UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________________
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
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)) |
[X] | Definitive Proxy Statement |
[ ] | Definitive Additional Materials |
[ ] | Soliciting Material Pursuant to Sec. 240.14a-12 |
Aegion 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):
[X] | No fee required. |
[ ] | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to beheld on April 20, 201626, 2017
TO THE OWNERS OF COMMON STOCK
OF AEGION CORPORATION:
You are invited to attend Aegion Corporation’s 20162017 Annual Meeting of Stockholders. The meeting will be held on April 20, 2016,26, 2017, at 8:30 a.m. local time at the DoubleTree by Hilton, located at 16625 Swingley Ridge Road, Chesterfield, Missouri 63017.
The purposes of this year’s meeting are:
(1) | to elect nine directors; |
(2) | to consider and vote upon a proposal to approve an advisory resolution relating to executive compensation; |
(3) | to vote to advise the Board on the frequency of the advisory vote on executive compensation; |
(4) | to approve the First Amendment to the Aegion Corporation 2016 Employee Equity Incentive Plan; |
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(5) | to approve the Aegion Corporation |
(6) | to ratify the appointment of PricewaterhouseCoopers LLP as our independent auditors for the year ending December 31, |
(7) | to transact any other business that may properly come before the meeting or anyadjournment(s) of the meeting. |
The Board of Directors set February 24, 2016March 3, 2017 as the record date for the meeting. This means that if you were an owner of our common stock at the close of business on that date, you are entitled to receive notice of the meeting and vote at the meeting and any adjournment(s) of the meeting.
Whether or not you expect to attend the meeting, please vote by following the instructions on the Notice Regarding Internet Availability of Proxy Materials that you received in the mail or, if you requested or received a hard copy of the Proxy Statement, on your enclosed proxy card.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 20162017 ANNUAL MEETING OF STOCKHOLDERS TO BE HELDON APRIL 20, 2016:26, 2017:
Our Proxy Statement and 20152016 Annual Report are available at
www.proxyvote.com
| By Order of the Board of Directors, | ||
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| David F. Morris | ||
| Secretary |
Chesterfield, Missouri
March 11, 201617, 2017
PROXY STATEMENT
Aegion Corporation’s Board of Directors is mailing this Proxy Statement and the proxy card, or the Notice Regarding Internet Availability of Proxy Materials (the “E-Proxy Notice”), to you to solicit proxies on its behalf to be voted at our 20162017 Annual Meeting of Stockholders, and at any adjournment(s) of the meeting. The meeting will be held on April 20, 201626, 2017 at 8:30 a.m. local time at the DoubleTree by Hilton, located at 16625 Swingley Ridge Road, Chesterfield, Missouri 63017 for the purposes listed in the E-Proxy Notice and the notice accompanying this Proxy Statement.
On or about March 11, 2016,17, 2017, we first mailed this Proxy Statement and the proxy card, or the E-Proxy Notice, to our stockholders as of the close of business on February 24, 2016.March 3, 2017. The E-Proxy Notice contains instructions on how to access an electronic copy of our proxy materials, including this Proxy Statement and our 20152016 Annual Report. The E-Proxy Notice also contains instructions on how to request a paper copy of our 20152016 Annual Report, this Proxy Statement as well as a proxy card.
We will bear all costs relating to the solicitation of proxies. Proxies may be solicited by our officers, directors and regular employees personally, by mail or by telephone. We may reimburse brokers and other persons holding shares of stock in their names, or the names of their nominees, for reasonable expenses incurred in sending soliciting material to their principals.
Our executive office is located at 17988 Edison Avenue, Chesterfield, Missouri 63005.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 20162017 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
APRIL 20, 2016:26, 2017:
Our Proxy Statement and 20152016 Annual Report are available at:
www.proxyvote.com
TABLE OF CONTENTS
PROXY STATEMENT SUMMARY | 1 | |
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING | 3 | |
PROPOSAL 1: ELECTION OF DIRECTORS | 9 | |
Certain Information Concerning Director Nominees | 9 | |
Vote Required for the Election of Directors | 14 | |
CORPORATE GOVERNANCE |
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Independent Directors |
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Board Leadership Structure | 15 | |
Role of Board in Risk Oversight | 16 | |
Board Meetings and Committees |
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Corporate Governance Documents |
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REPORT OF THE AUDIT COMMITTEE |
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DIRECTOR COMPENSATION |
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Additional Information about Director Compensation |
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Stock Ownership Policy with Respect to Non-Employee Directors |
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EXECUTIVE COMPENSATION |
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COMPENSATION DISCUSSION AND ANALYSIS |
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Overview |
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Say on Pay Results and Stockholder Outreach |
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Compensation Mix |
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Pay for Performance Analysis |
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Understanding the Pay of Our Chief Executive Officer and Other Named Executive Officers |
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Key 2016 Compensation Actions |
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Key 2017 Compensation Actions | 32 | |
How We Make Executive Compensation Decisions - Philosophy and Process |
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How We Made Compensation Decisions in |
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Compensation Related Policies |
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COMPENSATION COMMITTEE REPORT |
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COMPENSATION IN LAST FISCAL YEAR |
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Summary Compensation Table |
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Grants of Plan-Based Awards |
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Outstanding Equity Awards at Fiscal Year End |
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Option Exercises and Stock Vested |
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Nonqualified Deferred Compensation |
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Severance, Change in Control and Termination |
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Potential Post-Employment Payments as of December 31, |
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INFORMATION CONCERNING CERTAIN STOCKHOLDERS |
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RELATED-PARTY TRANSACTIONS |
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SECTION |
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PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION |
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PROPOSAL 3: FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION | 65 | |
PROPOSAL 4: APPROVAL OF THE FIRST AMENDMENT TO THE AEGION CORPORATION 2016 EMPLOYEE EQUITY INCENTIVE PLAN |
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Description of the Existing 2016 Employee Plan | 66 | |
Annual Evaluation of Existing Plan | 66 | |
Description of the First Amendment to the 2016 Employee Plan | 66 | |
Historic Use of Equity, Outstanding Awards and Dilution |
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Required Vote for Approval | 67 | |
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PROPOSAL 5: APPROVAL OF THE AEGION CORPORATION |
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| Stock Subject to the |
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Eligibility | 68 | |
Offerings Under the Plan | 69 | |
Termination of Enrollment | 70 | |
Plan Administration | 70 | |
Amendment and Termination | 70 | |
Federal Income Tax Consequences |
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Required Vote for Approval |
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PROPOSAL 6: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS |
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Independent Auditors’ Fees |
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Vote Required for Ratification of the Appointment of Independent Auditors |
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OTHER MATTERS |
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HOUSEHOLDING OF MATERIALS |
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STOCKHOLDER PROPOSALS |
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STOCKHOLDER COMMUNICATIONS WITH DIRECTORS |
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APPENDIX |
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APPENDIX |
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PROXY STATEMENT SUMMARY
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider. You should read the entire Proxy Statement carefully before voting.
Meeting Information and Mailing of Proxy Materials
• | Date and Time: | April | |
• | Location: | DoubleTree by Hilton, located at 16625 Swingley Ridge Road, Chesterfield, Missouri 63017 | |
• | Record Date: |
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• | Mailing Date: | On or about March | |
• | Voting: | Stockholders of record are entitled to one vote per share on each matter to be voted upon at the |
Voting Matters and Board Recommendations
| Board Voting Recommendation | Page Reference
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Election of nine directors for a term of one year or until their successors are elected and qualified | FOR each nominee | Pages 9 to 14 | |
Advisory vote to approve Named Executive Officer compensation | FOR | Pages | |
Vote to advise the Board on the frequency of the advisory vote on executive compensation | 1 YEAR | Page 65 | |
Approval of the First Amendment to the Aegion Corporation 2016 Employee Equity Incentive Plan | FOR | Pages | |
Approval of the Aegion Corporation | FOR | Pages 68 to 71 | |
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Ratification of the appointment of PricewaterhouseCoopers LLP as our independent auditors for the year ending December 31, | FOR | Pages |
Board Nominees
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C = Chair; M = Member
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Name/Occupation & Experience |
Age | Director Since | Independent | Audit Committee | Compensation Committee | Corporate Governance & Nominating Committee | Strategic Planning & Finance Committee |
Stephen P. Cortinovis Former President - Europe, Emerson Electric Co. | 67 | 1997 | Yes | M | C | ||
Stephanie A. Cuskley CEO, The Leona M. and Harry B. Helmsley Charitable Trust | 56 | 2005 | Yes | C | M | ||
Walter J. Galvin Former CFO & Vice Chairman, Emerson Electric Co. | 70 | 2014 | Yes | M | M | ||
Rhonda Germany Ballintyn VP & Chief Strategy and Marketing Officer for Honeywell International, Inc. (retiring March 31, 2017) | 60 | 2017 | Yes | M | M | ||
Charles R. Gordon President & CEO, Aegion Corporation | 59 | 2009 | No | M | |||
Juanita H. Hinshaw President & CEO,H&H Advisors | 72 | 2000 | Yes | M | C | ||
M. Richard Smith Former SVP of Bechtel Corporation and President of its Fossil Power business unit | 69 | 2009 | Yes | C | M | ||
Alfred L. Woods - Chairman Former President & CEO, Woods Group, LLC | 73 | 1997 | Yes | Ex Officio Member of all Standing Committees | |||
Phillip D. Wright Former President & CEO, Williams Energy Services, Inc. | 61 | 2011 | Yes | M | M | ||
C = Chair M = Member |
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING
Who may vote?
You may vote if you owned shares of our common stock at the close of business on February 24, 2016,March 3, 2017, the record date for our 20162017 Annual Meeting of Stockholders. You are entitled to one vote for each share you owned on that date for each director to be elected and on each other matter presented at the meeting. As of February 24, 2016,March 3, 2017, we had 35,486,75633,782,540 shares of common stock, $.01 par value, outstanding. We have no class or series of voting stock outstanding other than our common stock.
A list of stockholders entitled to vote at the meeting will be available for examination at our executive office located at 17988 Edison Avenue, Chesterfield, Missouri 63005 for ten days before the 20162017 Annual Meeting of Stockholders and at the Annual Meeting.
What am I voting on?
First, you are voting to elect nine directors. Each director, if elected, will serve a term of one year or until his or her successor has been elected and qualified.
Our Board of Directors recommends a vote “FOR” the election of each of our nominees for director.
Second, you are voting to approve an advisory resolution relating to executive compensation.
Our Board of Directors recommends a vote “FOR” the advisory resolution relating to executive compensation.
Third, you are voting to advise our Board on the frequency with which stockholders are provided an advisory vote on executive compensation.
Our Board of Directors recommends a votefor “1 YEAR” as the frequency with which stockholders are provided an advisory vote on executive compensation.
Fourth, you are voting to approve the First Amendment to the Aegion Corporation 2016 Employee Equity Incentive Plan.
Our Board of Directors recommends a vote “FOR” the approval of the amendment to the Aegion Corporation2016 Employee Equity Incentive Plan.
Fifth, you are voting to approve the Aegion Corporation Employee Stock Purchase Plan.
Our Board of Directors recommends a vote “FOR” the approval of the Aegion Corporation 2016 Employee Equity Incentive Plan.
Fourth, you are voting to approve the Aegion Corporation 2016 Executive Performance Plan.
Our Board of Directors recommends a vote “FOR” the approval of the Aegion Corporation 2016 Executive Performance Plan.
Fifth, you are voting to approve the Aegion Corporation 2016 Non-Employee Director Equity Plan.
Our Board of Directors recommends a vote “FOR” the approval of the Aegion Corporation 2016 Non-Employee Director EquityStock Purchase Plan.
Sixth, you are voting to ratify the appointment of PricewaterhouseCoopers LLP as our independent auditors for the year ending December 31, 2016.2017.
Our Board of Directors recommends a vote “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as our independent auditors for the year ending December 31, 2016.2017.
In addition, you may vote on other business, if it properly comes before the meeting, or any adjournment(s) of the meeting.
How do I vote?
By Telephone or Internet:You can vote by telephone or Internet by following the instructions included on the E-Proxy Notice that you received in the mail or, if you requested or received a hard copy of this Proxy Statement, on the enclosed proxy card.
By Written Proxy:If you requested or received a hard copy of this Proxy Statement, you can vote by written proxy by signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you sign and return the enclosed proxy card, the shares represented by the proxy will be voted in accordance with the terms of the proxy, unless you subsequently revoke your proxy.
In Person:If you are a record stockholder, you can vote in person at the meeting.
What is a record stockholder and what is the difference between a record stockholder and a stockholder who holds shares in street name?
If your shares are registered in your name, you are a record stockholder.
If your shares are in the name of your broker or bank, or their nominee, your shares are held in street name.
How many votes are required to elect directors?
Directors are elected by the majority of votes cast, unless the election is contested where the number of director nominees exceeds the number of directors to be elected. The election of directors at the 20162017 Annual Meeting of Stockholders is not a contested election. That means that the affirmative vote of a majority of the shares of our common stock cast is required for a director to be elected, the numberelection of shares voted “FOR” a director must exceed the aggregate number of votes “WITHHELD” from thateach director. A summary of our majority voting standard appears under the heading “Proposal 1: Election of Directors - Vote“Vote Required for the Election of Directors” beginning on page 9of14of this Proxy Statement.
How many votes are needed to approve the advisory resolution relating to executive compensation?
Approval of the advisory resolution relating to executive compensation requires the affirmative vote of a majority of the shares of our common stock cast on the proposal.
How many votes are needed to approve the frequency of the advisory vote on executive compensation?
The alternative on the frequency of the advisory vote on executive compensation that receives the greatest number of votes (i.e., one, two or three years) will be considered the advice of our stockholders to our Board on this matter.
How many votes are needed to approve the First Amendment to the AegionCorporation 2016 Employee EquityIncentive Plan?
Approval of the First Amendment to the Aegion Corporation 2016 Employee Equity Incentive Plan requires the affirmative vote of a majority of the shares of our common stock cast on the proposal.
How many votes are needed to approve the Aegion Corporation 2016 Executive Performance Plan?Employee Stock Purchase Plan?
Approval of the Aegion Corporation 2016 Executive PerformanceEmployee Stock Purchase Plan requires the affirmative vote of a majority of the shares of our common stock cast on the proposal.
How many votes are needed to approve the Aegion Corporation 2016 Non-Employee Director Equity Plan?
Approval of the Aegion Corporation 2016 Non-Employee Director Equity Plan requires the affirmative vote of a majority of the shares of our common stock cast on the proposal.
How many votes are required to ratify the appointment of PricewaterhouseCoopers LLP as our independent auditors for 2016?2017?
Ratification of the appointment of PricewaterhouseCoopers LLP as our independent auditors for the fiscal year ending December 31, 20162017 requires the affirmative vote of a majority of the shares of our common stock cast on the proposal.
What if other matters are voted on at the 20162017 Annual Meeting of Stockholders?
If any other matters are properly presented at the 20162017 Annual Meeting of Stockholders for consideration, the persons named as proxies in the enclosed proxy card (if you requested or received a hard copy of this Proxy Statement) will have the discretion to vote on those matters for you. Approval of any other matter requires the affirmative vote of a majority of the shares of our common stock cast on such matter. At the date we mailed the E-Proxy Notice or this Proxy Statement, our Board of Directors did not know of any other matter to be raised at the 20162017 Annual Meeting of Stockholders.
What does it mean if I receive more than one E-Proxy Notice or proxy card?
If you hold your shares in more than one account name, you will receive an E-Proxy Notice or a proxy card for each account. To ensure that all of your shares are voted, please follow the instructions on each E-Proxy Notice or proxy card that you receive.
Can I revoke my proxy?
Yes. You can revoke your proxy by:
writing to the attention of our Corporate Secretary at 17988 Edison Ave., Chesterfield, Missouri 63005 prior to the date of the 20162017 Annual Meeting of Stockholders;
voting by telephone or internet on a later date, or delivering a later-dated proxy card, if you requested or received a hard copy of this Proxy Statement, prior to or at the 20162017 Annual Meeting of Stockholders; or
voting in person at the 20162017 Annual Meeting of Stockholders.
What is the record date and what does it mean?
The record date for the 20162017 Annual Meeting of Stockholders is February 24, 2016.March 3, 2017. The record date is set by our Board of Directors, as required by Delaware law. Stockholders at the close of business on the record date are entitled to:
receive notice of the meeting; and
vote at the meeting, or at any adjournment(s) of the meeting.
What if I do not specify my vote when I return my proxy card?
If you received a hard copy of this Proxy Statement, you should specify your choice for each proposal on the enclosed proxy card. If no specific instructions are given, proxy cards that are signed and returned will be voted “FOR” the election of the director nominees named in this Proxy Statement, “FOR” the approval of the advisory resolution relating to executive compensation, for “1 YEAR” as the frequency with which stockholders are recommending an advisory vote on executive compensation, “FOR” the approval of the First Amendment to the Aegion Corporation 2016 Employee Equity Incentive Plan, “FOR” the approval of the Aegion Corporation 2016 Executive Performance Plan, “FOR” the approval of the Aegion Corporation 2016 Non-Employee Director EquityEmployee Stock Purchase Plan and “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as our independent auditors for the year ending December 31, 2016.2017.
How are broker non-votes and abstentions counted?
Broker “non-votes” will not be counted as present for the purpose of determining the presence of a quorum unless these shares are voted on at least one matter presented at the 20162017 Annual Meeting of Stockholders. A broker “non-vote” occurs when a broker or nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker or nominee:
has not received voting instructions on a particular matter from the beneficial owner or persons entitled to vote; and
does not have discretionary voting power on the matter.
Brokers are subject to New York Stock Exchange (“NYSE”) rules with respect to their ability to vote shares held by them for the benefit of other persons. The NYSE rules direct that, if you are the beneficial owner of shares held in “street name” by a broker, the broker, as the record holder of the shares, is required to vote those shares in accordance with your instruction. If you do not give instructions to the broker, the broker will be entitled to vote the shares with respect to “discretionary” items but will not be permitted to vote the shares with respect to “non-discretionary” items (the latter are treated as “broker non-votes”). Proposal 6 is the only proposal that may be considered discretionary.
Broker non-votes will not be considered as either a vote cast for or withheld fromagainst a director nominee and thus will have no effect on the vote for director nominees. Proposals 2, 3, 4 and 5 require the affirmative vote of the majority of shares cast on the proposal and, therefore, a broker non-vote will have no effect on the votes of these proposals. For Proposal 3, the frequency of the advisory vote that receives the greatest number of votes will be considered the advice of the stockholders to our Board on the frequency of the advisory vote on executive compensation. Accordingly, broker non-votes will also have no effect on the vote on Proposal 3.
Abstentions will be counted as present for the purpose of determining the presence of a quorum for transacting business at the 20162017 Annual Meeting of Stockholders. A stockholder has no ability to abstain in the election of directors. Proposals 2, 3, 4, 5 and 56 require an affirmative vote of a majority of shares cast on the proposal and, pursuant to our By-Laws, an abstention will have no effect on the votes on these proposals. For Proposal 3, the frequency of the advisory vote that receives the greatest number of votes will be considered the advice of our stockholders on the frequency of the advisory vote on executive compensation. Accordingly, abstentions will also have no effect on the vote on Proposal 3.
How many votes must be present to conduct business atthe 20162017 Annual Meeting of Stockholders?
Our By-Laws require that a quorum must be present to conduct business at the 20162017 Annual Meeting of Stockholders. To constitute a quorum, a majority of the outstanding shares of our common stock must be represented, in person or by proxy, at the 20162017 Annual Meeting of Stockholders. The treatment of broker non-votes and abstentions with regard to determining a quorum is discussed above.
Why did I receive the E-Proxy Notice and not the printed proxy materials?
We are pleased to continue using the U.S. Securities and Exchange Commission rule that allows companies to furnish their proxy materials over the Internet. As a result, we are mailing to many of our stockholders an E-Proxy Notice about the Internet availability of the proxy materials instead of a paper copy of the proxy materials. All stockholders receiving the E-Proxy Notice will have the ability to access the proxy materials over the Internet and request to receive a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the E-Proxy Notice. In addition, the E-Proxy Notice contains instructions on how you may request to access proxy materials in printed form by mail or electronically on an ongoing basis. Employing this distribution process will conserve natural resources and reduce the costs of printing and distributing our proxy materials.
Why did I not receive the E-Proxy Notice in the mail?
We are providing some of our stockholders, including stockholders who have previously requested to receive paper copies of the proxy materials, with paper copies of the proxy materials instead of the E-Proxy Notice. In addition, we are providing the E-Proxy Notice by e-mail to those stockholders who have previously elected delivery of the proxy materials electronically. Those stockholders should have received an e-mail containing a link to the website where those materials are available and a link to the proxy voting website.
How do I view the proxy materials online?
Go towww.proxyvote.comand follow the instructions to view the materials. It is necessary to provide the information printed in the box marked by the arrow located on your E-Proxy Notice.
What if I still prefer to receive a paper copy of the proxy materials?
You can easily request a paper copy at no cost by selecting from one of the three options below. You will need the information on the E-Proxy Notice that is printed in the box marked by the arrow.
• | ByINTERNETatwww.proxyvote.com; |
ByTELEPHONE, toll-free at 1-800-579-1639; or
• | By sending anE-MAILtosendmaterial@proxyvote.com; simply enter the information in the box next to the arrow from your E-Proxy Notice in the subject line. No other information is necessary. |
Can I request to receive my materials by e-mail rather than receive an E-ProxyE-Proxy Notice?
You may request to receive proxy materials for allfuturemeetings either by e-mail or in paper form by mail. To request future copies by e-mail, go towww.proxyvote.com and follow the electronic delivery enrollment instructions. If you choose to access future proxy materials electronically, you will receive an e-mail with instructions containing a link to the website where those materials are available and a link to the proxy voting website. Your election to access proxy materials by e-mail will remain in effect until you terminate it.
Please note that you MAY NOT USE YOUR E-Proxy Notice to vote your shares; it is NOT a form for voting. If you send the E-Proxy Notice back, your vote will not count.
For more information about the E-Proxy Notice, please visit:www.sec.gov/spotlight/proxymatters/e-proxy.shtml.
PROPOSAL 1: ELECTION OF DIRECTORS
At our 20162017 Annual Meeting of Stockholders, stockholders will elect nine directors, each to serve a term of one year or until his or her successor is elected and qualified. Our Board of Directors is currently comprised of nine directors. Our Board of Directors is not divided into classes of directors, meaning all of our directors are voted on every year at our Annual Meeting of Stockholders.
Unless otherwise instructed on the proxy card, each of the persons named as proxies on the proxy card intends to vote the shares represented thereby in favor of the nine nominees listed under “Certain Information Concerning Director Nominees” below.below, all of which have been recommended by our Board of Directors.
Each director nominee named below is presently serving as a director of our Company. All nominees have consented to being named in this Proxy Statement and to serve if elected. If, however, any nominee should become unable or unwilling to serve, the persons named as proxies on the proxy card will vote the shares represented by the proxy for another person duly nominated by our Board, based on the recommendation of our Corporate Governance and Nominating Committee, to stand for election in the nominee’s place. If no other person is so nominated, the shares will be voted only for the remaining nominees.
Certain Information Concerning Director Nominees
Certain information concerning the nominees for election as directors is set forth below. This information was furnished to us by the nominees. No family relationship exists between any of our directors or executive officers.
STEPHEN P. CORTINOVIS
Director since 1997
Age 6667
Mr. Cortinovis has been a co-owner of Lasco Foods, Inc., a privately-held food services industry manufacturer and distributor, since 2005. He was a partner in Bridley Capital Partners from 2001 until 2007. Previously, he was President - Europe of Emerson Electric Co. from 1995 until 2001 and held various other executive positions at Emerson Electric Co. from 1977 to 1995. Mr. Cortinovis also serves on the Boards of Directors of Plexus Corp., a publicly-held company, and Lasco Foods, Inc.
Chair of our Strategic Planning and Finance Committee and member of our |
CHRISTOPHER B. CURTIS
Director since 2015
Age 58
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STEPHANIE A. CUSKLEY
Director since 2005
Age 5556
Ms. Cuskley has served since late 2015 as the Chief Executive Officer of the Leona M. and Harry B. Helmsley Charitable Trust, which aspires to improve lives by supporting exceptional efforts in the U.S. and around the world in health and select place-based
Chair of our Audit Committee and member of our Compensation Committee. |
WALTER J. GALVIN
Director since 2014
Age 6970
Mr. Galvin
Member of our Audit Committee and our Corporate Governance and Nominating Committee. |
RHONDA GERMANY BALLINTYN
Director since 2017
Age 60
Ms. Germany Ballintyn has served as Corporate Vice President, Chief Strategy and Marketing Officer for Honeywell International Inc. (NYSE: HON) since November 2002. In January 2017, Ms. Germany Ballintyn announced that she would retire from her position with Honeywell International Inc. on March 31, 2017. Prior to Honeywell, Ms. Germany Ballintyn was with Booz, Allen & Hamilton, where she served as Vice President, Partner, Board Member and Member of the Board’s Personnel Committee. Prior to Booz, Allen & Hamilton, she ran an independent consulting firm specializing in strategic planning. She also has held management positions at Chem Systems Inc. and Union Carbide. Member of our Corporate Governance and Nominating Committee and member of our Strategic Planning and Finance Committee. |
CHARLES R. GORDON
Director since 2009
Age 5859
Mr. Gordon has been our President and Chief Executive Officer since October 2014 and served as our interim Chief Executive Officer from May 2014 to October 2014. Previously, Mr. Gordon served as the Chief Executive Officer of Natural Systems Utilities, LLC, a distributed water infrastructure company, from February 2014 until being appointed our interim Chief Executive Officer in May 2014. Prior to Natural Systems Utilities, Mr. Gordon was President and Chief Operating Officer of Nuverra Environmental Solutions, Inc., a holding company formerly known as Heckmann Corporation that buys and builds companies in the water sector, from October 2010 until October 2013. Mr. Gordon was President and Chief Executive Officer of Siemens Water Technologies, a business unit of Siemens AG, a world leader in products, systems and services for water and wastewater treatment for industrial, institutional and municipal customers, from 2008 to 2010. Previously, Mr. Gordon served as Executive Vice President of the Siemens Water & Wastewater Systems Group from 2005 to 2008 and as Executive Vice President of the Siemens Water & Wastewater Services and Products Group from 2003 to 2005. His past experience also includes various management positions with US Filter Corporation and Arrowhead Industrial Water, prior to the acquisition of US Filter Corporation by the Siemens family of companies in 2004.
Member of our Strategic Planning and Finance Committee. |
JUANITA H. HINSHAW
Director since 2000
Age 7172
Ms. Hinshaw has been the President and Chief Executive Officer of H & H Advisors, a financial advisory company, since 2005. Previously, she was Senior Vice President and Chief Financial Officer of Graybar Electric Company, Inc., an electrical and communications distributor, from 2000 to 2005. Her past experience also includes various management positions with Monsanto Company, an agricultural company. Ms. Hinshaw
Chair of our Compensation Committee and member of our Audit Committee. |
M. RICHARD SMITH
Director since 2009
Age 6869
Mr. Smith served as a Senior Vice President of Bechtel Corporation, a provider of engineering, construction and project management services in the energy, transportation, communications, mining and oil and gas industries, and President of its Fossil Power business unit from October 2005 until his retirement in December 2007.
Chair of our Corporate Governance and Nominating Committee and member of our Strategic Planning and Finance Committee. |
ALFRED L. WOODS
Director since 1997
Age 7273
Mr. Woods has served as Chairman of our Board of Directors since 2003. Before he retired, he was the President and Chief Executive Officer of Woods Group, LLC, a management consulting company, since before 2001. Prior thereto, Mr. Woods served in various executive positions, including Chairman and Chief Executive Officer, at a number of public and private companies.
Ex officio member of all standing Board Committees. |
PHILLIP D. WRIGHT
Director since 2011
Age 6061
Mr. Wright’s career has spanned
Member of our Compensation Committee and our Strategic Planning and Finance Committee. |
Vote Required for the Election of Directors
Our By-Laws provide that for director nominees to be elected in an uncontested election, the number of shares voted “FOR” such director must exceed the aggregate number of votes “WITHHELD” from“AGAINST” that director. Our Corporate Governance Guidelines provide that directors standing for re-election annually submit a contingent resignation in writing to the Chairman of the Corporate Governance and Nominating Committee to address majority voting in director elections. This resignation becomes effective only if the director fails to receive a sufficient number of votes for re-election at the 20162017 Annual Meeting of Stockholders and our Board accepts the resignation. Our Corporate Governance and Nominating Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date of the certification of the election results. A director whose resignation is being considered under this policy will not participate in the Corporate Governance and Nominating Committee’s consideration of its recommendation, if a member thereof, or in the Board’s decision, on whether to accept or reject the resignation or take such other actions.
Our Board of Directors recommends a vote “For” the election of
each of the nine nominees named herein as directors.
CORPORATE GOVERNANCE
Independent Directors
Based on the findings of our Board’s Corporate Governance and Nominating Committee, our Board has determined that the following directors are “independent directors” as defined by the rules applicable to companies listed on The Nasdaq Global Select Market:
Stephen P. Cortinovis | Juanita H. Hinshaw | |||
| M. Richard Smith | |||
Stephanie A. Cuskley | Alfred L. Woods | |||
Walter J. Galvin | Phillip D. Wright |
The Nasdaq Global Select Market sets forth independence guidelines that are aimed at determining whether a director has a relationship which, in the opinion of our Board of Directors, would interfere with the exercise of independence, such as a current or past employment relationship with us, the receipt by the director or one of his or her family members of compensation in excess of $120,000 from us other than for board or committee service and commercial relationships exceeding specified dollar thresholds. Independence determinations are made on an annual basis at the time the Board of Directors approves director nominees for inclusion in the annual Proxy Statement and, if a director joins the Board of Directors between annual meetings, at such time.
Our Board of Directors reviews various transactions, relationships and arrangements of individual directors in determining whether they are independent. With respect to Ms. Hinshaw, the Board considered Ms. Hinshaw’s prior service as a member on the Board of Directors of The Williams Companies, Inc. in connection with the commercial relationship between our Company and The Williams Companies, Inc. We provide services through our Corrosion Protection platform to The Williams Companies, Inc., an integrated natural gas company. The Board concluded this relationship did not impact the independence of Ms. Hinshaw.
With respect to Ms. Germany Ballintyn, the Board considered Ms. Germany Ballintyn’s employment with Honeywell International, Inc. in connection with the commercial relationship between our Company and Honeywell International, Inc. We have provided services through our Corrosion Protection and Energy Services platforms to Honeywell International, Inc., a manufacturing and technology company. The Board concluded this relationship did not impact the independence of Ms. Germany Ballintyn.
No other independent directors have had any personal, financial or business relationships with us either currently or during the three-year period ended December 31, 2015.2016.
Our independent directors meet in executive session, without management, as appropriate.
Bylaw Forum Selection Clause
Concurrent with the effectiveness of an amendment to the Delaware General Corporation Law (the “DGCL”) that expressly authorizes bylaw forum selection clauses, the Board of Directors amended and restated the By-Laws of the Company on August 1, 2015 to include a forum selection clause, and publicly filed such amended and restated By-Laws with the SEC. The forum selection clause provides generally that the Delaware Court of Chancery is the exclusive forum for any claims brought by a stockholder (including a beneficial owner) (i) that are based upon a violation of a duty by a current or former director or officer or stockholder in such capacity or (ii) as to which the Delaware General Corporation Law confers jurisdiction upon the Delaware Court of Chancery. The Board adopted this clause because it believes it to be in the best interests of the Company and its stockholders. This clause is intended to benefit the Company and its stockholders in significant part by directing litigation to a single Delaware court, which will apply its own state law with a well-established body of precedent, thereby reducing the risk and expense of concurrent, multi-jurisdictional litigation, saving Company resources (money and management attention) and leading to a single, more predictable outcome in litigation involving corporate governance and internal affairs. The clause does not preclude any type of litigation against the Company, its officers or directors; it simply channels certain litigation to a single, experienced court to enable a more efficient and effective resolution of disputes tied to Delaware. The amended and restated By-Laws also make clear that the Board may, under certain circumstances, waive the forum selection clause if it determines that it is in the best interests of stockholders
Board Leadership Structure
Our Chairman of the Board position is a non-executive position. Our Board separated the positions of Chairman of the Board and Chief Executive Officer in July 2003. Alfred L. Woods has served as our Chairman since July 2003.
Separating these positions allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairman of the Board to lead our Board in its fundamental role of providing advice to, and independent oversight of, management. Our Board recognizes the time, effort and energy that the Chief Executive Officer is required to devote to his position in the current business environment, as well as the commitment required to serve as our Chairman, particularly as the Board’s oversight responsibilities continue to grow. Our Board believes that having separate positions, with an independent non-executive director serving as Chairman, is the appropriate leadership structure for our Company at this time and demonstrates our commitment to good corporate governance.
Our Chairman is responsible for the smooth functioning of our Board, enhancing its effectiveness. Our Chairman guides the processes of our Board, setting the agenda for, and presiding at, Board meetings. Our Chairman also presides at stockholder meetings and ensures that directors receive appropriate information from our Company to fulfill their responsibilities.
Our Chairman is an ex officio member of each standing Board committee, providing guidance and, like all directors, taking an active role in evaluating our executive officers.
Our Chairman acts as a regular liaison between our Board and our executive management, consulting regularly with our executives over business matters and providing our executives with immediate consultation and advice on material business decisions that require prompt reflection or policy interpretation.
Pursuant to our Board’s delegation of authority policy, certain approval authorizations have been delegated to our Chairman. Any approvals made by the Chairman are then reported to our full Board at its next regularly scheduled meeting.
On June 27, 2013, the Board appointed Mr. Cortinovis to serve as Vice Chairman of the Board.Board, a position he has served in since being appointed. As Vice Chairman, Mr. Cortinovis assists the Chairman in the performance of his duties.
Role of Board in Risk Oversight
Our Board of Directors has responsibility for the oversight of risk management. Our Board, either as a whole or through its Committees, regularly discusses with management our major risk exposures, their potential impact on our Company and the steps we take to manage them.
While our Board is ultimately responsible for risk oversight at our Company, our Board Committees assist the Board in fulfilling its oversight responsibilities in certain areas of risk. In particular, our Strategic Planning and Finance Committee reviews and approves risk management programs. Our Audit Committee focuses on financial risk, including internal controls, and receives an annual risk assessment report from our internal auditors. Our Corporate Governance and Nominating Committee focuses on the management of risks associated with Board organization, membership and structure, succession planning for our directors and executive officers, leadership development, corporate governance and compliance. Finally, our Compensation Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs.
Board Meetings and Committees
Board of Directors. During 2015,2016, our Board of Directors held 9meetings6meetings and did not actacted by unanimous written consent.consent on four occasions. No director attended fewer than 75% of the aggregate number of Board meetings and Board Committee meetings on which the director served during 2015.2016. Our Board has four standing Committees, an Audit Committee, a Compensation Committee, a Corporate Governance and Nominating Committee and a Strategic Planning and Finance Committee. The Board may also, from time to time, establish such other Committees as it may deem necessary.
Audit Committee. The members of our Board’s Audit Committee are Stephanie A. Cuskley (Chair), Walter J. Galvin and Juanita H. Hinshaw. Mmes. Cuskley and Hinshaw and Mr. Galvin are independent directors as defined by the rules applicable to companies listed on The Nasdaq Global Select Market.
The primary functions of our Audit Committee are to oversee: (a) the integrity of our financial statements; (b) our compliance with legal and regulatory requirements; (c) our independent auditors’ qualifications and independence; and (d) the performance of our internal audit function and independent auditors. The Audit Committee also prepares the Report of the Audit Committee included in our Proxy Statement. The Audit Committee’s activities are intended to involve guidance and oversight and not to diminish the primary responsibility of management for our financial statements and internal controls. The Audit Committee’s primary responsibilities include:
the appointment, compensation, retention and termination of our independent auditors and of our internal auditors;
oversight of the work of independent auditors engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us;
oversight of our internal auditors’ work;
review of the scope and results of our internal controls;
approval of the professional services provided by our independent auditors; and
review of the independence of our independent auditors.
Audit Committee Financial Expert. Based on the findings of the Audit Committee, our Board has determined that each of Mmes. Cuskley and Hinshaw and Mr. Galvin are “audit committee financial experts,” as defined in the rules promulgated by the Securities and Exchange Commission and as required of Nasdaq-listed companies.
During 2015,2016, the Audit Committee held 1512 meetings and did not act by unanimous written consent. Our Board has adopted a written charter for the Audit Committee.
Compensation Committee. The members of our Board’s Compensation Committee are Juanita H. Hinshaw (Chair), Christopher B. Curtis, Stephanie A. Cuskley, Stephen P. Cortinovis and Phillip D. Wright. Mr. CurtisCortinovis joined the Compensation Committee in February 2015.January 2017. Mmes. Hinshaw and Cuskley and Messrs. CurtisCortinovis and Wright are independent directors as defined by the rules applicable to companies listed on The Nasdaq Global Select Market.
Among other responsibilities, the Compensation Committee: (a) determines the compensation level of our Chief Executive Officer and other executive officers, as well as certain other highly compensated key employees; (b) reviews management’s Compensation Discussion and Analysis relating to our Company’s executive compensation programs and approves the inclusion of the same in our Proxy Statement and/or Annual Report on Form 10-K; (c) issues a report confirming the Compensation Committee’s review and approval of the Compensation Discussion and Analysis for inclusion in our Proxy Statement and/or Annual Report on Form 10-K; (d) administers, and makes recommendations with respect to, our incentive compensation plans and stock-based plans; and (e) reviews and oversees risks arising from or in connection with our compensation policies and programs for all employees.
During 2015, the Compensation Committee held 10 meetings and did not act by unanimous written consent. Our Board has adopted a written charter for the Compensation Committee.Committee under which there is no express authorization for the Compensation Committee to delegate its authority with respect to the determination of executive and director compensation.
During 2016, the Compensation Committee held 7 meetings and acted by unanimous written consent on two occasions.
Compensation Committee Interlocks and Insider Participation.There were no compensation committee interlocks or insider participation on the part of the members of our Compensation Committee during 2015.2016. The members of our Compensation Committee are set forth above under “Compensation Committee.”
Corporate Governance and Nominating Committee. The members of our Board’s Corporate Governance and Nominating Committee are M. Richard Smith (Chair), Stephen P. CortinovisRhonda Germany Ballintyn and Walter J. Galvin. Ms. Germany Ballintyn joined the Corporate Governance and Nominating Committee in January 2017, and Mr. Cortnovis contemporaneously moved off of the Corporate Governance and Nominating Committee and onto the Compensation Committee. Messrs. Cortinovis, Galvin and Smith, and Ms. Germany Ballintyn, are independent directors as defined by the rules applicable to companies listed on The Nasdaq Global Select Market.
Among other responsibilities, the Corporate Governance and Nominating Committee: (a) advises the Board on corporate governance principles, including developing and recommending to our Board a set of corporate governance guidelines; (b) identifies qualified individuals to recommend as potential Board members to our stockholders; (c) oversees leadership development strategies; (d) oversees risks associated with the organization, membership and structure of our Board, succession planning for our directors and executive officers and corporate governance; and (e) oversees the Company’s compliance program.
When identifying nominees to serve as a director of our Company, our Corporate Governance and Nominating Committee considers candidates with diverse business and professional experience, skills, gender and ethnic background, as appropriate, in light of the current composition and needs of our Board. As part of its evaluation of a candidate’s business and professional experience, the Corporate Governance and Nominating Committee considers a variety of characteristics including, but not limited to: certain core competencies, including knowledge of accounting and finance, sound business judgment, knowledge of management trends, crisis response ability, industry knowledge and strategy and vision; experience in the industries in which we operate; independence; level of commitment; and personal characteristics. The Corporate Governance and Nominating Committee may engage a third party to assist it in identifying potential director nominees. The Corporate Governance and Nominating Committee assesses the effectiveness of this practice annually in connection with the nomination of directors for election at the annual meeting of stockholders.
The composition of our current Board reflects diversity in business and professional experience, skills, gender and ethnic background. When considering whether our current directors have the experience, qualifications, attributes and skills, taken as a whole, to enable our Board to satisfy its oversight responsibilities effectively in light of our Company’s business and structure, our Corporate Governance and Nominating Committee and Board focused primarily on the information discussed in each of the directors’ individual biographies set forth on pages 9through 13of13 of this Proxy Statement. In particular:
With regard to Mr. Cortinovis, our Board considered his strong background in the global manufacturing and technology sector, as well as his expertise with large multinational corporations.
With regard to Mr. Curtis, our Board considered his extensive sales and marketing background as well as his senior leadership experience, especially in the manufacturing sector.
With regard to Ms. Cuskley, our Board considered her strong financial and investment banking background.
With regard to Mr. Galvin, our Board considered his wealth of senior management, leadership and financial experience with well-respected public companies.
With regard to Ms. Germany Ballintyn, our Board considered her extensive strategy and marketing background as well as her senior leadership experience, especially in the manufacturing sector.
With regard to Mr. Gordon, our Board considered his extensive senior management experience in the water and wastewater industries as well as his in-depth knowledge of our Company and its operations as President and CEO.
With regard to Ms. Hinshaw, our Board considered her global experience in finance and investments, financial planning and risk management.
With regard to Mr. Smith, our Board considered his global business experience in the energy industry, including the mining and oil and gas sectors.
With regard to Mr. Woods, our Board considered his extensive managerial expertise, including as Chairman or Chief Executive Officer at a number of public and private companies, and experience in financial operations, as well as his diverse industry experience and entrepreneurial know-how.
With regard to Mr. Wright, our Board considered his extensive managerial experience in the energy industry, including numerous executive positions, as well as his in-depth knowledge of the oil and gas sectors.
In addition, our Corporate Governance and Nominating Committee has actively sought directors that allow our Board to benefit from potentially different perspectives arising from gender and ethnic diversity on the Board.
Stockholders also may make nominations for directors. Stockholders wishing to propose nominees for consideration at our 20172018 Annual Meeting of Stockholders must comply with the provisions of our By-Laws dealing with nominations. For a discussion of the nominating procedures, see “Stockholder Proposals” on page 7674 in this Proxy Statement. All director candidates, including those recommended by stockholders, are evaluated on the same basis.
The Corporate Governance and Nominating Committee held sixmeetingsfourmeetings in 20152016 and did not actacted by unanimous written consent.consent on one occasion. Our Board has adopted a written charter for the Corporate Governance and Nominating Committee.
Strategic Planning and Finance Committee. The members of our Board’s Strategic Planning and Finance Committee are Stephen P. Cortinovis (Chair), Christopher B. Curtis,Rhonda Germany Ballintyn, Charles R. Gordon, M. Richard Smith and Phillip D. Wright. Mr. CurtisMs. Germany Ballintyn joined the Strategic Planning and Finance Committee in February 2015.January 2017. Messrs. Cortinovis, Curtis, Smith and Wright, and Ms. Germany Ballintyn, are independent directors as defined by the rules applicable to companies listed on The Nasdaq Global Select Market.
The role of this Committee is to oversee the development of the ongoing strategic planning process and initiatives and financial affairs of our Company, including: (a) assisting management with strategic and annual business plans; (b) reviewing and discussing with management large projects, bids and other contractual arrangements; and (c) reviewing and making recommendations regarding financial matters, mergers and acquisitions, risk management, capital structure and investor relations and information technology.relations.
The Strategic Planning and Finance Committee held11meetingsheld9meetings in 20152016 and did not actacted by unanimous written consent.consent on two occasions. Our Board has adopted a written charter for the Strategic Planning and Finance Committee.
Corporate Governance Documents
Corporate Governance Guidelines.Based on the recommendation of the Corporate Governance and Nominating Committee, our Board has adopted a set of corporate governance guidelines. These corporate governance guidelines, which are subject to annual review by the Corporate Governance and Nominating Committee, provide a framework within which our Board and executive officers fulfill their respective responsibilities and reflect our Board’s commitment to monitor the effectiveness of decision-making, both at the Board and senior executive management level.
Board Committee Charters. As described above, our Board has adopted a charter for each of its standing Committees,Committees: the Audit, Compensation, Corporate Governance and Nominating, and Strategic Planning and Finance Committees.
Code of Ethics for our CEO, CFO and Senior Financial Employees. Our Audit Committee has adopted a written code of ethics that applies to our Chief Executive Officer, our Chief Financial Officer and senior financial employees. The purposes of the code of ethics, among other things, are to deter wrongdoing, to promote ethical conduct and to ensure that information that we provide in our public reports, including those filed with the Securities and Exchange Commission, is full, fair, accurate, timely and understandable.
Code of Conduct. Based on the recommendation of the Corporate Governance and Nominating Committee, our Board has adopted a code of conduct that applies to all of our employees, including our officers, and our directors.
Availability of Corporate Governance Documents. Each of our corporate governance guidelines, our By-Laws, Board committee charters, code of ethics and code of conduct are available, free of charge, on our website,www.aegion.com, under “Investors” and then “Corporate Governance.” We also will provide these documents, free of charge, to any stockholder who requests them by writing to the following address:
Investor Relations | ||
c/o Aegion Corporation | ||
17988 Edison Avenue | ||
Chesterfield, Missouri 63005 |
If we amend our code of ethics or grant a waiver of our code of ethics or code of conduct to any of our officers or directors, we will disclose the amendment or waiver on our website or as required by law or regulation.
Report of the Audit Committee
Our Board’s Audit Committee operates under a written charter, which was adopted by our Board of Directors. A copy of this charter is available, free of charge, on our website,www.aegion.com. Our Audit Committee consists of three independent directors: Stephanie A. Cuskley (Chair), Walter J. Galvin and Juanita H. Hinshaw.
Our Audit Committee reviews the Company’s financial reporting process on behalf of our Board of Directors. In fulfilling its responsibilities, our Audit Committee has reviewed and discussed the audited financial statements to be included in our 20152016 Annual Report on Form 10-K with management and PricewaterhouseCoopers LLP, our Company’s independent registered public accounting firm. Management is responsible for the financial statements and the reporting process, as well as maintaining effective internal control over financial reporting and assessing such effectiveness. Our independent registered public accounting firm is responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, as well as expressing an opinion on whether the Company maintained effective internal control over financial reporting.
Our Audit Committee has discussed with PricewaterhouseCoopers LLP the matters required to be discussed by the rules ofstatement on Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board (“PCAOB”), including U.S. Auditing Standard Section 380. in Rule 3200T. In addition, our Audit Committee has discussed with PricewaterhouseCoopers LLP the accounting firm’s independence with respect to our Company and its management, including the matters in the written disclosures and the letter required by the applicable requirements of the PCAOB regarding PricewaterhouseCoopers LLP’s communications with our Audit Committee concerning independence, received from PricewaterhouseCoopers LLP. Based upon the above reviews and discussions, our Audit Committee recommended to our Board that our audited consolidated financial statements for 20152016 be included in our 20152016 Annual Report on Form 10-K.
Our Board and our Audit Committee believe that our Audit Committee’s current member composition satisfies the rules that govern audit committee composition, including the requirement that all audit committee members are “independent” directors, as that term is defined in the listing standards of The Nasdaq Stock Market LLC.
Based on the findings of our Audit Committee, our Board has determined that our Audit Committee has three “audit committee financial experts,” as defined in the rules promulgated by the Securities and Exchange Commission, and as required of Nasdaq-listed companies. They are Stephanie A. Cuskley, Walter J. Galvin and Juanita H. Hinshaw.
Stephanie A. Cuskley, Chair Walter J. Galvin
Juanita H. Hinshaw
Notwithstanding anything set forth in any of our previous filings under the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the preceding report shall not be deemed
incorporated by reference in any such filings.
Director Compensation
The following table sets forth information concerning compensation earned by our non-employee directors in fiscal year 2015:2016:
Name | Year | Fees Earned orPaid in Cash ($) | Stock Awards ($)(1) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation ($) | Total ($) | Year | Fees Earned orPaid in Cash ($) | Stock Awards ($)(2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||||||||||||||||||||
Stephen P. Cortinovis | 2015 | $ | 86,000 | $ | 102,000 | – | – | – | – | $ | 188,000 | 2016 | $86,000 | $102,000 | – | – | – | – | $188,000 | ||||||||||||||||||||||||||||||||||||||||||
Christopher B. Curtis (2) | 2015 | 78,518 | 123,987 | – | – | – | – | 202,505 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Christopher B. Curtis (3) | 2016 | 62,250 | 102,000 | – | – | – | – | 164,250 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Stephanie A. Cuskley | 2015 | 92,000 | 102,000 | – | – | – | – | 194,000 | 2016 | 92,000 | 102,000 | – | – | – | – | 194,000 | |||||||||||||||||||||||||||||||||||||||||||||
Walter J. Galvin (3) | 2015 | – | 183,000 | – | – | – | – | 183,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Walter J. Galvin (4) | 2016 | – | 183,000 | – | – | – | – | 183,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Juanita H. Hinshaw | 2015 | 92,000 | 102,000 | – | – | – | – | 194,000 | 2016 | 92,000 | 102,000 | – | – | – | – | 194,000 | |||||||||||||||||||||||||||||||||||||||||||||
M. Richard Smith | 2015 | 87,000 | 102,000 | – | – | – | – | 189,000 | 2016 | 87,000 | 102,000 | – | – | – | – | 189,000 | |||||||||||||||||||||||||||||||||||||||||||||
Alfred L. Woods | 2015 | 131,000 | 176,400 | – | – | – | – | 307,400 | 2016 | 131,000 | 176,400 | – | – | – | – | 307,400 | |||||||||||||||||||||||||||||||||||||||||||||
Phillip D. Wright | 2015 | 87,000 | 102,000 | – | – | – | – | 189,000 | 2016 | 87,000 | 102,000 | – | – | – | – | 189,000 |
_________________________
(1) | Ms. Germany Ballintyn was appointed to our Board on January 4, 2017. As such, she did not earn any compensation from us in 2016 and does not appear in this table. |
(2) | Represents the aggregate grant date fair value, computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, “Compensation–Stock Compensation,” with respect to deferred stock units awarded on: (a) January |
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(3) | Mr. Curtis resigned from the Board effective September 30, 2016, as a result of the increased demands on his time in fulfilling the responsibilities associated with his new role as Chief Executive Officer of Wencor Group (a role he assumed effective August 1, 2016). Promptly following his resignation, one share of our common stock was distributed to Mr. Curtis in respect of each deferred stock unit held by Mr. Curtis at such time. As such, as of December 31, 2016, Mr. Curtis no longer held any deferred stock units. Please see the section below entitled “Additional Information about Director Compensation” below. |
(4) | As described in more detail below, our directors are permitted to receive deferred stock units in lieu of cash fees. Pursuant to this option, Mr. Galvin elected to receive deferred stock units in lieu of all cash fees payable to Mr. Galvin in |
Additional Information about Director Compensation
The Corporate Governance and Nominating Committee is responsible for reviewing and recommending to the Board of Directors the general guidelines for determining the form and amount of director compensation. Based on these guidelines, the Compensation Committee then reviews and recommends to the Board of Directors any changes in director compensation that will enhance the Company’s ability to attract and retain qualified directors.
During 2015,2016, no changes were recommended with respect to annual cash fees. Each non-employee director, other than Mr. Woods, was compensated at a rate of $57,000 per year, plus reimbursed for related business travel expenses. Mr. Woods, our Chairman, was compensated at a rate of $131,000 per year, plus reimbursed for related business travel expenses. Directors were not paid meeting fees in 2015.2016.
Non-employee directors, other than Mr. Woods, receivereceived the following additional annual compensation for serving on Board committees.
Board Committee | Chair Compensation | Member Compensation | Chair Compensation | Member Compensation | ||||||||||||||
Audit Committee | $ | 20,000 | $ | 15,000 | $20,000 | $15,000 | ||||||||||||
Compensation Committee | 20,000 | 15,000 | 20,000 | 15,000 | ||||||||||||||
Corporate Governance and Nominating Committee | 15,000 | 9,000 | 15,000 | 9,000 | ||||||||||||||
Strategic Planning and Finance Committee | 20,000 | 15,000 | 20,000 | 15,000 |
Non-employee directors are eligible to receive grants of stock options and/or awards of deferred stock units under our Non-Employee Director Equity Plan from time to time. Since 2013, our non-employee directors, other than our Chairman, receivehave received an annual equity grant of $102,000, and our Chairman receiveshas received an annual equity grant of $176,400, in each case payable in deferred stock units. Each award is based on the closing price of our common stock on the Nasdaq Global Select Market on the date of the award. For 2015,2016, the annual equity grant resulted in an award on April 22, 201520, 2016 of 5,4574,784 deferred stock units to each of Messrs. Cortinovis, Curtis, Galvin, Smith and Wright and Mmes. Cuskley and Hinshaw and 9,4388,274 deferred stock units to Mr. Woods.
Mr. Curtis joined our board on February 4, 2015. Upon joining the board, Mr. Curtis received a grant of 1,335 deferred stock units, which was a prorated portion of the 2014 annual equity grant to non-chair directors made on April 23, 2014.
In order to facilitate compliance with our stock ownership requirements as well as further align the interests of our directors with those of our stockholders, we permit our non-employee directors to elect to receive deferred stock units in lieu of the cash fees payable for board and committee service. In 2015,2016, Mr. Galvin elected to receive all cash fees for board and committee service in the form of deferred stock units. As a result, Mr. Galvin received 1,1024,124 deferred stock units on January 2, 2015, 1,125 deferred stock units on April 1, 2015, 1,088 deferred stock units on July 1, 2015 and 1,240 deferred stock units on October 1, 2015, each in lieu of the $20,250$81,000 cash fee that would have otherwise been payable to Mr. Galvin for board and committee service during each of the first, second, third and fourth quarters of 2015, respectively.2016.
Each deferred stock unit represents our obligation to transfer one share of our common stock to the director in the future, and is fully vested at award. Following termination of the director’s service on our Board or on any other distribution date after a mandatory deferral period as the director may elect, shares of our common stock equal to the number of deferred stock units reflected in the director’s account will be distributed to the director. Currently, pursuant to the Non-Employee Director Equity Plan, directors are required to defer the distribution of annual awards of deferred stock units for at least three years and the distribution of deferred stock units awarded in lieu of the payment of cash fees for at least one year, in each case unless there is a termination of a director’s service on our Board and such director has elected to have deferred stock units distribution aboutdistributed on termination.
Stock Ownership Policy with Respect to Non-Employee Directors
We have a policy with respect to required levels of stock ownership for our non-employee directors. Under the policy, each current non-employee director is required to beneficially own (and retain thereafter) the greater of: (a) 10,000 shares of our common stock; and (b) the number of shares of our common stock having a value equal to five times the amount of the non-employee director’s annual cash retainer, excluding any cash retainer paid for service on a Committee of the Board (where the number of shares is determined by dividing such value by the average closing price of our common stock for the ten trading days prior to December 31); provided, however, that for the Chairman, the amount of the annual cash retainer shall be the amount paid to our other non-employee directors. This ensures that the stock ownership requirement for our directors is proportional to the price of our common stock as well as our directors’ compensation for service on our Board. The required ownership amount is recalculated annually as of January 1, based on the director’s annual cash retainer as of December 31 of the immediately preceding year.
Each non-employee director is required to beneficially own (and retain thereafter) the requisite number of shares of our common stock no later than the third anniversary of his or her election or appointment. In the event there is a significant decline in the price of our common stock that causes a director’s holdings to fall below the applicable threshold, such director is not required to purchase additional shares to meet the threshold but our policy provides that such director shall not sell or transfer any shares until the threshold has again been achieved.
As of January 1, 2016,2017, the required ownership of each of our non-employee directors was as follows:
Non-Employee Director | Date Subject to Policy | Retainer Multiplied by 5 | 10-Day Average Closing Price | Required Share Ownership as of January 1, 2016 | Actual Share Ownership as of January 1, 2016 | Date Subject to Policy | Retainer Multiplied by 5 | 10-Day Average Closing Price | Required Share Ownership as of January 1, 2017 | Actual Share Ownership as of January 1, 2017 | |||||||||||||||||||||||
Stephen P. Cortinovis | July 25, 2006 | $285,000 | $19.35 | 14,730 | 78,063 | July 25, 2006 | $285,000 | $24.92 | 11,437 | 80,047 | |||||||||||||||||||||||
Christopher B. Curtis | February 4, 2015 | 285,000 | 19.35 | 14,730 | 13,542 | ||||||||||||||||||||||||||||
Stephanie A. Cuskley | July 25, 2006 | 285,000 | 19.35 | 14,730 | 45,771 | July 25, 2006 | 285,000 | 24.92 | 11,437 | 50,555 | |||||||||||||||||||||||
Walter J. Galvin | October 10, 2014 | 285,000 | 19.35 | 14,730 | 28,008 | October 10, 2014 | 285,000 | 24.92 | 11,437 | 36,916 | |||||||||||||||||||||||
Rhonda Germany Ballintyn (1) | January 4, 2017 | n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||
Juanita H. Hinshaw | July 25, 2006 | 285,000 | 19.35 | 14,730 | 53,537 | July 25, 2006 | 285,000 | 24.92 | 11,437 | 58,321 | |||||||||||||||||||||||
M. Richard Smith | December 15, 2009 | 285,000 | 19.35 | 14,730 | 39,207 | December 15, 2009 | 285,000 | 24.92 | 11,437 | 43,991 | |||||||||||||||||||||||
Alfred L. Woods | July 25, 2006 | 285,000 | (1) | 19.35 | 14,730 | 124,747 | July 25, 2006 | 285,000 (2) | 24.92 | 11,437 | 128,021 | ||||||||||||||||||||||
Phillip D. Wright | November 10, 2011 | 285,000 | 19.35 | 14,730 | 34,700 | November 10, 2011 | 285,000 | 24.92 | 11,437 | 40,402 |
_________________________
(1) | Ms. Germany Ballintyn was appointed to our Board on January 4, 2017. As such, on January 1, 2017 she was not yet subject to the terms of the non-employee director stock ownership policy. Ms. Germany Ballintyn will have three years to become in compliance with the stock ownership policy. |
(2) | For purposes of determining the required ownership of our Chairman, the annual cash retainer used is the amount paid to our other non-employee directors. |
As of January 1, 2016,2017, each non-employee director was in compliance with the stock ownership requirements of this policy, except for Mr. Curtis,Ms. Germany Ballintyn, who joined the Board on FebruaryJanuary 4, 20152017 and is still in the three-year window to achieve compliance. Mr. CurtisMs. Germany Ballintyn will be required to be in compliance by FebruaryJanuary 4, 2018.2020.
EXECUTIVE COMPENSATION
Compensation Discussion and AnalysisCOMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis provides information about our 20152016 compensation program for the following executive officers (collectively, our “Named Executive Officers”):
Charles R. Gordon, President and Chief Executive Officer;
David A. Martin, Executive Vice President and Chief Financial Officer;
David F. Morris, Executive Vice President, General Counsel and Chief Administrative Officer;
John D. Huhn, Senior Vice President –and Chief Strategy and Corporate Development;Officer; and
Michael D. White,Stephen P. Callahan, Senior Vice President and Corporate Controller.- Human Resources.
This discussion also contains forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs.
Overview
We emphasize a total compensation approach in establishing individual executive compensation levels, with each element of compensation serving a specific purpose. In this context, the foundation of all decisions regarding our executive compensation program is a pay for performance philosophy. Our pay for performance philosophy requires the achievement of financial goals designed to drive profitable growth coupled with service requirements to encourage retention of executive talent. We believe that the continuation of this philosophy will in turn drive stockholder value over time.
We also believe that our executive compensation decisions should be consistent with, and designed to facilitate, good corporate governance practices. Accordingly, we:
✔ | utilize independent compensation consultants that do not perform any other work for the Company or our management team; |
✔ | devote significant time to succession planning efforts; |
| adopt and maintain compensation programs that do not encourage imprudent risk; |
| do not enter into employment agreements with our executive officers; |
| include double-trigger change in control provisions for accelerated vesting of our long-term incentive awards; |
| target all components of compensation at the 50th percentile of our peer group companies; |
| maintain appropriate stock ownership guidelines, which prohibit the sale of shares (other than shares used to pay applicable taxes and/or the exercise price for stock options) until compliance is achieved; |
| consider benchmarking and market data in making compensation decisions; |
| do not permit or include problematic pay practices such as the repricing of “underwater” stock options without stockholder approval, excessive perquisites or tax gross-up payments (including in the event of a change in control); |
| maintain anti-hedging, anti-pledging and incentive compensation clawback policies; |
| maintain a robust stockholder outreach program; |
| elect directors annually by a majority vote standard (except in contested elections); |
| separate the roles of Chairman of the Board and Chief Executive Officer; |
| ensure that all of our directors are independent other than our Chief Executive Officer; and |
| mitigate the potential dilutive effect of equity awards through share repurchase programs. |
Say on Pay Results and Stockholder Outreach
We conduct a stockholder outreach program through which we interact with stockholders on a number of matters throughout the year, including executive compensation. The compensation disclosed in our 20152016 Proxy Statement was approved by our stockholders at the 20152016 Annual Meeting of Stockholders by a 94.2%95.12% vote, which reflects, in the view of the Compensation Committee of our Board of Directors (the “Committee”), the efficacy of that outreach. The Committee considered this favorable outcome and believes it conveyed our stockholders’ support of the Committee’s decisions and the existing executive compensation programs. Consistent with this support, the Committee decided to retain the design and structure of our executive compensation programs in the remainder of 20152016 and in 2016.2017. The Committee believes that the existing compensation programs continue to attract, retain and appropriately incent senior management.
As part of our long-standing stockholder outreach program, in 2015,2016, we: (i) attended eightsix conferences that included over 50approximately 40 individual and group meetings with current and prospective stockholders; (ii) conducted over 3050 stockholder meetings in nine15 different cities; (iii) met with stockholders owning over 30%45% or our outstanding shares; and (iv) had regular and periodic calls and other correspondence with stockholders, including with respect to corporate governance and executive compensation matters.
The Committee carefully considers the feedback received as a result of our stockholder outreach program and also routinely reviews executive compensation practices.
Compensation Mix
In 2015,2016, our executive compensation program consisted primarily of three elements: (i) short-term cash compensation in the form of a base salary; (ii) performance-based, short-term cash compensation in the form of annual cash incentives; and (iii) long-term equity incentive compensation in the form of performance-based stock units and time-based restricted stock units. The objective and rationalealignment with stockholder value creation for each of these elements isare set forth in the table below.
Component | Key Features |
|
| |||
| ||||||
Base Salary | • | Provides a base wage that is competitive to attract and retain highly qualified leaders | • Reflects individual performance, experience and scope of responsibility | • Only pay element that is independent of Company financial performance and service requirements | ||
Annual Cash Incentive | • | Provides additional cash compensation opportunity for executives | • |
| ||
Motivates executives to achieve annual business goals | • | At risk based on Company performance • Focused on Company income growth | ||||
Long-Term Incentives | ||||||
Performance Units | • Provides opportunity for stock acquisition | • |
| |||
| Motivates executives to make decisions that focus on long-term stockholder value | • Promotes retention of highly qualified leaders | • Equity-based • At risk based on Company TSR and ROIC goal achievement | |||
• | Payout based on sustained growth | |||||
Restricted Stock Units | • Same key features as “Performance Units” | • Equity-based | ||||
• | Service requirements aid long-term retention |
Pay for Performance Analysis
We target a mix of the compensation elements set forth in the table above in order to create a strong correlation between corporate performance and theeach executive’s actual total compensation, aligning the interests of our executives with the interests of our Company and its stockholders. Specifically, a significant portion of each executive’s total compensation is dependent upon our Company’s achievement of measurable annual and multi-year financial performance goals, rewarding our executives on both an annual and long-term basis if the Company attains specified targets. In addition, long-term compensation of our executives, if earned, is paid in Company stock, further aligning our executives’ incentives with increasing the value of our stock. As a result, we give substantial weight in total target compensation to long-term compensation.
The following graph illustrates the allocation in 20152016 of our total target direct compensation opportunity for our Chief Executive Officer, Mr. Gordon, and the weighted average of our other Named Executive Officers between short- and long-term elements and cash- and equity-based elements.
__________________________ |
(1) | Long-Term Equity-Based Compensation consists of performance units (at target) and time-based restricted stock units. |
(2) | Performance-Based Compensation consists of target annual cash incentives and performance units (at target). |
We believe the mix of compensation above appropriately provides rewards only upon strong financial and operational performance, especially over the long-term. Specifically, in 2015:2016:
50% of total target compensation of our CEO was performance-based and 60%52% was long-term and equity-based;
42% of total target compensation of our Named Executive Officers other than the CEO was performance-based and 46%42% was long-term and equity-based; and
a substantial portion of target pay is delivered through long-term equity awards, 50% of which is based on the achievement of objective performance goals and 100% of which is based on a multi-year vesting schedule and continued service requirements.
Due to challenging market conditions affecting certain portions of our business in 2016, including those businesses impacted by the significant decline in oil, natural gas and commodity pricing in 2015, financial results being belowthe Committee, based on recommendations from our expectations, ourCEO, made the following compensation decisions in 2016 which backed up our commitment to a pay for performance philosophy, specifically:philosophy:
the performance units from the 2013-2015 grant were forfeited in full because neither the pre-established annual performance metrics nor the pre-established three-year cumulative performance metrics were met;
equity awards granted to our Named Executive Officers in 2016 were less than equity awards granted to our Named Executive Officers in 2016, specifically a 30% reduction for Mr. Gordon and between a 10% and 20% reduction for our other Named Executive Officers;
modest (2.5% or less) or no increases toNo base salary increases were awarded to our Named Executive Officers for 2016, except that Mr. Martin’s base salary was increased 2.5% ($8,925) and Mr. Huhn received an increase of 15.4% ($40,000) to reflect additional responsibility Mr. Huhnhe assumed in 2015 as part of a promotion and to align Mr. Huhn’s base salary with the 50% range of our peer group for similar roles; and
cash incentive payments awardedWe significantly reduced award amounts to our Named Executive Officers for 2015 under our long-term equity incentive program due to market conditions. Specifically, we reduced the awards in 2016, as follows: Mr. Gordon’s award was reduced by 30%; Messrs. Martin and Morris’ awards were reduced by 20%; and Messrs. Huhn and Callahan’s awards were reduced by 10%.
Based on 2016’s actual net income (calculated in accordance with the 2016 Annual Incentive Plan) being only 86.5% of 2016’s target net income, cash incentive payments under our 2016 Annual Incentive Plan were less than target;paid at 50% of target.
• | For our Named Executive Officers, with the exception of Mr. Gordon, the performance units from the 2014-2016 performance awards vested at 44.35% of target value as a result of the earnings per share (“EPS”) metric (75%) not being achieved (actual EPS performance for the three-year period was $3.75 compared to the EPS threshold goal of $4.34 for the 2014-2016 performance period, which resulted in none of the performance units tied to the EPS goal being earned) and the total stockholder return (“TSR”) metric (25%) exceeding target over the three year cumulative period (for the three-year performance period (January 1, 2014 – December 31, 2016) our TSR was 19.36% compared to -28.93% for our TSR peer group at the 50th percentile, which resulted in the performance units tied to the TSR metric paying out at 177.38% of target); |
• | The performance units from the 2014-2016 performance award to Mr. Gordon vested at 45.81% of target value as a result of the EPS metric (75%) not being achieved (the EPS threshold goal was $3.06 for Mr. Gordon’s shorter 2015-2016 performance period, which resulted in none of the performance units tied to the EPS goal being earned) and the TSR metric (25%) exceeding target over the cumulative period of October 8, 2014 through December 31, 2016 (for the performance period from October 8, 2014 – December 31, 2016, our TSR was 7.94% compared to -30.81% for our TSR peer group at the 50th percentile, which resulted in the performance units tied to the TSR metric paying out at 183.25% of target). |
Understanding the Pay of Our Chief Executive Officer and Other Named Executive Officers
This section provides additional detail on the rationale for the pay of the Chief Executive Officer position as well as the pay of the other Named Executive Officers.
20152016 Total Reported Compensation v. Realizable Pay
The 20152016 realizable pay of our Named Executive Officers is set forth in the table below as compared to the total reported compensation of these executives as set forth in the Summary Compensation Table on page 4547 (the “SCT”). We define realizable pay for these purposes as the sum of the following: (1) base salary and cash incentives earned for 2015;2016; (2) the fair market value of the shares of our common stock payable in respect of non-forfeited performance units outstanding as of the end of 20152016 (but excluding the value of shares underlying any unvested performance units that may be earned based on Company performance in a later year or the value of shares paid during 20152016 in respect of performance units that were earned and vested based upon performance during a prior year); and (3) the fair market value of any restricted stock unit awards granted during 2015.2016. For purposes of the table, the value of shares subject to awards was based on the year-end 20152016 closing price of our common stock (i.e., $19.31)$23.70). Although the Committee did not rely on the information in the below table to make compensation decisions for 2015,2016, the information in the table is made available to the Committee as part of the compensation process.
2016 Realizable Pay | |||||||||||||||||||||||||||||||||
Name | 2016 Total Reported Compensation | Salary | Annual Cash Incentive | Performance Units (1) | Service-Based Restricted Stock Units (2) | Other Compensation (3) | Total Realizable Pay | Realizable Pay as a % of Total Reported Compensation | |||||||||||||||||||||||||
Charles R. Gordon | $2,547,291 | $650,000 | $325,000 | $446,081 | $909,535 | $172,291 | $2,502,907 | 98.3% | |||||||||||||||||||||||||
David A. Martin | 1,011,007 | 365,925 | 109,778 | 141,086 | 337,820 | 15,304 | 969,913 | 95.9 | |||||||||||||||||||||||||
David F. Morris | 1,045,989 | 392,080 | 117,624 | 141,086 | 337,820 | 16,285 | 1,004,895 | 96.1 | |||||||||||||||||||||||||
John D. Huhn | 638,352 | 300,000 | 75,000 | 30,573 | 129,923 | 13,352 | 548,848 | 86.0 | |||||||||||||||||||||||||
Stephen P. Callahan | 525,653 | 250,000 | 62,500 | n/a | 129,923 | 13,153 | 455,576 | 86.7 |
_________________________
2015 Realizable Pay | ||||||||||||||||||||||||||||||||
Name | 2015 Total Reported Compensation | Salary | Annual Cash Incentive | Performance Units (1) | Service-Based Restricted Stock Units (2) | Other Compensation (3) | Total Realizable Pay | Realizable Pay as a % of Total Reported Compensation | ||||||||||||||||||||||||
Charles R. Gordon | $ | 3,293,808 | $ | 650,000 | $ | 599,300 | $ | 0 | $ | 1,121,370 | $ | 44,508 | $ | 2,415,718 | 73.3 | % | ||||||||||||||||
David A. Martin | 1,220,258 | 357,000 | 197,492 | 0 | 364,438 | 15,766 | 934,696 | 76.6 | % | |||||||||||||||||||||||
David F. Morris | 1,388,746 | 392,000 | 216,899 | 0 | 491,266 | 16,747 | 1,116,912 | 80.4 | % | |||||||||||||||||||||||
John D. Huhn | 616,420 | 260,000 | 119,860 | 0 | 126,152 | 11,560 | 517,572 | 84.0 | % | |||||||||||||||||||||||
Michael D. White | 488,426 | 228,000 | 99,831 | 0 | 84,095 | 10,595 | 422,521 | 86.5 | % |
(1) |
|
(2) | Represents the fair market value as of December 31, |
(3) | Computed consistent with the “All Other Compensation” column of the Summary Compensation Table. |
As demonstrated by the above table, the actual compensation realizable in 20152016 by our Named Executive Officers was 73.3%86.0% to 86.5%98.3% of the compensation set forth on the SCT. The Committee believes this is an appropriate result in light of the Company’s financial performance in 20152016 (and, with respect to the performance units with a performance period from 2013-2015,2014-2016, the Company’s financial performance for that period) and demonstrates that our compensation program is working as designed to achieve pay for performance.
However, our adherence to a pay for performance philosophy is evident beyond 2016. The correlation between total stockholder return (“TSR”) and our Named Executive Officers’ realizable pay in the chart below illustrates the relationship at the Company between pay and performance over the past four years.
Realizable pay of our Named Executive Officers (as they existed in each of the prior four years) is calculated in the chart below in the same manner as the table above.
Total Compensation | Total Realizable | Total Stockholder Return | ||||||||||
2013 | $9,044,896 | $3,773,435 | -1.35% | |||||||||
2014 | 7,022,070 | 5,211,285 | -14.98 | |||||||||
2015 | 7,007,658 | 5,407,419 | 3.76 | |||||||||
2016 | 5,768,292 | 5,482,139 | 22.73 |
Key 20152016 Compensation Actions
As is our ongoing practice, in 2015,2016, we analyzed our executive compensation program in order to strengthen the correlation between pay and performance. As part of this analysis, we also considered the views of our stockholders as detailed above. In response, we took the following key actions regarding 20152016 executive compensation:
Base Salary
◦ |
|
Annual Incentive Plan
◦ | Cash incentive payments under our |
Long-Term Equity Incentive Program
◦ | We |
◦ | We continued the use of total stockholder return (“TSR”) as a key component of our long-term performance |
| We |
The Committee engaged independent advisors to work on its behalf to review the overall competitiveness of our executive compensation program and to review our pay practices in light of our pay for performance philosophy.
We analyzed our compensation programs and believe that our programs and policies are designed so as to discourage our employees from taking unnecessary or excessive risks that could harm the long-term value of the Company.
Key 20162017 Compensation Actions
We believe that the structure and form of our compensation program in 20152016 struck the appropriate balance between attraction and retention, on the one hand, and pay for performance, on the other hand. We further believe that our compensation program in 20152016 appropriately aligned the interests of our Named Executive Officers with those of our stockholders and rewarded the most relevant financial metrics (without over-rewarding any particular metric). As such, we have kept the structure and form of our compensation program for our Named Executive Officers intact and relatively unaltered for 2016.2017.
As discussed above, however, due to our financial performance in 2015 being below our expectations, thereThere were modest or no base salary increases awarded to our Named Executive Officers in early 2016 (other than Mr. Huhn as described above)2017 (between 2.5% and 8.0%), cash incentive payments for 2015 were less than target and annual equity awardsaward values were reducedreturned in 2016.2017 to 2015 levels based on improving market conditions. Cash incentive payments were awarded to our Named Executive Officers under our 2016 Annual Incentive Plan at 50% of target based on our actual 2016 net income being only 86.5% of our 2016 target net income.
How We Make Executive Compensation Decisions - Philosophy and Process
Compensation Philosophy
The Committee is responsible for establishing our compensation philosophy and for establishing individual executive compensation. In doing so, the Committee has developed a compensation philosophy that strives to ensure that:
our executive compensation aligns the interests of our executives with those of our stockholders by rewarding the achievement of specific annual, long-term and strategic goals, with the ultimate objective of increasing stockholder value;
our executive compensation attracts, retains and incentivizes top talent by providing a competitive and equitable compensation package relative to the compensation paid to similarly-situated executives of our peer group;
our executive compensation includes performance and/or service requirements for vesting or retention of equity awards;
our executive compensation is based on the executive’s combined and individual commitment, experience, level of responsibility and contribution to our business goals; and
our executive compensation policies enhance our business interests by encouraging innovation on the part of our executives and other key employees balanced by appropriate levels of risk taking.
The Committee also considers:
the tax and accounting effects of compensation when determining the elements, structure and amounts of our executives’ total compensation packages; and
whether our compensation policies and practices create risks that are reasonably likely to have a material adverse effect on our Company. The Committee has determined that the Company’s current compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
Compensation Process
Independent Compensation Consultants. In determining the total compensation of our executive officers and other high-level employees, the Committee is assisted by independent compensation consultants. In 2015,2016, the Committee engaged the services of Exequity, which only performed services in 20152016 at the request of the Committee and did not perform any other services that were not related to executive compensation for the Company through requests from management. Exequity provided the Committee with advice and recommendations with respect to our Company’s executive compensation program including a review of the overall competitiveness of the program and its consistency with our pay for performance philosophy.
Role of Chief Executive Officer. The Committee also seeks the input of Mr. Gordon in determining the total compensation of our executive officers (other than with respect to Mr. Gordon’s compensation) and other high-level employees. Mr. Gordon’s input includes his review of the performance of each executive officer, including our Named Executive Officers, and his recommendations to the Committee regarding the specific compensation levels of those executives. Mr. Gordon tracks each executive’s performance throughout the year, detailing accomplishments and areas of strength and improvement. Then, Mr. Gordon bases his evaluation and recommendation on his knowledge of each executive’s performance. Mr. Gordon and executive management then typically work together to develop performance target recommendations for presentation to, and consideration by, the Committee in connection with incentive compensation determinations for the coming year. In addition, executive management also recommends the management annual incentive compensation plan to the Committee for review and consideration by the Committee.
Benchmarking Target Executive Compensation. As noted above, in making decisions regarding the target total compensation of our executives, the Committee continuously reviews information provided by outside compensation consultants and considers, among other factors discussed herein, the relative compensation of similarly-situated employees of our peer group of companies. In selecting a peer group, the Committee reviews companies that the Committee believes, based on certain data and recommendations of Aon Hewitt and Exequity, compete most with our Company for executive talent. The Committee periodically reviews and updates our peer group.
The peer group of companies used for purposes of 20152016 compensation, as set forth immediately below, was the same group that is included in our 20152016 Annual Report on Form 10-K.
● Actuant Corporation | ● Barnes Group Inc. ● Basic Energy Services, Inc. ● C&J Energy Services, Inc. ● CIRCOR International, Inc. ● Dril-Quip, Inc. ● Forum Energy Technologies, Inc. | ● Helix Energy Solutions Group, Inc. ● Kennametal Inc. ● Mas Tec, Inc. ● Matrix Service Company ● McDermott International Inc. ● Newpark Resources, Inc. | ● Oil States International Inc. | |||||
● Team, Inc. | ||||||||
● Tesco Corporation | ||||||||
● Tetra Tech, Inc. | ||||||||
● Valmont Industries, Inc. | ||||||||
● Willbros Group, Inc. | ||||||||
The Committee also considers pay data of similarly situated executives from publicly filed proxy statements and compensation surveys. The data the Committee reviewed may include base salary, annual cash incentive payments and long-term incentive components of pay or selected market survey data where peer group data for a like-position is not available. In considering total compensation for 2015,2016, the Committee specifically considered pay data from Aon Hewitt’s Executive Compensation Benchmark Analysis, which included data from our peer group (as set forth above) as well as a broader group of 3334 companies 1 from our industry. For compensation paid to our executives, in 2015,2016, the Committee targeted annual cash compensation opportunity (base salaries and incentive compensation) and targeted total long-term incentive compensation opportunity at the 50% range of the peer group total annual cash for similarly-situated executives. The Committee believes that total compensation opportunity should be targeted at the median levels and that base salaries establish the minimum compensation upon which an executive can rely. Actual annual cash and long-term incentive compensation, and therefore, total compensation, can meet, fall short of or exceed the target based on the level of achievement of applicable corporate and individual performance requirements. The target compensation levels are only one factor in the Committee’s determination of executive compensation levels. Actual compensation levels for executives may be more or less than the targeted levels based upon other factors that the Committee may consider in its discretion as discussed herein.
1 | The 34 companies consist of: American Axle & Manufacturing Holdings, Inc.; A.O. Smith Corporation; Armstrong World Industries, Inc.; Barnes Group, Inc.; Brady Corp.; Cabot Corporation; Chart Industries Inc.; ESCO Technologies, Inc.; Aerojet Rocketdyne Holdings, Inc.; Graco Inc.; H.B. Fuller Company; Helix Energy Solutions Group, Inc.; IDEX Corporation; John Bean Technologies Corporation; Kaman Corporation; Leggett & Platt Inc.; Martin Marietta Materials, Inc.; Mueller Water Products, Inc.; Nordson Corporation; Oil States International, Inc.; Olin Corporation; OM Group, Inc.; OMNOVA Solutions Inc.; Packaging Corp of America; Polaris Industries Inc.; Polyone Corporation; SPX Corporation; Steelcase Inc.; Superior Energy Services, Inc.; Texas Industries, Inc.; Valmont Industries, Inc.; Waters Corporation; WGL Holdings Inc.; and Woodward, Inc. |
How We Made Compensation Decisions in 20152016
The following recap of 20152016 financial performance provides important context to the pay decisions made in 20152016 and to the incentive pay results for 2015.2016.
20152016 Financial Performance
Following 2014, which was a year of change for Aegion, including a leadership transition and a significant restructuring of our business, weWe operated in 20152016 facing severecontinued headwinds due to the significant decline in the price of oil as well as the weakening of foreign currencies in certain jurisdictions2015, which adversely impacted spending in industry sectors in which we historically generate a substantial portion of our revenue and operating income. Despite these challenges, we performed solidly.soundly. Specifically, in 2015:
2016:
our total stockholder return was 3.76%22.73%;
we had record revenue of $1.33$1.222 billion;
we successfully completed the restructuring announcedreduced our “days sales outstanding” ratio from 81 in October 2014, which achieved annual savings of $10.8 million pre-tax and from which we recognized an ROIC improvement of approximately 100 basis points;2015 to 66 in 2016;
cash flow from operations in 20152016 reached a record $132$73.2 million and, as of December 31, 2015,2016, we had a record cash balance of $212$129.5 million; and
we returned over $24$44.5 million to our stockholders pursuant to two board-authorized share repurchase programs, reducing our outstanding shares by over 1.32.3 million shares.
1 The 33 companies consist of: American Axle & Manufacturing Holdings, Inc.; A.O. Smith Corporation; Armstrong World Industries, Inc.; Barnes Group, Inc.; Cabot Corporation; Chart Industries Inc.; ESCO Technologies, Inc.; Gencorp Inc.; Graco Inc.; H.B. Fuller Company; Helix Energy Solutions Gorup, Inc.; IDEX Corporation; John Bean Technologies Corporation; Kaman Corporation; Leggett & Platt Inc.; Martin Marietta Materials, Inc.; Mueller Water Products, Inc.; Nordson Corporation; Oil States International, Inc.; Olin Corporation; OM Group, Inc.; OMNOVA Solutions Inc.; Packaging Corp of America; Polaris Industries Inc.; Polyone Corporation; SPX Corporation; Steelcase Inc.; Texas Industries, Inc.; Industries, Inc.; Waters Corporation; WGL Holdings Inc.; and Woodward, Inc.
However, our financial performance in 20152016 was still under our expectations, which is reflected in our 20152016 and 20162017 compensation decisions discussed throughout this Compensation Discussion and Analysis.
20152016 Compensation Decisions
In the context of our Company’s 20152016 financial performance above, set forth below is a more detailed description of each element of our compensation and benefits programs for our Named Executive Officers, including the compensation decision in 20152016 for each element.
Base Salary. Generally, in determining the base salary of each Named Executive Officer, the Committee considers, among other things, the level of responsibility and duties of the executive, individual performance, tenure, experience, Company performance, competition for the respective positions in the industry, and the applicable market data. In 2015,2016, certain of our Named Executive Officers received modest increases of 4%2.5% or less in base salary based on our financial results in 2014 as well as2015 and overall conditions in our energy markets (other than Mr. Huhn whose base salary was increased 15% ($40,000) to ensureadjust for his promotion and new role with the annual cash compensation of our Named Executive Officers remains at the 50% range of our peer group.Company). The 20152016 annual base salary for each Named Executive Officer and the increase (if any) from the 20142015 base salary for each individual that was a Named Executive Officer in 20142015 are set forth in the table below.
Named Executive Officer | 2015 Base Salary | Increase from 2014 | ||||||
Charles R. Gordon | $650,000 | 4.0% | ||||||
David A. Martin | 357,000 | 0.0% | ||||||
David F. Morris | 392,000 | 4.0% | ||||||
John D. Huhn | 260,000 | ̶* | ||||||
Michael D. White | 228,000 | ̶ * |
Named Executive Officer* | 2016 Base Salary | Increase from 2015 | |||||||
Charles R. Gordon | $650,000 | 0.0 | % | ||||||
David A. Martin | 365,925 | 2.5 | |||||||
David F. Morris | 392,080 | 0.0 | |||||||
John D. Huhn | 300,000 | 15.0 | |||||||
Stephen P. Callahan | 250,000 | -- | * |
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*Messrs. Huhn and White wereMr. Callahan was not a Named Executive OfficersOfficer in 2014.2015.
Annual Cash Incentive Compensation. We maintain a Management Annual Incentive Plan (the “AIP”), as reviewed and approved by the Committee, pursuant to which our executives and other key employees are eligible to receive annual cash incentive awards.
Each participant in the AIP is assigned a target incentive award goal that is expressed as a percentage of his or her base salary. For 2015,2016, the Committee assigned the following target annual incentive awards as a percentage of the Named Executive Officers’ respective base salaries, which percentages are consistent with 2014:2015:
Named Executive Officer |
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Charles R. Gordon | 100 | % | |||
David A. Martin | 60 | ||||
David F. Morris | 60 | ||||
John D. Huhn | 50 | ||||
| 50 |
In determining the annual target incentive award as a percentage of individual base salary for these executives, the Committee reviewed peer group data and other survey market data and trends and considered the mix of total compensation of individuals in positions similarly situated to our executives. Based on its review and analysis, the Committee determined that a significant portion of the total annual cash compensation opportunity of our executives (i.e., base salary and annual incentive compensation) should be tied to our Company’s annual operating results. Target incentive award goals are “mid-point” targets, and the executives’ annual incentive cash compensation could be higher (subject to the cap discussed below) or lower than the target award goals based upon the level of achievement against the pre-established performance goals.
The AIP is intended to compensate employees for the Company’s achievement of annual financial performance goals at corporate or business unit levels, as appropriate. The financial performance targets are intended to be consistent with our internal budgets. Payments under the AIP may be made if and to the extent that certain minimum, target and maximum goals were actually achieved, subject to the negative discretion of the Committee to reduce the amount of the award. The potential payout for each Named Executive Officer is 50% of the target award upon the Company achieving the threshold net income metric (85% of the target net income goal in 2015)2016). The potential payout upon the Company achieving the maximum net income metric (120% of target net income goal) is 200% of the target award. Performance results that fall between the goals are calculated from those points on a straight-line sliding scale to determine the potential payout.
The Committee strives to establish financial performance objectives that are difficult to achieve but are attainable in order to reinforce our pay for performance commitment. In 2013, our financial results were below the threshold net income goal and, as a result, no AIP payments were awarded to our Named Executive Officers. In 2014, our financial performance was above the threshold net income goal, but less than the target net income goal. As a result, AIP payments were made at the threshold level. In 2015, our financial performance was above the threshold net income goal, but less than the target net income goal. As a result, 2015 AIP paymentpayments were made at 92% of target. In 2016, our financial performance was above the threshold net income goal, but less than the target net income goal, set forth in the 2016 AIP. As a result, AIP payments were made to our Named Executive Officers at 50% of target.
Objective Financial Performance Goals.
In 2015,2016, the AIP financial performance objective for all Named Executive Officers was based on the achievement of consolidated threshold, target and maximum net income goals, subject to objective adjustment in accordance with the AIP. Net income was chosen as the applicable financial metric because it reflects the Company’s financial performance, is easy to track, and is communicated on a quarterly basis through the Company’s quarterly earnings press releases and conference calls.
For purposes of the AIP in 2015,2016, consolidated net income is determined from our audited financial statements for the year and is adjusted to exclude the following:
operating results and/or losses associated with the write-down of assets of a subsidiary, business unit or division that has been designated by the Board of Directors as a discontinued business operation or to be liquidated;
gains or losses on the sale of any subsidiary, business unit or division, or the assets or business thereof;
gains or losses from the disposition of material capital assets (other than in a transaction described in the immediately preceding bullet) or the refinancing of indebtedness, including, among other things, any make-whole payments and prepayment fees;
losses associated with the write-down of goodwill or other intangible assets of the Company due to the determination under applicable accounting standards that the assets have been impaired;
gains or losses from material property casualty occurrences or condemnation awards taking into account the proceeds paid by insurance companies and other third parties in connection with the casualty or condemnation;
any income statement effect resulting from a change in tax laws, accounting principles (including, without limitation, generally accepted accounting principles,principles), regulations, or other laws regulations affecting reported results, except, in each case, to the extent the effect of such a change is already reflected in the target net incomeNet Income amount;
reorganization or restructuring charges and acquisition relatedacquisition- or divestiture-related transaction expenses and costs;
any gains or losses from unusual nonrecurring or extraordinary items;
operating results of any entity or business acquired or disposed of during the Plan Year, except, in the case of an acquisition, to the extent such entity or business was included in the Company’s operating business plan for the Plan Year or, in the case of a disposition, to the extent such entity or business was not included in the Company’s operating business plan for the Plan Year;
any gain or loss resulting from currency fluctuations or translations as set forth in the Aegion Corporation Foreign Exchange Rate Policy for Annual Incentive Plan and Long Term Incentive Plan;
any other material income or loss item the realization of which is not directly attributable to the actions of current senior management of the Company;
operating results of any entity or business acquired during 2015, except to the extent such entity or business was included in the Company’s operating business plan for such year; and
the income taxes (benefits) of any of the above-designated gains or losses.
If the threshold net income goal is not achieved, the Company’s Chief Executive Officer may make awards under the 20152016 AIP of up to $1,000,000 in the aggregate for extraordinary performance, subject to review and approval of the Committee with respect to any such awards to executive officers of the Company (including each of the Named Executive Officers). Because the threshold net income goal was achieved in 2015, noNo such awards were made for 2015.as the 2016 AIP threshold goal was met.Cash incentive payments were awarded to our Named Executive Officers under our 2016 Annual Incentive Plan at 50% of target.
Negative Discretion of Compensation Committee. Notwithstanding the achievement of the threshold, target or maximum net income target, the Committee retains negative discretion to reduce payments to an individual participant or participants under the AIP.
Establishing and Achievement of 20152016 Goals. In establishing the net income target for the 20152016 AIP, the Committee considered the recommendations of executive management regarding current industry and market conditions and projections based on management’s internal market analysis and various market surveys, our 20152016 business plan as approved by our Board of Directors and prior year operating results. The net income target for the 20152016 AIP was $51.4$45.3 million, subject to the adjustments in accordance with the AIP described above. Considering our 20142015 performance, our internal budgets and the prevailing conditions in the Company’s energy markets, the 20152016 AIP net income target was believed to be set at a level that was aggressive and promoted our compensation objectives.
In determining the amount of the 20152016 annual incentive compensation, the Committee reviewed our operating results for 20152016 against the net income target, including any adjustments to net income as described above and concluded that the Company achieved 97.7%86.5% of the net income target.target, which fell slightly above the AIP threshold. As a result, AIP payments were awarded at the 92.2%threshold level as set forth in the table below.follows:
Named Executive Officer |
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Charles R. Gordon | $ | ||||
David A. Martin | |||||
David F. Morris | |||||
John D. Huhn | |||||
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For 2015,2016, each of our Named Executive Officers were participants under our Executive Performance Plan. Annual cash incentives payable under the Executive Performance Plan are intended to qualify as “performance-based” under Section 162(m) of the Internal Revenue Code (the “Code”) - see “Section 162(m) Performance-Based Compensation” below.
Long-Term Incentive Compensation. In order to reward executive actions that enhance long-term stockholder returns, the Committee provides certain long-term equity-based incentives to our executives and other key employees. We believe that the value of long-term equity awards with continued service requirements, as is the case with our restricted stock unit awards, encourages executives to remain with the Company as leaving the Company results in the forfeiture of the unvested portion of previously earned long-term equity awards. To that end, all of our long-term incentive compensation awards include a continued service requirement.
Each year, the Committee considers a number of factors when deciding on the amount and allocation of long-term compensation, including, among other things, recommendations by the Committee’s independent compensation consultants, peer group and other survey market data regarding similarly situated executives, the historical compensation for responsibilities of each Named Executive Officer, business objectives, historic Company performance, current market conditions, risks associated with compensation principally linked to stock price, and other factors that may be relevant at that point in time. Further, the Committee decides on a mix of long-term incentive compensation with the goal to provide the appropriate balance of stock price appreciation, performance and retention elements of long-term incentive compensation. Generally, annual awards of equity-based incentives are made during the Committee’s regularly scheduled first quarter meetings after financial results for the prior year as well as updated compensation data for our peer group are known.
In 2015,2016, the Committee determined that the Named Executive Officers would receive the following mix of long-term incentive compensation: 50% performance-based stock units and 50% time-based restricted stock units. Each type of award is described in more detail below. The Committee believes that the mix of long-term incentive compensation set forth above are appropriate for each of our Named Executive Officers in order to successfully balance the attributes of each form of long-term incentive compensation, which are set forth in this Compensation Discussion and Analysis.
In 2016, we significantly reduced award amounts to our Named Executive Officers under our long-term equity incentive program due to market conditions. Specifically, we reduced the awards (as compared to 2015 award amounts), as follows: Mr. Gordon’s award was reduced by 30%; Messrs. Martin and Morris’ awards were reduced by 20%; and Messrs. Huhn and Callahan’s awards were reduced by 10%.
Performance Units. Performance-based stock units support achievement of the Company’s longer term financial goals, while the three-year vesting period also simultaneously supports retention and succession planning. The performance units are denominated in restricted stock units.
Employees who receive performance units shall have no rights as stockholders with respect to such performance units until the performance units vest, although the awards are subject to adjustment due to stockdividends, split-ups, mergers, etc.
2013-2015 Performance Period
2015 was the last year in the 2013-2015 performance period for the performance units granted in 2013 (the “2013 awards”). The vesting of the 2013 awards depended upon the achievement of a ROIC goal, weighted at 25%, and an EPS goal, weighted at 75%. As discussed in more detail below, to the extent performance units eligible to vest in any particular year of the 2013-2015 performance period did not vest in such year, there was an opportunity at the end of the 2013-2015 performance period for such unvested performance units to vest upon the achievement of a pre-established average three-year ROIC target and cumulative three-year EPS target.
The following table generally illustrates the performance goals and annual vesting schedule for the 2013 awards:
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Performance results that fall between the threshold, target and maximum goals are calculated from those points on a straight-line sliding scale to determine the actual performance unit award for the executive.
In 2015, the Company did not achieve the threshold ROIC goal, which was 9.2%, or the threshold EPS goal, which was $1.75 and, as a result, none of the 2013 performance units vested in 2015, the third and final year of the three-year performance period.
Any performance units not vested in a particular year under the 2013 award, such as the case in 2013, 2014 and 2015 could be carried over and earned at the end of the three-year period through achievement of at least 85% of the pre-established three-year average ROIC goal, which was 9.83%, and at least 88% of the pre-established cumulative three-year EPS goal, which was $5.47, subject to the same sliding scale as set forth above. However, neither the cumulative ROIC goal or cumulative three-year EPS goal were met and, therefore, none of the 2013 awards vested and all of the 2013 awards have been forfeited.
2014-2016 Performance Period
For performance awards granted in 2014 for the 2014-2016 performance period (the “2014 awards”) to all of our Named Executive Officers other than Mr. Gordon and Mr. Callahan (who was not employed by the Committee adjusted the terms of our performance units such that onlyCompany in 2014), a cumulative three-year performance metric iswas used rather than, as in prior year awards, an annual metric followed by a cumulative three-year performance metric if any of the units did not vest under the annual metrics. 25% of the award eligible for performance vesting at the end of the three-year period is based on a cumulative relative TSR goal and 75% of the award eligible for performance vesting at the end of the three-year period is based on a cumulative EPS goal.
Mr. Gordon was granted a performance award in 2014 upon becoming our President and Chief Executive Officer on October 6, 2014, having served as our interim Chief Executive Officer from May 2014. In setting the parameters of Mr. Gordon’s 2014 performance award, the Committee considered, among other things, the fact that Mr. Gordon’s role as interim Chief Executive Officer did not commence until midway through the second quarter of 2014 and his role as President and Chief Executive Officer did not commence until the fourth quarter of 2014. As a result, the Committee believed Mr. Gordon’s performance award should be based on performance during his time as President and Chief Executive Officer since his ability to influence the Company’s performance in 2014 was materially limited. However, the Committee also believed it was important for Mr. Gordon’s performance award to have the same performance metrics as the other Named Executive Officers. As a result, the performance period for Mr. Gordon’s 2014 performance unit grant is eligible to vestended on December 31, 2016 (in line with our other Named Executive Officers), with 25% of his award eligible for performance vesting based on a relative TSR goal from October 8, 2014 to December 31, 2016 and 75% of his award eligible for performance vesting based on a cumulative EPS goal for 2015 and 2016. As described below, the performance metrics and goals applicable to Mr. Gordon with respect to his performance awardawards in 2015 and 2016 are the same as those applicable to the other Named Executive Officers. The Committee intends for Mr. Gordon’s performance awards in 2016 and beyond to also be the same as those applicable to other Named Executive Officers.
The following table generally illustrates the three year (or shorter in the case of Mr. Gordon) performance goals and vesting for the 2014 awards:
TSR Performance Goal | ||
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Threshold | Target | Maximum |
Percentile of Company TSR vs. Comparator Group (12.5% of Target Performance Units Vest) | Percentile of Company TSR vs. Comparator Group (25% of Target Performance Units Vest) | Percentile of Company TSR vs. Comparator Group (50% of Target Performance Units Vest) |
EPS Performance Goal | ||
Threshold | Target | Maximum |
85% of EPS Target (37.5% of Target Performance Units Vest) | 100% of EPS Target (75% of Target Performance Units Vest) | 125% of EPS Target (150% of Target Performance Units Vest) |
Performance results that fall between the threshold, target and maximum goals are calculated from those points on a straight-line sliding scale to determine the actual performance unit award for the executive.
The Company did not achieve the threshold EPS goal, which was $4.34 for the 2014-2016 performance period (or, in the case of Mr. Gordon, $3.06 for the 2015-2016 performance period). As a result, the 75% of the 2014 performance awards tied to the EPS goal did not vest and have been forfeited. With respect to the 25% of the 2014 performance awards tied to the TSR goal, the Company achieved a TSR of 19.36% and 7.94% for the period from January 1, 2014 through December 31, 2016 (for awards issued to Messrs. Martin, Morris and Huhn) and from October 8, 2014 through December 31, 2016 (for the award issued to Mr. Gordon), respectively, which was at the 81st and 83rd percentiles, respectively, compared to the Company’s TSR peer group. Based on the Company’s TSR performance as compared to the Company’s TSR peer group, the 25% of the 2014-2016 performance awards tied to the TSR goal vested and paid out at 177.38% of target with respect to Messrs. Martin, Morris and Huhn, and 183.25% of target with respect to Mr. Gordon.
2015-2017 Performance Period
For performance awards granted in 2015 for the 2015-2017 performance period (the “2015 awards”) to all of our Named Executive Officers (with the exception of Mr. Callahan who was not employed by the Company at the time of the awards), the Committee adjusted the terms of our performance units such that: (i) EPS has beenwas removed as a metric; (ii) the weight of the relative TSR component has beenwas increased from 25% to 75%; and (iii) ROIC has beenwas introduced as a metric, weighted at 25%. Like the 2014 awards, vesting of the 2015 awards is based on cumulative three-year performance metrics with no potential for vesting on an annual basis.
The following table generally illustrates the three-year performance goals and vesting for the 2015 awards:
TSR Performance Goal | ||
Threshold | Target | Maximum |
Percentile of Company TSR vs. Comparator Group (37.5% of Target Performance Units Vest) | Percentile of Company TSR vs. Comparator Group (75% of Target Performance Units Vest) | Percentile of Company TSR vs. Comparator Group (150% of Target Performance Units Vest) |
ROIC Performance Goal | ||
Threshold | Target | Maximum |
96.9% of ROIC target (12.5% of Target Performance Units Vest) | 100% of ROIC target (25% of Target Performance Units Vest) | 106% of ROIC target (50% of Target Performance Units Vest) |
2016-2018 Performance Period
For performance awards granted in 2016 for the 2016-2018 performance period (the “2016 awards”) to all of our Named Executive Officers, the Committee used the same metrics as the 2015-2017 performance period: (i) the weight of the relative TSR component remained at 75%; and (ii) ROIC continued to be weighted at 25%. Like the 2015 awards, vesting of the 2016 awards is based on cumulative three-year performance metrics with no potential for vesting on an annual basis.
The following table generally illustrates the three-year performance goals and vesting for the 2016 awards:
TSR Performance Goal | ||
Threshold | Target | Maximum |
Percentile of Company TSR vs. Comparator Group (37.5% of Target Performance Units Vest) | Percentile of Company TSR vs. Comparator Group (75% of Target Performance Units Vest) | Percentile of Company TSR vs. Comparator Group (150% of Target Performance Units Vest) |
ROIC Performance Goal | ||
Threshold | Target | Maximum |
96.9% of ROIC target (12.5% of Target Performance Units Vest) | 100% of ROIC target (25% of Target Performance Units Vest) | 106% of ROIC target (50% of Target Performance Units Vest) |
For performance awards granted in 2016 for the 2016-2018 performance period, we significantly reduced award amounts to our Named Executive Officers due to market conditions. Specifically, we reduced the awards, as follows: Mr. Gordon’s award was reduced by 30%; Messrs. Martin and Morris’ awards were reduced by 20%; and Messrs. Huhn and Callahan’s awards were reduced by 10%. In 2015,2016, as part of the annual compensation program offered to the Named Executive Officers, the Committee awarded performance units as follows:
Performance Units Awarded
NamedExecutive Officer | Threshold (#) | Target (#) | Maximum (#) | Target Award Date Value ($) | ||||||||||||||||||||||||||||||||
Named Executive Officer | Threshold (#) | Target (#) | Maximum (#) | Target Award Date Value ($) | ||||||||||||||||||||||||||||||||
Charles R. Gordon | Charles R. Gordon | 29,036 | 58,072 | 116,144 | $ | 1,000,000 | 19,189 | 38,377 | 76,754 | $700,000 | ||||||||||||||||||||||||||
David A. Martin | David A. Martin | 9,436 | 18,873 | 37,746 | 325,000 | 7,127 | 14,254 | 28,508 | 260,000 | |||||||||||||||||||||||||||
David F. Morris | David F. Morris | 9,436 | 18,873 | 37,746 | 325,000 | 7,127 | 14,254 | 28,508 | 260,000 | |||||||||||||||||||||||||||
John D. Huhn | John D. Huhn | 3,266 | 6,533 | 13,066 | 112,500 | 2,741 | 5,482 | 10,964 | 100,000 | |||||||||||||||||||||||||||
Michael D. White | 2,177 | 4,355 | 8,710 | 75,000 | ||||||||||||||||||||||||||||||||
Stephen P. Callahan | 2,741 | 5,482 | 10,964 | 100,000 |
For all Named Executive Officers, the target number of performance units awarded was calculated by dividing the target award date value of each Named Executive Officer’s respective award by $17.22,$18.24, the closing price of our common stock on the Nasdaq Global Select Market on February 18, 2015,24, 2016, the date of the award.
For all Named Executive Officers, threshold award levels are one-half of the target award levels and maximum award levels are two times the target award levels.
Restricted Stock Units.In 2015,2016, the granting of shares of time-based restricted stock units was specifically targeted toward the retention of our executives and key employees. Grants of restricted stock units have enabled us to attract and retain key employees by encouraging their ownership in our common stock. The award of restricted stock units is also designed to assist executives in satisfying our Company’s ownership guidelines with respect to our common stock. The number of restricted stock units awarded to an executive is based on the target dollar value of the amount of such executive’s long-term incentive compensation allocated to restricted stock units (i.e., 50% for all of our Named Executive Officers). That target dollar value is translated into a number of restricted stock units based on the fair value of the award, which is determined to be the closing price of our common stock on the Nasdaq Global Select Market on the date of the award.
In 2015,2016, restricted stock units awarded to our executive officers and all key employees contained a three-year service restriction. The entire restricted stock unit award remains subject to forfeiture until the third anniversary of the award. Upon the third anniversary of the award, the service restriction lifts, provided the recipient was an employee of our Company or any majority-owned subsidiary from the date of grant until the third anniversary of such date. As set forth in more detail below, there are certain instances in which time-based service restrictions will lapse prior to the third anniversary. The restricted stock units will vest immediately upon the occurrence of the recipient’s death, termination of employment as a result of disability or upon a change in control of our Company followed by an impermissible termination of employment. In addition, if we terminate a recipient’s employment without cause, provided the restricted stock unit was awarded more than 18 months prior to termination of employment, such restricted stock units will pro-rata vest as to a percentage of the award determined by dividing the number of whole months of the recipient’s employment beginning on the date of grant by 36. If a recipient retires from our Company after: (i) the age of 55 and with at least 10 years of full-time service; (ii) after age 60 with at least 5 years of full-time service; or (iii) the age of 65 with no minimum full-time service requirement, the time-based service restrictions will lapse and the restricted stock units will pro-rata vest as to a percentage of the grant determined by dividing the number of months of his or her employment since the date of the award by 36. If a recipient is terminated for cause or voluntarily terminates his employment prior to the third anniversary of the date of award, the entire restricted stock unit award is forfeited regardless of when the termination of employment occurs in the three-year service period. The Committee believes that allowing for the lapse of time-based service restrictions prior to the third anniversary of the award is appropriate in the instances set forth above as such instances are largely life events outside of the control of the participants and, as such, do not conflict with the retention goals provided with the three-year service requirement.
In 2015,2016, the Committee awarded restricted stock to all Named Executive Officers as follows:
Restricted Stock Awarded
Named Executive Officer* | Restricted Stock Awarded (#) | Target Award Date Value ($) | |||||||||||||||||
Named Executive Officer | Restricted Stock Awarded (#) | Award Date Value ($) | |||||||||||||||||
Charles R. Gordon | 58,072 | $ | 1,000,000 | 38,377 | $700,000 | ||||||||||||||
David A. Martin | 18,873 | 325,000 | 14,254 | 260,000 | |||||||||||||||
David F. Morris | 25,441 | * | 438,100 | 14,254 | 260,000 | ||||||||||||||
John D. Huhn | 6,533 | 112,500 | 8,223 | 1 | 150,000 | ||||||||||||||
Michael D. White | 4,355 | 75,000 | |||||||||||||||||
Stephen P. Callahan | 5,482 | 100,000 |
| Includes an annual grant of |
All the above grants were made on February 18, 2015.24, 2016. For all Named Executive Officers, the number of restricted stock units awarded was calculated by dividing the target award date value of each Named Executive Officer’s respective award by $17.22,$18.24, the closing price of our common stock on the Nasdaq Global Select Market on February 18, 2015,24, 2016, the date of the award.
Stock Options. Historically, the Company has at times granted some portion of the long-term equity incentives in stock options or provided Named Executive Officers with the opportunity to elect that a portion of their long-term equity incentive be in the form of stock options. In 2015,2016, no stock options were granted nor were our Named Executive Officers provided the opportunity to elect to receive a portion of their annual equity compensation in stock options as we had done in past years.
Other Benefits:Benefits: Supplemental Benefits for Certain Executives.In order to provide a competitively attractive package to secure and retain executives, we supplement our standard benefit packages offered to all employees with the executive benefits listed below. The executives’ benefits packages are designed to assist the executives in providing for their own financial security in a manner that recognizes individual needs and preferences.
Deferred Compensation Plan. Executives may choose to defer up to specified maximum amounts of compensation by contributing those amounts to our nonqualified deferred compensation plan for key employees. The plan allows for base salary deferral up to 75% of base salary and bonus deferral of up to 100% of bonus amounts. Under the plan, we will match contributions equal to the first 3% of compensation at a 100% rate, and contributions equal to the next 2% of compensation at a 50% rate, when aggregated with any matching contributions made under our 401(k) Profit Sharing Plan (Company-matching payments were limited to a maximum aggregate amount of $10,600 per employee for 2015)2016). Deferred account balances in the nonqualified deferred compensation plan are adjusted to match the performance of participant-selected indices, which mirror fund choices available under our 401(k) Profit Sharing Plan.
Account balances will accrue for each participant based on the amount of the participant’s deferrals into his or her account, the Company’s matching payments, if any, and the investment performance of his or her selected indices. Participants are at all times 100% vested in their deferrals, Company-matching payments and investment earnings. Participants generally will be paid their account balances after termination of their employment with our Company or on such other distribution date as they may elect. For our Named Executive Officers, however, no payments may be made from his or her account balance until the date that is six months following the date of termination of the Named Executive Officer’s employment.
During 2015,2016, Messrs. Martin, Morris and MorrisCallahan deferred $14,280$14,548, $54,225 and $28,275$25,000 of their compensation, respectively, under our nonqualified deferred compensation plan. We credited an additional $571$1,600 in Company-matching payments to Mr. Martin’s accountand Mr. Callahan’s accounts, respectively, in 2015.2016. No Company-matching payments were made under the plan to Mr. Morris’ account during 2015.2016.
Executive Disability Insurance. The Company provides a supplemental policy for executives pursuant to which the maximum monthly benefit under long-term disability is increased from $12,500 to 60% of the executive’s monthly cash compensation, inclusive of target annual incentive compensation.
Other Benefits. While we provide all employees with life insurance benefits in an amount equal to two times the employee’s salary up to $500,000, we provide our Chief Executive Officer with $1.0 million in life insurance benefits.
Mr. Gordon’s Relocation to St. Louis. Pursuant to Mr. Gordon’s employmentoffer letter dated October 6, 2014, for a period of four months from October 6, 2014, Mr. Gordon was entitled to reimbursement for certain expenses incurred in commuting between his home in Pittsburgh, Pennsylvania and our corporate headquarters in St. Louis, Missouri (to the extent not reimbursable business expenses). Accordingly, Mr. Gordon was reimbursed for travel, housing, transportation and meals between January 1, 2015 and February 6, 2015 related to his commute in an amount of $6,697. Also pursuant to Mr. Gordon’s employment letter, he is entitled to relocation assistance pursuant to the Company’s relocation policy with respect to his relocation from Pittsburgh, Pennsylvania andto St. Louis, Missouri. In 2016, the Company paid $149,120 on Mr. Gordon was providedGordon’s behalf for costs associated with $13,451 in relocation assistance in 2015.his household good moving ($24,825) and home sale ($124,295).
Compensation Related Policies
Underpinning our executive compensation philosophy are certain policies relating to compensation and equity ownership.
Policies Relating to Compensation
Section 162(m) Performance-Based Compensation.We generally structure incentive compensation to be deductible under Section 162(m) of the Code. However, we reserve the right to grant or pay amounts that are not deductible. For example, the Committee has granted incentive stock options, which generally do not result in deductible compensation at the time of exercise, and has made time-vested restricted stock and restricted stock unit grants, which may not qualify as performance-based compensation for purposes of Section 162(m) of the Code.
Policy on Recoupment of Incentive Compensation.Our Board of Directors has adopted a policy on recoupment of incentive compensation providing that if during any fiscal year there occurs a material misstatement or omission of financial information in our financial statements, our Board or the Committee may, in its discretion, recoup or cancel all or part of the incentive compensation provided to a responsible executive officer or key employee. For the purposes of the policy, incentive compensation includes any bonus, incentive payment, equity award or other compensation, including the amount of any annual salary increase or any gains realized on the exercise of stock options or sale of shares of our common stock received as incentive compensation. In addition to the recoupment of incentive compensation, our Board or the Committee may take such other actions as it deems necessary or appropriate to address the events that gave rise to the material misstatement or omission and to prevent its recurrence. Such actions may include, to the extent permitted by applicable law:
adjusting the future compensation of the executive officer or key employee;
terminating the employment of the executive officer or key employee; and
pursuing other legal remedies against the executive officer or key employee.
Each executive officer or key employee who receives incentive compensation pursuant to any of our incentive compensation plans is required to acknowledge in writing his or her agreement with the policy and understanding that any incentive compensation made to him or her is conditioned upon and subject to the policy.
We believe that by providing the Company with the appropriate power to recover incentive compensation paid to an executive officer, the Company demonstrates its commitment to strong corporate governance. This recoupment policy is in addition to any policies or recovery rights that are provided under applicable laws, including the Sarbanes-Oxley Act and the Dodd-Frank Act.
Policies Relating to Equity
In light of the significant portion of our executive compensation program that consists of equity-based compensation, we have adopted certain policies that help encourage stock ownership by our executives as well as protect the advantages, and mitigate against the risk, of equity holdings by our executives.
Stock Ownership Policy with Respect to Named Executive Officers.We have a policy with respect to the required stock ownership levels of certain highly compensated key employees, including our Named Executive Officers. The purpose of this policy is to ensure that the required stock ownership of these employees is commensurate with his or her duties and responsibilities, as measured on an annual basis. Under the policy, each of our Named Executive Officers is required to beneficially own, by no later than the third anniversary of the date he or she became subject to the policy (and to retain thereafter, until he or she is no longer subject to the policy), a minimum number of shares of our common stock that is equal in value to a multiple of his or her annual base salary. The minimum share ownership amount is recalculated annually as of January 1 based on the Named Executive Officer’s current annual base salary as of December 31 of the immediately preceding year. The following forms of equity interest count towards the achievement of the required stock ownership: (i) shares of common stock purchased on the open market; (ii) shares of common stock owned jointly with or separately by spouses and/or children; (iii) shares of common stock purchased through our employee stock purchase program; (iv) shares of stock acquired upon stock option exercises; (v) deferred stock units; and (vi) shares of restricted common stock or restricted stock units (but not performance stock units).
In February 2016, we revised our stock ownership policy to prohibit the sale or transfer of shares, other than shares used to pay applicable taxes and/or exercise price for stock options, until compliance with the minimum share ownership requirement is met. This prohibition applies during the three-year period provided to individuals to achieve compliance after becoming subject to the policy as well as any time after such three-year period in which an individual falls out of compliance (e.g., as a result of a depreciation in stock price).
The minimum number of shares is determined by dividing the base salary multiple by the average of the closing price of our common stock for the ten trading days prior to the applicable valuation date. The multiplier used in calculating the base salary multiple is assigned to each Named Executive Officer based on his or her responsibilities and duties and ranges from one to three times the Named Executive Officer’s annual base salary.
As of January 1, 2016,2017, the required share ownership of each of our Named Executive Officers was as follows:
Named Executive Officer | Date Subject to Policy | Salary at December 31, 2015 | Salary Multiplier | 10-Day Average Closing Price | Required Share Ownership as of January 1, 2016 | Actual Share Ownership as of January 1, 2016 | Date Subject to Policy | Salary at December 31, 2016 | Salary Multiplier | 10-Day Average Closing Price | Required Share Ownership as of January 1, 2017 | Actual Share Ownership as of January 1, 2017 | ||||||||||||||||||||||||||||||
Charles R. Gordon | October 6, 2014 | $ | 650,000 | 3x | $ | 19.35 | 100,786 | 210,397 | October 6, 2014 | $650,000 | 3x | $24.92 | 78,250 | 248,774 | ||||||||||||||||||||||||||||
David A. Martin | August 13, 2007 | 357,000 | 2x | 19.35 | 36,903 | 96,229 | August 13, 2007 | 365,925 | 2x | 24.92 | 29,368 | 99,065 | ||||||||||||||||||||||||||||||
David F. Morris | July 25, 2006 | 392,000 | 2x | 19.35 | 40,521 | 151,503 | July 25, 2006 | 392,080 | 2x | 24.92 | 31,467 | 147,845 | ||||||||||||||||||||||||||||||
John D. Huhn | June 2, 2014 | 260,000 | 1x | 19.35 | 13,438 | 13,597 | June 2, 2014 | 300,000 | 1x | 24.92 | 12,039 | 19,120 | ||||||||||||||||||||||||||||||
Michael D. White | April 22, 2015 | 228,000 | 1x | 19.35 | 11,784 | 10,601 | ||||||||||||||||||||||||||||||||||||
Stephen A. Callahan | Nov. 9, 2015 | 250,000 | 1x | 24.92 | 10,032 | 10,195 |
To date, each of the Named Executive Officers has fulfilled the stock ownership requirements of this policy except for Mr. White. Mr. White has until April 22, 2018 to be in compliance (three years after becoming subject to the policy) and, pursuant to our revised stock ownership policy, is prohibited from selling shares (other than shares used to pay applicable taxes or the exercise price for stock options) until compliance is achieved.policy.
Anti-Hedging Policy.In February 2012, our Board of Directors adopted an anti-hedging policy that prohibits officers, directors and employees from entering into hedging or monetization transactions involving our common stock. Prohibited transactions include, without limitation, zero-cost collars, forward sale contracts, purchase or sale of options, puts, calls, margin accounts, or other derivatives that are directly linked to our Company’s stock or transactions involving short sales of the Company’s stock. The Board adopted this policy to require officers, directors and employees to continue to own Company stock with the full risks and rewards of ownership, thereby ensuring continued alignment of their objectives with the Company’s other stockholders.
Anti-Pledging Policy.In July 2015, our Board of Directors amended the previously-adopted anti-pledging policy. The amended policy prohibits any officer or director from pledging our common stock owned by such director or officer; provided that any pledges existing as of the amendment must be unwound and terminated prior to July 22, 2020. One executive officer has an existing pledge of shares our common stock, as described in more detail in the footnotes of the table set forth under the heading “Information Concerning Certain Stockholders” beginning on page 5759 below.
COMPENSATION COMMITTEE REPORT
The responsibilities of our Compensation Committee are provided in its charter, which has been approved by our Board of Directors.
In fulfilling its oversight responsibilities with respect to the Compensation Discussion and Analysis included in this Report, the Compensation Committee, among other things, has:
reviewed and discussed the Compensation Discussion and Analysis with management, and
in reliance on such review and discussions, approved the inclusion of such Compensation Discussion and Analysis in this Proxy Statement.
SUBMITTED BY THE COMPENSATION COMMITTEE
Juanita H. Hinshaw, Chair Christopher B. CurtisStephen P. Cortinovis
Stephanie A. Cuskley Phillip D. Wright
Notwithstanding anything set forth in any of our previous filings under the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the preceding report shall not be deemed
incorporated by reference in any such filings.
COMPENSATION IN LAST FISCAL YEAR
Summary Compensation Table
The following table sets forth information concerning compensation earned for the fiscal years ended December 31, 2016, 2015 2014 and 2013,2014, if applicable, for all persons who served as our principal executive officer or principal financial officer during 20152016 and the three other most highly compensated executive officers of our Company who were serving as executive officers of the Company at December 31, 20152016 (collectively, the “Named Executive Officers”):
Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2)(3) | Non-Equity Incentive Plan Compensation ($)(1)(4) | All Other Compensation ($)(5) | Total ($) | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2)(3) | Non-Equity Incentive Plan Compensation ($)(1)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||||||||||||||||||||||||||||||
Charles R. Gordon (6) |
| 2015 | $ | 650,000 | — | $ | 2,000,000 | (8) | $ | 599,300 | $ | 44,508 | $ | 3,293,808 | 2016 | $650,000 | — | $1,400,000 | (8) | $325,000 | $172,291 | $2,547,291 | |||||||||||||||||||||||||||||||||||
Chief Executive Officer | 2014 | 156,250 | $ | 100,000 | (7) | 3,002,000 | (9) | 208,048 | 351,175 | 3,817,473 | 2015 | 650,000 | — | 2,000,000 | (9) | 599,300 | 44,508 | 3,293,808 | |||||||||||||||||||||||||||||||||||||||
and President | — | — | — | — | — | — | — | 2014 | 156,250 | $100,000(7) | 3,002,000 | (10) | 208,048 | 351,175 | 3,817,473 | ||||||||||||||||||||||||||||||||||||||||||
David A. Martin |
| 2015 | $ | 357,000 | — | $ | 650,000 | (8) | $ | 197,492 | $ | 15,766 | $ | 1,220,258 | 2016 | $365,925 | — | $520,000 | (8) | $109,778 | $15,304 | $1,011,007 | |||||||||||||||||||||||||||||||||||
Executive Vice President and | 2014 | 357,000 | — | 650,000 | (9) | 107,100 | 17,604 | 1,131,704 | 2015 | 357,000 | — | 650,000 | (9) | 197,492 | 15,766 | 1,220,258 | |||||||||||||||||||||||||||||||||||||||||
Chief Financial Officer | 2013 | 357,000 | — | 1,221,200 | (10) | — | 15,366 | 1,593,566 | 2014 | 357,000 | — | 650,000 | (10) | 107,100 | 17,604 | 1,131,704 | |||||||||||||||||||||||||||||||||||||||||
David F. Morris |
| 2015 | $ | 392,000 | — | $ | 763,100 | (8) | $ | 216,899 | $ | 16,747 | $ | 1,388,746 | 2016 | $392,080 | — | $520,000 | (8) | $117,624 | $16,285 | $1,045,989 | |||||||||||||||||||||||||||||||||||
Executive Vice President, General | 2014 | 377,000 | — | 650,000 | (9) | 113,100 | 18,591 | 1,158,691 | |||||||||||||||||||||||||||||||||||||||||||||||||
Counsel and Chief Admin. Officer | 2013 | 377,000 | — | 1,253,200 | (10) | — | 16,347 | 1,646,547 | |||||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President, | 2015 | 392,080 | — | 763,100 | (9) | 216,899 | 16,747 | 1,388,826 | |||||||||||||||||||||||||||||||||||||||||||||||||
General Counsel and Chief | 2014 | 377,000 | — | 650,000 | (10) | 113,100 | 18,591 | 1,158,691 | |||||||||||||||||||||||||||||||||||||||||||||||||
Administrative Officer | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John D. Huhn (11) | 2015 | $ | 260,000 | — | $ | 225,000 | (8) | $ | 119,860 | $ | 11,560 | $ | 616,420 | 2016 | $300,000 | — | $250,000 | (8) | $75,000 | $13,352 | $638,352 | ||||||||||||||||||||||||||||||||||||
Senior Vice President – Strategy | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
and Corporate Development | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Michael D. White (12) |
| 2015 | $ | 228,000 | — | $ | 150,000 | (8) | $ | 99,831 | $ | 10,595 | $ | 488,426 | |||||||||||||||||||||||||||||||||||||||||||
Senior Vice President and | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate Controller | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President and Chief | 2015 | 260,000 | — | 225,000 | (9) | 119,860 | 11,560 | 616,420 | |||||||||||||||||||||||||||||||||||||||||||||||||
Strategy Officer | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Stephen P. Callahan (12) | 2016 | $250,000 | — | $200,000 | (8) | $62,500 | $13,153 | $525,653 | |||||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President, Human | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Resources | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
(1) | Includes amounts earned but deferred at the election of the executive officer under our 401(k) Profit Sharing Plan and our nonqualified deferred compensation plan. |
(2) | Represents the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718. For a discussion regarding the valuation of our stock awards for financial statement reporting purposes, please refer to Note 9, “Equity-Based Compensation,” in the Notes to Consolidated Financial Statements contained in our Annual Report on Form 10-K filed on |
(3) | Stock Awards: These amounts do not necessarily reflect the actual economic value received by Named Executive Officers. |
(4) These amounts represent bonuses awarded in 2014, 2015 and 2016 under our Management Annual Incentive Plan. |
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(5) | For Mr. Gordon, includes the following amounts paid or accrued in |
(6) | Effective May 3, 2014, Mr. Gordon was appointed as interim Chief Executive Officer, a role he filled until October 6, 2014 when he was appointed President and Chief Executive Officer. |
(7) | In connection with the commencement of Mr. Gordon’s employment with the Company on October 6, 2014, he received a cash inducement bonus of $100,000. |
(8) | Includes the grant date fair value of performance units awarded in 2016 assuming the target level of performance conditions is achieved, which is equal to $700,000 for Mr. Gordon, $260,000 for each of Messrs. Martin and Morris, $100,000 for Mr. Huhn and $100,000 for Mr. Callahan. If the highest level of performance conditions is achieved with regard to the annual performance units granted in 2016, the aggregate grant date fair value of such awards would be $1,400,000 for Mr. Gordon, $520,000 for each of Messrs. Martin and Morris and $200,000 for each of Messrs. Huhn and Callahan. Also includes the grant date fair value of the annual awards of restricted stock units granted to each of our Named Executive Officers in 2016 as well as a special award of restricted stock units granted to Mr. Huhn in recognition of Mr. Huhn’s expanded responsibilities in 2016. All such awards of restricted stock units are subject to forfeiture if the Named Executive Officer’s employment terminates prior to the end of a three-year service period. |
| Includes the grant date fair value of performance units awarded in 2015 assuming the target level of performance conditions is achieved, which is equal to $1,000,000 for Mr. Gordon, $325,000 for each of Messrs. Martin and Morris and $112,500 for Mr. |
| Includes the grant date fair value of performance units awarded in 2014 assuming the target level of performance conditions is achieved, which is equal to $750,000 for Mr. Gordon and $325,000 for each of Messrs. Martin and Morris. If the highest level of performance conditions is achieved with regard to the annual performance units granted in 2014, the aggregate grant date fair value of such awards would be $1,500,000 for Mr. Gordon and $650,000 for each of Messrs. Martin and Morris. Also includes the grant date fair value of the annual awards of restricted stock granted in 2014, which awards are subject to forfeiture if the Named Executive Officer’s employment terminates prior to the end of the three-year service period. Finally, with respect to Mr. Gordon, includes an inducement award of restricted stock granted on October 6, 2014 with a grant date fair value of $1,400,000 in connection with Mr. Gordon being appointed President and Chief Executive Officer of the Company and an award of deferred stock units with an aggregate grant date fair value of $102,000 for Mr. Gordon’s service as a non-employee director prior to being appointed President and Chief Executive Officer. |
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(11) | Mr. Huhn became an executive officer of the Company on July 23, 2014, however, he was not one of our three most highly compensated executive officers in 2014. |
(12) | Mr. |
Grants of Plan-Based Awards
The following table sets forth information concerning grants of plan-based awards for the fiscal year ended December 31, 20152016 for our Named Executive Officers:
Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or | All Other Option Awards: Number of Securities Underlying | Exercise or Base Price of Option | Grant Date Fair Value of Stock and Option |
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or | All Other Option Awards: Number of Securities Underlying | Exercise or Base Price of Option | Grant Date Fair Value of Stock and Option | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Units (#) | Options (#) | Awards ($/Sh) | Awards ($)(1) | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Units (#) | Options (#) | Awards ($/Sh) | Awards ($)(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charles R. Gordon | 02/18/2015(2) | – | – | – | – | 58,072 | – | – | – | – | $ | 1,000,000 | 02/24/2016(2) | – | – | – | – | 38,377 | – | – | – | – | $700,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/18/2015(3) | – | – | – | 29,036 | 58,072 | 116,144 | – | – | – | 1,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/24/2016(3) | – | – | – | 19,189 | 38,377 | 76,754 | – | – | – | 700,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David A. Martin | 02/18/2015(2) | – | – | – | – | 18,873 | – | – | – | – | 325,000 | 02/24/2016(2) | – | – | – | – | 14,254 | – | – | – | – | 260,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/18/2015(3) | – | – | – | 9,437 | 18,873 | 37,746 | – | – | – | 325,000 | 02/24/2016(3) | – | – | – | 7,127 | 14,254 | 28,508 | – | – | – | 260,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David F. Morris | 02/18/2015(2) | – | – | – | – | 25,411 | – | – | – | – | 438,100 | 02/24/2016(2) | – | – | – | – | 14,254 | – | – | – | – | 260,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/18/2015(3) | – | – | – | 9,437 | 18,873 | 37,746 | – | – | – | 325,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/24/2016(3) | – | – | – | 7,127 | 14,254 | 28,508 | – | – | – | 260,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
John D. Huhn | 02/18/2015(2) | – | – | – | – | 6,533 | – | – | – | – | 112,500 | 02/24/2016(2) | – | – | – | – | 8,223 | – | – | – | – | 150,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/18/2015(3) | – | – | – | 3,267 | 6,533 | 13,066 | – | – | – | 112,500 | 02/24/2016(3) | – | – | – | 2,741 | 5,482 | 10,964 | – | – | – | 100,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stephen P. Callahan | 02/24/2016(2) | – | – | – | – | 5,482 | – | – | – | – | 100,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/24/2016(3) | – | – | – | 2,741 | 5,482 | 10,964 | – | – | – | 100,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael D. White | 02/18/2015(2) | – | – | – | – | 4,355 | – | – | – | – | 75,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
02/18/2015(3) | – | – | – | 2,178 | 4,355 | 8,710 | – | – | – | 75,000 |
___________________
(1) | Represents the grant date fair value (computed in accordance with FASB ASC Topic 718) of |
(2) | Represents the number of shares of time-based restricted stock units awarded on February |
(3) | Represents number of performance units at target performance awarded on February |
Outstanding Equity Awards at Fiscal Year End
The following table sets forth information concerning outstanding equity awards, as of the fiscal year ended December 31, 2015,2016, held by our Named Executive Officers:
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive PlanAwards:Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#)(1) | Market Value of Shares or Units of Stock that Have Not Vested ($)(2) | Equity Incentive Plan Awards:Number of Unearned Shares, Units, or Other Rights that Have Not Vested (#)(3) | Equity Incentive Plan Awards:Market or Payout Value of Unearned Shares, Units, or Other Rights that Have Not Vested ($)(4) | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#)(1) | Market Value of Shares or Units of Stock that Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights that Have Not Vested (#)(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights that Have Not Vested ($)(4) | ||||||||||||||||||||||||||||||||||||||||||||||
Charles R. Gordon | — | — | — | — | — | 175,840 | $ | 3,395,470 | — | — | — | — | — | — | — | 214,217 | $5,076,943 | — | — | |||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 49,577 | $ | 957,332 | — | — | — | — | — | — | — | 68,766 | $1,629,742 | ||||||||||||||||||||||||||||||||||||||||||||||
David A. Martin | 4,377 | — | — | 12.84 | 3/2/16 | — | — | ��� | — | 28,239 | — | — | $26.60 | 1/21/18 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
30,776 | — | — | 22.87 | 2/24/17 | — | — | — | — | 39,663 | — | — | 18.11 | 2/21/19 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
28,239 | — | — | 26.60 | 1/21/18 | — | — | — | — | — | — | 46,551 | 1,103,259 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
39,663 | — | — | 18.11 | 2/21/19 | — | — | — | — | — | — | — | — | 23,276 | 551,629 | ||||||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | 45,240 | 873,584 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 22,620 | 436,792 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David F. Morris | 30,776 | — | — | 22.87 | 2/24/17 | — | — | — | — | 28,239 | — | — | $26.60 | 1/21/18 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
28,239 | — | — | 26.60 | 1/21/18 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
39,663 | — | — | 18.11 | 2/21/19 | — | — | — | — | 39,663 | — | — | 18.11 | 2/21/19 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | 51,808 | 1,000,412 | — | — | — | — | — | — | — | 53,119 | 1,258,920 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 22,620 | 436,792 | — | — | — | — | — | — | — | 23,276 | 551,629 | |||||||||||||||||||||||||||||||||||||||||||||||
John D. Huhn | — | — | — | — | — | 10,897 | 210,421 | — | — | — | — | — | — | — | 19,120 | 453,144 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 4,721 | 91,163 | — | — | — | — | — | — | — | 7,462 | 176,849 | |||||||||||||||||||||||||||||||||||||||||||||||
Michael D. White | — | — | — | — | — | 10,601 | 204,705 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stephen P. Callahan | — | — | — | — | — | 10,195 | 241,622 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | 3,210 | 61,985 | — | — | — | — | — | — | — | 2,741 | 64,962 |
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(1) | Represents the number of shares of restricted stock or restricted stock units awarded and outstanding at fiscal year-end as follows: Mr. Gordon, 38,377 restricted stock units awarded on February 24, 2016, 58,072 restricted stock units awarded on February 18, 2015 and 117,768shares of restricted stock awarded on October 8, 2014; Mr. Martin, 14,254 restricted stock units awarded on February 24, 2016, 18,873 restricted stock units awarded on February 18, 2015 and 13,424 shares of restricted stock awarded on March 25, |
(2) | Represents the value of restricted stock and restricted stock units calculated on the basis of the closing price of our common stock on The Nasdaq Global Select Market on December 31, |
(3) | Represents the number of performance units granted in |
(4) | Represents the value of shares of performance units calculated on the basis of the closing price of our common stock on The Nasdaq Global Select Market on December 31, |
Option Exercises and Stock Vested
The following table sets forth information regarding options exercised by our Named Executive Officers and the vesting of stock awards previously granted to our Named Executive Officers during the fiscal year ended December 31, 2015:2016:
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares | Value Realized | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares | Value Realized | ||||||||||||||||||||||||||
Charles R. Gordon | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
David A. Martin | 92,486 | $ | 481,263 | — | — | 35,153 | $71,467 | 12,943 | $270,120 | |||||||||||||||||||||||||
David F. Morris | 107,566 | 616,479 | — | — | 30,766 | 40,303 | 12,943 | 270,120 | ||||||||||||||||||||||||||
John D. Huhn | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Michael D. White | — | — | — | — | ||||||||||||||||||||||||||||||
Stephen P. Callahan | — | — | — | — |
___________________
(1) | Reflects the difference between the market price on the date of exercise and the exercise price. Mr. Martin exercised: (i) |
(2) | Reflects the number of shares vesting multiplied by the market price ($20.87) on the date of |
Nonqualified Deferred Compensation
Executive officers may choose to defer up to specified maximum amounts of compensation by contributing those amounts to our nonqualified deferred compensation plan for key employees. For 2015,2016, the plan allowed for base salary deferral up to 75% of base salary, and bonus deferral of up to 100% of bonus amounts. Under the plan, we will match contributions equal to the first 3% of compensation at a 100% rate, and contributions equal to the next 2% of compensation at a 50% rate, when aggregated with any matching contributions made under our 401(k) Profit Sharing Plan (Company-matching payments were limited to a maximum aggregate amount of $10,600 per employee for 2015)2016). Deferred account balances in the nonqualified deferred compensation plan are adjusted to match the performance of participant-selected indices, which mirror fund choices available under our 401(k) Profit Sharing Plan. In connection with this plan, the Company established a Rabbi Trust to fund the Company’s promise to pay deferred compensation account balances contributed to by participants in the plan. This trust becomes fully funded upon a change in control.
Account balances will accrue for each participant based on the amount of the participant’s deferrals into the account, the Company’s matching payment, if any, and the investment performance of his or her selected indices. Participants are at all times 100% vested in their deferrals, Company-matching payments and investment earnings. Participants generally will be paid their account balances after termination of their employment with our Company or on such other distribution date as they may elect. For Named Executive Officers, however, no payments may be made from his or her account balance until a date that is at least six months following the date of termination of the Named Executive Officer’s employment.
During 2015,2016, Messrs. Martin, Morris and MorrisCallahan deferred $14,280$14,548, $54,225 and $28,275$25,000 of their compensation, respectively, under our nonqualified deferred compensation plan. We credited an additional $1,600in$1,600.00 in Company-matching payments to Mr. Martin’s accountand Mr. Callahan’s accounts, respectively, in 2015.2016. No Company-matching payments were made under the plan to Mr. Morris’ account during 2015.2016.
The following table sets forth information concerning contributions, Company-matching payments, earnings and balances under our nonqualified deferred contribution plan for our Named Executive Officers:
Name | Executive Contribution in Last FY ($)(1) | Registrant Contributions in Last FY ($)(1) | Aggregate Earnings in Last FY ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | Executive Contribution in Last FY ($)(1) | Registrant Contributions in Last FY ($)(1) | Aggregate Earnings in Last FY ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | |||||||||||||||||||||||||||||||||||
Charles R. Gordon | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
David A. Martin | $ | 14,280 | $ | 1,600 | $ | 619 | — | $ | 170,189 | $14,548 | $1,600 | $18,702 | — | $205,039 | |||||||||||||||||||||||||||||||
David F. Morris | 28,275 | — | 1,102 | — | 729,270 | 54,225 | — | 99,191 | — | 882,685 | |||||||||||||||||||||||||||||||||||
John D. Huhn | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Michael D. White | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Stephen P. Callahan | 25,000 | 1,600 | 1,944 | — | 28,544 |
___________________ _______________________
(1) | Named Executive Officer contributions and registrant payments also are reported in the “Salary”, “Non-Equity Incentive Plan Compensation” and “Other Compensation” columns of the Summary Compensation Table. |
(2) | Amounts credited do not constitute above-market earnings. |
Severance, Change in Control and Termination
Severance.
Effective March 1, 2008, we adopted a severance policy (which was still effective December 31, 2016) (the “Severance Policy”) that would provide for severance payments to Named Executive Officers (subject to the terms of Mr. Gordon’s employmentoffer letter and each of the Continuity Agreements for Messrs. Gordon, Martin and Morris, in each case as described below) at the rate of 12 weeks of base salary, plus two additional weeks of base salary for each full year of continuous service time with our Company; provided, however, that our Named Executive Officers would not receive more than 42 weeks of base salary as severance. Payments are not lump sum but are processed as extended payroll over the term of the applicable severance period. Executives may continue to receive medical and dental insurance through the severance period and the Companywe shall pay that portion of the medical and health insurance that it would have paid had the executive been an employee. Additionally, executives are entitled to $10,000 in outplacement services.
The Severance Policy would apply if a Named Executive Officer in good standing with our Company is involuntarily terminated without cause and not due to a Code of Conduct violation, and the Named Executive Officer has completed a minimum of six months’ continuous service time.
Our Company does not offer change in control tax gross-up provisions.
Under his employmentoffer letter, if Mr. Gordon is terminated for any reason other than for “Cause” (as defined in his employmentoffer letter), Mr. Gordon would receive severance benefits equal to 24 months of his then current base salary and 24 months of the monthly cost of health, dental, vision, life, long-term disability and accidental insurance then provided by the Company.us. The payments are in lieu of payments that would have been due Mr. Gordon under the Severance Policy. Any severance payments made pursuant to Mr. Gordon’s employmentoffer letter are conditioned upon certain representations, warranties, covenants and agreements to be made by Mr. Gordon, including, but not limited to, a release of all claims and covenants of confidentiality, non-solicitation and non-competition.non-competition and a release of all claims.
Effective March 1, 2017, our Board of Directors approved a new severance policy (the “2017 Severance Policy”). Mr. Gordon is not subject to the 2017 Severance Policy as his severance is addressed under the terms of his offer letter. Under the terms of the 2017 Severance Policy, in the event of a qualifying severance Messrs. Martin and Morris would be entitled to 18 months severance (base salary and benefits continuation), and Messrs. Huhn and Callahan would be entitled to 15 months severance (base salary and benefits continuation). Under the 2017 Severance Policy, severance is paid out over the course of the severance period (rather than a lump sum) and the employee must sign a separation agreement to qualify. In the event of a termination for cause, the employee is not eligible for severance.
Change in Control and Termination.
Continuity Agreements. On October 6, 2014, the Company entered into Executive Change in Control Severance Agreements (the “Continuity Agreements”) with each of Messrs. Gordon, Martin and Morris. Each of the Continuity Agreements provide for a “double trigger” such that benefits are only payable if there is a change in control (as defined in the Continuity Agreements) followed, within 24 months after the change in control, by involuntary termination without cause (as defined in the Continuity Agreements) or voluntary termination for good reason (as defined in the Continuity Agreements). Upon such a termination, the Continuity Agreements provide, among other things, for the following benefits:
A lump-sum payment of the executive’s accrued but unpaid base salary, accrued vacation pay and other items earned and owed to the executive through and including the effective date of termination;
A lump-sum payment of a pro-rated portion of the executive’s annual target bonus opportunity;
A lump-sum payment of a specified multiple, which is 2.99 for Mr. Gordon and 1.99 for Messrs. Martin and Morris, of the executive’s base salary and annual target bonus opportunity;
Continuation of health, dental and vision insurance coverage after termination for 36 months for Mr. Gordon and 24 months for Messrs. Martin and Morris; and
Up to $15,000 in executive outplacement services.
On March 1, 2017, the Company entered into Change in Control Severance Agreements (“Change in Control Agreements”) with each of Messrs. Huhn and Callahan. Each of the Change in Control Agreements provide for a “double trigger” such that benefits are only payable if there is a change in control (as defined in the Change in Control Agreements) followed, within 24 months after the change in control, by involuntary termination without cause (as defined in the Change in Control Agreements) or voluntary termination for good reason (as defined in the Change in Control Agreements). Upon such a termination, the Change in Control Agreements provide, among other things, for the following benefits:
A lump-sum payment of Mr. Huhn’s or Mr. Callahan’s accrued but unpaid base salary, accrued vacation pay and other items earned and owed to the them through and including the effective date of termination;
A lump-sum payment of a pro-rated portion of Mr. Huhn’s or Mr. Callahan’s annual target bonus opportunity (as defined in the Change in Control Agreements);
A lump-sum payment of 1.5 times Mr. Huhn’s or Mr. Callahan’s base salary and annual target bonus opportunity;
Continuation of health, dental and vision insurance coverage after termination for 18 months; and
Up to $15,000 in executive outplacement services.
Equity-Based Incentives. Since 2013, our equity award agreements, including those for restricted stock, restricted stock units and performance units, include a double trigger such that the outstanding unvested equity awards will immediately vest only upon a change in control followed by an involuntary termination without cause or a voluntary termination for good reason. In such case, performance units will vest at target.
If we were to terminate any Named Executive Officer’s employment without cause, the service restrictions on any restricted stock or restricted stock units awarded more than 18 months prior to such termination would vest as to a percentage of the award determined by dividing (i) the number of whole months of the Named Executive Officer’s employment beginning on the date of the award through the date of termination (provided that the number of whole months is at least 18) by (ii) 36; provided, however, that with respect to the award of 41,082 shares of restricted stock granted to Mr. Gordon on October 8, 2014, the denominator of such calculation is 30.36. With respect to the inducement award of 76,686 shares of restricted stock granted to Mr. Gordon on October 8, 2014, the denominator of such calculation is 60. A termination of any Named Executive Officer’s employment without cause does not result in any vesting of performance units and all such awards would be forfeited.
If any Named Executive Officer meets the definition of retirement as set out in the restricted stock or restricted stock unit award agreements, the service restrictions on any restricted stock or restricted stock units would vest as to a percentage of the award determined by dividing (i) the number of whole months of the Named Executive Officer’s employment beginning on the date of the award through the date of termination by (ii) 36; provided, however, that with respect to the award of 41,082 shares of restricted stock granted to Mr. Gordon on October 8, 2014, the denominator of such calculation is 30.36. With respect to the inducement award of 76,686 shares of restricted stock granted to Mr. Gordon on October 8, 2014, the denominator of such calculation is 60.
Upon death or disability of a Named Executive Officer, the award agreements in connection with all restricted stock and restricted stock unit awards provide that all restricted stock and restricted stock units will immediately vest. However, the award agreements in connection with our performance unit awards granted in 2013, 2014, 2015 and 20152016 provide that, upon death, disability or retirement (each as defined in the agreement) the performance units governed by such award agreement will vest to the extent that the three-year performance goals are met, but reduced pro rata to a percentage of that amount determined by dividing (i) the number of whole months of the participant’s employment with the Company or a subsidiary thereof during the performance period by (ii) 36; provided, however, that with respect to the award of 41,082 performance units granted to Mr. Gordon on October 8, 2014, the denominator of such calculation is 24 with respect to the EPS component and 27 with respect to the relative TSR component of such awards.36.
The performance metrics for the performance unit awards for the three-year performance period beginning in 2013 and ending in 2015 were deemed to not have been metPotential Post-Employment Payments as of December 31, 2015 and, therefore, no payment was made or will be made to the Named Executive Officers in connection with these awards.
Summary Data Charts.2016
The following tables show the potential payments and benefits due to each Named Executive Officer under various employment termination events and under the terms of the Severance Policy, Mr. Gordon’s employmentoffer letter and the applicable Continuity Agreement, as the case may be. These post-employment amounts are estimates only and do not necessarily reflect the actual amounts that would be paid to our Named Executive Officers. The assumptions used in preparation of these tables are consistent with the payments and benefits described above as well as the following assumptions:
A termination date of December 31, 2015.2016.
A value of $19.31$23.70 per share used for the value of our common stock, which was the closing price of our common stock on December 31, 2015.2016.
Potential Post-Employment Payments as of December 31, 2015
Charles R. Gordon - President and Chief Executive Officer
Type of Payment | Involuntary Termination without Cause | Involuntary Termination without Cause after a Change in Control | Voluntary Termination for Good Reason after a Change in Control | Retirement | Death | Disability | Involuntary Termination without Cause | Involuntary Termination without Cause after a Change in Control | Voluntary Termination for Good Reason after a Change in Control | Retirement | Death | Disability | ||||||||||||||||||||||||||||||||||||
Severance Compensation | $ | 1,300,000 | $ | 4,537,000 | $ | 4,537,000 | — | — | — | $1,300,000 | $4,537,000 | $4,537,000 | — | — | — | |||||||||||||||||||||||||||||||||
Medical, Dental, Vision, Life, Disability | 58,812 | 42,215 | 42,215 | — | — | — | 57,600 | 44,042 | 44,042 | — | — | — | ||||||||||||||||||||||||||||||||||||
Outplacement Services | — | 15,000 | 15,000 | — | — | — | — | 15,000 | 15,000 | — | — | — | ||||||||||||||||||||||||||||||||||||
Unvested Restricted Stock/Restricted Stock Units | — | 3,395,470 | (1) | 3,395,470 | (1) | (2) | $ | 3,395,470 | (1) | $ | 3,395,470 | (1) | 1,209,482 | 5,076,943 | (2) | 5,076,943 | (2) | (3) | $5,076,943 | (2) | $5,076,943 | (2) | ||||||||||||||||||||||||||
Performance Units | — | 1,914,664 | (3) | 1,914,664 | (3) | (2) | 774,109 | (4)(5) | 774,109 | (4)(5) | — | 2,731,875 | (4) | 2,731,875 | (4) | (3) | 2,125,511 | (5)(6)(7) | 2,125,511 | (5)(6)(7) | ||||||||||||||||||||||||||||
Total | $ | 1,358,812 | $ | 9,904,349 | $ | 9,904,349 | — | $ | 4,169,579 | $ | 4,169,579 | $2,567,082 | $12,404,860 | $12,404,860 | — | $7,202,454 | $7,202,454 |
___________________
(1) | The number of shares of unvested restricted stock immediately vesting upon an involuntary termination without cause is 51,033. |
(2) | The number of shares of unvested restricted stock immediately vesting upon an involuntary termination without cause after a change of control, voluntary termination for good reason after a change in control, death or disability is |
| As of December 31, |
| The number of unvested performance units immediately vesting upon an involuntary termination without cause after a change of control or voluntary termination for good reason after a change in control is |
| Represents |
(6) | Also represents two-thirds, which is |
| Also represents one-third, which is equal to the number of whole months of Mr. Gordon’s employment with the Company during the performance |
David A. Martin - Executive Vice President and Chief Financial Officer
Type of Payment | Involuntary Termination without Cause | Involuntary Termination without Cause after a Change in Control | Voluntary Termination for Good Reason after a Change in Control | Retirement | Death | Disability | Involuntary Termination without Cause | Involuntary Termination without Cause after a Change in Control | Voluntary Termination for Good Reason after a Change in Control | Retirement | Death | Disability | ||||||||||||||||||||||||||||||||||||
Severance Compensation | $ | 288,346 | $ | 1,350,888 | $ | 1,350,888 | — | — | — | $295,555 | $1,384,660 | $1,384,660 | — | — | — | |||||||||||||||||||||||||||||||||
Medical and Dental Benefits | 9,919 | 24,562 | 24,562 | — | — | — | 10,163 | 25,040 | 25,040 | — | — | — | ||||||||||||||||||||||||||||||||||||
Outplacement Services | 10,000 | 15,000 | 15,000 | — | — | — | 10,000 | 15,000 | 15,000 | — | — | — | ||||||||||||||||||||||||||||||||||||
Unvested Restricted Stock/Restricted Stock Units | 380,312 | 873,584 | (1) | 873,584 | (1) | (2) | $ | 873,584 | (1) | $ | 873,584 | (1) | 564,980 | (1) | 1,103,259 | (2) | 1,103,259 | (2) | (3) | $1,103,259 | (2) | $1,103,259 | (2) | |||||||||||||||||||||||||
Performance Units | — | 623,655 | (3) | 623,655 | (3) | (2) | 207,885 | (4)(5) | 207,885 | (4)(5) | — | 926,220 | (4) | 926,220 | (4) | (3) | 700,999 | (5)(6)(7) | 700,999 | (5)(6)(7) | ||||||||||||||||||||||||||||
Total | $ | 688,577 | $ | 2,887,689 | $ | 2,887,689 | — | $ | 1,081,469 | $ | 1,081,469 | $880,698 | $3,454,179 | $3,454,179 | — | $1,804,258 | $1,804,258 |
___________________
(1) | The number of shares of unvested restricted stock immediately vesting upon an involuntary termination without cause is 23,839. |
(2) | The number of shares of unvested restricted stock immediately vesting upon an involuntary termination without cause after a change of control, voluntary termination for good reason after a change in control, death or disability is |
| As of December 31, 2015, Mr. Martin did not meet the definition of “retirement” in the various award agreements. |
| The number of unvested performance units immediately vesting upon an involuntary termination without cause after a change of control or voluntary termination for good reason after a change in control is |
| Represents 44.35% of the 2014-2016 performance units granted to Mr. Martin, or 5,954 performance units. As described above, with respect to the 2014-2016 performance units granted to all Named Executive Officers other than Mr. Gordon, 44.35% of such performance units vested as a result of the TSR metric (25%) exceeding target for the period from January 1, 2014 to December 31, 2016, while the EPS metric (75%) was not achieved for the period from January 1, 2014 to December 31, 2016. |
(6) | Also represents two-thirds, which is equal to the number of whole months of Mr. Martin’s employment with the Company during the performance |
| Also represents one-third, which is equal to the number of whole months of Mr. Martin’s employment with the Company during the performance periods (i.e., 12) divided by 36, of the target performance unit award for the performance units granted in |
David F. Morris - Executive Vice President, General Counsel and Chief Administrative Officer
Type of Payment | Involuntary Termination without Cause | Involuntary Termination without Cause after a Change in Control | Voluntary Termination for Good Reason after a Change in Control | Retirement | Death | Disability | Involuntary Termination without Cause | Involuntary Termination without Cause after a Change in Control | Voluntary Termination for Good Reason after a Change in Control | Retirement | Death | Disability | ||||||||||||||||||||||||||||||||||||
Severance Compensation | $ | 241,231 | $ | 1,483,328 | $ | 1,483,328 | — | — | — | $256,360 | $1,483,631 | $1,483,631 | — | — | — | |||||||||||||||||||||||||||||||||
Medical and Dental Benefits | 4,737 | 15,394 | 15,394 | — | — | — | 5,133 | 15,623 | 15,623 | — | — | — | ||||||||||||||||||||||||||||||||||||
Outplacement Services | 10,000 | 15,000 | 15,000 | — | — | — | 10,000 | 15,000 | 15,000 | — | — | — | ||||||||||||||||||||||||||||||||||||
Unvested Restricted Stock/Restricted Stock Units | 380,312 | 1,000,412 | (1) | 1,000,412 | (1) | (2) | $ | 1,000,412 | (1) | $ | 1,000,412 | (1) | 660,107 | (1) | 1,258,920 | (2) | 1,258,920 | (2) | $753,946 | (3) | $1,258,920 | (2) | $1,258,920 | (2) | ||||||||||||||||||||||||
Performance Units | — | 623,655 | (3) | 623,655 | (3) | (2) | 207,885 | (4)(5) | 207,885 | (4)(5) | — | 926,220 | (4) | 926,220 | (4) | 700,999 | (5)(6)(7) | 700,999 | (5)(6)(7) | 700,999 | (5)(6)(7) | |||||||||||||||||||||||||||
Total | $ | 636,280 | $ | 3,137,789 | $ | 3,137,789 | — | $ | 1,208,297 | $ | 1,208,297 | $931,600 | $3,699,394 | $3,699,394 | $1,454,945 | $1,959,919 | $1,959,919 |
___________________
(1) | The number of shares of unvested restricted stock immediately vesting upon an involuntary termination without cause is 27,853. |
(2) | The number of shares of unvested restricted stock immediately vesting upon an involuntary termination without cause after a change of control, voluntary termination for good reason after a change in control, death or disability is |
|
|
(3) | The number of shares of unvested restricted stock immediately vesting upon retirement is 31,812. |
(4) | The number of unvested performance units immediately vesting upon an involuntary termination without cause after a change of control or voluntary termination for good reason after a change in control is |
| Represents 44.35% of the 2014-2016 performance units granted to Mr. Morris, or 5,954 performance units. As described above, with respect to the 2014-2016 performance units granted to all Named Executive Officers other than Mr. Gordon, 44.35% of such performance units vested as a result of the TSR metric (weighted at 25%) exceeding target for the period from January 1, 2014 to December 31, 2016, while the EPS metric (weighted at 75%) was not achieved for the period from January 1, 2014 to December 31, 2016. |
(6) | Also represents two-thirds, which is equal to the number of whole months of Mr. Morris’ employment with the Company during the performance |
| Also represents one-third, which is equal to the number of whole months of Mr. Morris’ employment with the Company during the performance periods (i.e., 12) divided by 36, of the target performance unit award for the performance units granted in |
John D. Huhn – Senior Vice President –and Chief Strategy and Corporate DevelopmentOfficer
Type of Payment | Involuntary Termination without Cause | Involuntary Termination without Cause after a Change in Control | Voluntary Termination for Good Reason after a Change in Control | Retirement | Death | Disability | Involuntary Termination without Cause | Involuntary Termination without Cause after a Change in Control | Voluntary Termination for Good Reason after a Change in Control | Retirement | Death | Disability | ||||||||||||||||||||||||||||||||||||
Severance Compensation | $ | 70,000 | $ | 70,000 | — | — | — | — | $92,308 | $92,308 | — | — | — | — | ||||||||||||||||||||||||||||||||||
Medical and Dental Benefits | 3,306 | 3,306 | — | — | — | — | 3,872 | 3,872 | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Outplacement Services | 10,000 | 10,000 | $ | 10,000 | — | — | — | 10,000 | 10,000 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Unvested Restricted Stock/Restricted Stock Units | 42,134 | 210,421 | (1) | 210,421 | (1) | (2) | $ | 210,421 | (1) | $ | 210,421 | (1) | 180,809 | (1) | 453,144 | (2) | $453,144 | (2) | (3) | $453,144 | (2) | $453,144 | (2) | |||||||||||||||||||||||||
Performance Units | — | 182,325 | (3) | 182,325 | (3) | (2) | 56,094 | (4)(5) | 56,094 | (4)(5) | — | 315,329 | (4) | 315,329 | (4) | (3) | 228,705 | (5)(6)(7) | 228,705 | (5)(6)(7) | ||||||||||||||||||||||||||||
Total | $ | 125,440 | $ | 476,052 | $ | 402,746 | — | $ | 257,153 | $ | 257,153 | $286,989 | $874,653 | $768,473 | — | $681,849 | $681,849 |
___________________
(1) | The number of shares of unvested restricted stock immediately vesting upon an involuntary termination without cause is 7,629. |
(2) | The number of shares of unvested restricted stock immediately vesting upon an involuntary termination without cause after a change of control, voluntary termination for good reason after a change in control, death or disability is |
| As of December 31, |
| The number of unvested performance units immediately vesting upon an involuntary termination without cause after a change of control or voluntary termination for good reason after a change in control is |
| Represents |
(6) | Also represents two-thirds, which is equal to the number of whole months of Mr. Huhn’s employment with the Company during the performance |
| Also represents one-third, which is equal to the number of whole months of Mr. Huhn’s employment with the Company during the performance periods (i.e., 12) divided by 36, of the target performance unit award for the performance units granted in |
Michael D. WhiteStephen P. Callahan - Senior Vice President and Corporate Controller– Human Resource
Type of Payment | Involuntary Termination without Cause | Involuntary Termination without Cause after a Change in Control | Voluntary Termination for Good Reason after a Change in Control | Retirement | Death | Disability | Involuntary Termination without Cause | Involuntary Termination without Cause after a Change in Control | Voluntary Termination for Good Reason after a Change in Control | Retirement | Death | Disability | ||||||||||||||||||||||||||||||||||||
Severance Compensation | $ | 70,154 | $ | 70,154 | — | — | — | — | $67,308 | $67,308 | — | — | — | — | ||||||||||||||||||||||||||||||||||
Medical and Dental Benefits | 3,823 | 3,823 | — | — | — | — | 3,966 | 3,966 | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Outplacement Services | 10,000 | 10,000 | $ | 10,000 | — | — | — | 10,000 | 10,000 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Unvested Restricted Stock/Restricted Stock Units | 78,799 | 204,705 | (1) | 204,705 | (1) | (2) | $ | 204,705 | (1) | $ | 204,705 | (1) | — | 241,622 | (1) | $241,622 | (1) | (2) | $241,622 | (1) | $241,622 | (1) | ||||||||||||||||||||||||||
Performance Units | — | 123,970 | (3) | 123,970 | (3) | (2) | 31,355 | (4)(5) | 31,355 | (4)(5) | — | 129,923 | (3) | 129,923 | (3) | (2) | 43,300 | (4) | 43,300 | (4) | ||||||||||||||||||||||||||||
Total | $ | 162,776 | $ | 412,652 | $ | 338,675 | — | $ | 236,060 | $ | 236,060 | $81,274 | $452,819 | $71,545 | — | $284,922 | $284,922 |
___________________
(1) | The number of shares of unvested restricted stock/restricted stock units immediately vesting upon an involuntary termination without cause after a change of control, voluntary termination for good reason after a change in control, death or disability is |
(2) | As of December 31, 2015, Mr. |
(3) | The number of unvested performance units immediately vesting upon an involuntary termination without cause after a change of control or voluntary termination for good reason after a change in control is |
(4) |
|
| Also represents one-third, which is equal to the number of whole months of Mr. |
INFORMATION CONCERNING CERTAIN STOCKHOLDERS
The table below sets forth certain information as of February 24, 2016March 3, 2017 with respect to the number of shares of our common stock owned by:
each of our Named Executive Officers,
each of our directors,
each person known by us to own beneficially more than 5% of the outstanding shares of our common stock, and
all of our directors and executive officers as a group.
Name and Address of Beneficial Owner(1) | Amount and Nature of Beneficial Ownership(2) | Percent of Common Stock (%) | Amount and Nature of Beneficial Ownership(2) | Percent of Common Stock (%) | ||||||||||
BlackRock, Inc. 55 East 52nd Street New York, New York 10022 | 3,527,200 | (3) | 9.94 | % | 4,311,920 | (3) | 12.76% | |||||||
Dimensional Fund Advisors LP Building One 6300 Bee Cave Road Austin, Texas 78746 | 3,088,467 | (4) | 8.70 | 3,014,375 | (4) | 8.92 | ||||||||
The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | 2,719,814 | (5) | 7.66 | 2,921,912 | (5) | 8.65 | ||||||||
T. Rowe Price Associates, Inc. 100 East Pratt Street Baltimore, Maryland 21202 | 2,111,120 | (6) | 5.95 | 2,774,290 | (6) | 8.21 | ||||||||
Stephen P. Callahan | 15,186 | (7) | — | (8) | ||||||||||
Stephen P. Cortinovis | 78,063 | (7) | — | (8) | 80,047 | (9) | — | (8) | ||||||
Christopher B. Curtis | 13,542 | (9) | — | (8) | ||||||||||
Stephanie A. Cuskley | 45,771 | (10) | — | (8) | 50,555 | (10) | — | (8) | ||||||
Walter J. Galvin | 29,070 | (11) | — | (8) | 37,770 | (11) | — | (8) | ||||||
Rhonda Germany Ballintyn | 1,254 | (12) | — | (8) | ||||||||||
Charles R. Gordon | 248,774 | (12) | — | (8) | 299,626 | (13) | — | (8) | ||||||
Juanita H. Hinshaw | 53,537 | (13) | — | (8) | 58,321 | (14) | — | (8) | ||||||
John D. Huhn | 21,820 | (14) | — | (8) | 24,928 | (15) | — | (8) | ||||||
David A. Martin | 213,538 | (15) | — | (8) | 184,992 | (16) | — | (8) | ||||||
David F. Morris | 303,520 | (16) | — | (8) | 267,868 | (17) | — | (8) | ||||||
M. Richard Smith | 39,207 | (17) | — | (8) | 43,991 | (18) | — | (8) | ||||||
Michael D. White | 14,302 | (18) | — | (8) | ||||||||||
Alfred L. Woods | 124,747 | (19) | — | (8) | 128,021 | (19) | — | (8) | ||||||
Phillip D. Wright | 34,700 | (20) | — | (8) | 40,402 | (20) | — | (8) | ||||||
Directors and executive officers as a group (14 persons) | 1,230,786 | (21) | 3.47 | 1,247,370 | (21) | 3.62 |
__________
(1) | The address for each of our directors and executive officers is 17988 Edison Avenue, Chesterfield, Missouri 63005. |
(2) | Except as otherwise indicated, as of |
References to stock options in the footnotes to this table include only those options that are or will become exercisable within 60 days after |
(3) | The information provided herein is based on Amendment No. |
(4) | The information provided herein is based on Amendment 2 to Schedule 13G filed by Dimensional Fund Advisors LP with the Securities and Exchange Commission on February 9, |
(5) | The information provided herein is based on Amendment |
(6) | The information provided herein is based on Amendment |
(7) | Represents 15,186 restricted stock units. |
(8) | Less than one percent. |
(9) | Represents |
|
|
|
|
(10) | Represents 4,159 shares of common stock and |
(11) | Represents 12,000 shares of common stock and |
(12) | Represents |
(13) | Represents 30,282 shares of common stock (of which 5,455 shares are held in Mr. Gordon’s Individual Retirement Account), 117,768 shares of restricted stock, |
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|
(14) | Represents |
(15) | Represents 817 shares of common stock, 4,364 shares of restricted stock and |
| Represents |
| Represents the following direct holdings: (a) |
| Represents |
|
|
(19) | Represents |
(20) | Represents |
(21) | Includes |
RELATED-PARTY TRANSACTIONS
Pursuant to its charter, our Audit Committee is responsible for reviewing and approving all transactions of our Company in which a related person has a direct or indirect material interest and the amount involved exceeds $120,000. It is our policy that executive management notify our Audit Committee of any transaction that may be deemed a related-party transaction. Upon such a notification, the Audit Committee will meet to review the terms of such a transaction and make any necessary determinations.
We maintain various written policies and procedures relating to the review, approval or ratification of transactions in which we, or any of our directors, officers or employees, may have a direct or indirect material interest. Our Code of Conduct, which may be found on our website atwww.aegion.com under “Investors” and then “Corporate Governance,” prohibits our directors, officers and employees from engaging in specified activities that may constitute a conflict of interest with the Company without prior approval of management or our Board or Audit Committee, as appropriate. Activities that may constitute a conflict of interest with our Company and require prior approval include: (a) investing in or being an officer or employee of one of our customers, suppliers, subcontractors or competitors; (b) having a business interest in a company competing with or doing business with our Company; (c) receiving any benefit, either direct or indirect, from the investment in or association with a company that our Company may have otherwise received; and (d) engaging in a transaction with our Company personally or through an affiliate.
Additionally, we require each of our directors and officers to complete a comprehensive questionnaire each year that, among other things, identifies any transactions or potential transactions with us in which the director or officer, or a family member or associated entity, has any interest, financial or otherwise. Our directors and officers are also required to update their information if there are changes throughout the year.
We believe that these policies and procedures ensure that all related-party transactions are appropriately reviewed and, if required, disclosed pursuant to the rules of the Securities and Exchange Commission.
For 2015,2016, we had no related-party transactions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To our knowledge, based solely upon a review of copies of reports received by us pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, and written representations that no other reports were required to be filed, we believe that all filing requirements applicable to our directors and officers under Section 16(a) with respect to 20152016 were satisfied, except that Messrs. Martin and all such reports were timely filed.Morris each had one late filing with respect to shares withheld for taxes upon the vesting of shares of restricted stock on March 7, 2016 and Mr. Woods had one late filing with respect to a sale of shares on May 9, 2017.
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION
We are seeking an advisory vote from our stockholders to approve the compensation of our Named Executive Officers, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K (including in the Compensation and Discussion Analysis section (“CD&A”), compensation tables and accompanying narrative disclosures). Item 402 of Regulation S-K of the Securities and Exchange Commission sets forth what companies must include in their CD&A and compensation tables. As required by Section 14A of the Securities Exchange Act of 1934, as amended, this is an advisory vote, which means that our Board will consider our stockholders’ vote on this proposal when making future compensation decisions for our Named Executive Officers. We plan to hold this vote annually.
As discussed in the CD&A, our Compensation Committee, with assistance from its independent compensation consultant, has structured our compensation program to emphasize pay for performance. The compensation opportunities provided to our Named Executive Officers, as well as our other executives, are highly dependent on our and each individual’s performance, which in turn drives the enhancement of stockholder value. Our Compensation Committee will continue to emphasize responsible compensation arrangements designed to attract, motivate, reward and retain executive talent required to achieve our corporate objectives and to align with the interests of our long-term stockholders.
You have the opportunity to votefor oragainst or toabstain from voting on the following advisory resolution relating to executive compensation:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the CD&A, compensation tables and narrative discussion set forth in this Proxy Statement, is hereby approved.”
In deciding how to vote on this proposal, you are encouraged to consider the description of the Compensation Committee’s executive compensation philosophy and its decisions in the CD&A, especially the following:
Pay for Performance. The foundation of all decisions regarding executive compensation is a strong pay for performance philosophy. We mix our compensation elements to create a strong correlation between corporate performance and the pay of our executive officers, aligning the interests of our executives with our stockholders. Specifically, in 2015 and early 2016, this philosophy was demonstrated by the fact that:
Only modest increases ofIn response to continued challenging market conditions expected for 2016, specifically with respect to our businesses focused on the oil and gas industries, no base salary of no more than 4% were awarded to our Named Executive Officers early in 2015.
The performance units from the 2013-2015 grant were forfeited in full because neither the pre-established annual performance metrics nor the pre-established three-year cumulative performance metrics were met.
Cash incentive payments awarded to our Named Executive Officers for 2015 under our Annual Incentive Plan were less than target.
Modest (2.5% or less) or no increases to base salary were awarded to our Named Executive Officers for 2016, except that Mr. Martin’s base salary was increased 2.5% ($8,925) and Mr. Huhn received an increase of 15.4% ($40,000) to reflect additional responsibility Mr. Huhn assumed in 2015 as part of a promotion and to align Mr. Huhn’s base salary with the 50% range of our peer group for similar roles.roles;
Equity awards grantedIn 2016, we significantly reduced award amounts to our Named Executive Officers in 2016under our long-term equity incentive program due to market conditions. Specifically, we reduced the awards, as follows: Mr. Gordon’s award was reduced by 30%; Messrs. Martin and Morris’ awards were less than equityreduced by 20%; and Messrs. Huhn and Callahan’s awards granted to our Named Executive Officers in 2016, specifically a 30% reduction for Mr. Gordon and between awere reduced by 10% and 20% reduction for our other Named Executive Officers.;
• | For our Named Executive Officers, with the exception of Mr. Gordon, the performance units from the 2014-2016 grant vested at 44.35% of target value as a result of the Earnings Per Share (“EPS”) metric (75%) not being achieved and the Total Stockholder Return (“TSR”) metric (25%) exceeding target over the three year cumulative period (for the three-year performance period (January 1, 2014 – December 31, 2016) our TSR was 19.36% compared to -28.93% for our TSR peer group at the 50th percentile); |
• | The performance units from the 2014-2016 grant to Mr. Gordon vested at 45.81% of target value as a result of the EPS metric (75%) not being achieved and the TSR metric (25%) exceeding target over the cumulative period of October 8, 2014 through December 31, 2016 (for the performance period from October 8, 2014 – December 31, 2016, our TSR was 7.94% compared to -30.81% for our TSR peer group at the 50th percentile); and |
In 2016, our financial performance was slightly above the threshold net income goal set forth in the 2016 AIP. As a result, payments were made to our Named Executive Officers under the 2016 AIP at 50% of target.
Favorable Pay Practices. In support of our pay for performance philosophy, our executive compensation program is based on favorable pay practices, including the following:
Our Compensation Committee is advised by independent advisors that keep the Compensation Committee apprised of developments and best practices. The independent advisors do not perform any services for management.
Our executive compensation program does not encourage imprudent risk and does not permit or include problematic pay practices such as the repricing of “underwater” stock options without stockholder approval or excessive perquisites or tax gross-up payments (including in the event of change in control).
In 2014, we removed the possibility of annual vesting from our performance units. Now, vesting is based on a three year performance period, which we believe enhances the long-term nature of these awards.
• | We target all components of compensation of the 50th percentile of our peer group companies. |
We maintain both anti-hedging and anti-pledging policies applicable to directors and officers of the Company with regard to Company stock.
Since 2013, we have included double triggers in all of our long-term incentive award agreements so that accelerated vesting of such awards occurs only upon a change in control coupled with a subsequent termination of employment without “cause” or for “good reason”.
We believe our executive compensation program is well-designed, appropriately aligns executive pay with Company performance and attracts, motivates, rewards and retains individuals who can achieve superior financial results.
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 as described in this Proxy Statement.
Although the vote is advisory only, our Board of Directors and Compensation Committee will review the voting results in connection with their ongoing evaluation of our Company’s compensation program. Our Board will consider the vote of a majority of the shares of our common stock cast on this proposal at our 20162017 Annual Meeting of Stockholders as the advice of our stockholders on this matter. The next advisory vote on executive compensation will occur at the 20172018 Annual Meeting of Stockholders.
Our Board of Directors recommends a vote “For” the resolution as set forth above.
PROPOSAL 3: FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION
We are seeking a vote, on an advisory basis, from our stockholders as to whether an advisory vote on executive compensation should occur every one, two or three years. This vote is required by Section 14A of the Securities Exchange Act of 1934, as amended.
After careful consideration of this agenda item, our Board has determined that an annual advisory vote on executive compensation is the most appropriate for our Company at this time. Our Board believes it is most appropriate for stockholders to express their views on our compensation every year so that our Board can consider our stockholders advice in making its annual compensation decisions.
While the results of voting on this item will be advisory only, our Board values stockholders’ opinions and will take the results of the vote into account when determining the frequency of an advisory vote on executive compensation.
You may cast your vote by specifying one of the following four options on the accompanying proxy card: “1 Year,” “2 Years,” “3 Years” or “Abstain.” You are not voting to approve or disapprove the Board’s recommendation. The alternative receiving the most votes of shares of our common stock will be considered by our Board to be the advice of our stockholders on this matter.
Our Board of Directors recommends a vote for “1 YEAR” for the frequency
of advisory votes on executive compensation.
PROPOSAL 4: APPROVAL OF THE
FIRST AMENDMENT TO THE
AEGION CORPORATION 2016 EMPLOYEE EQUITY INCENTIVE PLAN
Our Board of Directors has recently adopted subjectthe First Amendment (the “First Amendment”) to stockholder approval, the Aegion CorporationCompany’s 2016 Employee Equity Incentive Plan (the “2016 Employee Plan”), including and has directed that the performance goals with respectFirst Amendment be submitted to awards granted under the 2016 Plan that are intended to qualify as “performance-based compensation” within the meaning of Section 162(m)vote of the Code. Ifstockholders at the 2017 Annual Meeting of Stockholders.
Description of the Existing 2016 Employee Plan (including the updated performance goals) is approved by stockholders, our Board of Directors intends to terminate the Aegion Corporation 2013 Employee Equity Incentive Plan (the “2013 Employee Plan”) and cancel the authority to grant new awards under the 2013 Employee Plan. There are currently approximately 370,199 shares that are authorized for issuance, and not otherwise subject to outstanding awards, under the 2013 Employee Plan. Upon effectiveness of the 2016 Employee Plan, any shares remaining under the 2013 Employee Plan will no longer be available for future awards under the 2013 Employee Plan, but will be added to the total number of shares authorized for issuance under the 2016 Employee Plan. The cancellation of the 2013 Employee Plan will not terminate or otherwise affect the outstanding awards under the 2013 Employee Plan. Further, outstanding awards under the 2013 Employee Plan that expire, are cancelled or are forfeited will be added to the share pool available under the 2016 Employee Plan for future awards under the 2016 Employee Plan.
The 2016 Employee Plan, approved by our stockholders at the 2016 Annual Meeting of Stockholders, provides for the granting of stock options, restricted stock, performance units, stock units and other stock-based awards to our key employees.employees, selected at the discretion of our Company management, as approved by the Compensation Committee of our Board of Directors. In 2016, approximately 113 key employees participated in the 2016 Employee Plan, with approximately 69 employees expected to participate as selected key employees in 2017. Our Board of Directors believes that it is in our best interest to have sufficient shares available under the plan for awards to key employees, whose talents and special efforts are essential to our continued progress. In addition, our Board of Directors believes that the 2016 Employee Plan advances the interests of our Company and stockholders by encouraging key employees to acquire an ownership interest in our Company, thus aligning their interests in our financial performance more directly to those of our stockholders and providing them an incentive to remain employees over the long term. For further information regarding the 2016 Employee Plan, please see the Company’s 2016 Proxy Statement.
Annual Evaluation of Existing Plan
Each year, the Company undergoes a process of evaluating the dilution of shares of the Company’s common stock that are reserved and available under its then-existing employee equity incentive plan. When the Company determines that it is necessary to add shares to its plan, it seeks stockholder approval for such addition. As part of our annual review process in 2016, the Company identified the need to increase the number of shares in the 2016 Employee Plan in order to meet the projected demands on the 2016 Employee Plan in 2017 and beyond. As part of its evaluation process, the Company further determined that it was in the best interests of the stockholders to clarify the language in the 2016 Employee Plan concerning minimum vesting, and to add a restriction against the payment of dividends and dividend equivalents with respect to the unvested and/or unearned portion of any award granted under the 2016 Employee Plan.
In order to accomplish the foregoing needs identified in the Company’s annual review of the 2016 Employee Plan, the Company seeks stockholder approval of the First Amendment to the 2016 Employee Plan.
Description of the First Amendment to the 2016 Employee Plan
The complete text of the First Amendment is attached asAppendix A. The following summary of the First Amendment is qualified in its entirety by reference to the provisions of the First Amendment.
Shares Reserved Under the Plan. The total number of shares of ourthe Company’s common stock that is being authorizedreserved and available for issuance in connection with awards granted under the 2016 Employee Plan is increased by 1,000,000 shares. Therefore, the sum of: (i) anymaximum number of shares of common stock that areCommon Stock reserved and available for issuance pursuantin connection with awards under the First Amendment to the 2013 Employee Plan immediately prior to the effective date of the 2016 Employee Plan (currently, 370,199 shares); plus (ii) 800,000 new shares, subject in each caseis 1,800,000 shares.
Minimum Vesting. The Compensation Committee’s right to adjustmentprovide for earlier vesting of an award is clarified such that earlier vesting may occur only upon a participant’s death or disability, or upon a Change of Control (as defined in the eventplan).
Dividends and Dividend Equivalents. The payment of dividends and dividend equivalents with respect to the unvested and/or unearned portion of any subsequent change in the number of issued shares of our common stock without the payment of new consideration, such as in a stock dividend, stock split or similar issuance. Shares underlying awardsaward granted pursuant to either the 2013 Employee Plan orunder the 2016 Employee Plan that expire, are cancelledis expressly prohibited. In no event will dividends or are forfeited willdividend equivalents granted as a component of an award, whether subject to time-based and/or performance-based vesting criteria, be added back intopaid during the share pool for future awardsvesting period with respect to the unvested and/or unearned portion of any award under the 2016 Employee Plan. Upon the vesting of an award with respect to which dividends or dividend equivalents have been declared, any dividends or dividend equivalents declared but not paid during the vesting period shall be paid within 30 days following the vesting date.
Historic Use of Equity, Outstanding Awards and Dilution
The table below sets forth our historic use of equity with respect to both employees and non-employee directors in 2016, 2015 2014 and 2013.2014.
Fiscal Year Ended December 31, | 2015 | 2014 | 2013 | ||||||||||||
Stock options granted | 0 | 38,820 | 29,025 | ||||||||||||
Time-based restricted stock and restricted stock units granted | 422,141 | 459,477 | 447,367 | ||||||||||||
Deferred stock units granted (to non-employee directors) | 53,527 | 38,810 | 39,966 | ||||||||||||
Performance-based restricted stock and restricted stock units earned | 0 | 0 | 0 | ||||||||||||
Weighted average basic common shares outstanding | 36,554,437 | 37,651,492 | 38,692,658 |
Fiscal Year Ended December 31, | 2016 | 2015 | 2014 | |||||||||
Stock options granted | 0 | 0 | 38,820 | |||||||||
Time-based restricted stock and restricted stock units granted | 335,026 | 422,141 | 307,839 | |||||||||
Deferred stock units granted (to non-employee directors) | 45,886 | 53,527 | 38,810 | |||||||||
Performance-based restricted stock and restricted stock units earned | 0 | 0 | 0 | |||||||||
Weighted average basic common shares outstanding | 34,713,937 | 36,554,437 | 37,651,492 |
In 2016,2017, we significantly reduced the number of shares granted as part of the annual equity awards. Specifically, we reduced the number of shares granted by 37%9%, as compared to the 20152016 annual grant.
As of the date of this Proxy Statement, we have 284,006170,253 stock options outstanding (with a weighted average exercise price of $21.93$21.99 and a weighted average remaining term of 2.071.48 years), 160,798138,087 shares of restricted stock outstanding, 678,365895,151 restricted stock units outstanding, 721,363 restricted970,438 performance units outstanding and 248,281256,471 deferred stock units outstanding. Further, there are 370,199262,670 shares remaining available for awards under the 20132016 Employee Plan and 69,264161,326 shares remaining for awards under the 20112016 Non-Employee Director Plan (as defined in Proposal 5 below).Equity Plan. In aggregate, these outstanding equity awards and remaining available shares, when combined with the 800,0001,000,000 new shares under the First Amendment to the 2016 Employee Plan, and the 140,000 new shares under the 2016 Director Plan (as defined in Proposal 5 below), each if approved by our stockholders, result in a dilution level of less than 9%approximately 9.9%.
Equity awards are subject to our policy on recoupment of incentive compensation, which is described in detail on page 4144 of this Proxy Statement. Further, our Named Executive Officers are subject to stock ownership requirements, which are described in detail on page 4244 of this Proxy Statement.
Description of the 2016 Employee Plan
The complete text of the 2016 Employee Plan is attached asAppendix A. The following summary of the plan is qualified in its entirety by reference to the provisions of the plan.
Administration. The 2016 Employee Plan will be administered by the Compensation Committee of our Board of Directors (the “Compensation Committee”). Subject to the provisions of the 2016 Employee Plan, the Compensation Committee will have exclusive authority to interpret and administer the plan, to establish appropriate rules relating to the plan, to delegate some or all of its authority under the plan and to take all such steps and make all such determinations in connection with the plan and the awards granted pursuant to the plan as it may deem necessary or advisable.
Eligibility.Officers, key employees and independent contractors of our Company and subsidiaries will be eligible to participate. The Compensation Committee has the sole discretion to designate which individuals among the eligible participants will receive awards under the plan.
Shares Subject to the Plan.The number of shares being authorized for issuance under the 2016 Employee Plan is the sum of: (i) any shares of common stock that are available for issuance pursuant to the 2013 Employee Plan immediately prior to the effective date of the 2016 Employee Plan (currently, 370,199 shares); plus (ii) 800,000 new shares, subject in each case to adjustment in the event of any subsequent change in the number of issued shares of our common stock without the payment of new consideration, such as in a stock dividend, stock split or similar issuance. Shares underlying awards granted pursuant to the 2016 Employee Plan that expire, are cancelled or are forfeited will be added back into the share pool for future awards under the 2016 Employee Plan. Additionally, shares underlying awards granted pursuant to the 2013 Employee Plan that expire, are cancelled or are forfeited will also be added back into the share pool for future awards under the 2016 Employee Plan. Shares subject to awards under either the 2013 Employee Plan or the 2016 Employee Plan that are withheld, or otherwise remitted, in payment of the purchase price of an option or stock appreciation right or in satisfaction of a tax withholding obligation with respect to an award shall not be added back into the share pool for future awards under the 2016 Employee Plan.
Shares underlying “whole value” awards where the benefit of the award is not limited to the increase of value of the shares subject to the award over the fair value of the shares at the grant date of the award (such as options and stock appreciation rights) will count against the number of shares available for issuance under the 2016 Employee Plan at the rate of 1.54 shares for each share subject to these type of awards.
Types of Awards; Annual Limits on Awards. Stock appreciation rights, restricted stock, performance awards (both cash awards and equity awards), stock options (both incentive stock options and nonqualified stock options) and stock units may be granted under the 2016 Employee Plan.The maximum number of shares subject to all awards that are intended to qualify as “performance-based compensation” under Section 162(m) of the Code granted during any calendar year to any one participant may not exceed 500,000. This maximum number of share of common stock underlying options and SARs granted to a single participant in any year may also not exceed 500,000. The maximum aggregate amount payable as a cash award for any performance period to a participant that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code is $10,000,000 per calendar year. In the case of an award with a multi-year performance period, the 500,000 share and $10,000,000 limits apply to each calendar year in the performance period.
Stock Appreciation Rights. Stock appreciation rights entitle the holder to receive a payment equal to the difference between the fair market value of our common stock at the time of exercise of the stock appreciation right and the exercise price of the stock appreciation right established by the Compensation Committee at the time of grant. The exercise price established by the Compensation Committee may not be less than the fair market value of a share of our common stock on the grant date of the award. At the time of grant, the Compensation Committee may establish a maximum amount per share that will be payable upon exercise of a stock appreciation right, and may determine whether a stock appreciation right may be exercised (a) in lieu of all or part of a stock option; or (b) independent of the exercise of a stock option. In the Compensation Committee’s discretion, the value of a stock appreciation right may be paid in cash or common stock, or a combination thereof. The Compensation Committee will establish the term of any stock appreciation rights provided that stock appreciation rights may not be exercised more than ten years from the date of grant. The holder has no right to receive dividends or dividend equivalents on, or to vote shares subject to, stock appreciation rights until the shares are actually issued and received.
Restricted Stock. Awards of restricted stock consist of shares of our common stock that are subject to the restrictions or conditions specified by the Compensation Committee at the time of grant. During the period that the stock is restricted, holders will be entitled to vote the restricted stock without limitation. The Compensation Committee will determine whether or not a holder of restricted stock is entitled to receive dividends paid with respect to restricted stock during the period of restriction.
Performance Awards. In the discretion of the Compensation Committee, performance awards entitle the holder to receive shares of our common stock or cash, or both, upon the achievement of certain pre-established performance criteria (subject to the inclusion or exclusion of certain extraordinary events in determining if such performance criteria is achieved) during a performance period designated by the Compensation Committee. The Compensation Committee will determine whether the holder has the right to receive dividends or dividend equivalents on, or to vote shares subject to, performance awards. The Compensation Committee may determine whether any performance award is intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code.
Stock Options. Stock options entitle the holder to purchase common stock at a purchase
price established by the Compensation Committee on the date of grant. The purchase price of any stock option may not be less than the fair market value of our common stock on the date of grant. The Compensation Committee will determine the terms and conditions of such stock options, including whether the options will be incentive stock options under Section 422 of the Code or nonqualified stock options, and the times at which such stock options will be exercisable. The aggregate fair market value of common stock underlying all incentive stock options held by a participant that are exercisable for the first time in a calendar year may not exceed $100,000. The term of an incentive stock option shall not exceed ten years (or five years, in certain instances). The holder of a stock option has no right to receive dividends or dividend equivalents on the stock option until the shares are actually issued and received.
Stock Units. Stock units represent the right to receive shares of our common stock at a
time or upon terms designated in the award agreement. A holder of a stock unit or units does not have the rights of a stockholder until the shares are actually issued and received, including the right to vote, the holder does have the right to receive dividends or dividend equivalents on shares subject to stock units.
Minimum Vesting Period.All awards under the 2016 Employee Plan, regardless of the type of award, shall be subject to a minimum restriction period or performance period, as applicable, of one year from the date of grant, subject to two exceptions. First, the Compensation Committee may provide for earlier vesting upon a holder’s termination of service by reason of death or disability, or a change in control (as described below). Second, five percent of the total number of shares of common stock available for issuance under the 2016 Employee Plan are not subject to the minimum restriction period or performance period.
Change in Control.Awards under the plan are generally subject to a double trigger change in control provision. Specifically, awards will immediately vest if, in the event of a change in control: (i) the award no longer remains outstanding and is not substituted with an equivalent award; or (ii) if the award is substituted with an equivalent award, there is an termination by the Company without “cause” or by the participant for “good reason” following a change in control.
Subject to Clawback Policy.All awards granted under the plan will be subject, to the extent applicable, to the Company’s recoupment policy as it may be amended from time to time as well as the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Sarbanes-Oxley Act of 2002 and any similar legislation enacted in the future.
Effective Date and Duration.The 2016 Employee Plan will be effective upon approval of our stockholders at the 2016 Annual Meeting of Stockholders and shall remain effective for a period of ten years, unless our Board terminates the 2016 Employee Plan earlier.
Amendment or Modification of 2016 Employee Plan; No Unilateral Action on Outstanding Awards.Our Board of Directors may amend or modify the 2016 Employee Plan at any time except an amendment or modification: (a) increasing the number of shares of common stock that may be issued under the plan; (b) increasing the amount or type of awards that may be granted under the plan; or (c) modifying the eligibility requirements for benefits under the plan, each of which requires the approval of our stockholders. However, no amendment may reduce the amount, or change the material terms and conditions, of any outstanding award in a manner that would adversely affect a holder’s entitlements under the 2016 Employee Plan without the holder’s consent.
Prohibition on Repricing of Awards.Without the prior approval of our stockholders, the Compensation Committee may not effect a “repricing” (as defined in the 2016 Employee Plan) of any stock options, stock appreciation rights or other awards granted under the 2016 Employee Plan. Under the 2016 Employee Plan, a repricing will be deemed to mean any of the following or any action that has a similar effect: (a) the lowering of the purchase price of an option or other award after it is granted; (b) the canceling of an option or other award in exchange for another option or award at the time that the purchase price of the cancelled option or award exceeds the fair market value of the underlying stock, unless the cancellation or exchange occurs in the context of a merger, acquisition or other similar transaction; (c) the purchase of an option or other award for cash or other consideration at a time when the purchase price of the purchased option or award exceeds the fair market value of the underlying stock, unless the purchase or exchange occurs in the context of a merger, acquisition or other similar transaction; or (d) an action that is treated as a repricing under U.S. generally accepted accounting principles.
Federal Tax Consequences
Generally. A participating employee will not realize income at the time of the grant of stock options or stock appreciation rights or the award of restricted stock or stock units, and the Company will not be entitled to a deduction at such time.
Incentive Stock Options. If a holder exercises an incentive stock option and does not dispose of the shares acquired within two years from the date of the grant, or within one year from the date of exercise of the stock option, no ordinary income will be realized by the holder at the time of exercise, and we will not be entitled to a deduction by reason of the exercise. The holder will realize capital gain or loss upon the sale of the acquired shares equal to the difference between the sale price and the purchase price for the shares. If a holder disposes of the shares acquired pursuant to an incentive stock option within two years from the date of grant of the stock option or within one year from the date of exercise of the stock option, the holder will realize ordinary income at the time of disposition equal to the excess, if any, of the lesser of: (a) the amount realized on the disposition; or (b) the fair market value of the shares on the date of exercise, over the holder’s basis in the shares. We generally will be entitled to a deduction in an amount equal to such income in the year of the disqualifying disposition, except to the extent, if any, that such deduction may be limited under Section 162(m) or Section 280G of the Code. In addition, the holder will realize capital gain or loss on any excess of the sale price over the fair market value on the exercise date.
Nonqualified Stock Options; Stock Appreciation Rights. Upon the exercise of a nonqualified stock option or the surrender of a stock appreciation right, the excess, if any, of the fair market value of the stock on the date of exercise over the purchase price or base price, as the case may be, is ordinary income to the holder as of the date of exercise. We generally will be entitled to a deduction equal to such excess amount in the year of exercise, except to the extent, if any, that such deduction may be limited under Section 162(m) or Section 280G of the Code.
Performance Awards. A holder will realize ordinary income as a result of a performance award at the time the award is settled through the delivery of shares. The amount of income realized by the holder will be equal to the fair market value of the shares on the date of settlement, in the case of a stock award, and to the amount of the cash paid, in the event of a cash award. We will be entitled to a corresponding deduction equal to the income realized in the year of such issuance or payment, except to the extent, if any, that such deduction may be limited under Section 162(m) or Section 280G of the Code.
Stock Units. A holder will realize ordinary income as a result of an award of stock units at the time shares of common stock are issued, in an amount equal to the fair market value of such shares at that time. We will be entitled to a corresponding deduction equal to the income realized in the year of such issuance, except to the extent, if any, that such deduction may be limited under Section 162(m) or Section 280G of the Code.
Section 409A Compliance. The tax consequences to the holder of an award described above assume that, to the extent any award under the 2016 Employee Plan is subject to the requirements of Section 409A of the Code, such award will comply with that section. In the event any such award that is subject to Section 409A was determined not to be in compliance with the section, the holder could be subject to earlier taxation, a penalty tax of 20% of the amount includible in gross income, and interest on federal income taxes that would have been payable if the amount were taxable when first vested.
New Plan Benefits
Currently, approximately 113 employees will be eligible to participate in the 2016 Employee Plan. The Compensation Committee will determine annually the award recipients and the actual awards granted under the plan. As these awards are discretionary, the amount of awards to be granted under the plan is not determinable as of the date of this Proxy Statement.
The closing price per share of our common stock on February 24, 2016 was $18.24.
Required Vote for Approval
ApprovalThe required vote for approval of the 2016 Employee Plan and the Section 162(m) performance goals set forth therein will requireFirst Amendment is the affirmative vote of a majority of the shares of our common stock cast on this proposal at the 2016our 2017 Annual Meeting of Stockholders.
Our Board of Directors recommends a vote “For” the approval of the
Aegion Corporation 2016 Employee Equity Incentive Plan and
the Section 162(m) performance goals set forth therein
PROPOSAL 4: APPROVAL OF THEAEGION CORPORATION 2016 EXECUTIVE PERFORMANCE PLAN
Under Section 162(m) of the Code, the amount of our deduction for a fiscal year relatingFirst Amendment to compensation for certain executive officers is limited to $1,000,000 per year for each such officer unless that compensation satisfies the conditions in Section 162(m) for “performance-based” compensation.One of these conditions is stockholder approvalat least every five years of the material terms of the performance goals upon which compensation is based.Our 2011 Executive Performance Plan, which currently sets forth the criteria used by our Board or Compensation Committee to set goals for performance-based compensation, was last approved by our stockholders at the 2011 annual meeting. The 2016 Executive Performance Plan (the “Performance Plan”) is being submitted to the stockholders at our 2016 annual meeting to allow continued compliance with Section 162(m) and, upon approval, it will replace the 2011 Executive Performance Plan for awards granted after the date of approval of the Performance Plan by our stockholders.
Our Board of Directors believes that approval of the Performance Plan advances the interest of our Company and stockholders by providing for the payment of incentive compensation that will meet the Section 162(m) requirements for performance-based compensation thereby assuring that the compensation paid or issued will be fully deductible by us for federal tax purposes.
The following description of the material features of thePerformance Plan is a summary and is qualified in its entirety by reference to the Performance Plan, a copy of which is attached to this Proxy Statement asAppendix B.
If our stockholders do not approve the Performance Plan, no additional awards will be issued pursuant to the 2011 Executive Performance Plan. The Board of Directors may make annual incentive payments for fiscal year 2016 pursuant to another plan, but any such bonuses, together with all other compensation, paid would be subject to the $1.0 million limit on deductibility.
Description of the Performance Plan
Administration of the Performance Plan.Our Compensation Committee shall have full discretionary power to administer and interpret the Performance Plan and to establish rules for its administration. In making any determinations under or referred to in the Performance Plan, our Compensation Committee shall be entitled to rely on opinions, reports or statements of employees of our Company and its affiliates and of counsel, public accountants and other professional or expert persons.
Effective Date.The Performance Plan shall become effective upon stockholder approval.
Eligibility of Performance Plan Participants.The individuals who will be eligible to participate in the Performance Plan for any performance period will consist of the “executive officers” (as such term is defined under Rule 3b-7 of the Securities Exchange Act of 1934) of our Company at the time of grant of an award for such performance period and certain “key employees” of our Company (as designated either individually or by class as participants for suchperformance period by our Compensation Committee). However, our Compensation Committee may exclude any individual that would otherwise meet the foregoing criteria from eligibility for participation in the Performance Plan for a performance period for any reason or for no stated reason. Thus, the number of eligible participants in thePerformance Plan will vary from year to year at the discretion of our Compensation Committee.
Performance Goals.Our Compensation Committee may grant performance awards in its discretion. Performance Awards are subject to the attainment of one or more performance goals during a specified performance period. A performance period shall be at least one year, as designated by our Compensation Committee. Our Compensation Committee shall establish objective performance goals in writing not later than 90 days after the beginning of each performance period. The performance goals will be based on one or more of the following business criteria, individually or in combination, adjusted in such manner as our Compensation Committee shall determine in its sole discretion:
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The payment of any award under the Performance Plan shall be subject solely to achievement of the applicable performance goal (or goals) but may be reduced by our Compensation Committee in its sole discretion based upon such factors as our Compensation Committee shall determine. Our Compensation Committee has the power to impose such other restrictions on awards as it may deem necessary or appropriate to ensure that such awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m) of the Code.
Form of Payment.The Compensation Committee may settle awards in cash or through the grant of awards under the Aegion Corporation 2016 Employee Equity Incentive Plan. For more information on this plan, please see “Proposal 3: Approval of the Aegion Corporation 2016 Employee Equity Incentive Plan” on page 62 of this Proxy Statement.
Maximum Performance Plan Award.The maximum aggregate award amount that may be paid to a participant for 2016 is $10.0 million (pursuant to one or more awards under the Performance Plan for such year). Thereafter, the maximum aggregate award amount that may be paid to a participant for a calendar year will be 110% of the limit for the prior calendar year. For purposes of the maximum limit, compensation is treated as paid for the year it is otherwise allowable as a deduction by our Company for U.S. Federal income tax purposes.
Performance Plan Benefits.Because the performance award amounts payable under the Performance Plan are subject to the satisfaction of the performance targets and are discretionary in nature, it cannot be determined at this time what amounts, if any, will be received by participants under the Performance Plan with respect to the 2016 Performance Period.
Modification or Termination of the Performance Plan.Our Board may modify or terminate the Performance Plan at any time, effective at such date as our Board may determine.
New Plan Benefits
Currently, approximately six employees will be eligible to participate in the Performance Plan. The Compensation Committee will determine annually the award recipients and the actual awards granted under the plan. As these awards are discretionary, the amount of awards to be granted under the plan is not determinable as of the date of this Proxy Statement.
Required Vote for Approval
Approval of the Performance Plan and the Section 162(m) performance goals set forth therein will require the affirmative vote of a majority of the shares of our common stock cast on this proposal at the 2016 Annual Meeting of Stockholders, and such stockholder approval shall be a condition to the right of a participant to receive payment in respect of any award hereunder.
Our Board of Directors recommends a vote “For” the approval of
the 2016 Executive Performance Plan and
the Section 162(m) performance goals set forth therein
PROPOSAL 5: APPROVAL OF THE
AEGION CORPORATION 2016 NON-EMPLOYEE DIRECTOR EQUITYEMPLOYEE STOCK PURCHASE PLAN
Our Board of Directors has adopted, subjectWe are asking stockholders to stockholder approval,approve the 2016 Non-Employee Director EquityAegion Corporation Employee Stock Purchase Plan (the “2016 Director“Stock Purchase Plan”). IfThe purpose of the 2016 DirectorStock Purchase Plan is to provide employees of eligible domestic subsidiaries (“Employees”) the opportunity to acquire a proprietary interest in our Company at a 5% discounted price and thereby provide employees with an additional incentive to contribute to the long-term profitability and success of our Company and our subsidiaries.
The Stock Purchase Plan, if approved by the required vote, will replace a similar plan approved by stockholders our Boardin 2007 (the “2007 Stock Purchase Plan”), which expires this year. The 2007 Stock Purchase Plan approved a maximum of Directors intends to terminate750,000 shares of stock that could be purchased under that plan, of which only 146,676 shares of stock were actually issued/purchased through January 31, 2017. There currently are 146 active participants in the 2011 Non-Employee Director Equity Plan (the “2011 Director Plan”) and cancel the authority to grant new awards under the 2011 Director Plan. There are currently approximately 69,264shares which are authorized for issuance, and not otherwise subject to an outstanding award, under the 2011 Director Plan. Non-employee directors may receive awards of deferred stock units under our 2011 Director Plan at the Board’s April meeting as part of their annual compensation package. Upon effectiveness of the 2016 Director Plan, any shares remaining under the 2011 Director Plan will no longer be available for future awards under the 2011 Director Plan, but will be added to the total number of shares authorized for issuance under the 2016 Director2007 Stock Purchase Plan.
Please see “Proposal 3: ApprovalA copy of the Aegion Corporation 2016 Employee Equity Incentive Plan” on page 62 ofStock Purchase Plan is attached asAppendix B to this Proxy Statement for aproxy statement. The following summary of our historic use of equity, currently outstanding awards and dilution, taking into consideration equity granted to both employees and non-employee directors.
Thefollowing descriptionthe terms of the material features of the2016 DirectorStock Purchase Plan is a summary and is qualified in its entirety by reference thereto, with all capitalized terms as defined in the Stock Purchase Plan. Stockholders are urged to refer to the2016 Director Stock Purchase Plan document and to read it carefully for a copycomplete statement of which is attached to this Proxy Statement asAppendix C.the provisions summarized herein.
Description ofStock Subject to the 2016 Director Plan
Administration.The 2016 Directorstock subject to purchase under the Stock Purchase Plan willshall be administeredacquired in the market by our Board of Directors. Subject to the provisionscustodian (the “Custodian”) appointed by the Compensation Committee of the plan, our Board of Directors will have exclusive authority to interpret and administer the plan, to establish, amend and rescind any rules and regulations relating to the plan and to take all steps and make all determinations necessaryof Aegion Corporation (the “Compensation Committee”) or, advisable for the administration of the plan.
Eligibility.All ofat our directors who are not employed by uselection, shall be newly-issued or any of our affiliates during a calendar year will be eligible to participate in awards made pursuant to the plan with respect to such calendar year.
Shares Subject to the Plan.treasury shares. The aggregate number of shares being authorized for issuanceof stock that may be purchased under the 2016 DirectorStock Purchase Plan isshall not exceed Six Hundred Thousand (600,000) shares. All shares purchased for participants under the sum of: (i)Stock Purchase Plan, other than stock purchased as a result of the reinvestment of dividends, will count against this limitation.
In case of a reorganization, recapitalization, stock split, reverse stock split, stock dividend, combination of shares, merger, consolidation, offering of rights or other change in the capital structure of our Company, the Compensation Committee may make such adjustment, if any, shares that areas it deems appropriate in the number, kind and purchase price of stock available for issuancepurchase under the 2011 DirectorStock Purchase Plan, immediately prior to the effective date of the 2016 Director Plan (currently, 69,264 shares); plus (ii) 140,000 new shares, subject in each case to adjustment in the event of any subsequent changeand in the number of issued shares of our common stockwhich an employee is entitled to purchase, including, without limitation, closing an Offering Period early by setting a new consideration, such as in a stock dividend, stock splitTermination Date, or similar issuance. Shares underlying stock units that are forfeited or cancelled, or are settled in cash, shall be added backterminating an Offering Period and refunding amounts credited to the number of shares that shall be available for subsequent issuance under the 2016 Director Plan.an Employee’s Option Account.
Eligibility
Maximum Individual Award.The aggregate valueEmployees of the awards granted to any participant other than the Chairman of the Board shall not exceed $250,000 in any calendar year. The aggregate value of the awards granted to the Chairman of the Board shall not exceed $350,000 in any calendar year.
Stock Units. Stock units are the only type of award that can be granted under the 2016 Director Plan. Stock units represent the right to receive shareseligible domestic subsidiaries of our common stock at a time or upon terms designatedCompany, as defined in the award agreement; provided, however, that in no case shallStock Purchase Plan, who meet the shares underlying the stock units be issuable prior to the third anniversary of the date of grant, except in case of death or retirement of the director. Our Board of Directors may in its discretion provide in the award agreement that the holder will be entitled to payments in cash, or adjustments in the number of stock units, equivalent in value to the dividends on our common stock as if the stock units were shares of common stock at our dividend payment dates. If a director elects to receive stock units in lieu of his annual cash compensation due for board and/or committee service (which election must be made before the beginning of the calendar year during which the director’s service is being performed), the shares underlying these stock units are issuable upon the later of (i) one-year anniversary of the date of such grant and (ii) the date specified by the director in the deferral election.
No Rights as a Stockholder.Except for dividend equivalent payments that may be applicable to stock units (in those instances in which the Board, in its discretion, has expressly provided for such payments), holders of stock units will not have any rights as a stockholder on the basis of the awards.
Effective Date, Amendments and Duration.The 2016 Director Plan will be effective the day after it receives approval of our stockholders at the 2016 Annual Meeting.
Our Board of Directors may amend or modify the 2016 Director Plan at any time except an amendment or modification (i) changing selection or eligibility requirements under the plan, (ii) increasing the number of shares of common stock thatStock Purchase Plan may be issued under the plan, or (iii) increasing the amount or type of benefits that may be granted underparticipate in the plan. Our Board may not reduce the amount or change the terms and conditions of any outstanding stock unit without the holder’s consent.
The 2016 Director Plan will be effective for a period of ten years from the effective date unless our Board of Directors terminates the plan earlier or extends it past such effective date. The Board of Directors may suspend or terminate the plan at any time and for any reason.
Federal Tax Consequences
No income will be realized upon grant by the holders of stock units, and we will not be entitled to a deduction at such time.
A holder will realize ordinary income as a result of an award of stock units in an amount equal to the fair market value of such shares at the time shares of common stock underlying any stock unit awards are issued. We will be entitled to a corresponding deduction equal to the income realized in the year that the shares are issued.
The tax consequences to the holder of an award described above assume that, to the extent any award under the planAn employee is subject to the requirements of Section 409A of the Code, such award will comply with that section. In the event any such award that is subject to Section 409A was determined not to be in compliance with the section, the holder could be subject to earlier taxation, a penalty tax of 20% of the amount includible in gross income, and interest on federal income taxes that would have been payable if the amount were taxable when first deferred.
New Plan Benefits
Currently, our eight non-employee directors will be eligible to participate in the 2016 Director Plan. Awards will be granted underStock Purchase Plan if the planemployee is customarily employed for more than five months in any calendar year by us or any eligible subsidiary and who is regularly scheduled to work 20 or more hours per week, except that no employee may participate (1) if immediately upon enrollment the employee would own directly or indirectly, or hold options or rights to acquire, an aggregate of 5% or more of the total combined voting power or value of all outstanding shares of all classes of stock of our Company or any subsidiary, determined in accordance with Code Section 423(d); (2) if the employee is not employed by our Company or an eligible domestic subsidiary on the Offering Date; or, (3) if the terms of the employee’s employment are covered by a collective bargaining agreement and the employee, through his or her collective bargaining representative, has decided not to participate in the discretion of our Board of Directors and may vary yearStock Purchase Plan following good faith bargaining with the employee’s designated collective bargaining representative with respect to year. Thus, the amount of stock units to be granted under the plan is not determinable as of the date of this Proxy Statement. However, please see “Director Compensation” beginning on page 22 of this Proxy Statement for an example of awards that would have been granted under the plan had it been in effect during 2015.Stock Purchase Plan.
The closing price per shareCompensation Committee may designate such other restrictions as the Compensation Committee determines appropriate in its sole discretion.
Offerings Under the Plan
It is contemplated that, in a series of monthly grants of options to purchase Company stock under the Stock Purchase Plan, we will offer to all eligible employees the right to purchase under each monthly offering units of our common stock. The Stock Purchase Plan provides that each offering will commence on an “Offering Date,” will continue for one month and will end on a “Termination Date.” The period during which an offering is in effect is an “Offering Period.”
To enroll in the Stock Purchase Plan for an Offering Period, an employee must file an enrollment form with us and elect to make contributions under the Stock Purchase Plan by means of payroll deduction and must state the contribution rate elected by the employee for the Offering Period. Such contributions shall be a minimum of $5.00 per week and not more than 10% of the employee’s base pay, including commissions and overtime pay, during the applicable Offering Period. Each participating employee will automatically be enrolled in the Stock Purchase Plan for the next Offering Period unless the employee files a written notice of withdrawal with us before the Offering Date for the next Offering Period.
All contributions made by an employee under the Stock Purchase Plan will be credited to an account maintained for the employee by the Custodian. As soon as practicable after the Termination Date of each Offering Period, the Custodian will apply the amounts credited to each employee’s account as of such Termination Date to the purchase of Company stock. The number of units of stock to be purchased for each participating employee will equal the number of shares of Company stock that can be purchased at a price of 95% of the fair market value of the stock on a Termination Date. No employee shall be permitted to purchase stock with a fair market value of stock in excess of $25,000 for each calendar year. In the event that the amount withheld through payroll deductions with respect to an Offering Period exceeds the option price of the stock available for purchase for such employee for that Offering Period, the excess of the amount withheld over the option price of the stock purchased for the employee shall be returned to the employee without interest.
No employee may sell, transfer or otherwise dispose of stock credited to the employee’s account other than stock acquired with dividends credited to such option account until any date which is at least twelve months following the Termination Date as of which such stock was purchased, except in the event of termination of employment or death of the employee. An Employee may from time to time request distribution in whole units of stock with respect to that portion of stock then credited to the employee’s Option Account which is not then subject to the sale restrictions in the Stock Purchase Plan. The NasdaqCustodian shall pay to the employee cash equal to the fair market value (as defined in the Stock MarketPurchase Plan) of any fractional unit when all whole units of stock have been distributed.
Termination of Enrollment
An employee’s enrollment in the Stock Purchase Plan will terminate:(a) as of the beginning of the Offering Period after the employee files with the Company a written notice of withdrawal within the time period specified by the Compensation Committee; (b) on February 24, 2016 was $18.24.termination of employment with the Company or its subsidiaries; (c) as of the date on which the employee would own directly or indirectly, or hold options or rights to acquire, an aggregate of 5% or more of the total combined voting power or value of all outstanding shares of all classes of the Company or any subsidiary, determined in accordance with Code Sections 423(d); or (d) as of the date the relevant employer ceases to be an eligible subsidiary or affiliate of the Company.
An Employee whose enrollment in the Stock Purchase Plan terminates, other than by reason of termination of the Stock Purchase Plan, may again enroll in the Stock Purchase Plan if the Employee satisfies the eligibility conditions of Section 3.1 as of such date.
Upon termination of an employee’s enrollment, we will pay to such employee all cash amounts credited to the employee’s account as of the date of termination.If termination of the employee’s enrollment is the result of either the employee’s termination of employment with us and our subsidiaries or the termination of the Stock Purchase Plan, the Compensation Committee will direct the Custodian to distribute to the employee certificates representing the whole shares of stock then credited to the employee’s account and cash equal to the fair market value of any fractional share of stock. If an employee’s enrollment terminates as a result of death, all cash amounts payable to the employee will be paid to the employee’s beneficiary.
Plan Administration
The Stock Purchase Plan is administered by the Compensation Committee of our board of directors. The Compensation Committee is vested with full power to determine all questions that may arise under, construe the terms of, adopt rules of procedure and enforce the provisions of the Stock Purchase Plan.
The Stock Purchase Plan document is an omnibus document which includes a sub-plan (“Statutory Plan”) designed to permit offerings of grants to employees of certain Participating Subsidiaries (as defined in the Stock Purchase Plan) where such offerings are intended to satisfy the requirements of Section 423 of the Internal Revenue Code of 1986 (although the Company makes no undertaking nor representation to obtain or maintain qualification under Section 423 for any Subsidiary, individual, offering or grant) and also separate sub-plans which permit offerings of grants to employees of certain Participating Entities which are not intended to satisfy the requirements of Section 423 of the Code.
Amendment and Termination
We may at any time amend or terminate the Stock Purchase Plan. No amendment will be made without the prior approval of the stockholders if the amendment will increase the number of shares reserved for purchase under the Stock Purchase Plan or materially modify the eligibility conditions or increase the benefits available to employees under the Stock Purchase Plan. No amendment will make any change in an option granted previously and outstanding which adversely affects the rights of an employee with respect to such option. No amendment will reduce the amount of an Employee’s Option Account balance.
The Stock Purchase Plan will terminate on the earlier of (i) the date all of the shares represented by stock subject to the Stock Purchase Plan are purchased (unless additional shares represented by stock are authorized by the stockholders of the Company), and (ii) the end of the tenth year after the effective date of the Stock Purchase Plan. If the Stock Purchase Plan terminates, the Compensation Committee may elect to terminate all outstanding options either immediately or upon completion of the purchase of stock on the next following Termination Date. If the Compensation Committee terminates an option to purchase stock prior to the expiration of the option, all cash amounts contributed to the Stock Purchase Plan which remain in an employee’s account will be returned to the employee as soon as practicable.
Federal Income Tax Consequences
The amount which an employee contributes to the Stock Purchase Plan through payroll deductions is currently taxed as ordinary income. The employee does not recognize income on either the Offering Date or the Termination Date. However, if the employee disposes of shares of stock acquired pursuant to the Stock Purchase Plan (other than by death) within two years from the related Offering Date, the employee will recognize ordinary income equal to the excess of the fair market value of such shares on the related Termination Date over the option price. For purposes of computing gain or loss upon the disposition, the employee’s basis in any shares disposed of will be the fair market value of the shares on the related Termination Date. We will be entitled to a deduction in an amount equal to the amount includible as ordinary income of the employee. Our deduction will be taken in our taxable year which ends within the taxable year of the employee in which the employee recognizes the income.
If the employee disposes of the stock two or more years after the related Offering Date, or if the employee dies without having disposed of the stock, the employee will recognize ordinary income in an amount equal to the lesser of (a) the excess of the fair market value of the stock on the related Offering Date over the option price, or (b) the excess (if any) of the fair market value of the stock on the date of disposition or death over the option price. The basis of the shares to the employee will be the sum of the option price and the amount of any such recognized income; the basis of the shares to the estate of a deceased employee will be the fair market value of the shares at the employee’s death.
Required Vote for Approval
The required vote for approval of the 2016 DirectorStock Purchase Plan is the affirmative vote of a majority of the shares of our common stock cast, on this proposalpresent or represented by proxy at our 2016 Annual Meeting of Stockholders.the annual meeting.
Our Boardboard of Directorsdirectors recommends a vote “For” the“FOR” approval of
the 2016 Non-Employee Director Equityadoption of the Aegion Corporation Employee Stock Purchase Plan.
PROPOSAL 6: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Our Board of Directors, upon the recommendation of the Audit Committee of the Board, has appointed PricewaterhouseCoopers LLP as our independent auditors for the year ending December 31, 2016.2017. A resolution will be presented at the meeting to ratify the appointment of PricewaterhouseCoopers LLP.
PricewaterhouseCoopersLLP served as our independent auditors for the year ended December 31, 2015.2016. A representative of PricewaterhouseCoopersLLP is expected to be present at our 20162017 Annual Meeting of Stockholders to respond to appropriate questions from our stockholders and to make a statement if they so desire.
Independent Auditors’ Fees
Consistent with its charter adopted by our Board of Directors, the Audit Committee pre-approves all auditing services and all non-audit services (to the extent such non-audit services are permissible) to be provided by our independent auditors. Proposed audit and non-audit services are presented to our Audit Committee periodically for pre-approval, based on a budget that includes a description of, and a budgeted amount for, particular categories of audit services, non-audit services, tax services and other services. Our Audit Committee’s approval is required to exceed the budgeted amount. In addition, as permitted by law, the Chair of our Audit Committee may pre-approve services or changes to estimated, approved fees. If our Audit Committee Chair pre-approves services on behalf of the Audit Committee, the services are presented to our Audit Committee for ratification at its next regularly scheduled meeting.
In our two most recent fiscal years, we paid the following amounts to our independent auditors, all of which were approved by our Audit Committee:
2015 | 2014(1) | 2016 | 2015(1) | ||||||||||||||
Audit Fees | $ | 2,591,500 | $ | 2,726,050 | $2,563,500 | $2,590,750 | |||||||||||
Audit-Related Fees | 191,000 | 50,000 | 50,000 | 191,000 | |||||||||||||
Tax Fees | 93,205 | 120,150 | 117,983 | 93,205 | |||||||||||||
All Other Fees | — | — | — | — | |||||||||||||
Total | $ | 2,875,705 | $ | 2,896,200 | $2,731,483 | $2,874,955 |
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Audit Fees.Fees. In 2016, we paid an aggregate of $2,563,500to PricewaterhouseCoopers LLP for (i) the 2016 fiscal year audit, (ii) the review of the financial statements included in our 2016 quarterly reports on Form 10-Q, (iii) statutory and subsidiary audits, and (iv) audit efforts relating to internal controls over financial reporting. In 2015, we paid an aggregate of $2,591,500to$2,590,750to PricewaterhouseCoopers LLP for (i) the 2015 fiscal year audit, (ii) the review of the financial statements included in our 2015 quarterly reports on Form 10-Q, (iii) statutory and subsidiary audits, and (iv) audit efforts relating to internal controls over financial reporting. In 2014, we paid an aggregate of $2,726,050to PricewaterhouseCoopers LLP for (i) the 2014 fiscal year audit, (ii) the review of the financial statements included in our 2014 quarterly reports on Form 10-Q, (iii) statutory and subsidiary audits, and (iv) audit efforts relating to internal controls over financial reporting.
Audit-Related Fees.Fees.In 2016, we paid PricewaterhouseCoopers LLP $50,000 for audit-related services for due diligence. In 2015, we paid PricewaterhouseCoopers LLP $191,000 for audit-related services for due diligence. In 2014, we paid PricewaterhouseCoopers LLP $50,000for audit-related services for due diligence.diligence related to potential acquisitions.
Tax Fees.Fees.In 2016, we paid an aggregate of $117,983 for tax compliance and tax preparation services. In 2015, we paid an aggregate of $93,205 for tax tax compliance and tax preparation services. In 2014, we paid an aggregate of $120,150 for tax, tax compliance and tax preparation services.
All Other Fees.Fees. In 20152016 and 2014,2015, PricewaterhouseCoopers LLP did not perform any services for us other than those described above.
We intend to use our independent auditors to provide only audit, audit-related and tax services in the future.
Vote Required for Ratification of the Appointment of Independent Auditors
Ratification of the appointment of PricewaterhouseCoopers LLP as our independent auditors for the year ending December 31, 20162017 will require the affirmative vote of a majority of the shares of our common stock cast on this proposal at the 20162017 Annual Meeting of Stockholders.
Our Board of Directors recommends a vote “For” the ratification of the appointment of
PricewaterhouseCoopers LLP as our independent auditors for the year ending December 31, 2016.2017.
OTHER MATTERS
Our Board does not know of any other matters that may be brought before the 20162017 Annual Meeting of Stockholders. However, if any other matters are properly presented for action, it is the intention of the persons named in the proxy card to vote the shares represented thereby in accordance with their judgment on such matters.
HOUSEHOLDING OF MATERIALS
In some instances, only one copy of this Proxy Statement or our 20152016 Annual Report is being delivered to multiple stockholders sharing an address, unless we have received instructions from one or more of the stockholders to continue to deliver multiple copies. We will deliver promptly upon oral or written request a separate copy of this Proxy Statement or 20152016 Annual Report, as applicable, to any stockholder at your address. If you wish to receive a separate copy of this Proxy Statement or 20152016 Annual Report, you may call us at (636) 530-8000 or send a written request to Aegion Corporation, 17988 Edison Avenue, Chesterfield, Missouri 63005, Attention: Secretary. Alternatively, stockholders sharing an address who now receive multiple copies of this Proxy Statement or Annual Report may request delivery of a single copy also by calling us at the number or writing to us at the address listed above.
STOCKHOLDER PROPOSALS
Our By-Laws provide that, in order for a stockholder to nominate a candidate for director or to bring other business before a meeting of stockholders, the stockholder must have given timely notice thereof in writing to our Secretary at our principal executive office.
For the nomination of candidates for election as directors to be timely brought before a meeting by a stockholder, a stockholder’s notice shall be delivered: (a) with respect to an election to be held at an annual meeting of stockholders, not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting (which for the 20172018 Annual Meeting of Stockholders would be January 20, 201726, 2018 and December 21, 2016,27, 2017, respectively); and (b) with respect to an election to be held at a special meeting of stockholders (i) not earlier than the 120th day prior to such special meeting and (ii) not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees to be elected at such meeting.
In the event that the number of directors to be elected to our Board at an annual meeting is increased and there is no public announcement naming all of the nominees for directors or specifying the size of the increased Board made by us at least 60 days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is delivered not later than the close of business on the 10th day following the day on which such public announcement of the date of such meeting is first made.
For business other than nominations of candidates for and the election of directors to be timely brought before a meeting by a stockholder, a stockholder’s notice shall be delivered to or mailed to and received by our Secretary not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting (which for the 20172018 Annual Meeting of Stockholders would be January 20, 201726, 2018 and December 21, 201627, 2017 respectively).
However, in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, for a notice by the stockholder for these purposes to be timely, it must be so delivered: (a) not earlier than the 120th day prior to such annual meeting; and (b) not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement (as defined in our By-Laws) of the date of such meeting is first made.
Any written notice of a stockholder proposal, including a proposal for the nomination of candidates for election as director, must include the information and representations required by our By-Laws and, in the case of a notice of nomination of directors, all information relating to each person whom the stockholder proposes to nominate for election or reelection as a director, that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person’s written consent to being named in the Proxy Statement as a nominee and to serving as a director if elected).
The chairman of any meeting of stockholders for the election of directors or other business and the Board may refuse to acknowledge the nomination of any person or permit any business to be brought without compliance with the procedures set forth in our By-Laws or if the stockholder solicits proxies in support of such stockholder’s nominee(s) or proposal for other business without such stockholder having made the representations required by our By-Laws. If a stockholder does not appear or send a qualified representative (as defined in our By-Laws) to present the nomination or proposal at such meeting, we are not required to present such nomination or proposal for a vote at such meeting, notwithstanding that proxies in respect of such nomination or proposal may have been received by us. The foregoing requirements are separate from and in addition to the requirements of the Securities and Exchange Commission that a stockholder must meet to have a proposal included in our Proxy Statement.
Under the proxy rules of the Securities and Exchange Commission, a stockholder wishing to include a stockholder proposal in our Proxy Statement must submit the proposal to us not later than 120 calendar days before the first release date of the prior year’s annual meeting Proxy Statement. For the 20172018 Annual Meeting of Stockholders, this date would be November 11, 2016.17, 2017. This rule is independent of the procedures mandated in our By-Laws with respect to the ability of a stockholder to present stockholder proposals at an annual meeting as stated above.
STOCKHOLDER COMMUNICATIONS WITH DIRECTORS
Our Board has an informal process in place for our stockholders to communicate with directors. Any stockholder wishing to contact our Board or one of our directors can write to:
Board of Directors
c/o Aegion Corporation
17988 Edison Avenue
Chesterfield, Missouri 63005
All correspondence received by us and addressed as indicated above will be reviewed by appropriate Aegion personnel and promptly forwarded to our Chairman of the Board and/or to the appropriate director. Communications that relate to our accounting, internal accounting controls or auditing matters will also be referred to the Chair of our Board’s Audit Committee.
Although our Board does not have an express policy regarding director attendance at our annual meetings of stockholders, we anticipate that all directors will attend this year’s 20162017 Annual Meeting of Stockholders. All nineEight of our nine directors attended our 20152016 Annual Meeting of Stockholders.
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| David F. Morris | ||
Secretary |
Chesterfield, Missouri
March 11, 201617, 2017
| APPENDIX A |
Aegion CorporationFIRST AMENDMENT TO THE
AEGION CORPORATION
2016 EMPLOYEE EQUITY INCENTIVE PLAN
Aegion Corporation (the “Company”) previously adopted the Aegion Corporation 2016 Employee Equity Incentive Plan (the “Plan”). Section 21 of the Plan provides that the Board of Directors of the Company may modify the Plan at any time.
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The authorityCompany now desires to select persons eligibleamend the Plan to participate in thisincrease the total number of the Company’s shares available for issuance under the Plan, (each such person, a “Participant”), to grant awards in accordance with this Plan (each such grant under this Plan, an “Award”), and to establish the timing, pricing, amount and other terms and conditions of such grants (which need not be uniform with respect to the various Participants or with respect to different grants to the same Participant),clarify when vesting periods may be exercisedaccelerated by the Compensation Committee.Committee, and provide for an express prohibition on the payment of dividends and/or dividend equivalents on unvested awards.
SubjectNow, therefore, the Plan is hereby amended, effective as of the date it is approved by the stockholders of the Company, as follows:
1. Section 3(b) of the Plan is hereby deleted in its entirety and replaced with the following:
One Million Eight Hundred Thousand (1,800,000) additional shares of Common Stock, subject to approval by the provisionsholders of this Plan,a majority of the Compensation Committeeoutstanding voting stock of the Company;
2. The first sentence of Section 12 is hereby deleted in its entirety and replaced with the following:
Except as otherwise provided herein, any Award shall have exclusive authority to interpret and administer this Plan, to establish appropriate rules relating to this Plan, to delegate somea minimum restriction period or allperformance period, as applicable, of its authority under this Plan and to take all such steps and make all such determinations in connection with this Plan andone year from the Awards as it may deem necessary or advisable. Absent manifest error, any determination or action undertaken by the Committee in the exercisedate of its authority with respect to the matters described in this Section 2 shall be final, binding, and conclusive on all interested persons.
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grant;provided,however, that the total numberCompensation Committee may provide for earlier vesting but only upon a Participant’s termination of sharesemployment or service by reason of death or disability, or a Change in Control (as defined in Section 16).
3. The following Section 25 is hereby added to the Plan:
25. Dividends and Dividend Equivalents. Notwithstanding anything herein to the contrary, in no event will dividends or dividend equivalents granted as a component of an Award, whether subject to time-based and/or performance-based vesting criteria, be paid during the vesting period with respect to the unvested and/or unearned portion of any such Award. Upon the vesting of an Award with respect to which ISOs may be granted shalldividends or dividend equivalents have been declared, any dividends or dividend equivalents declared but not exceed One Million One Hundred Thousand (1,100,000) (as adjusted in accordance with Section 12). The shares of Common Stock issued under this Plan may be made available from authorized but unissued shares or shares re-acquired bypaid during the Company, including shares purchased in the open market or in private transactions.
After adoption of this Plan by the stockholders of the Company, all shares of Common Stock otherwise available for awards under the Prior Plan (but not subject to outstanding awards thereunder) at such timevesting period shall be unavailable for issuance underpaid within 30 days following the Prior Plan but rather shall be issued under this Plan in accordance with the provisions hereof. In addition, all shares of Common Stock underlying expired, canceled or forfeited awards under the Prior Plan that would have been added back under the share counting provisions of the Prior Plan upon the expiration, cancellation or forfeiture of such award shall also be unavailable for issuance under the Prior Plan upon the expiration, cancellation or forfeiture of such award and shall instead be available for issuance under this Plan in accordance with the provisions hereof.
Subject to the share counting rule in the next paragraph, shares of Common Stock underlying grants of outstanding Options, SARs, Stock Units, Restricted Stock or Performance Awards (each as defined below) will reduce the Plan Maximum. Shares underlying expired, canceled or forfeited Options, SARs, Stock Units, Restricted Stock or Performance Awards shall be added back to the Plan Maximum. If the exercise price of Options is paid by delivery of shares of Common Stock, or if shares of Common Stock are withheld from a distribution in payment of the exercise price, the Plan Maximum shallnot be increased by the number of shares so paid or withheld. If the number of shares of Common Stock issued in connection with the exercise of a SAR exceeds the number of underlying shares, such excess shall further reduce the Plan Maximum. Shares of Common Stock withheld by, or otherwise remitted to, the Company to satisfy a Participant’s tax withholding obligations with respect to Awards shallnot be added back to the Plan Maximum. Shares of Common Stock repurchased on the open market with the proceeds of an Option exercise shallnot be added back to the Plan Maximum.vesting date.
Awards other than Options, SARs and any other Award where the benefit to the Participant is not limited to the increase in value of the shares of Common Stock subject to the award over the “Fair MarketValue” (as defined below) of such shares on the date of grant, shall be counted against4. Except as amended hereby, the Plan Maximumremains in a 1.54-to-1 ratio. For purposes of this Plan, “Fair Market Value” will be deemed to be the closing transaction price of the Common Stock as of the relevant date on the Nasdaq Global Select Market, or such other primary national securities exchange on which the Common Stock is then-listed or, if no such price is reported for that date, the closing transaction price on the next preceding date for which such price was reported, unless determined otherwise by the Compensation Committee.
Subject to Section 12, the aggregate number of shares of Common Stock subject to all awards that are intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), granted during any calendar year to any one Participant shall not exceed 500,000.
The maximum number of shares of Common Stock underlying Optionsfull force and SARs granted to a single Participant in any year shall not exceed 500,000 shares.
The maximum aggregate amount payable as a cash award for any performance period to a Participant that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code shall be $10,000,000 per calendar year. In the case of an award with a multi-year performance period, the 500,000 share and $10,000,000 limit shall apply to each calendar year in the performance period.
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Any of the above performance goals may be determined on an absolute or relative basis, or, if applicable, in comparison to the performance of a published index selected by the Compensation Committee. More than one performance goal may apply to a Performance Award, and the Performance Award may be paid if only one of the goals related to the Performance Award is achieved for the applicable performance period.
The Committee may provide in any Performance Award intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Code that any evaluation of performance shall include or exclude any of the following items: (1) operating results and/or losses associated with the write-down of assets of a subsidiary, business unit or division that has been designated by the Board as a discontinued business operation or to be liquidated; (2) gains or losses on the sale of any subsidiary, business unit or division, or the assets or business thereof; (3) gains or losses from the disposition of material capital assets (other than in a transaction described in subsection (ii)) or the refinancing of indebtedness, including, among other things, any make-whole payments and prepayment fees; (4) losses associated with the write-down of goodwill or other intangible assets of the Company due to the determination under applicable accounting standards that the assets have been impaired; (5) gains or losses from material property casualty occurrences or condemnation awards taking into account the proceeds paid by insurance companies and other third parties in connection with the casualty or condemnation; (6) any income statement effect resulting from a change in tax laws, accounting principles (including, without limitation, generally accepted accounting principles), regulations, or other laws regulations affecting reported results, except, in each case, to the extent the effect of such a change is already reflected in the target Net Income amount; (7)reorganization or restructuring charges and acquisition- or divestiture-related transaction expenses and costs; (8) any gains or losses from unusual nonrecurring or extraordinary items; (9) operating results of any entity or business acquired or disposed of during the Plan Year, except, in the case of an acquisition, to the extent such entity or business was included in the Company’s operating business plan for the Play Year or, in the case of a disposition, to the extent such entity or business was not included in the Company’s operating business plan for the Plan Year; (10) any gain or loss resulting from currency fluctuations or translations as set forth in the Aegion Corporation Foreign Exchange Rate Policy for Annual Incentive Plan and Long Term Incentive Plan; (11) any other material income or loss item the realization of which is not directly attributable to the actions of current senior management of the Company; and (12) the income taxes (benefits) of any of the above-designated gains or losses.change.
Any other conditions and requirements set forth in Section 162(m) of the Code for “qualified performance-based compensation” (including but not limited to any requirements that are described in this subparagraph) shall apply to Performance Awards awarded pursuant to this Section 8(a). The Compensation Committee will designate the eligible Participants and establish the applicable performance goals no later than 90 days following the commencement of the applicable performance period (or such earlier or later date permitted or required by Section 162(m) of the Code)). Any payment of an Award granted with such performance goals shall be conditioned on the written certification of the Compensation Committee in each case that the performance goals and any other material conditions were satisfied. In the event the pre-established performance goals are not achieved at the conclusion of the applicable performance period, no payment shall be made to the Participant. Actual payment of the Award earned shall be in cash or in Common Stock or in a combination of both, as the Compensation Committee determines. If Common Stock is used, the Participant shall not have the right to vote and receive dividends until the goals are achieved and the actual shares are issued. Anything in the Plan or an Award agreement to the contrary notwithstanding, the Compensation Committee may, in its discretion, reduce the amount of any Performance Award based on such criteria as it shall determine.
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For purposes of this Section, “Permitted Transferee” shall include: (1) one or more members of the Participant’s family; (2) one or more trusts for the benefit of the Participant and/or one or more members of the Participant’s family; or (3) one or more partnerships (general or limited), corporations, limited liability companies or other entities in which the aggregate interests of the Participant and members of the Participant’s family exceed 80% of all interests. For this purpose, the Participant’s family shall include only the Participant’s spouse, children and grandchildren. As a condition to any transfer of an Award to a Permitted Transferee hereunder (or any exercise of rights under an Award by a Permitted Transferee, as the case may be), such Permitted Transferee expressly agrees to be bound by all of the terms and conditions of the applicable Award and any related award agreements.
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For purposes hereof, “person” shall mean any person, entity or “group” within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except that such term shall not include (i) the Company or any of its affiliates; (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportion as their ownership of stock of the Company, or (v) a person or group as used in Rule 13d-1(b) under the Exchange Act.
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APPENDIX B |
Aegion CorporationAEGION CORPORATION
2016Executive Performance Plan
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“Award” shall mean an award granted to an eligible Participant hereunder.EMPLOYEE STOCK PURCHASE PLAN
SECTION1 - INTRODUCTION
1.1 Purpose. The Company hereby establishes the Plan to provide eligible Employees the opportunity to acquire a proprietary interest in the Company and thereby provide employees with an additional incentive to contribute to the long-term profitability and success of the Company and its Subsidiaries. The Plan is for the exclusive benefit of eligible employees of the Company and its Subsidiaries.
1.2 Stock Purchase Plan.
(a) This Plan document is an omnibus document which includes a sub-plan (“Statutory Plan”) designed to permit offerings of grants to employees of certain Participating Subsidiaries where such offerings are intended to satisfy the requirements of Section 423 of the Code (although the Company makes no undertaking nor representation to obtain or maintain qualification under Section 423 for any Subsidiary, individual, offering or grant) and also separate sub-plans (“Non-Statutory Plans”) which permit offerings of grants to employees of certain Participating Entities which are not intended to satisfy the requirements of Section 423 of the Code. Section 1.5 of the Plan sets forth the maximum number of shares to be offered under the Plan (and its sub-plans), subject to adjustments as permitted under such Section.
(b) The Statutory Plan shall be a separate and independent plan from the Non-Statutory Plans, provided, however, that the total number of shares authorized to be issued under the Plan applies in the aggregate to both the Statutory Plan and the Non-Statutory Plans. Offerings under the Non-Statutory Plans may be made to achieve desired tax or other objectives in particular locations outside the United States of America or to comply with local laws applicable to offerings in such foreign jurisdictions. Offerings under the Non-Statutory Plans may also be made to employees of entities that are not Subsidiaries.
(c) All employees who participate in the Statutory Plan shall have the same rights and privileges under such sub-plan except for differences that may be mandated by local law and are consistent with the requirements of Code Section 423(b)(5). The terms of the Statutory Plan shall be those set forth in this Plan document to the extent such terms are consistent with the requirements for qualification under Code Section 423. The Administrator may adopt rules and procedures with respect to the Non-Statutory Plan designed to achieve tax, securities laws or other objectives for Employees and the Company. The terms of each such rule or procedure may take precedence over other provisions in this document, with the exception of Section 1.5 with respect to the total number of shares available to be offered under the Plan for all sub-plans. Unless otherwise superseded by the terms of such Non-Statutory Plan, the provisions of this Plan document shall govern the operation of such Non-Statutory Plan. Except to the extent expressly set forth herein or where the context suggests otherwise, any reference herein to “Plan” shall be construed to include a reference to the Statutory Plan and the Non-Statutory Plans.
1.3 Effective Date and Term. The Plan will be effective as soon as administratively feasible following adoption of the Plan by the Board of Directors and approval of the Plan by the stockholders of the Company. The Plan shall continue in effect until terminated in accordance with Section 7.2.
1.4 Participating Entities. Each Subsidiary organized under the laws of the United States as of the Effective Date will be deemed to have adopted the Statutory Plan for its eligible Employees as of the Effective Date. Any corporation (determined in accordance with Code Section 7701) organized under the laws of the United States that becomes a Subsidiary after the Effective Date will be deemed to have adopted the Statutory Plan for its eligible Employees immediately upon becoming a Subsidiary, unless the Committee acts to exclude the Subsidiary and its eligible Employees from participation in the Plan. The Committee may also designate other Subsidiaries or Affiliates as Participating Entities under the Statutory Plan or Non-Statutory Plan after the Effective Date.
1.5 Stock Subject to Plan.
(a) The Stock subject to purchase under the Plan shall be acquired in the market by the Custodian or, at the election of the Company, shall be newly-issued or treasury shares. The aggregate number of shares of Stock that may be purchased under the Plan shall not exceed Six Hundred Thousand (600,000) shares. All shares represented by Stock purchased under the Plan other than Stock purchased as a result of the reinvestment of dividends will count against this limitation.
(b) In case of a reorganization, recapitalization, stock split, reverse stock split, stock dividend, combination of shares, merger, consolidation, offering of rights or other change in the capital structure of the Company, the Committee may make such adjustment, if any, as it deems appropriate in the number, kind and purchase price of Stock available for purchase under the Plan, and in the number of shares which an Employee is entitled to purchase, including, without limitation, closing an Offering Period early by setting a new Termination Date, or terminating an Offering Period and refunding amounts credited to an Employee’s Option Account.
SECTION2 - DEFINITIONS
For purposes of this Plan, the following words and phrases, whether or not capitalized, have the meanings specified below, unless the context plainly requires a different meaning:
2.1 “BoardAffiliate” shall meanmeans any entity, other than a Subsidiary, in which the Company has an equity or other ownership interest.
2.2 “Beneficiary” means a person to whom all or a portion of the Stock or cash amounts due to the Employee under this Plan will be paid if the Employee dies before receiving such Stock or cash amounts.
2.3 “Board” means the Board of Directors of the Company.
2.4 “Code” shall meanmeans the Internal Revenue Code of 1986, as amended from time to time, and the applicable rulings andall regulations thereunder, and any successor provisions thereto.thereunder.
2.5 “Common StockCommittee” shall mean the Class A common stock, par value $0.01 per share, of the Company.
“Company”shall mean Aegion Corporation, a Delaware corporation.
“Compensation Committee” shall meanmeans the Compensation Committee of the Board (or any successor committee), which committee shall consist solely of two or more “outside directors” within the meaning of Section 162(m) of the Code.Board.
2.6 “Equity PlanCompany” shall mean themeans Aegion Corporation 2013and its respective successors and assigns.
2.7 “Compensation” means base pay, including commissions and overtime pay payable in cash to an Employee Equity Incentive Plan (and any amendments thereto) and any successor plan or plans ofby an Employer during the Company (and any amendments thereto).applicable period.
2.8 “ParticipantCustodian” shall meanmeans the custodian for the Plan appointed by the Committee.
2.9 “Effective Date” means the date designated by the Committee following approval of the Plan by the Company’s stockholders.
2.10 “Employee” means any common law employee of an Employer who:
(a) Is customarily employed for more than five months in a calendar year; and
(b) Is regularly scheduled to work twenty hours or more per week.
2.11 “Employer” means the Company who receives an Awardor a Participating Entity.
2.12 “Fair Market Value” means (a) if the Stock is listed on any established stock exchange or a national market system, including without limitation the New York Stock Exchange, NASDAQ Global Market, NASDAQ Global Select Market or the NASDAQ Capital Market, the closing sales price for such Stock as quoted on such exchange or system (or the closing bid, if no sales were reported), or (b) if the Stock is no longer traded, the fair market value of the Stock as determined by the Committee in good faith.
2.13 “Offering Date” means the first day of the Offering Period.
2.14 “Offering Period” means the month in which the Effective Date occurs and each consecutive month thereafter; or such other period designated by the Committee in its sole discretion.
2.15 “Option Account” means the Account maintained on behalf of the Employee under Section 3.4 to which contributions to the Plan are credited and from which amounts are withdrawn to exercise options as of a Termination Date.
2.16 “Participating Entity” means any Subsidiary or Affiliate that has been designated by the Committee from time to time in its sole discretion as eligible to participate in the Plan in accordance with Section 41.4. For purposes of thisthe Statutory Plan, only the Company and its Subsidiaries may be Participating Entities, provided, however that at any given time, a Subsidiary that is a Participating Entity under the Statutory Plan shall not be a Participating Entity under the Non-Statutory Plan.
2.17 “Performance PeriodParticipating Subsidiary” shall mean any period of at least one year designated asmeans a Performance Period bySubsidiary that is participating in the Compensation Committee.Plan in accordance with Section 1.4.
2.18 ““Plan”Plan shall mean this” means the Aegion Corporation 2016 Executive PerformanceEmployee Stock Purchase Plan, as described in this document and as amended from time to time.
2.19 “Stock” means Class A common stock, $.01 par value, of the Company. |
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2.20 “Subsidiary” means any corporation (determined in accordance with Code Section 7701) in an unbroken chain of corporations beginning with the Company if, at the time an option is granted, each of the corporations other than the last corporation owns 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. |
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2.21 “Termination Date” means the last day of an Offering Period; provided however, that if the last day of an Offering Period is not a business day, the immediately preceding business day shall be the Termination Date. |
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SECTION3 - ENROLLMENT AND CONTRIBUTIONS |
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3.1 Eligibility for Enrollment. |
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(a) An Employee may enroll in the Plan for an Offering Period unless one of the following applies: |
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(i) The Employee would, immediately upon enrollment, own directly or indirectly, or hold options or rights to acquire, an aggregate of 5% or more of the total combined voting power or value of all outstanding shares of all classes of the Company or any Subsidiary, determined in accordance with Code Section 423(d); |
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(ii) The Employee is not employed by an Employer on the Offering Date; |
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(iii) With respect to Employees of Employers participating in the Statutory Plan, the terms of the Employee’s employment are covered by a collective bargaining agreement and the Employee, through his or her collective bargaining representative, has decided not to participate in the Plan following good faith bargaining with the Employee’s designated collective bargaining representative with respect to the Plan; or |
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(iv) With respect to Employees of Employers participating in the Non-Statutory Plan, the Committee may designate such other restrictions as the Committee determines appropriate in its sole discretion. |
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(b) The Committee or its designee will notify an Employee that the Employee is first eligible to enroll in the Plan and make available to each eligible Employee the necessary enrollment forms before the Offering Date. |
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3.2 Enrollment Procedure. (a) To enroll in the Plan for an Offering Period, an Employee must file an enrollment form with the Employer and elect to make contributions under the Plan in accordance with Section 3.3. The enrollment form must be received by the Employer in the time and manner specified by the Committee prior to an Offering Date and must state the contribution rate elected by the Employee for the Offering Period. The Committee may, in its discretion, place additional restrictions and procedures on an Employee’s enrollment, including, without limitation, restricting enrollment to designated enrollment periods. |
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7.Other Conditions.
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8.Plan Administration.
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Aegion Corporation
2016Non-Employee Director Equity Plan
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After effectiveness of this Plan, all shares of Common Stock of the Company otherwise available for awards(b) An Employee whose enrollment in and contributions under the Prior Plan (but not subject to outstanding awards thereunder) at such time shallcontinue throughout an Offering Period will automatically be unavailableenrolled in the Plan for issuance under the Prior Plan but rather shall be issued under this Plannext Offering Period unless (i) the Employee files a written notice of withdrawal with the Employer before the Offering Date for the next Offering Period in accordance with Section 5.1(a)(i) or (ii) on the provisions hereof. In addition, all shares of Common Stock underlying expired, terminated, canceledOffering Date the Employee is described in Section 3.1(a)(i), (ii) or forfeited awards under(iii). The contribution rate for an Employee who is automatically enrolled for an Offering Period pursuant to this Section will be the Prior Plan that would have been added back undercontribution rate in effect for the provisions ofimmediately preceding Offering Period, unless the Prior Plan upon the expiration, termination, cancellation or forfeiture of such award shall also be unavailable for issuance under the Prior Plan upon the expiration, termination, cancellation or forfeiture of such award and shall instead be available for issuance under this Plan in accordanceEmployee files an amended enrollment form with the provisions hereof.Employer in the time and manner specified by the Committee prior to the next subsequent Offering Period designating a different contribution rate.
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3.3 8.Adjustment ProvisionsContributions. If
(a) To enroll for the Company shall at anyfirst time changein the number of issued shares of Common Stock without new considerationPlan for an Offering Period, an Employee must elect to the Company (such as by stock dividends or stock splits), the total number of shares of Common Stock reserved for issuancemake a contribution under the Plan, shall be appropriately adjusted,subject to the terms and conditions prescribed below, by means of payroll deduction for each payroll period within the numberOffering Period.
(b) An Employee may elect to make payroll deduction contributions in amounts not less than $5.00 per week and not more than the lesser of shares(i) 10% of Common Stock covered byCompensation per payroll period (or such other amount as the Committee may establish from time to time and communicate to Employees before the Offering Date) or (ii) a percentage of Compensation for each outstanding Stock Unit shall be appropriately adjusted sopayroll period that ensures that the aggregate valuelimit specified in Section 4.1 is not exceeded for the Offering Period.
(c) Payroll deductions will commence with the first payroll period that begins within the Offering Period in which the Employee is first enrolled and will be made in conformity with the Employer’s payroll deduction schedule and practices.
(d) Except as provided in Section 5.1, an Employee may elect to increase, decrease or discontinue contributions only as of each Stock Unit shall not be changed. Written Stock Unit agreements may also contain provisions for their continuation or forthe beginning of the first payroll period in an Offering Period (or during such other equitable adjustments after changestime periods as determined by the Committee in its discretion) by giving written notice to the Employer in the Common Stock resultingtime and manner specified by the Committee before such payroll period begins. The Committee may place additional restrictions and procedures on an Employee’s ability to modify such elections as determined by the Committee in its discretion.
3.4 Option Accounts. All contributions made by an Employee under the Plan will be credited to an Option Account maintained by the Company or the Custodian on behalf of the Employee. The Company will make the credit within ten (10) days after the contributions are withheld from the Company’s reorganization, recapitalization, sale, merger, consolidation, issuance of stock rights or warrants, or similar occurrence.Employee’s Compensation.
3.5 9.No Right to Continue as a Director; No Stockholder RightsFunding of Accounts. Neither theNo cash shall be set aside with respect to an Option Account. Nothing contained in this Plan nor the granting of a Stock Unit, nor any otherand no action taken pursuant to the Plan,provisions hereof shall constitutecreate or be evidenceconstrued to create a trust of any agreementkind, or understanding, expressa fiduciary relationship between the Company or implied,the Employer and any Employee or any other person with respect to an Option Account. Amounts credited to an Option Account at any time and from time to time shall be the general assets of the Employer. To the extent that the Eligible Director hasany person acquires a right to continue asreceive the benefit of amounts credited to an Eligible Director for any periodOption Account, such right shall be that of time, or at any particular rate of compensation. No Eligible Director shall have rights as a stockholder with respect to shares of Common Stock covered by Stock Units granted hereunder until the datean unsecured general creditor of the issuance of a stock certificate therefor.Employer.
10.SECTIONAmendment4 - GRANT AND EXERCISE OF OPTION
4.1 Grant of Options; Terms. Enrollment in the Plan for an Offering Period will constitute the grant by the Company of an option to purchase Stock under the Plan during such Offering Period. Enrollment in the Plan (whether initial or continuing) for each Offering Period will constitute a new grant of an option to purchase Stock under the Plan for that Offering Period. Notwithstanding anything to the contrary in this Plan, all Employees who participate in the Statutory Plan and are granted options for an Offering Period shall have the same rights and privileges as required by Code Section 423(b)(5). Each option will be subject to the following terms:
(a) The option price will be as specified in Section 4.2.
(b) Except as limited in (e) below, the number of units of Stock subject to the option will equal the number of whole and fractional units of Stock that can be purchased at the option price specified in Section 4.2 with the aggregate amount credited to the Employee’s Option Account as of the Termination Date.
(c) The option will be exercised automatically as of the Termination Date for the Offering Period.
(d) The payment by an Employee for the Stock purchased under an option will be made only from amounts credited to the Employee’s Option Account as a result of contributions through payroll deduction in accordance with Section 3.3.
(e) No Employee shall be granted an option which permits his right to purchase Stock (when taken together with all other options held by such Employee under the Plan and under any other stock purchase plan of the Company, any Subsidiary or any Affiliate) to exceed $25,000.00 of Fair Market Value of Stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time.
4.2 Purchase of Stock; Price.
(a) As soon as practicable after the Termination Date of each Offering Period, the Custodian will apply to the purchase of Stock the amounts credited to each Employee’s Option Account as of such Termination Date. The Company shall pay any additional amount required to purchase the number of units of Stock determined in accordance with Section 4.1(b). The Stock so purchased for each Employee shall be allocated to the Option Account for the Employee. The Stock shall be held by the Custodian on behalf of the Employee and registered in the name of a nominee.
(b) The option price of each share of Stock purchased as of a Termination Date shall be 95% of the Fair Market Value of the Stock on such Termination Date with respect to the Statutory Plan. The Committee may determine such other option price applicable to each share of Stock purchased as of a Termination Date with respect to a Non-Statutory Plan; provided that such price shall not be less than 95% of the Fair Market Value of the Stock on such Termination Date.
4.3 Option Accounts.
(a) All whole and fractional units of Stock purchased on behalf of an Employee as of a Termination Date shall be credited to such Employee’s Option Account, as of such Termination Date. Any cash insufficient to purchase a fractional unit described in Section 4.1(b) shall be carried over to the next Offering Period. Dividends payable with respect to Stock credited to the Employee’s Option Account will be credited to the Employee’s Option Account and reinvested in additional Stock which shall be purchased by the Custodian in the open market as soon as administratively feasible following receipt of the dividend payment by the Custodian. No discount from the market price shall apply with respect to Stock purchased with such dividends.
(b) In the event the amount withheld through payroll deductions with respect to an Offering Period exceeds the option price of the Stock available for purchase for such Employee for that Offering Period, the excess of the amount so withheld over the option price of the Stock so purchased for the Employee shall be returned to the Employee without interest.
(c) No Employee may sell, transfer or otherwise dispose of Stock credited to the Employee’s Option Account other than Stock acquired with dividends credited to such Option Account until any date which is at least one year following the Termination Date as of which such Stock was purchased, except in the event of termination of employment or death of the Employee. Any sale, transfer or other disposition of Stock by an Employee, former Employee or Beneficiary shall be subject to such laws, regulations or procedures as may be applicable from time to time in respect to dealing in the Stock or the shares represented by the Stock.
4.4 No Interest on Account Balances. No interest or other earnings will be credited to any Option Account with respect to (a) amounts credited thereto during an Offering Period or (b) amounts to be returned to the Employee. Neither the Committee nor the Company or any Employer shall have any obligation to invest or otherwise manage amounts credited to an Option Account, other than to apply such amounts to the purchase of Stock in accordance with the terms of this Plan.
SECTION5 - TERMINATION OF ENROLLMENT
5.1 Termination of Enrollment.
(a) An Employee’s enrollment in the Plan will terminate under the following circumstances:
(i) An Employee’s enrollment will terminate as of the beginning of the Offering Period after the Employee files with the Company a written notice of withdrawal within the time period specified by the Committee. The Committee may, in its discretion, place additional restrictions and procedures on an Employee’s termination of enrollment, including, without limitation, restricting termination enrollment to designated periods.
(ii) An Employee’s enrollment will terminate on termination of employment with all Employers.
(iii) An Employee’s enrollment will terminate as of the date on which the Employee would own directly or indirectly, or hold options or rights to acquire, an aggregate of 5% or more of the total combined voting power or value of all outstanding shares of all classes of the Company or any Subsidiary, determined in accordance with Code Sections 423(d) and (f).
(iv) An Employee’s enrollment will terminate upon termination of the Plan or as of the date the relevant Employer ceases to be a Subsidiary or Affiliate.
(b) An Employee whose enrollment in the Plan terminates under this Section other than by reason of termination of the Plan may again enroll in the Plan as of any subsequent Offering Date if the Employee satisfies the eligibility conditions of Section 3.1 as of such date.
5.2 Distributions to Employee.
(a) As soon as practicable after an Employee’s enrollment in the Plan terminates under Section 5.1:
(i) The Employer will pay to the Employee all cash amounts credited to the Employee’s Option Account as of the date of termination; and
(ii) If enrollment terminates pursuant to Section 5.1(a)(ii) or 5.1(a)(iv), the Committee will direct the Custodian to distribute to the Employee certificates representing the whole units of Stock then credited to the Employee’s Option Account and cash equal to the Fair Market Value of any fractional unit of Stock.
(b) If an Employee’s enrollment terminates as a result of death, or if the Employee’s death occurs before the Employee receives a distribution under this Section, all cash amounts payable under this Section to the Employee will be paid to the Employee’s Beneficiary.
(c) An Employee may from time to time request distribution in whole units of Stock with respect to that portion of Stock then credited to the Employee’s Option Account which is not then subject to the sale restriction in Section 4.3(c). The Custodian shall pay to the Employee cash equal to the Fair Market Value of any fractional unit when all whole units of Stock have been distributed.
5.3 Beneficiaries.
(a) An Employee may designate one or more persons (concurrently, contingently or successively) to whom cash amounts credited to the Option Account will be distributed if the Employee dies before receiving complete payment of such amounts. Any such designation must be made on a form provided by the Committee for this purpose, will be effective on the date received by the Committee and may be revoked by the Employee at any time.
(b) If the Employee fails to designate a beneficiary or if no designated beneficiary survives the Employee, then any cash amounts shall be paid to the Employee’s estate.
SECTION6 - PLAN ADMINISTRATION
6.1 Committee. The Plan will be administered by the Committee.
6.2 Committee Powers.
(a) The Committee will have all powers appropriate to administer the Plan including, but not limited to, the following:
(i) To determine all questions that may arise under the Plan, including the power to determine the rights or eligibility of an Employee or their Beneficiaries;
(ii) To construe the terms of the Plan and to remedy ambiguities, inconsistencies or omissions;
(iii) To adopt such rules of procedure and prescribe such forms as it considers appropriate for the proper administration of the Plan and are consistent with the Plan;
(iv) To enforce the Plan provisions and the rules of procedure which it adopts; and
(v) To employ agents, attorneys, accountants, actuaries or other persons, and to allocate or delegate to them such powers, rights and duties as it considers appropriate for the proper administration of the Plan.
(b) The Committee will have such further powers and duties as may be elsewhere specified in the Plan.
6.3 Committee Actions. The actions of the Committee may be taken at a meeting by a majority of its members, in writing without a meeting if all members of the Committee sign such writing or by the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other and participation in such a meeting in this manner shall constitute attendance and presence in person at the meeting of the person or persons so participating for all purposes. In taking action:
(a) The Committee may allocate authority to a specific member(s) of the Committee to carry out such duties as the Committee may assign;
(b) A member of the Committee may by writing delegate any or all of such member’s rights, powers, and duties to any other member of the Committee, with the consent of the latter;
(c) The Committee may delegate to any agents, which may include a Plan Committee, such duties and powers, as it deems appropriate, by an instrument in writing which specifies which duties are so delegated and to whom each such duty is so delegated; and
(d) When there is an even division of opinion among the members of the Committee as to a matter, the Board will decide the matter, provided, however, that no member of the Board may revisevote on such a matter if it concerns such member’s individual rights, privileges or obligations under the Plan.
6.4 Member Who is Participant. If a member of the Committee is an Employee, such member may not decide any matter relating to the member’s participation or Option Account or how the Option Account is to be paid to the member that the member would not have the right to decide in the absence of membership on the Committee, and no Employee will receive any compensation for services as a member of the Committee.
6.5 Information Required from Company. The Company will furnish the Committee with such data and information as the Committee deems appropriate to administer the Plan. The records of the Company and the Employers as to an Employee’s Compensation will be conclusive on all persons unless determined by the Committee to be clearly incorrect.
6.6 Information Required from Employees. Each person entitled to benefits under the Plan must furnish the Companyfrom time to time in writing such person’s mailing address, each change of mailing address and such other data and information as the Committee deems appropriate to administer the Plan. Any communication, statement or notice mailed with postage prepaid to any person at the last mailing address filed with the Companywill be binding upon such person for all purposes of the Plan.
6.7 Uniform Rules and Administration. The Committee will administer the Plan on a nondiscriminatory basis and will apply uniform rules to all persons similarly situated.
SECTION7 - AMENDMENT AND TERMINATION
7.1 Amendment.
(a) The Company reserves the right to amend the Plan in any respect whatsoever; provided, that,from time to time subject to the following limitations:
(i) No amendment will be made without the prior approval of the stockholders of the Company no revision orif the amendment shall (i) change the selection or eligibility requirements under the Plan, (ii)will (1) increase the number of shares of Common Stock that may be issuedreserved for purchase under the Plan, or (iii)(2) materially modify the eligibility conditions or increase the amount or type of benefits that may be grantedavailable to Employees under the Plan.
(ii) No action authorized by this Section 10 shallamendment will make any change in an option granted previously and outstanding which adversely affects the rights of an Employee with respect to such option.
(iii) No amendment will reduce the amount of any existing Stock Unitan Employee’s Option Account balance.
(b) The Company may delegate to the Committee or changeits officers the terms and conditions thereof withoutpower to amend the holder’s consent. WithoutPlan as the prior approvalCompany deems appropriate, subject to the limitations of this Section.
7.2 Termination. The Plan is entirely voluntary on the part of the Company’s stockholders,Company and the Company will not effect a “repricing” (as defined below) of any Stock Units granted under the terms of this Plan. For purposes of the immediately preceding sentence, a “repricing” shall be deemed to mean an action that is treated as a repricing under generally accepted accounting principles. To the extent that any Stock Units which may be granted within the termscontinuance of the Plan would qualify under present or future laws for tax treatment that is beneficial toshould not be construed as a recipient, then any such beneficial treatment shall be considered within the intent, purpose and operational purviewcontractual obligation of the Company. Accordingly, the Company reserves the right to terminate the Plan andat any time. Unless sooner terminated by the sole discretionCompany, the Plan shall terminate on the earlier of: (i) the date all of the Board, and to the extent that any suchshares represented by Stock Units would so qualify within the terms of the Plan, the Board shall have full and complete authority to grantspecified in Section 1.5(a) are purchased unless additional shares represented by Stock Units that so qualify (including the authority to grant, simultaneously or otherwise, Stock Units which do not so qualify) and to prescribe the terms and conditions (which need not be identical as among recipients) in respect to the grant or exercise of any such Stock Units under the Plan.
12.Rules of Construction; Compliance with 409A. The terms of this Plan, and any agreement containing the terms and conditions of an award made pursuant to this Plan, shall be interpreted: first, in a manner that causes the award to comply with Section 409A; and secondly, in accordance with the laws of the State of Delaware.
13.Effective Date, Duration, Suspension and Termination of the Plan. The Plan became effective the day immediately following approval ofare authorized for the Plan by the stockholders of the Company atCompany; and (ii) the 2016 Annual Meetingend of Stockholders (the “the tenth year beginning on or after the Effective DateDate. No option may be granted under the Plan after the Plan is terminated.
7.3 Rights Upon Termination”).
(a) If the Plan terminates, the Committee may elect to terminate all outstanding options to purchase shares of Stock under the Plan either immediately or upon completion of the purchase of Stock on the next following Termination Date.
(b) If the Committee terminates an option to purchase Stock prior to the expiration of the option, all amounts contributed to the Plan which remain in an Employee’s Option Account will be returned to the Employee as soon as practicable.
SECTION8 - GENERAL PROVISIONS
8.1 No Transfer or Assignment. The period during which Stock Unit grantsrights of an Employee under the Plan may not be sold, pledged, assigned or transferred, voluntarily or involuntarily, in any manner other than by will or the laws of descent and distribution. Any such attempted sale, pledge, assignment or transfer shall be madewithout effect. An Employee’s rights and all options granted under the Plan shall terminate ononly be exercisable during his or her lifetime by such Employee.
8.2 Equal Rights and Privileges. All Employees who are granted options under the day followingPlan for the tenth anniversaryOffering Period will have equal rights and privileges with respect to such option.
8.3 Rights as Stockholder. The grant of an option to purchase shares of Stock under the Plan will not confer upon an Employee any rights as a stockholder of the 2016 Annual MeetingCompany with respect to Stock subject to the option. An Employee will become a stockholder with respect to Stock subject to an option under the Plan only when the purchase of Stockholders (unlesssuch Stock is completed.
8.4 Rights as Employee. The Plan is not a contract of employment, and the grant of an option to purchase Stock under the Plan will not confer upon any Employee the right to be retained in the employ of any Employer. An Employee’s enrollment in the Plan shall constitute a waiver of any and all rights to compensation or damages relating to the cessation of such Employee’s eligibility to participate in the Plan upon termination of the Plan or termination of the Employee’s employment for any reason whatsoever.
8.5 Costs. All costs and expenses incurred in the administration of the Plan and the purchase of shares will be paid by the Company. Any brokerage fees or expenses for the sale or transfer of Stock by an Employee will be borne by the Employee.
8.6 Liability for Taxes. Each Employee shall be responsible for, and will indemnify the Employer against, any federal, state or local income or other applicable taxes, including any interest or penalties relating thereto, to which the Employee may be subject as a result of the Employee’s participation in the Plan or the Employee’s sale of Stock acquired thereunder.
8.7 Reports. The Committee will provide, or cause to be provided, to each Employee no less frequently than annually a report of the Employee’s contributions under the Plan for the reporting period, the Stock purchased with such contributions, and any dividends received with respect to such Stock.
8.8 Actions by Company. Any action taken by the Company with respect to the Plan will be by resolution of its Board of Directors or by a person or persons authorized by resolution of its Board of Directors.
8.9 Governmental Approval. The Plan and any offering or sale made to Employees under the Plan are subject to any governmental requirements, approvals or consents that are or may become applicable in connection herewith.
8.10 Stockholder Approval. The Plan is subject to approval by the holders of a majority of the Company’s issued and outstanding shares present in person or by proxy and voting at the meeting at which the Plan is extended or terminated at an earlier date by stockholders); provided, (i) such terminationconsidered and shall not affectbe effective without such approval.
8.11 Applicable Law. The Plan will be governed by the termslaws of any then outstanding Stock Unitthe State of Missouri, without regard to the law of conflicts of such state, to the extent that federal law does not preempt such laws.
8.12 Gender and (ii)Number. When the terms and conditions applicable to any a Stock Unit granted within such period may thereafter be amended or modified by mutual agreement between the Company and the holder. The Board may suspend or terminatecontext permits, words in the Plan at any timeused in the masculine gender include the feminine gender, words in the singular include the plural and words in the plural include the singular.
8.13 Headings. All headings in the Plan are included solely for any reason.ease of reference and do not bear on the interpretation of the text.
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