UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
o Preliminary Proxy Statement
oConfidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
BALCHEM CORPORATION
Payment of Filing Fee (Check the appropriate box):
☒ | No fee required. |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which the transaction applies: |
(2) | Aggregate number of securities to which the transaction applies: |
(3) | Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 |
(4) | Proposed maximum aggregate value of the transaction: |
(5) | Total fee paid: |
o | Fee paid previously with preliminary materials. |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: | |
(3) | Filing Party: | |
(4) | Date Filed: | |
Balchem Corporation New Hampton, New York 10958 Tel: 845-326-5600 Fax: 845-326-5702 |
April 29, 2019
NOTICE OF
VIRTUAL ANNUAL MEETING OF STOCKHOLDERS
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Virtual Annual Meeting of StockholdersShareholders (the “Annual Meeting”“Annual Meeting” or the “Meeting”“Meeting”) of Balchem Corporation (the “Company”“Company”) will begin promptly at 2:00 p.m. Eastern Daylight Savings Time on June 20, 2019. The Annual Meeting will be helda virtual meeting and there will be no physical meeting location. The meeting will only be conducted via live webcast and shareholders may participate online by logging in at www.virtualshareholdermeeting.com/BCPC2019. Using this website, shareholders will be able to listen, vote, and submit questions from their home or from any remote location that has internet connectivity. If you plan to participate in the Annual Meeting, please see the instructions on page 40 of the attached Proxy Statement.
The Michelangelo hotel, 152 West 51st Street, New York, NY 10019 on Tuesday, June 13, 2017 at 4:30 p.m., local time,Annual Meeting will be conducted for the following purposes:
1. | To elect |
2. |
To ratify the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
To hold an advisory (non-binding) vote on the Company’s executive compensation; and, |
To transact such other business as may properly come before the Meeting or any adjournment thereof. |
Information with respect to the above matters is set forth in the Proxy Statement, which accompanies this Notice.
The Board of Directors has set April ----20, 201723, 2019 as the record date for the Annual Meeting. This means that only stockholdersshareholders of record at the close of business on that date are entitled to notice of and to vote at the Meeting or any adjournment thereof.
Shareholders who do not expect to be able to attend the Meeting are requested to complete, date and sign the enclosed proxy and promptly return the same in the stamped, self-addressed envelope enclosed for your convenience. StockholdersShareholders may also submit a proxy over the internet or by phone. Stockholders who are present at the Meeting may withdraw their proxies and vote in person, if they so desire.
BY ORDER OF THE BOARD OF DIRECTORS
Theodore L. Harris, Chairman |
PROXY STATEMENT
BALCHEM CORPORATION
GENERAL
This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors (the “Board“Board of Directors”Directors” or the “Board”“Board”) of Balchem Corporation (the “Company”“Company”) to be voted at the 20172019 Virtual Annual Meeting of StockholdersShareholders (the “Annual Meeting”“Annual Meeting” or the “Meeting”“Meeting”) on June 20, 2019 at The Michelangelo hotel, 152 West 512:00st Street, New York, NY 10019 on Tuesday, June 13, 2017 at 4:30 p.m., local time, and at any adjournment or postponement thereof. Shareholders will be able to listen, vote, and submit questions from their home or from any remote location that has internet connectivity. Shareholders may only participate online by logging in at 1:55 p.m. This Proxy Statement and a proxy card are expected to be sent to stockholdersshareholders beginning on or about May 5, 2017.
The Board of Directors has fixed the close of business on April 20, 201723, 2019 as the record date (the “Record Date”“Record Date”) for the determination of stockholdersshareholders entitled to notice of, and to vote at, the Annual Meeting. At the Annual Meeting, stockholdersshareholders will be asked to consider and vote upon the following matters:
Holding an advisory (non-binding) vote on the Company’s executive compensation (“ |
Such other matters as may properly come before the Annual Meeting or any adjournment thereof. |
You can ensure that your shares are voted at the Annual Meeting by completing, signing, dating and returning the enclosed proxy card in the envelope provided. Sending in a signed proxy will not affect your right to attend the Meeting and vote. A stockholdershareholder who gives a proxy may revoke it at any time before it is exercised by voting in personby attending the virtual meeting or by proxy at the Annual Meeting, by submitting another proxy bearing a later date or by notifying the Inspectors of Election or the Secretary of the Company of such revocation, in writing, prior to the Annual Meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to attend and vote in personby attending the virtual meeting or by proxy at the Annual Meeting, you must obtain from the record holder a proxy issued in your name.
If your shares are registered in your name with our transfer agent, you may vote either over the internet or by telephone. Specific instructions for voting in this manner are set forth on the enclosed proxy card. These procedures are designed to authenticate each stockholder’sshareholder’s identity and to allow stockholdersshareholders to vote their shares and confirm that their instructions have been properly recorded. If your shares are registered in the name of a bank or brokerage firm, you may also be able to vote your shares over the internet or by telephone. A large number ofMany banks and brokerage firms are participating in online programs that allow eligible stockholdersshareholders to vote over the internet or by telephone. If your bank or brokerage firm is participating in such a program, your voting form will provide instructions. If your voting form does not contain internet or telephone voting information, please complete and return the paper voting form in the self-addressed, postage-paid envelope provided by your bank or brokerage firm.
If you properly specify how a proxy is to be voted, it will be voted accordingly. If you sign a proxy card or voting form but do not provide voting instructions, it will be voted FOR the director nominees, FOR approval of the Company’s 2017 Plan (the “2017 Plan”), FOR ratification of the appointment of the auditors, FOR approval of the Company’s executive compensation, FOR the frequency of future advisory votes to approve executive compensation to be every year, and at the discretion of the proxy holders with regard toabout any other matter that may come before the Meeting or any adjournment thereof.
Broker non-votes are shares held by brokers or nominees that are present in personby attending the virtual meeting or represented by proxy but are not voted on a particular matter because instructions have not been received from the beneficial owner and the
1
PROXY STATEMENT
BALCHEM CORPORATION
street-name in their discretion absent any instructions received from the beneficial owners of such shares. Brokers and nominees do not have such discretion with respect to the election of directors approval of the 2017 Incentive Plan, Say on Pay or Say on Pay Frequency.
Proxies may be solicited, without additional compensation, by directors, officers and other regular employees of the Company by telephone, email, fax or in person. All expenses incurred in connection withrelating to this solicitation will be borne by the Company. Brokers, nominees, fiduciaries and other custodians have been requested to forward soliciting material to the beneficial owners of our Common Stock, defined in the section below entitled “Voting Securities” held of record by them, and such custodians will be reimbursed for their reasonable expenses.
Internet Availability of Proxy Materials
The Company’s Proxy Statement and Annual Report to stockholdersshareholders for the year ended December 31, 2016 2018 are available at http://proxymaterials.balchem.com..
2
PROPOSAL NO. 1
The Company’s Bylaws provide for a staggered term Board of Directors consisting of seven (7) members, with the classification of the Board of Directors into three classes (Class 1, Class 2 and Class 3). The term of the threetwo current Class 31 directors will expire at the Annual Meeting. The Class 13 and Class 2 directors will remain in office until their terms expire, at the annual meetings of stockholdersshareholders to be held in the years 20192020 and 2018,2021, respectively.
At the 2017 Annual Meeting, threetwo Class 31 directors are to be elected to hold office until the annual meeting of stockholdersshareholders to be held in 20202022 and thereafter until their successors have been elected and qualified. The nominees are listed below with brief biographies and are currently directors and have been nominated for election after due consideration by the Corporate Governance and Nominating Committee and the Board.biographies. The Board is not aware of any reason why any such nominee may be unable to serve as a director. If any, some or all of such nominees are unable to serve, the shares represented by all valid proxies will be voted for the election of such other person or persons, as the case may be, as the Board may recommend, or the Board may fill the vacancy or may amend the Company’s Bylaws to reduce the size of the Board.
Vote Required to Elect Directors
Under the rules of the Securities and Exchange Commission (the “SEC”“SEC”), boxes and a designated blank space are provided on the form of proxy for stockholdersshareholders to mark if they wish to vote in favor of or withhold authority to vote for the Company’s nominees for director.
A director nominee must receive a plurality of the votes cast at the Meeting, assuming a quorum is present. This means that a broker non-vote or a vote withheld from a particular nominee will not affect the outcome of the election of directors. However, we have adopted a majority vote policy, as described below.
If for any reason any such named nominee should not be available as a candidate for director, the proxies will be voted in accordance with the authority conferred in the proxy for such other candidate as may be nominated by the Company’s Board of Directors.
Majority Vote Policy
Under the Company’s Corporate Governance Guidelines and adopted a Director Resignation Policy. This policy provides that(the “Governance Guidelines”), if a nominee for director in an uncontested election receives a greater number of “withhold” votes for election than “for” votes, (“Majority of Withhold”), that director shall promptly tender to the Board his or her resignation from the Board of Directors. Our The Corporate Governance and Nominating Committee will then make a recommendation to the Board whether to accept or reject the resignation tendered by such director or whether other action is necessary.
The Board will act on the tendered resignation, taking into accountconsidering the recommendation of the Corporate Governance and Nominating Committee as well as other potentially relevant factors, within 90 days from the date of the certification of the election results. The director whose resignation is under consideration is not permitted to participate in the recommendation of the Corporate Governance and Nominating Committee or deliberations of the Board with respect to his or her resignation. If a director’s resignation is accepted by our Board, the Board may fill the resulting vacancy or may amend the Company’s Bylaws to decrease the size of the Board.
The Company’s Corporate Governance Guidelines are available on the Corporate Governance page in the Investor Relations section of the Company’s website, website: www.balchem.com.
Nominees for Election as Director
Theodore L. Harris, age 54, a Class 1 director whose current term expires in 2019, has been a director, and President and Chief Executive Officer of the Company since April 2015, and Chairman of the Company’s Board of Directors since January 2017. Prior to joining the Company, Mr. Harris was employed by Ashland Global Holdings Inc. (formerly. Ashland Inc.) (NYSE), a specialty chemical company, in various senior management positions, serving as Senior Vice President, President Performance Materials, from November of 2014 to April
3
PROPOSAL NO. 1 − ELECTION OF DIRECTORS
2015. Prior to this position, from 2011 to 2014, he served as Senior Vice President, President Performance Materials & Ashland Supply Chain, and prior to that, Vice President, President Performance Materials & Ashland Supply Chain. Mr. Harris’ broad managerial, international, operational and sales experience, as well as his proven track record of developing and implementing strategies for delivering sustainable, profitable growth, make him a valuable member of our Board of Directors. Mr. Harris is also a member of the board of directors of Pentair plc (NYSE), a diversified industrial manufacturing company.
Matthew D. Wineinger, age 52, a Class 1 director whose current term expires in 2019, has been a director of the Company since September 2015. Since June 2015, Mr. Wineinger has been the President and Chief Executive Officer of United Sugars Corporation, a privately held, leading marketer of sugar. Mr. Wineinger served as President of Bulk Ingredients from June 2010 to November 2014, and as President, Food and Industrial Ingredients of Tate & Lyle PLC (LSE) from March 2008 to June 2010. Mr. Wineinger’s thirty-one years of extensive global, operational and strategic industry experience, together with his previous knowledge of manufacturing operations involving many of the Company’s current raw materials, make him a valuable member of our Board of Directors, particularly as the Company focuses on development and supply of products to human food and nutrition industries.
UPON RECOMMENDATION BY THE CORPORATE GOVERNANCE AND NOMINATING COMMITTEE, THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE ‘FOR’ THE ELECTION OF THE ABOVE NOMINEES AS DIRECTORS.
Directors Not Standing for Election
David B. Fischer, age 54,56, a Class 3 director whose current term expires in 2017,2020, was appointed as a director of the Company in September 2010. Mr. Fischer is retired and prior to his retirement, he was a director and President and Chief Executive Officer of Greif, Inc. (NYSE), a supplier of industrial packing systems from November 2011 to October 2015. From 2007 to 2011, Mr. Fischer was the President and Chief Operating Officer of Greif, and from 2004 to 2007, Mr. Fischer served as Greif’s Senior Vice President and Divisional President, Industrial Packaging &
Perry W. Premdas,age 64,66, a Class 3 director whose current term expires in 2017,2020, was appointed as a director of the Company in January 2008. He is currently retired. From 1999 to 2004, Mr. Premdas was Chief Financial Officer of Celanese AG, a chemical and plastics business spun-off by Hoechst AG and listed on the Frankfurt stock exchange and the NYSE. He was Senior Executive Vice President and Chief Financial Officer of Centeon LLC from 1997 to 1998. Over his career, he has led treasury, finance, audit and investor relations functions of US and international companies and had general manager, executive and director roles in various wholly-owned and joint venture operations. Mr. Premdas holds a BA from Brown University and an MBA from the Harvard University Graduate School of Business. He served as a member of the Board of Directors of Compass Minerals International, Inc. (NYSE) until May 2015. Mr. Premdas has beenwas our Audit Committee Chairman and the Board of Director’s audit committee financial expert since 2008. The Company’s financial compliance programs and policies benefit from Mr. Premdas’ particular input and skilled guidance.2008 to 2018. Mr. Premdas’ combination of financial and international business management experience makein the chemical industry makes him a valuable member of our Board of Directors.
Dr. John Y. Televantos,
age4
PROPOSAL NO. 1 − ELECTION OF DIRECTORS
traded chemical manufacturing entities, Dr. Televantos is also significantly involved in private equity markets and processes involving chemical manufacturing companies. Collectively, these make Dr. Televantos a valuable member of the Board of Directors.
Paul D. Coombs
, ageDaniel E. Knutson, age 71,62, a Class 2 director whose current term expires in 2018, has been a director of the Company since February 2003. Mr. McMillan owns and manages McMillan, LLC, a transaction-consulting firm that provides strategic consulting services and facilitates mergers and/or acquisitions predominantly to the food and agribusiness industry sectors. From 1988 to 1996, he2021, was President and CEO of Purina Mills, Inc., where he was involved for approximately 28 years in various senior level positions in marketing, strategic planning, and business segment management. Mr. McMillan is also a member of the Board of Trustees for the University of Illinois System, which has campuses in Champaign-Urbana, Chicago, and Springfield, Illinois. McMillian is also Chair of the University of Illinois Research Park, L.L.C. in Champaign, Illinois and Chair of IllinoisVentures L.L.C. based in Chicago. Mr. McMillan’s background, experience and continued involvement in the agribusiness industry are of particular valueappointed to our Board in February 2018. Until his retirement at the end of 2017, Mr. Knutson served as the Executive Vice President for Special Projects at Land O’Lakes, Inc. Land O’Lakes is one of America’s premier agribusiness and food companies. Previously, Mr. Knutson served as Executive Vice President and Chief Financial Officer at Land O’Lakes from 2000 to 2017, where he oversaw corporate finance, accounting, treasury, audit, information technology and strategy and played key roles in many of Land O’Lakes’ transactions. In addition, he was responsible for Land O’Lakes’ investment in Moark LLC. Mr. Knutson joined Land O’Lakes in 1978 and prior to his appointment as Chief Financial Officer, he held several leadership roles within its finance and accounting groups. Our Company’s financial compliance programs and policies benefit from Mr. Knutson’s input and skilled guidance. Mr. Knutson’s combination of financial and international business management experience makes him a valuable member of our Board of Directors.
Director Independence
The Board of Directors has made an affirmative determination that each of the Company’s directors, other than Mr. Harris is independent, as such term is defined under the NASDAQ Marketplace Rules.
Meeting Attendance
During fiscal 2016,2018, the Board of Directors held five regular meetings and one special meeting. Each director attended at least 75% of the meetings of the Board held when he was a director and of the meetings of those Committees of the Board on which he served.
Committees of the Board of Directors
The Company’s Board of Directors has a standing Audit Committee, Executive Committee, Compensation Committee, and Corporate Governance and Nominating Committee. The Board of Directors appoints the members of each Committee. In 2016,2018, the Audit Committee held three regular meetings and three telephonic or special meetings and each of the Compensation Committee and Corporate Governance and Nominating Committee held three meetings. The Executive Committee did not meet in 2016.
Audit Committee.Committee. The Audit Committee is directly responsible for appointing, compensating and overseeing the work of the Company’s independent registered public accounting firm. The Audit Committee also assists the Board of Directors in fulfilling its oversight responsibilities with respect to the Company’s financial reporting, internal controls and procedures, and audit functions.
5
PROPOSAL NO. 1 − ELECTION OF DIRECTORS
The primary duties and responsibilities of the Audit Committee are to (i) monitor the integrity of the Company’s financial reporting process and systems of internal controls regarding finance, accounting, and legal compliance, (ii) monitor the independence, qualifications and performance of the Company’s independent auditors, (iii) establish policies and procedures with respect to enterprise risk assessment and risk management, (iv) review Company procedures for identifying, monitoring, and mitigating risk exposures, and (v) provide an avenue of communication among the independent auditors, management and the Board of Directors. to:
(1) | monitor the integrity of the Company’s financial reporting process and systems of internal controls regarding finance, accounting, and legal compliance; |
(2) | monitor the independence, qualifications and performance of the Company’s independent auditors; |
(3) | establish policies and procedures with respect to enterprise risk assessment and risk management; |
(4) | review Company procedures for identifying, monitoring, and mitigating risk exposures; and |
(5) | provide an avenue of communication among the independent auditors, management and the Board of Directors. |
The Audit Committee’s role with respect to the Company’s risk oversight is discussed under the section below entitled below entitled “Board Role in Risk Oversight”. The Audit Committee also monitors and, if necessary, investigates, reports made to the Company’s hotline dedicated for the notification of potential financial fraud under the Sarbanes-
The Board of Directors of the Company has adopted a written charter for the Audit Committee, which is available on the Corporate Governance page in the Investor Relations section of the Company’s website, www.balchem.com. The current members of the Audit Committee are Messrs. PremdasKnutson (Chair), Coombs Fischer and McMillan.Fischer. The Board of Directors of the Company has determined that the Audit Committee Chairman,chairman, Mr. Premdas,Knutson, qualifies as an “audit committee financial expert,” as defined by SEC rules, and that all members of the Audit Committee are “independent” under the NASDAQ Marketplace Rules and SEC independence requirements applicable to audit committee members.
Compensation Committee
(1) | ensure that all compensation and benefit plans are aligned with the interests of shareholders and meet the needs of the Corporation and its employees; |
(2) | review, approve and recommend to the Board of Directors for approval a compensation program, including incentives, for the Chief Executive Officer (“CEO”) and senior executives of the Company (the CEO may not be present during deliberations or voting on his compensation); |
(3) | recommend to the Board of Directors for approval the compensation of directors; and |
(4) | administer the Company’s equity compensation plans. |
The Compensation Committee solicits input from our CEO with respect to the performance of our executive officers and their compensation levels no less than once per calendar year, usually in the first quarter.
The members of our Compensation Committee have extensive and varied experience with various public and private corporations - as investors and stockholders,shareholders, as senior executives, and as directors charged with the oversight of management and the setting of executive compensation levels. In addition to the extensive experience and expertise of the Compensation Committee’s members and their familiarity with the Company’s performance and the performance of our executive officers, the Compensation Committee is able to draw on the experience of other directors and on various legal and accounting executives employed by the Company, and the Compensation Committee has access to readily available public information regarding executive compensation structurestructures and the establishment of appropriate compensation levels.
The Board of Directors of the Company has adopted a written charter for the Compensation Committee, which is available on the Corporate Governance page in the Investor Relations section of the Company’s website, www.balchem.com. The current members of the Compensation Committee are Dr. Televantos (Chair) and Messrs. Fischer, McMillanPremdas and Wineinger, each of whom is independent, as such term is defined under the NASDAQ Marketplace Rules.
The Compensation Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee or, to the extent permitted by applicable law, to any other body or individual. In particular, the Compensation Committee may delegate the approval of certain transactions to a subcommittee
6
PROPOSAL NO. 1 − ELECTION OF DIRECTORS
consisting solely of members of the Compensation Committee who are (a) "non-employee directors"“non-employee directors” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934 and (b) "outside directors"“outside directors” for the purpose of Section 162(m) of the Internal Revenue Code of 1986, as amended.
The process forCompensation Committee, in setting 2018 director and executive compensation, in 2016 involved numerous steps. The Compensation Committee, with the assistance of Willis Towers Watson,engaged Mercer, LLC, an independent executive compensation advisory firm, approved a peer group of companies for purposes of targetingto provide survey data and advice on market trends on director and executive compensation. Based on information provided by Willis Towers Watson and by Company management, in early 2017 the Compensation Committee determined that no conflict of interest exists with, or was raised during 2016 by the work of, Willis Towers Watson, and that Willis Towers Watson is independent considering the factors enumerated by the SEC for evaluating compensation advisor independence. The next step in the process was an annual performance evaluation of each member of the management team.
At the Compensation Committee'sCommittee’s meetings in early 2016,2018, the Compensation Committee reviewed with senior management its recommendations and basis for Company performance goals for payouts of 20162018 annual incentive awards and long-term compensation awards. Following this discussion, the Compensation Committee set the 20162018 Company performance goals for annual incentive awards and long-term compensation awards that had to be achieved in order for payouts of such awards to occur. The Compensation Committee also approved the form of the
Corporate Governance and Nominating Committee
(1) | consider and make recommendations to the Board concerning the appropriate size, function and needs of the Board; |
(2) | determine the criteria for Board membership, oversee searches and evaluate and recommend candidates for election to the Board; |
(3) | evaluate and recommend to the Board responsibilities of the Board committees; |
(4) | annually review and assess the adequacy of the Governance Guidelines and recommend any changes to the Board for adoption; |
(5) | annually evaluate its own performance as well as oversee an annual self-evaluation of the Board and other Board Committees; |
(6) | oversee compliance with the Company’s Stock Ownership Policies; |
(7) | consider matters of corporate social responsibility, including reviewing the Company’s activities and practices regarding environmental, social and related governance, including sustainability (“ESG”) matters that are significant to the Company and periodically reviewing the Company’s ESG strategy, initiatives and policies; |
(8) | recruit and evaluate new candidates for nomination by the full Board for election as directors, (ix) prepare and update an orientation program for new directors; |
(9) | evaluate the performance of current directors in connection with the expiration of their term in office providing advice to the full Board as to nomination for reelection; and |
(10) | annually review and recommend policies on director retirement age. |
The Board of Directors of the Company has adopted a written charter for the Corporate Governance and Nominating Committee, which is available on the Corporate Governance page in the Investor Relations section of the Company’s website, www.balchem.com. The current members of the Corporate Governance and Nominating Committee are Messrs. McMillanWineinger (Chair), Coombs, Premdas and Coombs and Wineinger,Dr. Televantos, each of whom is independent, as such term is defined under the NASDAQ Marketplace Rules.
Executive Committee
(1) | the recruitment, evaluation and selection of suitable candidates for the position of CEO, for approval by the full Board; |
7
PROPOSAL NO. 1 − ELECTION OF DIRECTORS
(2) | the preparation, together with the Compensation Committee, of objective criteria for the evaluation of the performance of the CEO; and |
(3) | reviewing the CEO’s plan of succession for key executives of the Company. |
The current members of the Executive Committee are Dr. Televantos (Chair), Mr. Fischer and Mr. McMillan.
Nominations of Directors
The Corporate Governance and Nominating Committee considers re-nominating incumbent directors who continue to satisfy the Company’s criteria for membership on the Board; whom the Board believes will continue to make contributions to the Board; and who consent to continue their service on the Board. If the incumbent directors are not nominated for re-election or if there is otherwise a vacancy on the Board, the Corporate Governance and Nominating Committee will solicit recommendations for nominees from persons that they believe are likely to be familiar with qualified candidates, including Board members and members of management. The Corporate Governance and Nominating Committee may also determine to engage a professional search firm to assist in identifying qualified candidates. The Corporate Governance and Nominating Committee also considers independent director candidates recommended by one or more substantial, long-term stockholders.shareholders. Generally, stockholdersshareholders who individually or as a group hold 5% or more of the Company’s common stockour Common Stock and have continued to do so for over one year will be considered substantial, long-term stockholders. In order toshareholders. To be considered by the Corporate Governance and Nominating Committee, the names of such nominees, accompanied by relevant biographical information, must be properly submitted, in writing, to the Secretary of the Company by the deadline for including shareholder proposals in the Company’s proxy materials as set forth below in “Stockholder“Shareholder Proposals for 20182019 Annual Meeting.Meeting of Shareholders.” Stockholder Shareholder nominations that comply with these procedures and that meet the criteria outlined above will receive the same consideration that other candidates receive.
The Corporate Governance and Nominating Committee and the Board have adopted guidelines for identifying or evaluating nominees for directors, including incumbent directors and nominees recommended by stockholders.shareholders. The Company’s current policy is to require that a majority of the Board of Directors be independent; at least four of the directors have the financial literacy necessary for service on the audit committee and at least one of these directors qualifies as an audit committee financial expert.independent. In addition, directors may not serve on the boards of more than three other public companies without the approval of the Board of Directors and directors must satisfy the Company’s age limit policy for directors, which require that a director retire at the conclusion of his or her term in
The guidelines for nomination for a position on the Board of Directors provide for the selection of nominees based on the nominee’s skills, achievements and knowledge, and also contemplate that the following will be considered, among other things, in selecting nominees: experience and skills in areas critical to understanding the Company and its business; personal characteristics, such as integrity and judgment; and the candidate’s ability to commit to the Board of Directors of the Company.
(i) | experience and skills in areas critical to understanding the Company and its business; |
(ii) | personal characteristics, such as integrity and judgment; |
(iii) | diversity of background, experience and perspectives (including business experience, geographic origin, age, gender, and ethnicity); and |
(iv) | the candidate’s ability to commit to the Board of Directors. |
Members of the Corporate Governance and Nominating Committee (and/or the Board) also meet personally with each nominee to evaluate the candidate’s ability to work effectively with other members of the Board, while also exercising independent judgment. Although
The Board believes that diversity within a Board promotes the inclusion of different perspectives and ideas and ensures that the Company benefits from all available talent. Therefore, the Board does not have a formal diversity policy,evaluates each candidate in the context of the Board endeavors to comprise itselfas a whole, with the objective of members withrecommending an individual that can best perpetuate the success of the business and represent shareholder interests through the exercise of sound judgment based upon a broad mixdiversity of professionalbackground, experience and personal backgrounds. Further, in considering nominations, the Governance and Nominating Committee takes into account how a candidate’s professional background would fit into the mix of experiences represented by the then-current Board.perspectives.
8
PROPOSAL NO. 1 − ELECTION OF DIRECTORS
Lead Director
The Board of Directors has had a Lead Director since 2005. Dr. Televantos has been the Lead Director since August 2010. The Lead Director functions, in general, to reinforcerole reinforces the independence of the Board of Directors of the Company, and is appointed on a rotating basis from the independent directors.
The Lead Director serves at the pleasure of the Board and, in any event, only so long as that person shall be an independent director of the Company. The Corporate Governance and Nominating Committee reviews annually the functions of the Lead Director and recommends to the Board any changes that it considers appropriate. The Lead Director provides a source of Board leadership complementary to that of the Chairman of the Board.
The Lead Director is responsible for, among other things, (i) working with the Chairman and other directors to set agendas for Board meetings; (ii) providing leadership in times of crisis together with the Executive Committee; (iii) reviewing the individual performance of each of the directors with the Chair of the Corporate Governance and Nominating Committee; (iv) chairing regular meetings of independent Board members without management present (executive sessions); (v) acting as liaison between the independent directors and the Chairman; and (vi) chairing Board meetings when the Chairman is not in attendance.things:
(i) | working with the Chairman and other directors to set agendas for Board meetings; |
(ii) | providing leadership in times of crisis together with the Executive Committee; |
(iii) | reviewing the individual performance of each of the directors with the Chair of the Corporate Governance and Nominating Committee; |
(iv) | chairing regular meetings of independent Board members without management present (executive sessions); |
(v) | acting as liaison between the independent directors and the Chairman; and |
(vi) | chairing Board meetings when the Chairman is not in attendance. |
Current Board Leadership Structure
The Corporate Governance and Nominating Committee reviews the functioning of the Board and makes recommendations to the Board regarding the CEO, Chairman and Lead Director, in the manner in whichthat it determines to be in the best interests of our stockholders,shareholders, which is consistent with the Corporate Governance Guidelines adopted by the Company.Guidelines. Our CorporateThe Governance Guidelines are available on the Corporate Governance page in the Investor Relations section of the Company’s website, www.balchem.com. Our corporate governance principlesThe Governance Guidelines do not require the Chairman of the Board to be independent and do not specify whether the positions of Chairman of the Board and the Chief Executive Officer CEOmust be separated. The Board and the Corporate Governance and Nominating Committee regularly consider the appropriate leadership structure for the Company and have concluded that the Company and its stockholdersshareholders are best served by the Board the Corporate Governance and Nominating Committee retaining discretion to determine whether the same individual should serve as both Chief Executive OfficerCEO and Chairman of the Board, or whether the roles should be separated. The Board and the Corporate Governance and Nominating Committee believe that it is important to retain the flexibility to make this determination at any given point in time based on what it believes will provide the best leadership structure for the Company, based on the circumstances at the time.
Mr. Harris, our President and CEO, has been the Board of Directors. Mr. Rossi had been Chairman of the Board of Directors since 2007. On January 1, 2017, upon recommendation of the Corporate Governance and Nominating Committee, the Board of Directors appointed Mr. Harris, our President and CEO, to the additional position of Chairman of the Board of Directors.2017. The Board and the Corporate Governance and Nominating Committee currently believe that the Company and its stockholdersshareholders are best served by having Mr. Harris serve in both positions. The Board and the Corporate Governance and Nominating Committee believe a number ofseveral factors support this decision. The Board and the Corporate Governance and Nominating Committee believe the combined Chairman and CEO structure promotes decisive leadership, ensures clear accountability and enhances our ability to communicate with a single and consistent voice to stockholders,shareholders, employees and other stakeholders. Further, Mr. Harris is thoroughly familiar with our business and the challenges the Company faces in the current environment and is best situated to lead and focus discussions on those critical matters affecting the Company, which eliminates ineffective and unproductive meetings. In addition, the combination of the Chairman and the CEO position succeeds because of the engaged, knowledgeable involvement of our Board of Directors in combination with
9
PROPOSAL NO. 1 − ELECTION OF DIRECTORS
our culture of open
Board Role in Risk Oversight
While our Board provides direct risk oversight, responsibility for risk oversight is primarily administered through the Audit Committee. The Board and the Audit Committee hashave and will regularly discuss with management our major risk exposures, their potential financial impact on the Company and the management thereof. In particular, theThe Audit Committee receives, or arranges for the Board of Directors to receive, periodic reports from management on areas of material risk to the Company, including financial, operational, legal, regulatory and strategic risks. The Company has initiated an enterprise risk management effort led by its Internal Audit function. The Company does not have a chief risk officer; therefore, the Audit Committee receives these reports from the membermembers of management tasked with the responsibility to understand, manage and mitigate the particular risks. The Chairman of the Audit Committee reports on the discussion to the full Board during the Committee reports portion of the next Board meeting, which enables the Board and its Committees to coordinate the risk oversight role, particularly with respect to cross-discipline risks and interrelated risks. The Compensation Committee also evaluates risk, as such relates to our compensation program. Please refer to the discussion in the Compensation Discussion and Analysis under the section “Risk Considerations in our Compensation Program”.
Communicating Withwith the Board of Directors
Members of the Board and executive officers are accessible by mail in care of the Company. Any matter intended for the Board, or for any individual member or members of the Board, should be directed to the General Counsel with a request to forward the communication to the intended recipient. In the alternative, stockholdersshareholders can direct correspondence to the Board via the Chairman, or to the attention of the Lead Director, in care of the Company at the Company’s principal executive office address, 52 Sunrise Park Road, New Hampton, NY 10958. The Company will forward such communications, unless of an obviously inappropriate nature, to the intended recipient.
Executive Sessions of the Board of Directors
The Company’s independent directors meet regularly in executive sessions following each regularly scheduled meeting of the Board of Directors. These executive sessions are presided over by the Lead Director. The independent directors presently consist of all current directors, except Mr. Harris.
Executive Officers
Set forth below is certain information concerning the executive officers of the Company (other than Mr. Harris, whose background is described above under the caption “Directors Not Standing for Election”).
Martin Bengtsson, age 41, is the Company’s Chief Financial Officer. He joined the Company in February 2019. He served as Vice President and Chief Financial Officer for the Performance Materials and Technologies business unit of Honeywell International Inc. (“Honeywell”), a diversified technology and manufacturing company, from April 2018 until January 2019. Prior to that, Mr. Bengtsson was Vice President and Chief Financial Officer for the following Honeywell business units: (i) Advanced Materials’ (August 2016 – April 2018), (ii) Specialty Products (March 2016 – August 2016), and (iii) Fluorine Products’ April 2014 – February 2016). Prior to these roles, Mr. Bengtsson held a number of positions in Honeywell’s accounting and finance unit, each with increasing responsibility, including Vice President, Global Controller for the Performance Materials and Technologies business unit from October 2011 until March 2014 and as Vice President, Finance – Group Corporate Audit from February 2009 until September 2011.
10
PROPOSAL NO. 1 − ELECTION OF DIRECTORS
William A. Backus, CPA, age 51,53, served as Interim Chief Financial Officer from October 2018 to February 2019. Mr. Backus has been the Company’s Chief Accounting Officer since October 2017. Prior to that, Mr. Backus was the Company’s Chief Financial Officer and Treasurer sincefrom June 2014.2014 to October 2017. He was Chief Accounting Officer and Assistant Treasurer of the Company sincefrom June 2011 to June 2014 and was Controller of the Company from January 2006 to June 2011. He was Controller of Stewart EFI, LLC, a precision metal component manufacturer, from 1999 through 2005.
David F. Ludwig,
ageScott C. Mason,age 51,60, has been the Company’s Vice President Operations,of Manufacturing and Supply Chain, since May 2005October 2017. Prior to joining the Company, he was Senior Vice President for Global Supply Chain at Stepan Company, a producer of specialty and an executive officerintermediate chemicals, from March 2010 to August 2017. He was Senior Vice President, Global Supply Chain for Nalco Company from January 2006 to December 2009 and Vice President-General Manager of the Institutional, Manufacturing and Municipal Water Treatment Business at Graftech International from February 2000 to September 2006. From 1998 to February 2000, Mr. Mason was Vice President, Global Supply Chain for Union Carbide.
Mark A. Stach, age 57, has been General Counsel and Secretary since September 2017. He was Assistant General Counsel of the Company from October 2015 until September 2017. Prior to that he was in private practice and was Assistant General Counsel for Ashland Global Holdings Inc. (formerly, Ashland Inc.) (NYSE), where he was lead counsel and member of the leadership teams for two of Ashland’s business units and supervised the commercial, global trade compliance and intellectual property functions within Ashland’s Law Department.
Mary Theresa Coelho, age 56, was Company’s Chief Financial Officer and Treasurer from October 2017 until her resignation in October 2018. As Ms. Coelho served as the Company’s principal financial officer during a portion of 2018, information with respect to her compensation is being provided in accordance with Item 402(a)(3)(ii) of Regulation S-K. Prior to joining Balchem, Ms. Coelho was Chief Operating Officer of Diversey, Inc. since FebruarySeptember 2017. From 2002Prior to 2005, hethat role, Ms. Coelho was Vice President Operations, Corp. Packing DivisionFinance and Global Commercial Excellence for Diversey Care, a division of Flint, Inc., a manufacturer of various inksSealed Air Corporation, from February 2016 to September 2017 and pigments, and priorVice President Finance for Diversey Care from October 2014 to that, Plant Manager of Flint’s Holland Michigan manufacturing facility.
Code of Business Conduct and Ethics
The Company has adopted a Code of Ethics for Senior Financial Officers that applies to the Company’s Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Treasurer and Corporate Controller. The Company has also adopted a Code of Business Conduct and Ethics applicable to its employees, which is also applicable to the Company’s directors and officers. The Company has also adopted a Code of Ethics for Senior Financial Officers that applies to the Company’s Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Treasurer and Corporate Controller. Any waiver of any provision in either of the aforementionedthese codes in favor of members of the Board or in favor of executive officers may be made only by the Board. Any such waiver, and any material amendment to such Codes, will be publicly disclosed in a Current Report on Form 8-K. The Code of Ethics for Senior Financial Officers and Code of Business Conduct and Ethics are available on the Corporate Governance page in the Investor Relations section of the Company’s website www.balchem.com.:www.balchem.com.
Sustainability
We are committed to operating and delivering financial results in a way that respects the overall environment in which we operate. Therefore, corporate responsibility and sustainability play an important role in our business and operating strategies and long-term value creation for our stakeholders. We believe that our
11
PROPOSAL NO. 1 − ELECTION OF DIRECTORS
sustainability practices require transparency and accountability. The Company recently issued its first sustainability report. The report is the output of a process of engagement with select stakeholders to understand their sustainability interests and concerns and to capture Balchem’s efforts and achievements in key areas of sustainability. The report can be found at: www.balchem.com. Our Corporate Governance and Nominating Committee, in connection with its responsibility for reviewing the Company’s activities and practices regarding environmental, social and related governance matters maintains responsibility for oversight of our sustainability-related practices and will be monitoring the Company’s progress in this area.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors and executive officers and holders of more than 10% of the Company’sour Common Stock to file with the Securities and Exchange CommissionSEC initial reports of ownership and reports of any subsequent changes in ownership of Common Stock and other equity securities of the Company. Specific due dates for these reports have been established and the Company is required to disclose any failure to file by these dates.
Based upon a review of such reports furnished to the Company, or written representations that no reports were required, the Company believes that during the fiscal year ended December 31, 2016,2018, its officers and directors and holders of more than 10% of the Company’sour Common Stock timely complied with Section 16(a) filing date requirements with respect to transactions during such year.
Compensation Committee Interlocks and Insider Participation
Messrs. Fischer, McMillan andPremdas, Wineinger and Edward McMillan (who retired from the Board on June 20, 2018) and Dr. Televantos, each of whom is (or in the case of Mr. McMillan, was) a director of the Company, served as the members of the Compensation Committee during 2016.2018. None of Messrs. Fischer, McMillan, and Premdas, Wineinger, nor Dr. TelevantosTelevantos: (i) was, during the last completed fiscal year, an officer or employee of the Company, (ii) was formerly an officer of the Company or (iii) had any relationship requiring disclosure by the Company under Item 404 of Regulation S-K under the Securities Act of 1933, as amended. During 2016,2018, there were no interlocking relationships between the Company’s Board of Directors or Compensation Committee, or the board of directors or compensation committee of any other company that are required to be disclosed under Item 407 of Regulation S-K.
12
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&A”&A”) provides a detailed description of our executive compensation philosophy and programs, the compensation decisions the Compensation Committee (the “Compensation Committee”) of the Board of Directors has made under those programs and the factors considered in making those decisions. This CD&A focuses on the compensation of our named executive officers (“NEOs”Named Executive Officers (“Named Executive Officers” or “NEOs”) for 2016.
What We Do and Do Not Do
WE DO | WE DO NOT | |||
Target total direct compensation for our NEOs generally at the 50th percentile | Allow hedging or pledging of Company securities | |||
Pay for performance and, accordingly, a significant portion of each | Encourage unnecessary or excessive risk taking as a result of our compensation policies and practices | |||
Base our short-term incentive plan on multiple performance measurements, including both financial and operational metrics | Have employment agreements with any of our NEOs | |||
Complement our annual compensation to each NEO with time-based and performance-based multi-year vesting schedules and performance cycles for equity incentive awards | ||||
Provide a defined benefit pension plan or any supplemental executive retirement plan or other form of non-qualified retirement plan for our NEOs | ||||
Base any annual base salary adjustments and annual long-term equity awards to our NEOs, partially, on prior-year individual performance | Provide for any “gross ups” for any excise taxes imposed with respect to Section 280G (change-in-control payments) or Section 409A (nonqualified deferred compensation) of the Code. | |||
Select and use a similarly-sized peer group to assess the compensation of our NEOs and a publicly traded peer group to compare and rank the | ||||
Maintain a claw-back policy pursuant to which the Company can seek reimbursement of either cash or equity-based incentive compensation in the event of a financial restatement | Allow: (i) any repricing of stock options/stock appreciation rights without shareholder approval or (ii) for the unlimited transferability of awards | |||
Have stock ownership guidelines for our executives and non-employee directors | Have an employee stock | |||
Maintain a Compensation Committee, which is comprised solely of independent directors | ||||
For awards in 2017 and thereafter, provide for minimum vesting of awards and maximum award limits | ||||
Ensure that a significant portion of our non-employee director compensation consists of time-vested restricted stock | ||||
Annually benchmark executive compensation against that of a peer group of companies. | ||||
Consult with outside experts to determine the overall competitiveness of the Company’s executive compensation program. |
Consideration of 2016 Stockholder2018 Shareholder Advisory Vote on Executive Compensation
At our annual meeting of stockholdersshareholders on June 15, 2016,20, 2018, our stockholdersshareholders once again expressed support for our compensation programs and the compensation of our NEOs, with an approval rate of approximately 75%95% of votes cast for our management "saySay on pay"Pay resolution. The Compensation Committee carefully evaluated
13
EXECUTIVE COMPENSATION
the results of the 2016 “say2018 Say on pay”Pay vote and consistent with recommendations from Willis Towers Watson, made no significant changes to the overall design of our compensation program during 2016.2018. The Company communicates regularly with shareholders on various matters, including executive compensation, and seeks to incorporate shareholder input into its executive compensation practices. Consequently, in 2016,2018, driven partially by valuable feedback received from some of the Company'sCompany’s most significant stockholders,shareholders, we (i) did not award to any NEO any off-cycle time-vested retention equity grants; and (ii) have enhanced certain compensation disclosures included in this "Compensation Discussion and Analysis" section of this Proxy Statement.grants subject to time-based vesting. The Compensation Committee will continue to take into account stockholderconsider shareholder feedback and evolving best practices in making compensation decisions in future years and will continuously endeavor to ensure that management’s interests are aligned with those of our stockholdersshareholders and support long-term value creation.
In addition, also driven in part by shareholder input and our continuing efforts to implement best practices in executive compensation decisions, we have included the following features are included in our proposedthe Company’s 2017 Omnibus Incentive Plan (the “2017 Plan”):
• |
14
EXECUTIVE COMPENSATION
Compensation Objectives and GuidelinesPhilosophy
The Company’s overall compensation philosophy is to offer competitive salaries, cash incentives, equity awards and benefit plans consistent with peer entities, while considering the Company’s financial performance. Rewarding key employees who contribute to the continued success of the Company through cash compensation and equity participation are key elements of the Company’s compensation policy. The Company’s executive compensation policy is to attract and retain key executives necessary for the Company’s short and long-term success by establishing a direct link between executive compensation and the performance of the Company, by rewarding individual initiative and the achievement of annual corporate goals through salary and cash bonus awards, and by providing equity awards, wherein executives are incentivized to generate enhanced stockholdershareholder value. To effectuate this philosophy, the Compensation Committee favors a “pay for performance” approach. As a result, our compensation program contains a mix of stable and at risk at-risk compensation components, where a significant percentage of executive compensation is tied to corporate performance.
Compensation Committee Methodology
The CEO recommends to the Compensation Committee the amount of total annual compensation for each of the other Named Executive Officers. The CEO completes an annual performance assessment for each of the other Named Executive Officers, which is reviewed and considered by the Compensation Committee in its deliberations of compensation amounts.. The Compensation Committee conducts an annual performance appraisal of the CEO based onusing evaluation information solicited from each of the independent members of the Board of Directors and recommends to the Board of Directors the annual compensation package for the CEO. In determining the compensation of the Company’s Named Executive Officers for 2016,2018, including the compensation of the CEO, the Compensation Committee considered a number ofmany quantitative and qualitative performance factors. The Compensation Committee’s considerations consisted of,included, but were not limited to, analysis of the following factors: financial performance of the Company, including return on equity, cash flow, return on assets, growth of the Company,, management of assets, liabilities, capital, liquidity and risk. The Compensation Committee endeavors to balance short-term and long-term performance of the Company and cumulative shareholder value when establishing performance criteria for each of the Named Executive Officers and for the management team as a group. In formulating total compensation, theThe Compensation Committee also considers intangible factors such as: the scope of responsibility of the executive; leadership within the Company, the community and the applicable industries in which the Company engages; and the enhancement of shareholder value. All of these factors are considered in the context of the market for the Company’s products and services, and the complexity and difficulty of managing business risks in the prevailing economic conditions and regulatory environment. The analysis is conducted with respect to each of the Named Executive Officers, including the CEO.environment. The Compensation Committee believes that the total compensation provided to the Company’s Named Executive Officers is competitive and has been demonstrated as effective. Details regarding the compensation of each of the Named Executive Officers are set forth in the tables that follow.
Compensation Consultants
The Compensation Committee has authority to engage attorneys, accountants and consultants, including executive compensation consultants, to solicit input concerning compensation matters, and to delegate any of its responsibilities to one or more directors or members of management, where it deems such delegation appropriate and permitted under applicable law.
To better understand the compensation practices of similar companies, the Compensation Committee retainedmay, from time to time, review data gathered from a custom peer group (“Peer Group”) identified by Willis Towers Watson to provideand general market survey data and advice on market trends in executive compensation. This work enabledfrom Mercer, LLC (“Mercer”). Information gathered from the Peer Group serves as the primary reference point for the Compensation Committee to: (1) confirm thatwith Mercer survey data used as a secondary reference.
15
EXECUTIVE COMPENSATION
The following companies comprise the Company’s executive compensation program is competitive, and (2) discuss alternative program designs. With respect toPeer Group which was identified in late 2016 with the engagementassistance of Willis Towers Watson the Compensation Committee considered each of the six independence factors adopted by the SEC and NASDAQ under Exchange Act Rule 10C-1 and concluded that Willis Towers Watson was independent and that its services to the Compensation Committee did not raise any conflict of interest. Willis
Emergent BioSolutions, Inc. Ferro Corporation HB Fuller Co. | Impax Laboratories Inc. | Innophos Holdings Inc Innospec Inc. Masimo Corporation Minerals Technologies Inc. | Quaker Chemical Corporation Sensient Technologies Corporation Stepan Company Platform Specialty Products Corporation |
The “peer group”Peer Group shown above was developed based on comparability to the Company in terms of industry and size, with data generally takengathered from 2016 peer group proxy statements. Further, Willis Towers Watson used data compiled from its Top Management Compensation Survey, which was adjusted to our revenue size. The Company and Willis Towers Watson believe that the survey data iswas representative for executive compensation benchmarking purposes.purposes at the time it was gathered. As part of its 2018 engagement, Mercer identified a general rule, from timenew group of peer companies (the “New Peers”). The New Peers will be used for benchmarking purposes in 2019. We intend to time, we intendcontinue to retain outside compensation consultants that will provide benchmarking data, which will continue to include published survey data and may include “peer group”Peer Group data.
Benchmarks
While compensation survey data and benchmarking are useful guides for comparative purposes, we believe that a successful compensation program also requires the application of judgment and subjective determinations, particularly with respect to individual performance. Accordingly, our Compensation Committee applies its judgment to adjust and align each individual element of our compensation program with the broader objectives of the program. For example, we consider other factors, including, but not limited to, the Company’s historical compensation trends; recommendations of the CEO; the performance of the Company, its operating units and their respective executives; market factors such as the health of the economy and of the industries served by the Company; the availability of executive talent; executives’ length of service; and internal assessments and recommendations regarding particular executives. The compensation survey analysis for 2016prepared by Willis Towers Watson was not aimed at establishing exact benchmarks for our compensation program, but rather to provide a point of reference and a “reality check”reality check to obtain a general understanding of the current compensation levels of companies of approximately our size in industries in which we operate.
The results of the analysis of the compensation survey, as well as the other sources consulted, showed that the Company’s executive base compensation is below the market median, and the Company’s total compensation levels are consistent with the market median compensation levels giving consideration toconsidering equity awards and at-risk/performance compensation. In addition, Willis Towers Watson’s assessment confirmed that the relationship of the total compensation of the Chief Executive Officer and the Named Executive Officers is within standards identified by prominent proxy advisors and credit organizations as appropriate.
Base Salary
Base salary represents the fixed component of the executive compensation program. The base annual salaries we provide to our executive officers are intended as compensation for each executive officer’s ongoing contributions to the performance of the area(s) for which they are responsible. Base salary also impacts annual incentive cash bonus amounts and long termlong-term compensation, because they are based on a percentage of base salary.
In keeping with our compensation philosophy to attract and retain individuals of high quality, executive officer base salaries have been set to be competitive with base salaries paid to executive officers of comparable companies as referenced above. The Compensation Committee also considers: experience and industry knowledge of the Named Executive Officers; the quality and effectiveness of their leadership at the Company; performance relative to total compensation; internal pay equity among the Named Executive Officers and other Company senior executives; historical considerations; company strategy; retention factors and input from our CEO regarding individual performance.
16
EXECUTIVE COMPENSATION
The base annual salary levels of each of our executive officers are reviewed annually and adjusted from time to time to recognize individual performance, promotions, competitive compensation levels, retention requirements, internal pay equity, overall budgetary considerations and other qualitative factors. As shown below in “Executive Compensation - Summary Compensation Table,” in 2016,2019, the Compensation Committee increased the base salaries of the Named Executive Officers as a result of overall Company and individual performance in 2015.
Cash Based Incentives
Bonuses represent a variable, at-risk, component of the executiveNEO’s overall compensation program that is tied to both Company performance and individual achievement.business segment performance. The Company’s policy is to base a meaningful portion of its executive officers’ cash compensation on bonus opportunities. In determining bonuses, the Company considers factors such as the individual’s contribution to the Company’s performance and the relative performance of the Company during the year.
At the end of each calendar year, the Compensation Committee ofapproves the Board of Directors approves an Incentive Compensation Program (the “ICP”“ICP”) for the succeeding calendar year. The ICP provides for the awarding ofawards cash bonus compensation to executive officersNEOs and certain other employees, based upon for the most part, objective levels of achievement of specific company and business segment goals established for the particular officerNEO or employee, and for the weighting of those goals to determine the amount of the bonus. Although the Compensation Committee approves the ICP at the end of the preceding year, it also reviews competitive market data for executive officer positions from time to time. The Compensation Committee also may however,also grant incentive awards at other times during the year because of new appointments or promotions during the year. Our Compensation Committee does not time the grants of incentive awards around our release of undisclosed material information.
Establishing applicable goals requires a well-defined annual business plan and targets defined therein from which most ICP goals are measured. Our annual business plan evolves from our corporate strategic plan and is approved by the Board of Directors each December for the following fiscal year. Company Adjusted EBITDA, defined as consolidated earnings before interest, other expense/income, taxes, depreciation, amortization, stock-based compensation, acquisition-related expenses and amortization,legal settlements, and the fair valuation of acquired inventory, and Free Cash Flow, defined as operating cash flow minus capital expenditures, are the two primary and independent corporate metrics upon which bonuses are determined. No incentive cash bonus is payable in respect of the EBITDA measure under the ICP unless the Company attains a threshold minimum EBITDA as approved byUnless the Compensation Committee. Similarly,Committee, in its discretion, determines otherwise, no incentive cash bonus is payable in respect of the Free Cash Flow measure under the ICP unless the Company attains a threshold Free Cash Flow as approved by the Compensation Committee. InCommittee approved threshold minimum Adjusted EBITDA. If the event thatAdjusted EBITDA threshold minimum is achieved and the threshold minimums are exceeded however,for each metric, then the amount of the ICP awards will be pro-rated up to 100% of target bonus amounts for reaching target levels and in excess thereof for exceeding such target levels up to stretch and then maximum bonus amounts, all as originally established by the Compensation Committee. The Compensation Committee established such threshold, target, stretch and maximum levels of Adjusted EBITDA and Free Cash Flow for 20162018 as part of the approval of the ICP for that year, based, amongst other things, upon the Company’s preliminary results of operations for the 20152017, as then available. The Company’s threshold and target amounts were set in late 20152017 for 20162018, as follows: (i) EBITDA at $142,020,000 and $157,800,000, respectively, and (ii) Free Cash Flow at $77,900,000 and $86,500,000, respectively.
Metric | Threshold | Target | Stretch | Maximum |
Adjusted EBITDA | $143.8 million | $154.6 million | $162.4 million | $170.0 million |
Free Cash Flow | $76.4 million | $82.2 million | $86.3 million | $90.4 million |
For additional detail on the ICP, see “Summary Compensation Table – Grants of— Non-Equity Incentive Plan Based Awards.Compensation.”
Adjusted EBITDA and Free Cash Flow are financial measures that are not in accordance with United States generally accepted accounting principles (GAAP). The Company believes that the use of these measures in the executive compensation context is helpful in evaluating and comparing our past financial performance with our future results. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company believes that these non-GAAP measures provide useful information about certain of the Company'sCompany’s core operating results and thus are
17
EXECUTIVE COMPENSATION
appropriate to enhance the overall understanding of the Company'sCompany’s past financial performance and its prospects for the future in the context of evaluating the performance of our executive officers.
ICP target bonus amounts are based uponfor each NEO is expressed as a percentage of each executive officer’sactual base yearly salary.salary earned during the applicable calendar year. For 2016, the aggregate2018, NEO ICP targets were:
NEO | ICP Target as a Percent of Base Salary | ||
Mr. Harris | 100 | % | |
Mr. Backus | 45 | % | |
Mr. Ludwig | 40 | % | |
Mr. Mason | 45 | % | |
Mr. Stach | 35 | % | |
Ms. Coelho | 45 | % |
ICP target bonus for Mr. Harris was 100% of his annual base salary; for Mr. Backus was 45% of his annual base salary; for Mr. Kuehner was 45% of his annual base salary; for Mr. Fitzpatrick was 45% of his annual base salary; and for Mr. Ludwig was 40% of his annual base salary. These percentages were selected by the Compensation Committee as believed to be consistent with the custom and practice of industry peers and appropriate to attract and retain executive talent. The Compensation Committee may, in its discretion, approve cash basedcash-based bonuses when ICP goals are not met, if it believes there has nevertheless been exceptional segment or individual performance.
2018 ICP Discussion
On February 28, 2017, 12, 2019, the Compensation Committee, following the completion of the auditits review of the Company’s 2018 financial results for 2016 and the Compensation Committee’s review of those results, the committee, noted that the Company, in 2016, had achieved (i) EBITDA in the amount of $149,263,000, which exceeded the 2016 threshold EBITDA and nearly met the target EBITDA for the payment of ICP bonuses for 2016; and Free Cash Flow of $84,600,000, which exceeded the 2016 threshold EBITDA and nearly met the target EBITDA for the payment of ICP bonuses for 2016.
Metric | 2018 Result | Actual vs. Target | Payout Percentage | ||
Adjusted EBITDA | $159.9 million | $5.3 million | 120.6 | % | |
Free Cash Flow | $88.7 million | $6.5 million | 171.1 | % |
For additional detail on the ICP, goals and actual awards for our NEOs in 2016:
NEO | ICP % of Annual Base Salary | ICP Target Bonus | ICP Goal | Weight | 2016 ICP Award | ||||||||||||
Ted Harris | 100 | % | $ | 636,000 | |||||||||||||
$ | 446,000 | EBITDA | 70 | % | |||||||||||||
$ | 190,000 | Corporate Free Cash Flow | 30 | % | $ | 350,997 | |||||||||||
Bill Backus | 45 | % | $ | 116,424 | |||||||||||||
$ | 81,497 | EBITDA | 70 | % | |||||||||||||
$ | 34,927 | Corporate Free Cash Flow | 30 | % | $ | 61,778 | |||||||||||
Frank Fitzpatrick | 45 | % | $ | 138,600 | |||||||||||||
$ | 97,020 | EBITDA | 70 | % | |||||||||||||
$ | 41,580 | Corporate Free Cash Flow | 30 | % | $ | 77,219 | |||||||||||
David Ludwig | 40 | % | $ | 121,680 | |||||||||||||
$ | 24,336 | EBITDA | 20 | % | |||||||||||||
$ | 24,336 | Corporate Free Cash Flow | 20 | % | |||||||||||||
$ | 48,672 | Specialty Products Business Income | 40 | % | |||||||||||||
$ | 24,336 | Specialty Products Sales | 20 | % | $ | 38,513 | |||||||||||
John Kuehner | 45 | % | $ | 142,038 | |||||||||||||
$ | 99,427 | EBITDA | 70 | % | |||||||||||||
$ | 42,611 | Corporate Free Cash Flow | 30 | % | $ | 79,135 |
Equity Based Compensation
The Compensation Committee believes that one important goal of the executive compensation program should be to provide executives,NEO’s and, key employees —leaders who have significant responsibility for the management, growth and future success of the Company, and directors — with an opportunity for investment in the Company and the incentive advantages inherent in stock ownership in the Company. The goal of this approach is that the interests of the stockholders,shareholders, executives, employees and directors will be closely aligned. We believe that equity awards provide a strong alignment between the interests of our executives, including the NEOs, and our stockholders.shareholders. The EquityLong-Term Incentive Compensation Program, or LTCP,(“LTIP”), is a complementary compensation program to the ICP and accordingly, the Compensation Committee seeks to provide motivation to our executives through the use ofusing equity awards consistent with the reasonable management of the Company'sCompany’s overall equity compensation expense and stockholdershareholder dilution. The Compensation Committee grants equity awards to our executives, including the NEOs, in the first quarter of each fiscal year, as a reward for past corporate and individual performance, as an incentive for future performance, and as a retention tool.
18
EXECUTIVE COMPENSATION
LTIP Process
The Compensation Committee establishes each LTCP participant’s “TargetNEO’s LTIP “Target Equity Value”, which is the dollar amount of equity awards the executive can earnbe granted upon attainment of the ICPestablished goals for a fiscal year at target level performance. The Compensation Committee, having reviewed the “peer group”Peer Group data, has established “Target Equity Multipliers” (as a percentage of base salary) as set forth below with respect to the positions to whichfor each Target Equity Multiplier corresponds. The Target Equity Multiplier is based upon the Equity Award Level determined by the Compensation Committee, which is related to the individual participant’s position in the Company.
Named Executive Officer | Target Equity Multipliers (of Base Salary) | ||
Mr. Harris | 1.75 | ||
Mr. Bengtsson | 1.00 | ||
Mr. Backus | 1.00 | ||
Mr. Ludwig | 1.00 | ||
Mr. Mason | 1.00 | ||
Mr. Stach | 1.00 | ||
Ms. Coelho(1) | 1.00 |
(1) | Ms. Coelho resigned effective October 23, 2018, information with respect to her compensation is being provided in accordance with Item 402(a)(3)(ii) of Regulation S-K |
The applicable Target Equity Multiplier is multiplied by the respective individual LTCP participant’sNEO’s annual base salary to arrive atdetermine the Target Equity which is subject to grant pursuant to this LTCP.Value and expressed as the dollar value of the LTIP award. The Target Equity in dollars,Value is then converted into equity awards based upon the fair value of the Company’s common stock on the date of grant under this LTCP,LTIP awards are granted, usually in February or March of each calendar year.year, as computed in accordance with FASB Accounting Standards Codification 718. Accordingly, the LTCPLTIP Target Equity Values for 2016 was2018 were established in late 2015 and the equity awards earned thereunder for 2016 performance were granted on February 21, 2017. Although the Compensation Committee approves the LTCPLTIP equity in this time frame, it also reviews competitive market data for executive officer positionsNEOs from time to time. The Compensation Committee also may however, grant incentive awards at other times during the year because of new appointments, promotions or promotions during the year.other special circumstances. Our Compensation Committee does not time the grants of incentive awards around our release of undisclosed material information. The Compensation Committee may, in its discretion, make adjustments toadjust individual grants based upon individual performance. The Target Equity Value will then be granted to NEOs through a mix of Stock Options, time-based Restricted Shares and Performance Shares as follows:
25% of the |
Performance Level | % of EBITDA Performance | Shares Vesting as a % ofTarget | |
Maximum | 130 % of target | 200% | |
Target | 100% of target | 100% | |
Threshold | 80% of target | 50% | |
Below Threshold | <80% of target | 0% |
25% of the 2018 Target Equity Value is awarded as Total Shareholder Return (“TSR”) performance |
19
EXECUTIVE COMPENSATION
vs. the Russell 2000 Index over the three (3) fiscal years beginning with the fiscal year in which the grant was made (the “Performance Period”). TSR performance shares will cliff vest (or not vest) at the end of the Performance Period. The number of TSR performance shares that will vest is dependent on the level of relative TSR performance as follows:
Performance Level | 3 Year TSR Performance | Shares Vesting as a % of Target | |
Maximum | 75th Percentile | 200% | |
Target | 50th Percentile | 100% | |
Threshold | 25th Percentile | 50% | |
Below Threshold | <25th Percentile | 0% |
Name | Number of Performance Shares (EBITDA) (#)(1) | Number of Performance Shares (TSR) (#)(1) | Number of Shares Underlying Options (#)(1) | Exercise Price of Option Awards ($/Sh) | ||||||||||||
Theodore L. Harris | 3,590 | 2,940 | 25,930 | $ | 85.40 | |||||||||||
William A. Backus | 760 | 620 | 5,480 | $ | 85.40 | |||||||||||
Frank J. Fitzpatrick | 900 | 740 | 6,250 | $ | 85.40 | |||||||||||
David F. Ludwig | 790 | 650 | 5,720 | $ | 85.40 | |||||||||||
John E. Kuehner | 920 | 760 | 16,680 | (2) | $ | 85.40 |
Stock Ownership Requirements; Trading Limitations
The Company adoptedhas formal stock ownership requirements for its directors and executive officers. According to the stock ownership policy, directors are required to own shares of the Company’s Common Stock with a value at least equal to five times their annual cash retainer and executive officers must own such shares aswith a minimum value determined by a reference to a multiple of their annual base salary as follows: (1) CEO, three times; (2) Chief Financial Officer, one and one halfone-half times; and (3) Vice President/Officer, one times. Both directors and executive officers have five years from the later of the date of the adoption of this policy or from the date of hire or commencement of service as a director, as applicable, to attain the required level of ownership. All directors and officers are currently in compliance with this policy. The Company provides in its insider trading policy that directors and executive officers may not sell Company securities short and may not sell puts, calls or other similar derivative securities tied to our Common Stock.
Employment Agreements
The Company entered intohas an employment agreement with Mr. Harris in April 2015.Harris. Other than such employment agreement, there are no agreements or understandings between the Company and any executive officer which guarantee continued employment or guarantee any level of compensation, including incentive or bonus payments. The Company does not have a written policy regarding employment agreements. There is no provision in Mr. Harris’ employment agreement or in any employment or other arrangement with any other executive officer whereby any tax gross-up payment to cover any excise taxes on excess parachute payments will be made.
Balchem Corporation 401(k) Retirement/Profit Sharing Plan (“401(k) Plan”)
The Company sponsors the Company sponsored two 401(k) savings plansPlan for eligible employees. The plans allowed participants to make pretax contributions and the Company matched certain percentages of those pretax contributions. One of the plans had a discretionary profit sharing portion. The plans were merged in January 2017.employees including NEOs. The Company provides a fully vested 100% matching contribution onmatch equal to 100%of participant contributions up to 6% 6%of elective deferral. All amounts contributedeligible compensation, subject to the plan are deposited intoIRS guidelines. The 401(k) Plan also includes a trust fund administered by independent trustees.
Active employees who have completed 1,000 hours of service, as defined, are 18 years of age or older, and are active employees of the Company at December 31. Eligible employees31 are enrolled ineligible for the profit-sharing portion on the first day of the month after they become eligible to participate and the amount of eligible compensation used by the Company is retroactive to the date of hire for eligible employees.contribution. The amount of the Company’s contribution to the 401(k) Plan for each of the named executive officersNEOs is shown in a footnote to the Summary Compensation Table.
20
EXECUTIVE COMPENSATION
Perquisites
Perquisites are granted to the executive officers occasionally and are generally de minimis and not a material component of compensation.
Mr. Harris is entitled to the use of an automobile owned or leased by the Company and to be reimbursed for a specified level of premiums for life and disability insurance. He is also entitled to the use of a financial planner. The Company pays to insure and maintain Mr. Harris’ automobile, as well as reimburses Mr. Harris for auto expenses to the extentthat are related to Company business. Messrs. Backus, Fitzpatrick, Ludwig and KuehnerMr. Mason receive cash allowances associated with the use of their personal automobiles. Prior to resignation, Ms. Coelho received a cash allowance associated with the use of her personal automobile. Mr. Stach receives no such allowance.
Balchem Deferred Compensation Plan
Balchem offers a voluntary, non-qualified deferred compensation plan (“Deferred Compensation Plan”) for NEOs and select other executives. The Deferred Compensation Plan allows participants to defer up to 75% of annual base salary and up to 100% of annual ICP bonus. Compensation deferred under the Deferred Compensation Plan is deemed invested by the participant among various mutual fund investment options. Earnings (or losses) on investments are market earnings (or losses). The Deferred Compensation Plan is not formally funded nor does the Company guarantee any rate of return. The Company does not match any deferral contributions. Distributions may be in a lump sum or installments as determined by the participant’s distribution election.
Risk Considerations in ourOur Compensation Program
21
EXECUTIVE COMPENSATION
Deductibility of Executive Compensation
In accordance with Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), the deductibility for federal corporate income tax purposes of compensation paid to certain of our individual executive officers in excess ofover $1 million in any year may be restricted. The Compensation Committee considersUnder the impactTax Cut and Jobs Act of Section 162(m)2017, the exemption for qualifying “performance based” compensation was repealed for taxable years beginning after December 31, 2017. As a result, compensation paid to our individual executive officers (on or after January 1, 2018) in establishingexcess of $1 million is generally not deductible unless it qualifies for certain transition relief. While the structure, performance targetsCompany will monitor guidance and timing of awards under the 1999 Plan as well as the proportion of cash compensation attributable to base salary and performance based compensation. Although the Compensation Committee plans to evaluate and limit the impact of Section 162(m),developments in this area, it believes that the tax deduction is only one of several relevant considerations in setting compensation. Accordingly, where it is deemed necessary and in the best interests of the Company to attract and retain the best possible executive talent to compete successfully and to motivate such executives to achieve the goals inherent in our business strategy, the Compensation Committee may
22
COMPENSATION COMMITTEE REPORT
Based upon this review and discussion, we have recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement.
Submitted by the Compensation Committee of the Board of Directors.
John Y. Televantos (Chairman) | ||
David B. Fischer | ||
Perry W. Premdas | ||
Matthew D. Wineinger |
23
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation earned by (i) our Chief Executive Officer (“Principal Executive Officer”), (ii) our Chief Financial Officer (“Principal Financial Officer”), and (iii) each of our otherthe following “Named Executive Officers” for the fiscal years ended December 31, 2016, 2015 and 2014..
Name and Principal Position | Year | Salary | Bonus | Stock Awards (1) | Option Awards (1) | Non-Equity Incentive Plan Compensation (2) | Deferred Compensation Earnings | All Other Compensation (3) | Total | ||||||||||||||||||
Theodore L. Harris, Chairman, President & CEO | 2018 | $ | 800,000 | $ | 1,051,332 | $ | 350,056 | $ | 1,086,004 | $ | 631 | $ | 46,522 | $ | 3,334,545 | ||||||||||||
2017 | $ | 700,000 | $ | 349,938 | $ | 612,787 | $ | 612,467 | $ | 0 | $ | 32,331 | $ | 2,307,523 | |||||||||||||
2016 | $ | 636,000 | $ | 450,290 | $ | 449,988 | $ | 350,997 | $ | 28,212 | $ | 1,915,487 | |||||||||||||||
William A. Backus, Chief Accounting Officer | 2018 | $ | 277,917 | $ | 205,730 | $ | 68,894 | $ | 169,773 | $ | 17 | $ | 12,000 | $ | 734,331 | ||||||||||||
2017 | $ | 268,600 | $ | 61,091 | $ | 129,477 | $ | 129,438 | $ | 0 | $ | 12,000 | $ | 600,606 | |||||||||||||
2016 | $ | 258,720 | $ | 123,160 | $ | 465,142 | $ | 61,778 | $ | 12,000 | $ | 920,800 | |||||||||||||||
David F. Ludwig, Vice President and General Manager, Specialty and Industrial Products | 2018 | $ | 285,118 | $ | 210,125 | $ | 70,756 | $ | 139,029 | $ | 13,200 | $ | 718,228 | ||||||||||||||
2017 | $ | 276,708 | $ | 85,434 | $ | 135,164 | $ | 135,106 | $ | 0 | $ | 13,200 | $ | 645,612 | |||||||||||||
2016 | $ | 268,000 | $ | 130,093 | $ | 290,690 | $ | 38,513 | $ | 13,200 | $ | 740,496 | |||||||||||||||
Scott C. Mason, Vice President of Manufacturing and Supply Chain | 2018 | $ | 356,809 | $ | 263,579 | $ | 87,514 | $ | 218,701 | N/A | $ | 962,603 | |||||||||||||||
2017 | $ | 87,500 | $ | 19,684 | $ | 248,370 | $ | 0 | $ | 0 | N/A | $ | 355,554 | ||||||||||||||
Mark Stach, General Counsel | 2018 | $ | 257,967 | $ | 188,147 | $ | 63,308 | $ | 122,567 | (2,046 | ) | N/A | $ | 629,943 | |||||||||||||
2017 | $ | 222,998 | $ | 38,900 | $ | 0 | $ | 51,964 | $ | 0 | N/A | $ | 313,862 | ||||||||||||||
Mary Theresa Coelho, Former Chief Financial Officer & Treasurer | 2018 | $ | 318,312 | $ | 128,000 | (4) | $ | 15,660 | $ | 21,078 | $ | 0 | $ | 8,931 | $ | 491,891 | |||||||||||
2017 | $ | 72,115 | $ | 15,860 | $ | 250,410 | $ | 0 | $ | 0 | $ | 2,077 | $ | 340,462 |
Name and Principal Position | Year | Salary ($) | Stock Awards(1) ($) | Option Awards(1) ($) | Non-Equity Incentive Plan Compensation(2) ($) | All Other Compensation(3) ($) | Total ($) | |||||||||||||||||||
Theodore L. Harris | 2016 | $ | 636,000 | $ | 1,731,490 | $ | 185,614 | $ | 350,997 | $ | 44,526 | (a) | $ | 2,948,627 | ||||||||||||
Chairman, President & CEO | 2015 | $ | 319,617 | $ | 1,302,543 | $ | 39,388 | $ | 250,000 | $ | 10,188 | $ | 1,921,736 | |||||||||||||
William A. Backus | 2016 | $ | 258,720 | $ | 197,083 | $ | 235,768 | $ | 61,778 | $ | 28,330 | (b) | $ | 781,678 | ||||||||||||
CFO and Treasurer | 2015 | $ | 246,400 | $ | 255,000 | $ | 180,070 | $ | 75,000 | $ | 26,307 | $ | 782,778 | |||||||||||||
2014 | $ | 220,000 | $ | 95,740 | $ | 170,891 | $ | 96,566 | $ | 22,735 | $ | 605,932 | ||||||||||||||
Frank J. Fitzpatrick | 2016 | $ | 308,000 | $ | 174,709 | $ | 280,082 | $ | 77,219 | $ | 28,704 | (c) | $ | 868,714 | ||||||||||||
Vice President Administration, | 2015 | $ | 280,000 | $ | 241,922 | $ | 124,253 | $ | 83,500 | $ | 31,831 | $ | 761,506 | |||||||||||||
Asst. Secretary | 2014 | $ | 266,000 | $ | 114,087 | $ | 125,999 | $ | 132,929 | $ | 27,631 | $ | 666,646 | |||||||||||||
David F. Ludwig | 2016 | $ | 270,400 | $ | 156,832 | $ | 125,895 | $ | 38,513 | $ | 29,874 | (d) | $ | 621,514 | ||||||||||||
VP/GM Specialty Products | 2015 | $ | 260,000 | $ | 214,646 | $ | 87,791 | $ | 50,000 | $ | 33,062 | $ | 645,498 | |||||||||||||
2014 | $ | 252,960 | $ | 85,575 | $ | 93,592 | $ | 69,796 | $ | 29,071 | $ | 530,994 | ||||||||||||||
John E. Kuehner | 2016 | $ | 315,640 | $ | 172,505 | $ | 157,100 | $ | 79,135 | $ | 25,314 | (e) | $ | 749,694 | ||||||||||||
Vice President, Operations |
(1) | The amounts included in the “Stock Awards” and “Option Awards” columns reflect the aggregate grant date fair value as computed in accordance with FASB Accounting Standards Codification 718 adjusted to eliminate service-based forfeiture assumptions used for financial reporting purposes. A discussion of the assumptions used in valuation of stock and option awards may be found in “Note 3 – Stockholders’ Equity” in the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended December 31, N/A. Of the 1,260 shares of restricted stock granted to Ms. Coelho in February 2018, 210 shares vested on October 26, 2018 at a value of $20,248. The remaining 1,050 shares were cancelled. |
(2) | Reflects the value of cash incentive bonuses earned under |
(3) | The amounts reflected represent |
(a) | Mr. Harris’s other compensation for |
financial planning; Mr. Backus’s other compensation for |
Mr. Ludwig’s other compensation for |
(4) | Represents a pro-rated portion of the 2018 Incentive Compensation Plan (estimated at the date of Ms. Coelho’s resignation) which was paid on the first payroll date immediately following her resignation. |
24
SUMMARY COMPENSATION TABLE
2018 Grants of Plan BasedPlan-Based Awards for 2016
Name | Grant Date | Grant Type | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other Stock Awards: Number of Shares of Stock (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise Price of Option Awards (3) ($/Share) | Grant Date Fair Value of Stock and Option Awards (4) ($) | ||||||||||||||||||||||||||
Threshold | Target | Maximum | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||
Theodore L. Harris | ICP | $ | 0 | $ | 800,000 | $ | 1,600,000 | |||||||||||||||||||||||||||
2/15/2018 | Performance Shares | 4,830 | 9,660 | 19,320 | ||||||||||||||||||||||||||||||
2/15/2018 | Restricted Stock Awards | 4,700 | ||||||||||||||||||||||||||||||||
2/15/2018 | Stock Options | 18,800 | $ | 74.57 | ||||||||||||||||||||||||||||||
$ | 1,401,388 | |||||||||||||||||||||||||||||||||
William A. Backus | ICP | $ | 0 | $ | 125,920 | $ | 251,840 | |||||||||||||||||||||||||||
2/15/2018 | Performance Shares | 945 | 1,890 | 3,780 | ||||||||||||||||||||||||||||||
2/15/2018 | Restricted Stock Awards | 920 | ||||||||||||||||||||||||||||||||
2/15/2018 | Stock Options | 3,700 | $ | 74.57 | ||||||||||||||||||||||||||||||
$ | 274,624 | |||||||||||||||||||||||||||||||||
David F. Ludwig | ICP | $ | 0 | $ | 114,829 | $ | 229,658 | |||||||||||||||||||||||||||
2/15/2018 | Performance Shares | 965 | 1,930 | 3,860 | ||||||||||||||||||||||||||||||
2/15/2018 | Restricted Stock Award | 940 | ||||||||||||||||||||||||||||||||
2/15/2018 | Stock Options | 3,800 | $ | 74.57 | ||||||||||||||||||||||||||||||
$ | 280,881 | |||||||||||||||||||||||||||||||||
Scott. C. Mason | ICP | $ | 162,816 | $ | 325,632 | |||||||||||||||||||||||||||||
2/15/2018 | Performance Shares | 1,210 | 2,480 | 4,840 | ||||||||||||||||||||||||||||||
2/15/2018 | Restricted Stock Awards | 1,180 | ||||||||||||||||||||||||||||||||
2/15/2018 | Stock Options | 4,700 | $ | 74.57 | ||||||||||||||||||||||||||||||
$ | 351,093 | |||||||||||||||||||||||||||||||||
Mark Stach | ICP | $ | 0 | $ | 91,320 | $ | 182,640 | |||||||||||||||||||||||||||
2/15/2018 | Performance Shares | 865 | 1,730 | 3,460 | ||||||||||||||||||||||||||||||
2/15/2018 | Restricted Stock Awards | 840 | ||||||||||||||||||||||||||||||||
2/15/2018 | Stock Options | 3,400 | $ | 74.57 | ||||||||||||||||||||||||||||||
$ | 251,455 | |||||||||||||||||||||||||||||||||
Mary Theresa Coelho | ICP | $ | 0 | $ | 128,000 | (5) | NA | |||||||||||||||||||||||||||
2/15/2018 | Performance Shares | 0 | 0 | 0 | ||||||||||||||||||||||||||||||
2/15/2018 | Restricted Stock Awards | 1,260 | (6) | |||||||||||||||||||||||||||||||
2/15/2018 | Stock Options | 5,100 | (6) | $ | 74.57 |
Estimated Possible Payouts under Non-Equity Incentive Plan Awards (1) | Estimated Possible Payouts under Equity Incentive Plan Awards (2) | |||||||||||||||||||||||||||
Name | Threshold | Target | Stretch | Max | Threshold | Target | Max | |||||||||||||||||||||
Theodore L. Harris | $ | 0 | $ | 636,000 | $ | 826,800 | $ | 1,272,000 | $ | 556,500 | $ | 1,113,000 | $ | 2,226,000 | ||||||||||||||
William A. Backus | $ | 0 | $ | 116,424 | $ | 151,351 | $ | 232,848 | $ | 129,360 | $ | 258,720 | $ | 517,440 | ||||||||||||||
Frank J. Fitzpatrick | $ | 0 | $ | 138,600 | $ | 180,180 | $ | 277,200 | $ | 154,000 | $ | 308,000 | $ | 616,000 | ||||||||||||||
David F. Ludwig | $ | 0 | $ | 121,680 | $ | 158,184 | $ | 243,360 | $ | 135,200 | $ | 270,400 | $ | 540,800 | ||||||||||||||
John E. Kuehner | $ | 0 | $ | 142,038 | $ | 184,649 | $ | 284,076 | $ | 157,820 | $ | 315,640 | $ | 631,280 |
(1) |
(2) |
(3) | The exercise price equals the closing price of our Common Stock on the grant date. |
(4) | The amounts represent the grant date fair value of the awards as computed in accordance with FASB ASC Topic 718. |
(5) | Represents a pro-rated portion of the 2018 Incentive Compensation Plan (estimated at the date of Ms. Coelho’s resignation) which was paid on the first payroll date immediately following her resignation. |
(6) | In connection with Ms. Coelho’s resignation, effective at the date of her resignation: (A) 210 of the 1,260 the Restricted Stock Awards granted to |
25
SUMMARY COMPENSATION TABLE
Terms and Conditions of Awards
The 2017 Plan is an “omnibus” stock plan that provides for a variety of equity award vehicles to maintain flexibility. The 2017 Plan, which was adopted by the Company’s shareholders in 2017, permits the grant of stock options, SARs, restricted stock awards and other stock-based awards, and provides for the granting of cash performance awards. The 2017 Plan is flexible and allows the Company to change equity grant practices from time to time.
After the adoption of the 2017 Plan, no further awards have been granted under the Second Amended and Restated 1999 Stock Plan, as amended and restated effective June 20, 2013 (the “1999 Plan”), but outstanding awards granted under the 1999 Plan was adopted and approved by our stockholdersprior to the adoption of the 2017 Plan continue in 1999 and was amended in 2003, 2008, 2011 and 2013. accordance with their terms.Under the 1999 Plan, officers and other employees of the Company may be granted options to purchase our Common Stock of the Company which qualify as “incentive stock options” (“ISO”ISO” or “ISOs”“ISOs”) under Section 422(b) of the Internal Revenue Code of 1986, as amended (the “Code”);Code; directors, officers and employees may be granted options to purchase Common Stock which do not qualify as ISOs (“non-Qualified Option” or “Non-Qualified Options”Non-Qualified Options”); and directors, officers and employees may be granted the right to make direct purchases of Common Stock from the Company (“Purchases”Purchases”) and may also be granted restricted stock and performance award shares. Both ISOs and Non-Qualified Options are referred to in this Proxy Statement individually as an “Option”“Option” and collectively as “Options.“Options.” The exercise price per share specified to each Option granted under the 1999 Plan may not be less than the fair market value per share of Common Stock on the date of such grant.
Time based restricted shares generally vest in full either (1) four years or, (2) three years from grant, orthe date of grant. In the case of time restricted shares granted under the 1999 Plan, these shares may vest earlier upon an earlier change of control of the Company, provided the executive officer is employed by the Company on that date, but become fully vested upon death. In the event the grantee’s employment with the Company is terminated for cause or upon the grantee’s voluntary resignation from the Company’s employ, prior to vesting in full, the restricted shares are forfeited. In the event of a major disability or significant illness, time based restricted shares will vest based upon the amount of time remaining until the vesting date. Our performance based restricted shares generally vest in three years from grant, subject to the achievement of certain performance criteria. Performance based restricted stock will vest based upon the amount of time remaining until the vesting date in the event of recipient’s prior death, disability or “retirement,” as such is defined in the applicable Performance Share Grant Agreement. Upon an earlier change of control, time based restricted shares vest at target level performance. The Compensation Committee may accelerate the vesting of either time based or performance based restricted stock in its discretion.
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, set forth below is disclosure regarding the relationship of the annual total compensation of our employees and the total annual compensation of Mr. Harris, our Chairman, President and CEO.
Mr. Harris had 2018 annual total compensation of $3,334,545 as reflected in the Summary Compensation Table included in this Proxy Statement. Our median employee’s annual total compensation for 2018 was approximately $54,024. Therefore, the ratio of Mr. Harris’ 2018 annual total compensation to that of our median employee is approximately 62 to 1.
We identified the median employee by examining the 2018 total cash compensation for all individuals, excluding our CEO, who were employed by us on December 31, 2018, the last day of our payroll year. We included all employees, whether employed on a full-time, part-time, or seasonal basis. We did not make any assumptions, adjustments, or estimates with respect to total cash compensation, and annualized the compensation for any full-time employees that were not employed by the Company for all of 2018. We believe the use of total cash compensation for all employees is a consistently applied compensation measure because we do not widely distribute annual equity awards to employees. Approximately seven percent of our employees receive annual equity awards.
26
SUMMARY COMPENSATION TABLE
After identifying the median employee based on total cash compensation, we calculated annual total compensation for such employee using the same methodology we use for our NEOs as set forth in the 2018 Summary Compensation Table later in this proxy statement.
Outstanding Equity Awards at Fiscal Year End 20162018
The following table shows outstanding Option awards classified as exercisable and unexercisablenot currently exercisable as of December 31, 20162018 for each Named Executive Officer. The table also discloses the number and value of unvested restricted and performance stock awards as of December 31, 2016.2018.
Name | Option Awards | Stock Awards | Performance Awards | |||||||||||||||||||||
# of Securities Underlying Options | ||||||||||||||||||||||||
Exercisable (1) | Not Currently Exercisable (1) | Option Exercise Price/Share | Option Expiration Date | Number of Unvested Shares (2) | $ (3) | Number of Unvested Shares (2) | $ (3) | |||||||||||||||||
Theodore L. Harris | 10,000 | 0 | $ | 54.87 | 4/28/2025 | |||||||||||||||||||
14,610 | 9,740 | $ | 60.85 | 2/23/2026 | ||||||||||||||||||||
5,186 | 20,744 | $ | 85.40 | 2/21/2027 | ||||||||||||||||||||
0 | 18,800 | $ | 74.57 | 2/15/2028 | 4,700 | $ | 368,245 | 23,320 | $ | 1,827,122 | ||||||||||||||
William A. Backus | 4,178 | 0 | $ | 58.52 | 2/19/2025 | |||||||||||||||||||
3,500 | 0 | $ | 60.85 | 2/23/2026 | ||||||||||||||||||||
9,000 | 6,000 | $ | 60.85 | 2/23/2026 | ||||||||||||||||||||
4,002 | 2,668 | $ | 60.85 | 2/23/2026 | ||||||||||||||||||||
1,096 | 4,384 | $ | 85.40 | 2/21/2027 | ||||||||||||||||||||
0 | 3,700 | $ | 74.57 | 2/15/2028 | 2,235 | $ | 175,112 | 5,220 | $ | 408,987 | ||||||||||||||
David F. Ludwig | 12,750 | 0 | $ | 21.39 | 12/8/2019 | |||||||||||||||||||
23,200 | 0 | $ | 32.21 | 12/6/2020 | ||||||||||||||||||||
12,970 | 0 | $ | 29.06 | 2/28/2022 | ||||||||||||||||||||
9,134 | 0 | $ | 38.10 | 2/19/2023 | ||||||||||||||||||||
1,820 | 0 | $ | 50.32 | 2/26/2024 | ||||||||||||||||||||
5,385 | 0 | $ | 58.52 | 2/19/2025 | ||||||||||||||||||||
1,200 | 0 | $ | 60.85 | 2/23/2026 | ||||||||||||||||||||
4,500 | 3,000 | $ | 60.85 | 2/23/2026 | ||||||||||||||||||||
4,218 | 2,812 | $ | 60.85 | 2/23/2026 | ||||||||||||||||||||
1,144 | 4,576 | $ | 85.40 | 2/21/2027 | ||||||||||||||||||||
0 | 3,800 | $ | 74.57 | 2/15/2028 | 2,635 | $ | 206,452 | 5,430 | $ | 425,441 | ||||||||||||||
Scott C. Mason | 0 | 4,700 | $ | 74.57 | 2/15/2028 | 4,180 | $ | 327,503 | 2,480 | $ | 189,607 | |||||||||||||
�� | ||||||||||||||||||||||||
Mark Stach | 1,200 | 0 | $ | 60.85 | 2/23/2026 | |||||||||||||||||||
440 | 1,760 | $ | 85.40 | 2/21/2027 | ||||||||||||||||||||
0 | 3,400 | $ | 74.57 | 2/15/2028 | 840 | $ | 65,814 | 1,730 | $ | 135,546 | ||||||||||||||
Mary Theresa Coelho | 0 | 0 | N/A | 2/15/2028 | 0 | N/A | 0 | N/A | ||||||||||||||||
(1) | Stock option awards have a term of ten years from the grant date and become exercisable 20% after 1 year, 60% after 2 years and 100% after 3 years beginning on the first anniversary of the grant date. With respect to Ms. Coelho, please see Note 6 under 2081 Grants of Plan-Based Awards table above. |
27
SUMMARY COMPENSATION TABLE
(2) | Restricted stock generally vests four years from the date of grant. Performance-based restricted stock vests in three years and is reflected at target payout based on the probable outcome of the performance conditions. The following table provides information with respect to the final vesting dates of each outstanding restricted stock award (both performance and time based) held by each Named Executive Officer as of December 31, |
Final Vesting Date | Theodore L. Harris | William A. Backus | David F. Ludwig | Scott. C. Mason | Mark Stach | Mary Theresa Coelho | ||||||||||||
Jan. 1, 2019 | 7,130 | * | 1,950 | * | 2,060 | * | ||||||||||||
Feb. 19, 2019 | 1,315 | 1,695 | ||||||||||||||||
Jan. 1, 2020 | 6,530 | 1,380 | 1,440 | |||||||||||||||
Jan. 1, 2021 | 9,660 | 1,890 | 1,930 | 2,420 | 1,730 | |||||||||||||
Oct. 2, 2021 | 3,000 | |||||||||||||||||
Oct. 23, 2021 | ||||||||||||||||||
Feb. 15, 2022 | 4,700 | 920 | 940 | 1,180 | 840 | |||||||||||||
Total | 28,020 | 7,455 | 8,065 | 6,600 | 2,570 |
* | Actual number of shares received in satisfaction of the grant, based on the achievement of performance objectives is: (i) for Mr. Harris, 5,128 shares, (ii) for Mr. Backus, 1,405, and (iii) for Mr. Ludwig, 1,480 shares. |
(3) | Value is computed based on the closing price of our Common Stock on December 31, |
Option Exercises and Stock Vested in 20162018
The following table sets forth certain information regarding options and stock awards exercised and vested, respectively, by each of our Named Executive Officers during the fiscal year ended December 31, 2016.2018.
Option Awards | Stock Awards | |||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) (1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||
Theodore L. Harris | 0 | N/A | 6,400 | $ | 477,248 | |||||||
William A. Backus | 0 | N/A | 8,623 | $ | 766,507 | |||||||
David F. Ludwig | 0 | N/A | 3,275 | $ | 245,163 | |||||||
Scott C. Mason | 0 | N/A | 0 | N/A | ||||||||
Mark A. Stach | 0 | N/A | 0 | N/A | ||||||||
Mary Theresa Coelho | 0 | N/A | 3,210 | $309,508(2) |
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
Theodore L. Harris | - | $ | - | 27,000 | $ | 1,673,460 | ||||||||||
William A. Backus | 12,000 | $ | 566,640 | 2,500 | $ | 158,175 | ||||||||||
Frank J. Fitzpatrick | - | $ | - | 4,769 | $ | 301,735 | ||||||||||
David F. Ludwig | - | $ | - | 4,142 | $ | 262,064 | ||||||||||
John E. Kuehner | 10,000 | $ | 522,200 | 3,604 | $ | 228,025 |
(1) | Value realized represents the excess of the fair market value of the shares at the time of exercise over the exercise price of the options. |
(2) | In connection with Ms. Coelho’s resignation, effective at the date of her resignation: (A) 210 of the 1,260 Restricted Stock Awards granted to Ms. Coelho in 2018 vested and 3,000 of the Restricted Stock Awards granted to Ms. Coelho in 2017 vested, and (B) 1,132 of the 5,100 Stock Options granted to Ms. Coelho vested. The value of the vested Restricted Stock Awards is as set forth in the table above. The Stock Options lapsed without being exercised. |
28
SUMMARY COMPENSATION TABLE
Nonqualified Deferred Compensation
For a description of the Balchem Deferred Compensation Plan, see “Balchem Deferred Compensation Plan” at Page21 above.
Information regarding deferred elections under the Deferred Compensation Plan are included in the table below:
Name | NEO Contributions in Last Fiscal Year(1) ($) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($) | ||||||||
Theodore L. Harris | 100,000 | 613 | 0 | 100,613 | ||||||||
William A. Backus | 2,798 | 17 | 0 | 2,815 | ||||||||
David F. Ludwig | 0 | 0 | 0 | 0 | ||||||||
Scott C. Mason | 0 | 0 | 0 | 0 | ||||||||
Mark Stach | 26,036 | (2,046 | ) | 0 | 23,990 | |||||||
Mary Theresa Coelho | 0 | 0 | 0 | 0 |
(1) | NEO contributions include any deferrals of annual compensation, including earned awards under the ICP. These amounts are included in the NEOs’ compensation under either “Salary” or “Non-Equity Incentive Compensation”. |
Termination of Employment and Change of Control Arrangements
Agreement with Theodore L. Harris. We entered into an employment agreement with Mr. Harris on April 22, 2015, which provides for automatic one-year extensions of the employment term unless either party provides written notice of its intention not to extend the agreement within 60 days of the end of the then-current term.
If we terminate the employment agreement other than for “Cause” (as defined below) or in the event Mr. Harris terminates his employment under certain limited circumstances effectively amounting to a constructive termination, subject to his execution of an effective release of claims in favor of the Company, he will be entitled to severance payments ofequal to 200% of his then current annual salary (payable in 12 monthly installments), and all of his stock optionsunvested equity grants would become fully vested and exercisable, plus a portion of the ICP bonus he would have received had he been employed by us through the end of the full fiscal year in which the termination occurred, to be determined by the Compensation Committee.
If such termination bywe terminate the Company occursemployment agreement other than for Cause within two years after a change of control event, heMr. Harris would be entitled to a lump sum severance paymentspayment equal to 200% of the sum of his then current annual salary plus the annual bonus earned by him forin respect of the fiscal year immediately preceding the year in which the change of control event occurred. occurred (payable within 90 days following such termination, provided that Mr. Harris executes an effective release of claims in favor of the Company).
If Mr. Harris were to voluntarily terminate his employment after the occurrence of a change of control event, but prior to the second anniversary of such a changean event, subject to his execution of control event,an effective release of claims in favor of the Company, he would be entitled to severance payments equal to 100% of his then current annual salary.salary (payable in 12 equal monthly installments). In the event of any termination by the Company entitling Mr. Harris to severance payments, the Compensation Committee may
In the event that any of the payments following a changeprovided for in the employment agreement otherwise would constitute an “excess parachute payment” (as defined in Section 280G of controlthe Code), the amount of payments would be reduced to the extent necessary to avoid such payments being considered an "excess parachute payment"maximum level that would not result in excise tax under Section 280G4999 of the Code.
Under the employment agreement with Mr. Harris, “Cause”“Cause” means: habitual absence or lateness; gross insubordination;insubordination or material violation of published material Company policies; failure to devote full time to the Company’s business; failure to comply with the obligations of confidentiality, non-competition and
29
SUMMARY COMPENSATION TABLE
non-solicitation of the Company’s clients, customers and non-competition;employees; any action which constitutes a violation of any applicable criminal statute; or any act which frustrates or violates the fiduciary duties owed by Mr. Harris to the Company. In addition, “Change“Change in Control”Control” means:
(a) | any person or group is or becomes (including by merger, consolidation or otherwise) the beneficial owner, directly or indirectly, of 50% or more of the voting power of the total outstanding voting stock of the Company; or |
(b) | the sale or other disposition (other than by way of merger or consolidation) of all or substantially all of the capital stock or assets of Company to any person or group as an entirety or substantially as an entirety in one transaction or a series of related transactions, unless the ultimate beneficial owners of the voting stock of such person immediately after giving effect to such transaction own, directly or indirectly, more than 80% of the total voting power of the total outstanding voting stock of Company immediately prior to such transaction. |
During the period of Mr. Harris’s employment (or, in the case of a voluntary termination by Mr. Harris or a termination of his employment by the Company for cause, the balance of the term of the employment agreement before giving effect to such termination) and for a period of two years thereafter, the employment agreement imposes on Mr. Harris certain non-competition and non-solicitation obligations regarding the Company and its clients, customers and its employees.
The amount of compensation payable to Mr. Harris in the event of termination of employment, assuming termination as of December 31, 2016,2018, and a share price for the Company’s common stockour Common Stock equal to the closing market price on the last trading day prior to that date, is set forth in the table below. Mr. Harris’s employment agreement does not obligate us to provide any compensation to Mr. Harris in the case of a change in control that does not result in termination of employment; however, the 1999 Plan provides for full vesting of all Optionsoptions and restricted stock awards granted under that plan, upon a change in control, as defined in such Plan.Plan and the 2017 Plan allows for the discretionary automatic acceleration of outstanding awards upon the occurrence of a change-in-control pursuant to the terms of Mr. Harris’ employment agreement.
Benefits and Payments upon Termination | ||||||||||||
Base Salary | ICP Bonus (1) | Acceleration of Vesting Options and Restricted Stock (2) | Total | |||||||||
Voluntary termination by Mr. Harris or termination for Cause | $ | — | $ | 800,000 | $ | 2,195,367 | $ | 2,995,367 | ||||
Termination by Mr. Harris within 12 months after demotion by Company or because of constructive termination | $ | 1,600,000 | $ | 800,000 | $ | 2,436,881 | $ | 4,836,881 | ||||
Termination by Company following a Change in Control, except for Cause (3) | $ | 1,600,000 | $ | 800,000 | $ | 2,436,881 | $ | 4,836,881 | ||||
Voluntary termination by Mr. Harris following a Change of Control (3) | $ | 800,000 | $ | 800,000 | $ | 2,436,881 | $ | 4,036,881 | ||||
Termination by Company for any reason other than for Cause or after receipt of notice of termination from Mr. Harris | $ | 1,600,000 | $ | 800,000 | $ | 2,436,881 | $ | 4,836,881 | ||||
Death | $ | — | $ | 800,000 | $ | 2,195,367 | $ | 2,995,367 |
Benefits and Payments upon Termination | ||||||||||||||||
Base Salary | ICP Bonus(1) | Acceleration of Vesting Options and Restricted Stock (2) | Total | |||||||||||||
Voluntary termination by Mr. Harris or termination for Cause | $ | - | $ | 636,000 | $ | 2,323,940 | $ | 2,959,940 | ||||||||
Termination by Mr. Harris within 12 months after demotion by Company or as a result of constructive termination | $ | 1,272,000 | $ | 636,000 | $ | 4,144,436 | $ | 6,052,436 | ||||||||
Termination by Company following a Change in Control, except for Cause(3) | $ | 1,272,000 | $ | 636,000 | $ | 4,144,436 | $ | 6,052,436 | ||||||||
Voluntary termination by Mr. Harris following a Change of Control(3) | $ | 636,000 | $ | 636,000 | $ | 4,144,436 | $ | 5,416,436 | ||||||||
Termination by Company for any reason other than for Cause or after receipt of notice of termination from Mr. Harris | $ | 1,272,000 | $ | 636,000 | $ | 4,144,436 | $ | 6,052,436 | ||||||||
Death | $ | - | $ | 636,000 | $ | 2,323,940 | $ | 2,959,940 |
Represents the target bonus level under the |
Amounts in this column are calculated by multiplying the number of shares subject to accelerated vesting by the difference between |
Assumes the Change of Control occurred within the |
30
SUMMARY COMPENSATION TABLE
The amounts shown in the table above do not include payments for accrued salary and vacation, or payments made under theany life insurance policy in the case of death. Amounts shown in the table are subject to reduction to the extent necessary to avoid an “excess parachute payment"payment” under Section 280G of the Code.
Offer Letter with Mr. Bengtsson. Under the terms of an offer letter between Mr. Bengtsson and the Company dated January 10, 2019 (“Bengtsson Offer Letter”), if the Company terminates Mr. Bengtsson’s employment for any reason other than Cause (as defined in the Bengtsson Offer Letter), Mr. Bengtsson will receive a severance payment equal to one year of annual base salary, payable in twelve equal installments commencing on the month following the month in which the termination occurs.
All of our Named Executive Officers, other than Mr. Harris, are employees-at-will and, as such, do not have
Director Compensation
The Company pays each of its directors, other than Mr. Harris, an annual retainer of $30,000 and $4,000 for each Board meeting attended, plus expenses. The Lead Director is paid an additional $16,000 annual retainer. The Chairman of the Audit Committee is paid an additional $12,000 annual retainer, the Chairman of the Compensation Committee is paid an additional $10,000 annual retainer and the Chairman of the Corporate Governance and Nominating Committee is paid an additional $8,000 annual retainer. The Company also pays to each of its directors serving on Committees a fee of $1,000, plus expenses, for each Committee meeting attended. The Company has a Stock Ownership Policy that applies to directors. See “Stock Ownership Requirements; Trading Limitations.”
The following table discloses the cash, equity awards, and other compensation earned, paid, or awarded as the case may be, to each of the Company’s directors (other than Mr. Harris, whose compensation is set forth in the Summary Compensation Table above) during the fiscal year ended December 31, 2016.2018.
Name | Fees Earned or Paid in Cash | Stock Awards (1)(2) | All Other Compensation ($) | Total ($) | ||||||||
Paul Coombs | $ | 57,000 | $ | 126,000 | — | $ | 183,000 | |||||
David Fischer | $ | 56,000 | $ | 126,000 | — | $ | 182,000 | |||||
Daniel Knutson | $ | 56,500 | $ | 126,000 | — | $ | 182,500 | |||||
Edward McMillan (3) | $ | 37,000 | $ | 126,000 | — | $ | 163,000 | |||||
Perry Premdas | $ | 64,000 | $ | 126,000 | — | $ | 190,000 | |||||
John Televantos | $ | 85,250 | $ | 126,000 | — | $ | 211,250 | |||||
Matthew Wineinger | $ | 61,000 | $ | 126,000 | — | $ | 187,000 |
Name | Fees Earned or Paid in Cash ($) | Stock Awards (1)(2) ($) | All Other Compensation ($) | Total ($) | ||||||||||||
Paul Coombs | $ | 56,000 | $ | 110,017 | - | $ | 166,017 | |||||||||
David Fischer | $ | 56,000 | $ | 110,017 | - | $ | 166,017 | |||||||||
Edward McMillan | $ | 67,000 | $ | 110,017 | - | $ | 177,017 | |||||||||
Perry Premdas | $ | 68,000 | $ | 110,017 | - | $ | 178,017 | |||||||||
John Televantos | $ | 79,000 | $ | 110,017 | - | $ | 189,017 | |||||||||
Matthew Wineinger | $ | 55,000 | $ | 110,017 | - | $ | 165,017 |
(1) | On February |
31
SUMMARY COMPENSATION TABLE
(2) | The following table shows the aggregate number of options and stock awards outstanding for each outside director as of December 31, |
Name | Aggregate Stock Options Outstanding as of 12/31/2018 (4) | Aggregate Stock Awards Outstanding as of 12/31/2018 | ||||
Paul Coombs | 3,383 | 3,941 | ||||
David Fischer | 3,383 | 3,941 | ||||
Daniel Knutson | 3,383 | 845 | ||||
Edward McMillan | 3,383 | 0 | ||||
Perry Premdas | 3,383 | 3,941 | ||||
John Televantos | 3,383 | 3,941 | ||||
Matthew Wineinger | 3,383 | 3,941 |
(3) | ||||||||
retired from the Board on June 20, 2018. |
(4) | At its February 14, 2018 meeting, the Compensation Committee approved the alignment of the form of director equity compensation with that of management so that for 2018, director equity compensation is in the form of 50% restricted shares and 50% stock options. |
Under the director restricted stock grant agreements, restricted shares vest in full, four years from grant, or upon an earlier change of control of the Company, provided the grantee is a director of the Company on that date. The restricted shares will also vest in full upon the grantee’s death. In the event of: (1) the grantee’s retirement from the Company’s Board of Directors at or after age 70; (2) the grantee’s major disability, or (3) the grantee’s resignation from the Company’s Board of Directors due to a conflict of interest or serious illness, the number of restricted stock willshares that shall vest based upon any of such aforementioned events shall be the amountnumber of time remaining untilwhole shares equal to the vesting date. Except as set forth above, unvested restricted stock will be forfeited at the time the director ceases to be a directorproduct of (A) 1/48 of the Company.
The Company does not pay any other direct or indirect compensation to directors in their capacity as such.
Related PersonParty Transactions
Other than the compensation and employment arrangements described above, since the beginning of 2016, 2018, we have not entered into any transactions in which any of our directors or executive officers or their immediate family members have a direct or indirect interest.
The Company has adopted a related party transaction policy. Under the related party transaction policy, our Audit Committee reviews and approves proposed transactions or courses of dealings with respect to which holders of 5% or more of our stock and/or our executive officers or directors or members of their immediate families have an interest. Before entering into any transaction, arrangement or relationship constituting an interested transaction, other than certain basic pre-approved transactions, all material facts are required to be reviewed by the Audit Committee, which has the authority to approve or disapprove the transaction based on appropriate factors, including whether the transaction is on terms no less favorable to the Company than terms generally available from an un-affiliated third party and the extent of the related person’s interest in the transaction.
32
SUMMARY COMPENSATION TABLE
Equity Compensation Plan Information
The following table provides information, as of December 31, 2016,2018, with respect to shares of the Company’sour Common Stock that may be issued pursuant to awards under the 2017 Plan and the 1999 Plan (described above)(each as well as under the Company’s prior stock option plans, which plans were replaced by the 1999 Plan.described above). These plans are the Company’s only equity compensation plans approved by security holders, and there are no equity compensation plans that have not been approved by security holders. It should be noted that shares of the Company’sour Common Stock may be allocated to, or purchased on behalf of, participants in the Company’s 401(k)/Profit Sharing Plan retirement plan (described above). Consistent with Securities and Exchange CommissionSEC regulations governing equity compensation plans, information relating to shares issuable or purchased under the Company’s 401(k)/Profit Sharing Planretirement plan is not included in the table below.
Plan Category | Number of shares to be issued upon exercise of outstanding options, warrants and rights 1 | Weighted-average exercise price per share of outstanding options, warrants and rights | Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a)) | ||||||
Equity compensation plans approved by security holders | 887,066 | $ | 61.59 | 1,377,544 | |||||
Equity compensation plans not approved by security holders | 0 | 0 | 0 | ||||||
Total | 887,066 | $ | 61.59 | 1,377,544 |
(1) | 20,550 shares of unvested restricted stock granted to non-employee directors and 52,710 shares of unvested restricted stock granted to NEOs are excluded from this table. |
33
(a) | (b) | (c) | ||
Plan Category | Number of shares to be issued upon exercise of outstanding options, warrants and rights1 | Weighted-average exercise price per share of outstanding options, warrants and rights | Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a)) | |
Equity compensation plans approved by security holders | 1,066,373 | $45.32 | 3,476,571 | |
Equity compensation plans not approved by security holders | - | |||
Total | 1,066,373 | $45.32 | 3,476,571 |
SUMMARY COMPENSATION TABLE
Security Ownership of Certain Beneficial Owners and of Management
The table below sets forth as of April 1, 2017,2019, the number of shares of Common Stock beneficially owned by (i) each director, (ii) each of the Named Executive Officers, (iii) each beneficial owner of, or institutional investment manager exercising investment discretion with respect to 5% or more of the outstanding shares of our Common Stock known to the Company based upon filings with the Securities and Exchange Commission,SEC, and (iv) all current directors and executive officers of the Company as a group, and the percentage ownership of theour outstanding Common Stock as of such date held by each such holder and group:group. The table does not include performance-based restricted stock grants under the Company’s LTCPLTIP (which grants vest at the end of three years) at threshold or maximum,, as the number of shares to be awarded is not determinable at the time of grant and the recipients do not have beneficial ownership of such shares.
NAME AND ADDRESS OF BENEFICIAL OWNER | BENEFICIALLY OWNED (1) | PERCENT OF CLASS (2) | |||||||
BlackRock Institutional Trust Company, N.A. | 3 | 4,697,980 | 14.6 | % | |||||
The Vanguard Group, Inc. | 4 | 3,295,361 | 10.21 | % | |||||
Brown Capital Management, LLC | 5 | 2,202,178 | 6.83 | % | |||||
David F. Ludwig | 6 | 104,039 | * | ||||||
Theodore L. Harris | 7 | 97,488 | * | ||||||
Perry Premdas | 8 | 49,449 | * | ||||||
Bill Backus | 9 | 49,303 | * | ||||||
John Televantos | 10 | 29,784 | * | ||||||
Paul Coombs | 11 | 22,295 | * | ||||||
David B. Fischer | 12 | 18,710 | * | ||||||
Martin Bengtsson | 13 | 13,300 | * | ||||||
Scott C. Mason | 14 | 9,414 | * | ||||||
Mark A. Stach | 15 | 7,367 | * | ||||||
Matthew D. Wineinger | 16 | 5,396 | * | ||||||
Daniel E. Knutson | 17 | 2,950 | * | ||||||
Mary Theresa Coelho | 18 | 2,023 | * | ||||||
Totals Executive Officers/Directors | 411,518 | 1.28 | % | ||||||
Shares Outstanding April 1, 2018 | 32,098,840 |
* | Less than 1% |
Name and Address of Beneficial Owner | Beneficially Owned (1) | Percent of Class (2) | ||||||||||
Brown Capital Management, LLC | 3 | 3,630,745 | 11.40 | % | ||||||||
BlackRock Institutional Trust Company, N.A. | 4 | 3,233,603 | 10.16 | % | ||||||||
The Vanguard Group, Inc. | 5 | 2,699,711 | 8.48 | % | ||||||||
Neuberger Berman, LLC | 6 | 1,809,940 | 5.69 | % | ||||||||
Frank Fitzpatrick | 7 | 102,990 | * | |||||||||
David F. Ludwig | 8 | 97,544 | * | |||||||||
John E. Kuehner | 9 | 89,654 | * | |||||||||
Perry Premdas | 10 | 47,149 | * | |||||||||
Ted Harris | 11 | 40,612 | * | |||||||||
John Televantos | 12 | 29,072 | * | |||||||||
Edward L. McMillan | 13 | 28,296 | * | |||||||||
Bill Backus | 14 | 27,116 | * | |||||||||
Paul Coombs | 15 | 21,010 | * | |||||||||
David B. Fischer | 16 | 16,410 | * |
Matthew D. Wineinger | 17 | 3,096 | * | |||||||||
Totals Executive Officers/Directors | 502,949 | 1.59 | % | |||||||||
Shares Outstanding March 28, 2017 | 31,836,196 |
(1) | Beneficial ownership is determined in accordance with the rules of the |
(2) | For purposes of calculating the percentage of outstanding shares held by each person named above, any shares which such person has the right to acquire within 60 days after the date of the information in the table are deemed to be outstanding, but not for |
(3) | Based upon information provided in a Schedule 13G/A for such entity filed with the SEC on |
(4) | Based upon information provided in a Schedule 13G/A for such entity filed with the SEC on |
(5) | Based upon information provided in a Schedule 13G/A for such entity filed with the SEC on February |
(6) |
Consists of |
34
SUMMARY COMPENSATION TABLE
Consists of |
Consists of |
Consists of |
(10) | Consists of 677 shares such person has the right to acquire pursuant to stock options, 4,719 shares of restricted stock, and 24,388 shares held directly. |
(11) | Consists of 677 shares such person has the right to acquire pursuant to stock options, 4,719 shares of restricted stock, and 16,899 shares held directly. |
(12) | Consists of 677 shares such person has the right to acquire pursuant to stock options, 4,719 shares of restricted stock, and 13,314 shares held directly. |
(13) | Consists of 13,300 shares of restricted stock. |
(14) | Consists of 940 shares such person has the right to acquire pursuant to stock options, 8,260 shares of restricted stock, and 214 shares held in such person’s Company 401(k) retirement plan account. |
(15) | Consists of |
(16) | Consists of |
(17) | Consists of |
(18) | Consists of 2,023 shares held directly. |
35
PROPOSAL NO. 2
The Audit Committee has selected RSM US LLP (“RSM”RSM”) as the Company’s independent registered public accounting firm for the year ending December 31, 2017.2019. The Company is submitting its selection of RSM for ratification by the stockholdersshareholders at the Annual Meeting. RSM has audited the Company’s financial statements since 2005. Representatives of RSM will be present at the Annual Meeting and will have an opportunity to make a statement if they wish and will be available to respond to appropriate questions.
The Company’s Bylaws do not require that the stockholdersshareholders ratify the selection of RSM as the Company’s independent registered public accounting firm. However, the Company is submitting the selection of RSM to stockholdersshareholders for ratification as a matter of good corporate governance practice. If stockholdersshareholders do not ratify the selection, the Audit Committee will reconsider whether to retain RSM. Even if the selection is ratified, the Audit Committee in its discretion may change the appointment at any time during the year if they determine that such a change would be in the best interests of the Company and its stockholders.
Assuming a quorum is present, the affirmative vote of a majority of all votes cast on the proposal, in personby attending the virtual meeting or represented by proxy, is required for approval of this proposal. Abstentions will not be counted as votes cast and will have no effect on the vote. Brokers have discretionary authority to vote on this Proposal.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERSSHAREHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF RSM US LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2017.
Principal Accountant Fees and Services
During 2016,2018, the Company retained RSM to audit the consolidated financial statements for 2016.the fiscal year ended 2018. In addition, the Company also retained RSM to provide services relating to Management’s Assessment of Internal Controls as required by Section 404 of the Sarbanes-Oxley Act, as well as for other audit-related.audit-related services. During the period covering the fiscal years ended December 31, 20162018 and 2015,2017, RSM performed the following professional services:
2018 | 2017 | |||||
Audit fees (1) | $ | 1,189,375 | $ | 1,138,983 | ||
Audit-related fees (2) | $ | 51,018 | $ | 44,488 | ||
Total fees | $ | 1,240,393 | $ | 1,183,471 |
2016 | 2015 | |||||||
Audit fees (1) | $ | 1,061,445 | $ | 923,514 | ||||
Audit-related fees (2) | $ | 47,397 | $ | 97,472 | ||||
Total fees | $ | 1,108,842 | $ | 1,020,989 |
(1) | Fees relating to audit of the annual consolidated financial statements and quarterly reviews, including out of pocket disbursements and administrative charges. |
(2) | Audit-related fees in |
Audit Committee Financial Expert
The Board of Directors has determined that Perry W. Premdas,Mr. Knutson, the Chairmanchairman of the Audit committee, is an “audit committee financial expert” as defined under SEC rules.
36
PROPOSAL NO. 2 − RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Policy on Pre-Approval of Audit and Non-Audit Services
All audit and non-audit services provided to the Company by the independent accountants are pre-approved by the Audit Committee or in certain instances by one or more of its members pursuant to delegated authority. At the beginning of each year, the Audit Committee reviews and approves all known audit and non-audit services and fees to be provided by and paid to the independent accountants. During the year, specific audit and non-audit services or fees not previously approved by the Audit Committee are approved in advance by the Audit Committee or in certain instances by one or more of its members pursuant to delegated authority. In addition, during the year the Chief Financial Officer and the Audit Committee monitor actual fees to the independent accountants for audit and non-audit services.
The Audit Committee reviewed all audit and non-audit services provided by RSM with respect to the fiscal year ended December 31, 20162018 and concluded that the provision of such services was compatible with maintaining independence in the conduct of its auditing functions. All audit and non-audit services provided by RSM described in the table above were pre-approved by the Audit Committee.
Audit Committee Report
The Board of Directors has appointed an Audit Committee consisting of fourthree directors. Each member of the Audit Committee is independent as defined under the NASDAQ Marketplace Rules and SEC independence requirements applicable to audit committee members. The Board of Directors has adopted a written charter with respect to the Audit Committee’s responsibilities. The Audit Committee oversees the Company’s internal and independent auditors and assists the Board of Directors in overseeing matters relating to the Company’s financial reporting process and risk exposure.
In fulfilling its responsibilities, the Audit Committee reviewed and discussed the audited financial statements for the fiscal year ended December 31, 20162018 with management and discussed the audit with RSM, the Company’s independent registered public accounting firm. The Audit Committee also discussed with the Company’s independent registered public accounting firm the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”PCAOB”) Auditing Standard No. 16 (Communications with Audit Committees). This included a discussion of the independent auditors’ judgment as to the quality, not just the acceptability, of the Company’s accounting principles as applied to the Company’s financial reporting, and such other matters that generally accepted auditing standards require to be discussed with the Audit Committee. The Audit Committee also received from RSM the written disclosures and letter required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with RSM and management RSM’s independence.
Management is responsible for maintaining internal controls over financial reporting and assessing the effectiveness of internal control over financial reporting. The independent registered public accounting firm’s responsibility is to express an opinion on the effectiveness of the Company’s internal control over financial reporting based on their audit. In fulfilling its oversight responsibilities, the Audit Committee reviewed the Company’s assessment process of internal controls over financial reporting. The Audit Committee reviewed with the independent registered public accounting firm any deficiencies that had been identified during their engagement.
The Audit Committee also considered whether the provision of non-audit services by RSM to the Company is compatible with RSM’s independence. RSM advised the Audit Committee that RSM was and continues to be independent with respect to the Company.
37
PROPOSAL NO. 2 − RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Based upon the reviews, discussions and considerations referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 20162018 for filing with the Securities and Exchange Commission.
The Audit Committee has also recommended that the Board of Directors approve the selection of RSM as the Company’s independent auditors for 2017.
Submitted by the Audit Committee of the Board of Directors.
Daniel E. Knutson (Chair) | |
Paul D. Coombs | |
David B. Fischer | |
being the members of the Audit | |
Committee of the Board of Directors |
38
PROPOSAL NO. 4
Since 2011, as a resultbecause of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Company’s stockholdersshareholders were provided with an opportunity to vote to approve, on an advisory (nonbinding) basis, the compensation of the Company’s Named Executive Officers. At our 20162018 annual meeting of stockholders,shareholders, our stockholdersshareholders: (i) approved holding advisory (or “say on pay”) votes on executive an annual basis; and (ii) approved our “say-on-pay” resolution with approximately 70%95% of the votes cast by the holders of Common Stock approving the executive compensation described in our 20162018 Proxy Statement. In response to the voting results regarding the frequency of say-on-pay vote, this year, the
The Company again seeks your advisory vote and asks that you approve the compensation of the Named Executive Officers as disclosed in this Proxy Statement.
Please refer to the sections entitled “Compensation Committee and Processes”, “Compensation Discussion and Analysis”, and the tables and narratives in the Executive Compensation portion of this Proxy Statement for the discussion and summary of the policies of the Compensation Committee which form the basis for the compensation of our Named Executive Officers and information on the amounts paid.
We are asking for shareholder approval of the compensation of our Named Executive Officers as disclosed in this Proxy Statement in accordance with SEC rules, which includes the disclosures under the “Compensation Discussion and Analysis,” the compensation tables and the narrative discussion accompanying the tables. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the policies and practices described in this Proxy Statement. Because this vote is advisory only, the vote is not binding; however, the Compensation Committee will consider the results of shareholder voting in making future compensation decisions regarding Named Executive Officers.
Assuming a quorum is present, the affirmative vote of a majority of all votes cast on the proposal, in personby attendance at the virtual meeting or represented by proxy, is required for approval of this proposal. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the vote.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.
39
MISCELLANEOUS ITEMS
Quorum Required
Maryland law and the Company’s Bylaws require the presence of a quorum for the Meeting,meeting, defined as the presence in personat the meeting or represented by proxy of stockholdersshareholders entitled to cast a majority of all the votes entitled to be cast at the Meeting. Abstentions will be treated as “present” for purposes of determining whether a quorum has been reached.
Voting Securities
Shareholders of record on April 20, 201723, 2019 (the “Record Date”“Record Date”) will be eligible to vote at the Meeting. The voting securities of the Company consist of its Common Stock, $.06-2/3 par value (our “Common Stock”), of which 31,866,92432,333,546 shares were outstanding on the Record Date. Each share of Common Stock outstanding on the Record Date will be entitled to one vote.
Shareholder Proposals for 20182020 Annual Meeting of Shareholders
From time to time, the stockholdersshareholders of the Company may wish to submit proposals which they believe should be voted upon by the stockholders.shareholders. The Securities and Exchange Commission has adopted regulations which govern the inclusion of such proposals in the Company’s annual meeting proxy materials. In order forFor a proposal to be eligible for inclusion in the Company’s proxy statement for the 20172020 annual meeting, it must be received by the Secretary of the Company at the Company’s principal executive offices no later than January 4, 20181, 2020 and must satisfy the other requirements in the SEC regulations. With respect to any stockholderShareholder proposal intended to be presented at the 2018 annual meeting,2020 Annual Meeting of Shareholders, but not submitted for inclusion in the Company’s proxy materials for that meeting, the proxy for such meeting will confer discretionary authority to vote on such proposal unless the Company is notified of such proposal not later than March 20, 2018715, 2020 (45 days prior to the anniversary of the date this Proxy Statement is first being sent to stockholders)shareholders).
Director Attendance at Annual Meetings of Shareholders
The Company’s policy with regard to directors’ attendance at annual meetings of shareholders is included in the Governance Guidelines available on the Corporate Governance page in the Investor Relations section of the Company’s website: www.balchem.com. All of our directors attended the Company’s 2018 annual meeting of shareholders.
Matters Not Determined at the Time of Solicitation
The Board of Directors is not aware of any matters to come before the Meeting other than as described above. If any matter other than as described above should come before the Meeting, then the persons named in the enclosed form of proxy will have discretionary authority to vote all proxies with respect thereto in accordance with their judgment.
Approval of any other matter that may come before the Annual Meeting is be determined by the affirmative vote of a majority of all votes cast on the matter, in personby attending the virtual meeting or represented by proxy. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the vote.
Instructions for the Virtual Annual Meeting
This year our annual meeting will be a completely virtual meeting. There will be no physical meeting location. The meeting will only be conducted via live webcast.
40
MISCELLANEOUS ITEMS
To participate in the virtual meeting, visit www.virtualshareholdermeeting.com/BCPC2019 and enter the 16-digit control number included on your notice of Internet availability of the proxy materials, on your proxy card, or on the instructions that accompanied your proxy materials. You may begin to log into the meeting platform beginning at 1:50 p.m. Eastern Daylight Savings Time (“EDT”) on June 20, 2019. The meeting will begin promptly at 2:00 p.m. EDT on June 20, 2019.
If you wish to submit a question, you may submit your question during the meeting, log into the virtual meeting platform at www.virtualshareholdermeeting.com/BCPC2019, type your question into the “Ask a Question” field, and click “Submit.”
Questions pertinent to meeting matters will be answered during the meeting, subject to time constraints. Questions regarding personal matters, including those related to employment, product or service issues, or suggestions for product innovations, are not pertinent to meeting matters and therefore will not be answered.
/s/ Mark A. Stach | |
Mark A. Stach | |
Secretary | |
April 29, 2019 | |
New Hampton, New York | |
The Annual Report to StockholdersShareholders of the Company for the fiscal year ended December 31, 20162018 is being mailed to stockholdersshareholders with these proxy materials. The Annual Report does not form part of these proxy materials for the solicitation of proxies.
41