PRELIMINARY PROXY STATEMENT -SUBJECTTOCOMPLETION
UFP TECHNOLOGIES,INC.
100 HALE STREET
NEWBURYPORT, MASSACHUSETTS 01950-350401950‑3504 USA
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
of
UFP TECHNOLOGIES,INC.
To Be Held on June 9, 20217, 2023
The Annual Meeting of Stockholders of UFP Technologies, Inc. (“we,” “us,” “our,” or the “Company”) will be held on June 9, 2021,7, 2023, at 10:00 a.m., Eastern Daylight Time. There will be no physical meeting location. The Annual Meeting will be a virtual stockholder meeting, conducted via live audio webcast, through which you can submit questions and vote online. The Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/UFPT2021UFPT2023 and entering your 16-digit control number included in your proxy materials or on your proxy card. The Annual Meeting will be for the following purposes:
1. | To elect the |
2. | To vote on a |
3. | To |
4. | To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ended December 31, |
5. | To transact such other business as may properly come before the |
The Board of Directors has fixed April 12, 202110, 2023 as the record date for determining the stockholders entitled to notice of, and to vote at, the Annual Meeting. It is expected that this proxy statement and the accompanying proxy will be mailed to stockholders on or about May 3, 2021.2023.
You are cordially invited to attend the virtual Annual Meeting.
By Order of the Board of Directors | |
Christopher P. Litterio |
Newburyport, Massachusetts
April 27, 2021, 2023
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO VOTE, SIGN, DATE, AND RETURN THE ACCOMPANYING ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PAIDPOSTAGE‑PAID ENVELOPE ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE EXERCISE BY FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION, BY EXECUTING A PROXY WITH A LATER DATE, OR BY ATTENDING AND VOTING AT THE VIRTUAL ANNUAL MEETING.
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR OUR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD VIRTUALLY ON JUNE 9, 2021:7, 2023: This Proxy Statement, our Annual Report for the fiscal year ended December 31, 20202022 and the Proxy Card are available at our website, www.ufpt.com/investors/filings.html.
UFP TECHNOLOGIES,INC.
100 HALE STREET NEWBURYPORT, MASSACHUSETTS 01950-350401950‑3504 USA
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 9, 20217, 2023
This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of UFP Technologies, Inc., a Delaware corporation (“we,” “us,” “our,” or the “Company”) with its principal executive offices at 100 Hale Street, Newburyport, MA 01950-3504,01950‑3504, for use at the Annual Meeting of Stockholders to be held on June 9, 2021,7, 2023, and at any adjournment or postponement thereof (the “Meeting”). The enclosed proxy relating to the Meeting is solicited on behalf of our Board of Directors and the cost of such solicitation will be borne by us. It is expected that this proxy statement and the accompanying proxy will be mailed to stockholders on or about May 3, 2021.2023. Certain of our officers and regular employees may solicit proxies by correspondence, telephone or in person, without extra compensation. We may also pay to banks, brokers, nominees and certain other fiduciaries their reasonable expenses incurred in forwarding proxy material to the beneficial owners of securities held by them.
Only stockholders of record at the close of business on April 12, 202110, 2023 will be entitled to receive notice of, and to vote at, the Meeting. As of that date, there were outstanding and entitled to vote 7,524,4797,612,970 shares of our Common Stock, $0.01 par value (the “Common Stock”). Each such stockholder is entitled to one vote for each share of Common Stock so held and may vote such shares either in person or by proxy.
Due to the coronavirus (COVID-19) pandemic and outOut of an abundance of caution to support the health and well-being of our employees, stockholders, and communities, the Meeting will be held as a virtual meeting only, via a live audio webcast. There will be no physical meeting location. You will be able to attend the meeting online and vote your shares electronically during the meeting by visiting www.virtualshareholdermeeting.com/UFPT2021UFPT2023 and entering your 16-digit control number included in your proxy materials or on your proxy card. Even though the Meeting is being held virtually, stockholders will have the ability to participate in, hear others, and ask questions during the Meeting.
The meeting webcast will begin promptly at 10:00 a.m. Eastern Daylight Time on June 9, 2021.7, 2023. Online check-in will begin promptly at 9:45 a.m. Eastern Daylight Time on that date, and you should allow ample time for the online check-in procedures. We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during check-in or during the meeting, please call the technical support number that will be posted on the virtual stockholder meeting login page at www.virtualshareholdermeeting.com/UFPT2021.UFPT2023.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At our 2020 Annual MeetingThe Company currently has a total of Stockholders, we amended our certificate of incorporation to eliminate our classified Board of Directors. Accordingly, all of ourseven directors, who are not designated as Class II directors are standing for election at the Meeting. These five directors are to bewere elected to serve until the 20222023 Annual Meeting of Stockholders and until their successors have been duly elected and qualified. Effective as of andEach nominee, if elected, will serve for a one-year term ending at the 20222024 Annual Meeting of Stockholders all directorsand until his or nominees will stand for election for one-year terms.her successor has been duly elected and qualified.
Each nominee has indicated his or her willingness to serve, if elected. It is the intention of the persons named as proxies to vote for the election of the nominees. If any of the nominees declines to serve or becomes unavailable for any reason, or if a vacancy occurs before the election, the persons named as proxies will vote the proxy for such substitutes, if any, as the present Board of Directors may designate. We have no reason to believe that any of the nominees will be unable to serve if elected. The nominees have not been nominated pursuant to any arrangement or understanding with any person.
The following table sets forth certain information with respect to each of our current directors and nominees for director. When used below, positions held with us include positions held with our predecessors and subsidiaries:
Board Committees | |||||||
Name | Age | Position | Director | Year Term | Audit | Compensation | Nominating |
R. Jeffrey Bailly | 61 | President, Chief Executive Officer and Chairman of the Board of Directors | 1995 | 2024 | |||
Thomas Oberdorf | 65 | Director | 2004 | 2024 | X | X | |
Marc Kozin | 61 | Director | 2006 | 2024 | X (Chair)* | X | |
Daniel C. Croteau† | 57 | Director | 2015 | 2024 | X | X (Chair) | |
Cynthia L. Feldmann | 70 | Director | 2017 | 2024 | X (Chair) | X | |
Joseph John Hassett | 65 | Director | 2022 | 2024 | X | X | |
Symeria Hudson | 55 | Director | 2022 | 2024 | X | X | |
† Lead Independent Director
* It is expected that Mr. Hassett will serve as the Chair of the Compensation Committee commencing July 2023.
Board Committees | ||||||||||||||
Name | Age | Position | Director | Year Term | Audit | Compensation | Nominating | |||||||
| R. Jeffrey Bailly | 59 | President, Chief Executive Officer and Chairman of the Board of Directors | 1995 | 2022 | ||||||||||
| Thomas Oberdorf | 63 | Director | 2004 | 2022, Class II | X | X | ||||||||
| Marc Kozin† | 59 | Director | 2006 | 2022 | X | X (Chair) | ||||||||
| Robert W. Pierce, Jr. | 67 | Director | 2008 | 2022 | X | X | ||||||||
| Lucia Luce Quinn | 67 | Director | 2013 | 2022, Class II | X (Chair) | X | ||||||||
| Daniel C. Croteau | 55 | Director | 2015 | 2022 | X | X | ||||||||
| Cynthia L. Feldmann | 68 | Director | 2017 | 2022 | X (Chair) | X | ||||||||
Mr. Bailly has served as our Chairman since October 2006 and as Chief Executive Officer, President, and a director since January 1, 1995. He joined the Company in 1988 and served as a Division Manager (1989-1992)(1989‑1992), General Manager Northeast Operations (1992-1994)(1992‑1994), and as our Vice President of Operations (1994-1995)(1994‑1995). From 1984 through 1988, Mr. Bailly, a former certified public accountant, was employed by Coopers & Lybrand. Mr. Bailly is a member of Young Presidents’ Organization (YPO Gold). As a result of these and other professional experiences, Mr. Bailly possesses particular knowledge and experience in operations, accounting, finance, mergers and acquisitions, and executive leadership within a manufacturing environment that strengthen the Board’s collective qualifications, skills, and experience.
Mr. Oberdorf has served as one of our directors since 2004. Mr. Oberdorf is a Class II director, not standing for election at the Meeting. Presently Mr. Oberdorf is Chief Executive Officer and Chairman of SIRVA, Inc. a leading global provider of moving and relocation services to corporations, consumers and governments. From August 2010 through March 2011, Mr. Oberdorf consulted for Orchard Brands, a multi-channelmulti‑channel marketer of men’s and women’s apparel for the 55+ market segment. From December 2008 through August 2010, Mr. Oberdorf was Executive Vice President and Chief Financial Officer of infoGROUP, Inc., which provides business and consumer databases for sales leads and mailing lists, database marketing services, data processing services, e-maile‑mail marketing, market research, and sales and marketing solutions. From June 2006 through 2008, Mr. Oberdorf was Senior Vice President, Chief Financial Officer and Treasurer of Getty Images Inc., the world’s leading creator and distributor of still imagery, footage and multi-mediamulti‑media products, as well as a recognized provider of other forms of premium digital content, including music. From March 2002 through June 2006, Mr. Oberdorf was Senior Vice President, Chief Financial Officer and Treasurer of CMGI, Inc., a supply chain management, marketing distribution and ecommerce solutions company, where he served as a consultant from November 2001 through February 2002. From February 1999 through October 2001, Mr. Oberdorf was Senior Vice President and Chief Financial Officer of Bertelsmann AG’s subsidiary, BeMusic Direct, a direct-to-consumerdirect‑to‑consumer music sales company. From January 1981 through January 1999, Mr. Oberdorf served in various capacities at Readers Digest Association, Inc., most recently as Vice President Global Books & Home Entertainment—Finance. As a result of these and other professional experiences, Mr. Oberdorf possesses particular knowledge and experience in manufacturing and accounting, finance, capital markets, and public company experience that strengthen the Board’s collective qualifications, skills, and experience.
Mr. Kozin has served as a one of our directors since 2006. Mr. Kozin served as President of L.E.K. Consulting from 1997 through 2011 and as a senior Advisor from 2011 through 2018. In January 2021, Mr. Kozin joined the board of Isleworth Healthcare Acquisition Corporation (Nasdaq: ISLE), a blank check company organized to effect mergers and acquisitions with businesses in the healthcare industry. In December 2020, Mr. Kozin joined the Board of Vascular Biogenics (Nasdaq: VBLT), a late stage oncology company, as Vice Chairman.Chairman and was appointed Chairman in July 2021. In January 2019,December 2022, Mr. Kozin joinedtransitioned to the board of Dicerna Pharmaceuticals (Nasdaq: DNRA), a leading developer of investigational ribonucleic acid interference (RNAi) therapeutics. In 2012, Mr. Kozin joined the board of Endocyte (Nasdaq: ECYT), a small molecule targeted therapeutic company that has since been sold to Novartis. In January 2014, Mr. Kozin joined the board of OvaScience, Inc. (Nasdaq: OVAS), a life sciences company focused on new fertility treatments that has since merged with Millendo Therapeutics. In January 2013, Mr. Kozin joined the Strategic Advisory Board of Healthcare Royalty Partners from that company’s Strategic Advisory Board where he is Chairperson.had been serving as chairperson since January 2013. Previously, Mr. Kozin served on the boards of directors of Isleworth Healthcare Acquisition Corporation, Endocyte (sold to Novartis), OvaScience, Inc (merged with Millendo Therapeutics), Dyax (sold to Shire), Frequency Therapeutics, Flex Pharma, Crunchtime! Information Systems, Medical Simulation Corporation, Brandwise, Lynx Therapeutics, Inc. and Assurance Medical, Inc., and Dicerna (sold to Novo Nordisk). As a result of these and other professional experiences, Mr. Kozin possesses particular knowledge and experience in strategic planning and leadership consulting of complex organizations that strengthen the Board’s collective qualifications, skills, and experience.
Mr. Pierce has served as one of our directors since June 2008. Mr. Pierce serves as Chief Executive Officer, Chairman, and Co-Owner of Pierce Aluminum Companies, Inc. Pierce Aluminum supplies aluminum raw stock and finished goods to the marine, aerospace, medical, transportation, and defense industries. Over the last 40 years, Mr. Pierce has overseen the growth of the company from a small operating warehouse in Canton, Massachusetts, to a state of the art 150,000 square foot production facility and distribution center in Franklin, Massachusetts and eleven regional warehouses across the country. Mr. Pierce has served on the boards of directors of McLean Hospital since 2010, Crohn’s and Colitis Foundation of America—New England Chapter since 2010, Mass General Hospital for Children Business Advisory Board since 2000, and Overseers Marine Biological Laboratory Woods Hole, Massachusetts since 2009. Mr. Pierce is a past board member of the National Association of Aluminum Distributors. As a result of these and other professional experiences, Mr. Pierce possesses particular knowledge and experience in manufacturing and design, innovation, engineering, sales and marketing, organizational growth and executive leadership within a manufacturing environment that strengthen the Board’s collective qualifications, skills, and experience.
Ms. Quinn has served as one of our directors since December 2013. Ms. Quinn is a Class II director, not standing for election at the Meeting. Effective as of December 31, 2020, Ms. Quinn retired from her position as Chief People Officer and Head of Corporate Communications of Genuity Science (formerly WuXi NextCODE), a leading contract genomics and data-sourcing, analytics and insights organization providing global biopharma partners with services such as population-scale, disease-specific data sourcing, high quality sequencing, robust analysis software tools for mining massive datasets and statistical analysis, AI and quantum computing. Ms. Quinn continues work with Genuity Science as a consultant to its Board of Directors. In October 2016, Ms. Quinn accepted the position of Strategic Advisor at Shepley Bulfinch, a national architecture firm. Previously, Ms. Quinn served as Chief People Officer of Forrester Research, Inc. (Nasdaq: FORR), a $340 million global research and advisory firm from June 2013 until 2018. From June 2012 through May 2013, Ms. Quinn consulted with Truepoint Partners, a strategic planning and organization development consulting firm. From June 2010 through April 2012, Ms. Quinn was Senior Vice President, Global Human Resources and Corporate Affairs for Convatec, Inc., a $1.6 billion medical device and products company. From March 2005 through September 2009 Ms. Quinn was Executive Vice President, Global Human Resources at Boston Scientific (NYSE: BSX), an $8 billion medical solutions provider. Prior to that, Ms. Quinn served in various leadership and operations capacities at Quest Diagnostics, Allied Signal/Honeywell, Digital Equipment Corp. and Westinghouse Electric Corp. Ms. Quinn also served as a trustee of Simmons College from 1996 to 2011, including chairing the Technology and Executive Compensation committees and serving as Chair of the Board of Trustees for five years. Ms. Quinn possesses particular knowledge and experience in human resources, strategic planning and leadership consulting for complex organizations that strengthen the Board’s collective qualifications, skills, and experience.
Mr. Croteau has served as one of our directors since December 2015. Presently Mr. Croteau is a member of the CEOBoard of Directors of Corza Medical, a private equity-backed company that specializes in high performance wound closure products, biosurgical products and surgical knives.ophthalmic instrumentation. Mr. Croteau'sCroteau served as the CEO of Corza Medical from January of 2021 to January of 2023, when he retired. His prior company, Surgical Specialties Corporation, was acquired in January 2021 and was simultaneously combined with the Tachosil Business from Takeda Pharmaceuticals to form Corza Medical. Corza Medical has a global sales and marketing organization and operates manufacturing facilities in the United States, China, England, Germany, and Mexico. Mr. Croteau was the Chief Executive Officer of Vention Medical from January 2011 until March 2017, when he resigned in connection with the acquisition of Vention Medical by Nordson Corporation and the divestiture of the Vention Device Manufacturing Services business unit to MedPlast Inc. Vention Medical provides component manufacturing, assembly and design services for disposable medical devices, with fourteen facilities across the United States, Central America, Ireland and Israel. Prior to assuming his role with Vention Medical, Mr. Croteau was President of FlexMedical from July 2005 through December 2010. FlexMedical is the medical division of Flex (Nasdaq: FLEX), which provides manufacturing and supply chain services for disposable medical devices, medical equipment, and drug delivery devices. From July 2004 to June 2005, Mr. Croteau served as the Executive Vice President and General Manager of Orthopedics for Accellent (renamed Lake Region Medical in 2014 and now a division of Integer), a manufacturer of specialty components and finished medical devices used in orthopedic, cardiology, and surgical devices. From August 1999 to June 2004, Mr. Croteau served as an executive at MedSource Technologies, which was merged in June 2004 with UTI Corporation to form Accellent. As Senior Vice President at MedSource Technologies, Mr. Croteau was responsible for sales, marketing, strategy and acquisitions. Prior to entering the medical device industry in 1999, Mr. Croteau spent the majority of his career in various roles at General Electric, and working as a consultant for Booz & Company in Sydney, Australia. Mr. Croteau has a Bachelor of Science degree in mechanical engineering from the University of Vermont and a Master of Business Administration from Harvard Business School. Since May 2019, Mr. Croteau has served on the board of directors of Resonetics, a privately held laser manufacturing services company providing micro components to global medical device companies. From October 2014 to March 2018 and from July 2020 to present, Mr. Croteau also served as a member of the board of directors of Inventus Power, a privately held, global manufacturer of custom battery packs, chargers and portable power supply systems. As a result of these and other professional experiences, Mr. Croteau possesses knowledge and experience in manufacturing and design, particularly in the medical device industry, that strengthen the Board’s collective qualifications, skills and experience.
Ms. Feldmann has served as one of our directors since June 2017. In March 2022, Ms. Feldmann joined the board of Alexandria Real Estate Equities, Inc. (NYSE: ARE), an urban office real estate investing trust focused on collaborative life science, agtech and technology campuses in AAA innovation cluster locations. She serves on the Alexandria board’s Science and Technology Committee. In September 2020, Ms. FeldmanFeldmann joined the board of Frequency Therapeutics, Inc. (Nasdaq: FREQ), a clinical-stage biotechnology company focused on harnessing the body’s innate biology to repair or reverse damage caused by a broad range of degenerative diseases. She is a member of thediseases, and she chairs Frequency’s Audit Committee. Since 2005, Ms. Feldmann has served on the board of directors of STERIS PLC (NYSE: STE), an NYSE-listed $3.0 billiona provider of infection prevention, decontamination, and health science technologies, products and services, with a market cap of $16 billion.services. She is a member of STERIS’chairs the STERIS Nominating & Governance Committee and Compliance Committee and previously chaired and wasis a current member of the Audit Committee. Ms. Feldmann also served from 2003 to January 1, 2018 on the board of directors of Hanger Inc. (NYSE: HNGR), a $1.0 billion provider of orthotic and prosthetic services and products, and the largest orthotic and prosthetic managed care network in the U.S., with a market cap of $900 million. Ms. Feldmann served on the Audit Committee, including as Chair of the Audit Committee, the Compensation Committee and the Quality and Technology Committee of Hanger. Ms. Feldmann currently serves on the board of directors and is the chaira member of the Finance Committee of Falmouth Academy, an academically rigorous, co-ed college preparatory day school for grades 7 to 12. Ms. Feldmann previously served as a director (and chair of the Audit Committee and as a member of the Nominating and Governance, Compensation, and Quality and Technology Committees) of Heartware International, Inc., a Nasdaq-listed medical device company, from 2012 until its acquisition by Medtronic in August 2016. From 2012 to 2013, Ms. Feldmann served on the board of and chaired the Audit and Compliance Committees of Atrius Health, a non-profit organization comprised of six leading Boston area physician groups representing more than 1,000 physicians serving nearly 1 million adult and pediatric patients. Ms. Feldmann was also a member of the board and served as Chair of the Audit Committee of Hayes Lemmerz International Inc., a worldwide producer of aluminum and steel wheels for passenger cars, trucks and trailers and a supplier of brakes and powertrain components from 2006 to 2009. She was the President and Founder of Jetty Lane Associates, a consulting firm, from 2005 until 2012. Previously, Ms. Feldmann served as Business Development Officer at Palmer & Dodge LLP,had a Boston based law firm, with a specialty29-year career in serving life sciences companies. From 1994 to 2002,public accounting; she was a Partner at KPMG LLP, holding various leadership roles in the firm’s Medical Technology and Health Care & Life Sciences industry groups. Ms. Feldmann alsogroups and was National Partner-in-Charge of the Life Sciences practice for Coopers & Lybrand (now PricewaterhouseCoopers LLP) from 1989 to 1994,, among other leadership positions she held during her 19-year career there. Ms. Feldmann was a founding board member of Mass Medic, a Massachusetts trade association for medical technology companies, where she also served as treasurer and as a member of the board's Executive Committee during her tenure from 1997 to 2001. Ms. Feldmann is a retired CPA and holds a Masters Professional Director Certification from the American College of Corporate Directors.CPA. As a result of these and other professional experiences, Ms. Feldmann possesses particular knowledge and experience in accounting, finance, and capital markets, and public company experience particularly in the medical device industry, that strengthen the Board’s collective qualifications, skills and experience.
Mr. Hassett has served as one of our directors since June 2022. Presently Mr. Hassett is Senior Vice President and Chief Operating Officer for the Maxim Business since August 2021 where he leads Analog Devices Inc.’s (“ADI”) strategic and operational focus to integrate Maxim Inc., a $2.5 billion business acquired by ADI in August 2021. Mr. Hassett brings extensive experience as a business leader having run ADI’s largest revenue-generating business, operational expertise leveraging his previous Global Operations & Technology leadership, in addition to his various engineering management roles with ADI. Previously, Mr. Hassett was Senior Vice President, Corporate Integration Management where he led significant efforts in M&A transactions and was responsible for developing strategies that drove the integration of multi-billion-dollar transactions from due diligence to fully integrated entities from December 2020 to July 2021. Previously, Mr. Hassett was Senior Vice President of Industrial and Consumer Group from November 2019 to December 2020 where he led growth initiatives which leverage its extensive franchise capability in measurement, sensing and testing and was Senior Vice President of Global Operations & Technology from May 2015 to November 2019, where he was instrumental in setting and executing our manufacturing strategy and creating a world-class, scalable supply chain to deliver outstanding quality for our customers. Mr. Hassett joined ADI in 1982 after graduating from the University of Limerick where he earned a Bachelor of Science degree in Manufacturing Engineering. Mr. Hassett also holds a Master of Business Administration from the University of Limerick. As a result of these professional experiences, Mr. Hassett possesses particular knowledge and experience in strategic and operational efforts related to merger and acquisition transactions and extensive experience as a global leader in revenue generation, operations, and engineering management that strengthens the Boards collective qualifications, skills and experience.
Ms. Hudson has served as one of our directors since June 2022. Presently, Ms. Hudson is the President and CEO of United Way Miami. Prior to the United Way Miami role, she served as CEO of Chapman Partnership. Ms. Hudson serves as an executive Board Member and on the Governance Committee for MTF Biologics, an Operating Advisor for Revival Healthcare Partners; and Ms. Hudson served as a Board Member for Baxter Foundation. From April 2016 to January 2018, Ms. Hudson was the President of Global Franchises and Innovation for ConvaTec, a $1.8 Billion international medical products and technologies company. From December 2013 to March 2016, Ms. Hudson served in various strategic leadership roles for Baxter, Inc., a $10.7 billion company that develops, manufactures, and markets products providing a broad portfolio of essential renal hospital products including home, acute and in-center dialysis; sterile IV solutions; and infusion systems and devices. Before joining Baxter, Ms. Hudson was the VP of Continuous Improvement & Transformation for Hospira, Inc (now Pfizer), a $4 billion world leader in specialty generic injectable pharmaceuticals, generic acute-care and oncology injectables, integrated infusion therapy devices and medication management solutions. From May 2005 to July 2013, Ms. Hudson served as General Manager of Medication Management Systems, VP of Global Marketing for On-Market Product Strategies Devices, VP of Marketing – US Region Medication Management Systems, and VP of Continuous Improvement and Transformation. Between August 1999 and February 2005, Ms. Hudson served in various leadership roles for Aon Corporation, an $8 billion risk management, retail, reinsurance & wholesale brokerage, claims management, specialty services and human capital consulting services company; and Household International, an $8 billion financial service provider of consumer loans, credit cards, auto finance and credit insurance products in the US, UK and Canada. Ms. Hudson holds a Master of Business Administration from Harvard Business School and a BS from Alabama A&M University. She was recognized as a Top 50 Business Leader of Color in 2015. As a result of these experiences, Ms. Hudson possesses the knowledge and leadership experience, particularly in the medical products and technologies industries that strengthens the Board’s collective qualifications, skills and experience.
Vote Required
Directors are elected by a plurality of the votes cast by stockholders entitled to vote at the Meeting. Votes withheld and broker non-votesnon‑votes will not have any effect on this proposal. Accordingly, the nominees receiving the highest number of “for” votes at the Meeting will be elected as directors. Proxies solicited by the Board will be voted “for” the nominees listed above unless a stockholder has indicated otherwise in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE NOMINEES LISTED ABOVE AS STANDING FOR ELECTION AT THE MEETING, TO SERVE UNTIL THE ANNUAL MEETING OF OUR STOCKHOLDERS IN 2022,2024, AS DESCRIBED ABOVE.
EXECUTIVE OFFICERS
The names of our current executive officers, who are not also members of our Board of Directors, and certain biographical information furnished by them, are set forth below:
Name | Age | Title | ||
Ronald J. Lataille | 61 | Senior Vice President, Treasurer, and Chief Financial Officer | ||
Mitchell C. Rock | 55 | President, | ||
Christopher P. Litterio | 60 | General Counsel, Secretary, and Senior Vice President of Human Resources | ||
Steven G. Cardin | 59 | Vice President, | ||
Jason Holt | 49 | Vice President and |
Mr. Lataille joined the Company in November 1997 as our Chief Financial Officer. Prior to joining us, Mr. Lataille served as Vice President, Treasurer and Chief Financial Officer of Little Switzerland, Inc., from 1991 through October 1997. He also served as interim President and Chief Executive Officer of Little Switzerland from October 1994 through October 1995. From 1984 to 1991, Mr. Lataille, a former certified public accountant, was employed by Coopers & Lybrand.
Mr. Rock initially joined the Company in 1991 and served as Director, Sales and Marketing of what was our Moulded Fibre division (now “Molded Fiber”).division. From May 1999 through October 2000, Mr. Rock served as Vice President, Sales and Business Development of Esprocket, an internet start-upstart up company. Mr. Rock rejoined us in April 2001 as Vice President, Sales and Marketing of what was our Moulded Fibre division and served as our Vice President of Sales and Marketing from May 2002 to June 2014. SinceFrom June 2014 to June 2021, Mr. Rock has served as our Senior Vice President of Sales and Marketing. Since January1,Marketing, and from January 1, 2020 to June 2021, Mr. Rock also servesserved as General Manager, Medical. Since June 2021, Mr. Rock has served as President, UFP MedTech. Since 2016, Mr. Rock has also served on the board of directors of Outlook Amusements, Inc., an entertainment company specializing in advice-based products and services.
Mr. Litterio joined the Company in November 2017 as our first General Counsel and Senior Vice President of Human Resources. From 1989 until 2017, Mr. Litterio was engaged in the private practice of law at Ruberto, Israel & Weiner, PC, a Boston-based law firm, where he focused on complex business litigation and employment law. From 2005 until 2017, he served as the firm’s managing partner, and from 2000 until 2005, he was the chair of the firm’s litigation department.
Mr. ShawCardin joined the Company in 19832019 as Chief Operating Officer of the MedTech business. In June of 2021, the Board of Directors promoted him to Vice President. Prior to joining the Company, Mr. Cardin spent 27 years in a variety of leadership positions in the medical device industry for OEMs and contract manufacturers. From 2017 until 2019, Mr. Cardin served as President of Viant Medical, a Tier 1 contract manufacturer of medical components and devices. Before entering the medical manufacturing field, Mr. Cardin, a graduate of the United States Military Academy, served as a Corporate Industrial Engineer through September 1992.Captain in the United States Army.
Mr. Holt joined the Company in 2018 as General Manager and in June of 2021 was appointed Vice President by the Board of Directors. Mr. Holt is responsible for the Advanced Components portion of the Company’s business, and, since January 2023, is also Chief Commercial Officer, MedTech. From October 1992 through September 19962004-2018, Mr. Shaw served asHolt held a number of leadership positions at a Fortune 200 company, Illinois Tool Works, where he ultimately became Vice President and General Manager of Product Development and from October 1996 through May 2000 as Director of Product Development. From June 2000 through May 2002 Mr. Shaw served as a Divisional Vice President of the Specialty Components Division and from May 2002 through June 2014 Mr. Shaw served as our corporate Vice President, Engineering. Since June 2014, Mr. Shaw has served as Vice President of Research and Development.$100+ million business unit.
Executive officers are chosen by and serve at the discretion of our Board of Directors.
CORPORATE GOVERNANCE
Corporate Governance Framework
Our Board of Directors has adopted a set of corporate governance guidelines and, as described in further detail below, a Code of Ethics that applies to all directors, officers and employees. The guidelines and Code of Ethics, together with the charters of the standing committees of our Board of Directors, our certificate of incorporation, and bylaws, are the framework of our corporate governance. Our governance materials are available on our website, www.ufpt.com/investors/governance.html.
Meetings of the Board of Directors
Our Board of Directors held four meetings during 2020.2022. Each director attended at least 75% of the aggregate of all meetings of the Board of Directors and each committee each such director served on during 2020.2022. All our directors are encouraged to attend our Annual Meeting of Stockholders. All our directors were in attendance at our 20202022 Annual Meeting.
Independence, Diversity, Leadership Structure and Board Committees
Independence
Our Common Stock is listed on the NASDAQ Stock Market LLC, or Nasdaq, and Nasdaq’s listing standards relating to director independence apply to us. The Board of Directors has determined that the following current directors are independent under applicable Nasdaq listing standards: Messrs. Croteau, Kozin, Hassett and Oberdorf, and Pierce, as well as Mses. QuinnFeldmann and Feldmann.Hudson. In making its independence determination with respect to Mr. Croteau, the Board of Directors determined that Mr. Croteau’s position through January 2023 as Chief Executive Officer of one of our customers, Corza Medical (formerly Surgical Specialties Corporation), also did not impair his independence.
Diversity
We strive to have the members of our Board of Directors possess a diverse set of skills and background so as to best provide guidance to the management team and oversight to the Company. While the Nominating Committee does not have a formal policy in this regard, the Nominating Committee views diversity broadly to include a diversity of experience, skills and viewpoint, as well as diversity of gender and race. The Nominating Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. Skills sought include financial, capital markets, manufacturing, engineering, executive leadership, sales and marketing, organizational growth, human resources and strategic planning. We believe our Board of Directors has a minimum of one director for each of these skills.
Under Nasdaq’s Board diversity rule, approved by the SEC in August 2021, companies listed on Nasdaq’s U.S. exchange are required, subject to a phase-in period and certain exceptions, to (a) publicly disclose board-level diversity statistics using a standardized matrix and (b) have, or explain why they do not have, at least two directors who are diverse, including at least one diverse director who self-identifies as female and at least one diverse director who self-identifies as an underrepresented minority or LGBTQ+. The new rule is aimed at encouraging a minimum board diversity objective for companies and provide stockholders with consistent, comparable disclosures concerning a company’s current board composition.
Under the phase-in transition rules, the Company is required have, or provide an explanation why it does not have, (x) at least one diverse director by August 6, 2023, and (y) at least two diverse directors by August 6, 2026. The table below highlights certain information regarding the current composition of our Board of Directors, as well as our Board of Directors if our current director nominees are elected, as self-identified by the director or director nominee.
Current and Proposed Board Diversity Matrix
Board Size | ||||
Total Number of Directors | 7 | |||
Male | Female | Non-Binary | Did not Disclose Gender | |
Gender Identity | ||||
Directors | 5 | 2 | ||
Number of Directors who Identify in Any of the Categories Below | ||||
African American or Black | 1 | |||
Alaskan Native or Native American | ||||
Asian | ||||
Hispanic or Latinx | ||||
Native Hawaiian or Pacific Islander | ||||
White | 5 | 1 | ||
Two or More Races or Ethnicities | ||||
LGBTQ+ | ||||
Did not Disclose Demographic Background | ||||
Leadership Structure
As noted above, our Board of Directors is currently comprised of seven directors, six of whom are independent under applicable standards.
Mr. Bailly has served as Chief Executive Officer and member of the Board since January 1, 1995. He has served as Chairman of the Board since 2006.
We recognize that different board leadership structures may be appropriate for companies in different situations and believe that no one structure is suitable for all companies. We believe our current board leadership structure is optimal for us because it demonstrates to our employees, suppliers, customers, and other stakeholders that we are under strong leadership, with a single person setting the tone and having primary responsibility for managing our operations. A single leader for both the Company and the Board of Directors eliminates the potential for confusion or duplication of efforts and provides us with clear leadership.
Because the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the Board also believes it is appropriate for the independent directors to elect one independent director to serve as a Lead Independent Director. In addition to presiding at executive sessions of independent directors, the Lead Independent Director has the responsibility to: (1) coordinate with the Chairman of the Board and Chief Executive Officer in establishing the agenda and topic items for Board meetings; (2) retain independent advisors on behalf of the Board as the Board may determine is necessary or appropriate; and (3) perform such other functions as the independent directors may designate from time to time. Mr. KozinCroteau currently serves as the Lead Independent Director, a position he has held since January 2015.July 2021.
Our overall leadership structure consists of a single individual serving as Chief Executive Officer and Chairman of the Board, with independent and experienced directors making up the majority of our Board and independent oversight provided by our Lead Independent Director. We believe that this structure is beneficial to us and our stockholders.
Risk Oversight
Our Board of Directors is responsible for providing guidance and overseeing our strategic objectives and corresponding risk management process. The Board focuses on our general risk management strategy, the most significant risks facing us, and ensures that appropriate risk mitigation strategies are implemented by management. The Board is also apprised of particular risk management matters in connection with its general oversight and approval of corporate matters.
The Board of Directors has delegated to the Audit Committee oversight of certain aspects of our risk management process. Among its duties, the Audit Committee reviews with management (a) our policies with respect to risk assessment and risk management as well as our significant areas of financial risk exposure and (b) steps management has taken to monitor and control such exposure, including our system of disclosure controls and procedures and system of internal controls over financial reporting. Our Audit Committee reviews our environmental, social and governance initiatives, as well as the Company’s information security procedures. Our Compensation Committee also considers and addresses risk as it performs its committee responsibilities. Both committees report to the full Board as appropriate, including when a matter rises to the level of a material or enterprise level risk.
Our management is responsible for day-to-dayday‑to‑day risk management. Our Treasury, Finance, and Internal Audit functions serve as the primary monitoring and testing function for company-widecompany‑wide policies and procedures and manage the day-to-dayday‑to‑day oversight of the risk management strategy for the ongoing business. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, operational, and compliance and reporting levels.
We believe the division of risk management responsibilities described above is an effective approach for addressing the risks we face, and our Board leadership structure supports this approach.
Code of Ethics
Pursuant to Section 406 of the Sarbanes-OxleySarbanes‑Oxley Act of 2002, we have adopted a Code of Ethics for Senior Financial Officers that applies to our principal executive officer, principal financial officer, principal accounting officer, controller, and other persons performing similar functions. We also have in place a Code of Business Conduct and Ethics that is applicable to all of our directors, officers and employees. We require all of our directors, officers and employees to adhere to this code in addressing legal and ethical issues that they encounter in the course of doing their work. This code requires our directors, officers, and employees to avoid conflicts of interest, comply with all laws and regulations, conduct business in an honest and ethical manner and otherwise act with integrity. The Code of Ethics for Senior Financial Officers, as amended, is available at our website, www.ufpt.com/investors/governance.html as an attachment to our Code of Business Conduct and Ethics. We intend to satisfy the disclosure requirement under Item 5.05 of Current Report on Form 8-K8‑K regarding an amendment to, or waiver from, a provision of this code by posting such information on our website, at the address specified above.
Environmental, Social & Governance (ESG)
The Company’s Board of Directors unanimously agreed to the establishment of a cross-functional team led by senior executives of the Company to set the sustainability agenda and prioritize Environmental, Social, & Governance (ESG) goals and efforts to where the Company can make the most impact in our communities. The Board further designated oversight responsibility for the Company’s ESG initiatives to the Audit Committee. The Company has an established ESG Committee in response to this directive, and it is working to develop and prioritize the ESG goals and initiatives and incorporate them into the Company’s overall strategy. The Committee is comprised of executives of the Company and a supporting cross-functional team that has worked with external consultants to develop an appropriate ESG framework that identifies appropriate areas of focus and includes metrics that will allow the Company to measure its progress against the ESG goals into the future. Highlights of the Company’s ESG programs, policies and initiatives can be reviewed on the website, https://www.ufpt.com/about/sustainability-esg.html.
Nominating Committee
The Board of Directors has a Nominating Committee, which met on one occasion in 2020,2022, and is currently composed of Messrs. Croteau, Hassett, Kozin and Oberdorf, Croteau and Pierce, as well as Mses. QuinnFeldmann and Feldmann,Hudson, each of whom is an independent director under applicable Nasdaq standards. Mr. KozinCroteau serves as Chair. Director nominees are selected by the Nominating Committee. The Nominating Committee operates pursuant to a written charter (the “Nominating Committee Charter”) that was adopted by the Board of Directors and that complies with applicable Nasdaq listing standards. The Nominating Committee Charter is available at our website, www.ufpt.com/investors/governance.html.governance.html. The Nominating Committee may consider candidates recommended by stockholders as well as from other sources such as other directors or officers, third party search firms or other appropriate sources. For all potential candidates, the Nominating Committee may consider all factors it deems relevant, such as a candidate’s independence, character, ability to exercise sound judgment, diversity, age, demonstrated leadership, skills, including financial literacy and experience in the context of the needs of the Board, and concern for the long-termlong‑term interests of the stockholders. The Nominating Committee does not assign any particular weight or importance to any one of these factors but rather considers them as a whole. In general, persons recommended by stockholders will be considered on the same basis as candidates from other sources. If a stockholder wishes to recommend a candidate for election as a director at the 20212024 Annual Meeting of Stockholders, it must follow the procedures described in “Stockholder Proposals and Nominations for Director” below.
Compensation Committee
The Board of Directors has a Compensation Committee, which met on tenfive occasions in 2020,2022, and is currently composed of Messrs. Kozin, and Croteau and Ms. Quinn,Hassett, each of whom is an independent director under applicable Nasdaq standards. Ms. QuinnMr. Kozin serves as the Chair. The Compensation Committee operates pursuant to a written charter (the “Compensation Committee Charter”) that was adopted by the Board of Directors and that complies with applicable Nasdaq listing standards. The Compensation Committee Charter is available at our website, www.ufpt.com/investors/governance.html.governance.html. Under the provisions of the Compensation Committee Charter, the primary functions of the Compensation Committee include determining salaries and bonuses for our executive officers, individuals to whom stock options, and other equity-basedequity‑based awards are granted, and the terms upon which such grants and awards are made, adopting incentive plans, overseeing risks associated with our compensation policies and practices, evaluating the performance of our executive officers, reviewing with management compensation disclosures to be included in our filings with the Securities and Exchange Commission (“SEC”), and determining director compensation, benefits and overall compensation. The Compensation Committee or the Board of Directors may delegate limited authority to the Chief Executive Officer of the Company or one or more other officers of the Company (each, a “Designated Officer”) to assist the Compensation Committee administer and operate the 2003 Incentive Plan (as amended and restated) and to grant equity-based awards to persons other than a Designated Officer or any person who is an officer (as defined in Rule 16a-1(f)) of the Exchange Act). The Compensation Committee has the sole discretion and express authority to retain and terminate any compensation consultant, including sole authority to approve the consultant’s fees and other retention terms.
For a further description of our determination of executive and director compensation, see “Executive Compensation” below.
Audit Committee
The Board of Directors has an Audit Committee, which met on eightseven occasions in 2020,2022, and is currently composed of Ms.Mses. Feldmann and Messrs. PierceHudson and Mr. Oberdorf, each of whom meets the enhanced independence standards for audit committee members set forth in applicable SEC rules and Nasdaq listing standards. Ms. Feldmann serves as Chair. The Board of Directors had determined that each of Ms. Feldmann and Mr. Oberdorf qualifies as an “audit committee financial expert”, as defined by applicable SEC rules. The Audit Committee operates pursuant to a written charter (the “Audit Committee Charter”) that was adopted by the Board of Directors and that complies with currently applicable SEC rules and Nasdaq listing standards. The Audit Committee Charter is available at our website, www.ufpt.com/investors/governance.html.governance.html. Under the provisions of the Audit Committee Charter, the primary functions of the Audit Committee are to assist the Board of Directors with oversight of (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, and (iii) the qualifications, independence, appointment, retention, compensation and performance of our registered public accounting firm.firm and (iv) the review and assessment of our system of internal controls and procedures. The Audit Committee is also responsible for theoverseeing management’s maintenance of “whistle-blowing”“whistle‑blowing” procedures, the review and approval of all related-party transactions and the oversight of certain other compliance matters. See “Report of the Audit Committee” below.
Report of the Audit Committee
The Audit Committee of the Board of Directors is comprised of three independent directors, each of whom meet the enhanced independence standards for audit committee members set forth in applicable SEC rules and Nasdaq listing standards. Ms. Feldmann and Mr. Oberdorf served on the Audit Committee from the beginning of the fiscal year 2022 through the date of this Proxy Statement, with Ms. Feldmann serving as Chair. Mr. Pierce served on the Audit Committee from January 1, 2022 through June 7, 2022. Ms. Hudson served on the Audit Committee from June 8, 2022 through the date of this Proxy Statement. The Board of Directors had determined that each of Ms. Feldmann and Mr. Oberdorf qualifies as an “audit committee financial expert”, as defined by applicable SEC rules.
The Audit Committee has:
• Reviewed and discussed with management our audited financial statements as of and for the year ended December 31, 2020;
• Discussed with Grant Thornton, our independent registered public accounting firm, the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC;
• Received and reviewed the written disclosures and the letter from Grant Thornton required by applicable requirements of the PCAOB regarding Grant Thornton’s communications with the Audit Committee concerning independence, and discussed with Grant Thornton Grant Thornton’s independence; and
Based on the review and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the audited financial statements referred to above be included in our Annual Report on Form 10-K10‑K for the year ended December 31, 20202022 for filing with the SEC.
By the Audit Committee of the Board of Directors: | |
Cynthia L. Feldmann, Chair Thomas Oberdorf Symeria Hudson |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 12, 2021,10, 2023, with respect to the beneficial ownership of our Common Stock by each director, each nominee for director, each named executive officer in the Summary Compensation Table under “Executive Compensation” below, all executive officers and directors as a group, and each person known by us to be the beneficial owner of 5% or more of our Common Stock. This information is based upon information received from or on behalf of the named individuals. Unless otherwise indicated, (i) each person identified possesses sole voting and investment power with respect to the shares listed and (ii) the address for each person named below is: c/o UFP Technologies, Inc., 100 Hale Street, Newburyport, Massachusetts 01950.
Name | Shares of Common Stock | Percentage of | ||
| R. Jeffrey Bailly | 426,675 | 5.67% | ||
| Daniel Croteau(2) (3) | 17,296 | * | ||
| Mitchell C. Rock | 8,727 | * | ||
| Ronald J. Lataille | 68,061 | * | ||
| Daniel J. Shaw | 8,242 | * | ||
| Thomas Oberdorf(2)(3) | 71,028 | * | ||
| Marc Kozin(2)(3) | 32,638 | * | ||
| Cynthia L. Feldmann(2)(3) | 11,929 | * | ||
| Robert W. Pierce, Jr.(2)(3) | 81,026 | 1.07% | ||
| Lucia Luce Quinn(2)(3) | 22,944 | * | ||
| Christopher P. Litterio(2) | 11,624 | * | ||
| All executive officers and directors as a group (11 persons)(2)(3)(4) | 760,190 | 9.98% | ||
Renaissance Technologies LLC(5) 800 Third Avenue New York, NY 10022 | 518,875 | 6.90% | ||
Blackrock, Inc (6) 55 East 52nd Street New York, NY 10055 | 452,806 | 6.02% | ||
Thrivent Financial For Lutherans(7) 901 Marquette Avenue, Suite 2500 Minneapolis, Minnesota 55402 | 636,824 | 8.46% | ||
Name | Shares of Common Stock | Percentage of |
R. Jeffrey Bailly | 366,897 | 4.82% |
Daniel Croteau(2)(3) | 24,735 | * |
Mitchell C. Rock | 16,902 | * |
Ronald J. Lataille | 65,501 | * |
Thomas Oberdorf(2)(3) | 50,287 | * |
Marc Kozin(2)(3) | 36,327 | * |
Cynthia L. Feldmann(2)(3) | 16,618 | * |
Symeria Hudson(2)(3) | 2,293 | * |
Joseph John Hassett(2)(3) | 2,293 | * |
Christopher P. Litterio | 11,111 | * |
Steven G. Cardin | 2,443 | * |
All executive officers and directors as a group (12 persons)(2)(3)(5) | 599,066 | 7.80% |
Neuberger Berman Group LLC(4) | 706,377 | 9.28% |
1920 Avenues of the Americas New York, NY 10104 | ||
Blackrock, Inc (5) | 459,978 | 6.04% |
| 55 East 52nd Street New York, NY 10055 | ||
Renaissance Technologies LLC(6) | 379,873 | 4.99% |
| 800 Third Avenue New York, NY 10022 |
* Less than one percent
(1) Based upon 7,612,970 shares of Common Stock outstanding as of April 10, 2023.
(2) Includes shares issuable pursuant to stock options currently exercisable or exercisable within 60 days after April 10, 2023, as follows: 16,632 for Daniel Croteau, 21,550 for Thomas Oberdorf, 8,670 for Marc Kozin, 12,450 for Cynthia L. Feldmann, 1,646 for Symeria Hudson and 1,646 for Joseph John Hassett.
(3) Includes 647 shares issuable to each non-employee director within 60 days of April 10, 2023 pursuant to the vesting of stock unit awards.
(4) Shares of Common Stock beneficially owned and the information in this footnote are based solely upon information contained in a Schedule 13G filed with the SEC by Neuberger Berman Group, LLC on February 10, 2023. As of December 31, 2022, Neuberger Berman Group LLC had sole voting power over 0 shares, shared voting power over 698,858 shares, sole dispositive power over 0 shares, and shared dispositive power over 706,377 shares.
(5) Shares of Common Stock beneficially owned and the information in this footnote are based solely upon information contained in a Schedule 13G filed with the SEC by Blackrock, Inc. on February 1, 2023. As of December 31, 2022, Blackrock, Inc. had sole voting power over 450,667 shares, and sole dispositive power over 459,978 shares.
(6) Shares of Common Stock beneficially owned and the information in this footnote are based solely upon information contained in a Schedule 13G/A filed with the SEC by Renaissance Technologies LLC on February 13, 2023. As of December 31, 2022, Renaissance Technologies LLC had sole voting power over 344,773 shares, and sole dispositive power over 379,873 shares.
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
Introduction and Scope
This Compensation Discussion and Analysis (“CD&A”) is intended to provide a context for the disclosures contained in this Proxy Statement with respect to our “named executive officers.” Our named executive officers are determined in accordance with SEC rules. Under such rules, our named executive officers for fiscal 20202022 were Messrs. R. Jeffrey Bailly, Ronald J. Lataille, Mitchell C. Rock, William David Smith, Christopher P. Litterio and Daniel J. Shaw, Jr.Steven G. Cardin. The 20202022 compensation of our named executive officers is detailed in the tables that follow this section.
Our compensation programs are determined by the Compensation Committee of the Board of Directors, which has the ongoing responsibility for establishing, implementing, and monitoring our executive compensation programs. The Compensation Committee operates in accordance with the Compensation Committee Charter that was adopted by the Board of Directors and that complies with applicable Nasdaq listing standards. The Compensation Committee Charter is available at our website, www.ufpt.com/investors/governance.html.governance.html.
Executive Summary
We are an innovativea designer and custom manufacturer of components, subassemblies, productscomprehensive solutions for medical devices, sterile packaging, and packaging utilizingother highly specialized foams, films, and plastics primarily for the medical market. We manufacture our products by converting raw materials using laminating, molding, radio frequency and impulse welding and fabricating manufacturing techniques.engineered custom products. We are an important link in the medical device supply chain and a valued outsource partner to many of the top medical device manufacturers in the world. Our single-use and single-patient devices and components are used in a wide range of medical devices disposable wound care products, infection prevention,and packaging for minimally invasive surgery, infection prevention, wound care, wearables, orthopedic soft goods, and orthopedic implant packaging.implants.
We are diversified by also providing highly engineered products and components to customers in the automotive, aerospace and defense, consumer, electronics and industrial markets. Typical applications of its products include military uniform and gear components, automotive interior trim, athletic padding, environmentally friendly protective packaging, air filtration, abrasive nail files, and protective cases and inserts.
Our industry is fragmented across numerous competing entities. Our ability to compete effectively depends to a large extent on our ability to identify, recruit, develop and retain key management personnel. We believe this requires a competitive compensation structure as compared to other companies of a similar size in the same or similar industries.
The compensation programs for our named executive officers are designed to align compensation objectives with our business strategies and to encourage our executives to focus on creating stockholder value. While it is critical that our compensation programs allow for the recruitment and retention of highly qualified executives, it is also important that these programs are variable in nature such that performance is a key factor in realizing value. Accordingly, our programs combine competitive base salaries with annual cash incentives and long-termlong‑term equity incentives. Specifically, we structure our named executive officer compensation to include:
• Competitive base salary;
• Stock grant (Chief Executive Officer only);
• Performance‑based cash incentive bonus;
• Long‑term incentives in the form of time-basedtime‑based and time- and performance-based restricted stock awards; and
• Other common perquisites.
The compensation programs for the named executive officers provide equity incentives for a fixed dollar value within equity grants that are used to determine the number of shares being variable.time-based and time- and performance-based restricted stock awards granted to each executive officer at the current market price on the date of grant. The intent of this approach is to limit the amount of compensation variability resulting solely from fluctuations in our stock price while still providing variability in paycompensation based upon the achievement of financial and individual objectives.
Stock Performance Graph
The following graph compares cumulative total stockholder return on our Common Stock since December 31, 2015 with the cumulative total return of the (1) NASDAQ Stock Market (US Companies), (2) SIC Code 3841 Surgical and Medical Instruments and Apparatus, (3) GICS 15103020 Paper Packaging and (4) our peer group, as determined by Radford, a national compensation consulting company engaged by our Compensation Committee in 2018 to perform a comprehensive comparative market study of the compensation programs offered to peer company executives and directors, as described in “Use of Compensation Consultants” below. This graph assumes the investment of $100 on December 31, 2015 in our Common Stock, and for comparison the companies that comprise each of (1) the NASDAQ Stock Market, (2) SIC Code 3841 Surgical and Medical Instruments and Apparatus, (3) GICS 15103020 Paper Packaging and (4) our peer group, as described above, and that all dividends were reinvested. Measurement points are the last trading day of each respective fiscal year.
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
December 2020
Governance Developments
The Compensation Committee and/or the Board of Directors has taken the following steps to promote good corporate governance:
• Expiration of Rights Plan
—Through March 2019, we had a stockholder rights plan designed to protect and enhance the value of our outstanding equity interests in the event of an unsolicited attempt to acquire us in a manner or on terms not approved by our Board of Directors and that would prevent stockholders from realizing the full value of their shares of our common stock. However, the rights may have had the effect of rendering more difficult or discouraging an acquisition; the rights may have caused substantial dilution to a person or group that attempted to acquire us on terms or in a manner not approved by our Board of Directors. On March 13, 2019, our Board of Directors voted not to replace the rights when they expired on March 19, 2019.• Declassification of our Board of Directors
—In 2020, our Board of Directors and our stockholders approved an amendment to our Certificate of Incorporation to eliminate the classified structure of the Board of Directors and provide for the annual election of directors.• No Tax Gross-upsGross‑ups—We do not provide tax gross-upsgross‑ups to our named executive officers.
Anti-Hedging• Anti‑Hedging Policy—We established a policy prohibiting insider trading practices including the hedging of our stock by our employees, including our executive officers, and directors.
• Anti-Pledging and Margin Account Policy—We established a policy prohibiting employees from holding our securities in a margin account or pledging our securities as collateral for a loan.
• No Repricing of Stock Options—Our equity incentive plans prohibit the repricing of stock options or other equity awards without the consent of our stockholders.
• Buyouts of Underwater Options—Our equity incentive plans prohibit us from buying out underwater stock options from our executive officers.
• Stock Ownership Guidelines—We have adopted stock ownership guidelines for the named executive officers and independent directors that are described in more detail below.
• Clawback Policy—We have adopted a clawback policy that is described in more detail below.
• Independent Compensation Committee—Our Compensation Committee is comprised exclusively of independent directors.
• Independent Consultants—The independent consultants who provided benchmarking data with respect to the named executive officers do not provide services to us other than at the direction of the Compensation Committee.
Philosophy and Objectives of our Compensation Programs
The primary objectives of our compensation programs are to:
• Retain executive talent by offering compensation that is commensurate with pay at other companies of a similar size in similar industries, as adjusted for individual factors, and considering the complexity of our business;
• Safeguard our interests and those of our stockholders;
• Drive executive performance by having certain components of pay at risk and/or tied to our entity-wide and individual goal performance;
• Be fair to employees, management and stockholders; and
• Be well communicated and understood by program participants and stockholders.
The Compensation Committee believes that the most effective compensation program is one that provides a reasonable level of fixed income through competitive base salaries, equity grants and retirement benefits as well as additional rewards for achieving performance targets. The Compensation Committee also believes that these rewards should be in the form of both cash and non-cashnon‑cash and have some component subject to time-basedtime‑based vesting as a retention measure. Incentive cash bonuses are included to drive executive performance by having pay at risk so that a significant portion of potential annual cash compensation is tied to profitability targets. We also include time-based and time- and performance-basedperformance‑based restricted stock awards as a significant element of prospective executive compensation, so that the value of a portion of an executive’s compensation is dependent upon both continued, long-term employment and company-widecompany‑wide performance measures.
Our Decision-MakingDecision‑Making Process
The Role of the Compensation Committee—The Compensation Committee oversees the compensation and benefit programs for the named executive officers. The Compensation Committee is comprised solely of independent directors of the Board. The Compensation Committee works closely with management to examine the effectiveness of our executive compensation program. Details of the Compensation Committee’s authority and responsibilities are specified in the Compensation Committee Charter, which is available at our website,www.ufpt.com/investors/governance.html.governance.html.
The Role of Management—The Chief Executive Officer also makes recommendations to the Compensation Committee about the compensation of our other named executive officers. The Compensation Committee considers the Chief Executive Officer’s recommendations before making a final determination of the compensation programs for the named executive officers. The Chief Executive Officer and the other named executive officers may not be present during voting or deliberations on his or her compensation.
Use of Compensation Consultants—In 2018,2022, the Compensation Committee engaged Radford,Aon, a national compensation consulting firm, (“Radford”), to perform an updated comprehensive comparative market study of the compensation programs offered to peer company executives and directors.directors, and to provide recommendations on the Company’s executive compensation. The Compensation Committee used this information to evaluate and adjust executive and director compensation for fiscal 20202022 and plans to use this information thereafter, as well. The competitive assessment done by RadfordAon included a survey of the following 1514 companies:
• Accuray, Inc. • • • Atrion Corp • Avanos Medical, Inc. | • CryoLife, Inc. (now Artivion) • Cutera, Inc. • DMC Global, Inc. | •
• Lantheus Holdings,
| • Meridian Bioscience, Inc. • OraSure Technologies, Inc. • • SeaSpine Holdings Corporation
|
Principal Elements of the 20202022 Compensation Program
There were five principal elements of compensation for the named executive officers during fiscal 2020:2022:
• Base salary;
• Stock grant (Chief Executive Officer only);
• Performance‑based cash incentive bonus;
• Long‑term incentives in the form of time-basedtime‑based and time- and performance-based restricted stock awards; and
• Other common perquisites.
Base Salary—The base salaries established by the Compensation Committee for our named executive officers for fiscal 20202022 are set forth below.
|
| |
* Mr. Smith’s employment with us terminated during September 2020 and he was no longer one of our executive officers as of December 31, 2020. Mr. Smith is included in the proxy statement in accordance with Item 402(a)(3)(iv) of Regulation S-K. Mr. Smith has been omitted from the discussion of bonus payouts; long term incentives for 2020; estimated possible payouts of long-term incentive awards and outstanding equity awards at December 31, 2020 year end because he was ineligible for a 2020 bonus, his 2020 stock unit grants terminated without vesting and he held no outstanding equity awards at December 31, 2020.
Named Executive Officer | Annual Base | |||
R. Jeffrey Bailly | $ | 650,000 | ||
Ronald J. Lataille | $ | 420,000 | ||
Mitchell C. Rock | $ | 420,000 | ||
Christopher P. Litterio | $ | 338,000 | ||
Steven G. Cardin | $ | 310,000 | ||
Base salaries were reviewed by the Compensation Committee in light of the market competitive assessment done by RadfordAon in 20182022 and our philosophy of positioning executive compensation at or about the 50% percentile as compared to our peer group companies. Base salaries are reviewed by the Compensation Committee annually and, if appropriate, are adjusted. As detailed below under footnote 1 to the “Summary Compensation Table,” on February 22, 2021,14, 2023, the Compensation Committee approved increases to each of the above base salaries effective January 1, 2021.2023.
Stock Grant— In accordance with the terms of his employment agreement, we annually grant to Mr. Bailly, our Chief Executive Officer, an award of Common Stock as a component of his overall compensation. The objective of this equity component is to greater align the Chief Executive Officer’s interests with those of our stockholders. The stock is typically issued to the Chief Executive Officer in the last two weeks of the fiscal year, assuming we continue to employ the Chief Executive Officer on that date. In 2020,2022, consistent with the terms of his employment agreement, the Chief Executive Officer was granted shares valued at $400,000. See “Employment Contract” below.
Cash Incentive Bonus—In the beginning of each fiscal year,2022, following approval by the Board of Directors of our strategic plan and budget, the Compensation Committee establishes,established, at its discretion, performance targets for the named executive officers’ cash incentive bonus. This performance-basedperformance‑based cash bonus iswas based on the achievement of a combination of financial and individual objectives. Targeted payout levels were expressed as a percentage of base salary and established for each participant. An individual’s bonus components were determined by such individual’s title and/or role. Typically, the financial performance portion of the bonus fluctuates down and up based upon a degree by which our actual results fall short of or exceed the financial objective.
For 2020,2022, the financial objectives, which were established by the Compensation Committee at its meeting on February 24, 2020,15, 2022, were based upon targeted Adjusted Operating Income of $26,100,000.$32,821,000. Adjusted Operating Income is operating income as adjusted to disregard (i) non-recurringnon‑recurring restructuring charges related to plant closings and consolidations and (ii) the impact of acquired or disposed of operations during the fiscal year ended December 31, 2020.2022. Actual Adjusted Operating Income was $16,731,467$45,863,786 for 2020.fiscal year ended December 31, 2022.
Individual bonus objectives for the named executive officers, other than Mr. Bailly, were designed to reward the achievement of goals related to, among other things, the following: regulatory compliance, achievement of sales targets from both new and base business,MedTech financial goals, acquisition execution, improved employee engagement, research and development plans, safety and quality systems and compliance, return on invested capital, successful start-up in Mexico and investor relations. Individual bonus objectives for Mr. Bailly were designed to reward the achievement of goals related to acquisitions, reduced manufacturing costs, safety and quality compliance and return on invested capital.
Given the unprecedented and unforeseeable impact of the COVID-19 pandemic on the general economy, and on our operations and financial performance during the final three quarters of calendar year 2020, the Compensation Committee felt that it was necessary to use its discretion to consider a number of factors in establishing calendar year 2020 cash incentive bonus amounts, including the formulaic assessment of performance against the Adjusted Operating Income targets established during February 2020, the performance against our revised performance expectations as the COVID-19 pandemic continued through calendar year 2020, and a qualitative assessment of our and our management performance during the unprecedented challenges we faced during calendar year 2020. In order to provide linkage between cash incentive bonuses and the quality of our management’s performance throughout calendar year 2020, the Compensation Committee weighted individual performance for each of the named executive officer’s more heavily than performance against the formulaic Adjusted Operating Income targets. The Compensation Committee believes this analysis reflects management's strong performance in calendar year 2020 while taking into account the financial and operating impact of the COVID-19 pandemic on our shareholders and other stakeholders.
For 2020,2022, the following cash incentive bonuses were awarded by the Compensation Committee based upon our financial performance as well as the targeted payout levels and individual performance measures for each named executive officer:
R. Jeffrey Bailly—Mr. Bailly’s targeted payout level was 82%90% of base salary, or $490,000,$585,000, with $285,000$339,300 tied to our financial performance and $205,000$245,700 tied to individual goals. The financial component of the incentive bonus for Mr. Bailly fluctuates by 10% of the amount by which the actual Adjusted Operating Income exceeds the targeted Adjusted Operating Income, with a maximum financial component bonus of $700,000. To the extent that actual Adjusted Operating Income is less than 80% of targeted Adjusted Operating Income, the financial component of Mr. Bailly’s incentive bonus is zero. To the extent that actual Adjusted Operating Income equals or exceeds 80% of targeted Adjusted Operating Income but is less than targeted Adjusted Operating Income, the financial component of Mr. Bailly’s incentive bonus is determined as $142,500$169,650 (half of the targeted bonus) plus 2.73%2.58% of the amount by which actual Adjusted Operating Income exceeds 80% of targeted Adjusted Operating Income. Based upon our financial performance as well as an assessment of his performance for fiscal 2020,2022, Mr. Bailly was awarded a total performance-based bonus amount of $299,500.$944,800. In addition, based upon the Company’s extraordinary performance in 2022, Mr. Bailly was awarded a discretionary bonus of $300,000, as well as Stock Options with a value of $300,000.
Ronald J. Lataille—Mr. Lataille’s targeted payout level was 40%45% of base salary, or $144,000.$189,000. Based upon our financial performance as well as an assessment of his performance for fiscal 2020,2022, Mr. Lataille was awarded a total bonus amount of $85,500.$381,542.
Mitchell C. Rock—Mr. Rock’s targeted payout level was 40%45% of base salary, or $138,000.$189,000. Based upon our financial performance as well as an assessment of his performance for fiscal 2020,2022, Mr. Rock was awarded a total bonus amount of $81,300.$384,042.
Christopher P. Litterio—Mr. Litterio’s targeted payout level was 40% of base salary, or $114,000.$135,200. Based upon our financial performance as well as an assessment of his performance for fiscal 2020,2022, Mr. Litterio was awarded a total bonus amount of $66,500.$247,321.
Daniel J. Shaw, Jr.Steven G. Cardin—Mr. Shaw’sCardin’s targeted payout level was 40%35% of base salary, or $92,000.$108,500. Based upon our financial performance as well as an assessment of his performance for fiscal 2020,2022, Mr. ShawCardin was awarded a total bonus amount of $31,650.$173,064, of which $108,500 was paid in cash and $64,564 was paid in the Company’s common stock.
Long-termLong‑term Incentives—it is our philosophy and that of the Compensation Committee to provide executives with long-termlong‑term incentives and, thus, align their financial interests with those of our stockholders. We maintain a stock unit award program for the named executive officers under the 2003 Incentive Plan, as amended and restated (the “2003 Incentive Plan”). On March 14, 2023, the Compensation Committee of the Company’s approved certain amendments to the 2003 Incentive Plan. The amendments, among other things, increased the aggregate maximum of Cash Performance Awards (as defined in the 2003 Incentive Plan) from $1,000,000 to $2,000,000 that may be paid to any individual pursuant to the 2003 Incentive Plan. The stock unit awards represent a right to receive shares of our Common Stock in varying amounts based on our achievement of certain financial performance objectives and time-basedtime‑based vesting requirements. For 2020,2022, the following stock unit awards were approved by our Compensation Committee for grant to our named executive officers:
Threshold(1)(2) | Target Adjusted | Exceptional Adjusted | |||||||||
Number of | Grant Date | Number of | Grant Date | Number of | Grant Date | ||||||
| R. Jeffrey Bailly | 4,685 | $233,370 | 4,684 | $233,315 | 4,684 | $233,315 | |||||
| Ronald J. Lataille | 2,761 | $137,500 | 1,380 | $68,750 | 1,380 | $68,750 | |||||
| Mitchell C. Rock | 2,761 | $137,500 | 1,380 | $68,750 | 1,380 | $68,750 | |||||
| Christopher P. Litterio | 1,505 | $75,000 | 753 | $37,500 | 753 | $37,500 | |||||
| Daniel J. Shaw, Jr. | 753 | $37,500 | 376 | $18,750 | 376 | $18,750 | |||||
Threshold(1)(2) | Target Adjusted | Exceptional Adjusted | ||||||||||||||||||||||
Number of | Grant Date | Number of | Grant Date | Number of | Grant Date | |||||||||||||||||||
R. Jeffrey Bailly | 7,075 | $ | 526,733 | 7,075 | $ | 526,733 | 7,075 | $ | 526,734 | |||||||||||||||
Ronald J. Lataille | 3,158 | $ | 235,150 | 1,579 | $ | 117,575 | 1,579 | $ | 117,575 | |||||||||||||||
Mitchell C. Rock | 3,158 | $ | 235,150 | 1,579 | $ | 117,575 | 1,579 | $ | 117,575 | |||||||||||||||
Christopher P. Litterio | 1,478 | $ | 110,000 | 739 | $ | 55,000 | 739 | $ | 55,000 | |||||||||||||||
Steven G. Cardin | 1,007 | $ | 75,000 | 504 | $ | 37,500 | 504 | $ | 37,500 | |||||||||||||||
(1) | The “Threshold” stock unit awards are subject to time vesting only. The “Target” and “Exceptional” stock unit awards are also subject to financial performance objectives, established by the Compensation Committee as the achievement of 100% and 115%, respectively, of our targeted Adjusted Operating Income for |
(2) |
One‑third of these awards vested on March 1, 2023, one‑third of these awards vest on March 1, |
Other Practices, Policies& Guidelines
Stock Ownership Guidelines—we have adopted stock ownership guidelines for the named executive officers and independent directors. Under our stock ownership guidelines the Board has established a goal that (i) within five years after joining the Board, each non-employeenon‑employee director beneficially own shares of our stock valued at three times his or her annual base cash retainer fee, (ii) within five years after being appointed to his or her position, the Chief Executive Officer beneficially own shares of our stock valued at three times his or her base salary, and (iii) within five years after being appointed to his or her position, the other named executive officers beneficially shares of our stock valued at one times his or her base salary.
Claw-back Policy—we have adopted a policy that if we are required to prepare an accounting restatement due to our material noncompliance, as a result of misconduct, with any financial reporting requirement under the securities laws, within the meaning of Section 304 of the Sarbanes-OxleySarbanes‑Oxley Act of 2002, our Chief Executive Officer and Chief Financial Officer shall reimburse us for any incentive bonus, or other incentive award or any equity award or profit earned from the sale of our securities, during the twelve-monthtwelve‑month period in which the financial statements applied.
Employee, Officer and Director Hedging—our personnel are prohibited from engaging in any of the following activities with respect to our securities: (a) hedging or other similar arrangements with respect to our securities, including, without limitation, (i) short sales and (ii) buying or selling puts or calls (excluding options we have granted); and (b) holding our securities in a margin account or pledging our securities as collateral for a loan.
Deferred Compensation Plan—in 2006, we implemented the UFP Technologies Executive Nonqualified Excess Plan (the “Deferred Compensation Plan”). Under the Deferred Compensation Plan, named executive officers and other key employees are eligible to defer up to 90% of base salary and 100% of bonus and/or commissions into the plan. Investments of the deferrals are directed by the participants and returns on the deferrals are determined accordingly. Employer contributions into the Deferred Compensation Plan are discretionary and determined by the Compensation Committee. No employer contributions were made in 2020.2022.
Supplemental Disability Insurance—named executive officers receive long-termlong‑term disability insurance coverage to supplement our group long-termlong‑term disability plan. The objective is to provide named executive officers with sufficient coverage to replace a significant portion of their wages in the event of disability. We pay the premiums, which amounted to approximately $52,334$42,460 in the aggregate for all named executive officers in 2020.2022.
Profit Sharing/401(k) Plan—all employees of UFP Technologies, Inc., including named executive officers, who meet certain criteria are eligible to participate in the UFP Technologies, Inc. 401(k) Plan (the “401(k) Plan”). We matchFor 2022, the Company matched employee deferrals at a discretionary rate, which was 50% of employee deferrals up to a maximum of 2% of an employee’s eligible wages in 2020. In addition, we may make an additional discretionary profit-sharing contribution which was approximately 1.0% of eligible wages in 2020. No employee deferrals are required to receive an allocated portion of the profit-sharing contribution.2022.
Perquisites—we provide welfare benefits to our named executive officers with officer contributions consistent with contributions to other UFP employees. The Chief Executive Officer is also eligible for additional perquisites including club and marina fees, life insurance and company-paid tax preparation fees. These Chief Executive Officer perquisites are offered principally to facilitate the Chief Executive Officer’s role as our representative within the community, and to entertain customers.
Policy on Equity-BasedEquity‑Based Award Timing and Pricing
Our Board of Directors adopted a policy whereby equity-basedequity‑based awards are only to be granted by majority vote of members of the Compensation Committee at a committee meeting. Our 2003 Incentive Plan establishes fair market value as the closing price on the date of grant of any equity security, including stock options, granted pursuant to such plan.
Stockholder Advisory Vote on Executive Compensation
In reviewing our 20202022 compensation decisions and policies, we considered the results of our stockholders’ advisory vote to approve executive compensation, which was conducted at our 20202022 annual meeting of stockholders last June.stockholders. In the proxy statement provided to stockholders in connection with our 20202022 annual meeting, our Board of Directors recommended that stockholders vote in favor of this proposal. The affirmative vote of a majority of the votes cast by the stockholders entitled to vote on this proposal at the 20202022 annual meeting was required for advisory approval of this proposal. Over 95%91% of such shares were voted to approve, on an advisory basis, our executive compensation. We considered this vote as supportive of our compensation decisions and policies.
Compensation Committee Interlocks and Insider Participation
From January 1, 2022 through June 7, 2022, the Compensation Committee was comprised of Lucia Luce Quinn, Marc Kozin and Daniel C. Croteau. From June 8, 2022 through December 31, 2022, the Compensation Committee was comprised of Marc Kozin, Daniel C. Croteau and Joseph John Hassett. None of the members of the Compensation Committee were an employee or a current or former officer of the Company during such period. None of the Compensation Committee members had a relationship with the Company requiring disclosure during their service on the Compensation Committee.
Report of the Compensation Committee
The Compensation Committee of the Board of Directors of the Company has reviewed and discussed the foregoing Compensation Discussion and Analysis with management of the Company and, based on such review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
By the Compensation Committee of the Board of Directors:
Lucia Luce Quinn,
By the Compensation Committee of the Board of Directors: | |
Marc Kozin, Chair
Daniel C. Croteau Joseph John Hassett |
EXECUTIVE COMPENSATION
The following tables present information regarding compensation of each of the named executive officers for services rendered in fiscals 2020, 2019fiscal years 2022, 2021 and 2018.2020. A description of our compensation policies and practices as well as a description of the components of compensation payable to our named executive officers is included above.
SUMMARY COMPENSATION TABLE—2020, 2019, 2018TABLE
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| Name and Principal Position | Year | Salary($)(1) | Discretionary Bonus(2) | Stock Awards($)(3) | Non Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total | ||||||||||||||||||
R. Jeffrey Bailly | 2022 | $ | 650,000 | $ | 600,000 | $ | 1,980,200 | $ | 944,800 | $ | 125,557 | $ | 4,300,557 | ||||||||||||
President, Chief Executive Officer | 2021 | $ | 615,000 | — | $ | 1,145,947 | $ | 733,200 | $ | 125,354 | $ | 2,619,501 | |||||||||||||
2020 | $ | 600,000 | — | $ | 633,370 | $ | 299,500 | $ | 132,510 | $ | 1,665,380 | ||||||||||||||
Ronald J. Lataille | 2022 | $ | 420,000 | — | $ | 470,300 | $ | 381,542 | $ | 26,474 | $ | 1,298,316 | |||||||||||||
Senior Vice President, Treasurer, | 2021 | $ | 370,000 | — | $ | 308,531 | $ | 180,000 | $ | 20,111 | $ | 878,642 | |||||||||||||
and Chief Financial Officer | 2020 | $ | 360,000 | — | $ | 137,500 | $ | 85,500 | $ | 26,578 | $ | 609,578 | |||||||||||||
Mitchell C. Rock | 2022 | $ | 420,000 | — | $ | 470,300 | $ | 384,042 | $ | 25,921 | $ | 1,300,263 | |||||||||||||
President, MedTech | 2021 | $ | 355,000 | — | $ | 308,531 | $ | 171,000 | $ | 19,556 | $ | 854,087 | |||||||||||||
2020 | $ | 345,000 | — | $ | 137,500 | $ | 81,300 | $ | 26,023 | $ | 589,823 | ||||||||||||||
Christopher P. Litterio | 2022 | $ | 338,000 | — | $ | 220,000 | $ | 247,321 | $ | 21,915 | $ | 827,236 | |||||||||||||
General Counsel, Secretary, and | 2021 | $ | 293,000 | — | $ | 151,892 | $ | 128,000 | $ | 15,551 | $ | 588,443 | |||||||||||||
| Senior Vice President of Human Resources | 2020 | $ | 285,000 | — | $ | 75,000 | $ | 66,500 | $ | 22,018 | $ | 448,518 | |||||||||||||
Steven G. Cardin | 2022 | $ | 310,000 | — | $ | 214,564 | $ | 108,500 | $ | 19,633 | $ | 652,697 | |||||||||||||
Vice President, Chief Operating Officer, | 2021 | $ | 295,000 | — | $ | 113,920 | $ | 110,000 | $ | 8,630 | $ | 527,550 | |||||||||||||
MedTech | 2020 | $ | 285,000 | — | $ | 30,000 | $ | 75,000 | $ | 8,401 | $ | 398,401 | |||||||||||||
*
(1) On February 14, 2023, based upon the market competitive assessment performed by Aon in 2022, the Compensation Committee approved increases in the base salaries of Messrs. Bailly, Lataille, Rock, Litterio and Cardin to $680,000, $440,000, $440,000, $355,000 and $325,000, respectively, effective January 1, 2023.
(2) Represents a discretionary bonus of $300,000 earned in 2022 that was paid in March 2023, as well as stock options with a value of $300,000. With respect to the stock options, on February 14, 2023, the Compensation Committee granted stock options to Mr. Smith’s employment with us terminated during September 2020Bailly to purchase up to an aggregate of 7,935 shares of the Company’s common stock, consisting of 1,792 incentive stock options and he was no longer one6,143 non-qualified stock options (each, a “2023 Bailly Option” and, collectively, the “2023 Bailly Options”). The exercise price of our executive officerseach Option is $111.54 per share and each 2023 Bailly Option has a term of five years. The 2023 Bailly Options are exercisable as follows: (i) 50% of December 31, 2020. Mr. Smith isthe shares subject to each 2023 Bailly Option are exercisable on March 1, 2024 and (ii) the remaining 50% of the shares subject to each 2023 Bailly Option are exercisable on March 1, 2025.
(3) The amounts included in the proxy statement“Stock Awards” column represent the grant date fair value of stock unit awards granted to the named executive officers. Amounts shown do not reflect compensation actually received by the named executive officer nor does it necessarily reflect the actual value that will be recognized by the named executive officer. Instead, the amount shown is the grant date fair value of restricted stock granted to the named executive officer computed in accordance with Item 402(a)(3)(iv)FASB ASC, Topic 718, Compensation—Stock Compensation. The assumptions used to calculate the value of Regulation S-K.restricted stock awards are set forth under Note 1(l)—Share‑Based Compensation, to our consolidated financial statements included in our Annual Report on Form 10‑K for the fiscal year ended December 31, 2022. The grant date fair value is based upon the probable outcome of the performance conditions applicable to each award. Because the maximum share payout was earned as actual Adjusted Operating Income exceeded 115% of targeted Adjusted Operating Income, the grant date fair value of all stock awards granted in 2022 to each named executive officer was as follows: for Mr. Bailly, $1,580,200; for Mr. Lataille, $470,300; for Mr. Rock, $470,300; for Mr. Litterio $220,000 and for Mr. Cardin, $150,000. In the case of Mr. Bailly, the amount also includes a grant of 3,494 shares of Common Stock issued on December 15, 2022 at the closing price of $114.47 on that date with a grant date fair value of $400,000. In the case of Mr. Cardin, the amount also includes a grant of 579 shares of Common Stock issued on February 14, 2023 at the closing price of $111.54 on that date with a grant date fair value of $64,566, for a portion of his performance-based incentive bonus that he chose to have paid in Company stock.
(4) Represents performance‑based incentive bonuses earned in 2022, 2021 and 2020 that were paid in March 2023, 2022 and 2021, respectively.
(5) Represents our payments for (i) 2022, 2021 and 2020, respectively, of tax preparation fees and club and marina fees for Mr. Bailly (club and marina fees in the amount of $27,515 in 2021); (ii) company-paid life insurance premiums for Mr. Bailly in the amount of $77,160 in each of 2022, 2021 and 2020 and (iii) car allowances, supplemental disability premiums, excess personal liability insurance premiums and 401(k) contributions for each of the named executive officers in 2022, 2021 and 2020.
Employment Contract
On October 8, 2007, we entered into an employment agreement with Mr. Bailly, our President and Chief Executive Officer and the Chairman of our Board of Directors. The employment agreement is terminable by either party at any time, as provided below. On March 2, 2011, the employment was amended. Pursuant to the terms of the amendment, effective January 1, 2012, Mr. Bailly’s annual salary increased from not less than $300,000 to not less than $350,000, and the Annual Stock Grant Award (as defined below) changed from 25,000 shares of our Common Stock to $300,000 worth of shares of our Common Stock. On February 18, 2013 the employment agreement was again amended to provide that effective January 1, 2013, Mr. Bailly’s annual salary increased from not less than $350,000 to not less than $450,000, and the Annual Stock Grant Award changed from $300,000 worth of shares of our Common Stock to $400,000 worth of shares of our Common Stock. The amendment also eliminated the income tax gross-upgross‑up on the Annual Stock Grant Award contemplated by the original employment agreement.
As amended, the employment agreement provides that Mr. Bailly will receive a minimum annual salary of $450,000 and consideration for discretionary bonuses. Pursuant to the agreement, Mr. Bailly will receive an annual stock grant award (the “Annual Stock Grant Award”) each year entitling him to receive on or before December 31 (the “Issue Date”) of each year an aggregate of $400,000 worth of shares of our Common Stock, provided that Mr. Bailly remains employed with us through the Issue Date of each such year. Annual Stock Grant Awards are to be made under our 2003 Incentive Plan.
Mr. Bailly’s employment agreement prohibits him from competing with us for a period of eighteen months following the termination of his employment for any reason. The employment agreement provides Mr. Bailly with certain other benefits, including the opportunity to participate in our stock plans, fringe benefit plans and other employment benefits as may be generally available to our senior executives, as well as for the direct payment or reimbursement of tax preparation fees, a car allowance, certain dues and fees relating to club memberships and other fringe benefits.
Under the terms of his employment agreement, if (i) if we terminate Mr. Bailly’s employment without Cause (as defined in the agreement), (ii) Mr. Bailly terminates his employment for Good Reason (as defined in the agreement), or (iii) Mr. Bailly voluntarily terminates his employment within six months of our Change in Control (as defined in the agreement), then we are required to pay Mr. Bailly a lump sum amount equal to three times his average annual compensation for the two years preceding such termination. The employment agreement defines “average annual compensation” as including aggregate base salary, the Annual Stock Grant Award, and bonus compensation earned in such years. However, any termination payment to Mr. Bailly shall be limited to an amount that would not result in the imposition of an excise tax or denial of a tax deduction for us under the tax code’s golden parachute rules. The agreement also provides that in the event of (i) our Change in Control or (ii) our termination of Mr. Bailly’s employment without Cause, or by Mr. Bailly for Good Reason, then (x) any shares in the Annual Stock Grant Award not issued to Mr. Bailly to which he would otherwise be entitled as of the next Issue Date following such Change in Control or such termination will be immediately issued to him and (y) any of Mr. Bailly’s other earned but unvested Stock Rights (as defined in the employment agreement) will immediately vest in full. If Mr. Bailly’s employment is terminated by us without Cause, or if Mr. Bailly terminates his employment with us for Good Reason, we will continue to pay Mr. Bailly’s health insurance for up to thirty-sixthirty‑six months.
Grants of Plan-Based Awards—2020Awards—2022
Estimated Possible | Estimated Possible | ||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold | Target | Maximum | All Other | All Other | Exercise | Grant Date | Grant Date | Threshold | Target | Maximum | All Other | All Other | Exercise or Base Option Awards | Grant Date Option | |||||||||||||||||||||||||||||
| R. Jeffrey Bailly(2)(3) | 2/24/2020 | 4,685 | 9,369 | 14,053 | — | — | — | $233,370 | 2/15/2022 | 7,075 | 14,150 | 21,225 | — | — | — | $ | 1,580,200 | ||||||||||||||||||||||||||||
| R. Jeffrey Bailly(4) | 12/17/2020 | — | — | — | 8,645 | — | — | $400,000 | 12/15/2022 | — | — | — | 3,494 | — | — | $ | 400,000 | ||||||||||||||||||||||||||||
| Ronald J. Lataille(2)(3) | 2/24/2020 | 2,761 | 4,141 | 5,521 | — | — | — | $137,500 | 2/15/2022 | 3,158 | 4,737 | 6.316 | — | — | — | $ | 470,300 | ||||||||||||||||||||||||||||
| Mitchell C. Rock(2)(3) | 2/24/2020 | 2,761 | 4,141 | 5,521 | — | — | — | $137,500 | 2/15/2022 | 3,158 | 4,737 | 6.316 | — | — | — | $ | 470,300 | ||||||||||||||||||||||||||||
| Christopher P. Litterio(2)(3) | 2/24/2020 | 1,505 | 2,258 | 3,011 | — | — | — | $75,000 | 2/15/2022 | 1,478 | 2,217 | 2,956 | — | — | — | $ | 220,000 | ||||||||||||||||||||||||||||
| Daniel J. Shaw, Jr.(2)(3) | 2/24/2020 | 753 | 1,129 | 1,505 | — | — | — | $37,500 | |||||||||||||||||||||||||||||||||||||
Steven G. Cardin(2)(3) | 2/15/2022 | 1,007 | 1,511 | 2,015 | — | — | — | $ | 150,000 | ||||||||||||||||||||||||||||||||||||
(1) Amount shown does not reflect compensation actually received by the named executive officer nor does it necessarily reflect the actual value that will be recognized by the named executive officer. Instead, the amount shown is the grant date fair value of restricted stock and stock options granted to the named executive officer computed in accordance with FASB ASC, Topic 718, Compensation—Stock Compensation. The assumptions used to calculate the value of restricted stock awards and stock options are set forth under Note 1(l)—Share‑Based Compensation, to our consolidated financial statements included in our Annual Report on Form 10‑K for the fiscal year ended December 31, 2022.
(2) Reflects grants of stock unit awards to the named executive officers pursuant to our 2003 Incentive Plan. These stock unit awards are subject to a (i) time‑based vesting requirement and (ii) our financial performance objectives, which are discussed in footnote 3 below and above under “Compensation Discussion and Analysis.” One‑third of these awards vested on March 1, 2023, one‑third of these awards vest on March 1, 2024 and one‑third of these awards vest on March 1, 2025, provided that the recipient remains continuously employed by us through each such vesting date and, for the amounts disclosed under the target and maximum columns, the corresponding financial performance requirement is met. Recipients of the stock unit awards will have no rights as stockholders, including, without limitation, the right to vote or to receive dividends, until and to the extent such stock unit awards have vested and the issuance of the shares of Common Stock in respect of the stock unit awards has been appropriately evidenced. Except in the case of Mr. Bailly, any unvested stock unit awards shall terminate upon the cessation of a recipient’s employment with us. With respect to Mr. Bailly, in the event of a cessation of employment by us without Cause or by Mr. Bailly for Good Reason (as such terms are defined in his stock unit award agreement), all earned but unvested stock unit awards shall become immediately exercisable, regardless of such cessation of employment. In the event of our Change in Control (as defined in the stock unit award agreement evidencing the award) on or after January 1, 2023, all earned but unvested stock unit awards held by each of the named executive officers shall become fully vested immediately prior to the effective date of such change in control.
(3) The Threshold stock unit awards are subject to time vesting only. The Target and Maximum stock unit awards are also subject to financial performance objectives, established by the Compensation Committee as the achievement of 100% and 115%, respectively, of our targeted Adjusted Operating Income for fiscal 2022 of $32,821,000. The amounts in Threshold, Target and Maximum columns are cumulative; the “Target” award amount includes the full amount of the “Threshold” award amount, and the “Exceptional” award amount includes the full amount of both the “Threshold” and “Target” Amounts. Based upon our achievement of $45,863,786 in actual Adjusted Operating Income for our 2022 fiscal year, the Compensation Committee determined that both the Target goal and the Maximum goal had been fully achieved. Accordingly, each named executive officer earned the number of stock unit awards set forth next to his name in the Maximum columns above.
(4) In accordance with the terms of Mr. Bailly’s employment agreement, these shares were approved for Mr. Bailly by the Compensation Committee on February 15, 2022 and granted and issued on December 15, 2022, valued at $114.47 per share, the closing price of the Common Stock on the date of issuance. The grant was for a fixed dollar amount of $400,000, with the number of shares to be determined on the date of issuance based upon the closing price on that date.
Outstanding Equity Awards at Fiscal 2020 Year-End2022 Year‑End
Option Awards | Stock Awards | |||||||||||
Name | Number of | Number of | Option | Option | Number of | Market Value | ||||||
| R. Jeffrey Bailly | — | — | — | — | 31,756(4) | $1,479,830 | ||||||
| Ronald J. Lataille | — | — | — | — | 14,155(5) | $659,623 | ||||||
| Mitchell C. Rock | — | — | — | — | 14,155(5) | $659,623 | ||||||
| Christopher P. Litterio | 10,000(6) | — | $28.70 | 12/13/2022 | 8,335(7) | $388,411 | ||||||
| Daniel J. Shaw, Jr. | — | — | — | — | 5,419(8) | $252,525 | ||||||
Option Awards | Stock Awards | |||||||||||||||||||||||
Name | Number of | Number of | Option | Option | Number of | Market Value | ||||||||||||||||||
R. Jeffrey Bailly | — | — | — | — | 40,168 | (4) | $ | 4,735,406 | ||||||||||||||||
Ronald J. Lataille | — | — | — | — | 14,755 | (5) | $ | 1,739,467 | ||||||||||||||||
Mitchell C. Rock | — | — | — | — | 14,755 | (5) | $ | 1,739,467 | ||||||||||||||||
Christopher P. Litterio | — | — | — | — | 7,371 | (6) | $ | 868,967 | ||||||||||||||||
Steven G. Cardin | — | — | — | — | 3,648 | (7) | $ | 430,063 | ||||||||||||||||
(1) Exercise prices for all options granted to the named executive officers represent the closing price of the Common Stock on the date of grant.
(2) Represents unvested stock unit awards granted pursuant to our 2003 Incentive Plan.
(3) The market value of the stock unit awards that have not vested is calculated using the closing price of the Common Stock at the end of our last completed fiscal year. Accordingly, this value was determined based on the closing price of the Common Stock as of December 30, 2022, which was $117.89.
(4) Includes (i) 19,395 stock unit awards that vested on March 1, 2023, (ii) 13,696 stock unit awards that vest on March 1, 2024 and (iii) 7,077 stock unit awards that vest on March 1, 2025.
(5) Includes (i) 7,530 stock unit awards that vested on March 1, 2023, (ii) 5,119 stock unit awards that vest on March 1, 2024 and (iii) 2,106 stock unit awards that vest on March 1, 2025.
(6) Includes (i) 3,868 stock unit awards that vested on March 1, 2023, (ii) 2,517 stock unit awards that vest on March 1, 2024 and (iii) 986 stock unit awards that vest on March 1, 2025.
(7) Includes (i) 1,589 stock unit awards that vested on March 1, 2023, (ii) 1,388 stock unit awards that vest on March 1, 2024 and (iii) 671 stock unit awards that vest on March 1, 2025.
Option Exercises and Stock Vested—2020Vested—2022
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||
Name | Number of | Value Realized | Number of | Value Realized | Number of | Value Realized | Number of | Value Realized | ||||||||||||||||
| R. Jeffrey Bailly | — | — | 8,952 | $447,510 | — | — | 15,654 | $ | 1,048,818 | |||||||||||||||
| Ronald J. Lataille | — | — | 3,731 | $186,513 | — | — | 6,812 | $ | 456,404 | |||||||||||||||
| Mitchell C. Rock | — | — | 3,731 | $186,513 | — | — | 6,812 | $ | 456,404 | |||||||||||||||
| William David Smith | — | — | 3,731 | $186,513 | ||||||||||||||||||||
| Christopher P. Litterio | — | — | 1,389 | $69,436 | — | — | 4,270 | $ | 286,090 | |||||||||||||||
| Daniel J. Shaw, Jr. | — | — | 2,238 | $111,878 | ||||||||||||||||||||
Steven G. Cardin. | — | — | 1,047 | $ | 71,669 | |||||||||||||||||||
(1) On March 1, 2022, previously issued stock unit awards covering 15,654, 6,812, 6,812, 4,270, and 917 shares of our Common Stock vested in full for each of Messrs. Bailly, Lataille, Rock, Litterio and Cardin, respectively. The value realized upon the vesting of the stock unit awards is based upon the closing price of $67.00 on March 1, 2022. On June 3, 2022, previously issued stock unit awards covering 130 shares of our Common Stock vested in full for Mr. Cardin. The Value realized upon the vesting of the stock unit awards is based upon the closing price of $78.69 on June 3, 2022.
(2) Value realized is calculated based on the number of shares vested multiplied by the closing price of our Common Stock on the date of vesting. This calculation does not account for shares withheld for tax purposes, but rather, represents the gross value realized.
Nonqualified Deferred Compensation—2020Compensation—2022
Name | Executive | Company | Aggregate | Aggregate | Aggregate | |||||
| R. Jeffrey Bailly | $50,000 | — | $77,426 | — | $464,102 | |||||
| Ronald J. Lataille | — | — | — | — | — | |||||
| Mitchell C. Rock | — | — | $63,316 | — | $819,497 | |||||
| William David Smith | $79,916 | — | $24,583 | — | $431,467 | |||||
| Christopher P. Litterio | — | — | — | — | — | |||||
| Daniel J. Shaw, Jr. | — | — | — | — | — |
(1) Represents amounts contributed into | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See a description of the Deferred Compensation Plan by each named executive officer. Such amounts are included in the Summary Compensation Table in the “Salary” column for 2022.
(2) These amounts are not included in the Summary Compensation table because plan earnings were not preferential or above under “Compensation Discussionmarket.
(3) The following amounts are included in the fiscal year-end balance and Analysis—Other Practices, Policies & Guidelines.”previously were reported as compensation to the following officers in the Summary Compensation Table: Mr. Bailly, $391,868; Mr. Rock, $340,341; and Mr. Cardin, $281,609.
Potential Payments upon Termination or Change of Control and Severance Plans
Mr. Bailly may be entitled to payment upon his termination or upon our change of control. Under the terms of his employment agreement, if (i) we terminate Mr. Bailly’s employment without Cause (as defined in the agreement), (ii) Mr. Bailly terminates his employment with us for Good Reason (as defined in the agreement), or (iii) Mr. Bailly voluntarily terminates his employment within six months of a Change in Control (as defined in the agreement), then we are required to pay Mr. Bailly a lump sum amount equal to three times his average annual compensation for the two years preceding such termination. The employment agreement defines “average annual compensation” as including aggregate base salary, the Annual Stock Grant Award, and bonus compensation earned in such years. However, any termination payment to Mr. Bailly shall be limited to an amount that would not result in the imposition of an excise tax or denial of a tax deduction for us under the tax code’s golden parachute rules. Accordingly, assuming the triggering event occurred on December 31, 2020,2022, Mr. Bailly would have been entitled to receive a lump sum payment of $4,468,923.$6,064,500. Additionally, if we terminate Mr. Bailly without Cause or if he terminates his employment for Good Reason, he is also entitled to extended health insurance benefits for a period of up to thirty-sixthirty‑six months. Assuming a December 31, 20202022 triggering date, Mr. Bailly would have been entitled to receive health insurance benefits valued at $27,209.$28,683. The agreement also provides that in the event of (i) our Change in Control or (ii) our termination of Mr. Bailly’s employment without Cause, or by Mr. Bailly for Good Reason, then (x) any shares in the Annual Stock Grant Award not issued to Mr. Bailly to which he would otherwise be entitled as of the next Issue Date following such Change in Control or such termination will be immediately issued to him and (y) any of Mr. Bailly’s other earned but unvested Stock Rights (as defined in the employment agreement) will immediately vest in full. Assuming a December 31, 20202022 triggering date, Mr. Bailly would have been entitled to receive vested equity valued at $1,479,830$3,067,262 calculated based on the closing price of the Common Stock as of December 31, 2020,30, 2022, which was $46.60.$117.89.
Each of the outstanding stock unit awards between the Company and Messrs. Lataille, Rock, Litterio and Cardin become vested upon a change of control, as defined in our 2003 Incentive Plan, provided that such officer was employed as of the date immediately prior to the effective date of such change in control. Subject to attainment of the performance objectives contained in each award, the stock unit awards will vest at the applicable threshold, target and maximum amounts. Assuming a December 31, 2022 triggering date, Messrs. Lataille, Rock, Litterio and Cardin would have been entitled to receive vested equity valued at $1,367,170, $1,367,170, $694,726 and $311,230 respectively, calculated based on the closing price of the Common Stock as of December 30, 2022, which was $117.89.
In September 1993, we adopted a policy that all executive officers not otherwise a party to an employment agreement with us will receive a severance benefit should we terminate the employee’s employment other than for cause in connection with our change in control, in the form of a base salary continuation for a period equal to the sum of (i) four months plus (ii) one month for each year of service with us up to a maximum of 18 months. Accordingly, assuming termination on December 31, 2020,2022, such named executive officers would have been entitled to the following payments:
Name | Severance | |||
Ronald J. Lataille | $ | 630,000 | ||
Mitchell C. Rock | $ | 630,000 | ||
Christopher P. Litterio | $ | 253,500 | ||
Steven G. Cardin | $ | 180,833 | ||
Equity Compensation Plan Information
The following table discloses the securities authorized for issuance under our stock incentive plans as of December 31, 2022.
Plan Category | Number of | Weighted‑average | Number of securities remaining | |||||||||
Equity compensation plans approved by security holders(1) | 190,523 | $ | 39.98 | 870,615 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 190,523 | $ | 39.98 | 870,615 | ||||||||
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Includes our 2003 Incentive Plan and 2009 Non‑Employee Director Stock Incentive Plan. |
CEO Pay Ratio
In accordance with rules adopted pursuant to the Dodd-Frank Act of 2010, we are required to calculate and disclose the total compensation paid to our median employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to Mr. Bailly, our President and CEO. We identified the median employee based on the year-to-date gross pay of our full-time, part-time, seasonal and temporary employees as of October 23, 2020.7, 2022. The only assumptions, adjustments, or estimates that we made to year-to-date gross pay was annualizing the gross pay for any full-time and part-time employees who were not employed atfor the beginning of 2020.entire year. We believe that this is a consistently applied compensation measure to identify the median employee. The adjusted gross pay for all employees, other than Mr. Bailly, were ranked highest to lowest in order to determine the median employee. For purposes of reporting annual total compensation and the ratio of annual total compensation of the CEO to the median employee, both the CEO and median employee’s annual total compensation were calculated consistent with the disclosure requirements of executive compensation under Item 402(c)(2)(x) of Regulation S-K. The annual total compensation for the median employee selected in this analysis was $34,618.$5,782. The annual total compensation for 20202022 for Mr. Bailly was $1,665,380,$4,300,557 as reported under the heading “Summary Compensation Table.” For 2020,2022, the ratio of the median employee’s annual total compensation to Mr. Bailly’s annual total compensation was 48:744:1. In accordance with the SEC rules, the CEO pay ratio calculation included 1,435 employees from Costa Rica and the Dominican Republic, where such wages, on average, are lower than that of our US employees. If our Costa Rica and Dominican Republic based employees were excluded from such calculation, the CEO pay ratio would have been 108:1.
Director Compensation—2020
Our non-employeePay Versus Performance
The following table illustrates certain information about executive compensation for the Company’s Principal Executive Officer (“PEO”) and other named executive officers (NEOs) as well as certain performance measures against which compensation information can be compared. This disclosure has been prepared in accordance with Item 402(v) of Regulation S-K of the Exchange Act and does not necessarily reflect value actually realized by our NEOs or how our Compensation Committee evaluates compensation decisions in light of Company or individual performance. Please refer to the “Compensation Discussion and Analysis” for a discussion of our executive compensation program, its objectives, and the ways in which we align executive compensation with Company performance.
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| Year | Summary compensation table total for PEO | Compensation actually paid to PEO | Average summary compensation table total for non-PEO named executive officers | Average compensation actually paid to non-PEO named executive officers | Total | Peer group | Net income | Adjusted Operating Income (1) | ||||||||||||||||||||||||
2022 | $ | 4,300,557 | $ | 7,537,092 | $ | 1,019,628 | $ | 1,818,787 | $ | 237.60 | $ | 92.94 | $ | 41,789,243 | $ | 45,862,786 | ||||||||||||||||
2021 | $ | 2,619,501 | $ | 4,461,268 | $ | 712,181 | $ | 1,183,984 | $ | 141.62 | $ | 106.69 | $ | 15,885,720 | $ | 21,364,112 | ||||||||||||||||
2020 | $ | 1,665,380 | $ | 2,056,464 | $ | 460,442 | $ | 557,268 | $ | 93.93 | $ | 99.30 | $ | 13,368,880 | $ | 16,731,467 | ||||||||||||||||
(1) Adjusted Operating Income is operating income as adjusted to disregard (i) non‑recurring restructuring charges related to plant closings and consolidations and (ii) the impact of acquired or disposed of operations.
DIRECTOR COMPENSATION
From July 1, 2021 through June 30, 2022, our non‑employee directors annually receive:received: (i) a retainer of $115,000, with a $45,000 cash component and a $70,000 equity component, payable 50% in the form of restricted stock unit awards (“RSU’s”) that vest on May 31 of the following year and 50% in the form of stock options that become exercisable on May 31 of the following year, (ii) an audit committee retainer of $9,000 in cash, with an additional $11,000 for the non-employeenon‑employee director serving as audit committee chair, (iii) a compensation committee retainer of $6,000 in cash, with an additional $9,000 for the non-employee director serving as compensation committee chair, (iv) reimbursement of expenses for each meeting physically attended, and (v) a lead independent director retainer of $15,000 for the individual serving in that position.
Effective July 1, 2022, our non‑employee directors annually receive: (i) a retainer of $155,000, with a $55,000 cash component and a $100,000 equity component, payable 50% in the form of restricted stock unit awards (“RSU’s”) that vest on May 31 of the following year and 50% in the form of stock options that become exercisable on May 31 of the following year, (ii) an audit committee retainer of $9,000 in cash, with an additional $11,000 for the non‑employee director serving as audit committee chair, (iii) a compensation committee retainer of $6,000 in cash, with an additional $9,000 for the non-employee director serving as compensation committee chair, (iv) reimbursement of expenses for each meeting physically attended, and (v) a lead independent director retainer of $25,000 for the individual serving in that position.
There was no additional compensation paid for services to the nominating committee.committee in fiscal year 2022.
Under our stock ownership guidelines, the Board has established a goal that, within five years after joining the Board, each non-employeenon‑employee Board member beneficially own shares of our stock valued at three times his or her annual base cash retainer fee.
Name | Fees Earned or | Stock | Option | Total | ||||
| Marc Kozin | 66,000 | 35,000 | 35,000 | 136,000 | ||||
| Thomas Oberdorf | 54,000 | 35,000 | 35,000 | 124,000 | ||||
| Robert W. Pierce, Jr. | 54,000 | 35,000 | 35,000 | 124,000 | ||||
| Lucia Luce Quinn | 60,000 | 35,000 | 35,000 | 130,000 | ||||
| Daniel C. Croteau | 51,000 | 35,000 | 35,000 | 121,000 | ||||
| Cynthia L. Feldmann | 65,000 | 35,000 | 35,000 | 135,000 |
The table below summarizes the compensation paid to each of our non-employee directors. For a summary of the compensation earned by Mr. Bailly, our President, Chief Executive Officer and Chairman of the Board of Directors, see the “Executive Compensation” section above.
Name | Fees Earned or | Stock | Option | Total | ||||||||||||
Marc Kozin | $ | 60,500 | $ | 50,000 | $ | 50,000 | $ | 160,500 | ||||||||
Thomas Oberdorf | $ | 59,000 | $ | 50,000 | $ | 50,000 | $ | 159,000 | ||||||||
Robert W. Pierce, Jr. (4) | $ | 27,000 | — | — | $ | 27,000 | ||||||||||
Lucia Luce Quinn (4) | $ | 30,000 | — | — | $ | 30,000 | ||||||||||
Daniel C. Croteau | $ | 76,000 | $ | 50,000 | $ | 50,000 | $ | 176,000 | ||||||||
Cynthia L. Feldmann | $ | 70,000 | $ | 50,000 | $ | 50,000 | $ | 170,000 | ||||||||
Joseph John Hassett | $ | 30,500 | $ | 50,000 | $ | 50,000 | $ | 130,500 | ||||||||
Symeria Hudson | $ | 32,000 | $ | 50,000 | $ | 50,000 | $ | 132,000 | ||||||||
(1) On June 8, 2022 we granted to each continuing non‑employee director who served on the Board at that date, free of any restrictions, 647 RSU’s with a value equal to approximately $50,000, calculated using the $77.28 closing price of the Common Stock on the date of grant. Amounts reflected in the table represent the grant date fair value of the stock computed in accordance with FASB ASC, Topic 718, Compensation—Stock Compensation.
(2) On June 8, 2022 we granted to each continuing non‑employee director who served on the Board at that date, 1,646 non‑qualified stock options to acquire Common Stock. Each option is exercisable in its entirety on May 31, 2023 and has a ten‑year life with an exercise price of $77.28, the closing price of our Common Stock on the date of grant. Amounts reflected in the table represent the grant date fair value of the stock options computed in accordance with FASB ASC, Topic 718, Compensation—Stock Compensation.
(3) Messrs. Kozin, Oberdorf, Pierce, Croteau and Hassett and Mses. Quinn, Feldmann and Hudson had outstanding Option Awards at December 31, 2022 of 8,670, 21,550, 18,677, 16,632, 1,646, 10,804, 12,450 and 1,646, respectively.
(4) Mr. Pierce and Ms. Quinn did not stand for re-election at the 2022 Annual Meeting of Stockholders and, as a result, their compensation for 2022 shown above represents compensation for a partial year of service.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Policy for Review and Approval of Related Party Transactions
The Company’s Audit Committee reviews and approves all related-party transactions involving executive officers and directors. The Company has a written policy governing the review of related party transactions, which are defined as those transactions or series of similar transactions where (i) the aggregate amount involved exceeds $120,000 in any calendar year, (ii) the Company is a participant, and (iii) any related party has or will have a direct or indirect material interest in the transaction (other than solely as a result of being a director or a less than ten percent beneficial owner of another entity). Any transactions directly or indirectly involving any related party is subject to the review and approval process described in the policy.
Related Party Transactions
R. Jeffrey Bailly. In fiscal 2020,2022, we paid Mr. Bailly’s brother compensation in the aggregate amount of approximately $165,485,$188,630, which primarily consisted of salary and of benefits available to all employees, for services rendered to us in his capacity as Director, Corporate Estimating.
EQUITY COMPENSATION PLAN INFORMATION
The following table discloses the securities authorized for issuance under our stock incentive plans as of December 31, 2020.
Plan Category | Number of | Weighted-average | Number of securities remaining | |||
| Equity compensation plans approved by security holders(1) | 182,925 | $30.22 | 860,814 | |||
| Equity compensation plans not approved by security holders | — | — | — | |||
| Total | 182,925 | $30.22 | 860,814 |
PROPOSAL NO. 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
This advisory vote on executive compensation is provided as required pursuant to Section 14A of the Securities Exchange Act of 1934, as amended. We are seeking the approval by our stockholders of a non-bindingnon‑binding advisory resolution to approve the compensation of our named executive officers, as disclosed in this proxy statement under the section titled “Executive Officer and Director Compensation” and “Executive Compensation.” While this stockholders’ vote on executive compensation is only an advisory vote that is not binding on us or our Board of Directors, we value the opinions of our stockholders and will consider the outcome of the vote when making future compensation decisions.
As described more fully above under “Executive Officer and Director Compensation,” the primary objective of our executive compensation program is to attract, retain and reward executive officers who contribute to our long-termlong‑term success. We believe this requires a competitive compensation structure as compared to companies of a similar size in the same or similar industries. Additionally, we seek to align a significant portion of executive officer compensation to the achievement of our specified performance goals. Incentive cash bonuses are included to drive executive performance by having pay at risk so that a significant portion of potential annual cash compensation is tied to profitability targets. We also include performance-basedperformance‑based restricted stock awards with a time-basedtime‑based vesting component as a significant element of prospective executive compensation so that the value of a portion of an executive’s compensation is dependent upon both company-widecompany‑wide performance measures and continued employment.
We urge stockholders to read the Executive Officer and Director Compensation, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and the related compensation tables and narrative above which provide detailed information on the compensation of our named executive officers.
In light of the above, the Compensation Committee and the Board of Directors believe that the policies and procedures articulated in the Executive Officer and Director Compensation are effective in achieving our goals and that the compensation of our named executive officers reported in this proxy statement has supported and contributed to our success. To that end, we will ask our stockholders to vote “FOR” the following resolution at the Meeting:
RESOLVED, that the compensation paid to the named executive officers, as disclosed in this Proxy Statement pursuant to the SEC’sSEC’s executive compensation disclosure rules (which disclosure includes the Executive Officer and Director Compensation section, the compensation tables, and the narrative disclosures that accompany the compensation tables), is hereby APPROVED.
Principal Effects of Approval or Non-ApprovalNon‑Approval of the Proposal
The approval of the compensation of the named executive officers, commonly known as a “say-on-pay”“say‑on‑pay” resolution, is non-bindingnon‑binding on the Board of Directors. As stated above, although the vote is non-binding,non‑binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program.
It is our current intention to provide stockholders with an opportunity to approve, on a non-bindingnon‑binding advisory basis, the compensation of the named executive officers each year at the annual meeting of stockholders. It is expected that the next such vote will occur at the 20222024 annual meeting of stockholders.
Vote Required
The non-bindingnon‑binding approval of the compensation of the named executive officers by the stockholders requires the approval of a majority of the votes cast by the stockholders entitled to vote on this proposal at the Meeting. Abstentions and broker non-votesnon‑votes will not be treated as votes cast for this purpose and will not affect the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THIS RESOLUTION.
PROPOSAL NO. 3AMENDMENT
AMENDED AND RESTATEMENT OF THE COMPANY'S2003 INCENTIVE PLANRESTATED CHARTER
Effective June 4, 2003,We are asking our stockholders to consider and vote upon a proposal to amend and restate the Company’s Restated Certificate of Incorporation (the “Certificate of Incorporation”) by adopting the Amended and Restated Certificate of Incorporation in the form attached hereto as Annex A (the “Amended and Restated Charter”) to (i) add a provision exculpating certain of the Company’s officers from liability in specific circumstances, as permitted by Delaware law, (ii) remove all references to Series A Junior Participating Preferred Stock and (iii) to make clarifying technical amendments to certain definitions.
Officer Exculpation
The State of Delaware, which is the Company’s state of incorporation, recently enacted legislation that enables Delaware companies to limit the liability of certain of their officers in limited circumstances. In light of this update, we adoptedare proposing to amend and restate the 2003 Equity Incentive PlanCertificate of Incorporation to, among other things, add a provision exculpating certain of the Company’s officers from liability in specific circumstances, as permitted by Delaware law. The new Delaware legislation only permits, and the proposed Amended and Restated Charter would only permit, exculpation for direct claims (as amended,opposed to derivative claims made by stockholders on behalf of the "Incentive Plan").Company) and would not apply to breaches of the duty of loyalty, acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, or any transaction in which the officer derived an improper personal benefit. The Incentive Plan was amendedrationale for so limiting the scope of liability is to strike a balance between stockholders’ interest in accountability and their interest in the Company being able to attract and retain quality officers to work on February 26, 2007, March 22, 2007, February 21, 2008, March 2, 2011, March 7, 2013, March 17, 2016its behalf.
The Board of Directors believes that there is a need for officers to remain free of the risk of financial ruin as a result of an unintentional misstep. Further, the Board of Directors noted that the amendments to the Certificate of Incorporation would not negatively impact stockholder rights. Therefore, taking into account the narrow class and March 14, 2018.type of claims for which officers’ liability would be exculpated, and the benefits the Board of Directors believes would accrue to the Company and its stockholders in the form of an enhanced ability to attract and retain talented officers, the Board of Directors recommended to amend and restate the Certificate of Incorporation to provide such exculpation to the extent permitted by Delaware law.
Removal of Series A Junior Participating Preferred Stock
On March 16, 2021,20, 2009, the Company amended its then current Certificate of Incorporation by filing an Amended and Restated Certificate of Designation of Series A Junior Participating Preferred Stock which, among other things, created a class of 20,000 shares of Series A Junior Participating Preferred Stock, par value $0.01 per share, of the Company (the “Series A Junior Participating Preferred Stock”). The shares of Series A Junior Participating Preferred Stock were designated and issuable in connection with the Company’s former stockholder rights plan. The Company’s stockholder rights plan expired on March 19, 2019 and no rights issued under that plan were exercised. As a result, the Board concluded it is no longer necessary to have any shares of Series A Junior Participating Preferred Stock designated under the Certificate of Incorporation. The Board of Directors’ powers to issue and designate future series or classes of preferred stock remain unchanged in the Amended and Restated Charter.
Other Technical Amendments
Finally, the Amended and Restated Charter changed the definition of the Merger Date to insert November 15, 1993 rather than a formulaic date, making it easier to determine at a glance the meaning of Merger Date. This simplified Merger Date definition also enabled some clarifying changes to the term Related Person in the Amended and Restated Charter.
In light of the foregoing, the Board of Directors subjectdetermined that it is advisable and in the best interests of the Company and our stockholders to shareholder approval, amendedamend and restatedrestate the Incentive Plan. Certificate of Incorporation as described herein.
The purposegeneral description of the proposed amendmentAmended and restatement is primarily to ratify the issuance of additional “incentive stock options” under the Incentive Plan, because under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), a plan under which incentive stock options are issued must be approved by the issuer’s stockholders at least once every ten years. The Incentive Plan was most recently ratified by our stockholders on March 2, 2011, so we will be unable to issue additional incentive stock options under the Incentive Plan if this proposal is not approved by the stockholders.
The Incentive Plan is also being amended to reflect changes in the deductibility of performance-based compensation that resulted from the Tax Cuts and Jobs Act of 2017 (the “TCJA”). These changes modify the provisions of the Incentive Plan that relate to the performance-based compensation exception under Section 162(m) of the Code that was eliminated by the TCJA.
If this proposal is not approved by the stockholders, the Incentive Plan will remain in effect until such time as the Board of Directors further amends or terminates the Incentive Plan or until all shares subject to the Incentive Plan shall have been purchased or acquired according to the plan’s provisions, but no additional incentive stock options will be granted thereunder.
The Incentive Plan is intended to benefit us by offering equity-based and other incentives to certain of our executives and employees, thereby encouraging their continued involvement with our businesses. The following is a summary description of the Incentive Plan and isRestated Charteris qualified in its entirety by reference to the fullAmended and Restated Charter, which is attached hereto as Annex A.
Accordingly, we ask our stockholders to vote on the following resolution:
“RESOLVED, that the Amended and Restated Charter in the form attached hereto as Annex A is hereby approved.”
If the proposed is approved by our stockholders, it would become effective immediately upon the filing of the Amended and Restated Charter with the Secretary of State of the State of Delaware, which we would expect to file promptly after the Annual Meeting.
If the proposed Amended and Restated Charter is not approved by our stockholders, our Certificate of Incorporation would remain unchanged.
The text of the Incentive Plan, whichAmended and Restated Charter is set forthsubject to modification to include such changes as Appendix A to this Proxy Statement.
Description of the 2003 Incentive Plan
The Incentive Plan is administeredmay be required by the Compensation Committee, or another committee consistingDelaware Secretary of not less than two directors appointed from timeState to time byeffectuate the Board of Directors. Only independent directors may serve onamendments described above. In accordance with the committee administering the Incentive Plan (hereinafter, the "Committee"). Subject to the express provisions of the Incentive Plan, the Committee has the authority to interpret and construe the Incentive Plan and to adopt rules and regulations for administering the Incentive Plan. Such powers of the Committee include, except as otherwise provided in the Incentive Plan, exclusive authority to select the employees or determine classes of employees to be granted awards under the Incentive Plan, to determine the aggregate amount, type, size, and terms of the awards to be made to eligible employees, and to determine the time when awards will be granted. The Committee shall take into account compliance with Section 409A of the Code (as defined below) in connection with any grant of an award under the Incentive Plan, to the extent applicable.
Our executives and other employees (including officers) who (i) are employed full time or part time by us or our subsidiaries on a salaried basis and (ii) are selected on the basis of such criteria as the Committee may determine, are eligible to participate in the Incentive Plan. Employees who participate in our other incentive or benefit plans or the plans of any of our subsidiaries may also participate in the Incentive Plan. As of April 1, 2021, five officers and approximately 887 of our other employees will be eligible to receive awards under the Incentive Plan.
Governance Developments
The Compensation Committee and/orDelaware General Corporation Law, the Board of Directors has takenmay elect to abandon the following steps to promote good corporate governance:
Awards may be granted in the form ofproposed Amended and Restated Charter without further action by our stockholders at any or a combination of the following:
Under the Incentive Plan, "performance criteria" means specified criteria the satisfaction of which is a condition for the exercisability, vesting or full enjoyment of an award. For purposes of the Incentive Plan, a performance criterion shall mean an objectively determinable measure of performance relating to any of the following (determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof): (i) sales; revenues; assets; liabilities; costs; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, amortization or other items, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; one or more operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; working capital requirements; stock price; stockholder return; sales, contribution or gross margin, of particular products or services; particular operating or financial ratios; customer acquisition, expansion and retention; or any combination of the foregoing; or (ii) acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs, split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity) and refinancings; transactions that would constitute a change of control; or any combination of the foregoing. A performance criterion measure and targets with respect thereto determined by the Committee need not be based upon an increase, a positive or improved result or avoidance of loss. In the case of awards issued prior to November 2, 2017 that were intended to be eligible for the performance-based compensation exception under Section 162(m), the Incentive Plan and such award shall be construed to the maximum extent permitted by law in a manner consistent with qualifying the award for such exception (the “Grandfathered Awards”).
Unless the Committee expressly provides otherwise, (A) an award requiring exercise by the holder will not be deemed to have been exercised until the Committee receives a written notice of exercise (in form acceptable to the Committee) signed by the appropriate person and accompanied by any payment required under the award; and (B) if the award is exercised by any person other than the participant, the Committee may require satisfactory evidence that the person exercising the award has the right to do so. The Committee shall determine the exercise price of each Stock Option or SAR; provided, that each Stock Option or SAR must have an exercise price that is not less than the fair market value of the Stock subject to the Stock Option, determined as of the date of grant. Where the exercise of an award is to be accompanied by payment, the Committee may determine the required or permitted forms of payment.
The restrictions on Restricted Stock awards may include, without limitation, restrictions on the right of the grantee to sell, assign, transfer or encumber shares while such shares are subject to other restrictions imposed under the Incentive Plan, the duration of such restrictions; the events (which may, in the discretion of the Committee, include performance-based events or objectives) the occurrence of which would cause a forfeiture of the Restricted Stock in whole or in part; and such other terms and conditions as the Committee in its discretion deems appropriate. If so determined by the Committee at the time of an award of Restricted Stock, the lapse of restrictions on Restricted Stock may be based on the extent of achievement over a specified performance period of one or more performance targets based on performance criteria established by the Committee. Restricted Stock awards shall be effective upon execution of the applicable Restricted Stock agreement by us and the participant. Following a Restricted Stock award and prior to the lapse or terminationeffectiveness of the applicable restrictions, we shall hold the share certificates for such Restricted Stock in escrow. Upon the lapse or terminationfiling of the applicable restrictions (and not before such time),Amended and Restated Charter with the certificates for the Restricted Stock shall be issued or delivered to the participant. From the date a Restricted Stock award is effective, the participant shall be a shareholder with respect to all the shares represented by such certificates and shall have all the rightsSecretary of a shareholder with respect to all such shares, including the right to vote such shares and to receive all dividends and other distributions paid with respect to such shares, subject only to the restrictions imposed by the Committee.
Stock Unit Awards shall be evidenced by a written agreement in the form prescribed by the Committee in its discretion, which shall set forth the number of shares of Common Stock to be awarded pursuant to the award, the restrictions imposed thereon (which may include, without limitation: restrictions on the rightState of the grantee to sell, assign, transfer or encumber the award prior to vesting, and, in the discretionState of the Committee, certain continued service requirements and terms under which the vesting of such awards might be accelerated) and such other terms and conditions as the Committee in its discretion deems appropriate. If so determined by the Committee at the time of the grant of a Stock Unit Award, vesting of the award may be contingent on achievement over a specified performance period of one or more performance targets based on performance criteria established by the Committee. Stock Unit Awards shall be effective upon execution of the applicable Stock Unit Award Agreement by us and the participant. Upon a determination of satisfaction of the applicable performance-related conditions and satisfaction of the applicable continued service requirements (and not before such time), shares of Stock shall be issued to the participant pursuant to the award. The participant shall not have any rights of a shareholder with respect to such shares prior to such issuance.
The Committee shall have the authority in its discretion to grant to eligible participants Unrestricted Stock and other Stock-Based Awards and shall determine the terms and conditions, if any, of any other Stock-Based Awards made under the Incentive Plan. The Committee shall also have the authority in its discretion to grant to eligible participants awards not based on the Common Stock, including, without limitation, Cash Performance Awards, and other Performance Awards as deemed by the Committee to be consistent with the purposes of the Incentive Plan.
A maximum of 2,250,000 shares of Common Stock, subject to adjustments for stock splits, stock dividends, mergers, consolidations, and similar transactions as provided in the Incentive Plan, may be delivered in satisfaction of Stock- Based Awards under the Incentive Plan. Currently, 800,834 shares of Common Stock remain available for issuance under the Incentive Plan, subject to adjustments for stock splits, stock dividends, mergers, consolidations, and similar transactions as provided in the Incentive Plan.
The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an award. To the extent that an award expires or is canceled, forfeited, settled in cash or otherwise terminated or concluded without a delivery to the participant of the full number of shares to which the award related, the undelivered shares will again be available for grant. Shares withheld in payment of the exercise price or taxes relating to an award and shares equal to the number surrendered in payment of any exercise price or taxes relating to an award shall be deemed to constitute shares not delivered to the participant and shall be deemed to again be available for awards under the Incentive Plan; provided, however, that, where shares are withheld or surrendered more than ten years after the date of the most recentDelaware, notwithstanding stockholder approval of the Incentive Plan or any other transaction occurs that would result in shares becoming so available, such shares shall not become available ifproposed Amended and toRestated Charter at the extent that it would constitute a material revision of the Incentive Plan subject to stockholder approval under then applicable rules of the national securities exchange on which the Common Stock is listed or the Nasdaq Stock Market, as applicable. Common Stock we deliver under the Incentive Plan may be authorized but unissued Common Stock or previously issued Common Stock we acquired and hold in treasury. No fractional shares of Common Stock will be delivered under the Incentive Plan.Annual Meeting.
In the event of any change in our outstanding Common Stock by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares, or other similar corporate change, an equitable adjustment shall be made, as determined by the Committee, so as to preserve, without increasing or decreasing, the value of awards and authorizations, in (i) the maximum number or kind of shares issuable or awards which may be granted under the Incentive Plan, (ii) the maximum number, kind or value of any Incentive Plan awards which may be awarded or paid in general or to any one employee or to all employees in a fiscal year, (iii) the performance-based events or objectives applicable to any Incentive Plan awards, (iv) any other aspect or aspects of the Incentive Plan or outstanding awards made thereunder as specified by the Committee, or (v) any combination of the foregoing. Such adjustments shall be made by the Committee and shall be conclusive and binding for all purposes of the Incentive Plan.
Except as may otherwise be provided in an award agreement or a written employment agreement between the participant and us which has been approved by the Committee, upon certain fundamental corporate events described in the Incentive Plan, in lieu of providing the adjustment set forth above, the Committee may, in its discretion, cancel any or all vested and/or unvested awards as of the consummation of such corporate event, and provide that holders of awards so canceled will receive a payment in respect of cancellation of their awards based on the amount of the per share consideration being paid for the Common Stock in connection with such corporate event, less, in the case of Stock Options and other awards subject to exercise, the applicable exercise price, subject to and as set forth in the Incentive Plan.
The maximum number of shares of Common Stock subject to awards that may be granted to any person in any calendar year shall be 150,000. In addition, in no event shall the number of awards providing for the acquisition of shares of Common Stock for a consideration less than fair market value as of the date of grant or exercise of such awards granted to all participants in any fiscal year exceed 250,000. For this purpose, fair market value may be determined as of a date not more than two trading days prior to the date of grant or exercise in order to facilitate compliance with the reporting requirements under Section 16 of the Securities Exchange Act of 1934. Subject to these limitations, each person eligible to participate in the Incentive Plan shall be eligible in any year to receive awards covering up to the full number of shares of Common Stock then available for awards under the Incentive Plan.
No more than $1,000,000 may be paid to any individual with respect to any Cash Performance Award or other Performance Award (other than an award expressed in terms of shares of Common Stock or units representing Common Stock, which shall instead be subject to the limit set forth in the paragraph above). In applying the dollar limitation of the preceding sentence: (A) multiple Cash or other Performance Awards to the same individual that are determined by reference to performance periods of one year or less ending with or within the same fiscal year shall be subject in the aggregate to one $1,000,000 limit, and (B) multiple Cash or other Performance Awards to the same individual that are determined by reference to one or more multi-year performance periods ending in the same fiscal year shall be subject in the aggregate to separate $1,000,000 limits.
The holder of an Incentive Plan award shall have no rights as a shareholder with respect thereto unless and until the date as of which shares of Common Stock shall have been issued in respect of such award.
Except as the Committee shall otherwise determine, no Incentive Plan award or any rights or interests therein of the recipient thereof shall be assignable or transferable by such recipient except upon death to his or her designated beneficiary or by will or the laws of descent and distribution, and, except as aforesaid, during the lifetime of the recipient, an Incentive Plan award shall be exercisable only by, or payable only to, as the case may be, such recipient or his or her guardian or legal representative.
The Board may at any time terminate or from time to time amend or suspend the Incentive Plan in whole or in part in such respects as the Board may deem advisable in order that awards granted thereunder shall conform to any change in the law, or in any other respect which the Board may deem to be in our best interests; provided, however, that no amendment of the Incentive Plan shall be made without shareholder approval if shareholder approval of the amendment is at the time required by applicable law, or by the rules of the Nasdaq Stock Market or any stock exchange on which Common Stock may be listed.
The Board shall have the power to amend the Incentive Plan in any manner deemed necessary or advisable for the awards to continue to qualify for exemption from Section 16(b) of the Securities Exchange Act of 1934, to qualify as "performance-based" compensation under Section 162(m) of the Code (in the case of the Grandfathered Awards) or to comply with applicable law, and any such amendment shall, to the extent deemed necessary or advisable by the Board, be applicable to any outstanding awards theretofore granted under the Incentive Plan notwithstanding any contrary provisions contained in any award agreement. With the consent of the participant affected, the Board may amend outstanding agreements evidencing Incentive Plan awards in a manner not inconsistent with the terms of the Incentive Plan. Unless required by law, no such action or amendment shall adversely affect any rights of participants or our obligations to participants with respect to any award theretofore made under the Incentive Plan without the consent of the affected participant. The Incentive Plan shall remain in effect, subject to the right of the Board of Directors to further amend or terminate the Incentive Plan at any time, until all shares subject to it shall have been purchased or acquired according to the Incentive Plan's provisions.
Federal Income Tax Consequences
The following discussion of the Federal income tax consequences of the issuance of awards granted under the Incentive Plan is based upon the provisions of the Internal Revenue Code of 1986, as amended, as in effect on the date hereof (the "Code"), current regulations adopted and proposed thereunder, and existing administrative rulings and pronouncements of the Internal Revenue Service (the "IRS"). It is not intended to be a complete discussion of all of the Federal income tax consequences of the Incentive Plan or of all of the requirements that must be met in order to qualify for the described tax treatment. The Incentive Plan provides us with broad discretion to grant many different types of awards. The discussion below illustrates the Federal income tax consequences of only some of the types of awards we are permitted to make under the Incentive Plan. Depending on the type of award granted under the Incentive Plan, the Federal income tax consequences to us and recipients of awards could materially differ from the discussion below. In addition, because the tax consequences may vary, and certain exceptions to the general rules discussed herein may be applicable, depending upon the personal circumstances and the type of award granted, each recipient should consider his or her personal situation and consult with his or her tax advisor with respect to the specific tax consequences applicable to each recipient. No information is provided in the discussion below about foreign, state or local tax laws.
Nonqualified Stock Options.
An option holder will not recognize any taxable income upon the grant of a nonqualified option under the Incentive Plan. Generally, an option holder recognizes ordinary taxable income at the time a nonqualified option is exercised in an amount equal to the excess of the fair market value of the shares of Common Stock on the date of exercise over the exercise price.
However, if we impose restrictions on the shares that do not permit the recipient to transfer the shares to others and that require the recipient to return the shares us at less than fair market value (a "risk of forfeiture"), the date on which taxable income (if any) is recognized will be the date on which the stock becomes "freely transferable" or not subject to risk of forfeiture (the "Recognition Date"). In this circumstance, the option holder will generally recognize ordinary taxable income on the Recognition Date in an amount equal to the excess of the fair market value of the shares at that time over the exercise price.
Despite this general rule, in the case of a risk of forfeiture, the option holder may make an election pursuant to Section 83(b) of the Code. In this case, the option holder will recognize ordinary taxable income at the time the option is exercised and not on the later date. The option holder's holding period for purposes of determining the appropriate capital gains rate applicable to a subsequent sale of the stock will also be impacted by a Section 83(b) election. In order to be effective, the Section 83(b) election must be filed with us and the Internal Revenue Service within 30 days of exercise.
We will generally be entitled to a deduction for Federal income tax purposes in an amount equal to the ordinary taxable income recognized by the option holder, provided we report the income on a Form W-2 or 1099, whichever is applicable, that is timely provided to the option holder and filed with the IRS.
When an option holder subsequently disposes of the shares of Common Stock received upon exercise of a nonqualified option, he or she will recognize long-term or short-term capital gain or loss (depending upon the holding period), in an amount equal to the difference between (i) the sale price and (ii) the fair market value on the date on which the option holder recognized ordinary taxable income as a result of the exercise of the nonqualified option. The holding period for the shares generally would begin on the date the shares were acquired and would not include the period of time during which the option was held.
An option holder who pays the exercise price for a nonqualified option, in whole or in part, by delivering shares of our Common Stock already owned by him or her will recognize no gain or loss for Federal income tax purposes on the shares surrendered, but otherwise will be taxed according to the rules described above.
Any nonqualified options having an exercise price less than the fair market value of the Common Stock at the time such options are granted may be considered deferred compensation subject to Section 409A of the Code. Section 409A provides rules regarding the timing of deferred compensation payments. Independent of the tax treatment described above, a failure to meet the requirements of Section 409A can result in the acceleration of income recognition, an additional 20% tax obligation, plus penalties and interest.
Incentive Stock Options.
An option holder generally will not recognize taxable income upon either the grant or the exercise of an incentive stock option. However, under certain circumstances, there may be alternative minimum tax or other tax consequences, as discussed below.
An option holder will recognize taxable income upon the disposition of the shares received upon exercise of an incentive stock option. Any gain recognized upon a disposition that is not a "disqualifying disposition" will be taxable as long-term capital gain. A "disqualifying disposition" means any disposition of shares acquired on the exercise of an incentive stock option within two years of the date the option was granted or within one year of the date the shares were issued to the option holder. The use of shares acquired pursuant to the exercise of an incentive stock option to pay the option price under another stock option is treated as a disposition for this purpose. In general, if an option holder makes a disqualifying disposition, an amount equal to the excess of (a) the lesser of (i) the fair market value of the shares on the date of exercise or (ii) the amount actually realized on the disposition over (b) the option exercise price, will be taxable as ordinary income and the balance of the gain recognized, if any, will be taxable as either long-term or short-term capital gain, depending on the option holder's holding period for the shares. The holding period for the shares generally would begin on the date the shares were acquired and would not include the period of time during which the option was held.
In addition to the tax consequences described above, the exercise of incentive stock options may result in an "alternative minimum tax" under the Code. The Code provides that an "alternative minimum tax" will be applied against a taxable base which is equal to "alternative minimum taxable income," reduced by a statutory exemption. In general, the amount by which the value of the Common Stock received upon exercise of the incentive stock option exceeds the exercise price is included in the option holder's alternative minimum taxable income. A taxpayer is required to pay the higher of his regular tax liability or the alternative minimum tax. A taxpayer who pays alternative minimum tax attributable to the exercise of an incentive stock option may be entitled to a tax credit against his or her regular tax liability in later years. Because of the many adjustments that apply to the computation of the alternative minimum tax, it is not possible to predict the application of such tax to any particular option holder. An option holder may owe alternative minimum tax even though he or she has not disposed of the shares or otherwise received any cash with which to pay the tax.
We will not be entitled to any deduction with respect to the grant or exercise of an incentive stock option provided the holder does not make a disqualifying disposition. If the option holder does make a disqualifying disposition, we will generally be entitled to a deduction for Federal income tax purposes in an amount equal to the taxable ordinary income recognized by the holder, provided we report the income on a Form W-2 or 1099 (whichever is applicable) that is timely provided to the option holder and filed with the IRS.
Stock Appreciation Rights.
A recipient of a SAR will not be considered to receive any income at the time a SAR is granted, nor will we be entitled to a deduction at that time. Upon the exercise of a SAR, the holder will have ordinary income equal to the cash received upon the exercise. At that time, we will be entitled to a tax deduction equal to the amount of ordinary income realized by the holder.
Section 409A of the Code imposes certain rules applicable to "non-qualified deferred compensation plans," which may include certain grants of SARs. If a non-qualified deferred compensation plan subject to Section 409A fails to meet, or is not operated in accordance with, these requirements, then all compensation deferred under the plan is or becomes immediately taxable to the extent that it is not subject to a substantial risk of forfeiture and was not previously taxable. The tax imposed as a result of these rules would be increased by interest at a rate equal to the rate imposed upon tax underpayments plus one percentage point, and an additional tax equal to 20% of the compensation required to be included in income.
Under the applicable Treasury Regulations, a SAR does not provide for a deferral of compensation under Section 409A, and therefore is not subject to the imposition of the resulting taxes and interest charges, if (i) the compensation payable under the SAR cannot be greater than the difference between the stock's fair market value on the date the SAR was granted and the stock's fair market value on the date the SAR is exercised with respect to a number of shares that was fixed no later than the date of grant, (ii) the SAR exercise price can never be less than the stock's fair market value on the date of grant, and (iii) the SAR does not include any feature for the deferral of compensation other than the deferral of the recognition of income until the date of exercise. In addition, a SAR with a fixed payment date generally complies with Section 409A.
Restricted Stock and Performance Shares.
The recipient of restricted stock or performance shares will generally not recognize income at the time that shares subject to such restrictions are issued, unless a Section 83(b) election (described below) is made. Absent a Section 83(b) election, recipients of restricted shares will recognize income at the time the restrictions are removed from the shares. In such event, recipients will recognize ordinary income on the date the restrictions are removed in an amount equal to the excess of the then fair market value of such shares over the purchase price (if any) paid for such shares. The tax basis in the shares with respect to which restrictions are removed will be equal to the sum of the amount paid for such shares plus the amount of ordinary income recognized by the recipient. The holding period for such shares for purposes of determining whether any capital gain or loss is short term or long term will begin just after the restrictions are removed (absent a Section 83(b) election).
Recipients will generally recognize capital gain or loss on a sale or exchange of the shares. The gain or loss will equal the difference between (i) the proceeds received on the sale or exchange and (ii) the adjusted tax basis in the shares. The gain or loss recognized on a sale or exchange of the shares will be long-term capital gain or loss if the shares are held for more than one year. The deductibility of capital losses is subject to limitation.
If a recipient makes a Section 83(b) election with respect to the shares, the recipient will recognize ordinary compensation income at the time the shares are issued and not when the restrictions are removed from such shares. In such event, the tax basis in the shares would equal their fair market value on the date issued, and the holding period for the shares would begin just after such date. However, if property for which a Section 83(b) election is in effect is forfeited while substantially non-vested, such forfeiture shall be treated as a sale or exchange upon which there is realized a loss equal to the excess (if any) of: (1) the amount paid (if any) for such property, over, (2) the amount realized (if any) upon such forfeiture. The advisability of making a Section 83(b) election will depend on various factors and each recipient's individual circumstances. Recipients are urged to consult with his or her own tax advisors regarding whether, where and how to make a Section 83(b) election. Recipients who decide to do so must make a Section 83(b) election no later than the thirtieth day following the issuance of the shares and, once made, such election generally would be irrevocable by a recipient.
Any distributions that we make in respect of the vested shares (or shares subject to a valid Section 83(b) election) will be treated as dividends, taxable to recipients as ordinary income, to the extent paid out of our current or accumulated earnings and profits. If the distribution exceeds our current or accumulated earnings and profits, such excess will be treated first as a tax-free return of the recipient's investment, up to the recipient's basis in the shares. Any remaining excess will be treated as capital gain. Any distributions that we make in respect of substantially non-vested shares (i.e., shares subject to a risk of forfeiture and on which no valid Section 83(b) election has been made) will be compensation income to the recipient and not a dividend.
We will generally be entitled to a compensation deduction for Federal income tax purposes in an amount equal to, and at the same time as, the ordinary income recognized by recipients. We will report the income on a Form W-2 or 1099, whichever is applicable, and will recognize a deduction in such amount.
Unrestricted Common Stock.
A person who receives an award of Common Stock generally will have taxable income at the time the shares are received (i) in an amount equal to the excess of the then fair market value of such shares over the purchase price (if any) paid for such shares, if the Common Stock is not subject to restrictions, or (ii) as described in the preceding paragraphs for restricted stock, if the shares are subject to restrictions. The tax treatment of a stock award that consists of other rights will depend on the provisions of the award. It may be immediately taxable if there are no restrictions on the receipt of the cash or other property that the stock award represents, or the tax consequences may be deferred if the receipt of cash or other property for the stock award is restricted, or subject to vesting or performance goals. In those situations in which a participant receives property subject to restrictions, the participant may wish to make a Section 83(b) election, as described above. At the time that the holder of the stock award has ordinary income, we will be entitled to a tax deduction equal to the amount of ordinary income realized by the holder.
Deductibility of Awards.
In general, Section 162(m) of the Code denies a publicly held corporation a federal income tax deduction for compensation in excess of $1 million per year per person paid to its “covered employees,” subject to certain exceptions. Prior to the adoption of the TCJA certain “performance based” compensation was exempted from the $1,000,000 deductibility limit, and we believe that the Grandfathered Awards qualify for the performance-based compensation exception to the deductibility limit.
Equity compensation plan information is included in the chart on page 25 of this proxy statement.
Vote Required
The approval of the Amended and Restated Charter by the stockholders requires the affirmative vote of the holders of a majority of sharesthe voting power of Common Stock present in person or by proxy at the Meeting andoutstanding stock entitled to vote on the proposal to amendthis proposal. Abstentions and restate the Incentive Plan is required to amend and restate the Incentive Plan.
broker non-votes are treated as votes against this proposal. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "“FOR"” THE AMENDMENT AND RESTATEMENTAPPROVAL OF THE INCENTIVE PLAN.THIS RESOLUTION.
PROPOSAL NO. 4
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Grant Thornton LLP (“Grant Thornton”) as our independent registered public accounting firm for the year ending December 31, 2021,2023, and the Board of Directors is asking stockholders to ratify that selection. Although current law, rules, and regulations, as well as the Audit Committee Charter, require the Audit Committee to engage, retain, and supervise our independent registered public accounting firm, the Board considers the selection of the independent registered public accounting firm to be an important matter of stockholder concern and is submitting the selection of Grant Thornton for ratification by stockholders as a matter of good corporate practice. If the stockholders do not ratify the selection of Grant Thornton, the Audit Committee will review our relationship with Grant Thornton and take such action as it deems appropriate, which may include continuing to retain Grant Thornton as our independent registered public accounting firm.
Vote Required
The affirmative vote of a majority of the votes cast by the stockholders entitled to vote on this proposal at the Meeting is required to ratify the appointment of Grant Thornton. Abstentions will not be treated as votes cast for this purpose and will not affect the outcome of the vote. Please see Voting Procedure section below, with respect to broker non-votesnon‑votes on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON.
Independent Registered Public Accounting Firm
The Audit Committee has appointed Grant Thornton LLP to be our independent registered public accounting firm and to audit our consolidated financial statements for the year ending December 31, 2021.2023. We are advised that no member of Grant Thornton has any direct financial interest or material indirect financial interest in us or has had any connection with us in the capacity of promoter, underwriter, voting trustee, director, officer or employee since such date. Grant Thornton also served as our independent registered public accounting firm during 20202022 and 2019.2021.
A representative of Grant Thornton is expected to be present at the Meeting and will be given the opportunity to make a statement if so desired. The representative will be available to respond to appropriate questions.
Audit Fees. We incurred an aggregate of approximately $494,143$1,218,000 in fees for audit services from Grant Thornton in the fiscal year ended December 31, 20202022 and an aggregate of approximately $495,596$567,225 in fees for audit services from Grant Thornton in the fiscal year ended December 31, 2019.2021. Audit fees include fees and expenses for professional services rendered in connection with the audit of our annual financial statements, the audit of our internal control over financial reporting, reviews of the financial statements included in each of our Quarterly Reports on Form 10-Q10‑Q during those years and fees for services related to our registration statements, consents and assistance with and review of documents filed with the SEC.
Audit-RelatedAudit‑Related Fees. We incurred no audit-relatedaudit‑related fees in the fiscal years ended December 31, 20202022 and 20192021 from Grant Thornton.
Tax Fees. We incurred noan aggregate of approximately $182,470 in tax fees from Grant Thornton for tax planning and compliance in the fiscal year ended December 31, 2022 and $106,000 in tax fees from Grant Thornton for the fiscal yearsyear ended December 31, 2020 and 2019, respectively, from Grant Thornton.2021.
All Other Fees. We incurred an aggregate of $87,310 in other fees from Grant Thornton in the fiscal year ended December 31, 2022 and no other fees forin the fiscal yearsyear ended December 31, 2020 and 2019, respectively,221 from Grant Thornton.
The Audit Committee has considered whether the provision of non-auditnon‑audit services by Grant Thornton is compatible with maintaining Grant Thornton’s independence, and believes that the provision of such services is compatible.
Audit Committee Policy on Pre-ApprovalPre‑Approval of Services of Independent Registered Public Accounting Firm
The Audit Committee’s policy is to pre-approvepre‑approve all audit and permissible non-auditnon‑audit services provided by Grant Thornton. These services may include audit services, audit-relatedaudit‑related services, tax services and other services. All of the services described under Audit Fees and Tax Fees in the immediately preceding section were approved by the Audit Committee.
OTHER MATTERS
Voting Procedures
The votes of stockholders present in person or represented by proxy at the Meeting will be tabulated by an inspector of elections we appoint. An automated system tabulates the votes. The vote on each matter submitted to stockholders is tabulated separately.
A quorum, consisting of a majority of shares of all stock issued, outstanding and entitled to vote at the Meeting, will be required to be present in person or by proxy for consideration of the proposals at the Meeting. However, if a quorum is not present, a vote of a majority of the votes properly cast will adjourn the Meeting, whether or not a quorum is present. Votes withheld, abstentions and broker “non-votes” are included in the number of shares present or represented for purposes of quorum, but are disregarded for purposes of determining whether any of the proposals other than the amendment and restatement of the Company’s Certificate of Incorporation (Proposal No. 3) have been approved.
Banks, brokers, or other holders of record may vote shares held for a customer in street name on matters that are considered to be “routine” even if they have not received instructions from their customer. A broker “non-vote” occurs when a bank, broker, or other holder of record has not received voting instructions from a customer and cannot vote the customer’s shares because the matter is not considered routine.
One of the proposals before the Meeting is deemed a “routine” matter, namely the ratification of the appointment of Grant Thornton as our independent registered public accounting firm for fiscal 20212023 (Proposal No. 4), which means that, if your shares are held in street name, your bank, broker, or other nominee can vote your shares on that proposal if you do not provide timely instructions for voting your shares. The election of directors (Proposal No. 1), the non-binding advisory vote to approve executive compensation (Proposal No. 2) and the proposed amendment and restatement of the Incentive PlanCompany’s Certificate of Incorporation (Proposal No. 3) are not considered “routine” matters. As a result, if you do not instruct your bank, broker or nominee how to vote with respect to those matters, your bank, broker or nominee may not vote on those proposals and a broker “non-vote” will occur. Therefore, we urge you to give voting instructions to your bank, broker or nominee on all FOUR voting items.
The persons named as the proxies, R. Jeffrey Bailly, Christopher P. Litterio and Ronald J. Lataille, were selected by the Board of Directors. We do not know of any other matters to be presented at the Annual Meeting. If any other matters are properly presented at the Annual Meeting, your proxy authorizes us to vote, or otherwise act in accordance with the best judgment and discretion of the persons named as proxies below.proxies.
Other Proposed Action
The Board of Directors knows of no matters that may come before the Meeting other than those discussed above. However, if any other matters should properly be presented to the Meeting, the persons named as proxies shall have discretionary authority to vote the shares represented by the accompanying proxy in accordance with their own judgment and applicable laws and regulations.
Stockholder Communications
Stockholders may contact our Board of Directors by writing to them c/o Investor Relations, UFP Technologies, Inc., 100 Hale Street, Newburyport, Massachusetts 01950-3504.01950‑3504. In general, any stockholder communication directed to the Board or a committee thereof will be delivered to the Board or the appropriate committee. However, we reserve the right not to forward to the Board any abusive, threatening or otherwise inappropriate materials.
Stockholder Proposals and Nominations for Director
We must receive stockholder proposals for inclusion in our proxy materials for the 20222024 Annual Meeting of Stockholders pursuant to Rule 14a-814a‑8 of the Securities Exchange Act of 1934 no later than December 28, 2021.January 2, 2024. These proposals must also meet the other requirements of the rules of the SEC and our Bylaws.
Our Bylaws establish an advance notice procedure with regard to proposals that stockholders otherwise desire to introduce at our 20212024 Annual Meeting of Stockholders without inclusion in our proxy statement for that meeting. Written notice of such stockholder proposals and director nominations for our 2024 Annual Meeting of Stockholders in 2022 must be received by our Board of Directors, c/o Secretary, UFP Technologies, Inc., 100 Hale Street, Newburyport, Massachusetts 01950-3504,01950‑3504, not later than March 11, 20228, 2024 and must not have been received earlier than February 9, 20227, 2024 in order to be considered timely, and must contain specified information concerning the matters proposed to be brought before such meeting and concerning the stockholder proposing such matters. The matters proposed to be brought before the meeting also must be proper matters for stockholder action. If a stockholder who wishes to present suchnominate a director or make a proposal fails to notify us within this time frame, the proposal will not be addressed at our 2024 Annual Meeting of Stockholders. If a stockholder makes a timely notification, the proxies that management solicits for the meeting will have discretionary authority to vote on the stockholder’s proposal if it is properly brought before the meeting. If a stockholder makes a timely notification, the proxies may still exercise discretionary voting authority under circumstances consistent with the proxy rules of the SEC. In addition to satisfying the advance notice procedure in our Bylaws with respect to director nominations, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees for the 2024 Annual Meeting of Stockholders must provide notice that sets forth the information set forth in Rule 14a-19 under the Exchange Act of 1934, either postmarked or transmitted electronically to the Company no later than April 8, 2024.
Pursuant to our Bylaws, the notice must set forth: (a) for each nominee (i) information as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC, and (ii) written consent to be named in theany proxy statement and any associated proxy card and serve as director if so elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of any proposed business including (i) the text of such proposal and any accompanying resolutions, (ii) the reasons for conducting such business at the meeting, and (iii) any material interest held by the proposing stockholder or any beneficial owner on whose behalf the proposal is made; and (c) proposing stockholder and/or beneficial owner information including, (i) name and address, (ii) the class and number of shares of capital stock held, (iii) a description of any agreement, arrangement or understanding with respect to the nomination or proposal with any of their affiliates or associates, and any others acting in concert with the foregoing, (iv) a description of any agreement, arrangement or understanding with respect to shares of our stock entered into by the date of such notice for the purposes of loss mitigation, risk management or derivation of benefit from share price changes and/or redistribution of voting power, (v) a representation that such stockholder is the holder of record, is entitled to vote, and intends to appear in person or by proxy and propose such business or nomination, (vi) a representation of intention to either deliver proxy statements to holders of the necessary percentage of shares or to solicit proxies in support of the proposal, and (vii) any other information relating to such stockholder and/or beneficial owner required to be disclosed in filings made in connection with solicitation of proxies pursuant to the Securities Exchange Act of 1934. The stockholder can alternatively satisfy the notice requirement by submitting proposals in compliance with SEC requirements and inclusion of such proposal within a proxy statement we prepare. Compliance with our Bylaws shall be the exclusive means for a stockholder to make nominations or submit other business to the annual meeting (other than matters properly brought in compliance with the rules of the Securities Exchange Act of 1934).
“Householding” of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and annual reports with respect to two or more shareholders sharing the same address by delivering a single proxy statement and annual report addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for shareholders and cost savings for companies.
Once you have received notice from your broker or us that each of us will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, or if you are receiving multiple copies of the proxy statement and annual report and wish to receive only one, please notify your broker if your shares are held in a brokerage account or the Company if you hold registered shares. You can notify us by sending a written request to UFP Technologies, Inc., Attention: Investor Relation, 100 Hale Street, Newburyport, Massachusetts 01950 3504, or call us at (978) 352-2200.
Incorporation By Reference
To the extent that this Proxy Statement has been or will be specifically incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, the section of the Proxy Statement entitled “Report of the Audit Committee” shall not be deemed to be so incorporated, unless specifically otherwise provided in any such filing.
Annual Report on Form 10-K10‑K
Copies of our Annual Report on Form 10-K10‑K for the fiscal year ended December31, 20202022 as filed with the Securities and Exchange Commission, this Proxy Statement and the Proxy Card are available to stockholders without charge at our website, www.ufpt.com/investors/filings.html, and upon written request addressed to Investor Relations, UFP Technologies,Inc. at 100Hale Street, Newburyport, Massachusetts 01950-3504.01950‑3504.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS ARE URGED TO FILL IN, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE ENCLOSED ENVELOPE.
Appendix A
ANNEX A
FORM
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
UFP TECHNOLOGIES, INC.
2003 INCENTIVE PLAN
As Amended(Pursuant to Sections 242 and Restated on March 16, 2021245 of the
General Corporation Law of the State of Delaware)
UFP Technologies, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”),
DOES HEREBY CERTIFY:
1.Statement of Purpose. The purpose That the name of this 2003 Incentive Plancorporation is UFP Technologies, Inc. and that this corporation was originally incorporated pursuant to the General Corporation Law on October 15, 1993; and
2. That the Board of Directors duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:
FIRST: The name of the corporation (hereinafter referred to ascalled the “Plan”“Corporation”) is UFP Technologies, Inc.
SECOND: The address, including street, number, city, and county, of the registered office of the Corporation in the State of Delaware is 251 Little Falls Drive, Wilmington, County of Newcastle, Delaware 19808; and the name of the registered agent of the Corporation in the State of Delaware at such address is Corporation Service Company.
THIRD: The nature of the business and the purposes to benefit UFP TECHNOLOGIES, INC. (the “Company”) throughbe conducted and promoted by the maintenanceCorporation, shall be (a) to engage in the manufacture, sale, research and development of its businesses by offering equity-basedpackaging and other incentivesspecialty products and (b) any lawful business, to certain presentpromote any lawful purpose, and future executives and other employees who areto engage in a position to contribute toany lawful act or activity for which corporations may be organized under the long-term success and growthGeneral Corporation Law of the Company, thereby encouraging the continuanceState of their involvement with the Company and/or its subsidiaries.Delaware.
2. Administration of the PlanFOURTH.:
(a) Board or Committee Administration. The Plan shall be administered by the Compensation Committeetotal number of the Company's Boardshares of Directors (the “Board”) or such other committee thereof consistingall classes of such members (not less than two) of the Board as are appointed from time to time by the Board (the “Compensation Committee”), each of the members of which, at the time of any action under the Plan, shall be (i) a “non-employee director” as then defined under Rule 16b-3 under the Act (or meeting comparable requirements of any successor rule relating to exemption from Section 16(b) of the Act) and (ii) an “independent director” as then defined under the rules of the Nasdaq Stock Market (or meeting comparable requirements of any stock exchange on which the Company'sCorporation shall have authority to issue is (i) 20,000,000 shares of Common Stock, $.01 par value per share (“Common Stock”), and (ii) 1,000,000 shares of Preferred Stock, $.01 par value per share (the “Common“Preferred Stock”).
(b) The Preferred Stock may then be listed). Hereinafter, all references in this Plan to the “Committee” shall meanissued and designated by the Board if no Committee has been appointed. The Committeeof Directors, in one or more classes or series and with such rights, powers, preferences and terms and at such times and for such consideration as the Board of Directors shall have all necessary powersdetermine, without further stockholder action. With respect to administereach class or series of Preferred Stock, prior to issuance, the Board of Directors by resolution shall designate that class or series to distinguish it from other classes and interpret the Plan. Such powersseries of stock of the Compensation Committee include exclusive authority (withinCorporation, shall specify the limitations described and except as otherwise providednumber of shares to be included in the Plan) to selectclass or series, and shall fix the employees or determine classes of employees to be granted Awards under the Plan, to determine the aggregate amount, type, size,rights, powers, preferences and terms of the Awardsshares of the class or series, including, but without limitation: (i) the dividend rate, which may be fixed or variable, its preference as to any other class or series of capital stock, and whether dividends will be cumulative or noncumulative; (ii) whether the shares are to be redeemable and, if so, at what times and prices (which price or prices may, but need not, vary according to the time or circumstances of such redemption) and on what other terms and conditions; (iii) the terms and amount of any sinking fund provided for the purchase or redemption of the shares; (iv) whether the shares shall be convertible or exchangeable and, if so, the times, prices, rates, adjustments and other terms of such conversion or exchange; (v) the voting rights, if any, applicable to the shares in addition to those prescribed by law; (vi) the restrictions and conditions, if any, on the issue or reissue of any additional shares of such class or series or of any other class or series of Preferred Stock ranking on a parity with or prior to the shares of such class or series; (vii) whether, and the extent to which, any of the rights, powers, preferences and terms of any such class or series may be made dependent upon facts ascertainable outside of the Certificate of Incorporation or outside the resolution or resolutions providing for the issuance of such class or series by the Board of Directors, provided that the manner in which such facts shall operate is clearly set forth in the resolution or resolutions providing for the issuance of such class or series adopted by the Board of Directors; and (viii) the rights of the holders of such shares upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation.
FIFTH: [Intentionally omitted]
SIXTH: The Corporation shall have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to eligible employees,be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agrees to any compromise or arrangement and to determineany reorganization of this Corporation as a consequence of such compromise or arrangement, the time when Awards willsaid compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be granted. The Compensation Committeebinding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may take into consideration recommendations frombe, and also on this Corporation.
EIGHTH: For the appropriate officersmanagement of the Company with respect to making the foregoing determinations as to Plan Awards, administration, and interpretation. The Committee shall have full power and authority to adopt such rules, regulations, agreements and instruments for the administration of the Planbusiness and for the conduct of its business as the Committee deems necessary or advisable. The Committee's interpretationsaffairs of the PlanCorporation, and all action takenin further definition, limitation and determinations made by the Committee pursuant toregulation of the powers vested in it hereunder shall be conclusive and binding on all parties concerned, including the Company, its shareholders and any director or employee of the CompanyCorporation and of its directors and of its stockholders or any Subsidiary.
(b) Committee Actions. The Committee may select one class there‐of, its members as its chairman, and shall hold meetings at such time and places as it may determine. A majority of the Committee shall constitute a quorum and acts of a majority of the members of the Committee at a meeting at which a quorum is present, or acts reduced to or approved in writing by all the members of the Committee (if consistent with applicable state law), shall be the valid acts of the Committee. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer the Plan.
(c) Section 409A. The Committee shall take into account compliance with Section 409A of the Internal Revenue Code in connection with any grant of an Award under the Plan, to the extent applicable.
3. Eligibility. Participation in the Plan shall be limited to executives or other employees (including officers and directors who are also employees) of the Company and its Subsidiaries selected on the basis of such criteria as the Committee may determine. Employees who participate in other incentive or benefit plans of the Company or any Subsidiary may also participate in this Plan. As used herein, the term “employee” shall mean any person employed full time or part time by the Company or a Subsidiary on a salaried basis, and the term “employment” shall mean full-time or part-time salaried employment by the Company or a Subsidiary.
4. Rules Applicable to Awards.
(a) All Awards.
(i) Awards. Awards may be granted in the form of any or a combination of the following: Stock Options; SARs; Restricted Stock; Unrestricted Stock; Stock Unit Awards, other Stock Based Awards; Cash Performance Awards; other Performance Awards; or grants of cash, or loans, made in connection with other Awards in order to help defray in whole or in part the economic cost (including tax cost) of the Award to the Participant.
(ii) Terms of Awards. The Committee shall determine the terms of all Awards subject to the limitations provided herein.
(iii) Performance Criteria. Where rights under an Award depend in whole or in part on satisfaction of Performance Criteria, actions by the Company that have an effect, however material, on such Performance Criteria or on the likelihood that they will be satisfied will not be deemed an amendment or alteration of the Award.
(iv) Vesting, Etc. Without limiting the generality of Section 4(a)(ii), the Committee may determine the time or times at which an Award will vest (i.e., become free of forfeiture restrictions) or become exercisable and the terms on which an Award requiring exercise will remain exercisable.
(b) Awards Requiring Exercise.
(i) Time and Manner of Exercise. Unless the Committee expressly provides otherwise, (A) an Award requiring exercise by the holder will not be deemed to have been exercised until the Committee receives a written notice of exercise (in form acceptable to the Committee) signed by the appropriate person and accompanied by any payment required under the Award; and (B) if the Award is exercised by any person other than the Participant, the Committee may require satisfactory evidence that the person exercising the Award has the right to do so.
(ii) Exercise Price. The Committee shall determine the exercise price of each Stock Option or SAR; provided, however, that each Stock Option or SAR must have an exercise price that is not less than the fair market value of the Stock subject to the Stock Option, determined as of the date of grant. Except as provided in Section 6, in no event may any Stock Option or SAR previously granted under the Plan (i) be amended to decrease the exercise price or strike price thereof, as the case may be, (ii) be cancelled in conjunction with the grant of any new Stock Option or SAR with a lower exercise price or strike price, as the case may be, (iii) be amended to provide for a cash buyoutit is further provided that:
(a) The business of the Stock Option or SAR if such Stock Option or SAR is not “inCorporation shall be conducted by the money,” (iv) be subject to a voluntary surrender and subsequent grantofficers of “in the money” Stock Option or SAR (v) otherwise be subject to any action that would be treatedCorporation under the NASDAQ rules as a “repricing”supervision of such Stock Option or SAR unless such amendment, cancellation or action is approved by the Company’s shareholders.Board of Directors.
(iii) Payment(b) The number of Exercise Price, If Any. Wheredirectors which shall constitute the exercisewhole Board of an Award is toDirectors shall be accompaniedfixed by, payment,or in the Committee may determinemanner provided in, the required or permitted formsBy-Laws. No election of payment.Directors need be by written ballot.
(c) Awards Not Requiring Exercise.The Directors shall be elected for an annual term until the next succeeding annual meeting of stockholders and until such successors are duly elected and qualified.
(i). Restricted Stock. Restricted Stock awards(d) In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to adopt, amend or repeal the By-laws of the Corporation.
(e) Notwithstanding any other provision of law, all action required to be taken by the stockholders of the Corporation shall be evidencedtaken at a meeting duly called and held in accordance with law and with the Certificate of Incorporation and the By-laws, and not by written consent
NINTH:
(a) The Corporation may, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which a writtenperson indemnified may be entitled under any By-Law, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
(b) No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law (i) for breach of the Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the General Corporation Law of the State of Delaware or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this paragraph (b) of this Article Ninth shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such Director occurring prior to such amendment.
(c) No officer shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such officer as an officer. Notwithstanding the foregoing sentence, an officer shall be liable to the extent provided by applicable law (i) for breach of the officer’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for any transaction from which the officer derived an improper personal benefit, (iv) in any action by or in the formright of the Corporation. No amendment to or repeal of this paragraph (c) of this Article Ninth shall apply to or have any effect on the liability or alleged liability of any officer of the Corporation for or with respect to any acts or omissions of such officer occurring prior to such amendment.
TENTH: From time to time, subject to the provisions of this Certificate of Incorporation (including without limitation the provisions of paragraph (d) of Article Eleventh and of Article Twelfth), any of the provisions of this Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the Committeestockholders of the Corporation by this Certificate of Incorporation are granted subject to the provisions of this Article Tenth.
ELEVENTH:
(a) Any direct or indirect purchase or other acquisition in its discretion, whichone or more transactions by the Corporation or any Subsidiary of any of the outstanding Voting Stock of any class from any one or more individuals or entities known by the Corporation to be a Related Person, who has beneficially owned such security or right for less than two years prior to the date of such purchase, at a price in excess of the Fair Market Value shall, set forthexcept as hereinafter provided, require the affirmative vote of the holders of at least two-thirds of the shares of Voting Stock, voting as a single class, excluding any votes cast with respect to shares of Voting Stock beneficially owned by such Related Person. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified by law or any agreement with any national securities exchange, or otherwise, but no such affirmative vote shall be required with respect to any purchase or other acquisition of securities made as part of (i) a tender or exchange offer by the Corporation to purchase securities of the same class made on the same terms to all holders of such securities and complying with the applicable requirements of the Exchange Act and the rules and regulations thereunder, or any successor rule or regulation or (ii) pursuant to an open-market purchase program conducted in accordance with the requirements of Rule 10b-18 promulgated by the Securities and Exchange Commission pursuant to the Exchange Act or any successor rule or regulation.
(b) A majority of the Continuing Directors shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article Eleventh including, without limitation, (i) whether a person is a Related Person, (ii) the number of shares of CommonVoting Stock awarded, the restrictions imposed thereon (which may include, without limitation, restrictions on the rightbeneficially owned by any person and (iii) whether a price is in excess of the grantee to sell, assign, transfer or encumber shares while such shares are subject to other restrictions imposed underFair Market Value.
(c) Nothing contained in this Section 4), the duration of such restrictions; the events (which may, in the discretion of the Committee, include performance-based events or objectives) the occurrence of which would cause a forfeiture of the Restricted Stock in whole or in part; and such other terms and conditions as the Committee in its discretion deems appropriate. If so determined by the Committee at the time of an award of Restricted Stock, the lapse of restrictions on Restricted Stock may be based on the extent of achievement over a specified performance period of one or more performance targets based on performance criteria established by the Committee. Restricted Stock awardsArticle Eleventh shall be effective upon execution of the applicable Restricted Stock agreement by the Company and the Participant. Following a Restricted Stock award and priorconstrued to the lapse or termination of the applicable restrictions, the share certificates for such Restricted Stock shall be held in escrow by the Company. Upon the lapse or termination of the applicable restrictions (and not before such time), the certificates for the Restricted Stock shall be issued or delivered to the Participant. From the date a Restricted Stock award is effective, the Participant shall be a shareholder with respect to all the shares represented by such certificates and shall have all the rights of a shareholder with respect to all such shares, including the right to vote such shares and to receive all dividends and other distributions paid with respect to such shares, subject only to the restrictionsrelieve any Related Person from any fiduciary obligation imposed by the Committee.
(ii). Stock Unit Awards. Stock Unit Awards shall be evidenced by a written agreement in the form prescribed by the Committee in its discretion, which shall set forth the number of shares of Common Stock to be awarded pursuant to the Award, the restrictions imposed thereon (which may include, without limitation: restrictions on the right of the grantee to sell, assign, transfer or encumber the Award prior to vesting, and, in the discretion of the Committee, certain continued service requirements and terms under which the vesting of such Awards might be accelerated) and such other terms and conditions as the Committee in its discretion deems appropriate. If so determined by the Committee at the time of the grant of a Stock Unit Award, vesting of the Award may be contingent on achievement over a specified performance period of one or more performance targets based on performance criteria established by the Committee. Stock Unit Awards shall be effective upon execution of the applicable Stock Unit Award Agreement by the Company and the Participant. Upon a determination of satisfaction of the applicable performance-related conditions and satisfaction of the applicable continued service requirements, (and not before such time), shares of Stock shall be issued to the Participant pursuant to the Award. The Participant shall not have any rights of a shareholder of the Company with respect to such shares prior to such issuance.
(iii) Unrestricted Stock and Other Stock-Based Awards. The Committee shall have the authority in its discretion to grant to eligible Participants Unrestricted Stock and other Stock-Based Awards. The Committee shall determine the terms and conditions, if any, of any Other Stock Based Awards made under the Plan.
(iv) Non Stock – Based Awards. The Committee shall have the authority in its discretion to grant to eligible Participants Awards not based on the Stock, including, without limitation, Cash Performance Awards, and other Performance Awards as deemed by the Committee to be consistent with the purposes of the Plan.
5. Limits on Awards under the Plan.
(a) Number of Shares. A maximum of 2,250,000 shares of Common Stock, subject to adjustment as provided in Section 6, may be delivered in satisfaction of Stock-Based Awards under the Plan.
(b)Share Counting Rules. The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Award. To the extent that an Award expires or is canceled, forfeited, settled in cash or otherwise terminated or concluded without a delivery to the Participant of the full number of shares to which the Award related, the undelivered shares will again be available for grant. Shares withheld in payment of the exercise price or taxes relating to an Award and shares equal to the number surrendered in payment of any exercise price or taxes relating to an Award shall be deemed to constitute shares not delivered to the Participant and shall be deemed to again be available for Awards under the Plan; provided, however, that, where shares are withheld or surrendered more than ten years after the date of the most recent stockholder approval of the Plan or any other transaction occurs that would result in shares becoming available under this Section 5(b), such shares shall not become available if and to the extent that it would constitute a material revision of the Plan subject to stockholder approval under then applicable rules of the national securities exchange on which the Stock is listed or the Nasdaq Stock Market, as applicable.
(c) Type of Shares. Common Stock delivered by the Company under the Plan may be authorized but unissued Common Stock or previously issued Common Stock acquired by the Company and held in treasury. No fractional shares of Common Stock will be delivered under the Plan.law.
(d) Other Stock-Based Award Limits. The maximum numberNotwithstanding anything contained in this Certificate of shares of Common Stock subjectIncorporation to Awards that may be granted to any person in any calendar year shall be 150,000. In addition, in no event shall the number of Awards providing forcontrary, the acquisition of shares of Common Stock for a consideration less than Fair Market Value asaffirmative vote of the dateholders of grant or exerciseat least two-thirds of such Awards granted to all Participants in any Fiscal Year exceed 250,000. For this purpose, Fair Market Value may be determined as of a date not more than two trading days prior to the date of grant or exercise in order to facilitate compliance with the reporting requirements under Section 16 of the Act. Subject to these limitations, each person eligible to participate in the Plan shall be eligible in any year to receive Awards covering up to the full number of shares of Common Stock then available for Awards under the Plan.
(e) Other Award Limits. No more than $1,000,000 may be paid to any individual with respect to any Cash Performance Award or other Performance Award (other than an Award expressed in terms of shares of Common Stock or units representing Common Stock, which shall instead be subject to the limit set forth in Section 5(d) above). In applying the dollar limitation of the preceding sentence: (A) multiple Cash or other Performance Awards to the same individual that are determined by reference to performance periods of one year or less ending with or within the same fiscal year of the Company shall be subject in the aggregate to one $1,000,000 limit, and (B) multiple Cash or other Performance Awards to the same individual that are determined by reference to one or more multi-year performance periods ending in the same fiscal year of the Company shall be subject in the aggregate to separate $1,000,000 limits.
6. Adjustments for Recapitalizations, Mergers, Etc.
(a) Dilution and Other Adjustments. Notwithstanding any other provision of the Plan, in the event of any change in the outstanding shares of CommonVoting Stock, by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares, or other similar corporate change (includingvoting together as a Corporate Event, as defined below), an equitable adjustmentsingle class, shall be made,required to alter, change, amend, repeal or adopt any provision inconsistent with this Article Eleventh.
TWELFTH: Except as determinedotherwise provided in this Certificate of Incorporation, the By-laws, any designation of terms pursuant to Section 151 of the General Corporation Law of the State of Delaware, any vote required by stockholders pursuant to said General Corporation Law, other than the election of directors (which shall not be affected by this provision), shall be effective if recommended by a majority of the Continuing Directors and the vote of a majority of each class of stock outstanding and entitled to vote thereon; and if not recommended by a majority of the Continuing Directors, then by the Committee, so asvote of 80% of each class of stock outstanding and entitled to preserve, without increasing or decreasing,vote thereon.
THIRTEENTH:
Definitions
The following definitions shall apply for the valuepurpose of AwardsArticles Eleventh and authorizations,Twelfth only:
(a) “Affiliate” shall have the meaning given such term in (i) the maximum number or kind of shares issuable or Awards which may be grantedRule 12b-2 under the Plan, (ii) the maximum number, kind or value of any Plan Awards which may be awarded or paid in general or to any one employee or to all employees in a Fiscal Year, (iii) the performance-based events or objectives applicable to any Plan Awards, (iv) any other aspect or aspects of the Plan or outstanding Awards made thereunder as specified by the Committee, or (v) any combination of the foregoing. Such adjustments shall be made by the Committee and shall be conclusive and binding for all purposes of the Plan.Exchange Act.
(b) Corporate Events. Notwithstanding the foregoing, except as may otherwise be provided in an Award agreement or a written employment agreement between the Participant and the Company which has been approved by the Committee, upon any Corporate Event, in lieu of providing the adjustment set forth in Section 6(a) above, the Committee may, in its discretion, cancel any or all vested and/or unvested Awards as of the consummation of such Corporate Event, and provide that holders of Awards so cancelled will receive a payment in respect of cancellation of their Awards based on the amount of the per share consideration being paid for the Stock in connection with such Corporate Event, less, in the case of Options and other Awards subject to exercise, the applicable exercise price; provided, however, that holders of (i) Options shall only be entitled to consideration in respect of cancellation of such Awards if the per share consideration less the applicable exercise price is greater than zero, and (ii) Performance Awards shall only be entitled to consideration in respect of cancellation of such Awards to the extent that applicable performance criteria are achieved prior to or as a result of such Corporate Event, and shall not otherwise be entitled to payment in consideration of cancelled unvested Awards. Payments to holders pursuant to the preceding sentence shall be made in cash, or, in the sole discretion of the Committee, in such other consideration necessary for a holder of an Award to receive property, cash or securities as such holder would have been entitled to receive upon the occurrence of the transaction if the holder had been, immediately prior to such transaction, the holder of the number of shares of Stock covered by the Award at such time.
7. Miscellaneous Provisions.
(a) The holder of a Plan Award“Associate” shall have no rights as a Company shareholder with respect thereto unless, and until the date as of which, shares of Common Stock shall have been issuedmeaning given such term in respect of such Award.
(b) Except asRule 12b-2 under the Committee shall otherwise determine in connection with determining the terms of Awards to be granted or shall thereafter permit, no Plan Award or any rights or interests therein of the recipient thereof shall be assignable or transferable by such recipient except upon death to his or her Designated Beneficiary or by will or the laws of descent and distribution, and, except as aforesaid, during the lifetime of the recipient, a Plan Award shall be exercisable only by, or payable only to, as the case may be, such recipient or his or her guardian or legal representative.Exchange Act.
(c) All Awards granted under“Continuing Director” shall mean any member of the Plan shallBoard of Directors who is not an Affiliate of any Related Person and who was a member of the Board of Directors prior to the time that any such Related Person became a Related Person, and any successor of a Continuing Director who is unaffiliated with any Related Person and is recommended to succeed a Continuing Director by a majority of the Continuing Directors then on the Board of Directors. Notwithstanding the above, a majority of the then existing Continuing Directors can deem a new director to be evidenced by agreements ina Continuing Director, even though such form and containing and/or incorporating such terms and conditions (not inconsistentperson is Affiliated with the Plan and applicable law) in addition to those provided for herein as the Committee shall approve.a Related Person.
(d) No shares of Common Stock shall be issued, delivered or transferred upon exercise or in payment of any Award granted hereunder unless and until all legal requirements applicable to the issuance, delivery or transfer of such shares have been complied with to the satisfaction of the Committee and the Company, including, without limitation, compliance with the provisions of the Securities Act of 1933, the Act and the applicable requirements of the exchanges on which the Company's Common Stock may, at the time, be listed. The Committee and the Company shall have the right to condition any issuance of shares of Common Stock made to any Participant hereunder on such Participant's undertaking in writing to comply with such restrictions on his or her subsequent disposition of such shares as the Committee and/or the Company shall deem necessary or advisable as a result of any applicable law, regulation or official interpretation thereof, and certificates representing such shares may be legended to reflect any such restrictions.
(e) The Company shall have the right to make such provision for the withholding of taxes as it deems necessary. In furtherance of the foregoing, the Company shall have the right to require, as a condition of the distribution of Awards in Common Stock, that the Participant or other person receiving such Common Stock either (i) pay to the Company at the time of distribution thereof the amount of any federal, state, or local taxes which the Company is required to withhold with respect to such Common Stock or (ii) make such other arrangements as the Company may authorize from time to time to provide for such withholding including without limitation having the number of the units of the Award cancelled or the number of the shares of Common Stock to be distributed reduced by an amount with a value equal to the value of such taxes required to be withheld. Notwithstanding the foregoing, the Committee may, in its discretion, in connection with the grant of any Award of Common Stock, authorize the Company to pay to Participant receiving the Award, a cash gross-up payment in an amount necessary to cover such federal, state or local taxes attributable to such Award and to such cash payment.
(f) No employee or director of the Company or a Subsidiary or other person shall have any claim or right to be granted an Award under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any employee any right to be retained in the employ of the Company or a Subsidiary, it being understood that all Company and Subsidiary employees who have or may receive Awards under this Plan are employed at the will of the Company or such Subsidiary and in accord with all statutory provisions.
(g) The costs and expenses of administering this Plan shall be borne by the Company and not charged to any Award or to any employee or Participant receiving an Award.
(h) In addition to the terms defined elsewhere herein, the following terms as used in this Plan shall have the following meanings:
““Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, from time to time.
“Award”(e) “Fair Market Value” shall mean: (i) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the principal United States securities exchange registered under the Exchange Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use or, if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board of Directors in good faith; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board of Directors in good faith.
(g) “Merger Date” shall mean an award described in Section 4(a)(i).November 15, 1993.
“Business Combination”(h) “Person” shall mean any individual, firm, corporation or other entity.
(i) “Related Person” shall mean any Person (other than the consummation ofCorporation, any Subsidiary or any individual who was a reorganization, merger or consolidation or sale or disposition of all or substantially allstockholder of the assetsCorporation on the Merger Date) which, together with its Affiliates and Associates and with any other Person (other than the Corporation, any Subsidiary or any individual who was a stockholder of the Company.
“Cash Performance Award” shall mean a Performance Award payableCorporation on the Merger Date) with which it or they have entered into, after the Merger Date, any agreement, arrangement or understanding with respect to acquiring, holding or disposing of Voting Stock, acquires beneficial ownership (as defined in cash. The rightRule 13d-3 of the CompanyExchange Act, except that such term shall include any Voting Stock which such person has the right to extinguish an Award in exchange for cashacquire, whether or the exercise by the Company ofnot such right shall not make an Award otherwise not payable in cash a Cash Performance Award.
“Change in Control” shall, unless otherwise provided in an Award agreement, or an employee’s effective negotiated employment, change in control, severance or similar arrangement, mean: (i) a Business Combination, unless, in each case following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of the Common Stock of the Company immediately before the consummation of such Business Combination beneficially own,may be exercised within 60 days), directly or indirectly of more than 50%5% of respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securitiesVoting Stock after the Merger Date.
(j) “Subsidiary” shall mean any corporation in which a majority of the capital stock entitled to vote generally in the election of directors as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that as a result of the transaction owns the Company or all or substantially all of the assets of the Company eitheris owned, directly or indirectly, through one or more subsidiaries); and (B) no person or group (as defined in Section 13(d) or 14(d)(2) ofby the Securities Exchange Act of 1934) of the Company or the corporation resulting from the Business Combination) beneficially owns, directly or indirectly, more than 50%Corporation.
(k) “Voting Stock” shall mean all of the then outstanding shares of the common stock of the corporation resulting from the Business Combination; (ii) individuals who, as of the date of grant of an Award hereunder constitute the Board of Directors of the Company (the “Incumbent Board”) thereafter cease for any reason to constitute at least a majority of the Board of Directors of the Company, provided, however, that any individual's becoming a director after the date of grant of such Award whose election, or nomination for election by the stockholders of the Company, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board will be considered as though the individual were a member of the Incumbent Board, but excluding, for this purpose, any individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) any person (as defined in Section 13(d) or 14(d)(2) of the Securities Exchange Act of 1934) shall become at any time or in any manner the beneficial owner of capital stock of the Company representing more than 50% of the voting power of the Company.
“Corporate Event” means (i) a merger or consolidation involving the Company in which the Company is not the surviving corporation; (ii) a merger or consolidation involving the Company in which the Company is the surviving corporation but the holders of shares of Stock receive securities of another corporation and/or other property, including cash; or (iii) the reorganization or liquidation of the Company.
“Designated Beneficiary” shall mean the person or persons, if any, last designated as such by the Participant on a form filed by him or her with the Company in accordance with such procedures as the Committee shall approve.
“Fair Market Value” of a share of Common Stock of the Company on any date shall mean the closing price of the Common Stock on the trading day coinciding with such date, or if not trading on such date, then the closing price as of the next following trading day. If shares of the Common Stock shall not have been traded on any national exchange or interdealer quotation system for more than 10 days immediately preceding such date or if deemed appropriate by the Committee for any other reason, the fair market value of shares of Common Stock shall be determined by the Committee in such other manner as it may deem appropriate.
“Fiscal Year” shall mean the twelve-month period used as the annual accounting period by the Company and shall be designated accordingCorporation entitled to the calendar year in which such period ends.
“Internal Revenue Code” shall mean the Internal Revenue Code of 1986 and regulations thereunder as amended from time to time. References to particular sections of the Internal Revenue Code shall include any successor provisions.
“ISO” shall mean an incentive stock option under Section 422 of the Internal Revenue Code.
“Participant” shall mean, as to any Award granted under this Plan and for so long as such Award is outstanding, the employee to whom such Award has been granted.
“Performance Award” shall mean an Award subject to Performance Criteria. To the extent any Performance Award that was issued prior to adoption of the Tax Cuts and Jobs Act of 2017 was intended to be eligible for the performance-based compensation exception under Section 162(m) of the Internal Revenue Code, the Plan and such award shall be construed to the maximum extent permitted by law in a manner consistent with qualifying the award for such exception.
“Performance Criteria” shall mean specified criteria the satisfaction of which is a condition for the exercisability, vesting or full enjoyment of an Award. Performance Criterion shall mean: (a) an objectively determinable measure of performance relating to any of the following (determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis, or in combinations thereof): (i) sales; revenues; assets; liabilities; costs; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, amortization or other items, whether or not on a continuing operations or an aggregate or per share basis; comparisons with various stock market indices; return on equity, investment, capital or assets; one or more operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; working capital requirements; stock price; stockholder return; sales, contribution or gross margin, of particular products or services; particular operating or financial ratios; customer acquisition, expansion, retention; customer satisfaction; employee satisfaction; economic value added; attainment of strategic and operational initiatives; improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; operating margin; year-end cash; operating efficiencies; research and development achievements; manufacturing achievements (including obtaining particular yields from manufacturing runs and other measurable objectives related to process development activities); implementation, completion or attainment of measurable objectives with respect to manufacturing, commercialization, products or projects, production, volume levels, acquisitions and divestitures, recruiting and maintaining personnel; or any combination of the foregoing; or (ii) acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances;
strategic partnerships or transactions; spin-offs, split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity) and refinancings; transactions that would constitute a change of control; or any combination of the foregoing, or (b) a subjectively determinable measure of performance. A Performance Criterion measure and targets with respect thereto determined by the Committee need not be based upon an increase, a positive or improved result or avoidance of loss. In determining attainment of a performance goal (A) the Committee may exclude the impact of unusual, non-recurring or extraordinary items attributable to (1) acquisitions or dispositions of stock or assets, (2) any changes in accounting standards or treatments that may be required or permitted by the Financial Accounting Standards Board, Public Company Accounting Oversight Board or adopted by the Company, the Subsidiaries or any applicable division, business segment or business unit after the goal is established, (3) restructuring activities, including, without limitation, plant closings, plant moves or consolidations, (4) disposal of a segment of a business, (5) discontinued operations, (6) unbudgeted capital expenditures, (7) the issuance or repurchase of equity securities and other changesvote generally in the numberelection of outstanding shares, and (8) any business interruption event; and (B) the Committee may determine after the start of a Performance Period to exclude such other items, each determined according to Generally Accepted Accounting Principles (to the extent applicable) as identified in the Company’s accounts, financial statements, notes thereto, or management discussion and analysis.
“Restricted Stock” shall mean an Award of Stock subject to forfeiture to the Company if specified conditions are not satisfied.
“SARs” shall mean rights entitling the holder upon exercise to receive cash or Stock, as the Committee determines, equal to a function (determined by the Committee using such factors as it deems appropriate) of the amount by which the Stock has appreciated in value since the date of the Award.
“Stock” shall mean Common Stock of the Company, par value $.01 per share.
“Stock-based Awards” shall mean such awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of Common Stock as deemed by the Committee to be consistent with the purposes of the Plan, and shall include, without limitation, all Stock Options, SARs, Restricted Stock, Stock Unit Awards and any Performance Awards consisting of any of the foregoing.
“Stock Options” shall mean options entitling the recipient to acquire shares of Stock upon payment of the exercise price and shall consist of ISO’s and non-statutory options.
“Stock Unit Awards” shall mean an award payable in shares of Stock. A Stock Unit Award may, but shall not be required to, include a Performance Award.
“Subsidiary” shall mean any domestic or foreign corporation, partnership, association, joint stock company, trust or unincorporated organization “affiliated “ with the Company, that is, directly or indirectly, through one or more intermediaries, “controlling”, “controlled by” or “under common control with”, the Company.
“Unrestricted Stock” shall mean an Award of Stock not subject to any restrictions under the Plan.
(i) This Plan shall be governed by the laws of the Commonwealth of Massachusetts and shall be construed for all purposes in accordance with the laws of said Commonwealth except as may be required by the General Corporation Law of Delaware or by applicable federal law.
8. Amendments and Termination; Requisite Shareholder Approval. The Board may at any time terminate or from time to time amend or suspend the Plan in whole or in part in such respects as the Board may deem advisable in order that Awards granted thereunder shall conform to any change in the law, or in any other respect which the Board may deem to be in the best interests of the Company; provided, however, that no amendment of the Plan shall be made without shareholder approval if shareholder approval of the amendment is at the time required by applicable law, or by the rules of the Nasdaq Stock Market or any stock exchange on which Common Stock may be listed. The Board shall have the power to amend the Plan in any manner contemplated by Section 9 deemed necessary or advisable for Awards granted under the Plan to qualify for the exemption provided by Rule 16b-3 (or any successor rule relating to exemption from Section 16(b) of the Act), or to comply with applicable law, and any such amendment shall, to the extent deemed necessary or advisable by the Board, be applicable to any outstanding Awards theretofore granted under the Plan notwithstanding any contrary provisions contained in any Award agreement. In the event of any such amendment to the Plan, the holder of any Award outstanding under the Plan shall, upon request of the Board and as a condition to the exercisability thereof, execute a conforming amendment in the form prescribed by the Board to any Award agreement relating thereto within such reasonable time as the Board shall specify in such request. With the consent of the Participant affected, the Board may amend outstanding agreements evidencing Plan Awards in a manner not inconsistent with the terms of the Plan. Notwithstanding anything contained in this Section 8 or in any other provision of the Plan, unless required by law, no action contemplated or permitted by this Section 8 shall adversely affect any rights of Participants or obligations of the Company to Participants with respect to any Award theretofore made under the Plan without the consent of the affected Participant.
9. Effective Date and Term of Plan. This Plan was adopted on April 8, 2003. The Plan was amended on February 26, 2007, March 22, 2007, February 21, 2008, March 2, 2011, March 7, 2013, March 17, 2016, March 14, 2018 and March 16, 2021. The Plan shall remain in effect, subject to the right of the Board of Directors to further amend or terminate the Plan at any time pursuant to Section 8 hereof, until all shares subject to it shall have been purchased or acquired according to the Plan’s provisions, provided, however, that no ISO may be granted under the Plan after the tenth anniversary of the date upon which the Plan, as most recently amended and restated, has been ratified by the Company’s stockholders.directors.
3. That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.
4. That this Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this ___th day of June, 2023.
UFP TECHNOLOGIES, INC.
By ___________________________________
R. Jeffrey Bailly, Chairman and
Chief Executive Officer
