UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☒ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material |
inTEST Corporation
(Name of Registrant as Specified In Its Charter)
____________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ | No fee required. | |
|
| |
☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: |
☐ | Fee paid previously with preliminary materials. | |
☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |
| (1) | Amount Previously Paid: |
| (2) | Form, Schedule or Registration Statement No.: |
| (3) | Filing Party: |
| (4) | Date Filed: |
inTEST CORPORATION
804 East Gate Drive, Suite 200
Mt. Laurel, New Jersey 08054
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS | ||
NOTICE IS HEREBY GIVEN that the 20182020 Annual Meeting of Stockholders of inTEST Corporation will be held in our offices located at 804 East Gate Drive, Suite 200, Mt. Laurel, New Jersey,Jersey*, on Wednesday, June 27, 2018,24, 2020, at 11:00 A.M. Eastern Daylight Time, to consider and vote on the following matters described in the accompanying Proxy Statement:
1. |
| |
|
| |
| Ratification of the selection of RSM US LLP as our independent registered public accounting firm for the year ending December 31, | |
3. | Approval, on an advisory basis, of the compensation of our named executive officers; and | |
4. | Such other business as may properly be brought before the meeting or any adjournment thereof. |
The Board of Directors has fixed May 8, 2018,April 27, 2020, at the close of business, as the record date for the determination of stockholders entitled to notice of, and to vote at, the meeting.
April
* We are actively monitoring the public health and travel concerns relating to the coronavirus (COVID-19) pandemic and the related recommendations and protocols issued by federal, state and local governments. In the event that it is not possible or advisable to hold the 2020 Annual Meeting of Stockholders at the time, date orplace as originally planned, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication or adjourning or postponing the meeting. Any such change, including details on how to participate in a remote meeting, would be announced in advance via press release, a copy of which would be filed with the Securities and Exchange Commission as additional proxy solicitation materials and posted on our website at http://ir.intest.com/annual-meeting-materials. If you are planning to attend the 2020 Annual Meeting of Stockholders, please check our website prior to the meeting date.
YOUR VOTE IS IMPORTANT Whether or not you plan to attend the meeting, please complete, date, sign and mail your proxy card promptly in order that the necessary quorum may be represented at the meeting. If your shares are held in a brokerage account or by another nominee record holder, please be sure to mark your voting choices on the voting instruction card that accompanies this proxy statement. If you fail to specify your voting instructions for the election of directors or for Proposal 3, your shares will not be voted
804 East Gate Drive, Suite 200
ANNUAL MEETING OF STOCKHOLDERS
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON WEDNESDAY, JUNE
This proxy statement and the enclosed proxy card are intended to be sent or given to stockholders of inTEST Corporation (“inTEST”, “Company”, “we”, “us” or “our”) on or about May We are actively monitoring the public health and travel concerns relating to the COVID-19 pandemic and the related recommendations and protocols issued by federal, state and local governments. In the event that it is not possible or advisable to hold the Annual Meeting at the time, date or place as originally planned, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication or adjourning or postponing the meeting. Any such change, including details on how to participate in a remote meeting, would be announced in advance via press release, a copy of which would be filed with the Securities and Exchange Commission as additional proxy solicitation materials and posted on our website at http://ir.intest.com/annual-meeting-materials. If you are planning to attend the Annual Meeting, please check our website prior to the meeting date. QUESTIONS AND ANSWERS ABOUT THE 2020 ANNUAL MEETING OF STOCKHOLDERS
The following questions and answers present important information pertaining to the meeting:
2
|
Q: | How does the Board of Directors recommend that I vote on each of the proposals? |
A: | The Board recommends a vote "FOR" each of the director nominees and “FOR” |
|
|
Q: | How do I vote my shares? |
A: | The answer depends on whether you own your inTEST shares directly (that is, you hold stock certificates or your shares are registered directly in your name with our transfer agent) or if your shares are held in a brokerage account or by another nominee holder. |
| If you own inTEST shares directly (i.e. you are the registered stockholder): your proxy is being solicited directly by us, and you can vote by |
| If you vote by |
|
|
| If you vote by telephone or |
|
|
| If you hold your inTEST shares through a broker, bank or other nominee: you will receive a voting instruction card directly from your broker, bank or other nominee describing how to vote your shares. If you receive a voting instruction card, you can vote by completing and returning the voting instruction card. If you fail to specify your voting instructions for the election of directors or |
|
|
| If you hold your inTEST shares through a nominee and want to vote at the meeting: you must obtain a "legal proxy" from the nominee recordholder authorizing you to vote at the meeting. |
|
|
Q: | What if I want to change my vote or revoke my proxy? |
A: | If you are a registered stockholder, you may change your vote or revoke your proxy at any time before the meeting by (i) notifying our corporate Secretary, Hugh T. Regan, Jr., in writing, that you revoke your proxy, (ii) voting in person at the meeting, or (iii) submitting a new proxy card. You may contact our Transfer Agent, Computershare Investor Services, at (800) |
|
|
Q: | What is a quorum? |
A: | The presence at the meeting (in person or by proxy) of a majority of the shares entitled to vote at the meeting constitutes a quorum. A quorum must be present in order to convene the meeting. Both abstentions and broker non-votes (described below) are counted as present for determining the presence of quorum. |
|
|
Q: | How will directors be elected? |
A: | A plurality of the votes cast at the meeting is required for the election of directors. This means that the director nominee with the most votes for a particular director seat is elected to that seat. |
|
|
|
|
Q: | How will the outcome of the proposal to ratify the selection of our independent registered public accounting firm be determined? |
A: | To ratify the selection of the independent registered public accounting firm, a majority of the shares of stock that are present in person or by proxy and entitled to vote at the meeting must be voted in favor of the ratification. |
Q: | What vote is required to approve, on an advisory basis, the compensation of our named executive officers? |
A: | To approve the compensation of our named executive officers, a majority of the shares of stock that are present in person or by proxy and entitled to vote at the meeting must be voted in favor of the proposal. The results of this stockholder vote are non-binding. |
|
|
Q: | What is the effect if I fail to give voting instructions to my broker or other nominee? |
A: | If your shares are held by a broker or other nominee, you must provide your broker or nominee with instructions on how to vote your shares for the |
Q: | What is the effect if I withhold or abstain my vote? |
A: | Withheld votes will have no effect on the outcome of the election of directors. An abstention will have the effect of a "no" vote with respect to the |
|
|
Q: | Do the directors and officers of inTEST have an interest in the outcome of the matters to be voted on? |
A: | Our directors and officers will not receive any special benefit as a result of the outcome of the matters to be voted on, except that our non-employee directors will receive compensation for |
|
|
Q: | How many shares do the directors and officers of inTEST beneficially own, and how do they plan to vote their shares? |
A: | Directors and executive officers, who, as of April |
|
|
Q: | Who will count the votes? |
A: | Our transfer agent will count the votes cast by proxy. The Assistant Secretary of inTEST will count the votes cast in person at the meeting and will serve as the Inspector of Election. |
|
|
Q: | Who can attend the meeting? |
A: | All stockholders are invited to attend the meeting. |
|
|
Q: | Are there any expenses associated with collecting the stockholder votes? |
A: | We will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and other materials to our stockholders. We do not anticipate hiring an agency to solicit votes from stockholders at this time; however, if we determine that such action would be appropriate or necessary, we would pay the cost of such service. Officers and other employees of inTEST may solicit proxies in person or by telephone but will receive no special compensation for doing so. |
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to us regarding the beneficial ownership of our common stock as of April 25, 201827, 2020 (except where otherwise noted) by:
● | each of our named executive officers (as that term is defined later in this proxy statement under the heading "Executive Compensation"); | |
● | each of our |
● | all directors and executive officers as a group; and |
● | each stockholder known by inTEST to own beneficially more than 5% of our common stock. |
Percentage ownership in the following table is based on 10,473,55810,416,983 shares of common stock outstanding as of April 25, 2018.27, 2020.
We have determined beneficial ownership in the table in accordance with the rules of the Securities and Exchange Commission ("SEC"). In computing the number of shares beneficially owned by any person or group or persons and the percentage ownership of that person or group, shares of common stock subject to options held by such person or group or persons that are currently exercisable, or will become exercisable by June 24, 2018,26, 2020, are deemed to be beneficially owned by such person and outstanding for the calculation of such person's percentage ownership and for the percentage beneficially owned by all directors and executive officers as a group. However, we have not deemed these shares to be outstanding for computing the percentage ownership of any other person. To our knowledge, except as set forth in the footnotes following the table, each stockholder identified in the table possesses sole voting and investment power with respect to all shares of common stock shown as beneficially owned by such stockholder. Except as set forth in the footnotes following the table, the address of the beneficial owners is c/o inTEST Corporation, 804 East Gate Drive, Suite 200 Mt. Laurel, New Jersey 08054.
|
| Percent | ||||||
Directors and Named Executive Officers: | ||||||||
Robert E. Matthiessen (3) | 96,281 | * | ||||||
Steven J. Abrams, Esq. (4) | 33,000 | * | ||||||
Joseph W. Dews IV (5) | 33,000 | * | ||||||
William Kraut (6) | 33,000 | * | ||||||
James Pelrin (7) | 112,105 | 1.1 | % | |||||
Hugh T. Regan, Jr. (8) | 95,900 | * | ||||||
All directors and executive officers as a group (6 individuals) (9) | 403,286 | 3.8 | % | |||||
Five-Percent Stockholders: | ||||||||
Thomas A. Satterfield, Jr. (10) | 791,600 | 7.6 | % | |||||
Renaissance Technologies LLC (11) | 780,500 | 7.5 | % | |||||
Nokomis Capital, LLC (12) | 591,351 | 5.6 | % |
|
|
|
|
|
| Percent |
| |||
Directors, Director Nominee and Named Executive Officers: |
|
|
|
|
|
|
|
| |
Steven J. Abrams, Esq. (3) |
|
| 51,000 |
|
|
| * |
| |
Jeffrey A. Beck (4) | 22,500 | * |
| ||||||
Joseph W. Dews IV (5) |
|
| 51,000 |
|
|
| * |
| |
William Kraut (6) |
|
| 49,200 |
|
|
| * |
| |
Gerald J. Maginnis | - | - | |||||||
James Pelrin (7) |
|
| 245,449 |
|
|
| 2.3 | % | |
Hugh T. Regan, Jr. (8) |
|
| 158,350 |
|
|
| 1.5 | % | |
All directors and executive officers as a group (6 individuals) (9) |
|
| 577,499 |
|
|
| 5.5 | % | |
|
|
|
|
|
|
|
|
| |
Principal Stockholders: |
|
|
|
|
|
|
|
| |
Thomas A. Satterfield, Jr. (10) |
|
| 1,038,200 |
|
|
| 10.0 | % | |
Nokomis Capital, LLC (11) | 964,924 | 9.3 | % | ||||||
Renaissance Technologies LLC (12) |
|
| 812,721 |
|
|
| 7.8 | % | |
Dimensional Fund Advisors LP (13) | 640,151 | 6.1 | % | ||||||
BlackRock, Inc. (14) |
|
| 558,997 |
|
|
| 5.4 | % |
* Denotes less than one percent of class.
(1) | Includes unvested shares of restricted stock ("Restricted Shares"). Until such shares are vested, the beneficial owner does not have investment power over the | ||
|
| ||
(2) | Includes shares that may be acquired within sixty days after April | ||
| Includes | ||
| Includes | ||
|
| ||
(5) | Includes | ||
|
| ||
(6) | Includes | ||
|
| ||
(7) | Includes | ||
|
| ||
(8) | Includes | ||
|
| ||
(9) | Includes | ||
(10) | According to a Schedule 13G/A filed with the SEC on |
(11) | According to a Schedule 13G/A filed with the SEC on February 14, |
(12) | According to a Schedule 13G/A filed with the SEC on February 13, 2020, as of December 31, 2019, Renaissance Technologies LLC ("RTC"), a Delaware limited liability company and Renaissance Technologies Holdings Corporation ("RTHC"), a Delaware corporation and the majority owner of RTC, reported they were the beneficial owners of |
(13) | According to a Schedule 13G/A filed with the SEC on February 12, 2020, as of December 31, 2019, Dimensional Fund Advisors LP (“DFA”), a Delaware limited partnership, reported they were the beneficial owners of 640,151 shares of inTEST common stock. DFA, an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). In certain cases, subsidiaries of DFA may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager, DFA or its subsidiaries (collectively, “Dimensional”) may possess voting and/or investment power over the securities of the Issuer that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Issuer held by the Funds. However, all securities reported in this schedule are owned by the Funds. Dimensional disclaims beneficial ownership of such securities. Of the total shares reported as beneficially owned, DFA reported having the sole voting power over 611,801 shares and the sole dispositive power over all 640,151 shares. The principal business office of DFA is Building One, 6300 Bee Cave Road, Austin, TX 78746. |
(1 | According to a Schedule 13G/A filed with the SEC on |
PROPOSAL 1: ELECTION OF DIRECTORS
Our bylaws provide that our Board of Directors shall consist of not less than five directors, as determined by the Board of Directors, and that each director shall hold office until the next Annual Meeting of Stockholders and until a successor shall be duly elected and qualified, or until his earlier resignation, retirement or removal. The number of directors that presently constitute the entire Board is five.
Listed below are the five nominees for director. The persons designated as proxies in the accompanying proxy card intend to vote "FOR" each such nominee, unless a contrary instruction is indicated on the proxy card. If for any reason any such nominee should become unavailable for election, the persons designated as proxies in the proxy card may vote the proxy for the election of another person nominated as a substitute by the Board of Directors, if any person is so nominated. We have no reason to believe that any of the nominees will be unable or unwilling to serve if elected, and all nominees have expressed their intention to serve the entire term for which election is sought.
Recommendation of the Board
The Board of Directors recommends a vote "FOR" the election of each of the nominees to the Board of Directors named below.
Nominees for Election
The names of the persons nominated for election each of whom presently serves as a director, are listed below, together with their ages and certain other information regarding the nominees.
Nominee | Age | Position |
|
|
|
Steven J. Abrams, |
| Director |
Jeffrey A. Beck | 57 | Director |
Joseph W. Dews IV |
| Director |
|
| Director Nominee |
James Pelrin |
| President, Chief Executive Officer and Director |
Biographical and Other Information Regarding inTEST's DirectorsDirector Nominees
Biographical information regarding the business experience of each of our directorsnominees and the primary aspects of each of our directors'nominees' experience, qualifications, attributes or skills that led to the conclusion that each of our directorsnominees should serve on our Board of Directors is set forth below.
Robert E. Matthiessen was elected as Chairman effective January 1, 2018. He served as our Executive Chairman from May 2017, Chief Executive Officer from August 1998 and as our President from February 1997, in each case until his retirement on December 31, 2017. Mr. Matthiessen also served as our Chief Operating Officer from December 1997 to August 1998. Prior to that, Mr. Matthiessen served as our Executive Vice President after joining us in October 1984. Mr. Matthiessen has served as a director since February 1997. Among other attributes, skills, experiences and qualifications, the Board believes that Mr. Matthiessen's education and experience in the fields of mechanical and electrical engineering, his experience in the ATE industry throughout his over 40 year career and his extensive network of contacts and relationships in this industry, in addition to his over 30 years of experience at inTEST, are the attributes, skills, experiences and qualifications make valuable contributions as one of our directors.
Steven J. Abrams, Esq. was elected to serve as a director on January 8, 2013. In April 2016, Mr. Abrams joined Hogan Lovells US LLP as a partner. Prior to this, Mr. Abrams was a partner at Pepper Hamilton LLP for over 20 years where he was co-chair of the Corporate Securities and Life Sciences practice groups and a member of the Executive Committee. Mr. Abrams concentrates his legal practice on securities and merger and acquisition transactions. Mr. Abrams also counsels clients on governance, disclosure and transactional matters. Among other attributes, skills, experiences and qualifications, the Board believes that Mr. Abrams' over 20 years of experience as a corporate and securities attorney providing counsel to corporations and other business entities regarding governance, disclosure and transactional matters allows Mr. Abrams to make a valuable contribution as one of our directors.
Jeffrey A. Beck was elected to serve as a director on June 19, 2019. Since May 2018, Mr. Beck has been an operating advisor with Artemis Capital Partners, a lower middle market private equity firm specializing in industrial technology sectors. From October 2015 to April 2018, he was President and Chief Executive Officer of Astrodyne TDI Corporation, a private equity-owned manufacturer of high performance power supplies and systems utilized in semiconductor, aerospace, and medical markets. From March 2014 to October 2015, he was Chief Executive Officer of Presstek LLC, a manufacturer of digital offset presses, waterless printing plates, CTP hardware, and various plates for commercial applications. Mr. Beck also served as Chief Operating Officer of iRobot Corporation from March 2009 to December 2013. In addition, Mr. Beck was Senior Vice President/General Manager at AMETEK, Inc. from March 2004 to March 2009. Since March 2017, Mr. Beck has served on the board of directors, including the audit committee and compensation committee, of Soft Robotics, Inc., a venture capital-funded business focused on factory automation segments. He previously served on the board of directors, including the audit committee and nominating and governance committee, of SunEdison Semiconductor Limited, a leading manufacturer of semiconductor wafers. The Board believes that Mr. Beck’s extensive experience building and leading industrial technology and automation businesses allows him to make valuable contributions as one of our directors. Moreover, his prior public company board experience, which includes serving on the audit as well as nominating and governance committees, adds valuable perspective to critical board discussions, decisions and governance topics.
Joseph W. Dews IV was elected to serve as a director on April 10, 2014. Mr. Dews has been a partnerManaging Director at AGC Partners,Craig-Hallum Capital Group, an advisory-only technology investment bank, since July 2012.May 2019. Prior to that, Mr. Dews was a Partner at AGC Partners from July 2012 until May 2019, and held various positions, including Managing Director and partner,Partner, at ThinkEquity LLC from May 2007 to July 2012, and held various positions, including Managing Director and principal, at Needham & Company from February 2001 to May 2007, both technology investment banks. Mr. Dews has acted as a strategic and financial advisor to numerous public and private technology companies in the U.S. and internationally, including assessing corporate strategies and evaluating options for fund raising, share repurchases and acquisitions of businesses. In addition to his experience as an investment banker, Mr. Dews has a technical background including a Bachelor of Science in Applied & Engineering Physics from Cornell University and approximately two years of experience in the semiconductor industry working as a Field Applications Engineer for Cirrus Logic KK. Among other attributes, skills, experiences and qualifications, the Board believes that Mr. Dews' over 20 years of experience as an investment banker and his familiarity with the semiconductor industryand industrial technology businesses uniquely positions him to contribute strategic insight, acquisition knowledge, and other valuable contributions as one of our directors.
William KrautGerald J. (Jerry) Maginnis was elected to serveis a nominee for director at the Annual Meeting. Since October 2015, Mr. Maginnis has served as a directormember of the Board of Directors of the Funds comprising the Cohen & Steers Mutual Fund Complex (the “Complex”). Since January 2019, he has served as the Chair of the Audit Committee of the 20 Funds within the Complex, including 8 closed-end Funds which are publicly traded on January 8, 2013.the New York Stock Exchange. From 2006 through his retirement in 2015, Mr. KrautMaginnis served as the Managing Partner of the KPMG LLP’s (“KPMG”) Philadelphia Office. From 2002 until 2008, Mr. Maginnis served as the Partner in Charge of KPMG’s Pennsylvania Business Unit Audit Practice, which included the Firm’s offices in Philadelphia, Pittsburgh and Harrisburg. Prior to 2002, Mr. Maginnis was an audit partner with EisnerAmper LLP until he retiredat KPMG who concentrated on serving clients in August 2011.the Information, Communications and Entertainment industries. From December 1980 until July 2010 he was partner in charge2014 to 2015, Mr. Maginnis served as the President of the audit practice, for both public and non-public companies,Pennsylvania Institute of Certified Public Accountants (“PICPA”), a State CPA Society. He currently serves as well as partner in charge of quality control functions within the firm of Amper, Politziner & Mattia LLP until it combined with Eisner LLP to form EisnerAmper LLP in July 2010. From December 2011 through December 2017, Mr. Kraut has been a partner of Newport Board Group LLC which provides strategic advisory and risk management consulting services to companies in various industries. Among other attributes, skills, experiences and qualifications, the Board believes that Mr. Kraut's accounting experienceChair of the PICPA Foundation. From 2014 to 2017, he served as a certified public accountantmember of the Council of the American Institute of Certified Public Accountants (“AICPA”). From 2015 through March 2020, Mr. Maginnis was a member of the Board of Trustees of the AICPA Foundation where he served as Treasurer from 2018-2020. Mr. Maginnis has also served as a member of the Advisory Board of the Raj and Kamla Gupta Governance Institute at a national accounting firm, including 30 yearsDrexel University since 2010. And, since 2016, he serves as an Executive in Residence at Rowan University and the Chair of the University’s Accounting Advisory Board. Mr. Maginnis holds a BS from Saint Joseph’s University and is a Certified Public Accountant. The Board believes Mr. Maginnis’ considerable audit, partner, giveaccounting and leadership experience will enable him insight into corporate finance trends and practices and in-depth understanding and familiarity with generally accepted accounting principles and internal control procedures. In 2014, Mr. Kraut was designated a Board Governance Fellow by the National Association of Corporate Directors (the "NACD"). In February 2017, Mr. Kraut became cybersecurity certified by the NACD and Carnegie Mellon University. These attributes, skills, experiences and qualifications allows Mr. Kraut to make a valuable contributioncontributions as one of our directors and as the Chairman of our Audit Committee.Committee following the Annual Meeting.
James Pelrin was elected as President and Chief Executive Officer of the Company effective January 1, 2018 and as a director inon May 16, 2017. He served as our Chief Operating Officer from May 2017 and as our Executive Vice President from November 2015, in each case until December 2017. Prior to that, Mr. Pelrin served as Vice President from August 2006 until November 2017 and as General Manager - Thermal Products Segment from November 2004 until May 2017. In addition, Mr. Pelrin has served as President of our subsidiary, Temptronic Corporation, since December 2008. Prior to that, Mr. Pelrin served as the General Manager of Temptronic Corporation since joining us in October 2001. From July 1999 to June 2001, Mr. Pelrin served as Vice President and General Manager of Accusonic Technologies, Inc., a privately held company that designs and manufactures hydro-acoustic measurement systems. In additionPrior to his 16 years working for inTEST in the automated test equipment (“ATE”) and thermal solutions industries, Mr. Pelrin held senior management positions in a variety of high techhigh-tech electronic industries around the globe including the U.K., Canada and Mexico. Among other attributes, skills, experiences and qualifications, the Board believes that Mr. Pelrin’s education and experience in international business management throughout his over 40 year career, breadth of knowledge of inTEST’s products, operations and markets, and his in depth knowledge of a variety of technically sophisticated industries will enable him to help guide and execute corporate strategies and make valuable contributions as one of our directors.
Director Independence
Our Board of Directors has determined that each of the current directors and those who served as such in 2019 as well as our new director nominee, Mr. Maginnis, meets the independence requirements of the NYSE American Listing Rules (the "NYSE American Rules"), with the exception of Mr. Matthiessen and Mr. Pelrin, our former and our current President and Chief Executive Officer, respectively.and Mr. Robert E. Matthiessen, our former President and Chief Executive Officer, who served as a director in 2019. In making the foregoing determination, with respect to our independent directors, the Board did not identify any matters, transactions, relationships or arrangements that needed to be considered in determining independence of these directors.such persons.
Board Leadership Structure
As stated in the Company’s Guidelines on Significant Corporate Governance Issues,Guidelines, which can be found on the Company’s website at www.intest.com, the Board believes that it is in the best interests of the Company for the Board to make a determination regarding whether or not to separate the roles of ChairmanChairperson of the Board and President and Chief Executive Officer based upon the circumstances. Currently,As of the date of this proxy statement, the offices of Chairman and President and Chief Executive Officer are held by two separate individuals, Robert E. Matthiessen, former President and Chief Executive Officer of the Company,individuals. Joseph W. Dews IV, an independent director, serves as the ChairmanChairperson of the Board, and James Pelrin serves as the President and Chief Executive Officer of the Company. We believe thisThe Board believes the separation of the roles is the most appropriate structure at this time as it allows our Chairmanthe Company’s Chairperson to lead the Board’s responsibilities for reviewing, approving and monitoring fundamental financial and business strategies whileallowing the President and Chief Executive Officer has primaryto focus primarily on establishing and implementing the Company’s strategic plan and on day-to-day operations.
Because the Chairman is the former President and Chief Executive Officer, the Board has designated an independent director as the Lead Independent Director. Our Lead Independent Director is William Kraut. As Lead Independent Director, he is responsible for calling and chairing meetings of the independent directors, acting as a liaison between the independent directors and the Chairman of the Board and performing various other duties. The general responsibilities of the Lead Independent Director are set forth in a written charter adopted by the Board and posted on our website: www.intest.com.
Risk Oversight
Management is responsible for the day-to-day management of risks that we face, while the Board of Directors, as a whole and through its Committees, has responsibility for the oversight of risk management. Management attends regular Board and Committee meetings and discusses with the Board or appropriate Committees the various risks confronting inTEST, including the operational, legal, market and competitive risks that we face. In addition, the Audit Committee regularly considers major financial risk exposures and the steps management has taken to monitor and control such exposures.risks. The Audit Committee also provides oversight of the Risk and Information Security Committee, formerly named the Cyber Security Committee, which is composed of the Chair of the Audit Committee and senior members of management and which, among other responsibilities, monitors and reviews (i) the Company’s IT internal controls to protect the Company’s information and proprietary assets, (ii) the Company’s IT risk tolerances, and (iii) compliance with international, federal, state, and local information security requirements. The Compensation Committee provides oversight of risks related to our compensation policies and practices. The Nominating and Corporate Governance Committee oversees risks associated with our corporate governance practices and the independence of directors. The Audit Committee also provides oversight of the Cyber Security Committee, which is composed of the Chair of the Audit Committee and senior members of management and which monitors cyber security risks.
Transactions with Related Persons
We have not entered into any transactions with a related person since January 1, 2017,2018, nor are we otherwise a participant in a current transaction, and no transaction is currently proposed, in which the amount of the transaction exceeds the lesser of $120,000 or 1% of the average of the Company’s total assets at year end for the last two completed fiscal years and in which a related person had or will have a direct or indirect material interest. For purposes of this paragraph, a related person includes any executive officer, director or nominee for director, any greater than 5% beneficial owner of our common stock, and any immediate family or household member of any of the foregoing.
CORPORATE GOVERNANCE
CommitteesCommittees of the Board of Directors
In 2017,Currently, our Board of Directors had fourhas three standing Committees: Executive, Audit, Compensation and Nominating and Corporate Governance. In 2018, the Executive Committee was eliminated. Copies of the charters of each of the current committees are posted on our website: www.intest.com.
The Executive Committee was appointed by the Board of Directors to exercise all powers and authority of the Board of Directors in the management of our business and affairs during intervals between meetings of the Board of Directors, and to provide oversight of, and make recommendations to, the Board of Directors regarding corporate initiatives and strategies. During 2017, the members of the Committee were Alyn R. Holt (Chairman), who passed away in May 2017, Robert E. Matthiessen, Steven J. Abrams, and Joseph W. Dews IV. The Committee held no meetings in 2017.
The Audit Committee is appointed by the Board of Directors to assist the Board of Directors in fulfilling its oversight responsibilities with respect to ourthe Company’s financial management and controls. The Audit Committee's primary oversight responsibilities relate to the integrity of our accounting and financial reporting processes, audits of our financial statements, and systems of internal control over financial reporting and accounting matters, and the independence, qualifications, retention, and performance of our independent registered public accounting firm. During 2017,2019, the members of the Audit Committee until June 19, 2019 were William Kraut (Chairman)(Chairperson), Steven J. Abrams and Joseph W. Dews IV. Following his election to the Board on June 19, 2019, Jeffrey A. Beck replaced Mr. Dews as a member of the Audit Committee. Since Mr. Kraut will not stand for reelection at the Annual Meeting, the nominee for director, Mr. Maginnis, upon election would be added to the Audit Committee and become its Chairperson. The Board of Directors has determined that Mr.both Messrs. Kraut meetsand Maginnis meet the criteria of an "audit committee financial expert" as that term is defined in Item 401 of Regulation S-K. The Board of Directors has also determined that each of the members of the Audit Committee is independent within the meaning of the NYSE American Rules. The Audit Committee held teneleven meetings during 2017.2019.
The Compensation Committee is appointed by the Board of Directors to review, evaluate, and approve the compensation and benefit programs of our executive officers, to administer our equity based compensation plans, and to review and recommend to the Board of Directors changes to our director compensation.compensation and to review the annual disclosures regarding the compensation of the Company’s executive officers to be included in inTEST’s annual proxy statement and Annual Report on Form 10-K. During 2017,2019, the members of the Compensation Committee until June 19, 2019 were Joseph W. Dews IV (Chairman)(Chairperson), Steven J. Abrams and William Kraut. Following his election to the Board on June 19, 2019, Jeffrey A. Beck replaced Mr. Kraut as a member of the Compensation Committee. The Board of Directors has determined that each of the members of the Compensation Committee is independent within the meaning of the NYSE American Rules, including the stricter requirements of Section 803 of the NYSE American Company Guide, which are not applicable to smaller reporting companies, but which we have adopted as the standard of independence for this Committee. The Compensation Committee held six meetings during 2017.2019.
The Nominating and Corporate Governance Committee is appointed by the Board of Directors to select the director nominees to be presented for election at future annual meetings of stockholders, and to review and assess our corporate governance procedures.procedures and to oversee annual evaluations of the Board and director self-assessments. During 2017,2019, the members of the Nominating and Corporate Governance Committee were Steven J. Abrams (Chairman)(Chairperson), William Kraut, and Joseph W. Dews IV. The Board of Directors has determined that each of the members of the Nominating and Corporate Governance Committee is independent within the meaning of the NYSE American Rules. See "Nominating Procedures" for information regarding the process for identifying and evaluating nominees, procedures for stockholder nominations and director qualifications. The Nominating and Corporate Governance Committee held one meeting during 2017.2019.
Board Meetings
During the year ended December 31, 2017,2019, the Board of Directors held a total of thirteenseventeen meetings. Each of our directors attended at least 75% of the aggregate number of meetings of the Board and meetings of any committee of which he was a member, which were held during the time in which he was a director or a committee member, as applicable.
All members of the Board of Directors are encouraged, but not required, to attend our annual meeting of stockholders, and may do so in person or by phone. All of our directors attended the 20172019 Annual Meeting of Stockholders held on June 28, 2017.19, 2019 in person or by phone.
Director Stock Ownership Guidelines
On January 14, 2019, the Board approved stock ownership guidelines (the “Ownership Guidelines”) for non-employee directors. The ownership target under the Ownership Guidelines for each non-employee director is five times the annual cash retainer for non-employee directors. Non-employee directors have five years to achieve the ownership target from the later of the date on which the Ownership Guidelines were approved or a director joined the Board. Sales of the Company’s stock by non-employee directors are allowed only after each director reaches his ownership target. Such sales of the Company’s stock are allowed, however, prior to the achievement of the ownership target for the purpose of covering taxes due on vesting restricted stock awards and pursuant to any existing trading plans. Each of our non-employee directors as of December 31, 2019 was in compliance with the Ownership Guidelines, except for Mr. Beck, who is within the five-year phase-in period.
Employee, Officer and Director Hedging
The Board believes it is improper and inappropriate for any director, officer or other employee to engage in short-term or speculative transactions involving inTEST’s securities. As such, inTEST’s insider trading policy prohibits directors and employees, including executive officers, from engaging in any hedging or monetization transactions involving inTEST’s securities, purchases on margin or pledging of securities, short sales, buying or selling put or call options and (i) selling equity securities of the Company sooner than six months after last acquiring such equity securities or (ii) buying equity securities of the Company sooner than six months after last selling such equity securities.
Stockholder Communications with the Board of Directors
Stockholders who wish to communicate directly with the Board of Directors, or with a particular director, may send a letter addressed to our Secretary at 804 East Gate Drive, Suite 200, Mt. Laurel, NJ 08054. The mailing envelope must contain a clear notation indicating that the enclosed letter is a "Stockholder Board Communication" or "Stockholder Director Communication." All such letters must identify the author as a stockholder and clearly state whether the intended recipients are all members of the Board or just certain specified individual directors. The Secretary will make copies of all such letters and circulate them to the directors addressed. If a stockholder wishes the communication to be confidential, such stockholder must clearly indicate on the envelope that the communication is "confidential." The Secretary will then forward such communication, unopened, to the directors, or director, specified on the envelope, or if none, to the ChairmanChairperson of the Board of Directors.
Compensation Procedures
During 2017,2019, the Compensation Committee was comprised, and presently is comprised, solely of independent directors. Under Delaware state law, the Compensation Committee has the authority to delegate any or all of its powers and authority to one or more subcommittees, each subcommittee to consist of one or more members of the Compensation Committee. No such delegation of authority to a subcommittee has occurred. All decisions regarding the compensation of our executive officers are approved by the Compensation Committee.
As a general matter, changes to director compensation are periodically considered by the Compensation Committee and recommended to the Board of Directors for approval. Any change in the compensation of any director or any group of directors is approved by a majority of non-interested directors, and, if such recommendation applies to the compensation of all directors, by a majority of the independent directors in addition to a majority of the directors then in office.
In 2016,2018, the Compensation Committee directly retained Radford, a unit of Aon plc, as its independent compensation consultant to advise it regarding current best practices for executive and director compensation arrangements and to review and make recommendations regarding the amount, type and structure of compensation to be paid to the Company's executive officers and directors in 2017.2019. At the direction of the Compensation Committee, Radford compared the levels of compensation of the executive officers and directors to market based data available in the Radford Global Technology Survey for similarly-sized companies and provided the Compensation Committee with peer group data regarding compensation arrangements, plans, and amounts.
The Compensation Committee determined that Radford does not provide any material services to management or the Company, and that Radford does not have any business or personal relationship with any other member of the Compensation Committee or management or otherwise have any conflict of interest in performing this work.its services for the Compensation Committee.
Nominating Procedures
Generally, in order to identify and evaluate director nominees, our Nominating and Corporate Governance Committee (which is comprised solely of independent directors) assesses the qualifications, expertise, performance and willingness to serve of each current director.director or candidate. If as a result of such assessment, or at any other time during the year, the Board of Directors determines a need to add a new director with specific qualifications or to fill a vacancy on the Board, a search will be initiated utilizing appropriate staff support, input from other directors, senior management, and outside contacts, consideration of nominees previously submitted by stockholders, and, if deemed necessary or appropriate, retention of a search firm. An initial slate of candidates satisfying the specific qualifications, if any, and otherwise qualifying for membership on the Board, will be identified and reviewed by the Nominating and Corporate Governance Committee and the Board. The candidates will be prioritized and a determination made as to whether a member of the Nominating and Corporate Governance Committee, another director or member of senior management has a relationship with the preferred candidate and can initiate contacts. If not, contact may be initiated by athe Company or the search firm. The Chairman and one or more members of the Nominating and Corporate Governance Committee or the Board will interview theany prospective candidate.candidates. Evaluations and recommendations of the interviewers will be shared with all members of the Nominating and Corporate Governance Committee for final evaluation. The Nominating and Corporate Governance Committee will then meet to consider such recommendations and to determine which candidate (or candidates) to select. The Nominating and Corporate Governance Committee will evaluate all nominees for director, including nominees recommended by a stockholder, on the same basis.
Each of the incumbent nominees for director included in this proxy statement was selectedrecommended for re-election by the Nominating and Corporate Governance Committee. Mr. Maginnis, a first-time nominee, was initially identified by the Chief Financial Officer, and was then evaluated and considered by the Nominating and Corporate Governance Committee, which subsequently unanimously recommended him for election. The full Board of Directors, including the President and Chief Executive Officer, unanimously recommendapproved all of the nominees for election by the stockholders of the Company.
Pursuant to the Charter ofCompany, as recommended by the Nominating and Corporate Governance Committee, the Nominating and Corporate Governance Committee considers all candidates, including candidates submitted by stockholders on the same basis. Committee.
Stockholder recommendations with regard to director candidates may be submitted in writing to the Secretary of inTEST for consideration by the Nominating and Corporate Governance Committee. Each such recommendation should include the following information: (i) the name, age, business address and, if known, residence address of each nominee, (ii) the principal occupation or employment of each such nominee, (iii) the number of shares of common stock of inTEST which are beneficially owned by each such nominee, (iv) the qualifications of such nominee for service on the Board of Directors, (v) the name and residence address of the proposing stockholder(s), (vi) the number of shares of common stock owned by the proposing stockholder(s), and (vii) such other information as the stockholder making such recommendation believes would be relevant to the consideration of such candidate.
Director candidates must meet certain minimum qualifications, including being at least 21 years old and possessing (1) the ability to read and understand corporate financial statements, (2) relevant business experience and professional skills, (3) high moral character and personal and professional integrity, and (4) the willingness to commit sufficient time to attend to his or her duties and responsibilities as a director of a public corporation. In addition, the Nominating and Corporate Governance Committee may consider a variety of other qualities and skills, including (i) expertise in finance, economics, technology or markets related to the business in which inTEST and its subsidiaries may engage, (ii) the ability to exercise independent decision-making, (iii) the absence of conflicts of interest, (iv) diversity of experience, and (v) the ability to work effectively with other directors in collectively serving the long-term interests of all stockholders. Nominees must also meet any applicable requirements of SEC regulations, state law, and inTEST's charter and bylaws. While we do notWhen assessing a candidate, consideration will be given to the effect such candidate will have a policy related to Board diversity,on the Nominating and Corporate Governance Committee seeks nominees whose qualifications provide a diversity of relevant experiencethe Board. Diversity of the Board is evaluated by considering a broad range of attributes, such as background, both geographic and skill sets that synergistically combine to provide a strong management advisorydemographic (including, without limitation race, gender and oversight capability.national origin), expertise and experience.
Stockholders who wish to make nominations to be considered at the 2018 Annual2021Annual Meeting of Stockholders may do so by following the procedures set forth in our Bylaws.bylaws. See "Information Regarding Deadlines and Procedures for Submission of Stockholder Proposals and Nominations of Directors" for additional information regarding the deadlines and notice procedures.
Changes to Board Structure and Committee CompositionsFollowing the Annual Meeting
In light of the fact that Mr. Kraut, our current Audit Committee Chairperson and financial expert and a member of the Nominating and Corporate Governance Committee, is not standing for reelection at the Annual Meeting, subject to and upon the election of each director nominee to the Board at the Annual Meeting, the Committee compositions following the Annual Meeting will be as follows:
Audit Committee Gerald J. Maginnis (Chair) Steven J. Abrams, Esq. Jeffrey A. Beck | Compensation Committee Joseph W. Dews IV (Chair) Steven J. Abrams, Esq. Jeffrey A. Beck |
Nominating and Corporate Governance Committee Steven J. Abrams, Esq. (Chair) Joseph W. Dews IV Gerald J. Maginnis |
The Audit Committee reviewed our audited consolidated financial statements for the year ended December 31, 20172019 and met with both management and RSM US LLP ("RSM"), our independent registered public accounting firm, to discuss those financial statements. The Audit Committee also reviewed the report of management contained in our Annual Report on Form 10-K for the year ended December 31, 20172019 filed with the SEC, as well as RSM's report included in our Annual Report on Form 10-K related to its audit of the consolidated financial statements and financial statement schedule. The Audit Committee has discussed with RSM the matters required to be discussed under the rules adopted by the Public Company Accounting Oversight Board ("PCAOB"). The Audit Committee has received the written disclosures and the letter from RSM required by the PCAOB regarding RSM's communications with the Audit Committee concerning independence, and has discussed with RSM their independence.
Based on these reviews and discussions with management and RSM, the Audit Committee recommended to our Board of Directors (and the Board approved) that our audited consolidated financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2017.2019.
Audit Committee:
| |
William Kraut, Chairman | |
Steven J. Abrams, Esq. | |
Jeffrey A. Beck |
Our executive officers and their ages are as follows:
Name | Age | Position |
James Pelrin |
| President, Chief Executive Officer and Director |
Hugh T. Regan, Jr. |
| Secretary, Treasurer and Chief Financial Officer |
Biographical and Other Information Regarding inTEST's Executive Officers
Executive officers are appointed by the Board of Directors. Each executive officer is appointed to serve at the will of the Board of Directors.
James Pelrin.Pelrin. See "Biographical and Other Information Regarding inTEST's Directors"Director Nominees" above.
Hugh T. Regan, Jr. has served as our Treasurer and Chief Financial Officer since joining us in April 1996 and has served as Secretary since December 1999. From 1985 to April 1996, Mr. Regan served in various financial capacities for Value Property Trust, a publicly traded real estate investment trust, including Vice President of Finance from 1989 to September 1995 and Chief Financial Officer from September 1995 until April 1996.
Executive Summary
InSince 2016, the Compensation Committee has retained an independent compensation consultant, Radford, to review our executive compensation structure and recommend changes to the structure and manner of compensating our executive officers for 2017. Onofficers. In March 15, 2017,2019, as a result of the Compensation Committee's analysis of the information provided by, and the recommendations of Radford, the compensation consultant, theCompensation Committee adopted a new compensation program in 2017for 2019 for our executive officers to more closely alignthat aligns executive officer compensation with competitive market practices and specific objectives of the Company and more closely align thein addition to aligning our executive officers' long-term interests with those of our stockholders.stockholders by targeting pay for performance. Based on the recommendations of the compensation consultantRadford and discussions among the Compensation Committee and management, the Company’s executive compensation program focused on the following changes were made:for 2019:
● | Compensation levels were benchmarked to market survey data based on a group of public capital equipment, semiconductor, network equipment, computer and communications companies with a median headcount of | |
● | All elements of compensation - salary, bonus, total cash, long-term incentives and total direct compensation, were compared to the market; |
● |
|
● |
|
Overview of the Executive Compensation Program
The executive compensation program is designed to reflect the performance of the Company and align the executive officers' interests with those of our stockholders. To achieve these ends, the executive compensation program consists of three components: base salary, performance-based annualshort-term incentives, and long-term incentives, as more fully described below. While there is no fixed formula, the Compensation Committee seeks an appropriate balance between cash and non-cash compensation, short and long term incentives, at-risk compensation and a mix of differentvarious forms of equity compensation. In addition, consistent with market practices, the Compensation Committee believes that executive officers who have greater and more direct impact and ability to influence the Company's overall performance should receive a significant proportion of equity-based compensation relative to their total compensation, thus seeking to align the executive officers' incentives and impact with the value they bring to Company-wide performance.
The components of our 20172019 Executive Compensation Plan were as follows:
Base Salary | Individual base salaries were increased to within competitive, targeted ranges |
|
|
| Annual incentive percentages of base salary, Company and business unit performance targets, and strategic performance criteria |
|
|
| Equity-based compensation serves to link the interests of the executives and our stockholders and focuses the executives on the long-term appreciation of the Company's stock. For |
Philosophy
The Compensation Committee is committed to the general principle that executive compensation should be commensurate with the Company's performance and the performance of the individual executive officer. The primary objectives of our executive compensation program are to:
● | attract and retain executive officers who demonstrate the leadership and management skills necessary to drive our long-term success; | |
● | reward the achievement of our business goals and individual contributions toward achievement of those goals; and |
● | provide compensation opportunities linked to the Company's performance and the interests of our stockholders. |
Our pay philosophy is for the total cash compensation (base salary plus annualshort-term incentive compensation) of our named executive officers to be targeted to the market median for similarly situated companies, with long-term (equity-based) incentive compensation to increase at a reasonable rate on an annual basis until it reaches the market median for similarly situated companies.
Underlying our executive compensation program is the philosophy that the interests of our stockholders are best served by a program that includes a significant variable component based on our performance. As a result, our executives have a significant portion of their compensation "at risk," either through the variability of the annualshort-term incentive portion of the plan, or subject to the movement in the price of the Company's stock through the long-term incentive portion of the plan. Amounts paid under the plan are further subject to repayment or "claw back" as needed to comply with all applicable laws and regulations.
Accordingly, and as more fully described below, the Compensation Committee approved the following compensation arrangements for our executive officers for 2017:2019, who we refer to as our “named executive officers” (“2019 Executive Compensation Plan”).
2017 Executive Compensation and Equity Awards | ||||||||||||
Name and Title | Annual | Restricted | Options | |||||||||
Robert E. Matthiessen, former President and CEO (a) | $ | 348,966 | 11,500 | (1) | 34,000 | (1)(2) | ||||||
James Pelrin, President and CEO (b) | $ | 286,000 | 11,500 | (1) | 34,000 | (1)(2) | ||||||
Hugh T. Regan, Jr., Secretary, Treasurer and CFO | $ | 246,864 | 9,500 | (1) | 28,000 | (1)(2) |
2019 Executive Compensation and Equity Awards
Name and Title | Annual | Restricted | Options | |||||||||
James Pelrin, President and CEO | $ | 340,000 | 31,100 | (1) | 93,200 | (1)(2) | ||||||
Hugh T. Regan, Jr., Secretary, Treasurer and CFO | $ | 265,000 | 13,200 | (1) | 39,400 | (1)(2) |
|
| |||
|
| |||
(1) | The shares of restricted stock and stock options | |||
(2) | The exercise price is |
Description of the AnnualShort-Term Incentive Portion of the 20179 Executive Compensation Plan
The following is a summary of the annualshort-term incentive portion of our 20172019 Executive Compensation Plan:
● | Target incentive opportunity of | |
● | Performance bonus payment based upon satisfaction of the following weighted performance metrics: |
● |
|
● | At minimum financial performance, a named executive officer |
● |
|
● | At maximum financial performance, a named executive officer could earn 150% of his target incentive opportunity for financial performance. |
● | The strategic performance goal was the consummation of an acquisition of a company or assets of a company in |
● |
|
The following matrix shows the payout opportunity for the financial performance portion of the annualshort-term incentive program.
Net Revenue v. Target | |||||||
|
| <80% | 80% | 90% | 100% | 110% | 120% |
Earnings | <80% | 0% | 0% | 0% | 0% | 0% | 0% |
80% | 0% | 50% | 63% | 75% | 88% | 100% | |
90% | 0% | 63% | 75% | 88% | 100% | 113% | |
100% | 0% | 75% | 88% | 100% | 113% | 125% | |
110% | 0% | 88% | 100% | 113% | 125% | 138% | |
120% | 0% | 100% | 113% | 125% | 138% | 150% |
|
| Net Revenue v. Target | |||||
|
| <80% | 80% | 90% | 100% | 110% | 120% |
Earnings | <80% | 0% | 0% | 0% | 0% | 0% | 0% |
Before | 80% | 0% | 50% | 63% | 75% | 88% | 100% |
Income Taxes | 90% | 0% | 63% | 75% | 88% | 100% | 113% |
v. | 100% | 0% | 75% | 88% | 100% | 113% | 125% |
Target | 110% | 0% | 88% | 100% | 113% | 125% | 138% |
120% | 0% | 100% | 113% | 125% | 138% | 150% |
For 2017,2019, the net revenue target was $43.5$80.8 million and the actual net revenues were $66.8$60.7 million and the earnings before income taxes target was $4.7$11.2 million and the actual earnings before income taxes were $3.8$3.2 million. Both the actual net revenues andThe actual earnings before income taxes for 20172019 were adjusted for acquisition-related income and expenses relating to our ongoing acquisition-related activities in 2019 as well as adjustments to the contingent consideration related to the acquisition of Ambrell Corporation (“Ambrell”) in May 2017. Adjusted actual net revenues and adjusted actual earnings before income tax areis a non-GAAP performance measuresfinancial measure presented to provide investors with meaningful supplemental information in order to provide them with an understanding of the basis for the computation of the bonus amounts determined for the financial performance goal of the annualshort-term incentive program.
In the case of adjusted actual net revenues, we adjusted our 2017 actual net revenues to eliminate the impact of Ambrell’s 2017 net revenues so that our Compensation Committee could compare the 2017 target net revenues with 2017 actual net revenues computed on a consistent basis. The adjustment to the 2017 actual net revenues was made because the 2017 target net revenues did not include any projected 2017 net revenues from an acquisition.
In the case of adjusted actual earnings before income tax, we adjusted our 20172019 actual earnings before income tax to eliminate the impact of 20172019 acquisition-related expenses and changes inadjustments to the estimate of futurecontingent consideration that may be paid related to the Ambrell acquisition as well as eliminate the impact of Ambrell’s 2017 earnings before income tax so that our Compensation Committee could compare the 20172019 target earnings before income tax with 20172019 actual earnings before income tax computed on a consistent basis. The adjustments to the 20172019 actual earnings before income tax were made because the 20172019 target earnings before income tax did not include any projected acquisition-related expenses adjustment in thenor any estimate of futurethe adjustment to the contingent consideration that may be paid related to the Ambrell acquisition or the earnings before income tax from an acquisition).acquisition.
The adjusted actual net revenues and adjusted actual earnings before income tax areis provided as a complement to actual net revenues and actual net earnings before income tax provided in accordance with GAAP and areis used by the Compensation Committee to make compensation decisions with respect to the annualshort-term incentive program. A summary of the results of the financial performance goals and a reconciliation of actual net revenues andadjusted actual earnings before income tax to adjusted actual net revenues and adjusted actual earnings before income tax, which areis the most directly comparable GAAP measures, aremeasure, is contained in the table below. The amounts in the table below are in thousands with the exception of percentages:
2017 Target net revenues | $ | 43,504 | ||||||
2017 Actual net revenues (GAAP) | $ | 66,801 | ||||||
Less: Ambrell revenues | (13,562 | ) | ||||||
2017 Adjusted actual net revenues (non-GAAP) | $ | 53,239 | ||||||
Percentage of adjusted actual net revenues exceeding target | 122.4 | % | ||||||
2017 Target earnings before income tax | $ | 4,737 | ||||||
2017 Actual earnings before income tax (GAAP) | $ | 3,838 | ||||||
Add back: Acquisition-related expenses | 905 | |||||||
Contingent consideration adjustment | 6,976 | |||||||
Less: Ambrell earnings before income tax | (1,004 | ) | ||||||
2017 Adjusted actual earnings before income tax (non-GAAP) | $ | 10,715 | ||||||
Percentage of adjusted actual earnings before income tax exceeding target | 226.2 | % |
2019 Target net revenues | $ | 80,773 | ||||||
2019 Actual net revenues | 60,660 | |||||||
Actual net revenues shortfall of target | $ | (20,113 | ) | |||||
Percentage of adjusted actual net revenues shortfall of target | 75.1 | % | ||||||
2019 Target earnings before income tax | $ | 11,221 | ||||||
2019 Actual earnings before income tax | $ | 2,549 | ||||||
Add-back: Acquisition related expenses | 683 | |||||||
Less: Contingent consideration adjustment | (48 | ) | ||||||
2019 Adjusted actual earnings before income tax | 3,183 | |||||||
Adjusted actual earnings before income tax shortfall of target | $ | (8,038 | ) | |||||
Percentage of adjusted actual earnings before income tax shortfall of target | 28.4 | % |
Accordingly, for the short-term incentive program, the financial performance goalgoals described above, which were weighted at 60%, the completion of the annual incentive program,an acquisition in 2019, which was weighted at 50%15%, was achieved at 150%. As a result ofand the Ambrell acquisition, the strategic performance goal,increase in chiller product revenue and minimum aggregate gross margin on such revenues, which was weighted at 30%,10% were not achieved. The implementation of the Ambrell strategy with respect to operations, which was achieved at 100%. The individual goals, which were weighted at 20%15%, were also eachwas achieved at 100%.
As a result, payouts for 20172019 were as follows:
Name | Target | Actual | Actual | Target | Actual | Actual | ||||||||||||||||||
Robert E. Matthiessen | $ | 209,380 | $ | 261,725 | 125 | % | ||||||||||||||||||
James Pelrin | $ | 157,300 | $ | 196,625 | 125 | % | $ | 238,000 | $ | 35,700 | 15 | % | ||||||||||||
Hugh T. Regan, Jr. | $ | 135,775 | $ | 169,719 | 125 | % | $ | 145,750 | $ | 21,863 | 15 | % |
Description ofLong-Term Long-Term Incentive Portion of the 20179 Executive Compensation Plan
As part of the compensation consultant’sRadford’s scope of work, the Compensation Committee sought the consultant’s advice and recommendations on the use of equity-based compensation for the executive officers. With such input from the consultant,Radford, the Compensation Committee determined that:
● | A regular program of long-term incentive awards would increase the linkage between the pay of the executive officers and the performance delivered to our stockholders; | |
● | Stock options would be effective as a tool to reward the executive officers for focusing on growing the value of the Company over the long term; and |
● | Shares of restricted |
stock options and shares of restricted stock as set forth above in the 2019 Executive Compensation and Equity Awards table.
ChartsTables and Additional Narrative Discussion
The following chartstables and discussions set forth certain information with respect to the compensation we paid, or recognized as an expense in accordance with Accounting Standards Codification (“ASC”) Topic 718 (Compensation – Stock Compensation), to our Chief Executive Officer and our two other most highly compensatedthe executive officers listed in the table below who were serving as such at December 31, 2017.2019. These executive officers are referred to as our “named executive officers.”
Summary Compensation Table | |||||||||||||||||||||||||||||
|
|
|
|
|
| Non-Equity |
|
| |||||||||||||||||||||
Robert E. Matthiessen (D) | 2017 | $ | 348,966 | $ | 750 | (1) | $ | 73,025 | $ | 89,760 | $ | 261,725 | (2) | $ | 4,750 | (3) | $ | 778,976 | |||||||||||
Chairman, Former President | 2016 | 348,478 | 500 | (1) | 41,952 | 10,296 | 193,677 | (2) | 4,750 | (3) | 599,653 | ||||||||||||||||||
and Chief Executive Officer | |||||||||||||||||||||||||||||
James Pelrin (E) | 2017 | $ | 286,000 | $ | 750 | (1) | $ | 73,025 | $ | 89,760 | $ | 196,625 | (2) | $ | 8,050 | (4) | $ | 654,210 | |||||||||||
President and Chief Executive | 2016 | 285,619 | 500 | (1) | 41,952 | 10,296 | 145,503 | (2) | 8,921 | (4) | 492,791 | ||||||||||||||||||
Officer | |||||||||||||||||||||||||||||
Hugh T. Regan, Jr. | 2017 | $ | 246,864 | $ | 750 | (1) | $ | 60,325 | $ | 73,920 | $ | 169,719 | (2) | $ | 4,750 | (3) | $ | 556,328 | |||||||||||
Secretary, Treasurer and | 2016 | 246,518 | 500 | (1) | 31,464 | 7,722 | 125,593 | (2) | 4,750 | (3) | 416,547 | ||||||||||||||||||
Chief Financial Officer |
Summary Compensation Table |
|
|
|
|
|
| Non-Equity |
|
| |||||||||||||||||
($) | ($) | ($)(A) | ($)(B) | ($)(C) | ($) | ($) | |||||||||||||||||||
James Pelrin | 2019 | $ | 340,000 | - | $ | 221,743 | $ | 291,716 | $ | 35,700 | (1) | $ | 8,673 | (2) | $ | 897,832 | |||||||||
President and Chief | 2018 | 315,000 | - | 174,070 | 219,849 | 204,750 | (1) | 8,385 | (2) | 922,054 | |||||||||||||||
Hugh T. Regan, Jr. | 2019 | $ | 264,770 | - | $ | 94,116 | $ | 123,322 | $ | 21,863 | (1) | $ | 4,750 | (3) | $ | 508,821 | |||||||||
Secretary, Treasurer and | 2018 | 254,844 | - | 92,105 | 116,242 | 140,250 | (1) | 17,500 | (3) | 620,941 |
(A) | Restricted stock awards issued to our named executive officers vest 25% upon each of the next four anniversaries of the date of grant subject to certain conditions. The above amounts represent the fair market value of the restricted stock based on the closing price of our stock on the date of |
|
|
(B) | Stock option awards issued to our named executive officers vest 25% upon each of the next four anniversaries of the date of grant. On March |
|
|
(C) | The material terms of the non-equity incentive plan awards, including a general description of the formula and criteria that was applied in determining the amounts paid, are described above under the heading “Description of |
|
|
|
|
(1) |
|
| The amounts consist of the cash incentive portion of the Executive Compensation Plans of |
|
|
|
|
| Consists of $4,750 for matching contributions to Mr. Pelrin’s 401(k) plan account in both 2019 and |
(3) | Consists of $4,750 for matching contributions to Mr. Regan’s 401(k) plan account in both |
Outstanding Equity Awards at Fiscal Year-End
For the Fiscal Year Ended December 31, 20179
| Stock Awards | Options Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name | Number of | Number of | Option | Option | Number of | Market Value | Number of | Number of | Option | Option | Number of | Market Value | ||||||||||||||||||||||||||||||
Robert E. Matthiessen | 1,800 | 5,400 | (2) | $ | 4.37 | 1/21/2026 | 7,200 | (2)(3) | $ | 62,280 | ||||||||||||||||||||||||||||||||
James Pelrin | 5,400 | 1,800 | $ | 4.37 | 1/21/2026 | 2,400 | (2) | $ | 14,280 | |||||||||||||||||||||||||||||||||
- | 34,000 | (2) | $ | 6.35 | 3/14/2027 | 11,500 | (2)(4) | $ | 99,475 | 17,000 | 17,000 | $ | 6.35 | 3/14/2027 | 5,750 | (3) | $ | 34,213 | ||||||||||||||||||||||||
15,225 | 45,675 | $ | 8.45 | 3/11/2028 | 15,450 | (4) | $ | 91,928 | ||||||||||||||||||||||||||||||||||
James Pelrin | 1,800 | 5,400 | $ | 4.37 | 1/21/2026 | 7,200 | (3) | $ | 62,280 | |||||||||||||||||||||||||||||||||
- | 34,000 | $ | 6.35 | 3/14/2027 | 11,500 | (4) | $ | 99,475 | - | 93,200 | $ | 7.13 | 3/10/2029 | 31,100 | (5) | $ | 185,045 | |||||||||||||||||||||||||
Hugh T. Regan, Jr. | 1,350 | 4,050 | $ | 4.37 | 1/21/2026 | 5,400 | (3) | $ | 46,710 | 4,050 | 1,350 | $ | 4.37 | 1/21/2026 | 1,800 | (2) | $ | 10,710 | ||||||||||||||||||||||||
- | 28,000 | $ | 6.35 | 3/14/2027 | 9,500 | (4) | $ | 82,175 | 14,000 | 14,000 | $ | 6.35 | 3/14/2027 | 4,750 | (3) | $ | 28,263 | |||||||||||||||||||||||||
8,050 | 24,150 | $ | 8.45 | 3/11/2028 | 8,175 | (4) | $ | 48,641 | ||||||||||||||||||||||||||||||||||
- | 39,400 | $ | 7.13 | 3/10/2029 | 13,200 | (5) | $ | 78,540 |
(1) | Based on the closing share price on December | ||||||||
(2) |
| ||||||||
| Represents the unvested portion of restricted stock that was granted on January 22, 2016 under the 2007 Stock Plan and the Second Amended and Restated 2014 Stock | ||||||||
| Represents the unvested portion of restricted stock that was granted on March 15, 2017 under the Second Amended and Restated 2014 Stock | ||||||||
(4) | Represents the unvested portion of restricted stock that was granted on March 12, 2018 under the Second Amended and Restated 2014 Stock Plan. These shares will vest in equal portions on March 12, 2020, 2021 and 2022. | ||||||||
(5) | Represents the unvested portion of restricted stock that was granted on March 11, 2019 under the Second Amended and Restated 2014 Stock Plan. These shares will vest in equal portions on March 11, 2020, 2021, 2022 and 2023. |
Employment Agreements. We have not entered into any employment agreements with our named executive officers. However, as discussed in the “Potential Payments upon Termination Following a Change of Control” section below, we have entered into agreements with our named executive officers whichthat provide for the payment of certain benefits in the event of termination of employment following a change in control.
Retirement Benefits. Our named executive officers are provided retirement benefits under the tax-qualified 401(k) plan provided to our other domestic employees. Messrs. Matthiessen,Pelrin and Regan and Pelrin are subject to provisions that allow participants to make contributions from their own salary on a pre-tax basis and provide a discretionary employer matching contribution not to exceed $4,750 a year. The amount of employer contributions made to our 401(k) plans for our named executive officers for 20172019 and 20162018 are included in the column entitled “All Other Compensation” in the Summary Compensation Table.Table above. We do not provide any other retirement benefits to our named executive officers.
Potential Payments upon Termination Following a Change of Control. In 2017, we had Change-of-ControlWe have Change of Control Agreements in place with Messrs. Matthiessen,Pelrin and Regan (“Change of Control Agreements”). These Change of Control Agreements were amended and Pelrin. These Change-of-Controlrestated in April 2020 to align with the amendments to our Second Amended and Restated 2014 Stock Plan approved at the 2019 Annual Meeting of Stockholders, as well as to correct technical and grammatical items. The Change of Control Agreements provide for the payment of certain benefits upon the executive officer’s separation from service by us without Cause or by the executive officer for Good Reason within two years following a Change of Control. These benefits consist of the continuation of the executive officer’s base salary and fringe benefitscontinued coverage under group benefit plans for the one year period following the separation of such executive officer’s service from the Company and payment of the variable performance based compensation that he would have earned for such one year period.
Under the Change-of-ControlChange of Control Agreements, a Change“Change of ControlControl” occurs in the event of:
● | our dissolution or liquidation; | |
● | the sale of substantially all of our assets, except to a stockholder who as of the date of the Change of Control Agreements owned 20% or more of our stock (a “Related Person”); |
● | our merger or consolidation with another company unless our stockholders own stock in that company in the same proportion that they own stock in us prior to the transaction; |
● | any person or entity other than a Related Person obtains the voting control of 40% or more of our stock; or |
● | our directors and those persons our directors may nominate to become our directors, cease to comprise a majority of our Board members. |
Under the Change-of-ControlChange of Control Agreements, a termination for “Cause” means the executive’s termination by us because of an act of fraud upon inTEST, hisa violation of inTEST’s Code of Ethics, willful refusal to perform the duties assigned to him by the Board or his conviction for any crime involving dishonesty or breach of trust or for any crime that is a felony or of moral turpitude.
The term “Good Reason” under the Change-of-ControlChange of Control Agreements means a material adverse change in an executive’s status, responsibilities or benefits; a failure to be nominated or elected to his current officer position; a requirement to report to anyone other than his direct report; an assignment of duties inconsistent with his current officer position; any reduction in base salary, variable component or formula for determining the variable component which would have the effect of reducing his variable component, or other reduction in compensation or benefits; or a requirement to relocate more than thirty miles from his current office.
The benefits payable under the Change-of-ControlChange of Control Agreements are subject to the release of any claims that the named executive officers may have against us pursuant to the agreements as we may request. Fringe benefitsBenefits will be reduced or eliminated to the extent that comparable benefits are received from another source. Furthermore, the benefits will be reduced to the extent that the payments would not be deductible by us (in whole or in part) under Section 280G of the Internal Revenue Code.
Also in the event of a Change of Control, all equity awards issued to our named executive officers become 100% vested. For purposes of equity awards under the inTEST Corporation 2007 and 2014 Stock Plans, the definition of Change of Control is the same as defined above.Mr. Matthiessen’s Change of Control Agreement automatically terminated upon his retirement as President and Chief Executive Officer effective December 31, 2017.
In 2017,2019, non-employee directors received an annual retainer of $25,000, non-employee members of the Executive Committee received an additional annual fee of $15,000, the lead independent director received an additional annual fee of $10,000, and the chairmen of the committeesChairperson of the Board received an additional annual retainer of $40,000. The annual retainer for lead independent director was eliminated in June 2019, as an independent director was appointed as Chairperson in 2019. The Chair of each of the Committees of the Board are paid an additional annual fee as follows: the ChairmanChair of the Audit Committee receivedreceives an additional annual fee of $20,000;$20,000 and the ChairmanChairs of the Compensation Committee receivedand Nominating and Corporate Governance Committee each receive an additional annual fee of $10,000;$10,000, respectively. The members of the Committees, other than the Chairs, receive additional annual fees of: $10,000 for members of the Audit Committee and the Chairman$5,000 for members of each of the Compensation Committee and Nominating and Corporate Governance Committee, received an additional annual fee of $10,000.respectively. Also, onin March 15, 2017,2019, based upon the evaluation and recommendation of our independent compensation consultant,Radford, the Compensation Committee recommended, and the Board of Directors approved, the award of 7,5009,000 shares of restricted stock to each of the non-employee directors to further align their interests with those of our stockholders. Such shares vested 25% immediately and 25% on each of the following dates: March 31, 2019, June 30, 2017,2019, September 30, 20172019 and December 31, 20172019 subject to certain conditions, including, but not limited to, the continued service to inTEST of the respective beneficial ownernon-employee director through each such vesting date. On July 31, 2019, the Compensation Committee recommended, and the Board of Directors approved, two restricted stock awards to the then newly elected director, Jeffrey A. Beck: (1) 4,500 shares of restricted stock to vest 50% on each of the following dates -September 30, 2019 and December 31, 2019; and (2) a new director award of 9,000 shares of restricted stock to vest 25% annually beginning on July 31, 2020. In addition, we reimbursethe Company reimburses non-employee directors’ travel expenses and other costs associated with attending Board or committee meetings. We doThe Company does not pay additional cash compensation to ourany executive officersofficer for their service as directors.
In 2018, the additional annual fee of $15,000 for non-employee members of the Executive Committee was eliminated as the Executive Committee was eliminated effective January 1, 2018. In addition to the above, the non-employee Chairman of the Board will receive an additional annual retainer of $40,000. Members of each Committee, who are not the Chair, will receive an additional annual fee of $10,000 for members of the Audit Committee and $5,000 for members of each of the Compensation Committee and Nominating and Corporate Governance Committee.a director.
The following table sets forth the compensation earned by, or paid in cash to, the members of our Board of Directors, who are not named executive officers, for the year ended December 31, 2017:2019:
|
| Fees |
| All |
|
| Fees |
|
|
|
|
| All |
|
|
|
| ||||||||||||||||
Alyn R. Holt | -- | (1) | -- | (1) | $ | 73,457 | (1) | $ | 73,457 | ||||||||||||||||||||||||
Steven J. Abrams, Esq. | Steven J. Abrams, Esq. | $ | 50,000 | (2) | $ | 47,625 | -- | $ | 97,625 |
| $ | 50,000 | (1) |
| $ | 64,170 | (A) |
| $ | -- |
|
| $ | 114,170 |
| ||||||||
Jeffrey A. Beck | $ | 21,333 | (2) | $ | 61,155 | (B) | $ | -- | $ | 82,488 | |||||||||||||||||||||||
Joseph W. Dews IV | Joseph W. Dews IV | $ | 50,000 | (3) | $ | 47,625 | (4) | -- | $ | 97,625 |
| $ | 66,000 | (3) |
| $ | 64,170 | (A) |
| $ | -- |
|
| $ | 130,170 |
| |||||||
William Kraut | William Kraut | $ | 55,000 | (5) | $ | 47,625 | -- | $ | 102,625 |
| $ | 57,000 | (4) |
| $ | 64,170 | (A) |
| $ | -- |
|
| $ | 121,170 |
| ||||||||
Robert E. Matthiessen |
| $ | 30,333 | (5) |
| $ | 64,170 | (A) |
| $ | -- |
|
| $ | 94,503 |
|
(A) | These amounts represent the fair market value of the award of restricted stock based on the closing price of our common stock on the date of grant of |
|
| |
|
| |
| Consists of $25,000 annual retainer, $10,000 for service as | |
(2) | Consists of $13,333* annual retainer, $5,333* for service as a member of the Audit Committee, and $2,667* for service as a member of the Compensation Committee, paid after Mr. Beck’s election as a director on June 19, 2019. |
(3) | Consists of $25,000 annual retainer, $21,333* for service as Chair of the Board, $10,000 for service as | |||||
|
| |||||
(4 |
| |||||
| Consists of $25,000 annual retainer, $20,000 for service as | |||||
PROPOSAL 2: APPROVAL OF AMENDMENT AND RESTATEMENT OF 2014 STOCK PLANTO INCREASE THE NUMBER OF SHARES AVAILABLE UNDER THE 2014 STOCK PLAN
Overview
We are proposing to amend and restate the inTEST Corporation 2014 Stock Plan (the “2014 Plan”) to increase by 500,000 shares the number of authorized shares of common stock available for issuance under the 2014 Plan. This will increase the number of shares of common stock that may be delivered pursuant to awards granted under the 2014 Stock Plan from 500,000 to 1,000,000 shares. In addition to increasing the number of shares available for issuance under the 2014 Plan, the 2014 Plan will also be amended to make other non-material changes and updates. The amendment and restatement of the 2014 Plan was approved by our Board of Directors on April 23], 2018 and became effective on that date and will terminate unless the amendment and restatement of the 2014 Plan is approved by stockholders within twelve months of the date of the approval by the Board of Directors.
Our 2014 Plan was initially adopted by our Board of Directors on March 4,2014 and was approved by our stockholders on June 25, 2014. Our Board of Directors believes that our continued growth and success depends, in large part, on our ability to retain, incent and attract existing and future directors, officers, key employees and consultants (“Recipients”) through grants of equity-based awards as described in the 2014 Plan and in the summary below. An increase in shares available under the 2014 Plan is necessary not only to retain current employees, but also to attract new talent as we grow. We anticipate that the shares currently available under our 2014 Plan will be insufficient to meet our future needs, thus potentially impairing our ability to attract and retain key employees and consultants through the grant of stock-based awards. The 2014 Plan is designed to attract, motivate and retain Recipients and to further the growth and financial success of the Company by aligning the interests of such persons through ownership with the interests of our stockholders.
We have previously issued options and restricted stock awards pursuant to the 2014 Plan. As of April 25, 2018, we have outstanding options to purchase 217,000 shares of common stock and 116,225 shares of unvested restricted stock awards under the 2014 Plan and 125,300 shares available for future awards under the 2014 Plan. Additional shares may become available under the 2014 Plan to the extent that awards are forfeited. As of April 25, 2018, 10,473,558 shares of our common stock were issued and outstanding.
We have also previously issued restricted stock awards pursuant to the inTEST Corporation 2007 Stock Plan (“2007 Plan”). As of April 25, 2018, we have outstanding 17,000 shares of unvested restricted stock awards under the 2007 Plan. No further shares can be issued under the 2007 Plan as it expired in June 2017.
The remainder of this discussion, when referring to the 2014 Plan, refers to the amended and restated 2014 Plan as if this proposal is approved by our stockholders, unless otherwise specified or the context otherwise references the 2014 Plan prior to the amendment and restatement.
Summary of 2014 Plan
The following information provides a summary of the 2014 Plan. This summary is qualified in its entirety by the terms of the 2014 Plan, which is attached to this proxy statement as Appendix A.
The purpose of the 2014 Plan is to promote our overall business objectives by motivating the selected Recipients to achieve long-term growth of our equity, and by continuing our association with individuals who are instrumental in achieving this growth. The 2014 Plan provides incentives to Recipients to enter into or remain in our service or employ, and to devote themselves to our success, by granting to them an opportunity to acquire or increase interests in our common stock through receipt of four different kinds of equity-based "Awards": (i) options to acquire shares of our common stock, including both incentive stock options and non-qualified stock options ("Options"); (ii) awards of stock appreciation rights ("SARs"); (iii) awards of shares of our common stock ("Stock Awards"); and (iv) awards of restricted stock units ("RSUs").
The 2014 Plan consists of two parts: the “Non-Qualified Plan” and the “Key Employee Plan.” Our non-employee directors and consultants are eligible to receive Awards under the Non-Qualified Plan, and our officers and other key employees are eligible to receive Awards under the Key Employee Plan.
The Non-Qualified Plan and Key Employee Plan are administered by the Compensation Committee of our Board of Directors, which is referred to in this summary as the "Administrator." The Administrator has sole discretion to determine when and to whom Awards will be granted, the number of shares covered by each Award, the type of Award, and the terms, provisions and kind of consideration payable, if any, with respect to any Award, subject to the provisions of the 2014 Plan. In determining the persons to whom awards will be granted and the number of shares covered by each award, the Administrator may take into account the duties of the respective persons, their present and potential contribution to our success and such other factors as the Administrator may deem relevant. Awards which are made to all directors require the further approval of a majority of the Board of Directors, in addition to a majority of the independent directors.
Awards Under the 2014 Plan
Options
Options granted under the Key Employee Plan may be either incentive stock options ("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or non-qualified stock options ("NSOs"). All Options granted under the Non-Qualified Plan will be NSOs. The exercise price of any Option will be determined by the Administrator, but will not be less than 100% of the "Fair Market Value," as defined in the 2014 Plan on the date of grant. In the case of ISOs, certain limitations will apply with respect to the aggregate value of option shares which can become exercisable for the first time during any one calendar year, and certain additional limitations will apply to ISOs granted to persons who, at the time the option is granted, own more than 10% of the outstanding voting power of our stock. The Administrator may provide in any option agreement that the payment of the exercise price may be made in cash, by delivery of shares of common stock held by the Recipient for more than one year and having a Fair Market Value equal to such option price, by a combination thereof, or by any other method the Administrator may approve.
Generally, Options granted under the 2014 Plan (unless otherwise determined by the Administrator at the time of grant), to the extent not earlier exercised, will expire on the earliest of (i) the last business day immediately preceding the tenth anniversary of the date of grant, (ii) one year following the Recipient's termination of his or her employment or service (unless such termination is for cause, as defined in the 2014 Plan, in which case any options held by such Recipient will terminate immediately upon a finding that the termination was for cause) or (iii) a date set by the Administrator upon a finding that a change in the financial accounting treatment for the Options has been adopted that may have a material adverse effect on us. In addition, in the event of a Change of Control, as defined in the 2014 Plan, the Administrator may take various actions with respect to outstanding options as it deems necessary or advisable, including accelerating the expiration date of any outstanding Option to a date not earlier than thirty (30) days from the date notice of such acceleration is given to the Recipient, accelerating the vesting of any Option or terminating any Option to the extent not then vested.
Stock Appreciation Rights
A SAR is an Award entitling the holder, upon exercise, to receive cash or shares of common stock, or a combination thereof, in an amount determined solely by reference to appreciation, from and after the date of grant, in the fair market value of a share of common stock. SARs may be granted in tandem with, or independently of, Options granted under the 2014 Plan. A SAR that granted in tandem with an Option will be exercisable only at such time or times, and to the extent, that the related Option is exercisable, provided that the SAR will generally terminate upon exercise of the related Option, and the Option will terminate and no longer be exercisable upon the exercise of the related SAR.
Restricted Stock and Restricted Stock Units
Stock Awards will consist of awards of restricted stock, which are shares of common stock that are subject to a risk of forfeiture or other restrictions that lapse upon the satisfaction of specified conditions. Subject to any restrictions applicable to the Stock Award, a Recipient holding restricted stock, whether vested or unvested, will be entitled to enjoy all rights of a stockholder with respect to such restricted stock, including the right to receive dividends and to vote the shares.
RSUs represent a right to receive shares of common stock in the future, with the right to future delivery of the shares subject to a risk of forfeiture or other restrictions that will lapse upon satisfaction of specified conditions. A Recipient holding an RSU does not own the underlying shares, and may not vote the shares represented by the RSU.
Amendment of Awards; No Repricing
The Administrator has the right to amend any outstanding Award, subject to the Recipient's consent if such amendment would not be favorable to the Recipient, except that the consent of the Recipient will not be required for any amendment made in the event of a Change of Control. Notwithstanding the foregoing, however, the Administrator may not take any of the following actions without stockholder approval: (i) reduce the exercise price of an outstanding Award, (ii) exchange an Award that has an exercise price per share greater than the then-Fair Market Value, either for cash or shares, or (iii) cancel an Award in exchange for a replacement Award.
Adjustments
If this proposal is approved by our stockholders, up to 1,000,000 shares of common stock may be issued in the aggregate pursuant to Awards granted under the 2014 Plan including without limitation the Key Employee Plan. This number is subject to adjustment in the event of a stock dividend, stock split or similar increase or decrease in the number of issued and outstanding shares of common stock resulting from a subdivision or consolidation of the common stock or other capital adjustment (but not an amendment of the Company's certificate of incorporation to authorize a greater number of shares of capital stock) effected without receipt of consideration by the Company.
Termination of Plan and Awards
No Award may be granted under the 2014 Plan on or after March 4, 2024, but Awards granted before that date may be exercised thereafter to the extent so provided in the Award. The Administrator may amend, suspend or terminate the 2014 Plan or any portion thereof at any time; provided, however, any amendment of the Key Employee Plan that would change the eligibility of employees or the class of employees eligible to receive an Award, or increase the maximum number of shares as to which Awards may be granted, will not be effective without stockholder approval, to the extent that approval is necessary for the 2014 Plan to satisfy the requirements of Section 422 of the Code, or of applicable securities laws or securities exchange listing requirements. If any Award expires, or is terminated, surrendered or forfeited, in whole or in part, then unissued shares covered by such Award will again be available for the grant of Awards under the 2014 Plan.
Eligibility
All or any portion of the available Awards under the 2014 Plan may be granted to our officers, directors, key employees and consultants. As of April 25, 2018, we had two executive officers (one of whom is also a director), approximately 200 employees who are not executive officers and four non-employee directors, who may receive Awards under the 2014 Plan. The number of consultants who may receive Awards under the 2014 Plan varies from time to time.
New Plan Benefits
No grants have been issued with respect to the additional 500,000 shares to be reserved for issuance under the 2014 Plan. The number of shares that may be granted to Recipients under the 2014 Plan, is not determinable at this time, as such grants are subject to the discretion of the Board of Directors. The following table provides information with respect to the number of shares granted under the 2014 Plan for the fiscal year ended December 31, 2017 to Recipients. Additional information about the number of shares granted to our Chief Executive Officer and other named executive officers can be found herein under the heading “Outstanding Equity Awards at Fiscal Year End.”
2017 | ||||||||||||||||
Name and Title | Number of | $ | Number of | $ | ||||||||||||
James Pelrin, President and Chief Executive Officer | 34,000 | $ | 89,760 | 11,500 | $ | 73,025 | ||||||||||
Robert E. Matthiessen, Former President and Chief Executive Officer, and Chairman | 34,000 | (1) | $ | 89,760 | 11,500 | (1) | $ | 73,025 | ||||||||
Hugh T. Regan, Jr., Secretary, Treasurer and Chief Financial Officer | 28,000 | $ | 73,920 | 9,500 | $ | 60,325 | ||||||||||
All Current Executive Officers as Group | 62,000 | $ | 163,680 | 21,000 | $ | 133,350 | ||||||||||
All Current Non-Executive Directors as a Group | - | 22,500 | $ | 142,875 | ||||||||||||
All Current Non-Executive Officer Employee Group | - | - | 11,000 | $ | 82,450 |
|
|
Recommendation of the Board of Directors
Our Board of Directors recommends a vote “FOR” the approval of the amendment and restatement of the 2014 Plan to increase the maximum number of shares authorized for issuance thereunder to 1,000,000 shares.
EQUITY COMPENSATION PLAN INFORMATION
The following table shows the number of securities that may be issued pursuant to our equity compensation plans (including individual compensation arrangements) as of December 31, 2017:
Equity Compensation Plan Information
| Number of securities |
| Number of securities | |||||||||
Equity compensation plans approved by security holders | 76,400 | $ | 5.98 | 345,200 | ||||||||
Equity compensation plans not approved by security holders | - | - | - | |||||||||
Total | 76,400 | $ | 5.98 | 345,200 |
| The |
|
|
PROPOSAL 32: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
RSM US LLP was appointed as our independent registered public accounting firm ("IRPA Firm") on June 16, 2008. RSM US LLP audited our consolidated financial statements for the years ended December 31, 20172019 and 2016.2018. The Audit Committee of our Board of Directors has selected RSM US LLP as our IRPA Firm for the year ending December 31, 2018,2020, subject to the determination of the 20182020 audit fees. The Audit Committee has the sole authority and responsibility to select, appoint, evaluate and, where appropriate, discharge and replace RSM US LLP as our IRPA Firm, and the selection of our IRPA Firm is not required to be submitted to a vote of the stockholders for ratification. The Audit Committee has elected to submit its appointment of RSM US LLP for ratification by stockholders. Notwithstanding the outcome of the vote by the stockholders, the Audit Committee is not bound to retain the IRPA Firm or to replace the IRPA Firm, where, in either case, after considering the outcome of the vote, the Audit Committee determines its decision regarding the IRPA Firm to be in the best interests of inTEST. Representatives of RSM US LLP will attend the 2018 Annual Meeting, of Stockholders.and will be available to respond to questions and if they desire, make a statement.
The following table sets forth the fees billed by RSM US LLP as described below:
2017 | 2016 | 2019 | 2018 | |||||||||||||
Fee Category: | ||||||||||||||||
Audit Fees | $ | 398,386 | $ | 295,195 | $ | 387,000 | $ | 372,000 | ||||||||
Audit-Related Fees | - | - | 36,114 | - | ||||||||||||
Tax Fees | 148,899 | 85,927 | 202,049 | 151,500 | ||||||||||||
All Other Fees | 57,405 | 137,887 | 49,095 | 37,175 | ||||||||||||
Total Fees | $ | 604,690 | $ | 519,009 | $ | 674,258 | $ | 560,675 |
Audit Fees: Consists of fees billed for professional services rendered in connection with the audit of our consolidated financial statements and review of the interim condensed consolidated financial statements for 20172019 and 2016,2018, respectively, that are included in quarterly reports during those years and services that are normally provided by our IRPA Firm in connection with statutory and regulatory filings or engagements, and attest services, except those not required by statute or regulation.
Audit-Related Fees: Consists of fees billed in each of 20172019 and 20162018 for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under "Audit Fees." These services would include auditing procedures in connection with acquisitions and divestitures, attest services that are not required by statute or regulation, and auditing procedures in connection with the adoption of financial accounting and reporting standards.
Tax Fees: Consists of fees billed in each of 20172019 and 20162018 for tax related services including advice, preparation of returns and other tax services related to federal, state and international taxes.
All Other Fees: Consists of fees billed in each of 20172019 and 20162018 for all products and services provided by the principal accountant, other than those reported above.
In accordance with the Sarbanes-Oxley Act of 2002, the Audit Committee's policy is to pre-approve all audit and non-audit services provided by our IRPA Firm. On an ongoing basis, management defines and communicates specific projects and categories of service for which the advance approval of the Audit Committee is requested. The Audit Committee reviews these requests and advises management if the Audit Committee approves the engagement of our IRPA Firm for such services. The Audit Committee has also delegated authority to the Chairman of the Audit Committee, and if the Chairman of the Committee is unavailable, to any other Audit Committee member, to pre-approve permitted services. Any such pre-approval must be reported to the Audit Committee at its next meeting. The Audit Committee did not approve any services pursuant to the de minimis exception of Rule 2-01(c)(7)(i)(C) of Regulation S-X during 2017.2019.
Recommendation of the Board of Directors
The Board of Directors recommends a vote "FOR" the ratification of the selection of RSM US LLP as our independent registered public accounting firm for the year ending December 31, 2018.2020.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEPROPOSAL 3: ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
In accordance with Section 16(a)14A of the Securities Exchange Act requiresof 1934, as amended (the “Exchange Act”), we are again providing our directors, certain officers and persons who own more than ten percent ofstockholders with the opportunity at the Annual Meeting to approve, on a registered classnon-binding advisory basis, the 2019 compensation of our equity securitiesnamed executive officers as disclosed in the Executive Compensation section of this proxy statement, including the Overview of Executive Compensation Program, the Summary Compensation Table and the related tables, notes, and narratives. Currently this “say on pay” vote is conducted every year. As previously reported, the option of holding the advisory vote on the compensation of the Company’s named executive officers every year was approved on an advisory basis by a vote of the stockholders at the 2019 Annual Meeting of Stockholders. The Company’s Board of Directors considered the outcome of such advisory vote and determined to file reportshold future stockholder advisory votes on executive compensation every year, until the Board of ownershipDirectors determines that a different frequency for such votes is in the best interests of the Company’s stockholders or until the next required vote of the Company’s stockholders on the frequency of such votes.
As described in the Overview of Executive Compensation Program, our 2019 executive compensation program was designed to provide our executive officers with compensation that is commensurate with our performance and changes in ownershipthe performance of the individual officer, reflecting the cyclicality of our business and allocating compensation between fixed pay and variable performance-based pay, and aligning the long-term interests of our executive officers with the SEC. These officers, directorslong-term interests of our stockholders. We urge stockholders to read the discussion in this proxy statement of Executive Compensation which describes our principles and greater than ten percent stockholders are required by SEC regulation to furnish us with copiespractices in more detail, including the Summary Compensation table and other related tables, notes and narratives, which provide detailed information about the compensation of all Section 16(a) forms they file.our named executive officers.
While this proposal is an advisory vote that will be non-binding, the Board of Directors and the Compensation Committee will review and consider the voting results when making future decisions regarding the compensation of our named executive officers.
Based solelyThe next advisory vote on reviewthe compensation of our named executive officers will take place at our Annual Meeting of Stockholders to be held in 2021.
Recommendation of the copiesBoard
The Board of such forms furnished to us, or written representationsDirectors recommends that no Forms 5 were required, we believe that, during 2017, all Section 16(a) filing requirements applicable to these officers, directors and greater than ten-percent beneficial owners were timely met, except for Form 4’s that were inadvertently filed late for Robert E. Matthiessen reporting salesyou vote "FOR" the approval, on October 9, 2017 peran advisory basis, of the termscompensation of his 10b5-1 trading plan and the forfeiture of unvested restricted stock on December 31, 2017 as a result of his retirement as President and Chief Executive Officer.our named executive officers.
INFORMATION REGARDING DEADLINES AND PROCEDURES FOR SUBMISSION OF STOCKHOLDER PROPOSALS AND NOMINATIONSNOMINATION OF DIRECTORS
Under the Proxy Rulesproxy rules of the SEC, stockholders intending to submit proposals to be included in our proxy statement for our Annual Meeting of Stockholders to be held in 20192021 must send their proposals to Hugh T. Regan, Jr., Secretary at 804 East Gate Drive, Suite 200, Mt. Laurel, New Jersey 08054, not later than December 31, 2018.January 20, 2021. These proposals must relate to matters appropriate for stockholder action and be consistent with regulations of the SEC relating to stockholder proposals (Proxy (“Rule 14a-8)14a-8”) in order to be considered for inclusion in our proxy statement relating to that meeting.
Under our Bylaws,bylaws, certain procedures are provided that a stockholder must follow to nominate persons for election as Directorsdirectors or to introduce an item of business at an annual meeting of stockholders. These procedures provide that nominations for Directordirector nominees and/or an item of business to be introduced at an annual meeting of stockholders must be submitted in writing to the Secretary of inTEST at the address set forth above, not later than 90 days and not earlier than 120 days prior to the first anniversary of the preceding year's annual meeting of stockholders, subject to certain exceptions. Accordingly, a notice of a stockholder proposal, submitted outside of Rule 14a-8 under the Securities and Exchange Act, or a stockholder nomination for the 20192021 Annual Meeting of Stockholders will be untimely if received by inTEST's Secretary before February 27, 201924, 2021 or after March 29, 2019,26, 2021, unless the date of the 20192021 Annual Meeting of Stockholders is advanced by more than 30 days or delayed (other than as a result of adjournment) by more than 30 days from the anniversary of the 20182020 Annual Meeting of Stockholders.Meeting. If the date of the 20192021 Annual Meeting of Stockholders is changed by more than 30 days from the anniversary of the 20182020 Annual Meeting, of Stockholders, then notice by the stockholder to be timely must be delivered not earlier than the 120th day prior to the date of the 20192021 Annual Meeting of Stockholders and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made.
The Bylawsbylaws set forth various qualifications and disclosure requirements for such advance written notice of a nomination or proposal to be in proper form. A stockholder wishing to submit such a notice should review the provisions of our Bylawsbylaws (which wereare filed with the SEC on April 25, 2018 as Exhibit 3.1 to our CurrentAnnual Report on Form 8-K)10-K for the year ended December 31, 2019). In general, the disclosure requirements include information about the stockholder making the nomination or proposal, information regarding the nominee or proposal, and in the case of a nomination, a certification and consent from the nominee. If a stockholder fails to comply with the time of notice procedures set forth in our Bylaws, that stockholder will not be entitled to present the proposal or nomination at the meeting. If, however, notwithstanding the requirements of the Bylaws,bylaws, a proposal is brought before the meeting, then under the SEC's proxy rules, the proxies inTEST solicits with respect to the 20192021 Annual Meeting of Stockholders will confer discretionary voting authority on the persons so named as proxies with respect to such proposal.
Our Annual Report to Stockholders (which includes our consolidated financial statements for the year ended December 31, 2017)2019), accompanies this proxy statement. The Annual Report to Stockholders does not constitute a part of the proxy solicitation materials.
24
|