UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☑ Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☐ | Preliminary Proxy Statement |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☑ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to§240.14a-12 |
GRAHAM CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)all boxes that apply):
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Fee paid previously with preliminary materials. |
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GRAHAM CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 11, 2020
The 2020 annual meetingWe are a global leader in the design and manufacture of stockholders of Graham Corporation will be held on Tuesday, August 11, 2020, at 11:00 a.m., Eastern Time, at our principal executive offices located at 20 Florence Avenue, Batavia, New York 14020,mission critical fluid, power, heat transfer and vacuum technologies for the following purposes, which are more fully described in the accompanying proxy statement:defense, space, energy and process industries. Our core strengths include:
to elect as directors the two nominees named in the attached proxy statement;
We have a value-enhancing sales and development platform.
We are known for our strong capabilities to approve, on an advisory basis, the compensation of our named executive officers;handle complex, custom orders.
to approve the 2020 Graham Corporation Equity Incentive Plan;We maintain a responsive, flexible production environment.
We have the capability to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2021; andmanage outsourced production.
to transact such other business as may properly come before the annual meeting or any adjournment or postponement of the annual meeting.We provide robust after-the-sale technical support.
Although
We have a highly trained workforce.
We have the unique capability to manufacture to tight tolerances.
Notice of Annual Meeting
of Stockholders
Meeting Details: | ||||||||||||
Meeting Business The principal business of the 2022 Annual Meeting of Stockholders (the “Annual Meeting”), as described in the accompanying proxy materials will be: (1) Election of two director nominees; (2) To approve, on an advisory basis, the compensation of our named executive officers (“say on pay”); (3) To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2023; (4) To approve Amendment No. 2 to the Employee Stock Purchase Plan; and (5) To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. | | Date: Wednesday, July 27, 2022 |
| Place: www.proxydocs.com/GHM In order to virtually attend the Annual Meeting, you must register in advance at www.proxydocs.com/GHM. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you access to the meeting and will also permit you to vote and submit questions at the meeting. There will not be a physical meeting location and you will not be able to attend the Annual Meeting in person. | ||||||||
| Time: 11:00 a.m. Eastern Time | |||||||||||
| Record Date: June 8, 2022 | |||||||||||
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JULY 27, 2022: The Notice of Annual Meeting, Proxy Statement and the Annual Report are available at www.proxydocs.com/GHM BY ORDER OF THE BOARD OF DIRECTORS
Christopher Thome Vice President – Finance, Chief Financial Officer and Corporate Secretary | ||||||||||||
Dated: June 17, 2022
Vote Your Shares
How to Vote
Your vote is very important, and we intendhope that you will participate in the Annual Meeting. You are eligible to hold the meeting on August 11, 2020, we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state and local governments may impose as it relates to the ongoingCOVID-19 pandemic. In the event we determine not to hold the annual meeting as originally scheduled, we will announce alternative arrangements as promptly as practicable.
Our Boardvote if you were a stockholder of Directors has fixedrecord at the close of business on June 19, 2020 as8, 2022. In order to virtually attend the record date for determiningAnnual Meeting, you must register in advance at www.proxydocs.com/GHM. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you access to the stockholders who are entitled to receive notice ofmeeting. Please read the proxy statement and to vote at the annual meeting as well as atright away using any adjournment or postponement of the annual meeting.following methods.
BY ORDER OF THE BOARD OF DIRECTORSStockholders of Record:
 | Vote By Internet Before or During the Meeting Visit: www.proxypush.com/GHM and follow the instructions |  | Vote By Telephone Call 1-866-256-0715 and follow the instructions |  | Vote By Mail Sign, date, and return your proxy card, if you received one, using the enclosed envelope | |||||||||
James R. Lines
President and Chief Executive Officer
Dated: June 30, 2020Beneficial Stockholders:
If you ownare a beneficial stockholder, you will receive instructions from your brokerage firm, bank, broker-dealer, nominee, custodian, fiduciary or other nominee that you must follow in order for your shares through a broker, we encourage you to follow the instructions provided by your broker regarding how to vote.be voted. Your broker may not vote your shares for director nominees or on the advisory vote on executive compensation or on the proposal to approve the 2020 Graham Corporation Equity Incentive Plan unless you provide your broker with voting instructions.
TABLE OF CONTENTSTable of Contents
iCertain statements in this proxy statement contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as “expects,” “intends,” “anticipates,” “believes,” “opportunities,” “will,” “may,” “seeks,” “estimates,” and other similar words. All statements addressing operating performance, events, or developments that we expect or anticipate will occur in the future, including but not limited to our growth, diversification strategy, markets, returns and solutions, financial flexibility, and our ability to achieve our operating priorities are forward-looking statements and should be evaluated in light of important risk factors and uncertainties. These risk factors and uncertainties are more fully described in our Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize or should any of our underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on our forward-looking statements. These forward-looking statements are not guarantees of future performance and speak only as of the date made, and except as required by law, Graham Corporation disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained herein.
Proxy Statement Summary • The Annual Meeting |
GRAHAM CORPORATION
PROXY STATEMENTProxy Statement Summary
To assist you in reviewing the proposals to be considered and voted upon at our annual meeting of stockholders (the “Annual Meeting”) to be held on July 27, 2022, we have summarized information contained elsewhere in this proxy statement or in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 (the “Annual Report”). This summary does not contain all of the information you should consider about Graham Corporation (the “Company”) and the proposals being submitted to stockholders at the Annual Meeting. We encourage you to read the entire proxy statement and Annual Report carefully before voting.
| Date and Time: | Wednesday, July 27, 2022, 11:00 a.m. Eastern Time | |
| Location: | Online via: www.proxydocs.com/GHM | |
| Record Date: | June 8, 2022 | |
In order to virtually attend the Annual Meeting, you must register in advance at www.proxydocs.com/GHM. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you access to the meeting and will also permit you to vote and submit questions at the meeting. There will not be a physical meeting location and you will not be able to attend the Annual Meeting in person.
Meeting Agenda and Voting Matters
| Item | Proposal | Board Vote Recommendation | Page Reference (for more information) | |||
| 1 | Election of two director nominees named in this proxy statement | FOR each nominee | 7 | |||
| 2 | Advisory vote on the compensation of our named executive officers (“say on pay”) | FOR | 45 | |||
| 3 | Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2023 | FOR | 46 | |||
| 4 | To approve Amendment No. 2 to the Employee Stock Purchase Plan | FOR | 48 | |||
Directors and Nominees
Name | Age | Recent Professional Experience | Board Committees | |||||
James J. Barber, Ph.D.* | 68 | Independent Consultant and Principal of Barber Advisors, LLC | CC**, NCGC | |||||
Alan Fortier* | 65 | President of Fortier & Associates, Inc. | AC, NCGC** | |||||
Cari L. Jaroslawsky*◆ | 53 | Senior Vice President and General Manager of Eaton Mission Systems | AC, NCGC | |||||
Jonathan W. Painter*◆ | 63 | Chair of the Company’s Board; Chair of Kadant Inc. | AC, CC | |||||
Lisa M. Schnorr* | 56 | Former Senior Vice President and Project Lead, Digital Enablement for Constellation Brands, Inc. | AC**, CC | |||||
Troy A. Stoner* | 58 | Chief Executive Officer of Argon ST | CC, NCGC | |||||
Daniel J. Thoren | 58 | Chief Executive Officer of the Company | — | |||||
* — Independent Director
◆ — Director Nominee
** — Chair
AC — Audit Committee
CC — Compensation Committee
NCGC — Nominating and Corporate Governance Committee
GRAHAM CORPORATION 2022 PROXY STATEMENT | 1 | |
Proxy Statement Summary • Our Business |
Our Business
We are providing thisa global leader in the design and manufacture of mission critical fluid, power, heat transfer and vacuum technologies for the defense, space, energy and process industries. For the defense industry, our equipment is used in nuclear and non-nuclear propulsion, power, fluid transfer, and thermal management systems. For the space industry our equipment is used in propulsion, power and energy management systems and for life support systems. Our energy and new energy markets include oil refining, cogeneration, and multiple alternative and clean power applications including hydrogen. For the chemical and petrochemical industries, our equipment is used in fertilizer, ethylene, methanol and downstream chemical facilities. We design and manufacture custom-engineered vacuum, heat transfer, pump and turbomachinery technologies.
Director Skills and Attributes
We believe that our directors possess the requisite experience and skills necessary to carry out their duties and to serve our best interests and those of our stockholders.
2 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Questions and Answers About the Annual Meeting |
Questions and Answers About the Annual Meeting
Why am I receiving these proxy statementmaterials?
These proxy materials are being furnished to our stockholdersyou in connection with the solicitation of proxies by our Boardboard of Directors of proxiesdirectors (the “Board”) for use at the 2020 annual meeting of stockholders as well as for use at any adjournment or postponement of the annual meeting.
Date and Location of Annual Meeting
The annual meeting will to be held on Tuesday, August 11, 2020,Wednesday, July 27, 2022, at 11:00 a.m., Eastern Time, and at any adjournment or postponement thereof. The Annual Meeting will be conducted as a virtual meeting of stockholders by means of a live audio-only webcast. We believe that hosting a virtual meeting will enable greater stockholder participation from any location. There will not be a physical meeting location and you will not be able to attend the Annual Meeting in person.
We made our principal executive offices located at 20 Florence Avenue, Batavia, New York 14020.
Although we intendproxy materials available to holdstockholders via the meetinginternet or in printed form if requested on August 11, 2020, we are sensitive toor about June 17, 2022. Our proxy materials include the public health and travel concerns our stockholders may haveNotice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”), the Notice of the Annual Meeting, this proxy statement and the protocols that federal, stateAnnual Report. If you requested and local governments may impose as it relates to the ongoingCOVID-19 pandemic. In the event we determine not to hold the annual meeting as originally scheduled, we will announce alternative arrangements as promptly as practicable.
Record Date and Shares Outstanding
Each holder of shares of our common stock having a par value of $0.10 per share, which we refer to as common stock, at the close of business on June 19, 2020, the record date for the annual meeting, is entitled to notice of and to vote at the annual meeting. Asreceived paper copies of the record date, there were 9,968,962 shares ofproxy materials by mail, our common stock issued and outstanding.
Notice and Access of Proxy Materialsproxy materials also include the proxy card. These proxy materials, other than the proxy card, can be accessed at www.proxydocs.com/GHM.
The Securities and Exchange Commission’s (the “SEC”) e-proxy rules allow companies to post their proxy materials on the Internetinternet and provide only a Notice of Internet Availability of Proxy Materials to stockholders as an alternative to mailing full sets of proxy materials except upon request. Similar to last year, we have elected to use this notice and access model. Unless you previously indicated your preference to receive paper copies of our proxy statement and annual report to security holders,Annual Report, you should have received a Notice of Internet Availability of Proxy Materials, which we refer to as a Notice of Internet Availability. The Notice of Internet Availability includes information on how to access our proxy materials on the Internet,internet, how to vote and how to request a paper or email copy of suchthe proxy materials at no extra charge this year or on an ongoing basis.
Mail DateWhat am I voting on?
On or about June 30, 2020, we commencedAt the mailingAnnual Meeting, you will vote upon:
| (1) | the election of two director nominees identified in this proxy statement; |
| (2) | a proposal to approve, on an advisory basis, the compensation of our named executive officers; |
| (3) | a proposal to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2023; and |
| (4) | a proposal to approve Amendment No. 2 to the Employee Stock Purchase Plan. |
Will there be any other items of business addressed at the Annual Meeting?
As of the date of this proxy statement, we are not aware of any other matter to be presented at the Annual Meeting. If any other matters properly come before the Annual Meeting, it is intended that the holders of the proxies will act in accordance with their best judgment.
What must I do if I want to participate in the Annual Meeting?
You can participate in the Annual Meeting so long as you register in advance to attend the Annual Meeting at www.proxydocs.com/GHM. You will be asked to provide the control number located inside the shaded gray box on your Notice of Internet Availability or proxy card. After completion of your registration, further instructions, including a unique link to access the Annual Meeting, will be emailed to you. Please be sure to follow the instructions found on your Notice of Internet Availability, proxy card and/or voting instruction card and madesubsequent instructions that will be delivered to you via email.
By visiting www.proxydocs.com/GHM, pre-registering and then accessing the Annual Meeting as instructed, you will be able to participate in the Annual Meeting, vote your shares and ask questions during the meeting. However, if youdo not comply with the procedures outlined above, you may not be admitted to the Annual Meeting.
As always, we encourage you to vote your shares prior to the Annual Meeting. This proxy materials availablestatement furnishes you with the information you need in order to our stockholders.vote, whether or not you participate in the Annual Meeting.
Votes
GRAHAM CORPORATION 2022 PROXY STATEMENT | 3 | |
Each holder
Questions and Answers About the Annual Meeting |
Who may vote and how many shares can be cast?
If you owned shares of our common stock at the close of business on June 19, 20208, 2022, which is the record date for the Annual Meeting, then you are entitled to vote your shares at the Annual Meeting. At the close of business on the record
date, we had 10,602,605 shares of common stock outstanding and entitled to vote. Each share is entitled to one vote foron each share of common stock held.
Procedures for VotingHow do I vote?
Stockholder of Record:Shares Registered in Your Name. If on June 19, 2020,the record date, your shares of our common stock were registered directly in your name with our transfer agent, then you are a stockholder of record and your shares will be voted as you indicate. If you are a stockholder of record, there are four ways to vote:
By Internetinternet at www.proxyvote.com.www.proxypush.com/GHM. We encourage you to vote this way.
By touch tone telephone: call toll-free at1-800-690-6903.1-866-256-0715.
By completing and mailing your proxy card.
By written ballot atvoting during the annual meeting.Annual Meeting before the polls close: To vote in person, comebe admitted to the annual meeting with photo identificationAnnual Meeting and wevote your shares, you must register and provide the control number as described in the Notice of Internet Availability or proxy card. After completion of your registration, further instructions, including a unique link to access the Annual Meeting, will give you a ballot when you arrive.be emailed to you.
Your vote is important. Whether or not you plan to attend the meeting, we urge you to vote to ensure your vote is counted. You may still attend the meeting and vote in personduring the meeting if you have already voted by proxy. Only the latest vote you properly submit will be counted.
Beneficial Owner: Shares Registered in the Name of Broker or Bank.If on June 19, 2020,the record date, your shares of our common stock were held in an account at a brokerage firm, bank, dealer or other similar organization, (“broker”),which we collectively refer to as a broker, then you are the beneficial owner of shares held in “street name” and these proxy materials are being made available to you by that organization along with a voting instruction card. As a beneficial owner, you must vote your shares in the manner prescribed by your broker. Your broker has enclosed or otherwise provided a voting instruction card for you to use in directing the broker how to vote your shares. Your shares will be voted as you indicate. Check the voting instruction card used by that organization to see if it offers Internetinternet or telephone voting. You are also invited
If you hold your shares in street name, you will receive instructions from your broker, bank or nominee that you must follow in order to attendsubmit your voting instructions and have your shares voted at the annual meeting. ToAnnual Meeting. If you want to vote in person virtually at the annual meeting,Annual Meeting, you must present photo identification andregister in advance at www.proxydocs.com/GHM. You may be instructed to obtain a legal proxy from your broker. Contactbroker, bank or other nominee and to submit a copy in advance of the meeting. Further instructions will be provided to you as part of your brokerregistration process.
Even if you plan to request aattend the Annual Meeting, we recommend that you submit your proxy or voting instruction cardinstructions in advance of the Annual Meeting as described above so that your vote will be counted if you later decide not to attend or are unable to obtain a legal proxy to vote in person atattend the annual meeting.Annual Meeting.
WhetherWhat happens if I do not give specific voting instructions?
If you are a stockholder of record or a beneficial owner, your shares will be voted as you indicate on your properly executed proxy.
Recommendations of our Board of Directors; Voting in the Event no Specific Instructions are Given
Stockholder of Record. Ifand you indicate when voting onover the Internetinternet or by telephone that you wish to vote as recommended by our Board of Directors or you properly executesign and datereturn a proxy in time to be voted at the annual meetingcard without giving specific voting instructions, then the named proxiesproxy holders will vote your shares in the manner recommended by our Board of Directors (i.e. FOR each ofon all matters presented in this proxy statement and as the director nominees namedproxy holders may determine in Proposal One and FOR Proposals Two, Three, and Four).their discretion with respect to any other matters properly presented for a vote at the Annual Meeting.
An executed proxy without voting instructions marked on it may also be voted by the named proxies for such other business as may properly come before the annual meeting or at any adjournment or postponement of the annual meeting.
Beneficial Owner. If you are a beneficial owner of shares held in street name and do not provide the organization that holds your brokershares with specific voting instructions, or if you do not obtainthen a legal proxy“broker non-vote” occurs. In that gives youcase, the right to vote the shares in person at the annual meeting, your shares will not be voted with respect to Proposals One, Two, and Three, which arenon-routine proposals. Your broker has discretionary authority to vote your uninstructed shares with respect to Proposal Four, whichthe ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm (because it is considered a routine proposal.
Our Board“routine” proposal under the rules of Directors recommends a vote:the New York Stock Exchange (the “NYSE”), but cannot vote your shares on any other matters being considered at the Annual Meeting (because they are considered to be non-routine proposals under NYSE rules). When our inspector of election tabulates the votes for
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Questions and Answers About the |
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Quorumany particular matter, broker non-votes will be counted for purposes of determining whether a quorum is present, but will not otherwise be counted. We therefore encourage you to provide voting instructions on each proposal to the organization that holds your shares.
What constitutes a quorum for the Annual Meeting?
A quorum is required for our stockholders to conduct business at the annual meeting.Annual Meeting. Pursuant to our amended and restatedby-laws, the holders of record of a majority of the shares of our common stock present in person or by proxy and entitled to vote at the annual meetingAnnual Meeting will constitute a quorum.
Vote RequiredWhat vote is required to approve each proposal and how does the Board recommend that I vote?
The table below shows the vote required to approve each ofproposal, and the proposalsBoard’s recommendation with respect to each proposal are described in this proxy statement, assuming the presence of a quorum, in person or by proxy, at the annual meeting.below:
Proposal Number | Proposal Description | Board Recommendation | Vote Required | Effect of Abstentions | Effect of Broker Non-Votes | |||||
One | Election of the two director nominees identified in this proxy statement | FOR each nominee | Plurality of the shares present, in person or by proxy, and entitled to vote at the | None | None | |||||
Two | Approval, on an advisory basis, of the compensation of our named executive officers | FOR | Majority of the shares eligible to be cast by holders present, in person or by proxy, and entitled to vote at the | Same effect as a vote cast against the proposal | Same effect as vote cast against proposal | |||||
Three | ||||||||||
| Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending March 31, | FOR | Majority of the shares eligible to be cast by holders present, in person or by proxy, and entitled to vote at the | Same effect as vote cast against proposal | N/A because this proposal is a routine matter on which brokers may vote | |||||
Four | Approve Amendment No. 2 to the Employee Stock Purchase Plan | FOR | Majority of the shares eligible to be cast by holders present, in person or by proxy, and entitled to vote at the Annual Meeting | Same effect as a vote cast against the proposal | Same effect as vote cast against proposal | |||||
| (1) | Our stockholders elect directors by a plurality vote, which means that the director nominees receiving the most votes will be elected. However, our Corporate Governance Guidelines provide that any nominee for director who receives a greater number of votes “withheld” from his or her election than “for” such election must tender his or her resignation for consideration by the Nominating and Corporate Governance Committee of our |
| (2) | The advisory vote to approve the compensation of our named executive officers is not binding upon our Board |
| (3) | We are presenting the appointment of Deloitte & Touche LLP to our stockholders for ratification. The Audit Committee of our Board |
How can I obtain a stockholder list?
A stockholder list will be available for examination by our stockholders during ordinary business hours throughout the ten-day period prior to the Annual Meeting at our principal executive offices at 20 Florence Avenue, Batavia, New York 14020, and during the meeting via the virtual meeting site for any purpose germane to the meeting.
GRAHAM CORPORATION 2022 PROXY STATEMENT | 5 | |
Questions and Answers About the Annual Meeting |
Effect of Not Casting Your Vote, Abstentions and BrokerNon-Votes
If you hold your shares in street name, it is critical that you cast your vote if you want it to count with respect to Proposals One, Two and Three. If you hold your shares in street name and do not indicate how you want your shares voted on these proposals, your bankCan I change or broker is not permitted to, and will not, vote your shares on your behalf. This result is known as a brokernon-vote.revoke my vote? Your bank or broker has discretionary authority to vote anynon-instructed shares on Proposal Four.
We count shares subject to brokernon-votes and abstentions in determining the presence of a quorum and the number of shares entitled to vote on a proposal. Brokernon-votes will have no effect on the outcome of Proposals One, Two and Three because they are not eligible to be cast on such proposals. Abstentions will have no effect on the results of Proposal One and will have the same effect as a vote against Proposals Two, Three and Four.
If you are a stockholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the items of business at the annual meeting.
Revocability of Proxies
Your attendance at the annual meetingAnnual Meeting will not automatically revoke your proxy. However, if you are a stockholder of record you can change or revoke your proxy at any time before it is voted at the annual meetingAnnual Meeting by:
timely voting again via the Internetinternet or by telephone (only your latest Internet or telephone vote timely submitted prior to the annual meeting will be counted);telephone;
delivering a timely written notice of revocation to our Corporate Secretary;
delivering a duly executed proxy bearing a later date to our Corporate Secretary; or
attending the annual meeting, filing a written notice of revocation with our Corporate Secretary, and voting in person.
Notices of revocation and revised proxies should be sent to the attention of our Corporate Secretary at the following address: Graham Corporation, 20 Florence Avenue, Batavia, New York 14020.14020;
completing, signing, dating and mailing a timely new proxy card to the address above; or
attending the Annual Meeting and voting again.
Only your last-submitted, timely vote will count at the Annual Meeting.
SolicitationIf you are a street name holder, you must contact your broker to receive instructions as to how you may revoke your proxy instructions.
We encourage you to vote in advance of Proxiesthe Annual Meeting to ensure your vote is counted should you be unable to participate in the Annual Meeting. Stockholders who have pre-registered to attend the Annual Meeting and who have not voted their shares prior to the Annual Meeting or who wish to change their vote will be able to vote their shares electronically at the Annual Meeting while the polls are open. If you properly provide your proxy in time to be voted at the Annual Meeting, it will be voted as you specify unless it is properly revoked prior thereto. If you properly provide your proxy but do not include your voting specifications, the shares represented by the proxy will be voted in accordance with the recommendations of the Board, as described in this proxy statement.
Who is paying for this proxy solicitation?
This proxy solicitation is made by our Board of Directors on our behalf, and we will bear the cost of soliciting proxies. In addition to solicitation by mail, our directors, officers and employees may solicit proxies personally or by telephone or other means of communication. We will not compensate our directors, officers or employees for making proxy solicitations on our behalf. We will provide persons holding shares in their name or in the names of nominees, which in either case are beneficially owned by others, soliciting materials for delivery to those beneficial owners and will reimburse the record owners for their expenses in doing so.
Principal Executive OfficesCan I ask questions at the Annual Meeting?
Our principal executive officesIf you registered in advance and attend the Annual Meeting, you may submit questions during the Annual Meeting. We encourage you to submit questions at www.proxydocs.com/GHM after logging in with your unique control number provided in connection with your pre-registration for the Annual Meeting.
We expect to respond to questions during the Annual Meeting that are locatedpertinent to meeting matters as time permits. We may group together questions that are substantially similar to avoid repetition.
How can I find out the voting results of the Annual Meeting?
Preliminary voting results will be announced at 20 Florence Avenue, Batavia, New York 14020. Our telephone number is585-343-2216.
the Annual Report to Stockholders and AnnualMeeting. We will publish the voting results in a Current Report onForm 10-K
Our annual report to stockholders on Form10-K8-K, for our fiscal year ended March 31, 2020, which we refer to as fiscal year 2020, is available athttp://www.graham-mfg.com/annual-meeting-proxy-materials. Our annual report onForm 10-K for fiscal year 2020 aswill be filed with the Securities and Exchange Commission, is included inSEC within four business days after the fiscal year 2020 annual report. The fiscal year 2020 annual report includes our audited financial statements, along with other information about us, which we encourage you to read.Annual Meeting.
Where can I obtain additional information?
You can obtain, free of charge, a copy of our fiscal year 2020 annual report on Form10-K for the fiscal year ended March 31, 2022 (“fiscal year 2022”) by:
accessing our website athttp://www.graham-mfg.com/annual-meeting-proxy-materials; www.grahamcorp.com under the heading “Investor Relations”;
writing to us at: Graham Corporation, Attention: Annual Report Request, 20 Florence Avenue, Batavia, New York 14020; or
telephoning us at (585) 585-343-2216.343-2216.
You can also obtain a copy of our annual report onForm 10-K and all other reports and information that we file with, or furnish to, the Securities and Exchange CommissionSEC from the Securities and Exchange Commission’sSEC’s EDGAR database located at www.sec.gov.
6 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Proposal One: Election of Directors • Nominees Proposed for Election as Directors at the Annual Meeting |
ELECTION OF DIRECTORS
Our BoardElection of Directors
The Board currently consists of seven members. Our amended and restatedby-laws provide for a classified Boardboard of Directorsdirectors consisting of three classes of directors, with each class serving a staggered three-year term. As a result, stockholders elect only a portion of our Board of Directors each year. The terms of two of our directors, James J. BarberCari L. Jaroslawsky and Gerard T. Mazurkiewicz,Jonathan W. Painter, will expire at the 2020 annual meeting.Annual Meeting.
The Nominating and Corporate Governance Committee of our Board of Directors has nominated James J. BarberCari L. Jaroslawsky and Gerard T. MazurkiewiczJonathan W. Painter forre-election election as directors. If elected, each of Messrs. BarberMs. Jaroslawsky and MazurkiewiczMr. Painter will hold office for a three-year term expiring in 20232025 or until his or her successor is duly elected and qualified. Our Board of Directors does not contemplate that either of the nominees will be unable to serve as a director, but if that contingency should occur before the proxies are voted, the designated proxies reserve the right to vote for such substitute nominee(s) as they, in their discretion, determine. Our amended and restatedby-laws do not permitre-election after a director reaches the age of 75.
OurThe Board of Directors unanimously recommends a voteFOR the election of each of Messrs. BarberMs. Jaroslawsky and MazurkiewiczMr. Painter as a director to serve for a three-year term expiring in 2023.2025.
Nominees Proposed for Election as Directors at the 2020 Annual Meeting
James J. Barber, Ph.D.
Age: 66
Director Since:2011
Cari L. Jaroslawsky Ms. Jaroslawsky has served as the Senior Vice President and General Manager of Eaton Mission Systems, a leading manufacturer of air-to-air refueling systems, environmental systems, and actuation, primarily for defense markets and a division of Eaton Corporation plc (“Eaton”) since January 2019, having previously served as Senior Vice President of Finance from October 2016 to December 2018 for Cobham International until it was acquired by Eaton. Prior to her position with Cobham Mission Systems, Ms. Jaroslawsky served as the Chief Financial Officer and Treasurer of Servotronics, Inc. (NYSE American: SVT), a designer and manufacturer of advanced technology and consumer products, from 2005 until 2016. Ms. Jaroslawsky is a certified public accountant. She also serves on the board of directors of Rand Capital Corporation (Nasdaq: RAND). |
Senior Vice President and General Manager of Eaton Mission Systems AGE DIRECTOR SINCE 53 2022 COMMITTEES ▶ Audit Committee ▶ Nominating and Corporate Governance | |||||
Qualifications Ms. Jaroslawsky brings to the Board substantial operational and leadership experience and a significant background in accounting and financial matters, including through her prior service as the Chief Financial Officer and Treasurer of a publicly traded company. |
Dr. Barber has been an independent consultant and the principal of Barber Advisors, LLC, a consulting business advising firms andnon-profits in the areas of strategy, management, marketing and operations, since September 2007. From January 2000 to May 2007, Dr. Barber was the President and Chief Executive Officer of Metabolix, Inc. (NASDAQ: MBLX), a bioscience company focused on plastics, chemicals and energy. He was responsible for transforming Metabolix, Inc. from a research boutique into a leader in “clean tech” and industrial biotechnology.
Dr. Barber has served as the independentnon-executive chairman of Itaconix plc (formerly Revolymer plc) (LON: ITX), a specialty chemicals company, since December 2018, and served as anon-executive director of Itaconix plc from September 2016 to November 2018. He has also served as a director of the following private companies on the dates indicated: Agrivida, from first quarter 2011 through December 2014; Allylix, from May 2012 through December 2014; Segetis, Inc., from July 2012 through February 2016; Itaconix, Inc., from June 2014 through June 2016; and Nanocomp Technologies, Inc.; from February 2014 through February 2018. From February 2008 through November 2010, Dr. Barber was a director and on the finance committee of Bluewater Holdings Corp., a provider of sewage and water-treatment services, which filed for Chapter 11 bankruptcy protection in October 2010.
Dr. Barber brings to our Board of Directors substantial executive level leadership experience and a deep understanding of product and business development in highly technical industries and alternative energy markets. Dr. Barber also has significant experience in structuring both joint venture and acquisition transactions.
GRAHAM CORPORATION 2022 PROXY STATEMENT | 7 | |
Gerard T. Mazurkiewicz
Proposal One: Election of Directors • Nominees Proposed for Election as Directors at the Annual Meeting |
Age:73
Director Since:2007
Mr. Mazurkiewicz has been a Tax Partner with Dopkins & Company, LLP, a regional accounting firm located in Buffalo, New York, since 2004. Prior to his tenure at Dopkins & Company, LLP, Mr. Mazurkiewicz spent more than 32 years with KPMG, LLP, and was the partner in charge of KPMG’s upstate New York/Albany tax practice prior to his retirement in 2002. Mr. Mazurkiewicz has served as a director of Trebor, Inc., a distributor of tissue, pulp, paper and container board and as a director of Robert James Sales, Inc., a distributor of stainless steel pipe, valves, and fittings, each since 2004.
Jonathan W. Painter Mr. Painter has served as the Chair, since July 2019, and a director, since January 2010, of Kadant Inc. (NYSE: KAI), a leading global supplier of components and engineered systems used in process industries, including the pulp and paper industry. Mr. Painter served as President and Chief Executive Officer of Kadant from January 2010 to July 2019 and as President and Chief Operating Officer from September 2009 to December 2009. Mr. Painter also serves on the board of governors of the Handel and Haydn Society, a symphony orchestra based in Boston Massachusetts. Chair of Kadant Inc. AGE DIRECTOR SINCE 63 2014 CHAIR OF THE BOARD COMMITTEES ▶ Audit ▶ Compensation Qualifications Mr. Painter brings valuable experience to the Board and management as a former executive officer of a public company that, similar to us, is in the business of designing, manufacturing and marketing specialized, engineered equipment. The Board believes that Mr. Painter’s diverse experience in operations, finance, mergers and acquisitions and corporate strategy enables him to provide critical insight to the Board and management that will help us to achieve our strategic goals. Directors Whose Terms Mr. Mazurkiewicz is a member of the American Institute of Certified Public Accountants and the Buffalo Chapter of the New York State Society of Certified Public Accountants. Mr. Mazurkiewicz has served on numerousnot-for-profit boards and foundations, including the Women’s and Children’s Hospital of Buffalo Foundation, the Kaleida Health Foundation, the University of Buffalo Foundation and the Community Foundation for Greater Buffalo. Currently, he serves as a Trustee for the Ralph C. Wilson Jr. Foundation.With his background of significant accounting and financial experience, Mr. Mazurkiewicz brings to our Board of Directors substantial leadership skills and an understanding of how to provide value related to finance, management, operations and risk.
Do Notdo not Expire at the 2020 Annual MeetingAlan Fortier
James J. Barber, Ph.D. Dr. Barber has been an independent consultant and the principal of Barber Advisors, LLC, a consulting business advising firms and non-profits in the areas of strategy, management, marketing and operations, since September 2007. From January 2000 to May 2007, Dr. Barber was the President and Chief Executive Officer of Metabolix, Inc. (NASDAQ: MBLX), a bioscience company focused on plastics, chemicals and energy. He was responsible for transforming Metabolix, Inc. from a research boutique into a leader in “clean tech” and industrial biotechnology. Dr. Barber has served as the independent non-executive Chair of Itaconix plc (formerly Revolymer plc) (LON: ITX), a specialty chemicals company, since December 2018, and served as a non-executive director of Itaconix plc from September 2016 to November 2018. He has also served as a director of numerous private companies. |
Independent Consultant and AGE DIRECTOR SINCE 68 2011 TERM EXPIRES 2023 COMMITTEES ▶ Compensation (Chair) ▶ Nominating and Corporate Governance | |||||
Qualifications Dr. Barber brings to our Board substantial executive level leadership experience and a deep understanding of product and business development in highly technical industries and alternative energy markets. Dr. Barber also has significant experience in structuring both joint venture and acquisition transactions. |
Age: 63
Troy A. Stoner Mr. Stoner has served as the Chief Executive Officer of Argon ST, a specialist in systems engineering and a subsidiary of The Boeing Company, since April 2020 having served Boeing in a series of advancing roles including Senior Program Manager, Missions & Payloads, Autonomous Systems from December 2019 to March 2020, Senior Manager, Autonomous Systems, Boeing Strategy from November 2017 to November 2019, Senior Maritime Representative, Boeing Global Sales and Marketing, April 2016 to October 2017, and Senior Manager, Boeing Strategy from May 2015 to March 2016. Mr. Stoner retired from the U.S. Navy after 30 years of service. |
Chief Executive Officer of Argon ST AGE DIRECTOR SINCE 58 2021 TERM EXPIRES 2023 COMMITTEES ▶ Compensation ▶ Nominating and Corporate Governance | |||||
Qualifications Mr. Stoner brings to the Board extensive business experience with strategy, leadership and operations at companies within the defense, space and security markets. Our Board and management team value his in-depth knowledge of the U.S. Navy as well as his extensive expertise in military defense systems and U.S. Navy planning and procurement processes. |
8 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Director Since:
Proposal One: Election of Directors • Directors Whose Terms do not Expire at the Annual Meeting |
Alan Fortier Mr. Fortier has served as President of Fortier & Associates, Inc., a strategy and profit improvement consulting firm focused on capital goods and chemicals companies, since 1988. Over his 30+ year consulting career he has helped hundreds of manufacturing businesses exceed aggressive profit targets, in all regions globally. He has also been a Strategic Advisory Board member for Genstar Capital, a middle market private equity group with over $30 billion in assets under management, since January 2019. In addition, between 2007 and 2016, Mr. Fortier was a guest lecturer at Columbia Business School’s MBA and Executive Education programs. Prior to entering consulting he held technical and management positions with DuPont. |
President of Fortier & Associates, Inc. AGE DIRECTOR SINCE 65 2008 TERM EXPIRES 2024 COMMITTEES ▶ Nominating and Corporate Governance (Chair) ▶ Audit | |||||
Qualifications Mr. Fortier brings to the Board more than 35 years of global industrial experience as a strategy and execution consultant and manager. Our Board and management team benefit from his extensive background in our served markets, including energy, petrochemicals, chemicals and large engineering firms, as well as his extensive experience advising boards and senior executives of global capital goods businesses on business strategy, mergers and acquisitions, global growth, pricing, organizational development and management control. |
Lisa M. Schnorr Ms. Schnorr has served as a director since 2014. She retired in May 2021 from Constellation Brands (NYSE: STZ), a Fortune 500 company and a leading international producer of beer, wine and spirits with operations in the U.S., Mexico, New Zealand and Italy. Ms. Schnorr joined Constellation Brands in 2004 and earned promotions through a series of positions with increasing responsibility, including Vice President of Compensation and HRIS (2011-2013), Senior Vice President of Total Rewards (2014-2015), Corporate Controller (2015-2017), Chief Financial Officer of the Wine & Spirits Division (2017-2019), and Senior Vice President and Project Lead of Digital Enablement (2019-2021). Before joining Constellation Brands, Ms. Schnorr held financial and accounting positions at various public and private companies and she began her career in 1987 at PricewaterhouseCoopers (formerly Price Waterhouse), all in Rochester, New York. Since June 2021, Ms. Schnorr has been a member of the board of directors of Vintage Wine Estates (NASDAQ: VWE), where she serves as Audit Committee Chair, since 2021. She holds a B.S. degree in Accounting from the State University of New York at Oswego. |
Former Senior Vice President and AGE DIRECTOR SINCE 56 2014 TERM EXPIRES 2024 COMMITTEES ▶ Compensation ▶ Audit (Chair) | |||||
Qualifications With her background and experience in strategic planning, audit, financial planning and analysis, capital allocation, public company governance and risk management, human resources and investor relations, Ms. Schnorr offers a global business and organizational perspective to the Board. The Board believes that Ms. Schnorr’s background and expertise enables her to guide us through a continued period of organic and acquisition-related growth and allows her to provide insight and leadership to our Audit Committee and Compensation Committee. |
Daniel J. Thoren Mr. Thoren has served as our Chief Executive Officer since September 2021 and became our President and Chief Operating Officer in June 2021. Prior to joining the Company, Mr. Thoren had been employed by Barber-Nichols, LLC (“Barber-Nichols”), a premier supplier of specialty turbomachinery, pumps and electronic drives that address critical applications for the defense and aerospace/space industries, from 1991 until we acquired Barber-Nichols in June 2021, and served in progressively increasing roles, including his service as Barber-Nichol’s President and Chief Executive Officer from 1997 until May 2021 and its Chairman of the Board of Directors through June 2021. |
Chief Executive Officer of the Company AGE DIRECTOR SINCE 58 2021 TERM EXPIRES 2024 | |||||
Qualifications As our Chief Executive Officer, and as a result of his day-to-day leadership of the business, Mr. Thoren provides the Board with valuable insight regarding the operations of our Company and our management team and he performs a critical role in the Board’s discussions regarding strategic planning and development. Our Board also benefits from Mr. Thoren’s proven strong leadership skills and experience at Barber-Nichols. |
GRAHAM CORPORATION 2022 PROXY STATEMENT | 9 | |
Term Expires:2021
Corporate Governance • Director Independence |
Mr. Fortier has served as President of Fortier & Associates, Inc., a strategy and profit improvement consulting firm focused on petrochemicals and capital goods companies, since 1988. He has also been a Strategic Advisory Board member for Genstar Capital, a middle market private equity group, since January 2019. In addition, between 2007 and 2016, Mr. Fortier was a guest lecturer at Columbia Business School’s MBA and Executive Education programs.
Mr. Fortier brings to our Board of Directors more than 35 years of global industrial experience as a strategy and execution consultant, educator and manager, having helped create value for hundreds of businesses while exceeding aggressive profit targets. Our Board of Directors and management team benefits from his extensive background in our served markets, including energy, petrochemicals, chemicals and large engineering firms, as well as his extensive experience advising boards and senior executives of global capital goods businesses on business strategy, mergers and acquisitions, global growth, pricing, organizational development and management control.
James R. Lines
Age:59
Director Since:2006
Term Expires:2021
Mr. Lines became our President and Chief Executive Officer in January 2008, having previously served as our President and Chief Operating Officer since June 2006. Mr. Lines has served us in various capacities since 1984, including Vice President and General Manager, Vice President of Engineering, and Vice President of Sales and Marketing. Prior to joining our management team, he served us as an application engineer and sales engineer as well as a product supervisor. Mr. Lines has been an independent director of Superior Drilling Products (NYSE American: SDPI) since December 2016, where he chairs the audit committee and is a member of the nominating and corporate governance committee and compensation committee.
As our President and Chief Executive Officer, and as a result of hisday-to-day leadership of the business, Mr. Lines provides our Board of Directors with valuable insight regarding the operations of our Company and our management team and he performs a critical role in board discussions regarding strategic planning and development. Our Board of Directors also benefits from his historical knowledge of our Company and his broad andin-depth understanding of our markets and customers. Mr. Lines has served our Company in various executive capacities for more than 20 years, and has more than 30 years of experience interacting with our customers, engineering contractors, competitors and similar companies serving the energy markets.
Lisa M. Schnorr
Age:54
Director Since:2014
Term Expires:2021
Ms. Schnorr has served as a Senior Vice President for Constellation Brands, Inc. (NYSE: STZ), a leading international producer and marketer of beer, wine and spirits, since January 2018 and has held the role of Project Lead, Digital Enablement for Constellation Brands since October 2019. Ms. Schnorr joined Constellation Brands in May 2004 as Director, Investor Relations and served in various roles including Vice President, JV Business Development from January 2010 to April 2011, Vice President, Compensation & HRIS from May 2011 to January 2014, Senior Vice President, Total Rewards from January 2014 to July 2015, Corporate Controller from July 2015 to January 2018 and most recently served as Chief Financial Officer for Constellation Brands’ Wine and Spirits Division from January 2018 to October 2019.
With her background in human resources, investor relations and finance with large public companies, Ms. Schnorr offers a global business and organizational perspective to our Board of Directors. The Board of Directors believes that Ms. Schnorr’s background and expertise enables her to guide us through a continued period of organic and acquisition-related growth and allows her to provide insight and leadership to our Compensation Committee.
James J. Malvaso
Age: 70
Director Since:2003
Term Expires: 2022
After his retirement as President and Chief Executive Officer of Toyota Material Handling North America, a manufacturer and distributor of Toyota material handling equipment, and Managing Officer of Toyota Industries Corporation, positions he held from April 2010 until March 2012, Mr. Malvaso acted as a senior advisor to Toyota Material Handling Group until May 2013. From 1997 until 2010, Mr. Malvaso served as the Chairman, President and Chief Executive Officer of The Raymond Corporation, a subsidiary of Toyota and the North American market leader in electric warehouse trucks, located in Greene, New York. Mr. Malvaso is a former President of the Industrial Truck Association and a current member of its Industrial Truck Standards Development Board. Mr. Malvaso has also served as a Trustee of LeMoyne College.
Mr. Malvaso has proven business acumen, having successfully served as the chief executive officer of large, complex businesses with global operations. His experience with a major industrial equipment company is particularly helpful to our Board of Directors in understanding the challenges of global manufacturing, distribution and sales as it relates to the business and strategy of our Company.
Jonathan W. Painter
Age:61
Director Since:2014
Term Expires: 2022
Mr. Painter has served as the Executive Chairman, since July 2019, and a director, since January 2010, of Kadant Inc. (NYSE: KAI), a leading global supplier of components and engineered systems used in process industries, including the pulp and paper industry. From September 2009 to March 2019, Mr. Painter served as President of Kadant Inc. and from January 2010 to June 2019, Mr. Painter also served as the Chief Executive Officer of Kadant Inc. Prior to becoming its President, Mr. Painter served as an Executive Vice President from 1997 to September 2009, with supervisory responsibility for Kadant Inc.’s stock-preparation and fiber-based products businesses from March 2007 to September 2009. Mr. Painter also serves on the Board of Governors of the Handel and Haydn Society based in Boston, Massachusetts.
Mr. Painter brings valuable experience to the Board of Directors and management as an executive officer of a public company that, similar to us, is in the business of designing, manufacturing and marketing specialized, engineered equipment. The Board of Directors believes that Mr. Painter’s diverse experience in operations, finance, mergers and acquisitions and corporate strategy enables him to provide critical insight to the Board of Directors and management that will help us to achieve our strategic goals.
Our Board of Directors has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. We describe the function, composition, and number of meetings of each of these committees held during fiscal year 2020 below.
Our Corporate Governance Guidelines provide that the independence standards of the New York Stock Exchange, which we refer to as the NYSE govern the independence determinations for the members of our Board. The Board of Directors. Our Board of Directors has affirmatively determined that each of directorsMessrs. Barber, Fortier, Malvaso, Mazurkiewicz, Painter, and Stoner, and Mses. Jaroslawsky and Schnorr is independent and has no material relationship with us as required by the independence standards of the NYSE. AsIn addition, the Board has determined that Messrs. Malvaso and Mazurkiewicz were independent during their respective period of service with the Company under the NYSE independence standards. Mr. Thoren, our Chief Executive Officer and employee, and Mr. Lines, our President andformer Chief Executive Officer isand former employee, are not independent.
Mr. Malvaso,Painter, anon-executive independent director, serves as ChairmanChair of our Board of Directors.the Board. Our Board of Directors believes that its leadership structure, with anon-executive chairmanChair position separate from our President and Chief Executive Officer, provides appropriate, independent oversight of management. As ChairmanThe Chair of our Board of Directors, Mr. Malvaso presides at all meetings of ourthe Board of Directors and stockholders; presides during regularly held sessions with only the independent directors; encourages and facilitates active participation of all directors; develops the calendar of and agendas for boardBoard meetings in consultation with our Chief Executive Officer and other members of our Board of Directors;the Board; determines, in consultation with our Chief Executive Officer, the information that should be provided to ourthe Board of Directors in advance of meetings; and performs any other duties requested by ourthe Board of Directors from time to time.
Committees and Meetings of the Board of Directors;Board; Meeting Attendance
Our Board has a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. The duties and responsibilities of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are set forth in their respective charters and are described below. The current charter of each board committee is available on our website atwww.graham-mfg.com www.grahamcorp.com under the heading “Investor Relations” and the subheading “Corporate Governance.“Governance.” Information contained on our website is not a part of this proxy statement.
The following table lists the membership of the committees of ourthe Board, of Directors, the chairpersonsChairs of each committee, the directors who currently serve on them and the number of committee meetings held in fiscal year 2020.2022.
| Committee Membership | Committee Membership | |||||||||||||||||
| Name | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | ||||||||||||
James J. Barber, Ph.D. | ☑ | ☑ |
|
|  |  | ||||||||||||
Alan Fortier | ☑ | Chairperson |
| |
| | ||||||||||||
James J. Malvaso | ☑ | ☑ | ☑ | |||||||||||||||
Gerard T. Mazurkiewicz | Chairperson | ☑ | ||||||||||||||||
Cari L. Jaroslawsky(3) |
| |
| | ||||||||||||||
Jonathan W. Painter | ☑ | ☑ |
| | |
| ||||||||||||
Lisa M. Schnorr | ☑ | Chairperson |
| | |
| ||||||||||||
Meetings in fiscal year 2020: | 5 | 2 | 2 | |||||||||||||||
Troy A. Stoner(4) |
|
| | | ||||||||||||||
| Number of meetings in fiscal year 2022: |
| 5 | 6 | 5 | ||||||||||||||
= Chair
= Member
10 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Corporate Governance • Committees and Meetings of the Board; Meeting Attendance |
| (1) | Mr. Barber served on the Audit Committee from April 1, 2021 to August 31, 2021. Since September 1, 2021, Mr. Barber has served on the Compensation Committee. Mr. Barber served on the Nominating and Corporate Governance Committee during all of fiscal year 2022. |
| (2) | Mr. Fortier served on the Compensation Committee from April 1, 2021 to August 31, 2021. Since September 1, 2021, Mr. Fortier has served on the Audit Committee. Mr. Fortier served on the Nominating and Corporate Governance Committee during all of fiscal year 2022. |
| (3) | Ms. Jaroslawsky joined the Board in March 2022. |
| (4) | Mr. Stoner joined the Board in March 2022. |
During fiscal year 2020, our2022, the Board of Directors held a total of fiveeight meetings. Each director attended at least 75% of the aggregate of the total number of meetings of ourthe Board, of Directors, and the total number of meetings of all committees of ourthe Board of Directors on which he or she served.
Thenon-management directors meet without members of management present during regularly scheduled executive sessions and at such other times as they deem necessary or appropriate. The ChairmanChair of ourthe Board of Directors presides over these executive sessions.
Our policy requires that each director attend our annual meeting of stockholders or provide the ChairmanChair of ourthe Board of Directors with advance notice of the reason for not attending. All of our then serving directors attended our 20192021 annual meeting of stockholders.
Audit Committee
We have a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended which we refer to as the Exchange Act. Our(the “Exchange Act”). The Board of Directors has affirmatively determined that each member of the Audit Committee satisfies the independence standards of the NYSE applicable to audit committee members and applicable Securities and Exchange CommissionSEC rules. OurThe Board of Directors has also determined that Mr. Mazurkiewiczeach of Mses. Jaroslawsky and Schnorr qualifies as an “audit committee financial expert” in accordance with applicable Securities and Exchange CommissionSEC rules based on histheir education and experience as a certified public accountant and extensive professional work experience as described in his biographyeach of their biographies under “Proposal One: Election of Directors.”
The Audit Committee reviews with Deloitte & Touche LLP, our independent registered public accounting firm, our financial statements and internal control over financial reporting, Deloitte & Touche LLP’s auditing procedures and fees, and the possible effects of professional services upon the independence of Deloitte & Touche LLP.
The Audit Committee works closely with ourthe Board, of Directors, our executive management team and our independent registered public accounting firm to assist ourthe Board of Directors in overseeing
our accounting and financial reporting processes and financial statement audits. In furtherance of these responsibilities, the Audit Committee assists ourthe Board of Directors in its oversight of:
the integrity of our financial statements and internal controls;
our compliance with legal and regulatory requirements;
the qualifications and independence of our independent registered public accounting firm;
the performance of our independent registered public accounting firm;
the planning for and performance of our internal audit function; and
risk management (including risk management relating to cybersecurity).
In addition, the Audit Committee’s responsibilities include reviewing and overseeing any transactions between us and any related person as defined by the Securities and Exchange Commission’sSEC’s rules and discussing our guidelines and policies with respect to risk assessment and risk management. The Audit Committee is also responsible for preparing the Audit Committee’s report that the Securities and Exchange Commission’sSEC’s rules require to be included in our annual proxy statement, and performing such other tasks that are consistent with the Audit Committee’s charter. The Audit Committee’s report appears under the heading “Report of the Audit Committee.”
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee evaluates, interviews and nominates candidates for election to ourthe Board of Directors and is responsible for oversight of our corporate governance practices.
When identifying director nominees, the Nominating and Corporate Governance Committee solicits suggestions from incumbent directors, management and stockholders. In identifying and evaluating nominees, the Nominating and
GRAHAM CORPORATION 2022 PROXY STATEMENT | 11 | |
Corporate Governance • Committees and Meetings of the Board; Meeting Attendance |
Corporate Governance Committee seeks candidates possessing the highest standards of personal and professional ethics and integrity; practical wisdom, independent thinking, maturity and the ability to exercise sound business judgment; skills, experience and demonstrated abilities that help meet the current needs of our Board of Directors;the Board; and a firm commitment to the interests of our stockholders. Although the Nominating and Corporate Governance Committee does not maintain a specific written diversity policy, it recognizes the value of diversity and seeks diverse candidates when possible and appropriate and considers diversity in its review of candidates. The Nominating and Corporate Governance Committee believes that diversity includes not only gender and ethnicity, but the various perspectives that come from having differing geographic and cultural backgrounds, viewpoints and life experiences.
In addition, the Nominating and Corporate Governance Committee takes into consideration such other factors as it deems appropriate. These factors may include knowledge of our industry and markets, experience with businesses and other organizations of comparable size, the interplay of the nominee’s experience with the experience of other members of ourthe Board, of Directors, and the extent to which the candidate would be a desirable addition to ourthe Board of Directors and any of its committees. The Nominating and Corporate Governance Committee may consider, among other factors, experience or expertise in our industry, global business, science and technology, competitive positioning, corporate governance, risk management, finance or economics, and public affairs.
Stockholders entitled to vote in the election of directors at any annual meeting may recommend candidates for consideration by the Nominating and Corporate Governance Committee as potential nominees by submitting written recommendations to the attention of our Corporate Secretary at the
following address: Graham Corporation, 20 Florence Avenue, Batavia, New York 14020. Stockholder recommendations must contain: (i) each candidate’s name, age, business and residence addresses; (ii) the candidate’s principal occupation or employment; (iii) each candidate’s written consent to serve as a director, if elected; (iv) whether each candidate would be an independent director if elected, and the basis therefore, under the New York Stock ExchangeNYSE listing standards; (v) a description of the candidate’s qualifications to be a director; and (vi) such other information regarding each candidate as would be required to be included in the proxy statement pursuant to the Securities and Exchange Commission’sSEC’s rules. Any stockholder submitting a recommendation must provide his or her own name and address as they appear on our books and records, as well as the class and number of our shares owned of record and the dates he or she acquired such shares. In addition, any stockholder submitting a recommendation must provide (i) a description of all arrangements or understandings between the stockholder and each candidate and any other person pursuant to which the nominations were made; (ii) the identification of any person retained by the stockholder or by any candidate, or any person acting on his or her behalf to make solicitations for the purpose of electing such candidate and a brief description of the terms of such arrangement; (iii) a description of any arrangement, the effect or intent of which is to mitigate loss, manage risk or benefit from changes in the Company’s share price, or increase or decrease the voting power of the stockholder or beneficial owner with respect to the Company’s shares, and the stockholder’s agreement to notify the Company in writing within five business days after the record date for such meeting of any such arrangement in effect as of the record date for the meeting; and (iv) any such information regarding the stockholder as would be required to be included in a proxy statement or provided to the Company pursuant to the Securities and Exchange Commission’sSEC’s rules. The Nominating and Corporate Governance Committee will evaluate director candidates proposed by stockholders using the same criteria, and in the same manner, as described above for other potential nominees.
Compensation Committee
The Compensation Committee annually reviews and approves the goals and objectives relevant to the compensation of the Chief Executive Officer, evaluates the Chief Executive Officer’s performance and either as a committee or with the other independent directors of the board,Board, determines and approves the Chief Executive Officer’s compensation levels.
The Compensation Committee also annually reviews and approves salaries, incentive cash awards and other forms of compensation paid to our other executive officers, approves recipients of equity-based awards and establishes the number of shares and other terms applicable to such awards. The Compensation Committee also construes the provisions of and generally administers the Amended and Restated 20002020 Graham Corporation Incentive Plan to Increase Shareholder Value, which we refer to as the Existing Equity Incentive Plan (the “Equity Incentive Plan”), and any successor plan thereto. The Compensation Committee operates pursuant to its charter and may delegate its authority or responsibility to one or more subcommittees.
The Compensation Committee also reviews and makes recommendations regarding the compensation paid to our Board of Directors, including fees paid for meeting attendance and equity-based awards.the Board. More information about the compensation of our directors is set forth under the heading “Director Compensation.” The Compensation Committee annually conducts a performance evaluation of its operation and function and recommends any proposed changes to ourthe Board of Directors for approval.
12 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Corporate Governance • Committees and Meetings of the Board; Meeting Attendance |
In addition, the Compensation Committee is responsible for reviewing and discussing with management the Compensation Discussion and Analysis that is included in our annual proxy statement and performing such other tasks that are consistent with its charter.
The Compensation Committee recognizes the importance of using an independent consultant that provides services solely to the Compensation Committee and not to management. The Compensation Committee typically engages aengaged an independent compensation consultant every few years. Duringin fiscal year 2020, no compensation consultant was engaged by2022. For more information on the role of the Compensation Committee.Committee in determining executive compensation, including its use of an independent consultant, see “Compensation Discussion and Analysis” under the heading “Executive Compensation.”
Corporate Governance Guidelines
OurThe Board of Directors has adopted Corporate Governance Guidelines to promote the effective functioning of the Board of Directors in its governance of our business and corporate operations. The Corporate Governance Guidelines are available on our website atwww.graham-mfg.com www.grahamcorp.com under the heading “Investor Relations” and the subheading “Corporate Governance.subheadings “Governance” and “Governance Documents.”
Political Contribution Policy Statement
The Board has adopted a political contribution policy statement, which outlines the Company’s policies, procedures and philosophy regarding its political contributions and activities. It is the Company’s policy not to make independent political expenditures in support of the election or defeat of particular candidates and not to maintain a political action committee. This policy is available on our website at www.grahamcorp.com under the heading “Investor Relations” and the subheadings “Governance” and “Governance Documents.”
Board Policy on Stockholder Rights Plans
We do not have a “poison pill” or stockholder rights plan. If we were to adopt a stockholder rights plan, the Board would seek prior stockholder approval of the plan unless, due to timing constraints or other reasons, a majority of independent directors of the Board determines that it would be in the best interests of stockholders to adopt a plan before obtaining stockholder approval. If a stockholder rights plan is adopted without prior stockholder approval, the Board will submit the plan for approval by stockholders prior to the first anniversary of the effective date of the plan or the plan will otherwise terminate.
The Board of Director’sBoard’s Role in Risk Oversight
OurThe Board of Directors oversees our risk profile and management’s processes for managing risk, primarily through the board’sBoard’s committees. Our Audit Committee focuses on financial risks, including those that could arise from our accounting and financial reporting processes. Additionally, our Audit Committee monitors and directs the formal risk management projects implemented by management. Our Nominating and Corporate Governance Committee focuses on the management of risks associated with board organization, membership and structure, corporate governance, and the recruitment and retention of talented boardBoard members. Our Compensation Committee focuses on the management of risks that could arise from our compensation policies and programs and, in particular, our executive compensation programs and policies.
As part of its risk oversight responsibilities, ourthe Board of Directors and its committees review the policies and processes that senior management uses to manage our risk exposure. In doing so, ourthe Board of Directors and its committees review our overall risk function and senior management’s establishment of appropriate systems and processes for managing areas of material risk to ourthe Company, including, but not limited to, operational, financial, legal, regulatory, strategic and information technology risks (including with respect to cybersecurity).
Communications from Stockholders and other Interested Parties
Stockholders and other interested parties who wish to contact the Board of Directors or an individual director, including the independent ChairmanChair of ourthe Board of Directors or independent directors as a group, should send their communications to the attention of the Corporate Secretary, Graham Corporation, 20 Florence Avenue, Batavia, New York 14020. The Corporate Secretary will forward all such communications as directed unless the communication is inappropriate.
GRAHAM CORPORATION 2022 PROXY STATEMENT | 13 | |
Environmental and Social Matters • Commitment to Sustainability |
ENVIRONMENTAL AND SOCIAL MATTERSEnvironmental and Social Matters
Human Capital ManagementCommitment to Sustainability
Oversight
Graham Corporation is committed to embedding sustainability throughout our business. We believe that all our stakeholders must be considered in our everyday actions. In 2021, we enhanced our environmental, social and governance (“ESG”) strategy to align with the broader transformation of our business. Our executive management team recognized the importance of embedding environmental and social priorities within our business operations and approved an enhanced and modernized ESG strategy intended to drive additional progress on initiatives that promote sustainability and increase transparency. Notably, to help ensure our accountability and progress, the Board has appointed Mr. Thoren, Graham’s Chief Executive Officer, as the lead officer with responsibility for overseeing and advancing the Company’ efforts with respect to ESG initiatives. In such capacity, Mr. Thoren reviews our ESG efforts with the Board and the various Board committees as appropriate.
This year, we also established an ESG working group, which is responsible for leading our ESG strategy and monitoring our corporate social responsibility and environmental sustainability initiatives. This group includes cross-functional subject matter experts from across the business. Against this backdrop, we have, with the assistance of outside ESG expertise, performed an assessment of key indicators and engaged with our internal and external stakeholders on ESG topics to help further inform our future direction and tenets. This ESG working group oversees Graham’s sustainability strategy and subsequent disclosures, including the production of our recently released 2022 Sustainability Accounting Standards Board (SASB) Factsheet available on our website www.grahamcorp.com.The four tenets of our ESG strategy are shown below:
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Environment
We believe that human capitala focus on environmental stewardship is fundamental and integral to the work we do every day to serve our customers, create value for our stockholders, and benefit our global community. We have taken steps at both our business units in Batavia, New York and Arvada, Colorado to improve energy efficiencies and air quality that are intended to lessen our impact on the environment. Notably:
Encouraged environmentally friendly work practices by supporting recycling, reuse, and by continuing to install energy efficient equipment;
Increased the use of e-records and e-signing technology resulting in paper waste and carbon emissions reduction;
Engaged with energy professionals to conduct regular inspections and provide utility and financial savings information to relevant decision makers;
Maintained a concerted effort to reduce our reliance on energy, which in turn mitigates the strain we place on the power grid; and
Protecting biodiversity at our sites and in surrounding habitats.
Furthermore, in addition to serving mature fossil-based end markets, we are well established in and support the development of emerging and transformative products for alternate and renewable energy sources. Graham Batavia, NY maintains compliance with multiple quality programs including The American Society of Mechanical Engineers (ASME) and the National Board of Boiler & Pressure Vessel Inspectors while maintaining ISO 9001 certification. Barber-Nichols is certified to AS9100 and ISO 9001.
14 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Environmental and Social Matters • Commitment to Sustainability |
We have over 490 employees across our facilities, including our new 43,000 square foot, state-of-the-art manufacturing plant that is part of the 96,000 square foot facility in Arvada, Colorado, where our commitment to reducing the waste we generate and utilizing our expertise to produce high quality and sustainable products. Each of our facilities are diligent in controlling hazardous waste and ensuring wastewater and storm sewer discharges are monitored to support greater access to clean water. Additionally, a key aspect of our ESG strategy is climate change. We help minimize our environmental footprint with Adopt A Street activities, factory recycling programs, electric car charging stations, and energy saving initiatives like LED lighting, motion sensors for lighting, smart compressors to manage energy loads and installing programmable thermostats in our facilities.
Our People
At Graham, we believe our most important asset is our people. We are committed to fostering and embracing a Graham community in which employees share a mutual understanding and respect for each other. Our pledge to diversity and equality encompasses our commitment to create a work environment which embraces inclusion regardless of race, color, religion, gender, sexual orientation, gender identity, national origin, age, genetic information, marital status, amnesty, pregnancy, childbirth, disability, veteran status, or medical conditions. We continually strive to use our knowledge, talents, and resources to improve the quality of life of our workforce.
Diversity, Equality & Inclusion (“DEI”) is very important to us at Graham. Our commitment starts with our goal of attracting, retaining, and developing a workforce that is diverse in background, knowledge, skill, and experience. As of March 31, 2022, women represented approximately 19% and self-identified racial and ethnic minorities represented approximately 5% of our workforce. We strive to mirror our local communities through recruitment in our high schools and community colleges.
Our management recognizes that a diverse workforce and a culture of equity and inclusion helps us compete more effectively, sustain success, and build long-term shareholder value. We encourage every one of our team members to form deeper relationships with those around them based on mutual respect, dignity, and understanding. Furthermore, to encourage productive conversations within our organization, we have implemented employee surveys. Graham has robust non-discrimination and anti-harassment policies as outlined in our employee handbook, as well as a formal Code of Business Conduct and Ethics.
We believe that employee development areis vital to our continued success.success, and we support the development of our employees through programs such as our internal weld school training, our partnerships for external weld training, our tuition assistance program, and management training classes. Our management is continuously focused on developing an inclusive and respectful work environment where our employees are highly engaged and motivated. Management regularly engages with employees on a broad range of human capital management topics, including corporate culture, diversity and inclusion,
We are dedicated to ensuring the health and safety trainingof our team members by supporting the whole person. Our dedicated global health and development,safety function is executed through our business unit safety committees to ensure that employees are trained on best practices to create a safe and compensationhealthy workplace for all. Arvada has met the requirements to be certified as a Safety and benefits. SafetyHealth Achievement Recognition Program (SHARP) by OSHA. To ensure the health and wellbeing of our employees, is our top priority. In responsewe aim to provide a robust health and wellness package. Some of the recentvarious benefits we offer include:
Competitive medical, dental and vision benefits.
Flexible spending and health savings accounts for both healthcare and dependent care.
Short- and long-term disability insurance.
Paid maternity and parental leave.
401(k) retirement savings program, including company matching contributions.
Employee Assistance Program providing free counseling services.
Wellness incentives, including a wellness consultant.
Since the start of the COVID-19 pandemic in 2020 and throughout 2021, the health, safety, and wellness of Graham’s employees and their families have been our highest priority. We ask our employees and visitors to stay home if ill and we have taken stepsmaintain visitor logs to ensureenable contact tracing if necessary. Our leadership continues to monitor the health and safety of our employees including restricting business travelin accordance with the U.S. Centers for Disease Control and site visitors, implementing remote working for certain office employees, deep cleaningPrevention (CDC) and World Health Organization (WHO) guidelines.
GRAHAM CORPORATION 2022 PROXY STATEMENT | 15 | |
Environmental and Social Matters • Commitment to Sustainability |
Our Communities
We believe that investing in local communities to create positive social and economic outcomes is at the heart of our facilities, prohibiting group gatherings, and encouraging hygiene practices advised by health authorities.generating social impact. We expect to continue to enhance our practices to remain aligned with state and federal guidelines.
At Graham, we believe that to be successful we need to push ourselves to do our best, for our customers, for our stockholders, for the Company, for ourselves, for those around us, and for the world that we all share. We are committed to supporting the communities in which we do business by leveraging the power of our Company through donations, scholarships, education and participation with certain charitable organizations. For example, in response to theCOVID-19 pandemic, we have donated N95 masks to hospitals to help protect essential healthcare workers. We strive to use our capabilities, reach and resources to make a lasting difference in the world. Notably:
We are proud to be a partner with the Leukemia and Lymphoma Society Team in Training, and we support the American Cancer Society, Habitat for Humanity along with a long list of other charities.
We participated in the GLOW Corporate Cup. The goal of this event is for local businesses to form racing teams, compete in a fun atmosphere, and crown a winner of the Corporate Cup. With the proceeds raised from this event, the YMCA is able to fulfill its mission of youth development, healthy living and social responsibility in the GLOW region.
We participated in the United Way Day of Giving, the largest community-wide volunteer event across our region serving Genesee, Livingston, Monroe, Ontario, Wayne, and Wyoming counties.
We partner with nonprofit and for-profit organizations to enable low cost trades and university education through endowed scholarships, and implement elementary school STEM programs, where 30+ volunteers created STEM kits to support educational endeavors; and
| • | We spearheaded Women in Manufacturing events to further bolster industry participation. |
We believe it is our responsibility to respect human rights in our operations, including, among other things, by opposing human trafficking and the exploitation of children. Accordingly, we have adopted a Human Rights Policy Statement to emphasize our strong commitment to human rights. As another part of being a good corporate citizen, we adopted a Conflict Minerals Policy that is intended to support our commitment to sourcing components and materials from companies that share our values around human rights and ethics. Both policies are available on our website: www.grahamcorp.com.
Corporate Governance
Graham is committed to achieving excellence in our corporate governance practices. We emphasize a focus on environmental responsibilityculture of accountability and conduct our business in a manner that is fundamentalfair, ethical, and integralresponsible to earn the trust of our stakeholders. The Company has corporate governance and sustainability policies and structures in place to foster accountability and transparency. These policies reflect our underlying commitment to maintain the highest standards of ethics and integrity and to operate our business in compliance with all applicable anti-corruption, anti-bribery, and anti-trust laws and regulations.
The Board of Directors is comprised of a majority of independent directors as defined by the NYSE listing standards and the Board’s Corporate Governance Guidelines. All of the Board committees are comprised entirely of independent directors. The Board also believes that director refreshment is an important component of good corporate governance, and therefore, in March of 2022, nominated two new directors.
Graham recognizes that effectively managing enterprise risks is critically important to the worklong-term success of our business. Management is responsible for our company’s day-to-day risk management activities. Our company relies on a comprehensive risk management process to aggregate, monitor, measure, and manage risks. While we exercise oversight, we do every daynot have full control over our supply chain nor the suppliers we do business with; however, we continually seek to servepartner with suppliers that share common values and a shared commitment to our customers, create valueESG objectives.
As a global leader in the design and manufacture of critical electronics-enhanced turbomachines and turbomachine-based subsystems as well as vacuum and heat exchangers technologies, Graham is a trusted partner that meets the industry’s high bar for data resiliency and security. We leverage the latest encryption configurations and technologies on our stockholders,systems, devices, and benefitthird-party connections and further vet third-party vendors’ encryption, as required, through our global community. vendor management process.
We have taken steps atroutinely engage with our main operations in Batavia, New Yorkstakeholders to improve energy efficienciesbetter understand their views on ESG matters, carefully considering the feedback we receive and air quality that are intended to lessenacting when appropriate. For more information, please visit our impact on the environment. Further, in addition to serving mature fossil-based end markets, we are also entrenched in and support the development of emerging and transformative end markets that rely on alternate and renewable energy sources.website: https://grahamcorp.com.
16 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Executive Officers |
EXECUTIVE OFFICERSExecutive Officers
As of March 31, 2020,June 8, 2022, we were served by the following executive officers and Section 16 officers, each of whom was appointed by our Board of Directors:the Board:
James R. LinesDaniel J. Thoren, age 59,58, has served as our Chief Executive Officer since September 2021 and became our President and Chief ExecutiveOperating Officer in January 2008.June 2021. Further information about Mr. LinesThoren is set forth under “Proposal One: Election of Directors.”
Jeffrey F. GlajchChristopher J. Thome, age 57,51, became our Vice President—Finance & Administration, and Chief Financial Officer in March 2009.April 2022. Prior to joining the Company, Mr. Glajch also servesThome served as Corporate Controller and Treasurer of Allied Motion Technologies Inc., a producer of precision and specialty motion control components and systems, since February 2020 and held progressively advancing roles at Integer Holdings Corporation, a provider of advanced medical device outsourcing, from July 2006 to February 2020, including Senior Director—Treasurer and Senior Director—Financial Reporting, Treasury Operations and Shared Services. Mr. Thome is a certified public accountant.
Matthew Malone, age 35, became our Corporate Secretary. From October 2006 until February 2009, heVice President—Barber-Nichols in June 2021. Prior to joining the Company, Mr. Malone served as the President and Chief FinancialExecutive Officer of Nukote International, a privately heldglobalre-manufacturerBarber-Nichols in May 2021, having previously served as Barber-Nichols Vice President of printingOperations from May 2020 to May 2021, Project Management Office Manager from November 2017 to May 2020, and imaging products. Previously, between June 2000 and May 2006, Mr. Glajch was the Chief Financial Officer of Fisher Scientific Canada, a global healthcare and laboratory equipment company. Mr. Glajch also previously worked at Walt Disney World Company, Great Lakes Chemical Corporation and Air Products and Chemicals, Inc.Project Engineer from July 2015 to November 2017.
Alan E. Smith, age 53,55, became our Vice President and General Manager - Manager—Batavia in July 2015. Mr. Smith served as our Vice President of Operations from July 2007 until July 2015. Previously, from 2005 until July 2007, Mr. Smith served as Director of Operations for Lydall, Inc., a designer and manufacturer of specialty engineering products. Prior to that, he had been employed by us for fourteen years, progressing from Project Engineer to Engineering Manager.
Jennifer R. Condame,age 55,57, became our Chief Accounting Officer inJulyinJuly 2008. She also serves as our Corporate Controller, a position she has held since 1994. From 1992 to 1994, she was our Manager of Accounting and Financial Reporting. Prior to joining us in 1992, Ms. Condame was employed as an Audit Manager by Price Waterhouse, a predecessor to PricewaterhouseCoopers LLP.
GRAHAM CORPORATION 2022 PROXY STATEMENT | 17 | |
Executive Compensation • Compensation Discussion and Analysis |
EXECUTIVE COMPENSATIONExecutive Compensation
While we, asAs a smaller reporting company under the Securities Exchange Act of 1934, as amended,we are not required to provide certain disclosures pursuant to Item 402 of RegulationS-K, however, we have nonetheless elected to provide such executive compensation information in accordance with certain scaled disclosure requirements allowed of smaller reporting companies.companies to provide transparency with respect to the compensation of our named executive officers.
Compensation Discussion and Analysis
Introduction
This Compensation Discussion and Analysis which we refer to as the (“CD&A,&A”) provides information about the compensation programs for certain of our executive officers named in the fiscal year 2020Fiscal Year 2022 Summary Compensation Table and referred to in this CD&A and in the subsequent tables as our named executive officers.Table. These named executive officers are:
Daniel J. Thoren, our Chief Executive Officer;
Matthew Malone, our Vice President and General Manager - Barber-Nichols;
James R. Lines, our President andformer Chief Executive Officer; and
Jeffrey F. Glajch, our former Vice President - Finance & Administration, Chief Financial Officer and Corporate Secretary; andSecretary.
Alan E. Smith,Mr. Lines retired from the Company effective as of August 31, 2021 and is included as a named executive officer because he served as our Vice PresidentChief Executive Officer during fiscal year 2022. Mr. Glajch retired from the Company effective April 15, 2022 and General Manager - Batavia.is included as a named executive officer because he was among the two most highly compensated executive officers (other than the Chief Executive Officer) on the last day of fiscal year 2022.
This CD&A includes the philosophy and objectives of the Compensation Committee of our Board, of Directors, descriptions of each of the elements of our executive compensation programs, and thebasisthe basis for the compensation decisions we made during fiscal year 2020.2022.
Executive Summary
Fiscal Year 20202022 Results
The Compensation Committee’s philosophy focuses on aligning the interests of our named executive officers with those of our stockholders by rewarding performance that enhances the objective of increasing both current and long-term stockholder value. Our executive compensation programs are designed to provide a strong link between the amounts earned by our named executive officers and Company and individual performance.
During fiscal year 2020,2022, our named executive officers continued to implement our strategic plan to diversify, increase productivity, improve processes, and grow our market share and profits in our existing businesses.
We are experiencing weaknessEarly in our energy markets; however, our diversificationfiscal year 2022, we acquired Barber-Nichols which has changed the composition of the Company’s end market mix as we substantially increased sales to the defense industry and added sales to the space industry. While Barber-Nichols outperformed expectations in U.S. Navy work will help mitigatefiscal year 2022, Graham manufacturing faced challenges during the commercial market challenges. TheCOVID-19 pandemic hassame period which resulted in a significantly volatile economic and capital markets environment, which makes the future performance of our core markets unpredictable.added costs. Highlights of our financial results for fiscal year 20202022 are as follows:
Net sales for fiscal year 20202022 were $90.6$122.8 million, down 1%up 26% compared with $91.8$97.5 million in the fiscal year 2019; andended March 31, 2021 (“fiscal year 2021”). Barber-Nichols contributed $47.9 million of sales for fiscal year 2022, which more than offset the $22.5 million decline in our legacy business. Barber-Nichols has outperformed our expectations during the first ten months of ownership.
Net incomeloss for fiscal year 20202022 was $1.9$8.8 million, or $0.19$0.83 per diluted share, compared to a net lossincome for fiscal year 20192021 of $0.3$2.4 million, or a loss of $0.03$0.24 per diluted share.
During fiscal year 2020:
We divested of our commercial nuclear utility business to focus on our U.S. Navy and energy markets businesses;
We returned $4.25 million to our stockholders as dividends The net losses incurred in fiscal year 2020, compared with $3.83 million2022 were primarily due to our strategic decision to take on additional costs in fiscal year 2019;order to meet our customers’ delivery schedules. We estimate that these strategic decisions, as well as material cost increases for first article projects impacted our results by over $10.0 million. The losses at our Batavia, NY facility were partly offset by income from Barber-Nichols and higher refinery and chemical aftermarket sales.
At March 31, 2022, we had $0 outstanding on our line of credit. We ended the fiscal year with a solid balance sheet that was free of bank debt, providing us substantial financial flexibility.
In linebelieve this along with ourpay-for-performance philosophy, in fiscal year 2020, cash balances provide us adequate financial flexibility to meet our named executive officers realized the following compensation based on our fiscal year 2020 financial performance and their individual performance:
As described more fully under the heading “Annual Cash Incentive Compensation” in this CD&A, for fiscal year 2020 the Compensation Committee set challenging targets for two key financial metrics: net income and bookings. Our performance did not meet any level of the net income metric or the bookings metric. These levels of Company performance, as well as our named executive officers’ achievement against their individual goals, resulted in the payment of annual cash incentive compensation below target levels. We report the annual cash incentive compensation earned by each of the named executive officers during fiscal year 2020 in the“Non-Equity Incentive Plan Compensation” column of the Fiscal Year 2020 Summary Compensation Table.obligations.
18 |
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Executive Compensation • Compensation Discussion and |
| Number of Shares of Performance-Vested Restricted Stock | ||||||||
Named Executive Officer | Target Grant 2018 | Realized in 2020 | ||||||
James R. Lines | 7,274 | 3,419 | ||||||
Jeffrey F. Glajch | 3,226 | 1,516 | ||||||
Alan E. Smith | 2,879 | 1,353 | ||||||
Our “Pay for Performance” Philosophy
Our executive compensation programs contain key components and features that reinforce our “pay for performance” philosophy. For example:
A significant portion of our named executive officer’s compensation is“at-risk,” and depends on either meeting performance-based criteria or continuing in service to the Company. Both our short-term and long-term incentive compensation programs use goals that tie to our performance in key financial metrics. We pay 50% of our long-term incentive compensation in shares of performance-vested restricted stock. The shares of performance-vested restricted stock cliff vest on the third anniversary of the date of grant only upon the achievement of predetermined performance metrics. Our named executive officers receive the other 50% of long-term incentive compensation in restricted stock that time vests in equal
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| • | A significant portion of our named executive officers’ compensation is “at-risk,” and depends on either meeting performance-based criteria or continuing in service to the Company. Both our short-term and long-term incentive compensation programs use goals that tie to our performance in key financial metrics. During fiscal year 2022, we paid 50% of our long-term incentive compensation in shares of performance-vested restricted stock. The shares of performance-vested restricted stock cliff vest on the third anniversary of the date of grant only upon the achievement of predetermined performance metrics. Our named executive officers received the other 50% of long-term incentive compensation in restricted stock that time vests in equal installments of 331/3% on each anniversary of the date of grant, subject to the executive officer’s continued service at each such date. |
We require all of our named executive officers currently employed by us to hold substantial amounts of our stock. We believe that our robust stock ownership guidelines drive an ownership culture and enhance the connection between our management and our stockholders.
We do not reimburse or“gross-up” our named executive officers for any of the taxes associated with any of the compensation and benefits we provide to them.
We maintain “double-triggered” provisions in our agreements with our named executive officers under which payment is triggered only by certain terminations of employment subsequent to a change in control of our Company.
The Compensation Committee incorporates tally sheets as an analytical tool as part of its annual executive compensation review to help ensure that compensation is consistent with performance goals.
We provide limited perquisites and personal benefits beyond those provided to all other employees.
Our policies strictly prohibit our executive officers and directors from engaging in any hedging, pledging, or other monetization transactions involving our securities.
Principles and Objectives
In establishing executive compensation, the guiding principles and objectives of the Compensation Committee are as follows:
to provide market competitive compensation that includes an appropriate balance of fixed and incentive elements which allows us to both attract and retain executive personnel best suited by training, ability, and other relevant criteria for our management requirements;
to align our incentive compensation programs with superior business performance in order to maximize stockholder value; and
to avoid compensation incentives that create undue financial or business risk for our Company.
The Compensation Committee reviews the market median and also considers measures of Company and industry performance when determining named executive officer compensation, including revenue, net income, earnings per share, EBITDA margin, total market value, average working capital, performance relative to the market, and total stockholder return. As described further below under the heading “Use of Peer Group Compensation Data and Tally Sheets,” from time to time, the Compensation Committee reviews data on the executive compensation programs of othercomparably-sized companies both within our industry and in our geographic region as part of the process of establishing and maintaining our executive compensation programs.
We designed our executive compensation programs to reward our named executive officers for Company and individual performance that maximizes stockholder value. We describe the Company and individual performance measures that the Compensation Committee takes into account in determining cash and equity-based incentive awards for our named executive officers below under the headings “Annual Cash Incentive Compensation” and “Long-Term Equity Incentive Compensation,” respectively.
GRAHAM CORPORATION 2022 PROXY STATEMENT | 19 | |
Executive Compensation • Compensation Discussion and Analysis |
How Wewe Make Compensation Decisions
Role of the Compensation Committee
The Compensation Committee designs and implements compensation programs that further the intent and purpose of our fundamental compensation philosophy, principles, and objectives. The Compensation Committee is responsible for setting appropriate compensation levels for our named executive officers, and determines base salary, as well as cash and equity-based incentive awards for each of our named executive officers. We provide additional information about the Compensation Committee under the heading “Corporate Governance.”
Role of Named Executive Officers in Compensation Decisions
Within the framework of the executive compensation programs approved by the Compensation Committee and based on management’s review of market competitive positions, our Chief Executive Officer annually reviews the performance of our other named executive officers and presents such performance information to the Compensation Committee. In addition, our Chief Executive Officer makes recommendations to the Compensation Committee with respect to the salary, cash incentive and equity-based incentive compensation paid to our other named executive officers. The Compensation Committee considers such performance information in determining each element of compensation for the other named executive officers. The Compensation Committee uses its discretion to determine whether to accept, reject or modify any adjustments to awards that may be recommended by our Chief Executive Officer. The Compensation Committee annually reviews the performance of our Chief Executive Officer. Our Chief Executive Officer does not play any role with respect to any matter affecting his own compensation.
On an annual basis, our Chief Executive Officer also approves and recommends to the Compensation Committee the individual objectives for our other named executive officers under the Stock Bonus Plan and Cash Bonus Program. The ChairpersonChair of our Compensation Committee, in consultation with the ChairmanChair of ourthe Board, of Directors, approves individual objectives for our Chief Executive Officer.
Use of Outside Consultants by the Compensation Committee
The Compensation Committee believes that it benefits from external advice and assistance to help meet its objectives and fulfill its responsibilities. The Compensation Committee periodically engages outside consultants to educate and inform Committee members with regard to compensation matters, including the advantages and disadvantages of existing and proposed compensation programs, and keeps the Compensation Committee abreast of current and emerging compensation trends both within our industry and for companies of similar size and stature. These consultants also may advise the Compensation Committee with respect to various compensation alternatives, provide the Compensation Committee with relevant market compensation data and assist the Compensation Committee in analyzing such data when making compensation decisions.
The Compensation Committee typically engages a compensation consultant every few years. During fiscal year 2020, no compensation consultant was engaged by2022, the Compensation Committee.Committee engaged Frederic W. Cook & Co., Inc. to assist the Compensation Committee with respect to the compensation paid to the Company’s senior executive officers.
Use of Peer Group Compensation Data and Tally Sheets
Peer Group Compensation Data.When making compensation decisions, the Compensation Committee may consider executive compensation programs and individual elements of compensation paid to other named executive officers at a group ofcomparably-sized companies both within our
industry and in our geographic region or which we otherwise consider to be our peers. When selecting our peer group shown below, the Compensation Committee considered the companies’ revenue, market capitalization, number of employees, and industry classification.
| DMC Global, Inc. | ||||
| Allied Motion Technologies Inc. | Energy Recovery, Inc. | Perma-Pipe International Holdings, Inc. | ||
| Hurco Companies, Inc. | The Eastern Company | |||
| CECO Environmental Corp. | Natural Gas Services Group, Inc. | The Gorman-Rupp Company | ||
| CPI Aerostructures, Inc. | Orbital Energy Group, Inc. | Thermon Group Holdings, Inc. |
20 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Executive Compensation • Compensation Discussion and Analysis |
The Compensation Committee may use peer group compensation data to provide an informational perspective on our compensation practices, levels of base salary, and the design of annual cash and long-term equity incentive compensation programs and the overall competitiveness of our compensation program.
Tally SheetsSheets.. The Compensation Committee analyzes tally sheets prepared for each named executive officer as part of its responsibilities for our executive compensation programs. Tally sheets present the dollar amount of each component of compensation for each named executive officer. The purpose of tally sheets is to bring together, in summary form, all of the elements of total direct compensation for our named executive officers so that the Compensation Committee may analyze both the individual elements of compensation (including the weighting of each element as compared to each other element) and the aggregate amount of total direct compensation. During fiscal year 2020,2022, the Compensation Committee regularly used tally sheets to assist in its review of the compensation of our named executive officers. No compensation changes were made with respect to fiscal year 20202022 compensation based on those reviews.
Executive Compensation Components
As discussed in greater detail below, our compensation philosophy focuses on aligning the total direct compensation of our named executive officers with the interests of our stockholders by rewarding performance that enhances the objective of increasing both current and long-term stockholder value. We use the term “total direct compensation” to refer to the sum of base salary, annual incentive compensation, and long-term incentive compensation.
Total Direct Compensation | = | Base Salary | + | Annual Incentive Compensation | + | Long-Term Incentive Compensation | ||||||||||
The components of total direct compensation granted during fiscal year 20202022 were:
Compensation Element | Form of Compensation | Purpose | Performance Criteria | |||
Base Salary | Cash | Provide compensation that is not“at-risk” to compensate our named executive officers for services rendered during the fiscal year | Not performance based | |||
Annual Incentive Compensation | Cash | Motivate our named executive officers to attain vital short-term Company and individual objectives | Net income, bookings, and individual officer goals linked to achievement of Company strategic objectives | |||
Long-term Incentive Compensation | Performance-Vested Restricted Stock | Incent our named executive officers to focus on Company growth, align their compensation with our business strategy, and create value for our stockholders | ||||
Time-Vested Restricted Stock | Encourage retention of our named executive officers over a three-year period | Not performance based | ||||
The Compensation Committee seeks to align our annual and long-term compensation elements to our strategic plan. We strive to strike a balance between establishing incentives that motivate our named executive officers to achieve meaningful results, while ensuring that we sufficiently recognize our named executive officers for achieving results that
GRAHAM CORPORATION 2022 PROXY STATEMENT | 21 | |
Executive Compensation • Compensation Discussion and Analysis |
are within their control. The Compensation Committee believes that the diversity of the selected forms of compensation and the applicable performance metrics help to manage the pay for performance challenges presented by the cyclicality of our business while creating the proper focus among our named executive officers to facilitate our growth.
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We establish each element comprising target total direct compensation for the named executive officers annually. We do not have a specific policy for the allocation of compensation between short-term and long-term compensation or cash and equity compensation, as the allocation of these items is primarily driven by market compensation information and Company performance and goals.
We generally do not consider gains realized from prior compensation, such as stock option exercises and restricted stock vesting, in setting other elements of compensation. We believe that reducing or limiting restricted stock awards because of prior gains realized by a named executive officer would unfairly penalize the officer for outstanding past performance and reduce the motivation for continued outstanding achievement. Similarly, our severance andchange-in-control arrangements, which we discuss in detail under the heading “Potential Payments upon Termination or Change in Control,” do not affect our decisions regarding other elements of compensation. Those arrangements serve specific purposes that are unrelated to the determination of a named executive officer’s compensation for a specific year.
In support of our “pay for performance” philosophy, our executive compensation is heavily weighted toward incentive (variable) compensation, and the proportion of variable, or “at risk,” compensation increases as the level of responsibility increases. As shown below, in fiscal year 2020,2022, we provide 63%provided 69% of our Chief Executive Officer’s target compensation through annual and long-term incentive compensation, and, on average, we provide 51%provided 53% of our other named executive officers’ target compensation through annual and long-term incentive compensation.
Beginning in fiscal year 2023, we have changed our form of long-term compensation awards. Our Compensation Committee will grant awards consisting of time-based restricted stock units and performance-based restricted stock units instead of our traditional awards of time-vested and performance-vested restricted stock. We believe the use of such restricted stock units will continue to support our long-term compensation philosophy as well as emphasize performance and alignment of executives’ interests with our stockholders. The Compensation Committee will continue to review our executive compensation programs, as well as consider the outcome of the “say-on-pay” votes when making future compensation decisions for the named executive officers.
Fiscal Year 20202022 Total Target Compensation*
| * | The fair market value of |
22 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Executive Compensation • Compensation Discussion and Analysis |
We also provide compensation and benefits to our named executive officers through the following programs:
Compensation Element | Form of Compensation | Purpose | ||
Health and welfare plans | Eligibility to receive health and other welfare benefits paid for by the Company, including life insurance, | Provide a competitive employee benefits program | ||
Retirement benefits | Named executive officers hired prior to January 1, 2003 (Mr. | Provide an incentive for long-term retention of our named executive officers | ||
Limited perquisites and other personal benefits | A $5,000 allowance for our Chief Executive Officer ($2,500 for our other named executive officers) to purchase term life insurance and an additional amount necessary to purchase a personal umbrella insurance policy | Provide a competitive compensation package, facilitate strong, focused performance and better enable us to attract and retain superior employees for key positions | ||
Stockholder Advisory Vote on Executive Compensation
At our 20192021 annual meeting of stockholders, our stockholders approved, by 83.2% of the votes represented in person or by proxy, on an advisory basis, the compensation of our named executive officers as disclosed in our 20192021 proxy statement, referred to as a“say-on-pay” vote. Without taking into account brokernon-votes, we received approval by 95.8% of the votes represented in person or by proxy.
At our 2017 annual meeting of stockholders, our stockholders expressed a preference that the“say-on-pay” vote take place on the annual basis recommended by our Board of Directors.Board. This preference was subsequently adopted by our Board, of Directors, and so we are providing our stockholders with a“say-on-pay” vote this year.
The Compensation Committee evaluated the positive results of the 20192021 “say-on-pay” vote as well as the other factors discussed in this CD&A. While eachEach of these factors informed the Compensation Committee’s decisions regarding our executive compensation programs, the Compensation Committee did not implement changes to our executive compensation programs as a result of the 2019“say-on-pay” vote.
Annual Base Salaries
The Compensation Committee reviews base salaries for each of our named executive officers at least annually. In general, the Compensation Committee sets base salaries based on the following factors:
factors including Company performance;
and individual performance;
performance, job responsibilities;
responsibilities, internal pay equity;equity, and
base salary levels of similar positions in our peer group.
The annual base salariessalary rate for Messrs. Lines, Glajch, and Smith at March 31, 2019 were $435,000, $280,252 and $250,058, respectively. The Compensation Committee approved a 15% increase to the base salaryMr. Thoren is $400,000. Effective as of Mr. Lines, increasing his base salary to $500,000 effective April 1, 2019. The Compensation Committee approved 3% increases to the base salaries of each of our named executive officers other than2022, Mr. Lines, effective April 1, 2019 (the first day of our fiscal year ending March 31, 2020), increasing the base salaries for Messrs. Glajch and Smith to $288,660 and $257,560, respectively. The increases to the base salaries of each of our named executive officers other than Mr. Lines were consistent with salary increases implemented to all employees on a company-wide basis. In addition, effective September 12, 2019, pursuant to an amendment to his employment agreement, Mr. Glajch’sMalone’s annual base salary was increased to $325,000.rate is $300,000 following the Compensation Committee’s approval of an increase from his prior annual rate of $250,000. Until their retirements from the Company, Messrs. Lines and Glajch had an annual base salary rate of $500,000 and $334,750, respectively. For additional information about the annual base salariessalary rates of our named executive officers, see Fiscal“Fiscal Year 20202022 Summary Compensation TableTable” below.
Annual Cash Incentive Compensation
Our Annual Executive Cash Bonus Program, which we refer to as the Cash Bonus Program, is designed to compensate our named executive officers for above-average performance through an annual cash incentive award related both to Company and individual performance. We instituted the Cash Bonus Program to effectively align short-term individual performance with Company performance.
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Executive Compensation • Compensation Discussion and Analysis |
The Compensation Committee designed the Cash Bonus Program to provide a clear link between the named executive officers’ goals and our performance and business objectives. In fiscal year 2020,2022, the Compensation Committee used a combination of net income, bookings, and personal objectives as the performance metrics to evaluate our named executive officers’ performance under the Cash Bonus Program. The net income performance metric is based on 20202022 fiscalyear-end results. Bookings represent new orders received from customers requesting us to supply products and services and entered into backlog during fiscal year 2020,2022, reduced by any backlog cancellations. The Compensation Committee selected net income and bookings achieved as the quantitative measures of short-term performance because it believes that these metrics impact our annual profitability and growth.
For fiscal year 2020,2022, the Compensation Committee established personal goals for our named executive officers, which included the following:
Mr. Thoren - develop and implement the Company’s long-term strategy, lead stabilization, improvement and expansion of the organization following the Barber-Nichols acquisition and management transition.
Mr. Malone - strengthen and broaden capabilities of management team in alignment with strategic segment growth.
Mr. Lines - deploy capital to expand revenue, strengthen sustained earnings, reduce earnings volatility, and improve return on invested capital.
Mr. Glajch - deploy capital to expand revenue, strengthen sustained earnings, reduce earnings volatilitydevelop corporate roles and improve return on invested capital.
Mr. Smith - structure supply chain management, improve Navy backlog conversion, and expand aftermarket and short-cycle revenueresponsibilities, develop process improvements, refine strategies for growth.
The Compensation Committee assigned the weightings applicable to the three metrics to align our named executive officers’ goals with our current business objectives as follows:
Metric | Weighting | |||
Net income(1) | 40 | % | ||
Bookings(2) | 40 | % | ||
Personal goals | 20 | % | ||
| (1) | For Messrs. Thoren, Lines and Glajch net income included consolidated net income and for Mr. Malone net income included consolidated net income (10%) and divisional income (30%). |
| (2) | For Messrs. Thoren, Lines and Glajch bookings included consolidated bookings and for Mr. Malone bookings included consolidated bookings (10%) and divisional bookings (30%). |
The Compensation Committee typically establishes the goals for the Cash Bonus Program during our annual budgeting process following the commencement of the fiscal year. The Compensation Committee typically approves such goals during our first quarter, subject to the ratification of our Board of Directors.the Board. The ChairpersonChair of our Compensation Committee, in consultation with the ChairmanChair of ourthe Board, of Directors, approves personal goals for our Chief Executive Officer. Our Chief Executive Officer develops the personal goals for our other named executive officers in alignment with our corporate strategy and recommends these goals to our Compensation Committee ChairpersonChair for approval.
For fiscal year 2020,2022, the Compensation Committee set target bonus levels at 100% attainment of both Company and individual objectives as follows: Mr. Thoren - 100% of base salary (previously 50% of base salary until he became Chief Executive Officer); Mr. Lines - 80% of base salary; Mr. Glajch - 50% of base salary; and Mr. SmithMalone - 50% of base salary. The Compensation Committee uses a stretch maximum payout level to better incentivize and reward above target performance. Each named executive officer may receive anywhere from 0% to 200% of his target bonus level depending on the attainment of objectives, as follows:
Target Level | Net Income Payout as Percentage of Target Bonus | Bookings Payout as Percentage of Target Bonus | Net Income Payout as Percentage of Target Bonus | Bookings Payout as Percentage of Target Bonus | ||||||||
Below Threshold | 0% | 0% | ||||||||||
Threshold | 25% | 25% | 50 | % | 50 | % | ||||||
Above Threshold | 50% | 50% | ||||||||||
Target | 100% | 100% | 100 | % | 100 | % | ||||||
Maximum | 200% | 200% | 200 | % | 200 | % | ||||||
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Executive Compensation • Compensation Discussion and Analysis |
We may use linear interpolation to determine the percentage of the target bonus payable based on performance in between threshold and target or target and maximum. The Compensation Committee may consider extraordinary events that either positively or negatively affect financial performance, and may in its discretion, include or exclude the impact of these events in approving awards under the Cash Bonus Program. The Compensation Committee did not exercise this discretion during fiscal year 2020.2022.
For fiscal year 2020,2022, threshold, target, maximum, and actual quantitative performance metrics used under the Cash Bonus Program were as follows (millions of dollars):
Performance Measure | Threshold | Target | Maximum | Actual | ||||
Net Income | $4.7 | $6.4 | $8.8 | $1.9 | ||||
Bookings | $90.0 | $120.0 | $160.0 | $80.0 | ||||
| Performance Measure | Threshold | Target | Maximum | Actual | ||||||||||||
Net Income (Loss) | $ 2.0 | $ 3.0 | $ 6.0 | $ (8.8 | ) | |||||||||||
Bookings | $130 | $160 | $200 | $143.9 | ||||||||||||
Divisional Operating Income | $ 2.2 | $ 3.2 | $ 5.1 | $ 4.3 | ||||||||||||
Divisional Bookings | $ 50 | $ 65 | $ 80 | $ 68 | ||||||||||||
At its June 9, 2020May 23, 2022 meeting, the Compensation Committee reviewed each named executive officer’s achievement of Company and individual objectives during fiscal year 20202022 and approved the award of cash incentive compensation under the Cash Bonus Program.Program for each named executive officer other than Mr. Lines who did not receive a bonus award. Based on our performance during fiscal year 2020,2022, the Compensation Committee determined that our named executive officersMr. Malone achieved above the target level for the net income and bookings component of the Cash Bonus Program and Messrs. Thoren and Glajch did not meet anythe target level of the net income component or the bookings componentsuch components of the Cash Bonus Program. The Compensation Committee determined that each of our named executive officers, other than Mr. Lines, achieved the following percentages of their respective target personal goals: Mr. LinesThoren - 0%50%; Mr. Malone - 200%; and Mr. Glajch - 0%; and Mr. Smith - 127%. Based on these results and achievements, the cash incentive compensation earned under the Cash Bonus Program for our named executive officers for fiscal year 20202022 was as follows:
Named Executive Officer | Bonus Award | Percent of Target Bonus | Percent of Maximum Available Bonus | Bonus Award | Percent of Target Bonus | Percent of Available | ||||||||||||||||||
Daniel J. Thoren | $ | 127,237 | 39 | % | 20 | % | ||||||||||||||||||
Matthew Malone | $ | 135,521 | 130 | % | 65 | % | ||||||||||||||||||
James R. Lines | $ | 0 | 0 | % | 0 | % | — | — | — | |||||||||||||||
Jeffrey F. Glajch | $ | 0 | 0 | % | 0 | % | $ | 48,874 | 29 | % | 15 | % | ||||||||||||
Alan E. Smith | $ | 32,710 | 25 | % | 13 | % | ||||||||||||||||||
The Compensation Committee sets what it believes are challenging goals for maximum bonus awards and expects that maximum bonus awards will be made only in extraordinary circumstances.
The amount of these cash awards earned by each named executive officer in fiscal year 20202022 is shown in the“Non-Equity Incentive Plan Compensation” column of the Fiscal Year 20202022 Summary Compensation Table.
Under the Cash Bonus Program, special awards may be made to a named executive officer who has made an extraordinary contribution to us during the fiscal year. Such awards are generally recommended in writing by our Chief Executive Officer to the ChairpersonChair of the Compensation Committee and approved by the Compensation Committee before grant. The Compensation Committee did not approve any such awards in fiscal year 2020.2022.
Long-Term Equity Incentive Compensation
The Compensation Committee designed our Annual Stock-Based Long-Term Incentive Award Plan for Senior Executives, which we refer to as the Stock Bonus Plan, to motivate our named executive officers to increase stockholder value by providing them with long-term stock-based awards for above-average Company performance. Our long-term incentive opportunities are intended to be competitive with the long-term incentive opportunities offered by the companies constituting our peer group. We issue shares of restricted stockawards pursuant to our Existing Equity Incentive Plan, a comprehensive executive compensation plan that provides for the grant of stock options, restricted stock, and other stock-related awards, as well as other awards that may be settled in cash or other property. All of our named executive officers currently employed by us are eligible to participate in the Existing Equity Incentive Plan.
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Executive Compensation • Compensation Discussion and Analysis |
The Compensation Committee designed the Stock Bonus Plan to create a tight link between the named executive officers’ goals and the Company’s performance and business objectives. In fiscal year 2020,2022, the Compensation Committee granted half of the restricted stock awards in time-vested restricted stock, and the other half in performance-vested restricted stock. The Compensation Committee chose these forms of awards in consideration of the Company’s current approach to risk and the traditional cyclicality of the Company’s business.
Time-Vested Restricted Stock.We grantgranted time-vested restricted stock because we believe that time-vested restricted stock helps us retain our named executive officers by offering our named executive officers the opportunity to receive shares of our common stock if they continue to be employed by us on the date the time-vested restricted stock vests. The Compensation Committee determines the number of shares of time-vested restricted stock to award to our named executive officers under the Stock Bonus Plan based on a percentage of each named executive officer’s annual base salary. Unless the Compensation Committee determines otherwise, shares granted vest in installments ofone-third on each anniversary of grant.
Performance-Vested Restricted Stock.We grantgranted performance-vested restricted stock because we believe that performance-vested restricted stock helps us reward our named executive officers by conditioning the grant of restricted stock upon the satisfaction of predetermined Company objectives. Unless the Compensation Committee determines otherwise, the shares of performance-vested restricted stock cliff vest on the third anniversary of the date of grant, subject to satisfaction of the performance metrics for the applicable three-year period. The Compensation Committee typically sets the metrics applicable to the performance-vested restricted stock just prior to the start of the fiscal year and finalizes and approves such metrics and the other terms of the restricted stock grants during our first quarter.
For fiscal year 20202022 grants, the performance metricsmetric applicable to the performance-vested restricted stock consist of two relative metrics: our EBITDA margin for fiscal year 2022 as compared to the Baird Industrial Company Composite for calendar year 2021, andis our achievement over a three yearthree-year period of Total Stockholder Return compared to the Russell 2000 Capital Goods and Energy Composite Rankings (using a 20 day20-day price average at the start and end of the three yearthree-year period commencing April 1, 20192021 and ending March 31, 2022)2024). Once the Compensation Committee determines the achievement of the performance criteria for fiscal year 2022,2024, it will adjust the actual number of shares to which each named executive officer is entitled accordingly. Any unearned shares are forfeited back to the Company.
The Compensation Committee seeks to establish performance goals that are challenging but attainable based on our business and financial plan for the year. When establishing performance goals, the Compensation Committee reviews and discusses our business and financial plans for that year and the opportunity to generate stockholder value. The Compensation Committee establishes a range of performance goals for the year as well as individual payment thresholds, targets and maximums for each goal.
Forfeitures. If the named executive officers terminate their employment for reasons other than death or disability prior to the vesting of restricted shares, they will forfeit those shares. Both Messrs. Lines and Glajch, who retired from the Company in fiscal year 2022 and fiscal year 2023, respectively, forfeited shares subject to their time-vested restricted stock awards and their remaining performance-vested restricted stock awards granted in May 2019, June 2020 and June 2021.
Additional information regarding the restricted stock awards granted to each named executive officer in fiscal year 20202022 is set forth in the Fiscal Year 20202022 Summary Compensation Table, the Fiscal Year 20202022 Grants of Plan-Based Awards Table,table, and in the narrative that follows the tables.
Perquisites and Other Personal Benefits
We provide limited perquisites and benefits to attract, retain, and reward named executive officers by providing an overall benefit package similar to those received by similarly-situated executive officers atcomparably-sized companies in our industry and geographic region.
During fiscal year 2020,2022, we paid premiums for life insurance policies for the benefit of each of our named executive officers. In addition, all of our named executive officers participateMessrs. Lines and Glajch, while employed by us, participated in our short-term disability program that is available to our Batavia-based managers and executive officers. We also make available to
our named executive officers health insurance and long-term disability programs that are generally available to our salaried employees.
Our named executive officers also receive an allowance up to $2,500 for the purpose of purchasing term life insurance with a named beneficiary of each officer’s choosing as well as an additional amount necessary for our named executive
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Executive Compensation • Compensation Discussion and Analysis |
officers to purchase a personal umbrella insurance policy. Our Chief Executive Officer is entitled to up to $5,000 for the purpose of purchasing term life insurance.
Retirement Benefits
We provide retirement benefits to our named executive officers to attract, retain, and reward named executive officers by providing an overall benefit package similar to those received by similarly-situated executive officers atcomparably-sized companies in our industry and geographic region.
Mr.Messrs. Thoren and Malone participate, and prior to their retirements Messrs. Lines and Mr. Smith are each eligible to participate in our Retirement Income Plan, which is a defined benefit pension plan for the benefit of our domestic employees hired prior to January 1, 2003. Benefits are based on the employee’s years of service and average annual base salary for the five highest consecutive calendar years of compensation in theten-year period preceding retirement, reduced to take into account a participant’s Social Security benefits paid for by the Company.
All of our named executive officers currently employed by us participateGlajch participated, in our Incentive Savings Plan (the “401(k) Plan”), which is a defined contribution plan that provides for both employer and employee contributions. The Incentive Savings401(k) Plan uses a “safe harbor” design that provides for a matching contribution of 100% of a participant’s deferrals up to 3% of compensation plus 50% of deferrals in excess of 3% but not in excess of 5% of compensation (for a maximum 4% matching contribution). Additionally, eligible employees hired after January 1, 2003, which includesincluding Messrs. Thoren and Malone, and previously including Mr. Glajch, with at least one hour of service during the relevant plan year who are employed by us at the end of such year receive a contribution in an amount equal to 3.25% of eligible compensation received during such year, which contribution is paid on the first $280,000$290,000 of compensation, as adjusted forcost-of-living increases, in accordance with Section 401(a)(17) of the Internal Revenue Code of 1986, as amended which we refer to as the Code.(the “Internal Revenue Code”). The amounts allocated to participants under the Incentive Savings401(k) Plan fully vest after four years of employment.
Following his retirement, Mr. Lines receives pension benefits pursuant to our Retirement Income Plan, which is a defined benefit pension plan for the benefit of our domestic employees hired prior to January 1, 2003. Benefits are based on the employee’s years of service and average annual base salary for the five highest consecutive calendar years of compensation in the ten-year period preceding retirement, reduced to take into account a participant’s Social Security benefits paid for by the Company.
We also make available to our named executive officers who participate in our Retirement Income Plan our Supplemental Executive Retirement Plan, which we refer to as the Supplemental Plan. The Supplemental Plan is intended to provide eligible participants and their surviving spouses and beneficiaries with the amount of employer-provided retirement benefits that the Retirement Income Plan would provide, but for the limitation on compensation that may be recognized undertax-qualified plans imposed by Section 401(a)(17) of the Internal Revenue Code and the limitations on benefits imposed by Section 415 of the Internal Revenue Code. Following his retirement, Mr. Lines receives benefits from our Supplemental Plan.
We have provided more information about our defined benefit retirement plans and the benefits payable to our named executive officers under such plans under the heading “Pension Benefits at March 31, 2020.2022.”
Employment Agreements and Potential Payments upon Termination or Change in Control
We have or had employment agreements with each of our named executive officers. The decisions to enter into employment agreements and the terms of those agreements were based on our need to motivate and retain talent for our long-term growth. The material terms of the employment agreements with certain of our named executive officers are described under the heading “Employment Agreements” in the Narrative to the Fiscal Year 20202022 Summary Compensation Table and Fiscal Year 20202022 Grants of Plan-Based Awards Table.
Pursuant to their respective employment agreements, we have agreed to provide payments to certain of our named executive officers in the event of a termination of employment as a result of normal and early retirement, involuntary termination, death, and disability. Mr. Lines and Mr. Glajch areThoren is also eligible to receive additional payments in the event of termination following a change in control. We believe these arrangements promote stability and continuity of leadership to the benefit of our named executive officers and the Company. See “Potential Payments upon Termination or Change in Control” for further information regarding these arrangements.
Stock Ownership Guidelines
In order to more closely align the interests of our named executive officers with the interests of our stockholders, the Compensation Committee has established minimum stock ownership guidelines that require our named executive
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Executive Compensation • Compensation Discussion and Analysis |
officers to work towards acquiring and maintaining specific levels of equity ownership interests in our common stock within specified time frames. A summary of our current stock ownership guidelines for our named executive officers is as follows:
Position | Stock Ownership Guideline | |
Chief Executive Officer | Common stock with a value equal to at least 4.00 times his annual base salary | |
Other named executive officers | Common stock with a value equal to at least 2.00 times his annual base salary | |
Our stock ownership guidelines also require our named executive officers to retain 50% of the net shares realized (after tax) when a restricted stock award vests or a stock option is exercised until they are in compliance with the guidelines, unless waived by the ChairpersonChair of the Compensation Committee.
The Compensation Committee monitors the progress made by our named executive officers in achieving their stock ownership guidelines and, if circumstances warrant, may modify the guidelines and/or time frames for one or more of our named executive officers. Under the guidelines, our named executive officers are directed to be in compliance with their respective ownership objectives within five years of becoming a named executive officer.officer (with an additional two-fiscal year grace period if the guidelines are amended to increase the ownership target). If a named executive officer does not meet his ownership guidelines, the Compensation Committee may take that fact into consideration when evaluating such executive’s overall performance. As of the end of fiscal year 2020, only Mr. Glajch2022, one named executive officer was in compliance with our stock ownership guidelines.
Certain Tax and Accounting Implications
We periodically review accounting and tax laws, rules, and regulations that may apply to our compensation programs. However, tax and accounting considerations have not significantly impacted the compensation programs that we offer to our named executive officers.
We account for stock-based employee compensation at fair value of the awards on the grant date and recognize the related cost in our statements of operations in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, Compensation-Stock Compensation, which we refer to as FASB ASC Topic 718, formerly SFAS No. 123(R), “Share-Based Payment,” which we adopted effective April 1, 2006 utilizing the modified prospective method. These stock-based payments include awards made under our Existing EquityIncentiveEquity Incentive Plan.
Risk Considerations in our Compensation Programs
At least one time each year, we undertake a Company-wide analysis of our compensation programs to assess whether they create risks that are reasonably likely to have a material adverse effect on our business. In fiscal year 2020,2022, the Compensation Committee conducted its own risk assessment for our compensation programs and plans. As part of that assessment, the Compensation Committee reviewed the intent, purposes, and practices of our compensation programs and plans. The Compensation Committee conducted this review in connection with a review of our business and growth strategies. Based on these reviews, we have concluded that our compensation programs are appropriately tailored to encourage employees to grow our business, but not incentivize them to do so in a way that is reasonably likely to have a material adverse effect on our Company.
For example, our Cash Bonus Program and our Stock Bonus Plan, which are our two primary executive compensation programs, balance each other by providing compensation that rewards short-term (Cash Bonus Program) and long-term (Stock Bonus Plan) performance. The Cash Bonus Program balances risk by considering several performance metrics and capping the maximum payout a named executive officer can receive at 200% of target bonus level (target bonus level is between 80%100% and 50% of base salary for each of our named executive officers). In addition, our Stock Bonus Plan provides balanced incentives through equity-based compensation awards, which include time-vested restricted stock and performance-vested restricted stock. The Compensation Committee believes that this mix of incentives, together with our executive stock ownership guidelines, encourages our named executive officers to achieve both short-term operating and long-term strategic objectives, including the long-term performance of our stock.
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Executive Compensation • Fiscal Year 2022 Summary Compensation Table |
Fiscal Year 20202022 Summary Compensation Table
The following table shows certain information regardingabout the compensation of our named executive officers for services rendered to us in all capacities for theour two most recently completed fiscal years ended March 31, 2020 and 2019.(one if the individual was not a named executive officer for fiscal year 2021).
| Name and Principal Position | Fiscal Year | Salary (1) ($) | Bonus ($) | Stock Awards (2)(3) ($) | Non-Equity ($) | Change in ($) | All Compensation (6) ($) | Total ($) | ||||||||||||||||||||||||
James R. Lines | 2020 | 500,000 | — | 451,834 | — | 619,514 | 41,086 | 1,612,434 | ||||||||||||||||||||||||
President and CEO | 2019 | 435,000 | — | 348,551 | 181,482 | 192,260 | 20,151 | 1,177,444 | ||||||||||||||||||||||||
Jeffrey F. Glajch | 2020 | 309,858 | — | 163,055 | — | — | 26,280 | 499,193 | ||||||||||||||||||||||||
VP - Finance & Administration and CFO | 2019 | 280,252 | — | 160,395 | 106,776 | — | 25,208 | 572,631 | ||||||||||||||||||||||||
Alan E. Smith | 2020 | 257,560 | — | 145,449 | 32,710 | 261,196 | 15,500 | 712,415 | ||||||||||||||||||||||||
VP and General Manager - Batavia | 2019 | 250,058 | — | 143,126 | 88,521 | 95,821 | 15,264 | 592,790 | ||||||||||||||||||||||||
| Name and Principal Position | Fiscal Year | Salary(1) ($) | Bonus ($) | Stock Awards(2)(3) ($) | Non-Equity Incentive Plan Compensation(4) ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(5) ($) | All Other Compensation(6) ($) | Total ($) | ||||||||||||||||||||||||
Daniel J. Thoren | 2022 | 324,583 | — | 480,420 | 127,237 | — | 18,664 | 950,904 | ||||||||||||||||||||||||
CEO | ||||||||||||||||||||||||||||||||
Matthew Malone | 2022 | 208,333 | — | 155,247 | 135,521 | — | 12,848 | 511,949 | ||||||||||||||||||||||||
VP and GM - Barber - Nichols | ||||||||||||||||||||||||||||||||
James R. Lines | 2022 | 208,333 | — | 496,813 | — | 4,295 | 355,237 | 1,064,678 | ||||||||||||||||||||||||
Former CEO | 2021 | 500,000 | — | 468,174 | 652,800 | 255,003 | 17,332 | 1,893,309 | ||||||||||||||||||||||||
Jeffrey F. Glajch | 2022 | 334,750 | — | 207,883 | 48,874 | — | 26,627 | 618,134 | ||||||||||||||||||||||||
Former VP - Finance & Administration and CFO | 2021 | 325,000 | — | 190,190 | 265,200 | — | 26,143 | 806,533 | ||||||||||||||||||||||||
| (1) | The amounts shown in this column include cash compensation earned and paid, and cash compensation deferred at the election of each named executive officer under our |
| (2) | Restricted stock awards are granted under our |
| (3) | Additional information regarding the performance-vested restricted stock granted to our named executive officers in fiscal year |
| (4) | The amounts shown in this column reflect the cash payment made to our named executive officers under the Cash Bonus Program in effect for fiscal year |
| (5) | The amounts shown in this column reflect the changes in the actuarial present values under our Retirement Income Plan and our Supplemental Plan. See “Pension Benefits at March 31, |
| (6) | All Other Compensation consists of the following: |
| Named Executive Officer | Insurance ($) | 401(k) Plan Matching Contributions ($) | 401(k) Plan Non-elective Contributions ($) | Service Award | Total ($) | Insurance ($) | 401(k) Plan Matching Contributions ($) | 401(k) Plan Non-elective Contributions ($) | Service ($) | Severance ($) | Vacation Payout ($) | Total ($) | ||||||||||||||||||||||||||||||||||||
Daniel J. Thoren | 450 | 10,219 | 7,138 | 857 | — | — | 18,664 | |||||||||||||||||||||||||||||||||||||||||
Matthew Malone | 450 | 7,693 | 4,705 | — | — | — | 12,848 | |||||||||||||||||||||||||||||||||||||||||
James R. Lines | 5,497 | 10,488 | — | 25,101 | 41,086 | 228 | 6,600 | — | — | 291,667 | 56,742 | 355,237 | ||||||||||||||||||||||||||||||||||||
Jeffrey F. Glajch | 5,533 | 11,647 | 9,100 | — | 26,280 | 5,420 | 11,782 | 9,425 | — | — | — | 26,627 | ||||||||||||||||||||||||||||||||||||
Alan E. Smith | 4,225 | 11,275 | — | — | 15,500 | |||||||||||||||||||||||||||||||||||||||||||
Employees who complete 35 years of service are awarded three weeks of base salary under a Company-wide program. Mr. Line’s service award shown above was granted in recognition of his 35 years of service to the Company and represents three weeks of base salary.
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Executive Compensation • Fiscal Year 2022 Grants of Plan-Based Awards |
Fiscal Year 20202022 Grants of Plan-Based Awards
The following table shows information regarding the grants of annual incentive cash compensation and restricted stock during fiscal year 20202022 to our named executive officers.
|
|
|
| Estimated Future Payouts UnderNon-Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other (#) | Grant Date of Stock and Option ($) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All (#) | Grant Date Fair Value of Stock and Option Awards(2) ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Type of Award | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Type of Award | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Daniel J. Thoren | Performance- Vested Restricted Stock(3) | 6/1/21 | 2,980 | 5,960 | 11,920 | 135,424 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9/1/21 | 4,468 | 8,936 | 17,872 | 144,998 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Vested Restricted Stock(3) | 6/1/21 | 5,960 | 91,248 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9/1/21 | 8,936 | 108,751 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Incentive | 162,292 | 324,583 | 649,166 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Matthew Malone | Performance- Vested Restricted Stock | 6/1/21 | 2,041 | 4,082 | 8,164 | 92,752 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Time-Vested Restricted Stock | 6/1/21 | 4,082 | 62,495 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Incentive | 52,084 | 104,167 | 208,334 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James R. Lines | Performance-Vested Restricted Stock |
| 5/29/19 |
|
| 4,902 |
|
| 9,804 |
|
| 19,608 |
|
| 251,830 |
| Performance- Vested Restricted Stock | 6/1/21 | 6,532 | 13,063 | 26,126 | 296,819 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Time-Vested Restricted Stock |
| 5/29/19 |
|
| 9,804 |
|
| 200,002 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive |
| 120,000 |
|
| 400,000 |
|
| 800,000 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James R. Lines | Time-Vested Restricted Stock | 6/1/21 | 13,063 | 199,995 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Incentive | 200,000 | 400,000 | 800,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jeffrey F. Glajch | Performance-Vested Restricted Stock |
| 5/29/19 |
|
| 1,769 |
|
| 3,538 |
|
| 7,076 |
|
| 90,879 |
| Performance- Vested Restricted Stock | 6/1/21 | 2,733 | 5,466 | 10,932 | 124,199 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jeffrey F. Glajch | Time-Vested Restricted Stock | 6/1/21 | 5,466 | 83,684 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annual Incentive | 83,688 | 167,375 | 334,750 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Time-Vested Restricted Stock |
| 5/29/19 |
|
| 3,538 |
|
| 72,175 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive |
| 46,479 |
|
| 154,929 |
|
| 309,858 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Alan E. Smith | Performance-Vested Restricted Stock |
| 5/29/19 |
|
| 1,578 |
|
| 3,156 |
|
| 6,312 |
|
| 81,077 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Time-Vested Restricted Stock |
| 5/29/19 |
|
| 3,156 |
|
| 64,382 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Incentive |
| 38,634 |
|
| 128,780 |
|
| 257,560 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | The amounts shown in these columns reflect the incentive cash compensation amounts that potentially could have been earned during fiscal year |
| (2) | The dollar values of |
30 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Executive Compensation • Fiscal Year 2022 Grants of Plan-Based Awards |
| set forth in Note 1 (The Company and Its Accounting Policies) and Note |
| (3) | Mr. Thoren received awards upon joining the Company on June 1, 2021 and in connection with his appointment as Chief Executive Officer on September 1, 2021. |
Narrative to the Fiscal Year 20202022 Summary Compensation Table and Fiscal Year 20202022 Grants of Plan-Based Awards Table
Awards Granted in Fiscal Year 20202022
The Compensation Committee determines the number of shares of restricted stock to award to our named executive officers based on a percentage of each named executive officer’s annual base salary. The Compensation Committee determined the number of shares of performance-vested restricted stock to award to our named executive officers by using each such officer’s Long-Term Incentive Percentage, which we refer to as theL-T Percentage. For fiscal year 2020,2022, theL-T Percentage in effect for each of our named executive officers was as follows: Mr. Thoren - 100%; Mr. Malone - 50%; Mr. Lines - 80%; and Mr. Glajch - 50%; and Mr. Smith - 50%.
The aggregate number of shares of restricted stock (50% awarded as time-vested restricted stock, and 50% as performance-vested restricted stock) was determined by multiplying 50%100% of each named executive officer’s base salary then in effect by such officer’sL-T Percentage, and then dividing the product by the closing price of our common stock on the date of grant.
The closing price of our common stock on May 29, 2019the June 1, 2021 date of grant was $20.40$15.31 without adjusting for the payment of dividends. Mr. Thoren received a grant upon joining the Company on June 1, 2021 and an additional grant in connection with his appointment as Chief Executive Officer on September 1, 2021. The closing price of our common stock on September 1, 2021 was $12.17 without adjusting for the payment of dividends. The number of shares of time-vested restricted stock and the number of shares
of performance-vested restricted stock granted to our named executive officers in fiscal year 20202022 are as follows:
| Number of Shares of Restricted Stock Granted | Number of Shares of Restricted Stock Granted | |||||||||||||||
Named Executive Officer | Performance-Vested (1)(2) | Time-Vested (1) | Performance-Vested(1)(2) | Time-Vested(1) | ||||||||||||
Daniel J. Thoren | 29,792 | 14,896 | ||||||||||||||
Matthew Malone | 8,164 | 4,082 | ||||||||||||||
James R. Lines | 19,608 | 9,804 | 26,126 | 13,063 | ||||||||||||
Jeffrey F. Glajch | 7,076 | 3,538 | 10,932 | 5,466 | ||||||||||||
Alan E. Smith | 6,312 | 3,156 | ||||||||||||||
| (1) | In the event a named executive officer’s employment terminates prior to the conclusion of the applicable vesting period for reasons other than death or disability, such officer’s right to receive the restricted stock will be forfeited. In connection with their retirements from the Company, Messrs. Lines and Glajch forfeited their performance-vested and time-vested restricted shares. |
| (2) | The number of shares that will vest at the end of fiscal year |
Vesting
Beginning with grants made during fiscal year 2015, shares of time-vested restricted stock vest in installments ofone-third on each anniversary of grant over three years assuming the named executive officer is employed by us on the date the time-vested restricted stock vests. The shares of performance-vested restricted stock cliff vest on the last day of the third fiscal year following the fiscal year of grant, subject to satisfaction of the performance metrics for the applicable three-year period. We pay dividends on unvested restricted stock at the same rate as paid on our common stock.
GRAHAM CORPORATION 2022 PROXY STATEMENT | 31 | |
Executive Compensation • Narrative to the Fiscal Year 2022 Summary Compensation Table and Fiscal Year 2022 Grants of Plan-Based Awards Table |
Option Grants
Prior to fiscal year 2014, we granted stock options under the Existing Equity Incentive Plan. Our named executive officers only realize the compensation if our stock price increases over the term of the award, which aligned this element of compensation with our performance. Outstanding stockStock options typically vest over a three-year period, with 331/3% of the shares subject to such option vesting on each of the first, second, and third anniversaries of the date of grant.
Employment Agreements
During fiscal year 2020,2022, we were a party to employment agreements with each of our named executive officers. The following is a summary of the key terms of each of these employment agreements.
James R. Lines.Daniel J. Thoren. On August 9, 2021, the Company and Mr. Thoren entered into an Amended and Restated Employment Agreement (the “Restated Employment Agreement”), effective as of the close of business on August 31, 2021, which amended and restated the employment agreement between the Company and Mr. Thoren dated as of June 1, 2006,2021 (the “Employment Agreement”). Pursuant to the terms of the Restated Employment Agreement, Mr. Thoren serves as the Company’s President and Chief Executive Officer effective as of the close of business on August 31, 2021 (having previously served as the Company’s President and Chief Operating Officer under the Employment Agreement). The Restated Employment Agreement has a term of one year, subject to automatic renewal periods until the Restated Employment Agreement is terminated or Mr. Thoren attains the age of 65. Mr. Thoren’s initial base salary rate pursuant to the Restated Employment Agreement is $400,000 per year. If Mr. Thoren remains continuously and actively employed by the Company through June 1, 2023, he will receive a retention bonus equal to $730,000.
The Restated Employment Agreement also provides for us to make certain payments to Mr. Thoren in the event we terminate his employment without cause or upon the occurrence of certain events relating to a change in control of the Company, as described under “Involuntary Termination” and “Termination Following a Change in Control” under the heading “Potential Payments Upon Termination or Change in Control.”
In addition, if Mr. Thoren’s employment with us is terminated for any reason, he will be subject to a 12-month covenant not to compete with us, not to interfere in certain of our business relationships, and not to disclose to anyone our confidential information.
The Restated Employment Agreement also provides that we will indemnify Mr. Thoren for all acts or omissions and for any suits brought against him which relate to duties he performed in good faith for us.
Matthew Malone. On June 1, 2021, we entered into an employment agreement with Mr. Lines, as subsequently amended on December 31, 2008, whichMalone. The agreement provides that Mr. LinesMalone will receive an annual minimum base salary as well as other customary benefits. Mr. Lines is also eligible under the agreement
to receive discretionary bonuses. TheMalone’s agreement automatically renews such that it always has aone-year term remaining, unless we or Mr. LinesMalone elect not to extend the term further, in which case the term will end on the first anniversary of the date on which notice of such election not to extend is given. If not terminated sooner, the agreement will end on the last day of the month in which Mr. LinesMalone turns 65. Effective as of April 1, 2022, Mr. Malone’s annual base salary rate is $300,000 following the Compensation Committee’s approval of an increase from his prior annual rate of $250,000. Pursuant to his employment agreement, if Mr. Malone remains continuously and actively employed by the Company through June 1, 2023, he will receive a retention bonus equal to $250,000.
Pursuant to our employment agreement with Mr. Lines,Malone, if he resignshis employment with us is terminated for reasons other than a material breach of the agreement by us, departs from our employment without the approval of our Board of Directors, or is discharged for cause,any reason, he will be subject to ana 18-month12-month covenant not to compete with us, not to interfere in certain of our business relationships, and not to disclose to anyone our confidential information.
Our employment agreement with Mr. LinesMalone also provides for us to make certain payments to him in the event we terminate his employment without cause as described below under “Involuntary Termination” under the heading “Potential Payments Upon Termination or Change in Control.”
Our employment agreement with Mr. Malone provides that we will indemnify him for all acts or omissions and for any suits brought against him which relate to duties he performed in good faith for us.
James R. Lines. On August 9, 2021, we entered into a Severance and Transition Agreement (the “Transition Agreement”) with Mr. Lines pursuant to which he resigned from his position as our Chief Executive Officer and as a member of the Board, and from positions he holds with all our subsidiaries and affiliates, effective as of the close of
32 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Executive Compensation • Narrative to the Fiscal Year 2022 Summary Compensation Table and Fiscal Year 2022 Grants of Plan-Based Awards Table |
business on August 31, 2021 (the “Separation Date”). The Transition Agreement provides that for a period of 18 months following the Separation Date, Mr. Lines will provide certain transition-related services to the Company. The Transition Agreement also provides that the Company will pay Mr. Lines (i) a severance payment in an amount equal to 18 months of Mr. Lines’ base salary, less applicable deductions and withholdings, payable in accordance with the Company’s regular payroll schedule and practices, and (ii) monthly health premiums for a period of 18 months following the Separation Date subject to certain conditions contained in the Transition Agreement.
Prior to the Separation Date, we had an employment agreement with Mr. Lines which provided that Mr. Lines would receive an annual minimum base salary as well as other customary benefits. Mr. Lines was also eligible under the employment agreement to receive discretionary bonuses. The agreement automatically renewed such that it always had a one-year term remaining, unless we or Mr. Lines elected not to extend the term further, in which case the term would end on the first anniversary of the date on which notice of such election not to extend was given. If not terminated sooner, the agreement would have ended on the last day of the month in which Mr. Lines turned 65.
Pursuant to the Transition Agreement, certain provisions of our employment agreement with Mr. Lines continue including those regarding covenants not to compete with us, not to interfere in certain of our business relationships, and not to disclose to anyone our confidential information, as well as provisions that we indemnify him for all acts or omissions and for any suits brought against him which relate to duties he performed in good faith for us.
Jeffrey F. Glajch. As of March 7, 2022, we entered into the Amended and Restated Severance and Transition Agreement (the “Amended Transition Agreement”) with Mr. Glajch, which amended and restated the Severance and Transition Agreement dated November 29, 2021. Pursuant to the Amended Transition Agreement, Mr. Glajch retired from the Company on April 15, 2022 (the “Resignation Date”). In addition, pursuant to the Amended Transition Agreement, Mr. Glajch agreed to provide certain transition-related services to the Company for a period of nine months following the Resignation Date. The Amended Transition Agreement also provides that the Company will pay Mr. Glajch (i) a severance payment in an amount equal to nine months of Mr. Glajch’s base salary, less applicable deductions and withholdings, payable in accordance with the Company’s regular payroll schedule and practices commencing on or around the Resignation Date, with such payments to be completed by December 31, 2022, and (ii) monthly health premiums for a period of nine months following the Resignation Date, subject to certain conditions contained in the Amended Transition Agreement.
Previously we had an amended and restated employment agreement with Mr. Glajch, pursuant to which Mr. Glajch served as our Vice President - Finance & Administration and Chief Financial Officer. The agreement provided that Mr. Glajch would receive an annual minimum base salary as well as other customary benefits. The agreement automatically renewed such that it always had a one-year term remaining, unless we or Mr. Glajch elected not to extend the term further, in which case the term would end on the first anniversary of the date on which notice of such election not to extend was given. If not terminated sooner, the agreement would have ended on the last day of the month in which Mr. Glajch turns 65.
Our employment agreement with Mr. Glajch also provided for us to make certain payments to him in the event we terminated his employment without cause or upon the occurrence of certain events relating to a change in control of the Company, as described under “Involuntary Termination” and “Termination Following a Change in Control” under the heading “Potential Payments Upon Termination or Change in Control.”
OurPursuant to the Amended Transition Agreement, certain provisions of our employment agreement with Mr. Lines providesGlajch continue including those regarding covenants not to compete with us, not to interfere in certain of our business relationships, and not to disclose to anyone our confidential information, as well as provisions that we will indemnify him for all acts or omissions and for any suits brought against him which relate to duties he performed in good faith for us.
Jeffrey F. Glajch.On March 2, 2009, we entered into an employment agreement with Mr. Glajch, as subsequently amended on July 29, 2010 and September 12, 2019, to serve as our Vice President—Finance & Administration and Chief Financial Officer. The agreement provides that Mr. Glajch will receive an annual minimum base salary as well as other customary benefits. The agreement automatically renews such that it always has aone-year term remaining, unless we or Mr. Glajch elect not to extend the term further, in which case the term will end on the first anniversary of the date on which notice of such election not to extend is given. If not terminated sooner, the agreement will end on the last day of the month in which Mr. Glajch turns 65.
Pursuant to our employment agreement with Mr. Glajch, if his employment with us is terminated for any reason, he will be subject to an18-month covenant not to compete with us, not to interfere in certain of our business relationships, and not to disclose to anyone our confidential information.
Our employment agreement with Mr. Glajch also provides for us to make certain payments to him in the event we terminate his employment without cause or upon the occurrence of certain events relating to a change in control of the Company, as described under “Involuntary Termination” and “Termination Following a Change in Control” under the heading “Potential Payments Upon Termination or Change in Control.”
Our employment agreement with Mr. Glajch provides that we will indemnify him for all acts or omissions and for any suits brought against him which relate to duties he performed in good faith for us.
Alan E. Smith. On July 30, 2007, we entered into an employment agreement with Mr. Smith, as subsequently amended on December 31, 2008. The agreement provides that Mr. Smith will receive an annual minimum base salary as well as other customary benefits. Mr. Smith’s agreement automatically renews such that it always has aone-year term remaining, unless we or Mr. Smith elect not to extend the term further, in which case the term will end on the first anniversary of the date on which notice of such election not to extend is given. If not terminated sooner, the agreement will end on the last day of the month in which Mr. Smith turns 65.
Pursuant to our employment agreement with Mr. Smith, if his employment with us is terminated for any reason, he will be subject to an18-month covenant not to compete with us, not to interfere in certain of our business relationships, and not to disclose to anyone our confidential information.
Our employment agreement with Mr. Smith also provides for us to make certain payments to him in the event we terminate his employment without cause as described below under “Involuntary Termination” under the heading “Potential Payments Upon Termination or Change in Control.”
Our employment agreement with Mr. Smith provides that we will indemnify him for all acts or omissions and for any suits brought against him which relate to duties he performed in good faith for us.
Additional Information
We have provided additional information regarding the compensation we pay to our named executive officers in the CD&A and encourage you to read the above tables and their footnotes in conjunction with such information.
GRAHAM CORPORATION 2022 PROXY STATEMENT | 33 | |
Executive Compensation • Outstanding Equity Awards at March 31, 2022 |
Outstanding Equity Awards at March 31, 20202022
The following table shows information regarding the number of unexercised stock options and the number and value of unvested restricted stock awards held by our named executive officers at March 31, 2020.2022.
| Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of That Have Not Vested ($) | Equity Unearned (#) | Equity ($) | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Plan Number of Unearned Units or Rights Not Vested (#) | Equity Plan Market or Value of Shares, Other ($) | ||||||||||||||||||||||||||||||||||||||||||||||||
James R. Lines |
|
10,894 |
|
|
— |
|
|
18.65 |
|
|
5/30/2022 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
Daniel J. Thoren | 5,960 | (1) | 45,952 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8,936 | (2) | 68,897 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2,425 | (1) | 31,283 | 11,920 | (3) | 91,903 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| 17,872 | (3) | 137,793 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3,876 | (2) | 50,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Matthew Malone | 4,082 | (1) | 31,472 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| 8,164 | (3) | 62,944 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9,804 | (3) | 126,472 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 14,548 | (4) | 187,669 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11,626 | (5) | 149,975 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 19,608 | (6) | 252,943 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
James R. Lines | 10,894 | — | 18.65 | 5/30/2022 |
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jeffrey F. Glajch |
|
7,141 |
|
|
— |
|
|
18.65 |
|
|
5/30/2022 |
| 7,141 | — | 18.65 | 5/30/2022 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 10,932 | (3) | 84,286 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1,076 | (1) | 13,880 | 3,538 | (4)(6) | 27,278 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| 11,516 | (5)(6) | 88,788 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1,784 | (2) | 23,014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3,538 | (3) | 45,640 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6,452 | (4) | 83,231 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5,350 | (5) | 69,015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7,076 | (6) | 91,280 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Alan E. Smith |
|
6,059 |
|
|
— |
|
|
18.65 |
|
|
5/30/2022 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 960 | (1) | 12,384 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1,592 | (2) | 20,537 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3,156 | (3) | 40,712 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5,758 | (4) | 74,278 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4,774 | (5) | 61,585 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6,312 | (6) | 81,425 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | One-third of this grant of time-vested restricted stock vests on |
| (2) | One-third of this grant of time-vested restricted stock vests on |
|
| (3) | This grant of performance-vested restricted stock vests on the date that the Compensation Committee ratifies the satisfaction of the performance metrics for the applicable three-year performance period ending March 31, 2024. This number reflects the maximum number of shares of restricted stock that may be earned if the maximum level of performance is achieved. |
| (4) | This grant of performance-vested restricted stock vests on the date that the Compensation Committee ratifies the satisfaction of the performance metrics for the applicable three-year performance period ended March 31, |
| (5) | This grant of performance-vested restricted stock vests on the date that the Compensation Committee ratifies the satisfaction of the performance metrics for the applicable three-year performance period ending March 31, |
| (6) | This |
34 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Executive Compensation • Fiscal Year 2022 Option Exercises and Stock Vested |
Fiscal Year 20202022 Option Exercises and Stock Vested
The following table shows information regarding the number and value realized of stock options exercised and stock awards that vested during fiscal year 20202022 for each of our named executive officers. None of our named executive officers exercised any options during fiscal year 2020.2022.
| Stock Awards | Stock Awards | |||||||||||||||
| Name | Number of Shares (#) | Value ($) | Number of Shares (#) | Value Realized on ($) | ||||||||||||
Daniel J. Thoren | — | — | ||||||||||||||
Matthew Malone | — | — | ||||||||||||||
James R. Lines |
|
12,386 |
|
|
254,748 |
| 11,819 | 172,166 | ||||||||
Jeffrey F. Glajch |
|
5,565 |
|
|
114,456 |
| 4,859 | 70,841 | ||||||||
Alan E. Smith |
|
4,966 |
|
|
102,137 |
| ||||||||||
| (1) | The value realized on the vesting of stock awards is the closing price of our common stock on the vesting date multiplied by the number of shares acquired. |
Pension Benefits at March 31, 20202022
The following table shows information at March 31, 20202022 regarding our Retirement Income Plan and our Supplemental Executive Retirement Plan.
| Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit(1) ($) | Payments During Last Fiscal Year ($) | Plan Name | Number of Years Credited Service (#) | Present Value of ($) | Payments During Last Fiscal Year ($) | ||||||||||||||||||||
Daniel J. Thoren(2) | Retirement Income Plan | — | — | — | ||||||||||||||||||||||||
|
| Supplemental Executive Retirement Plan | — | — | — | ||||||||||||||||||||||||
Matthew Malone(2) | Retirement Income Plan | — | — | — | ||||||||||||||||||||||||
|
| Supplemental Executive Retirement Plan | — | — | — | ||||||||||||||||||||||||
James R. Lines |
Retirement Income Plan |
|
30 |
|
|
1,534,190 |
|
|
— |
| Retirement Income Plan | 30 | 1,654,388 | 51,350(3) | ||||||||||||||
Supplemental Executive Retirement Plan | — | 1,320,367 | 40,806 | |||||||||||||||||||||||||
Supplemental Executive Retirement Plan
|
| —
|
|
| 1,225,330
|
|
| —
|
| |||||||||||||||||||
Jeffrey F. Glajch(2) |
Retirement Income Plan |
|
— |
|
|
— |
|
|
— |
| Retirement Income Plan | — | — | — | ||||||||||||||
Supplemental Executive Retirement Plan | — | — | — | |||||||||||||||||||||||||
Supplemental Executive Retirement Plan
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Alan E. Smith |
Retirement Income Plan |
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27 |
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1,026,762 |
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— |
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Supplemental Executive Retirement Plan
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| (1) |
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| (2) | Because |
| (3) | Amount reported for Mr. Lines has been adjusted to correct for an administrative error that resulted in overpayments under the defined benefit pension plan upon his retirement in August 2021 until May 2022 that are being repaid by Mr. Lines. |
Retirement Income Plan
Our Retirement Income Plan is a defined benefit pension plan for the benefit of our domesticBatavia-based employees hired prior to January 1, 2003. The purpose of the Retirement Income Plan is to supplement Social Security benefits and to provide a reliable source of regular income for participants or their survivors after retirement by the participant. During fiscal year 2020,2022, Mr. Lines and Mr. Smith werewas the only named executive officer eligible to participate in the Retirement Income Plan.
GRAHAM CORPORATION 2022 PROXY STATEMENT | 35 | |
Executive Compensation • Pension Benefits at March 31, 2022 |
Normal retirement under the Retirement Income Plan is generally the later of a participant’s 65th birthday or the 5th anniversary of the date on which he or she became a participant. Early retirement under the Retirement Income Plan is available for a participant who is at least 55 years old and has completed fifteen years or more of creditable service. The Retirement Income Plan also provides for a disability retirement allowance in the event of disability.
The Retirement Income Plan also provides for the payment of a retirement benefit in the event that a participant’s employment was terminated when the participant was not eligible for normal, early or disability retirement. Eligibility for such “vested retirement” requires the completion of five years of service with us. A participant who is entitled to a vested retirement allowance when his employment terminates will ordinarily begin receiving payments after reaching normal retirement age. If the participant has completed at least fifteen years of creditable service, he or she may elect to begin
receiving payments on the first day of the month after he or she reaches age 55 and up to the first month after he or she reaches normal retirement age. The amount of a participant’s monthly vested retirement payment will vary depending on age, service and time of commencement.
Benefits under the Retirement Income Plan are based on the employee’s years of service and average annual base salary for the five highest consecutive calendar years of compensation in theten-year period preceding retirement. Benefits under the Retirement Income Plan are reduced to take into account a participant’s Social Security benefits paid for by the Company. To calculate the present value of theMr. Lines accumulated benefits, the following assumptions were used: a 3.44%3.64% discount rate and thePRI-2012 White Collar Mortality Table dataset projected generationally by scale MP 2019 and an age 63 retirement age.2021.
The approximateMr. Lines had 30 years of creditable service as of March 31, 2020 of each of the named executive officers eligible to participate inunder the Retirement Income Plan are as follows: Mr. Lines - 30of August 31, 2021, the date of his retirement, and Mr. Smith- 27.receives benefits under the Retirement Income Plan. Although our named executive officers may serve us for more than 30 years, we do not normally grant additional years of creditable service.
The form and amount of the payments made under the Retirement Income Plan depends upon marital status when payment begins and the form of payment selected. The normal form of benefit for a married participant is a 100% joint and survivor annuity, which provides a retirement allowance in the form of reduced monthly payments that will continue for the rest of the participant’s life. If the participant is survived by the person who was the participant’s spouse when payments began, such spouse will receive survivor benefits equal to 100% of the amount of the payments made to the participant during his lifetime. His spouse will be paid survivor benefits for his or her remaining lifetime. Subject (in most cases) to the spouse’s consent, a participant may elect to receive benefits in the form of a single life annuity, 50% joint and survivor annuity, a Social Security Level Income Option, a 10, 15, or 20 year20-year certain annuity or a life annuity with a 10, 15, or 20 year guarantee.
Supplemental Executive Retirement Plan
In addition to the Retirement Income Plan, we maintain the Supplemental Plan that is anon-qualified deferred compensation plan and is intended to provide eligible participants and their surviving spouses and beneficiaries with the amount of employer-provided retirement benefits that the Retirement Income Plan would provide but for the limitation on compensation that may be recognized undertax-qualified plans imposed by Section 401(a)(17) of the Internal Revenue Code and the limitations on benefits imposed by Section 415 of the Internal Revenue Code.
A participant who has completed a period of service of at least five years under the Retirement Income Plan and whose benefits are limited by the above-referenced provisions of the Internal Revenue Code, is entitled to receive a monthly benefit from the Supplemental Plan. All of our named executive officers hired prior to January 1, 2003 are eligible to participate in the Supplemental Plan, but Mr. Lines is the only named executive officer that currently has an accrued benefitreceives benefits under the Supplemental Plan.
The monthly benefit under the Supplemental Plan is equal to the excess, if any, of the retirement benefits that would have been payable to or with respect to the plan participant under the Retirement Income Plan had the limitations imposed by the Internal Revenue Code not been applicable over the retirement benefits payable to or with respect to the participant under the Retirement Income Plan. This formula was modified in 2016 to provide that for calendar years through 2020, in the event that Mr. Lines’ employment is involuntarily terminated without cause or voluntarily terminated with good reason following a change in control, the calculation of average compensation for Mr. Lines would only take into account his base salary since April 1, 2016.
A participant’s retirement benefits under the Supplemental Plan generally will be paid to or with respect to the participant in the same form and at the same time as the participant’s retirement benefits under the Retirement Income Plan. The benefits under the Supplemental Plan will terminate upon cessation of benefits to the participant or his beneficiary under the Retirement Income Plan.
36 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Executive Compensation • Pension Benefits at March 31, 2022 |
Upon a “change in control” of ourthe Company, each participant in the Supplemental Plan would automatically become 100% vested in his benefits. A “change in control” for the purposes of the Supplemental Plan is defined as:
the acquisition of the assets or a majority of the shares of the Company by a person or group not controlled by the Company;
a cash tender offer or exchange offer, consolidation or merger or other business combination, sale of assets or contested election as a result of which the members of ourthe Board of Directors before the event cease to constitute a majority of our Board of Directors;the Board;
the acquisition of 25% or more of the shares of the Company by a person or a group; or
the occurrence of any event that would be required to be reported in response to Item 6(e) of Schedule 14A or to Item 5.01 of Form8-K.
Incentive Savings401(k) Plan
All of our named executive officers currently employed by us are also eligible to participate in our Incentive Savings401(k) Plan, (our 401(k) savings plan), which is available to all of our employees. Pursuant to the Incentive Savings401(k) Plan, we match funds deferred at the election of participants, up to a certain percentage, and we makenon-elective contributions to the accounts of eligible participants. Matching contributions under the Incentive Savings401(k) Plan always are fully vested. Additionally, eligible employees hired after January 1, 2003 with at least one hour of service during the relevant plan year who are employed by us at the end of such year receive a nonelective contribution as described above.
Potential Payments upon Termination or Change in Control
The following information and the table entitled “Estimated Payments Upon Termination or a Change in Control” set forth the amount of payments to each of our named executives in the event of a termination of employment as a result of normal and early retirement, voluntary termination and termination for cause, involuntary termination, death, disability, and termination following a change in control of the Company.
Assumptions and General Principles
The following assumptions and general principles apply with respect to the table entitled “Estimated Payments Upon Termination or a Change in Control” and any termination of employment of a named executive officer:officer, other than Mr. Lines, for whom the table reflects amounts he was entitled to receive upon his retirement:
The amounts shown in the table assume that each named executive officer was terminated on March 31, 2020.2022, except for Mr. Lines. Accordingly, the table reflects amounts earned as of March 31, 20202022 and includes estimates of amounts that would be paid to the named executive officerMessrs. Thoren, Malone and Glajch upon the occurrence of a termination. The actual amounts to be paid to a named executive officer can only be determined at the time of the termination. For Mr. Lines, the table shows only the amounts he was entitled to receive upon his retirement on August 31, 2021.
Unless otherwise noted, the fair market values of stock-based compensation were calculated using the closing price of our common stock on March 31, 2020,2022, the last trading day of fiscal year 20202022 ($12.90)7.71).
A named executive officer is entitled to receive certain amounts earned during his term of employment regardless of the manner in which the named executive officer’s employment is terminated. These amounts include base salary, unused vacation pay, and earned annual cash incentive compensation. These amounts are not shown in the table.
A named executive officer may exercise any stock options that are exercisable prior to the date of termination and will be entitled to receive unrestricted shares of common stock with respect to any restricted stock awards for which the vesting period has expired prior to the date of termination. Any payments related to these stock options and restricted stock awards are not included in the table as they are not payable upon the termination of a named executive officer’s employment or upon a change in control of the Company.
A named executive officer will be entitled to receive all amounts accrued and vested under our retirement and savings programs, including our Existing Equity Incentive Plan, any successor plan thereto, and any pension plans in which the named executive officer participates. These amounts are not included in the table as these amounts are disclosed under the heading “Pension Benefits at March 31, 2020” unless such amounts are accelerated or enhanced in the event of the termination of a named executive officer’s employment or upon a change in control of the Company.
GRAHAM CORPORATION 2022 PROXY STATEMENT | 37 | |
Executive Compensation • Potential Payments upon Termination or Change in Control |
disclosed under the heading “Pension Benefits at March 31, 2022” unless such amounts are accelerated or enhanced in the event of the termination of a named executive officer’s employment or upon a change in control of the Company. |
Normal and Early Retirement
A named executive officer is eligible to elect normal retirement at age 65 and early retirement between agesat age 55 andwith at least 15 years of creditable service to the Company or age 64 with at least fifteen and five years respectively, of creditable service to the Company, as discussed under the heading “Pension Benefits at March 31, 2020.2022.”
As of March 31, 2020, Mr. Lines is the only named executive officer eligible for early retirement and2022, none of our named executive officers were eligible for normal retirement. Messrs. Lines and Glajch retired from the Company on August 31, 2021 and April 15, 2022, respectively.
Voluntary Termination and Termination for Cause
Pursuant to our employment agreements with certain of our named executive officers, cause exists if ourthe Board of Directors determines that there has been willful misconduct by the named executive officers in connection with the performance of their duties or if the named executive officers have engaged in any other conduct that has been materially injurious to the Company or have breached any of the representations and warranties in their employment agreements. Under the employment agreements with Mr. Lines and Mr. Smith, upon termination for cause, we would pay all legal fees and other expenses incurred by such named executive officers if they, in good faith, contest the termination. The named executive officers would be required to reimburse us for all such costs if a court of final adjudication were to determine that they did not act in good faith in bringing such challenge.
Our named executive officers are not entitled to receive any severance payments or other benefits upon their voluntary decision to terminate employment with the Company prior to being eligible for retirement (other than compensation due through the date of termination) or upon termination for cause. However, the Transition Agreement with Mr. Lines and the Amended Transition Agreement with Mr. Glajch provide for certain payments and benefits following their retirements from the Company as described in this CD&A.
Involuntary Termination
Our employment agreement with Mr. Lines alsoThoren provides that, upon termination without cause, or if he resigns because of our material breach of his employment agreement, we will have the following obligations: (1)(i) pay to him compensation due him through the date of termination, including any accrued bonus; (2)within ten business days of the termination date; (ii) continue his base salary for nine12 months following such termination; (3)termination at a rate equal to the greater of $400,000 annually or his then-current annualized salary; and (iii) pay to him
a lump sum payment equal to nine months’ base salary; (4) provide him with continuing health care coverage for a period any accrued bonuses as soon as administratively practicable after the six-month anniversary of 18 months following the effective date of termination of his employment; and (5) pay for certain outplacement services.date.
Our employment agreement with Mr. GlajchMalone provides that, upon termination without cause, or if he resigns because of our material breach of his employment agreement, we will have the following obligations: (i) pay to him compensation due him through the date of termination, within ten business days of the termination date; (ii) continue his base salary for 12 months following such termination at a rate equal to the greater of $250,000 annually or his then-current annualized salary; and (iii) pay to him any accrued bonuses as soon as administratively practicable after the six-month anniversary of the termination date.
Our obligation to make payments upon any termination of Messrs. Thoren or Malone without cause or upon his resignation because of a material breach of his agreement by us is conditioned on his execution of an enforceable release of all claims against us and his compliance with all provisions of his employment agreement.
Until his retirement in April 2022, our employment agreement with Mr. Glajch provided that, upon termination without cause, or if he resigned because of our material breach of his employment agreement, we would pay compensation due to Mr. Glajch through the date of termination, including any accrued bonus; and that we willwould pay, in regular monthly payments, Mr. Glajch’s salary for 24 months following the effective date of his termination of employment.
Our employment agreement with Mr. Smith provides that, upon termination without cause, or if he resigns because of our material breach of his employment agreement, we will pay compensation due to Mr. Smith through the date of termination, including any accrued bonus; and that we will pay, in regular monthly payments, Mr. Smith’s salary for 12 months following the effective date of his termination of employment.
Our obligation to make payments upon any termination of Messrs. Lines, Glajch or Smith without cause or upon their resignation because of a material breach of their agreement by us is conditioned on their execution of an enforceable release of all claims against us and their compliance with all provisions of their employment agreement.
Death or Disability
Pursuant to our Stock Bonus Plan, upon the death or disability of a currently employed named executive officer, all unvested shares of time-vested restricted stock and stock options held by the named executive officer will become immediately vested and the stock options will become exercisable in full. All unvested shares of performance-vested restricted stock held by the named executive officer will vestpro-rata based on the satisfaction of the applicable performance goals through the end of the quarter immediately preceding the date of the named executive officer’s death or disability.
38 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Executive Compensation • Potential Payments upon Termination or Change in Control |
All of our named executive officers currently employed by us participate in our life insurance plan, whereby his beneficiary would be entitled to a death benefit equal to $50,000 or, for Batavia-based officers, three times base salary. We also provide each of our named executive officers with an allowance of $2,500 annually (except for Mr. Lines,our Chief Executive Officer, who receivesis entitled to $5,000 annually) for the purpose of procuring a term life insurance policy.
Each of our named executive officers currently employed by us also participates in our short-term disability program that is available to our managers and executive officers. Pursuant to such program, each Batavia-based named executive officer would be entitled to payments equal to his full base salary for six months following such disability. Each of our named executive officers currently employed by us also participates in our long-term disability plan that is generally available to all of our salaried employees.
Termination Following a Change in Control
Our employment agreementsagreement with Messrs. Lines,Mr. Thoren requires, and our prior employment agreement with Mr. Glajch and Smith requirerequired, a termination of employment following a change in control of our Company (commonly referred to as a “double trigger”) in order to trigger certain payments.
A “change in control” is defined in each of our employment agreementsagreement with Messrs. Lines,Mr. Thoren and our prior employment agreement with Mr. Glajch and Smith to include the following events:
any person, party or group (other than the Company, any subsidiary of the Company or any employee benefit plan sponsored by the Company or any subsidiary), directly or indirectly, acquires or has acquired during the12-month period ending on the date of the most recent acquisition, 30% (except that the employment agreement with Mr. Smith uses a lower 25%
|
a change in the composition of our Board of Directors such that members of our Board of Directors as of the effective date of the respective employment agreement cease to constitute at least a majority of our Board of Directors (unless the election or nomination of any new directors was approved by a vote of at least three-quarters of the directors comprising our Board of Directors as of the effective date of the respective employment agreement);
the closing of a reorganization, merger or consolidation of the Company with one or more individuals, corporations, partnerships, associations, joint-stock companies, trusts, estates, unincorporated organizations or any other business organizations (“Persons”), other than one with respect toa transaction following which all or substantially allat least 51% of those personsthe ownership interests of the institution resulting from such transaction are owned by Persons who, were the beneficial owners immediately prior to such event, of outstanding securities of the Company ordinarily having the right to vote in the election of directors own, immediately after such transaction, more than three-quartersowned at least 51% of the outstanding securitiesvoting share of the resulting corporation ordinarily having the right to vote in the election of directors;Company;
the closingacquisition of a salemore than 25% of the voting shares of the Company by any Person or other dispositionPersons acting in concert;
the acquisition of all or substantially all of the assets of the Company other than to a subsidiary of the Company;by any Person or Persons acting in concert; or
the complete liquidation and dissolutionoccurrence of any event if, immediately following such event, at least 50% of the Company.members of the Board do not belong to any of the following groups:
Mr. Lines.Our
| ○ | individuals who were members of the Board on August 11, 2020; or |
| ○ | individuals who first became members of the Board after August 11, 2020 either: |
upon election to serve as a member of the Board by the affirmative vote of a majority of the members of the Board, or a nominating committee thereof, in office at the time of such first election; or
upon election by the stockholders of the Company to serve as a member of the Board, but only if nominated for election by affirmative vote of a majority of the members of the Board, or a nominating committee thereof, in office at the time of such first nomination.
Under his employment agreement, with Mr. Lines provides that,Thoren will not be entitled to any payments by us upon the occurrence of a triggering event that would be deemed anchange in control. Rather, upon the occurrence of a change in control, Mr. Thoren must continue to provide us with the services contemplated by the employment agreement until three months after a change in control has occurred. However, upon the event of termination within two years after a change in control of the Company, Mr. Lines would beThoren is entitled to certain payments, including, among other things, a lump sum paymentin an amount equal to one dollar less than threetwo and a half times the sum of his annualized gross compensation (including bonus) forsalary at the five most recent taxable years ending beforetime of termination and the datetarget amount of such change in control.his bonus under the Cash Bonus Plan.
In addition, allany unvested stock options would become immediately vested and exercisable and any unvestedor shares of restricted stock wouldMr. Thoren holds at the time of termination shall accelerate and become immediately exercisable or fully vested. We would also be required to pay to Mr. LinesThoren six months after the triggering event, a lump sum payment in an amount equal to the excess, if any, of (1)(i) the present value of the aggregate benefits to which he would be entitled under any and all qualified andnon-qualified defined benefitcontribution pension plans maintained by, usor covering employees of, the Company as if he were 100% vested under such plans over (2)or (ii) the present value of the benefits to which he is actually entitled under such defined benefitcontribution pension plans as of the date of his termination. Mr. Lines’Thoren’s employment agreement contains certain limitations for these payments that relate to our ability to deduct such payments for federal income tax purposes.
Pursuant to ourhis employment agreement, with Mr. Lines, our obligation to make payments upon termination following a change in control is conditioned on hisMr. Thoren’s execution of an enforceable release of all claims and his compliance with all provisions of the employment agreement.
GRAHAM CORPORATION 2022 PROXY STATEMENT | 39 | |
Executive Compensation • Potential Payments upon Termination or Change in Control |
The triggering events that would be deemed events of termination include, among others, termination of Mr. LinesThoren for any reason other than death, disability or cause, or resignation of Mr. LinesThoren under the following circumstances:
a change in the nature or scope of his authority from his role and responsibilities immediately prior to the change in control;
a reduction of his total compensation from that prior to the change in control;
a failure by the Company to make any increase in compensation to which Mr. LinesThoren may be entitled under his employment agreement, or action by the Company to decrease his base salary;agreement;
a change requiring Mr. LinesThoren to perform services other than in Batavia, New YorkArvada, Colorado or in any location more than thirty miles distant from Rochester, New York,Arvada, Colorado, except for certain required travel on the Company’s business;
without his express written consent, the assignment to Mr. LinesThoren of any duties inconsistent with his positions, duties, responsibilities and status with the Company immediately prior to the change in control;
a failure by the Company to continue in effect any bonus plans or other benefit or compensation plan in which Mr. LinesThoren was participating at the time of the change in control or the taking of any action by the Company which would adversely affect his participation in or materially reduce his benefits under such plans; or
prior to a change in control of the Company, the failure by the Company to obtain the assumption of the agreement to perform his employment agreement by any successor Company.
Mr. Glajch.Our prior employment agreement with Mr. Glajch providesprovided that, upon the occurrence of a triggering event that would bewas deemed an event of termination within two years after a change in control of the Company, Mr. Glajch would be entitled to certain payments, including, among other things, a lump sum payment(subject to any applicable payroll or other taxes required to be withheld) equal to one dollar less than three2.5 times his annualized gross compensation (including bonus)the sum of (i) Mr. Glajch’s salary at the rate in effect at the time of the termination of employment and (ii) the target amount of Mr. Glajch’s bonus under the Company’s Annual Executive Cash Bonus Plan for the five most recent taxable years ending beforefiscal year that included the date of such change in control.the termination of employment.
In addition, all unvested stock options would become immediately vested and exercisable and any unvested shares of restricted stock would become immediately vested. We would also behave been required to pay to Mr. Glajch six months after the triggering event a lump sum payment amount equal to the excess, if any,provide continuation of (1) the present value of the aggregate benefits to which he would be entitled under any and all qualified andnon-qualified defined benefit pension plans maintained by us as if he were 100% vested under such plans, over (2) the present value of the benefits to which he is actually entitled under such defined benefit pension plans as of the date of his termination. Mr. Glajch’s employment agreement contains certain limitationshealth and medical coverage for these payments that relate to our ability to deduct such payments for federal income tax purposes.a period of 18 months.
Pursuant to our prior employment agreement with Mr. Glajch, our obligation to make payments upon termination following a change in control iswas conditioned on his execution of an enforceable release of all claims and his compliance with all provisions of the employment agreement.
The triggering events that would behave been deemed events of termination include,included, among others, termination of Mr. Glajch for any reason other than death, disability or cause, or resignation of Mr. Glajch under the following circumstances:
a change in the nature or scope of his authority from his role and responsibilities immediately prior to the change in control;
a reduction of his total compensation from that prior to the change in control;
a failure by the Company to make any increase in compensation to which Mr. Glajch may behave been entitled under his employment agreement, or action by the Company to decrease his base salary;
a change requiring Mr. Glajch to perform services other than in Batavia, New York or in any location more than thirty miles distant from Batavia, New York, except for certain required travel on the Company’s business;
without his express written consent, the assignment to Mr. Glajch of any duties inconsistent with his positions, duties, responsibilities and status with the Company immediately prior to the change in control;
a failure by the Company to continue in effect any bonus plans or other benefit or compensation plan in which Mr. Glajch was participating at the time of the change in control or the taking of any action by the Company which would adversely affect his participation in or materially reduce his benefits under such plans; or
prior to a change in control of the Company, the failure by the Company to obtain the assumption of the agreement to perform his employment agreement by any successor Company.
Mr. Smith.Under his employment agreement, Mr. Smith will not be entitled to any payments by us upon the occurrence of a change in control. Rather, upon the occurrence of a change in control, Mr. Smith must continue to provide us with the services contemplated by the employment agreement until three months after a change in control has occurred. However, pursuant to our restricted stock award agreements, shares of unvested restricted stock will be subject to accelerated vesting in the event Mr. Smith is terminated within 12 months of the change in control.
General.In the event of any sale, merger or any form of business combination affecting us, our employment agreements with Messrs. Lines, GlajchThoren and SmithMalone require us to obtain the express written assumption of the agreement by the acquiring or surviving entity, and failure to do so would entitle the executive officer to all payments and other benefits to be provided by us in the event of termination without cause.
In addition, pursuant to the Supplemental Plan, in the event of a “change in control,” each participant in our Supplemental Plan, which currently includes Mr. Lines and Mr. Smith, would become 100% vested in his benefits.
40 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Executive Compensation • Potential Payments upon Termination or Change in Control |
Estimated Payments Upon Termination or Change in Control
Event | James R. Lines ($) | Jeffrey F. Glajch ($) | Alan E. Smith ($) | |||||||||
Normal and Early Retirement(1) | ||||||||||||
Accelerated vesting of stock options | — | — | — | |||||||||
Accelerated vesting of time-vested and performance-vested restricted stock | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | — | — | — | |||||||||
Involuntary Termination without Cause | ||||||||||||
Continued salary | 375,000 | 650,000 | 257,560 | |||||||||
Cash severance payment | 375,000 | — | — | |||||||||
Healthcare coverage | 17,595 | — | — | |||||||||
Outplacement services | 40,000 | (2) | — | — | ||||||||
Enhanced SERP benefits | 125,485 | (3) | — | — | ||||||||
|
|
|
|
|
| |||||||
Total | 933,080 | 650,000 | 257,560 | |||||||||
Voluntary Termination for Good Reason | ||||||||||||
Continued salary | 375,000 | 650,000 | 257,560 | |||||||||
Cash severance payment | 375,000 | — | — | |||||||||
Healthcare coverage | 17,595 | — | — | |||||||||
Outplacement services | 40,000 | (2) | — | — | ||||||||
|
|
|
|
|
| |||||||
Total | 807,595 | 650,000 | 257,560 | |||||||||
Death | ||||||||||||
Life insurance proceeds | 2,950,000 | 2,312,445 | 3,712,433 | |||||||||
Accelerated vesting of stock options | — | — | — | |||||||||
Accelerated vesting of time-vested and | 377,940 | 155,841 | 139,047 | |||||||||
|
|
|
|
|
| |||||||
Total | 3,327,940 | 2,468,286 | 3,851,480 | |||||||||
Disability | ||||||||||||
Short-term disability payments | 250,000 | 162,500 | 128,780 | |||||||||
Accelerated vesting of stock options | — | — | — | |||||||||
Accelerated vesting of time-vested and | 377,940 | 155,841 | 139,047 | |||||||||
|
|
|
|
|
| |||||||
Total | 627,940 | 318,341 | 267,827 | |||||||||
Termination Following Change in Control | ||||||||||||
Accelerated vesting of stock options | — | — | — | |||||||||
Accelerated vesting of restricted stock | 503,048 | 204,297 | 182,277 | |||||||||
Continued salary | — | — | 257,560 | |||||||||
Cash severance payment | 1,628,171 | 1,046,426 | — | |||||||||
Healthcare coverage | 17,595 | — | — | |||||||||
Outplacement services | 40,000 | (2) | — | — | ||||||||
Accelerated vesting of defined contribution | — | — | — | |||||||||
Pension enhancement | — | — | — | |||||||||
Enhanced SERP benefits | 125,485 | (3) | — | — | ||||||||
|
|
|
|
|
| |||||||
Total | 2,314,299 | (4) | 1,250,723 | (4) | 439,837 | |||||||
| Event | Daniel J. Thoren ($) | Matthew Malone ($) | James R. Lines(1) ($) | Jeffrey F. Glajch(2) ($) | ||||||||||||
Normal and Early Retirement | ||||||||||||||||
Cash severance payment |
| — |
|
| — |
|
| 750,000 |
|
| — |
| ||||
Healthcare coverage |
| — |
|
| — |
|
| 19,322 |
|
| — |
| ||||
Accelerated vesting of stock options |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Accelerated vesting of time-vested and performance-vested restricted stock(3) |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Total |
| — |
|
| — |
|
| 769,322 |
|
| — |
| ||||
Involuntary Termination without Cause | ||||||||||||||||
Continued salary |
| 400,000 |
|
| 250,016 |
|
| — |
|
| 669,504 |
| ||||
Cash severance payment |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Healthcare coverage |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Outplacement services |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Enhanced SERP benefits |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Total |
| 400,000 |
|
| 250,016 |
|
| — |
|
| 669,504 |
| ||||
Voluntary Termination for Good Reason | ||||||||||||||||
Continued salary |
| 400,000 |
|
| 250,016 |
|
| — |
|
| 669,504 |
| ||||
Cash severance payment |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Healthcare coverage |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Outplacement services |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Total |
| 400,000 |
|
| 250,016 |
|
| — |
|
| 669,504 |
| ||||
Death | ||||||||||||||||
Life insurance proceeds |
| 50,000 |
|
| 50,000 |
|
| — |
|
| 2,004,256 |
| ||||
Accelerated vesting of stock options |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Accelerated vesting of time-vested and performance-vested restricted stock |
| 140,921 |
|
| 40,202 |
|
| — |
|
| 51,405 |
| ||||
Total |
| 190,921 |
|
| 90,202 |
|
| — |
|
| 2,055,661 |
| ||||
Disability | ||||||||||||||||
Short-term disability payments |
| 18,000 |
|
| 18,000 |
|
| — |
|
| 167,376 |
| ||||
Accelerated vesting of stock options |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Accelerated vesting of time-vested and performance-vested restricted stock |
| 140,921 |
|
| 40,202 |
|
| — |
|
| 51,405 |
| ||||
Total |
| 158,921 |
|
| 58,202 |
|
| — |
|
| 218,781 |
| ||||
Termination Following Change in Control | ||||||||||||||||
Accelerated vesting of stock options |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Accelerated vesting of restricted stock |
| 229,696 |
|
| 40,202 |
|
| — |
|
| 100,176 |
| ||||
Continued salary |
| — |
|
| 250,016 |
|
| — |
|
| — |
| ||||
Cash severance payment |
| 716,501 |
|
| — |
|
| — |
|
| 1,245,452 |
| ||||
Healthcare coverage |
| 18,492 |
|
| — |
|
| — |
|
| 29,639 |
| ||||
Outplacement services |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Accelerated vesting of defined contribution pension contributions |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Pension enhancement |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Enhanced SERP benefits |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Total |
| 964,689 | (4) |
| 290,218 |
|
| — |
|
| 1,375,267(4) |
| ||||
| (1) | The amounts shown for Mr. Lines are the actual amounts he is entitled to receive as a result of his retirement from the Company pursuant to the Transition Agreement. |
GRAHAM CORPORATION 2022 PROXY STATEMENT | 41 | |
Executive Compensation • Potential Payments upon Termination or Change in Control |
| (2) | Mr. Glajch retired from the Company in April 2022. |
| (3) | Beginning with grants made in fiscal year 2014, retirement does not trigger accelerated vesting of performance-vested restricted shares and time-vested restricted shares. |
|
|
| (4) | Such amount takes into account limitations imposed by our employment |
42 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Director Compensation • Director Compensation Programs |
DIRECTOR COMPENSATIONDirector Compensation
Director Compensation Programs
The Compensation Committee annually reviews and approves compensation for our independent directors. Mr. Lines,Thoren, our President and Chief Executive Officer is not an independent director under applicable NYSE and Securities and Exchange CommissionSEC rules and, therefore, does not receive any additional compensation for services as a director. Similarly, Mr. Lines, our former Chief Executive Officer was not independent and did not receive any compensation for services as a director. The compensation that we pay to Mr. Thoren and that we paid to Mr. Lines in fiscal year 2022 is disclosed in the Fiscal Year 20202022 Summary Compensation Table.
We use a combination of cash and equity-based compensation to attract and retain our independent directors. As described below, independent director compensation consists of an annual cash retainer; an additional annual cash retainer for the ChairmanChair of ourthe Board of Directors and the chair of each committee of our Board of Directors; committee meeting fees;the Board; restricted stock awards; and stock options. We also reimburse our independent directors for reasonable expenses incurred in connection with their attendance at Board of Directors and committee meetings. We do not provide retirement benefits to our independent directors. Commencing in fiscal year 2023, we changed the form of awards we provide directors from restricted stock awards to restricted stock unit awards.
Cash Compensation
Each of our independent directors receives an annual retainer fee of $50,000 for service on our Board of Directors.the Board.
The ChairmanChair of ourthe Board of Directors and each of our independent directors serving as a chairpersonchair of committees of ourthe Board of Directors receive additional fees for such service. For fiscal year 2020,2022, the ChairmanChair of ourthe Board of Directors received an additional annual fee of $25,000, the ChairmanChair of the Audit Committee received an additional annual fee of $15,000, the ChairpersonChair of the Compensation Committee received an additional annual fee of $10,000 and the ChairmanChair of the Nominating and Corporate Governance Committee received an additional annual fee of $7,000.
Options.Our independent directors are also eligible to participate in the Existing Equity Incentive Plan, pursuant to which they may be granted options to purchase shares of our common stock. No options were granted to our independent directors during fiscal year 2020.2022.
Restricted Stock.EquityDuring fiscal year 2022, equity compensation awards to independent directors arewere made in the form of time-vested restricted stock awarded under the Existing Equity Incentive Plan. On May 29, 2019,June 1, 2021, the Compensation Committee awarded 2,4503,265 shares of time-vested restricted stock, with a grant date fair market value of approximately $50,000 to each of our then serving independent directors. The shares of restricted stock awarded to our independent directors vest on the first anniversary of the date of grant. In addition, each of Ms. Jaroslawsky and Mr. Stoner received as compensation for their service from the date of their appointment to the Board to the date of the Annual Meeting, a cash retainer of $18,000 and 1,235 shares of time-vested restricted stock, with a grant date fair value of approximately $9,600 that vests one year from the date of grant.
Stock Ownership Guidelines
In order to more closely align the interests of our independent directors with the interests of our stockholders, the Compensation Committee established minimum stock ownership guidelines that require our independent directors to work towards acquiring and maintaining specific levels of equity ownership interests in our common stock within specified time frames.
UnderWe revised our stock ownership guidelines in 2022 to increase the common stock ownership target for our independent directors are required to own shares of our common stock valuedan amount at least 3.05.0 times their annual retainer. New independentIndependent directors are expected to achieve their ownership guidelines within five years of becoming subject to the guidelines.guidelines (with an additional two-fiscal year grace period if the guidelines are amended to increase the ownership target). Our stock ownership guidelines also require our independent directors to retain 50% of the net shares they realize (after tax) when a restricted stock award vests or a stock option is exercised until they are in compliance with the guidelines. The Compensation Committee monitors the progress made by
independent directors in achieving their stock ownership guidelines and, in its discretion, may modify the guidelines and/or time frames for some or all of our independent directors. As of the end of fiscal year 2020,2022, all of our independent directors except Ms. Jaroslawsky and Mr. Stoner, who each joined the Board in March 2022, and Mr. Painter, were in compliance with our stock ownership guidelines.
GRAHAM CORPORATION 2022 PROXY STATEMENT | 43 | |
Director Compensation • Fiscal Year 2022 Director Compensation Table |
Fiscal Year 20202022 Director Compensation Table
The following table shows information regarding the compensation of our independent directors serving for all or part of fiscal year 2020.2022.
| Name | Fees Earned or Paid in Cash ($) | Stock Awards (1) ($) | All Other Compensation ($) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards(1) ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||
James J. Barber | 52,000 | 49,980 | — | 101,980 | 50,000 | 49,987 | — | 99,987 | ||||||||||||||||||||||||
Alan Fortier | 59,000 | 49,980 | — | 108,980 | 57,000 | 49,987 | — | 106,987 | ||||||||||||||||||||||||
Cari L. Jaroslawsky | 18,000 | 9,596 | — | 27,596 | ||||||||||||||||||||||||||||
James J. Malvaso | 77,500 | 49,980 | — | 127,480 | 75,000 | 49,987 | — | 124,987 | ||||||||||||||||||||||||
Gerard T. Mazurkiewicz | 67,000 | 49,980 | — | 116,980 | 65,000 | 49,987 | — | 114,987 | ||||||||||||||||||||||||
Jonathan W. Painter | 50,000 | 49,987 | — | 99,987 | ||||||||||||||||||||||||||||
Lisa M. Schnorr | 62,000 | 49,980 | — | 111,980 | 60,000 | 49,987 | — | 109,987 | ||||||||||||||||||||||||
Jonathan W. Painter | 52,000 | 49,980 | — | 101,980 | ||||||||||||||||||||||||||||
Troy A. Stoner | 18,000 | 9,596 | — | 27,596 | ||||||||||||||||||||||||||||
| (1) | The amounts shown in this column represent the estimated grant date fair value of the shares of restricted stock granted to each independent director during fiscal year |
The table below presents the aggregate number of unvested restricted stock awards outstanding for each of our independent directors serving at March 31, 2020.2022. None of our independent directors serving at March 31, 20202022 held any unexercised stock option awards as of such date.
Name | Restricted Stock Awards | |||
James J. Barber | 3,265 | |||
Alan Fortier | 3,265 | |||
| ||||
| ||||
Jonathan W. Painter | 3,265 | |||
Lisa M. Schnorr | 3,265 | |||
Troy A. Stoner | 1,235 | |||
44 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Proposal Two: Advisory Vote on our Executive Compensation • Board Recommendation |
ADVISORY VOTE ON OUR EXECUTIVE COMPENSATIONAdvisory Vote on our Executive Compensation
Pursuant to Section 14A of the Exchange Act, we are providing our stockholders the opportunity to vote to approve, on anon-binding, advisory basis, the compensation of our named executive officers as described in the Compensation Discussion and Analysis,CD&A, accompanying compensation tables and related narrative discussion contained in this proxy statement. At the 2017 annual meeting, our stockholders expressed an overwhelming preference for this vote to occur on the annual basis recommended by our Board of Directors.the Board. This preference was subsequently adopted by ourthe Board of Directors and we are providing our stockholders with an advisory vote this year. The next advisory vote will take place at our 2021 annual meeting of stockholders, and the next advisory vote regarding frequency of such votes will take place at our 2023 annual meeting of stockholders.
We encourage stockholders to carefully review the Compensation Discussion and AnalysisCD&A section of this proxy statement for additional details on our executive compensation programs, including our compensation philosophy and objectives, as well as the processes our Compensation Committee used to determine the structure and amounts of the compensation of our named executive officers during fiscal year 2020.2022. For your convenience, we have provided an executive summary in the first few pages of the Compensation Discussion and AnalysisCD&A section that highlights information that we believe is particularly important in helping you decide how to vote on this proposal. You should also carefully review the tables that immediately follow the Compensation Discussion and Analysis,CD&A, together with the related narrative disclosure and footnotes.
We are asking you to indicate your support for the compensation of our named executive officers as described in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement.
As an advisory vote, this proposal is not binding upon ourthe Board of Directors or ourthe Compensation Committee. However, the Compensation Committee and ourthe Board of Directors value the opinions expressed by stockholders in their vote on this proposal and will consider the outcome of the vote in deciding whether to take any action as a result of the vote and when making future compensation decisions for named executive officers.
Our Board of Directors unanimously recommends that stockholders voteFORthe following advisory resolution:
“RESOLVED, that the compensation paid toof our named executive officers, as disclosed pursuant to the Securities and Exchange Commission’s compensation disclosure rules, including the Compensation Discussion and Analysis, compensation tables and related narrative discussions set forth in this proxy statement, is hereby approved.”
GRAHAM CORPORATION 2022 PROXY STATEMENT | 45 | |
Proposal Three: Ratification of the Appointment of our Independent Registered Public Accounting Firm • Board Recommendation |
PROPOSAL THREE:Proposal Three:
APPROVAL OF THE 2020 GRAHAM CORPORATION EQUITY INCENTIVE PLAN
You are being asked to approve the 2020 Equity Incentive Plan which was adopted by our Board of Directors on June 9, 2020, subject to stockholder approval. The 2020 Equity Incentive Plan is being submitted to our stockholders for approval with respect to future awards. The 2020 Equity Incentive Plan will become effective upon stockholder approval, and no awards may be granted under the 2020 Equity Incentive Plan after the date that it is 10 years from the date the 2020 Equity Incentive Plan was last approved by the Company’s stockholders.
The 2020 Equity Incentive Plan will replace the Existing Equity Incentive Plan. If stockholders approve the adoptionRatification of the 2020 Equity Incentive Plan, the Existing Equity Incentive Plan will immediately be terminated with respect to future awards, and the remaining authorized shares under the Existing Equity Incentive Plan will become available for grant under the 2020 Equity Incentive Plan, as described in greater detail under “Summary of the 2020 Equity Incentive Plan - Available Shares,” below.
Highlights and a summary of the 2020 Equity Incentive Plan are set forth below, but one aspect of the 2020 Equity Incentive Plan, among other things, is a request for 310,167 additional shares for grants of awards under the 2020 Equity Incentive Plan. We believe that our prudent use of equity compensation has been an important driver of, and necessary for, our success. We are requesting only this limited number of shares, which we believe will be necessary for continuing to manage and grow our business in the current economic environment. We expect this increase to provide sufficient shares to continue to be available under the 2020 Equity Incentive Plan for approximately two additional years if the present economic or market situations effecting us continue and our common stock continues to trade near its current price level.
The Compensation Committee and the Board of Directors considered a number of factors in approving the proposed number of authorized shares under the 2020 Equity Incentive Plan, including our historical burn rate, the number of shares remaining available under the Existing Equity Incentive Plan for future awards, our potential increased need for shares given the impact ofCOVID-19 on our liquidity and the market priceAppointment of our common stock, the number of our issued and outstanding common stock, and potential dilution resulting from the proposed increase in authorized shares.
If our stockholders do not approve the 2020 Equity Incentive Plan, the Existing Equity Incentive Plan will remain in effect; however, we believe that the shares currently available for issuance under the Existing Equity Incentive Plan would be quickly depleted, and we would lose our ability to use equity as a compensation and incentive tool. Instead, we could have to increase the cash component of our compensation mix, which would inhibit our ability to meet our compensation objectives, including aligning our officers’ and directors’ interests with the interests of our stockholders and motivating our officers and directors in the long-term.
The Board of Directors and the Compensation Committee recognize the impact of potential dilution on our stockholders and have evaluated this request for additional shares carefully in the context of the need to promote our growth and profitability, provide our officers, managers, andnon-employeeIndependent Registered Public Accounting Firm directors with an incentive to achieve corporate objectives, attract and retain officers and directors of outstanding ability, and provide such persons with an equity interest in our Company in order to better align their interests with the interests of stockholders, taking into account the uncertainty of the current economic environment.
The closing stock price of a share of the Company’s common stock as reported on the NYSE on June 19, 2020 was $11.96.
Highlights of the 2020 Equity Incentive Plan
The 2020 Equity Incentive Plan provides for the grant of various types of equity awards (stock options, stock awards, and restricted stock units).
2020 Equity Incentive Plan does…
Provide for aminimum one-year vesting period subject to certain limited exceptions
Contain limits on the number of shares that may be granted to any employee in a year
Contain limits on the number of shares and the cash amounts that may be granted or paid toany non-employee director in a year
Provide for the recycling of shares back to the plan pool only in the event of expiration, forfeiture or cancellation of awards
Provide for the forfeiture/clawback of awards under certain circumstances
Retain annual limits on awards that may be granted
2020 Equity Incentive Plan does NOT…
Permit single-trigger vesting on a change in control (except where an acquirer does not assume outstanding awards)
Permit liberal share recycling
Permit the direct or indirect repricing of stock options rights without stockholder approval
Permit the grant of stock options with below-market exercise prices
Permit excisetax gross-ups
Contain any “evergreen” provisions that automatically add shares to the plan reserve
Permit the grant of reload stock options
Summary of the 2020 Equity Incentive Plan
The following summary of the 2020 Equity Incentive Plan is qualified in its entirety by the terms of the 2020 Equity Incentive Plan, a copy of which is attached to this proxy statement as Appendix B.
Purpose
The purpose of the 2020 Equity Incentive Plan is to increase stockholder value by (i) promoting the growth and profitability of our Company; (ii) providing officers, managers, andnon-employee directors with an incentive to achieve corporate objectives; (iii) attracting and retaining officers andnon-employee directors of outstanding ability; and (iv) providing such persons with an equity interest in our Company in order to better align their interests with the interests of stockholders.
Administration
The Compensation Committee of the Board of Directors will administer the 2020 Equity Incentive Plan. Additionally, the Compensation Committee may delegate some or all of its functions to any one or more of its members, the Chief Executive Officer of the Company, or other senior members of management; provided, however, that only the Compensation Committee or other committee consisting of two or morenon-employee directors may select and grant awards to eligible participants subject to Section 16 of the Exchange Act.
Available Shares
The 2020 Equity Incentive Plan provides that the maximum number of shares available for grant to participants pursuant to awards under the 2020 Equity Incentive Plan is 310,167, plus the number of remaining shares available under the Existing Equity Incentive Plan not issued or subject to outstanding grants under the Existing Equity Incentive Plan at the time our stockholders approve the 2020 Equity Incentive Plan, plus any shares that are subject to awards granted under the Existing Equity Incentive Plan that expire, are forfeited or canceled or terminate for any other reason after the date our stockholders approve the 2020 Equity Incentive Plan without the issuance of shares.
The shares available for issuance under the 2020 Equity Incentive Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares, including shares purchased in open market or private transactions. Any shares of stock related to awards which terminate by expiration, forfeiture, cancellation or otherwise without the issuance of such shares shall be available again for grant under the 2020 Equity Incentive Plan. Any shares of stock that are subject to outstanding awards under the Existing Equity Incentive Plan that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award under the Existing Equity Incentive Plan after August 11, 2020 will not become available under the 2020 Equity Incentive Plan.
As of March 31, 2020, 201,846 shares were available for grant and issuance under the Existing Equity Incentive Plan and 36,941 shares were subject to awards granted under the Existing Equity Incentive Plan.
Eligibility for Participation
All employees andnon-employee directors will be eligible to participate in the 2020 Equity Incentive Plan; provided, however, only employees of the Company and its subsidiaries are eligible to receive incentive stock options pursuant to the 2020 Equity Incentive Plan. As of June 19, 2020, approximately 29 persons, including four executive officers, sixnon-employee directors and approximately 19 other individuals may be considered for awards under the 2020 Equity Incentive Plan.
Types of Awards
The 2020 Equity Incentive Plan authorizes the grant of:
Nonqualified and incentive stock options;
Stock awards; and
Restricted stock units.
Termination and Amendment of the 2020 Equity Incentive Plan
The Board of Directors may, at any time, alter, amend, suspend, discontinue, or terminate the 2020 Equity Incentive Plan in whole or in part; provided, however, that (i) no such action shall adversely affect the rights of participants to awards previously granted and (ii) any stockholder approval necessary or desirable in order to comply with tax, securities, or other applicable laws or regulations, including, but not limited to, the listing requirements of the NYSE, shall be obtained in the manner required. In addition, the Board of Directors and the Compensation Committee may not reprice outstanding stock options (or take similar action) without stockholder approval.
Award Limits
The maximum number of shares of stock for which awards may be granted to any participant during a calendar year is 60,000. The maximum aggregate number of shares of stock for which awards may be granted to all participants during any continuous36-month period is 3% of the Company’s total number of authorized shares of stock as of the beginning of such period. The maximum aggregate number of shares of stock that may be issued under the 2020 Equity Incentive Plan upon the exercise of incentive stock options is 310,167 plus the number of remaining shares not issued or subject to outstanding grants under the Existing Equity Incentive Plan on August 11, 2020. The aggregate fair market value, determined at the time an incentive stock option is granted, of the stock with respect to which incentive stock options are exercisable for the first time by any employee during any calendar year under all plans of the Company shall not exceed $100,000. The aggregate grant date fair value of nonqualified stock options and restricted stock units granted to anon-employee director during any calendar year shall not exceed $50,000, and the total fees paid to anon-employee director in cash for services in any calendar year shall not exceed $100,000.
Minimum Vesting Period
Awards granted under the 2020 Equity Incentive Plan are subject to a minimum vesting period of one year, except:
awards of unrestricted shares of stock granted to anon-employee director in lieu of cash fees;
substitute awards granted in assumption of, or in substitution or exchange for, outstanding awards previously granted by a company acquired by the Company or any subsidiary or with which the Company or any subsidiary combines;
up to a maximum of five percent (5%) of the maximum number of shares of stock that may be issued under the 2020 Equity Incentive Plan may be issued pursuant to awards granted without regard for any minimum exercisability or vesting period; and
continued employment or service for exercisability or vesting shall not be required as the Compensation Committee may otherwise determine or permit in the event of death, disability, retirement or other termination of a participant, or, subject to the limitations described under “Change in Control” below in connection with a corporate transaction.
Grants toNon-U.S. Employees
To facilitate the granting of awards to participants who are employed outside of the United States, the 2020 Equity Incentive Plan authorizes the Compensation Committee to modify and amend the terms and conditions of an award to accommodate differences in local law, policy or custom.
Stock Options
The Compensation Committee may grant stock options that are incentive stock options or nonqualified stock options. The exercise price per share of a stock option may not be less than the fair market value of a share of our stock on the date of grant. No stock option can be exercised more than ten years from the date of grant. Only employees of the Company or its subsidiaries may receive incentive stock options, and for incentive stock options granted to certain employees who own 10% or more of the voting power of the Company or any of its subsidiaries, the exercise price per share of the incentive stock option may not be less than 110% of the fair market value of a share of our stock on the date of grant and the incentive stock option can be exercised more than five years from the date of grant.
Stock Awards
The Compensation Committee may grant awards as stock or restricted shares of stock. Unrestricted shares of stock may only be granted tonon-employee directors in lieu of cash fees. While a stock award is subject to restrictions, the Compensation Committee can limit the participant’s rights under the award, including the right to vote and receive dividends. The Compensation Committee may decide to hold dividends in escrow (with or without the accrual of interest) or to reinvest dividends into additional shares of stock subject to the same vesting or performance conditions as the underlying stock award.
Restricted Stock Units
The Compensation Committee may grant awards as restricted stock units, which are rights to receive shares of stock, or an equivalent cash payment, in the future. The Compensation Committee may include with the grant of restricted stock units the right to receive dividend equivalents. The Compensation Committee may decide to hold dividend equivalents in escrow (with or without the accrual of interest) or to reinvest dividend equivalents into additional shares of stock subject to the same vesting or performance conditions as the underlying restricted stock units.
Dividend Equivalents
For restricted stock units, the Compensation Committee may include as part of the award an entitlement to receive dividend equivalents. If a right to dividend equivalents for restricted stock units is included in an award agreement, then dividend equivalents in an amount equal to any cash dividends declared and paid with respect to the shares of stock shall be paid to the participant at the time specified in the award agreement. The Compensation Committee may decide to hold dividends in escrow (with or without the accrual of interest) or to reinvest dividends into additional shares of stock.
Other Terms
Awards may be paid in cash, shares, a combination of cash and shares, or any other form of property as the Compensation Committee may determine.
Adjustments in Authorized Shares and Outstanding Awards
In the event of any corporate event or transaction involving the Company, a subsidiary and/or an affiliate (including, but not limited to, a change in the shares of the Company or the capitalization of the Company), the Compensation Committee to prevent dilution or enlargement of participants’ rights under the 2020 Equity Incentive Plan, shall substitute or adjust (in each case in such manner as it deems equitable and appropriate):
The number and kind of shares or other property (including cash) that may be issued under the 2020 Equity Incentive Plan or under particular forms of awards;
The number and kind of shares or other property (including cash) subject to outstanding awards;
The option price, grant price or purchase price applicable to outstanding awards;
Any individual award limits; and/or
Other value determinations applicable to the 2020 Equity Incentive Plan or outstanding awards.
Change in Control
Upon the occurrence of a change in control of the Company, the Compensation Committee has the authority to determine the treatment of outstanding awards with respect to any amendments, acceleration, and/or substitution of such awards, provided that any acceleration of the exercisability, vesting or payment of, or the lapse of restrictions or deemed satisfaction of any performance objective with respect to an award may only occur if (1) the change in control occurs and (2) either the employment or service of the participant is terminated (i.e., “double-trigger”) or the acquirer does not agree to the assumption or substitution of outstanding awards, and with respect to any award that is earned or vests based upon achievement of one or more performance objectives, unless otherwise required by an employment agreement or other agreement the amount deemed earned or vested in connection with a change in control or associated termination of employment or services shall be based upon the level of actual achievement of the performance objectives and/or the period of time elapsed in the performance period, each as of the applicable date.
Recoupment
The Company is entitled, to the extent required by applicable law or rules of the NYSE, to recoup compensation of whatever kind paid under the 2020 Equity Incentive Plan by the Company at any time.
The benefits or amounts to be received by or allocated to participants and the number of shares to be granted under the 2020 Equity Incentive Plan cannot be determined at this time because the amount and form of grants to be made to any eligible participant in any year is determined at the discretion of the Compensation Committee and the Compensation Committee has not determined future awards or who might receive them. No nominee for election as a director, no associate of any executive officer, director or nominee, and no other person who received or is to receive five percent of the options or rights under the 2020 Equity Incentive Plan will receive any options or rights that are determinable at this time.
The following table sets forth awards that would have been granted under the 2020 Equity Incentive Plan during fiscal year 2020 to each of the indicated individuals and groups had such plan been in effect.
| Name and Principal Position | Options | Dollar Value | Restricted Stock | Dollar Value | ||||||||||||
James R. Lines President and CEO | — | — | 29,412 | $ | 451,832 | |||||||||||
Jeffrey F. Glajch VP - Finance & Administration and CFO | — | — | 10,614 | $ | 163,054 | |||||||||||
Alan E. Smith VP and General Manager - Batavia | — | — | 9,468 | $ | 145,459 | |||||||||||
All current executive officers as a group | — | — | 54,138 | $ | 831,678 | |||||||||||
All current directors who are not executive officers as a group | — | — | 14,700 | $ | 299,880 | |||||||||||
All employees, including all current officers who are not executive officers, as a group | — | — | 7,996 | $ | 163,118 | |||||||||||
The following discussion of the U.S. federal income tax consequences of awards under the 2020 Equity Incentive Plan is based on present federal tax laws and regulations and does not purport to be complete. Foreign, other federal, state and local taxes not described below may also apply.
Incentive Stock Options
If a stock option is an incentive stock option, the employee does not realize income upon grant or exercise of the incentive stock option, and no deduction is available to the Company at such times, but the difference between the value of the shares of stock purchased on the exercise date and the exercise price paid is an item of tax preference for purposes of determining the employee’s alternative minimum tax. If the shares of stock purchased upon the exercise of an incentive stock option are held by the employee for at least two years from the date of the grant and for at least one year after exercise, any resulting gain is taxed at long-term capital gains rates.
If the shares are disposed of before the expiration of that period, any gain on the disposition, up to the difference between the fair market value of the shares at the time of exercise (or sale proceeds if less) and the exercise price of the incentive stock option, is taxed at ordinary rates as compensation paid to the employee, and, subject to the limitations of Section 162(m) of the Code, the Company is entitled to a deduction for an equivalent amount. Any additional gain recognized from the disposition in excess of the fair market value of the shares at the time of exercise is treated as short- or long-term capital gain depending on how long the shares have been held.
Nonqualified Stock Options
If a stock option is a nonqualified stock option, the participant does not realize income at the time of grant of the nonqualified stock option, and no deduction is available to the Company at such time. At the time of exercise, ordinary income is realized by the participant in an amount equal to the difference between the exercise price and the fair market value of the shares of stock on the exercise date, and,
subject to the limitations of Section 162(m) of the Code, the Company is entitled to a deduction for such amount. Upon disposition, any appreciation or depreciation of the shares after the date of exercise will be treated as short- or long-term capital gain or loss depending on how long the shares have been held.
Stock Awards
Upon the grant of an award of unrestricted shares of stock, the participant realizes ordinary income equal to the fair market value at the time (less the purchase price therefor, if any), and, subject to the limitations of Section 162(m) of the Code, the Company is entitled to a corresponding tax deduction at that time. Upon disposition, any appreciation or depreciation of the shares after the date of grant will be treated as short- or long-term capital gain or loss depending on how long the shares have been held.
Upon the grant of an award of restricted shares of stock, no income is realized by the participant (unless the participant makes an election under Section 83(b) of the Code), and the Company is not allowed a deduction at that time. When the restricted shares vest, the participant realizes ordinary income in an amount equal to the fair market value of the restricted shares at the time of vesting (less the purchase price therefor, if any), and, subject to the limitations of Section 162(m) of the Code, the Company is entitled to a corresponding deduction at such time. Upon disposition, any appreciation or depreciation of the shares after the time of vesting will be treated as short- or long-term capital gain or loss depending on how long the shares have been held.
If a participant makes a timely election under Section 83(b) of the Code, then the participant recognizes ordinary income in an amount equal to the fair market value of the restricted shares at the time of grant, and, subject to the limitations of Section 162(m) of the Code, the Company is entitled to a corresponding deduction at such time. Upon disposition, any appreciation or depreciation of the shares after the time of grant will be treated as short- or long-term capital gain or loss depending on how long the shares have been held.
Restricted Stock Unit Awards
Upon the grant of restricted stock units, no income is realized by the participant, and the Company is not allowed a deduction at that time. When restricted stock units vest and are paid, the participant realizes ordinary income in an amount equal to the fair market value of the shares of stock received or the amount of cash paid at the time of payment, and, subject to the limitations of Section 162(m) of the Code, the Company is entitled to a corresponding deduction at such time. Upon disposition, any appreciation or depreciation of the shares after the time of payment will be treated as short- or long-term capital gain or loss depending on how long the shares have been held.
Limitation on Income Tax Deduction
Section 162(m) of the Code places a $1,000,000 annual limit on the compensation deductible by the Company that is paid to an individual who is a covered employee.
Securities Authorized for Issuance under Equity Compensation Plans as of March 31, 2020
| Equity Compensation Plan Information | ||||||||||||
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| (a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders | 36,941 | $ | 18.92 | 201,846 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | 36,941 | $ | 18.92 | 201,846 | ||||||||
|
|
|
|
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Approval of the 2020 Equity Incentive Plan requires the affirmative vote of a majority of the shares present, in person or by proxy, and entitled to vote at the annual meeting.
Our Board of Directors unanimously recommends a voteFOR approval of the 2020 Equity Incentive Plan.
RATIFICATION OF THE APPOINTMENT OF OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP served as our independent registered public accounting firm in fiscal year 2020.2022. The Audit Committee of ourthe Board of Directors has appointed Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending March 31, 2021, which we refer to as 2023 (“fiscal year 2021.2023”). This appointment will be presented to our stockholders for ratification at the annual meeting.Annual Meeting. The Audit Committee will consider the outcome of this vote in its future discussions regarding the appointment of our independent registered public accounting firm.
We have been advised by Deloitte & Touche LLP that a representative will be present at the annual meetingAnnual Meeting and that such representative will be available to respond to appropriate questions. Such representative will be given an opportunity to make a statement if he or she so desires.
OurThe Board of Directors unanimously recommends a voteFOR the proposal to ratify the appointment of Deloitte & Touche LLP to serve as our independent registered public accounting firm for fiscal year 2021.2023.
Fees Paid to Deloitte & Touche LLP
We paid the following fees to Deloitte & Touche LLP for fiscal year 20202022 and for the fiscal year ended March 31, 2019, which we refer to as fiscal year 2019:2021:
| Fiscal Year 2020 | Fiscal Year 2019 | Fiscal Year 2022 | Fiscal Year 2021 | |||||||||||||
Audit fees | $ | 430,000 | $ | 435,000 | $ | 993,520 | $ | 474,960 | ||||||||
Audit-related fees | 31,526 | 18,936 | — | 25,000 | ||||||||||||
Tax fees | — | — | — | — | ||||||||||||
All other fees | 2,047 | 2,047 | 2,047 | — | ||||||||||||
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Total fees | $ | 463,573 | $ | 455,983 | $ | 995,567 | $ | 499,960 | ||||||||
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Audit fees for each of fiscal year 20202022 and fiscal year 20192021 included fees associated with audits of our financial statements audits of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and reviews of financial statements included in our quarterly reports onForm 10-Q.
Audit-related fees for fiscal year 20202021 included fees for the reviewissuance of the valuation, classification and divestiture of the Company’s former wholly-owned subsidiary, Energy Steel & Supply Co. Audit-related feesa consent for fiscal year 2019 includeda registration statement on Form out-of-pocketS-8. expenses. All other fees for fiscal years 2020 and 2019year 2022 included the subscription feefees for the Deloitte & Touche LLP Technical Library Research Tool.
The Audit Committee has determined that the provision of permittednon-audit services described above has not compromised the independence of Deloitte & Touche LLP.
The Audit Committee has adopted procedures forpre-approving all audit and permittednon-audit services provided by our independent registered public accounting firm. The Audit Committee annually
pre-approves a list of specific services and categories of services, subject to a specified cost level. Part of this approval process includes making a determination as to whether permittednon-audit services are consistent with the Securities and Exchange Commission’sSEC’s rules on auditor independence. The Audit Committee has delegatedpre-approval authority to the ChairmanChair of the Audit Committee, subject to reporting any such approvals at the next Audit Committee meeting.
The Audit Committee monitors the services rendered and actual fees paid to our independent registered public accounting firm quarterly to ensure that such services are within the scope of approval. All audit and permittednon-audit services for which Deloitte & Touche LLP was engaged werepre-approved by the ChairmanChair of the Audit Committee.
46 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Report of the Audit Committee |
The Audit Committee is currently comprised of directors Mazurkiewicz (Chairman), Barber, Malvaso, Painter, and Schnorr each of whom our Board of Directors has affirmatively determined is independent pursuant to the listing standards of the NYSE and applicable Securities and Exchange Commission rules. The duties and responsibilitiesReport of the Audit Committee are set forth in the Audit Committee’s charter, as last amended and restated by our Board of Directors effective May 2, 2014.
The Audit Committee oversees the Company’s financial reporting process on behalf of our Board of Directors and has other duties and functions as described in its charter.
Management has the primary responsibility for the Company’s financial statements and the reporting process. The Company’s independent registered public accounting firm, Deloitte & Touche LLP, is responsible for auditing the Company’s financial statements and expressing an opinion as to their conformity with generally accepted accounting principles generally accepted in the United States.
The Audit Committee has:
reviewed and discussed the Company’s audited financial statements for the fiscal year ended March 31, 20202022 with management and the independent registered public accounting firm;
discussed with the Company’s independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) and the Securities and Exchange Commission;SEC;
received and discussed the written disclosures and the letter from the Company’s independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence; and
discussed with the Company’s independent registered public accounting firm its independence.
When evaluating Deloitte & Touche LLP’s independence, the Audit Committee discussed with Deloitte & Touche LLP any relationships that may impact such firm’s objectivity and independence. The Audit Committee has also considered whether the provision of permittednon-audit services by Deloitte & Touche LLP is compatible with maintaining such firm’s independence, and has satisfied itself with respect to Deloitte & Touche LLP’s independence from the Company and its management.
The Audit Committee discussed with the personnel responsible for the internal audit function and the Company’s independent registered public accounting firm the overall scope and plans for their respective audits. The Audit Committee meets with the personnel responsible for overseeing the internal audit function and with the Company’s independent registered public accounting firm, with and without management present, to discuss the results of their examinations, the evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
Based on the reviews and discussions referred to above, the Audit Committee recommended to our Board of Directors (and our Board of Directors has approved) that the audited financial statements be included in the Company’s annual report onForm 10-K for the year ended March 31, 20202022 for filing with the Securities and Exchange Commission. The Audit Committee has also appointed the Company’s independent registered public accounting firm for the fiscal year ending March 31, 20212023 and has submitted such appointment for ratification by the stockholders at the Company’s annual meeting.Annual Meeting.
Audit Committee:
Gerard T. Mazurkiewicz, ChairmanAlan Fortier
James J. Barber
James J. MalvasoCari L. Jaroslawsky
Jonathan W. Painter
Lisa M. Schnorr (Chair)
GRAHAM CORPORATION 2022 PROXY STATEMENT | 47 | |
Proposal Four: Approve Amendment No. 2 to the Employee Stock Purchase Plan • General |
CERTAIN RELATIONSHIPSProposal Four:
Approve Amendment No. 2 to the Employee Stock Purchase Plan
We are asking stockholders to approve Amendment No. 2 to the Employee Stock Purchase Plan, as amended (the “ESPP”) to increase the number of shares of our common stock reserved for issuance under the ESPP from 200,000 shares to 400,000 shares.
Total Shares Authorized to Date Under ESPP | 200,000 | |||
Shares Issued Through March 31, 2022 Under ESPP | 171,118 | |||
Estimated Shares Available Under the ESPP as of March 31, 2022 (a) | 28,882 | |||
Additional Shares Requested Under Amendment No. 2 (b) | 200,000 | |||
Shares of Common Stock Outstanding as of the Record Date (c) | 10,602,605 | |||
ESPP Shares as a Percentage of Common Stock Outstanding (a+b)/c | 2.2% | |||
On March 11, 2010, our Board adopted the ESPP, and on July 29, 2010, our stockholders approved the ESPP. On October 28, 2010, our Board adopted Amendment No. 1 to the ESPP, which added an annual limit on the number of shares of our common stock that a participant could purchase under the ESPP in any calendar year of 5,000 shares.
The rights granted under the ESPP to purchase shares of our common stock are intended to qualify as options issued under an “employee stock purchase plan” as that term is defined in Section 423(b) of the Internal Revenue Code.
The following is a summary of the material features of the ESPP. This summary is qualified in its entirety by reference to the complete text of the ESPP (as amended by Amendment No. 1) and Amendment No. 2, which are attached as Appendices A and B, respectively. Our stockholders are urged to read the actual text of the ESPP and Amendment No. 2 in their entirety.
The ESPP is intended to: (1) provide present and future employees of our company and any future U.S. subsidiaries at all levels with an opportunity to purchase shares of our common stock at a discount through payroll deductions; (2) provide to such employees the benefit of the incentive created by stock ownership; (3) better align the interests of such employees with those of our stockholders for our continued growth and success; and (4) enhance our ability to attract, retain and motivate our employees.
All of our U.S.-based employees are eligible to participate in the ESPP, except any employee who owns five percent or more of our common stock. Accordingly, as of June 8, 2022, approximately 483 of our employees were eligible to participate in the ESPP.
Eligible employees of ours may participate by enrolling in the ESPP and authorizing specified payroll deductions up to a maximum dollar amount of regular earnings (including bonuses) specified by the Compensation Committee of our Board.
48 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Proposal Four: Approve Amendment No. 2 to the Employee Stock Purchase Plan • Purchase Price |
Participating employees will purchase shares of our common stock on the last day of a six-month offering period at a purchase price equal to the lesser of 85 percent of the fair market value of the common stock on either the first day of the six-month offering period or the last day of the offering period.
No participating employee may (i) have the right to purchase shares of our common stock under the ESPP in excess of $25,000 of fair market value (determined as of the first day of the offering period) in any one calendar year, or (ii) have the right to purchase in excess of 5,000 shares of our common stock in any one calendar year.
If Amendment No. 2 is approved by our stockholders, a total of 400,000 shares of our common stock would be available under the ESPP, of which approximately 228,882 shares would actually be available for issuance. Shares of our common stock subject to the ESPP may either be authorized but unissued shares or shares that were once issued and subsequently reacquired by us. In the event of a stock dividend, merger, consolidation, recapitalization, stock split or similar event, the aggregate number and kind of shares available for purchase under the ESPP will be appropriately adjusted.
The ESPP will be administered by the Compensation Committee of our Board unless the Board appoints another committee to administer the ESPP. Each member of the administering committee shall be a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act.
Our Board may amend the ESPP at any time, provided that stockholder approval will be required for amendments that materially: (1) increase the benefits accruing to participating employees; (2) increase (other than through an antidilution adjustment) the number of shares of common stock that may be issued under the ESPP; or (3) modify the requirements as to eligibility for participation in the ESPP. Our Board may also terminate the ESPP at any time.
We intend to register the additional shares of our common stock made available under the ESPP by Amendment No. 2 with the Securities and Exchange Commission pursuant to a Registration Statement on Form S-8 as soon as practicable, subject to the stockholders’ approval of Amendment No. 2 at the Annual Meeting.
Subject to the eligibility requirements described above, all of our domestic employees are eligible to participate in the ESPP. Whether to participate in the ESPP and the amount of each participating employee’s payroll deduction is within the discretion of each individual employee. As such, awards under the ESPP for the current fiscal year are not determinable.
For illustrative purposes, the following table sets forth (a) the number of shares of our common stock that were purchased under the ESPP during fiscal year 2022 by our executive officers, as a group, and by our other employees, as a group, and (b) the weighted average per share purchase price paid for such shares by each such group.
| ESPP Purchased for Fiscal Year 2022 | ||||||||
| Number of Shares Purchased | Weighted Average Purchase Price | |||||||
All executive officers as a group (7 persons) | 1,646 | $ | 11.70 | |||||
All eligible employees, other than executive officers, as a group (approximately 86 persons) | 16,460 | $ | 11.21 | |||||
GRAHAM CORPORATION 2022 PROXY STATEMENT | 49 | |
Proposal Four: Approve Amendment No. 2 to the Employee Stock Purchase Plan • Federal Income Tax Consequences |
Federal Income Tax Consequences
THE FOLLOWING IS A GENERAL SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES TO US AND RELATEDTO PARTICIPATING U.S. TAXPAYER EMPLOYEES OF THE EXERCISE OF SHARES OF COMMON STOCK UNDER THE ESPP. IT DOES NOT DESCRIBE STATE OR OTHER TAX CONSEQUENCES OF OTHER TRANSACTIONS UNDER THE ESPP. TAX CONSEQUENCES FOR ANY PARTICULAR EMPLOYEE MAY BE DIFFERENT.
The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. Under a qualifying plan, no taxable income will be reportable by a participating employee and we will not be allowed any deductions by reason of the grant or exercise of the purchase rights issued thereunder. A participating employee will, however, recognize income in the year in which the purchased shares are sold or otherwise made the subject of disposition and the method of taxation will depend upon the holding period for the acquired shares.
If common stock acquired under the ESPP is disposed of at least two years after the start of the offering period and at least one year after the applicable date of purchase then the lesser of (1) the excess of the fair market value of the purchased shares at the time of disposition over the exercise price, or (2) the excess of the fair market value of such shares as of the beginning of the offering period over the exercise price (determined as of the beginning of the offering period), will be treated as ordinary income. Any further gain or any loss will be taxed as a long-term capital gain or loss.
A sale or other disposition of the purchased shares will be a disqualifying disposition if made on or before the expiration of either of the holding periods described above. If the participating employee makes a disqualifying disposition of the purchased shares, then the participating employee will recognize compensation income and we will be entitled to an income tax deduction for the taxable year in which such disposition occurs, equal to the amount by which the fair market value of such shares on the date of purchase exceeds the purchase price. In no other instance will we be allowed a deduction with respect to the participating employee’s disposition of the purchased shares. Any additional gain or loss recognized upon the disposition of the shares will be a capital gain or loss, which will be long-term if the shares have been held for more than one year following the date of purchase under the ESPP.
The closing price of a share of our common stock reported on the NYSE on June 8, 2022 was $8.50 per share.
Vote Required and Board Recommendation
Approval of Amendment No. 2 requires the affirmative vote of a majority of the votes eligible to be cast on this Proposal Four in person or by proxy at the Annual Meeting.
The Board unanimously recommends a vote FOR Proposal Four to approve the adoption of Amendment No. 2 to the Graham Corporation Employee Stock Purchase Plan.
Securities Authorized for Issuance under Equity Compensation Plans as of March 31, 2022
| Equity Compensation Plan Information | ||||||||||||
| Plan Category | Number of securities to be issued upon exercise of outstanding options and rights | Weighted average exercise price of outstanding option and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| (shares in thousands) | (a) | (b) | (c) | |||||||||
Equity compensation plans approved by security holders | 33 | $ | 18.65 | 434 | (1) | |||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 33 | $ | 18.65 | 434 | (1) | |||||||
| (1) | Amount includes 29 shares remaining available for issuance under the ESPP. |
50 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Certain Relationships and Related Transactions • Policies and Procedures for Review, Approval or Ratification of Related Person Transactions |
Certain Relationships and Related Transactions
Policies and Procedures for Review, Approval or Ratification of Related Person Transactions
Our Audit Committee reviews all relationships and transactions in which the Company and our directors and executive officers or their immediate family members are participants in advance for review and approval. Any existing related person transactions are reviewed at least annually by the Audit Committee. Any director or executive officer with an interest in a related person transaction is expected to recuse himself or herself from any consideration of the matter.
Although the Audit Committee has not established a written policy regarding the approval of related person transactions, when evaluating these transactions, the Audit Committee considers, among other factors:
the nature of the related person’s interest in the transaction;
the material terms of the transaction, including the amount and type of transaction;
the importance of the transaction to the related person and to the Company;
whether the transaction would impair the judgment of a director or executive officer to act in the best interest of the Company; and
any other matters the Committee deems appropriate.
To the extent that the transaction involves an independent director, consideration is also given, as applicable, to the listing standards of the NYSE and other relevant rules related to independence.
In addition, our Audit Committee also reviews all transactions between us and any entity with which an independent director or executive officer is an affiliate, taking into account the factors listed above as well as all other factors deemed appropriate by the Audit Committee.
Barber-Nichols, the Company’s wholly-owned subsidiary, is a party to a lease agreement and equipment lease agreement with Ascent Properties, LLC, a limited liability company of which Daniel J. Thoren holds a majority interest. The initial annual base rent under the lease agreement is $476,000 with annual 3% increases in base rent and the lease has a nine-year term. The equipment lease requires monthly payments of approximately $15,900 and has a seven-year term. As of March 31, 2022, the anticipated aggregate remaining payment obligations under the lease agreement and equipment lease agreement were approximately $3.8 million and $1.9 million, respectively.
GRAHAM CORPORATION 2022 PROXY STATEMENT | 51 | |
Security Ownership of Certain Beneficial Owners |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSSecurity Ownership of Certain Beneficial Owners
The table below shows certain information, as of June 19, 2020,8, 2021, regarding the only persons known to us to be the beneficial owners of more than five percent of the outstanding shares of our common stock, with percentages based on 9,968,96210,602,605 shares issued and outstanding.
| Name and Address of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned | Percent of Class Beneficially Owned | ||||||
BlackRock, Inc.(1) 55 East 52nd Street New York, New York 10055 | 690,539 | 6.93 | % | |||||
ArrowMark Colorado Holdings LLC(2) 100 Fillmore Street, Suite 325 Denver, Colorado 80206 | 718,486 | 7.21 | % | |||||
DePrince, Race & Zollo, Inc.(3) 250 Park Ave South, Suite 250 Winter Park, Florida 32789 | 520,502 | 5.22 | % | |||||
Thomson Horstmann & Bryant, Inc.(4) 501 Merritt 7 Norwalk, Connecticut 06851 | 526,928 | 5.29 | % | |||||
| Name and Address of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned | Percent of Class Beneficially Owned | ||||||
American Century Companies, Inc., et al. 4500 Main Street, 9th Floor Kansas City, Missouri 64111 | 1,120,017 | (1) | 10.6 | % | ||||
Brandes Investment Partners, L.P., et al. 4275 Executive Square, 5th Floor La Jolla, California 92037 | 764,485 | (2) | 7.2 | % | ||||
Royce & Associates, LP 745 Fifth Avenue New York, New York 10151 | 589,951 | (3) | 5.6 | % | ||||
| (1) |
|
This information as to the beneficial ownership of shares of our common stock is based on Amendment No. 2 to |
| (2) | This information as to the beneficial ownership of shares of our common stock is based on a Schedule 13G filed with the SEC on February 8, 2022 by Brandes Investment Partners, L.P. (“Brandes”). Brandes reports shared voting power with respect to 342,485 shares and shared dispositive power with respect to 764,485 shares. The 764,485 shares are deemed to be beneficially owned by CO-GP, LLC, Brandes Worldwide Holdings, L.P., and Glenn Carlson, as control persons of Brandes. |
| (3) | This information as to the beneficial ownership of shares of our common stock is based on Amendment No. |
|
52 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Security Ownership of Management |
SECURITY OWNERSHIP OF MANAGEMENTSecurity Ownership of Management
The table below shows certain information, as of June 19, 2020,8, 2022, regarding shares of our common stock held by (1)(i) each of our directors; (2)(ii) each of our of named executive officers; and (3)(iii) all directors, named executive officers and named executive officers as a group.
| Name of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned (1) | Percent of Class Beneficially Owned (1)(2) | ||||||
Directors | ||||||||
James J. Barber, Ph.D. | 23,538 | (3) | — | |||||
Alan Fortier | 27,803 | (3) | — | |||||
James J. Malvaso | 26,119 | (3) | — | |||||
Gerard T. Mazurkiewicz | 17,823 | (3) | — | |||||
Jonathan W. Painter | 11,403 | (3) | — | |||||
Lisa M. Schnorr | 12,214 | (3) | — | |||||
Named Executive Officers | ||||||||
Jeffrey F. Glajch | 80,111 | (4) | — | |||||
James R. Lines(5) | 178,177 | (6) | 1.79 | % | ||||
Alan E. Smith | 53,452 | (7) | — | |||||
All directors and executive officers as a group (10 persons) | 462,503 | (8) | 4.63 | % | ||||
| Name of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned(1) | Percent of Class Beneficially Owned(1)(2) | ||||||
Directors | ||||||||
James J. Barber, Ph.D. | 38,403 | — | ||||||
Alan Fortier | 37,068 | — | ||||||
Cari L. Jaroslawsky | 1,235(3) | — | ||||||
Jonathan W. Painter | 17,168 | — | ||||||
Lisa M. Schnorr | 20,479 | — | ||||||
Troy A. Stoner | 1,235(3) | |||||||
Named Executive Officers | ||||||||
Daniel J. Thoren(4) | 303,682(5) | 2.9% | ||||||
Matthew Malone | 38,550(6) | — | ||||||
Jeffrey F. Glajch | 44,155 | — | ||||||
James R. Lines | 100,502 | — | ||||||
All directors, named executive officers and executive officers as a group (13 persons) | 695,826(7) | 6.6% | ||||||
| (1) | As reported by such persons as of June |
| (2) | We have omitted percentages of less than 1% from the table. |
| (3) | The amount shown for |
| (4) | Mr. Thoren, our Chief Executive Officer, is also a director. |
| (5) | The amount shown for Mr. |
|
| (6) | The amount shown for Mr. |
| (7) | The amount shown |
GRAHAM CORPORATION 2022 PROXY STATEMENT |
| |
Delinquent Section 16(a) Reports |
DELINQUENT SECTIONDelinquent Section 16(a) REPORTSReports
Section 16(a) of the Exchange Act requires our directors, officers and beneficial owners of moregreater than 10% of our common stockstockholders to file with the Securities and Exchange CommissionSEC reports of ownership and changes in ownership of our common stock.regarding their holdings in Company securities. Based solely on the written representations of our directors and executive officers and copies of the reports that they and beneficial owners ofpersons who owned more than 10% of our common stock have filed with the Securities and Exchange Commission,SEC, we believe that during fiscal year 2020 all of our directors, executive officers and beneficial owners of moregreater than 10% of our common stockbeneficial owners timely complied with the filing requirements of Section 16(a), during Fiscal Year 2022, except that each of Messrs. Lines, Glajch, andfor Mr. Smith and Ms. Condame, officers, and Messrs. Lines and Glajch, former officers, each of whom filed one late Form 4 with respect to one transaction.two transactions.
2021 ANNUAL MEETING OF STOCKHOLDERS2023 Annual Meeting of Stockholders
Proposals Submitted for Inclusion in Our Proxy Materials
We will include in our proxy materials for our 20212023 annual meeting of stockholders any stockholder proposals that comply with Rule14a-8 under the Exchange Act. Among other things, Rule14a-8 requires that we receive such proposals not less than 120 days prior to theone-year anniversary of this proxy statement, or February 25, 2021.15, 2023. If the proposal is in compliance with all of the requirements set forth inRule 14a-8 under the Exchange Act, we will include the stockholder proposal in our proxy statement and place it on the form of proxy issued for the 20212023 annual meeting. Stockholder proposals submitted for inclusion in our proxy materials should be mailed to the following address: Graham Corporation, Attention: Corporate Secretary, 20 Florence Avenue, Batavia, New York 14020.
Stockholder Nominations of Directors
Pursuant to our amended and restatedby-laws, no nominations for directors shall be acted upon at the annual meeting except for those made by the Nominating and Corporate Governance Committee and those made by stockholders of record upon timely notice in writing to our Corporate Secretary. To be considered timely, notice must be received by us no earlier than 120 days and no later than 90 days prior to theone-year anniversary of the previous year’s annual meeting. Thus, for the 20212023 annual meeting of stockholders, we must receive the notice between March 29, 2023 and April 13, 2021 and May 13, 2021.28, 2023. The notice must contain all information, including the completed questionnaire, referenced in our amended and restated by-laws. Stockholder notice of nominations for directors should be mailed to the following address: Graham Corporation, Attention: Corporate Secretary, 20 Florence Avenue, Batavia, New York 14020. You may obtain a copy of our amended and restated by-laws by writing to the Corporate Secretary at the address above.
In addition to satisfying the advance notice requirements under our amended and restated by-laws, to comply with the universal proxy rules under the Exchange Act (once effective), stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice to our Corporate Secretary that sets forth the information required by Rule 14a-19 under the Exchange Act no later than May 28, 2023.
Pursuant to our amended and restatedby-laws, items of business that are proposed outside of the process pursuant to Rule14a-8 under the Exchange Act as described above, may properly be brought before the 20212023 annual meeting of stockholders only if we receive notice of such business no earlier than 120 days and no later than 90 days prior to theone-year anniversary of our 20202022 annual meeting. Thus, for the 20212023 annual meeting of stockholders, we must receive notice of business that is not submitted for inclusion in our proxy materials pursuant to Rule14a-8 under the Exchange Act between March 29, 2023 and April 13, 2021 and May 13, 2021.28, 2023. The notice must be in accordance with and contain all information provided for in our amended and restated by-laws and such business must be a proper matter for stockholder action under the General Corporation Law of Delaware. We will not permit business that does not comply with the
foregoing notice requirement to be brought before the 20212023 annual meeting of stockholders. Stockholder business that is not submitted for inclusion in our proxy statement pursuant to Rule14a-8 should be mailed to the following address: Graham Corporation, Attention: Corporate Secretary, 20 Florence Avenue, Batavia, New York 14020. You may obtain a copy of our amended and restated by-laws by writing to the Corporate Secretary at the address above.
54 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Other Matters |
OurThe Board of Directors does not know of any other matters that may be presented for action at the 2020 annual meeting.Annual Meeting. Should any other matters come before the annual meeting,Annual Meeting, however, the persons named as proxies will have discretionary authority to vote all proxies with respect to such matters in accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Christopher Thome
Vice President – Finance,
Chief Financial Officer and Corporate Secretary
Dated: June 17, 2022
GRAHAM CORPORATION 2022 PROXY STATEMENT | 55 | |
Appendix A |
Dated: June 30, 2020
RECONCILIATION OFNON-GAAPGraham Corporation Employee Stock Purchase Plan MEASURE
In this Proxy Statement, we provide information regarding EBITDA and EBITDA margin,non-GAAP(as Amended by Amendment No. 1) financial measures. Our industry peers may provide similar supplementalnon-GAAP information, although they may not use the same or comparable terminology and may not make identical adjustments. We believe that thesenon-GAAP measures represent an important internal measure of performance. We provide these measures to help in understanding our operating performance. In addition, our credit facility contains ratios based on EBITDA.
The following table reconciles the most directly comparable GAAP measure of Net Income to EBITDA for the twelve months ended March 31, 2020 and March 31, 2019:
EBITDA Reconciliation - Unaudited
(amounts in thousands)
| Year Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
Net Income/(Loss) | $ | 1,872 | (308 | ) | ||||
+Net interest income | (1,312 | ) | (1,450 | ) | ||||
+Income taxes | 440 | 163 | ||||||
+Depreciation & amortization | 1,968 | 2,205 | ||||||
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EBITDA | $ | 2,968 | 610 | |||||
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EBITDA margin % | 3.3 | % | 0.7 | % | ||||
2020 GRAHAM CORPORATION EQUITY INCENTIVE PLAN
2020 GRAHAM CORPORATION EQUITY INCENTIVE PLAN
Effective August 11, 2020
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The purpose of the Plan is to increase stockholder value by promoting growth and profitabilityprovide employees of the Corporation;Company with an opportunity to provide certain directors and key executivespurchase Common Stock at a discount through payroll deductions. The Plan is intended to qualify as an employee stock purchase plan under Section 423 of the CorporationCode, and the provisions of the Plan shall be construed consistent with an incentive to achieve corporate objectives; to attract and retain directors and key executives of outstanding competence; and to provide such directors and key executives with an equity interest in the Corporation.intention.
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Unless the context clearly indicates otherwise, the following terms, whenAs used in the Plan, the following terms shall have the meanings set forth in this Section 2:below:
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provided, however, that no benefit conferred under the Plan, or under the terms of any Award granted under the Plan, solely as a result of the occurrence of a Change in Control of the Corporation shall be conferred upon any Person, or any member of the group of Persons, who makes an acquisition described in Section 2(e)(ii) and for purposes of this provision, the term Change in Control as applied to such a Person shall not include any acquisition made by such group of Persons of which he is a member.
With respect to any Award that constitutes a nonqualified deferred compensation plan within the meaning of Section 409A and provides for accelerated payment in connection with a change in control (whether or not in conjunction with a termination of employment), “Change in Control” for purposes of such accelerated payment shall mean a Change in Control as described above in this Section 2(e) that is also a “change in the ownership of a corporation,” a “change in the effective control of a corporation” or a “change in the ownership of a substantial portion of a corporation” within the meaning of Section 409A.
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| (i) | “Enrollment Form” means the electronic or hardcopy form filed with the Committee or its designated agent pursuant to Section 6. |
| (j) | “Fair Market Value” of Common Stock on a given date means the closing sale price of the Common Stock on the NYSE Amex, or if the NYSE Amex is not open for trading on such date, then on the most recent preceding date when the NYSE Amex is open for trading. |
| (k) | “Graham” means Graham Corporation, a Delaware corporation. |
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GRAHAM CORPORATION 2022 PROXY STATEMENT | A-1 | |
Appendix A |
| 3. | Shares |
Subject to the provisions of Section 12, the total number of shares of Common Stock which may be purchased by employees under the Plan shall not exceed 200,000. Shares subject to the Plan may be either authorized but unissued shares or shares that were once issued and subsequently reacquired by the Company.
| 4. | Administration of the Plan |
The Plan shall be administered by the Committee appointed by the Board, which shall be comprised of two or more members of the Board, and each member of the Committee shall be a “non-employee director” within the meaning of Rule 16b-3. The Committee shall be the Compensation Committee of the Board unless the Board shall appoint another committee to administer the Plan.
Subject to the express provisions of the Plan, the Committee shall have the authority to take any and all actions necessary to implement the Plan and to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable in administering the Plan. All of such determinations shall be final and binding upon all persons. The Committee may request advice or assistance or employ such other persons as are necessary for proper administration of the Plan.
| 5. | Eligible Employees |
Any employee of the Company shall be eligible to participate in the Plan, except an employee who owns (or is considered as owning within the meaning of Section 424(d) of the Code) stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company. No director of the Company who is not an employee shall be eligible to participate in the Plan.
| 6. | Election to Participate |
An Eligible Employee may become a Participant effective on the first day of any Offering Period coincident with or following the date he or she becomes an Eligible Employee by filing with the Committee or its designated agent an Enrollment Form authorizing specified regular payroll deductions from his or her Eligible Compensation. Such regular payroll deductions shall be subject to a maximum deduction of a maximum dollar amount specified by the Committee for such Offering Period.
Payroll deductions for an Offering Period shall commence on the first payroll date occurring on or after the applicable Offering Commencement Date and shall end on the last payroll date occurring on or before the Purchase Date for that Offering Period. A Participant’s payroll deductions shall be credited to the Payroll Deduction Account that the Company has established in the name of the Participant.
A Participant may at any time withdraw from the Plan and cease to be a Participant following the end of the Offering Period in which the election is made to discontinue participation. A Participant may, to be effective as of the first day of the next following Offering Period, increase or decrease his or her payroll deduction by filing a new Enrollment Form. Elections shall last the entire Offering Period, or until the employee ceases to be a Participant, whichever is longer.
Enrollment Forms must be filed with the Committee or its designated agent not less than ten days before the beginning of an Offering Period to be effective for that Offering Period, unless a shorter period of time is prescribed by the Committee. An Enrollment Form not filed within the prescribed filing period shall be effective the first day of the Offering Period following the Offering Period in which it would otherwise become effective.
As a condition of participation in the Plan, each Participant agrees to notify the Company if he or she sells or otherwise disposes of any Common Stock purchased by him or her under the Plan within two years of the Purchase Date on which such shares were purchased.
| 7. | Purchase of Shares |
Each Participant having eligible funds in his or her Payroll Deduction Account on a Purchase Date shall be deemed, without any further action, to have purchased the number of full shares of Common Stock which the eligible funds in his or her Payroll Deduction Account could purchase on that Purchase Date at a price per share that shall be the lesser of (a) the Applicable Percentage of the Fair Market Value of such share on the Purchase Date, or (b) the Applicable Percentage of the Fair Market Value of such share on the Offering Commencement Date. The Payroll
A-2 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Appendix A |
Deduction Account of each such Participant shall be charged for the amount of such purchase and shares shall be issued to the Participant as of the Purchase Date. No fractional shares shall be purchased; any funds in a Participant’s Payroll Deduction Account that are insufficient to purchase a full share shall be retained in the Participant’s Payroll Deduction Account for the following Offering Period, subject to earlier payment to the Participant pursuant to Section 13 or 15. Except for amounts not expended because of the preceding sentence, any funds left over in a Participant’s Payroll Deduction Account after a Purchase Date shall be returned to the Participant.
As soon as administratively practicable following each Purchase Date on which a purchase of shares occurs, the Company shall arrange for the delivery to each Participant or his or her broker, or a broker designated by the Committee, of the shares purchased by that Participant on that Purchase Date.
| 8. | Registration of Shares |
Shares of Common Stock will be registered only in the name of the Participant or, if he or she so indicates on his or her Enrollment Form, in the Participant’s name jointly with one other person, with right of survivorship.
| 9. | Limitation on Purchases |
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None of the rights or privileges of a stockholder of Graham shall exist with respect to shares of Common Stock purchased under the Plan until the date as of which such shares are delivered pursuant to Section 7.
| 11. | Rights Not Transferable |
Except as expressly provided in Section 13, neither payroll deductions credited to a Participant’s Payroll Deduction Account nor any rights with regard to participation in the Plan nor the right to receive shares of Common Stock shall be transferable in any way by a Participant.
| 12. | Change in Capital Structure |
In the event of a stock dividend, stock split or combination of shares, recapitalization or merger in which Graham is the surviving corporation or other change in Graham’s capital stock applicable to all stockholders generally, the number and kind of shares of stock or other securities of Graham to be subject to the Plan, the maximum number of shares or other securities which may be delivered under the Plan, and other relevant provisions shall be appropriately adjusted by the Committee, whose determination shall be binding on all persons.
If Graham is a party to a consolidation or a merger in which Graham is not the surviving corporation, a transaction that results in the acquisition of substantially all of Graham’s outstanding stock by a single person or entity, or a sale or transfer of substantially all of Graham’s assets, the Committee may take such actions with respect to the Plan as the Committee deems appropriate.
Notwithstanding anything in the Plan to the contrary, the Committee may take the foregoing actions without the consent of any Participant, and the Committee’s determination shall be conclusive and binding on all persons for all purposes.
GRAHAM CORPORATION 2022 PROXY STATEMENT | A-3 | |
Appendix A |
| 13. | Retirement, Termination and Death |
In the event of a Participant’s death or retirement or termination of employment for any reason, or in the event that a Participant ceases to be such, then no further purchase of shares shall be made by him or her under the Plan. In such event, the amount remaining in the employee’s Payroll Deduction Account shall be refunded to him or her without interest. In the event of a Participant’s death, the amount in his or her Payroll Deduction Account shall be delivered without interest to the beneficiary designated by the Participant in a writing filed with the Company. If no beneficiary has been designated, or if the designated beneficiary does not survive the Participant, such amount shall be delivered to the employee’s estate without interest.
| 14. | Amendment of |
The Board may at any time, or from time to time, amend the Plan in any respect; provided, however, that the stockholders of Graham must approve any amendment that would materially (a) increase the benefits accruing to Participants under the Plan, (b) increase (other than pursuant to Section 12) the number of securities that may be issued under the Plan, or (c) modify the requirements as to eligibility for participation in the Plan.
| 15. | Termination of the Plan |
The Plan and all rights of employees hereunder shall terminate on the earlier of: (a) the Purchase Date that Participants become entitled to purchase a number of shares greater than the number of shares remaining available for purchase under the Plan; or (b) a date specified by the Board in its sole discretion. In the event that the Plan terminates under circumstances described in clause (a) of this Section, the shares remaining as of the termination date shall be purchased by Participants on a pro-rata basis. Upon termination of the Plan, all amounts in an employee’s Payroll Deduction Account that are not used to purchase Common Stock will be refunded to such employee.
| 16. | General Provisions |
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| (c) | No |
| (d) | No Right |
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No Guarantee of Tax Consequences. No person connected with the Plan in any capacity, including, but not limited to, the |
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A-4 | GRAHAM CORPORATION 2022 PROXY STATEMENT | |
Appendix A |
| (g) | Indemnification. |
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| (i) | Severability. If any provision of the Plan is, becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or would disqualify the |
Graham Corporation
20 Florence Avenue
Batavia, New York 14020
Attention: Chief Financial Officer
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| (l) | Gender and Number. As used herein, and as appropriate to the |
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GRAHAM CORPORATION
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Amendment No. 2 to the Graham Corporation Employee Stock Purchase Plan
| 1. | Purpose of Amendment |
The purpose of this Amendment No. 2 to the Graham Corporation Employee Stock Purchase Plan (the “Plan) is to increase the aggregate number of shares of Common Stock available for purchase under the Plan by 200,000 shares and to make certain other updates to the terms of the Plan.
| 2. | Definitions |
Terms not otherwise defined herein shall have the meanings set forth in the Plan.
| 3. | Amended Terms |
Section 2(f) of the Plan is hereby amended to change the references to “NYSE Amex” in such section to “NYSE”.
Section 3 of the Plan is hereby amended to increase the number of available shares of Common Stock available for purchase under the Plan by 200,000 shares by restating such section to read in its entirety as follows:
“Subject to the provisions of Section 12, the total number of shares of Common Stock which may be purchased by employees under the Plan shall not exceed 400,000. Shares subject to the Plan may be either authorized but unissued shares or shares that were once issued and subsequently reacquired by the Company.”
| 4. | No Other Changes |
Except as specifically set forth herein, no other terms of the Plan are being modified by this Amendment No. 2.
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GRAHAM CORPORATION 2022 PROXY STATEMENT | B-1 | |
| YOUR VOTE | |||||
|  | INTERNET Go To: www.proxypush.com/GHM • Cast your vote online • Have your Proxy Card ready • Follow the simple instructions to record your vote | ||||
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• Use any touch-tone telephone • Have your Proxy Card ready • Follow the simple recorded instructions
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|  | • Mark, sign and date your Proxy Card • Fold and return your Proxy Card in the postage-paid envelope provided | ||||
| You must register to attend the meeting online and/or participate at www.proxydocs.com/GHM | |||||
| Graham Corporation | ||||||||
Annual Meeting of Stockholders
For Stockholders of record as of June 08, 2022
| TIME: | Wednesday, July 27, 2022 11:00 a.m., Eastern Time |
| PLACE: | Annual Meeting to be held live via the Internet - please visit |
www.proxydocs.com/GHM for more details. |
This proxy is being solicited on behalf of the Board of Directors
The undersigned hereby appoints Daniel J. Thoren and Jonathan W. Painter (the “Named Proxies”), and each or either of them, as the true and lawful attorneys of the undersigned, with full power of substitution and revocation, and authorizes them, and each of them as proxies, to vote all the shares of capital stock of Graham Corporation which the undersigned is entitled to vote at said Annual Meeting and any adjournment thereof upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment thereof, conferring authority upon such true and lawful attorneys to vote in their discretion on such other matters as may properly come before the Annual Meeting and revoking any proxy heretofore given.
THE SHARES REPRESENTED BY THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED IDENTICAL TO THE BOARD OF DIRECTORS RECOMMENDATION. In their discretion, the Named Proxies are authorized to vote upon such other matters that may properly come before the Annual Meeting or any adjournment or postponement thereof.
If you hold shares in any Employee Stock Purchase Plan, or 401(k) savings plan of Graham Corporation (the “Plans”), then this proxy card, when signed and returned, or your telephone or Internet proxy, will constitute voting instructions on matters properly coming before the Annual Meeting and at any adjournments or postponements thereof in accordance with the instructions given herein to the trustee for shares held in any of the Plans. Shares in each of the Plans for which voting instructions are not received by July 22, 2022 at 5:00 PM ET, or if no choice is specified, will be voted by an independent fiduciary.
You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendation. The Named Proxies cannot vote your shares unless you sign (on the reverse side) and return this card.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY CARD AND MARK ON THE REVERSE SIDE
Graham Corporation
Annual Meeting of Stockholders
| Please make your marks like this: |  |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE:
FOR EACH NOMINEE IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4
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| BOARD OF DIRECTORS RECOMMENDS | ||||||||||||||||||||
two director nominees |  | |||||||||||||||||||||||
| FOR | WITHHOLD | |||||||||||||||||||||||
1.01 Cari L. Jaroslawsky | ☐ | ☐ | FOR | |||||||||||||||||||||
1.02 Jonathan W. Painter | ☐ | ☐ | FOR | |||||||||||||||||||||
| FOR | AGAINST | ABSTAIN | ||||||||||||||||||||||
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2. | To approve, on an advisory basis, the compensation of our named executive | ☐ | ☐ | ☐ | ||||||||||||||||||||
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| 3. To ratify the |
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| ☐ | ☐ | ☐ | FOR | ||||||||||||||||||||
4. To approve Amendment No. 2 to the Employee Stock Purchase Plan | ☐ | ☐ | ☐ | FOR | ||||||||||||||||||||
You must register to attend the meeting online and/or participate at www.proxydocs.com/GHM
Authorized Signatures - Must be completed for your instructions to be executed.
Please sign exactly as your name(s) appears on your account. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy/Vote Form.
| Signature (and Title if applicable) | Date | Signature (if held jointly) | ||||||||||||||||||||||
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The 2020 Annual Meeting of Stockholders of Graham Corporation will be held on Tuesday, August 11, 2020 at 11:00 a.m., Eastern Time, at our principal executive offices located at 20 Florence Avenue, Batavia, New York 14020, for the following purposes:
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Our Board of Directors has fixed the close of business on June 19, 2020 as the record date for determining the stockholders who are entitled to receive notice of and to vote at the Annual Meeting as well as at any adjournment of the Annual Meeting.
At this time, we intend to hold our annual meeting on August 11, 2020. However, we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state and local governments may impose as it relates to the ongoing COVID-19 pandemic. In the event we determine not to hold the annual meeting as originally scheduled, we will announce alternative arrangements as promptly as practicable. If we take this step, we will announce the decision to do so in advance via a press release, which will be filed with the Securities and Exchange Commission. As always, we encourage you to vote your shares before the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
James R. Lines
President and Chief Executive Officer
June 30, 2020
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report/Form 10-K are available at www.proxyvote.com.
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D18605-P41854
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