UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☐ | Preliminary Proxy Statement | |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| ☒ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material Pursuant to §240.14a-12 | |
EVOQUA WATER TECHNOLOGIES CORP.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| ☒ | No fee required. | |||
| ☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
| (1) | Title of each class of securities to which transaction applies:
| |||
| (2) | Aggregate number of securities to which transaction applies:
| |||
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
| |||
| (4) | Proposed maximum aggregate value of transaction:
| |||
| (5) | Total fee paid:
| |||
| ☐ | Fee paid previously with preliminary materials. | |||
| ☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
| (1) | Amount Previously Paid:
| |||
| (2) | Form, Schedule or Registration Statement No.:
| |||
| (3) | Filing Party:
| |||
| (4) | Date Filed:
| |||
January 5, 20212022
To the Stockholders of Evoqua Water Technologies Corp.:
You are cordially invited to attend the Annual Meeting of Stockholders of Evoqua Water Technologies Corp. (the “Company”) for the fiscal year ended September 30, 20202021 (the “Annual Meeting”) to be held virtually via live webcast on Tuesday,Wednesday, February 16, 2021,2022, at 1:00 p.m. (Eastern Time). Due to the COVID-19 pandemic, this year we are holding our Annual Meeting in a virtual format by webcast to reduce the public health impact of our meeting. You can attend our virtual 2021and participate in the Annual Meeting online, vote your shares electronically, and submit your questions during the meetingAnnual Meeting by visiting www.virtualshareholdermeeting.com/AQUA2021.AQUA2022.
We have decided to hold the Annual Meeting virtually again this year due to the ongoing COVID-19 pandemic in order to protect the health and well-being of our stockholders and employees, and because hosting a virtual Annual Meeting (i) enables stockholders to attend and participate from any location around the world, (ii) provides for cost savings to the Company and our stockholders, and (iii) reduces the environmental impact of our Annual Meeting.
At the Annual Meeting you will be asked to (i) elect fourthree Class III directors to our Board of Directors,I director nominees for three-year terms, (ii) approve, on an advisory basis, the compensation of our named executive officers, (iii) ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2021,2022, and (iv) transact any other business that may properly come before the Annual Meeting or any adjournment or postponement thereof.
Your vote is important to us and our business.us. Whether or not you plan to participate in the Annual Meeting, it is important that your shares be represented and voted. We encourage you to vote promptly and submit your proxy via the internet, by telephone, or by completing and mailing a proxy card. Instructions on how to vote are found in the section entitled “Q&A—Information About the Annual Meeting” in the Proxy Statement.
ThankLastly, I would like to acknowledge and thank Judd Gregg, Brian Hoesterey, and Vinay Kumar for their service and contributions to the Company as members of our Board of Directors (the “Board”). Judd is retiring as a director at the end of his current term at the Annual Meeting, in accordance with the retirement policy in our Corporate Governance Guidelines. Brian and Vinay, both principals of the Company’s former private equity sponsor, AEA Investors LP (“AEA”), stepped down from our Board following AEA’s full divestiture of its ownership position in the Company in 2021. Judd, Brian, and Vinay all have served as members of our Board since Evoqua’s inception in 2014. The Company has benefited greatly from their counsel and guidance, and we express our sincere appreciation for their dedication and leadership during their years with us.
On behalf of the Company and the Board, we thank you for your continued support and interest in Evoqua Water Technologies Corp.
Sincerely,
Ron C. Keating
President,
Chief Executive Officer and
Director
Pittsburgh, Pennsylvania
January 5, 20212022
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
| Date | Time | Place | ||
 |  |   | ||
February 16, | 1:00 p.m. (Eastern Time) | Virtual meeting at www.virtualshareholdermeeting.com/
| ||
You can attend and participate in the 20212022 Annual Meeting of Stockholders (the “Annual Meeting”) online, vote your shares electronically, and submit your questions during the meetingAnnual Meeting by visiting www.virtualshareholdermeeting.com/AQUA2021. Be sureAQUA2022. You will need the 16-digit control number included on your Notice of Internet Availability of Proxy Materials (the “Notice”) or proxy card to haveaccess the Control Number we have provided to you to join the meeting.Annual Meeting platform.
Meeting Agenda:
| 1: | ||
|
Approval, on an Advisory Basis, of | ||
| ||
Ratification of the | ||
| ||
To transact
| 4: | Transaction of any other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. |
Record Date:
Stockholders of record at the close of business on December 18, 2020,20, 2021, are entitled to receive notice of and to vote at the Annual Meeting and any adjournment or postponement thereof.
Materials for Review:
We encourage you to review the proxy materials for our Annual Meeting, which include our Proxy Statement and 20202021 Annual Report. Beginning January 5, 2021,2022, we made the proxy materials available via the internet at www.proxyvote.com and began mailing athe Notice of Internet Availability of Proxy Materials to our stockholders. The Notice contains important information about how to access the proxy materials and vote online.
How to Vote:
At the Annual Meeting |
Internet |
Telephone |
| |||
Follow the instructions at www.virtualshareholdermeeting. com/AQUA2022 | Visit www.proxyvote.com | Call the number listed on your proxy card or voting instruction form. | If you received printed copies of the proxy materials, complete, sign, date, and return your proxy card or voting instruction form. |
Important Information Regarding the Availability of Proxy Materials
|
| By Order of the Board of Directors,
Vincent Grieco Executive Vice President, General Counsel and Secretary
|
| |
The Notice,
Your vote is very important. Please carefully read the attached Proxy Statement. Whether or not you plan to attend the Annual Meeting,
|
PROXY STATEMENT
Election of Three Class | ||||
| ||||
| 22 | ||||
| 23 | |||
| 27 | ||||
| ||||
| ||||
| 39 | ||||
| 40 | ||||
| 47 | ||||
Compensation Discussion and Analysis | ||||
| ||||
Independent Registered Public Accounting Firm’s Fees and Services | ||||
Security Ownership of Certain Beneficial Owners and Management | ||||
Securities Authorized for Issuance Under Equity Compensation Plans | ||||
| ||||
| A-1 | ||||
| B-1 | ||||
Evoqua Water Technologies Corp.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 16, 2022
You are receiving this Proxy Statement in connection with the solicitation by the Board of Directors (the “Board”) of Evoqua Water Technologies Corp., a Delaware corporation, of proxies to be voted at our Annual Meeting of Stockholders for the fiscal year ended September 30, 2021, and at any reconvened meeting after an adjournment or postponement of the meeting (the “Annual Meeting”). Unless the context otherwise requires, all references in this Proxy Statement to “Evoqua,” the “Company,” “we,” “us,” and “our” refer to Evoqua Water Technologies Corp. and its subsidiaries.
We will hold the Annual Meeting online via live webcast on Wednesday, February 16, 2022, at 1:00 p.m. (Eastern Time). We have decided to hold the Annual Meeting virtually again this year due to the ongoing COVID-19 pandemic in order to protect the health and well-being of our stockholders and employees, and because hosting a virtual Annual Meeting (i) enables stockholders to attend and participate from any location around the world, (ii) provides for cost savings to the Company and our stockholders, and (iii) reduces the environmental impact of our Annual Meeting.
We have designed the virtual Annual Meeting to provide similar opportunities to participate as you would have at an in-person meeting.You will be able to attend and participate in the Annual Meeting online, vote your shares electronically, and submit your questions during the Annual Meeting by visiting www.virtualshareholdermeeting.com/AQUA2022. To access the webcast, you will need your Control Number included on your proxy card, voting instruction card, or Notice of Internet Availability of Proxy Materials (the “Notice”).
Our mailing address and the location of our principal executive office is 210 Sixth Avenue, Pittsburgh, Pennsylvania 15222. Our corporate website is www.evoqua.com. The information contained on, or that can be accessed through, our website is not a part of this Proxy Statement.
On January 5, 2022, we began distributing proxy materials or a Notice to each of our stockholders who are entitled to vote at the Annual Meeting. That Notice contains instructions for accessing the proxy materials relating to our Annual Meeting and voting online, or alternatively, requesting a paper copy of the proxy materials and a proxy card or voting instruction card.
Matters To Be Considered at the Annual Meeting
At the Annual Meeting, you will be asked to consider and vote upon the following proposals:
Proposals | Board’s Recommendation | |||
| Proposal 1 | Election of Three Class I Director Nominees for Three-Year Terms | FOR ALL | ||
| Proposal 2 | Approval, on an Advisory Basis, of the Compensation of Our Named Executive Officers | FOR | ||
| Proposal 3 | Ratification of the Appointment of Ernst & Young LLP as Our Independent Registered Public Accounting Firm for the Fiscal Year Ending September 30, 2022 | FOR | ||
2022 Proxy Statement | ||||
I |
Forward-Looking Statement Safe Harbor
This Proxy Statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You can generally identify forward-looking statements by our use of forward-looking terminology such as “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “might,” “plan,” “progress,” “potential,” “predict,” “projection,” “seek,” “should,” “will,” or “would” or the negative thereof or other variations thereon or comparable terminology. All of these forward-looking statements are based on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements, or could affect our share price. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, among other things, general global economic and business conditions, including the impacts of the COVID-19 pandemic and disruptions in global oil markets; our ability to compete successfully in our markets;pandemic; our ability to execute projects on budget and on schedule; material, freight, and labor inflation, commodity availability constraints, and disruptions in global supply chains and transportation services; the potential for us to incur liabilities to customers as a result of warranty claims or failure to meet performance guarantees; our ability to meet our own and our customers’ safety standards or the potential for adverse publicity affecting our reputation as a result of incidents such as workplace accidents, mechanical failures, spills, uncontrolled discharges, damagestandards; failure to customer or third-party property or the transmission of contaminants or diseases;effectively treat emerging contaminants; our ability to continue to develop or acquire new products, services and solutions and adaptthat allow us to compete successfully in our business to meet the demands of our customers, comply with changes to government regulations and achieve market acceptance with acceptable margins;markets; our ability to implement our growth strategy, including acquisitions, and our ability to identify suitable acquisition targets; our ability to operate or integrate any acquired businesses, assets or product lines profitably or otherwise successfully implement our growth strategy;profitably; our ability to achieve the expected benefits of our restructuring actions, including restructuring our business into two segments; material and other cost inflation and our ability to mitigate the impact of inflation by increasing selling prices and improving our productivity efficiencies; our ability to accurately predict the timing of contract awards;actions; delays in enactment or repeals of environmental laws and regulations; the potential for us to become subject to claims relating to handling, storage, release or disposal of hazardous materials; our ability to retain our senior management, skilled technical, engineering, sales, and other key personnel;personnel and to attract and retain key talent in increasingly competitive labor markets; risks associated with international sales and operations; our ability to adequately protect our intellectual property from third-party infringement; risks related to our contracts with federal, state, and local governments, including risk of termination or modification prior to completion; risks associated with product defects and unanticipated or improper use of our products; our ability to accurately predict the timing of contract awards; risks related to our substantial indebtedness; our increasing dependence on the continuous and reliable operation of our information technology systems; risks associated with product defects and unanticipated or improper use of our products; litigation, regulatory or enforcement actions and reputational risk as a result of the nature of our business or our participation in large-scale projects; seasonality of sales and weather conditions; risks related to government customers, including potential challenges to our government contracts or our eligibility to serve government customers; the potential for our contracts with federal, state and local governments to be terminated or adversely modified prior to completion; risks related to foreign, federal, state and local environmental, health and safety laws and other applicable laws and regulations and the costs associated therewith; risks associated with international sales and operations, including our operations in China; our ability to adequately protect our intellectual property from third-party infringement; risks related to our substantial indebtedness; our need for a significant amount of cash, which depends on many factors beyond our control; AEA’s influence over us; and other factorsrisks and uncertainties, described in the “Risk Factors” section included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020,2021, filed on November 20, 2020,17, 2021 (the “Form 10-K”), and in other periodic reports we file with the SEC.Securities and Exchange Commission (the “SEC”). All statements other than statements of historical fact included in this Proxy Statement are forward-looking statements, including, but not limited to, financial projections,expectations for fiscal year 2022, expectations related to customer demand, growth opportunities, supply chain challenges, material availability, price/cost, labor shortages, inflation, and general macroeconomic conditions, and statements related to the ongoing impact of the COVID-19 the impact of which remains inherently uncertain, expected demand outlooks and statements regarding our digital water strategy.pandemic. Any forward-looking statement that we makestatements made in this Proxy Statement speaksspeak only as of the date of this Proxy Statement. WeExcept as required by law, we do not undertake noany obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements made herein, whether as a result of new information, future events or otherwise.otherwise after the date of this Proxy Statement. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date of this Proxy Statement.
| ||||
II |
Evoqua Water Technologies Corp.
INTRODUCTION AND PROXY SUMMARYProxy Summary
This summary is intended to provide a broadgeneral overview of our fiscal 2020year 2021 performance, corporate governance, and compensation highlights. For complete information about these topics, please reviewsee our Annual Report on Form 10-K (the “Form 10-K”) for fiscal 2020 and the more detailed sections of this entire Proxy Statement.
Who We Are \e-vōk-wä\
Evoqua’s missionEvoqua is to be a leading provider of mission-critical water treatment solutions. We are a “pure play” water and wastewater treatment company, focused on technologies, products, systems and services that address the universal need for reliable water quality and quantity acrosssolutions, offering a broad spectrumportfolio of products, services, and expertise to support customers across various end markets. We are headquartered in Pittsburgh, Pennsylvania, with locations across ten countries. We have a comprehensive portfolio of differentiated, proprietary technologies offered under market-leading and well-established brands.
Our business is highly diversified, with many end markets:
• General Manufacturing | • Municipal Wastewater | |
• Healthcare, Pharmaceuticals, and Biotechnology | • Power | |
• Chemical Processing | • Microelectronics | |
• Municipal Drinking Water | • Aquatics | |
• Refining and Marine | • Food and Beverage | |
Understanding the Complete Water Cycle. We provide solutions across the entire water cycle. The water cycle begins with influent water, which is sourced from rivers, lakes, and other sources. We treat influent water for use in a wide variety of industrial, commercial, and municipal applications, including use as process water in manufacturing, power generation, and recreationalother industrial applications, use as ingredient water in the production of food, beverage, and other goods, use in laboratory testing, use by commercial aquatic facilities, and to produce safe drinking water. After the water is used it is considered effluent water, and we treat it to remove impurities so that it can be discharged safely back into the environment or reused for industrial, commercial, or municipal applications. Our solutions are used in operations and processes for healthcare, pharmaceuticals and biotechnology; general industry; municipal wastewater treatment; power generation; microelectronics; chemicals processing; aquatics; food and beverage; refining; and marine.
Building Sustainable Water Systems. Our core treatment solutions include water clarification, separation, filtration, adsorption, disinfection, and solids removal.removal, which remove impurities from water, rather than neutralizing them through the addition of chemicals. We also have an expanding portfolio of digitally connected and enabled solutions that are designed to help our customers achieve lower costs through greater uptime, throughput, and efficiency in their operations, and supportwhile supporting their regulatory compliance and environmental sustainability efforts. Coupled with our extensive network of service branches, which means a certified Evoqua service technicianService Technician is within approximately a two-hour drive from 90% of our industrial North American customers’ sites, and our rapid-response fleet of mobile water treatment systems, we believe we are uniquely positioned to implement tailored solutions and provide critical ongoing service and support to our customers.
We became a publicly traded company when our common stock began trading on the New York Stock Exchange (“NYSE”) on November 2, 2017, under the ticker symbol “AQUA.”
2022 Proxy Statement | ||||
1 |
Recognition and Awards
|
Recognized by Frost & Sullivan for | 2022 INSTITUTIONAL INVESTOR ALL-AMERICA EXECUTIVE TEAM RANKINGS • #1 Overall • #1 ESG Electrical Equipment & Multi-Industry Sector in the Midcap category |
2021 CLEAN200™* Recognized by As You Sow and Corporate Knights as one of the 200 largest public companies, ranked by clean energy revenues |
| SDG 2000
Identified by the World Benchmarking Alliance as one of the 2,000 companies in the world with the greatest potential to influence a more sustainable future as envisioned by the |
| * |
| |||
|
Financial Performance Highlights
After the emergence of the COVID-19 pandemic in early 2020, we prioritized protection of the safety of our employees and stakeholders, taking actions to ensure the resiliency of our business and managing the business for liquidity. Our Executive Leadership Team, together with our Board, assessed business options and developed new operating priorities to address the challenges posed by the pandemic. Actions taken included a number of cost reduction and cash conservation actions, such as reducing marketing and travel activity; deferral of headcount additions; temporarily suspending 401(k) plan matching contributions and merit-based salary increases; taking a more selective approach to certain sales opportunities and projects; and reallocating resources to enhance cash monitoring and collection functions. Our facilities and offices around the globe adapted to change course and execute on these new priorities. Because of these collective efforts, we have successfully avoided layoffs, furloughs and salary reductions among our workforce due to COVID-19, while being able to maintain our business operations. We have been able to preserve our business continuity and the foundation we created for continued long-term growth.
In the face of these hardships and challenges, we are pleased to have continued the overall positive trajectory in our operating results and financial performance in fiscal 2020 which have carried over from fiscal 2019 following the reorganization of our operating model to a more streamlined two-segment structure.
|
Improved Profitability. Net income grew in fiscal 2020 to $114.4 million versus a net loss of $8.5 million in the prior year. Additionally, the principal financial measure we use to assess our profitability, non-GAAP Adjusted EBITDA, increased by 2.0% to $239.6 million in fiscal 2020 versus $235.0 million in the prior fiscal year. In fiscal 2020 we achieved improved gross margins and operational efficiencies and benefited from temporary cost controls connected to our COVID-19 response plan.
Improved Cash Flow. We achieved operating cash flow of $158.4 million and non-GAAP Adjusted Free Cash Flow of $115.8 million in the fiscal year ended September 30, 2020, versus operating cash flow of $125.2 million and non-GAAP Adjusted Free Cash Flow of $103.2 million in the fiscal year ended September 30, 2019. The performance metric of Adjusted Free Cash Flow continues to be a critical element of our annual operating plan, as we strive to increase our capacity for desirable growth opportunities, such as investments in high-return capital projects and tuck-in acquisitions, and beneficial capital actions, such as repayment of debt.
For complete information about our financial performance, please review our Annual Report on Form 10-K for the fiscal year ended September 30, 2020.
Note regarding non-GAAP financial measures: Adjusted EBITDA, Adjusted Free Cash Flow, organic revenue and net leverage are non-GAAP financial measures, meaning adjusted financial measures that are not calculated and presented in accordance with generally accepted accounting principles in the United States, or “GAAP.” See Appendix A of this Proxy Statement for definitions of Adjusted EBITDA, Adjusted Free Cash Flow, organic revenue and net leverage and reconciliations of these financial measures with the most directly comparable financial measures presented in accordance with GAAP.
| ||||
|
Financial Performance Highlights
SustainabilityStrong Positioning for Growth
Last
| In fiscal year 2021, we continued an overall positive trajectory in our operating results and financial performance, fueled, in part, by the October 2018 reorganization of our operating model to a more streamlined two-segment structure that aligns more strategically with how our customers purchase products and services. We believe our operating results demonstrate that we have focused on appropriate and beneficial priorities for our organization; that we have established an effective operating platform for managing the macroeconomic challenges that have arisen from the COVID-19 pandemic, such as unpredictable and unprecedented labor shortages and supply chain disruptions; our strong positioning for continued growth as customer demand returns post-pandemic; and, importantly, that our overall business strategy continues to be resilient and productive. For complete information about our fiscal year 2021 financial performance, please see our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. | > Our management team is focused on driving profitable growth and maintaining our strong balance sheet. We are investing across multiple organic revenue growth and margin expansion initiatives, as well as expected accretive inorganic opportunities. |
Historically Stable and Recurring Revenues
The chart below shows our revenue and organic revenue(1) performance from fiscal year 2018 through fiscal year 2021. Our pipeline remains robust as demand is strong across almost all of our end markets. Our goal is to achieve annual organic revenue growth of 3% to 5% over the next several years. Prior to the COVID-19 pandemic, we adopted “Sustainable” asgrew organic revenues within this targeted range. Over the past two fiscal years, we have navigated the COVID-19 pandemic and maintained stable revenues while growing organic revenues by 1.6% each year, which we believe showcases the resilience of our fourth core value,recurring revenue model, the diversity and breadth of our customer end markets, and the competitiveness of our highly differentiated products and services.
| (1) | Organic revenue is a non-GAAP financial measure. For information about how we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures, see “Appendix A—Non-GAAP Financial Measures.” |
| (2) | Historical results include the Memcor® filter business. FY19 and FY20 revenue of $59.5 million and $14.4 million, respectively. Memcor® is a trademark of Rohm & Haas Electronic Materials Singapore Pte. Ltd. |
Strong Shareholder Return and Value Creation—Since Our Initial Public Offering (“IPO”) in 2017. | Evoqua’s total shareholder return (TSR) for the most recent three fiscal year period was 111.2%, which outperformed the peer group we use for compensation benchmarking purposes and other relevant indices below: | |||
Evoqua’s Percentile Rank vs. | ||||
Russell 2000 Index | = 84thpercentile | |||
Evoqua’s compensation peer group | = 82ndpercentile | |||
S&P Global Water Index (U.S. constituents only) | = 73rdpercentile | |||
S&P 400 Index | = 86thpercentile | |||
S&P 600 Index | = 87thpercentile | |||
Source: S&P Capital IQ
2022 Proxy Statement | ||||
3 |
Our Approach to celebrate the sense of stewardship we strive to imprint throughout our business:Planet and People
By Our Handprint.Natural Capital. We seek to live this value foremost through our products and solutions. Every day our employees around the globe are working to deliver clean, safe and reliable water for consumption, production of goods and services and enjoyment. Water is a finite resource, but through our expertise, innovation and commitment to maintaining this resource, we can transform water to ensure a high quality of life, now and in the future.
We are proud to have a product portfolio with a 100-year heritage of water innovations that ensure health and safety, enable performance, and create sustainable environments. We are continuously building on this heritageexperience to identify water issues on the horizon and develop solutions to help our customers stay ahead and meet their sustainability goals. Highlighted below are some of the ways we are creating opportunities for better water stewardship.
Emerging Contaminants. We believe we have one of the leading portfolios of water treatment products and solutions to remove emerging contaminants from water, including granular activated carbon, ion exchange resin, reverse osmosis, and advanced oxidation processes. Emerging contaminants such as PFAS, PFOA, selenium, micro-plastics, and many others, present global health risks if not properly removed from drinking water, process water and wastewater.
| • | Digital Water. We bring innovation to the water industry through our |
Recycle/Reuse. As human population growth has increased the demand for water, industrial plants are investigating alternative water sources and sustainable water solutions in order to decrease costs, reduce the size of their facilities’ water footprint, and be conscientious members of a community. We provide insight and clarity on where to focus water recycling and reuse efforts and implement the right treatment and reuse solution. With our broad range of proven technologies and extensive application expertise, we can develop tailored solutions across diverse end markets, regardless of water quality requirements, space constraints, and budgetary considerations.
Human Capital and Inclusion and Diversity. We believe our talent within the organization is key to our long-term success. To succeed as a water technology company, we need to be able to optimize a myriad of processes and operations of industrial, commercial, recreational, and municipal customers across a wide spectrum of end markets; distribute and sell highly differentiated products and technologies through multiple sales channels around the world; and continually develop or acquire new products, services, and solutions. As a global, complex organization, we rely on talented individuals at every level to deliver on our core value proposition to our customers and other stakeholders. We focus on creating a high performance culture in which our employees are highly enabled, empowered, and accountable to deliver results. We continually work on programs to foster leadership development, enhance the overall employee experience, and leverage technology and process improvements to enable our employees to perform more effectively.
Below are some examples of steps we are taking under our inclusion and diversity strategy:
Forming the Evoqua Inclusion Network, a business resource group that is tasked with identifying opportunities to promote greater inclusiveness and minimize unconscious bias.
Establishing an unconscious bias learning program for all global employees.
Striving to sustain higher levels of participation by women in the Company’s Leadership Development Program (“LDP”), a 24-month long recruitment program in which new university graduates participate in cross-functional rotations intended to develop their capabilities through organization-wide exposure. Over the past three years, women have represented, on average, 52% of our LDP participants. In 2021, women constituted 45% of our LDP participants.
Requiring interview panels for senior leadership roles to include diverse personnel.
Implementing other recruiting strategies, including branding and advertising within the talent market, to attract diverse candidates.
| ||||
4 |
SAFETY AT EVOQUA | ||||||||
The health, safety and well-being of our employees is our top priority. Fostering a safe working environment is critical to our ability to attract and retain talent and to earn and keep the trust of our customers. In order to do so, our Environmental, Health and Safety (“EHS”) team conducts monthly safety reviews at the executive level, reviews each recordable accident with our CEO and leadership team, conducts quarterly reviews with our Board of Directors, routinely reviews key performance indicators, and conducts regular facility audits. Every employee is empowered to stop work when they |
|
Our Sustainability Program
In 2020, we adopted “sustainable” as our fourth core value, to celebrate the sense of stewardship we strive to imprint throughout our business:
| OUR HANDPRINT Enabling our | | OUR FOOTPRINT Evoqua’s responsibility to become more sustainable in our internal operations | |||||||||
By Our Footprint. During 2020, we began executing on environmental and social initiatives under our new Sustainability Program. In addition to helping our customers improve their sustainability performance, for water, energy and waste, we are working to lessen the environmental impact of our internal operations; help our employees, supply chain partners, and communities thrive; and improve the communities in which we work. We annually publishOur sustainability program is operated by a cross-functional team consisting of a core sustainability team and senior leaders from operations, EHS, supply chain, human resources, and legal. The core sustainability team reports to our Chief Growth and Sustainability ReportOfficer, and receives regular input from an internal Sustainability Steering Committee which monitors our various stakeholders’ interests.
Progress on Our ESG and Sustainability Journey. During 2021, we demonstrated our commitment to provide our stakeholders with more detailed information aboutmaking further progress on our sustainability performance injourney by delivering on the prior fiscal year.following:
• In April 2021, we published our 2020 sustainability report, leveraging the reporting standards of the Global Reporting Initiative (GRI) to communicate more effectively with stakeholders on topics such as the Company’s approach to governance, human capital management, and health and safety. • We incorporated environmental, social, and governance (“ESG”)-related performance metrics in our fiscal year 2022 annual incentive program (“AIP”). A total of 10% of the aggregate bonus opportunity for our executives and senior managers is linked to meeting water stewardship and safety goals, both key elements of our company culture. • Our Board amended the charters of the Compensation Committee and the Nominating and Corporate Governance Committee to formally delegate oversight of environmental and social matters to these committees. • We expanded our internal sustainability organization, and formally designated Snehal A. Desai, previously our Chief Growth Officer, as Chief Growth and Sustainability Officer, to reflect his leadership in ESG-related matters. | We annually publish a sustainability report to provide our stakeholders with more detailed information about our sustainability performance in the prior fiscal year. To review our most recent sustainability report and learn more about our sustainability handprint and footprint, visit: evoqua.com/sustainability. |
| ||||
|
To review our most recent Sustainability ReportNominees and learn moreDirectors
The table below contains summary information about our sustainability handprintClass I director nominees and footprint, visit: evoqua.com/sustainability.our directors continuing in office following the Annual Meeting. Judd A. Gregg, a Class I director who has served on our Board since our Company began operating in 2014, will retire from our Board at the end of his term at the Annual Meeting and is not standing for reelection pursuant to the retirement policy in our Corporate Governance Guidelines.
| ||||||
|
|
Name
| Occupation
| Director
| Independent
| Total
| Committee
| |||||||||||||
Nominees to Class I |
|
|
|
|
|
|
|
|
|
|
| |||||||
Nick Bhambri | President of Louis York Capital and former President and Chief Executive Officer of MECS, Inc. (Monsanto Company subsidiary)
| 2014 | ✓ | 1 | Audit | |||||||||||||
Sherrese Clarke Soares | Founder and Chief Executive Officer of HarbourView Equity Partners, LLC
| 2021 | ✓ | 1 | Audit |
| ||||||||||||
Lynn C. Swann | President of Swann, Inc. and former Director of Athletic Programs of the University of Southern California | 2018 | ✓ | 3 | Audit; Nominating and Corporate Governance |
| ||||||||||||
Directors Continuing in Office |
| |||||||||||||||||
Gary A. Cappeline, Board Chairperson | Former President and Chief Operating Officer of Ashland Inc. and former Operating Partner of AEA Investors LP | 2014 | ✓ | 1 | Audit; Compensation; Nominating and Corporate Governance
|
| ||||||||||||
Lisa Glatch | President, LNG and Net-Zero Solutions, and Chief Sustainability Officer of Sempra Infrastructure and board chairperson of Cameron LNG, LLC, a joint venture 50% owned by Sempra (formerly Sempra Energy)
| 2020 | ✓ | 1 | Nominating and Corporate Governance |
| ||||||||||||
Ron C. Keating | President and Chief Executive Officer of Evoqua Water Technologies Corp.
| 2014 |
|
|
| 2 | None |
| ||||||||||
Martin J. Lamb | Non-Executive Chairperson of Rotork plc and former Chief Executive Officer of IMI plc | 2014 | ✓ | 2 | Compensation; Nominating and Corporate Governance
|
| ||||||||||||
Peter M. Wilver | Former Chief Administrative Officer and Chief Financial Officer of Thermo Fisher Scientific Inc. | 2018 | ✓ | 2 | Audit; Compensation |
| ||||||||||||
| ||||
|
Corporate Governance Highlights
This summary highlights several corporate governance developments from the past year, which reflect our stewardship priorities and our approach to building a governance framework that will help support long-term value creation and sustainable relationships with our stakeholders.
Our “One Evoqua” CultureBoard Refreshment and Diversity
Since the Company’s IPO in November 2017, we have been actively engaged in Board development efforts. In the past four years, we have recruited four talented directors to join our Board. The charts below provide certain demographic information about our current nine-member Board.
 |  |  |
|
| ||||||||
|
| ||||
|
Response to COVID-19
After the emergence of the pandemic, we took numerous actions to preserve our workforce, maintain their engagement with us, and encourage adaptation to a “new normal.” Below are some of the actions we took in response to the pandemic. We are continuing these initiatives and monitoring the need for additional measures, as the pandemic continues in fiscal 2021.
Immediately organized and empowered a COVID-19 task force led by executive management, which continues to meet daily;
Early engagement of medical management resources to advise on infection control procedures;
Monthly or bi-monthly company-wide town halls led by our Executive Leadership Team since early 2020 to ensure all employees receive the same information about how we are responding to the pandemic and have the opportunity to ask questions;
COVID-19 resource page on our intranet and a dedicated email box for questions relating to COVID-19, which is monitored by our COVID-19 task force;
Anonymous “pulse” surveys across one-third of our employee population to monitor employee concerns;
Reallocated underutilized personnel to other functions to enable us to maintain productivity levels and meet liquidity goals, while maintaining employees’ engagement with us;
Company-wide availability of personal protective equipment (PPE);
Remote working arrangements, where practicable; and protocols for reducing employee population density, social distancing and disinfecting high-touch areas, work surfaces and equipment;
Contact tracing and quarantines; return-to-work protocols; and
Travel restrictions and cancellation of in-person meetings.
| ||||
|
2021 Annual Meeting of Stockholders
| ||
| ||
| ||
| ||
|  | |
ProposalsBoard Engagement with ESG Topics
To foster deeper engagement over enterprise strategy and growth, in 2021, the Board formally delegated oversight of environmental and social matters to its Nominating and Corporate Governance Committee and Compensation Committee, respectively, as reflected in their charters. Below is a summary of how our Board monitors the Company’s strategies for Your Votemanaging ESG-related matters.
Oversight of enterprise strategy and growth; Quarterly review of workplace safety performance | ||||||
Audit Committee
|
|
| ||||
Areas of Oversight |
| Key human capital management strategies and programs, such as talent recruitment, retention, and inclusion and diversity. | ||||
Examples of Quarterly Engagement Topics |
Various compliance and risk assessment matters, e.g., periodic reports throughout the | |||||
|
| Sustainability program initiatives, goal-setting activities, and reporting to stakeholders. | ||||
| ||||
|
Nominees and DirectorsContinuing Evolution of Executive Compensation
The table below contains summary information about our director nomineesCompensation Committee has implemented changes to Class III and our directors who are continuing in office.the Company’s executive compensation program for fiscal year 2022. See pages 67-69 of this Proxy Statement for more information.
|
|
|
|
|
| |||||||||||||
| ||||||||||||||||||
|
| |||||||||||||||||
| ||||||||||||||||||
| ||||||||||||||||||
|
| |||||||||||||||||
| 10% of the AIP opportunity under our fiscal year 2022 AIP will be tied to two new ESG-related performance metrics. These metrics are based on two of the defining elements of the Company’s culture—water stewardship and safety. Performance metrics: • Water Stewardship: Based on achieving a target level of water reuse/recycling vs. water withdrawn from source at Evoqua’s ten most water-intensive facilities (5%) • Safety: Based on Total Recordable Incident Rate (TRIR), as calculated in accordance with OSHA requirements (5%) | |||||||||||||||||
|
| |||||||||||||||||
|
| |||||||||||||||||
|
| |||||||||||||||||
|
| |||||||||||||||||
|
| |||||||||||||||||
| S&P Global Water Index). | |||||||||||||||||
| ||||
|
CorporateCertain Governance HighlightsPractices
Independent Board Oversight
Our Board is led by an independent Chairman.
70% of Board members are independent; only our CEO and two directors affiliated with our private equity sponsor, AEA Investors LP, lack independence.
100% of the members of the key committees of the Board (Audit, Compensation, and Nominating and Corporate Governance Committees) are independent.
Non-management directors meet in executive session without management present at nearly all Board meetings.
All current Audit Committee members meet the NYSE listing standard of financial literacy and two members are audit committee financial experts under the Securities and Exchange Commission (“SEC”) rules.
Our Board and each of its committees annually conduct a self-evaluation.
Board Development
Our Board has committed to include women and persons with ethnically or racially diverse backgrounds in each pool of candidates from which we select new director nominees (known as the “Rooney Rule”) to aid development of a pipeline of potential director candidates for our Board.
Since our IPO in 2017, we have added three independent directors to our Board, including two directors, Mr. Swann and Ms. Glatch, who further increase the diversity of our Board.
| • Our Board • 80% of our current Board members are independent; only our CEO and one director affiliated with our former private equity sponsor, AEA Investors LP, lack independence. • 100% of the members of the key committees of the Board (Audit, Compensation, and Nominating and Corporate Governance Committees) are independent. • Non-management directors meet in executive session without management present at nearly all Board meetings. • All current Audit Committee members meet the NYSE listing standard of financial literacy and two members are audit committee financial experts under Securities and Exchange Commission (“SEC”) rules. | |||||
Diversity | • Our Nominating and Corporate Governance Committee will include, and request that any search firm it engages include, female and racially/ethnically diverse candidates in the initial pool from which new director nominees are selected. | |||||
Board Evaluations and Refreshment | • Our Board and each of its committees annually conduct a self-evaluation. • Non-employee directors generally are not eligible to stand for re-election after reaching age 75.
| |||||
| •
| |||||
| •
| |||||
|
| |||||
| ||||
|
Board Diversity
Race, Ethnicity, Gender and Nationality. Overall, 40% of our Board members self-identify as diverse, in terms of race, ethnicity or gender. Additionally, one Board member is a national of, and lives and works in, the United Kingdom.
Age. Our Board members range in age from 42 to 73; the average age on our Board is 59.5.
| ||||
|
Executive Compensation Highlights
Our Named Executive Officers (“NEOs”)
Name | Title | |
Ron C. Keating | President, Chief Executive Officer and Director | |
Benedict J. Stas | Executive Vice President, Chief Financial Officer and Treasurer | |
Rodney O. Aulick | Executive Vice President, Integrated Solutions and Services Segment President | |
Hervé P. Fages | Executive Vice President, Applied Product Technologies Segment President | |
| Executive Vice President, | |
Our Approach to Executive Compensation Program
Investing in our talent is critical to enabling us to deliver value to our customers and stockholders. To attract the leadership needed for our business to be successful, we strive to build a compelling, market-based, and flexible total compensation program that is strongly aligned with the interests of our stockholders and connected to key performance goals.
Aligning Pay with Stockholders’ Interests: | •
• | |
|
|
Changes Resulting from COVID-19.Our heightened focus on employee health and safety, cash conservation, liquidity and business continuity in response to the COVID-19 pandemic changed our perspective and approach to our 2020 operating plan from what we originally envisioned in the Fall of 2019.Regular-Cycle Program
After the end of our 2020 fiscal year, the Compensation Committee of our Board of Directors assessed the impact of the operational changes carried out in response to COVID-19, together with the strong performance achieved by the Company despite the uncertainties created by the pandemic. To maintain a clear connection between revised priorities, the Company’s operating performance against those revised priorities, and resulting executive compensation, the Compensation Committee made the following post-year end determinations:
To measure performance under our short-term incentive plan in a manner which is consistent with the mid-year shift in our corporate priorities in response to the COVID-19 pandemic; and
| ||||||
| Fiscal Year 2021 AIP | How We Performed:
| |||||
To place greater emphasis on the weighting of the goal for cash flow performance, and no weighting on the goal for sales performance, which were originally established in the Fall of 2019. This resulted in the following weighting of performance goals for our NEOs under our short-term incentive plan:
Higher sales volume across the enterprise, along with disciplined price/cost management and improved operating efficiencies translated to continuing improvements in enterprise profitability and cash conversion rate. |
• 102.2% of target of Evoqua Global Adjusted EBITDA
• 190.7% of target of Evoqua Global Adjusted Free Cash Flow | |||
| Maintain balanced incentives in fiscal year 2021 |
| ||
Aligned With Our Business Priorities:
Returning value to our stockholders: the average closing price of a share of our common stock in fiscal 2020 was $18.31 versus $12.88 in fiscal 2019;
|
Continued progress in delevering the business: we ended fiscal 2020 with a 3.0x net leverage ratio versus 3.8x in fiscal 2019;
Pursuing sustainable growth: we believe our fiscal 2020 financial results demonstrated the resilience of our recurring revenue business model, which is based on subscription-like digital water offerings and high value-add outsourced water and capital projects that generate service, parts and other aftermarket opportunities over the lifecycle of the process or capital equipment;
Optimizing management of our products and services portfolio to improve profitability;
Investing in new technologies, vertical markets and geographies through strategic acquisitions; and
Focusing on operational excellence through initiatives in supply chain, logistics and transportation management; sales, inventory and operations planning; and footprint rationalization.
Aligned With Strong Governance:
Our Clawback Policyallows us to recoup erroneously awarded incentive compensation if a material restatement of the Company’s financial statements occurs or if misconduct causes economic or reputational damage to the Company.
Double-trigger change-in-control provisions apply to all stock-based awards under our omnibus equity compensation plan.
Stockholder approval is required to increase the share reserve for our omnibus equity compensation plan.
Discounted stock options or stock appreciation rights are not permitted under our omnibus equity compensation plan without stockholder approval.
Repricing of equity awards is not permitted under our omnibus equity compensation plan without stockholder approval.
| ||||
|
Evoqua Water Technologies Corp.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 16, 2021
You are receiving this Proxy Statement in connection with the solicitation by the Board of Directors (the “Board”) of Evoqua Water Technologies Corp., a Delaware corporation, of proxiesLooking to be voted at our Annual Meeting of Stockholders for the fiscal year ended September 30, 2020, and at any reconvened meeting after an adjournment or postponement of the meeting (the “Annual Meeting”). Unless the context otherwise requires, all references in this Proxy Statement to “Evoqua,” “Company,” “we,” “us,” and “our” refer to Evoqua Water Technologies Corp. and its subsidiaries.
We will hold the Annual Meeting on Tuesday, February 16, 2021, at 1:00 p.m. (Eastern Time). The Annual Meeting will occur as a virtual meeting conducted exclusively via audio webcast at www.virtualshareholdermeeting.com/AQUA2021. You can attend online, vote and submit questions during the meeting by visiting www.virtualshareholdermeeting.com/AQUA2021. You will need your Control Number, included on your proxy card or Notice of Internet Availability of Proxy Materials, to access the webcast.
Our mailing address and principal executive office is 210 Sixth Avenue, Pittsburgh, Pennsylvania 15222. Our corporate website is www.evoqua.com. The information contained on, or that can be accessed through, our website is not a part of this Proxy Statement.
On January 5, 2021, we began distributing a Notice of Internet Availability of Proxy Materials to each of our stockholders who is entitled to vote at the Annual Meeting. That notice contains instructions for accessing the proxy materials relating to our Annual Meeting: the notice of Annual Meeting, this Proxy Statement, and our 2020 Annual Report, which includes our Annual Report on Form 10-KFuture for the fiscal year ended September 30, 2020 (the “Annual Report”).
Matters To Be Considered at the Annual Meeting
At the Annual Meeting, you will consider and vote on:
| In May 2021, we granted special one-time retention awards to drive consistent, exceptional leadership performance over the next three years and support retention in a tight market for executive talent. See pages 64-67 of this Proxy Statement for more information about these awards. | • Award is composed of PSUs and RSUs.
|
| ||||
| We are continuing to evolve our executive compensation program to support our strategic objectives. See pages 67-69 of this Proxy Statement for more information about changes that have been adopted for fiscal year 2022. |
| |||||
| ||||||
|
| |||||
| ||||
|
| ||||||
| ||||||
|
|
|
| |||
Q&A—Information About the Annual Meeting
What is a proxy?
The Board is asking for your proxy. This means you are authorizing the persons named on the proxy card to vote your shares at the Annual Meeting according to your instructions. All shares represented by valid proxies that are received and not revoked before the Annual Meeting, will be voted at the Annual Meeting in accordance with the stockholder’s specific voting instructions.
Why am I receiving, or being notified about the availability of, the Company’s proxy materials?
You are receiving, or being notified about the availability of, the Company’s proxy materials because you are entitled to attend and vote at the Annual Meeting. All stockholders who owned shares of the Company’s common stock, $0.01 par value per share, at the close of business on December 18, 2020 (the “Record Date”), are entitled to attend and vote at the Annual Meeting.
Each outstanding share of the Company’s common stock on the Record Date is entitled to one vote on each of the matters to be voted on at the Annual Meeting. As of the Record Date, 118,551,382 shares of the Company’s common stock were outstanding.
Why did I receive a one-page Notice of Internet Availability of Proxy Materials in the mail instead of a full set of proxy materials?
SEC rules allow companies to choose the method for delivery of proxy materials to stockholders. The Company has elected to mail a one-page Notice of Internet Availability of Proxy Materials to each stockholder instead of sending printed copies of the proxy materials through the mail. That Notice is being sent to stockholders beginning on or about January 5, 2021, and the proxy materials will be posted www.proxyvote.com and the Investor Relations section of the Company’s website, aqua.evoqua.com, on the same day. We believe this method of delivery will expedite delivery of proxy materials to stockholders and lower the Company’s mailing costs. All stockholders will have the ability to access, and receive instructions on how to access, the proxy materials over the internet or request a printed copy of the proxy materials, if desired. The Notice will also provide instructions on how to vote online.
| ||||
|
What information is contained in this Proxy Statement?
This Proxy Statement includes information about the nominees for Class III directors and other matters to be voted on at the Annual Meeting. It also contains information about our practices in the areas of corporate governance and executive compensation.
What if I receive more than one Notice of Internet Availability of Proxy Materials, proxy card or voting instruction form?
If you receive more than one Notice of Internet Availability of Proxy Materials, proxy card or voting instruction form because your shares are held in multiple accounts or registered in different names or addresses, please provide voting instructions for your shares held in each account to ensure that all of your shares will be voted.
What matters am I voting on, how may I vote on each matter and how does the Board recommend that I vote on each matter?
The following table sets forth each of the proposals you are being asked to vote on, how you may vote on each proposal and how the Board recommends that you vote on each proposal:
|
|
|
| |||
| ||||||
| ||||||
| ||||||
| ||||
|
How can I attend the Annual Meeting?
The Annual Meeting will be hosted online through Broadridge Financial Solutions, Inc. A summary of the information you need to attend the Annual Meeting online is provided below:
Any stockholder can attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/AQUA2021.
We encourage you to access the Annual Meeting online at least 10 minutes before the beginning of the meeting to complete the online check-in procedures.
The Annual Meeting starts at 1:00 p.m. (Eastern Time).
Stockholders may vote electronically and submit questions online while attending the Annual Meeting.
Please have the Control Number we have provided to you to join the Annual Meeting. The Control Number is a 16-digit number which appears on your Notice of Internet Availability of Proxy Materials, your proxy card (if you received a printed copy of the proxy materials), or on the instructions that accompanied your proxy materials.
If you have questions about how to attend and participate in the Annual Meeting, call 1-800-586-1548 on the day of the Annual Meeting. Technicians will be available 30 minutes prior to the start of the meeting to answer your questions.
At the Annual Meeting, we will endeavor to answer as many stockholder-submitted questions as time permits that comply with the meeting rules of conduct. We reserve the right to group questions on the same topic, to edit profanity or other inappropriate language, and to exclude questions regarding topics that are not pertinent to Annual Meeting matters or that are otherwise inappropriate.
What if I have technical difficulties or trouble accessing the virtual meeting website?
On the day of the Annual Meeting, technicians will be available to assist you with any technical difficulties you may have accessing the virtual meeting, beginning 30 minutes prior to the start of the meeting. If you encounter any difficulties accessing the virtual meeting during the meeting, please call toll free: 1-800-586-1548, or if calling internationally, please call: 303-562-9288.
What is the difference between holding shares as a “stockholder of record” and as a “beneficial owner”?
Stockholder of Record. If your shares are registered directly in your name with the Company’s transfer agent and registrar, American Stock Transfer & Trust Company, LLC, you are considered the “stockholder of record” with respect to those shares. We have undertaken to mail a Notice of Internet Availability of Proxy Materials or a full set of printed proxy materials (including this Proxy Statement, the Annual Report and proxy card with a postage-paid envelope), as applicable, to stockholders of record as of December 18, 2020. Stockholders of record have the right to vote in person at the Annual Meeting or through a proxy.
Beneficial Owner. If your shares are held with a broker or in an account at a bank (i.e., held “in street name”), you are considered the “beneficial owner” of those shares, and your broker, bank or other nominee is the stockholder of record of those shares. The Notice of Internet Availability of Proxy Materials or a full set of printed proxy materials would have been forwarded to you by your broker, bank or other nominee. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares. Please use the voting instruction card provided by your broker, bank or other nominee.
How do I vote if I am a stockholder of record?
As a stockholder of record, you may vote your shares in any of the following ways:
On the Internet: Follow the instructions on the Notice of Internet Availability of Proxy Materials or the proxy card to vote online;
By Telephone: Call the toll-free number shown on the proxy card;
| ||||
|
By Mail: Mark, sign, date and return the proxy card in the accompanying postage-paid envelope; or
At the Annual Meeting: Please follow the instructions for attending the Annual Meeting and voting during the meeting posted at www.virtualshareholdermeeting.com/AQUA2021. All votes must be received before the polls close during the Annual Meeting.
If you do not have a printed proxy card and wish to receive one, please follow the instructions on the Notice of Internet Availability of Proxy Materials to request a set of printed proxy materials.
Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy card or vote on the internet or by telephone by the applicable deadline so that your vote will be counted if you later decide not to attend the Annual Meeting.
How do I vote if I am a beneficial owner?
As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares. You should follow the instructions provided by your broker, bank or other nominee. You will receive, or be provided access to, proxy materials and voting instructions for each account that you have with a broker, bank or other nominee. If you wish to change the voting instructions that you provided your broker, bank or other nominee, you should follow the instructions from your broker, bank or other nominee.
You may also attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/AQUA2021 and vote during the Annual Meeting. You will need a Control Number to join the meeting. If you do not have a Control Number, please contact your bank, broker or other nominee in advance of the Annual Meeting.
What can I do if I change my mind after I vote?
If you are a stockholder of record, you can revoke your proxy and/or change your vote at any time before the polls close during the Annual Meeting as follows:
Revoke your proxy: Mail written notice of revocation of your proxy to our General Counsel and Secretary at 210 Sixth Avenue, Pittsburgh, PA 15222;
Change your vote by Internet or telephone: Vote again over the internet or by telephone prior to 11:59 p.m. (Eastern Time) on February 15, 2021;
Change your vote by mail: Sign and mail on a timely basis another proxy card with a later date; or
Change your vote at the Annual Meeting: Attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/AQUA2021 and vote again.
If you hold your shares through a bank, broker or other nominee, you can revoke your proxy and/or change your vote as follows:
Give new voting instructions: Contact the broker, bank or other nominee holding your shares and follow its instructions for changing your vote;
Change your vote at the Annual Meeting: Alternatively, you may attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/AQUA2021 and vote again.
All shares represented by valid proxies received and not revoked will be voted at the Annual Meeting in accordance with the stockholder’s specific voting instructions.
What if I submit my proxy, but do not specify how I want to vote?
If you are a stockholder of record and you submit your proxy, but do not specify how you want to vote your shares, we will vote them as follows:
FOR the election of our Class III director nominees, Gary A. Cappeline, Lisa Glatch, Brian R. Hoesterey and Vinay Kumar;
| ||||
|
FOR the approval, on an advisory basis, of the executive compensation of our named executive officers; and
FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2021.
If you are a beneficial owner, your broker, bank or other nominee will determine whether it has discretion to vote your shares on your behalf. In general, your broker, bank or nominee may vote on your behalf with respect to matters that are considered “routine.” Your broker, bank or nominee may not vote on your behalf with respect to matters that are “non-routine.” See “—What is a ‘broker non-vote’?” below.
What is a “broker non-vote”?
Under the rules of the NYSE, if you are a beneficial owner, your broker, bank or other nominee has discretion to vote your shares on “routine” matters without receiving voting instructions from you. The proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm is considered a routine matter. However, the election of our Class III directors and the advisory vote to approve the compensation of our named executive officers are considered “non-routine” matters. Accordingly, if you hold your shares through a broker, bank or other nominee, your broker, bank or other nominee will not be permitted to vote your shares on the election of Class III directors or the advisory vote to approve the compensation of our named executive officers unless you provide proper voting instructions. Broker non-votes have no effect on the vote for any matter at the meeting.
How many shares must be present or represented to conduct business at the Annual Meeting?
Under our Third Amended and Restated Bylaws, a quorum will exist at the Annual Meeting if stockholders holding a majority of the shares entitled to vote at the Annual Meeting are present in person or by proxy. Stockholders of record who return a proxy or vote in person at the meeting will be considered part of the quorum. Abstentions are counted as present for determining a quorum. Uninstructed broker votes, also called “broker non-votes,” are also counted as present for determining a quorum so long as there is at least one matter that a broker may vote on without specific instructions from a beneficial owner. See “—What is a ‘broker non-vote’?” above.
| ||||
|
What vote is required to approve each of the proposals?
The following table sets forth the voting requirements with respect to each of the proposals. As an advisory vote, Proposal 2 is not binding on the Company. However, the Compensation Committee and the Board value the opinions expressed by the Company’s stockholders on this issue and will consider the outcome of this vote when making future decisions.
| ||||
| ||||
| ||||
Other matters that may properly come before the Annual Meeting may require more than a majority vote under our Third Amended and Restated Bylaws, our Amended and Restated Certificate of Incorporation, the laws of Delaware or other applicable laws. We do not know of any such matters as of the date of this Proxy Statement.
Who will count the votes?
A representative of Broadridge Financial Solutions, Inc. will act as the inspector of elections and count the votes.
Where can I find the voting results?
We will announce the preliminary voting results at the Annual Meeting. We will also publish voting results on a Current Report on Form 8-K that we will file with the SEC within four business days of the Annual Meeting. If on the date of this Form 8-K filing the inspector of elections for the Annual Meeting has not certified the voting results as final, we will note in the filing that the results are preliminary and publish the final results in a subsequent Form 8-K filing within four business days after the final voting results are known.
| ||||
|
Who will pay the costs of soliciting these proxies?
We will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of the Notice of Internet Availability of Proxy Materials or a full set of the proxy materials (including the Proxy Statement, the Annual Report and proxy card with postage-paid envelope), as applicable, and any additional information furnished to stockholders. We have retained D.F. King & Co., Inc. to assist with the solicitation of proxies for a fee estimated not to exceed $7,500 plus reimbursement of reasonable out-of-pocket expenses. Original solicitation of proxies may be supplemented by electronic means, mail, facsimile, telephone or personal solicitation by our directors, officers or other employees. No additional compensation will be paid to our directors, officers or other employees for such services. Copies of solicitation materials will be furnished to banks, brokers and other nominees holding shares of voting stock beneficially owned by others to forward to such beneficial owners. In accordance with SEC rules, we may reimburse banks, brokers and other nominees for their reasonable costs of forwarding proxy materials to beneficial owners.
Are you “householding” for stockholders sharing the same address?
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 stockholders sharing the same address by delivering a single proxy statement or annual report, as applicable, addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies.
Evoqua has not instituted householding for stockholders of record. However, certain brokerage firms may have instituted householding for beneficial owners of shares of Evoqua’s common stock held through brokerage firms. If your household has multiple accounts holding shares of Evoqua’s common stock, you may already have received a householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of this Proxy Statement. The broker will arrange for delivery of a separate copy of this Proxy Statement promptly upon your request. Evoqua stockholders may decide at any time to revoke a decision to household, and thereby receive multiple copies.
What is the deadline for stockholders to propose actions for consideration at the Annual Meeting of Stockholders for the fiscal year ending September 30, 2021?
Stockholders who wish to nominate persons for election to our Board or propose other matters to be considered at our Annual Meeting of Stockholders for the fiscal year ending September 30, 2021 must provide us with advance notice of their director nomination or stockholder proposal, as well as the information specified in our Third Amended and Restated Bylaws, no earlier than October 19, 2021, and no later than November 18, 2021. Stockholders are advised to review our Third Amended and Restated Bylaws, which contain the requirements for advance notice of director nominations and stockholder proposals. Notice of director nominations and stockholder proposals must be mailed to our General Counsel and Secretary at 210 Sixth Avenue, Pittsburgh, PA 15222. The requirements for advance notice of stockholder proposals under our Third Amended and Restated Bylaws do not apply to proposals properly submitted under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as those stockholder proposals are governed by Rule 14a-8. We reserve the right to reject, rule out of order or take other appropriate action with respect to any director nomination or stockholder proposal that does not comply with our Third Amended and Restated Bylaws and other applicable requirements.
September 7, 2021, is the deadline for stockholders to submit proposals to be included in our Proxy Statement under Rule 14a-8 under the Exchange Act. However, if the date of the Annual Meeting of Stockholders for the fiscal year ending September 30, 2021, is changed by more than 30 days from the anniversary of the date of the previous year’s meeting, then the deadline will be a reasonable time before we begin to print and send our Proxy Statement for the Annual Meeting of Stockholders for the fiscal year ending September 30, 2021. Proposals by stockholders must comply with all requirements of applicable rules of the SEC, including Rule 14a-8, and be mailed to our General Counsel and Secretary at 210 Sixth Avenue, Pittsburgh, PA 15222. We reserve the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with Rule 14a-8 and other applicable requirements.
| ||||
|
Proposal 1—Election of Three Class III DirectorsI Director Nominees for Three-Year Terms
Our Board consists of nine members and is divided into three classes and is currently comprised of four directors in Class I, three directors in Class II, and two directors in Class III, each consisting of as near an equal number of directors as practicable.III. Our directors serve staggered three-year terms according to class, so that only a single class of directors shall have termsa term expiring in any given year. As a result, directors may serve for a three-year term orand until their successors are duly elected and qualified, or until the director’s earlier death, resignation, retirement, disqualification, or removal.
The termscurrent term of our Class IIII directors, GaryNick Bhambri, Sherrese Clarke Soares, Judd A. Cappeline, Lisa Glatch, Brian R. HoestereyGregg, and Vinay Kumar,Lynn C. Swann, will expire at the Annual Meeting. OurBased on the recommendation of our Nominating and Corporate Governance Committee, our Board fixedhas nominated each of Nick Bhambri, Sherrese Clarke Soares, and Lynn C. Swann for re-election as a Class I director at the Annual Meeting. Messrs. Bhambri and Swann were elected to the Board by the stockholders at the Company’s 2019 Annual Meeting of Stockholders. Ms. Clarke Soares was first introduced to the Nominating and Corporate Governance Committee as a potential nominee by a third-party consulting firm engaged by the Nominating and Corporate Governance Committee to conduct a candidate search, and was elected to serve as a Class I director on August 16, 2021.
Judd A. Gregg, who has been a member of our Board since our Company began operating in 2014, is not standing for re-election, as he will retire as a director at the end of his current term at the Annual Meeting, in accordance with the retirement policy in our Corporate Governance Guidelines. The Board has approved that, immediately upon the conclusion of the Annual Meeting, the size of our Board at tenwill be reduced from nine to eight directors, as of the Annual Meeting. Our Board also fixedand the number of directors assigned to Class III atI will be reduced from four and nominated Ms. Glatch and Messrs. Cappeline, Hoesterey and Kumar for election as our Class IIIto three directors.
We believe each nomineeof the Class I director nominees possesses the followingexperience, background, qualifications, qualities,and skills and other expertise that are necessary to serve on our Board:Board, including, but not limited to, the following:
Highhigh personal and professional integrity;
Broadbroad business and social perspective and mature judgment;
Broad experience at the policy-making level in business, finance, accounting, government or education;
Expertise and experience useful to Evoqua in relevant disciplines, especially in financial, commercial, operational, international and technical disciplines, and complementary to the background and experience of other Board members;
Willingness to devote the time necessary to carry out the duties and responsibilities of a director;
Commitment to serve on the Board for an extended period of time to ensure continuity and to develop knowledge about the Company’s business; and
Willingnessability to representcontribute meaningfully to the best interests of our stockholdersBoard’s oversight and objectively appraise Company performance.decision-making.
See the section of this Proxy Statement titled “Our Board of Directors,”Directors” for the backgrounds,background, principal occupations, and ages of the Class IIII director nominees and our other directors, as well as a description of the specificexperience, background, qualifications, qualities,and skills and other expertise for which they were chosen to serve on our Board.
If elected by our stockholders, Ms. GlatchClarke Soares and Messrs. Cappeline, HoestereyBhambri and KumarSwann will hold office until the Annual Meeting of Stockholders for the fiscal year ending September 30, 2023, or2024, and until their successors have been duly elected and qualified, subject to the director’s earlier death, or resignation, retirement, disqualification, or removal. If any nominee becomes unable to serve, proxies will be voted for the election of such other person as the Board may designate, unless the Board chooses to reduce the number of directors.directors in Class I. Each of Ms. GlatchClarke Soares and Messrs. Cappeline, HoestereyBhambri and KumarSwann has consented to be named in this Proxy Statement and has agreed to serve if elected.
 |
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION OF
| |
| ||||
12 |
9
Our Board of Directors provides oversight, strategic direction, and counsel to management regarding the business, affairs, and long-term interests of our Company and our stockholders. An overview of our BoardClass I director nominees and our current Class II and Class III directors as of January 1, 2021,2022, is provided in the table below.
For more complete information regarding the professional experience, background, qualifications, attributes and skills of each current Class II and Class III director and Class I director nominee, see the biographical information on the pages that follow.
Committees | ||||||||||||||||
| Directors | Age | Independent | Audit | Compensation | Nominating and Corporate Governance |
Qualifications | ||||||||||
| Class | ||||||||||||||||
|
| |||||||||||||||
| 58 | ü | ● |
|
| •
•
• Engineering, technology, and industrial expertise
| ||||||||||
| ü | ● |
|
| • • Corporate finance, capital markets, investment banking, and private equity experience • Strategic perspective in | |||||||||||
| ü | ● |
| Committee Chairperson | • • Policy experience in • Experienced member of public company boards and audit committees | |||||||||||
| ||||
|
Committees | ||||||||||||
| Directors | Age | Independent | Audit | Compensation | Nominating and Corporate Governance | |||||||
|
| |||||||||||
|
| |||||||||||
|
| |||||||||||
| Class II | ||||||||||||
Ron C. Keating |
|
|
|
| • Strategic perspective, management, leadership, and finance experience, water industry and operational expertise as our President and Chief Executive Officer
•
| |||||||
Martin J. Lamb | ü |
| ● | ● | • • Global management, operations, and leadership experience as former CFO of global company
• Engineering, technology, and industrial expertise
• Experienced member of public company boards | |||||||
Peter M. Wilver | ü | Committee Chairperson | ● |
| •
• Experienced member of public company boards and audit and compensation committees | |||||||
| ||||
14 |
Committees | ||||||||||||
| Directors | Age | Independent | Audit | Compensation | Nominating and Corporate Governance | Summary of Qualifications | ||||||
| Class III (Term Expires 2024) | ||||||||||||
Gary A. Cappeline (Board Chairperson) | 72 | ü | ● | Committee Chairperson | ● | • Global management, operations, and leadership experience as former executive • Chemicals and water industry experience • Engineering, technology, and industrial expertise • Industry-specific financial experience as former executive and investor • Particular knowledge and experience in corporate finance, strategic planning, and investments with respect to relevant industries | ||||||
Lisa Glatch | 59 | ü | ● | • Strategic perspective, management, leadership, and finance experience • Engineering, technology, and industrial expertise • Experience across a range of organizational functions, including strategic initiatives, human resources, sales, and governmental relations • More than 30 years’ experience in senior leadership roles at firms that provide technical services to customers across end markets that are relevant to Evoqua | ||||||||
2022 Proxy Statement | ||||
|
Harbhajan (Nick) Bhambri | CLASS I DIRECTOR NOMINEE | |
Independent Age: 58 Director Since: 2014 Committee Memberships: • Audit Other Public Co. Boards: • None | Harbhajan (Nick) Bhambri has served on our Board since 2014. Mr. Bhambri, a former chemicals/manufacturing executive, has served as President of Louis York Capital, a private investment firm focusing on the industrial, chemical, energy, manufacturing, distribution and services markets since 2015. Prior to Louis York Capital, Mr. Bhambri spent over two decades of his career at MECS Inc., a Monsanto Company subsidiary and process technology provider to the sulfuric acid industry serving the refining, metallurgical, uranium, and fertilizer industries, including as its President and Chief Executive Officer from 2007 until its acquisition by DuPont Clean Technologies in 2012. Mr. Bhambri also is a past President of the Washington University Olin Business School Executive MBA alumni board and a member of the Olin National Council at Washington University in St. Louis. Mr. Bhambri earned an M.B.A. and a B.S. in Mechanical Engineering from Washington University in St. Louis. Former Public Company Boards (Within Past 5 Years): • MPG Performance Group Qualifications as Board Member: Global management, operations, and leadership experience as former CEO; industry-specific financial experience as former CEO and investor; engineering, technology, and industrial expertise. | |
Sherrese Clarke Soares | CLASS I DIRECTOR NOMINEE | |
Independent Age: 45 Director Since: 2021 Committee Memberships: • Audit Other Public Co. Boards: • None | Ms. Clarke Soares has served on our Board since 2021. Ms. Clarke Soares is the Chief Executive Officer of HarbourView Equity Partners, LLC (“HarbourView”), a global investment firm focused on intellectual property and alternative investments in media and entertainment assets, which she founded in 2021. Prior to founding HarbourView, Ms. Clarke Soares founded Tempo Music Investments LLC (“Tempo Music”), an investment platform for premium music rights, in 2019 and served as its Chief Executive Officer from 2019 to 2021. She also chaired Tempo Music’s investment committee, set the investing strategy, and served on its board of directors. Before launching Tempo Music, Ms. Clarke Soares served at Morgan Stanley, a global financial services firm, as a Managing Director and the Global Head of Entertainment, Media, and Sports Structured Solutions from 2017 to 2019 and as the Head of North America Relationship Lending from 2009 to 2017. She also was a Senior Vice President in the Entertainment Practice at CIT Group Inc. from 2005 to 2009 and an Assistant Vice President at GE Capital from 2004 to 2005. She earned an M.B.A. from Harvard Business School and a B.S. from Georgetown University. Qualifications as Board Member: Management and leadership experience as an entrepreneur, founder, and CEO; corporate finance, capital markets, investment banking, and private equity experience; strategic perspective in an evolving industry. | |
| ||||
16 |
Lynn C. Swann | CLASS I DIRECTOR NOMINEE | |
Independent Age: 69 Director Since: 2018 Committee Memberships: • Audit • Nominating and Corporate Governance (Chairperson) Other Public Co. Boards: • American Homes 4 Rent • Athene Holding Ltd. | Lynn C. Swann joined our Board in 2018. Mr. Swann has held various leadership roles across business, government, and philanthropic organizations. Mr. Swann is president of Swann, Inc., a marketing and consulting firm he founded in 1976, and has held Series 7 and 63 registrations for securities industry professionals. Mr. Swann currently serves on the board of trustees of American Homes 4 Rent, a Maryland real estate investment trust, where he is a member of the audit and the nominating and corporate governance committees, and on the board of directors of Athene Holding Ltd., a financial services company that provides retirement savings products. Mr. Swann has previously served on the boards of directors of a number of publicly traded, privately held, and non-profit entities, such as Caesars Entertainment Corp., Fluor Corporation, Hershey Entertainment and Resorts, H.J. Heinz Company, and the Professional Golfers’ Association of America. Mr. Swann was chairperson of the national board of Big Brothers Big Sisters of America for two years, overseeing management of more than 400 agencies across the U.S. and establishing Big Brothers Big Sisters as a premier mentoring group. From 2016 to 2019, Mr. Swann served as the athletic director of the University of Southern California, where he was responsible for the overall administration of the university’s women’s and men’s Division I athletic programs. He was appointed by President George W. Bush as the Chairman of the President’s Council on Fitness, Sports and Nutrition from 2002 to 2005, and was the Republican party nominee for Pennsylvania governor in 2006. Mr. Swann also is a Hall of Fame athlete, played for nine seasons with the Pittsburgh Steelers professional football team, and worked on-air as a host, reporter, and analyst for the American Broadcast Company (ABC-TV). Mr. Swann earned a B.A. in Journalism from the University of Southern California. Former Public Company Boards (Within Past 5 Years): • Fluor Corporation Qualifications as Board Member: Business, finance, marketing, political, civic engagement, and philanthropic experience; policy experience in government and education; experienced member of public company boards and audit committees. | |
2022 Proxy Statement | ||||
17 |
Ron C. Keating | CLASS II DIRECTOR TERM EXPIRES 2023 | |
President and Chief Executive Officer Age: 53 Director Since: 2014 Committee Memberships: • None Other Public Co. Boards: • US Ecology Inc. | Ron C. Keating has served on our Board and as our President and Chief Executive Officer since 2014. Prior to joining Evoqua, Mr. Keating served as President, Chief Executive Officer and Chairperson of the Board of Directors of Contech Engineered Solutions (“Contech”), an infrastructure site solutions provider, from 2007 to 2014. Before heading Contech, Mr. Keating served as President of the Metalworking Solutions and Services Group of Kennametal Inc. (“Kennametal”), a supplier of tooling and industrial materials. He also held previous roles at Kennametal as the Vice President and General Manager of the Energy, Mining and Construction Group and for the Electronics Products Group from 2001 to 2007. Mr. Keating started his career at Ingersoll-Rand Inc. in 1992, where he held various roles of increasing responsibility until departing in 2001. Mr. Keating currently serves on the board of directors of US Ecology Inc., where he is a member of its compensation committee and nominating and corporate governance committee. Mr. Keating also serves on the board of trustees of the Manufacturers Alliance for Productivity and Innovation and the board of directors of the Allegheny Conference. Mr. Keating earned an M.B.A. from the Kellogg School of Management at Northwestern University and a B.S. in Industrial Distribution from Texas A&M University. Qualifications as Board Member: Strategic perspective, management, leadership, and finance experience, water industry and operational expertise as our President and Chief Executive Officer; experienced member of public company boards. | |
Martin J. Lamb | CLASS II DIRECTOR TERM EXPIRES 2023 | |
Independent Age: 61 Director Since: 2014 Committee Memberships: • Compensation • Nominating and Corporate Governance Other Public Co. Boards: • Rotork plc | Martin J. Lamb joined our Board in 2014 and served as Chairperson of our Board from 2014 to 2021. Mr. Lamb, a former engineering/industrial services executive, spent 33 years at IMI plc, an engineering company that designs, manufactures, and services highly engineered products that control the precise movement of fluids, until his retirement in 2013, and served as its Chief Executive Officer from 2001 to 2013. In 2014, Mr. Lamb joined Rotork plc, a global designer and manufacturer of industrial valve actuators, control system and accessories, as its Non-Executive Chairperson, and led the organization as its Interim Chief Executive Officer from 2017 until 2018, at which time Mr. Lamb returned to the position of Non-Executive Chairperson. Mr. Lamb has also served as a Non-Executive Director of Mercia Technologies PLC, an investment group; Severn Trent plc, a water utility company; and Spectris plc, a supplier of precise instrumentation and controls. Mr. Lamb is a member of the European Advisory Board of AEA Investors LP. Mr. Lamb earned an M.B.A. from Cranfield Business School and a B.S. in Mechanical Engineering from Imperial College, London. Former Public Company Boards (Within Past 5 Years): • Mercia Technologies PLC Qualifications as Board Member: Experience managing and developing large businesses and complex projects in all parts of the world; global management, operations, and leadership experience as former CEO; engineering, technology, and industrial expertise; experienced member of public company boards. | |
| ||||
18 |
Peter M. Wilver | CLASS II DIRECTOR TERM EXPIRES 2023 | |
Independent Age: 62 Director Since: 2018 Committee Memberships: • Audit (Chairperson) • Compensation Other Public Co. Boards: • Shoals Technologies Group, Inc. | Peter M. Wilver joined our Board in 2018. Mr. Wilver, a former technology manufacturing and services executive and certified public accountant, served in leadership roles at Thermo Fisher Scientific Inc., a leading provider of laboratory products and services (“Thermo Fisher”), and its predecessor, Thermo Electron Corp. (“Thermo Electron”), for nearly two decades. At Thermo Fisher, Mr. Wilver served as Executive Vice President and Chief Administrative Officer from 2015 until his retirement in 2017 and as the Chief Financial Officer from 2006 to 2015. Mr. Wilver also served as the Chief Financial Officer of Thermo Electron from 2004 to 2006, after joining that company in 2000. Prior to Thermo Electron, Mr. Wilver worked for General Electric, Grimes Aerospace Company, and Honeywell International (formerly AlliedSignal), where he was Vice President and Chief Financial Officer of the electronic materials business. Mr. Wilver currently serves on the board of directors of Shoals Technologies Group, Inc., where he is the chair of the audit committee and a member of the nominating and corporate governance committee. Mr. Wilver previously served on the boards of directors of CIRCOR International, Inc., where he was the chair of the audit committee and a member of the compensation committee; and Tenet Healthcare Corporation, where he was a member of the audit and human resources committees. Mr. Wilver earned a B.S.B.A. in Accounting from The Ohio State University. Former Public Company Boards (Within Past 5 Years): • CIRCOR International, Inc. • Tenet Healthcare Corporation Qualifications as Board Member: Experience in strategic planning and mergers & acquisitions and expertise in leading the financial, accounting, and investor relations functions of large, multi-national manufacturing companies as former CFO; experienced member of public company boards and audit and compensation committees. | |
2022 Proxy Statement | ||||
19 |
Gary A. Cappeline | CLASS III DIRECTOR
| |
Board Chairperson Independent
Age:
Director Since: 2014
Committee Memberships: • Audit • Compensation • Nominating and Corporate Governance Other Public Co. Boards: • None | Gary A. Cappeline has served on our Board since the inception of our Company in Former Public Company Boards (Within Past 5 Years): • Innophos Holdings, Inc.
Qualifications as Board Member: Global management, operations, and leadership experience as former executive; chemicals and water industry experience; engineering, technology, and industrial expertise; industry-specific financial experience as former executive and investor; particular knowledge and experience in corporate finance, strategic planning, and investments with respect to relevant industries. | |
| ||||
|
Lisa Glatch | CLASS III DIRECTOR
| |
Independent
Age:
Director Since: 2020
Committee Memberships: • Nominating and Corporate Governance Other Public Co. Boards: • None | Lisa Glatch joined our Board in Former Public Company Boards (Within Past 5 Years): • CH2M Hill Companies Ltd. • Infraestructura Energética Nova, S.A.B. de C.V.
Qualifications as Board Member: Strategic perspective, management, leadership, and finance experience; engineering, technology, and industrial expertise; experience across a wide range of | |
|
| |
|
| |
| ||||
|
Board Composition and Board Development
Our Board currently consists of nine directors. The Board has affirmatively determined that eight of its nine current members, including each of the Class I director nominees standing for election at the Annual Meeting, are independent directors. Our independent directors and Class I director nominees are named below.
Independent Class I Director Nominees (Also Serving as Current Directors): Nick Bhambri, Sherrese Clarke Soares, and Lynn C. Swann | 9 current members Board of Directors 8 current members (including 3 Class I director nominees) Independent Under NYSE Standards* *Ron C. Keating is non-independent | |||
Other Currently-Serving Independent Directors: Gary A. Cappeline, Lisa Glatch, Judd A. Gregg, Martin J. Lamb, and Peter M. Wilver |
Our Board applied the independence standards of the NYSE, as set forth in our Corporate Governance Guidelines and summarized below under “Summary of Applicable Independent Standards.” In making its independence determinations, our Board considered that Gary A. Cappeline, a non-employee director, has been retired from AEA, our former private equity sponsor, since December 31, 2018. Ron C. Keating is not independent because of his employment with the Company as an executive officer. Brian R. Hoesterey and Vinay Kumar, who resigned from our Board on December 31, 2021 and August 18, 2021, respectively, were not considered to be independent because of their affiliation with AEA.
Since November 1, 2020, only directors who meet the NYSE independence standards applicable to audit committees, compensation committees, and nominating committees, are serving on our Board’s Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, respectively. Prior to November 1, 2020, pursuant to the NYSE transition provisions for former “controlled companies,” Messrs. Hoesterey and Kumar served as members of the Compensation Committee and the Nominating and Corporate Governance Committee. Evoqua ceased to be a controlled company under NYSE rules on November 2, 2019, meaning that no individual, group, or company holds more than 50% of the voting power of our Company.
| ||||
22 |
Summary of Applicable Independence Standards Under our Corporate Governance Guidelines and the NYSE corporate governance standards, a majority of the members of our Board are required to be independent directors. An individual director is considered to be independent if our Board affirmatively determines the director does not have a material relationship with Evoqua or any of its subsidiaries that would interfere with the director’s exercise of independent judgment. A director may not be considered independent if he or she has any relationship with Evoqua that is described in the following objective tests for independence in the NYSE corporate governance standards: • A director currently is employed by Evoqua, or was employed by Evoqua within the last three years; • A director’s immediate family member currently is an executive officer of Evoqua, or was an executive officer of Evoqua within the last three years; • A director or immediate family member received more than $120,000 in direct compensation from Evoqua, except for certain permitted payments (such as director and committee fees, pension, or other forms of deferred compensation), during any 12-month period within the last three years; • Certain employment relationships between a director or an immediate family member and Evoqua’s internal or external auditors; • A director or immediate family member is an executive officer of a company, or has within the last three years been an executive officer of a company, during the same time that an Evoqua executive officer served on that company’s compensation committee; or • A director is an employee or an immediate family member is an executive officer of a company that has made payments to, or received payments from, Evoqua for property or services in excess of the greater of $1 million or 2% of such other company’s consolidated gross revenues in any of the last three fiscal years. In the event a director has a relationship with the Company that is relevant to his or her independence and is not addressed by the objective tests for independence set forth in the NYSE corporate governance standards, our Board would determine, considering all relevant facts and circumstances, whether such relationship is material to the director’s ability to exercise independent judgment as a member of our Board. |
DIVERSITY OF BACKGROUND, SKILLS, AND EXPERIENCE
In the process of searching for qualified persons to serve on the Board, the Board strives for the inclusion of diverse knowledge and viewpoints, and takes into account age, gender, race, ethnicity, sexual orientation, gender identity, and other personal characteristics. Since October 2018, our Corporate Governance Guidelines have provided that the Nominating and Corporate Governance Committee will include, and request that any search firm it engages include, female and racially/ethnically diverse candidates in the initial pool from which new director nominees are selected. Our two most recent Board appointments have been female and/or racially/ethnically diverse candidates: Ms. Glatch was elected to our Board in 2020 and Ms. Clarke Soares was elected to our Board in 2021.
2022 Proxy Statement | ||||
23 |
Overall, three of our current Board members self-identify as diverse based on their race or ethnicity, and two members self-identify as female. Additionally, one Board member is a national of, and lives and works in, the United Kingdom. Our nine current Board members range in age from 45 to 74, and the average age of our Board members is 61.4.
|
| |
Skills and Experience
Our Board is attuned to the value and opportunities created by diversity, in its many forms. In addition to personal characteristics of diversity, our Board is focused on achieving a mix of experience, background, qualifications, and skills that will help the Company’s strategic direction and organizational development. The below graphic is provided to illustrate the range of experience, background, qualifications, and skills that our current Board members collectively possess, which relate to aspects of Company strategy. Our directors also possess other individual experience, background, qualifications, and skills not depicted in the graphic.
| NUMBER OF DIRECTORS | |
|   9 Directors | |
Compensation & Human Resources | 9 Directors | |
End Markets & Growth Areas |  7 Directors | |
Enterprise Risk Management | 9 Directors | |
Financial Literacy | 9 Directors | |
International Markets | 9 Directors | |
IT Expertise & Cybersecurity | 8 Directors | |
Operations | 7 Directors | |
Strategic Leadership & Management | 9 Directors | |
Environmental, Social and Governance Matters | 9 Directors | |
Technology & Innovation | 9 Directors | |
Water Industry Knowledge | 7 Directors |
| * |
|
|
Information Regarding each Experience Category
Board Governance—Board governance requirements; practices and functions of the governance oversight role; and board operations, especially with respect to U.S. publicly-traded companies.
Compensation & Human Resources—Compensation practices, including executive compensation programs; organizational structures and recruiting programs in the U.S. or in other countries where the Company has operations. Also, human resources practices, inclusion and diversity programs, assessment of corporate culture and organization development.
End Markets & Growth Areas—The Company’s key end markets and growth areas.
Enterprise Risk Management—Enterprise risk management and assessment processes; risk mitigation strategies; risk-return trade-off; development and implementation of risk management policies and procedures.
| ||||
24 |
Financial Literacy—Understanding of the preparation, audit, and evaluation of financial statements comparable in complexity to the Company’s. Understanding of audit committee functions, internal controls over financial reporting and compliance. Knowledge of or familiarity with evaluating capital structure and corporate finance activities.
International Markets—Experience living and working outside of the U.S., especially in countries or regions where the Company has operations or views as a key geographic market. Familiarity with the business culture, regulatory and political systems, and socio-economic factors of that market.
IT Expertise & Cybersecurity—Enterprise-wide development, implementation, and maintenance of computer hardware and software systems. Global cyber risk trends and risk mitigation strategies, including prevention, detection, and response planning.
Operations—Inner workings of operations in equipment manufacturing, system integration and related services and aftermarket. Logistics and supply chain management or project delivery management.
Strategic Leadership & Management—Executive management (CEO, COO, CFO, or equivalent) experience. Experience in formulating strategy for an organization and coordinating efforts of managers to accomplish strategic objectives through the application of available resources, including employees.
Environmental, Social, and Governance Matters—Evaluation of climate change risks and opportunities; corporate social responsibility policies; human capital management, inclusion and diversity, and corporate culture.
Technology & Innovation—Innovation systems, including but not limited to the research and development process, technology acquisition process, and methods of monetizing acquired technologies or intellectual property rights, in each case on a worldwide basis, and measurement and tracking systems to evaluate the effectiveness of the innovation system.
Water Industry Knowledge—The water industry, including the competitive landscape, geographic markets, and strategic positioning; environmental changes impacting the water industry; emerging regulations and technologies that enable a critical evaluation of strategic plans. Water and wastewater treatment and water quality/water resources law in the U.S. or equivalent in international jurisdictions.
Tenure and Board Development
Considering Evoqua’s eight-year operating history, including as a publicly-traded company for approximately the last four years, we believe our Board has a reasonable and appropriate mix of tenure among its members. As Evoqua has transitioned from a pre-IPO group of water technologies businesses to a public company with a restructured operating model in the present day—and as we look ahead to potential future transitions in Evoqua’s business and the world around us—our Board seeks to maintain appropriate resources of institutional knowledge and leadership continuity, as well as refreshment of perspectives, skills, and experience. Of our non-employee directors, the four directors with the longest tenures have served for approximately eight years; two directors have served for approximately four years, and two directors have served for two years or less. As of January 1, 2022, our average board tenure for non-employee directors is approximately 5.4 years. Following Mr. Gregg’s retirement, and assuming each of the Class I director nominees is elected at the Annual Meeting, the average tenure of the non-employee directors on our Board |
(as |
2022 Proxy Statement | ||||
25 |
Addition of Four New Directors in Past Four Years
| In the approximately four years since our initial public offering in November 2017, we have added four new Board members, who bring independent and diverse perspectives; extensive experience as public company board members or as leaders in strategic planning and operational roles; and knowledge and skills which can contribute to our overall organizational success and competitiveness. | Snapshot of New Directors— • Gender ratio: 2 women / 2 men • 2 individuals are ethnically / racially diverse |
Joined Our Board | Board Roles | |||||
| Former Chief Administrative Officer and Chief Financial Officer of Thermo Fisher Scientific Inc. | 2018 | • Director • Audit Committee Chairperson • Compensation Committee Member | |||
Lynn C. Swann |
| 2018 | • Director • Nominating and Corporate Governance Committee Chairperson • Audit Committee Member | |||
|
| 2020 | • Director • Nominating and | |||
Sherrese Clarke Soares | Founder and Chief Executive Officer
| 2021 |
• Audit Committee Member | |||
| ||||
|
|
| |
|
| |
| ||||
|
|
| |
|
| |
|
| |
|
| |
| ||||
|
|
| |
|
| |
|
| |
|
| |
| ||||
|
Corporate Governance and Board Matters
Corporate Governance Guidelines
We believe that good corporate governance helps ensureshould be the Company is managed for the long-term benefitkeystone of our stockholders. Theorganization, as good corporate governance helps enable effective business strategies and sustainable relationships with Company stakeholders.
Corporate Governance Guidelines
We have adopted the Evoqua Water Technologies Corp. Corporate Governance Guidelines (our “Corporate Governance Guidelines”) set forth guidingto promulgate principles for the governance of our Board, in carrying out its responsibilities. the highest governing body of our Company. The Nominating and Corporate Governance Committee of our Board periodically reviews our Corporate Governance Guidelines and, as applicable, makes recommendations to our Board regarding appropriate updates to promote the quality and effectiveness of the Board as a governing body and comply with applicable laws, regulations, and NYSE listing requirements.
Our Corporate Governance Guidelines address, among other things:
the composition, structure, and policies of the Board and its committees;
determination of director qualifications;qualifications and independence;
consideration of diversity in identifying potential director candidates;
expectations and responsibilities of directors;
management succession planning;
evaluation of the performance of the Board and each of its committees;
principles of Board compensation; and
communications with stockholders and non-managementnon-employee directors.
Code of Ethics and Business Conduct
Integrity is a core value at Evoqua. We have adopted an enterprise-wide Code of Ethics and Business Conduct, which applies to our directors, officers (including our principal executive officer, principal financial officer, and principal accounting officer), and employees. Our Corporate Governance Guidelines are postedCode of Ethics and Business Conduct provides a framework for conducting business in an ethical manner and sets forth our expectations on a number of topics, including conflicts of interest, safety, compliance with laws, use of our assets, and business ethics.
In the event that we amend or waive certain provisions of the Code of Ethics and Business Conduct applicable to our principal executive officer, principal financial officer, or principal accounting officer that require disclosure under applicable SEC rules, we will disclose the same on our website. Our Code of Ethics and Business Conduct is available on our website at aqua.evoqua.com/governance/governance-documents/default.aspx. The Nominating and Corporate Governance Committee of our Board reviews the Corporate Governance Guidelines periodically to ensure that they continue to promote the quality and effectiveness of the Board as a governing body and comply with applicable laws, regulations and NYSE requirements.
Director IndependenceBOARD OPERATIONS
At least onceBoard Leadership Structure
| Our Board believes there is no single, mandated approach to effective Board leadership and that the Board’s leadership structure may vary from time to time as circumstances warrant. The Board does not have a policy on whether the role of Chairperson and CEO should be separate or combined. | • Board Chairperson and CEO are separate roles • Board Chairperson is an independent director |
We currently separate the roles of CEO and Board Chairperson. The Board has been led by a year,non-employee Board Chairperson since Evoqua commenced operations in 2014. Martin J. Lamb, an independent director, served as our Board evaluates the independence of each of its members, to ensure that at least a majority of its members are independent directors. Under our Corporate Governance Guidelines and NYSE corporate governance standards, a director is considered to be independent ifChairperson from 2014 until May 2021. In May 2021, our Board affirmatively determines that the director does not have a material relationship with Evoqua or any of its subsidiaries, other than service on our Board. In the event a director has a relationship with the Company that is relevant to his or her independence and is not addressed by the objective tests for independence set forth in the NYSE corporate governance standards, our Board will determine, considering all relevant facts and circumstances, whether such relationship is material to the Director’s ability to exercise independent judgment as a member of our Board.
Our Board has affirmatively determined that seven of the ten members of our Board — Nick Bhambri,elected Gary A. Cappeline, Lisa Glatch, Judd A. Gregg, Martin J. Lamb, Lynn C. Swann and Peter M. Wilver — arealso an independent directorsdirector, as defined by our Corporate Governance Guidelines and the corporate governance standards of the NYSE. In making this determination, our Board considered that Mr. Cappeline, a non-employeeChairperson. director, has been retired from AEA since December 31, 2018. Ron C. Keating, our President and Chief Executive Officer, is not independent because of his position as an executive officer; and Brian R. Hoesterey and Vinay Kumar are not independent because of their affiliation with AEA.
As of November 1, 2020, each of the Audit, Compensation and Nominating and Corporate Governance Committees of our Board is composed entirely of members who meet the definitions of independence required by our Corporate Governance Guidelines and the NYSE corporate governance standards. Prior to November 1, 2020, in compliance with NYSE transition provisions for former “controlled companies” and our Corporate Governance Guidelines, we had a majority of independent directors on our Compensation and Nominating and Corporate Governance Committees. We ceased to be a controlled company under NYSE rules on November 2, 2019; no individual, group or company holds more than 50% of the voting power of our Company. Our Audit Committee has been fully independent since November 2018, and our Board has had a majority of independent members since May 2018.
| ||||
|
The Nominating and Corporate Governance Committee monitors the composition of our Board and its committees, identifies and evaluates potential director candidates and makes recommendations to the full Board on these matters. The Nominating and Corporate Governance Committee considers the Company’s strategy, business and structure as well as input from our CEO on strategic priorities when developing a search for a director candidate. Additionally, under our Corporate Governance Guidelines, diverse candidates, including women and minorities, must be included in each pool of candidates from which we select new director candidates. Director candidate searches are conducted by a reputable, third party leadership consulting firm engaged by our Board. Potential candidates are evaluated by the Nominating and Corporate Governance Committee, giving consideration to the types of qualifications, qualities, skills and other expertise we seek in all of our directors, as generally described above under “Proposal 1—Election of Class III Directors”; the needs of our Board; and other factors bearing on the candidate’s effectiveness as a contributor to our Board.
In the three years since our initial public offering in November 2017, we have added three new Board members, who bring independent and diverse perspectives; extensive experience as public company board members or as leaders in strategic planning and operational roles; and knowledge and skills which can contribute to our overall organizational success and competitiveness. Additionally, two of our new Board members, Mr. Swann and Ms. Glatch, further increase the diversity of our Board.
|
| |||||
|
| |||||
|
| |||||
|
| |||||
With assistance of its Nominating and Corporate Governance Committee, our Board is committed to thoughtful review and selection of new director candidates to provide the “right board at the right time” as our Company and its business evolve.
Our Board actively considers racial, ethnic and gender diversity in recruitment of potential director candidates for vacancies. Since October 2018, our Corporate Governance Guidelines have provided that diverse candidates, including women and minorities, must be included in each pool of candidates from which we select new director candidates, otherwise known as the “Rooney Rule.” In the proxy materials for our 2020 Annual Meeting, we discussed our search for a female director candidate, which resulted in the addition of Ms. Glatch to our Board in February 2020.
Forty percent of our Board members self-identify as diverse, in terms of race, ethnicity or gender. Additionally, one Board member is a national of, and lives and works in, the United Kingdom. Our Board members range in age from 42 to 73; the average age on our Board is 59.5.
| ||||
|
Distribution of Racial, Ethnic, Gender and National Diversity
Distribution of Age Diversity
Our Board is attuned to the value and opportunities created by diversity, in its many forms. In addition to personal characteristics of diversity, our Board is focused on combining the right mix of professional skills, experience and perspectives to support the Company’s strategic direction and organizational development.
Current or Former CEO
|
Former CFO/Significant Financial Expertise
|
Global Industrial Experience
|
IT, Digital Businesses and Cybersecurity
|
M&A/Strategic Transactions/
Consulting and Private Equity
|
Public Board Experience
|
Environment, Health and Safety/Risk Management
|
Sustainability
|
Government Relations/Academic Institutions
|
| ||||
|
Consideration of Stockholders’ Recommendations
The Nominating and Corporate Governance Committee will give consideration to director candidates recommended by stockholders using the same criteria discussed above. To recommend a potential director candidate to the Nominating and Corporate Governance Committee, see “—Communications with the Board” on page 25 of this Proxy Statement.
We currently separate the roles of Chief Executive Officer and Chairman of the Board. These positions are currently held by Ron C. Keating, as our Chief Executive Officer, and Martin J. Lamb, an independent director, as Chairman of our Board. We believe thisa leadership structure with a separate CEO and Board Chairperson is appropriate for our Company at this time due to the differences between the two roles. The Chief Executive OfficerCEO is responsible for setting our strategic direction, providing day-to-day leadership, and managing our business, while the Chairman of thebusiness. The Board Chairperson provides guidance to the Chief Executive Officer,CEO, chairs Board meetings, sets the agendas for Board meetings, of our Board and providesmaintains the flow of information to theBoard members of our Board in advance of, suchand in between, Board meetings. As a result of this BoardCurrently, separating these leadership structure,roles allows our Chief Executive Officer is ableCEO to focus on developing and implementing our Company’s business strategies and objectives and monitoring the Chairmanday-to-day management and performance of our Company. The Board Chairperson, on the other hand, is able to provide independent oversight of our Company, and serve as an independent liaison between our management and the members of our Board. DueBoard in providing feedback to Mr. Lamb’s significant prior experience as a chief executiveour CEO, and non-executive director, we believe Mr. Lamb is well-suitedfocus on governance of our Board, including Board composition and the recruitment of new directors, Board meeting schedules and agenda-setting, and information flow and management reporting to serve in his leadership role as Chairman. Thethe Board.
Designation of Lead Director
If the positions of Board recognizes that there is no single, generally accepted approach to providing Board leadershipChairperson and that the Board’s leadership structure may varyCEO are combined in the future, as circumstances warrant. Our Corporate Governance Guidelines provide that our non-managementnon-employee directors shall designatewill elect from among themselves a Lead IndependentDirector. The Lead Director ifwill have the positions of Chairman of the Boardduties and Chief Executive Officer are combined.
Our Board has standing Audit, Compensation, and Nominating and Corporate Governance Committees. Each Committee operates under a written charter approved by the Board, copies of which are available on our website at aqua.evoqua.com/governance/governance-documents/default.aspx. The key responsibilities of each committee, as set forth in its charter, are summarized below.
The current members of the Audit, Compensation, and Nominating and Corporate Governance Committees are identified below. Our Board has affirmatively determined that each of these directors is independent based on our Corporate Governance Guidelines, and the independence definitions applicable to members of those committees under NYSE corporate governance standards.
Prior to November 1, 2020, two non-independent directors, Messrs. Hoesterey and Kumar, also served as members of the Compensation and Nominating and Corporate Governance Committees, as permitted by the NYSE transition provisions for former “controlled companies” and our Corporate Governance Guidelines.
Audit Committee
The Audit Committee recommends the annual appointment of, and reviews the independence of, our auditors and reviews the scope of audit and non-audit assignments and related fees, the results of the annual audit, accounting principles used in financial reporting, internal auditing procedures, the adequacy of our internal control procedures, related party transactions and investigations into matters related to audit functions. The Audit Committee is also responsible for overseeing risk management on behalf of our Board. See “—Board Oversight of Risk Management.”
The members of the Audit Committee are: Peter M. Wilver (Chairman), Nick Bhambri, Gary A. Cappeline and Lynn C. Swann. Each member of our Audit Committee is an independent director under applicable NYSE corporate governance standards and SEC rules and is “financially literate.” Messrs. Wilver and Cappeline qualify as our “audit committee financial experts” within the meaning of the SEC rules.
The Audit Committee met eight times during the fiscal year ended September 30, 2020.
| ||||
|
The charter of the Audit Committee permits the Committee, in its discretion, to delegate its duties and responsibilities to one or more subcommittees as it deems appropriate and to the extent permitted by applicable law.
Compensation Committee
The principal responsibilities of the Compensation Committee are to review and approve matters involving executive compensation, make recommendations to the Board regarding setting of director compensation, authorize equity and other incentive arrangements, monitor employee benefit programs, and approve employment agreements and other employment-related arrangements for executive officers.
The current members of the Compensation Committee are: Gary A. Cappeline (Chairman), Judd A. Gregg, Martin J. Lamb and Peter M. Wilver. Each current member of our Compensation Committee is an independent director under applicable NYSE corporate governance standards for purposes of serving on the Compensation Committee.
The Compensation Committee met six times during the fiscal year ended September 30, 2020.
The charter of the Compensation Committee permits the Committee to, in its discretion, delegate its duties and responsibilities to a subcommittee of the Compensation Committee as it deems appropriate and to the extent permitted by applicable law. All proposed delegations of duties of must be adopted by a resolution of the Compensation Committee and reviewed for compliance with the corporate governance standards of the NYSE, the rules and regulations of the SEC and Delaware corporate law. During the fiscal year ended September 30, 2020, the Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”) as its compensation consultant.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee assists our Board in identifying individuals qualified to become Board members, makes recommendations for nominees for committees and develops, recommends to the Board and reviews our corporate governance principles.
The members of the Nominating and Corporate Governance Committee are: Lynn C. Swann (Chairman), Gary A. Cappeline, Lisa Glatch, Judd A. Gregg, and Martin J. Lamb. Each member of our Nominating and Corporate Governance Committee is an independent director under applicable NYSE corporate governance standards for purposes of serving on this Committee.
The Nominating and Corporate Governance Committee met four times during the fiscal year ended September 30, 2020.
The charter of the Nominating and Corporate Governance Committee permits the Committee, in its sole discretion, to delegate its duties and responsibilities to one or more subcommittees as it deems appropriate and to the extent permitted by applicable law.
Board Oversight of Risk Management
Our full Board is engaged in risk oversight both directly and through its standing committees. The risks our Company faces include,including, but are not limited to, competitive, economic, operational, financial (accounting, credit, liquidity and tax), legal, regulatory, compliance and reputational risks. On an ongoing basis, our fullthe following:
Preside over all meetings of the Board monitors management’s approach to addressingat which the risks that could prevent our business from executing against our annual operating plan and long-term strategic plans. The BoardChairperson is not present, including over executive sessions of non-employee directors
Act as the liaison between the non-employee directors and the AuditChairperson of the Board, as appropriate
Call meetings of the non-employee directors when necessary or appropriate
Collaborate with the CEO on Board meeting agendas and Compensation Committees also meet regularlyapprove such agendas
Assist in executive sessions with key management personnelscheduling Board meetings and representativesapprove meeting schedules to ensure there is sufficient time for discussion of outside advisors to understand how management identifiesall agenda items
Be available for consultation and manages risk.direct communication if requested by major stockholders
Beginning in early 2020, the COVID-19 pandemic brought an unprecedented combination of challenges to businesses around the world, including ours. Because we are deemed an essential business under US federal andFiscal Year 2021 Board Meetings
| ||||
|
local standards, and many of our customers, including those in the pharmaceuticals and health sciences industries, use water as a critical part of their operations or production processes, our first priority has been our business continuity and the safety and well-being of our employees. Our Board engaged with our executive management to assess our business options for adapting to the challenges created by the pandemic, adjust our risk tolerance in certain operating areas, and develop operating priorities. We developed a COVID-19 readiness plan and assembled a cross-disciplinary business continuity team led by our executive management to monitor the impact of the COVID-19 pandemic across our business operations and guide implementation of company-wide protocols to protect employee health and safety and continuity of customer service. Our Board has remained engaged with management in monitoring the resilience of our business, and management provides regular updates to the Board regarding the mitigation measures that have been implemented.• In fiscal year 2021, we held 7 Board meetings.
| ||
|
| |
|
| |
|
| |
|
|
In addition, our Chief Executive Officer’s membership on, and collaboration with, the Board allows him to gauge whether management is providing adequate information for the Board to understand the interrelationship of our various business and financial risks. Mr. Keating is available to the Board to address any questions from other directors regarding executive management’s ability to identify and mitigate risks and weigh them against potential rewards.
Sustainability Oversightsuch fiscal year during which such director served on the Board; the average attendance rate was greater than 95%.
In its oversight role, the full Board acts as a sounding board to management in defining the sustainability priorities of the Company and the overall execution of its Sustainability Program. Since our inception as a standalone company, promoting worker safety through a robust environment health and safety program and incident report and investigation procedures has been a key operating priority, which is monitored by the Board. As our organization has evolved from our former three-segment structure to our current two-segment structure, and continues to evolve, attracting, developing and retaining human capital to support execution of our long-term goals has become an important element of our strategic planning. Our Board is also engaged with our Executive Leadership Team in succession planning for senior management positions, including emergency succession/replacement planning should the need arise. We have also begun executing environmental and social initiatives under our sustainability program that are designed to help our customers improve their sustainability performance for water, energy and waste; lessen the environmental impact of our internal operations; help our employees, supply chain partners and communities thrive; and improve the communities in which we work.
| ||||
|
During the fiscal year ended September 30, 2020, our Board held six telephonic and in-person meetings. All of the directors who served during the fiscal year ended September 30, 2020, attended at least 75% of the total meetings of the Board and each of the Board committees on which such directors served during their respective tenures. Average director attendance rates at fiscal 2020 Board and Board committee meetings are set forth below.
|
| |
|
|
We expect our directors to be engaged and to devote substantial time and energy to their service on our Board. Directors are expected to make their best effort to attend all Board meetings, all meetings of the committees of the Board of which they are a member, and theour annual meeting of stockholders. All
During the fiscal year ended September 30, 2021, our Board held a total of seven meetings. Additionally, each director serving at the memberstime of our Board of Directors attended our 20202021 Annual Meeting of Stockholders which was conducted atattended our facility in Colorado Springs, Colorado. 2021 Annual Meeting of Stockholders.
We typically conduct at least one Board meeting per year at a Company branch office or facility to allow directors the opportunity to assess our culture and operations. ThisWe suspended this practice has been suspended during 2021 due to the COVID-19 pandemic.
Pursuant to our Corporate Governance Guidelines, our Board currently plans to hold at least four meetings each year, with additional meetings to occur (or action to be taken by unanimous consent, either in writing or by electronic transmission) at the discretion of the Board.
| ||||
28 |
Executive Sessions of Non-Management Directors
| We expect our Board to express opinions and views that are independent from management. We believe that dedicated opportunities for free and open discussion and communication among the non-management members of our Board advance this objective. At the conclusion of most Board meetings, the non-employee directors of our Board meet separately in executive session, without any members of management present. Pursuant to our Corporate Governance Guidelines, our independent Board Chairperson, Gary Cappeline, is the presiding officer at these executive sessions. In the event the Board Chairperson is not a non-employee director, the Lead Director will preside at the executive sessions. | • Non-employee directors meet separately at the conclusion of most Board meetings. • No members of management present. • Independent Board Chairperson is the presiding officer. | |||
Annual Board and Committee Evaluations
• The Board and each committee conducts an annual self-evaluation. • Evaluation process is reviewed annually by the Nominating and Corporate Governance Committee. |
We expect our Board to thoughtfully appraise its own performance as the highest governing body of our Company. The Nominating and Corporate Governance Committee establishes and oversees a process for the annual evaluation of the Board and each standing committee thereof. On an annual basis, our Board and each of its Committees conducts a self-evaluation under the framework that has been established by the Nominating and Corporate Governance Committee, including with respect to performance and effectiveness. Each Committee and the full Board separately discusses the results of its self-evaluation, in conjunction with the organizational meeting of our Board that is held following our Annual Meeting of Stockholders. The fiscal 2021 evaluation process resulted in a continuing focus on strategy and adjustments to time allocation for meetings.
Continuing Education We believe our directors should pursue opportunities to deepen their | • Annual stipends for education programs | |||
perspective and knowledge base regarding our business and our stakeholders. As appropriate, from time to time, management prepares additional educational sessions for directors on matters relevant to the Company and its business, which may include briefing sessions specific to a business or operational area; on topics that present particular risks and opportunities to the Company; or on environmental and social factors relevant to Company performance. In addition, directors are expected to attend education programs each year on topics relevant to publicly-traded companies, and we provide a stipend to support these activities.
Limitations on Outside Activities
• Non-Executive Directors: no more than four public company boards (including Evoqua’s Board), without specific approval from the Board. • Audit Committee Members: no more than three public company audit committees (including Evoqua’s Audit Committee). • Directors who also serve as executive officers of public companies: no more than two public or private company boards (other than Evoqua’s Board). |
We believe these requirements allow our directors to benefit from exposure to other boards while fulfilling their duties to the Company. We also expect directors who experience a significant change in their principal current employer or principal employment to offer to resign from our Board. The Board shall determine the action, if any, to be taken with respect to such director’s position on the Board.
2022 Proxy Statement | ||||
29 |
Retirement Policy
• Non-employee directors generally are not eligible to stand for election after reaching age 75. |
To facilitate refreshment of the skills, experience, and perspectives represented on our Board, our Corporate Governance Guidelines in order to ensure free and open discussion and communication among theprovide that non-managementnon-employee directors or non-employee director nominees generally will not stand for election after reaching age 75.
No Hedging Policy
• All directors and executive officers are prohibited from hedging or pledging Company stock. |
The Company’s Securities Trading Policy prohibits all directors and executive officers of the Board,Company from engaging in the non-management directors meetfollowing activities with respect to the Company’s securities: short sales; transactions in executive session at most Board meetings with no membersput options, call options, or other derivative securities related to Company securities, on an exchange or in any other organized market; hedging or monetization transactions related to Company securities, including through the use of management present. In accordance with ourfinancial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds; and holding Company securities in a margin account, or otherwise pledging Company securities as collateral for a loan. For purposes of the policy, an “executive officer” means the senior executives of the Company who are subject to the reporting requirements of Section 16(a) of the Exchange Act.
| ||||
30 |
Our Corporate Governance Guidelines provide that our Board shall have at least three committees: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. These standing committees enable our Board to delegate certain responsibilities, helping our Board acquire a closer working knowledge of these matters. Our Board currently does not have any other standing committees.
non-managementThe charter of each standing committee, as established by the Board and amended from time-to-time, directorsis available on the Investor Relations page of our website at aqua.evoqua.com/governance/governance-documents/default.aspx. Each standing committee must have designated our Chairmanat least three members and has been given express authority to retain its own advisors and consultants.
Each standing committee reports to the full Board on its activities following each committee meeting. Additionally, all Board members have access to all committee materials, and all Board members are welcome to attend any meetings of the Board, Martin J. Lamb,standing committees.
Committee Membership
Director
| Audit
| Compensation
| Nominating and
| |||
Nick Bhambri | ∎ | |||||
Gary A. Cappeline | ∎ | Chairperson | ∎ | |||
Sherrese Clarke Soares | ∎ | |||||
Lisa Glatch | ∎ | |||||
Judd A. Gregg | ∎ | ∎ | ||||
Ron C. Keating | ||||||
Martin J. Lamb | ∎ | ∎ | ||||
Lynn C. Swann | ∎ | Chairperson | ||||
Peter M. Wilver | Chairperson | ∎ | ||||
No. of Meetings held during fiscal year 2021: | 8 | 6 | 4 | |||
| (1) | Our Board appointed Sherrese Clarke Soares to serve as a member of the Audit Committee, effective December 1, 2021, which was after the end of fiscal year 2021. |
| (2) | During fiscal year 2021, Brian R. Hoesterey and Vinay Kumar served on the Compensation Committee and the Nominating and Corporate Governance Committee until November 1, 2020. Messrs. Hoesterey and Kumar resigned from our Board effective December 31, 2021 and August 18, 2021, respectively. |
2022 Proxy Statement | ||||
31 |
Purpose and Function of the director who is responsible for presiding over executive sessionsAudit Committee
Members: Peter M. Wilver (Committee Chairperson) Nick Bhambri Gary A. Cappeline Sherrese Clarke Soares Lynn C. Swann Held 8 meetings during fiscal year 2021 | Primary responsibilities and functions: • Provide assistance to the Board with respect to its oversight of: • the quality and integrity of the Company’s financial statements; • the integrity and adequacy of the Company’s auditing, accounting and financial reporting processes, and systems of internal control over financial reporting; • the Company’s compliance with legal and regulatory requirements, including internal controls and whistleblower procedures designed for that purpose and its Code of Ethics and Business Conduct and programs established in accordance therewith; • the Company’s independent registered public accounting firm’s qualifications, performance, and independence; • the performance of the Company’s internal audit function; and • the Company’s enterprise risk management framework and its policies and procedures for risk management, including the Company’s cybersecurity risk exposure. • Prepare an annual Audit Committee Report as required by the corporate governance standards of the NYSE and the rules and regulations of the SEC for inclusion in the Company’s annual proxy materials. Each member of our Audit Committee is an independent director under applicable NYSE corporate governance standards and SEC rules and is financially literate. Our Board has determined that Messrs. Wilver and Cappeline qualify as “audit committee financial experts” within the meaning of the SEC rules. |
Purpose and Function of non-management directors.the Compensation Committee
Members: Gary A. Cappeline (Committee Chairperson) Judd A. Gregg Martin J. Lamb Peter M. Wilver Held 6 meetings during fiscal year 2021 | Primary responsibilities and functions: • Discharge the Board’s responsibilities relating to the Company’s compensation and employment benefit plans, policies, and programs for members of the Executive Leadership Team (i.e., our CEO and the senior executives of the Company who report to the CEO); • Prepare an annual Compensation Committee Report on executive compensation as required by the corporate governance standards of the NYSE and by the rules and regulations of the SEC for inclusion in the Company’s annual proxy materials; • Recommend to the Board the compensation of directors who are not employees of the Company; and • Assist the Board in discharging its responsibilities with respect to oversight of the Company’s key human capital management strategies and programs, including talent recruitment and retention and inclusion and diversity. Each member of our Compensation Committee is an independent director under applicable NYSE corporate governance standards for purposes of serving on the Compensation Committee. Scope of Authority. The Compensation Committee reviews key elements of our executive compensation programs annually and adjusts those programs as appropriate. Each year, the Compensation Committee makes decisions regarding the amount of annual compensation and equity-based or other long-term compensation |
| ||||
32 |
for our executive officers and other designated senior employees. These decisions are typically made in the first quarter of each year, following an evaluation of the prior year’s performance. The Compensation Committee typically reviews elements of director compensation every other year and presents recommendations to the full Board when it determines adjustments are warranted. Adjustments to director compensation are subject to the approval of the Board. The Compensation Committee obtains assistance from an independent compensation consultant in its reviews of executive compensation and director compensation. Delegation of Duties. Under its charter, the Compensation Committee is permitted, in its discretion, to delegate its duties and responsibilities to a subcommittee or to other directors or officers of the Company as it deems appropriate and to the extent permitted by applicable laws, regulations, and the corporate governance standards of the NYSE. The Compensation Committee has delegated authority to the CEO and the Chief Human Resources Officer to grant equity awards to Company employees who are not executive officers, including to determine the specific grantees and award size. Role of Management. Our executive officers, including the CEO and the Chief Human Resources Officer, often review compensation information with the Compensation Committee during Committee meetings and may present management’s views or recommendations. The Compensation Committee evaluates these recommendations, generally in consultation with the independent compensation consultant retained by the Compensation Committee, who attends each meeting. The Compensation Committee considers input from the CEO on the individual performance of, and compensation decisions for, members of the Executive Leadership Team, other than the CEO. The Compensation Committee reviews compensation decisions for the Chief Human Resources Officer and the CEO in executive session, without either officer present for the discussion of their compensation. Retention of Compensation Consultants. The Compensation Committee has sole authority to retain and terminate compensation consultants used to assist in the evaluation of CEO, executive, or director compensation. The Compensation Committee has directly engaged Meridian Compensation Partners, LLC (“Meridian”) as its compensation consultant. Meridian provides the Compensation Committee with relevant market data, current updates regarding trends in executive and director compensation, and advice with respect to program design. Meridian also provides specific compensation recommendations for the CEO and feedback on compensation recommendations made by the CEO for executives other than the CEO. Representatives of Meridian attended all meetings of the Compensation Committee in fiscal year 2021. In connection with the engagement of Meridian, the Compensation Committee evaluated Meridian’s independence under applicable SEC rules and NYSE listing standards, taking into account all factors relevant to its independence from management. Based on that evaluation, the Compensation Committee determined that the work performed by Meridian did not raise any conflict of interest. The Compensation Committee annually evaluates the work performed by the compensation consultant to determine whether any conflict of interest has been raised. Meridian reports to the Compensation Committee, and does not perform any other services for the Company. The Compensation Committee meets multiple times throughout the year with Meridian in executive session without management present. |
2022 Proxy Statement | ||||
33 |
Compensation Committee Interlocks and Insider Participation
None of our executive officers serves, or in the past year has served, as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our Board or Compensation Committee. No interlocking relationship exists between any member of our Compensation Committee (or other committee performing equivalent functions) and any executive, member of the board of directors or member of the compensation committee (or other committee performing equivalent functions) of any other company.
Annual BoardPurpose and Committee Evaluations
Our Board and eachFunction of its Committees conduct an annual performance self-evaluation under the framework established by the Nominating and Corporate Governance Committee. Each member of our Board completes a written questionnaire covering various aspects of Board performance; similarly, each member of the Audit, Compensation, and Nominating and Corporate Governance Committees completes a written questionnaire soliciting feedback on the effectiveness of that Committee. Responses to the questionnaires are collected on an anonymous basis, and then compiled and summarized into a report by a third party. Each Committee and the full Board separately discusses the results of its performance evaluation in conjunction with the organizational meeting of our Board which is held following our Annual Meeting of Stockholders. The fiscal 2020 evaluation process resulted in an overall continued focus on strategy.
Members: Lynn C. Swann (Committee Chairperson) Gary A. Cappeline Lisa Glatch Judd A. Gregg Martin J. Lamb Held 4 meetings during fiscal 2021 | Primary responsibilities and functions: • The Company’s director nominations process and procedures; • Evaluating the performance of the Board; • Developing and maintaining the Company’s corporate governance policies; • Oversight of the Company’s key policies and strategies with respect to its environmental impact, sustainability practices, and corporate responsibility initiatives; and • Any other matters delegated by the Board or required by the NYSE or the rules and regulations of the SEC. Each member of our Nominating and Corporate Governance Committee is an independent director under applicable NYSE corporate governance standards for purposes of serving on this Committee. Director Nomination Process. The Nominating and Corporate Governance Committee monitors the composition of our Board and its committees, identifies, and evaluates potential director candidates, and makes recommendations to the full Board on these matters. The Nominating and Corporate Governance Committee considers the Company’s strategy, business, and structure as well as input from our CEO on strategic priorities when developing a search for a director candidate. Candidates for nomination to the Board may be suggested by current directors, management, stockholders, or a third-party search firm engaged to assist with director recruitment. The Nominating and Corporate Governance Committee does not have specific minimum qualifications that must be met for a prospective director candidate to be nominated. However, in identifying potential candidates, it focuses on individuals with certain experience, background, qualifications, and skills, as described under “Board Composition and Board Development—Diversity of Background, Skills, and Experience” in this Proxy Statement. The Nominating and Corporate Governance Committee considers diversity in knowledge and viewpoints, and takes into account age, gender, race, ethnicity, sexual orientation, gender identity, and other personal characteristics in reviewing potential candidates. Additionally, under our Corporate Governance Guidelines, the Nominating and Corporate Governance Committee will include, and request that any search firm it engages include, female and racially/ethnically diverse candidates in the initial pool from which the new director nominees are selected (also known as the “Rooney Rule”). The Nominating and Corporate Governance Committee may engage a third-party consulting firm to conduct director candidate searches. In such cases, the |
| ||||
|
Nominating and Corporate Governance Committee provides the consulting firm with guidance as to the experience, background, qualifications, and skills it is seeking in potential candidates, and the consulting firm provides research and pertinent information regarding candidates, and recommends candidates who satisfy such criteria. The potential candidates recommended by the consulting firm are then evaluated by the Nominating and Corporate Governance Committee, giving consideration to the types of experience, background, qualifications, and skills we seek in all of our directors, as generally described above under “Board Composition and Board Development—Diversity of Background, Skills, and Experience,” the needs of our Board, and other factors bearing on the candidate’s effectiveness as a contributor to our Board and its committees. In fiscal year 2021, Ms. Clarke Soares was identified by a third-party consulting firm and evaluated by the Nominating and Corporate Governance Committee in this manner. Consideration of Stockholders’ Recommendations.The Nominating and Corporate Governance Committee will give consideration to director candidates recommended by stockholders in the same manner and using the same criteria discussed above. Such recommendations, together with biographical and business experience information regarding the candidate, should be submitted in writing to our General Counsel and Secretary at 210 Sixth Avenue, Pittsburgh, PA 15222. For additional information about nominations, see p.111 of this Proxy Statement |
Code of Ethics and Business Conduct
We have adopted a code of ethics applicable to all of our directors, officers (including our principal executive officer, principal financial officer and principal accounting officer) and employees, known as the Code of Ethics and Business Conduct. The Code of Ethics and Business Conduct is available on our website at aqua.evoqua.com/governance/governance-documents/default.aspx. In the event that we amend or waive certain provisions of the Code of Ethics and Business Conduct applicable to our principal executive officer, principal financial officer or principal accounting officer that require disclosure under applicable SEC rules, we will disclose the same on our website.
Communications with the BoardCOMMUNICATIONS WITH THE BOARD
Any interested parties wishing to communicate with, or otherwise make his or her concerns known directly to the Board or chairperson of any of the Audit, Compensation, andor Nominating and Corporate Governance Committees, or to the non-management or independent directors as a group or individually, may do so by addressing such communications or concerns to the General Counsel and Secretary of the Company, 210 Sixth Avenue, Pittsburgh, Pennsylvania 15222. The General Counsel and Secretary will forward such communications to the appropriate party as soon as practicable. SuchThe General Counsel and Secretary will submit to the appropriate party all communications may be done confidentiallyreceived, excluding only those items that are not related to Board duties and responsibilities, such as: junk mail and mass mailings; product complaints and product inquiries; new product or anonymously.technology suggestions; job inquiries and resumes; advertisements or solicitations; and surveys.
Availability of Corporate Governance Documents For more information, the following documents are available on the Investor Relations page of our website at https://aqua.evoqua.com/governance/governance-documents/default.aspx : • Corporate Governance Guidelines • Code of Ethics and Business Conduct • Audit Committee Charter • Compensation Committee Charter • Nominating and Corporate Governance Committee Charter |
No Hedging PolicyRISK OVERSIGHT
The Company’s Securities Trading Policy prohibits all directorsOur Board is responsible for overseeing the management of the business and executive officersaffairs of the Company from effecting short sales, put options, call options or transactions in other derivative securities (on an exchange or in any other organized market), holding securities in a margin account or otherwise pledging securities as collateral for a loan or hedging or similar monetization transactionsmanner consistent with respectthe best interests of the Company and its stockholders. In this oversight role, our Board must actively evaluate management’s business strategies, plans, policies, and activities, and understand management’s approach to identifying, assessing, and managing the Company’s common stock, including throughassociated risks and opportunities. Because of the usebroader implications of financial instrumentscertain categories of risk, such as prepaid variable forwards, equity swaps, collarsfinancial, compensation, cybersecurity, human capital management, and exchange funds. For purposesESG or sustainability, our Board coordinates oversight of the policy, an executive officer includes senior executives that are subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended.these risks with its standing committees.
| ||||
|
Role of Management
Management is responsible for identifying, assessing, prioritizing, and managing the Company’s risks. To support risk management activities within each of the functional areas of the Company, the Company maintains a management-level Risk Committee, consisting of the Chief Financial Officer, General Counsel, and vice presidents and senior managers from areas such as Internal Audit, Ethics and Compliance, Information Security, and Risk Management. The Risk Committee monitors the effectiveness of the risk management structures within each functional area and advises our Executive Leadership Team on the effectiveness of those structures and strategies for prioritizing and mitigating enterprise risks.
The Risk Committee reports on its activities periodically to the Audit Committee. The Audit Committee is responsible for oversight of the structures, systems, and processes established by management to identify and manage enterprise risk, as well as legal and regulatory risk, compliance risk, and cybersecurity risk.
Role of the Board
The full Board monitors the strategic risks and business risks that could prevent our business from executing against our annual operating plan and long-term strategic plan. During fiscal year 2021, the Board also received updates on the impact of COVID-19 on the Company’s workforce, operations, and customers.
Our Board is given access to all members of senior management and employees of the Company and may consult with independent legal, financial, accounting, and other advisors, as necessary or appropriate, at the Company’s expense. The entire Executive Leadership Team, as well as the senior operational finance managers for each business segment, regularly attend each quarterly Board meeting. From time to time during the year, senior employees from a range of functional areas, such as corporate development and M&A, sustainability, legal and compliance, and risk management, are invited to speak with the full Board or its committees. In addition, our Chief Executive Officer’s membership on, and collaboration with, the Board allows him to gauge whether management is providing adequate information for the Board to understand the interrelationship of our various business and financial risks. Our Chief Executive Officer reserves time at the beginning of most Board meetings to discuss priorities and initiatives.
| Areas of Risk Oversight | ||
Full Board | Strategic, financial, operating, and execution risks; safety performance; M&A transactions; new products, new markets, and technology risks; the Company’s annual operating plan and budget and long-term strategic plan | |
Audit Committee | Auditing, accounting, and financial reporting processes and systems of internal controls implemented by management, including the internal audit function; systems established by management to identify and manage enterprise risks generally, and for managing legal and regulatory, compliance, and cybersecurity risks | |
Compensation Committee | Executive compensation arrangements, including corporate goals and objectives that affect the amount of compensation earned by our CEO and members of our Executive Leadership Team; the specific relationship of corporate performance to executive officer compensation and performance targets; human capital management; and director compensation arrangements | |
Nominating and Corporate Governance Committee | Corporate governance policies, including oversight of the Company’s Code of Ethics and Business Conduct; the composition and effectiveness of our Board and each of its standing committees; independence and potential conflicts of interest; succession planning for our Board and its standing committees; policies with respect to environmental impact, ESG and sustainability practices; and corporate responsibility initiatives |
| ||||
36 |
Cybersecurity
The Company maintains an Information Security Program to monitor and help mitigate its cybersecurity risk environment and assure the confidentiality, integrity, and availability of the Company’s information systems and data. The program is aligned to the National Institute of Standards and Technology (NIST) Cybersecurity Framework (CSF), Special Publications 800-53 and 800-171. The Information Security Program is operated by the Company’s Chief Information Security Officer in collaboration with the Chief Information Officers, and includes an information security policy; regular cybersecurity awareness communications and training for employees; system logging and monitoring; vulnerability and patch management; and a detailed incident response program.
The Audit Committee is responsible for monitoring the Company’s Information Security Program, and periodically receives reports from the Chief Information Officer and Chief Information Security Officer.
Human Capital Management and Management Succession Planning
Our Board and its Committees engage with the topics of human capital management and management succession planning on multiple fronts:
The Compensation Committee periodically receives reports from management on the Company’s key human capital management programs, focusing on topics such as inclusion and diversity and talent development, as well as the Company’s global compensation, incentive, and health and wellness programs.
As part of its quarterly business performance updates, management reports to the full Board on anticipated needs or status of workforce skills development for particular functional areas.
As part of its annual strategic review, our full Board also receives reports from management on human capital management initiatives, such as inclusion and diversity programs, the employee experience, and enhanced onboarding and training programs.
The full Board reviews management succession planning matters periodically throughout the year, with assistance from the Compensation Committee and the Nominating and Corporate Governance Committee
2022 Proxy Statement | ||||
37 |
Our sustainability program is governed through a multi-tiered structure, as depicted below, and is designed to cover each of the broad categories of sustainability topics that we have identified, with assistance from our stakeholders. On a day-to-day basis, our core Sustainability Team manages our sustainability program and coordinates with the individual workgroups that focus on each sustainability topic. We also maintain a Sustainability Steering Team, composed of vice presidents and senior managers from different functional areas, which monitors stakeholders’ interests. The Sustainability Steering Team advises the Executive Leadership Team on priorities to pursue under our sustainability program, and reports to our Chief Growth and Sustainability Officer and periodically to the full Executive Leadership Team.
Currently, our full Board periodically reviews ESG-related matters, on a holistic basis, along with other elements of the Company’s overall business strategy.
Beginning in fiscal year 2022, the Nominating and Corporate Governance Committee will provide a deeper level of oversight with respect to the Company’s sustainability program. The Chief Growth and Sustainability Officer will provide quarterly updates to the Nominating and Corporate Governance Committee regarding management of the sustainability program and goal-setting and reporting activities.
| ||||
38 |
STOCKHOLDER OUTREACH — ESG TOPICS
The Company interacts with its stockholders and stakeholders in various forums throughout the year, and values receiving their feedback and insights.
As described in greater detail in the Compensation Discussion & Analysis (the “CD&A”) on page 55 of this Proxy Statement, during the summer and fall of 2021, our Board Chairperson and our Director of Investor Relations reached out to our largest stockholders, representing approximately 66% of our outstanding shares at that time. Stockholders representing approximately 18% of our outstanding shares agreed to engage with us. Although these engagement conversations generally focused on our executive compensation program and the Special Awards, most of our engagements also included discussion of ESG-related matters. We provide information about how we are addressing the topics raised in these engagements on the pages of this Proxy Statement referenced below.
| Topics Identified by Our Stockholders | Information Available in This Proxy Statement | |
Linking Executive Compensation to ESG Goals | In November 2021, our Compensation Committee approved the incorporation of two ESG-related performance goals in the Company’s AIP. For the fiscal year 2022 AIP, 10% of the aggregate bonus opportunity for our executives and senior managers is linked to meeting goals for water stewardship and safety. For more information about this and other changes to our fiscal year 2022 executive compensation program, see pages 67-68 of this Proxy Statement. | |
Insight into Board Composition/Structure, including: • Gender Diversity • Refreshment • Board Practices | We have been active in our Board development efforts since 2017. In the past five years, we have recruited four talented directors to join our Board, including two women. Two of our new directors also self-identify as ethnically and/or racially diverse. To aid Board refreshment, we have also established a director retirement age policy (75 years) in our Corporate Governance Guidelines. For more information about the composition and structure of our Board and Board practices, see pages 22-38 of this Proxy Statement. | |
Insight into Our Sustainability Program/Organizational Structure | “Sustainable” is Evoqua’s fourth core value, which we embrace through our Footprint — “Evoqua’s responsibility to become more sustainable in our internal operations” — and our Handprint — “Enabling our customers to become more sustainable through our solutions and service offerings.” Our internal sustainability program organizational structure reflects this holistic approach and consists of a core Sustainability Team, which reports to our Chief Growth and Sustainability Officer, individual workgroups that execute on specified sustainability goals, and a Steering Committee that monitors stakeholder expectations. For more information about the organizational structure of our sustainability program, see page 38 of this Proxy Statement. | |
2022 Proxy Statement | ||||
39 |
Certain Relationships and Related Party Transactions
Policies and Procedures for Related Party Transactions
Our Board has adopted a written Related Party Transactions Policy (the “RPT Policy”) providing that the Audit Committee will review and approve or ratify transactions, arrangements, or relationships (or any series of similar or related transactions, arrangements, or relationships) in excess of $120,000 of value in which the Company is or will be a participant and in which a related party (as defined below) has or will have a direct or indirect material interest. Pursuant to the RPT Policy, the General Counsel and the Corporate Controller shall review all of the relevant facts and circumstances of all related party transactions and either (a) bring to the Audit Committee for approval or ratification any transaction (i) exceeding $120,000 or (ii) considered potentially material to the Company’s business, financial condition, results of operations or prospects, or (b) approve or disapprove of the entry into any transaction not meeting the conditions specified in clauses (a)(i) or (a)(ii) of this paragraph.
The Audit Committee or the General Counsel and the Corporate Controller, as the case may be, may approve only those related party transactions that they determine are on terms, taken as a whole, that are no less favorable to us than could be obtained in an arm’s-length transaction with an unrelated third party and that are not inconsistent with the best interests of the Company. In particular, the RPT Policy requires our Audit Committee or the General Counsel and the Corporate Controller, as the case may be, in considering whether to approve or ratify a related party transaction, to take into account, among other factors: (i) whether the transaction was undertaken in the ordinary course of business, (ii) whether the related party transaction was initiated by the Company or the related party, (iii) the availability of other sources for comparable products or services, whether the transaction with the related party is proposed to be, or was, entered into on terms no less favorable to the Company than terms that could have been reached with an unrelated third party and the duration of the transaction and the terms available to unrelated third parties and employees generally, (iv) the purpose of, and the potential benefits to the Company of, the related party transaction, (v) the impact on a director’s independence in the event that the related party is a director, director nominee, immediate family member of a director or director nominee or an entity in which any such person has an interest or relationship, (vi) the approximate amount involved in the related party transaction, (vii) the related party’s interest in the related party transaction and (viii) any other information regarding the related party transaction or the related party that would be material to investors in light of the circumstances of the particular transaction or would impair the independence of an independent director or present an improper conflict of interest for any director or executive officer.
For the purposes of the RPT Policy, a “related party” is defined as: (i) any person who is or was (at any time since the beginning of the last completed fiscal year, even if such person does not presently serve in that role) an executive officer, director or nominee for director of the Company, or any immediate family member of such person, (ii) any person beneficially owning more than 5% of any class of the Company’s voting securities at the time of the occurrence of the transaction at issue, (iii) any affiliates of the Company, (iv) any entities for which investments in their equity securities would be required to be accounted for by the equity method by the investing entity, (v) any trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management, and (vi) all members of the Company’s Executive Leadership Team, Finance Leadership, Plant Controllers, Segment Leadership and any immediate family member of such persons.
Transactions with Related Parties
Transactions with AEA. Set forth below are summaries of transactions involving AEA, our former private equity sponsor. Certain affiliates of AEA previously served on our Board, including Brian R. Hoesterey, the Chief Executive Officer of AEA, and Vinay Kumar, a partner of AEA. Messrs. Hoesterey and Kumar served on our Board until December 31, 2021 and August 18, 2021, respectively.
—Indemnification. We agreed to indemnify AEA and its affiliates against certain claims, liabilities, expenses, losses, and damages (or actions in respect thereof) arising out of a class action lawsuit and stockholder derivative lawsuit, which made allegations regarding certain disclosures of the Company in the period leading up to its
| ||||
40 |
October 2018 announcement of its preliminary results for fiscal year 2018, and its transition from a three-segment structure to a two-segment operating model. Pursuant to our agreement to indemnify AEA, in fiscal year 2021, we incurred an aggregate liability of approximately $1,509,951 to AEA in connection with these matters, all of which was paid by our insurance carriers.
—Registration Rights. We previously entered into a registration rights agreement with AEA (as amended, the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, AEA had the right to require us to register secondary public offerings of its shares under the Securities Act, with the Company paying the costs and expenses associated with such transactions. In connection with the secondary public offerings conducted during fiscal year 2021 pursuant to the Registration Rights Agreement, the Company paid registration and offering expenses of AEA, in an aggregate amount of approximately $524,012. As a result of these secondary public offerings, as of February 11, 2021, AEA has disposed of all of its shares of our common stock. The Company did not receive any proceeds from the sale of shares in these secondary public offerings.
Family Relationships. The son of James M. Kohosek, our Executive Vice President, Chief Administrative Officer, was an employee of the Company until September 11, 2021. He was employed in a non-executive officer capacity and did not report to an executive officer. His total compensation during the fiscal year ended September 30, 2021, including base salary, bonus, and benefits, exceeded the $120,000 related person transaction threshold and, as a result, was reviewed by the Audit Committee. He participated in compensation and incentive plans or arrangements on the same basis as other similarly situated employees.
2022 Proxy Statement | ||||
41 |
The Company compensatesstrives to provide fair compensation to its non-employee directors for their serviceto address the time, effort, expertise, and accountability required of active Board membership. We also seek to provide compensation that will attract and retain individuals with the appropriate experience, background, qualifications, and skills to serve on our Board, except for Messrs. Hoesterey and Kumar, who are employed by AEA. Mr. Cappeline, a non-employee director, retired from AEA effective December 31, 2018.as well as align their interests with those of our stockholders.
The Compensation Committee intends to reviewreviews the form and amountcompensation of compensation for our non-employee directors no less frequently thanperiodically (generally every other year. During its most recent reviewyear) and recommends changes to the Board when it deems appropriate.
The table below describes the components of ourthe non-employee directordirectors’ compensation program that were in February 2019,effect during fiscal year 2021. The forms and amounts of the compensation elements shown below were initially adopted by the Company in 2018 and affirmed in 2019. The Compensation Committee received assistance and advice from its independent compensation consultant, Meridian, Compensation Partners, LLC (“Meridian”), whoin its reviews of the director compensation program in 2018 and 2019. Among other things, Meridian provided a market analysis of director compensation practices based on the same comparator group then used for benchmarking NEOexecutive officer compensation. Considering this market dataIn August and other factors, following its review ofNovember 2021, the non-employee director compensation program, the Compensation Committee determined that no changesBoard adopted updates to the non-employee directordirectors’ compensation program, were advisable at that time. Therefore, non-employee director retainer amounts and equity compensation have remained at the same levels since fiscal 2018. In August 2020,based upon the Compensation Committee discussed its process for reviewing non-employee director compensation and determined that, in light of the impact of the COVID-19 pandemic, its next market-basedCommittee’s review of director compensation practices should occursuch program with assistance from Meridian. These updates are effective beginning in 2021.
Under the Company’s Amended and Restated Non-Employee Director Compensation Policy, each director who is not employed by either the Company or AEA (each such director, an “Outside Director”) receives an annual retainer of $70,000, paid quarterly in arrears. The chairperson of the Board receives an additional annual retainer of $60,000, paid quarterly in arrears. The chairpersons of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee receive additional annual retainers of $20,000, $15,000 and $10,000, respectively, in each case paid quarterly in arrears. Non-chairperson members of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee receive additional annual retainers of $10,000, $7,500 and $5,000, respectively, in each case paid quarterly in arrears. All annual retainers are paid on a calendar year basis.2022.
On the date of each annual stockholder meeting of the Company, subject to each Outside Director’s continued service on the Board following such annual stockholder meeting and approval by the Compensation Committee, each Outside Director is granted an equity award under the Amended and Restated Evoqua Water Technologies Corp. 2017 Equity Incentive Plan. The award consists of restricted stock units in respect of the Company’s common stock valued at approximately $100,000 and is subject to a one-year vesting requirement (i.e., 100% of the restricted stock units vest on the first anniversary of the date of grant) (the “Annual Equity Grant”). If an Outside Director joins the Board at a time other than effective as of the first day of the calendar year, the Annual Equity Grant is pro rated based on the number of full calendar quarters served in the calendar year in which such Outside Director commences service on the Board.
Compensation Element(1) | Director Compensation Program in Effect During Fiscal Year 2021 | |
Annual Cash Retainer(2) | $70,000 | |
Annual Equity Grant(3) | $100,000 in restricted stock units that vest on the first anniversary of the date of grant | |
Board Chairperson Fee(2) | $60,000 | |
Committee Chairperson Fee(2) | $20,000 for the Audit Committee $15,000 for the Compensation Committee $10,000 for the Nominating and Corporate Governance Committee | |
Committee Member Fee(2) | $10,000 for the Audit Committee $7,500 for the Compensation Committee $5,000 for the Nominating and Corporate Governance Committee | |
Stock Ownership Guideline(4) | Ownership of Common Stock or restricted stock units that have a value equivalent to five times the annual cash retainer; to be satisfied within five years of joining the Board | |
| (1) | Non-employee directors may participate in the Evoqua Water Technologies Corp. Non-Employee Directors Deferred Compensation Plan, which provides them with an opportunity to defer up to 100% of their annual cash retainer and/or 100% of their annual equity grant until the earliest of separation from the Board, death, a specified future date, and a change in control of the Company. |
| (2) | Paid in cash, quarterly in arrears, on a calendar year basis. If a director joins our Board at a time other than as of the first day of the calendar year, the director receives a pro-rated amount of the cash retainer, based on the number of days of service the director will perform in such calendar year. |
| (3) | Grants are made to directors on the date of our annual meeting. If a new director joins our Board at a time other than as of the first day of the calendar year, the director receives an award with a pro-rated equity value, based on the number of full calendar quarters of service the director will perform in such calendar year. |
| (4) | Adopted in December 2017. As of December 28, 2021, each of our non-employee directors satisfied this guideline, with the exception of Lisa Glatch and Sherrese Clarke Soares, who joined the Board in February 2020 and August 2021, respectively. Mses. Glatch and Clarke Soares each have five years from the date they joined the Board to fulfill the stock ownership requirement. |
The award agreement evidencing the Annual Equity Grant sets forth the terms and conditions applicable to such award upon termination of service, which shall be determined by the Board, in its discretion, at the time the
| ||||
42 |
award is granted or at any time thereafter. Upon termination of service due to death, disability, or mandatory retirement, the Annual Equity Grant, to the extent not already vested, fully vests as of the date of such termination of service. For purposes of the Non-Employeenon-employee Director Compensation Policy, “mandatory retirement”director compensation program, retirement means a compulsory retirement defined to be effective astermination of service on the day prior to the date of the next occurring annual meeting of the stockholders of the CompanyBoard following the date on which an Outside Directorthe non-employee director has attained 75 years of age.
Outside Directors are also able to participate in a deferred compensation plan which provides them with an opportunity to defer up to 100% of their cash retainer and/or 100% of their equity retainer until the earliest of separation from the Board, death, a specified future date and a change-in-control of the Company.
To enhance alignment of our non-employee directors with our stockholders’ interests, all non-employee directors are required to comply with our stock ownership guidelines. Under these guidelines, within five years of their
| ||||
|
appointment to the Board, each non-employee director is required to own shares of our stock with a value equal to five times the portion of the annual retainer that is paid in cash.
Shown below is information regarding the fiscal 2020year 2021 compensation for each member of the Board other than Mr. Keating, whose compensation is reported in the Summary Compensation Table. (SeeTable — Fiscal Years 2021, 2020, and 2019. Mr. Keating did not receive any additional compensation for his service on the Board. See “Executive Compensation—Summary Compensation Table for— Fiscal 2020”Years 2021, 2020, and 2019” in this Proxy Statement.)
Fiscal 2020 OutsideYear 2021 Non-Employee Director Compensation
Name | Fees Earned or Paid in Cash ($) | Option Awards ($) | Stock Awards ($) | Total ($) | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Total ($) | ||||||||||||||||||||||||||||
Nick Bhambri |
| 80,000 |
|
| — | (1) |
| 100,011 | (2) |
| 180,011 |
|
| 80,000 |
| 100,006 |
| — |
| 180,006 | ||||||||||||||||
Gary A. Cappeline |
| 100,000 |
|
| — |
|
| 100,011 | (2) |
| 200,011 |
|
| 123,242 |
| 100,006 |
| — |
| 223,248 | ||||||||||||||||
Sherrese Clarke Soares(4) |
| 8,750 |
| 25,000 |
| — |
| 33,750 | ||||||||||||||||||||||||||||
Lisa Glatch |
| 44,708 |
|
| 75,009 | (3) |
| 119,717 |
|
| 73,777 |
| 100,006 |
| — |
| 173,783 | |||||||||||||||||||
Judd A. Gregg |
| 77,446 |
|
| — | (4) |
| 100,011 | (2) |
| 177,457 |
|
| 80,666 |
| 100,006 |
| — |
| 180,672 | ||||||||||||||||
Brian R. Hoesterey |
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||
Vinay Kumar |
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||||||||||||
Brian R. Hoesterey(5) |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||
Vinay Kumar(6) |
| — |
| — |
| — |
| — | ||||||||||||||||||||||||||||
Martin J. Lamb |
| 135,525 |
|
| — | (5) |
| 100,011 | (2) |
| 235,536 |
|
| 116,295 |
| 100,006 |
| — |
| 216,301 | ||||||||||||||||
Lynn C. Swann |
| 83,261 |
|
| — |
|
| 100,011 | (2) |
| 183,272 |
|
| 87,554 |
| 100,006 |
| — |
| 187,560 | ||||||||||||||||
Peter M. Wilver |
| 95,625 |
|
| — |
|
| 100,011 | (2) |
| 195,636 |
|
| 97,500 |
| 100,006 |
| — |
| 197,506 | ||||||||||||||||
| (1) | Independent Board Chairperson compensation was paid to Mr. |
| (2) |
|
The value of the restricted stock units in this column is equal to the aggregate grant date fair value computed in accordance with stock-based accounting rules (Stock Compensation Topic 718 of the Accounting Standards Codification (“ASC Topic 718”)), excluding the effect of estimated forfeitures. The grant date fair value of the restricted stock units is based on the closing price per share of the Company’s common stock on the grant date. |
The number of restricted stock units held by each non-employee director as of September 30, 2021, was as follows: Ms. Glatch and Messrs. Bhambri, Cappeline, Gregg, Lamb, Swann, and Wilver — 4,039 restricted stock units; Ms. Clarke Soares — 655 restricted stock units; and Messrs. Hoesterey and Kumar — 0 restricted stock units. |
| (3) |
|
| (4) |
|
| (5) | Mr. |
| (6) | Mr. Kumar was a member of our Board until August 18, 2021. |
| ||||
|
We provide information below regarding our executive officers as of January 1, 2021:2022:
Name | Age | Position | ||
Executive Officers: | ||||
Ron C. Keating* |
| President, Chief Executive Officer and Director | ||
Benedict J. Stas |
| Executive Vice President, Chief Financial Officer and Treasurer | ||
Rodney O. Aulick |
| Executive Vice President, Integrated Solutions and Services Segment President | ||
Snehal A. Desai |
| Executive Vice President, Chief Growth and Sustainability Officer | ||
Hervé P. Fages |
| Executive Vice President, Applied Product Technologies Segment President | ||
Vincent Grieco |
| Executive Vice President, General Counsel and Secretary | ||
James M. Kohosek |
| Executive Vice President, Chief Administrative Officer | ||
Anthony J. Webster |
| Executive Vice President, Chief Human Resources Officer |
| * | For Mr. Keating’s biography, see “Our Board of |
Benedict J. Stas has served as our Executive Vice President, Chief Financial Officer and Treasurer since March 2015. Prior to joining Evoqua, Mr. Stas held variousa variety of senior financial and business roles at Kennametal, Inc. (NYSE: KMT), a supplier of tooling and industrial materials, from 1997 to 2015, including roles as Vice President Finance of Business Groups from 2010 to 2013 and as Vice President of Manufacturing for the Industrial Segment from 2014 to 2015. While at Kennametal, Inc., Mr. Stas also served as Chief Financial Officer of the Industrial Business Group, Chief Financial Officer of Kennametal Europe GmbH, Director of Global Manufacturing Finance, Controller of Metalworking Americas, and Senior Financial Analyst for Global Financial Sales and Marketing from 1997 to 1999. Prior to joining Kennametal, Inc., Mr. Stas worked for DuPont Co. as a Plant Controller, Accountant and Team Leader, from 1991 to 1997. Mr. Stas receivedearned an M.B.A. from Duquesne University and a B.S. in Business Administration from Drexel University.
Rodney O. Aulick became our Executive Vice President, Integrated Solutions and Services Segment President in October 2018, as a result offollowing the reorganization of our business from a three-segment structure to a two-segment operating model. Prior to our segment realignment, Mr. Aulick served as our Executive Vice President, Industrial Segment President from October 2015 to October 2018, and as president of our former Products &and Technologies Division from June 2014 to October 2015. Previously, Mr. Aulick served as Vice President, Industrial Equipment Division from 2011 to 2014, and Vice President, Light Industry Segment from 2008 to 2011 at Siemens Water Technologies, and held positions in senior management at USFilter Corporation from 2001 to 2008, both predecessor businesses to Evoqua. Mr. Aulick began his career in the water treatment industry in 1997 at Chem-Aqua, a specialty chemical company in water treatment, where he held the position of regional manager. He subsequently joined USFilter Corporation, a predecessor of Evoqua, as a field services regional manager in 2001 and succeeded to positions of increasing responsibility at USFilter Corporation and its successor Siemens Water Technologies, including as Vice President of the Light Industry Segment from 2008 to 2011 and the Industrial Equipment Division from 2011 to 2014. Mr. Aulick attended Northwestern University, Kellogg School of Management’s Executive Management Program from 2001 to 2003.
Snehal A. Desai has served as our Executive Vice President, Chief Growth Officer since January 2018.2018, and as our Executive Vice President, Chief Growth and Sustainability Officer since 2021. Prior to joining Evoqua, Mr. Desai was the global business director for Dow Water & Process Solutions.Solutions (“Dow”), a leading supplier of advanced water purification and separation technologies, from 2012 to 2018. Earlier in his career at Dow, where he worked for more than 20 years across two periods, Mr. Desai held various positions in sales, marketing, business development, and technical service and development. Prior to joining Dow, Mr. Desai led commercial and business development for Segetis, and was vice presidentVice President and chief marketing officerChief Marketing Officer of NatureWorks LLC. Mr. Desai currently serves on the board of directors of USU.S. Water Alliance and on the board of trustees of Chatham University. Mr. Desai receivedearned an M.B.A. from the Kellogg Graduate School of Management at Northwestern University and a B.A. in Chemistry and Chemical Engineering from the University of Michigan.
Hervé P. Fages joined Evoqua as Executive Vice President, Applied Product Technologies Segment President in March 2019. Mr. Fages brings more than 25 years of industrial market experience to Evoqua. From July 2017 to
| ||||
|
MarchHervé P. Fages joined Evoqua as Executive Vice President, Applied Product Technologies Segment President in 2019. Mr. Fages brings more than 25 years of industrial market experience to Evoqua. From 2017 to 2019, Mr. Fages was President, Connected Building and Building Management Systems, at Honeywell International, Inc., a diversified technology and manufacturing company. From May 2004 to July 2017, Mr. Fages served in various managerial and business development roles at Schneider Electric, including as Chief Executive Officer of its Pelco business unit, a security and surveillance technologies provider. Mr. Fages holdsearned a B.S. in Marketing and Business Administration from the University of Montpellier, France.
Vincent Grieco has served as our Executive Vice President, General Counsel and Secretary since January 2015. Mr. Grieco was appointed as acting General Counsel at the inception of our Company in January 2014 after working the majority of his career in the water treatment industry. He joined USFilter Corporation in January 2003 as Senior Counsel and, following the acquisition of USFilter Corporation by Siemens Corp. inFrom 2004 continuedto 2014, Mr. Grieco served as legal counsel to Siemens Water Technologies, the group of legal entities comprisingconstituting the predecessor business to Evoqua. PriorEvoqua, and from 2003 to joining2004, as senior counsel at USFilter Corporation, prior to its acquisition by Siemens Corp. Previously, Mr. Grieco was a member ofan attorney in the business and finance sectionpractice of the law firm Morgan Lewis & Bockius, LLP from 1997 to 2002 and at the law firm Dickie, McCamey & Chilcote, P.C. from 1993 to 1997. Mr. Grieco receivedearned a J.D. from the University of Virginia School of Law and received a B.S. in Economics from St. Vincent College.
James M. Kohosek has served as our Executive Vice President, Chief Administrative Officer since January 2018. Since joining Evoqua in January 2016, Mr. Kohosek has held various leadership roles, including presidentpreviously served as President of our former Products & Technologies Division and Business Operations (January 2017 to December 2017);in 2017; Vice President and General Manager, Wallace & Tiernan® Systems brand (June 2016 to December 2016);in 2016; and Vice President, Strategy, (January 2016 to May 2016).also in 2016. Prior to joining Evoqua, Mr. Kohosek was employed in senior management positions at global industrial and manufacturing companies. From 2008 to 2015, Mr. Kohosek was employed at Kennametal, Inc. (NYSE: KMT)a supplier of tooling and industrial materials, as VPVice President of Kennametal and President, Infrastructure Division and asSegment from 2014 to 2015; Vice President, of the Transportation Business Unit andfrom 2011 to 2013; Vice President, General Industrial Business Unit from 2010 to 2011; and as Chief Financial Officer of the Advanced Materials Group. Mr. Kohosek also was Vice President and Chief Financial Officer, Industrial Technologies Sector of Ingersoll Rand plc (NYSE: IR) from 2002 to 2007, and President of Westinghouse Communications from 1998 to 2001. Mr. Kohosek receivedearned a B.S.B.A. in Accounting and a B.S.B.A. in Finance, both from Shippensburg University. He also attended the Executive Development Program at the Wharton University of Pennsylvania School of Business.
Anthony J. Webster has served as our Executive Vice President, Chief Human Resources Officer since March 2016. Prior to joining Evoqua, Mr. Webster served as Vice President of Human Resources, Europe & Americas, for Glaxo Smith KlineGSK Consumer Health,Healthcare, a joint venture between Novartis and Glaxo Smith KlineGlaxoSmithKline plc, from 2015 to 2016; and as Senior Vice President and Global Head of Human Resources for Novartis Consumer Health (NYSE: NVS) from 2011 to 2015. Mr. Webster hasalso previously held senior human resources roles with numerous companies, including as Regional Vice President, Human Resources, EMEA for Bristol-Myers Squibb from 2008 to 2011; as Senior Director, Research & Development for Bristol-Myers Squibb from 2006 to 2008; as Director, Human Resources, Latin America & Canada for Bristol-Myers Squibb from 2004 to 2006; as Director, Global Business Support Functions for Mead Johnson Nutritionals from 2001 to 2004; in senior human resources and labor relations management capacities for Phelps Dodge Corporation from 1994 to 2001; and as Manager, Human Resources for Consolidation Coal Co. from 1992 to 1994. Mr. Webster receivedearned an M.S. in Industrial and Labor Relations and a B.S. in Business Administration from West Virginia University.
| ||||
|
Proposal 2—Approval, on an Advisory Vote onBasis, of the Compensation of Our Named Executive CompensationOfficers
Pursuant to Section 14A of the Securities Exchange Act, of 1934, we are seeking an advisory vote from our stockholders to approve the compensation of our named executive officersNEOs for the 2020 fiscal year 2021, as disclosed in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our overall compensation policies and procedures relating to the named executive officers.NEOs.
As described in detail in the Compensation Discussion and Analysis section of this Proxy Statement,CD&A, the Compensation Committee oversees our compensation program and the compensation awarded to our executive officers;officers, adopts changes to the program;program, and awards compensation as appropriate to reflect the Company’s circumstances and to promote the main objectives of the program. These objectives include:
attracting and retaining top-level, talented leaders who reflect our culture of high performance, growth, and accountability;
motivating our leaders to create long-term value for our stockholders; and
aligning pay to performance.
We are asking you to indicate your support for our named executive officerNEOs’ compensation as described in this Proxy Statement. We believe the information we have provided in this Proxy Statement demonstrates that our compensation program is designed appropriately and works to ensure that the interests of our executive officers, including our named executive officers,NEOs, are aligned with your interest in long-term value creation.
Accordingly, our Board recommends that the Company’s stockholders vote “FOR” the following resolution to approve, on an advisory basis, the compensation of our named executive officers:NEOs:
RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including in the Compensation Discussion and Analysis,CD&A, the compensation tables and related narrative disclosure, is hereby approved on an advisory basis.
Under our Third Amended and Restated Bylaws, the above resolution will be approved if the votes cast “FOR” its approval exceed the votes cast “AGAINST” its approval. Abstentions will have the same effect as a vote “AGAINST” the proposal. Non-votes by brokers, banks and other nominee holders of record will not be counted as votes “FOR” or “AGAINST” the above resolution.
Although this vote is advisory, the Board of Directors and the Compensation Committee intend to consider the results of the vote, as well as other relevant factors, as we continue to evolve our executive compensation program.
We intend to hold this non-binding advisory vote every year, consistent withAt the preference expressed by our stockholders who voted at our 2019 annual meeting, stockholders voted to conduct thishold an advisory “say-on-pay” vote on an annual basis; and we will continuebasis. Accordingly, the Company has determined to do sosubmit an advisory vote on our executive compensation program to our stockholders at each annual meeting (with the next one occurring in 2023) until we hold our nextthe Company seeks another advisory vote on the frequency of say-on-pay proposals in 2025.the advisory vote on executive compensation, which is anticipated to occur at the 2025 annual meeting.
|
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION
| |
| ||||
|
Letter from the Compensation Committee
Dear Fellow Stockholders,
The Compensation Committee is committed to ensuring that Evoqua has the right leadership team firmly in place for the long term and that our compensation programs appropriately balance business performance and accountability to build a stronger, sustainable and more valuable company. As Evoqua enters its fifth year as a public company, we continue to focus on innovation and profitable growth.
Demonstrated Performance Results. Under the leadership of Ron Keating, our CEO, and his executive leadership team (ELT), Evoqua has executed on its strategic plans, successfully navigated the challenging conditions and risks posed by the COVID-19 pandemic, and is well-positioned for on-going growth. Certain of Evoqua’s performance highlights and accomplishments are:
| • | Relative Total Shareholder Return (TSR) at the 82nd percentile, as compared to our compensation peer group, and the 84th percentile, as compared to the Russell 2000, over the most recent three fiscal year period; |
| • | Absolute Stock Price increased by 111.2% over the most recent three fiscal year period and Evoqua’s stock recently closed at $47.24 per share on December 27, 2021; and |
| • | Revenue Compound Annual Growth Rate of 5.0% for the most recent five fiscal year period comparing favorably to 3.9% for the compensation peer group. |
We believe this consistent performance and impressive track record demonstrate the effectiveness of our team and their transformation of Evoqua from a collection of water technologies businesses, to an integrated, established business positioned for future success and stockholder value creation.
Securing Our Executive Leadership Team. Evoqua’s success has not gone unnoticed by the marketplace. The executive leadership team is widely viewed as top-notch and the Compensation Committee and independent members of the Board became aware that certain members of the ELT were being solicited in a tight market for executive talent. We determined it was necessary to take action to secure our ELT in order to continue Evoqua’s growth and execute on our strategic plans. As such, we authorized special one-time retention awards for Mr. Keating and the other ELT members that incentivize significant value creation over the long term. We reached out to our top 25 stockholders to discuss the special retention awards, and encourage you to review the more detailed description of these awards and the feedback from our stockholder outreach on pages 55-56 in the CD&A.
Fiscal Year 2022 Performance Incentive Awards. To incentivize and motivate toward achievement of Evoqua’s financial and sustainability-related goals, our ELT recommended a change to the design of our annual and long-term incentive programs for fiscal year 2022 to incorporate specific and quantifiable financial and ESG goals. The Compensation Committee discussed these changes with both internal and external stakeholders, and strongly supported:
The annual incentive program including ESG goals for water stewardship and safety; and
PSUs incorporated into the regular-cycle long-term incentive program with payout tied to the achievement of Organic Revenue Growth Dollars and Average Adjusted EBITDA Margin goals over a cumulative three-year performance period, with a relative TSR modifier affecting ultimate payout.
We provide more information regarding our fiscal year 2022 performance incentive programs on pages 67-69 in the CD&A.
Evoqua has a firmly embedded pay-for-performance culture, which is explained in detail in the CD&A. We have designed our executive incentive programs to ensure responsible long-term financial, operational, and stock price performance for our stockholders.
With best regards,
The Compensation Committee
2022 Proxy Statement | ||||
47 |
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (CD&A) describes our executive compensation philosophy and program, the objectives we sought to achieve, and the rationale for the compensation decisions we made. Our discussion focuses on the compensation of our Named Executive Officers (NEOs) for fiscal year 2021:
Ron C. Keating President and Chief Executive Officer Benedict J. Stas Executive Vice President, Chief Financial Officer and Treasurer Rodney O. Aulick Executive Vice President, Integrated Solutions and Services Segment President Hervé P. Fages Executive Vice President, Applied Product Technologies Segment President Vincent Grieco Executive Vice President, General Counsel and Secretary Each NEO is a member of our Executive Leadership Team, which consists of our CEO and all senior executives who report to the CEO. | TABLE OF CONTENTS | |||||||
| 49 | ||||||||
| 54 | ||||||||
Primary Components of Fiscal Year 2021 Regular-Cycle Compensation | 58 | |||||||
| 59 | ||||||||
| 60 | ||||||||
| 64 | ||||||||
| 64 | ||||||||
| 67 | ||||||||
| 69 | ||||||||
| 72 | ||||||||
| 73 | ||||||||
- Summary Compensation Table—Fiscal Years 2021, 2020, and 2019 | 73 | |||||||
| 75 | ||||||||
- Outstanding Equity Awards at Fiscal Year-End—Fiscal Year 2021 | 79 | |||||||
| 81 | ||||||||
| 81 | ||||||||
| 82 | ||||||||
| ||||
48 |
Our Vision. Evoqua’s vision is to be the world’s first choice for water treatment solutions. As we strive to be the most trusted and complete source of water treatment solutions across industrial, commercial, and municipal end markets, we believe our ability to refine and leverage our knowledge about our customers’ operations and production processes will continue to be a differentiator. Investing in our talent is critical to enabling us to deliver value to our customers and stockholders, and that guides our executive compensation philosophy: to build a compelling, market-based, and flexible total compensation program whichthat is strongly aligned with the interests of our stockholders and connected to key performance goals.
We believe this philosophy has helped us attract, engage, and motivate the leadership needed for our business.business to be successful. In the past seveneight years since itsour inception, Evoqua has continuously worked to build a sustainable business that can deliver increased value to its customers and stockholders.
The Prior SevenEight Years: How Far We’ve Come With Our Business
|
Strategic acquisitions are an important part of our growth strategy:
• Enhance our technologies portfolio;
• Increase our critical mass in existing markets;
• Expand into new geographies and new end market verticals;
• Opportunities to leverage our existing customer relationships, best-in-class channels to market, and ability to rapidly commercialize acquired technologies We have completed 17 acquisitions since 2016. | 2014 to 2017 | • Inception of Evoqua through the acquisition of a group of water technologies companies from Siemens Aktiengesellschaft • Organizational restructuring to achieve an overall lower cost structure, operational efficiencies, and improved accountability and responsiveness | We have also focused on debt reduction. We reduced total debt to $1,013.3 million in 2019, $923.1 million in 2020 and $793.2 million in 2021, and net debt to $891.3 million in 2019, $720.7 million in 2020 and $635.3 million in 2021. We generated net loss of $8.5 million in 2019, net income of $114.4 million in 2020 and net income of $51.7 million in 2021, and adjusted EBITDA of $235.0 million in 2019, $239.6 million in 2020 and $250.9 million in 2021. This resulted in net leverage ratio based on net income (loss) of (104.9x) at September 30, 2019, 6.3x at September 30, 2020, and 12.3x at September 30, 2021, and net leverage ratio based on adjusted EBITDA of 3.8x at September 30, 2019, 3.0x at September 30, 2020, and 2.5x at September 30, 2021. | ||||||||||||
| 2017 | • Initial public offering and listing of our common stock on the | |||||||||||||||
| 2018 | • Organizational restructuring from a three-segment to a two-segment operating model that better aligns with our two primary sales channels; operational changes to enhance our recurring revenue business model and revenue visibility | |||||||||||||||
| 2019 | • Divestiture of our non-core, capital intensive Memcor® product line and business(1) for an aggregate purchase price of $131 million (following adjustments for cash and net working capital)
• Expansion of Water One® digital services offering | |||||||||||||||
| 2020 | • Reduction in year-over-year net leverage ratio(2) from 3.8x to 3.0x
• Reduction in number of manufacturing facilities from 16 to 10 as part of our ongoing plan to rationalize our footprint and create “centers of excellence” to optimize business processes
• Implementation of employee health and safety protocols and business resiliency programs, including managing for cash conservation and liquidity, in response to COVID-19 |
| ||||
|
|
| |||||
investments with respect to PPE, disinfection protocols and medical management; and significant investments of time to preserve our safety record and safe operations. This allowed our manufacturing and service technicians to continue performing the essential work of our business, under adaptations for more time-intensive hygiene and safety protocols. Through our frontline personnel, we have been able to help our customers’ operations, including hospitals and testing labs, stay online during difficult times. In recognition of their important work, we paid one-time bonuses to service technicians facing particularly rigorous service schedules.
| 2021 | • Further reduction in year-over-year net leverage ratio(2) from 3.0x to 2.5x • Refinanced approximately $722 million in long-term debt at favorable rates and extended debt maturity profile, enhancing Evoqua’s financial flexibility
• |
|
| (1) | Memcor®is a trademark of Rohm & Haas Electronic Materials Singapore Pte. Ltd. |
| (2) | Net leverage ratio is a non-GAAP financial measure. For information about how we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures, see “Appendix A — Non-GAAP Financial Measures.” |
| ||||
|
Fiscal Year 2021 Performance Highlights — Strong Positioning for Growth
| Our management team is focused on driving profitable growth and maintaining our strong balance sheet. We are investing across multiple organic revenue growth and margin expansion initiatives, as well as expected accretive inorganic opportunities. |
Fiscal year 2021 was another year of strong financial performance for Evoqua. We continued an overall positive trajectory in our operating results and financial performance, fueled, in part, by the October 2018 reorganization of our operating model to a more streamlined two-segment structure that aligns more strategically with how our customers purchase products and services. We believe our streamlined operations, combined withoperating results demonstrate that we have focused on appropriate and beneficial priorities for our organization; that we have established an effective operating platform for managing the resiliency of our recurring revenue business model, the diversity and breadth of our customer end markets and our unique mix of products and services, allowed the Company’s share price to quickly begin recovering shareholder value after the share price declines caused by the initial investor reactions to the COVID-19 pandemic. Our actions in response tomacroeconomic challenges that have arisen from the COVID-19 pandemic, such as unpredictable and unprecedented labor shortages and supply chain disruptions; our strong operating performance over the course of the 2020 fiscal year have also allowed uspositioning for continued growth as customer demand returns post-pandemic; and, importantly, that our overall business strategy continues to continue to build cashbe resilient and further reduce our net leverage ratio to 3.0x at the end of fiscal 2020. We believe the actions we took in response to the COVID-19 pandemic, together with the strategic reshaping of our business in recent years and our technology-first mindset, will position us well to take advantage of opportunities both during and after the pandemic, and continue the long-term, viable growth of our business.productive.
Performance Results in Fiscal 2020. The heightened focus on employee health and safety, cash conservation, liquidity and business continuity in response to the COVID-19 pandemic changed our perspective and approach to our 2020 operating plan from what we originally envisioned in the Fall of 2019.
However, we believe our fiscal 2020 performance showcases the resilience and strength of our business model, and important growing capabilities with respect to management of our products and services portfolio. Despite the overall uneven customer demand in our primary end markets due to the COVID-19 pandemic, we delivered strong performance on the key metrics we use as the basis for our executive compensation program, revenue, Adjusted EBITDA and Adjusted Free Cash Flow, as shown below.Percentages are year-over-year
|
$
|
|
$
|
|
$
| |||||||
|
Adjusted $
|
$
| ||||||||||
In particular, we were pleased to achieve above-target profitability (100.8% of target)
| * | Fiscal year 2020 net income included a net pre-tax benefit of $57.7 million, which resulted from the Company’s divestiture of the Memcor® product line in the first quarter of fiscal year 2020. |
| ** | Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP financial measures. For information about how we use non-GAAP financial measures and a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP financial measures, see “Appendix A — Non-GAAP Financial Measures.” |
For complete information about our fiscal 2020 under these unfavorable conditions. This achievement allowed for a payout underyear 2021 financial performance, please see our annual incentive plan – the first since our initial public offering – to our executive leadership and other participating employees.
Form Note regarding non-GAAP10-K. financial measures: Adjusted EBITDA, Adjusted Free Cash Flow, organic revenue and net leverage are non-GAAP financial measures. A definition of these and other non-GAAP financial measures used in the Compensation Discussion and Analysis section and elsewhere in this Proxy Statement, other than as part of disclosure of target levels, and a reconciliation to the most directly comparable financial measures presented in accordance with GAAP can be found in Appendix A.
| ||||
Strategies that we believe have contributed to the Company’s consistent operating results include:
|
Core Objectives of Our Compensation Philosophy capital and outsourced water projects, which allow us to generate recurring and predictable revenue through aftermarket service and sales
• Digital Deployment: In conjunction with our recurring revenue strategy, deploy digital technologies across our product and | and | |||||||||||||||
• Diversity of End Markets: Strengthen our competitiveness across highly diverse end markets through growing vertical market expertise and focused management of our extensive products and services portfolio
• Two Segment Structure: Clarify and refine our operating model to align with, and promote organizational development around, the primary channels through which we sell our products and services to customers | ||||||||||||||||
Fiscal 2020 Compensation Highlights
The following are some of the highlights of our fiscal 2020 executive compensation program:
Our management team was rewarded for executing against a specific long-term strategic goal as well as short-term operating goals:
|
Above-target payout was authorized under our annual incentive plan for achievement of above-target profitability (100.8%) based on the Evoqua Global Adjusted EBITDA performance metric.
We exceeded our Adjusted Free Cash Flow performance goal target despite unprecedented economic challenges arising out of the COVID-19 pandemic. We achieved performance at 104.0% of target, representing a 12.2% improvement over fiscal 2019 performance.
The average closing price of a share of Company common stock was $18.31 in fiscal 2020 versus $12.88 in fiscal 2019, reflecting management’s execution on key operating improvements and creation of long-term value for stockholders.
We amended our omnibus equity compensation plan with stockholder approval in February 2020, including enhancements to governance and compensation practices that support stockholders’ interests, such as the following:
Minimum 1-year vesting requirement for awards, with limited exceptions;
No dividends or dividend equivalents can be payable until the underlying awards vest; and
No automatic single-trigger vesting of unvested equity in the event of a change-in-control, except in the circumstance where a successor company does not assume or replace the outstanding equity awards in connection with the change-in-control.
| ||||
|
Executive Compensation Practices
|
WHAT WE DO
|
 | Pay for Approximately | | Robust Stock Ownership We have stock ownership guidelines for executive officers to instill pride in, and a sense of, Company ownership, and to align the interests of management and our stockholders. | |||
| Annual “Say-on-Pay” We seek an annual non-binding advisory vote from our stockholders to approve compensation paid to our NEOs as disclosed in our proxy statement. | | Independent Compensation The Compensation Committee retains an independent compensation consultant and reassesses the consultant’s independence annually. | |||
| Encourage Long-Term Long-term awards have | | Balanced Short-Term We establish clear, measurable, and appropriately rigorous performance goals and targets, and cap the maximum payouts under our short-term incentive plan. | |||
| Double Trigger Vesting Awards under our current equity incentive plan | | Clawback We adopted a robust clawback policy that allows the Company to recoup incentive compensation earned by executive officers or other employees in the event of a material restatement of the Company’s financial statements or certain misconduct that has caused economic or reputational damage to the Company. | |||
| Minimum Vesting
| | Multi-Dimensional Performance Performance assessments under our | |||
|
WHAT WE DON’T DO
|
 | Hedging/Pledging of Company We prohibit our officers and directors from hedging, margining, pledging, short-selling, or publicly trading options in our stock. | | Excessive We do not provide reimbursement to our NEOs for any perquisites beyond a prescribed limited | |||
| Dividends on Unvested Equity We do not pay dividends on unvested equity awards, including options, restricted stock, and performance shares. | | Repricing or Exchange of Underwater We prohibit | |||
| Excise Tax We do not pay excise tax gross-ups on | | Single Trigger Vesting No awards granted under our current plan will vest solely because of a | |||
| ||||
|
The discussion that follows describes the fiscal 2020 executive compensation program for the named executive officers listed below:Highlights of Our Fiscal Year 2021 Executive Compensation Program
| ||||
| • Our NEOs did not receive any increase to their base salaries for 2021 compared to their base salaries for 2020. | |||
| Market-based assessment of NEOs’ short-term incentive opportunities |
• Appropriate increases to variable, at-risk compensation: • For our Segment presidents, Messrs. Aulick and Fages, increased from 60% to 65% of base salary • For our General Counsel, Mr. Grieco, increased from 50% to 60% of base salary | |||
 | • Strong enterprise-wide operational performance, especially in light of macroeconomic challenges, including labor shortages, supply chain disruptions, and other COVID-related factors | • Annual Incentive Plan funded at 111.6% | ||
| • Evoqua Global Adjusted EBITDA performance at 102.2% of target • Evoqua Global Adjusted Free Cash Flow performance at 190.7% of target • Resulted in overall payout at 114.7% of target bonus opportunity for Messrs. Keating, Stas, and | |||
| • ISS Segment • Resulted in overall payout at 106.0% of target bonus opportunity for Mr. Aulick | |||
| • APT Segment Adjusted EBITDA performance at 106.5% of target • Resulted in overall payout at 126.2% of target bonus opportunity for Mr. Fages | |||
| ||||
52 |
Our Approach and Factors Considered | Resulting Determinations | |||
 | • Maintain balanced incentives in fiscal year 2021 | • Balanced incentives are created by our equity mix of 50% restricted stock units (“RSUs”) and 50% stock options: RSUs support stock price alignment and retention by enabling award recipients to receive Company stock if they are still employed by us on the date the restrictions lapse; and stock options encourage strong alignment with stockholders’ interest in the market value growth of our Company. In fiscal year 2022, performance share units will replace stock options. See “Compensation Program Changes for Fiscal Year 2022” in this CD&A. | ||
 | • One-time award to the NEOs and other executive officers • Tailored for a one-time, situational objective • Reward leadership performance to the extent it aligns with the stockholder experience, while supporting leadership retention and stability | • Special PSUs constitute 2/3 of the target value of the Special Awards and cliff vest following the 3rd anniversary of the grant date, based on the achievement of pre-set relative total shareholder return (“TSR”) performance goals: • Threshold performance level—60th percentile • Target performance level—80th percentile • No payout for performance below threshold • Payout is capped at target, even if performance exceeds the 80th percentile • Comparator group—the U.S. constituents in the S&P Global Water Index, as our competitors for investor capital • Awards are settled in stock, to the extent earned and vested • Special RSUs constitute 1/3 of the target value of the Special Awards, vest in equal annual installments over a three-year period, and are settled in stock. | ||
2022 Proxy Statement | ||||
53 |
Compensation Philosophy and Objectives
Compensation PrinciplesProcess
Our executive compensation program is designed to attract and retain talent in our industry with the greatest potential to ensure we execute on the Company’s business goals to promote both short- and long-term profitable growth of the Company, and to create long-term stockholder value. To this end, our program is guided by the following principles:
| Pay for Performance | A significant portion of each NEO’s total compensation should be at-risk and performance-based with metrics aligned to the Company’s short-term and long-term financial results and business strategy, reflecting the Company’s high-performance culture, accountability, and high-growth trajectory. | |
| Stockholder Alignment | NEOs should be compensated through pay elements designed to align directly with the long-term interests of our stockholders, and our executives should share with our stockholders in the performance and value of the Company, cultivating ownership of the Company’s vision and strategic direction. | |
| Attraction and Retention | The executive compensation program should provide overall target compensation that is market-competitive and enables the Company to attract and retain high-caliber talent. | |
| Simplified Approach | The executive compensation program should foster growth and motivation through a straightforward, flexible, and clear approach to compensation design. | |
Core Objectives
| Instill a sense of ownership and pride in Evoqua in order to drive excellence | Create market-competitive compensation opportunities to attract and retain executives who reflect our culture of high performance, growth, and accountability | Support overall alignment of pay and performance, while considering retention of key talent | Promote the values of teamwork and respect | |||||||||||||
Oversight by the Compensation Committee
The Compensation Committee is responsible for oversight of the executive compensation arrangements for our executive officers, including our NEOs, and exercises these duties with the overall intent of structuring future compensation in a way that provides fair and reasonable compensation to our executive officers based on their performance and contributions to the Company; keeps their focus on long-term Company growth; instills in them a long-term commitment to the Company; and aligns their interests with the interests of our stockholders. To ensure our executive compensation program remains flexible, the Compensation Committee may exercise its discretion to adjust compensation to meet business needs and preserve a clear connection between compensation and performance.
The Compensation Committee has the authority to approve, adopt, administer, interpret, amend, suspend, and terminate compensation plans applicable to our executive officers, and meets throughout the fiscal year to assess, revise as appropriate, and ultimately determine, the compensation packages for our executive officers. At the request of the Compensation Committee, these meetings are also attended by the Chief Executive Officer, the Chief Human Resources Officer, and representatives of the Compensation Committee’s independent compensation consultant.
Prior Year Say-on-Pay Vote
Following our 20202021 Annual Meeting of Stockholders, the Compensation Committee reviewed the results of the stockholder advisory vote, or “say-on-pay” vote, that was held at the 20202021 Annual Meeting with respect to the
| ||||
|
compensation of our NEOs for the 20192020 fiscal year. Approximately 96%93% of the votes cast onshares of common stock present in person or represented by proxy at the say-on-pay proposal2021 Annual Meeting and entitled to vote were voted in support of the compensation of our NEOs, and we believe this affirms the steps we are taking to align our NEOs’ compensation with our stockholders’ interests. The Compensation Committee will continue to consider stockholder input, including the advisory say-on-pay vote, as it evaluates the design of executive compensation programs and specific compensation decisions for executive officers in the future.
We actively engage with our stockholders and stakeholders in a number of forums on a year-round basis. These efforts supplement the ongoing communications between our management and stockholders through various engagement channels, including direct meetings, analyst conferences, and roadshows. We take feedback and insights from our engagement with stockholders and other stakeholders into consideration as we review and evolve our practices and disclosures.
As part of these engagement efforts, we proactively reached out to our stockholders to discuss the rationale of our Compensation Committee for the Special Awards that were granted to the NEOs and other executive officers in May 2021, as described on pages 64-67 of this CD&A.
In the summer and fall of 2021, Gary Cappeline, Chairperson of our Board and the Compensation Committee, and Dan Brailer, Director of Investor Relations, reached out to our largest stockholders representing approximately 66% of our outstanding shares at that time. Stockholders representing approximately 18% of our outstanding shares agreed to engage with us. These engagement conversations generally focused on our executive compensation program and the Special Awards. We also invited stockholders to ask questions and provide us with feedback on other ESG matters. A summary of our engagement with stockholders on those topics is provided on page 39 of this Proxy Statement.
Below is a summary of the feedback we received from our stockholders on executive compensation-related matters:
Special Awards | • Most stockholders indicated that our rationale for granting the Special Awards was well-explained and understandable, particularly in light of the tight market for executive talent, and appreciated several aspects of the Special Awards that are aligned with stockholders’ long-term interests, such as (a) the use of a relative TSR performance metric with vesting at threshold when Evoqua’s stock is at the 60th percentile relative to the peer group, and (b) capping payout at target when Evoqua’s stock is at the 80th percentile or above, relative to the peer group. Stockholders also appreciated that the full target payout will require outstanding relative TSR performance. • Some stockholders asked questions related to the structure of the award and retention. We provide information about the structure of the Special Awards on pages 64-67 of this CD&A. | |
Executive Compensation Program | • Stockholders appreciated that we have taken steps to include financial and TSR performance metrics in our regular-cycle long-term incentive program for fiscal year 2022, as discussed on pages 68-69 of this CD&A. • Some stockholders asked whether we considered incorporating ESG-related metrics into our compensation program. Subsequently, the Compensation Committee considered this feedback in determining the performance metrics for the fiscal year 2022 AIP. See pages 67-68 of this CD&A for more information about the ESG-related performance metrics we are incorporating in our AIP for fiscal year 2022. | |
2022 Proxy Statement | ||||
55 |
Messrs. Cappeline and Brailer shared the feedback received from these engagements with the Board and the Compensation Committee. The Compensation Committee considered this stockholder input, along with market practices, standards, and policies, in reviewing the Company’s executive compensation program and developing the fiscal year 2022 programs.
Role of the Independent Compensation Consultant
The Compensation Committee obtains advice from an independent compensation consultant on all matters related to compensation design decisions for our executive officers. For fiscal 2020,year 2021, the Compensation Committee continued the engagement of Meridian Compensation Partners, LLC (“Meridian”) as its independent compensation consultant. Meridian provides the Compensation Committee with relevant market data, current updates regarding trends in executive compensation, and advice with respect to program design. Meridian also provides specific compensation recommendations for the Chief Executive OfficerCEO and feedback on compensation recommendations made by the Chief Executive OfficerCEO for executives other than the Chief Executive Officer.
Each year, prior to setting executive compensation for the next fiscal year,CEO. Representatives of Meridian attended all meetings of the Compensation Committee receives information about the independence and potential conflicts of interest of its compensation consultant and evaluates the consultant’s independence. Inin fiscal 2020, the Compensation Committee concluded that Meridian is independent and its work has not raised any conflicts of interest. Meridian reports to the Compensation Committee, does not perform any other services for the Company, and has no economic or other ties to the Company or the management team that could compromise its independence or objectivity.year 2021.
Fiscal 2020Year 2021 Peer Group
Throughout the compensation setting process, the Compensation Committee solicited information from Meridian about compensation practices across a group of peer companies used as a general comparator group:group for benchmarking purposes.
Peer Company | GICS Subindustry | Revenue (in millions) | 6-Month (in millions) | GICS Subindustry | Revenue (in millions) | 6-Month (in millions) | ||||||||||||||||
| Donaldson Company, Inc. | Industrial Machinery | $ | 2,698 | $ | 7, 658 | |||||||||||||||||
| ITT Inc. | Industrial Machinery | $ | 2,814 | $ | 5,042 | Industrial Machinery | $ | 2,513 | $ | 7,564 | ||||||||||||
| Donaldson Company, Inc. | Industrial Machinery | $ | 2,691 | $ | 5,914 | |||||||||||||||||
| IDEX Corporation | Industrial Machinery | $ | 2,409 | $ | 15,900 | |||||||||||||||||
| Itron, Inc. | Electronic Equipment and Instruments | $ | 2,486 | $ | 2,795 | Electronic Equipment and Instruments | $ | 2,095 | $ | 4,141 | ||||||||||||
| IDEX Corporation | Industrial Machinery | $ | 2,467 | $ | 11,768 | |||||||||||||||||
| Harsco Corporation | Environmental and Facilities Services | $ | 1,994 | $ | 1,531 | |||||||||||||||||
| Advanced Drainage Systems, Inc. | Building Products | $ | 1,983 | $ | 7,399 | |||||||||||||||||
| Altra Industrial Motion Corp. | Industrial Machinery | $ | 1,764 | $ | 3,940 | |||||||||||||||||
| Kennametal Inc. | Industrial Machinery | $ | 2,110 | $ | 2,250 | Industrial Machinery | $ | 1,705 | $ | 3,256 | ||||||||||||
| Altra Industrial Motion Corp. | Industrial Machinery | $ | 1,786 | $ | 1,822 | |||||||||||||||||
| Advanced Drainage Systems, Inc. | Building Products | $ | 1,674 | $ | 2,803 | |||||||||||||||||
| Forterra, Inc. | Construction Materials | $ | 1,632 | $ | 1,486 | |||||||||||||||||
| Watts Water Technologies, Inc. | Industrial Machinery | $ | 1,594 | $ | 2,986 | Industrial Machinery | $ | 1,539 | $ | 4,276 | ||||||||||||
| Forterra, Inc. | Construction Materials | $ | 1,569 | $ | 639 | |||||||||||||||||
| SPX FLOW, Inc. | Industrial Machinery | $ | 1,423 | $ | 1,515 | Industrial Machinery | $ | 1,425 | $ | 2,686 | ||||||||||||
| Franklin Electric Co., Inc. | Industrial Machinery | $ | 1,314 | $ | 3,631 | |||||||||||||||||
| Chart Industries, Inc. | Industrial Machinery | $ | 1,331 | $ | 1,642 | Industrial Machinery | $ | 1,164 | $ | 5,205 | ||||||||||||
| Franklin Electric Co., Inc. | Industrial Machinery | $ | 1,291 | $ | 2,431 | |||||||||||||||||
| EnPro Industries, Inc. | Industrial Machinery | $ | 1,071 | $ | 1,778 | |||||||||||||||||
| Mueller Water Products, Inc. | Industrial Machinery | $ | 1,012 | $ | 1,578 | Industrial Machinery | $ | 999 | $ | 2,163 | ||||||||||||
| Enerpac Tool Group Corp. | Industrial Machinery | $ | 540 | $ | 1,176 | Industrial Machinery | $ | 495 | $ | 1,513 | ||||||||||||
| Badger Meter, Inc. | Electronic Equipment and Instruments | $ | 428 | $ | 1,753 | Electronic Equipment and Instruments | $ | 435 | $ | 2,842 | ||||||||||||
| Milacron Holdings Corp.(1) | Industrial Machinery | — | — | |||||||||||||||||||
|
The comparator group consists of 16 publicly traded companies which reflect the Company’s business competitors and business strategy, with revenues for the trailing twelve months ranging from approximately 33% to 300% of the Company’s revenues. The comparator group was constructed to position the Company within a reasonable range of the median of the peer companies.
| ||||
|
These peer companies were initially selected in November 2018 as the comparator group for the fiscal 2019 executive compensation program. The selection criteria were developed by Meridian after obtaining management’s views on the Company’s competitors for executive talent and consideration of other relevant factors. The comparator group is intended to represent the most appropriate peers which are industry-relevant competitors of the Company for the same executive talent; the Compensation Committee believes there are no public companies that provide the full scope of water and wastewater treatment products, solutions and services which the Company offers. The size and composition of the comparator group are intended to allow for more robust sampling across all executive positions; to ensure all peer companies have industry relevance; and to ensure an appropriate range with respect to size of peers. Additionally, the Committee uses information regarding compensation practices across a broader survey of manufacturing companies to provide greater context for the comparator group information.
The Compensation Committee reassessed the comparator group in August 2019, prior to commencing work on the fiscal 2020 executive compensation program. Based on the recommendation of Meridian, the Compensation Committee determined that this comparator group remained reasonable and appropriate for purposes of the fiscal 2020 executive compensation program.
Fiscal 2020 Compensation Determination Process
Each year, the Compensation Committee reexamines the Company’s executive compensation program to establish the appropriate mix and level of pay elements for the next fiscal year. This review process generally commences in August, in conjunction with the Board’s annual review of the next fiscal year’s annual and long-term business and strategic plans with management and continues into the first quarter of the new fiscal year. During the first quarter of the new fiscal year, after considering the analyses, recommendations and other information provided by its advisors, the Compensation Committee identifies the incentive plans, award levels and performance goals that it believes will establish a clear connection between compensation and execution on the Company’s business goals for the new fiscal year. At the conclusion of this process, which is typically in the last month of that first fiscal quarter, the Compensation Committee establishes the individual participation levels in the compensation plans, including base salary determinations, for the CEO and other members of the Executive Leadership Team, and the guidelines for participation levels of other eligible employees. Typically, at this time, the Compensation Committee also reviews the Company’s year-end financial results for the most recently completed fiscal year to determine the extent to which performance-based compensation has been earned under awards that have measurement periods based on such most recently completed fiscal year.
To ensure our executive compensation program remains flexible, the Compensation Committee may exercise discretion to adjust compensation to meet business needs and preserve a clear connection between compensation and performance. As discussed below, during fiscal 2020 the Compensation Committee found it appropriate to reevaluate the compensation structure to fairly recognize the NEOs’ leadership in achieving critical business goals that changed during the course of fiscal 2020.
At the end of December 2019, the Compensation Committee approved a one-time discretionary cash payment to a number of employees, including the NEOs, for the Company’s achievement of a key strategic goal. As previously disclosed, in December 2019 the Company sold its non-core, capital-intensive Memcor®product line and related business, or the “Memcor business,” to DuPont de Nemours, Inc. (“DuPont”). Divestiture of this business had long been identified by management as a key transaction that could give the Company greater resources to build and refine the suite of products and solutions that represent its core value proposition and, with net proceeds from the transaction, enable the Company to significantly reduce its net leverage ratio from its then-current level of 3.8x. The Compensation Committee also considered the significant efforts of, and results achieved by, the NEOs and other employees, including: the multi-year effort needed for the turnaround and management of the Memcor business since assuming that business from Siemens Aktiengesellschaft in January 2014; the successful marketing of the Memcor business which resulted in an aggregate purchase price of $131 million in cash (following adjustments for cash and net working capital), an attractive multiple of earnings for the Memcor business; and the fact that the Company would continue to have the ability to design, source and assemble membrane-based systems for its customers through DuPont.Source: S&P Capital IQ
| ||||
|
The Compensation Committee determines its comparator group annually, before commencing work on the executive compensation program for the new fiscal year. With assistance from Meridian, the Compensation Committee assesses the adequacy of the comparator group used for the prior fiscal year, and makes adjustments as appropriate. The Compensation Committeeutilizes general industry and comparator group data that is intended to be representative of the market in which we compete most directly for executive talent, and seeks to set pay at or within a reasonable range of the market median. The principal selection criteria for the comparator group were developed by Meridian after obtaining management’s views on the Company’s competitors for executive talent and consideration of other relevant factors; the Compensation Committee believes there are no public companies that provide the full scope of water and wastewater treatment products, solutions, and services that the Company offers. In August 2020, the Compensation Committee, in consultation with Meridian, determined that the peer selection criteria and group size used in fiscal year 2020 remained appropriate. Based on its consultations with Meridian, the Compensation Committee determined it would be beneficial and consistent with the peer selection criteria to add Harsco Corporation and EnPro Industries, Inc. to the comparator group for fiscal year 2021. Milacron Holdings, Corp. was removed from the comparator group due to its acquisition by Hillenbrand, Inc. in November 2019. In addition to the comparator group, the Compensation Committee uses information regarding compensation practices across a broader survey of manufacturing companies to provide greater context for the comparator group information, and to benchmark roles for which peer group data may not be as directly applicable. | Comparator Group—Principal Selection Criteria and Considerations • The comparator group consists of publicly traded companies, designated according to the below selection criteria and factors: • Reflect the Company’s business competitors and business strategy; • Represent the most appropriate peers that are industry-relevant competitors of the Company for the same executive talent; and • Generated revenues for the trailing twelve months ranging from approximately 33% to 300% of the Company’s revenues. • The size and composition of the comparator group should allow for more robust sampling across all executive positions; ensure all peer companies have industry relevance; and ensure an appropriate range with respect to the size of peers. • The comparator group should be constructed so as to position the Company within a reasonable range of the median of the peer companies. |
2022 Proxy Statement | ||||
57 |
As the COVID-19Fiscal Year 2021 Compensation Determination Process pandemic became a global emergency in early 2020, our full Board and management engaged in developing the Company’s response plan. The consistent focus of the Company’s annual operating plan has been pursuit of revenue growth and market penetration. However, to preserve business continuity, our Board and management led an organization-wide recalibration of our operations, planning and strategy to prioritize protection of the safety of our employees and stakeholders, taking actions to ensure the resiliency of our business and managing the business for liquidity. The Company focused on securing supplies of PPE, development of enhanced cash monitoring and collection procedures and reduction of costs. Additionally, throughout the latter half of the 2020 fiscal
Each year, the Compensation Committee consideredworks according to an established schedule to determine the impactappropriate mix and level of pay elements for the pandemic on the strategy of the Company and resulting implications on executive pay programs. Our full Board monitored the Company’s efforts to preserve business continuity, maintain engagement with employees, conserve cash and strengthen the Company’s financial condition. After the end of thenext fiscal year.
August 2020 fiscal year, the Compensation Committee assessed the impact of the operational changes carried out by the Company, together with the strong performance achieved by the Company in
| ||
(2) The Compensation Committee, with assistance from Meridian, members of senior management, and other advisors, then reviews the existing incentive plans and discusses any appropriate design adjustments to be implemented for the next fiscal year. | ||
(3) After the end of the current fiscal year, the Compensation Committee reviews the year-end financial results and determines the level of achievement reached under the annual incentive plan and the payout amounts, if any. | ||
(4) The Compensation Committee evaluates CEO performance and, with input from the CEO, the performance of the other NEOs for the most recently completed fiscal year. The Compensation Committee also reviews competitive market pay levels. | ||
(5) The Compensation Committee then determines the total direct compensation for the CEO and, with input from the CEO, for the other NEOs, for the new fiscal year. The Compensation Committee also finalizes the design of the incentive plans for the new fiscal year and approves the NEOs’ incentive awards. |
December 2020 in spite of the continuing uncertainties growing out of the pandemic. Based on this review and after consulting with Meridian, the Compensation Committee determined it was appropriate to measure management’s performance under the 2020 annual incentive plan by reallocating the relative weightings of the performance goals to emphasize the goal based on cash flow performance, as described below under “—AIP Performance Metrics and Goals.” By making this adjustment, the Compensation Committee believed that annual incentive payouts would better reflect the dramatically changed circumstances that resulted from the pandemic and maintain a clear connection between revised priorities, operating performance against those revised priorities, and resulting compensation.
PrincipalPrimary Components of ExecutiveFiscal Year 2021 Regular-Cycle Compensation
Our NEOs receive, or have the opportunity to receive, three principal forms of compensation—compensation under our regular-cycle compensation program — base salary, short-term annual incentives, and long-term equity-based incentives.
Compensation Component | Time Horizon | |||||||
| Base Salary | 1 year |
| • Fixed compensation that is reviewed and established at least annually.
|
• Compensates for | ||||
| Cash | |||||||
| Short-Term Annual Incentives | 1 year | • Variable compensation that is based on achievement of annual Company (and, in some cases, Business Segment) performance goals. • Rewards NEOs for achieving annual financial performance goals that are aligned with our annual operating plan. | Cash | |||||
| ||||
58 |
Compensation
| Time Horizon | Objective | Form of Compensation | |||||
| Long-Term Incentives | 4 years | • Variable compensation that is tied to the Company’s long-term growth. |
• In fiscal year 2022, performance share units will replace stock options. | 50% stock options, which vest in equal annual installments over a four-year period with a ten-year term. 50% RSUs, which vest in equal annual installments over a four-year period and are settled in stock. | ||||
The Compensation Committee does not maintain any formal policy or formula for allocating the mix of compensation, as it believes it is more important to remain flexible to respond to business needs and shifts in the marketplace in which the Company must compete to recruit and retain executive talent. Therefore, the Compensation Committee retains the authority to review our NEOs’ compensation periodically and to use its discretion to adjust the mix of compensation and the amount of any element of compensation as it deems appropriate for each NEO.
| ||||
|
The charts below illustrate the allocation of the principal compensation components for our NEOs for fiscal 2020.year 2021.
 | ||
|
|
Fiscal 2020 Mix of Compensation Elements
Base Salary
We believe that base salary plays an important role in attracting and retaining top executive talent by providing executives with a predictable level of income. Base salaries represent asalary is the only fixed portion of our NEOs’ compensation that is not at-risk,and vary,varies, principally based on job responsibility.
The Compensation Committee generally reviews our NEOs’ base salaries annually on a calendar year cycle. This review typically occurs in December of each year, with any adjustments beinggenerally becoming effective usually as of January 1 of the new calendar year. This timing coordinates with the Compensation Committee’s determination of the other material elements of direct compensation, e.g., incentive plan design, award levels, and performance
2022 Proxy Statement | ||||
59 |
goals, for the full fiscal year. The Compensation Committee considers, among other factors, market data, the level of the executive’s compensation (individually and relative to the other executives), the length of the executive’s tenure, the level of the executive’s performance and, for the base salaries of executives other than our Chief Executive Officer,CEO, the recommendations of our Chief Executive Officer. Additionally, theCEO. The Compensation Committee also may authorize periodic base salary adjustments in connection with ana NEO’s promotion or change in job responsibility, or when otherwise necessary for equitable reasons. Base salaries typically are set near the median salary levels for comparable positions in the peer group used for benchmarking purposes.
Based on thisits annual evaluation, in December 20192020, and after giving consideration to the continuing COVID-19 pandemic and related macroeconomic uncertainties, the Compensation Committee determined not to increase our NEOs’ base salaries for the calendar year 2021. Base salary levels in effect for the calendar year 2021 are shown below.
Named Executive Officer | Base Salary—2021 Calendar Year($) | Change from 2020 Calendar Year | ||||||
Ron C. Keating | 875,000 | — | ||||||
Benedict J. Stas | 479,700 | — | ||||||
Rodney O. Aulick | 431,250 | — | ||||||
Hervé P. Fages | 442,900 | — | ||||||
Vincent Grieco | 366,000 | — | ||||||
Short-Term / Annual Incentives
• Performance goals tied to critical financial objectives under Evoqua’s annual operating plan • Approximately 17—22% of NEOs’ target compensation |
The Company maintains a short-term incentive plan for administering the AIP, which provides performance-oriented incentive pay opportunities to the Company’s executives, including our NEOs. The purpose of the AIP is to drive behaviors that will achieve the financial goals under the Company’s annual operating plan and promote the Company’s success. Payout amounts under the AIP are based on achievement of predetermined Company-wide annual goals and, for the Segment presidents, Messrs. Aulick and Fages, predetermined Segment-based annual goals.
Target Bonus Opportunity
Target incentive compensation levels under our AIP are expressed as a percentage of base salary. We typically set the annual incentive target level near the median of bonus targets for comparable positions in the peer group used for benchmarking purposes.
For fiscal year 2021, the Compensation Committee approved base salary increasesincreased target incentive compensation levels for the NEOs in relationour Segment presidents, Messrs. Aulick and Fages, and for our General Counsel, Mr. Grieco, to thereflect market valuevalues for comparable positions. All increases became effective January 1, 2020.
Named Executive Officer | Base Salary—2020 Calendar Year ($) | Base Salary—2019 Calendar Year ($) | ||||||
Ron C. Keating | 875,000 | 827,367 | ||||||
Benedict J. Stas | 479,700 | 410,000 | ||||||
Hervé P. Fages | 442,900 | 430,000 | (1) | |||||
Rodney O. Aulick | 431,250 | 375,000 | ||||||
Snehal A. Desai | 380,800 | 340,000 | ||||||
positions across our comparator group. For the other NEOs, the Compensation Committee concluded that their established target bonus levels remained appropriate for fiscal year 2021, and no adjustments were made to their target incentive levels for fiscal year 2021.
Name | Target Fiscal Year 2021 |
2020 | ||||
Ron C. Keating | 100% | — | ||||
Benedict J. Stas | 70% | — | ||||
Rodney O. Aulick | 65% | +5 | % | |||
Hervé P. Fages | 65% | +5 | % | |||
Vincent Grieco | 60% | +10 | % | |||
| ||||
|
Short-Term Annual Incentives
The Company maintains the Evoqua Short-Term Incentive Plan under the Evoqua Water Technologies Corp. Annual Incentive Plan (the “AIP”) to provide performance-oriented incentive pay opportunities to the Company’s executives, including our NEOs. The purposeCalculation of theCash Value of AIP is to drive the Company’s annual performance through variable pay opportunities linked to the Company’s annual operating plan. Payouts under the AIP to our NEOs are based on achievement of predetermined Company-wide annual goals and, as applicable, predetermined Segment-based annual goals. Similar to prior years, the AIP for fiscal 2020 provided that an annual bonus pool would be established and funded based solely on the Compensation Committee’s determination that at least 95% of the Company-wide Adjusted EBITDA goal for the relevant fiscal year (including an amount equal to the fiscal 2020 budgeted expense for the AIP, or “AIP expense”) has been achieved.
Individual Bonus Opportunity
We did not increase our target percentages for annual incentive awards in fiscal 2020, which are measured as a percentage of base salary. We concluded that the fiscal 2019 target bonus levels established for all NEOs remained appropriate for fiscal 2020, and no adjustments were made to their target incentive levels for fiscal 2020.
Name | Target | Change from Fiscal 2019 | ||||||
Ron C. Keating | 100 | % | 0 | % | ||||
Benedict J. Stas | 70 | % | 0 | % | ||||
Hervé P. Fages | 60 | % | 0 | % | ||||
Rodney O. Aulick | 60 | % | 0 | % | ||||
Snehal A. Desai | 50 | % | 0 | % | ||||
The general method of calculating the cash value of the NEOs’ annual incentive payouts is set forth below:
FormulaPayout
Base Salary ($)
| X | Target Bonus Opportunity (%) | X | Weighted Achievement Level (% of Target) | = | Annual Incentive Payout ($) | ||||||
Fiscal Year 2021 AIP Performance Metrics and Goals
Our AIP is largely designed around company-wide performance goals whichthat are tied directly to critical financial performance goalsobjectives under the Company’s annual operating plan. We believe this emphasis on company-wide goals fosters a culture of teamwork and organizational purpose.purpose, while setting clear expectations on operational priorities.
The Compensation Committee approved the fiscalIn December 2020, plan design in December 2019. As was the case with the fiscal 2019 annual incentive plan,at its customary AIP goal-setting meeting, the Compensation Committee decided to carry over the same performance metrics and relative weightings used for the fiscal year 2020 AIP, as set forth in the “Summary of Fiscal Year 2021 AIP Performance Metrics” table below, to the fiscal year 2021 AIP.
In making this decision, the Compensation Committee considered various factors, including the following:
| • | Continuing Pandemic Conditions in Fiscal Year 2021— |
Challenges in the Company’s business environment linked to the COVID-19 pandemic remained persistent and required continuation of an operating plan structured around: (a) heightened public health concerns and special operating measures to assure the health and safety of employees and customers, business resilience, supply chain continuity, and liquidity; (b) negative impacts on sales volumes due primarily to customer site access restrictions, temporary customer site closures, and temporary delays in annual maintenance activities by customers in certain end markets; and (c) labor shortages and continuing overall economic uncertainty.
| • | Demonstrated Line of Sight Based on Fiscal Year 2020 Results— |
Despite the onset of the COVID-19 pandemic in early 2020, the Company achieved strong financial performance during fiscal year 2020. The Company successfully delivered stable revenues, above-target profitability (Evoqua Global Adjusted EBITDA), and above-target cash flow (Evoqua Global Adjusted Free Cash Flow) for fiscal year 2020, while maintaining the continuity of its operations throughout its nationwide network of manufacturing and service facilities, and continuing to support critical operations and processes of its customers, such as hospitals and testing labs. Importantly, there were no layoffs, furloughs, or salary reductions among the Company’s workforce due to the COVID-19 pandemic.
We believe the Company’s fiscal year 2020 financial results showcased the strength of its recurring revenue business model, the diversity and breadth of its customer end markets, and the competitiveness of its unique mix of products and services. The average closing price of a share of Company common stock increased in fiscal year 2020 to $18.31 from $12.88 in fiscal year 2019, demonstrating management’s ability to create long-term value for stockholders.
To maintain this positive momentum and incent our NEOs to continue executing on strategies to meet critical annual operating goals and deliver performance and value creation for our stockholders, the Compensation Committee determined it was advisable and in stockholders’ best interests to continue to use the key performance metrics of the fiscal year 2020 AIP, namely Evoqua Global Adjusted EBITDA, Sales,Segment Adjusted EBITDA and Evoqua Global Adjusted Free Cash Flow, and Segment Adjusted EBITDA (i.e., ISS Segment Adjusted EBITDA and APT Segment Adjusted EBITDA)for purposes of the fiscal year 2021 AIP, as the performance metrics, so that the performance goals would correspond to the principal financial performance goals understrong indicators of the Company’s fiscal 2020profitability and operating plan at that time.efficiency, effective cash management strategies, and overall enterprise resilience.
| ||||
|
Consistent withSummary of Fiscal Year 2021 AIP Performance Metrics
| Relative Weighting | ||||||||||
| Financial performance metric(1) | Who does it apply to | Keating Stas Grieco | Aulick Fages | Why it is used in our annual operating plan | ||||||
| Company-wide | Evoqua Global Adjusted EBITDA | All NEOs | 60% | 20% | Indicator of the effectiveness of our enterprise-wide business strategies and the profitability of our overall operations
| |||||
| Segment | Segment Adjusted EBITDA | Segment Presidents (Messrs. Aulick and Fages) | 0% | 40% | Indicator of the effectiveness of Segment business strategies and the profitability of Segment operations
| |||||
| Company-wide | Evoqua Global Adjusted Free Cash Flow | All NEOs | 40% | 40% | Indicator of operational efficiency and cash available for growth opportunities, repayment of debt, and other beneficial capital actions
| |||||
| (1) | These measures are non-GAAP financial measures. Please see “Appendix A—Non-GAAP Financial Measures” for further discussion regarding how these measures are calculated from the Company’s Consolidated Financial Statements. |
Fiscal Year 2021 AIP Funding and Achievement Levels
The Compensation Committee determined the annual bonus pool for the fiscal 2019 annual incentive plan,year 2021 AIP would be established and funded only if at least 85% of the Evoqua Global Adjusted EBITDA target goal for fiscal year 2021 was achieved. The Compensation Committee determined that setting the threshold performance goalslevel at 85% of the target goal was appropriate and in the best interests of the Company and its stockholders. This threshold performance level is consistent with broader market practice and allows AIP participants to realize a fair payout level for substantial achievement of difficult performance goals.
The table below sets forth the achievement levels and corresponding payouts (expressed as a percentage of target bonus) established under the fiscal 2020 annual incentive plan were initially weighted as follows:year 2021 AIP with respect to each performance metric. Above-target performance may be scored on these metrics, based on applicable leverage tables, only if 100% of Evoqua Global Adjusted EBITDA is achieved. Linear interpolation is used to determine the payout percentages for results that fall between the achievement levels shown.
| Below Threshold | Threshold | Target | Maximum | |||||||||||||||||||||||||||||
| Performance | Payout | Performance | Payout | Performance | Payout | Performance | Payout | |||||||||||||||||||||||||
Evoqua Global | Less than 85% | 0 | % | 85 | % | 25 | % | 100 | % | 100 | % | 115% | 200% | (capped) | ||||||||||||||||||
Evoqua Global | Less than 90% | 0 | % | 90 | % | 50 | % | 100 | % | 100 | % | —(1) | —(1) | |||||||||||||||||||
Segment | Less than 85% | 0 | % | 85 | % | 25 | % | 100 | % | 100 | % | 115% | 200% | (capped) | ||||||||||||||||||
| (1) |
| |
| ||
However, as the COVID-19 pandemic emerged in early 2020, at the Board’s direction, Company management shifted its operating focus, prioritizing employee and customer health and safety, business continuity and liquidity. The Company reallocated various personnel and other resources to focus on collecting and conserving cash, securing supplies of personal protective equipment (PPE) and developing disinfection and safety protocols and medical management resources. The Company also adopted a more selective approach to certain sales opportunities and projects.
At the end of fiscal 2020, the Compensation Committee determined that it would be more equitable and appropriate for performance to be measured under the AIP in a manner consistent with the mid-year shift in the corporate priorities in response to the COVID-19 pandemic. Accordingly, when measuring performance under the AIP, the Compensation Committee determined not to put any weighting on the original sales goals, but rather place greater emphasis on the weighting of cash flow goals, as follows:
| ||
| ||
| ||||
|
These financial performance metrics guided our annual incentive plan in the manner described below. As indicated, certain performance metrics we use are non-GAAP measures. See page 46 of this Proxy Statement for information about how these metrics were calculated for our annual incentive plan. We also use these metrics in our financial reporting. See Appendix A of this Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, for information about how these metrics are used and calculated in our financial reporting.
| Relative Weighting | ||||||||||||||
| Financial performance metric | Who does it apply to | Keating Stas Desai | Aulick Fages | What it is | Why it is used in our annual operating plan | How did COVID-19 impact it | ||||||||
| Company-wide | Evoqua Global Adjusted Free Cash Flow (non-GAAP) | All NEOs | 40% | 40% | Net cash from operating activities, less capital expenditures and adjusted for certain other items that management believes are not related to our ongoing operations and performance. This does not consider certain non-discretionary cash payments, such as debt. | Indicator of operational efficiency and cash available for growth opportunities, repayment of debt and other beneficial capital actions. | Became our principal financial goal—to optimize collection and conservation of cash; enhance balance sheet strength and liquidity | |||||||
| Company-wide | Evoqua Global Adjusted EBITDA (non-GAAP) | All NEOs | 60% | 20% | Earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted to exclude certain other items, including restructuring costs, stock-based compensation, transaction costs and certain other gains or losses. | Indicator of the effectiveness of our business strategies and profitability of our operations | Continued to be an overarching financial goal as a measure of effectiveness of our business management | |||||||
| Segment | Segment Adjusted EBITDA (non-GAAP) | Segment Presidents
(Messrs. Aulick and Fages) | 0% | 40% | EBITDA of the applicable operating segment, as adjusted to exclude charges of the type described above that are presented within corporate activities. | Indicator of the effectiveness of Segment business strategies and profitability of Segment operations | Continued to be an overarching financial goal as a measure of the effectiveness of our business management | |||||||
| Company-wide | Evoqua Global Sales | All NEOs | 0% | 0% | Revenue generated by sales of our products and services | Indicator of our market penetration and commercial excellence as well as customer demand for our products and services | Due to the shift in priorities under our 2020 operating plan to emphasize liquidity goals, its relative weighting was reallocated to Global Adjusted Free Cash Flow | |||||||
| ||||
|
Achievement Levels
The tables below set forth the achievement levels and corresponding payouts (expressed as a percentage of target bonus) established under the fiscal 2020 AIP with respect to each performance goal that is applicable to our NEOs. Interpolation is used to determine the payout percentages for results that fall between the achievement rates shown.
| Below Threshold | Threshold | Target | Maximum | |||||||||||||||||||||||||||||
| Performance | Payout | Performance | Payout | Performance | Payout | Performance(1) | Payout | |||||||||||||||||||||||||
Evoqua Global Adjusted EBITDA | Less than 95% | 0 | % | 95 | % | 25 | % | 100 | % | 100 | % | Up to 109% | 200% | (capped) | ||||||||||||||||||
Evoqua Global Adjusted Free Cash Flow | Less than 91% | 0 | % | 91 | % | 20 | % | 100 | % | 100 | % | — | — | |||||||||||||||||||
Segment Adjusted EBITDA | Less than 95% | 0 | % | 95 | % | 25 | % | 100 | % | 100 | % | — | — | |||||||||||||||||||
|
Post-Year End Determinations
As discussed above, after the end of fiscal 2020 the Compensation Committee reevaluated the weighting of the fiscal 2020 performance goals against the operating results achieved by the Company in this performance period.
Despite the challenges arising out of the COVID-19 pandemic, the Company’s overall performance in fiscal 2020 was stronger than anticipated. The Company achieved excellent financial and non-financial performance outcomes, which demonstrate the value and quality of execution of the strategic initiatives and operating improvements instituted by management over the past several years to build a more resilient business. These outcomes reflect the organization’s capacity to respond to and manage the operating challenges in a disciplined manner to continue making positive gains in profitability. The Company also demonstrated its ability to return value to its stockholders in fiscal 2020, as the average closing price of a share of Company common stock was $18.31 in fiscal 2020 versus $12.88 in fiscal 2019.
Financial performance outcomes:
Revenue of $1.43 billion in fiscal 2020, representing a (1.0%) change from the prior year;
Non-GAAP organic revenue grew by 1.5% in fiscal 2020;
| ||||
|
Net Income of $114.4 million and non-GAAP Adjusted EBITDA of $239.6 million in fiscal 2020, representing a significant improvement over net loss of $8.5 million and Adjusted EBITDA of $235.0 million in the prior year;
Operating Cash Flow of $158.4 million and non-GAAP Adjusted Free Cash Flow of $115.8 million in fiscal 2020, representing a 26.5% and 12.2% improvement from the prior year, respectively;
Record low level of past-due collections—76.8% accounts receivable collected while current vs. 64.8% in the prior year;
Record low level of working capital as a percentage of sales—12.5% vs. 16.4% in prior year;
Significantly reduced net leverage to 3.0x vs. 3.8x at end of prior year;
Non-financial performance outcomes:
Preserved workforce and continuity of supply—no layoffs, furloughs or salary reductions as a result of the pandemic;
Reduced rate of employee turnover overall and in the first year of employment; and
Reduced accident totals by 30% compared to fiscal 2019.
Note regarding non-GAAP financial measures: Organic revenue, Adjusted EBITDA, Adjusted Free Cash Flow and net leverage are non-GAAP financial measures. A definition of these and other non-GAAP financial measures used in the Compensation Discussion and Analysis section and elsewhere in this Proxy Statement, other than as part of disclosure of target levels, and a reconciliation to the most directly comparable financial measures presented in accordance with GAAP can be found in Appendix A.
Because of the Company’s stronger than anticipated cash position at the end of fiscal 2020, to reward for strong performance through incredibly challenging circumstances, and considering anticipated future share usage needs under the 2017 Plan, solely in the case of the NEOs and other members of the Executive Leadership Team, the form of payment of the AIP bonus amounts was changed from restricted stock units (RSUs) to cash (without the 20% premium associated with awards paid in RSUs). The fiscal 2020 AIP originally required the NEOs and other members of the Executive Leadership Team to receive payment of their AIP bonus amounts solely in RSUs. However, consistent with the original terms of the fiscal 2020 AIP, other plan participants were permitted to receive payment in RSUs according to the voluntary elections made by those participants, in order to reinforce a culture of ownership among the broader leadership bench (which includes potential successorship candidates), and align with the Company’s expected cash planning needs.
|
| ||||
|
| Global Adjusted Free Cash Flow metrics is determined based on Evoqua Global Adjusted EBITDA performance and application of the leverage table for these metrics. |
The resulting fiscal 2020year 2021 performance goals for each of our NEOs, compared against fiscal 2020 achievement levels,established by the Compensation Committee and actual performance achieved by the Company are set forth below. The target performance goals directly correspond to financial objectives under the Company’s fiscal year 2021 annual operating plan, as reviewed and adopted by the Board in September 2020.
| Relative Weighting |
• At-target performance for Evoqua Global Adjusted EBITDA represented 2.5% profitability improvement over the prior fiscal year;
• At-target performance for Evoqua Global Adjusted Free Cash Flow is correlated with the fiscal year 2021 annual operating goal of 100% or greater cash conversion of Adjusted Net Income; and
• At-target performance for ISS Segment Adjusted EBITDA and APT Segment Adjusted EBITDA represented 5.4% and 3.6% profitability improvement over the prior fiscal year, respectively.
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fiscal 2020 Performance Goals | Keating Desai | Aulick | Fages | Threshold(1) | Target(1) | Maximum(1) | Fiscal 2020 Actual Performance | Actual % of Target | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
($ in millions) Fiscal Year 2021 Performance Goals(1) | Threshold | Target | Maximum | | Fiscal Year 2021 Actual Performance | | | Actual Achievement % of Target |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Evoqua Global Adjusted EBITDA | 60 | % | 20 | % | 20 | % | $ | 227.4 | $ | 239.4 | $ | 261.0 | $ | 241.1 | (2) | 100.8 | % | td10.1 | td47.1 | td84.2 | td52.4 | 102.2% | ||||||||||||||||||||||||||||||||||||||||
Evoqua Global Adjusted Free Cash Flow | 40 | % | 40 | % | 40 | % | $ | 101.3 | $ | 111.3 | — | $ | 115.8 | 104.0 | % | $ 72.4 | $ 80.4 | — | td53.3 | 190.7% | ||||||||||||||||||||||||||||||||||||||||||
ISS Segment Adjusted EBITDA | — | 40 | % | — | 204.6 | 215.4 | — | 215.3 | (2) | 100.0 | % | td90.4 | td24.0 | td57.6 | td20.7 | 98.6% | ||||||||||||||||||||||||||||||||||||||||||||||
APT Segment Adjusted EBITDA | — | — | 40 | % | 93.9 | 98.8 | — | 98.8 | (2) | 100.1 | % | $ 88.4 | td04.0 | td19.6 | td10.7 | 106.5% |
• At-target performance for Evoqua Global Adjusted EBITDA represented 2.5% profitability improvement over the prior fiscal year;
• At-target performance for Evoqua Global Adjusted Free Cash Flow is correlated with the fiscal year 2021 annual operating goal of 100% or greater cash conversion of Adjusted Net Income; and
• At-target performance for ISS Segment Adjusted EBITDA and APT Segment Adjusted EBITDA represented 5.4% and 3.6% profitability improvement over the prior fiscal year, respectively.
| |||||||||||||||||||||||||||||||||||||||||||||
| (1) |
|
|
|
|
|
|
| ||||
|
Calculation of AIP Payments
The results of the annual incentive award calculations for the NEOs for fiscal 2020year 2021 are illustrated below.
NEO | Base Salary ($)(1) | Target Bonus Opportunity (%) | Weighted Achievement Level (% of Target) | Annual Incentive Payout ($) | ||||||||||||||||||||||||
Ron C. Keating | 864,198 | x | 100 | x | 108.9 | = | 941,112 | |||||||||||||||||||||
Benedict J. Stas | 463,894 | x | 70 | x | 108.9 | = | 353,627 | |||||||||||||||||||||
Hervé P. Fages | 439,975 | x | 60 | x | 105.8 | = | 279,349 | |||||||||||||||||||||
Rodney O. Aulick | 418,494 | x | 60 | x | 105.3 | = | 264,506 | |||||||||||||||||||||
Snehal A. Desai | 371,548 | x | 50 | x | 108.9 | = | 202,308 | |||||||||||||||||||||
NEO | Base Salary ($)(1) | Target Bonus Opportunity (%) | Weighted Achievement Level (% of Target)(2) | Annual Incentive Payout ($) | ||||||||||||||||||||||||
Ron C. Keating | 875,000 | x | 100 | x | 114.7 | = | 1,003,625 | |||||||||||||||||||||
Benedict J. Stas | 479,700 | x | 70 | x | 114.7 | = | 385,151 | |||||||||||||||||||||
Rodney O. Aulick | 431,250 | x | 65 | x | 106.0 | = | 297,188 | |||||||||||||||||||||
Hervé P. Fages | 442,900 | x | 65 | x | 126.2 | = | 363,253 | |||||||||||||||||||||
Vincent Grieco | 366,000 | x | 60 | x | 114.7 | = | 251,881 | |||||||||||||||||||||
| (1) | We calculate AIP payment amounts using the |
| (2) | This column reflects actual performance against fiscal year 2021 AIP goals and application of the relevant leverage tables for Evoqua Global Adjusted EBITDA, ISS Segment Adjusted EBITDA, and APT Segment Adjusted EBITDA for each NEO. As indicated above, linear interpolation is used to determine the payouts (expressed as a percentage of the NEO’s target payout amount) in cases where performance results fall between the pre-set achievement levels. |
The Compensation Committee considered that the adjusted weightings would result in higher payout levels for the NEOs than under the original performance goal weightings: an overall increase of approximately 7.4% for Messrs. Keating, Stas and Desai; approximately 7.8% for Mr. Fages; and approximately 8.2% for Mr. Aulick. The Compensation Committee approved the adjusted weightings because they would more clearly support the connection between compensation and performance; would allow the NEOs and other participating employees to be fairly rewarded for their contributions to the Company’s excellent performance results under unprecedented circumstances; and would motivate the NEOs and other key managers to continue achieving critical operating goals that drive improved financial performance and long-term value creation.
2022 Proxy Statement | ||||
63 |
Discretionary Cash Payment—December 2019Long-Term Incentives
As discussed earlier, in December 2019 the NEOs and other employees received a one-time discretionary cash payment in connection with the Company’s successful divestiture of its non-core, capital intensive Memcor® product line and business. This strategic transaction was completed on December 31, 2019, fulfilling a multi-year effort to turnaround, manage and prepare the business for potential sale. As a result of these efforts, the Company obtained an aggregate purchase price of $131 million in cash (following adjustments for cash and net working capital) for the Memcor business, representing an attractive multiple of earnings for this business. The disposition of this business allowed the Company to devote greater resources to its core products and solutions, while permitting the Company to continue to design, source and assemble membrane-based systems for its customers through DuPont, the purchaser of the Memcor business. Additionally, with net proceeds from this transaction, the Company paid down $100 million of debt, significantly reducing its net leverage ratio from its then-current level of 3.8x. Among other benefits, we also believe this divestiture has provided us with needed runway for future growth and,
• Four-year time horizon, subject to continued employment • Approximately 41—66% of NEOs’ target compensation under our regular-cycle compensation program | Regular-Cycle LTI Equity Mix
|
Long-term incentives constitute nearly half (or more, in the near term, has placed the Company in a better position to reduce its cash requirements, adjust its operations to manage successfully through fiscal 2020, and generally withstand the economic stress created by the COVID-19 pandemic to date.
The amounts paid to the NEOs as a resultcase of the Memcor divestiture are as follows:
Mr. Keating | $ | 661,894 | Mr. Aulick | $ | 191,475 | |||||
Mr. Stas | $ | 225,600 | Mr. Desai | $ | 136,000 | |||||
Mr. Fages | $ | 206,400 |
Long-Term Incentivesour CEO) of our NEOs’ direct compensation.
The main objectives of our long-term incentive program are to: (1) directly link our executives to increasing stockholder value, (2)(a) create strong alignment with stockholders’ interests through participation in stock ownership, (b) incent our executives to work towards the achievement of our long-term performance goals, (3)(c) provide the Company a competitive means through which we may better attract able individuals to become executives, (4)and (d) promote retention of executives through multi-year vesting periods, and (5) create strong alignment with stockholders’ interests through participation in stock ownership.periods.
| ||||
|
Long-term incentives constitute nearly the majority (or more, in the case of our CEO) of our NEOs’ direct compensation. Currently, our long-term incentive program providesWe set award amounts for our NEOs to receiveafter taking into account market data for comparable positions in the peer group used for benchmarking purposes.
The Compensation Committee adopted the current regular-cycle equity mix for our NEOs in 2019. Under our fiscal year 2021 LTIP, 50% of their award in the formNEOs’ awards consisted of stock options and the remaining 50% inconsisted of RSUs. This equity mix was adopted by the Compensation Committee in fiscal 2019 as part of the multi-year process of transitioning our long-term incentive program from one that is consistent with a pre-IPO and newly public company model to a program for a more mature public company. The Compensation Committee believes this equity mix creates appropriate, balanced incentives for our NEOs: (1) stockNEOs. Stock options encourage strong alignment with stockholders’ interest in growth since options have value only to the extent that our stock price rises between the grant date and exercise date; and (2) RSUs support retention and stock price alignment by allowing award recipients the opportunity to receive Company stock if they are still employed by us on the date the restrictions lapse. Both the options and the RSUs will vest in four equal annual installments over a period of four years, provided the NEO remains employed by the Company on each of the applicable vesting dates. All stock option and RSU awards under the Amended and Restated Evoqua Water Technologies Corp. 2017 Equity Incentive Plan (the “2017 Plan”) (including RSUs granted under the AIP in lieu of cash) are subject to a double trigger change-in-control vesting condition. In the event a Change in Control (as defined in the 2017 Plan) occurs, and employment is terminated within 12 months thereafter (or such longer period as may be provided under an executive’s employment agreement) (x) due to death or disability or (y) without cause, the then-unvested portion of his option or RSU awards under the 2017 Plan will become fully vested as of the date of termination.
Since 2019, grants of equity-based long-term incentive awards have generally occurred in mid-February. The number of shares granted each year fluctuates based on our stock price and other equity unit valuation methods (i.e., Black-Scholes for stock options). Additionally, the grant date may be adjusted if the Compensation Committee anticipates the release of material nonpublic information.
The table below sets forth the number of shares underlying the RSUs and options awarded to each of our NEOs on February 14, 2020.16, 2021.
Name | Shares Underlying RSU Grant | Shares Underlying Stock Option Grant | Shares Underlying RSU Grant(1) | Shares Underlying Stock Option Grant(2) | ||||||||||||
Ron C. Keating | 64,748 | 252,684 | 69,871 | 192,693 | ||||||||||||
Benedict J. Stas | 19,044 | 74,319 | 20,194 | 55,692 | ||||||||||||
Rodney O. Aulick | 13,126 | 36,200 | ||||||||||||||
Hervé P. Fages | 10,580 | 41,288 | 12,116 | 33,415 | ||||||||||||
Rodney O. Aulick | 11,638 | 45,417 | ||||||||||||||
Snehal A. Desai | 7,406 | 28,902 | ||||||||||||||
Vincent Grieco | 8,078 | 22,277 | ||||||||||||||
| (1) | The number of shares underlying the RSU awards was determined by dividing the dollar value of the grants by the closing price per share of the Company’s common stock on the date of grant ($24.76). |
| (2) | The grant date fair market value of the stock option grants is based on the Black-Scholes option pricing model. |
All stock option and RSU awards granted under the Amended and Restated Evoqua Water Technologies Corp. 2017 Equity Incentive Plan (the “2017 Plan”) are subject to a double trigger change in control vesting condition, as more fully described in “Payments Upon Certain Events of Termination or Change in Control.”
Retirement Plans2021 Special Awards
The Company provides retirement benefits toOn May 18, 2021, the NEOs,Compensation Committee approved the grant of special one-time retention awards, including matching contributions, underRSUs (the “Special RSUs”) and PSUs (the “Special PSUs” and, collectively with the terms of its tax-qualifiedSpecial RSUs, the defined contribution plan (the “401(k) Plan”). The NEOs participate in the 401(k) Plan on the same terms as our other participating employees. Prior to March 30, 2020, the Company matched 100% of each participant’s contribution up to the first 6% of the participant’s base salary. As part of cash conservation measures in response to the COVID-19 pandemic, the Company match was temporarily suspended for all participants. After October 1, 2020, the Company match was reinstated with retroactive effect as to all participants.
The Company also maintains a nonqualified deferred compensation plan (the “Deferred Compensation Plan”) in which the NEOs participate and under which they are eligible to receive matching contributions. Under the Deferred Compensation Plan, the NEOs may elect to defer portions of their compensation that are not otherwise covered by the 401(k) Plan due to limitations on contributions to the 401(k) Plan under the Internal Revenue Code of 1986, as amended (the “Code”). For a further description of the Deferred Compensation Plan and the payments that were made in fiscal 2020, please see the table titled “Nonqualified Deferred Compensation for 2020” below.
| ||||
|
“Special Awards”) under the 2017 Plan to each of the NEOs and the other executive officers. The purpose of this grant was to incentivize significant value creation and rigorous performance over the long term.
Summary of Features of 2021 Special Awards
Special PSUs (2/3 value of Special Award) | Special RSUs (1/3 value of Special Award) | |
• Earned incrementally over three tranches/performance periods: • Tranche 1 (2021-2022) – 25% • Tranche 2 (2021-2023) – 25% • Tranche 3 (2021-2024) – 50% • Earned PSUs, if any, cliff vest after the 3rd anniversary of the grant date • Performance is based on TSR, relative to U.S. constituents in the S&P Global Water Index • Threshold performance — 60th percentile • Target performance — 80th percentile • No payout for performance below Threshold • Payout is capped at Target, even if performance exceeds the 80th percentile • Payout will be reduced by 50% for any performance period in which the Company’s absolute TSR is negative (regardless of relative positioning) | • Vest ratably over a three-year period (2022-2024) based on continued employment with the Company |
Special Award Determinations. The Company’s executive leadership team is widely viewed as top-notch and the Compensation Committee and the independent members of the Board became aware that certain members of the team were being solicited in a tight market for executive talent. Given the highly competitive nature of the market for executive talent and the impact that the loss of key members of the executive leadership team would have on the Company, the Compensation Committee consulted with Meridian and the independent members of the Board to evaluate various compensation strategies for retention, as applied in the ordinary course and in special, one-time situations, and for further motivating long-term, outstanding performance. During these sessions, the Compensation Committee considered, among other things, external factors, such as the market for executive talent; the contributions of the leadership team to the Company’s development and growth, particularly since becoming a publicly-traded company; strategic plans for the Company’s future growth; the overall value of promoting stability among the leadership team at this stage of the Company’s development; and stockholders’ interest in long-term stock price performance and sustained enterprise growth.
The Compensation Committee ultimately determined that, given these circumstances, it was in the best interests of the Company and its stockholders to grant special one-time retention awards to Mr. Keating and the other ELT members, including the NEOs, consisting of the Special PSUs and the Special RSUs, in order to drive outperformance as well as promote retention of the leadership team during a critical period of Evoqua’s development. The Special Awards are tailored to achieve this objective by providing the leadership team (a) an opportunity to receive an enhanced payout in 2024, solely to the extent that the Company maintains TSR performance that is consistently well above its peers during the prescribed one-, two-, and three-year performance periods, as well as (b) strong retention incentives through the vesting structures of the Special PSUs and the Special RSUs. The Compensation Committee believes the overall structure of the award strongly aligns leadership performance with stockholders’ interest in sustained value creation over short-, medium- and long-term performance periods.
2022 Proxy Statement | ||||
65 |
Additional information regarding factors considered by the Compensation Committee is provided below.
Certain Considerations Relating to the 2021 Special Awards
| Determination of Size of Award | • Goal was to retain and motivate the leadership team • With Meridian’s assistance, considered broader market data for prior grants of similar awards by other public companies, the internal budget, and share usage and dilution • A significantly larger portion of the pool was allocated to Mr. Keating to reflect his singular role in developing, guiding, and motivating his leadership team and in establishing and executing the Company’s business strategy | |
Selection of Relative TSR as Performance Metric | • Goal was to continue to drive short-, medium-, and long-term stockholder returns and directly correlate compensation with resilient value creation for stockholders • Relative TSR strongly correlates with the stockholder experience by rewarding company TSR outperformance relative to a comparator group, and penalizing TSR median or underperformance (i.e., no payout) • The U.S. constituents of the S&P Global Water Index were selected as an appropriate comparator group, as Evoqua’s principal competitors for talent, investor capital, and customers • Strong Company performance on operational and financial results should correspond with above-peer TSR performance • Consistent above-peer performance on TSR is challenging | |
Fit With Our Compensation Program and Strategy | • Goal was to develop a one-time, standalone award that would be separate from the Company’s regular-cycle incentive programs, which already focus on driving various aspects of the Company’s financial performance �� • Awards are to be settled in equity, not cash, to ensure realized value stays correlated with stock price and aligns with our stockholders’ interests • Risk mitigation provided through our stock ownership guidelines, robust clawback policy. and capping payout (at target) on the Special PSUs (i.e., no additional payout for performance above target) | |
Promote Exceptional Performance | • Special PSUs require relative TSR performance at the 60th percentile for 50% payout (threshold level) and at the 80th percentile for 100% payout (target level) • No payout for performance below threshold • If the Company’s TSR is negative for any performance period, the number of Special PSUs that may vest for the corresponding tranche will be capped at 50% of the amount that otherwise would have been earned for such period | |
Promote Retention | • Special PSUs, which constitute 2/3 of the Special Awards, generally cliff vest and are paid, to the extent earned, only after the end of the full three-year performance period • Special RSUs, which constitute 1/3 of the Special Awards, are time-based and generally vest ratably over the same three-year period |
| ||||
66 |
The table below sets forth the amounts of the Special Awards granted to our NEOs.
Name | Shares Underlying (at target) (#) | Special ($)(1) | Shares Underlying Special RSU Grant (#) | Special RSUs Value ($)(1) | ||||||||||||
Ron C. Keating |
| 328,061 |
|
| 9,333,335 |
|
| 164,031 |
|
| 4,666,682 |
| ||||
Benedict J. Stas |
| 35,150 |
|
| 1,000,018 |
|
| 17,575 |
|
| 500,009 |
| ||||
Rodney O. Aulick |
| 17,575 |
|
| 500,009 |
|
| 8,788 |
|
| 250,019 |
| ||||
Hervé P. Fages |
| 17,575 |
|
| 500,009 |
|
| 8,788 |
|
| 250,019 |
| ||||
Vincent Grieco |
| 17,575 |
|
| 500,009 |
|
| 8,788 |
|
| 250,019 |
| ||||
| (1) | The share amounts for both types of awards were determined by dividing the dollar value of each award by the Company’s average closing price per share for the 30 trading days prior to and including the grant date, May 18, 2021. |
The dollar values shown above do not reflect valuations computed in accordance with ASC 718. See “Summary Compensation Table—Fiscal Years 2021, 2020, and 2019” and “Grants of Plan-Based Awards—Fiscal Year 2021” for the grant date fair value of the Special Awards.
Terms of the Award. Subject to the applicable NEO’s continued employment with the Company and the terms and conditions of the 2017 Plan and the related award agreement, (a) the Special RSUs will vest ratably over a three-year period on each annual anniversary of the grant date, May 18, 2021, and, (b) in order to incent sustained value creation over short-, medium-, and long-term periods, the Special PSUs will be earned incrementally in three tranches of 25%, 25%, and 50% after one-, two- and three-year performance periods, respectively, and will cumulatively be paid, if earned, after the end of the three-year performance period ending on May 18, 2024 (the “Total Performance Period”), based on the Company’s TSR compared to the U.S. constituents of the S&P Global Water Index, as listed on “Appendix B—2021 Special Awards Peer Group.” Each tranche of the Special PSUs reflects the right to receive between 50% to 100% of the shares underlying such tranche, if earned, based on the Company’s TSR as compared to such companies (“Relative TSR”) for the applicable performance period. Subject to certain exceptions provided in the award agreements in the event of death, disability or change in control (as more fully described in this Proxy Statement under the heading “Payments Upon Certain Events of Termination or Change in Control”), for each tranche, Special PSUs will be earned based on the following performance levels:
| Performance Level | Relative TSR | % of Tranche Earned | ||
Target | Equal To or Greater Than 80th Percentile | 100% | ||
Threshold | 60th Percentile | 50% | ||
Below Threshold | Below 60th Percentile | 0% | ||
Linear interpolation will be used to determine the percentage of each tranche earned when the Company’s Relative TSR falls between the 60th percentile and the 80th percentile for the applicable performance period. The payout for each tranche of the Special PSUs is capped at target (or 100%) even if the Company’s Relative TSR exceeds the 80th percentile for the applicable performance period. If the Company’s TSR is negative for any performance period, the number of Special PSUs that may vest for the corresponding tranche will be capped at 50% of the amount that otherwise would have been earned for such period.
Compensation Program Changes for Fiscal Year 2022
Fiscal Year 2022 AIP Performance Metrics and Goals
For fiscal year 2022, the Compensation Committee determined to incorporate two new ESG-related performance metrics described below into the Company’s AIP. These goals are based on two of the defining elements of the Company’s culture, water stewardship and safety, and are intended to focus executives on the achievement of the Company’s broader sustainability goals.
2022 Proxy Statement | ||||
67 |
In November 2021, the Compensation Committee approved the following performance metrics and weightings for the Company’s fiscal year 2022 AIP (with payouts ranging from 0-200% of target depending on performance).
| Relative Weighting | ||||||||||||||||||||||||||||||||||||||||||||
Performance | Company- wide Plan | Segment- based Plan | Threshold | Target | Max | |||||||||||||||||||||||||||||||||||||||
| Performance | Payout | Performance | Payout | Performance | Payout | |||||||||||||||||||||||||||||||||||||||
Evoqua Global Adjusted EBITDA(1) | 60 | % | 30 | % | 85 | % | 25 | % | 100 | % | 100 | % | 115 | % | 200 | % (capped) | ||||||||||||||||||||||||||||
Segment Adjusted EBITDA(1) | — | 40 | % | 85 | % | 25 | % | 100 | % | 100 | % | 115 | % | 200 | % (capped) | |||||||||||||||||||||||||||||
Evoqua Global Adjusted Free Cash Flow(1) | 30 | % | 20 | % | 90 | % | 50 | % | 100 | % | 100 | % | — | (2) | — | (2) | ||||||||||||||||||||||||||||
Water Stewardship(3) | 5 | % | 5 | % | — | — | 100 | % | 100 | % | — | (2) | — | (2) | ||||||||||||||||||||||||||||||
Safety(4) | 5 | % | 5 | % | — | — | 100 | % | 100 | % | — | (2) | — | (2) | ||||||||||||||||||||||||||||||
| (1) | Evoqua Global Adjusted EBITDA, Segment Adjusted EBITDA, and Evoqua Global Adjusted Free Cash Flow are non-GAAP financial measures. Please see “Appendix A—Non-GAAP Financial Measures” for further discussion regarding how these measures are calculated from the Company’s Consolidated Financial Statements. |
| (2) | If 100% of the target goal for Evoqua Global Adjusted EBITDA and this metric is achieved, the payout attributable to this metric is determined based on Evoqua Global Adjusted EBITDA performance and the applicable leverage tables. |
| (3) | Performance will be measured based on achieving a target level of water reuse/recycling vs. water withdrawn from source at Evoqua’s ten most water-intensive facilities |
| (4) | Performance will be measured based on achieving a target Total Recordable Incident Rate (TRIR), as calculated in accordance with OSHA requirements. |
The fiscal year 2022 AIP will only fund if the Company’s performance equals or exceeds 85% of its target Global Adjusted EBITDA goal. Payouts under the fiscal year 2022 AIP will be determined based on (a) the attainment of the selected financial performance goals at threshold, target, or above-target levels, and (b) the absolute attainment of the selected ESG-related performance goals (i.e., all or nothing payout). Similar to the fiscal year 2021 AIP, above-target performance may be scored on these metrics, based on applicable leverage tables, only if 100% of Evoqua Global Adjusted EBITDA is achieved.The Compensation Committee approved performance goals for the fiscal year 2022 AIP that it believes to be challenging, but reasonably achievable.
In November 2021, the Compensation Committee approved the design of the Company’s fiscal year 2022 LTIP (the “FY 2022 LTIP”). The equity mix for the FY 2022 LTIP will include 50% PSUs (at target) (the “FY 2022 PSUs”) and 50% RSUs. The FY 2022 PSUs are a new component of the Company’s LTIP for fiscal year 2022, replacing the stock options that historically have comprised 50% of the Company’s LTIP program.
| ||||
68 |
The RSUs will generally vest in three equal annual installments over a period of three years, provided the NEO remains employed by the Company on each of the applicable vesting dates. To the extent earned, the FY 2022 PSUs will cliff vest at the end of a cumulative three-year performance period based on achievement of goals related to the following performance metrics (with payouts ranging from 0-200% of target depending on performance):
| Performance Metric | Relative Weighting | Measurement Method(1) | ||
Sustained Improvement in Revenue Growth | 50% | Three-Year Cumulative Organic Revenue Growth Dollars ($) | ||
Sustained Improvement in Profitability | 50% | Three-Year Average Adjusted EBITDA Margin (%) |
| (1) | Organic Revenue Growth and Average Adjusted EBITDA Margin are non-GAAP financial measures. Please see “Appendix A—Non-GAAP Financial Measures” for further discussion regarding how these measures are calculated from the Company’s Consolidated Financial Statements. |
The number of FY 2022 PSUs that may be earned is subject to a TSR modifier, which operates by increasing or decreasing the total number of shares earned by up to 25% based on the Company’s TSR relative to the TSR of the U.S. constituents of the S&P Global Water Index.
The Compensation Committee approved performance goals related to the FY 2022 PSUs that it believes to be challenging, but reasonably achievable.
Other Compensation Program Elements
Retirement Plans
The Company provides retirement benefits to the NEOs, including discretionary matching and profit-sharing contributions, under the terms of its tax-qualified defined contribution plan (the “401(k) Plan”). The NEOs may participate in the 401(k) Plan on the same terms as our other participating employees.
Beginning January 1, 2021, the Company matching contribution is made annually following the end of the calendar year and using a formula of 100% of a participant’s elective deferrals up to 4% of the participant’s compensation. A participant must be employed on the last day of the calendar year to receive the Company matching contribution, except in the case of the participant’s death, disability, or termination of employment after attaining age 65.
Beginning January 1, 2021, the Company profit-sharing contribution is made annually following the end of the calendar year and using a formula of 4% of a participant’s compensation for the calendar year. A participant must have one year of service in order to receive any Company profit-sharing contribution. In addition, a participant must be employed on the last day of the Company’s fiscal year (September 30) to receive the Company profit-sharing contribution, except in the case of the participant’s death, disability, or termination of employment after attaining age 65.
Company matching and profit-sharing contributions vest on a three-year graded schedule.
The Company also maintains a nonqualified deferred compensation plan (the “Deferred Compensation Plan”) in which the NEOs may participate. Under the Deferred Compensation Plan, the NEOs may elect to defer portions of their base salary, short-term incentives, and sales commissions/bonuses, and they may receive certain Company matching contributions. For a further description of the Deferred Compensation Plan and the payments that were made in fiscal year 2021, please see the table titled “Nonqualified Deferred Compensation” below.
2022 Proxy Statement | ||||
69 |
We believe the retirement benefits provided under the 401(k) Plan and the Deferred Compensation Plan are comparable to those provided by comparable companies. The Company does not maintain any defined benefit plans for any of its executive officers.
Perquisites and Other Personal Benefits
The Company provides the NEOs with perquisites and other personal benefits, or an allowance for certain perquisites, that it believes are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain superior employees for key positions.
Since July 2018, the Company has maintained a reimbursement plan pursuant to which the CEO and executive and senior vice presidents and vice presidents may incur qualifying expenses related to executive physicals, financial planning, health club and/or social club dues and fees, personal automobile, parking, and charitable donations, which will be reimbursed by the Company up to the applicable reimbursement limit, which limit is generally consistent with the allowance level that had applied prior to implementation of the reimbursement plan. These reimbursements are paid to the executives on a tax neutral basis.limit. The reimbursement limits (not including any amounts to cover taxes) are: $30,000 for Mr. Keating,Keating; $25,000 for Mr. StasStas; and $20,000 for Messrs. Aulick, Fages, Aulick and Desai.Grieco. For Mr. Keating, the Compensation Committeereimbursement plan also approvedcovers payment of social club dues having an aggregate value of up to an additional $30,000.
We believe these benefits enable our executives to focus on our business and enhance their commitment to us. In addition, each of our NEOs received Company matching contributions under the 401(k) Plan and the Deferred Compensation Plan.
The Compensation Committee periodically reviews the levels of perquisites and other personal benefits that may be made available to our NEOs through the reimbursement program to confirm that such levels are reasonable and continue to serve their intended retentive purposes.
Internal Revenue Code Section 162(m)
Section 162(m) of the Code limits the Company’s deduction for compensation paid to the NEOs (and certain other “covered employees”) to $1 million during the tax year, subject to certain permitted exceptions. Prior to enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), this limitation did not generally apply to compensation paid to the chief financial officer or to qualifying performance-based compensation if certain requirements were met. The 2017 Plan was structured so that in the future certain awards thereunder could have been granted in a manner that satisfied the exception under Section 162(m) for qualified performance-based compensation, and similarly, the AIP was structured so that in the future annual performance-based incentive awards made thereunder could have satisfied the exception under Section 162(m). Pursuant to the Tax Act, the exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our NEOs, including our Chief Financial Officer, in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.
Notwithstanding the repeal of the performance-based compensation exemption under the Tax Act, Section 162(m) also provides an exemption from the deductibility limitations in the form of a transition rule for newly public companies. Under this transition rule, a company that undergoes an initial public offering is generally not subject to the compensation deduction limitations for a period of approximately three years following the year of the initial public offering with respect to certain compensation arrangements that were entered into before such initial public offering, including, without limitation, awards under the EWT Holdings I Corp. Stock Option Plan (the “2014 Plan”), the 2017 Plan and certain RSUs granted to key employees in November 2017 in connection with the Company’s initial public offering. Going forward, for compensation arrangements that are not covered by the exemption for newly public companies, and in light of the Tax Act changes to Section 162(m), although the Compensation Committee intends to consider the impact of Section 162(m) in making its compensation decisions, it believes the tax deduction is only one of several relevant considerations in setting compensation. Accordingly, to maintain flexibility in compensating our executives, the Compensation Committee reserves the right to use its judgment in approving compensation that may not be tax deductible in the future.
| ||||
|
Stock Ownership Guidelines
The Compensation Committee believes our officers should own a significant amount of Evoqua common stock to strongly align their interests directly with the interests of stockholders.our stockholders’ interests. Accordingly, in April 2018, the Compensation Committee adopted stock ownership guidelines applicable to all of our officers based on a multiple of base salary. Officers are expected to meet these ownership requirements within five years of election, appointment, or promotion. At November 17, 2021, each of our NEOs was in compliance with our stock ownership guidelines.
The current stock ownership requirements applicable to our executive officers are:
| CEO | 5X annual base salary | |
| Executive Officers | 3X annual base salary | |
Shares that count towards satisfaction of the stock ownership guidelines for our officers include the following:
Shares owned directly by the officer, or by his or her immediate family members residing in the same household (whether acquired through a Company-sponsored equity-based compensation plan or program of the Company, or otherwise);
Shares held in trust for the benefit of the officer, or his or her immediate family members;
Vested shares held in the officer’s retirement accounts; and
Shares of restricted stock, restricted stock units, or deferred stock units that may only be settled in shares, whether vested or unvested.
Clawback Policy
In February 2019, the Company adopted a clawback policy whichthat applies to all current and former executive officers (including the NEOs), certain senior managers,employees at the vice president level and above (together with current and former executive officers, the “Covered Executives”), and other designated employees of the Company and its subsidiaries.subsidiaries (the “Participating Employees”). The policy provides that, in the event the Company is required to prepare an accounting restatement of financial statements which have been fileddue to the Company’s material noncompliance with any financial reporting requirement under the SEC,federal securities laws, the Company will make a reasonable attempt to recover the portionobtain reimbursement or forfeiture of theany excess incentive compensation that was paid to the officer or other employeereceived by a Covered
| ||||
70 |
Executive during the three most recently completed fiscal years based onimmediately preceding the erroneous data.date the Company is required to prepare an accounting restatement. Separately, if it is determined that an officera Covered Executive has willfully, knowingly, or other employee covered by the policy has intentionally engaged in misconduct, an intentional violation of any of the Company’s rules or any applicable legal or regulatory requirements, fraud or other illegal conduct, which either contributed to the circumstances requiring an accounting restatement or otherwise caused economic or reputational damage to the Company, and the Compensation Committee determines it would be appropriate to seek recovery under the policy, the Company will make a reasonable attempt to recover part or allup to 100% of the incentive compensation that was paid to the officerCovered Executive or other employeeParticipating Employee during the three most recently completed fiscal years.years immediately preceding the date the Company is required to prepare an accounting restatement.
Securities Trading Policy
To ensure alignment of the interests of our stockholders and executive officers, including our NEOs, as well as compliance with applicable securities laws, the Company’s Securities Trading Policy (i) prohibits all directors, officers and employees from engaging in transactions involving the Company’s stock based on material non-public information or communicating material non-public information to any person who uses that information to purchase or sell Company securities, and (ii) requires directors, executive officers (including the NEOs) and certain other designated employees (as identified in the Securities Trading Policy) to preclear any trading in Company securities, whether or not during an open trade window (except that such policies shall not apply to the exercise of options not involving a market sale to generate cash to pay the exercise price, the vesting of restricted stock or restricted stock unit awards or transactions in accordance with a previously established trading plan that meets SEC requirements).
The policy also prohibits the Company’s directors and executive officers from engaging in hedging and pledging activities, as more fully described in this Proxy Statement under the heading “Corporate Governance and Board Matters—No Hedging Policy.Governance.”
| ||||
|
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD
The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management, and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
Compensation Committee
Gary A. Cappeline, ChairmanCommittee Chairperson
Judd A. Gregg
Martin J. Lamb
Peter M. Wilver
| ||||
72 |
51
SUMMARY COMPENSATION TABLE FOR TABLE—FISCAL YEARS 2021, 2020, AND 2019
The following table sets forth the cash and non-cash compensation paid to our NEOs for the last three fiscal year ended September 30, 2020 and fiscal years ended September 30, 2019 and September 30, 2018, for those individuals who were also considered NEOs in those years.
| ||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Name & Principal Position | Fiscal Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | All Other Compensation ($)(6) | Total ($) | ||||||||||||||||||||||||||||||||
Ron C. Keating President, Chief Executive Officer and Director | | 2021 2020 2019 | | 876,010 862,176 827,367 | | — 661,894 — | | 11,947,480 1,529,995 1,174,002 | | 1,729,998 1,530,002 1,174,000 | | 1,003,625 941,112 — | | 103,279 132,135 116,016 | | 15,660,392 5,657,314 3,291,385 | ||||||||||||||||||||||||
Benedict J. Stas Executive Vice President, Chief Financial Officer and Treasurer | | 2021 2020 2019 | | 480,254 460,935 410,000 | | — 229,600 — | | 1,594,750 450,010 349,996 | | 500,003 450,002 350,000 | | 385,151 353,627 — | | 48,475 49,524 62,242 | | 3,008,633 1,993,698 1,172,238 | ||||||||||||||||||||||||
Rodney O. Aulick Executive Vice President, Integrated Solutions and Services Segment President | | 2021 2020 2019 | | 431,748 416,106 375,000 | | — 191,475 — | | 872,388 275,006 199,996 | | 325,004 275,000 200,000 | | 297,188 264,506 — | | 41,701 42,537 32,056 | | 1,968,029 1,464,630 807,052 | ||||||||||||||||||||||||
Hervé P. Fages Executive Vice President, Applied Product Technologies Segment President | | 2021 2020 2019 | | 443,411 439,427 233,192 | | — 206,400 — | | 847,380 250,005 250,004 | | 300,000 249,999 249,998 | | 363,253 279,349 — | | 44,014 31,925 105,262 | | 1,998,058 1,457,105 838,456 | ||||||||||||||||||||||||
Vincent Grieco* Executive Vice President, General Counsel and Secretary | 2021 | 366,422 | — | 747,399 | 200,003 | 251,881 | 35,565 | 1,602,270 | ||||||||||||||||||||||||||||||||
| * | Mr. Grieco was not a NEO in fiscal year 2020 or fiscal year 2019; accordingly, compensation information for Mr. Grieco for those fiscal years is not shown. |
| (1) | Base salary rates are set on a calendar year basis; however, amounts in this column are required to be reported on a fiscal year basis. Therefore, this column reflects salaries paid at the calendar year |
| (2) |
|
| (3) | The amounts in this column represent the aggregate grant date fair value of the following awards, as computed in accordance with ASC Topic 718, excluding the effect of estimated forfeitures: |
| (a) | Special PSUs and Special RSUs, granted on May 18, 2021, to each NEO. See the CD&A narrative for more information regarding the Special Awards. |
| (b) | RSUs granted under our regular-cycle LTIP during each of the fiscal years presented. |
Assumptions used in calculating the amounts in this column are set forth in Note 18 to the Consolidated Financial Statements in our Form 10-K. For the RSUs and the Special RSUs, the grant date fair value was computed based on the closing price per share of the Company’s common stock on the date of grant, multiplied by the number of shares awarded. Because the Special PSUs are subject to performance conditions, the grant date fair value shown is based on performance at target levels, which is the probable outcome of such conditions. The maximum payout for the Special PSUs is 100% of target. The potential maximum payouts for the Special PSUs would be: for Mr. Keating, $5,550,792; for Mr. Stas, $594,738; and for each of the other NEOs, $297,369.
| (4) | The amounts in this column represent the aggregate grant date fair value of stock option awards granted under our regular-cycle LTIP, calculated in accordance with ASC Topic 718. The values were calculated using a Black-Scholes option pricing model based on the assumptions set forth in Note 18 to the Consolidated Financial Statements in our Form 10-K. |
| (5) | Represents amounts earned by our NEOs under our fiscal year 2021 AIP. Payments under the fiscal year 2021 AIP are described above in the section of the |
|
|
For fiscal |
For Mr. Keating, total perquisites of $60,000, includingwhich include social club memberships ($30,000) and amounts for, an executive physical, charitable contributions, and financial planning services, plusand a tax gross-up related to these perquisites as applicable, of $25,881.34.$27,033.
For Mr. Stas, total perquisites of $25,000, including amounts forwhich include an executive physical, financial planning services, automobile, social club membership, and charitable contributions, plusand a tax gross-up related to these perquisites as applicable, of $9,256.43.
For Mr. Fages, total perquisites of $16,649, including amounts for an executive physical, financial planning services, automobile, parking expenses and health club membership, plus a tax gross-up related to these perquisites, as applicable, of $5,262.$7,037.
For Mr. Aulick, total perquisites of $20,000, including amounts forwhich include an executive physical, financial planning services, automobile, and health club membership, plusand a tax gross-up related to these perquisites as applicable, of $10,320.82.$10,320.
For Mr. Desai,Fages, total perquisites of $20,000, including amounts for$15,227, which include an executive physical, financial planning services, automobile, parking expenses, health club membership, and a tax gross-up related to these perquisites of $6,646.
For Mr. Grieco, total perquisites of $18,000, which include an executive physical, health club membership, social club memberships, and financial planning services, plusand a tax gross-up related to these perquisites as applicable, of $8,619.70.$5,203.
2022 Proxy Statement | ||||
73 |
In addition:
With respect to Mr. Keating: For fiscal 2020,year 2021, in addition to the items listed above, the amount set forth in the “All Other Compensation” column includes (i) matching contributions made to the 401(k) Plan of approximately $13,287$3,213 and (ii) matching contributions made to the Deferred Compensation Plan of approximately $32,967.$13,033.
With respect to Mr. Stas: For fiscal 2020,year 2021, in addition to the items listed above, the amount set forth in the “All Other Compensation” column includes (i) matching contributions made to the 401(k) Plan of approximately $7,284$8,856 and (ii) matching contributions made to the Deferred Compensation Plan of approximately $7,983.$7,582.
With respect to Mr. Fages:Aulick: For fiscal 2020,year 2021, in addition to the items listed above, the amount set forth in the “All Other Compensation” column includes (i) matching contributions made to the 401(k) Plan of approximately $8,379$3,981 and (ii) matching contributions made to the Deferred Compensation Plan of approximately $1,635.$7,400.
With respect to Mr. Aulick:Fages: For fiscal 2020,year 2021, in addition to the items listed above, the amount set forth in the “All Other Compensation” column includes (i) matching contributions made to the 401(k) Plan of approximately $6,270$10,728 and (ii) matching contributions made to the Deferred Compensation Plan of approximately $5,947.$11,413.
With respect to Mr. Desai:Grieco: For fiscal 2020,year 2021, in addition to the items listed above, the amount set forth in the “All Other Compensation” column includes (i) matching contributions made to the 401(k) Plan of approximately $7,341,$6,757 and (ii) relocation expenses of approximately $41,536 and (iii) matching contributions made to the Deferred Compensation Plan of approximately $2,847.$6,605.
| ||||
|
GRANTS OF PLAN-BASED AWARDS DURING AWARDS—FISCAL 2020YEAR 2021
The table below sets forth information regarding all grants of plan-based awards made to the NEOs during the fiscal year ended September 30, 2020.2021. For further information regarding these grants, see “Compensation Discussion and Analysis”the CD&A narrative above.
Date Grant | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | All Other Stock Awards (#)(2) | All Other Option Awards (#)(2) | Exercise Price of Option Awards ($) | Grant Date Fair Value of Stock and Option Awards ($)(3) | |||||||||||||||||||||||||||
Name | Threshold ($) | Target ($) | Max ($) | |||||||||||||||||||||||||||||
Ron C. Keating | — | 864,198 | — | |||||||||||||||||||||||||||||
| 2/14/20 | 64,748 | 252,684 | 23.63 | 3,059,997 | ||||||||||||||||||||||||||||
Benedict J. Stas | — | 324,726 | — | |||||||||||||||||||||||||||||
| 2/14/20 | 19,044 | 74,319 | 23.63 | 900,012 | ||||||||||||||||||||||||||||
Hervé P. Fages | — | 263,985 | — | — | ||||||||||||||||||||||||||||
| 2/14/20 | 10,580 | 41,288 | 23.63 | 500,004 | ||||||||||||||||||||||||||||
Rodney O. Aulick | — | — | 251,096 | — | — | — | — | — | ||||||||||||||||||||||||
| 2/14/20 | 11,638 | 45,417 | 23.63 | 550,006 | ||||||||||||||||||||||||||||
Snehal A. Desai | — | — | 185,774 | — | — | — | — | — | ||||||||||||||||||||||||
| 2/14/20 | 7,406 | 28,902 | 23.63 | 350,006 | ||||||||||||||||||||||||||||
|
|
|
|
Estimated Possible |
|
Estimated Future Incentive Plan Awards | All
| All
| Exercise
| Grant
| |||||||||||||||||||||||||||||||||||||||||
Name
| Type of
| Grant
| Threshold
| Target
| Max
|
| Threshold
| Target
| Max
| |||||||||||||||||||||||||||||||||||||||||
R.C. Keating | AIP | — | 218,750 | 875,000 | 1,750,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — | |||||||||||||||||||||||
| RSUs(3) | 2/16/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 69,871 |
|
|
|
|
|
| 1,730,006 | |||||||||||||||||||
| Options(3) | 2/16/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 192,693 | 24.76 | 1,729,998 | |||||||||||||||||||||
| Special PSUs(4) | 5/18/21 |
|
|
|
|
|
|
|
|
|
|
|
| 164,031 | 328,061 |
|
|
|
|
|
|
|
|
|
|
|
| 5,550,792 | |||||||||||||||||||||
| Special RSUs(4) | 5/18/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 164,031 |
|
|
|
|
|
| 4,666,682 | |||||||||||||||||||
B.J. Stas | AIP | — | 83,948 | 335,790 | 671,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — | |||||||||||||||||||||||
| RSUs(3) | 2/16/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,194 |
|
|
|
|
|
| 500,003 | |||||||||||||||||||
| Options(3) | 2/16/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 55,692 | 24.76 | 500,003 | |||||||||||||||||||||
| Special PSUs(4) | 5/18/21 |
|
|
|
|
|
|
|
|
|
|
|
| 17,575 | 35,150 |
|
|
|
|
|
|
|
|
|
|
|
| 594,738 | |||||||||||||||||||||
| Special RSUs(4) | 5/18/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 17,575 |
|
|
|
|
|
| 500,009 | |||||||||||||||||||
R.O. Aulick | AIP | — | 70,078 | 280,313 | 560,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — | |||||||||||||||||||||||
| RSUs(3) | 2/16/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 13,126 |
|
|
|
|
|
| 325,000 | |||||||||||||||||||
| Options(3) | 2/16/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 36,200 | 24.76 | 325,004 | |||||||||||||||||||||
| Special PSUs(4) | 5/18/21 |
|
|
|
|
|
|
|
|
|
|
|
| 8,788 | 17,575 |
|
|
|
|
|
|
|
|
|
|
|
| 297,369 | |||||||||||||||||||||
| Special RSUs(4) | 5/18/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,788 |
|
|
|
|
|
| 250,019 | |||||||||||||||||||
H.P. Fages | AIP | — | 71,971 | 287,885 | 575,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — | |||||||||||||||||||||||
| RSUs(3) | 2/16/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,116 |
|
|
|
|
|
| 299,992 | |||||||||||||||||||
| Options(3) | 2/16/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 33,415 | 24.76 | 300,000 | |||||||||||||||||||||
| Special PSUs(4) | 5/18/21 |
|
|
|
|
|
|
|
|
|
|
|
| 8,788 | 17,575 |
|
|
|
|
|
|
|
|
|
|
|
| 297,369 | |||||||||||||||||||||
| Special RSUs(4) | 5/18/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,788 |
|
|
|
|
|
| 250,019 | |||||||||||||||||||
V. Grieco | AIP | — | 54,900 | 219,600 | 439,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — | |||||||||||||||||||||||
| RSUs(3) | 2/16/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,078 |
|
|
|
|
|
| 200,011 | |||||||||||||||||||
| Options(3) | 2/16/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 22,277 | 24.76 | 200,003 | |||||||||||||||||||||
| Special PSUs(4) | 5/18/21 |
|
|
|
|
|
|
|
|
|
|
|
| 8,788 | 17,575 |
|
|
|
|
|
|
|
|
|
|
|
| 297,369 | |||||||||||||||||||||
|
| Special RSUs(4) | 5/18/21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,788 |
|
|
|
|
|
| 250,019 | |||||||||||||||||||
| (1) | These |
2022 Proxy Statement | ||||
75 |
| (2) |
|
The amounts in this column |
| (3) | Represents regular-cycle long-term incentive awards made under made under the 2017 Plan. These awards vest over a four-year period, with 25% of the awards vesting on each of the first, second, third, and fourth anniversaries of the grant date. See the section of the CD&A titled “—Long-Term Incentives” above. |
| (4) | Represents special long-term incentive awards made under the 2017 Plan. Special PSUs will be earned incrementally in |
We have entered into employment agreements with each of our NEOs and believe these agreements have helped create stability for our management team. These agreements provide for the basic terms of their employment, including the details of their compensation as well as certain severance and change-in-controlchange in control benefits. The material terms of these agreements are summarized below and in the section titled “—Payments Upon Certain Events of Termination or Change-in-Control.Change in Control.”
President, Chief Executive Officer and Director (Ron C. Keating)
The Company entered into an amended and restated employment agreement with Mr. Keating on November 25, 2019. This amended and restated employment agreement replaced the prior employment agreement entered into on September 8, 2014, which had been amended twice. As amended and restated, Mr. Keating’s employment agreement does not provide for a fixed term of employment. The amended and restated employment agreement provides that Mr. Keating shall receive a base salary of $827,367 per year, subject to increase at the discretion ofwhich will be reviewed annually and may be adjusted upward (but not downward) by the Board of Directors or(or a committee thereof,thereof) in its discretion, and shall be eligible to receive a target annual bonus equal to 100% of his base salary, with the actual bonus amount, if any, to be based on the Company’s actual performance relative to theone or more performance targets established by the Board or a committee thereof.goals. The annual bonus may be paid in cash or in equity securities, which equity securities may be conditioned on satisfactionsubject to vesting restrictions, provided that any vesting period may not extend beyond the 15-month period following the end of certain additional vesting requirements ifthe fiscal year to which the annual bonus relates and the value of the equity securities awarded in lieu of the annual bonus will include a
| ||||
|
bonus premium ofequal to no less than 20% of the earned annual bonus amount is provided upon vesting.bonus. In addition, Mr. Keating is entitled to reimbursement for commercially reasonable out-of-pocket business expenses incurred in performing his duties in accordance with the expense reimbursement policy of the Company in effect from time to time and is eligible to participate in all health and other group insurance and other employee and fringe benefit plans programs for whichof the Company on the same basis as other senior executives of the Company are generally eligible.Company. Mr. Keating’s amended and restated employment agreement provides for severance payments and benefits upon certain terminations of employment, as described below under “—Payments Upon Certain Events of Termination or Change-in-Control.Change in Control.” The amended and restated employment agreement also includes restrictive covenants providing for non-competition, non-solicitation of employees and non-interference with business relationships, in each case, during employment and for two years thereafter, mutual non-disparagement, and perpetual non-disclosure of confidential information.
Executive Vice President, Chief Financial Officer and Treasurer (Benedict J. Stas)
The Company entered into an amended and restated employment agreement with Mr. Stas on November 25, 2019. This amended and restated employment agreement replaced the prior employment agreement entered into on February 26, 2015, which had been amended twice. As amended and restated, Mr. Stas’ employment agreement does not provide for a fixed term of employment. The amended and restated employment agreement provides that Mr. Stas shall receive a base salary of $410,000 subject to increase at the discretion ofper year, which will be reviewed annually and may be adjusted upward (but not downward) by the Board of Directors or(or a committee thereof,thereof) in its discretion, and shall be eligible to receive a target annual bonus equal to 70% of his base salary, with the actual bonus amount, if any, to be based on the Company’s actual performance relative to theone or more performance targets established by the Board or a committee thereof.goals. The annual bonus may be paid in cash or in equity securities, which equity securities may be conditioned on satisfactionsubject to vesting restrictions, provided that any vesting period may not extend beyond the 15-month period following the
| ||||
76 |
end of certain additional vesting requirements ifthe fiscal year to which the annual bonus relates and the value of the equity securities awarded in lieu of the annual bonus will include a bonus premium ofequal to no less than 20% of the earned annual bonus amount is provided upon vesting.bonus. In addition, Mr. Stas would beis entitled to reimbursement for commercially reasonable out-of-pocket business expenses incurred in performing his duties in accordance with the expense reimbursement policy of the Company in effect from time to time and is eligible to participate in all health and other group insurance and other employee benefit plans and programs for whichof the Company on the same basis as other executives of the Company are generally eligible.Company. Mr. Stas’ amended and restated employment agreement also provides for severance payments and benefits upon certain terminations of employment, as described below under “—Payments Upon Certain Events of Termination or Change-in-Control.Change in Control.” The amended and restated employment agreement also includes restrictive covenants providing for non-competition, non-solicitation of employees and non-interference with business relationships, in each case during employment and for one year thereafter, non-disparagement, and perpetual non-disclosure of confidential information.
Executive Vice President, Applied Product Technologies Segment President (Hervé P. Fages)
On January 31, 2019, the Company entered into an employment agreement with Mr. Fages. Mr. Fages’ employment agreement provides that his initial employment term will expire on January 31, 2022, subject thereafter to automatic one-year extensions unless either the Company or Mr. Fages provides at least 30 days’ written notice to the other of intent not to renew the term. The employment agreement provides that Mr. Fages shall receive an initial annual base salary of $430,000, subject to increase at the discretion of the Board of Directors or a committee thereof, and shall be eligible to receive a target annual bonus equal to 60% of his base salary, with the actual bonus amount, if any, to be based on the Company’s actual performance relative to the performance targets established by the Board or a committee thereof. The annual bonus may be paid in cash or in equity, which equity may be conditioned on satisfaction of certain additional vesting requirements if a bonus premium of no less than 20% of the earned annual bonus amount is provided upon vesting. In addition, Mr. Fages is entitled to reimbursement for reasonable out-of-pocket business expenses incurred in performing his duties and is eligible to participate in all benefit programs for which other executives of the Company are generally eligible. Mr. Fages’ employment agreement also provides for severance upon certain terminations of employment, as described below under “—Payments Upon Certain Events of Termination or Change-in-Control.” The employment agreement includes restrictive covenants providing for non-competition, non-solicitation of employees and non-interference with business relationships, in each case during employment and for two years thereafter, non-disparagement, and perpetual non-disclosure of confidential information.
| ||||
|
Executive Vice President, Integrated Solutions and Services Segment President (Rodney O. Aulick)
On April 14, 2014, theThe Company entered into an employment agreement with Mr. Aulick on April 14, 2014, which agreement was amended effective ason each of September 6, 2017 and June 22, 2018. Mr. Aulick’s employment agreement provides that his initial employment term commenced on April 14, 2014 and expired on April 14, 2017, but is subject thereafter to automatic one-year extensions unless either the Company or Mr. Aulick provides at least 30 days’ written notice to the other party of intentits or his intention not to renewfurther extend the term.employment period. The employment agreement provides that Mr. Aulick shall receive an initial annuala base salary of $250,000 subject to increase at the discretion ofper year, which will be reviewed annually and may be adjusted upward (but not downward) by the Board of Directors or(or a committee thereof,thereof) in its discretion, and shall be eligible to receive an initial target annual bonus equal to 60% of his base salary, with the actual bonus amount, if any, to be based on the Company’s actual performance relative to theone or more performance targets established by the Board or a committee thereof.goals. The annual bonus may be paid in cash or in equity securities, which equity securities may be conditioned on satisfactionsubject to vesting restrictions, provided that any vesting period may not exceed the 15-month period following the end of certain additional vesting requirements ifthe fiscal year to which the annual bonus relates and the value of the equity securities awarded in lieu of the annual bonus will include a bonus premium ofequal to no less than 20% of the earned actual bonus amount is provided upon vesting.annual bonus. In addition, in accordance with the Company’s expense reimbursement policy in effect from time to time, Mr. Aulick is entitled to reimbursement for commercially reasonable out-of-pocket business expenses incurred in performing his duties in accordance with the expense reimbursement policy of the Company in effect from time to time and is eligible to participate in all health and other group insurance and other employee benefit plans and programs for whichof the Company on the same basis as other senior executives of the Company are generally eligible.Company. Mr. Aulick’s employment agreement also provides for severance payments and benefits upon certain terminations of employment, as described below under “—Payments uponUpon Certain Events of Termination or Change-in-Control.Change in Control.” The employment agreement includes restrictive covenants providing for non-competition, non-solicitation of employees and non-interference with business relationships, in each case during employment and for one year thereafter, non-disparagement of the Company, and perpetual non-disclosure of confidential information.
Executive Vice President, Chief Growth Officer (Snehal A. Desai)Applied Product Technologies Segment President (Hervé P. Fages)
On January 15, 2018, theThe Company entered into an employment agreement with Mr. Desai, which agreement was amended effective as of June 22, 2018.Fages on January 31, 2019. Mr. Desai’sFages’ employment agreement provides that his initial employment term commenced on January 15, 2018 and will expire on January 15, 2021,31, 2022, but is subject thereafter to automatic one-year extensions unless either the Company or Mr. DesaiFages provides at least 30 days’ written notice to the other party of intentits or his intention not to renewfurther extend the term. However, the Company may, at any time and in its sole discretion, terminate the Employment Agreement if Mr. Desai’s previous employer, Dow Chemical Company, or an affiliate thereof, seeks to enforce any non-compete or confidentiality provisions against Mr. Desai or the Company (a “Dow Claim”).employment period. The employment agreement provides that Mr. DesaiFages shall receive an initial annuala base salary of $340,000, subject to increase at the discretion of$430,000 per year, which will be reviewed annually and may be adjusted upward (but not downward) by the Board of Directors or(or a committee thereof,thereof) in its discretion, and shall be eligible to receive a target annual bonus equal to 60% of his base salary, with the actual bonus amount, if any, to be based on the Company’s actual performance relative to one or more performance goals. The annual bonus may be paid in cash or in equity securities, which equity securities may be subject to vesting restrictions, provided that any vesting period may not exceed 15 months from the end of the relevant fiscal year and Mr. Fages shall be entitled to a bonus premium of not less than 20% of the annual bonus. In addition, Mr. Fages is entitled to reimbursement for commercially reasonable out-of-pocket business expenses incurred in performing his duties in accordance with the expense reimbursement policy of the Company and is eligible to participate in all health and other group insurance and other employee benefit plans and programs of the Company on the same basis as other executives of the Company. Mr. Fages’ employment agreement also provides for severance payments and benefits upon certain terminations of employment, as described below
2022 Proxy Statement | ||||
77 |
under “—Payments Upon Certain Events of Termination or Change in Control.” The employment agreement includes restrictive covenants providing for non-competition, non-solicitation of employees and non-interference with business relationships, in each case during employment and for two years thereafter, non-disparagement, and perpetual non-disclosure of confidential information.
Executive Vice President, General Counsel and Secretary (Vincent Grieco)
The Company entered into an employment agreement with Mr. Grieco on September 6, 2017, which agreement was amended on June 22, 2018. Mr. Grieco’s employment agreement provides that his initial employment term expired on September 6, 2020, but is subject to automatic one-year extensions unless either the Company or Mr. Grieco provides at least 30 days’ written notice to the other party of its or his intention not to further extend the employment period. The employment agreement provides that Mr. Grieco shall receive a base salary of $250,000 per year, which will be reviewed annually and may be adjusted upward (but not downward) by the Board (or a committee thereof) in its discretion, and shall be eligible to receive an initial target annual bonus equal to 50% of his base salary, with the actual bonus amount, if any, to be based on the Company’s actual performance relative to theone or more performance targets established by the Board or a committee thereof.goals. The annual bonus may be paid in cash or in equity securities, which equity securities may be conditioned on satisfactionsubject to vesting restrictions, provided that any vesting period may not exceed the 15-month period following the end of certain additional vesting requirements ifthe fiscal year to which the annual bonus relates and the value of the equity securities awarded in lieu of the annual bonus will include a bonus premium ofequal to no less than 20% of the earned actual bonus amount is provided upon vesting.annual bonus. In addition, Mr. DesaiGrieco is entitled to reimbursement for commercially reasonable out-of-pocket business expenses incurred in performing his duties in accordance with the expense reimbursement policy of the Company in effect from time to time and is eligible to participate in all health and other group insurance and other employee benefit plans and programs for whichof the Company on the same basis as other executives of the Company are generally eligible.Company. Mr. Desai’sGrieco’s employment agreement also provides for severance payments and benefits upon certain terminations of employment, as described below under “—Payments Upon Certain Events of Termination or Change-in-Control.Change in Control.” The employment agreement includes restrictive covenants providing for non-competition, non-solicitation of employees and non-interference with business relationships, in each case during employment and for one year thereafter, non-disparagement of the Company, and perpetual non-disclosure of confidential information.
| ||||
78 |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END—FISCAL YEAR 2021
This table summarizes the long-term equity-based awards held by our NEOs that were outstanding as of September 30, 2021 (our fiscal year-end).
| Option Awards |
| Stock Awards | ||||||||||||||||||||||||||||||||||
Name | Number of Options (#) | Number of Securities Underlying Unexercised Options (#) Un-exercisable | Option Price | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) (1) | Equity incentive plan awards; number of unearned shares, units or other rights that have not vested (#) | Equity incentive plan awards; market or payout value of unearned shares, units, or other rights that have not vested ($) | ||||||||||||||||||||||||||||
R.C. Keating |
| 1,243,581(2) |
|
| — |
|
| 4.64 |
|
| 12/15/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| 29,653(3) |
|
| — |
|
| 7.42 |
|
| 10/28/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| 221,148(4) |
|
| 73,716(4) |
|
| 20.88 |
|
| 4/2/2028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| 152,467(5) |
|
| 152,468(5) |
|
| 12.67 |
|
| 2/14/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| 63,171(6) |
|
| 189,513(6) |
|
| 23.63 |
|
| 2/14/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| — |
|
| 192,693(7) |
|
| 24.76 |
|
| 2/16/2031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 46,330(8) |
|
| 1,740,155 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 48,561(9) |
|
| 1,823,951 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 69,871(10) |
|
| 2,624,355 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 164,031(11) |
|
| 6,161,004 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 164,031(12) |
|
| 6,161,004 |
| |||||||||
B.J. Stas |
| 200,000(13) |
|
| — |
|
| 4.64 |
|
| 4/6/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| 8,464(3) |
|
| — |
|
| 7.42 |
|
| 10/28/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| 59,054(4) |
|
| 19,685(4) |
|
| 20.88 |
|
| 4/2/2028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| 45,454(5) |
|
| 45,455(5) |
|
| 12.67 |
|
| 2/14/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| 18,579(6) |
|
| 55,740(6) |
|
| 23.63 |
|
| 2/14/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| — |
|
| 55,692(7) |
|
| 24.76 |
|
| 2/16/2031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 13,812(8) |
|
| 518,779 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 14,283(9) |
|
| 536,469 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,194(10) |
|
| 758,487 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 17,575(11) |
|
| 660,117 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 17,575(12) |
|
| 660,117 |
| |||||||||
R.O. Aulick |
| 37,297(4) |
|
| 12,433(4) |
|
| 20.88 |
|
| 4/2/2028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| — |
|
| 25,974(5) |
|
| 12.67 |
|
| 2/14/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| 11,354(6) |
|
| 34,063(6) |
|
| 23.63 |
|
| 2/14/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| — |
|
| 36,200(7) |
|
| 24.76 |
|
| 2/16/2031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,893(8) |
|
| 296,461 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,729(9) |
|
| 327,861 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 13,126(10) |
|
| 493,013 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,788(11) |
|
| 330,077 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,788(12) |
|
| 330,077 |
| |||||||||
2022 Proxy Statement | ||||
|
OUTSTANDING EQUITY AWARDS AS OF SEPTEMBER 30, 2020
The following table sets forth certain information with respect to outstanding options and RSUs held by each of our NEOs on September 30, 2020.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||
Name | Number of Options | Number of Securities Underlying Unexercised Options Un-exercisable | Option Price | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested | Market Value of Shares or Units of Stock that Have Not Vested ($) (1) | ||||||||||||||||||||||
Ron C. Keating | 2,049,469 | — | 4.64 | 12/15/2024 | ||||||||||||||||||||||||
| 29,653 | — | 7.42 | 10/28/2026 | |||||||||||||||||||||||||
| 147,432 | 147,432 | (2) | 20.88 | 4/2/2028 | ||||||||||||||||||||||||
| 76,233 | 228,702 | (3) | 12.67 | 2/14/2029 | ||||||||||||||||||||||||
| — | 252,684 | (4) | 23.63 | 2/14/2030 | ||||||||||||||||||||||||
| 69,495(5) | 1,474,684 | |||||||||||||||||||||||||||
| 64,748(6) | 1,373,953 | |||||||||||||||||||||||||||
Benedict J. Stas | 619,437 | — | 4.64 | 4/6/2025 | ||||||||||||||||||||||||
| 8,464 | — | 7.42 | 10/28/2026 | |||||||||||||||||||||||||
| 39,369 | 39,370 | (2) | 20.88 | 4/2/2028 | ||||||||||||||||||||||||
| 22,727 | 68,182 | (3) | 12.67 | 2/14/2029 | ||||||||||||||||||||||||
| — | 74,319 | (4) | 23.63 | 2/14/2030 | ||||||||||||||||||||||||
| 20,718(5) | 439,636 | |||||||||||||||||||||||||||
| 19,044(6) | 404,114 | |||||||||||||||||||||||||||
Hervé P. Fages | 14,937 | 44,814 | (7) | 13.91 | 3/1/2029 | |||||||||||||||||||||||
| — | 41,288 | (4) | 23.63 | 2/14/2030 | ||||||||||||||||||||||||
| 13,480(8) | 286,046 | |||||||||||||||||||||||||||
| 10,580(6) | 224,508 | |||||||||||||||||||||||||||
Rodney O. Aulick | 224,141 | — | 4.64 | 3/6/2024 | ||||||||||||||||||||||||
| 24,865 | 24,865 | (2) | 20.88 | 4/2/2028 | ||||||||||||||||||||||||
| 12,987 | 38,961 | (3) | 12.67 | 2/14/2029 | ||||||||||||||||||||||||
| — | 45,417 | (4) | 23.63 | 2/14/2030 | ||||||||||||||||||||||||
| 11,839(5) | 251,224 | |||||||||||||||||||||||||||
| 11,638(6) | 246,958 | |||||||||||||||||||||||||||
Snehal A. Desai | 17,318 | 17,318 | (9) | 24.25 | 1/16/2028 | |||||||||||||||||||||||
| 16,639 | 16,640 | (2) | 20.88 | 4/2/2028 | ||||||||||||||||||||||||
| 9,740 | 29,221 | (3) | 12.67 | 2/14/2029 | ||||||||||||||||||||||||
| — | 28,902 | (4) | 23.63 | 2/14/2030 | ||||||||||||||||||||||||
| 8,880(5) | 188,434 | |||||||||||||||||||||||||||
| 7,406(6) | 157,155 | |||||||||||||||||||||||||||
| Option Awards |
| Stock Awards | ||||||||||||||||||||||||||||||||||
Name | Number of Options (#) | Number of Securities Underlying Unexercised Options (#) Un-exercisable | Option Price | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) (1) | Equity incentive plan awards; number of unearned shares, units or other rights that have not vested (#) | Equity incentive plan awards; market or payout value of unearned shares, units, or other rights that have not vested ($) | ||||||||||||||||||||||||||||
H.P. Fages |
| 29,875(14) |
|
| 29,876(14) |
|
| 13.91 |
|
| 3/1/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| 10,322(6) |
|
| 30,966(6) |
|
| 23.63 |
|
| 2/14/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| — |
|
| 33,415(7) |
|
| 24.76 |
|
| 2/16/2031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,987(8) |
|
| 337,552 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 7,935(9) |
|
| 298,039 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,116(10) |
|
| 455,077 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,788(11) |
|
| 330,077 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,788(12) |
|
| 330,077 |
| |||||||||
V. Grieco |
| 25,084(15) |
|
| — |
|
| 7.42 |
|
| 12/19/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| 24,959(4) |
|
| 8,320(4) |
|
| 20.88 |
|
| 4/2/2028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| 17,208(5) |
|
| 17,208(5) |
|
| 12.67 |
|
| 2/14/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| 7,225(6) |
|
| 21,677(6) |
|
| 23.63 |
|
| 2/14/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| — |
|
| 22,277(7) |
|
| 24.76 |
|
| 2/16/2031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,229(8) |
|
| 196,401 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,555(9) |
|
| 208,646 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,078(10) |
|
| 303,410 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,788(11) |
|
| 330,077 |
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,788(12) |
|
| 330,077 |
| |||||||||
| (1) | Values in |
| (2) | These stock options |
| (3) | These stock options vested on October 28, 2016. |
| (4) | These stock options vested in four equal installments on January 1st of 2019, 2020, 2021, and 2022. |
| (5) | These stock options vested or will vest in four equal installments on January 1st of 2020, 2021, 2022, and 2023. |
| (6) | These stock options vested or will vest in four equal installments on January 1st of 2021, 2022, 2023, and 2024. |
| (7) | These stock options vested or will vest in four equal installments on January 1st of 2022, 2023, 2024, and 2025. |
| (8) | These RSUs vested or will vest in two equal installments on January 1st of 2022 and 2023. |
| (9) | These RSUs vested or will vest in three |
| (10) | These RSUs vested or will vest in four equal installments on January 1st of 2022, 2023, 2024, and 2025. |
| (11) | These Special RSUs will vest in three equal installments on May 18th of 2022, 2023, and 2024. |
| (12) | Represents the number of shares that may be earned under the Special PSUs, assuming threshold performance for each of the tranches in the three-year performance period ending May 18, 2024. These awards generally cliff vest, to the extent earned, after third anniversary of the grant date of the award. |
| (13) | These stock options vested in four equal installments on March 30th of 2016, 2017, 2018, and 2019. |
| (14) | These stock options vested or will vest in four equal installments on March 1st of 2020, 2021, |
| (15) | These stock options vested in four equal installments on December 19th of 2017, 2018, 2019, and 2020. |
| ||||
|
OPTION EXERCISES AND STOCK VESTED—FISCAL YEAR 2021
The following table provides information related to (1) stock options exercised by our NEOs during fiscal year 2021, including the number of shares acquired upon exercise and the value realized, and (2) the number of shares acquired upon the vesting of RSU awards in fiscal year 2021, and the value realized before payment of any applicable withholding tax or broker commissions.
| Option Awards |
| Stock Awards | ||||||||||||||||||
Name | Number of Shares (#) | Value Realized on ($)(1) |
| Number of Shares (#) | Value Realized on ($)(2) | |||||||||||||||
Ron C. Keating |
| 805,888 |
|
| 17,047,602 |
|
| 39,352 |
|
| 1,061,717 |
| ||||||||
Benedict J. Stas |
| 419,437 |
|
| 9,213,439 |
|
| 11,667 |
|
| 314,776 |
| ||||||||
Rodney O. Aulick |
| 250,115 |
|
| 5,161,848 |
|
| 6,855 |
|
| 184,948 |
| ||||||||
Hervé P. Fages |
| — |
|
| — |
|
| 7,138 |
|
| 181,665 |
| ||||||||
Vincent Grieco |
| 141,848 |
|
| 3,093,986 |
|
| 4,466 |
|
| 120,493 |
| ||||||||
|
|
|
|
|
|
NONQUALIFIED DEFERRED COMPENSATION FOR COMPENSATION—FISCAL 2020YEAR 2021
The following table provides information with respect to the Deferred Compensation Plan.
Name | Executive Contributions in Last FY ($)(1) | Company Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(4) | |||||||||||||||||||||||||||||||||||
Ron C. Keating | 55,769 | 32,967 | 7,671 | — | 635,553 |
| 134,584 |
| 13,033 |
| 187,275 |
| 281,053 |
| 685,861 | ||||||||||||||||||||||||||||||
Benedict J. Stas | 29,870 | 7,983 | 5,102 | — | 314,890 |
| 53,527 |
| 7,582 |
| 47,308 |
| — |
| 419,132 | ||||||||||||||||||||||||||||||
Rodney O. Aulick |
| 82,834 |
| 7,400 |
| 101,351 |
| — |
| 595,341 | |||||||||||||||||||||||||||||||||||
Hervé P. Fages | 34,119 | 1,635 | 1,794 | — | 36,266 |
| 100,194 |
| 11,413 |
| 11,165 |
| — |
| 153,637 | ||||||||||||||||||||||||||||||
Rodney O. Aulick | 44,928 | 5,947 | 6,817 | — | 406,186 | ||||||||||||||||||||||||||||||||||||||||
Snehal A. Desai | 51,837 | 2,847 | 3,179 | — | 291,809 | ||||||||||||||||||||||||||||||||||||||||
Vincent Grieco |
| 55,742 |
| 6,605 |
| 40,528 |
| — |
| 206,984 | |||||||||||||||||||||||||||||||||||
| (1) | This amount reflects a portion of salary that the indicated executive elected to defer during fiscal |
| (2) | The full amounts reported as Company contributions have been reported in the “All Other Compensation” column in the Summary Compensation |
| (3) | These amounts include earnings, dividends, and interest provided on account balances, including the change in value of the underlying investments in which the NEOs are deemed to be invested. These amounts are not reported in the Summary Compensation Table—Fiscal Years 2021, 2020, and 2019. |
| (4) | These amounts represent each NEO’s aggregate account balance at September 30, 2021. The amounts include Company contributions, which are also reported in the “All Other Compensation” column of the Summary Compensation Table—Fiscal Years 2021, 2020, and 2019. The portion of these aggregate account balances that was previously reported as compensation in the Summary Compensation Table for fiscal years 2019, 2020, and 2021 are as follows: Mr. Keating ($79,142); Mr. Stas ($23,665); Mr. Aulick ($19,347); Mr. Fages (13,048); and Mr. Grieco ($6,605). |
2022 Proxy Statement | ||||
81 |
Our NEOs are eligible to participate in the Deferred Compensation Plan, which benefits only a select group of United States management employees. The Deferred Compensation Plan uses a tracking account for each participant who elects to defer income.
The participant selects investment funds from a broad range of options. Earnings and losses on each account are determined based on the performance of the investment funds selected by the participant. A participant may elect to defer up to 50% of his annual base compensation and up to 90% of his bonus awarded pursuant to the AIP as compensation deferrals. The NEOs are 100% vested with respect to both employee contributions and their employer contributions. Distributions under the Deferred Compensation Plan may be made as a single lump sum, on a fixed date or schedule, or in equal installments over periods of (x) five, 10 or 15 years or (y) two, three, four or five years, depending on the distribution’s triggering event and the participant’s elections, in compliance with the election and timing rules of Code Section 409A.
PAYMENTS UPON CERTAIN EVENTS OF TERMINATION OR CHANGE-IN-CONTROLCHANGE IN CONTROL
As discussed below, each of our NEOs may receive various forms of compensation or benefits in the event of termination of his employment under certain circumstances.
Accrued Benefits Payable Upon Termination
InPursuant to their employment agreements, in the event of termination of employment for any reason, each of our NEOs is generally are entitled to the following compensation earned during his term of employment:payments and benefits:
Earned but unpaid salary to be paid inthrough the ordinary course;termination date;
Incentive compensation earnedEarned but unpaid annual incentive compensation pertaining to a fiscal year completed prior fiscal year;to the termination date;
| ||||
|
Unused vacation days to be paid out at a daily rate based on histhe NEO’s per-business-day base salary;salary rate;
Vested benefits, if any, in accordance with applicablethe terms of applicable Company arrangements; and
Unreimbursed expenses.Any unreimbursed expenses (collectively, the “Accrued Amounts”).
However, in the event the executive’sNEO’s employment has been terminated by the Company for Cause (as defined below), the executive shall forfeit any annual incentive compensation amounts earned in respect of a prior fiscal year, to the extent not yet paid or due to be paid.paid, shall be forfeited.
Severance Benefits Payable Upon Certain Involuntary Terminations
CertainPursuant to their employment agreements, in addition to the Accrued Amounts, certain severance payments and benefits may be payable to the executiveeach of our NEOs in the event (i) the Company terminates his employment other than for Cause (as well as(including, in the case of Messrs. Aulick, Fages, and Grieco, termination by the Company due to a non-renewal of the NEO’s employment agreement), death or Disability (pursuant to the terms of the executive’s agreement)equity award agreements); or (ii) the executive’s employment terminates due to the executive’s death or Disability; or (iii) the executiveNEO terminates his employment for Good Reason. Definitions of the terms “Cause,” “Disability” and “Good Reason” are provided below under “—Definitions for Triggering Events.”
The severance payments and benefits, other than in connection with a Change in Control (described below) generally consist of:
Base salary continuation for a period of 24 months in the case of Mr. Keating, and 12 months in the case of allthe other executives,NEOs, which is to be paid in equal installments on the Company’s regular payroll dates;
ProA pro rata portion of the annual incentive compensation that would have been payable to the executiveNEO based on the Company’s actual performance in the year of termination (the “Prorated Bonus”), which is to be paid at the same time such compensation is paid to the Company’s other senior executives;
Medical and dental benefits continuation for a maximum of 12 months; and
Reimbursement for outplacement assistance for six months up to a maximum of $15,000.
These severance payments and benefits are conditioned on the executive’s execution of a general release in favor of the Company, which has become irrevocable, and the executive’s continuing compliance with the restrictive covenants contained in his employment agreement.
| ||||
82 |
Additionally, each of Messrs. Keating and Stas is eligible to receive enhanced severance payments and benefits including in the event his employment is terminated within two years of a “Change-in-Control,“Change in Control,” as reflected including: (i) a lump sum payment in an amount equal to the sum of (x) the relevant multiple of his base salary (2.5x times for Mr. Keating; 2x for Mr. Stas), plus (y) the relevant multiple of his target annual incentive compensation opportunity (2.5x for Mr. Keating; 2x for Mr. Stas), plus (z) a pro rata portion of his target annual incentive compensation opportunity in the tables below under “—Estimated Paymentsyear of termination; and Benefits.” These enhancements were adopted(ii) the full vesting of any outstanding unvested equity awards issued by the Company to the NEO (in the case of the Special PSU awards, subject to the attainment of the applicable performance goals). Such enhancements of base salary continuation and annual incentive compensation would be paid in November 2019lieu of the base salary continuation and incorporated intoannual incentive compensation payments described above.
These severance payments and benefits are conditioned upon (i) the amendedNEO’s continued compliance with his obligations pursuant to the restrictive covenants (including confidentiality, non-competition, non-solicitation, and restatedinterference with business relationships, among others), contained in his employment agreement, and (ii) the NEO’s execution, delivery, and non-revocation of a valid and enforceable general release of claims in favor of the Company within 45 days after the termination date. Pursuant to the employment agreements, for eachin the event of Messrs. Keatingany breach or threat of breach of the restrictive covenants contained therein, the Company will be entitled to an immediate injunction and Stas, based on a reviewrestraining order to prevent such breach and/or threatened breach and/or continued breach, without having to prove damages, in addition to any other remedies to which the Company may be entitled at law or in equity, including, without limitation, the obligation of market practices.the NEO to return any portion of the severance payments paid by the Company to the NEO.
Definitions for Triggering Events. The terms “Cause,” “Disability,” and “Good Reason” used in the NEOs’ employment agreements and equity award agreements generally are defined as set forth below.
“Cause,” as used in the employment agreement and award agreements, means the executiveNEO has engaged in: fraud;in any of the following: (i) commission of an act which constitutes common law fraud, embezzlement or a felony;felony, an act of moral turpitude; misconductturpitude, or of any tortious or unlawful act causing material harm to the Company’s business;business, standing or reputation of the Company or any of its affiliates, (ii) gross negligence on the part of the NEO in performingthe performance of his duties; aduties hereunder, (iii) breach of his duty of loyalty or care to the Company;Company, (iv) other misconduct that is materially detrimental to the Company or any of its affiliates, or (v) ongoing and deliberate refusal or failure to perform the NEO’s duties as contemplated by his duties,employment agreement or any other agreement with or for the benefit of the Company to which he hasthe NEO is a party or by which the NEO is bound, which in the case of a failure that is capable of being cured, is not satisfactorily cured.cured to the reasonable satisfaction of the Board within 30 days after the NEO receives from the Company written notice of such failure, provided that for the avoidance of doubt a failure to meet performance expectations shall not in of itself constitute Cause.
“Disability,” as used in the employment agreements, means the executiveNEO is entitled to and has begun to receive long-term disability benefits under the Company’s long-term disability plan.plan of the Company in which the NEO participates, or, if there is no such plan, the NEO’s inability, due to physical or mental ill health, to perform the essential functions of the NEO’s job, with or without a reasonable accommodation, for 180 days out of any 270 day consecutive day period.
“Disability,” as used in the award agreements, means a permanent and total disability as defined in Code Section 22(e)(3). A determination of Disability may be made by a physician selected or approved by the Compensation Committee and, in this respect, the NEO shall submit to any reasonable examination(s) required by such physician upon request. Notwithstanding the foregoing, in the event any award is considered to be “deferred compensation” as that term is defined under Section 409A of the Code and the terms of the award are such that the definition of “disability” is required to comply with the requirements of Section 409A of the Code then, in lieu of the foregoing definition, the definition of “Disability” for purposes of such award shall mean, with respect to a NEO, that the NEO is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.
“Good Reason,” as used in the employment agreements, means one of the following has occurred: (i) a material and adverse change in the executive’sNEO’s duties or responsibilities as an employee of the Company, or(ii) a breach by the Company of a material term of the executive’sNEO’s employment agreement by the Company or (iii) in the case of Messrs. Keating,
2022 Proxy Statement | ||||
83 |
Stas and Stas,Aulick, a relocation of the executive’sNEO’s principal place of employment without his consent, which, in the case of each case,of (i)-(iii), has not been cured by the Company.Company within 30 days of the NEO providing written notice to the Company of his termination of employment for Good Reason. However, except in the case of Mr. Keating, “Good Reason” shall not exist pursuant to subpart (i) above if the Company has been acquired in a strategic transaction and the executiveMr. Keating continues to report to the most senior executive of the division, unit or sector of the post-transaction organization in which the Company’s business is resident, or to an individual morewho is senior thanto such senior executive.
As used in the award agreements for each of the NEOs and in the employment agreements of Messrs. Keating and Stas, the term “Change in Control” is defined with reference to the 2017 Plan. Under this plan, a Change in Control is deemed to have occurred upon the occurrence of any of the events listed below.
An acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any person, immediately after which such person first acquires “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined voting power of the Company’s then-outstanding Voting Securities; provided, however, that the acquisition of Voting Securities in a Non-Control Acquisition (as defined below) shall not constitute a Change in Control. A “Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other person the majority of the voting power, voting equity securities or equity interest of which is owned, directly or indirectly, by the Company (for purposes of this definition, a “Related Entity”), (ii) the Company or any Related Entity or (iii) any person in connection with a Non-Control Transaction (as hereinafter below);
The individuals who are members of the Board (the “Incumbent Board”), cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the election, or nomination for election by the Company’s common stockholders, of any new director, was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any Proxy Contest;
The consummation of:
(i) A merger, consolidation, or reorganization (x) with or into the Company or (y) in which securities of the Company are issued (a “Merger”), unless such Merger is a Non-Control Transaction. A “Non-Control Transaction” shall mean a Merger in which:
(A) the stockholders of the Company immediately before such Merger own directly or indirectly immediately following such Merger at least a majority of the combined voting power of the outstanding voting securities of (1) the corporation resulting from such Merger (the “Surviving Corporation”), if fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Surviving Corporation is not Beneficially Owned, directly or indirectly, by another person (a “Parent Corporation”), or (2) if there is one or more than one Parent Corporation, the ultimate Parent Corporation;
(B) the individuals who were members of the Board immediately prior to the execution of the agreement providing for such Merger constitute at least a majority of the members of the board of directors of (1) the Surviving Corporation, if there is no Parent Corporation, or (2) if there is one or more than one Parent Corporation, the ultimate Parent Corporation; and
(C) no person other than (1) the Company or another corporation that is a party to the agreement of Merger, (2) any Related Entity, (3) any employee benefit plan (or any trust forming a part thereof) that, immediately prior to the Merger, was maintained by the Company or any Related Entity or (4) any person who, immediately prior to the Merger, had Beneficial Ownership of Voting Securities representing more than fifty percent (50%) of the combined voting power of the Company’s then-outstanding Voting Securities, has Beneficial Ownership, directly or
| ||||
|
As used in the employment agreements of Messrs. Keating and Stas, the term “Change-in-Control” is defined with reference to the Amended and Restated Evoqua Water Technologies Corp. 2017 Equity Incentive Plan. Under this plan, a Change-in-Control generally is deemed to have occurred upon the occurrence of any of the events listed below.
indirectly, of 50% or more of the combined voting power of the outstanding voting securities of (x) the Surviving Corporation, if there is no Parent Corporation, or (y) if there is one or more than one Parent Corporation, the ultimate Parent Corporation; |
A person acquires 50% or more of the combined voting power of the Company’s then-outstanding voting securities;
A majority of the members of our Board of Directors are replaced by directors whose appointment or election was not endorsed by a majority of Board members then in office immediately before such appointment or election;
Any merger, consolidation or reorganization; or
(ii) A complete liquidation or dissolution of the Company; or
(iii) The sale or other disposition of all or substantially all of the assets of the Company.
However, ifCompany and its Subsidiaries taken as a whole to any person (other than (x) a transfer to a Related Entity or (y) the distribution to the Company’s stockholders of the below conditions is satisfied (indicating that no “changestock of a Related Entity or any other assets).
Notwithstanding the foregoing, a Change in control” has actually occurred), according to the 2017 Plan, a Change-in-Control willControl shall not be deemed to have occurred:
Our stockholders immediately before the transaction continue to own at least a majority of the combined voting power of the resulting entity after the transaction;
A majority of the members of our Board immediately before the transaction continue to constitute at least a majority of the board of the resulting entity after the transaction; or
With certain exceptions, no person other thanoccur solely because any person who had beneficial ownership(the “Subject Person”) acquired Beneficial Ownership of more than 50%the permitted amount of the combined voting powerthen outstanding Voting Securities as a result of the Company’sacquisition of Voting Securities by the Company which, by reducing the number of Voting Securities then outstanding, voting securities immediately before such transaction has beneficial ownershipincreases the proportional number of more than 50%shares Beneficially Owned by the Subject Person; provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the combined voting poweracquisition of Voting Securities by the Company and, after such acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Voting Securities and such Beneficial Ownership increases the percentage of the resulting entity’sthen outstanding voting securities immediately afterVoting Securities Beneficially Owned by the transaction.Subject Person, then a Change in Control shall occur.
Equity Treatment
If ana NEO’s employment is terminated, the treatment of his equity awards will generally be based on the terms of the applicable equity plan and the award agreements adopted by the Compensation Committee to evidence the awards granted under such plan, unless otherwise provided in the executive’sNEO’s employment agreement.agreement (provided, however, that with respect to performance share unit awards, the amount or number of such performance share units that become earned by the NEO based on the achievement of the applicable performance metrics will be solely determined pursuant to the terms of the applicable award agreement).
Termination of Employment Without
| • Options: Unvested
• • Special PSUs: Earned Special PSUs will fully vest; unearned Special PSUs will be forfeited.
| |
Termination of Employment due to Death or Disability:
| • Options: • Granted Prior to 2/14/19: Unvested • Granted on or After 2/14/19: Unvested options will fully • RSUs: Unvested RSUs will fully vest. • Special RSUs: A pro rata portion of the Special RSUs will vest.(1) • Special PSUs: A pro rata portion of each tranche of the Special PSUs will vest.(2)
| |
| •
•RSUs: Unvested RSUs will continue to vest • Special RSUs and Special PSUs: Not applicable.
| |
Termination of Employment With Cause:
| •
| |
2022 Proxy Statement | ||||
85 |
Termination of Employment
| • Options: • Granted Prior to 2/14/19: Unvested • Granted on or After 2/14/19: If termination occurs within the 24-month period, in the case of Messrs. Keating and Stas, or 12-month period, in the case of the other NEOs, following a Change in Control, unvested options will fully • RSUs: If termination occurs within the 24-month period, in the case of Messrs. Keating and Stas, or 12-month period, in the case of the other NEOs, following a Change in Control, unvested RSUs will fully vest. • Special RSUs: If termination occurs following a Change in Control and prior to the third anniversary of the grant date, unvested Special RSUs will fully vest. • Special PSUs: • Modified Change in Control: If a Modified Change in Control occurs prior to the last day of the Total Performance Period, all Special PSUs will be deemed earned at a target performance level and will be subject to time-based vesting based on continued employment until the last day of the Total Performance Period. If termination occurs prior to the last day of the Total Performance Period, all earned Special PSUs will vest.(4) • Change in Control: If termination occurs following a Change in Control (under circumstances other than a Modified Change in Control) and prior to the last day of the Total Performance Period, earned Special PSUs will vest and each tranche of Special PSUs for a current or future performance period will remain eligible to be earned subject to the attainment of the applicable performance goal.
| |
| (1) |
|
No acceleration of vesting; and
Vested options remain exercisable for 180 days.
| (2) | Earned Special PSUs for previously completed performance periods will vest on a pro rata basis based on actual performance for the completed period. Special PSUs for incomplete performance periods will become earned on the termination date (scored with the termination date deemed as the final day of the applicable performance period) and will vest on a pro rata basis. In each case, proration will be calculated as follows: (i) the total number of earned Special PSUs for each performance period multiplied by (ii) a fraction with the numerator equal to the number of calendar days that elapsed from the first day of the Total Performance Period until termination and the denominator equal to 1,096. |
Applies only to awards under the 2017 Plan made on or after February 14, 2019. An award holder is considered “retirement eligible” if he or she has given prior written notice of intent to retire at least six |
| ||||
|
| months |
|
| (4) |
|
With respect to options granted under the EWT Holdings I Corp. Stock Option Plan (i.e., prior to our initial public offering), if an award holder’s employment is terminated, unvested options are immediately terminated as of the date of termination, and vested options remain outstanding for the 45-day period following termination (or for a 180-day period following a termination due to death or disability); provided, however, that in the event of a termination for cause, all options, whether vested or unvested, are immediately terminated. In the event of a change-in-control, all unvested options will become fully vested and exercisable.
Additionally, the employment agreements of the NEOs provide for certain enhancements to treatment of equity awards, as summarized below.
| ||||
86 |
The employment agreements of Messrs. Fages, Aulick and Desai provide for a minimum post-termination exercise period of 45-days for vested stock options, subject to the maximum term of the option.
The employment agreements of Messrs. Keating and Stas provide that the post-termination exercise period of the stock options held by them as of the date of the employment agreement shall be the longer of 90 days following the date of his termination, and the period specified in the applicable option award agreement, subject to the maximum term of the option. Additionally, the amended and restated employment agreements of Messrs. Keating and Stas provide that if the executive’s employment has been terminated other than for Cause, or due to death or Disability, or for Good Reason, in each case within a two-year period of time following a Change-in-Control, all of his outstanding unvested equity awards shall become fully vested on the date that a general release by the executive in favor of the Company becomes effective.
Estimated Payments and Benefits
The following tables describe the estimated value of payments and benefits that would have been due to each NEO in the event his employment was terminated on September 30, 20202021 (in addition to any accrued but unpaid benefits that may be applicable as of such date), under the circumstances delineated in the tables. None of the NEOs was eligible to retire as of September 30, 2020.2021. Calculations of estimated intrinsic value with regard to stock options and RSUsoutstanding equity awards are based upon the closing price per share of the Company’s common stock ($21.22)37.56) as of September 30, 2020.2021. However, the actual amounts payable can only be determined at the time of such executive’s separation from the Company.
Ron C. Keating
Incremental Benefits Due to Termination Event | Involuntary Not-for-Cause Termination or Resignation for Good Reason (w/n 24 months of Change-in-Control) | Involuntary Not-for-Cause Termination or Resignation for Good Reason | Death or Disability | For Cause Termination | ||||||||||||
Salary Continuation | $ | 2,187,500 | (1) | $ | 1,750,000 | $ | 1,750,000 | — | ||||||||
Benefits Continuation | $ | 35,803 | (2) | $ | 35,803 | (2) | $ | 35,803 | (2) | — | ||||||
Short-Term Incentive | $ | 3,062,500 | (1)(3) | $ | 941,112 | (4) | $ | 941,112 | (4) | — | ||||||
Unvested Stock Options | $ | 2,005,529 | (5) | — | $ | 1,955,402 | (6) | — | ||||||||
Unvested RSUs | $ | 2,848,636 | (7) | — | $ | 2,848,636 | (8) | — | ||||||||
TOTAL: | $ | 10,139,968 | $ | 2,726,915 | $ | 7,530,953 | — | |||||||||
Payments and Benefits Upon Termination(1) | Retirement(2) | Termination Not For Cause | Termination For Good Reason | Termination For Cause | Death or Disability | Termination Not For Cause or For Good Reason Within Two Years of Change in Control | Termination Not For Cause or For Good Reason Following Modified Change in Control(3) | ||||||||||||||||||||||||||||
Cash Compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Base Salary(4) | — | $ | 1,750,000 | $ | 1,750,000 | — | — | $ | 2,187,500 | $ | 1,750,000 | ||||||||||||||||||||||||
Short-Term Annual Incentive(5) | — | $ | 1,003,625 | $ | 1,003,625 | — | — | $ | 3,062,500 | $ | 1,003,625 | ||||||||||||||||||||||||
Long-Term Incentive Compensation(6): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Unvested Stock Options(7) | — | — | — | — | $ | 8,901,315 | $ | 10,130,898 | — | ||||||||||||||||||||||||||
Unvested RSUs(8) | — | — | — | — | $ | 6,188,461 | $ | 6,188,461 | — | ||||||||||||||||||||||||||
Unvested Special RSUs(9) |
|
|
| — | — | — | $ | 764,496 | $ | 6,161,004 | — | ||||||||||||||||||||||||
Unvested Special PSUs(10) | — | — | — | — | $ | 1,528,992 | $ | 12,321,971 | $ | 12,321,971 | |||||||||||||||||||||||||
Benefits and Perquisites: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Outplacement service(11) | — | $ | 15,000 | $ | 15,000 | — | — | $ | 15,000 | $ | 15,000 | ||||||||||||||||||||||||
Continuation of medical/dental benefits(12) | — | $ | 21,192 | $ | 21,192 | — | — | $ | 21,192 | $ | 21,192 | ||||||||||||||||||||||||
TOTAL | — | $ | 2,789,817 | $ | 2,789,817 | — | $ | 17,383,264 | $ | 40,088,526 | $ | 15,111,788 | |||||||||||||||||||||||
| (1) |
|
| (2) | Mr. Keating was not retirement eligible as of September 30, 2021. |
| (3) | Assumes that a Modified Change in Control and subsequent termination occurred on September 30, 2021. The value of the unvested Special PSUs was calculated at a target award level using a closing price per share |
2022 Proxy Statement | ||||
87 |
| of $37.56 on September 30, 2021. In the case of a termination for Good Reason following a Modified Change in Control, Mr. Keating would not receive any payment for unvested Special PSUs. |
| (4) | In the case of “Termination Not For Cause,” “Termination For Good Reason,” and “Termination Not For Cause or For Good Reason Following Modified Change in Control,” represents 2x base salary at the rate in effect on September 30, 2021, which would be paid in equal installments on the Company’s regular payment dates occurring during the 24-month period beginning on the first payroll date |
| (5) | In the case of “Termination Not For Cause,” “Termination For Good Reason,” and “Termination Not For Cause or For Good Reason Following Modified Change in Control,” represents the short-term annual incentive payout actually earned by Mr. Keating for fiscal 2021 under the AIP, which would be paid at the same time as annual bonuses are paid to other senior executives of the Company. In the case of “Termination Not For Cause or For Good Reason Within Two Years of Change in Control,” represents the sum of (x) 2.5x Mr. Keating’s target short-term annual incentive opportunity, plus (y) Mr. Keating’s target short-term annual incentive opportunity, which would be payable in a lump sum on the Payment Date. |
| (6) | The values for long-term incentive compensation represent the value of the unvested stock options, RSUs, Special RSUs, and Special PSUs that would accelerate and vest depending on the applicable termination event. The value of the unvested stock options, RSUs, Special RSUs, and Special PSUs was calculated using a closing price per share of $37.56 on September 30, 2021. |
| (7) | In the case of “Death or Disability,” represents the estimated value of 534,674 unvested options held by Mr. Keating, which would become fully vested upon termination due to death or Disability. In the case of “Termination Not For Cause or For Good Reason Within Two Years of Change in Control,” represents the estimated value of 608,390 unvested options held by Mr. Keating, which would become fully vested on the date that the Release becomes |
| (8) | Represents the estimated value of 164,762 unvested RSUs held by Mr. Keating, which, in the case of “Death or Disability,” would become fully vested upon termination due to death or Disability, and in the case of “Termination Not For Cause or For Good Reason Within Two Years of Change in Control,” would become fully vested on the date that the Release becomes effective. |
| (9) | In the case of “Death or Disability,” represents the estimated value of a pro rata portion of 164,031 unvested Special RSUs held by Mr. Keating (20,354 Special RSUs, based on a termination date of September 30, 2021), which would become fully vested upon termination due to death or Disability. In the case of “Termination Not For Cause or For Good Reason Within Two Years of Change in Control,” represents the estimated value of 164,031 unvested Special RSUs held by Mr. Keating, which would become fully vested on the date that the Release becomes effective following a Change in Control and prior to May 18, 2024. |
| (10) | In the case of “Death or Disability,” represents the estimated value of a pro rata portion of 328,061 unvested Special PSUs held by Mr. Keating (40,708 Special PSUs, based on a termination date of September 30, 2021 and a deemed performance period end date of September 30, 2021). In the case of “Termination Not For Cause or For Good Reason Within Two Years of Change in Control,” represents the estimated value of 328,061 unearned and unvested Special PSUs (assumed payable at a target award level) held by Mr. Keating, which would become non-forfeitable on the date that the Release becomes effective and remain eligible to be earned subject to the attainment of the applicable performance goals. In the case of “Termination Not For Cause or For Good Reason Following Modified Change in Control,” represents the estimated value of 328,061 unearned and unvested Special PSUs held by Mr. Keating, which would become fully vested at a target award level upon termination following a Modified Change in Control but prior to May 18, 2024. |
| (11) | Represents the $15,000 maximum reimbursement allowed for outplacement services. |
| (12) | Includes medical and dental coverage for a 12-month period. |
| ||||
|
|
|
|
|
|
|
|
Benedict J. Stas
Incremental Benefits Due to Termination Event | Involuntary Not-for-Cause Termination or Resignation for Good Reason (w/n 24 months of Change-in-Control) | Involuntary Not-for-Cause Termination or Resignation for Good Reason | Death or Disabilty | For Cause Termination | ||||||||||||
Salary Continuation | $ | 959,400 | (1) | $ | 479,700 | $ | 479,700 | — | ||||||||
Benefits Continuation | $ | 35,803 | (2) | $ | 35,803 | (2) | $ | 35,803 | (2) | — | ||||||
Short-Term Incentive | $ | 1,007,370 | (1)(3) | $ | 353,627 | (4) | $ | 353,627 | (4) | — | ||||||
Unvested Stock Options | $ | 596,342 | (5) | — | $ | 582,956 | (6) | — | ||||||||
Unvested RSUs | $ | 843,750 | (7) | — | $ | 843,750 | (8) | — | ||||||||
TOTAL: | $ | 3,442,665 | $ | 869,130 | $ | 2,295,836 | — | |||||||||
Payments and Benefits Upon Termination(1) | Retirement(2) | Termination Not For Cause | Termination For Good Reason | Termination For Cause | Death or Disability | Termination Not For Cause or For Good Reason Within Two Years of Change in Control | Termination Not For Cause or For Good Reason Following Modified Change in Control(3) | ||||||||||||||||||||||||||||
Cash Compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Base Salary(4) | — | $ | 479,700 | $ | 479,700 | — | — | $ | 959,400 | $ | 479,7000 | ||||||||||||||||||||||||
Short-Term Annual Incentive(5) | — | $ | 385,151 | $ | 385,151 | — | — | $ | 1,007,370 | $ | 385,151 | ||||||||||||||||||||||||
Long-Term Incentive Compensation(6): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Unvested Stock Options(7) | — | — | — | — | $ | 2,620,691 | $ | 2,949,037 | — | ||||||||||||||||||||||||||
Unvested RSUs(8) | — | — | — | — | $ | 1,813,735 | $ | 1,813,735 | — | ||||||||||||||||||||||||||
Unvested Special RSUs(9) |
|
|
| — | — | — | $ | 81,918 | $ | 660,117 | — | ||||||||||||||||||||||||
Unvested Special PSUs(10) | — | — | — | — | $ | 163,799 | $ | 1,320,234 | $ | 1,320,234 | |||||||||||||||||||||||||
Benefits and Perquisites: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Outplacement service(11) | — | $ | 15,000 | $ | 15,000 | — | — | $ | 15,000 | $ | 15,000 | ||||||||||||||||||||||||
Continuation of medical/dental benefits(12) | — | $ | 21,192 | $ | 21,192 | — | — | $ | 21,192 | $ | 21,192 | ||||||||||||||||||||||||
TOTAL | — | $ | 901,043 | $ | 901,043 | — | $ | 4,680,143 | $ | 8,746,085 | $ | 2,221,277 | |||||||||||||||||||||||
| (1) |
|
| (2) | Mr. Stas was not retirement eligible as of September 30, 2021. |
| (3) | Assumes that a Modified Change in Control and subsequent termination occurred on September 30, 2021. The value of the unvested Special PSUs was calculated at a target award level using a closing price per share of $37.56 on September 30, 2021. In the case of a termination for Good Reason following a Modified Change in Control, Mr. Stas would not receive any payment for unvested Special PSUs. |
| (4) | In the case of “Termination Not For Cause,” “Termination For Good Reason,” and “Termination Not For Cause or For Good Reason Following Modified Change in Control,” represents 1x base salary at the rate in effect on September 30, 2021, which would be paid in equal installments on the Company’s regular payment dates occurring during the 12-month period beginning on the first payroll date |
|
| ||||
89 |
| payout actually earned by Mr. Stas for fiscal 2021 under the AIP, which would be paid at the same time as annual bonuses are paid to other senior executives of the Company. In the case of “Termination Not For Cause or For Good Reason Within Two Years of Change in Control,” represents the sum of (x) 2x |
| (6) | The values for long-term incentive compensation represent the value of |
|
|
|
Represents the estimated value of |
| (9) | In the case of “Death or Disability,” represents the estimated value of a pro rata portion of 17,575 unvested Special RSUs held by Mr. Stas (2,181 Special RSUs, based on a termination date of September 30, 2021), which would become fully vested upon termination due to death or Disability. In the case of “Termination Not For Cause or For Good Reason Within Two Years of Change in Control,” represents the estimated value of 17,575 unvested Special RSUs held by Mr. Stas, which would become fully vested on the date that the |
|
| ||||
|
Hervé P. Fages
Incremental Benefits Due to Termination Event | Involuntary Not-for-Cause Termination or Resignation for Good Reason (w/n 12 months of Change-in-Control) | Involuntary Not-for-Cause Termination or Resignation for Good Reason | Death or Disability | For Cause Termination | ||||||||||||
Salary Continuation | $ | 442,900 | $ | 442,900 | $ | 442,900 | — | |||||||||
Benefits Continuation | $ | 22,505 | (1) | $ | 22,505 | (1) | $ | 22,505 | (1) | — | ||||||
Short-Term Incentive | $ | 279,349 | (2) | $ | 279,349 | (2) | $ | 279,349 | (2) | — | ||||||
Unvested Stock Options | $ | 327,590 | (3) | — | $ | 327,590 | (3) | — | ||||||||
Unvested RSUs | $ | 510,553 | (4) | — | $ | 510,553 | (4) | — | ||||||||
TOTAL: | $ | 1,582,897 | $ | 744,754 | $ | 1,582,897 | — | |||||||||
|
|
|
|
Rodney O. Aulick
Incremental Benefits Due to Termination Event | Involuntary Not-for-Cause Termination or Resignation for Good Reason (w/n 12 months of Change-in-Control) | Involuntary Not-for-Cause Termination or Resignation for Good Reason | Death or Disability | For Cause Termination | ||||||||||||
Salary Continuation | $ | 431,250 | $ | 431,250 | $ | 431,250 | — | |||||||||
Benefits Continuation | $ | 34,244 | (1) | $ | 34,244 | (1) | $ | 34,244 | (1) | — | ||||||
Short-Term Incentive | $ | 264,506 | (2) | $ | 264,506 | (2) | $ | 264,506 | (2) | — | ||||||
Unvested Stock Options | $ | 341,571 | (3) | — | $ | 333,117 | (4) | — | ||||||||
Unvested RSUs | $ | 498,182 | (5) | — | $ | 498,182 | (5) | — | ||||||||
TOTAL: | $ | 1,569,753 | $ | 730,000 | $ | 1,561,299 | — | |||||||||
Includes medical and dental coverage for a |
|
|
|
|
| ||||
|
Snehal A. DesaiRodney O. Aulick
Incremental Benefits Due to Termination Event | Involuntary Not-for-Cause Termination or Resignation for Good Reason (w/n 12 months of Change-in-Control) | Involuntary Not-for-Cause Termination or Resignation for Good Reason | Death or Disability | For Cause Termination | ||||||||||||
Salary Continuation | $ | 380,800 | $ | 380,800 | $ | 380,800 | — | |||||||||
Benefits Continuation | $ | 35,803 | (1) | $ | 35,803 | (1) | $ | 35,803 | (1) | — | ||||||
Short-Term Incentive | $ | 202,308 | (2) | $ | 202,308 | (2) | $ | 202,308 | (2) | — | ||||||
Unvested Stock Options | $ | 255,497 | (3) | — | $ | 249,840 | (4) | — | ||||||||
Unvested RSUs | $ | 345,589 | (5) | — | $ | 345,589 | (5) | — | ||||||||
TOTAL: | $ | 1,219,997 | $ | 618,911 | $ | 1,214,340 | — | |||||||||
Payments and Benefits Upon Termination(1) | Retirement(2) | Termination Not For Cause(3) | Termination For Good Reason | Termination For Cause | Death or Disability | Termination Not For Cause or For Good Reason Following Change in Control | Termination Not For Cause or For Good Reason Following Modified Change in Control(4) | ||||||||||||||||||||||||||||
Cash Compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Base Salary(5) | — | $ | 431,250 | $ | 431,250 | — | — | $ | 431,250 | $ | 431,250 | ||||||||||||||||||||||||
Short-Term Annual Incentive(6) | — | $ | 297,188 | $ | 297,188 | — | — | $ | 297,188 | $ | 297,188 | ||||||||||||||||||||||||
Long-Term Incentive Compensation(7): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Unvested Stock Options(8) | — | — | — | — | $ | 1,584,350 | $ | 1,584,350 | — | ||||||||||||||||||||||||||
Unvested RSUs(9) | — | — | — | — | $ | 1,117,335 | $ | 1,117,335 | — | ||||||||||||||||||||||||||
Unvested Special RSUs(10) |
|
|
| — | — | — | $ | 40,940 | $ | 330,077 | — | ||||||||||||||||||||||||
Unvested Special PSUs(11) | — | — | — | — | $ | 81,881 | $ | 660,117 | $ | 660,117 | |||||||||||||||||||||||||
Benefits and Perquisites: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Outplacement service(12) | — | $ | 15,000 | $ | 15,000 | — | — | $ | 15,000 | $ | 15,000 | ||||||||||||||||||||||||
Continuation of medical/dental benefits(13) | — | $ | 19,602 | $ | 19,602 | — | — | $ | 19,602 | $ | 19,602 | ||||||||||||||||||||||||
TOTAL | — | $ | 763,040 | $ | 763,040 | — | $ | 2,824,506 | $ | 4,454,919 | $ | 1,423,157 | |||||||||||||||||||||||
| (1) | Pursuant to Mr. Aulick’s employment agreement, the Company’s obligations to pay the amounts and provide the benefits described in this table are conditioned upon (i) Mr. Aulick’s continued compliance with his obligations pursuant to the restrictive covenants (including confidentiality (indefinite duration), non-competition (one-year period following termination date), non-solicitation (one-year period following termination date), and interference with business relationships (one-year period following termination date), among others) contained in his employment agreement; and (ii) Mr. Aulick’s execution, delivery, and non-revocation of a Release within 45 days after the termination date. In the case of a Change in Control, the table assumes the acquirer assumed outstanding equity awards. |
| (2) | Mr. Aulick was not retirement eligible as of September 30, 2021. |
| (3) | Includes |
| (4) | Assumes that a Modified Change in Control and |
| (5) | Represents 1x base salary at the rate in effect on September 30, 2021, which would be paid in equal installments on the Company’s regular payment dates occurring during the 12-month period beginning on the first payroll date following the date on which the Release becomes irrevocable and effective (the “Payment Date”). |
| (6) | Represents the short-term annual incentive payout actually earned by Mr. Aulick for fiscal 2021 under the AIP, which would be paid at the same time as annual bonuses are paid to other senior executives of the Company. |
| (7) | The values for long-term incentive compensation represent the value of the unvested stock options, RSUs, Special RSUs, and Special PSUs that would accelerate and vest depending on the applicable termination |
2022 Proxy Statement | ||||
91 |
| event. The value of the unvested stock options, RSUs, Special RSUs, and Special PSUs was calculated using a closing price per share of $37.56 on September 30, 2021. In the case of a termination for Good Reason following a Change in Control, Mr. Aulick would not receive any long-term incentive compensation payments. |
| (8) | In the case of “Death or Disability,” represents the estimated value of 96,237 unvested options held by Mr. Aulick, which would become fully vested upon termination due to death or Disability. In the case of “Termination Not For Cause or For Good Reason Following Change in Control,” represents the estimated value of 96,237 unvested options held by Mr. Aulick, which would become fully vested upon termination within 12 |
| (9) | In the case of “Death or Disability,” represents the estimated value of 29,748 unvested RSUs held by Mr. Aulick, which would become fully vested upon termination due to death or Disability. In the case of “Termination Not For Cause or For Good Reason Following Change in Control,” represents the estimated value of 29,748 unvested RSUs held by Mr. Aulick, which would become fully vested upon termination within 12 months of a Change of Control. |
| (10) | In the case of “Death or Disability,” represents the estimated value of a pro rata portion of 8,788 unvested Special RSUs held by Mr. Aulick (1,090 Special RSUs, based on a termination date of September 30, 2021), which would become fully vested upon termination due to death or Disability. In the case of “Termination Not For Cause or For Good Reason Following Change in Control,” represents the estimated value of 8,788 unvested Special RSUs held by Mr. Aulick, which would become fully vested upon termination following a Change in Control but prior to May 18, 2024. |
| (11) | In the case of “Death or Disability,” represents the estimated value of a pro rata portion of 17,575 unvested Special PSUs held by Mr. Aulick (2,180 Special PSUs, based on a termination date of September 30, 2021 and a deemed performance period end date of September 30, 2021). In the case of “Termination Not For Cause or For Good Reason Following Change in Control,” represents the estimated value of 17,575 unearned and unvested Special PSUs (assumed payable at a target award level) held by Mr. Aulick, which would become non-forfeitable upon termination following a Change in Control but prior to May 18, 2024, and remain eligible to be earned subject to the attainment of the applicable performance goals. In the case of “Termination Not For Cause or For Good Reason Following Modified Change in Control,” represents the estimated value of 17,575 unearned and unvested Special PSUs held by Mr. Aulick, which would become fully vested at a target award level upon termination following a Modified Change in Control but prior to May 18, 2024. |
| (12) | Represents the $15,000 maximum reimbursement allowed for outplacement services. |
| (13) | Includes medical and dental coverage for a 12-month period. |
| ||||
92 |
Hervé P. Fages
Payments and Benefits Upon Termination(1) | Retirement(2) | Termination Not For Cause(3) | Termination For Good Reason | Termination For Cause | Death or Disability | Termination Not For Cause or For Good Reason Following Change in Control | Termination Not For Cause or For Good Reason Following Modified Change in Control(4) | ||||||||||||||||||||||||||||
Cash Compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Base Salary(5) | — | $ | 442,900 | $ | 442,900 | — | — | $ | 442,900 | $ | 442,900 | ||||||||||||||||||||||||
Short-Term Annual Incentive(6) | — | $ | 363,253 | $ | 363,253 | — | — | $ | 363,253 | $ | 363,253 | ||||||||||||||||||||||||
Long-Term Incentive Compensation(7): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Unvested Stock Options(8) | — | — | — | — | $ | 1,565,636 | $ | 1,565,636 | — | ||||||||||||||||||||||||||
Unvested RSUs(9) | — | — | — | — | $ | 1,090,667 | $ | 1,090,667 | — | ||||||||||||||||||||||||||
Unvested Special RSUs(10) |
|
|
| — | — | — | $ | 40,940 | $ | 330,077 | — | ||||||||||||||||||||||||
Unvested Special PSUs(11) | — | — | — | — | $ | 81,881 | $ | 660,117 | $ | 660,117 | |||||||||||||||||||||||||
Benefits and Perquisites: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Outplacement service(12) | — | $ | 15,000 | $ | 15,000 | — | — | $ | 15,000 | $ | 15,000 | ||||||||||||||||||||||||
Continuation of medical/dental benefits(13) | — | $ | 7,645 | $ | 7,645 | — | — | $ | 7,645 | $ | 7,645 | ||||||||||||||||||||||||
TOTAL | — | $ | 828,798 | $ | 828,798 | — | $ | 2,779,124 | $ | 4,475,295 | $ | 1,488,915 | |||||||||||||||||||||||
| (1) | Pursuant to Mr. Fages’ employment agreement, the Company’s obligations to pay the amounts and provide the benefits described in this table are conditioned upon (i) Mr. Fages’ continued compliance with his obligations pursuant to the restrictive covenants (including confidentiality (indefinite duration), non-competition (two-year period following termination date), non-solicitation (two-year period following termination date), and interference with business relationships (two-year period following termination date), among others) contained in his employment agreement; and (ii) Mr. Fages’ execution, delivery, and non-revocation of a Release within 45 days after the termination date. In the case of a Change in Control, the table assumes the acquirer assumed outstanding equity awards. |
| (2) |
|
| (3) | Includes termination by the Company due to a non-renewal of Mr. Fages’ employment agreement. |
| (4) | Assumes that a Modified Change in Control and subsequent termination occurred on September 30, 2021. The value of the unvested Special PSUs was calculated at a target award level using a closing price per share of $37.56 on September 30, 2021. In the case of a termination for Good Reason following a Modified Change in Control, Mr. Fages would not receive any payment for unvested Special PSUs. |
| (5) | Represents 1x base salary at the rate in effect on September 30, 2021, which would be paid in equal installments on the Company’s regular payment dates occurring during the 12-month period beginning on the first payroll date following the date on which the Release becomes irrevocable and effective (the “Payment Date”). |
| (6) | Represents the |
| (7) | The values for long-term incentive compensation represent the value of |
2022 Proxy Statement | ||||
93 |
| closing price per share of $37.56 on September 30, 2021. In the case of a termination for Good Reason following a Change in Control, Mr. Fages would not receive any long-term incentive compensation payments. |
| (8) | In the case of “Death or Disability,” represents the estimated value of 94,257 unvested options held by Mr. |
| (9) | In the case of “Death or Disability,” represents the estimated value of 29,038 unvested RSUs held by Mr. Fages, which would become fully vested upon termination due to death or Disability. In the case of “Termination Not For Cause or For Good Reason Following Change in Control,” represents the estimated value of 29,038 unvested RSUs held by Mr. Fages, which would become fully vested upon termination within 12 months of a Change of Control. |
| (10) | In the case of “Death or Disability,” represents the estimated value of a pro rata portion of 8,788 unvested Special RSUs held by Mr. Fages (1,090 Special RSUs, based on a termination date of September 30, 2021), which would become fully vested upon termination due to death or Disability. In the case of “Termination Not For Cause or For Good Reason Following Change in Control,” represents the estimated value of 8,788 unvested Special RSUs held by Mr. Fages, which would become fully vested upon termination following a Change in Control but prior to May 18, 2024. |
| (11) | In the case of “Death or Disability,” represents the estimated value of a pro rata portion of 17,575 unvested Special PSUs held by Mr. Fages (2,180 Special PSUs, based on a termination date of September 30, 2021 and a deemed performance period end date of September 30, 2021). In the case of “Termination Not For Cause or For Good Reason Following Change in Control,” represents the estimated value of 17,575 unearned and unvested Special PSUs (assumed payable at a target award level) held by Mr. Fages, which would become non-forfeitable upon termination following a Change in Control but prior to May 18, 2024, and remain eligible to be earned subject to the attainment of the applicable performance goals. In the case of “Termination Not For Cause or For Good Reason Following Modified Change in Control,” represents the estimated value of 17,575 unearned and unvested Special PSUs held by Mr. Fages, which would become fully vested at a target award level upon termination following a Modified Change in Control but prior to May 18, 2024. |
| (12) | Represents the $15,000 maximum reimbursement allowed for outplacement services. |
| (13) | Includes medical and dental coverage for a 12-month period. |
| ||||
94 |
Vincent Grieco
Payments and Benefits Upon Termination(1) | Retirement(2) | Termination Not For Cause(3) | Termination For Good Reason | Termination For Cause | Death or Disability | Termination Not For Cause or For Good Reason Following Change in Control | Termination Not For Cause or For Good Reason Following Modified Change in Control(4) | ||||||||||||||||||||||||||||
Cash Compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Base Salary(5) | — | $ | 366,000 | $ | 366,000 | — | — | $ | 366,000 | $ | 366,000 | ||||||||||||||||||||||||
Short-Term Annual Incentive(6) | — | $ | 251,881 | $ | 251,881 | — | — | $ | 251,881 | $ | 251,881 | ||||||||||||||||||||||||
Long-Term Incentive Compensation(7): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Unvested Stock Options(8) | — | — | — | — | $ | 1,015,413 | $ | 1,015,413 | — | ||||||||||||||||||||||||||
Unvested RSUs(9) | — | — | — | — | $ | 708,457 | $ | 708,457 | — | ||||||||||||||||||||||||||
Unvested Special RSUs(10) |
|
|
| — | — | — | $ | 40,940 | $ | 330,077 | — | ||||||||||||||||||||||||
Unvested Special PSUs(11) | — | — | — | — | $ | 81,881 | $ | 660,117 | $ | 660,117 | |||||||||||||||||||||||||
Benefits and Perquisites: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Outplacement service(12) | — | $ | 15,000 | $ | 15,000 | — | — | $ | 15,000 | $ | 15,000 | ||||||||||||||||||||||||
Continuation of medical/dental benefits(13) | — | $ | 0 | $ | 0 | — | — | $ | 0 | $ | 0 | ||||||||||||||||||||||||
TOTAL | — | $ | 632,881 | $ | 632,881 | — | $ | 1,846,691 | $ | 3,659,814 | $ | 1,292,998 | |||||||||||||||||||||||
| (1) | Pursuant to Mr. Grieco’s employment agreement, the Company’s obligations to pay the amounts and provide the benefits described in this table are conditioned upon (i) Mr. Grieco’s continued compliance with his obligations pursuant to the restrictive covenants (including confidentiality (indefinite duration), non-competition (one-year period following termination date), non-solicitation (one-year period following termination date), and interference with business relationships (one-year period following termination date), among others) contained in his employment agreement; and (ii) Mr. Grieco’s execution, delivery, and non-revocation of a Release within 45 days after the termination date. In the case of a Change in Control, the table assumes the acquirer assumed outstanding equity awards. |
| (2) | Mr. Grieco was not retirement eligible as of September 30, 2021. |
| (3) | Includes termination by the Company due to a non-renewal of Mr. Grieco’s employment agreement. |
| (4) | Assumes that a Modified Change in Control and subsequent termination occurred on September 30, 2021. The value of the unvested Special PSUs was calculated at a target award level using a closing price per share of $37.56 on September 30, 2021. In the case of a termination for Good Reason following a Modified Change in Control, Mr. Grieco would not receive any payment for unvested Special PSUs. |
| (5) | Represents 1x base salary at the rate in effect on September 30, 2021, which would be paid in equal installments on the Company’s regular payment dates occurring during the 12-month period beginning on the first payroll date following the date on which the Release becomes irrevocable and effective (the “Payment Date”). |
| (6) | Represents the |
| (7) | The values for long-term incentive compensation represent the value of |
2022 Proxy Statement | ||||
95 |
| event. The value of the unvested stock options, RSUs, Special RSUs, and Special PSUs was calculated using a closing price per share of $37.56 on September 30, 2021. In the case of a termination for Good Reason following a Change in Control, Mr. Grieco would not receive any long-term incentive compensation payments. |
| (8) | In the case of “Death or Disability,” represents the estimated value of 61,162 unvested options held by Mr. |
|
| (9) | In the case of “Death or Disability,” represents the estimated value of 18,862 unvested RSUs held by Mr. |
| (10) | In the case of “Death or Disability,” represents the estimated value of a pro rata portion of 8,788 unvested Special RSUs held by Mr. Grieco (1,090 Special RSUs, based on a termination date of September 30, 2021), which would become fully vested upon termination due to death or Disability. In the case of “Termination Not For Cause or For Good Reason Following Change in Control,” represents the estimated value of 8,788 unvested Special RSUs held by Mr. Grieco, which would become fully vested upon termination following a Change in Control but prior to May 18, 2024. |
| (11) | In the case of “Death or Disability,” represents the estimated value of a pro rata portion of 17,575 unvested Special PSUs held by Mr. Grieco (2,180 Special PSUs, based on a termination date of September 30, 2021 and a deemed performance period end date of September 30, 2021). In the case of “Termination Not For Cause or For Good Reason Following Change in Control,” represents the estimated value of 17,575 unearned and unvested Special PSUs (assumed payable at a target award level) held by Mr. Grieco, which would become non-forfeitable upon termination following a Change in Control but prior to May 18, 2024, and remain eligible to be earned subject to the attainment of the applicable performance goals. In the case of “Termination Not For Cause or For Good Reason Following Modified Change in Control,” represents the estimated value of 17,575 unearned and unvested Special PSUs held by Mr. Grieco, which would become fully vested at a target award level upon termination following a Modified Change in Control but prior to May 18, 2024. |
| (12) | Represents the $15,000 maximum reimbursement allowed for outplacement services. |
| (13) | Includes medical and dental coverage for a 12-month period. |
Risk AssessmentRISK ASSESSMENT
In conjunction with development of the fiscal 2020year 2021 compensation program, the Compensation Committee reviewed the compensation program to determine if the program elements encourage excessive or unnecessary risk-taking that is reasonably likely to have a material adverse effect on the Company. The Compensation Committee believes the Company’s compensation program offers an appropriate mix of fixed compensation and short- and long-term variable compensation which align with the Company’s business strategy. In addition, the Compensation Committee believes that its discretion and authority in making decisions related to executive compensation as well as the caps on annual incentive payouts, stock ownership guidelines, and clawback policy, all serve to mitigate excessive risk. Finally, as noted above, the Compensation Committee engaged Meridian as its independent compensation consultant to advise on matters related to fiscal 2020year 2021 compensation design decisions for the Company’s executive officers. As a result, the Compensation Committee believes that our compensation program does not encourage unreasonable risk-taking that is reasonably likely to have a material adverse effect on the Company.
In accordance with SEC rules, and applyingwe are providing the ratio of the annual total compensation of our CEO to the annual total compensation of our median employee. Using the methodology described below, we calculated the annual total compensation of our median employee (other than our CEO) for fiscal 2020year 2021 to be $74,540.$92,260. As reported in the Summary Compensation Table for— Fiscal Years 2021, 2020, and 2019 in this Proxy Statement, the annual total compensation of our CEO for fiscal 2020year 2021 was $5,657,314.$15,660,392. Based on this information, the ratio of the annual total compensation of our CEO to the annual total compensation of our median employee for fiscal 2020year 2021 was 76:170:1.
The fiscal 2020 annual total compensation of our median employee was calculated based on the same requirements which apply to the determination of total compensation for the Summary Compensation Table, and includes: base salary earned and paid from October 1, 2019 through September 30, 2020; incentive plan payments (both non-equity and equity-based) made for the performance period October 1, 2019 through September 30, 2020; and other compensation earned and/or paid in fiscal 2020. Our median compensated employee is an individual located in the US.
| ||||
|
To identify our median employee, we selected August 1, 2020 as our determination date and determined that we had a total of 4,041 employees (3,108 US employees, and 933 non-US employees) on that date, constituting all full-time, part-time, seasonal and temporary workers employed by the Company and its consolidated subsidiaries (other than our CEO). The foregoing total does not include workers we lease from unaffiliated third parties. Next, pursuant to the “de minimis” exemption under SEC rules, we excluded from the aforementioned employee population our employees in countries that, in the aggregate, constitute less than 5% of our total global employee population of 4,041, as detailed in the table below.
Jurisdictions Excluded from Employee Population (Total of 179 employees estimated as of August 1, 2020)
| ||||||
Australia | 28 | Korea | 4 | |||
Bahrain | 1 | Malaysia | 4 | |||
France | 11 | Mexico | 2 | |||
Greece | 1 | Singapore | 58 | |||
India | 62 | Spain | 1 | |||
Ireland | 4 | Taiwan | 2 | |||
Japan | 1 |
|
| |||
We then compared annual base salaries as of August 1, 2020, as a consistently applied compensation measure, among the remaining 3,862 employees. In the case of hourly employees, annual base salary was determined by multiplying the hourly compensation rate by the target annual work schedule, as of August 1, 2020. We did not make any cost-of-living adjustments. Any base salary paid in a foreign currency was converted to US Dollars at prevailing exchange rates as of August 1, 2020.
With the resulting middle three employees, we calculated their annual total compensation based on the same requirements which apply to the determination of total compensation for the Summary Compensation Table in this Proxy Statement and selected the employee whose compensation represented the median as our median employee for fiscal 2020.
| ||||
|
The fiscal year 2021 annual total compensation of our median employee was calculated based on the same requirements that apply to the determination of total compensation for the Summary Compensation Table — Fiscal Years 2021, 2020, and 2019, and includes: base salary earned and paid from October 1, 2020 through September 30, 2021; incentive plan payments (both non-equity and equity-based) made for the performance period October 1, 2020 through September 30, 2021; and other compensation earned or paid in fiscal year 2021. Our median compensated employee is an individual located in the U.S.
To identify our median employee, we selected August 1, 2021 as our determination date. On that date, we had a total of 4,037 employees (3,057 U.S. employees and 980 non-U.S. employees), constituting all full-time, part-time, seasonal, and temporary workers employed by the Company and its consolidated subsidiaries, except our CEO. The foregoing total does not include workers we lease from unaffiliated third parties and whose compensation was determined by such third parties. Pursuant to the de minimis exemption under SEC rules, we excluded from the aforementioned total employee population our employees in countries which, in the aggregate, constitute less than 5% of our total global employee population, as detailed in the table below.
Jurisdictions Excluded from Employee Population (Total of 198 employees estimated as of August 1, 2021) | ||||||
Australia | 28 | Mexico | 2 | |||
Egypt | 1 | Netherlands | 70 | |||
France | 13 | Poland | 1 | |||
Greece | 1 | Russian Federation | 1 | |||
Republic of Ireland | 4 | Singapore | 63 | |||
Japan | 1 | Taiwan | 2 | |||
Republic of Korea | 5 | United Arab Emirates | 2 | |||
Malaysia | 4 |
|
| |||
We then compared the annual base salaries, as a consistently applied compensation measure, of the remaining 3,839 employees (other than our CEO). In the case of hourly employees, annual base salary was determined by multiplying the hourly compensation rate by the employee’s target annual work schedule. We did not make any cost-of-living adjustments. Any base salary paid in a foreign currency was converted to U.S. Dollars at prevailing exchange rates as of August 1, 2021.
The CEO pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on the methodologies, estimates, and assumptions described above. SEC rules for identifying the median employee and determining the CEO pay ratio permit companies to employ a wide range of methodologies, estimates and assumptions. As a result, the CEO pay ratios reported by other companies, which may have employed other permitted methodologies or assumptions and which may have a significantly different work force structure from ours, are likely not comparable to our CEO pay ratio.
2022 Proxy Statement | ||||
97 |
Proposal 3—Ratification of the Appointment of Ernst & Young LLP as Our Independent Registered Public Accounting Firm for the Fiscal Year Ending September 30, 2022
Under its charter, the Audit Committee of the Board has direct responsibility for the appointment, compensation, retention, oversight, and termination of the independent registered public accounting firm engaged to audit the Company’s financial statements.
The Audit Committee of the Board has appointed Ernst & Young LLP (“Ernst & Young”) as our independent registered public accounting firm for the fiscal year ending September 30, 2021.2022. Ernst & Young LLP also served as our independent registered public accounting firm for the fiscal year ended September 30, 2020.2021. The services provided to us by Ernst & Young LLP in the fiscal year ended September 30, 20202021, are described below under the heading “Independent Registered Public Accounting Firm’s Fees and Services.” Representatives of Ernst & Young willLLP are expected to be present at the Annual Meeting, will be available to respond to appropriate questions, and will have the opportunity to make a statement if they so desire.desire to do so.
The Audit Committee is responsible for selecting the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2021. Accordingly, stockholderStockholder approval is not required to appoint Ernst & Young LLP as the Company’s independent registered public accounting firm. However, the Board believes that the submission of the Audit Committee’s selection to the stockholders for ratification is a matter of good corporate governance. If the Company’s stockholders do not ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm, the Audit Committee will review its future selection of an independent registered public accounting firm. The Audit Committee may retain another independent registered public accounting firm at any time during the year if it concludes that such change would be in the best interest of the Company’s stockholders.
Under the Third Amended and Restated Bylaws, ratification of the appointment of Ernst & Young as our independent registered public accounting firm for the fiscal year ending September 30, 2021 will be approved if the votes cast “FOR” its approval exceed the votes cast “AGAINST” its approval. Abstentions will have the same effect as a vote “AGAINST” the proposal. Non-votes by brokers, banks and other nominee holders of record, if any, will not be counted as votes “FOR” or “AGAINST” the proposal.
|
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE
| |
| ||||
98 |
65
Independent Registered Public Accounting Firm’s Fees and Services
The following is a description of the professional services performed and the fees billed by Ernst & Young LLP for the fiscal years ended September 30, 20202021, and September 30, 2019.2020.
Type of Fees | Fiscal Year Ended September 30, 2020 | Fiscal Year Ended September 30, 2019 | Fiscal Year Ended September 30, 2021 | Fiscal Year Ended September 30, 2020 | ||||||||||||||
Audit Fees(1) | $ | 2,795,819 | $ | 2,619,762 | $ | 2,592,563 | $ | 2,795,819 | ||||||||||
Audit-Related Fees | — | 2,000 | — | — | ||||||||||||||
Tax Fees | 436,039 | 510,000 | 413,257 | 436,039 | ||||||||||||||
All Other Fees | 2,000 | 2,584 | 2,000 | 2,000 | ||||||||||||||
Total | $ | 3,233,858 | $ | 3,134,346 | $ | 3,007,820 | $ | 3,233,858 | ||||||||||
| (1) | Audit fees consist of fees related to the annual audit of our consolidated financial statements and review of the consolidated financial statements in our Quarterly Reports on Form 10-Q; Sarbanes-Oxley Section 404 attestation services, audit and attestation services related to statutory or regulatory filings; and the issuance of consents. Audit fees in the fiscal |
| (2) |
|
Tax fees are fees for a variety of permissible services relating to tax compliance, tax planning and tax advisory services. |
All other fees relate to professional services not included in the categories above, including subscriptions to Ernst & |
All audit-related services, tax services, and other services in fiscal years 20202021 and 20192020 were pre-approved by the Audit Committee, who concluded that the provision of such services by Ernst & Young LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit Committee’s outside auditor independence policy provides that the Audit Committee must pre-approve all services and associated fees provided to the Company by its independent registered public accounting firm, with certain de minimis exceptions described in the policy.
| ||||
|
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Related Services of Independent Auditors
The Audit Committee is responsible for the appointment, compensation, retention, oversight, and termination of Evoqua Water Technologies Corp.’sthe Company’s independent registered public accounting firm. The Audit Committee has adopted a policy requiring that substantially all audit, audit-related, and non-audit services provided by the independent auditor be pre-approved by the Audit Committee. Pre-approval is not necessary for certain minor non-audit services that (i) do not constitute more than 5% of the total amount of revenues paid by the Company to the independent auditor during the fiscal year the non-audit services were provided; (ii) were not recognized by the Company to be non-audit services at the time of the engagement for such services; and (iii) are promptly brought to the attention of the Audit Committee and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee who are members of the Board to whom authority to grant such approvals has been delegated by the Audit Committee. The Audit Committee may delegate authority to one or more independent members of the Audit Committee to grant pre-approvals of audit and permitted non-audit services, provided that any such pre-approvals are presented to the full Audit Committee at its next scheduled meeting.
The Audit Committee has adopted a policy that prohibits our independent auditors from providing the following services:
bookkeeping or other services related to the accounting records or financial statements of Evoqua Water Technologies Corp.;the Company;
financial information systems design and implementation;
appraisal or valuation services, providing fairness opinions, or preparing contribution-in-kind reports;
actuarial services;
internal audit outsourcing services;
management functions or human resources;
broker or dealer, investment adviser, or investment banking services;
legal services and expert services unrelated to the audit; and
any other service that the Public Company Accounting Oversight Board prohibits through regulation.
The Audit Committee’s pre-approval policy is in the Audit Committee Charter, a copy of which is available on ourthe Company’s Investor Relations website at https://aqua.evoqua.com/governance/governance-documents/default.aspx.
| ||||
100 |
67
Report of the Audit Committee of the Board
The Audit Committee is composed of Peter M. Wilver, as Chairman, Nick Bhambri, Gary A. Cappeline and Lynn C. Swann. The Audit Committee oversees Evoqua Water Technologies Corp.’s financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the financial reporting process, including maintainingmaintenance of an effective system of internal controlscontrol over financial reporting. The Audit Committee meets separatelyOur Company’s independent auditor, Ernst & Young LLP, is responsible for expressing an opinion on the conformity, in all material respects, of our Company’s audited financial statements with management,U.S. generally accepted accounting principles, and on the effectiveness of management’s system of internal auditor and the independent registered public accounting firm. control over financial reporting.
The Audit Committee operates under a written charter approved by the Board, a copy of which is available on ourthe Company’s Investor Relations website at aqua.evoqua.com/corporate-governance.governance/governance-documents/default.aspx. The charter, among other things, provides that the Audit Committee has full authority to appoint, compensate, retain, oversee, and terminate, when appropriate, the independent auditor. The Audit Committee meets separately with management, the internal auditor, and the independent registered public accounting firm.
In addition to fulfilling its oversight responsibilities as set forth in its charter and further described above in the section of this Proxy Statement entitled “Corporate Governance and Board Matters—Committees of the Board—Audit Committee,”role, the Audit Committee has done the following things:following:
reviewedReviewed and discussed with management the audited financial statements in Evoqua Water Technologies Corp.’s Annual Report on Form 10-Kof the Company as of and for the fiscal year ended September 30, 2020 with management,2021, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements;
reviewedReviewed with Ernst & Young LLP (“Ernst & Young”), Evoqua Water Technologies Corp.’s independent registered public accounting firm, who is responsible for expressing an opinion on the conformity of those audited financial statements with US generally accepted accounting principles, their judgments as to the quality and acceptability of Evoqua Water Technologies Corp.’s accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards;
receivedReceived the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) regarding Ernst & Young’sYoung LLP’s communications with the Audit Committee concerning independence;
discussedDiscussed with Ernst & Young LLP its independence from management and Evoqua Water Technologies Corp.the Company, and considered whether Ernst & Young LLP could also provide non-audit services without compromising the firm’s independence;
discussedDiscussed with Ernst & Young LLP the matters required to be discussed by PCAOB Auditing Standards No. 1301, formerly known as the Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380, as adopted byapplicable requirements of the PCAOB in Rule 3200T);and the SEC; and
discussedDiscussed with the Company’s internal auditors and Ernst & Young LLP the overall scope and plans for their respective audits, and then met with the internal auditors and Ernst & Young LLP, with and without management present, to discuss the results of their examinations, their evaluations of Evoqua Water Technologies Corp.’sthe Company’s internal controlscontrol over financial reporting and the overall quality of Evoqua Water Technologies Corp.’s financial reporting.
Based on the foregoing reviews and discussions, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-Kfor the fiscal year ended September 30, 2020,2021, be included in the Company’s Form 10-K, for filing with the SEC.
This report has been furnished by the members of the Audit Committee of the Board:
Audit CommitteeCommittee*
Peter M. Wilver, ChairmanCommittee Chairperson
Nick Bhambri
Gary A. Cappeline
Lynn C. Swann
* Sherrese Clarke Soares was appointed to the Audit Committee in December 2021, and therefore did not participate in the review, discussions or recommendation described in this report.
| ||||
|
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial ownership of our common stock as of December 18, 2020:20, 2021:
each person or entity who is known by us to beneficially own more than 5% of our common stock;
each of our directors and named executive officers; and
all of our directors and executive officers as a group.
Information with respect to beneficial ownership is based upon information furnished to us by each director, executive officer or stockholder, and on information reported in Schedules 13G filed with the SEC, as the case may be. The amounts and percentages of our common stock beneficially owned are reported on the basis of rules of the SEC governing the determination of beneficial ownership of securities. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. Persons who have a right to acquire beneficial ownership of our common stock within 60 days after December 18, 2020,20, 2021, including any shares of our common stock subject to an option that has vested or will vest within 60 days after December 18, 2020,20, 2021, are also deemed to be beneficial owners of our common stock. More than one person may be deemed to be a beneficial owner of the same securities.
Each stockholder’s percentage of beneficial ownership is based on 118,551,382120,707,940 shares of common stock outstanding as of December 18, 202020, 2021, plus the number of shares of common stock such stockholder has the right to acquire, including through the exercise of options, within 60 days of December 18, 2020.20, 2021.
| ||||
102 |
69
Unless otherwise indicated below, to our knowledge, all persons listed below have sole voting and investment power with respect to their shares of common stock, except to the extent authority is shared by spouses under applicable law. Unless otherwise indicated below, the address for each person or entity listed below is c/o Evoqua Water Technologies Corp., 210 Sixth Avenue, Pittsburgh, Pennsylvania 15222.
Name of Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Class | ||||||
5% Stockholders |
|
|
|
|
|
| ||
AEA(1) | 11,341,930 | 9.57 | % | |||||
BlackRock, Inc.(2) | 6,703,087 | 5.65 | % | |||||
The Vanguard Group(3) | 6,681,497 | 5.64 | % | |||||
Havelock Fund Investments Pte Ltd(4) | 6,037,705 | 5.09 | % | |||||
Directors and Named Executive Officers |
|
|
|
|
|
| ||
Ron C. Keating(5) | 2,480,604 | 2.09 | % | |||||
Benedict J. Stas(6) | 736,911 | * | ||||||
Hervé P. Fages(7) | 30,955 | * | ||||||
Rodney O. Aulick(8) | 151,936 | * | ||||||
Snehal A. Desai(9) | 98,226 | * | ||||||
Martin J. Lamb(10) | 372,296 | * | ||||||
Nick Bhambri(11) | 327,277 | * | ||||||
Gary A. Cappeline(12) | 7,893 | * | ||||||
Lisa Glatch | — | — | ||||||
Judd A. Gregg(13) | 157,298 | * | ||||||
Brian R. Hoesterey(14) | — | — | ||||||
Vinay Kumar(14) | — | — | ||||||
Lynn C. Swann | 21,861 | * | ||||||
Peter M. Wilver | 12,682 | * | ||||||
All executive officers and directors as a group (17 persons) | 5,205,243 | 4.39 | % | |||||
Name of Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Class | ||||||
5% Stockholders |
|
|
|
|
|
| ||
BlackRock, Inc.(1) | 12,664,663 | 10.49% | ||||||
Invesco Ltd.(2) | 6,358,089 | 5.27% | ||||||
The Vanguard Group(3) | 9,515,708 | 7.88% | ||||||
Directors and Named Executive Officers |
|
|
|
|
|
| ||
Ron C. Keating(4) | 2,387,321 | 1.98% | ||||||
Benedict J. Stas(5) | 557,973 | * | ||||||
Rodney O. Aulick(6) | 179,776 | * | ||||||
Hervé P. Fages(7) | 64,546 | * | ||||||
Vincent Grieco(8) | 148,427 | * | ||||||
Gary A. Cappeline(9) | 16,159 | * | ||||||
Nick Bhambri(10) | 335,543 | * | ||||||
Sherrese Clarke Soares | — | * | ||||||
Lisa Glatch(11) | 7,136 | * | ||||||
Judd A. Gregg(12) | 152,564 | * | ||||||
Martin J. Lamb(13) | 245,562 | * | ||||||
Lynn C. Swann(11) | 30,127 | * | ||||||
Peter M. Wilver(11) | 20,948 | * | ||||||
All executive officers and directors as a group (16 persons) | 4,574,240 | 3.79% | ||||||
| * | Represents beneficial ownership of less than 1% of our outstanding common stock. |
| (1) |
|
| ||||
|
The address for each of AEA EWT Holdings, AEA EWT Holdings GP, AEA Investors Participant Fund V LP, AEA Investors QP Participant Fund V LP, AEA Investors PF V LLC, AEA Investors LP, AEA Investors Fund V-A LP, AEA Investors Fund V-B LP, Dr. Garcia and Mr. Hoesterey is c/o AEA Investors LP, 666 Fifth Avenue, 36th Floor, New York, New York 10103. The address for each of AEA Investors Fund V LP, AEA Investors Partners V LP and AEA Management (Cayman) Ltd. is P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands.
Based on information as of |
| (2) | Based on information as of December 31, 2020 contained in a Schedule 13G filed with the SEC on February 16, 2021 by Invesco Ltd. The Schedule 13G indicates that Invesco Ltd. has sole voting power with respect to 6,216,953 shares and sole dispositive power with respect to 6,358,089 shares. The address for Invesco Ltd. is 1555 Peachtree Street NE, Suite 1800, Atlanta, GA 30309. |
| (3) | Based on information as of December 31, |
| (4) |
|
Includes |
Includes |
2022 Proxy Statement | ||||
103 |
| (6) | Includes 94,475 shares of common stock issuable upon exercise of options that have vested or will vest within 60 days after December 20, 2021, and 10,137 shares of common stock issuable upon vesting of restricted stock units that will vest within 60 days after December 18, 2020. |
| (7) | Includes |
| (8) | Includes |
| (9) | Includes |
| (10) | Includes (i) 134,788 shares held indirectly through the Nick Bhambri Revocable Trust dated June 23, 2008 (of which Mr. Bhambri is the trustee), (ii) 179,807 shares of common stock issuable upon exercise of options that have vested or will vest within 60 days after December |
Includes 4,039 shares of common stock issuable upon vesting of restricted stock units that will vest within 60 days after December 20, 2021. |
| (12) | Includes 114,607 shares of common stock issuable upon exercise of options that have vested or will vest within 60 days after December 20, 2021, and 4,039 shares of common stock issuable upon vesting of restricted stock units that will vest within 60 days after December 20, 2021. |
| (13) | Includes (i) |
|
|
|
|
| ||||
104 |
71
Securities Authorized for Issuance Under Equity Compensation Plans
The following sets forth the aggregate information of our equity compensation plans in effect as of September 30, 2020.2021. For further information, see Note 1718 of the Notes to our Consolidated Financial Statements included in our Form 10-K10-K. for the fiscal year ended September 30, 2020 under the caption “Item 8—Financial Statements and Supplementary Data.”
Plan category | Equity Compensation Plan Information | Equity Compensation Plan Information | |||||||||||||||||||||||||
| Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column | ||||||||||||||||||||||
Equity compensation plans |
|
|
|
|
|
| |||||||||||||||||||||
Approved by security holders | 8,196,544 | (1) | $ | 10.30 | (2) | 12,880,479 | (3) | 6,777,258 | (1) | $ | 13.87 | (2) | 11,013,470 | (3) | |||||||||||||
Not approved by security holders | — | — | — | — | — | — | |||||||||||||||||||||
Total | 8,196,544 | $ | 10.30 | 12,880,479 | 6,777,258 | $ | 13.87 | 11,013,470 | |||||||||||||||||||
| (1) |
|
| (2) | The weighted average exercise price does not take into account |
| (3) | Includes |
2022 Proxy Statement | ||||
105 |
Q&A—Information About the Annual Meeting
What is a proxy?
The Board is asking for your proxy. This means you are authorizing the persons named on the proxy card to vote your shares at the Annual Meeting according to your instructions. All shares represented by valid proxies that are received and not revoked before the Annual Meeting will be voted at the Annual Meeting in accordance with the stockholder’s specific voting instructions.
Why am I receiving, or being notified about the availability of, the Company’s proxy materials?
You are receiving, or being notified about the availability of, the Company’s proxy materials because you owned shares of the Company’s common stock, $0.01 par value per share (the “common stock”), at the close of business on December 20, 2021 (the “Record Date”). All stockholders of record as of the Record Date are entitled to attend, participate in and vote at the Annual Meeting.
Each outstanding share of the Company’s common stock on the Record Date is entitled to one vote on each of the matters to be voted on at the Annual Meeting. As of the Record Date, 120,707,940 shares of the Company’s common stock were outstanding.
Why did I receive a Notice of Internet Availability of Proxy Materials in the mail instead of a full set of proxy materials?
In accordance with rules and regulations adopted by the SEC, the Company may furnish proxy materials by providing internet access to those documents instead of mailing a printed copy of the Company’s proxy materials to each stockholder of record. The Notice contains instructions on how to access the proxy materials and vote online, or alternatively, request a paper copy of the proxy materials and a proxy card or voting instruction card. Proxy materials or a Notice are first being made available, released, or mailed to stockholders on January 5, 2022. We believe this method of delivery will expedite the delivery of proxy materials to stockholders and lower the Company’s mailing costs.
What if I receive more than one Notice of Internet Availability of Proxy Materials, proxy card or voting instruction form?
If you receive more than one Notice, proxy card or voting instruction form because your shares are held in multiple accounts or registered in different names or addresses, please provide separate voting instructions for shares held in each of your accounts to ensure that all of your shares will be voted.
| ||||
|
Certain RelationshipsWhat matters am I voting on, how may I vote on each matter and Related Party Transactionshow does the Board recommend that I vote on each matter?
The following table sets forth each of the proposals you are being asked to vote on, how you may vote on each proposal, and how the Board recommends that you vote on each proposal:
Proposal | Description | How may I vote? | How does the Board recommend that I vote? | |||
Proposal 1 | Election of Three Class I Director Nominees For Three-Year Terms | FOR the election of all Class I director nominees or WITHHOLD for one or more of the Class I director nominees | FOR ALL | |||
Proposal 2 | Approval, on an Advisory Basis, of the Compensation of Our Named Executive Officers | FOR, AGAINST, or ABSTAIN | FOR | |||
Proposal 3 | Ratification of the Appointment of Ernst & Young LLP as Our Independent Registered Public Accounting Firm for the Fiscal Year Ending September 30, 2022 | FOR, AGAINST, or ABSTAIN | FOR | |||
How can I attend and participate in the Annual Meeting?
Virtual Meeting Format. The Annual Meeting will be hosted online via live webcast through Broadridge Financial Solutions, Inc. We have designed the virtual Annual Meeting to provide stockholders with substantially the same opportunities to participate as if the Annual Meeting were held in person.
Attendance and Participation. If you were a stockholder at the close of business on the Record Date, you may attend and participate in the Annual Meeting by visiting www.virtualshareholdermeeting.com/AQUA2022 and entering the 16-digit control number included on your Notice, proxy card, or voting instruction card. The Annual Meeting will begin promptly at 1:00 p.m. (Eastern Time). We encourage you to access the Annual Meeting prior to the start time. Online check-in will begin at 12:45 p.m. (Eastern Time).
The virtual Annual Meeting platform is fully supported across browsers (Edge, Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Stockholders should ensure that they have a strong internet connection if they intend to attend and/or participate in the Annual Meeting. Attendees should allow plenty of time to log in and ensure that they can hear streaming audio prior to the start of the Annual Meeting.
Even if you plan to attend and participate in the Annual Meeting, we encourage you to vote your shares in advance using one of the methods described in this Proxy Statement to ensure that your vote will be represented at the Annual Meeting.
Questions and Information Accessibility. The virtual Annual Meeting format allows stockholders to communicate with us during the Annual Meeting so they can ask questions of our management and Board, as appropriate. If you wish to submit a question during the Annual Meeting, you may do so by logging into the virtual meeting platform at www.virtualshareholdermeeting.com/AQUA2022, typing your question into the “Ask a Question” field, and clicking “Submit.”
Questions pertinent to the Annual Meeting will be answered in the live Question and Answer session during the Annual Meeting, subject to time constraints. Any such questions that cannot be answered during the Annual Meeting due to time constraints will be posted and answered on the Investor Relations section of the Company’s website, aqua.evoqua.com, as soon as practicable after the Annual Meeting. We reserve the right to group questions on the same topic, to edit profanity or other inappropriate language, and to exclude questions regarding topics that are not pertinent to Annual Meeting matters or that are otherwise inappropriate.
2022 Proxy Statement | ||||
107 |
Materials for the Annual Meeting, including the rules of conduct and the list of our stockholders of record, will be available during the Annual Meeting at www.virtualshareholdermeeting.com/AQUA2022.
Technical Difficulties. If you encounter any difficulties accessing the virtual Annual Meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual meeting login page for assistance. Technical support will be available beginning approximately 30 minutes prior to the start of the Annual Meeting through its conclusion.
What is the difference between holding shares as a “stockholder of record” and as a “beneficial owner”?
Stockholder of Record. If your shares are registered directly in your name with the Company’s transfer agent and registrar, American Stock Transfer & Trust Company, LLC, you are considered the “record owner” or “stockholder of record” with respect to those shares. We have made available, released, or mailed a Notice or a full set of printed proxy materials (including this Proxy Statement, the 2021 Annual Report, and proxy card with a postage-paid envelope), as applicable, to stockholders of record as of the Record Date. Stockholders of record as of the Record Date have the right to vote electronically online during the Annual Meeting or in advance of the Annual Meeting through submission of a proxy.
Beneficial Owner. If your shares are held in an account with a broker, bank, or other nominee (i.e., held “in street name”), you are considered the “beneficial owner” and not the “record owner” of those shares. The Notice or a full set of printed proxy materials will have been forwarded to you by your broker, bank, or other nominee.
As the beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote your shares. Please use the voting instruction card provided by your broker, bank, or other nominee. If you do not provide your broker, bank, or other nominee with instructions on how to vote your shares, your broker, bank, or other nominee will be able to vote your shares only with respect to Proposal 3. See “—What is a ‘broker non-vote’?” below.
How do I vote if I am a stockholder of record?
As a stockholder of record, you may vote your shares using any of the methods listed below. Except as provided below, if you wish to vote in advance of the Annual Meeting by internet, telephone, or mail, your vote must be received prior to 11:59 p.m. (Eastern Time) on February 15, 2022.
By Internet: To vote online, please visit www.proxyvote.com or, if you received printed copies of your proxy materials, scan the QR code located on your proxy card—you will need the 16-digit control number included on your Notice or proxy card.
By Telephone: To vote by telephone, please call the number listed on your Notice or proxy card and follow the recorded instructions — you will need the 16-digit control number included on your Notice or proxy card.
By Mail: All stockholders of record who received paper copies of our proxy materials can vote by marking, signing, dating, and returning their written proxy card. If you are a stockholder of record and received a Notice, you may request a written proxy card by following the instructions included in the Notice. If you sign and return your proxy card but do not mark any selections giving specific voting instructions, your shares represented by that proxy will be voted as recommended by the Board.
At the Annual Meeting: Please follow the instructions for attending the Annual Meeting and voting electronically online during the Annual Meeting posted at www.virtualshareholdermeeting.com/AQUA2022 — you will need the 16-digit control number included on your Notice, proxy card, or voting instruction card. All votes must be received before the polls close during the Annual Meeting. Voting electronically online during the Annual Meeting will revoke any previous votes.
Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy card or vote on the internet or by telephone by the applicable deadline so that your vote will be counted if you later decide not to attend the Annual Meeting.
| ||||
108 |
How do I vote if I am a beneficial owner?
As the beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote the shares in your account. You should follow the voting instructions provided by your broker, bank, or other nominee. You will receive, or be provided access to, proxy materials and voting instructions for each account that you have with a broker, bank, or other nominee. If you wish to change the voting instructions that you provided your broker, bank, or other nominee, you should follow the instructions from your broker, bank, or other nominee.
Beneficial owners may also attend the Annual Meeting and vote electronically online during the Annual Meeting by logging into the virtual meeting platform at www.virtualshareholdermeeting.com/AQUA2022 — you will need the 16-digit control number included on your Notice or voting instruction card from your broker, bank, or other nominee. All votes must be received before the polls close during the Annual Meeting. Voting electronically online during the Annual Meeting will revoke any previous votes.
What can I do if I change my mind after I vote?
If you are a stockholder of record, you can revoke your proxy and/or change your vote at any time before the polls close during the Annual Meeting as follows:
Revoke your proxy: Mail written notice of revocation of your proxy to our General Counsel and Secretary at 210 Sixth Avenue, Pittsburgh, PA 15222;
Change your vote by Internet or telephone: Vote again over the internet or by telephone prior to 11:59 p.m. (Eastern Time) on February 15, 2022;
Change your vote by mail: Sign and mail, on a timely basis, another proxy card with a later date; or
Change your vote at the Annual Meeting: Attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/AQUA2022 and vote again.
If you hold your shares through a bank, broker, or other nominee, you can revoke your proxy and/or change your vote as follows:
Give new voting instructions: Contact the broker, bank, or other nominee holding your shares and follow its instructions for changing your vote;
Change your vote at the Annual Meeting: Attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/AQUA2022 and vote again.
All shares represented by valid proxies received and not revoked will be voted at the Annual Meeting in accordance with the stockholder’s specific voting instructions.
What if I submit my proxy but do not specify how I want to vote?
If you are a stockholder of record and you submit your proxy, but do not specify how you want to vote your shares, we will vote them as follows:
FOR the election of all three Class I director nominees for three-year terms;
FOR the approval, on an advisory basis, of the compensation of our named executive officers; and
FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2022.
If you are a beneficial owner, your broker, bank, or other nominee will determine whether it has discretion to vote your shares on your behalf. In general, your broker, bank or nominee may vote on your behalf with respect to matters that are considered “routine.” Your broker, bank or nominee may not vote on your behalf with respect to matters that are “non-routine.” See “—What is a ‘broker non-vote’?” below.
What is a “broker non-vote”?
Under the rules of the NYSE, if you are a beneficial owner, your broker, bank, or other nominee has discretion to vote your shares on “routine” matters without receiving voting instructions from you. Proposal 3 (ratification of
2022 Proxy Statement | ||||
109 |
The followingthe appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2022) is considered a descriptionroutine matter. However, Proposal 1 (the election of transactions sincethree Class I directors for three-year terms) and Proposal 2 (approval, on an advisory basis, of the beginningcompensation of our 2020 fiscal yearnamed executive officers) are considered “non-routine” matters. Accordingly, if you hold your shares through a broker, bank, or other nominee, your broker, bank, or other nominee will not be permitted to vote your shares on Proposal 1 or Proposal 2 unless you provide proper voting instructions, resulting in which we were a participant, where (i)broker non-vote. Broker non-votes will have no effect on the amount involved exceededvote for Proposal 1 or will exceed $120,000,Proposal 2.
How many shares must be present or represented to conduct business at the Annual Meeting?
Under our Third Amended and (ii) any of our executive officers, directors orRestated Bylaws, the holders of more than 5%record of any classa majority of ourthe voting securities, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest inpower of the transaction. We believe the terms obtained or the consideration that we paid or received, as applicable, in connection with the transactions described below are comparable to terms available or amounts that would be paid or received, as applicable, in arm’s-length transactions with parties unrelated to us.
Transactions with AEA
We became a standalone company in January 2014, with the assistance of AEA as our private equity sponsor, when we acquired, through our wholly-owned subsidiaries, EWT Holdings II Corp.issued and EWT Holdings III Corp., all of the outstanding shares of Siemens Water Technologies,capital stock of the Company entitled to vote, present in person or represented by proxy at the Annual Meeting, will constitute a groupquorum for the transaction of legal entity businesses formerly ownedbusiness at the Annual Meeting. Stockholders of record who return a proxy or vote electronically during the Annual Meeting will be considered part of the quorum. Abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum.
What vote is required to approve each of the proposals?
The following table sets forth the voting requirements with respect to each of the proposals. As an advisory vote, Proposal 2 is not binding on the Company. However, the Compensation Committee and the Board value the opinions expressed by Siemens Aktiengesellschaft. the Company’s stockholders on this issue and will consider the outcome of this vote when making future decisions regarding executive compensation.
| Proposal | Voting Requirement | |||
Proposal 1 | Election of Three Class I Director Nominees for Three-Year Terms | Each Class I director nominee must be elected by a plurality of the votes cast. A plurality means that the director nominees who receive the most votes of all of the votes cast for Proposal 1 will be elected as directors (up to the maximum number of directors to be elected at the Annual Meeting). A “WITHHOLD” vote will have no effect on the vote. Broker non-votes have no effect. | ||
Proposal 2 | Approval, on an Advisory Basis, of the Compensation of Our Named Executive Officers | Proposal 2 must be approved by the vote of the holders of a majority of the voting power of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote. If a stockholder votes to “ABSTAIN,” it has the same effect as a vote “AGAINST.” Broker non-votes have no effect. | ||
Proposal 3 | Ratification of the Appointment of Ernst & Young LLP as Our Independent Registered Public Accounting Firm for the Fiscal Year Ending September 30, 2022 | Proposal 3 must be approved by the vote of the holders of a majority of the voting power of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote. If a stockholder votes to “ABSTAIN,” it has the same effect as a vote “AGAINST.” If you are a beneficial owner, your broker, bank, or other nominee may vote your shares on this proposal without receiving voting instructions from you. | ||
We refer todo not know of any other business properly submitted for the Annual Meeting as of the date of this acquisitionProxy Statement.
| ||||
110 |
Who will count the votes?
A representative of Broadridge Financial Solutions, Inc. will act as the “Acquisition.”inspector of elections and count the votes.
Management Agreement. On January 7, 2014,Where can I find the voting results?
We will announce the preliminary voting results at the Annual Meeting. We will publish final voting results on a Current Report on Form 8-K that we entered into a management agreementwill file with AEA relating to the provision of its advisory and consulting services. The agreement required us to pay AEA an annual management fee of approximately $4.0 million per year following the completionSEC within four business days of the AcquisitionAnnual Meeting.
Who will pay the costs of soliciting these proxies?
We will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and continuingmailing of the Notice or a full set of the proxy materials (including the Proxy Statement, the 2021 Annual Report and proxy card with postage-paid envelope), as applicable, and any additional information furnished to stockholders. We have retained Okapi Partners LLC to assist with the solicitation of proxies for as long as AEA, either directly or indirectly, owns anya fee not to exceed $40,000, plus reimbursement of our or our subsidiaries’ equity. The annual management fee was payable in quarterly installments of approximately $1.0 million, in advance, on the first day of each calendar quarter. The agreement also required us to reimburse AEA for its reasonable out-of-pocket expenses. Original solicitation of proxies may be supplemented by electronic means, mail, facsimile, telephone or personal solicitation by our directors, officers, or other employees. No additional compensation will be paid to our directors, officers, or other employees for such services. Copies of solicitation materials will be furnished to brokers, banks, and other nominees holding shares of voting stock beneficially owned by others to forward to such beneficial owners. In accordance with SEC rules, we may reimburse brokers, banks, and other nominees for their reasonable costs of forwarding proxy materials to beneficial owners.
Are you “householding” for stockholders sharing the same address?
The SEC has adopted rules that permit companies and expenses incurred in connectionintermediaries, such as brokers, to satisfy delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the Acquisition, its provisionsame address by delivering a single proxy statement or annual report, as applicable, addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies.
Evoqua has not instituted householding for stockholders of ongoing advisoryrecord. However, certain brokerage firms may have instituted householding for beneficial owners of shares of Evoqua’s common stock held through brokerage firms. If your household has multiple accounts holding shares of Evoqua’s common stock, you may already have received a householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of this Proxy Statement, the Notice, or the 2021 Annual Report. The broker will arrange for delivery of a separate copy of these materials promptly upon your request. Evoqua stockholders may decide at any time to revoke a decision to household, and consulting services, monitoring its investment in us and developing, negotiating, performing or enforcing any agreements or documents relatingthereby receive multiple copies.
What is the deadline for stockholders to its investment in us. We believe thatpropose actions for consideration at the agreement and the services mentioned above are, or were on terms at least as favorable to us, as we would expect to negotiate with unrelated third parties. In connection with our initial public offering, the agreement was terminated on November 6, 2017. While the agreement did not require us to pay AEA a termination fee, we are required to reimburse AEAAnnual Meeting of Stockholders for its reasonable out-of-pocket costs and expenses incurred in connection with its provision of ongoing advisory and consulting services. We incurred expenses of less than $20,000 in the fiscal year endedending September 30, 2020.2022?
Pursuant to the management agreement, we agreed to indemnify AEA against any claims or liabilities relating to or arising out of actions taken by AEA relating to the provision of its advisory and consulting services (under the terms of the agreement) or the operation of our business, except for claims or liabilities that are shown to have resulted from actions taken by AEA in bad faith, or due to AEA’s gross negligence or willful misconduct. If for any reason (other than the bad faith, gross negligence or willful misconduct of AEA as provided above) the foregoing indemnity is unavailable to or insufficient to hold AEA harmless, then we will be required to contribute to any amount paid or payable by AEA as a result of such claims or liabilities in such proportion as is appropriate to reflect (i) the relative benefits received by us, on the one hand, and AEA, on the other hand, (ii) the relative fault of us and AEA and (iii) any relevant equitable considerations, subject to the limitation that in any event AEA’s aggregate contribution to all claims and liabilities shall not exceed the amount of fees actually received by AEA under the agreement (notwithstanding a finding of bad faith, gross negligence or willful misconduct of AEA). Under the agreement, AEA did not have any liability to us in connection with the services it rendered pursuant to the agreement (notwithstanding a finding of bad faith, gross negligence or willful misconduct of AEA). Those indemnification provisions survive termination of the agreement.
Stockholders’ Agreement and Voting Proxies. We, AEA, certain members of management and certain of our stockholders entered into a stockholders’ agreement, dated as of December 11, 2014 (the “Stockholders’ Agreement”), in connection with the Acquisition. The Stockholders’ Agreement provides that, for so long as certain affiliates of AEA hold an aggregate of at least 10% of our outstanding common stock, AEA will be entitledStockholders who wish to nominate at least one individualpersons for election to our Board or propose other matters to be considered at our Annual Meeting of Stockholders for the fiscal year ending September 30, 2022 (the “2022 Annual Meeting”) must provide us with advance written notice of their director nomination or stockholder proposal, as well as the information specified in our Third Amended and Restated Bylaws, no earlier than October 19, 2022, and no later than November 18, 2022. However, in the event that the date of the 2023 Annual Meeting is advanced by more than 30 days, or delayed by more than 70 days, from the anniversary date of the Annual Meeting, notice by stockholders, to be timely, must be delivered not earlier than the 120th day prior to the 2023 Annual Meeting and not later than the close of business on the later of the 90th day prior to the 2023 Annual Meeting and 10th day following the day on which public announcement of the date of the 2023 Annual Meeting is first made. Stockholders are advised to review our BoardThird Amended and Restated Bylaws, which contain the Nominatingrequirements for advance notice of director nominations and Corporate Governance Committee thereof will nominatestockholder proposals. Notice of director nominations and recommendstockholder proposals must be mailed to our stockholders that such individual be electedGeneral Counsel and Secretary at 210 Sixth Avenue, Pittsburgh, PA 15222. The requirements for advance notice of stockholder proposals under our Third Amended and Restated Bylaws do not apply to our Board. Certain of our stockholders have entered into voting proxies in which they agreedproposals properly submitted under Rule 14a-8 under the Exchange Act, as those stockholder proposals are governed by Rule 14a-8. We reserve the right to votereject, rule out
| ||||
|
of order or take other appropriate action with respect to any director nomination or stockholder proposal that does not comply with our Third Amended and Restated Bylaws and other applicable requirements.
September 7, 2022 is the deadline for stockholders to submit proposals to be included in our Proxy Statement for the 2023 Annual Meeting under Rule 14a-8 under the Exchange Act. However, if the date of the 2023 Annual Meeting, is changed by more than 30 days from the anniversary of the date of the Annual Meeting, then the deadline will be a reasonable time before we begin to print and send our Proxy Statement for the 2023 Annual Meeting. Proposals by stockholders must comply with all requirements of their shares to elect such individualapplicable rules of the SEC, including Rule 14a-8, and be mailed to our Board. As a result of our secondary offering in December 2020, AEAGeneral Counsel and its affiliates hold an aggregate of less than 10% of our outstanding common stock and therefore, AEA no longer hasSecretary at 210 Sixth Avenue, Pittsburgh, PA 15222. We reserve the right to nominate one individual to our boardreject, rule out of directors.
Registration Rights Agreement. The parties to the Stockholders’ Agreement described above also entered into a registration rights agreement in connection with the Acquisition, which was amended and restated in connection with our initial public offering and further amended on November 22, 2019 and November 25, 2020 (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, holders of a total of 16,382,793 shares of our common stock as of December 18, 2020 will have the right to require us to register these shares under the Securities Act of 1933, as amended (the “Securities Act”), under specified circumstancesorder, or will have incidental registration rights as described below. After registration pursuant to these rights, these shares will become freely tradable without restriction under the Securities Act.
Demand Registration Rights. Subject to certain restrictions, AEA may request that we register all or a portion of their common stock for sale under the Securities Act. We will effect the registration as requested in writing by AEA, unless in the good faith judgment of our Board, such registration would materially and adversely interfere with certain existing or potential material transactions or events involving the Company and should be delayed. We are not obligated to file a registration statement pursuant to these demand provisions on more than five occasions on Form S-1; however, AEA is entitled to make an unlimited number of demands for registration on Form S-3.
Piggyback Registration Rights. In addition, if at any time, we register any shares of our common stock (other than pursuant to registrations on Form S-4 or Form S-8), the holders of all shares having registration rights are entitled, subject to certain exceptions, to receive notice at least five business days prior to the filing of the registration statement, or, in the case of holders who are individuals, no more than five business days after such filing, and to include all or a portion of their common stock in the registration.
In the event that any registration in which the holders of registrable shares participate pursuant to the Registration Rights Agreement is an underwritten public offering, the number of registrable shares to be included may, in specified circumstances, be limited.
Other Provisions. We will pay all registration and offering expenses, including, amongtake other things, reasonable fees and disbursements of a single special counsel for AEA and of a single special counsel for all other selling stockholders, related to any demand or piggyback registration. The Registration Rights Agreement contains customary cross-indemnification provisions, pursuant to which we are obligated to indemnify any selling stockholders in the event of material misstatements or omissions in the registration statement attributable to us, and they are obligated to indemnify us for material misstatements or omissions in the registration statement attributable to them. A particular stockholder’s shares shall no longer be considered registrable shares, to which demand and piggyback registration rights apply, (i) when such shares have been disposed of under an effective registration statement or (ii) when such stockholder can sell, orappropriate action with respect to AEA, has sold, such shares under Rule 144 of the Securities Act. In addition, certain parties to the Registration Rights Agreement have agreed to not sell any shares pursuant to Rule 144 of the Securities Act or in another private placement for a period of four years following the closing of our initial public offering, unless consented to by our Board or sold to certain permitted transferees. The Registration Rights Agreementproposal that does not provide for any cash penalties orcomply with Rule 14a-8 and other penalties associated with any delays in registering any shares.
Family Relationships
The son of James M. Kohosek, our Executive Vice President, Chief Administrative Officer, is an employee of the Company. He is employed in a non-executive officer capacity and does not report to an executive officer. His total compensation during the fiscal year ended September 30, 2020, including base salary, bonus and benefits, exceeded the $120,000 related person transaction threshold and, as a result, was reviewed by the Audit Committee. He participates in compensation and incentive plans or arrangements on the same basis as other similarly situated employees.applicable requirements.
| ||||
|
Policies and Procedures for Related Party Transactions
Our Board has adopted a written policy providing that the Audit Committee will review and approve or ratify transactions in excess of $120,000 of value in which the Company is a participant and in which a related party (as defined below) has or will have a direct or indirect material interest. The General Counsel and Corporate Controller shall review all of the relevant facts and circumstances of all related party transactions and either (a) bring to the Audit Committee for approval or ratification any transaction (i) exceeding $120,000 or (ii) considered potentially material to the Company’s business, financial condition, results of operations or prospects, or (b) approve or disapprove of the entry into any transaction not meeting the conditions specified in clauses (a)(i) or (a)(ii) of this paragraph.
The Audit Committee or the General Counsel and Corporate Controller, as the case may be, may approve only those related party transactions that they determine are on terms, taken as a whole, that are no less favorable to us than could be obtained in an arm’s-length transaction with an unrelated third party and that the Audit Committee or the General Counsel and Corporate Controller, as the case may be, determine are not inconsistent with the best interests of the Company. In particular, our policy with respect to related party transactions requires our Audit Committee or the General Counsel and Corporate Controller, as the case may be, to consider (i) whether the transaction was undertaken in the ordinary course of business, (ii) whether the related party transaction was initiated by the Company or the related party, (iii) the availability of other sources for comparable products or services, whether the transaction with the related party is proposed to be, or was, entered into on terms no less favorable to the Company than terms that could have been reached with an unrelated third party and the duration of the transaction and the terms available to unrelated third parties and employees generally, (iv) the purpose of, and the potential benefits to the Company of, the related party transaction, (v) the impact on a director’s independence in the event that the related party is a director, director nominee, immediate family member of a director or director nominee or an entity in which any such person has an interest or relationship, (vi) the approximate amount involved in the related party transaction, (vii) the related party’s interest in the related party transaction and (viii) any other information regarding the related party transaction or the related party that would be material to investors in light of the circumstances of the particular transaction or would impair the independence of an independent director or present an improper conflict of interest for any director or executive officer.
For the purposes of this policy, the Company deems a “related party” to be (i) any person who is or was at any time since the beginning of the last completed fiscal year an executive officer, director or nominee for director, or any immediate family member of such person, (ii) any person beneficially owning more than 5% of any class of the Company’s voting securities, (iii) any affiliates of the Company, (iv) any entities for which investments in their equity securities would be required to be accounted for by the equity method by the investing entity, (v) any trusts for the benefit of employees that are managed by or under the trusteeship of management and (vi) all members of the Company’s Executive Leadership Team, Finance Leadership, Plant Controllers, Segment Leadership and any immediate family member of such person.
| ||||
|
The Report of the Audit Committee of the Board and the Report shallof the Compensation Committee of the Board will not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shallwill not be deemed to be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate itthem by reference into such filing. In addition, the information contained on, or that can be accessed through, our website is not part of this Proxy Statement and references to our website addresses in this Proxy Statement are inactive textual references only.
Access to Reports and Other Information
Our website is www.evoqua.com. Our Annual Reportannual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Proxy Statements and other documents filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available on our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our Corporate Governance Guidelines, Code of Ethics and Business Conduct, and Board committee charters are also available on our website. We will provide, free of charge, a copy of any of our corporate documents listed above upon written request to our General Counsel and Secretary at 210 Sixth Avenue, Pittsburgh, Pennsylvania 15222.
Other Matters That May Come Before the Annual Meeting
We do not know of any other matters that will be considered at the Annual Meeting. However, if any other proper business should come before the meeting, the persons named in the proxy card will have discretionary authority to vote according to their best judgment to the extent permitted by applicable law.
* * *
By Order of the Board of Directors,
Vincent Grieco
Executive Vice President,
Secretary and General Counsel
Pittsburgh, Pennsylvania
January 5, 20212022
2022 Proxy Statement | ||||
113 |
Non-GAAP Financial Measures
We have included in this Proxy Statement measures of financial performance that are not calculated and presented in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company reports its financial results in accordance with GAAP. However, management believes that certain non-GAAP financial measures provide users of the Company’s financial information with additional useful information in evaluating operating performance. The presentation of this additional information is not meant to be considered in isolation or as a substitute for GAAP measures.
FISCAL YEAR 2021 AIP
| Evoqua Global Adjusted EBITDA | Evoqua Global Adjusted EBITDA is defined as net income (loss) before interest expense, income tax benefit (expense), and depreciation and amortization, adjusted for the impact of certain other items, including restructuring and related business transformation costs, share-based compensation, transaction costs, and other gains, losses and expenses that we believe do not directly reflect our underlying business operations. For the periods presented, other gains, losses, and expenses include the following: iv. amounts related to the prior year sale of the Memcor® product line; v. expenses incurred by the Company as a result of the COVID-19 pandemic, including additional charges for personal protective equipment, increased costs for facility sanitization and one-time payments to certain employees; We also adjust for the impacts of acquisitions and divestitures so that payout levels are not artificially inflated or impaired by factors unrelated to the ongoing operation of the business. For purposes of the fiscal year 2020 AIP, we also included an adjustment to reflect the payment of fiscal year 2020 AIP bonuses to Executive Leadership Team members in cash, rather than in RSUs. | |
2022 Proxy Statement | ||||
A-1 |
| ISS Segment Adjusted EBITDA | We calculate Segment Adjusted EBITDA in the ISS Segment as ISS Segment operating profit (as determined in accordance with GAAP) plus add-backs for depreciation and amortization, restructuring and related business transformation costs, transaction costs and other gains, losses, and expenses. Other losses, (gains), and expenses, as discussed above, distinct to our ISS Segment include a loss on the divestiture of the Lange Product Line. We also adjust for the impacts of acquisitions and divestitures so that payout levels are not artificially inflated or impaired by factors unrelated to the ongoing operation of the business. For purposes of the fiscal year 2020 AIP, we also included an adjustment to reflect the payment of fiscal year 2020 AIP bonuses to Executive Leadership Team members in cash, rather than in RSUs. | |
| APT Segment Adjusted EBITDA | We calculate Segment Adjusted EBITDA in the APT Segment as APT Segment operating profit (as determined in accordance with GAAP) plus add-backs for depreciation and amortization, restructuring and related business transformation costs, transaction costs and other gains, losses, and expenses. Other losses, (gains), and expenses, as discussed above, distinct to our APT segment include the following: i. trailing costs from the sale of the Memcor® product line; ii. net pre-tax benefit on the sale of the Memcor product line; We also adjust for the impacts of acquisitions and divestitures so that payout levels are not artificially inflated or impaired by factors unrelated to the ongoing operation of the business. For purposes of the fiscal year 2020 AIP, we also included an adjustment to reflect the payment of fiscal year 2020 AIP bonuses to Executive Leadership Team members in cash, rather than in RSUs. | |
| Evoqua Global Adjusted Free Cash Flow | We calculate Evoqua Global Adjusted Free Cash Flow as net cash from operating activities (as determined in accordance with GAAP and as reported in our Statement of Cash Flows) less capital expenditures as well as adjustments for other significant items that impact current results which management believes are not related to our ongoing operations and performance. Our definition of free cash flow does not consider certain non-discretionary cash payments, such as debt. | |
FISCAL YEAR 2022 LTIP
| Cumulative Organic Revenue Growth ($) | Cumulative organic revenue growth dollars means the increase in revenue over the performance period, adjusted for acquisitions and divestitures. | |
| Average Adjusted EBITDA Margin (%) | Average adjusted EBITDA margin means the average of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), as adjusted to exclude certain other items, including restructuring costs, stock-based compensation, transaction costs, acquisitions and divestitures and certain other gains or losses for years one, two, and three, divided by revenue for years one, two, and three. |
| ||||
|
Appendix AGAAP TO NON-GAAP RECONCILIATIONS
Non-GAAP Financial MeasuresAdjusted EBITDA
ADJUSTED EBITDA RECONCILIATION
We use the non-GAAP financial measure "Adjusted EBITDA" in evaluating our past performance and future prospects. Adjusted EBITDA is defined as net income (loss) before interest expense, income tax benefit (expense), and depreciation and amortization, adjusted for the impact of certain other items, including restructuring and related business transformation costs, purchase accounting adjustment costs, non-cash share-based compensation, transaction costs, and other gains, losses, and expenses. expenses that we believe do not directly reflect our underlying business operations.
Adjusted EBITDA is one of the primary metrics used by management to evaluate the financial performance of our business. We present Adjustedadjusted EBITDA which is not a recognized financial measure under GAAP, because we believe it is frequently used by analysts, investors, and other interested parties to evaluate and compare operating performance and value companies inwithin our industry. Further, we believe it is helpful in highlighting trends in our operating results and provides greater clarity and comparability period over period to management and our investors regarding the operational impact of long-term strategic decisions regardingrelating to capital structure, the tax jurisdictions in which we operate and capital investments. In addition, adjusted EBITDA highlights true business performance by removing the impact of certain items that management believes do not directly reflect our underlying operations and provides investors with greater visibility into the ongoing organic drivers of our business performance.
Management uses adjusted EBITDA to supplement GAAP measures of performance as follows:
to assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance;
in our management incentive compensation, which is based in part on components of adjusted EBITDA;
in certain calculations under our senior secured credit facilities, which use components of adjusted EBITDA;
to evaluate the effectiveness of our business strategies;
to make budgeting decisions; and
to compare our performance against that of other peer companies using similar measures.
In addition to the above, our chief operating decision maker uses adjusted EBITDA of each reportable operating segment to evaluate the operating performance of such segments. Adjusted EBITDA on a segment basis is defined as earnings before depreciation and amortization, adjusted for the impact of certain other items that have been reflected at the segment level. Adjusted EBITDA of the reportable operating segments do not include certain charges that are presented within corporate activities. These charges include certain restructuring and other business transformation charges that have been incurred to align and reposition the Company to the current reporting structure, acquisition related costs (including transaction costs and integration costs) and share-based compensation charges.
Adjusted EBITDA should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP. The financial results prepared in accordance with GAAP and the reconciliations from these results included below should be carefully evaluated. You are encouraged to evaluate each adjustment and the reasons we consider it appropriate for supplemental analysis. In addition, in evaluating adjusted EBITDA, you should be aware that in the future, we may incur expenses similar to the adjustments in the presentation of adjusted EBITDA. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, adjusted EBITDA may not be comparable to similarly titled measures used by other companies in our industry or across different industries.
2022 Proxy Statement | ||||
A-3 |
The following is a reconciliation of our net income (loss) to Adjustedadjusted EBITDA:
($ in millions) | FY2020 | FY2019 | FY2021 | FY2020 | ||||||||||||
Net income (loss) | $ | 114.4 | $ | (8.5) | ||||||||||||
Net income | $ | 51.7 | $ | 114.4 | ||||||||||||
Income tax expense | 7.4 | 9.6 | 10.1 | 7.4 | ||||||||||||
Interest expense | 46.6 | 58.6 | 37.5 | 46.6 | ||||||||||||
Operating profit | $ | 168.4 | $ | 59.7 | $ | 99.3 | $ | 168.4 | ||||||||
Depreciation and amortization | 107.3 | 98.2 | 113.7 | 107.3 | ||||||||||||
EBITDA | $ | 275.7 | $ | 157.9 | $ | 213.0 | $ | 275.7 | ||||||||
Restructuring and related business transformation costs | 17.4 | (1) | 24.2(5) | 11.3 | (1) | 17.4(5) | ||||||||||
Share-based compensation | 10.5 | (2) | 20.0(6) | 17.7 | (2) | 10.5(6) | ||||||||||
Transaction costs | 1.9 | (3) | 11.6(7) | 1.6 | (3) | 1.9(7) | ||||||||||
Other (gains), losses and expenses | (65.9 | )(4) | 21.3(8) | 7.3 | (4) | (65.9)(8) | ||||||||||
Adjusted EBITDA | $ | 239.6 | $ | 235.0 | $ | 250.9 | $ | 239.6 | ||||||||
Revenue | $ | 1,429.5 | $ | 1,444.4 | $ | 1,464.4 | $ | 1,429.5 | ||||||||
Adjusted EBITDA as a % of Revenue | 16.8 | % | 16.3% | 17.1 | % | 16.8% | ||||||||||
| (1) | Primarily comprised of severance costs, relocation costs, recruiting expenses, certain non-cash charges and third-party consultant costs associated with the restructuring initiatives to reduce the cost structure and rationalize location footprint following the sale of the Memcor® product line, |
| (2) | Represents |
| (3) | Removal of expenses associated with recent acquisitions and divestitures and post-acquisition integration costs including adjustments to earn-outs. |
| (4) |
|
| (5) | Primarily comprised of severance costs, relocation costs, recruiting expenses, certain non-cash charges and third-party consultant costs associated with the restructuring initiatives to reduce the cost structure and rationalize location footprint following the sale of the Memcor® product line, the two-segment realignment and other various restructuring and efficiency initiatives. |
| (6) | Represents non-cash share-based compensation. |
| (7) | Removal of expenses associated with recent acquisitions and divestitures and post-acquisition integration costs including adjustments to earn-outs. |
| (8) | Deduction of gains and add back of losses associated with foreign exchange and other unusual business gains and expenses consisting of net |
|
|
| ||||
A-4 |
A-1
Adjusted EBITDA on a segment basis is defined as earnings before interest expense, income tax benefit (expense) and depreciation and amortization, adjusted for the impact of certain other items that have been reflected at the segment level. We do not present net income on a segment basis because we do not allocate interest expense or income tax benefit (expense) to our segments, making operating profit the most comparable GAAP metric. The following is a reconciliation of our segment operating profit to our segment adjusted EBITDA:
| Year Ended September 30, | $ Variance | % Variance | ||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||
(In millions) | Integrated Solutions and Services | Applied Product Technologies | Integrated Solutions and Services | Applied Product Technologies | Integrated Solutions and Services | Applied Product Technologies | Integrated Solutions and Services | Applied Product Technologies | ||||||||||||||||||||||||||||||||
Operating Profit | $147.3 | $ 82.9 | $145.7 | $134.3 |
|
|
| $ 1.6 | $(51.4 | ) |
|
|
| 1.1% | -38.3% | |||||||||||||||||||||||||
Depreciation and amortization | 70.6 | 14.4 | 67.4 | 14.2 |
|
|
| 3.2 | 0.2 |
|
|
| 4.7% | 1.4% | ||||||||||||||||||||||||||
EBITDA | $217.9 | $ 97.3 | $213.1 | $148.5 |
|
|
| $ 4.8 | $(51.2 | ) |
|
|
| 2.3% | -34.5% | |||||||||||||||||||||||||
Restructuring and related business transformation costs(a) | 1.8 | 5.9 | 0.6 | 9.7 |
|
|
| 1.2 | (3.8 | ) |
|
|
| 200.0% | -39.2% | |||||||||||||||||||||||||
Transaction costs(b) | (0.6 | ) | (0.1 | ) | — | (0.5 | ) |
|
|
| (0.6 | ) | 0.4 |
|
|
| n/a | -80.0% | ||||||||||||||||||||||
Other losses (gains) and expenses(c) | 0.2 | 2.6 | — | (58.5 | ) |
|
|
| 0.2 | 61.1 |
|
|
| n/a | -104.4% | |||||||||||||||||||||||||
Adjusted EBITDA | $219.3 | $105.7 | $213.7 | $ 99.2 |
|
|
| $ 5.6 | $ 6.5 |
|
|
| 2.6% | 6.6% | ||||||||||||||||||||||||||
|
|
| (c) | Other losses, (gains) and |
| Year Ended September 30, | ||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||
(In millions) | ISS | APT | ISS | APT | ||||||||||||||||
Trailing costs from the sale of the Memcor® product line | $ | — |
| $ | 0.2 |
| $ | — |
| $ | — |
| ||||||||
Net pre-tax benefit on sale of the Memcor product line |
| — |
|
| — |
|
| — |
|
| (57.7 | ) | ||||||||
Remediation of manufacturing defects |
| — |
|
| — |
|
| — |
|
| (1.5 | ) | ||||||||
Product rationalization in electrochlorination business |
| — |
|
| 2.4 |
|
| — |
|
| 0.7 |
| ||||||||
Loss on divestiture of Lange Product Line |
| 0.2 |
|
| — |
|
| — |
|
| — |
| ||||||||
Total | $ | 0.2 |
| $ | 2.6 |
| $ | — |
| $ | (58.5 | ) | ||||||||
ADJUSTED FREE CASH FLOW
"Adjusted Free Cash Flow"Flow
“Adjusted Free Cash Flow” is defined as net cash from operating activities, as reported in the Statement of Cash Flows, less capital expenditures as well as adjustments for other significant items that impact current results which management believes are not related to our ongoing operations and performance. Our definition of free cash flow does not consider certain non-discretionary cash payments, such as debt.
2022 Proxy Statement | ||||
A-5 |
The following is a reconciliation of our net cash fromprovided by operating activities to Adjusted Free Cash Flow:
($ in millions) | FY2020 | FY2019 | FY2021 | FY2020 | ||||||||||||
Operating Cash Flow | $ | 158.4 | $ | 125.2 | $178.7 | $177.0 | ||||||||||
(+/-) EBITDA adjustments including: |
|
|
|
| ||||||||||||
Restructuring and related business transformation costs | 17.4 | 24.2 | 11.3 | 17.4 | ||||||||||||
Transaction costs | 1.9 | 11.6 | 1.6 | 1.9 | ||||||||||||
Other (gains) losses including: |
|
|
|
| ||||||||||||
(i) | (1.5 | ) | 2.1 | — | (1.5 | ) | ||||||||||
(ii) | 0.7 | 4.1 | 2.4 | 0.7 | ||||||||||||
(iii) | 10.4 | — | 0.2 | 10.4 | ||||||||||||
(iv) | — | 5.0 | 0.5 | 1.3 | ||||||||||||
(v) | 1.3 | — | 5.7 | — | ||||||||||||
(vi) | 0.2 | — | ||||||||||||||
(+/-) Tax impact of above EBITDA adjustments (1) | 0.9 | (12.1 | ) | (5.7 | ) | 0.9 | ||||||||||
(+) Adoption impact of ASC 842 | (2.0 | ) | — | — | (2.0 | ) | ||||||||||
(-) Capital expenditures | (88.5 | ) | (88.9 | ) | (75.3 | ) | (88.5 | ) | ||||||||
(+) Financing related to growth capital expenditures | 23.3 | 38.4 | 37.5 | 23.3 | ||||||||||||
(-) Purchases of intangibles (e.g., software licenses) | (6.5 | ) | (6.4 | ) | (3.8 | ) | (6.5 | ) | ||||||||
Adjusted Free Cash Flow | $ | 115.8 | $ | 103.2 | $153.3 | $134.4 | ||||||||||
| (i) |
|
| (ii) | Charges incurred by the Company related to product rationalization in the |
| (iii) |
|
| (iv) |
|
Expenses incurred by the Company as a result of the COVID-19 pandemic, including additional charges for personal protective equipment, increased costs for facility |
| (v) | Legal fees incurred in excess of amounts covered by the Company’s insurance related to the Securities Litigation and SEC investigation; and |
| (vi) | The loss on divestiture of the Lange Product Line. |
| (1) | The blended statutory tax rate was 26.0% |
Organic Revenue
Organic revenue is another metric used by management to evaluate the performance of our business. “Organic revenue” is defined as revenue excluding the impact of foreign currency translation and inorganic revenue. Inorganic revenue represents the impact from acquisitions and divestitures during the first 12 months following the closing of the acquisition or divestiture. Divestitures include sales of insignificant portions of our business that did not meet the criteria for classification as a discontinued operation. Management believes that reporting organic revenue provides useful information to investors by helping identify underlying growth trends in our core business and facilitating easier comparisons of our revenue performance with prior and future periods and to our peers.. We exclude the effect of foreign currency translation from organic sales because foreign currency translation is not under management’s control, is subject to volatility and can obscure underlying business trends. We exclude the effect of acquisitions and divestitures because they can obscure underlying business trends and make comparisons of long-term performance difficult between the Company and its peers due to the varying nature, size and number of transactions from period to period.
| ||||
|
ORGANIC REVENUE GROWTHWe have not presented a quantitative reconciliation of the forward-looking non-GAAP
"Organic financial measure organic revenue growth"to its most directly comparable GAAP financial measure, total revenue, because it is defined asimpractical to forecast certain items without unreasonable efforts due to the year-over-year rateuncertainty and inherent difficulty of change in revenues excludingpredicting the occurrence and financial impact of, and the periods in which, such items, including foreign exchange impact and acquisitions and divestitures.or divestitures, may be recognized. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.
The following is a reconciliationare reconciliations of our organic change in revenue for FY2020:FY2021, FY2020, and FY2019:
| GAAP Reported | Currency | Acquisitions/ Divestitures | Organic | Total Revenue | Foreign Currency | Inorganic Revenue(1) | Organic Revenue | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended September 30, | Year Ended September 30, | Year Ended September 30, | Year Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
($ in millions) | 2020 | 2021 | % Variance | 2020 | 2021 | % Variance | 2020 | 2021 | % Variance | 2020 | 2021 | % Variance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Evoqua Water Technologies | (1.0 | )% | (0.1 | )% | (2.5 | )% | 1.5 | % | $ | 1,429.5 | $ | 1,464.4 | 2.4% |
| n/a | $18.1 | 1.3% |
| $ | 16.2 | $9.9 | -0.4% |
| $ | 1,413.3 | $ | 1,436.4 | 1.6% | ||||||||||||||||||||||||||||||||||||||||||||||||
Integrated Solutions & Services | 3.7 | % | (0.1 | )% | 0.6 | % | 3.2 | % | $ | 944.2 | $ | 959.9 | 1.7% |
| n/a | $ 2.8 | 0.3% |
| $ | 1.8 | $9.9 | 0.9% |
| $ | 942.4 | $ | 947.2 |
| 0.5% |
| ||||||||||||||||||||||||||||||||||||||||||||||
Applied Product Technologies | (9.1 | )% | (0.2 | )% | (7.6 | )% | (1.3 | )% | $ | 485.3 | $ | 504.5 | 4.0% |
| n/a | $15.3 | 3.2% |
| $ | 14.4 | $ — | -3.0% |
| $ | 470.9 | $ | 489.2 | 3.8% | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total Revenue | Foreign Currency | Inorganic Revenue | Organic Revenue | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended September 30, | Year Ended September 30, | Year Ended September 30, | Year Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
($ in millions) | 2019 | 2020 | % Variance | 2019 | 2020 | % Variance | 2019 | 2020 | % Variance | 2019 | 2020 | % Variance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Evoqua Water Technologies | $ | 1,444.4 | $ | 1,429.5 | -1.0% |
| n/a | $(2.9 | ) | -0.2% |
| $ | 50.4 | $15.4 | -2.4% |
| $ | 1,394.0 | $ | 1,417.0 | 1.6% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Revenue | Foreign Currency | Inorganic Revenue | Organic Revenue | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended September 30, | Year Ended September 30, | Year Ended September 30, | Year Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
($ in millions) | 2018 | 2019 | % Variance | 2018 | 2019 | % Variance | 2018 | 2019 | % Variance | 2018 | 2019 | % Variance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Evoqua Water Technologies | $ | 1,339.5 | $ | 1,444.4 | 7.8% |
| n/a | $(11.8 | ) | -0.9% |
| $— | $47.5 | 3.5% |
| $ | 1,339.5 | $ | 1,408.7 | 5.2% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Includes acquisition of our interest in Frontier Water Systems LLC on October 1, 2019, divestiture of the Memcor® product line on December 31, 2019, divestiture of the Lange Product Line on March 1, 2021, acquisition of Aquapure Technologies on September 3, 2020, acquisition of Ultrapure & Industrial Services on December 17, 2020 and acquisition of WCSI on April 1, 2021. |
NET LEVERAGE RATIONet Leverage Ratio
"“Net leverage ratio"ratio” is defined as total net debt divided by net income, as well as adjusted EBITDA. Total net debt is defined as total debt including finance leases less unamortized discount and lendersdeferred financing fees lessminus cash and cash equivalents, divided by Adjusted EBITDA.equivalents.
2022 Proxy Statement | ||||
A-7 |
The following is a calculationreconciliation of our net leverage ratio:ratio for both net income, as well as adjusted EBITDA:
($ in millions) | FY2020 | FY2019 | FY2021 | FY2020 | FY2019 | |||||||||||||||
Cash and cash equivalents | $ | 193.0 | $ | 109.9 | $ | 146.2 | $ | 193.0 | $ | 109.9 |
| |||||||||
|
|
|
|
|
| |||||||||||||||
AR Securitization Program |
| 150.1 |
| — |
|
| — |
| ||||||||||||
Revolving Credit Facility | — | — |
| 37.3 |
| — |
|
| — |
| ||||||||||
First Lien Term Facility | 819.3 | 928.8 |
| 473.8 |
| 819.3 |
| 928.8 |
| |||||||||||
Mortgage | 1.7 | 1.6 |
| — |
|
| 1.7 |
| 1.6 |
| ||||||||||
Equipment financing facilities | 64.5 | 46.8 |
| 93.8 |
| 64.5 |
| 46.8 |
| |||||||||||
Finance leases | 37.6 | 36.1 | ||||||||||||||||||
|
| |||||||||||||||||||
Finance lease obligations |
| 38.2 |
| 37.6 |
| 36.1 |
| |||||||||||||
|
| |||||||||||||||||||
Total debt including finance leases | 923.1 | 1,013.3 |
| 793.2 |
| 923.1 |
| 1,013.3 |
| |||||||||||
|
|
|
| |||||||||||||||||
Less unamortized discount and deferred financing fees |
| (11.7 | ) |
| (9.4 | ) |
| (12.1 | ) | |||||||||||
|
| |||||||||||||||||||
Less unamortized discount and lenders fees | (9.4 | ) | (12.1 | ) | ||||||||||||||||
Total net debt including finance leases | $ | 635.3 | $ | 720.7 | $ | 891.3 |
| |||||||||||||
|
|
|
| |||||||||||||||||
Total net debt including finance leases(1) | $ | 720.7 | $ | 891.3 | ||||||||||||||||
Net Income | $ | 51.7 |
| $ | 114.4 |
| $ | (8.5 | ) | |||||||||||
Net leverage ratio based on Net Income |
| 12.3x |
|
| 6.3x |
|
| (104.9)x |
| |||||||||||
|
| |||||||||||||||||||
Net leverage ratio(2) | 3.0x | 3.8x | ||||||||||||||||||
Adjusted EBITDA | $ | 250.9 |
| $ | 239.6 |
| $ | 235.0 |
| |||||||||||
Net leverage ratio based on Adjusted EBITDA |
| 2.5x |
|
| 3.0x |
|
| 3.8x |
| |||||||||||
| ||||
A-8 |
2021 Special Awards Peer Group
S&P GLOBAL WATER INDEX — U.S. COMPANIES
| 1. | Advanced Drainage Systems, Inc. |
|
| 3. | America Water Works Company, Inc. |
| 4. | Artesian Resources Corporation |
| 5. | Badger Meter, Inc. |
| 6. | California Water Service Group |
| 7. | Energy Recovery, Inc. |
| 8. | Essential Utilities, Inc. |
| 9. | Forterra, Inc. |
| 10. | Franklin Electric Co., |
| 11. | Lindsay Corporation |
| 12. | Middlesex Water Company |
| 13. | Montrose Environmental Group, Inc. |
| 14. | Mueller Water Products, Inc. |
| 15. | Northwest Pipe Company |
| 16. | Olin Corporation |
| 17. | Pentair plc |
| 18. | Rexnord Corporation |
| 19. | Select Energy Services, Inc. |
| 20. | SJW Group |
| 21. | Tetra Tech, Inc. |
| 22. | The Gorman-Rupp Company |
| 23. | The York Water Company |
| 24. | Watts Water Technologies, Inc. |
| 25. | Xylem Inc. |
| ||||
|
EVOQUA WATER TECHNOLOGIES CORP.
210 SIXTH AVENUE SUITE 3300
PITTSBURGH, PA 15222
VOTE BY INTERNET
Before The Meeting - Go to www.proxyvote.comor scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on Monday,Tuesday, February 15, 2021.2022. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go to www.virtualshareholdermeeting.com/AQUA2021AQUA2022
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on Monday,Tuesday, February 15, 2021.2022. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
| KEEP THIS PORTION FOR YOUR RECORDS |
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
| EVOQUA WATER TECHNOLOGIES CORP. | For | Withhold | For All | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | ||||||||||||||||||
The Board of Directors recommends you vote FOR | All
| All
| Except
| |||||||||||||||||||
1. Election of | ☐ | ☐ | ☐ |
| ||||||||||||||||||
Nominees: | ||||||||||||||||||||||
01) | ||||||||||||||||||||||
02) | ||||||||||||||||||||||
03) Lynn C. Swann | For | Against | Abstain | |||||||||||||||||||
2. Approval, on an advisory basis, of the compensation of our named executive | ☐ | ☐ | ☐ | |||||||||||||||||||
3. Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending September 30, | ☐ | ☐ | ☐ | |||||||||||||||||||
| ||||||||||||||||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | ||||||||||||||||||||||
| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
EVOQUA WATER TECHNOLOGIES CORP.
2022 ANNUAL MEETING OF STOCKHOLDERS
February 16, 2022, 1:00 p.m. Eastern Time
www.virtualshareholdermeeting.com/AQUA2022
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice, and Proxy Statement and 2021 Annual Report to Stockholders are available at www.proxyvote.com.
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
D26530-P46726D63498-P64724
EVOQUA WATER TECHNOLOGIES CORP. 2022 Annual Meeting of Stockholders February 16, This proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Vincent Grieco and Anthony J. Webster,
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted FOR Your vote on the election of Class I directors and the other proposals described in the accompanying Proxy Statement may be specified on the reverse side. If properly signed, dated and returned, this proxy will be voted as specified on the reverse side or, if no choice is specified, this proxy will be voted in accordance with the recommendations of the Board of Directors.
Continued and to be signed on reverse side
|
