UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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GARDNER DENVER HOLDINGS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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22222 East Erie Street, Suite 500
Milwaukee, Wisconsin 53202
March 27, 201826, 2019
Dear Stockholders:
You are cordially invited to attend the 20182019 Annual Meeting of Stockholders of Gardner Denver Holdings, Inc. (the “Annual Meeting”) to be held on Thursday, May 10, 20189, 2019 at 10:00 a.m., Central Daylight Time at the Kimpton Journeyman Hotel, 310 East ChicagoWestin Milwaukee, 550 N. Van Buren Street, Milwaukee, Wisconsin 53202. For those who cannot attend in person, we are pleased to offer a virtual stockholder meeting, which will be conducted via live audio webcast, in which you can submit questions and vote online, at www.virtualshareholdermeeting.com/GDI2018GDI2019.
As permitted by the rules of the Securities and Exchange Commission, we are also pleased to be furnishing our proxy materials to stockholders primarily over the Internet. We believe this process expedites stockholders’ receipt of the materials, lowers the costs of the Annual Meeting and conserves natural resources. We sent a Notice of Internet Availability of Proxy Materials on or about March 27, 201826, 2019 to our stockholders of record at the close of business on March 14, 2018.13, 2019. The notice contains instructions on how to access our Proxy Statement and 20172018 Annual Report and vote online. If you would like to receive a printed copy of our proxy materials from us instead of downloading a printable version from the Internet, please follow the instructions for requesting such materials included in the notice.
Your vote is important to us. Whether or not you plan to attend the Annual Meeting, we strongly urge you to cast your vote promptly. You may vote over the Internet, as well as by telephone or by mail. Please review the instructions on the proxy or voting instruction card regarding each of these voting options.
Thank you for your continued support of Gardner Denver Holdings, Inc.
Sincerely,
Peter M. Stavros
Chairman of the Board of Directors
Vicente Reynal
Chief Executive Officer, Director
NOTICE OF 20182019 ANNUAL MEETING OF STOCKHOLDERS OF GARDNER DENVER HOLDINGS, INC.
Date | Thursday, May |
Time | 10:00 a.m. Central Daylight Time |
Place | Milwaukee, Wisconsin 53202 |
Record date | March |
Items of business | (1) To elect the three director nominees listed herein. |
(2) To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for | |
(3) | |
Virtual meeting | You may also vote at the Annual Meeting via the Internet by visiting www.virtualshareholdermeeting.com/ |
You have three options for submitting your vote before the Annual Meeting:
Please vote as soon as possible to record your vote promptly, even if you plan to attend the Annual Meeting in person or via the Internet.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on Thursday, May 10, 2018:9, 2019: The Proxy Statement and 20172018 Annual Report to Stockholders, which includes the the Annual Report on Form 10-K for the year ended December 31, 2017,2018, are available at www.proxyvote.com.
By Order of the Board of Directors,
Andrew Schiesl
Corporate Secretary
March 27, 201826, 2019
Milwaukee, Wisconsin
222 East Erie Street, Suite 500
Milwaukee, Wisconsin 53202
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 20189, 2019
Why am I being provided with these materials?
We first sent a Notice of Internet Availability of Proxy Materials and made these proxy materials available to you via the Internet on or about March 27, 201826, 2019 or, upon your request, have delivered printed versions of these proxy materials to you by mail in connection with thethe/ solicitation by the Board of Directors (the “Board” or “Board of Directors”) of Gardner Denver Holdings, Inc. (the “Company”) of proxies to be voted at our Annual Meeting of Stockholders to be held on May 10, 20189, 2019 (“Annual Meeting”), and at any postponements or adjournments of the Annual Meeting. Directors, officers and other Company employees also may solicit proxies by telephone or otherwise. Brokers and other nominees will be requested to solicit proxies or authorizations from beneficial owners and will be reimbursed for their reasonable expenses. You are invited to attend the Annual Meeting and vote your shares in person or to attend the virtual annual meeting and vote your shares via the Internet in accordance with the instructions at www.virtualshareholdermeeting.com/GDI2018GDI2019.
What am I voting on?
There are fourtwo proposals scheduled to be voted on at the Annual Meeting:
Who is entitled to vote?
Stockholders as of the close of business on March 14, 201813, 2019 (the “Record Date”) may vote at the Annual Meeting. As of that date, there were 197,223,598200,408,868 shares of common stock outstanding. You have one vote for each share of common stock held by you as of the Record Date, including shares:
What constitutes a quorum?
The holders of record of a majority of the voting power of the issued and outstanding shares of capital stock entitled to vote must be present in person or represented by proxy to constitute a quorum for the Annual Meeting. Abstentions are counted as present and entitled to vote for purposes of determining a quorum. Shares
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represented by “broker non-votes” also are counted as present and entitled to vote for purposes of determining a quorum. However, as described below under “How are votes counted?”, if you hold your shares in street name and do not provide voting instructions to your broker, your shares will not be voted on any proposal on which your broker does not have discretionary authority to vote (a “broker non-vote”).
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What is a “broker non-vote”?
A broker non-vote occurs when shares held by a broker are not voted with respect to a proposal because (1) the broker has not received voting instructions from the stockholder who beneficially owns the shares and (2) the broker lacks the authority to vote the shares at his/her discretion. Under current New York Stock Exchange interpretations that govern broker non-votes, each of the Nominee Proposal Say-on-Pay Proposal and Say-on-Frequency Proposal areis considered a non-discretionary mattersmatter and a broker will lack the authority to vote shares at his/her discretion on such proposals.proposal. The Ratification Proposal is considered a discretionary matter and a broker will be permitted to exercise his/her discretion.
How many votes are required to approve each proposal?
With respect to the Nominee Proposal, each director is elected at the Annual Meeting by a plurality vote, which means that the director nominees with the greatest number of votes cast, even if less than a majority, will be elected. There is no cumulative voting.
With respect to the Ratification Proposal, the Say-on-Pay Proposal and the Say-on-Frequency Proposal, approval of eachsuch proposal requires a vote of the holders of a majority of the voting power of the shares of stock present in person or represented by proxy and entitled to vote on the proposal.
While the Say-on-Pay Proposal is advisory in nature and non-binding, the Board will review the voting results and expects to take it into consideration when making future decisions regarding executive compensation.
How are votes counted?
With respect to the Nominee Proposal, you may vote “FOR,”“FOR” or “WITHHOLD” with respect to each nominee. Votes that are “withheld” will not count as a vote “for” or “against” a director because directors are elected by plurality voting. Broker non-votes will have no effect on the outcome of the Nominee Proposal.
With respect to the Ratification Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions will be counted as a vote “AGAINST” the Ratification Proposal.
With respect to the Say-on-Pay Proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions will be counted as a vote “AGAINST” the Say-on-Pay Proposal. Broker non-votes will have no effect on the outcome of the Say-on-Pay Proposal.
With respect to the Say-on-Frequency Proposal, you may vote every “ONE YEAR,” “TWO YEARS,” “THREE YEARS” or “ABSTAIN.” Abstentions will be counted as a vote “AGAINST” the Say-on-Frequency Proposal. Broker non-votes will have no effect on the outcome of the Say-on-Frequency Proposal.
If you just sign and submit your proxy card without voting instructions, your shares will be voted “FOR” each director nominee listed herein and “FOR” the Ratification and Say-on-Pay Proposals and for every “THREE YEARS” with respect to the Say-on-Frequency Proposal as recommended by the Board and in accordance with the discretion of the holders of the proxy with respect to any other matters that may be voted upon.
Who will count the vote?
Representatives of Broadridge Investor Communications Services (“Broadridge”) will tabulate the votes, and representatives of Broadridge will act as inspectors of election.
How does the Board recommend that I vote?
Our Board recommends that you vote your shares:
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How can I attend the Annual Meeting in person?
You are entitled to attend the Annual Meeting only if you are a stockholder as of the close of business on March 14, 2018,13, 2019, the record date, or hold a valid proxy for the meeting. In order to be admitted to the Annual Meeting, you must present proof of ownership of Gardner Denver Holdings, Inc. stock on the record date. This can be any of the following:
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Stockholders and proxy holders must also present a form of photo identification such as a driver’s license. We will be unable to admit anyone who does not present identification or refuses to comply with our security procedures.
No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the Annual Meeting.
For directions to the meeting, you may contact Vikram Kini at (414) 212-4753 or vikram.kini@gardnerdenver.com.
How can I attend and vote at the Virtual Annual Meeting?
You may also attend this year’s Annual Meeting via the Internet. Any stockholder can attend the Annual Meeting live online at www.virtualshareholdermeeting.com/GDI2018GDI2019. If you were a stockholder as of the Record Date, or you hold a valid proxy for the Annual Meeting, you can vote electronically if you attend the Annual Meeting via the Internet. A summary of the information you need to attend the Annual Meeting via the Internet is provided below:
• | Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/ |
• | Assistance with questions regarding how to attend and participate via the Internet will be provided at www.virtualshareholdermeeting.com/ |
How can I vote my shares without attending the Annual Meeting?
If you are a stockholder of record, you may vote by granting a proxy. Specifically, you may vote:
• | By Internet |
• | By Telephone |
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• | By Mail |
If you hold your shares in street name, you may also submit voting instructions to your broker, bank or other nominee. In most instances, you will be able to do this over the Internet, by telephone or by mail. Please refer to information from your bank, broker, or other nominee on how to submit voting instructions.
Internet and telephone voting facilities will close at 11:59 p.m., Eastern Daylight Time on May 9, 20188, 2019 for the voting of shares held by stockholders of record or held in street name.
Mailed proxy cards with respect to shares held of record or in street name must be received no later than May 9, 2018.8, 2019.
What does it mean if I receive more than one Notice on or about the same time?
It generally means you hold shares registered in more than one account. To ensure that all your shares are voted, please sign and return each proxy card or, if you vote by Internet or telephone, vote once for each Notice you receive.
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May I change my vote or revoke my proxy?
You may change your vote and revoke your proxy at any time prior to the vote at the Annual Meeting. If you are the stockholder of record, you may change your vote by granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described above (and until the applicable deadline for each method), by providing a written notice of revocation to the Company’s Corporate Secretary at Gardner Denver Holdings, Inc., 222 East Erie Street, Suite 500, Milwaukee, Wisconsin 53202 prior to your shares being voted, or by attending the Annual Meeting in person or via the Internet and voting. Attendance at the meeting in person or via the Internet will not cause your previously granted proxy to be revoked unless you specifically so request. For shares you hold beneficially in street name, you may change your vote by submitting new voting instructions to your broker, trustee or nominee following the instructions it has provided, or, if you have obtained a legal proxy from your broker or nominee giving you the right to vote your shares, by attending the Annual Meeting in person or via the Internet and voting.
Could other matters be decided at the Annual Meeting?
At the date this Proxy Statement went to press, we did not know of any matters to be raised at the Annual Meeting other than those referred to in this Proxy Statement.
If other matters are properly presented at the Annual Meeting for consideration and you are a stockholder of record and have submitted a proxy card, the persons named in your proxy card will have the discretion to vote on those matters for you.
Who will pay for the cost of this proxy solicitation?
We will pay the cost of soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees (for no additional compensation) in person or by telephone, electronic transmission and facsimile transmission. Brokers and other nominees will be requested to solicit proxies or authorizations from beneficial owners and will be reimbursed for their reasonable expenses.
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PROPOSAL NO. 1—ELECTION OF DIRECTORS
Our Amended and Restated Certificate of Incorporation provides for a classified Board of Directors divided into three classes. Peter M. Stavros, William E. Kassling and Michael V. Marn constitute a class with a term that expires at the Annual Meeting of Stockholders in 2018 (the “Class I Directors”);Vicente Reynal, John Humphrey Vicente Reynal and Joshua T. Weisenbeck constitute a class with a term that expires at the Annual Meeting of Stockholders in 2019 (the “Class II Directors”); and Brandon F. Brahm, William P. Donnelly, Marc E. Jones and Nickolas Vande Steeg constitute a class with a term that expires at the Annual Meeting of Stockholders in 2020 (the “Class III Directors”); and Peter M. Stavros, Elizabeth Centoni, William E. Kassling and Michael V. Marn constitute a class with a term that expires at the Annual Meeting of Stockholders in 2021 (the “Class I Directors”).
TheUpon the recommendation of the Nominating and Corporate Governance Committee, the full Board of Directors has considered and nominated the following slate of nominees for a three-year term expiring in 2021: Peter M. Stavros, William E. Kassling2022: John Humphrey, Vicente Reynal and Michael V. Marn.Joshua Weisenbeck. Action will be taken at the Annual Meeting for the election of these three Class III nominees.
Unless otherwise instructed, the persons named in the form of proxy card (the “proxyholders”) attached to this proxy statement intend to vote the proxies held by them for the election of Peter M. Stavros, William E. KasslingJohn Humphrey, Vicente Reynal and Michael V. Marn.Joshua Weisenbeck. If any of these three nominees ceases to be a candidate for election by the time of the Annual Meeting (a contingency which the Board does not expect to occur), such proxies may be voted by the proxyholders in accordance with the recommendation of the Board.
Nominees for Election to the Board of Directors in 20182019
The following information describes the offices held, other business directorships, and the class and term of each director nominee.nominee, as well as the experiences, qualifications, attributes or skills that caused the Nominating and Corporate Governance Committee and the Board to determine that the director nominee should serve as a director. Beneficial ownership of equity securities of the director nominees is shown under “Ownership of Securities” below.
Class | ||
Name | Age | Principal Occupation and Other Information |
Mr. Reynal has 22 years of experience in corporate strategy, new product development, general management processes and operations leadership with | ||
companies in the industrial, energy and medical industries. |
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Class | ||
Name | Age | Principal Occupation and Other Information |
Mr. Humphrey has many years of experience at manufacturing companies, including experience as the chief financial officer and board member of a | ||
Mr. Weisenbeck is a representative appointed by affiliates of KKR, our principal stockholder, and |
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE
ELECTION OF EACH OF THE DIRECTOR NOMINEES NAMED ABOVE.
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Continuing Members of the Board of Directors
The following information describes the offices held, other business directorships, and the class and term of each director whose term continues beyond the Annual Meeting and who is not subject to election this year.year, as well as the experiences, qualifications, attributes or skills that caused the Board to determine that the director should serve as a director. Beneficial ownership of equity securities for these directors is also shown under “Ownership of Securities” below.
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Class III - Directors Whose Term Expires in 2020 | ||
Name | Age | Principal Occupation and Other Information |
Brandon F. Brahm | Brandon F. Brahm has been a member of our board of directors since July 2013. Mr. Brahm has been a member of the Industrials private equity team at KKR since 2010. He has been actively involved with the investments in Capital Safety, Gardner Denver, Mr. Brahm is a representative appointed by affiliates of KKR, our principal stockholder, and has significant financial, investment and operational experience from his involvement in KKR’s investments in numerous portfolio companies and has played active roles in overseeing those businesses. | |
William P. Donnelly | William P. Donnelly has been a member of our board of directors since May 2017. Mr. Donnelly joined Mettler-Toledo International Inc. in 1997 and Mr. Donnelly has many years of experience as the chief financial officer of a publicly held company. | |
Marc E. Jones | 60 | Marc E. Jones has been a member of our board of directors since December 2018. Mr. Jones has served as Chief Executive Officer and Chairman of Aeris Communications, Inc., a provider of machine to machine and Internet of Things communications services, since 2008. Before joining Aeris Communications, he served as President and Chief Executive Officer of Visionael Corporation, a network service business |
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Class III - Directors Whose Term Expires in 2020 | ||
Name | Age | Principal Occupation and Other Information |
software and service provider, from 1998 to 2005, President and Chief Operating Officer of Madge Networks, a supplier of networking hardware, from 1994 to 1998, Senior Vice President, Integrated System Products of Chips and Technologies, Inc., one of the first fabless semiconductor companies, from 1987 to 1993, and Senior Vice President, Corporate Finance of LF Rothschild, Unterberg, Towbin, a merchant and investment banking firm, from 1985 to 1987. Mr. Jones began his career at the law firm Pillsbury, Madison & Sutro. Mr. Jones holds both a Bachelor of Arts in Political Science and a Juris Doctor from Stanford University. Mr. Jones has held senior leadership roles, including chief executive officer, at several technology companies and also has experience in senior financial leadership roles and a background in law. | ||
Nickolas Vande Steeg | Nickolas Vande Steeg has been a member of our board of directors Mr. Vande Steeg has many years of experience as president, chief operating officer and board member of a publicly held engineered products company. |
Class I – Directors Whose Term Expires in 2021 | |||
Name | Age | Principal Occupation and Other Information | |
Peter M. Stavros | 44 | Peter M. Stavros has been a member of our board of directors since July 2013. Mr. Stavros joined Kohlberg Kravis and Roberts & Co. L.P. (“KKR”) in 2005 and is a Member of KKR and head of its Industrials private equity team. He also became a member of KKR’s Americas Investment Committee in September 2013 and KKR’s Healthcare Growth Investment Committee in 2016. Prior to taking over responsibility for the Industrials sector in 2010, Mr. Stavros was a member of KKR’s Healthcare investment team. During that time, he was actively involved with the investment in HCA and, since assuming responsibility for the Industrials sector, has been actively involved with the investments in Capsugel, Capital Safety, Gardner Denver, The Crosby Group, CHI Overhead Doors, Hyperion Materials, Geostabilization International and Minnesota Rubber & Plastics. Prior to |
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Class I – Directors Whose Term Expires in 2021 | |||
Name | Age | Principal Occupation and Other Information | |
joining KKR, Mr. Stavros was with GTCR Golder Rauner from 2002 to 2005, where he was involved in the execution of numerous investments in the health care sector. He holds a Bachelor of Science in Chemistry, magna cum laude, from Duke University and a Master of Business Administration with high distinction, Baker Scholar, from Harvard Business School. Mr. Stavros is a representative appointed by affiliates of KKR, our principal stockholder, and has significant financial, investment and operational experience from his involvement in KKR’s investments in numerous portfolio companies and has played active roles in overseeing those businesses. | |||
Elizabeth Centoni | 54 | Elizabeth Centoni has been a member of our board of directors since December 2018. Ms. Centoni joined Cisco Systems, Inc., an internet technology company, in 2000, and since April 2018 has been Senior Vice President, General Manager of Cisco’s IoT Business Group. Prior to that, Ms. Centoni spent two years as the Senior Vice President, General Manager of Cisco’s Computing Systems Product Group. From 2000 to 2016, Ms. Centoni served in numerous engineering senior leadership roles at Cisco, including Vice President, Engineering Strategy and Portfolio Planning and Vice President, General Manager of the Service Provider Access Group. Ms. Centoni holds a Bachelor of Science in Chemistry from the University of Mumbai and an M.B.A. in Marketing from the University of San Francisco. Ms. Centoni has significant experience in senior leadership roles at a publicly held technology company. | |
William E. Kassling | 75 | William E. Kassling has been a member of our board of directors since August 2013. He has served as Lead Director of Wabtec Corporation, a manufacturer of braking equipment and other parts for locomotives, freight cars and passenger rail cars, since 2013. Mr. Kassling also previously served as President and Chief Executive Officer of Wabtec Corporation from 1990 until 2001 and 2004 to 2006, and served as Chairman from 2009 to 2013. Before leading a management group in the purchase of Wabtec Corporation from American Standard in 1990, Mr. Kassling spent six years overseeing its operations as American Standard’s Vice President, Group Executive, Railway Products Group. Prior to that, between 1978 and 1984, he served American Standard Incorporated first as Vice President, Strategic Planning and Development and later as Vice President, Group Executive and Building Specialties Group. In addition to Wabtec Corporation, Mr. Kassling is a board member of The Crosby Group, Pacific Design Technologies, the Pittsburgh Penguins and the Texas Rangers and served as a board member of Parker Hannifin Corporation from 2001 to 2015. He is also a member of the advisory board of the University of Pittsburgh Cancer Institute. Mr. Kassling holds a Master of Business Administration from the University of Chicago and a Bachelor of Science degree in Industrial Management from Purdue University. |
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Class I – Directors Whose Term Expires in 2021 | |||
Name | Age | Principal Occupation and Other Information | |
Mr. Kassling has many years of experience at manufacturing companies, including experience as chief executive officer and chairman of the board of a publicly held company. | |||
Michael V. Marn | 66 | Michael V. Marn has been a member of our board of directors since August 2013. Mr. Marn has served as an Industry Advisor in KKR’s Industrials private equity team, specializing in industrial marketing since 2010. From 1977 until his retirement in 2010, he was a Partner at McKinsey & Company. As a leader in McKinsey’s worldwide marketing practice, Mike focused primarily on business-to-business clients, and split his time between assisting clients and leading research and development efforts. He also served as the Chairman of the American Red Cross Northeast Ohio Region. Mr. Marn holds a Bachelor of Arts from Hiram College and a Masters in Management Science from Case Western Reserve University. Mr. Marn has many years of experience as a senior partner at a consulting company and has been involved in KKR’s investments in industrial companies. |
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THE BOARD OF DIRECTORS AND CERTAIN GOVERNANCE MATTERS
Our Board manages or directs the business and affairs of the Company, as provided by Delaware law, and conducts its business through meetings of the Board and twothree standing committees: the Audit Committee, the Compensation Committee and the CompensationNominating and Corporate Governance Committee. Because affiliates of KKR hold more than 50% of our common stock we are considered a “controlled company” as defined in the listing standards of the New York Stock Exchange (the “NYSE”). As such, we have elected to be exempt from the requirements to have a nominating/corporate governance committee, a compensation committee composed entirely of independent directors and a majority of independent directors on our Board.
Our Board evaluates the Company’s corporate governance policies on an ongoing basis with a view towards maintaining the best corporate governance practices in the context of the Company’s current business environment and aligning our governance practices closely with the interests of our stockholders. Our Board and management value the perspective of our stockholders and encourage stockholders to communicate with the Board as described under “―Communications with the Board” below.
As described in our Corporate Governance Guidelines, stockholders and other interested parties who wish to communicate with a member or members of the Board, including the chairperson of the Audit, Compensation or CompensationNominating and Corporate Governance Committee or the non-management or independent directors as a group, may do so by addressing such communications or concerns to the Secretary of the Company, 222 East Erie Street, Suite 500, Milwaukee, Wisconsin 53202.
Director Independence and Independence Determinations
Under our Corporate Governance Guidelines and NYSENew York Stock Exchange (“NYSE”) rules, a director is not independent unless the Board affirmatively determines that he or she does not have a direct or indirect material relationship with the Company or any of its subsidiaries.
Our Corporate Governance Guidelines define independence in accordance with the independence definition in the current NYSE corporate governance rules for listed companies. Our Corporate Governance Guidelines require our Board of Directors to review the independence of all directors at least annually.
In the event a director has a relationship with the Company that is relevant to his or her independence and is not addressed by the objective tests set forth in the NYSE independence definition, our Board of Directors will determine, considering all relevant facts and circumstances, whether such relationship is material.
Our Board of Directors has determined that each of Messrs. Stavros, Brahm, Donnelly, Humphrey, Jones, Kassling, Marn, Vande Steeg and DonnellyWeisenbeck and Ms. Centoni is independent under the guidelines for director independence set forth in the Corporate Governance Guidelines and under all applicable NYSE guidelines, including with respect to committee membership. Our Board also has determined that each of Messrs. Donnelly, KasslingHumphrey and HumphreyKassling is “independent” for purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that Mr.each of Messrs. Stavros, Vande Steeg and Weisenbeck is “independent” for purposes of Section 10C(a)(3) of the Exchange Act. In addition, our Board of Directors had determined that Pastor Velasco, who resigned from the Board of Directors in October 2017, was independent under the guidelines for director independence set forth in the Corporate Governance Guidelines and under all applicable NYSE guidelines, including with respect to committee membership, as well as for purposes of Section 10A(m)(3) of the Exchange Act.
Our Board of Directors is led by Mr. Stavros, our Chairman. The Chief Executive Officer position is currently separate from the Chairman position. We believe that the separation of the Chairman and Chief Executive Officer positions is appropriate corporate governance for us at this time. Accordingly, Mr. Stavros serves as Chairman, while Mr. Reynal serves as our Chief Executive Officer.
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The following table summarizes the current membership of each of the Board’s Committees.
Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | |
William P. Donnelly | X, Chair | ||
John Humphrey | X | X | |
William E. Kassling | X | ||
Peter M. Stavros | X, Chair | X, Chair | |
Nickolas Vande Steeg | X | ||
Joshua T. Weisenbeck | X | X |
All directors are expected to make every effort to attend all meetings of the Board, meetings of the committees of which they are members and the annual meeting of stockholders. During 2017,2018, the Board held 5six meetings and acted 4two times by unanimous written consent. During 2017,2018, (i) the Audit Committee held 6five meetings and did not actacted no times by unanimous written consent; (ii) the Compensation Committee held five meetings and acted two times by unanimous written consent; and (ii)(iii) the CompensationNominating and Corporate Governance Committee held 6four meetings and acted 2no times by unanimous written consent. No member of the Board attended fewer than 75% of the aggregate of the total number of meetings of the Board (held during the period for which he or she was a director) and the total number of meetings held by all committees of the Board on which such director served (held during the period that such director served). All nine directors serving at the time of last year’s annual meeting attended last year’s annual meeting of stockholders.
During the course of 2017, ourOur Audit Committee consistedconsists of Messrs. Donnelly, Kassling, Stavros and Velasco. The current members of the Audit Committee are Messrs. Donnelly, Humphrey and Kassling, with Mr. Donnelly serving as Chair. All current members of the Audit Committee have been determined to be “independent,” consistent with our Corporate Governance Guidelines and the NYSE listing standards applicable to boards of directors in general and audit committees in particular. Our Board has determined that each of the members of the Audit Committee is “financially literate” within the meaning of the listing standards of the NYSE. In addition, our Board has determined that Messrs. Donnelly and Humphrey qualify as audit committee financial experts as defined by applicable Securities Exchange Commission (the “SEC”) regulations. The Board reached its conclusion as to Mr. Donnelly’s qualification based on, among other things, Mr. Donnelly’s experience as the Chief Financial Officer of Mettler-Toledo International Inc. and as an auditor with PriceWaterhouseCoopers LLP. The Board reached its conclusion as to Mr. Humphrey’s qualification based on, among other things, Mr. Humphrey’s experience as the Chief Financial Officer of Roper Technologies.
The duties and responsibilities of the Audit Committee are set forth in its charter, which may be found at www.gardnerdenver.com under Investors: Corporate Governance: Governance Documents: Audit Committee Charter, and include the following:
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With respect to our reporting and disclosure matters, the responsibilities and duties of the Audit Committee include reviewing and discussing with management and the independent registered public accounting firm our annual audited financial statements and quarterly financial statements prior to inclusion in our Annual Report on Form 10-K or other public dissemination in accordance with applicable rules and regulations of the SEC. The Audit Committee also prepares the report of the committee required by the rules and regulations of the SEC to be included in our annual proxy statement.
The charter of the Audit Committee permits the committee to delegate any or all of its authority to one or more subcommittees. In addition, the Audit Committee has the authority under its charter to engage independent counsel and other advisors as it deems necessary or advisable.
On behalf of the Board, the Audit Committee plays a key role in the oversight of the Company’s risk management policies and procedures. See “Oversight of Risk Management” below.
Our Compensation Committee consists of Messrs. Stavros, Vande Steeg and Weisenbeck, with Mr. Stavros serving as chair. Mr. Vande Steeg hasAll members of our Compensation Committee have been determined to be “independent” as defined by our Corporate Governance Guidelines and the NYSE listing standards applicable to boards of directors in general and compensation committees in particular.
The duties and responsibilities of the Compensation Committee are set forth in its charter, which may be found at www.gardnerdenver.com under Investors: Corporate Governance: Governance Documents: Compensation Committee Charter, and include the following:
With respect to our reporting and disclosure matters, the responsibilities and duties of the Compensation Committee include overseeing the preparation of and recommending the Compensation Discussion and Analysis to the Board for inclusion in our annual proxy statement or Annual Report on Form 10-K in accordance with applicable rules and regulations of the SEC.
The charter of the Compensation Committee permits the committee to delegate any or all of its authority to one or more subcommittees and to delegate to one or more officers of the Company the authority to make awards to any non-Section 16 officer of the Company under the Company’s incentive-compensation or other equity-based plan, subject to compliance with the plan and the laws of the state of the Company’s jurisdiction. In addition, the Compensation Committee has the authority under its charter to retain outside consultants or advisors, as it deems necessary or advisable.
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For a description of our processes and procedures for the determination of executive and director compensation, see the “Compensation Discussion and Analysis” and “Director Compensation in Fiscal 2017―2018―Description of Director Compensation” sections of this proxy statement.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee consists of Messrs. Stavros, Humphrey and Weisenbeck, with Mr. Stavros serving as chair. All members of our Nominating and Corporate Governance Committee have been determined to be “independent” as defined by our Corporate Governance Guidelines and the NYSE listing standards.
The duties and responsibilities of the Nominating and Corporate Governance Committee are set forth in its charter, which may be found at www.gardnerdenver.com under Investors: Corporate Governance: Governance Documents: Nominating and Corporate Governance Committee Charter, and include the following:
The charter of the Nominating and Corporate Governance Committee permits the committee to delegate any or all of its authority to one or more subcommittees. In addition, the Nominating and Corporate Governance Committee has the authority under its charter to retain outside counsel or other experts as it deems necessary or advisable.
The Board has extensive involvement in the oversight of risk management related to us and our business and accomplishes this oversight through the regular reporting by the Audit Committee. The Audit Committee
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represents the Board by periodically reviewing our accounting, reporting and financial practices, including the integrity of our financial statements, the surveillance of administrative and financial controls and our compliance with legal and regulatory requirements. Through its regular meetings with management, including the finance, legal, and internal audit functions, the Audit Committee reviews and discusses all significant areas of our business, including areas of risk (including cyber risk) and mitigating factors and summarizes these discussions for the Board. The Compensation Committee considers, and discusses with management, management’s assessment of certain risks, including whether any risks arising from our compensation policies and practices for our employees are reasonably likely to have a material adverse effect on us.
Executive sessions, which are meetings of the non-management members of the Board, are regularly scheduled throughout the year. In addition, at least once a year, the independent directors meet in a private session that excludes management and non-independent directors. At each of these meetings, the non-management and independent directors in attendance, as applicable, will determine which member will preside at such session.
Committee Charters and Corporate Governance Guidelines
Our commitment to good corporate governance is reflected in our Corporate Governance Guidelines, which describe the Board’s views on a wide range of governance topics. These Corporate Governance Guidelines are reviewed from time to time by the Boardour Nominating and Corporate Governance Committee and, to the extent deemed appropriate in light of emerging practices, revised accordingly, upon recommendation to and approval by the Board.
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Our Corporate Governance Guidelines and our Audit, Compensation and CompensationNominating and Corporate Governance Committee charters and other corporate governance information are available on the Corporate Governance page of the Investors section on our website at www.gardnerdenver.com. Any stockholder also may request them in print, without charge, by contacting the Secretary of the Company, 222 East Erie Street, Suite 500, Milwaukee, Wisconsin 53202.
The Company has adopted a Code of Conduct that applies to all of the Company’s employees, including the Company’s Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Controller and other persons performing similar functions. The Code of Conduct sets forth our policies and expectations on a number of topics, including conflicts of interest, corporate opportunities, confidentiality, compliance with laws (including insider trading laws), use of our assets and business conduct and fair dealing. This Code of Conduct also satisfies the requirements for a code of ethics, as defined by Item 406 of Regulation S-K promulgated by the SEC. The Company will disclose within four business days any substantive changes in or waivers of the Code of Conduct granted to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, or any other executveexecutive officer or director, by posting such information on our website as set forth above rather than by filing a Form 8-K.
The Code of Conduct may be found on our website at www.gardnerdenver.com under Investors: Corporate Governance: Governance Documents: Code of Conduct.
Because the Board of Directors believes that all of the directors of the Company should be involved in the process of nominating persons for election as directorsThe Nominating and the Company is not required to have a nominating committee under the listing standards of the NYSE as described above, the Board of Directors as a whole performs the functions of nominating committee and is responsible for reviewing the requisite skills and characteristics of the nominees for the Board of Directors.
The BoardCorporate Governance Committee weighs the characteristics, experience, independence and skills of potential candidates for election to the Board. In considering candidates for the Board, the BoardNominating and Corporate Governance Committee also assesses the size, composition and combined expertise of the Board. As the application of these factors involves the exercise of judgment, the BoardNominating and Corporate Governance Committee does not have a standard set of fixed qualifications that is applicable to all director candidates, although the BoardNominating and Corporate Governance Committee does at a minimum assess each candidate’s strength of character, mature judgment, industry knowledge or experience and his or her independence of thought and ability to work collegially with the other members of the
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Board. In addition, althoughthe Company endeavors to have a diverse Board of Directors representing a range of experiences in areas that are relevant to the Company’s strategy and business and, as part of any director search process, the Nominating and Corporate Governance Committee and the Board considers diversity of viewpoints, backgroundDirectors will, and experiences, thewill request that any search firm hired by it also, consider highly qualified candidates, including women and minorities. The Board does not, however, have a formal diversity policy. In identifying prospective director candidates, the BoardNominating and Corporate Governance Committee may seek referrals from its members, management, stockholders and other sources. The BoardNominating and Corporate Governance Committee also may, but need not, retain a search firm in order to assist it in identifying candidates to serve as directors of the Company. In 2018, the Company paid fees to two third party search firms to assist in identifying and evaluating potential candidates for election to our Board. The BoardNominating and Corporate Governance Committee utilizes the same criteria for evaluating candidates regardless of the source of the referral. When considering director candidates, the BoardNominating and Corporate Governance Committee seeks individuals with backgrounds and qualities that, when combined with those of our incumbent directors, provide a blend of skills and experience to further enhance the Board’s effectiveness.
The stockholders’ agreement described below under “Transactions with Related Persons” provides that KKR has the right to nominate to our Board a number of designees approximately equal to the percentage of voting power of all shares of the Company’s capital stock entitled to vote generally in the election of directors collectively beneficially owned by KKR. Currently, three directors (Messrs. Stavros, Weisenbeck and Brahm) nominated by KKR serve on our Board of Directors.
Mr. Humphrey was first recommended for election to our Board by our non-employee directors and Mr. Reynal was first recommended for election to our Board by our non-employee directors.
In connection with its annual nomination of a slate of nominees, the BoardNominating and Corporate Governance Committee may also assess the contributions of those directors recommended for re-election in the context of the Board evaluation process and other perceived needs of the Board.
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When considering whether the directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board to satisfy its oversight responsibilities effectively in light of the Company’s business and structure, the Board focused primarily on the information discussed in each of the board member’s biographical information set forth above. Each of the Company’s directors possesses high ethical standards, acts with integrity and exercises careful, mature judgment. Each is committed to employing his skills and abilities to aid the long-term interests of the stakeholders of the Company. In addition, our directors are knowledgeable and experienced in one or more business, governmental, or civic endeavors, which further qualifies them for service as members of the Board. A significant number of our directors possess experience in owning and managing public and privately held enterprises and are familiar with corporate finance and strategic business planning activities that are unique to publicly traded companies like ours.
In particular, See the members ofdirectors’ biographical information set forth above for the important characteristics considered by our Board of Directors considered the following important characteristics:
This annual director nomination process resulted in the Board’s nomination of the three incumbent directors named in this Proxy Statement and proposed for election by you at the upcoming Annual Meeting.
The Board regularly considersNominating and Corporate Governance Committee will consider director candidates recommended by stockholders. Any recommendation submitted to the Secretary of the Company should be in writing and should include any supporting material the stockholder considers appropriate in support of that recommendation, but must include information that would be required under the rules of the SEC to be included in a proxy statement soliciting proxies for the election of such
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candidate and a written consent of the candidate to serve as one of our directors if elected. Stockholders wishing to propose a candidate for consideration may do so by submitting the above information to the attention of the Secretary of the Company, Gardner Denver Holdings, Inc., 222 East Erie Street, Suite 500, Milwaukee, Wisconsin 53202. All recommendations for nomination received by the Secretary of the Company that satisfy our by-law requirements relating to such director nominations will be presented to the BoardNominating and Corporate Governance Committee for its consideration. Stockholders must also satisfy the notification, timeliness, consent and information requirements set forth in our by-laws. These requirements are also described under the caption “Stockholder Proposals for the 20192020 Annual Meeting.”
Executive Officers of the Company
Set forth below is certain information regarding each of our current executive officers, other than Vicente Reynal, whose biographical information is presented under “Continuing Members of the Board of Directors.”
Name | Age | Principal Occupation and Other Information |
Andrew Schiesl | Andrew Schiesl has served as our Vice President, General Counsel, Chief Compliance Officer and Secretary since joining Gardner Denver in December 2013. Mr. Schiesl is responsible for leading the Company’s |
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Name | Age | Principal Occupation and Other Information |
legal, compliance, governance and risk management functions and has global oversight for human resource and compensation matters. Mr. Schiesl served as Vice President and General Counsel of Quad/Graphics, Inc., a commercial printing business, from 2003 until he joined Gardner Denver. Prior to Quad/Graphics, he was Senior Counsel at Harley-Davidson, Inc., after beginning his career practicing law with Foley & Lardner LLP in Milwaukee. Mr. Schiesl received a bachelor’s degree in Political Science and History from the University of Wisconsin-Milwaukee and graduated from the University of Pennsylvania School of Law. He holds a Master of Business Administration from the Kellogg School of Management at Northwestern University. | ||
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Enrique Miñarro Viseras | Enrique Miñarro Viseras has served as our Vice President and General Manager, Industrials segment EMEA Region since joining Gardner Denver in May 2016. Mr. Miñarro Viseras is responsible for leading all Industrials segment operations including sales, service and manufacturing within Europe and India. Prior to Gardner Denver, Mr. Miñarro Viseras had an extensive fifteen year career at Emerson Network Power and Emerson Industrial Automation, most recently serving as the Managing Director, Emerson Network Power from May 2015 to April 2016. Prior to Managing Director, Mr. Miñarro Viseras held the position of President, Control Techniques for Emerson Industrial Automation from July 2012 to April 2015. Mr. Miñarro Viseras holds a degree in Industrial Engineering from Universidad Politécnica of Valencia, Spain, a Master of Business Administration and a Master of Engineering and Management from Cranfield University, United Kingdom and a Doctorate in Engineering. | |
Kimberly J. Rubottom | Kimberly J. Rubottom has served as our Vice President of Human Resources since January 2015. Ms. Rubottom joined Gardner Denver in January 2014 as Vice President, Industrials segment focusing on Organization Management & Strategy. Prior to joining Gardner Denver, Ms. Rubottom served most recently as Underground Hard Rock Drilling Global Product Manager for Caterpillar Inc. from July 2011 to December 2013. Ms. Rubottom previously held multiple roles with increasing responsibility in Human Resources, Corporate Control, Business Management and Operations/Lean Management at Caterpillar Inc., Bucyrus International, Inc. and DBT GmbH from 1999 through 2011. Ms. Rubottom earned a Bachelor of Business Administration, Accounting and Finance from Clarion University of Pennsylvania. | |
Michael A. Weatherred | 57 | Michael A. Weatherred has served as Vice President – Execution Excellence (GDX) since February 2019. Mr. Weatherred joined Gardner Denver in May 2018 as Vice President – Gardner Denver Operating Systems. Prior to joining Gardner Denver, Mr. Weatherred served most recently as Vice President of Growth in the Danaher Business System Office of Danaher Corporation from 2013 to May 2018. Before that, he spent 12 years at Danaher in its Dental and Product ID platforms in various general management, marketing and strategic account roles. Before joining Danaher in 2002, Mr. Weatherred spent time at Honeywell and Black & Decker in various sales, marketing and general management roles. Mr. Weatherred earned a Bachelor of Science in Accounting from Pittsburg State University and a Master of Business Administration from Loyola University. |
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PROPOSAL NO. 2—RATIFICATION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit Committee has selected Deloitte & Touche LLP to serve as our independent registered public accounting firm for 2018.2019.
Although ratification is not required by our by-laws or otherwise, the Board is submitting the selection of Deloitte & Touche LLP to our stockholders for ratification because we value our stockholders’ views on the Company’s independent registered public accounting firm. If our stockholders fail to ratify the selection, it will be considered as notice to the Board and the Audit Committee to consider the selection of a different firm. Even if the selection is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.
Representatives of Deloitte & Touche LLP are expected to be present at the Annual Meeting. They also will have the opportunity to make a statement if they desire to do so, and they are expected to be available to respond to appropriate questions.
The shares represented by your proxy will be voted for the ratification of the selection of Deloitte & Touche LLP unless you specify otherwise.
In connection with the audit of the 20172018 financial statements, we entered into an agreement with Deloitte & Touche LLP which sets forth the terms by which Deloitte & Touche LLP would perform audit services for the Company.
The following tablestable sets forth the aggregate fees for professional services provided by Deloitte & Touche LLP for the audit of our financial statements for the fiscal years ended December 31, 20172018 and 20162017 and fees billed for other services rendered by Deloitte & Touche LLP for those periods, all of which were approved by the Audit Committee.
For the Years Ended December 31, (in thousands) | For the Years Ended December 31, (in thousands) | |||||||||||
2017 | 2016 | 2018 | 2017 | |||||||||
Fees: | ||||||||||||
Audit fees | $ | 2,952 | $ | 3,019 | $ | 4,703 | $ | 2,952 | ||||
Audit Related fees(1) | 773 | 75 | 380 | 773 | ||||||||
Tax fees(2) | 298 | 344 | 277 | 298 | ||||||||
All other fees(3) | 298 | — | 327 | 298 | ||||||||
Total | $ | 4,321 | $ | 3,438 | $ | 5,687 | $ | 4,321 |
(1) | Audit related fees include fees related to the Company’s public offerings, |
(2) | Tax fees include fees for |
(3) | All other fees include fees related to professional services rendered in connection with the Company’s issuance of deferred stock units during |
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The Audit Committee pre-approved all the services included in this table. The Audit Committee of the Board considered whether providing the non-audit services included in this table was compatible with maintaining Deloitte & Touche LLP’s independence and concluded that it was.
Consistent with SEC policies regarding auditor independence and our Audit Committee’s charter, the Audit Committee has responsibility for engaging, setting compensation for and reviewing the performance of the independent registered public accounting firm. In exercising this responsibility, the Audit Committee has established procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm and pre-approves all audit and permitted non-audit services provided by any independent registered public accounting firm prior to each engagement.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2018.
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PROPOSAL NO. 3—NON-BINDING VOTE ON EXECUTIVE COMPENSATION
In accordance with the requirements of Section 14A of the Exchange Act (which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”)) and the related rules of the SEC, we are including in these proxy materials a separate resolution subject to stockholder vote to approve, in a non-binding, advisory vote, the compensation paid to our named executive officers as disclosed on pages 22 to 42. While the results of the vote are non-binding and advisory in nature, the Board intends to carefully consider the results of this vote.
The text of the resolution in respect of Proposal No. 3 is as follows:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.”
In considering their vote, stockholders may wish to review with care the information on the Company’s compensation policies and decisions regarding the named executive officers presented in Compensation Discussion and Analysis on pages 22 to 30, as well as the discussion regarding the Compensation Committee on page 12.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS.2019.
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PROPOSAL NO. 4—NON-BINDING VOTE ON FREQUENCY OFSTOCKHOLDER VOTES ON EXECUTIVE COMPENSATION
In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, stockholders are being asked to recommend, in a non-binding advisory vote, whether a non-binding stockholder vote to approve the compensation paid to our named executive officers (that is, votes similar to the non-binding vote in Proposal No. 3 on page 19) should occur every one, two or three years. While the results of the vote are non-binding and advisory in nature, the Board intends to carefully consider the results of the vote.
In considering their vote, stockholders may wish to review with care the information presented in connection with Proposal No. 3 on page 19, the information on our compensation policies and decisions regarding the named executive officers presented in Compensation Discussion and Analysis on pages 22 to 30 as well as the discussion regarding the Compensation Committee on page 12.
We believe a three-year frequency is most consistent with the Company’s approach to compensation. Our compensation committee reviews the Company’s executive compensation program regularly to ensure alignment with the goals of attracting and retaining individuals with the qualifications to meet the Company’s strategic objectives and creating value for our stockholders. Longer-term and forward-thinking plans and strategies often take more than a year or two to have a meaningful impact on the Company and translate into stockholder value. The Board believes an annual or biennial stockholder vote on the compensation paid to our named executive officers would run counter to the goal of encouraging long-term planning and could instead lead to planning that focuses too heavily on short-term achievements. In addition, the Board believes a vote every three years will provide sufficient time for stockholders to evaluate the effectiveness of the Company’s larger, and more impactful, plans and strategies.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE EVERY “THREE YEARS” WITH RESPECT TO HOW FREQUENTLY A STOCKHOLDER VOTE TO APPROVE, IN A NON-BINDING VOTE, THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS SHOULD OCCUR.
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The Audit Committee operates pursuant to a charter which is reviewed annually by the Audit Committee. Additionally, a brief description of the primary responsibilities of the Audit Committee is included in this Proxy Statement under “The Board of Directors and Certain Governance Matters—Board Committees and Meetings—Audit Committee.” Under the Audit Committee charter, our management is responsible for the preparation, presentation and integrity of our financial statements, the application of accounting and financial reporting principles and our internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for auditing our financial statements and expressing an opinion as to their conformity with accounting principles generally accepted in the United States of America.
In the performance of its oversight function, the Audit Committee reviewed and discussed the audited financial statements of the Company with management and with the independent registered public accounting firm. The Audit Committee also discussed with the independent registered public accounting firm the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 1301 “Communications with Audit Committees.” In addition, the Audit Committee received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and discussed with the independent registered public accounting firm their independence.
Based upon the review and discussions described in the preceding paragraph, the Audit Committee recommended to the Board that the audited financial statements of the Company be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 20172018 filed with the SEC.
Submitted by the Audit Committee of the Company’s Board of Directors:
William P. Donnelly, Chair
John Humphrey
William E. KasslingPeter M. Stavros (Audit Committee member until February 7, 2018)
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REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has reviewed and discussed the following Compensation Discussion and Analysis with management. Based on its review and discussion with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and in the Company’s proxy statement on Schedule 14A for the 2018 Annual Meeting of Stockholders.2018.
Submitted by the Compensation Committee of the Board of Directors:
Peter M. Stavros, Chair | |
�� | Nickolas Vande Steeg |
Joshua T. Weisenbeck |
Compensation Discussion and Analysis
Introduction
This section describesCompensation Discussion and Analysis (“CD&A”) outlines our 2018 executive compensation philosophy and detailsobjectives, describes the elements of our executive compensation programs that coverprogram, and explains how the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) arrived at its compensation decisions for our 2018 named executive officers (“NEOs”). listed below:
NEOs/Executive Officers | Title |
Vicente Reynal | Chief Executive Officer (“CEO”) |
Neil D. Snyder(1) | Vice President & Chief Financial Officer (“CFO”) |
Andrew Schiesl | Vice President, General Counsel, Chief Compliance Officer & Secretary |
Enrique Miñarro Viseras | Vice President and General Manager, Industrials Segment EMEA |
Philip T. Herndon(2) | Former CFO |
(1) | Mr. Snyder served as Senior Vice President of Strategy, Business Development & Planning until August 2018 at which point he became Senior Vice President of Global Finance, Business Development and Planning. Effective January 1, 2019 he was appointed CFO. |
(2) | Mr. Herndon retired from his position as CFO effective at the end of the day on December 31, 2018. He remained an employee of the Company until his retirement on February 28, 2019. |
Executive Summary
Our NEOs2018 Business Highlights
Gardner Denver management continued to execute strategies in 2018 to further strengthen and grow our business through our first full year as a publicly-traded company. The executive management team’s primary goal was to support long-term valuation creation for 2017 are:our stockholders by continuing to focus on our four key strategic priorities of deploying talent, expanding margins, accelerating growth and allocating capital effectively. Success in delivering on these strategic priorities resulted in strong performance in 2018 and notable year-over-year improvements of certain key metrics, as highlighted below:
• | Net income of $269 million and Adjusted EBITDA(1) of $682M, up 1,356% and 21%, respectively |
• | Free cash flow(2) generation of $392M, up 173% |
(1) | See “Item 6. Selected Financial Data” in our Annual Report on Form 10-K for the year ended December 31, 2018 for a reconciliation of Adjusted EBITDA to Net income, the most directly comparable GAAP measure. |
(2) | See “Item 6. Selected Financial Data” in our Annual Report on Form 10-K for the year ended December 31, 2018 for a reconciliation of Free Cash Flow to Cash flows from operating activities, the most directly comparable GAAP measure. |
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2018 Stockholder Engagement and “Say on Pay” Results
We value our Vice President, General Counsel, Chief Compliance Officerstockholders’ perspectives on our business and Secretary;
At the Company’s annual meeting in May 2018, we received substantial support for our executive compensation program, with over 99% of the stockholders who voted on the “say on pay” proposal approving the compensation of our NEOs, which was consistent with the positive feedback we received in discussions with our stockholders throughout the year. Based on the positive feedback we received from our major stockholders, in addition to the vote result in 2018, and General Manager, Industrials Segment EMEA
Executive Compensation Objectives and Philosophy
Our executive compensation philosophy is designed to attract and retain individuals with the qualifications to meet the Company’s strategic objectives and createcentered on two key tenets: (1) building long-term value for our shareholders. We believe that the best way to align our executives with our objectives and create shareholder value is to emphasize two key compensation principles: (1) significant equity participationstockholders, and (2) pay-for-performance.
In February 2018, following an evaluation with the assistance of Pearl Meyer of equity-based incentives fordriving employee engagement. To that end, our executive officers, the Compensation Committee adopted a new long-term equity incentivecompensation program (the “2018 LTI Program”). Under the 2018 LTI Program, our NEOs will receive annual equity awards, 50% of which will beis grounded in the form of time-vesting restricted stock units and 50% of which will be infollowing principles:
Attraction and Retention | Enable the Company to attract and retain highly-talented people with exceptional leadership capabilities. |
Competitiveness | Provide total compensation opportunity levels that are competitive with those being offered to individuals holding comparable positions at other companies with which we compete for business and leadership talent. |
Shareholder Alignment | Deliver majority of compensation through pay elements that are designed to create long-term value for our stockholders (see positioning versus market below), as well as foster a culture of ownership. |
Pay for Performance | Ensure that a significant portion of an executive’s total compensation is variable (“at risk”) and dependent upon the attainment of certain specific and measurable business performance objectives. |
Compensation Elements
Our compensation philosophy is supported by the form of time-vesting stock options. The following charts illustrate our focus on equity participation by showing that 72% of our CEO’s expected 2018 target base salary, annual incentive, and long-term equity incentive compensation mix and 49% of our other NEOs’ expected 2018 mix is based on long-term equity incentives. See “Compensation Actions Taken in 2018—Long-Term Incentive Compensation”.principal pay elements:
Element | Target Positioning vs. Market | Primary Objectives | |
Base Salary (Cash) | At or Below Median | • | Attract and retain high-performing and experienced individuals |
• | Provide steady source of income | ||
Management Incentive Plan (“MIP”) (Cash Bonus) | At or Below Median | • | Motivate executives to achieve challenging short-term performance goals |
• | Align with annual financial objectives | ||
Long-Term Incentives (Stock Options and RSUs) | 50th - 75th percentile | • | Align executives’ interests with those of stockholders |
• | Align with long-term business strategy | ||
• | Retain executive talent through multi-year vesting schedules | ||
• | Motivate sustainable performance that creates long-term value for stockholders |
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Our commitment to aligning the interestsThe following charts illustrate that a majority of our executives to the interests of our shareholders through equity participationNEO annual Target Total Direct Compensation (“TDC”) is further evidenced by the fact that in 2017 we adopted what we believe is a market-leading stock ownership and retention policy for our executives and non-employee directors that combines robust stock ownership requirements with retention requirements. See “Stock Ownership and Retention Policy” below. All of our NEOs maintain a significant equity stake in the Company and currently exceed their respective ownership requirements through ownership of vested and exercisable stock options and/or direct investments in our common stock.performance-based.
In addition to equity participation, we strongly believe in a pay-for-performance culture. This is evidenced by the fact that our annual cash incentive program is 100% based on the financial performance of the Company and its business units and that it accounts for 50% of the expected total cash compensation of our CEO, and on average 41% for our other NEOs, in each case when paid out at target. When paid out at the maximum payout (capped at 200% of target), this percentage increases to 67% and 58%, respectively. Also, our executives receive no payout for below threshold performance and we believe that our threshold at 95% of target is more challenging than typical market practice. See “—Executive Compensation Program Elements—Cash Bonus Opportunities—Annual Cash Bonus Opportunity”. Even more importantly, when our short-term cash incentive is combined with our long term equity incentive, it results in 84% of our CEO’s and 70% of our NEOs’ compensation being variable performance compensation.
In addition to equity compensation and our annual cash incentive opportunity, we provide NEOs a combination of the following other compensation components:
In 2017 we did not make any equity grants to our NEOs believing that the equity grants made in prior years were sufficiently retentive and fostered the necessary level of alignment with shareholder interests. See “—Executive Compensation Program Elements—Long-Term Equity Incentive Awards”.
Strong Compensation Governance Practices and Policies
Within the context of the compensation philosophy and the Company’s business objectives, the Compensation Committee engages in an ongoing review of the Company’s executive compensation programs. In connection with this review, theThe Compensation Committee has adopted the following practices and policies reflecting what it believes to be a best practices approach to executive compensation.
Compensation DeterminationThe Decision-Making Process and Compensation Consultant Independence
Prior to our initial public offering, ourThe Compensation Committee historically made alloversees the executive compensation decisions, including determinations as to the compensation ofprogram for our NEOs. FromThe Committee works closely with its independent consultant and management to examine the dateeffectiveness of our initial public offering, the Company’s executive compensation program throughout the year. For additional information regarding the Committee see “The Board of Directors and Certain Governance Matters―Board Committees and Meetings―Compensation Committee.”
The Role of the Committee. The Compensation Committee has been responsible for determining the compensation of
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our Chief Executive Officer (“CEO”) and other executive officers and approving or recommending such compensation to the Board of Directors. Because of his daily involvement withensures that the executive team, ourcompensation program supports the Company’s business goals and aligns with shareholder interests. The Compensation Committee annually reviews NEO compensation levels by considering various factors, including:
The Role of Management. Our CEO makes recommendations to the Compensation Committee regarding compensation for the executive officers other than himself. No member of management participates in discussions with the Compensation Committee regarding his or her own compensation.
In connection with our initial public offering, we engagedThe Role of the Independent Consultant. The Compensation Committee retained Pearl Meyer & Partners, LLC (“Pearl Meyer”), a compensation consulting firm, to assist us in evaluating the elements and levels of our executive compensation, including base salaries, annual cash incentive awards and equity-based incentives for our executive officers. In February 2018,March 2019, the Compensation Committee determined that Pearl Meyer is independent
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from management and that Pearl Meyer’s work has not raised any conflicts of interest.
The Pearl Meyer reports directly to the Compensation Committee did not benchmark 2017and the Compensation Committee has the sole authority to approve Pearl Meyer’s compensation against a peer group. However, overand may terminate the course of the second half of 2017 and earlyrelationship at any time.
During 2018, Pearl Meyer developedadvised the Committee on a variety of topics, including the formation of a compensation peer group conductedand a competitive market assessment, the development of our executive and developed recommendations fornon-employee director compensation philosophy and the 2018 LTI Program. See “Compensation Actions Taken in 2018—Long-Term Incentive Compensation.”structure of short- and long-term incentive programs, and assisted with our compensation risk assessment.
Peer Group. The Compensation Committee believes it is important to understand current trends in compensation practices and pay levels for companies that are comparable to Gardner Denver. Together with its independent consultant and input from management, the Compensation Committee developed a compensation Peer Group of 11 companies. Companies chosen are comparable in size, as the Compensation Committee believes size is a key determinant of compensation levels. Companies selected generally have revenue of 1/2x – 2x of Gardner Denver’s revenue and market capitalization of 1/3x – 3x of Gardner Denver’s market capitalization. In addition to size, companies are in comparable industries where we source executive talent. In helping to set compensation levels for 2018, the Compensation Committee used the following Peer Group:
A.O. Smith Corporation | Colfax Corporation | Donaldson Company, Inc. |
Flowserve Corporation | Graco, Inc. | IDEX Corporation |
Mettler-Toledo International, Inc. | Nordson Corporation | Rotork plc |
Xylem, Inc. | The Weir Group plc |
The Compensation Committee does not rely solely on data from the Peer Group in establishing compensation levels and practices as highlighted above; however the Compensation Committee generally targets the cash compensation of the NEOs at or below the median of the Peer Group and long-term equity incentive compensation between the 50th and 75th percentile of the Peer Group. Additionally, the Compensation Committee may also consider survey compensation data based on companies of similar size to Gardner Denver.
2018 Executive Compensation Program Elementsin Detail
Base SalariesSalary
Base salary is the only fixed component of the Company’s NEOs’NEO cash compensation. An NEO’s base salary is related to the individual’s level of responsibility and provides them with a level of cash income predictability and stability with respect to a portion of their total compensation. The Compensation Committee believes that base salaries for executives should reflect competitive levels of pay and factors unique to each executive such as experience and breadth of responsibilities, performance, individual skill set, time in the role and internal pay parity. Base salaries are reviewed annually or at other times when appropriate (i.e., promotions, changes in job scope and/or responsibilities, etc.) and may be increased from time to time pursuant to such review. In connectionBased on its assessment and consistent with our annual review, we determinedphilosophy to focus on long-term variable pay, the Compensation Committee approved base salary increases in 2018 for two NEOs. Messrs. Reynal, Schiesl and Herndon elected to not receive a salary increase. Mr. Snyder received a base salary increase of 2% in his former role of Senior Vice President of Global Finance, Business Development and Planning, which was consistent with the base salaries of each of our NEOs by not more than 3% based on their performance in 2016, effective April 2017.Company’s broad-based merit increase. Mr. Miñarro Viseras is based in Germany and compensated in Euros; accordingly, hisreceived a base salary increase was based onof 17% to better align his salary in Euros.compensation with market competitive levels for his role. See “―Other 2018 Compensation Developments” below for additional information. The following table reflects the base salaries of our NEOs as of December 31, 2017.2018.
Base Salary as of December 31, 2016 | Base Salary as of December 31, 2017 | Base Salary as of December 31, 2017 | Base Salary as of December 31, 2018 | % Increase | |||||||||||
Vicente Reynal, Chief Executive Officer | $ | 750,000 | $ | 766,500 | $ | 766,500 | $ | 766,500 | 0 | % | |||||
Philip T. Herndon, Vice President and Chief Financial Officer | $ | 400,000 | $ | 409,000 | |||||||||||
Neil D. Snyder, Vice President and Chief Financial Officer | $ | 353,000 | $ | 360,060 | 2 | % | |||||||||
Andrew Schiesl, Vice President, General Counsel, Chief Compliance Officer and Secretary | $ | 450,000 | $ | 460,000 | $ | 460,000 | $ | 460,000 | 0 | % | |||||
Neil D. Snyder, Senior Vice President, Strategy, Business Development and Planning | $ | 345,000 | $ | 353,000 | |||||||||||
Enrique Miñarro Viseras, Vice President and General Manager, Industrials Segment EMEA(1) | $ | 304,288 | $ | 337,814 | $ | 337,814 | $ | 389,331 | 17 | % | |||||
Philip T. Herndon, Former Vice President and Chief Financial Officer | $ | 409,000 | $ | 409,000 | 0 | % |
(1) | Mr. Miñarro Viseras is based in Europe and |
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Cash Bonus Opportunities
Annual Cash Bonus Opportunity
In order toTo tie a significant portion of their annual cash compensation to actual performance, each NEO is eligible for an annual cash bonus award under our management incentive plan (“MIP”)MIP, based on the achievement of our financial goals for the Company and their respective business units.
A target annual bonus opportunity, expressed as a percentage of an NEO’s base salary in effect at year-end,year end, is established within certain NEOs’ offer letters and employment agreementsannually and may be adjusted from time to time by the Compensation Committee in connection with an NEO’s promotion or performance. The table below shows the 2018 target annual cash bonus opportunities for each of the NEOs.
NEO | Target Bonus Opportunity (as a % of Salary) | ||
Vicente Reynal | 100 | % | |
Neil D. Snyder | 50 | % | |
Andrew Schiesl | 75 | % | |
Enrique Miñarro Viseras | 60 | % | |
Philip T. Herndon | 100 | % |
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2018 Performance Measures. The MIP pays out to participants based on levels of performance against financial metrics established by the Compensation Committee. To be eligible for a payout a participant must be employed by the Company through the payment date or have an Approved Retirement (as defined below under “Potential Payments to Named Executive Officers upon Termination of Employment or Change in Control―Treatment of Outstanding Equity Awards in the Event of Termination of Employment or Change in Control―Equity awards granted in 2018”) after the end of the year but before the payment date. To ensure the right level of accountability and line-of-sight, the performance measures vary depending upon the role and responsibility of the NEO. For 2018, annual cash bonus awards for 2017 for Messrs.Corporate NEOs (Messrs. Reynal, Snyder, Schiesl and Herndon was 100%Herndon) were based on the achievement of their respective base salaries, for Mr. Schiesl was 75% of his base salary, for Mr. Snyder was 50% of his base salary and foroverall Corporate performance, as described below. Mr. Miñarro ViserasViseras’ annual cash bonus award was 45% of his base salary.
We generally believe that tying our corporate level NEOs’ bonuses to company-wide performance goals encourages those NEOs to focus on company-wide priorities, and that tying the bonuses of our NEOs at the business segment and business unit level to business segment goals and business unit goals, respectively, rewards these NEOs for achievements with respect to their business segments and units. In 2017, the Compensation Committee decided to base MIP awards for Messrs. Reynal, Herndon and Snyderbased in part on the achievement of overall Industrials Group performance of our Industrials segment because each servesand in roles at both the corporate level and the Industrials segment level and the Compensation Committee wanted them to continue to focuspart on the objectivesachievement of Industrials EMEA performance, as described below, to reflect his leadership of the Industrials segment since it typically accounts for a significant portion of our total revenue.EMEA business unit and his ability to impact the overall Industrials Group. A detailed description of the 20172018 MIP metrics and the calculation of the actual amounts paid to each of our NEOs are provided below.
We chose to use Adjusted EBITDA (75% of award) as that term is defined elsewherethe primary performance measure in this Annual Report on Form 10-Kthe MIP because we believe that it provides a reliable indicator of our strategic growth and the strength of our overall financial results. Adjusted EBITDA represents net income (loss) before interest, taxes, depreciation and amortization, as further adjusted to exclude certain non-cash, nonrecurring and other adjustment items. In 2018, the Compensation Committee determined it was appropriate to add an operational efficiency metric to balance out our profitability metric. After considering potential metrics, the Committee determined Net Operating Working Capital (defined as Accounts Receivables and Contract Assets + Inventory (excluding LIFO) – Accounts Payable – Contract Liabilities) as a Percentage of Revenue (25% of award) is a valid and widely understood metric to measure operational efficiency.
Actual amounts paid to Messrs. Reynal, Herndon and Snyder underFor our Corporate NEOs, Corporate performance against the 2017 MIP were calculated by multiplying their target annual bonus for 2017 by the sum of (1) 75% multipliedAdjusted EBITDA metric is determined by the weighted average of the payout percentages associated with our achievement against the Adjusted EBITDA targets for the MIP“MIP Business Units (as defined below) and (2) 25% multipliedUnits.” Corporate performance against the Net Operating Working Capital as a Percentage of Revenue metric is determined by the payout percentage associated with our achievement against the Industrials Segment Adjusted EBITDA target.Net Operating Working Capital as a Percentage of Revenue target for the Company. The “MIP Business Units” include Energy P&IP, Energy Nash/Garo, Energy Emco, Industrials Americas, Industrials EMEA, Industrials APAC, Medical and Medical. The weighting for each MIP Business Unit is determined by dividing fiscal 2017Runtech. We believe the Adjusted EBITDA budget for each business unit by the sumand Net Operating Working Capital as a Percentage of fiscal 2017 Adjusted EBITDA budgets for all the MIP Business Units. To calculate the composite payout percentage for all MIP Business Units, each MIP Business Unit’s corresponding weighting is multiplied by the payout percentage associated with actual 2017 Adjusted EBITDA achievement against that business unit’s respective Adjusted EBITDA budget and the resulting amounts are summed.
We believe Adjusted EBITDARevenue targets set for the MIP Business Units in 20172018 provided reasonably achievable, but challenging goals for our NEOs and the other MIP participants at the corporateCorporate level. In addition, we believe
For our NEO at the Industrials SegmentGroup level, Mr. Miñarro Viseras, performance against the Adjusted EBITDA target set in 2017 provided reasonably achievable, but challenging goals for our NEOs and other MIP participants in the Industrials segment.
Actual amounts paid to Mr. Schiesl under the 2017 MIP were calculated by multiplying his target annual bonus for 2017metric is determined by the weighted average of the payout percentages associated with our achievement against the Adjusted EBITDA targets forIndustrials Group and the MIP Business Units.
For our NEO atIndustrials EMEA targets. Performance against the business unit level, Mr. Miñarro Viseras, the MIP awardNet Operating Working Capital as a Percentage of Revenue metric is tied to the financial results of his business segment and his business unit measured by Adjusted EBITDA. The actual amount paid to Mr. Miñarro Viseras under the 2017 MIP was calculated by multiplying his target annual bonus for 2017 by the sum of (1) 50% multiplieddetermined by the payout percentage associated with our achievement against the Industrials Segment Adjusted EBITDANet Operating Working Capital as a Percentage of Revenue target and (2) 50% multiplied by the payout percentage associated with our achievement againstfor the Industrials EMEA Adjusted EBITDA target. We believe the Industrials EMEA Adjusted EBITDA target set in 2017 provided a reasonably achievable, but challenging goal for Mr. Miñarro Viseras and other MIP participants at our Industrials EMEA business unit.Group, which could range
The Adjusted EBITDA payout percentage for each of our segments and business units was determined by calculating actual achievement against the Adjusted EBITDA performance targets based on the pre-established scale set forth in the table below.
Achievement of Performance Target | Payout Percentage |
Less than 95% | 0% |
95% | 75% |
100% | 100% |
110% | 200% |
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from 50% for threshold performance, to 100% for target performance, to a maximum of 200% for performance significantly above target (with the payout percentage for performance between such levels determined on a linear basis). We believe the Adjusted EBITDA and Net Operating Working Capital as a Percentage of Revenue targets provided reasonably achievable, but challenging goals for Mr. Miñarro Viseras and the other MIP participants at the Industrials Group level.
The following table details the payout percentage associated with a corresponding performance level against the Adjusted EBITDA targets for our NEOs at both the Corporate and Industrials Group level and against the Net Operating Working Capital as a Percentage of Revenue targets for our NEOs at the Corporate level:
Performance Level | Adjusted EBITDA Performance % of Target | Net Operating Working Capital % of Revenue (Total Company) | Payout % of Target | ||||||
Below Threshold | <90 | % | >25.6 | % | 0 | % | |||
Threshold | 90 | % | 25.6 | % | 50 | % | |||
Target | 100 | % | 24.6 | % | 100 | % | |||
Maximum | 110 | % | 20.1 | % | 200 | % |
No cash incentive award would have been paid to our NEOs whose awards were based partially or entirely on theoverall Corporate performance of our MIP Business Units unless actual performance for fiscal 20172018 for at least one of the MIP Business Units was at or above 95%90% of the applicable Adjusted EBITDA target (or, in the case of Mr. Miñarro Viseras, if the performance of our Industrials segment for 20172018 was at or above the Adjusted EBITDA target for our Industrials segment). Adjusted EBITDA results are adjusted to the extent that actual foreign exchange rates by country differ by more than 5% of budgeted foreign exchange rates. For performance percentages between the levels set forth above, the resulting payout percentage is adjusted on a linear basis. In addition to setting Adjusted EBITDA targets for our business units, we set an annual corporate expense budget each year and any difference between actual and budgeted corporate expense ismay be allocated to the Adjusted EBITDA at our business units at the discretion of the Compensation Committee. While there are no individual goals for purposes of MIP award payments, the Compensation Committee, on the recommendation of Mr. Reynal, may adjust an incentive payment upward or downward for performance-related reasons.reasons for other NEOs. In addition, the Compensation Committee has discretion to adjust MIP award payments for unanticipated events. For 2017,2018, the Compensation Committee did not make any discretionary adjustments to the calculated MIP award payments.payments for our NEOs.
The following table sets forth our actual payout percentage achieved with respect to each performance metric applicable to our NEOs and illustrates the calculation of the annual cash incentive awards payable to our NEOs under the 20172018 MIP in light of these performance results.
Adjusted EBITDA Payout Percentage | ||||||||||||||||||||||||
Name | 2017 Base Salary | Target Bonus % | Target Bonus Amount | Industrials | Industrials EMEA | Weighted Average of Business Units(1) | Weighted Payout Percentage | Actual Bonus Paid | ||||||||||||||||
Vicente Reynal(2) | $ | 766,500 | 100 | % | $ | 766,500 | 150 | % | N/A | 142 | % | 144 | % | $ | 1,103,760 | |||||||||
Philip T. Herndon(2) | $ | 409,000 | 100 | % | $ | 409,000 | 150 | % | N/A | 142 | % | 144 | % | $ | 588,960 | |||||||||
Andrew Schiesl | $ | 460,000 | 75 | % | $ | 345,000 | N/A | N/A | 142 | % | 142 | % | $ | 489,900 | ||||||||||
Neil Snyder | $ | 353,000 | 50 | % | $ | 176,500 | 150 | % | 142 | % | 144 | % | $ | 254,160 | ||||||||||
Enrique Miñarro Viseras(3) | $ | 337,814 | 45 | % | $ | 152,016 | 150 | % | 120 | % | N/A | 135 | % | $ | 205,222 |
Adjusted EBITDA (75%) | Net Operating Working Capital % of Revenue (25%) | ||||||||||||||||||||||||||
NEO(1) | 2018 Base Salary | Target Bonus % | Target Bonus Amount | Wtd. Average of MIP Business Units | Industrials EMEA (50%) and Industrials (50%) | Corporate | Industrials | Overall Payout Factor | 2018 Bonus Payout | ||||||||||||||||||
Vicente Reynal | $ | 766,500 | 100 | % | $ | 766,500 | 54.1 | % | —- | 112.5 | % | —- | 69 | % | $ | 528,885 | |||||||||||
Neil D. Snyder | $ | 360,060 | 50 | % | $ | 180,030 | 54.1 | % | —- | 112.5 | % | —- | 69 | % | $ | 124,221 | |||||||||||
Andrew Schiesl | $ | 460,000 | 75 | % | $ | 345,000 | 54.1 | % | —- | 112.5 | % | —- | 69 | % | $ | 238,050 | |||||||||||
Enrique Miñarro Viseras(2) | $ | 389,331 | 60 | % | $ | 233,598 | — | 78.4 | % | —- | 193.3 | % | 107 | % | $ | 249,950 |
(1) |
(2) |
IPO Bonuses
For their extraordinary efforts in 2017 in connection with our initial public offering, the Compensation Committee in February 2018 determined to award each of Messrs. Reynal, Herndon, Schiesl and Snyder a one-time discretionary IPO bonus. The IPO bonuses were awarded in the following amounts: Mr. Reynal - $225,000; Mr. Herndon - $125,000; Mr. Schiesl - $100,000; and Mr. Snyder - $75,000.26
Sign-on BonusesTABLE OF CONTENTS
From time to time, we may award sign-on bonuses in connection with the commencement of an NEO’s employment with us. Sign-on bonuses are used only when necessary to attract highly skilled officers to the Company. Generally, they are used to provide an incentive to candidates to leave their current employers or may be used to offset the loss of unvested compensation that they may forfeit as a result of leaving their current employers. Sign-on bonuses are typically subject to a clawback obligation if the officer voluntarily terminates his or her employment with us prior to the first anniversary of the employment commencement date. We did not award any sign-on bonuses to our NEOs in 2017.
Long-Term Equity Incentive Awards
Our long-term incentive awards, established through our Gardner Denver Holdings, Inc. 2017 Omnibus Incentive Plan (our “2017 Omnibus Incentive Plan”), are intended to drive executives to deliver strong stock performance, align our executives’ experience with that of our stockholders and to attract and retain highly-qualified executives. As a newly public company with a history of equity awards of which a significant portion would vest in 2018, it was determined that grants made in 2018 should have an extended vesting schedule and vest in equal installments on each of the second, third, fourth and fifth anniversaries. It was also determined that awards made in subsequent years would vest in equal annual installments on each of the first, second, third and fourth anniversaries of the grant date. The details of these awards are as follows:
Target value for annual equity award grants made in February 2018 for each NEO are shown below.
Executive | Stock Options (50%) | RSUs (50%) | ||||
Vicente Reynal | $ | 2,000,000 | $ | 2,000,000 | ||
Neil D. Snyder | $ | 200,000 | $ | 200,000 | ||
Andrew Schiesl | $ | 337,500 | $ | 337,500 | ||
Enrique Miñarro Viseras | $ | 250,000 | $ | 250,000 | ||
Philip T. Herndon | $ | 500,000 | $ | 500,000 |
Target annual equity award values were determined based on our competitive market analysis and our compensation philosophy which calibrates award levels between market median and 75th percentile.
These grant amounts were translated into a number of stock options and shares of restricted stock by taking such dollar amount and dividing it by the per share or per option “fair value” that was used for reporting the compensation expense associated with the grant under applicable accounting guidance, which “fair value” was based in part on the per share closing price of our common stock on the NYSE on the date of grant. Stock options and RSUs subject to these grants will vest in equal installments on February 22 of each of 2020, 2021, 2022 and 2023.
In addition to the annual equity award granted to in February 2018 to Mr. Miñarro Viseras, in connection with a competitive review of the compensation of our executive officers we granted a one-time equity award to Mr. Miñarro Viseras in September 2018. See “Other 2018 Compensation Developments” below.
Vesting of Equity Awards Made Prior to our Initial Public Offering
Prior to our initial public offering, in 2014, 2015, and 2016, we granted long-term equity-basedequity awards pursuant to our executives that were designed to align executives’ and shareholders’ interests, promote performance through a broad ownership mindset, incentivize our executives to remain in our service and align the interests2013 Stock Incentive Plan for Key Employees of our executives with those
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of our ultimate equity holders. The awards we grantedGardner Denver Holdings, Inc. (our “2013 Stock Incentive Plan”) to our NEOs under our long-term incentive program (our “Long-Term Incentive Program”) were in the form of stock options, with 50% of each award vesting based on time-based vesting conditions (“Time Options”) and 50% of each award vesting based on performance-based vesting conditions (“Performance Options”). The stock options generally vest, if at all, ratably over a three- to five-year period, subject to continued employment through the applicable vesting date and, in the caseA portion of the Performance Options achievementwere eligible to vest on December 31, 2018 if and only to the extent that the Company achieved the annual adjusted EBITDA performance target for fiscal 2018 set by the Compensation Committee (where “adjusted EBITDA” refers to earnings before interest, taxes, depreciation and amortization plus transaction, management and/or similar fees paid to KKR and/or its affiliates). The fiscal 2018 adjusted EBITDA performance target was $560 million and our adjusted EBITDA performance for fiscal 2018 was $682 million. Therefore, the portion of the applicable performance criteria. See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2017—Terms of Equity Awards—Long-Term Incentive Plan Grants.” The Compensation Committee determined that grantingPerformance Options held by our NEOs stock options would meet our goals of fostering a culture of performance and commitment to our Company. Stock options serve as components of performance-based compensation because they only provide value to our NEOs if the value of our stock appreciates. All equity-based awards under our Long-Term Incentive Program were granted under the 2013 Stock Incentive Plan.
In addition to granting them long-term equity-based awards, we have given our executive officers the opportunity to, and in some cases, in connection with the commencement of their employment with us, have required them to, make meaningful investments in our common stock, subject to satisfaction of applicable securities law requirements. See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2017—Summary of NEO Offer Letters and Employment Agreements.”
In connection with our initial public offering, we adopted a new incentive plan, the Gardner Denver Holdings, Inc. 2017 Stock Incentive Plan, pursuant to which we will grant our future long-term equity incentive awards. See “Compensation Actions Taken in 2018—Long-Term Incentive Compensation” below.
Benefits and Perquisites
While our compensation philosophy is to focus on performance-based forms of compensation while providing only minimal executive benefits and perquisites, we provide to all of our employees, including our NEOs, broad-based employee benefits that are intended to attract and retain employees while providing them with retirement and health and welfare security. These include:
401(k) Plan
Our U.S. eligible employees, including our NEOs, participate in the Gardner Denver, Inc. Retirement Savings Plan (the “401(k) plan”), which is a tax-qualified retirement savings plan. For employees hired after January 1, 2014, enrollment in the 401(k) plan is automatic for employees who meet eligibility requirements unless they decline participation. Under the 401(k) plan, we match 100% of the first 6% of a participant’s salary contributions to the 401(k) plan. Participants are 100% vested in employee and matching contributions. The maximum contribution to the 401(k) plan is 100% of an employee's annual eligible compensation, subject to regulatory and plan limitations.
Supplemental Excess Defined Contribution Plan
In addition to the 401(k) plan, U.S. employees with a salary grade of 20 or higher (generally senior managers and above), including the NEOs other than Mr. Miñarro Viseras, arewas eligible to participate invest based on the Gardner Denver, Inc. Supplemental Excess Defined Contribution Plan (the “Excess Contribution Plan”), which is funded through a Rabbi Trust. This plan provides participants with a similar level of benefits afforded to all other eligible employees who are not subject to the limitations imposed by the IRS on our tax-qualified 401(k) plan.
Eligible employees may contribute to the Excess Contribution Plan when they exceed the annual IRS pre-tax contribution limits and the annual catch-up contribution limit for participants age 50 or over. Under the Excess Contribution Plan, we match 100% of the first 6% of a participant’s salary contributions to the Excess Contribution Plan. Company matching contributions under the Excess Contribution Plan are contributed in the form of cash rather than our common stock. All employee and Company matching contributions are fully vested immediately.Company’s fiscal 2018 adjusted EBITDA performance vested.
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Limited PerquisitesOther 2018 Compensation Developments
Compensation Actions in Connection with Mr. Snyder’s Appointment as CFO
On November 28, 2018, the Board appointed Mr. Snyder as the Company’s CFO, effective January 1, 2019. Mr. Herndon, our previous CFO, retired from his position effective as of the end of the day on December 31, 2018 and retired from the Company on February 28, 2019.
In connection with Mr. Snyder’s appointment as CFO, the Company approved the following compensation terms for Mr. Snyder, effective January 1, 2019: (i) an annual base salary of $425,000, (ii) an annual bonus opportunity with a target amount equal to 65% of base salary, with the actual bonus amount based upon achievement of performance targets established by the Compensation Committee and (iii) a long-term incentive award for 2019 with a target value of $725,000.
Compensation Actions in Connection with Competitive Review of Executive perquisites areOfficer Compensation
In connection with our annual compensation review, we found that Mr. Miñarro Viseras’ annual compensation was not part ofaligned with our general compensation philosophy however we provide limited perquisites and personal benefits that are not generally availableincreased his base salary from $337,814 to all employees when necessary$389,331 and his target annual bonus opportunity from 45% to attract top talent. These are typically set forth60% of base salary. This increase better aligns his compensation relative to NEOs in our compensation Peer Group and our compensation philosophy and is reflected in the offer letters ornew employment agreementsagreement we enterentered into with our executive officers.Mr. Miñarro Viseras in October 2018. See “Other Compensation Policies that Align Our NEOs to Our Stockholders―Employment Agreements” and “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2017—2018―Summary of NEO Offer Letters and Employment Agreements.” For example,Agreements―Employment Agreements with Mr. Miñarro Viseras” below for additional details regarding Mr. Miñarro Viseras’ new employment agreement. Additionally, although we do not make special or one-time grants except under highly-limited circumstances, such as new hires or promotions, in 2017, per his employment agreement,September 2018 we granted Mr. Miñarro Viseras was entitled to international school assistance and use of a company car. Mr. Snyder was also providedone-time equity award with a housing allowance.grant date fair value of $500,000, 50% of which was in the form of stock options and 50% in the form of restricted stock units. In addition from time to time,aligning Mr. Miñarro Viseras’ compensation with our compensation philosophy, we believe these awards provide tax gross-upsadditional retention value. Both awards vest in equal annual installments on perquisites we provide in order to allow ourthe first four anniversaries of the grant date.
Other Compensation Practices and Policies that Align Our NEOs to enjoy the full benefit of the perquisite we are providing.
Severance and Change in Control Agreements
The Company believes that reasonable and appropriate severance and change in control benefits are necessary in order to be competitive in the Company’s executive attraction and retention efforts. As discussed above, the offer letters we enter into with our NEOs provide for certain payments, rights and benefits to the NEOs upon an involuntary termination of employment without Cause (as defined in “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control-Severance Arrangements and Restrictive Covenants” below) from the Company or a termination by the NEO for Good Reason (as defined in “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control-Severance Arrangements and Restrictive Covenants” below). In addition, our equity award agreements provide for accelerated vesting upon a change in control in certain circumstances, as more fully described above under “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2017—Terms of Equity Awards.”
Employment Agreements
We do not typically enter into employment agreements with our NEOs; however, we entered into an employment agreement and offer letter with Mr. Miñarro Viseras and offer letters setting forth initial compensation and benefits, as well as severance terms, with each of our other NEOs. Full descriptions of the material terms of the employment agreement and offer letter we entered into with Mr. Miñarro Viseras and the offer letters we entered into with Messrs. Reynal, Herndon, Schiesl and Snyder are presented below in “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2017.”
Risk Management
The Compensation Committee conducts a thorough review of all incentive programs and confirms that our executives are not incented to focus on short-term stock performance or take excessive risk in managing the business. In particular, long-term incentive awards, as a significant portion of total direct compensation and robust stock holding requirements, are structured to align management with the long-term health of the business.Our Stockholders
Stock Ownership and Retention Policy
To align the interests of our management and directors with those of our stockholders, the Board of Directors concluded that certain of our executive officersexecutives (the “Covered Executives”) and non-employee directors should have a significant financial stake in the Company’s stock. To further that goal, we implemented stock ownership guidelines (the “Guidelines”) in 2017, (the “Guidelines”).the year we completed our initial public offering. The Covered Executives will beand non-employee directors are required to hold a specific level of equity ownership as outlined below:below.
Covered Executives: The Guidelines will apply to the Covered Executives in the following Tiers:
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Covered Executives’ Stock Ownership Multiples:three tiers. The stock ownership levels under the Guidelines, expressed as a multiple of the Covered Executive’s annual base annual salary rate as of January 1st of the year, are as follows:
Tier | Multiple of Salary | |
Tier | 10x Salary | |
Tier | 5x Salary | |
Tier Three | P&L and Corporate Leaders | 3x Salary |
Retention Requirement: There is no required time period within which a Covered Executive must attain the applicable stock ownership level under the Guidelines. However, until the applicable ownership level is achieved, Covered Executives must retain 75% of net shares granted to them. Once the ownership guideline is met, Covered Executives must retain 30% of net shares granted to them; however, this requirement drops to 20% for a Covered Executive upon the earlier of a (1) such Covered Executive reaching the age of 55 and (2) such covered executive achieving 10 years of service with the Company and terminates upon the earlier of (1) such Covered Executive reaching the age of 60 and (2) such covered executive achieving 15 years of service with the Company.
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The shares counted toward these ownership requirements includesinclude shares owned outright and vested stock options. The retention requirement applies to all prior and future grants.
These ownership requirements are set at levels that the Company believes are robust given the Covered Executives’ respective salaries and responsibilities.
Non-Employee Directors: Our non-employee directors are required to hold 75% of net shares granted to them under our benefit plans until they own equity equal to five times their annual cash retainers. Once the ownership guideline is met, directors must retain 30% of the net shares granted to them under our benefit plans until their retirement.
As of January 1, 2018,2019, all of our NEOs and then serving directors who were with the Company for at least one year were in compliance with the applicable stock ownership levels under the Guidelines.
Hedging and Pledging Policies
The Company’s Securities Trading Policy requires executive officers and directors to consult the Company’s General Counsel prior to engaging in transactions involving the Company’s securities. The Company’s Securities Trading Policy prohibits directors and executive officers from hedging or monetization transactions including, but not limited to, through the use of financial instruments such as exchange funds, variable forward contracts, equity swaps, puts, calls, and other derivative instruments, or through the establishment of a short position in the Company’s securities. The Company’s Securities Trading Policy limits the pledging of Company securities to those situations approved by the Company’s General Counsel.
Section 162(m)Other Benefits
While our compensation philosophy is to focus on performance-based forms of compensation while providing only minimal executive benefits and perquisites, we provide to all our employees, including our NEOs, broad-based employee benefits that are intended to attract and retain employees while providing them with retirement and health and welfare security. These include:
401(k) Plan
Our U.S. eligible employees, including our NEOs other than Mr. Miñarro Viseras, participate in the Gardner Denver, Inc. Retirement Savings Plan (the “401(k) plan”), which is a tax-qualified retirement savings plan. Eligible employees hired on and after January 1, 2014, are automatically enrolled in the 401(k) plan to make pre-tax salary contributions, unless they decline participation. Under the 401(k) plan, we match 100% of the Internal Revenue Code
We expect to be able to claim the benefitfirst 6% of a special exemption rule that appliesparticipant’s eligible pre-tax and/or Roth salary contributions, subject to all IRS annual limits and plan limitations. Participants are 100% vested in employee salary contributions and Company matching contributions. 401(k) plan participants may elect to contribution up to 100% of their annual eligible compensation paid (or(either through pre-tax or Roth contributions), subject to annual IRS and plan limitations.
Supplemental Excess Defined Contribution Plan
In addition to the 401(k) plan, U.S. employees with a salary grade of 20 or higher (generally senior managers and above), including the NEOs other than Mr. Miñarro Viseras, are eligible to participate in the Gardner Denver, Inc. Supplemental Excess Defined Contribution Plan (the “Excess Contribution Plan”), which is funded through a Rabbi Trust. This Excess Contribution Plan is intended to permit Company matching contributions on eligible compensation contributions in respectexcess of equity awards such as stock options granted) during a specified transition period followingthe annual limitations imposed by the IRS on our initial public offering. This transition period was previously anticipatedtax-qualified 401(k) plan.
Eligible employees may contribute to potentially extend until our firstthe Excess Contribution Plan when they exceed (i) the annual stockholders meeting that occurs in 2021 pursuant to regulationsIRS pre-tax/Roth contribution limits and the annual catch-up contribution limit for participants age 50 or over or (ii) the annual IRS compensation limit, under the Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). However, the recently enacted Tax Cut and Jobs Act amended Section 162(m) of the Code in several respects, including the elimination the “performance-based compensation” exception under Section 162(m) of the Code for tax years beginning after December 31, 2017. Pending further guidance under Section 162(m) of the Code, it is unclear whether the post-IPO transition period exception under Section 162(m) will continue to apply to us for compensation paid or awards granted in 2018 or beyond. Once applicable guidance is released, we expect the Compensation Committee to consider the implications of Section 162(m) and such guidance in its future compensation decisions.
Compensation Actions Taken in 2018
Long-Term Incentive Compensation
In February 2018, following an evaluation with the assistance of Pearl Meyer of the equity-based incentives for our executive officers, the Compensation Committee adopted the 2018 LTI Program.401(k) plan. Under the 2018 LTI Program, our NEOs will receive annual equity awards, 50% of which will be in the form of time-vestingExcess Contribution Plan, we match
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restricted stock units and 50%100% of which will bethe first 6% of a participant’s eligible salary contributions to the Excess Contribution Plan. Company matching contributions under the Excess Contribution Plan are contributed to the Rabbi Trust in the form of time-vesting stock options. The time-vesting restricted stock units awardscash rather than our common stock. All employee and Company matching contributions are fully vested immediately.
Limited Perquisites
Executive perquisites are not part of our general compensation philosophy; however, we provide limited perquisites and personal benefits that are not generally available to all employees when necessary to attract top talent. These are typically set forth in the time-vesting options awards under the 2018 LTI Program will vest in equal annual installments on eachoffer letters or employment agreements we enter into with our executive officers. See “Narrative Disclosure to Summary Compensation Table and Grants of the first four anniversaries of the grant date, except that the awards grantedPlan-Based Awards in 2018 will vest in equal annual installments on eachSummary of the second, third, fourthNEO Offer Letters and fifth anniversaries of the grant date. The Compensation Committee determined that,Employment Agreements.” For example, in 2018, awards under the 2018 LTI Program would be made to our NEOs in the following amounts: Mr. Reynal — $4,000,000; Mr. Herndon — $1,000,000; Mr. Schiesl — $675,000; Mr. Snyder — $400,000;per his employment agreement, Mr. Miñarro Viseras — $500,000. These grant amounts were translatedwas entitled to international school assistance and use of a company car. Mr. Snyder was also provided with a housing allowance.
Severance and Change in Control Agreements
The Company believes that reasonable and appropriate severance and change in control benefits are necessary in order to be competitive in the Company’s executive attraction and retention efforts. As discussed below, the offer letters we enter into with our NEOs provide for certain payments, rights and benefits to the NEOs upon an involuntary termination of employment without Cause (as defined in “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control-Severance Arrangements and Restrictive Covenants” below) from the Company or a termination by the NEO for Good Reason (as defined in “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control-Severance Arrangements and Restrictive Covenants” below). In addition, our equity award agreements provide for accelerated vesting upon a change in control in certain circumstances and upon certain qualifying terminations of employment, as more fully described above under “―Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2018―Terms of Equity Awards.”
Risk Management and Mitigation of Compensation Policies and Practices
The Compensation Committee has reviewed our incentive compensation programs, discussed the concept of risk as it relates to our compensation program, considered various mitigating factors, and reviewed these items with its independent consultant, Pearl Meyer. In addition, our Compensation Committee asked Pearl Meyer to conduct an independent risk assessment of our executive compensation program. Based on these reviews and discussions, the Compensation Committee does not believe our compensation program creates risks that are reasonably likely to have a material adverse effect on our business.
For the foregoing reasons, the Compensation Committee has concluded that the programs by which our executives are compensated strike an appropriate balance between short-term and long-term compensation and incentivize our executives to act in a manner that prudently manages enterprise risk.
Employment Agreements
We do not typically enter into employment agreements with our NEOs; however, we entered into an employment agreement with Mr. Miñarro Viseras when he joined the Company in 2016 and we entered into a numbernew employment agreement with him in October 2018 in connection with our competitive review of stock optionsexecutive officer compensation. See “―2018 Compensation Program in Detail―Other 2018 Compensation Developments―Compensation Actions in Connection with Competitive Review of Executive Officer Compensation.” In addition, we entered into offer letters setting forth initial compensation and restricted stock units by taking such dollar amount and dividing it by the per share or per option “fair value” that will be used for reporting the compensation expense associatedbenefits, as well as severance terms, with the grant under applicable accounting guidance, which “fair value” will be based in part on the per share closing priceeach of our common stock onother NEOs. Full descriptions of the NYSE onmaterial terms of the dateemployment agreements we entered into with Mr. Miñarro Viseras and the offer letters we entered into with Messrs. Reynal, Herndon, Schiesl and Snyder are presented below in “―Narrative Disclosure to Summary Compensation Table and Grants of grant.Plan-Based Awards in 2018.”
Executive Severance Benefits – Mr. Snyder and Mr. Miñarro Viseras
In February 2018, in connection with our annual review of our executive compensation, we approved an increase toincreased the benefits to which Messrs. Snyder and Miñarro Viseras are entitled in the event of certain qualifying terminations to align them with the severance benefits to which our other senior executive officers are entitled.
Under the terms approveda termination by the Compensation Committee in February 2018, if the Company terminates Mr. Snyder’s employment without Cause (as that term is defined below under “Potential Payments to Named Executive Officers upon
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Termination of Employment or Change in Control—Control―Severance Arrangements and Restrictive Covenants”) or if Mr. Snyder terminates his employmentby the executive with us for Good Reason (as that term is defined below under “Potential Payments to Named Executive Officers upon Termination of Employment or Change in Control—Control―Severance Arrangements and Restrictive Covenants”), to align them with the severance benefits to which our other senior executive officers are entitled.
Under the terms of the severance agreement we entered into with Mr. Snyder, if the Company terminates Mr. Snyder’s employment without Cause or if Mr. Snyder terminates his employment with us for Good Reason, subject to Mr. Snyder’s continued compliance with the restrictive covenants in his management equity agreements and his execution of a customary waiver and release agreement, he will be entitled to receive:
The Compensation Committee also approved in February 2018amendment we and Mr. Miñarro Viseras entered into to his employment agreement provides for a mutual twelve-month advance notice period for a termination of Mr. Miñarro Viseras's employment not for cause or without good reason, during which Mr. Miñarro Viseras may be released from his work duties but will still be entitled to remuneration.
Transition Agreement – Mr. Herndon
In February 2019, in connection with his retirement from the Company, we entered into a transition agreement with Mr. Herndon. See “Potential Payments to Named Executive Officers upon Termination of Employment or Change in Control.”
Section 162(m) of the Internal Revenue Code
We expect to be able to claim the benefit of a special exemption rule that applies to compensation paid (or compensation in respect of equity awards such as stock options granted) during a specified transition period following our initial public offering. This transition period was previously anticipated to potentially extend until our first annual stockholders meeting that occurs in 2021 pursuant to regulations under the Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). However, the Tax Cut and Jobs Act amended Section 162(m) of the Code in several respects, including the elimination of the “performance-based compensation” exception under Section 162(m) of the Code for tax years beginning after December 31, 2017. Pending further guidance under Section 162(m) of the Code, it is unclear whether the post-IPO transition period exception under Section 162(m) will continue to apply to us. Once applicable guidance is released, we expect the Compensation Committee to consider the implications of Section 162(m) and such guidance in its future compensation decisions.
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The following table provides summary information concerning compensation of our NEOs for services rendered to us during the years indicated.
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | ||||||||||||||||||||||||||||||
Vicente Reynal, Chief Executive Officer | 2017 | 765,754 | 225,000 | — | 1,103,760 | 285,581 | 2,380,095 | 2018 | 766,500 | ― | 1,999,999 | 2,000,003 | 528,885 | 409,961 | 5,705,349 | ||||||||||||||||||||||||||||||
2016 | 750,000 | — | 4,568,331 | 877,500 | 233,614 | 6,429,445 | 2017 | 765,754 | 225,000 | ― | ― | 1,103,760 | 285,581 | 2,380,095 | |||||||||||||||||||||||||||||||
Philip T. Herndon, Vice President and Chief Financial Officer | 2017 | 406,750 | 125,000 | — | 588,960 | 11,258 | 1,131,968 | ||||||||||||||||||||||||||||||||||||||
2016 | 347,917 | — | 3,257,821 | 446,262 | 7,897 | 4,059,972 | |||||||||||||||||||||||||||||||||||||||
Vicente Reynal, Chief Executive Officer | 2016 | 750,000 | ― | ― | 4,568,331 | 877,500 | 233,614 | 6,429,445 | |||||||||||||||||||||||||||||||||||||
2018 | 409,000 | ― | 500,008 | 499,997 | ― | 25,298 | 1,434,302 | ||||||||||||||||||||||||||||||||||||||
2017 | 406,750 | 125,000 | ― | ― | 588,960 | 11,258 | 1,131,968 | ||||||||||||||||||||||||||||||||||||||
Philip T. Herndon, Former Vice President and Chief Financial Officer | 2016 | 347,917 | ― | ― | 3,257,821 | 446,262 | 7,897 | 4,059,972 | |||||||||||||||||||||||||||||||||||||
2017 | 457,500 | 100,000 | — | 489,900 | 75,872 | 1,123,272 | 2018 | 460,000 | ― | 337,496 | 337,495 | 238,050 | 42,954 | 1,415,995 | |||||||||||||||||||||||||||||||
2016 | 450,000 | — | 610,717 | 367,875 | 49,565 | 1,478,082 | 2017 | 457,500 | 100,000 | ― | ― | 489,900 | 73,301 | 1,120,701 | |||||||||||||||||||||||||||||||
Neil Snyder, Senior Vice President, Strategy, Business Development and Planning | 2017 | 351,000 | 75,000 | — | 254,160 | 123,941 | 804,101 | ||||||||||||||||||||||||||||||||||||||
Andrew Schiesl, Vice President, General Counsel, Chief Compliance Officer and Secretary | 2016 | 450,000 | ― | ― | 610,717 | 367,875 | 49,565 | 1,478,082 | |||||||||||||||||||||||||||||||||||||
2018 | 358,295 | ― | 199,990 | 200,002 | 124,221 | 155,965 | 1,038,473 | ||||||||||||||||||||||||||||||||||||||
2017 | 351,000 | 75,000 | ― | ― | 254,160 | 123,941 | 804,101 | ||||||||||||||||||||||||||||||||||||||
Enrique Miñarro Viseras, Vice President and General Manager, Industrials Segment EMEA(6) | 2017 | 316,000 | — | — | 205,222 | 229,222 | 750,444 | 2018 | 350,562 | ― | 499,997 | 500,002 | 249,950 | 213,203 | 1,813,714 | ||||||||||||||||||||||||||||||
2016 | 195,943 | 532,517 | 691,114 | 113,015 | 155,548 | 1,684,817 | 2017 | 316,000 | ― | ― | ― | 205,222 | 229,222 | 750,444 | |||||||||||||||||||||||||||||||
Enrique Miñarro Viseras, Vice President and General Manager, Industrials Segment EMEA(6) | 2016 | 195,943 | 532,517 | ― | 691,114 | 113,015 | 155,548 | 1,684,817 |
(1) | Reflects the salary amounts earned by our NEOs in the years indicated. |
(2) |
(3) | Amounts shown for 2018 reflect amounts earned under our |
(4) | Amounts reported under All Other Compensation reflect the following: |
(a) | as to Mr. Reynal, reimbursement for |
(b) | as to Mr. Herndon, company-paid life insurance premiums ($ |
(c) | as to Mr. Schiesl, company-paid life insurance premiums ($ |
(d) | as to Mr. Snyder, company-paid life insurance premiums ($ |
(e) | as to Mr. Miñarro Viseras, actual Company expenditures for use, including business use, of a Company car, including expenditures for the car lease and gas ($ |
(5) | Mr. Snyder served as Senior Vice President of Strategy, Business Development & Planning until August 2018 at which point he became Senior Vice President of Global Finance, Business Development and Planning. Effective January 1, 2019 he was appointed CFO. |
(6) | Mr. Miñarro Viseras is based in Europe and compensated in Euros. We converted his |
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Grants of Plan-Based Awards in 20172018
Estimated Possible Payouts under Non-Equity Incentive Plan Awards(1) | Estimated Possible Payouts under Non-Equity Incentive Plan Awards(1) | All Other Stock Awards: Number of Shares(2) (#) | All Other Option Awards: Number of Securities Underlying Options(3) (#) | Exercise Price of Option Awards ($) | Grant Date Fair Value of Stock and Option Awards ($)(4) | |||||||||||||||||||||||||||||||
Name | Threshold ($) | Target ($) | Maximum ($) | Grant Date | Approval Date | Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||||||||
Vicente Reynal | 8,083 | 766,500 | 1,533,000 | 7,665 | 766,500 | 1,533,000 | ||||||||||||||||||||||||||||||
Vicente Reynal | 2/22/2018 | 2/7/2018 | 62,383 | $ | 1,999,999 | |||||||||||||||||||||||||||||||
2/22/2018 | 2/7/2018 | 142,349 | $ | 32.06 | $ | 2,000,003 | ||||||||||||||||||||||||||||||
4,090 | 409,000 | 818,000 | ||||||||||||||||||||||||||||||||||
Philip T. Herndon | 2/22/2018 | 2/7/2018 | 15,596 | $ | 500,008 | |||||||||||||||||||||||||||||||
4,313 | 409,000 | 818,000 | 2/22/2018 | 2/7/2018 | 35,587 | $ | 32.06 | $ | 499,997 | |||||||||||||||||||||||||||
10,914 | 345,000 | 690,000 | 3,450 | 345,000 | 690,000 | |||||||||||||||||||||||||||||||
Neil Snyder | 3,722 | 176,500 | 353,000 | |||||||||||||||||||||||||||||||||
Andrew Schiesl | 2/22/2018 | 2/7/2018 | 10,527 | $ | 337,496 | |||||||||||||||||||||||||||||||
2/22/2018 | 2/7/2018 | 24,021 | $ | 32.06 | $ | 337,495 | ||||||||||||||||||||||||||||||
1,800 | 180,030 | 360,060 | ||||||||||||||||||||||||||||||||||
Neil D. Snyder | 2/22/2018 | 2/7/2018 | 6,238 | $ | 199,990 | |||||||||||||||||||||||||||||||
2/22/2018 | 2/7/2018 | 14,235 | $ | 32.06 | $ | 200,002 | ||||||||||||||||||||||||||||||
57,006 | 152,016 | 304,032 | 30,368 | 233,598 | 467,197 | |||||||||||||||||||||||||||||||
Enrique Miñarro Viseras | 2/22/2018 | 2/7/2018 | 7,798 | $ | 250,004 | |||||||||||||||||||||||||||||||
2/22/2018 | 2/7/2018 | 17,794 | $ | 32.06 | $ | 250,006 | ||||||||||||||||||||||||||||||
9/11/2018 | 9/10/2018 | 9,549 | $ | 249,993 | ||||||||||||||||||||||||||||||||
9/11/2018 | 9/10/2018 | 22,361 | $ | 26.18 | $ | 249,996 |
(1) | Reflects the possible payouts of cash incentive compensation under the |
(2) | Reflects restricted stock units granted under our 2017 Omnibus Incentive Plan. Vesting conditions and other key terms of these awards are discussed in more detail above under “Compensation Discussion and Analysis―2018 Executive Compensation Program in Detail―Long-Term Equity Incentive Awards” and “Compensation Discussion and Analysis―2018 Executive Compensation Program in Detail―2018 Leadership and Compensation Developments.” |
(3) | Reflects stock option granted under our 2017 Omnibus Incentive Plan. Vesting conditions and other key terms of these awards are discussed in more detail above under “Compensation Discussion and Analysis―2018 Executive Compensation Program in Detail―Long-Term Equity Incentive Awards” and “Compensation Discussion and Analysis―2018 Executive Compensation Program in Detail―2018 Leadership and Compensation Developments.” |
(4) | Represents the grant date fair value of the awards computed in accordance with FASB ASC Topic 718, using the assumptions discussed in Note 16: “Stock-Based Compensation Plans” of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December |
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 20172018
Summary of NEO Offer Letters and Employment Agreements
In general, the Company does not enter into employment agreements with employees, including our executive officers, however we do enter into offer letters with many of our executive officers. In addition, we did
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enter into an employment agreement with Mr. Miñarro Viseras as well as an offer letter.in 2016 and a new employment agreement with him in October 2018. Descriptions of the offer letters we entered into with Messrs. Reynal, Herndon, Schiesl and Snyder and the employment agreement and offer letteragreements we entered into with Mr. Miñarro Viseras are provided below. All current NEOs serve at the will of our Boardboard of Directors.directors.
Offer Letter with Mr. Reynal
The Company entered into an offer letter with Mr. Reynal, dated April 17, 2015, which was modified by a letter, dated November 19, 2015, we entered into with Mr. Reynal in connection with his promotion to Chief Executive Officer of the Company (the offer letter, dated April 17, 2015, as so modified, the “Reynal Offer Letter”). The Reynal Offer Letter provides that, as of January 1, 2016, Mr. Reynal is entitled to receive a base salary of $750,000, which base salary was increased to $766,500 in April, 2017, and that Mr. Reynal is entitled to participate in our annual MIP with a target award opportunity of 100% of his annual base salary. The Reynal Offer Letter further provides that, in 2016, Mr. Reynal’s MIP award would be based on the achievement of performance goals comparable to those that typically would be assigned to the Chief Executive Officer of the Industrials segment; however, following Mr. Reynal’s transition to devoting more of his business time and
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attention to the performance of duties as the Chief Executive Officer of the Company, his annual MIP award would transition to being based on the achievement of Company performance goals.
Mr. Reynal was eligible to receive two option grants under our Long-Term Incentive Program: one grant of 876,975 options upon commencement of his employment as the Chief Executive Officer of our Industrials segment, which he received in May 2015; and one grant of 585,403 options in connection with his promotion to Chief Executive Officer of the Company, which he received in May 2016. In addition, pursuant to the terms of the Reynal Offer Letter, Mr. Reynal was expected to invest a minimum of $2,000,000, and was given the opportunity to invest significantly more, into our common stock, subject to satisfaction of applicable securities law requirements.
During the time Mr. Reynal was based in Munich, Germany (the “Expat Period”), the Reynal Offer Letter provides that he was entitled to certain expatriate benefits, including an annual cost of living adjustment of $26,000, a monthly housing allowance of $5,533, payment or reimbursement of tuition to an international school for his dependent children, payment or reimbursement of school-sponsored transportation for his dependent children, reimbursement of expenses related to tax preparation performed by a tax preparation firm, use of a company car, reimbursement for expenses in connection with storage of household goods in the United States and reimbursement for business class travel to the United States or a comparable location for Mr. Reynal and his immediate family once per year. Mr. Reynal was also entitled to tax equalization on his cash compensation and expatriate benefits during the Expat Period; provided that the annual cost to the Company of such tax equalization shall not exceed $275,000.
Mr. Reynal is also eligible to participate in the Company’s 401(k), Excess Contribution, medical, dental, life insurance and disability plans, along with a comprehensive wellness program.
The Reynal Offer Letter also contains severance arrangements, which are discussed below under “Potential Payments to Named Executive Officers upon Termination of Employment or Change in Control.”
Offer Letter with Mr. Herndon
The Company entered into an offer letter with Mr. Herndon, dated November 18, 2015, which was modified by an offer letter, dated September 2, 2016, we entered into with Mr. Herndon in connection with his promotion to Chief Financial Officer of the Company (the offer letter, dated November 18, 2015, as so modified, the “Herndon Offer Letter”). The Herndon Offer Letter provides that Mr. Herndon is entitled to receive a base salary of $400,000, which base salary was increased to $409,000 in April, 2017, and is eligible to participate in the annual MIP with a target award opportunity of 100% of his base salary.
Mr. Herndon was eligible to receive a grant of 468,323 options under our Long-Term Incentive Program, which he received in May 2016. In addition, pursuant to the terms of the Herndon Offer Letter, Mr. Herndon was expected to invest a minimum of $1,000,000, and was given the opportunity to invest significantly more, into our common stock, subject to satisfaction of applicable securities law requirements, no later than two months following the date his employment with us commenced.
Mr. Herndon is also eligible to participate in the Company’s 401(k), Excess Contribution, medical, dental, life insurance and disability plans, along with a comprehensive wellness program.
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The Herndon Offer Letter also contains severance arrangements, which are discussed below under “Potential Payments to Named Executive Officers upon Termination of Employment or Change in Control.”
Offer Letter with Mr. Schiesl
The Company entered into an offer letter with Mr. Schiesl, dated November 25, 2013 (the “Schiesl Offer Letter”). The Schiesl Offer Letter provides that Mr. Schiesl is entitled to receive a base salary of $450,000, which base salary was increased to $460,000 in April, 2017, and is eligible to participate in the annual MIP with a target award opportunity of 75% of his base salary.
Mr. Schiesl was eligible to receive (i) a grant of 394,474 options under our Long-Term Incentive Program, which he received in March 2014, and (ii) a grant of 36,739 options (the “Investment Options”) which he received in lieu of a sign-on bonus in March 2014 and which vested on June 16, 2014.
Mr. Schiesl is also eligible to participate in the Company’s 401(k), Excess Contribution, medical, dental, life insurance and disability plans, along with a comprehensive wellness program.
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The Schiesl Offer Letter also contains severance arrangements, which are discussed below under “Potential Payments to Named Executive Officers upon Termination of Employment or Change in Control.”
Offer Letter with Mr. Snyder
The Company entered into an offer letter with Mr. Snyder, dated December 18, 2015(the2015 (the “Snyder Offer Letter”). The Snyder Offer Letter provides that Mr. Snyder is entitled to receive a base salary of $300,000, which base salary was increased to $353,000 in April, 2017, to $360,060 in 2018 and to $425,000 effective January 1, 2019 and is eligible to participate in the annual MIP with a target award opportunity of 45% of his base salary, which target award opportunity was increased to 50% in November 2016.2016 and to 65% effective January 1, 2019.
Mr. Snyder was eligible to receive a grant of 263,430 options under our Long-Term Incentive Program, which he received in December 2016. In addition, pursuant to the terms of the Snyder Offer Letter, Mr. Snyder was expected to invest a minimum of $90,000, and was given the opportunity to invest significantly more, into our common stock, subject to satisfaction of applicable securities law requirements, no later than two months following the date his employment with us commenced.
Under the Snyder Offer Letter, Mr. Snyder received a lump sum cash signing bonus of $300,000 in February 2016. Such bonus was subject to a repayment obligation upon certain terminations of Mr. Snyder’s employment.
Under the Snyder Offer Letter, Mr. Snyder is entitled to reimbursement for his reasonable commuting expenses (consistent with our travel policies) related to travel to and from his home, as well as a tax gross-up relating to such reimbursement.
Mr. Snyder is also eligible to participate in the Company’s 401(k), Excess Contribution, medical, dental, life insurance and disability plans, along with a comprehensive wellness program.
The Snyder Offer Letter also contains severance arrangements, which are discussed below under “Potential Payments to Named Executive Officers upon Termination of Employment or Change in Control.”
Employment Agreement and Offer LetterAgreements with Mr. Miñarro Viseras
The Company entered into an employment agreement with Mr. Miñarro Viseras, dated April 29, 2016 and commencing on May 10, 2016 (the “Miñarro Viseras Employment Agreement”), which was superseded by a new employment agreement on October 22, 2018 (the “New Miñarro Viseras Employment Agreement”). The Miñarro Viseras Employment Agreement providesprovided that Mr. Miñarro Viseras iswas entitled to receive a base salary of $330,013,$324,325, which base salary was increased to $337,814$331,992 in April, 2017 (in each case, converted(converted from Euros to U.S. dollars at an exchange rate of 1.20048,1.1798, which was the end of monthyaverage monthly translation rate December 2017)for 2018), iswas eligible to participate in the annual MIP with an award opportunity of up to 45% of his base salary and iswas eligible to participate in our Management Equity Program.
Under the Miñarro Viseras Employment Agreement, Mr. Miñarro Viseras received a lump sum cash signing bonus of $470,263 (which amount was paid to Mr. Miñarro Viseras in Euros and has been converted to U.S. dollars at an exchange rate of 1.1065, which is the average monthly translation rate for 2016) in August 2016. Such bonus was subject to a repayment obligation upon certain terminations of Mr. Miñarro Viseras’sViseras’ employment.
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Under the Miñarro Viseras Employment Agreement, Mr. Miñarro Viseras iswas eligible for relocation benefits, use of a company car, and international school assistance for his children in the amount of $54,002 (converted$54,271 for the first year of his employment and for $41,293 (in each case, converted from Euros to U.S. dollars at an exchange rate of 1.20048,1.1798, which was the end of monthaverage monthly translation rate December 2017) for the first year of his employment and for $42,039 (converted from Euros to U.S. dollars at an exchange rate of 1.20048, which was the end of month translation rate, December 2017)2018) for each year thereafter. Such relocation benefits arewere subject to a repayment obligation if Mr. Miñarro Viseras iswas terminated within 24 months by the Company for cause or by Mr. Miñarro Viseras without good reason.
Under the Miñarro Viseras Employment Agreement, Mr. Miñarro Viseras iswas also covered under the standard group accident insurance of the Company.
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The Miñarro Viseras Employment Agreement providesprovided for a mutual three-month advance notice period, which notice period was increased to twelve months in February 2018, for a termination of employment not for cause or without good reason, during which Mr. Miñarro Viseras maycould be released from his work duties but willwould still be entitled to remuneration.
Under the terms of the Miñarro Viseras Employment Agreement, Mr. Miñarro Viseras iswas subject to certain restrictive covenants, including a perpetual confidentiality covenant, violation of which willwould constitute “cause” under such agreement, and a noncompetition covenant for the duration of the employment relationship. Mr. Miñarro Viseras may be required to pay certain contractual penalties for each breach of either restrictive covenant.
We also entered into an offer letter withOn October 22, 2018, Mr. Miñarro Viseras dated March 16, 2016 (the “Miñentered into the New Miñarro Viseras Offer Letter”). The terms ofEmployment Agreement with the Company, which replaced the Miñarro Viseras Offer Letter are generally identical to those ofEmployment Agreement. The New Miñarro Viseras Employment Agreement incorporated the terms from the Miñarro Viseras Employment Agreement except that it does not contain any restrictive covenants, nor does it providewith the following significant changes: (i) Mr. Miñarro Viseras’ annual base salary was increased from $331,992 to $389,331 (in each case, converted from Euros to U.S. dollars at an exchange rate of 1.1798, which was the average monthly translation rate for a mutual three-month advance notice period2018), (ii) Mr. Miñarro Viseras’ target annual cash bonus opportunity was increased from 45% of his annual base salary to 60% of his annual base salary, and (iii) the annual amount of international school assistance for a termination of employment nothis children for cause or without good reason. In addition, the Miñarro Viseras Offer Letter provided thatwhich Mr. Miñarro Viseras is eligible was eligibleincreased from $41,293 to receive a grantthe lesser of 136,074 stock options under our Long-Term Incentive Plan,(x) $62,283 (converted from Euros to U.S. dollars at an exchange rate of 1.1798, which he received in May 2016.was the average monthly translation rate for 2018) and (y) actual cost. The New Miñarro Viseras Offer LetterEmployment Agreement also provided thatallows Mr. Miñarro Viseras was expected to invest a minimum of $60,000, andcontinue to receive while he was givenis living in Germany the opportunitysame annual housing allowance that had been previously provided to invest significantly more, into our common stock, subject to satisfaction of applicable securities law requirements.
Terms of Equity Awards
Long-Term Incentive Plan Grants
Time Option Vesting Schedule. We granted Time Options in May 2016 to Messrs. Reynal, Herndon, Snyder and Miñarro Viseras and in December 2016 to Messrs. Herndon and Snyder. The Time Options granted to Messrs. Reynal, Herndon and Snyder in May 2016 vest and become exercisable over time with respect to 33.3% of such Time Options on December 31st of each of 2016, 2017 and 2018, subject to continued employment through the applicable vesting date. The Time Options granted in May 2016 to Mr. Miñarro Viseras and December 2016 to Messrs. Herndon and Snyder vest and become exercisable over time with respect to 20% or such Time Options on December 31st of each of 2016, 2017, 2018, 2019 and 2020, subject to continued employment through the applicable vesting date.
In addition, we granted Time Options to Mr. Schiesl in 2014, and to Mr. Reynal in 2015. The Time Options granted to Mr. Schiesl in 2014 vest and become exercisable over time with respect to 20% of such Time Options on December 31st of each of 2014, 2015, 2016, 2017 and 2018, subject to continued employment through the applicable vesting date. The Time Options granted to Mr. Reynal in 2015 vest and become exercisable over time with respect to 33.3% of such Time Options on December 31st of each of 2016, 2017 and 2018, subject to continued employment through the applicable vesting date.
Performance Option Vesting Schedule. We granted Performance Options in May 2016 to Messrs. Reynal, Herndon, Snyder and Miñarro Viseras and in December 2016 to Messrs. Herndon and Snyder. The Performance Options granted in May 2016 to Messrs. Reynal, Herndon and Snyder are eligible to vest and become exercisable with respect to up to 33.3% of such Performance Options on December 31st of each of 2016, 2017 and 2018 and the Performance Options granted in May 2016 and December 2016 to Mr. Miñarro Viseras and Messrs. Herndon and Snyder, respectively, are eligible to vest and become exercisable with respect to up to 20% of such Performance Options on December 31st of each of 2016, 2017, 2018, 2019 and 2020, subject to continued employment through the applicable vesting date, if and only to the extent that the Company achieves the annual adjusted EBITDA performance targets set by the Compensation Committee, where “adjusted
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EBITDA” refers to earnings before interest, taxes, depreciation and amortization plus transaction, management and/or similar fees paid to KKR and/or its affiliates; provided that the Board may, following consultation with the CEO, adjust the calculation of adjusted EBITDA to reflect, to the extent not contemplated in the management plan, any extraordinary or one-time events, including, without limitation, acquisitions, divestitures, major capital investment programs, changes in accounting standards, stock expense related to the issuance of stock options, or other extraordinary or unusual events or occurrences, or any costs or expenses incurred during such period relating to environmental remediation, litigation or other disputes in respect of events and exposures that occurred prior to the end of the relevant fiscal year.
We also granted Performance Options to Mr. Schiesl in 2014, and to Mr. Reynal in 2015. The Performance Options granted to Mr. Schiesl in 2014 were eligible to vest and become exercisable with respect to up to 20% of such Performance Options on December 31st of each of 2014, 2015, 2016, 2017 and 2018, subject to continued employment through the applicable vesting date, if and only to the extent that the Company achieves the annual adjusted EBITDA performance targets set by the Compensation Committee. The Performance Options granted to Mr. Reynal in 2015 were eligible to vest and become exercisable with respect to up to 33.3% of such Performance Options on December 31st of each of 2016, 2017 and 2018, subject to continued employment through the applicable vesting date, if and only to the extent that the Company achieves the annual adjusted EBITDA performance targets set by the Compensation Committee.
The fiscal 2017 adjusted EBITDA performance target for purposes of determining vesting of Performance Options was $470 million and our actual adjusted EBITDA performance for fiscal 2017 was $561.5 million. Therefore, 33.3% of the Performance Options granted in May 2016 to Messrs. Reynal, Herndon and Snyder and to Mr. Reynal in 2015 and 20% of the Performance Options granted in May 2016 to Mr. Miñarro Viseras, in December 2016 to Messrs. Herndon and Snyder and to Mr. Schiesl in 2014 vested on December 31, 2017.
If the Company does not achieve the adjusted EBITDA performance target in 2018, buthim under the Company’s adjusted EBITDA in respect of fiscal year 2018 equals or exceeds the adjusted EBITDA performance threshold set by the Compensation Committee for fiscal year 2018 then one-quarter (1/4) of the Performance Options granted in 2016 to our NEOs in other than Mr. Miñarro Viseras eligible to vest on December 31st of such year shall vest on December 31st of such year and with respect to the remaining three-quarters (3/4) of the Performance Options eligible to vest on December 31st of such year, one-half (1/2) of such Performance Options shall vest on December 31, 2019 if the Company’s adjusted EBITDA in respect of fiscal year 2019 equals or exceeds the adjusted EBITDA target set by the Compensation Committee for fiscal year 2019 and one-half (1/2) of such Performance Options shall vest on December 31, 2020 if the Company’s adjusted EBITDA in respect of fiscal year 2020 equals or exceeds the adjusted EBITDA target set by the Compensation Committee for fiscal year 2020.expatriate policies.
At the end of the yearly measurement period with respect to any award of Performance Options, any then outstanding Performance Options that were not vested and exercisable in any previous year in accordance with their terms shall become vested and exercisable to the extent that the cumulative performance objectives have been satisfied in respect of the applicable performance period.
We believe that the adjusted EBITDA performance targets in all periods provide reasonably achievable, but challenging goals for our NEOs and other Long-Term Incentive Program participants and are intended to incentivize all participants to maximize their performance for the long-term benefit of our stockholders.
Effect of Change in Control on Vesting of Options. Notwithstanding the foregoing, immediately prior to any Change in Control (as defined below), any unvested portion of the Time Options shall vest and become immediately exercisable as to 100% of such Time Options. In addition, immediately prior to any Change in Control, the Performance Options shall vest and become immediately exercisable as to 100% of such Performance Options but only if, and to the extent that, as of such Change in Control, KKR achieves (x) a Sponsor IRR (as defined below) of 22.5% and (y) a Sponsor MOIC (as defined below) of 2.5x. No option will become exercisable as to any additional shares of the Company’s common stock following the termination of employment of an NEO for any reason and any option that is unexercisable as of the NEO’s termination of employment will immediately expire without payment.
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“Sponsor IRR” means, as of a Change in Control, the cumulative internal rate of return of KKR, excluding any fees paid to KKR or expenses reimbursed to KKR from time to time (“Sponsor Fees”), on KKR’s aggregate investment in the Company determined on a fully diluted basis, assuming inclusion of all shares of the Company’s common stock underlying all then outstanding Time Options and Performance Options.
“Sponsor MOIC” means, as of a Change in Control, the result obtained by dividing (i) the cash consideration received by KKR (other than any Sponsor Fees) as of the Change in Control by (ii) the aggregate amount of cash invested in (and the initial gross asset value of any property (other than money) contributed to) the Company by KKR, directly or indirectly, from time to time in respect of such investment.
A “Change in Control” means, (i) in one or a series of related transactions, the sale of all or substantially all of the assets of the Company to any person (or group of persons acting in concert), other than to (x) KKR or one or more of its controlled affiliates or (y) any employee benefit plan (or trust forming a part thereof) maintained by the Company or its controlled affiliates; or (ii) a merger, recapitalization, or other sale by the Company, KKR, or any of their respective affiliates, to a person (or group of persons acting in concert) of the Company’s common stock that results in more than 50% of the common stock of the Company (or any resulting company after a merger) being held by a person (or group of persons acting in concert) that does not include (x) KKR or its affiliates or (y) an employee benefit plan (or trust forming a part thereof) maintained by the Company or its controlled affiliates; and in any event of clause (i) or (ii), which results in KKR and its controlled affiliates or such employee benefit plan ceasing to hold the ability to elect a majority of the members of the Company’s Board of Directors.
Expiration of Vested Options. Except as provided in the Management Stockholder’s Agreement described below under “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2017,” all vested options will expire upon the earliest to occur of the following events: (1) the tenth anniversary of the date such options were granted, so long as the NEO remains employed with the Company through such date; (2) the first anniversary of the termination of the NEO’s employment with the Company because of death or Disability (as defined in the option award agreement); (3) one hundred eighty (180) days after the termination of the NEO’s employment with the Company without Cause (as defined in the option award agreement) (except due to death or Disability) or the NEO’s resignation for Good Reason (as defined in the option award agreement); (4) the date the NEO’s employment is terminated by the Company for Cause; or (5) thirty (30) days after the NEO’s employment is terminated by the NEO without Good Reason. In addition, at the discretion of the Company, options may be cancelled at the effective date of a merger, consolidation, or other transaction or capital change of the Company, in accordance with the terms of the 2013 Stock Incentive Plan, in exchange for a payment (payable in cash or other consideration depending on the terms of the transaction) per share equal to the excess, if any, of (x) the per share consideration paid to stockholders of the Company in the transaction over (y) the exercise price of the option.
General Provisions for Options and Shares under the Management Stockholder’s Agreement
In connection with their initial equity awards, each of our NEOs became party to a Management Stockholder’s Agreement.
Under the Management Stockholder’s Agreement, shares of our common stock beneficially owned by our NEOs are generally nontransferable prior to the earlier of (i) a Change in Control or (ii) the fifth anniversary of the effective date of the applicable Management Stockholder’s Agreement.
Our NEOs have limited “piggyback” registration rights with respect to shares of our common stock, provided that in lieu of piggyback rights where such rights would otherwise be available, our Board of Directors, in its sole discretion, may elect to waive the transfer restrictions (other than any such restrictions contained in an underwriters’ lock-up or in connection with a public offering) on the number of shares of Common Stock that would have been subject to such piggyback rights
Pursuant to the terms of the Management Stockholder’s Agreement, the NEOs are subject to covenants not to (1) disclose confidential information, (2) solicit customers and certain employees, consultants and independent contractors of the Company, (3) compete with the Company and (4) disparage the Company.
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Outstanding Equity Awards at 20172018 Fiscal Year End
Option Awards | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable(2) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)(3) | Option Exercise Price ($) | Option Expiration Date | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable(2) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)(3) | Option Exercise Price ($) | Option Expiration Date | Number of Shares of Stock That Have Not Vested (#)(4) | Market Value of Shares of Stock That Have Not Vested ($)(5) | ||||||||||||||||||||||
Vicente Reynal | 5/10/2015 | 438,487 | 109,622 | 10.61 | 5/10/2025 | 5/24/15 | 438,486 | — | — | 10.61 | 5/24/2025 | |||||||||||||||||||||||||
5/24/15 | 438,486 | — | — | 10.61 | 5/24/2025 | |||||||||||||||||||||||||||||||
5/10/16 | 292,702 | — | — | 10.61 | 5/10/2026 | |||||||||||||||||||||||||||||||
5/10/2015 | 219,244 | 109,622 | 10.61 | 5/10/2025 | 5/10/16 | 292,701 | — | — | 10.61 | 5/10/2026 | ||||||||||||||||||||||||||
5/10/2016 | 195,135 | 97,568 | 10.61 | 5/10/2026 | 2/22/18 | — | 142,349 | — | 32.06 | 2/22/2028 | ||||||||||||||||||||||||||
5/10/2016 | 195,134 | 97,567 | 10.61 | 5/10/2026 | 2/22/18 | — | — | — | — | — | 62,383 | $ | 1,275,732 | |||||||||||||||||||||||
Philip T. Herndon | 5/10/2016 | 156,108 | 78,054 | 10.61 | 5/10/2026 | 5/10/16 | 234,162 | — | — | 10.61 | 5/10/2026 | |||||||||||||||||||||||||
5/10/2016 | 156,108 | 78,054 | 10.61 | 5/10/2026 | 5/10/16 | 234,161 | — | — | 10.61 | 5/10/2026 | ||||||||||||||||||||||||||
12/9/2016 | 28,261 | 42,392 | 11.43 | 12/9/2026 | 12/9/16 | 42,391 | 28,262 | — | 11.43 | 12/9/2026 | ||||||||||||||||||||||||||
12/9/2016 | 28,261 | 42,392 | 11.43 | 12/9/2026 | 12/9/16 | 42,392 | — | 28,262 | 11.43 | 12/9/2026 | ||||||||||||||||||||||||||
2/22/18 | — | 35,587 | — | 32.06 | 2/22/2028 | |||||||||||||||||||||||||||||||
2/22/18 | — | — | — | — | — | 15,596 | $ | 318,938 | ||||||||||||||||||||||||||||
Andrew Schiesl | 3/7/2014 | 157,789 | 39,447 | 8.16 | 3/7/2024 | 3/19/14 | 197,237 | — | — | 8.16 | 3/19/2024 | |||||||||||||||||||||||||
3/7/2014 | 157,789 | 39,447 | 8.16 | 3/7/2024 | 3/19/14 | 197,237 | — | — | 8.16 | 3/19/2024 | ||||||||||||||||||||||||||
3/7/2014 | 36,739 | — | 8.16 | 3/7/2024 | 3/19/14 | 36,739 | — | — | 8.16 | 3/19/2024 | ||||||||||||||||||||||||||
Neil Snyder | 5/10/2016 | 87,810 | 43,905 | 10.61 | 5/10/2026 | |||||||||||||||||||||||||||||||
2/22/18 | — | 24,021 | — | 32.06 | 2/22/2028 | |||||||||||||||||||||||||||||||
2/22/18 | — | — | — | — | — | 10,527 | $ | 215,277 | ||||||||||||||||||||||||||||
Neil D. Snyder | 5/10/16 | 131,715 | — | — | 10.61 | 5/10/2026 | ||||||||||||||||||||||||||||||
5/10/16 | 131,716 | — | — | 10.61 | 5/10/2026 | |||||||||||||||||||||||||||||||
12/9/16 | 14,131 | 9,421 | 11.43 | 12/9/2026 | ||||||||||||||||||||||||||||||||
5/10/2016 | 87,810 | 43,905 | 10.61 | 5/10/2026 | 12/9/16 | 14,130 | — | 9,421 | 11.43 | 12/9/2026 | ||||||||||||||||||||||||||
12/1/2016 | 9,420 | 14,131 | 11.43 | 12/1/2026 | 2/22/18 | — | 14,235 | — | 32.06 | 2/22/2028 | ||||||||||||||||||||||||||
12/1/2016 | 9,421 | 14,131 | 11.43 | 12/1/2026 | 2/22/18 | 6,238 | $ | 127,567 | ||||||||||||||||||||||||||||
Enrique Miñarro Viseras | 5/10/2016 | 27,215 | 40,823 | 10.61 | 5/10/2026 | 5/10/16 | 40,822 | 27,215 | — | 10.61 | 5/10/2026 | |||||||||||||||||||||||||
5/10/2016 | 27,214 | 40,822 | 10.61 | 5/10/2026 | 5/10/16 | 40,821 | — | 27,215 | 10.61 | 5/10/2026 | ||||||||||||||||||||||||||
2/22/18 | — | 17,794 | — | 32.06 | 2/22/2028 | |||||||||||||||||||||||||||||||
2/22/18 | — | — | — | — | — | 7,798 | $ | 159,469 | ||||||||||||||||||||||||||||
9/11/18 | — | 22,361 | — | 26.18 | 9/11/2028 | |||||||||||||||||||||||||||||||
9/11/18 | — | — | — | — | — | 9,549 | $ | 249,993 |
(1) | Reflects vested and exercisable Time Options, Performance Options and, in the case of Mr. Schiesl, Investment |
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(2) | Reflects unvested Time |
(3) | Reflects unvested Performance |
(4) | Reflects unvested RSUs granted pursuant to our 2017 Omnibus Incentive Plan. The RSUs granted to our NEOs on February 22, 2018 vest in equal installments on February 22nd of each of 2020, 2021, 2022 and 2023. The RSUs granted to Mr. Miñarro Viseras on September 11, 2019 vest in equal installments on September 11 of each of 2019, 2020, 2021 and 2022. |
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(5) | Values determined based on the December 31, 2018 closing price of the Company’s common stock on the NYSE of $20.45. |
Option Exercises and Stock Vested in 20172018
During 2017,2018, none of our NEOs exercised options or had any shares of stock or restricted stock or restricted stock units or similar instruments vest.
Pension Benefits - Fiscal 20172018
During 2017,2018, no NEOs participated in either a tax-qualified or non-qualified defined benefit plan sponsored by the Company.
Non-Qualified Deferred Compensation - Fiscal 20172018
Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(4) | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(4) | ||||||||||||||||||||
Vicente Reynal | 888,016 | 161,300 | 140,712 | — | 1,499,684 | 512,193 | 61,223 | (101,774 | ) | — | 1,943,727 | |||||||||||||||||||
Philip T. Herndon | — | — | — | — | — | 42,372 | 21,473 | (1,989 | ) | — | 61,855 | |||||||||||||||||||
Andrew Schiesl | 57,081 | 57,081 | 37,994 | — | 301,805 | 25,383 | 25,383 | (33,866 | ) | — | 305,419 | |||||||||||||||||||
Neil Snyder | — | — | — | — | — | |||||||||||||||||||||||||
Neil D. Snyder | 18,850 | 18,850 | (5,606 | ) | — | 32,094 | ||||||||||||||||||||||||
Enrique Miñarro Viseras | — | — | — | — | — | — | — | — | — | — |
(1) | The amounts in this column are reported as compensation for fiscal |
(2) | Represents the amount of the matching contribution made by us in accordance with our Excess Contribution Plan. Matching contributions are reported for the year in which the compensation against which the applicable deferral election is applied has been earned (regardless of whether such matching contribution is actually credited to the NEO’s non-qualified deferred compensation account in that year or the following year). The amounts in this column are reported as compensation for fiscal |
(3) | Amounts in this column are not reported as compensation for fiscal |
(4) | Of the amounts reported in this |
Non-qualified Deferred Compensation Plan
In addition to the 401(k) plan, U.S. employees with a salary grade of 20 or higher (generally senior managers and above) are eligible to participate in the Excess Contribution Plan. Once a participant in the Excess
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Contribution Plan reaches the IRS annual limits for the 401(k) plan, contributions will be made to the Excess Contribution Plan based on the salary deferral percentage elected by the participant under the 401(k) plan. SuchThe participant selects the deferral percentage is selectedfor both the 401(k) plan and the Excess Contribution Plan at the time of initial enrollment in the Excess Contribution Plan or once per year in December for the following year. AIn December of each year, a participant may make a separate election to defer from the annual MIP awards is made in December for the MIP award earned the following year and payable in the year thereafter. The Company matches each participant’s contributions to the Excess Contribution Plan with Company matching contributions. The Company match consists of $1 for each $1 contributed by athe participant updefers under the Excess Contribution Plan (up to the first 6% of a participant’s annual compensation.eligible compensation), less any matching contribution made to the 401(k) plan. The Company match is credited to the Excess Contribution Plan in the form of cash.
Historically, the NEOs were also credited with a nonelective Company contribution of 12% of recognizedeligible compensation in excess of the IRS annual limit. The Company nonelective contributions were also contributed in cash and became fully vested after three years of employment. We discontinued the nonelective Company contributions in 2014.effective January 1, 2015.
Mr. Schiesl is fully vested in the nonelectiveWith respect to employee and Company contribution portion ofmatching contributions made to the Excess Contribution Plan on and Messrs. Reynal and Herndon joinedafter January 1 2019, participants may elect to receive distributions in a lump sum or 5- or 10-year installments payable (i) when the participant separates from service with the Company afteror (ii) on a specific in-service date designated by the nonelective contribution had been discontinued.
Participantsparticipant. A participant makes this distribution election for the specific year’s contributions at the time the participant makes the salary and MIP deferral elections in December for the following year. For amounts deferred before January 1, 2019, participants in the Excess Contribution Plan may elect to receive distributions of their plan account in either (x) a lump sum to be paid onor 5- or 10-year installments payable when the March 1 ofparticipant separates from service with the calendar year following the year of separation from the Company, or (y) in a lump sum to be paid within 90 days after separation from service, subject to the terms and conditions of the Excess Contribution Plan. Loans and in-service withdrawals are not permitted under the Excess Contribution Plan.
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The investment options available to participants, including the named executive officersNEOs, under the Excess Contribution Plan are virtually the same assimilar to those offered to all of the participants in the 401(k) plan. Because some specific investment options available under the 401(k) plan are not available forunder the nonqualified plan,Excess Contribution Plan, the Company has made similar investment options available to the nonqualified planExcess Contribution Plan participants. Our stock is not a permitted investment option under the Excess Contribution Plan. The table below shows the funds available under the Excess Contribution Plan and their annual rate of return for the calendar year ended December 31, 2017,2018, as reported by the administrator of the 401(k) plan.
Name of Investment Fund | Ticker Symbol/Index Type | Annual Rate of Return % | ||
)% | ||||
DODGE & COX STOCK | DODGX | (7.07 | )% | |
FID 500 INDEX | FXAIX | (4.40 | )% | |
FID MID CAP IDX | FSMDX | (9.05 | )% | |
MFS MID CAP GRTH R6 | OTCKX | 1.21 | % | |
)% | ||||
)% | ||||
)% | ||||
RERGX | )% | |||
)% | ||||
)% | ||||
)% | ||||
)% | ||||
)% | ||||
)% | ||||
)% | ||||
)% | ||||
)% | ||||
FVTKX | (8.69 | )% | ||
FID FREEDOM INC K6 | FYTKX | (1.71 | )% | |
FID TOTAL BOND K6 | FTKFX | (0.77 | )% | |
VANG VMMR-FED MMKT | VMFXX | )% |
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Potential Payments to Named Executive Officers upon Termination of Employment or Change in Control
The following table describes the potential payments and benefits that would have been payable to our NEOs under existing plans and arrangements assuming a qualifying termination if a termination or change in control occurred on December 29, 2017,31, 2018, the last business day of our 20172018 fiscal year. A description of the provisions governing such payments under our agreements and any material conditions or obligations applicable to the receipt of payments is described below under “Severance Arrangements and Restrictive Covenants.”
The amounts shown in the table do not include payments and benefits to the extent they are provided generally to all salaried employees upon termination of employment and do not discriminate in scope, terms or operation in favor of the NEOs. These include accrued but unpaid salary and distributions of plan balances under our 401(k) savings plan.
Name | Cash Severance Payment ($)(1) | Continuation of Group Health Coverage ($)(2) | Accrued but Unused Vacation ($)(3) | Value of Time Option and Performance Option Acceleration ($)(4) | Total ($) | ||||||||||
Vicente Reynal | |||||||||||||||
Qualifying Termination | 1,644,000 | 20,052 | — | — | 1,664,052 | ||||||||||
Change in Control | — | — | — | 9,663,318 | 9,663,318 | ||||||||||
Philip T. Herndon | |||||||||||||||
Qualifying Termination | 409,000 | 20,052 | — | — | 429,052 | ||||||||||
Change in Control | — | — | — | 5,548,079 | 5,548,079 |
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Name | Cash Severance Payment ($)(1) | Continuation of Group Health Coverage ($)(2) | Accrued but Unused Vacation ($)(3) | Value of Time Option and Performance Option Acceleration ($)(4) | Total ($) | Cash Severance Payment ($)(1) | Continuation of Group Health Coverage ($)(2) | Accrued but Unused Vacation ($)(3) | Value of Time Option and Performance Option Acceleration ($)(4) | Value of Restricted Stock Unit and Stock Option Acceleration ($)(5) | Total ($) | ||||||||||||||||||||||
Vicente Reynal | |||||||||||||||||||||||||||||||||
Qualifying Termination | 1,870,260 | 22,896 | — | — | 318,918 | 2,212,074 | |||||||||||||||||||||||||||
Change in Control | — | — | — | — | — | — | |||||||||||||||||||||||||||
Qualifying Termination and Change in Control | 1,870,260 | 22,896 | — | — | 1,275,732 | 3,168,888 | |||||||||||||||||||||||||||
Philip T. Herndon | |||||||||||||||||||||||||||||||||
Qualifying Termination | 409,000 | 22,896 | — | — | 79,735 | 511,631 | |||||||||||||||||||||||||||
Change in Control | — | — | — | 509,846 | — | 509,846 | |||||||||||||||||||||||||||
Qualifying Termination and Change in Control | 409,000 | 22,896 | — | 509,846 | 318,938 | 1,260,681 | |||||||||||||||||||||||||||
Andrew Schiesl | |||||||||||||||||||||||||||||||||
Qualifying Termination | 827,875 | 20,052 | — | — | 847,927 | 949,900 | 22,896 | — | — | 53,804 | 1,026,600 | ||||||||||||||||||||||
Change in Control | — | — | — | 2,033,098 | 2,033,098 | — | — | — | — | — | — | ||||||||||||||||||||||
Neil Snyder | |||||||||||||||||||||||||||||||||
Qualifying Termination and Change in Control | 949,900 | 22,896 | — | — | 215,277 | 1,188,073 | |||||||||||||||||||||||||||
Neil D. Snyder | |||||||||||||||||||||||||||||||||
Qualifying Termination | 172,500 | 10,026 | — | — | 186,526 | 351,000 | 22,896 | — | — | 31,882 | 405,778 | ||||||||||||||||||||||
Change in Control | — | — | — | 2,683,624 | 2,683,624 | — | — | — | 169,955 | — | 169,955 | ||||||||||||||||||||||
Qualifying Termination and Change in Control | 351,000 | 22,896 | — | 169,955 | 127,567 | 671,418 | |||||||||||||||||||||||||||
Enrique Miñarro Viseras | |||||||||||||||||||||||||||||||||
Qualifying Termination | — | — | — | — | — | 389,331 | — | — | — | 88,671 | 478,002 | ||||||||||||||||||||||
Change in Control | — | — | — | 1,903,961 | 1,903,961 | — | — | — | 535,591 | — | 535,591 | ||||||||||||||||||||||
Qualifying Termination and Change in Control | 389,331 | — | — | 535,591 | 354,746 | 1,279,668 |
(1) | Cash severance payment includes the following: |
(2) | With respect to Messrs. Reynal, Herndon, Schiesl and |
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(3) | Amounts reported in this column reflect zero accrued but unused vacation days for each of our NEOs. |
(4) | Immediately prior to a Change in Control, all of our NEOs’ unvested Time Options granted prior to our IPO would vest and become immediately exercisable. In addition, immediately prior to a Change in Control, all of our NEOs’ Performance Options would vest and become immediately exercisable but only if, and to the extent that, KKR achieves (x) a Sponsor IRR of 22.5% and (y) a Sponsor MOIC of 2.5. See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based |
(5) | Unvested RSUs and Options granted to our NEOs in 2018 vest and, in the case of options, become immediately exercisable upon a termination without Cause (as defined below) within two years of a Change in Control. See “Treatment of Outstanding Equity Awards in the Event of Termination of Employment or Change in Control―Equity Awards Granted in 2018” below. |
Transition Agreement – Mr. Herndon
On February 27, 2019, in connection with Mr. Herndon’s departure from the Company, we entered into a transition agreement (the “Transition Agreement”) with Mr. Herndon. Under the Transition Agreement, subject to Mr. Herndon’s continued compliance with the restrictive covenants and his non revocation of the release and waiver of claims therein, he is entitled to (all values determined as of the date of the Transition Agreement):
Under the Transition Agreement, Mr. Herndon is subject to various restrictive covenants; Mr. Herndon also continues to be subject to the covenants in his Management Stockholder’s Agreement.
Mr. Herndon is also entitled to distribution of amounts held by him under the Excess Contribution Plan. See “—Non-Qualified Deferred Compensation – Fiscal 2018.”
Severance Arrangements and Restrictive Covenants
We entered into offer letters with each of our NEOs, other than Mr. Miñarro Viseras, that contain severance terms. In 2017,As discussed above under “Compensation Discussion and Analysis―Compensation Actions Taken in 2018,” in February 2018, we amended the terms of Mr. Miñarro Viseras’ employment agreement to increase his termination benefits, and in October 2018 we entered into a new employment agreement with Mr. Miñarro Viseras was not eligible for any severance pay and benefits not provided generally to all salaried employees upon(which also includes such increase in termination of employment, however hisbenefits). His new employment agreement requires that we provide threetwelve months’ notice in the event of his termination, with the option to terminate him immediately with a lump sum payment of threetwelve months’ salary. As discussed above under “Compensation Discussion and Analysis—Compensation Actions Taken in 2018,” in February 2018, we approved an increase to Mr. Miñarro Viseras’s termination benefits.
Messrs. Reynal and Schiesl
Under the terms of their offer letters, if the Company terminates either of Messrs. Reynal’s or Schiesl’s employment without Cause (as defined below) or either of Messrs. Reynal or Schiesl terminates his employment with us for Good Reason (as defined below), subject in Mr. Reynal’s case to his continued compliance with the restrictive covenants in his management equity agreements, in Mr. Schiesl’s case to certain provisions in the Severance Plan, and in either case to the NEO’s execution of a customary waiver and release agreement, he will be entitled to receive:
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Mr. Snyder
In February 2018, we increased Mr. Snyder’s termination benefits to more closely align with market practices. Under the terms of Mr. Snyder’s offer letter, if the Company terminates Mr. Snyder’s employment without Cause or if Mr. Snyder terminates his employment with us for Good Reason, subject to Mr. Snyder’s continued compliance with the restrictive covenants in his management equity agreements and his execution of a customary waiver and release agreement, he will be entitled to receive:
Mr. Herndon
Under the terms of Mr. Herndon’s offer letter, if the Company terminatesterminated Mr. Herndon’s employment without Cause or if Mr. Herndon terminatesterminated his employment with us for Good Reason, subject to Mr. Herndon’s continued compliance with the restrictive covenants in his management equity agreements and his execution of a customary waiver and release agreement, he will bewould have been entitled to receive:
Mr. Snyder
Under the terms of Mr. Snyder’s offer letter, if the Company terminates Mr. Snyder’s employment without Cause or if Mr. Snyder terminates his employment with us for Good Reason, subject to Mr. Snyder’s continued compliance with the restrictive covenants in his management equity agreements and his execution of a customary waiver and release agreement, he will be entitled to receive:
As described above under “Compensation Discussion and Analysis—Compensation Actions Taken in 2018,” in February 2018, we approved an increase to Mr. Snyder’s termination benefits.
In addition to the payments described above, each of our NEOs is entitled to receive a distribution of all vested amounts under our Excess Contribution Plan. See “—“―Non-Qualified Deferred Compensation — Fiscal 2017.2018.”
For purposes of each of the severance arrangements described above:
“Cause” means the occurrence of any of the following with respect to an NEO: (1) a material breach by the NEO of the terms of the Company’s policies, the terms of which have previously been provided to such NEO; (2) any act of theft, misappropriation, embezzlement, fraud or similar conduct by the NEO involving the Company or any of its affiliates; (3) the NEO’s failure to act in accordance with any specific lawful instructions given to the NEO by the Boardboard of Directorsdirectors (or any committee thereof) in connection with the performance of the NEO’s duties for the Company or any subsidiary of the Company, which continues beyond ten (10) business days after a written demand for substantial performance is delivered to the NEO by the Company (the “Cure Period”); (4) any damage of a material nature to the business or property of the Company or any affiliate caused by NEO’s willful or grossly negligent conduct which continues beyond the Cure Period (to the extent that, in the Boardboard of Directors’directors’ reasonable judgment, such breach can be cured); (5) any intentional misconduct by the NEO which is reasonably likely to be materially damaging to the Company without a reasonable good faith belief by the NEO that such conduct was in the best interests of the Company; (6) the conviction or the plea of nolo contendere or the equivalent in respect of any felony or a misdemeanor involving an act of dishonesty, moral turpitude, deceit, or fraud by the NEO; or (7) a knowing and material breach of any written agreement with the Company to which the NEO is a party, which continues beyond the Cure Period (to the extent that, in the Boardboard of Directors’directors’ reasonable judgment, such breach can be cured). A termination for Cause shall be effective when
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the Company has given the NEO written notice of its intention to terminate for Cause, describing those acts or omissions that are believed to constitute Cause, and has given the NEO the Cure Period within which to respond.
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“Good Reason” means any of the following actions if taken without an NEO’s prior written consent (which will be deemed to have been given if the NEO does not provide written notification of an event described in clauses (1) and (2) within 90 days after the NEO knows or has reason to know of the occurrence of any such event): (1) a material adverse change in the NEO’s position causing it to be of materially less stature, responsibility, or authority or the assignment to the NEO of any material duties inconsistent with the customary duties of the NEO’s position, in each case without the NEO’s written consent (provided that if, after an initial public offering of equity securities of the Company, at a later date the Company or its successor entity ceases to be a publicly traded entity, such fact shall not constitute a change in the NEO’s existing position); (2) the relocation of the offices at which the NEO is principally employed to a location which is more than 50 miles from the offices at which the NEO is principally employed immediately prior to such relocation; or (3) a reduction, without the NEO’s written consent, in the NEO’s base salary or the target bonus amount the NEO is eligible to earn under the MIP; provided, however, that nothing herein shall be construed to guarantee the NEO’s MIP award payable for any fiscal year if the applicable performance targets are not met; and provided, further, that it shall not constitute Good Reason if the Company makes an appropriate pro rata adjustment to the applicable amount payable and targets under the MIP in the event of a change in the fiscal year.
Notwithstanding the foregoing, any event described in clauses (1) or (2) above must be an event that would result in a material negative change in the Executive’s employment relationship with the Company and thus effectively constitute an involuntary termination of employment for purposes of Section 409A of the Code.
Treatment of Outstanding Equity Awards in the Event of Termination of Employment or Change in Control
The Time Option and Performance Option awards we granted to our NEOs prior to our initial public offering as well as the RSU and option awards we granted to our NEOs in 2018 provide for accelerated vesting in the event of certain qualifying terminations of employment as described below and/or, in certain circumstances described below, in connection with a change in control.
Equity awards granted prior to our initial public offering
Effect of Change in Control on Vesting of Options. Immediately prior to any Change in Control (as defined below), any unvested portion of the Time Options shall vest and become immediately exercisable as to 100% of such Time Options. In addition, immediately prior to any Change in Control, the Performance Options shall vest and become immediately exercisable as to 100% of such Performance Options but only if, and to the extent that, as of such Change in Control, KKR achieves (x) a Sponsor IRR (as defined below) of 22.5% and (y) a Sponsor MOIC (as defined below) of 2.5x. No option will become exercisable as to any additional shares of the Company’s common stock following the termination of employment of an NEO for any reason and any option that is unexercisable as of the NEO’s termination of employment will immediately expire without payment.
For purposes of the foregoing:
“Sponsor IRR” means, as of a Change in Control, the cumulative internal rate of return of KKR, excluding any fees paid to KKR or expenses reimbursed to KKR from time to time (“Sponsor Fees”), on KKR’s aggregate investment in the Company determined on a fully diluted basis, assuming inclusion of all shares of the Company’s common stock underlying all then outstanding Time Options and Performance Options.
“Sponsor MOIC” means, as of a Change in Control, the result obtained by dividing (i) the cash consideration received by KKR (other than any Sponsor Fees) as of the Change in Control by (ii) the aggregate amount of cash invested in (and the initial gross asset value of any property (other than money) contributed to) the Company by KKR, directly or indirectly, from time to time in respect of such investment.
A “Change in Control” means, (i) in one or a series of related transactions, the sale of all or substantially all of the assets of the Company to any person (or group of persons acting in concert), other than to (x) KKR or one or more of its controlled affiliates or (y) any employee benefit plan (or trust forming a part thereof) maintained by the Company or its controlled affiliates; or (ii) a merger, recapitalization, or other sale by the Company, KKR, or any of their respective affiliates, to a person (or group of persons acting in concert) of the Company’s common stock that results in more than 50% of the common stock of the Company (or any resulting company after a merger) being held by a person (or group of persons acting in concert) that does not include
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(x) KKR or its affiliates or (y) an employee benefit plan (or trust forming a part thereof) maintained by the Company or its controlled affiliates; and in any event of clause (i) or (ii), which results in KKR and its controlled affiliates or such employee benefit plan ceasing to hold the ability to elect a majority of the members of the Company’s board of directors.
Expiration of Vested Options. Except as provided in the Management Stockholder’s Agreement described below under “Transactions with Related Persons—Arrangements with Our Executive Officers, Directors and Advisors—Management, Director and Advisor Stockholder’s Agreements,” all vested options will expire upon the earliest to occur of the following events: (1) the tenth anniversary of the date such options were granted, so long as the NEO remains employed with the Company through such date; (2) the first anniversary of the termination of the NEO’s employment with the Company because of death or Disability (as defined in the option award agreement); (3) one hundred eighty (180) days after the termination of the NEO’s employment with the Company without Cause (as defined in the option award agreement) (except due to death or Disability) or the NEO’s resignation for Good Reason (as defined in the option award agreement); (4) the date the NEO’s employment is terminated by the Company for Cause; or (5) thirty (30) days after the NEO’s employment is terminated by the NEO without Good Reason. In addition, at the discretion of the Company, options may be cancelled at the effective date of a merger, consolidation, or other transaction or capital change of the Company, in accordance with the terms of the 2013 Stock Incentive Plan, in exchange for a payment (payable in cash or other consideration depending on the terms of the transaction) per share equal to the excess, if any, of (x) the per share consideration paid to shareholders of the Company in the transaction over (y) the exercise price of the option.
Equity awards granted in 2018
Effect of Qualifying Termination on Vesting of Options and RSUs. In the event of an NEO’s termination without Cause (as defined below) or Approved Retirement (as defined below), such NEO’s outstanding RSUs and options that would have vested on the first vesting date otherwise scheduled to occur immediately following the date of such termination without Cause or Approved Retirement will vest as of the date of such termination without Cause or Approved Retirement, as applicable. In the event of an NEO’s death or Disability (as defined in the 2017 Omnibus Incentive Plan), such NEO’s outstanding RSUs and options that would have vested on the first and second vesting date otherwise scheduled to occur immediately following the date of such death or Disability shall vest as of the date of death or Disability. Notwithstanding the foregoing, if the Company receives a legal opinion that there has been a legal judgment and/or legal development in the NEO’s jurisdiction that would likely result in the favorable treatment that applies to the RSUs and options if the NEO’s termination occurs as a result of NEO’s Approved Retirement being deemed unlawful and/or discriminatory, the Company may determine that the NEO’s Retirement (as defined below) is no longer an Approved Retirement.
Effect of a Change in Control on Vesting of Options and RSUs. In the event of an NEO’s termination without Cause during the two-year period following a Change in Control (as defined in our 2017 Omnibus Incentive Plan), all of such NEO’s outstanding RSUs and options will immediately vest as of the date of such termination without Cause.
For purposes of the foregoing:
“Approved Retirement” means a Retirement that occurs following the NEO’s receipt of written confirmation by the Company that such Retirement will be designated as an “Approved Retirement” for purposes of the 2017 Omnibus Incentive Plan.
“Cause” means the NEO’s (A) willful neglect in the performance of the NEO’s duties for the Company or willful or repeated failure or refusal to perform such duties; (B) engagement in conduct in connection with the NEO’s employment or service with the Company, which results in, or could reasonably be expected to result in, material harm to the business or reputation of the Company or any other member of the Company Group (as defined in the 2017 Omnibus Incentive Plan); (C) conviction of, or plea of guilty or no contest to, (I) any felony; or (II) any other crime that results in, or could reasonably be expected to result in, material harm to the business or reputation of the Company or any other member of the Company Group; (D) engaging in any act of moral turpitude, illegality or harassment, whether or not such act was committed in connection with the NEO’s services to the Company Group; (E) material violation of the Company’s Code of Conduct or any other written policies of the Company, including, but not limited to, those relating to sexual harassment or the disclosure or misuse of confidential information, or those set forth in the manuals or statements of policy of the Company; (F) fraud or
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misappropriation, embezzlement or misuse of funds or property belonging to the Company or any other member of the Company Group; or (G) act of personal dishonesty that involves personal profit in connection with the NEO’s employment or service to the Company.
“Detrimental Activity” means any of the following: (i) unauthorized disclosure of any confidential or proprietary information of any member of the Company Group; (ii) any activity that would be grounds to terminate the NEO’s employment or service with the Company for Cause; or (iii) a breach by the NEO of any restrictive covenant by which such NEO is bound, including, without limitation, the covenants contained in the applicable award agreement.
“Retirement” means the NEO’s termination of employment with the Company as a result of the NEO’s voluntary resignation on or after the date on which the NEO has reached age 62 and has completed at least 10 years of service with the Company Group.
Director Compensation in Fiscal 20172018
Name | Fees Earned or Paid In Cash ($) | Option Awards ($)(1) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Total ($) | ||||||||||||||
Brandon F. Brahm | — | — | — | — | — | — | — | ||||||||||||||
William P. Donnelly(2) | 75,000 | 400,000 | 475,000 | ||||||||||||||||||
John Humphrey(3) | — | — | — | ||||||||||||||||||
Elizabeth Centoni(3) | — | — | — | — | |||||||||||||||||
William P. Donnelly | 100,000 | — | (2) | 100,000 | |||||||||||||||||
John Humphrey(4) | 75,000 | 125,002 | — | 200,000 | |||||||||||||||||
Marc E. Jones(5) | — | — | — | — | |||||||||||||||||
William E. Kassling | 75,000 | (1) | 75,000 | 75,000 | — | (2) | 75,000 | ||||||||||||||
Michael V. Marn | 75,000 | (1) | 75,000 | 75,000 | — | (2) | 75,000 | ||||||||||||||
Peter M. Stavros | — | — | — | — | — | — | — | ||||||||||||||
Nickolas Vande Steeg | 75,000 | (1) | 75,000 | 75,000 | — | (2) | 75,000 | ||||||||||||||
Pastor Velasco(4) | 75,000 | 422,519 | (1) | 497,519 | |||||||||||||||||
Joshua T. Weisenbeck | — | — | — | — | — | — | — |
(1) | Represents |
(2) | In May 2017, we granted 44,799 time-vesting options to Mr. Donnelly (the “Donnelly Time Options”) |
In December 2013, we granted 57,534 time-vesting options (the “Director Time Options”) to purchase shares of our common stock at an exercise price of $8.16 per share to each non-employee director who was not associated with our Sponsor: Messrs. Kassling, Marn, Vande Steeg and Velasco. Of the Director Time Options, 46,026 are fully vested and exercisable. The remaining 11,507 Director Time Options will vest and become exercisable on December 31, 2018.
Mr. Humphrey joined our Board of Directors in February 2018. |
Description of Director Compensation
This section contains a description of the material terms of our compensation arrangements for our non-employee directors in 2017.2018.
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Sponsor Directors Associated with KKR
Our non-employee directors associated with KKR, including Messrs. Brahm, Stavros and Weisenbeck, received no compensation for their service on our Board of Directors in 2017.2018.
Messrs. Donnelley, Humphrey, Jones, Kassling, Marn and Vande Steeg and VelascoMs. Centoni
EachFollowing a competitive market assessment of Messrs. Donnelly, Kassling, Marn, Vande Steeg and Velasco was entitled to receive an annual $75,000non-employee director compensation conducted by Pearl Meyer, the Board adopted the following director compensation program beginning in 2018 for each of our non-employee directors not associated with KKR:
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Our directors were not paid any fees for attending meetings, however, our directors are reimbursed for reasonable travel and related expenses associated with attendance at Board or committee meetings. In addition, Mr. Donnelly was eligible to receive an annual $25,000 cash retainer for his service as chairpersonBecause each of the Audit Committee, payable in quarterly installments in arrears and pro-rated for any portion of a calendar quarter during which he commences or terminates service as chairperson of the Audit Committee. The Board of Directors also approved in 2017 an annual $25,000 cash retainer for anyour non-employee directordirectors not associated with KKR other than Mr. Humphrey serving at the time the board of directors adopted the foregoing director compensation program was granted an equity award at or before our initial public offering, it was determined that such directors would not receive their first equity awards under the newly-adopted director compensation program until 2019.
While our directors who serves as chairpersonserved prior to 2018 did not receive their first annual equity grant until 2019, in February 2018 Mr. Humphrey received an award of restricted stock units having a fair market value of $125,000 which vests on the anniversary of the Compensation Committee, payable in quarterly installments in arrears and pro-rated for any portion of a calendar quarter during which such director commences or terminates service as chairperson of the Compensation Committee; however, Mr. Stavros, the chairperson of our Compensation Committee was ineligible to receive compensation for his service.grant date.
In connection with his election to our Board of Directors, Mr. Donnelly received the Donnelly Time Options, a grant of options under the 2013 Stock Incentive Plan with a fair value of $400,000 and vesting and becoming exercisable in equal parts on December 31, 2017 and December 31, 2018.
In addition, in December 2013, we granted each of Messrs. Kassling, Marn and Vande Steeg and Velasco 57,534 Director Time Options pursuant to the 2013 Stock Incentive Plan. Prior to our initial public offering, we also gave our non-employee directors not associated with our sponsorKKR the opportunity to make investments in our common stock, subject to satisfaction of applicable securities law requirements, and each of Messrs. Marn and Vande Steeg has done so.
The Director Time Options vested and became exercisable or will vest and become exercisable with respect to 20% of such Director Time Options on December 31st31st of each of 2014, 2015, 2016, 2017 and 2018, subject to the director’s continued service through such date.
Vested Director Time Options and Donnelly Time Options expire upon the earliest to occur of the following events: (1) the tenth anniversary of the date such options were granted; (2) the first anniversary of the cessation of the director’s service to the Company because of death or Disability (as defined in the option award agreement); (3) one hundred eighty (180) days after the cessation of the director’s service to the Company without Cause (as defined in the option award agreement) (except due to death or Disability); (4) the date the director’s service is terminated by the Company for Cause; or (5) pursuant to the repurchase rights in the Director Stockholder’s Agreement described below. In addition, at the discretion of the Company, options may be cancelled at the effective date of a merger, consolidation, or other transaction or capital change of the Company, in accordance with the terms of the 2013 Stock Incentive Plan, in exchange for a payment (payable in cash or other consideration depending on the terms of the transaction) per share equal to the excess of (x) the per share consideration paid to stockholders of the Company in the transaction over (y) the exercise price of the option.
Except as described below with respect to Mr. Velasco’s Director Time Options, theThe Director Time Options and the Donnelly Time Options will not become exercisable as to any additional shares following the cessation of director’s service to the Company for any reason except in connection with a Change in Control. Notwithstanding the foregoing, immediately prior to any Change in Control (as defined in “Narrative Disclosure“Potential Payments to Summary Compensation Table and GrantsNamed Executive Officers upon Termination of Plan-BasedEmployment or Change in Control―Treatment of Outstanding Equity Awards in 2017— Termsthe Event of Termination of Employment or Change in Control―Equity Awards”awards granted prior to our initial public offering”), any unvested portion of the Director Time Options and Donnelly Time Options shall vest and become immediately exercisable as to 100% of such Time Options.
On October 23, 2017, in connection with his resignation from our Board of Directors, we agreed to allow Mr. Velasco’s unvested Director Time Options to remain outstanding and eligible to vest following Mr. Velasco’s resignation as if Mr. Velasco had continued to provide services to the Company through each applicable vesting date. The incremental fair value in connection with such modification is reflected in the “Option Awards” column of the “Director Compensation in Fiscal 2017” table above.
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In connection with their option awards, each of Messrs. Donnelly, Kassling, Marn and Vande Steeg and Velasco became party to a Director Stockholder’s Agreement.
Under the Director Stockholder’s Agreement, shares of our common stock beneficially owned by our directors are generally nontransferable prior to the earlier of (i) a Change in Control or (ii) the fifth anniversary of the effective date of the applicable Director Stockholder’s Agreement.
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Our directors party to a Director Stockholder’s Agreement have limited “piggyback” registration rights with respect to shares of our common stock, provided that in lieu of piggyback rights where such rights would otherwise be available, our Board of Directors, in its sole discretion, may elect to waive the transfer restrictions (other than any such restrictions contained in an underwriters’ lock-up or in connection with a public offering) on the number of shares of Common Stock that would have been subject to such piggyback rights.
Pursuant to the terms of the Director Stockholder’s Agreement, the directors party to such agreement are subject to covenants not to (1) disclose confidential information, (2) solicit customers and certain employees, consultants and independent contractors of the Company, (3) compete with the Company and (4) disparage the Company.
Mr. Humphrey
Mr. Humphrey, who joined our Board on February 7, 2018, will be entitled to receive the compensation described below under “Director Compensation in 2018.” However, while our directors who served prior to 2018 will not receive their first annual equity grant until 2019, in February 2018 Mr. Humphrey received an award of restricted stock units having a fair market value of $125,000 which vests on the anniversary of the grant date.
Stock Ownership and Retention Policy
Our directors are also subject to the stock ownership guidelines and retention policy described under “—Compensation“Compensation Discussion and Analysis—Analysis―Other Compensation Practices that Align Our NEOs to Our Stockholders―Stock Ownership and Retention Policy.”
Director Compensation in 2018
Following a competitive market assessment of non-employee director compensation conducted by Pearl Meyer, the Board adopted the following director compensation program for each of our non-employee directors not associated with KKR:
Our directors will not be paid any fees for attending meetings, however, our directors will be reimbursed for reasonable travel and related expenses associated with attendance at Board or committee meetings. Because each of our non-employee directors not associated with KKR other than Mr. Humphrey was granted an equity award at or before our initial public offering, such directors will not receive their first equity awards under our newly-adopted director compensation program until 2019.
Compensation Committee Interlocks and Insider Participation
During 2017, none2018, our Compensation Committee was composed of Messrs. Stavros, Vande Steeg and Weisenbeck. None of the members of our Compensation Committee has at any time been one of our executive officers or employees. None of our executive officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K (“Item 402(u)”), the Company is providing the following information regarding the relationship of the median of the annual total compensation of all of our employees (except Vicente Reynal, our Chief Executive Officer (“CEO”)), to the annual total compensation of Mr. Reynal, calculated in a manner consistent with Item 402(u). For 2018, our last completed fiscal year:
Based on this information, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all of our employees except our CEO was 93:1.
We are partiesdetermined that, as of November 30, 2018, our employee population consisted of 6,656 individuals, including full time, part time, and temporary employees.
To identify our “median employee” from this employee population, we obtained annual base salary and target annual bonus information as of November 30, 2018 from our internal payroll records for each employee in our employee population. We believe this consistently applied compensation measure reasonably reflects annual compensation across our employee base. Base salary amounts for employees located outside the United States and compensated in currencies other than U.S. dollars were converted to certain transactionsU.S. dollars based on the average annual exchange rate for 2018. We then ranked the resulting annual base salary plus target annual bonus amounts for all of the employees in the employee population other than our CEO to determine our median employee. Once we identified our median employee, who is an engineer in our Industrials Group, we combined all of the elements of such employee’s compensation for 2018 in accordance with KKR described below under “Item 13. Certain Relationshipsthe requirements of Item 402(c)(2)(x) of Regulation S-K for the Summary Compensation Table and Related Transactions, and Director Independence—Transactions with Related Persons”.converted amounts in Euros to U.S. dollars based on the average annual exchange rate for 2018. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our Summary Compensation Table set forth above in this proxy statement.
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The following table and accompanying footnotes set forth information regarding the beneficial ownership of our common stock as of March 14, 201813, 2019 by: (1) each person known to us to beneficially own more than 5% of our common stock, (2) each of the named executive officers, (3) each of our directors and (4) all of our directors and executive officers as a group.
As of March 14, 2018,13, 2019, there were 197,223,598200,408,868 shares of our common stock outstanding.
Name of beneficial owner | Amount and Nature of Beneficial Ownership | Percent of Common Stock Outstanding | ||||
Beneficial Owners of More than 5% | ||||||
Investment funds affiliated with KKR(1) | 121,157,473 | 61.4 | % | |||
Directors and Named Executive Officers: | ||||||
Vicente Reynal(2) | 1,280,024 | * | ||||
Philip T. Herndon(2) | 538,305 | * | ||||
Andrew Schiesl(2) | 352,318 | * | ||||
Neil D. Snyder(2) | 222,721 | * | ||||
Enrique Miñarro Viseras(2) | 60,076 | * | ||||
Peter M. Stavros(3) | — | — | ||||
Brandon F. Brahm(3) | — | — | ||||
William P. Donnelly(2) | 65,041 | * | ||||
John Humphrey | — | * | ||||
William E. Kassling(2) | 376,003 | * | ||||
Michael V. Marn(2) | 46,026 | * | ||||
Nickolas Vande Steeg(2) | 222,920 | * | ||||
Joshua T. Weisenbeck(3) | — | — | ||||
All directors and executive officers as a group (15 persons)(2) | 3,402,830 | 1.7 | % |
Name of beneficial owner | Amount and Nature of Beneficial Ownership | Percent of Common Stock Outstanding | ||||
Beneficial Owners of More than 5% | ||||||
Investment funds affiliated with KKR(1) | 70,671,135 | 35.3% | ||||
Artisan Partners(2) | 10,426,745 | 5.2% | ||||
The Vanguard Group(3) | 11,450,706 | 5.7% | ||||
T. Rowe Price(4) | 18,073,291 | 9.0% | ||||
Directors and Named Executive Officers: | ||||||
Vicente Reynal(5) | 1,694,403 | * | ||||
Philip T. Herndon(5) | 722,674 | * | ||||
Andrew Schiesl(5) | 431,213 | * | ||||
Neil D. Snyder(5) | 319,953 | * | ||||
Enrique Miñarro Viseras(5) | 87,291 | * | ||||
Michael A. Weatherred | — | — | ||||
Peter M. Stavros(6) | — | — | ||||
Brandon F. Brahm(6) | — | — | ||||
Elizabeth Centoni | * | |||||
William P. Donnelly(5) | 87,801 | * | ||||
John Humphrey | 3,899 | * | ||||
Marc E. Jones | * | |||||
William E. Kassling(5) | 387,510 | * | ||||
Michael V. Marn(5) | 57,533 | * | ||||
Nickolas Vande Steeg(5) | 234,427 | * | ||||
Joshua T. Weisenbeck(6) | — | — | ||||
All directors and executive officers as a group (16 persons)(5) | 3,403,993 | 1.7% |
* | Less than 1 percent |
(1) | Includes |
(2) | Beneficial ownership information is based on information contained in the Schedule 13G filed on February 7, 2019 on behalf of Artisan Partners Limited Partnership (“APLP”), Artisan Investments GP LLC (“Artisan Investments”), Artisan Partners Holdings LP (“Artisan Holdings”) and Artisan Partners Asset Management Inc. (“APAM”). According to the schedule, included in the shares of our common stock listed above as beneficially owned by Artisan Partners are 9,358,417 shares over which APLP, Artisan Investments, Artisan Holdings and APAM have shared voting power and 10,426,745 shares over which APLP, Artisan Investments, Artisan Holdings and APAM have shared dispositive power. According to the schedule, Artisan Holdings is the sole limited partner of APLP and the sole member of Artisan Investments; Artisan Investments is the general partner of APLP; APAM is the general partner of Artisan Holdings. According to the schedule, the shares reported above as beneficially owned by Artisan Partners have been acquired on behalf of discretionary clients of APLP. Persons other than APLP are entitled to receive all dividends from, and proceeds from the sale of, those |
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shares. According to the schedules, none of those persons, to the knowledge of APLP, Artisan Holdings, APAM, or Artisan Investments has an economic interest in more than 5% of the class. The principal business address of each of APLP, Artisan Investments, Artisan Holdings and APAM is 875 East Wisconsin Avenue, Suite 800, Milwaukee, WI 53202.
(3) | Beneficial ownership information is based on information contained in the Schedule 13G filed on February 11, 2019 on behalf of The Vanguard Group and its wholly-owned subsidiaries, Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd. According to the schedule, included in the shares of our common stock listed above as beneficially owned by The Vanguard Group are 64,440 shares over which The Vanguard Group has sole voting power, 19,334 shares over which The Vanguard Group has shared voting power, 11,380,039 shares over which The Vanguard Group has sole dispositive power and 70,667 shares over which The Vanguard Group has shared dispositive power. The address of the principal business office of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355. |
(4) | Beneficial ownership information is based on information contained in the Schedule 13G filed on February 14, 2019 on behalf of T. Rowe Price Associates, Inc. (“Price Associates”). According to the schedule, included in the shares of our common stock listed above as beneficially owned by T. Rowe Price, are 6,233,815 shares over which Price Associates has sole voting power and 18, 073,291 shares over which Price Associates has sole dispositive power. According to the schedule, Price Associates does not serve as custodian of the assets of any of its clients; accordingly, in each instance only the client or the client’s custodian or trustee bank has the right to receive dividends paid with respect to, and proceeds from the sale of, such securities. The ultimate power to direct the receipt of dividends paid with respect to, and the proceeds from the sale of, such securities, is vested in the individual and institutional clients which Price Associates serves as investment adviser. Any and all discretionary authority which has been delegated to Price Associates may be revoked in whole or in part at any time. According to the schedule, not more than 5% of the class of such securities is owned by any one client subject to the investment advice of Price Associates. The principal business address of T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, MD 21202. |
(5) | The number of shares reported includes shares covered by options that are exercisable within 60 days as follows: Mr. Reynal, |
The principal business address of each of Messrs. Stavros, Weisenbeck and Brahm is c/o Kohlberg Kravis Roberts & Co. L.P., 9 West |
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires executive officers and directors, a company’s chiefprincipal accounting officer and persons who beneficially own more than 10% of a company’s common stock to file initial reports of ownership and reports of changes in ownership with the SEC and the NYSE. Executive officers, directors, the chiefprincipal accounting officer and beneficial owners with more than 10% of our common stock are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of copies of such reports and written representations from our executive officers, directors and KKR, we believe that our executive officers, directors and KKR complied with all Section 16(a) filing requirements during 2017.2018.
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TRANSACTIONS WITH RELATED PERSONS
Arrangements with Our Executive Officers, Directors and Advisors
We have entered into letter agreements with certain members of management, including each of our executive officers, and our directors and certain advisors, pursuant to which such individuals agreed to invest in our stock and/or through the purchase of our shares with cash. In addition, our Board of Directors granted options to purchase shares of our common stock to certain members of management and key employees, including to our executive officers. In connection with the grants of new options described above, the participating members of our management, including our executive officers, were required to enter into a Management Stockholder’s Agreement as well as a stock option agreement, as applicable.
Below is a brief summary of the principal terms of the Management Stockholder’s Agreements, the Director Stockholder’s Agreements and the Advisor Stockholder’s Agreements, which are qualified in their entirety by reference to the agreements themselves, forms of which are filed as exhibits to thisour Annual Report on Form 10-K.
Management, Director and Advisor Stockholder’s Agreements
The Management Stockholder’s Agreements impose significant restrictions on transfers of shares of our common stock. Generally, shares held by our management are nontransferable by any means at any time prior to the earlier of (i) the occurrence of a Change in Control (as defined in the Management Stockholder’s Agreements) or (ii) the later to occur of (a) the fifth anniversary of the execution of the applicable Management Stockholder’s Agreement or (b) the consummation of an Initial Public Offering (as defined in the Management Stockholder’s Agreements). These transfer restrictions are subject to certain exceptions, including transfers approved by our Board of Directors; transfers upon the death or Disability (as defined in the Management Stockholder’s Agreements) of the holder; transfers to immediate family members or estate planning vehicles, provided such transferees become party to the applicable Management Stockholder’s Agreement; or repurchases of such shares by the Company.
Additionally, management stockholders have limited “piggyback” registration rights with respect to certain registered offerings conducted by the Company. The maximum number of shares of common stock which a management stockholder may register is generally proportionate with the percentage of common stock being sold by certain affiliates of KKR (relative to their holdings thereof). The Management Stockholder’s Agreements also contain certain lock-up provisions in the event that any shares are offered to the public pursuant to an effective registration statement under the Securities Act.
The Director Stockholder’s Agreements and Advisor Stockholder’s Agreements are substantially similar to the Management Stockholder’s Agreements. In addition to certain exceptions to transfer restrictions related to piggyback rights available to Management Stockholders, the Director and Advisor Stockholder’s Agreements further provide that in lieu of piggyback registration rights in connection with a public offering in which such piggyback rights would otherwise be available, the Board of Directors may waive transfer restrictions with respect to the number of shares that would have been subject to such piggyback rights.
Arrangements with KKR
Stockholders Agreement
In connection with our initial public offering, we entered into a stockholders agreement with certain affiliates of KKR. This agreement grants affiliates of KKR the right to nominate to our Board of Directors a
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number of designees equal to: (i) at least a majority of the total number of directors comprising our Board of Directors at such time as long as affiliates of KKR beneficially own at least 50% of the shares of our common stock entitled to vote generally in the election of our directors; (ii) at least 40% of the total number of directors comprising our Board of Directors at such time as long as affiliates of KKR beneficially own at least 40% but less than 50% of the shares of our common stock entitled to vote generally in the election of our directors; (iii) at least 30% of the total number of directors comprising our Board of Directors at such time as long as affiliates of KKR beneficially own at least 30% but less than 40% of the shares of our common stock entitled to vote generally in the election of our directors; (iv) at least 20% of the total number of directors comprising our Board of Directors at such time as long as affiliates of KKR beneficially own at least 20% but less 30% of the
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shares of our common stock entitled to vote generally in the election of our directors; and (v) at least 10% of the total number of directors comprising our Board of Directors at such time as long as affiliates of KKR beneficially own at least 5% but less than 20% of the shares of our common stock entitled to vote generally in the election of our directors. For purposes of calculating the number of directors that affiliates of KKR are entitled to nominate pursuant to the formula outlined above, any fractional amounts would be rounded up to the nearest whole number and the calculation would be made on a pro forma basis, taking into account any increase in the size of our Board of Directors (e.g., one and one quarter (11/4) ¼) directors shall equate to two directors). In addition, in the event a vacancy on the Board of Directors is created by the death, disability, retirement or resignation of a Sponsor director designee, affiliates of KKR shall, to the fullest extent permitted by law, have the right to have the vacancy filled by a new Sponsor director-designee. In addition, the stockholders agreement grants to KKR special governance rights, for as long as KKR maintains ownership of at least 30% of our outstanding common stock, including rights of approval over certain corporate and other transactions such as mergers or other transactions involving a change in control and certain rights regarding the appointment of our chief executive officer.
Registration Rights Agreement
In connection with the KKR Transaction, certain affiliates of KKR entered into a registration rights agreement with us. In connection with the completion of our initial public offering, we and KKR entered into an amended and restated registration rights agreement. The amended and restated registration rights agreement grants such affiliates of KKR the right to cause us to register shares of our common stock held by it under the Securities Act and, if requested, to use our reasonable best efforts (if we are not eligible to use an automatic shelf registration statement at the time of filing) to maintain a shelf registration statement effective with respect to such shares. Certain affiliates of KKR are also entitled to participate on a pro rata basis in any registration of our common stock under the Securities Act that we may undertake. The amended and restated registration rights agreement also provides that we will pay certain expenses relating to such registrations and indemnify certain affiliates of KKR and members of management participating in any offering against certain liabilities, which may arise under the Securities Act, the Exchange Act, any state securities law or any rule or regulation thereunder applicable to us.
MonitoringIndemnification Agreement
In connection with the KKR Transaction, we entered into a monitoring agreement with KKR pursuant to which KKR provided various management and advisory services to us and our direct and indirect divisions, subsidiaries, parent entities and controlled affiliates and received fees and reimbursements of related out-of-pocket expenses. We paid management fees of $17.3 million to KKR for the year ended December 31, 2017. In May 2017, the monitoring agreement was terminated in accordance with its terms and we paid a termination fee of approximately $16.2 million.
Indemnification Agreement
In connection with entering into the monitoring agreement, we also entered into a separate indemnification agreement with KKR and certain of its affiliates, which provides customary exculpation and indemnification provisions in favor of KKR and such affiliates in connection with the services provided to us under the monitoring, transaction fee and syndication fee agreements.agreements we entered into with KKR or otherwise.
Relationship with KKR Capstone Americas LLC
We have utilized and may continue to utilize KKR Capstone Americas LLC and/or its affiliates (“KKR Capstone”), a consulting company that works exclusively with KKR’s portfolio companies, for consulting services, and have paid to KKR Capstone related fees and expenses. KKR Capstone is not a subsidiary or affiliate of KKR. KKR Capstone operates under several consulting agreements with KKR and uses the “KKR” name under license from KKR.
Relationship with KKR Credit
Since 2014, investment funds or accounts managed or advised by the global credit business of KKR (“KKR Credit”) were participating lenders under our existing credit agreements and holders of notes issued by us, and as of December 31, 2017,2018, had received in aggregate principal payments of approximately $0.5$0.47 million and
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interest payments of approximately $4.0 million.$1.3 million (in each case, converted from Euros to U.S. dollars at an exchange rate of 1.1798, which was the average monthly translation rate for 2018). As of December 31, 2017,2018, investment funds or accounts managed or advised by KKR Credit held a position in the debt of the Company.
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Financing Arrangements with Related Parties
In May 2017, KKR Capital Markets LLC, an affiliate of KKR, acted as an underwriter in connection with the initial public offering of the Company’s stock and received underwriter discounts and commissions of approximately $8.9 million. In August 2017, KKR Capital Markets LLC received $1.5 million for services rendered in connection with a debt refinancing transaction. In November 2017,2018, KKR Capital Markets LLC acted as an underwriter in connection with an offering of Company’s stock by certain selling shareholders,stockholders, and earned underwriter discounts and commissions of approximately $3.5$6.0 million.
Policies and Procedures for Related Person Transactions
Our Board of Directors has adopted a written statement of policy regarding transactions with related persons, which we refer to as our “related person transaction policy.” Our related person transaction policy requires that (a) any “related person transaction” (defined as any transaction that is anticipated would be reportable by us under Item 404(a) of Regulation S-K in which we were or are to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest) be approved or ratified by an approving body comprised of the disinterested members of our Board of Directors or any committee of the Board of Directors (provided that a majority of the members of the Board of Directors or such committee, respectively, are disinterested) and (b) any employment relationship or transaction involving an executive officer and any related compensation be approved by the Compensation Committee of the Board of Directors or recommended by the Compensation Committee to the Board of Directors for its approval. In connection with the review and approval or ratification of a related person transaction:
In addition, the related person transaction policy provides that the committee or disinterested directors, as applicable, in connection with any approval or ratification of a related person transaction involving a non-employee director or director nominee, should consider whether such transaction would compromise the director or director nominee’s status as an “independent,” “outside,” or “non-employee” director, as applicable, under the rules and regulations of the SEC, the NYSE and the Internal Revenue Code.
STOCKHOLDER PROPOSALS FOR THE 20192020 ANNUAL MEETING
If any stockholder wishes to propose a matter for consideration at our 20192020 Annual Meeting of Stockholders, the proposal should be mailed by certified mail return receipt requested, to our Corporate Secretary, Gardner Denver Holdings, Inc., 222 East Erie Street, Suite 500 Milwaukee, Wisconsin 53202. To be eligible under the SEC’s stockholder proposal rule (Rule 14a-8(e) of the Exchange Act) for inclusion in our 20192020 Annual Meeting Proxy Statement and form of proxy, a proposal must be received by our Corporate Secretary on or before November 27, 2018.2019. Failure to deliver a proposal in accordance with this procedure may result in it not being deemed timely received.
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In addition, our bylaws permit stockholders to nominate directors and present other business for consideration at our Annual Meeting of Stockholders. To make a director nomination or present other business
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for consideration at the Annual Meeting of Stockholders to be held in 2019,2020, you must submit a timely notice in accordance with the procedures described in our by-laws. To be timely, a stockholder’s notice shall be delivered to the Corporate Secretary at the principal executive offices of our Company not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting. Therefore, to be presented at our Annual Meeting to be held in 2019,2020, such a proposal must be received on or after January 10, 2019,2020, but not later than February 9, 2019.2020. In the event that the date of the Annual Meeting of Stockholders to be held in 20192020 is advanced by more than 30 days, or delayed by more than 70 days, from the anniversary date of this year’s Annual Meeting of Stockholders, such notice by the stockholder must be so received no earlier than 120 days prior to the Annual Meeting of Stockholders to be held in 20192020 and not later than the later of the 90th90th day prior to such Annual Meeting of Stockholders to be held in 20192020 or ten (10) calendar days following the day on which public announcement of the date of such Annual Meeting is first made. Any such proposal will be considered timely only if it is otherwise in compliance with the requirements set forth in our bylaws. The proxy solicited by the Board for the 20192020 Annual Meeting of Stockholders will confer discretionary authority to vote as the proxy holders deem advisable on such stockholder proposals which are considered untimely.
The Board does not know of any other matters to be brought before the meeting. If other matters are presented, the proxy holders have discretionary authority to vote all proxies in accordance with their best judgment.
By Order of the Board of Directors,
Andrew Schiesl
Corporate Secretary
We make available, free of charge on our website, all of our filings that are made electronically with the SEC, including Forms 10-K, 10-Q and 8-K. To access these filings, go to our website (www.gardnerdenver.com) and click on “SEC Filings” under the “Investors” heading.
Copies of our Annual Report on Form 10-K for the year ended December 31, 2017,2018, including financial statements and schedules thereto, filed with the SEC, are also available without charge to stockholders upon written request addressed to:
Corporate Secretary
Gardner Denver Holdings, Inc.
222 East Erie Street, Suite 500
Milwaukee, Wisconsin 53202
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