation Element | 2023 Compensation Program | | Annual Board Cash Retainer | ● $60,000 annual cash retainer paid in equal quarterly installments to each Board member. | | | ● $65,000 additional annual cash retainer for the Chairman of the Board, paid in equal quarterly installments. | | Annual Board Equity Retainer | ● Restricted stock units with an approximate value of $200,000 granted annually to each non-employee director on the date of his or her re-election at the 2024 Annual Meeting; each annual grant will vest one year from the date of grant. ● Additional restricted stock units with an approximate value of $50,000 granted annually to the Chairman of the Board on the date of his or her reelection at the 2024 Annual Meeting; each annual grant will vest one year from the date of grant. ● The Board may (but is not required to) grant restricted stock units to a new non-employee director upon initial election or appointment to the Board. | | Annual Chair Cash Fees | ● $30,000 annual cash retainer fee for Audit and Finance Committee Chair. ● $25,000 annual cash retainer fee for Compensation Committee Chair. ● $15,000 annual cash retainer fee for Nominating, Governance & Sustainability Committee Chair. | | Annual Committee Member Retainer | ● $13,000 annual cash retainer fee for Audit and Finance Committee members. ● $10,000 annual cash retainer fee for Compensation Committee members. ● $5,000 annual cash retainer fee for Nominating, Governance & Sustainability Committee members. |
To be held on April 25, 2024
In February 2014, our Board of Directors adopted a Stock Ownership Policy that requires non-employee directors to own an amount of stock of the Company with a value equal to at least five times the annual retainer for Board service (exclusive of any compensation for committee service, meeting fees, leadership roles, etc.), based in each case, on the volume weighted average closing price of the Company’s stock for the two fiscal years as of December 31 of the applicable year and subject to the terms in the Stock Ownership Policy. The Stock Ownership Policy provides for a phase-in period over five years for each member to achieve the requisite ownership requirements. All non-employee members of the Board either currently conform to the policy or are on track to meet the policy within the required time frame.
To be held on April 25, 2024
| 16 | PRECISION | POWER | PERFORMANCE |
To be held on April 25, 2024
| | 2024 ANNUAL | | | PROXY STATEMENT |
To be held on April 25, 2024
The Compensation Committee continually reviews and monitors non-employee director compensation, uses market data for comparisons to peer programs, and works with the Company’s independent compensation consultant, Compensia, Inc., to ensure the program remains appropriate. The following table details director compensation for 2023.
To be held on April 25, 2024
| 2023 Director Compensation | | | | | | | | | | | | | | Change in | | | | | | | | | Pension Value | | | | | | | | | and | | | | | | | | | Nonqualified | | | | | | | | Non-Equity | Deferred | | | | | Fee Earned or | | Option | Incentive Plan | Compensation | All Other | | | | Paid in Cash | Stock Awards | Awards | Compensation | Earnings | Compensation | Total | | Name | ($) | ($) (1) | ($) | ($) | ($) | ($) | ($) | | Grant H. Beard | 125,000 | 245,201 | — | — | — | — | 370,201 | | Frederick A. Ball | 85,000 | 196,178 | — | — | — | — | 281,178 | | Anne T. DelSanto | 75,000 | 196,178 | — | — | — | — | 271,178 | | Tina M. Donikowski | 88,000 | 196,178 | — | — | — | — | 284,178 | | Ronald C. Foster | 90,000 | 196,178 | — | — | — | — | 286,178 | | Edward C. Grady* | 36,500 | — | — | — | — | — | 36,500 | | Lanesha T. Minnix | 78,000 | 196,178 | — | — | — | — | 274,178 | | David W. Reed | 70,000 | 196,178 | — | — | — | — | 266,178 | | John A. Roush | 75,000 | 196,178 | — | — | — | — | 271,178 | | Brian M. Shirley | 73,000 | 196,178 | — | — | — | — | 269,178 | | Stephen D. Kelley | — | — | — | — | — | — | — |
The Compensation Committee
The Compensation Committee The Compensation Committee is responsible for establishing, implementing, and monitoring adherence with the Company’s compensation philosophy. Accordingly, the Compensation Committee strives to develop and maintain competitive, progressive programs that reward executives for continuous improvement in key financial metrics that drive Company performance and stockholder value. The Compensation Committee also recognizes the need for compensation programs to attract, retain, and motivate high caliber employees, foster teamwork, and maximize the long-term success of Advanced Energy by appropriately rewarding our executives for their achievements. The Compensation Committee evaluates risk and rewards associated with the Company’s overall compensation philosophy and structure. The Compensation Committee has the authority to engage independent advisors to assist it in making determinations with respect to the compensation of our executives and other employees. For the 2023 fiscal year, the Compensation Committee engaged Compensia, Inc. to conduct a competitive review of executive compensation and advise the Compensation Committee on other compensation related matters. Compensia has not provided any other services to the Company or the Compensation Committee and has not received compensation other than with respect to the services provided to the Compensation Committee. In connection with its engagement of Compensia, the Compensation Committee (a) evaluated Compensia’s independence from management including the independence of the individual representatives of Compensia who served as the Compensation Committee’s consultants, and (b) determined that Compensia is free of conflicts of interest and independent based on the Nasdaq Stock Market’s independence factors.
Use of Market Data for Comparison Against Peer Companies
Use of Market Data for Comparison Against Peer Companies One factor that the Compensation Committee considers when making compensation decisions is the compensation paid to executives of a peer group of companies. The Compensation Committee also considers other factors discussed below under the heading “Components of Executive Compensation.” Our compensation peer group consists of publicly traded companies of roughly similar size to Advanced Energy, all of which are from related industries, including the semiconductor and electronic equipment industries, and may compete with Advanced Energy for executive talent. Our criteria for selecting our peer group companies includes companies with revenue between 50% and 200% and market capitalization between 33% and 300% of Advanced Energy. The Compensation Committee reviews our peer companies annually to take into account the volatility and breadth of the industries in which Advanced Energy participates. While the Compensation Committee attempts to maintain consistency year to year, adjustments are made as needed. In consultation with Compensia, the Compensation Committee reviewed its list of peer companies in July 2022, to be used for a comparative review for 2023 compensation. As a result of this review, the Compensation Committee removed Azenta, Inc. (formerly Brooks Automation, Inc.), Curtiss-Wright Corp., MACOM Technology Solutions Holdings, Inc., Moog, Inc., Novanta, Inc., Rogers Corporation, Semtech Corp., SPX Technologies, and Wolfspeed Inc. due to revenues outside the selection criteria, acquisition activity, and less relevant business fits. To replace these companies and better align with the semiconductor industry, the Compensation Committee added Cirrus Logic, Inc., MaxLinear, Inc., Silicon Laboratories Inc., Synaptics Incorporated, and Ultra Clean Holdings, Inc. For 2023, the list of peer companies consists of the following 15 publicly traded companies.
Use of Market Data for Comparison Against Peer Companies
| Peer Companies | | | | Coherent Corp. (formerly II-IV) | Littelfuse Inc. | Power Integrations, Inc. | | Cirrus Logic, Inc. | MaxLinear, Inc. | Silicon Laboratories Inc. | | Entegris, Inc. | MKS Instruments, Inc. | Smart Global Holdings Inc. | | FormFactor, Inc. | Monolithic Power Systems, Inc. | Synaptics Incorporated | | Kulicke & Soffa Industries, Inc. | OSI Systems, Inc. | Ultra Clean Holdings, Inc. |
Components of Executive Compensation
| PRINCIPAL COMPENSATION COMPONENTS FOR NAMED EXECUTIVE OFFICERS: | | | | | | | | | Base Salary | | Short-Term Incentive Plan | | Long-Term Incentive Plan | | | Other Benefits | | The amount and relative allocation of each of the above components at target depends on the following factors: | | | | | | | | | | Historical rates of executive compensation | | Data obtained from management’s recruitment activities | | Comparative review and analysis provided by Compensia, our independent compensation consultant | Alignment with the Company’s overall compensation philosophy, the executives’ responsibilities, and their performance | |
Short-Term Incentive Plan Compensation
Short-Term Incentive Plan Compensation
2023 Short-Term Incentive Plan Metrics
2023 Short-Term Incentive Plan Metrics The 2023 STI Plan provides the Company’s named executive officers with an opportunity to earn an annual cash bonus based on the Company’s achievement of certain financial performance goals. We intended for the 2023 STI Plan to motivate our executive officers to achieve these financial performance goals and reward them for accomplishing these goals. For 2023, the Compensation Committee selected the following financial
2023 Short-Term Incentive Plan Metrics
| 36 | PRECISION | POWER | PERFORMANCE |
2023 Short-Term Incentive Plan Metrics
| | 2024 ANNUAL | | | PROXY STATEMENT |
2023 Short-Term Incentive Plan Metrics
measures: revenue, weighted at 40%, non-GAAP operating income from continuing operations weighted at 40%, and adjusted cash flow, weighted at 20%. The Compensation Committee believes that these metrics help to drive balanced performance across the business and that non-GAAP metrics are better indicators of the operating performance of the Company. For further discussion and a reconciliation of these non-GAAP measures, see Appendix A to this proxy statement. To address ongoing volatility in the markets the Company serves, the 2023 STI Plan provided two six-month performance periods (January 1 - June 30 and July 1 - December 31) for each of the financial measures. Any bonus earned during either six-month performance period is not paid until after the end of the fiscal year. The Compensation Committee set each of our named executive officers’ annual full-year target bonus opportunity as a percentage of his or her base salary. Actual bonuses awarded to each of our named executive officers may range from 0% to 200% of target depending on actual company performance over the performance periods, as described below. For 2023 these annual full-year bonus targets were as follows:
2023 Short-Term Incentive Plan Metrics
| Name | Target as a % of Base Salary | Target | | Stephen Kelley | 125% | $1,187,500 | | Paul Oldham | 85% | $455,175 | | Eduardo Bernal Acebedo (1) | 85% | $417,748 | | Elizabeth Vonne | 75% | $307,500 | | John Donaghey | 85% | $391,000 |
2023 Short-Term Incentive Plan Metrics
(1) Mr. Bernal Acebedo is paid in Singapore Dollars (“SGD”) and his annual target was converted to USD using an exchange rate of 0.76 as of December 31, 2023. Our named executive officers’ bonuses are paid out of a bonus pool, the size of which is determined based upon the achievement of established financial performance goals during the relevant six-month performance period. The Compensation Committee established the performance goals for each metric in alignment with the Company’s annual operating plan, which contemplated the Company’s business objectives and anticipated market conditions.
2023 Short-Term Incentive Plan Metrics
| Values in $M, except as noted | | | | | | | | | | Performance Goals | | | Actual Performance | | | | | Threshold | Target | Stretch | | | | 2023 STI Plan | | (50% | (100% | (200% | Dollar | Incentive | | Financial Performance Metric | Weight | Payout) | Payout) | Payout) | Value | Earned | | 1H 2023 | | | | | | | | Revenue* | 40% | $710 | $835 | $960 | $841 | 104.0% | | Non-GAAP Operating Income from Continuing Operations** | 40% | $44 | $102 | $156 | $106 | 108.0% | | Adjusted Cash Flow*** | 20% | $78 | $116 | $160 | $110 | 92.0% | | | | | | 1H Achievement | | 51.6% | | 2H 2023 | | | | | | | | Revenue* | 40% | $716 | $842 | $968 | $815 | 89.4% | | Non-GAAP Operating Income from Continuing Operations** | 40% | $48 | $107 | $157 | $101 | 94.4% | | Adjusted Cash Flow*** | 20% | $56 | $117 | $162 | $126 | 119.0% | | | | | | 2H Achievement | | 48.7% | | | | | | Overall Achievement | | 100.3% |
2023 Short-Term Incentive Plan Metrics
| * Revenue targets based on total company operations for the first and second halves of 2023, as applicable. |
2023 Short-Term Incentive Plan Metrics
| ** Non-GAAP Operating Income from Continuing Operations must be met at threshold to trigger pool funding for the Revenue and Non-GAAP Operating Income components. Under the 2023 STI Plan, Non-GAAP Operating Income from Continuing Operations excludes non- cash related charges and non-recurring items. |
2023 Short-Term Incentive Plan Metrics
| PRECISION | POWER | PERFORMANCE | 37 |
2023 Short-Term Incentive Plan Metrics
| 2024 ANNUAL | | | PROXY STATEMENT | |
2023 Short-Term Incentive Plan Metrics
| *** Adjusted Cash Flow is measured as Non-GAAP Operating Income from Continuing Operations plus or minus the change in working capital, as defined as Accounts Receivable, Inventory, and Accounts Payable. |
2023 Short-Term Incentive Plan Metrics
Note: Achievement percentages between the threshold and target and between the target and stretch levels are linearly interpolated for each of the first and second half year results, and then those results are averaged together for the full-year payout levels. A reconciliation of the non-GAAP measures above is provided in Appendix A to this proxy statement.
Results of the 2023 Short-Term Incentive Plan
Results of the 2023 Short-Term Incentive Plan Based on the performance over both halves of the incentive period, our overall corporate achievement was 100.3% for 2023. As a result, the Company’s payouts under the 2023 Short-Term Incentive Plan were as follows:
Results of the 2023 Short-Term Incentive Plan
| | Financial | | | | (Actual at 100.3 % of Target) | | | Name | Target | Actual | | Stephen Kelley | $1,187,500 | $1,191,063 | | Paul Oldham | $455,175 | $456,541 | | Eduardo Bernal Acebedo | $417,748 | $419,001 | | Elizabeth Vonne | $307,500 | $308,423 | | John Donaghey | $391,000 | $392,173 |
Results of the 2023 Short-Term Incentive Plan
The 2023 STI Plan included a discretionary individual performance-based modifier ranging from 0% to 150% of the amounts otherwise earned based on corporate performance by the named executive officers. The modifier had a cap in which no executive could achieve greater than 200% of the target incentive. For fiscal year 2023, the Compensation Committee chose not to modify the 2023 bonus of any executive officer based on individual performance.
2024 Short-Term Incentive Plan
2024 Short-Term Incentive Plan The Compensation Committee, in consultation with Compensia, maintained the 2024 Short-Term Incentive Plan largely as designed in 2023, including the right to use a discretionary individual performance-based modifier ranging from 0% to 150% for the named executive officers, and continuation of the cap in which no executive can achieve greater than 200% of the target incentive. The Compensation Committee also approved weighting the potential 2024 STI earned over the two six-month performance periods proportional to the 2024 annual operating plan where 40% of the incentive potential is calculated in the first half and 60% of the incentive potential is calculated in the second half, consistent with the timing of projected earnings. Each half will be a stand-alone performance period.
Long-Term Incentive Plan Compensation
Long-Term Incentive Plan Compensation We use stock awards to motivate and reward our executive officers, including our named executive officers, for long-term corporate performance and to align their interests with those of our stockholders. Consistent with market practice in companies of our size and in our industry, our long-term incentive program is comprised primarily of full-value equity vehicles, namely time-based and performance-based restricted stock units (“RSUs”). We award RSUs to provide a long-term, retentive element to the executive pay package. We also use performance-based RSUs (“performance stock units”) in the program to further enhance the alignment between pay and the long-term performance of our Company. In fiscal year 2023, we granted our executives, including our named executive officers, a mix of performance-based and time-based RSU awards, on an equally weighted basis, under the 2023 LTI Plan. The annual equity awards granted to our named executive officers under the 2023 LTI Plan were determined by our Compensation Committee after reviewing data from a competitive market analysis prepared by Compensia. In addition, our
Long-Term Incentive Plan Compensation
| 38 | PRECISION | POWER | PERFORMANCE |
Long-Term Incentive Plan Compensation
| | 2024 ANNUAL | | | PROXY STATEMENT |
Long-Term Incentive Plan Compensation
Compensation Committee considered the input of our CEO regarding the criticality of, individual performance of, and pay levels for his direct reports. During 2023 each of our named executive officers participated in the 2023 LTI Plan, pursuant to which we granted equity awards under the Company’s 2017 Omnibus Incentive Plan, as amended. For 2023, the Compensation Committee determined the following 2023 target dollar value for equity awards granted to each of our named executive officers:
Long-Term Incentive Plan Compensation
| | 2023 LTI Plan Target | | Name | Grant Date Fair Value | | Stephen Kelley | $6,250,000 | | Paul Oldham | $1,800,000 | | Eduardo Bernal Acebedo | $1,600,000 | | Elizabeth Vonne | $1,000,000 | | John Donaghey | $1,000,000 |
Long-Term Incentive Plan Compensation
2023 LTI Plan targets are set at levels that the Compensation Committee deems to be sufficient to attract and retain highly talented executive officers capable of fulfilling the Company’s key objectives. In consultation with Compensia, the Compensation Committee reviewed the LTI Plan targets of the Company’s executive officers compared to the peer group and general market data, as well as named executive officer performance and execution, to determine a 2023 LTI Plan target award value. The Compensation Committee determined that each of the named executive officers listed above would receive (a) 50% of the 2023 LTI Plan award value in the form of time-based restricted stock units and (b) 50% of the LTI Plan award value in the form of performance stock units. We determined the number of time-based restricted stock units and performance stock units to be granted to each named executive officer by dividing each named executive officer’s target grant date value indicated above by the 30-day trailing average of the closing price of the Company’s common stock leading up to the grant date, which was March 1, 2023 for the named executive officers. Accordingly, these values differ from the grant date fair value amounts reported in the “Summary Compensation Table for 2023” below, which are reported in accordance with both SEC and accounting rules. Further details regarding the number of time-based restricted stock units and performance stock units that we granted to each of the named executive officers under the 2023 LTI Plan can be found in the “2023 Grants of Plan-Based Awards” table below. The grants of time-based restricted stock units in 2023 vest ratably over a three-year period with 1/3 vesting on each anniversary of the grant date. The Compensation Committee, in consultation with Compensia, kept the metrics for the achievement of the performance stock units granted as part of the 2023 LTI Plan largely unchanged from 2022. In 2023, the performance stock units were again based 70% on our relative total shareholder return (“rTSR”) performance compared to a benchmark performance of the S&P 1000, and 30% based on achievement of strategic goals. For 2023, the strategic goal relates to achievement of established levels of non-GAAP gross margin percentage measured over any four consecutive quarters in the three-year performance period. Amounts may be earned as performance occurs, but do not vest and are not issued until the end of the performance period. The Compensation Committee believes that these metrics again closely align management’s interests with stockholders and maintains a focus on achieving strategic objectives. With respect to the rTSR component, eligible participants have the opportunity to earn up to one-third of the performance stock units during each of the 12-month, 24-month, and 36-month measurement periods, respectively, based on our rTSR performance compared to the S&P 1000. Eligible participants also have the ability to earn any additional performance stock units not earned in the first two measurement periods based on financial performance of our rTSR ranking relative to the S&P 1000 during the 36-month performance period. As noted above, any earned performance stock units are not eligible to vest or be issued until the end of the 36-month performance period. The multi-year structure reflects the cyclical nature of the markets that the Company operates in and encourages performance each year, while the 36-month performance period reflects the long- term incentive structure of the plan. As of December 31, 2023, participants have banked and earned
Long-Term Incentive Plan Compensation
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Long-Term Incentive Plan Compensation
| 2024 ANNUAL | | | PROXY STATEMENT | |
Long-Term Incentive Plan Compensation
23.3% of the total shares granted at target based on rTSR performance in 2023; provided however, that these shares will not vest until the end of the three-year performance period.
Long-Term Incentive Plan Compensation
| 2023 LTI Performance Stock Unit Performance Goals | | | | | | | | Threshold | Target | Stretch | | | | (0% | (100% | (200% | | Financial Performance Metric | Weight | payout) | payout) | payout) | | Relative Total Shareholder Return | 70% | -50pp to Index | At Index | +50pp to Index | | Non-GAAP Gross Margin Percentage* | 30% | 37% | 40% | 42% |
Long-Term Incentive Plan Compensation
| * Non-GAAP Gross Margin Percentage refers to the Company’s non-GAAP gross margin from continuing operations, which excludes non-cash related charges (such as stock-based compensation) and non-recurring items (such as acquisition related costs and facility expansion, relocation, and restructuring related costs). |
Long-Term Incentive Plan Compensation
The chart set forth below shows the time-based restricted stock units (which vest in three equal installments on each of the first three anniversaries of the grant date) and the performance stock units awarded under the 2023 LTI Plan and earned as a result of the performance for the year.
Long-Term Incentive Plan Compensation
| | 2023 LTI Time-Based | 2023 LTI Time-Based | 2023 LTI Performance | 2023 LTI Performance | | | Restricted Stock | Restricted Stock Units | Stock Units Granted | Stock Units Vested | | | Units Granted | Vested in 2023 | (At Target) | In 2023 | | Name | (#) | (#) | (#) (1) | (#) | | Stephen Kelley | 32,849 | — | 32,849 | — | | Paul Oldham | 9,460 | — | 9,460 | — | | Eduardo Bernal Acebedo | 8,409 | — | 8,409 | — | | Elizabeth Vonne | 5,255 | — | 5,255 | — | | John Donaghey | 5,255 | — | 5,255 | — |
Long-Term Incentive Plan Compensation
| (1) In 2023, we granted these awards at the target amount. Previous years were granted at 200% of the target amount for tracking purposes, should stretch targets be met. |
Long-Term Incentive Plan Compensation
The chart set forth below shows the time-based restricted stock units (which vest in three equal installments on each of the first three anniversaries of the grant date) and the performance stock units awarded under the 2022 Long-Term Incentive Plan (the “2022 LTI Plan”) and earned as a result of the rTSR performance for the year. As of December 31, 2023, participants have banked and earned 46.6% of the total shares granted at target based on rTSR performance in 2022 and 2023; provided however, these shares will not vest until the end of the three-year performance period. Consistent with the design of the 2023 LTI Plan, our Compensation Committee determined that if the performance results of the 36-month period, as applied to all of the rTSR performance stock units, exceeds the sum of the 12-month, 24-month, and 36-month performance periods, each as applied to one-third of the rTSR performance stock units, then the performance results for the 36-month performance period will be the rTSR achievement for all of the rTSR performance stock units (up to 200%).
Long-Term Incentive Plan Compensation
| 40 | PRECISION | POWER | PERFORMANCE |
Long-Term Incentive Plan Compensation
| | 2024 ANNUAL | | | PROXY STATEMENT |
Long-Term Incentive Plan Compensation
| | 2022 LTI Time-Based | 2022 LTI Time-Based | 2022 LTI Performance | 2022 LTI Performance | | | Restricted Stock | Restricted Stock Units | Stock Units Granted | Stock Units Vested | | | Units Granted | Vested in 2023 | (At Target) | In 2023 | | Name | (#) | (#) | (#) (1) | (#) | | Stephen Kelley | 26,564 | 8,855 | 26,564 | — | | Paul Oldham | 7,674 | 2,558 | 7,674 | — | | Eduardo Bernal Acebedo | 7,083 | 2,361 | 7,084 | — | | Elizabeth Vonne (2) | 5,146 | 1,716 | 3,371 | — | | John Donaghey | 4,132 | 1,378 | 4,132 | — |
Long-Term Incentive Plan Compensation
| (1) Granted at 200% of the target amount should stretch targets be met for tracking purposes. |
Long-Term Incentive Plan Compensation
| (2) Reflects an initial grant Ms. Vonne received upon joining the Company of time-based restricted stock units valued at $150,000. |
Long-Term Incentive Plan Compensation
2021 Long-Term Incentive Plan In 2021, we awarded each of our named executive officers performance stock units under our 2021 Long-Term Incentive Plan (the “2021 LTI Plan”) that vest based on our achievement of performance metrics over a three-year performance period (2021-2023). Under the 2021 LTI Plan, the performance stock units would vest based on the achievement of rTSR performance relative to the S&P 1000 for the 12-month, 24-month, and 36-month measurement periods and achievement of the strategic objectives to increase our market share in specified areas and to develop and implement an ESG plan. Our Compensation Committee determined to base the performance outcome for the rTSR component of the 2021 LTI Plan on our 36-month rTSR performance relative to the S&P 1000, which was achieved at 78.3%, and determined that the strategic objectives were achieved at the 116.6% performance level, resulting in overall performance for the 2021 LTI Plan of 89.8% of target. We believe that disclosure of the specific strategic objectives and outcomes could cause competitive harm as such corporate goals and results are not publicly disclosed and are competitively sensitive. Similar to our other targets, the Compensation Committee set the strategic objectives at a rigorous level so as to be challenging, yet achievable.
Long-Term Incentive Plan Compensation
| | 2021 LTI Time-Based | 2021 LTI Time-Based | 2021 LTI Performance | 2021 LTI Performance | | | Restricted Stock | Restricted Stock Units | Stock Units Granted | Stock Units Vested | | | Units Granted | Vested in 2023 | (at Target) | In 2024 | | Name | (#) | (#) | (#) (1) | (#) | | Stephen Kelley | 22,052 | 7,351 | 22,052 | 19,801 | | Paul Oldham | 5,513 | 1,838 | 5,513 | 4,949 | | Eduardo Bernal Acebedo | 7,459 | 2,487 | 1,715 | 1,538 | | Elizabeth Vonne (2) | — | — | — | — | | John Donaghey | 3,421 | 1,140 | 1,474 | 1,322 |
Long-Term Incentive Plan Compensation
| (1) Granted at 200% of this amount should stretch targets be met. |
Long-Term Incentive Plan Compensation
| (2) Ms. Vonne did not receive a grant for the 2021 plan year. |
Long-Term Incentive Plan Compensation
Additional information regarding the number of restricted stock units that vested under our 2021, 2022, and 2023 LTI Plans for each named executive officer in 2023 can be found below in the “2023 Option Exercises and Stock Vested” table and information regarding the number of restricted stock units that are unvested but remain outstanding for each named executive officer can be found below in the “2023 Outstanding Awards at Fiscal Year End” table.
Change in Control and General Severance Agreements
Change in Control and General Severance Agreements The Company entered into certain executive change in control and general severance agreements (the “agreements”) in 2018 with Mr. Oldham, in 2021 with Mr. Kelley and in 2022 with Ms. Vonne and Mr. Donaghey. The agreements provide each of the executive officers with severance payments and certain benefits in the event of a termination without cause (as defined in the agreements) at any time (known as the “General Severance Benefits”), or a termination without cause or for good reason (as defined in the agreements) following an actual, or during a pending, change in control (known as “CIC Benefits”). The Company provides CIC Benefits in order to keep management focused on the Company’s stated corporate objectives irrespective of whether the achievement of such objectives makes the Company attractive for acquisition, and to avoid the distraction and loss of key management that could occur in connection with a rumored or actual change in corporate control. The Company decided to also provide General Severance Benefits in these agreements after determining that such benefits were commonly provided by the Company’s peers. The Compensation Committee approved the terms and conditions of the agreements based on consideration of marketplace benchmark data and the Company’s retention objectives. Under these agreements, if the executive’s employment is terminated without cause (and not in connection with a change in control), then the General Severance Benefits provided to the executive are: (a) all then accrued compensation, (b) a lump sum payment equal to one times (1x) (or in the case of the Chief Executive Officer, one and a half times (1.5x)) the executive’s then current annual base salary, (c) continuation of insurance and other benefits for twelve (12) months following the date of termination, (d) an amount equal to the contributions that would have been made to the Company’s retirement plans on behalf of executive, if the executive had continued to be employed for twelve (12) months following the date of termination, and (e) reimbursement, up to $15,000, for outplacement services. Under these agreements, in the event of an executive’s termination without cause or for good reason within 12 months following an actual, or during a pending, change in control, the CIC Benefits provided to the executive are: (a) all then accrued compensation and a pro-rata portion of executive’s target bonus for the year in which the termination is effected, (b) a lump sum payment equal one and a half times (1.5x) the executive’s then current annual base salary and target bonus for the year in which the termination is effected (or in the case of the Chief Executive Officer, two times (2x) the then current annual base salary and target bonus amount), (c) continuation of insurance and other benefits for 18 months following the date of termination, (d) an amount equal to the contributions that would have been made to the Company’s retirement plans on behalf of executive, if the executive had continued to be employed for twelve (12) months following the date of termination, (e) reimbursement, up to $15,000, for outplacement services, and (f) full vesting and right to exercise all stock options, equity grants and other equity awards (at maximum) then held by the executive so terminated. The payment of the General Severance Benefits and CIC Benefits under these agreements are conditioned upon the executive’s execution of a release of claims against the Company. Compensation Risk Assessment In 2023, the Compensation Committee, with the assistance of our compensation consultant, Compensia, Inc., reviewed the formal risk assessment for all our incentive compensation programs that have material impact on our financial statements. In conducting such review, the Compensation Committee considered key information about each incentive compensation plan within our compensation program, including the number of participants, target annual awards, performance metrics, and design features. As a result of such review, the Compensation Committee determined that none of our incentive plans presents a material adverse risk to the financial statements of the Company.
Change in Control and General Severance Agreements
| 44 | PRECISION | POWER | PERFORMANCE |
Change in Control and General Severance Agreements
| | 2024 ANNUAL | | | PROXY STATEMENT |
Change in Control and General Severance Agreements
Compensation Committee Report The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically incorporates such information by reference in a document filed under the Securities Act or the Exchange Act. The Compensation Committee of the Board has reviewed and discussed with management the above Compensation Discussion and Analysis for fiscal year 2023. Based upon the review and discussions, the Compensation Committee recommended to the Board, and the Board has approved, that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement for its 2024 Annual Meeting. This report is submitted by the Compensation Committee. Frederick A. Ball, Chair Anne T. DelSanto David W. Reed John A. Roush
Change in Control and General Severance Agreements
| PRECISION | POWER | PERFORMANCE | 45 |
Change in Control and General Severance Agreements
| 2024 ANNUAL | | | PROXY STATEMENT | |
Change in Control and General Severance Agreements
Equity Compensation Plan Information The Company currently maintains two equity compensation plans, each of which were approved by the Company’s stockholders: The Company’s Amended and Restated 2023 Omnibus Incentive Plan (the “2023 Omnibus Plan”) and the Employee Stock Purchase Plan (“ESPP”). The 2023 Omnibus Plan replaced and superseded the Company’s 2017 Omnibus Incentive Plan, as amended (the “Prior Plan”), which terminated on April 27, 2023, following stockholders’ approval of the 2023 Omnibus Plan. Although options remain outstanding under the Prior Plan, no shares are available for future equity grants. The following table sets forth the number of shares of common stock subject to outstanding options and other rights, the weighted-average exercise price of outstanding options, and the number of shares remaining available for future award grants as of December 31, 2023, in the equity compensation plans.
Change in Control and General Severance Agreements
| | A | B | C | | | | | Number of securities | | | | | remaining available | | | Number of securities | | for issuance under | | | to be issued upon | Weighted average | equity compensation | | | exercise of outstanding | exercise price of | plans (excluding | | | options, warrants, | outstanding options, | securities reflected | | | and rights | warrants, and rights | in column (A) | | Plan Category | (#) | ($) | (#) | | Equity Compensation plans approved by security holders | 89,162(1) | 76.69 | 2,900,540(2) | | Equity compensation plans not approved by security holders | — | — | — | | Total | 89,162(1) | 76.69 | 2,900,540(2) |
Change in Control and General Severance Agreements
| (1) Includes shares underlying options granted under the Prior Plan. |
Change in Control and General Severance Agreements
| (2) Includes 577,461 shares available for future issuance under the ESPP. |
Change in Control and General Severance Agreements
| 46 | PRECISION | POWER | PERFORMANCE |
Change in Control and General Severance Agreements
| | 2024 ANNUAL | | | PROXY STATEMENT |
Change in Control and General Severance Agreements
Management Executive officers of the Company are appointed by the Board and serve until their successors have been appointed and qualified or until their earlier resignation or removal by the Board. The following table sets forth names and ages of our current executive officers of the Company and their respective positions with the Company as of the date of mailing this proxy statement.
Change in Control and General Severance Agreements
| Name | Age | Position | Principal Occupation and Business Experience | | STEPHEN KELLEY | 61 | President, Chief Executive Officer and Director | Stephen D. Kelley has served as President & Chief Executive Officer, and as a member of Board of Directors of the Company since March 2021. Mr. Kelley served as President & CEO of Amkor Technology, Inc. (Nasdaq: AMKR), a publicly traded leading semiconductor package and test company, from May 2013 to June 2020. Prior to joining Amkor, Mr. Kelley served as Senior Advisor to Advanced Technology Investment Company, the Abu Dhabi-sponsored investment company that owns GlobalFoundries, until December 2012. Mr. Kelley served as Executive Vice President and Chief Operating Officer of Cree Inc. (now Wolfspeed, Inc., NYSE: WOLF) from 2008 to 2011. Previously, Mr. Kelley held executive leadership roles of various businesses at companies including Texas Instruments, Philips Semiconductors, National Semiconductor, and Motorola. Mr. Kelley currently serves on the board of directors of ONTO Innovation Inc. (NYSE: ONTO), a leader in the process control for the semiconductor and related industries, since January 2023. Mr. Kelley holds an SB ChE from the Massachusetts Institute of Technology and a JD from Santa Clara University. | | PAUL OLDHAM | 61 | Executive Vice President, Chief Financial Officer | Mr. Oldham joined the Company in May 2018 as its Executive Vice President & Chief Financial Officer. Previously Mr. Oldham served as the Senior Vice President of Administration, Chief Financial Officer and Corporate Secretary of Electro Scientific Industries, Inc., a developer and manufacturer of laser-based production equipment (“ESI”), from February 2016, until December 2017, and as the Vice President of Administration, Chief Financial Officer and Corporate Secretary of ESI from January 2008, until February 2016. Prior to joining ESI, Mr. Oldham was employed at Tektronix, Inc., a test, measurement, and monitoring company, since 1988, where he held several senior leadership positions, including Vice President Finance and Corporate Controller, Vice President - Treasurer and Investor Relations and European Operations Controller. Mr. Oldham has a bachelor’s degree in Accounting and an MBA in accounting and finance from Brigham Young University. | | EDUARDO BERNAL ACEBEDO | 57 | Executive Vice President, Chief Operations Officer | Mr. Bernal Acebedo joined the Company in September 2021 as Executive Vice President and Chief Operations Officer and is based in Singapore. Mr. Bernal Acebedo has more than 30 years of experience managing global operations in the semiconductor industry and has successfully led large, complex, global organizations through phases of significant growth and transformation. He joined the Company from NXP Semiconductors (Nasdaq: NXPI), where he was senior vice president of assembly and test operations, responsible for a global footprint of multiple factories with a team of 12,000 employees. Prior to that, Mr. Bernal Acebedo was with Texas Instruments, where he held various leadership roles in operations, manufacturing, planning, and quality. Mr. Bernal Acebedo holds a Bachelor of Science degree in Industrial Engineering from the Technological Institute of Aguascalientes in Mexico and is a graduate of the Leading Organization & Change program from the Massachusetts Institute of Technology. |
Change in Control and General Severance Agreements
| PRECISION | POWER | PERFORMANCE | 47 |
Change in Control and General Severance Agreements
| 2024 ANNUAL | | | PROXY STATEMENT | |
Change in Control and General Severance Agreements
| Name | Age | Position | Principal Occupation and Business Experience | | ELIZABETH VONNE | 51 | Executive Vice President, General Counsel & Corporate Secretary | Ms. Vonne joined the Company in April 2022 as Executive Vice President, General Counsel and Corporate Secretary. Ms. Vonne has more than 20 years of experience in the legal field. She joined the Company from Mesa Laboratories, Inc., a multinational manufacturer of critical quality control and life science tools, where she served as Vice President, Legal, General Counsel, and Secretary. Prior to that, Ms. Vonne was a Partner at Davis, Graham & Stubbs LLP, a leading law firm that focuses on corporate transactions, complex litigation, and regulatory compliance. Previously, she was an Associate Attorney at a multinational law firm in New York City. Ms. Vonne holds a Juris Doctor from Columbia Law School and a Bachelor of Arts degree from Amherst College. | | JOHN DONAGHEY | 55 | Executive Vice President, Global Sales | Mr. Donaghey joined the Company in July 2021 as Senior Vice President, Global Sales and as of July 2022, serves as Executive Vice President, Global Sales. Mr. Donaghey served in senior sales and business leadership roles at Amkor Technology, Inc. (Nasdaq: AMKR), a publicly traded leading semiconductor package and test company, for seven years, most recently as global leader of sales. Prior to that, Mr. Donaghey was with Texas Instruments (Nasdaq: TXN) from 1991 to 2014 in various leadership, sales, and marketing roles. Mr. Donaghey holds a Bachelor of Science degree in electrical engineering from Texas A&M University and a Master of Business Administration from Southern Methodist University. |
Change in Control and General Severance Agreements
| 48 | PRECISION | POWER | PERFORMANCE |
Change in Control and General Severance Agreements
| | 2024 ANNUAL | | | PROXY STATEMENT |
Change in Control and General Severance Agreements
Summary Compensation Table for 2023 The following table shows compensation information for fiscal 2021, 2022, and 2023 for the named executive officers. We did not have any other executive officers during fiscal 2023.
Change in Control and General Severance Agreements
| (1) Mr. Kelley and Ms. Vonne did not elect to participate in the non-qualified deferred compensation plan for 2023. Mr. Bernal Acebedo is not eligible to participate in the non-qualified deferred compensation plan as he is not employed in the U.S. |
Change in Control and General Severance Agreements
| (5) 2022 was the first year for the non-qualified deferred compensation plan. For 2022, $17,433 was reported in the All Other Compensation column of the Summary Compensation Table for Mr. Oldham. None of the remaining eligible named executive officers elected to participate in the non-qualified deferred compensation plan in 2022. |
Analysis of the Information Presented in the Pay Versus Performance Table
Analysis of the Information Presented in the Pay Versus Performance Table As described in detail in the section “Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable pay-for-performance philosophy. While the Company utilizes several
Analysis of the Information Presented in the Pay Versus Performance Table
| PRECISION | POWER | PERFORMANCE | 57 |
Analysis of the Information Presented in the Pay Versus Performance Table
| 2024 ANNUAL | | | PROXY STATEMENT | |
Analysis of the Information Presented in the Pay Versus Performance Table
performance measures to align executive compensation with Company performance, all of those Company measures are not presented in the Pay Versus Performance table. Moreover, 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 Item 402(v) of Regulation S-K) for a particular year. In accordance with Item 402(v) of Regulation S-K, the Company is providing the following descriptions of the relationships between information presented in the Pay Versus Performance table.
Compensation Actually Paid and Cumulative TSR
Compensation Actually Paid and Cumulative TSR The following graph illustrate the relationship between the amount of compensation actually paid to Mr. Kelley, the average amount of compensation actually paid to the Company’s named executive officers as a group (excluding Mr. Kelley), the Company’s total stockholder return, and the total stockholder return of the Dow Jones Electrical Components & Equipment Index over the four years presented in the table. We believe the “Compensation Actually Paid” in each of the years reported above and over the four-year cumulative period are reflective of the Compensation Committee’s emphasis on “pay-for-performance” as the “Compensation Actually Paid” fluctuated year-over-year, primarily due to the result of our stock performance and our varying levels of achievement against pre-established performance goals under our 2023 STI program and 2023 LTI Plans.
Compensation Actually Paid and Cumulative TSR
| 58 | PRECISION | POWER | PERFORMANCE |
Compensation Actually Paid and Cumulative TSR
| | 2024 ANNUAL | | | PROXY STATEMENT |
Compensation Actually Paid and Net Income
Compensation Actually Paid and Net Income The following graph illustrate the relationship between the amount of compensation actually paid to Mr. Kelley, the average amount of compensation actually paid to the Company’s named executive officers as a group (excluding Mr. Kelley) and the Company’s net income over the four years presented in the table. While the Company does not use net income as a performance measure in the overall executive compensation program, the measure of net income is correlated with the measure Non-GAAP Operating Income which the Company does use for setting goals in the Company’s short-term incentive compensation program. As described in more detail in the section “Compensation Discussion and Analysis,” the Company targets that approximately 18% of the value of total compensation awarded to the named executive officers consists of amounts determined under the Company short-term incentive compensation program.
Compensation Actually Paid and Net Income
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Compensation Actually Paid and Net Income
| 2024 ANNUAL | | | PROXY STATEMENT | |
Compensation Actually Paid and Revenue
Compensation Actually Paid and Revenue The following graph illustrates the relationship between the amount of compensation actually paid to Mr. Kelley, the average amount of compensation actually paid to the Company’s named executive officers as a group (excluding Mr. Kelley) and the Company’s revenue performance. While the Company uses numerous financial and non-financial performance measures for the purpose of evaluating performance for the Company’s compensation programs, the Company has determined that revenue is the financial performance measure that, in the Company’s assessment, represents the most important performance measure (that is not otherwise required to be disclosed in the table) used by the Company to link compensation actually paid to the Company’s named executive officers, for the most recently completed fiscal year, to Company performance. As described in more detail in the section “Compensation Discussion and Analysis,” the Company targets that approximately 18% of the value of total compensation awarded to the named executive officers consists of amounts determined under the Company short-term incentive compensation program and approximately 60% of the value of total compensation awarded to the named executive officers is to be comprised of equity awards, including restricted stock and stock options.
Compensation Actually Paid and Revenue
| 60 | PRECISION | POWER | PERFORMANCE |
Compensation Actually Paid and Revenue
| | 2024 ANNUAL | | | PROXY STATEMENT |
Compensation Actually Paid and Revenue
CEO Pay Ratio As required by SEC rules, we are providing the following information about the ratio of the median annual total compensation of our employees and the annual total compensation of Mr. Kelley, our President and Chief Executive Officer. For the year ended December 31, 2023:
Compensation Actually Paid and Revenue
| ● | the median of the annual total compensation of all employees of our Company was reasonably estimated to be $8,368. The median identified is an Engineer, Design, located in the Philippines. |
Compensation Actually Paid and Revenue
| ● | the annual total compensation of Mr. Kelley for 2023, calculated in accordance with the Summary Compensation Table rules, was $8,296,122. |
Compensation Actually Paid and Revenue
| ● | based on this information, the ratio of the annual total compensation of our chief executive officer to the median of the annual total compensation of all other employees is estimated to be 991 to 1. |
Compensation Actually Paid and Revenue
Excluding our CEO, we identified the median employee by examining the base salary for all individuals we employed on December 31, 2023, the last day of our payroll year. We included all our employees globally, whether full-time, part-time, or seasonal, including any interns, fixed term, or apprentice employees. We annualized the total actual base salary for any permanent employee that works full-time but was hired after January 1, 2023. For any employee that we paid in currency other than U.S. Dollars, we then applied the applicable foreign currency exchange rate as of December 31, 2023, to convert such employee’s total compensation into U.S. Dollars. Once we identified our median employee, we added together all of the elements of such employee’s compensation for 2023 in the same way that we calculate the annual total compensation of our named executive officers in the Summary Compensation Table. To calculate our ratio, we divided Mr. Kelley’s annual total compensation by the median employee’s annual total compensation.
Compensation Actually Paid and Revenue
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Compensation Actually Paid and Revenue
| 2024 ANNUAL | | | PROXY STATEMENT | |
Compensation Actually Paid and Revenue
Certain Relationships and Related Transactions Policies and Procedures with Respect to Related Party Transactions The Board is committed to upholding the highest legal and ethical standards of conduct in fulfilling its responsibilities and recognizes that transactions with the Company involving related parties can present a heightened risk of potential or actual conflicts of interest. Accordingly, as a general matter, it is the policy of the Company to avoid related party transactions. Such policy is evidenced in the Board Governance Guidelines and committee charters referenced in this proxy statement and in Integrity at our Core, Advanced Energy’s Code of Ethical Conduct. The types of transactions covered by the policy are:
Compensation Actually Paid and Revenue
| ● | those transactions described under FASB ASC Topic 850 or required to be disclosed in the Company’s financial statements or periodic filings with the SEC under Item 404(a) of Regulation S-K; |
Compensation Actually Paid and Revenue
| ● | any monetary engagement between the Company and a Board member or an officer; and |
Compensation Actually Paid and Revenue
| ● | business or personal relationships between Board members. |
Compensation Actually Paid and Revenue
Any related party transaction that does arise must be reviewed and approved by the Audit and Finance Committee. The Audit and Finance Committee, in determining whether to approve the transaction, reviews the facts and circumstances in respect of the transaction for conflicts of interest, including the extent of the Board member or officer’s interest in the transaction, any anticipated effect on the Board member’s or officer’s independent decision-making or judgment in respect to matters affecting the Company, whether the transaction is on terms no more favorable than terms generally available to an unaffiliated third party, any anticipated effect on a Board member’s ability to commit sufficient time and attention to the Board, and other standards deemed appropriate by the committee members in light of the particular transaction being reviewed. In addition, the Audit and Finance Committee is responsible for reviewing and investigating any matters pertaining to the integrity of management, including conflicts of interest and adherence to the Code of Ethical Conduct. Under the Code of Ethical Conduct, directors, officers, and all other members of the workforce are expected to avoid any relationships, influence, or activity that would cause or even appear to cause a conflict of interest. Certain Transactions with Related Persons To the Company’s knowledge, since January 1, 2023, the Company has not participated in, nor are there currently planned, any related party transactions required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Compensation Actually Paid and Revenue
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Compensation Actually Paid and Revenue
| | 2024 ANNUAL | | | PROXY STATEMENT |
Compensation Actually Paid and Revenue
Proposal No. 4 – Approval of Advanced Energy’s Second Amended and Restated Certificate of Incorporation to Provide Exculpation from PERSONAL Liability for Certain Officers as Permitted by Delaware Law and Make Certain Other Minor, Non-Substantive Updates
Compensation Actually Paid and Revenue
| What am I voting on and how should I vote? | You are being asked to vote on approval of Advanced Energy’s Second Amended and Restated Certificate of Incorporation that would, among other minor, non-substantive updates, provide exculpation from personal liability for certain of the Company’s officers, as permitted by 2022 amendments to the Delaware General Corporation Law. We believe this Second Amended and Restated Certificate of Incorporation is necessary in order to (i) continue to attract and retain experienced and qualified executives, as similar officer exculpation provisions have been or are likely to be adopted by our peers and others with whom we compete for talent, and (ii) reduce personal legal exposure and help curb corporate litigation and associated costs. This Second Amended and Restated Certificate of Incorporation would also more generally align the protections available to officers with those protections currently available to our directors. The Board of Directors therefore recommends you vote “FOR” the approval of the Second Amended and Restated Certificate of Incorporation. |
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On February 8, 2024, the Board approved, subject to approval from our stockholders at the 2024 Annual Meeting, the Second Amended and Restated Certificate of Incorporation of Advanced Energy (the “Proposed Certificate”) to (i) limit the personal liability of the Company’s officers (“Officer Exculpation”) in light of recent amendments to the Delaware General Corporation Law (“DGCL”) and (ii) make certain other minor, non-substantive updates and improvements (the “Non-Substantive Revisions”). Officer Exculpation Recent amendments to the DGCL, effective August 2022, enabled Delaware corporations to exculpate officers from personal liability for breach of the fiduciary duty of care in certain limited circumstances, similar to the limitations on liability that have long been applicable to directors. After careful consideration, the Board believes that the Company’s Amended and Restated Certificate of Incorporation currently in effect should be updated to align with developing law and provide exculpation from personal liability to certain senior officers in specific circumstances, as permitted by the DGCL.
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| PRECISION | POWER | PERFORMANCE | 63 |
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The DGCL and the Proposed Certificate both permit exculpation from liability only for direct claims brought by stockholders, including class actions, for breach of the fiduciary duty of care. Neither the DGCL, nor the Proposed Certificate eliminate officers’ personal liability for (i) claims for breach of the fiduciary duty of care brought by the Company itself or for derivative claims brought by stockholders in Advanced Energy’s name, (ii) breaches of the duty of loyalty, (iii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, and (iv) any transactions from which the officer derived an improper personal benefit. The Board believes the Proposed Certificate’s provision of officer exculpation is in the Company’s and its stockholders’ interests for the following reasons:
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| ● | In recent years, officers have increasingly been named as defendants in stockholder litigation for claims of breach of fiduciary duty, resulting in protracted litigation (and associated costs) that would have been quickly dismissed if brought against directors. The Board believes that the Proposed Certificate could help mitigate any potential future harm to the Company and stockholders from this trend by preventing prolonged or frivolous litigation that distracts officers from their primary responsibilities and reducing insurance costs associated with lawsuits. Additionally, as public companies increasingly adopt officer exculpation clauses, insurance companies may raise director and officer insurance premiums for corporations that do not adopt officer exculpation provisions in their governing documents. |
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| ● | The Board also believes it is necessary to provide officers with protection from exposure to personal liability to the fullest extent permitted by the DGCL in order to attract and retain skilled officers, especially as more and more public companies adopt officer exculpation provisions. The Company also expects its peers to adopt exculpation clauses that limit the personal liability officers in their governing documents, and failing to provide for Officer Exculpation could result in impaired recruitment and retention. Qualified officer candidates might be deterred from serving a company who fails to adopt similar protections due to exposure to personal liability and the risk that substantial expense may be incurred in defending lawsuits, regardless of merit. |
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| ● | Finally, Advanced Energy’s officers frequently must make time-sensitive business decisions that can create substantial risk of investigations or lawsuits seeking to impose personal liability on the basis of hindsight and regardless of merit. The Board believes that the Proposed Certificate, by limiting officers’ exposure to personal monetary liability, will empower officers to exercise their business judgment in furtherance of stockholder interests without the potential distraction of undue personal risk. Officer Exculpation will also more generally align the protections available to our directors with those available to our officers. |
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The Proposed Certificate is not being proposed in response to any specific resignation, threat of resignation, or refusal to serve by any officer or as a result of any pending or threatened litigation. Non-Substantive Revisions The Proposed Certificate also includes other minor, non-substantive improvements and updates to the Company’s currently effective Amended and Restated Certificate of Incorporation, principally technical and conforming changes and modernizing updates, such as conforming language between sections of the Proposed Certificate and the Company’s Second Amended and Restated By-Laws and substituting gender neutral terms. These minor improvements and updates will not have a substantive impact on the rights of stockholders of the Company. Effect of Approval The foregoing description of the Proposed Certificate is qualified in its entirety by reference to, and should be read in conjunction with, the full text of the Proposed Certificate, which is set forth in the form of the Second Amended and Restated Certificate of Incorporation attached hereto as Appendix B to this proxy statement. For
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your convenience, Appendix B is marked with additions indicated by bold, underlined text and deletions indicated by struck text. If the Proposed Certificate is approved by the Company’s stockholders, it will become effective upon the filing of the Second Amended and Restated Certificate of Incorporation with the Delaware Secretary of State. This filing is expected to occur shortly after the 2024 Annual Meeting. If the Proposed Certificate is not approved by the Company’s stockholders, the Company’s Amended and Restated Certificate of Incorporation will not be amended and restated, and no exculpation from personal liability will be provided for the Company’s officers. The Company’s officers will nevertheless retain their rights under any indemnification agreements and insurance policies. Required Vote Approval of the Proposed Certificate requires the affirmative “FOR” vote of sixty-six and two-thirds percent (66 ⅔%) of the outstanding shares of voting stock of the Company. Abstentions and broker non-votes will have the same effect as a vote against this proposal. The Board of Directors recommends a vote “FOR” the approval of Advanced Energy’s Second Amended and Restated Certificate of Incorporation to provide exculpation from personal liability for certain officers as permitted by Delaware law and make certain other minor, non-substantive updates.
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Conduct and Communications Code of Ethical Conduct Advanced Energy has adopted Integrity at our Core, Advanced Energy’s Code of Ethical Conduct updated in 2023, which applies to all employees, officers, contractors, and members of the Board of Directors. The Code of Ethical Conduct is available on our website at www.advancedenergy.com/en-us/about/environment-social-and-governance. Any waivers of, or amendments to, our Code of Ethical Conduct will be posted on our website. Communications with Directors The Board of Directors has established a process to receive communications from stockholders and other interested parties. Stockholders and other interested parties may contact any member, or all members, of the Board of Directors electronically or by mail. Electronic communications should be addressed to corporate.secretary@aei.com. Mail may be sent to any director or the Board of Directors in care of Advanced Energy’s corporate office at 1595 Wynkoop St., Suite 800, Denver, CO 80202. All such communications will be forwarded to the full Board of Directors or to any individual director to whom the communication is addressed unless the communication is clearly of a marketing or inappropriate nature. Proposals of Stockholders Stockholder Proposals for Inclusion in Next Year’s Proxy Statement To be considered for inclusion in next year’s proxy statement, stockholder proposals submitted in accordance with Rule 14a-8 under the Exchange Act must be received at our principal executive offices no later than the close of business on November 15, 2024. Proposals should be addressed to Corporate Secretary, Advanced Energy Industries, Inc., 1595 Wynkoop Street, Suite 800, Denver, Colorado 80202. Other Stockholder Proposals for Presentation at Next Year’s Annual Meeting Our Second Amended and Restated By-Laws require that any stockholder proposal that is not submitted for inclusion in next year’s proxy statement under Rule 14a-8 under the Exchange Act but is instead sought to be presented directly at the 2025 annual meeting of stockholders (the “2025 Annual Meeting”), must be received at our principal executive offices not earlier than the 90th day and not later than the close of business on the 60th day prior to the anniversary of the date of the 2024 Annual Meeting. As a result, proposals, including director nominations, submitted pursuant to our Second Amended and Restated By-Laws must be received no earlier than January 26, 2025 and no later than the close of business on February 24, 2025; provided, however, that in the event that the 2025 Annual Meeting is called for a date that is not within 30 days before or after the date of the 2024 Annual Meeting, notice by stockholders in order to be timely must be delivered not earlier than the close of business on the 90th day prior to the date of the 2025 Annual Meeting and not later than the 60th day prior to the date of the 2025 Annual Meeting. In the alternative, if the first public announcement of the date of the 2025 Annual Meeting is less than 70 days prior to the date of such annual meeting, notice by stockholders must be delivered no later than the 10th day following the day on which public announcement of the date of the 2025 Annual Meeting is first made by the Company in order to be timely. Proposals should be addressed to Corporate Secretary, Advanced Energy Industries, Inc., 1595 Wynkoop Street, Suite 800, Denver, Colorado 80202. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above. Stockholders are advised to review the Second Amended and Restated By-Laws, which contain additional requirements with respect to advance notice of stockholder proposals and director nominations. In addition to satisfying the
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foregoing requirements under our Second Amended and Restated By-Laws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than February 24, 2025. Form 10-K The Annual Report on Form 10-K for the year ended December 31, 2023 is included in the 2023 Annual Report to Stockholders (the “2023 Annual Report”) accompanying this proxy statement. You can obtain an additional copy of the 2023 Annual Report on our website, www.advancedenergy.com, or by mailing a request to the Corporate Secretary of Advanced Energy at 1595 Wynkoop Street, Suite 800, Denver, Colorado 80202. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires that our executive officers, directors, and certain persons who beneficially own more than 10% of our shares file with the SEC reports of ownership and changes in ownership of our shares and other equity securities. To the Company’s knowledge, based solely on a review of the copies of Forms 3, 4 and 5 filed with the SEC and on written representations from certain reporting persons, we believe that during 2023, our directors, executive officers, and ten-percent stockholders complied with all applicable Section 16(a) filing requirements on a timely basis, except for (i) one Form 4 filed for Paul R. Oldham on July 5, 2023 to report a sale of shares pursuant to a Rule 10b5-1 trading plan on June 29, 2023, (ii) one Form 4 filed for Lanesha T. Minnix on December 14, 2023 to report a sale of shares pursuant to a Rule 10b5-1 trading plan on May 10, 2023, and (iii) one Form 4 filed for John Donaghey on January 19, 2024 to report the withholding of shares for tax liability on August 2, 2023 incident to vesting of restricted stock units. General Meeting Matters The board of directors of Advanced Energy is making this solicitation for proxies. By delivering the enclosed proxy card by any of the methods described on the card, you will appoint each of Stephen D. Kelley, Paul R Oldham, and Elizabeth K. Vonne as your agent and proxy to vote your shares of common stock at the meeting. In this proxy statement, “proxy holders” refers to Messrs. Kelley and Oldham and Ms. Vonne in their capacities as your agents and proxies. Advanced Energy’s principal executive offices are located at 1595 Wynkoop Street, Suite 800, Denver, Colorado 80202. The telephone number is 970-407-6626. Record Date and Share Ownership If you owned shares of Advanced Energy common stock in your name as of the close of business on March 5, 2024, you are entitled to vote on the proposals that are presented at the 2024 Annual Meeting. On that date, which is referred to as the “record date” for the meeting, 37,395,284 shares of Advanced Energy common stock were issued and outstanding and were held by approximately 236 stockholders of record, according to the records of Equiniti Trust Company LLC (previously known as American Stock Transfer & Trust Company), Advanced Energy’s transfer agent.
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Voting Procedures Each share of Advanced Energy common stock that you hold entitles you to one vote on each of the proposals that are presented at the 2024 Annual Meeting. Each stockholder entitled to vote at the 2024 Annual Meeting may cast his, her or its vote in person or by proxy. To vote in person, a stockholder should attend the 2024 Annual Meeting with a completed proxy or, alternatively, the Company will give you a ballot to complete upon arrival at the 2024 Annual Meeting. To vote by mail using a proxy card, a stockholder should mark, sign, date and mail the enclosed proxy card as promptly as possible in the enclosed postage-prepaid envelope. To vote by telephone, dial (866) 390-9955 using a touch-tone phone and follow the recorded instructions. To vote via the Internet, a stockholder must go to www.proxypush.com/AEIS and complete an electronic proxy card. The inspector of election will determine whether or not a quorum is present at the 2024 Annual Meeting. A quorum will be present at the 2024 Annual Meeting if a majority of the shares entitled to vote at the 2024 Annual Meeting are represented at the 2024 Annual Meeting, either by proxy or by the person who owns the shares. In the event there are not sufficient shares of stock entitled to vote present for a quorum or to approve any proposals at the time of the 2024 Annual Meeting, the 2024 Annual Meeting may be adjourned in order to permit further solicitation of proxies. Advanced Energy’s transfer agent will deliver a report to the inspector of election in advance of the 2024 Annual Meeting, tabulating the votes cast by proxies returned to the transfer agent. The inspector of election will tabulate the final vote count, including the votes cast in person and by proxy at the 2024 Annual Meeting. If a broker holds your shares, this proxy statement and the enclosed proxy card have been sent to the broker. You may have received this proxy statement directly from your broker, together with instructions as to how to direct the broker concerning how to vote your shares. Under the rules for Nasdaq-listed companies, brokers cannot vote on certain matters without instructions from you. If you do not give your broker instructions or discretionary authority to vote your shares on such matters and your broker returns the proxy card without voting on a proposal, your shares will be recorded as “broker non-votes” with respect to the proposals on which the broker does not vote. Broker non-votes and abstentions will be counted as present for purposes of determining whether a quorum is present. If a quorum is present, the directors referenced in Proposal 1 will be elected by a plurality of the votes of shares present at the 2024 Annual Meeting (by proxy or in person), Proposals 2 and 3 will be approved by a majority of the shares present at the 2024 Annual Meeting (by proxy or in person), excluding abstentions and broker non-votes, and Proposal 4 will be approved by sixty-six and two-thirds percent (66 ⅔%) of the outstanding shares of voting stock of the Company. Broker non-votes and abstentions will have no effect on the outcome of Proposals 1 – 3 and will have the same effect as a vote against Proposal 4. Cumulative voting shall not be allowed in the election of directors or any of the proposals being submitted to the stockholders at the 2024 Annual Meeting.
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The following table reflects the vote required for each proposal and the effect of broker non-votes and abstentions on the vote, assuming a quorum is present at the Annual Meeting:
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| Proposal | | Vote Required | Effect of Broker Non- Votes and Abstentions | | 1 | Election of ten (10) directors | Plurality of votes of shares present at the 2024 Annual Meeting (by proxy or in person), subject to the resignation policy described on page 15 | No effect | | 2 | Ratification of the appointment of Ernst & Young LLP as Advanced Energy’s independent registered public accounting firm for 2024 | Majority of shares present at the Annual Meeting (by proxy or in person), excluding broker non-votes and abstentions | No effect | | 3 | Advisory approval of Advanced Energy’s compensation of its named executive officers | Majority of shares present at the Annual Meeting (by proxy or in person), excluding broker non-votes and abstentions – this is an advisory vote which is not binding on the Company | No effect | | 4 | Approval of Advanced Energy’s Second Amended and Restated Certificate of Incorporation to provide exculpation from personal liability for certain officers as permitted by Delaware law and make certain other minor, non-substantive updates | Sixty-six and two-thirds percent (66 ⅔%) of outstanding shares of voting stock of the Company | Same effect as a vote “against” |
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If any other proposals are properly presented to the stockholders at the Annual Meeting, the number of votes required for approval will depend on the nature of the proposal. Generally, under Delaware law and the Second Amended and Restated By-Laws of Advanced Energy, the number of votes required to approve a proposal is a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote, excluding broker non-votes and abstentions. The proxy card provided herewith gives discretionary authority to the proxy holders to vote on any matter not included in this proxy statement that is properly presented to the stockholders at the Annual Meeting. Costs of Solicitation Advanced Energy will bear the costs of soliciting proxies in connection with the Annual Meeting. In addition to soliciting your proxy by this mailing, proxies may be solicited personally or by telephone or facsimile by some of Advanced Energy’s directors, officers and employees, without additional compensation. We may reimburse our transfer agent, Equiniti Trust Company, LLC (previously known as American Stock Transfer & Trust Company), our proxy agent, Mediant Communications, brokerage firms and other persons representing beneficial owners of Advanced Energy common stock for their expenses in sending proxies to the beneficial owners. We do not currently intend to retain a professional solicitor to assist in the solicitation of proxies, however, we may later elect to do so.
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| PRECISION | POWER | PERFORMANCE | 69 |
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Delivery and Revocability of Proxies In addition to the ability of our record stockholders to vote in person at the Annual Meeting, you may vote your shares either by (i) marking the enclosed proxy card and mailing it in the enclosed postage prepaid envelope, (ii) voting online at www.proxypush.com/aeis, or (iii) voting by telephone at (866) 390-9955. If you mail your proxy, please allow sufficient time for it to be received in advance of the Annual Meeting. If you deliver your proxy and change your mind before the Annual Meeting, you may revoke your proxy by delivering notice to our Corporate Secretary at Advanced Energy Industries, Inc., 1595 Wynkoop Street, Suite 800, Denver, Colorado 80202, stating that you wish to revoke your proxy or by delivering another proxy with a later date. You may vote your shares by attending the Annual Meeting in person but, if you have delivered a proxy before the Annual Meeting, you must revoke it before the Annual Meeting begins. Attending the Annual Meeting will not automatically revoke your previously delivered proxy. Delivery of Documents to Stockholders Sharing an Address If two or more stockholders share an address, Advanced Energy may send a single copy of this proxy statement and other soliciting materials, as well as the 2023 Annual Report, to the shared address, unless Advanced Energy has received contrary instructions from one or more of the stockholders sharing the address. If a single copy has been sent to multiple stockholders at a shared address, Advanced Energy will deliver a separate proxy card for each stockholder entitled to vote. Additionally, Advanced Energy will send an additional copy of this proxy statement, other soliciting materials and the 2023 Annual Report, promptly upon oral or written request by any stockholder to Investor Relations, Advanced Energy Industries, Inc., 1595 Wynkoop Street, Suite 800, Denver, Colorado 80202: telephone number 970- 407-6626. If any stockholders sharing an address receive multiple copies of this proxy statement, other soliciting materials, and the 2023 Annual Report and would prefer in the future to receive only one copy, such stockholders may make such request to Investor Relations at the same address or telephone number. No Incorporation by Reference As provided under SEC rules, the “Report of the Audit and Finance Committee” and the “Compensation Committee Report” contained in this proxy statement are not incorporated by reference into any of our other filings with the SEC, except to the extent we specifically incorporate either report by reference into a filing. In addition, this proxy statement includes several website addresses, which are intended to provide inactive, textual references for convenience only. The contents on the referenced websites are not part of or otherwise incorporated by reference into this proxy statement or any of our other filings with the SEC. Special Note Regarding Forward-Looking Statements This proxy statement contains, in addition to historical information, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Statements herein that are not historical information are forward-looking statements. For example, statements relating to Advanced Energy’s beliefs, expectations, and plans are forward-looking statements, as are statements that certain actions, conditions, events, or circumstances will continue. The inclusion of words such as “anticipate,” “expect,” “estimate,” “can,” “may,” “might,” “continue,” “enable,” “plan,” “intend,” “should,” “could,” “would,” “will,” “likely,” “potential,” “believe,” and similar expressions and the negative versions thereof indicate forward-looking statements; however, not all forward-looking statements may contain such words or expressions. Although Advanced Energy believes that the expectations reflected in or suggested by these forward-looking statements are reasonable, the Company may not achieve the results, performance, plans, or objectives expressed or implied by such forward-looking statements. Forward-looking statements involve risks and uncertainties, which are difficult to predict and many of which are beyond Advanced Energy’s control. Actual results could differ materially and adversely from those expressed in any forward-looking statements, and you are cautioned not to place undue reliance on forward-looking statements. Factors that could contribute
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to these differences or prove the forward-looking statements herein, by hindsight, to be overly optimistic or unachievable include the risk factors described in Advanced Energy’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and other reports and statements filed with the SEC, which can be obtained from the SEC’s website at www.sec.gov or from Advanced Energy’s Investors page at ir.advancedenergy.com. Other factors might also contribute to the differences between these forward-looking statements and Advanced Energy’s actual results. All forward looking statements are based on management’s current estimates, projections and assumptions, and Advanced Energy assumes no obligation to update them. Representation at the Annual Meeting It is important that your stock be represented at the Annual Meeting, regardless of the number of shares that you hold. You are therefore urged to execute and return, at your earliest convenience, the accompanying proxy card in the envelope that has been enclosed or vote your shares by telephone or Internet as described on the proxy card. Instructions as to how to deliver your proxy are included in this proxy statement under the section entitled “Delivery and Revocability of Proxies” on page 70 and on the enclosed proxy card. THE BOARD OF DIRECTORS Dated March 15, 2024 Denver, Colorado
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Appendix A - Reconciliation of Non-GAAP Measures The “Compensation Discussion & Analysis” and “Pay versus Performance” sections of this proxy statement include references to certain financial measures that are not recognized under generally accepted accounting principles (“GAAP”). These non-GAAP measures exclude the impact of non-cash related charges, such as stock-based compensation, amortization of intangible assets, and long-term unrealized foreign exchange gains and losses. In addition, we exclude discontinued operations and other non-recurring items such as acquisition-related costs, facility expansion and related costs, restructuring, asset impairments, and other charges, as they are not indicative of Advanced Energy’s ongoing performance. The tax effect of our non-GAAP adjustments represents the anticipated annual tax rate applied to each non-GAAP adjustment after consideration of their respective book and tax treatments. In addition, the tax effect also includes a discrete tax benefit associated with the release of a portion of our deferred tax asset valuation allowance. Reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are provided in the financial tables below. We believe that these non-GAAP measures provide useful information to management and investors to evaluate business performance without the impacts of certain non-cash charges, non-economic foreign currency remeasurements, and other cash charges which are not part of our usual operations. We use these non-GAAP measures to assess performance against business objectives, make business decisions, develop budgets, forecast future periods, assess trends, and evaluate financial impacts of various scenarios. As discussed in “Compensation Discussion & Analysis” above, the incentive plans for our named executive officers include these non-GAAP measures as criteria for achievements. Non-GAAP measures should not be considered in isolation and should not be considered superior to, or a substitute for, financial measures calculated in accordance with GAAP. To gain a complete picture of all effects on our financial results from any and all events, management does (and investors should) evaluate our results of operations in conjunction with the corresponding GAAP measures, as the use of non-GAAP measures has limitations in that the non-GAAP measures are not prepared in accordance with GAAP or based on any comprehensive set of accounting rules or principles, may be different from non-GAAP measures used by other companies, and may exclude certain items that may have a material impact upon our reported financial results.
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| Revenue | | | | | | 2021 | 2022 | 2023 | | GAAP Revenue | $1,456 | $1,845 | $1,656 |
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| Operating Income from Continuing Operations | | | | | | 2021 | 2022 | 2023 | | GAAP Operating Income | $152 | $233 | $114 | | Add backs: | | | | | Stock Based Compensation | 16 | 20 | 31 | | Acquisition related costs | 10 | 9 | 4 | | Facility expansion, relocation costs, and other | 6 | 5 | 3 | | Amortization of intangible assets | 22 | 26 | 28 | | Restructuring, asset impairments, and other charges | 5 | 7 | 27 | | Non-GAAP Operating Income from Continuing Operations | $211 | $300 | $207 |
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| PRECISION | POWER | PERFORMANCE | A-1 |
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| Net Income & EPS | | | | | | 2021 | 2022 | 2023 | | Income from continuing operations, less noncontrolling interest, net of income taxes | $135 | $202 | $131 | | Add backs: | | | | | Amortization of intangible assets | 22 | 26 | 28 | | Acquisition-related costs | 10 | 9 | 4 | | Facility expansion, relocation costs, and other | 6 | 5 | 3 | | Restructuring, asset impairments, and other charges | 5 | 7 | 27 | | Unrealized foreign currency (gain) loss | (4) | (8) | (0) | | Acquisition-related and other costs included in other income (expense), net | (2) | (8) | (2) | | Tax effect of Non-GAAP adjustments, including certain discrete tax benefits | (1) | (3) | (31) | | Stock-based compensation, net of taxes | 12 | 15 | 24 | | Non-GAAP income, net of income taxes | $183 | $245 | $184 | | Diluted earnings per share from continuing operations, as reported | $3.51 | $5.35 | $3.46 | | Add back: | | | | | Per share impact of Non-GAAP adjustments, net of taxes | $1.27 | $1.14 | $1.42 | | Non-GAAP per share earnings | $4.78 | $6.49 | $4.88 |
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| Adjusted Cash Flow | | | | | | 2021 | 2022 | 2023 | | Net cash provided by operating activities from continuing operations | $141 | $184 | $213 | | Add backs to operating profit (Acquisitions, other income, taxes) | 17 | 25 | (17) | | Non-GAAP adjustment | 14 | 1 | 34 | | Depreciation | (31) | (34) | (38) | | Other items excluded from operational cash | 5 | 3 | 52 | | Adjustment to change in operating assets and liabilities | 12 | 4 | (7) | | Adjusted Cash Flow* | $158 | $183 | $236 |
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| * For variable compensation programs, adjusted cash flow is defined as non-GAAP operating profit adjusted for changes in Net Working Capital (Changes in A/R; Inventory and A/P). |
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Note: Tables may not foot due to rounding.
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Appendix B - Second Amended and Restated Certificate of Incorporation