| Named Executive Officer Compensation This section provides an overview of our compensation program for our Chief Executive Officer and our other executive officers named below (our “named executive officers”). The compensation program for our named executive officers generally is consistent with the compensation program with other executive officers, and our Compensation Committee generally designs and administers the compensation program for our named executive officers and the other executive officers as a group. | Name | | | Title in 2023 Proxy Statement 51 | | | Scott M. Rajeski | | | President and Chief Executive Officer | | | J. Mark Borseth | | | Former Interim Chief Financial Officer and Former Strategic Advisor | | | Joshua D. Cowley | | | Chief Commercial Officer | | | Patrick M. Sheller | | | General Counsel and Secretary | |
Messrs. Borseth, Cowley and Sheller were not named executive officers in 2022. Mr. Borseth previously served as our Chief Financial Officer from February 2020 to July 2022 and our Strategic Advisor from July 2022 until December 2022. In January 2023, our then Chief Financial Officer resigned, effective March 17, 2023, and we re-hired Mr. Borseth in February 2023 to serve in an interim capacity until the Company appointed a new Chief Financial Officer. Mr. Borseth served as a Strategic Advisor and Interim Chief Financial Officer in 2023 under an employment agreement. His employment agreement was further amended in 2023 as the search process continued to ensure continuity of finance leadership and due to his significant knowledge of the Company’s business. He continued as Interim Chief Financial Officer until Oliver Gloe started his employment as Chief Financial Officer on November 13, 2023. See “—2023 Compensation Determinations—J. Mark Borseth—2023 Target and Earned Compensation” below for a description of his compensation in 2023. This section regarding named executive officer compensation otherwise does not apply to Mr. Borseth. Executive Summary Compensation Philosophy The compensation program for our named executive officers is designed to attract, motivate and retain qualified employees and to provide them incentives to achieve or exceed the Company’s annual operational, financial and strategic goals and to increase long-term stockholder value. Our Compensation Committee considers Company and individual performance, as well as competitive peer group compensation data, as key factors when setting compensation levels to reward achievement and reinforce accountability.
| | | | 2024 Proxy Statement 43 | |
Named Executive Officer Compensation Tables Summary Compensation Table for 2022 and 2021
The following table sets forth the compensation paid to, awarded to or earned by our named executive officers for services rendered in all capacities in 2022 and 2021, and reflects their principal position with the Company in 2022.
| Name and Principal Position(1) | | | Fiscal Year | | | Salary ($) | | | Bonus ($)(2) | | | Option Awards ($)(3) | | | Stock Awards ($)(4) | | | Non-Equity Incentive Plan Compensation ($)(5) | | | All Other Compensation ($)(6) | | | Total ($) | | | Scott M. Rajeski Chief Executive Officer | | | | | 2022 | | | | | | 448,077 | | | | | | — | | | | | | 1,124,994 | | | | | | — | | | | | | 62,280 | | | | | | 27,343 | | | | | | 1,662,694 | | | | | | 2021 | | | | | | 400,000 | | | | | | | | | | | | 997,553 | | | | | | 68,242,399 | | | | | | 746,800 | | | | | | 92,709 | | | | | | 70,479,461 | | | | Sanjeev Bahl Chief Operating Officer | | | | | 2022 | | | | | | 323,077 | | | | | | — | | | | | | 524,998 | | | | | | 524,997 | | | | | | 29,904 | | | | | | 11,827 | | | | | | 1,414,803 | | | | Robert L. Masson II Chief Financial Officer | | | | | 2022 | | | | | | 193,846 | | | | | | 252,000 | | | | | | 377,999 | | | | | | 314,996 | | | | | | — | | | | | | 9,000 | | | | | | 1,147,841 | | |
(1)
Mr. Bahl and Mr. Masson were hired by the Company in 2022. Accordingly, their respective compensation information for 2021 is not included herein.
(2)
The amount reported in this column represents the guaranteed cash bonus earned for 2022, which was paid on March 10, 2023.
(3)
The amounts reported in this column represent the grant date fair value of stock options granted to each person in 2022. We use the Black-Scholes model for estimating the grant date fair value, which requires critical assumptions including risk-free rate, volatility, expected term and expected dividend yield. See Note 19, Stock-Based Compensation to our consolidated financial statements contained in our annual report on Form 10-K for 2022 for a discussion of these assumptions in determining grant date fair value in accordance with FASB ASC Topic 718. The amounts reported in this column do not correspond to the actual economic value that will be ultimately realized by such persons.
(4)
The amounts reported in this column represent the grant date fair value of RSUs granted to each person in 2022. The grant date fair value of the RSUs are calculated as of the closing price of our Common Stock as quoted on NASDAQ on the grant date multiplied by the number of shares subject to the award. The amounts reported in 2021 for Mr. Rajeski represent the accounting cost for modified vesting of equity he acquired in connection with the reorganization transactions for the IPO, and do not correspond to the actual economic value that he will ultimately receive.
(5)
Amounts set forth in this column represent cash bonuses earned under the MIB Plan for 2022, based on the achievement of pre-established financial performance criteria (adjusted EBITDA) and individual performance goals. Such amounts were paid on March 10, 2023.
(6)
Amounts reported under All Other Compensation in 2022 reflect the following: (a) Company 401(k) match for Mr. Rajeski ($9,150) and Mr. Bahl ($2,827); (b) company automobile reimbursement for each named executive officer; (c) cell phone allowance for Messrs. Bahl and Masson); and (d) attendance at sporting events for Mr. Rajeski.
| 2023 Compensation Elements As a new public company in 2021, our Compensation Committee continues to evolve our compensation philosophy, policies and practices for our named executive officers. The 2023 compensation program for named executive officers consisted principally of a base salary, an annual cash bonus opportunity, and equity awards. •
The annual bonus plan, called the Management Incentive Bonus or MIB Plan, was revised in 2023 to utilize a single performance metric, Company-based Adjusted EBITDA. In 2022, the target bonus was based on two components, Adjusted EBITDA (80% weighting) and individual objective goals (20% weighted). •
In 2023, the annual equity program was revised to consist of RSUs (70% weighted) and stock-settled SARs (30% weighted). In previous years, equity grants generally consisted of stock options, with RSUs utilized for new hire grants. The following table sets forth additional information regarding the principal elements of the 2023 compensation program for named executive officers. | | | 2023 Proxy Statement 52 | Element | | | | | | Purpose | | | Key Features | | | Performance / Vesting Period | |
| | Short-Term | | | Base Salary | | | Named Executive Officer Compensation Tables
Outstanding Equity Awards as of December 31, 2022
The following table provides information about the outstanding equity awards held by our named executive officers as of December 31, 2022.
| | | | | | | | | | Option Awards(1) | | | Stock Awards | | | Name | | | Grant Date | | | Number of Securities Underlying Unexercised Options Exercisable (#) | | | Number of Securities Underlying Unexercised Options Unexercisable (#)(2) | | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (#)(3) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | | | Scott M. Rajeski | | | | | 4/22/2021 | | | | | | 34,637 | | | | | | 103,912 | | | | | | 19.00 | | | | | | 4/22/2031 | | | | | | 1,079,218 | | | | | | 3,475,082 | | | | | | 3/3/2022 | | | | | | — | | | | | | 172,281 | | | | | | 15.69 | | | | | | 3/3/2032 | | | | | | — | | | | | | — | | | | Sanjeev Bahl | | | | | 2/1/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 30,864 | | | | | | 99,382 | | | | | | 3/3/2022 | | | | | | — | | | | | | 80,398 | | | | | | 15.69 | | | | | | 3/3/2032 | | | | | | — | | | | | | — | | | | Robert L. Masson II | | | | | 8/4/2022 | | | | | | — | | | | | | 151,807 | | | | | | 5.77 | | | | | | 8/4/2032 | | | | | | 54,592 | | | | | | 175,786 | | |
(1)•
These columns show the number, option exercise priceAnnual fixed cash compensation to attract, recruit and option expiration date of outstanding stock options held by our named executive officers as of December 31, 2022. The first column shows this information for exercisable stock options, and the second column shows this information for unexercisable stock options.retain qualified employees
| | | (2)•
The options vestBased on experience, responsibilities, market pay, anticipated performance growth, annual individual performance, internal pay equity and become exercisable 25% each year on the anniversary of the grant date, subject to continued employment.succession planning considerations
| | | (3)•
This column shows the number of unvested shares of time-based restricted stock (Rajeski) or RSUs (Bahl and Masson) heldImpacted by our named executive officers as of December 31, 2022. All vesting events are subject to continued employment. For Mr. Rajeski, the restricted stock is held by the Scott Rajeski Family, LLC. For Mr. Rajeski, 539,608 shares vested ratably in June 2022 and December 2022, and will vest ratably in June 2023 and December 2023. For Mr. Bahl, 10,288 shares will vest on each of January 2023, 2024, and 2025. For Mr. Masson, 18,197 shares would have vested on each of August 2023, 2024 and 2025.
(4)
This column shows the market value of the unvested shares of restricted stock or RSUs held by our named executive officers based on $3.22 per share, the closing price of our Common Stock on December 30, 2022, the last trading day of 2022.
| | | | 2023 Proxy Statement 53 | |
Named Executive Officer Compensation Tables
Potential Payments upon Termination of Employment or Change in Control
Treatment of Incentive Equity Awards
Upon a termination of a named executive officer’s employment for any reason, all of such officer’s unvested equity awards will be forfeited for no consideration, unless otherwise agreed to in a separation agreement.
Severance Benefits under Employment Agreements
Scott M. Rajeski. Upon a termination of employment by us without cause or a resignation by Mr. Rajeski for good reason (each as defined in his employment agreement), Mr. Rajeski will be entitled to (i) any earned but unpaid base salary through the last day of employment; (ii) any accrued but unused paid time off up to a maximum of 80 hours; (iii) continuation of health coverage through the U.S. Consolidated Omnibus Budget Reconciliation Act of 1985, as codified at Section 601 et seq. of the Employee Retirement Income Security Act of 1974 and at Section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”), (collectively, “COBRA”) at a pro-rata cost share and (iv) any other vested benefits to which Mr. Rajeski is entitled, in accordance with the terms of the applicable plans. In addition, subject to Mr. Rajeski’s execution of a separation agreement containing a general release of claims and such general release of claims becoming irrevocable, Mr. Rajeski will also be entitled to a pro rata share of any annual performance bonus to which Mr. Rajeski is entitled determined based on actual performance as of the end of the performance period and continued payment of his base salary for the lesser of (x) 12 months or (y) the remainder of the term under the employment agreement.
Upon any termination of employment, including a resignation without good reason, termination of employment due to his death or disability or termination for cause, Mr. Rajeski shall also be entitled to payment of base salary through the date of termination, accrued benefits and any other vested benefits to which Mr. Rajeski is entitled, in accordance with the terms of the applicable plans.
If any payments or benefits payable to Mr. Rajeski would be a “parachute payment” resulting in a lost tax deduction for the Company under Section 280G of the Code and excise tax to Mr. Rajeski under Section 4999 of the Code, the payments and benefits shall be reduced to the largest amount that will result in no portion of the severance payment being subject to the excise tax imposed by Section 4999 of the Code.
Sanjeev Bahl. Upon a termination of employment by us without cause or a resignation by Mr. Bahl for good reason (each as defined in his employment agreement), Mr. Bahl will be entitled to (i) any earned but unpaid base salary through the last day of employment; (ii) any accrued but unused paid time off up to a maximum of 80 hours; (iii) continuation of health coverage through COBRA at a pro-rata cost share through the end of the 12 month period following termination and (iv) any other vested benefits to which Mr. Bahl is entitled, in accordance with the terms of the applicable plans. In addition, subject to Mr. Bahl’s execution of a separation agreement containing a general release of claims and such general release of claims becoming irrevocable, Mr. Bahl will also be entitled to 12 months’ base salary paid over the 12-month period following termination.
Upon any termination of employment, including a resignation without good reason, termination of employment due to his death or disability or termination for cause, Mr. Bahl shall also be entitled to payment of base salary through the date of termination, accrued benefits and any other vested benefits to which Mr. Bahl is entitled, in accordance with the terms of the applicable plans.
If any payments or benefits payable to Mr. Bahl would be a “parachute payment” resulting in a lost tax deduction for the Company under Section 280G of the Code and excise tax to Mr. Bahl under Section 4999 of the Code, the payments and benefits shall be reduced to the largest amount that will result in no portion of the severance payment being subject to the excise tax imposed by Section 4999 of the Code.
| | | | 2023 Proxy Statement 54 | |
Named Executive Officer Compensation Tables
Robert L. Masson II. Upon a termination of employment by us without cause or a resignation by Mr. Masson for good reason (each as defined in his employment agreement), Mr. Masson will be entitled to (i) any earned but unpaid base salary through the last day of employment; (ii) any accrued but unused paid time off up to a maximum of 80 hours; (iii) continuation of health coverage through COBRA at a pro-rata cost share through the end of the 12 month period following termination and (iv) any other vested benefits to which Mr. Masson is entitled, in accordance with the terms of the applicable plans. In addition, subject to Mr. Masson’s execution of a separation agreement containing a general release of claims and such general release of claims becoming irrevocable, Mr. Masson will also be entitled to 12 months’ base salary paid over the 12-month period following termination.
Upon any termination of employment, including a resignation without good reason, termination of employment due to his death or disability or termination for cause, Mr. Masson shall also be entitled to payment of base salary through the date of termination, accrued benefits and any other vested benefits to which Mr. Masson is entitled, in accordance with the terms of the applicable plans.
If any payments or benefits payable to Mr. Masson would be a “parachute payment” resulting in a lost tax deduction for the Company under Section 280G of the Code and excise tax to Mr. Masson under Section 4999 of the Code, the payments and benefits shall be reduced to the largest amount that will result in no portion of the severance payment being subject to the excise tax imposed by Section 4999 of the Code.
| | | | 2023 Proxy Statement 55 | |
Proposal Three: Amendment to the 2021 Omnibus Equity Incentive Plan
Our Board is asking our stockholders to approve an amendment (the “Amendment”) to the Latham Group, Inc. 2021 Omnibus Equity Incentive Plan (the “2021 Omnibus Equity Plan”). On March 2, 2023, our Board, upon the recommendation of our Compensation Committee, approved the Amendment, subject to stockholder approval at our Annual Meeting. The 2021 Omnibus Equity Plan was initially adopted by our Board on April 12, 2021 and our stockholders on April 13, 2021. Our IPO was completed on April 27, 2021.
We use awards under the 2021 Omnibus Equity Plan to attract and retain employees, ensure that our compensation program provides appropriate incentives to motivate our key employees, officers and non-employee directors to contribute to our long-termprior performance and growth, develop a culture of ownership, and align further the interests of participants and our stockholders. Stockholder approval of the Amendment will permit us to continue to grant equity compensation awards to our key employees, officers and non-employee directors in furtherance of this philosophy.
Our Board has determined that it is in the best interests of us and our stockholders to approve the Amendment, which includes an increase in the share pool, as well as other best practice equity plan matters. The Amendment provides for the following terms.
| •
An increase by 8,000,000 shares of the number of shares of Common Stock that may be issued pursuant to awards.
•
A prohibition on recycling of shares withheld or remitted to pay taxes for all awards (to enhance the current prohibition, which solely addresses stock options and SARs).
•
A minimum vesting period of one year for all awards, with an exception for shares representing 5% of the share pool.
•
A prohibition on the transfer of stock options and SARs for value or to third-party financial institutions without stockholder approval.future performance potential
| |
The proposed Amendment is set forth on Appendix A to this proxy statement. The full text of the 2021 Omnibus Equity Plan (not reflecting the proposed Amendment) is set forth on Appendix B to this proxy statement. The material features of the 2021 Omnibus Equity Plan are summarized below, although stockholders should review the 2021 Omnibus Equity Plan and the Amendment for a full understanding of their contents. If our stockholders approve the Amendment, a Registration Statement on Form S-8 covering the additional shares available for issuance will be filed with the SEC.
Our officers and directors have an interest in this Proposal Three due to their participation in the 2021 Omnibus Equity Plan. In addition, on March 1, 2023, our Compensation Committee approved our annual equity award grants under the 2021 Omnibus Equity Plan to officers and other employees. A portion of the awards granted to our executive officers included SARs for an aggregate of 790,181 shares of our Common Stock, with an strike price of $3.24 per share (the “Contingent Grants”). The Contingent Grants are subject to stockholder approval of this Proposal Three and the effectiveness of the Amendment, as we do not have enough shares of Common Stock in the share pool to support such grant currently. If the Amendment is not approved, the Contingent Grants will be canceled in their entirety. See “—Interests of Directors and Executive Officers; New Benefits under the Plan Resulting From the Amendment—New Plan Benefits” below for additional information.
Excluding the Contingent Grants, we had 289,475 shares of our Common Stock remaining available for issuance for awards under the 2021 Omnibus Equity Plan as of March 6, 2023.
| | | Management Incentive Bonus | | | 2023 Proxy Statement 56 | |
Proposal Three: Amendment to the 2021 Omnibus Equity Incentive Plan
Reasons to Vote For the Amendment
| •
Critical Importance of Equity Awards to Our Long-Term Business Strategy, Including Employee Recruitment and Retention in a Competitive Market
•
Historical Usage and Effectiveness of Prior Equity Grants Strongly Impacted by Macroeconomic Conditions and Stock Price Volatility
•
We Did Not Utilize Customary Methods to Avoid or Limit Stockholder Approval of Share Pool Increases
•
Our Compensation Committee is Committed to Evolving our Annual Equity Program
•
A Reasonable Number of Shares Will Be Added to the 2021 Omnibus Equity Plan
•
The 2021 Omnibus Equity Plan, as Amended, Includes Significant Compensation and Governance Best Practices
| |
Critical Importance of Equity Awards to Our Long-Term Business Strategy, Including Employee Recruitment and Retention in a Competitive Market
Our Board believes that it is in the best interests of us and our stockholders for the Company to be in a position to offer equity awards to eligible participants described under “—Eligibility” below in accordance with the terms of the 2021 Omnibus Equity Plan. In furtherance of our compensation philosophy, equity awards are a core component of our compensation program for key employees and non-employee directors. As of March 6, 2023, approximately 114,678,263 shares of our Common Stock were subject to awards held by our existing or former executive officers, other key employees, and non-employee directors.
We strongly believe that the approval of the Amendment is essential to our long-term growth strategy, which will require continuing to enhance our employee talent and retention. We are the leader in the large and growing residential in-ground swimming pool industry, and we expect to grow our business organically and through strategic investments and acquisitions. Equity awards motivate high levels of performance, align the interests of our employees and stockholders by giving them the perspective of an owner with an equity stake in the Company, and provide an effective means of recognizing their contributions to the success of the Company. If our stockholders do not approve this Proposal Three, the Contingent Grants will be terminated and we will be unable to maintain our existing equity compensation programs under the 2021 Omnibus Equity Plan. Therefore, we would expect to have to utilize a significant portion of additional cash compensation to provide appropriate attraction, retention and motivation incentives, which would reduce our available cash for other business needs such as capital expenditures, acquisitions, investments, and marketing and adversely impact our growth strategy.
We believe that equity awards are central to our employment value proposition and are necessary for us to continue competing for top talent as we grow. Our ability to grant further equity awards will permit us to remain competitive with our public company peer companies with whom we compete for talent in this post-pandemic, Great Resignation era. The Amendment will give us flexibility as to the compensation packages we offer, which we believe is critical in this challenging labor market. If the Amendment is not approved, we will be significantly limited in our ability to offer equity awards as a component of compensation. Therefore, we will be at a disadvantage relative to other companies that will be able to offer more attractive and broad-based compensation packages to their executive officers, other key employees and non-employee directors. Our inability to attract, retain and motivate our key employees would adversely impact our ability to achieve our long-term growth initiatives.
| | | | 2023 Proxy Statement 57 | |
Proposal Three: Amendment to the 2021 Omnibus Equity Incentive Plan
Historical Usage and Effectiveness of Prior Equity Grants Strongly Impacted by Macroeconomic Conditions and Stock Price Volatility
When our Board and our stockholders approved the initial share pool under the 2021 Omnibus Equity Plan, we expected the share pool to be sufficient to cover anticipated equity awards for the next three to four years, subject to material changes in business conditions or our compensation programs, our ability to hire and retain key employees, and retention considerations for existing equity awards. However, our prior expectation for the share pool was adversely impacted by employee hiring and turnover, challenging operational, industry and macroeconomic conditions, and our stock price volatility and price declines.
Our 2021 and 2022 annual equity program consisted solely of time-based stock options, vesting annually on a pro rata basis over four years. In particular, our annual stock option grants in April 2021 and March 2022 were issued with an exercise price of $19.00 and $15.69, respectively. Our stock price as of the record date was $3.36. Therefore, the 2021 and 2022 annual equity awards are significantly underwater and have minimal retentive value. Further, in order to provide meaningful grants in the future in light of our current stock price, we will need to utilize significantly more shares of Common Stock than we had anticipated as of the IPO.
We Did Not Utilize Customary Methods to Avoid or Limit Stockholder Approval of Share Pool Increases
In recent years, it has been customary practice for many controlled companies and newly public companies to utilize equity plans with an evergreen provision, which provides for an automatic annual increase in the share pool without stockholder approval. However, we did not elect to include an evergreen provision in the 2021 Omnibus Equity Plan. Therefore, we are seeking approval of the increase in the share pool in this Proposal Three, and we will seek stockholder approval in the future to the extent our Board determines it is in the best interests of the Company and our stockholders to seek additional increases in the share pool.
We also have utilized a significant portion of our share pool in connection with the hiring of key executives and other key employees since our IPO. Our Compensation Committee has approved significant grants of time-based RSUs, vesting annually on a pro rata basis over three years, to key employees upon hiring. New hire awards are a significant retention and motivation tool, as well as to attract persons who may be losing significant equity or other compensation in leaving their current jobs. NASDAQ rules permit companies to utilize a new hire inducement exception that allow new hire grants not to be counted against the share pool. However, we have not historically utilized the new hire inducement exception.
Our Compensation Committee is Committed to Evolving our Annual Equity Program
Our Compensation Committee, with advice from its independent compensation consultant, Pearl Meyer, regularly reviews our historical share usage and availability and considers such information in setting equity compensation levels. Our Compensation Committee administers and oversees our equity compensation practices to ensure they are reasonable, recognizing that equity awards dilute stockholder equity and must be used appropriately.
Our Compensation Committee has begun to evolve our compensation program for named executive officers to address the foregoing challenges and further enhance alignment with stockholders. Our Compensation Committee believes a new mix of equity will provide a better tool to attract and retain executives given the volatility of our shares of Common Stock and the challenging industry trends we expect in the near term.
•
In March 2023, our Compensation Committee approved our annual equity program, which consists of 70% RSUs and 30% SARs. As noted, the SARs are contingentAnnual cash incentive based on stockholder approval of this Proposal Three.rigorous, objective financial criteria
•
For the 2024 annual equity program, our Compensation Committee has committed to include performance-based equity awards for our named executive officers.Alignment with short-term operating performance and strategy
| | | | 2023 Proxy Statement 58 | |
Proposal Three: Amendment to the 2021 Omnibus Equity Incentive Plan
•
Further, to support the utilizationTarget bonus is 60%-100% of equity awards and to enhance the alignment with stockholders, our Compensation Committee has committed to adopt reasonable stock ownership guidelines for our named executive officers (and non-employee directors) in 2023.
A Reasonable Number of Shares Will Be Added to the 2021 Omnibus Equity Plan
If our stockholders approve the Amendment, 8,000,000 shares of our Common Stock will be added to the share pool of the 2021 Omnibus Equity Plan.
•
Overhang. As of March 6, 2023, outstanding equity awards under the 2021 Omnibus Equity Plan covered 6,878,901 shares, which represented approximately 6% of our outstanding shares of Common Stock as of such date. The additional 8,000,000 shares of our Common Stock represented approximately 7% of our outstanding shares of Common Stock as of such date.base salary
•
Historical and Future Grant Practices. See above for a description of our historical and planned future equity grant practices.Adjusted EBTIDA is sole performance metric
•
Expected UseReasonable cap for Three Years.earned bonus of 0-200% of target bonus based on actual performance
| | | • We anticipate the additional shares requested will be enough to meet our expected needs for at least the next three years, subject to material changes in business conditions or our compensation programs, our ability to hire
Annual performance | | | Long-Term Annual long-term incentive with grant value ranging from 150%-250% of base salary | | | SARs (30% of annual grant value) | | | •
Fosters ownership culture, motivating long-term performance and retain key employees, and retention considerations for existing equity awards. Since our 2021 Omnibus Equity Plan does not include an evergreen provision, we will be required to seek stockholder approval for future increases in our share pool.aligning long-term interests with stockholders •
Significant upside, balanced against no value unless stock price is above strike price | | | Analysis of Forecasted Grants by Our Independent Compensation Consultant.• To determine
Upon vesting and exercise, receive Common Stock having a value equal to the impact of the proposed increase of the share pool, our Compensation Committee reviewed a forecast provided by its independent compensation consultant, Pearl Meyer, working together with our management. In particular, Pearl Meyer considered:spread between closing stock price and strike price •
The target numberGrant value divided by grant date fair value (Black-Scholes model) to calculate SARs granted on grant date
| | | •
Four-year annual pro rata vesting | | | RSUs (70% of shares needed to make annual equity awards over the next three years based on our current stock price and future potential stock pricesgrant value) | | | •
Fosters ownership culture, aligning long-term interests with stockholders •
Total projected overhangMore limited upside value, and dilution from our equity plan compared to our peer groupmore protection on downside value
| | | •
Upon vesting, receive one share of Common Stock for each RSU •
Equity plan provisions aligned with our peer group and broad market “best practices”Grant value divided by grant date fair value (closing price on grant date) to calculate RSUs granted on grant date
Accordingly, our Board believes that the request to increase the share pool by 8,000,000 shares of our Common Stock is reasonable and prudent. This number of shares should allow us to continue our planned granting practices in the future and to be able to support our planned growth, address market competition and react to stock price fluctuations.
The 2021 Omnibus Equity Plan, as Amended, Includes Significant Compensation and Governance Best Practices
The 2021 Omnibus Equity Plan, as amended, includes provisions considered best practices for compensation and corporate governance purposes. The following provisions align with our stockholders’ interests:
| | | •
Four-year annual pro rata vesting, except three-year annual pro rata vesting for new hire grants | |
| | | | 2024 Proxy Statement 44 | |
Named Executive Officer Compensation
In addition, our named executive officers are each party to an offer letter with our subsidiary Latham Pool Products and participate in the Severance Plan. See “—Offer Letters and Severance Plan” below for a description of specified terms of employment and “Named Executive Officer Compensation Tables—Potential Payments upon Termination of Employment or Change in Control” for the terms of the Severance Plan. 2023 Target Annual Compensation Our Chief Executive Officer’s target annual compensation in 2023 generally was consistent with 2022, including: •
An initial base salary of $450,000 (which increased to $465,000 effective August 1, reflecting the rollover of a previous automobile stipend). •
A target bonus of 100% of base salary. •
A target long-term incentive award of 250% of base salary. | The target pay mix for our Independent Administration.Chief Executive Officer, Mr. Rajeski, in 2023 is set forth below, excluding benefits. | | | The average target pay mix for our other named executive officers The 2021 Omnibus Equity Planin 2023 is administered by our Compensation Committee, which consists entirely of independent non-employee directors. NASDAQset forth below, excluding benefits. | | | | | | | |
2023 CEO Earned and Realizable Compensation The Company reported Adjusted EBITDA of $88.0 million for 2023, and our Compensation Committee determined that no bonus was earned under the 2023 Management Incentive Bonus Plan terms. Our CEO’s realizable compensation for 2023 is lower than his target total compensation as demonstrated in the table below. Target total compensation is the sum of his base salary, target bonus and the reported grant date value of RSUs and SARs in 2023. Realizable compensation is the sum of his base salary, bonus payout for 2023 performance and the current intrinsic value of his 2023 RSUs and SARs. | | | | Base Salary | | | Bonus | | | 2023 Equity | | | Total | | | Target Compensation | | | | $ | 456,000 | | | | | $ | 456,000 | | | | | $ | 1,125,000 | | | | | $ | 2,037,000 | | | | Realizable Compensation | | | | $ | 456,000 | | | | | $ | 0 | | | | | $ | 639,237 | | | | | $ | 1,095,237 | | | | Realizable vs. Target | | | | | 0% | | | | | | -100% | | | | | | -43% | | | | | | -46% | | |
2024 Compensation Program—Increased Focus on Performance-Based Compensation For 2024, our Compensation Committee determined to increase the performance-based focus of the named executive officer compensation program by (i) changing the performance metrics in the annual bonus plan from solely Adjusted EBITDA to an equally weighted mix of revenue and Adjusted EBITDA margin, and (ii) amending the annual equity program to include the grant of PSUs, with a performance-metric of Adjusted EBITDA, in lieu of the SAR component. See “—Initial 2024 Compensation Determinations.” | | | | 2024 Proxy Statement 45 | |
Named Executive Officer Compensation
2023 Compensation Determinations Base Salary The base salary changes in 2023 were effective August 1, 2023 to roll over a previous automobile and cell phone stipend, as applicable. The annual base salary rates of our named executive officers for 2022 and 2023 are set forth below. | Name | | | 2022 ($) | | | Jan. – July, 2023 ($) | | | Aug. – Dec., 2023 ($) | | | Change in 2023 (%) | | | Scott M. Rajeski | | | | | 450,000 | | | | | | 450,000 | | | | | | 465,000 | | | | | | 3.3 | | | | Joshua D. Cowley | | | | | — | | | | | | 370,000 | | | | | | 379,000 | | | | | | — | | | | Patrick M. Sheller (1) | | | | | — | | | | | | 350,000 | | | | | | 359,000 | | | | | | — | | |
(1)
Mr. Sheller was hired on August 8, 2022. Management Incentive Bonus Plan (“MIB Plan”) During 2023, our named executive officers were eligible to participate in our annual performance-based MIB Plan. The annual target bonuses are determined as a percentage of their base salaries averaged on a pro rata basis for the plan year. Our Compensation Committee determined not to change the annual target bonuses as a percentage of base salary, but the target dollar value of the opportunity was impacted by the base salary changes noted above on a pro rata basis. The target bonus in 2022 and 2023, as a percentage of base salary and dollar value, for our named executive officers are set forth below. | | | | Target Bonus | | | Name | | | 2022 (as % of Base Salary) | | | 2022 ($) | | | 2023 (as % of Base Salary) | | | 2023 ($) | | | Change in $ (%) | | | Scott M. Rajeski | | | | | 100 | | | | | | 450,000 | | | | | | 100 | | | | | | 456,250 | | | | | | 1.4 | | | | Joshua D. Cowley | | | | | — | | | | | | — | | | | | | 60 | | | | | | 224,250 | | | | | | — | | | | Patrick M. Sheller | | | | | — | | | | | | — | | | | | | 60 | | | | | | 212,250 | | | | | | — | | |
In the 2023 MIB Plan, named executive officers were eligible to earn 0% to 200% of their respective target bonus based on Company Adjusted EBITDA performance against the plan goals. Adjusted EBITDA Adjusted EBITDA is a key supplemental metric used by management and our Board to assess our financial performance, and the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures. We believe it is also used by analysts, investors and other interested parties to evaluate companies in our industry. The Adjusted EBITDA performance goal under the 2023 MIB Plan was defined as reflected in our Annual Report as a supplemental performance measure. Adjusted EBITDA is defined as net income (loss) plus (i) depreciation and amortization, (ii) interest expense, (iii) income tax (benefit) expense, (iv) loss on sale and disposal of property and equipment, (v) restructuring charges, (vi) management fees, (vii) stock-based compensation expense, (viii) unrealized (gains) losses on foreign currency transactions, (ix) strategic initiative costs, (x) acquisition and integration related costs, (xi) other and (xii) IPO costs. See our Annual Report for additional information on the use and utility of Adjusted EBITDA, as well as its limitations. | | | | 2024 Proxy Statement 46 | |
Named Executive Officer Compensation
For the 2023 MIB Plan, our Compensation Committee recommended and our Board approved the following payout scale for Adjusted EBITDA: •
Threshold (0% payout) = $112.5 million •
Target (100% payout) = $125 million •
Maximum (200% payout) = $144 million •
For actual performance between the specified levels, the percentage achievement and payout are determined on a linear interpolation basis. For 2023, the Company reported Adjusted EBITDA of $88.0 million, which is below the threshold payout level, and therefore our Compensation Committee determined that no bonus was earned. 2023 Annual Equity Awards In 2021, our Compensation Committee established an annual equity program under the 2021 Omnibus Equity Plan, including for our named executive officers. Equity awards continue to represent a significant portion of our named executive officers’ target compensation. The 2023 annual equity program consisted of RSUs (70% weighted) and stock-settled SARs (30% weighted). Our 2021 and 2022 annual equity program consisted solely of time-based stock options. However, our annual stock option grants in April 2021 and March 2022 were issued with an exercise price of $19.00 and $15.69, respectively, and therefore currently do not have any intrinsic value and have minimal retentive value. Our Compensation Committee determined that a new mix of equity would provide a better tool to attract and retain executives given the volatility of our shares of Common Stock and the challenging industry trends we expect in the near term. Our Compensation Committee sought to ensure that the 2023 equity awards would increase retention and retain economic value and therefore determined to allocate a significant portion of the annual equity program to RSUs. Our Compensation Committee also determined to provide some of the upside of stock options, but without some of the cash and tax challenges associated with stock option exercises, and therefore allocated a portion of the annual equity program to SARs. On March 1, 2023, our Compensation Committee approved the annual equity award grants to the named executive officers. The RSUs were granted as of such date. However, the Company did not have enough shares of Common Stock in the share pool of the 2021 Omnibus Equity Plan and therefore SARs grants to our executive officers were approved contingent on stockholder approval of the First Amendment to such plan (requesting an increase of 8 million shares available for issuance under such plan) at the 2023 annual meeting. On May 2, 2023, the SARs became effective without condition following the stockholder approval of the plan amendment. Our Compensation Committee, with advice from its independent compensation consultant, Pearl Meyer, regularly reviews our historical share usage and availability and considers such information in setting equity compensation levels. Our Compensation Committee administers and oversees our equity compensation practices to ensure they are reasonable, recognizing that equity awards dilute stockholder equity and must be used appropriately. Our Compensation Committee determined not to change the target annual equity as a percentage of base salary for 2023, and the 2023 base salary rate increase occurred after the equity award grants and therefore did not impact the target annual equity. The grant value for each named executive officer was based on a percentage of base salary. The grant values, as a percentage of base salary and dollar value, and RSUs and SARs granted to our named executive officers, in 2023 are set forth below. | | | | 2024 Proxy Statement 47 | |
Named Executive Officer Compensation
| | | | Grant Value | | | RSUs (70% weighted) | | | SARs (30% weighted)(1) | | | Name | | | % of Base Salary | | | $ | | | Grant Value $ | | | #(2) | | | Grant Value $ | | | #(3) | | | Scott M. Rajeski | | | | | 250 | | | | | | 1,125,000 | | | | | | 787,500 | | | | | | 243,056 | | | | | | 337,500 | | | | | | 222,039 | | | | Joshua D. Cowley | | | | | 200 | | | | | | 700,000 | | | | | | 490,000 | | | | | | 159,807 | | | | | | 210,000 | | | | | | 146,053 | | | | Patrick M. Sheller | | | | | 150 | | | | | | 500,000 | | | | | | 350,000 | | | | | | 113,426 | | | | | | 150,000 | | | | | | 103,618 | | |
(1)
The SARs have a strike price of $3.24, the closing price of our Common Stock on the contingent issuance date, March 1, 2023. (2)
The number of RSUs granted were determined by dividing the grant value by the grant date fair value, which was the closing price of our Common Stock on the grant date, March 1, 2023. (3)
The number of SARs granted were determined by dividing the grant value by the grant date fair value in accordance with the Black-Scholes model. 2021 Omnibus Equity Plan The 2021 Omnibus Equity Plan, as amended, includes provisions we believe are best practices for compensation and corporate governance purposes. The following provisions align with our stockholders’ interests: •
Independent Administration. The 2021 Omnibus Equity Plan is administered by our Compensation Committee, which consists entirely of independent non-employee directors. Nasdaq rules permit controlled companies such as us not to have a fully independent Compensation Committee, but our Board has determined to implement such practice. •
No Evergreen of Share Pool. The 2021 Omnibus Equity Plan does not include an automatic annual increase in the share pool without stockholder approval, which is a common practice among controlled companies and newly public companies. Therefore, we will seek stockholder approval prior to any future additional increases in the share pool. •
No Liberal Share Recycling. Shares of Common Stock used to pay the exercise or strike price of stock options or SARs, respectively, or used to cover withholding taxes for any award, are not available for future grant. •
Minimum Vesting Period. Awards are subject to a minimum vesting period of one year, subject to limited exceptions. •
No Dividends on Unvested Awards, Stock Options and SARs. No dividends or other distributions are paid on unvested awards. Any accrued dividends or other distributions are paid only if such awards are earned and vested, and no dividends or other distributions will be paid with respect to outstanding stock options and SARs. •
No Discounted Stock Options or SARs. The exercise or strike price of stock options or SARs, respectively, must be at least equal to the fair market value of our Common Stock on the date of grant (except in the limited case of substitute awards in connection with acquisition transactions). •
Repricing of Stock Options and SARs is Not Allowed without Stockholder Approval. Other than in connection with specified corporate transactions, the 2021 Omnibus Equity Plan prohibits stock options and SARs to be repriced or exchanged for other awards unless stockholders approve the repricing or exchange. •
No Tax Gross-Ups. The 2021 Omnibus Equity Plan does not provide for tax gross-ups. •
No Liberal Definition of Change in Control. A change-in-control under the 2021 Omnibus Equity Plan, which could trigger an acceleration of unvested awards, is not triggered unless a qualifying transaction is consummated, a third party acquires 50% or more of the Company’s outstanding voting securities or there is a change in more than half of the incumbent directors of our Board. | | | | 2024 Proxy Statement 48 | |
Named Executive Officer Compensation
•
Our Compensation Committee Retains a Significant Clawback Right. Upon specified events, our Compensation Committee is authorized to terminate outstanding awards and recoup the benefits from previously vested, settled and exercised awards. •
No Transferability. Awards generally cannot be transferred, except by will or the laws of descent and distribution, unless approved by our Compensation Committee. •
Reasonable Annual Limits on Non-Employee Director Compensation. The 2021 Omnibus Equity Plan sets a reasonable limit as to the total compensation that non-employee directors generally may receive (for service as a non-employee director) during each year. Limited Other Benefits and Perquisites Our named executive officers are entitled to participate in our 401(k) plan on the same basis as our other eligible employees. The Company’s matching contributions for 401(k) plan participants is 50% of the first 6% contributed by the employee for a maximum employer match of 3%. The Company also provided our named executive officers with an automobile reimbursement and a cell phone allowance through July 2023 (following which the applicable amounts were rolled over into base salary). J. Mark Borseth—2023 Target and Earned Compensation In January 2023, our then Chief Financial Officer, Robert Masson II, resigned, effective March 17, 2023, and we re-hired Mr. Borseth to serve as a strategic advisor from February 13, 2023 to March 17, 2023, following which he became the Interim Chief Financial Officer. He served in such capacity until a new Chief Financial Officer was appointed on November 13, 2023, following which Mr. Borseth served as our Strategic Advisor through December 31, 2023. On February 6, 2023, Mr. Borseth entered into an employment agreement with the Company, effective as of February 13, 2023. The employment agreement had an expiration date of August 13, 2023. Under such agreement, Mr. Borseth received: (i) an annual base salary of $425,000; (ii) a target bonus of 60% of his annual base salary (with pro ration); (iii) a cash signing bonus of $50,000; and (iv) limited participation in the Company’s employee benefit plans and perquisite arrangements. The agreement also provided specified severance benefits, none of which were triggered, and continuation of specified confidentiality, non-disparagement, non-competition and non-solicitation provisions from his prior retirement agreement with the Company. The agreement was amended on July 24, 2023 to extend Mr. Borseth’s interim service as the search process continued to ensure continuity of finance leadership and due to his significant knowledge of the Company’s business. The amendment: (i) extended the expiration date of the employment agreement to December 31, 2023; (ii) provided that he would continue to serve as Interim Chief Financial Officer through the earlier of the expiration date and the start of employment of a permanent Chief Financial Officer, following which he would serve as a Strategic Advisor through the expiration date; (iii) set forth additional compensation for Mr. Borseth, including (A) a grant of 213,212 RSUs, with 50% immediately vested and the remainder vesting on December 27, 2023; (B) an additional signing bonus of $100,000 and (C) a guaranteed minimum bonus payment for 2023 of 75% of his target bonus, without proration (i.e. no less than $191,250). The Summary Compensation Table reflects the $191,250 as severance since Mr. Borseth was not required to be employed as of the payout date, as required by the MIB Plan. | | | | 2024 Proxy Statement 49 | |
Named Executive Officer Compensation
Compensation Policies Executive Clawback Policies Policy for the Recovery of Erroneously Awarded Compensation (Dodd-Frank Compliant Policy) As required by the listing standards adopted by Nasdaq as a result of SEC rulemaking, our Board recently adopted a new Policy for the Recovery of Erroneously Awarded Compensation. The policy provides that the Company must promptly recover specified incentive-based compensation that is received by our Section 16 officers on or after October 2, 2023, regardless of fault or misconduct, upon specified accounting restatements of the Company’s financial statements that resulted in such persons receiving an amount that exceeded the amount that would have been received if based on the restated financial statements. There are limited exceptions to the recovery requirement as set forth in the listing standards. Incentive-based compensation is defined as any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a financial reporting measure. The subject compensation will be determined without regard to any net settlement of, or taxes paid or payable or withheld on, such compensation, but there will not be any duplicative recovery by the Company. As specified in the listing standards, the Company cannot indemnify, or pay or reimburse for insurance for, a Section 16 officer for recoveries under this policy. The recovery period under the policy is three full years preceding the date our Board or Audit Committee concludes, or reasonably should have concluded, that an accounting restatement is required. If applicable, the Company will provide the current or former Section 16 officer with a written demand for repayment or return and the method thereof. If such repayment or return is not made when due, the policy provides that the Company will take all reasonable and appropriate actions to recover such erroneously awarded compensation from such person. Amended and Restated Clawback Policy (Calculation Errors) Following the adoption of the Policy for the Recovery of Erroneously Awarded Compensation, we amended our prior Clawback Policy solely to address circumstances where any cash-based and equity-based incentive compensation that is paid or awarded to executive officers was based on the incorrect calculation of performance metrics in any incentive compensation plan. The revised policy provides that our Compensation Committee or our Board has discretion to take appropriate action against an executive officer if it determines that any fraud, intentional misconduct, gross negligence or lack of sufficient oversight by such executive officer was a significant contributing factor to the Company having miscalculated one or more performance metrics used to determine incentive compensation that, if calculated correctly, would have resulted in reduced compensation payout. If applicable, the Company is authorized to seek to recover from any applicable executive officer any cash-based or equity-based incentive compensation, including but not limited to annual or special performance-based bonuses and equity-based awards that were granted, issued, earned, paid or became vested or settled in the covered period and to prevent the recurrence of such activity to the fullest extent permitted by governing law. The subject compensation will be determined without regard to any net settlement of, or taxes paid or payable or withheld on, such compensation. The recovery period under the policy is three full years preceding the date the administrator concludes, or reasonably should have concluded, that the event occurred; provided, however, the recovery period and subject compensation exclude any incentive compensation granted, issued, earned, paid or that vested or settled prior to our initial public offering in April 2021. | | | | 2024 Proxy Statement 50 | |
Named Executive Officer Compensation
2021 Omnibus Equity Plan As permitted by the 2021 Omnibus Equity Plan, our equity award agreements provide that our Compensation Committee may cancel an equity award if the participant, without our consent, has engaged in or engages in activity that is in conflict with or adverse to the interest of the Company or any affiliate while employed by, or otherwise providing services to, the Company or any affiliate, including fraud or conduct contributing to any financial restatements or irregularities, or a violation of the restrictive covenants set forth therein (including non-competition, non-solicitation, non-disparagement or non-disclosure covenant or agreement) or any similar restrictive covenant agreement with the Company or any affiliate (after giving effect to any applicable cure period). In such event, the participant will forfeit any compensation, gain or other value realized thereafter on the vesting, exercise or settlement of the equity award, the sale or other transfer of the equity award, or the sale of shares of Common Stock acquired in respect of the equity award, and must promptly repay such amounts to the Company. If the participant receives any amount in excess of what the participant should have received under the terms of the equity award for any reason (including without limitation by reason of a financial restatement, mistake in calculations or other administrative error), all as determined by our Compensation Committee, then the participant must promptly repay any such excess amount to the Company. Securities Trading Policy; Prohibition on Hedging and Pledging of Company Securities Our Securities Trading Policy is designed to inform, educate and create reasonable processes to prevent the Company and its directors, officers, employees and other specified persons from insider trading violations and the appearance of any related improper conduct. Our Corporate Governance Guidelines prohibit directors, executive officers and employees of the Company, and their designees, from hedging or pledging our securities. See “Board of Directors and Corporate Governance—Key Governance Policies” for more information. Stock Ownership Guidelines Our Board believes that the executive leadership team and non-management directors of our Board should maintain a meaningful equity interest in the Company to promote the long-term interests of the Company, including the achievement of strategic goals, and further align our non-management directors and executive leadership team’s interests with stockholders. In 2023, our Compensation Committee approved Stock Ownership Guidelines that require our Chief Executive Officer to own qualifying Common Stock having a value equal to 300% of annual base salary, our other executive officers own qualifying Common Stock having a value equal to 100% of annual base salary, and our controller to own qualifying Common Stock having a value equal to 50% of annual base salary. All persons covered by the guidelines are required to retain 50% of the net shares of qualifying Common Stock that vest pursuant to equity awards granted by the Company until the ownership level is met, as determined by the Company. Following compliance with the guidelines, a covered person can sell or transfer Common Stock only if such person would be in compliance with the guideline limitations following such transaction. Shares included for compliance include shares of Common Stock held by such person and such person’s immediate family members (individually or jointly) or in a trust, partnership, LLC, a deferred compensation plan, a 401(k) plan or an employee stock purchase plan for the economic benefit of such person or immediate family members. In addition, the value of unvested restricted stock and RSUs and earned (but unvested) PSUs are included for compliance. Our Compensation Committee is responsible for reviewing any non-compliance with these guidelines and has discretion to enforce the requirements and approve exceptions for specified matters. Compliance with the stock ownership requirement is computed annually as of fiscal year end and is based on a 60-trading day average closing price of our Common Stock within a reasonable period of time prior to such date. | | | | 2024 Proxy Statement 51 | |
Named Executive Officer Compensation
Process for Making Compensation Determinations Our Compensation Committee establishes the compensation of the Chief Executive Officer and other named executive officers after reviewing their respective performance against pre-established annual goals, the overall performance of the Company (and business unit and other areas of responsibility, as applicable), market data and other factors it deems relevant. As discussed below under “—Offer Letters and Severance Plan,” we entered into offer letters with each of our named executive officers, which address certain elements of their compensation and benefits package, and approved an executive severance plan, which provides specified compensation and benefits upon specified termination events. In establishing the named executive officer compensation program, our Compensation Committee seeks significant input of the Chief Executive Officer, our General Counsel and the Chief Human Resources Officer. No named executive officer provides input or participates in the deliberation of our Compensation Committee with respect to such person’s own compensation. At the end of each year, the Chief Executive Officer reviews, with input from the Chief Human Resources Officer, the performance of each other named executive officer as well the potential for advancement. Our Compensation Committee then considers the Chief Executive Officer’s assessment, the relevant performance factors for each person, benchmarking data and other factors it deems relevant, and reviews and approves the compensation for each named executive officer. Our Compensation Committee determined to re-engage Pearl Meyer & Partners, LLC as its independent compensation consultant for 2023 and approved the terms of the engagement. Pearl Meyer has served in such capacity since 2020. In 2023, a representative of Pearl Meyer attended each regular Compensation Committee meeting. For our named executive officer compensation program for 2023, Pearl Meyer’s services included: •
Reviewing and recommending a peer group for benchmarking •
Providing and analyzing benchmarking data in 2022 to inform 2023 compensation decisions •
Providing advice regarding incentive plan designs •
Reviewing regulatory updates and compensation trends Peer Group Utilized for Benchmarking in 2023 Since November 2020, our Compensation Committee benchmarks our named executive officer compensation against a peer group of public companies with which we believe we compete for executive talent, as well as executive compensation surveys (based on comparable revenue size) from Pearl Meyer. Such benchmarking has focused on target total direct compensation, which consists of base salary, the target annual incentive bonus opportunity and the target long-term equity incentive opportunity. Our Compensation Committee used the benchmarking information as one data point of several factors and did not utilize the data to benchmark individual compensation components at specific percentiles or ranges of percentiles. The peer group is periodically evaluated by the Compensation Committee to ensure the companies in the group remain relevant to us based on our changing size, changing dynamics in the market in which we compete for executive talent and other factors. In assessing the appropriateness of peer companies, our Compensation Committee primarily considered the following criteria for our peer group utilized for 2023 benchmarking: other participants in the pool-related business, leisure and outdoor living products, building products and other high-growth/high margin consumer goods companies; enterprise value; revenues; and other related factors, including revenue growth, number of employees and Adjusted EBITDA margin. | | | | 2024 Proxy Statement 52 | |
Named Executive Officer Compensation
The peer group of 15 companies utilized for 2023 compensation determinations of our named executive officers is set forth below. | •
AAON, Inc. | | | •
iRobot Corporation | | | •
MasterCraft Boat Holdings, Inc. | | | •
The AZEK Company Inc. | | | •
Armstrong World Industries, Inc. | | | •
Johnson Outdoors, Inc. | | | •
PGT Innovations, Inc. | | | •
Trex Company, Inc. | | | •
Clarus Corporation | | | •
Leslie’s, Inc. | | | •
Simpson Manufacturing Co., Inc | | | •
YETI Holdings, Inc. | | | •
Hayward Holdings, Inc. | | | •
Malibu Boats, Inc. | | | •
Sonos, Inc. | | | | |
Hayward Holdings, Inc. was added to the peer group used for 2023 benchmarking. Companies used for 2022 benchmarking that were not used for 2023 benchmarking include Callaway Golf Company, Plantronics, Inc. and Pool Corporation. Our Compensation Committee further revised the peer group utilized for 2024 compensation determinations of our named executive officers. Offer Letters and Severance Plan In July 2023, our Compensation Committee determined to terminate the existing employment agreements and enter into an offer letter (collectively, the “Offer Letters”) with each of our named executive officers and other specified executive officers. The Compensation Committee approved the foregoing matters to conform to good governance practices, to enhance retention and reduce litigation risk, and to standardize the severance benefits of the named executive officers and other persons. In connection with such change, our Compensation Committee adopted The Latham Pool Products, Inc. Officer Severance Plan (the “Severance Plan”) in July 2023. See “Named Executive Officer Compensation Tables—Potential Payments upon Termination of Employment or Change in Control” for the terms of the Severance Plan. Each Offer Letter (i) confirms each officer as an at-will employee, (ii) sets forth specified compensation matters, including initially to continue the annual base salary and target bonus (as a percentage of the annual base salary) in effect immediately prior to the effective date of the Offer Letter, except to increase the annual base salary in an amount equal to the cash value of specified annual perquisites in lieu of providing such perquisites, (iii) specifies eligibility to continue to participate in the Company’s annual equity and cash incentive programs and the other employee benefit plans and programs generally available, and (iv) provides for the execution of ancillary agreements among the parties, including a Confidentiality, Non-Competition, and Non-Solicitation Agreement and a Mutual and Binding Employment Arbitration Agreement. A summary of the compensation terms in the Offer Letters with each of our named executive officers appears below: | Name | | | Offer Letter Terms* | | | Scott M. Rajeski | | | •
Base salary of $465,000 •
No EvergreenTarget bonus of Share Pool. The 2021 Omnibus Equity Plan does not include an automatic annual increase in the share pool without stockholder approval, which is a common practice among controlled companies and newly public companies. Therefore, we will seek stockholder approval prior to any future additional increases in the share pool.
| | | | 2023 Proxy Statement 59 | |
Proposal Three: Amendment to the 2021 Omnibus Equity Incentive Plan
•
No Liberal Share Recycling. Shares100% of Common Stock used to pay the exercise or strike price of stock options or SARs, respectively, or used to cover withholding taxes for any award, are not available for future grant.base salary
•
Minimum Vesting Period. Awards are subject to a minimum vesting periodTarget equity of one year, subject to limited exceptions.250% of base salary
| | | Joshua D. Cowley | | | •
Base salary of $379,000 •
No Dividends on Unvested Awards, Stock Options and SARs. No dividends or other distributions are paid on unvested awards. Any accrued dividends or other distributions are paid only if such awards are earned and vested, and no dividends or other distributions will be paid with respect to outstanding stock options and SARs.Target bonus of 60% of base salary
•
No Discounted Stock Options or SARs. The exercise or strike priceTarget equity of stock options or SARs, respectively, must be at least equal to the fair market value200% of our Common Stock on the datebase salary
| | | Patrick M. Sheller | | | •
Base salary of grant (except in the limited case of substitute awards in connection with acquisition transactions).$359,000 •
RepricingTarget bonus of Stock Options and SARs is Not Allowed without Stockholder Approval. Other than in connection with specified corporate transactions, the 2021 Omnibus Equity Plan prohibits stock options and SARs to be repriced or exchanged for other awards unless stockholders approve the repricing or exchange.60% of base salary
•
No Tax Gross-Ups. The 2021 Omnibus Equity Plan does not provide for tax gross-ups.Target equity of 150% of base salary
•
No Liberal Definition
| |
*
The Offer Letter confirms that each of the existing terms are subject to future change, at the discretion of Change in Control. A change-in-control under the 2021 Omnibus Equity Plan, which could trigger an acceleration of unvested awards, is not triggered unless a qualifying transaction is consummated, a third party acquires 50% or more of the Company’s outstanding voting securities or there is a change in more than half of the incumbent directors of our Board.
•
Our Compensation Committee Retains a Significant Clawback Right. Upon specified events, our Compensation Committee is authorized to terminate outstanding awards and recoup the benefits from previously vested, settled and exercised awards.
•
No Transferability. Awards generally cannot be transferred, except by will or the laws of descent and distribution, unless approved by our Compensation Committee.
•
Reasonable Annual Limits on Non-Employee Director Compensation. The 2021 Omnibus Equity Plan sets a reasonable limit as to the total compensation that non-employee directors generally may receive (for service as a non-employee director) during each year.
| | | | 2024 Proxy Statement 53 | |
Named Executive Officer Compensation
Initial 2024 Compensation Determinations Our Compensation Committee intends to continue to evolve our compensation program for named executive officers. Our Compensation Committee has approved key components of the 2024 compensation program for the named executive officers, including increasing the focus on performance-based goals. •
The base salaries for our named executive officers increased up to 4%. •
Target bonuses (as a % of base salary) and target annual equity (as a % of base salary) for named executive officers were not changed, but the targets in dollars increase to the extent base salaries were changed. •
The annual bonus plan is based on the achievement of revenue (50%) and Adjusted EBITDA margin (50%) performance goals, with a 0% to 200% payout opportunity and a 20% threshold payout. •
The annual equity program consists of 70% RSUs and 30% PSUs. PSUs are based on an Adjusted EBITDA performance goal, with a 0% to 200% payout opportunity, a 20% threshold payout and cliff vesting on the third anniversary of the grant date. The RSUs have annual pro rata vesting on the anniversary of the grant date over a four-year period. | | | | 2024 Proxy Statement 54 | |
| | | | 2023 Proxy Statement 60 | |
Proposal Three: Amendment to the 2021 Omnibus Equity IncentiveNamed Executive Officer Compensation Tables Summary Compensation Table for 2023 and 2022 The following table sets forth the compensation paid and awarded to or earned by our named executive officers for services rendered in all capacities in 2023 and 2022, and reflects their principal position with the Company in 2023. | Name and Principal Position(1) | | | Year | | | Salary ($) | | | Bonus ($)(2) | | | Option Awards ($)(3) | | | Stock Awards ($)(4) | | | Non-Equity Incentive Plan Compensation ($)(5) | | | All Other Compensation ($)(6) | | | Total ($) | | | Scott M. Rajeski President and Chief Executive Officer | | | | | 2023 | | | | | | 456,000 | | | | | | — | | | | | | 337,499 | | | | | | 787,501 | | | | | | — | | | | | | 20,996 | | | | | | 1,601,996 | | | | | | 2022 | | | | | | 448,077 | | | | | | — | | | | | | 1,124,994 | | | | | | — | | | | | | 62,280 | | | | | | 27,343 | | | | | | 1,662,694 | | | | J. Mark Borseth Former Interim Chief Financial Officer and Former Strategic Advisor | | | | | 2023 | | | | | | 389,135 | | | | | | 150,000 | | | | | | — | | | | | | 852,848 | | | | | | — | | | | | | 212,664 | | | | | | 1,604,647 | | | | Joshua D. Cowley Chief Commercial Officer | | | | | 2023 | | | | | | 373,215 | | | | | | — | | | | | | 222,001 | | | | | | 518,001 | | | | | | — | | | | | | 12,755 | | | | | | 1,125,972 | | | | Patrick M. Sheller General Counsel and Secretary | | | | | 2023 | | | | | | 353,600 | | | | | | — | | | | | | 157,499 | | | | | | 367,500 | | | | | | — | | | | | | 13,184 | | | | | | 891,783 | | |
(1)
Messrs. Borseth, Cowley and Sheller were not named executive officers in 2022 and therefore their respective compensation for 2022 is not included herein. (2)
The amount reported in this column represents Mr. Borseth’s signing cash bonuses of $50,000 and $100,000, which were paid on February 16 and August 17, 2023, respectively. (3)
The amounts reported in this column represent the grant date fair value of SARs granted to each person in 2023 and stock options granted to Mr. Rajeski in 2022. For the SARs, we use the Black-Scholes model for estimating the grant date fair value, which requires critical assumptions including risk-free rate, volatility, expected term and expected dividend yield. See Note 18, Stock-Based Compensation to our consolidated financial statements contained in our Annual Report on Form 10-K for 2023 for a discussion of these assumptions in accordance with FASB ASC Topic 718. The amounts reported in this column do not correspond to the actual economic value that will be ultimately realized by such persons. For 2023 awards, the SARs vest and become exercisable 25% each year on the anniversary of March 1, 2023, subject to continued employment. (4)
The amounts reported in this column represent the grant date fair value of RSUs granted to each person in 2023 and 2022. The grant date fair value of the RSUs are calculated as of the closing price of our Common Stock as quoted on Nasdaq on the grant date multiplied by the number of shares subject to the award. The RSUs granted in 2023 vest 25% each year on the anniversary of the grant date, subject to continued employment. (5)
No bonus was earned under the MIB Plan for 2023 because the threshold payout level for Adjusted EBITDA performance was not achieved. (6)
Amounts reported under All Other Compensation in 2023 reflect the following: (a) Company 401(k) match for Mr. Rajeski, Mr. Borseth, and Mr. Sheller; (b) Company automobile reimbursement for each named executive officer; (c) $191,250 severance for Mr. Borseth; and (d) cell phone allowance for Messrs. Cowley and Sheller. | Summary of the 2021 Omnibus Equity Plan, as Proposed to be AmendedThe proposed Amendment is set forth on Appendix A to this
| | | 2024 Proxy Statement. The full text of the 2021 Omnibus Equity Plan (not reflecting the proposed Amendment) is set forth on Appendix B to this Proxy Statement. The material features of the 2021 Omnibus Equity Plan are summarized above, but each stockholder should review the 2021 Omnibus Equity Plan itself for a full understanding of its contents. If our stockholders approve the Amendment, a Registration Statement on Form S-8 covering the shares newly available for issuance will be filed with the SEC. | Key Terms | | | Description55 | | | Plan Term | | | Ten years from April 13, 2021, the date the plan was approved by stockholders |
Named Executive Officer Compensation Tables
Outstanding Equity Awards as of December 31, 2023 The following table provides information about the outstanding equity awards held by our named executive officers as of December 31, 2023. | | | | | | | | | | Option Awards(1) | | | Stock Awards | | | Name | | | Grant Date | | | Number of Securities Underlying Unexercised Options Exercisable (#) | | | Number of Securities Underlying Unexercised Options Unexercisable (#)(2) | | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (#)(3) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | | | Scott M. Rajeski | | | | | 4/22/2021 | | | | | | 69,274 | | | | | | 69,275 | | | | | | 19.00 | | | | | | 4/22/2031 | | | | | | — | | | | | | — | | | | | | 3/3/2022 | | | | | | 43,070 | | | | | | 129,210 | | | | | | 15.69 | | | | | | 3/3/2032 | | | | | | — | | | | | | — | | | | | | 3/1/2023 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 243,056 | | | | | | 639,237 | | | | | | 5/2/2023 | | | | | | — | | | | | | 222,039 | | | | | | 3.24 | | | | | | 5/2/2033 | | | | | | — | | | | | | — | | | | J. Mark Borseth | | | | | 4/22/2021 | | | | | | 18,184 | | | | | | — | | | | | | 19.00 | | | | | | 4/22/2031 | | | | | | — | | | | | | — | | | | Joshua D. Cowley | | | | | 4/22/2021 | | | | | | 48,492 | | | | | | 48,492 | | | | | | 19.00 | | | | | | 4/22/2031 | | | | | | — | | | | | | — | | | | | | 3/3/2022 | | | | | | 26,799 | | | | | | 80,398 | | | | | | 15.69 | | | | | | 3/3/2032 | | | | | | — | | | | | | — | | | | | | 3/1/2023 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 159,807 | | | | | | 420,292 | | | | | | 5/2/2023 | | | | | | — | | | | | | 146,053 | | | | | | 3.24 | | | | | | 5/2/2033 | | | | | | — | | | | | | — | | | | Patrick M. Sheller | | | | | 8/8/2022 | | | | | | 27,149 | | | | | | 81,450 | | | | | | 6.54 | | | | | | 8/8/2032 | | | | | | — | | | | | | — | | | | | | 8/8/2022 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 26,758 | | | | | | 70,374 | | | | | | 3/1/2023 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 113,426 | | | | | | 298,310 | | | | | | 5/2/2023 | | | | | | — | | | | | | 103,618 | | | | | | 3.24 | | | | | | 5/2/2033 | | | | | | — | | | | | | — | | |
(1)
These columns show: (1) for 2021 and 2022 awards, the number, option exercise price and option expiration date of outstanding stock options and (2) for 2023 awards, the number, strike price and expiration date of outstanding SARs, in each case held by our named executive officers as of December 31, 2023. The first column shows this information for exercisable stock options or SARs, and the second column shows this information for unexercisable stock options or SARs. The SARs were granted on March 1, 2023, subject to stockholder approval of an amendment to the 2021 Omnibus Equity Plan, which was received on May 2, 2023. (2)
For 2021 and 2022 awards, the options vest and become exercisable 25% each year on the anniversary of the grant date, subject to continued employment. For 2023 awards, the SARs vest and become exercisable 25% each year on the anniversary of March 1, 2023, subject to continued employment. (3)
This column shows the number of unvested shares of RSUs held by our named executive officers as of December 31, 2023. Mr. Sheller’s RSUs granted in 2022 were new hire awards and vest 33.33% each year on the anniversary of the grant date, subject to continued employment. The RSUs granted in 2023 vest 25% each year on the anniversary of the grant date, subject to continued employment. (4)
This column shows the market value of the unvested shares of RSUs held by our named executive officers based on $2.63 per share, the closing price of our Common Stock on December 29, 2023, the last trading day of 2023. | | | | 2024 Proxy Statement 56 | | | Eligible Participants | | | Current or prospective employees, directors, officers, consultants or advisors of the Company or its subsidiaries (and in the case of current consultants of advisors, its affiliates) |
Named Executive Officer Compensation Tables
Potential Payments upon Termination of Employment or Change in Control Treatment of Incentive Equity Awards Upon a termination of a named executive officer’s employment for any reason, all of such officer’s unvested equity awards will be forfeited for no consideration, unless otherwise approved by the Compensation Committee, in its discretion, and documented in a separation agreement. Severance Benefits under Latham Pool Products, Inc. Officer Severance Plan Our Compensation Committee adopted the Severance Plan in July 2023 in order to standardize the severance benefits of key leaders of the Company, including the named executive officers. The Severance Plan provides participants with certain payments and benefits (i) following specified termination events and (ii) following specified termination events subsequent to a change in control of the Company. Unless extended by the Compensation Committee, the Severance Plan will expire on December 31, 2025 (unless a Change in Control, as defined in the Severance Plan, has occurred prior to such date), although payment and benefit obligations from a termination event prior to such date will continue thereafter. Under the Severance Plan, a participant receives the following payments and benefits if the Compensation Committee determines that (i) the participant resigned for Good Reason (as defined in the Severance Plan) or (ii) the participant was involuntarily terminated by Latham Pool for reasons other than for Cause (as defined in the Severance Plan): •
1.5x (CEO) or 1x (other participants generally) of base salary, payable ratably over a period of 18 months or one year, respectively, in accordance with regular payroll practices; •
During the severance period (subject to specified events that would terminate such payments on an earlier date), an amount equal to the full cost of continuation coverage premiums under COBRA for the participant and eligible dependents; and •
In its discretion, our Compensation Committee may determine that the participant will be eligible to continue to vest in such person’s equity awards during the severance period. A participant receives the following if (i) the participant resigned for Good Reason or (ii) the participant was involuntarily terminated by Latham Pool for reasons other than for Cause, in each case within 12 months following a Change in Control: •
The severance specified above, but payable in a single lump sum payment as soon as reasonably practicable following such termination date; and •
The full acceleration of vesting of all outstanding equity-based awards granted to the participant by the Company or any affiliate; provided, for any performance-based equity award, such award will vest based on the target amount. In the event of a termination due to death or disability: •
All outstanding equity-based awards granted to the participant by the Company or any affiliate will vest on a pro-rated basis based on the number of full months of service completed during the applicable vesting period; provided, for any performance-based equity award, such award will vest also based on actual performance; and •
Notwithstanding anything to the contrary in the applicable equity award agreement, any vested stock option or stock appreciation right granted will expire on the earlier of the last day of the “Option Period” or “SAR Period” and the one year after the termination date. The right to receive payments and benefits under the Severance Plan is also subject to the participant’s delivery and non-revocation of a valid release of claims, a non-compete and non-solicitation agreement and any other document deemed appropriate by the administrator. Payments will be delayed until the | | | | 2024 Proxy Statement 57 | | | Shares Authorized | | | 21,170,212 shares of our Common Stock |
Named Executive Officer Compensation Tables
effectiveness of the release and as required by Section 409A of the Internal Revenue Code of 1986, as amended. Upon a determination by the administrator that the participant has engaged in Detrimental Activity (as defined in the Severance Plan), the payments and benefits under the Severance Plan will cease and prior payments and benefits would be subject to recovery. Mark Borseth Severance In connection with his employment agreement, Mr. Borseth received a guaranteed minimum bonus payment for 2023 of 75% of his target bonus, without proration (i.e. no less than $191,250). The Summary Compensation Table reflects the $191,250 as severance since he was not required to be employed as of the payout date, as required by the MIB Plan. | | | | 2024 Proxy Statement 58 | | | Award Types | | | Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Other Stock-Based Awards, and Other Cash-Based Award | | | Vesting | | | Minimum vesting period of one year for all new awards, with an exception for shares representing 5% of the share pool | | | Dividends and Distributions | | | No dividend payments or other distributions will be made on unvested shares subject to grants under the 2021 Omnibus Equity Plan, but instead any dividends will be deferred until the relevant awards become vested. No dividends and distributions will be accrued or paid on stock options and SARs | | | Additional Award Terms | | | Stock options and SARs have a term no longer than ten years from the date the options or SARs were granted, except in the case of incentive stock options granted to holders of more than 10% of the Company’s voting power, which have a term no longer than five years | | | Prohibition on Repricing | | | Repricing, or reducing the exercise price of outstanding options or any similar employee program, or buying out underwater options, without stockholder approval is prohibited under the 2021 Omnibus Equity Plan | | | Clawback | | | Awards may be subject to clawback or forfeiture upon specified detrimental activity by participant or if participant receives in excess of what should have been received (due to financial restatement, calculation mistake or other administrative error) | |
Administration
Our Compensation Committee administers the 2021 Omnibus Equity Plan. Our Compensation Committee has the authority to determine the terms and conditions of awards granted under the 2021 Omnibus Equity Plan and to establish, amend, suspend or waive any rules or regulations relating to the 2021 Omnibus Equity Plan. Our Compensation Committee has full discretion to administer and interpret the 2021 Omnibus Equity Plan and to determine, among other things, the time or times at which the awards may be exercised and whether and under what circumstances an award may be exercised.
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Proposal Three: Amendment to the 2021 Omnibus Equity Incentive Plan
Number of Shares Authorized
Pursuant to the 2021 Omnibus Equity Plan, assuming the Amendment is approved, we will have reserved an aggregate 21,170,212 shares of our Common Stock for issuance of awards to be granted thereunder. 4,830,086 shares of our Common Stock may be issued with respect to incentive stock options under the 2021 Omnibus Equity Plan.
If any award granted under the 2021 Omnibus Equity Plan terminates, expires, or is cash-settled, canceled, forfeited, exchanged, or surrendered without having been exercised, vested, or settled, shares of our Common Stock subject to such award will again be made available for future grants. Shares of our Common Stock will not be made available for issuance under the 2021 Omnibus Equity Plan if: (i) they are tendered by participants, or withheld by us, as full or partial payment upon the exercise of options; (ii) they are reserved for issuance upon the grant of SARs, to the extent that the number of reserved shares of Common Stock exceeds the number of shares of Common Stock actually issued upon the exercise of the SARs; and (iii) they are withheld by, or otherwise remitted to, the Company to satisfy a participant’s tax withholding obligations upon the exercise of awards or receipt of shares of Common Stock granted under the 2021 Omnibus Equity Plan. The total number of awards that may be granted under the 2021 Omnibus Equity Plan cannot presently be determined.
Awards Available for Grant; Vesting
Under the 2021 Omnibus Equity Plan, our Compensation Committee may grant awards of non-qualified stock options, incentive (qualified) stock options, stock appreciation rights (“SARs”), restricted stock, RSUs, other stock-based awards, other cash-based awards or any combination of the foregoing. Awards may be granted under the 2021 Omnibus Equity Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity acquired by us or with which the Company combines, which are referred to herein as “Substitute Awards.”
Awards that settle in shares of Common Stock (excluding, for this purpose, any Substitute Awards) shall vest no earlier than the first anniversary of the date of grant for such award; provided, that our Compensation Committee may grant awards without regard to the foregoing minimum vesting requirement with respect to a maximum of 5% of the shares of Common Stock subject to the share pool.
Eligibility
Any current employee (other than an employee covered by a collective bargaining agreement), director, or officer of the Company or a subsidiary or consultants or advisors of the Company or an affiliate or any prospective director, officer, consultant or advisor who has accepted an offer of employment or service from the Company or subsidiary who is selected by our Compensation Committee is eligible for awards under the 2021 Omnibus Equity Plan. Our Compensation Committee has the sole and complete authority to determine who may be granted an award under the 2021 Omnibus Equity Plan.
Non-Employee Director Compensation Limit
Under the 2021 Omnibus Equity Plan, the maximum grant date fair value of cash and equity awards that may be awarded to a non-employee director during any one fiscal year, taken together with any cash fees paid to such non-employee director during such fiscal year, is $750,000.
Change in Capitalization
If there is a change in our capitalization in the event of a stock or extraordinary cash dividend, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of our Common Stock or other relevant change in capitalization or applicable law or circumstances, such that our Compensation Committee determines that an adjustment to the terms of the 2021 Omnibus Equity Plan (or awards thereunder) is necessary or
Certain Relationships and Related Party Transactions | | | | 2023 Proxy Statement 62 | |
Proposal Three: Amendment to the 2021 Omnibus Equity Incentive Plan
appropriate, then our Compensation Committee shall make adjustments in a manner that it deems equitable. Such adjustments may be to the number of shares reserved for future issuance under the 2021 Omnibus Equity Plan, the number of shares covered by awards then outstanding under the 2021 Omnibus Equity Plan, the limitations on awards under the 2021 Omnibus Equity Plan, the exercise price of outstanding options, or such other equitable substitution or adjustments as our Compensation Committee may determine appropriate.
Stock Options
Our Compensation Committee is authorized to grant options to purchase shares of our Common Stock that are either “qualified,” meaning they are intended to satisfy the requirements of Section 422 of the Code for incentive stock options, or “non-qualified,” meaning they are not intended to satisfy the requirements of Section 422 of the Code. All options granted under the 2021 Omnibus Equity Plan shall be non-qualified unless the applicable award agreement expressly states that the option is intended to be an incentive stock option. Options granted under the 2021 Omnibus Equity Plan are subject to the terms and conditions established by our Compensation Committee. Under the terms of the 2021 Omnibus Equity Plan, the exercise price of the options will not be less than the fair market value (or 110% of the fair market value in the case of a qualified option granted to a 10% stockholder) of our Common Stock at the time of grant (except with respect to Substitute Awards). Options granted under the 2021 Omnibus Equity Plan are subject to such terms, including the exercise price and the conditions and timing of exercise, as may be determined by our Compensation Committee and specified in the applicable award agreement. The maximum term of an option granted under the 2021 Omnibus Equity Plan is ten years from the date of grant (or five years in the case of a qualified option granted to a 10% stockholder), provided that if the term of a non-qualified option would expire at a time when trading in the shares of our Common Stock is prohibited by the Company’s insider trading policy, the option’s term shall be extended automatically until the 30th day following the expiration of such prohibition (as long as such extension shall not violate Section 409A of the Code). Payment in respect of the exercise of an option may be made in cash, by check, by cash equivalent and/or by delivery of shares of our Common Stock valued at the fair market value at the time the option is exercised, or any combination of the foregoing, provided that such shares are not subject to any pledge or other security interest, or by such other method as our Compensation Committee may permit in its sole discretion, including (i) by delivery of other property having a fair market value equal to the exercise price and all applicable required withholding taxes, (ii) if there is a public market for the shares of our Common Stock at such time, by means of a broker-assisted cashless exercise mechanism or (iii) by means of a “net exercise” procedure effected by withholding the minimum number of shares otherwise deliverable in respect of an option that are needed to pay the exercise price and all applicable required withholding taxes. In all events of cashless or net exercise, any fractional shares of our Common Stock will be settled in cash.
SARs
Our Compensation Committee is authorized to award SARs under the 2021 Omnibus Equity Plan. SARs are subject to the terms and conditions established by our Compensation Committee. A SAR is a contractual right that allows a participant to receive, in the form of either cash, shares or any combination of cash and shares, the appreciation, if any, in the value of a share over a certain period of time. An option granted under the 2021 Omnibus Equity Plan may include SARs, and SARs may also be awarded to a participant independent of the grant of an option. SARs granted in connection with an option shall be subject to terms similar to the option corresponding to such SARs, including with respect to vesting and expiration. Except as otherwise provided by our Compensation Committee (in the case of Substitute Awards or SARs granted in tandem with previously granted options), the strike price per share of our Common Stock underlying each SAR shall not be less than 100% of the fair market value of such share, determined as of the date of grant and the maximum term of a SAR granted under the 2021 Omnibus Equity Plan will be ten years from the date of grant; provided that if the term of a SAR would expire at a time when trading in the shares of our Common Stock is prohibited by the Company’s insider trading policy, the SAR’s term shall
Other than compensation arrangements for our executive officers and directors (see “Named Executive Officer Compensation”, “Named Executive Officer Compensation Tables” and “Director Compensation” for a discussion of compensation arrangements for our named executive officers and directors), the following includes a summary of transactions since January 1, 2023 and any currently proposed transactions to which we have been or are to be a party in which: | | | | 2023 Proxy Statement 63 | |
Proposal Three: Amendment to the 2021 Omnibus Equity Incentive Plan•
be extended automatically until the 30th day following the expiration of such prohibition (as long as such extension shall not violate Section 409A of the Code).
Restricted Stock
Our Compensation Committee is authorized to grant restricted stock under the 2021 Omnibus Equity Plan, which is subject to the terms and conditions established by our Compensation Committee. Restricted stock is common stock that is generally non-transferable and is subject to other restrictions determined by our Compensation Committee for a specified period. Any accumulated dividends will be payable at the same time that the underlying restricted stock vests.
RSUs
Our Compensation Committee is authorized to grant RSUs, which are subject to the terms and conditions established by our Compensation Committee. RSUs, once vested, may be settled in a number of shares of our Common Stock equal to the number of units earned, in cash equal to the fair market value of the number of shares of our Common Stock earned in respect of such RSU award or in a combination of the foregoing, at the election of our Compensation Committee. RSUs may be settled at the expiration of the period over which the units are to be earned or at a later date selected by our Compensation Committee. To the extent provided in an award agreement, the holder of outstanding RSUs shall be entitled to be credited with dividend equivalent payments upon the payment by us of dividends on shares of our Common Stock, either in cash or, at the sole discretion of our Compensation Committee, in shares of our Common Stock having a fair market value equal to the amount of such dividends (or a combination of cash and shares), and interest may, at the sole discretion of our Compensation Committee, be credited on the amount of cash dividend equivalents at a rate and subject to such terms as determined by our Compensation Committee, which accumulated dividend equivalents (and interest thereon, if applicable) shall be payable at the same time that the underlying RSUs are settled and if such RSUs are forfeited, the holder thereof shall have no right to such dividend equivalent payments.
Other Stock-Based Awards and Other Cash-Based Awards
Our Compensation Committee is authorized to grant awards of unrestricted shares of our Common Stock, rights to receive grants of awards at a future date, other awards denominated in shares of our Common Stock, or awards that provide for cash payments based in whole or in part on the value of our Common Stock under such terms and conditions as our Compensation Committee may determine and as set forth in the applicable award agreement.
Effect of a Change in Control
In the event of a Change in Control (as defined in the 2021 Omnibus Equity Plan), our Compensation Committee may provide for: (i) continuation or assumption of outstanding awards under the 2021 Omnibus Equity Plan by the Company (if it is the surviving corporation) or by the surviving corporation or its parent; (ii) substitution by the surviving corporation or its parent of awards with substantially the same terms and value for such outstanding awards (in the case of an option or SAR, the Intrinsic Value (as defined in the 2021 Omnibus Equity Plan) at grant of such substitute award shall equal the Intrinsic Value of the award); (iii) acceleration of the vesting (including the lapse of any restrictions, with any performance criteria or other performance conditions deemed met at target) or right to exercise such outstanding awards immediately prior to or as of the date of the Change in Control, and the expiration of such outstanding awards to the extent not timely exercised by the date of the Change in Control or other date thereafter designated by our Compensation Committee; or (iv) in the case of an option or SAR, cancelation in consideration of a payment in cash or other consideration to the holder of such award in an amount equal to the Intrinsic Value of such award (which may be equal to but not less than zero), which, if in excess of zero, shall be payable upon the effective date of such Change in Control. Our Compensation Committee may, in its
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Proposal Three: Amendment to the 2021 Omnibus Equity Incentive Plan
sole discretion, terminate any options or SARs for which the exercise or strike price is equal to or exceeds the per share value of the consideration to be paid in the Change in Control transaction without payment of consideration therefor.
Nontransferability
Each award may be exercised during the participant’s lifetime by the participant or, if permissible under applicable law, by the participant’s guardian or legal representative. No award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a participant other than by will or by the laws of descentthe amounts involved exceeded or will exceed $120,000; and distribution unless our Compensation Committee permits the award to be transferred to a Permitted Transferee (as defined in the 2021 Omnibus Equity Plan). In no event may any option or SAR be transferable for value or to any third-party financial institutions without stockholder approval.
Term; Suspensions, Terminations and Amendments
The 2021 Omnibus Equity Plan has a term of ten years from April 13, 2021, the date it was initially approved by our stockholders. Our Board may amend, suspend or terminate the 2021 Omnibus Equity Plan at any time, subject to stockholder approval if necessary to comply with any tax regulation, exchange rules, or other applicable regulatory requirement. No amendment, suspension or termination will materially and adversely affect the rights of any participant or recipient of any award without the consent of the participant or recipient.
Our Compensation Committee may, to the extent consistent with the terms of any applicable award agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate any award theretofore granted or the associated award agreement, prospectively or retroactively; provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any participant with respect to any award theretofore granted will not to that extent be effective without the consent of the affected participant; and provided further that, without stockholder approval: (i) no amendment or modification may reduce the exercise price of any option or the strike price of any SAR; (ii) our Compensation Committee may not cancel any outstanding option and replace it with a new option (with a lower exercise price) or cancel any SAR and replace it with a new SAR (with a lower strike price) or, in each case, with another award or cash in a manner that would be treated as a repricing (for compensation disclosure or accounting purposes); (iii) our Compensation Committee may not take any other action considered a repricing for purposes of the stockholder approval rules of the applicable securities exchange on which our common shares are listed; and (iv) our Compensation Committee may not cancel any outstanding option or SAR that has a per-share exercise price or strike price (as applicable) at or above the fair market value of a share of our Common Stock on the date of cancellation and pay any consideration to the holder thereof. However, stockholder approval is not required with respect to clauses (i), (ii), (iii) and (iv) above with respect to certain adjustments on changes in capitalization.
Clawback/Forfeiture
Our Compensation Committee may cancel an equity award if the participant, without our consent, has engaged in or engages in activity that is in conflict with or adverse to the interest of the Company or any Affiliate (as defined in the 2021 Omnibus Equity Plan) while employed by, or otherwise providing services to, the Company or any Affiliate, including fraud or conduct contributing to any financial restatements or irregularities, or violates the restrictive covenants set forth therein (including noncompetition, non- solicitation, non-disparagement or non-disclosure covenant or agreement) or any similar restrictive covenant agreement with the Company or any Affiliate (after giving effect to any applicable cure period set forth therein). In such event, the participant will forfeit any compensation, gain or other value realized thereafter on the vesting, exercise or settlement of the equity award, the sale or other transfer of the equity award, or the sale of shares of Common Stock acquired in respect of the equity award, and must promptly repay such amounts to the Company. If the participant receives any amount in excess of what the
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Proposal Three: Amendment to the 2021 Omnibus Equity Incentive Plan
participant should have received under the terms of the equity award for any reason (including without limitation by reason of a financial restatement, mistake in calculations or other administrative error), all as determined by our Compensation Committee, then the participant must promptly repay any such excess amount to the Company. Further, to the extent required by applicable law (including, without limitation, Section 304 of the Sarbanes-Oxley Act and Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act) and/or the rules and regulations of the NASDAQ or any other securities exchange or inter-dealer quotation service on which our Common Stock is listed or quoted, or if so required pursuant to a written policy adopted by the Company. Awards shall be subject (including on a retroactive basis) to clawback, forfeiture or similar requirements.
Federal Income Tax Consequences
The rules governing the tax treatment of awards are quite technical. Therefore, the description of the tax consequences set forth below is necessarily general in nature and does not purport to be complete. Moreover, the statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances. Finally, the tax consequences under applicable state and local income tax laws may not be the same as under the federal income tax laws.
Incentive (qualified) stock options granted pursuant to the 2021 Omnibus Equity Plan are intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code. If the participant makes no disposition of the shares acquired pursuant to exercise of an incentive option within one year after the transfer of shares to such participant and within two years from the grant of the option, the participant will realize no taxable income as a result of the grant or exercise of such option (except that the alternative minimum tax may apply), and any gain or loss that is subsequently realized upon disposition may be treated as long-term capital gain or loss, as the case may be. Under these circumstances, the Company will not be entitled to a deduction for federal income tax purposes with respect to either the issuance of such incentive options or the transfer of shares upon their exercise.
If shares subject to incentive stock options are disposed of prior to the expiration of the above time periods, the participant will recognize ordinary income in the year in which the disqualifying disposition occurs, the amount of which will generally be the lesser of (i) the excess of the market value of the shares on the date of exercise over the option price, or (ii) the gain recognized on such disposition. In general, such amount will be deductible by the Company for federal income tax purposes in the same year, as long as the amount constitutes reasonable compensation, and the Company must comply with certain federal income tax reporting requirements with respect to such amount. In addition, the excess, if any, of the amount realized on a disqualifying disposition over the market value of the shares on the date of exercise will be treated as capital gain.
A participant who acquires shares by exercise of a non-qualified stock option generally realizes, as taxable ordinary income at the time of exercise, the difference between the exercise price and the fair market value of the shares. In general, such amount will be deductible by the Company in the same year, provided that the amount constitutes reasonable compensation, and the Company must satisfy certain federal income tax withholding and reporting requirements with respect to such amount. Subsequent appreciation or decline in the value of the shares on the sale or other disposition of the shares will generally be treated as capital gain or loss.
A participant generally will recognize ordinary income upon the exercise of an SAR in an amount equal to the amount of cash received and the fair market value of any shares received at the time of settlement of the SAR, plus the amount of any taxes withheld. Such amount will ordinarily be deductible by the Company in the same year as long as the amounts constitute reasonable compensation, and the Company must satisfy certain federal income tax withholding and reporting requirements with respect to such amount.
A participant who is granted a restricted stock award under the 2021 Omnibus Equity Plan is not required to include the value of such shares in ordinary income until the first time such participant’s rights in the
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Proposal Three: Amendment to the 2021 Omnibus Equity Incentive Plan•
shares are transferable or are not subject to substantial risk of forfeiture, whichever occurs earlier, unless such participant timely files an election under Section 83(b) of the Code to be taxed on the receipt of the shares.
A participant who is granted an RSU award under the 2021 Omnibus Equity Plan is not required to include the value of such RSUs in ordinary income until such time the value of the RSUs is paid to the participant in cash or stock. In the case of either restricted stock or RSUs, the amount of such income will be equal to the fair market value of the shares or RSUs at the time the income is recognized. The Company will ordinarily be entitled to a deduction, in the amount of the ordinary income recognized by the participant, at the same time the participant recognizes such income, as long as the amount constitutes reasonable compensation, and the Company must satisfy certain federal income tax withholding and reporting requirements with respect to such amount.
A participant who is permitted to make an outright purchase of unrestricted Common Stock will recognize ordinary income at the time of purchase if and to the extent the purchase price is less than the fair market value of our Common Stock on the date of purchase. The Company will be entitled to a corresponding deduction equal to the amount of any ordinary income recognized by a participant who makes an outright purchase of our Common Stock, at the time the participant recognizes the ordinary income, provided that such amount constitutes reasonable compensation, and the Company must satisfy certain federal income tax withholding and reporting requirements with respect to such amount.
Section 162(m) of the Code denies a deduction to any publicly held corporation for compensation paid to certain covered employees in a taxable year to the extent such compensation exceeds $1,000,000. For this purpose, a covered employee generally means the Company’s principal executive officer, the Company’s principal financial officer and the Company’s three highest compensated officers (other than the principal executive officer and the principal financial officer). It is possible that compensation attributable to awards under the 2021 Omnibus Equity Plan to a covered employee, when combined with all other types of compensation received by the covered employee from the Company, may cause this limitation to be exceeded in any particular year.
The foregoing general tax discussion is intended for the information of stockholders considering how to vote with respect to this proposal and not as tax guidance to participants in the 2021 Omnibus Equity Plan. Different tax rules may apply to specific participants and transactions under the 2021 Omnibus Equity Plan.
Withholding Payments
A participant is required to pay to the Company and the Company shall have the right to withhold, from any cash, shares of Common Stock, other securities or other property deliverable under any award or from any compensation of other amounts owing to the participant, an amount of any required withholding taxes (up to the maximum permissible withholding amounts) in respect to such award, its exercise, or any payment or transfer of an award or under the 2021 Omnibus Equity Plan and to take other actions that our Compensation Committee or the Company deem necessary to satisfy all obligations for the payment of such withholding.
Our Compensation Committee may, in its discretion, permit the participant to satisfy such withholding obligations by, in whole or in part: (i) payment in cash; (ii) delivery of shares of our Common Stock owned by the participant having a fair market value on such date equal to such withholding obligation; or (iii) having the Company withhold from the number of shares of our Common Stock otherwise issuable or deliverable pursuant to the exercise or settlement of an award a number of shares of our Common Stock with a fair market value on such date equal to such withholding obligation. Subject to any requirements of applicable law, a participant may also satisfy the withholding obligations by other methods, including selling shares of our Common Stock that would be otherwise available for delivery, provided that our Compensation Committee has specifically approved such payment method in advance.
| | | | 2023 Proxy Statement 67 | |
Proposal Three: Amendment to the 2021 Omnibus Equity Incentive Plan
Equity Compensation Plans
The following table sets forth certain information as of December 31, 2022 concerning our equity compensation plans.
| Plan Category | | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)(1) | | | Weighted-average exercise price of outstanding options, warrants and rights ($)(b)(2) | | | Number of securities remaining available for further issuance under equity compensation plans (excluding securities reflected in column (a) (c)(3) | | | Equity compensation plans approved by stockholders | | | | | 2,770,540 | | | | | | 14.85 | | | | | | 2,059,546 | | | | Equity compensation plans not approved by stockholders | | | | | — | | | | | | — | | | | | | — | | | | Total | | | | | 2,770,540 | | | | | | 14.85 | | | | | | 2,059,546 | | |
(1)
Consists of stock options to purchase 1,914,690 shares and 855,870 RSUs granted under the 2021 Omnibus Equity Plan.
(2)
Excludes RSUs, which have no exercise price.
(3)
Consists of shares of Common Stock that may be issued pursuant to awards under the 2021 Omnibus Equity Plan as of December 31, 2022 prior to the Amendment.
As of December 31, 2022, there were 2,576,219 shares of unvested, restricted stock awards outstanding. No shares of restricted stock were granted during 2022. 8,340,126 shares of restricted stock awards were granted in 2021.
Additional Equity Plan Information
The following table provides certain additional information regarding the 2021 Omnibus Equity Plan as of March 6, 2023 and pro forma as of March 6, 2023 assuming that the Contingent Grants are outstanding.
| Plan Category | | | As of March 6, 2023 | | | Pro forma as of March 6, 2023 | | | Total stock options outstanding | | | 1,904,852 | | | 1,904,852 | | | Weighted-average exercise price of stock options outstanding | | | $14.83 per share | | | $14.83 per share | | | Weighted-average remaining duration of stock options outstanding | | | 8.78 years | | | 8.78 years | | | Total SARs outstanding | | | — | | | 790,181 | | | Weighted-average strike price of SARs outstanding | | | — | | | $3.24 per share | | | Weighted-average remaining duration of SARs outstanding | | | — | | | 10 years | | | Total unvested restricted stock outstanding | | | 2,576,219 | | | 2,576,219 | | | Total RSUs outstanding | | | 2,397,830 | | | 2,397,830 | | | Total shares available for grant under the 2021 Omnibus Equity Plan | | | 289,475(1) | | | (2) | | | Percentage of outstanding shares of Common Stock(3) | | | 6.3% | | | 6.7% | |
(1)
Shares of our Common Stock available for grant under the 2021 Omnibus Equity Plan as of March 6, 2023, excluding the Contingent Grants.
any of our directors, director nominees, executive officers or holders of more than 5% of our capital stock or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest. | | | | 2023 Proxy Statement 68 | |
Proposal Three: Amendment to the 2021 Omnibus Equity Incentive Plan
(2)
Pro forma shares of our Common Stock available for grant under the 2021 Omnibus Equity Plan as of March 6, 2023 is 7,499,294 shares, solely reflecting (i) shares of our Common Stock available for grant as of March 6, 2023, and (ii) stockholder approval of the Amendment to increase the share pool by 8,000,000 shares of our Common Stock at our Annual Meeting and including the Contingent Grants as a result of such approval.
(3)
Percentage represents (i) grants outstanding plus shares of our Common Stock available for grant, each under the 2021 Omnibus Equity Plan, divided by (ii) total shares of our Common Stock outstanding as of the record date.
Interests of Directors and Executive Officers; New Benefits under the Plan Resulting From the Amendment
All non-employee directors, executive officers, and other employees who are deemed to be key employees under the 2021 Omnibus Equity Plan are eligible for awards under the 2021 Omnibus Equity Plan. Consequently, each current director and each current executive officer has a personal interest in the approval of the Amendment. However, except with respect to the Contingent Grants set forth in the table below, the actual benefit and number of shares to be issued to the non-employee directors, executive officers, and other employees under the 2021 Omnibus Equity Plan if the Amendment is approved cannot be determined at this time because awards to be made under the 2021 Omnibus Equity Plan have not been determined or granted and are not determinable using an objective formula. No additional benefits or amounts would have been awarded to directors, executive officers, non-executive officers and employees during the fiscal year ended December 31, 2022 if the Amendment had been in effect during such period.
New Plan Benefits
The following Contingent Grants were made effective March 1, 2023, and are subject to stockholder approval of the Amendment as described in this Proposal Three. SARs were only granted to executive officers of the Company as of such date.
| Name and Position | | | Grant Value ($) | | | SARs (#) | | | Vesting Terms | | | Scott M. Rajeski | | | | | 337,500 | | | | | | 222,039 | | | | Four years, pro rata annual vesting | | | Sanjeev Bahl | | | | | 157,500 | | | | | | 103,618 | | | | Four years, pro rata annual vesting | | | Executive Officers | | | | | 706,077 | | | | | | 464,524 | | | | Four years, pro rata annual vesting | |
| Our Board unanimously recommends that our stockholders vote “FOR” the approval of the Amendment to the Latham Group, Inc. 2021 Omnibus Equity Incentive Plan | |
| Technology ServicesAlexander L. Hawkinson, a co-founder of BrightAI Corporation, served on our Board from December 9, 2020 to February 21, 2024. Since 2020, BrightAI Corporation has rendered services to the Company in connection with the development of Measure by Latham, an advanced, artificial intelligence-powered device that measures swimming pools for covers and vinyl liners. In December 2022, we executed an additional agreement with BrightAI Corporation for the provision of hardware that will run the technology developed by BrightAI and Latham. During 2023, we paid $2.4 million of fees associated with services performed by BrightAI. As of December 31, 2023, we had de minimis accounts payable owed to BrightAI. In 2024, we executed an amendment to the statement of work under the services agreement with BrightAI Corporation in order to establish certain project milestones and deliverables. Stockholders’ Agreement We entered into the Stockholders’ Agreement with our Principal Stockholders on April 27, 2021. The Stockholders’ Agreement grants Pamplona the right to nominate to our Board a number of designees equal to: (i) at least a majority of the total number of directors comprising our Board as long as Pamplona and its affiliates collectively beneficially own at least 50% of the outstanding shares of our Common Stock; (ii) at least 40% of the total number of directors comprising our Board as long as Pamplona and its affiliates collectively beneficially own at least 40% but less than 50% of the outstanding shares of our Common Stock; (iii) at least 30% of the total number of directors comprising our Board as long as Pamplona and its affiliates collectively beneficially own at least 30% but less than 40% of the outstanding shares of our Common Stock; (iv) at least 20% of the total number of directors comprising our Board at such time as long as Pamplona and its affiliates collectively beneficially own at least 20% but less than 30% of the outstanding shares of our Common Stock; and (v) at least 10% of the total number of directors comprising our Board at such time as long as Pamplona and its affiliates collectively beneficially own at least 5% but less than 20% of the outstanding shares of our Common Stock. So long as Pamplona has the right to designate at least one director to our Board, Pamplona will have the right to appoint a representative as an observer to any committee of our Board to which Pamplona does not have a member representative, subject to applicable laws and the rules and regulations of Nasdaq. | | | 2023 Proxy Statement 69 | |
| | | | 2024 Proxy Statement 59 | |
Certain Relationships and Related Party Transactions Other than compensation arrangements for our executive officers and directors (see “Named Executive Officer Compensation”, “Named Executive Officer Compensation Tables” and “Director Compensation” for a discussion of compensation arrangements for our named executive officers and directors), the following includes a summary of transactions since January 1, 2022 and any currently proposed transactions to which we have been or are to be a party in which:
•
the amounts involved exceeded or will exceed $120,000; and
•
any of our directors, director nominees, executive officers or holders of more than 5% of our capital stock or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest.
Purchases from Equity Holders
On January 11, 2022, we completed an offering of 13,800,000 shares of our Common Stock at a public offering price of $19.50 per share. We received proceeds of $257.7 million from this offering, net of $11.4 million of underwriting fees. The proceeds of $257.7 million were used to purchase 13,800,000 shares of Common Stock from certain of the Company’s stockholders, primarily investment funds managed by the Principal Stockholders, and also a small percentage of shares of Common Stock owned by some of our directors and executive officers.
The following table sets forth the number of shares purchased from (for $19.45 per share), and the cash proceeds received by, each of our Principal Stockholders, our directors and executive officers (as of such date) as a result of this offering.
| Name | | | Number of Shares of Common Stock Sold to Us | | | Cash Proceeds ($) | | | Pamplona Funds | | | | | 9,630,896 | | | | | | 187,320,927 | | | | Wynnchurch Funds | | | | | 2,783,397 | | | | | | 54,137,072 | | | | Scott M. Rajeski | | | | | 344,487 | | | | | | 6,700,272 | | | | J. Mark Borseth | | | | | 77,599 | | | | | | 1,509,301 | | | | Joel R. Culp | | | | | 35,412 | | | | | | 688,763 | | | | James E. Cline | | | | | — | | | | | | — | | | | Robert D. Evans | | | | | — | | | | | | — | | | | Alexander L. Hawkinson | | | | | — | | | | | | — | | | | Mark P. Laven | | | | | 100,000 | | | | | | 1,945,000 | | | | Suzan Morno-Wade | | | | | — | | | | | | — | | | | Christopher P. O’Brien | | | | | — | | | | | | — | | | | William M. Pruellage | | | | | — | | | | | | — | | | | Andrew D. Singer | | | | | — | | | | | | — | | | | Other executive officers (2 persons) | | | | | 49,626 | | | | | | 965,271 | | |
Technology Services
Alexander L. Hawkinson, a co-founder of BrightAI Corporation, has served on our Board since December 9, 2020. Since 2020, BrightAI Corporation has rendered services to the Company in connection with the
| | | | 2023 Proxy Statement 70 | |
Certain Relationships and Related Party Transactions
development of Measure by Latham, an advanced, artificial intelligence-powered device that measures swimming pools for covers and vinyl liners. In December 2022, we executed an additional agreement with BrightAI Corporation for the provision of hardwareFor purposes of calculating the number of directors that Pamplona and its affiliates are entitled to nominate pursuant to the formulas outlined above, any fractional amounts would be rounded up to the nearest whole number and taking into account any increase in the size of our Board (e.g., one and one quarter (1 1/4) directors will equate to two directors). In addition, in the event a vacancy on our Board is created by the death, retirement or resignation of a Principal Stockholders’ director designee, affiliates of our Principal Stockholders will, run the technology developed by BrightAI and Latham. During 2022, we paid $0.2 million of fees associated with services performed by BrightAI. As of December 31, 2022, we had accounts payable of $0.4 million owed to BrightAI. Stockholders’ Agreement
We entered into the Stockholders’ Agreement with our Principal Stockholders on April 27, 2021. The Stockholders’ Agreement grants Pamplona the right to nominate to our Board a number of designees equal to: (i) at least a majority of the total number of directors comprising our Board as long as Pamplona and its affiliates collectively beneficially own at least 50% of the outstanding shares of our Common Stock; (ii) at least 40% of the total number of directors comprising our Board as long as Pamplona and its affiliates collectively beneficially own at least 40% but less than 50% of the outstanding shares of our Common Stock; (iii) at least 30% of the total number of directors comprising our Board as long as Pamplona and its affiliates collectively beneficially own at least 30% but less than 40% of the outstanding shares of our Common Stock; (iv) at least 20% of the total number of directors comprising our Board at such time as long as Pamplona and its affiliates collectively beneficially own at least 20% but less than 30% of the outstanding shares of our Common Stock; and (v) at least 10% of the total number of directors comprising our Board at such time as long as Pamplona and its affiliates collectively beneficially own at least 5% but less than 20% of the outstanding shares of our Common Stock.
So long as Pamplona has the right to designate at least one director to our Board, Pamplona will have the right to appoint a representative as an observer to any committee of our Board to which Pamplona does not have a member representative, subject to applicable laws and the rules and regulations of NASDAQ.
For purposes of calculating the number of directors that Pamplona and its affiliates are entitled to nominate pursuant to the formulas outlined above, any fractional amounts would be rounded up to the nearest whole number and taking into account any increase in the size of our Board (e.g., one and one quarter (1 1/4) directors shall equate to two directors). In addition, in the event a vacancy on our Board is created by the death, retirement or resignation of a Principal Stockholders’ director designee, affiliates of our Principal Stockholders shall, to the fullest extent permitted by law, have the right to have the vacancy filled by a new respective Principal Stockholders’ director-designee. Dane Derbyshire, Robert D. Evans, Mark P. Laven, Brian Pratt and William M. Pruellage are the current designees of Pamplona under the Stockholders’ Agreement.
In addition, the Stockholders’ Agreement grants to Pamplona special governance rights for as long as Pamplona and its affiliates collectively maintain beneficial ownership of at least 25% of our outstanding Common Stock, including, but not limited to, rights of approval over certain strategic transactions such as mergers or other transactions involving a change in control, and certain rights regarding the appointment or termination of our chief executive officer.
The Stockholders’ Agreement grants Wynnchurch the right to nominate to our Board one director at such time as long as Wynnchurch and its affiliates beneficially own at least 5% of the outstanding shares of our Common Stock. So long as Wynnchurch has the right to designate a director to our Board, Wynnchurch will have the right to appoint a representative as an observer to any committee of our Board, subject to applicable laws and the rules and regulations of NASDAQ. In connection with the resignation of Christopher O’Brien from our Board on July 20, 2022, Wynnchurch irrevocably waived all their rights under Section 2.1 of the Stockholders Agreement, including, without limitation, the right to nominate a director, remove a designee, fill a vacancy and appoint an observer to our Board. Wynnchurch has also entered into a voting agreement under which they and their affiliates committed not to vote more than 9.9% shares of our outstanding Common Stock owned by Wynnchurch and their affiliates from July 20, 2022 until the date, if any, that Wynnchurch and their affiliates own more than 50% of shares of our outstanding Common Stock.
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Certain Relationships and Related Party Transactions
The Stockholders’ Agreement also requires us to reimburse the reasonable out-of-pocket costs and expenses of the Principal Stockholders and their affiliates in connection with monitoring and overseeing their investment in us. During 2022, $0.2 million and less than $0.1 million was paid to Pamplona and Wynnchurch, respectively, with respect to this obligation. As of December 31, 2022, less than $0.1 millionOn July 20, 2022, Wynnchurch irrevocably waived all their rights under Section 2.1 of the Stockholders’ Agreement, including, without limitation, the right to nominate a director, remove a designee, fill a vacancy and appoint an observer to our Board. Wynnchurch has also entered into a voting agreement under which they and their affiliates committed not to vote more than 9.9% shares of our outstanding Common Stock owned by Wynnchurch and their affiliates from July 20, 2022 until the date, if any, that Wynnchurch and their affiliates own more than 50% of shares of our outstanding Common Stock.
The Stockholders’ Agreement also requires us to reimburse the reasonable out-of-pocket costs and expenses of the Principal Stockholders and their affiliates in connection with monitoring and overseeing their investment in us. During 2023, $0 and $210,012 was paid to Pamplona and Wynnchurch, respectively, with respect to this obligation. As of December 31, 2023, no amount was payable to Pamplona with respect to this obligation. This obligation will terminate with respect to each of our Principal Stockholders once such Principal Stockholder beneficially owns less than 5% of our Common Stock. Registration Rights Agreement We entered into a registration rights agreement (the “Registration Rights Agreement”) with Pamplona Fund and Wynnchurch Funds (each, a “Registration Party”) on April 27, 2021, pursuant to which each Registration Party is entitled to demand the registration of the sale of certain or all of our Common Stock that it beneficially owns. Among other things, under the terms of the Registration Rights Agreement: •
if we propose to file certain types of registration statements under the Securities Act of 1933, as amended (the “Securities Act”) with respect to an offering of equity securities, we will be required to use our reasonable best efforts to offer each Registration Party the opportunity to register the sale of all or part of its shares on the terms and conditions set forth in the Registration Rights Agreement (customarily known as “piggyback rights”); and •
Each Registration Party has the right, subject to certain conditions and exceptions, to request that we file (i) registration statements with the SEC for one or more underwritten offerings of all or part of our shares of Common Stock that it beneficially owns and/or (ii) a shelf registration statement that includes all or part of our shares of Common Stock that it beneficially owns as soon as we become eligible to register the sale of our securities on Form S-3 under the Securities Act, and we are required to cause any such registration statements to be filed with the SEC, and to become effective, as promptly as reasonably practicable. All expenses of registration under the Registration Rights Agreement, including the legal fees of one counsel retained by or on behalf of the Registration Parties, will be paid by us. The registration rights granted in the Registration Rights Agreement are subject to customary restrictions such as minimums, blackout periods and, if a registration is underwritten, any limitations on the number of shares to be included in the underwritten offering as reasonably advised by the managing underwriter. The Registration Rights Agreement also contains customary indemnification and contribution provisions. The Registration Rights Agreement is governed by New York law. Indemnification Agreement We entered into indemnification agreements with each of our current directors and executive officers. These agreements require us to indemnify these individuals to the fullest extent permitted under Delaware | | | | 2024 Proxy Statement 60 | |
Certain Relationships and Related Party Transactions
law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We also intend to enter into indemnification agreements with our future directors and executive officers. Policies and Procedures for Related Party Transactions We have adopted a written Related Persons Transaction Policy, (the “policy”), which sets forth our policy with respect to the review, approval, ratification and disclosure of all material related person transactions by our Audit Committee. In accordance with the policy, our Audit Committee has overall responsibility for implementation of and compliance with the policy. For purposes of the policy, a “related person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we were, are or will be a | | | | 2023 Proxy Statement 72 | |
Certain Relationships and Related Party Transactions
participant and the amount involved exceeded, exceeds or will exceed $120,000 and in which any related person (as defined in the policy) had, has or will have a direct or indirect material interest. A “related person transaction” does not include any employment relationship or transaction involving an executive officer and any related compensation resulting solely from that employment relationship that has been reviewed and approved by our Board or Audit Committee. The policy requires that notice of a proposed related person transaction be provided to our legal department prior to entry into such transaction. If our legal department determines that such transaction is a related person transaction, the proposed transaction will be submitted to our Audit Committee for consideration. Under the policy, our Audit Committee may approve only those related person transactions that are in, or not inconsistent with, our best interests and the best interests of our stockholders. In the event that we become aware of a related person transaction that has not been previously reviewed, approved or ratified under the policy and that is ongoing or is completed, the transaction will be submitted to our Audit Committee so that it may determine whether to ratify, rescind or terminate the related person transaction. The policy also provides that our Audit Committee review certain previously approved or ratified related person transactions that are ongoing to determine whether the related person transaction remains in our best interests and the best interests of our stockholders. Additionally, we make periodic inquiries of directors and executive officers with respect to any potential related person transaction of which they may be a party or of which they may be aware. | | | | 20232024 Proxy Statement 7361 | |
Security Ownership of Certain Beneficial Owners and Management The following table sets forth information relating to the beneficial ownership of our Common Stock as of March 6, 2023,2024, referred to in the table below as the “Beneficial Ownership Date”“beneficial ownership date” by the following: •
Each person, or group of affiliated persons, who we know to beneficially own more than 5% of our Common Stock; •
Each of our named executive officers for fiscal year 2022;2023; •
Each of our current directors;
•
Each of ourdirectors and director nominees; and
•
All of our current directors and executive officers as a group. Percentage ownership of our Common Stock is based on 114,678,263114,988,676 shares of Common Stock outstanding as of March 6, 2023.2024. Beneficial ownership is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to such securities. Except as otherwise indicated, all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. Unless otherwise indicated, the address of each person or entity named in the table below is 787 Watervliet Shaker Road, Latham, New York 12110. | Name of Beneficial Owner | | Shares Beneficially Owned (1) | | Percentage of Shares Beneficially Owned | | Name of Beneficial Owner | | Shares Beneficially Owned (1) | | Percentage of Shares Beneficially Owned | | | 5% Stockholders: | | | | | | | | | | | | 5% Stockholders: | | | | | | | | | | | | | Pamplona Funds (2) | | | | 51,845,685 | | | | | 45.2% | | | Pamplona Funds (2) | | | | 51,845,685 | | | | | 45.1% | | | | Wynnchurch Funds (3) | | | | 14,983,771 | | | | | 13.1% | | | Wynnchurch Funds (3) | | | | 14,983,771 | | | | | 13.0% | | | | Kayne Anderson Rudnick Investment Management LLC (4) | | | | 5,924,563 | | | | | 5.2% | | | Named Executive Officers and Directors: | | | | | | | | | | | | | Named Executive Officers and Directors: | | | | | | | | | | | | Scott M. Rajeski (4) | | | | 4,407,312 | | | | | 3.8% | | | | Scott M. Rajeski (5) | | | | 4,205,245 | | | | | 3.7% | | | J. Mark Borseth | | | | 778,054 | | | | | * | | | | Sanjeev Bahl | | | | 26,734 | | | | | * | | | Joshua D. Cowley | | | | 235,977 | | | | | * | | | | Robert L. Masson II (6) | | | | — | | | | | — | | | Patrick M. Sheller | | | | 84,357 | | | | | * | | | | James E. Cline (7) | | | | 572,632 | | | | | * | | | James E. Cline (5) | | | | 674,933 | | | | | * | | | | Dane Derbyshire | | | | — | | | | | — | | | Robert D. Evans | | | | 697,420 | | | | | * | | | | Robert D. Evans | | | | 666,040 | | | | | * | | | DeLu Jackson | | | | 31,380 | | | | | * | | | | Alexander L. Hawkinson | | | | 493,907 | | | | | * | | | Mark P. Laven (6) | | | | 1,473,628 | | | | | 1.3% | | | | Mark P. Laven (8) | | | | 1,442,248 | | | | | 1.3% | | | Suzan Morno-Wade | | | | 59,219 | | | | | * | | | | Suzan Morno-Wade | | | | 20,575 | | | | | * | | | Brian Pratt | | | | — | | | | | * | | | | William M. Pruellage | | | | — | | | | | — | | | William M. Pruellage | | | | — | | | | | * | | | | All current directors and executive officers as a group (16 persons) | | | | 9,838,517 | | | | | 8.6% | | | All current directors and executive officers as a group (13 persons) | | | | 8,798,209 | | | | | 7.6% | | |
*
Less than one percent. | | | | 20232024 Proxy Statement 7462 | |
Security Ownership of Certain Beneficial Owners and Management
*
Less than one percent.
(1)
Includes the following number of shares that the following persons could acquire through the exercise of stock options and SARs within 60 days of March 6, 20232024 and RSUs scheduled to vest within 60 days of March 6, 2023:2024: Mr. Rajeski, 112,344 options;190,051 options and 55,509 SARs; Mr. Bahl, 20,099 options;Cowley, 126,336 options and 36,513 SARs; Mr. Sheller, 27,149 options and 25,904 SARs; Mr. Cline, 10,17052,301 RSUs; Mr. Evans, 6,10231,380 RSUs; Mr. Hawkinson, 6,102Jackson, 31,380 RSUs; Mr. Laven, 6,10231,380 RSUs; Ms. Morno-Wade, 11,36536,644 RSUs; and all directors and executive officers as a group, 345,062401,499 options, 183,303 SARs and 62,648183,085 RSUs. (2)
Beneficial ownership information is as of December 31, 2022,2023, as reported on a Schedule 13G/A (Amendment No. 2)3) filed by Pamplona Manager Entities (defined below) on February 14, 2023.2024. Reflects 51,845,685 shares of Common Stock held by Pamplona Capital Partners V, L.P. Pamplona Capital Partners V, L.P., a Cayman Islands limited partnership, is controlled by Pamplona Equity Advisors V Ltd, a Cayman Islands limited company, its general partner. John C. Halsted owns 100% of the shares of Pamplona Equity Advisors V, Ltd. Pamplona PE Investments Malta Limited, a Malta limited company serves as an investment manager to Pamplona Capital Partners V, L.P. Pamplona Capital Management LLP, a United Kingdom limited liability partnership, Pamplona Capital Management LLC, a Delaware limited liability company, Pamplona Capital Management (PE) SL, a Spanish limited liability company and Pamplona Capital Management (Monaco) SAM, a Monaco joint stock company, (together, the “Pamplona Manager Entities”) serve as investment advisors to Pamplona PE Investments Malta Limited. Mr. John C. Halsted and Mr. Alexander M. Knaster are the principals of Pamplona Manager Entities. Each of Pamplona Equity Advisors V, Ltd, the Pamplona Manager Entities, John C. Halsted and Alexander M. Knaster may be deemed to have voting and dispositive power with respect to our Common Stock directly owned by Pamplona Capital Partners V, L.P. and therefore be deemed to be the beneficial owner of our Common Stock held by Pamplona Capital Partners V, L.P., but each disclaim beneficial ownership of such Common Stock. The principal business address of each of the entities and persons identified in this paragraph is c/o Pamplona Capital Management LLC, 667 Madison Avenue, 22nd Floor, New York, NY 10065. (3)
Beneficial ownership information is as of December 31, 2022,2023, as reported on a Schedule 13G/A (Amendment No. 1)2) filed by the Wynnchurch entities specified herein on February 14, 2023.2024. Reflects 14,983,771 shares of Common Stock held by Wynnchurch IV and WC Executive. The general partner of Wynnchurch IV and WC Executive is Wynnchurch Partners IV, L.P. (“Wynnchurch GP IV”). The general partner of Wynnchurch GP IV is Wynnchurch Management, Ltd. (“WML”). WML and a limited partner committee consisting of other senior partners manage the Wynnchurch GP IV, provided that WML’s consent is required for any action, decision, consent or other determination. The sole director of WML is John Hatherly. The address of each of the entities and persons identified in this paragraph is 6250 N. River Road, Suite 10-100, Rosemont, IL 60018. (4)
Beneficial ownership information is as of December 31, 2022, as reported on a Schedule 13G/A (Amendment No.1) filed by Kayne Anderson Rudnick Investment Management LLC (“Kayne Anderson”), a California Limited Liability company, on February 14, 2023. Reflects 5,924,563 shares of Common Stock held by Kayne Anderson as follows: (i) sole power to vote or to direct the vote of 3,267,907 shares; (ii) shared power to vote or direct the vote of 1,764,533 shares; (iii) sole power to dispose or to direct the disposition over 4,160,030 shares; and (iv) shared power to dispose or to direct the disposition over 1,764,533 shares. The address of the business office of Kayne Anderson is 2000 Avenue of the Stars, Suite 1110, Los Angeles, CA 90067.
(5)
Consists of 4,077,901 shares of Common Stock held by Scott Rajeski Family, LLC (the “Rajeski LLC”) and 15,00083,851 shares of Common Stock held by Mr. Rajeski. Mr. Rajeski’s spouse, Cindy G. Rajeski, is the sole manager of the Rajeski LLC. (6)
Mr. Masson’s equity awards were forfeited upon his resignation from the Company effective as of March 17, 2023.
(7)(5)
Consists of 56,579116,749 shares of Common Stock held by Mr. Cline and 505,883 shares of Common Stock held by James E. Cline Revocable Trust. (8)(6)
Consists of 500,433 shares of Common Stock held by Laven Family Holdings, LLC (the “Laven LLC”) and 935,713941,815 shares of Common Stock held by Mr. Laven. Mr. Laven and Mr. Laven’s spouse, Leslie J. Laven, are managers of the Laven LLC. | | | | 20232024 Proxy Statement 7563 | |
Questions and Answers The information provided in the “Questions and Answers” format below is for your convenience and includes only a summary of certain information contained in this proxy statement. You should read this entire proxy statement carefully. How do I vote at our Annual Meeting? Our Annual Meeting will be held in person on Tuesday,Thursday, May 2, 2023,2024, at Hampton Inn Saratoga, National Golf Club, 458 Union25 Lake Avenue, Saratoga Springs, NY 12866. Our Annual Meeting will commence at approximately 8:00 AM Eastern Daylight Time. You may attend the meeting in person and vote at the meeting, or you may vote by using one of the following options discussed below under “—How Can I Vote My Shares?” We recommend that you vote by proxy now even if you plan to attend the meeting. What should I know about attending our Annual Meeting? If you attend, please note that you will be asked to check in at the registration desk and present valid photo identification. Please check in at least 15 minutes prior to the start of the meeting to ensure timely entry to the meeting. If you are a beneficial owner, you will also need to bring a copy of your voting instruction card or brokerage statement reflecting your stock ownership as of the record date. If you wish to designate someone as a proxy to attend our Annual Meeting on your behalf, that person must bring a valid legal proxy containing your signature and printed or typewritten name as it appears in the list of registered stockholders or on your account statement if you are a beneficial owner. Cameras, recording devices, cell phones, and other electronic devices will not be permitted at the meeting other than those operated by the Company or its designees. All bags, briefcases, and packages will need to be checked at the door and/or will be subject to search. What proposals will be voted on at our Annual Meeting? Stockholders will vote on threetwo proposals at our Annual Meeting: 1.
The election of threetwo Class IIIII directors named in this proxy statement, each to serve for a three-year term and until a successor has been duly elected and qualified, or until such director’s earlier resignation, retirement or other termination of service. 2.
The ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023.
3.
The approval of an amendment to the Latham Group, Inc. 2021 Omnibus Equity Incentive Plan to increase by 8,000,000 shares the number of shares of Common Stock that may be issued pursuant to awards granted under such plan and make other specified changes.2024.
How does our Board recommend that stockholders vote on the proposals? Our Board recommends that stockholders vote “FOR” the election of the threetwo Class IIIII directors and vote “FOR” the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2023 and vote “FOR” the approval of the proposed amendment to the Latham Group, Inc. 2021 Omnibus Equity Incentive Plan.2024. What happens if other business not discussed in this proxy statement comes before our Annual Meeting? The Company does not know of any business to be presented at our Annual Meeting other than the proposals discussed in this proxy statement. If other business comes before our Annual Meeting and is proper under our Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, and Delaware law, your properly executed proxy gives authority to Patrick M. Sheller, our General Counsel, | | | | 2023 Proxy Statement 76 | |
and Sanjeev Bahl, our Chief Operating Officer, the authority, with full power of substitution, to use their discretion in casting all of the votes that they are entitled to cast. Why am I receiving these materials? We are distributing our proxy materials because our Board is soliciting your proxy to vote at our Annual Meeting. This proxy statement summarizes the information you need to vote at our Annual Meeting. You do not need to attend our Annual Meeting to vote your shares. | | | | 2024 Proxy Statement 64 | |
Pursuant to SEC rules, we are providing access to our proxy materials via the Internet. Accordingly, we are sending an Internet Notice to all of our stockholders as of the record date. All stockholders may access our proxy materials on the website referred to in the Internet Notice. You may also request to receive a printed set of the proxy materials. You can find instructions regarding how to access our proxy materials via the Internet and how to request a printed copy in the Internet Notice. Additionally, by following the instructions in the Internet Notice, you may request to receive proxy materials in printed form by mail or electronically by email in the future on an ongoing basis. We believe that these rules allow us to provide our stockholders with the information they need while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting. Who is entitled to vote? The record date for our Annual Meeting is the close of business on March 6, 2023.2024. As of the record date, 114,678,263114,988,676 shares of Common Stock, par value $0.0001 per share, were outstanding. Only holders of record of our Common Stock as of the record date will be entitled to notice of and to vote at our Annual Meeting or any adjournment or postponement thereof. Each stockholder is entitled to one vote for each share of our Common Stock held by such stockholder on the record date. How can I vote my shares? Voting on the Internet You can vote your shares via the Internet by following the instructions in your proxy materials, on your proxy card, or on the instructions that accompanied your proxy materials. The Internet voting procedures are designed to authenticate your identity, allow you to vote your shares and confirm your voting instructions have been properly recorded. If you vote via the Internet, you do not need to complete and mail a proxy card or attend our Annual Meeting to have your vote count. We encourage you to vote your shares via the Internet in advance of our Annual Meeting even if you plan to attend our Annual Meeting. Voting by Mail You can vote your shares by mail by requesting a printed copy of the proxy materials sent to your address. When you receive the proxy materials, you may fill out the proxy card or voting instruction card enclosed therein and return it per the instructions on the card. If you request a printed copy of the proxy materials, we encourage you to sign and return the proxy card or voting instruction card even if you plan to attend our Annual Meeting. Proxy cards can be returned via mail to: Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Voting by Telephone You can vote your shares by telephone. Instructions are included on your proxy materials, on your proxy card, or on the instructions that accompanied your proxy materials. If you vote by telephone, you do not need to complete and mail your proxy card or attend our Annual Meeting to have your vote count. What if I am not the stockholder of record? If you are a holder of record of shares of Common Stock of the Company, you may direct your vote as instructed above. | | | | 2023 Proxy Statement 77 | |
If you hold your shares in street name via a broker, bank or other nominee, you may direct your vote by signing, dating and mailing your voting instruction card. Internet or telephonic voting may also be available. Please see your voting instruction card provided by your broker, bank or other nominee for further details. | | | | 2024 Proxy Statement 65 | |
Can I change my vote or revoke my proxy? You may change your vote or revoke your proxy at any time before it is voted at our Annual Meeting. If you are a stockholder of record, you may change your vote or revoke your proxy by: •
delivering to the attention of the Corporate Secretary at Latham Group, Inc., 787 Watervliet Shaker Road, Latham, New York 12110, a written notice of revocation of your proxy; •
delivering to us an authorized proxy bearing a later date (including a proxy over the Internet or by telephone); or •
attending our Annual Meeting and voting your shares electronically. Attendance at our Annual Meeting will not, by itself, revoke a proxy. If your shares are held in the name of a bank, broker or other nominee, you may change your vote by submitting new voting instructions to your bank, broker or other nominee. What is a broker non-vote? Brokers, banks or other nominees holding shares on behalf of a beneficial owner may vote those shares in their discretion on certain “routine” matters even if they do not receive timely voting instructions from the beneficial owner. With respect to “non-routine” matters, the broker, bank or other nominee is not permitted to vote shares for a beneficial owner without timely received voting instructions. The only routine matter to be presented at our Annual Meeting is the proposal to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 20232024 (Proposal Two). The election of the threetwo Class IIIII directors (Proposal One) and the approval of the proposed amendment to the Latham Group, Inc. 2021 Omnibus Equity Incentive Plan (Proposal Three) areis a non-routine matters.matter. A broker non-vote occurs when a broker, bank or other nominee does not vote on a non-routine matter because the beneficial owner of such shares has not provided voting instructions with regard to such matter. If a broker, bank or other nominee exercises their discretionary voting authority on Proposal Two, such shares will be considered present at our Annual Meeting for quorum purposes and broker non-votes will occur as to ProposalsProposal One, and Three, or any other non-routine matters that are properly presented at our Annual Meeting. Broker non-votes will have no impact on the voting results. What constitutes a quorum? The presence at our Annual Meeting, either in person or by proxy, of holders of a majority of the aggregate number of shares of our issued and outstanding Common Stock entitled to vote thereat as of the record date shallwill constitute a quorum for the transaction of business at our Annual Meeting. Abstentions and broker non-votes will be counted as present for determining whether a quorum is present at our Annual Meeting. | | | | 2023 Proxy Statement 78 | |
What vote is required to approve each matter to be considered at our Annual Meeting? | | | | | | | | | | How Do Votes Impact Approval of Proposal | | | Proposal | | | Required Approval | | | For | | | Withhold / Against | | | Abstention | | | Broker Non- Votes | | | 1 | | | Election of Directors | | | Plurality of votes cast | | | For the proposal | | | Against the proposal | | | Not applicable | | | No effect. Not a vote cast | | | 2 | | | Ratification of the Appointment of Deloitte & Touche LLP as Our Independent Registered Public Accounting Firm for 20232024 | | | Majority of the voting power present in person or represented by proxy and entitled to vote | | | For the proposal | | | Against the proposal | | | Against the proposal | | | Not applicable | | | 3 | | | Approval of an Amendment to the Latham Group, Inc. 2021 Omnibus Equity Incentive Plan | | | Majority of the voting power present in person or represented by proxy and entitled to vote | | | For the
proposal | | | Against the
proposal | | | Against the
proposal | | | No effect. Not
entitled to vote | |
Proposal One: Our Amended and Restated Bylaws provide for a plurality voting standard for the election of directors. This means that the director nominee with the most votes for a particular seat is elected for that seat. A broker non-vote on Proposal One will not have any effect on the election of the directors. | | | | 2024 Proxy Statement 66 | |
Proposal Two: The affirmative vote of the majority of our shares of Common Stock present at our Annual Meeting or represented by proxy and entitled to vote at our Annual Meeting is required for the approval of Proposal Two. An abstention on Proposal Two will have the same effect as a vote “AGAINST” Proposal Two. Brokers will have discretionary authority to vote on this proposal. Accordingly, there will not be any broker non-votes on Proposal Two. Proposal Three: The affirmative vote of the majority of our shares of Common Stock present at our Annual Meeting or represented by proxy and entitled to vote at our Annual Meeting is required for the approval of Proposal Three. An abstention on Proposal Three will have the same effect as a vote “AGAINST” Proposal Three. A broker non-vote on Proposal Three will not have any effect on the outcome of the vote.
What is the deadline for submitting a proxy? To ensure that proxies are received in time to be counted prior to our Annual Meeting, proxies submitted by Internet or by telephone should be received by 11:59 p.m. Eastern Daylight Time on the day before our Annual Meeting, and proxies submitted by mail should be received by the close of business on the day prior to the date of our Annual Meeting. What does it mean if I receive more than one Internet Notice or proxy card? If you hold your shares in more than one account, you will receive an Internet Notice or proxy card for each account. To ensure that all of your shares are voted, please complete, sign, date and return a proxy card for each account or use the Internet Notice or proxy card for each account to vote by Internet or by telephone. To ensure that all of your shares are represented at our Annual Meeting, we recommend that you vote every Internet Notice or proxy card that you receive. How will my shares be voted if I return a blank proxy card or a blank voting instruction card? If you are a holder of record of our Common Stock and you sign and return a proxy card or otherwise submit a proxy without giving specific voting instructions with respect to one or more proposals (including by signing and returning a blank proxy card), your shares will be voted: •
“FOR” the election of the threetwo Class IIIII nominees for director named in this proxy statement; and | | | | 2023 Proxy Statement 79 | |
•
“FOR” the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023; and
•
“FOR” the approval of the proposed amendment to the Latham Group, Inc. 2021 Omnibus Equity Incentive Plan.2024.
If you hold your shares in street name via a broker, bank or other nominee and do not provide the broker, bank or other nominee with voting instructions with respect to one or more proposals (including by signing and returning a blank voting instruction card), your shares: •
will be counted as present for purposes of establishing a quorum; •
will be voted in accordance with the broker’s, bank’s or other nominee’s discretion on “routine” matters, which includes only the proposal to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 20232024 (Proposal Two); and •
will not be counted in connection with the election of the threetwo Class IIIII directors named in this proxy statement (Proposal One), the approval of the proposed amendment to the Latham Group, Inc. 2021 Omnibus Equity Incentive Plan (Proposal Three) or any other non-routine matters that are properly presented at our Annual Meeting. For each of these proposals, your shares will be treated as “broker non-votes.” A broker non-vote will have no impact on voting results. ���
Our Board knows of no matter to be presented at our Annual Meeting other than Proposals One Two and Three.Two. If any other matters properly come before our Annual Meeting upon which a vote properly may be taken, shares represented by all proxies received by us will be voted with respect thereto as permitted and in accordance with the judgment of the proxy holders. Who is making this solicitation and who will pay the expenses? This proxy solicitation is being made on behalf of our Board. All expenses of the solicitation, including the cost of preparing and mailing the Internet Notice or this proxy statement, will be borne by the Company. | | | | 2024 Proxy Statement 67 | |
We may supplement our solicitation of proxies by mail with telephone, e-mail or personal solicitation by our officers or other regular employees. We will not pay any additional compensation to any of our employees for their supplemental solicitation services. We have requested banks, brokers and other nominees to forward the proxy materials to, and to obtain proxies from, the beneficial owners and we will reimburse such record holders for their reasonable out-of-pocket expenses in doing so upon request. Will a stockholder list be available for inspection? A list of stockholders entitled to vote at our Annual Meeting will be available to stockholders of record during our Annual Meeting and to all stockholders of the Company for 10 days prior to our Annual Meeting, at Latham Group, Inc., 787 Watervliet Shaker Road, Latham, New York 12110, between the hours of 9:00 a.m. and 5:00 p.m. Eastern Daylight Time. If you would like to schedule an appointment to examine the stockholder list during this period, please email our Corporate Secretary at latham@edelman.com.lathamir@advisiry.com. The stockholder list will also be available during our Annual Meeting. What is “householding” and how does it affect me? We have adopted a procedure approved by the SEC, called “householding.” Under this procedure, we send only one proxy statement and one annual report to eligible stockholders who share a single address, unless we have received instructions to the contrary from any stockholder at that address. This practice is designed to eliminate duplicate mailings, conserve natural resources and reduce our printing and mailing costs. Stockholders who participate in householding will continue to receive separate proxy cards. If you share an address with another stockholder and receive only one set of proxy materials but would like to request a separate copy of these materials, now or in the future, please contact our mailing agent, Broadridge Financial | | | | 2023 Proxy Statement 80 | |
Solutions, Inc. by calling 1-866-540-7095 or writing to 51 Mercedes Way, Edgewood, New York 11717, Attention: Householding Department, and an additional copy of proxy materials will be promptly delivered to you. Similarly, if you receive multiple copies of the proxy materials and would prefer to receive a single copy in the future, you may also contact Broadridge Financial Solutions, Inc. at the above telephone number or address. If you own shares through a bank, broker, or other nominee, you should contact the nominee concerning householding procedures. Were there any delinquent Section 16 reports in 2022?
Section 16(a) of the Exchange Act requires our directors, our executive officers and persons who beneficially own more than 10% of a registered class of our equity securities (“insiders”) to file reports with the SEC regarding their pecuniary interest in our equity securities and any changes thereto. Based on our review of the insiders’ forms filed with the SEC during 2022 and representations made by the directors and executive officers, two transactions involving a vesting of RSUs and a grant of RSUs were filed late on a Form 4 by each of Mr. Cline, Mr. Evans, Mr. Hawkinson, Mr. Laven, and Ms. Morno-Wade, and two transactions involving a vesting of RSUs and two sell-to cover sales of shares of our Common Stock for tax withholding upon the vesting of RSUs were filed late on a Form 4 by each of Mr. Cowley and Mr. Kunchala.
How can I find out the results of the voting at our Annual Meeting? We expect to announce preliminary voting results at our Annual Meeting. We will also disclose voting results on a Current Report on Form 8-K that we will file with the SEC, which is required within four business days after our Annual Meeting. When are stockholder proposals due for next year’s annual meeting of the stockholders? Our stockholders are entitled to present proposals for action at a forthcoming meeting if they comply with the requirements of our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws, and the rules established by the SEC. Under Rule 14a-8 of the Exchange Act, if you want us to include a proposal in the proxy materials for our 20242025 annual meeting of stockholders, we must receive the proposal at our executive offices at 787 Watervliet Shaker Road, Latham, New York 12110, no later than November 22, 2023.2024. Our Amended and Restated Bylaws govern the submission of nominations for director or other business proposals that a stockholder wishes to have considered at a meeting of stockholders, but which are not included in the Company’s proxy statement for that meeting. Under our Amended and Restated Bylaws, nominations for director or other business proposals to be addressed at our next annual meeting may be made by a stockholder entitled to vote who has delivered a notice to the Corporate Secretary not earlier than January 3, 20242, 2025 and not later than the close of business on February 2, 2024.1, 2025. The notice must contain the information required by the Amended and Restated Bylaws. In addition, stockholders who | | | | 2024 Proxy Statement 68 | |
intend to solicit proxies in support of director nominees other than the Company’s nominees must also comply with the additional requirements of Rule 14a-19(b) of the Exchange Act, to the extent applicable. A proxy granted by a stockholder will give discretionary authority to the proxies to vote on any matters introduced pursuant to the above advance notice bylaw provisions, subject to applicable rules of the SEC. Copies of our Amended and Restated Bylaws are available on our website, https://ir.lathampool.com, or may be obtained from the Corporate Secretary. Whom can I contact for further information? If you would like additional copies, without charge, of this proxy statement or if you have questions about our Annual Meeting, the proposals, or the procedures for voting your shares, you should contact our Corporate Secretary at our principal executive office, 787 Watervliet Shaker Road, Latham, New York 12110 or by telephone at (800) 833-3800. | | | | 20232024 Proxy Statement 8169 | |
Equity Compensation Plans The following table sets forth certain information as of December 31, 2023 concerning our equity compensation plans. | Plan Category | | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)(1) | | | Weighted-average exercise price of outstanding options, warrants and rights ($)(b)(2) | | | Number of securities remaining available for further issuance under equity compensation plans (excluding securities reflected in column (a)(c)(3)) | | | Equity compensation plans approved by stockholders | | | | | 4,511,685 | | | | | $ | 11.34 | | | | | | 7,580,719 | | | | Equity compensation plans not approved by stockholders | | | | | — | | | | | | — | | | | | | — | | | | Total | | | | | 4,511,685 | | | | | $ | 11.34 | | | | | | 7,580,719 | | |
(1)
Consists of stock options to purchase 1,520,404 shares, stock appreciation rights to purchase 755,802 shares, and 2,235,479 RSUs granted under the 2021 Omnibus Equity Plan. (2)
Excludes RSUs, which have no exercise price. (3)
Consists of shares of Common Stock that may be issued pursuant to awards under the 2021 Omnibus Equity Plan as of December 31, 2023. As of December 31, 2023, there were 42,886 shares of unvested, restricted stock awards outstanding. No shares of restricted stock were granted in 2023 or 2022. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires our directors, our executive officers and persons who beneficially own more than 10% of a registered class of our equity securities (“insiders”) to file reports with the SEC regarding their pecuniary interest in our equity securities and any changes thereto. Based on our review of the insiders’ forms filed with the SEC during 2023 and representations made by the directors and executive officers, one transaction of a Company grant of SARs was filed late on a Form 4 by Mr. Kunchala, our controller, and one transaction of a Company grant of RSUs was filed late on a Form 4 by Mr. Laven, a director. Forward-Looking Statements Certain statements in this Proxy Statement constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Proxy Statement other than statements of historical fact may constitute forward-looking statements, including statements regarding our future operating results and financial position, our business strategy and plans, business and market trends, our objectives for future operations, and our future compensation, ESG and governance commitments. These statements involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside of our control, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including the factors set forth under “Risk Factors” and elsewhere in our most recent Annual Report on Form 10-K and subsequent reports we file or furnish with the SEC. New emergingMoreover, we operate in a very competitive and rapidly changing environment, and new risks and uncertainties not presently knownemerge from time to us or that we currently deem immaterial also may impair our business, financial condition, results of operations and cash flows.time. | | | | 2024 Proxy Statement 70 | |
Although we believe that the expectations reflected in the forward-looking statements are reasonable and our expectations based on third-party information and projections are from sources that management believes to be reputable, we cannot guarantee future results, levels of activities, performance or achievements. These forward-looking statements reflect our views with respect to future events as of the date of this Proxy Statement or the date specified herein, and we have based these forward-looking statements on our current expectations and projections about future events and trends. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Proxy Statement. We anticipate that subsequent events and developments will cause our views to change. Our forward-looking statements further do not reflect the potential impact of any future acquisitions, merger, dispositions, joint ventures or investments we may undertake. Where You Can Find More Information We are subject to the informational requirements of the Exchange Act, and, in accordance therewith, file electronically with the SEC our annual, quarterly and current reports, proxy statements and other information. We make available on the investor relations page of our website at https://ir.lathampool.com, free of charge, copies of these reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that website is www.sec.gov. The information in or accessible through any website referenced throughout this proxy statement is not incorporated into, and is not considered part of, this proxy statement. Further, our references to the URLs for these websites are intended to be inactive textual references only. You should rely on the information contained in this proxy statement to vote your shares at our Annual Meeting. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated March 21, 2023.22, 2024. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date, and the mailing of this proxy statement to stockholders at any time after that date does not create an implication to the contrary. This proxy statement does not constitute a solicitation of a proxy in any jurisdiction where, or to or from any person to whom, it is unlawful to make such proxy solicitations in such jurisdiction. | | | | 2023 Proxy Statement 82 | |
Form 10-KAnnual Report
We will make available, on or about March 21, 2023,22, 2024, the proxy materials, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, at www.proxyvote.com. We will also make available, solely for your reference and by courtesy, oursuch Annual Report on Form 10-K for the fiscal year ended December 31, 2022 on the investor relations page of our website at https://ir.lathampool.com. We will also provide, free of charge, to each person to any stockholder of record or beneficial owner of our Common Stock as of the record date, upon the written or oral request of any such persons, a copy of our Annual Report as filed with the SEC (excluding certain exhibits or documents incorporated by reference in our annual report on Form 10-K for the fiscal year ended December 31, 2022 as filed with the SEC.2023). Requests for such copies should be addressed to our Corporate Secretary at the address below: Latham Group, Inc. 787 Watervliet Shaker Road Latham, New York 12110 Attention: Corporate Secretary Telephone: (800) 833-3800 Please include your contact information with the request. The exhibits set forth on the exhibit indexA copy of the Form 10-K may be madeexcluded exhibits and documents incorporated by reference are available atfor a reasonable charge. | | | | 2024 Proxy Statement 71 | |
Other Matters We have no knowledge of any other matters that may come before our Annual Meeting and do not intend to present any other matters. However, if any other matters shallare properly comebrought before the meeting or any adjournment, our representatives will have the discretion to vote as they see fit unless directed otherwise. If you do not plan to attend our Annual Meeting, in order that your shares may be represented and in order to assure the required quorum, please sign, date and return your proxy promptly. In the event you are able to attend our Annual Meeting, at your request, we will cancel your previously submitted proxy. | | | | 20232024 Proxy Statement 8372 | |
Appendix A
LATHAM GROUP, INC.
FIRST AMENDMENTSCAN TO
2021 OMNIBUS EQUITY INCENTIVE PLAN
The Latham Group, Inc. 2021 Omnibus Incentive Plan (as amended from time to time, the “Plan”), effective April 22, 2021, of Latham Group, Inc., a Delaware corporation (including any successor thereto, the “Company”) and its Affiliates is hereby amended by this First Amendment (the “First Amendment”) as set forth below. The First Amendment shall be effective from and after the date this First Amendment is approved by the stockholders of the Company in accordance with Section 13(a) of the Plan. Following such effective date, any reference to the “Plan” shall mean the Plan, as amended by this First Amendment. All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Plan.
1.
Section 5(a) of the Plan is hereby deleted and replaced in its entirety with the following:
(a) Awards; Minimum Vesting.
(i) The Committee may grant Awards to one or more Eligible Persons. All Awards granted under the Plan shall vest and become exercisable in such manner and on such date or dates or upon such event or events as determined by the Committee, including, without limitation, attainment of Performance Conditions.
(ii) Notwithstanding any other provision of the Plan to the contrary and subject to the remaining terms of this clause (ii), any Awards granted under the Plan that settle in shares of Common Stock (excluding, for this purpose, any Substitute Awards) shall vest no earlier than the first anniversary of the date of grant for such Award; provided, however, that the Committee may grant Awards without regard to the foregoing minimum vesting requirement with respect to a maximum of 5% of the shares of Common Stock subject to the Share Pool (which such Share Pool may be increased from time to time in accordance with the Plan). For purposes of Awards to non-employee directors, such Award will be deemed to vest no earlier than the first anniversary of the date of grant of the Award if such Award vests on the earlier of (X) the date of the next annual meeting of stockholders (which date is at least 50 weeks after the immediately preceding year’s annual meeting of stockholders) and (Y) the first anniversary of the date of grant. For the avoidance of doubt, this Section 5(a)(ii) shall not be construed to limit the Committee’s discretion to provide for accelerated exercisability or vesting of an Award, or to deem an Award to be earned, including in cases of death, Disability, retirement, termination without Cause or a Change in Control.
2.
Section 5(b) of the Plan is hereby deleted and replaced in its entirety with the following:
(b) Share Limits. Subject to Section 11 of the Plan and subsection (e) below, the following limitations apply to the grant of Awards: (i) no more than 21,170,212 shares of Common Stock may be reserved for issuance and delivered in the aggregate pursuant to Awards granted under the Plan (the “Share Pool”); (ii) no more than 4,830,086 shares of Common Stock may be delivered pursuant to the exercise of Incentive Stock Options granted under the Plan; and (iii) the maximum amount (based on the Fair Market Value of shares of Common Stock on the date of grant as determined in accordance with applicable financial accounting rules) of Awards that may be granted in any single fiscal year to any non-employee member of the Board, taken together with any cash fees paid to such non-employee member of the Board in respect of service as a member of the Board during such fiscal year, shall be $750,000; provided, that the foregoing limitation shall not apply in respect of any Awards issued to (x) a non-employee director in connection with the Company’s initial public offering of shares of Common Stock, or in respect of any one-time equity grant upon his or her appointment to the Board or (y) a non-executive chairman of the
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Board, provided, that the non-employee director receiving such additional compensation does not participate in the decision to award such compensation.
3.
Section 5(c) of the Plan is hereby deleted and replaced in its entirety with the following:
(c) Share Counting. The Share Pool shall be reduced, on the date of grant, by the relevant number of shares of Common Stock for each Award granted under the Plan that is valued by reference to a share of Common Stock; provided that Awards that are valued by reference to shares of Common Stock but are required to be paid in cash pursuant to their terms shall not reduce the Share Pool. If and to the extent that Awards originating from the Share Pool terminate, expire, or are cash-settled, canceled, forfeited, exchanged, or surrendered without having been exercised, vested, or settled, the shares of Common Stock subject to such Awards shall again be available for Awards under the Share Pool. Notwithstanding the foregoing, the following shares of Common Stock shall not become available for issuance under the Plan: (i) shares of Common Stock tendered by Participants, or withheld by the Company, as full or partial payment to the Company upon the exercise of Stock Options granted under the Plan; (ii) shares of Common Stock reserved for issuance upon the grant of Stock Appreciation Rights, to the extent that the number of reserved shares of Common Stock exceeds the number of shares of Common Stock actually issued upon the exercise of the Stock Appreciation Rights; and (iii) shares of Common Stock withheld by, or otherwise remitted to, the Company to satisfy a Participant’s tax withholding obligations upon the exercise of, upon the lapse of restrictions on, or settlement of, an Award.
4.
Section 14(b)(ii) of the Plan is hereby deleted and replaced in its entirety with the following:
(ii) Notwithstanding the foregoing, the Committee may permit Awards (other than Incentive Stock Options) to be transferred by the Participant, without consideration, subject to such rules as the Committee may adopt, to: (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act or any successor form of registration statements promulgated by the Securities and Exchange Commission (collectively, the “Immediate Family Members”); (B) a trust solely for the benefit of the Participant or the Participant’s Immediate Family Members; (C) a partnership or limited liability company whose only partners or stockholders are the Participant and the Participant’s Immediate Family Members; or (D) any other transferee as may be approved either (1) by the Board or the Committee, or (2) as provided in the applicable Award Agreement, in each case in compliance with the instructions to Form S-8 (each transferee described in clause (A), (B), (C) or (D) above is hereinafter referred to as a “Permitted Transferee”); provided, that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan; and provided further, that in no event shall any Option or SAR (either granted independently or in tandem) be transferable for value or to any third-party financial institutions without stockholder approval. Nothing in this Section 14(b)(ii) shall apply to any portion of an Award that has been fully exercised or settled, as the case may be, and shall not preclude the forfeiture of an Award in accordance with the terms thereof or the Plan.
5.
This First Amendment shall be and is hereby incorporated into and forms a part of the Plan. Except as expressly provided herein, all terms and conditions of the Plan shall remain in full force and effect.
* * *
As adopted by the Board of Directors of the Company on March 2, 2023.
As approved by the stockholders of the Company on , 2023.
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Appendix B
LATHAM GROUP, INC.
2021 OMNIBUS EQUITY INCENTIVE PLAN
1. Purpose. The Latham Group, Inc. 2021 Omnibus Incentive Plan (as amended from time to time, the “Plan”) is intended to help Latham Group, Inc., a Delaware corporation (including any successor thereto, the “Company”), and its Affiliates (i) attract and retain key personnel by providing them the opportunity to acquire an equity interest in the Company or other incentive compensation measured by reference to the value of Common Stock or a targeted dollar value if denominated in cash, and (ii) align the interests of key personnel with those of the Company’s stockholders.
2. Effective Date; Duration. The effective date of the Plan is April 13, 2021 (the “Effective Date”), which is the date that the Plan was approved by the stockholders of the Company. The expiration date of the Plan, on and after which date no Awards may be granted, shall be the tenth anniversary of the Effective Date; provided, however, that such expiration shall not affect Awards then outstanding, and the terms and conditions of the Plan shall continue to apply to such Awards.
3. Definitions. The following definitions shall apply throughout the Plan:
(a) “Award” means any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Stock-Based Award, or Other Cash-Based Award granted under the Plan.
(b) “Award Agreement” means the agreement (whether in written or electronic form) or other instrument or document evidencing any Award granted under the Plan.
(c) “Beneficial Ownership” has the meaning set forth in Rule 13d-3 promulgated under Section 13 of the Exchange Act.
(d) “Board” means the Board of Directors of the Company.
(e) “Cause” in the case of a particular Award, unless the applicable Award Agreement states otherwise, (i) shall have the meaning given such term (or term of similar import) in any employment, consulting, change-in-control, severance or any other agreement between the Participant and the Company or an Affiliate, or severance plan in which the Participant is eligible to participate, in either case in effect at the time of the Participant’s termination of employment or service with the Company and its Affiliates, or (ii) if “cause” or term of similar import is not defined in, or in the absence of, any such employment, consulting, change-in-control, severance or any other agreement between the Participant and the Company or an Affiliate, or severance plan in which the Participant is eligible to participate, means: (A) embezzlement, theft, misappropriation or conversion, or attempted embezzlement, theft, misappropriation or conversion, by Participant of any property, funds or business opportunity of the Company or any of its Subsidiaries; (B) willful failure or refusal by Participant to perform any directive of the Board or the Chief Executive Officer or the duties of his or her employment which continues for a period of thirty (30) days following notice thereof by the Board or the Chief Executive Officer to Participant; (C) any act by Participant constituting a felony (or its equivalent in any non-United States jurisdiction) or otherwise involving theft, fraud, dishonesty, misrepresentation or moral turpitude; (D) indictment for, conviction of, or plea of nolo contendere (or a similar plea) to, or the failure of Participant to contest his or her prosecution for, any other criminal offense; (E) any violation of any law, rule or regulation relating in any way to the business or activities of the Company or its Subsidiaries, or other law that is violated during the course of Participant’s performance of services, regulatory disqualification or failure to comply with any legal or compliance policies or code of ethics, code of business conduct, conflicts of interest policy or similar policies of the Company or its Subsidiaries; (F) gross negligence or material willful misconduct on the part of Participant in the performance of his or her duties as an employee, officer or director of the
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Company or any of its Subsidiaries; (G) Participant’s breach of fiduciary duty or duty of loyalty to the Company or any of its Subsidiaries; (H) any act or omission to act of Participant intended to materially harm or damage the business, property, operations, financial condition or reputation of the Company or any of its Subsidiaries; (I) Participant’s failure to cooperate, if requested by the Board, with any investigation or inquiry into the business practices, whether internal or external, or the Company and its Subsidiaries or Participant, including Participant’s refusal to be deposed or to provide testimony or evidence at any trial, proceeding or inquiry; (J) any chemical dependence of Participant which materially interferes with the performance of his or her duties and responsibilities to the Company or any of its Subsidiaries; or (K) Participant’s voluntary resignation or other termination of employment effected by Participant at any time when the Company could effect such termination with Cause.
(f) “Change in Control” means, in the case of a particular Award, unless the applicable Award Agreement (or any employment, consulting, change-in-control, severance or other agreement between the Participant and the Company or an Affiliate) states otherwise, the first to occur of any of the following events:
(i) the acquisition by any Person or related “group” (as such term is used in Section 13(d) and Section 14(d) of the Exchange Act) of Persons, or Persons acting jointly or in concert, of Beneficial Ownership (including control or direction) of 50% or more (on a fully diluted basis) of either (A) the then-outstanding shares of Common Stock, including Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Common Stock (the “Outstanding Company Common Stock”), or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote in the election of directors (the “Outstanding Company Voting Securities”), but excluding any acquisition by the Company or any of its Affiliates, or the Investor, its Permitted Transferees or any of their respective Affiliates or by any employee benefit plan sponsored or maintained by the Company or any of its Affiliates;
(ii) a change in the composition of the Board such that members of the Board during any consecutive 12-month period (the “Incumbent Directors”) cease to constitute a majority of the Board. Any person becoming a director through election or nomination for election approved by a valid vote of at least two-thirds of the Incumbent Directors shall be deemed an Incumbent Director; provided, however, that no individual becoming a director as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board, shall be deemed an Incumbent Director;
(iii) the approval by the stockholders of the Company of a plan of complete dissolution or liquidation of the Company; and
(iv) the consummation of a reorganization, recapitalization, merger, amalgamation, consolidation, statutory share exchange or similar form of corporate transaction involving the Company (a “Business Combination”), or sale, transfer or other disposition of all or substantially all of the business or assets of the Company to an entity that is not an Affiliate of the Company (a “Sale”), unless immediately following such Business Combination or Sale: (A) more than 50% of the total voting power of the entity resulting from such Business Combination or the entity that acquired all or substantially all of the business or assets of the Company in such Sale (in either case, the “Surviving Company”), or the ultimate parent entity that has Beneficial Ownership of sufficient voting power to elect a majority of the board of directors (or analogous governing body) of the Surviving Company (the “Parent Company”), is represented by the Outstanding Company Voting Securities that were outstanding immediately prior to such Business Combination or Sale (or, if applicable, is represented by shares into which the Outstanding Company Voting Securities were converted pursuant to such Business Combination or Sale), and such voting power among the holders thereof is in substantially the same proportion as the voting power of the Outstanding Company Voting Securities among the holders thereof immediately prior to the Business Combination or Sale, (B) no Person (other than any employee benefit plan
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sponsored or maintained by the Surviving Company or the Parent Company) is or becomes the beneficial owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company), and (C) at least a majority of the members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) following the consummation of the Business Combination or Sale were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination or Sale.
Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred if immediately after the occurrence of any of the events described in clauses (i)—(iv) above, the Investor is the Beneficial Owner, directly or indirectly, of more than 50% of the combined voting power of the Company or any successor.
(g) “Code” means the U.S. Internal Revenue Code of 1986, as amended, and any successor thereto. References to any section of the Code shall be deemed to include any regulations or other interpretative guidance under such section, and any amendments or successors thereto.
(h) “Committee” means the Compensation Committee of the Board or subcommittee thereof if required with respect to actions taken to comply with Rule 16b-3 promulgated under the Exchange Act in respect of Awards or, if no such Compensation Committee or subcommittee thereof exists, or if the Board otherwise takes action hereunder on behalf of the Committee, the Board.
(i) “Common Stock” means the common stock of the Company, par value $0.01 per share (and any stock or other securities into which such common stock may be converted or into which it may be exchanged).
(j) “Disability” means cause for termination of the Participant’s employment or service due to a determination that the Participant is disabled in accordance with a long-term disability insurance program maintained by the Company or a determination by the U.S. Social Security Administration that the Participant is totally disabled.
(k) “$” shall refer to the United States dollars.
(l) “Eligible Director” means a director who satisfies the conditions set forth in Section 4(a) of the Plan.
(m) “Eligible Person” means any (i) individual employed by the Company or a Subsidiary; provided, however, that no such employee covered by a collective bargaining agreement shall be an Eligible Person, (ii) director or officer of the Company or a Subsidiary, (iii) consultant or advisor to the Company or an Affiliate who may be offered securities registrable on Form S-8 under the Securities Act, or (iv) prospective employee, director, officer, consultant or advisor who has accepted an offer of employment or service from the Company or its Subsidiaries (and would satisfy the provisions of clause (i), (ii) or (iii) above once such individual begins employment with or providing services to the Company or a Subsidiary).
(n) “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and any successor thereto. References to any section of (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successors thereto.
(o) “Exercise Price” has the meaning set forth in Section 7(b) of the Plan.
(p) “Fair Market Value” means, (i) with respect to Common Stock on a given date, (x) if the Common Stock is listed on a national securities exchange, the closing sales price of a share of Common Stock reported on such exchange on such date, or if there is no such sale on that date, then on the last preceding date on which such a sale was reported, or (y) if the Common Stock is not listed on any national securities exchange, the amount determined by the Committee in good faith to be the fair market value of the
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Common Stock, or (ii) with respect to any other property on any given date, the amount determined by the Committee in good faith to be the fair market value of such other property as of such date; provided, however, as to any Awards with a date of grant that is the date of the pricing of the Company’s initial public offering (if any), “Fair Market Value” shall be equal to the per share price at which the Common Stock is offered to the public in connection with such initial public offering.
(q) “Incentive Stock Option” means an Option that is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in the Plan.
(r) “Intrinsic Value” with respect to an Option or SAR means (i) the excess, if any, of the price or implied price per Share in a Change in Control or other event over (ii) the exercise or hurdle price of such Award multiplied by (iii) the number of Shares covered by such Award.
(s) “Immediate Family Members” has the meaning set forth in Section 14(b)(ii) of the Plan.
(t) “Indemnifiable Person” has the meaning set forth in Section 4(e) of the Plan.
(u) “Investor” means, collectively, the investment funds managed, sponsored or advised by Pamplona Capital Management LLC. A reference to a member of Investor is a reference to any such investment fund.
(v) “NASDAQ” means the Nasdaq Global Select Market.
(w) “Nonqualified Stock Option” means an Option that is not designated by the Committee as an Incentive Stock Option.
(x) “Option” means an Award granted under Section 7 of the Plan.
(y) “Option Period” has the meaning set forth in Section 7(c) of the Plan.
(z) “Other Cash-Based Award” means an Award granted under Section 10 of the Plan that is denominated and/or payable in cash, including cash awarded as a bonus or upon the attainment of specific performance criteria or as otherwise permitted by the Plan or as contemplated by the Committee.
(aa) “Other Stock-Based Award” means an Award granted under Section 10 of the Plan.
(bb) “Participant” has the meaning set forth in Section 6 of the Plan.
(cc) “Performance Conditions” means specific levels of performance of the Company (and/or one or more Affiliates, divisions or operational and/or business units, product lines, brands, business segments, administrative departments, units, or any combination of the foregoing), which may be determined in accordance with GAAP or on a non-GAAP basis, including without limitation, on the following measures: (i) net earnings or net income (before or after taxes); (ii) basic or diluted earnings per share (before or after taxes); (iii) net revenue or net revenue growth; (iv) gross revenue or gross revenue growth, gross profit or gross profit growth; (v) net operating profit (before or after taxes); (vi) return measures (including, but not limited to, return on investment, assets, net assets, capital, gross revenue or gross revenue growth, invested capital, equity or sales); (vii) cash flow measures (including, but not limited to, operating cash flow, free cash flow and cash flow return on capital), which may but are not required to be measured on a per-share basis; (viii) earnings before or after taxes, interest, depreciation, and amortization (including EBIT and EBITDA); (ix) gross or net operating margins; (x) productivity ratios; (xi) share price (including, but not limited to, growth measures and total shareholder return); (xii) expense targets or cost reduction goals, general and administrative expense savings; (xiii) operating efficiency; (xiv) customer satisfaction; (xv) working capital targets; (xvi) measures of economic value added or other “value creation” metrics; (xvii) enterprise value; (xviii) stockholder return; (xix) client or customer retention; (xx) competitive market metrics; (xxi) employee retention; (xxii) personal targets, goals or completion of projects (including but not limited to succession and hiring projects, completion of specific acquisitions, reorganizations or other
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corporate transactions or capital-raising transactions, expansions of specific business operations and meeting divisional or project budgets); (xxiii) system-wide sales; (xxiv) cost of capital, debt leverage year-end cash position or book value; (xxv) strategic objectives, development of new product lines and related revenue, sales and margin targets, or international operations; (xxvi) store growth or (xxvii) same store sales growth; or any combination of the foregoing. Any one or more of the aforementioned performance criteria may be stated as a percentage of another performance criteria, or used on an absolute or relative basis to measure the of the Company and/or one or more Affiliates as a whole or any divisions or operational and/or business units, product lines, brands, business segments, administrative departments of the Company and/or one or more Affiliates or any combination thereof, as the Committee may deem appropriate, or any of the above performance criteria may be compared to the performance of a group of comparator companies, or a published or special index that the Committee deems appropriate, or as compared to various stock market indices. The Performance Conditions may include a threshold level of performance below which no payment shall be made (or no vesting shall occur), levels of performance at which specified payments shall be made (or specified vesting shall occur), and a maximum level of performance above which no additional payment shall be made (or at which full vesting shall occur). The Committee shall have the authority to make equitable adjustments to the Performance Conditions as may be determined by the Committee, in its sole discretion.
(dd) “Permitted Transferee” has the meaning set forth in Section 14(b)(ii) of the Plan.
(ee) “Person” has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company.
(ff) “Released Unit” has the meaning set forth in Section 9(d)(ii) of the Plan.
(gg) “Restricted Period” has the meaning set forth in Section 9(a) of the Plan.
(hh) “Restricted Stock” means an Award of Common Stock, subject to certain specified restrictions, granted under Section 9 of the Plan.
(ii) “Restricted Stock Unit” means an Award of an unfunded and unsecured promise to deliver shares of Common Stock, cash, other securities or other property, subject to certain specified restrictions, granted under Section 9 of the Plan.
(jj) “SAR Period” has the meaning set forth in Section 8(c) of the Plan.
(kk) “Securities Act” means the U.S. Securities Act of 1933, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Securities Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or other interpretive guidance.
(ll) “Strike Price” has the meaning set forth in Section 8(b) of the Plan.
(mm) “Stock Appreciation Right” or “SAR” means an Award granted under Section 8 of the Plan.
(nn) “Subsidiary” means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.
(oo) “Substitute Awards” has the meaning set forth in Section 5(e) of the Plan.
4.
Administration.
(a) The Committee shall administer the Plan, and shall have the sole and plenary authority to (i) designate Participants, (ii) determine the type, size, and terms and conditions of Awards to be granted
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and to grant such Awards, (iii) determine the method by which an Award may be settled, exercised, canceled, forfeited, suspended, or repurchased by the Company, (iv) determine the circumstances under which the delivery of cash, property or other amounts payable with respect to an Award may be deferred, either automatically or at the Participant’s or Committee’s election, (v) interpret, administer, reconcile any inconsistency in, correct any defect in and supply any omission in the Plan and any Award granted under the Plan, (vi) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of the Plan, (vii) accelerate the vesting, delivery or exercisability of, or payment for or lapse of restrictions on, or waive any condition in respect of, Awards, and (viii) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan or to comply with any applicable law. To the extent required to comply with the provisions of Rule 16b-3 promulgated under the Exchange Act (if applicable and if the Board is not acting as the Committee under the Plan), or any exception or exemption under applicable securities laws or the applicable rules of the NASDAQ or any other securities exchange or inter-dealer quotation service on which the Common Stock is listed or quoted, as applicable, it is intended that each member of the Committee shall, at the time such member takes any action with respect to an Award under the Plan, be (1) a “non-employee director” within the meaning of Rule 16b-3 promulgated under the Exchange Act and/or (2) an “independent director” under the rules of the NASDAQ or any other securities exchange or inter-dealer quotation service on which the Common Stock is listed or quoted, or a person meeting any similar requirement under any successor rule or regulation (“Eligible Director”). However, the fact that a Committee member shall fail to qualify as an Eligible Director shall not invalidate any Award granted or action taken by the Committee that is otherwise validly granted or taken under the Plan.
(b) The Committee may delegate all or any portion of its responsibilities and powers to any person(s) selected by it, except for grants of Awards to persons who are non-employee members of the Board or are otherwise subject to Section 16 of the Exchange Act. Any such delegation may be revoked by the Committee at any time.
(c) As further set forth in Section 14(f) of the Plan, the Committee shall have the authority to amend the Plan and Awards to the extent necessary to permit participation in the Plan by Eligible Persons who are located outside of the United States on terms and conditions comparable to those afforded to Eligible Persons located within the United States; provided, however, that no such action shall be taken without stockholder approval if such approval is required by applicable securities laws or regulation or NASDAQ listing guidelines.
(d) Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions regarding the Plan or any Award or any documents evidencing Awards granted pursuant to the Plan shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all persons and entities, including, without limitation, the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, and any stockholder of the Company.
(e) No member of the Board or the Committee, nor any employee or agent of the Company (each such person, an “Indemnifiable Person”), shall be liable for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award hereunder (unless constituting fraud or a willful criminal act or willful criminal omission). Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense (including attorneys’ fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be involved as a party, witness or otherwise by reason of any action taken or omitted to be taken or determination made under the Plan or any Award Agreement and against and from any and all amounts paid by such Indemnifiable Person with the Company’s approval (not to be unreasonably withheld), in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, and the Company shall advance to such Indemnifiable Person any such expenses promptly upon written request (which request shall include an undertaking by the Indemnifiable Person
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to repay the amount of such advance if it shall ultimately be determined as provided below that the Indemnifiable Person is not entitled to be indemnified); provided, that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding, and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of recognized standing of the Company’s choice. The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts or omissions or determinations of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person’s fraud or willful criminal act or willful criminal omission or that such right of indemnification is otherwise prohibited by law or by the Company’s certificate of incorporation or by-laws. The foregoing right of indemnification shall not be exclusive of or otherwise supersede any other rights of indemnification to which such Indemnifiable Persons may be entitled under the Company’s certificate of incorporation or by-laws, as a matter of law, individual indemnification agreement or contract or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold them harmless.
(f) The Board may at any time and from time to time grant Awards and administer the Plan with respect to such Awards. In any such case, the Board shall have all the authority granted to the Committee under the Plan.
5.
Grant of Awards; Shares Subject to the Plan; Limitations.
(a) Awards. The Committee may grant Awards to one or more Eligible Persons. All Awards granted under the Plan shall vest and become exercisable in such manner and on such date or dates or upon such event or events as determined by the Committee, including, without limitation, attainment of Performance Conditions.
(b) Share Limits. Subject to Section 11 of the Plan and subsection (e) below, the following limitations apply to the grant of Awards: (i) no more than 13,170,212 shares of Common Stock may be reserved for issuance and delivered in the aggregate pursuant to Awards granted under the Plan (the “Share Pool”); (ii) no more than 4,830,086 shares of Common Stock may be delivered pursuant to the exercise of Incentive Stock Options granted under the Plan; and (iii) the maximum amount (based on the Fair Market Value of shares of Common Stock on the date of grant as determined in accordance with applicable financial accounting rules) of Awards that may be granted in any single fiscal year to any non-employee member of the Board, taken together with any cash fees paid to such non-employee member of the Board in respect of service as a member of the Board during such fiscal year, shall be $750,000; provided, that the foregoing limitation shall not apply in respect of any Awards issued to (x) a non-employee director in connection with the Company’s initial public offering of shares of Common Stock, or in respect of any one-time equity grant upon his or her appointment to the Board or (y) a non-executive chairman of the Board, provided, that the non-employee director receiving such additional compensation does not participate in the decision to award such compensation.
(c) Share Counting. The Share Pool shall be reduced, on the date of grant, by the relevant number of shares of Common Stock for each Award granted under the Plan that is valued by reference to a share of Common Stock; provided that Awards that are valued by reference to shares of Common Stock but are required to be paid in cash pursuant to their terms shall not reduce the Share Pool. If and to the extent that Awards originating from the Share Pool terminate, expire, or are cash-settled, canceled, forfeited, exchanged, or surrendered without having been exercised, vested, or settled, the shares of Common Stock subject to such Awards shall again be available for Awards under the Share Pool. Notwithstanding the foregoing, the following shares of Common Stock shall not become available for issuance under the Plan: (i) shares of Common Stock tendered by Participants, or withheld by the Company, as full or partial payment to the Company upon the exercise of Stock Options granted under the Plan; (ii) shares of Common Stock reserved for issuance upon the grant of Stock Appreciation Rights, to the extent that the number of reserved shares of Common Stock exceeds the number of shares of Common Stock actually issued upon the exercise of the Stock Appreciation Rights; and (iii) shares of Common Stock withheld by, or otherwise
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remitted to, the Company to satisfy a Participant’s tax withholding obligations upon the exercise of Options or SARs granted under the Plan. Shares of Common Stock withheld by, or otherwise remitted to the Company to satisfy a Participant’s tax withholding obligations upon the lapse of restrictions on, or settlement of, an Award other an Option or SAR shall again be available for Awards under the Share Pool.
(d) Source of Shares. Shares of Common Stock delivered by the Company in settlement of Awards may be authorized and unissued shares, shares held in the treasury of the Company, shares purchased on the open market or by private purchase, or a combination of the foregoing.
(e) Substitute Awards. The Committee may grant Awards in assumption of, or in substitution for, outstanding awards previously granted by the Company or any Affiliate or an entity directly or indirectly acquired by the Company or with which the Company combines (“Substitute Awards”), and such Substitute Awards shall not be counted against the aggregate number of shares of Common Stock available for Awards (i.e., Substitute Awards will not be counted against the Share Pool); provided, that Substitute Awards issued or intended as “incentive stock options” within the meaning of Section 422 of the Code shall be counted against the aggregate number of Incentive Stock Options available under the Plan.
6. Eligibility. Participation shall be limited to Eligible Persons who have been selected by the Committee and who have entered into an Award Agreement with respect to an Award granted to them under the Plan (each such Eligible Person, a “Participant”).
7.
Options.
(a) Generally. Each Option shall be subject to the conditions set forth in the Plan and in the applicable Award Agreement. All Options granted under the Plan shall be Nonqualified Stock Options unless the Award Agreement expressly states otherwise. Incentive Stock Options shall be granted only subject to and in compliance with Section 422 of the Code, and only to Eligible Persons who are employees of the Company and its Affiliates and who are eligible to receive an Incentive Stock Option under the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option properly granted under the Plan.
(b) Exercise Price. The exercise price (“Exercise Price”) per share of Common Stock for each Option (that is not a Substitute Award) shall not be less than 100% of the Fair Market Value of such share, determined as of the date of grant. Any modification to the Exercise Price of an outstanding Option shall be subject to the prohibition on repricing set forth in Section 13(b).
(c) Vesting, Exercise and Expiration. The Committee shall determine the manner and timing of vesting, exercise and expiration of Options. The period between the date of grant and the scheduled expiration date of the Option (“Option Period”) shall not exceed ten years, unless the Option Period (other than in the case of an Incentive Stock Option) would expire at a time when trading in the shares of Common Stock is prohibited by the Company’s insider-trading policy or a Company-imposed “blackout period,” in which case the Option Period shall be extended automatically (other than with respect to Options with an Exercise Price as of the end of the Option Period (prior to any such extension) that is not less than the Fair Market Value of a share of Common Stock at such time) until the 30th day following the expiration of such prohibition (so long as such extension shall not violate Section 409A of the Code). The Committee may accelerate the vesting and/or exercisability of any Option, which acceleration shall not affect any other terms and conditions of such Option.
(d) Method of Exercise and Form of Payment. No shares of Common Stock shall be delivered pursuant to any exercise of an Option until the Participant has paid the Exercise Price to the Company in full, and an amount equal to any U.S. federal, state and local income and employment taxes and non-U.S. income and employment taxes, social contributions and any other tax-related items required to be withheld. Options may be exercised by delivery of written or electronic notice of exercise to the Company or its designee (including a third-party administrator) in accordance with the terms of the Option and the Award Agreement accompanied by payment of the Exercise Price and such applicable taxes. The Exercise
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Price and delivery of all applicable required withholding taxes shall be payable (i) in cash or by check, cash equivalent and/or shares of Common Stock valued at the Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of shares of Common Stock in lieu of actual delivery of such shares to the Company) or any combination of the foregoing; provided, that such shares of Common Stock are not subject to any pledge or other security interest; or (ii) by such other method as elected by the Participant and that the Committee may permit, in its sole discretion, including without limitation: (A) in the form of other property having a Fair Market Value on the date of exercise equal to the Exercise Price and all applicable required withholding taxes; (B) if there is a public market for the shares of Common Stock at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company or its designee (including third-party administrators) is delivered a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price and all applicable required withholding taxes against delivery of the shares of Common Stock to settle the applicable trade; or (C) by means of a “net exercise” procedure effected by withholding the minimum number of shares of Common Stock otherwise deliverable in respect of an Option that are needed to pay for the Exercise Price and all applicable required withholding taxes. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional shares of Common Stock, or whether such fractional shares of Common Stock or any rights thereto shall be canceled, terminated or otherwise eliminated.
(e) Notification upon Disqualifying Disposition of an Incentive Stock Option. Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date on which the Participant makes a disqualifying disposition of any Common Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Stock before the later of (i) two years after the date of grant of the Incentive Stock Option and (ii) one year after the date of exercise of the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession, as agent for the applicable Participant, of any Common Stock acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instruction from such Participant as to the sale of such Common Stock.
(f) Compliance with Laws. Notwithstanding the foregoing, in no event shall the Participant be permitted to exercise an Option in a manner that the Committee determines would violate the Sarbanes-Oxley Act of 2002, or any other applicable law or the applicable rules and regulations of the Securities and Exchange Commission or the applicable rules and regulations of any securities exchange or inter-dealer quotation service on which the Common Stock of the Company is listed or quoted.
(g) Incentive Stock Option Grants to 10% Stockholders. Notwithstanding anything to the contrary in this Section 7, if an Incentive Stock Option is granted to a Participant who owns stock representing more than ten percent of the voting power of all classes of stock of the Company or of a parent or subsidiary of the Company (within the meaning of Sections 424(e) and 424(f) of the Code), the Option Period shall not exceed five years from the date of grant of such Option and the Exercise Price shall be at least 110% of the Fair Market Value (on the date of grant) of the shares subject to the Option.
(h) $100,000 Per Year Limitation for Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined as of the date of grant) of shares of Common Stock for which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company) exceeds $100,000, such excess Incentive Stock Options shall be treated as Nonqualified Stock Options.
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8.
Stock Appreciation Rights (SARs).
(a) Generally. Each SAR shall be subject to the conditions set forth in the Plan and the Award Agreement. Any Option granted under the Plan may include a tandem SAR. The Committee also may award SARs independent of any Option.
(b) Strike Price. The strike price (“Strike Price”) per share of Common Stock for each SAR (that is not a Substitute Award) shall not be less than 100% of the Fair Market Value of such share, determined as of the date of grant; provided, however, that a SAR granted in tandem with (or in substitution for) an Option previously granted shall have a Strike Price equal to the Exercise Price of the corresponding Option. Any modification to the Strike Price of an outstanding SAR shall be subject to the prohibition on repricing set forth in Section 13(b).
(c) Vesting and Expiration. A SAR granted in tandem with an Option shall vest and become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option. A SAR granted independently of an Option shall vest and become exercisable and shall expire in such manner and on such date or dates determined by the Committee and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the “SAR Period”); provided, however, that notwithstanding any vesting or exercisability dates set by the Committee, the Committee may accelerate the vesting and/or exercisability of any SAR, which acceleration shall not affect the terms and conditions of such SAR other than with respect to vesting and/or exercisability. If the SAR Period would expire at a time when trading in the shares of Common Stock is prohibited by the Company’s insider trading policy or a Company-imposed “blackout period,” the SAR Period shall be automatically extended (other than with respect to SARs with a Strike Price as of the end of the SAR Period (prior to any such extension) that is not less than the Fair Market Value of a share of Common Stock at such time) until the 30th day following the expiration of such prohibition (so long as such extension shall not violate Section 409A of the Code).
(d) Method of Exercise. SARs may be exercised by delivery of written or electronic notice of exercise to the Company or its designee (including a third-party administrator) in accordance with the terms of the Award, specifying the number of SARs to be exercised and the date on which such SARs were awarded.
(e) Payment. Upon the exercise of a SAR, the Company shall pay to the holder thereof an amount equal to the number of shares subject to the SAR that are being exercised multiplied by the excess, if any, of the Fair Market Value of one share of Common Stock on the exercise date over the Strike Price, less an amount equal to any U.S. federal, state and local income and employment taxes and non-U.S. income and employment taxes, social contributions and any other tax-related items required to be withheld. The Company shall pay such amount in cash, in shares of Common Stock valued at Fair Market Value as determined on the date of exercise, or any combination thereof, as determined by the Committee. Any fractional shares of Common Stock shall be settled in cash.
9.
Restricted Stock and Restricted Stock Units.
(a) Generally. Each Restricted Stock and Restricted Stock Unit Award shall be subject to the conditions set forth in the Plan and the applicable Award Agreement. The Committee shall establish restrictions applicable to Restricted Stock and Restricted Stock Units, including the period over which the restrictions shall apply (the “Restricted Period”), and the time or times at which Restricted Stock or Restricted Stock Units shall become vested (which, for the avoidance of doubt, may include service- and/or performance-based vesting conditions). To the extent permitted in the Committee’s sole discretion, and subject to such rules, approvals, and conditions as the Committee may impose from time to time, an Eligible Person who is a non-employee director may elect to receive all or a portion of such Eligible Person’s cash director fees and other cash director compensation payable for director services provided to the Company by such Eligible Person in any fiscal year, in whole or in part, in the form of Restricted Stock Units. The Committee may accelerate the vesting and/or the lapse of any or all of the restrictions on Restricted Stock and Restricted Stock Units which acceleration shall not affect any other terms and conditions of such
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Awards. No share of Common Stock shall be issued at the time an Award of Restricted Stock Units is made, and the Company will not be required to set aside a fund for the payment of any such Award.
(b) Stock Certificates; Escrow or Similar Arrangement. Upon the grant of Restricted Stock, the Committee shall cause share(s) of Common Stock to be registered in the name of the Participant and held in book-entry form subject to the Company’s directions. The Committee may also cause a stock certificate registered in the name of the Participant to be issued. In such event, the Committee may provide that such certificates shall be held by the Company or in escrow rather than delivered to the Participant pending vesting and release of restrictions, in which case the Committee may require the Participant to execute and deliver to the Company or its designee (including third-party administrators) (i) an escrow agreement satisfactory to the Committee, if applicable, and (ii) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock. If the Participant shall fail to execute and deliver the escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be null and void. Subject to the restrictions set forth in this Section 9 and the Award Agreement, the Participant shall have the rights and privileges of a stockholder as to such Restricted Stock, including without limitation the right to vote such Restricted Stock.
(c) Restrictions; Forfeiture. Restricted Stock and Restricted Stock Units awarded to the Participant shall be subject to forfeiture until the expiration of the Restricted Period and the attainment of any other vesting criteria established by the Committee, and shall be subject to the restrictions on transferability set forth in the Award Agreement. In the event of any forfeiture, all rights of the Participant to such Restricted Stock (or as a stockholder with respect thereto), and to such Restricted Stock Units, as applicable, including to any dividends and/or dividend equivalents that may have been accumulated and withheld during the Restricted Period in respect thereof, shall terminate without further action or obligation on the part of the Company. The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock and Restricted Stock Units whenever it may determine that, by reason of changes in applicable laws or other changes in circumstances arising after the date of grant of the Restricted Stock Award or Restricted Stock Unit Award, such action is appropriate.
(d) Delivery of Restricted Stock and Settlement of Restricted Stock Units.
(i) Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock and the attainment of any other vesting criteria, the restrictions set forth in the applicable Award Agreement shall be of no further force or effect, except as set forth in the Award Agreement. If an escrow arrangement is used, upon such expiration the Company shall deliver to the Participant or such Participant’s beneficiary (via book-entry notation or, if applicable, in stock certificate form) the shares of Restricted Stock with respect to which the Restricted Period has expired (rounded down to the nearest full share). Dividends, if any, that may have been withheld by the Committee and attributable to the Restricted Stock shall be distributed to the Participant in cash or in shares of Common Stock having a Fair Market Value (on the date of distribution) (or a combination of cash and shares of Common Stock) equal to the amount of such dividends, upon the release of restrictions on the Restricted Stock.
(ii) Unless otherwise provided by the Committee in an Award Agreement, upon the expiration of the Restricted Period and the attainment of any other vesting criteria established by the Committee, with respect to any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or such Participant’s beneficiary (via book-entry notation or, if applicable, in stock certificate form), one share of Common Stock (or other securities or other property, as applicable) for each such outstanding Restricted Stock Unit that has not then been forfeited and with respect to which the Restricted Period has expired and any other such vesting criteria are attained (“Released Unit”); provided, however, that the Committee may elect to (A) pay cash or part cash and part Common Stock in lieu of delivering only shares of Common Stock in respect of such Released Units or (B) defer the delivery of Common Stock (or cash or part Common Stock and part cash, as the case may be) beyond the expiration of the Restricted Period if such extension would not cause adverse tax consequences under Section 409A of the Code. If a cash payment is made in lieu of delivering shares of Common
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Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock as of the date on which the shares of Common Stock would have otherwise been delivered to the Participant in respect of such Restricted Stock Units.
(iii) To the extent provided in an Award Agreement, the holder of outstanding Restricted Stock Units shall be entitled to be credited with dividend equivalent payments (upon the payment by the Company of dividends on shares of Common Stock) either in cash or, if determined by the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends as of the date of payment (or a combination of cash and shares of Common Stock) (and interest may, if determined by the Committee, be credited on the amount of cash dividend equivalents at a rate and subject to such terms as determined by the Committee), which accumulated dividend equivalents (and interest thereon, if applicable) shall be payable at the same time as the underlying Restricted Stock Units are settled (in the case of Restricted Stock Units, following the release of restrictions on such Restricted Stock Units), and if such Restricted Stock Units are forfeited, the holder thereof shall have no right to such dividend equivalent payments.
(e) Legends on Restricted Stock. Each certificate representing Restricted Stock awarded under the Plan, if any, shall bear a legend substantially in the form of the following in addition to any other information the Company deems appropriate until the lapse of all restrictions with respect to such Common Stock:
TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS OF THE VIEW MATERIALS &VOTE LATHAM GROUP, INC. 2021 OMNIBUS INCENTIVE PLAN AND A RESTRICTED STOCK AWARD AGREEMENT, DATED AS OF , BETWEEN LATHAM GROUP, INC. AND . A COPY OF SUCH PLAN AND AWARD AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF LATHAM GROUP, INC.
10. Other Stock-Based Awards and Other Cash-Based Awards. The Committee may issue unrestricted Common Stock, rights to receive future grants of Awards, or other Awards denominated in Common Stock (including performance shares or performance units), or Awards that provide for cash payments based in whole or in part on the value or future value of shares of Common Stock (“Other Stock-Based Awards”) and Other Cash-Based Awards under the Plan to Eligible Persons, alone or in tandem with other Awards, in such amounts as the Committee shall from time to time determine. Each Other Stock-Based Award shall be evidenced by an Award Agreement, which may include conditions including, without limitation, the payment by the Participant of the Fair Market Value of such shares of Common Stock on the date of grant.
11. Changes in Capital Structure and Similar Events. In the event of (a) any dividend (other than regular cash dividends) or other distribution (whether in the form of cash, shares of Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, amalgamation, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of Common Stock or other securities of the Company, issuance of warrants or other rights to acquire shares of Common Stock or other securities of the Company, or other similar corporate transaction or event (including, without limitation, a Change in Control) that affects the shares of Common Stock, or (b) unusual or nonrecurring events (including, without limitation, a Change in Control) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange or inter-dealer quotation service, accounting principles or law, such that in any case an adjustment is determined by the Committee to be necessary or appropriate, then the Committee shall (other than with respect to Other Cash-Based Awards) make any such adjustments in such manner as it may deem equitable, including without limitation any or all of the following:
(i) adjusting any or all of (A) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) that may be delivered in respect of Awards or with respect to which Awards may be granted under the Plan (including, without limitation, adjusting any or all of the limitations under Section 5 of the Plan) and (B) the terms of any outstanding Award, including, without limitation, (1) the number of shares of Common Stock or other
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securities of the Company (or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate, (2) the Exercise Price or Strike Price with respect to any Award and/or (3) any applicable performance measures (including, without limitation, Performance Conditions and performance periods);
(ii) providing for a substitution or assumption of Awards (or awards of an acquiring company), accelerating the delivery, vesting and/or exercisability of, lapse of restrictions and/or other conditions on, or termination of, Awards or providing for a period of time (which shall not be required to be more than ten (10) days) for Participants to exercise outstanding Awards prior to the occurrence of such event (and any such Award not so exercised shall terminate or become no longer exercisable upon the occurrence of such event); and
(iii) cancelling any one or more outstanding Awards (or awards of an acquiring company) and causing to be paid to the holders thereof, in cash, shares of Common Stock, other securities or other property, or any combination thereof, the value of such Awards, if any, as determined by the Committee (which if applicable may be based upon the price per share of Common Stock received or to be received by other stockholders of the Company in such event), including without limitation, in the case of an outstanding Option or SAR, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the shares of Common Stock subject to such Option or SAR over the aggregate Exercise Price or Strike Price of such Option or SAR, respectively (it being understood that, in such event, any Option or SAR having a per-share Exercise Price or Strike Price equal to, or in excess of, the Fair Market Value (as of the date specified by the Committee) of a share of Common Stock subject thereto may be canceled and terminated without any payment or consideration therefor);
provided, however, that the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect any “equity restructuring” (within the meaning of the Financial Accounting Standards Codification Topic 718 (or any successor pronouncement thereto)). Except as otherwise determined by the Committee, any adjustment in Incentive Stock Options under this Section 11 (other than any cancellation of Incentive Stock Options) shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code, and any adjustments under this Section 11 shall be made in a manner that does not adversely affect the exemption provided pursuant to Rule 16b-3 promulgated under the Exchange Act. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes. In anticipation of the occurrence of any event listed in the first sentence of this Section 11, for reasons of administrative convenience, the Committee in its sole discretion may refuse to permit the exercise of any Award during a period of up to 30 days prior to, and/or up to 30 days after, the anticipated occurrence of any such event.
12. Effect of Termination of Service or a Change in Control on Awards.
(a) Termination. To the extent permitted under Section 409A of the Code, the Committee may provide, by rule or regulation or in any applicable Award Agreement, or may determine in any individual case, the circumstances in which, and to the extent to which, an Award may be exercised, settled, vested, paid or forfeited in the event of the Participant’s termination of service prior to the end of a performance period or vesting, exercise or settlement of such Award.
(b) Change in Control. In the event of a Change in Control, notwithstanding any provision of the Plan to the contrary, the Committee may provide for: (i) continuation or assumption of such outstanding Awards under the Plan by the Company (if it is the surviving corporation) or by the surviving corporation or its parent; (ii) substitution by the surviving corporation or its parent of awards with substantially the same terms and value for such outstanding Awards (in the case of an Option or SAR, the Intrinsic Value at grant of such Substitute Award shall equal the Intrinsic Value of the Award); (iii) acceleration of the vesting (including the lapse of any restrictions, with any performance criteria or other performance conditions deemed met at target) or right to exercise such outstanding Awards immediately prior to or as of the date of the Change in Control, and the expiration of such outstanding Awards to the extent not timely
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exercised by the date of the Change in Control or other date thereafter designated by the Committee; or (iv) in the case of an Option or SAR, cancelation in consideration of a payment in cash or other consideration to the Participant who holds such Award in an amount equal to the Intrinsic Value of such Award (which may be equal to but not less than zero), which, if in excess of zero, shall be payable upon the effective date of such Change in Control. For the avoidance of doubt, in the event of a Change in Control, the Committee may, in its sole discretion, terminate any Option or SARs for which the exercise or strike price is equal to or exceeds the per share value of the consideration to be paid in the Change in Control transaction without payment of consideration therefor.
13. Amendments and Termination.
(a) Amendment and Termination of the Plan. The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided, that no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement applicable to the Plan (including, without limitation, as necessary to comply with any applicable rules or requirements of any securities exchange or inter-dealer quotation service on which the shares of Common Stock may be listed or quoted, for changes in GAAP to new accounting standards); provided, further, that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary, unless the Committee determines that such amendment, alteration, suspension, discontinuance or termination is either required or advisable in order for the Company, the Plan or the Award to satisfy any applicable law or regulation. Notwithstanding the foregoing, no amendment shall be made to the last proviso of Section 13(b) without stockholder approval.
(b) Amendment of Award Agreements. The Committee may, to the extent not inconsistent with the terms of any applicable Award Agreement or the Plan, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award Agreement, prospectively or retroactively (including after the Participant’s termination of employment or service with the Company); provided, that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant unless the Committee determines that such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination is either required or advisable in order for the Company, the Plan or the Award to satisfy any applicable law or regulation; provided, further, that except as otherwise permitted under Section 11 of the Plan, if (i) the Committee reduces the Exercise Price of any Option or the Strike Price of any SAR, (ii) the Committee cancels any outstanding Option or SAR and replaces it with a new Option or SAR (with a lower Exercise Price or Strike Price, as the case may be) or other Award or cash in a manner that would either (A) be reportable on the Company’s proxy statement or Form 10-K (if applicable) as Options that have been “repriced” (as such term is used in Item 402 of Regulation S-K promulgated under the Exchange Act), or (B) result in any “repricing” for financial statement reporting purposes (or otherwise cause the Award to fail to qualify for equity accounting treatment), (iii) the Committee takes any other action that is considered a “repricing” for purposes of the stockholder approval rules of the applicable securities exchange or inter-dealer quotation service on which the Common Stock is listed or quoted, or (iv) the Committee cancels any outstanding Option or SAR that has a per-share Exercise Price or Strike Price (as applicable) at or above the Fair Market Value of a share of Common Stock on the date of cancellation, and pays any consideration to the holder thereof, whether in cash, securities, or other property, or any combination thereof, then, in the case of the immediately preceding clauses (i) through (iv), any such action shall not be effective without stockholder approval.
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14. General.
(a) Award Agreements; Other Agreements. Each Award under the Plan shall be evidenced by an Award Agreement, which shall be delivered to the Participant and shall specify the terms and conditions of the Award and any rules applicable thereto. In the event of any conflict between the terms of the Plan and any Award Agreement or employment, change-in-control, severance or other agreement in effect with the Participant, the term of the Plan shall control.
(b) Nontransferability.
(i) Each Award shall be exercisable only by the Participant during the Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant other than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or an Affiliate; provided, that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
(ii) Notwithstanding the foregoing, the Committee may permit Awards (other than Incentive Stock Options) to be transferred by the Participant, without consideration, subject to such rules as the Committee may adopt, to (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act or any successor form of registration statements promulgated by the Securities and Exchange Commission (collectively, the “Immediate Family Members”); (B) a trust solely for the benefit of the Participant or the Participant’s Immediate Family Members; (C) a partnership or limited liability company whose only partners or stockholders are the Participant and the Participant’s Immediate Family Members; or (D) any other transferee as may be approved either (1) by the Board or the Committee, or (2) as provided in the applicable Award Agreement; (each transferee described in clause (A), (B), (C) or (D) above is hereinafter referred to as a “Permitted Transferee”); provided, that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan.
(iii) The terms of any Award transferred in accordance with the immediately preceding paragraph shall apply to the Permitted Transferee, and any reference in the Plan, or in any applicable Award Agreement, to the Participant shall be deemed to refer to the Permitted Transferee, except that (A) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the shares of Common Stock to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award Agreement, that such a registration statement is necessary or appropriate; (C) the Committee or the Company shall not be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise; (D) the consequences of the termination of the Participant’s employment by, or services to, the Company or an Affiliate under the terms of the Plan and the applicable Award Agreement shall continue to be applied with respect to the transferred Award, including, without limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award Agreement; and (E) any non-competition, non-solicitation, non-disparagement, non-disclosure, or other restrictive covenants contained in any Award Agreement or other agreement between the Participant and the Company or any Affiliate shall continue to apply to the Participant and the consequences of the violation of such covenants shall continue to be applied with respect to the transferred Award, including without limitation the clawback and forfeiture provisions of Section 14(u) of the Plan.
| | | | 2023 Proxy Statement B-15 | |
(c) Dividends and Dividend Equivalents. The Committee may provide the Participant with dividends or dividend equivalents as part of an Award, payable in cash, shares of Common Stock, other securities, other Awards or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee, including, without limitation, payment directly to the Participant, withholding of such amounts by the Company subject to vesting of the Award or reinvestment in additional shares of Common Stock, Restricted Stock or other Awards; provided, that no dividends or dividend equivalents shall be payable (i) in respect of outstanding Options or SARs or (ii) in respect of any other Award unless and until the Participant vests in such underlying Award; provided, further, that dividend equivalents may be accumulated in respect of unearned Awards and paid as soon as administratively practicable, but no more than 60 days, after such Awards are earned and become payable or distributable (and the right to any such accumulated dividends or dividend equivalents shall be forfeited upon the forfeiture of the Award to which such dividends or dividend equivalents relate).
(d) Tax Withholding.
(i) The Participant shall be required to pay to the Company or any Affiliate, and the Company or any Affiliate shall have the right (but not the obligation) and is hereby authorized to withhold, from any cash, shares of Common Stock, other securities or other property deliverable under any Award or from any compensation or other amounts owing to the Participant, the amount (in cash, Common Stock, other securities or other property) of any required withholding taxes (up to the maximum permissible withholding amounts) in respect of an Award, its exercise, or any payment or transfer under an Award or under the Plan and to take such other action that the Committee or the Company deem necessary to satisfy all obligations for the payment of such withholding taxes.
(ii) Without limiting the generality of paragraph (i) above, the Committee may permit the Participant to satisfy, in whole or in part, the foregoing withholding liability by (A) payment in cash, (B) the delivery of shares of Common Stock (which shares are not subject to any pledge or other security interest) owned by the Participant having a Fair Market Value on such date equal to such withholding liability or (C) having the Company withhold from the number of shares of Common Stock otherwise issuable or deliverable pursuant to the exercise or settlement of the Award a number of shares with a Fair Market Value on such date equal to such withholding liability. In addition, subject to any requirements of applicable law, the Participant may also satisfy the tax withholding obligations by other methods, including selling shares of Common Stock that would otherwise be available for delivery, provided that the Board or the Committee has specifically approved such payment method in advance.
(e) No Claim to Awards; No Rights to Continued Employment, Directorship or Engagement. No employee, director of the Company, consultant providing service to the Company or an Affiliate, or other person, shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Company or an Affiliate, or to continue in the employ or the service of the Company or an Affiliate, nor shall it be construed as giving any Participant who is a director any rights to continued service on the Board.
(f) International Participants. With respect to Participants who reside or work outside of the United States, the Committee may amend the terms of the Plan or appendices thereto, or outstanding Awards, with respect to such Participants, in order to conform such terms with or accommodate the requirements of local laws, procedures or practices or to obtain more favorable tax or other treatment for the Participant, the Company or its Affiliates. Without limiting the generality of this subsection, the Committee is specifically authorized to adopt rules, procedures and sub-plans with provisions that limit or modify rights on death, disability, retirement or other terminations of employment, available methods of exercise or settlement of an
| | | | 2023 Proxy Statement B-16 | |
Award, payment of income, social insurance contributions or payroll taxes, withholding procedures and handling of any stock certificates or other indicia of ownership that vary with local requirements. The Committee may also adopt rules, procedures or sub-plans applicable to particular Affiliates or locations.
(g) Beneficiary Designation. The Participant’s beneficiary shall be the Participant’s spouse (or domestic partner if such status is recognized by the Company and in such jurisdiction), or if the Participant is otherwise unmarried at the time of death, the Participant’s estate, except to the extent that a different beneficiary is designated in accordance with procedures that may be established by the Committee from time to time for such purpose. Notwithstanding the foregoing, in the absence of a beneficiary validly designated under such Committee-established procedures and/or applicable law who is living (or in existence) at the time of death of a Participant residing or working outside the United States, any required distribution under the Plan shall be made to the executor or administrator of the estate of the Participant, or to such other individual as may be prescribed by applicable law.
(h) Termination of Employment or Service. The Committee, in its sole discretion, shall determine the effect of all matters and questions related to the termination of employment of or service of a Participant. Except as otherwise provided in an Award Agreement, or any employment, consulting, change-in-control, severance or other agreement between the Participant and the Company or an Affiliate, unless determined otherwise by the Committee: (i) neither a temporary absence from employment or service due to illness, vacation or leave of absence (including, without limitation, a call to active duty for military service through a Reserve or National Guard unit) nor a transfer from employment or service with the Company to employment or service with an Affiliate (or vice versa) shall be considered a termination of employment or service with the Company or an Affiliate; and (ii) if the Participant’s employment with the Company or its Affiliates terminates, but such Participant continues to provide services with the Company or its Affiliates in a non-employee capacity (including as a non-employee director) (or vice versa), such change in status shall not be considered a termination of employment or service with the Company or an Affiliate for purposes of the Plan.
(i) No Rights as a Stockholder. Except as otherwise specifically provided in the Plan or any Award Agreement, no person shall be entitled to the privileges of ownership in respect of shares of Common Stock that are subject to Awards hereunder until such shares have been issued or delivered to that person.
(j) Government and Other Regulations.
(i) Nothing in the Plan shall be deemed to authorize the Committee or Board or any members thereof to take any action contrary to applicable law or regulation, or rules of the NASDAQ or any other securities exchange or inter-dealer quotation service on which the Common Stock is listed or quoted.
(ii) The obligation of the Company to settle Awards in Common Stock or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any shares of Common Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to and in compliance with the terms of an available exemption. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Common Stock to be offered or sold under the Plan. The Committee shall have the authority to provide that all shares of Common Stock or other securities of the Company or any Affiliate delivered under the Plan shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the Plan, the applicable Award Agreement, U.S. federal securities laws, or the rules, regulations and other requirements of the U.S. Securities and Exchange Commission, any securities exchange or inter-dealer quotation service upon which such shares or other securities of the Company are then listed or quoted and any other applicable federal,
| | | | 2023 Proxy Statement B-17 | |
state, local or non-U.S. laws, rules, regulations and other requirements, and, without limiting the generality of Section 9 of the Plan, the Committee may cause a legend or legends to be put on any such certificates of Common Stock or other securities of the Company or any Affiliate delivered under the Plan to make appropriate reference to such restrictions or may cause such Common Stock or other securities of the Company or any Affiliate delivered under the Plan in book-entry form to be held subject to the Company’s instructions or subject to appropriate stop-transfer orders. Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to add any additional terms or provisions to any Award granted under the Plan that it in its sole discretion deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject.
(iii) The Committee may cancel an Award or any portion thereof if it determines that legal or contractual restrictions and/or blockage and/or other market considerations would make the Company’s acquisition of shares of Common Stock from the public markets, the Company’s issuance of Common Stock to the Participant, the Participant’s acquisition of Common Stock from the Company and/or the Participant’s sale of Common Stock to the public markets illegal, impracticable or inadvisable. If the Committee determines to cancel all or any portion of an Award in accordance with the foregoing, unless prevented by applicable laws, the Company shall pay to the Participant an amount equal to the excess of (A) the aggregate Fair Market Value of the shares of Common Stock subject to such Award or portion thereof canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or delivered, as applicable), over (B) the aggregate Exercise Price or Strike Price (in the case of an Option or SAR, respectively) or any amount payable as a condition of delivery of shares of Common Stock (in the case of any other Award). Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof.
(k) Lock-Up Agreement. As a condition to the grant of an Award, if requested by the Company and the lead underwriter of any public offering of Common Stock (the “Lead Underwriter”), a Participant must irrevocably agree not to sell, contract to sell, grant any option to purchase, transfer the economic risk of ownership in, make any short sale of, pledge or otherwise transfer or dispose of, any interest in any Common Stock or any securities convertible into, derivative of, or exchangeable or exercisable for, or any other rights to purchase or acquire Common Stock (except Common Stock included in such public offering or acquired on the public market after such offering) during such period of time after the effective date of a registration statement of the Company filed under the Securities Act that the Lead Underwriter may specify (the “Lock-Up Period”). Each Participant must sign such documents as may be requested by the Lead Underwriter or the Company to effect the foregoing. The Company may impose stop-transfer instructions with respect to Common Stock acquired under an Award until the end of such Lock-Up Period. In addition, the Company may impose additional restrictions.
(l) Payments to Persons Other Than Participants. If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for such person’s affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or such person’s estate (unless a prior claim therefor has been made by a duly appointed legal representative or a beneficiary designation form has been filed with the Company) may, if the Committee so directs the Company, be paid to such person’s spouse, child, or relative, or an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.
(m) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options or awards otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.
| | | | 2023 Proxy Statement B-18 | |
(n) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate, on the one hand, and the Participant or other person or entity, on the other hand. No provision of the Plan or any Award shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or to otherwise segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan other than as unsecured general creditors of the Company.
(o) Reliance on Reports. Each member of the Committee and each member of the Board (and each such member’s respective designees) shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent registered public accounting firm of the Company and its Affiliates and/or any other information furnished in connection with the Plan by any agent of the Company or the Committee or the Board, other than such member or designee.
(p) Relationship to Other Benefits. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan.
(q) Governing Law. The Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws thereof, or principles of conflicts of laws of any other jurisdiction that could cause the application of the laws of any jurisdiction other than the State of Delaware.
(r) Severability. If any provision of the Plan or any Award or Award Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or entity or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, person or entity or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.
(s) Obligations Binding on Successors. The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to all or substantially all of the assets and business of the Company.
(t) Section 409A of the Code.
(i) It is intended that the Plan comply with Section 409A of the Code, and all provisions of the Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code. Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with the Plan or any other plan maintained by the Company, including any taxes and penalties under Section 409A of the Code, and neither the Company nor any Affiliate shall have any obligation to indemnify or otherwise hold such Participant or any beneficiary harmless from any or all of such taxes or penalties. With respect to any Award that is considered “deferred compensation” subject to Section 409A of the Code, references in the Plan to “termination of employment” (and substantially similar phrases) shall mean “separation from service” within the meaning of Section 409A of the Code. For purposes of Section 409A of the Code, each of the payments that may be made in respect of any Award granted under the Plan is designated as a separate payment.
(ii) Notwithstanding anything in the Plan to the contrary, if the Participant is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, no payments or deliveries in
| | | | 2023 Proxy Statement B-19 | |
respect of any Awards that are “deferred compensation” subject to Section 409A of the Code shall be made to such Participant prior to the date that is six months after the date of such Participant’s “separation from service” within the meaning of Section 409A of the Code or, if earlier, the Participant’s date of death. All such delayed payments or deliveries will be paid or delivered (without interest) in a single lump sum on the earliest date permitted under Section 409A of the Code that is also a business day.
(iii) In the event that the timing of payments in respect of any Award that would otherwise be considered “deferred compensation” subject to Section 409A of the Code would be accelerated upon the occurrence of (A) a Change in Control, no such acceleration shall be permitted unless the event giving rise to the Change in Control satisfies the definition of a change in the ownership or effective control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation pursuant to Section 409A of the Code and any Treasury Regulations promulgated thereunder or (B) a Disability, no such acceleration shall be permitted unless the Disability also satisfies the definition of “disability” pursuant to Section 409A of the Code and any Treasury Regulations promulgated thereunder.
(u) Clawback/Forfeiture. Notwithstanding anything to the contrary contained herein, the Committee may cancel an Award if the Participant, without the consent of the Company, (A) has engaged in or engages in activity that is in conflict with or adverse to the interests of the Company or any Affiliate while employed by or providing services to the Company or any Affiliate, including fraud or conduct contributing to any financial restatements or irregularities or (B) violates a non-competition, non-solicitation, non-disparagement or non-disclosure covenant or agreement with the Company or any Affiliate, as determined by the Committee, or if the Participant’s employment or service is terminated for Cause. The Committee may also provide in an Award Agreement that in any such event the Participant will forfeit any compensation, gain or other value realized thereafter on the vesting, exercise or settlement of such Award, the sale or other transfer of such Award, or the sale of shares of Common Stock acquired in respect of such Award, and must promptly repay such amounts to the Company. The Committee may also provide in an Award Agreement that if the Participant receives any amount in excess of what the Participant should have received under the terms of the Award for any reason (including without limitation by reason of a financial restatement, mistake in calculations or other administrative error), all as determined by the Committee, then the Participant shall be required to promptly repay any such excess amount to the Company. In addition, the Company shall retain the right to bring an action at equity or law to enjoin the Participant’s activity and recover damages resulting from such activity. Further, to the extent required by applicable law (including, without limitation, Section 304 of the Sarbanes-Oxley Act and Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act) and/or the rules and regulations of the NASDAQ or any other securities exchange or inter-dealer quotation service on which the Common Stock is listed or quoted, or if so required pursuant to a written policy adopted by the Company, Awards shall be subject (including on a retroactive basis) to clawback, forfeiture or similar requirements (and such requirements shall be deemed incorporated by reference into all outstanding Award Agreements).
(v) No Representations or Covenants With Respect to Tax Qualification. Although the Company may endeavor to (i) qualify an Award for favorable U.S. or non-U.S. tax treatment or (ii) avoid adverse tax treatment, the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment. The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on holders of Awards under the Plan.
(w) No Interference. The existence of the Plan, any Award Agreement, and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company, the Board, the Committee, or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization, or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants, or rights to purchase stock or of bonds, debentures, or preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or that are convertible into or exchangeable for Common Stock, or
| | | | 2023 Proxy Statement B-20 | |
the dissolution or liquidation of the Company or any Affiliate, or any sale or transfer of all or any part of their assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
(x) Expenses; Titles and Headings. The expenses of administering the Plan shall be borne by the Company and its Affiliates. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control.
(y) Whistleblower Acknowledgments. Notwithstanding anything to the contrary herein, nothing in this Plan or any Award Agreement will (i) prohibit a Participant from making reports of possible violations of federal law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Exchange Act or Section 806 of the Sarbanes-Oxley Act of 2002, or of any other whistleblower protection provisions of federal law or regulation, or (ii) require prior approval by the Company or any of its Affiliates of any reporting described in clause (i).
* * *
As adopted by the Board of Directors of the Company on April 12, 2021.
As approved by the stockholders of the Company on April 13, 2021.
| | | | 2023 Proxy Statement B-21 | |
LATHAM GROUP, INC787INC 787 WATERVLIET SHAKER ROADLATHAM,ROAD LATHAM, NY 12 110 BRO ADRIDGEFINANCIAL SOLUTIONS, INC. ATTENTION:TEST PRINT51 MERCEDES WAY EDGEWOOD, NY 11717SCAN TOVIEW MATERIALS &VOTE NAMETHE COMPANY NAME INC. -COMMON12110 VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on May 1, 2023.2024 . Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.ELECTRONICform. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALSIfMATERIALS If you would like to reduce the costs incurred by our company in mailin gmailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please fol lowfollow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.VOTEyears. VOTE BY PHONE - 1-800-690-6903Use1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on May 1, 2023.2024. Have your proxy card in hand when you call and then follow the instructions.VOTEinstructions. VOTE BY MAILMark,MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Wa , Ed ewood,Way, Edgewood, NY 11 717.CONTROL#+ I 0000000000000000 I123,456,789,012.12345 THE COMPANY NAME INC. - CLASS A THE COMPANY NAME INC. - CLASS B THE COMPANY NAME INC. - CLASS C THE COMPANY NAME INC. - CLASS D THE COMPANY NAME INC. - CLASS E THE COMPANY NAME INC. - CLASS F THE COMPANY NAME INC. -401 K SHARES 123,456,789,012.1234511717. TO VOTE,VOTE. MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:IX! PAGE1 OF2D98481-P85870 V29350-P05295 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLYV.1.6-CONONLY LATHAM GROUP, INC. The Board of Directors recommends you vote FOR the following: 1. Election of Class Ill Directors Nominees: 01) Suzan Morna-Wade 02) Brian Pratt For Withhold For All All All Except 0 0 0 To withhold authority to vote for any individual nominee(s), mark "For All Exc ept " and write the number(s) of the nominee(s) on the line below. The Board of Directors recommends you vote FOR the following proposal: For Against Abstain 2. The ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending 0 0 0 December 31, 2024. NOTE: Such other business as may properly come before the meeting or any adjournment or postponement thereof.Please sign exactly as your name(s) appear(s) hereon . When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally . All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:The Notice of 20232024 Annual Meeting of Stockholders and Proxy Statement, and the 20222023 Annual Report are available at www.proxyvote.com.D98482- P85870LATHAMwww .proxyvote.com.LATHAM GROUP, INC.AnnualINC. Annual Meeting of Stockholders May 2, 20232024 8:00 AM EDTThisEDT This proxy is solicited by the Board of DirectorsTheDirectors The undersigned hereby appoints Patrick Sheller and Sanjeev Bahl, and each of them, each with power of substitution and revocation, as proxies for the undersigned to act and vote all of the shares of common stock of Latham Group , Inc. that the undersigned would be entitled to vote at the Annual Meeting of Stockholders of Latham Group, Inc. to be held on May 2, 2023,2024, and at any postponed or reconvened meeting, as directed on this Proxy Card, upon the matters set forth on the reverse side hereof, all as described in the Proxy Statement and, in their discretion, upon any other business that may properly come before said meeting, including an adjournment or postponement.Ifpostponement. If this Proxy Card is properly signed and returned, but does not provide voting instructions, then the votes represented by this Proxy Card will be voted FOR ALL the election of the director nominees and FOR Proposals 2 and 3.TheProposal 2. The undersigned hereby revokes all proxies previously given by the undersigned to vote at the Annual Meeting of Stockholders or any adjournment or postponement thereof .Continued. Continued and to be signed on reverse side
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