(Amendment No. )
| ☐ | 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 240.14a-12 | |
| ☒ | No fee required. | |||
| ☐ | Fee paid previously with preliminary materials. | |||
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
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Dear Fellow Shareholders
On behalf of the Board of Directors, we are pleased to invite you to attend APi Group’s Annual Meeting of Shareholders on June 15, 2023. You will find information about the meeting, including how to participate and the items to be voted on, in the Notice of Annual Meeting of Shareholders and the Proxy Statement that accompany this letter.
Thank you for your investment and continued support of APi. I look forward to working with my fellow Directors and the leadership team in the coming year to continue advancing the business.
Sincerely,
Russell A. Becker
Chief Executive Officer
NOTICE OF 2022 ANNUAL MEETING OF STOCKHOLDERS
April 29, 2022
| Notice of 2023 Annual Meeting of Shareholders |
It is my pleasure to invite you to attend APi Group Corporation’s 20222023 Annual Meeting of StockholdersShareholders (“20222023 Annual Meeting”). The meeting2023 Annual Meeting will be held on June 15, 2022,2023, at 9:8:30 a.m. (Eastern(Central Time) in virtual-only format conducted via live webcast at www.virtualshareholdermeeting.com/APG2022.APG2023. You will be able to participate, submit questions and vote your shares electronically. The information for how to attend virtually and vote at the meeting, are2023 Annual Meeting is described below. At the meeting,2023 Annual Meeting, you will be asked to:
| 1. | Elect ten directors for a one-year term expiring at the |
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Ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
| 3. | Approve, on an advisory basis, the compensation of our named executive officers; and |
| 4. | Transact such other business as may properly come before the |
Only stockholdersshareholders of record as of the close of business on April 18, 20222023, may vote at the 20222023 Annual Meeting.
It is important that your shares be represented at the 20222023 Annual Meeting, regardless of the number of shares you may hold. Whether or not you plan to attend, please vote using the Internet, by telephone or by mail, in each case by following the instructions in our proxy statement. This will not prevent you from voting your shares in person if you are present virtually at the 20222023 Annual Meeting.
Louis B. Lambert Senior Vice President, General Counsel and Secretary
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We have elected to use the “Notice and Access” method of providing our proxy materials over the internet.Internet. Accordingly, we mailed a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy statement and annual report on or about April 29, 2022.28, 2023.
How to Attend the Virtual Annual Meeting | ||||
via the Internet |
Vote during the Meeting |
Ask Questions | ||
| live webcast at www.virtualshareholdermeeting.com/APG2023 | ||||
Other Ways to Vote Your Shares if unable to Attend the Virtual Meeting | ||||
by Internet |
by Telephone |
by Mail | ||
| Follow the instructions in our proxy statement | ||||
Our proxy statement and annual report are available online at
http://materials.proxyvote.com/00187Y.
APi Group Corporation, 1100 Old Highway 8 NW, New Brighton, MN 55112
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PROXY STATEMENT
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 15, 2022
You are receiving this proxy statement (the “Proxy Statement”), the accompanying proxy card or other voting instruction card (the “Proxy Card”) and our annual report to stockholders (the “Annual Report”) because you own shares of common stock, par value $0.0001 per share (the “Common Stock”), shares of Series A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”) or shares of 5.5% Series B Perpetual Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”) of APi Group Corporation (the “Company,” “APi,” “our,” “we” or “us”) that entitle you to vote at the 2022 Annual Meeting of Stockholders (the “2022 Annual Meeting”). Our Board of Directors (the “Board of Directors” or the “Board”) is soliciting proxies from stockholders entitled to vote at the 2022 Annual Meeting. By use of the enclosed Proxy Card, you can vote even if you do not attend the 2022 Annual Meeting. This Proxy Statement describes the matters on which you are being asked to vote and provides information on those matters so that you can make an informed decision. These proxy materials are being distributed and/or made available to stockholders on or about April 29, 2022.
Date, Time and Place of the 2022 Annual Meeting
We will hold the 2022 Annual Meeting on June 15, 2022, at 9:30 a.m. (Eastern Time) in virtual-only format via live webcast at www.virtualshareholdermeeting.com/APG2022. You will be able to participate, submit questions and vote your shares electronically.
Our Board of Directors has fixed the close of business on April 18, 2022 as the record date (the “Record Date”) for the determination of stockholders entitled to notice of and to vote at the 2022 Annual Meeting. Each stockholder will be entitled to (1) one vote for each share of Common Stock or Series A Preferred Stock or (2) the number of votes equal to the number of shares of Common Stock into which the holder’s shares of Series B Preferred Stock could be converted as of such date, in each case held as of the Record Date on all matters to come before the 2022 Annual Meeting and may vote in person virtually at the meeting, via Internet or telephone or by proxy authorized in writing, except as qualified below.
QUESTIONS AND ANSWERS ABOUT VOTING AT THE
2022 ANNUAL MEETING AND RELATED MATTERS
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If your shares are registered directly in your name with our transfer agent, Computershare, you are a “registered holder,” which means you are the stockholder of record with respect to those shares.
If your shares are held by a bank or broker, the bank or broker is the stockholder of record. You are the “beneficial owner” (and hold your shares in “street name”) and the bank or broker is your “nominee.”
If you hold shares as a participant in the (1) APi Group, Inc. Employee Stock Ownership Plan (“ESOP”), (2) APi Group 401(k) & Profit Sharing Plan, (3) APi Group Safe Harbor 401(k) & Profit Sharing Plan, and/or (4) the Vipond Inc. Employees’ Profit Sharing Plan (collectively, “employee benefit plans”), the plan trustee of the applicable plan is the stockholder of record and your nominee.
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With that exception, anyone owning shares of Common Stock, Series A Preferred Stock or Series B Preferred Stock at the close of business on the Record Date may vote electronically at the 2022 Annual Meeting. You may cast at or prior to the 2022 Annual Meeting (1) one vote for each share of Common Stock held by you on the Record Date, (2) one vote for each share of Series A Preferred Stock held by you on the Record Date and (3) the number of votes equal to the number of shares of Common Stock into which your shares of Series B Preferred Stock could be converted as of such date, on all items of business presented in this Proxy Statement and at the 2022 Annual Meeting. Each share of Series A Preferred Stock and Series B Preferred Stock will entitle the holder thereof to vote together with the holders of Common Stock as a single class. As of the close of business on the Record Date, we had (a) 233,188,612 shares of Common Stock outstanding entitled to cast 233,188,612 votes, (b) 4,000,000 shares of Series A Preferred Stock outstanding entitled to 4,000,000 votes and (c) 800,000 shares of Series B Preferred Stock outstanding entitled to 32,520,326 votes.
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Beneficial Owners: If you are a beneficial owner of shares held in “street name,” a proxy card has been forwarded to you by your broker or other nominee. You have the right to direct your broker or other nominee on how to vote your shares by following the instructions on the proxy card, which generally provides four ways to vote:
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If you attend the 2022 Annual Meeting as a guest, you will not be able to vote your shares during the meeting.
If you vote over the Internet or by telephone, you do not need to return your proxy card. Internet and telephone voting for stockholders will be available 24 hours a day, and will close at 11:59 p.m.,
Eastern Time, on June 14, 2022. Even if you plan to attend the 2022 Annual Meeting virtually, the Company recommends that you vote your shares in advance as described above so that your vote will be counted if you later decide not to attend the 2022 Annual Meeting.
Participants in the employee benefit plans:
Shares Held in Your Account under the ESOP. If you are a participant or beneficiary with an account in the ESOP, you are entitled to direct the ESOP’s trustee as to how any shares that have been allocated to your ESOP account and that remained in your ESOP account as of the Record Date should be voted at the 2022 Annual Meeting.
Shares Held in Your Account under the APi Group 401(k) & Profit Sharing Plan, the APi Group Safe Harbor 401(k) & Profit Sharing Plan or the Vipond Inc. Employees’ Profit Sharing Plan. If you are a participant or beneficiary with an account in one or more of (1) the APi Group 401(k) & Profit Sharing Plan, (2) the APi Group Safe Harbor 401(k) & Profit Sharing Plan and/or (3) the Vipond Inc. Employees’ Profit Sharing Plan, you will be permitted to direct the applicable plan trustee(s) or other intermediary as to how any shares held in your plan account as of the Record Date should be voted at the 2022 Annual Meeting.
You have the right to direct your nominee(s) or other intermediary on how to vote your shares by following the instructions on the proxy card or voting information form forwarded to you by your nominee(s), which generally provides three ways to vote:
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Earlier Voting Deadlines for Participants in Certain Employee Benefit Plans. Because the ESOP’s trustee and the other employee benefits plans’ trustee(s) or other intermediary will vote on your behalf, and in accordance with your directions, except as noted below, you will not be able to vote during the 2022 Annual Meeting and must vote by following deadlines:
Votes of shares held in an ESOP account must be made by 11:59 p.m. (Eastern Time) on June 7, 2022.
Votes of shares held in a APi Group 401(k) & Profit Sharing Plan or APi Group Safe Harbor 401(k) & Profit Sharing Plan account must be made by 11:59 p.m. (Eastern Time) on June 9, 2022.
Votes of shares held in a Vipond Inc. Employees’ Profit Sharing Plan account must be made by 11:59 p.m. (Eastern Time) on June 14, 2022 in order to vote prior to the 2022 Annual Meeting, or you may vote during the meeting. See “How can I attend the 2022 Annual Meeting” below for information on how to attend the meeting as a stockholder to vote your shares during the meeting.
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To access the 2022 Annual Meeting, please visit www.virtualshareholdermeeting.com/APG2022. You may begin logging into the 2022 Annual Meeting on the day of the meeting at 9:15 a.m., Eastern Time, 15 minutes in advance of the start of the meeting. We encourage you to access the meeting prior to the start time and allow ample time for the check-in procedures.
You may log in using one of two options: (1) join as a guest or (2) join as a stockholder. To join as a guest, you will need to enter the information requested on the screen to register as a guest. If you enter the meeting as a guest, you will not be able to vote your shares or submit questions during the meeting.
If you were a registered holder or a beneficial owner as of the Record Date, you may join the 2022 Annual Meeting as a stockholder by entering the 16-digit control number found on the proxy card, voting instruction form or other notice previously received in connection with the 2022 Annual Meeting. If you are a beneficial owner as of the Record Date and you do not have a 16-digit control number, you should contact your bank, broker or other nominee (preferably at least 5 days before the meeting) and obtain a “legal proxy” in order to be able to attend and participate in the meeting. You must join the meeting as a stockholder to vote your shares or submit questions during the meeting.
If you were a participant in an employee benefit plan and you have a control number, you may join the 2022 Annual Meeting as a stockholder using that control number. Otherwise, you may join the meeting as a guest.
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Responses to questions relevant to 2022 Annual Meeting matters that are not answered during the meeting will be posted on the Company’s Investor Relations webpage.
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If you are a beneficial owner or a participant in an employee benefit plan, you may be able to elect to receive future annual reports or proxy statements by email. For information regarding electronic delivery of proxy materials for shares held in “street name” or in an employee benefit plan, you should contact your broker or other nominee.
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We will also consider other proposals that properly come before the 2022 Annual Meeting in accordance with our bylaws.
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The table below sets forth, for each proposal described in this Proxy Statement, whether a broker can exercise discretion and vote your shares absent your instructions and if not, the impact of such broker non-vote on the approval of the applicable proposal:Summary
Annual Meeting
Date and Time June 15, 2023 8:30 a.m. (Central Time) |
Location Virtual-only at www.virtualshareholdermeeting.com/APG2023 |
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April 18, 2023 |
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If you are a registered holder, you may change your vote or revoke your proxy by (1) voting in person at the 2022 Annual Meeting, (2) delivering to the Corporate Secretary (at the address indicated below) a revocation of proxy or (3) executing a new proxy bearing a later date.
Corporate Secretary
APi Group Corporation
1100 Old Highway 8 NW
New Brighton, MN 55112
United States
If you are a beneficial owner, you must follow the instructions provided by your broker or other nominee to change your vote or revoke your proxy.
If you are a participant in an employee benefit plan, you may change your vote or revoke your proxy by executing a new proxy bearing a later date, prior to the voting cutoff date for the applicable plan.
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If you vote in advance and also attend the 2022 Annual Meeting, you do not need to vote again at the 2022 Annual Meeting unless you want to change your vote. Please see the information above under “How do I vote?” for information on how to vote.
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Voting Matters and Board Recommendations
Matter | Board Recommendation | Page | ||||
Proposal 1—Election of Directors | FOR each Director Nominee | 14 | ||||
Proposal 2—Ratification of KPMG as Independent Auditor | FOR | 45 | ||||
Proposal 3—Advisory Vote on Executive Compensation | FOR | 47 | ||||
How to Vote
via the Internet |
During the Meeting live webcast at www.virtualshareholdermeeting.com/APG2023 | |||||
by Telephone Follow the instructions in our proxy statement | ||||||
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Overview and 2021 Financial Highlights
We are a global, market-leading business services provider of safety and specialty services in over 500 locations in approximately 20 countries. We provide statutorily mandated and other contracted services to a strong base of long-standing customers across industries. We have a winning leadership culture driven by entrepreneurial business leaders to deliver innovative solutions for our customers.
We believe that our core strategies of driving organic growth and growth through accretive acquisitions, promoting sharing of best practices across all of our businesses, and leveraging our scale and services offerings place us in the position to capitalize on opportunities and trends in the industries we serve, grow our businesses and advance our position in each of our markets. We believe that our revenue diversification across customers, end markets, geographies and projects, combined with our go-to market strategy of selling inspection and installation work first, regional approach to operating our businesses, specialty operations in niche markets, strong commitment to leadership development, long-standing customers with a robust reputation in the industries we serve, and strong safety track record differentiates us from our competitors.
A summary of the 2021 Financial Highlights are as follows:
Reported net revenues increased by 9.8% or $353 million to $3.9 billion compared to $3.6 billion in the prior year period, primarily driven by general market recoveries in our Safety and Specialty Services segments, revenue from acquisitions completed in the prior twelve months in Safety Services and an increase in inspection and service revenue across all of our segments, partially offset by the divestiture of two businesses in the former Industrial Services segment and the delay and suspension of certain projects in that segment.
Reported gross margin was 23.8%, representing a 276 basis point increase compared to prior year period reported gross margin of 21.1%, driven by a decrease in amortization expense, growth in the higher margin Safety Services segment and an improved mix of inspection and service revenue, partially offset by supply chain disruptions and inflation causing downward pressure on margins.
Net income (loss) for the year ended December 31, 2021 was $47 million of income compared to a net loss of ($153) million for the year ended December 31, 2020, an improvement of $200 million. Net income (loss) as a percentage of net revenues for the year ended December 31, 2021 was 1.2% compared to (4.3%) for the year ended December 31, 2020. The change was principally from an impairment charge that occurred in 2020 related to goodwill of $197 million that did not recur in 2021,
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Board and Governance Highlightsof Directors
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Name | Director Since | Independent | Audit Committee | Compensation Committee | Nominating Committee | |||||||
Sir Martin E. Franklin, Board Co-Chair | 2017 | No | ||||||||||
James E. Lillie, Board Co-Chair | 2017 | Yes | ||||||||||
Ian G.H. Ashken | 2019 | Yes | ✓ | |||||||||
Russell A. Becker | 2019 | No | ||||||||||
David S. Blitzer | 2021 | Yes | ||||||||||
Paula D. Loop | 2022 | Yes | ✓ | ✓ | ||||||||
Anthony E. Malkin | 2019 | Yes | ✓ | |||||||||
Thomas V. Milroy | 2017 | Yes | ✓* | |||||||||
Cyrus D. Walker | 2019 | Yes | ✓ | ✓* | ||||||||
Carrie A. Wheeler | 2019 | Yes | ||||||||||
✓ Member * Chair
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2023 PROXY STATEMENT | 1 | ||
Proxy Summary
Who We Are
APi was founded in 1926 and has since grown to be the world’s premier life safety, security, monitoring, and specialty services business with over $6.6 billion in revenue, operating in over 20 countries, with approximately 27,400 team members. Our core purpose of Building Great Leaders defines who we are. This focus and other foundational priorities provide the platform from which we can continue to enhance shareholder value. We operate two business segments: Safety Services and Specialty Services. In our Safety Services segment, our mission is to protect our customers’ people, property and high-value assets. We design, install, service, and monitor fire detection and suppression systems and security systems for a wide range of end customers in a broad range of industries. In our Specialty Services segment, we provide specialized industrial services, which include maintenance and repair of critical infrastructure such as underground electric, gas, water, sewer, and telecommunications infrastructure. We believe our growth is sustainable and resilient for the long-term because our business is increasingly driven by statutorily required recurring service revenue, because we operate in highly diversified end-markets, and because our teams deliver industry-leading performance for our customers.
Our “13-60-80” Shareholder Value Creation Model
2 | 2023 PROXY STATEMENT | | ||
Proxy Summary
Corporate Governance Highlights
What We Do
We are committed to principles of effective corporate governance and to high ethical standards, as well as compliance with all applicable governance standards of the SECSecurities and NYSE.Exchange Commission (“SEC”) and the New York Stock Exchange (“NYSE”). Highlights of the framework we have established for governance are outlined here, and further described below.
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Independent Lead Director and Committees | Executive Sessions during each Board meeting without employee directors | |||||
| the Board | ✓ | Annual Board and Committee self-evaluations | |||
| ✓ | Majority voting standard for uncontested director elections | ✓ | Age limit for directors (75) | |||
| ✓ | Code of Conduct applicable to all directors and executive officers | ✓ | Director and executive officer stock ownership requirements | |||
| ✓ | Clawback policy for performance-based compensation | ✓ | Open communication encouraged among directors and management | |||
Board Composition
Our Board of Directors (“Board”) brings deep expertise and broad perspectives from a diversity of industry experiences, backgrounds, nationalities, ages (ranging from 51-67) and other attributes. Our Board believes that this diversity generates better ideas and perspectives, increases the Board’s overall effectiveness, and puts it in a better position to make complex decisions and execute APi Group’s long-term strategic objectives. Currently, our Board is 20% female and 10% BIPOC (black/indigenous/people of color). Our Board is 80% independent.
Sustainability Strategy
Our key strategic priorities for sustainability are: Leadership, Safety, Environment, and Inclusion. We believe these priorities will enable us to deliver on our core purpose: Building Great Leaders.
Our sustainability strategy will be discussed in more detail as part of our first corporate Sustainability Report.
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2023 PROXY STATEMENT |
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Proxy Summary
Executive Compensation and Financial Highlights
Compensation Strategy
Our executive compensation philosophy aligns executive compensation decisions with shareholder interests, business strategy, and performance. The strategy and priorities of our compensation philosophy are the following:
Compensation Design
Our compensation plans are designed to drive long-term financial returns for our shareholders and reward our executives for executing on the Company’s strategy and key initiatives.
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2022 Financial Highlights
2022 was a year of record financial results for APi Group. Revenues increased by 66.4% compared to 2021, driven by the acquisition of Chubb Fire and Security and strong organic revenue growth, including a double-digit increase in inspection, service and monitoring revenue.
REVENUE
| NET INCOME $73M | ADJUSTED EBITDA* $673M | ||
| * | Refer to Appendix for reconciliation of |
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2023 PROXY STATEMENT
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CORPORATE GOVERNANCE
Corporate Governance Guidelines
Our Board is responsible for overseeing the management of our Company. Our Board has adopted Corporate Governance Guidelines (the “Governance Guidelines”), which set forth our governance principles and policies relating to, among other things:
| • | director independence; |
| • | director qualifications and responsibilities; |
| • | mandatory retirement age for independent directors |
| • | Board structure and meetings; |
| • | management succession; and |
| • | the performance evaluation of our Board. |
Our Governance Guidelines are available in the Investor Relations section of our website at www.apigroup.com. The Board reviews its Governance Guidelines from time to time to evaluate evolving corporate governance practices and to ensure the guidelines continue to best serve the Company.
Board Leadership Structure
The Board has not adopted a formal policy regarding the need to separate or combine the offices of Chief Executive Officer (“CEO”) and Co-Chairs of the Board. Instead, the Board remains free to make this determination from time to time in a manner that seems most appropriate for the Company. Currently, we separate the positions of our CEO and Co-Chairs of the Board. The CEO is responsible for the day-to-day leadership and performance of the Company, while the Co-Chairs of the Board provide strategic guidance to the CEO and set the agenda for and preside over the Board meetings. We believe that the current separation provides a more effective monitoring and objective evaluation of the CEO’s performance. The separation also allows the Co-Chairs of the Board to strengthen the Board’s oversight of our performance and governance standards.
Director Independence
The Board has affirmatively determined that each of Messrs. Lillie, Ashken, Blitzer, Milroy, Malkin and Walker and Mses. Loop and Wheeler are “independent” as that term is defined under the applicable rules and regulations of the SEC and the NYSE listing standards, as well as our Governance Guidelines. Thomas V. Milroy serves as lead independent director. Because Sir Martin controls the entity which receives advisory fees from us, he is not independent under NYSE listing standards. As CEO of the Company, Mr. Becker is also not independent.
Board Role in Risk Management
While our management is responsible for day-to-day risk management identification and mitigation, the Board is actively involved in the oversight and management of risks that could affect the Company. We engage in an Enterprise Risk Management (“ERM”) process that evaluates risks over the short-term, mid-term, and long-term. The ERM process consists of periodic risk assessments performed by various functional management groups during the year. Executive management presents these assessments to the Audit Committee to ensure that the process is sound and complete, oversight is appropriate, and the risks and risk assessments are properly reviewed. The other Committees of the Board consider the risks within their areas of responsibility. While risk oversight and management is conducted primarily through Committees of the Board, the full Board has retained responsibility for general oversight of risks. The Board satisfies its oversight responsibility through full reports by each Committee chair regarding the Committee’s considerations and actions (including from the Audit Committee Chair related specifically to the ERM process), as well as through regular reports directly from management responsible for oversight of particular risks within the Company.
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Corporate Governance
Code of Business Conduct and Ethics
We have adopted a written Code of Business Conduct and Ethics (“Code of Conduct”) that establishes the standards of ethical conduct applicable to all our directors, officers, and employees. In addition, we have adopted a written Code of Ethics for Senior Financial Officers (“Code of Ethics”) applicable to our CEO and senior financial officers. Copies of our Code of Conduct and Code of Ethics are publicly available in the Investor Relations section of our website at www.apigroup.com. Any waiver of our Code of Ethics with respect to our CEO, chief financial officer, controller or persons performing similar functions, or waiver of our Code of Conduct with respect to our directors or executive officers, may only be authorized by our Board and will be disclosed on our website as promptly as practicable, as may be required under applicable SEC and NYSE rules.
Meetings
During 2022, the Board held a total of five meetings. Each incumbent director attended at least seventy-five percent (75%) of the aggregate of (i) the total number of meetings of the Board during the period for which he or she was a director and (ii) the total number of meetings of all Board committees (the “Committees”) on which he or she served during the period for which he or she was a director. It is the policy of the Board to encourage its members to attend our annual meeting of shareholders. Half of our Board members attended the 2022 Annual Meeting of Shareholders.
During 2022, our Board generally held executive sessions, or meetings of non-employee directors without management present, as part of regularly scheduled Board, Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee meetings. Thomas V. Milroy presides over executive sessions of the Board. Messrs. Ashken, Milroy, and Walker generally preside over the executive sessions of the Audit, Compensation, and Nominating and Corporate Governance Committees, respectively.
Board Committees
Our Board has three standing Committees: an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. Copies of the committee charters setting forth the responsibilities of the Committees are available in the Investor Relations section of our website at www.apigroup.com, and such information is also available in print to any shareholder who requests it through our Investor Relations department. The Committees will periodically review their respective charters and recommend any needed revisions to the Board. The following is a summary of the composition of each Committee:
| Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | ||
| Ian G.H. Ashken | |||
| Thomas V. Milroy* | Anthony E. Malkin | ||
Carrie A. Wheeler | Cyrus D. Walker | Cyrus D. Walker* | ||
* Committee Chair
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2023 PROXY STATEMENT | | ||
Corporate Governance
Audit Committee
Number of Meetings in 2022: Four
Responsibilities. Our Audit Committee operates pursuant to a formal charter that governs the responsibilities of the Audit Committee. Pursuant to the Audit Committee Charter, the Audit Committee is responsible for, among other things:
| • | overseeing preparation of our financial statements, the financial reporting process and our compliance with legal and regulatory matters; |
| • | appointing and overseeing the work of our independent auditor; |
| • | preapproving all auditing services and permitted non-auditing services to be performed for us by our independent auditor and approving the fees associated with such work; |
| • | approving the scope of the annual audit; |
| • | reviewing interim and year-end financial statements; |
| • | overseeing our internal audit function, reviewing any significant reports to management arising from such internal audit function and reporting to the Board; |
| • | approving the audit committee report required to be included in our annual proxy statement; and |
| • | reviewing and pre-approving all related party transactions. |
The Audit Committee has the power to investigate any matter brought to its attention within the scope of its duties and to retain counsel for this purpose where appropriate.
Independence and Financial Expertise. The Board has reviewed the background, experience and independence of the Audit Committee members and based on this review, has determined that each member of the Audit Committee:
| • | meets the independence requirements of the NYSE governance listing standards; |
| • | meets the enhanced independence standards for audit committee members required by the SEC; and |
| • | is financially literate, knowledgeable and qualified to review financial statements. |
In addition, the Board has determined that each of Mr. Ashken, Ms. Loop and Ms. Wheeler qualifies as an “audit committee financial expert” under SEC rules.
Compensation Committee
Number of Meetings in 2022: Four
Responsibilities. Our Compensation Committee operates pursuant to a formal charter that governs the responsibilities of the Compensation Committee. Pursuant to the Compensation Committee Charter, the Compensation Committee is responsible for, among other things:
| • | assisting the Board in developing and evaluating potential candidates for executive positions; |
| • | reviewing and approving corporate goals and objectives with respect to compensation for the CEO, evaluating the CEO’s performance and approving the CEO’s compensation based on such evaluation; |
| • | determining the compensation of other non-CEO Section 16 executive officers and all equity awards to such executive officers and other
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| • | reviewing on a periodic basis compensation and benefits paid to directors and recommending such compensation to the Board for approval; |
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Corporate Governance
| • | reviewing and approving our equity-based compensation plans and incentive compensation plans, including reviewing and approving the target performance benchmarks, if any, and range of aggregate value of our annual incentive program for senior management; and |
| • | approving the compensation committee report on executive compensation required to be included in our annual proxy statement. |
Independence. The Board Diversityhas reviewed the background, experience and independence of the Compensation Committee members and based on this review, has determined that each member of the Compensation Committee:
| • | meets the independence requirements of the NYSE governance listing standards; |
| • | is a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and |
| • | meets the enhanced independence standards for compensation committee members established by the SEC. |
Compensation Committee Interlocks and Insider Participation. None of the members of the Compensation Committee who presently serve or, in the past year, have served on the Compensation Committee has interlocking relationships as defined by the SEC or had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related party transactions.
The Compensation Committee has the authority to delegate any of its responsibilities to subcommittees as it may deem appropriate in its sole discretion.
Use of Compensation Consultant
The Compensation Committee has the authority to retain compensation consultants, outside counsel and other advisors as it may deem appropriate in its sole discretion. The Compensation Committee has sole authority to approve related fees and retention terms.
During 2022, the Compensation Committee utilized the services of Willis Tower Watson (“WTW”), a global human resources and risk management consulting firm, which acted as its compensation consultant to assist in reviewing competitive market data and preparing proposals for 2023 executive compensation. The total fees paid to WTW for these services were approximately $147,762.
During 2022, our management also retained separate business units of WTW (Work, Rewards & Career; Corporate Risk & Broking; and Retirement) to provide insurance brokerage and human-capital management services to the Company. The total fees paid to WTW’s separate business units with respect to services provided during 2022 (excluding services provided as compensation consultant as discussed above) were approximately $3.0M. The Compensation Committee was not involved in management’s decision to retain these separate business units of WTW to provide such services.
The Compensation Committee determined that the work of the separate business units of WTW on matters other than executive compensation did not raise any conflict of interest with WTW’s services as compensation consultant. It took into account, among other factors, WTW’s policies and procedures relating to the prevention and mitigation of conflicts of interest, and the use of separate teams for compensation consulting services and other services provided by WTW and its business units, and it determined that WTW is independent.
8 | 2023 PROXY STATEMENT | | ||
Corporate Governance
Nominating and Corporate Governance Committee
Number of Meetings in 2022: Two
Responsibilities. Our Nominating and Corporate Governance Committee operates pursuant to a formal charter that governs the responsibilities of the Nominating and Corporate Governance Committee. Pursuant to the Nominating and Corporate Governance Committee Charter, the Nominating and Corporate Governance Committee is responsible for, among other things:
| • | assisting our Board in identifying prospective director nominees and recommending nominees for each annual meeting of shareholders to our Board; |
| • | leading the search for individuals qualified to become members of the Board and selecting director nominees to be presented for shareholder approval at our annual meetings; |
| • | reviewing the Board’s committee structure and recommending to the Board for approval directors to serve as members of each committee; |
| • | developing and recommending to the Board for approval a set of corporate governance guidelines and generally advising the Board on corporate governance matters; |
| • | reviewing such corporate governance guidelines on a periodic basis and recommending changes as necessary; and |
| • | reviewing director nominations submitted by shareholders. |
The Nominating and Corporate Governance Committee may, when it deems appropriate, delegate certain of its responsibilities to one or more Nominating and Corporate Governance Committee members or subcommittees.
Independence. The Board believeshas reviewed the background, experience and independence of the Nominating and Corporate Governance Committee members and based on this review, has determined that each member of the Nominating and Corporate Governance Committee meets the independence requirements of the NYSE governance standards and SEC rules and regulations.
Consideration of Director Nominees. The Nominating and Corporate Governance Committee considers possible candidates for nominees for directors from many sources, including shareholders. The Nominating and Corporate Governance Committee evaluates the suitability of potential candidates nominated by shareholders in the same manner as other candidates recommended to the Nominating and Corporate Governance Committee. Shareholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board at an annual meeting of shareholders may do so by delivering a written recommendation to our Secretary at the following address: APi Group Corporation, 1100 Old Highway 8 NW, New Brighton, Minnesota 55112, Attn: Secretary, generally not less than 90 nor more than 120 calendar days prior to the first anniversary of the date on which the Company held the preceding year’s annual meeting of shareholders. Submissions must include, among other things, (i) all information relating to the individual subject to such nomination that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with Regulation 14A under the Exchange Act, (ii) such individual’s written consent to being named in a proxy statement as a nominee and to serving as director if elected and (iii) such other information as may be required by our Bylaws, including information with respect to the shareholder giving notice of such nomination.
In making nominations, the Nominating and Corporate Governance Committee is required to submit candidates who have the highest personal and professional integrity, who have demonstrated exceptional ability and judgment and who will be most effective, in conjunction with the other nominees to the Board, in collectively serving the long-term interests of the shareholders. In evaluating nominees, the Nominating and Corporate Governance Committee is required to take into consideration the following attributes, which are desirable for a member of the Board: leadership, independence, interpersonal skills, financial acumen, business experiences, industry knowledge and diversity of viewpoints. In addition, while we do not have a formal, written diversity
| | 2023 PROXY STATEMENT | 9 | ||
Corporate Governance
policy, the Nominating and Corporate Governance Committee will attempt to select candidates who will assist in making the Board a diverse body. As discussed under the heading “Board Composition” above, we believe that a diverse group of directors brings a broader range of experiences to the Board and generates a greater volume of ideas and perspectives, and therefore, is in a better position to make complex decisions. Currently, our Board
Anti-Hedging Policy
Our Insider Trading Policy, which is 20% femaleapplicable to all employees (including executive officers) and 10% BIPOC (black/indigenous/peopledirectors of color), and 80%the Company, makes clear that no employee or director may engage in hedging transactions or any other forms of monetization transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of our equity securities granted as compensation, or held directly or indirectly by the employee or director.
Communications with the Board
Under our Governance Guidelines, a process has been established by which shareholders and other interested parties may communicate with members of the Board. Any shareholder or other interested party may communicate in writing to any Chair of the Board, is independent.c/o General Counsel and Secretary, APi Group Corporation, 1100 Old Highway 8 NW, New Brighton, MN 55112.
Diversity, EquityThe Board has approved a process for handling correspondence received by the Company and Inclusion (DEI) Initiativesaddressed to non-management members of the Board. Under that process, any Chair or an officer delegated by the Co-Chairs (“Delegated Officer”) reviews all such correspondence and maintains a log of all such correspondence and forwards to the directors copies of all correspondence that, in the opinion of any Chair or the Delegated Officer, deal with the functions of the Board or Committees thereof or that any Chair or Delegated Officer otherwise determines requires their attention. Any Chair or Delegated Officer may screen frivolous or unlawful communications and commercial advertisements. Directors may at any time review the log.
We believe our success in attractingCertain Relationships and retaining qualified employees will be based on the qualityRelated Transactions
Since January 1, 2022, we did not enter into any related party transactions other than as set forth below.
Advisory Services Agreement
On October 1, 2019, we entered into an Advisory Services Agreement with Mariposa Capital, LLC, an affiliate of our training, leadershipSir Martin. Under this agreement, Mariposa Capital, LLC agreed to provide certain services, including corporate development and opportunitiesadvisory services, advisory services with respect to mergers and acquisitions, investor relations services, strategic planning advisory services, capital expenditure allocation advisory services, strategic treasury advisory services and such other services relating to the Company as may from time to time be mutually agreed. In connection with these services, Mariposa Capital, LLC is entitled to receive an annual fee equal to $4,000,000, payable in quarterly installments. The initial term of this agreement was through October 1, 2020 and has been and will in the future be automatically renewed for advancement. We are making significant investmentssuccessive one-year terms unless either party notifies the other party in diversity, equity and inclusion (“DEI”) initiatives. We have created a senior DEI rolewriting of its intention not to strengthen our commitmentrenew this agreement no later than 90 days prior to these initiatives and support cultural awareness and fluency through various initiatives. We have also adopted the Intercultural Development Inventory (“IDI”) Assessment, a cross-culturally assessment of intercultural competence. The IDI® Assessment provides key insights into how one makes sense of cultural differences and is an effective tool for increasing skill in navigating cultural differences. The useexpiration of the IDI asterm. This agreement may only be terminated by the Company upon a cultural awareness resource has provided a common language to discuss DEI. Our leaders have used these insights to inform their business strategies for human capital management, including DEI objectives. Through the endvote of February 2022, 235 of our employees have taken the IDI, including approximately 100% of our executive, corporate and segment leadership and 80% of our operating company leadership.
Executive Compensation Highlights
Our Compensation Committee has developed an executive compensation program consistent with its compensation philosophy and market and peer-based practices. Fundamentally, our program is designed to ensure that the Company’s compensation policies attract and retain the key employees necessary to support the Company’s growth and success, both operationally and strategically, and to motivate executives to contribute to the achievement of the Company’s short- and long-term goals with the ultimate objective of creating sustainable improvements in stockholder value. The following briefly describes our compensation program, which is fully outlined below in “Compensation Discussion and Analysis.”
Policies that Promote Sustainable Stockholder Value Creation
Our executive compensation program places a majority of executive officer compensation “at risk”our directors. In the event that this agreement is terminated by linking both short-the Company, the effective date of the termination will be six months following the expiration of the initial term or a renewal term, as the case may be.
Registration Rights
Mariposa
The Company has agreed to provide Sir Martin, Messrs. Lillie and long-term incentive structures either totallyAshken, and the Mariposa Acquisition IV, LLC with certain registration rights that require the Company to provide them with such information and assistance following the acquisition of APi Group, Inc. (the “APi Acquisition”), subject to certain restrictions and customary exceptions, as they may reasonably request to enable it to effect a disposition of all or predominantlypart of their common stock or warrants, including, without limitation, the preparation, qualification and approval of a prospectus in respect of such common stock or warrants.
10 | 2023 PROXY STATEMENT | | ||
Corporate Governance
Viking Global Investors
Pursuant to the Company’sregistration rights agreement dated March 24, 2020, with Viking Global Opportunities Liquid Portfolio Sub-Master LP (“Viking”), the beneficial owner of approximately 14.4% of our outstanding shares of common stock (or 15.5% of the total voting power) as of the Record Date, we (i) filed a registration statement on May 12, 2021 (that was declared effective by the SEC on May 21, 2021) to register the resale of common stock then held by Viking and (ii) agreed that, if we propose to register any of our common stock under the Securities Act of 1933, as amended (the “Securities Act”) in connection with the public offering of such securities solely for cash (other than in certain excluded registrations), we will register all of the shares that the Viking Opportunities Fund requests to be included in such registration (subject to customary cutbacks if the underwriters determine that less than all of the shares requested to be registered can be included in such offering).
The registration rights agreement contains customary indemnities. Our obligations under the registration rights agreement will terminate on the earlier of (a) such time as all of the shares that may be registered under the agreement have been sold and (b) such time as all of such shares may be sold, transferred or otherwise disposed of in a single transaction without limitation under Rule 144 under the Securities Act.
Series B Preferred Stock Purchasers
In connection with the issuance of the Series B Preferred Stock, on January 3, 2022, we entered into registration rights agreements with Juno Lower Holdings L.P. (“Juno”), FD Juno Holdings L.P. (“FD Juno” and, together with Juno, the “Blackstone Purchasers”), Viking Global Equities Master Ltd. (“VGEM”) and Viking Global Equities II LP (“VGE” and, together with VGEM, the “Viking Purchasers,” and together with the Blackstone Purchasers, the “Series B Purchasers”). On January 3, 2022, we filed a registration statement to satisfy our obligations under such registration rights agreements to register the resale of the shares of common stock issuable upon conversion of or as dividends on the Series B Preferred Stock.
In addition, pursuant to the registration rights agreements, if we propose to register any shares of common stock under the Securities Act in connection with the public offering of such securities solely for cash, we will register all of the shares that the Series B Purchasers request to be included in such registration (subject to customary cutbacks if the underwriters determine that less than all of the shares requested to be registered can be included in such offering). The holders also have the right to request one or more underwritten offerings, so long as the anticipated gross proceeds of such underwritten offering is not less than $25 million (unless such holders are proposing to sell all of their remaining registrable securities), and the holders have the right to request unlimited non-underwritten shelf take-downs. We will not be obligated to effect more than two underwritten offerings for a particular Series B Purchaser during any 12-month period.
The registration rights agreements contain customary indemnities. Our obligations under the registration rights agreements will terminate as to a particular Series B Purchaser when all shares that are registrable under the registration rights agreements are no longer held by such Series B Purchaser.
Commercial Relationships
During 2022, we, through certain of our subsidiaries, provided fire safety and dust mitigation services to Royal Oak Enterprises, LLC (“ROE”), a manufacturer and distributor of charcoal, fire logs and related products, in the ordinary course of business and on arm’s length terms. As consideration for our services, we received aggregate revenue of approximately $8 million from ROE during 2022. Our Co-Chair, Sir Martin E. Franklin, is the chairman and controlling shareholder of ROE.
Related Party Transaction Policy
The Board has determined that the Audit Committee is best suited to review and pre-approve transactions with related persons, in accordance with the policy set forth in the Audit Committee Charter. Such review will apply to any material transaction or series of related transactions or any material amendment to any such transaction involving a related person and the Company or any subsidiary of the Company. For purposes of the policy, “related persons” will consist of executive officers, directors, director nominees, any shareholder beneficially
| | 2023 PROXY STATEMENT | 11 | ||
Corporate Governance
owning more than 5% of the issued and outstanding common stock, and immediate family members of any such persons. In reviewing related person transactions, the Audit Committee will take into account all factors that it deems appropriate, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction. No member of the Audit Committee will be permitted to participate in any review, consideration or approval of any related person transaction in which the director or any of his or her immediate family members is the related person.
Director Compensation
Our non-employee director compensation policy provides for the following compensation for our non-employee directors:
| • |
|
| • | Committee Fees. Members of any of our Committees are entitled to an additional annual cash fee of $5,000. Each of the chairs of our Committees is entitled to an additional $10,000 annual cash fee. |
| • | Annual Equity Award. Each non-employee director will be granted annually a number of restricted stock units equal to $100,000 at the date of issue. The restricted stock units will vest and |
In addition, all of our directors are entitled to be reimbursed by the Company for reasonable expenses incurred by them in the course of their directors’ duties relating to the Company.
Sir Martin does not receive any additional compensation for services as a director in light of his affiliation with Mariposa Capital, LLC, which provides advisory services to the Company in exchange for a fee. In addition, Mr. Becker, who serves as our CEO, is not entitled to receive any additional compensation for his services as a director. Mr. Blitzer elected to waive all compensation for his service as a director for 2022.
The table below sets forth the non-employee director compensation for the year ended December 31, 2022.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | Total ($) | |||||||||
Sir Martin E. Franklin | $ | — | $ | — | $ | — | ||||||
James E. Lillie | $ | 75,000 | $ | 100,005 | $ | 175,005 | ||||||
Ian G.H. Ashken | $ | 90,000 | $ | 100,005 | $ | 190,005 | ||||||
David S. Blitzer | $ | — | $ | — | $ | — | ||||||
Paula D. Loop(3) | $ | 58,750 | $ | 100,005 | $ | 158,755 | ||||||
Anthony E. Malkin | $ | 80,000 | $ | 100,005 | $ | 180,005 | ||||||
Thomas V. Milroy | $ | 90,000 | $ | 100,005 | $ | 190,005 | ||||||
Lord Paul Myners(4) | $ | 21,250 | $ | — | $ | — | ||||||
Cyrus D. Walker | $ | 85,000 | $ | 100,005 | $ | 185,005 | ||||||
Carrie A. Wheeler | $ | 85,000 | $ | 100,005 | $ | 185,005 | ||||||
| (1) | Represents the aggregate grant date fair values of restricted stock units granted during 2022, computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions used in calculating the amounts for 2022, see Note 19 to our historical consolidated financial statements for the year ended December 31, 2022 included in our Annual Report on Form 10-K for the year ended December 31, 2022. |
12 | 2023 PROXY STATEMENT | | ||
Corporate Governance
| (2) | The following table sets forth the aggregate number of restricted shares of our common stock and unexercised stock options to purchase our common stock outstanding at |
Name | Aggregate Number of Restricted Stock Units Outstanding at December 31, 2022 | Aggregate Number of Unexercised Stock Options Outstanding at December 31, 2022 | ||||||||
Sir Martin E. Franklin | — | — | ||||||||
James E. Lillie | 6,266 | — | ||||||||
Ian G.H. Ashken | 6,266 | — | ||||||||
David S. Blitzer | — | — | ||||||||
Paula D. Loop | 6,266 | — | ||||||||
Anthony E. Malkin | 6,266 | — | ||||||||
Thomas V. Milroy | 6,266 | 37,500 | ||||||||
Cyrus D. Walker | 6,266 | — | ||||||||
Carrie A. Wheeler | 6,266 | — | ||||||||
Our long-term incentive program uses three-year vesting periods for equity awards, with performance
| (3) | Ms. Loop joined the Board on March 28, 2022. As such, the amounts reported for fees earned or paid in cash include the cash paid from March 28, 2022 through December 31, 2022. |
| (4) | Due to Lord Myner’s passing in 2022, the amounts reported for fees earned or paid in cash include the cash paid in January 2022 for first quarter fees. |
Director Stock Ownership Guidelines
In 2022, the Board adopted stock units representing 80%ownership guidelines, which provide that each independent director is expected to own, directly or indirectly, shares of our common stock having a value of at least five times the amount of the total target award amount, assuming performance and vesting at target levels.
We use several distinct performance metrics tiedannual Board member retainer. All non-employee directors are expected to our financial and strategic objectives in our short-and long-term incentive plans.
We incorporate a relatively small time-based component in our long term grantssatisfy the stock ownership guidelines within four years following the date they are first elected to foster retention and guard against excessive risk taking.
We believe this balanced performance and time-based approach creates a focus on overall, sustainable performance and value creation.
Focus on Risk Managementthe Board.
| | 2023 PROXY STATEMENT | 13 | ||
Our equity incentive plan incorporates a “clawback” policy with broad application to discourage aggressive risk-taking.
Our policies include anti-hedging provisions and prohibit short sales.
Rigor in Goal Setting
Performance goals that determine executive officer compensation are established by the Compensation Committee taking into account historical performance, current objectives and strategic initiatives, and macroeconomic conditions. Performance goals will be calibrated to incentivize solid growth and value creation.
For 2021, all performance goals were metric driven, although the Compensation Committee may use individual or other non-financial goals in the future to foster the achievementProposal 1—Election of strategic objectives.
PROPOSAL 1—ELECTION OF DIRECTORSDirectors
Under our bylaws, directors are elected for a one-year term expiring at the next annual meeting of stockholders.shareholders. Upon the recommendation of the Nominating and Corporate Governance Committee, our Board of Directors has nominated Sir Martin E. Franklin, James E. Lillie, Ian G.H. Ashken, Russell A. Becker, David S. Blitzer, Paula D. Loop, Anthony E. Malkin, Thomas V. Milroy, Cyrus D. Walker and Carrie A. Wheeler for election or re-election, each for a one-year term that will expire at the 20232024 Annual Meeting of Stockholders.shareholders. Each of our directors consented to serve if elected.
Mr. Blitzer was nominated by the holders of our Series B Preferred Stock affiliated with Blackstone Inc. pursuant to such holders’ nomination right pursuant to the applicable stock purchase agreement for the Series B Preferred Stock, and was elected to the Board of Directors effective January 3, 2022 to serve as a director until the next election of directors at the 2022 Annual Meeting, or until his successor is duly elected and qualified. Ms. Loop was elected to the Board of Directors effective March 28, 2022 to fill the vacancy that resulted following the passing of former director Lord Paul Myners in January 2022, to serve as a director until the next election of directors at the 2022 Annual Meeting, or until her successor is duly elected and qualified. We are grateful to Lord Myners for his services to the Company.
Our bylaws provide that directors are elected by a majority of the votes cast with respect to the nominee for election to the Board of Directors at any meeting of stockholdersshareholders at which directors are to be elected and a quorum is present, except in the case of a contested election. As set forth in our bylaws, “a majority of the votes cast” means that the number of shares voted “for” a nominee for election to the Board of Directors exceeds the votes cast “against” such nominee and shall not include abstentions. In the event of a contested election, in accordance with our bylaws, directors are elected by a plurality of the votes cast.
We believe that each of our directors possesses the experience, skills and qualities to fully perform his or her duties as a director and contribute to our success. Our directors were nominated because we believe each is of high ethical character, highly accomplished in his or her field with superior credentials and recognition, has a reputation, both personal and professional, that is consistent with our image and reputation, has the ability to exercise sound business judgment, and is able to dedicate sufficient time to fulfilling his or her obligations as a director. Our directors as a group complement each other and each of their respective experiences, skills and qualities so that collectively the Board operates in an effective, collegial and responsive manner. EachBelow we have set out each director’s principal occupation and other pertinent information about particular experience, qualifications, attributes and skills that led the Board to conclude that such person should serve as a director, appears on the following pages.director.
Director Since 2017 Co-Chair Since 2019 Age:
Other Public Co. Boards:
• Nomad Foods Limited • Element Solutions Inc | Sir Martin E. Franklin | |
Sir Martin has served as a director of APi Group Corporation since September 2017 and has served as Co-Chair since October 2019. Sir Martin is the founder and Chief Executive Officer of Mariposa Capital, LLC, and Chairman and controlling shareholder of Royal Oak Enterprises, LLC, a manufacturer of charcoal and grilling products, since July 2016. Sir Martin is also founder and Executive Chairman of Element Solutions Inc, a specialty chemicals company, and has served as a director since its inception in April 2013, and co-founder and co-chairman of Nomad Foods Limited, a leading European frozen food company, and has served as a director since its inception in April 2014. Sir Martin was the | ||
Sir Martin served as the Chairman and/or Chief Executive Officer of three public companies: Benson Eyecare Corporation, an optical products and services company; Lumen Technologies, Inc., a holding company that designed, manufactured and marketed lighting products; and Bollé Inc., a holding company that designed, manufactured and marketed sunglasses, goggles and helmets worldwide.
We believe Sir Martin’s qualifications to serve on our Board |
14 | 2023 PROXY STATEMENT | | ||
Proposal 1—Election of Directors
Director Since 2017 Co-Chair Since 2019 Age:
Other Public Co. Boards:
• Nomad Foods Limited | James E. Lillie | |
Mr. Lillie has served as a director of APi Group Corporation since September 2017 and has served as Co-Chair since October 2019.
We believe Mr. Lillie’s qualifications to serve on our Board | ||
Director Since 2019 Age:
Committees:
• Audit (Chair) • Nominating and Corporate Governance
Other Public Co. Boards:
• Nomad Foods Limited • Element Solutions | Ian G.H. Ashken | |
Mr. Ashken has served as a director of APi Group Corporation since October 2019.
We believe Mr. Ashken’s qualifications to serve on our Board | ||
| | 2023 PROXY STATEMENT | 15 | ||
Proposal 1—Election of Directors
(Chief Executive Officer) Director Since 2019 Age:
Other Public Co. Boards:
• None | Russell A. Becker | |
Mr. Becker has served as a director of APi Group Corporation since October 2019. Mr. Becker joined APi Group, Inc. in 2002 as
We believe Mr. Becker’s qualifications to serve on our Board | ||
Director Since 2022 Age:
Committees:
• None
Other Public Co. Boards:
• None | David S. Blitzer | |
Mr. Blitzer has served as a director of APi Group Corporation since January 2022. Mr. Blitzer was nominated by the holders of our Series B Preferred Stock affiliated with Blackstone Inc. pursuant to such holders’ nomination right pursuant to the applicable stock purchase agreement for the Series B Preferred Stock. Mr. Blitzer joined Blackstone in 1991 and is currently Blackstone’s Global Head of Tactical Opportunities group (Tac Opps), an opportunistic investment business which invests globally across asset classes and industries. Mr. Blitzer is a member of Blackstone’s Management
We believe Mr. Blitzer qualifications to serve on our Board | ||
16 | 2023 PROXY STATEMENT | | ||
Proposal 1—Election of Directors
Director Since 2022 Age:
Committees:
• Audit • Compensation
Other Public Co. Boards:
• Fastly, Inc. • Robinhood Markets, Inc. | Paula D. Loop | |
Ms. Loop has served as a director of APi Group Corporation since March 2022. Ms. Loop retired as an Assurance Partner at PricewaterhouseCoopers (“PwC”) in June 2021 after | ||
| financial services company, since June 2021 and as a director of Fastly Inc., an edge cloud computing company, since July 2021. Ms. Loop holds a bachelor’s degree in business administration from the University of California at Berkeley.
We believe Ms. Loop’s qualifications to serve on our Board |
Director Since 2019 Age:
Committees:
•
Other Public Co. Boards:
• Empire State Realty Trust, Inc. | Anthony E. Malkin | |
Mr. Malkin has served as a director of APi Group Corporation since October 2019. Since October 2013, Mr. Malkin has served as Chairman and Chief Executive Officer of Empire State Realty Trust, Inc. (“ESRT”), a real estate investment trust. Mr. Malkin joined ESRT’s predecessor entities in 1989. Mr. Malkin is the Chairman of Malkin Holdings L.L.C. Mr. Malkin has been a leader in existing building energy efficiency retrofits through coordinating the team of Clinton Climate Initiative, Johnson Controls, JLL and Rocky Mountain Institute in a groundbreaking project at the Empire State Building. Mr. Malkin led the development of standards for energy efficient office tenant installations, now known as the Tenant Energy Optimization Program, at the Urban Land Institute. Mr. Malkin also serves as a member of the Real Estate Roundtable and Chair of its Sustainability Policy Advisory Committee, the Climate Mobilization Advisory Board of the New York City Department of Buildings, Urban Land Institute, the Board of Governors of the Real Estate Board of New York, and the Partnership for New York City’s Innovation
We believe Mr. Malkin’s qualifications to serve on our Board | ||
| | 2023 PROXY STATEMENT | 17 | ||
Proposal 1—Election of Directors
(Lead Independent Director) Director Since 2017 Age:
Committees:
• Compensation (Chair)
Other Public Co. Boards:
• Interfor Corporation | Thomas V. Milroy | |
Mr. Milroy has served as a director of APi Group Corporation since September 2017. Mr. Milroy has been retired since 2015, and worked for BMO Capital Markets (“BMOCM”), an investment banking firm, from 1993 to January 2015. From March 2008 to October 2014, Mr. Milroy served as Chief Executive Officer of BMOCM and acted as senior advisor to the Chief Executive Officer of BMO Financial Group from November 2014 until his retirement in January 2015. During his tenure as
We believe Mr. Milroy’s qualifications to serve on our Board | ||
Director Since 2019 Age: Committees: • Nominating and Corporate Governance (Chair) • Compensation Other Public Co. Boards: • Houlihan Lokey, Inc. • Arbor Rapha Capital Bioholdings Corp. I | Cyrus D. Walker | |
Mr. Walker has served as a director of APi Group Corporation since October 2019. Since February 2022, Mr. Walker | ||
| Mr. Walker
We believe Mr. Walker’s qualifications to serve on our Board |
18 | 2023 PROXY STATEMENT | | ||
Proposal 1—Election of Directors
Director Since 2019 Age:
Committees:
• Audit
Other Public Co. Boards:
• | Carrie A. Wheeler | |
Ms. Wheeler has served as a director of APi Group Corporation since October 2019.
We believe Ms. Wheeler’s qualifications to serve on our Board | ||
RECOMMENDATION OF THE BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
✔ | OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE DIRECTOR NOMINEES. | |
| | 2023 PROXY STATEMENT | 19 | ||
COMPENSATION DISCUSSION & ANALYSIS
THE ELECTION OF EACH OF THE DIRECTOR NOMINEES.
Name | Title | |
Russell A. Becker | CEO and President | |
Kevin S. Krumm | Executive Vice President and CFO | |
Louis B. Lambert | Senior Vice President, General Counsel and Secretary(1) | |
Kristina M. Morton | Senior Vice President and Chief People Officer(2) | |
Glenn David Jackola | Former Vice President, Controller and Chief Accounting Officer(3) | |
Andrea M. Fike | Former Senior Vice President, General Counsel and Secretary(4) | |
| (1) | Mr. Lambert joined the Company on July 25, 2022, and was appointed an executive officer on August 2, 2022. |
| (2) | Ms. Morton joined the Company on February 14, 2022, and was appointed an executive officer on March 1, 2022. |
| (3) | Mr. Jackola transitioned to the new role of CFO, Chubb effective January 1, 2023. |
| (4) | Ms. Fike transitioned out of the Senior Vice President, General Counsel and Secretary role effective August 2, 2022, and ended her employment with the Company as of March 31, 2023. |
Compensation Strategy
Our executive compensation philosophy aligns executive compensation decisions with shareholder interests, business strategy, and performance. The strategy and priorities of our compensation philosophy are the following:
20 | 2023 PROXY STATEMENT | | ||
CORPORATE GOVERNANCECompensation Discussion & Analysis
DuringPay for Performance
The Compensation Committee creates a pay-for-performance culture with a significant portion of executive compensation delivered through at-risk pay. Their compensation is appropriately weighted between short- and long-term performance, balancing near- and long-term strategic goals and shareholder value creation.
Overview of 2022 Performance
2022 was a year of record financial results for APi Group. We delivered strong organic growth, adjusted earnings per share and free cash flow growth in a challenging macro environment. We believe this once again demonstrates the stability of our recurring revenue, services focused business model and the ongoing execution of our strategy by our talented team members. Revenues increased by 66.4% compared to 2021 to $6.6 billion, driven by the Boardacquisition of Directors heldChubb Fire and Security and strong organic revenue growth, including a double-digit increase in inspection, service and monitoring revenue in our legacy business. We achieved our stated goal of growing inspection revenue 10%+ as we drive towards our goal of 60%+ of total revenues coming from inspection, service and monitoring.
REVENUE $6.6B | NET INCOME $73M | ADJUSTED EBITDA* $673M | ||
| * | Refer to Appendix for reconciliation of non-GAAP measures to most directly comparable GAAP measures. |
| | 2023 PROXY STATEMENT | 21 | ||
Compensation Discussion & Analysis
2022 Key Decisions
Topic | Description | More Information | ||
Executive Compensation Risk Mitigation Policies | The Compensation Committee approved: • Stock Ownership Guidelines for executive officers and directors • Clawback policy for executive officers | Page 31 | ||
Executive Officer Compensation Decisions | • Base Salary: Increases in line with market data • Short-Term Incentives (“STI”): 2022 actual financial performance was above target (140.6%) • Long-Term Incentives (“LTI”): Performance Share Unit (PSU) award: 50% Cumulative Adjusted EBITDA $ and 50% Target Share Price | Pages 27-29 | ||
Say-on-Pay Voting Results
As part of 8 meetings. Each incumbent director attended at least seventy five percent (75%)its decision making on compensation, the Compensation Committee evaluates the most recent advisory vote of the aggregate of (i)Company’s shareholders on executive compensation, known as the total number of meetings of the Board during the period for which he or she was a director and (ii) the total number of meetings of all Board committees (the “Committees”) on which he or she served during the period for which he or she was a director, with the exception of Lord Myners due to illness. Three directors attended the 2021 annual meeting of stockholders. It is the policy of the Board of Directors to encourage its members to attend our annual meeting of stockholders.
During 2021, our Board generally held executive sessions, or meetings of non-employee directors without management present, as part of regularly scheduled Board, Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee meetings. Thomas V. Milroy serves as lead independent director and he presides over executive sessions of the Board. Messrs. Ashken, Milroy and Lord Myners generally presided over the executive sessions of the Audit, Compensation and Nominating and Corporate Governance committees, respectively.
Corporate Governance Guidelines
Our Board of Directors is responsible for overseeing the management of our Company. Our Board has adopted Corporate Governance Guidelines (the “Governance Guidelines”), which set forth our governance principles and policies relating to, among other things:
director independence;
director qualifications and responsibilities;
mandatory retirement age for independent directors at 75;
board structure and meetings;
management succession; and
the performance evaluation of our Board.
Our Governance Guidelines are available in the Investor Relations section of our website at www.apigroupcorp.com.
The Board has not adopted a formal policy regarding the need to separate or combine the offices of Chief Executive Officer (“CEO”) and Chair of the Board and instead the Board remains free to make this determination from time to time in a manner that seems most appropriate for the Company. Currently, we separate the positions of our CEO and Co-Chairs of the Board. The CEO is responsible for the day-to-day leadership and performance of the Company, while the Co-Chairs of the Board provide strategic guidance to the CEO and set the agenda for and preside over the Board meetings. We believe that the current separation provides a more effective monitoring and objective evaluation of the CEO’s performance. The separation also allows the Co-Chairs of the Board to strengthen the Board’s independent oversight of our performance and governance standards.
Our Common Stock is listed on the NYSE. As such, the composition of the Board and its Committees are subject to the independence requirements set forth under the NYSE corporate governance listing standards“Say-on-Pay” vote, as well as other feedback that it may receive from the Governance Guidelines which have been adopted byCompany’s largest shareholders in connection with this vote. Our Say-on-Pay results consistently reflected strong support for the Board. Underlinkage between pay and performance in our compensation programs. Over the NYSE governance standards, a director qualifies as independent ifpast three years, the Board affirmatively determines that the director has no
material relationship with us. While the focussupport of the inquiry is independence from management,percentage of votes cast on the Board is required to broadly consider all relevant facts and circumstances in making an independence determination. In making each of these independence determinations, the Board has considered all of the information provided by each director in response to detailed inquiries concerning his or her independence and any direct or indirect business, family, employment, transactional or other relationship or affiliation of such director with us. Specifically, Mr. Malkin currently servesSay-on-Pay proposal are as an executive officer of a company that has in the past procured services from one or more Company subsidiaries. We reviewed these commercial relationships and found that all transactions between us and the relevant companies were made in the ordinary course of business and negotiated at arms’ length. Furthermore, these commercial relationships were below the threshold set forth in the NYSE governance standards (i.e., two percent of such other company’s consolidated gross revenues for such year or $1 million, whichever is greater). As a result, our Board determined that these commercial relationships did not impair Mr. Malkin’s independence.
Based on information provided by each director concerning his or her background, employment, and affiliations, and after considering the transactions described above, the Board has affirmatively determined that each of Messrs. Lillie, Ashken, Blitzer, Milroy, Malkin and Walker and Mses. Loop and Wheeler are “independent” as that term is defined under the applicable rules and regulations of the SEC and the NYSE governance standards. Because Sir Martin controls the entity which receives advisory fees from us, he is not independent under NYSE governance standards. As CEO of the Company, Mr. Becker is also not independent.
Our Board has three standing Committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Copies of the committee charters setting forth the responsibilities of the Committees are available in the Investor Relations section of our website at www.apigroupcorp.com, and such information is also available in print to any stockholder who requests it through our Investor Relations department. The Committees will periodically review their respective charters and recommend any needed revisions to the Board. The following is a summary of the composition of each Committee:follows:
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| 97.5% | 2020 Results 93% | ||||||||||
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Number of Meetings in 2021: Four
Responsibilities. Our Audit Committee operates pursuant to a formal charter that governs the responsibilities of the Audit Committee. Pursuant to the Audit Committee Charter, the Audit Committee is responsible for, among other things:
overseeing preparation of our financial statements, the financial reporting process and our compliance with legal and regulatory matters;
appointing and overseeing the work of our independent auditor;
preapproving all auditing services and permitted non-auditing services to be performed for us by our independent auditor and approving the fees associated with such work;
approving the scope of the annual audit;
reviewing interim and year-end financial statements;
overseeing our internal audit function, reviewing any significant reports to management arising from such internal audit function and reporting to the Board;
approving the audit committee report required to be included in our annual proxy statement; and
reviewing and pre-approving all related party transactions.
The Audit Committee has the power to investigate any matter brought to its attention within the scope of its duties and to retain counsel for this purpose where appropriate. Pursuant to the Audit Committee Charter, the Audit Committee reviews and pre-approves all audit and non-audit services performed by our independent accountant.
Independence and Financial Expertise. The Board has reviewed the background, experience and independence of the Audit Committee members and based on this review, has determined that each member of the Audit Committee:
meets the independence requirements of the NYSE governance listing standards;
meets the enhanced independence standards for audit committee members required by the SEC; and
is financially literate, knowledgeable and qualified to review financial statements.
In addition, the Board has determined that each of Mr. Ashken and Mses. Loop and Wheeler qualifies as an “audit committee financial expert” under SEC rules.
Number of Meetings in 2021: Three
Responsibilities. Our Compensation Committee operates pursuant to a formal charter that governs the responsibilities of the Compensation Committee. Pursuant tobelieves these voting results demonstrate significant, continuing support for our executive compensation program, and the Compensation Committee Charter, the Compensation Committee is responsible for, among other things:
assisting the Board in developing and evaluating potential candidates for executive positions;
reviewing and approving corporate goals and objectives with respect to compensation for the CEO, evaluating the CEO’s performance and approving the CEO’s compensation based on such evaluation;
determining the compensation of other non-CEO executive officers and all equity awards to such executive officers and other employees;
reviewing on a periodic basis compensation and benefits paid to directors and recommending such compensationdid not make any substantial changes to the Board of Directors for approval;
reviewing and approving our equity-based compensation plans and incentive compensation plans, including reviewing and approving the target performance benchmarks, if any, and range of aggregate value of our annual incentiveexisting program for senior management; and
approving2022 specifically in response to the compensation committee report on executive compensation required to be included in our annual proxy statement.
Independence. The Board has reviewed the background, experience and independence of the Compensation Committee members and based on this review, has determined that each member of the Compensation Committee:
meets the independence requirements of the NYSE governance listing standards;
is a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and
meets the enhanced independence standards for compensation committee members established by the SEC.
Compensation Committee Interlocks and Insider Participation. None of the members of the Compensation Committee who presently serve or, in the past year, have served on the Compensation Committee has interlocking relationships as defined by the SEC or had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related party transactions.
2021 Say-on-Pay voting results. The Compensation Committee haswill continue to consider the authority to delegate anyviews of its responsibilities to subcommittees as it may deem appropriate in its sole discretion.
Use of Compensation Consultant
The Compensation Committee has the authority to retain compensation consultants, outside counsel and other advisors as it may deem appropriate in its sole discretion. The Compensation Committee has sole authority to approve related fees and retention terms.
During 2021, the Compensation Committee utilized the services of Willis Tower Watson (“WTW”), a global management consulting firm, which acted as its compensation consultant to assist in reviewing competitive market data and preparing proposals for 2022 executive compensation . The total fees paid to WTW for these services were approximately $39,250.
During 2021, our management also retained separate business units of WTW (Corporate Risk & Broking and Retirement) to provide insurance brokerage services to the Company. The total fees paid to WTW’s separate business units with respect to services provided during 2021 (excluding services provided as compensation consultant as discussed above) were approximately $2.7 million, with the increase over 2020 attributable to services providedshareholders in connection with the acquisition of the Chubb fireexecutive pay practices and security business (the “Chubb Business”) from Carrier Global Corporation, which closed on January 3, 2022. The Compensation Committee was not involved in management’s decision to retain the separate business unit of WTW to provide such services.
The Compensation Committee determined that the work of the separate business unit of WTW on matters other than executive compensation did not raise any conflict of interest with WTW’s services as compensation consultant, taking into account, among other factors, WTW’s policiesprograms and procedures relating to the prevention and mitigation of conflicts of interest, the use of separate teams for compensation consulting services and other services provided by WTW and its business units, and determined that WTW is independent.
Nominating and Corporate Governance Committee
Number of Meetings in 2021: Two
Responsibilities. Our Nominating and Corporate Governance Committee operates pursuant to a formal charter that governs the responsibilities of the Nominating and Corporate Governance Committee. Pursuant to the Nominating and Corporate Governance Committee Charter, the Nominating and Corporate Governance Committee is responsible for, among other things:
assisting our Board in identifying prospective director nominees and recommending nominees for each annual meeting of stockholders to our Board;
leading the search for individuals qualified to become members of the Board and selecting director nominees to be presented for stockholder approval at our annual meetings;
reviewing the Board’s committee structure and recommending to the Board for approval directors to serve as members of each committee;
developing and recommending to the Board for approval a set of corporate governance guidelines and generally advising the Board on corporate governance matters;
reviewing such corporate governance guidelines on a periodic basis and recommending changes as necessary; and
reviewing director nominations submitted by stockholders.
The Nominating and Corporate Governance Committee may, when it deems appropriate, delegate certain of its responsibilities to one or more Nominating and Corporate Governance Committee members or subcommittees.
Independence. The Board has reviewed the background, experience and independence of the Nominating and Corporate Governance Committee members andwill make adjustments based on this review, has determined that each member of the Nominating and Corporate Governance Committee meets the independence requirements of the NYSE governance standards and SEC rules and regulations.
Consideration of Director Nominees. The Nominating and Corporate Governance Committee considers possible candidates for nominees for directors from many sources, including stockholders. The Nominating and Corporate Governance Committee evaluates the suitability of potential candidates nominated by stockholders in the same manner as other candidates recommended to the Nominating and Corporate Governance Committee.
In making nominations, the Nominating and Corporate Governance Committee is required to submit candidates who have the highest personal and professional integrity, who have demonstrated exceptional ability and judgment and who shall be most effective, in conjunction with the other nominees to the Board, in collectively serving the long-term interests of the stockholders. In evaluating nominees, the Nominating and Corporate Governance Committee is required to take into consideration the following attributes, which are desirable for a member of the Board: leadership, independence, interpersonal skills, financial acumen, business experiences, industry knowledge and diversity of viewpoints. In addition, while we do not have a formal, written diversity policy, the Nominating and Corporate Governance Committee will attempt to select candidates who will assist in making the Board a diverse body. As discussed under the heading “Board Diversity” above, we believe that a diverse group of directors brings a broader range of experiences to the Board and generates a greater volume of ideas and perspectives, and therefore, is in a better position to make complex decisions.
Code of Business Conduct and Ethics
We have adopted a written Code of Business Conduct and Ethics (“Code of Conduct”) that establishes the standards of ethical conduct applicable to all our directors, officers, and employees. In addition, we have adopted a written Code of Ethics for Senior Financial Officers (“Code of Ethics”) applicable to our CEO and senior financial officers. Copies of our Code of Conduct and Code of Ethics are publicly available in the Investor Relations section of our website at www.apigroupcorp.com. Any waiver of our Code of Ethics with respect to our CEO, chief financial officer, controller or persons performing similar functions or waiver of our Code of Conduct with respect to our directors or executive officers may only be authorized by our Board of Directors and will be disclosed on our website as promptly as practicable, as may be required under applicable SEC and NYSE rules.
Certain Relationships and Related Transactions
Since January 1, 2021, we did not enter into any related party transactions other than as set forth below.
Advisory Services Agreement
On October 1, 2019, we entered into an Advisory Services Agreement with Mariposa Capital, LLC, an affiliate of Sir Martin. Under this agreement, Mariposa Capital, LLC agreed to provide certain services, including corporate development and advisory services, advisory services with respect to mergers and acquisitions, investor relations services, strategic planning advisory services, capital expenditure allocation advisory services, strategic treasury advisory services and such other services relating to the Company as may from time to time be mutually agreed. In connection with these services, Mariposa Capital, LLC is entitled to receive an annual fee equal to $4,000,000, payable in quarterly installments. The initial term of this agreement was through October 1, 2020 and has been and will in the future be automatically renewed for successive one-year terms unless either party notifies the other party in writing of its intention not to renew this agreement no later than 90 days prior to the expiration of the term. This agreement may only be terminated by the Company upon a vote of a majority of our directors. In the event that this agreement is terminated by the Company, the effective date of the termination will be six months following the expiration of the initial term or a renewal term, as the case may be.
Registration Rights
Mariposa
The Company has agreed to provide Sir Martin, Messrs. Lillie and Ashken, and the Mariposa Acquisition IV, LLC with certain registration rights that require the Company to provide them with suchevolving best practices, competitive market information and assistance following the acquisition of APi Group, Inc. (the “APi Acquisition”), subject to certain restrictionspractices, and customary exceptions, as they may reasonably request to enable it to effect a disposition of allchanging regulatory or part of their Common Stock or warrants, including, without limitation, the preparation, qualification and approval of a prospectus in respect of such Common Stock or warrants.
Viking Global Investors
Pursuant to the registration rights agreement dated March 24, 2020 with Viking Global Opportunities Liquid Portfolio Sub-Master LP (“Viking”), the beneficial owner of approximately 14.3% of our outstanding shares of Common Stock (or 15.4% of the total voting power) as of the Record Date, we (i) filed a registration statement on May 12, 2021 (that was declared effective by the SEC on May 21, 2021) to register the resale of Common Stock then held by Viking and (ii) agreed that, if we propose to register any of our Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) in connection with the public offering of such securities solely for cash (other than in certain excluded registrations), we will register all of the shares that the Viking Opportunities Fund requests to be included in such registration (subject to customary cutbacks if the underwriters determine that less than all of the shares requested to be registered can be included in such offering).
The registration rights agreement contains customary indemnities. Our obligations under the registration rights agreement will terminate on the earlier of (a) such time as all of the shares that may be registered under the agreement have been sold and (b) such time as all of such shares may be sold, transferred or otherwise disposed of in a single transaction without limitation under Rule 144.
Series B Preferred Stock Purchasers
In connection with the issuance of the Series B Preferred Stock, on January 3, 2022, we entered into registration rights agreements with Juno Lower Holdings L.P. (“Juno”), FD Juno Holdings L.P. (“FD Juno” and, together with Juno, the “Blackstone Purchasers”), Viking Global Equities Master Ltd. (“VGEM”) and Viking Global Equities II LP (“VGE” and, together with VGEM, the “Viking Purchasers”, and together with the Blackstone Purchasers, the “Series B Purchasers”). On January 3, 2022, we filed a registration statement to satisfy our obligations under such registration rights agreements to register the resale of the shares of Common Stock issuable upon conversion of or as dividends on the Series B Preferred Stock.
In addition, pursuant to the registration rights agreements, if we propose to register any shares of Common Stock under the Securities Act in connection with the public offering of such securities solely for cash, we will register all of the shares that the Series B Purchasers request to be included in such registration (subject to customary cutbacks if the underwriters determine that less than all of the shares requested to be registered can be included in such offering). The holders also have the right to request one or more underwritten offerings, so long as the anticipated gross proceeds of such underwritten offering is not less than $25 million (unless such holders are proposing to sell all of their remaining registrable securities), and the holders have the right to request unlimited non-underwritten shelf take-downs. We will not be obligated to effect more than two underwritten offerings for a particular Series B Purchaser during any 12-month period.
The registration rights agreements contain customary indemnities. Our obligations under the registration rights agreements will terminate as to a particular Series B Purchaser when all shares that are registrable under the registration rights agreements are no longer held by such Series B Purchaser.
Commercial Relationships
During 2021, we, through certain of our subsidiaries, provided fire safety and dust mitigation services to Royal Oak Enterprises, LLC (“ROE”), a manufacturer and distributor of charcoal, fire logs and related products, in the ordinary course of business and on arm’s length terms. As consideration for our services, we received aggregate revenue of approximately $8 million from ROE during 2021. Our Co-Chair, Sir Martin E. Franklin, is the chairman and controlling shareholder of ROE.
Policy Concerning Related Party Transactions
The Board of Directors has determined that the Audit Committee is best suited to review and pre-approve transactions with related persons, in accordance with the policy set forth in the Audit Committee Charter. Such review will apply to any material transaction or series of related transactions or any material amendment to any such transaction involving a related person and the Company or any subsidiary of the Company. For purposes of the policy, “related persons” will consist of executive officers, directors, director nominees, any stockholder beneficially owning more than 5% of the issued and outstanding common stock, and immediate family members of any such persons. In reviewing related person transactions, the Audit Committee will take into account all factors that it deems appropriate, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction. No member of the Audit Committee will be permitted to participate in any review, consideration or approval of any related person transaction in which the director or any of his or her immediate family members is the related person.
The Board is actively involved in the oversight and management of risks that could affect the Company. This oversight and management is conducted primarily through Committees of the Board, as disclosed in the descriptions of each of the Committees above and in the charters of each of the Committees, but the full Board has retained responsibility for general oversight of risks. The Audit Committee is primarily responsible for overseeing our policies and procedures with respect to risk assessment and risk management. The other Committees of the Board consider the risks within their areas of responsibility. The Board satisfies their oversight responsibility through full reports by each Committee chair regarding the Committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within the Company.
Our Insider Trading Policy, which is applicable to all employees (including officers) and directors of the Company, makes clear that no employee or director may engage in hedging transactions or any other forms of
monetization transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of our equity securities granted as compensation, or held directly or indirectly by the employee or director.
Our non-employee director compensation policy provides for the following compensation for our non-employee directors:
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In addition, all of our directors are entitled to be reimbursed by the Company for reasonable expenses incurred by them in the course of their directors’ duties relating to the Company.
Messrs. Ashken, Lillie, Milroy, Malkin and Walker and Mses. Loop and Wheeler will be paid compensation for their respective services on our Board. Sir Martin will not receive any additional compensation for services as a director in light of his affiliation with Mariposa Capital, LLC, which provides advisory services to the Company in exchange for a fee. In addition, Mr. Becker, who serves as our CEO, is not entitled to receive any additional compensation for his services as a director. Mr. Lillie elected to waive all compensation for his service as a director for 2021 and Mr. Blitzer has elected to waive all compensation for his service as a director for 2022.
The table below sets forth the non-employee director compensation for the year ended December 31, 2021. Mr. Becker, our CEO, is omitted from the table as he does not receive any additional compensation for his services as a director and each of Mr. Blitzer and Ms. Loop are omitted from the table as they were not directors during 2021. For more information on Mr. Becker’s compensation, see “Executive Compensation.”
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | Total ($) | |||||||||
Sir Martin E. Franklin | — | — | — | |||||||||
James E. Lillie | — | — | — | |||||||||
Ian G.H. Ashken | 90,000 | 100,000 | 190,000 | |||||||||
Anthony E. Malkin | 80,000 | 100,000 | 180,000 | |||||||||
Thomas V. Milroy | 90,000 | 100,000 | 190,000 | |||||||||
Lord Paul Myners | 85,000 | 100,000 | 185,000 | |||||||||
Cyrus D. Walker | 80,000 | 100,000 | 180,000 | |||||||||
Carrie A. Wheeler | 85,000 | 100,000 | 185,000 | |||||||||
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Name | Aggregate Number of Restricted Stock Units Outstanding at December 31, 2021 | Aggregate Number of Unexercised Stock Options Outstanding at December 31, 2021 | ||||||
Sir Martin E. Franklin | — | — | ||||||
James E. Lillie | — | — | ||||||
David S. Blitzer | — | — | ||||||
Ian G.H. Ashken | 4,876 | — | ||||||
Anthony E. Malkin | 4,876 | — | ||||||
Thomas V. Milroy | 4,876 | 37,500 | ||||||
Lord Paul Myners | 4,876 | 50,000 | ||||||
Cyrus D. Walker | 4,876 | — | ||||||
Carrie A. Wheeler | 4,876 | — | ||||||
Set forth below is certain information relating to our current executive officers. Biographical information with respect to Mr. Becker is set forth above under “PROPOSAL 1—ELECTION OF DIRECTORS.”requirements.
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Kevin S. Krumm has served as Executive Vice President and Chief Financial Officer of the Company since September 2021. Prior to joining the Company, Mr. Krumm served as Corporate Treasurer and Senior Vice President of Global Business Services for Ecolab, Inc. During his 17-year tenure there, he also held roles leading the Industrial segment finance team, regional finance teams in Europe, the Middle East and Africa, Asia and Latin America and leading international integration efforts for a major acquisition. Mr. Krumm began his career in public accounting working for consulting firms PwC, Arthur Andersen and Deloitte with a heavy emphasis on M&A/corporate finance. Mr. Krumm earned his bachelor’s degree from the University of Northern Iowa and his master’s degree in Business Administration from the University of Chicago Booth School of Business.
Andrea M. Fike has served as Senior Vice President and General Counsel of the Company since January 2020 and as Secretary since March 2020. Most recently, Ms. Fike was Executive Vice President and General Counsel for iMedia Brands, Inc., a digital and television media and retailing company. From April 2017 to June 2019, Ms. Fike headed the iMedia Brands legal department and assumed leadership of several operations functions, including the company’s customer solutions group, after which she was a consultant until she joined the Company. Prior to that, Ms. Fike served as Senior Vice President and General Counsel at Regency Corporation, an educational institution, from 2008 to July 2017. At Regency Corporation, Ms. Fike was responsible for management of the legal and compliance, campus operations and human resources functions. Prior to that, she spent eight years at FICO, an analytics software company, where she was responsible for oversight of the legal department. Prior to that, Ms. Fike spent ten years at a law firm where, as a partner, she focused on financial institutions regulatory law.
Glenn David Jackola has served as Vice President, Controller and Interim Chief Accounting Officer since March 2022 and previously served as the Company’s Vice President, Corporate Planning and Analysis since joining the Company in October 2021. Prior to joining the Company, Mr. Jackola was the Vice President of Finance of James Hardie Building Products where he served as head of finance and led a cross-functional team for a $2 billion business unit until October 2021. Prior to that, Mr. Jackola was Vice President of Finance—Europe for Ecolab and also held other roles of increasing responsibility within Ecolab since joining in July 2008, including leading regional finance teams in Europe and Latin America, in corporate planning and analysis and in other finance roles. He also previously held analyst roles at the Brattle Group, a consulting firm, from 2001 to 2006 prior to earning his Master of Business Administration in Finance from the University of Chicago.
Kristina M. Morton has served as Senior Vice President and Chief People Officer of the Company since February 2022. Prior to joining the Company, Ms. Morton served as Vice President, Human Resources, Supply Chain and Global Operations for General Mills. During her 23-year tenure at General Mills, she also held roles in marketing, sales and supply chain, most recently leading 175 human resources professionals that supported 20,000 employees globally across 45 manufacturing facilities, in the U.S. and Europe. Ms. Morton earned her bachelor’s degree from the University of St. Thomas and her master’s degree from the University of Minnesota.
COMPENSATION DISCUSSION & ANALYSIS
This Compensation Discussion and Analysis provides information regarding our executive compensation philosophy, programs and decisions for 2021 for our named executive officers. For 2021, our named executive officers were:
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2023 PROXY STATEMENT | ||||
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Compensation Philosophy and Objectives
Our Compensation Committee’s guiding principle when reviewing and determining executive compensation is to ensure that the Company’s compensation policies attract and retain the key employees necessary to support the Company’s growth and success, both operationally and strategically, and to motivate executives to achieve short- and long-term goals with the ultimate objective of creating sustainable improvements in stockholder value by:Discussion & Analysis
appropriately rewarding executives for their contributions to our successful performance;
providing that a significant portion of each executive’s compensation is “at risk” and tied to overall Company, business unit and individual performance;
balancing short- and long-term compensation elements to motivate and reward superior performance without encouraging excessive or unnecessary risk taking; and
designing compensation programs that align with the interests of our stockholders.
Overview of 2021 Performance
2021 was a watershed year in the development of the Company. Despite the many macro headwinds we achieved our stated strategic goals amidst ongoing supply chain disruptions, inflationary pressures and COVID-19 impacts.
Our ability to execute was in large part due to the ongoing leadership efforts, focus and discipline of our leaders who have remained focused on supporting our company and our customers.
Reported net revenues increased by 9.8% or $353 million to $3.9 billion compared to $3.6 billion in the prior year period, primarily driven by general market recoveries in our Safety and Specialty Services segments, revenue from acquisitions completed in the prior twelve months in Safety Services and an increase in inspection and service revenue across all of our segments, partially offset by the divestiture of two businesses in the former Industrial Services segment and the delay and suspension of certain projects in that segment.
Reported gross margin was 23.8%, representing a 276 basis point increase compared to prior year period reported gross margin of 21.1%, driven by a decrease in amortization expense, growth in the higher margin Safety Services segment and an improved mix of inspection and service revenue, partially offset by supply chain disruptions and inflation causing downward pressure on margins.
Net income (loss) for the year ended December 31, 2021 was $47 million of income compared to a net loss of ($153) million for the year ended December 31, 2020, an improvement of $200 million. Net income (loss) as a percentage of net revenues for the year ended December 31, 2021 was 1.2% compared to (4.3%) for the year ended December 31, 2020. The change was principally from an impairment charge that occurred in 2020 related to goodwill of $197 million that did not recur in 2021, an increase in inspection and service revenue, and an improved gross margin. These improvements were partially offset by lower investment income and other, net due to a $11 million decrease in income from joint ventures and a decline in income from COVID-19 relief programs of $6 million.
Continued success in our ongoing goal of growing the acyclical, recurring service revenue aspects of our portfolio, which we believe helps to build a more protective moat around the business. Service represented approximately 43% of total net revenues in our Safety Services segment, up from approximately 41% of total net revenues in 2020.
Within our Safety Services segment, we achieved our goal of growing inspection revenue 10%+. We continue to drive our go-to-market strategy of selling inspection work first which we believe will lead to further service revenue growth and ultimately drive margin expansion.
Continued progress with disciplined project and customer selection. We ended the year with a contract loss rate of less than 0.50%, exceeding our goal of 0.70% or less. We will continue to resist lower margin, higher risk activity and work to drive this towards zero.
Our rate of incidents recordable under the standards of the U.S. Occupational Safety and Health Administration (“OSHA”) per one hundred employees per year, also known as the OSHA recordable rate, was 1.3 during both 2021 and 2020, considerably less than the most recently published OSHA rate for our industry of 2.5.
On July 26, 2021, we signed a definitive agreement to acquire the Chubb Business. With the closing of the acquisition on January 3, 2022, we began 2022 as the world’s leading life safety services provider. The acquisition significantly expands our geographical reach from 200+ locations to 500+ locations and strengthens our protective moat through greater statutorily required, recurring revenue with 50%+ of our revenue now coming from service-related activities.
Compensation Governance Practices
Our executive compensation governance practices are intended to support the needs of the business, drive performance, and ensure management alignment with the short- and long-term interests of our stockholders. Selected key policies embedded in our executive compensation program are set forth below:shareholders.
What We | ||
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| Pay for performance with a substantial majority of pay dependent on performance, not guaranteed | ||
| ✓ | Use multi-year vesting terms for annual executive officer equity awards | |
| ✓ | Balance short- and long-term incentives | |
| ✓ | Require executive officers to place compensation at risk of “clawback” actions by the Company in appropriate circumstances | |
| ✓ | Engage an independent compensation consultant | |
| ✓ | Benchmark compensation to peer and market data during compensation decision-making process | |
| ✓ | Maintain stock ownership guidelines for officers | |
| What We DON’T DO | ||
| x | Maintain single trigger severance provisions upon a change in control in employment agreements | |
| Permit liberal share recycling | ||
| Permit hedging or short sales of the Company’s stock | ||
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| Provide excise tax gross-ups for change in control payments | |||
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| x | Provide excessive perquisites | ||
Executive Compensation Setting Process
ReviewRole of the Compensation Committee
Our Board of Directors has adopted a written Compensation Committee Charter that governs the responsibilities of the Compensation Committee. The Compensation Committee is responsible for, among other things:
the design, implementation and administration of short- and long-term compensation (including benefits and awards under our 2019 Equity Incentive Plan (the “Equity Incentive Plan”)) for directors, executive officers and other employees;
| • | the design, implementation and administration of short- and long-term compensation (including benefits and awards under our 2019 Equity Incentive Plan (the “Equity Incentive Plan”)) for directors, executive officers and other employees; |
| • | reviewing and approving corporate goals and objectives with respect to compensation for the CEO, evaluating the CEO’s performance and approving the CEO’s compensation based on such evaluation; and |
| • | determining compensation for the Company’s other executive officers. |
In reviewing and approving corporate goalsdetermining executive compensation, the Compensation Committee generally considers: compensation levels at peer companies and objectives with respect toinformation derived from compensation forsurveys provided by outside consultants, as further described below; the CEO, evaluating the CEO’sCompany’s past-year performance and approvinggrowth; the CEO’sresults of any “Say-on-Pay” (defined below) votes by shareholders; achievement of specific pre-established financial goals; a subjective determination of the executives’ past performance and expected future contributions to the Company; past equity awards granted to such executives, and the recommendation of the CEO.
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Compensation Discussion & Analysis
Role of our Compensation Peer Group
How we use peer group data
We compare our executive compensation based on such evaluation; andprograms to those of 17 companies that make up our compensation peer group. The Compensation Committee uses peer group data to generally inform:
| • | compensation plan design, |
determining compensation for non-CEO Company executive officers.
| • | compensation levels for our NEOs, including base salaries, annual incentive targets and LTI award targets, and |
| • | form and mix of equity awards granted to our NEOs. |
When making compensation decisions, the Compensation Committee generally analyzes data relating to our Peer Group (as identified below in “Peer Group and Market Benchmarking”)peer group and considers the dynamics of operating in the safety services and specialty services industries, the importance of rewarding and retaining talented and experienced executives to continue to guide the Company, the alignment of our executive compensation program with stockholders’shareholders’ interests and the voting guidelines of certain proxy advisory firms and stockholders. In reviewing and determining executive compensation, the Compensation Committee also considers: compensation levels at peer companies and information derived from compensation surveys provided by outside consultants; the Company’s past-year performance and growth; the results of any “Say-on-Pay” (defined below) votes by stockholders; achievement of specific pre-established financial goals; a subjective determination of the executives’ past performance and expected future contributions to the Company; and past equity awards granted to such executives.shareholders. In addition, in connection with the 20212022 executive compensation program design, the Compensation Committee received analyses, guidance and recommendations, including general information on executive compensation market trends and practices of peer companies, provided by WTW.
Considerationthe Compensation Committee’s independent compensation consultant (described below). The Compensation Committee does not strictly benchmark executive pay against this comparative compensation information, but instead uses this data as a market check on its compensation decisions. We do not mandate target ranges for our NEO’s base salaries, annual incentive targets, long-term incentive award targets, or total direct compensation levels as compared to the peer group. The Compensation Committee recognizes that over-reliance on external comparisons can be of concern; therefore, the Committee uses external comparisons as only one point of reference and is mindful of the Stockholder Advisory Vote on Executive Compensationvalue and limitations of comparative data.
As part of its decision making on compensation,How our peer group was determined
In determining our 2022 peer group, the Compensation Committee evaluates the most recent advisory vote of the Company’s stockholders on executive compensation, knownconsidered factors such as the “Say-on-Pay” vote, as well as other feedback that it may receive from the Company’s largest shareholders in connection with this vote.
At our annual meeting on July 14, 2021, our executive compensation for 2020 received the support of approximately 98% of the votes cast on the “Say-on-Pay” proposal. We understand that our stockholders support an executive compensation program the majority of which is based on the achievement of performance objectives. In establishing our 2021 executive compensation program, this perspective was reviewed and considered by the Compensation Committee, in combination with the other information outlined herein. As further described below, 80% of our 2021 annual awards to our named executive officers are performance-based and the Compensation Committee expects that future equity awards will have a significant component that is performance-based. The Compensation Committee will continue to consider the views of our stockholders in connection with executive pay practices and programs and will make adjustments based on evolving best practices, competitive market information and practices, and changing regulatory or other requirements.
Peer Group and Market Benchmarking
In developing our 2021 executive compensation program, the Compensation Committee identified a representative peer group in the same or similar industries that the Compensation Committee believes is representative of the labor market from which we recruit talent. These industries include diversified support services, security and alarm services, building products, engineering and construction, and industrial machinery. Factors used to select the peer group included industry segment, revenues, profitability,revenue, market capitalization, numberglobal scope of employees, capital structureoperations, and a qualitative review of potential companies’ business fundamentals to ensure alignment with our company. Several companies were identified whose business models more closely align with the Company, but which have a larger revenue base.industry alignment. The approach taken by the Compensation Committee in selecting the primary peer group excluded these larger companies from the market data review but included them as “reference peers” for the purpose of providing qualitative data about program design for the Compensation Committee’s reference. The primary peer group for 2021 was composed of the following companies: ADT, Inc.; Advanced Drainage Systems, Inc.; Cintas Corporation; Comfort Systems USA, Inc.; Dycom Industries, Inc.; EMCOR Group, Inc.; Flowserve Corporation; MasTec, Inc.; MYR Group, Inc.; Otis Worldwide Corporation; Primoris Services Corporation; Quanta Services, Inc.; Residio Technologies, Inc.; SPX Corporation; Tutor Perini Corporation; Watts Water Technologies, Inc., and; Xylem Inc. The reference peer group was composed of the following companies: Johnson Controls International PLC; Carrier Global Corporation, and; Jacobs Engineering Group, Inc. In addition to current market trends, the Compensation Committee will consider the primary peer group to inform pay decisions and both the primary and reference peer groups to inform executive compensation program design.
In consultation with WTW, the Compensation Committee determined to adjust the peer group utilized in 2021 with respect to considering and determining 2022 compensation to ensure alignment with APi’s size and business givenGiven the acquisition of Chubb Fire and Security business from Carrier Global in 2022, there were significant changes to the Peer Group in 2022. Specifically, the Peer Group was changed to better align with the new increase in annual revenue from the Chubb Business in January 2022acquisition and APi’s continued services focus. Specifically, the Compensation Committee determinedevolution to (1) remove four companiesa service-oriented business. Five peers were removed given that had revenues substantially belowtheir revenue was less than half of APi expected 2022 revenues (Advanced Drainage Systems, MYR Group, SPX CorporationGroup’s, and Watts Water Technologies), (2) remove Carrier Global Corporation which is no longer a comparable peer company following our acquisition of the Chubb Business from such company, (3) remove Flowserve Corporation given it is primarily a manufacturing business, and (4) add five peers that havewere added because they had a significant service element to their business (Aramark, ASGN Incorporated, Ecolab, Jacobs Engineering Group and SNC-Lavalin Group).business.
The
2022 Peer Group | ||||
ADT Inc. | Ecolab Inc. | Quanta Services, Inc. | ||
Aramark | EMCOR Group, Inc. | Resideo Technologies, Inc. | ||
ASGN Incorporated | Jacobs Engineering Group Inc. | SNC-Lavalin Group Inc. | ||
Cintas Corporation | MasTec, Inc. | Tutor Perini Corporation | ||
Comfort Systems USA, Inc. | Otis Worldwide Corporation | Xylem Inc. | ||
Dycom Industries, Inc. | Primoris Services Corporation | |||
Reference Peer | ||||
Johnson Controls International plc | ||||
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Compensation Committee expects to continue to utilize outside compensation and benefits consultants from time to time to assistDiscussion & Analysis
Peer Group Changes Made for 2022 | ||||
Removed from peer group: | ||||
Flowserve Corporation | Advanced Drainage Systems, Inc. | SPX Corporation | ||
MYR Group Inc. | Watts Water Technologies, Inc. | |||
Added to peer group: | ||||
Aramark | ASGN Incorporated | SNC-Lavalin Group Inc. | ||
Ecolab Inc. | Jacobs Engineering Group Inc. | |||
Removed as reference peer: | ||||
Carrier Global Corporation | Jacobs Engineering Group Inc. | |||
Role of Compensation Consultant
In 2022, the Compensation Committee in designing management pay,used WTW to serve as the independent compensation design and other related matters.consultant. The information from any outside consultantWTW regarding pay practices at peer companies will beis used by the Compensation Committee as a resource in its deliberations regarding executive compensation and will be useful in determining the marketplace competitiveness as well as reasonableness and appropriateness of our executive compensation programs. Although at this time we do not intend to target executive compensation to a specific market percentile, we intend to provide a compensation package that is competitive in the market and rewards each executive’s performance for executing the strategic and financial goals of the Company for the long-term benefit of our stockholders.
Role of Executives in Establishing Compensation
We expectThe Compensation Committee considers input from our CEO, toChief Financial Officer, and Chief People Officer when determining performance metrics and objectives for our STI and LTI plans and evaluating performance against such metrics and objectives. Our CEO and Chief People Officer then evaluate the individual performance and the competitive pay positioning of senior management members who report directly to the CEO, including the named executive officers. Our CEO canNEOs, and then make recommendations to the Compensation Committee regarding the target compensation job leveling and grading for such named executive officersNEOs and other executive officers of the Company.
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Compensation Discussion & Analysis
Components of the Executive Compensation Program
We have entered into an employment agreement or offer of employment with each of our named executive officers (collectively, the “Employment Arrangements”) which provide forOur NEOs receive a base salary, annual cash incentive compensation, annual time- and performance-basedannual equity incentive awards (each, an “LTI Award”) and participationparticipate in our employee benefits programs and plans.
In the first quarter of 2021,2022, the Compensation Committee approved, and the Company implemented, anthe executive compensation program for 2021. The 2021 executive compensation program was intended to attract and retain a high caliber of executive talent, align incentives with stockholder’s interests, and support the Company’s pay-for-performance philosophy. From time to time, the Compensation Committee may also approve discretionary awards to executives in connection with their initial employment or for extraordinary performance, a significant contribution to the Company’s strategic objectives or other retention or business purposes.2022.
The following table summarizes the primary components of the 20212022 executive compensation program:
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2023 PROXY STATEMENT
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Compensation Discussion & Analysis
2022 Compensation Decisions
Consistent with our compensation philosophy of paying for performance, our compensation decisions closely link pay and performance. Our performance during 2022 resulted in the following compensation actions.
Base Salary
The Compensation Committee believes base salary, in combination with health, welfare and retirement benefits, serves to attract and retain high-quality executives needed to lead our complex business by providing
basic compensation and financial stability. The Compensation Committee expects to annually review the named executive officers’NEOs’ base salaries and make appropriate adjustments subject tobased on factors determined by the terms of any individual Employment Arrangements. Any adjustments will be based onCompensation Committee, including individual responsibilities and performance, internal pay equity, compensation history, executive potential, and peer group and market-based data.
data, as described above. During 2021,2022, the base salaries of our named executive officers were: Mr. Becker—$1.25 million; Mr. Krumm—$750,000; Mr. Lydon—$825,000; Mr. Grunau—$340,000; Ms. Fike—$400,000; and Mr. Cebulla—$280,000. Other than Ms. Fike whose base salary was increased to $400,000 based on market data, none of our named executive officers received any increase in base salary during 2021. In 2020, due to the uncertainties presented by the COVID-19 pandemic, the Company’s management team took early preemptive cost-containment measures, including the voluntary reduction of named executive officer base salaries. These reductions were effective on March 16, 2020 and ranged from 20% to 97%, with the reduction for our CEO at 97%. These reductions continued for a minimum of 4 months, at which time the base salaries for Mr. Lydon and Ms. Fike were incrementally returned to their original levels over three months’ time. The base salaries for Messrs. Becker and Grunau stayed at fully reduced levels until mid-November, when their salary levels were re-instated at pre-COVID levels.NEOs changed as set forth below:
Name | Base Salary | Increase (%) | ||||||
Russell A. Becker | $ | 1,350,000 | 8 | % | ||||
Kevin S. Krumm | $ | 750,000 | 0 | %(1) | ||||
Louis B. Lambert | $ | 500,000 | 0 | %(2) | ||||
Kristina M. Morton | $ | 450,000 | 0 | %(3) | ||||
Glenn David Jackola | $ | 350,000 | 13 | %(4) | ||||
Andrea M. Fike | $ | 450,000 | 14 | % | ||||
| (1) | Mr. Krumm joined the Company on September 20, 2021, and was not eligible for a base salary increase in 2022. |
| (2) | Mr. Lambert joined the Company on July 25, 2022, and was not eligible for a base salary increase in 2022. |
| (3) | Ms. Morton joined the Company on February 14, 2022, and was not eligible for a base salary increase in 2022. |
| (4) | Mr. Jackola’s base salary was increased from $310,000 to $350,000 as of March 1, 2022, in connection with his assumption of additional responsibility as the Controller for the Company. |
Short-Term Incentive Compensation
In addition, in February 2021, the Committee reviewed the overall company performance and determined that, in light of the financial performance achieved, the outsized base pay reductions taken by certain named executives reflected a diminution in annual compensation that was not merited based on actual company performance and which far exceed the general pay reduction of 20% or less for other employees. Accordingly, the Compensation Committee awarded a one-time stock grant to each named executive officer whose pay reduction in 2020 exceeded 20% of base salary, in the amount of the difference between the actual pay reductions and a 20% pay reduction. The value of the one-time stock grants were: Mr. Becker—$700,263; Mr. Lydon—$186,683; and Mr. Grunau—$173,256.
Annual Cash Incentive Compensation
The Compensation Committee believes that the annual incentive compensation program encourages executive officers to focus on those short-term financial, operational and qualitative performance metrics that will be the basis of long-term growth. Consistent with the Company’s pay-for-performance philosophy, and to promote alignment with stockholders’ interests, the 2021 annual incentive program was based on Company performance. Under the program,2022, Company executives had an opportunity to earn cash incentive compensation represented by a percentage of their base salary based on the achievement of annual performance goals developed in the annual budget process and approved by the Compensation Committee. The Compensation Committee annually reviews, and revises if necessary, the appropriateness of the performance metrics, their correlation to the Company’s overall growth strategy and the impact of such performance metrics on long-term stockholdershareholder value. The Compensation Committee did not make any revisions to the STI plan after the goals were approved at the beginning of the performance period.
TargetSTI Opportunity. For 2021,2022, all our named executive officersNEOs were eligible for an annual cash incentive opportunity as outlined below, based on the achievement of a performance goal tied to the Company’s annual adjustedAdjusted EBITDA performance.
Named Executive Officer | Target as a Base Salary | |||
Russell A. Becker | 100 | % | ||
Kevin S. Krumm | 100 | % | ||
| % | |||
Kristina M. Morton | 75 | % | ||
Glenn David Jackola | 50 | % | ||
Andrea M. Fike | ||||
| ||||
| % | |||
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Compensation Discussion & Analysis
Amounts payable under the annual incentive portion of the executive compensation plan were subject tocan range from 0-200% of target, with a threshold (25%payout at 40% of target)target and a maximum (125%-200%payout of target) payouts for200% of target based on achievement of the performance
goal at threshold and max levels, respectively. The maximum payouts levels were: Messrs. Becker, Krumm, Lydon, and Cebulla and Ms. Fike—200%; Mr. Grunau—125%. goal. If the performance goal was achieved between the threshold level and target or between the target and maximum level, the amount of the annual incentive payment with respect to that metric would beperformance goal is calculated on a linear basis from the target level.
Performance Metrics, Target, 20212022 Performance and Payout. For 2021,2022, the Compensation Committee determined that the annual incentive compensation paid to our named executive officersNEOs would be based on performance against adjusted EBITDA targets. Adjusted EBITDA targets.is calculated based on net income, adjusted as described in the Appendix and to eliminate the impact of foreign currency fluctuations. The Compensation Committee believes that Adjustedour NEOs can impact adjusted EBITDA and that it is one of the most important performance metrics used by investors, stockholdersshareholders and creditors as an indicator of the performance of our core business. Furthermore, Adjusted EBITDA is a metric that every named executive officer can impact and therefore serves as an appropriate measure of company-wide performance.
The 2021 Adjusted EBITDA targets were:
| Threshold | Target | Maximum | ||||||||||
| $ | 382 million | $ | 415 million | $ | 456 million | |||||||
Percentage of Target | 92% | 100% | 110% | |||||||||
| Threshold | Target | Maximum | ||||||||||
2022 Adjusted EBITDA Targets | $640 million | $674 million | $710 million | |||||||||
The Company’s reported Adjustedadjusted EBITDA for 20212022 was $407$688.6 million, or 98.1% of target, resulting in an 82%140.6% payout on the annual cash incentives. The payouts for the named executive officersNEOs were: Mr. Becker—$1.025 million; Mr. Krumm—$220,000 (representing a pro rata share of the target payout, given Mr. Krumm joined the Company in September 2021); Mr. Grunau—$246,000; Ms. Fike—$164,000; and Mr. Cebulla—$150,000.
Given the significant time and effort spent by certain key Company leaders during 2021 in connection with the acquisition of the Chubb Business, the Compensation Committee determined to pay transaction bonuses to certain Company employees, including payments of $75,000 and $100,000 to Ms. Fike and Mr. Grunau, respectively.
Named Executive Officer | Payout | |||
Russell A. Becker | $ | 1,898,100 | ||
Kevin S. Krumm | $ | 1,054,500 | ||
Louis B. Lambert(1) | $ | 230,672 | ||
Kristina M. Morton(2) | $ | 418,859 | ||
Glenn David Jackola | $ | 244,292 | ||
Andrea M. Fike | $ | 347,985 | ||
For Mr. Lydon, given his employment ended effective December 31, 2021 and pursuant to the terms of the Separation Agreement between Mr. Lydon and the Company, Mr. Lydon received severance payments in lieu of any payout under the annual incentive compensation program. See the “Executive Compensation—Potential Payments Upon Termination or Change in Control” section for additional detail.
| (1) | Mr. Lambert received a prorated STI award based on his start date with the Company of July 25, 2022. |
| (2) | Ms. Morton received a prorated STI award based on her start date with the Company of February 14, 2022. |
2022 LTI Awards
LTI Awards granted by the Compensation Committee are intended to align the financial interests of our executives with those of the stockholders of the Company. We believe that stockholders’ interests are best served by balancing the focus of executives’ decisions between short and long-term measures. We also believe that providing executives with opportunities to acquire significant stakes in the Company’s growth incentivizes and rewards executives for sound business decisions and high-performance team environments, while fostering the accomplishment of short- and long-term strategic objectives and improvement in stockholder value, all of which are essential to our ongoing success. We expect our executive officers and other key management personnel to be and remain stockholders in the Company.
LTI Awards are granted under the Equity Incentive Plan or such other long-term incentive plans, programs and arrangements established and modified from time to time by the Compensation Committee. We expect any LTI Awards will be granted in the form of stock options, restricted stock units, performance shares or other forms of equity or long-term incentive as determined by the Compensation Committee and on terms to be specified by the Compensation Committee in its discretion. Our named executive officers are eligible to participate in our Equity Incentive Plan and any other long-term incentive plan, program and/or arrangements applicable to senior-level executives as established and modified from time to time by the Compensation Committee, in its sole discretion.
2021 LTIP
The 20212022 executive compensation program adopted by the Compensation Committee includes the grant of LTI Awards.Awards under the Equity Incentive Plan. The Compensation Committee believes that named executive officer long-term compensation should be correlated with salary and short-term incentive compensation. Accordingly, the Compensation Committee used a percentage of each named executive officer’sNEO’s base salary to determine the value of the LTI Award to be granted to each named executive officerNEO each year. The Compensation Committee also believes that the structure of LTI Awards should correlate the value of any such award to the achievement by the Company of long-term and strategic objectives. As such, the Compensation Committee expects that a significant percentage of the amount of LTI Awards will be subject to the achievement of three-year Company performance goals. Time-based awards may beare awarded as part of a balanced approach to encourage retention and ensure that the Company’s compensation programs do not encourage excessive risk-taking.
For 2021,2022, the Compensation Committee approved the grant of a mix of performance stock unitsPSUs and restricted stock unitsRSUs to the named executive officers.NEOs. The restricted stock unitsRSUs represent 20% of the total target award amount and will vest ratably over three years from the date of grant. The performance stock unitsPSUs represent 80% of the total target award amount, assuming performance and vesting at target levels. The performance stock units will vest atmetrics for the 2022 PSU LTI Awards were based equally on (i) cumulative adjusted EBITDA dollars and (ii) a Company target share price. These metrics were chosen because we believe them to be drivers of sustained value creation over the long term for our shareholders. The cumulative adjusted EBITDA dollar metric has a three-year performance period and a payout range of 0-200% (0-175% for Mr. Jackola) based on the achievement of the pre-established goals (below threshold (25%)performance equating to 0%, threshold performance equating to 25%, target (100%) orperformance equating to 100% and maximum (125-200%) levels, if the applicable performance goal is met at the corresponding threshold, target or maximum level. The performance metric goalequating to 200% (175% for the 2021 LTIP Awards was adjusted EBITDA margin,Mr. Jackola)), the achievement of which will be determined by the Compensation Committee following the three-year performance period ending December 31, 2023. In addition, an adjusted consolidated net revenue2024. The target share price PSU has a
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Compensation Discussion & Analysis
share price hurdle performance goal mustcriteria, which needs to be met ator exceeded for 20 consecutive trading days by the endfifth anniversary of the three-year performance period for any performance stockgrant date, otherwise such units to be earned atare forfeited.
Named Executive Officer | Target LTI as a % of Base Salary | ||||
Russell A. Becker(1) | 400 | % | |||
Kevin S. Krumm(2) | 250 | % | |||
Louis B. Lambert(3) | 175 | % | |||
Kristina M. Morton(3) | 150 | % | |||
Glenn David Jackola | 50 | % | |||
Andrea M. Fike | 110 | % | |||
| (1) | Pursuant to his Employment Agreement Mr. Becker is entitled to annual time and/or performance-based LTI awards under the Equity Incentive Plan and/or such other plans, programs or arrangements having a grant date value of not less than 400% of his then current base salary. |
| (2) | Pursuant to his Employment Agreement, Mr. Krumm was entitled to an annual LTI award having a grant date value of not less than 250% of his annual base salary. |
| (3) | Neither Mr. Lambert nor Ms. Morton were eligible for a 2022 annual LTI award. |
In 2022, the end ofCompensation Committee granted the performance period. The awards grantedfollowing LTI Awards to the named executive officers were as follows:NEOs:
Named Executive Officer(1) | % of Base Salary at Target | Restricted Stock Units | Performance Stock Units | |||||||||
Russell A. Becker | 400 | % | 52,356 | 209,425 | ||||||||
Thomas A. Lydon | 180 | % | 15,707 | 62,828 | ||||||||
Andrea M. Fike | 90 | % | 3,770 | 15,079 | ||||||||
Paul W. Grunau | 100 | % | 3,560 | 14,242 | ||||||||
Named Executive Officer | RSUs | PSUs | Total Grant Date Fair Value ($) | |||||||||
Russell A. Becker | 51,999 | 247,615 | $ | 5,400,052 | ||||||||
Kevin S. Krumm | 18,055 | 85,978 | $ | 1,875,022 | ||||||||
Louis B. Lambert(1) | 33,539 | — | $ | 600,013 | ||||||||
Kristina M. Morton(2) | 77,035 | — | $ | 1,600,017 | ||||||||
Glenn David Jackola | 1,686 | 8,026 | $ | 175,045 | ||||||||
Andrea M. Fike(3) | 4,767 | 22,698 | $ | 495,013 | ||||||||
| (1) | In connection with his employment with the Company, Mr. |
| (2) | In |
The premium factor to be applied to the award to Messrs. Becker, Lydon, and Ms. Fike is 200%; and the premium factor to be applied to the award to Mr. Grunau is 125%.
| (3) | Unvested LTI grants to Ms. Fike were forfeited when she ended employment with the Company as of March 31, 2023. |
Each of the above performance stock unitPSU awards represents the target grant amount; actual shares earned at vesting, if any, may be higher or lower depending on the level of performance achieved.
2022 LTIP2023 LTI Awards
In February 2022,2023, the Compensation Committee made certain changes to the mix and design of the LTI Awards for 2022. Specifically,2023 grants to better align with the market prevalence of our peers and to better attract and retain key executives. For 2023, the Compensation Committee changed the mix of LTI Awards to be comprised 60% in the form of PSUs and 40% in the form of time-based RSUs. With respect to the performance-based awards, 40%PSUs, 100% of earned amounts will be based on achievement of cumulative AdjustedCumulative adjusted EBITDA targetsbasis over a three-yearthe 2023-2025 performance period and 40% will be earned based on meeting a share price target.
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Compensation Discussion & Analysis
Benefits and Other Perquisites
We provide employees, including the named executive officers,NEOs, with a range of employee benefits including life and health insurance, disability benefits and retirement benefits (as described below), that are designed to assist in attracting and retaining skilled employees critical to our long-term success, provide basic financial stability, and to be competitive with market practice.
401(k) & Profit Sharing & 401(k) Plan
Most of our domestic employees, including our named executive officers,NEOs, are eligible to participate in the Company’s tax-qualified 401(k) & Profit Sharing & 401(k) Plan (the “401(k) Plan”). Pursuant to the 401(k) Plan, employees may elect to contribute a portion of their current compensation to the 401(k) Plan, in an amount up to the statutorily prescribed annual limit. The 401(k) Plan provides the option for the Company to make matching contributions. Participants may also direct the investment of their 401(k) Plan accounts into several investment alternatives.
Other Benefits and Perquisites
We also provide each of our named executive officersNEOs with an executive term life insurance policy which provides a death benefit of $550,000 and an executive disability insurance policy which covers up to 75% of their base salary. In addition, we provide certain of our named executive officersNEOs with a car allowance.allowance as well as reimbursement of the cost of annual physicals.
Company matching contributions and cash profit sharing contributions allocated to named executive officersNEOs under the 401(k) Plan, premiums paid by the Company on the life and disability insurance policies on behalf of named executive officersNEOs and amounts paid by the Company for the car allowance for named executive officersNEOs are shown in the “All Other Compensation” column in the Summary Compensation Table in the “Executive Compensation” section.
Employee Stock Purchase Plan
Most of our domestic employees, including our named executive officers,NEOs, are eligible to participate in the Company’s Employee Stock Purchase Plan (the “ESPP”). Sales of shares of our Common Stockcommon stock under the ESPP are generally made pursuant to offerings that are intended to satisfy the requirements of Section 423 of the Internal Revenue Code. The ESPP permits employees of the Company, including our named executive officers,NEOs, to purchase Common Stockcommon stock at a discount equal to 85% of the lesser of (i) the market value of the Common Stockcommon stock on the first day of the offering period, or (ii) the market value of the Common Stockcommon stock on the purchase date, whichever is lower. Participants are subject to eligibility requirements and may not purchase more than 500 shares in any offering period or more than $10,000 of Common Stockcommon stock in a year under the ESPP.
Other Compensation-Related Practices and Policies
Change in Control
The Employment ArrangementsAgreements with Mr. Becker and Mr. Krumm provide that if anthe executive is terminated either without “cause” (as defined in their Employment Arrangements)Agreements) or terminates their employment for “good reason” (as defined in their Employment Arrangements)Agreements) during the two-year period immediately following a “change in control” (as defined in the Equity Incentive Plan), they shall be entitled to certain payments and benefits. The Executive Severance Policy, effective January 1, 2023, provides that if an Eligible Executive (as defined in the policy and not including Mr. Becker and Mr. Krumm specifically) is terminated without “cause” (as defined in the policy) or terminates their employment for “good reason” (as defined in the Equity Incentive Plan) during the one-year period following a “change in control” (as defined in the Equity Incentive Plan), they shall be entitled to certain severance payments and benefits. See the “Potential Payments Upon Termination or Change in Control” section below. We believe such change in control provisions serve the best interests of the Company and our stockholdersshareholders by allowing our executives to exercise sound business judgement without fear of significant economic loss in the event they lose their employment with the Company as a result of a change in control. We also believe that such arrangements are competitive, reasonable and necessary to attract and retain key executives.
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Compensation Discussion & Analysis
Severance
TheExecutive Severance
Under their Employment Arrangements provide thatAgreements, if an executive isMr. Becker or Mr. Krumm are involuntarily terminated without “cause” or terminatesterminate their employment for “good reason,” theyreason” during a period outside the two-year period immediately following a change in control, each shall be entitled toto: (i) all previously earned and accrued but unpaid amounts of their base salary up to their termination date. Subjectdate; and (ii) subject to certain conditions, such an executive (other thanseverance pay as described under the “Potential Payments Upon Termination or Change in Control” section below. Under the Executive Severance Policy, effective January 1, 2023, Mr. Cebulla) will also beLambert and Ms. Morton are entitled to severance pay as set forth in their Employment Arrangement and described under the “Potential Payments Upon Termination or Change in Control” section below.
Clawback Policy
In 2022, the Company adopted its current Executive Compensation Clawback Policy. The policy applies to officers subject to Section 16 of the Exchange Act or as designated by the Compensation Committee. Under the policy, incentive compensation is subject to recoupment or forfeiture if (i) the Company files revised financial statements with the SEC for any of the three preceding completed fiscal years, which restatement involves a material negative revision of a measure related to incentive compensation earned or paid to an officer; (ii) the Company makes a material negative revision for any of the three preceding completed fiscal years of a measure related to incentive compensation earned or paid to an officer, where such revision was directly related to misconduct by such officer in violation of the law or the Company’s Code of Conduct; or (iii) a material error is made in favor of the officer in calculation of the officer’s incentive compensation payout within three months after the erroneous amount is paid. We expect in 2023 to review and revise the Executive Compensation Clawback Policy in connection with the adoption of final rules regarding recovery of erroneously awarded compensation as promulgated by the SEC and the NYSE in 2022 and 2023, respectively.
Executive Stock Ownership Guidelines
The Dodd-Frank Wall Street ReformCompensation Committee believes that it is important to align the interests of our directors and Consumer Protection Act (knownexecutive officers, including our NEOs, with the interests of our shareholders. In 2022, the Compensation Committee adopted Stock Ownership Guidelines for Executive Officers and Non-Employee Directors, which require non-employee directors and executive officers to hold shares with a value equal to or exceeding a multiple of annual cash retainer or base salary, as applicable. Each non-employee director and executive officer is expected to comply with the “Dodd-Frank Act”)guidelines within four years following the date he or she becomes subject to the requirements. Failure to satisfy these Guidelines will limit the ability of the relevant individual to sell shares of our stock. The following table sets forth the Stock Ownership Guidelines:
Title | Stock Ownership Guidelines | |
CEO | 5x Base Salary | |
Executive Vice Presidents & Senior Vice Presidents | 2x Base Salary | |
Shares included in this calculation are those directly or indirectly owned (including without limitation unvested RSU awards not subject to achievement of performance goals) and shares held in savings plans (including without limitation the 401(k) Plan) or acquired through the ESPP.
| | 2023 PROXY STATEMENT | 31 | ||
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation of our NEOs for the fiscal years presented.
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock ($)(2)(3) | Non-Equity ($)(4) | All Other ($)(5) | Total ($) | |||||||||||||||||||||
Russell A. Becker President and Chief Executive Officer | 2022 | $ | 1,350,000 | $ | — | $ | 5,400,052 | $ | 1,898,100 | $ | 53,705 | $ | 8,701,857 | |||||||||||||||
| 2021 | $ | 1,250,012 | $ | — | $ | 5,700,280 | $ | 1,025,000 | $ | 52,216 | $ | 8,027,508 | ||||||||||||||||
| 2020 | $ | 440,379 | $ | 1,251,000 | $ | — | $ | — | $ | 51,615 | $ | 1,742,994 | ||||||||||||||||
Kevin S. Krumm Executive Vice President and Chief Financial Officer | 2022 | $ | 750,000 | $ | — | $ | 1,875,022 | $ | 1,054,500 | $ | 27,398 | $ | 3,706,920 | |||||||||||||||
| 2021 | $ | 213,068 | $ | — | $ | 1,250,003 | $ | 220,000 | $ | 5,199 | $ | 1,688,270 | ||||||||||||||||
Louis B. Lambert(6)(7) Senior Vice President, General Counsel and Secretary | 2022 | $ | 218,750 | $ | 120,000 | $ | 600,013 | $ | 230,672 | $ | 5,431 | $ | 1,174,866 | |||||||||||||||
Kristina M. Morton(7)(8) Senior Vice President, Chief People Officer | 2022 | $ | 397,211 | $ | 107,000 | $ | 1,600,017 | $ | 418,859 | $ | 16,896 | $ | 2,539,983 | |||||||||||||||
Glenn David Jackola(7) Former Vice President, Controller and Chief Accounting Officer | 2022 | $ | 347,500 | $ | 120,000 | $ | 175,045 | $ | 244,292 | $ | 10,151 | $ | 896,988 | |||||||||||||||
Andrea M. Fike Former Senior Vice President and General Counsel | 2022 | $ | 450,001 | $ | — | $ | 495,013 | $ | 347,985 | $ | 32,214 | $ | 1,325,213 | |||||||||||||||
| 2021 | $ | 393,762 | $ | 75,000 | $ | 360,016 | $ | 164,000 | $ | 19,629 | $ | 1,012,407 | ||||||||||||||||
| 2020 | $ | 303,669 | $ | 172,000 | $ | 264,632 | $ | — | $ | 16,652 | $ | 756,953 | ||||||||||||||||
| (1) | The amounts in this column for 2022 represent signing bonuses for each of Ms. Morton and Messrs. Lambert and Jackola upon commencement of their employment in 2022, intended primarily to compensate them for equity forfeited at their prior employer. |
| (2) | The amounts in this column do not reflect compensation actually received by the NEOs nor do they reflect the actual value that will be recognized by the NEOs. Instead, the amounts represent the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions used in calculating the amounts for 2022, see Note 19 to our historical consolidated financial statements for the year ended December 31, 2022 included in our Annual Report on Form 10-K for the year ended December 31, 2022. |
| (3) | Amounts shown in this column represent the aggregate grant date fair value of PSUs granted to certain of our NEOs, and the grant date fair value of time-based RSUs granted to each of our NEOs in the fiscal years indicated, computed in accordance with FASB ASC Topic 718. The aggregate grant date fair value of the PSUs that have an EBITDA performance condition was computed based on the probable outcome of the applicable performance target as of the grant date and 100% achievement of such performance target. For 2022, the value of these PSUs at the grant date assuming the highest level of performance achieved, earned at 200% of target would be $4,320,036 for Mr. Becker; $1,500,010 for Mr. Krumm; and $396,001 for Ms. Fike; and earned at 175% of target would be $122,528 for Mr. Jackola. The PSUs that have a share price target are considered to have a market condition and not a performance condition under FASB ASC Topic 718. Accordingly, there is no grant date fair value below or in excess of the amounts reflected in the table above that could be calculated and disclosed based on achievement of market conditions. The grant date fair value of the time-based RSUs was computed in accordance with FASB ASC Topic 718, based on the closing market price of our common stock on the grant date. Additional information regarding the 2022 equity awards is set forth below in the Grants of Plan-Based Awards During 2022 table. |
| (4) | The amounts reported reflect compensation earned for 2022 performance under our annual cash incentive compensation program. We make payments under this program in the first quarter of the fiscal year following the fiscal year in which they were earned after finalizing our annual audited financial statements. For Mr. Lambert and Ms. Morton, this amount represents a pro rata share of the target payout, given they joined the Company in July 2022 and March 2022, respectively. |
| (5) | These amounts represent Company payments for executive life and disability insurance benefits of $25,245, $6,863 and $5,576 for Messrs. Becker, Krumm and Jackola, respectively, and $6,255 and $10,929 for Mses. Morton and Fike, respectively, and Company matching contributions to NEO’s 401(k) Plan of $8,013, $9,150, $1,681 and $4,575 for |
32 | 2023 PROXY STATEMENT | | ||
Executive Compensation
Messrs. Becker, Krumm, Lambert and Jackola, respectively, and $2,766 and $9,837 for Mses. Morton and Fike, respectively. For Mr. Becker and Ms. Fike, the amounts also include Company profit-sharing contributions of common stock to such officer’s 401(k) Plan of $11,448 each; and for Messrs. Becker, Krumm, and Lambert, and Ms. Morton, a Company-paid car allowance of $9,000, $9,000, $3,750, and $7,875, respectively, and for Mr. Krumm, annual executive physical reimbursement of $2,385. |
| (6) | Mr. Lambert joined the Company on July 25, 2022. As such, the amounts reported for salary include the salary earned from July 25, 2022 through December 31, 2022. |
| (7) | Messrs. Lambert and Jackola and Ms. Morton first became NEOs in 2022. |
| (8) | Ms. Morton joined the Company on February 14, 2022. As such, the amounts reported for salary include the salary earned from February 14, 2022 through December 31, 2022. |
Grants of Plan-Based Awards During 2022
The following table provides information about cash (non-equity) and equity incentive compensation awarded to our NEOs in 2022. Information on the terms of these awards is discussed in greater detail in this proxy statement under the caption “Compensation Discussion and Analysis.” See “Potential Payments Upon Termination or Change in Control” for a discussion of how equity awards are treated under various termination scenarios.
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Grant Date | Approval Date | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock Awards ($)(3) | |||||||||||||||||||||||||||||||
Name | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||
Russell A. Becker | $ | 540,000 | $ | 1,350,000 | $ | 2,700,000 | 3/9/2022 | 2/28/2022 | 25,999 | 103,997 | 207,994 | $ | 2,160,018 | |||||||||||||||||||||||
| 3/9/2022 | 2/28/2022 | 143,618 | (4) | $ | 2,160,015 | |||||||||||||||||||||||||||||||
| 3/9/2022 | 2/28/2022 | 51,999 | (5) | $ | 1,080,019 | |||||||||||||||||||||||||||||||
Kevin S. Krumm | $ | 300,000 | $ | 750,000 | $ | 1,500,000 | 3/9/2022 | 2/28/2022 | 9,028 | 36,110 | 72,220 | $ | 750,005 | |||||||||||||||||||||||
| 3/9/2022 | 2/28/2022 | 49,868 | (4) | $ | 750,015 | |||||||||||||||||||||||||||||||
| 3/9/2022 | 2/28/2022 | 18,055 | (5) | $ | 375,002 | |||||||||||||||||||||||||||||||
Louis B. Lambert | $ | 65,625 | $ | 164,062 | $ | 328,125 | 8/2/2022 | 8/2/2022 | 33,539 | (5) | $ | 600,013 | ||||||||||||||||||||||||
Kristina M. Morton | $ | 119,163 | $ | 297,909 | $ | 595,817 | 3/9/2022 | 2/28/2022 | 77,035 | (5) | $ | 1,600,017 | ||||||||||||||||||||||||
Glenn David Jackola | $ | 69,500 | $ | 173,750 | $ | 347,500 | 3/9/2022 | 2/28/2022 | 843 | 3,371 | 5,899 | $ | 70,016 | |||||||||||||||||||||||
| 3/9/2022 | 2/28/2022 | 4,655 | (4) | $ | 70,011 | |||||||||||||||||||||||||||||||
| 3/9/2022 | 2/28/2022 | 1,686 | (5) | $ | 35,018 | |||||||||||||||||||||||||||||||
Andrea M. Fike | $ | 99,000 | $ | 247,500 | $ | 495,000 | 3/9/2022 | 2/28/2022 | 2,383 | 9,533 | 19,066 | $ | 198,000 | |||||||||||||||||||||||
| 3/9/2022 | 2/28/2022 | 13,165 | (4) | $ | 198,002 | |||||||||||||||||||||||||||||||
| 3/9/2022 | 2/28/2022 | 4,767 | (5) | $ | 99,011 | |||||||||||||||||||||||||||||||
| (1) | The amounts in these columns reflect potential payments of annual cash incentive compensation based on 2022 performance. The 2022 annual cash incentive payments were made in March 2023. The actual amounts paid under our annual cash incentive compensation program are the amounts reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. |
| (2) | This column represents the number of PSUs granted in 2022 to the NEOs. The threshold, target and maximum amounts reflect the maximum number of shares that may be earned assuming that 25%, 100% and 200% (175% for Mr. Jackola) of the applicable performance target is achieved. See footnote 3 to the Summary Compensation Table and page 35 of the Compensation Discussion and Analysis section for additional information. |
| (3) | Each amount reported in this column represents the grant date fair value of the applicable award which was determined pursuant to FASB ASC Topic 718. The calculation of the grant date fair value of the PSU awards discussed in footnote (4) is based on a Monte Carlo simulation model. The actual amounts that will be received by our NEOs with respect to these performance-based awards will be determined at the end of the performance period based upon our actual stock price performance, which may differ from the performance that was deemed probable at the date of the grant. |
| | 2023 PROXY STATEMENT | 33 | ||
Executive Compensation
| (4) | This amount represents the number of PSUs granted in 2022 to the NEOs, which vest at the later of the third anniversary of the grant date and the date the performance target is achieved on or prior to the fifth anniversary of the grant date. These PSUs vest at target and only in the event that the performance target is achieved. |
| (5) | This amount represents the number of RSUs granted in 2022 to the NEOs. The RSUs vest in equal installments on the first, second and third anniversaries of the grant date. |
Outstanding Equity Awards at 2022 Year End
The following table provides information concerning unvested RSUs and PSUs held by each of our NEOs as of December 31, 2022.
| Stock Awards | ||||||||||||||||||||
Name | Grant Date | Number of (#)(1) | Market Value of ($)(2) | Equity (#) | Equity ($)(2) | |||||||||||||||
Russell A. Becker | 3/9/2022 | 51,999 | $ | 978,101 | ||||||||||||||||
| 3/9/2022 | (3) | 143,618 | $ | 2,701,455 | ||||||||||||||||
| 3/9/2022 | (4) | 26,000 | $ | 489,060 | ||||||||||||||||
| 2/17/2021 | 34,904 | $ | 656,544 | |||||||||||||||||
| 2/17/2021 | (5) | 52,357 | $ | 984,835 | ||||||||||||||||
Kevin S. Krumm | 3/9/2022 | 18,055 | $ | 339,615 | ||||||||||||||||
| 3/9/2022 | (3) | 49,868 | $ | 938,017 | ||||||||||||||||
| 3/9/2022 | (4) | 9,028 | $ | 169,817 | ||||||||||||||||
| 9/20/2021 | 40,296 | $ | 757,968 | |||||||||||||||||
Louis B. Lambert | 8/2/2022 | 33,539 | $ | 630,869 | ||||||||||||||||
Kristina M. Morton | 3/9/2022 | 77,035 | $ | 1,449,028 | ||||||||||||||||
Glenn David Jackola | 3/9/2022 | 1,686 | $ | 31,714 | ||||||||||||||||
| 3/9/2022 | (3) | 4,655 | $ | 87,561 | ||||||||||||||||
| 3/9/2022 | (4) | 843 | $ | 15,857 | ||||||||||||||||
Andrea M. Fike | 3/9/2022 | 4,767 | $ | 89,667 | ||||||||||||||||
| 3/9/2022 | (3) | 13,165 | $ | 247,634 | ||||||||||||||||
| 3/9/2022 | (4) | 2,384 | $ | 44,843 | ||||||||||||||||
| 2/17/2021 | 2,513 | $ | 47,270 | |||||||||||||||||
| 2/17/2021 | (5) | 3,770 | $ | 70,914 | ||||||||||||||||
| 11/14/2019 | 8,130 | $ | 152,925 | |||||||||||||||||
| (1) | The RSUs vest in equal installments on the first, second and third anniversaries of the grant date, except for Ms. Fike’s November 14, 2019 grant, which vested in equal installments on January 1, 2021, January 1, 2022 and January 1, 2023. |
| (2) | These amounts are calculated by multiplying the closing price of the underlying shares of common stock on December 31, 2022, or $18.81 per share, by the number of units. The actual value realized could be different based upon the stock price at the time of settlement. |
| (3) | These PSUs vest at the later of the third anniversary of the grant date and the date the performance target is achieved on or prior to the fifth anniversary of the grant date. |
| (4) | These PSUs are subject to a three-year performance period beginning January 1, 2022 and ending December 31, 2024, and may be earned and vested at the end of the three-year performance period. The amount shown represents the number of units assuming threshold level performance. There is no assurance that the target amount will be the actual amount ultimately paid. |
34 | 2023 PROXY STATEMENT | | ||
Executive Compensation
| (5) | These PSUs are subject to a three-year performance period beginning January 1, 2021 and ending December 31, 2023, and may be earned and vested at the end of the three-year performance period. The amount shown represents the number of units assuming threshold level performance. There is no assurance that the target amount will be the actual amount ultimately paid. |
Stock Vested During 2022
The following table provides information regarding vesting of RSUs and the value realized on vesting of RSUs on an aggregated basis during the fiscal year ended December 31, 2022 for each of the NEOs.
| Stock Awards(1) | ||||||||
Name(2) | # of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(3) | ||||||
Russell A. Becker | 180,785 | $ | 2,538,807 | |||||
Kevin S. Krumm | 20,149 | $ | 311,101 | |||||
Andrea M. Fike | 9,387 | $ | 236,259 | |||||
| (1) | These columns reflect RSUs previously awarded to the NEOs that vested during 2022 and represents gross amounts before withholding for tax purposes. |
| (2) | Ms. Morton, and Messrs. Lambert and Jackola are omitted from this chart because they had no vesting events during 2022. |
| (3) | Calculated based on the closing price of a share of common stock on the applicable vesting dates. |
Potential Payments Upon Termination or Change in Control
Our Employment Agreements with Mr. Becker and Mr. Krumm as in effect in 2022 provide for severance payments under certain circumstances. Under these Employment Agreements, the Company may terminate Mr. Becker’s and Mr. Krumm’s employment at any time with or without “cause” (as defined in their respective Employment Agreements), enactedand each of these executives may terminate employment at any time for “good reason” (as defined in July 2010, required stock exchangestheir respective Employment Agreements). If the Company terminates the employment of Mr. Becker or Mr. Krumm without cause or if they terminate employment for good reason, each would be entitled to adopt rules requiring listed companiesreceive (i) his base salary for two years from the date of termination, (ii) an amount equal to developtwo times his target annual bonus, paid in two annual installments, (iii) any earned and implementaccrued but unpaid base salary up to the date of termination, (iv) his prorated annual bonus for the year in which the termination occurs, (v) any unpaid annual bonus with respect to any completed fiscal year and (vi) his vested employee benefits. In addition, Mr. Krumm would be entitled to continued insurance coverage for eighteen months following the date of termination. Neither Mr. Becker nor Mr. Krumm would be entitled to any unearned salary, bonus or other benefits if the Company were to terminate them for cause or if they were to terminate employment voluntarily without good reason.
With respect to Mr. Becker and Mr. Krumm, pursuant to their respective Employment Agreements, if employment should terminate as a policyresult of the death or disability of the executive, the executive, or his estate, would be entitled to receive (i) all previously earned and accrued but unpaid base salary up to the date of termination and (ii) his prorated annual bonus for recovery (i.e.the year in which termination occurs. The Company’s obligation under the Employment Agreements with these executives terminates on the last day of the month in which the executive’s death occurs or on the date of termination of employment on account of the executive’s disability.
With respect to Mr. Lambert and Ms. Morton, as provided under the Executive Severance Policy (i) if, during the one-year period immediately following a “change in control,” the Company terminates the executive without “cause” (as defined in the policy) or if the executive terminates employment for “good reason” (as defined in the Equity Incentive Plan), clawback)the executive would be entitled to receive, subject to satisfaction of incentive-based compensation fromcertain conditions, (a) an amount equal to 1.5x base salary, (b) an annual bonus amount based on target performance, (c) continued insurance coverage for twelve months following the date of termination, and (d) accelerated vesting of his or her unvested RSUs and PSUs at the greater of actual or target performance; and (ii) if the
| | 2023 PROXY STATEMENT | 35 | ||
Executive Compensation
Company should terminate the executive officerswithout cause at any other time, the executive would be entitled to receive, subject to satisfaction of certain conditions, (a) an amount equal to 1.0x or 1.5x base salary, determined by length of employment, (b) an annual bonus amount based on target performance, and (c) continued COBRA insurance coverage for twelve months following the date of termination. Neither Mr. Lambert nor Ms. Morton would be entitled to any unearned salary, bonus or other benefits if the Company were to terminate them for cause or if they were to terminate employment voluntarily without good reason.
With respect to Ms. Fike, cash severance includes twelve months of annual base salary. Upon termination of the transition period that ended on March 31, 2023, Ms. Fike received severance pursuant to the terms of her agreement in the amount of $450,000.
The following table shows the estimated benefits payable to each other NEO in the event of termination of employment and/or change in control of the restatementCompany, as described above. The amounts shown assume that a termination of previously published financial statementsemployment or a change in control occurs on December 31, 2022. The amounts do not include payments or benefits provided under insurance or other plans that are generally available to all full-time employees.
Name | Termination without Cause or for Good Reason not in connection with a Change in Control ($) | Death or Disability ($) | Termination without Cause or for Good Reason in connection with a Change in Control ($) | Change in Control ($) | ||||||||||||
Russell A. Becker | ||||||||||||||||
Cash Severance | $ | 6,750,000 | $ | 1,350,000 | $ | 6,750,000 | $ | — | ||||||||
Intrinsic Value of Equity(1) | $ | — | $ | — | $ | 10,231,568 | $ | 1,634,645 | ||||||||
Insurance Benefits(2) | $ | — | $ | — | $ | 38,051 | $ | — | ||||||||
Total | $ | 6,750,000 | $ | 1,350,000 | $ | 17,019,619 | $ | 1,634,645 | ||||||||
Kevin S. Krumm | ||||||||||||||||
Cash Severance | $ | 3,750,000 | $ | 750,000 | $ | 3,750,000 | $ | — | ||||||||
Intrinsic Value of Equity(1) | $ | — | $ | — | $ | 2,714,829 | $ | 1,097,583 | ||||||||
Insurance Benefits(2) | $ | 38,051 | $ | — | $ | 38,051 | $ | — | ||||||||
Total | $ | 3,788,051 | $ | 750,000 | $ | 6,502,880 | $ | 1,097,583 | ||||||||
Louis B. Lambert(3) | ||||||||||||||||
Cash Severance | $ | 875,000 | $ | — | $ | 1,125,000 | $ | — | ||||||||
Intrinsic Value of Equity(1) | $ | — | $ | — | $ | 630,869 | $ | 630,869 | ||||||||
Insurance Benefits(2) | $ | — | $ | — | $ | — | $ | — | ||||||||
Total | $ | 875,000 | $ | — | $ | 1,755,869 | $ | 630,869 | ||||||||
Kristina M. Morton(3) | ||||||||||||||||
Cash Severance | $ | 787,500 | $ | — | $ | 1,012,500 | $ | — | ||||||||
Intrinsic Value of Equity(1) | $ | — | $ | — | $ | 1,449,028 | $ | 1,449,028 | ||||||||
Insurance Benefits(2) | $ | 24,309 | $ | — | $ | 24,309 | $ | — | ||||||||
Total | $ | 811,809 | $ | — | $ | 2,485,837 | $ | 1,449,028 | ||||||||
Glenn David Jackola | ||||||||||||||||
Cash Severance | $ | — | $ | — | $ | — | $ | — | ||||||||
Intrinsic Value of Equity(1) | $ | — | $ | — | $ | 182,684 | $ | 31,714 | ||||||||
Insurance Benefits(2) | $ | — | $ | — | $ | — | $ | — | ||||||||
Total | $ | — | $ | — | $ | 182,684 | $ | 31,714 | ||||||||
36 | 2023 PROXY STATEMENT | | ||
Executive Compensation
| (1) | The Intrinsic Value of Equity represents the value of the acceleration of vesting of the executive’s RSUs and PSUs in the event of termination without cause or for good reason during the applicable period immediately following a change in control or upon a change in control pursuant to the applicable PSU agreement. The value is calculated by multiplying the closing price of a share of common stock on December 31, 2022, or $18.81 per share, by the number of units, which, in the case of PSUs, assumes target performance. |
| (2) | Amount includes the cost of benefits continuation for the applicable period. |
| (3) | For Mr. Lambert and Ms. Morton, the table reflects severance benefits payable under the Executive Severance Policy, effective January 1, 2023. Prior to January 1, 2023, Mr. Lambert and Ms. Morton were not entitled to cash severance upon termination of employment. |
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the median annual total compensation of our employees and the annual total compensation of our CEO, Mr. Becker.
As of December 31, 2022, our employee population consisted of approximately 27,400 individuals working at the Company and its subsidiaries, of which approximately 13,500 are based in the United States and approximately 13,900 are based outside of the United States.
To identify our median employee,
| • | We included all Company employees (excluding the CEO) on December 31, 2022, located in 10 countries in which we have operations; our employees in those 10 countries represent approximately 95% of employees on that date. |
| • | We excluded 1,402 employees from 13 countries under the SEC’s de minimis exemption.1 |
| • | We used the gross cash compensation paid during calendar year 2022; we did not make any cost-of-living or other adjustments in identifying the median employee, and we did not annualize the pay of any employees who were not employed for the full year. |
We then calculated the 2022 total annual compensation of the median employee in accordance with the requirements of the executive compensation rules for the Summary Compensation Table (Item 402(c)(2)(x) of Regulation S-K). Foreign currencies were converted into U.S. Dollars as of December 31, 2022, based on the average daily spot rates during December 2022. Once we identified the median employee using gross cash compensation, 2022 total compensation was calculated for the CEO and the median employee for 2022 using the same methodology required by the SEC for reporting in the Summary Compensation Table. Under this methodology, the annual total compensation of our CEO was $8,701,857, and the median employee’s annual total compensation was $55,709. The resulting fromratio of the annual total compensation of our CEO to the annual total compensation of the median employee was 156 to 1. This ratio represents a material accounting error, material noncompliancereasonable estimate calculated in a manner consistent with financial reporting requirements or violations of U.S. securities laws. TheseSEC rules have not yet been adopted.based on the methodology described above.
The Equity Incentive Plan includesSEC rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a clawback policy which allowsvariety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices, and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
This information is being provided in response to SEC disclosure requirements. Neither the Compensation Committee nor management of the Company uses the pay ratio measure in making any compensation decisions.
| 1 | The countries and approximate number of employees excluded from the calculation are as follows: Austria (73), Belgium (279), China (75), Ireland (167), Macau (114), Monaco (3), New Zealand (205), Norway (88), Portugal (5), Singapore (157), Sweden (51), Switzerland (136), and Thailand (49). |
| | 2023 PROXY STATEMENT | 37 | ||
Year | Summary Compensation Table Total for PEO 1 | Compensation Actually Paid to PEO 1 2 | Average Summary Compensation Table Total for Non-PEO NEOs 1 | Average Compensation Actually Paid to Non-PEO NEOs 1 3 | Value of Initial Fixed $100 Investment Based On: | Net Income (Loss) (millions) | Adjusted EBITDA (millions) | |||||||||||||||||||||||||
Total Shareholder Return | Peer Group Total Shareholder Return 4 | |||||||||||||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | ||||||||||||||||||||||||
| 2022 | $ | 8,701,857 | $ | 4,391,722 | $ | 1,928,794 | $ | 1,723,965 | $ | 178 | $ | 172 | $ | 73 | $ | 674 | ||||||||||||||||
| 2021 | $ | 8,027,508 | $ | 11,514,717 | $ | 1,611,370 | $ | 1,288,101 | $ | 244 | $ | 181 | $ | 47 | $ | 407 | ||||||||||||||||
| 2020 | $ | 1,742,994 | $ | 4,880,625 | $ | 858,874 | $ | 1,069,057 | $ | 172 | $ | 126 | ( $ | 153 | ) | $ | 381 | |||||||||||||||
| 1 | Russell Becker was the principal executive officer (“PEO”) for each of the Covered Years. The names of each of the other NEOs included for purposes of calculating the average amounts in each Covered Year are as follows: (i) for 2022, Kevin Krumm, Louis Lambert, Kristina Morton, David Jackola, and Andrea Fike; (ii) for 2021, Kevin Krumm, Andrea Fike, Paul Grunau, Thomas Lydon, and Andrew Cebulla; and (iii) for 2020, Thomas Lydon, Julius Chepey, Andrea Fike, Paul Grunau, and Mark Polovitz. |
38 | 2023 PROXY STATEMENT | | ||
| 2 | In accordance with the PVP Rules, the following adjustments were made to Mr. Becker’s total compensation for each Covered Year to determine the PEO CAP: |
Year | Stock Awards Value Reported for the Covered Year | Year End Fair Value of Equity Awards Granted in the Covered Year | Year over Year Change in Fair Value of Equity Awards Outstanding and Unvested at Year End | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Covered Year | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Covered Year | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Covered Year | Value of Dividends or Other Earnings Paid on Stock Awards not Otherwise Reflected in Fair Value or Total Compensation | Total Equity Award Adjustments | ||||||||||||||||||||||||
| 2022 | ($ | 5,400,052 | ) | $ | 4,910,468 | ($ | 1,700,530 | ) | ($ | 2,120,022 | ) | $ | 0 | $ | 0 | $ | 0 | ($ | 4,310,135 | ) | ||||||||||||
| 2021 | ($ | 5,700,280 | ) | $ | 6,746,096 | $ | 1,244,597 | $ | 496,532 | $ | 700,263 | $ | 0 | $ | 0 | $ | 3,487,209 | |||||||||||||||
| 2020 | $ | 0 | $ | 0 | $ | 2,482,662 | $ | 654,969 | $ | 0 | $ | 0 | $ | 0 | $ | 3,137,631 | ||||||||||||||||
| (a) | The grant date fair value of equity awards represents the amount reported in the “Stock Awards” column in the Summary Compensation Table and subtracted for the applicable Covered Year. |
| (b) | The equity award adjustments for each applicable Covered Year include those adjustments required by Item 402(v) of Regulation S-K. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. |
| 3 | In accordance with the requirements of Item 402(v) of Regulation S-K, adjustments were made to average total compensation for the NEOs as a group (excluding Mr. Becker) for each Covered Year to determine the compensation actually paid, using the same methodology described above in Note 2. The amounts deducted or added in calculating the total average equity award adjustments are as follows: |
Year | Stock Awards Value Reported for the Covered Year (a) | Average Year End Fair Value of Equity Awards Granted in the Covered Year | Year over Year Average Change in Fair Value of Equity Awards Outstanding and Unvested at Year End | Year over Year Average Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Covered Year | Average Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Covered Year | Average Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Covered Year | Average Value of Dividends or Other Earnings Paid on Stock Awards not Otherwise Reflected in Fair Value or Total Compensation | Total Average Equity Award Adjustments | ||||||||||||||||||||||||
| 2022 | ($ | 949,022 | ) | $ | 878,847 | ($ | 91,897 | ) | ($ | 42,757 | ) | $ | 0 | $ | 0 | $ | 0 | ($ | 204,829 | ) | ||||||||||||
| 2021 | ($ | 819,570 | ) | $ | 515,967 | $ | 49,560 | $ | 40,286 | $ | 71,988 | ($ | 181,500 | ) | $ | 0 | ($ | 323,269 | ) | |||||||||||||
| 2020 | ($ | 148,190 | ) | $ | 0 | $ | 305,231 | $ | 53,141 | $ | 0 | $ | 0 | $ | 0 | $ | 210,182 | |||||||||||||||
| (a) | The grant date fair value of equity awards represents the amount reported in the “Stock Awards” column in the Summary Compensation Table and subtracted for the applicable Covered Year. |
| (b) | The equity award adjustments for each applicable Covered Year include those adjustments required by Item 402(v) of Regulation S-K. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. |
| 4 | Peer Group TSR represents the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. |
| | 2023 PROXY STATEMENT | 39 | ||
40 | 2023 PROXY STATEMENT | | ||
The Compensation Committee has reviewed and discussed the disclosure set forth above under the heading “Compensation Discussion and Analysis” with management and, based on such review and discussions, it has recommended to the Board that the “Compensation Discussion and Analysis” be included in this Proxy Statement.proxy statement.
The Compensation Committee
Thomas V. Milroy, Chair
Anthony E. MalkinPaula D. Loop
Carrie A. Wheeler
The following table summarizes the compensation of our named executive officers for the fiscal years ended December 31, 2021, 2020 and 2019.Cyrus D. Walker
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
Russell A. Becker | 2021 | 1,250,012 | — | 5,700,280 | 1,025,000 | 52,216 | (4) | 8,027,508 | ||||||||||||||||||||
President and Chief | 2020 | 440,379 | 1,251,000 | — | — | 51,615 | 1,742,994 | |||||||||||||||||||||
Executive Officer | 2019 | 1,100,000 | 6,256,461 | 5,022,500 | — | 24,375 | 12,403,336 | |||||||||||||||||||||
Kevin S. Krumm | 2021 | 213,068 | — | 1,250,003 | 220,000 | 5,199 | (4) | 1,688,270 | ||||||||||||||||||||
Executive Vice President and Chief Financial Officer(5) | ||||||||||||||||||||||||||||
Andrea M. Fike | 2021 | 393,762 | 75,000 | (6) | 360,016 | 164,000 | 19,629 | (4) | 1,012,407 | |||||||||||||||||||
Senior Vice President and General Counsel | 2020 | 303,669 | 172,000 | 264,632 | — | 16,652 | 722,319 | |||||||||||||||||||||
Paul W. Grunau | 2021 | 340,003 | 100,000 | (6) | 513,274 | 246,000 | 37,597 | (4) | 1,236,874 | |||||||||||||||||||
Former Chief Learning | 2020 | 137,045 | 301,000 | — | — | 37,813 | 475,858 | |||||||||||||||||||||
Officer | 2019 | 332,500 | 275,000 | 499,995 | — | 26,011 | 1,133,506 | |||||||||||||||||||||
Thomas A. Lydon | 2021 | 825,008 | — | 1,686,702 | — | 880,748 | (4) | 3,392,458 | ||||||||||||||||||||
Former Chief Financial | 2020 | 566,146 | 950,000 | — | — | 55,147 | 1,571,989 | |||||||||||||||||||||
Officer(7) | 2019 | 825,000 | 950,000 | 1,537,500 | — | 18,730 | 3,330,870 | |||||||||||||||||||||
Andrew J. Cebulla | 2021 | 271,333 | — | 287,856 | 150,000 | 17,653 | (4) | 726,842 | ||||||||||||||||||||
Former Vice President, Chief Accounting Officer and Controller | ||||||||||||||||||||||||||||
| |
2023 PROXY STATEMENT | |||
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Grants of Plan-Based Awards During 2021
The following table provides information about cash (non-equity) and equity incentive compensation awarded to our named executive officers in 2021 including: (1) the range of possible cash payouts under our annual incentive compensation program; (2) the grant date of equity awards; (3) the number of time-based and performance-based restricted stock units granted; and (4) the grant date fair value of the time-based and performance-based restricted stock unit grants calculated in accordance with FASB ASC Topic 718. These awards are discussed in greater detail in this proxy statement under the caption “Compensation Discussion and Analysis.”
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Grant Date | Approval Date | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock Awards ($) | |||||||||||||||||||||||||||||||||||
| Name | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||
Russell A. Becker | 312,500 | 1,250,000 | 2,500,000 | 2/17/2021 | 2/15/2021 | 52,356 | 209,425 | 418,850 | 4,000,018 | |||||||||||||||||||||||||||||||
| 2/17/2021 | 2/15/2021 | 52,356 | (3) | 1,000,000 | ||||||||||||||||||||||||||||||||||||
| 2/17/2021 | 2/15/2021 | 36,663 | (4) | 700,263 | ||||||||||||||||||||||||||||||||||||
Kevin S. Krumm | 187,500 | 750,000 | 1,500,000 | 9/20/2021 | 9/9/2021 | 60,445 | (3) | 1,250,003 | ||||||||||||||||||||||||||||||||
Andrea M. Fike | 50,000 | 200,000 | 400,000 | 2/17/2021 | 2/15/2021 | 3,770 | 15,079 | 30,158 | 288,009 | |||||||||||||||||||||||||||||||
| 2/17/2021 | 2/15/2021 | 3,770 | (3) | 72,007 | ||||||||||||||||||||||||||||||||||||
Paul W. Grunau | 75,000 | 300,000 | 375,000 | 2/17/2021 | 2/15/2021 | 3,561 | 14,242 | 17,803 | 272,022 | |||||||||||||||||||||||||||||||
| 2/17/2021 | 2/15/2021 | 3,560 | (3) | 67,996 | ||||||||||||||||||||||||||||||||||||
| 2/17/2021 | 2/15/2021 | 9,071 | (4) | 173,256 | ||||||||||||||||||||||||||||||||||||
Thomas A. Lydon(5) | 206,250 | 825,000 | 1,650,000 | 2/17/2021 | 2/15/2021 | 15,707 | 62,828 | 125,656 | 1,200,015 | |||||||||||||||||||||||||||||||
| 2/17/2021 | 2/15/2021 | 15,707 | (3) | 300,004 | ||||||||||||||||||||||||||||||||||||
| 2/17/2021 | 2/15/2021 | 9,774 | (4) | 186,683 | ||||||||||||||||||||||||||||||||||||
Andrew J. Cebulla | 44,750 | 179,000 | 358,000 | 2/17/2021 | 2/15/2021 | 3,014 | 12,057 | 24,114 | 230,289 | |||||||||||||||||||||||||||||||
| 2/17/2021 | 2/15/2021 | 3,014 | (3) | 57,567 | ||||||||||||||||||||||||||||||||||||
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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Pursuant to their respective Employment Arrangements, Messrs. Becker, Krumm and Grunau and Ms. Fike are entitled to a base salary, which amounts will be reviewed and may be adjusted annually by the Compensation Committee. Pursuant to his prior Employment Arrangement, Mr. Lydon was entitled to a base salary of $825,000.
Pursuant to their respective Employment Arrangements, Mr. Becker, Mr. Krumm and Mr. Lydon were each eligible in 2021 to receive an annual cash incentive award with a target incentive opportunity equal to 100% of their annual base salary and a maximum incentive opportunity equal to 200% of their annual base salary, in each case subject to the performance metrics and targets to be established by the Compensation Committee. Pursuant to her Employment Arrangement, Ms. Fike was eligible to receive an annual cash incentive award with a target incentive opportunity of 50% of her annual base salary. Mr. Grunau was also eligible to participate in any annual cash incentive program established by the Compensation Committee.
Pursuant to his Employment Arrangement, beginning in 2021, Mr. Becker is entitled to annual time and/or performance based long-term compensation awards under the Equity Incentive Plan and/or such other plans, programs or arrangements having a grant date value of not less than 400% of his then current base salary. Pursuant to his Employment Arrangement, Mr. Krumm was entitled to an annual long-term equity incentive award having a grant date value of not less than 250% of his annual base salary and an initial long-term equity incentive award in the form of restricted stock units with a grant date value of $1,250,000 which will vest in three equal annual installments. The awards will be granted in the form of stock options, restricted stock units, performance shares or other forms of equity or long-term incentive as determined by the Compensation Committee and on terms to be specified by the Compensation Committee in its discretion. All other awards granted to the named executive officers will be made at the discretion of the Compensation Committee on terms and conditions approved by the Compensation Committee.
The Employment Arrangements with Messrs. Becker, Krumm and Grunau and Ms. Fike provide for severance payments under certain circumstances. See “—Potential Payments Upon Termination or Change in Control” for additional information.
Outstanding Equity Awards at 2021 Year End
The following table provides information concerning unvested restricted stock units held by each of our named executive officers as of December 31, 2021.
| Stock Awards | ||||||||||||||||||||
Name | Grant Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: # of Unearned Shares Not Vested (#)(3) | Equity Incentive Plan Awards: Value Unearned Shares Not Vested ($)(2) | |||||||||||||||
Russell A. Becker | 2/17/2021 | 52,356 | 1,349,214 | 209,425 | 5,396,882 | |||||||||||||||
| 10/1/2019 | 163,333 | 4,209,091 | — | — | ||||||||||||||||
Kevin S. Krumm | 9/20/2021 | 60,445 | 1,557,668 | — | — | |||||||||||||||
Andrea M. Fike | 2/17/2021 | 3,770 | 97,153 | 15,079 | 388,586 | |||||||||||||||
| 1/20/2020 | 16,260 | 419,020 | — | — | ||||||||||||||||
Paul W. Grunau | 2/17/2021 | 3,560 | 91,741 | 14,242 | 367,016 | |||||||||||||||
| 10/1/2019 | 16,260 | 419,020 | — | — | ||||||||||||||||
Thomas A. Lydon(4) | 2/17/2021 | 15,707 | 404,769 | 62,828 | 1,619,078 | |||||||||||||||
| 10/1/2019 | 50,000 | 1,288,500 | ||||||||||||||||||
Andrew J. Cebulla | 2/17/2021 | 3,014 | 77,671 | 12,057 | 310,709 | |||||||||||||||
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The following table provides information regarding vesting of restricted stock units and the value realized on vesting of restricted stock units on an aggregated basis during the fiscal year ended December 31, 2021 for each of the named executive officers.
| Stock Awards(1) | ||||||||
Name(2) | # of Shares Acquired on Vesting (#)(3) | Value Realized on Vesting ($)(4) | ||||||
Russell A. Becker | 163,333 | $ | 3,461,026 | |||||
Andrea M. Fike | 8,130 | $ | 147,560 | |||||
Paul W. Grunau | 16,260 | $ | 344,549 | |||||
Thomas A. Lydon | 50,000 | $ | 1,059,500 | |||||
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Potential Payments Upon Termination or Change in Control
Our Employment Arrangements with Messrs. Becker, Krumm, Lydon and Grunau, and Ms. Fike (each an “Executive,” and collectively “Executives”) as in effect in 2021 provide for severance payments under certain circumstances. Under these Employment Arrangements, the Company may terminate Executive’s employment at any time with or without “cause,” as defined in certain Employment Arrangements, and Executive may terminate employment at any time for “good reason,” as defined in the applicable Employment Arrangements. With respect to Messrs. Becker, Krumm and Lydon, if the Company should terminate Executive without cause or if Executive terminates employment for good reason, Executive would be entitled to receive (i) his base salary for two years from the date of termination, (ii) an amount equal to two times his target annual bonus, paid in two annual installments, (iii) any earned and accrued but unpaid base salary up to the date of termination, (iv) his pro-rata annual bonus for the year in which the termination occurs, (v) any unpaid annual bonus with respect to any completed fiscal year and (vi) his vested employee benefits. In addition, Mr. Krumm would be entitled to continued insurance coverage for eighteen months following the date of termination. Executive would not be entitled to any unearned salary, bonus or other benefits if the Company were to terminate him for cause or if Executive were to terminate employment voluntarily without good reason. With respect to Mr. Grunau, if the Company should terminate Executive without cause, he would be entitled to receive an amount equal to two times his annual base salary, payable in equal installments over a 24-month period. With respect to Ms. Fike, if the Company should terminate Executive without cause, she would be entitled to receive an amount equal to her annual base salary, payable in equal installments over a 12-month period.
With respect to Messrs. Becker and Krumm, pursuant to their Employment Arrangements, if the Company should terminate Executive without cause or if Executive terminates employment for good reason during the two-year period immediately following a “change in control,” as defined in their Employment Arrangements, then in lieu of any amounts otherwise payable, Executive would be entitled to receive (i) all earned and accrued but unpaid base salary and annual bonus amounts up to the date of termination, (ii) an amount equal to two times his base salary, (iii) an amount equal to two times his target annual bonus, (iv) continued insurance coverage for eighteen months following the date of termination, (v) full and immediate vesting of all outstanding long-term incentive awards, (vi) reasonable legal fees and related expenses as a result of the termination and (vii) outplacement counseling.
Upon a change in control, each Executive will be entitled to the benefit resulting from the acceleration of his or her unvested time- and performance-based restricted stock units upon a change in control as provided in his or her restricted stock unit agreement, whether or not his or her employment is terminated.
With respect to Messrs. Becker, Krumm and Lydon, pursuant to his Employment Arrangement, if employment should terminate as a result of the death or disability of the Executive, the Executive, or his estate, would be entitled to receive (i) all previously earned and accrued but unpaid base salary up to the date of termination and (ii) his pro-rata annual bonus for the year in which termination occurs. The Company’s obligation under the Employment Arrangements with Executives terminates on the last day of the month in which Executive’s death occurs or on the date of termination of employment on account of Executive’s disability.
Mr. Lydon’s employment with the Company ended effective December 31, 2021. In connection with his separation of employment, the Company entered into a Separation Agreement with Mr. Lydon pursuant to which Mr. Lydon was entitled to receive, in lieu of the severance payments under his Employment Arrangement described above, an aggregate of $4,125,000, consisting of (1) continuation of Mr. Lydon’s annual salary of $825,000 for a period of 24 months, (ii) payment of $1,650,000, which is equal to two times Mr. Lydon’s target bonus amount, payable in two annual installments, and (iii) payment of $825,000, which is equal to Mr. Lydon’s target bonus amount applicable for 2021, payable when 2021 annual bonuses would be paid to employees generally. Also pursuant to the Separation Agreement, Mr. Lydon agreed to continue to serve as an employee for a transition period ending December 31, 2021 and to a customary release of claims. As a result of his employment ending, the 60,445 restricted stock units that had not vested as of the effective date of his employment ending were forfeited per the terms of the award.
Mr. Cebulla is not entitled to any severance or related benefits upon termination. Upon a change in control, Mr. Cebulla would be entitled to receive the benefit resulting from the acceleration of his unvested restricted stock units as provided in his restricted stock unit agreements.
The following table shows the estimated benefits payable to each Executive in the event of termination of employment and/or change in control of the Company. The amounts shown assume that a termination of employment or a change in control occurs on December 31, 2021. The amounts do not include payments or benefits provided under insurance or other plans that are generally available to all full-time employees.
Name(1) | Termination without Cause or for Good Reason not in connection with a Change in Control ($) | Death or Disability ($) | Termination without Cause or for Good Reason in connection with a Change in Control ($) | Change in Control ($) | ||||||||||||
Russell A. Becker | ||||||||||||||||
Cash Severance (2) | 5,000,000 | 1,250,000 | 5,000,000 | — | ||||||||||||
Intrinsic Value of Equity (3) | — | — | 10,955,187 | 10,955,187 | ||||||||||||
Insurance Benefits (4) | — | — | 37,477 | — | ||||||||||||
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Total | 5,000,000 | 1,250,000 | 15,992,664 | 10,955,187 | ||||||||||||
Kevin S. Krumm | ||||||||||||||||
Cash Severance (2) | 3,000,000 | 750,000 | 3,000,000 | — | ||||||||||||
Intrinsic Value of Equity (3) | — | — | 1,557,668 | 1,557,668 | ||||||||||||
Insurance Benefits (4) | — | — | 37,477 | — | ||||||||||||
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Total | 3,000,000 | 750,000 | 4,595,145 | 1,557,668 | ||||||||||||
Andrea M. Fike | ||||||||||||||||
Cash Severance (2) | 400,000 | — | 400,000 | — | ||||||||||||
Intrinsic Value of Equity (3) | — | — | 904,759 | 904,759 | ||||||||||||
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Total | 400,000 | — | 1,304,759 | 904,759 | ||||||||||||
Paul W. Grunau | ||||||||||||||||
Cash Severance (2) | 680,000 | — | 680,000 | |||||||||||||
Intrinsic Value of Equity (3) | — | — | 877,777 | 877,777 | ||||||||||||
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Total | 680,000 | — | 1,557,777 | 877,777 | ||||||||||||
Andrew J. Cebulla | ||||||||||||||||
Intrinsic Value of Equity (3) | — | — | 388,380 | 388,380 | ||||||||||||
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Total | 388,380 | 388,380 | ||||||||||||||
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As required by Section 953(b) of the Dodd-Frank Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the median annual total compensation of our employees and the annual total compensation of our CEO, Mr. Becker.
As of December 31, 2021, our employee population consisted of approximately 13,255 individuals working at the Company and its subsidiaries, of which approximately 11,576 are based in the United States and approximately 1,679 are based outside of the United States.
As permitted by applicable SEC rules, we have elected to use the same median employee identified for purposes of the 2019 pay ratio disclosed in the “CEO Pay Ratio” section of our proxy statement for the 2020 annual meeting of stockholders filed with the SEC on July 2, 2020. There has been no change in our employee population or employee compensation arrangements as of December 31, 2021 that we believe would significantly impact our pay ratio disclosure.
To identify our median employee and calculate such employee’s annual total compensation based on our employee population as of December 31, 2019, we excluded 59 employees based in the United Kingdom, who at that time represented less than 5% of our employee population. To identify the median employee, we used the gross pay of all of our employees, excluding our CEO, our U.K.-based employees, and independent contractors and consultants who were not paid directly by the Company. We did not make any cost-of-living or other adjustments in identifying the median employee and we did not annualize the pay of any employees who were not employed for the full year.
We then calculated the 2021 total annual compensation of the median employee in accordance with the requirements of the executive compensation rules for the Summary Compensation Table (Item 402(c)(2)(x) of Regulation S-K). Under this calculation, the median employee’s annual total compensation was $58,443.
Utilizing the same executive compensation rules, and consistent with the amount reported in the “Total” Column of our Summary Compensation Table for 2021 above for our CEO, the annual total compensation of our CEO was $8,027,508. The resulting ratio of the annual total compensation of our CEO to the annual total compensation of the median employee was 137 to 1. This ratio represents a reasonable estimate calculated in a manner consistent with SEC rules based on the methodology described above.
The SEC rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices, and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
This information is being provided in response to SEC disclosure requirements. Neither the Compensation Committee nor management of the Company uses the pay ratio measure in making any compensation decisions.
The following table sets forth certain information regarding (i) all stockholdersshareholders known by the Company to be the beneficial owners of more than 5% of the Company’s issued and outstanding Common Stockcommon stock and (ii) each director, each named executive officer and all directors and executive officers as a group, together with the approximate percentages of issued and outstanding Common Stockcommon stock owned by each of them. Percentages are calculated based upon shares issued and outstanding plus shares which the holder has the right to acquire under share options, restricted stock units, warrants or Series A Preferred Stock or Series B Preferred Stock exercisable for or convertible into Common Stockcommon stock within 60 days. Unless otherwise indicated, amounts are as of April 18, 2022,2023, and each of the stockholdersshareholders has sole voting and investment power with respect to the Common Stockcommon stock beneficially owned, subject to community property laws where applicable. As of April 18, 2022,2023, we had (1) 233,188,612235,212,900 shares of Common Stockcommon stock issued and outstanding, (2) 4,000,000 shares of Series A Preferred Stock issued and outstanding entitled to 4,000,000 votes and (3) 800,000 shares of Series B Preferred Stock issued and outstanding entitled to 32,520,326 votes. The percentage of “Total Voting Power” is calculated taking into account the voting power of these additional classes of voting securities.
Unless otherwise indicated, the address of each person named in the table below is c/o APi Group, Inc., 1100 Old Highway 8 NW, New Brighton, MN 55112.
| Shares Beneficially Owned | Shares Beneficially Owned | |||||||||||||||||||||||
| Beneficial Owner | Number | % of Common Stock | % of Total Voting Power | Number | % of Common Stock | % of Total Voting Power | ||||||||||||||||||
More than 5% Stockholders: | ||||||||||||||||||||||||
More than 5% Shareholders: | ||||||||||||||||||||||||
Entities managed by Viking Global Investors LP | 41,463,414 | (1) | 14.3 | % | 15.4 | % | 42,095,793 | (1) | 14.4 | % | 15.4 | % | ||||||||||||
Sir Martin E. Franklin | 28,261,410 | (2) | 10.4 | % | 10.5 | % | 28,273,924 | (2) | 10.3 | % | 10.4 | % | ||||||||||||
Entities affiliated with Blackstone Inc. | 24,390,243 | (3) | — | 9.0 | % | 24,390,243 | (3) | — | 9.0 | % | ||||||||||||||
The Vanguard Group | 17,491,333 | (4) | 7.5 | % | 6.5 | % | 18,324,090 | (4) | 7.8 | % | 6.7 | % | ||||||||||||
BlackRock, Inc. | 13,515,441 | (5) | 5.8 | % | 5.0 | % | 14,490,896 | (5) | 6.2 | % | 5.3 | % | ||||||||||||
Named Executive Officers and Directors: | ||||||||||||||||||||||||
Sir Martin E. Franklin | 28,261,410 | (2) | 10.4 | % | 10.5 | % | 28,273,942 | (2) | 10.3 | % | 10.4 | % | ||||||||||||
James E. Lillie | 5,693,621 | (6) | 2.4 | % | 2.1 | % | 5,699,887 | (6) | 2.4 | % | 2.1 | % | ||||||||||||
Ian G.H. Ashken | 5,715,417 | (7) | 2.5 | % | 2.1 | % | 5,334,062 | (7) | 2.3 | % | 2.0 | % | ||||||||||||
Russell A. Becker | 2,901,365 | (8) | 1.2 | % | 1.1 | % | 3,006,836 | (8) | 1.3 | % | 1.1 | % | ||||||||||||
David S. Blitzer | — | — | — | — | — | — | ||||||||||||||||||
Andrew J. Cebulla | 644 | * | * | |||||||||||||||||||||
Andrea M. Fike | 18,155 | * | * | 25,233 | (9) | * | * | |||||||||||||||||
Paul W. Grunau | 560,703 | (9) | * | * | ||||||||||||||||||||
Glenn David Jackola | 764 | (10) | * | * | ||||||||||||||||||||
Kevin S. Krumm | — | — | — | 18,161 | (11) | * | * | |||||||||||||||||
Thomas A. Lydon | 144,938 | * | * | |||||||||||||||||||||
Louis B. Lambert | — | — | — | |||||||||||||||||||||
Paula D. Loop | — | * | * | 6,266 | (12) | * | * | |||||||||||||||||
Thomas V. Milroy | 69,296 | (10) | * | * | 75,562 | (13) | * | * | ||||||||||||||||
Anthony E. Malkin | | 21,796 | (11) | * | * | 194,862 | (14) | * | * | |||||||||||||||
Kristina M. Morton | 17,821 | * | * | |||||||||||||||||||||
Cyrus D. Walker | | 21,796 | (11) | * | * | 28,062 | (12) | * | * | |||||||||||||||
Carrie A. Wheeler | 21,796 | (11) | * | * | 28,062 | (12) | * | * | ||||||||||||||||
All Executive Officers, Directors and Covered Persons as a group (17 persons): | 32,021,899 | (12) | 13.7 | % | 11.9 | % | ||||||||||||||||||
All Current Executive Officers and Directors as a group (13 persons): | 42,683,523 | (15) | 16.4 | % | 15.7 | % | ||||||||||||||||||
| * | Represents beneficial ownership of less than one percent (1%) of our outstanding |
42 | 2023 PROXY STATEMENT | | ||
SECURITY OWNERSHIP
| (1) | Based on a Schedule |
| may be exercised by its general partner, Viking Global Opportunities Portfolio GP LLC (“Viking Opportunities GP”), and Viking Global Investors LP (“VGI”), which provides managerial services to VGOP, (ii) 619,733 shares of common stock and 196,000 shares of Series B Preferred Stock (which are initially convertible into 7,967,479 shares of common stock) are held by Viking Global |
| (2) | This amount consists of (i) 12,342,559 shares of |
| (3) | Based on a Schedule 13D filed with the SEC on January 13, 2022. As of January 3, 2022, (i) Juno Lower Holdings directly holds 592,610 shares of Series B Preferred Stock (which is initially convertible into 24,089,837 shares of |
| L.L.C. and Blackstone Holdings III GP Management L.L.C. The sole holder of the Series II preferred stock of Blackstone Inc. is Blackstone Group Management L.L.C. Blackstone Group Management L.L.C. is wholly-owned by Blackstone’s senior managing directors and controlled by its founder, Stephen A. Schwarzman. Does not include any |
| (4) | Based on a Schedule |
| (5) | Based on a Schedule |
| | 2023 PROXY STATEMENT | 43 | ||
SECURITY OWNERSHIP
| (6) | This amount consists of (i) |
| (7) | This amount consists of (i) 5,106,000 shares of |
| (8) | This amount |
| (9) | This amount includes |
| (10) | This amount includes 404 shares of |
This amount includes |
| (12) | This amount includes 6,266 shares of |
This amount consists of (i) 31,796 shares of common stock; (ii) 37,500 shares of common stock underlying options to purchase common stock, pursuant to an Option Deed, which are exercisable at any time until October 1, 2024 at the option of the holder; and (iii) 6,266 shares of common stock issuable in settlement of restricted stock units vesting within 60 days of April 18, 2023. |
| (14) | This amount consists of (i) 77,396 shares of common stock held directly; (ii) 83,400 shares of Common Stock held by a limited liability company of which Mr. Malkin is the manager; (iii) 27,800 shares of Common Stock held by a limited liability company of which Mr. Malkin is the manager; and (iv) 6,266 shares of common stock issuable in settlement of restricted stock units vesting within 60 days of April 18, 2023. |
| (15) | This amount includes |
44 |
2023 PROXY STATEMENT | | ||
PROPOSAL 2—APPROVE, ON AN ADVISORY BASIS, OUR EXECUTIVE COMPENSATION
The Dodd-Frank Act requires us to provide our stockholders with the opportunity to approve, on a nonbinding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC, often referred to as “Say-on-Pay.”
The core of our executive compensation philosophy is to assure that the Company’s compensation policies attract and retain the key employees necessary to support the Company’s growth and success, both operationally and strategically, and to motivate executives to achieve short- and long-term goals with the ultimate objective of creating sustainable improvements in stockholder value.
In deciding how to cast their vote on this proposal, stockholders should consider the significant work performed to complete the acquisition of the Chubb Business and to meet our stated strategic objectives in the face of supply chain disruptions, inflationary pressures, and ongoing COVID-19-related uncertainty. Embedded in the compensation decisions for the 2021 executive compensation program is the core philosophy that our executive compensation should be linked to achievement of financial and operating performance metrics that drive stockholder value over both the short- and long-term. We have designed our compensation program to focus on the Company’s strategic objectives, value drivers and priorities. As such, through our executive compensation program we seek to ensure that:
executives are appropriately rewarded for their contributions to our successful performance;
a significant portion of each executive’s compensation is “at risk” and tied to overall Company performance and, where applicable, business unit performance;
there is a balance of short- and long-term compensation elements to motivate and reward superior performance without encouraging excessive or unnecessary risk taking; and
there is alignment between the interests of executives and those of our stockholders.
Stockholders’ vote on this proposal is advisory, and therefore not binding on the Company, the Compensation Committee or the Board. The vote will not be construed to create or imply any change to the fiduciary duties of the Company or the Board, or to create or imply any additional fiduciary duties for the Company or the Board. However, we value the opinions of our stockholders and, accordingly, the Board and the Compensation Committee will consider the outcome of this advisory vote in connection with future executive compensation decisions.
For reasons set forth above, the Board recommends that you vote for the compensation paid to the named executive officers in 2021.
Accordingly, we will ask our stockholders to vote on the following resolution at the 2022 Annual Meeting:
“RESOLVED, that, the compensation paid to the Company’s named executive officers in 2021, as disclosed in this Proxy Statement for our 2022 Annual Meeting pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables and related narrative disclosure, is hereby approved.”
RECOMMENDATION OF THE BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS IN 2021.
PROPOSAL 3—RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR 20222023 FISCAL YEAR
The Audit Committee of the Board of Directors has appointed KPMG to continue to serve as our independent registered public accounting firm for the 20222023 fiscal year. KPMG has been our independent registered public accounting firm since November 14, 2019.
In the event our stockholdersshareholders do not ratify the appointment of KPMG, such appointment may be reconsidered by the Audit Committee. Ratification of the appointment of KPMG to serve as our independent registered public accounting firm for the 20222023 fiscal year will in no way limit the Audit Committee’s authority to terminate or otherwise change the engagement of KPMG for the 20222023 fiscal year. We expect representatives of KPMG to attend the 20222023 Annual Meeting, virtually.where they will have an opportunity to make a statement, if they so desire, and will also be available to respond to appropriate questions.
Fees Billed to the Company by its Independent Registered Public Accounting Firms
The following table presents fees billed for audit and other services rendered by KPMG and in 20212022 and 2020:2021:
| Services Provided | 2021 (KPMG) ($) | 2020 (KPMG) ($) | 2022 ($) | 2021 ($) | ||||||||||||
Audit Fees(1) | 6,150,275 | 6,002,800 | $ | 8,864,000 | $ | 6,150,000 | ||||||||||
Audit-Related Fees(2) | 1,873,000 | — | ||||||||||||||
Audit Related Fees(2) | $ | 1,627,000 | $ | 1,873,000 | ||||||||||||
Tax Fees(3) | 2,533,253 | 3,404,367 | $ | 1,161,000 | $ | 2,533,253 | ||||||||||
All Other Fees | — | — | $ | — | $ | — | ||||||||||
|
| |||||||||||||||
Total | 10,556,253 | 9,407,167 | $ | 11,652,000 | $ | 10,556,253 | ||||||||||
|
| |||||||||||||||
| (1) | Audit fees for 2022 were for professional services rendered in connection with the audit of our consolidated financial statements, including quarterly reviews. Audit fees for 2021 were for professional services rendered in connection with the audit of our consolidated financial statements, including quarterly reviews and consents related to registration statements |
| (2) | With respect to KPMG, the 2022 audit-related fees |
|
| (3) | Tax fees for |
Pre-Approval Policies and Procedures for Audit and Permitted Non-Audit Services
The Audit Committee requires that it preapprove all auditing services and permitted non-audit services to be performed by its independent auditor, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act, which are approved by the Audit Committee prior to the completion of the audit. Either the Chair of the Audit Committee acting alone or the other two members acting jointly may grant preapprovals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant preapprovals shall be presented to the full Audit Committee or the Board of Directors at its next scheduled meeting.
Consistent with these policies and procedures, the Audit Committee has approved all of the services rendered by KPMG during fiscal year 2021,2022, as described above.
| | 2023 PROXY STATEMENT | 45 | ||
Proposal 2—Ratification of Independent Registered Public Accountants For 2023 Fiscal Year
Audit Committee Report
The Audit Committee oversees the accounting and financial reporting processes of the Company on behalf of the Board of Directors.Board. Management has primary responsibility for the Company’s financial statements,
financial reporting process and internal controls over financial reporting. The independent auditors are responsible for performing an independent audit of the Company’s financial statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States) (“PCAOB”) and evaluating the effectiveness of internal controls and issuing reports thereon. The Audit Committee’s responsibility is to select the independent auditors and monitor and oversee the accounting and financial reporting processes of the Company, including the Company’s internal controls over financial reporting and the audits of the financial statements of the Company.
During 20212022 and the first quarter of 2022,2023, the Audit Committee regularly met and held discussions with management and the independent auditors. In the discussions related to the Company’s financial statements for fiscal year 2021,2022, management represented to the Audit Committee that such financial statements were prepared in accordance with U.S. generally accepted accounting principles. The Audit Committee reviewed and discussed with management and the independent auditors the audited financial statements for fiscal year 20212022 and management’s evaluation of the effectiveness of the design and operation of disclosure controls and procedures.
In fulfilling its responsibilities, the Audit Committee discussed with the independent auditors those matters required to be discussed by the auditors with the Audit Committee under the applicable rules adopted by the PCAOB and the SEC. In addition, the Audit Committee received from the independent auditors the written disclosures and letter required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with the independent auditors that firm’s independence. In connection with this discussion, the Audit Committee also considered also whether the provision of services by the independent auditors not related to the audit of the Company’s financial statements for fiscal year 2021 is2022 was compatible with maintaining the independent auditors’ independence. The Audit Committee’s policy requires that the Audit Committee approve any audit or permitted non-audit service proposed to be performed by its independent auditors in advance of the performance of such service.
Based upon the Audit Committee’s discussions with management and the independent auditors and the Audit Committee’s review of the representations of management and the written disclosures and letter of the independent auditors provided to the Audit Committee, the Audit Committee recommended to the Board of Directors that the audited financial statements for the year ended December 31, 20212022 be included in the Company’s Annual Report.
See the portion of this Proxy Statementproxy statement titled “Corporate Governance—Board Committees”Audit Committee” for information on the Audit Committee’s meetings in 2021.2022.
The Audit Committee
Ian G.H. Ashken, Chair
Thomas V. MilroyPaula D. Loop
Carrie A. Wheeler
RECOMMENDATION OF THE BOARD OF DIRECTORS
✔ | OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE 2023 FISCAL YEAR. | |
46 | 2023 PROXY STATEMENT | | ||
PROPOSAL 3—ADVISORY VOTE ON EXECUTIVE COMPENSATION
Section 14A of the Exchange Act requires us to provide our shareholders with the opportunity to approve, on a nonbinding, advisory basis, the compensation of our NEOs, often referred to as “Say-on-Pay.”
At the 2022 Annual Meeting, approximately 96% of the votes cast supported our executive compensation program. We believe that our executive compensation program continues to be consistent with our core compensation principles and is structured to assure that those principles are implemented. We encourage you to read the entire Compensation Discussion and Analysis portion of this proxy statement (“CD&A”) to learn more about our executive compensation program and the impact that our financial performance has on the short-term and long-term incentive compensation earned by our executives in 2022. As described in the CD&A, our executive compensation philosophy and programs align executive compensation decisions with our desired business direction, strategy and performance and to attract and retain the key executives necessary to support the Company’s growth and success, both operationally and strategically, and to motivate executives to achieve short- and long-term goals with the ultimate objective of creating sustainable shareholder value.
The Board recommends that you vote for the compensation paid to our NEOs in 2022 and is submitting to shareholders the following resolution for their consideration and approval at the 2023 Annual Meeting:
“RESOLVED, that, the compensation paid to the Company’s NEOs in 2022, as disclosed in this proxy statement for our 2023 Annual Meeting pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables and related narrative disclosure, is hereby approved.”
Shareholders’ vote on this proposal is advisory, and therefore not binding on the Company, the Compensation Committee or the Board. However, we value the opinions of our shareholders and, accordingly, the Board and the Compensation Committee will consider the outcome of this advisory vote in connection with future executive compensation decisions.
RECOMMENDATION OF THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
THE RATIFICATION OF THE APPOINTMENT OF KPMG FOR FISCAL YEAR 2022.
✔ | OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS IN 2022. | |
| | 2023 PROXY STATEMENT | 47 | ||
Requirements, including Deadlines, for Submission of Proxy Proposals, Nomination of Directors and Other Business of StockholdersShareholders
In order to submit stockholdershareholder proposals to be considered for inclusion in the Company’s proxy statement, notice of annual meeting and proxy for our 20232024 Annual Meeting of StockholdersShareholders pursuant to SEC Rule 14a-8, materials must be received by the Corporate Secretary at the Company’s principal office in New Brighton, MN, no later than December 30, 2022.2023.
The proposals must comply with all of the requirements of SEC Rule 14a-8. Proposals should be addressed to: Corporate Secretary, APi Group Corporation, 1100 Old Highway 8 NW, New Brighton, Minnesota 55112, United States. As the rules of the SEC make clear, simply submitting a proposal does not guarantee its inclusion.
The Company’s bylaws also establish an advance notice procedure with regard to director nominations and stockholdershareholder proposals that are not submitted for inclusion in the Company’s proxy statement, but that a stockholdershareholder instead wishes to present directly at an annual meeting. To be properly brought before our 20232024 Annual Meeting of Stockholders,Shareholders, a notice of the director nomination or the matter the stockholdershareholder wishes to present at the meeting complying with the Company’s bylaws must be delivered to the Corporate Secretary at the Company’s principal office in New Brighton, MN (see above), not less than 90 or more than 120 days prior to the first anniversary of the date of the 20222023 Annual Meeting, except that if the 20232024 Annual Meeting of StockholdersShareholders is more than 30 days before or more than 70 days after such anniversary date, such notice must be delivered not earlier than 120 days prior to such anniversary date or the 10th day following our public announcement of the date of the 20222024 Annual Meeting of Stockholders.Shareholders. As a result, and assuming that the 20232024 Annual Meeting of StockholdersShareholders is not more than 30 days before or more than 70 days after the first anniversary of the date of the 20222023 Annual Meeting, any notice given by or on behalf of a stockholdershareholder pursuant to these provisions of the Company’s bylaws (and not pursuant to Exchange Act Rule 14a-8) must be delivered no earlier than February 15, 2023,16, 2024, and no later than March 17, 2023.2024. All director nominations and stockholdershareholder proposals must comply with the requirements of the Company’s bylaws, a copy of which may be obtained at no cost from the Corporate Secretary of the Company.
Shareholders providing notice to the Company under the SEC’s Rule 14a-19 who intend to solicit proxies in support of nominees submitted under the advance notice provision of the Company’s bylaws for the 2024 Annual Meeting of Shareholders must comply with the advance notice deadline set forth above, the requirements of the Company’s bylaws and the additional requirements of Rule 14a-19(b).
Other than the items of business described in this Proxy Statement,proxy statement, the Company does not expect any matters to be presented for a vote at the 20222023 Annual Meeting. If you grant a proxy, the persons named as proxy holders on the Proxy Cardproxy card or voting instruction form will have the discretion to vote your shares on any additional matters properly presented for a vote at the 20222023 Annual Meeting. If, for any unforeseen reason, any one or more of the Company’s nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board of Directors.Board.
Our Board of Directors or the chair of the Annual Meeting may refuse to allow the transaction of any business or the consideration of any director nomination not made in compliance with the Company’s bylaws.
List of StockholdersShareholders Entitled to Vote at the 20222023 Annual Meeting
The names of stockholdersshareholders of record entitled to vote at the 20222023 Annual Meeting will be available at the Company’s principal office in New Brighton, MN, for a period of ten (10) days prior to the 20222023 Annual Meeting and continuing through the 20222023 Annual Meeting. The list will also be made available during the 20222023 Annual Meeting.
48 | 2023 PROXY STATEMENT | | ||
Other Matters
Expenses Relating to this Proxy Solicitation
This proxy solicitation is being made by the Company, and we will pay all expenses relating to this proxy solicitation. In addition to this solicitation, our officers, directors and employees may solicit proxies by
telephone, personal call or electronic transmission without extra compensation for that activity. We also expect to reimburse our transfer agent, banks, brokers and other persons for reasonable out-of-pocket expenses in forwarding proxy materials to beneficial owners of our Common Stockcommon stock and obtaining the proxies of those owners. We have engaged GeorgesonMorrow Sodali LLC (“Georgeson”Morrow Sodali”) as our proxy solicitor at an anticipated cost of approximately $11,000$12,000 plus reasonable out-of-pocket expenses and fees for optional services. This estimate is subject to the final solicitation campaign approved by us and Georgeson.Morrow Sodali.
Communication with Our Board of Directors
Any stockholdershareholder or other interested party who desires to contact any member of the Board of Directors (or our Board of Directors as a group) may do so in writing to the following address:
Co-Chairs of the Board
APi Group Corporation
c/o Corporate Secretary
1100 Old Highway 8 NW
New Brighton, MN 55112
United States
Communications are distributed to the Board, or to any individual directors as appropriate, depending on the facts and circumstances outlined in the communication.
Some brokers, banks or other intermediaries may be participating in the practice of “householding” our proxy materials. Under this procedure, which has been approved by the SEC, stockholdersshareholders who have the same address and last name will receive only one copy of our Notice of Internet Availability of Proxy Materials (the “Notice”) or proxy statement and annual report, as applicable, unless contrary instructions have been received from the affected stockholders.shareholders. This procedure will reduce our printing costs and postage fees. We do not household for our stockholdersshareholders of record.
Once you have received notice from your broker, bank or other intermediary that it will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate copy of our Notice or proxy statement and annual report, as applicable, or if you are receiving multiple copies of any of these documents and wish to receive only one, please notify your broker, bank or other intermediary.
We will deliver promptly upon written or oral request a separate copy of our Notice, proxy statement and/or annual report to a stockholdershareholder at a shared address to which a single copy was delivered. For copies of any of these documents, stockholdersshareholders should contact us using the contact information set forth below under “Available Information.”
We will deliver without charge to each person whose proxy is being solicited, upon request of any such person, a copy of the Notice, this Proxy Statementproxy statement and our Annual Report. A request for a copy of any of these documents should be directed to APi Group Corporation, 1100 Old Highway 8 NW, New Brighton, MN 55112, Attention: Investor Relations,Secretary, Telephone: (651) 604-2773.636-4320.
| | 2023 PROXY STATEMENT | 49 | ||
Other Matters
In addition, copies of the charters of each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, together with certain other corporate governance materials, including our Business Conduct and Ethics Policy and Code of Ethics for Senior Financial Officers, can be found under the Investor Relations—Corporate Governance section of our website at www.apigroupcorp.comwww.apigroup.com and such information is also available in print to any stockholdershareholder who requests it through our Investor Relations department at the address and phone numbermethods listed above.
|
2023 PROXY STATEMENT
| | ||
QUESTIONS AND ANSWERS ABOUT VOTING AT THE 2023 ANNUAL MEETING AND RELATED MATTERS
| Q: |
|
| A: | Shareholders of record as of April 18, 2023 (the “Record Date”), beneficial owners with control numbers or legal proxies obtained from the shareholders of record as of the Record Date, and guests may attend the 2023 Annual Meeting virtually. See the Notice of 2023 Annual Meeting for additional information on how to gain access to the 2023 Annual Meeting. |
If your shares are registered directly in your name with our transfer agent, Computershare, you are a “registered holder,” which means you are the shareholder of record with respect to those shares.
If your shares are held by a bank or broker, the bank or broker is the shareholder of record. You are the “beneficial owner” (and hold your shares in “street name”) and the bank or broker is your “nominee.”
If you hold shares as a participant in the (1) APi Group, Inc. Employee Stock Ownership Plan (“ESOP”), (2) APi Group 401(k) & Profit Sharing Plan, (3) APi Group Safe Harbor 401(k) & Profit Sharing Plan, and/or (4) the Vipond Inc. Employees’ Profit Sharing Plan (collectively, “employee benefit plans”), the plan trustee of the applicable plan is the shareholder of record and your nominee.
| Q: | Who may vote at the 2023 Annual Meeting? |
| A: | You are receiving this proxy statement, the accompanying proxy card or voting instruction form and our annual report to shareholders because you own shares of common stock, shares of Series A Preferred Stock, (the “Series A Preferred Stock”) or shares of 5.5% Series B Perpetual Convertible Preferred Stock, (the “Series B Preferred Stock”) of APi Group Corporation that entitle you to vote at the 2023 Annual Meeting. |
If you are a participant in an employee benefit plan, you may vote in advance of the 2023 Annual Meeting (as described below under “How do I Vote?”) and, if you do, your vote will be counted at that meeting; however, except as otherwise described below, you will not be able to vote at the 2023 Annual Meeting.
With that exception, anyone owning shares of common stock, Series A Preferred Stock or Series B Preferred Stock at the close of business on the Record Date may vote electronically at the 2023 Annual Meeting. You may cast at or prior to the 2023 Annual Meeting (1) one vote for each share of common stock held by you on the Record Date, (2) one vote for each share of Series A Preferred Stock held by you on the Record Date and (3) the number of votes equal to the number of shares of common stock into which your shares of Series B Preferred Stock could be converted as of such date, on all items of business presented in this proxy statement and at the 2023 Annual Meeting. Each share of Series A Preferred Stock and Series B Preferred Stock will entitle the holder thereof to vote together with the holders of common stock as a single class. As of the close of business on the Record Date, we had (a) 235,212,900 shares of common stock outstanding entitled to cast 235,212,900 votes, (b) 4,000,000 shares of Series A Preferred Stock outstanding entitled to 4,000,000 votes and (c) 800,000 shares of Series B Preferred Stock outstanding entitled to 32,520,326 votes.
| Q: | How do I vote? |
| A: | Registered Holder: If you are a registered holder, there are four ways to vote: |
| • | Via the Internet. You may vote by proxy via the Internet by following the instructions provided on the proxy card or voting instruction form mailed to you. |
| | 2023 PROXY STATEMENT | 51 | ||
Questions and Answers About Voting at the 2023 Annual Meeting and Related Matters
| • | By Telephone. You may vote by proxy by calling the toll-free number found on the proxy card or voting instruction form. |
| • | By Mail. You may vote by proxy by filling out the proxy card or voting instruction form and returning it in the envelope provided. |
| • | During the Meeting. You must attend the 2023 Annual Meeting virtually as a shareholder to vote during the meeting. Please see the information below for how to attend the 2023 Annual Meeting. If you attend the 2023 Annual Meeting as a shareholder, you can follow the online instructions to vote your shares during the meeting. |
Beneficial Owners: If you are a beneficial owner of shares held in “street name,” a proxy card or voting instruction form has been forwarded to you by your broker or other nominee. You have the right to direct your broker or other nominee on how to vote your shares by following the instructions on the proxy card or voting instruction form, which generally provides four ways to vote:
| • | Via the Internet. You may vote by proxy via the Internet by visiting www.proxyvote.com and entering the control number found on the proxy card or voting instruction form provided by your broker or other nominee. The availability of Internet voting may depend on the voting process of your broker or other nominee. |
| • | By Mail. You may vote by proxy by filling out the proxy card or voting instruction form provided by your broker or other nominee and returning it in the envelope provided. |
| • | By Telephone. You may vote by proxy by calling the toll-free number found on the proxy card or voting instruction form. |
| • | During the Annual Meeting. To vote your shares during the 2023 Annual Meeting, you must follow the instructions provided by your broker or other nominee and attend the meeting as a shareholder. Please see “How can I attend the 2023 Annual Meeting” below for information on how to attend the meeting as a shareholder to vote your shares during the meeting. |
If you attend the 2023 Annual Meeting as a guest, you will not be able to vote your shares during the meeting.
If you vote over the Internet or by telephone, you do not need to return your proxy card or voting instruction form. Internet and telephone voting for shareholders will be available 24 hours a day, and will close at 10:59 p.m., Central Time, on June 14, 2023. Even if you plan to attend the 2023 Annual Meeting virtually, the Company recommends that you vote your shares in advance as described above so that your vote will be counted if you later decide not to attend the 2023 Annual Meeting.
Participants in the employee benefit plans:
| • | Shares Held in Your Account under the ESOP. If you are a participant or beneficiary with an account in the ESOP, you are entitled to direct the ESOP’s trustee as to how any shares that have been allocated to your ESOP account and that remained in your ESOP account as of the Record Date should be voted at the 2023 Annual Meeting. |
| • | Shares Held in Your Account under the APi Group 401(k) & Profit Sharing Plan, the APi Group Safe Harbor 401(k) & Profit Sharing Plan or the Vipond Inc.
|
|
2023 PROXY STATEMENT
| | ||
Questions and Answers About Voting at the 2023 Annual Meeting and Related Matters
You have the right to direct your nominee(s) or other intermediary on how to vote your shares by following the instructions on the proxy card or voting instruction form forwarded to you by your nominee(s), which generally provides three ways to vote:
| • |
|
| • | By Telephone. You may vote by proxy by calling the |
| • |
|
Earlier Voting Deadlines for Participants in Certain Employee Benefit Plans. Because the ESOP’s trustee and the other employee benefits plans’ trustee(s) or other intermediary will vote on your behalf, and in accordance with your directions, except as noted below, you will not be able to vote during the 2023 Annual Meeting and must vote by following deadlines:
| • |
|
| • | Votes of shares held in a APi Group 401(k) & Profit Sharing Plan or APi Group Safe Harbor 401(k) & Profit Sharing Plan account must be made by 10:59 p.m. (Central Time) on June 12, 2023. |
| • | Votes of shares held in a Vipond Inc. Employees’ Profit Sharing Plan account must be made by 10:59 p.m. (Central Time) on June 14, 2023 in order to vote prior to the
meeting. |
| Q: | How can I attend the 2023 Annual Meeting? |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
| A: | The 2023 Annual Meeting will be held in a virtual-only format via live webcast. No physical meeting will be held. |
To access the 2023 Annual Meeting, please visit www.virtualshareholdermeeting.com/APG2023. You may begin logging into the 2023 Annual Meeting on the day of the meeting at 8:15 a.m., Central Time, 15 minutes in advance of the start of the meeting. We encourage you to access the meeting prior to the start time and allow ample time for the check-in procedures.
D84518-P69213-Z82041-Z82042 KEEP THIS PORTION FOR YOUR RECORDSYou may log in using one of two options: (1) join as a guest or (2) join as a shareholder. To join as a guest, you will need to enter the information requested on the screen to register as a guest. If you enter the meeting as a guest, you will not be able to vote your shares or submit questions during the meeting.
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —If you were a registered holder or a beneficial owner as of the Record Date, you may join the 2023 Annual Meeting as a shareholder by entering the 16-digit control number found on the proxy card or voting instruction form previously received in connection with the 2023 Annual Meeting. If you are a beneficial owner as of the Record Date and you do not have a 16-digit control number, you should contact your bank, broker or other nominee (preferably at least 5 days before the meeting) and obtain a “legal proxy” in order to be able to attend and participate in the meeting. You must join the meeting as a shareholder to vote your shares or submit questions during the meeting.
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.If you were a participant in an employee benefit plan and you have a control number, you may join the 2023 Annual Meeting as a shareholder using that control number. Otherwise, you may join the meeting as a guest.
| | 2023 PROXY STATEMENT | 53 | ||
Questions and Answers About Voting at the 2023 Annual Meeting and Related Matters
| Q: | What if I need technical assistance accessing the virtual-only meeting? |
| A: | The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most updated version of applicable software and plugins. Beginning 15 minutes prior to the meeting start, technicians will be available to assist you with any technical difficulties you may have accessing the virtual meeting webcast. If you encounter any difficulties accessing the webcast, please call the technical support number that will be posted on the annual meeting website log-in page (www.virtualshareholdermeeting.com/APG2023). |
| Q: | How do I ask questions at the 2023 Annual Meeting? |
| A: | Shareholders will have the ability to submit questions during the 2023 Annual Meeting via the meeting website at www.virtualshareholdermeeting.com/APG2023 by following the instructions available on the meeting page. Questions relevant to 2023 Annual Meeting matters will be answered during the meeting, subject to time constraints. To ensure that as many shareholders as possible are able to ask questions during the 2023 Annual Meeting, each shareholder will be permitted no more than two questions. Questions from multiple shareholders on the same topic or that are otherwise related may be grouped, summarized and answered together. If you join the meeting as a guest, you will not be able to ask questions. |
Responses to questions relevant to 2023 Annual Meeting matters that are not answered during the meeting will be posted on the Company’s Investor Relations webpage.
| Q: | How do I obtain electronic access to the proxy materials? |
| A: | This proxy statement and our Annual Report are available to shareholders free of charge at http://materials.proxyvote.com/00187Y. |
If you are a beneficial owner or a participant in an employee benefit plan, you may be able to elect to receive future annual reports or proxy statements by email. For information regarding electronic delivery of proxy materials for shares held in “street name” or in an employee benefit plan, you should contact your broker or other nominee.
| Q: | What constitutes a quorum, and why is a quorum required? |
| A: | State law requires that we have a quorum of shareholders present in person or by proxy for all items of business to be voted at the 2023 Annual Meeting. The presence at the 2023 Annual Meeting, in person or by proxy, of the holders of a majority in voting power of the shares of common stock, Series A Preferred Stock and Series B Preferred Stock issued and outstanding and entitled to vote on the Record Date will constitute a quorum, permitting us to conduct the business of the 2023 Annual Meeting. Proxies received but marked as abstentions, if any, and broker non-votes (described below) will be included in the calculation of the number of shares considered to be present at the 2023 Annual Meeting for quorum purposes. If we do not have a quorum, then the person presiding over the 2023 Annual Meeting or the shareholders present at the 2023 Annual Meeting may, by a majority in voting power thereof, adjourn the meeting from time to time, as authorized by our bylaws, until a quorum is present. |
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Questions and Answers About Voting at the 2023 Annual Meeting and Related Matters
| Q: | What am I voting on? |
| A: | Those entitled to vote are asked to vote on the following three proposals. Our Board’s recommendation for each of these proposals is set forth below: |
| Proposal | Board Recommendation | |||||||||||||||||||||||||||||||
1. | To elect ten directors for a one-year term expiring at the | FOR | ||||||||||||||||||||||||||||||
2. To ratify the appointment of KPMG LLP (“KPMG”) as our independent registered public accounting firm for the 2023 fiscal year | FOR | |||||||||||||||||||||||||||||||
3. To approve, on an advisory basis, the compensation of our named executive | ||||||||||||||||||||||||||||||||
We will also consider other proposals that properly come before the 2023 Annual Meeting in accordance with our bylaws.
| Q: | Is my vote confidential? |
| A: | Yes. We encourage shareholder participation in corporate governance by ensuring the confidentiality of shareholder votes. We have designated Broadridge Financial Solutions, Inc. as inspector to receive and tabulate shareholder votes. Your vote on any particular proposal will be kept confidential and will not be disclosed to us or any of our officers or employees except (1) where disclosure is required by applicable law, (2) where disclosure of your vote is expressly requested by you or (3) where we conclude in good faith that a bona fide dispute exists as to the authenticity of one or more proxies, ballots or votes, or as to the accuracy of any tabulation of such proxies, ballots or votes. Aggregate vote totals will be disclosed to us from time to time and publicly announced following the 2023 Annual Meeting. |
| Q: | What happens if additional matters are presented at the 2023 Annual Meeting? |
| A: | Our bylaws provide that items of business may be brought before the 2023 Annual Meeting only (1) pursuant to the Notice of 2023 Annual Meeting (or any supplement thereto) included in this proxy statement, (2) by or at the direction of the Board, or (3) by a shareholder of the Company who was a shareholder at the time proper notice of such business is delivered to our Corporate Secretary, who is entitled to vote at the meeting and who complies with the notice procedures set forth in our bylaws. Other than the three items of business described in this proxy statement, we are not aware of any other business to be acted upon at the 2023 Annual Meeting as of the date of this proxy statement. If you grant a proxy, the persons named as proxy holders, Russell A. Becker, Kevin S. Krumm and Louis B. Lambert, will have the discretion to vote your shares on any additional matters properly presented for a vote at the 2023 Annual Meeting in accordance with Delaware law and our bylaws. |
| Q: | How many votes are needed to approve each proposal? |
| A: | The table below sets forth, for each proposal described in this proxy statement, the vote required for approval of the proposal, assuming a quorum is present: |
| Proposal | Vote Required | |||||||||||||||||||||||||||||
1. To elect ten directors for a one-year term expiring at the 2024 Annual Meeting of Shareholders | The majority of votes cast | |||||||||||||||||||||||||||||
2. To ratify the appointment of KPMG | ||||||||||||||||||||||||||||||
| The majority of votes cast | ||||||||||||||||||||||||||||||
3. To approve, on an advisory basis, the compensation of our named executive officers | The majority of votes cast | |||||||||||||||||||||||||||||
| | 2023 PROXY STATEMENT | 55 | ||
Questions and Answers About Voting at the 2023 Annual Meeting and Related Matters
| Q: | What if I am a registered holder and I return my proxy without making any selections? |
| A: | If you are a registered holder and sign and return your proxy card or voting instruction form without making any selections, your shares will be voted “FOR” all director nominees and “FOR” proposals 2 and 3. If other matters properly come before the 2023 Annual Meeting, Russell A. Becker, Kevin S. Krumm and Louis B. Lambert will have the authority to vote on those matters for you at their discretion. As of the date of this proxy statement, we are not aware of any matters that will come before the 2023 Annual Meeting other than those disclosed in this proxy statement. |
| Q: | What if I am a beneficial owner and I do not give the broker or other nominee voting instructions? |
| A: | If you are a beneficial owner and your shares are held in the name of a broker or other nominee, such nominee is bound by the rules of the NYSE regarding whether or not it can exercise discretionary voting power for any particular proposal if the broker has not received voting instructions from you. Brokers have the authority to vote shares for which their customers do not provide voting instructions on certain “routine” matters. A broker non-vote occurs when a broker or other nominee who holds shares for another does not vote on a particular item because the nominee does not have discretionary voting authority for that item and has not received voting instructions from the beneficial owner of the shares. Broker non-votes are included in the calculation of the number of votes considered to be present at the 2023 Annual Meeting for purposes of determining the presence of a quorum but are not considered a vote cast. |
The table below sets forth, for each proposal described in this proxy statement, whether a broker can exercise discretion and vote your shares absent your instructions and if not, the impact of such broker non-vote on the approval of the applicable proposal:
| Proposal | Can Brokers Vote Absent Instructions? | Impact of Broker Non-Vote | ||
1. To elect ten directors for a one-year term expiring at the 2024 Annual Meeting of Shareholders | No | None | ||
2. To ratify the appointment of KPMG as our independent registered public accounting firm for the 2023 fiscal year | Yes | Not Applicable | ||
3. To approve, on an advisory basis, the compensation of our named executive officers | No | None | ||
| Q: | What if I am a participant in an employee benefit plan and I do not give the nominee voting instructions? |
| A: | If you are a participant in an employee benefit plan and you do not provide voting instructions (or your instructions are incomplete or unclear) as to one or more of the matters to be voted on, the unvoted shares in your account will be treated as follows: |
| • | The ESOP. The ESOP’s trustee will vote shares in your account with respect to each applicable proposal in the same proportion for which the trustee received timely, complete and clear voting instructions. |
| • | The APi Group 401(k) & Profit Sharing Plan and APi Group Safe Harbor 401(k) & Profit Sharing Plan.The trustee will vote shares in your account with respect to each applicable proposal in the same proportion for which the trustee received timely, complete and clear voting instructions. |
| • | The Vipond Inc. Employees’ Profit Sharing Plan. The intermediary will vote only those shares for which it received timely, complete and clear voting instructions. The intermediary will not vote unvoted shares in your account. |
56 | 2023 PROXY STATEMENT | | ||||||||||||||||||||||||||||||||
Questions and Answers About Voting at the 2023 Annual Meeting and Related Matters
| Q: | What if I abstain on a proposal? |
| A: | If you sign and return your proxy card or voting instruction form marked “Abstain” on any proposal, your shares will not be voted on that proposal. Marking “Abstain” with respect to any of the proposals described in this proxy statement will not have any impact on the approval of the applicable proposal. |
| Q: | Can I change my vote or revoke my proxy after I have delivered my proxy card or voting instruction form? |
| A: | Yes. |
If you are a registered holder, you may change your vote or revoke your proxy by (1) voting in person at the 2023 Annual Meeting, (2) delivering to the Corporate Secretary (at the address indicated below) a revocation of proxy or (3) executing a new proxy bearing a later date.
Corporate Secretary
APi Group Corporation
1100 Old Highway 8 NW
New Brighton, MN 55112
United States
If you are a beneficial owner, you must follow the instructions provided by your broker or other nominee to change your vote or revoke your proxy.
If you are a participant in an employee benefit plan, you may change your vote or revoke your proxy by executing a new proxy bearing a later date, prior to the voting cutoff date for the applicable plan.
| Q: | If I am a registered holder or a beneficial owner and I plan to attend the 2023 Annual Meeting, should I still vote by proxy? |
| A: | Yes. Casting your vote in advance does not affect your right to attend the 2023 Annual Meeting. |
If you vote in advance and also attend the 2023 Annual Meeting, you do not need to vote again at the 2023 Annual Meeting unless you want to change your vote. Please see the information above under “How do I vote?” for information on how to vote.
| Q: | Am I entitled to dissenter’s rights? |
| A: | No. Delaware General Corporation Law does not provide for dissenter’s rights in connection with the matters being voted on at the 2023 Annual Meeting. |
| Q: | Where can I find voting results of the 2023 Annual Meeting? |
| A: | We will announce the voting results for the proposals at the 2023 Annual Meeting and publish final detailed voting results in a Form 8-K filed with the SEC within four business days after the 2023 Annual Meeting. |
| Q: | Who should I call with other questions? |
| A: | If you have any questions about this proxy statement or the 2023 Annual Meeting, or need assistance voting your shares, please contact our proxy solicitor, Morrow Sodali at 1-800-662-5200. |
| | 2023 PROXY STATEMENT | 57 | ||||||||||||||||||||||||||||||||
Appendix
APi Group Corporation
Reconciliations of GAAP to Non-GAAP Financial Measures
EBITDA and adjusted EBITDA (non-GAAP)
(Amounts in millions)
(Unaudited)
| For the Year Ended December 31, | ||||||||||||
| 2022 | 2021 | |||||||||||
Net income (as reported) | $ | 73 | $ | 47 | ||||||||
Adjustments to reconcile net income to EBITDA: | ||||||||||||
Interest expense, net | 125 | 60 | ||||||||||
Income tax provision | 20 | 32 | ||||||||||
Depreciation and amortization | 304 | 202 | ||||||||||
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EBITDA | $ | 522 | $ | 341 | ||||||||
Adjustments to reconcile EBITDA to adjusted EBITDA: |
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Contingent consideration and compensation | (a) | 9 | (7 | ) | ||||||||
Non-service pension benefit | (b) | (42 | ) | — | ||||||||
Inventory step-up | (c) | 9 | — | |||||||||
Business process transformation expenses | (d) | 22 | 35 | |||||||||
Acquisition expenses | (e) | 26 | 26 | |||||||||
Recent acquisition transition expenses | (f) | 95 | — | |||||||||
Integration and reorganization expenses | (g) | 9 | — | |||||||||
Restructuring costs | (h) | 30 | — | |||||||||
(Gain) loss on extinguishment of debt, net | (i) | (5 | ) | 9 | ||||||||
Divested businesses | (j) | — | (1 | ) | ||||||||
COVID-19 relief at international subsidiaries, net | (k) | (2 | ) | (2 | ) | |||||||
Corporate executive reorganization | (l) | — | 6 | |||||||||
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Adjusted EBITDA | $ | 673 | $ | 407 | ||||||||
Notes:
| (a) | Adjustment to reflect the elimination of the expense, or reversal of previously recorded expense, attributable to deferred consideration to prior owners of acquired businesses not expected to continue or recur. |
| (b) | Adjustment to reflect the elimination of non-service pension benefit, which consists of interest cost, expected return on plan assets and amortization of actuarial gains/losses of the pension programs assumed as part of the Chubb acquisition. |
| (c) | Adjustment to reflect the elimination of costs related to the fair value step-up of acquired inventory. |
| (d) | Adjustment to reflect the elimination of non-operational costs related to business process transformation, including system and process development costs and implementation of processes and compliance programs related to the Sarbanes-Oxley Act of 2002. |
| (e) | Adjustment to reflect the elimination of potential and completed acquisition-related expenses. |
| (f) | Adjustment to reflect the elimination of expenses associated with the transition of newly acquired businesses from prior ownership into APi Group. |
| (g) | Adjustment to reflect the elimination of expenses related to the integration and reorganization of newly acquired businesses. |
| (h) | Adjustment to reflect the elimination of expenses associated with restructuring programs. |
| (i) | Adjustment to reflect the elimination of (gain)/loss on extinguishment of debt resulting from early repayments and repurchases of long-term debt. |
| (j) | Adjustment to reflect the elimination of amounts related to businesses divested and classified as held-for-sale, inclusive of impairment charges and gain/(loss) on sale. |
| (k) | Adjustment to reflect the elimination of miscellaneous income in international subsidiaries related to COVID-19 relief, net of severance costs. |
| (l) | Adjustment to reflect the elimination of costs related to non-recurring severance related costs resulting from corporate leadership changes. |
| | 2023 PROXY STATEMENT | A-1 | ||||||||||||||||||||||||||||||||
Global Reach of Our Workforce
We build lasting success at APi Group on a foundation of leadership, dedication to growth and a vision for excellence.
We are a global, market-leading business services provider of safety services and specialty services.
We provide statutorily-mandated and other contracted services to a strong base of long-standing customers across industries.
We have a winning leadership culture driven by an entrepreneurial environment that delivers innovative solutions for our customers.
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Plan for Excellence
When customers choose APi Group companies, they choose a legacy of trust and experience. | ||
Safety Services Life Safety HVAC Services Security Monitoring | Specialty Services Infrastructure / Utility Specialty Contracting Fabrication Transmission Civil | |
API GROUP CORPORATION ATTN: LOUIS B. LAMBERT 1100 OLD HIGHWAY 8 NW NEW BRIGHTON, MN 55112-6447
SCAN TO
VIEW MATERIALS & VOTE
VOTING DEADLINES
For Participants in the APi Group, Inc. Employee Stock Ownership Plan:
You must vote these shares no later than 10:59 p.m. Central on June 6, 2023.
For Participants in (1) the APi Group 401(k) & Profit Sharing Plan and/or (2) the APi Group Safe Harbor 401(k) & Profit Sharing Plan:
You must vote these shares no later than 10:59 p.m. Central on June 12, 2023.
For Participants in the Vipond Inc. Employees’ Profit Sharing Plan:
You must vote these shares no later than 10:59 p.m. Central on June 14, 2023.
VOTING OPTIONS Vote By Internet
Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above
Use the Internet to transmit your voting instructions and for electronic delivery of information. 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/APG2023
You may attend the meeting via the Internet and, except as noted in the proxy statement for the meeting, 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. 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.
Your vote must be received by the voting deadlines above.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
V16751-P83189-Z83954-Z83955 KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
API GROUP CORPORATION
The Board of Directors recommends you vote FOR the following proposals:
1. To elect ten directors for a one-year term expiring at the 2024 Annual Meeting of Shareholders:
Nominees: For Against Abstain
1a. Sir Martin E. Franklin For Against Abstain
2. To ratify the appointment of KPMG LLP as our
1b. James E. Lillie independent registered public accounting firm for the 2023 fiscal year.
1c. Ian G.H. Ashken 3. To approve, on an advisory basis, the compensation of our named executive officers.
1d. Russell A. Becker 1e. David S. Blitzer 1f. Paula D. Loop 1g. Anthony E. Malkin 1h. Thomas V. Milroy 1i. Cyrus D. Walker 1j. Carrie A. Wheeler
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com
V16752-P83189-Z83954-Z83955
Notice of 2023 Annual Meeting of Shareholders
Proxy Solicited by Board of Directors for Annual Meeting — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —June 15, 2023
Non-Plan Shareholders
Russell A. Becker, Kevin S. Krumm and Louis B. Lambert, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of APi Group Corporation to be held on June 15, 2023 at 8:30 a.m. Central or at any postponement or adjournment thereof.
Shares represented by this proxy will be voted as directed by the shareholder. If no such directions are indicated, the Proxies will have authority to vote “FOR” the director nominees in Proposal 1 and “FOR” Proposals 2 and 3.
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. Participants in Employee Benefit Plans
The undersigned participant in one or more of the Plans below hereby directs the Trustee for the applicable Plan(s) to vote all shares of Common Stock of APi Group Corporation allocated to the undersigned’s account under the Plan(s) at the 2023 Annual Meeting of Shareholders to be held on June 15, 2023 and at any adjournment thereof, upon such business as may properly come before the meeting, including the proposals described in the Proxy Statement, a copy of which has been received by the undersigned, and on matters incidental to the conduct of the meeting.
For Participants in the APi Group, Inc. Employee Stock Ownership Plan
You must vote these shares no later than 10:59 p.m. Central on June 6, 2023
For Participants in (1) the APi Group 401(k) & Profit Sharing Plan and/or (2) the APi Group Safe Harbor 401(k) & Profit Sharing Plan
You must vote these shares no later than 10:59 p.m. Central on June 12, 2023
For Participants in the Vipond Inc. Employees’ Profit Sharing Plan
You must vote these shares no later than 10:59 p.m. Central on June 14, 2023
Continued and to be signed on reverse side
D84519-P69213-Z82041-Z82042
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