The primary purpose of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities for management’s conduct of the Company’s accounting and financial reporting processes and the Company’s system of internal controls regarding finance, accounting, legal compliance and ethics. The Audit Committee’s function is more fully described in its Audit Committee Charter, which the Board of Directors has adopted and is available on the Company's website. The Audit Committee reviews this Audit Committee Charter on an annual basis. The Board of Directors annually reviews the NASDAQ listing standards’Nasdaq Global Select Market definition of independence for audit committee members and has determined that each member of the Audit Committee meets that standard.
Management is responsible for the preparation, presentation, and integrity of the Company’s financial statements, and financial reporting principles, internal controls and procedures designed to ensure compliance with accounting standards, applicable laws and regulations. The Company’s independent auditors, Ernst & Young LLP, are responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with generally accepted accounting principles.
The Audit Committee has selected Ernst & Young LLP as the Company’s independent auditors for the year ending December 31, 2019,2021, and has submitted the same to the shareholders for ratification at the Annual Meeting.
This report of the Audit Committee does not constitute "soliciting material" and should not be deemed "filed" or incorporated by reference into any of the other Company filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically requests that the information be treated as soliciting material or specifically incorporates this report by reference therein.
The primary purpose of the Compensation Committee of the Board of Directors of the Company is to assist the Board of Directors in discharging its responsibilities related to compensation of the Company's officers. The Compensation Committee's function is more fully described in its Charter, which the Board of Directors has adopted and is available on the Company's website. The Compensation Committee reviews its Compensation Committee Charter on an annual basis, recommending changes to the Board of Directors when and as appropriate. The Compensation Committee is comprised of three members, each of whom the Board of Directors has determined meets the appropriate independence tests for compensation committee members under the NASDAQ listing standards.
Our Compensation Discussion and Analysis describes the key principles and approaches used to determine the elements of compensation awarded to, earned by, and paid to each of our named executive officers ('NEOs") during 2018.2020. The discussion provides information and context to the compensation disclosures included in the accompanying compensation tables and footnotes therein. It should be read in conjunction with such disclosures. It also addresses any changes to the same for 2019.2020.
We first provide a brief overview of our officer compensation program and then discuss and analyze the following topics:topics including:
Our compensation program is designed to balance short-term performance with long-term growth. Our compensation and benefits must be competitive with compensation arrangements provided to officers at comparably-sized companies with whom we compete for talent. Our officer compensation philosophy is reviewed annually by the Compensation Committee, and has the following key objectives:
Our long-term strategy builds on our strong technology foundation and leverages our operating model to drive performance in our primary industries, while at the same time seeking opportunities in other industries.
effectively.
* As adjusted to avoid impact of certain one-time or unusual events.
*As adjusted to avoid impact of certain one-time or unusual events.
One of the factors our Compensation Committee uses in setting officer compensation is an evaluation of how our target compensation and benefit levels compare to those of similarly-situated executives at companies that comprise our officer compensation peer group ("Peer Group"). Our philosophy for officer pay, including NEO pay, is
to target the 50th percentile of our Peer Group and to use general industry market data as provided by the Compensation Committee’s independent compensation consultant as appropriate. In addition to market data, other factors such as an individual’s experience, responsibilities, and long-term strategic value are also considered when making recommendations and decisions on compensation.
The Peer Group is reviewed by the Compensation Committee every year and modifications are made to ensure each company in the group meets the above comparison criteria. The companies shown in the table below comprise our Peer Group:
As part of adopting the Long-Term Incentive Plan, the Compensation Committee considered the correlation between NEO realizable compensation and Company performance. The Compensation Committee will continue to review the alignment between pay of our NEO's and our performance on a short and long-term basis.
To align pay levels for our NEOs with the Company's performance, the compensation program places the greatest emphasis on performance-based incentives. A significant majority (75%(In 2020, 77% of our CEO’s target compensation and 64%68% of the average target compensation of our other NEOs) is performance-based.
We provide base salaries to compensate our officers, including NEOs, for their primary roles and responsibilities and to provide a stable level of annual compensation. Actual NEO salary levels and adjustments thereto vary based on the NEO’sNEOs role, level of responsibility, experience, individual performance, future potential and market value, and market data including market median of our Peer Group. In addition, salary increases may be warranted because of a promotion or change in responsibilities.
The Annual Incentive Plan covers all officers, including our NEOs. At the beginning of each year, the Compensation Committee reviews and approves an annual cash bonus target for each NEO, as a percentage of base salary for the year, as observedset forth in further detail below. The NEOs may earn from 0% to 200% of base salary. The performance-related targets for revenue, operating income, and earnings per diluted share, are set by, and achievement of targets are approved by, the Compensation Committee and/or the Board of Directors.Board.
|
| | | | | | |
Executive Officer | 2018 Annual Award Performance Bonus | 2018 Discretionary Bonus |
Steve Downing | $ | 323,989 |
| $ | 180,000 |
|
Kevin Nash | $ | 132,132 |
| $ | 90,000 |
|
Neil Boehm | $ | 129,442 |
| $ | 80,000 |
|
Matt Chiodo | $ | 130,578 |
| $ | 80,000 |
|
Scott Ryan | $ | 122,417 |
| $ | 80,000 |
|
The performance and payout range (threshold, target and maximum incentive opportunity) of annual cash incentives for reaching 20182020 performance goals under the 2018 Annual Incentive Plan for each of our NEOs is provided in the table titled “Grants of Plan-Based Awards.” The actual performance bonus paid, as shown in the table above, is also provided in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” below. In addition to the Annual Incentive Plan performance payments, the Board of Directors approved discretionary bonuses for personal performance disclosed in the aforementioned table, which are included in the "Bonus" column of the "Summary Compensation Table." Discretionary bonuses were paid to NEO's based on the Company's ability to outperform underlying markets in terms of revenues, effective execution of the Company's capital allocation strategy, and tax strategies, management of capital expenditures and other factors.
For 2019,2021, the Compensation Committee has established thresholds, targets, and maximums for Revenue, Operating Income, and Earnings per Diluted Share as the Annual Incentive Plan performance metrics.
Long-Term Incentive Plan
2018. During 2018 and before, our officers, including NEO's, were eligible to receive grants of stock options under the Employee Stock Option Plan and RS under the Second Restricted Stock Plan, each of which has been approved by shareholders. These awards were predicated on: both individual and Company performance; providing incentives to help achieve our long-term goals; aligning employee interests with those of our shareholders; and retaining executive talent. With respect to such stock option awards, during 2018 officers, including NEO's, like all employees, could elect to take RS in lieu of such stock options (one share of RS for each 3.33 stock option as noted above). Such awards are noted in the "Grant of Plan-Based Awards" table.
Such stock options to officers were only granted at their fair market value on the date approved by the Board of Directors as recommended by the Compensation Committee. For 2018, stock option awards to officers were granted with a ten-year term and become exercisable (as long as employment continues), for 25 percent of the shares on each anniversary of the grant date commencing on the first anniversary of the grant date.
RS awards were made to NEO and other officers once approved by the entire Board of Directors as recommended by the Compensation Committee. In 2018, the Compensation Committee granted RS awards to NEOs and other officers at the time of the reviews of such individuals. Such restricted stock grants are for a period of years from the date of grant, and are viewed as a retention tool. Dividends are paid on RS so granted if, and to the extent, we pay dividends on our common stock. The vesting schedules associated with stock option and RS awards, in part, discourage excessive and unnecessary risk-taking (especially when considered in connection with the stock ownership guidelines for executive officers).
Based on the information set forth above, the Compensation Committee also made the following equity grants in 2018:
|
| | | | |
Executive Officer | Stock Option Grant | Restricted Share Award |
Steve Downing | 101,000 |
| 68,000 |
|
Kevin Nash | 27,000 |
| 8,000 |
|
Neil Boehm | 30,000 |
| 8,000 |
|
Matt Chiodo | 30,000 |
| 8,000 |
|
Scott Ryan | 25,000 |
| 8,000 |
|
These stock option grants and RS awards were approved pursuant to the Company's shareholder approved Employee Stock Option Plan and shareholder approved Second Restricted Stock Plan, respectively. The stock option grants are ten-year options that become exercisable as long as employment of the Company continues for 25 percent of such shares on each anniversary of the grant date commencing with the first anniversary of the grant date. The exercise price is the closing price of the stock on the grant date. RS awards vest at the fourth anniversary of the grant, except 37,000 shares of RS granted in recognition of Steve Downing's promotion to President and CEO, which vest on the fifth anniversary of the grant. For 2019, the Compensation Committee has now adopted a revised approach to equity compensation for officers, including NEO's, by creating long-term performance objectives associated with equity compensation awards, which will be in addition to vesting requirements as set forth herein.
20192020. We continue to believe that our long-term performance is driven through an ownership mentality and culture that rewards officers for creating and maximizing shareholder value. That is a philosophy that permeates our organization as evidenced by the fact that over 1,0001,400 employees receive stock option and/or RS awards. Our recently adoptedThe Long-Term Incentive Plan pursuant to the 2019 Omnibus Plan (which is subject to shareholder approval) provides officers, including our NEOs, with incentive awards that serve an important role by balancing other applicable short-term goals with long-term shareholder value creation while minimizing risk-taking behaviors that could negatively affect long-term results.
The Board of Directors and/or the Compensation Committee approves the amount of the long-term incentive awards, which are based on a percentage of the officers, including NEO’s, base salary. Each officer's, including NEO’s, award opportunity is based on a target dollar value (determined toward the beginning of the performance period) as a percentage of base salary assigned to his or her position based on market comparisons for similar positions, using both Peer Group and general industry market data. The following target opportunities apply for the 2019-20212020-2022 performance period under the Long-Term Incentive Plan:
|
| | | | |
Executive Officer | Long-Term Plan Target Opportunity percentagePercentage of Base Salary for 2019-20212020-2022 |
StevenSteve Downing | 200%240% |
Neil Boehm | 150% |
Kevin Nash | 100% |
Neil Boehm | 100%140% |
Matt Chiodo | 100%130% |
Scott Ryan | 100%125% |
2021. For 2021, the Target was moved to 285% for Mr. Downing, and 185% for the other named executive officers in lieu of base salary increases, which were deferred for the second year in a row. The Compensation Committee had intended to move base salaries for NEOs toward the market median of the Company's established Peer Group (as previously discussed and disclosed), but instead provided more upside under the Long-Term Plan for the 2021-2023 performance period. Such changes were also deemed appropriate in light of there being no adjustments to outstanding Long-Term Incentive Plan awards, though the Compensation Committee believes such adjustments could be justified as a result of the impact of the COVID-19 pandemic in order to achieve the goals of the Long-Term Incentive Plan. No other changes were made in 2021 with respect to the Long-Term Incentive Plan.
Achievement at threshold performance yields 50% of the target award and achievement of maximum performance yields another 100% of the target award. To the extent performance exceeds threshold or target, as applicable, for an applicable performance objective, but does not meet or exceed the established target or maximum, as applicable, linear interpolation is used to determine the pro rata portion of such award.
Seventy percent (70%) of the total value of the target long-term incentive opportunity is delivered through performance shares awards or PSAs and the other thirty percent (30%) through restricted stock or RS. We believe both PSAs and RSsRS are forms of performance-based incentive compensation because PSAs provide direct alignment with shareholder interests and the value of RSUs fluctuates based on stock price performance.
In addition to requiring achievement of performance objectives in respect ofto PSAs, PSAs and RS require the NEO to remain employed with the Company for three years from the grant date, unless the NEO attains retirement age, departs for good reason, dies, or becomes disabled whereby an award may be paid or partially paid.
Performance Shares
The Long-Term Incentive Plan is designed to provide PSAs for officers, including our NEOs. PSAs, which are 70% of the total long-term incentive opportunity, are tied to the achievement of two performance objectives, each weighted equally: EBITDA (50%) and ROIC (50%), adjusted as determined by the Compensation Committee. Each performance objective is based on a three-year performance period (2019-2021)(2020-2022) with a performance range that can result in PSAs of 0% to another 100% of the target opportunity. Under the Long-Term Incentive Plan, PSA'sPSAs are generally granted in February to certain officers, including NEO'sNEOs and vest based on achievement of the performance objectives and remaining employed until the third anniversary of the grant.
EBITDA drives the ability to commit resources to continued growth, but is also a measure of ability to provide shareholder return. It also drives profitable sales growth and optimizes our cost structure. ROIC ensures management uses our capital in an effective manner that drives shareholder return. Since the value of PSAs is also tied to our actual performance in key performance objectives over a three year period, PSAs align the officers' interests with those of shareholders. The target opportunities of PSAs for the NEOs are shown in the table below:
|
| | | | |
Executive Officer | Number of PSAs awarded in 20192020 (Target ) for 2019-20202020-2022 |
Steve Downing | 49,57541,516 |
|
Neil Boehm | 14,081 | |
Kevin Nash | 13,22012,916 |
|
Neil Boehm | 13,451 |
|
Matt Chiodo | 12,55911,394 |
|
Scott Ryan | 11,56810,091 |
|
Restricted Stock Awards
The other 30% of the total value of the long-term incentive opportunity consists of RS awards. RS incents and rewards executives for improving long-term stock value and serve as a retention tool. Under the Long-Term Incentive Plan, RS is generally granted in February to certain officers, including our NEOs, and cliff vest on the third anniversary of the grant, provided the recipient remains employed on the third anniversary of the grant. The RS awarded in 2019,2020, based on the target opportunities, for the NEOs are shown in the table below:
|
| | | | |
Executive Officer | Number of RS Awarded in 2019 (Target)2020 for 2019-20212020-2022 |
Steve Downing | 21,24617,792 |
|
Neil Boehm | 6,035 | |
Kevin Nash | 5,6665,535 |
|
Neil Boehm | 5,765 |
|
Matt Chiodo | 5,3824,883 |
|
Scott Ryan | 4,9584,325 |
|
All PSAsEquity awards granted to our NEOs are shown in the "Grant of Plan-Based Awards" table and RS awards are subject to shareholder approvalin the "Summary Compensation Table" below.
Retirement and Deferred Compensation
Each of the 2019 Omnibus Plan. Such awards are intendedNEOs is eligible to replace historical grantsparticipate in the following retirement and deferred compensation benefit plans:
•Retirement Savings Plan
•Deferred Compensation Plan
The Gentex Corporation Retirement Savings Plan is a tax-qualified, "safe harbor" 401(k) plan for our U.S.-based employees of stock optionsthe Company, including NEOs. Participants may elect to contribute a portion of their earnings to the plan each year. We match 100% on an employee's contributions up to 3% of compensation and restricted stock under existing plans which50% on an
employee's contributions on the 2019 Omnibusnext 2% of compensation. The matching amounts for the NEOs is listed in the "Summary Compensation Table" in the Proxy Report.
The Gentex Corporation Non-Qualified Deferred Compensation Plan (the "Deferred Compensation Plan") provides a vehicle for key employees and officers to defer compensation on a tax-favored basis. The Deferred Compensation Plan is intended to replace. Ifenhance retirement savings among a select group of management and highly compensated employees who contribute significantly to the 2019 Omnibussuccess of the Company. Only select management and highly compensated employees, including NEOs, are eligible to participate allowing them to elect, on a pre-tax basis, to defer receipt of certain compensation by making an election in accordance with the terms of the Deferred Compensation Plan. Participants are immediately vested in their own deferrals and related earnings. The Company may, but is not required, to match participant deferrals. Participants are generally vested in any such matching contributions 50% after two years but before three years of service and 100% after three years of service. A participant's vested credit balance will generally be paid on the earliest to occur of: a separation from service; a fixed date or event; a change of control; or a plan termination. A participant can elect whether to receive his or her vested credit balance in a lump sum on the relevant payment date or in installments thereafter. The Deferred Compensation Plan maintains a "rabbi trust" to assist the Company in meeting its obligations under the Deferred Compensation Plan. The assets in such trust remain subject to the creditors of the Company and are not property of any participant. The Deferred Compensation Plan is not approved by shareholders,intended to comply with Section 409A of the Internal Revenue Code.
In fiscal year 2020, participants were eligible to elect to defer up to 75% of their base pay and up to 75% of any incentive performance bonus, quarterly profit sharing bonus or look back performance bonus into the plan on a tax-deferral basis. For 2020,the Company elected to make discretionary company credit of 10% of contributions into all participants accounts. The deferral amount and the Company matching amounts for the NEOs are listed, respectively, in the "Summary Compensation Committee will consider making awards toTable" and the officers, including NEO's, under the existing plans."Non-Qualified Deferred Compensation Table" each below.
HOW COMPENSATION DECISIONS ARE MADE
Role of the Compensation Committee and CEO
The Compensation Committee of the Board of Directors assists the Board of Directors in fulfilling its obligations related to the compensation of the Company's officers and, in general, with respect to equity compensation for all employees. Our current Compensation Committee consists of a chair and independent directors who are appointed annually by the Board of Directors.Board. Under the Compensation Committee Charter, the Compensation Committee must have a minimum of three members who meet the requirements for independence as set forth by the Securities and Exchange Commission ("SEC") and the NASDAQ.NASDAQ Stock Market Rules. Members of the Compensation Committee must also qualify as
“non-employee “non-employee directors” within the meaning of Exchange Act Rule 16b-3 and as “outside directors” for purposes of Section 162(m) of the Internal Revenue Code.16b-3.
The Compensation Committee members during 20182020 were: Richard Schaum (Chair), Gary Goode, and James Wallace.
The Compensation Committee’s responsibilities include, but are not limited to, reviewing our officer compensation philosophy and strategy, participating in the performance evaluation process for our President and CEO, setting base salary and incentive opportunities for our President and CEO and other NEO's,NEOs, establishing the overarching pay philosophy for our management team, establishing incentive compensation and performance goals and objectives for our NEO's and other officers and determining whether performance objectives have been achieved. Executive sessions are held by the Compensation Committee without the participation of any member of management. Each year, the Compensation Committee reviews the performance and total compensation package of our NEOs. The Compensation Committee reviews and establishes each NEO’sNEOs total target and actual compensation for the current year, which includes base salary, annual bonus opportunities, and long-term equity incentive awards as more fully defineddescribed herein. The Compensation Committee also approves equity compensation for all employees.
Our President and CEO is responsible for making recommendations to the Compensation Committee regarding base salary and incentive opportunities for the NEOs, other than with respect to his own compensation.compensation, but does not vote with respect thereto.
Compensation decisions are made by the Compensation Committee using its sole judgment, but may be recommended to the full Board of Directors for approval as well. The Compensation Committee focuses primarily on each NEO’s performance against financial and strategic objectives and the Company's overall performance.
Role of the Independent Compensation Consultant
The Compensation Committee Charter states that the Compensation Committee may retain outside compensation consultants, legal advisors, or other advisors in its discretion. TheThough it has in the past, during 2020, the Compensation Committee has chosen to retain andid not engage its independent compensation consultant Mercer (ofMercer(US) Inc.(of the Marsh & McLennan Companies), to provide it with objective and expert analyses on certainany new or expanded services related to compensation matters. Inmatters beyond those services previously disclosed. When engaging Mercer,Mercer(US) Inc., the Compensation Committee consideredconsiders the relevant independence factors with respect to Mercer's services and determined that Mercer'sensure such work diddoes not raise any conflict of interest.
All services provided by Mercer were done pursuant to an engagement by, and under the direction and authority of, the Compensation Committee. The Compensation Committee requested Mercer's advice on a variety of topics including: assessment of the existing executive compensation program and strategy; market comparisons, including with the Peer Group; plan design alternatives; pay trends; performance metrics; stock ownership guidelines; employment agreements; director compensation; best practices; and reporting with respect to the same. Mercer did not provide any other services to the Company in 2018 and its fees for the foregoing services were $66,000 in 2018. We also used Marsh USA Inc. ("Marsh"), another of the Marsh & McLennan Companies, to provide insurance services in 2018. The Company paid Marsh $394,000 in 2018. The decision of the Compensation Committee to engage Mercer was done with the knowledge that Marsh was engaged to provide insurance services. The total fees paid to Mercer and Marsh for 2018 was approximately $460,000, which is approximately .0031% of the revenues of Marsh & McLennan Companies for 2018.
Mercer provided Peer Group and general industry compensation data to the Compensation Committee and such data was used as a frame of reference for establishing appropriate compensation targets for base salaries, annual bonuses and long-term equity incentives for officers, including NEOs for 2018 and 2019.
COMPENSATION POLICIES & PRACTICES
Stock Ownership Guidelines
We recently amended ourOur Stock Ownership Guidelines are intended to encourage executives to own a significant number of shares of our common stock. The stock ownership guidelinesStock Ownership Guidelines are calculated based on a multiple of the NEO’s annual base salary (five times for the President and CEO and three times for the other NEOs). Further, the stock ownership guidelines also apply to non-employee directors using a multiple of their annual retainer (five times).
Such Stock Ownership Guidelines provide for the NEOs and non-employee directors to achieve the targeted stock ownership levels on a schedule within five years. In determining if our NEOs and non-employee directors have satisfied the ownership requirements, we generally include RS that has been granted and any shares owned outright by the NEO or non-employee directors.
Clawback Provisions
To mitigate risk of paying either annual or long-term incentives including equity incentives based on faulty financial results, we have a Clawback Policy regarding adjustment of compensation in the event of a restatement of our financial results. It provides that the Compensation Committee will review all bonuses and other compensation paid or awarded to our executive officers based on the achievement of corporate performance goals during the period covered by a restatement. If the amount of such compensation paid or payable to any current or former executive officer based on the originally reported financial results differs from the amount that would have been paid or payable based on the restated financial results, the Company will seek recovery from the executive officer of any compensation exceeding that to which he or she would have been entitled based on the restated results.
Hedging and Pledging of Stock
Under the terms of our Anti-Hedging and Anti-Pledging Policy, no officer or director is permitted to engage in securities transactions that would allow them either to insulate themselves from or profit from, a decline in the Company's stock price. Similarly, no officer or director may enter into hedging transactions in the Company's stock. Such transactions include, but are not limited to, short sales as well as any hedging transactions in derivative securities (e.g. puts, calls, options, collars, etc.) or other speculative transactions relating to the Company's stock. Pledging of our stock is prohibited as well. This policy is intended to ensure our officers and directors have full risks and rewards of ownership of our stock.
Equity-Based Grant Practices
Under our equity-based grant practices, we make annual equity-based grants to certain officers, including NEOs, in the first quarter of the calendar year at a meeting of the Board of Directors. Under our recently adopted practice, theBoard. The exercise price, in the case of any stock options, or the value in the case of PSA'sPSAs or RS, is now the average closing price of our common stock on the NASDAQ for the twenty (20) trading days preceding the day of the grant (but prior to that, the date of grant was used). for NEOs, officers, and non-employee directors. The Compensation Committee approves all equity-based grants, though the Board of Directors also approves all NEO compensation.
Mitigation of Potential Risk in Pay Programs
The Compensation Committee has reviewed our compensation policies and practices and determined that there are no risks arising from our compensation policies and practices for our employees that are reasonably likely to have a material adverse effect on the Company. To avoid excessive risk-taking behaviors, we have put in place several mechanisms, including, but not limited to:
•Stock Ownership Guidelines;
•Caps on annual incentive payouts;
•Financial performance-based annual incentive program;
•Long-term incentive awards (which are delivered in the form of equity) based on remaining with the Company and/or financial performance objectives;
•Mix of multiple types of awards;
•Use of multiple performance objectives to determine annual and long-term incentive payouts; and
•Clawback Policy and Anti-Hedging and Anti-Pledging Policy.
Impact of Accounting and Tax Treatments
Internal Revenue Code Section 162(m)
Subject to certain exceptions, Section 162(m) of the Internal Revenue Code limits our ability to deduct compensation in excess of $1 million per year paid to certain covered employees. The exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements entered prior to November 2, 2017 and which are not materially amended thereafter. We do not believe the foregoing has had a material impact on the Company's compensation-related decision making or our results of operations.
Accounting for Stock-Based Compensation
We account for stock-based payments under our equity-based plans in accordance with the requirements of FASB ASC Topic 718. Further information about this accounting treatment can be found in Notes 1 and 5 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2018.
DIRECTOR COMPENSATION
Our Board of Directors has responsibility for periodically assessing our director compensation program.
For 2018, each director who was not an employee at the Company received, as applicable:
Annual retainer - $80,000
Chair of the Board retainer - $75,000
Audit Committee Chair retainer - $12,500
Compensation Committee Chair retainer - $10,000
Nominating and Corporate Governance Committee Chair retainer - $10,000
Audit Committee Member retainer (non-chair) - $7,500
Compensation Committee Member retainer (non-chair) - $5,000
Nominating and Corporate Governance Committee Member (non-chair) - $5,000
All of the foregoing amounts are payable quarterly. The Company also retained Mercer to provide market comparisons, review of the Peer Group, and trends in terms of director pay. The Board of Directors determined director compensation, like officer compensation, was prior to 2018 significantly below Peer Group median. As such, the Board of Directors adjusted director compensation in 2018 to approach such median. For 2019, the Board of Directors adjusted the equity compensation for non-employee directors, subject to shareholder approval of the 2019 Omnibus Plan. If the 2019 Omnibus Plan is approved by shareholders thereby replacing the Non-Employee Director Stock Option Plan, after each Annual Meeting of Shareholders, non-employee directors will receive a grant of RS equal to $100,000 divided by the average closing price per share of the Company's common stock on the twenty (20) trading days preceding the date of the grant of such RS. Such RS grants will vest on the first anniversary of the grant.
PAY RATIO
As a result of rules adopted under the Dodd-Frank Act, beginning with our 2018 Proxy Statement, the SEC required disclosure of the CEO to median employee pay ratio. In 2018, the CEO's annual total compensation was $3,427,450 as reflected in the "Summary Compensation Table." Our median employee's annual compensation for 2018 was $49,597. As a result, we estimate that the CEO's annual total compensation was approximately 69 times that of our median employee.
CONCLUSION
We have reached the conclusion that each individual element of compensation, as well as the total compensation, delivered to our NEO's and to our directors during 2018 are reasonable, appropriate, and in the best interests of the Company and our shareholders. We believe the changes implemented for 2019 will be the same. That determination is based on a continuation of our compensation philosophy and practices which we believe align both the short-term and long-term interests of our officers with those of our shareholders. It remains the case that each
element of our compensation program is important to accomplishing the Company's goals of creating an entrepreneurial environment so that our employees are motivated to remain with us, individually perform to the best of their abilities, and focus on our long-term success.
EXECUTIVE COMPENSATION
Summary Compensation
2020.
The following table sets forth the compensation earned by the principal executive officer, principal financial officer, and other executive officers for services rendered to the Company for the fiscal year ended December 31, 2018.
|
| | | | | | | | | | | | | | | | | |
Summary Compensation Table for 2018 |
Name and Principal Position | Year | Salary ($) |
Bonus ($) | (2) Stock Awards ($) | (3) Option Awards ($) | (4) Non-Equity Incentive Plan Compensation | Change in Pension Value and Non-qualified Deferred Compensation Earnings ($) | (5) All Other Compensation ($) | Total ($) |
Steve Downing, President and CEO | 2018 | 618,173 |
| 180,000 |
| 1,559,920 |
| 636,017 |
| 323,989 |
| — |
| 109,351 |
| 3,427,450 |
|
2017 | 420,959 |
| 182,358 |
| 286,130 |
| — |
| 96,809 |
| — |
| 88,514 |
| 1,074,770 |
|
2016 | 335,949 |
| 98,609 |
| 92,610 |
| 62,783 |
| 113,749 |
| — |
| 87,126 |
| 790,826 |
|
Kevin Nash, Vice President - Finance, CFO and Treasurer | 2018 | 327,075 |
| 90,000 |
| 183,520 |
| 170,024 |
| 132,132 |
| | 87,485 |
| 990,236 |
|
2017 | 225,504 |
| 104,254 |
| 134,447 |
| — |
| 51,451 |
| — |
| 84,757 |
| 600,413 |
|
2016 | 187,808 |
| 75,094 |
| 46,305 |
| 29,993 |
| 63,355 |
| — |
| 80,116 |
| 482,671 |
|
Scott Ryan, Vice President, General Counsel and Corporate Secretary | 2018 | 305,573 |
| 80,000 |
| 183,520 |
| 157,430 |
| 122,417 |
| — |
| 77,805 |
| 926,745 |
|
2017 | 237,776 |
| 87,838 |
| 68,373 |
| — |
| 54,433 |
| — |
| 48,332 |
| 496,752 |
|
2016 | 210,497 |
| 61,541 |
| 24,255 |
| 16,218 |
| 69,382 |
| — |
| 48,447 |
| 430,340 |
|
Neil Boehm, CTO and Vice President, Engineering | 2018 | 317,734 |
| 80,000 |
| 183,520 |
| 188,916 |
| 129,412 |
| | 58,428 |
| 958,010 |
|
Matt Chiodo, Vice President - Sales | 2018 | 321,270 |
| 80,000 |
| 183,520 |
| 188,916 |
| 130,578 |
| — |
| 50,949 |
| 955,233 |
|
(1) Mr. Boehm and Mr. Chiodo became named executive officers of the Company in February 2018.
(2)For each outstanding restricted stock award, the value shown is the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 (as opposed to what is included in the Company's financial statements). See the Company’s Annual Report (Footnote 5) for the years ended December 31, 2018, 2017, and 2016 for the assumptions made in the valuation of restricted stock. The actual number of restricted shares granted is shown in the "Grants of Plan-Based Awards" table included in this Proxy Statement. Assuming continued employment with the Company, restrictions on shares lapse upon expiration of four or five years from date of grant. Dividends are and will be paid on the shares if, and to the same extent, paid on the Company's common stock. Named executive officers are eligible to receive restricted stock awards at the discretion of the Compensation Committee in accordance with the Second Restricted Stock Plan and 2019 Omnibus Plan (if approved by shareholders) as discussed in the "Compensation Discussion and Analysis" section of this Proxy Statement.
(3)For each outstanding stock option award, the value shown is the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 (as opposed to what is included in the Company's financial statements). See the Company’s Annual Report (Footnote 5) for the years ended December 31, 2018, 2017, and 2016 for the assumptions made in the valuation of stock options. The actual number of stock options granted is shown in the "Grants of Plan-Based Awards" table included in this Proxy Statement.
(4) Amounts set forth relate to performance-based bonuses earned in 2018 under the Amended and Restated Annual Incentive Performance-Based Bonus Plan based on the achievement of performance metrics set forth therein and are
discussed further in the "Compensation Discussion and Analysis" section of this Proxy Statement. Discretionary bonuses are also discussed in the "Compensation Discussion and Analysis" section of this Proxy Statement.
(5)Other compensation includes the sum of restricted stock dividends, matching contributions by the Company pursuant to its 401(k) Plan, the use of Company automobiles or reimbursement for the use of personal automobiles pursuant to the Company's policy for use of such vehicles, detailed in the table set forth below. Other compensation also includes membership fees at local country clubs and certain costs associated with the personal use of Company aircraft which is subject to income inclusion as a taxable fringe benefit, as summarized below in "Other Perquisites".
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| | | | | | | | | | |
Name | Restricted Stock Dividends | 401(k) Employer Match | Personal Use of Automobiles | Other Perquisites | Total Other Compensation |
Steve Downing | 39,485 |
| 11,000 |
| 25,956 |
| 32,910 |
| 109,351 |
|
Kevin Nash | 15,182 |
| 11,000 |
| 21,756 |
| 39,547 |
| 87,485 |
|
Scott Ryan | 6,782 |
| 11,000 |
| 22,992 |
| 37,031 |
| 77,805 |
|
Neil Boehm | 14,873 |
| 11,000 |
| 20,364 |
| 12,191 |
| 58,428 |
|
Matt Chiodo | 9,757 |
| 11,000 |
| 22,228 |
| 7,964 |
| 50,949 |
|
Grant of Plan-Based Awards
The following table discloses the actual number of restricted stock awards and stock options granted and the grant date of those awards. It also captures potential future payouts under the Company's non-equity and equity incentive plans.
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| | | | | | | | | | | | | | | | | | | | | | | | |
Grants of Plan-Based Awards for 2018 |
Name | (1) Grant Date | (2) Estimated Future Payouts Under Non-Equity Incentive Plans | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | (3) All Other Option Awards: Number of Securities Underlying Options (#) | (4) Exercise or Base Price of Option Awards ($/Sh)
| (5) Grant Date Fair Value of Stock and Option Awards ($)
|
Thres-hold ($) | Target ($) | Maximum ($) | Thres-hold (#) | Target (#) | Maxi-mum (#) |
Steve Downing | 02/15/18 | $ | 325,000 |
| $ | 650,000 |
| $ | 1,300,000 |
| — |
| — |
| — |
| 68,000 |
| 101,000 |
| $22.94 | $ | 2,195,937 |
|
Kevin Nash | 02/15/18 | $ | 127,500 |
| $ | 255,000 |
| $ | 510,000 |
| — |
| — |
| — |
| 8,000 |
| 27,000 |
| $22.94 | $ | 353,544 |
|
Scott Ryan | 02/15/18 | $ | 118,125 |
| $ | 236,250 |
| $ | 472,500 |
| — |
| — |
| — |
| 8,000 |
| 25,000 |
| $22.94 | $ | 340,950 |
|
Neil Boehm | 02/15/18 | $ | 124,875 |
| $ | 249,750 |
| $ | 499,500 |
| | | | 8,000 |
| 30,000 |
| $22.94 | $ | 372,436 |
|
Matt Chiodo | 02/15/18 | $ | 126,000 |
| $ | 252,000 |
| $ | 504,000 |
| | | | 8,000 |
| 30,000 |
| $22.94 | $ | 372,436 |
|
(1) The Grant Date is the date when the Compensation Committee's recommendation was approved by the entire Board of Directors.
(2) For 2018, the Compensation Committee has established ratios of 25% for the named executive officers upon achievement of the threshold, 100% for the President and CEO and 75% for the other named executive officers upon achievement of the target, and another 100% for the named executive officers upon achievement of the maximum. At its February 2018 meeting, the Compensation Committee also established thresholds, targets, and maximums for the Revenue, Operating Income, and Earnings Per Diluted Share performance metrics.
(3)The exercise price was the average closing price of the stock as of the day when Compensation Committee's recommendation was approved by the entire Board of Directors. The exercise price may be paid in cash, in shares of the Company's common stock, and/or by the surrender of the exercisable options valued at the difference between the exercise price and the market value of the underlying shares.
(4) Stock option grant date fair values are based on the Black-Scholes option valuation model in accordance with FASB ASC Topic 718. Restricted stock awards represent the aggregate value at the date of grant for shares of common stock awarded under the Company’s Second Restricted Stock Plan. See the Company’s Annual Report (Footnote 5) for the year ended December 31, 2018, for the assumptions made in the valuation of stock options.
Outstanding Equity Awards at Fiscal Year End
The following table shows outstanding stock option awards classified as exercisable and unexercisable as of December 31, 2018, for the named executive officers. It also shows restricted stock awards not yet vested as of December 31, 2018. The information contained in this table is based on the 2 for 1 common stock split effected as of December 31, 2014 in the form of a 100% stock dividend.
|
| | | | | | | | | | | | | | | | | |
Outstanding Equity Awards at Fiscal Year-End at December 31, 2018 |
| Option Awards | Stock Awards |
Name | (1) Number of Securities Underlying Unexercised Options (#) Exercisable | (1) Number of Securities Underlying Unexercised Options (#) Unexercis-able | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | (2) Option Exercise Price ($) | Option Expiration Date | (3) Number of Shares or Units of Stock That Have Not Vested (#) | (4) Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
Steve Downing | 5,000 |
| — |
| — |
| 8.64 |
| 27-Sep-2019 | — |
| — |
| — |
| — |
|
16,200 |
| — |
| — |
| 12.80 |
| 30-Sep-2020 | 6,000 |
| 121,260 |
| — |
| — |
|
— |
| — |
| — |
| | 16-Feb-2021 | 6,384 |
| 129,021 |
| — |
| — |
|
— |
| — |
| — |
| | 22-Feb-2021 | 6,300 |
| 127,323 |
| — |
| — |
|
18,000 |
| 4,500 |
| — |
| 13.39 |
| 30-Sep-2021 | — |
| — |
| — |
| — |
|
— |
| — |
| — |
| | 15-Feb-2022 | 31,000 |
| 626,510 |
| — |
| — |
|
— |
| — |
| — |
| | 16-Feb-2022 | 7,560 |
| 152,788 |
| — |
| — |
|
6,752 |
| 6,752 |
| — |
| 15.50 |
| 30-Sep-2022 | — |
| — |
| — |
| — |
|
— |
| — |
| — |
| | 15-Feb-2023 | 37,000 |
| 747,770 |
| — |
| — |
|
7,092 |
| 10,638 |
| — |
| 14.70 |
| 22-Feb-2023 | — |
| — |
| — |
| — |
|
— |
| 101,000 |
| — |
| 22.94 |
| 15-Feb-2028 | — |
| — |
| — |
| — |
|
53,044 |
| 122,890 |
| — |
|
| | 94,244 |
| 1,904,672 |
| — |
| — |
|
Kevin Nash | — |
| — |
| — |
| | 30-Sep-2019 | 12,000 |
| 242,520 |
| — |
| — |
|
— |
| — |
| — |
| | 30-Sep-2020 | 3,000 |
| 60,630 |
| — |
| — |
|
— |
| — |
| — |
| | 16-Feb-2021 | 2,922 |
| 59,054 |
| — |
| — |
|
— |
| — |
| — |
| | 22-Feb-2021 | 3,150 |
| 63,662 |
| — |
| — |
|
2,932 |
| 2,932 |
| — |
| 13.39 |
| 30-Sep-2021 | — |
| — |
| — |
| — |
|
— |
| — |
| — |
| | 15-Feb-2022 | 8,000 |
| 161,680 |
| — |
| — |
|
— |
| — |
| — |
| | 16-Feb-2022 | 3,630 |
| 73,362 |
| — |
| — |
|
1,612 |
| 3,224 |
| — |
| 15.50 |
| 30-Sep-2022 | — |
| — |
| — |
| — |
|
1,694 |
| 5,082 |
| — |
| 14.70 |
| 22-Feb-2023 | — |
| — |
| — |
| — |
|
— |
| 27,000 |
| — |
| 22.94 |
| 15-Feb-2028 | — |
| — |
| — |
| — |
|
6,238 |
| 38,238 |
| — |
| | | 32,702 |
| 660,908 |
| — |
| — |
|
Scott Ryan | 8,320 |
| — |
| — |
| 18.31 |
| 30-Dec-2019 | — |
| — |
| — |
| — |
|
— |
| — |
| — |
| | 31-Dec-2020 | 1,650 |
| 33,347 |
| — |
| — |
|
— |
| — |
| — |
| | 16-Feb-2021 | 1,512 |
| 30,558 |
| — |
| — |
|
— |
| — |
| — |
| | 22-Feb-2021 | 1,650 |
| 33,347 |
| — |
| — |
|
— |
| — |
| — |
| | 15-Feb-2022 | 8,000 |
| 161,680 |
| — |
| — |
|
— |
| — |
| — |
| | 16-Feb-2022 | 1,820 |
| 36,782 |
| — |
| — |
|
2,748 |
| 1,832 |
| — |
| 16.01 |
| 31-Dec-2022 | — |
| — |
| — |
| — |
|
1,832 |
| 2,748 |
| — |
| 14.70 |
| 22-Feb-2023 | — |
| — |
| — |
| — |
|
— |
| 25,000 |
| — |
| 22.94 |
| 15-Feb-2028 | — |
| — |
| — |
| — |
|
12,900 |
| 29,580 |
| — |
| | | 14,632 |
| 295,714 |
| — |
| — |
|
Neil Boehm | 2,686 |
| — |
| — |
| 15.41 |
| 28-Mar-2019 | — |
| — |
| — |
| — |
|
— |
| — |
| — |
| | 29-Mar-2019 | 6,920 |
| 139,853 |
| — |
| — |
|
— |
| — |
| — |
| | 30-Sep-2019 | 12,000 |
| 242,520 |
| — |
| — |
|
4,230 |
| 1,410 |
| — |
| 18.30 |
| 31-Mar-2020 | — |
| — |
| — |
| — |
|
— |
| — |
| — |
| | 31-Mar-2021 | 2,053 |
| 41,491 |
| — |
| — |
|
— |
| — |
| — |
| | 15-Feb-2022 | 8,000 |
| 161,680 |
| — |
| — |
|
— |
| — |
| — |
| | 31-Mar-2022 | 4,500 |
| 90,945 |
| — |
| — |
|
2,484 |
| 3,726 |
| — |
| 15.69 |
| 31-Mar-2023 | — |
| — |
| — |
| — |
|
— |
| 30,000 |
| — |
| 22.94 |
| 15-Feb-2028 | — |
| — |
| — |
| — |
|
9,400 |
| 35,136 |
| — |
| | | 33,473 |
| 676,489 |
| — |
| — |
|
|
| | | | | | | | | | | | | | | | | |
Outstanding Equity Awards at Fiscal Year-End at December 31, 2018 |
Matt Chiodo | 3,000 |
| — |
| — |
| 15.41 |
| 28-Mar-2019 | — |
| — |
| — |
| — |
|
— |
| — |
| — |
| | 29-Mar-2019 | 4,000 |
| 80,840 |
| — |
| — |
|
1,530 |
| 1,530 |
| — |
| 18.30 |
| 31-Mar-2020 | — |
| — |
| — |
| — |
|
2,500 |
| 5,000 |
| — |
| 15.69 |
| 31-Mar-2021 | — |
| — |
| — |
| — |
|
— |
| — |
| — |
| | 31-Mar-2021 | 3,151 |
| 63,682 |
| — |
| — |
|
— |
| — |
| — |
| | 31-Mar-2021 | 3,700 |
| 74,777 |
| — |
| — |
|
— |
| — |
| — |
| | 15-Feb-2022 | 8,000 |
| 161,680 |
| — |
| — |
|
— |
| — |
| — |
| | 31-Mar-2022 | 5,700 |
| 115,197 |
| — |
| — |
|
— |
| 30,000 |
| — |
| 22.94 |
| 15-Feb-2028 | — |
| — |
| — |
| — |
|
7,030 |
| 36,530 |
| — |
| | | 24,551 |
| 496,176 |
| — |
| — |
|
(1) These options become exercisable, as long as employment with the Company continues, for 20 percent on each anniversary of the grant date commencing with the first anniversary of the grant date for all grants prior to 2018. For option grants during 2018, options become exercisable, as long as employment with the Company continues, for 25% on each anniversary of the grant date, with an expiration date ten years from grant date. Mr. Ryan has 8,320 five-year options that are fully exercisable as of December 31, 2018, and were granted to Mr. Ryan before he became a named executive officer of the Company. Mr. Boehm has 8,326 five-year options of which 6,916 are fully exercisable as of December 31, 2018, and were granted to Mr. Boehm before he became a named executive officer of the Company. Mr. Chiodo has 13,560 five-year options of which 7,030 are fully exercisable as of December 31, 2018, and were granted to Mr. Chiodo before he became a named executive officer of the Company.
(2) The exercise price was the closing price of the stock on the date the Compensation Committee met to approve the option grants, or when the Compensation Committee's recommendation was approved by the entire Board of Directors. The exercise price may be paid in cash, in shares of the Company's common stock, and/or by the surrender of the exercisable options valued at the difference between the exercise price and the market value of the underlying shares.
(3) Assuming continued employment with the Company, restrictions on shares lapse upon the expiration of four or five years from the date of grant. Dividends are and will be paid on these shares if, and to the same extent, paid on the Company's common stock.
| |
(4) | Represents the aggregate market value as of December 31, 2018, for shares of common stock awarded under the Company's Second Restricted Stock Plan. |
Option Exercises and Stock Vested
The following table contains information regarding the exercise of stock options during the fiscal year ended December 31, 2018, by the following executive officers:
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| | | | | | | | |
Option Exercises and Stock Vested for 2018 |
| Option Awards | Stock Awards |
Name
| Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)
| Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) |
Steve Downing | — |
| — |
| 18,000 |
| 388,620 |
|
Kevin Nash | 7,874 |
| 77,444 |
| 6,000 |
| 129,540 |
|
Scott Ryan | 7,220 |
| 52,306 |
| 3,000 |
| 59,520 |
|
Neil Boehm | 5,260 |
| 56,982 |
| 4,000 |
| 86,360 |
|
Matt Chiodo | 9,996 |
| 55,894 |
| — |
| — |
|
The Company has not adopted any defined benefit or actuarial plan, or non-qualified deferred compensation plan (though the Board of Directors has authorized such a plan), as those terms are defined in applicable laws, rules, and regulation promulgated by the SEC. The Company does not have any contracts with its named executive officers linked to a change in control of the Company other than with respect to vesting certain restricted stock or stock option awards which provisions are applicable to all employees receiving such awards.
DIRECTOR COMPENSATION
Our Compensation Committee has responsibility for periodically assessing our director compensation program.
For 2020, each director who was not an employee at the Company received, as applicable:
Annual retainer - $80,000
Chair of the Board retainer - $75,000
Audit Committee Chair retainer - $12,500
Compensation Committee Chair retainer - $10,000
Nominating and Corporate Governance Committee Chair retainer - $10,000
Audit Committee Member retainer (non-chair) - $7,500
Compensation Committee Member retainer (non-chair) - $5,000
Nominating and Corporate Governance Committee Member (non-chair) - $5,000
All of the foregoing amounts are payable quarterly. As of 2019, directors elected at each Annual Meeting receive a grant of RS equal to $100,000 divided by the average closing price per share of the Company's common stock on the twenty (20) days preceding the date of the grant rounded to the nearest whole share of such RS. Each such RS grant will vest on the first anniversary of the grant.
PAY RATIO
As a result of rules adopted under the Dodd-Frank Act, the SEC requires disclosure of the CEO to median employee pay ratio. In 2020, the CEO's annual total compensation was $3,537,446 as reflected in the "Summary Compensation Table." Our median employee's annual compensation for 2020 was $50,506. As a result, we estimate that the CEO's annual total compensation was approximately 70 times that of our median employee in 2020. This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.
For purposes of determining our CEO pay ratio, SEC rules allow us to use the same median paid employee for three years as long as there has been no change in our employee population or employee compensation arrangements that we reasonably believe would result in a significant change to our CEO pay ratio disclosure. We analyzed the 2018 gross earnings (as described in the following paragraph) for our employee population, and as a result of such analysis, we do not believe any such change occurred during 2020. Therefore, we have utilized the same median paid employee for this year's CEO pay ratio disclosure as we used for 2018.
To identify our median paid employee for 2018, we analyzed our employee population as of 12/31/2018. Our employee population was approximately 5,800. We identified our median paid employee based on gross annualized earnings for 2018, which included gross wages, bonus payments, stock compensation expense and taxable benefits. Compensation earned in currencies other than U.S. Dollars was translated into U.S. Dollars.
We determined the median paid employee's annual total compensation using the methodology for calculating total compensation for the Summary Compensation Table and compared that to the annual total compensation of our CEO, as disclosed in the Summary Compensation Table.
CONCLUSION
We have reached the conclusion that each individual element of compensation, as well as the total compensation, delivered to our NEOs and to our directors during 2020 are reasonable, appropriate, and in the best interests of the Company and our shareholders. We believe the elements of compensation for 2021 will be the same. That determination is based on a continuation of our compensation philosophy and practices which we believe align both the short-term and long-term interests of our officers with those of our shareholders. It remains the case that each element of our compensation program is important to accomplishing the Company's goals of creating an entrepreneurial environment so that our employees are motivated to remain with us, individually perform to the best of their abilities, and focus on our long-term success.
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth the compensation earned by the principal executive officer, principal financial officer, and other executive officers for services rendered to the Company for the fiscal year ended December 31, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Summary Compensation Table for 2020 |
Name and Principal Position | Year | Salary ($) | Bonus ($) | (1) Stock Awards ($) | (2) Option Awards ($) | (3) Non-Equity Incentive Plan Compensation | Change in Pension Value and Non-qualified Deferred Compensation Earnings ($) | (4) All Other Compensation ($) | Total ($) |
Steve Downing, President and CEO | 2020 | 764,423 | | — | | 1,843,293 | | — | | 748,370 | | — | | 181,360 | | 3,537,446 | |
2019 | 733,846 | | — | | 1,444,748 | | — | | 735,272 | | — | | 145,836 | | 3,059,702 | |
2018 | 618,173 | | 180,000 | | 1,559,920 | | 636,017 | | 323,989 | | — | | 109,351 | | 3,427,450 | |
Neil Boehm, Vice President - Engineering and CTO | 2020 | 414,827 | | — | | 625,205 | | — | | 304,587 | | — | | 86,102 | | 1,430,721 | |
2019 | 395,046 | | — | | 392,006 | | — | | 299,256 | | — | | 68,838 | | 1,155,146 | |
2018 | 317,734 | | 80,000 | | 183,520 | | 188,916 | | 129,412 | | — | | 58,428 | | 958,010 | |
Kevin Nash, Vice President - Finance, CFO and Treasurer | 2020 | 413,692 | | — | | 573,457 | | — | | 299,348 | | — | | 107,329 | | 1,393,826 | |
2019 | 396,308 | | — | | 385,274 | | — | | 294,109 | | — | | 76,251 | | 1,151,942 | |
2018 | 327,075 | | 90,000 | | 183,520 | | 170,024 | | 132,132 | | — | | 87,485 | | 990,236 | |
Matt Chiodo, Vice President - Sales | 2020 | 387,308 | | — | | 505,889 | | — | | 284,381 | | — | | 105,495 | | 1,283,073 | |
2019 | 372,893 | | — | | 365,996 | | — | | 279,403 | | — | | 63,193 | | 1,081,485 | |
2018 | 321,270 | | 80,000 | | 183,520 | | 188,916 | | 130,578 | | — | | 50,949 | | 955,233 | |
Scott Ryan, Vice President, General Counsel and Corporate Secretary | 2020 | 360,731 | | — | | 448,049 | | — | | 261,930 | | — | | 80,761 | | 1,151,471 | |
2019 | 348,346 | | — | | 337,130 | | — | | 257,345 | | — | | 63,608 | | 1,006,429 | |
2018 | 305,573 | | 80,000 | | 183,520 | | 157,430 | | 122,417 | | — | | 77,805 | | 926,745 | |
| | | | | | | | | | | | | | | |
(1) | The amounts shown in this column for 2020 include the aggregate grant date fair market value of RS granted in 2020 and the aggregate grant date fair market value of PSAs awarded for the 2020-2022 performance cycle at target. The value of the PSA at grant date if maximum performance is achieved would be as follows: Mr. Downing - $2,580,000; Mr. Boehm - $875,000, Mr. Nash - $803,000; Mr. Chiodo - $708,000; and Mr. Ryan - $627,000. The amounts in this column for 2019 and 2018 are solely the outstanding RS award with the value shown in the aggregate grant date fair value. The values in this column are computed in accordance with FASB ASC Topic 718 (as opposed to what is included in the Company's financial statements). See the Company's Annual Report (Footnote 5) for the years ended December 31, 2020, 2019 and 2018 for the assumptions made in the valuation of the RS grants and PSA grants. The actual number of RS shares granted and PSA shares granted is shown in the "Grants of Plan-Based Awards" table included in this Proxy Statement. Dividends for RS grants are and will be paid on the shares, if, and to the same extent, paid on the Company's common stock. Dividend equivalents are earned and accumulated over the performance period for PSAs, if, and at a similar rate and to the same extent, paid on the Company's common stock. NEOs are eligible to receive RS awards and PSA awards at the discretion of the Compensation Committee in accordance with the 2019 Omnibus Plan as discussed in the "Compensation Discussion and Analysis" section of this Proxy Statement. | | | | | | |
(2) | For each outstanding stock option award, the value shown is the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 (as opposed to what is included in the Company's financial statements). See the Company's Annual Report (Footnote 5) for the years ended December 31, 2020, 2019 and 2018 for the assumptions made in the valuation of stock options. The actual number of stock options granted is shown in the "Outstanding Equity Awards at Fiscal Year-End" table included in this Proxy Statement. | | | | | | |
(3) | Amounts set forth relate to performance-based bonuses earned under the Annual Incentive Plan based on the achievement of performance metrics set forth therein and are discussed further in the "Compensation Discussion and Analysis" section of this Proxy Statement. | | | | | | |
(4) | Other compensation includes the sum of RS dividends, PSA deemed dividends, matching contributions by the Company pursuant to its 401(k) Plan, matching contributions by the Company pursuant to its Deferred Compensation Plan, and the use of Company automobiles or reimbursement for the use of personal automobiles pursuant to the Company's policy for use of such vehicles, detailed in the table set forth below. Other compensation also includes membership fees at local country clubs and certain variable costs associated with the personal use of Company aircraft which is subject to income inclusion as a taxable fringe benefit. | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | Restricted Stock Dividends ($) | Performance Share Deemed Dividends ($) | 401(k) Employer Match ($) | NQDC Employer Match ($) | Personal Use of Automobiles ($) | Personal use of Aircraft ($) | Other Perquisites ($) | Total Other Compensation($) |
Steve Downing | $ | 60,543 | | 43,724 | 11,400 | 20,893 | 26,455 | 10,345 | 18,345 | 191,705 |
Neil Boehm | $ | 11,824 | | 13,215 | 11,400 | 5,575 | 20,756 | 19,331 | 4,001 | 86,102 |
Kevin Nash | $ | 14,157 | | 12,545 | 11,400 | 6,371 | 22,174 | 32,682 | 8,000 | 107,329 |
Matt Chiodo | $ | 14,076 | | 11,497 | 11,400 | 8,673 | 23,865 | 28,579 | 7,405 | 105,495 |
Scott Ryan | $ | 10,862 | | 10,396 | 11,400 | 6,115 | 25,122 | 9,529 | 7,337 | 80,761 |
Grant of Plan-Based Awards
The following table discloses the actual number of RS awards, PSAs, and stock options granted and the grant date of those awards. It also captures potential future payouts under the Company's non-equity and equity incentive plans.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Grants of Plan-Based Awards for 2020 |
Name | (1) Grant Date | (2) Estimated Future Payouts Under Non-Equity Incentive Plans | (3) Estimated Future Payouts Under Equity Incentive Plan Awards | (4) All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | (5) Grant Date Fair Value of Stock and Option Awards ($) |
Thres-hold ($) | Target ($) | Maximum ($) | Thres-hold (#) | Target (#) | Maxi-mum (#) |
Steve Downing | 02/20/20 | $ | 375,000 | | $ | 750,000 | | $ | 1,500,000 | | 20,758 | | 41,516 | | 83,032 | | 17,792 | | — | | — | | $ | 1,843,293 | |
Neil Boehm | 02/20/20 | $ | 152,625 | | $ | 305,250 | | $ | 610,500 | | 7,041 | | 14,081 | | 28,162 | | 6,035 | | — | | — | | $ | 625,205 | |
Kevin Nash | 02/20/20 | $ | 150,000 | | $ | 300,000 | | $ | 600,000 | | 6,458 | | 12,916 | | 25,832 | | 5,535 | | — | | — | | $ | 573,457 | |
Matt Chiodo | 02/20/20 | $ | 142,500 | | $ | 285,000 | | $ | 570,000 | | 5,697 | | 11,394 | | 22,788 | | 4,883 | | — | | — | | $ | 505,889 | |
Scott Ryan | 02/20/20 | $ | 131,250 | | $ | 262,500 | | $ | 525,000 | | 5,046 | | 10,091 | | 20,182 | | 4,325 | | — | | — | | $ | 448,049 | |
| | | | | |
(1) | The Grant Date is the date when the Compensation Committee's recommendation was approved by the entire Board. |
(2) | For 2020 under the Annual Incentive Plan, the Compensation Committee has established ratios of 50% of base salary for the President and CEO and 37.5% of base salary for the other NEOs upon achievement of the threshold, 100% of base salary for the President and CEO and 75% of base salary for the other NEOs upon achievement of the target, and another 100% of base salary for the President and CEO and another 75% of base salary for the other NEOs upon achievement of the maximum, representing potential payments to NEOs. At its February 2020 meeting, the Compensation Committee also established thresholds, targets, and maximums for the Revenue, Operating Income, and Earnings per Diluted Share performance metrics. As such, the columns reflect potential payments for each NEO under the Annual Incentive Plan. |
(3) | These columns reflect the potential issuance of shares of common stock for each NEO under the PSA component of the Long-Term Incentive Plan for 2020. PSAs accounted for seventy percent (70%) of the Long-Term Incentive Plan awards in 2020 as discussed in the Long-Term Incentive Plan section of "Compensation Discussion and Analysis". Such PSAs cliff vest at the end of a three year period based on the Company's performance against established metrics as discussed in "Compensation Discussion and Analysis". |
(4) | These RS awards represent the number of shares of restricted common stock awarded under the Long-Term Incentive Plan. RS accounted for thirty percent (30%) of the Long-Term Incentive Plan awards in 2020 as discussed in the Long-Term Incentive Plan section of "Compensation Discussion and Analysis." Such RS cliff vests three (3) years from the grant date. |
(5) | This column represents the fair value (at grant date) of RS awards and PSAs granted to each of the NEOs in 2020 at target. See the Company's Annual Report on Form 10-K, Note 5, for the year ended December 31, 2020 for the assumptions made in the valuation of RS awards and PSAs. See also the "Summary Compensation Table" for the value of PSAs at grant date if maximum performance is achieved. |
Outstanding Equity Awards at Fiscal Year End
The following table shows outstanding stock option awards classified as exercisable and unexercisable as of December 31, 2020, for the NEOs. It also shows RS awards and PSAs not yet vested as of December 31, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Outstanding Equity Awards at Fiscal Year-End at December 31, 2020 |
| Option Awards | Stock Awards |
Name | (1) Number of Securities Underlying Unexercised Options (#) Exercisable | (1) Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | (2) Option Exercise Price ($) | Option Expiration Date | (3) Number of Shares or Units of Stock That Have Not Vested (#) | (4) Market Value of Shares or Units of Stock That Have Not Vested ($) | (5) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | (6) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
Steve Downing | — | | — | | — | | | 16-Feb-2021 | 6,384 | | 216,609 | | — | | — | |
— | | — | | — | | | 22-Feb-2021 | 6,300 | | 213,759 | | — | | — | |
— | | — | | — | | | 15-Feb-2022 | 31,000 | | 1,051,830 | | — | | — | |
— | | — | | — | | | 16-Feb-2022 | 7,560 | | 256,511 | | — | | — | |
— | | — | | — | | | 20-Feb-2022 | 21,246 | | 720,877 | | 49,575 | | 1,682,080 | |
— | | — | | — | | | 15-Feb-2023 | 37,000 | | 1,255,410 | | — | | — | |
— | | — | | — | | | 20-Feb-2023 | 17,792 | | 603,683 | | 41,516 | | 1,408,638 | |
14,184 | | 3,546 | | — | | 14.70 | 22-Feb-2023 | — | | — | | — | | — | |
50,500 | | 50,500 | | — | | 22.94 | 15-Feb-2028 | — | | — | | — | | — | |
| 64,684 | | 54,046 | | — | | | | 127,282 | | 4,318,679 | | 91,091 | | 3,090,718 | |
| — | | — | | — | | | 31-Mar-2021 | 2,053 | | 69,658 | | — | | — | |
Neil Boehm | — | | — | | — | | | 15-Feb-2022 | 8,000 | | 271,440 | | — | | — | |
— | | — | | — | | | 20-Feb-2022 | 5,765 | | 195,606 | | 13,451 | | 456,392 | |
— | | — | | — | | | 31-Mar-2022 | 4,500 | | 152,685 | | — | | — | |
— | | — | | — | | | 20-Feb-2023 | 6,035 | | 204,768 | | 14,081 | | 477,768 | |
— | | 1,242 | | — | | 15.69 | 31-Mar-2023 | — | | — | | — | | — | |
— | | 15,000 | | — | | 22.94 | 15-Feb-2028 | — | | — | | — | | — | |
| — | | 16,242 | | — | | | | 26,353 | | 894,157 | | 27,532 | | 934,160 | |
Kevin Nash | — | | — | | — | | | 16-Feb-2021 | 2,922 | | 99,143 | | — | | — | |
— | | — | | — | | | 22-Feb-2021 | 3,150 | | 106,880 | | — | | — | |
— | | — | | — | | | 15-Feb-2022 | 8,000 | | 271,440 | | — | | — | |
— | | — | | — | | | 16-Feb-2022 | 3,630 | | 123,166 | | — | | — | |
— | | — | | — | | | 20-Feb-2022 | 5,666 | | 192,247 | | 13,220 | | 448,555 | |
— | | — | | — | | | 20-Feb-2023 | 5,535 | | 187,803 | | 12,916 | | 438,240 | |
5,082 | | 1,694 | | — | | 14.70 | 22-Feb-2023 | — | | — | | — | | — | |
13,500 | | 13,500 | | — | | 22.94 | 15-Feb-2028 | — | | — | | — | | — | |
18,582 | | 15,194 | | — | | | | 28,903 | | 980,679 | | 26,136 | | 886,795 | |
Matt Chiodo | 5,000 | | — | | — | | 15.69 | 31-Mar-2021 | — | | — | | — | | — | |
— | | — | | — | | | 31-Mar-2021 | 3,151 | | 106,913 | | — | | — | |
— | | — | | — | | | 31-Mar-2021 | 3,700 | | 125,541 | | — | | — | |
— | | — | | — | | | 15-Feb-2022 | 8,000 | | 271,440 | | — | | — | |
— | | — | | — | | | 20-Feb-2022 | 5,382 | | 182,611 | | 12,559 | | 426,127 | |
— | | — | | — | | | 31-Mar-2022 | 5,700 | | 193,401 | | — | | — | |
— | | — | | — | | | 20-Feb-2023 | 4,883 | | 165,680 | | 11,394 | | 386,598 | |
15,000 | | 15,000 | | — | | 22.94 | 15-Feb-2028 | — | | — | | — | | — | |
20,000 | | 15,000 | | — | | | | 30,816 | | 1,045,586 | | 23,953 | | 812,725 | |
Scott Ryan | — | | — | | — | | | 16-Feb-2021 | 1,512 | | 51,302 | | — | | — | |
— | | — | | — | | | 22-Feb-2021 | 1,650 | | 55,985 | | — | | — | |
— | | — | | — | | | 15-Feb-2022 | 8,000 | | 271,440 | | — | | — | |
— | | — | | — | | | 16-Feb-2022 | 1,820 | | 61,753 | | — | | — | |
— | | — | | — | | | 20-Feb-2022 | 4,958 | | 168,225 | | 11,568 | | 392,502 | |
4,580 | | — | | — | | 16.01 | 31-Dec-2022 | — | | — | | — | | — | |
— | | — | | — | | | 20-Feb-2023 | 4,325 | | 146,747 | | 10,091 | | 342,388 | |
3,664 | | 916 | | — | | 14.70 | 22-Feb-2023 | — | | — | | — | | — | |
12,500 | | 12,500 | | — | | 22.94 | 15-Feb-2028 | — | | — | | — | | — | |
20,744 | | 13,416 | | — | | | | 22,265 | | 755,452 | | 21,659 | | 734,890 | |
| | | | | |
(1) | These options become exercisable, as long as employment with the Company continues, for 20 percent on each anniversary of the grant date commencing with the first anniversary of the grant date for all grants prior to 2018. For option grants during 2018, options become exercisable, as long as employment with the Company continues, for 25% on each anniversary of the grant date, with an expiration date ten years from grant date. Mr. Chiodo has 5,000 five-year options of which 5,000 are fully exercisable as of December 31, 2020, and were granted to Mr. Chiodo before he became a NEO of the Company. |
(2) | The exercise price is the closing price of the stock on the date the Compensation Committee met to approve the option grants, or when the Compensation Committee's recommendation was approved by the entire Board. The exercise price may be paid in cash, in shares of the Company's common stock, and/or by the surrender of the exercisable options valued at the difference between the exercise price and the market value of the underlying shares. |
(3) | As long as employment with the Company continues, restrictions on RS granted under the Long-Term Incentive Plan and Second Restricted Stock Plan lapse upon the expiration of three, four, or five years from the date of grant (shown in the Option Expiration Date column for convenience). Dividends on RS are, and will be, paid on these shares if, and to the same extent, paid on the Company's common stock. See "Grant of Plan Based Awards Table for 2019" for additional detail on RS awarded in 2020. |
(4) | The amounts in this column represent the market value as of December 31, 2020, of RS awarded under the Long-Term Incentive Plan and Second Restricted Stock Plan. |
(5) | PSAs granted in February 2019 and 2020, cliff vest after a three year performance period as long as the NEO remains employed by the Company. Dividend equivalents on PSAs are and will be deferred on these awards over the performance period, if, and at an equivalent value as, dividends are paid on the Company's common stock. The PSAs shown in this column reflect target performance under the Long-Term Incentive Plan as discussed in the Long-Term Incentive Plan section of "Compensation Discussion and Analysis," with maximum performance, if achieved, essentially doubling the same. See "Grant of Plan Based Awards Table for 2020" for additional detail on PSAs awarded in 2020. |
(6) | For PSAs granted in 2019 and 2020, the amounts in this column reflect the market value as of December 31, 2020, of 100% (i.e., target performance) of PSAs awarded under the Long-Term Incentive Plan in 2019 and 2020, with maximum performance if achieved, essentially doubling the same. |
Option Exercises and Stock Vested
The following table contains information regarding the exercise of stock options and vesting of restricted stock during the fiscal year ended December 31, 2020, by the following NEOs:
| | | | | | | | | | | | | | |
Option Exercises and Stock Vested for 2020 |
| Option Awards | Stock Awards |
Name
| Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)
| Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) |
Steve Downing | 52,204 | | 893,005 | | 6,000 | | 153,720 | |
Neil Boehm | 19,968 | | 241,369 | | — | | — | |
Kevin Nash | 10,700 | | 201,593 | | 3,000 | | 76,860 | |
Matt Chiodo | — | | — | | — | | — | |
Scott Ryan | — | | — | | 1,650 | | 56,199 | |
Non-Qualified Deferred Compensation
The following table contains information regarding Deferred Compensation Plan contributions, earnings and withdrawals for the plan year ended December 31, 2020, by the following NEOs:
| | | | | | | | | | | | | | | | | |
Non-Qualified Deferred Compensation |
Executive Officer | Executive Contributions Y/E 2020 (1) | Company Contributions in 2020 (2) | Aggregate Earnings in 2020 (3) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Y/E 2020 |
Steve Downing | $ | 246,430 | | $ | 20,893 | | $ | 103,863 | | $ - | $ | 438,036 | |
Neil Boehm | $ | 71,409 | | $ | 5,575 | | $ | 23,648 | | $ - | $ | 246,430 | |
Kevin Nash | $ | 71,583 | | $ | 6,371 | | $ | 26,146 | | $ | — | | $ | 118,846 | |
Matthew Chiodo | $ | 96,962 | | $ | 8,673 | | $ | 35,312 | | $ | — | | $ | 161,952 | |
Scott Ryan | $ | 55,236 | | $ | 6,115 | | $ | 15,786 | | $ | — | | $ | 87,508 | |
| | | | | |
(1) | Amounts in this column represent the deferrals of base salary earned in fiscal 2020 which are included in Summary Compensation Table under Salary, plus deferral of amounts earned in fiscal 2019 and paid in fiscal 2020 under the Annual Incentive Plan which was included in the fiscal 2019 Summary Compensation Table under Non-Equity Incentive Plan Compensation. |
(2) | Amounts in this column represent the Company's contribution and are included in the "All Other Compensation" column of the Summary Compensation Table. |
(3) | The amounts shown includes interest earned from cash deferrals. The earnings during 2020 were not above market or preferential; therefore, these amounts were not included in the 2020 Summary Compensation Table. |
For further information, see the Deferred Compensation section of "Compensation Discussion and Analysis".
The Company does not have any contracts with its NEOs linked to a change in control of the Company other than with respect to vesting certain RS, stock option awards, or PSAs.
DIRECTOR COMPENSATION
The following table discloses the cash, stock option awards, and other compensation earned, paid, or awarded to each of the Company's directors during the fiscal year 2018.2020.
| | | | | | | | | | | | | | | | | | | | | | | |
Director Compensation for 2020 |
Name | (1) Fees Earned or Paid in Cash ($) | (2) Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | (3) All Other Compensation ($) | Total ($) |
Leslie Brown | 85,000 | | 102,743 | | — | | — | | — | | 2,009 | | 189,752 | |
Gary Goode | 110,000 | | 102,743 | | — | | — | | — | | 2,009 | | 214,752 | |
James Hollars | 80,000 | | 102,743 | | — | | — | | — | | 2,009 | | 184,752 | |
John Mulder | 80,000 | | 102,743 | | — | | — | | — | | 2,009 | | 184,752 | |
Richard Schaum | 102,500 | | 102,743 | | — | | — | | — | | 2,009 | | 207,252 | |
Kathleen Starkoff | 86,563 | | 102,743 | | — | | | | 2,009 | | 191,315 | |
Fred Sotok | 43,750 | | — | | — | | — | | — | | 1,035 | | 44,785 | |
James Wallace | 175,000 | | 102,743 | | — | | — | | — | | 2,009 | | 279,752 | |
Brian Walker | 80,000 | | 102,743 | | — | | — | | — | | 2,009 | | 184,752 | |
|
| | | | | | | | | | | | | | |
Director Compensation for 2018 |
Name | (1) Fees Earned or Paid in Cash ($) | Stock Awards ($) | (2) Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | (3) All Other Compensation ($) | Total ($) |
Leslie Brown | 84,083 |
| — |
| 37,451 |
| — |
| — |
| — |
| 121,534 |
|
Gary Goode | 111,250 |
| — |
| 37,451 |
| — |
| — |
| — |
| 148,701 |
|
James Hollars | 80,000 |
| — |
| 37,451 |
| — |
| — |
| — |
| 117,451 |
|
John Mulder | 80,000 |
| — |
| 37,451 |
| — |
| — |
| — |
| 117,451 |
|
Richard Schaum | 96,250 |
| — |
| 37,451 |
| — |
| — |
| — |
| 133,701 |
|
Kathleen Starkoff | 20,000 |
| | 20,838 |
| | | | 40,838 |
|
Fred Sotok | 87,500 |
| — |
| 37,451 |
| — |
| — |
| — |
| 124,951 |
|
James Wallace | 172,500 |
| — |
| 37,451 |
| — |
| — |
| — |
| 209,951 |
|
Brian Walker | 10,000 |
| — |
| 17,697 |
| — |
| — |
| — |
| 27,697 |
|
| | | | | |
(1) | Any Director who is also an employee of the Company receives no compensation for services as a director. Directors who are not employees of the Company received a director's cash retainer in the amount of $80,000 per year ($20,000 per quarter). The Chair of the Board received an additional cash retainer of $75,000 and directors who chaired the Audit Committee, Compensation Committee, and the Nominating and Corporate Governance Committee each received an additional cash retainer fee in the amounts of $12,500, $10,000, and $10,000, respectively during 2020. In addition, each director who served as a member of the Audit Committee, Compensation Committee or Nominating and Corporate Governance Committee each received an additional cash retainer in the amount of $7,500, $5,000, and $5,000, respectively in 2020. |
(2) | Immediately following each Annual Meeting, non-employee directors receive a grant of RS equal to $100,000 divided by the average closing price per share of the Company's common stock on the twenty (20) trading days preceding the date of grant of such RS and such RS will vest on the first anniversary of the grant. See the Company’s Annual Report on Form 10-K (Footnote 5) for the year ended December 31, 2020 for the assumptions made in the valuation of RS awards. |
(3) | All other compensation includes RS dividends. The Company also makes Company aircraft available to directors for personal use if such use does not conflict with any business purpose for the aircraft. The cost of the flight is calculated using the same method as is the case for NEOs as well. |
(1) Any Director who is also an employee of the Company receives no compensation for services as a director. Directors who are not employees of the Company received a director's retainer in the amount of $80,000 per year ($20,000 per quarter). The Chair of the Board of Directors received an additional retainer of $75,000 and directors who chaired the Audit Committee, Compensation Committee
, and the Nominating and Corporate Governance Committee each received an additional retainer fee in the amounts of $12,500, $10,000, and $10,000, respectively during 2018. In addition, each director who served as a member of the Audit Committee, Compensation Committee or Nominating and Corporate Governance Committee each received a retainer in the amount of $7,500, $5,000, and $5,000, respectively in 2018. The foregoing compensation has been adjusted for 2019 as set forth in the "Compensation Discussion and Analysis" section of this Proxy Statement.
(2) Immediately following each Annual Meeting of Shareholders non-employee directors are entitled to receive an option to purchase 7,000 shares of the Company's common stock at a price per share equal to the closing price of the Company's stock on NASDAQ on that date. Each option has a term of ten years and becomes exercisable in full six months after the date of grant. For each outstanding stock option award, the value shown is the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 (as opposed to what is included in the Company's financial statements). See the Company’s Annual Report (Footnote 5) for the years ended December 31, 2018, 2017, and 2016 for the assumptions made in the valuation of stock options. For 2019, if the 2019 Omnibus Plan is approved by shareholders, after each Annual Meeting of Shareholders, non-employee directors will receive a grant of RS equal to $100,000 divided by the average closing price per share of the Company's Common Stock on the twenty (20) trading days preceding the date of grant of such RS and such RS will vest on the first anniversary of the grant.
(3) The Company also makes Company aircraft available to directors for personal use if such use does not conflict with any business purpose for the aircraft. The cost of the flight is calculated using the SIFL (Standard Industry Fare Level) rates published by the IRS in accordance with Treasury Regulation Section 1.61-21 (Taxation of fringe benefits).
The following table summarizes securities issued and to be issued under the Company’s equity compensation plans as of December 31, 2018:2019:
| | | | | | | | | | | |
Executive Compensation Plan Information |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) |
Equity compensation Plans approved by Shareholders | 4,765,669 | | 22.96 | | 35,131,420 | |
Equity Compensation Plans not approved by Shareholders | — | | — | | — | |
Total | 4,765,669 | | 22.96 | | 35,131,420 | |
|
| | | | | | |
Executive Compensation Plan Summary |
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) |
Equity compensation Plans approved by Shareholders | 9,305,876 |
| 17.77 |
| 15,139,059 |
|
Equity Compensation Plans not approved by Shareholders | — |
| — |
| — |
|
Total | 9,305,876 |
| 17.77 |
| 15,139,059 |
|
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee, which includes Messrs. Schaum (Chair), Goode, and Wallace, is currently comprised solely of members of the Company’s Board of Directors who are independent under the applicable NASDAQ listing standards. The Compensation Committee is responsible for supervising the Company’s executive compensation arrangements, including the making of decisions with respect to the award of stock-based incentives for executive officers.
CERTAIN TRANSACTIONS
The Audit Committee of the Company reviews and approves all related party transactions in accordance with its Charter. The Code of Business Conduct and Ethics requires directors, officers, and employees to report these types of matters. In addition, the Company uses questionnaires for its directors and officers annually in part to discover any unreported related-party transactions. The approval of the Audit Committee is required for related-party transactions.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS – PRINCIPAL ACCOUNTING FEES AND SERVICES
The Audit Committee and Board of Directors have selected, and submitssubmit to shareholders for ratification, Ernst & Young LLP to serve as the Company’s independent auditors for the fiscal year ending December 31, 2019.2021. The following fees were billed by Ernst & Young LLP, the Company’s independent auditors, for the services provided to the Company during the fiscal years ended December 31:
| | | | | | | | |
| 2020 | 2019 |
Audit Fees | $ | 468,000 | | $ | 540,000 | |
Audit-Related | 44,000 | | 24,000 | |
Tax Fees | — | | — | |
All Other | 48,000 | | 92,500 | |
Total | $ | 560,000 | | $ | 656,500 | |
|
| | | | | | |
| 2018 | 2017 |
Audit Fees | $ | 499,600 |
| $ | 440,000 |
|
Audit-Related | 45,000 |
| 165,000 |
|
Tax Fees | — |
| — |
|
All Other | — |
| — |
|
Total | $ | 544,600 |
| $ | 605,000 |
|
Audit fees include the annual audit of the Company’s consolidated financial statements, the audit of internal control over financial reporting, and timely quarterly reviews. Audit-Related fees principally consist of consultations concerning accounting matters associated with the annual audit, incremental consent filings, and other out-of-scope work. Tax fees principally consist of fees for tax advice. All Other fees principally consist of diligence services pertaining to potential acquisitions, including tax due diligence (but not tax services related to structuring). All non-audit services, including those indicated above, are pre-approved by the Audit Committee pursuant to the Revised Audit Committee Procedures for Approval of Audit and Non-auditNon-Audit Services by Independent Auditors, which is attached as Appendix A to this Proxy Statement. The Audit Committee considers the amount of fees for non-audit services in selecting and assessing the independence of the Company's auditors.
The Audit Committee periodically evaluates the Company's independent auditor. The quality of the staff of Ernst & Young LLP, historical and current performance, expertise in the Company's industries, reasonableness of fees, and independence are all factors that went into the Audit Committee's decision to select Ernst & Young LLP as the Company's independent auditors. The audit engagement partner for the Company rotates at least every five years and the Audit Committee is involved in the selection of a new audit engagement partner. Although ratification of the independent auditors by the Company’s shareholders is not legally required, ourthe Audit Committee and Board of Directors believesbelieve that submission of this matter to the shareholders follows sound business practice and is in the best interest of shareholders in the current environment. If the shareholders do not approve the selection of Ernst & Young LLP, the selection of such firm as our independent auditors will be reconsidered by the Audit Committee. Accordingly, you may vote on the following resolution at the 20192020 Annual Meeting of Shareholders:
RESOLVED, that Ernst & Young LLP be and hereby is ratified to serve as the independent auditors of the Company for the fiscal year ended December 31, 2019.2021.
A representative of Ernst & Young LLP is expected to be present at the Annual Meeting to respond to appropriate questions and will have an opportunity to make a statement if they desire.
The Board of Directors unanimously recommends a vote FOR the ratification of Ernst & Young LLP to serve as the Company's independent auditors for fiscal year ended December 31, 2019.2021.
ADVISORY VOTE ON EXECUTIVE COMPENSATION
As described in the detail under the Compensationin "Compensation Discussion and Analysis,Analysis", the Company's compensation system is designed to balance short-term performance with long-term growth. Our compensation system must be competitive with compensation arrangements provided to executives at comparably sized companies with whom we compete for talent. We look to reward performance (with an increasing percentage of executive pay being performance based); emphasize long-term incentive compensation; drive ownership mentality; and attract, retain and reward the best talent to achieve desired results. Shareholders are encouraged to read the Compensation"Compensation Discussion and Analysis,Analysis", the Company compensation tables, and the related narrative disclosure.
In accordance with certain legislation, the Company is providing shareholders with an advisory (nonbinding) vote on compensation programs for named executive officers (sometimes referred to as "say-on-pay"). Accordingly, you may vote on the following resolution at the 20192021 Annual Meeting of Shareholders:
RESOLVED, that the compensation of the Company's named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including Compensation Discussion and Analysis, compensation tables, and narrative disclosure is hereby APPROVED.
This vote is non-binding. The Board of Directors and the Compensation Committee, which is comprised of independent directors, expect to take into account the outcome of this advisory vote when considering future executive compensation decisions, to the extent they can determine the cause or causes of any significant negative voting results.
The Board of Directors unanimously recommends that you vote FOR the approval, on an advisory basis, of the compensation of our named executive officers as disclosed pursuant to Item 402 of Resolution S-K, including Compensation Discussion and Analysis, compensation tables, and narrative disclosure.
APPROVAL OF THE 2019 GENTEX CORPORATION OMNIBUS INCENTIVE PLAN
Background
In February 2019, our Compensation Committee and Board of Directors approved the 2019 Gentex Corporation Omnibus Incentive Plan or 2019 Omnibus Plan, subject to shareholder approval. The 2019 Omnibus Plan provides for the potential awards to: i) employees; and ii) non-employee directors of the Company or its subsidiaries, which awards may be stock options [both incentive stock options ("ISOs") and non-qualified stock options ("NQSOs"] (collectively, "Options")), appreciation rights ("ARs"), RS, restricted stock units ("RSUs") and PSAs, and performance units ("Performance Units") (collectively, "Performance Awards") and other awards that are stock-based, cash-based or a combination of both ("Other Awards") (collectively, "Awards"). The 2019 Omnibus Plan is intended to replace the Company's shareholder approved Employee Stock Option Plan, Second Restricted Stock Plan, and Amended and Restated Non-Employee Director Stock Option Plan ("Prior Plans"), upon shareholder approval (though first quarter 2019 grants to non-officer employees will be made under the Prior Plans since the 2019 Omnibus Plan has not yet been approved by Shareholders). Any existing awards previously granted under the prior plans, including those made to non-officers in the first quarter of 2019, will continue to remain outstanding in accordance with their terms and be governed thereby. If, however, the 2019 Omnibus Plan is approved by the shareholders, all future Awards thereafter will be made under the 2019 Omnibus Plan, including those made to officers as described in the Compensation Discussion and Analysis as set forth above. If the 2019 Omnibus Plan is not approved by our shareholders, it will not be adopted, and we will continue to operate under the Prior Plans until their expiration, including for officers.
Current Equity Compensation Plan Information
The following table contains information as of December 31, 2018, about shares of stock which may be issued under our equity compensation plans, all of which have been approved by our shareholders.
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Executive Compensation Plan Summary |
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) |
Equity compensation Plans approved by Shareholders | 9,305,876 |
| 17.77 |
| 15,139,059 |
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Equity Compensation Plans not approved by Shareholders | — |
| — |
| — |
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Total | 9,305,876 |
| 17.77 |
| 15,139,059 |
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Shareholder Approval.
If the 2019 Omnibus Plan is adopted by our shareholders, we will not make any new grants of awards under the Prior Plans. The 2019 Omnibus Plan submitted for approval reflects current practices in equity incentive plans that we consider best practices such as:
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| | | No Evergreen Feature. The 2019 Omnibus Plan does not include an “evergreen” feature that would cause the number of authorized shares to automatically increase in future years.
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| | | Conservative Share Reuse Provision. Shares subject to an award under the 2019 Omnibus Plan will not be available for reuse if such shares are tendered in payment of a stock option or delivered or withheld to satisfy any tax withholding obligation.
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| | | Minimum Vesting Period. Awards granted must have a vesting period of at least twelve months, with the exception that up to 5% of the share reserve may have a shorter vesting period.
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| | | Repricings and Exchanges Prohibited. The 2019 Omnibus Plan prohibits the repurchase, cancellation and exchange of out-of-the-money outstanding Options or ARs for consideration.
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| | | Discount Options and ARs Prohibited. All Options and ARs must have an exercise price equal to or greater than the fair market value of our common stock on the date the Option or AR is granted.
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| | | Double Trigger Change-in-Control Provisions. The change-in-control provisions under the 2019 Omnibus Plan provide an appropriate definition of a change-in-control and for acceleration of vesting in the event of a change in control only if the 2019 Omnibus Plan does not become an obligation of the successor entity or the participant incurs a termination of service without cause or for good reason following the change in control.
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| | | No Dividends on Unearned PSAs. The 2019 Omnibus Plan prohibits the current payment of dividends or dividend equivalents on unearned PSAs subject to performance conditions.
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A summary of the 2019 Omnibus Plan is set forth below. This summary is qualified in its entirety by reference to the full text of the 2019 Omnibus Plan, which is attached as Appendix B.
General Plan Information. The 2019 Omnibus Plan is intended to permit the grant of Options (both ISOs, NQSOs or a combination of both), ARs, RS, RSUs, Performance Awards and Other Awards. All Awards granted under the 2019 Omnibus Plan will be governed by separate written or electronic agreements or other evidence of award between the Company and each participant. The evidence of award will specify the terms and conditions of the Award. No right or interest of a participant in any Award will be subject to any lien, obligation or liability of the participant. The laws of the State of Michigan govern the 2019 Omnibus Plan and any Awards granted thereunder.
Administration. We will bear all expenses of administering the 2019 Omnibus Plan. Our Compensation Committee will administer the 2019 Omnibus Plan and have the authority to grant Awards to participants upon such terms and conditions (not inconsistent with the provisions of the 2019 Omnibus Plan) as may be considered appropriate. The interpretation and construction by the Compensation Committee of any provision of the 2019 Omnibus Plan or of any evidence of award, and any determination by the Compensation Committee pursuant to any provision of the 2019 Omnibus Plan or of any evidence of award, are considered final and conclusive. To the extent permitted by law as well as limits under the 2019 Omnibus Plan, the Board of Directors or the Compensation Committee, as applicable, may, from time to time, delegate to one or more of its members or to one or more officers of the Company, or to one or more agents or advisors, administrative duties or powers as it may deem advisable, and the Board of Directors, the Compensation Committee or any person to whom duties or powers have been delegated, may utilize third parties to provide advice with respect to any responsibility the Board of Directors or the Compensation Committee or such person may have under the 2019 Omnibus Plan. The Board of Directors or the Compensation Committee may, to the extent permitted, authorize one or more of our executive officers, including our President and CEO, to do one or both of the following on the same basis as the Compensation Committee: (i) designate participants to be recipients of Awards; and (ii) determine the size of any such Awards. The authorized officer(s) are required to report periodically to the Compensation Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated. This authority may not be delegated with respect to Awards to any executive officer, director or owner of more than 10% of the Company’s equity securities.
Eligibility for Participation. Any of our employees, employees of our subsidiaries and non-employee members of our Board of Directors are eligible to receive an Award under the 2019 Omnibus Plan. ISOs, however, may only be granted to employees of the Company or as otherwise permitted by law. Because the 2019 Omnibus Plan provides for broad discretion in selecting participants and in making Awards, the total number of persons who will participate in the 2019 Omnibus Plan and the benefits that will be provided to the participants cannot be determined at this time.
DELINQUENT SECTION 16 REPORTS
Shares Available for Issuance Under the 2019 Omnibus Plan. Subject to adjustment as provided in the 2019 Omnibus Plan, the number of shares of our common stock reserved for issuance under the 2019
Omnibus Plan is 45,000,000 ("Available Common Shares") plus any shares related to Awards(including Full Value Awards) under the 2019 Omnibus Plan that terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such shares, or are settled in cash in lieu of shares, will be available again for grant under the 2019 Omnibus Plan. PSA's, RS, or any other Awards granted with a per share price of less than 100% of the Market Value per Share as determined for such Award (i.e. Full Value Awards) shall be counted against the Available Common Shares as 4.06 shares for every one share of Common Stock subject thereto. Options and AR's with a per share price of at least 100% of the Market Value per Share as determined for such Award shall be counted against the Available Common Shares as one share for every one share of Common Stock subject thereto. Notwithstanding the foregoing, (x) upon the exercise of a stock-settled stock appreciation right or net-settled option granted under the 2019 Omnibus Plan, the number of shares subject to the Award (or portion of the Award) that is then being exercised will be counted against the maximum aggregate number of shares that may be issued under the 2019 Omnibus Plan as provided above, regardless of the actual number of shares issued upon exercise and (y) any shares withheld (or, with respect to RS, returned) in satisfaction of tax withholding obligations will be counted as shares issued.
The number of shares of common stock actually issued or transferred by the Company upon the exercise of ISOs will not exceed 2,000,000. In addition, during any performance period no participant will be granted Options and ARs and other Awards with rights which are substantially similar to Options or ARs, in the aggregate, for more than 1,000,000 shares of common stock. Further, during any performance period no participant will be granted performance vesting RS or RSUs or stock-denominated Performance Shares or Other Awards with rights which are substantially similar to Performance Shares for more than 1,000,000 shares of common stock. During any performance period no participant will be granted Performance Units or cash-denominated Other Awards with rights which are substantially similar to Performance Units pursuant to which the Participant can receive, in the aggregate, more than $10,000,000. During any calendar year, no Participant who is a non-employee director shall be granted overall compensation in excess of $500,000. Any Awards granted by the Company in substitution for Awards granted by companies acquired by the Company (Substitute Awards) will not reduce the shares of common stock available for Awards under the 2019 Omnibus Plan.
Description of Awards Under the 2019 Omnibus Plan.
Stock Options. Our Board of Directors or Compensation Committee may award ISOs, which are intended to comply with Section 422 of the Code, NQSOs, which are not intended to comply with Section 422 of the Code or a combination of both. An evidence of award will be given to a participant who receives a grant and will set forth: i) the number of shares granted; ii) the exercise price, which may not be less than the fair market value of the underlying shares of common stock on the date the Option is granted; iii) the method by which the exercise price is payable; iv) the conditions to become exercisable (including without limitation the attainment of performance objectives) and the period(s) for which they will remain exercisable and v) such other terms as the Compensation Committee or an authorized officer may approve, including without limitation provisions under which some portion or all of the Options or proceeds attributable to them may be subject to recoupment in circumstances of conduct deemed detrimental to the Company.
Successive grants may be made to the same participant whether or not any previous grants remain unexercised. Options must provide for a minimum vesting period of twelve months from the date of grant, with the exception that up to 5% of the share reserve may have a shorter vesting period. Any grant may provide for the earlier exercise or other modifications in the event of specified terminations of the participant’s employment or service, a change in control, an unforeseeable emergency, the grant of a Substitute Award or other special circumstances. The exercise of an Option will result in the cancellation on a share-for-share basis of any related tandem appreciation right authorized. No Option granted will be exercisable for more than ten years from the date it was granted. Except as provided in an evidence of award, in the event of a participant’s termination of employment or service, any Options that have not vested as of the termination date will be cancelled and immediately forfeited, without further action on the part of the Company or the Compensation Committee, and the participant will have no further rights in respect of such grant. In no event may an Option be repurchased or cancelled in exchange for cash or other consideration at a time when the exercise price exceeds the fair market value of the shares of common stock.
Appreciation Rights. The Board of Directors or the Compensation Committee may grant: i) tandem ARs with Options; or ii) freestanding ARs unrelated to Options. A tandem AR gives the participant holding an associated Option a right, exercisable by the surrender of the Option, to receive an amount determined by the Board of Directors, the Compensation Committee or an authorized officer, which is a percentage of the spread on the related Option (not exceeding 100%) at the time of exercise. Tandem ARs may be granted at
any time prior to the exercise or termination of the related Option, although a tandem AR awarded in relation to an ISO must be granted concurrently with the ISO. Free-standing ARs grant the participant the right to receive an amount determined by the Board of Directors, the Compensation Committee or an authorized officer, which is a percentage of the spread (not exceeding 100%) at the time of exercise.
An evidence of award will be given to a participant who receives a grant and will set forth: i) the number of shares of common stock to which it pertains; ii) the percentage of the spread (not exceeding 100%) payable at the time of exercise and whether such amount will be paid in cash, in shares of common stock or a combination; iii) the conditions to become exercisable (including without limitation the attainment of performance objectives) and the exercise period; and iv) such other terms as the Compensation Committee or authorized officer may approve, including without limitation provisions under which some portion or all of the ARs or proceeds attributable to them may be subject to recoupment in circumstances of conduct deemed detrimental to the Company.
ARs must provide for a minimum vesting period of twelve months from the date of grant, with the exception that up to 5% of the share reserve may have a shorter vesting period. A grant may provide for an earlier exercise or other modifications in the event of specified terminations of the participant’s employment or service, a change in control, an unforeseeable emergency, the grant of a Substitute Award or other special circumstances. Except as provided in an evidence of award, in the event of a participant’s termination of employment or service, any ARs that have not vested as of the participant’s termination date will be cancelled and immediately forfeited, without further action on the part of the Company or the Compensation Committee, and the participant will have no further rights in respect of such grant.
A grant of tandem ARs will provide that such grant may be exercised only at a time when the related Option is also exercisable and at a time when the spread is positive, and by surrender of the related option for cancellation. Successive grants of tandem ARs may be made to the same participant regardless of whether any previous grants remain unexercised.
With respect to free-standing ARs only: i) each grant will specify a base price which may not be less than the market value per share on the grant date; ii) successive grants may be made regardless of whether any previous grant(s) remain unexercised; and iii) no grant may be exercised more than ten years from the grant date. In no event may an AR be repurchased or cancelled in exchange for cash or other consideration at a time when the exercise price exceeds the fair market value of the shares of common stock.
Restricted Stock. The Board of Directors, the Compensation Committee or an authorized officer may grant RS. Each grant constitutes an immediate transfer of ownership of shares of the Company common stock entitling the participant to voting, certain dividend and other ownership rights, subject to a substantial risk of forfeiture and restrictions on transfer pending lapse of the forfeiture risk.
An evidence of award will be given to a participant who receives a grant and will set forth: i) the number of shares of common stock to which it pertains; ii) any restrictions on transfer and forfeitability provisions; iii) the conditions under which restrictions on transfer and forfeitability provisions will lapse, including without limitation upon the attainment of performance objectives; and (iv) such other terms the Compensation Committee or an authorized officer may approve, including without limitation provisions under which some portion or all of the RS or proceeds attributable to it may be subject to recoupment in circumstances of conduct deemed detrimental to the Company.
RS must provide for a minimum vesting period of twelve months from the date of grant, with the exception that up to 5% of the share reserve may have a shorter vested period. A grant may provide for the earlier lapse of restrictions or other modifications in the event of terminations of employment or service, a change in control, an unforeseeable emergency, the grant of a Substitute Award or other special circumstances. Except as otherwise provided in an evidence of award, in the event of a participant’s termination of employment or service, any RS that has not yet become free of restrictions will be immediately forfeited, without further action on the part of the Company or the Compensation Committee, and the participant will have no further rights in respect of such grant. A grant may require that any or all dividends or other distributions paid during the period of such restrictions be automatically deferred and/or reinvested in additional shares of RS (which may be subject to the same restrictions as the underlying Award) or be paid in cash on a deferred or contingent basis (subject to any restrictions on performance-based Awards).
Restricted Stock Units. The Compensation Committee or an authorized officer may grant RSUs. A grant will constitute the agreement by the Company to deliver shares of its common stock or cash to the participant
in the future in consideration of the performance of services. An evidence of award will be given to a participant who receives a grant and will set forth: i) the number of shares of common stock to which it pertains; ii) the conditions for the RSUs or installments to vest (including without limitation the attainment of performance objectives); iii) form of payment and time(s) payable; and iv) such other terms as the Compensation Committee or authorized officer may approve, including without limitation provisions under which some portion or all of an RSU or proceeds attributable to it may be subject to recoupment in circumstances of conduct deemed detrimental to the Company.
During the restriction period, no participant will have the rights of a shareholder of any shares of common stock, but the Compensation Committee or an authorized officer may authorize the payment of dividend equivalents on such RSUs on either a current, deferred or contingent basis, either in cash or in additional shares of common stock (subject to any restrictions on performance-based Awards). RSUs must provide for a minimum vesting period of twelve months from the date of grant, with the exception that up to 5% of the share reserve may have a shorter vesting period. A grant of RSUs may provide for the earlier lapse of restrictions or other modifications in the event of specified terminations of the participant’s employment or service, a change in control, an unforeseeable emergency, the grant of a Substitute Award or other special circumstances. Except as otherwise provided in an evidence of award, in the event of a participant’s termination of employment or service, any RSU that has not yet become vested will be immediately forfeited without further action on the part of the Company or the Compensation Committee, and the participant will have no further rights in respect of such grant.
Performance Shares and Performance Units. The Compensation Committee or an authorized officer may grant PSAs and Performance Units that will become payable upon achievement of specified performance objectives during performance periods. An evidence of award will be given to a participant who receives a grant and will set forth: i) the number of units or shares of common stock to which it pertains, which number may be subject to adjustment to reflect changes in compensation or other factors; ii) the conditions for the Performance Awards or installments to vest; iii) form of payment; and iv) such other terms as the Compensation Committee or authorized officer may approve, including without limitation provisions under which some portion or all of the Performance Awards or proceeds attributable thereto may be subject to recoupment in circumstances of conduct deemed detrimental to the Company.
Performance Awards must provide for a minimum vesting period of twelve months from the date of grant, with the exception that up to 5% of the share reserve may have a shorter vesting period. A grant of Performance Awards may provide for the earlier lapse of restrictions or other modifications in the event of specified terminations of employment or service, a change in control, an unforeseeable emergency, the grant of a Substitute Award or other special circumstances. Except as provided in an evidence of award, in the event of a termination of employment or service, any Performance Award that has not yet become vested will be immediately forfeited, without further action, and the participant will have no further rights in respect of such grant. During the performance period, the participant will have none of the rights of a shareholder with respect to Performance Shares, but the Compensation Committee or authorized officer may authorize the payment of dividend equivalents on Performance Shares on either a current, deferred or contingent basis, either in cash or in additional shares of common stock (subject to any restrictions on performance-based Awards).
Other Awards. The Compensation Committee or an authorized officer may authorize grants of other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to: i) shares of the Company common stock or factors that may influence the value of such shares, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of common stock, purchase rights for shares of common stock, awards with value and payment contingent upon performance of the Company or any other factors designated by the Compensation Committee or authorized officer, and awards valued by reference to the book value of shares of common stock or the value of securities of, or the performance of specified subsidiaries or affiliates or other business units of, the Company; ii) cash; or iii) any combination of the foregoing, including without limitation grants of cash or shares of common stock as a bonus or in lieu of obligations of the Company to pay cash or deliver other property under the 2019 Omnibus Plan or under other plans or compensatory arrangements, all subject to such terms determined by the Board of Directors, the Compensation Committee or authorized officer.
An evidence of award will be given to a participant who receives a grant and will set forth: i) the number of shares of common stock and/or the amount of cash to which it pertains; ii) the conditions for the Other
Award or installments to vest (including without limitation the attainment of performance objectives); iii) the form of payment; and iv) such other terms as the Board of Directors, the Compensation Committee or authorized officer may approve, including without limitation provisions under which some portion or all of the Other Award or proceeds attributable thereto may be subject to recoupment in circumstances of conduct deemed detrimental to the Company. Other Awards must provide for a minimum vesting period of twelve months from the date of grant, with the exception that up to 5% of the share reserve may have a shorter vesting period. A grant of an Other Award may provide for the earlier lapse of restrictions or other modifications in the event of specified terminations of employment or service, a change in control, an unforeseeable emergency, the grant of a Substitute Award or other special circumstances. Except as provided in an evidence of award, in the event of termination of employment or service, any Other Award that has not yet become vested will be immediately forfeited, without further action on the part of the Company or the Compensation Committee, and the participant will have no further rights in respect of such grant.
Awards to Non-Employee Directors. The Board of Directors may from time to time grant Awards to non-employee directors upon the terms and conditions otherwise applicable to the grants of Awards under the 2019 Omnibus Plan. If a non-employee director subsequently becomes an employee of the Company while remaining a member of the Board of Directors, any Award held by such individual at the time will not be affected.
Performance Measures. The Board of Directors or the Compensation Committee may grant Awards under the 2019 Omnibus Plan subject to the attainment of measurable performance objectives. Performance objectives may be described in terms of the Company-wide objectives or objectives that are related to such other performance including that related to the performance of the individual participant. Performance objectives may be made relative to the performance of other companies or an index covering multiple companies.
The Compensation Committee at any time may exclude the impact on performance of charges for restructuring, acquisitions, divestitures, discontinued operations, extraordinary items, and other unusual or non-recurring items and the cumulative effects of changes in tax law or accounting principles, as such are defined by generally accepted accounting principles or the SEC and as identified in the Company’s audited financial statements, notes to such financial statements or management’s discussion and analysis in the Company’s annual report or other filings with the SEC. With respect to any grant under the 2019 Omnibus Plan, if the Compensation Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances render the performance objectives unsuitable, the Compensation Committee may in its discretion modify such performance objectives or the related minimum acceptable level or levels of achievement, in whole or in part, as the Compensation Committee deems appropriate and equitable.
Subject to the individual and other 2019 Omnibus Plan limits described above, the number of performance-based Awards granted to any participant in any year is determined by the Compensation Committee in its sole discretion. The Compensation Committee may reduce, but not increase, the value of a performance-based Award.
Adjustments. The Board of Directors shall make or provide for adjustments in the numbers of shares of common stock covered by outstanding Options, ARs, RSUs, Performance Awards and Other Awards, in the option price and base price provided in outstanding Options and ARs, and in the kind of shares covered thereby, as equitably required to prevent dilution or enlargement of the rights of participant that otherwise would result from: (a) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company; (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities; or (c) any other corporate transaction or event having an effect similar to any of the foregoing. In the event of any such transaction or event, the Compensation Committee, in its discretion, may provide in substitution for any or all outstanding Awards alternative consideration (including cash), if any, as it may determine, in good faith, to be equitable in the circumstances and may require the surrender of all Awards to be replaced. The Board of Directors or the Compensation Committee also will make or provide for adjustments in the numbers of shares as is appropriate to reflect any transaction or event described above.
Change in Control. In the event of a “Change in Control” (as defined in the 2019 Omnibus Plan), except as otherwise provided in an evidence of award or by the Compensation Committee on the grant date, to the extent outstanding Awards granted under the 2019 Omnibus Plan are not assumed, converted or replaced
by the resulting entity or its direct or indirect parent, all outstanding Awards that may be exercised will become fully exercisable, all restrictions with respect to outstanding Awards will lapse and become vested and non-forfeitable, and any specified performance objectives with respect to outstanding Awards will be deemed to be satisfied at target.
Except as otherwise provided in an evidence of award or by the Compensation Committee, to the extent outstanding Awards granted are assumed, converted or replaced by the resulting entity or its direct or indirect parent in the event of a Change in Control, any outstanding Awards that are subject to performance objectives will be converted by the resulting entity or its direct or indirect parent, based on whether target performance had been achieved as of the date of the Change in Control, and each Award of: (i) PSAs or Performance Units will continue to vest during the remaining performance period; (ii) RS will remain subject to the otherwise applicable vesting conditions during the remaining vesting period; (iii) RSUs will remain subject to the applicable vesting conditions during the restriction period; and (iv) all other Awards will remain subject to the applicable vesting conditions during the remaining vesting period, if any.
Except as otherwise provided in an evidence of award or by the Compensation Committee, to the extent outstanding Awards granted are either assumed, converted or replaced by the resulting entity or its direct or indirect parent in the event of a Change in Control, if a participant’s service is terminated without cause by the Company or the resulting entity or a participant resigns his or her employment for good reason (as those terms are defined in his or her employment agreement as applicable and otherwise in an evidence of award), in either case, all outstanding Awards held by the participant that may be exercised will become exercisable and restrictions with respect to outstanding Awards will lapse and become vested and non-forfeitable as set forth in an evidence of award.
The Board of Directors in its discretion, at or after a grant date, may: (i) provide for the cancellation of each outstanding and unexercised Option or AR with an option or base price, less than the highest price per share of common stock paid for a share of common stock in the Change in Control (or, if less, the market value per share at the time of cancellation to the extent required to avoid imposition of a tax under Section 409A of the Code) (such amount the “Transaction Consideration”) in exchange for a cash payment to be made at the same time as payment is made to holders of common stock in connection with the Change in Control in an amount equal to the amount by which the Transaction Consideration exceeds the option or base price, as applicable, multiplied by the number of shares of common stock granted under the Option or AR; and (ii) provide for the cancellation of each outstanding and unexercised Option or AR with an option or base price, as applicable, equal to or more than the Transaction Consideration without any payment to the holder of such Option or AR, as applicable.
Non-U.S. Participants. The Board of Directors or the Compensation Committee may provide for special terms for Awards to participants who are employed by the Company or its subsidiaries outside of the United States of America, as the Board of Directors or the Compensation Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Board of Directors or the Compensation Committee may approve supplements to or amendments, restatements or alternative versions of the 2019 Omnibus Plan as it may consider necessary or appropriate for such purposes. No special terms, supplements, amendments or restatements, however, will include any provisions that are inconsistent with the terms of the 2019 Omnibus Plan as then in effect unless such revisions are permitted without further approval by the shareholders of the Company.
Transferability. Except as otherwise determined by the Board of Directors or the Compensation Committee, no Award or dividend equivalents paid may be transferable by a participant except by will or the laws of descent and distribution, and may be otherwise transferred in a manner that protects the interest of the Company as the Board of Directors or the Compensation Committee may determine. If approved by the Board of Directors or the Compensation Committee, each participant may, in a manner established by the Board of Directors or the Compensation Committee, designate a beneficiary to exercise the rights of the participant with respect to any Award upon the death of the participant and to receive shares of common stock or other property issued upon such exercise.
The Board of Directors, the Compensation Committee or an authorized officer may specify on the grant date that part or all of the shares of common stock that are: (i) to be issued or transferred by the Company upon the exercise of an Option or ARs, upon the termination of the restriction period applicable to RSUs or upon payment under any grant of Performance Shares or Performance Units; or (ii) no longer subject to the substantial risk of forfeiture and restrictions on transfer, will be subject to further restrictions on transfer.
The Board of Directors or the Compensation Committee may determine that Awards (other than ISOs) may be transferable by a participant, without payment of consideration by the transferee, only to any one or more family members of the participant. No transfer will be effective unless reasonable prior notice is delivered to the Company and the transfer is affected in accordance with any terms and conditions that were made applicable. Any transferee will be subject to the same terms and conditions as the participant.
Federal Income Tax Consequences
The following discussion covers some of the United States federal income tax consequences with respect to Awards that may be granted under the 2019 Omnibus Plan. This summary does not describe state, local, or foreign tax consequences of an individual’s participation in the 2019 Omnibus Plan.
Options. A participant will not recognize income for federal income tax purposes when ISOs are granted or timely exercised. If the participant disposes of shares acquired by exercise of an ISO either before the expiration of two years from the date the Options are granted or within one year after the issuance of shares upon exercise of the ISO, the participant will recognize in the year of disposition: (a) ordinary income, to the extent the lesser of either (1) the fair market value of the shares on the date of Option exercise, or (2) the amount realized on disposition, exceeds the Option exercise price; and (b) capital gain, to the extent the amount realized on disposition exceeds the sum of the exercise price paid and any ordinary income recognized by the participant. If the shares are sold after expiration of these holding periods, the participant generally will recognize capital gain or loss equal to the difference between the amount realized on disposition and the Option exercise price.
Exercise of an ISO will be timely if made during its term and if the participant remains employed at all times during the period beginning on the date of grant of the ISO and ending on the date three months before the date of exercise (or one year before the date of exercise in the case of a disabled participant). Exercise of an ISO will also be timely if made by the legal representative of a participant who dies while employed or within three months after termination of employment. The tax consequences of an untimely exercise of an ISO will be determined in accordance with the rules applicable to NQSOs discussed below.
The exercise of an ISO may result in alternative minimum tax liability. The excess of the fair market value of the shares purchased on exercise of an ISO over the exercise price paid for such shares is considered alternative minimum taxable income for alternative minimum tax purposes.
With respect to NQSOs, the participant will recognize no income upon grant of the Option, and, upon exercise, will recognize ordinary income to the extent of the excess of the fair market value of the shares on the date of Option exercise over the Option exercise price. Upon a subsequent disposition of the shares received from the exercise of an NQSO, the participant generally will recognize capital gain or loss to the extent of the difference between the fair market value of the shares at the time of exercise and the amount realized on the disposition.
Appreciation Rights. The recipient of a grant of ARs will not realize taxable income on the date of the grant. Upon the exercise of ARs, the recipient will realize ordinary income equal to the amount of cash or the fair market value of stock received.
Restricted Stock. A participant holding RS will, at the time the shares vest, realize ordinary income in an amount equal to the fair market value of the shares and any cash received at the time of vesting. Any dividends paid to the participant on the RS during the restriction period will generally be ordinary income to the participant.
Under Section 83(b) of the Code, a participant may elect (not later than 30 days after acquiring the RS) to recognize ordinary income at the time the shares are awarded in an amount equal to their fair market value at that time, notwithstanding the fact that the shares are subject to transferability restrictions and a substantial risk of forfeiture. If such an election is made, no additional taxable income will be recognized by the participant at the time the restrictions lapse, the participant will have a tax basis in the shares equal to their fair market value on the date of their award, and the participant’s holding period for capital gains purposes will begin at that time. If, however, the shares are later forfeited, no tax deduction is allowable to the participant, and the Company will recognize ordinary income equal to the amount of its deduction when the participant made the Section 83(b) election.
Restricted Stock Units and Performance Awards. A participant holding RSUs or Performance Awards will, at the time the RSUs or Performance Awards become payable, realize ordinary income in an amount equal to the fair market value of the shares and any cash received.
Other Awards. The tax consequences of Other Awards will depend upon the terms and conditions of such Awards as determined by the Board of Directors or the Compensation Committee. A participant holding Other Awards, however, will generally realize ordinary income in an amount equal to the fair market value of the shares or cash received at the time of payment of shares or cash.
Federal Tax Consequences to the Company. In general, we will receive an income tax deduction at the same time and in the same amount as the amount which is taxable to the employee as ordinary income, except to the extent prohibited by Section 162(m). To the extent a participant realizes capital gains, as described above, we will not be entitled to any corresponding deduction for federal income tax purposes.
Dividends and Dividend Equivalents. The Compensation Committee may provide the participant as part of an Award with dividends or dividend equivalents, payable in cash, shares of common stock, other securities, other Awards, or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee, provided , that no dividends or dividend equivalents shall be payable in respect of outstanding: (i) Options or ARs; or (ii) unearned Performance Awards or other unearned Awards subject to performance objectives.
Award Deferral and Compliance with Section 409A of the Code. The Compensation Committee may permit participants to elect to defer the issuance of stock or the settlement of Awards in cash (other than with respect to Options or ARs) pursuant to such rules, procedures or programs as it may establish. The Compensation Committee also may provide that deferred issuances and settlements include the payment or crediting of dividend equivalents or interest on the deferral amounts, provided that no dividend equivalents shall be payable in respect of outstanding Options or unearned Performance Awards or other unearned Awards subject to performance conditions. It, however, is intended that any grants made will be exempt from Section 409A of the Code or are structured in a manner that would not cause a participant to be subject to taxes and interest pursuant to Section 409A of the Code.
Effective Date. Though Awards may be made under the 2019 Omnibus Plan prior to shareholder approval as described herein, such Awards and the 2019 Omnibus Plan will only be effective as of the date it is approved by the shareholders. The 2019 Omnibus Incentive Plan will terminate on the tenth anniversary of shareholder approval unless earlier terminated in accordance with its provisions. Awards outstanding as of the date of termination of the 2019 Omnibus Plan will not be affected or impaired by the termination.
Amendments and Termination. The 2019 Omnibus Plan and any Award may be amended, suspended or terminated at any time by the Board of Directors, provided no amendment is permitted without shareholder approval if shareholder approval is required in order to comply with applicable law or the rules of the NASDAQ or any other securities exchange on which our common stock is traded or quoted. Except as otherwise permitted, no termination, suspension or amendment of the 2019 Omnibus Plan or any Award will adversely affect the right of any participant with respect to any Award granted, as determined by the Board of Directors or the Compensation Committee, without a participant’s written consent.
The Company will obtain shareholder approval for: i) a reduction in the exercise price of an Award (or the cancellation and re-grant of an Award resulting in a lower exercise price) other than equitable adjustments in accordance with the 2019 Omnibus Plan; ii) any amendment to materially expand the group of individuals eligible for Awards under the 2019 Omnibus Plan; iii) an increase to the maximum number of shares of common stock available for issuance under the 2019 Omnibus Plan (other than equitable adjustments in accordance with the 2019 Omnibus Plan); or (iv) amendments that would materially increase the benefits accruing to participants.
Substitute Awards for Awards Granted by Other Entities. Substitute Awards may be granted for grants or awards held by employees of a company or entity who become the Company employees as a result of the acquisition, merger or consolidation of the employer company by or with the Company. Except as otherwise provided by applicable law and notwithstanding anything in the 2019 Omnibus Plan to the contrary, the terms, provisions and benefits of the Substitute Awards grant may vary from those set forth in or required or authorized by the 2019 Omnibus Plan to such extent as the Compensation Committee at the time of the grant may deem appropriate to conform, in whole or part, to the terms, provisions and benefits of grants or awards in substitution for which they are granted.
Additional Information Regarding New Plan Benefits. Other than the Long-Term Incentive Plan and as otherwise described in the "Compensation Discussion and Analysis" with respect to officers and non-employee directors, we do not have any current proposals, plans or arrangements, written or otherwise, to grant any specific Awards under the 2019 Omnibus Plan to any executive officers, other employees or non-employee directors of the Company. Accordingly, future Awards under the 2019 Omnibus Plan to NEOs, officers, other employees and non-employee directors are not readily determinable at this time, as such awards remain in the discretion fo the Board of Directors and the Compensation Committee. Reference is made to the tables captioned “Summary Compensation Table,” “Grants of Plan-Based Awards,” “Outstanding Equity Awards at Fiscal Year-End,” and “Option Exercises and Stock Vested” in this Proxy Statement for detailed information on incentive awards granted and the exercise of stock options by certain executive officers under the Prior Plans during the three most recent fiscal years.
Market Price of the Common Stock. As of March 1, 2019, the fair market value of our common stock was $20.50 per share, based on the closing price of the common stock as reported by NASDAQ.
In accordance with the foregoing, you may vote on the following resolution at the 2019 Annual Meeting of Shareholders:
RESOLVED, that the Gentex Corporation 2019 Omnibus Incentive Plan is hereby APPROVED.
The Board of Directors unanimously recommends that you vote for the approval of the Gentex Corporation 2019 Omnibus Incentive Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of Forms 3, 4, and 5 furnished to the Company during or with respect to the preceding fiscal year and written representations from certain reporting persons, the Company is not aware of any failure by any reporting person to make timely filings of those Forms as required by Section 16(a) of the Securities Exchange Act of 1934, except that of the non-employee director Ms. Kathleen StarkoffMr. John Mulder who was one (1) day late with reporting on Form 4 an option to purchase 4,430a gift of 1,000 shares of the Company's common stock granted under the Company's shareholder approved, Amended and Restated Nonemployee Director Stock Option Plan following the appointment of Ms. Starkoff as a non-employee directorheld indirectly on September 28, 2018.November 23, 2016, which did not get reported until May 26, 2020.
SHAREHOLDER PROPOSALS
Any proposal of a shareholder intended to be presented at the 20202022 Annual Meeting of the Company must be received by the Company at its headquarters, c/o Corporate Secretary’s Office, 600 North Centennial Street, Zeeland, Michigan 49464, no later than December 8, 2019,9, 2021, if the shareholder wishes the proposal to be included in the Company’s Proxy Statement relating to that meeting. In addition, the Company’s Bylaws contain certain notice and procedural requirements applicable to shareholder proposals, irrespective of whether the proposal is to be included in the Company’s Proxy materials. To be timely, such a shareholder's notice must be delivered, or mailed and received at, the Company's headquarters as set forth in the Company’s Bylaws. A copy of the Company’s Bylaws is filed with the Securities and Exchange Commission and can be obtained from the Public Reference Section of the Commission or the Company.
MISCELLANEOUS
The Company’s Annual Report to Shareholders, including financial statements, is being delivered to shareholders with this Proxy Statement.Statement and can be found online at http://ir.gentex.com.
Management is not aware of any matters to be presented for action at the Annual Meeting other than as set forth in this Proxy Statement. If other business should come before the meeting, it is the intention of the persons named as Proxy holders in the accompanying Proxy to vote the shares in accordance with their judgment. Discretionary authority to do so is included in the Proxy.
The cost of the solicitation of Proxies will be borne by the Company. In addition to the use of the mail and e-mail, Proxies may be solicited personally or by telephone or facsimile by a few regular employees of the Company without additional compensation. The Company has not retained any third party to help solicit proxies but reserves the right to do so. In addition, the Company will reimburse brokers, nominees, custodians, and other fiduciaries for their expenses in connection with sending Proxy materials to registered and beneficial owners and obtaining their Proxies.
Shareholders are urged to promptly vote your shares either on the Internet (preferred method), via telephone, or by dating, signing, and returning the accompanying Proxy in the enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
Scott Ryan
Corporate Secretary
Corporate Secretary
April 2, 20199, 2021
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APPENDIX A
Revised Audit Committee
Procedures for Approval of Audit and Non-Audit
Services by Independent Auditors
The following procedure is adopted by the Audit Committee relating to the approval of audit and non-audit services provided by the Company’s independent auditors.
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1. | The Committee has reviewed and approved work to be performed by the independent auditors in the areas of tax, audit and advisory services and subcategories within each category as designated on the attached schedule. |
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2. | Any additional audit and non-audit work performed by the independent auditors that is not included on the attached schedule must be specifically pre-approved as follows: |
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a. | If the proposed independent auditors’ engagement is equal to or less than $50,000, the Chairman of the Audit Committee must pre-approve the work and will communicate his approval to the full Audit Committee at the next regularly scheduled meeting of the Audit Committee. |
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b. | If the proposed independent auditors’ engagement is greater than $50,000, the full Audit Committee must pre-approve the work. |
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3. | The independent auditors may not conduct any work that is prohibited by applicable SEC rules or regulations. |
1.The Committee has reviewed and approved work to be performed by the independent auditors in the areas of tax, audit and advisory services and subcategories within each category as designated on the attached schedule.
2.Any additional audit and non-audit work performed by the independent auditors that is not included on the attached schedule must be specifically pre-approved as follows:
a.If the proposed independent auditors’ engagement is equal to or less than $50,000, the Chairman of the Audit Committee must pre-approve the work and will communicate his approval to the full Audit Committee at the next regularly scheduled meeting of the Audit Committee.
b.If the proposed independent auditors’ engagement is greater than $50,000, the full Audit Committee must pre-approve the work.
3.The independent auditors may not conduct any work that is prohibited by applicable SEC rules or regulations.
Effective February 20, 2014
APPENDIX B
GENTEX CORPORATION
2019 OMNIBUS INCENTIVE PLAN
(EFFECTIVE May 16, 2019)
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1. | Purpose. The purpose of this 2019 Omnibus Incentive Plan is to attract and retain directors, officers, and other employees Gentex Corporation and its Subsidiaries and to motivate and provide to such persons incentives and rewards for performance.
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2. | Definitions. As used in this Plan:
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A. | “Affiliate” means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified (provided that an entity shall be deemed an Affiliate of the Corporation for purposes of this Plan only for such periods as the requisite ownership or control relationship is maintained). |
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B. | “Appreciation Right” means a right granted pursuant to Section 5 of the Plan and will include both Free-Standing Appreciation Rights and Tandem Appreciation Rights.
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C. | “Authorized Officer” has the meaning specified in Section 12.D. of the Plan.
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D. | “Award” means a grant of Option Rights, Appreciation Rights, Performance Shares, Performance Units, Restricted Stock, Restricted Stock Units, and/or Other Awards. |
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E. | “Base Price” means the price to be used as the basis for determining the Spread upon the exercise of a Free-Standing Appreciation Right or a Tandem Appreciation Right. |
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F. | “Board” means the Board of Directors of the Corporation and, to the extent of any delegation by the Board to a committee (or subcommittee thereof) pursuant to Section 12 of the Plan, such committee (or subcommittee).
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G. | “Cause” shall have the meaning assigned such term in the employment agreement, if any, between a Participant and an Employer and, in the absence of such an agreement, the meaning specified in the applicable Evidence of Award. |
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H. | For purposes of the Plan, except as may be otherwise provided in an Evidence of Award, a “Change in Control” shall be deemed to have occurred upon the happening of any of the following events: |
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i. | any Person is or becomes (other than in connection with a transaction described in clause (A) or (B) of Paragraph (iii) below) the beneficial owner (within the meaning of Rule 13d-3 of the Securities and Exchange Commission promulgated under the Exchange Act), directly or indirectly, of securities of the Corporation (not including in the securities beneficially owned by such Person any securities acquired directly from the Corporation or any of its Affiliates) representing more than fifty percent (50%) of the combined voting power of the Corporation’s then outstanding securities; |
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ii. | individuals who on the Effective Date constitute the Board, and any new Director (other than a Director whose initial assumption of office is in connection with an actual or threatened election contest, including without limitation a consent solicitation, relating to the election of Directors of the Corporation) whose election by the Board or nomination for election by the Corporation’s shareholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; |
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iii. | consummation of a merger or consolidation of the Corporation or any direct or indirect parent or subsidiary of the Corporation with any other company, other than (A) a merger or consolidation which would result in (1) the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or direct or indirect parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any of its Affiliates, more than fifty percent (50%) of the combined voting power of the voting securities of the Corporation or such surviving entity or direct or indirect parent thereof outstanding immediately after such merger or consolidation, and (2) the individuals who comprise the Board immediately prior thereto constituting at least a majority of |
the board of directors of (I) any parent of the Corporation or the entity surviving such merger or consolidation or (II) if there is no such parent, of the Corporation or such surviving entity, or (B) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no Person acquires more than fifty percent (50%) of the combined voting power of the Corporation’s then outstanding securities; or
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iv. | the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or there is consummated the sale, disposition or long-term lease by the Corporation of all or substantially all of the Corporation’s assets. |
Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred (1) by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the Common Stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in one or more entities which, singly or together, immediately following such transaction or series of transactions, own all or substantially all of the assets of the Corporation as constituted immediately prior to such transaction or series of transactions, or (2) with respect to any Award subject to Section 409A of the Code, unless the applicable event also constitutes a change in the ownership or effective control of the Corporation or in the ownership of a substantial portion of the assets of the Corporation under Section 409A(a)(2)(A)(v) of the Code.
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I. | “Code” means the Internal Revenue Code of 1986, as amended from time to time, including any rules and regulations promulgated thereunder, along with Treasury and IRS interpretations thereof. Reference to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation that amends, supplements or replaces such section or subsection.
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J. | “Common Stock” means the common stock, par value $.06 per share, of the Corporation or any security into which such shares of Common Stock may be changed by reason of any transaction or event of the type referred to in Section 13 of the Plan.
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K. | “Compensation Committee” means the Compensation Committee of the Board, or any other committee of the Board or subcommittee thereof authorized to administer this Plan in accordance with Section 12 of the Plan.
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L. | “Corporation” means Gentex Corporation, a Michigan corporation, and its successors. |
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M. | “Date of Grant” means the date as of which an Award is determined to be effective and designated in a resolution by the Board, the Compensation Committee, or an Authorized Officer and is granted pursuant to the Plan. The Date of Grant shall not be earlier than the date of the resolution and action therein by the Board, the Compensation Committee, or an Authorized Officer. |
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N. | “Director” means a member of the Board. |
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O. | “Effective Date” means May 16, 2019 as long as the Plan is approved by the shareholders of the Corporation; provided, however, any Awards made prior to such date which are granted contingent upon such shareholder approval of the Plan shall be effective and remain in place once such shareholder approval of the Plan is obtained. If shareholder approval is not obtained, the Plan shall not become effective, any Awards made under the Plan shall be expunged, and the Prior Plans shall remain in place. |
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P. | “Employee” means any employee of the Corporation or of any Subsidiary. |
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Q. | “Employer” means the Corporation or any successor thereto or a Subsidiary. |
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R. | “Evidence of Award” means an agreement, certificate, resolution or other written evidence, whether or not in electronic form, that sets forth the terms and conditions of an Award. Each Evidence of Award shall be subject to this Plan and shall contain such terms and provisions, not inconsistent with this Plan, as the Compensation Committee or an Authorized Officer may approve. An Evidence of Award may be in an electronic medium, may be limited to notation on the books and records of the Corporation and, unless determined otherwise by the Compensation Committee, need not be signed by a representative of the Corporation or a Participant. |
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S. | “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder. Reference to any section or subsection of the Exchange Act includes reference to any comparable or succeeding provisions of any legislation that amends, supplements or replaces such section or subsection. |
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T. | “Executive Officer” means an officer of the Corporation who is subject to the liability provisions of Section 16 of the Exchange Act. |
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U. | “Free-Standing Appreciation Right” means an Appreciation Right granted pursuant to Section 5 of the Plan that is not granted in tandem with an Option Right.
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V. | “Good Reason” shall have the meaning assigned such term in the employment agreement, if any, between a Participant and an Employer and, in the absence of such an agreement, the meaning specified in the applicable Evidence of Award. |
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W. | “Incentive Stock Options” means Option Rights that are intended to qualify as “incentive stock options” under Section 422 of the Code. |
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X. | “Market Value per Share” means, as of any particular date the closing sale price of the Common Stock as reported on the NASDAQ Global Select Market or, if not listed on such exchange, on any other national securities exchange on which the Common Stock is listed. If the Common Stock is not traded as of any given date, the Market Value per Share means the closing price for the Common Stock on the principal exchange on which the Common Stock is traded for the immediately preceding date on which the Common Stock was traded. If there is no regular public trading market for such Common Stock, the Market Value per Share of the Common Stock shall be the fair market value of the Common Stock as determined in good faith by the Board. The Board is authorized to adopt another fair market value pricing method, provided such method is stated in the Evidence of Award, and, to the extent an Award is subject to Section 409A of the Code, is in compliance with the fair market value pricing rules set forth in Section 409A of the Code. |
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Y. | “Non-Employee Director” means a member of the Board who is not an Employee. |
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Z. | “Non-Qualified Options” means Option Rights that are not intended to qualify as “incentive stock options” under Section 422 of the code. |
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AA. | “Optionee” means the Participant named in an Evidence of Award evidencing an outstanding Option Right. |
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AB. | “Option Price” means the purchase price payable on exercise of an Option Right. |
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AC. | “Option Right” means the right to purchase shares of Common Stock upon exercise of a Non-Qualified Option or an Incentive Stock Option granted pursuant to Section 4 of the Plan.
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AD. | “Other Award” means an Award granted pursuant to Section 9 of the Plan.
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AE. | “Participant” means a person who is selected by the Board, the Compensation Committee or an Authorized Officer to receive benefits under this Plan and who is at the time an Employee or a Non-Employee Director. |
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AF. | “Performance Objectives” means the measurable performance objective or objectives established pursuant to this Plan for Participants who have received grants of Performance Shares or Performance Units or, when so determined by the Board, the Compensation Committee, or an Authorized Officer, Option Rights, Appreciation Rights, Restricted Stock, Restricted Stock Units, Other Awards or dividend credits pursuant to the Plan. Performance Objectives may be described in terms of Corporation-wide objectives or objectives that are related to the performance of a joint venture, Subsidiary, business unit, division, department, business segment, region or function and/or that are related to the performance of the individual Participant. The Performance Objectives may be made relative to the performance of other companies or an index covering multiple companies. The Performance Objectives applicable to any Award can be based on specified levels of or growth in any appropriately determined Performance Objective. |
With respect to any grant under the Plan, if the Compensation Committee determines that a change in the business, operations, corporate structure or capital structure of the Corporation, or the manner in which it conducts its business, or other events or circumstances render the Performance Objectives unsuitable, the Compensation Committee may in its discretion modify such Performance Objectives or the related minimum acceptable level or levels of achievement, in whole or in part, as the Compensation Committee deems appropriate and equitable.
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AG. | "Performance Period” means, in respect of a Performance Share or Performance Unit, a period of time established pursuant to Section 8 of the Plan within which the Performance Objectives relating to such Performance Share or Performance Unit are to be achieved.
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AH. | “Performance Share” means a bookkeeping entry that records the equivalent of one share of Common Stock awarded pursuant to Section 8of the plan.
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AI. | “Performance Unit” means a bookkeeping entry awarded pursuant to Section 8 of the Plan that records a unit equivalent to $1.00 or such other value as is determined by the Compensation Committee.
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AJ. | “Person” means shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Corporation or any director or indirect subsidiary thereof, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any direct or indirect subsidiary thereof, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation. |
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AK. | “Plan” means this Gentex Corporation 2019 Omnibus Incentive Plan, as it may be amended from time to time. |
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AL. | “Prior Plans” means the Employee Stock Option Plan, Second Restricted Stock Plan, and 2012 Amended and Restated Nonemployee Director Stock Option Plan. |
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AM. | “Restricted Stock” means shares of Common Stock granted pursuant to Section 6 of the Plan.
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AN. | “Restricted Stock Unit” means an award granted pursuant to Section 7 of the Plan of the right to receive shares of Common Stock or cash at the end of the Restriction Period.
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AO. | "Restriction Period” means the period of time during which Restricted Stock Units are subject to restrictions, as provided in Section 7 of the plan.
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AP. | “Spread” means the excess of the Market Value per Share on the date when an (i) Option Right is exercised over the Option Price, or (ii) Appreciation Right is exercised over the Option Price or Base Price provided for in the related Option Right or Free-Standing Appreciation Right, respectively. |
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AQ. | “Subsidiary” means a corporation, company or other entity (i) more than 50% of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), but more than 50% of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Corporation, except that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, “Subsidiary” means a “subsidiary corporation” within the meaning of Section 424(f) of the Code. |
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AR. | “Substitute Awards” means Awards that are granted in assumption of, or in substitution or exchange for, outstanding awards previously granted by an entity acquired directly or indirectly by the Corporation or with which the Corporation directly or indirectly combines. |
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AS. | “Tandem Appreciation Right” means an Appreciation Right granted pursuant to Section 5 of the Plan that is granted in tandem with an Option Right.
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AT. | “Ten Percent Shareholder” means any Participant who owns more than 10% of the combined voting power of all classes of stock of the Corporation, within the meaning of Section 422 of the Code. |
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AU. | “Termination Date,” for purposes of the Plan, except as may be otherwise prescribed by the Compensation Committee or an Authorized Officer in an Evidence of Award, means with respect to any Employee, the date on which the Employee ceases to be employed by an Employer. |
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3. | Shares Subject to this Plan. |
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A. | Maximum Shares Available Under Plan. |
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i. | Subject to adjustment as provided in Section 13 of the Plan, the maximum aggregate number of shares of Common Stock that may be issued or delivered under the Plan is 45,000,000 shares of Common Stock ("Available Common Shares"). Performance Shares, Restricted Stock, or any other Awards granted with a per share price of less than 100% of the Market Value per Share as determined for such Awards ("Full Value Awards") shall be counted against the Available Common Shares as 4.06 shares for every one share of Common Stock subject thereto. Option Rights and Appreciation Rights granted with a per share price of at least 100% of the Market Value per Share as determined for such Award shall be counted against the Available Common Shares as one share for every one share of Common Stock subject thereto. From and after the Effective Date, no new grants shall be made under the Prior Plans, but outstanding grants made under the Prior Plans will remain subject to the terms and conditions of the Prior Plans. Any Award that by its terms can be settled only in cash shall not count against the number of shares of Common Stock available for award under the Plan.
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ii. | In addition to the shares of Common Stock authorized in Section 3.A.i. of the Plan, if and to the extent any (A) Option Right, Appreciation Right or other Award granted pursuant to this Plan terminates, expires or is forfeited without having been exercised or settled in full, or (B) Award granted pursuant to this Plan that may be settled in either cash or shares of Common Stock is settled in cash, then the underlying shares of Common Stock, including Full Value Awards counted as such, again shall be available for grant under this Plan and credited toward the Plan limit as set forth in Section 3.A.i. of the Plan.
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iii. | Shares of Common Stock that are tendered, whether by physical delivery or by attestation, to the Corporation by a Participant or withheld from the Award by the Corporation as full or partial payment of the exercise price of any Award or in payment of any applicable withholding for Federal, state, city, local or foreign taxes incurred in connection with the exercise, vesting or earning of any Award under the Plan will not become available for future grants under the Plan. With respect to an Appreciation Right, when such Appreciation Right is exercised and settled in shares of Common Stock, the shares of Common Stock subject to such Appreciation Right shall be counted against the shares of Common Stock available for issuance under the Plan as one share of Common Stock for every one share of Common Stock subject thereto, regardless of the number of shares of Common Stock used to settle the Appreciation Right upon exercise. |
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B. | Life-of-Plan Limits. Notwithstanding anything in this Section 3, or elsewhere in this Plan, to the contrary and subject to adjustment pursuant to Section 13 of the Plan, the aggregate number of shares of Common Stock actually issued or transferred by the Corporation upon the exercise of Incentive Stock Options shall not exceed 2,000,000.
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C. | Individual Participant Limits. Notwithstanding anything in this Section 3, or elsewhere in this Plan, to the contrary and subject to adjustment pursuant to Section 13 of the Plan:
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i. | During any Performance Period no Participant shall be granted Option Rights or Appreciation Rights or Other Awards with rights which are substantially similar to Option Rights or Appreciation Rights, in the aggregate, for more than 1,000,000 shares of Common Stock. |
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ii. | For grants of performance-based Awards, during any Performance Period no Participant shall be granted Restricted Stock, Restricted Stock Units or stock-denominated Performance Shares or Other Awards with rights which are substantially similar to Performance Shares, in the aggregate, for more than 1,000,000 shares of Common Stock. |
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iii. | For grants of performance-based Awards, during any Performance Period no Participant shall be granted Performance Units or cash-denominated Other Awards with rights which are substantially similar to Performance Units pursuant to which the Participant can receive, in the aggregate, more than $10,000,000. |
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iv. | During any calendar year no Participant who is a Non-Employee Director shall be granted overall compensation (inclusive of cash compensation) in excess of $500,000. |
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D. | Substitute Awards. Any Substitute Awards granted by the Corporation shall not reduce the shares of Common Stock available for Awards under the Plan.
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A. | The Board, the Compensation Committee or, in accordance with Section 12(D) of the Plan, an Authorized Officer, may, from time to time and upon such terms and conditions as it or the Authorized Officer may determine, grant Option Rights to Participants. Option Rights granted under this Plan may be (i) Incentive Stock Options, (ii) Non-Qualified Options, or (iii) combinations of the foregoing. Incentive Stock Options may be granted only to Participants who at the time of grant meet the definition of “employee” under Section 3401(c) of the Code in respect of the Corporation or a Subsidiary.
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B. | Each Option Right will be memorialized by an Evidence of Award that shall specify: |
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i. | the number of shares of Common Stock to which it pertains, subject to the limitations set forth in Section 3 of the Plan;
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ii. | the Option Price per share of Common Stock, which may not be less than the Market Value Per Share on the Date of Grant (provided, however, that in the case of the grant |
of an Incentive Stock Option to a Ten Percent Shareholder the Option Price shall not be less than 110 percent of the Market Value Per Share on the Date of Grant);
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iii. | whether the Option Price will be payable (A) in cash or by check or by wire transfer of immediately available funds, (B) by the actual or constructive transfer to the Corporation of whole shares of Common Stock owned by the Optionee (or other consideration authorized pursuant to the Plan) having a value at the time of exercise equal to the total Option Price, (C) by means of a broker-assisted cashless exercise, (D) by the withholding of shares of Common Stock from delivery with a value equal to some portion or all of the Option Price, (E) by a combination of such methods of payment, or (F) by such other methods as may be approved by the Compensation Committee; |
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iv. | the conditions for the Option Rights or installments thereof to become exercisable (including without limitation the attainment of Performance Objectives) and the periods for which they will remain exercisable; and |
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v. | such other terms as the Compensation Committee or Authorized Officer may approve, including without limitation provisions under which some portion or all of the Option Right or proceeds attributable thereto may be subject to recoupment in circumstances of Optionee conduct deemed detrimental to the Corporation or its Affiliates. |
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C. | Successive grants may be made to the same Participant whether or not any Option Rights previously granted to such Participant remain unexercised. |
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D. | Except as provided in Section 11, each Award of Option Rights granted under this Plan shall provide for a minimum vesting period of twelve (12) months from the Date of Grant.
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E. | Any grant of Option Rights may provide for the earlier exercise of such Option Rights or other modifications in the event of specified terminations of the Optionee’s employment or service, a Change in Control, an unforeseeable emergency, the grant of a Substitute Award or other special circumstances. |
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F. | Except as provided in an Evidence of Award, in the event of a Participant's termination of employment or service, any Option Rights that have not vested as of the Participant's Termination Date will be cancelled and immediately forfeited, without further action on the part of the Corporation or the Compensation Committee, and the Participant will have no further rights in respect of such Option Rights. |
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G. | The exercise of an Option Right will result in the cancellation on a share-for-share basis of any related Tandem Appreciation Right authorized under Section 5 of the Plan.
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H. | No Option Right will be exercisable more than ten (10) years from the Date of Grant (five (5) years in the case of the grant of an Incentive Stock Option to Participant who is a Ten Percent Shareholder on the Date of Grant). |
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I. | Except as provided in an Evidence of Award, in the event of an Optionee’s termination of employment or service, any Option Rights that have not vested as of the Optionee’s Termination Date will be cancelled and immediately forfeited, without further action on the part of the Corporation or the Compensation Committee, and the Optionee will have no further rights in respect of such Option Rights. |
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J. | In no event may any Option Right be repurchased or cancelled in exchange for cash or other consideration at a time when the Option Price exceeds the Market Value Per Share subject to such Option Right. |
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A. | The Board, the Compensation Committee or, in accordance with Section 12.D. of the Plan, an Authorized Officer, may grant (i) to any Optionee, Tandem Appreciation Rights in respect of Option Rights granted hereunder, and (ii) to any Participant, Free-Standing Appreciation Rights.
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B. | A Tandem Appreciation Right will be a right of the Optionee, exercisable by surrender of the related Option Right, to receive from the Corporation an amount determined by the Compensation Committee or an Authorized Officer, which will be expressed as a percentage of the Spread on the related Option Right (not exceeding 100%) at the time of exercise. Tandem Appreciation Rights may be granted at any time prior to the exercise or termination of the related Option Rights; provided, however, that a Tandem Appreciation Right awarded in relation to an Incentive Stock Option must be granted concurrently with such Incentive Stock Option. |
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C. | A Free-Standing Appreciation Right will be a right of the Participant to receive from the Corporation an amount determined by the Compensation Committee or an Authorized Officer, |
which will be expressed as a percentage of the Spread (not exceeding one hundred percent (100%)) at the time of exercise.
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D. | Each Appreciation Right will be memorialized by an Evidence of Award that shall specify: |
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i. | The number of shares of Common Stock to which it pertains, subject to the limitations set forth in Section 3 of the Plan;
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ii. | the percentage of the Spread (not exceeding 100%) payable at the time of exercise and whether such amount shall be paid by the Corporation in cash, in shares of Common Stock or in any combination thereof (and whether such form may be determined in the discretion of the Compensation Committee or Authorized Officer or Participant); |
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iii. | the conditions for the Appreciation Rights or installments thereof to become exercisable (including without limitation the attainment of Performance Objectives) and the periods for which they will remain exercisable; and |
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iv. | such other terms as the Compensation Committee or Authorized Officer may approve, including without limitation provisions under which some portion or all of the Appreciation Right or proceeds attributable thereto may be subject to recoupment in circumstances of Participant conduct deemed detrimental to the Corporation or its Affiliates. |
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E. | Except as provided in Section 11, each Award of Appreciation Rights granted under this Plan shall provide for a minimum vesting period of twelve (12) months from the Date of Grant.
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F. | Any grant of Appreciation Rights may provide for the earlier exercise of such Appreciation Rights or other modifications in the event of specified terminations of the Participant’s employment or service, a Change in Control, an unforeseeable emergency, the grant of a Substitute Award or other special circumstances. |
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G. | Except as provided in an Evidence of Award, in the event of a Participant’s termination of employment or service, any Appreciation Rights that have not vested as of the Participant’s Termination Date will be cancelled and immediately forfeited, without further action on the part of the Corporation or the Compensation Committee, and the Participant will have no further rights in respect of such Appreciation Rights. |
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H. | Any grant of Tandem Appreciation Rights will provide that such Tandem Appreciation Rights may be exercised only at a time when the related Option Right is also exercisable and at a time when the Spread is positive, and by surrender of the related Option Right for cancellation. Successive grants of Tandem Appreciation Rights may be made to the same Participant regardless of whether any Tandem Appreciation Rights previously granted to the Participant remain unexercised. In the case of a Tandem Appreciation Right granted in relation to an Incentive Stock Option to an employee who is a Ten Percent Shareholder on the Date of Grant, the amount payable with respect to each Tandem Appreciation Right shall be equal in value to the applicable percentage of the excess, if any, of the Market Value Per Share on the exercise date over the Base Price of the Tandem Appreciation Right, which Base Price shall not be less than 110 percent of the Market Value Per Share on the date the Tandem Appreciation Right is granted. |
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I. | Regarding Free-Standing Appreciation Rights only: |
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i. | Each grant will specify in respect of each Free-Standing Appreciation Right a Base Price, which may not be less than the Market Value Per Share on the Date of Grant; |
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ii. | Successive grants may be made to the same Participant regardless of whether any Free-Standing Appreciation Rights previously granted to the Participant remain unexercised; and |
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iii. | No Free-Standing Appreciation Right granted under this Plan may be exercised more than ten (10) years from the Date of Grant. |
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J. | In no event may any Appreciation Right be repurchased or cancelled in exchange for cash or other consideration at a time when the Base Price exceeds the Market Value Per Share subject to such Appreciation Right. |
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A. | The Board, the Compensation Committee or, in accordance with Section 12.D. of the Plan, an Authorized Officer, may grant Restricted Stock to Participants.
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B. | Each such grant will constitute an immediate transfer of the ownership of shares of Common Stock to the Participant in consideration of the performance of services, entitling such Participant |
to voting, dividend and other ownership rights, but subject to the substantial risk of forfeiture and restrictions on transfer hereinafter referred to and Section 22.
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C. | Each grant of Restricted Stock will be memorialized by an Evidence of Award that shall specify: |
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i. | the number of shares of Common Stock to which it pertains, subject to the limitations set forth in Section 3 of the Plan;
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ii. | any restrictions on transfer and forfeitability provisions applicable to the Restricted Stock (which restrictions may include, without limitation, subjecting the Restricted Stock to a substantial risk of forfeiture in the hands of any transferee); |
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iii. | the conditions under which restrictions on transfer and forfeitability provisions shall lapse, including without limitation upon the attainment of Performance Objectives; and |
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iv. | such other terms as the Compensation Committee or Authorized Officer may approve, including without limitation provisions under which some portion or all of the Restricted Stock or proceeds attributable thereto may be subject to recoupment in circumstances of Participant conduct deemed detrimental to the Corporation or its Affiliates. |
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D. | Except as provided in Section 11, each Award of Restricted Stock granted under this Plan shall provide for a minimum vesting period of twelve (12) months from the Date of Grant.
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E. | Any grant of Restricted Stock may provide for the earlier lapse of restrictions or other modifications in the event of specified terminations of the Participant’s employment or service, a Change in Control, an unforeseeable emergency, the grant of a Substitute Award or other special circumstances. |
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F. | Except as provided in an Evidence of Award, in the event of a Participant’s termination of employment or service, any Restricted Stock that has not yet become free of restrictions will be immediately forfeited to the Corporation, without further action on the part of the Corporation or the Compensation Committee, and the Participant will have no further rights in respect of such Restricted Stock. |
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G. | Any grant of Restricted Stock may require that any or all dividends or other distributions paid thereon during the period of such restrictions be automatically deferred and/or reinvested in additional shares of Restricted Stock (which may be subject to the same restrictions as the underlying Award) or be paid in cash on a deferred or contingent basis, subject to Section 22.
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H. | Unless otherwise directed by the Compensation Committee, (i) all certificates representing shares of Restricted Stock will be held in custody by the Corporation until all restrictions thereon have lapsed, together with a stock power or powers executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such shares of Common Stock, or (ii) all uncertificated shares of Restricted Stock will be held at the Corporation’s transfer agent in book entry form with appropriate restrictions relating to the transfer of such shares of Restricted Stock. |
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7. | Restricted Stock Units.
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A. | The Board, the Compensation Committee or, in accordance with Section 12.D. of the Plan, an Authorized Officer, may grant Restricted Stock Units to Participants. Each such grant of Restricted Stock Units will constitute the agreement by the Corporation to deliver shares of Common Stock or cash to the Participant in the future in consideration of the performance of services.
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B. | Each grant of Restricted Stock Units will be memorialized by an Evidence of Award that shall specify: |
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i. | the number of shares of Common Stock to which it pertains, subject to the limitations set forth in Section 3 of the Plan;
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ii. | the conditions for the Restricted Stock Units or installments thereof to vest (including without limitation the attainment of Performance Objectives); |
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iii. | whether payment thereunder shall be made in Common Stock, cash or any combination thereof (and whether such form may be determined in the discretion of the Compensation Committee or Authorized Officer or Participant) and the time or times at which such amounts shall be payable; and |
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iv. | such other terms as the Compensation Committee or Authorized Officer may approve, including without limitation provisions under which some portion or all of the Restricted Stock Units or proceeds attributable thereto may be subject to recoupment in circumstances of Participant conduct deemed detrimental to the Corporation or its Affiliates. |
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C. | During the Restriction Period, the Participant will have none of the rights of a shareholder of any shares of Common Stock with respect to such Restricted Stock Units, but the Compensation Committee or Authorized Officer may authorize the payment of dividend equivalents on such Restricted Stock Units on either a current, deferred or contingent basis, either in cash or in additional shares of Common Stock, subject to Section 22.
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D. | Except as provided in Section 11, each Award of Restricted Stock Units granted under this Plan shall provide for a minimum vesting period of twelve (12) months from the Date of Grant.
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E. | Any grant of Restricted Stock Units may provide for the earlier lapse of restrictions or other modifications in the event of specified terminations of the Participant’s employment or service, a Change in Control, an unforeseeable emergency, the grant of a Substitute Award or other special circumstances. |
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F. | Except as provided in an Evidence of Award, in the event of a Participant’s termination of employment or service, any Restricted Stock Unit that has not yet become vested will be immediately forfeited to the Corporation, without further action on the part of the Corporation or the Compensation Committee, and the Participant will have no further rights in respect of such Restricted Stock Units. |
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8. | Performance Shares and Performance Units.
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A. | The Board, the Compensation Committee or, in accordance with Section 12.D. of the Plan, an Authorized Officer, may grant Performance Shares and Performance Units that will become payable to a Participant upon achievement of specified Performance Objectives during the Performance Period.
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B. | Each grant of Performance Shares or Performance Units will be memorialized by an Evidence of Award that shall specify: |
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i. | the number of units or shares of Common Stock to which it pertains, subject to the limitations set forth in Section 3 of the Plan, which number may be subject to adjustment to reflect changes in compensation or other factors;
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ii. | the conditions for the Performance Shares or Performance Units or installments thereof to vest; |
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iii. | whether payment under Performance Shares or Performance Units shall be made in Common Stock, cash or any combination thereof (and whether such form may be determined in the discretion of the Compensation Committee or Authorized Officer or Participant) and the time or times at which such amounts shall be payable; and |
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iv. | such other terms as the Compensation Committee or Authorized Officer may approve, including without limitation provisions under which some portion or all of the Performance Shares or Performance Units or proceeds attributable thereto may be subject to recoupment in circumstances of Participant conduct deemed detrimental to the Corporation or its Affiliates. |
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C. | Except as provided in Section 11, each Award of Performance Shares or Performance Units granted under this Plan shall provide for a minimum vesting period of twelve (12) months from the Date of Grant.
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D. | Any grant of Performance Shares or Performance Units may provide for the earlier lapse of restrictions or other modifications in the event of specified terminations of the Participant’s employment or service, a Change in Control, an unforeseeable emergency, the grant of a Substitute Award or other special circumstances. |
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E. | Except as provided in an Evidence of Award, in the event of a Participant’s termination of employment or service, any Performance Share or Performance Unit that has not yet become vested will be immediately forfeited to the Corporation, without further action on the part of the Corporation or the Compensation Committee, and the Participant will have no further rights in respect of such Performance Shares or Performance Units. |
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F. | During the Performance Period, the Participant will have none of the rights of a shareholder of any shares of Common Stock with respect to Performance Shares, but the Compensation Committee or Authorized Officer may authorize the payment of dividend equivalents on Performance Shares on either a current, deferred or contingent basis, either in cash or in additional shares of Common Stock, subject to Section 22.
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A. | The Board, the Compensation Committee or, in accordance with Section 12.D. of the Plan, an Authorized Officer, may, subject to limitations under applicable law, rule, or regulation applicable to the Corporation, authorize grants to any Participant other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to (i) shares of Common Stock or factors that may influence the value of such shares, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of Common Stock, purchase rights for shares of Common Stock, awards with value and payment contingent upon performance of the Corporation or specified Subsidiaries, Affiliates or other business units thereof or any other factors designated by the Compensation Committee or Authorized Officer, and awards valued by reference to the book value of shares of Common Stock or the value of securities of, or the performance of specified Subsidiaries or Affiliates or other business units of, the Corporation, (ii) cash, or (iii) any combination of the foregoing, including without limitation grants of cash or shares of Common Stock as a bonus or in lieu of obligations of the Corporation or a Subsidiary to pay cash or deliver other property under this Plan or under other plans or compensatory arrangements, all subject to such terms as shall be determined by the Compensation Committee or Authorized Officer.
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B. | Each grant of an Other Award will be memorialized by an Evidence of Award that shall specify: |
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i. | the number of shares of Common Stock and/or the amount of cash to which it pertains, subject to the limitations set forth in Section3 of the Plan;
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ii. | the conditions for the Other Award or installments thereof to vest (including without limitation the attainment of Performance Objectives); |
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iii. | whether payment thereunder shall be made in Common Stock, cash or any combination thereof (and whether such form may be determined in the discretion of the Compensation Committee or Authorized Officer or Participant) and the time or times at which such amounts shall be payable; and |
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iv. | such other terms as the Compensation Committee or Authorized Officer may approve, including without limitation provisions under which some portion or all of the Other Award or proceeds attributable thereto may be subject to recoupment in circumstances of Participant conduct deemed detrimental to the Corporation or its Affiliates. |
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C. | Except as provided in Section 11, each Other Award granted under this Plan shall provide for a minimum vesting period of twelve (12) months from the Date of Grant.
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D. | Any grant of an Other Award may provide for the earlier lapse of restrictions or other modifications in the event of specified terminations of the Participant’s employment or service, a Change in Control, an unforeseeable emergency, the grant of a Substitute Award or other special circumstances. |
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E. | Except as provided in an Evidence of Award, in the event of a Participant’s termination of employment or service, any Other Award that has not yet become vested will be immediately forfeited to the Corporation, without further action on the part of the Corporation or the Compensation Committee, and the Participant will have no further rights in respect of such Other Award. |
10.Awards to Non-Employee Directors. The Board may from time to time grant Awards to Non-Employee Directors upon the terms and conditions otherwise applicable to the grants of Awards under the Plan. If a Non-Employee Director subsequently becomes an employee of the Corporation or a Subsidiary while remaining a member of the Board, any Award held under this Plan by such individual at the time of such commencement of employment will not be affected thereby.
11.Minimum Vesting Period. Awards covering in the aggregate not more than 5% of the shares of Common Stock available for issuance under the Plan shall not necessarily be subject to the restrictions set forth Section 4.D., 5.E., 6.D., 7.D., 8.C., or 9.C.
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12. | Administration of the Plan. |
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A. | This Plan will be administered by the Compensation Committee. The Board or the Compensation Committee, as applicable, may from time to time delegate all or any part of its authority under this Plan to any other committee of the Board or subcommittee thereof consisting exclusively of not less than two or more members of the Board, each of whom shall be a “non-employee director” within the meaning of Rule 16b-3 of the Securities and Exchange |
Commission promulgated under the Exchange Act, and an “independent director” within the meaning of the rules of the NASDAQ, as constituted from time to time. To the extent of any such delegation, references in this Plan to the Board or the Compensation Committee, as applicable, will be deemed to be references to such committee or subcommittee. A majority of the committee (or subcommittee) will constitute a quorum, and the action of the members of the committee (or subcommittee) present at any meeting at which a quorum is present, or acts unanimously approved in writing, will be the acts of the committee (or subcommittee).
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B. | The interpretation and construction by the Compensation Committee of any provision of the Plan or of any agreement, notification or document evidencing the grant of an Award, and any determination by the Compensation Committee pursuant to any provision of the Plan or of any such agreement, notification or document will be final and conclusive. No member of the Board will be liable for any such action or determination made in good faith. |
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C. | To the extent permitted by applicable law but subject to Section 12.D. of the Plan, the Board or the Compensation Committee, as applicable, may, from time to time, delegate to one or more of its members or to one or more officers of the Corporation, or to one or more agents or advisors, such administrative duties or powers as it may deem advisable, and the Board, the Compensation Committee or any person to whom duties or powers have been delegated as aforesaid, may employ one or more persons to render advice with respect to any responsibility the Board, the Compensation Committee or such person may have under this Plan.
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D. | To the extent permitted by applicable law, rule, and regulation, the Compensation Committee may, by resolution, authorize one or more Executive Officers of the Corporation (each, an “Authorized Officer”), to do one or both of the following on the same basis as the Compensation Committee: (i) designate Participants to be recipients of Awards under this Plan and (ii) determine the size of any such Awards; provided, however, that (A) the Compensation Committee shall not delegate such responsibilities to any Executive Officer for Awards granted to a Participant who is an Executive Officer, a Director, or a more than 10% beneficial owner of any class of the Corporation’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Board in accordance with Section 16 of the Exchange Act, and (B) the resolution providing for such authorization sets forth the total number of shares of Common Stock the Authorized Officer(s) may grant. The Authorized Officer(s) shall report periodically to the Compensation Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated. |
13.Adjustments. The Board shall make or provide for such adjustments in the numbers of shares of Common Stock covered by outstanding Option Rights, Appreciation Rights, Restricted Stock Units, Performance Shares, Performance Units and Other Awards, in the Option Price and Base Price provided in outstanding Option Rights and Appreciation Rights, and in the kind of shares covered thereby, as is equitably required to prevent dilution or enlargement of the rights of Participants or Optionees that otherwise would result from (a) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Corporation, (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event specified in this Section 13 of the Plan, the Compensation Committee, in its discretion, may provide in substitution for any or all outstanding Awards under this Plan such alternative consideration (including cash), if any, as it may determine, in good faith, to be equitable in the circumstances and may require in connection therewith the surrender of all Awards so replaced. The Compensation Committee also shall make or provide for such adjustments in the numbers of shares specified in Section 3 of the Plan as is appropriate to reflect any transaction or event described in this Section 13.
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A. | Except as otherwise provided in an Evidence of Award or by the Compensation Committee at the Date of Grant, to the extent outstanding Awards granted under this Plan are not assumed, converted or replaced by the resulting entity or its direct or indirect parent in the event of a Change in Control, all outstanding Awards that may be exercised shall become fully exercisable, all restrictions with respect to outstanding Awards shall lapse and become vested and non-forfeitable, and any specified Performance Objectives with respect to outstanding Awards shall be deemed to be satisfied at target. |
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B. | Except as otherwise provided in an Evidence of Award or by the Compensation Committee, to the extent outstanding Awards granted under this Plan are assumed, converted or replaced |
by the resulting entity or its direct or indirect parent in the event of a Change in Control, any outstanding Awards that are subject to Performance Objectives shall be converted by the resulting entity or its direct or indirect parent, as if target performance had been achieved as of the date of the Change in Control, and each Award of: (i) Performance Shares or Performance Units shall continue to vest during the remaining Performance Period, (ii) Restricted Stock shall remain subject to the otherwise applicable vesting conditions during the remaining vesting period, (iii) Restricted Stock Units shall remain subject to the otherwise applicable vesting conditions during the Restriction Period, and (iv) all other Awards shall remain subject to the otherwise applicable vesting conditions during the remaining vesting period, if any.
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C. | Except as otherwise provided in an Evidence of Award or by the Compensation Committee, to the extent outstanding Awards granted under this Plan are either assumed, converted or replaced by the resulting entity or its direct or indirect parent in the event of a Change in Control, if a Participant’s service is terminated without Cause by the Corporation, any of its Subsidiaries or the resulting entity or a Participant resigns his or her employment with an Employer for Good Reason, in either case, all outstanding Awards held by the Participant that may be exercised shall become fully exercisable and all restrictions with respect to outstanding Awards shall lapse and become vested and non-forfeitable. |
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D. | Notwithstanding any other provision of the Plan, in the event of a Change in Control, the Board in its discretion, at or after the Date of Grant, may (i) provide for the cancellation of each outstanding and unexercised Option Right or Appreciation Right with an Option Price or Base Price, as applicable, less than the highest price per share of Common Stock paid for a share of Common Stock in the Change in Control (or, if less, the Market Value Per Share at the time of cancellation to the extent required to avoid imposition of a tax under Section 409A of the Code) (such amount the “Transaction Consideration”) in exchange for a cash payment to be made at the same time as payment is made to holders of Common Stock in connection with the Change in Control in an amount equal to the amount by which the Transaction Consideration exceeds the Option Price or Base Price, as applicable, multiplied by the number of shares of Common Stock granted under the Option Right or Appreciation Right, and (ii) provide for the cancellation of each outstanding and unexercised Option Right or Appreciation Right with an Option Price or Base Price, as applicable, equal to or more than the Transaction Consideration without any payment to the holder of such Option Right or Appreciation Right, as applicable. |
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E. | Notwithstanding any provision of the Plan to the contrary, to the extent an Award constitutes a “deferral of compensation” for purposes of Section 409A of the Code, and such Award shall be deemed to be vested or restrictions lapse, expire or terminate upon the occurrence of a Change in Control and such Change in Control does not constitute a “change in the ownership or effective control” or a “change in the ownership or a substantial portion of the assets” of the Corporation within the meaning of Section 409A(a)(2)(A)(v) of the Code, then even though such Award may be deemed to be vested or restrictions lapse, expire or terminate upon the occurrence of the Change in Control or any other provision of the Plan, payment will be made, to the extent necessary to comply with the provisions of Section 409A of the Code, to the Participant on the earliest of: (i) the Participant’s “separation from service” with the Corporation (determined in accordance with Section 409A of the Code); provided, however, that if the Participant is a “specified employee” (within the meaning of Section 409A of the Code), the payment date shall be the date that is six (6) months after the date of the Participant’s separation from service with the Employer, (ii) the date payment otherwise would have been made in the absence of any provisions in this Plan to the contrary (provided such date is permissible under Section 409A of the Code), or (iii) the Participant’s death. |
15.Non-U.S. Participants. In order to facilitate the making of any grant or combination of grants under this Plan, the Board or the Compensation Committee may provide for such special terms for awards to participants who are foreign nationals or who are employed by the Corporation or any Subsidiary outside of the United States of America or who provide services to the Corporation or any Subsidiary under an agreement with a foreign nation or agency, as the Board or the Compensation Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Compensation Committee may approve such supplements to or amendments, restatements or alternative versions of the Plan (including, without limitation, sub-plans) as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of the Plan as in effect for any other purpose, and the Secretary or other appropriate officer of the Corporation may certify any such document as having been approved and adopted in the same manner as this Plan. No such special terms, supplements, amendments or restatements, however, will include any provisions that are inconsistent with the terms of the Plan as then in effect unless this Plan
could have been amended to eliminate such inconsistency without further approval by the shareholders of the Corporation.
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A. | Except as otherwise determined by the Board or the Compensation Committee pursuant to the provisions of Section 16.C. of the Plan, no Award or dividend equivalents paid with respect to Awards made under this Plan shall be transferable by the Participant except by will or the laws of descent and distribution, and may be otherwise transferred in a manner that protects the interest of the Corporation as the Board or the Compensation Committee may determine; provided, however, that if so determined by the Compensation Committee, each Participant may, in a manner established by the Board or the Compensation Committee, designate a beneficiary to exercise the rights of the Participant with respect to any Award upon the death of the Participant and to receive shares of Common Stock or other property issued upon such exercise.
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B. | The Compensation Committee or an Authorized Officer may specify at the Date of Grant that part or all of the shares of Common Stock that are (i) to be issued or transferred by the Corporation upon the exercise of Option Rights or Appreciation Rights, upon the termination of the Restriction Period applicable to Restricted Stock Units or upon payment under any grant of Performance Shares or Performance Units or (ii) no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Section 6 of the Plan, will be subject to further restrictions on transfer.
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C. | Notwithstanding Section 16.A. of the Plan, the Board or the Compensation Committee may determine that Awards (other than Incentive Stock Options) may be transferable by a Participant, without payment of consideration therefor by the transferee, only to any one or more family members (as defined in the General Instructions to Form S-8 under the Securities Act of 1933) of the Participant; provided, however, that (i) no such transfer shall be effective unless reasonable prior notice thereof is delivered to the Corporation and such transfer is thereafter effected in accordance with any terms and conditions that shall have been made applicable thereto by the Board or the Compensation Committee, and (ii) any such transferee shall be subject to the same terms and conditions hereunder as the Participant.
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17.Withholding Taxes. To the extent that an Employer is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a Participant or other person under this Plan, and the amounts available to the Employer for such withholding are insufficient, it will be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Corporation for payment of the balance of such taxes required to be withheld, which arrangements (in the discretion of the Compensation Committee) may include relinquishment of a portion of such benefit or the delivery to the Corporation of other shares of Common Stock held by such Participant. If a Participant’s benefit is to be received in the form of shares of Common Stock, and such Participant fails to make arrangements for the payment of tax, the Corporation may withhold such shares of Common Stock having a value equal to the amount required to be withheld. In no event shall the Market Value Per Share of the shares of Common Stock to be withheld pursuant to this section to satisfy applicable withholding taxes in connection with the benefit exceed the maximum statutory withholding amount permitted that will not result in a negative accounting impact.
18. Compliance with Section 409A of the Code. To the extent applicable, it is intended that this Plan and any grants made hereunder are exempt from Section 409A of the Code or are structured in a manner that would not cause a Participant to be subject to taxes and interest pursuant to Section 409A of the Code. This Plan and any grants made hereunder shall be administered in a manner consistent with this intent.
19.Effective Date and Term of Plan. This Plan will be effective as of the Effective Date, provided the shareholders of the Company approve the Plan. No grant will be made under this Plan more than ten (10) years after the Effective Date, but all grants made on or prior to such date will continue in effect thereafter subject to the terms thereof and of the Plan.
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20. | Amendments and Termination. |
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A. | The Plan and any Award may be amended, suspended or terminated at any time by the Board, provided that no amendment shall be made without shareholder approval if such shareholder |
approval is required in order to comply with applicable law, rule, or regulation, including the rules of the NASDAQ or any other securities exchange on which Common Stock is traded or quoted. Except as otherwise provided in Section 14 of the Plan, no termination, suspension or amendment of the Plan or any Award shall adversely affect the right of any Participant with respect to any Award theretofore granted, as determined by the Compensation Committee, without such Participant’s written consent.
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B. | Notwithstanding Section 20.A. of the Plan, the Corporation shall obtain shareholder approval for: (i) subject to Section 13 of the Plan, a reduction in the exercise price of an Award (or the cancellation and re-grant of an Award resulting in a lower exercise price); (ii) any amendment to materially expand the group of individuals eligible for Awards under the Plan; (iii) an increase to the maximum number of shares of Common Stock available for issuance under the Plan (other than adjustments in accordance with Section 13 of the Plan); or (iv) amendments that would materially increase the benefits accruing to Participants under this Plan.
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21.Substitute Awards for Awards Granted by Other Entities. Substitute Awards may be granted under this Plan for grants or awards held by employees of a company or entity who become employees of the Corporation or a Subsidiary as a result of the acquisition, merger or consolidation of the employer company by or with the Corporation or a Subsidiary. Except as otherwise provided by applicable law and notwithstanding anything in the Plan to the contrary, the terms, provisions and benefits of the Substitute Awards so granted may vary from those set forth in or required or authorized by this Plan to such extent as the Compensation Committee at the time of the grant may deem appropriate to conform, in whole or part, to the terms, provisions and benefits of grants or awards in substitution for which they are granted.
22.Dividends and Dividend Equivalents. The Compensation Committee may provide the Participant as part of an Award with dividends or dividend equivalents, payable in cash, shares of Common Stock, other securities, other Awards, or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee, including, without limitation, payment directly to the Participant, withholding of such amounts by the Corporation subject to vesting of the Award, or reinvestment in additional shares of Common Stock or other Awards, provided, that no dividends or dividend equivalents shall be payable in respect of outstanding (i) Option Rights or Appreciation Rights or (ii) unearned Performance Shares or Performance Units or other unearned Awards subject to performance conditions (other than or in addition to the passage of time); provided, further, that dividend equivalents may be accumulated in respect of unearned Awards and paid as soon as administratively practicable, but no more than 60 days, after such Awards are earned and become payable or distributable (and the right to any such accumulated dividends or dividend equivalents shall be forfeited upon the forfeiture of the Award to which such dividends or dividend equivalents relate).
23. Governing Law. This Plan and all grants and Awards and actions taken thereunder shall be governed by and construed in accordance with the internal substantive laws of the State of Michigan, without regard to its conflicts of laws principles.
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24. | Miscellaneous Provisions. |
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A. | The Corporation will not be required to issue any fractional shares of Common Stock pursuant to this Plan. The Board or the Compensation Committee may provide for the elimination of fractional shares or for the settlement of fractional shares in cash.
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B. | This Plan will not confer upon any Participant any right with respect to continuance of employment or other service with the Corporation or any Subsidiary, nor will it interfere in any way with any right the Corporation or any Subsidiary would otherwise have to terminate such Participant’s employment or other service at any time. |
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C. | No Award under this Plan may be exercised by the holder thereof if such exercise, and the receipt of cash or stock thereunder, would be, in the opinion of counsel selected by the Compensation Committee, contrary to any law, rule or regulation of any duly constituted authority having jurisdiction over this Plan. |
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D. | No Participant shall have any rights as a shareholder with respect to any shares of Common Stock subject to Awards granted to him or her under this Plan prior to the date as of which he or she is actually recorded as the holder of such shares upon the stock records of the Corporation. |
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E. | The Compensation Committee may condition the grant of any Award or combination of Awards authorized under this Plan on the surrender or deferral by the Participant of his or her right to |
receive a cash bonus or other compensation otherwise payable by the Corporation or a Subsidiary to the Participant.
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F. | Except with respect to Option Rights and Appreciation Rights, the Compensation Committee may permit Participants to elect to defer the issuance of shares of Common Stock or the settlement of Awards in cash under this Plan pursuant to such rules, procedures or programs as it may establish for purposes of the Plan. The Compensation Committee also may provide that deferred issuances and settlements include the payment or crediting of dividend equivalents or interest on the deferral amounts, subject to Section 22.
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G. | Any Award granted under the terms of the Plan may specify in the Evidence of Award that the Participant is subject to restrictive covenants including, but not limited to, covenants not to compete and covenants not to solicit, unless otherwise determined by the Compensation Committee. |
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H. | Participants shall provide the Corporation with a completed, written election form setting forth the name and contact information of the person who will have beneficial ownership rights of Awards made to the Participant under this Plan upon the death of the Participant. |
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I. | If any provision of the Plan is or becomes invalid, illegal or unenforceable in any jurisdiction, or would disqualify this Plan or any Award under any law deemed applicable by the Board or the Compensation Committee, such provision shall be construed or deemed amended or limited in scope to conform to applicable laws or, in the discretion of the Board or the Compensation Committee, it shall be stricken and the remainder of the Plan shall remain in full force and effect. |