Proposal Two
| · | Ratification ofTo ratify the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018;2021. | | | FOR | | | Majority present & entitled to vote. | | | |
Proposal Three
| · | HoldingTo hold an advisory (non-binding)(nonbinding) vote on the Company’s executive compensation (“Say on Pay”);compensation. | | | FOR | | | Majority present & entitled to vote. | | | |
*For the election of directors, you have the choice of voting “FOR” all or individual nominees or to “Withhold Authority” to vote for all or individual nominees. For the other proposals, you have the choice to vote “FOR”, “AGAINST” or “ABSTAIN”. Casting Your Vote Please provide your proxy by internet, phone, or by filling in, signing, dating and promptly mailing your Proxy Card or voting instruction form. www.proxyvote.com | | | 1-800-690-6903
(toll free within U.S. and Canada) | | | Vote Processing
c/o Broadridge
51 Mercedes Way
Edgewood, NY 11717 |
| · | Such other matters as may properly come before the Annual Meeting or any adjournment thereof. |
You can ensure that your shares are
TABLE OF CONTENTS Why did I receive these materials? Our Board is soliciting proxies to be voted at the Annual Meeting by completing, signing, dating and returning the enclosed proxy cardon June 17, 2021. To participate in the envelope provided. Sending in a signed proxy will not affectMeeting, visit www.virtualshareholdermeeting.com/BCPC2021 and enter the 16-digit control number included on your rightProxy Card or Materials’ Notice. You may begin to attend the Meeting and vote. A Shareholder who gives a proxy may revoke it at any time before it is exercised by voting by attendinglog into the virtual meeting platform (the “Meeting Platform”) beginning at 8:55 a.m. EDT on June 17, 2021. The Meeting will begin promptly at 9:00 a.m. EDT on June 17, 2021. How are these materials being distributed? On or byabout April 26, 2021, we began mailing this Proxy Statement, a Proxy Card and a Notice of Materials’ Availability to certain shareholders of record as of April 20, 2021 and posted our proxy materials for shareholder access at www.proxyvote.com. As more fully described in the Annual Meeting, by submitting anotherMaterials’ Notice, shareholders may also request printed proxy bearing a later datematerials. The Materials’ Notice and website also provide information regarding how you may request proxy materials in printed or by notifying the Inspectors of Electionelectronic form or the Secretary of the Company of such revocation, in writing, priorelectronically on an ongoing basis. We also mailed proxy materials to the Annual Meeting. Please note, however, that ifcertain shareholders. Why am I getting these materials from my broker, bank or other nominee, and not directly from Balchem? If you hold your shares are held of record bythrough a broker, bank or other nominee, you may also receive either the Materials’ Notice or printed proxy materials from that entity, as required by SEC rules. What is the difference between a shareholder of record and you wish to attend and vote by attending the virtual meeting or by proxy at the Annual Meeting, you must obtain from the record holder a proxy issuedshareholder who holds shares in your name.
street name?
If your shares are registered in your name withon the books and records of our transfer agent, Broadridge Corporate Issuer Solutions, you are a shareholder of record. If your shares are held for you in the name of your broker, bank or other nominee, your shares are held in street name. Who Is Entitled to Vote and How Many Shares Must Be Present to Hold the Annual Meeting? Shareholders of record at Record Date will be entitled to vote at the Annual Meeting or any adjournment or postponement of the Meeting. As of April 20, 2021, there were 32,435,692 outstanding shares of our Common Stock. Each share of our Common Stock is entitled to one vote on each matter to be voted on at the Annual Meeting. Shares of our Common Stock that are held by us in our treasury are not counted as outstanding shares and will not be voted. To conduct the Meeting, a majority of the shares issued and outstanding as of the Record Date must be present. This is referred to as a quorum. By Telephone, E-Mail or Internet: All shareholders of record may vote either overtheir shares by telephone (within the internetUnited States, U.S. territories and Canada, there is no charge for the call), e-mail or by telephone. Specificinternet, using the procedures and instructions for voting in this manner are set forthdescribed on the enclosed proxy card. These procedures are designedProxy Card, Materials’ Notice. If you vote by telephone, e-mail or internet, you need not mail back your Proxy Card. A control number, located on the Proxy Card or Materials’ Notice, must be provided to authenticate each shareholder’sverify your identity and to allow shareholdersyou to vote theiryour shares and confirm that theiryour voting instructions have been properly recorded. Street name holders may vote by telephone or internet if their brokers, banks or other nominees make those methods available. Each broker, bank or other nominee will enclose instructions with the proxy materials. Follow the voting instructions on the form you receive from that firm. In Writing: All shareholders also may vote by mailing their completed and signed Proxy Card (in the case of shareholders of record) or their completed and signed voting instruction form (in the case of street name holders). What vote is required to pass the proposals? If youra quorum is present, the affirmative vote of a majority of the shares entitled to vote which are present in person or represented by proxy at the 2021 Annual Meeting is required to elect directors, to ratify the appointment of RSM, to approve the compensation of the Company’s Named Executive Officers (“NEOs”) and TABLE OF CONTENTS QUESTIONS AND ANSWERS ABOUT THE BALCHEM ANNUAL MEETING
to act on any other matters properly brought before the meeting. Shares represented by proxies which are marked or voted “withhold authority” with respect to the election of any one or more nominees for election as Directors, proxies which are marked or voted “abstain” on the other proposals, and proxies which are marked or voted to deny discretionary authority on other matters will be counted for the purpose of determining the number of shares represented by proxy at the meeting. Such proxies will thus have the same effect as a vote against such nominee or nominees, against such proposals and against such other matters, respectively. What if my shares are registeredheld in the name of a bank or brokerage firm, you may also be able to vote your shares over the internet or by telephone. account? Many banks and brokerage firms are participating in online programs that allow eligible shareholders 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.firm Voting via the internet is conducted at www.proxyvote.com, or by phone. You will need to input the control number located on the Proxy Card or Materials’ Notice when accessing these documents. If you attend the Meeting virtually, using the above website, you will be able to vote and submit questions from any remote location that has internet connectivity. What if I own registered shares? 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 shareholder’s identity and to allow shareholders to vote their shares and confirm that their instructions have been properly specify howrecorded Will my shares be voted if I do not provide my Proxy Card or voting instructions? Street Name Holders: If your shares are held in a proxybrokerage, bank or another account that bears the name of the holder and not you—shares referred to as held in “street name”—and you do not provide your voting instructions to your broker, your shares may be voted by your broker, bank or other nominee only on certain “routine” matters, pursuant to stock exchange rules. Only the ratification of RSM as our independent registered public accounting firm is considered a “routine” matter for which brokers, banks or other nominees may vote uninstructed shares. The other proposals to be voted it will be voted accordingly.on at the Meeting are not considered “routine” under stock exchange rules. If you sign a proxy card or voting form but do not provide voting instructions on a non-routine matter, your broker may indicate on the proxy that it does not have discretionary voting authority and your shares will not be voted on that matter, which is referred to as a “broker non-vote.” Broker non-votes, which only count toward the establishment of a quorum, will not be considered as present and entitled to vote with respect to that matter and thus will have no effect on the outcome of the vote with regard to such matters. Shareholders of Record: If your shares are registered in your name on the books and records of our transfer agent, you are a shareholder of record, meaning you are designated a registered shareholder. If you are a shareholder of record, your shares will not be voted if you do not provide your Proxy Card or vote in person at the meeting. It is, therefore, important that you vote your shares. What if I do not specify a choice for a matter when returning a Proxy Card? If your Proxy Card is signed and returned without specifying choices, the shares will be voted FOR the director nominees for Director in Proposal 1, FOR the ratification of the appointment of RSM as our independent registered public accounting firm in Proposal 2 and FOR the auditors, FOR approval, on an advisory basis, of the compensation of the Company’s executive compensation, and atNamed Executive Officers in Proposal 3. Otherwise, signed Proxy Cards without specified choices will be voted in the discretion of the proxy holders aboutproxies. How will my shares be voted on any other matters to come before the meeting? The Board 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 Card 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 or any adjournment thereof.
Broker non-votes are shares heldis be determined by brokers or nominees that are presentthe affirmative vote of a majority of all votes cast on the matter, by attending the virtual meetingMeeting or represented by proxy, butproxy. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the vote.
TABLE OF CONTENTS QUESTIONS AND ANSWERS ABOUT THE BALCHEM ANNUAL MEETING
How Will Business Be Conducted at the Annual Meeting? The presiding officer at the Annual Meeting will determine how business at the Meeting will be conducted. Only nominations and other proposals brought before the Annual Meeting in accordance with the advance notice and information requirements of our Bylaws will be considered, and no such nominations or other proposals were received. May shareholders ask questions at the 2021 Annual Meeting? Yes. You may submit questions on line via the link provided above. Questions must relate directly to the business of the meeting. To submit a question, log into the Meeting Platform at: www.virtualshareholdermeeting.com/BCPC2021 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 votedpertinent to Meeting matters and therefore will not be answered. Any questions pertinent to meeting matters that cannot be answered during the Meeting due to time constraints will be posted online and answered at https://balchem.com/our-company/investor-relations/. The questions and answers will be available as soon as practical after the Meeting and will remain available until one week after posting. If you encounter any technical difficulties with the Meeting Platform on a matter because instructions have not been received from the beneficial ownerMeeting day, please call the technical support number that will be posted on the Meeting Platform. Technical support will be available starting at 8:00 a.m. EDT on June 17, 2021 and will remain available until thirty minutes after the broker or nominee does not have discretion to vote without such instructions. Brokers and nominees generally do not have such discretion when the matter is deemed by the broker voting rules to be “non-routine.” The ratification of the independent registered public accounting firm is a “routine” matter with respect to which brokers and nominees have discretion to vote shares held by them in 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, or Say on Pay.
Meeting has finished.
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 relating 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 ofour Common Stock held of record by them, and such custodians will be reimbursed for their reasonable expenses. A shareholder who votes prior to the Meeting may revoke their proxy by attending and voting at the Meeting, or by submitting another proxy bearing a later date, by notifying the Inspector of Election, or the Secretary of the Company of such revocation, in writing, prior to the Annual Meeting and the closing of the polls at the Meeting. Internet Availability of Proxy Materials
The Company’s Proxy Statement and the Annual Report to shareholders for the year ended December 31, 2017 are available at http://proxymaterials.balchem.comproxymaterials.balchem.com..
TABLE OF CONTENTS MANAGEMENT PROPOSALS
1. ELECTION OF DIRECTORS
The Company’s Bylaws provide for a staggered termAt the time of the Annual Meeting, our Board will consist of Directors consisting of eight (8)7 members, with the classification of the Board of Directors into three classes (Class 1, Class 2 and Class 3). The termterms of theour three current Class 2 directors will expire at the Annual Meeting.Meeting and Paul Coombs, one of the current members of Class 2, is not standing for re-election. The Class 1 and Class 3 directors will remain in office until their terms expire, atCompany’s Bylaws have been amended so that the annual meetingsnumber of shareholders to be held in the years 2019 and 2020, respectively.
At the 2018 Annual Meeting, two Class 2 directors arewill be reduced to be elected totwo as of the Annual Meeting. So, two current Class 2 directors, Daniel Knutson and Joyce Lee, will stand for re-election at the Annual Meeting. Assuming their election, Mr. Knutson and Ms. Lee will hold office until the 2024 annual meeting of shareholders to be held in 2021 and thereafteror until their successors have been elected and qualified. The nominees and continuing directors are listed below with brief biographies.
| | Daniel Knutson | | | 2 | | | 2024 | | | | Joyce Lee | | | 2 | | | 2024 | | | | David Fisher | | | 3 | | | 2023 | | | | Perry Premdas | | | 3 | | | 2023 | | | | Dr. John Televantos | | | 3 | | | 2023 | | | | Ted Harris | | | 1 | | | 2022 | | | | Matthew Wineinger | | | 1 | | | 2022 | |
Consistent with Company’s Corporate Governance Guidelines, which call for a director to retire at the conclusion of his term in which he reaches the age of 70, Edward L. McMillan, a Class 2 director whose current term expires in 2018, will not stand for re-election at the end of his term at the Annual Meeting. The Board thanks Mr. McMillan for his dedicated service to the Company. In light of Mr. McMillan’s departure at the end of his term, effective February 2018, the Board of Directors expanded the full Board size to eight members and the size of Class 2 to three members and thereafter elected Daniel E. Knutson to the Class 2 in accordance with our Amended and Restated Bylaws. The Board also voted to reduce the size of the Board back to seven members and the size of Class 2 back to two members immediately following the expiration of Mr. McMillan’s term at the Annual Meeting.
Accordingly, two directors are nominated to serve in Class 2 and eligible for election at the Annual Meeting. Mr. Coombs has been a director since 2010. As noted above, Mr. Knutson was appointed as a director by the Board to fill a vacancy and is standing for election for the first time. Both nominees have been nominated for election after due consideration by the Corporate Governance and Nominating Committee and the Board. The Board is not aware of any reason why any such nomineeeither Mr. Knutson or Ms. Lee 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.
DIRECTORS STANDING FOR RE-ELECTION
Vote Required to Elect Directors
Under the rules of the Securities and Exchange Commission (the “SEC”), boxes and a designated blank space are provided on the form of proxy for shareholders 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
In 2012, the Board of Directors amendedpolicy. 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. OurBoard. 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.
OurThe 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 CorporateLeadership & Governance page in the Investor Relations section of the Company’s website, website: www.balchem.com. 12
Nominees for Election as Director
TABLE OF CONTENTS PROPOSAL 1. ELECTION OF DIRECTORS
Paul D. Coombs, age 62, a Class 2 director whose current term expires in 2018, was appointed to our Board of Directors in September 2010. From April 2005 until his retirement in June 2007, Mr. Coombs served as the Executive Vice President of Strategic Initiatives for Tetra Technologies, Inc. (NYSE), an oil and gas services company, and from May 2001 to April 2005, as its Executive Vice President and Chief Operating Officer. From January 1994 to May 2001, Mr. Coombs served as Tetra’s Executive Vice President – Oil & Gas. Mr. Coombs is a director of Tetra and is a member of its Audit and Corporate Governance and Nominating Committees. Mr. Coombs also serves as a director of CSI Compressco GP Inc., the general partner of CSI Compressco LP, CCLP (NASDAQ), a publicly traded limited “partnership”, both of which are subsidiaries of Tetra. Mr. Coombs has thirty-five years of experience in the oil and gas service and exploration industries, which, together with his entrepreneurial approach to management, provides the Board of Directors with essential counsel and insight into this area.
NOMINEES’ BIOGRAPHICAL INFORMATION Daniel E. Knutson, age 61, a Class 2 director whose current term expires in 2018, was appointed 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.
| | Daniel Knutson, Class 2 Director (Term expires 2021) | | | | Age: 64 | | | | Independent Director since 2018 | | | | Professional Highlights | | | | | | | • | | | Until his retirement at the end of 2017, Mr. Knutson served as the Executive Vice President for Special Projects at Land O’Lakes, Inc., an agribusiness and food co-operative. | | | | | | | • | | | From 2000 to 2017, Mr. Knutson served as Executive Vice President and Chief Financial Officer at Land O’Lakes, 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. | | | | Committee Assignments | | | | | | | • | | | Audit Committee, Chair | | | | Other Current Public Company Directorships | | | | | | | • | | | None | | | | Nominee Qualifications | | | | Our Company’s financial compliance programs and policies benefit from Mr. Knutson’s input and skilled guidance. Mr. Knutson’s animal feed and human food industry experience, combined with his financial and international business management experience, makes him a valuable member of our Board. | |
| | Joyce Lee, Class 2 Director (Term expires 2021) | | | | Age: 48 | | | | Independent Director since 2019 | | | | Professional Highlights | | | | | | | • | | | Since April of 2020, Ms. Lee has served as Executive Vice President and President of U.S. Pet Health and U.S. Commercial Operations of Elanco Animal Health Incorporated (NYSE: ELAN). | | | | | | | • | | | From 2016 to April 2020, Ms. Lee served as the president of North America for Bayer Animal Health. | | | | | | | • | | | From 2013 to 2015, Ms. Lee was Executive Vice President and Area President of Canada and Latin America at Zoetis Inc. (NYSE: ZTS), a global leader in the discovery, development, manufacture and commercialization of animal health medicines, vaccines and diagnostic products with a focus on both livestock and companion animals. | | | | | | | • | | | Prior to Zoetis being spun out of Pfizer Inc., Ms. Lee held various senior leadership positions at Pfizer, including serving as Area President of Canada and Latin America and Vice President of Global Poultry Health | | | | Committee Assignments | | | | | | | • | | | Audit Committee | | | | Other Current Public Company Directorships | | | | | | | • | | | None | | | | Nominee Qualifications | | | | Ms. Lee’s domestic and international business management experience, particularly with respect to the development and supply of products to the animal feed and nutrition industries, makes her a valuable member of our Board. | |
UPON RECOMMENDATION BY THE CORPORATE GOVERNANCE AND NOMINATING COMMITTEE, THE BOARD OF DIRECTORS OF THE COMPANYUNANIMOUSLY RECOMMENDS A VOTE ‘FOR’ THE ELECTION OF THE ABOVE NOMINEES AS DIRECTORS. Directors Not Standing for ElectionTABLE OF CONTENTS PROPOSAL 1. ELECTION OF DIRECTORS
CONTINUING DIRECTORS’ BIOGRAPHICAL INFORMATION Theodore L. Harris, age 53, a Class 1 director whose current term expires in 2019, has been a director,| | Ted Harris, Class 1 Director, Chairman of the Board | | | | Age: 56 | | | | Director since 2015, Chairman since 2017 (Term expires 2022) | | | | Professional Highlights | | | | | | | • | | | Director, President and Chief Executive Officer of Balchem Corporation since April 2015, and Chairman of the 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. During his tenure at Ashland, his management positions included Senior Vice President/Ashland, President, Performance Materials, from November of 2014 to April 2015, Senior Vice President/Ashland, President, Performance Materials & Ashland Supply Chain from 2011 to 2014, and Vice President/Ashland, President, Performance Materials & Ashland Supply Chain. | | | | Other Current Public Company Directorships | | | | | | | • | | | Pentair plc (NYSE) | | | | Board Qualifications | | | | 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. | |
| | Matthew Wineinger, Class 1 Director (Term expires 2022) | | | | Age: 54 | | | | Independent Director since 2015 | | | | Professional Highlights | | | | | | | • | | | Since June 2015, Mr. Wineinger has been the President and Chief Executive Officer of United Sugars Corporation, a privately held, leading marketer of sugar. | | | | | | | • | | | President, Bulk Ingredients of Tate & Lyle PLC (LSE) from June 2010 to November 2014 and prior to that, President, Food and Industrial Ingredients from March 2008 to June 2010. | | | | Committee Assignments | | | | | | | • | | | Compensation | | | | | | | • | | | Corporate Governance and Nominating Committee, Chairman | | | | Other Current Public Company Directorships | | | | | | | • | | | None | | | | Board Qualifications | | | | 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, particularly as the Company focuses on development and supply of products to human nutrition markets. | |
TABLE OF CONTENTS PROPOSAL 1. ELECTION OF DIRECTORS
| | David Fischer, Class 3 Director (Term expires 2023) | | | | Age: 58 | | | | Independent Director since 2010 | | | | Professional Highlights | | | | | | | • | | | Retired director and President and Chief Executive Officer of Greif, Inc. (NYSE), a supplier of industrial packing systems from November 2011 to October 2015. President and Chief Operating Officer of Greif from 2007 to 2011, and from 2004 to 2007, Senior Vice President and Divisional President, Industrial Packaging & Services - Americas. | | | | | | | • | | | A co-founder and chairman of the board of directors of 10x Engineered Materials, a manufacturer of high-tech abrasives for industrial applications. | | | | Committee Assignments | | | | | | | • | | | Executive | | | | | | | • | | | Compensation | | | | | | | • | | | Audit | | | | Other Current Public Company Directorships | | | | | | | • | | | Ingredion Incorporated (NYSE) | | | | Board Qualifications | | | | Mr. Fischer’s management and leadership skills, developed over years of responsibility for complex, global manufacturing operations, and his intimate knowledge of mergers and acquisitions, position him as a critical component of our Board as we look to grow both organically and by acquisition. | |
| | Perry Premdas, Class 3 Director (Term expires 2023) | | | | Age: 68 | | | | Independent Director since 2008 | | | | Professional Highlights | | | | | | | • | | | 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 from 1999 to 2004. | | | | | | | • | | | Senior Executive Vice President and Chief Financial Officer of Centeon LLC from 1997 to 1998. | | | | Committee Assignments | | | | | | | • | | | Executive | | | | | | | • | | | Compensation | | | | | | | • | | | Corporate Governance and Nominating Committee | | | | Other Current Public Company Directorships | | | | | | | • | | | None | | | | Past Public Company Directorships | | | | | | | • | | | Compass Minerals International, Inc. (NYSE) (until May 2015) | | | | Board Qualifications | | | | Over his career, Mr. Premdas 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. He holds a BA from Brown University and an MBA from the Harvard University Graduate School of Business. Mr. Premdas, who served as our Audit Committee Chairman and the Board of Director’s audit committee financial expert from 2008 to 2018, brings a combination of financial and international business management experience in the chemical industry, making him a valuable member of our Board. | |
TABLE OF CONTENTS PROPOSAL 1. ELECTION OF DIRECTORS
| | Dr. John Televantos, Class 3 Director and Lead Director (Term expires 2023) | | | | Age: 68 | | | | Independent Director since 2005, Lead Director since 2010 | | | | Professional Highlights | | | | | | | • | | | Senior Partner at Arsenal Capital Partners, Inc., a private equity investment firm, where he leads the Chemicals and Materials practice of the firm. | | | | | | | • | | | From April 2002 through February 2005, President of the Aqualon Division and Vice President of Hercules, Inc., a chemical manufacturing company. | | | | Committee Assignments | | | | | | | • | | | Executive | | | | | | | • | | | Compensation, Chairman | | | | | | | • | | | Corporate Governance and Nominating Committee | | | | Other Current Public Company Directorships | | | | | | | • | | | None | | | | Board Qualifications | | | | Dr. Televantos holds B.S. and Ph.D. degrees in Chemical Engineering from the University of London, United Kingdom. In addition to his experience in the chemical manufacturing industry and management of publicly 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. | |
DIRECTOR NOT STANDING FOR RE-ELECTION | | Paul Coombs, Class 2 Director (Term expires 2021) | | | | Age: 65 | | | | Independent Director since 2010 | | | | Professional Highlights | | | | | | | • | | | Tetra Technologies, Inc. (NYSE), an oil and gas services company | | | | | | | | | | — | | | Executive Vice President of Strategic Initiatives (April 2005 until his retirement in June 2007) | | | | | | | | | | — | | | Executive Vice President and Chief Operating Officer (May 2001 to April 2005) | | | | | | | | | | — | | | Executive Vice President – Oil & Gas January (1994 to May 2001). | | | | Committee Assignments | | | | | | | • | | | Audit | | | | | | | • | | | Corporate Governance and Nominating Committee | | | | Other Current Public Company Directorships | | | | | | | • | | | None | | | | Past Public Company Directorships | | | | | | | • | | | Tetra Technologies Inc. (NYSE) | | | | | | | • | | | CSI Compressco GP Inc., the general partner of CSI Compressco LP, CCLP (NASDAQ) | | | | Board Qualifications | | | | Mr. Coombs has thirty-five years of experience in the oil and gas service and exploration industries, which, together with his entrepreneurial approach to management, provides the Board with essential counsel and insight into these areas. | |
TABLE OF CONTENTS The Board, upon the recommendation of the Audit Committee, has selected RSM US LLP (“RSM”) as the Company’s independent registered public accounting firm for the year ending December 31, 2021. The Company is submitting its selection of RSM for ratification by the shareholders at the Annual Meeting. RSM has audited the Company’s financial statements since 2004. The Company’s Bylaws do not require that the shareholders ratify the selection of RSM as the Company’s independent registered public accounting firm. However, the Company is submitting the selection of RSM to shareholders for ratification as a matter of good corporate governance practice. If shareholders 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 since April 2015 and Chairmanits shareholders. Assuming a quorum is present, the affirmative vote of a majority of all votes cast on the proposal, by 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 SHAREHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF RSM AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2021. Please refer to the sections entitled “Principal Accountant Fees and Services”, “Audit Committee Financial Expert”, “Policy on Pre-Approval of Audit and Non-Audit Services” and “Audit Committee Report” at Pages 51 through 52 in connection with your consideration of these issues. TABLE OF CONTENTS Since 2011, the Company’s shareholders have been provided with an opportunity to vote to approve, on an advisory (nonbinding) basis, the compensation of the Company’s Named Executive Officers (“NEOs”). At our 2017 annual meeting, our shareholders approved holding advisory or “Say on Pay” votes on executive compensation an annual basis. The “Say on Pay” vote has been held annually since then. Last year, our shareholders approved our “Say on Pay” resolution with approximately 95% of the votes cast approving the executive compensation described in our 2020 Proxy Statement. The Company again seeks your advisory vote and asks that you approve the compensation of the NEOs as disclosed in this Proxy Statement. Please refer to the section entitled “Compensation Discussion and Analysis”, and the tables and narratives in the Executive Compensation portion of this section for the discussion and summary of the policies of the Compensation Committee which form the basis for the compensation of our NEOs and information on the amounts paid. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs 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 NEOs. Assuming a quorum is present, the affirmative vote of a majority of all votes cast on the proposal, by 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, ON AN ADVISORY (NONBINDING) BASIS, OF THE COMPENSATION OF OUR NEOS AS DISCLOSED IN THIS PROXY STATEMENT. TABLE OF CONTENTS Balchem’s Board of Directors since January 2017. Mr. Harris was employed by Ashland Global Holdings Inc. (formerly. Ashland Inc.) (NYSE), in various senior management positions, serving most recently as Senior Vice President, President Performance Materials, from November of 2014 to April 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
The following charts provide information regarding the members of our Board, including certain types of Directors.
Matthew D. Wineinger, age 51,knowledge, skills, experiences and attributes possessed by one or more of our directors which our Board believes are relevant to our business or industry. The charts do not encompass all of the knowledge, skills, experiences or attributes of our directors, and the fact that a Class 1 director whose current term expires in 2019, has beenparticular knowledge, skill, experience or attribute is not listed does not mean that a director does not possess it. In addition, the absence of a particular knowledge, skill, experience or attribute with respect to any of our directors does not mean the director in question is unable to contribute to the decision-making process in that area. The type and degree of knowledge, skill and experience listed below may vary among the members of the Company since September 2015. Since June 2015, Mr. Wineinger has been the President/CEO 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 twenty-six 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.Board.
| | Core Industry Experience | | | • | | | • | | | • | | | • | | | • | | | • | | | • | | | • | | | | Executive Experience | | | • | | | • | | | • | | | • | | | • | | | • | | | • | | | • | | | | Corporate Governance | | | • | | | • | | | • | | | | | | | | | • | | | • | | | • | | | | Public Company
Board Experience | | | • | | | • | | | • | | | | | | | | | • | | | • | | | | | | | Environmental/Social | | | • | | | • | | | • | | | | | | | | | | | | • | | | • | | | | Financial / Accounting / Risk Management | | | • | | | • | | | • | | | • | | | | | | • | | | • | | | • | | | | Health & Safety | | | • | | | • | | | • | | | | | | • | | | | | | • | | | • | | | | Mergers & Acquisitions –
Capital Markets | | | | | | • | | | • | | | • | | | | | | | | | • | | | • | | | | Research & Development | | | • | | | • | | | • | | | | | | • | | | | | | • | | | • | | | | International Markets | | | • | | | • | | | • | | | | | | • | | | • | | | • | | | • | | | | Marketing | | | • | | | • | | | • | | | | | | • | | | | | | • | | | • | | | | Manufacturing /
Supply Chain | | | • | | | • | | | • | | | | | | • | | | | | | • | | | • | |
| | Hispanic or Latino | | | | | | | | | | | | | | | | | | | American Indian or Alaskan Native | | | | | | | | | | | | | | | | | | | Asian | | | | | | 1 | | | | | | | | | | | | | Black or
African American | | | 1 | | | | | | | | | | | | | | | | Native Hawaiian or Other Pacific Islander | | | | | | | | | | | | | | | | | | | White | | | 6 | | | | | | | | | | | | | | | | Two or More Races | | | | | | | | | | | | | | | | | | | LGBTQ+ | | | | | | | | | | | | | | | | |
Capital Partners, Inc., a private equity investment firm, where he leads the Chemicals and Materials practice of the firm. Dr. Televantos was formerly with Hercules, Inc., a chemical manufacturing company, as President of the Aqualon Division and as Vice President of Hercules, Inc. from April 2002 through February 2005. Dr. Televantos holds B.S. and Ph.D. degrees in Chemical Engineering from the University of London, United Kingdom. In addition to Dr. Televantos’ experience in the chemical manufacturing industry and management of publicly 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 DirectorsTABLE OF CONTENTS
The Board of Directors has made an affirmative determinationdetermined that each of the Company’s directors, other than Mr. Harris, is independent, as such term is defined under the NASDAQ Marketplace Rules.
During fiscal 2017,2020, the Board of Directors held five regular meetings and one special meeting. Each director attended at least 75%all of the meetings of the Board held when hehe/she was a director and of the meetings of those Committees of the Board on which hehe/she served. The Company has a policy of strongly encouraging directors to attend the annual meeting of shareholders, which policy will continue as the Company transitions to conducting its annual meeting on a virtual basis. Historically, attendance has been excellent. All seven members of theCurrent Board of Directors attended the Company’s 2017 annual meeting of shareholders.
Leadership Structure
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 2017, the Audit Committee held three regular meetings and three telephonic or special meetings and each of the Compensation Committee andBalchem’s Corporate Governance and Nominating Committee held three meetings. The Executive Committee did not meet in 2017.
Audit 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. 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. 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-Oxley Act of 2002. Responsibilities, activities and independence of the Audit Committee are discussed in greater detail under the section of this Proxy Statement entitled “Audit Committee Report.”
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. Premdas (Chair), Coombs, Fischer, Knutson and McMillan. Effective in June, Mr. Premdas will transition off the Audit Committee and Mr. Knutson will succeed Mr. McMillan as chairman. Upon his retirement, Mr. McMillan will no longer be a member of the Audit Committee. The Board of Directors of the Company has determined that the Audit Committee chairman, Mr. Premdas and its future chairman, Mr. Knutson, qualify as “audit committee financial experts,” 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. The duties of the Compensation Committee are, among other things, to (i) 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), (ii) recommend to the Board of Directors for approval the compensation of directors, and (iii) 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 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 structures 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, McMillan and Wineinger, each of whom is independent, as such term is defined under the NASDAQ Marketplace Rules. Mr. Premdas will succeed Mr. McMillan as a member of the Compensation Committee upon Mr. McMillan’s retirement.
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 consisting solely of members of the Compensation Committee who are (a) “non-employee directors” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934 and (b) “outside directors” for Section 162(m) of the Internal Revenue Code of 1986, as amended.
The process for setting director and executive compensation in 2017 involved numerous steps. In 2016, the Compensation Committee engaged Willis Towers Watson, an independent executive compensation advisory firm, to provide survey data and advice on market trends in executive compensation, and as a result, the Compensation Committee approved a peer group of companies for purposes of targeting executive compensation.
At the Compensation Committee's meetings in early 2017, the Compensation Committee reviewed with senior management its recommendations and basis for Company performance goals for payouts of 2017 annual incentive awards and long-term compensation awards. Following this discussion, the Compensation Committee set the 2017 Company performance goals for annual incentive awards and long-term compensation awards that had to be achieved for payouts of such awards to occur. The Compensation Committee also approved the form of the long-term compensation awards. For information regarding the Compensation Committee’s role, absence of conflicts and fees, among other matters, see “Compensation Discussion and Analysis.”
Corporate Governance and Nominating Committee. The duties of the Corporate Governance and Nominating Committee are, among other things, to (i) consider and make recommendations to the Board concerning the appropriate size, function and needs of the Board, (ii) determine the criteria for Board membership, oversee searches and evaluate and recommend candidates for election to the Board, (iii) evaluate and recommend to the Board responsibilities of the Board committees, (iv) annually review and assess the adequacy of the Company’s Corporate Governance Guidelines and recommend any changes to the Board for adoption, (v) annually evaluate its own performance as well as oversee an annual self-evaluation of the Board and other Board Committees, (vi) oversee compliance with the Company’s Stock Ownership Policies, (vii) consider matters of corporate social responsibility and corporate public affairs related to the Company’s employees and shareholders, (viii) 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, (x) 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 (xi) 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. McMillan (Chair), Coombs, Premdas and Wineinger, each of whom is independent, as such term is defined under the NASDAQ Marketplace Rules. Dr. Televantos will succeed Mr. McMillan as a member the Corporate Governance and Nominating Committee and Mr. Wineinger will become the chairman of the Corporate Governance and Nominating Committee effective upon Mr. McMillian’s retirement.
Executive Committee. The Executive Committee is authorized to exercise all the powers of the Board of Directors in the interim between meetings of the Board, subject to the limitations imposed by Maryland law. The Executive Committee is also responsible for: (i) the recruitment, evaluation and selection of suitable candidates for the position of CEO, for approval by the full Board; (ii) the preparation, together with the Compensation Committee, of objective criteria for the evaluation of the performance of the CEO; and (iii) 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. Mr. Premdas will become a member of the Executive Committee effective upon Mr. McMillian’s retirement.
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 shareholders. Generally, shareholders who individually or as a group hold 5% or more of the Company’s common stock and have continued to do so for over one year will be considered substantial, long-term shareholders. 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 “Shareholder Proposals for 2019 Annual Meeting of Shareholders.” 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 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. 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 which he or she reaches the age of 70. 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 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. 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. 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 evaluates each candidate in the context of the Board as a whole, with the objective of recommending an individual that can best perpetuate the success of the business and represent shareholder interests through the exercise of sound judgment based upon a diversity of background, experience and perspectives.
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 reinforce 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.
Current Board Leadership Structure
The Corporate Governance and Nominating Committeecontinuously reviews the functioning of the Board and makes recommendations to the Board regarding the CEO, Chairman and Lead Director, in the manner that it determines to be in(based on its determination of the best interests of our shareholders which isand consistent with our Governance Guidelines) to the CorporateBoard regarding the Chief Executive Officer (“CEO”), Chairman of the Board (the “Chairman”) and Lead Director.
Our Governance Guidelines adopted by the Company. Our Corporate 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 principles do not require the Chairman of the Board to be independent and do not specify whether the positions of Chairmanrequire separation of the BoardChairman and the Chief Executive Officer must be separated. CEO positions. 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 shareholders are best served by the Board and 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. Chairman. 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 theany given time.
Mr. Harris, our President and CEO, has been the Chairman of the Board of Directors since January 1, 2017. The Board and the Corporate Governance and Nominating Committee currently believe that the Company and its shareholders are best served by having Mr. Harris serve in both positions. The Board and the Corporate Governance and Nominating Committee believe several factors support this decision. These include: 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 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 unproductiveincreases the effectiveness of Board meetings. In addition, Finally, the combination of the Chairman and the CEO position succeeds because of the engaged, knowledgeable involvement of our Board of Directors in combination with our culture of open communication with the CEO and senior management, enabling the CEO to be an effective conduit between management and the Board. This structure’s effectiveness Our board leadership structure is supported by the active function of the Lead Director, who provides and confirms the necessary independence in the functioning of the Board.
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 has and will regularly discuss with management our major risk exposures, their potential financial impact on the Company and the management thereof. The Audit Committee receives, or arranges for the Board of Directors to receive, periodic reports from management on areashas had a Lead Director since 2005. Dr. Televantos has been the Lead Director since August 2010. The Lead Director role reinforces the independence 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 member of management tasked with the responsibility to understand, manage and mitigate the 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 coordinateis appointed on a rotating basis from the risk oversight role, particularly with respect to cross-discipline risksindependent directors.
The Lead Director serves at the pleasure of the Board and, interrelated risks. in any event, only so long as that person shall be an independent director of the Company. The CompensationCorporate Governance and Nominating Committee also evaluates risk, as such relates to our compensation program. Please referannually TABLE OF CONTENTS reviews the functions of the Lead Director and recommends to the discussion inBoard any changes that it considers appropriate. The Lead Director provides a source of Board leadership complementary to that of the Compensation Discussion and Analysis under the section “Risk Considerations in our Compensation Program”.Chairman. The Lead Director’s responsibilities include: (1)
| working with the Chairman and other directors to set agendas for Board meetings; |
(2)
| together with the Executive Committee, providing leadership in times of crisis; |
(3)
| reviewing the individual performance of each of the directors with the Chair of the Corporate Governance and Nominating Committee; |
(4)
| chairing regular meetings of independent Board members without management present (executive sessions); |
(5)
| acting as liaison between the independent directors and the Chairman; and |
(6)
| chairing Board meetings when the Chairman is not in attendance. |
Communicating with 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, shareholders 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.Board. These executive sessions are presided over by the Lead Director. Committees of the Board of Directors The Company’s Board has the following standing committees: (3)
| Compensation Committee; and |
(4)
| Corporate Governance and Nominating Committee. |
The Board appoints the members of each Committee. | | Paul Coombs | | | X | | | | | | X | | | | | | | David Fisher | | | X | | | X | | | | | | X | | | | Daniel Knutson | | | Chair | | | | | | | | | | | | | Joyce Lee | | | X | | | | | | | | | | | | | Perry Premdas | | | | | | X | | | X | | | X | | | | Dr. John Televantos | | | | | | Chair | | | X | | | Chair | | | | Matthew Wineinger | | | | | | X | | | Chair | | | | | | | | | | | | | | | | | | | | | | | Number of Committee Meetings Held in 2020 | | | 6 | | | 3 | | | 3 | | | 0 | |
TABLE OF CONTENTS 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 in fulfilling its oversight responsibilities with respect to the Company’s financial reporting, internal controls and procedures, and audit functions. The primary duties and responsibilities of the Audit Committee are 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. |
The Audit Committee’s role with respect to the Company’s risk oversight is discussed under the section below entitled “Corporate Risk Oversight”. The Audit Committee also monitors and, if necessary, investigates reports made to the Company’s hotline. Responsibilities, activities and the independence of the Audit Committee are discussed in greater detail under the section below entitled “Audit Committee Report.” The Board has adopted a written charter for the Audit Committee, which is available on the Leadership & Governance page in the Investor Relations section of the Company’s website, www.balchem.com. The Board has determined that the Audit Committee Chairman, Mr. Knutson, and Messer’s Coombs and Fisher qualify as “audit committee financial experts,” 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. With respect to Corporate 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 regularly discuss with management our major risk exposures, their potential financial impact on the Company and the management thereof. (1)
| The Audit Committee receives, or arranges for the Board to receive, periodic reports from management on areas of material risk to the Company, including financial, operational, legal, regulatory and strategic risks (the “Company Risk Reports”). |
(2)
| The Audit Committee receives the Company Risk Reports from members of management tasked with the responsibility to understand, manage and mitigate the risks (with the Company’s enterprise risk management effort being led by its Internal Audit function). |
(3)
| The Chairman of the Audit Committee reports on its discussion of the Company Risk Reports to the full Board during the Committee reports’ portion of the Board meeting following the receipt of said Company Risk Reports, 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.” The duties of the Compensation Committee are, among other things, to: (1)
| ensure that compensation and benefit plans are aligned with the interests of shareholders and meet the needs of the Company and its employees; |
TABLE OF CONTENTS (2)
| review, approve and recommend to the Board for approval various aspects of a compensation program, including incentives, for the 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 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 shareholders, as senior executives, and as directors presently consistcharged with the oversight of management and the setting of executive compensation levels. The Board has adopted a written charter for the Compensation Committee, which is available on the Leadership & Governance page in the Investor Relations section of the Company’s website, www.balchem.com. The current members of the Compensation Committee are all 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 consisting solely of members of the Compensation Committee who are: (1)
| “non-employee directors” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended, and |
(2)
| “outside directors” for Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). |
In setting 2020 director and executive compensation the Compensation Committee engaged Mercer, LLC (“Mercer”), an independent executive compensation advisory firm, to provide survey data and advice on market trends on director and executive compensation. In early 2020, the Compensation Committee reviewed with senior management its recommendations and basis for Company performance goals for payouts of 2020 annual incentive awards and long-term compensation awards. Following this discussion, the Compensation Committee set the 2020 Company performance goals for annual incentive awards and long-term compensation awards and also approved the long-term compensation awards. For information regarding the Compensation Committee’s role, absence of conflicts and fees, among other matters, see “Compensation Discussion and Analysis.” Corporate Governance and Nominating Committee The duties of the Corporate Governance and Nominating Committee include: (1)
| considering and making recommendations to the Board concerning the appropriate size, function and needs of the Board; |
(2)
| determining the criteria for Board membership, overseeing searches, and evaluating and recommending candidates for election to the Board; |
(3)
| evaluating and recommending to the Board responsibilities of the Board committees; |
(4)
| annually reviewing and assessing the adequacy of the Governance Guidelines and recommending any changes to the Board for adoption; |
(5)
| annually evaluating its own performance as well as overseeing an annual self-evaluation of the Board and other Board Committees; |
(6)
| overseeing compliance with the Company’s Stock Ownership Policies; |
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| considering 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)
| recruiting and evaluating new candidates for nomination by the full Board for election as directors, |
(9)
| preparing and updating an orientation program for new directors; |
(10)
| evaluating 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, |
(11)
| annually reviewing and recommending policies on director retirement age. |
The Board has adopted a written charter for the Corporate Governance and Nominating Committee, which is available on the Leadership & Governance page in the Investor Relations section of the Company’s website, www.balchem.com. The current directors, exceptmembers of the Corporate Governance and Nominating Committee are all independent, as such term is defined under the NASDAQ Marketplace Rules. The Executive Committee is authorized to exercise all the powers of the Board in the interim meetings of the Board, subject to the limitations imposed by Maryland law. The Executive Committee is also responsible for: (1)
| the recruitment, evaluation and selection of suitable candidates for the position of CEO, for approval by the full Board; |
(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. Harris.Fischer and Mr. Premdas. Executive Officers
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, particularly whether the director will continue to make meaningful contributions to the Board. When vacancies take place on the Board, the Committee will solicit recommendations from Board members, members of management and others likely to be familiar with qualified candidates. The Committee may also engage a professional search firm to assist in identifying qualified candidates, as well as candidates recommended by one or more substantial, long-term shareholders. Generally, shareholders who individually or as a group hold 5% or more of our Common Stock and have continued to do so for over one year will be considered substantial, long-term shareholders. To be considered by the Committee, the names of such nominees along with relevant biographical information must be properly submitted to the Secretary of the Company by the deadline for including shareholder proposals as set forth below in “Shareholder Proposals for 2022 Annual Meeting of Shareholders.” Shareholder nominations that comply with these procedures and meet the criteria outlined above and in our Bylaws will receive the same consideration that other candidates. The Company’s current policy is certain information concerning the executive officersto require that a majority of the Board of Directors be independent. In addition, directors may not serve on the boards of more than three other public companies without the approval of the Board, 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 which he/she or she reaches the age of 70. Nominees for the Board must meet the following criteria: (1)
| have experience and skills in areas critical to understanding the Company and its business; |
(2)
| possess certain personal characteristics, such as integrity and judgment; |
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| have a diverse background of experience and perspectives (including business experience, geographic origin, age, gender, and ethnicity); and |
(4)
| have sufficient ability to commit the necessary time and effort required to serve on the Board. |
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. 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 evaluates each candidate in the context of the Board as a whole, with the objective of recommending an individual that can best perpetuate the success of the Company and represent shareholder interests through the exercise of sound judgment based upon a diversity of background, experience and perspectives. Each directors, other than Mr. Harris, receives compensation, including fees, retainers and equity awards. Outside directors are paid an annual retainer of $30,000 and a fee of $4,000 for each Board meeting attended, plus expenses. Committee members earn a fee of $1,000, plus expenses, for each Committee meeting attended. The Lead Director and Committee Chairman receive the following additional annual retainers: (1)
| the Lead Director – $16,000; |
(2)
| the Chairman of the Audit Committee – $12,000; |
(3)
| the Chairman of the Compensation Committee – $10,000; and, |
(4)
| the Chairman of the Corporate Governance and Nominating Committee – $8,000. |
The Company has a Stock Ownership Policy that applies to directors. See “Stock Ownership Requirements; Trading Limitations.” The following table discloses the fees, equity awards, and other compensation earned, paid, or awarded to each of the Company’s directors (other than Mr. Harris, whose backgroundcompensation is described above underset forth in the caption “Directors Not Standing for Election”)Summary Compensation Table below) during the fiscal year ended December 31, 2020. | | Paul Coombs | | | $56,000 | | | $135,822 | | | 0 | | | $191,822 | | | | David Fischer | | | $56,000 | | | $135,822 | | | 0 | | | $191,822 | | | | Daniel Knutson | | | $65,000 | | | $135,822 | | | 0 | | | $200,822 | | | | Joyce Lee | | | $53,000 | | | $135,822 | | | 0 | | | $188,822 | | | | Perry Premdas | | | $56,000 | | | $135,822 | | | 0 | | | $191,822 | | | | John Televantos | | | $83,500 | | | $135,822 | | | 0 | | | $219,322 | | | | Matthew Wineinger | | | $64,000 | | | $135,822 | | | 0 | | | $199,822 | |
(1)
| On February 13, 2020, each director, other than Mr. Harris was granted 607 Time-Based Restricted Shares (as defined below) and 2,946 Stock Options (as defined below). The Time-Based Restricted Shares cliff vest after three years. The grant date fair value per share of each share of restricted stock was $111.94. The Stock Options have a strike price of $111.94 per share and expire on February 13, 2030. |
William A. Backus, CPA, age 52, has been Chief Accounting Officer since October 2017. Prior to that, Mr. Backus was
TABLE OF CONTENTS (2)
| The following table shows the aggregate number of Stock Options and stock awards outstanding for each outside director as of December 31, 2020: |
| | Paul Coombs | | | 9,916 | | | 3,518 | | | | David Fischer | | | 9,916 | | | 3,518 | | | | Daniel Knutson | | | 9,916 | | | 2,230 | | | | Perry Premdas | | | 9,916 | | | 3,518 | | | | Joyce Lee | | | 2,946 | | | 607 | | | | John Televantos | | | 9,916 | | | 3,518 | | | | Matthew Wineinger | | | 9,916 | | | 3,518 | |
Under the Company’s Chief Financial Officer and Treasurer since June 2014. He was Chief Accounting Officer and Assistant Treasurerdirector Time-Based Restricted Shares grant agreements, restricted shares vest in full, three years from grant, or upon an earlier change of control of the Company, since June 2011, and was Controllerprovided the grantee is a director of the Company from January 2006on 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 at or after age 70; |
(2)
| the grantee’s major disability, or |
(3)
| the grantee’s resignation from the Board of Directors due to a conflict of interest or serious illness, |
the number of restricted shares that shall vest shall equal the product of (A)
| 1/36 of the total number of Restricted Shares subject to this Grant; and |
(B)
| the number of full months of that Grantee has served on the Board from the date of the grant to the date of Grantee’s retirement or resignation, as applicable; and all Restricted Shares not so vested shall be immediately forfeited. |
The Company does not pay any other direct or indirect compensation to June 2011. He was Controller of Stewart EFI, LLC, a precision metal component manufacturer, from 1999 through 2005.directors.
Mary Theresa Coelho, age 56, has been the Company’s Chief Financial Officer and Treasurer since October 2017. Prior to that, Ms. Coelho was Chief Operating Officer of Diversey, Inc. since September 2017. Prior to that role, Ms. Coelho was Vice President Finance and Global Commercial Excellence for Diversey Care, a division of Sealed Air Corporation, from February 2016 to September 2017 and Vice President Finance for Diversey Care from October 2014 to February 2016. Prior to joining Diversey Care, Ms. Coelho was the Global Head of Oncology Development Finance for Novartis Pharmaceuticals Corporation, a multinational pharmaceutical company, from March 2010 to October 2014. Ms. Coelho has also held numerous roles of increasing responsibility with Novartis from 2007 through 2014 and with Mars Inc., a global manufacturer of confectionery, pet food and other food products, from 1987 to 2007.
David F. Ludwig, age 60, has been Vice President and General Manager, Specialty Products since July 1999, Vice President and General Manager, Industrial Products since February 2017, and an executive officer of the Company since June 2000. He was Vice President and General Manager of Scott Specialty Gases, a manufacturer of high purity gas products and specialty gas blends, from September 1997 to June 1999. From 1986 to 1997 he held various international and domestic sales and marketing positions with Engelhard Corporation’s Pigments and Additives Division.
Mark A. Stach, age 56, 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.
CodeCodes of Business Conduct and Ethics
The Company has adopted aBalchem’s Code of Business Conduct and Ethics applicableapplies to all its employees, which is also applicable to the Company’s directors and officers. The Company has also adopted
Additionally, 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 codesthese 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 and Code of Business Conduct and Ethics8-K filed with the SEC. Both codes are available on the CorporateLeadership & Governance page in the Investor Relations section of the Company’s website: www.balchem.com. We are committed to running our business in a way that respects the overall environment in which we operate. Therefore, corporate responsibility and sustainability play an important role in our strategies and long-term value creation for our stakeholders. We believe that our sustainability practices require transparency and accountability. The Company issues a sustainability report on an annual basis. The report is the result of a process of engagement with select constituents to understand their sustainability interests and concerns and capture Balchem’s efforts and achievements in key areas of sustainability. The report can be found on the Corporate TABLE OF CONTENTS Social Responsibility page of the Balchem website www.balchem.com.www.balchem.com. Our Corporate Governance and Nominating Committee, in connection with its responsibility for reviewing the Company’s activities and practices regarding ESG matters, maintains responsibility for oversight of our sustainability-related practices and monitors 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 officersNEOs and holders of more than 10% of the Company’s 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, 2017,2020, its officers and directors and holders of more than 10% of the Company’s 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 Dr. Televantos, each of whom is a director of the Company, served as the members of the Compensation Committee during 2017. 2020. None of Messrs. Fischer, McMillan,Premdas, Wineinger, nor Dr. Televantos: (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. (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 2017,2020, 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. EXECUTIVE COMPENSATION
TABLE OF CONTENTS
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”)NEOs.NAMED EXECUTIVE OFFICERS
Our NEOs for 2017.
What We Do and Do Not Do2020 are, in addition to Mr. Harris (whose background is described above under the caption “Continuing Directors’ Biographical Information”), the following individuals:
| | Martin Bengtsson | | | Chief Financial Officer | | | | James Hyde | | | Senior Vice President and General Manager, Human Health and Nutrition | | | | Scott Mason | | | Vice President of Manufacturing and Supply Chain and Vice President and General Manager, Industrial Products(1) | | | | Mark Stach | | | General Counsel | | | | William Backus | | | Chief Accounting Officer | |
(1)
| Mr. Mason retired effective March 5, 2021 |
WHAT WE DO AND DO NOT DO
| | Target total direct compensation for our NEOs generally at the 50th percentilepercentile. | | | Allow hedging or pledging of Company securities for any employee (including our NEOs) or director. | | | | Pay for performance and, accordingly, a significant portion of each NEO'sNEOs’ total compensation opportunity is “at risk” and dependent upon achievement of specific corporate and individual performance goals, resulting in lesser emphasis on fixed base salarysalary. | | | Encourage unnecessary or excessive risk takingrisk-taking as a result of our compensation policies and practicespractices. | | | | Base our short-term incentive plan on multipleCorporate and business segment financial performance measurements, including both financial and operational metricsmetrics. | | Provide perquisites to | Have employment agreements with any of our NEOs that are not generally offered to all other executivesthan as described below (see Pages 35). | | | | Complement our annual compensation to each NEO with time-based and performance-based multi-year vesting schedules and performance cycles for equity incentive awardsawards. | | Have employment agreements with any of our NEOs other than our CEO | Base any annual base salary adjustments and annual long-term equity awards to our NEOs, partially, on prior-year individual performance | | Provide a defined benefit pension plan or any supplemental executive retirement plan or other form of non-qualified retirement plan for our NEOsNEOs. | | | | Annual base salary adjustments are based, primarily, on prior-year individual performance. | | | Provide for “gross ups” for excise taxes imposed with respect to Section 280G (change-in-control payments) or Section 409A (nonqualified deferred compensation) of Internal Revenue Code of 1986, as amended (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 Company'sCompany’s total shareholder returnreturn. | | Provide | Except as provided in the Harris Agreement (as defined below), 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)single-trigger vesting acceleration upon a change in control of the U.S. Internal Revenue Code of 1986, as amended (which we refer to as the “Code”)Company. | | | | Maintain a claw-back policy pursuant to which the Company can seek reimbursement of either cash or equity basedequity-based incentive compensation in the event of a financial restatementrestatement. | | | Except as provided in a single employment agreement, provide for single-trigger vesting acceleration upon a change in control of the Company
| Have stock ownership guidelines for our executives and non-employee directors
| | Allow: (i) any repricing of stock options/stock appreciation rightsStock Options (as defined below)/Stock Appreciation Rights (“SARs”) without shareholder approval or (ii) for the unlimited transferability of awards | |
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
| | Have stock ownership guidelines for our executives and non-employee directors. | | | Have an employee stock purchase plan. | | | | Maintain a Compensation Committee, which is comprised solely of independent directorsdirectors. | | | Have an employee stock purchase plan
| | | | For awards in 2017 and thereafter, provide for minimum vesting of awards and maximum award limitslimits. | | | | |
| | Ensure that a significant portion of our non-employee director compensation consists of time-vested restricted stocklong-term equity awards. | | | | | | | 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 20172020 Shareholder Advisory Vote on Executive Compensation
At our 2020 annual meeting of shareholders, on June 13, 2017, our shareholders once again expressed support for our compensation programs and the compensation of our NEOs, with an approval rate of approximately 98%97% of votes cast for“for” our management “say“Say on pay”Pay” resolution. The Compensation Committee carefully evaluated the results of the 2017 “say2020 “Say on pay”Pay” vote and made no significant changes to the overall design of our compensation program during 2017.2020. 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 2017, driven partially by valuable feedback received from some of the Company's most significant shareholders, we did not award to any NEO any off-cycle retention equity grants subject to time-based vesting, other than is as discussed in connection with the Coelho Offer Letter under “Termination of Employment and Change of Control Arrangements” on Page 30. The Compensation Committee will continue to consider 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 shareholders 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, the following features are included in the Company’s 2017 Omnibus Incentive Plan (the “2017 Plan”“2017 Plan”): Limitation on Shares: The maximum number of shares which may be issued under the 2017 Plan is 1,600,000 shares; No Repricing of Stock Options or SARs: The 2017 Plan does not allowNo repricing, amendment or exchange of outstanding options/SARSStock Options/SARs is allowed without shareholder approval; No Discounted Awards: The exercise price per share of stock under an option ora Stock Option SAR award must be not less than the fair market value of the common stock of the Companyour Common Stock on the date of grant; Minimum Vesting: Except for 5% of the shares authorized for grant under the 2017 Plan or as provided in an employment agreement as in effect on the effective date of the 2017 Plan,Harris Agreement, awards (other than cash performance awards) are generally subject to a minimum vesting period of one year; Dividends or Dividend Equivalents: Dividends or dividend equivalents otherwise payable on an unvested award will accrue and be paid only when the vesting conditions applicable to the underlying award have been satisfied; No “Liberal” Share Recycling: The 2017 Plan does not allow for the recyclingRecycling of shares used to satisfy the exercise price or taxes for any awards;awards is prohibited; No “Liberal” Change-in-Control: The 2017 Plan requires the consummation of a merger or similar transaction and a minimum acquisition of 50% of the outstanding shares is required before a change-in-control occurs; TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
No Automatic “Single-Trigger” Vesting on Change-in-Control: Except as provided in an employment agreement as in effect on the effective date of the 2017 Plan, the 2017 Plan does not provide forHarris Agreement, there is no automatic acceleration of outstanding awards upon the occurrence of a of a change-in-control; Limitations on Awards to Non-Employee Directors: In the case of awards to non-employee directors, under the 2017 Plan, the maximum amount or value that may be granted in any calendar year (inclusive of cash compensation) may not exceed $800,000; Compensation Recovery: Under the 2017 Plan, inIn the event that the Company is required to prepare an accounting restatement of its financial statements due to the Company’s material noncompliance with any financial reporting requirements under the securities laws, the Compensation Committee would have the discretion to require reimbursement or forfeiture of certain excess performance-based awards received by certain executive officers of the Company during the three completed fiscal years immediately preceding the date that the Company is required to prepare an accounting restatement; and Section 162(m): Awards may (but need not) be structured to qualify as “performance based” under Section 162(m) of the Code. The Tax Cuts and Jobs Act of 2017 has eliminated the “performance-based” compensation exception under Section 162(m) of the Code for fiscal years beginning after December 31, 2017, with transition relief applicable to certain arrangements in place as of November 2, 2017 (the scope of which is uncertain under the legislation). General Compensation Objectives and Guidelines
Philosophy
The Company’s overall compensation philosophy isAt Balchem, we strive to attract and retain key executives who will consistently deliver short- and long-term value to our shareholders through the realization of our specific business objectives. These include consistent, sustained growth in earnings, cash flow and return on investments. Hence, we seek to offer competitive salaries, cash incentives, equity awards and benefit plans consistent with peer entities, while also 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 designed to attract and retain key executives necessary for the Company’s short and long-term success by establishingestablish a direct link between executive compensation and the performance of the Company by rewarding individual initiativeresults and the achievement of annual corporate goals through salary and cash bonus awards, and by providingto provide equity awards whereinto incentivize executives are incentivized to generate enhanced shareholder value. To effectuate Consistent with 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 compensation components, where a significant percentage of executive compensation is variable and tied to corporate performance. TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
Full Year 2020 Financial Summary
Compensation Committee Methodology
The CEO recommends to the Compensation Committee the amount of total annual compensation for each of the other Named Executive Officers. NEOs. The CEO completes an annual performance assessment for each of the other Named Executive Officers,NEOs, which is reviewed and considered by the Compensation Committee in its deliberations of compensation amounts. Committee. The CEO: 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,member and recommends to the Board of Directors the annual compensation package for the CEO. In determining the compensation of the Company’s Named Executive OfficersNEOs for 2017, including the compensation of the CEO,2020, the Compensation Committee considered a number ofmany quantitative and qualitative performance factors. The Compensation Committee’s considerations consisted of, but were not limited to, analysis offactors, including 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 also considered intangible factors such as: the scope of responsibility of the NEO leadership within the Company, the community, the applicable industries in which the Company operates and the enhancement of shareholder value. When establishing performance criteria for each of the NEOs and for the management team as a group, 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, the 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’sBalchem’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. The Compensation Committee believes that the total compensation provided to the Company’s Named Executive OfficersNEOs is competitive and has been demonstrated as effective. Details regarding the NEO compensation of each of the Named Executive Officers areis set forth in the tables that follow. TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
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 may, from time to time, review data gathered from a custom peer group. The current peer group was identified by Mercer in 2018. Information gathered from the peer group serves as the primary reference point for the Compensation Committee with Mercer market survey data used as a secondary reference.
The Compensation Committee did not retain outside consultants in connection with its executive compensation program in 2017, given the review of its overall competitiveness of the Company’s executive compensation program conducted in in 2016 with the assistance of Willis Towers Watson.
As part of its review in 2016, Willis Towers Watson identified the “peer group” offollowing companies shown below:
comprise our peer group:
| | Akorn, Inc.American Vanguard Corp.
| | | Calgon CarbonIngevity Corporation
| | | ChemturaPhibro Animal Health
| | | | Chase Corporation Emergent BioSolutions, Inc.
Ferro Corporation
HB Fuller Co.
| Impax Laboratories Inc.
Innophos Holdings Inc
| | Innospec Inc. Masimo Corporation
Minerals Technologies Inc.
Platform Specialty Products Corporation
| | | Quaker Chemical Corp. | | | | Ferro Corporation | | | J&J Snack Food Corp. | | | Sensient Technologies | | | | FMC Corporation | | | Kraton Corporation | | | Stepan Company | | | | FutureFuel Corporation | | | Lancaster Colony Corp. | | | Tootsie Roll Industries, Inc. | | | | Hain Celestial Group | | | Minerals Technologies | | | W.R. Grace & Co. | | | | H.B. Fuller Company | | | Newmarket Corporation | | | | |
The “peer group” shown abovepeer group 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 adjustedWe intend to our revenue size. The Company and Willis Towers Watson believe that the survey data was representative for executive compensation benchmarking purposes. As a general rule, from time 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 prepared 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” 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 considering equity awards and at-risk/performance compensation.
Base Salary
Base salary representsis the fixed component of the executive compensation program. The base annual salaries we provide to our executive officers are intended as compensation forpay based on each executive officer’s ongoing contributions to theNEO’s job responsibilities, performance of the area(s) for which they are responsible. Base salary also impacts annualand competitive benchmark data. Annual incentive cash bonus amountsbonuses and long-term compensation because theyalso are based on a percentage of base salary.
In keeping with our compensation philosophy toTo ensure we attract and retain individuals of high quality, executive officerthe leadership talent required to successfully lead the Company, NEO base salaries have been setare targeted to be competitive with base salariessalary compensation paid to executive officers of comparable companies as referenced above. Thepeer group NEOs and other relevant external benchmarks derived from established market survey information.
In establishing NEO base salaries, the Compensation Committee also considers: experience and industry knowledge of the Named Executive Officers; knowledge; the quality and effectiveness of their leadership at the Company; leadership; performance relative to total compensation; internal pay equity among the Named Executive OfficersNEOs and other Company senior executives; historical considerations; company strategy; TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
retention factorsfactors; and input from our CEO regarding individual performance.
TheNEO base annual salary levels of each of our executive officerssalaries are reviewed annually and may be 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 2018, the Compensation Committee increased the base salaries of the Named Executive Officers as a result of overall Company and individual performance in 2017.
Cash Based Incentives – Incentive Compensation Plan
Bonuses representBalchem’s Incentive Compensation Plan (“ICP”) represents a variable, at-risk, cash-based component of the executive compensation program that is tied to both Company performance and individual achievement.NEOs’ compensation. The Company’s policy is to base a meaningful portion of its executive officers’NEO cash compensation on bonus opportunities. In determining bonuses, thevariable incentive opportunities that drives year-over-year financial performance to align NEO compensation opportunities directly with Company considers factors such as the individual’s contribution to the Company’s performance and the relative performance of the Company during the year.financial performance.
ICP awards are based on two financial metrics: At the end of each calendar year, the Compensation Committee of the Board of Directors approves an Incentive Compensation Program (the “ICP”) for the succeeding calendar year. The ICP provides for the awarding of cash bonus compensation to executive officers and certain other employees, based upon, for the most part, objective levels of achievement of specific company goals established for the particular officer 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 may 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(defined as earnings before interest, other expense/income, taxes, depreciation, amortization, stock-based compensation, acquisition-related expenses and legal settlements, and the fair valuation of acquired inventory,inventory); and,
Free Cash Flow defined(defined as operating cash flow minus capital expenditures, are the two primary and independent corporate metrics upon which bonuses are determined. expenditures). Unless the Compensation Committee in its discretion determines otherwise, no incentive cash bonus isICP awards are payable unless the Company attains the Compensation Committee approvedCommittee-approved threshold minimum Adjusted EBITDA. If the Adjusted EBITDA threshold minimum is achieved and the threshold minimums are exceeded 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 2017 as part of the approval of the ICP for that year, based, amongst other things, upon the Company’s preliminary results of operations for 2016, as then available. The Company’s threshold and target amounts were set in late 2016 for 2017, as follows: (i) Adjusted EBITDA at $149,500,000 (threshold), $155,700,000 (target), $158,800,000 (stretch) and $168,200,000 (maximum) and (ii) Free Cash Flow at $77,400,000 (threshold), $80,600,000 (target), $82,200,000 (stretch) and $87,000,000 (maximum). For additional detail on the ICP, see “Summary Compensation Table – Grants of Plan Based Awards.”
EBITDA.
Adjusted EBITDA and Free Cash Flow are financial measures that are not in accordance with United States generally accepted accounting principles (GAAP)(“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. TheGAAP; however, the Company believes that these non-GAAP measuresthey provide useful information about certain of the Company'sCompany’s core operating results and thus are 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.
The Compensation Committee may also approve at its discretion ICP or discretionary cash-based awards at other times during the year in connection with new appointments or promotions. Our Compensation Committee does not time the issuance of incentive awards around our release of undisclosed material information.
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 2017,2020, NEO ICP targets were: | | Mr. Harris | | | 100% | | | | Mr. Bengtsson | | | 60% | | | | Mr. Hyde | | | 45% | | | | Mr. Mason | | | 45% | | | | Mr. Stach | | | 45% | | | | Mr. Backus | | | 45% | |
For the 2020 plan year, the Compensation Committee established the Adjusted EBITDA and Free Cash Flow performance weighting and metrics as follows: | | Adjusted EBITDA | | | 70% | | | $160.0 million | | | $173.5 million | | | $182.2 million | | | $190.9 million | | | | Free Cash Flow | | | 30% | | | $85.0 million | | | $94.4 million | | | $99.1 million | | | $103.8 million | |
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
2020 ICP Discussion On February 10, 2021, the Compensation Committee, following its review of the Company’s 2020 financial results, noted that the Company had achieved the following results: | | Adjusted EBITDA | | | $174.2 million | | | $0.7 million | | | 102.6% | | | | Free Cash Flow | | | $117.7 million | | | $23.3 million | | | 200.0% | |
Based on the resulting Adjusted EBITDA and Free Cash Flow results, the Compensation Committee, approved the aggregate ICP target bonus for Mr. Harris was 100%payout level at 131.8% of his annual base salary; for Mr. Backus was 45% of his annual base salary; for Ms. Coelho was 45% of her annual base salary; and for Mr. Ludwig was 40% of his annual base salary and for Mr. Stach was 35% 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. target. 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. 2017For additional detail on the ICP, Discussion
On February 15, 2018, following its review of the Company’s financial results for 2017 and thesee “Summary Compensation Committee’s review of those results, the committee noted that the Company, in 2017, had achieved (i) Adjusted EBITDA in the amount of $147,800,000, which fell below the 2017 Adjusted EBITDA threshold amount; and Free Cash Flow of $83,100,000, which exceeded the 2017 Free Cash Flow threshold amount by $5,700,000. While the Adjusted EBITDA threshold was not met, the Compensation Committee approved a discretionary bonus pool payout of $2,300,000 in recognition of: (i) management’s performance in regard to strong balanced scorecard metrics, (ii) delivering corporate free cash flow well above plan, and (iii) successful execution of two acquisitions. Each eligible employee, other than Mr. Ludwig, who received an additional bonus due the superior performance of one of the businesses which he leads, was awarded 50% of his or her ICP Bonus Target. This resulted in the following bonus pool payments: Mr. Harris: $349,938, Mr. Coelho: $15,860, Mr. Backus: $61,091, Mr. Ludwig: $85,434, and Mr. Stach: $38,900.
Table – Non-Equity Incentive Plan Compensation.”
Equity Based Compensation – Long-Term Incentive Program (“LTIP”)
The Compensation Committee believes that one important goal of the executive compensation program should be to provide executives, key employees — whoOur NEOs have significant responsibility for the management, growth and futurelong-term 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 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 shareholders. The Long-Term Incentive Compensation Program, (“LTIP”), is a complementary compensation program to the ICP and accordingly,Consequently, the Compensation Committee seeks to provide motivation to our executives usingbelieves that a significant portion of their compensation be a variable, at-risk equity awards consistentcomponent that is aligned with the reasonable managementcreation over time of the Company's overall equity compensation expensevalue for shareholders and shareholder 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 corporatestakeholders while supporting critical retention and individual performance, as an incentive for future performance, and as a retention tool.key leadership development efforts.
Awards
The Compensation Committee establishes each LTIP participant’sNEOs’ “Target Equity Value”,Multiplier,” which is multiplied by the NEOs’ base salary to determine the “Target Equity Value” and expressed as the dollar amount of equity awards the executive can be granted upon attainmentvalue of the established goals for a fiscal year at target level performance. The Compensation Committee, having reviewed the “peer group” data, has established “Target Equity Multipliers” (as a percentage of base salary) as set forth below with respect to the positions to which each Target Equity Multiplier corresponds.LTIP award. The Target Equity Multiplier for each NEO is based upon the Equity Award Level determined by the Compensation Committee, which is related to the individual participant’s position in the Company.
shown below:
President & CEO (Theodore L. Harris) | 1.75 | CFO & Treasurer (Mary Theresa Coelho) | 1.00Mr. Harris | | | 2.25 | | CAO (William A. Backus) | Mr. Bengtsson | | | 1.00 | | | | VP/GM Specialty & Industrial Products
(David F. Ludwig)Mr. Hyde
| | | 1.00 | | | | Mr. Mason | | | 1.00 | | | | Mr. Stach | | | 1.00 | | | | Mr. Backus | | | 1.00 | |
General Counsel (Mark Stach) | 1.00 |
The applicable Target Equity Multiplier is multiplied by the respective individual LTIP participant’s annual base salary to arrive at the Target Equity, which is subject to grant pursuant to this LTIP. The Target Equity in dollars,Value is then converted into equity awards based upon the fair value on the date LTIP awards are granted, usually in February or March of each calendar year, as computed in accordance with FASB Accounting Standards Codification 718. Accordingly, the LTIP Target Equity Values for 20172020 were established in late 2015. 2019.
Although the Compensation Committee approves the LTIP equity in this time frame, it also reviews competitive market data for executive officer positionsNEOs from time to time. The Compensation Committee also may grant incentiveLTIP awards at other times during the year because of new appointments, promotions or other special circumstances during the year.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 adjust individual grants based upon individual performance. The Target Equity will then beValue is granted through a mix of stock options (“Stock Options”), time-based restricted shares (“Time-Based Restricted Shares”) and Performance Shares (as defined below) as follows: 25% of the 2020 Target Equity Value is awarded as Stock Options with an exercise price equal to the participant infair market value of our Common Stock on the combinationdate of options to purchase common stockgrant. Stock Options have a ten-year term and performance shares,vest ratably over a three-year period. 25% of the 2020 Target Equity Value is awarded as follows:Time-Based Restricted Shares which are granted at the fair market value of our Common Stock on the date of grant and cliff vest three (3) years from said date. TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
| • | · | 50%25% of the 2020 Target Equity Value is awarded to each participant for 2017 is in the form of options to purchase the Company’s common stock. Stock options vest incrementally over three years: 20% on the first anniversary of the grant date; 40% on the second anniversary of the grant date; and 40% on the third anniversary of the grant date. These options expire ten years after grant. Stock options will be granted pursuant to the terms and conditions of the Company’s stock option agreement. |
| · | 50% of the Target Equity awarded to each participant in 2017 is in the form of performance shares. These grantedas EBITDA performance shares are split equally into performance shares based upon different performance metrics, as follows: |
| · | 50%(“EBITDA Performance Shares”). The number of the performance shares grantedEBITDA Performance Shares that will vest (or not)not vest) is based upon the attainment of a pre-determined Company Adjusted EBITDA performance target over the three (3) fiscal years beginning with the fiscal year in which the grant was made (the “Performance Period”(“Performance Period”) and. The EBITDA Performance Shares will cliff vest (or not vest) at the end of the Performance Period,Period. |
| • | 25% of the 2020 Target Equity Value is awarded as Total Shareholder Return performance shares (the “TRS Performance Shares” and collectively with the vesting being dependent onEBITDA Performance Shares, the level“Performance Shares”). The number of performance achieved. At the end of theTSR Performance Period, the grantee will receive shares of Company common stock as follows: |
| Performance Level | % of Adjusted EBITDA
Performance
| Stock Granted as a % of
Target
| | Maximum | 130 % of target | 200% | | Target | 100% of target | 100% | | Threshold | 80% of target | 50% | | Below Threshold | <80% of target | 0% |
| · | 50% of the performance shares grantedShares that will vest (or not vest) is based upon total shareholder return (TSR) v.the relative Company TSR vs. the Russell 2000 Index over the three (3) fiscal years beginning with Performance Period. The TSR performance shares will cliff vest three (at the end of the Performance Period, with the vesting being dependent on the TSR performance achieved. At the end of the three-year performance period, the grantee will receive shares of the Company common stock as follows: |
| Performance Level | 3 Year TSR Performance | Payout as a % of Target | | Maximum | 75th Percentile
| 200% | | Target | 50th Percentile
| 100% | | Threshold | 25th Percentile
| 50% |
| Below Threshold | <25th Percentile
| 0% |
The 2020-2022 Performance Period will conclude at the end of fiscal 2022 and the awards will pay out, to the extent earned, in shares of common stock in February 2023.
Stock Ownership Requirements; Trading Limitations
In 2008, theThe Company adoptedhas formal stock ownership requirements for its directors and executive officers. AccordingThe requirements under 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 with 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-half times; and (3) Vice President/Officer, one times. are:
| | Directors | | | 5x annual cash retainer | | | | CEO | | | 3x multiple of annual base salary | | | | Chief Financial Officer | | | 1.5x multiple of annual base salary | | | | Vice President/Officer | | | 1x multiple of annual base salary | |
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.
The Company has employment agreements with Messrs. Harris and Hyde and has entered into an employment agreement with Mr. Harris in April 2015.the Bengtsson Offer Letter (as defined on Page 43 below). Other than such agreement,agreements, there are no agreements or understandings between the Company and any executive officer whichNEO that 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 agreementforegoing agreements 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
During 2017,The Company sponsors the Company sponsored a 401(k) savings plansPlan for eligible employees. The plan allowed participants to make pre-tax contributions and the Company matched certain percentages of those pre-tax contributions.employees, including NEOs. The Company provides a fully vested match equal to 100% matching contribution onof participant contributions up to 6% of elective deferral.eligible compensation, subject to Internal Revenue Service guidelines. The plan401(k) Plan also includes a discretionary profit-sharing contribution. All amounts contributed to the plan are deposited into a trust fund administered by independent trustees.
The profit-sharing portion of the plan covers all activeActive 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 officersNEO is shown in a footnote to the “All Other Compensation” section of the Summary Compensation Table.
Perquisites
Perquisites are granted to the executive officers occasionally and are generally de minimis and not a material component of compensation. TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
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. Ms. CoelhoMessrs. Backus, Bengtsson, Hyde and Messrs. Backus and LudwigMason receive or received cash allowances associated with the use of their personal automobiles. Mr. Stach receives no such allowance. Perquisites for each NEO are shown in the “All Other Compensation” section of the Summary Compensation Table.
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
Our Compensation Committee has discussed the concept of risk as it relates to our compensation program and does not believe our compensation program encourages excessive or inappropriate risk takingrisk-taking for the following reasons:
Our compensation consists of both fixed and variable components.
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| · | Our compensation consists of both fixed and variable components. The fixed (or salary) portion of compensation is designed to provide a steady income regardless of our stock price performance so that executives do not feel pressured to focus exclusively on stock price performance to the detriment of other important business aspects. |
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| The variable portions of compensation (cash bonus and equity) portions of compensation are designed to reward both shortshort- and long-term corporate performance. For short-term performance, our cash bonus is awarded based primarily on individual and corporate performance goals or targets. For long-term performance, our stock option awards generally incrementally vest over three years and are only valuable if our stock price increases over time. Our restricted stock grants generally cliff vest in four years, while our performance based restricted stock grants generally cliff vest in three years subject to performance criteria being met. We feel that these variable elements of compensation are a sufficient percentage of overall compensation to motivate executives to produce superior short and long-term corporate results, while the fixed element is also sufficient such that that the executives are not encouraged to take unnecessary or excessive risks in doing so. |
○
For short-term performance, our cash bonus is awarded based primarily on corporate and business segment performance goals or targets. ○
For long-term performance, our Stock Options generally vest ratably over three years and are only valuable if our stock price increases over time. Our Time-Based Restricted Share grants and Performance Share grants generally cliff vest in three years. The variable elements of compensation are a sufficient percentage of overall compensation to motivate executives to produce superior short- and long-term corporate results, while the fixed element is also sufficient such that executives are not encouraged to take unnecessary or excessive risks in doing so. The use of Adjusted EBITDA as the contingent factor upon which ICP cash incentive depends, encourages our executives to take a balanced approach that focuses on corporate profitability, rather than other measures such as revenue targets, which may create incentives for management to drive sales without regard to cost structure. No payout is made under the ICP program if we are not sufficiently profitable. Our ICP and LTIP awards are capped for each participant, which mitigates excessive risk-taking. Even if the Company dramatically exceeds its Adjusted EBITDA target, the awards are limited. Conversely, there is no ICP or LTIP award unless minimum performance levels of applicable goals are achieved. Because a portion of management’s personal investment portfolio consists of the Company’s stock, we believe that the stock ownership guidelines we have in place provide a considerable incentive for management to consider the Company’s long-term interests in both their short- and long-term decisions. In addition, we prohibit all hedging transactions involving our stock, so our executives and directors cannot insulate themselves from the effects of poor Company stock price performance. 36
| · | Because consolidated Adjusted EBITDA is the contingent factor upon which ICP cash incentive depends, we believe our executives are encouraged to take a balanced approach that focuses on corporate profitability, rather than other measures such as revenue targets, which may incentivize management to drive sales levels without regard to cost structure. If we are not sufficiently profitable, there are is payout under the ICP program. |
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
| · | Our ICP and LTIP awards are capped for each participant, which mitigates excessive risk taking. Even if the Company dramatically exceeds its Adjusted EBITDA target, ICP and LTIP awards are limited. Conversely, there is no ICP award unless minimum performance levels of applicable goals are achieved, nor is there an award of performance shares within LTIP unless minimum performance levels of applicable goals are achieved. |
| · | We have stock ownership guidelines, which we believe provide a considerable incentive for management to consider the Company’s long-term interests because a portion of their personal investment portfolio consists of the Company’s stock. In addition, we prohibit all hedging transactions involving our stock so our executives cannot insulate themselves from the effects of poor Company stock price performance. |
Deductibility of Executive Compensation
In accordance with Section 162(m) of the Internal RevenueIRS 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 over $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, the compensation paid to our individual executive officers (on or after January 1, 2020) 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 2017 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 theimpact 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 approve compensation to executive officers which exceeds the deductibility limits or otherwise may not qualify for deductibility. In this regard, certain portions of compensation paid to the Named Executive OfficersNEOs may not be deductible for federal corporate income tax purposes under Section 162(m) of the Code. The Tax Cuts and Jobs Act of 2017 has eliminated the “performance-based” compensation exception under Section 162(m) of the Code for fiscal years beginning after December 31, 2017, with transition relief applicable to certain arrangements in place as of November 2, 2017 (the scope of which is under legislation).
COMPENSATION COMMITTEE REPORT
Compensation Committee Report
We have reviewed and discussed the above “Compensation Discussion and Analysis” with management.
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 | | Edward L. McMillan | | | | | Perry W. Premdas | | | | | | | Matthew D. Wineinger |
SUMMARY COMPENSATION TABLE OF CONTENTS Summary Compensation Table The following table sets forth the compensation earned by the following “Named Executive Officers”.our NEOs:
Name and Principal Position | Year | | Salary | | | Bonus | | | Stock Awards(1) | | | Option Awards(1) | | | Non-Equity Incentive Plan Compensation(2) | | | All Other Compensation(3) | | | Total | | Theodore L. Harris, Chairman, President & CEO | 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 | | | 2015 | | $319,617 | | | | | | $3,262,727 | | | $170,700 | | | $250,000 | | | $0 | | | $4,003,044 | | | | | | | | | | | | | | | | | | | | | | | | | | Mary Theresa Coelho Chief Financial Officer & Treasurer | 2017 | | $72,115 | | | $15,860 | | | $250,410 | | | $0 | | | $0 | | | $2,077 | | | $340,462 | | | | | | | | | | | | | | | | | | | | | | | | | | William A. Backus, Chief Accounting Officer | 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 | | | 2015 | | $246,400 | | | | | | $199,791 | | | $76,959 | | | $75,000 | | | $7,477 | | | $605,627 | | | | | | | | | | | | | | | | | | | | | | | | | | | David F. Ludwig, Vice President and General Manager, Specialty and Industrial Products | 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 | | | 2015 | | $258,680 | | | | | | $225,555 | | | $99,192 | | | $50,000 | | | $13,708 | | | $647,135 | | | | | | | | | | | | | | | | | | | | | | | | | | Mark Stach General Counsel | 2017 | | $222,998 | | | $38,900 | | | $0 | | | $51,964 | | | $0 | | | N/A | | | $313,862 | |
| | Ted Harris,
Chairman, President & CEO | | | 2020 | | | $1,000,000 | | | $1,688,698 | | | $564,725 | | | $1,318,131 | | | $26,821 | | | $48,701 | | | $4,647,076 | | | | 2019 | | | $915,000 | | | $1,546,392 | | | $516,146 | | | $749,209 | | | $15,661 | | | $66,002 | | | $3,808,410 | | | | 2018 | | | $800,000 | | | $1,051,332 | | | $350,056 | | | $1,086,004 | | | $631 | | | $65,772 | | | $3,353,795 | | | | Martin Bengtsson,
Chief Financial Officer and Treasurer | | | 2020 | | | $454,329 | | | $328,430 | | | $110,640 | | | $362,287 | | | $0 | | | $30,400 | | | $1,286,086 | | | | 2019 | | | $393,173 | | | $1,352,106 | | | $386,955 | | | $177,063 | | | $0 | | | $29,361 | | | $2,338,658 | | | | James Hyde,
Senior Vice President and General Manager, Human Health and Nutrition | | | 2020 | | | $429,887 | | | $324,737 | | | $108,335 | | | $240,893 | | | $19,875 | | | $31,600 | | | $1,155,327 | | | | 2019 | | | $416,287 | | | $214,589 | | | $72,954 | | | $119,472 | | | $14,318 | | | $31,600 | | | $869,220 | | | | 2018 | | | $412,167 | | | $208,634 | | | $70,756 | | | $144,307 | | | $(3,206) | | | $31,250 | | | $863,908 | | | | Scott Mason, Vice President of Manufacturing and Supply Chain, Vice President and General Manager, Industrial Products(4) | | | 2020 | | | $401,725 | | | $292,174 | | | $99,115 | | | $221,532 | | | $0 | | | $30,400 | | | $1,044,946 | | | | 2019 | | | $381,596 | | | $524,478 | | | $91,192 | | | $140,604 | | | $0 | | | $30,400 | | | $1,168,270 | | | | 2018 | | | $356,809 | | | $263,579 | | | $87,514 | | | $218,701 | | | $0 | | | $30,050 | | | $956,653 | | | | Mark Stach, General Counsel and Secretary | | | 2020 | | | $330,889 | | | $227,831 | | | $76,065 | | | $198,021 | | | $ (13,377) | | | $19,600 | | | $839,029 | | | | 2019 | | | $291,205 | | | $365,232 | | | $65,658 | | | $107,299 | | | $24,533 | | | $19,600 | | | $873,527 | | | | 2018 | | | $257,967 | | | $188,147 | | | $63,308 | | | $122,567 | | | $(2,046) | | | $19,250 | | | $649,193 | | | | William Backus, Chief Accounting Officer | | | 2020 | | | $293,467 | | | $218,207 | | | $73,760 | | | $175,453 | | | $2,225 | | | $31,600 | | | $794,712 | | | | 2019 | | | $286,282 | | | $465,530 | | | $71,130 | | | $105,484 | | | $109 | | | $31,600 | | | $960,135 | | | | 2018 | | | $277,917 | | | $205,730 | | | $68,894 | | | $169,773 | | | $17 | | | $31,250 | | | $753,581 | |
(1)
| The amounts included in the “Stock Awards” and “Option Awards”“Stock Options” 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 awardsStock Options 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, 2017,2020, as filed with the SEC on March 2, 2018. Amounts shown for the December 31, 2015 fiscal year reflects grants for 2015 based on achievement of performance goals set in the prior year under the LTIP (e.g., amounts shown for 2015 reflect grants made in 2015 based on performance of our achievement goals set in late 2014 under the LTIP).February 19, 2021. For fiscal years ended December 31, 20172019 and 2016,2018, the awards reported in the “Stock Awards” column above consist of performance-based restricted stock.Performance Shares and Time-Based Restricted Shares. The grant date fair value of the performance-based restricted stockPerformance Shares is reflected at target payout based on the probable outcome of the applicable performance conditions. The maximum value atfor the grant date assumingPerformance Shares is as follows: (i) for 2020: Mr. Harris – $1,992,532; Mr. Bengtsson – $387,312; Mr. Hyde – $382,835; Mr. Mason $344,775; Mr. Stach – $268,656; and Mr. Backus – $257,462; (ii) for 2019: Mr. Harris - $2,083,750; Mr. Bengtsson – $442,313; Mr. Hyde – $289,270; Mr. Mason $366,632; Mr. Stach – $265,724; and Mr. Backus – $284,224; and (iii) for 2018: Mr. Harris - $1,440,692; Mr. Bengtsson – N/A; Mr. Hyde – $286,349; Mr. Mason $360,919; Mr. Stach – $258,012; and Mr. Backus – $281,875, with the foregoing being calculated by multiplying the number of shares that would be granted upon achievement atof the highest performance conditions atby the conclusionprice on the grant date. For Mr. Bengtsson, the Stock Awards and Stock Options columns reflect the Time-Based Restricted Shares and Stock Options granted under the LTIP in 2019 ($328,146 and $109,430 respectively) and sign-on Time-Based Restricted Shares and Stock Options ($1,023,960 and $277,525 respectively) granted in part in recognition of the applicable performance period would be as follows: (i) for 2017: Mr.value in unvested equity and other benefits from his prior employer that he forfeited (See the description of the Bengtsson Offer Letter at Page 43). |
Harris - $1,225,574; Ms. Coelho – N/A; Mr. Backus – $258,954; Mr. Ludwig – $270,327 and Mr. Stach – N/A; and (ii) for 2016: Mr. Harris - $900,580; Ms. Coelho – N/A; Mr. Backus – $246,320; Mr. Ludwig – $260,186 and Mr. Stach – N/A and (iii) for 2015: Mr. Harris - $599,494; Ms. Coelho – N/A; Mr. Backus – $245,674; Mr. Ludwig – $252,727 and Mr. Stach – N/A.
(2)
| Reflects the value of cash incentive bonuses earned under ourthe Company’s ICP. |
TABLE OF CONTENTS (3)
| The amounts reflected represent automobile allowancelisted in the following“All Other Compensation” column for fiscal 2020 include actual and estimated matching and profit-sharing contributions by the Company under the 401(k) Plan, and other perquisites and personal benefits, and details about these amounts for each Named Executive Officer forare set forth in the indicated year: (a) Mr. Harris’s other compensation for 2017 consists of $32,331 for automobile allowance; Ms. Coelho’s other compensation for 2017 consists of $2,077 for automobile allowance; Mr. Backus’s other compensation for 2017 consists of $12,000 for automobile allowance; and Mr. Ludwig’s other compensation for 2017 consists of $13,200 fortable below. |
Mr. Harris | | | $19,600 | | | $29,101 | | | $48,701 | Mr. Bengtsson | | | $19,600 | | | $10,800 | | | $30,400 | Mr. Hyde | | | $19,600 | | | $12,000 | | | $31,600 | Mr. Mason | | | $19,600 | | | $10,800 | | | $30,400 | Mr. Stach | | | $19,600 | | | $0 | | | $19,600 | Mr. Backus | | | $19,600 | | | $12,000 | | | $31,600 |
For Mr. Harris, the amounts other than 401(k) contributions reflect: (i) an automobile allowance; (ii) the reimbursement of certain expenses related to his use of a financial planner; (iii) amounts associated with the insurance and maintenance of Mr. Harris’ automobile; and, (iv) the reimbursement of automobile expenses that are related to Company business. For each NEO other than Mr. Harris, the amounts other than 401(k) contributions reflect an automobile allowance. (4)
| Mr. Mason retired March 5, 2021. |
TABLE OF CONTENTS 2020 Grants of Plan-Based Awards
| | | Estimated Future Payouts Under Non- Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | | | | Name | Grant Date | Grant Type | | Threshold | | | Target | | | Maximum | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | All Other Stock Awards : Number
of Shares of Stock (#) | | | All Other Option Awards: Number of Securities Underlying Options (#) | | | Exercise Price of Option Awards(3) ($/Share) | | | Grant Date Fair Value of Stock and Option Awards(4) ($) | | Theodore L. Harris | | ICP | | $0 | | | $700,000 | | | $1,400,000 | | | | | | | | | | | | | | | | | | | | | | | | 2/23/2017 | Performance Shares | | | | | | | | | | | | 3,265 | | | | 6,530 | | | | 13,060 | | | | | | | | | | | | | | | 2/23/2017 | Stock Options | | | | | | | | | | | | | | | | | | | | | | | | | | | 25,930 | | | $85.40 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $1,225,254 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mary Theresa Coelho | | ICP | | $0 | | | $32,452 | | | $64,904 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 10/23/2017 | Restricted Stock | | | | | | | | | | | | | | | | | | | | | | | | 3,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $250,410 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | William A. Backus | | ICP | | $0 | | | $122,203 | | | $244,407 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/23/2017 | Performance Shares | | | | | | | | | | | | 690 | | | | 1,380 | | | | 2,760 | | | | | | | | | | | | | | | | | | Stock Options | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,480 | | | $85.40 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $258,915 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | David F. Ludwig | | ICP | | $0 | | | $111,440 | | | $222,880 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/23/2017 | Performance Shares | | | | | | | | | | | | 720 | | | | 1,440 | | | | 2,880 | | | | | | | | | | | | | | | | | 2/23/2017 | Stock Options | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,720 | | | $85.40 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $270,270 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mark Stach | | ICP | | $0 | | | $77,814 | | | $155,628 | | | | | | | | | | | | | | | | | | | | 2,200 | | | $85.40 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $51,964 | |
| | Ted Harris | | | | | | ICP | | | $0 | | | $1,000,000 | | | $2,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | 02/13/2020 | | | Performance Shares | | | | | | | | | | | | 4,450 | | | 8,900 | | | 17,800 | | | | | | | | | | | | | | | | 02/13/2020 | | | Time-Based Restricted Shares | | | | | | | | | | | | | | | | | | | | | 5,030 | | | | | | | | | | | | | 02/13/2020 | | | Stock Options | | | | | | | | | | | | | | | | | | | | | | | | 24,500 | | | $111.94 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $2,253,423 | | | | Martin Bengtsson | | | | | | ICP | | | $0 | | | $276,870 | | | $553,740 | | | | | | | | | | | | | | | | | | | | | | | | | 02/13/2020 | | | Performance Shares | | | | | | | | | | | | 865 | | | 1,730 | | | 3,460 | | | | | | | | | | | | | | | | 02/13/2020 | | | Time-Based Restricted Shares | | | | | | | | | | | | | | | | | | | | | 980 | | | | | | | | | | | | | 02/13/2020 | | | Stock Options | | | | | | | | | | | | | | | | | | | | | | | | 4,800 | | | $111.94 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $439,070 | | | | James Hyde | | | | | | ICP | | | $0 | | | $172,000 | | | $344,000 | | | | | | | | | | | | | | | | | | | | | | | | | 02/13/2020 | | | Performance Shares | | | | | | | | | | | | 855 | | | 1,710 | | | 3,420 | | | | | | | | | | | | | | | | 02/13/2020 | | | Time-Based Restricted Shares | | | | | | | | | | | | | | | | | | | | | 970 | | | | | | | | | | | | | 02/13/2020 | | | Stock Options | | | | | | | | | | | | | | | | | | | | | | | | 4,700 | | | $111.94 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $433,072 | | | | Scott Mason | | | | | | ICP | | | $0 | | | $183,060 | | | $366,120 | | | | | | | | | | | | | | | | | | | | | | | | | 02/13/2020 | | | Performance Shares | | | | | | | | | | | | 770 | | | 1,540 | | | 3,080 | | | | | | | | | | | | | | | | 02/13/2020 | | | Time-Based Restricted Share Awards | | | | | | | | | | | | | | | | | | | | | 870 | | | | | | | | | | | | | 02/13/2020 | | | Stock Options | | | | | | | | | | | | | | | | | | | | | | | | 4,300 | | | $111.94 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $391,289 | | | | Mark Stach | | | | | | ICP | | | $0 | | | $153,945 | | | $307,890 | | | | | | | | | | | | | | | | | | | | | | | | | 02/13/2020 | | | Performance Shares | | | | | | | | | | | | 600 | | | 1,200 | | | 2,400 | | | | | | | | | | | | | | | | 02/13/2020 | | | Time-Based Restricted Shares | | | | | | | | | | | | | | | | | | | | | 680 | | | | | | | | | | | | | 02/13/2020 | | | Stock Options | | | | | | | | | | | | | | | | | | | | | | | | 3,300 | | | $111.94 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $303,896 | | | | William Backus | | | | | | ICP | | | $0 | | | $132,930 | | | $265,860 | | | | | | | | | | | | | | | | | | | | | | | | | 02/13/2020 | | | Performance Shares | | | | | | | | | | | | 575 | | | 1,150 | | | 2,300 | | | | | | | | | | | | | | | | 02/13/2020 | | | Time-Based Restricted Shares | | | | | | | | | | | | | | | | | | | | | 650 | | | | | | | | | | | | | 02/13/2020 | | | Stock Options | | | | | | | | | | | | | | | | | | | | | | | | 3,200 | | | $111.94 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $291,967 | |
(1)
| The maximum amounts equal 200% of target. Additional information regarding the design of the ICP is included in the Compensation Discussion and Analysis. |
(2)
| The target number of shares shown in the table reflects the number of shares of our Common Stock earned if performance is achieved at target levels. All shares will be awarded net of applicable tax withholding. Dividend equivalents accrue during the performance cycle and will be paid out in shares, net of applicable tax withholding, based on the actual number of shares earned for the performance cycle, if any. |
(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. |
TABLE OF CONTENTS Executive Compensation Discussion and Analysis.
(2) The target number of shares shown in the table reflects the number of shares of our Common Stock earned if performance is achieved at target levels. All shares will be awarded net of applicable tax withholding. Dividend equivalents accrue during the performance cycle and will be paid out in shares, net of applicable tax withholding, based on the actual number of shares earned for the performance cycle, if any.
(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.
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 Company to grant of stock options, stock appreciation rights (“SARs”)Stock Options, Stock Appreciation Rights (SARs), restricted stock awards restricted stock 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”“1999 Plan”), but outstanding awards granted under the 1999 Plan prior to the adoption of the 2017 Plan continue in accordance with their terms. Under the 1999 Plan, officers and other employees of the Company may bePlan: 1.
| Officers and other employees of the Company may be granted Stock Options which qualify as incentive stock options (“ISOs”) under Section 422(b) of the Code; |
2.
| Directors, officers and employees may be granted Stock Options which do not qualify as ISOs (“Non-Qualified Options”); and |
3.
| Directors, officers and employees may be granted the right to make direct purchases of Common Stock from the Company and may also be granted Time-Based Restricted Shares and Performance Shares. |
granted options to purchase Common Stock of the Company which qualify as “incentive stock options” (“ISO” or “ISOs”) under Section 422(b) of the Internal Revenue Code of 1986, as amended (the “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”); and directors, officers and employees may be granted the right to make direct purchases of Common Stock from the Company (“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” and collectively as “Options.” The exercise price per share specified to each Stock 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 sharesTime-Based Restricted Shares generally vest in full fourthree years from grant, or, inthe date of grant. In the case of time restricted sharesTime-Based Restricted Shares granted under the 1999 Plan, Time-Based Restricted 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 sharesTime-Based Restricted Shares are forfeited. In the event of a major disability or significant illness, time based restricted sharesTime-Based Restricted Shares will vest based upon the amount of time remaining until the vesting date. Our performance based restricted shares
The Performance Shares generally vest in three years from grant, subject to the achievement of certain performance criteria. Performance based restricted stockShares 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 sharesTime-Based Restricted Shares vest at target level performance. The Compensation Committee may accelerate the vesting of either time basedTime-Based Restricted Shares or performance based restricted stockPerformance Shares 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 20172020 annual total compensation of $2,307,523$4,647,076 as reflected in the Summary Compensation Table included in this Proxy Statement. Our median employee’s annual total compensation for 20172020 was approximately $51,315.$64,595. Therefore, the ratio of Mr. Harris’ 20172020 annual total compensation to that of our median employee is approximately 4572 to 1.
We identified the median employee by examining the 20172020 total cash compensation for all individuals, excluding our CEO, who were employed by us on December 29, 2017,31, 2020, the last day of our payroll year. We included all employees whether they were employed on a full-time, part-time or seasonal basis. We did not TABLE OF CONTENTS make any assumptions, adjustments, or estimates with respect to total cash compensation, and annualized the compensation for any full-time employees thatwho were not employed by usthe Company for all of 2017.2020. 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 sevenfour percent of our employees receive annual equity awards.
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 named executive officersNEOs as set forth in the 20172020 Summary Compensation Table later in this proxy statement.Proxy Statement. Outstanding Equity Awards at Fiscal Year End 20172020
The following table shows outstanding Option awardsStock Options classified as exercisable and not currently exercisable as of December 31, 20172020 for each Named Executive Officer.NEO. The table also discloses the number and value of unvested restrictedTime-Based Restricted Shares and performance stock awardsPerformance Shares as of December 31, 2017.2020. | | Ted Harris | | | 10,000 | | | 0 | | | $54.87 | | | 4/28/2025 | | | | | | | | | | | | | | | | 24,350 | | | 0 | | | $60.85 | | | 2/23/2026 | | | | | | | | | | | | | | | | 25,930 | | | 0 | | | $85.40 | | | 2/21/2027 | | | | | | | | | | | | | | | | 11,280 | | | 7,520 | | | $74.57 | | | 2/15/2028 | | | | | | | | | | | | | | | | 5,660 | | | 22,640 | | | $84.09 | | | 2/13/2029 | | | | | | | | | | | | | | | | 0 | | | 24,500 | | | $111.94 | | | 2/13/2030 | | | 15,860 | | | $1,827,389 | | | 30,950 | | | $3,566,059 | | | | Martin
Bengtsson (4) | | | 3,000 | | | 12,000 | | | $85.33 | | | 2/4/2029 | | | | | | | | | | | | | | | | 1,200 | | | 4,800 | | | $84.09 | | | 2/13/2029 | | | | | | | | | | | | | | | | 0 | | | 4,800 | | | $111.94 | | | 2/13/2030 | | | 10,280 | | | $1,184,462 | | | 4,360 | | | $502,359 | | | | James Hyde | | | 18,000 | | | 0 | | | $60.85 | | | 2/01/2026 | | | | | | | | | | | | | | | | 5,660 | | | 0 | | | $85.40 | | | 2/21/2027 | | | | | | | | | | | | | | | | 2,280 | | | 1,520 | | | 74.57 | | | 2/15/2028 | | | | | | | | | | | | | | | | 800 | | | 3,200 | | | $84.09 | | | 2/13/2029 | | | | | | | | | | | | | | | | 0 | | | 4,700 | | | $111.94 | | | 2/13/2030 | | | 6,750 | | | $777,735 | | | 5,350 | | | $616,427 | | | | Scott Mason | | | 2,820 | | | 1,880 | | | $74.57 | | | 2/15/2028 | | | | | | | | | | | | | | | | 1,000 | | | 4,000 | | | $84.09 | | | 2/13/2029 | | | | | | | | | | | | | | | | 0 | | | 4,300 | | | $111.94 | | | 2/13/2030 | | | 9,130 | | | $1,051,959 | | | 6,140 | | | $707,451 | | | | Mark Stach | | | 1,200 | | | 0 | | | $60.85 | | | 2/23/2026 | | | | | | | | | | | | | | | | 2,200 | | | 0 | | | $85.40 | | | 2/21/2027 | | | | | | | | | | | | | | | | 2,040 | | | 1,360 | | | 74.57 | | | 2/15/2028 | | | | | | | | | | | | | | | | 720 | | | 2,880 | | | $84.09 | | | 2/13/2029 | | | | | | | | | | | | | | | | 0 | | | 3,300 | | | $111.94 | | | 2/13/2030 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,300 | | | $495,446 | | | 4,510 | | | $519,642 | |
| | Option Awards # of Securities Underlying Options | | | Stock Awards | | | Performance Awards | | | | | Name | | 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 | | | 6,000 | | | | 4,000 | | | $54.87 | | | 4/28/2025 | | | | | | | | | | | | | | | | | 4,870 | | | | 19,480 | | | $60.85 | | | 2/23/2026 | | | | | | | | | | | | | | | | | 0 | | | | 25,930 | | | $85.40 | | | 2/21/2027 | | | | 0 | | | $0 | | | | 18,760 | | | $1,512,056 | | | | | | Mary Theresa Coelho | | | N/A | | | | N/A | | | N/A | | | | N/A | | | | 3,000 | | | $241,800 | | | | 0 | | | $0 | | | | | | William A. Backus | | | 2,507 | | | | 1,671 | | | $58.52 | | | 2/19/2025 | | | | | | | | | | | | | | | | | | | 3,500 | | | | 0 | | | $60.85 | | | 2/23/2026 | | | | | | | | | | | | | | | | | | | 3,000 | | | | 12,000 | | | $60.85 | | | 2/23/2026 | | | | | | | | | | | | | | | | | | | 1,334 | | | | 5,336 | | | $60.85 | | | 2/23/2026 | | | | | | | | | | | | | | | | | | | 0 | | | | 5,480 | | | $85.40 | | | 2/21/2027 | | | | 7,315 | | | $589,589 | | | | 5,420 | | | $436,852 | | | | | | 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 | | | | | | | | | | | | | | | | | | | 3,231 | | | | 2,154 | | | $58.52 | | | 2/19/2025 | | | | | | | | | | | | | | | | | | | 1,200 | | | | 0 | | | $60.85 | | | 2/23/2026 | | | | | | | | | | | | | | | | | | | 1,500 | | | | 6,000 | | | $60.85 | | | 2/23/2026 | | | | | | | | | | | | | | | | | | | 1,406 | | | | 5,624 | | | $60.85 | | | 2/23/2026 | | | | | | | | | | | | | | | | | | | 0 | | | | 5,720 | | | $85.40 | | | 2/21/2027 | | | | 2,272 | | | $183,123 | | | | 5,650 | | | $455,390 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mark Stach | | | 1,200 | | | | 0 | | | $60.85 | | | 2/23/2026 | | | | | | | | | | | | | | | | | | | | 0 | | | | 2,200 | | | $85.40 | | | 2/21/2027 | | | | 0 | | | $0 | | | | 0 | | | $0 | |
(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.
(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, 2017.
| Final Vesting Date | Theodore L. Harris | Mary Theresa Coelho | William A. Backus | David F. Ludwig | Mark Stach | | Jan. 1, 2018 | 5,100* | | 2,090* | 2,150* | | | Feb. 26, 2018 | | | 1,000 | 577 | | | June 17, 2018 | | | 5,000 | | | | 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 | | | Oct. 23, 2021 | | 3,000 | | | | | Total | 18,760 | 3,000 | 12,735 | 7,922 | 0 |
* Actual number of shares received in satisfaction of the grant, based on the achievement of performance objectives is: (i) for Mr. Harris, 6,400 shares, (ii) for Mr. Backus, 2,623, and (iii) for Mr. Ludwig, 2,698 shares.
(3) Value is computed based on the closing price of our Common Stock on December 29, 2017, which was $80.60 per share.TABLE OF CONTENTS | | William Backus | | | 4,178 | | | 0 | | | $58.52 | | | 2/19/2025 | | | | | | | | | | | | | | | | 3,500 | | | 0 | | | $60.85 | | | 2/23/2026 | | | | | | | | | | | | | | | | 15,000 | | | 0 | | | $60.85 | | | 2/23/2026 | | | | | | | | | | | | | | | | 6,670 | | | 0 | | | $60.85 | | | 2/23/2026 | | | | | | | | | | | | | | | | 5,480 | | | 0 | | | $85.40 | | | 2/21/2027 | | | | | | | | | | | | | | | | 2,200 | | | 1,480 | | | $74.57 | | | 2/15/2028 | | | | | | | | | | | | | | | | 780 | | | 3,120 | | | $84.09 | | | 2/13/2029 | | | | | | | | | | | | | | | | 0 | | | 3,200 | | | $111.94 | | | 2/13/2030 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,410 | | | $623,340 | | | 4,730 | | | $544,991 | |
(1)
| Stock Options 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. |
(2)
| Time-Based Restricted Shares generally vest three years from the date of grant. Performance Shares vest in three years and are 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 Time-Based Restricted Shares and Performance Shares) held by each NEO as of December 31, 2020. |
| | Jan. 1, 2021 | | | 9,660 | | | | | | 1,920 | | | 2,420 | | | 1,730 | | | 1,890 | | | | Feb. 4, 2021 | | | | | | 4,000(4) | | | | | | | | | | | | | | | | Oct. 2, 2021 | | | | | | | | | | | | 3,000 | | | | | | | | | | Jan. 1, 2022 | | | 12,390 | | | 2,630 | | | 1,720 | | | 2,180 | | | 1,580 | | | 1,690 | | | | Feb. 4, 2022 | | | | | | 4,000(4) | | | | | | | | | | | | | | | | Feb. 13, 2022 | | | 6,130 | | | 1,300 | | | 850 | | | 4,080 | | | 2,780 | | | 3,840 | | | | Feb. 15, 2022 | | | 4,700 | | | | | | 930 | | | 1,180 | | | 840 | | | 920 | | | | Jan. 1, 2023 | | | 8,900 | | | 1,730 | | | 1,710 | | | 1,540 | | | 1,200 | | | 1,150 | | | | Jan. 15, 2023 | | | | | | | | | 4,000 | | | | | | | | | | | | | Feb. 13, 2023 | | | 5,030 | | | 980 | | | 970 | | | 870 | | | 680 | | | 650 | | | | Total | | | 46,810 | | | 14,640 | | | 12,100 | | | 15,270 | | | 8,810 | | | 10,140 | |
(3)
| Value is computed based on the closing price of our Common Stock on December 31, 2020, which was $115.22 per share. |
(4)
| In connection with the hiring of Mr. Bengtsson as Chief Financial Officer, the Company and Mr. Bengtsson entered into an offer letter dated January 10, 2019 (“Bengtsson Offer Letter”). The Bengtsson Offer Letter provided in part that Mr. Bengtsson would also receive 12,000 shares of Company Time-Based Restricted Shares, which will vest ratably over three years after the date of grant (February 4, 2019), with one-third vesting each year beginning in 2020, and Stock Options to acquire 15,000 shares of Company stock at $85.33 per share, which Stock Options vest 20% after Year 1, 40% after Year 2 and 40% after Year 3. |
TABLE OF CONTENTS Option Exercises and Stock Vested in 20172020
The following table sets forth certain information regarding options and stock awards exercised and vested, respectively, by each of our Named Executive OfficersNEOs during the fiscal year ended December 31, 2017.2020.
| | | Option Awards | | | | | | Stock Awards | | | Name | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($)(1) | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($) | | | Theodore L. Harris | | | 0 | | | N/A | | | | 27,000 | | | $2,114,370 | | | Mary Theresa Coelho | | | 0 | | | N/A | | | | 0 | | | N/A | | | William A. Backus | | | 62,500 | | | $2,884,175 | | | | 1,447 | | | $123,588 | | | David F. Ludwig | | | 0 | | | N/A | | | | 3,081 | | | $263,117 | | | Mark A. Stach | | | 0 | | | N/A | | | | 0 | | | N/A | |
| | Ted Harris | | | 0 | | | N/A | | | 4,371(2) | | | $489,290 | | | | Martin Bengtsson | | | 0 | | | N/A | | | 4,000 | | | $447,920 | | | | James Hyde | | | 0 | | | N/A | | | 5,951(2)(3) | | | $606,605 | | | | Scott Mason | | | 0 | | | N/A | | | 0 | | | N/A | | | | Mark Stach | | | 0 | | | N/A | | | 0 | | | N/A | | | | William Backus | | | 0 | | | N/A | | | 922(2) | | | $103,209 | |
(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)
| Reflects the earnings of Performance Shares granted in 2017 under the Fiscal 2017 – 2019 Performance Share awards including dividend equivalent shares. The Performance Shares were subject to performance goals for the performance period ended December 31, 2019. The Performance Shares were subject to performance goals for the performance period ended December 31, 2019, with the number of TSR Performance Shares vesting representing 146.4% of the target shares and with no EBITDA Performance shares vesting as the threshold for EBITDA Performance Shares was not achieved. Awards vested on February 13, 2020. See “LTIP Awards” beginning at Page 34 above). Values realized for performance shares earned are based on the closing share prices ($111.94) on February 13, 2020, the date the Compensation Committee determined that the performance targets for the performance period ended December 31, 2019 had been met. |
(3)
| For Mr. Hyde, the amounts shown reflect both the Performance Shares discussed in Note 2 above and the vesting of Time-Based Restricted Shares. |
Nonqualified Deferred Compensation
For a description of the Balchem Deferred Compensation Plan, see “Balchem Deferred Compensation Plan” at Page 36 above. Information regarding deferred elections under the Deferred Compensation Plan are included in the table below: | | Ted Harris | | | $ 524,605 | | | $26,821 | | | $0 | | | $ 1,347,952 | | | | Martin Bengtsson | | | $0 | | | $0 | | | $0 | | | $0 | | | | James Hyde | | | $438,325 | | | $19,875 | | | $0 | | | $763,475 | | | | Scott Mason | | | $0 | | | $0 | | | $0 | | | $0 | | | | Mark Stach | | | $196,768 | | | $ (13,377) | | | $0 | | | $403,337 | | | | William Backus | | | $10,548 | | | $2,225 | | | $0 | | | $18,561 | |
(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”. |
TABLE OF CONTENTS Termination of Employment and Change of Control Arrangements
Agreement with Theodore L.Mr. Harris. We entered into an employment agreement with Mr. Harris on April 22, 2015 (the “Harris Agreement”), which provides for automatic one-year extensions of the employment term unless either party provides within 60 days of the end of the then-current term written notice of its intention not to extend the agreement within 60 days of the end of the then-current term. agreement. If we terminate the employment agreementHarris Agreement other than for “Cause” (as defined below) or in the eventif Mr. Harris terminates his employment under certain limited circumstances, effectively amounting to a constructive termination, subjectthen, if he releases claims in favor of the Company, he will be entitled to: (i)
| severance payments equal to 200% of his then-current annual salary (payable in 12 monthly installments), |
(ii)
| all of his unvested equity grants would become fully vested and exercisable, and |
(iii)
| 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 will also vest, with the portion to be determined by the Compensation Committee. |
If we terminate the Harris Agreement other than for Cause within two years after a Change of Control (as defined below), then, if he releases claims in favor of the Company, he will be entitled to: (i)
| a lump sum severance payment equal to 200% of the sum of his then-current annual salary, and |
(ii)
| the annual bonus earned by him in respect of the fiscal year immediately preceding the year in which the Change of Control occurred (payable within 90 days following such termination). |
If Mr. Harris were to voluntarily terminate his executionemployment after the occurrence of a Change of Control, but prior to the second anniversary of such an effective release ofevent, then, if he releases claims in favor of the Company, he will be entitled to severance payments equal to 200% of his then current annual salary (payable in 12 monthly installments), and all of his unvested 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 we terminate the employment agreement other than for “Cause” within two years after a change of control event, Mr. Harris would be entitled to a lump sum severance payment equal to 200% of the sum of his then current annual salary plus the annual bonus earned by him in respect of the fiscal year immediately preceding the year in which the change of control event 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 an event, subject to his execution of an effective release of claims in favor of the Company, he would be entitled to severance payments equal to 100% of his then currentthen-current annual 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 accelerate the vesting of Mr. Harris’s restricted stock Harris’ Time-Based Restricted Shares, Performance Shares and/or options. In the event that any of the payments provided for in the employment agreementHarris Agreement otherwise would constitute an “excess parachute payment” (as defined in Section 280G of the Code), the amount of payments would be reduced to the maximum level that would not result in excise tax under Section 4999 of the Code, if this reduction would cause Mr. Harris to receive a larger after-tax amount than if no reduction were made. Under the employment agreement with Mr. Harris “Cause”Agreement, “Cause” means: habitual absence or lateness; gross 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 non-solicitation of the Company’s clients, customers and 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: (i)
| 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 |
(ii)
| 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. |
(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; or45
(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.TABLE OF CONTENTS During the period of Mr. Harris’sHarris’ employment (or, in the case of a voluntary termination by Mr. Harris or a termination of his employment by the Company for cause,Cause, the balance of the term of the employment agreementHarris Agreement before giving effect to such termination) and for a period of two years thereafter, the employment agreementHarris 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, 2017,2020, 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 agreementThe Harris Agreement does not obligate us to provide any compensation to Mr. Harris in the case of a changeChange in controlControl that does not result in termination of employment; however, the 1999 Plan provides for full vesting of all options and restricted stock awardsTime-Based Restricted Shares, Performance Shares and/or Stock Options granted under that plan,the 1999, upon a change in control, as defined in such Plan and the 2017 Plan allows for the discretionary automatic acceleration of outstanding awards upon the occurrence of a change-in-controlChange in Control pursuant to the terms of Mr. Harris’ employment agreement.the Harris 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 | | - | | | $700,000 | | | $1,512,056 | | | $2,212,056 | | | Termination by Mr. Harris within 12 months after demotion by Company or because of constructive termination | | $1,400,000 | | | $700,000 | | | $1,999,706 | | | $4,099,706 | |
Termination by Company following a Change in Control, except for Cause(3) | | $1,400,000 | | | $700,000 | | | $1,999,706 | | | $4,099,706 | | Voluntary termination by Mr. Harris following a Change of Control(3) | | $700,000 | | | $700,000 | | | $1,999,706 | | | $3,399706 | | | Termination by Company for any reason other than for Cause or after receipt of notice of termination from Mr. Harris | | $1,400,000 | | | $700,000 | | | $1,999,706 | | | $4,099,706 | | | | | | | | | | | | | | | | | Death | | - | | | $700,000 | | | $1,512,056 | | | $2,212,056 | |
| | Voluntary termination by Mr. Harris or termination for Cause | | | $— | | | $1,000,000 | | | $5,393,448 | | | $6,393,448 | | | | Termination by Mr. Harris within 12 months after demotion by Company or because of constructive termination | | | $2,000,000 | | | $1,000,000 | | | $6,484,279 | | | $9,484,279 | | | | Termination by Company following a Change in Control, except for Cause (3) | | | $2,000,000 | | | $1,000,000 | | | $6,484,279 | | | $9,484,279 | | | | Voluntary termination by Mr. Harris following a Change of Control (3) | | | $1,000,000 | | | $1,000,000 | | | $6,484,279 | | | $8,484,279 | | | | Termination by Company for any reason other than for Cause or after receipt of notice of termination from Mr. Harris | | | $2,000,000 | | | $1,000,000 | | | $6,484,279 | | | $9,484,279 | | | | Death | | | $— | | | $1,000,000 | | | $5,393,448 | | | $6,393,448 | |
| 1.(1)
| Represents the target bonus level under the ICP. |
(2)
| 2. | Amounts in this column are calculated byby: (i) multiplying the number of shares subject to accelerated vesting (all Time-Based Restricted Shares being accelerated and the target level of Performance Shares being accelerated) by the difference between $80.60,$115.22, which is the closing market price per share of our common stockCommon Stock on December 29, 2017,31, 2020, and (ii) the difference between (x) the per share exercisegrant price of the applicable accelerated stock award or option,Stock Options and accelerating(y) $115.22, which is the numberclosing market price per share of performance shares at target level. our Common Stock on December 31, 2020 Performance Shares) and Stock Options. |
| 3.(3)
| Assumes the Change of Control occurred within the two-year period prior to December 31, 2017.2020. |
The amounts shown in the table above do not include payments for accrued salary and vacation, or payments made under any 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” under Section 280G of the Code, if such reduction would cause the executive to receive a larger after-tax amount than if no reduction were made. Hyde Employment Agreement. When in 2016 Balchem acquired Albion International, Inc., now Albion Laboratories, Inc. (“Albion”), Albion and Mr. Hyde were parties to an employment agreement. In connection with the acquisition, the parties amended and restated the employment agreement (as so amended and restated, the “Hyde Agreement”). If Balchem terminates the employment agreement other than for “Cause” (as defined in the Hyde Agreement), or in the event Mr. Hyde 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 equal to 100% of his then current annual salary (payable in 12 monthly installments). The Hyde Agreement imposes on Mr. Hyde certain non-competition and non-solicitation obligations regarding the Company and its clients, customers and its employees during the term thereof and for a two-year period following its termination. TABLE OF CONTENTS Offer Letter with Ms. Coelho. Mr. Bengtsson. Under the terms of an offer letter between Ms. Coelho and the Company dated October 3, 2017 (“CoelhoBengtsson Offer Letter”), Ms. Coelho was granted 3,000 shares of restricted stock as part of a signing bonus; these shares will cliff vest on the fourth anniversary of the date of grant. In the eventLetter, if the Company terminates Ms. Coelho’sMr. Bengtsson’s employment for any reason other than Cause (as defined in the CoelhoBengtsson Offer Letter), Mr. Bengtsson will receive a pro-rated portionseverance payment equal to one year of annual base salary, payable in twelve equal installments commencing on the restricted shares granted to Ms. Coelho as part of her signing bonus will immediately vest. If Ms. Coelho had been terminated bymonth following the Companymonth in which the termination occurs. The other than for Cause on December 31, 2017, she would have vested in 141.69 shares of the restricted stock granted to her as part of a signing bonus (which would have had an aggregate value of approximately $11,420 on such date, based upon the closing market price per share of our common stock on December 29, 2017, which was $80.60).
All our Named Executive Officers, other than Mr. Harris,NEOs are employees-at-willemployees at-will and, as such, do not have employment agreements therefore, we are not obligatedor any entitlement to provide them with any post-employment compensation or benefits. However, upon a change of control as defined in the 1999 Plan, all unvested option grantsStock Options granted pursuant to that plan immediately vest and become exercisable, all restrictions, applicable to outstanding shares of restricted stockTime-Based Restricted Shares granted pursuant to that plan, lapse, and all performance sharesPerformance Shares granted pursuant to that plan shall immediately vest and be deemed earned. Except as provided in Mr. Harris’ employment agreement,the Harris Agreement, the 2017 Plan does not provide for automatic acceleration of outstanding awards upon the occurrence of a of a change of control. Assuming such a change of control occurred on December 31, 2017, based on the closing market price of the Company’s common stock on December 29, 2017 (the last trading day of 2017), the amount of compensation payable to the Named Executive Officers other than Mr. Harris, are as follows: Mr. Backus, $1,432,102; Mr. Ludwig $1,189,963; Ms. Coelho $0 and Mr. Stach, $0.
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 $1,000, plus expenses, for each Committee meeting attended. The Company has a Stock Ownership Policy that applies to directors. See “Stock Ownership Requirements; Trading Limitations.”
The following table discloses the cash, equity awards, and other compensation earned, paid, or awarded to each of the Company’s directors (other than Mr. Harris, whose compensation is set forth in the Summary Compensation Table above) during the fiscal year ended December 31, 2017.
| Name | | Fees Earned or Paid in Cash | | | Stock Awards(1)(2) | | | All Other Compensation ($) | | | Total ($) | | | Paul Coombs | | $57,000 | | | $109,995 | | | | - | | | $166,995 | | | David Fischer | | $56,000 | | | $109,995 | | | | - | | | $165,995 | | | Edward McMillan | | $68,000 | | | $109,995 | | | | - | | | $177,995 | | | Perry Premdas | | $69,000 | | | $109,995 | | | | - | | | $178,995 | | | John Televantos | | $79,000 | | | $109,995 | | | | - | | | $188,995 | | | Matthew Wineinger | | $57,000 | | | $109,995 | | | | - | | | $166,995 | |
(1) | On February 21, 2017, each director, other than Mr. Harris, was granted 1,288 shares of restricted stock. The shares are subject to restrictions on transfer until they vest after four years, in accordance with the provisions of the Restricted Stock Grant Agreement, dated February 21, 2017, between the Company and each such director. The grant date fair value per share of each award was $85.40.
|
Because Mr. Knutson was appointed to our Board in February 2018, he did not receive compensation for serving as director during the fiscal year ended December 31, 2017.
(2) | The following table shows the aggregate number of options and stock awards outstanding for each outside director as of December 31, 2017: |
Name | | Aggregate
Stock Options Outstanding
as of 12/31/2017(1)
| | | Aggregate
Stock Awards Outstanding
as of 12/31/2017
| | Paul Coombs | | | - | | | | 4,760 | | David Fischer | | | - | | | | 4,760 | | Daniel Knutson | | | - | | | | N/A | (2)
| Edward McMillan | | | - | | | | 4,760 | | Perry Premdas | | | - | | | | 4,760 | | John Televantos | | | - | | | | 4,760 | | Matthew Wineinger | | | - | | | | 3,096 | |
(1) | 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. |
(2) | Because Mr. Knutson was appointed to our Board in February 2018, he did not hold any Company options or stock awards as of December 31, 2017. |
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 shares that shall vest upon any of such aforementioned events shall be the number of whole shares equal to the product of (A) 1/48 of the total number of Restricted Shares subject to this Grant and (B) the number of full months of that Grantee has served on the Company’s Board of Directors from the date of this Agreement to the date of Grantee's retirement or resignation, as applicable; and all Restricted Shares not so vested shall be immediately forfeited.
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 2017,2020 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. TABLE OF CONTENTS Equity Compensation Plan Information
The following table provides information, as of December 31, 2017,2020, 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 (each as 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) 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) retirement plan is not included in the table below. | | Equity compensation plans approved by security holders | | | 858,480 | | | $ 80.58 | | | 861,608 | | | | Equity compensation plans not approved by security holders | | | 0 | | | 0 | | | 0 | | | | Total | | | 858,480 | | | $ 80.58 | | | 861,608 | |
(1)
| 20,427 shares of unvested Time-Based Restricted Shares granted to non-employee directors and 107,770 shares of unvested Time-Based Restricted Shares granted to NEOs are excluded from this table. |
| | | (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 | 945,665 | $55.44 | 1,586,500 | | | Equity compensation plans not approved by security holders | 0 | 0 | 0 | | | Total | 945,665 | $55.44 | 1,586,500 |
TABLE OF CONTENTS Executive Compensation
(1)26,896 shares of unvested restricted stock granted to non-employee directors and 42,417 shares of unvested restricted stock granted to NEOs are excluded from this table.
Security Ownership of Certain Beneficial Owners and of Management
The table below sets forth as of April 1, 2018,2021, the number of shares of Common Stock beneficially owned by (i) each director, (ii) each of the Named Executive Officers,NEO, (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 CompanyNEOs as a group, and the percentage ownership of theour outstanding Common Stock as of such date held by each such holder and group. The table does not include performance-based restricted stock grantsPerformance Shares granted under the Company’s LTIP (which grants vest at the end of three years), 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 | | | | 3,964,398 | | | | 12.4 | % | | Brown Capital Management, LLC | | | 4 | | | | 3,686,733 | | | | 11.52 | % | | The Vanguard Group, Inc. | | | 5 | | | | 2,971,978 | | | | 9.28 | % | | Neuberger Berman, LLC | | | 6 | | | | 1,583,054 | | | | 4.95 | % | | David F. Ludwig | | | 7 | | | | 108,632 | | | | * | | | Perry Premdas | | | 8 | | | | 47,994 | | | | * | | | Theodore L. Harris | | | 9 | | | | 37,465 | | | | * | | | John Televantos | | | 10 | | | | 29,035 | | | | * | | | Bill Backus | | | 11 | | | | 27,236 | | | | * | | | Edward L. McMillan | | | 12 | | | | 26,454 | | | | * | | | Paul Coombs | | | 13 | | | | 21,555 | | | | * | | | David B. Fischer | | | 14 | | | | 17,255 | | | | * | | | Mary Theresa Coelho | | | 15 | | | | 4,294 | | | | * | |
| Matthew D. Wineinger | | | 16 | | | | 3,941 | | | | * | | | Mark A. Stach | | | 17 | | | | 2,857 | | | | * | | | Daniel E. Knutson | | | | | | | 845 | | | | * | | | Totals Executive Officers/Directors | | | | | | | 327,563 | | | | 1.02 | % | | | | | | | | | | | | | | | | Shares Outstanding April 1, 2017 | | | | | | | 32,027,540 | | | | | |
*Less than 1%
| | BlackRock Institutional Trust Company, N.A. | | | 3 | | | 5,029,187 | | | 15.55% | | | | The Vanguard Group, Inc. | | | 4 | | | 3,589,118 | | | 11.09% | | | | Brown Capital Management, LLC | | | 5 | | | 1,391,418 | | | 4.30% | | | | Ted Harris | | | 6 | | | 163,591 | | | * | | | | William Backus | | | 7 | | | 61,408 | | | * | | | | Perry Premdas | | | 8 | | | 56,094 | | | * | | | | James Hyde | | | 9 | | | 44,794 | | | * | | | | John Televantos | | | 10 | | | 35,112 | | | * | | | | Paul Coombs | | | 11 | | | 28,665 | | | * | | | | Martin Bengtsson | | | 12 | | | 26,406 | | | * | | | | David Fischer | | | 13 | | | 25,355 | | | * | | | | Scott Mason | | | 14 | | | 19,834 | | | * | | | | Mark Stach | | | 15 | | | 16,546 | | | * | | | | Matthew Wineinger | | | 16 | | | 12,041 | | | * | | | | Daniel Knutson | | | 17 | | | 9,595 | | | * | | | | Joyce Lee | | | 18 | | | 1,786 | | | * | | | | Totals Executive Officers/Directors | | | | | | 501,227 | | | 1.54% | | | | | | | | | | | | | | | | | Shares Outstanding April 1, 2021 | | | | | | 32,451,930 | | | | |
(1)
| Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (“SEC”)SEC and generally includes voting or investment power with respect to securities. In accordance with SEC rules, shares which may be acquired upon exercise of stock options which are currently exercisable, or which become exercisable within 60 days after the date of the information in the table are deemed to be beneficially owned by the optionee. Except as indicated by footnote, and subject to community property laws where applicable, to the Company’s knowledge, the persons or entities named in the table above are believed to have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them. |
| (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 calculating the percentage ownership of any other person. |
| (3) | Based upon information provided in a Schedule 13G/A for such entity filed with the SEC on January 18, 2018. Such entity’s address as reported in its Schedule 13G/A is 55 East 52nd Street, New York, NY 10022. |
| (4)
| Based upon information provided in a Schedule 13G/A for such entity filed with the SEC on January 25, 2021. Such entity’s address as reported in its Schedule 13G/A is 55 East 52nd Street, New York, NY 10022. |
(4)
| Based upon information provided in a Schedule 13G/A for such entity filed with the SEC on February 14, 2018.10, 2021. Such entity’s address as reported in its Schedule 13G/A is 100 Vanguard Blvd, Malvern, PA 19355. |
(5)
| Based upon information provided in a Schedule 13G/A for such entity filed with the SEC on February 12, 2021. Such entity’s address as reported in its Schedule 13G/A is 1201 N. Calvert Street, Baltimore, MD 21202. |
| (5) | Based upon information provided in a Schedule 13G/A for such entity filed with the SEC on February 12, 2018. Such entity’s address as reported in its Schedule 13G/A is 100 Vanguard Blvd, Malvern, PA 19355.
|
| (6) | Based upon information provided in a Schedule 13G/A for such entity filed with the SEC on February 15, 2018. Such entity’s address as reported in its Schedule 13G/A is 1290 Avenue of Americas, New York, NY 10104.
|
| (7)
| Consists of 76,321,100,960 shares such person has the right to acquire pursuant to stock options, 3,212,Stock Options, 21,920 shares of restricted stock, 14,335Time-Based Restricted Shares, 1,377 shares held in such person’s Company 401(k) retirement plan account, and 14,76439,334 shares held directly. |
TABLE OF CONTENTS | (8)(7)
| Consists of 4,760 shares of restricted stock, and 43,234 shares held directly. |
| (9) | Consists of 25,79641,508 shares such person has the right to acquire pursuant to stock options, 4,700Stock Options, 6,880 shares of restricted stock, 702Time-Based Restricted Shares, 605 shares held in such person’s Company 401(k) retirement plan account, and 29,45012,415 shares held directly. |
| (10)(8)
| Consists of 4,760 shares of restricted stock and 24,275 shares held directly. |
| (11) | Consists of 21,7766,125 shares such person has the right to acquire pursuant to stock options, 7,235Stock Options, 2,820 shares of restricted stock, 4,320Time-Based Restricted Shares, and 47,149 shares held directly. |
(9)
| Consists of 30,800 shares such person has the right to acquire pursuant to Stock Options, 7,660 shares of Time-Based Restricted Shares, 814 shares held in such person’s Company 401(k) retirement plan account and 7,1675,520 shares held directly. |
| (12)(10)
| Consists of 4,7606,125 shares such person has the right to acquire pursuant to Stock Options, 2,820 shares of restricted stockTime-Based Restricted Shares, and 21,69426,167 shares held directly. |
| (13)(11)
| Consists of 4,7606,125 shares such person has the right to acquire pursuant to Stock Options, 2,820 shares of restricted stockTime-Based Restricted Shares, and 16,79519,720 shares held directly. |
| (14)(12)
| Consists of 4,76013,560 shares such person has the right to acquire pursuant to Stock Options, 7,740 shares of restricted stock and 12,495 shares held directly. |
| (15) | Consists of 4,260 shares of restricted stock and 34Time-Based Restricted Shares, 496 shares held in such person’s Company 401(k) retirement plan account.account and 4,610 shares held directly. |
| (16)(13)
| Consists of 3,096 shares of restricted stock. |
| (17) | Consists of 1,6406,125 shares such person has the right to acquire pursuant to stock options 840Stock Options, 2,820 shares of restricted stock, 377Time-Based Restricted Shares, and 16,410 shares held directly.
|
(14)
| Consists of 8,560 shares such person has the right to acquire pursuant to Stock Options, 9,130 shares of Time-Based Restricted Shares, 690 shares held in such person’s Company 401(k) retirement plan account.account, and 1,454 shares held directly. |
(15)
| Consists of 9,620 shares such person has the right to acquire pursuant to Stock Options, 5,020 shares of Time-Based Restricted Shares, 940 shares held in such person’s Company 401(k) retirement plan account, and 966 shares held directly |
(16)
| Consists of 6,125 shares such person has the right to acquire pursuant to Stock Options, 2,820 shares of Time-Based Restricted Shares, and 3,096 shares held directly |
(17)
| Consists of 6,125 shares such person has the right to acquire pursuant to Stock Options, 2,820 shares of Time-Based Restricted Shares, and 650 shares held directly. |
(18)
| Consists of 589 shares such person has the right to acquire pursuant to Stock Options, and 1,197 Time-Based Restricted Shares. |
TABLE OF CONTENTS INFORMATION RELATING TO PROPOSAL NO. 2 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected RSM US LLP (“RSM”) as the Company’s independent registered public accounting firm for the year ending December 31, 2018. The Company is submitting its selection of RSM for ratification by the shareholders 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 shareholders ratify the selection of RSM as the Company’s independent registered public accounting firm. However, the Company is submitting the selection of RSM to shareholders for ratification as a matter of good corporate governance practice. If shareholders 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 shareholders.
Assuming a quorum is present, the affirmative vote of a majority of all votes cast on the proposal, by 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 SHAREHOLDERS 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, 2018.
Principal Accountant Fees and Services
During 2017,2020, the Company retained RSM to audit the consolidated financial statements for 2017.the fiscal year ended 2020. 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 services. During the period covering the fiscal years ended December 31, 20172020 and 2016,2019, RSM performed the following professional services:
| | | 2017 | | | 2016 | | Audit fees (1) | | $1,138,983 | | | $1,061,445 | | Audit-related fees (2) | | $44,488 | | | $47,397 | | | Total fees | | $1,183,471 | | | $1,108,842 | |
| | Audit fees (1) | | | $1,120,424 | | | $1,290,141 | | | | Audit-related fees (2) | | | $36,315 | | | $265,402 | | | | Tax fees (3) | | | $0 | | | $75,104 | | | | Total fees | | | $1,156,739 | | | $1,630,647 | |
(1)
| (1) | Fees relatingAudit fees relate to audit of the annual consolidated financial statements and quarterly reviews, including out of pocket disbursements and administrative charges.charges, and fees related to foreign statutory audit. |
| (2)
| Audit-related fees in 2017for 2020 consist of fees paid for the employee benefit plan audit.audit and for 2019 consist of fees paid for the employee benefit plan audit and fees paid for financial due diligence procedures related to an acquisition. |
(3)
| Tax fees for 2019 consist of tax due diligence procedures related to an acquisition. |
Audit Committee Financial Expert
Experts
The Board of Directors has determined that Mr. Premdas,Knutson, the chairmanChairman of the Audit committee, is anCommittee, and Messer’s Coombs and Fischer are “audit committee financial expert”experts” as defined under SEC rules. Mr. Knutson, who will succeed Mr. Premdas as chairman of the Audit committee in June, is also an “audit committee financial expert” as defined under SEC rules.
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, 20172020 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 four 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, 20172020 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 TABLE OF CONTENTS 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.
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, 20172020 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 2018.2021.
Submitted by the Audit Committee of the Board of Directors.
| Perry W. Premdas (Chair) | | Daniel E. Knutson, Chairman | | | | Paul D. Coombs | | | | David B. Fischer | | Daniel E. Knutson | | Joyce Lee | | Edward L. McMillan | | | | | | | | being the members of the Audit | |
Committee of the Board of Directors |
PROPOSAL NO. 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Since 2011, because of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Company’s shareholders 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 2017 annual meeting of shareholders, our shareholders: (i) approved holding advisory (or “say on pay”) votes on executive an annual basis; and (ii) approved our “say-on-pay” resolution with approximately 98% of the votes cast by the holders of Common Stock approving the executive compensation described in our 2017 Proxy Statement.
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, by 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.
CONTENTSQuorum Required
Maryland law and the Company’s Bylaws require the presence of a quorum for the meeting, defined as the presence at the meetingMeeting or represented by proxy of shareholders 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 23, 2018 (the “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, of which 32,034,73032,435,692 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 20192022 Annual Meeting of Shareholders
From time to time, the shareholders of the Company may wish to submit proposals which they believe should be voted upon by the shareholders. The Securities and Exchange Commission has adoptedSEC regulations which govern the inclusion of such proposals in the Company’s annual meeting proxy materials. For a proposal to be eligible for inclusion in the Company’s proxy statementProxy Statement for the 2019 annual meeting,2022 Annual Meeting, it must be received by the Secretary of the Company at the Company’s principal executive offices no later than January 2, 20196, 2022 and must satisfy the other requirements in the SEC regulations. regulations and the Company’s Bylaws. With respect to any Shareholdershareholder proposal intended to be presented at the 20192022 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 17, 201918, 2022 (45 days prior to the anniversary of the date this Proxy Statement is first being sent to 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. All of our directors attended the Company’s 2020 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 proxyProxy Card 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, by 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. TABLE OF CONTENTS
This year our annual meetingAnnual Meeting will be a completely virtual meeting. There will be no physical meeting location. The meeting will only be conducted via live webcast.
We encourage our shareholders to participate in the Annual Meeting. As described below, technical support will be available to you on the Meeting date through the Meeting Platform. If you have questions about participating in the Annual Meeting prior to Meeting date, please email the undersigned at mstach@balchem.com. If your questions are technical in nature, they will be referred to Balchem’s Information Technology department for resolution.
To participate in the virtual meeting, visit www.virtualshareholdermeeting.com/BCPC2018BCPC2021 and enter the 16-digit control number included on your notice of Internet availability of the proxy materials, on your proxy card,Proxy Card or Materials’ Notice or on the instructions that accompanied your proxy materials. You may begin to log into the meeting platformMeeting Platform beginning at 1:50 p.m. Eastern Daylight Savings Time (‘‘EDT’’)8:55 a.m. EDT on June 20, 2018.17, 2021. The meeting will begin promptly at 2:9:00 p.m.a.m. EDT on June 20, 2018.
17, 2021.
If you wish to submit a question, you may submit your question during the meeting, log into the virtual meeting platformMeeting Platform at www.virtualshareholdermeeting.com/BCPC2018BCPC2021, type your question into the ‘‘Ask“Ask a Question’’Question” field, and click ‘‘Submit.’’
“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. Any questions pertinent to meeting matters that cannot be answered during the Meeting due to time constraints will be posted online and answered at https://balchem.com/our-company/investor-relations/. The questions and answers will be available as soon as practical after the Meeting and will remain available until one week after posting.
If you encounter any technical difficulties with the Meeting Platform on the Meeting day, please call the technical support number that will be posted on the Meeting Platform. Technical support will be available starting at 8:00 a.m. EDT on June 17, 2021 and will remain available until thirty minutes after the Meeting has finished.
/s/ Mark A. Stach
Mark A. Stach
Secretary
April 30, 2018
New Hampton, New York
| | | /s/ Mark A. Stach | | | | Mark A. Stach | | | | Secretary | | | | April 26, 2021 | | | | | | | | New Hampton, New York | | | |
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The Annual Report to Shareholders of the Company for the fiscal year ended December 31, 2017 is being mailed or otherwise made available to shareholders with these proxy materials.shareholders. The Annual Report does not form part of these proxy materialsthis Proxy Statement for the solicitation of proxies. | | | VOTE BY INTERNET | | | | Before The Meeting - Go to www.proxyvote.com
| | | | | | BALCHEM CORPORATION52 SUNRISE PARK ROADNEW HAMPTON, NY 10958
| | Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | | | | | | | | During The Meeting - Go to www.virtualshareholdermeeting.com/BCPC2018
| | | | | | | | You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. | | | | | | | | VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
| | | | | | | | VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
E47095-P01716 | KEEP THIS PORTION FOR YOUR RECORDS | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
TABLE OF CONTENTS BALCHEM CORPORATION
| For
| Withhold
| For All
| | To withhold authority to vote for any individual | | | | All | All | Except | | nominee(s), mark "For All Except" and write the | | | The Board of Directors recommends you vote | | | | | number(s) of the nominee(s) on the line below. | | | FOR the following: | | | | | | | | | | | | | | | | 1. | Election of Directors | ☐ | ☐ | ☐ | | | | | | | | | | | | | | Nominees: | | | | | | | | | | | | | | | | | 1) Paul D. Coombs | | | | | | | 2) Daniel E. Knutson | | | | | | | |
The Board of Directors recommends you vote FOR proposals 2 and 3. | | For | Against
| Abstain
| | | | | | 2 | Ratification of the appointment of RSM US LLP as the Company's independent registered public accounting firm for the year 2018. | | ☐ | ☐ | ☐ | | | | | | | 3 | Non-binding advisory approval of Named Executive Officers compensation as described in the Proxy Statement. | | ☐ | ☐ | ☐ |
NOTE: Such other business as may properly come before the Annual Meeting or any adjournment thereof. For address changes and/or comments, please check this box | ☐
| and write them on the back where indicated. | |
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | Date | | Signature (Joint Owners) | Date | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement, Form 10-K and Shareholder Letter are available at www.proxyvote.com.
TABLE OF CONTENTS E47096-P01716
REVOCABLE PROXY
BALCHEM CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING TO BE HELD JUNE 20, 2018
The undersigned hereby appoints Theodore L. Harris, Mary Theresa Coelho and Mark A. Stach, and each of them individually, as attorneys and proxies of the undersigned, with full power of substitution, at the Annual Meeting of Stockholders of Balchem Corporation scheduled to be held on June 20, 2018, and at any adjournments thereof, and to vote all shares of Common Stock of the Company which the undersigned is entitled to vote on all matters coming before said meeting. The undersigned hereby revokes all proxies previously given by the undersigned to vote at this meeting or any adjournment thereof.
This proxy, when properly executed, will be voted in the manner directed herein. If no direction is made, the proxies will vote: FOR the nominees for election as directors named on this proxy card; FOR the ratification of the appointment of RSM US LLP as the Company’s independent registered public accounting firm for the year 2018; FOR approval of the compensation of our Named Executive Officers; and in their discretion on such other matters as may properly come before the meeting.
Address Changes/Comments: | | | | (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) |
Continued and to be signed on reverse side
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