UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
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| Preliminary Proxy Statement | ||
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| Definitive Proxy Statement | ||
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| ☐ | Soliciting Material under | |
SUN HYDRAULICS CORPORATIONHELIOS TECHNOLOGIES, INC.
(Name of registrant as specified in its charter)
(Name of person(s) filing proxy statement, if other than the registrant
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 | Dear Shareholders: The year of 2020 was a watershed year for Helios on many levels. What helps keep companies anchored through challenging times is being able to lean into a shared corporate purpose. A purpose statement should help provide context for our strategy, be easy to remember, and help inspire each other, as well as our partners. It is meant to act as our compass, and to help guide each of us in making better decisions as a leader. It should also describe who we are when we are at our best. We have recently developed a purpose statement that we feel connects Helios to its valued customers, shareholders, employees and stakeholders: |
Our trusted global brands deliver technology solutions that ensure safety, reliability, connectivity and control.
This is a succinct statement, but if you look at each word in this sentence, you will see deep meaning and connection points across our businesses. As we reflect on how we did business through 2020 and plan our business goals for 2021 and beyond, we will reference and incorporate this purpose statement.
We have also been working with the core values of our subsidiaries (those that formally had them) to find common connection points to also bring us together under one “corporate umbrella.” We have identified “The Helios Shared Values” which are not meant to replace any of our subsidiaries’ individual core values, but rather reinforce as well as be the common thread that unites us. I am proud of the Shared Values set forth in the graphic below. This framework will help all of us continue to create and cultivate the strong, deeply rooted, values-based culture that will carry us to our many corporate milestones to come.
Our Shared Values are the foundation of our corporate culture. This shines through as you read our proxy and understand how our employees pulled together and performed so well while supporting each other and our communities during the very challenging year of 2020.
You are cordially invited to attend the Helios Technologies (“Helios”) Annual Meeting of Stockholders on June 3, 2021 at 10:00 a.m. (Eastern Daylight Time), at the offices of Helios Technologies, 7456 16th Street East, Sarasota, FL 34243. All Helios stockholders of record at the close of business on April 6, 2021 are welcome to attend the Annual Meeting, but it is important that your shares are represented at the Annual Meeting even if you do not plan to attend. To ensure you will be represented, as soon as possible please vote by telephone, mail, or online.
With COVID-19 top of mind, we will continue to take precautionary measures to ensure the health and well-being of our employees, visitors and communities and ask that you also make a safe, comfortable choice regarding whether to attend our in-person meeting. On behalf of the Board of Directors and our leadership team, I would like to express our appreciation for your continued interest in and support of Helios Technologies.
Sincerely,
Josef Matosevic
President & CEO
Helios Technologies,Inc.
SUN HYDRAULICS CORPORATIONHELIOS TECHNOLOGIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Thursday, June 13, 20193, 2021
Notice is hereby is given that the Annual Meeting of Shareholders of Sun Hydraulics Corporation,Helios Technologies, Inc., a Florida corporation, will be held on Thursday, June 13, 2019,3, 2021 at 10:00 a.m., Eastern (Eastern Daylight Time,Time) at The Benjamin Hotel 125 E 50ththe offices of Helios Technologies, 7456 16th Street New York, NY 10022,East, Sarasota, FL 34243* for the following purposes:
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To ratify the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year |
To conduct an advisory vote on executive compensation; and |
To transact such other business as properly may come before the Meeting or any adjournment thereof. |
Shareholders of record at the close of business on April 4, 2019,6, 2021 (referred to herein as the “record date”), are entitled to receive notice of and to vote at the Meeting and any adjournment thereof.
We sent a Notice of Internet Availability of Proxy Materials on or about April 26, 2019,23 2021, and provided access to our proxy materials over the Internet beginning April 26, 2019,23, 2021, for the holders of record and beneficial owners of our common stock as of the close of business on the record date. If you received a Notice of Internet Availability by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice of Internet Availability instructs you on how to access and review this proxy statement and our annual report and authorize a proxy online to vote your shares. If you received a Notice of Internet Availability by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice of Internet Availability.
All shareholders are cordially invited to attend the Meeting. Whether or not you expect to attend, to assure the presence of a quorum at the Meeting, please authorize your proxy by Internet or, if you received a paper copy of the materials by mail, please mark, sign, date and return your proxy card, so that your shares will be represented at the Meeting. You may revoke your Proxy and vote in person at the Meeting if you desire.
If your shares are held in street name by a brokerage, your broker will supply the Notice of Internet Availability instructions on how to access and review this proxy statement and our annual report and authorize a proxy online to vote your shares. If you receive paper copies of the materials from your broker by mail, please mark, sign, date and return your proxy card to the brokerage. It is important that you return your proxy to the brokerage as quickly as possible so that the brokerage may vote your shares. You may not vote your shares in person at the Meeting unless you obtain a power of attorney or legal proxy from your broker authorizing you to vote the shares, and you present this power of attorney or proxy at the Meeting.
By Order of the Board of Directors,
GREGORY C. YADLEYMelanie M. Nealis
Secretary
Sarasota, Florida
April 26, 201923, 2021
* As part of our precautions regarding the COVID-19 pandemic, we are planning for the possibility that the Meeting may be held solely by means of remote communications. If we take this step, we will announce the decision to do so in advance, and details on how to participate, including details on how to inspect a list of shareholders of record, will be posted on our website and filed with the Securities and Exchange Commission as proxy material.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE SHAREHOLDERS MEETING TO BE HELD ON JUNE 13, 20193, 2021
This Proxy Statement and our 20182021 Annual Report to Shareholders are available at:
https://materials.proxyvote.com/866942www.viewproxy.com/HeliosTechnologies/2021 andhttps://ir.heliostechnologies.com.
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 | 2021 Proxy Statement | i |
Table of Contents |
 ii |2021 Proxy Statement | |
SUN HYDRAULICS CORPORATIONHELIOS TECHNOLOGIES, INC.
1500 West University Parkway
Sarasota, Florida 34243
This proxy overview is a summary of information that you will find throughout this proxy statement. As this is only an overview, we encourage you to read the entire proxy statement, which was first distributed to our stockholdersshareholders onor about April 26, 2019.23, 2021.
20192021 ANNUAL MEETING OF SHAREHOLDERS
| Time and Date: | Thursday, June | |
| Place: | Helios Technologies, Inc. 7456 16th Street East Sarasota, FL34243 | |
| Record Date: | April | |
| Voting: | Shareholders as of | |
By completing, signing and dating the voting instructions in the envelope provided |
By the internet at
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By telephone at
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In person by completing, signing and dating a ballot at the annual meeting |
Any proxy delivered pursuant to this solicitation may be revoked, at the option of the person executing the proxy, at any time before it is exercised by delivering a signed revocation to the Company, by submitting a later-dated proxy or by attending the Meetingmeeting in person and casting a ballot. If proxies are signed and returned without voting instructions, the shares represented by the proxies will be voted as recommended by the Board of Directors.Directors (the “Board”). If you are a shareholder of record, you may vote by granting a proxy. Specifically, you may vote:
| • | By Internet—If you have Internet access, you may submit your proxy by going to www.fcrvote.com/HLIO and by following the instructions on how to complete an electronic proxy card. You will need the 16-digit number included on your Notice or your proxy card in order to vote by Internet. |
| • | By Telephone—If you have access to a touch-tone telephone, you may submit your proxy by dialing 1-866-402-3905 and by following the recorded instructions. You will need the 16-digit number included on your Notice or your proxy card in order to vote by telephone. |
| • | By Mail—You may vote by mail by returning the card in the envelope that will be provided to you. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), indicate your name and title or capacity. |
| • | In Person—You may vote by attending the Meeting in person and casting a ballot. |
The cost of soliciting proxies will be borne by the Company. In addition to the use of the mail, proxies may be solicited personally, by internet or by telephone by regular employees of the Company. The Company does not expect to pay any compensation for the solicitation of proxies, but may reimburse brokers and other persons holding stock in their names, or in the names of nominees, for their expense in sending proxy materials to their principals and obtaining their proxies. The approximate date on which this Proxy Statement and enclosed form of proxy first has been mailed or made available over the Internet to shareholders is as of April 26, 2019.23, 2021.
| 2021 Proxy Statement| 1 |
PROXY STATEMENT |
The close of business on April 4, 2019,6, 2021, has been designated as the record date for the determination of shareholders entitled to receive notice of and to vote at the Meeting. As of April 4, 2019, 32,011,3756, 2021, 32,233,465 shares of the Company’s Common Stock, par value $.001 per share, were issued and outstanding. Each shareholder will be entitled to one vote for each share of Common Stock registered in his or her name on the books of the Company on the close of business on April 4, 2019,6, 2021, on all matters that come before the Meeting. Abstentions will be counted as shares that are present and entitled to vote for purposes of determining whether a quorum is present. Shares held by nominees for beneficial owners will also be counted for purposes of determining whether a quorum is present if the nominee has the discretion to vote on at least one of the matters presented, even though the nominee may not exercise discretionary voting power with respect to other matters and even though voting instructions have not been received from the beneficial owner (a “brokernon-vote”). Abstentions and brokernon-votes are not counted in determining whether a proposal has been approved.
We intend to hold our Meeting in person. However, as part of our precautions regarding the COVID-19 pandemic, we are planning for the possibility that the Meeting may be held solely by means of remote communications. If we take this step, we will announce the decision to do so in advance, and details on how to participate will be posted on our website and filed with the Securities and Exchange Commission (“SEC”) as proxy material.
2 |2021 Proxy Statement | |
PROPOSAL 1 — ELECTION OF DIRECTORS
The Board of Directors of the Company currently consistswill consist of seven members.eight members (presently nine members). The Board is divided into three classes of Directors serving staggered three-year terms. Directors hold their positions until the annual meeting of shareholders in the year in which their terms expire, and until their respective successors are elected and qualified or until their earlier resignation, removal from office or death.
The term of office of three of the Company’s current seven Directors, Marc Bertoneche, Douglas M. Britt, Philippe Lemaitre,nine directors – Josef Matosevic, Gregory Yadley, and Kennon Guglielmo – will expire at the Meeting. Dr. Guglielmo will not be nominated for reelection. The Board would like to express its sincere gratitude to Dr. Guglielmo for his years of service on the Helios Board.
The Governance and Nominating Committee of the Board of Directors has selected Messrs. Bertoneche, BrittMr. Matosevic and Lemaitre as nomineesMr. Yadley to stand for reelection to the Board at the Meeting, to serve until the Company’s annual meeting in 2022. The Committee also has determined to nominate Kennon H. Guglielmo for election to the Board at the Meeting, to serve until the Company’s annual meeting in 2021.
2024. In making its nominations of Messrs. Bertoneche, Britt, Guglielmo,Mr. Matosevic and Lemaitre,Mr. Yadley, the Governance and Nominating Committee reviewed the backgrounds of the fourtwo individuals and believes that each of them (as well as each other continuing Director whose term does not expire at the Meeting) has valuable individual skills and experiences that, taken together, provide the Company with the diversity and depth of knowledge, judgment and vision necessary to provide effective oversight.
Biographical information for each of the nominees is set forth below under “Directors and Executive Officers.”
Shareholders may vote for up to threetwo nominees for the class of Directors who will serve until the Company’s annual meeting in 2022 and for one nominee, Dr. Guglielmo, for the class of Directors who will serve until the Company’s annual meeting in 2021.2024. If a quorum is present at the meeting, Directors will be elected by a plurality of the votes cast. Shareholders may not vote cumulatively in the election of Directors. In the event anyeither of the nominees should be unable to serve, which is not anticipated, the proxy committee, which consists of Christine L. KoskiAlexander Schuetz and Alexander Schuetz,Philippe Lemaitre, will vote for such other person or persons for the office of Director as the Board of Directors may recommend.
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The Board of Directors recommends that you vote“FOR” |
| 2021 Proxy Statement | | |
Directors and Executive Officers
The following table sets forth the names and ages of the Company’s Directors, nominees for Director,current directors and current executive officers and the positions they hold with the Company. Executive officers serve at the pleasure of the Board of Directors.Board.
Name/Age/Independence
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  | Marc Bertoneche, Independent Director | August 2001 | Marc Bertoneche is an Emeritus Professor in Business Administration at the University of Bordeaux in France, and was on the Faculty of INSEAD, the European Institute of Business Administration in Fontainebleau, France, for more than 20 years. He was a Visiting Professor of Finance at the Harvard Business School. He is an Associate Fellow at the University of Oxford and a Distinguished Visiting Professor at HEC Paris. Dr. Bertoneche is a graduate of University of Paris and earned his MBA and PhD from Northwestern University. He has served as a Director of the Company since August 2001. Dr. Bertoneche has 40 years of teaching corporate finance to MBA students and business executives. As an academic and a consultant to universities and businesses throughout the world, Dr. Bertoneche is exposed to diverse business leaders and brings a global perspective and depth of experience in the finance area. Dr. Bertoneche has served on boards of more than a dozen companies. | ● | ● | |||||||||
4 |2021 Proxy Statement | |
Governance of the Company |
Name/Age/Independence | Director Since | Committee Membership (C: Chair) | ||||||||||||
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 | Douglas M. Britt, Independent Director | December 2016 | Doug Britt has been a Director of the Company since December 2016. In May of 2020, Mr. Britt became President and Chief Executive Officer of Boyd Corporation, a multinational company with a workforce of over 6,000 employees. Boyd Corporation is a global leader in engineered materials and thermal management solutions. Previously, he served as President of the Integrated Solutions division of Flex | ● | C | |||||||||
 | Laura Dempsey Brown, 57 Independent Director | April 2020 |
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Name/Age/Independence
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M. Chenanda, 53 Independent Director |
| Cary Chenanda is a Vice President and Officer of Cummins Inc. (NYSE: CMI), a global power provider, with complementary business segments that design, manufacture, distribute and service a broad portfolio of power solutions. Cummins products range from diesel, natural gas, electric and hybrid powertrains and powertrain-related components including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems, automated transmissions, electric power generation systems, batteries, electrified power systems, hydrogen generation and fuel cell products. Mr. |
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Governance of the Company |
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  | Alexander Schuetz, Independent Director | June 2014 | Alexander Schuetz serves as CEO of Knauf Engineering GmbH, an engineering company in the gypsum based construction materials industry. Dr. Schuetz is currently responsible for a portfolio of multinational projects with a total volume of $500 million. Prior to joining Knauf in February 2009, Dr. Schuetz held various management positions for more than 10 years in Finance, Business Development, Mergers & Acquisitions, Project Management and General Management in the fluid power industry at Mannesmann and Bosch Rexroth, including as CEO of Rexroth Mexico and Central America from August 2000 to August 2007. From 1998 to 2000, he was based in Beijing, China and was responsible for the Finance, Tax and Legal division at Mannesmann (China) Ltd., the holding company for a number of affiliated companies of the Mannesmann Group, including Rexroth, Demag, Sachs and VDO. Dr. Schuetz holds a Ph.D. in international commercial law from the University of Muenster, Germany. In 2003, Dr. Schuetz completed the Robert Bosch North America International General Management Program at Carnegie Mellon University. Dr. Schuetz has served as a Director of the Company since June 2014. With more than ten years working in the fluid power industry, Dr. Schuetz has his career in high level corporate positions with a special focus on corporate strategies, and |
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Independent Director | April 2020 | Gregory Yadley has practiced corporate and securities law for over 40 years and has been a partner with Shumaker, Loop & Kendrick, LLP, a full-service law firm, since January 1993. Prior to entering private practice, he served as Branch Chief at the U.S. Securities and Exchange Commission and Assistant General Counsel for the Federal Home Loan Mortgage Corporation, both in Washington, D.C. Mr. Yadley currently serves as a member of the SEC’s Advisory Committee on Small Business Capital Formation. He is a graduate of Dartmouth College and the George Washington University Law School. Mr. Yadley brings to the Board broad experience with respect to securities, corporate governance, financing transactions, mergers and acquisitions, internal investigations, contract negotiations and disputes, strategic planning, and general corporate matters. Mr. Yadley has advised more than a dozen public companies with respect to corporate, securities, internal investigations and other matters. Mr. Yadley has helped draft provisions of and amendments to the Florida Business Corporation Act for more than 35 years and has served as an expert witness for major national law firms in corporate and legal matters. He currently serves and has served as Chair or a member of numerous not-for-profit and civic boards of directors. | ● | ● | |||||||||||
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Governance of the Company |
Name/Age | Executive
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President, Director | June
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| Tricia Chief Financial Officer | March 2006 | Tricia Fulton joined the Company in March 1997 and held positions of increasing responsibility, including Corporate Controller, prior to being named Chief Financial Officer on March 4, | |||||
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2019 | Matteo Arduini was appointed General Manager of Faster S.r.l., a European manufacturer of quick release couplings, in January of 2019, after having served as Faster’s Chief Financial Officer beginning in April of 2018. From September 2012 to April 2018, Mr. Arduini was with Brevini /Dana Incorporated (NYSE: DAN). He served as the CFO of the Brevini Group and the project leader in Dana’s acquisition of Brevini Group. For one and a half years after the acquisition, he served as Head of Finance in Dana Brevini Italy. Mr. Arduini graduated from the University of Parma in 1998 with a degree in Economics and gained professional experience through roles at Ernst & Young, Ferrari Cars and Technogym. | ||||
8 |2021 Proxy Statement | |
Governance of the Company |
Name/Age | Executive Officer Since | Biographies | ||||
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 | Jinger
| December 2016 | Jinger McPeak served asCo-General Manager of Enovation, | |||
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| Melanie Chief Legal and Compliance Officer and
| July 2018 | Melanie Nealis joined the Company in July 2018 and brings over | |||
| 2021 Proxy Statement| 9 |
 Governance of the Company |
Board Skills and Diversity Matrix
The below matrix summarizes the skills and diversity demographics of our Board of Directors in 2020.
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Governance of the Company |
Board Leadership Structure and the Board’s Role in Risk Oversight
The Board of Directors acts as a collaborative body that encourages broad participation of each of the Directors at Board meetings and in the committees, described below, on which they serve. The Board believes that a majority of Directors should be independent. Prior to each Board meeting theThe independent directors meet informally, and they also meet in regular executive sessions of the Board of Directors.Board. The Company currently separates the functions of Chairman of the Board and Chief Executive Officer. The Chairman of the Board, who is anon-management, independent director, chairs the meetings of the Board, and also serves as a nonvotingex officio member of each of the Board committees.committees and is a member of the Nominating committee. He approves the agenda for each meeting, after soliciting suggestions from management and the other Directors. Given the size of the Company, its international operations and its culture of individual initiative and responsibility, the Board believes that its leadership structure is appropriate. The Board believes that a governing body comprised of a relatively small number of individuals with diverse backgrounds in terms of geographic, cultural and subject matter experience, strong leadership and collaborative skills, is best equipped to oversee the Company and its management.
The Company’s culture emphasizes individual integrity, initiative and responsibility. The Company’s compensation structure does not encourage individuals to undertake undue risk for personal financial gain. The Board has delegated to the Audit Committee the responsibility for financial risk and fraud oversight, to consider for approval all transactions involving conflicts of interest and to monitor compliance with the Company’s Code of Business Conduct and Ethics (“Code”).
The Governance and Nominating Committee addresseshas historically addressed non-financial risks, including political and economic risks, risks relating to the Company’s growth strategy, and current business risks on a quarterly basis, and makes recommendations to the Board with respect to those and other risks, including leadership development and succession. In March 2021, the Board created a new Environmental, Social and Governance (“ESG Committee”). The new ESG committee will address risk previously overseen by the Governance and Nominating Committee related to the global enterprise. To supplement the reports of the former Governance and Nominating Committee and now the ESG Committee, the Chief Executive Officer reports to the full Board, at least annually, regarding material risks facing the Company, risks it may face in the future, measures that management has employed to address those risks and other information regardingrelating to how risk analysis is incorporated into the Company’s corporate strategy andday-to-day business operations.
As part of its risk oversight and compliance responsibilities, the Board, of Directors, in December 2018, adopted a new Code that serves as an overarching document to supplement similar policies adopted by its subsidiaries. The Code has been
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translated into fiveseven languages, and training programs are held to ensure the code is understood and observed throughout the Company. In July 2018, the Board appointed a Chief Legal and Compliance Officer (“CLCO”) who oversees and manages the legal and compliance functions of the Company on a global basis. In January 2021, the Board approved minor revisions to the Code and the updated Code was communicated to all Helios employees globally.
Independence and Committees of the Board of Directors
At its meeting inon March 8, 2019,10, 2021, the Board undertook a review of Director Independence. ItExcept as described under “Certain Relationships and Related Transactions,” it was determined that there were no transactions or relationships between any of the Directors or any member of the Director’sDirectors’ immediate familyfamilies and the Company and its subsidiaries and affiliates. The purpose of this review was to determine the independence of each of the Directors under the rules of the Nasdaq Stock Market and, for audit committee and compensation committee members, also under the rulesheightened independence standards of the Securities and Exchange Commission.SEC. The Board determined that other than the CEO, all of the Company’s Directors, Messrs. Bertoneche, Britt, Grzelak,Chenanda, Lemaitre, and Schuetz, Yadley and Ms. Koski,Dempsey Brown, qualify as independent directors under both the rules of the Nasdaq Stock Market and the SEC. In December 2020, the Board reevaluated the independence of Dr. Guglielmo and determined that Dr. Guglielmo did not meet the independence rules of Nasdaq and as a result he was removed from all Committees of the Board and served the remainder of his term as a member “at large.”
In considering the independence of Messrs. Yadley and Chenanda, the Board took into consideration the transactions set forth under “Certain Relationships and Related Transactions,” as well as certain other customer contracts with Cummins in which Mr. Chenanda does not have a material interest. The Board concluded that Messrs. Yadley and Chenanda qualify as independent under the rules of Nasdaq. By virtue of his position as President and Chief Executive Officer of the Company, the Board has concluded that Mr. Matosevic does not qualify as independent.
| 2021 Proxy Statement| 11 |
Governance of the Company |
In 2020, the Board had three standing committees, which are listed below. The Boardcurrent composition of Directors has the three standing committees listed below.is included in the table set forth under the heading “Directors and Executive Officers.”
As discussed below under “Oversight of Environmental, Social and Governance (ESG) Matters,” on March 10, 2021, the Board formally memorialized the Company’s commitment to fundamental ethical principles, including diversity and respect for the dignity of every individual, in the form of the ESG Committee, which will assume the responsibility for overseeing the Company’s corporate governance practices, as well as social, environmental, enterprise risk and other matters. The Governance and Nominating Committee was recast as the Nominating Committee and will continue to nominate Directors with diverse backgrounds in terms of geographic, cultural and subject matter experience, as well as gender, race, national origin and other diverse characteristics, that are complementary to those of the other Directors so that, as a group, the Board will possess the appropriate talent, skills and expertise to oversee the Company’s business.
Audit Committee
The Audit Committee, currently comprised of Laura Dempsey Brown (Chair), Marc Bertoneche, Cary Chenanda and Doug Britt David W. Grzelak (Chair), and Alexander Schuetz, held nine meetings in 2018.2020. The Board of Directors determined, under applicable SEC and NASDAQNasdaq rules, that all of the members of the Audit Committee are independent and that Dr. Bertoneche meets the qualifications as an Audit Committee Financial Expert, and he has been so designated. During 2020, the following Board members served on the Audit Committee in addition to those currently serving: Alexander Schuetz (Chair through October 2020) and Kennon Guglielmo. Each of the current members of the Audit Committee satisfies the heightened independence standards of Rule 10A-3 under the Exchange Act. The functions of the Audit Committee are to select the independent public accountants who will prepare and issue an audit report on the annual financial statements of the Company and a report on the Company’s internal controls over financial reporting, to establish the scope of and the fees for the prospective annual audit with the independent public accountants, to review the results thereof with the independent public accountants, to review and approvenon-audit services of the independent public accountants, to review compliance with existing major accounting and financial policies of the Company, to review the adequacy of the financial organization of the Company, to review management’s procedures and policies relative to the adequacy of the Company’s internal accounting controls, to review areas of financial risk and provide fraud oversight, to review compliance with federal and state laws relating to accounting practices and to review and approve transactions, if any, with affiliated parties. It also invites and investigates reports regarding accounting, internal accounting controls or auditing irregularities or other matters.
The Audit Committee is responsible for review ofreviews management’s monitoring of the Company’s compliance with its Code, including its confidential ethics reporting hotline and the periodic review and update of the code.Code. No waivers of the Company’s Code were requested or granted during the year ended December 29, 2018.January 2, 2021. The Code is available on the Investors page of our Web sitewebsite www.heliostechnologies.com and from the Company upon written request sent to the Corporate Secretary, 1500 West University Parkway, Sarasota, Florida 34243.
The Audit Committee is governed by a written charter approved by the Board of Directors.Board. The charter is available on the Investors page of our Web sitewebsite www.heliostechnologies.comand from the Company upon written request sent to the Corporate Secretary, 1500 West University Parkway, Sarasota, Florida 34243.
Compensation Committee
The Compensation Committee is currently comprised of Marc Bertoneche, Douglas M. Britt (Chair), Marc Bertoneche, Alexander Schuetz and Gregory Yadley. In 2020, the following Board members also served on the Compensation Committee: Laura Dempsey Brown, Cary Chenanda, Christine L. Koski and Kennon Guglielmo. Each of the current members of the Compensation Committee satisfies the heightened independence standards of Rule 10C-1 under the Exchange Act. The Compensation Committee oversees the Company’s compensation program, including executive compensation and the review, approval and recommendation to the Board of Directors of the terms and conditions of all employee benefit plans or changes thereto. The Committee administers the Company’s equity incentive andnon-employee director fees plans and carries out the responsibilities required by the rules of the Securities and Exchange Commission.SEC. The Compensation Committee met six times during 2018.2020.
The Compensation Committee is governed by a written charter approved by the Board of Directors.Board. The charter is available on the Investors page of our Web sitewebsite www.heliostechnologies.comand from the Company upon written request sent to the Corporate Secretary, 1500 West University Parkway, Sarasota, Florida 34243.
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Governance and Nominating Committee
The Governance and Nominating Committee, comprised in 2020 of David W. Grzelak, Christine L. Koski, and Alexander Schuetz (Chair), Cary Chenanda, Philippe Lemaitre, and Gregory Yadley, held four meetings in 2018.2020. The following Board members also served on the Governance and Nominating Committee during 2020: Kennon Guglielmo, Christine Koski, and Doug Britt. The primary purpose of the Committee isin 2020 was to identify and recommend to the Board individuals qualified to become members of the Board, of Directors, consistent with criteria approved by the Board, develop
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and recommend to the Board corporate governance guidelines and policies for the Company, and monitor the Company’s compliance with good corporate governance standards. The Committee also addressesaddressed non-financial risks, including development and succession of leadership, and makesmade recommendations to the Board with respect to those and other risks facing the Company.
The Governance and Nominating Committee is governed by a written charter approved by the Board of Directors.Board. The charter is available on the Investors page of our websitewww.heliostechnologies.com and from the Company upon written request sent to the Corporate Secretary, 1500 West University Parkway, Sarasota, Florida 34243. With the reconstitution of the Committees to include the ESG Committee in 2021, the new Nominating Committee and ESG Committee Charters are expected to be adopted at the next meeting of the Board, to be held on June 3, 2021.
The Board has adopted a Statement of Policy Regarding Director Nominations, setting forth qualifications of Directors, procedures for identification and evaluation of candidates for nomination, and procedures for recommendation of candidates by shareholders.
As set forth in the Statement of Policy, a candidate for Director should meet the following criteria:
| • | must, above all, be of proven integrity with a record of substantial achievement; |
| • | must have demonstrated ability and sound judgment that usually will be based on broad experience; |
| • | must be able and willing to devote the required amount of time to the Company’s affairs, including attendance at Board and committee meetings and the annual shareholders’ meeting; |
| • | must possess a judicious and somewhat critical temperament that will enable objective appraisal of management’s plans and programs; and |
| • | must be committed to building sound, long-term Company growth. |
Other than the foregoing, the Board does not believe there is any single set of qualities or skills that an individual must possess to be an effective Director or that it is appropriate to establish any specific, minimum qualifications for a candidate for election as a Director. Rather, the Committee will consider each candidate in light of the strengths of the other members of the Board of Directors and the needs of the Board and the Company at the time of the election.
As discussed below under “Oversight of Environmental, Social and Governance (ESG) Matters,” theThe Board of Directors formally memorializedadheres to the Company’s“Rooney Rule” with respect to its consideration of board candidates. The Board is committed to considering multiple diverse candidates in evaluating any vacancy on the Board to underscore Helios’s commitment to fundamental ethical principles, including diversity and respect for the dignity of every individual. The Governance and Nominating Committee will continue to nominate Directors with diverse backgrounds in terms of geographic, cultural and subject matter experience that are complementary to those of the other Directors so that, as a group, the Board will possess the appropriate talent, skills and expertise to oversee the Company’s business.diversity.
The Committee will take whatever actions it deems necessary under the circumstances to identify qualified candidates for nomination for election as a member of the Board, of Directors, including the use of professional search firms, recommendations from Directors, members of senior management and security holders. All such candidates for any particular seat on the Board shall be evaluated based upon the same criteria, including those set forth above and such other criteria as the Committee deems suitable under the circumstances existing at the time of the election.
At its meeting on March 5, 2020, the Governance and Nominating Committee unanimously recommended two new candidates for nomination to the Board for the class of directors whose term expires in 2023, Ms. Dempsey Brown and Mr. Chenanda. Additionally, at its meeting on April 20, 2020, the Governance and Nominating Committee unanimously recommended one new candidate, Mr. Yadley, for nomination to the Board for the class of directors whose term expires at the 2021 Annual Meeting. Ms. Dempsey Brown, Mr. Chenanda and Mr. Yadley possess talent, skill sets and qualifications that align with the criteria for Board service as set forth in the Statement of Policy above. Additionally, on May 15, 2020, the
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Company announced publicly that an offer of employment was extended to and accepted by Mr. Josef Matosevic to assume the role of President and Chief Executive Officer of the Company. Mr. Matosevic’s appointment was effective June 1, 2020. Mr. Matosevic was appointed to the Board in connection with his assumption of this role on June 1, 2020, in the class of directors whose term expires at the 2021 Annual Meeting. The Governance and Nominating Committee unanimously recommended Mr. Matosevic’s nomination to the Board and concluded he possesses the talent, skill set and qualifications that align with the criteria for Board service stated above.
At its meeting on March 5, 2021, the Governance and Nominating Committee unanimously recommended to the Board that Mr. Matosevic and Mr. Yadley be nominated to serve in the class of directors whose term expires at the 2024 Annual Meeting. Mr. Matosevic and Mr. Yadley possess the talent, skill sets, and qualifications that align with the criteria for Board service as set forth in the Statement of Policy above. The Board unanimously adopted the recommendation of the Committee. Following the reconstitution of the Committees at the Board’s meeting on March 10, 2021, the members of the new ESG committee are: Mr. Chenanda (Chair), Ms. Dempsey Brown, and Mr. Yadley. The Nominating Committee members are: Dr. Schuetz (Chair), Mr. Chenanda, and Mr. Lemaitre.
Shareholder Recommendations for Nomination as a Director.Director
In order for the Committee to consider a candidate recommended by a shareholder, the shareholder must provide to the Corporate Secretary, at least 120, but not more than 150, days prior to the date of the shareholders’ meeting at which the election of Directors is to occur, a written notice of such security holder’s desire that such person be nominated for election at the upcoming shareholders meeting; provided, however, that in the event that less than 120 days’ notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be received not later than the close of business on the tenth business day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs.
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A shareholder’s notice of recommendation must set forth:
| (a) | as to each person whom the shareholder proposes be considered for nomination for election as a Director |
| (i) | the name, age, business address and residence |
| (ii) | his or her principal occupation or employment during the past five years, |
| (iii) | the number of shares of Company common stock he or she beneficially owns, |
| (iv) | any other information relating to the person that is required to be disclosed in solicitations for proxies for election of Directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, and |
| (v) | the consent of the person to serve as a Director, if so elected; and |
| (b) | as to the shareholder giving the notice |
| (i) | the name and record address of shareholder, |
| (ii) | the number of shares of Company common stock beneficially owned by the shareholder, |
| (iii) | a description of all arrangements or understandings between the shareholder and each proposed nominee and any other person pursuant to which the nominations are to be made, and |
| (iv) | a representation that the shareholder intends to appear in person or by proxy at the meeting to nominate the person(s) named. |
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Director Participation and Relationships
The2020 presented unprecedented challenges for the Company, necessitating an increased number of Board of Directorsmeetings. Consequently, the Board held ninefifteen meetings during 2018,2020 (the majority were telephonic), and all of the Directors who served in 2020 were present at each meeting. Each Director also attended all of the meetings of each committee of which he or she was a member in 2018.2020.
The Board of Directors has adopted a policy stating that it is in the best interests of the Company that all Directors and nominees for Director attend each annual meeting of the shareholders of the Company. The policy provides that the Board, in selecting a date for the annual shareholders meeting, will use its best efforts to schedule the meeting at a time and place that will allow all Directors and nominees for election as Directors at such meeting to attend the meeting. The policy further provides that an unexcused absence under the policy should be considered by the Governance and Nominating Committee in determining whether to nominate a Director forre-election at the end of his or her term of office. All of the Directors attended last year’s annual meeting of shareholders.
No family relationships exist between any of the Company’s Directors and executive officers. There are no arrangements or understandings between Directors and any other person concerning service as a Director.
Compensation Committee Interlocks and Insider Participation
None.During fiscal 2020, Marc Bertoneche, Douglas M. Britt, Laura Dempsey Brown, Cary Chenanda, Kennon Guglielmo, Christine L. Koski, Alexander Schuetz and Gregory Yadley served on the Compensation Committee. None of the current members of the Compensation Committee has been an officer or employee of our Company. Additionally, none of our executive officers serve as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s Directors, officers and holders of more than 10% of the Company’s Common Stock to file with the Securities and Exchange CommissionSEC initial reports of ownership and reports of changes in ownership of Common Stock and any other equity securities of the Company. To the Company’s knowledge, based solely upon a review of the forms, reports and certificates filed with the Company by such persons, all of themthe Company’s Directors, officers, and holders of more than 10% of the Company’s Common Stock complied with the Section 16(a) filing requirements in 2018,2020, except for Christine L. Koski and Tricia L. FultonAlexander Schuetz, who each filed one Form 4 reporting one transaction late.
Communications with the Board of Directors
Shareholders and other parties interested in communicating with our Board of Directors may do so by writing to the Board, of Directors, Sun Hydraulics Corporation d/b/a Helios Technologies, Inc., 1500 West University Parkway, Sarasota, Florida 34243. Under the process for such communications established by the Board, of Directors, the Chairman of the Board reviews all such correspondence and regularly forwards it, or a summary of the correspondence, to all of the other members of the
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Board. Directors may at any time review a log of all correspondence received by the Company that is addressed to the Board or any member of the Board and request copies of any such correspondence. Additionally, correspondence that, in the opinion of the Chairman, relates to concerns or complaints regarding accounting, internal accounting controls and auditing matters is forwarded to the Chair of the Audit Committee.
Environmental, Social and Governance (ESG) Matters
Corporate responsibilityIn 2020, Helios and sustainability are reflected inits Board affirmed its commitment to ESG matters as an integral part of the Company’s business strategy. TheTo underscore its commitment, the Board of Directors recently reviewed the Company’s historical commitment to principles of corporatecreated a new Committee entitled “Environmental, Social and social responsibility. The Company is committed to reducing emissions, recycling, and minimizing its environmental footprint and has implemented several strategies to achieve these goals. The Company is also fully committed to the safety of its employees and the safety of those who use its products. Additionally, the Company actively seeks to support diversity initiatives in its hiring and employment practices. The Board and its committeesGovernance,” whose charter will continuebe to assist the Company in its oversight of corporate social responsibilities, significant public policy issues, health and safety, and climate-change related trends. Below is a summary oftrends and other global ESG matters in addition to overseeing all corporate governance matters pertaining to the Company’s ESG activities for 2018.Company.
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We are
Additionally, the Board adopted several new policies and procedures that underscore its commitment to ESG matters. Highlights include:
ESG Policy & Procedure Highlights | ||
• Corporate Responsibility Policy (including Human Rights Policy) • Code of Conduct for Suppliers and Third-Party Vendors (including Policy Against Human Trafficking & Slavery | • Conflict Mineral Policy • Anti-Hedging Policy (Update) • Code of Business Conduct and Ethics (“Code”) (Update) | |
As summarized below, 2020 was a year of significant progress towards ESG goals for Helios across the globe.
GOVERNANCE/BUSINESS CONDUCT
Helios is committed to conducting our business with ethics and integrity. This expectation is memorialized in the policies and procedures applicable to our employees, vendors, and partners across the globe. All of our operating companies maintain their own individual ethics and code of conduct policies, the collective policies of which are also incorporated into our corporate policy, the Code. In 2020, every Helios employee across the globe was required to complete an ethics training course and to acknowledge the Code. In addition, the Helios companies maintain ethical and conduct standards for their suppliers across the globe.globe and require all suppliers to execute a Code of Conduct for Suppliers and Third-Party Vendors. In 2020, we required all employees who interact with third party suppliers to attend a training session on the prevention of human trafficking and slavery in our supply chain.
Helios maintains a confidential ethics and reporting hotline that can be accessed by employees all over the globe (heliostechnologies.ethicspoint.com). Both the Audit and GovernanceESG Committees of the Board of Directors oversee the ethics and compliance programs of the Company. As noted above, in 2018 Helios hired aOur Chief Legal and Compliance Officer who oversees our ethics and compliance programs and provides advice and counsel on a regular basis to Helios and its employees on these topics.
Information Security Disclosure
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AcrossOur Board remains active in reviewing our information security exposure and risks. In 2020, our Governance and Nominating Committee, composed of all independent Directors, was responsible for reviewing our information security risks quarterly. Some of our Directors have information security experience and have the globe,knowledge and skills to provide valuable guidance. Beginning in 2021, the same responsibility will move to the newly formed ESG committee. Our Board also receives a comprehensive review of information security measures annually.
In 2020, Helios companiesbolstered its Cyber Security posture by implementing a three-tiered security strategy, focusing on user training, email hygiene, and real-time monitoring. This strategy also assists in identifying and mitigating information security risks. To address user training, Helios implemented a cyber security training platform to raise employee awareness across all its businesses. These trainings are committeddelivered monthly and provide trainings ranging from password best practices to leadingrecognizing malicious links. Additionally, Helios has standardized a powerful email filter, protecting users and recipients from dangerous email attachments. Further, Helios implemented a powerful 24/7 security operations center (SOC) to monitor every Helios computer system in their industriesreal-time and alert the IT team of any potential danger. The SOC also utilizes a preconfigured IT “playbook” to minimizeautomatically neutralize threats based on predetermined criteria. Together, these tiers of security greatly reduce the impactHelios attack surface. Helios has not experienced a material information security breach in the last three years.
Responsible Corporate Funding
Consistent with the policies set forth in our Code, Helios does not use any corporate funds for the purposes of their activities on the environment. The Companypolitical advocacy. We recognize that using corporate funds for political advocacy is committedrestricted in many territories. Helios identifies using corporate funds for political advocacy purposes as making donations or payments for lobbying, campaign contributions, or contributions to reducing emissions, recycling, and minimizing its environmental footprint. The key points of Helios’s strategytax-exempt groups including trade associations.
In 2020, Helios did not use any corporate funds to achieve these goals are:engage in political advocacy with any individual, group, trade association, or political entity.
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Environmental and Social Responsibilities Matters
Since its inception, Helios has developed business policies and practices that support our business model and philosophy of running an ethical organization that embraces its corporate citizenship responsibilities. During 2020, a highly unusual year, our business responded with both a socially responsible and environmental approach.
Our focus:
In line with theseGiving back to our planet by becoming more energy efficient and environmentally friendly;
Giving back to our communities, supporting their causes during an eventful season of political, social and health unrest;
Giving back to our employees by driving inclusivity, diversity and equity in the workplace; and
Giving back to our shareholders, aligning our governance practices to their interests and vision.
Our commitment to sustainable, ever-evolving efforts below are some examplesin the areas of environmental and social responsibility is clearly outlined by the allocation of resources that we dedicate to ensure we can have a focused approach to planning, execution, continuous improvement, auditing and tracking of our 2018 achievements:environmental, social and governance (ESG) efforts.
ENVIRONMENTAL RESPONSIBILITY
| In 2020, Helios made several strides in its efforts to be responsible stewards of the environment. Our commitment was underscored by the creation of a new role, Senior Vice President of Global Manufacturing Operations. In this role, our senior VP will take a holistic approach to our operations as they relate to cost, quality, |
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| safety and environmental stewardship. This position will have the main oversight responsibility to ensure Helios provides enhanced disclosure on environmental issues and that it continues its new direction of a targeted approach to address risk and material concerns in the way we design, manufacture and deliver our products while eliminating risks to shareholders and their financial interests and promoting leadership accountability. Further, as detailed below, Helios companies across the globe had tangible results in the elimination of waste, | our environment. | ||||||||
TALENT DEVELOPMENT, DIVERSITY, INCLUSION AND COMPENSATION
| We believe that human resource management’s material impact to our business cannot be overstated. From the increase of employee productivity through engagement and a positive work environment to the bottom line impact the reduction of turnover can have, it is our intention to continue self-assessing and developing our ability to thrive in how we manage this critical aspect of our operation. |
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The CompanyIn 2020, Helios continued its commitments to talent development, diversity, inclusion and its employees have a long historyfair compensation practices. As set forth in the Company’s Code of caring for our communities around the worldConduct & Business Ethics and the people we employ. The Company supports social welfare programs around the globe through financial efforts and employee engagement. The CompanyCorporate Responsibility Policy, Helios is fully committed to workplaces free of discrimination or harassment of any kind and focused on increasing diversity. As highlighted below, the safety of its employeesHelios companies demonstrated their commitment to these topics through policies and the safety of those who use our products. Additionally, the Company actively seeks to support diversity initiatives in itsprocedures, training, hiring practices, and employment practices. Below are some highlights of some of these efforts made by our companies in 2018.
1.Diversity & Inclusion
The Company believes that diversity and inclusion is critical for the attraction and retention of top talent. We are investing in global leadership programs that support and develop our talent throughout the world. Of particular note, 43% of our executive officers are female. In our corporate headquarters, 54% of the professionals are female. In addition, our Enovation workforce is comprised of 44% minorities and 41% female. As a contributor to our proactive efforts to attract a diverse workforce, Enovation participates in a number of diversity events, including the Oklahoma State University’s Women’s Business Leadership Conference.events.
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2.CommunitySOCIAL RESPONSIBILITY AND JUSTICE, CORPORATE CITIZENSHIP & ECONOMIC GROWTH
Below are some highlights from 2018 demonstrating the Helios companies’ commitment to the communities in which we operate:
| In 2020, we celebrated fifty years of our pioneer business unit. Fifty years of establishing a strong presence as a corporate citizen. Although our historical commitment to enrich our local communities has never faltered, this past year’s unique social, health and financial developments |
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To continue to support Helios in its special focus on corporate giving, volunteerism, employee relief, and other giving, the Company has partnered with a third-party to continue guiding and expanding our efforts to take action on important social issues that allow us not only to serve our neighbors, but to tell the world where we stand on relevant ethical and social issues. This partner, with a long tenure administering the social responsibility efforts of other organizations, will support our efforts to provide relief to our own employees while also identifying service opportunities that allow us to address a variety of social needs within our communities. It will also help us to track our actions and investment to deliver these services, creating public confidence and goodwill and mitigating the risk that negative publicity and potentially costly litigation can have in instances where an organization fails to take action or fulfill their duty on important social issues. Inappropriately managed social risks can also be detrimental to the value of a business and a threat to shareholder value. Our new program will help us with the oversight of these risks, as well as the effective management of our resources and those of our employees who are committed to exercise their civic and social duty in a responsible, compassionate and conscientious manner.
ENVIRONMENTAL MATTERS – OUR PLANET
We take great pride in protecting the environment, and we want to preserve the beauty of our planet for Our commitment to being good stewards of our environment has continued not only with isolated energy consumptions actions, but with a systematic approach to monitoring our operations from a functionality, energy and quality perspective. Our approach focuses not only on a change in operations, but also on product design, and extending our energy-efficiency efforts to our end users. We also established metrics and associated with industry auditing firms to certify our efforts, resulting in important designations. |
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Here are some of our most significant accomplishments:
Environmental Stewardship – Energy Efficiency • Energy efficient product design and modification: These snapshots (pictured right) are from CFD Simulation (Computational Fluid Dynamics). There are two efficiencies gained with simulation. First, we optimize pressure drop in the valve to reduce energy consumption when the valve is in use. Second, simulation allows virtual optimization so there are fewer iterations done with real hardware, thus reducing material usage, processing, etc. This is an excellent illustration of our new way to handle product design and modification to ensure energy efficiency for us and our end users. |  |
Electricity improvements: In Italy, we improved energy efficiency by changing LED lights in production areas from 6,000 to 16,800 lumens while maintaining the same consumption in Watts. In Korea, our efforts resulted in an increased electricity efficiency from 87% to 95%.
Facility updates: We improved our cooling efficiency by switching from a straight cool unit to a Variable Air Volume (VAV) system, removed an old fire suppression system and upgraded to an environmentally friendly system, upgraded all new motors to high efficiency (greater than 95%) and created electric vehicle charging stations in 2020 with more to be installed in 2021.
Energy use monitoring: Our process now includes ultrasonic checks for leak determination and replacement of various fittings to reduce compressed air losses.
Product design improvements: We established a new control scheme for test stand control, increasing efficiency, reducing energy and heat waste and resulting in lower energy consumption for our customers.
Environmental Stewardship – Recycling
Reusage: Our business units reused packaging (up to 98% reusage rate), logistics waste and shipping materials intra-company and third party, creating a highly efficient, cost-effective and environmentally friendly packing and shipping recycling program. This effort included the collection of plastic trays that were sent back to suppliers for reuse.
Paper use reduction: By inserting the Quick Response Code (QR) code on packaging, it allowed for elimination of the paper manual. Our new system of reference drawings also eliminates the need of printouts. We eliminated paper catalogs by establishing a web-enabled catalog that allows original equipment manufacturers (“OEM”) and distributors to order and submit modifications online. In addition, we introduced three new environmentally friendly models to our MultiFaster product family, reducing the use of chemical painting resulting in reduction of business cost and paper usage.
Waste reduction: We streamlined processes to drastically reduce solid scraps and oil waste. All in-house generated scraps are now sold to scrap vendors for recycling. We also redoubled recycling and scrap material management in our facilities.
Recyclable packaging: Helios business units changed packaging material for shipment from Sealed urethane foam and film to recyclable materials (paper and air cushion). Further use of urethane foam and film has been permanently discontinued as of 2020.
Facility recycling efforts: At one of our Florida facilities, we recycled 25 tons of steel, 20 tons of aluminum and 27 tons of cardboard in one year. In Italy, our “Green Together” initiative established organic food in vendor-only machines, avoiding the use of plastic, recycling and reusing material and exclusively utilizing a water dispenser to reduce paper consumption. In addition, we have fully transitioned from plastic to cardboard coffee cups in all vending machines.
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Environmental Stewardship – Emission & Waste Reduction
 | • New technology: We received a John Deere Supplier Innovation Award for our industry-leading design that enabled a 75% reduction in leak points and purchased components on a combine harvester (pictured right). • Process improvements: In Korea, we changed our washing method for integrated packages from a solvent/thinner product to a degreasing process. Compared to 2018, this change reduces the usage of methylene chloride from 3,000 liters to 0 liters annually. |  | ||
We have eliminated the use of Freon 113 in manufacturing, we are converting our warehouse forklifts from propane to electric power to reduce C02 emissions and we are converting all hand soldering operations to lead free solder. In 2020, we installed spill protection and plastic reduction in our facilities. | ||||
One of our Florida facilities successfully diverted 270,000 gallons of wastewater per year from the local sewer system.
Goals have been set for all new and revised product designs to reduce the probability of leaks, reducing environmental contamination. We maintain supplier relations ensuring vendors provide certification on an annual basis on their compliance with REACH (Registration, Evaluation, and Authorization and Restriction of Chemicals), to ensure our third-party associates are truly committed to the protection of human health and the environment from chemicals contained in our manufactured goods and as well as and not operating in conflict mineral regions. We also require our suppliers to ensure they are compliant with RoHS (Restriction of Hazardous Substance) Directive to ensure their products are “lead-free” and do not contain any of the 10 substances restricted by RoHS. This helps to ensure our suppliers are truly committed to the wellbeing of their associates, while protecting the environment from toxic chemicals.
Social Matters How do we serve others? As reflected in our Corporate Responsibility Policy, Helios is committed to giving back to the communities in which we serve as well as encouraging positive social action. We strive for alignment with the recognized United Nations Sustainable Development Goals (SDGs). We believe these goals are the roadmap for businesses to align their business objectives, strategy and execution with the world in which they exist. |
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At Balboa Denmark, many team members make the conscious choice to ride their bikes to work instead of their cars (pictured right) to create less CO2 emissions and protect the environment. |
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DIVERSITY, INCLUSION & EQUITY
Helios’s culture emphasizes individual integrity, initiative and responsibility. We are committed to conducting our business ethically and with integrity. The Company’s commitment to diversity and inclusion is at the very core of our talent acquisition and overall employment practices. We define diversity and inclusion as:
• Diversity – a culture that values uniqueness • Inclusion – an invitation for all individuals and groups to participate in every aspect of company life • Belonging – the feeling each employee should have in bringing their authentic self to work and being accepted for who they are • Echoing the words of our founder, Bob Koski, our commitment is to ensure that throughout our organization, we are fostering an environment that is harassment and discrimination free, that brings new and different perspectives and that attracts and retains a diverse workforce. We understand that it is our differences that bring us together to collectively achieve the same goals. We are determined to go beyond mere compliance with the law. |  |
Here are some of our recent accomplishments around diversity, inclusion and equity summarized in three main categories:
ASPIRATIONAL GOALS | INCREASING REPRESENTATION | LEARNING, DEVELOPMENT, |
ASPIRATIONAL GOALS
Strategy and execution at the board and senior leadership level was just the beginning. We regularly seek our employees’ input, thoughts, feedback and collaboration as we continue to build a work environment where our colleagues feel comfortable being themselves, and where they feel valued, respected and have a real opportunity to excel within our company.
Employees were surveyed and given a voice to weigh in on a variety of issues from core values, mission, their history with the organization, etc. We accomplished this via a variety of awareness sessions, development opportunities and monthly round tables where senior leaders interact, exchange information and listen to each one of our employees. We take great pride in maintaining an open and direct communication that develops a sense of belonging.
Each one of our operating companies maintains their own individual ethics and code of conduct policies as well as being fully committed to the Code, which sits above each operating company policy. Our organization lives these policies and takes steps to prevent discrimination and harassment in our workplaces, promotes ethical behavior, and supports diversity and inclusion within our workforce and business partners.
As noted above, Helios’s confidential ethics and reporting hotline that can be accessed by employees all over the globe under the oversight of our Chief Legal and Compliance Officer. Reported violations against our diversity and inclusion philosophy and practices are thoroughly investigated, and corrective actions are swift and effective.
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INCREASING REPRESENTATION & ENGAGING CULTURE
Relationships with Third Parties
 |  | | Increasing our commitment to the respect and dignity of all human life, we require all our third-party suppliers to execute a Code of Conduct for Suppliers and Third-Party Vendors which includes our Policy Against Human Trafficking and Slavery. |
Throughout the procurement process, we audit third party businesses to ensure they have received and understand the policy. We issue questionnaires and require attestations that they agree to abide by it. We are committed to a zero-tolerance policy with respect to human trafficking and slavery. We train our internal procurement personnel to identify and report any behaviors inconsistent with our policy. We clearly communicate that for us to maintain a working relationship with any third parties, regardless of the country or type of cultural environment in which our vendors or associates operate, they must ensure that our commitment against any type of slavery or inhumane treatment is embedded in how they conduct business and how they hire, treat and maintain their own workers. No compromises.
Internal Efforts
| Our Company has operations in twelve nations across the globe: China, Korea, Germany, Italy, India, United Kingdom, Australia, Mexico, Denmark, Argentina, Brazil and the United States of America. We can proudly report that 41% of our workforce is comprised of diverse, minority nationalities. Our organization is | | | |  | ||||
| committed to actively seek and support diversity and representation of minorities and women in the workplace. | ||||||||
We strive to create and develop opportunities for diversity throughout our organization. Notably, sixty percent (60%) of our executive officers are women. We have also made significant strides in increasing the representation of minorities within our workplace.
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Diversity & Inclusion Strategy & Commitment to Board Diversity As demonstrated above, Helios believes that diversity and inclusion, leadership development, and workforce equality are critical for the attraction and retention of top talent. Helios believes that diversity extends beyond race and gender, and also includes disability, ethnicity, nationality, religion, sexual orientation, gender identity and expression. To create a more inclusive company, we are committed to taking diversity into consideration when assessing director nominees, senior |
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| management positions, and the general workforce level. It is our belief that our Board of Directors and senior management should possess a combination of skills, experience, and diversity of background necessary to lead the Company. Helios is committed to maintaining a gender-diverse Board of Directors. In the event that our Board no longer has an acceptable level of gender-diversity, we will immediately seek to include a new Board member who not | ||||
| only satisfies our gender-diversity obligations but is exceptionally qualified. | ||||
LEARNING, DEVELOPMENT & AWARENESS
 | Helios has a long history of devoting significant resources to embed diversity and inclusion in all our training sessions to increase awareness, among other organizational and talent development initiatives. The following are some of the awareness and development sessions that were delivered to our employees across the globe: |
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3.Safety & HealthOur Social Responsibility in Challenging Times – COVID-19
The Company is committedAs discussed more fully in our 10-K, the COVID-19 pandemic caused, and continues to cause, significant economic disruption globally, and substantial uncertainty exists regarding the magnitude and duration of the pandemic and its economic impact. Helios took important steps to ensure our facilities remained operational and took many measures to give back to the community during these challenging times.
Taking Care of Our Own – Keeping Our Employees Safe During COVID-19
As an essential business, we took strides to continue to operate seamlessly, preserving our ability to provide components to our life saving and sustaining product applications. We took significant steps to ensure that our employees could safely return to work.
| ��� | COVID Risk Reduction Program: We deployed transmission risk-mitigation measures and communication efforts across all facilities, which including safety protocol training, social distancing, single entrances, monitoring and auditing, special cleaning protocols and tracing, regular communications, onsite nurses’ stations with daily questions and temperature checks and, whenever possible, conversion to working from home and, in at least one of our business units, the conversion to a 4-day work week to reduce exposure and to facilitate extraordinary cleaning measures and sanitizing during weekly closure. |
Whenever possible team members worked from home. Manufacturing employees and support personnel continued reporting to work without any major business or customer care disruption.
We created and ensured adherence to strict safety protocol across business units to protect our employees and trace COVID-19 cases to avoid spread.
Executives, senior leaders, and board members took a 20% pay cut, other employees took salary reductions in varying amounts, furloughs, voluntary retirements and small reductions in force to preserve a healthy balance sheet and business as well as employment stability.
Our COVID Risk Reduction Program deployed regular communications of its customersrisk-mitigation measures and its employees. Each company within our group maintains environmental,written and videography communications providing business, health and safety policiesoverall pandemic status updates.
Our COVID Health Crisis Leave Policy provided paid leave for those negatively impacted by illness, contact tracing, high risk and child-care/schooling challenges.
We maintained employee morale despite furloughs, temporary pay reductions and times of uncertainly via regular communications and creating an open-door policy where team members enjoyed the support of a proactive, service-oriented human resources team who provided guidance on COVID-19-related questions, unemployment compensation and other employment-related aspects of the pandemic.
Faster employees joined forces to support one of their own who suffered a serious medical emergency. They collected generous monetary donations and even prepared special t-shirts to show their support.
Enovation has an Employee Assistance Fund that seekprovides financial support to promote the operationemployees in need. The fund paid out over $10,000 in 2020.
Taking Care of Our Neighbors
In 2020, we celebrated fifty years of our business insubsidiary, Sun Hydraulics LLC, and highlighted our journey as a manner that is protective of thestrong corporate citizen. Although our historical commitment to enrich our local communities has never faltered, this past year’s unique social, health and safety of the publicfinancial developments tested our resolve to balance being active corporate citizens, delivering products to maintain lifesaving and feeding applications and safeguarding our employees. Several of our businesses have onsite medical clinics for employees and their families. Our companies offer several health and welfare programs to employees to promote fitness and wellness and preventative healthcare. In addition, our employees are offered a confidential employee assistance program that provides professional counselling to employees and their family members.
Some other examples of our safety and health initiatives are below:business profitability.
| In these difficult times, we knew that we could not stay inactive or inwardly focused; reaching out to our community did as much for the community as it did for us. Not only were we able to make a difference but focusing on the least fortunate better allowed our team to deal with our own personal, family and team challenges. |  |
24 |2021 Proxy Statement | |
Governance of the Company |
Here are a few highlights of how we made and continue to make a difference in our communities across the globe:
| • |
| neediest in Florida (pictured right). |
| • |
| lunch” was not an option for these workers (pictured below). |
| • |
| Italy for the purchase of a COVID-19 intensive care station. |
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|
Board Memberships, Volunteerism & Monetary Donations
|
|
Our organization is well represented in every community by the presence and volunteer work of many of our employees. Employees sit in over twenty boards of directors, advisory boards and advocacy teams. Hundreds volunteer countless hours of personal time to enhance the quality of life of the citizens of our localities.Helios also supported the community by making charitable donations, sponsoring events, creating multi-year scholarships and contributions in support of youth development, charities, medical, special causes and emergency services, among other non-profit community care initiatives.
| 2021 Proxy Statement | 25 |
|
Non-Profit Organizations Supported by Helios Companies | ||||
• Australian Cancer Council • Boss Car Rally Queensland – Australia • Boys and Girls Club • British Fluid Power Association • Multiple local and youth sports clubs • Community Foodbank of Eastern Oklahoma • Ganapathi Festival – India • Hunter Manufacturing Awards | • Night Light Tulsa • Red Cross International • Rotary Club Australia • Tulsa Chamber of Commerce • The University of Newcastle • University of Tulsa Catholic Center for Students • Westpac Rescue Helicopter Service • Williams Route 66 Marathon • IDS Foundation • HunterNet Cooperative | • Junior Achievement • Lions Cancer Foundation • MAKE UK • Marine Toys for Tots Foundation • Movember Foundation • National Alliance for Mental Illness (NAMI) • National Fluid Power Association • National Marine Manufacturers Association/Boat PAC • National Multiple Sclerosis Society | ||
Safety and Health
 |  | Helios is committed to a safe, secure, and healthy workplace for all of its employees worldwide. In addition to all of the safety related measures taken to protect our employees during the pandemic, Helios ensures its employees are safe in its day-to-day operations. We track and report all safety incidences and the total case incident rate (TCIR). Beyond reporting, we ensure there were appropriate measures taken not only after accidents, but also proactively via our program of safety system improvements. Our safety system improvements resulted in the implementation of changes across the organization to ensure a progressively safe operation. |
Sun Hydraulics established the Safety Training & Hearing Protection Program, rolling out a mandatory use of hearing protection throughout all our facilities. We also enforced the use of safety shoes across the board, including office personnel when visiting the manufacturing floor. As with any other safety measure, all team members are encouraged to self-audit and audit their co-workers respectfully and in a friendly manner. To promote safety while respecting social distancing restrictions, we offered regular safety e-training modules to maintain an informed workforce and safe workplace.
With the increase of racial and political tension, our business units rolled out new preventative e-sessions on violence in the workplace, stress management and unconscious bias.
Several of our business units have implemented wellness programs which reward healthy behaviors including, but not limited, to regular exercise, preventative medical care, nutrition and smoking cessation. On-site clinics are available in most of our work units. We have also implemented health passports or wellness sites that allow risk and health assessments and real-time, personalized health and nutrition information.
Flu shots were provided in most of our operating units at no cost to employees.
All of our businesses strive to be accident free, and one of our subsidiaries, Enovation Controls, had no recordable accidents in 2020.
| Talent Development and Employment Engagement |
| A core tenant of Helios’s values is our commitment to develop talent. Helios has robust programs to identify, assess, manage and develop talent globally. The process involves senior leadership and supervisors from its inception, but extends to all talent, facilitating and supporting individual professionals and personal development via focused and standardized individual development plans, career pathing, gap analysis and development & learning opportunities. | | | |
26 |2021 Proxy Statement | |
Governance of the Company |
Our key talent and leaders continue participating in the 3C Asian Leadership Institute Triad, a peer-driven, ten-module program geared to develop coaching, collaboration, leadership and communication skills and self-awareness. To date, 130 participants across the organization have participated, raising leadership quality and standard of performance for participants and their teams.
Our talent development tool, Helios Leadership Development Program (HDLP), which seeks to develop 24 vital leadership competencies to increase leadership and team effectiveness across the board, has been recently revamped and revised to tie into business needs for organizational renewal and continuous improvement. This multi-faceted, selective program includes assessments, peer support and practical high-level assignments that provide both individual formation and organizational development. In addition to the HDLP, each Helios operating company has multiple programs in place to support talent development. A few examples are below:
Our workforce has access to employee assistance programs at no cost to them. These wellness and support lines allow our workforce to speak to qualified professionals in real time about health, financial, emotional or mental health issues. These confidential counseling and support programs are available to all our employees and their direct family members free of charge.
Sun Hydraulics Korea employees created a club called The Voice of the Employee which organizes quarterly meetings with the overall workforce to engage in in-house recreational activities to increase satisfaction and inclusion. This employee-driven club reviews suggestions and plans implementation for the meeting. Awards are granted to those whose suggestions/ideas are implemented and materialized.
Our operating companies support talent development with tuition reimbursement programs and other training opportunities designed to enhance an employee’s skills, knowledge and abilities.
Conclusion
Helios is committed to operating an ethical and profitable business through a satisfied, engaged and healthy workforce. We are determined to provide our employees with the highest level of support to ensure they are safe, healthy, well-trained and aware not only of the role they play in the organization, but of their rights to work in an inclusive, diverse and respectful environment where everyone is celebrated, encouraged and appreciated.
We pledge to continue embracing our communities by supporting their mission via funding, volunteerism or other type of involvement. Finally, we are committed to the sustainability of our environment. We will leave this earth a healthy place for generations to come. We are driven by the desire to produce the type of impact that goes beyond financial results. We will deliver on our promises to maintain profitability and a healthy balance sheet, while making our communities a better place for all us to live in, share and cherish.
| 2021 Proxy Statement| 27 |
The following report shall not be deemed to be incorporated by reference into any filings made by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference, or to be “soliciting material” or to be “filed” with the Securities and Exchange CommissionSEC or subject to Regulations 14A or 14C or to the liabilities of Section 18 of the Securities Exchange Act of 1934.
Management is responsible for the Company’s internal controls, financial reporting process, compliance with laws and regulations and ethical business standards. The independent accountants are responsible for performing an independent audit of the Company’s consolidated financial statements and internal controls over financial reporting based on criteria established in the 2013Internal Control —– Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The primary purpose of the Audit Committee is to oversee the Company’s financial reporting activities. The Audit Committee selects the Company’s independent accountants and meets regularly with them to review and approve the scope of their audit, report, recommendations and fees.
The Audit Committee has reviewed and discussed the audited consolidated financial statements of the Company for the fiscal year ended December 29, 2018,January 2, 2021, with the Company’s management and with Grant Thornton LLP (“Grant Thornton”). Management represented to the Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee also reviewed and discussed with the Company’s management and Grant Thornton their respective reports on the effectiveness of the Company’s internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act as of December 29, 2018.January 2, 2021. The Audit Committee has discussed with Grant Thornton the matters required to be discussed by PCAOB Auditing Standard No. 16 (Communication With Audit Committees).
The Audit Committee has received from Grant Thornton written disclosures and the letter required by the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Committee concerning independence and has discussed with Grant Thornton its independence. The Audit Committee has considered the provision of allnon-audit services by Grant Thornton and has determined that such services are compatible with the firm maintaining its independence from the Company.
Based on its review and discussions noted above, the Audit Committee recommended to the Board, of Directors, and the Board has approved, the inclusion of the audited financial statements in the Company’s Annual Report on Form10-K for the fiscal year ended December 29, 2018,January 2, 2021, for filing with the Securities and Exchange Commission.SEC.
AUDIT COMMITTEE
David W. Grzelak, ChairLaura Dempsey Brown (Chair)
Marc Bertoneche
Douglas M.Doug Britt
Alexander SchuetzCary Chenanda
28 |2021 Proxy Statement | |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2018,2020, except as described below, the Company had no material relationships or transactions with any of the Directors or executive officers, or their affiliates. Under the Company’s Code, all employees, including the CEO, the CFO and persons performing the functions of a controller, are instructed to avoid any personal activity, investment or association which could appear to interfere with their good judgment concerning the Company’s best interests. The Company’s policy is that if an employee or Director is related in any way to a vendor or customer, someone other than that employee or Director should be the one to decide whether the Company will do business with that person. The Audit Committee must approve all transactions in which an officer or Director, or any member of such person’s family, may have a personal interest.
When the Company acquired Enovation Controls, LLC in December 2016, its natural gas production controls and engine controls and fuel systems business segments were spun off to Genisys Controls, LLC (“Genisys”), which is owned by Kennon Guglielmo and Frank Murphy, III. Until April 5, 2019, Dr. Guglielmo served as the Company’s GlobalCo-Lead, Electronic Controls, and also asCo-General Manager of Enovation Controls, and has been nominated aswas elected to be a member of the Board in June of Directors.2019. In 2018,2020, the Company sold approximately $2,584,000$732,000 of products to Genisys and purchased approximately $6,178,000$4,269,000 of products from Genisys.
OneAs an owner of the two former owners of Enovation Controls, EControls Group, Inc. (“EControls”), is wholly owned byGenisys, Dr. Guglielmo. EControlsGuglielmo received approximately $70 million from the Company for itshis equity ownership of Enovation Controls at closing and an additional $18 million inearn-out payments, including interest, for the 27 monthearn-out period following the closing. In 2019, the final earnout payment of $16,680,000 plus interest was paid to the former owners, of which Dr. Guglielmo received $5,838,000.
AsAdditionally, Mr. Gregory Yadley is a former shareholderpartner of EControls and Murphy Group, Inc.,Shumaker, Loop & Kendrick, LLP. The Company engages Shumaker, Loop & Kendrick, LLP for a variety of legal services. Since the other ownerbeginning of Enovation Controls prior to its acquisition byfiscal year 2020 through March 31, 2021, the Company Jinger McPeak received a portionpaid the firm fees of theearn-out payments from those companies. In 2018, Ms. McPeak received $128,665 inearn-out payments.$257,147 for legal services.
| 2021 Proxy Statement | | |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
The following table sets forth information as of April 4, 2019,6, 2021, except as otherwise indicated, regarding the beneficial ownership of shares of our Company’s Common Stock by:
| • | each shareholder known to us to be the beneficial owner of more than 5% of the outstanding shares of Common Stock; |
| • | each of our named executive officers; |
| • | each director; and |
| • | all executive officers and directors as a group. |
Information in this table as to our directors, named executive officers and all directors and executive officers as a group is based upon information supplied by these individuals and Forms 3, 4, and 5 filed with the SEC. Information in this table as to our greater than 5% shareholders is based solely upon the Schedules 13G filed by these shareholders with the SEC. Where information regarding shareholders is based on Schedules 13G, the number of shares owned is as of the date for which information was provided in such schedules.
Name and Address(1)
| Amount and
| Percent
| ||||||
5% Beneficial Owner
| ||||||||
Brown Capital Management, LLC and The Brown Capital Management Small Company Fund(3) 1201 N. Calvert Street Baltimore, MD 21202
|
|
5,752,164 |
|
|
18.0% |
| ||
Wasatch Advisors, Inc.(4) 505 Wakara Way Salt Lake City, UT 84108
|
|
2,901,838 |
|
|
9.1% |
| ||
The Vanguard Group(5) 100 Vanguard Blvd. Malvern, PA 19355
|
|
2,537,136 |
|
|
7.9% |
| ||
T. Rowe Price Associates, Inc.(6) 100 E. Pratt Street Baltimore, MD 21202
|
|
2,330,331 |
|
|
7.3% |
| ||
Thomas L. Koski(7)(8) 4995 Ashley Parkway Sarasota, FL 34241
|
|
2,213,212 |
|
|
6.9% |
| ||
Royce & Associates, LP(9) 745 Fifth Avenue New York, NY 10151
|
|
2,125,595 |
|
|
6.6% |
| ||
Beverly Koski(7) 700 John Ringling Boulevard Sarasota, FL 34236
|
|
1,979,604 |
|
|
6.2% |
| ||
BlackRock, Inc.(10) 55 East 52ndStreet New York, NY 10055
|
|
1,987,634 |
|
|
6.2% |
| ||
Robert C. Koski(7) 7362 Hawkins Road Sarasota, FL 34241
|
|
1,685,493 |
|
|
5.3% |
| ||
Conestoga Capital Advisors, LLC(11) 550 E. Swedesford Rd. Ste. 120 Wayne, PA 19087
|
|
1,654,305 |
|
|
5.2% |
| ||
Name and Address (1)
| Amount and
| Percent of
| ||||||
5% Beneficial Owner |
|
|
|
|
|
| ||
Wasatch Advisors, Inc. (3) 505 Wakara Way Salt Lake City, UT 84108 | 4,811,401 | 14.9 | % | |||||
T. Rowe Price Associates, Inc. (4) 100 E. Pratt Street Baltimore, MD 21202 | 3,124,998 | 9.7 | % | |||||
Brown Capital Management, LLC (5) 1201 N. Calvert Street Baltimore, MD 21202 | 2,780,456 | 8.6 | % | |||||
The Vanguard Group (6) 100 Vanguard Blvd Malvern, PA 19355 | 2,638,087 | 8.2 | % | |||||
BlackRock, Inc. (7) 55 East 52nd Street New York, NY 10055 | 2,156,158 | 6.7 | % | |||||
Directors and Officers | ||||||||
Philippe Lemaitre | 54,088 | * | ||||||
Tricia Fulton | 53,340 | * | ||||||
Marc Bertoneche | 22,449 | * | ||||||
Doug Britt | 14,600 | * | ||||||
Gregory C. Yadley | 9,948 | * | ||||||
Melanie Nealis (8) | 9,265 | * | ||||||
Alexander Schuetz | 7,675 | * | ||||||
Kennon H. Guglielmo | 5,850 | * | ||||||
30 |2021 Proxy Statement | |
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters |
Name and Address(1) | Amount and Nature of Beneficial Ownership (2) | Percent of Class | ||||||
Koski Family Limited Partnership(12) 3525 Turtle Creek Boulevard #19B Dallas, TX 75219 | 1,640,493 | 5.1 | % | |||||
Directors and Officers | ||||||||
Christine L. Koski(7) 3525 Turtle Creek Boulevard #19B Dallas, TX 75219 | 1,766,995 | 5.5 | % | |||||
Tricia L. Fulton(13) |
| 65,164 |
|
| * |
| ||
Wolfgang H. Dangel (14) |
| 47,073 |
|
| * |
| ||
Philippe Lemaitre |
| 42,113 |
|
| * |
| ||
Craig Roser(15) |
| 18,898 |
|
| * |
| ||
Marc Bertoneche |
| 16,899 |
|
| * |
| ||
Gary A. Gotting(16) |
| 13,767 |
|
| * |
| ||
David W. Grzelak |
| 13,000 |
|
| * |
| ||
Alexander Schuetz |
| 11,040 |
|
| * |
| ||
Doug Britt |
| 8,500 |
|
| * |
| ||
Melanie M. Nealis(17) |
| 6,475 |
|
| * |
| ||
Jinger McPeak(18) |
| 4,295 |
|
| * |
| ||
Kennon H. Guglielmo |
| 0 |
|
| * |
| ||
All Directors and Executive Officers as a Group (13 persons) |
| 2,014,219 |
|
| 6.3 | % | ||
Name and Address (1)
| Amount and
| Percent of
| ||||||
Jinger McPeak | 4,616 | * | ||||||
Laura Dempsey Brown | 3,300 | * | ||||||
Cary Chenanda | 2,550 | * | ||||||
Matteo Arduini | 1,525 | * | ||||||
Rajasekhar Menon | 1,360 | * | ||||||
Josef Matosevic | - | * | ||||||
Wolfgang Dangel | - | * | ||||||
All Directors and Executive Officers as a Group (15 persons) | 190,566 | 0.6 | % | |||||
| * | Less than 1%. |
| (1) | Unless otherwise indicated, the address of each of the persons listed is 1500 West University Parkway, Sarasota, Florida 34243. |
| (2) | This column sets forth shares of the Company’s Common Stock which are deemed to be “beneficially owned” by the persons named in the table under Rule13d-3 of the |
| (3) | According to Amendment No. |
|
According to Amendment No. |
|
| (5) | According to Amendment No. 14 to Schedule 13G, filed February 12, 2021, by Brown Capital Management, LLC, Brown Capital Management, LLC has sole voting power with respect to 1,708,203 shares and sole dispositive power with respect to 2,780,456 shares. |
| (6) | According to Amendment No. 6 to Schedule 13G, filed February 10, 2021, by The Vanguard Group, The Vanguard Group has shared voting power with respect to 49,328 shares, sole dispositive power with respect to 2,563,796 shares and shared dispositive power with respect to 74,291 shares. |
| (7) |
|
|
According to Amendment No. |
| |
|
|
|
Includes |
|
|
|
|
|
|
|
Compensation Discussion and Analysis
The Compensation Discussion and Analysis (CD&A) describes our general executive compensation approach, and specifically describes the compensation earned by our named executive officers (“NEOs”) in 2020. This past year, Wolfgang Dangel stepped down as CEO, and the Board appointed Josef Matosevic as the new President and Chief Executive Officer. Also, Rajasekhar Menon resigned from the Company in 2020. Our 2020 NEOs and their titles were as follows:
Named Executive Officer | Position | |
Josef Matosevic (1) | President and Chief Executive Officer (“CEO”) | |
Tricia Fulton (2) | Chief Financial Officer (and Former Interim CEO) | |
Melanie Nealis | Chief Legal & Compliance Officer & Secretary | |
Jinger McPeak | President, Electronic Controls (EC) | |
Matteo Arduini | President, Quick Release Couplings (QRC) | |
Wolfgang Dangel (3) | Former President and CEO | |
Rajasekhar Menon (4) | Former President, Cartridge Valve Technology (CVT) | |
| (1) | Mr. Matosevic assumed the role of President and CEO on June 1, 2020. |
| (2) | Ms. Fulton served as CFO and Interim CEO during the transition period of April 5, 2020 to May 31, 2020. |
| (3) | Mr. Dangel stepped down as President and CEO and separated from the Company effective April 5, 2020. |
| (4) | Mr. Menon resigned effective Sept. 25, 2020. |
Impact of COVID-19
The COVID-19 pandemic and broad measures taken by governments, businesses and others to limit the spread of the virus adversely affected the Company and its customers. Some of Helios’s global locations and production facilities had to close temporarily due to government mandates. Employees whose positions were amenable to remote work continued to work from their homes and provide support to our customers. Throughout 2020, Helios remained focused on the health, safety and welfare of our global employees, customers and communities by adopting measures in all of our facilities to allow for social distancing and additional cleaning protocols while remaining focused on meeting our customers’ needs.
The pandemic impacted Helios’s financial results relative to our performance-based incentive targets. Incoming order rates and sales declined during the year as the pandemic impacted our business, customers and end markets. During the month of April, we experienced a considerable impact on sales due to facility closures, customer shutdowns and regulatory restrictions imposed on shipments. Our production capabilities recovered throughout the second quarter, with the third quarter returning to more typical levels while order intake remained soft throughout the year. Towards the end of the year, we began to experience some recovery, with fourth quarter sales of our legacy business exceeding second and third quarter levels. Throughout the year, we implemented multiple cost saving measures to mitigate the effects of the downturn, including decreased use of consultants and contractors, adjustments to our fixed cost labor base by implementing salary reductions, furloughs and layoffs, and reduced travel, marketing and other non-essential discretionary spending. We incurred costs related to the purchase of safety equipment, personal protective equipment and additional cleaning costs to ensure the safety of our employees. To further reduce costs due to the challenges of the COVID-19 pandemic, the NEOs agreed to a 20% salary reduction for the month of May, and the Board approved a 20% reduction in director compensation for the August, October and December meetings.
Despite the challenges of the global pandemic, Helios achieved several significant financial and operational milestones in 2020, including a significant acquisition of Balboa Water Group (“BWG”) in November 2020.
32 |2021 Proxy Statement | |
Executive Compensation |
2020 Performance Results and Pay Outcomes
Increasing cash flow and paying down debt were important goals for us this year and we finished 2020 with strong cash generation and paid down nearly $50 million of debt. Other 2020 financial highlights for Helios are as follows:
Sales of $523 million
Net Income of $14.2 million
Adjusted net income of $71.9 million
Adjusted EBITDA of $121.2 million
Adjusted free cash flow of $94 million
EPS of $0.44
Adjusted cash EPS of $2.24
As a result of our 2020 performance, our short-term incentive (“STI”) program paid between 103% and 154% of the target percentage to our NEOs based on achievement of certain metrics as detailed below. All STI payouts were subject to a circuit breaker threshold of Helios net income that was met for 2020. The Compensation Committee made no adjustments to the STI plan due to the impact of COVID-19.
Our long-term incentive (“LTI”) program, which includes performance-based incentive metrics, is aligned with our Vision 2025 financial performance measures. The 2020 LTI performance-based awards will be measured over a three-year period (2020-2022) and are tied to the financial metrics set for Helios and the subsidiaries as described below.
Wolfgang Dangel separated from Helios as President, Chief Executive Officer and Director on April 5, 2020. The Company appointed Tricia Fulton, the Company’s Chief Financial Officer, to also serve as Interim President and Chief Executive Officer from April 5, 2020 until a new CEO was appointed (“Transition Period”). In addition, the Company appointed Philippe Lemaitre to the newly established position of Independent Executive Chairman during the Transition Period. Ms. Fulton and Mr. Lemaitre’s interim roles ceased on June 1, 2020 when Mr. Josef Matosevic assumed the role of President and Chief Executive Officer and joined the Board of Directors.
Compensation Philosophy and Objectives
The goals of our executive compensation program are to attract, retain and retainmotivate highly qualified leadership personnel, providing them long-term career opportunities.personnel. Our compensation philosophy is to provide executives with a competitive total compensation package whichthat motivates superior job performance, the achievement of our business objectives, and the enhancement of shareholder value. Historically,Prior to 2019 rather than basing compensation strictly on a series of specific financial metrics, we have encouraged initiative, teamwork and innovation, and each executive was enabled to use his or her abilities and particular area of responsibility to strengthen our overall performance.
We set overalltotal compensation at a level we believe to be fair, based uponon an objective review as well as a subjective analysis of the individual executive’s experience and past and potential contributions to us.the Company. An individual executive’s leadership and contribution to the accomplishment of the Company’s strategic goals has always been part of his or her performance evaluation. As described more fully in “2019 Compensation Philosophy
Shareholder Engagement and Pay Program Changes” at page 23, our approach to compensating executive officers, beginning in 2019 was substantially revised to include specific, performance-based short-term and long-term compensation. The sections below describe our 2018 compensation philosophy and objectives. As explained furtherSay on page 23,Pay
In 2020, the Company has revamped itsheld a “say-on-pay” vote on the company’s executive compensation program as set forth in the proxy statement, and 97.68% of votes cast supported the proposal. The Compensation Committee considered the results of the shareholder vote in finalizing 2021 compensation and because a substantial majority of shareholders approved the compensation program, the Committee continued to apply the same principles in determining the amounts and types of executive compensation and did not implement substantial changes as a result of the shareholder advisory vote.
| 2021 Proxy Statement| 33 |
Executive Compensation |
Shareholders have demonstrated strong support for our say-on-pay proposals in recent years, but we continue to seek shareholder feedback on our compensation program to ensure it aligns with shareholder interests and supports the long-term strategy of the Company. In 2020, we reached out to shareholders holding approximately 85% of our outstanding shares and met with shareholders holding approximately 55% of our outstanding shares. During these interactions, we discussed our executive compensation program, corporate governance and other issues. We gathered feedback from our investors and shared the feedback with management and the full Board.
2020 Compensation Program
In connection with the Company’s desire to align pay for performance and to offer market-based compensation to attract and retain top talent, the Compensation Committee performed a comprehensive review of our compensation program in 20192020. The following table describes the principal pay elements of our executive compensation program for 2020, including their purpose, timeframe and performance measures:
2020 Compensation Elements | ||||||
Pay Element | Purpose | Timeframe | Performance Measures | |||
Base Salary | Attract and retain executive talent and compensate for performing day-to-day responsibilities | Annual | Fixed cash compensation reviewed annually based on market data, company performance, and executive’s experience and past and potential contributions to the Company | |||
Short-term incentive (STI) | Reward performance against principal short-term financial drivers to achieving our objectives under Vision 2025 | Annual | Metrics are based on corporate or subsidiary performance as follows: Corporate executive metrics: • Adjusted EBITDA (40%) • Adjusted free cash flow (40%) • Helios revenue (20%) Subsidiary executive metrics: • Helios adjusted EBITDA (25%) • Subsidiary adjusted EBITDA (25%) • Subsidiary adjusted free cash flow (25%) • Subsidiary revenue (25%) | |||
Long-term incentive (LTI) | ||||||
• Performance-based restricted stock units (50%) | Motivate executives to achieve multi-year corporate financial objectives consistent with the Company’s long-term strategy | Vest in full after 3 years | Metrics are based on corporate or subsidiary performance as applicable: • Adjusted EBITDA margin (40%) • Adjusted EPS (40%) • Revenue compound annual growth rate (CAGR) (20%) | |||
• Time-vested restricted stock (25%) | Attract and retain executives and motivate support for our long-term strategy | Vest pro rata over 3 years | ||||
• Stock options (25%) | Align executives’ interests with those of shareholders | Vest pro rata over 3 years; 10-year term | ||||
34 |2021 Proxy Statement | |
Executive Compensation |
2021 Compensation Program Changes
To align pay with performance and to offer market-based compensation to attract and retain top talent, the Compensation Committee performed a comprehensive review of our compensation program in late 2020. The result of the review was recommendations for changes to our 2020 compensation plans intended to tie each executive’s pay more closely with the corporate and subsidiary financial and operational performance objectives over which they have the greatest impact. To more fully align executive pay with performance, the Compensation Committee modified the metrics and weightings in the short- and long-term incentive plans to link each executive’s compensation more closely with their individual and business unit goals (if applicable).
Short-term incentive plan.For 2021, to reward corporate executives for personal achievements related to their specific financial and operational goals, the Committee added an individual goal weighted at 10% and reduced the free cash measure. The revised corporate executives’ measures and weightings for 2021 are as follows:
2021 Changes to STI Measures and Weightings
Corporate Executives | ||||
Performance Measures | 2020 Weightings | 2021 Weightings | ||
Helios adjusted EBITDA | 40% | 40% | ||
Helios net sales | 20% | 20% | ||
Helios adjusted free cash flow | 40% | 30% | ||
Individual goals | — | 10% | ||
Also, to more directly align our Vision 2025 strategy.subsidiary executives’ pay with the performance of their business unit and to reward them for meeting individual goals related to the success of their business unit, the Committee eliminated the corporate-level EBITDA measure and added a personal goal weighted at 10%. The revised subsidiary executives’ measures and weightings for 2021 are as follows:
2021 Changes to STI Measures and Weightings
Subsidiary Executives | ||||
Performance Measures | 2020 Weightings | 2021 Weightings | ||
Helios adjusted EBITDA | 25% | — | ||
Subsidiary adjusted EBITDA | 25% | 40% | ||
Subsidiary net sales | 25% | 20% | ||
Subsidiary adjusted free cash flow | 25% | 30% | ||
Individual Goals | — | 10% | ||
Long-term incentive plan.The Compensation Committee also revised the performance metrics for the performance-based restricted stock units to eliminate the Helios three-year compound annual growth in net sales to increase the focus on profitability over revenue. For 2021, the long-term incentive plan mix will remain the same: time-vested restricted stock units that vest pro rata over three years (25%), stock options (25%) and performance-based restricted stock units that vest in full after three years based on meeting certain performance goals (50%).
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Executive Compensation |
Compensation Policies and Practices
The Company employs the following best pay practices that reflect the Company’s compensation philosophy:
What we do | What we don’t do | |
✓ Link executive pay to company performance through our annual and long-term incentive plans | × No single-trigger change-in-control provisions for future long-term incentive awards | |
✓ Balance among short- vs. long-term incentives, cash vs. equity and fixed vs. variable pay | × No hedging or pledging by executives or directors of equity holdings | |
✓ Compare executive compensation and company performance to relevant peer group companies | × No repricings of underwater stock options | |
✓ Minimum stock ownership requirements for all executives and members of the Board | × No tax gross-ups | |
✓ Maintain a compensation clawback policy to recapture unearned incentive pay | × No aspect of the pay policies or practices pose material adverse risk to the Company | |
✓ Provide only limited perquisites | ||
The 2018 Compensation Process and Approach
Our compensation program is overseen by a compensation committee (the “Committee”)the Compensation Committee, comprised of independent directors, which operates pursuant tounder a charter that was approved by the Board on June 14, 2019. The Committee reviews the compensation of Directors on May 29, 2013. Compensation of oureach individual executive officers on an individual basis is reviewed annually by the Committee.officer annually. The Committee also makes equity awards under compensation plans approved by the Board of Directors and, where required, by the shareholders, to the chief executive officer and to other key management employees uponon the recommendation of the chief executive officer. All changes
Compensation Program Reviews
The Company’s compensation program seeks to align executive pay with the market medians, as well as to executive and Company performance and business objectives in order to retain key talent and reward high-performing executives to maintain a strong management team. The Compensation Committee engages an independent compensation consultant, Mercer, to review our compensation philosophy and the competitiveness of the NEOs’ current compensation oflevels.
In 2018, Mercer conducted a review focused on strengthening the Company’s executive officers are requiredpay philosophy to be reported promptlyprovide market competitive pay and to link compensation to performance, including the contribution each executive makes to the full Boardoverall business objectives and corporate success. Mercer’s 2018 review informed our 2019 and 2020 pay decisions.
The 2018 review also assessed the methodology we use to set executive pay, and to ensure that our pay levels are consistent with the market. The review included a detailed evaluation of Directors.the compensation program, including base salary, STI opportunity, LTI opportunity, target total cash compensation, and target total direct compensation for the NEOs. The review found that base salaries, short-term incentives and target total cash compensation were below the 50th percentile for the CEO, CFO and other NEOs. Long-term incentives were slightly above market, which improves overall positioning of target total direct compensation compared to market. Based on this review, the Company will be moving to align executive pay more closely with the 50th percentile of its market peers over the next few years, both in the level and structure of its compensation.
Mercer’s 2018 review compared our executive compensation program to the market using Mercer’s proprietary survey database as well as public company proxy data, including publicly traded, similarly sized companies in our industry. Mercer evaluated peer company appropriateness by auditing the ISS peer group, companies provided by Helios, and S&P CapIQ’s database of publicly-traded U.S. Companies, based on their revenue size, industry, other financial and organizational measures, and business model/footprint to determine if they accurately describe the Company’s market for executive talent.
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Executive Compensation |
In the fourth quarter of 2020, Mercer again reviewed our peer group and executive compensation levels and made changes to the peer group and executive pay levels for 2021 to more closely align executive pay with the market median (see “2021 Peer Group” below).
Peer Group
To assist the Compensation Committee in determining appropriate overallreviewing and setting executive compensation for 2020, the Committee considered data from annual reports and proxy statements of selected “peer group” companies. The Committee reviews from time to time information regardingon revenues, income, and executive compensation for other U.S. public manufacturing companies and selected businesses in the U.S. of similar size and scope. The Committee also considers selectedconsidered information regardingon compensation practices, including employee benefits, from manufacturing companies in other countries in which we operate in an effort to ensure that we maintain competitiveness locally in the markets in which our executive officers reside.
The peer group used to set 2020 pay was comprised of companies with revenue between 0.5x to 2x that of the Company’s revenue, representing a similar industry or related industry that offer similar products, have a similar value chain, or operate within a similar geographic footprint. Data from these sources was individually matched to each executive based on title, job, functional responsibility, and business line scope where possible. The peer group is used to assess executive pay competitiveness, inform subsequent pay decisions, and shape the future design of the STI and LTI plans.
The peer group includes primarily companies in the industrial machinery industry that are similar in size to the Company based on revenue and market capitalization, and with which the Company competes for talent. At the time the peer group was set, the Company’s percentile ranks for revenue and market capitalization compared to the peer group were as follows:
Peer Group Used to set 2020 Pay | ||||
Percentile Rank | Revenue (in millions) * | Market Capitalization (in millions) * | ||
25th Percentile | $411 | $1,115 | ||
Median | $687 | $1,719 | ||
75th Percentile | $918 | $2,117 | ||
Helios Technologies | $585 | $1,800 | ||
Percentile Rank | 47% | 61% | ||
| * | For trailing 12-month period as of Sept. 17, 2018 based on S&P CapIQ database. |
The peer group includes the following 15 companies that were identified in late 2018 to set 2019 and 2020 pay:
Peer Group Companies | ||
AAON, Inc. | NV5 Global, Inc. | |
Actuant Corporation (later became Enerpac Tool Group) | Protolabs, Inc. | |
Altra Industrial Motion Corp. | Raven Industries, Inc. | |
Badger Meter, Inc. | RBC Bearings Incorporated | |
CIRCOR International, Inc. | Tennant Company | |
Dorman Products, Inc. | The Gorman-Rupp Company | |
ESCO Technologies Inc. | The KeyW Holding Corporation (was acquired in 2019 and removed from peer group) | |
Mueller Water Products, Inc. | ||
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Executive Compensation |
2021 Peer Group
In September 2020, the Committee asked its independent compensation consultant, Mercer, to review the 2018 peer group for continued appropriateness as part of its 2020 executive pay market study. The 2020 review found the total direct compensation of each of the CEO, President, Electronic Controls (EC) and Chief Legal & Compliance Officer & Secretary were below market median. Mercer recommended a revised peer group of companies with revenues between 0.5x and 2.0x Helios’s revenues that are in a similar industry or related industry that offer similar products, have a similar value chain, or that operate within a similar geographic footprint. Mercer also considered other financial metrics, such as market capitalization and EBITDA in its analysis. Based on Mercer’s recommendations and to more appropriately reflect the Company’s size, the Compensation Committee made the following changes to the 2018 peer group to set 2021 pay:
2021 Peer Group Changes | ||
Deletions | Additions | |
Altra Industrial Motion Corp. | Douglas Dynamics, Inc. | |
The KeyW Holding Corporation | Kadant, Inc. | |
| Lindsay Corp. | ||
| Trimas Corp. | ||
The 2021 peer group includes primarily companies in the industrial machinery industry that are similar in size to the Company based on revenue and market capitalization, and with which the Company competes for talent. At the time 2021 compensation levels were set, the Company’s percentile rank for revenue and market capitalization compared to the 2021 peer group were as follows:
2021 Peer Group | ||||
Percentile Rank | Revenue (in millions) * | Market Capitalization (in millions) * | ||
25th Percentile | $450 | $882 | ||
Median | $592 | $1,290 | ||
75th Percentile | $841 | $2,519 | ||
Helios Technologies | $513 | $1,350 | ||
Percentile Rank | 41% | 55% | ||
| * | For trailing 12-month period as of August 19, 2020 based on S&P Capital IQ database. |
CEO Total Compensation
In 2020, the Compensation Committee engaged Mercer to review Mr. Matosevic’s total compensation package. Based on Mercer’s assessment of peer group compensation and survey data, the Committee determined that Mr. Matosevic’s total compensation was below the market median, with some aspects of his pay significantly below the median, based on the updated peer group data and survey data Mercer used in its 2020 analysis. To bring his pay closer to the market median, the Committee approved a base salary increase for 2021 and increases to his target short- and long-term incentive plan opportunities, as noted in the table below.
| 2020 Base | 2020 STI/LTI % | Target Total 2020 Pay | 2021 Base | 2021 STI/LTI % | Target Total 2021 Pay | |||||||
Josef Matosevic | $704,000 | 100%/175% | $2,455,2001 | $786,000 | 100%/258% | $3,600,000 | ||||||
| 1 | Mr. Matosevic was given a sign-on equity award and his total target compensation rate on an annualized basis was $3,054,000. |
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Executive Compensation |
Components of Executive Compensation
Executive pay includes a mix of fixed compensation (base salary and benefits) and variable pay (annual and long-term incentives) that is based on meeting a combination of short- and long-term goals. A significant portion of executive pay is “at risk” or based on meeting performance goals to align executive pay with the long-term goals of the company. The following disclosure discusses our general executive and key employeecharts illustrate the target total direct compensation approach, and specifically describesmix for the compensation earned by our “named executive officers” (“NEOs”) in 2018. The NEOs are the chief executive officerCEO and the fouraverage for the other most-highly compensatedNEOs as a group.
Company CEO Target Total Compensation Mix2 | Company Average All Other NEOs Target Total Compensation Mix | |
|
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On February 28, 2020, the Compensation Committee of the Board approved a new Executive Compensation Plan (“ECP”). The ECP sets forth the elements of executive compensation: base salary, STI, LTI, and benefits. As described more fully below, the STI and LTI elements of the program are specifically designed to align pay directly to Company performance. In February 2020, the Compensation Committee changed the allocation of long-term compensation for the executive officers in a given year. For 2018, our NEOs were Wolfgang Dangel, Tricia Fulton, Gary Gotting, Jinger McPeak,to 25% stock options, 25% time-based restricted stock units and Craig Roser.50% performance-based restricted stock units. The revised ECP allows for straight line interpolation of payouts ranging from 0-200% based upon the achievement of the underlying metrics.
Compensation.Base Salary
Our general approach to compensating executive officers is to pay cash salaries whichthat are generally are competitive within ranges ofwith salaries paid to executives of other manufacturing companies, particularly in our geographic areas. The Compensation Committee approved salary increases for 2020 as part of a plan to more closely align total compensation with the median of our peer group over the next five years. Our overall financial performance also influences the general level of salary increases. To reduce costs due to the challenges of the COVID-19 pandemic, the NEOs agreed to a 20% salary reduction for the month of May.
| 2 | For purposes of this chart, the mix represents Mr. Matosevic’s 2020 compensation as if earned as an annual representation. |
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Executive Compensation |
Salaries are reviewed annually by theThe Compensation Committee.Committee reviews salaries annually. The chief executive officer,Chief Executive Officer, after seeking input from other key managers and reviewing selected market data, has recommended increases for the other executive officers based uponon his analysis of theeach individual executive’s experience and past and potential contributions to the Company. Based on the foregoing factors, the compensationsalary increases for 2020 ranged from 3% to 10% for the NEOs, was increased in 2018, as set forth in the following table:
2017 Salary | Salary Increase | 2018 Salary | ||||||||||
Wolfgang H. Dangel | $ | 515,000 |
| $ | 14,856 |
| $ | 529,856 |
| |||
Tricia L. Fulton | $ | 262,000 |
| $ | 60,817 |
| $ | 322,817 |
| |||
Jinger McPeak | $ | 209,077 |
| $ | 31,586 |
| $ | 240,663 |
| |||
Gary A. Gotting | $ | 200,000 |
| $ | 24,038 |
| $ | 224,038 |
| |||
Craig Roser | $ | 205,000 |
| $ | 33,654 |
| $ | 238,654 |
| |||
| Named Executive Officer | 2019 Salary | 2020 Salary(1) | ||||||
Josef Matosevic (2) | — | $ | 704,000 | |||||
Tricia Fulton | $ | 400,000 | $ | 412,000 | ||||
Melanie Nealis | $ | 319,000 | $ | 338,000 | ||||
Jinger McPeak | $ | 265,000 | $ | 292,000 | ||||
Matteo Arduini (3) | $ | 246,338 | $ | 278,000 | ||||
Wolfgang Dangel (4) | $ | 546,000 | $ | 590,000 | ||||
Rajasekhar Menon (5) | $ | 350,000 | $ | 386,000 | ||||
Bonuses historically
| (1) | All officers took a 20% pay cut during the month of May 2020 that is not reflected in the table above. |
| (2) | Mr. Matosevic assumed the role of President and CEO on June 1, 2020. |
| (3) | Mr. Arduini’s salary was paid in Euros and converted to U.S. dollars using average annual exchange rates of $1.139184/Euro and $1.119719/Euro for the 2020 and 2019 years, respectively. |
| (4) | Mr. Dangel stepped down as CEO and separated from the Company effective April 5, 2020. |
| (5) | Mr. Menon joined the Company in April 2019 and resigned effective Sept. 25, 2020. |
Short-Term Incentives
In 2020, our STI program aimed to harmonize the bonus structure across corporate and subsidiary functions, and to enhance our pay-for-performance relationship by increasing the program’s alignment with our communicated financial goals, and improving the clarity of our plan’s objectives for our employees and shareholders. Cash STI awards for 2020 were granted for superior performancebased on an individual basis orobjective formula with preset financial targets designed to drive our overall Company and subsidiary financial results. The primary financial performance goals are adjusted EBITDA (40%), adjusted free cash flow (FCF) (40%), and revenue (20%). These measures were selected because they are the principal financial drivers to achieving our objectives under Vision 2025. The STI awards for subsidiary-level NEOs (Matteo Arduini, Jinger McPeak, and Rajasekhar Menon) were based on the same metrics at the subsidiary level (except for Helios Adjusted EBITDA). Due to exceptional performance in 2020, the STI plan allowed for bonus payouts. All STI payouts were subject to a circuit breaker threshold of Helios net income that was met for 2020. The Committee made no adjustments to the STI plan due to the impact of COVID-19.
The Committee determines STI payouts based on an objective formula with target and maximum performance levels. As updated, the ECP provides for a maximum STI payout of 200% of target. In February 2020, the Compensation Committee set STI targets for each of the NEOs consistent with the recommendations set forth by the Mercer study.
Annual cash incentive awards for the NEOs in 2020 were contingent on the attainment of corporate and subsidiary performance metrics established by management and approved by the Board. Targets were set using the anticipated 2020 budget of the Company and external financial guidance range to determine target and maximum payments.
Corporate executives.For 2020, the Compensation Committee set annual incentive cash targets for corporate-level NEOs (Josef Matosevic, Tricia Fulton and Melanie Nealis) based on meeting the following performance goals:3
Measure | Weighting | Actual/Actual as a Percent of Target ** | ||
Adjusted EBITDA Margin* | 40% | 23.1%/154% | ||
Adjusted Free Cash Flow (as a % of Sales)* | 40% | 18.8%/200% | ||
Net Sales * | 20% | (10.4%)/0% | ||
| 3 | Mr. Dangel did not receive a 2020 incentive cash bonus under the STI plan. He was paid the value of his target bonus pursuant to the terms of his Separation Agreement as discussed below. |
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Executive Compensation |
| * | 2020 results excluded our acquisition of Balboa Water Group that occurred in November 2020. |
| ** | The Company does not disclose the specific corporate level goals because it believes disclosing these goals would reveal confidential and proprietary information and could result in competitive harm to the Company. |
Subsidiary executives.For 2020, the Compensation Committee set annual incentive cash targets for subsidiary-level NEOs (Matteo Arduini (QRC) and Jinger McPeak (EC) based on meeting subsidiary performance goals as partfollows:4
Measure | Weighting | EC % of Goal Achieved Actual/ Actual as Percent of Target ** | QRC % of Goal Achieved Actual/Actual as Percent of Target ** | |||
Helios Adjusted EBITDA Margin* | 25% | 23.1%/154% | 23.1%/154% | |||
Subsidiary Adjusted EBITDA Margin | 25% | 16.7%/125% | 25.1%/127% | |||
Subsidiary Adjusted Free Cash Flow (as a % of Sales) | 25% | 15.8%/131% | 16.9%/200% | |||
Subsidiary Net Sales | 25% | (20.1%)/0% | 3.2%/134% | |||
| * | 2020 results excluded our acquisition of Balboa Water Group that occurred in November 2020. |
| ** | The Company does not disclose the specific subsidiary level goals because it believes disclosing these goals would reveal confidential and proprietary information and could result in competitive harm to the Company. |
The disclosure of a company-wide bonus award. Enovation has a formula-driven, short-term cash bonus planthe underlying goals for its employees, including NEO Jinger McPeak.the measures above would reveal competitively sensitive, proprietary and confidential information that the Company does not disclose publicly. Disclosing these metrics could potentially reveal insights about our business plans and strategic objectives that our competitors could use against us in the marketplace. Achieving target-level goals is reasonably anticipated but uncertain and would be considered “strong performance” based on historical performance. Threshold goals are more likely to be achieved and maximum goals are considered aggressive.
Equity Compensation.Award payouts. After year-end, the Compensation Committee determined to what extent the goals were satisfied, with partial satisfaction warranting partial payout of the cash incentive awards. The award opportunity as a percentage of each NEO’s base salary, target and maximum award levels and actual awards are set forth in the table below. Linear interpolation is used to determine STI payouts for performance between levels.
Executive | Target as a % of Base Salary | Target | Maximum | Actual Award as a % of Base Salary | Actual Award | |||||
Josef Matosevic (1) | 100% | 100% | 200% | 142% | $583,147 | |||||
Tricia Fulton | 60% | 100% | 200% | 85% | $351,024 | |||||
Melanie Nealis | 40% | 100% | 200% | 57% | $191,984 | |||||
Jinger McPeak | 40% | 100% | 200% | 41% | $120,304 | |||||
Matteo Arduini (2) | 30% | 100% | 200% | 46% | $127,159 | |||||
Wolfgang Dangel (3) | 70% | 100% | 200% | 70% | $413,000 | |||||
Rajasekhar Menon (4) | 50% | 100% | 200% | 50% | $193,000 | |||||
| (1) | Mr. Matosevic’s award was prorated since he assumed the role of President and CEO on June 1, 2020. |
| (2) | Mr. Arduini’s annual incentive award was paid in Euros and converted to U.S. dollars using an average exchange rate for 2020 of $1.139184/Euro |
| (3) | Mr. Dangel stepped down as CEO and separated from the Company effective April 5, 2020 and under the terms of his Separation Agreement, the Company paid him a lump-sum cash payment of $413,000, representing his short-term incentive bonus paid at target, which was less than he would have received based on actual performance. |
| (4) | Mr. Menon resigned effective Sept. 25, 2020 and under the terms of his Separation Agreement, the Company paid him a lump-sum cash payment of $193,000, representing his short-term incentive bonus paid at target, which was less than he would have received based on actual performance. |
| 4 | Mr. Menon did not receive a 2020 incentive cash bonus under the STI plan. He was paid the value of his target bonus pursuant to the terms of his Separation Agreement as discussed below. |
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Executive Compensation |
Special one-time cash awards. Due to their extraordinary efforts during 2020 to manage through the COVID-19 global pandemic, CEO transition, and significant acquisition of Balboa Water Group, the Compensation Committee awarded special one-time discretionary awards to Ms. Fulton ($66,093), Ms. Nealis ($66,093) and Ms. McPeak ($50,750). Also, Mr. Matosevic received a one-time cash sign-on bonus of $42,644 intended to offset the cost of temporary housing expenses for a period of six months under the terms of his offer of employment.
Long-Term Incentives
We utilizeuse equity awards as long-term compensation incentives for executive officers and other key managers. The Committee determined that the long-term compensation program would be related to Company performance but, historically, it did not move automatically in lock-steplockstep with such performance. To better align with long-term value creation and the Company’s Vision 2025, in 2020, the Committee reintroduced stock options, which make up 25% of the equity awards, along with 25% time-based restricted stock units and 50% performance-based restricted stock units. The purpose of the new plan is to attract, retain, and motivate executives, consistent with the Company’s long-term strategy, and to align more fully the interests of executives with those of shareholders by giving them a personal interest in the value of the Company’s Common Stock over the long term. Stock options vest pro rata over three years and have a 10-year term. The time-based restricted stock awards vest pro rata over three years and the performance-based restricted stock units vest in full after three years based on meeting certain performance goals. All time-based and performance-based restricted stock units are settled in Company common stock.
Mr. Menon forfeited all equity received under the 2020 annual equity award when he resigned from the Company effective Sept. 25, 2020, and Mr. Dangel forfeited all equity received under the 2020 annual equity award when he stepped down as CEO and separated from the Company effective April 5, 2020. LTI awards will be forfeited if a recipient violates applicable non-solicitation or non-competition agreements.
In setting LTI award levels as a percentage of base salary, the Committee considered the results of Mercer’s competitive market analysis in an effort to better align executives’ award levels with the median of peer company award levels. For 2020, our NEOs were awarded the following:
Executive | Target as a % of Base Salary | Number of Time-based Restricted Stock Units Awarded | Number of Performance-based Restricted Stock Units Awarded | Number of Stock Options Awarded | ||||
Josef Matosevic (1) | 175% | 5,127 | 10,255 | 5,127 | ||||
Tricia Fulton | 106% | 3,239 | 6,478 | 3,239 | ||||
Melanie Nealis | 106% | 2,657 | 5,314 | 2,657 | ||||
Jinger McPeak | 64% | 1,377 | 2,755 | 1,377 | ||||
Matteo Arduini | 64% | 1,311 | 2,623 | 1,311 | ||||
Wolfgang Dangel (2) | 159% | 6,958 | 13,915 | 6,958 | ||||
Rajasekhar Menon (3) | 90% | 2,579 | 5,159 | 2,579 | ||||
| (1) | Mr. Matosevic was hired on June 1, 2020. His 2020 awards were pro-rated for the partial year. Additionally, the number of time-based awards included in the table above, does not include the 17,500 units issued for his sign on bonus. |
| (2) | Mr. Dangel forfeited all equity received under the 2020 annual equity award when he stepped down as CEO and separated from the Company effective April 5, 2020. |
| (3) | Mr. Menon forfeited all equity received under the 2020 annual equity award when he resigned from the Company effective Sept. 25, 2020. |
Performance-Based Restricted Stock Units. Half of the 2020 equity awards were in the form of performance-based restricted stock units that vest in full after three years based on performance against threshold, target and maximum levels achieved over a three-year performance period. Provided minimum threshold performance is met with respect to each performance metric, payout for that metric may be from 0% to 200% of the performance-based restricted stock units allocated to that metric. For 2020, the measures for corporate executives were adjusted EBITDA margin (40%), adjusted EPS (40%) and revenue compound annual growth rate (CAGR) (20%). Adjusted EBITDA margin and adjusted earnings per share are driven by revenue growth, partially offset by items such as freight, seasonality, foreign currency exchange, one-time operational items, and the impact of acquisitions. Helios believes that adjusted EBITDA margin and adjusted EPS, which are non-GAAP measures, are good measures of the Company’s operating performance. For Matteo Arduini and Jinger McPeak who are employed within a subsidiary, LTI measures are tied to the same metrics but for subsidiary level performance.
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Executive Compensation |
Given the impact of the COVID-19 pandemic on the economy and the Company, which negatively affected the ability of our officers to realistically achieve awards under the 2019-2021 LTI, the Compensation Committee adjusted certain targets. The Committee has recognizeddetermined that the adjustments were appropriate to maintain a LTI program that aligns pay for performance with the Company’s desire to attract and retain top talent, as well as the Company’s migration to market-based compensation at different periods in the economic cycle, long-term compensation might have greater or lesser importance in relationship to salary adjustments. Through 2018,50th percentile over time.
In February 2020, the Committee reviewed our actual results for 2019 against the 2019 long-term incentive plan targets established annually a pool of shares to be used for long-term compensation. The levelat the beginning of the pool varied withthree-year performance period during Q1 of 2019 and covering the performance period of 2019-2021. The Committee determined that the performance levels that had been established at the beginning of the year were based on the then-current business environment (without consideration of unknown extraordinary events such as the tariffs imposed by China) and our performance, althoughinternal projections were no longer reasonably attainable, and as such the plan would likely result in little to no payout to plan participants. As a result, the Committee has believed it is important to rewarddetermined that the plan would not effectively serve its goal of incentivizing the performance and incentivize employees even in difficult times. The chief executive officer recommends awards forretention of our executive officers and other keyplan participants. In light of these findings, and after reviewing our 2020 forecast and projections for 2021 performance, the Committee decided to adjust the underlying performance levels for each of the three measures. The Committee retained the structure and weighting of each metric as originally designed. In making these adjustments, the Committee wanted to ensure that the 2019 LTI plan continued to incentivize our executive officers and other participating employees. The Committee reviews those recommendations, approves or revises them,believes that the adjusted target levels remain difficult to achieve and determines long-term compensationwould continue to encourage dedicated corporate and individual performance.
In January 2021, the Compensation Committee assessed the impact of the pandemic on the LTI plan awards for the chief2019-2021 and 2020-2022 performance periods. In part to address the challenges presented by Covid-19 and to continue to incentivize and retain the executive officerteam, after considering various alternatives, the Compensation Committee decided to adjust the LTI plan targets for the 2019-2021 and 2020-2022 performance periods. In making this decision, the other executive officers.
Compensation Committee considered that these awards would not be effective to motivate and retain our executives without adjustment. The principal elementCompensation Committee adjusted the targets for the 2019-2021 and 2020-2022 performance periods to raise the target revenue CAGR and adjusted EPS metrics and lower the EBITDA metric. The revised revenue CAGR, adjusted EPS, and adjusted EBITDA margin include the forecasted results of our long-term compensation program through 2018 has been2020 acquisition of Balboa Water Group. In revising the usetargets, the Committee also considered the investments into the business that would be needed that will impact the EBITDA margins.
Time-based Restricted Stock Units. In 2020, 25% of the LTI was awarded in time-based restricted shares of Company common stock granted under a written plan approved by our shareholders.units that vest one-third each year over three years. The Committee determined that this form of long-term compensation, tied to value creation for the Company, best alignedaligns the interests of key employeesofficers with those of shareholders. The objectives of the program are to award the high achievers, to identify key employees within the Company (including those who demonstrate leadership)reward officers for long-term performance, encourage retention, and because it is long-term, to promote equity ownership in the Company. Criteria used by
Stock Options. In 2020, the CommitteeCompany reintroduced stock options, which make up 25% of the equity awards. The stock option awards will vest pro rata over three years and have a 10-year term. Exercise price is equal to the fair market value of the Company’s stock on the date of grant.
Special Retention Awards. In April 2020, the Board granted special restricted stock unit awards designed to retain executives throughout the CEO leadership transition. Mr. Arduini, Ms. McPeak, Ms. Nealis and Mr. Menon each received an award of 5,418 restricted stock units with an equivalent value of $175,000. Ms. Fulton received an award of 7,740 restricted stock units with an equivalent value of $250,000 to compensate her for serving as interim President and Chief Executive Officer. Award values were calculated based on the closing price on April 27, 2020, and each award will fully vest in these24 months provided the executive remains with the Company through April 26, 2022. The Board granted the awards have included individual responsibilities and performance results and the individual’s years of experienceto ensure stability in the industry, withleadership team in the emphasis on subjective measures such as sustained contributions towake of an unexpected CEO departure. Separately, Mr. Menon resigned from the Company initiative,effective September 25, 2020. According to his Separation Agreement, the effect5,418 special retention restricted stock units awarded to Mr. Menon in April 2020 will vest one year from his date of separation.
CEO Sign-On Award.Mr. Matosevic received an award of 17,500 time-based restricted stock units, which will vest in one-third increments per year over a three-year time frame and were awarded on the first day of the individualquarter following June 1, 2020 under the terms of his employment agreement.
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Executive Compensation |
Equity Awards Prior to 2020. The 2019 LTI plan consisted of 50% time-vested restricted stock units that vest pro rata over three years and 50% performance-based restricted stock units that vest in full after three years based on meeting certain performance goals. Prior to 2019, the attitudes and performanceprincipal element of others, and the amount of management required for the individual.our long-term compensation program was restricted shares. Historically, no specific weight was given to any specific criterion although leadership and performance were of particular importance.
Equity awards haveprior to 2019 were primarily been made under the Company’s 2011 Equity Incentive Plan (the “2011(“2011 Equity Plan”), an omnibus plan designed to provide great flexibility in making a variety of equity or equity-based awards. The 2011 Equity Plan was approved by the Company’s shareholders at the 2012 Annual Meeting. In March 2018, as set forth in the table of Grants of Plan-Based Awards of page 29, the Committee awarded shares of restricted stock to our NEOs. These equity awards, as has been the case historically, were “time-based” so that, in order to earn the full award, the NEO must remain employed for three years.
As described below, beginning in 2019, specific key performance indicators will be used in making long-term compensation awards, and restricted stock units will be used rather than restricted shares of Company stock. Performance-based, as well as time-based, awards will be used. The Until 2020, the Committee in the past hashad not granted stock options vesting over a specified period of time, but since 2005 no stock options have been awarded.2005.
Other Compensation
Retirement Plan and ESOPPlan.. All of the U.S. basedU.S.-based employees of Sun Hydraulics CorporationHelios Technologies, Inc. and Sun Hydraulics LLC, including executive officers, are eligible to participate in the Sun Hydraulics CorporationHelios Technologies, Inc. 401(k) and ESOP Retirement Plan (the “Plan”). Under thetax-qualified Plan, such employees are able to contribute the lesser of up to 100% of their annual salary or the limit prescribed by the Internal Revenue Service to the Plan on abefore-tax basis. Based on years of service, we match 100% of up to the first 6% of pay that is contributed to the Plan. All employee contributions are fully vested upon contribution. Our
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matching contributions vest over a five year period — five-year period—20% after one year, 40% after two years, 60% after three years, 80% after four years and 100% after five years. Each year, the Board of Directors determines, based on the Company’s performance and other factors it deems relevant, whether to make an additional contribution, and if so, in what amount. Since 2004, when an employee stock ownership plan (“ESOP”) was incorporated into the Plan, these additional contributions have been made in shares of Company common stock and all eligible employees, regardless of whether they make voluntary contributions to the Plan, participate pro rata, based upon their pay as a percentage of total pay for all U.S. employees. Effective January 1, 2019, the ESOP feature was replaced by the inclusion of Company common stock as an investment option under the 401(k) Plan. Our executive officersMs. McPeak, who areis employed by Enovation Controls, participateparticipates in a separatethe same 401(k) plan, with generally similar provisions, except thatbut has a different match schedule applicable to employees of Enovation Controls matches 100%Controls. Based on employee contributions, the Enovation match schedule provides up to 4.5% of the first 2% contributed by the employeeemployee’s pay as an employer match and 50%vesting of the next 5%. Employer matching contributions and any profit-sharing contributions by the employer, which are discretionary, vest over amatch is based on years of service from one to three year period —years: 33% after one year, 67% after two years and 100% after three years.
Special Shared Distribution. Between 2008Mr. Arduini, who is located in Italy, is eligible for certain retirement benefits under plans specific to Italian-based employees. Mr. Arduini is a participant in a state retirement pension plan. His employer, Faster S.r.l., contributes $27,953 per year for the benefit of Mr. Arduini’s retirement in the state plan. Additionally, Mr. Arduini is a participant in the Previndai, a supplemental pension plan. In this plan, Mr. Arduini contributes a portion of his salary into the plan and 2016, on a discretionary basis, the Company employedmakes a “shared distribution”contribution in the amount of $8,202.12 per year. These amounts are paid in Euros and converted to U.S. dollars using an average exchange rate for 2020 of $1.139184/Euro. Under the terms of the Previndai, Mr. Arduini’s family members are also eligible to participate at their discretion. At retirement, Mr. Arduini will be able to access the Previndai funds in the form of an annuity, lump sum or combination of both while the state plan in the form of monthly payment.
Perquisites and Other Benefits.We provide only limited perquisites and other personal benefits. Senior management participates in our benefit plans on the same terms as a means of maintaining a highly productive workforce to sustain its growthother employees. These plans include medical and profitability. To accompany a special cash dividend todental insurance, and group life insurance. Under our employee stock purchase plan (ESPP), approved by the shareholders concurrent contributions for employees equal to a percentage of their wages were made, primarily into subsidiary-level retirement plans. In the first and fourth quarters of 2018,across-the-board, profit-sharing cash bonuses were paid to all hydraulicsin 2001, U.S. employees, including executive officers. In March 2018,officers, may purchase shares of Company common stock at a discount of 15% from the Board concluded that, at this stagemarket price on the first or last day of the quarterly purchase period, whichever is lower, on a tax-favored basis under Section 423 of the U.S. Internal Revenue Code.
Mr. Arduini, who is located in Italy, received $9,313 in a housing allowance and a company vehicle allowance in the Company’s evolution, there no longer was a needamount of $20,038 in 2020, which are paid in Euros and converted to U.S. dollars using an average exchange rate for the shared distribution with shareholders as historically employed.2020 of $1.139184/Euro.
Other Compensation. We do not use other forms of compensation on a regular basis. Cash and equity bonuses have been used periodically to reward significant and unusual contributions. Because of the broad responsibilities given to employees and the encouragement of individual initiative, we have educational assistance policies for all employees, including executive officers. Educational assistance has been given to executive officers in the past for graduate study leading to masters and other degrees, and more specialized training, including management training at the Harvard Business School. Senior management participates in our benefit plans on the same terms as other employees. These plans include medical and dental insurance, group life insurance, and charitable gift matching. Under our employee stock purchase plan, approved by the shareholders in 2001, U.S. employees including executive officers may purchase shares of Company common stock at a discount of 15% from market price on the first or last day of the quarterly purchase period, whichever is lower, on atax-favored basis under Section 423 of the Internal Revenue Code. Along with the Sun Hydraulics global workforce, each of the NEOs (except Ms. McPeak), in March 2018, received a cash bonus in a net amount of $600 (plus applicable taxes) and, in December of 2018, received a payment equal to 1.5% of his or her 401(k) eligible earnings in cash, plus applicable taxes. The Board also determined that in recognition of strong performance in 2018, Sun Hydraulics’ domestic and foreign employees, including NEOs, would be eligible for a 3% bonus into their retirement plans. This bonus was paid in March 2019.
We provide only limited perquisites and other personal benefits.
Risks Arising from Compensation Policies and Practices.Practices We have not frequently used cash bonuses or included short-term incentives in our compensation program. Therefore, the
The Board has determined that its compensation policypolicies and practices do not motivate imprudent risk-taking or encourage Company leaders to make decisions that might be beneficial in the short term at the expense of creating long-term Company value. The Company’s long-term compensation program, as described above, relies on general criteria that are not primarily focused on the achievement of short-term objectives but, rather, what is in the long-term best interest of the Company. The equity awards granted under the program are generally determined towardsin the endfirst quarter of the year. For 2018,2020, awards were granted at a special meeting of the Compensation Committee meeting held for that purpose afterconvened on February 28, 2020.
44 |2021 Proxy Statement | |
Executive Compensation |
The Company’s compensation programs are designed with an appropriate balance of risk and reward so they will not encourage excessive or unnecessary risk-taking behavior. To assess compensation risk, the endCompensation Committee reviewed the policies and practices of the fiscal year. Historically,Company and determined they do not create risks reasonably likely to have a material adverse effect on the Company. In conducting this review, the Committee noted the following risk-mitigating features of the compensation policies and practices:
Balance among short- and long-term incentives, cash and equity and fixed and variable pay
Multiple performance measures
Stock ownership and holding guidelines
Anti-hedging policy
Clawback policy
Limited change-in-control (CIC) benefits
Stock Ownership Guidelines
To better link management’s interests with those of shareholders, the Board of Directors has implemented stock ownership guidelines for the Company’s NEOs. The ownership guidelines specify a number of shares that Company executives must acquire and hold within five years of appointment as an executive officer.
In determining whether an executive has met the stock ownership guidelines, all shares and units (vested or unvested) held by him or her will be counted, including those held jointly or in common with a spouse or dependent children or held in his or her individual retirement account, or 401(k) plan or similar benefit plan. Each executive agrees to hold any equity awards have been “time based”or grants until the required level is met. Each of the Company’s NEOs had either satisfied the ownership guidelines or had time remaining to do so that, to earnas of December 31, 2020, as set forth in the full award, an employee must remain in our employ for one or more years.following table:
We had a 91.82% favorable advisory vote on our executive compensation program at our 2018 Annual Meeting. The Committee reviewed these results and intends to continue following the above principles and practices.
Executive | Ownership requirement as a multiple of salary | |
Josef Matosevic | 5x | |
Tricia Fulton | 3x | |
Melanie Nealis | 2x | |
Jinger McPeak | 2x | |
Matteo Arduini | 2x | |
Hedging Policy
Our Confidentiality and Insider Trading Policy prohibits our directors, officers and employees and their designees from entering into hedging transactions or other financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) that are designed to hedge or offset any decrease in the market value of the Company’s securities. The policy also prohibits directors, officers and employees and their designees from selling company securities short, engaging in short-term trading, trading company securities on margin or pledging company securities as collateral for a loan.
Clawback Policy
The Company maintains a Clawback Policy that allows the Company to recover certain forms of compensation paid to executive officers in certain situations. The Policy applies to certain of the Company’s current and former executive officers, including all of the NEOs. The Board adopted this policy, which provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the federal securities laws or from material misconduct or fraud. If the Company is required to prepare an accounting restatement due to material noncompliance with financial reporting requirements, the Board will require reimbursement or forfeiture of any excess incentive compensation received by an executive during the three completed fiscal years immediately preceding the date on which the Company is required to prepare the accounting restatement. If the Board determines that an NEO has committed any act of fraud or willful misconduct and the act of fraud or willful misconduct directly or indirectly caused a material adverse effect, the Board will require the executive who committed the act to forfeit or reimburse the Company for some or all (as determined by the Board) of the incentive compensation awarded to or received during the three years following the commission of the act.
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Executive Compensation |
Shareholder EngagementEmployment Agreements and Say on PayChange-in-Control Provisions
In 2018, we enhanced our shareholder engagement process, proactively reaching out during over five hundred meetingsThe Company typically does not enter into employment agreements with investors throughoutits executives. However, the year. During these interactions, we discussed our executive compensation programs, corporate governanceCompany has entered into employment arrangements with Mr. Matosevic to serve as President and other issues. We gathered feedbackChief Executive Officer and, as customary in Italy, an employment agreement with Mr. Arduini in connection with his promotion to the role of General Manager and Managing Director of Faster (known internally as “President, QRC”). The Company also has entered into continuity and severance agreements with each of the NEOs to protect them from our investorsloss of income in the case of change of control and also sharedto provide protections for the feedback with managementcompany and the full Board.NEOs covering employment related issues as well as confidentiality.
Shareholders have demonstrated strong supportMatosevic Offer of Employment
Josef Matosevic was appointed President and Chief Executive Officer of the Company and to the Board of Directors effective June 1, 2020. Pursuant to his offer of employment, as President and Chief Executive Officer, Mr. Matosevic is entitled to an annual base salary of $704,000. In addition, under the Company’s incentive plans, his STI target is 100% of his base salary and his LTI target is 175% of his base salary, with 25% allocated to nonqualified stock options, 25% allocated to time-based restricted stock units, and 50% allocated to performance-based restricted stock units. For the fiscal year 2020, all of the above compensation elements, with the exception of the performance-based restricted stock unit component of the LTI award, were fully guaranteed and prorated based on his June 1, 2020 date of appointment. Additionally, Mr. Matosevic was entitled to a one-time cash sign-on bonus of $42,644 and 17,500 time-based restricted stock units, which will vest in one-third increments per year over a three-year time frame and were awarded on the first day of the quarter following June 1, 2020. Mr. Matosevic’s cash sign-on award was intended to offset the cost of temporary housing expenses for oursay-on-pay proposalsa period of six months. Mr. Matosevic is eligible to participate in recent years, but we continuethe standard health, welfare and retirement benefit plans that are applicable to seek shareholder feedback on our compensation program to ensure it aligns with shareholder interests and supports the long-term strategyemployees of the Company. AsMr. Matosevic is not entitled to any compensation for his service as a result,director on the Compensation Committee electedCompany’s Board.
In connection with Mr. Matosevic’s appointment, he entered into the Company’s standard form Indemnification Agreement and Continuity Agreement and Executive Officer Severance Agreement. His Severance Agreement is similar to performthe Severance Agreements discussed below, however, Mr. Matosevic is entitled to a comprehensive reviewcontinuation of our compensation program in 2018. As discussed more fully below, the compensation study and recommendationshis annual base salary for changes18 months, a payment equal to our 2019 compensation practices are intended to more fully align shareholder expectations with respect to executive compensation and company performance. These changes were effective as150% of the beginningtarget value at the time of our 2019 fiscal year.
2019 Compensation Philosophygrant of his current year STI award, and Compensation Program Changes
In 2018,continuing medical benefits for Mr. Matosevic and his family for 12 months. To receive the Compensation Committee engaged Mercer as an independent compensation consultant to conductpayment and benefits under his Severance Agreement, Mr. Matosevic must, among other things, execute a review of our compensation philosophycustomary release and the competitiveness of the named executive officers’ current compensation levels. The review was focused on strengthening the Company’s executive pay philosophy to provide market competitive pay and to link compensation to performance, including the contribution each executive makes to the overall business objectives and corporate success. Thus, the Company’s compensation program seeks to align executive paycomply with customary restrictive covenants set forth in his agreements with the market median (50th percentile), executive and Company performance and business objectives in order to retain key talent and reward high-performing executives to maintain a strong management team.
The reviewCompany. Further, Mr. Matosevic also assessed the methodology we use to set executive pay, and to ensure that our pay levels areentered into certain restrictive covenants consistent with the market. Company’s standard form that are contained in the Restricted Stock Unit and Stock Option Agreement.
Arduini Employment Agreement
The reviewCompany entered into an employment agreement with Mr. Arduini effective January 1, 2019 in connection with his promotion to the role of General Manager and Managing Director of Faster (known internally as “President, QRC”). Mr. Arduini’s employment agreement sets forth an annual gross base salary, target cash bonus (short-term incentive or “STI”), and participation in the Helios Long-Term Incentive (LTI) Plan. Mr. Arduini’s employment agreement also provides for an annual amount as consideration for entering into the non-competition agreement, as required by Italian law for the enforcement of certain restrictive covenants. The amount is included a detailed evaluationin his base salary. Mr. Arduini’s employment agreement was amended in 2020 and 2021 to reflect increases in his compensation package. For 2020, Mr. Arduini’s base salary was increased to Euro 242,000 ($278,000 USD), his target STI percentage was 30% of his base salary, and the total value of his LTI was 75% of his base salary (approximately $174,000). Mr. Arduini’s 2020 LTI award consisted of 25% stock options, 25% time-based RSUs, and 50% performance based RSUs. Mr. Arduini has an opportunity to earn up to 200% of his target STI award and up to 200% of the compensation program, including base salary, short-term incentive (“STI”) opportunity, long-term incentive (“LTI”) opportunity, target total cash compensation,portion of his LTI award that consists of performance based RSUs for exceptional achievement of predetermined metrics. In addition, Mr. Arduini received $9,313 per year in a housing allowance and target total direct compensation for the named executive officers. The review found that base salaries, short-term incentives and target total cash compensation were below the 50th percentile for the CEO, CFO and other named executive officers. Long-term incentives were slightly above market, which improves overall positioning of target total direct compensation compared to market. Based on this review, the Company will be moving to align executive pay more closely with the 50th percentile of its market peers over the next few years, botha company vehicle allowance in the levelamount of $20,038, which are paid in Euros and structureconverted to U.S. dollars using an average exchange rate for 2020 of its compensation.$1.139184/Euro.
Mercer’s review compared our executive compensation program to the market using Mercer’s proprietary survey database as well as public company proxy data, including publicly-traded, similarly sized companies in our industry. Mercer evaluated peer company appropriateness by auditing the ISS peer group, companies provided by Helios, and S&P CapIQ’s database of publicly-traded U.S. Companies, based on their revenue size, industry, other financial and organizational measures, and business model/footprint to determine if they accurately describe the Company’s market for executive talent. A peer group was compiled of companiesExecutive Officer Continuity Agreement
The Company has entered into Executive Officer Continuity Agreements (“Continuity Agreements”) with revenue between .5x to 2x thateach of the Company’s revenue, representingNEOs: Josef Matosevic, Tricia Fulton, Matteo Arduini, Jinger McPeak, and Melanie Nealis. The Continuity Agreements provide for certain benefits to be paid to the executive in connection with a similar industry or related industrytermination of employment that offer similar products, havetakes place in connection with a similar value chain, or operate within a similar geographic footprint. Data from these sources was individually matched to each executive based on title, job, functional responsibility,“Change of Control” (as defined in the Continuity Agreements). The Continuity Agreements supersede and business line scope where possible. The peer group will be used to assess executive pay competitiveness, inform subsequent pay decisions, and shape the future design of the STI and LTI plans.replace any prior agreements.
46 |2021 Proxy Statement | |
Executive Compensation |
The peer group identifiedContinuity Agreements provide that on termination of the executive’s employment or other triggering event during the two-year period immediately following, or within 90 days prior to, a change in late 2018control, as defined in the Continuity Agreements, he or she is entitled to a lump-sum payment equal to twice the amount of his or her annual salary, plus the cash value at the time of grant of the executive’s current year short-term compensation award, and continuing medical benefits, at the Company’s expense, for the executive and his or her family, for a period of 24 months. The executive also is entitled to immediate vesting of, and an extended period following termination, to exercise all unvested and unexercised stock options and immediate vesting and lapse of all forfeiture provisions relating to, and restrictions upon transfer of, all previously issued shares of restricted stock. To receive the payment and benefits under the Continuity Agreement, the executive must execute a general release and comply with the restrictive covenants set forth in his or her other agreements with the Company during the 24-month period following termination of employment.
Executive Officer Severance Agreement
On June 14, 2019, the Company entered into Executive Officer Severance Agreements (“Severance Agreements”) with Wolfgang Dangel, Tricia Fulton, Matteo Arduini, Jinger McPeak, Melanie Nealis and Rajasekhar Menon. The Severance Agreements provide for certain benefits to be paid to the executive in connection with a termination of employment that does not occur in connection with a change in ownership or control of the Company. Mr. Arduini is based in Italy and his Italian employment contract would supersede the Severance Agreement where the provisions are more favorable. Mr. Dangel’s and Mr. Menon’s severance agreements were superseded and replaced by the Dangel Separation Agreement and Menon Separation Agreement, respectively, as discussed below.
The Severance Agreements provide that on an “Involuntary Termination of Employment” (as defined in the Severance Agreement), the executive is entitled to a continuation of his or her annual base salary for 12 months, a payment equal to the target value at the time of grant of the executive’s current year short-term compensation award, and continuing medical benefits, at Company expense, for the executive and his or her family for a period of 12 months. To receive the payment and benefits under the Severance Agreement, the executive must comply with a number of conditions including, executing a general release and complying with the restrictive covenants set forth in his or her agreement(s) with the Company for a period of 12 months following termination of employment.
Mr. Arduini is entitled to certain additional severance components pursuant to his employment contract and Italian law in the event of an Involuntary Termination. In the event a benefit is higher under Italian law that provided for under his Severance Agreement, Italian law will govern with the higher term. Based on the events and reasons for the termination, Mr. Arduini may receive, based on his current seniority with the Company, 6 months of notice period compensation plus up to 8 months of supplemental indemnity, the average amount of his short-term incentive award (based on the last three years), an amount, for the duration of his notice period for continued coverage on his health and welfare plans, his car and housing allowances, and contributions to his pension schemes. In addition, Mr. Arduini will receive consideration for the value of his non-competition clause (the difference between 50% of his annual salary for three years less payments already made).
Dangel Separation Agreement
On April 5, 2020, the Company entered into a Separation Agreement (the “Dangel Separation Agreement”) with Mr. Dangel that superseded and replaced any prior compensation and employment agreements between the Company and Mr. Dangel. Under the terms of the Separation Agreement, the Company paid Mr. Dangel the same compensation to which he was entitled under his Severance Agreement, which included a lump-sum cash payment of $413,000, representing Mr. Dangel’s short-term incentive bonus paid at target. In lieu of continuing medical and healthcare benefits initially provided under his Severance Agreement, Mr. Dangel received a cash amount equal to $73,048 that included reimbursement for the following companies:
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Executive Compensation |
In addition, for 2019, we have made several significant changes to our short-Menon Separation Agreement
On September 9, 2020, the Company entered into a Separation Agreement (the “Menon Separation Agreement”) with Mr. Menon that superseded and long-term incentive plansreplaced any prior compensation and pay mix to enhanceemployment agreements between thepay-for-performance link Company and align with market practices, as noted inMr. Menon. Under the following table and discussed in more detail below:
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Beginning in 2019, the STI and LTI plans will strive to align with market practice and enhance thepay-for-performance link. On February 22, 2019, the Compensation Committeeterms of the Board approved a new Executive Compensation Plan (“ECP”). The ECP sets forthSeparation Agreement, the elements of executiveCompany paid Mr. Menon the same compensation to bewhich he was entitled under his Severance Agreement, which included a lump-sum cash payment of $193,000, representing Mr. Menon’s short-term incentive bonus paid at target. In lieu of continuing medical and healthcare benefits initially provided under his Severance Agreement, Mr. Menon received a cash amount equal to $24,169 that included reimbursement for the cost of health insurance under COBRA for a period of 12 months. Additionally, Mr. Menon was entitled to the continuation of his annual base salary STI, LTI,($386,000) for a period of 12 months from the date of termination. Mr. Menon is subject to confidentiality restrictions and benefits. As described more fully below,restrictive covenants under previously executed equity award and other agreements for a 12-month period. Also, the STI and LTI elements of the program are specifically designed to align pay directly to Company performance.
Short Term Incentive
Beginning in 2019, our STI program will aim to harmonize the bonus structure across corporate and subsidiaries as well as enhance ourpay-for-performance relationship by increasing the program’s alignment with our communicated financial goals and improving the clarity of our plan’s objectives for our employees and shareholders. Cash bonuses under the 2019 STI will
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be based on objective measures that are designed to drive our overall Company and subsidiary financial results. The STI payouts will be based on an objective formula with preset financial targets. For 2019, the primary financial performance goals are adjusted EBITDA, adjusted free cash flow (FCF) and revenue. These measures were selected because we believe they are the principal financial drivers to achieving our objectives under Vision 2025. In addition to these financial targets, the 2019 STI also has an overall Company net income level target that must be met for our executives to receive a payout. No awards will be granted if the Company does not achieve thepre-established minimum net income level. Also, to improve the clarity of the plan’s objectives, the Committee will determine payouts based on an objective formula with threshold, target and maximum performance levels. Under the 2019 STI, Compensation Committee discretion will be limited to eliminating the financial impact of certain items that do not reflect the underlying operating performance of the business. We believe the ability of the Compensation Committee to make adjustments for these items is appropriate because we believe NEO short-term incentive compensation should not be impacted by events that do not reflect the underlying operating performance of the business. In March 2019, the Compensation Committee set STI targets for each of the NEOs consistent with the recommendations set forth by the Mercer study.
Long Term Incentive
The Compensation Committee modified the 2019 LTI to include performance-based awards to align management interests with those of shareholders and with the Company’s Vision 2025. To better align with long-term value creation and market practices, the Committee decided to reduce the weighting on time-vested5,418 special recognition restricted stock units thatawarded to Mr. Menon in April 2020 will vest pro rata over three yearsone year from 100% to 50%his September 25, 2020 date of the equity awards. The remaining 50% of the awards will be in the form of performance-based restricted stock units which cliff vest after three years based upon performance achievement against threshold, target and maximum performance levels achieved over a three year performance period. For 2019, the measures are adjusted EBITDA margin (40%), adjusted EPS (40%) and revenue compound annual growth rate (20%). For executive officers employed within a subsidiary, the LTI measures will be tied to the same metrics but for subsidiary level performance.
In March 2019, the Board of Directors adopted a new comprehensive equity incentive plan. The purpose of the new plan, as with the 2011 Equity Plan, is to attract, retain, and motivate excellent employees, in alignment with the Company’s long-term strategy, and to align more fully the interests of employees, consultants, officers and Directors with those of the shareholders by giving them a personal interest in the value of the Company’s Common Stock. Please see Proposal 4 – “Approval of 2019 Equity Incentive Plan” at page 36.separation.
Section 162(m) of the U.S. Internal Revenue Code (the “Code”) places a limit on the tax deductibility of compensation in excess of $1 million paid to certain “covered employees” of a publicly held corporation (generally, the corporation’s principal executive officer, principal financial officer and its next three most highly compensated executive officers in the year that the compensation is paid). Prior to the adoption of the Tax Cuts and Jobs Act (the “Tax Reform”), this limitation applied only applied to compensation that was not considered performance-based under the Section 162(m) rules. The Tax Reform repealed this exception for performance-based compensation. We generally structure our compensation programs, where feasible, to minimize or eliminate the impact of the limitations of Section 162(m) of the Code when we believe such payments are appropriate, after taking into consideration changing business conditions or the officer’s performance. However, nondeductible compensation in excess of this limitation may be paid.
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The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
COMPENSATION COMMITTEE
Douglas M. Britt, Chair
Marc Bertoneche
Christine L. KoskiAlexander Schuetz
Gregory C. Yadley
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Executive Compensation |
The table below summarizes the total compensation paid or earned by each of the named executive officers serving as such for the fiscal years ended January 2, 2021, December 28, 2019, and December 29, 2018, December 30, 2017, and December 31, 2016.2018. When setting total compensation for each of the named executive officers, the Compensation Committee reviews the executive’s current compensation, including equity andnon-equity-based compensation, compensation history, performance and other information it deems relevant.
SUMMARY COMPENSATION TABLE
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | ||||||||||||||||||
Wolfgang H. Dangel |
| 2018 |
|
| 529,856 |
|
| 8,425 |
|
| 968,580 |
|
| 32,246 |
|
| 1,539,107 |
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President and |
| 2017 |
|
| 515,000 |
|
| 826 |
|
| 425,400 |
|
| 17,610 |
|
| 958,836 |
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Chief Executive Officer(3) |
| 2016 |
|
| 386,250 |
|
| — |
|
| 331,600 |
|
| 15,050 |
|
| 732,900 |
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Tricia L. Fulton |
| 2018 |
|
| 322,817 |
|
| 5,448 |
|
| 710,292 |
|
| 34,301 |
|
| 1,072,858 |
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Chief Financial Officer |
| 2017 |
|
| 262,000 |
|
| 30,826 |
|
| 425,400 |
|
| 20,013 |
|
| 738,239 |
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| 2016 |
|
| 250,923 |
|
| — |
|
| — |
|
| 28,275 |
|
| 279,198 |
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Gary A. Gotting |
| 2018 |
|
| 224,038 |
|
| 4,084 |
|
| 177,573 |
|
| 21,463 |
|
| 427,158 |
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Global Lead, CVT |
| 2017 |
|
| 200,000 |
|
| 6,826 |
|
| 106,350 |
|
| 10,086 |
|
| 323,262 |
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Product Development |
| 2016 |
|
| 180,800 |
|
| — |
|
| — |
|
| 13,303 |
|
| 194,103 |
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and Marketing | ||||||||||||||||||||||||
Jinger McPeak |
| 2018 |
|
| 240,663 |
|
| 93,406 |
|
| 134,525 |
|
| 13,658 |
|
| 482,252 |
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GlobalCo-Lead, |
| 2017 |
|
| 209,077 |
|
| 55,075 |
|
| 79,763 |
|
| 12,090 |
|
| 356,005 |
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Electronic Controls |
| 2016 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
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Craig Roser |
| 2018 |
|
| 238,654 |
|
| 4,225 |
|
| 269,050 |
|
| 24,152 |
|
| 536,081 |
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Global Lead, CVT |
| 2017 |
|
| 205,000 |
|
| 30,826 |
|
| 159,525 |
|
| 13,439 |
|
| 408,790 |
| ||||||
Sales and Business |
| 2016 |
|
| 155,985 |
|
| — |
|
| — |
|
| 11,985 |
|
| 167,970 |
| ||||||
Development | ||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) (1) | Option Awards ($) (1) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) (2) | Total ($) | ||||||||||||||||||||||||
Josef Matosevic(3) | 2020 | 406,154 | — | 1,124,819 | 63,729 | 583,147 | 49,651 | 2,227,500 | ||||||||||||||||||||||||
President and | ||||||||||||||||||||||||||||||||
Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Tricia Fulton | 2020 | 405,662 | 66,093 | 652,622 | 41,490 | 351,024 | 17,100 | 1,533,991 | ||||||||||||||||||||||||
Chief Financial Officer | 2019 | 397,116 | — | 390,956 | — | 144,000 | 16,800 | 948,872 | ||||||||||||||||||||||||
| 2018 | 322,817 | 5,448 | 710,292 | — | — | 34,301 | 1,072,858 | ||||||||||||||||||||||||
Melanie Nealis | 2020 | 332,800 | 66,093 | 505,238 | 34,034 | 191,984 | 7,446 | 1,137,595 | ||||||||||||||||||||||||
Chief Legal and Compliance | 2019 | 318,654 | — | 311,780 | — | 76,560 | — | 706,994 | ||||||||||||||||||||||||
Officer and Secretary | 2018 | 147,846 | 102,039 | 311,700 | — | — | — | 561,585 | ||||||||||||||||||||||||
Jinger McPeak | 2020 | 278,041 | 50,750 | 341,749 | 17,638 | 120,304 | 12,600 | 821,082 | ||||||||||||||||||||||||
President, | 2019 | 260,286 | — | 129,498 | — | 58,156 | 12,600 | 460,540 | ||||||||||||||||||||||||
Electronic Controls | 2018 | 240,663 | 93,406 | 134,525 | — | — | 13,658 | 482,252 | ||||||||||||||||||||||||
Matteo Arduini | 2020 | 271,419 | — | 333,595 | 16,793 | 127,159 | 85,676 | 834,642 | ||||||||||||||||||||||||
President, QRC | 2019 | 246,338 | — | 123,629 | — | 37,950 | 51,026 | 458,943 | ||||||||||||||||||||||||
| 2018 | 217,787 | 41,341 | — | — | — | 25,571 | 284,699 | ||||||||||||||||||||||||
Wolfgang Dangel (4) | 2020 | 161,115 | — | 860,938 | 89,128 | — | 1,076,869 | 2,188,050 | ||||||||||||||||||||||||
(Former) President and | 2019 | 545,402 | — | 640,411 | — | 196,560 | 35,053 | 1,417,426 | ||||||||||||||||||||||||
Chief Executive Officer | 2018 | 529,856 | 8,425 | 968,580 | — | — | 32,246 | 1,539,107 | ||||||||||||||||||||||||
Rajasekhar Menon (5) | 2020 | 278,692 | — | 489,995 | 33,035 | — | 698,503 | 1,500,225 | ||||||||||||||||||||||||
President, CVT | 2019 | 261,154 | 106,610 | 292,083 | — | 54,688 | 97,195 | 811,730 | ||||||||||||||||||||||||
50 |2021 Proxy Statement | |
Executive Compensation |
| (1) |
|
|
| Year | Stock Awards, Assuming ($) | ||||
Josef Matosevic | 2020 | 1,473,079 | ||||
Tricia Fulton | 2020 | 918,778 | ||||
Melanie Nealis | 2020 | 723,215 | ||||
Jinger McPeak | 2020 | 453,476 | ||||
Matteo Arduini | 2020 | 439,981 | ||||
Wolfgang Dangel | 2020 | 1,424,703 | ||||
Rajasekhar Menon | 2020 | 698,875 | ||||
| (2) |
|
Name | Year | Perquisites and Other Personal Benefits(*) ($) | Company ($) | Total ($) | ||||||||||||||||
Wolfgang H. Dangel |
| 2018 |
| 8,100 |
| 24,146 |
| 32,246 | ||||||||||||
Tricia L. Fulton |
| 2018 |
| 8,124 |
| 26,177 |
| 34,301 | ||||||||||||
Gary A. Gotting |
| 2018 |
| 1,809 |
| 19,654 |
| 21,463 | ||||||||||||
Jinger McPeak |
| 2018 |
| 1,283 |
| 12,375 |
| 13,658 | ||||||||||||
Craig Roser |
| 2018 |
| 2,673 |
| 21,479 |
| 24,152 | ||||||||||||
|
Name | Year | Perquisites and Other Personal Benefits ($) | Company ($) | Severance Payments / Accruals ($) | Total ($) | |||||||||||||||
Josef Matosevic | 2020 | 42,644 | (a) | 7,007 | — | 49,651 | ||||||||||||||
Tricia Fulton | 2020 | — | 17,100 | — | 17,100 | |||||||||||||||
Melanie Nealis | 2020 | — | 7,446 | — | 7,446 | |||||||||||||||
Jinger McPeak | 2020 | — | 12,600 | — | 12,600 | |||||||||||||||
Matteo Arduini | 2020 | 49,521 | (b) | 36,155 | — | 85,676 | ||||||||||||||
Wolfgang Dangel | 2020 | — | 4,782 | 1,072,087 | 1,076,869 | |||||||||||||||
Rajasekhar Menon | 2020 | 94,325 | (a) | 1,751 | 602,427 | 698,503 | ||||||||||||||
| (a) | Represents one-time relocation bonus. |
| (b) | Represents car and housing allowances and amounts contributed to employee’s Trattamento di Fine Rapporto (TFR) (Italian statutory severance plan). |
| (3) |
|
| (4) | Wolfgang Dangel |
| (5) | Raj Menon separated from the Company in September |
| 2021 Proxy Statement | | |
Executive Compensation |
Name | Grant Date | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of ($) | |||||||||
Wolfgang H. Dangel | March 6, 2018 |
| 18,000 | (1) |
| 968,580 | ||||||
Tricia L. Fulton | March 6, 2018 |
| 13,200 | (1) |
| 710,292 | ||||||
Gary A. Gotting | March 6, 2018 |
| 3,300 | (1) |
| 177,573 | ||||||
Jinger McPeak | March 6, 2018 |
| 2,500 | (1) |
| 134,525 | ||||||
Craig Roser | March 6, 2018 |
| 5,000 | (1) |
| 269,050 | ||||||
Name | Grant Date | Estimated future payouts under non-equity incentive plan awards | Estimated future payouts under equity incentive plan awards (2) | All Other | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or base price of option awards ($/Sh) | Grant Date Fair Value of ($) (3) | |||||||||||||||||||||||||||||||||||||||
Threshold ($) (1) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||
Josef Matosevic | July 1, 2020 | (4) | — | — | — | 5,127 | 15,382 | 25,637 | 17,500 | (9) | 5,127 | 35.04 | 1,188,548 | |||||||||||||||||||||||||||||||||
| July 1, 2020 | (4) | — | 410,667 | 821,333 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Tricia Fulton | February 28, 2020 | — | — | — | 3,239 | 9,717 | 16,195 | 7,740 | (10) | 3,239 | 39.75 | 662,938 | ||||||||||||||||||||||||||||||||||
| February 28, 2020 | — | 247,200 | 494,400 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| February 22, 2019 | (5) | — | — | — | — | — | — | — | — | — | 31,174 | |||||||||||||||||||||||||||||||||||
Melanie Nealis | February 28, 2020 | — | — | — | 2,657 | 7,971 | 13,285 | 5,418 | (10) | 2,657 | 39.75 | 514,410 | ||||||||||||||||||||||||||||||||||
| February 28, 2020 | — | 135,200 | 270,400 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| February 22, 2019 | (5) | — | — | — | — | — | — | — | — | — | 24,862 | |||||||||||||||||||||||||||||||||||
Jinger McPeak | February 28, 2020 | — | — | — | 1,377 | 4,132 | 6,887 | 5,418 | (10) | 1,377 | 39.75 | 349,060 | ||||||||||||||||||||||||||||||||||
| February 28, 2020 | — | 116,800 | 233,600 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| February 22, 2019 | (5) | — | — | — | — | — | — | — | — | — | 10,327 | |||||||||||||||||||||||||||||||||||
Matteo Arduini | February 28, 2020 | — | — | — | 1,311 | 3,934 | 6,557 | 5,418 | (10) | 1,311 | 39.75 | 340,533 | ||||||||||||||||||||||||||||||||||
| February 28, 2020 | — | 83,400 | 166,800 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| February 22, 2019 | (5) | — | — | — | — | — | — | — | — | — | 9,855 | |||||||||||||||||||||||||||||||||||
Wolfgang Dangel | February 28, 2020 | (6) | — | — | — | 6,985 | 20,873 | 34,788 | — | 6,958 | 39.75 | 899,000 | ||||||||||||||||||||||||||||||||||
| February 28, 2020 | (7) | — | 413,000 | 826,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| February 22, 2019 | (5) | — | — | — | — | — | — | — | — | — | 51,066 | |||||||||||||||||||||||||||||||||||
Rajasekhar Menon | February 28, 2020 | (8) | — | — | — | 2,579 | 7,738 | 12,897 | 5,418 | (10) | 2,579 | 39.75 | 504,370 | |||||||||||||||||||||||||||||||||
| February 28, 2020 | (7) | — | 193,000 | 386,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| April 1, 2019 | (5) | — | — | — | — | — | — | — | — | — | 18,660 | |||||||||||||||||||||||||||||||||||
| (1) |
|
OUTSTANDING EQUITY AWARDS AT FISCALYEAR-END
| Option Awards | Stock Awards | |||||||||||||||||||
Name | Number of (#) | Number of (#) | Option Exercise Price ($) | Option Expiration Date | Number of (#) | Market ($) | ||||||||||||||
Wolfgang H. Dangel | — | — | — |
| 26,000 | (1) |
| 867,360 |
| |||||||||||
Tricia L. Fulton | — | — | — |
| 21,200 | (2) |
| 707,232 |
| |||||||||||
Gary A. Gotting | — | — | — |
| 5,300 | (3) |
| 176,808 |
| |||||||||||
Jinger McPeak | — | — | — |
| 4,000 | (4) |
| 133,440 |
| |||||||||||
Craig Roser | — | — | — |
| 8,000 | (5) |
| 266,880 |
| |||||||||||
|
| (2) |
|
| (3) |
|
| (4) |
|
| (5) |
|
| (6) | Stock and option awards were forfeited upon termination in accordance with the terms of the separation agreement. |
| (7) | Amount was paid at target in accordance with the terms of the separation agreement. |
| (8) | Stock options and awards were forfeited upon termination, except 5,418 special retention shares, in accordance with the terms of the separation agreement. |
| (9) | Restricted units were granted as |
| (10) | Restricted units were granted under the Special Retention Restricted Stock Unit Agreements dated April 27, 2020. |
52 |2021 Proxy Statement | |
Executive Compensation |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||||||||||||||
Josef Matosevic | — | 5,127 | $ | 35.04 | 7/1/2030 |
| 22,627 | (1) | 1,205,793 | 10,255 | (1) | 546,489 | ||||||||||||||||||||||||||||||
Tricia Fulton | — | 3,239 | $ | 39.75 | 2/28/2030 |
| 18,821 | (2) | 1,002,971 | 11,640 | (2) | 620,296 | ||||||||||||||||||||||||||||||
Melanie Nealis | — | 2,657 | $ | 39.75 | 2/28/2030 |
| 12,820 | (3) | 683,178 | 9,431 | (3) | 502,578 | ||||||||||||||||||||||||||||||
Jinger McPeak | — | 1,377 | $ | 39.75 | 2/28/2030 |
| 8,769 | (4) | 467,300 | 4,465 | (4) | 237,940 | ||||||||||||||||||||||||||||||
Matteo Arduini | — | 1,311 | $ | 39.75 | 2/28/2030 |
| 7,818 | (5) | 416,621 | 4,255 | (5) | 226,749 | ||||||||||||||||||||||||||||||
Wolfgang Dangel | — | — | — | — |
| — | — | — | — | |||||||||||||||||||||||||||||||||
Rajasekhar Menon | — | — | — | — |
| 5,418 | (6) | 288,725 | — | — | ||||||||||||||||||||||||||||||||
| (1) | Unvested earned awards represent restricted stock that will vest as follows: 7,542 on July 1, 2021, 7,542 on July 1, 2022 and 7,543 on July 1, 2023. Unvested unearned awards represent restricted units that are contingent upon the achievement of pre-established performance metrics and vest as follows: up to 200% of 10,255 shares on December 31, 2022. |
| (2) | Unvested earned awards represent restricted stock that will vest as follows: 1,721 on February 22, 2021, 1,079 on February 28, 2021, 4,400 on March 6, 2021, 1,721 on February 22, 2022, 1,080 on February 28, 2022, 7,740 on April 27, 2022, and 1,080 on February 28, 2023. Unvested unearned awards represent restricted units that are contingent upon the achievement of pre-established performance metrics and vest as follows: up to 150% of 5,162 shares on January 1, 2022 and up to 200% of 6,478 shares on December 31, 2022. |
| (3) | Unvested earned awards represent restricted stock that will vest as follows: 1,372 on February 22, 2021, 885 on February 28, 2021, 2,000 on July 9, 2021, 1,373 on February 22, 2022, 886 on February 28, 2022, 5,418 on April 27, 2022 and 886 on February 28, 2023. Unvested unearned awards represent restricted units that are contingent upon the achievement of pre-established performance metrics and vest as follows: up to 150% of 4,117 shares on January 1, 2022 and up to 200% of 5,314 shares on December 31, 2022. |
| (4) | Unvested earned awards represent restricted stock that will vest as follows: 570 on February 22, 2021, 459 on February 28, 2021, 834 on March 6, 2021, 570 on February 22, 2022, 459 on February 28, 2022, 5,418 on April 27, 2022 and 459 on February 28, 2023. Unvested unearned awards represent restricted units that are contingent upon the achievement of pre-established performance metrics and vest as follows: up to 150% of 1,710 shares on January 1, 2022 and up to 200% of 2,755 shares on December 31, 2022. |
| (5) | Unvested earned awards represent restricted stock that will vest as follows: 544 on February 22, 2021, 437 on February 28, 2021, 545 on February 22, 2022, 437 on February 28, 2022, 5,418 on April 27, 2022 and 437 on February 28, 2023. Unvested unearned awards represent restricted units that are contingent upon the achievement of pre-established performance metrics and vest as follows: up to 150% of 1,632 shares on January 1, 2022 and up to 200% of 2,623 shares on December 31, 2022. |
| (6) | Awards represent restricted stock that will vest on September 25, 2021; one year from the former executive’s separation date as stated in the separation agreement. |
| 2021 Proxy Statement| 53 |
Executive Compensation |
OPTION EXERCISES AND STOCK VESTED
| Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
Wolfgang H. Dangel | — | — |
| 4,000 |
|
| 212,120 |
| ||||||||
Tricia L. Fulton | — | — |
| 7,667 |
|
| 384,982 |
| ||||||||
Gary A. Gotting | — | — |
| 1,300 |
|
| 67,172 |
| ||||||||
Jinger McPeak | — | — |
| 750 |
|
| 39,773 |
| ||||||||
Craig Roser | — | — |
| 1,800 |
|
| 93,687 |
| ||||||||
| Option Awards | Stock Awards | |||||||||
Name | Number of Shares (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||
Josef Matosevic | — | — |
| — | — | |||||
Tricia Fulton | — | — |
| 10,121 | 417,860 | |||||
Melanie Nealis | — | — |
| 3,373 | 124,699 | |||||
Jinger McPeak | — | — |
| 2,153 | 89,020 | |||||
Matteo Arduini | — | — |
| 545 | 22,792 | |||||
Wolfgang Dangel | — | — |
| 12,819 | 529,571 | |||||
Rajasekhar Menon | — | — |
| 1,031 | 35,570 | |||||
The Company does not maintain a pension plan for any of its U.S.-based executive officers, other than its 401(k) Plans. Through December 31, 2018, the Sun Hydraulics Corporation 401(k) Plan contained an employee stock ownership plan (ESOP) feature. Effective January 1, 2019, the ESOP feature was replaced by the inclusion of Company common stock as an investment option under the 401(k) Plan.Plan (and the plan was renamed to the Helios Technologies 401(k) Plan).
As described above, Mr. Arduini is a participant in both a state and supplemental pension schemes consistent with Italian law. The Company contributes to both pension schemes on behalf of Mr. Arduini.
Nonqualified Deferred Compensation
The Company does not maintain a nonqualified deferred compensation program.
In connection with its acquisition of Enovation Controls, LLC (“Enovation”),During 2020, the Company entered into two agreements with former NEOs as summarized below.
Dangel Separation Agreement
On April 5, 2020, the Company entered into a Separation Agreement (the “Dangel Separation Agreement”) with Mr. Dangel that superseded and replaced any prior compensation and employment agreements with Kennon Guglielmobetween the Company and Jinger McPeak to serve asCo-General ManagersMr. Dangel. Under the terms of the acquired company.
Dr. Guglielmo’s employment agreement,Separation Agreement, the Company paid Mr. Dangel the same compensation to which hadhe was entitled under his Severance Agreement, which included a 28 month termlump-sum cash payment of $413,000, representing Mr. Dangel’s short-term incentive bonus paid at target. In lieu of continuing medical and expired April 5, 2019, required himhealthcare benefits initially provided under his Severance Agreement, Mr. Dangel received a cash amount equal to devote 20%$73,048 that included reimbursement for the cost of his total work time to his position with EnovationGerman health insurance and acknowledged that the remaindercost of his time would be devoted to Genisys. His employment agreement provided for an annual salary of $41,200 and additional aggregate bonus potential of 40% of his base salary. Dr. Guglielmo also was entitled to participate in benefit plans and programs made available to similarly situated employees generally. If his employment had been terminated by Enovation without cause or by him with good reason, Dr. Guglielmo would have been entitled to severance equal to six months of his then current base salary.
Ms. McPeak’s employment agreement has a 36 month term requiring her to devote all necessary working time to Enovation and prohibits her from being employed or rendering other services to any other person or entity without the prior written approval of Enovation Controls. Her employment agreement providesU.S. health insurance under COBRA for a base salary, reviewed annually, and an aggregate bonus potentialperiod of 40% of her base salary. Ms. McPeak is also entitled to participate in benefit plans and programs made available to similarly situated employees generally. If her employment is terminated by Enovation without cause or by her with good reason, Ms. McPeak12 months. Additionally, Mr. Dangel is entitled to severance equal to six monthsthe continuation of herhis annual base salary in effect on($590,000) for a period of 12 months from the date of termination. Ms. McPeak hasMr. Dangel is subject to confidentiality restrictions and restrictive covenants under previously executed equity award and other agreements for a 12-month period.
Menon Separation Agreement
On September 9, 2020, the Company entered into a Separation Agreement (the “Menon Separation Agreement”) with Mr. Menon that superseded and replaced any prior compensation and employment agreements between the Company and Mr. Menon. Under the terms of the Separation Agreement, the Company paid Mr. Menon the same compensation to which he was entitled under his Severance Agreement, which included a lump-sum cash payment of $193,000, representing Mr. Menon’s short-term incentive bonus paid at target. In lieu of continuing medical and healthcare benefits initially
54 |2021 Proxy Statement | |
Executive Compensation |
provided under his Severance Agreement, Mr. Menon received merit increasesa cash amount equal to $24,169 that included reimbursement for the cost of health insurance under COBRA for a period of 12 months. Additionally, Mr. Menon was entitled to the continuation of his annual base salary ($386,000) for a period of 12 months from the date of termination. Mr. Menon is subject to confidentiality restrictions and her 2018 base compensation is reflectedrestrictive covenants under previously executed equity award and other agreements for a 12-month period. Also, the 5,418 special recognition restricted stock units awarded to Mr. Menon in the table above.April 2020 will vest one year from his September 25, 2020 date of separation.
Potential Payments Upon Termination or Change of Control
TheOn June 14, 2019, the Board of Directors approved and the Company entered into an Executive Continuity Agreement (the “Agreement”) with Tricia Fulton, CFO, in December 2009, and with Wolfgang Dangel, President and CEO, in April 2016.for all of its executive officers. The intent of theContinuity Agreement is to assure the Company and the executive of continuity of management in the event of any actual or threatened change in control of the Company, by providing for specific benefits to such executives in the event of the termination of their employment, reduction in compensation or other triggering event in connection with a change in control.
Uponprovides that upon termination of the executive’s employment or other triggering event in connection withduring the two-year period immediately following, or within 90 days prior to, a change in control, as defined in the Continuity Agreement, he or she is entitled to a lump sumlump-sum payment equal to twice the amount of his or her annual salary, at the time of termination, plus the cash value at the time of grant of the executive’s current year long-termshort-term compensation award; as well asaward, and continuing medical, dental, life, disability and hospitalization benefits, at Companythe Company’s expense, for the executive and his or her family, as then in effect, for a period of 24 months. The executive also is entitled to immediate vesting of and an extended period of at least one year following termination in which to exercise all unvested and unexercised stock options and immediate vesting and lapse of all forfeiture provisions relating to, and restrictions upon transfer of, all previously issued shares of restricted stock. To receive the payment and benefits under the Continuity Agreement, the executive must execute a general release and comply with the restrictive covenants set forth in his or her other agreements with the Company during the 24-month period following termination of employment.
Additionally, on June 14, 2019, the Compensation Committee adopted, and the Board endorsed, a form of Severance Agreement to be entered into with each of the Company’s executive officers. The Severance Agreement provides for certain benefits to be paid to the executive in connection with a termination of employment that does not occur in connection with a change in ownership or control of the Company. The Severance Agreement provides that upon an “Involuntary Termination of Employment” (as defined in the Severance Agreement), he or she is entitled to a continuation of his or her annual base salary for 12 months, a payment equal to the cash value at the time of grant of the executive’s current year short-term compensation award, and continuing medical, dental, life, disability and hospitalization benefits, at Company expense, for the executive and his or her family for a period of 12 months. To receive the payment and benefits under the Severance Agreement, the executive must comply with a number of conditions including, executing a general release and complying with the restrictive covenants set forth in his or her agreements with the Company for a period of 12 months following termination of employment.
Mr. Dangel’s Continuity Agreement and Severance Agreement were superseded and replaced in their entirety by the Dangel Separation Agreement on April 5, 2020. Mr. Menon’s Continuity Agreement and Severance Agreement were superseded and replaced in their entirety by the Menon Separation Agreement on Sept. 25, 2020.
Mr. Arduini is entitled to certain additional severance components pursuant to his employment contract and Italian law in the event of an Involuntary Termination. In the event a benefit is higher under Italian law that provided for under his Severance Agreement, Italian law will govern with the higher term. Based on the events and reasons for the termination, Mr. Arduini may receive, based on his current seniority with the Company, 6 months of notice period compensation plus up to 8 months of supplemental indemnity, the average amount of his short-term incentive award (based on the last three years), an amount, for the duration of his notice period for continued coverage on his health and welfare plans, his car and housing allowances, and contributions to his pension schemes. In addition, Mr. Arduini will receive consideration for the value of his non-competition clause (the difference between 50% of his annual salary for three years less payments already made).
Mr. Matosevic’s entered into the Company’s standard form Continuity Agreement on the Effective Date. In addition, the Company and Mr. Matosevic entered into an executive officer severance agreement on the Effective Date. Mr. Matosevic’s severance agreement is similar to the Severance Agreements discussed above, however, Mr. Matosevic is entitled to a continuation of his annual base salary for 18 months, a payment equal to 150% of the target value at the time of grant of his current year STI award, and continuing medical benefits, at Company expense, for Mr. Matosevic and his family for a period of 12 months. To receive the payment and benefits under his severance agreement, Mr. Matosevic must, among other things, execute a customary release and comply with customary restrictive covenants set forth in his agreements with the Company.
| 2021 Proxy Statement | | |
Executive Compensation |
shares of restricted Company stock. The “taxgross-up” provisions in Mr. Dangel’s original agreement were eliminated by an amendment to the agreement effective April 2, 2019.
For 2019, Mr. Dangel has agreed to forego his taxgross-up in his existing Executive Continuity Agreement in the event of a change in control. The Company is currently evaluating Severance and Change in Control agreements for its NEOs and intends to enter into arrangements during 2019 consistent with market based terms.
The following table shows the potential payments upon termination following a change of control, for Mr. Dangel and Ms. Fulton, as if termination had occurred on December 29, 2018:January 2, 2021:
Wolfgang H. Dangel, President and CEO | Tricia L. Fulton, Chief Financial Officer | |||||||||
Severance Pay ($) |
| 1,060,900 |
| 650,000 | ||||||
Acceleration of Restricted Stock Grants ($) |
| 867,360 |
| 707,232 | ||||||
Accelerated Stock Option Vesting ($) |
| — |
| — | ||||||
Welfare Benefits ($) |
| 31,063 |
| 25,890 | ||||||
TOTAL | 1,959,323 | 1,383,122 | ||||||||
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| Salary ($) | STI ($) | Accelerated ($) | Accelerated Stock ($)(1) | Welfare ($) | Other Benefits ($) | Total ($) | ||||||||||||||||||||||||||||
Josef Matosevic | 1,408,000 | 1,408,000 | 1,752,282 | 93,568 | 50,031 | — | 4,711,881 | ||||||||||||||||||||||||||||
Tricia Fulton | 824,000 | 494,400 | 1,623,267 | 43,856 | 27,812 | — | 3,013,335 | ||||||||||||||||||||||||||||
Melanie Nealis | 676,000 | 270,400 | 1,185,756 | 35,976 | 52,671 | — | 2,220,803 | ||||||||||||||||||||||||||||
Jinger McPeak | 584,000 | 233,600 | 705,240 | 18,645 | 13,888 | — | 1,555,373 | ||||||||||||||||||||||||||||
Matteo Arduini | 556,000 | 166,800 | 643,370 | 17,751 | 15,222 | 194,960 | (2) | 1,594,103 | |||||||||||||||||||||||||||
| (1) | Amounts assume all unvested options vest and in the money options are transacted immediately upon termination. |
| (2) | Amount relates to car and housing allowances of $7,337 required under Italian statutory regulations, $18,078 pension contributions, and $169,545 of consideration for non-competition obligations. |
The following table shows the potential payments following an involuntary termination, as if termination had occurred on January 2, 2021:
|
| Salary ($) | STI ($) | Welfare ($) | Other Benefits ($) (1) | Total ($) | ||||||||||||||||||||
Josef Matosevic | 1,056,000 | 1,056,000 | 25,016 | — | 2,137,016 | ||||||||||||||||||||
Tricia Fulton | 412,000 | 247,200 | 13,906 | — | 673,106 | ||||||||||||||||||||
Melanie Nealis | 338,000 | 135,200 | 26,336 | — | 499,536 | ||||||||||||||||||||
Jinger McPeak | 292,000 | 116,800 | 6,944 | — | 415,744 | ||||||||||||||||||||
Matteo Arduini | 258,257 | 83,400 | 7,611 | 194,960 | 544,228 | ||||||||||||||||||||
| (1) | Amount relates to car and housing allowances of $7,337 required under Italian statutory regulations, $18,078 pension contributions, and $169,545 of consideration for non-competition obligations. |
CEO to Median Employee Pay Ratio
As required under and calculated in accordance with Item 402(u) ofRegulation S-K, we have determined a reasonable estimate of the ratio of the annualannualized total compensation of Mr. Dangel, our three CEOs during 2020 (our former President and Chief Executive Officer Wolfgang Dangel, our former Interim President and CEO Tricia Fulton and our President and CEO Josef Matosevic) to the median of the annual total compensation of all employees excluding Mr. Dangel for 2018the CEOs was 25:71:1. This ratio was calculated as described below using the median of annual total compensation of all employees, other than Mr. Dangelthe CEOs of $62,619,$41,639, and the annualannualized total compensation of Mr. Dangel as reportedthe CEOs of $2,972,281. Compensation for the CEOs was based on amounts earned during the periods they served in our 2018 Summary Compensation Table of $1,539,107.the role.
The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilizeuse different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios.
56 |2021 Proxy Statement | |
Executive Compensation |
The median employee used in our 20182020 pay ratio calculation had substantially similar compensation tois the compensation of thesame employee we used for the 20172019 fiscal year pay ratio disclosure. The annual total compensation for this employee has been updated to reflect 20182020 compensation. We calculated total compensation for 20182020 for this employee using the same methodology used for Mr. Dangelthe CEOs in the Summary Compensation Table. We determined that during fiscal year 20182020 there had been no changes in our employee population or employee compensation arrangements that would result in significant change to our pay ratio disclosure. Therefore, we are allowedpermitted to identify this employee only once every three years. For purposes of this 20182020 disclosure, we used December 30, 201728, 2019 (the same date as the prior year), as the date used to identify the Median Employee (the “Determination Date”).
On the Determination Date, the Company employed a total of 1,1391,929 employees (including 9421,070 employees based in the United States). Since Faster and Custom Fluidpower were acquired after the Determination Date, their employees were not included in our analysis as permitted by applicable rules. The Company determined the Median Employee as of the Determination Date by identifying total compensation for the period beginning on January 1, 2017December 29, 2018 and ending on December 30, 201728, 2019 for 1,1181,875 employees who were employed by the Company on the Determination Date. This group of employees included all full- and part-time employees but excluded Mr. Dangel and 2054 non-U.S. employees employees (consisting of 11 employees in China, 846 employees in India, seven employees in Brazil and 1one employee in Argentina). This, who were excluded under the de minimis exception, which allows exclusion of up to 5% of the total employee population. Balboa Water Group was acquired during the 2020 fiscal year. Approximately 80 employees of Balboa Water Group have been omitted from this analysis as permitted by Item 402(u) of Regulation S-K.
The group of employees used to determine the median employee does not include any independent contractors or “leased” workers and does not exclude any employees of businesses acquired by us or combined with us.workers. Further, we did not utilizeuse any statistical sampling orcost-of-living adjustments for purposes of this CEO pay ratio disclosure. Total compensation used to determine the median employee included base wages, overtime, bonus payments, and the grant date fair value of restricted stock awards granted during the year. A portion of our employee workforce (full-time and part-time) identified above worked for less than the full fiscal year due to commencing employment after January 1, 2017.December 29, 2018. In determining the Median Employee, we annualized the total compensation for such individuals (but avoided creating full-time equivalencies) based on reasonable assumptions and estimates. Compensation paid in currencies other than U.S. dollars werewas converted to U.S. dollars based on average exchange rates for the12-month period ending December 30, 2017.28, 2019. After identifying the median employee, we calculated the annual total compensation for 2020 for this employee using the same methodology used for the CEOs in the Summary Compensation Table.
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Since June 2012, the Company has used shares of its common stock as the sole compensation for members of its Board of Directors.Board. Since 2015, each nonemployee Director is paid an annual retainer of 2,000 shares of Company common stock. The retainer for committee chairs is 1.5 times the regular Director rate and the Board Chair’s retainer is 2.25 times the regular Director rate. Each nonemployee Director also receives 250 shares for attendance at each Board meeting and eachin-person committee meeting on which he or she serves. No additional compensation is paid for meetings that are held within one day of a Board meeting or for separate meetings of less than four hours duration.hours. The shares of Company common stock are issued pursuant tounder the Sun Hydraulics Corporation 2012 Nonemployee Director Fees Plan (the “2012 Directors Plan”).
The Board believes that compensation of Directors entirely in Company common stock with a specified number of shares, rather than calculating the number based uponon a stated dollar amount, aligns the interests of Directors with those of the shareholders in the long-term growth and profitability of the Company. The Compensation Committee reviews the Director compensation program and adjusts compensation periodically so that it remains fair and competitive. As with executive compensation, industry data is used periodically as reference points. Directors also are reimbursed for their expenses incurred in connection with their attendance at such meetings. Directors who are employees of the Company do not receive any additional compensation for their service as Directors. Additionally, Directors are subject to Stock Ownership Guidelines where non-management members of the Board should own and hold shares with a value equal to two times (2x) the number of shares award to them annually as directors’ fees.
20182020 Board Pay Decisions
Due to the challenges of the COVID-19 pandemic and to manage costs, at its April 2020 meeting, the Board approved a 20% reduction in director compensation for the August, October and December meetings. The Board also granted special assignment equity awards to four directors for various roles serving on the CEO selection committee in 2020: Laura Dempsey Brown, Kennon Guglielmo, Doug Britt and Philippe Lemaitre. Also, Mr. Lemaitre received an additional equity award for serving as the temporary Executive Chairman during the 2020 CEO transition.
2020 Director Compensation
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($) (2) | Total ($) | ||||||||||||||||
Marc Bertoneche |
| — |
| 149,535 |
| 38,938 |
| 188,473 | ||||||||||||
Doug Britt |
| — |
| 199,380 |
| 18,415 |
| 217,795 | ||||||||||||
Wolfgang H. Dangel(3) |
| — |
| — |
| — |
| — | ||||||||||||
David W. Grzelak |
| — |
| 199,380 |
| — |
| 199,380 | ||||||||||||
Christine L. Koski |
| — |
| 149,535 |
| — |
| 149,535 | ||||||||||||
Philippe Lemaitre |
| — |
| 274,148 |
| 16,098 |
| 290,246 | ||||||||||||
Alexander Schuetz |
| — |
| 199,380 |
| 27,717 |
| 227,097 | ||||||||||||
Allen J. Carlson(4) |
| — |
| 41,265 |
| — |
| 41,265 | ||||||||||||
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | All Other Compensation ($) (2) | Total ($) | ||||||||||||||||
Marc Bertoneche | — | 109,568 | — | 109,568 | ||||||||||||||||
Douglas M. Britt (3) | — | 182,413 | — | 182,413 | ||||||||||||||||
Laura Dempsey Brown (4) | — | 105,475 | — | 105,475 | ||||||||||||||||
Cariappa (Cary) M. Chenanda | — | 79,530 | — | 79,530 | ||||||||||||||||
Kennon H. Guglielmo(4) | — | 125,135 | — | 125,135 | ||||||||||||||||
Christine L. Koski | — | 30,038 | — | 30,038 | ||||||||||||||||
Philippe Lemaitre (5) | — | 294,276 | — | 294,276 | ||||||||||||||||
Josef Matosevic (6) | — | — | — | — | ||||||||||||||||
Alexander Schuetz | — | 172,235 | — | 172,235 | ||||||||||||||||
Gregory C. Yadley | — | 79,530 | — | 79,530 | ||||||||||||||||
| (1) | The stock awards represent aggregate grant date fair market value, based on the average of the high and low market price as of the date of grant. The common stock was issued during |
| (2) | We have a travel and reimbursement policy under which we reimburse |
| (3) | Includes 700 special assignment equity awards for various roles serving on the CEO selection committee in 2020. |
| (4) | Includes 300 special assignment equity awards for various roles serving on the CEO selection committee in 2020. |
| (5) | Includes 1,800 special assignment equity awards for various roles serving on the CEO selection committee and serving as Executive Chairman in 2020. |
| (6) | Mr. |
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Director Compensation |
Equity Compensation Plan Information
The following table summarizes the Company’s equity compensation plan information as of December 29, 2018.January 2, 2021. Information is included for both equity compensation plans approved by the Company’s shareholders and equity compensation plans not approved by the shareholders.
| Number of securities to be issued upon exercise of outstanding options, warrants, and rights | average exercise price of outstanding options, warrants, and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||||||||||||||||||||||||||||||||||||
Plan category | (a) | (b) | (c) | ||||||||||||||||||||||||||||||||||||||||||
Equity compensation plans approved by shareholders | — | — |
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Equity compensation plans not approved by shareholders | — | — |
| — | |||||||||||||||||||||||||||||||||||||||||
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Total | — | — |
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Equity compensation plans approved by the shareholders include the Employee Stock Purchase Plan, the 20112019 Equity Incentive Plan and the 2012 Nonemployee Director Fees Plan.
The number of securities available for future issuance in column (c) as of December 29, 2018,January 2, 2021, were 452,925363,458 shares under the Employee Stock Purchase Plan, 52,67048,171 shares under the Sun Hydraulics Limited Share Incentive Plan, 361,298968,666 shares under the 20112019 Equity Incentive Plan, and 124,62471,549 shares under the 2012 Nonemployee Director Fees Plan.
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PROPOSAL 2 — APPROVAL OF CORPORATE NAME CHANGE
On March 8, 2019, the Board unanimously approved an amendment to our amended and restated articles of incorporation (“Articles of Incorporation”) to change our corporate name from “Sun Hydraulics Corporation” to “Helios Technologies, Inc.” The Board believes it is in the Company’s and our shareholders best interests to effect the name change and recommends to our shareholders the approval and adoption of the name change amendment.
Reason for the Amendment
The change in our corporate name is proposed to more accurately reflect the breadth and scope of the Company’s global operations and vision. Since August 6, 2018, the Company has used the name Helios Technologies as its business name in alignment with its progress toward its Vision 2025 strategy, which is to achieve global technology leadership in the industrial goods sector by 2025 with critical mass exceeding $1 billion in sales while maintaining superior profitability and financial strength.
The Board of Directors believes that use of Helios Technologies as the Company’s corporate name will reflect that we now have several operating companies under our holding company structure, including the legacy hydraulics business Sun Hydraulics, which now includes Custom Fluidpower, as well as Enovation Controls and Faster as wholly-owned subsidiaries. An integral part of the Company’s Vision 2025 strategy is to recognize that the parent company is evolving and should be independent from its multiple operating brands. A key component of Vision 2025 is the smart acquisition of aligned companies to broaden end market coverage in both hydraulics and electronics, and eventually with technologies that link those applications.
Effects of the Amendment
The Board of Directors has adopted resolutions setting forth an amendment to the Company’s Articles of Incorporation. The resolutions also provide that the amendment be submitted to the shareholders entitled to vote thereon for consideration at the Meeting in accordance with the Business Corporation Law of the State of Florida. The following is the text of the proposed amendment to Article 1 of the Company’s Articles of Incorporation:
“The name of the Corporation is Helios Technologies, Inc.”
If approved, the amendment to our Articles of Incorporation, will become effective upon the filing of the amendment with the Secretary of State of the State of Florida, which will occur as soon as reasonably practicable following the Meeting.
If the name change amendment becomes effective, the rights of shareholders holding certificated shares under currently outstanding stock certificates and the number of shares represented by those certificates will remain unchanged. The name change will not affect the validity or transferability of any currently outstanding stock certificates nor will it be necessary for stockholders with certificated shares to surrender or exchange any stock certificates they currently hold as a result of the name change. Any new stock certificates that are issued after the name change becomes effective will bear the name “Helios Technologies, Inc.”
If the shareholders do not approve the name change amendment, no amendment to our Articles of Incorporation will be made, and the Company’s name will remain unchanged.
Vote Required
Approval of an amendment to our Articles of Incorporation requires the affirmative vote of the holders of a majority of the outstanding shares of common stock, voting as a class, entitled to vote thereon. Abstentions will have the same effect as a vote against this proposal, and your broker (or another organization that holds your shares for you) may exercise its discretionary authority to vote your shares in favor of this proposal.
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PROPOSAL 3 — APPROVAL OF INCREASE IN NUMBER OF SHARES OF COMMON STOCK
On March 8, 2019, the Board unanimously approved an amendment to our Articles of Incorporation to increase the number of authorized shares of the Company’s common stock, par value $0.001 per share (“Common Stock”) to 100,000,000 shares. The Board believes it is in the Company’s and our shareholders’ best interests to increase the Company’s capitalization and recommends to our shareholders to increase the number of authorized shares of Common Stock.
Reason for the Amendment
The Company’s authorized capital consists of 2,000,000 shares of preferred stock and 50,000,000 shares of Common Stock. The Company uses Common Stock for executive and key employee incentive compensation awards, to pay Director fees, under an employee stock purchase plan, and for other corporate purposes, including acquisitions. In 2018, the Company issued new shares of Common Stock in an underwritten public offering and in connection with the acquisition of the Company’s Australian subsidiary. As of March 2018, there were approximately 32 million shares of Common Stock issued and outstanding and another approximately one million shares reserved for issuance under various equity incentive and Director compensation plans. The Board of Directors believes that the current number of authorized shares does not provide the Company with adequate flexibility in facilitating the effective use of securities with respect to future capital raises and acquisitions, under incentive and other compensation plans, and for stock dividends, stock splits and other corporate purposes. Although we cannot guarantee that any future acquisitions, stock offerings or dividends will occur, the Board believes that the proposed increase in the number of authorized shares will provide the Company with the flexibility to issue future shares without the expense of convening a special shareholders’ meeting or the delay of waiting until the next annual meeting.
Effects of the Amendment
The Board has adopted resolutions setting forth the proposed increase in capitalization in the form of an amendment to Article 5 of our Articles of Incorporation. The resolutions also provide that proposed amendment be submitted to the shareholders entitled to vote thereon for consideration at the Meeting in accordance with the Business Corporation Law of the State of Florida. The following is the text of the proposed amendment to Article 5 of our Articles of Incorporation:
The first sentence ofArticle 5 — Authorized Shares of the Amended and Restated Articles of Incorporation shall be amended to read as follows: The total number of shares of all classes of capital stock which the Corporation shall have the authority to issue is One Hundred Two Million (102,000,000) shares, consisting of (i) One Hundred Million (100,000,000) shares of common stock, $.001 value per share (the “Common Stock”), and (ii) Two Million (2,000,000) shares of preferred stock, $.001 value per share (the “Preferred Stock”).
If approved, the amendment to our Articles of Incorporation will become effective upon the filing of the amendment with the Secretary of State of the State of Florida, which will occur as soon as reasonably practicable following the Meeting. Thereafter, the unissued shares of common stock will be available for issuance from time to time for such purposes and consideration as the Board of Directors may approve. No such specific activities have been approved by the Board.
If Proposal 3 is not approved by the shareholders, no amendment to our Articles of Incorporation will be made, and the capitalization of the Corporation will remain unchanged.
Vote Required
Approval of an amendment to our Articles of Incorporation requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock, voting as a class, entitled to vote thereon. Abstentions will have the same effect as a vote against this proposal, and your broker (or another organization that holds your shares for you) may exercise its discretionary authority to vote your shares in favor of this proposal.
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PROPOSAL 4 — APPROVAL OF 2019 EQUITY INCENTIVE PLAN
On March 8, 2019, the Board of Directors approved a new comprehensive equity incentive plan, the Helios Technologies 2019 Equity Incentive Plan (“Equity Incentive Plan”). The Equity Incentive Plan authorizes the Board to grant shares of restricted or unrestricted common stock of the Company, stock appreciation rights, restricted stock units, stock options, and other equity-based awards to officers, employees, consultants, and directors of the Company and to those of its subsidiaries. The Company currently has six executive officers, sixnon-management directors and approximately 2,065 employees worldwide. The market value of the Company’s stock at April 4, 2019, was $49.62 per share. The Equity Incentive Plan is subject to approval by the Company’s shareholders at the Meeting. The Board believes that the Equity Incentive Plan is in the Company’s and our shareholders’ best interests and recommends to our shareholders its approval.
Reason for the Equity Incentive Plan
As part of its comprehensive review of executive compensation, which began in September 2018, the Compensation Committee of the Board of Directors, in conjunction with its compensation consultant Mercer (US) Inc. and management, considered the types of compensation awards that would provide flexibility to align the interests of executive officers and key managers of the Company with the strategic objectives embodied in the Company’s Vision 2025 strategy. As part of this review, the Compensation Committee reviewed the Company’s 2011 Equity Incentive Plan (“2011 Plan”), which will expire in 2021, and the 2006 Stock Option Plan, which expired in 2016.
On March 8, 2019, the Board of Directors reviewed the recommendation of the Compensation Committee that a new comprehensive equity incentive plan be adopted. The Committee based its recommendation on the desirability of providing flexibility to the Board and the Committee in making a wide variety of equity or equity-based awards under a current market, comprehensive omnibus plan. The Committee emphasized that the purpose of the new plan, as with the prior plans, is to attract, retain, and motivate excellent employees, in alignment with the Company’s Vision 2025 and long-term strategy, and to align more fully the interests of employees, consultants, officers and directors with those of the shareholders by giving them a personal interest in the value of the Company’s Common Stock. No more than 1,000,000 shares of Common Stock may be issued under the terms of the Plan.
FOLLOWING IS A SUMMARY WHICH DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROVISIONS OF THE 2019 EQUITY INCENTIVE PLAN. IN CASE OF ANY CONFLICT BETWEEN THIS SUMMARY AND THE ACTUAL TEXT OF THE PLAN, WHICH IS ATTACHED AS APPENDIX A TO THIS PROXY STATEMENT, THE TERMS OF THE PLAN CONTROL.
Capitalized terms used in the following summary but not defined have the meanings set forth in the Equity Incentive Plan.
Shares Available Under the Equity Incentive Plan. Subject to adjustment as provided in the Equity Incentive Plan, the number of shares of Common Stock or other equity-based awards that may be granted under the Equity Incentive Plan will not in the aggregate exceed 1,000,000, which may be original issue shares, treasury shares, or a combination thereof. No more than 500,000 shares may be granted as incentive stock options.
Eligibility. The Board of Directors may, in its discretion award Restricted Shares to any officer, employee, consultant, or member of the Board of Directors of the Company or any of its subsidiaries.
Equity Awards. At the time of the Award, the Board of Directors will cause the Company to deliver to the Participant a Grant Agreement specifying the terms of such Award. Upon the execution of the Grant Agreement by the Participant, and the payment of the purchase price for the award set forth therein, if any, the Board will cause the Company to issue a certificate or book entry shares or other documentation for such award registered or issued in the name of the Participant.
Restricted Stock Units under the Plan. In addition to other types of equity Awards, the Board of Directors may grant restricted stock units (RSU) to Participants. The RSUs granted under the Plan will be subject to vesting criteria that may be time-based, performance-based, or based on a combination of both time and performance. Performance-based awards will be subject to the achievement of certain corporate or subsidiary performance metrics and such units will only vest upon the achievement of those metrics. The metrics will be determined by the Compensation Committee at the beginning of each fiscal year.
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Adjustments. The maximum number of shares that may be issued or transferred under the Equity Incentive Plan and the number of shares covered by the Equity Incentive Plan are subject to adjustment in the event of stock dividends, stock splits, combinations, recapitalizations, mergers, consolidations, liquidation of the Company, and similar transactions or events.
Change in Control. In the event of a Change in Control, including but not limited to, merger, consolidation, reorganization or acquisition, the Board of Directors may, in its sole discretion, accelerate the exercise or vesting dates of any outstanding Award, grant a cash bonus award, pay cash in exchange for the cancellation of outstanding Awards or make any other adjustments or amendments to the Equity Incentive Plan and outstanding Awards.
Administration and Amendments. The Equity Incentive Plan will be administered by the Compensation Committee of the Board of Directors, except to the extent the Board has reserved its authority or delegates authority to another committee, as provided therein. The Board (and, by delegation, the Compensation Committee or other committees) will have the authority, in its sole discretion, from time to time, to: (i) grant Awards to officers, employees or Directors; (ii) prescribe such limitations, restrictions and conditions upon any such Awards as it may deem appropriate; (iii) accelerate the vesting of Awards; (iv) amend Grant Agreements with the consent of the affected Participants, including amending such agreements to amend vesting schedules; and (v) interpret the Equity Incentive Plan, to adopt, amend and rescind rules and regulations relating to the Equity Incentive Plan, and to make all other determinations and to take all other action necessary or advisable for its implementation and administration.
Effects of the Approval of the 2019 Equity Incentive Plan
The Board of Directors has adopted resolutions to approve the 2019 Equity Incentive Plan. The resolutions also provide that the plan be submitted to the shareholders. The tax treatment of certain equity awards that may be granted under the proposed plan are governed by the tax laws in applicable jurisdictions, and shareholder approval is required for the intended tax treatment of such awards under those federal laws and regulations promulgated thereunder.
If approved by the shareholders, the Company will make future equity and equity-based awards under the 2019 Plan and will no longer make any equity or equity-based awards under the 2011 Plan. The approximately 361,298 reserved, but unissued, shares under the 2011 Plan will be used under the new plan as part of the maximum 1,000,000 shares that are available for awards under the 2019 Equity Incentive Plan.
If the shareholders do not approve the 2019 Equity Incentive Plan, the plan will be cancelled, and the Board of Directors and the Compensation Committee will continue to make awards under the 2011 Plan.
Vote Required
Approval of the 2019 Equity Compensation Plan requires the affirmative vote of a majority of the votes cast in person or by proxy at the Meeting, assuming a quorum is present.
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PROPOSAL 5 — RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee engaged Grant Thornton LLP (“Grant Thornton”) to report upon the financial statements of the Company for the years ended December 30, 2017,29, 2019 and December 29, 2018,January 2, 2021, and the effectiveness of the Company’s internal control over financial reporting as of December 30, 2017,28, 2019 and December 29, 2018,January 2, 2021, respectively. Those audited financial statements are provided in conjunction with the Company’s annual report to shareholders that has been provided to the shareholders along with this Proxy Statement.
Fees
The Company incurred the following fees to Grant Thornton LLP during fiscal years 20182020 and 2017.2019.
2020 | 2019 | |||||||||||||||
2018 | 2017 | |||||||||||||||
Audit Fees: |
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Grant Thornton (principal auditor) | $ | 1,353,707 |
| $ | 1,244,299 |
| $ | 1,505,520 |
| $ | 1,419,384 |
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Other Auditors |
| — |
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| — |
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| — |
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| — |
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Subtotal |
| 1,353,707 |
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| 1,244,299 |
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| 1,505,520 |
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| 1,419,384 |
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Audit Related Fees |
| 291,613 |
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| 189,991 |
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| 48,555 |
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| 50,083 |
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Tax Fees |
| 27,000 |
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| — |
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| 41,305 |
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| 53,500 |
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All Other Fees |
| — |
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| — |
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| — |
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| — |
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Audit Fees were for professional services rendered for the audit of the Company’s consolidated financial statements included in Form10-K, reviews of the consolidated financial statements included in Forms10-Q, and statutory audits of the Company’s wholly-owned subsidiaries for the fiscal years 20182020 and 2017,2019, respectively.
Audit Related Fees were incurred for employee benefit plan audit services, audits in connection with acquisitions and due diligence services provided by Grant Thornton’s transaction advisory services group in connection with the Company’s acquisition activity.services.
The Audit Committee has not adopted anypre-approval policies and approves all engagements with the Company’s auditors prior to the performance of services by them.
A representative from Grant Thornton will be in attendance at the Meeting, will have the opportunity to make a statement if desired, and will be available to respond to any questions from those in attendance.
The Audit Committee has appointed Grant Thornton to report upon the financial statements of the Company for the year ended December 27, 2019,January 1, 2022, and the effectiveness of the Company’s internal control over financial reporting as of December 27, 2019.January 1, 2022. Although the Company is not required to seek shareholder ratification of this appointment by the Company’s Bylaws or otherwise, the Board believes it to be sound corporate governance to do so. If the shareholders do not ratify this appointment, the Audit Committee will reconsider the appointment and consider that vote in the review of its future selection of accountants, but will not be required to engage a different auditing firm.
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The Board of Directors, as a matter of good corporate practice, has elected to seek ratification of Grant Thornton LLP as the independent registered public accounting firm to report
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PROPOSAL 63 — ADVISORY VOTE ON EXECUTIVE COMPENSATION
At our 20182021 Annual Meeting of Shareholders, as provided in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) and as required by Section 14A of the Securities Exchange Act of 1934, as amended, we provided our shareholders the opportunity to advise our Compensation Committee and Board of Directors regarding the compensation of our named executive officers as described in our proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange CommissionSEC (“say on pay”). At our 2017 Annual Meeting of Shareholders, as provided in the Dodd-Frank Act, our shareholders were asked to indicate how frequently we should seek a “say on pay” advisory vote. The shareholders were able to indicate whether they would prefer an advisory vote on named executive officer compensation once every one, two, or three years. At the 2017 Annual Meeting, 89.95% of shareholders voting or who abstained from voting endorsed our Board’s recommendation that the advisory “say on pay” vote be held every year. Therefore, we are providing our shareholders the opportunity to advise our Compensation Committee and Board of Directors regarding the compensation of our named executive officers as described in this Proxy Statement.
As set forth in detail under the heading “Executive Compensation — Compensation Discussion and Analysis,” the goals of our compensation program are to attract, retain, motivate and reward highly qualified leadership personnel and to provide them with attractive long-term career opportunities. Our compensation philosophy is to provide executives with a competitive total compensation package which motivates superior job performance, the achievement of our business objectives, and the enhancement of shareholder value. The Company’s objective is to attract, retain, and motivate excellent employees, in alignment with the Company’s Vision 2025 and long-term strategy, and to align the interests of employees with those of the shareholders by giving them a personal interest in the value of the Company’s Common Stock. Please see the Compensation Discussion and Analysis beginning on page 2032 for a detailed description and analysis of our executive compensation programs, including information about the fiscal year 20182019 and 20192020 compensation of our named executive officers.
The advisory “say on pay” vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. We will ask our shareholders to vote “FOR” the following resolution at the Meeting:
“RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation and the accompanying narrative disclosure set forth in the Company’s 20192021 Proxy Statement.”
Thissay-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or our Board. However, we value the opinions of our shareholders and our Board and Compensation Committee will consider the outcome of the vote when making future executive compensation decisions. If a quorum is present at the meeting, Proposal 3 will be approved if votes cast favoring the action exceed the votes cast opposing the action.
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The Board of Directors recommends that you vote“FOR” Proposal
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Management of the Company does not know of any other business that may be presented at the Meeting. If any matter not described herein should be presented for shareholder action at the Meeting, the persons named in the enclosed Proxy will vote the shares represented thereby in accordance with their best judgment.
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REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY PROPOSALS AND NOMINATION OF DIRECTORS BY SHAREHOLDERS FOR THE 20202022 PROXY STATEMENT AND PRESENTATION AT THE 20202022 ANNUAL MEETING
Our Bylaws govern the submission of nominations for Director or other business proposals that a shareholder wishes to have considered at a meeting of shareholders, but which are not included in the Company’s proxy statement for that meeting. Under our Bylaws, if a shareholder, at our 20202022 Annual Meeting, of Shareholders (“2020 Annual Meeting”), wants to:
(i) nominate a person to stand for election as a Director, the nomination must be received at our principal executive offices no earlier than December 31, 2019,January 8, 2022, and no later than January 30, 2020.February 7, 2022. Therefore, notice to the Company of a shareholder nomination submitted before December 31, 2019,January 8, 2022, or after January 30, 2020,February 7, 2021, will be considered untimely and will not be considered at the 20202022 Annual Meeting; or
(ii) introduce an item of business, the proposal must be received at our principal executive offices no later than December 27, 2019.23, 2021. Accordingly, notice to the Company of a shareholder proposal received after December 27, 2019,23, 2021, will be considered untimely and will not be considered at the 20202022 Annual Meeting.
These advance notice provisions are in addition to, and separate from, the SEC requirements that a shareholder must meet to have a proposal included in our proxy statement and form of proxy for presentation at our annual meetings. Under SEC Rule14a-8, if a shareholder wantsWe expect to nominate a person to stand for election as a Director or introduce an item of business athold our 20202022 Annual Meeting and have us include such nominationon or proposal in our proxy statement and form of proxy for presentation at the 2020 Annual Meeting, the nomination or proposal must be received at our principal executive offices no later than December 27, 2020.about June 7, 2022.
Under our Bylaws, a shareholder must follow certain procedures to nominate persons for election as Directors or to introduce an item of business at an Annual Meeting of Shareholders. The procedures for nominating a Director are described above in “Independence“Governance of the Company — Independence and Committees of the Board of Directors” under the headings “Governance and Nominating Committee”and“and“Shareholder recommendationsRecommendations for Nomination as a Director.”
The procedures for introducing an item of business at the 20202022 Annual Meeting require providing a written notice of each proposed item of business that must include:
| (i) | a brief description of the business desired to be brought before the meeting, |
| (ii) | the reasons for conducting such business at the meeting, |
| (iii) | the name and record address of the shareholder proposing such business, |
| (iv) | the number of shares of stock owned beneficially or of record by the shareholder, |
| (v) | a description of all arrangements or understandings between the shareholder and any other person or persons (including their names) in connection with the proposal of such business by the shareholder and any material interest of the shareholder in such business, and |
| (vi) | a representation that the shareholder intends to appear in person or by proxy to bring such business before the meeting. |
Shareholder proposals and nominations for Director should be submitted in writing to the Corporate Secretary, at 1500 West University Parkway, Sarasota, Florida 34243. A copy of the Company’s Bylaws will be provided upon request in writing to the Secretary.
By Order of the Board of Directors,
GREGORY C. YADLEYMELANIE M. NEALIS
Secretary
Dated: April 26, 201923, 2021
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APPENDIX A
HELIOS TECHNOLOGIES, INC.
2019 EQUITY INCENTIVE PLANANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 3, 2021
SECTION 1THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
BACKGROUND AND PURPOSE
1.1. PurposeThe undersigned hereby makes, constitutes and appoints Alexander Schuetz and Phillippe Lemaitre and each of them (with the Plan. The purposepower of thissubstitution) proxies for the undersigned to represent and to vote, as designated below, all shares of Common Stock of Helios Technologies, 2019 Equity Incentive Plan is to promote the growth and profitabilityInc. held of Sun Hydraulics Corporation, d/b/a Helios Technologies (the “Corporation”) by (i) providing officers, employees and directors of the Corporation and of its subsidiaries with additional incentives to achieve long-term corporate objectives, (ii) assisting the Corporation and its subsidiaries in attracting and retaining officers, employees, consultants and directors of outstanding competence, and (iii) providing such officers, employees, consultants and directors with an opportunity to acquire an equity interest (direct or indirect) in the Corporation.
1.2. Effective Date. The Plan has been approvedrecord by the Corporation’s Boardundersigned on March 8, 2019, and the Plan is subject to approval by the shareholders of the CorporationApril 6, 2021 at the Corporation’s 2019 Annual Meeting of Shareholders. All Awards granted underStockholders to be held on June 3, 2021 at 10:00 AM EDT at Helios Technologies, Inc., 7456 16th Street East, Sarasota, FL 34243 or any adjournment or postponement thereof.
This proxy, when properly executed, will be voted as directed herein. If no direction is made, this Plan priorproxy will be voted “FOR” the Election of Directors and “FOR” Proposals 2, and 3. The proxy holders named above also will vote in their discretion upon such other business as may properly come before the meeting or any adjournment thereof, including procedural matters and matters relating to the dateconduct of the 2019 Annual Meeting shall be expressly subjectmeeting.
You are encouraged to approval ofspecify your choices by marking the Planappropriate boxes on the reverse side. The proxies cannot vote your shares unless you sign and return this card or vote by telephone or Internet as described below before the shareholders at that Annual Meeting.
SECTION 2Voting by telephone or Internet eliminates the need to return this proxy card. Your vote authorizes the proxies named above to vote your shares to the same extent as if you had marked, signed, dated and returned the proxy card. Before voting, read the Proxy Statement and Proxy Voting Instructions.
DEFINITIONSThank you for voting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED.
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to be held June 3, 2021
The following wordsProxy Statement and phrases shallour 2020 Annual Report are available at:
http://www.viewproxy.com/HeliosTechnologies/2021
Please mark your votes like this ☒
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSALS 2, and 3.
| 1. Nominees to serve until the Company’s 2024 annual meeting: | ||||||
| FOR | AGAINST | ABSTAIN | ||||
01 Josef Matosevic | ☐ | ☐ | ☐ | |||
02 Gregory C. Yadley | ☐ | ☐ | ☐ | |||
| Address Change/Comments: (If you noted | Please indicate if you | |||||
| any Address Changes and/or Comments | ||||||
| above, please mark box.) ☐ | plan to attend this meeting ☐ | |||||
2. Proposal to ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the year ended January 1, 2022. |
| ☐ FOR ☐ AGAINST ☐ ABSTAIN |
3. Approval, on an advisory basis, of the compensation of our named executive officers. |
| ☐ FOR ☐ AGAINST ☐ ABSTAIN |
| In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof, including procedural matters and matters relating to the conduct of the meeting. |
| Date |
| Signature |
| Signature |
| (Joint Owners) |
| Note: Please sign exactly as your name or names appear on this card. Joint owners should each sign personally. If signing as a fiduciary or attorney, please give your exact title. |
CONTROL NUMBER
PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED.
CONTROL NUMBER
PROXY VOTING INSTRUCTIONS
Please have the following meanings unless a different meaning is plainly requiredyour 11 digit control number ready when voting by the context:
2.1. “1934 Act” means the Securities Exchange Act of 1934, as amended. Reference to a specific section of the 1934 ActInternet or regulation thereunder shall include such section or regulation, any valid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
2.2. “Affiliate” means any corporation or any other entity (including, but not limited to, partnerships and joint ventures) controlling, controlled by, or under common control with the Corporation.
2.3. “Affiliated SAR” means an SAR that is granted in connection with a related Option, and which automatically will be deemed to be exercised at the same time that the related Option is exercised.
2.4. “Award” means, individually or collectively, a grant under the Plan of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Restricted Stock Units or Cash Awards.
2.5. “Award Agreement” means the written agreement setting forth the terms and provisions applicable to each Award granted under the Plan.
2.6. “Board” or “Board of Directors” means the Board of Directors of the Corporation.
2.7. “Cash Award” means the right to receive cash as described in Section 9.
2.8. “Cause” means (i) the commission of an act of fraud, embezzlement, theft or proven dishonesty, or any other illegal act or practice (whether or not resulting in criminal prosecution or conviction), including theft or destruction of property of the Corporation or a Subsidiary, or any other act or practice which the Committee shall, in good faith, deem to have resulted in the recipient’s becoming unbondable under the Corporation or any Subsidiary’s fidelity bond; (ii) the willful engaging in misconduct which is deemed by the Committee, in good faith, to be materially injurious to the Corporation or any Subsidiary, monetarily or otherwise, including, but not limited to, improperly disclosing trade secrets or other confidential or sensitiveTelephone
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business information and data about the Corporation or any Subsidiaries and competing with the Corporation or any Subsidiaries, or soliciting employees, consultants or customers of the Corporation or any Subsidiaries in violation of law or any employment or other agreement to which the recipient is a party; (iii) the continued failure or habitual neglect by a person who is an Employee to perform his or her duties with the Corporation or any Subsidiary; or (iv) other disregard of rules or policies of the Corporation or any Subsidiary, or conduct evidencing willful or wanton disregard of the interests of the Corporation or any Subsidiary. For purposes of this Plan, no act or failure to act by the recipient shall be deemed “willful” unless done or omitted to be done by the recipient not in good faith and without reasonable belief that the recipient’s action or omission was in the best interest of the Corporation and/or the Subsidiary. Notwithstanding the foregoing, if the recipient has entered into an employment agreement that is binding as of the date of employment termination, and if such employment agreement defines “Cause,” then the definition of “Cause” in such agreement shall apply to the recipient in this Plan.
2.9. “Change in Control” means the occurrence of any of the following events:
(a) any person becomes, after the effective date of this Plan, the “beneficial owner” (as defined in Rule13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Corporation representing 30% or more of the combined voting power of the Corporation’s then outstanding securities in a transaction that qualifies as a “change in ownership” or “change in effective control” under Treasury RegulationSection 1.409A-3(i)(5);
(b) individuals who constitute the Board on the effective date of the Plan cease, for any reason, to constitute at least a majority of the Board in a manner that qualifies as a “change in effective control” under Treasury RegulationSection 1.409A-3(i)(5), provided, however, that any person becoming a director subsequent to the effective date of the Plan who was nominated for election by at least 662⁄3% of the Board as constituted on the effective date of the Plan (other than the nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest, relating to the election of the Board, as such terms are used in Rule14a-11 of the Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Plan, considered a member of the Board as constituted on the effective date of the Plan; or
(c) the consummation of a merger or consolidation of the Corporation, other than a merger or consolidation in which the Shareholders of the Corporation immediately prior to the merger or the consolidation continue to hold (either directly or indirectly) at least 51% or more of the combined voting power of the Corporation or surviving entity immediately after the merger or consolidation with another entity; or
(d) a sale of substantially all of the assets of the Corporation to one or more unrelated businesses (other than to a corporation more than 50% of which is controlled by, or under common control with, the Corporation) in a transaction that qualifies as a “change in ownership of a substantial portion of assets” under Treasury RegulationSection 1.409A-3(i)(5)(vii), or an agreement to liquidate or dissolve the Corporation.
2.10. “Code” means the Internal Revenue Code of 1986, as amended. Reference to a specific section of the Code or regulation thereunder shall include such section or regulation, any valid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
2.11. “Committee” means the Compensation Committee of the Board, or such other committee as may be appointed by the Board (pursuant to Section 3.1) to administer the Plan.
2.12. “Corporation” means Sun Hydraulics Corporation, d/b/a Helios Technologies, a Florida corporation, or any successor thereto. With respect to the definitions of the Performance Goals, the “Corporation” means Sun Hydraulics Corporation and its consolidated subsidiaries, except to the extent the Committee expressly determines otherwise.
2.13. “Consultant” means any consultant, independent contractor, or other person who provides significant services to the Corporation or its Affiliates, but who is neither an Employee nor a Director.
2.14. “Director” means any individual who is a member of the Board of Directors of the Corporation.
2.15. “Disability” means a permanent and total disability within the meaning of Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Committee in its discretion may determine whether a
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permanent and total disability exists in accordance with uniform andnon-discriminatory standards adopted by the Committee from time to time.
2.16. “Employee” means any employee of the Corporation or of an Affiliate, whether such employee is so employed at the time the Plan is adopted or becomes so employed subsequent to the adoption of the Plan.
2.17. “Exercise Price” means the price at which a Share may be purchased by a Participant pursuant to the exercise of an Option.
2.18. “Fair Market Value” means the last sale price of the Common Stock as reported on the NASDAQ Global Select Market (or any other exchange or quotation system, if applicable) on the date specified; or if no sales occurred on such day, at the last sale price reported for the Common Stock; but if there should be any material alteration in the present system of reporting sales prices of such Common Stock, or if such Common Stock should no longer be listed on the NASDAQ Global Select Market (or other exchange or quotation system), or if the last sale price reported shall be on a date more than 30 days from the date in question, the market value of the Common Stock as of a particular date shall be determined in such a method as shall be specified by the Board.
2.19. “Fiscal Year” means the fiscal year of the Corporation.
2.20. “Freestanding SAR” means a SAR that is granted independently of any Option.
2.21. “Grant Date” means, with respect to an Award, the date that the Award was granted.
2.22. “Incentive Stock Option” means an Option to purchase Shares which is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code.
2.23. “Nonemployee Director” means a Director who is an employee of neither the Corporation nor of any Affiliate.
2.24. “Nonqualified Stock Option” means an option to purchase Shares which is not intended to be an Incentive Stock Option.
2.25. “Option” means an Incentive Stock Option or a Nonqualified Stock Option.
2.26. “Participant” means an Employee, Consultant, or Nonemployee Director who has an outstanding Award.
2.27. “Performance Goals” means the goal(s) (or combined goal(s)) determined by the Committee (in its discretion) to be applicable to a Participant with respect to an Award. As determined by the Committee, the Performance Goals applicable to an Award may provide for a targeted level or levels of achievement using one or more of the following measures: annual revenue, cash position, earnings per share, individual objectives, net income, operating cash flow, operating income, return on assets, return on equity, return on sales, stock price and total shareholder return. The Performance Goals may differ from Participant to Participant and from Award to Award.
2.28. “Period of Restriction” means the period during which the transfer of Restricted Stock is subject to restrictions and therefore, the Shares subject to the Restricted Stock grant are subject to a substantial risk of forfeiture. With respect to Restricted Stock granted pursuant to Section 7, such restrictions may be based on continued employment or other performance of services for the Corporation, the passage of time, the achievement of target levels of Performance Goals, or the occurrence of other events as determined by the Committee, in its discretion.
2.29. “Plan” means the Helios Technologies 2019 Equity Incentive Plan, as set forth in this instrument and as hereafter amended from time to time.
2.30. “Restricted Stock” means an Award granted to a Participant pursuant to Section 7.
2.31. “Restricted Stock Units” means an Award granted to a Participant pursuant to Section 8, consisting of a bookkeeping entry representing an amount equivalent to the Fair Market Value of one Share (or a fraction or multiple of such value), payable in cash, property or Shares. Restricted Stock Units represent an unfunded and unsecured obligation of the Corporation, except as otherwise provided for by the Committee.
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2.32. “Retirement” means a Participant’s voluntary termination of service with the Corporation after attainment of age sixty-five (65).
2.33. “Rule16b-3” means Rule16b-3 promulgated under the 1934 Act, and any future regulation amending, supplementing or superseding such regulation.
2.34. “Section 16 Person” means a person who, with respect to the Shares, is subject to Section 16 of the 1934 Act.
2.35. “Shares” means the shares of common stock, par value $.001 per share, of the Corporation.
2.36. “Stock Appreciation Right” or “SAR” means an Award, granted alone or in connection with a related Option, that pursuant to Section 6 is designated as an SAR.
2.37. “Subsidiary” means any corporation (or any similar entity organized under foreign law) which, on the date of determination, qualifies as a subsidiary corporation of the Corporation under Section 424(f) of the Code.
2.38. “Tandem SAR” means an SAR that is granted in connection with a related Option, the exercise of which shall require forfeiture of the right to purchase an equal number of Shares under the related Option (and when a Share is purchased under the Option, the SAR shall be canceled to the same extent).
2.39. “Termination of Service” means (a) in the case of an Employee, a cessation of the employee-employer relationship between the Employee and the Corporation or an Affiliate for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, Disability or the disaffiliation of an Affiliate, but excluding any such termination where there is a simultaneous reemployment by the Corporation or an Affiliate; (b) in the case of a Consultant, a cessation of the service relationship between the Consultant and the Corporation or an Affiliate for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, Disability, or the disaffiliation of an Affiliate, but excluding any such termination where there is a simultaneousre-engagement of the consultant by the Corporation or an Affiliate; and (c) in the case of a Nonemployee Director, a cessation of the Director’s service on the Board for any reason, including, but not by way of limitation, a termination by resignation, death, Disability ornon-reelection to the Board.
SECTION 3
ADMINISTRATION
3.1. The Committee. The Plan shall be administered by the Compensation Committee of the Board or such other committee as may be appointed by the Board. Unless the Committee is the full Board or all determinations made by the Committee are made only with the approval or ratification of the full Board, then the Committee shall be comprised solely of Directors who are“non-employee directors” under Rule16b-3.
3.2. Authority of the Committee. It shall be the duty of the Committee to administer the Plan in accordance with the Plan’s provisions. Except to the extent the Board has reserved to itself the authority to review, approve and ratify actions of the Committee, the Committee shall have all powers and discretion necessary or appropriate to administer the Plan and to control its operation, including, but not limited to, the power to (a) determine which Employees, Consultants and Directors shall be granted Awards, (b) prescribe the terms and conditions of the Awards, (c) interpret the Plan and the Awards, (d) adopt such procedures and subplans as are necessary or appropriate to permit participation in the Plan by Employees and Directors who are foreign nationals or employed outside of the United States, (e) adopt rules for the administration, interpretation and application of the Plan as are consistent therewith, and (f) interpret, amend or revoke any such rules.
3.3. Delegation by the Committee. Except to the extent the Board has reserved to itself the authority to review, approve and ratify actions of the Committee, the Committee, in its sole discretion and on such terms and conditions as it may provide, may delegate (a) all or any part of its authority and powers under the Plan to one or more Directors, and (b) more limited authority and powers under the Plan to one or more officers of the Corporation; provided, however, that the Committee may not delegate its authority and powers (a) with respect to Section 16 Persons, or (b) in any way which would jeopardize the Plan’s qualification under Rule16b-3.
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3.4. Decisions Binding. All determinations and decisions made by the Committee, the Board, and any delegate of the Committee pursuant to the provisions of the Plan shall be final, conclusive, and binding on all persons, and shall be given the maximum deference permitted by law.
3.5. No Liability. Neither any member of the Board nor any member of the Committee shall be liable to any person for any act or determination made in good faith with respect to the Plan or any Award granted hereunder.
3.6. Corporation Assistance. The Corporation shall supply full and timely information to the Committee on all matters relating to eligible persons, their employment, death, Retirement, disability, or other termination of employment or service, and such other pertinent facts as the Committee may require. The Corporation shall furnish the Committee with such clerical and other assistance as is necessary in the performance of its duties.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1. Number of Shares. Subject to adjustment as provided in Section 4.3, the total number of Shares available for issuance under the Plan shall not exceed 1,000,000 Shares, of which no more than 500,000 Shares may be granted as Incentive Stock Options. Shares issued under the Plan may be either authorized but unissued Shares or treasury Shares.
4.2. Awards Settled in Cash, Reissue of Awards and Shares. If an Award is settled in cash, or is cancelled, terminates, expires, or lapses for any reason (with the exception of the termination of a Tandem SAR upon exercise of the related Option, or the termination of a related Option upon exercise of the corresponding Tandem SAR), any Shares subject to such Award again shall be available for subsequent Awards under the Plan. Shares that are exchanged by a Participant or withheld by the Corporation as full or partial payment in connection with any Award under the Plan, as well as any Shares exchanged by a Participant or withheld by the Corporation or one of its Affiliates to satisfy the tax withholding obligations related to any Award, shall not be available for subsequent Awards under the Plan. To the extent that Shares are delivered pursuant to the exercise of a SAR or Option granted under the Plan, the number of underlying Shares as to which the exercise related shall be counted against the applicable share limits under Section 4.1, as opposed to only counting the Shares issued. (For purposes of clarity, if a SAR relates to 100,000 Shares and is exercised at a time when the payment due to the Participant is 15,000 Shares, 100,000 Shares shall be charged against the applicable Share limits under Section 4.1 with respect to such exercise.)
4.3. Adjustments in Awards and Authorized Shares. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,split-up,spin-off, combination, repurchase, or exchange of Shares or other securities of the Corporation, or other change in the corporate structure of the Corporation affecting the Shares occurs such that an adjustment is determined by the Committee (in its sole discretion) to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall in such manner as it may deem equitable, (a) adjust the number and class of Shares (or other securities) that may be delivered under the Plan under Section 4.1, and the number, class, and price of Shares (or other securities) subject to outstanding Awards or (b) make provision for a cash payment or for the assumption, substitution or exchange of any or all outstanding Awards or the cash, securities or property deliverable to the holder of any or all outstanding Awards, based upon the distribution or consideration payable to holders of the Shares upon or in respect of such event. The specific adjustments shall be determined by the Committee. Notwithstanding the preceding, the number of Shares subject to any Award always shall be a whole number.
SECTION 5
STOCK OPTIONS
5.1. Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Employees, Consultants and Directors at any time and from time to time as determined by the Committee in its sole discretion. The Committee may grant Incentive Stock Options, Nonqualified Stock Options, or a combination thereof, and the Committee, in its sole discretion, shall determine the number of Shares subject to each Option.
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5.2. Award Agreement. Each Option shall be evidenced by an Award Agreement that shall specify the Exercise Price, the expiration date of the Option, the number of Shares to which the Option pertains, any conditions to exercise the Option, and such other terms and conditions as the Committee, in its discretion, shall determine. The Award Agreement shall also specify whether the Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option.
5.3. Exercise Price. Subject to the provisions of this Section 5.3, the Exercise Price for each Option shall be determined by the Committee in its sole discretion.
5.3.1. Nonqualified Stock Options. In the case of a Nonqualified Stock Option, the Exercise Price shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date.
5.3.2. Incentive Stock Options. In the case of an Incentive Stock Option, the Exercise Price shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date; provided, however, that if on the Grant Date, the Employee (together with persons whose stock ownership is attributed to the Employee pursuant to Section 424(d) of the Code) owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation or any of its Subsidiaries, the Exercise Price shall be not less than one hundred and ten percent (110%) of the Fair Market Value of a Share on the Grant Date.
5.3.3. Substitute Options. Notwithstanding the provisions of Sections 5.3.1 and 5.3.2, in the event that the Corporation or an Affiliate consummates a transaction described in Section 424(a) of the Code (e.g., the acquisition of property or stock from an unrelated corporation), persons who become Employees, Directors or Consultants on account of such transaction may be granted Options in substitution for options granted by their former employer. If such substitute Options are granted, the Committee, in its sole discretion and consistent with Section 424(a) of the Code, may determine that such substitute Options shall have an exercise price less than one hundred percent (100%) of the Fair Market Value of the Shares on the Grant Date.
5.4. Expiration of Options.
5.4.1. Expiration Dates. Each Option shall terminate no later than the first to occur of the following events:
(a) The date for termination of the Option set forth in the written Award Agreement, or
(b) If no date for the termination of the Option is set forth in the written Award Agreement (other than reference to Section 5.4.1(c)), (a) the expiration of twelve (12) months from the date of the Participant’s Termination of Service if such Termination of Service is a result of death or Disability, or (b) three (3) months from the date of the Participant’s Termination of Service for any other reason; or
(c) The expiration of ten (10) years from the Grant Date.
5.4.2. Committee Discretion. Subject to the limits of Section 5.4.1, the Committee, in its sole discretion, (a) shall provide in each Award Agreement when each Option expires and becomes unexercisable, and (b) may, after an Option is granted, extend the maximum term of the Option (subject to Section 5.8.4 regarding Incentive Stock Options).
5.5. Exercisability of Options. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall determine in its sole discretion. The Committee may, in its discretion, condition the vesting and exercisability of any Option granted under the Plan on satisfaction of (i) any minimum period of continued employment or other continued service with the Corporation by the Participant the Committee deems appropriate (“service vesting”), (ii) satisfaction of any of one or more Performance Goals the Committee deems appropriate (“performance vesting”), or (iii) any combination of servicing vesting and performance vesting requirements the Committee deems appropriate. After an Option is granted, the Committee, in its sole discretion, may accelerate the exercisability of the Option.
5.6. Payment. Options shall be exercised by the Participant’s delivery of a written notice of exercise to the Secretary of the Corporation (or its designee), setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares, including satisfaction of any applicable withholding taxes.
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Upon the exercise of any Option, the Exercise Price shall be payable to the Corporation in full in cash or its equivalent. The Committee, in its sole discretion, also may permit exercise (a) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Exercise Price (such previously acquired Shares must have been held for the requisite period necessary to avoid a charge to the Corporation’s earnings for the financial reporting purposes, unless otherwise determined by the Committee), or (b) by any other means which the Committee, in its sole discretion, determines to both provide legal consideration for the Shares, and to be consistent with the purposes of the Plan.
As soon as practicable after receipt of a written notification of exercise and full payment for the Shares purchased, including satisfaction of any applicable withholding taxes, the Corporation shall deliver to the Participant (or the Participant’s designated broker), Share certificates (which may be in book entry form) representing such Shares.
5.7. Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option as it may deem advisable, including, but not limited to, restrictions related to applicable federal securities laws, the requirements of any national securities exchange or system upon which Shares are then listed or traded, or any blue sky or state securities laws.
5.8. Certain Additional Provisions for Incentive Stock Options.
5.8.1. Exercisability. The aggregate Fair Market Value (determined on the Grant Date(s)) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Employee during any calendar year (under all plans of the Corporation and its Subsidiaries) shall not exceed $100,000. To the extent that the aggregate Fair Market Value exceeds such $100,000 limit, such options shall be treated as nonqualified stock options. In reducing the number of options treated as Incentive Stock Options to meet the $100,000 limit, the most recently granted Options shall be reduced first. To the extent a reduction of simultaneously granted options is necessary to meet the $100,000 limit, the Committee may, in the manner and to the extent permitted by law, designate which Shares are to be treated as shares acquired pursuant to the exercise of an Incentive Stock Option.
5.8.2. Termination of Service. No Incentive Stock Option may be exercised more than three (3) months after the Participant’s Termination of Service for any reason other than Disability or death, unless (a) the Participant dies during such three-month period, and/or (b) the Award Agreement or the Committee permits later exercise. No Incentive Stock Option may be exercised more than one (1) year after the Participant’s Termination of Service on account of death or Disability, unless the Award Agreement or the Committee permit later exercise. Notwithstanding the foregoing, to the extent that the post-termination exercise period exceeds the limitations under Section 422 of the Code, the Option will cease to be treated as an Incentive Stock Option and shall be treated as a Nonqualified Stock Option at such time that the applicable time limit is exceeded.
5.8.3. Corporation and Subsidiaries Only. Incentive Stock Options may be granted only to persons who are employees of the Corporation or a Subsidiary on the Grant Date.
5.8.4. Duration of Authority to Grant Incentive Stock Options. No Incentive Stock Option may be granted more than ten (10) years after the effective date of this Plan, except to the extent the shareholders of the Corporation have approved grants after that date pursuant to Section 12.2 below.
5.8.5. Expiration. No Incentive Stock Option may be exercised after the expiration of ten (10) years from the Grant Date; provided, however, that if the Option is granted to an Employee who, together with persons whose stock ownership is attributed to the Employee pursuant to Section 424(d) of the Code, owns stock possessing more than 10% of the total combined voting power of all classes of the stock of the Corporation or any of its Subsidiaries, the Option may not be exercised after the expiration of five (5) years from the Grant Date.
5.8.6. Other Terms There shall be imposed in any Award Agreement relating to Incentive Stock Options such other terms and conditions as from time to time are required in order that the option be an “incentive stock option” as that term is defined in Section 422 of the Code.
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SECTION 6
STOCK APPRECIATION RIGHTS
6.1. Grant of SARs. Subject to the terms and conditions of the Plan, an SAR may be granted to Employees, Directors and Consultants at any time and from time to time as shall be determined by the Committee, in its sole discretion. The Committee may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination thereof.
6.1.1. Number of Shares. The Committee shall have complete discretion to determine the number of SARs granted to any Participant.
6.1.2. Exercise Price and Other Terms. The Committee, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of SARs granted under the Plan. However, the exercise price of a Freestanding SAR shall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date. The exercise price of Tandem or Affiliated SARs shall equal the Exercise Price of the related Option.
6.2. Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. With respect to a Tandem SAR granted in connection with an Incentive Stock Option: (a) the Tandem SAR shall expire no later than the expiration of the underlying Incentive Stock Option; (b) the value of the payout with respect to the Tandem SAR shall be for no more than one hundred percent (100%) of the difference between the Exercise Price of the underlying Incentive Stock Option and the Fair Market Value of the Shares subject to the underlying Incentive Stock Option at the time the Tandem SAR is exercised; and (c) the Tandem SAR shall be exercisable only when the Fair Market Value of the Shares subject to the Incentive Stock Option exceeds the Exercise Price of the Incentive Stock Option.
6.3. Exercise of Affiliated SARs. An Affiliated SAR shall be deemed to be exercised upon the exercise of the related Option. The deemed exercise of an Affiliated SAR shall not necessitate a reduction in the number of Shares subject to the related Option.
6.4. Exercise of Freestanding SARs. Freestanding SARs shall be exercisable on such terms and conditions as the Committee, in its sole discretion, shall determine. The Committees may, in its discretion, condition the vesting and exercisability of any Freestanding SARs granted under the Plan on satisfaction of (i) any minimum period of continued employment or other continued service with the Corporation by the Participant the Committee deems appropriate (“service vesting”), (ii) satisfaction of any of one or more Performance Goals the Committee deems appropriate (“performance vesting”), or (iii) any combination of servicing vesting and performance vesting requirements the Committee deems appropriate.
6.5. SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Committee, in its sole discretion, shall determine.
6.6. Expiration of SARs. An SAR granted under the Plan shall expire upon the date determined by the Committee, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 5.4 also shall apply to SARs.
6.7. Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Corporation in an amount determined by multiplying:
(a) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times
(b) The number of Shares with respect to which the SAR is exercised.
6.8. At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof.
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SECTION 7
RESTRICTED STOCK
7.1. Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Restricted Stock to Employees, Directors and Consultants in such amounts as the Committee, in its sole discretion, shall determine. The Committee, in its sole discretion shall determine the number of Shares to be granted to each Participant.
7.2. Restricted Stock Agreement. Each Award of Restricted Stock shall be evidenced by an Award Agreement that shall specify the Period of Restriction, the number of Shares granted, purchase price, if any, and such other terms and conditions as the Committee, in its sole discretion, shall determine. Unless the Committee determines otherwise, Restricted Stock shall be held by the Corporation as escrow agent until the restrictions on such Restricted Stock have lapsed.
7.3. Transferability. Except as provided in this Section 7, Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.
7.4. Other Restrictions. The Committee, in its sole discretion, may impose such other restrictions on Restricted Stock as it may deem advisable or appropriate, in accordance with this Section 7.4.
7.4.1. General Restrictions. The Committee may set restrictions based upon the achievement of specific performance objectives (Corporation-wide, divisional, or individual), applicable federal or state securities laws, or any other basis determined by the Committee in its discretion. In addition, the Committee will have the discretion to determine the restrictions or other limitations of the individual awards granted under this Section 7.4.1 including the authority to reduce or eliminate Awards, in its sole discretion, if the Committee preserves such authority at the time of grant by language to this effect in its authorizing resolutions or otherwise.
7.4.2. Legend on Certificates. The Committee, in its discretion, may legend the certificates representing Restricted Stock to give appropriate notice of such restrictions.
7.5. Dividends and Other Distributions. During the Period of Restriction, Participants holding Restricted Stock shall be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Restricted Stock with respect to which they were paid. In addition, any dividends as to the unvested portion of a Restricted Stock award that is subject to performance-based vesting requirements (or any dividend equivalents as to the unvested portion of a Restricted Stock Unit award that is subject to performance-based vesting requirements) will be subject to termination and forfeiture to the same extent as the corresponding portion of the Award to which they relate.
7.6. Voting Rights. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Committee determines otherwise.
7.7. Return of Restricted Stock to Corporation. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed shall revert to the Corporation and again shall become available for grant under the Plan.
SECTION 8
RESTRICTED STOCK UNITS
8.1. Grant of Restricted Stock Units. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Restricted Stock Units to Employees, Directors and Consultants in such amounts as the Committee, in its sole discretion, shall determine. The Committee, in its sole discretion shall determine the number of Shares to be granted to each Participant and the terms of such Restricted Stock Units.
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8.2. Award Agreement. Each Award of Restricted Stock Units shall be evidenced by an Award Agreement that shall specify the number of Shares granted, the conditions for vesting of the Restricted Stock Units, and such other terms and conditions as the Committee, in its sole discretion, shall determine.
8.3. Transferability. Restricted Stock Units may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.
8.4. Vesting. The Committee, in its sole discretion, may impose such restrictions on the vesting of the Participant’s Restricted Stock Units as it may deem advisable or appropriate, in accordance with this Section 8.4.
8.4.1. Service Vesting. The Committee may condition the vesting of a Participant’s Restricted Stock Units upon the Participant’s continued performance of services for the Corporation through a specified vesting date or dates. If the Participant’s Termination of Service occurs before such vesting date, the relevant Restricted Stock Units shall be forfeited, except as may otherwise be provided in the Award Agreement.
8.4.2. Performance Vesting. Alternatively, the Committee may, in its discretion, condition the vesting of all or a portion of the Participant’s Restricted Stock Units upon completion of based upon the achievement of specific performance objectives (Corporation-wide, divisional, or individual), applicable federal or state securities laws, or any other basis determined by the Committee in its discretion. In addition, the Committee will have the discretion to determine the vesting or other limitations of the individual awards granted under this Section 8.4.2 including the authority to reduce or eliminate Awards, in its sole discretion, if the Committee preserves such authority at the time of grant by language to this effect in its authorizing resolutions or otherwise.
8.5. Settlement of Restricted Stock Units. Upon vesting of all or part of a Participant’s Restricted Stock Units, the Participant shall be entitled to receive from the Corporation in settlement of the vested Restricted Stock Units either, at the discretion of the Committee:
(a) The number of Shares with respect to that portion of the Restricted Stock Units which have become vested; or
(b) An amount determined by multiplying the Fair Market Value of a Share on the date of vesting; times the number of Shares with respect to which the Restricted Stock Units which have become vested.
In either case, the Corporation may reduce the net amount or number of Shares actually delivered to the Participant to account for payroll taxes withheld pursuant to Section 13.2 below.
8.6. No Rights of Shareholder Until Restricted Stock Units Vest. Until such time as the Restricted Stock Units vest and shares of Common Stock are issued to the Participant, the Participant shall not have the rights of a shareholder with respect to the covered shares. In particular, Participants holding unvested Restricted Stock Units shall not be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement or exercise voting rights with respect to those shares.
SECTION 9
CASH AWARDS
9.1. Cash Awards. Cash Awards may be granted either alone, in addition to, or in tandem with other Awards granted under the Plan. After the Committee determines that it will offer a Cash Award, it shall advise the Participant, by means of an Award Agreement, of the terms, conditions and restrictions related to the Cash Award. The grant or vesting of a Cash Award may be made contingent on the achievement of Performance Goals.
SECTION 10
CHANGE IN CONTROL
10.1. Change in Control. In the event of a pending Change in Control, the Board may, in its sole discretion, take any one or more of the following actions with respect to any one or more Participants:
(a) Accelerate the exercise dates or vesting dates of any outstanding Awards;
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(b) Make outstanding Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights or Cash Awards fully vested and exercisable;
(c) Grant a cash bonus award to any of the holders of outstanding Awards;
(d) Pay cash to any or all Participants in exchange for the cancellation of their outstanding Awards; or
(e) Make any other adjustments or amendments to the Plan and outstanding Awards.
10.2. Requirements if Shares are Publicly Traded. If the Shares are registered under the Securities Exchange Act of 1934, any such action with respect to any named executive officer of the Corporation shall be effective only if it is approved by the Compensation Committee of the Board and the Committee is comprised exclusively of Nonemployee Directors.
10.3. Uniform Treatment Not Required. In exercising its authority under this Section 10, the Board or Committee shall have no duty to apply any action taken under this Section 10 uniformly to all Participants, and may choose, in its sole discretion, whether or not the Awards granted to any particular Participant will be affected (subject to anypre-existing provisions in a Participant’s Award Agreement or other agreement with the Corporation requiring accelerated vesting or payment upon a Change in Control).
SECTION 11
MISCELLANEOUS
11.1. Issuance of Shares. The Corporation shall not be required to issue or deliver any certificate for Shares purchased upon the attempted exercise of any Option or SAR granted hereunder or any portion thereof, or deliver any certificate for shares of Restricted Stock or Restricted Stock Unit granted hereunder, and no attempted exercise of an Option or SAR shall be effective prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on which the Shares are then listed;
(b) The completion of any registration or other qualification of such Shares which the Committee shall deem necessary or advisable under any federal or state law or under the rulings or regulations of the SEC or any other governmental regulatory body;
(c) The obtaining of any approval or other clearance from any federal or state governmental agency or body which the Committee shall determine to be necessary or advisable; and
(d) The lapse of such reasonable period of time following the exercise of the Option or SAR as the Board from time to time may establish for reasons of administrative convenience.
Stock certificates issued and delivered to Participants shall bear such restrictive legends as the Corporation shall deem necessary or advisable pursuant to applicable federal and state securities laws. The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Shares pursuant to Options shall relieve the Corporation of any liability with respect to thenon-issuance or sale of the Shares as to which such approval shall not have been obtained. The Corporation shall, however, use reasonable efforts to obtain all such approvals.
11.2. No Effect on Employment or Service. Nothing in the Plan shall interfere with or limit in any way the right of the Corporation to terminate any Participant’s employment or service at any time, with or without cause. For purposes of the Plan, transfer of employment of a Participant between the Corporation and any one of its Affiliates (or between Affiliates) shall not be deemed a Termination of Service. Employment with the Corporation and its Affiliates is on anat-will basis only.
11.3. Participation. No Employee, Director or Consultant shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.
11.4. Indemnification. Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Corporation against and from (a) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding
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to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan or any Award Agreement, and (b) from any and all amounts paid by him or her in settlement thereof, with the Corporation’s approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit, or proceeding against him or her, provided he or she shall give the Corporation an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Corporation’s Certificate of Incorporation or Second Amended and Restated Bylaws, by contract, as a matter of law, or otherwise, or under any power that the Corporation may have to indemnify them or hold them harmless.
11.5. Successors. All obligations of the Corporation under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Corporation, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business or assets of the Corporation.
11.6. Beneficiary Designations. If permitted by the Committee, a Participant under the Plan may name a beneficiary or beneficiaries to whom any vested but unpaid Award shall be paid in the event of the Participant’s death. Each such designation shall revoke all prior designations by the Participant and shall be effective only if given in a form and manner acceptable to the Committee. In the absence of any such designation, any vested benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate and, subject to the terms of the Plan and of the applicable Award Agreement, any unexercised vested Award may be exercised by the administrator or executor of the Participant’s estate.
11.7. Limited Transferability of Awards. Subject to Section 7.3, no Award granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, by the laws of descent and distribution, or to the limited extent provided in Section 11.7. All rights with respect to an Award granted to a Participant shall be available during his or her lifetime only to the Participant. Notwithstanding the foregoing, the Participant may, in a manner specified by the Committee, (a) transfer a Nonqualified Stock Option to a Participant’s spouse, former spouse or dependent pursuant to a court-approved domestic relations order which relates to the provision of child support, alimony payments or marital property rights, and (b) transfer a Nonqualified Stock Option by bona fide gift and not for any consideration, to (i) a member or members of the Participant’s immediate family, (ii) a trust established for the exclusive benefit of the Participant and/or member(s) of the Participant’s immediate family, (iii) a partnership, limited liability company of other entity whose only partners or members are the Participant and/or member(s) of the Participant’s immediate family, or (iv) a foundation in which the Participant and/or member(s) of the Participant’s immediate family control the management of the foundation’s assets.
11.8. No Rights as Shareholder. Except to the limited extent provided in Sections 7.6 and 7.7 no Participant (nor any beneficiary) shall have any of the rights or privileges of a shareholder of the Corporation with respect to any Shares issuable pursuant to an Award (or exercise thereof), unless and until certificates representing such Shares shall have been issued, recorded on the records of the Corporation or its transfer agents or registrars, and delivered to the Participant (or beneficiary).
11.9. Tax Matters. Notwithstanding anything to the contrary contained herein, to the extent that the Committee determines that any Award granted under the Plan is subject to Code Section 409A and unless otherwise specified in the applicable Award Agreement, the Award Agreement evidencing such Award shall incorporate the terms and conditions necessary for such Award to avoid the consequences described in Code Section 409A(a)(1), and to the maximum extent permitted under applicable law (and unless otherwise stated in the applicable Award Agreement), the Plan and the Award Agreements shall be interpreted in a manner that results in their conforming to the requirements of Code Section 409A(a)(2), (3) and (4) and any Department of Treasury or Internal Revenue Service regulations or other interpretive guidance issued under Section 409A.
11.10. Non-Exclusivity of the Plan. Neither the adoption of the Plan by the Board nor the submission of the Plan to the shareholders of the Corporation for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options and the awarding of stock and/or cash, and such arrangements may be either generally applicable or applicable only in specific cases.
11.11. Other Forfeiture Events, Clawback and Recoupment. The Committee may specify in an Award Agreement that the Participant’s rights, payments, and/or benefits with respect to an Award will be subject to reduction, cancellation, forfeiture,
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and/or recoupment upon the occurrence of certain specified events, in addition to any applicable vesting, performance or other conditions and restrictions of an Award. Except as otherwise determined by the Committee, a Participant shall forfeit all of his or her outstanding Awards if such Participant is determined to have engaged in an act that constitutes Cause (regardless of whether the Participant’s service with the Corporation is terminated as a result of such Cause). The determination of whether a Participant has engaged in an act that constitutes Cause shall be made by the Committee, which prior to making such determination shall provide written notice of the event of Cause to the Participant and allow the Participant a reasonable opportunity to cure such event. Notwithstanding any provisions to the contrary under this Plan, an Award granted under the Plan shall be subject to the Corporation’s clawback policy as may be established and/or amended from time to time. The Corporation may require a Participant to forfeit or return to and/or reimburse the Corporation all or a portion of the Award and/or Shares issued under the Award, any amounts paid under the Award, and any payments or proceeds paid or provided upon disposition of the Shares issued under the Award, pursuant to the terms of such clawback policy or as necessary or appropriate to comply with applicable laws.
11.12. Delay of Payment Pending Investigation. If any Award becomes payable (or any restrictions relating to such Award lapse) while a Participant is under investigation for any event that would constitute Cause or otherwise result in forfeiture of an Award, payment of such Award shall be delayed pending the outcome of such investigation. If such investigation is pending on the latest date upon which such Award may be paid (or such restrictions may lapse) in order for payment of the Award to remain qualified as a short-term deferral under Treasury RegulationSection 1.409A-1(b)(4) or would otherwise not result in a violation of Code Section 409A, the Award may be paid on that date only if the Participant executes an agreement with the Corporation under which he or she agrees to repay or forfeit the Award if the investigation results in the Participant being found to have committed an act that constitutes Cause or would result in forfeiture of the Award. If the Participant fails to execute such an agreement, the Award shall be forfeited.
SECTION 12
AMENDMENT, TERMINATION, AND DURATION
12.1. Amendment, Suspension, or Termination. The Board, in its sole discretion, may amend, suspend or terminate the Plan, or any part thereof, at any time and for any reason. The amendment, suspension, or termination of the Plan shall not, without the consent of the Participant, alter or impair any rights or obligations under any Award already granted to such Participant; provided that such consent shall not be required if the Board determines, in its sole and absolute discretion, that the amendment, suspension or termination: (a) is required or advisable in order for the Corporation, the Plan or the Award to satisfy applicable law, to meet the requirements of any accounting standard or to avoid any adverse accounting treatment, or (b) in connection with any Change in Control transaction or event, is in the best interests of the Corporation or its shareholders. The Board may, but need not, take the tax or accounting consequences to affected Participants into consideration in acting under the preceding sentence. No Award may be granted during any period of suspension or after termination of the Plan. The Corporation shall obtain shareholder approval if necessary or desirable to comply with applicable laws, rules and regulations, including of any governmental agencies and national securities exchanges. Decisions of the Board shall be final, binding and conclusive.
12.2. Duration of the Plan. The Plan shall be effective as of the date the Plan is approved by the Corporation’s Shareholders at the 2019 Annual Meeting of Shareholders, and subject to Section 12.1 (regarding the Board’s right to amend or terminate the Plan), shall remain in effect thereafter. However, no Incentive Stock Option may be granted under the Plan after ten years from the latest date the Corporation’s shareholders approve the Plan, including any subsequent amendment or restatement of the Plan approved by the Corporation’s shareholders.
SECTION 13
TAX WITHHOLDING
13.1. Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Corporation shall have the power and the right to deduct or withhold, or require a Participant to remit to the Corporation, an amount sufficient to satisfy federal, state, and local taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof).
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13.2. Withholding Arrangements. The Committee, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (a) electing to have the Corporation withhold otherwise deliverable Shares, or (b) delivering to the Corporation already-owned Shares having a Fair Market Value equal to the minimum amount required to be withheld. If the Committee permits Award Shares to be withheld from the Award to satisfy applicable withholding obligations, the Fair Market Value of the Award Shares withheld, as determined as of the date of withholding, shall not exceed the amount determined by the applicable minimum statutory withholding rates to the extent the Committee determines such limit is necessary or advisable in light of generally accepted accounting principles.
13.3. Liability for Applicable Taxes. Regardless of any action the Corporation or the Participant’s employer (the “Employer”) takes with respect to any or all income tax, social security, payroll tax, payment on account, othertax-related withholding or information reporting(“Tax-Related Items”), the Participant acknowledges and agrees that the ultimate liability for allTax-Related Items legally due by Participant is and remains the Participant’s responsibility and that the Corporation and or the Employer (a) make no representations nor undertakings regarding the treatment of anyTax-Related Items in connection with any aspect of an Award; and (b) do not commit to structure the terms or any aspect of any Award granted hereunder to reduce or eliminate the Participant’s liability forTax-Related Items. The Participant shall pay the Corporation or the Employer any amount ofTax-Related Items that the Corporation or the Employer may be required to withhold as a result of the Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Corporation may refuse to deliver any benefit under the Plan if the Participant fails to comply with his or her obligations in connection with theTax-Related Items.
SECTION 14
LEGAL CONSTRUCTION
14.1. Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.
14.2. Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
14.3. Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
14.4. Securities Law Compliance. With respect to Section 16 Persons, transactions under this Plan areintended to comply with all applicable conditions of Rule16b-3. To the extent any provision of the Plan, Award Agreement or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee.
14.5. Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Florida.
14.6. Captions. Captions are provided herein for convenience only, and shall not serve as a basis for interpretation or construction of the Plan.
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