UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. _________ )
Filed by the Registrantx
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)) |
| x | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material Pursuant to Rule 14a-12 |
ACETO 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):
| x | 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 |
ACETO CORPORATION
4 Tri Harbor Court
Port Washington, NY 11050
Tel. (516) 627-6000
October 20, 2017
Dear Fellow Shareholder:
Having recently been named as President and Chief Executive Officer of Aceto Corporation, I take pleasure in inviting each of you to attend Aceto’s annual meeting of shareholders to be held on Thursday, December 7, 2017 at 10:00 a.m., Eastern Standard Time, at the Company’s offices, 4 Tri Harbor Court, Port Washington, New York. This year, Aceto will continue to use the “notice and access” method of providing proxy materials to you via the Internet. On or about October 24, 2017, you will receive a Notice of Internet Availability of Proxy Materials (the “Notice”), which includes instructions regarding voting your shares and requesting a printed copy of our proxy materials.
Please use this opportunity to take part in our affairs by voting on the business to come before this meeting.
I look forward to seeing you at the annual meeting and thank you for your continued support.
| Sincerely, | |
 | |
| William C. Kennally, III | |
| President and Chief Executive Officer |
| 2 |
ACETO CORPORATION
4 Tri Harbor Court
Port Washington, New York 11050
Tel. (516) 627-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Aceto Corporation:
We hereby notify you that the annual meeting of shareholders of Aceto Corporation, a New York corporation (the “Company”), will be held on Thursday, December 7, 2017 at 10:00 a.m., Eastern Standard Time, at the Company’s offices, 4 Tri Harbor Court, Port Washington, New York, for the following purposes:
| · | to elect seven directors to the board of directors to hold office for the following year and until their successors are elected; |
| · | to approve the material terms of the performance goals under our Executive Performance Award Plan; |
| · | to hold an advisory vote on executive compensation; |
| · | to hold an advisory vote on the frequency of holding an advisory vote on executive compensation; |
| · | to ratify the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for our fiscal year ending June 30, 2018; and |
| · | to transact any other business that may properly come before the meeting or any adjournment thereof. |
This proxy statement is first being delivered to shareholders on or about October 20, 2017. The matters listed in this notice of meeting are described in the accompanying proxy statement. The Company’s board of directors (the “Board”) has fixed the close of business on October 10, 2017 as the record date for this year’s annual meeting. You must be a shareholder of record at that time to be entitled to notice of the annual meeting and to vote at the annual meeting.
Important notice regarding the availability of Proxy Materials:The proxy statement and the Company’s Annual Report on Form 10-K for the year ended June 30, 2017 are available on the internet to the Company’s shareholders of record as of the close of business on October 10, 2017.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE. FOR SPECIFIC INSTRUCTIONS ON HOW TO VOTE YOUR SHARES, PLEASE REFER TO THE INSTRUCTIONS ON THE NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS YOU RECEIVED IN THE MAIL OR, IF YOU REQUESTED TO RECEIVE PRINTED PROXY MATERIALS, YOUR ENCLOSED PROXY CARD. ANY SHAREHOLDER MAY REVOKE A SUBMITTED PROXY AT ANY TIME BEFORE THE MEETING BY WRITTEN NOTICE TO SUCH EFFECT, BY SUBMITTING A SUBSEQUENTLY DATED PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON. THOSE VOTING BY INTERNET MAY ALSO REVOKE THEIR PROXY BY VOTING IN PERSON AT THE MEETING OR BY VOTING AND SUBMITTING THEIR PROXY AT A LATER TIME BY INTERNET.
| By order of the board of directors, | |
 | |
| Douglas Roth | |
| Chief Financial Officer and Assistant Secretary |
Port Washington, New York
October 20, 2017
| 3 |
ACETO CORPORATION
4 Tri Harbor Court
Port Washington, New York 11050
Tel. (516) 627-6000
Table of Contents
| 4 |
ACETO CORPORATION
4 Tri Harbor Court
PORT WASHINGTON, NEW YORK 11050
Tel. (516) 627-6000
——————
PROXY STATEMENT
——————
Information About Proxy Solicitation
This proxy statement is being furnished to holders of shares as of the record date of the common stock, $0.01 par value per share, of Aceto Corporation, a New York corporation (the “Company”), in connection with the Company’s annual meeting to be held on Thursday, December 7, 2017 at 10:00 a.m., Eastern Standard Time, at the Company’s offices, 4 Tri Harbor Court, Port Washington, New York. As used in this proxy statement, “Aceto,” “we,” “us,” and “our” refer to the Company. We made this proxy statement available to you because our Board is soliciting your proxy to vote your shares at the annual meeting and at any adjournment. This proxy statement summarizes information that we are required to provide to you under the rules of the United States Securities and Exchange Commission (the “SEC”) and the NASDAQ Global Select Market, which information is designed to assist you in voting your shares. The purposes of the meeting and the matters to be acted on are stated in the accompanying notice of annual meeting of shareholders. At present, the Board knows of no other business that will come before the meeting.
This solicitation is made by the Company. We will bear the cost of soliciting proxies, including preparation, assembly, printing and mailing of the Proxy Statement. Proxies are being solicited by and on behalf of the Board. In addition to the use of the mails, proxies may be solicited by personal interview, telephone, telegram, facsimile and advertisement in periodicals and postings, in each case by our directors, officers and employees without additional compensation. Brokerage houses, nominees, fiduciaries and other custodians will be requested to forward solicitation materials to beneficial owners and will be reimbursed for their reasonable expenses incurred in so doing. We may request by telephone, facsimile, mail, electronic mail or other means of communication the return of the proxy cards.
Information About Voting
| Q: | Why am I receiving these materials? |
| A: | The Board has made these proxy materials available to you on the Internet or, upon your request, has delivered printed proxy materials to you, in connection with the Company’s annual meeting of shareholders, which will take place on December 7, 2017. As a shareholder, you are invited to attend the annual meeting and to vote on the items of business described in this proxy statement. |
| Q: | What information is contained in these materials? |
| A: | The information included in this proxy statement relates to the proposals to be voted on at the annual meeting, the voting process, the compensation of directors and the most highly paid executive officers, and certain other required information. A copy of our Annual Report on Form 10-K for the fiscal year ended June 30, 2017 (the “Form 10-K”) is also included as part of the proxy materials. |
| Q: | Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials? |
| A: | In accordance with the “notice and access” rules adopted by the SEC, we may furnish proxy materials, including this proxy statement and our Form 10-K to our shareholders by providing access to such documents on the Internet instead of mailing printed copies. Most shareholders will not receive printed copies of the proxy materials unless they request them. Instead, the Notice, which was mailed to most of our shareholders, will instruct you as to how you may access and review all of the proxy materials on the Internet. The Notice also instructs you as to how you may access and submit your proxy. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice. |
| 5 |
| Q: | How do I get electronic access to the proxy materials? |
| A: | The Notice will provide you with instructions regarding how to access the Notice of Annual Meeting, this Proxy Statement, your proxy and Form 10-K. The proxy materials will be available on the Internet starting on October 24, 2017, as described in the Notice. You will not receive a printed copy of these proxy materials unless you request them in accordance with the instructions provided in the Notice. |
| Q: | What items of business will be voted on at the annual meeting? |
| A: | The following matters will be voted on at the annual meeting: |
| · | to elect seven directors to the Board to hold office for the following year and until their successors are elected; |
| · | to approve the material terms of the performance goals under our Executive Performance Award Plan; |
| · | to hold an advisory vote on executive compensation; |
| · | to hold an advisory vote on the frequency of holding an advisory vote on executive compensation; |
| · | to ratify the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for our fiscal year ending June 30, 2018; and |
| · | to transact any other business that may properly come before the meeting or any adjournment thereof. |
| Q: | How does the Company’s board of directors recommend that I vote? |
| A: | The Board recommends that you vote: |
| · | FOR each of the nominees to the Board; |
| · | FOR approval of the material terms of the performance goals under our Executive Performance Award Plan; |
| · | FOR approval, on a non-binding basis, of the Company’s compensation of our named executive officers as described in the Compensation Discussion and Analysis section and the accompanying compensation tables and narrative disclosures contained in this proxy statement; |
| · | FOR every year (as opposed to every two or three years) as the frequency of future non-binding shareholder advisory votes on compensation of our named executive officers; and |
| · | FOR the ratification of the appointment of the Company’s independent registered public accounting firm. |
| Q: | What shares can I vote? |
| A: | You may vote all shares owned by you as of the close of business on October 10, 2017, the record date. These shares include: (1) shares held directly in your name as a shareholder of record; and (2) shares held for you, as the beneficial owner, through a broker or other nominee, such as a bank. |
| Q: | Can I vote my shares by filling out and returning the Notice? |
| A: | No. The Notice identifies the items to be voted on at the Annual Meeting, but you cannot vote by marking the Notice and returning it. The Notice provides instructions on how to vote by (i) Internet, (ii) requesting and returning a paper proxy card or voting instruction card, or (iii) submitting a ballot in person at the meeting. |
| 6 |
| Q: | What is the difference between holding shares as a shareholder of record and as a beneficial owner? |
| A: | Most shareholders of the Company hold their shares through a broker or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially. |
If your shares are registered directly in your name with the Company’s transfer agent, American Stock Transfer & Trust Company, LLC, you are considered, with respect to those shares, the shareholder of record and the Notice is being sent directly to you by the Company. As the shareholder of record, you have the right to grant your proxy directly to the Board or to vote in person at the meeting.
If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of those shares, which are said to be held in “street name,” and the Notice is being forwarded to you by your broker or nominee. As the beneficial owner, you have the right to direct your broker or nominee how to vote and are also invited to attend the annual meeting. However, since you are not the shareholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the broker or nominee that holds your shares, giving you the right to vote the shares. If you do not provide voting instructions to your broker or nominee, your votes will be treated as a “broker non-vote.”
| Q: | What is a “broker non-vote”? |
| A: | Broker non-votes occur when nominees, such as banks and brokers holding shares on behalf of beneficial owners, do not receive voting instructions from the beneficial holders at least ten days before the meeting. If that happens, the nominees may vote those shares only on matters deemed “routine” by the New York Stock Exchange, such as the ratification of our independent accounting firm. Nominees cannot vote on non-routine matters unless they receive voting instructions from beneficial holders, resulting in so-called “broker non-votes.” |
| Q: | How can I attend the annual meeting? |
| A: | You are entitled to attend the annual meeting only if you were a shareholder of the Company or joint holder as of the close of business on October 10, 2017, or you hold a valid proxy for the annual meeting. You should be prepared to present photo identification for admittance. If you are not a record holder but hold shares through a broker or nominee (that is, in “street name”), you should provide proof of beneficial ownership on the record date, such as your most recent account statement prior to the record date, a copy of the voting instruction card provided by your broker or nominee, or other similar evidence of ownership. If you do not provide photo identification or comply with the other procedures outlined above upon request, you will not be admitted to the annual meeting. The annual meeting will begin promptly at 10:00 a.m. Eastern Standard Time. Check-in will begin at 9:00 a.m., and you should allow ample time for the check-in procedures. |
| Q: | How can I vote my shares in person at the annual meeting? |
| A: | You may vote in person at the annual meeting any shares that you hold as the shareholder of record. You may only vote in person shares held in street name if you obtain from the broker or nominee that holds your shares a “legal proxy” giving you the right to vote the shares. |
| Q: | How can I vote my shares without attending the annual meeting? |
| A: | Whether you hold shares directly as the shareholder of record or beneficially in street name, you may without attending the meeting direct how your shares are to be voted. If you are a shareholder of record, you may vote by granting a proxy. If you hold shares in street name, you may vote by submitting voting instructions to your broker or nominee. |
| 7 |
| Q: | Can I change my vote? |
| A: | You may change your vote at any time prior to the vote at the annual meeting. For shares held directly in your name, you may accomplish this by granting a new proxy bearing a later date (which automatically revokes the earlier proxy), by revoking your proxy or by attending the annual meeting and voting in person. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically revoke your proxy or vote at the annual meeting. For shares you hold beneficially, you may change your vote by submitting new voting instructions to your broker or nominee or, if you have obtained a “legal proxy” from your broker or nominee giving you the right to vote your shares, by attending the meeting and voting in person. If you decide to revoke your proxy, you should send a written notice of revocation to Mr. Steven Rogers, Senior Vice President, Chief Legal Officer and Secretary, Aceto Corporation, 4 Tri Harbor Court, Port Washington, New York 11050. |
| Q: | Who can help answer my questions? |
| A: | If you have any questions about the annual meeting or how to vote or revoke your proxy, you should contact Mr. Steven Rogers, Senior Vice President, Chief Legal Officer and Secretary by mail to Aceto Corporation, 4 Tri Harbor Court, Port Washington, New York 11050 or by phone at 516-627-6000. Also, if you need additional copies of this proxy statement or voting materials, you should contact Mr. Rogers. |
| Q: | How are votes counted? |
| A: | In the election of directors, you may vote FOR all of the seven nominees or you may direct your vote to be WITHHELD with respect to one or more of the seven nominees. In the vote with respect to the performance goals under our Executive Performance Award Plan, you may vote FOR approval of the material terms of the performance goals, AGAINST approval of such terms or you may ABSTAIN from voting on this proposal. In the advisory vote on executive compensation, you may vote FOR, AGAINST, or you may ABSTAIN from voting with respect to the approval of the compensation of the named executive officers as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and any related material disclosed in this proxy statement.In the advisory vote on the frequency of holding an advisory vote on executive compensation, you may vote FOR every year, FOR every two years, FOR every three years, or ABSTAIN. In the ratification of the Company’s independent registered public accounting firm, you may vote FOR ratification, AGAINST ratification or you may ABSTAIN from voting with respect to ratification. If you provide specific instructions, your shares will be voted as you instruct. If you sign your proxy card or voting instruction card or vote over the Internet with no further instructions, your shares will be voted in accordance with the recommendations of the Board FOR all of the Company’s nominees, FOR approval of the material terms of the performance goals under our Executive Performance Award Plan, FOR approval of the compensation of the named executive officers as described above, FOR EVERY YEAR on the frequency of holding an advisory vote on executive compensation, FOR ratification of the Company’s independent registered public accounting firm and in the discretion of the proxy holders on any other matters that properly come before the meeting. If any other matters properly arise at the meeting, your proxy, together with the other proxies received, will be voted at the discretion of the proxy holders. |
| Q: | What is a quorum and why is it necessary? |
| A: | Conducting business at the meeting requires a quorum. The presence, either in person or by proxy, of the holders of one-third of the Company’s shares of common stock outstanding on October 10, 2017 is necessary to constitute a quorum. For the purposes of determining a quorum, shares held by brokers or nominees from whom we receive a signed or electronically transmitted proxy will be treated as present even if the broker or nominee does not have discretionary power to vote on a particular matter, or if instructions were never received from the beneficial owner. These shares are called “broker non-votes.” Abstentions will be counted as present for quorum purposes. |
| 8 |
| Q: | What is the voting requirement to approve each of the proposals? |
| A: | In the election of directors, the seven persons receiving the highest number of FOR votes at the annual meeting will be elected, subject to the operation of our Director Resignation Policy. For purposes of determining whether a nominee is elected, votes withheld and broker non-votes do not have the effect of a vote for or against the election of any nominee. You do not have the right to cumulate your votes. Under our Director Resignation Policy, in an uncontested election, if a nominee receives the affirmative vote of less than a majority of the votes cast (thereby excluding broker non-votes), the nominee must tender his or her resignation to the Board. Thus, the practical effect of a vote withheld is that such vote may result in requiring the nominee to submit his or her resignation if the aggregate number of votes withheld exceeds the aggregate number of votes cast for the nominee in an uncontested election. For approval of the material terms of the performance goals under our Executive Performance Award Plan, for the advisory vote on executive compensation, for the ratification of the appointment of the Company’s independent registered public accounting firm for our fiscal year ending June 30, 2018 and for any other matters that might properly arise at the meeting, the affirmative FOR vote of holders of a majority of the total votes cast on the proposal is required for approval. Accordingly, abstentions will have no effect on the vote on the approval of the material terms of the performance goals under our Executive Performance Award Plan, the advisory vote on executive compensation, or on the ratification of the appointment of the Company’s independent registered public accounting firm.With respect to the advisory vote on the frequency of holding an advisory vote on executive compensation, the frequency alternative that receives the highest number of votes cast will be considered to be the frequency alternative that is preferred by our shareholders. Accordingly, abstentions and broker non-votes will not be counted as expressing any preference.A list of shareholders entitled to vote at the annual meeting will be available at the annual meeting for examination by any shareholder. |
| Q: | What should I do if I receive more than one Notice? |
| A: | You may receive more than one Notice if you are a shareholder of record and hold shares in a brokerage account, if you hold your shares in more than one brokerage account, or if you are a shareholder of record and your shares are registered in more than one name. Please complete and return a proxy card or voting instruction card for each Notice that you receive. |
| Q: | Where can I find the voting results of the annual meeting? |
| A: | Voting results will be announced at the annual meeting and are expected to be posted shortly after the meeting on our website atwww.aceto.com. Voting results will also be reported in a Current Report on Form 8-K, which is expected to be filed with the SEC within four business days after the meeting. |
| Q: | What are the dissenters’ rights of appraisal? |
| A: | Pursuant to the applicable provisions of the Business Corporation Law of the State of New York, there are no dissenters’ rights of appraisal provided to the Company’s shareholders in connection with the proposals described in this proxy statement. |
| Q: | What happens if additional matters are presented at the annual meeting? |
| A: | Other than the five items of business described in this proxy statement, we are not aware of any other business to be acted upon at the annual meeting. However, if you grant a proxy, the persons named as proxy holders, William C. Kennally, the Company’s President and Chief Executive Officer and Douglas Roth, the Company’s Chief Financial Officer and Assistant Secretary, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any unforeseen reason any of our nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for any one or more other candidates nominated by the Board. |
| Q: | What shares are entitled to be voted? |
| A: | Each share of the Company’s common stock issued and outstanding as of the close of business on October 10, 2017, the record date, is entitled to be voted on all items being voted on at the annual meeting, with each share being entitled to one vote. On the record date, 30,641,254 shares of the Company’s common stock were issued and outstanding. |
| 9 |
| Q: | Who will count the votes? |
| A: | One or more inspectors of election will tabulate the votes. |
| Q: | Is my vote confidential? |
| A: | Proxy instructions, ballots, and voting tabulations that identify individual shareholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed, either within the Company or to anyone else, except: (1) as necessary to meet applicable legal requirements; (2) to allow for the tabulation of votes and certification of the vote; or (3) to facilitate a successful proxy solicitation. |
| Q: | Who will bear the cost of soliciting votes for the annual meeting? |
| A: | The Company is making this solicitation and will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. Certain of our directors, officers and employees, without any additional compensation, may also solicit your vote in person, by telephone or by electronic communication. On request, we will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to shareholders. |
| Q: | May I propose actions for consideration at next year’s annual meeting of shareholders? |
| A: | You may submit proposals for consideration at future shareholder meetings. However, in order for a shareholder proposal to be considered for inclusion in the Company’s proxy statement for the annual meeting next year, the written proposal must be received by the Secretary of the Company no later than June 25, 2018. Such proposals also will need to comply with SEC regulations under Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding the inclusion of shareholder proposals in company-sponsored proxy materials. |
| 10 |
ELECTION OF DIRECTORS
THE NOMINEES
The Board is proposing a slate of directors that consists of seven incumbent directors. Mr. Hans C. Noetzli will not be standing for re-election.
The names of the nominees, their ages (as of October 10, 2017), their committee positions and the period during which they have been serving on our Board are set forth in the table below:
| NAME | AGE | AUDIT & RISK COMMITTEE | COMPENSATION COMMITTEE | NOMINATING & GOVERNANCE COMMITTEE | DIRECTOR SINCE | |||||
| Albert L. Eilender (1) | 74 | 2000 | ||||||||
| William C. Kennally, III | 61 | 2016 | ||||||||
| Vimal Kavuru | 49 | 2017 | ||||||||
| William N. Britton | 72 | C | X | 2006 | ||||||
| Natasha Giordano | 57 | C | 2011 | |||||||
| Alan G. Levin | 55 | X | C | 2013 | ||||||
| Dr. Daniel B. Yarosh | 63 | X | X | X | 2014 |
(1) Chairman of the Board
C – Chairperson
X – Committee member
One current compensation committee member, Hans C. Noetzli, is not standing for re-election. Mr. Kennally ceased serving on our compensation committee on September 27, 2017, when our Board determined that Mr. Kennally would succeed Salvatore Guccione as president and chief executive officer of Aceto, effective as of October 2, 2017. On September 27, 2017, Dr. Daniel B. Yarosh was named to the compensation committee to replace Mr. Kennally.
It is the intention of the persons named in the proxy card to vote all shares of common stock for which they have been granted a proxy for the election of the nominees, each to serve as a director for a term of office of one year and until his or her successor shall have been duly elected. All the nominees have consented to being named in this proxy statement and to serve as a director if elected.
At the time of the annual meeting, if any of the nominees named above is not available to serve as director (an event that the Board does not currently have any reason to anticipate), all proxies will be voted for any one or more other persons that the Board designates. The Board believes that it is in the best interests of the Company to elect the above-described nominees.
INFORMATION ABOUT THE NOMINEES
No director or executive officer of the Company is related to any other director or executive officer. None of the Company’s officers or directors holds any directorships in any other public company, except for Mr. Levin, who is a member of the board of directors of Diffusion Pharmaceuticals, Inc., and Natasha Giordano, who is a member of the board of directors (and the president and chief executive officer) of PLx Pharma Inc. A majority of our board members are independent based on the definition of independence in Listing Rule 5605(a)(2) of The NASDAQ Stock Market.
Set forth below is the principal occupation and employment of the nominees, the business experience of each for at least the past five years and certain other information relating to the nominees.
| 11 |
Albert L. Eilender. Mr. Eilender has been the Chairman of the Board since October 2009. He joined the Board in 2000, was the lead independent director from 2005 to September 2009 and served as Chief Executive Officer of the Company from September 2010 to January 2013. He is the sole owner of Waterways Advisory Services, a firm specializing in advising companies on developing and evaluating options relative to mergers, acquisitions and strategic partnerships in the chemical industry. Mr. Eilender has not been active in the operations of this enterprise since October 2009. He has more than 35 years of diverse senior level experience in the specialty chemicals and pharmaceutical industry and has had direct financial responsibility, with significant experience in mergers, acquisitions and joint ventures, both domestically and internationally. He has also served on the boards of numerous industry trade associations during his career. We believe that Mr. Eilender’s past 25 years of industry experience in executive management for operations within all three segments of Aceto’s business, as well as operations in North America, Europe and Asia, coupled with his experience in the areas of business consultation and mergers and acquisitions, and his service on the Board since 2000, give him the qualifications and skills to serve as one of our directors. In addition, as a director of Aceto he has demonstrated leadership within the Board and the ability to work effectively with management to create unity of effort.
William C. Kennally, III. Mr. Kennally assumed the position of president and chief executive officer of Aceto on October 2, 2017. He retired from Pfizer in 2015 after 37 years of service, most recently as Regional President North America, Global Established Pharma Division from 2014 to 2015 and Regional President North America, Global Established Products from 2010 to 2014. Both roles involved leading three separate and distinct brand businesses and two generic businesses. From 2001 to 2009, Mr. Kennally was President of Greenstone, LLC, a generic and authorized generic pharmaceutical supplier which became a wholly owned subsidiary of Pfizer, Inc. after Pfizer’s acquisition of Pharmacia. Mr. Kennally started his professional career in Sales with the Upjohn Company, which was later acquired by Pharmacia, and followed a Pharmaceutical Sales Career pathway that included front line management and a corporate office position as Sales Incentive Compensation Manager. Mr. Kennally graduated from St. Anselm College with a B.S. in Criminal Justice. We believe that Mr. Kennally’s deep, multi-faceted experience in pharmaceutical sales, general management, and business leadership gained over a 37-year distinguished career, and in particular his knowledge and experience in the generic pharmaceutical business, gives him the qualifications and skills to serve as one of our directors.
Vimal Kavuru.Mr. Kavuru has been a member of the Executive Committee of the Company’s subsidiary, Rising Pharmaceuticals, Inc. (“Rising), since December 2016. Since 2013, Mr. Kavuru has been the CEO of Cedar Pharma LLC (formerly known as Citron Pharma LLC and referred to herein as “Citron”) and Aster Pharma LLC (formerly known as Lucid Pharma LLC and referred to herein as “Lucid”), from which Rising acquired certain generic products and related assets in December 2016. Citron and Lucid provide certain transition services to Rising. In 2008, Mr. Kavuru founded and served as CEO until 2013 of Gen-Source RX, a generic pharmaceutical distributor that was sold to Cardinal Health in 2014. Since 2007, Mr. Kavuru has served as a director of Celon Labs Ltd., an Indian specialty pharmaceutical company focused on the oncology and critical care segments. Additionally, he has served as a director of Cronus Pharma LLC, an animal health pharmaceutical company, since 2016, is the founder and CEO of Casper Pharma LLC, an emerging specialty brand and injectable pharmaceutical company, and is a co-founder of Grace Therapeutics, a specialty pharmaceutical company focused on treating rare and orphan diseases. Mr. Kavuru graduated with a B.S. in Pharmacy from the College of Pharmacy, Gulbarga, India and is a registered Pharmacist in the State of New York. Since June 2017 Mr. Kavuru has also served on the advisory committee of the CCIT subsidiary of New Jersey Economic Development Authority.We believe that Mr. Kavuru’s extensive experience in the generic products industry, as well as his previous association with Citron and Lucid gives him the qualifications and skills to serve as one of our directors.
William N. Britton. Mr. Britton is the sole owner of TD AIM, LLC, through which he is involved in a variety of activities surrounding financial consulting and private equity investing. Previously, from 1969 to 2001, Mr. Britton was with JP Morgan Chase, where he retired as a Senior Vice President. He has over 30 years of commercial lending experience ranging from large syndicated financings with Fortune 500 companies to privately owned businesses, with significant experience in private equity related transactions, asset based lending arrangements, leasing and many other forms of secured lending. Mr. Britton is a former member of the Northeast Advisory Council of Opera Solutions, a private firm engaged in consulting. Mr. Britton is a former Vice President-Finance for the Boy Scouts of America (Manhattan Council) and is on the board of the Rutgers Business School. We believe that Mr. Britton’s finance and business consultation and executive-level management experience, as well as his service on the Board of the Company since 2006, give him the qualifications and skills to serve as one of our directors.
| 12 |
Natasha Giordano. Ms. Giordano has been the President and Chief Executive Officer as well as a Director of PLx Pharma Inc. since January 2016. PLx Pharma is a late-stage specialty pharmaceutical company focused on developing a clinically validated and patent protected delivery system to provide more effective aspirin and safer products.Previously, Ms. Giordano served as the Chief Executive Officer of ClearPoint Learning, Inc., from May 2015 through November 2015 and a director of ClearPoint from December 2009 through November 2015. Prior to ClearPoint, Ms. Giordano served as the Chief Executive Officer of Healthcare Corporation of America through August 2014. From 2009 to August 2012, Ms. Giordano served as Chief Operating Officer and then Chief Executive Officer and President of Xanodyne Pharmaceuticals, Inc., a branded specialty pharmaceutical company. From 2000 to 2008, she served in various senior executive positions at Cegedim Dendrite (formerly Dendrite International Inc.), including serving as President, Americas from 2007 to 2008. Earlier in her career, Ms. Giordano worked for nine years at Parke-Davis, a subsidiary of Warner Lambert. Ms. Giordano holds a Bachelor of Science degree in nursing from Wagner College. We believe that Ms. Giordano’s twenty plus years of senior leadership positions in the healthcare and pharmaceutical industry brings to our Board a vast amount of practical experience in general management, strategy, marketing, sales development, and compliance, which give her the qualifications and skills to serve as one of our directors.
Alan G. Levin.Mr. Levin served as Executive Vice President and Chief Financial Officer of Endo Health Solutions Inc. (Endo), a global specialty healthcare company, from June 2009 until September 2013. Prior to joining Endo, Mr. Levin worked with Texas Pacific Group, a leading private equity firm, and one of their start-up investments. Before that, he was Senior Vice President & Chief Financial Officer of Pfizer, Inc. where he worked for 20 years in a variety of executive positions of increasing responsibility, including Treasurer and Senior Vice President of Finance & Strategic Management for the company’s research and development organization. Mr. Levin received a bachelor’s degree from Princeton University and a master’s degree from New York University’s Stern School of Business. Mr. Levin is a certified public accountant. He is a member of the Advisory Board of Auven Therapeutics, a private equity fund; the Board of Directors of Diffusion Pharmaceuticals Inc., a development stage oncology company, and the Board of Directors of the Critical Path Institute, a non-profit collaboration between the Food and Drug Administration and pharmaceutical industry participants. We believe that Mr. Levin’s financial experience, including his prior positions as chief financial officer of Endo and Pfizer and executive-level experience in the pharmaceutical industry, as well as his experience in financial reporting, treasury and corporate finance, gives him the qualifications and skills to serve as one of our directors.
Dr. Daniel B. Yarosh. Dr. Daniel B. Yarosh, PhD retired as Chief Technology Advisor, Estee Lauder Companies, a manufacturer and marketer of skin care, makeup, fragrance and hair care products at the end of 2016. From 2008 to 2014 he was Senior Vice President of Basic Science Research at Estee Lauder R&D. He founded and served as President and Chairman of Applied Genetics Inc. Dermatics, a biotech company focusing on DNA science for 23 years before selling it to Estee Lauder. Dr. Yarosh has a PhD degree in molecular biology, and was a National Science Foundation postdoctoral fellow at Brookhaven National Laboratories and Staff Fellow and Cancer Expert at the National Cancer Institute, National Institutes of Health in Bethesda, Maryland. He is active in the New York biotech community and many scientific and medical societies, including the American Academy of Dermatology. Dr. Yarosh is the author of over 100 scientific papers, two dozen patents, and the book “The New Science of Perfect Skin”. Dr. Yarosh is a volunteer board member of the Photomedicine Society, a medical professional non-profit society and is also a volunteer advisor to other professional scientific, medical and patient groups. Dr. Yarosh received a bachelor’s degree in biology from Macalester College and a PhD from the University of Arizona School of Medicine. Dr. Yarosh’s prior experience, including his executive and scientific research experience at Estee Lauder and his expertise in the biotech industry, gives him the qualifications and skills to serve as one of our directors.
INFORMATION ABOUT THE COMPANY’S COMMITTEES
Board Leadership Structure and Role in Risk Oversight
Effective October 2, 2017, William C. Kennally commenced serving as our Chief Executive Officer and President, succeeding Salvatore Guccione, who resigned from those positions on September 27, 2017. Mr. Guccione served as our Chief Executive Officer and President since January 2013. Our Chief Executive Officer assumes leadership for all aspects of Aceto Corporation’s operations. Our Chief Executive Officer concentrates on strategic issues, long range planning, acquisition activity and day-to-day operations. Albert L. Eilender, the Chairman of the Board, concentrates on strategic issues while continuing to coordinate the Board's agenda and investor relations. This structure is designed to sharpen the focus on all aspects of the Company's business. Alan G. Levin is currently our lead independent director. In that role, Mr. Levin serves as a liaison between the Chairman of the Board and the independent directors of the Board.
| 13 |
The Board has an active role, directly and through the Board’s committee structure, in the oversight of the Company’s risk management efforts. The Audit & Risk Committee assists the Board in performing its oversight responsibilities relating to the Company’s processes and policies with respect to identifying, monitoring, assessing, reporting on, managing and controlling the Company’s business and financial risk. The committee oversees, reviews, monitors and assesses (including through regular reports by, and discussions with, management), the Company’s processes and policies for risk identification, risk assessment, reporting on risk, risk management and risk control (including with respect to risks arising from the Company’s compensation policies and practices and in connection with the business and operations of its subsidiaries), and the steps that management has taken to identify, assess, monitor, report on, manage and control risks. The committee also discusses with management the balancing of risk versus reward for the Company and areas of specific risk identified by management and/or the committee.
Audit & Risk Committee
The Audit & Risk Committee is currently comprised of William N. Britton (Chairman), Alan G. Levin and Dr. Daniel B. Yarosh. The Audit & Risk Committee recommends to the Board the approval of the Company’s independent registered public accounting firm and reviews management actions in matters relating to audit functions. The committee reviews with the Company’s independent registered public accounting firm the scope and results of its audit engagement and the Company’s system of internal controls and procedures. The committee also reviews the effectiveness of procedures intended to prevent violations of laws. The committee also reviews, prior to publication, our quarterly earnings releases and reports to the SEC on Form 10-K and Form 10-Q. The report of the Audit & Risk Committee for fiscal year 2017 can be found below.
The Audit & Risk Committee has adopted a written policy for the pre-approval of audit, audit-related and non-audit services to be provided by the Company’s independent registered public accounting firm. In general, the Company’s independent registered public accounting firm cannot be engaged to provide any audit or non-audit services unless the engagement is pre-approved by the Audit & Risk Committee in compliance with the Sarbanes-Oxley Act of 2002. Certain basic services may also be pre-approved by the Chairman of the Audit & Risk Committee under the policy. However, any service that is not specifically pre-approved under the policy must be specifically pre-approved by the Audit & Risk Committee if it is to be provided by the independent registered public accounting firm.
The Audit & Risk Committee, consistent with the Sarbanes-Oxley Act of 2002 and the rules adopted thereunder, also meets with management and the auditors prior to the filing of officers’ certifications with the SEC to request information concerning, among other things, significant deficiencies in the design or operation of internal controls, if any.
The Audit & Risk Committee assists the Board in performing its oversight responsibilities relating to the Company’s processes and policies with respect to identifying, monitoring, assessing, reporting on, managing and controlling the Company’s business and financial risk. The Audit & Risk Committee discusses with the Company’s Senior Risk Officer, and other members of management responsible for managing risk, areas of specific risk identified by management and/or the Committee.
The Board has determined that all Audit & Risk Committee members are independent under applicable SEC regulations, and based on the definition of independence in Listing Rule 5605(a)(2) of The NASDAQ Stock Market. Our Board has determined that Mr. Britton and Mr. Levin qualify as an “audit committee financial expert” as that term is used in SEC regulations. The Audit & Risk Committee operates under a formal charter that governs its duties and conduct and is published on the Company’s corporate website –www.aceto.com.
The Audit & Risk Committee has adopted a Non-Retaliation Policy and a Complaint Monitoring Procedure to enable confidential and anonymous reporting regarding financial irregularities, if any.
| 14 |
Nominating and Governance Committee
The Nominating and Governance Committee is currently comprised of Alan G. Levin (Chairman), William N. Britton and Dr. Daniel B. Yarosh, each of whom is an “independent director” based on the definition of independence in Listing Rule 5605(a)(2) of The NASDAQ Stock Market. The Nominating and Governance Committee addresses Board organizational issues and reviews the Company’s corporate governance framework. In addition, the Nominating and Governance Committee searches for persons qualified to serve on the Board and monitors, assesses and makes recommendations to the Board annually with respect to the leadership structure of the Board. While the Nominating and Governance Committee does not have a formal policy on diversity for members of the Board, the Nominating and Governance Committee considers diversity of background, experience and qualifications in evaluating prospective Board members. The committee will evaluate the suitability of potential nominees for membership on the Board, taking into consideration the Board’s current composition, including expertise, diversity, and balance of inside, outside and independent directors, and considering the qualifications and criteria established by the Board. In considering director candidates, the Nominating and Governance Committee and the Board endeavor to establish a diversity of background and experience in a number of areas of core competency, including business judgment, management, accounting and finance, knowledge of the industries in which the Company operates, strategic vision, knowledge of international markets, and other areas relevant to the Company’s business.
The Nominating and Governance Committee operates under a formal charter that governs its duties and conduct and is published on the Company’s corporate website –www.aceto.com.
A shareholder entitled to vote in the election of directors may nominate one or more persons for election as director at a meeting if written notice of that shareholder’s intent to make the nomination has been given to Aceto Corporation, 4 Tri Harbor Ct, Port Washington, New York 11050, Attention, Secretary, with respect to an election to be held at an annual meeting of shareholders not earlier than the close of business on the 120th day prior to the first anniversary of the date of the previous year’s annual meeting of shareholders, and not later than the 90th day prior to such anniversary date; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the 120th day prior to such annual meeting and not later than the later of the 90th day prior to such annual meeting or if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such meeting is first made.
In the case of a nomination, the proponent’s written notice must set forth: (i) the name, age, business address and residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, (iii) the class and number of shares of capital stock of the Company that are owned of record and beneficially by each such nominee (the “Shares”), (iv) an undertaking by each nominee to complete and return to the Company any information questionnaire completed by other nominees, and such nominee’s consent to serve as a director if elected or re-elected, (v) such other information concerning each such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an election contest is not involved), or that would otherwise be required to be disclosed, under the rules of the SEC, and (vi) as to the proponent: (a) the name and address of the Proponent, and of any holder of record of the Shares beneficially owned by the proponent, as they appear on the Company’s books, (b) the class and number of shares of capital stock of the Company that are owned by the proponent (beneficially and of record) and owned by any holder of record of the Shares beneficially owned by the proponent, as of the date of the proponent’s notice, (c) a description of any derivative instrument, swap, option, warrant, short interests, hedge or profit interest that has been entered into by or on behalf of such proponent or any of its affiliates or associates with respect to the shares of the Company, (d) a description of any other transaction, agreement, arrangement, or understanding (including any short position or any borrowing or lending of shares) has been made by or on behalf of such proponent or any of its affiliates or associates, the effect or intent of which is to mitigate loss to, or to manage risk on or benefit from share price changes for such Proponent, or any of its affiliates or associates or to increase or decrease the voting power or pecuniary or economic interest of such proponent or any of its affiliates or associates with respect to shares of the Company, (e) a representation that the proponent is a holder of record or beneficial owner of Shares entitled to vote at the meeting for the election or re-election of such proponent’s nominee or nominees and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (f) a representation as to whether the proponent intends to deliver a proxy statement and/or form of proxy to holders of the Company’s outstanding capital stock and/or otherwise to solicit proxies from stockholders in support of the nomination, and (g) an undertaking by the proponent to notify the Company in writing of any change in any of the foregoing information, or confirm there has been no change, as applicable, as of the record date for the annual meeting promptly following the later of the record date or the date notice of the record date is first publicly announced. The Company may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director of the Company or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee. No person shall be eligible for election as a director of the Company, unless nominated in accordance with the procedures set forth herein and in our By-laws.
| 15 |
As described above, the Company’s By-laws contain provisions which address the process by which a shareholder may nominate an individual to stand for election to the Board at the Company’s annual meeting of shareholders. The Nominating and Governance Committee will consider and vote on any recommendations so submitted. In considering any person recommended by a shareholder, the committee will look for the same qualifications that it looks for in any other person that is considered for a position on the Board.
Any shareholder nominee recommended by the Nominating and Governance Committee and proposed by the Board for election at the next annual meeting of shareholders will be included in the company's proxy statement for that annual meeting.
Director Resignation Policy
The Company has established a “Director Resignation Policy”, which addresses the situation in which a nominee for election to the Company’s Board fails to receive a majority of the votes cast by the shareholders of the Company in an uncontested election of directors. An “uncontested election of directors” is any election of directors by the shareholders of the Company in which the number of nominees for election does not exceed the number of directors to be elected. Pursuant to our Director Resignation Policy, if, in any uncontested election, a nominee receives less than a majority of the votes cast by the shareholders of the Company, such nominee is required to promptly tender his or her written resignation from the Board to the Secretary of the Company. The Board will then determine whether to accept or reject the resignation. The Director Resignation Policy is published on the Company’s corporate website –www.aceto.com.
Compensation Committee
The Compensation Committee is currently comprised of Natasha Giordano (Chairperson), Hans C. Noetzli, and Dr. Daniel B. Yarosh each of whom is an “independent director” based on the definition of independence in Listing Rule 5605(a)(2) of The NASDAQ Stock Market. The Compensation Committee conducts reviews of the compensation of the directors, Chief Executive Officer and other senior executive officers of the Company including evaluating and making recommendations to the Board concerning those officers’ benefits, bonus, incentive compensation, severance, equity-based compensation, and other forms of compensation provided by the Company. The Compensation Committee meets as it determines, but not less frequently than annually. The Compensation Committee may delegate a portion of its authority to a subcommittee or subcommittees. The Compensation Committee has the exclusive authority to retain any compensation consultants to be used to assist the committee in the evaluation and determination of the Company’s compensation for its Chief Executive Officer, other senior executive officers and directors. As noted above, Mr. Noetzli will not be standing for re-election.
The Compensation Committee operates under a formal charter that governs its duties and conduct and reviews the charter not less than every two years. The charter is published on the Company’s corporate website –www.aceto.com.
Compensation Consultant Role
Our Compensation Committee engaged Frederic W. Cook & Co. Inc. (FW Cook), an executive compensation consulting firm, during the fiscal year ended June 30, 2017 to conduct compensation benchmarking for our executive officers, as well as Board compensation analysis and a review of competitive severance opportunities. In addition, the Compensation Committee utilized FW Cook to review our peer group composition. Our Compensation Committee directed FW Cook to provide it with the benefits of its industry experience after taking into account the specific needs and positioning of our Company. The Compensation Committee intends to continue to engage a compensation consulting firm to perform executive and director compensation studies as needed.
While FW Cook provided data and advice regarding our compensation practices, our Compensation Committee exercises autonomy when formulating and presenting recommendations to our Board regarding our compensation practices for our named executive officers and Board of Directors. Our Compensation Committee has assessed FW Cook’s independence pursuant to applicable SEC rules and concluded that no conflict of interest exists that would prevent FW Cook from independently advising the Compensation Committee.
| 16 |
Management’s Role in Establishing Our Executive Compensation
Our Chief Executive Officer plays an important role in assisting our Compensation Committee in establishing the compensation for our executive officers. Key aspects of this role include:
| • | suggesting to the Compensation Committee business performance targets and objectives; |
| • | evaluating employee performance; and |
| • | recommending salary and bonus levels and long-term incentive compensation. |
During this process, the Compensation Committee may ask our Chief Executive Officer, Chairman of the Board and other executive officers to provide guidance to the Compensation Committee regarding background information for our strategic objectives, an evaluation of the performance of our executive officers, and compensation recommendations as to the executive officers. Members of the Compensation Committee met informally with our Chief Executive Officer and Chairman of the Board throughout the year to discuss compensation matters and compensation policies in order to obtain insight regarding the day-to-day performance of each of our executive officers.
Board and Committee Meetings
During the Company’s fiscal year ended June 30, 2017, the Board held eleven meetings and acted by unanimous written consent six times. Each director attended at least 75% of the Board’s meetings and the meetings of the Board committees on which he or she served.
At most scheduled meetings of the Board, the independent members of the Board met separately in executive session without management being present. A lead independent director elected by the independent directors is responsible for chairing such executive sessions. Currently, the lead independent director is Alan G. Levin.
During the Company’s fiscal year ended June 30, 2017, the Compensation Committee met nine times, the Audit & Risk Committee met five times and the Nominating and Governance Committee met five times.
Director Attendance at Annual Meetings
Our directors are encouraged, but not required, to attend the annual meeting of shareholders. All of our directors, with the exception of Mr. Kavuru, who was not appointed to the Board until February 2017, attended the 2016 annual meeting of shareholders.
Communications by our Shareholders to the Board
The Board recommends that shareholders direct to the Company’s secretary any communications intended for the Board. Shareholders can send communications by e-mail to srogers@aceto.com, by facsimile to (516) 627-6093, or by mail to Steven Rogers, Senior Vice President, Chief Legal Officer and Secretary, Aceto Corporation, 4 Tri Harbor Court, Port Washington, New York 11050.
This centralized process will assist the Board in reviewing and responding to shareholder communications in an appropriate manner. If a shareholder wishes to direct any communication to a specific board member, the name of that board member should be noted in the communication. The Board has instructed the Secretary to forward shareholder correspondence only to the intended recipients, but the Board has also instructed the Secretary to review all shareholder correspondence and, in his discretion, not forward any items that he deems to be of a commercial or frivolous nature or otherwise inappropriate for the Board's consideration. Any such items may be forwarded elsewhere in the Company for review and possible response. The Company has adopted a Non-Retaliation Policy, or a whistleblower policy, which establishes procedures for submitting these types of concerns, either personally or anonymously through a toll free telephone “hotline” operated by an independent party. A copy of our Non-Retaliation Policy is available on our website atwww.aceto.com.
| 17 |
CORPORATE GOVERNANCE
The Company operates within a comprehensive plan of corporate governance for the purpose of defining responsibilities, setting high standards of professional and personal conduct and assuring compliance with those responsibilities and standards. In July 2002, Congress passed the Sarbanes-Oxley Act of 2002 which, among other things, establishes, or provides the basis, for, a number of corporate governance standards and disclosure requirements. In addition, the NASDAQ Stock Market has corporate governance and listing requirements. The Company also has policies covering non-discrimination and diversity that are communicated to all employees. The Board has initiated numerous actions consistent with these rules and will continue to monitor developments in the area of corporate governance regularly.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics for all Aceto directors and employees that includes provisions ranging from restrictions on gifts to conflicts of interest. All employees are required annually to affirm in writing their acceptance of the code. This Code of Business Conduct and Ethics is in accordance with NASDAQ Listing Rule 5610 and is published on the Company’s corporate website –www.aceto.com. We intend to satisfy the disclosure requirement under Item 5.05(c) of Form 8-K regarding an amendment to, or a waiver from, a provision of our Code of Business Conduct and Ethics by posting such information on our website,www.aceto.com.
Disclosure Committee
The Company has formed a disclosure committee, comprised of senior management, including senior financial personnel, to formalize processes to ensure accurate and timely disclosure in Aceto’s periodic reports filed with the United States Securities and Exchange Commission and to implement certain disclosure controls and procedures. The disclosure committee operates under a formal charter that governs its duties and conduct. The charter is published on the Company’s corporate website –www.aceto.com.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16 of the Exchange Act, the Company's directors, certain of the Company’s officers and beneficial owners of more than 10% of the Company's Common Stock are required to file certain reports, within specified time periods, indicating their holdings of and transactions in the Common Stock and derivative securities of Aceto. Based solely on a review of such reports provided to the Company and written representations from such persons regarding the necessity to file such reports, the Company is not aware of any failures to file reports or report transactions in a timely manner during the Company's fiscal year ended June 30, 2017 except for a late Form 4 for one transaction for Charles Alaimo, Senior Vice President, Human Resources, that was filed approximately three months late.
| 18 |
The executive officers of Aceto, and their ages, as of October 10, 2017, are as follows:
| Name | Age | Position | ||
| William C. Kennally, III | 61 | President and Chief Executive Officer | ||
| Douglas Roth | 60 | Senior Vice President and Chief Financial Officer | ||
| Walter Kaczmarek, III | 58 | Chief Operating Officer | ||
| Albert L. Eilender | 74 | Chairman | ||
| Frank DeBenedittis | 63 | Senior Vice President, Corporate Business Development | ||
| Charles J. Alaimo | 51 | Senior Vice President, Human Resources | ||
| Steven Rogers | 56 | Senior Vice President, Chief Legal Officer and Secretary |
William C. Kennally, III.Mr. Kennally retired from Pfizer in 2015 after 37 years of service, most recently as Regional President North America, Global Established Pharma Division from 2014 to 2015 and Regional President North America, Global Established Products from 2010 to 2014. Both roles involved leading three separate and distinct brand businesses and two generic businesses. From 2001 to 2009, Mr. Kennally was President of Greenstone, LLC, a generic and authorized generic pharmaceutical supplier which became a wholly owned subsidiary of Pfizer, Inc. after Pfizer’s acquisition of Pharmacia. Mr. Kennally started his professional career in Sales with the Upjohn Company, which was later acquired by Pharmacia, and followed a Pharmaceutical Sales Career pathway that included front line management and a corporate office position as Sales Incentive Compensation Manager. Mr. Kennally graduated from St. Anselm College with a B.S. in Criminal Justice.
Douglas Roth. Mr. Roth has been Senior Vice President and Chief Financial Officer since March 2010 and had previously been Vice President and Chief Financial Officer since joining the Company in May 2001. Prior to joining the Company, Mr. Roth was the Vice President and Chief Financial Officer of CitySprint 1-800 Deliver from September 1998 through April 2001. Mr. Roth holds a bachelor degree in accounting from the State University of New York at Oswego and an MBA in finance from Fordham University.
Walter Kaczmarek, III. Mr. Kaczmarek was appointed Chief Operating Officer of Aceto effective August 1, 2016. Mr. Kaczmarek possesses more than 25 years of experience in the pharmaceutical industry spanning the value chain from development to manufacturing to sales and marketing. Prior to joining Aceto, he served as President, Multisource Pharmaceutical Division of Mallinckrodt Pharmaceuticals from November 2012 to July 2016. Prior to serving at Mallinckrodt, he held various positions of increasing responsibility including Senior Vice President at Fougera Pharmaceuticals, Inc., from February 2012 to November 2012 and Vice President, National Accounts, at Nycomed US Inc., from November 2004 to February 2012 and Vice President, National Accounts, at McKesson Corporation from October 1998 to November 2004. Mr. Kaczmarek holds a Bachelor of Business Administration from Stetson University and since June 2013 serves on the Advisory Board of McKesson Corporation. In addition, Mr. Kaczmarek served on the Advisory Board of AmerisourceBergen Corporation from 2008 to 2010.
Albert L. Eilender. Mr. Eilender has been the Chairman of the Board since October 2009. He joined the Board in 2000, was the lead independent director from 2005 to September 2009 and served as Chief Executive Officer of the Company from September 2010 to January 2013. He is the sole owner of Waterways Advisory Services, a firm specializing in advising companies on developing and evaluating options relative to mergers, acquisitions and strategic partnerships in the chemical industry. Mr. Eilender has not been active in the operations of this enterprise since October 2009. He has more than 35 years of diverse senior level experience in the specialty chemicals and pharmaceutical industry and has had direct financial responsibility, with significant experience in mergers, acquisitions and joint ventures, both domestically and internationally. He has also served on the boards of numerous industry trade associations during his career.
| 19 |
Frank DeBenedittis.Mr. DeBenedittis has served as Senior Vice President, Corporate Business Development since August 2011 and International Senior Vice President, Active Pharmaceutical Ingredients since February 2011. Prior to that, Mr. DeBenedittis was Executive Vice President since January 2009 and Senior Vice President of the Company since 2001. Mr. DeBenedittis joined the Company in 1979 as a marketing assistant and held various positions within the Company including Assistant Product Manager, Product Manager, Assistant Vice President and Vice President. In addition, Mr. DeBenedittis served on the board of directors of Rising Pharmaceuticals, Inc., a wholly owned subsidiary of the Company, until May 2017. Mr. DeBenedittis currently serves on the Executive Committee of Rising Pharmaceuticals Inc. Mr. DeBenedittis holds a B.A. in Chemistry from Stony Brook University.
Charles J. Alaimo.Mr. Alaimo has been Senior Vice President, Human Resources of the Company since July 2012 and Vice President, Human Resources, since January 2011. Mr. Alaimo oversees Aceto’s global human resources functions. Prior to joining the Company, from 2008 to 2011, Mr. Alaimo was Director, Global Human Resources for Coby Electronics where he oversaw all human resources activities for this private consumer electronics company. From 2004 to 2007, he was Director, Human Resources and General Affairs for TDK Electronics Corporation. Mr. Alaimo also served as Regional Manager, Human Resources for Group One Trading, LP, a private, derivatives trading firm, from 2000 to 2004. Mr. Alaimo earned his B.B.A. in Human Resources Management from Baruch College in 1989 and a M.S. in Industrial and Labor Relations from Baruch College in 2005.
Steven Rogers.Mr. Rogers has been Senior Vice President, Chief Legal Officer and Secretary of the Company since April 2016, Senior Vice President, General Counsel and Secretary of the Company since October 2011 and Vice President, General Counsel and Secretary since January 2011. Prior to joining the Company, Mr. Rogers was the General Counsel of Rising, certain assets of which the Company acquired in December 2010. Mr. Rogers oversees all legal and regulatory matters and provides legal counsel to the Company’s senior management and the Board. From 1986 to 1994, Mr. Rogers was a corporate litigator at Kelley Drye & Warren LLP. From 1994 to 1997, he was Associate General Counsel/First Vice-President of PaineWebber, Inc. From 1997 to 2009, he served as General Counsel of LibertyView Capital Management, a SEC-registered investment adviser, owned by Credit Agricole and then Neuberger Berman, LLC, where he was responsible for all legal, compliance and regulatory matters and oversaw the research and risk departments. Mr. Rogers earned his J.D. from the Fordham University School of Law in 1986 and a B.A. in History from the State University of New York at Binghamton in 1983. He is a member of the New York and Connecticut State Bars, as well as various federal courts including the United States Supreme Court.
The executive officers of the Company are elected annually by the Board at its meeting held immediately after the annual meeting of shareholders and will hold office for one year and until their successors have been duly elected and qualified or until their earlier resignation or removal.
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
The mission of our Compensation Committee is to ensure that the programs for executive and staff compensation best help the Company achieve its strategic goals and include best practices of our industry.
The objectives of our compensation program are to:
| · | provide compensation and benefit plans that are equitable to our executives and other employees as well as our shareholders; |
| · | enable us to attract, motivate and retain highly qualified, experienced talent; and |
| · | align our rewards with long term corporate goals as well as shareholder expectations and value. |
We strive to reward our named executive officers fairly and competitively through a properly balanced mix of base salary, short-term and long-term incentives, benefits, career growth and development opportunities. We believe this mix drives company performance and assists with employee retention. We do this by weighting the compensation of our named executive officers toward long-term incentives over salary and annual cash incentives. We regularly review our executives’ compensation against our own selected peer group, and we review the composition of our peer group annually. Historically, our compensation program has provided a strong balance of retention and ownership with a direct linkage to the Company’s strategic objectives, operating and shareholder performance.
| 20 |
When we refer to our “named executive officers” in this proxy statement, we are referring to our chief executive officer throughout our last fiscal year, our chief financial officer throughout our last fiscal year and our three most highly compensated executive officers other than our chief executive officer and chief financial officer who were serving as executive officers as of June 30, 2017. Our named executive officers for our fiscal year ended June 30, 2017 were the following individuals:
Salvatore Guccione, President and Chief Executive Officer
Douglas Roth, Senior Vice President and Chief Financial Officer
Walter Kaczmarek, III, Chief Operating Officer
Albert L. Eilender, Chairman
Frank DeBenedittis, Senior Vice President, Corporate Business Development
As noted elsewhere in this proxy statement, Salvatore Guccione stepped down as President and Chief Executive Officer on September 27, 2017 and has been succeeded by William Kennally. However, since Mr. Guccione was serving in that capacity during our most recently completed fiscal year and Mr. Kennally was not an executive officer at any point during that year, Mr. Guccione is considered a named executive officer for purposes of this proxy statement and Mr. Kennally (who has served as a director since 2016) is not considered a named executive officer for these purposes.
Our Compensation Philosophy and Objectives
The philosophy of the Compensation Committee is to ensure that the strategic vision of our executive team is supported by modern compensation practices that reward achievement and creation of shareholder value.
Consistent with those purposes, our compensation program employs the following principles:
| • | compensation among our executives and staff should be equitable regardless of gender, race, religion or sexual orientation; |
| • | the compensation program should pay for performance, that is, reward the achievement of our strategic initiatives and short-term and long-term operating and financial goals, and provide disincentives for underperformance; |
| • | compensation should reflect differences in position and responsibility; |
| • | compensation should be comprised of a mix of cash and equity-based compensation that aligns the short-term and long-term interests of our executives with those of the Company, the corporation strategy and our shareholders; and |
| • | the compensation program should be understandable and transparent. |
In structuring a compensation program that implements these principles, we have developed the following strategies for our executive compensation program:
| • | overall compensation levels should be competitive with our peers and should be set at levels that allow us to attract and retain talented leaders and motivate them to achieve superior results; |
| • | a majority of total compensation should be contingent on, and variable with, achievement of objective corporate performance goals; |
| • | total compensation should be higher for individuals with greater responsibility and greater ability to influence achievement of our operating and financial goals and strategic initiatives; |
| • | the number of different elements in our compensation program should be limited, and those elements should be stable year-over-year, and effectively communicated to and understood by executives and shareholders; and |
| 21 |
| • | compensation should be set at levels that promote a sense of equity among all employees while giving due regard to any premiums that may be necessary in our industry in order to attract top talent at the executive level. |
Consideration of Last Year’s “Say on Pay” Advisory Vote
At last year’s annual meeting of shareholders, we held an advisory shareholder vote on executive compensation. More than 97% of the shares that voted approved our executive compensation described in last year’s proxy statement. The Compensation Committee viewed the results of this vote as a strong indication that the Company’s shareholders support the compensation policies and practices of the Company. Accordingly, the results of this vote did not affect the Company's executive compensation decisions and policies for our named executive officers during the fiscal year ended June 30, 2017.
Elements of Our Executive Compensation
Our executive compensation program has historically been comprised of base salary, performance-based annual cash incentives, long-term equity incentive awards and fringe benefits. These elements of compensation have been supplemented by benefit plans to which the Company contributes, including our 401(k) plan and our supplemental executive retirement plan, as well as life insurance premiums paid by the Company for employee life insurance policies. We use our experience and judgment to determine what is the appropriate mix of compensation elements for each executive. In allocating compensation among the various elements, the Compensation Committee considers many factors including market data, Company performance, individual performance, the impact of the executive’s position on the Company, individual past performance, experience in the position, any anticipated increase in the individual’s responsibilities, internal pay equity for comparable positions, and succession planning and retention strategies.
With the adoption of the Aceto Corporation 2010 Equity Participation Plan (the “2010 Plan”) in December 2010 and the Aceto Corporation 2015 Equity Participation Plan (the “2015” Plan) in December 2015, our long-term incentive compensation component has been increased for our named executive officers, making a significant and in some cases majority portion of their annual total direct compensation dependent on long-term stock appreciation and long-term company financial and operating performance. We have concluded that shifting some executive compensation to long-term incentive compensation will further align our named executive officers’ goals and interests with those of our shareholders and encourage long-term retention and operational and financial success.
The pie charts below show that most of our named executive officers’ target compensation for fiscal 2017 was variable (71% for CEO and an average of 68% for our other named executive officers). Variable pay includes the target value of short-term cash incentives and restricted stock.
| 22 |
Our peer group was reviewed with FW Cook in fiscal 2017 and at that time, it was decided to change our peer group to a new peer group consisting of 15 companies selected by us to reflect our current business strategy of focusing more on the end market pharmaceutical space. These companies included in the new peer group reflect Aceto’s business strategy, placing greater emphasis on companies whose primary business is tied to health care. The selection criteria to evaluate the peer group companies included comparable business content/model, company size, business characteristics and executive talent. During the fiscal year, our consultant conducted a benchmarking review consisting of a competitive review of executive compensation levels for certain executive officers, including our named executive officers. The analysis focused on target compensation in order to provide market competitive comparisons for setting executive compensation opportunities. The Compensation Committee’s benchmarking criteria for these purposes included comparisons of executive base salary compensation, performance awards, long term incentive compensation, total cash compensation (base salary plus annual performance awards), and total direct compensation (total cash compensation plus long-term incentive compensation) of our peer group. Based upon the results of the study, it was determined that Aceto’s executive officers are generally positioned approximately 15% below market levels for base salary and approximately 12% below the market median for target bonus percentage. For long-term incentives, the Company’s executive officers were positioned approximately 15% above the market median. Aceto’s target total direct compensation positioning approximates the market overall median, reflective of generally below-market target total cash combined with above market long-term incentives. For executive compensation planning and benchmark analysis purposes, the financial details of the peer group companies are listed below in the table.
As shown below, the Company ranked in the upper half of the peer group in terms of revenues, slightly below the 50th percentile for profitability and near the bottom for equity market capitalization and number of employees.
| Fiscal | Equity | Fiscal Year | Fiscal Year | |||||||||||||
| Year End | Market Cap. | End Operating | End # of | |||||||||||||
| Company Name | Sales | 6/30/2017 | Income(1) | Employees | ||||||||||||
| (in thousands, except # of employees) | ||||||||||||||||
| Akorn, Inc. | $ | 1,117,000 | $ | 4,185,000 | $ | 372,000 | 2,388 | |||||||||
| Albany Molecular Research, Inc. | 570,000 | 923,000 | 8,000 | 3,085 | ||||||||||||
| American Vanguard Corporation | 312,000 | 514,000 | 21,000 | 395 | ||||||||||||
| Amphastar Pharmaceuticals, Inc. | 255,000 | 817,000 | 16,000 | 1,541 | ||||||||||||
| ANI Pharmaceuticals, Inc. | 129,000 | 545,000 | 34,000 | 143 | ||||||||||||
| Cambrex Corporation | 490,000 | 1,946,000 | 130,000 | 1,295 | ||||||||||||
| Depomed, Inc. | 456,000 | 670,000 | 24,000 | 490 | ||||||||||||
| Impax Laboratories, Inc. | 824,000 | 1,187,000 | 91,000 | 1,495 | ||||||||||||
| Innophos Holdings, Inc. | 725,000 | 854,000 | 81,000 | 1,319 | ||||||||||||
| Lannett Company, Inc. | 637,000 | 760,000 | 190,000 | 1,126 | ||||||||||||
| Lawson Products, Inc. | 277,000 | 196,000 | 1,000 | 1,590 | ||||||||||||
| Prestige Brands Holdings, Inc. | 882,000 | 2,797,000 | 279,000 | 530 | ||||||||||||
| Quaker Chemical Corporation | 747,000 | 1,930,000 | 84,000 | 2,020 | ||||||||||||
| Sagent Pharmaceuticals, Inc. | 318,000 | N/A | (2) | 9,000 | 440 | |||||||||||
| USANA Health Sciences, Inc. | 1,006,000 | 1,572,000 | 139,000 | 1,788 | ||||||||||||
| Aceto Corporation | 638,000 | 465,000 | 44,000 | 286 | ||||||||||||
| % Rank | 60 | % | 7 | % | 47 | % | 7 | % | ||||||||
(1) Operating income is adjusted to exclude one-time merger-related expenses.
(2) Market cap data is unavailable as the company was acquired by Nichi-Iko Pharmaceutical Co., Ltd. in August, 2016
Base Salary
We provide our named executive officers with base salary to provide them with a fixed base amount of compensation for services rendered during a fiscal year. We believe this is consistent with competitive practices and will help assure our retention of qualified leadership in those positions. We intend to maintain base salaries at competitive levels in the marketplace for comparable executive ability and experience, taking into consideration changes from time to time in the consumer price index and whether competitive adjustments are necessary to promote retention. Consideration also is given in each case to the historical results achieved by each executive and the Company during each executive’s tenure, to whether each executive is enhancing the team oriented nature of the executive group, the potential of each executive to achieve future success, and the scope of responsibilities and experience of each executive. In addition, evaluations are made regarding the competencies of each named executive officer that are considered essential to our success.
| 23 |
The Compensation Committee evaluated the historical performance of our executive officers and considered the compensation levels and programs within the peer group before it made its fiscal 2017 compensation recommendations to the full board. As previously discussed, FW Cook completed an assessment during the fiscal year that reviewed the compensation program for certain executive officers, including our named executive officers, regarding base pay, performance awards and long-term incentive compensation. The report indicated that the pay mix for Aceto’s executive officers is weighted more toward long-term incentive compensation than the companies included in the peer group. The Compensation Committee recommended and the Board approved increases in base salaries of our executive officers averaging 3% for fiscal 2018.
Annual Performance Awards
We grant annual performance awards to encourage achievement of goals established for our short-term and long-term financial and operating results, and to reward our named executive officers for consistent performance in assisting us in achieving those goals. Pre-determined annual performance measures were utilized in connection with our performance awards for the fiscal year ended June 30, 2017.
For our fiscal year ended June 30, 2017, the annual performance award criteria for 85% of the awards payable under our Executive Award Plan established by our Compensation Committee, and approved by the Board, were based upon results obtained with respect to the following four financial factors: (1) company sales; (2) company gross profit; (3) company net income; and (4) company earnings per share. For the named executive officers, the financial factors were weighted at 15% for company sales, 10% for company gross profit, 30% for company net income, 30% for company earnings per share and the individual performance goals (which are qualitative in nature) were weighted at 15%. The specific performance-related financial factors at the minimum, target and maximum levels for the fiscal year ended June 30, 2017 were:
| Performance Metric | Minimum | Target | Maximum | Actual Results | ||||||||||||
| Company Sales | $ | 446,021,919 | $ | 630,377,646 | $ | 1,189,391,784 | $ | 638,318,000 | ||||||||
| Company Gross Profit | $ | 110,901,593 | $ | 147,868,790 | $ | 295,737,580 | $ | 140,792,000 | ||||||||
| Company Net Income | $ | 34,994,250 | $ | 46,659,000 | $ | 93,318,00 | $ | 37,857,000 | * | |||||||
| Company Earnings Per Share | $ | 1.17 | $ | 1.56 | $ | 3.12 | $ | 1.16 | * | |||||||
*Adjusted for certain charges including acquisition related costs and environmental remediation charge.
The annual award percentages at the minimum, target and maximum levels for the fiscal year ended June 30, 2017 for each of the named executive officers were as follows:
| Executive Officer | Minimum | Target | Maximum | |||
| Salvatore Guccione | 37.5% of base salary | 75% of base salary | 150% of base salary | |||
| Douglas Roth | 25% of base salary | 50% of base salary | 100% of base salary | |||
| Walter Kaczmarek, III | 30% of base salary | 60% of base salary | 120% of base salary | |||
| Albert L. Eilender | 30% of base salary | 60% of base salary | 120% of base salary | |||
| Frank DeBenedittis | 22.5% of base salary | 45% of base salary | 90% of base salary |
| 24 |
The following describes the performance-based bonus criteria for each named executive officer:
Salvatore Guccione, President and Chief Executive Officer. Mr. Guccione’s 2017 annual performance award was $282,749 and reflected, on an individual performance basis, his search for acquisition opportunities.
Douglas Roth, Chief Financial Officer. Mr. Roth’s 2017 annual performance award was $114,654 and reflected, on an individual performance basis, his achievement of an individual performance goal of identifying certain strategies in Europe.
Walter Kaczmarek III, Chief Operating Officer.Mr. Kaczmarek’s 2017 annual performance award was $169,037 and reflected, on an individual performance basis, his review of the Company’s business model, including making recommendations with respect to certain processes.
Albert L. Eilender, Chairman. Mr. Eilender’s 2017 annual performance award was $173,930 and reflected, on an individual performance basis, his transitioning the newly hired COO to Aceto’s policies and working with the COO on the strategic direction of the Company.
Frank DeBenedittis, Senior Vice President, Corporate Business Development. Mr. DeBenedittis' 2017 annual performance award was $90,287 and reflected, on an individual performance basis, his contributing to our merger and acquisition efforts by establishing contacts and relationships at several generic pharmaceutical companies.
The Compensation Committee recommended and the Board approved continued emphasis on the use of objective performance criteria to determine annual performance awards for the fiscal year ended June 30, 2017. The precise criteria that we will use to determine the annual performance award for our executive officers will vary depending on each officer’s specific responsibilities. In all cases, annual performance awards paid to any one individual cannot exceed two times the individual’s base salary.
Long-Term Incentive Compensation
Based upon the reviews by our compensation consultant in fiscal 2017 as well as in prior years, our Compensation Committee recommended that our compensation mix include a greater proportion of long-term incentive compensation. We continue to place increasing emphasis on compensation tied to the Company’s strategic objectives, long-term financial and operating performance. We believe that these incentives further align management’s interest with the interests of our shareholders.
For fiscal 2017, our Compensation Committee recommended and the Board approved, a three year long term incentive compensation program pursuant to the 2015 Plan consisting of restricted stock and performance-vested restricted stock units for our executive officers. The restricted stock awards vest over three years. Performance-vested restricted stock units will cliff vest 100% at the end of the third year following the grant upon the attainment of pre-tax income and total shareholder return performance goals relative to the Russell 2000 Index. The number of shares subject to the 2017 long term incentive awards is set forth in the table entitled “2017 Grants of Plan-Based Awards.”
Recoupment of Awards
Each performance award paid shall for a period of two years (or such longer period as the Compensation Committee may determine in its discretion) be subject to forfeiture, cancelation and/or repayment to the Company if: (i) the payment of such award (or portion thereof) was predicated upon the achievement of certain financial results or other performance criteria; (ii) in the Compensation Committee’s view, the participant either benefited from a calculation that later proves to be materially inaccurate, or engaged in one or more material acts of fraud or misconduct that caused or partially caused the need for a financial restatement by the Company; and (iii) in the Compensation Committee’s view, a lesser payment (or no payment) of such award would have occurred based on a correct calculation or upon restated financial results or other performance criteria.
| 25 |
Other Compensation
Our U.S. executive officers may also participate in our 401(k) plan on the same terms as the rest of our eligible employees. We currently make a non-elective contribution on behalf of each of our participating employees equal to 3% of the participant’s eligible compensation, including base salary and bonus, up to a maximum of $265,000 of eligible compensation. We also have historically made discretionary contributions for each of our participating employees on an annual basis up to approximately 8% of the participant’s eligible compensation. Our participating employees are fully vested in both their salary deferrals and non-elective contributions, but Company discretionary contributions vest at the rate of 20% per year with 100% vesting after five years of participation.
We also maintain a supplemental executive retirement plan, commonly called a “SERP”. This plan is a non-qualified deferred compensation plan intended to provide executive officers with supplemental retirement benefits. Annual Company contributions to the SERP are fixed by the Board and vest at the rate of 20% per year of service over five consecutive years. In addition to Company contributions, participants can elect to defer some or all of their bonus compensation into their SERP account for the following year.
Perquisites
We allow certain of our executive officers to use a Company automobile as a perquisite to enhance our compensation package and make it more attractive relative to our competition. The financial value of the personal use of a Company automobile for each of these executive officers for our fiscal year ended June 30, 2017 is set forth in footnote six to the All Other Compensation column of theSummary Compensation Table contained in this proxy statement.
Stock Ownership Requirements
In order to further align management’s interest with the interests of our shareholders, our Compensation Committee established, and the Board approved, stock ownership requirements for our Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers. These stock ownership requirements provide that our Chief Executive Officer must own shares of our common stock valued at three times his base salary and our Chief Financial Officer and our other three most highly compensated executive officers must own shares of our common stock valued at one and a quarter times their base salaries. As of the record date, the named executive officers have met their respective stock ownership requirements, with the exception of Mr. Kaczmarek, who was hired in August 2016 and has until August of 2021 to meet this requirement, and Mr. Kennally, who has until October of 2022 to meet this requirement. The stock ownership program also includes as a guideline, but not a requirement, that all our other executive officers own shares of our common stock valued at one half times base salary by such date. Shares of our restricted stock that are granted but not yet vested count toward these stock ownership guidelines.
The stock ownership program also includes as a guideline, but not a requirement, that all non-employee directors achieve a level of ownership of our common stock, including restricted stock granted but not yet vested, valued at five times the annual cash retainer by January 2020.
Tax and Accounting Implications of Executive Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended, provides that compensation in excess of $1 million paid to named executive officers (other than our Chief Financial Officer) is not deductible unless it satisfies the exception for qualified performance-based compensation under Section 162(m). Our Compensation Committee and Board generally consider all current compensation paid to our named executive officers (other than base salary) to be performance-based, even though certain elements of our compensation may not satisfy the more limited exception for qualified performance-based compensation under Section 162(m). However, stock options awarded to our named executive officers are intended to qualify as qualified performance-based compensation under Section 162(m), as is the portion of annual bonuses tied to the achievement of financial targets under our Executive Performance Award Plan, which was approved by our shareholders at the 2012 annual meeting. A proposal to approve the material terms of the performance goals under our Executive Performance Award Plan will be considered at the annual meeting of shareholders. It is expected that approximately $275,000 in compensation attributable to restricted stock and other compensation will be treated as nondeductible by virtue of Section 162(m). While the Compensation Committee considers the impact of Section 162(m) on our compensation program, it reserves the right to pay nondeductible compensation if it determines that it is appropriate to do so. It is our policy to review all compensation plans and policies against tax, accounting, and SEC regulations, including Section 162(m), Internal Revenue Code Section 409A, and generally accepted accounting principles.
| 26 |
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement. Based on that review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in the Company’s annual report on Form 10-K for its last completed fiscal year.
Natasha Giordano (Chairperson)
Hans C. Noetzli
Daniel B. Yarosh
| 27 |
As noted above, for purposes of our discussion of executive compensation, Salvatore Guccione (who stepped down as President and Chief Executive Officer on September 27, 2017) is treated as a named executive officer and William Kennally (who commenced serving as President and Chief Executive Officer effective as of October 2, 2017) is not treated as a named executive officer.
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding the compensation of our named executive officers for the fiscal years ended June 30, 2017, June 30, 2016 and June 30, 2015. Except as set forth below, no other compensation was paid to these individuals during the years presented. Mr. Kaczmarek commenced employment with us effective as of August 1, 2016. As a result, the compensation reflected below with respect to Mr. Kaczmarek reflects compensation for 11 months.
| Name and Principal Position | Year | Salary($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compen- sation ($)(6) | Total ($) | ||||||||||||||||||||||||
| Salvatore Guccione | 2017 | $ | 619,914 | $ | - | $ | 1,134,423 | $ | 149,600 | $ | 282,749 | $ | 90,273 | $ | 2,276,959 | |||||||||||||||||
| President and Chief Executive | 2016 | 605,205 | - | 1,441,823 | - | 394,908 | (5) | 101,955 | 2,543,891 | |||||||||||||||||||||||
| Officer | 2015 | 584,810 | - | 843,938 | - | 443,326 | (5) | 100,592 | 1,972,666 | |||||||||||||||||||||||
| Douglas Roth | 2017 | 377,060 | - | 617,042 | - | 114,654 | 57,624 | 1,166,380 | ||||||||||||||||||||||||
| Chief Financial Officer | 2016 | 368,100 | - | 782,785 | - | 217,009 | (5) | 66,788 | 1,434,682 | |||||||||||||||||||||||
| 2015 | 353,998 | - | 486,350 | - | 220,226 | (5) | 76,596 | 1,137,170 | ||||||||||||||||||||||||
| Walter Kaczmarek, III | 2017 | 429,327 | 150,000 | 1,610,600 | - | 169,037 | 307,677 | 2,666,641 | ||||||||||||||||||||||||
| Chief Operating Officer | ||||||||||||||||||||||||||||||||
| Albert L. Eilender | 2017 | 455,649 | - | 1,081,533 | - | 173,930 | 59,457 | 1,770,569 | ||||||||||||||||||||||||
| Chairman | 2016 | 425,000 | - | 1,204,940 | - | 255,922 | 63,539 | 1,949,401 | ||||||||||||||||||||||||
| 2015 | 425,000 | - | 745,999 | - | 314,018 | 64,728 | 1,549,745 | |||||||||||||||||||||||||
| Frank DeBenedittis | 2017 | 332,342 | - | 390,141 | - | 90,287 | 46,968 | 859,738 | ||||||||||||||||||||||||
| Senior Vice President | 2016 | 326,751 | - | 494,229 | - | 114,808 | 48,918 | 984,706 | ||||||||||||||||||||||||
| 2015 | 314,987 | - | 297,825 | - | 138,483 | 49,974 | 801,269 | |||||||||||||||||||||||||
(1) Bonuses paid during 2017, 2016 and 2015 pursuant to the Company’s bonus plan are reflected under the column entitled “Non-Equity Incentive Plan Compensation.” The Company did not pay discretionary bonuses during 2017, 2016 and 2015 with the exception of a sign-on bonus paid to Mr. Kaczmarek in 2017; all other bonuses were performance-based.
(2)Amounts shown in this column reflect the aggregate grant date fair value of restricted stock awards and restricted stock units granted during the year computed in accordance with generally accepted accounting principles.
(3)Amounts shown in this column reflect the aggregate grant date fair value of stock option awards granted during the year computed in accordance with generally accepted accounting principles. There were no stock options granted to our named executive officers during fiscal 2016 and 2015.
(4)Reflects cash bonuses under the Company’s bonus plan. Bonuses listed for a particular year represent bonuses earned with respect to such year even though the bonuses were paid during the first quarter of the subsequent year.
(5) The bonus amount for Mr. Guccione includes $39,491 and $39,338 of restricted stock, which was received by Mr. Guccione in lieu of a portion of his bonus for fiscal years 2016 and 2015, respectively. The bonus amount for Mr. Roth includes $18,201 and $19,027 of restricted stock, which was received by Mr. Roth in lieu of a portion of his bonus for fiscal years 2016 and 2015, respectively.
(6)All Other Compensation consists of the personal use of a Company owned automobile, contributions to retirement plans, reimbursement of relocation expenses and compensation recognized from the issuance of premium shares of restricted stock as described in footnote 7 as follows:
| 28 |
| Name | Year | Company Automobile ($) | Company Contributions to Retirement Plans ($) | Issuance of premium shares of restricted stock ($) (7) | Relocation Expenses ($) (8) | Total Other Compensation ($) | ||||||||||||||||||
| S. Guccione | 2017 | $ | 18,321 | $ | 66,534 | $ | 5,418 | - | $ | 90,273 | ||||||||||||||
| 2016 | 18,133 | 71,407 | 12,415 | - | 101,955 | |||||||||||||||||||
| 2015 | 15,054 | 72,469 | 13,069 | - | 100,592 | ||||||||||||||||||
| D. Roth | 2017 | 9,495 | 45,987 | 2,142 | - | 57,624 | ||||||||||||||||||
| 2016 | 9,984 | 50,656 | 6,148 | - | 66,788 | |||||||||||||||||||
| 2015 | 9,869 | 49,773 | 16,954 | - | 76,596 | |||||||||||||||||||
| W. Kaczmarek | 2017 | 1,299 | 61,217 | - | 245,161 | 307,677 | ||||||||||||||||||
| A. Eilender | 2017 | 6,577 | 52,880 | - | - | 59,457 | ||||||||||||||||||
| 2016 | 8,092 | 55,447 | - | - | 63,539 | |||||||||||||||||||
| 2015 | 6,715 | 58,013 | - | - | 64,728 | |||||||||||||||||||
| F. DeBenedittis | 2017 | 4,436 | 42,532 | - | - | 46,968 | ||||||||||||||||||
| 2016 | 5,439 | 43,479 | - | - | 48,918 | |||||||||||||||||||
| 2015 | 6,238 | 43,736 | - | - | 49,974 | |||||||||||||||||||
(7) Eligible employees have the right to purchase restricted stock with a portion of their annual bonus (up to 20%). Each restricted stock purchase is entitled to a premium equal to 25% of the number of shares of the purchase, paid on the third anniversary of the purchase, only if the employee is still employed with the Company.
(8) Represents expenses incurred in relocating employee.
| 29 |
2017 GRANTS OF PLAN-BASED AWARDS
The following table discloses information regarding plan awards made to each of our named executive officers during the year ended June 30, 2017.
| Estimated Future Payouts Under Non- Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(3) | |||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||
| Salvatore Guccione | 9/01/16 | $ | 238,361 | $ | 476,723 | $ | 953,445 | 13,750 | 27,500 | 48,125 | 27,500 | 27,500 | 20.03 | $ | 1,284,023 | |||||||||||||||||||||||||||
| Douglas Roth | 9/01/16 | 96,655 | 193,310 | 386,619 | 7,500 | 15,000 | 26,250 | 15,000 | - | - | 617,042 | |||||||||||||||||||||||||||||||
| Walter Kaczmarek, III | 9/01/16 | 142,500 | 285,000 | 570,000 | 7,500 | 15,000 | 26,250 | 55,000 | - | - | 1,610,600 | |||||||||||||||||||||||||||||||
| Albert Eilender | 9/01/16 | 146,625 | 293,250 | 586,500 | 13,225 | 26,450 | 46,288 | 26,450 | - | - | 1,081,533 | |||||||||||||||||||||||||||||||
| Frank DeBenedittis | 9/01/16 | 76,113 | 152,226 | 304,453 | 4,750 | 9,500 | 16,625 | 9,500 | - | - | 390,141 | |||||||||||||||||||||||||||||||
(1) Actual awards paid for 2017 performance are included in theSummary Compensation Table under the column Non-Equity Incentive Plan Compensation, while opportunities for 2017 at threshold, target and maximum are included in the above2017 Grants of Plan-Based Awards.These amounts were determined using financial factors related to our company and results obtained with respect to certain individual goals that were tailored for each named executive officer and approved by our Compensation Committee.
(2) Represents a grant of performance-vested restricted stock units, which grant could be as much as 175% of the original grant if certain performance criteria, including adjusted pre-tax income and total shareholder return are met. Performance-vested restricted stock units will cliff vest 100% at the end of the third year following grant in accordance with the performance metrics set forth in the applicable executive officer’s performance-vested restricted stock unit grant.
(3) Amounts shown in this column reflect the aggregate grant date fair value of restricted stock awards, restricted stock units and option awards granted during the year computed in accordance with generally accepted accounting principles. These awards relate to equity awards granted in connection with the Company’s long-term incentive compensation program.
| 30 |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table discloses information regarding outstanding equity awards granted or accrued as of June 30, 2017 for each of our named executive officers.
| Option Awards | Stock Awards | |||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | Number of Securities Underlying Unexercised Options (#) Unexercisable(2) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($) (3) | ||||||||||||||||||
| Salvatore Guccione | 62,500 | - | $ | 5.77 | 10/05/2021 | 133,475 | $ | 2,062,189 | ||||||||||||||||
| 13,000 | - | 6.76 | 12/01/2021 | |||||||||||||||||||||
| 27,500 | 20.03 | 6/30/2021 | ||||||||||||||||||||||
| Douglas Roth | 20,000 | - | 7.76 | 12/02/2020 | 74,028 | 1,143,733 | ||||||||||||||||||
| 6,000 | - | 6.18 | 08/03/2021 | |||||||||||||||||||||
| Walter Kaczmarek, III | - | - | - | - | 70,000 | 1,081,500 | ||||||||||||||||||
| Albert Eilender | 6,199 | - | 8.05 | 12/06/2017 | 119,773 | 1,850,493 | ||||||||||||||||||
| 15,000 | - | 6.18 | 08/03/2021 | |||||||||||||||||||||
| Frank DeBenedittis | 5,000 | - | 8.62 | 12/04/2018 | 46,397 | 716,834 | ||||||||||||||||||
| 10,000 | - | 7.76 | 12/02/2020 | |||||||||||||||||||||
| 5,000 | - | 6.18 | 08/03/2021 | |||||||||||||||||||||
(1) The stock options vested over three years and have a term of ten years from the date of grant. The restricted stock awards also vest over three years. Performance-vested restricted stock units will cliff vest 100% at the end of the third year following grant in accordance with the performance metrics set forth in the award.
(2) The performance options vest if the closing stock price meets or exceeds the target price of $40 for 20 consecutive trading days prior to June 30, 2021 and the explicit service period of 1 year has been met. The options will expire June 30, 2021, if the stock price target is not achieved. If it is achieved, the options will expire ten years from the date of grant.
(3) Reflects amounts based on the closing market price of the Company’s common stock of $15.45 per share on June 30, 2017.
| 31 |
OPTION EXERCISES AND STOCK VESTED
The following table shows information concerning stock options exercised during fiscal 2017 by the named executive officers and restricted stock held by the named executive officers that vested during fiscal 2017:
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
| Salvatore Guccione | - | - | 69,168 | 1,447,931 | ||||||||||||
| Douglas Roth | - | - | 33,774 | 709,264 | ||||||||||||
| Walter Kaczmarek, III | - | - | - | - | ||||||||||||
| Albert L. Eilender | 30,000 | 363,654 | 50,832 | 1,067,729 | ||||||||||||
| Frank DeBenedittis | 5,000 | 34,434 | 20,648 | 433,819 | ||||||||||||
NON-QUALIFIED DEFERRED COMPENSATION
The following table shows the Non-Qualified Deferred Compensation amounts earned by the named executive officers during fiscal 2017:
| Name | Executive Contributions in Last FY($) | Registrant Contributions in Last FY ($) (1) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/Distributions ($) | Aggregate Balance at Last FYE($)(2) | |||||||||||||||
| Salvatore Guccione | $ | 25,000 | $ | 36,883 | $ | 24,693 | $ | - | $ | 307,408 | ||||||||||
| Douglas Roth | 20,000 | 16,336 | 21,463 | - | 494,380 | |||||||||||||||
| Walter Kaczmarek, III | - | 31,566 | - | - | 31,566 | |||||||||||||||
| Albert L. Eilender | 50,000 | 23,229 | 96,415 | - | 815,857 | |||||||||||||||
| Frank DeBenedittis | 30,000 | 12,881 | 16,034 | - | 823,370 | |||||||||||||||
(1) These amounts are reported in theSummary Compensation Table.
(2) Registrant contributions for prior fiscal years were included in the registrant’sSummary Compensation Table for previous years.
Deferred Compensation Plan
On March 14, 2005, the Board adopted the SERP. The SERP is a non-qualified deferred compensation plan intended to provide certain qualified executives with supplemental benefits beyond the Company’s 401(k) plan, as well as to permit additional deferrals of a portion of their compensation. Substantially all compensation deferred under the SERP, as well as Company contributions, is held by the Company in a grantor trust, which is considered an asset of the Company. The assets held by the grantor trust are mutual fund investments owned by the Company. Effective July 1, 2013, the SERP was frozen and a new plan, entitled “Aceto Corporation 2013 Senior Executive Retirement Plan” was adopted by the Company’s Board.
| 32 |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
On February 13, 2015, we entered into revised change in control agreements with Messrs. Guccione, Roth, Eilender and DeBenedittis, and on August 1, 2016, we entered into a change in control agreement with Mr. Kaczmarek. These agreements (other than the agreement with Mr. Kaczmarek) superseded and replaced in their entirety Change in Control Agreements entered into with such individuals on July 2, 2012. The agreements provide “double trigger” change in control severance protections, which means no amount will become payable under the agreements unless a “change in control” of Aceto occurs and an executive’s employment is terminated by Aceto other than for “cause” or by the executive for “good reason” within a specified period following the change in control.
Each agreement will automatically terminate if the executive ceases to be an employee of Aceto for any reason prior to the occurrence of a “change in control” (as defined in each agreement). In addition, the Company can terminate each agreement on one year’s prior written notice; provided that, if a “change in control” of the Company occurs while the agreement is in effect, no such termination notice shall become effective until the second anniversary of the “change in control.”
If, during the two (2) year period following the occurrence of a “change in control,” an executive’s employment is terminated by the Company other than for “cause” (as defined in each agreement) or by the executive for “good reason” (as defined in each agreement), subject to the provisions regarding Sections 280G and 4999 of the Code summarized below, the executive will be entitled to the following (in lieu of any payments under the Company’s severance policy):
| ○ | a cash lump sum equal to two (2) times (or, in the case of Mr. DeBenedittis 1.75 times), the sum of the executive’s base salary and annual performance award for the fiscal year preceding the “change in control,” and |
| ○ | continued participation in the Company’s group health plan, at the Company’s expense, for a period of two (2) years. |
To the extent not theretofore already vested, one hundred percent (100%) of the executive’s then-outstanding and unvested “equity awards” (as defined in each agreement) will become vested in full. If, however, an outstanding equity award is to vest and/or the amount of the award to vest is to be determined based on the achievement of performance criteria, then the equity award will vest as to one hundred percent (100%) of the amount of the equity award assuming the performance criteria had been achieved at target levels for the relevant performance period(s).
To the extent any amount or benefit to be provided pursuant to the agreement or otherwise (collectively, the “Payments”) would be treated as an “excess parachute payment,” as that phrase is defined in Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), then the amounts and benefits the executive would otherwise receive shall be either (i) paid or allowed in full; or (ii) reduced (but not below zero) to the maximum amount which may be paid without causing any Payment to be nondeductible to the Company under Section 280G of the Code, or subject the executive to an excise tax under Section 4999 of the Code, whichever would result in the executive’s receipt, on an after-tax basis, of the greatest amount of Payments.
On December 16, 2014, we entered into an Employment Agreement (the “ Guccione Employment Agreement”) with Mr. Guccione, effective as of January 1, 2015. That agreement provided that if the Company terminated Mr. Guccione’s employment other than for cause pursuant to the Guccione Employment Agreement or Mr. Guccione terminated his employment for good reason pursuant to the Guccione Employment Agreement, regardless of whether such termination occurred during or after the employment term, the Company would be required to (a) continue to pay Mr. Guccione’s base salary, at the rate then in effect, for the 24 month period following the date of termination, (b) make a lump sum cash payment to Mr. Guccione which would be based upon and equal to the past two years earned “Performance Award” and (c) accelerate the vesting to the date of termination on all outstanding unvested Stock Options, Restricted Stock Units and Restricted Stock Awards the Company had previously granted to Mr. Guccione, subject to the exercise provisions in the Corporate Trading Policy.
| 33 |
As previously disclosed, in connection with Mr. Guccione’s stepping down as President and Chief Executive Officer on September 27, 2017, the Company entered into a separation agreement (the “Separation Agreement”) with Mr. Guccione confirming the final terms of his departure from the Company. Under the Separation Agreement, Mr. Guccione agreed to waive any termination notice requirements under the Guccione Employment Agreement, Aceto agreed to pay to Mr. Guccione as severance the amount provided for severance under the Guccione Employment Agreement, equal to twenty-four (24) months of base salary ($1,271,260 in the aggregate) and a lump sum cash payment equal to the amount of Mr. Guccione’s performance awards for the prior two years ($677,657 in the aggregate), and Aceto agreed to provide for the acceleration, in the manner set forth in the Guccione Employment Agreement, of the vesting of all outstanding unvested Stock Options, Restricted Stock Units and Restricted Stock Awards that Aceto previously granted to Mr. Guccione. Mr. Guccione’s Change in Control Agreement no longer remains in effect.
Mr. Eilender and Mr. DeBenedittis are eligible to receive severance pay and benefits pursuant to the Aceto Severance Policy (the “Severance Policy”) in the event of an involuntarily termination of their employment. In the case of Messrs. Eilender and DeBenedittis, severance pay may be provided under the Severance Policy, in Aceto’s sole discretion, in an amount up to twelve (12) weeks of base salary plus two (2) additional weeks for each year of service with Aceto, up to a maximum of fifty-two (52) weeks of base salary. In addition, under the Severance Policy, Mr. DeBenedittis would be eligible to receive up to ninety (90) days of continued coverage under the Aceto health plan (at active employee rates).
In April 2013, Aceto entered into an enhanced severance protection letter agreement with Mr. Roth. If, prior to a change in control, Mr. Roth’s employment is terminated by the Company without cause (other than due to disability), the Company shall continue to pay Mr. Roth’s base salary, at the rate then in effect, for the fifteen (15) month period following the date of termination as severance.
The following table shows the estimated amounts that would have been payable to the named executive officers other than Mr. Guccione upon the occurrence of the indicated event, had the applicable event occurred on June 30, 2017. The actual compensation and benefits these executives would receive at any subsequent date would likely vary from the amounts set forth below as a result of certain factors, such as a change in any additional benefits the officer may have accrued as of that time under applicable benefit or compensation plans. The actual terms of Mr. Guccione’s severance are summarized above.
| 34 |
| Name | Event | Salary ($) | Bonus ($) | Company Automobile ($) | Company Contributions to Retirement Plans ($) | Equity Awards ($)(1) | Healthcare and Life | Total ($) | ||||||||||||||||||||||
| Douglas Roth | Termination without cause or resignation for good reason | 483,274 | - | - | - | 654,477 | - | 1,137,751 | ||||||||||||||||||||||
| Termination without cause or resignation for good reason following a change in control | 773,238 | 229,308 | - | - | 1,143,733 | 36,512 | 2,182,791 | |||||||||||||||||||||||
| Walter Kaczmarek, III | Termination without cause or resignation for good reason | 593,750 | - | �� | - | - | 317,590 | - | 911,340 | |||||||||||||||||||||
| Termination without cause or resignation for good reason following a change in control | 950,000 | 338,074 | - | - | 1,081,500 | 36,742 | 2,406,316 | |||||||||||||||||||||||
| Albert L. Eilender | Termination without cause or resignation for good reason | 375,962 | - | - | - | 1,023,300 | - | 1,399,262 | ||||||||||||||||||||||
| Termination without cause or resignation for good reason following a change in control | 977,500 | 347,860 | - | - | 1,850,493 | - | 3,175,853 | |||||||||||||||||||||||
| Frank DeBenedittis | Termination without cause or resignation for good reason | 338,281 | - | - | - | 406,968 | 4,564 | 749,813 | ||||||||||||||||||||||
| Termination without cause or resignation for good reason following a change in control | 591,992 | 158,002 | - | - | 716,834 | 36,512 | 1,503,340 | |||||||||||||||||||||||
(1) For termination without cause or resignation for good reason, the above-mentioned executives’ then outstanding and unvested equity awards will vest on a pro-rata basis based on the termination date. With respect to Mr. Guccione, his employment agreement provided for awards to vest 100% at his termination date. Upon a change in control, 100% of the above-named executives' then-outstanding and unvested equity awards will become vested in full.
| 35 |
ARRANGEMENTS WITH WILLIAM C. KENNALLY
William C. Kennally, a non-employee director since 2016, became our President and Chief Executive Officer effective as of October 2, 2017. Mr. Kennally will be compensated in accordance with the following arrangements:
• Mr. Kennally’s initial base salary will be $650,000 per annum.
• During his employment, Mr. Kennally will be eligible to participate in our annual performance award program as in effect from time to time. Mr. Kennally’s target performance award will be 100% of base salary, pro-rated for the remainder of the fiscal year ending June 30, 2018. The achievement of the performance award for each fiscal year, if any, will be based on company performance and Mr. Kennally’s performance for the relevant year.
• In accordance with the terms of our 2015 Equity Participation Plan, for the fiscal year ending June 30, 2018, Mr. Kennally was awarded on October 2, 2017, (i) 60,000 shares of restricted stock, vesting in three equal installments on each of September 1, 2018, September 1, 2019, and September 1, 2020, and (ii) 35,000 restricted stock units subject to vesting if certain performance metrics are met during a performance period that ends on June 30, 2020.
• During his employment, upon satisfying certain applicable eligibility conditions, Mr. Kennally will be entitled to participate in a benefit package generally available to the Company’s executives, consisting of health insurance, life insurance, participation in a 401(k) plan, a Supplemental Executive Retirement Plan and a Flex Spending Plan, and the use of an automobile in accordance with our automobile policy.
• The Agreement provides for “at-will” employment subject to termination by either party pursuant to the terms of the Agreement. In the event of Mr. Kennally’s voluntary resignation, Mr. Kennally is required to deliver at least thirty (30) days’ prior written notice to the Company.
• If the Company terminates Mr. Kennally’s employment other than for cause pursuant to the Agreement, the Company will be required to continue to pay Mr. Kennally’s base salary, at the rate then in effect, for the fifteen month period following the date of termination, subject to offset by any amounts earned by Mr. Kennally through other employment or consultancy during the fifteen (15) month period.
In connection with Mr. Kennally’s appointment, the Company entered into a change in control agreement with Mr. Kennally comparable, in all material respects, to the change in control agreements for Messrs. Guccione, Roth, Eilender, DeBenedittis and Kaczmarek described above under the caption “POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL”.
The fiscal 2017 fees for non-employee directors are shown in the table below:
| Fee Type | Value in $ | |||
| Annual Retainer – Cash | 47,500 | |||
| Annual Retainer – Stock (1) | 70,000 | |||
| Annual Lead Independent Director Fee | 17,500 | |||
| Annual Retainer for Chairperson: | ||||
| Audit & Risk Committee | 15,000 | |||
| Compensation Committee | 12,000 | |||
| Nominating & Governance Committee | 8,000 | |||
| Board of Director Meeting Fee | 1,750 | * | ||
| Independent Director Meeting Fee | 1,500 | * | ||
| Audit & Risk Committee Meeting Fee | 2,250 | * | ||
| Compensation Committee Meeting Fee | 2,000 | * | ||
| Nominating & Governance Committee Meeting Fee | 1,250 | * | ||
(1) awarded in December following the annual meeting of shareholders
* - per meeting attended
Employees of the Company who are also directors do not receive any separate fees for acting as directors.
| 36 |
The following table sets forth the compensation of our non-employee directors for the fiscal year ended June 30, 2017.
| DIRECTOR COMPENSATION | ||||||||||||
| Name | Fees Earned or Paid in Cash($) (1) | Stock Awards($)(2) | Total($) | |||||||||
| Hans C. Noetzli | $ | 89,500 | $ | 70,000 | $ | 159,500 | ||||||
| William N. Britton | 108,500 | 70,000 | 178,500 | |||||||||
| Natasha Giordano | 96,500 | 70,000 | 166,500 | |||||||||
| Alan G. Levin | 120,750 | 70,000 | 190,750 | |||||||||
| Dr. Daniel B. Yarosh | 88,250 | 70,000 | 158,250 | |||||||||
| William C. Kennally, III | 94,875 | 87,500 | 182,375 | |||||||||
Directors also receive reimbursement for expenses incurred in connection with meeting attendance.
(1)Includes payments made in fiscal 2017 for attendance at certain meetings held at the end of fiscal 2016 and does not include payments for attendance at certain meetings held at the end of fiscal 2017 for which payments will be made in fiscal 2018. There were no option grants awarded to directors in fiscal 2017.
(2)Amounts shown in this column reflect the aggregate grant date fair value of restricted stock awards granted during the year computed in accordance with generally accepted accounting principles.
The following is a list of the outstanding options and restricted stock awards held by each of our non-employee directors as of June 30, 2017:
| Option Awards (#) | Stock Awards (#) | |||||||
| Hans C. Noetzli | - | 3,467 | ||||||
| William N. Britton | 6,199 | 3,467 | ||||||
| Natasha Giordano | - | 3,467 | ||||||
| Alan G. Levin | - | 3,467 | ||||||
| Dr. Daniel B. Yarosh | - | 3,467 | ||||||
| William C. Kennally, III | - | 4,334 | ||||||
All such director options were granted at the fair market value determined on the date of grant.
Mr. Kennally ceased to be a non-employee director, and became an employee-director, effective as of October 2, 2017.
Compensation Committee Interlocks and Insider Participation
None of the independent directors responsible for compensation matters has ever served as an officer or employee of the Company or any of our subsidiaries. During the last fiscal year, none of our senior executives served on the Board or committee of any other entity whose officers served either on our Board or Compensation Committee. During the last fiscal year, none of the members of the Compensation Committee had a direct or indirect material interest in any transaction in which the Company was a participant and the amount involved exceeded $120,000.
| 37 |
REPORT OF THE AUDIT & RISK COMMITTEE
The Audit & Risk Committee acts under a written charter adopted by the Audit & Risk Committee and approved by the Board. The Audit & Risk Committee charter is available on the Company’s corporate website-www.aceto.com.
The Audit & Risk Committee is comprised of William N. Britton (Chairman), Alan G. Levin and Dr. Daniel B. Yarosh. Each of these directors meets the independence and expertise requirements of the SEC and the NASDAQ Global Select Market. Subject to shareholder ratification at the annual meeting, the Audit & Risk Committee appoints and retains the Company’s independent registered public accounting firm, approves the scope of the audit plan, and reviews and approves the fees of the independent accounting firm. The Audit & Risk Committee met regularly with the Company’s independent accountants during the past fiscal year, both with and without management present, to review the scope and results of the audit engagement, the Company’s system of internal controls and procedures, the effectiveness of procedures intended to prevent violations of laws and regulations, and the implementation of internal financial controls required by the Sarbanes-Oxley Act of 2002. In compliance with the SEC rules regarding auditor independence, and in accordance with the Company’s Audit & Risk Committee Charter, the Audit & Risk Committee reviewed all services performed by BDO USA, LLP for the Company within and outside the scope of the quarterly review and annual auditing functions.
The Audit & Risk Committee also:
| · | Met to discuss the quarterly unaudited and the annual audited financial statements with management and BDO USA, LLP prior to the statements being filed with the SEC; |
| · | Reviewed the Company’s disclosures in the Management’s Discussion and Analysis sections of such filings; |
| · | Reviewed management’s program, schedule, progress and accomplishments for maintaining financial controls and procedures to assure compliance with Section 404 of the Sarbanes-Oxley Act of 2002; |
| · | Reviewed quarterly earnings releases prior to their publication; |
| · | Received from BDO USA, LLP written communications regarding the matters required to be discussed with the Audit & Risk Committee. These matters included information regarding the scope and results of their audit of the Company’s financial statements, including with respect to (i) their responsibilities under generally accepted auditing standards, (ii) significant accounting policies, (iii) management judgments and estimates, (iv) any significant accounting adjustments, (v) any disagreements with management and (vi) any difficulties encountered in performing the audit. The Committee discussed these matters with BDO USA, LLP, with and without management present; |
| · | Reviewed and approved in advance in accordance with the Company’s Audit & Risk Committee Pre-Approval Policy all proposals and fees for any work to be performed by BDO USA, LLP; |
| · | Reviewed and made recommendations to the Board to revise the committee’s charter as necessary in order to comply with best practice as well as newly enacted rules and regulations; |
| · | Monitored the Company’s “whistleblower” program under which any complaints are forwarded directly to the Committee, to be reviewed in accordance with an established procedure for all such matters; |
| · | Reviewed the Company’s related party transactions and policy for related party transactions |
| · | Oversaw the Company’s relationship with the independent auditor, including overseeing the rotation of the audit partners as required by law and meeting with the independent auditor to discuss planning and staffing of the audit; |
| · | Reviewed the audit, tax and audit-related services the Company had received from BDO USA, LLP and determined that the providing of such services by BDO USA, LLP was compatible with the preservation of their independent status as our independent registered public accounting firm; |
| 38 |
| · | Discussed with the Company’s General Counsel legal matters that may have a material impact on the financial statements or the Company’s compliance policies; |
| · | Reviewed the status and functioning of the Company’s internal audit function, as internal audit functionally reports directly to the Audit & Risk Committee; and |
| · | Met to discuss with the Company’s senior risk officer, and other members of management responsible for managing risk, as well as other members of the Board, areas of specific risk identified by management and/or the Committee. |
The Audit & Risk Committee also reviewed and discussed the audited financial statements for the fiscal year ended June 30, 2017 with management and discussed with BDO USA, LLP the matters required to be discussed pursuant to Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 16 (Communications with Audit Committees). In addition, the Committee has discussed various matters with BDO USA, LLP related to the Company’s consolidated financial statements, including critical accounting policies and practices used, alternative treatments for material items that have been discussed with management, and other material written communications between BDO USA, LLP and management. The Audit & Risk Committee also received during the past fiscal year the written disclosures and the letter from BDO USA; LLP required by applicable requirements of the PCAOB regarding BDO USA, LLP’s communications with the Audit & Risk Committee concerning independence and has discussed with BDO USA, LLP their independence. Based on their review and in reliance on the discussions referred to in this paragraph, the Audit & Risk Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the last fiscal year for filing with the SEC.
Respectfully submitted by the members of the Audit & Risk Committee.
William N. Britton (Chairman)
Alan G. Levin
Dr. Daniel B. Yarosh
| 39 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 10, 2017, the number and percentage of shares of the Company’s outstanding common stock owned by each named executive officer, each director and director nominee and each person that, to the best of the Company’s knowledge, owns more than 5% of the Company’s issued and outstanding common stock, and all executive officers and directors as a group. Unless indicated otherwise, the information in the table is as of October 10, 2017 and the business address of each person is c/o Aceto Corporation, 4 Tri Harbor Court, Port Washington, New York 11050.
| Name and Address of Beneficial Owner | Number of Shares Beneficially Owned (excluding stock options and restricted stock units) (#) (1) | Exercisable Stock Options and Restricted Stock Units (#) (2) | Total Beneficial Ownership (#) | Percent % (3) | ||||||||||||
| Directors and Officers: | ||||||||||||||||
| William C. Kennally, III | 64,334 | - | 64,334 | * | ||||||||||||
| Salvatore Guccione | 260,338 | 75,500 | 335,838 | 1.1 | % | |||||||||||
| Douglas Roth | 105,694 | 26,000 | 131,694 | * | ||||||||||||
| Walter Kaczmarek, III | 70,182 | - | 70,182 | * | ||||||||||||
| Albert L. Eilender (4) | 309,172 | 15,000 | 324,172 | 1.1 | % | |||||||||||
| Vimal Kavuru (5) | - | - | - | * | ||||||||||||
| Frank DeBenedittis | 94,545 | 20,000 | 114,545 | * | ||||||||||||
| Hans C. Noetzli (6) | 83,039 | - | 83,039 | * | ||||||||||||
| William N. Britton | 44,034 | 6,199 | 50,233 | * | ||||||||||||
| Natasha Giordano | 14,235 | - | 14,235 | * | ||||||||||||
| Alan G. Levin | 11,511 | - | 11,511 | * | ||||||||||||
| Daniel B. Yarosh | 8,179 | - | 8,179 | * | ||||||||||||
| Five percent shareholders: | ||||||||||||||||
| BlackRock Inc. (7) 55 East 52nd Street New York, NY 10022 | 3,421,844 | - | 3,421,844 | 11.2 | % | |||||||||||
| Dimensional Fund Advisors LP (8) 6300 Bee Cave Road Austin, TX 78746 | 2,530,011 | - | 2,530,011 | 8.3 | % | |||||||||||
| Wellington Management Group LLP (8) 280 Congress Street Boston, MA 02210 | 1,736,638 | - | 1,736,638 | 5.7 | % | |||||||||||
| Northern Trust Corp.(8) 50 S. LaSalle Street Chicago, IL 60603 | 1,556,429 | - | 1,556,429 | 5.1 | % | |||||||||||
| Vanguard Group, Inc.(8) PO Box 2600 Valley Forge, PA 19482 | 1,545,990 | - | 1,545,990 | 5.1 | % | |||||||||||
| All executive officers and directors as a group (14 persons, including Mr. Guccione) (5) | 1,129,413 | 142,699 | 1,272,112 | 4.1 | % | |||||||||||
| 40 |
* Less than 1%.
| (1) | Unless otherwise indicated, each person has, or shares with his or her spouse, sole voting and dispositive power over the shares shown as owned by him or her. |
| (2) | For purposes of the table, a person is deemed to have “beneficial ownership” of any shares which such person has the right to acquire within 60 days after the record date. Any share which such person has the right to acquire within those 60 days is deemed to be outstanding for the purpose of computing the percentage ownership of such person, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. |
| (3) | Based on 30,641,254 shares issued and outstanding as of the record date. |
| (4) | Includes 6,950 shares owned indirectly by Mr. Eilender through a trust. |
| (5) | Pursuant to the product purchase agreement that Aceto entered into to acquire certain of the products and related assets of Citron and Lucid (the “Product Purchase Agreement”), and as one of the elements of the consideration payable thereunder, Aceto is obligated to issue 5,121,951 shares of Common Stock to the sellers thereunder (the “Sellers”). Aceto is required to issue 75% of those shares to the Sellers in December 2019 (on the third anniversary of the closing of the transaction) and 25% of those shares one year later, subject in all cases to certain indemnification and set-off provisions set forth in the Product Purchase Agreement. Such shares are also subject to voting and transfer restrictions previously disclosed by us. Mr. Kavuru is a principal equity owner and executive officer of entities that own, directly or indirectly, the Sellers. Inasmuch as such 5,121,951 shares have not been issued as yet and are not issuable within 60 days after the record date, such shares have not been included in the table set forth above |
| (6) | Mr. Hans Noetzli will not be standing for reelection |
| (7) | Based on information filed on Schedule 13G with the Securities and Exchange Commission as of December 31, 2016. |
| (8) | Based on information filed on Schedule 13F with the Securities and Exchange Commission as of June 30, 2017. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 2017, Rising Health and Acetris Health incurred costs of $1,865,000 and $165,000, respectively, payable to Lucid and Citron, respectively, related to consulting services provided by former Citron and Lucid employees. These amounts are payable pursuant to a transition services agreement entered into at the time of the Company’s Product Purchase Agreement. Vimal Kavuru, one of our directors, is a principal equity owner and executive officer of entities that own, directly or indirectly, Citron and Lucid.
In September 2017, Rising commenced leasing approximately 125,000 gross square feet of warehouse space in Somerset, New Jersey. This building is owned by an affiliate of Mr. Kavuru. From the closing under the Product Purchase Agreement until September 30, 2017, Rising was charged $76,533 for rent and other expenses incurred in connection with this lease.
On November 2, 2016, the Company, Citron and Cronus Research Labs Private Limited,a research and development company headquartered in India that is affiliated with Vimal Kavuru (“Cronus”), entered into two amended and restated joint development agreements pursuant to which Cronus has been engaged to develop a portfolio of nine pipeline products (“Development Agreement I”) and certain other products (“Development Agreement II” and together with Development Agreement I, the “Development Agreements”) on behalf of Citron. Under the terms of Development Agreement I, Cronus has agreed to pay the first $3,500,000 of the development costs incurred after December 21, 2016, and 50% of any development costs incurred above that threshold in exchange for obtaining reimbursement for its costs funded out of the profits earned, if any, from the pipeline products that are commercially launched, and a specified portion of the profits from those products thereafter. Under the terms of Development Agreement II, Cronus has agreed to pay the development costs for the products covered thereby in exchange for obtaining reimbursement for its costs funded out of the profits earned, if any, from such products that are commercially launched (subject to a $1,445,000 maximum), and a specified portion of the profits from those products thereafter.
At the closing under the Asset Purchase Agreement, we paid a total of $270 million in cash consideration to the Sellers.
| 41 |
Mr. Kavuru was not a member of the Company’s Board at the time that the above-mentioned Product Purchase Agreement, transition services agreement, lease or Development Agreements were executed.
Pursuant to its charter, the Company’s Audit & Risk Committee shall review on an on-going basis for potential conflicts of interest, and approve if appropriate, all “Related Party Transactions” of the Company as required by the applicable NASDAQ listing rule. For purposes of the Audit & Risk Committee charter, “Related Party Transactions” shall mean those transactions required to be disclosed pursuant to SEC Regulation S-K, Item 404.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH OF THE SEVEN NOMINEES FOR DIRECTOR (PROPOSAL ONE).
APPROVAL OF MATERIAL TERMS OF THE SECTION 162(m) PERFORMANCE GOALS FOR AWARDS UNDER THE ACETO EQUITY PERFORMANCE AWARD PLAN
Our board of directors recommends that shareholders approve the material terms of the performance goals that may be used under the Company’s Executive Performance Award Plan (the “Performance Award Plan”). Approval of the material terms of the performance goals is a condition for certain awards made under the Performance Award Plan to qualify as tax-deductible performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”).
Section 162(m) places a limit of $1 million on the amount the Company may deduct in any one year for compensation paid to a “covered employee,” which is defined by Section 162(m) to mean any person who as of the last day of the fiscal year is the chief executive officer or one of the Company’s three highest compensated executive officers other than the Company’s principal financial officer, as determined under SEC rules. There is, however, an exception to this limit on deductibility for compensation that satisfies certain conditions for “qualified performance-based compensation” set forth under Section 162(m). One of the conditions requires shareholder approval every five years of the material terms of the performance goals of the plan under which the compensation will be paid. The Company’s shareholders most recently approved the material terms of the performance goals of the Performance Award Plan when they approved the Performance Award Plan at the Company’s 2012 Annual Meeting of Shareholders. At the 2017 Annual Meeting, the board is asking shareholders to approve the material terms of the performance goals for use under the Performance Award Plan, as described herein.
For purposes of Section 162(m), the material terms of the performance goals include (i) the individuals eligible to receive compensation under the Performance Award Plan, (ii) a description of the business criteria on which performance goals may be based and (iii) the maximum amount payable to any covered employee under the Performance Award Plan in any year. Each of these aspects of the Performance Award Plan is discussed below.
Awards under the Performance Award Plan are made in the form of cash, provided that in lieu of cash, the compensation committee may settle all or a portion of an award payable to a participant with equity-based awards pursuant to the Company’s 2015 Equity Participation Plan which equity-based awards will be subject to such terms and conditions (including vesting requirements) as the compensation committee may determine. The Performance Award Plan is administered by the compensation committee of our board of directors, which is composed of “outside directors” as defined under Section 162(m).
Eligibility and Participation
Executive officers of the Company or any of its subsidiaries are eligible to participate in the Performance Award Plan. The compensation committee selects, from among those eligible, the persons who will from time to time participate in the Performance Award Plan. The approximate number of persons who currently are eligible to participate under the Performance Award Plan is 149 employees.
| 42 |
Performance Goals
Under the Performance Award Plan, the business criteria on which performance goals can be based are:
| • | profit before taxes |
| • | total shareholder return |
| • | gross revenue |
| • | gross profit |
| • | net income |
| • | EBITDA |
| • | cash flow |
| • | return on equity |
| • | cost reductions and savings |
| • | stock price |
| • | market share |
| • | net revenue |
| • | pre-tax income |
| • | operating income |
| • | earnings per share |
| • | return on invested capital or assets |
| • | return on revenues or productivity |
The foregoing business criteria may be determined by reference to the Company as a whole, any of the Company’s subsidiaries, operating divisions, regional business units or other operating units, or any combination thereof.
Maximum Awards under the Performance Award Plan
The compensation committee, as the administrator of the Performance Award Plan, has the full power and authority to interpret the Performance Award Plan and awards granted under the Performance Award Plan, to determine eligibility for awards, to determine performance goals and other terms and conditions applicable to any award, and to take all other actions necessary or appropriate in administering the Performance Award Plan.
The maximum amount payable to any person in any fiscal year of the Company under awards that are intended to satisfy the conditions for deductibility under Section 162(m) as “performance-based compensation” is $1.5 million.
Our board believes that it is in the best interests of the Company and its shareholders to enable the Company to implement compensation arrangements that qualify as fully tax deductible performance-based compensation under the Performance Award Plan. The board is therefore asking shareholders to approve, for Section 162(m) purposes, the material terms of the performance goals as set forth above. However, shareholder approval of the performance goals is only one of several requirements under Section 162(m) that must be satisfied for amounts realized under the Performance Award Plan to qualify for the “performance-based” compensation exemption under Section 162(m), and submission of the material terms of the Performance Award Plan’s performance goals for shareholder approval should not be viewed as a guarantee that the Company can deduct all compensation under the Performance Award Plan. Nothing in this proposal precludes the Company and the administrator of the Performance Award Plan from making any payment or granting awards that do not qualify for tax deductibility under Section 162(m), nor is there any guarantee that awards intended to qualify for tax deductibility under Section 162(m) will ultimately be viewed as so qualifying by the Internal Revenue Service. A copy of the Performance Award Plan can be obtained upon request from the Company’s Secretary.
THE BOARD RECOMMENDS THAT YOU APPROVE THE MATERIAL TERMS OF THE PERFORMANCE GOALS DESCRIBED ABOVE (PROPOSAL TWO).
| 43 |
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enables our shareholders to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the SEC’s rules.
As previously described in detail in the “Compensation Discussion and Analysis”, our executive compensation programs are designed to provide compensation and benefit plans that are equitable to our executives and other employees as well as our shareholders; enable us to attract, motivate and retain highly qualified, experienced talent; and align our rewards with long term corporate goals as well as shareholder expectations and value. Please see the “Compensation Discussion and Analysis” beginning on page 20 and the Executive Compensation disclosure beginning on page 28 for additional details about our executive compensation programs and information about the fiscal year 2017 compensation of our named executive officers.
As required pursuant to section 14A of the Exchange Act, we are asking our shareholders to indicate their support for our named executive officer compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on the compensation of our named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. The say-on-pay vote is advisory, and therefore not binding on the Company, our Compensation Committee or the Board. Our Board and our Compensation Committee value the opinions of our shareholders and, to the extent there is any significant vote against the named executive officer compensation as disclosed in the proxy statement, we will consider our shareholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns. We currently intend to hold an advisory vote to approve executive compensation annually, subject to our analysis of how stockholders vote with respect to Proposal Four. The next advisory vote to determine the frequency of such votes will occur no later than the 2023 annual meeting of shareholders.
THE BOARD RECOMMENDS THAT YOU APPROVE, ON A NON-BINDING, ADVISORY BASIS, THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THE COMPANY’S PROXY STATEMENT FOR THE 2017 ANNUAL MEETING OF SHAREHOLDERS PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC, INCLUDING THE COMPENSATION DISCUSSION AND ANALYSIS, THE COMPENSATION TABLES AND ANY RELATED MATERIAL DISCLOSED IN THIS PROXY STATEMENT (PROPOSAL THREE).
ADVISORY VOTE ON THE FREQUENCY OF HOLDING AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Act also enables our shareholders to indicate how frequently we should seek an advisory vote on the compensation of our named executive officers. Shareholders may indicate whether they would prefer an advisory vote on named executive officer compensation once every one, two, or three years. These votes are required to be held not less frequently than once every six years.
| 44 |
After careful consideration of this Proposal, our Board of Directors has determined that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for the Company, and therefore our Board recommends that you vote for a one-year interval for the advisory vote on executive compensation for the following reasons:
| ● | Shareholder communications will be enhanced by providing a clear, simple means for the Company to obtain information on investor views about our executive compensation philosophy and program and provide investors with sufficient time to evaluate the effectiveness of the program, corporate strategies and Company performance. |
| ● | An advisory vote every year will be the most effective timeframe for the Board of Directors and the Company to thoughtfully evaluate and respond to feedback from its shareholders and provide sufficient time to engage in dialogue with them. |
| ● | Our executive compensation programs are focused on measuring performance over an extended period of time, and holding a vote every year is consistent with our long-term objectives. |
As an advisory vote, this Proposal is not binding on the Company. Notwithstanding the advisory nature of this vote, the Board of Directors values the opinions expressed by shareholders in their vote on this Proposal, and will consider the outcome of the vote when making its determination as to the frequency of future advisory votes on executive compensation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE OPTION OF ONE YEAR AS THE FREQUENCY WITH WHICH SHAREHOLDERS ARE PROVIDED WITH AN ADVISORY VOTE ON EXECUTIVE COMPENSATION AS DISCLOSED PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC (PROPOSAL FOUR).
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Based on the recommendation of the Audit & Risk Committee, the Board has appointed BDO USA, LLP, an independent registered public accounting firm, to audit the financial statements of the Company for the year ending June 30, 2018. BDO USA, LLP has been the independent registered public accounting firm of the Company since 2005.
Although ratification by shareholders is not required by the Company’s organizational documents or other applicable law, the Board has determined that requesting ratification by shareholders of its appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2018 is a matter of good corporate practice. If shareholders do not ratify the selection, the Board will reconsider whether or not to retain BDO USA, LLP, but may still retain them. Even if the selection is ratified, the Board, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders.
The Company anticipates that representatives of BDO USA, LLP will attend the annual meeting for the purpose of responding to appropriate questions. At the annual meeting, the representatives of BDO USA, LLP will be afforded an opportunity to make a statement if they so desire.
| 45 |
The aggregate fees for professional services rendered by BDO USA, LLP for the years ended June 30, 2017 and 2016 were:
| Fiscal 2017 | Fiscal 2016 | |||||||
| Audit fees | $ | 1,215,000 | $ | 1,128,000 | ||||
| Audit related fees | 205,000 | 148,000 | ||||||
| Tax fees | 161,000 | 179,000 | ||||||
| Total fees | $ | 1,581,000 | $ | 1,455,000 | ||||
Audit fees are fees for the audit of the Company’s annual financial statements included on Form 10-K, including the audits of internal control over financial reporting, reviews of the quarterly financial statements, statutory audits and assistance with and review of documents filed with the SEC.
Audit related fees consisted of fees for due diligence and accounting consultations in connection with acquisitions.
Tax fees are fees for tax services, including tax compliance, tax advice and planning.
The Audit & Risk Committee reviewed and approved in advance in accordance with the Company’s Audit & Risk Committee Pre-Approval Policy all proposals and fees for any work to be performed by BDO USA, LLP.
THE BOARD RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE APPOINTMENT OF BDO USA, LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY’S FISCAL YEAR ENDING JUNE 30, 2018 (PROPOSAL FIVE).
In order to include information with respect to a shareholder proposal in the Company’s proxy statement and related form of proxy for a shareholder’s meeting; shareholders must provide notice as required by the regulations promulgated under the Exchange Act.
Proposals that shareholders wish to include in our proxy statement and form of proxy for presentation at our 2018 annual meeting of shareholders must be received by us at Aceto Corporation, 4 Tri Harbor Ct, Port Washington, New York 11050, Attention, Secretary, no later than June 25, 2018. Any shareholder proposal submitted for inclusion must be eligible for inclusion in our proxy statement in accordance with the rules and regulations promulgated by the SEC.
With respect to proposals submitted by a shareholder other than for inclusion in our proxy statement and related form of proxy for our 2018 annual meeting of shareholders, timely notice of any shareholder proposal must be received by us in accordance with our By-laws and our rules and regulations no later than September 7, 2018 and no earlier than August 8, 2018, unless the date of the annual meeting is more than 30 days before or 60 days after the anniversary of the 2017 annual meeting of shareholders. Any proxies solicited by the Board for the 2017 annual meeting of shareholders may confer discretionary authority to vote on any proposals notice of which is not timely received. In order to include information with respect to a shareholders proposal in our proxy statement and form of proxy for a shareholders’ meeting, shareholders must provide notice as required by the regulations promulgated under the Exchange Act.
| 46 |
In the case of a proposal other than a nomination, the proponent’s written notice must set forth (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address of the proponent, and of any holder of record of the Shares beneficially owned by the proponent, as they appear on the Company’s books, (c) the class and number of Shares that are owned by the proponent (beneficially and of record) and owned by any holder of record of the Shares beneficially owned by the proponent, as of the date of the proponent’s notice, (d) any material interest of the proponent in such business, (e) a description of any derivative instrument, swap, option, warrant, short interests, hedge or profit interest that has been entered into by or on behalf of such proponent or any of its affiliates or associates with respect to the shares of the Company, (f) a description of any other transaction, agreement, arrangement, or understanding (including any short position or any borrowing or lending of shares) that has been made by or on behalf of such shareholder or any of its affiliates or associates, the effect or intent of which is to mitigate loss to, or to manage risk on or benefit from share price changes for such shareholder, or any of its affiliates or associates or to increase or decrease the voting power or pecuniary or economic interest of such shareholder or any of its affiliates or associate with respect to shares of the Company, (g) a representation that the proponent is a holder of record or beneficial owner of Shares entitled to vote at the annual meeting and intends to appear in person or by proxy at the meeting to propose such business, (h) a representation as to whether the proponent intends to deliver a proxy statement and/or form of proxy to holders of the Company’s outstanding shares and/or otherwise to solicit proxies from shareholders in support of the proposal, and (i) an undertaking by the proponent to notify the Company in writing of any change in any of the foregoing information, or confirm there has been no change, as applicable, as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly announced.
In the case of a nomination to the Board, the proponent’s written notice must set forth: (i) the name, age, business address and residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, (iii) the class and number of Shares that are owned of record and beneficially by each such nominee, (iv) an undertaking by each nominee to complete and return to the Company any information questionnaire completed by other nominees, and such nominee’s consent to serve as a director if elected or re-elected, (v) such other information concerning each such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an election contest is not involved), or that would otherwise be required to be disclosed, under the rules of the SEC, and (vi) as to the proponent: (a) the name and address of the Proponent, and of any holder of record of the Shares beneficially owned by the proponent, as they appear on the Company’s books, (b) the class and number of shares of capital stock of the Company that are owned by the proponent (beneficially and of record) and owned by any holder of record of the Shares beneficially owned by the proponent, as of the date of the proponent’s notice, (c) a description of any derivative instrument, swap, option, warrant, short interests, hedge or profit interest that has been entered into by or on behalf of such proponent or any of its affiliates or associates with respect to the shares of the Company, (d) a description of any other transaction, agreement, arrangement, or understanding (including any short position or any borrowing or lending of shares) has been made by or on behalf of such proponent or any of its affiliates or associates, the effect or intent of which is to mitigate loss to, or to manage risk on or benefit from share price changes for such Proponent, or any of its affiliates or associates or to increase or decrease the voting power or pecuniary or economic interest of such proponent or any of its affiliates or associates with respect to shares of the Company, (e) a representation that the proponent is a holder of record or beneficial owner of Shares entitled to vote at the meeting for the election or re-election of such proponent’s nominee or nominees and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (f) a representation as to whether the proponent intends to deliver a proxy statement and/or form of proxy to holders of the Company’s outstanding capital stock and/or otherwise to solicit proxies from stockholders in support of the nomination, and (g) an undertaking by the proponent to notify the Company in writing of any change in any of the foregoing information, or confirm there has been no change, as applicable, as of the record date for the annual meeting promptly following the later of the record date or the date notice of the record date is first publicly announced. The Company may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director of the Company or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee. No person shall be eligible for election as a director of the Company, unless nominated in accordance with the procedures set forth herein and in our By-laws.
OUR ANNUAL REPORT ON FORM 10-K AND CORPORATE GOVERNANCE COMPLIANCE DOCUMENTS
If you own our common stock, you can obtain copies of our annual report on Form 10-K for the fiscal year ended June 30, 2017 as filed with the SEC, including the financial statements, our committee charters, and our code of business conduct and ethics, all without charge, by writing to Mr. Douglas Roth, Chief Financial Officer, Aceto Corporation, 4 Tri Harbor Ct, Port Washington, New York 11050. You can also access our 2017 Form 10-K on our website atwww.aceto.com by clicking on “Investors”, then “Financial Information” and then on “SEC Filings”. You can also access our committee charters at our website by clicking on “Corporate Governance”.
| 47 |
The Board knows of no other business to be acted upon at the meeting. However, if any other business properly comes before the meeting, it is the intention of the persons named in the proxy to vote on such matters in accordance with their best judgment.
The prompt return of the proxy will be appreciated and helpful in obtaining the necessary vote. Therefore, whether or not you expect to attend the meeting, please submit your proxy or voting instructions.
| BY ORDER OF THE BOARD OF DIRECTORS | |
| | |
| Douglas Roth | |
Chief Financial Officer |
Dated: October 20, 2017
| 48 |
*** Exercise YourRight to Vote ***
Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to Be Held on December 7, 2017.
| Meeting Information | |
| ACETO CORPORATION | |
| Meeting Type: Annual Meeting | |
| For holders as of: October 10, 2017 | |
| Date: December 7, 2017 Time: 10:00 AM EST | |
| Location: Aceto Corporation | |
| 4 Tri Harbor Court | |
| Port Washington, NY 11050 | |
ACETO CORPORATION |
You are receiving this communication because you hold shares in the company named above.
This is not a ballot. You cannot use this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online atwww.proxyvote.comor easily request a paper copy (see reverse side).
We encourage you to access and review all of the important information contained in the proxy materials before voting. |
| See the reverse side of this notice to obtain proxy materials and voting instructions. |
E33770-P98080
—Before You Vote —
How to Access the Proxy Materials
| Proxy Materials Available to VIEW or RECEIVE: | |||||
| NOTICE AND PROXY STATEMENT ANNUAL REPORT ON FORM 10-K SHAREHOLDER LETTER | |||||
| How to View Online: | |||||
Have the information that is printed in the box marked by the arrow (located on the following page) and visit:www.proxyvote.com. | |||||
| How to Request and Receive a PAPER or E-MAIL Copy: | |||||
| If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: | |||||
| 1) | BY INTERNET: | www.proxyvote.com | |||
| 2) | BY TELEPHONE: | 1-800-579-1639 | |||
| 3) | BY E-MAIL*: | sendmaterial@proxyvote.com | |||
| * If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box marked by the arrow (located on the following page) in the subject line. | |||||
| Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before November 23, 2017 to facilitate timely delivery. | |||||
—How To Vote —
Please Choose One of the Following Voting Methods
Vote In Person: Many shareholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares.
Vote By Internet: To vote now by Internet, go towww.proxyvote.com. Have the information that is printed in the box marked by the arrow
Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card.
|
E33771-P98080
| Voting Items |
The Board of Directors recommends you vote FOR all of
the following nominees:
| 1. | Election of Directors | |||
| Nominees: | ||||
| 01) | Albert L. Eilender | 05) | Natasha Giordano | |
| 02) | William C. Kennally, III | 06) | Alan G. Levin | |
| 03) | Vimal Kavuru | 07) | Dr. Daniel B. Yarosh | |
| 04) | William N. Britton | |||
The Board of Directors recommends you vote FOR the following proposals:
| 2. | Approval of the material terms of the performance goals under the Executive Performance Award Plan. |
| 3. | Advisory Vote to Approve Named Executive Officer Compensation. |
The Board of Directors recommends you vote ONE YEAR on the following proposal:
| 4. | Advisory Vote on the frequency of holding an advisory vote on executive compensation. |
The Board of Directors recommends you vote FOR the following proposal:
| 5. | Ratification of the appointment of BDO USA, LLP as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2018. |
NOTE: Whether or not you provide voting directions, your proxy, when properly executed, will be voted in the discretion of the proxy holders upon such other matters as may properly come before the meeting and any postponement or adjournment thereof.
E33772-P98080
E33773-P98080
ACETO CORPORATION 4 TRI HARBOR COURT PORT WASHINGTON, NY 11050 | VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
| E33768-P98080 | KEEP THIS PORTION FOR YOUR RECORDS | |
| DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
ACETO CORPORATION
The Board of Directors recommends you vote FOR all of the following nominees: | For All | Withhold All | For All Except | To withhold authority to vote for any individual nominee(s), mark "For All Except" and write the number(s) of the nominee(s) on the line below. | |||||||||||
| 1. | Election of Directors | ¨ | ¨ | ¨ | |||||||||||
| Nominees: | |||||||||||||||
| 01) | Albert L. Eilender | 05) | Natasha Giordano | ||||||||||||
| 02) | William C. Kennally, III | 06) | Alan G. Levin | ||||||||||||
| 03) | Vimal Kavuru | 07) | Dr. Daniel B. Yarosh | ||||||||||||
| 04) | William N. Britton | ||||||||||||||
| The Board of Directors recommends you vote FOR the following proposals: | For | Against | Abstain | ||||||||||||
| 2. | Approval of the material terms of the performance goals under the Executive Performance Award Plan. | ¨ | ¨ | ¨ | |||||||||||
| 3. | Advisory Vote to Approve Named Executive Officer Compensation. | ¨ | ¨ | ¨ | |||||||||||
| The Board of Directors recommends you vote ONE YEAR on the following proposal: | 1 Year | 2 Years | 3 Years | Abstain | |||||||||||
| 4. | Advisory Vote on the frequency of holding an advisory vote on executive compensation. | ¨ | ¨ | ¨ | ¨ | ||||||||||
| The Board of Directors recommends you vote FOR the following proposal: | For | Against | Abstain | ||||||||||||
| 5. | Ratification of the appointment of BDO USA, LLP as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2018. | ¨ | ¨ | ¨ | |||||||||||
| | For address changes and/or comments, please check this box and write them on the back where indicated. Please indicate if you plan to attend this meeting. | ¨ Yes | ¨ No | ¨ | NOTE:Whether or not you provide voting directions, your proxy, when properly executed, will be voted in the discretion of the proxy holders upon such other matters as may properly come before the meeting and any postponement or adjournment thereof. | ||||||||||
| Please sign exactly as your name appears on this proxy. If shares are held jointly, each joint owner should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. Proxies executed by a corporation must be signed with the full corporate name by a duly authorized officer. | |||||||||||||||
| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | ||||||||||||
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement, Annual Report on Form 10-K and Shareholder Letter are available at www.proxyvote.com.
E33769-P98080
| ACETO CORPORATION | ||||||
| ANNUAL MEETING OF SHAREHOLDERS | ||||||
| THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS | ||||||
| The undersigned, revoking all previous proxies, hereby constitutes and appoints William C. Kennally, III and Douglas Roth, and each of them, proxies with full power of substitution to vote for the undersigned all shares of Aceto Corporation’s Common Stock which the undersigned would be entitled to vote if personally present at the Annual Meeting of Shareholders to be held on December 7, 2017 at the Company’s offices, 4 Tri Harbor Court, Port Washington, New York, at 10:00 a.m., Eastern Standard Time, and at any adjournment thereof, upon the matters described in the accompanying Proxy Statement and upon any other business that may properly come before the meeting or any adjournment thereof. Said proxies are directed to vote or refrain from voting as checked on the reverse side upon the matters listed on the reverse side, and otherwise in their discretion. | ||||||
| PLEASE INDICATE HOW YOUR SHARES ARE TO BE VOTED. IF THIS PROXY IS SIGNED BUT NO SPECIFIC VOTING INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS RECOMMENDED BY THE BOARD OF DIRECTORS. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL" IN ITEM 1, A VOTE "FOR" IN ITEMS 2, 3 AND 5 AND A VOTE FOR "ONE YEAR" IN ITEM 4. | ||||||
| Address Changes/Comments: | ||||||
| (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) | ||||||
| Continued and to be signed on reverse side | ||||||