(2)
| These 2020 values represent the aggregate grant date fair value of the service-based and performance-based 2020 RSU awards as computed in accordance with FASB ASC Topic 718. The assumptions used in determining the grant date fair value of the stock awards are set forth in Note 12 to our consolidated financial statements, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. | | | | | | | | | | | | | | | | | | | Name and Principal Position | Year | Salary(1) ($) | Bonus(2) ($) | Stock Awards(3) ($) | Option Awards(4) ($) | Non-Equity Incentive Comp.(5) ($) | Change in Pension Value and Nonqualified Deferred Comp. Earnings(6) ($) | All Other Comp.(7) ($) | Total ($) | D. Michael Wilson | 2018 | 895,833 |
| — |
| 1,856,270 |
| 618,771 |
| 1,800,000 |
| — |
| 251,903 |
| 5,422,777 |
| President and CEO | 2017 | 845,833 |
| — |
| 1,593,778 |
| 531,253 |
| 1,700,000 |
| — |
| 186,723 |
| 4,857,587 |
| | 2016 | 800,000 |
| 565,419 |
| 2,579,160 |
| 509,157 |
| 1,029,600 |
| — |
| 616,767 |
| 6,100,103 |
| John C. Fortson | 2018 | 503,750 |
| — |
| 662,879 |
| 220,942 |
| 707,000 |
| — |
| 124,317 |
| 2,218,888 |
| CFO & Treasurer | 2017 | 488,750 |
| — |
| 643,534 |
| 214,493 |
| 686,000 |
| — |
| 100,819 |
| 2,133,596 |
| | 2016 | 475,000 |
| 197,678 |
| 1,608,602 |
| 286,606 |
| 427,930 |
| — |
| 356,169 |
| 3,351,985 |
| Katherine P. Burgeson | 2018 | 387,500 |
| — |
| 292,598 |
| 97,525 |
| 468,000 |
| — |
| 84,547 |
| 1,330,170 |
| General Counsel | 2017 | 357,500 |
| — |
| 229,488 |
| 76,503 |
| 360,000 |
| 131,306 |
| 68,047 |
| 1,222,844 |
| | 2016 | 325,833 |
| 89,950 |
| 269,912 |
| 80,533 |
| 209,680 |
| 642 |
| 223,525 |
| 1,200,075 |
| Michael P. Smith | 2018 | 397,917 |
| — |
| 580,103 |
| 110,025 |
| 499,200 |
| — |
| 75,056 |
| 1,662,301 |
| President, Performance Chemicals; EVP, Strategy | 2017 | 369,167 |
| — |
| 224,974 |
| 74,991 |
| 412,500 |
| — |
| 67,722 |
| 1,149,354 |
| S. Edward Woodcock | 2018 | 327,500 |
| — |
| 247,578 |
| 82,525 |
| 363,000 |
| — |
| 76,215 |
| 1,096,818 |
| President, Performance Materials | 2017 | 297,917 |
| — |
| 179,990 |
| 59,997 |
| 330,000 |
| 53,784 |
| 96,869 |
| 1,018,557 |
| | 2016 | 275,000 |
| 48,611 |
| 192,454 |
| 54,731 |
| 176,960 |
| 7,411 |
| 30,914 |
| 786,081 |
|
| | (1) | The amounts in this column represent salaries before compensation reduction under the Company’s qualified and non-qualified retirement and savings plans. |
| | (2) | These values represent the 2016 amounts paid to Messrs. Wilson, Fortson and Ms. Burgeson pursuant to their Letter Agreements entered into in connection with their employment. These provided for short-term cash awards for the period commencing from their respective hire dates and ending with the Separation, prorated for the partial year and assuming target performance. In the case of Mr. Woodcock, the amounts above include a 2016 incentive cash replacement awards in the amount of $48,611, which was an award granted by WestRock and assumed by Ingevity under the terms of the Employee Matters Agreement in connection with the Separation. |
| | (3) | These 2018 values represent the aggregate grant date fair value of the service-based and performance-based restricted stock unit awards made in 2018 as computed in accordance with FASB ASC Topic 718. The assumptions used in determining the grant date fair value of the stock awards are set forth in Note 11 to our consolidated financial statements, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. For grants of restricted stock units, the fair value per share is equal to the closing price of Ingevity’s Common Stock on the NYSE on the date of grant. Mr. Smith’s value includes a special RSU2020. For grants of RSUs, the fair value per share is equal to the closing price of Ingevity’s Common Stock on the NYSE on the date of grant. Mr. Fortson's value includes a special PSU grant upon his appointment as CEO on September 1, 2020 approved by the LD&C Committee with a fair market value of $700,000. See “Compensation Discussion & Analysis Other Compensation Practices and Policies” on page 37. With respect to the 2020 grants of PSUs, the value is reported assuming the target level of performance is achieved. The grant date value of the 2020 PSU awards if the maximum level of performance was achieved would be: Mr. Fortson $2,336,292; Mr. Smith $591,500; Mr. Woodcock $531,250; and Ms. Burgeson $445,670. Messrs. Kelson and Wilson did not receive any awards under the Company’s 2020 LTIP program for executives. The amount reported in this column for Mr. Kelson reflects the grant date fair value of the Deferred Stock Units (DSUs) granted to him in 2020 in lieu of his annual grant of director RSUs plus 211 RSUs that were forfeited when Mr. Kelson ceased being an independent Board member, in accordance with his election under the Non-Employee Director Deferred Compensation Committee with a fair Market value of $250,000, See "Compensation Discussion & Analsysis - Other Compensation Practices and Policies" on page 31. With respect to the 2018 grants of PSUs, the value is reported assuming the target level of performance is achieved. The value of the 2018 PSU awards if the maximum level of performance was achieved would be: Mr. Wilson $2,475,026; Mr. Fortson $883,788; Mr. Smith $440,021; Mr. Woodcock $330,053; and Ms. Burgeson $390,131. |
| | (4) | These 2018 values represent the aggregate grant date fair market value of stock option awards granted in 2018 computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 11 to the Company’s audited consolidated financial statements for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 20, 2019. |
| | (5) | The 2018 amounts shown in this column represent cash payments made to NEOs under the Short-Term Incentive Plan. See “Compensation Discussion and Analysis — 2018 STIP” for additional information regarding the plan design, 2018 actual performance and payouts authorized under the plan. |
| | (6) | The Company does not maintain a qualified defined benefit pension plan for any of our salaried employees, including our NEOs. However, the Company maintains a Retirement Restoration Plan that mirrors benefits provided under a qualified defined benefit plan sponsored and maintained by our former parent company, WestRock. See Pension Benefits Table - 2018 at page 38. The amounts in this column represent the actuarial increase in the present value of the two participating NEOs’ benefits under this non-qualified Retirement Restoration Plan maintained by the Company during the 12-months ended December 31, 2018. The present value of accumulated benefits is based on benefits payable at age 65 using a discount rate of 4.15 percent and mortality based on the RP-2014 White Collar Mortality Table adjusted back to 2006 using Scale MP-2014 and projected with Scale MP-2016. While these amounts appear as a lump sum, the normal form of payment is an annuity. These amounts are “pension accounting values” and were not realized by these NEOs during 2018. No above market or preferential earnings are provided to any NEO on non-qualified deferred compensation. Due to the changes in discount rate and mortality tables, the increase in pension values for Ms. Burgeson and Mr. Woodcock are negative. The actual change in the value of the pension benefit was -$54,964 and -$31,738 for the Retirement Restoration Plan, respectively.
|
(3)
| These 2020 values represent the aggregate grant date fair market value of stock option awards granted in 2020 computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 11 to the Company’s audited consolidated financial statements for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 18, 2021. |
(4)
| The 2020 amounts shown in this column represent cash payments made to NEOs under the Short-Term Incentive Plan. See “Compensation Discussion and Analysis — Short-Term Incentive Plan and 2020 Awards” for additional information regarding the plan design, 2020 actual performance and payouts authorized under the plan. Messrs. Kelson and Mr. Wilson did not participate in the STIP for 2020. Ms. Burgeson took early retirement and was not eligible for a STIP under the terms of the early retirement program. |
42 | | | INGEVITY - 20192021 Proxy Statement | | | | | | | | |
TABLE OF CONTENTS (5)
| The Company does not maintain a qualified defined benefit pension plan for any of our salaried employees, including our NEOs. However, the Company maintains a Retirement Restoration Plan that mirrors benefits provided under a qualified defined benefit plan sponsored and maintained by our former parent company, WestRock. See Pension Benefits Table - 352020 at page 46. The amounts in this column represent the actuarial increase in the present value of the two participating NEOs’ benefits under this non-qualified Retirement Restoration Plan maintained by the Company during the 12-months ended December 31, 2020. The present value of accumulated benefits is based on benefits payable at age 65 using a discount rate of 3.10 percent and mortality based on the “Pri-2012 Private Retirement Plans White Collar Mortality Table. While these amounts appear as a lump sum, the normal form of payment is an annuity. These amounts are “pension accounting values” and were not realized by these NEOs during 2020. No above market or preferential earnings are provided to any NEO on non-qualified deferred compensation.
| | (7) | Amounts shown in this column for 2018 are derived as follows: |
| | | | | | | | | | | | | D. Michael Wilson | John C. Fortson | Katherine P. Burgeson | Michael P. Smith | S. Edward Woodcock | Financial Planning/Counseling(a) | 15,228 |
| 15,000 |
| 15,325 |
| 15,231 |
| 15,228 |
| Qualified Savings Plan Contributions(b) | 24,750 |
| 24,750 |
| 24,750 |
| 23,438 |
| 24,750 |
| Non-Qualified Savings Plan Contributions(c) | 208,875 |
| 82,328 |
| 42,525 |
| 34,406 |
| 34,425 |
| Life Insurance Premiums | 1,913 |
| 1,102 |
| 810 |
| 844 |
| 675 |
| Executive Long-Term Disability(d) | 1,137 |
| 1,137 |
| 1,137 |
| 1,137 |
| 1,137 |
| Total Other Compensation | 251,903 |
| 124,317 |
| 84,547 |
| 75,056 |
| 76,215 |
|
| | (a) | Reimbursement by the Company for financial planning.(6)
| Amounts shown in the “All Other Compensation” column for 2020 are derived as follows: |
| Financial Planning/Counseling(1) | | | $15,815 | | | 15,842 | | | 16,103 | | | — | | | 10,855 | | | 2,635 | | | Qualified Savings Plan Contributions(2) | | | $25,650 | | | 24,434 | | | 24,908 | | | — | | | 22,070 | | | 11,857 | | | Non-Qualified Savings Plan Contributions(3) | | | $63,651 | | | 25,291 | | | 41,500 | | | — | | | 18,268 | | | — | | | Life Insurance Premiums | | | $2,014 | | | 2,957 | | | 2,570 | | | — | | | 2,578 | | | — | | | Executive Long-Term Disability(4) | | | $2,213 | | | 2,098 | | | 1,959 | | | — | | | 1,269 | | | 376 | | | ERIP Compensation(5) | | | — | | | — | | | — | | | — | | | 1,028,863 | | | — | | | Total Other Compensation | | | $109,343 | | | 70,622 | | | 87,040 | | | — | | | 1,083,903 | | | 14,868 | |
(1)
| Company provided financial planning including service fee and travel expenses. | (b) |
(2)
| Annual matching and non-contributory contributions by the Company to qualified 401(k) Savings Plan. |
(3)
| Annual matching and non-contributory contributions by the Company to non-qualified deferred compensation plan. |
(4)
| Annual long-term disability premium paid by the Company. |
Grants of Plan-Based Awards in 2018
The following table reports plan-based awards granted to the NEOs during fiscal 2018. The material terms of our short- and long-term incentive compensation awards are described in “Compensation Discussion and Analysis — Executive (5)
| Compensation Philosophy and Pay Elements” beginning on page 22. | | | | | | | | | | | | | | | | | | | | | Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | |
Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards or Units (# of awards)(3) | All Other Option Awards (# of awards)(4) | Exercise Or Base Price of Option Awards(5) ($) | Grant Date Fair Market Value of Stock & Option Awards(6) ($) | Threshold ($) | Target ($) | Maximum ($) | Threshold (# of awards) | Target (# of awards) | Maximum (# of awards) | D. Michael Wilson | | | | | | | | | | | | | STIP Annual Incentive | | 450,000 |
| 900,000 |
| 1,800,000 |
| | | | | | | | | PSUs | 2/28/2018 | | | | | 8,260 | 16,520 | 33,040 | | | | 1,237,513 |
| RSUs | 2/28/2018 | | | | | | | | 8,260 |
| | | 618,757 |
| Stock Options | 2/28/2018 | | | | | | | | | 24,256 |
| 74.91 |
| 618,771 |
| John C. Fortson | | | | | | | | | | | | | STIP Annual Incentive | | 176,750 |
| 353,500 |
| 707,000 |
| | | | | | | | | PSUs | 2/28/2018 | | | | | 2,950 | 5,899 | 11,798 | | | | 441,894 |
| RSUs | 2/28/2018 | | | | | | | | 2,950 |
| | | 220,985 |
| Stock Options | 2/28/2018 | | | | | | | | | 8,661 |
| 74.91 |
| 220,942 |
| Katherine P. Burgeson | | | | | | | | | | | | | STIP Annual Incentive | | 117,000 |
| 234,000 |
| 468,000 |
| | | | | | | | | PSUs | 2/28/2018 | | | | | 1,302 | 2,604 | 5,208 | | | | 195,066 |
| RSUs | 2/28/2018 | | | | | | | | 1,302 |
| | | 97,533 |
| Stock Options | 2/28/2018 | | | | | | | | | 3,823 |
| 74.91 |
| 97,525 |
| Michael P. Smith | | | | | | | | | | | | | STIP Annual Incentive | | 130,000 |
| 260,000 |
| 520,000 |
| | | | | | | | | PSUs | 2/28/2018 | | | | | 1,469 | 2,937 | 5,874 | | | | 220,011 |
| RSUs | 2/28/2018 | | | | | | | | 4,807 |
| | | 360,092 |
| Stock Options | 2/28/2018 | | | | | | | | | 4,313 |
| 74.91 |
| 110,025 |
| S. Edward Woodcock | | | | | | | | | | | | | STIP Annual Incentive | | 90,750 |
| 181,500 |
| 363,000 |
| | | | | | | | | PSUs | 2/28/2018 | | | | | 1,102 | 2,203 | 4,406 | | | | 165,027 |
| RSUs | 2/28/2018 | | | | | | | | 1,102 |
| | | 82,551 |
| Stock Options | 2/28/2018 | | | | | | | | | 3,235 |
| 74.91 |
| 82,525 |
|
| | (1) | These columns reflect threshold, target and maximum amounts potentially payable under the Short-Term Incentive Plan if certain performance criteria are satisfied during the 2018 fiscal year, subject to continued employment with the Company. See “Compensation Discussion and Analysis” for additional detail regarding the performance targets and amounts that may be earned. |
| | (2) | These columns reflect the threshold, target and maximum number of shares that may be earned pursuant to PSUs awarded under the Long-Term Incentive Plan if certain performance goals are satisfied as of December 31, 2018, subject to continued employment with the Company. See "Compensation Discussion and Analysis" regarding the performance targets and amounts that may be earned. |
INGEVITY - 2019 Proxy Statement - 36
| | (3) | RSU awards generally vest ratably in one-third increments over a three-year period from the date on which the Compensation Committee approves compensation decisions in February of each calendar year. Mr. Smith received a special RSU award, as described on page 31, that is subject to three-year cliff vesting. |
| | (4) | All options granted in 2018 vest in full on February 28, 2021, subject to continued employment with the Company. |
| | (5) | This represents the closing price of the Common Stock of the Company on the date of grant issuance. |
| | (6) | This amount represents the full grant fair market value of equity awards (PSUs, RSUs and options) computed in accordance with FASB ASC Topic 718. The fair market value of the PSUs is calculated at target. |
Outstanding Equity Awards at 2018 Fiscal Year End
The table below shows the equity awards that have been previously awarded by the Company to our NEOs and which remained outstanding as of December 31, 2018.
| | | | | | | | | | | | | | | | | | | Option Awards(1) | | Stock Awards(2) | Name (a) | Grant Date (b) | Option Awards Number of Securities Underlying Unexercised Options Exercisable (c) (1) | Number of Securities Underlying Unexercised Options Unexercisable (d) | Number of Securities Underlying Unexercised Unearned Options (e) | Option Exercise Price (f) | Option Expiration Date (g) | | Stock Awards Number of Shares of Stock that have not yet Vested (h) (2) | Market Value of Unvested Shares of Stock ($) (i) (4) | Equity Incentive Plan Awards: Number of Unearned Unvested Units or Shares (J) (3) | Plan Awards Payout Value of Unearned, Unvested Units or Shares ($) (k) (4) | D. Michael Wilson | 5/27/16 | 0 | 48,170 | 0 | 27.90 |
| 5/27/2026 | | 91,947 | 7,695,044 |
| 73,052 |
| 6,113,722 |
| | 2/27/17 | 0 | 25,652 | 0 | 53.11 |
| 2/27/2027 | | | | | | | 2/28/18 | 0 | 24,256 | 0 | 74.91 |
| 2/28/2028 | | | | | | John C. Fortson | 5/27/16 | 0 | 27,115 | 0 | 27.90 |
| 5/27/2026 | | 46,750 | 3,912,508 |
| 27,954 |
| 2,339,470 |
| | 2/27/17 | 0 | 10,357 | 0 | 53.11 |
| 2/27/2027 | | | | | | | 2/28/18 | 0 | 8,661 | 0 | 74.91 |
| 2/28/2028 | | | | | | Katherine P. Burgeson | 5/27/16 | 0 | 7,619 | 0 | 27.90 |
| 5/27/2026 | | 13,813 | 1,156,010 |
| 10,970 |
| 918,079 |
| | 2/27/17 | 0 | 3,694 | 0 | 53.11 |
| 2/27/2027 | | | | | | | 2/28/18 | 0 | 3,823 | 0 | 74.91 |
| 2/28/2028 | | | | | | Michael P. Smith | 2/27/17 | 0 | 3,621 | 0 | 53.11 |
| 2/27/2027 | | 12,550 | 1,050,310 |
| 11,522 |
| 964,276 |
| | 2/28/18 | 0 | 4,313 | 0 | 74.91 |
| 2/28/2028 | | | | | | | | | | | | | | | | | | S. Edward Woodcock | 5/27/16 | 0 | 5178 | 0 | 27.90 |
| 5/27/2026 | | 10,135 | 848,198 |
| 8,924 |
| 746,850 |
| | 2/27/17 | 0 | 2897 | 0 | 53.11 |
| 2/27/2027 | | | | | | | 2/28/18 | 0 | 3235 | 0 | 74.91 |
| 2/28/2028 | | | | | |
| | (1) | All options granted in 2016 will vest in full on February 27, 2019, those granted in 2017 will vest in full on February 27, 2020 and those granted in 2018 will vest in full on February 28, 2021. |
| | (2) | The RSU awards reported in column (h) vest ratably generally in one-third increments over a three-year period tied to the date on which the Compensation Committee approves compensation decisions in February of each calendar year; provided, however, that with respect to certain 2016 grants made to Messrs. Wilson and Fortson under their Letter Agreements, the RSUs vest in one-third increments on the anniversary date of each NEO’s respective hire date with WestRock pursuant to their Letter Agreements. Mr. Smith received a special RSU award in 2018, as described on page 31, that is subject to three-year cliff vesting. Column (h) also includes PSU awards granted on May 27, 2016, which vested at the maximum level (200 percent of target), as determined by the Compensation Committee based on the Company’s attainment of pre-established financial metrics relating to return on invested capital and cumulative earnings per share for the performance period beginning January 1, 2016 through December 31, 2018, subject to the continued employment of the NEOs until February 20, 2019, the date that performance was determined by the Compensation Committee. |
| | (3) | Column (j) includes PSU awards granted on February 27, 2017, which will vest as determined by the Compensation Committee based on the Company’s attainment of pre-established financial metrics relating to return on invested capital and cumulative earnings per share for the performance period beginning January 1, 2017 through December 31, 2019, and PSU awards granted on February 28, 2018, which will vest as determined by the Compensation Committee based on the Company’s attainment of pre-established financial metrics relating to return on invested capital and cumulative earnings per share for the performance period beginning January 1, 2018 through December 31, 2020. The number of PSU shares shown in column (j) is reported at the maximum level (200 percent of target), based on interim performance through the end of fiscal 2018. |
| | (4) | Market and payout values are based on the Company’s common stock price of $83.69, which was the closing price of the Company’s common stock on December 31, 2018. |
INGEVITY - 2019 Proxy Statement - 37
Option Exercises and Stock Vested during Fiscal 2018
This table shows the stock options that were exercised by, and the RSUs that vested for, each of our NEOs during 2018. Option award value realized is calculated by subtracting the aggregate exercise price of the options exercised from the aggregate market value of shares of Common Stock.
| | | | | | | | Option Awards(1) | | Stock Awards(2) | | Number of Shares Acquired on Exercise (#) | Value Realized upon Exercise ($) | | Number of Shares Acquired on Vesting (#) | Value Realized Upon Vesting ($) | D. Michael Wilson | — | — | | 22,327 | 2,035,485 | John C. Fortson | — | — | | 14,252 | 1,182,141 | S. Edward Woodcock | — | — | | 2,153 | 169,129 | Katherine P. Burgeson | 4,376 | 43,769 | | 3,986 | 313,120 | Michael P. Smith | — | — | | 1,009 | 79,262 |
| | (1) | Shares acquired for Mrs. Burgeson relate to stock option awards granted by WestRock that vested prior to Separation. The value realized upon exercise column for Mrs. Burgeson represents the difference between the exercise price and the stock price on the date of settlement. |
| | (2) | These amounts reflect the number of shares relating to RSUs that vested on the applicable vesting date, prior to withholding of any shares to satisfy taxes for each of the NEOs affected. The amounts for Messrs. Wilson, Fortson, Woodcock, and Smith as well as Ms. Burgeson relate to 2016 and 2017 RSU awards granted by the Company. The values realized upon vesting column for all NEOs represent the closing price on the date of settlement. |
Pension Benefits Table - 2018
The following table provides information with respect to the Company’s non-qualified defined benefit plan (which we refer to as the “Retirement Restoration Plan”). The Retirement Restoration Plan provides benefits to only two of our NEOs representing “historic” liabilities assumed by the Company under the terms of the EMA in connection with our separation from our former parent, WestRock. None of our NEOs currently accrues a benefit under this plan with respect to service with the Company.
| | | | | | | | Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit(1) ($) | Payments During Last Fiscal Year ($) | Katherine P. Burgeson | Retirement Restoration Plan | 15.83 | 1,080,148 |
| — |
| S. Edward Woodcock | Retirement Restoration Plan | 27.83 | 312,373 |
| — |
|
| | (1) | The accumulated benefits included in this column were computed through December 31, 2018 using the assumptions stated in the financial statements included in the 2018 Company Form 10-K (Note 14). |
Understanding Our Pension Benefits Table
The Company maintains the Retirement Restoration Plan, a non-qualified plan that mirrors benefits provided under a qualified defined benefit pension plan sponsored and maintained by our former parent, WestRock (the “WestRock Pension Plan”). The Retirement Restoration Plan was adopted by the Company to honor obligations under the EMA between the Company and WestRock to pay certain assumed historic liabilities transferredpaid as a result of the separation.Early Retirement Program - severance $415,000, stock buyout of $598,592, accrued and unused vacation of $11,971 and COBRA subsidy of $3,300.
|
Grants of Plan-Based Awards in 2020 The following table reports plan-based awards granted to the NEOs during fiscal 2020. The material terms of our short- and long-term incentive compensation awards are described in “Compensation Discussion and Analysis — Executive Compensation Philosophy and Pay Elements” beginning on page 28. | John C. Fortson | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STIP Annual Incentive | | | | | | 270,781 | | | 54,562 | | | 1,083,124 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | PSUs | | | 02/28/2020 | | | — | | | — | | | — | | | 5,197 | | | 10,394 | | | 20,788 | | | — | | | — | | | — | | | 468,146 | | | RSUs | | | 02/28/2020 | | | — | | | — | | | — | | | — | | | — | | | — | | | 5,197 | | | — | | | — | | | 234,073 | | | Stock Options | | | 02/28/2020 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 5,792 | | | 45.04 | | | 234,067 | | | Special PSU Award | | | 09/01/2020 | | | — | | | — | | | — | | | 6,135 | | | 12,270 | | | 24,540 | | | — | | | — | | | — | | | 700,004 | | | Michael P. Smith | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STIP Annual Incentive | | | | | | 73,937 | | | 295,750 | | | 591,500 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | PSUs | | | 02/28/2020 | | | — | | | — | | | — | | | 3,284 | | | 6,567 | | | 13,134 | | | — | | | — | | | — | | | 295,778 | | | RSUs | | | 02/28/2020 | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,284 | | | — | | | — | | | 147,911 | | | Stock Options | | | 02/28/2020 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 9,318 | | | 45.04 | | | 147,877 | | | S. Edward Woodcock | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STIP Annual Incentive | | | | | | 63,750 | | | 255,000 | | | 510,000 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | PSUs | | | 02/28/2020 | | | — | | | — | | | — | | | 2,949 | | | 5,898 | | | 11,796 | | | — | | | — | | | — | | | 265,646 | | | RSUs | | | 02/28/2020 | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,949 | | | — | | | — | | | 132,823 | | | Stock Options | | | 02/28/2020 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 8,369 | | | 45.04 | | | 132,816 | |
INGEVITY - 2021 Proxy Statement | | | 43 | | | | | | | | |
TABLE OF CONTENTS | Katherine P. Burgeson | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STIP Annual Incentive | | | | | | 62,250 | | | 249,000 | | | 498,000 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | PSUs | | | 02/28/2020 | | | — | | | — | | | — | | | 2,650 | | | 5,299 | | | 10,598 | | | — | | | — | | | — | | | 238,667 | | | RSUs | | | 02/28/2020 | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,650 | | | — | | | — | | | 119,356 | | | Stock Options | | | 02/28/2020 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 7,519 | | | 45.04 | | | 119,327 | | | Richard B. Kelson | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DSUs | | | 04/24/2020 | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,906 | | | — | | | — | | | 113,246 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)
| These columns reflect threshold, target and maximum amounts potentially payable under the Short-Term Incentive Plan if certain performance criteria are satisfied during the 2020 fiscal year, subject to continued employment with the Company. See “Compensation Discussion and Analysis” for additional detail regarding the performance targets and amounts that may be earned. Mr. Fortson's incentive is based on a proration of eight months as CFO and four months as CEO. Neither Mr. Kelson nor Mr. Wilson participated in the 2020 Short-Term Incentive Plan. |
(2)
| These columns reflect the threshold, target and maximum number of shares that may be earned pursuant to PSUs awarded under the Long-Term Incentive Plan if certain performance goals are satisfied as of December 31, 2022, subject to continued employment with the Company. See “Compensation Discussion and Analysis” regarding the performance targets and amounts that may be earned. Neither Mr. Kelson nor Mr. Wilson were granted any PSUs during 2020. |
(3)
| RSU awards to our executives generally vest ratably in one-third increments over a three-year period from the date on which the Compensation Committee approves compensation decisions in February of each calendar year. Mr. Fortson received a special RSU award, as described on page 34, that is subject to three-year cliff vesting. Mr. Wilson did not receive any stock awards during 2020. Mr. Kelson did not participate in our RSU program for executives; instead, the stock awards reported for Mr. Kelson represent the DSUs granted to him during 2020 in lieu of his director RSU award plus 211 RSUs that were forfeited when Mr. Kelson ceased being an independent Board member, in accordance with his election under the Non-Employee Director Deferred Compensation Program. Following his passing away, Mr. Kelson's DSUs vested on February 16, 2021 and were settled in Ingevity common shares. |
(4)
| All options granted in 2020 vest ratably over three years on the anniversary date of the grant, subject to employment with the company. Neither Mr. Kelson nor Mr. Wilson was granted any options during 2020. |
(5)
| This represents the closing price of the Common Stock of the Company on the date of grant of the option. |
(6)
| This amount represents the full grant fair market value of equity awards (PSUs, RSUs, options and DSUs) computed in accordance with FASB ASC Topic 718. The fair market value of the PSUs is calculated at target. |
44 | | | INGEVITY - 2021 Proxy Statement | | | | | | | | |
TABLE OF CONTENTS Outstanding Equity Awards at 2020 Fiscal Year End The table below shows the equity awards that have been awarded by the Company to our NEOs and which remained outstanding as of December 31, 2020. | John C. Fortson | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 05/27/2016 | | | 27,115 | | | — | | | — | | | 27.90 | | | 05/27/2026 | | | 21,262 | | | 1,610,171 | | | 24,639 | | | 1,865,911 | | | | | | 02/27/2017 | | | 10,357 | | | — | | | — | | | 53.11 | | | 02/27/2027 | | | — | | | — | | | — | | | — | | | | | | 02/28/2018 | | | — | | | 8,661 | | | — | | | 74.91 | | | 02/28/2028 | | | — | | | — | | | — | | | — | | | | | | 02/28/2019 | | | 1,931 | | | 3,861 | | | — | | | 115.22 | | | 02/28/2029 | | | — | | | — | | | — | | | — | | | | | | 02/28/2020 | | | — | | | 14,749 | | | — | | | 45.04 | | | 02/28/2030 | | | — | | | — | | | — | | | — | | | Michael P. Smith | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 05/27/2016 | | | 4,257 | | | — | | | — | | | 27.90 | | | 05/27/2026 | | | 11,475 | | | 869,002 | | | 7,693 | | | 582,591 | | | | | | 02/27/2017 | | | 3,621 | | | — | | | — | | | 53.11 | | | 02/27/2027 | | | — | | | — | | | — | | | — | | | | | | 02/28/2018 | | | — | | | 4,313 | | | — | | | 74.91 | | | 02/28/2028 | | | — | | | — | | | — | | | — | | | | | | 02/28/2019 | | | 1,101 | | | 2,201 | | | — | | | 115.22 | | | 02/28/2029 | | | — | | | — | | | — | | | — | | | | | | 02/28/2020 | | | — | | | 9,318 | | | — | | | 45.04 | | | 02/28/2030 | | | — | | | — | | | — | | | — | | | S. Edward Woodcock | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 05/27/2016 | | | 5,178 | | | — | | | — | | | 27.90 | | | 05/27/2026 | | | 6,607 | | | 500,348 | | | 6,770 | | | 512,692 | | | | | | 02/27/2017 | | | 2,897 | | | — | | | — | | | 53.11 | | | 02/27/2027 | | | — | | | — | | | — | | | — | | | | | | 02/28/2018 | | | — | | | 3,235 | | | — | | | 74.91 | | | 02/28/2028 | | | — | | | — | | | — | | | — | | | | | | 02/28/2019 | | | 852 | | | 1,704 | | | — | | | 115.22 | | | 02/28/2029 | | | — | | | — | | | — | | | — | | | | | | 02/28/2020 | | | — | | | 8,369 | | | — | | | 45.04 | | | 02/28/2030 | | | — | | | — | | | — | | | — | | | Katherine P. Burgeson | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 05/27/2016 | | | — | | | — | | | — | | | 27.90 | | | 05/27/2026 | | | 2,286 | | | 173,119 | | | 457 | | | 34,609 | | | | | | 02/27/2017 | | | 3,694 | | | — | | | — | | | 53.11 | | | 02/27/2027 | | | — | | | — | | | — | | | — | | | | | | 02/28/2018 | | | 3,823 | | | — | | | — | | | 74.91 | | | 02/28/2028 | | | — | | | — | | | — | | | — | | | | | | 02/28/2019 | | | 2,836 | | | — | | | — | | | 115.22 | | | 02/28/2029 | | | — | | | — | | | — | | | — | | | | | | 02/28/2020 | | | 7,519 | | | — | | | — | | | 45.04 | | | 02/28/2030 | | | — | | | — | | | — | | | — | | | D. Michael Wilson | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 05/27/2016 | | | — | | | — | | | — | | | 27.90 | | | 05/27/2026 | | | — | | | — | | | — | | | — | | | | | | 02/27/2017 | | | — | | | — | | | — | | | 53.11 | | | 02/27/2027 | | | — | | | — | | | — | | | — | | | | | | 02/28/2018 | | | — | | | — | | | — | | | 74.91 | | | 02/28/2028 | | | — | | | — | | | — | | | — | | | | | | 02/28/2019 | | | — | | | — | | | — | | | 115.22 | | | 02/28/2029 | | | — | | | — | | | — | | | — | | | Richard B. Kelson | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 04/24/2020 | | | — | | | — | | | — | | | — | | | — | | | 2,906 | | | 220,071 | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | | | 41,630 | | | 3,152,640 | | | 39,559 | | | 2,995,803 | |
(1)
| All options granted in 2018 will vest in full on February 27, 2021, those granted in 2019 and 2020 vest ratably in one-third increments over a three-year period from the grant date. |
(2)
| The WestRock Pension Plan (now frozen) providesRSU awards reported in column (h) generally vest ratably in one-third increments over a three-year period tied to the date on which the Compensation Committee approves compensation decisions in February of each calendar year. Mr. Fortson received a special award of 6,510 RSUs in 2019, that is subject to three-year cliff vesting. Mr. Kelson did not participate in our RSU program for executives; instead, the stock awards reported for Mr. Kelson represent the DSUs granted to him during 2020 in lieu of his director RSU award plus 211 RSUs that were forfeited when Mr. Kelson ceased being an unreduced benefit payable at age 65 (or 62 ifindependent Board member, in accordance with his election under the employee has 20 years of service). The retirement benefit payable is equal to 1.6Non-Employee Director Deferred Compensation Program. Following his passing away, Mr. Kelson’s DSUs vested on February 16, 2021 and were settled in Ingevity common shares. Column (h) also includes PSU awards granted on February 28, 2018, which vested above target (123 percent of final averagetarget), as determined by the LD&C Committee based on the Company’s attainment of pre-established financial metrics relating to return on invested capital and cumulative earnings (or pay) times yearsper share for the performance period beginning January 1, 2018 through December 31, 2020, subject to the continued employment of benefit service (upthe NEOs until February 18, 2021, the date that performance was determined by the LD&C Committee. |
(3)
| Column (j) includes PSU awards granted on February 28, 2019, which will vest as determined by the LD&C Committee based on the Company’s attainment of pre-established financial metrics relating to a maximumreturn on invested capital and cumulative earnings per share for the performance period beginning January 1, 2019 through December 31, 2021, and PSU awards granted on February 28, 2020, which will vest as determined by |
INGEVITY - 2021 Proxy Statement | | | 45 | | | | | | | | |
TABLE OF CONTENTS the LD&C Committee based on the Company’s attainment of pre-established financial metrics relating to return on invested capital and cumulative earnings per share for the performance period beginning January 1, 2020 through December 31, 2022. The number of PSU shares shown in column (j) is reported at threshold (50 percent of target) and target level for PSU's granted in 2019 and 2020, respectively based on interim performance through the end of fiscal 2020. (4)
| Market and payout values are based on the Company’s common stock price of 40 years), minus$75.73, which was the closing price of the Company’s common stock on December 31, 2020. |
Option Exercises and Stock Vested during Fiscal 2020 This table shows the stock options that were exercised by, and the RSUs that vested for, each of our NEOs during 2020. Option award value realized is calculated by subtracting the aggregate exercise price of the options exercised from the aggregate market value of shares of Common Stock. | John C. Fortson | | | — | | | — | | | 2,988 | | | 137,741 | | | Michael P. Smith | | | — | | | — | | | 1,336 | | | 61,193 | | | S. Edward Woodcock | | | — | | | — | | | 1,035 | | | 47,443 | | | Katherine P. Burgeson | | | 7,619 | | | 358,535 | | | 1,237 | | | 56,791 | | | D. Michael Wilson | | | 48,170 | | | 953,371 | | | — | | | — | | | Richard B. Kelson | | | — | | | — | | | 845 | | | 32,545 | |
(1)
| The value realized on exercise of an employee’s primary social security benefitoption award equals the number of shares for which the option was exercised multiplied by 1.25percent times years of benefit service (up to a maximum of 40 years of service). The formula is illustrated below:
[1.6% x Years of Benefit x Final Average Pay]
Service (up to 40)
-
[1.25% x Years of Benefit x Primary Social Security Benefit] Service (up to 40)
The Retirement Restoration Plan mirrors benefits provided under the WestRock Pension Plan following the same formula but recognizing compensation in excess of the Internal Revenue Code limit, which was $275,000closing market price of our common stock on the exercise date over the exercise price per share.
|
(2)
| These amounts generally reflect the number of shares relating to RSUs that vested on the applicable vesting date, prior to withholding of any shares to satisfy taxes for 2018. Mr.Woodcockeach of the NEOs affected. The amounts for Messrs. Fortson, Woodcock, and Smith as well as Ms. Burgeson while participantsrelate to 2016, 2017, 2018 and 2019 RSU awards granted by the Company. The amount reported for Mr. Kelson represents the DSUs granted to him during 2019 under our non-employee director compensation program and his election to defer receipt of his director equity award under the Non-Employee Director Deferred Compensation Plan, which DSUs vested in 2020. Following his passing away, Mr. Kelson's DSUs vested on February 16, 2021 and were settled in Ingevity common shares. |
(3)
| This column represents the value of the awards using the closing price on the date of settlement (or vesting, as applicable). |
Pension Benefits Table - 2020 The following table provides information with respect to the Company’s non-qualified defined benefit plan (which we refer to as the “Retirement Restoration Plan”). The Retirement Restoration Plan provides benefits to only two of our NEOs representing “historic” liabilities assumed by the Company under the terms of the Employee Matters Agreement in connection with the Separation from our former parent, WestRock. None of our NEOs currently accrues a benefit under this plan with respect to service with the Company. | Katherine P. Burgeson | | | Retirement Restoration Plan | | | 15.83 | | | 1,457,477 | | | — | | | S. Edward Woodcock | | | Retirement Restoration Plan | | | 27.83 | | | 482,083 | | | — | |
(1)
| The accumulated benefits included in this plan, no longer accrue any benefit under this plan. Benefits are payablecolumn were computed through December 31, 2020 using the assumptions stated in annuity form only and a lump sum is not available.the financial statements included in the 2020 Company Form 10-K (Note 15). |
46 | | | INGEVITY - 20192021 Proxy Statement - 38
The underlying plan, the WestRock Pension Plan, to which our Retirement Restoration Plan relates was frozen (generally) on December 31, 2015. Accordingly, the values above represent a historic
| | | | | liability accrued under the former Parent’s plan, the WestRock Pension Plan with respect to service performed for WestRock, not Ingevity.
| | |
Non-Qualified Deferred Compensation at 2018
|
TABLE OF CONTENTS Understanding Our Pension Benefits Table The Company maintains the Retirement Restoration Plan, a non-qualified plan that mirrors benefits provided under a qualified defined benefit pension plan sponsored and maintained by our former parent, WestRock (the “WestRock Pension Plan”). The Retirement Restoration Plan was adopted by the Company to honor obligations under the Employee Matters Agreement between the Company and WestRock to pay certain assumed historic liabilities transferred as a result of the Separation. The WestRock Pension Plan (now frozen) provides an unreduced benefit payable at age 65 (or 62 if the employee has 20 years of service). The retirement benefit payable is equal to 1.6 percent of final average earnings (or pay) times years of benefit service (up to a maximum of 40 years), minus an employee’s primary social security benefit multiplied by 1.25 percent times years of benefit service (up to a maximum of 40 years of service). The formula is illustrated below: [1.6% x Years of Benefit x Final Average Pay] Service (up to 40) Less [1.25% x Years of Benefit x Primary Social Security Benefit] Service (up to 40) The Retirement Restoration Plan mirrors benefits provided under the WestRock Pension Plan following the same formula but recognizing compensation in excess of the Internal Revenue Code limit, which was $285,000 for 2020. Ms. Burgeson and Mr. Woodcock, while participants in this plan, no longer accrue any benefit under this plan. Benefits are payable in annuity form only, and a lump sum is not available. The underlying plan, the WestRock Pension Plan, to which our Retirement Restoration Plan relates was frozen (generally) on December 31, 2015. Accordingly, the values above represent a historic liability accrued under the former Parent’s plan, the WestRock Pension Plan with respect to service performed for WestRock, not Ingevity. Non-Qualified Deferred Compensation at 2020 Fiscal Year End The Company maintains a non-qualified deferred compensation plan that permits executives to defer up to 80 percent of their base salary and 100 percent of their short-term incentive compensation. The plan also operates as an excess benefit plan enabling employees to defer salary, Company matching, transition and other non-contributing contributions in excess of Internal Revenue Code limits that apply to the Company’s qualified 401(k) Savings Plan. Amounts contributed may be allocated towards notional accounts into up to 16 investment funds as directed by the executive. There is no guaranteed investment return with respect to any of these funds. The funds mirror those options available to all employees who participate in the Company’s broad-based qualified 401(k) Savings Plan including two additional funds. The Company adopted the use of a Rabbi Trust, which is funded through the purchase of Company Owned Life Insurance. The table below includes information on each of our NEO’s non-qualified deferred compensation plan accounts for 2020. | John C. Fortson | | | 42,434 | | | 63,651 | | | 98,530 | | | 0 | | | 726,743 | | | Michael P. Smith | | | 244,341 | | | 25,293 | | | 204,499 | | | 0 | | | 1,457,866 | | | S. Edward Woodcock | | | 248,913 | | | 41,501 | | | 196,662 | | | 0 | | | 1,282,651 | | | Katherine P. Burgeson | | | 118,278 | | | 18,269 | | | 9,637 | | | 0 | | | 876,858 | | | D. Michael Wilson | | | 0 | | | 0 | | | -33,046 | | | 2,171,370 | | | 0 | | | Richard B. Kelson | | | 32,545 | | | 0 | | | 31,447 | | | 0 | | | 63,992 | |
(1)
| After each NEO reaches the designated maximum contribution or contribution limit under the Company’s 401(k) Savings Plan, he or she may continue to defer compensation under this plan, and separately he or she can defer up to 80% of his or her base compensation and 100% of his or her incentive compensation into the Company’s plan. These amounts represent contributions made by our NEOs (other than Mr. Kelson) during 2020 and are reported as 2020 compensation in the Summary Compensation Table under the All Other Compensation column. For Mr. Kelson, the amount reported in this column represents vesting date value of the DSUs credited to his account under the Non-Employee Director Deferred Compensation Plan during 2020, in accordance with his election under that plan. |
(2)
| These amounts represent contributions by the Company that exceeded the qualified plan contribution and compensation limits applicable to matching, nonelective, and transition contributions that would otherwise have been made to the Company’s qualified 401(k) Savings Plan. Amounts contributed may be allocated towards notional accounts into upPlan, but for the limits applicable to 16 investment fundssuch plan. These amounts are reported as directed by the executive.There is no guaranteed investment return with respect to any of these funds. The funds mirror those options available to all employees who participate2020 compensation in the Company’s broad-based qualified 401(k) Savings Plan including two additional funds. In 2018,Summary Compensation Table.
|
(3)
| Represents the Company adoptedbalance of each participating NEO's account under the use of a Rabbi Trust which is funded through the purchase of Company Owned Life Insurance.
The table below includes information on each of our NEO’s non-qualified deferred compensation plan accountsas of December 31, 2020. For each NEO, the portion of the aggregate balance at 2020 fiscal year end that was reported in the Summary Compensation Table for 2018.
a prior fiscal year are as follows: Mr. Wilson $2,204,416; Mr. Fortson $522,128; Ms. Burgeson $730,676; Mr. Smith $983,732, Mr. Woodcock $795,574 and Mr. Kelson $0. |
| | | | | | | Name | Executive Contributions in Last Fiscal Year(1) ($) | Registrant Contributions in Last Fiscal Year(2) ($) | Aggregate Earnings (Loss) in Last Fiscal Year ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year-End (3) ($) | D. Michael Wilson | 428,100 | 208,875 | (95,928) | — | 1,139,187 | John C. Fortson | 54,885 | 82,328 | (23,326) | — | 292,881 | Katherine P. Burgeson | 164,125 | 42,525 | (17,923) | — | 342,494 | Michael P. Smith | 305,729 | 34,406 | (25,543) | — | 357,562 | S. Edward Woodcock | 97,602 | 70,171 | (17,868) | — | 298,102 |
| | (1) | After each NEO reaches the designated maximum contribution or contribution limit under the Company’s 401(k) Savings Plan, he or she may continue to defer compensation under Company's deferred compensation plan, and separately he or she can defer up to 80 percent of his or her eligible compensation into the this plan. These amounts represent contributions made by each of our NEOs during 2018 and are included as salary and non-equity incentive compensation as reported in the Summary Compensation Table. |
| | (2) | These amounts represent contributions by the Company that exceeded the qualified plan contribution and compensation limits applicable to matching, non-elective, and transition contributions that would otherwise have been made to the Company’s qualified 401(k) Savings Plan, but for the limits applicable to such plan. These amounts are reported as 2018 compensation in the Summary Compensation Table. |
| | (3) | The amounts in this column are calculated by adding the amounts set forth in each of the first four columns of this table for each NEO to the applicable NEO’s aggregate balance as of the end of fiscal 2017. For each NEO, the portion of the aggregate balance at 2018 fiscal year end that was reported in the Summary Compensation Table for a prior fiscal year are as follow: Mr. Wilson $598,140; Mr. Fortson $178,994; Ms. Burgeson $153,767; Mr. Smith $42,970 and Mr. Woodcock $148,197. |
INGEVITY - 20192021 Proxy Statement - 39
Potential Payments Upon Involuntary Termination
(other than Change of Control)
| | | The table below shows the severance benefits that would be payable to each of our NEOs if he or she had experienced an involuntary termination of employment from the Company on December 31, 201847
| | | | | | | | |
TABLE OF CONTENTS Potential Payments Upon Involuntary Termination (other than Change of Control) The table below shows the severance benefits that would be payable to each of our NEOs if he or she had experienced an involuntary termination of employment from the Company on December 31, 2020 (absent cause and excluding death, disability or retirement), pursuant to the terms of Severance and Change of Control Agreements. | Cash Severance(1) | | | $3,300,000 | | | $750,750 | | | $680,000 | | | Prorated Target Incentives(2) | | | $825,000 | | | $295,750 | | | $255,000 | | | Prorated vesting Options(3), (4) | | | $334,087 | | | $173,794 | | | $355,057 | | | Prorated Vesting RSUs(3), (5) | | | $432,490 | | | $308,499 | | | $178,033 | | | Prorated Vesting PSUs(3), (5) | | | $604,670 | | | $314,284 | | | $238,230 | | | Post-Termination Health Care(6) | | | $35,212 | | | $12,525 | | | $17,606 | | | Outplacement Services and Financial Planning(7) | | | $40,000 | | | $40,000 | | | $40,000 | | | Total Other Compensation | | | $3,921,459 | | | $1,599,852 | | | $1,508,926 | |
(1)
| Severance and Change in Control agreements entered into in 2017 and amended for Mr. Fortson in September 2020 provide for the payment of cash severance in the amount of two times the sum of the executive’s base salary and target annual incentive for Mr. Fortson payable over a two-year period, and one times the sum of the NEO’s base salary and target annual incentive for Mr. Smith and Mr. Woodcock payable over a one-year period. |
(2)
| This represents the value of the annual STIP (assuming target performance levels) payable upon termination. Actual payout for 2020 was at 84.1% for Mr. Fortson, 72.9 percent for Mr. Smith and 125 percent for Mr. Woodcock. |
(3)
| These amounts assume a stock price of $75.73, which was the closing price of the Company’s stock on December 31, 2020, the assumed termination date. Actual values will vary based on changes in the Company’s stock price on the termination date. |
(4)
| This represents the intrinsic value of stock options that would vest in the event of an involuntary termination, other than for cause, absent a change of control, assuming a termination date occurred on December 31, 2020. Mr. Woodcock is retirement eligible and his options would vest in full. |
(5)
| These represent the value of 2018 and 2019 RSU and PSU awards which would vest on a prorated basis in the event of an involuntary termination, other than for cause, absent a change of control, assuming target performance. |
(6)
| This represents a cash lump sum payment in lieu of continued health care coverage pursuant to the executive's Severance and Change of Control Agreements. | | | | | | | | D. Michael Wilson | John C. Fortson | Katherine P. Burgeson | Michael P. Smith | S. Edward Woodcock | Cash Severance(2) | 3,600,000 | 1,287,750 | 936,000 | 660,000 | 511,500 | Prorated Target Incentive(3) | 900,000 | 353,500 | 234,000 | 260,000 | 181,500 | Prorated Vesting Options(1), (4) | 2,793,572 | 1,496,268 | 435,088 | 243,335 | 302,925 | Prorated Vesting RSUs(1), (5) | 529,674 | 251,405 | 77,832 | 55,403 | 58,248 | Prorated Vesting PSUs(1), (5) | 3,639,427 | 1,802,515 | 539,633 | 371,416 | 397,193 | Post-Termination Health Care(6) | 41,781 | 31,336 | 30,981 | 20,891 | 20,891 | Outplacement Services and Financial Planning(7) | 40,000 | 40,000 | 40,000 | 40,000 | 40,000 | Total | 11,544,454 | 5,262,774 | 2,293,534 | 1,651,045 | 1,512,257 |
| | (1) | These amounts assume a stock price of $83.69, which was the closing price of the Company’s stock on December 31, 2018, the assumed termination date. Actual values will vary based on changes in the Company’s stock price on the termination date. |
| | (2) | Severance and Change in Control agreements entered into in 2017 with Messrs. Wilson, Fortson and Ms. Burgeson provide for the payment of cash severance in the amount of two times the sum of the executive’s base salary and target annual incentive for Mr. Wilson, and one and one-half times the sum of the NEO’s base salary and target annual incentive for For Mr. Fortson, and Ms. Burgeson. The severance is payable over two years for Mr. Wilson and eighteen months for Mr. Fortson and Ms. Burgeson. In the case of Messrs. Smith and Woodcock, both would receive a cash severance payment equal to one times their base salary and target annual incentive payable over a one-year period. |
| | (3) | This represents the value of the annual STIP (assuming target performance levels) payable upon termination. Actual payout for 2018 was at 192 percent for Mr. Smith and 200 percent for the other NEO's. |
| | (4) | This represents the intrinsic value of stock options that would vest in full in the event of an involuntary termination, other than for cause, absent a change of control, assuming a termination date occurred on December 31, 2018. |
| | (5) | These represent the value of 2016 and 2017 RSU and PSU awards which would vest in the event of an involuntary termination, other than for cause, absent a change of control, assuming target performance. |
| | (6) | This represents a cash lump sum payment in lieu of continued health care coverage pursuant to the executive's Severance and Change of Control Agreements. For Mr. Wilson, this represents the cost of two years of health care coverage for Mr. Fortson and Ms. Burgeson 18 months and for Mr. Smith, and Mr. Woodcock one year. |
| | (7)
| This represents the value of twelve months of outplacement services ($25,000), a benefit that is also provided for under the terms of the severance plan, as well as one year of financial counseling ($15,000). |
Potential Payments Upon Termination — Retirement
The Omnibus Plan provides for accelerated vesting due to retirement at age 65 (or 55 with twenty years of service). None of the NEOs are eligible for special vesting rights under the plan’s retirement provisions assuming a December 31, 2018 termination date.
INGEVITY - 2019 Proxy Statement - 40
Potential Payments Upon Termination — Death or Disability
The table below reflects the impact for death or disability as of December 31, 2018, under the terms of the Company’s plans and programs.
| | | | | | | | | | | | | D. Michael Wilson | John C. Fortson | Katherine P. Burgeson | Michael P. Smith | S. Edward Woodcock | Intrinsic Value of Stock Option(1),(2) | 3,684,810 |
| 1,905,506 |
| 571,592 |
| 324,260 |
| 405,874 |
| Performance-Based RSU Award(1), (3) | 3,639,427 |
| 1,802,515 |
| 539,633 |
| 371,416 |
| 397,193 |
| Service-Based RSU Award(1),(4) | 529,674 |
| 251,405 |
| 77,832 |
| 55,403 |
| 58,248 |
| Deferred Compensation(5) | 1,139,187 |
| 292,881 |
| 342,494 |
| 357,532 |
| 298,102 |
| Total | 8,993,098 |
| 4,252,307 |
| 1,531,551 |
| 1,108,611 |
| 1,159,417 |
|
| severance plan, as well as one year of financial counseling ($15,000). | (1) | These amounts assume a stock price of $83.69, |
Potential Payments Upon Termination — Retirement, Death or Disability The Omnibus Plan provides for accelerated vesting due to retirement at age 65 (or 55 with twenty years of service). Mr. Woodcock is the only NEO eligible for special vesting rights under the plan’s retirement provisions assuming a December 31, 2020 termination date. The table below reflects the impact for retirement, death or disability as of December 31, 2020, under the terms of the Company’s plans and programs. | Intrinsic Value of Stock Option(1)(2) | | | $727,590 | | | $422,398 | | | $355,057 | | | Performance-Based RSU Award(1)(3) | | | $604,670 | | | $314,284 | | | $238,230 | | | Service-Based RSU Award(1)(4) | | | $432,490 | | | $308,499 | | | $178,033 | | | Total Other Compensation(5) | | | $726,743 | | | $1,457,866 | | | $1,282,651 | | | Total | | | $2,491,494 | | | $2,503,047 | | | $2,053,971 | |
(1)
| These amounts assume a stock price of $75.73, which was the closing price of the Company’s stock on December 31, 2018, the assumed termination date. Actual values will vary based on changes in the Company’s stock price on the termination date. |
| | (2) | This represents the intrinsic value of unvested stock options, that would vest as of the termination date following the death or disability of the executive. |
| | (3) | This represents the prorated value of 2016 and 2017 PSU awards that would vest as of the termination date following the death or disability of the executive, assuming target performance with proration. |
| | (4) | This represents the prorated value of 2016 and 2017 RSU awards that would vest as of the termination date following the death or disability of the executive. |
| | (5) | This represents the value of the executive’s non-qualified deferred compensation account payment accelerated in the event of death or disability. |
| | Potential Payments Upon Termination and Change of Control |
The Company has approved and entered into Severance and Change of Control Agreements with each of its NEOs. Under these agreements, participants are entitled to severance payments if their employment with Ingevity terminates within two years following a change of control (for any reason other than cause, disability, death or a termination initiated by the participant without good reason, all as defined). The table below reflects the amount of compensation that would be payable to each of our NEOs as if the NEO’s employment had terminated on December 31, 20182020, the assumed termination date. Actual values will vary based on their respective Severance and Change of Control Agreements. The benefits described arechanges in addition to any benefits available prior to the occurrence of a change of control, such as qualified plan distributions from the Company’s 401(k) Savings Plan, paymentstock price on the termination date.
|
(2)
| This represents the intrinsic value of any accrued vacation or exercises of anyunvested stock options already exercisable.For Messrs. Wilson, Fortsonthat would vest in full as of the termination date following the death or disability of the executive.
|
(3)
| This represents the prorated value of 2018 and Ms. Burgeson, if a change2019 PSU awards that would vest as of controlthe termination event occurs ondate following the death or before January 1, 2020,disability of the executive, assuming target performance with proration. |
(4)
| This represents the prorated value of 2018 and such NEO is terminated by2019 RSU awards that would vest as of the Companytermination date following the death or any successor (or he or she terminates employment ondisability of the executive. |
(5)
| This represents the value of the executive’s non-qualified deferred compensation account of Good Reason)before January 1, 2020 absent cause within one year following a change of control, he or she is entitled to receive cash severancepayment accelerated in the amountevent of three years (for Mr. Wilson)death or disability.
|
48 | | | INGEVITY - 2021 Proxy Statement | | | | | | | | |
TABLE OF CONTENTS Potential Payments Upon Termination and Change of Control The Company has entered into Severance and Change of Control Agreements with each of the NEOs. Under these agreements, participants are entitled to severance payments if their employment with Ingevity terminates within two years following a change of control (for any reason other than cause, disability, death or a termination initiated by the participant without good reason, all as defined). The table below (“Change of Control Severance Payments”) reflects the amount of compensation that would be payable to each of our NEOs as if the NEO’s employment had terminated on December 31, 2020 based on their respective Severance and Change of Control Agreements. The benefits described are in addition to any benefits available prior to the occurrence of a change of control, such as qualified plan distributions from the Company’s 401(k) Savings Plan, payment of any accrued vacation or exercises of any stock options already exercisable. Mr. Fortson and Ms. Burgeson) of his or her then-current base salary and target bonus for such period, the payment of which is to be made over a three-year period (for Mr. Wilson) and two-years (for Mr. Fortson and Ms. Burgeson). For termination on or after January 1, 2020, Mr. Wilson would receive a severance payment equal to three times the sum of his then current annual base salary and his target incentive, payable in a single lump sum. The other NEOs would receive severance payments equal to two times the sum of their then current annual base salary and their target incentive, payable in a single lump sum. No Gross-Up; Release of Claims The Severance and Change of Control Agreements covering our NEOs do not include any gross-up feature payable to NEOs with respect to any excise taxes owed in connection with a change of control severance payment. Severance is not payable to any NEO unless and until he or she signs a release of claims against the Company. The agreements also include post-termination covenants relating to confidentiality, non-competition and non-solicitation. Equity Acceleration (Double Trigger) As described above on page 38, the company’s 2016 Omnibus Incentive Plan was amended in 2019 to clarify that “double trigger” vesting will apply in the case of a change of control. In particular, in the event of a change of control where the NEO receives a “replacement award,” there will be no accelerated vesting, exercisability, and/or payment of an outstanding award unless the NEO’s employment is terminated without cause, other than as a result of death or disability, or the NEO resigns for Good Reason within two years of the change of control event. In such cases, upon the second trigger, NEO holders of such awards will be entitled to accelerated vesting, and his or her awards will be exercisable and/or will be settled. If a NEO does not receive a replacement award or if the award is not otherwise assumed by the acquirer, then upon the occurrence of a change of control, all outstanding unvested options will be fully vested and exercisable and all restrictions applicable to outstanding stock awards that are not performance-based will lapse in full and the awards will be fully vested. With respect to performance awards, upon a change of control, a pro-rated portion of such awards will be considered earned at their target value (or, if greater, the level of achievement as of the date of the change of control, if determinable by the LD&C Committee) and will immediately be paid or settled subject to the provisions of Section 409A of the Code. Change of Control Severance Payments The table below reflects the impact of an involuntary termination of employment (or Good Reason termination, if applicable) on December 31, 2020 under the terms of the Company’s Severance and Change of Control agreements in place with our NEOs in effect on December 31, 2020: | Cash Severance(1) | | | $4,950,000 | | | $1,501,500 | | | $1,360,000 | | | Pro-Rata Target Incentive(2) | | | $825,000 | | | $295,750 | | | $255,000 | | | Intrinsic Value of Stock Option(3) | | | $727,590 | | | $422,398 | | | $355,057 | | | Performance-Based RSU Award(4),(5) | | | $2,462,134 | | | $890,282 | | | $745,486 | | | Service-Based RSU Award(4),(6) | | | $1,060,674 | | | $595,389 | | | $295,120 | | | Post-Termination Healthcare(7) | | | $52,810 | | | $25,050 | | | $35,212 | | | Outplacement Services and Financial Planning(8) | | | $40,000 | | | $40,000 | | | $40,000 | | | Deferred Compensation(9) | | | $726,743 | | | $— | | | $1,282,651 | | | Total | | | $10,844,951 | | | $3,770,369 | | | $4,368,526 | |
INGEVITY - 2021 Proxy Statement | | | 49 | | | | | | | | |
TABLE OF CONTENTS (1)
| The change of control cash severance is equal to three times the sum of his then current annual base salary plus the executive’s current target annual cash incentive award for Mr. Fortson. For Messrs. Smith and his target incentive, payableWoodcock, the change in a single lump sum. For Mr. Fortson and Ms. Burgeson, they would receivecontrol cash severance paymentsis equal to two times the sum of their then current annual base salary and theirplus the executive’s current target annual cash incentive payable in a single lump.Messrs. Smith and Woodcock would receive severance payments equal to two times the sum of their annual base salary and their target incentive, payable in a single lump sum in accordance with their agreements, which are consistent with the provisions discussed above for Messrs. Wilson and Fortson and Ms. Burgeson.
INGEVITY - 2019 Proxy Statement - 41
The Severance and Change(2)
| This represents the value of Control Agreements covering our NEOs do not include any gross-up featurethe annual STIP (assuming target performance levels) payable to NEOs with respect to any excisetaxes owedupon termination in connection with a change of control severance payment.
| | Release of Claims and Noncompetition and Non-Solicitation Agreementcontrol. Actual payout for 2020 was at 84.1% for Mr. Fortson, 72.9 percent for Mr. Smith and 125 percent for Mr. Woodcock. |
Severance is not payable to any NEO unless and until he or she signs(3)
| This represents the intrinsic value of unvested stock options, which vest in full as of the termination date following a releasechange of claims against the Company. The agreements also include post-termination covenants relating to confidentiality, non-competition and non-solicitation.
| | Equity Acceleration (Double Trigger)control scenario. |
In(4)
| These amounts assume a stock price of $75.73, which was the closing price of the Company’s stock on December 31, 2020, the assumed termination date. Actual values will vary based on changes in the Company’s stock price on the termination date. |
(5)
| This represents the value of 2018, 2019 and 2020 PSU awards which would vest in full in connection with a termination following a change of control, assuming target performance with no proration. |
(6)
| This represents the full value of 2018, 2019 and 2020 RSU awards that vest in full upon a termination of employment following a change of control. |
(7)
| This represents a cash lump sum payment in lieu of continued health care coverage pursuant to each respective executive's Severance and Change of Control Agreement. For Mr. Fortson, this represents the cost of three years of health care coverage and for the other executives it represents two years. |
(8)
| This represents the value of outplacement services for one year following termination of employment ($25,000) and financial counseling for one year ($15,000). |
(9)
| This represents the value of the executive’s non-qualified deferred compensation account payment accelerated in the event of a change of control event wherebased on the NEO receives a “replacement award,” there will beexecutive’s election. Absent an executive election, no accelerated vesting, exercisability, and/or payment of an outstanding award, unless the NEO’s employment is terminated without cause, other than as a result of death or disability, or the NEO resigns for Good Reason within two years of the change of control event. In such cases, upon the second trigger, NEO holders of such awards will be entitled to accelerated vesting, and his or her awards will be exercisable and/or will be settled.If a NEO does not receive a replacement award or if the award is not otherwise assumed by the acquirer, then upon the occurrence of a change of control, all outstanding unvested options will be fully vested and exercisable and all restrictions applicable to outstanding stock awards that are not performance-based will lapse in full and the awards will be fully vested. With respect to performance awards, upon a change of control, such awards will be considered earned at their target value (or, if greater, the level of achievement as of the date of the change of control, if determinable by the Compensation Committee) and will immediately be paid or settled subject to the provisions of Section 409A of the Code.
INGEVITY - 2019 Proxy Statement - 42
| | Change of Control Severance Payments |
The table below reflects the impact of an involuntary termination of employment (or Good Reason termination, if applicable)acceleration occurs on December 31, 2018 under the terms of the Company’s Severance and Change of Control agreements in place with our NEOs in effect on December 31, 2018:
| | | | | | | | | | | | | D. Michael Wilson | John C. Fortson | Katherine P. Burgeson | Michael P. Smith | S. Edward Woodcock | Cash Severance(2) | 5,400,000 |
| 1,717,000 |
| 1,248,000 |
| 1,320,000 |
| 1,023,000 |
| Pro-Rata Target Incentive(3) | 900,000 |
| 353,500 |
| 234,000 |
| 260,000 |
| 181,500 |
| Intrinsic Value of Stock Option(1),(4) | 3,684,810 |
| 1,905,506 |
| 571,592 |
| 359,362 |
| 405,874 |
| Performance-Based RSU Award(1),(5) | 6,025,010 |
| 2,754,907 |
| 904,438 |
| 744,255 |
| 692,535 |
| Service-Based RSU Award(1),(6) | 1,758,745 |
| 742,163 |
| 265,214 |
| 526,075 |
| 209,978 |
| Post-Termination Healthcare(7) | 62,672 |
| 41,781 |
| 41,308 |
| 41,781 |
| 41,121 |
| Outplacement Services and Financial Planning(8) | 40,000 |
| 40,000 |
| 40,000 |
| 40,000 |
| 40,000 |
| Deferred Compensation(9) | 1,139,187 |
| 292,881 |
| — |
| — |
| 298,102 |
| Total | 19,010,424 |
| 7,847,738 |
| 3,304,552 |
| 3,291,473 |
| 2,892,110 |
|
| | (1) | These amounts assume a stock price of $83.69, which was the closing price of the Company’s stock on December 31, 2018, the assumed termination date. Actual values will vary based on changes in the Company’s stock price on the termination date. |
| | (2) | The change of control cash severance is equal to three times the sum of base salary plus the executive’s current target annual cash incentive award for Mr. Wilson. For Messrs. Fortson, Smith, Woodcock and Ms. Burgeson, the change in control cash severance is equal to two times the sum of base salary plus the executive’s current target annual cash incentive award. |
| | (3) | This represents the value of the annual STIP (assuming target performance levels) payable upon termination in connection with a change of control. Actual payout for 2018 was at 192 percent for Mr. Smith and 200 percent for the other NEOs. |
| | (4) | This represents the intrinsic value of unvested stock options, which vest as of the termination date following a change of control scenario. |
| | (5) | This represents the value of 2016, 2017 and 2018 PSU awards which would vest in full in connection with a termination following a change of control, assuming target performance with no proration. |
| | (6) | This represents the full value of 2016, 2017 and 2018 RSU awards that vest in full upon a termination of employment following a change of control. |
| | (7) | This represents a cash lump sum payment in lieu of continued health care coverage pursuant to each respective executive's Severance and Change of Control Agreement. For Mr. Wilson, this represents the cost of three years of health care coverage and for the other executives it represents two years. |
| | (8) | This represents the value of outplacement services for one year following termination of employment ($25,000) and financial counseling for one year ($15,000). |
| | (9) | This represents the value of the executive’s non-qualified deferred compensation account payment accelerated in the event of a change of control based on the executive’s election. Absent an executive election, no acceleration occurs on a change of control. |
INGEVITY - 2019 Proxy Statement - 43
RELATED PARTY TRANSACTIONS
Under its charter, the Governance Committee is charged with reviewing all potential related party transactions. Our policy has been that the Governance Committee, which is comprised solely of independent directors, reviews and then recommends such related party transactions to the entire Board for further review and approval. All such
related party transactions are then required to be reported under applicable SEC rules. Aside from this policy, we have not adopted additional procedures for review of, or standards for approval of, related party transactions but instead review such transactions on a case by case basis.
The preceding tables and discussion reflect the potential payments upon a hypothetical termination and/or change in control of the Company effective as of December 31, 2020. The Governance Committee has not identified any related party transactions since the beginning of the fiscal year ended December 31, 2018 and none are currently proposed.
AUDIT COMMITTEE REPORT
Management is responsible for the Company’s financial reporting process, including the effectiveness of its internal control over financial reporting. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s financial statements and the Company’s internal control over financial reporting and issuing reports thereon. The Audit Committee’s responsibility is, among other things, to monitor and oversee these processes and to report thereon to the Board.
Throughout 2018, the Audit Committee received regular reports from management, the internal auditors and PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, regarding the plans for, and scope and results of, their audits and reviews of the Company’s financial statements and internal control over financial reporting.
Management has represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and PricewaterhouseCoopers LLP.
This review included discussions with PricewaterhouseCoopers LLP of the matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees,” as adopted by the Public Company Accounting Oversight Board.
The Audit Committee also received from PricewaterhouseCoopers LLP the written disclosures and letter required by applicable requirements of the Public Company Accounting Oversight Board regarding PricewaterhouseCoopers LLP’s communications with the Audit Committee concerning independence and has discussed with PricewaterhouseCoopers LLP the issue of their independence from the Company.
Based on the foregoing, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
THE AUDIT COMMITTEE
Jean S. Blackwell, Chair
Luis Fernandez-Moreno
J. Michael Fitzpatrick
Daniel F. Sansone
CEO Pay Ratio Disclosure
The Compensation Committee reviewed a comparison of our Chief Executive Officer’s (CEO) annual total compensation. We determined that the 2018CEO Pay Ratio DisclosureThe LD&C Committee reviewed a comparison of the annual total compensation of John C. Fortson, our CEO as of December 31, 2020, to the annual total compensation of the median compensated employee for fiscal 2020. We determined that the 2020 annual total compensation of the median compensated of all our employees who were employed as of December 31, 2020, other than Mr. Fortson, was $80,132; Mr. Fortson’s 2020 annual total compensation for purposes of this disclosure was $3,155,114; and the ratio of these amounts was 39:1. Because Mr. Fortson served as CEO for a portion of the year, we determined his 2020 annual total compensation for purposes of this disclosure by annualizing the amounts reported for him in the “Salary” and “Non-Equity Incentive Compensation” columns of the Summary Compensation Table to reflect the base salary and the Short-Term Incentive Plan award he would have earned for 2020 if he had served as CEO for the entire fiscal year $825,000 and $693,825, respectively. As of December 31, 2020, our total employee population (excluding the CEO) consisted of 1,319 employees in the United States and 418 employees who were employed as of December 31, 2018, other than our CEO, D. Michael Wilson, was $81,092; Mr. Wilson’s 2018 annual total compensation was $5,422,777; and the ratio of these amounts was 1-to-67. As of December 31, 2018, our total population consisted of 1,655 employees, of which 1,351 were in the United States and 304 were in non-US jurisdictions. Pursuant to the Pay Ratio SEC rules, we excluded six(6) employees from India under the de minimis exemption. After
applying this exemption, the employee population used for purposes of identifying the median employee consisted of 1,649 employees of which 1,351 were in the United States and 298 were located in non-US jurisdictions.
To identify the median compensated employee, we used total cash compensation, determined in the same manner as the “Total Compensation” column shown for our CEO in the Summary Compensation Table on page 35 of this proxy.
Pay elements that were included in the annual total compensation for each employee are:
INGEVITY - 2019 Proxy Statement - 44
Base salary received in 2018 annualized for those permanent employees hired mid-year during 2018
Annual incentive paid or actual bonus paid for 2018
Overtime and allowances, as applicable, for fiscal 2018
Grant fair value of stock options, PSUs, and RSUs granted in 2018
Company paid 401(k) contributions in 2018
Company paid non-qualified plan contributions in 2018
Company paid life insurance premiums in 2018
We believe this pay ratio is a reasonable estimate calculated in a manner consistent with the Pay Ratio Securities and Exchange Commission (SEC) rules under SEC rules, we excluded 7 employees located in India and 12 employees located in Brazil under the de minimis exemption and included 31 contractors. After applying these rules, the employee population used for purposes of identifying the median employee consisted of 1,755 employees, of which 1,319 were in the United States and 436 were in non-US jurisdictions.
To identify the median compensated employee, we used total cash compensation, determined in the same manner as the “Total Compensation” column shown for our CEO in the Summary Compensation Table on page 42 of this proxy. Pay elements that were included in the annual total compensation for each employee are: Base salary received in 2020 annualized for those permanent employees hired mid-year during 2020 Annual incentive paid or actual bonus paid for 2020 Overtime and allowances, as applicable, for fiscal 2020 Grant fair value of stock options, PSUs, and RSUs granted in 2020 Company paid 401(k) contributions in 2020 Company paid non-qualified plan contributions in 2020 Company paid life insurance premiums in 2020 We believe this pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K, the applicable SEC regulation, based on our payroll and employment records and the methodology described above. 50
| | | INGEVITY - 20192021 Proxy Statement - 45 |
| | | | | | | |
TABLE OF CONTENTS | | | | | | Proposal
| | | PROPOSAL NO. 2 — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (SAY-ON-PAY)
| | | In accordance with the requirements of Section 14A of the Exchange Act, we are asking stockholders
| 3 | | | Non-Binding Advisory Vote to approve, on an advisory basis, the following resolution concerning the compensation of our NEOs: RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of our named executive officers as described in this Proxy Statement, includingApprove the Compensation Discussion and Analysis and the tabular compensation disclosures and related narrative discussion.
In considering this proposal, we encourage you to review the CD&A beginning on page 20 and the tabular compensation disclosures and accompanying narrative discussion beginning on page 35. The CD&A describes our executive compensation philosophy, programs and objectives, while the tabular compensation disclosures and accompanying narrative discussion provide detailed information on the compensation of our NEOs.
We believe that our compensation policies and procedures are competitive, are focused on pay for performance principles and are strongly aligned with the long-term interests of our stockholders. Our executive compensation philosophy is based on the belief that the compensation of our employees should be set at levels that allow us to attract and retain employees who are committed to achieving high performance and who demonstrate the ability to do
so. We seek to provide an executive compensation package that is driven by our overall financial performance, increased stockholder value, the success of areas of our business directly impacted by the executive’s performance, and the performance of the individual executive. We view our compensation program as a strategic tool that supports the successful execution of our business strategy and reinforces a performance-based culture. The Company employs an executive compensation program for our senior executives that emphasizes long-term compensation over short-term compensation, with a significant portion weighted toward equity awards. This approach strongly aligns our senior executives’ compensation with the interest of our stockholders.
This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs resulting from the executive compensation policies and practices described in this Proxy Statement.
Because your vote is advisory, it will not be binding upon the Board. However, the Board and Compensation Committee value the opinion of the Company’s stockholders as expressed through their votes on this proposal and will carefully consider the outcome of this proposal in connection with their ongoing evaluation of the Company’s executive compensation program.
Recommendation of the Board
The Board recommends that the stockholders vote “FOR” the adoption of this resolution and approve, on an advisory basis, the Company’s executive compensation as described in this proxy statement.
Ingevity Named Executive Officers
INGEVITY - 2019 Proxy Statement - 46
PROPOSAL NO. 3 — TO RATIFY APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee is directly responsible for appointing, retaining, fixing the compensation of, and overseeing the work of our independent registered public accounting firm. The Audit Committee has appointed PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2019.
Although it is not legally required to do so, the Board has elected to seek stockholder ratification of the appointment of PricewaterhouseCoopers LLP as a matter of good corporate governance. If stockholders do not ratify the appointment of
PricewaterhouseCoopers LLP, the Audit Committee will reconsider the appointment. Regardless of the outcome of this proposal, the Audit Committee may, in its discretion, select a new independent registered public accounting firm at any time during the year if it believes such a change would be in the Company’s best interest.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting. They will have the opportunity to make a statement if they so desire and will be available to respond to appropriate questions from stockholders.
Recommendation of the Board
The Board recommends a vote “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company.
Audit and Other Fees
The following table shows the fees paid by us to PricewaterhouseCoopers LLP for audit and other services provided for the fiscal 2018 and 2017, all of which were preapproved by the Audit Committee.
| | | | | | | 2018 | 2017 | Audit Fees | 1,379,000 |
| 1,132,000 |
| Audit-Related Fees | 100,000 |
| 50,000 |
| Tax Fees | 202,000 |
| 227,000 |
| All Other Fees | 10,000 |
| 15,000 |
| Total | 1,691,000 |
| 1,424,000 |
|
Audit Fees.FOR Fees for professional services performed for the integrated audit of the Company’s annual consolidated financial statements included in the Company’s Form 10-K filing and review of financial statements included in the Company’s Form 10-Q filings. The amount also includes other services that are normally provided by PricewaterhouseCoopers LLP in connection with statutory and regulatory filings or engagements and, for 2018, audit services related to the acquisition of the Georgia-Pacific pine chemicals business.this proposal.
| | | | | | | Audit-Related Fees. This includes fees paid for services that are reasonably related to the performance of the audit or review of the Company's financial statements. This includes services provided in connection with debt financing transactions.
| Tax Fees. This includes fees and expenses for U.S. federal, state, and international tax planning and tax compliance services.
| All Other Fees. This category includes fees for services in connection with attestations by PricewaterhouseCoopers LLP that are required by statute or regulation.
| | | | | | | |
In accordance with the requirements of Section 14A of the Exchange Act, we are asking stockholders to approve, on an advisory basis, the following resolution concerning the compensation of our NEOs: RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of our named executive officers as described in this Proxy Statement, including the Compensation Discussion and Analysis and the tabular compensation disclosures and related narrative discussion. In considering this proposal, we encourage you to review the CD&A beginning on page 27 and the tabular compensation disclosures and accompanying narrative discussion beginning on page 42. The CD&A describes our executive compensation philosophy, programs and objectives, while the tabular compensation disclosures and accompanying narrative discussion provide detailed information on the compensation of our NEOs. We believe that our compensation policies and procedures are competitive, are focused on pay for performance principles and are strongly aligned with the long-term interests of our stockholders. Our executive compensation philosophy is based on the belief that the compensation of our employees should be set at levels that allow us to attract and retain employees who are committed to achieving high performance and who demonstrate the ability to do so. We seek to provide an executive compensation package that is driven by our overall financial performance, increased stockholder value, the success of areas of our business directly impacted by the executive’s performance, and the performance of the individual executive. We view our compensation program as a strategic tool that supports the successful execution of our business strategy and reinforces a performance-based culture. The Company maintains an executive compensation program for our senior executives that emphasizes long-term compensation over short-term compensation, with a significant portion weighted toward equity awards. This approach strongly aligns our senior executives’ compensation with the interest of our stockholders. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs resulting from the executive compensation policies and practices described in this Proxy Statement. Because your vote is advisory, it will not be binding upon the Board. However, the Board and LD&C Committee value the opinion of the Company’s stockholders as expressed through their votes on this proposal and will carefully consider the outcome of this proposal in connection with their ongoing evaluation of the Company’s executive compensation program. Recommendation of the Board The Board recommends that the stockholders vote “FOR” the adoption of this resolution and approve, on an advisory basis, the Company’s executive compensation as described in this proxy statement.
INGEVITY - 20192021 Proxy Statement - 47 | | | 51
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TABLE OF CONTENTS OWNERSHIP OF EQUITY SECURITIES The following table lists any person (including any “group” as that term is used in Section 13(d)(3) of the Exchange Act) who, to our knowledge, was the beneficial owner as of February 22, 2021, of more than 5 percent of our outstanding voting shares. | Common Stock | | | BlackRock Inc.
55 East 52nd Street
New York, New York 10055 | | | 4,777,233(1) | | | 11.6% | | | Common Stock | | | The Audit Committee’s pre-approval policy requires that all services to be performed by the Company’s independent registered public accounting firm be pre-approved either on a case-by-case basis by the Audit Committee or its delegate or on a categorical basis based on the Audit Committee’s prior approval of a specific category of service and theexpected cost thereof. Any request for services involving less than $50,000 may be approved by the Chair of the Audit Committee if it is not practicable to obtain the approval of the full committee, provided that any such approval is presented to the full Audit Committee at its next scheduled meeting.
Vanguard Group
INGEVITY - 2019 Proxy Statement - 48
100 Vanguard Blvd.
PROPOSAL NO. 4 — APPROVAL OF THE AMENDMENTS TO THE CERTFICATE OF INCORPORATION TO ELIMINATE SUPER MAJORITY VOTE REQUIRMENTS AND REMOVE CERTAIN OBSOLETE PROVISIONSMalvern, Pennsylvania 19355
| | | 3,870,014(2) | | | 9.38% | | | Common Stock | | | Wellington Management Group LLP
Our Certificate currently requires an affirmative vote of the holders of 75 percent of the voting power of the then outstanding shares of stock entitled to vote in the election of directors to amend certain provisions of our Certificate and By-Laws (the supermajority vote requirement). Our Board of Directors has voted unanimously to approve, and has recommended that our stockholders approve,280 Congress Street
Boston, Massachusetts 02210 | | | 2,127,158(3) | | | 5.15% | | | Common Stock | | | Boston Partners
One Beacon Street, 30th Floor
Boston, Massachusetts 02108 | | | 2,071,107(4) | | | 5.02% | |
(1)
| Information provided is based solely on an amendment to our CertificateSchedule 13G filed on January 26, 2021 by BlackRock, Inc., which reports having sole voting power over 4,698,914 shares and sole dispositive power over 4,777,233 shares. |
(2)
| Information provided is based solely on an amendment to eliminateSchedule 13G filed on February 10, 2021 by The Vanguard Group, which reports having sole dispositive power over 3,739,417 shares, shared voting power over 95,978 shares and shared dispositive power over 130,597 shares. |
(3)
| Information provided is based solely on a Schedule 13G filed on February 4, 2021, which reports Wellington Management Group LLP, Wellington Group Holdings LLP and Wellington Investment Advisors Holdings LLP each having shared voting power over 1,882,470 shares, shared dispositive power over 2,127,158 shares. |
(4)
| Information provided is based solely on an amendment to Schedule 13G filed on February 11, 2021 by Boston Partners, which reports having sole voting power over 1,709,592 shares, shared voting power over 4,152 shares and sole dispositive power over 2,071,107 shares. |
Executive Officers and Directors The following table shows how much of our Common Stock our current directors, named executive officers (“NEOs”), and all officers and directors as a group beneficially owned as of March 1, 2021. Beneficial ownership is a technical term broadly defined by the SEC to mean more than ownership in the usual sense. In general, beneficial ownership includes any shares a director or officer can vote or transfer and any security the director or officer has the right to vote or transfer within 60 days. Each stockholder listed in the table has sole voting and investment power for all shares shown as beneficially owned by him or her. Individual directors and executive officers as well as directors and executive officers as a group beneficially own less than one percent of the shares of Common Stock outstanding as of March 1, 2021. | Jean S. Blackwell(1) | | | 12,475 | | | Luis Fernandez-Moreno | | | 14,525 | | | J. Michael Fitzpatrick | | | 9,475 | | | Diane H. Gulyas | | | 4,747 | | | Frederick J. Lynch | | | 14,475 | | | Karen G. Narwold | | | 3,747 | | | Daniel F. Sansone | | | 11,822 | | | John C. Fortson(2) | | | 102,512 | | | Katherine P. Burgeson | | | 19,538 | | | Michael P. Smith(3) | | | 35,316 | | | S. Edward Woodcock(4) | | | 29,777 | | | D. Michael Wilson | | | 85,157 | | | Directors and executive officers as a group (11 persons) (5) | | | 238,871 | |
(1)
| Includes 6,287 shares held by the supermajority vote requirement and to also remove certain obsolete provisions.Jean S. Blackwell Revocable Trust. |
(2)
| Includes 54,912 stock options exercisable within 60 days of March 1, 2021. |
52 | | | INGEVITY - 2021 Proxy Statement | | | | | | | | |
TABLE OF CONTENTS (3)
Eliminating Supermajority Vote Requirement
Article V and Article VIII
| Includes 17,499 stock options exercisable within 60 days of our Certificate containMarch 1, 2021. |
(4)
| Includes 15,804 stock options exercisable within 60 days of March 1, 2021. |
(5)
| Includes a supermajority vote requirement to amend, modify or repeal specific provisionstotal of our Certificate and By-Laws relating to:
Special meetings88,215 stock options exercisable within 60 days of stockholders, including stockholders’ rights to call such a meeting (Section 1.3March 1, 2021. The total number of the By-Laws);
The right of directors to set the size of Board and to fill Board vacancies (Section 2.1 and the last sentence of Section 2.2 of the By-Laws);
Compensation of non-employeeshares beneficially owned by directors and director expense reimbursement (Section 2.11 of the By-Laws);
Indemnification rights for certain persons including our directors andexecutive officers as well as the Company’s right to maintain insurance concerning such indemnification (Section 2.12 of the By-Laws);
The limitation of personal liability of directors to Ingevity and its stockholders (Article VIII of the Certificate);
The vote required for stockholders to amend the Certificate generally and as well as the supermajority vote requirement (Articles V and VIII of the Certificate); and
The vote required for stockholders to amend the By-Laws generally as well as the supermajority vote requirement that mirrors the supermajority vote requirement in Article V of the Certificate (the last sentence of Section 7.7 of the By-Laws).
If this proposal is approveda group does not include shares held by stockholders, any future amendment to the above provisions of the
Certificate will require the approval of a majority of the outstanding shares of Common Stock, which is the default standard under the Delaware General Corporate Law (the "DGCL"). The supermajority vote requirement regarding the above By-Law provisions is also replicated in the Company’s By-Laws. If this proposed amendment to our Certificate is approved by the stockholders, then the Board of Directors intends to effect corresponding amendments to the By-Laws, so that any amendment to the above By-Law provisions will also require the approval of a majority of the outstanding shares of Common Stock.
Notwithstanding elimination of the supermajority vote requirement, any amendment to the Certificate will also require approval of the Board as is required by the DGCL.
The supermajority vote requirement that is the subject of this Proposal 4 were included in our Certificate in connection with the Company’s separation from our former parent company, WestRock Company. Since the spin-off, the Board has engaged inMr. Wilson or Ms. Burgeson since neither individual was an ongoing review of the Company’s corporate governance principles. After receiving the advice of management, the Board considered the relative weight of the arguments in favor of and against maintaining the supermajority vote requirement. As a result of its review, and after careful deliberation, the Board has determined that it is in the best interestsexecutive officer of the Company on March 1, 2021.
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CODES OF CONDUCT AND ETHICS The Company maintains three codes of business conduct and ethics (collectively, the “Codes of Ethics”) to focus the Board and management on areas of ethical risk, provide guidance to personnel to help them recognize and deal with ethical issues, provide mechanisms to report unethical conduct and help to foster a culture of honesty and accountability. The Codes of Ethics include: Code of Ethical Conduct for CEO and Senior Officers, which applies to the Company’s CEO, Chief Financial Officer, principal accounting officer, and each executive who reports to the CEO; Code of Business Conduct and Ethics for the Board of Directors, which applies to the Company’s directors; and Employee Code of Conduct and Ethics, which applies to directors and all Company employees. Each of the Codes of Ethics is available for review on our website at http://ir.ingevity.com/governance/codes-of-conduct. This website is also where we will disclose, to the extent and in the manner permitted by Item 5.05 of Form 8-K under the Exchange Act, the nature of any amendment to the Codes of Ethics (other than technical, administrative, or other non-substantive amendments), our approval of any material departure from a provision of the Codes of Ethics and our failure to take action within a reasonable period of time regarding any material departure from a provision of the Codes of Ethics that has been made known to any of our executive officers. Any waiver of the Codes of Ethics for executive officers or directors will be made only by the Board or its NG&S Committee. In support of the Codes of Ethics, we have provided employees with a number of avenues for the reporting of ethics violations or similar concerns, including an anonymous telephone hotline. RELATED PARTY TRANSACTIONS Under its charter, the NG&S Committee is charged with reviewing all potential related party transactions. Our policy has been that the NG&S Committee, which is comprised solely of independent directors, reviews and then recommends such related party transactions to the entire Board for further review and approval. All such related party transactions are then required to be reported under applicable SEC rules. Aside from this policy, we have not adopted additional procedures for review of, or standards for approval of, related party transactions but instead review such transactions on a case by case basis. The NG&S Committee has advised the Board that it has not identified any related party transactions since the beginning of the fiscal year ended December 31, 2020, and none are currently proposed. INGEVITY - 2021 Proxy Statement | | | 53 | | | | | | | | |
TABLE OF CONTENTS QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING, PROXY SOLICITATION AND VOTING INFORMATION Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on April 22, 2021: Our Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31, 2020, are available at http://ir.ingevity.com under the Financial Information Tab. Why did I receive these materials? You received these materials (the “Proxy Materials”) because you owned shares of Ingevity Common Stock as of the close of business on the Record Date and are therefore entitled to vote at the Annual Meeting. Why did I receive a Notice Regarding the Availability of Proxy Materials instead of printed Proxy Materials? Most of our stockholders received a Notice Regarding the Availability of Proxy Materials (the “Notice”) instead of a full set of printed proxy materials. The Notice provides access to our Proxy Materials in a fast and efficient manner via the Internet. This reduces the amount of paper necessary to produce these materials, as well as costs associated with mailing these materials to stockholders. On or around March 8, 2021, we began mailing the Notice to our stockholders of record as of February 22, 2021 and posted our Proxy Materials on the website referenced in the Notice (http://ir.ingevity.com). As more fully described in the Notice, stockholders may choose to access our Proxy Materials on the website or may request to receive a printed set of our Proxy Materials. The Notice and website provide information regarding how you may request to receive Proxy Materials in printed form by mail or electronically by email for this meeting and on an ongoing basis. What is included in the Proxy Materials? The Proxy Materials include the Notice of the Annual Meeting, our proxy statement for the Annual Meeting (the “Proxy Statement”) and our 2020 annual report to stockholders (the “Annual Report”), which includes our Annual Report on Form 10-K for the year ended December 31, 2020. These materials provide you with important information about the Company, the Annual Meeting and the proposals to be voted on at the Annual Meeting. What is a proxy? A proxy is your legal designation of another person to vote the stock you own as of the Record Date in the manner you direct. The person you designate to vote your shares is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. We have designated Stacy L. Cozad and Ryan C. Fisher to serve as proxies for the Annual Meeting. The proxies also may be voted at any adjournments or postponements of the meeting. The Board is soliciting proxies for use at the Annual Meeting. A proxy statement is a document we give you when we are soliciting your vote pursuant to SEC regulations. What is the difference between a stockholder of record and a beneficial owner? If your shares are registered in your name on the books and records of our transfer agent, you are a “stockholder of record.” We therefore sent the Notice or Proxy Materials directly to you. If your shares are held for you in the name of your broker or bank, your shares are held in “street name” and you are considered the “beneficial owner” of your shares and the broker or bank is considered to be the stockholder of record. If you are a beneficial owner, the Notice or Proxy Materials have been forwarded to you by the broker or bank that holds your shares, and, as the beneficial owner, you have the right to direct your broker or bank on how to vote your shares by using the voting instruction form provided to you by your broker or bank. 54 | | | INGEVITY - 2021 Proxy Statement | | | | | | | | |
TABLE OF CONTENTS How do I vote? Your voting method depends on whether you are a stockholder of record or a beneficial owner. Stockholder of Record. If you are a stockholder of record, you may vote using one of the following methods: Over the Internet. By telephone. If you have requested to receive a paper proxy card in the mail, by completing, signing and returning the paper proxy card. During the Annual Meeting by following the instructions available on the meeting website. The Notice provides instructions on how to access the Proxy Materials and how to vote via the Internet. For those stockholders who request to receive a paper proxy card in the mail, instructions for voting via the Internet, by telephone or by mail are set forth on the paper proxy card. Please follow the directions on your proxy card carefully. Even if you plan to attend the Annual Meeting virtually, we encourage you to vote your shares ahead of time. Beneficial Owner. If you are a beneficial owner, you may vote by following the instructions on the voting instruction form or notice provided to you by the bank or broker that holds your shares. May I revoke my proxy and change my vote? If you are a stockholder of record, you may revoke your proxy and change your vote before the polls close at the Annual Meeting by doing one of the following: Voting again by telephone or over the Internet prior to 11:59 p.m., Eastern Daylight Time, on April 21, 2021. Giving written notice to the Corporate Secretary of the Company. Delivering a later-dated proxy to the Company. Voting during the Annual Meeting by following the instructions available on the meeting website. If you are a beneficial owner, please check your voting instruction form or contact the bank or broker that holds your shares for instructions on how to revoke or change your voting instruction. Who is entitled to vote at the Annual Meeting? All Ingevity stockholders who owned Common Stock as of the close of business on the Record Date are entitled to vote at the Annual Meeting. How many votes are entitled to be cast at the Annual Meeting? Each Ingevity stockholder is entitled to one vote for each share of Common Stock owned as of the Record Date. There were 42,934,785 shares of Common Stock outstanding on the Record Date. There is no cumulative voting. When and where is the Annual Meeting, and may I attend? In light of the ongoing coronavirus pandemic and after careful consideration, the Board has determined to hold the Annual Meeting virtually in order to facilitate stockholder attendance and participation by enabling stockholders to participate from any location and at no cost. To participate in the virtual meeting, you will need the 16-digit control number included on your Notice, proxy card or voting instruction form. The meeting webcast will begin promptly at 9:30 a.m., Eastern Standard Time, and we encourage stockholders to access the meeting prior to the start time. Technical assistance will be available on the day of the annual meeting, April 22, 2021. If you experience difficulties during the check-in process with joining the meeting, please call TFN: 844-986-0822 in the U.S., or 303-562-9302 for International assistance. We are committed to ensuring that stockholders will be afforded the same rights and opportunities to participate in the meeting as they would at an in-person meeting. You will be able to attend the meeting online, vote your shares electronically and submit questions during the meeting by visiting www.virtualshareholdermeeting.com/NGVT2021. We will try to answer as many stockholder-submitted questions as time permits, and in the event we receive more questions than we can answer INGEVITY - 2021 Proxy Statement | | | 55 | | | | | | | | |
TABLE OF CONTENTS during our allotted period of time, we will answer them in the order received. However, we reserve the right to edit inappropriate language and to exclude questions that are not pertinent to meeting matters, do not comply with the meeting rules of conduct or are otherwise inappropriate. If we receive substantially similar questions, we will group such questions together and provide a single response to avoid repetition. How many votes must be present to hold the Annual Meeting? In order for us to conduct the Annual Meeting, a majority of the shares outstanding as of the Record Date, or 21,467,394 shares, must be present at the meeting (including by proxy). This is referred to as a quorum. If a share is represented for any matter at the Annual Meeting, it is deemed to be present for quorum purposes. Abstentions and shares held of record by a bank or broker or its nominee (“Broker Shares”) that are voted on any matter are included in determining the number of shares present at the Annual Meeting. However, Broker Shares that are not voted on any matter at the Annual Meeting will not be included in determining whether a quorum is present at such meeting. What proposals will be voted on at the Annual Meeting? The following proposals will be voted on at the Annual Meeting, along with any other business properly presented: Proposal No. 1 — Election of the eight director nominees named in this Proxy Statement. Proposal No. 2 — Ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021. Proposal No. 3 — Approve on an advisory (non-binding) basis the compensation paid to our named executive officers (Say-on-Pay). Transact such other business that may properly come before the Annual Meeting and any adjournment or postponement thereof. The Board recommends that you vote “FOR” each of the eight director nominees named in Proposal 1 of this Proxy Statement and “FOR” Proposals 2 and 3. How many votes are needed to approve each proposal? Proposal No. 1: To be elected as a director, each nominee will need to receive a majority of the votes cast, which means that the number of votes cast “for” a director nominee must exceed the number of votes cast “against” the director nominee. Abstentions and broker non-votes will have no effect on the outcome of the election of directors. Proposal No. 2: An affirmative vote of the majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required for the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal 2021. Abstentions will have the same effect as voting against this proposal because they are considered present and entitled to vote on this proposal. Proposal No. 3: An affirmative vote of the majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve, on an advisory basis, the compensation paid to Ingevity’s named executive officers. Abstentions will have the same effect as voting against this proposal because they are considered present and entitled to vote on this proposal. Broker non-votes will have no effect on the outcome of this proposal. What is discretionary voting by brokers and what is a broker non-vote? If you are a beneficial owner and hold shares through an account with a bank or broker, your shares may be voted on certain matters even if you do not provide voting instructions. Brokerage firms have the discretionary authority under the New York Stock Exchange (“NYSE”) rules to vote shares for which their customers do not provide voting instructions on “routine” matters. The ratification of the appointment of PricewaterhouseCoopers LLP is considered a routine matter. The election of directors, and the advisory approval of the Say-on-Pay proposal are not considered routine. When a matter is not routine and the brokerage firm has not received voting instructions from the beneficial owner, the brokerage firm cannot vote the shares on that matter. This is called a broker non-vote. 56 | | | INGEVITY - 2021 Proxy Statement | | | | | | | | |
TABLE OF CONTENTS What if I do not specify a choice for a matter when returning a proxy? Proxies signed and returned by stockholders of record that do not contain voting instructions will be voted: “FOR” the election of each of the eight director nominees named in this Proxy Statement; “FOR” the ratification of appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal 2021; “FOR” the approval of the advisory Say-on-Pay proposal; and in accordance with the best judgment of the named proxies on any other matters properly brought before the Annual Meeting. Will there be any other matters of business addressed at the Annual Meeting? As of the date of this Proxy Statement, we are not aware of any other matter that will be properly brought before the Annual Meeting. If other matters are properly introduced, the persons named in the proxy as the proxy holders will vote on such matters in their discretion. Who bears the expenses of solicitation? We will bear the cost of solicitation of proxies by the Board in connection with the Annual Meeting. We will reimburse brokers, fiduciaries and custodians for reasonable expenses incurred by them in forwarding Proxy Materials to beneficial owners of Common Stock held in their names. Proxies may be solicited by mail, in person, by telephone, facsimile or other means of communication by our officers and other employees. These people will receive no additional compensation for these services but will be reimbursed for any expenses incurred by them in connection with these services. What is Ingevity’s principal executive office address? The address of Ingevity’s principal executive office is: 4920 O’Hear Avenue, Suite 400, North Charleston, South Carolina 29405. What is “householding” and how does it affect me? “Householding” refers to a procedure allowed by the SEC to reduce the number of copies of the notice or proxy materials mailed to one address, unless their broker, bank or other nominee has received contrary instructions from any beneficial holder at that address. Under this procedure, we will deliver one Notice or one set of printed Proxy Materials to stockholders of record residing at the same address, unless we receive instructions from such stockholders to the contrary. If you reside at the same address as other stockholders of record and would like to receive a separate Notice or set of Proxy Materials, please contact us at 1-844-643-8489 (1-84-INGEVITY) or at Ingevity Corporation, 4920 O’Hear Avenue, Suite 400, North Charleston, South Carolina 29405, Attn: Corporate Secretary, and we will promptly deliver a separate set to you. If you and other stockholders of record residing at the same address received multiple Notices or sets of the Proxy Materials and would like to receive a single Notice or set in the future, please contact us as described above. Beneficial owners with questions about combined mailings should contact the bank or broker holding their shares. INGEVITY - 2021 Proxy Statement | | | 57 | | | | | | | | |
TABLE OF CONTENTS QUESTIONS AND ANSWERS REGARDING STOCKHOLDER COMMUNICATIONS, STOCKHOLDER PROPOSALS AND COMPANY DOCUMENTS How can I obtain copies of Ingevity’s Annual Report and Form 10-K? We will provide without charge, at the written request of any stockholder of record as of February 22, 2021, a copy of our Annual Report on Form 10-K, including the financial statements and financial statement schedule, as filed with the SEC, excluding exhibits. We will provide copies of the exhibits to eligible stockholders making such a request. Requests for copies of our Annual Report on Form 10-K should be mailed to: Ingevity Corporation, 4920 O’Hear Avenue, Suite 400, North Charleston, South Carolina 29405, Attn: Corporate Secretary. You may also access a copy of our annual report via the Internet by visiting our website located at http://ir.ingevity.com under the Financial Information tab. How do I submit a proposal for inclusion next year’s proxy statement? Under SEC rules, a proposal that a stockholder wishes to include in our proxy statement for the 2022 Annual Meeting must be received by our Corporate Secretary no later than the close of business on November 8, 2021. Proposals should be sent to: Ingevity Corporation, 4920 O’Hear Avenue, Suite 400, North Charleston, South Carolina 29405, Attn: Corporate Secretary. Stockholders wishing to submit a proposal should refer to Rule 14a-8 of the Exchange Act, which sets standards for eligibility and specifies the types of proposals that are not appropriate for inclusion in our proxy statement. How do I nominate a director for election at next year’s annual meeting of stockholders? Under our Bylaws, any stockholder entitled to vote in the election of directors at an annual meeting of our stockholders may nominate persons for election as directors by providing written notice of their intent to do so to our Corporate Secretary no less than 90 days and not more than 120 days prior to the first anniversary of the preceding year’s annual meeting. This means that written notice of any nominations intended to be made at the 2022 Annual Meeting must be delivered between December 23, 2021 and January 22, 2022. Any such notice must contain the information and conform to the requirements specified in our Bylaws. How do I bring other business before next year’s annual meeting of stockholders? Under our Bylaws, any stockholder of record wishing to present a matter (other than the nomination of a director or matters that have been submitted for inclusion in our proxy statement for such meeting) in person at the 2022 Annual Meeting must provide written notice to our Corporate Secretary no less than 90 days and not more than 120 days prior to the first anniversary of the preceding year’s annual meeting. This means that any notice regarding matters to be presented at the 2022 Annual Meeting must be delivered between December 23, 2021 and January 22, 2022. Any such notice must contain the information and conform to the requirements specified in our By-laws. 58 | | | INGEVITY - 2021 Proxy Statement | | | | | | | | |
TABLE OF CONTENTS FORWARD LOOKING STATEMENTS This Proxy Statement contains “forward-looking statements” within the meaning of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements generally include the words “will,” “plans,” “intends,” “targets,” “expects,” “outlook,” or similar expressions. Forward-looking statements may include, without limitation, expected financial positions, results of operations and cash flows; financing plans; business strategies and expectations; operating plans; impact of COVID-19; capital and other expenditures; competitive positions; growth opportunities for existing products; benefits from new technology and cost-reduction initiatives, plans and objectives; markets for securities and expected future repurchases of shares, including statements about the manner, amount and timing of repurchases. Actual results could differ materially from the views expressed. Factors that could cause actual results to materially differ from those contained in the forward-looking statements, or that could cause other forward-looking statements to prove incorrect, include, without limitation, adverse effects from the COVID-19 pandemic; adverse effects of general economic and financial conditions; risks related to international sales and operations; impacts of currency exchange rates and currency devaluation; compliance with U.S. and foreign regulations concerning our operations outside the U.S.; changes in trade policy, including the imposition of tariffs; adverse conditions in the global automotive market or adoption of alternative and new technologies; competition from producers of alternative products and new technologies, and new or emerging competitors; competition from infringing intellectual property activity; worldwide air quality standards; a decrease in government infrastructure spending; the impact of adverse conditions in cyclical end markets on demand for engineered polymers products; declining volumes and downward pricing in the printing inks market; the limited supply of or lack of access to sufficient crude tall oil; a prolonged period of low energy prices; the impact of the United Kingdom’s withdrawal from the European Union; exposure to unknown or understated liabilities from the acquisition of the Perstorp Holding AB’s Capa® caprolactone business; the provision of services by third parties at several facilities; supply chain disruptions; natural disasters, such as hurricanes, winter or tropical storms, earthquakes, tornados, floods, fires; other unanticipated problems such as labor difficulties, equipment failure or unscheduled maintenance and repair; attracting and retaining key personnel; protection of intellectual property and proprietary information; information technology security breaches and other disruptions; complications with designing and implementing our new enterprise resource planning system; government policies and regulations, including, but not limited to, those affecting the environment, climate change, tax policies, tariffs and the chemicals industry; and lawsuits arising out of environmental damage or personal injuries associated with chemical or other manufacturing processes, and the other factors detailed from time to time in the reports we file with the SEC, including those described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and other periodic filings. These forward-looking statements speak only as of the date of this Proxy Statement. Ingevity assumes no obligation to provide any revisions to, or update, any projections and forward-looking statements contained in this Proxy Statement. For these reasons, readers are cautioned not to place undue reliance on any forward-looking statement. INGEVITY - 2021 Proxy Statement | | | 59 | | | | | | | | |
TABLE OF CONTENTS APPENDIX-A NON-GAAP FINANCIAL MEASURES In the CD&A, Ingevity has presented certain financial measures, defined below, which have not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) These financial measures are not meant to be considered in isolation or as a substitute for the most directly comparable financial measure calculated in accordance with GAAP. Cumulative Earnings (Loss) per Share (“Cumulative EPS”) “Cumulative EPS” is defined as continuing operations diluted EPS attributable to Ingevity stockholders plus restructuring and other (income) charges, net per share, acquisition and other-related costs per share, impairment charges, per share, pension and postretirement settlement and curtailment (income) charges, net per share, tax expense (benefit) recorded as a result of legislative tax rate changes and certain discrete tax items such as excess tax benefits on share-based compensation vesting per share, Performance Materials’ intellectual property litigation expense per share, and Certain non-cash (income) charges per share (which includes: cumulative effect of accounting changes per share, the effect of new accounting pronouncements per share, last-in, first-out (LIFO) adjustment (income) expense per share, (gain) loss on currency translation and hyperinflation (gain) loss per share, COVID-19-related customer provisions per share) and the income tax expense (benefit) per share on these items. The table below reconciles Cumulative to diluted earnings per share, the most directly comparable financial measure calculated in according with GAAP. Adjusted EBITDA “Adjusted EBITDA” is defined as Net income (loss) plus provision (benefit) for income taxes, interest expense, net, depreciation and amortization, separation costs, restructuring and other (income) charges, net, acquisition and other-related costs, and pension and postretirement settlement and curtailment (income) charges, net. In section entitled “2020 Business Highlights” discuss Adjusted EBITDA. For more information regarding the non-GAAP financial measure Adjusted EBITDA including a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Use of Non-GAAP Financial Measures” on page 40 of the 2020 Form 10-K. Company STIP-Adjusted EBITDA “Company STIP-Adjusted EBITDA” is defined as Adjusted EBITDA, plus or minus the impact of certain non-cash gains or charges. In the section entitled “Short-Term Incentive Plan (“STIP”) and 2020 Awards” in the CD&A we discuss Company STIP-Adjusted EBITDA for fiscal year 2020. Company STIP-Adjusted EBITDA was selected as a performance measure under the Short-Term Incentive Plan for 2020 because Adjusted EBITDA is the primary performance measurement of the Company’s earnings guidance and drives behavior consistent with the stockholders’ interests. Additionally, for compensation award purposes, eliminating the other certain non-cash gains or losses was appropriate because the impacts of both were primarily driven by external market conditions and not by decisions management could directly influence. The table below reconciles Company STIP-Adjusted EBITDA to net income (loss), the most comparable financial measure calculated in accordance with GAAP. Business Unit STIP-Adjusted EBITDA (“BU STIP-Adjusted EBITDA”) “BU STIP-Adjusted EBITDA” is defined as Segment EBITDA, plus or minus the impact of Separation-related Reimbursement Awards and certain non-cash gains or charges. In the section entitled “Short-Term Incentive Plan (“STIP”) and 2020 Awards” in the CD&A we discuss each segment's BU STIP-Adjusted EBITDA for fiscal year 2020. These metrics were selected as a performance measure under the Short-Term Incentive Plan for 2020 because Segment EBITDA is the primary performance measurements of the Company’s segment earnings and drives behavior consistent with the stockholders’ interests. INGEVITY - 2021 Proxy Statement | | | A-1 | | | | | | | | | | | |
TABLE OF CONTENTS Additionally, for segment compensation award purposes, eliminating the fair market gain or loss from other certain non-cash gains or losses was appropriate because the impacts of both were primarily driven by external market conditions and not by decisions management could directly influence. The table below reconciles Performance Chemicals' BU STIP-Adjusted EBITDA and Performance Materials' BU STIP-Adjusted EBITDA to each segment's EBITDA, respectively, the most comparable financial measure calculated in accordance with. Free Cash Flow “Free Cash Flow” is defined as operating cash flow less capital expenditures. In the section entitled “2020 Business Highlights” in the CD&A we discuss Free Cash Flow for fiscal year 2020. Management believes that free cash flow is an important liquidity measure for the Company and that it is useful to investors and management as a measure of the ability of our business to generate cash. The table below reconciles the Company’s Free Cash Flow for to net cash provided by operating activities, the most comparable financial measure calculated in accordance with GAAP. Average Return on Invested Capital (“Average ROIC”) “Average ROIC” is defined as net operating profit after tax (NOPAT) divided by the average Invested Capital for the period. NOPAT is defined as net income (loss) from continuing operations plus interest expense (income), net, restructuring and other (income) charges, acquisition and other-related costs, pension settlement and curtailment (gain) loss, Performance Materials’ intellectual property litigation expense and the income tax expense (benefit) on these items, including the tax expense (benefit) recorded as a result of legislative tax rate changes and certain discrete tax items such as excess tax benefits on share-based compensation vestings. Invested Capital is defined as total debt including financing lease obligations (including the amounts recorded as the result of adoption of new accounting standards), less the financing lease restricted investment and restricted cash plus total Ingevity stockholders’ equity, adjusted for the impact of the Performance Materials’ intellectual property litigation expense adjustment. Average Invested Capital will be defined as a two (2) point average: (beginning calendar year Invested Capital plus end of calendar year Invested Capital) divided by two. The table below calculates the Company’s Average ROIC for 2020. The tables below also reconcile NOPAT (Average ROIC numerator) to Net Income Attributable to Ingevity Stockholders, the most comparable measure calculated in accordance with GAAP, and calculates Average Invested Capital (Average ROIC denominator) using the balance sheet. See the Company’s 2020 Form 10-K for more information our consolidated balance sheet. Reconciliation of Diluted EPS (GAAP) to Cumulative EPS (Non-GAAP) | Diluted earnings (loss) per common share (GAAP) | | | $4.37 | | | $4.35 | | | $3.97 | | | Restructuring and other (income) charges | | | 0.45 | | | 0.04 | | | (0.01) | | | Acquisition and other-related costs | | | 0.04 | | | 0.84 | | | 0.28 | | | Pension and postretirement settlement and curtailment charges (income) | | | — | | | — | | | 0.01 | | | Tax effect on items above | | | (0.10) | | | (0.16) | | | (0.07) | | | Tax benefit from legislative tax rate changes, including certain discrete tax items(1) | | | 0.12 | | | (0.14) | | | (0.07) | | | Diluted adjusted earnings (loss) per share (Non-GAAP) | | | $4.88 | | | $4.93 | | | $4.11 | | | Adjustments: | | | | | | | | | | | | Performance Materials’ intellectual property litigation expense | | | 0.24 | | | 0.36 | | | 0.12 | | | Certain non-cash (income) charges(2) | | | 0.03 | | | 0.06 | | | — | | | Tax effect on items above | | | (0.07) | | | (0.09) | | | (0.03) | | | Diluted adjusted earnings (loss) per share, net of adjustments | | | $5.08 | | | $5.26 | | | $4.20 | | | Cumulative EPS (Non-GAAP)(3) | | | $14.54 | | | | | | | |
(1)
| Represents certain discrete tax items such as excess tax benefits on stock compensation and its stockholders to amendimpacts of changes associated with U.S. Tax Reform. Management believes excluding these discrete tax items assists investors, potential investors, securities analysts, and others in understanding the Certificate to removetax provision and the supermajority vote requirement as described in this Proposal 4.
Removal of Obsolete Provisions
The proposed amendment to our Certificate also removes two obsolete provisions in Article VII of our Certificate that are no longer applicable or relevant. First, the proposed amendment removes from Article VII transition provisionseffective tax rate related to the de-staggering of the Company's Board of directors that will be fully implemented and therefore obsolete as of the 2019 Annual Meeting, since at such time all of our directors will be elected to serve one-year terms. Second, the proposed amendment removes a provision prohibiting the removal of a director without cause, continuing operating results thereby providing useful supplemental information about operational performance. |
| A-2 | | | INGEVITY - 20192021 Proxy Statement - 49
which ceases to be applicable under the DGCL when a board of directors is not classified or a corporation does not have cumulative voting.
New Article Heading
The proposed amendment also adds a new heading “Article IX” in order to separate current Article VIII into two separate articles, with Article VIII governing personal liability of directors and Article IX concerning amendments to the Certificate.
Required Vote
Our Certificate requires that the affirmative vote of the holders of at least 75 percent of the voting power of all outstanding shares entitled to vote generally in the election of directors to approve this amendment
| | | | | | | to our Certificate. The general descriptions of the Proposed Amendment set forth above are qualified in their entirety by reference to the text of the Proposed Amendment, which is attached as Appendix A to these proxy materials. Additions to the Certificate are indicated by underlining, and deletions are indicated by strike-outs. If it is approved by the stockholders, this amendment would become effective after the Company files a certificate of amendment with the Secretary of State of Delaware, which would occur promptly after the Annual Meeting.
| | |
Recommendation of the Board
The Board recommends that the stockholders vote “FOR” the adoption of this resolution and approve the amendment to our Certificate of Incorporation.
QUESTIONS AND ANSWERS REGARDING STOCKHOLDER COMMUNICATIONS, STOCKHOLDER PROPOSALS AND COMPANY DOCUMENTS
|
| | How can I obtain copies of Ingevity’s Annual Report and Form 10-K? |
We will provide without charge, at the written request of any stockholder of record as of February 25, 2019, a copy of our Annual Report on Form 10-K, including the financial statements and financial statement schedule, as filed with the SEC, excluding exhibits. We will provide copies of the exhibits to eligible stockholders making such a request.
TABLE OF CONTENTS Requests for copies of our Annual Report on Form 10-K should be mailed to: Ingevity Corporation, 5255 Virginia Ave, N. Charleston, SC 29406, Attn: Katherine P. Burgeson, Secretary. You may also access a copy of our annual report via the Internet by visiting our website located at http://ir.ingevity.com under the Financial Information tab.
| | How do I submit a proposal for inclusion next year’s proxy statement? |
Under SEC rules, a proposal that a stockholder wishes to include in our proxy statement for the 2020 Annual Meeting must be received by our Corporate Secretary no later than the close of business on November 12, 2019. Proposals should be sent to: Ingevity Corporation, 5255 Virginia Ave, N. Charleston, SC 29406, Attn: Katherine P. Burgeson, Secretary. Stockholders wishing to submit a proposal should
refer to Rule 14a-8 of the Exchange Act, which sets standards for eligibility and specifies the types of proposals that are not appropriate for inclusion in our proxy statement.
INGEVITY - 2019 Proxy Statement - 50
| | How do I nominate a director for election at next year’s annual meeting of stockholders? |
Under our By-Laws, any stockholder entitled to vote in the election of directors at an annual meeting of our stockholders may nominate persons for election as directors by providing written notice of their intent to do so to our Corporate Secretary no less than 90 days and not more than 120 days prior to the first anniversary of the preceding year’s annual meeting.
This means that written notice of any nominations intended to be made at the 2020 Annual Meeting must be delivered between December 27, 2019 and January 26, 2020. Any such notice must contain the information and conform to the requirements specified in our By-Laws.
| | How do I bring other business before next year’s annual meeting of stockholders? |
Under our By-Laws, any stockholder of record wishing to present a matter (other than the nomination of a director or matters that have been submitted for inclusion in our proxy statement for such meeting) in person at the 2020 Annual Meeting must provide written notice to our Corporate Secretary no less than 90 days and not more than 120 days prior to the first
anniversary of the preceding year’s annual meeting. This means that any notice regarding matters to be presented at the 2020 Annual Meeting must be delivered between December 27, 2019 and January 26, 2020. The notice must contain the information and conform to the requirements specified in our By-Laws.
INGEVITY - 2019 Proxy Statement - 51
APPENDIX A - AMENDMENT TO CERTIFICATE OF INCORPORATION
If stockholders approve Proposal 4 to amend the Company’s Certificate of Incorporation, the text in blue and indicated by underline will be added, text in red and indicated by strike-through will be deleted and text in [green] and will be moved.
In order to eliminate the supermajority vote requirement, Article V shall read as follows:
In furtherance of, and not in limitation of, the powers conferred by law, the Board of Directors is expressly authorized and empowered to adopt, amend or repeal the By-Laws of the Corporation; provided, however, that the By-Laws adopted by the Board of Directors under the powers hereby conferred may be amended or repealed by the Board of Directors or by the stockholders having voting power with respect thereto, provided, further, that, notwithstanding anything to the contrary in this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any series of Preferred Stock required by law, this Certificate of Incorporation or any Preferred Stock Designation, Section 1.3, Section 2.1, the last sentence of Section 2.2, Section 2.11, Section 2.12 or the last sentence of Section 7.7 of the By-Laws of the Corporation may be modified, amended or repealed, and any By-Law provision inconsistent with such provisions may be adopted, by the stockholders of the Corporation only by the affirmative vote of the holders of at least 75 percent (75%) of the voting power of the then outstanding Voting Stock (as defined in the next sentence), voting together as a single class.
For the purposes of this Certificate of Incorporation, “Voting Stock” shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors.
To remove a provision regarding the elimination of the separate classes for directors that is no longer applicable, the second paragraph of Article VII shall read as follows:
Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, the directors shall be divided, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as is reasonably possible, with the
term of office of the first class to expire at the 2017 annual meeting of stockholders, the term of office of the second class to expire at the 2018 annual meeting of stockholders and the term of office of the third class to expire at the 2019 annual meeting of stockholders, with each director to hold office until his or her successor shall have been duly elected and qualified. At each annual meeting of stockholders, commencing with the 2017 annual meeting, (a) directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the 2019 annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified and (b) beginning at the 2019 annual meeting, directors elected to succeed those directors whose terms then expiredirectors shall be elected for a term of office to expire at the next annual meeting of stockholders after their election, with each director to hold office until his or her successor shall have been duly elected and qualified.
In order to eliminate a provision that is no longer necessary since all directors will be in the same class as of the 2019 Annual Meeting, and to remove the use of a defined term, the last sentence of Article VII shall read as follows:
Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, any director, or the entire Board of Directors, may be removed from office at any time by the affirmative vote of the holders of a majority of the voting power of the then outstanding Voting Stockshares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, provided, that for as long as the Board of Directors is separated into separate classes, directors may only be removed for cause.
In order to make a change related to the elimination the supermajority vote requirement, Article VIII is separated into Articles VIII and IX and shall read as follows:
ARTICLE VIII
A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a
INGEVITY - 2019 Proxy Statement - 52
director, except to the extent such exemption from liability or limitation thereof is not permitted under the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended. Any amendment or repeal of this Article VIII shall not adversely affect any right or protection of a director of the Corporation existing hereunder in respect of any act or omission occurring prior to such amendment or repeal.
ARTICLE IX
Except as may be expressly provided in this Certificate of Incorporation, the Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation or a Preferred Stock Designation, and any other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed herein or by applicable law, and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any
other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article IX; provided, however, that any amendment or repeal of Article VIII of this Certificate of Incorporation shall not adversely affect any right or protection existing hereunder in respect of any act or omission occurring prior to such amendment or repeal; provided, further, that no Preferred Stock Designation shall be amended after the issuance of any shares of the series of Preferred Stock created thereby, except in accordance with the terms of such Preferred Stock Designation and the requirements of applicable law, and provided, further, that any proposed alteration, amendment or repeal of, or the adoption of any provision inconsistent with, Article V and Article VIII of this Certificate of Incorporation (in each case, as in effect on the date hereof) may only be made by the affirmative vote of shares representing not less than seventy-five percent (75%) of the voting power of all of the Voting Stock, voting together as a single class.
APPENDIX-B NON-GAAP FINANCIAL MEASURES
In the CD&A, Ingevity has presented certain financial measures, defined below, which have not been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) These financial measures are not
meant to be considered in isolation or as a substitute for the most directly comparable financial measure calculated in accordance with GAAP.
| | Cumulative Earnings (Loss) per Share ("Cumulative EPS") |
"Cumulative EPS" is defined as continuing operations diluted EPS attributable to Ingevity stockholders plus restructuring and other (income) charges, net per share, separation costs per share, acquisition and other related costs per share, impairment charges, per share, pension settlement and curtailment (gain)loss per share, cumulative effect of accounting changes per share, the effect of new accounting pronouncements per share, last-in, first-out (LIFO) adjustment (income) expense per share, (gain) loss on currency translation and hyperinflation (gain) loss, per share and the income tax expense (benefit) per share on these items, including
the tax expense (benefit) recorded as the result of 2017 U.S. Tax Reform (and related guidance adopted in 2018-2020).
The table below reconciles Cumulative EPS for 2018, 2017, and 2016 to diluted earnings per share, the most directly comparable financial measure calculated in according with GAAP set forth in the Company's 2018 Form 10-K.
“Adjusted EBITDA” is defined as Net income (loss) plus interest expense, net, provision (benefit) for income taxes, separation costs, restructuring and other (income) charges, net, acquisition and other related costs, depreciation and amortization.
In section entitled “2018 Performance Highlights” and in the description of D. Michael Wilson’s individual performance achievements in the CD&A we discuss
Adjusted EBITDA. For more information regarding the non-GAAP financial measure Adjusted EBITDA for both fiscal years 2018 and 2017, including a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Use of Non-GAAP Financial Measures” on page 48 of the 2018 Form 10-K.
INGEVITY - 2019 Proxy Statement - 53
| | Segment EBITDA and Segment EBITDA Margin |
“Segment EBITDA” is defined as segment profit plus depreciation and amortization.
In the description of Michael P. Smith’s and S. Edward Woodcock’s individual performance achievements in the CD&A we discuss Segment EBITDA. For more information regarding the non-GAAP financial measure Segment EBITDA for both fiscal years 2018 and 2017, including a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP, please see “Management’s Discussion and Analysis of Financial Condition and Results of
Operations — Use of Non-GAAP Financial Measures” on page 48 of the 2018 Form 10-K.
The table below reconciles Segment EBITDA and Segment EBITDA margin for 2018 and 2017 to segment operating profit and segment operating profit margin, respectively, the most comparable financial measures calculated in accordance with GAAP set forth in the Company’s 2018 Form 10-K.
| | Company STIP-Adjusted EBITDA |
“Company STIP-Adjusted EBITDA” is defined as Adjusted EBITDA, plus or minus the impact of Separation-related Reimbursement Awards and certain non-cash gains or charges.
In the section entitled “2018 Short-Term Incentive Plan (“STIP”)” in the CD&A we discuss Company STIP-Adjusted EBITDA for fiscal year 2018. Company STIP-Adjusted EBITDA was selected as a performance measure under the Short Term Incentive Plan for 2018 because Adjusted EBITDA is the primary performance measurement of the Company’s earnings guidance and drives behavior consistent with the stockholders’ interests.
Additionally, for compensation award purposes, eliminating the fair market gain or loss from the Separation-related Reimbursement Awards and other certain non-cash gains or losses was appropriate because the impacts of both were primarily driven by external market conditions and not by decisions management could directly influence.
The table below reconciles Company STIP-Adjusted EBITDA for 2018 to net income for 2018, the most comparable financial measure calculated in accordance with GAAP set forth in the Company’s 2018 Form 10-K.
| | Business Unit STIP-Adjusted EBITDA ("BU STIP-Adjusted EBITDA") |
“BU STIP-Adjusted EBITDA" is defined as Segment EBIDTA, plus or minus the impact of Separation-related Reimbursement Awards and certain non-cash gains or charges.
In the section entitled “2018 Short-Term Incentive Plan (“STIP”)” in the CD&A we discuss each segment's BU STIP-Adjusted EBITDA for fiscal year 2018. These metrics were selected as a performance measure under the Short Term Incentive Plan for 2018 because Segment EBITDA is the primary performance measurements of the Company’s segment earnings and drives behavior consistent with the stockholders’ interests.
Additionally, for segment compensation award purposes, eliminating the fair market gain or loss from the Separation-related Reimbursement Awards and other certain non-cash gains or losses was appropriate because the impacts of both were primarily driven by external market conditions and not by decisions management could directly influence.
The table below reconciles Performance Chemicals' BU STIP-Adjusted EBITDA and Performance Materials' BU STIP-Adjusted EBITDA for 2018 to each segment's operating profit for 2018, respectively, the most comparable financial measure calculated in accordance with GAAP set forth in the Company’s 2018 Form 10-K.
“Free Cash Flow” is defined as operating cash flow less capital expenditures.
In the section entitled “2018 Performance Highlights” in the CD&A we discuss Free Cash Flow for fiscal year 2018. Management believes that free cash flow is an important liquidity measure for the Company and that it is useful to investors and management as a measure of the ability
of our business to generate cash. The table below reconciles the Company’s Free Cash Flow for 2018 to net cash provided by operating activities for 2018, the most comparable financial measure calculated in accordance with GAAP set forth in the Company’s 2018 Form 10-K.
INGEVITY - 2019 Proxy Statement - 54
| | Average Return on Invested Capital ("Average ROIC") |
“Average ROIC” is defined as net operating profit after tax (NOPAT) divided by the average Invested Capital for the period.
NOPAT is defined as net income (loss) from continuing operations plus interest expense (income), net, restructuring and other (income) charges, separation cost, acquisition and other related costs, pension settlement and curtailment (gain) loss, and the income tax expense (benefit) on these items, including the tax expense (benefit) recorded as the result of 2017 U.S. Tax Reform (and related guidance adopted in 2018-2020).
Invested Capital is defined as total debt including financing lease obligations (including the amounts recorded as the result of adoption of new accounting standards), less the financing lease restricted
investment plus total Ingevity stockholders’ equity. Average Invested Capital will be defined as a two (2) point average: (beginning calendar year Invested Capital plus end of calendar year Invested Capital) divided by two.
The table below calculates the Company’s Average ROIC for 2018. The tables below also reconcile NOPAT (Average ROIC numerator) to Net Income Attributable to Ingevity Stockholders, the most comparable measure calculated in accordance with GAAP, and calculates Average Invested Capital (Average ROIC denominator) using the balance sheet. See the Company’s 2018 Form 10-K for more information our consolidated balance sheet.
Reconciliation of Diluted EPS (GAAP) to Cumulative EPS (Non-GAAP)
| | | | | | | | Shares In millions, unaudited | Year Ending 2018 | Year Ending 2017 | Year Ending 2016 | Diluted earnings (loss) per common share (GAAP) | 3.97 |
| 2.97 |
| 0.83 |
| Restructuring and other (income) charges | (0.01 | ) | 0.09 |
| 0.98 |
| Separation costs | — |
| 0.02 |
| 0.41 |
| Acquisition and other related costs | 0.28 |
| 0.17 |
| — |
| Pension and postretirement settlement and curtailment charges (income) | 0.01 |
| — |
| — |
| Tax effect on items above | (0.07 | ) | (0.09 | ) | (0.14 | ) | Tax benefit from U.S. Tax Reform | (0.05 | ) | (0.58 | ) | — |
| Diluted adjusted earnings (loss) per share (Non-GAAP) | 4.13 |
| 2.58 |
| 2.08 |
| | | | | Adjustments: | | | | Separation-related Reimbursement Awards, net of tax(1) | (0.01 | ) | — |
| 0.04 |
| Certain non-cash (income) charges, net of tax(2) | 0.01 |
| (0.04 | ) | (0.02 | ) | Diluted adjusted earnings (loss) per share, net of adjustments | 4.13 |
| 2.54 |
| 2.10 |
| Cumulative EPS (Non-GAAP)(3) | 8.77 |
| | |
| | (1) | For more information regarding the amount please see “Note 6: Fair Value Measurements” to the “Notes to the Consolidated and Combined Financial Statements” included within the “Item 8. Financial Statements” in our 2018 Form 10-K. |
| | (2)
| Represents certain non-cash costs primarily including non-cash income resulting from inventory adjustments recorded during the period in accordance with last-in, first-out (“LIFO”) inventory accounting, adoption impacts from ASC 606 - Revenue from Contracts with Customers and ASC 326 – Financial Instruments – Credit Losses, COVID-19-related customer provisions, and non-cash translation impacts associated with currency exchange rate fluctuations. |
(3)
| Sum of 2018, 2019, and 2020. |
Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP) to Company STIP-Adjusted EBITDA (Non-GAAP) | Net income (loss) (GAAP) | | | $181.4 | | | $183.7 | | | $181.8 | | | Provision (benefit) for income taxes | | | 53.7 | | | 44.2 | | | 40.0 | | | Interest expense | | | 47.1 | | | 54.6 | | | 33.2 | | | Interest income | | | (4.9) | | | (7.7) | | | (3.4) | | | Depreciation and amortization | | | 100.2 | | | 85.0 | | | 57.0 | | | Restructuring and other (income) charges, net | | | 18.5 | | | 1.8 | | | (0.5) | | | Acquisition and other-related costs | | | 1.8 | | | 35.3 | | | 12.2 | | | Pension and postretirement settlement and curtailment charges (income), net | | | 0.1 | | | — | | | 0.2 | | | Adjusted EBITDA (Non-GAAP) | | | $397.9 | | | $396.9 | | | $320.5 | | | Certain non-cash charges(1) | | | 1.0 | | | 2.8 | | | — | | | Company STIP-Adjusted EBITDA (Non-GAAP) | | | $398.9 | | | $399.7 | | | $320.5 | |
(1)
| Represents certain non-cash costs primarily including non-cash income resulting from inventory adjustments recorded during the period in accordance with last-in, first-out (“LIFO”) inventory accounting, adoption impacts from ASC 606 - Revenue from Contracts with Customers and ASC 326 – Financial Instruments – Credit Losses, COVID-19-related customer provisions, and non-cash translation impacts associated with currency exchange rate fluctuations. |
Reconciliation of Segment EBITDA (GAAP) to BU STIP-Adjusted EBITDA (Non-GAAP) | Segment EBITDA (GAAP) | | | $148.7 | | | $249.2 | | | Certain non-cash charges(1) | | | — | | | 2.4 | | | STIP-Adjusted EBITDA (Non-GAAP) | | | $148.7 | | | $251.6 | |
(1)
| Represents certain non-cash costs primarily including non-cash income resulting from inventory adjustments recorded during the period in accordance with last-in, first-out (“LIFO”) inventory accounting, adoption impacts from ASC 606 - Revenue from Contracts with Customers and ASC 326 – Financial Instruments – Credit Losses, COVID-19-related customer provisions, non-cash translation impacts associated with currency exchange rate fluctuations, and an impairment charge in our Performance Materials’ segment of an equity security. |
Reconciliation of Operating Cash Flow (GAAP) to Free Cash Flow (Non-GAAP) | Cash Flows from Operating Activities (GAAP) | | | $352.4 | | | $275.7 | | | Capital expenditures | | | (82.1) | | | (114.8) | | | Free Cash Flow (Non-GAAP) | | | $270.3 | | | $160.9 | |
| | (3) | Sum of 2016, 2017, and 2018. |
INGEVITY - 20192021 Proxy Statement - 55 | | | A-3
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TABLE OF CONTENTS Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP) to Company STIP-Adjusted EBITDA (Non-GAAP)
| | | | | | | | In millions, unaudited | Year Ending 2018 | Year Ending 2017 | Year Ending 2016 | Net income (loss) (GAAP) | 181.8 |
| 145.2 |
| 44.4 |
| Provision (benefit) for income taxes | 40.0 |
| 29.6 |
| 42.6 |
| Interest expense | 35.0 |
| 18.1 |
| 19.3 |
| Interest income | (5.2 | ) | (2.3 | ) | (1.4 | ) | Separation costs | 0.0 |
| 0.9 |
| 17.5 |
| Depreciation and amortization | 57.0 |
| 40.4 |
| 38.8 |
| Restructuring and other (income) charges, net | (0.5 | ) | 3.7 |
| 41.2 |
| Pension settlement and curtailment (income) charges | 0.2 |
| 0.0 |
| 0.0 |
| Acquisition and other related costs | 12.2 |
| 7.1 |
| — |
| Adjusted EBITDA (Non-GAAP) | 320.5 |
| 242.7 |
| 202.4 |
| Separation-related Reimbursement Awards(1) | (0.3 | ) | 0.3 |
| 1.6 |
| Certain non-cash charges(2) | 0.3 |
| (3.3 | ) | (0.7 | ) | Company STIP-Adjusted EBITDA (Non-GAAP) | 320.5 |
| 239.7 |
| 203.3 |
|
| | (1) | For more information regarding the amount please see “Note 6: Fair Value Measurements” to the “Notes to the Consolidated and Combined Financial Statements” included within the “Item 8. Financial Statements” in our 2018 Form 10-K. |
| | (2) | Represents certain non-cash costs primarily including non-cash income resulting from inventory adjustments recorded during the period in accordance with last-in, first-out (“LIFO”) inventory accounting, adoption impacts from ASC 606 - Revenue from Contracts with Customers, and non-cash translation impacts associated with currency exchange rate fluctuations. |
Segment EBITDA
| | | | | | | | In millions, except percentages unaudited | Year Ending 2018 | Year Ending 2017 | Year Ending 2016 | Performance Materials | | | | Segment operating profit (GAAP) | 147.2 |
| 122.0 |
| 106.9 |
| Depreciation and amortization | 22.2 |
| 19.8 |
| 16.4 |
| Segment EBITDA (Non-GAAP) | 169.4 |
| 141.8 |
| 123.3 |
| Net Sales | 400.4 |
| 349.3 |
| 301.0 |
| Segment operating margin | 36.8 | % | 34.9 | % | 35.5 | % | Segment EBITDA margin | 42.3 | % | 40.6 | % | 41.0 | % |
| | | | | | | | In millions, except percentages unaudited | Year Ending 2018 | Year Ending 2017 | Year Ending 2016 | Performance Chemicals | | | | Segment operating profit (GAAP) | 116.3 |
| 80.3 |
| 56.7 |
| Depreciation and amortization | 34.8 |
| 20.6 |
| 22.4 |
| Segment EBITDA (Non-GAAP) | 151.1 |
| 100.9 |
| 79.1 |
| Net Sales | 733.2 |
| 623.1 |
| 607.3 |
| Segment operating margin | 15.9 | % | 12.9 | % | 9.3 | % | Segment EBITDA margin | 20.6 | % | 16.2 | % | 13.0 | % |
INGEVITY - 2019 Proxy Statement - 56
Reconciliation of Segment Operating Profit (GAAP) to BU STIP-Adjusted EBITDA (Non-GAAP)
| | | | | | | Year Ending 2018(1) | In millions, unaudited | Performance Chemicals | Performance Materials | Segment operating profit (GAAP) | 116.3 |
| 147.2 |
| Depreciation and amortization | 34.8 |
| 22.2 |
| Separation-related Reimbursement Awards(2) | (0.3 | ) | 0.0 |
| Certain non-cash charges(3) | 0.4 |
| 1.4 |
| STIP-Adjusted EBITDA (Non-GAAP) | 151.2 |
| 170.8 |
|
| | (1) | BU STIP-Adjusted EBITDA is a new metric for 2018. |
| | (2) | For more information regarding the amount please see “Note 6: Fair Value Measurements” to the “Notes to the Consolidated and Combined Financial Statements” included within the “Item 8. Financial Statements” in our 2018 Form 10-K. |
| | (3) | Represents certain non-cash costs primarily including non-cash income resulting from inventory adjustments recorded during the period in accordance with last-in, first-out (“LIFO”) inventory accounting, adoption impacts from ASC 606 - Revenue from Contracts with Customers, non-cash translation impacts associated with currency exchange rate fluctuations, and an impairment charge in our Performance Materials' segment of an equity security. |
Reconciliation of Operating Cash Flow (GAAP) to Free Cash Flow (Non-GAAP)
| | | | | | In millions, unaudited | Year Ending 2018 | Year Ending 2017 | Cash Flows from Operating Activities (GAAP) | 252.0 |
| 174.3 |
| Capital expenditures | (93.9 | ) | (52.6 | ) | Free Cash Flow (Non-GAAP) | 158.1 |
| 121.7 |
|
Reconciliation of Net Income (Loss) Attributable to Ingevity Stockholders (GAAP) to NOPAT (Non-GAAP)
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