THERMON GROUP HOLDINGS, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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THERMON GROUP HOLDINGS, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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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.
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Thermon Group Holdings, Inc.
100 Thermon Drive
San Marcos, Texas 78666
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
July 30, 2015
To the stockholders of Thermon Group Holdings, Inc.:
Notice is hereby given that the 2015 Annual Meeting of Stockholders (the "2015 Annual Meeting") of Thermon Group Holdings, Inc., a Delaware corporation, (the "Company," "we" or "our") will be held on Thursday, July 30, 2015, at 7:30 a.m. Central Time, at the DoubleTree by Hilton, Houston Intercontinental Airport, 15747 John F. Kennedy Blvd, Houston, Texas 77032 for the following purposes, as more fully described in the accompanying proxy statement (the "Proxy Statement"):
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(1)
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to elect as directors the eight nominees named in the Proxy Statement, each for a term of one year;
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to ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending March 31, 2016;
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to approve, on a non‑binding advisory basis, the compensation of our executive officers; and
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to transact such other business that may properly come before the 2015 Annual Meeting and any postponement or adjournment thereof.
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Only holders of record of our common stock as of the close of business on June 2, 2015 (the "Record Date") are entitled to receive notice of, attend, and vote at the 2015 Annual Meeting.
The Company is pleased to continue utilizing the Securities and Exchange Commission rules that allow issuers to furnish proxy materials to their stockholders on the Internet. Accordingly, on or about June 11, 2015, we began mailing a Notice of Internet Availability of Proxy Materials (the "Notice") to all stockholders of record as of the Record Date. The Notice contains instructions on how to access our proxy materials via the Internet as well as information on how to vote your shares.
It is important that your shares are represented and voted at the meeting and, whether or not you expect to attend in person, we encourage you to vote as promptly as possible to ensure that your vote is counted.
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By Order of the Board of Directors
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Charles A. Sorrentino
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Chairman of the Board
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San Marcos, Texas
June 11, 2015
YOUR VOTE IS IMPORTANT
PLEASE PROMPTLY VOTE BY TELEPHONE OR INTERNET, OR REQUEST A PROXY CARD TO COMPLETE, SIGN AND RETURN BY MAIL SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND SO THAT THE PRESENCE OF A QUORUM MAY BE ASSURED. YOUR PROMPT ACTION WILL AID THE COMPANY IN REDUCING THE EXPENSE OF PROXY SOLICITATION.
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Important Notice Regarding the Availability of Proxy Materials
for the 2015 Annual Meeting to be Held Thursday, July 30, 2015: |
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As permitted by rules adopted by the Securities and Exchange Commission, rather than mailing a full paper set of these proxy materials, we are mailing to many of our stockholders only a notice of Internet availability of proxy materials containing instructions on how to access these proxy materials and submit proxy votes online.
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The Notice, Proxy Statement and 2015 Annual Report are available at:
http://proxy.thermon.com
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TABLE OF CONTENTS
Thermon Group Holdings, Inc.
100 Thermon Drive
San Marcos, Texas 78666
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JULY 30, 2015
GENERAL INFORMATION
This proxy statement ("Proxy Statement") is being furnished in connection with the solicitation of proxies by the Board of Directors (the "Board") of Thermon Group Holdings, Inc. (the "Company," "Thermon," "we," "our" or "us") for use at the 2015 Annual Meeting of Stockholders of the Company to be held at the DoubleTree by Hilton, Houston Intercontinental Airport, 15747 John F. Kennedy Blvd, Houston, Texas 77032 on Thursday, July 30, 2015 at 7:30 a.m. Central Time, and any adjournment or postponement thereof (the "2015 Annual Meeting").
As permitted by the rules adopted by the Securities and Exchange Commission (the "SEC"), we have elected to provide access to our proxy materials primarily via the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the "Notice") to our stockholders of record entitled to vote at the 2015 Annual Meeting. Instructions on how to access and review these proxy materials electronically, request hard copies of these materials and submit proxy votes online are stated in the Notice.
Pursuant to provisions of our Amended and Restated Bylaws (the "Bylaws") and by action of our Board, the close of business on June 2, 2015 was established as the time and record date for determining the stockholders entitled to receive notice of, attend and vote at the 2015 Annual Meeting (the "Record Date"). We began mailing the Notice to stockholders of record on or about June 11, 2015. We first made this Proxy Statement available online to our stockholders at
http://proxy.thermon.com
on or about June 11, 2015, along with our Annual Report on Form 10-K for the fiscal year ended March 31, 2015, as filed with the SEC on June 1, 2015 (the "2015 Annual Report").
How can I attend the 2015 Annual Meeting?
Only stockholders as of the Record Date are entitled to attend the 2015 Annual Meeting, which will be held on Thursday, July 30, 2015 at the DoubleTree by Hilton, Houston Intercontinental Airport, 15747 John F. Kennedy Blvd, Houston, Texas 77032. Doors will open at 7:00 a.m., Central Time, and the meeting will begin promptly at 7:30 a.m., Central Time.
What is the Company’s fiscal year?
The Company's fiscal year ends on March 31. In this Proxy Statement, we refer to the fiscal years ended March 31, 2013, 2014 and 2015 and the fiscal year ending March 31, 2016 as "Fiscal 2013," "Fiscal 2014," "Fiscal 2015," and "Fiscal 2016," respectively. Unless otherwise stated, all financial information presented in this Proxy Statement is based on the Company’s fiscal calendar.
What items will be voted on at the 2015 Annual Meeting?
Stockholders may vote on the following proposals at the 2015 Annual Meeting:
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the election to the Board of the eight nominees named in this Proxy Statement, each for a term of one year;
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ratification of the appointment of KPMG LLP ("KPMG") as the Company’s independent registered public accounting firm for Fiscal 2016; and
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the approval, on a non-binding advisory basis, of the compensation of our executive officers.
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The Company is not aware of any other business to be presented for a vote of the stockholders at the 2015 Annual Meeting. If any other matters are properly presented, the people named as proxies will have discretionary authority, to the extent permitted by law, to vote on such matters according to their best judgment. The chairman of the 2015 Annual Meeting
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may refuse to allow presentation of a proposal or nominee for the Board if the proposal or nominee was not properly submitted.
What are the Board’s voting recommendations?
The Board recommends that you vote your shares:
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"FOR" each of the nominees to the Board;
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"FOR" ratification of the appointment of KPMG as the Company’s independent registered public accounting firm for Fiscal 2016; and
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"FOR" the resolution to approve, on a non-binding advisory basis, the compensation of the Company’s executive officers.
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Who may vote at the 2015 Annual Meeting?
Holders of our common stock on the Record Date are entitled to one vote for each share of the Company’s common stock held on the Record Date. As of the Record Date, there were 32,113,629 shares of the Company’s common stock issued and outstanding and approximately 48 stockholders of record.
What is the difference between a stockholder of record and a beneficial owner of shares held in street name?
Stockholder of Record.
If, on the Record Date, your shares were registered directly in your name with the Company’s transfer agent, American Stock Transfer and Trust Company, LLC ("AST"), you are considered the stockholder of record with respect to those shares, and the Notice was sent directly to you by AST at the Company's request. If you request printed copies of the proxy materials by mail, you will receive a proxy card.
Beneficial Owner of Shares Held in Street Name.
If, on the Record Date, your shares were held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in "street name," and the Notice was sent to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the 2015 Annual Meeting. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account. Those instructions are contained in a "vote instruction form." If you request printed copies of the proxy materials by mail, you will receive a vote instruction form.
What is the quorum requirement for the 2015 Annual Meeting?
The presence in person or by proxy of the holders of stock having a majority of the votes which could be cast by the holders of all outstanding stock entitled to vote at the 2015 Annual Meeting is required for the transaction of business. This is called a quorum. Your shares will be counted for purposes of determining if there is a quorum, whether representing votes for, against or abstained, if you (i) are present and vote in person at the 2015 Annual Meeting, or (ii) have voted on the Internet, by telephone or by properly submitting a proxy card or vote instruction form by mail. Broker non-votes, as described below, will also be counted for purposes of determining whether a quorum is present. If a quorum is not present, the 2015 Annual Meeting will be adjourned until a quorum is obtained.
If I am a stockholder of record of the Company’s shares, how do I vote?
If you are a stockholder of record, there are four ways to vote:
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In person.
You may vote in person at the 2015 Annual Meeting. The Company will give you a ballot when you arrive.
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Via the Internet.
You may vote by proxy via the Internet by following the instructions provided in the Notice.
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By Telephone.
If you request printed copies of the proxy materials by mail, you may vote by proxy by calling the toll free number found on the proxy card.
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By Mail.
If you request printed copies of the proxy materials by mail, you may vote by proxy by filling out the proxy card and sending it back in the envelope provided.
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If I am a beneficial owner of shares held in street name, how do I vote?
If you are a beneficial owner of shares held in street name, there are four ways to vote:
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In person.
If you wish to vote in person at the 2015 Annual Meeting, you must obtain a legal proxy from the organization that holds your shares. Please contact that organization for instructions regarding obtaining a legal proxy.
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Via the Internet.
You may vote by proxy via the Internet by following the instructions provided in the vote instruction form that was sent to you by the organization holding your shares.
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By Telephone.
If you request printed copies of the proxy materials by mail, you may vote by proxy by calling the toll free number found on the vote instruction form.
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By Mail.
If you request printed copies of the proxy materials by mail, you may vote by proxy by filling out the vote instruction form and sending it back in the envelope provided.
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Can I change my vote?
You may change your proxy instructions at any time prior to the vote at the 2015 Annual Meeting. You may enter a new vote by using the Internet or the telephone or by mailing a new proxy card or new vote instruction form bearing a later date (which will automatically revoke your earlier voting instructions). If you are a stockholder of record, you may accomplish this by granting a new proxy or by voting in person at the 2015 Annual Meeting. If you are a beneficial owner of shares held in street name, you may change your vote by submitting new voting instructions to your broker or nominee.
How are proxies voted?
All shares represented by valid proxies received prior to the 2015 Annual Meeting will be voted, and where a stockholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the stockholder’s instructions.
What happens if I do not give specific voting instructions?
Stockholders of Record.
If you are a stockholder of record and you sign and return a proxy card without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the 2015 Annual Meeting.
Beneficial Owners of Shares Held in Street Name.
If you are a beneficial owner of shares held in street name and do not provide the broker or nominee that holds your shares with specific voting instructions, the broker or nominee that holds your shares may generally vote your shares on "routine" matters but cannot vote your shares on "non-routine" matters. If the broker or nominee that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, it will inform the inspector of election that it does not have the authority to vote on such matter with respect to your shares. This occurrence is referred to as a "broker non-vote." The only routine matter scheduled to be voted upon at the 2015 Annual Meeting is Proposal No. 2 (to ratify the appointment of the Company’s independent registered public accounting firm for Fiscal 2016). All other matters scheduled to be voted upon are non-routine and therefore broker non-votes may exist in connection with Proposals No. 1 (to elect directors) and No. 3 (to approve, on a non-binding advisory basis, the compensation of our executive officers). Therefore, if you hold your shares in street name through a broker or other nominee, it is critical that you instruct your broker or other nominee how to vote on Proposals No. 1 and No. 3 if you want your vote to count.
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What is the vote required for each proposal and how are abstentions and broker non-votes treated?
Proposal No. 1 (to elect directors):
Directors shall be elected by a plurality of the votes cast at the 2015 Annual Meeting. The eight director nominees receiving the greatest number of affirmative votes of the shares entitled to be voted will be elected as directors to serve until the next annual meeting of stockholders. Broker non-votes are not considered votes cast on the matter and will have no effect on the outcome of the proposal. Our Corporate Governance Guidelines require any incumbent director who receives a greater number of votes "withheld" than votes "for" in an uncontested election to promptly submit a written offer of resignation to the Nominating and Corporate Governance Committee, who will review and evaluate the offer of resignation and recommend to the Board whether to accept or reject the resignation. The Board will decide whether to accept or reject the resignation and publicly disclose its decision and, if it rejects the resignation, the rationale behind such decision, within 90 days after the election results for the 2015 Annual Meeting are certified.
Proposal No. 2 (to ratify the appointment of the Company's independent registered public accounting firm):
Approval of Proposal No. 2 will require the affirmative vote by the holders of stock having a majority of the votes which could be cast by holders of shares (i) present in person or by proxy at the 2015 Annual Meeting and (ii) entitled to vote on such matter. Abstentions will have the same practical effect as votes against the proposal. Proposal No. 2 is considered a routine matter; therefore, no broker non-votes are expected in connection with the proposal.
Proposal No. 3 (to approve, on a non-binding advisory basis, the compensation of our executive officers):
Approval of Proposal No. 3 will require the affirmative vote by the holders of stock having a majority of the votes which could be cast by the holders of shares (i) present in person or by proxy at the 2015 Annual Meeting and (ii) entitled to vote on such matter. Abstentions will have the same practical effect as votes against the proposal. Broker non-votes are not considered entitled to vote on the matter and will have no effect on the outcome of the proposal.
Who will serve as the inspector of election?
A representative from AST will serve as the inspector of election.
Where can I find the voting results of the 2015 Annual Meeting?
The preliminary voting results will be announced at the 2015 Annual Meeting. The final voting results will be tallied by the inspector of election and published in a Current Report on Form 8-K, which the Company is required to file with the SEC within four business days following the 2015 Annual Meeting.
Who is paying for the cost of this proxy solicitation?
The Company is paying the costs of the solicitation of proxies. In addition to solicitation by mail, proxies may be solicited personally or by telephone, facsimile, email or other means by our directors, officers or regular employees on the Company’s behalf.
Upon request, we will also reimburse brokerage firms, banks, broker-dealers or other similar organizations and other custodians, nominees, and fiduciaries for their reasonable out-of-pocket expenses for sending proxy and solicitation materials to beneficial owners of stock.
Will any other matters be acted on at the 2015 Annual Meeting?
As of the date these proxy materials were mailed, we are not aware of any other matters to be presented at the 2015 Annual Meeting other than the proposals described herein. If you grant a proxy, the persons named as proxy holders will vote your shares on any additional matters properly presented for a vote at the meeting as recommended by the Board or, if no recommendation is given, in their own discretion.
Whom should I call with other questions?
If you have additional questions about these proxy materials or the 2015 Annual Meeting, please contact: Thermon Group Holdings, Inc., 100 Thermon Drive, San Marcos, Texas 78666, Attention: General Counsel, Telephone: (512) 396-5801.
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DIRECTORS AND EXECUTIVE OFFICERS
Directors
Our Board currently consists of eight directors with each term expiring at the 2015 Annual Meeting. The authorized number of directors is presently fixed at eight. Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated Rodney L. Bingham, Marcus J. George, Richard E. Goodrich, Kevin J. McGinty, John T. Nesser, III, Michael W. Press, Stephen A. Snider and Charles A. Sorrentino for re-election at the 2015 Annual Meeting. Each of the directors elected at the 2015 Annual Meeting will serve a one-year term expiring at the 2016 Annual Meeting of Stockholders (the "2016 Annual Meeting").
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Position
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Age as of the
2015 Annual Meeting |
Director
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Rodney L. Bingham
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Director, President and Chief Executive Officer
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2009
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Marcus J. George
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Director
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2010
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Richard E. Goodrich
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Director
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2010
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Kevin J. McGinty
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Director
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2012
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John T. Nesser, III
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Director
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2012
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Michael W. Press
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Director
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2011
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Stephen A. Snider
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Director
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2011
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Charles A. Sorrentino
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Chairman of the Board
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2010
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Each of the nominees has indicated his willingness to serve, if elected, but if any of the nominees should be unable or unwilling to serve at the time of the 2015 Annual Meeting, the Board may either reduce its size, or designate or not designate a substitute nominee. If the Board designates a substitute nominee, proxies that would have been cast for the original nominee will be cast for the substitute nominee, unless instructions are given to the contrary.
The biographies below describe the skills, qualifications, attributes and experience of each of the nominees that led the Board to determine that it is appropriate to nominate each director.
Rodney L. Bingham
has served as President and Chief Executive Officer of the Company and a director since 2009. He joined Thermon in April 1971 and has over 40 years of experience in various senior management roles within the Company. Under Mr. Bingham’s leadership, the Company completed its initial public offering of common stock ("IPO") in May 2011. Mr. Bingham has been instrumental in the development and introduction of several key heat tracing products which advanced the state of the industry, including the first parallel resistance, cut-to-length heating cables and the first pipe-mounted power termination assemblies in the industry. Mr. Bingham has been involved in the Institute of Electrical and Electronics Engineers ("IEEE") since 1974 and has been a member of the Petroleum and Chemical Industry Committee within the IEEE for over 15 years. He also served on the Power Engineering Society Working Group for the Development of Heat Tracing Standards (IEEE 622). Among other qualifications, Mr. Bingham brings to the Board extensive executive leadership experience in the heat tracing industry and an invaluable, in-depth knowledge of the Company and our industry, operations and business plans.
Marcus J. George
has served as a director since April 2010. In 2015, Mr. George co-founded and is currently a partner at Onward Capital LLC, a private equity firm focused on investing in and growing lower middle market industrial businesses. Mr. George previously served as a partner at the private equity firm CHS Capital LLC ("CHS") until March 2015. CHS is one of our former private equity sponsors and significant stockholders. Mr. George joined CHS in 1997 and was promoted to partner in 2007. He also served as a partner at Shorehill Capital, LLC, a private equity firm focused on control investments in middle market industrial and distribution companies from 2013 to 2014. Prior to joining CHS, Mr. George was employed by Heller Financial, Inc. in the Corporate Finance Group. He was also an associate at KPMG from 1991 to 1993. Mr. George previously served as a director of GSE Holding, Inc. ("GSE") from June 2011 to August 2014, Dura-Line Holdings, Inc., Waddington North America, Inc. and KB Alloys, LLC. Mr. George holds a B.B.A. from the University of Notre Dame and an M.B.A. from the University of Chicago. We believe that Mr. George's substantial experience in private equity investments focused on infrastructure and industrial products and financial and capital markets matters bring important and valuable skills to the Board.
Richard E. Goodrich
has served as a director since April 2010. He is a retired executive vice president and chief financial officer of Chicago Bridge & Iron Company N.V. (NYSE:CBI), an engineering, procurement and construction
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company that provides services to customers in the chemicals and energy industries. Prior to retiring, he served as executive vice president and chief financial officer of CBI from 2001 to 2005 and as acting chief financial officer until June 2006. Mr. Goodrich has served as a director of Chart Industries, Inc. (NASDAQ:GTLS) since 2006 and currently serves on its audit and compensation committees. He previously served as a director of GSE from June 2011 to August 2014. He is a Certified Public Accountant having been certified in the District of Columbia in November 1970 (license inactive). Mr. Goodrich brings to the Board financial and strategic expertise as well as the experience and international operations insight of a chief financial officer of a large multinational company.
Kevin J. McGinty
has served as a director since June 2012. He is a retired senior advisor of Peppertree Capital Management, Inc. ("Peppertree"), a private equity fund management firm. Prior to founding Peppertree in January 2000, he served as a Managing Director of Primus Venture Partners from 1990 to December 1999. In both organizations Mr. McGinty was involved in private equity investing, both as a principal and as a limited partner. From 1970 to 1990, Mr. McGinty was employed by Society National Bank, now KeyBank, N.A., where in his final position he was an executive vice president. Mr. McGinty has over 40 years of experience in the banking and private equity industries, including 20 years as an officer of a bank and 20 years serving in the role of managing director for a variety of private equity firms. Mr. McGinty previously served as a director of Marlin Business Services, Inc. (NASDAQ:MRLN) from February 1998 to June 2014. He also has 25 years of experience serving as a director of privately held companies. Mr. McGinty has also held leadership positions with various cultural and community organizations. Mr. McGinty received his undergraduate degree in economics from Ohio Wesleyan University and his M.B.A. in finance from Cleveland State University. The Board views Mr. McGinty’s independence, his banking experience, his experience as a director of other companies and his demonstrated leadership roles in business and community activities as important qualifications, skills and experience.
John T. Nesser, III
has served as a director since June 2012. Since July 2013, Mr. Nesser has served as the co-founder, manager, co-chief executive officer and director of All Coast, LLC ("All Coast"). Following its acquisition of Hercules Offshore Domestic Liftboat Fleet in July 2013, All Coast owns and operates the largest fleet of liftboats for the offshore oil and gas market in the Gulf of Mexico. Mr. Nesser retired as executive vice president and chief operating officer of McDermott International, Inc. (NYSE:MDR) ("McDermott") in 2011. He joined McDermott, a global engineering, procurement, construction and installation company with a focus on the energy industry, as associate general counsel in 1998 and spent over 10 years in various senior management roles, including as general counsel, chief administrative officer and chief legal officer. Previously, he served as a managing partner of Nesser, King & LeBlanc, a New Orleans law firm, which he co-founded in 1985. Mr. Nesser has served as a director of Layne Christensen Company (NASDAQ:LAYN) since August 2013 and is currently the chair of its compensation committee and a member of the audit and nominating and corporate governance committees. Mr. Nesser also served as a director of Seahawk Drilling Incorporated ("Seahawk") from August 2009 to October 2011. Mr. Nesser is a member of the Texas and Louisiana Bar Associations and is also a member of the Louisiana State University Law Center Board of Trustees. Mr. Nesser holds a B.S. in Business Administration, majoring in finance and a J.D. from Louisiana State University. We believe that Mr. Nesser’s significant prior experience in the roles of chief operating officer and general counsel and his legal and operational backgrounds make a significant contribution to the Board’s mix of backgrounds and skills and qualify him to be a director.
Michael W. Press
has served as a director since the completion of the Company's IPO in May 2011. He is a retired chief executive officer of KBC Advanced Technologies PLC (LSE:KBC), a publicly traded international petroleum and petrochemicals consulting and software firm, a position he held from 1997 to 2001. Since 2001, Mr. Press has served on various boards of directors and worked with a number of private equity backed companies in the United States, Europe and Asia, often in preparation for a public listing or sale. He has served on the board of directors of Chart Industries, Inc. (NASDAQ: GTLS) since 2006 and is currently its lead independent director, a member of its audit committee and chair of its nominations and corporate governance committee. He has served on the board of directors of Lamprell plc (LSE: LAM), a provider of diversified engineering and contracting services to the onshore and offshore oil & gas and renewable energy industries, since 2013 and is currently its senior independent director and chair of the remuneration committee. Mr. Press previously served as a director and senior independent director of Petrofac, Ltd. (LSE:PFC) from 2002 to 2010. He holds a B.S. from Colorado College, an M.S. from Columbia University and an Advanced Management Program degree from Stanford University. Mr. Press brings to the Board substantial experience as a director and executive officer of publicly held companies and over 30 years of international energy industry experience, including senior executive positions at The Standard Oil Company, British Petroleum plc, BP America and Amerada Hess Corporation. He also has significant manufacturing, operations, finance, corporate governance and corporate development experience.
Stephen A. Snider
has served as a director since June 2011. Mr. Snider is a retired chief executive officer and director of Exterran Holdings, Inc. (NYSE:EXH), a global natural gas compression services company, from August 2007 to June 2009, and was Chief Executive Officer and Chairman of the general partner of Exterran Partners, L.P. (NASDAQ:EXLP), a domestic natural gas contract compression services business, from August 2007 to June 2009. Both companies are publicly
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traded and headquartered in Houston, Texas. Prior to that, Mr. Snider was President, Chief Executive Officer and director of Universal Compression Holdings Inc. ("Universal"), a supplier of equipment used to ship natural gas through pipelines, from 1998 until Universal merged with Hanover Compressor Company in 2007 to form Exterran Corporation. Mr. Snider has over 30 years of experience in senior management of operating companies. He has served as a director of Energen Corporation (NYSE:EGN) since 2000 and is a currently the chair of its compensation committee and member of its governance and nominations committee. He has also served as a director of Dresser-Rand Group Inc. (NYSE:DRC) since 2009 and is currently a member of its compensation and nominating and governance committees. Mr. Snider also served as a director of Seahawk from August 2009 to February 2011. Mr. Snider holds a B.S. in Civil Engineering from the University of Detroit and an M.B.A. from the University of Colorado at Denver. Mr. Snider brings to the Board leadership experience, including as a public company chief executive officer, and extensive experience in the energy industry, including approximately 25 years dedicated to natural gas compression and processing.
Charles A. Sorrentino
has served as a director since April 2010 and as our independent Chairman of the Board since the completion of our IPO in May 2011. Mr. Sorrentino also served as the President and Chief Executive Officer of GSE, a position he was first appointed to on an interim basis in July 2013 and then on a permanent basis from November 2013 through November 2014. GSE is a global provider of engineered geosynthetic containment solutions for environmental protection and confinement applications. Mr. Sorrentino also served as a director of GSE from June 2011 through August 2014. In May 2014, in connection with a restructuring support agreement entered into with its lenders, GSE voluntarily filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. The U.S. Bankruptcy Court in Delaware approved GSE’s reorganization plan in July 2014. Prior to joining GSE, Mr. Sorrentino was President and Chief Executive Officer of Houston Wire & Cable Co. (NASDAQ:HWCC), a leading provider of wire and cable and related services from 1998 until his retirement in 2011. He previously served as President of Pameco Corporation ("Pameco") (NYSE:PCN), a national heating, ventilation, air conditioning and refrigeration distributor, from 1994 to 1998. Pameco was a $600 million distributor that was listed on the NYSE following an IPO in 1997 and was later merged into a larger company. After completing college, he served nine years with PepsiCo, Inc. (NYSE:PEP) and twelve years with United Technologies (NYSE:UTX) (formerly Sundstrand Corporation) in a variety of engineering, sales, marketing and executive management functions. Mr. Sorrentino earned a B.S. in Mechanical Engineering from Southern Illinois University and an M.B.A. from the University of Chicago. He also served in the United States Marine Corps. Mr. Sorrentino has served as an executive of several large manufacturing companies and brings a diversity of managerial experience from both publicly and privately held companies to the Board.
Executive Officers
The following table and biographies set forth certain information about our executive officers. Information pertaining to Mr. Bingham, who is both a director and an executive officer of the Company, may be found in the section above entitled "Directors." Throughout this Proxy Statement, we refer to Messrs. Bingham, Alexander, Peterson and van der Salm collectively as our "Named Executive Officers" for Fiscal 2015. Mr. Thames joined the Company in April 2015 and was not a Named Executive Officer during Fiscal 2015.
|
Name
|
Title
|
Age as of the
2015 Annual
Meeting
|
||
|
George P. Alexander
|
Executive Vice President, Global Sales and Marketing
(Special Advisor to the President and Chief Executive Officer)
|
64
|
||
|
Jay C. Peterson
|
Chief Financial Officer; Senior Vice President, Finance; Secretary; Treasurer
|
58
|
||
|
Bruce A. Thames
|
Executive Vice President and Chief Operating Officer
|
52
|
||
|
Johannes (René) van der Salm
|
Senior Vice President, Global Operations
|
51
|
||
George P. Alexander
joined Thermon in August 1971 working in the production department. He then spent time in various sales and management roles before accepting the role of Senior Vice President, Eastern Hemisphere in 2005. Mr. Alexander assumed responsibility for the Company’s global sales and marketing efforts in the role of Executive Vice President, Global Sales and Marketing in 2011. In connection with the Company's succession planning process, Mr. Alexander transitioned into the role of Special Advisor to the President and Chief Executive Officer on April 1, 2015. Mr. Alexander has been instrumental in establishing and growing the Company's operations internationally. He was also played a significant role in the Company's IPO in 2011. During Mr. Alexander’s tenure, he established the Company as the primary supplier for heat tracing systems to the nuclear power generation industry and co-authored IEEE 622 "IEEE Recommended Practice for the Design and Installation of Electric Pipe Heating Systems for Nuclear Power Generating Stations" published in 1979. Mr. Alexander initiated the formation of Thermon’s Customer Advisory Council. This Council consists of twelve representatives of major corporations from the refining and chemical industries. They, along with the Company’s Distributor
7
Council, provide management with essential feedback regarding current and future industry practices and needs. Mr. Alexander holds a B.S. in Mathematics from Texas State University.
Jay C. Peterson
joined Thermon in July 2010 as Chief Financial Officer. Prior to joining Thermon, Mr. Peterson held positions as Chief Financial Officer, Vice President of Finance, Senior Director of Finance, Secretary and Treasurer at Asure Software, Inc. (NASDAQ:ASUR) (formerly Forgent Networks, Inc.) ("Forgent"). Mr. Peterson started with Forgent in 1995 and was named Chief Financial Officer in 2001. Before joining Forgent, Mr. Peterson was Assistant Controller in Dell Computer Corporation’s $1 billion Direct division. He also spent 11 years in various financial management positions with IBM Corporation (NYSE:IBM). Mr. Peterson holds a B.A. and an M.B.A. from the University of Wisconsin.
Bruce A. Thames
joined Thermon in April 2015 as Executive Vice President and Chief Operating Officer. Prior to joining Thermon, Mr. Thames was Senior Vice President and Chief Operating Officer of TD Williamson in Tulsa, Oklahoma, a position he held since 2012. TD Williamson manufactures and delivers a portfolio of solutions to the owners and operators of pressurized piping systems for onshore and offshore applications. He joined TD Williamson in 2005 as Vice President, North America. During his tenure at TD Williamson, he also served as Vice President and General Manager, Eastern Hemisphere. Mr. Thames began his career with Cooper Industries (formerly Intool), where he spent 12 years in various roles within the product engineering, marketing and operations groups. Mr. Thames then joined GE Energy (formerly Dresser Flow Solutions) ("Dresser") and served primarily as the Director of North American Operations and Product Director for Ball Valves globally for Dresser's Valve Group during his tenure from 2002 to 2005. Mr. Thames holds a B.S. in Mechanical Engineering from the University of Texas at Austin.
Johannes (René) van der Salm
joined Thermon in October 2001 as European Logistics Manager based in the Company's European headquarters in Pijnacker, the Netherlands. In 2006, Mr. van der Salm was promoted to Vice President, Manufacturing and Logistics. During that period, he divided his time between the United States and European operations. In 2007, Mr. van der Salm relocated to the United States and was promoted to Senior Vice President, Operations. He was instrumental in the global implementation of the Company’s enterprise resource planning software. In 2011, Mr. van der Salm was promoted to Senior Vice President, Global Operations. After completing his undergraduate studies and a period of military service, Mr. van der Salm worked as sales engineer, project manager and production manager in supplying the petrochemical industry prior to joining Thermon. Mr. van der Salm holds a B.S. in Mechanical Engineering from Amsterdam Technical University.
8
CORPORATE GOVERNANCE
The Board oversees the Company’s Chief Executive Officer and other senior management in the competent and ethical operation of the Company and works to assure that the long-term interests of the stockholders are being served. The key practices and procedures of the Board are outlined in the Corporate Governance Guidelines and the Code of Business Conduct and Ethics, both available on the Company’s website at
http://ir.thermon.com/governance.cfm
. Stockholders can also obtain a free copy by writing to the General Counsel, Thermon Group Holdings, Inc., 100 Thermon Drive, San Marcos, Texas 78666.
During Fiscal 2015, the full Board met five times. Each member of the Board attended or participated in 75% or more of the aggregate of (i) the total number of meetings of the Board (held during the period for which such person has been a director); (ii) the total number of subcommittee meetings of the Board or one of its committees on which such person served; and (iii) the total number of meetings held by all committees of the Board on which such person served (during the periods that such person served) during Fiscal 2015.
Our Corporate Governance Guidelines require any incumbent director who receives a greater number of votes "withheld" than votes "for" in an uncontested election to promptly submit a written offer of resignation to the Nominating and Corporate Governance Committee, who will review and evaluate the offer of resignation and recommend to the Board whether to accept or reject the resignation. The Board will decide whether to accept or reject the resignation and publicly disclose its decision and, if it rejects the resignation, the rationale behind such decision, within 90 days after the election results for the 2015 Annual Meeting are certified.
There are no family relationships between any director, executive officer or person nominated by the Board to become a director or executive officer.
Board Composition
The composition of our Board is currently balanced among seven independent directors and a management director. The balance is important to us for several reasons, including:
|
•
|
Each of our independent directors contributes an outside point of view that we value for providing multiple perspectives to the Board’s oversight and direction of the Company and facilitating objectivity in its decision-making process.
|
|
•
|
Mr. Bingham, who has been with the Company for over 40 years, brings to the Board an invaluable, in-depth knowledge of the Company and our industry, operations and business plans.
|
Director Independence
The Board reviews the independence of each director annually. In determining the independence of our directors, the Board considered Section 303A of the NYSE rules, applicable SEC rules as well as all relevant facts and circumstances, including, among other things, the types and amounts of commercial dealings between the Company and companies and organizations with which the directors are affiliated. Based on the foregoing criteria, the Board has affirmatively determined that Messrs. Goodrich, McGinty, Nesser, Press, Snider and Sorrentino were independent for Fiscal 2015. The Board's three standing committees, Audit, Compensation, and Nominating and Corporate Governance, were comprised solely of independent directors during Fiscal 2015.
The Board did not affirmatively determine that Mr. George was an independent director for Fiscal 2015 based on his affiliation with the Company's former private equity sponsor, CHS. In examining director independence for Fiscal 2016, the Board again examined the relationship between Mr. George and CHS and the Company and CHS to determine whether or not Mr. George should be eligible to be considered an independent director for Fiscal 2016. The Board concluded that the last material transaction between the Company and CHS had occurred in connection with the IPO and more than three fiscal years had elapsed since such transaction. Further, Mr. George informed the Board that his affiliation with CHS ended in March 2015. The Board is not required to consider former employment of the director in making independence determinations. Therefore, the Board has affirmatively determined that Mr. George's previous affiliation with CHS no longer precludes his independence.
9
Mr. Bingham, the Company’s President and Chief Executive Officer, is not an independent director by virtue of his employment with the Company. There were no other transactions, relationships or arrangements with respect to any independent director that required review by our Board for purposes of determining director independence and the Board found that none of the independent directors had a material or other disqualifying relationship with the Company.
Board Leadership Structure and Executive Sessions
In connection with the completion of our IPO on May 10, 2011, the Board appointed Mr. Sorrentino as independent Chairman of the Board ("Chairman"). The Board believes that its current leadership structure best serves the objectives of the Board’s oversight of management, the ability of the Board to carry out its roles and responsibilities on behalf of the stockholders and the Company’s overall corporate governance. The Board also believes that the current separation of the Chairman and Chief Executive Officer roles allows the Chief Executive Officer to focus his time and energy on operating and managing the Company and leverage the experience and perspectives of the Chairman. The Board, however, periodically reviews the leadership structure and may make changes in the future.
In accordance with the listing standards of the NYSE and our Corporate Governance Guidelines, the non-employee directors meet in regularly scheduled executive sessions, generally following each quarterly Board meeting. At least one executive session per year is limited to independent directors as defined under the NYSE rules. The executive sessions are chaired by the Chairman.
Committees of the Board
The Board currently has three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. The members of each committee as comprised during Fiscal 2015 were as follows:
|
Directors
|
Audit
Committee |
Compensation
Committee |
Nominating and
Corporate Governance Committee |
|||
|
Richard E. Goodrich
|
Chair
|
Member
|
—
|
|||
|
Kevin J. McGinty
|
Member
|
Member
|
—
|
|||
|
John T. Nesser, III
|
Member
|
—
|
Member
|
|||
|
Michael W. Press
|
—
|
Member
|
Chair
|
|||
|
Stephen A. Snider
|
—
|
Chair
|
Member
|
|||
|
Charles A. Sorrentino
|
Member
|
—
|
Member
|
|||
On May 21, 2015, upon the recommendation of the Nominating and Corporate Governance Committee, the Board approved the following changes to our committee composition:
|
Directors
|
Audit
Committee |
Compensation
Committee |
Nominating and
Corporate Governance Committee |
|||
|
Marcus J. George
|
Member
|
Member
|
—
|
|||
|
Richard E. Goodrich
|
Chair
|
Member
|
—
|
|||
|
Kevin J. McGinty
|
Member
|
Member
|
—
|
|||
|
John T. Nesser, III
|
Member
|
—
|
Member
|
|||
|
Michael W. Press
|
—
|
Member
|
Chair
|
|||
|
Stephen A. Snider
|
—
|
Chair
|
Member
|
|||
|
Charles A. Sorrentino
|
Member
|
—
|
Member
|
|||
The Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee operate under written charters adopted by the Board. These charters, as well as our Code of Business Conduct and Ethics and our Corporate Governance Guidelines, are posted and available on the Company’s website at
http://ir.thermon.com/governance.cfm
.
The Audit Committee has responsibility for, among other things, reviewing our financial reporting and other internal control processes, our financial statements, the independent auditors’ qualifications and independence, the performance of our
10
internal audit function and independent auditors, and our compliance with legal and regulatory requirements and our Code of Business Conduct and Ethics. The Board has determined that each of Messrs. George, Goodrich, McGinty, Nesser and Sorrentino is financially literate and qualified to address any issues that are likely to come before the Audit Committee, including the evaluation of our financial statements and supervision of our independent auditors, and meets the additional criteria for independence of audit committee members under Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules of the NYSE. For Fiscal 2015, the Board determined Mr. Goodrich qualified as an "audit committee financial expert" as such term is defined in Item 407(d)(5)(ii) of Regulation S-K based on his education and experience in his respective fields. In addition to Mr. Goodrich, the Board determined that Mr. George qualifies as an audit committee financial expert for Fiscal 2016 based on his education and experience in his respective fields. The Audit Committee met four times during Fiscal 2015.
The Compensation Committee has responsibility for, among other things, reviewing and recommending policies relating to compensation and benefits of our executive officers, including: reviewing and approving corporate goals and objectives relevant to the compensation of the Chief Executive Officer and other executive officers; evaluating the performance of these officers in light of those goals and objectives; and setting compensation of these officers based on such evaluations. The Compensation Committee also has responsibility for management succession planning. The Compensation Committee may delegate its authority to one or more subcommittees of the Compensation Committee. The Compensation Committee also oversees our equity and incentive-based plans and administers the issuance of stock options, restricted stock, performance units and other awards with respect to executives and other employees. The Compensation Committee also reviews and evaluates its performance and the performance of each of its members, including compliance of the Compensation Committee with its charter, and prepares any report required under SEC rules. The report of the Compensation Committee is included in this Proxy Statement. The Compensation Committee has the authority to engage independent advisors, such as compensation consultants, to assist it in carrying out its responsibilities. The Compensation Committee, at present, engages an outside consultant on a regular basis to advise the Compensation Committee on the Company's compensation practices.
The Board has determined that each of Messrs. George, Goodrich, McGinty, Press and Snider is independent under the heightened independence standards applicable to Compensation Committee members under the NYSE rules and Rule 10C-1 under the Exchange Act. In addition, each member of the Compensation Committee also meets the definitions of "outside director" under Section 162(m) of the Internal Revenue Code and "non-employee director" under Rule 16b-3 under the Exchange Act. The Compensation Committee met six times during Fiscal 2015.
The Nominating and Corporate Governance Committee has responsibility for, among other things, identifying, evaluating and recommending nominees for appointment or election as directors, developing and recommending a set of corporate governance guidelines, considering and approving director compensation and overseeing the evaluation of our Board and its committees. The Nominating and Corporate Governance Committee also oversees our equity plans and administers the issuance of equity with respect to our non-employee directors. The Board has determined that each of Messrs. Nesser, Press, Snider and Sorrentino is independent under the rules of the NYSE. The Nominating and Corporate Governance Committee met four times during Fiscal 2015.
Director Qualifications
The Nominating and Corporate Governance Committee has not established specific minimum education, experience or skill requirements for potential board or committee members, but, in general, nominees will be selected on the basis of their experience, background, judgment, integrity, ability to make independent analytical inquiries, understanding of the Company’s business environment and willingness to devote adequate time to Board duties. We expect that qualified candidates will have high-level managerial experience in a complex and global organization and will be able to represent the interests of the stockholders as a whole and not just certain special interest groups or constituencies. The Board evaluates each individual in the context of the Board as a whole with the objective of retaining a group with diverse and relevant experience that can best perpetuate the Company’s success and represent stockholder interests through sound judgment. The Nominating and Corporate Governance Committee also values work ethic, leadership, problem-solving skills and diversity in selecting nominees to serve on the Board and is committed to actively seeking out highly qualified individuals to contribute to the diversity of the pool from which Board nominees are chosen. When current Board members are considered for nomination for re-election, the Nominating and Corporate Governance Committee also takes into consideration their prior Board contributions, performance and meeting attendance.
Although the Nominating and Corporate Governance Committee does not have a formal policy on diversity, it construes diversity to mean a variety of opinions, perspectives, expertise, personal and professional experiences and backgrounds (including gender, race and ethnicity), as well as other differentiating characteristics. Our Board and each of the
11
committees of the Board engage in an annual self-evaluation that includes an evaluation of diversity as well as overall effectiveness. The Nominating and Corporate Governance Committee may (but is not required to) identify nominees based upon suggestions by directors, management, outside consultants, including third party search firms, and stockholders. Before considering any nominee, the Nominating and Corporate Governance Committee makes a preliminary determination as to the need for additional members of the Board. If a need is identified, members of the Nominating and Corporate Governance Committee discuss and evaluate possible candidates in detail and suggest individuals to explore in more depth. Once a candidate is identified for further consideration, members of the Nominating and Corporate Governance Committee, as well as other members of the Board and management, as appropriate, interview the nominee. After completing this evaluation, the Nominating and Corporate Governance Committee makes a recommendation and refers the nominee to the full Board for consideration. The Nominating and Corporate Governance Committee will consider candidates recommended by stockholders in the same manner as other candidates. Stockholders may nominate candidates to serve as directors in accordance with the advance notice and other procedures contained in our Bylaws.
Communications with Directors
A stockholder or other interested party who wishes to communicate directly with the Board, one of its committees or with an individual director regarding matters related to the Company should send the communication, with a request to forward the communication to the intended recipient or recipients, to:
|
Thermon Group Holdings, Inc.
|
|
Attention: General Counsel
|
|
100 Thermon Drive
|
|
San Marcos, Texas 78666
|
We will forward all stockholder correspondence, as appropriate. Please note that we will not forward communications that are spam, junk mail or mass mailings, resumes and other forms of job inquiries, surveys and business solicitations or advertisements. Further, we will not forward any abusive, threatening or otherwise inappropriate materials.
Attendance of Directors at the Annual Meeting of Stockholders
Directors are strongly encouraged to attend the Company's annual meeting of stockholders unless extenuating circumstances prevent them from attending, although the Company has no formal, written policy requiring such attendance. All of the Company's directors attended the 2014 Annual Meeting of Stockholders (the "2014 Annual Meeting").
Board Oversight of Risk Management
The Board believes that evaluating the ability of senior management to manage the various risks confronting the Company is one of its most important areas of oversight. In carrying out this responsibility, the Board has designated the Audit Committee with primary responsibility for overseeing enterprise risk management and risks related to financial reporting and internal controls. The Audit Committee makes periodic updates to the Board regarding the risks inherent to the business of the Company, including the identification, assessment, management and monitoring of those risks, and risk management decisions, practices and activities of the Company.
While the Audit Committee has primary responsibility for overseeing enterprise risk management, each of the other Board committees also considers risk within its area of responsibility. For example, the Nominating and Corporate Governance Committee reviews legal and regulatory compliance risks as they relate to corporate governance structures and processes, and the Compensation Committee reviews risks related to compensation matters. The committee chairs periodically apprise the Board of significant risks and management’s response to those risks. While the Board and its committees oversee risk management strategy, senior management is responsible for implementing and supervising day-to-day risk management processes and reporting to the Board and its committees on such matters.
With respect to risk related to compensation matters, the Compensation Committee considers, in establishing and reviewing the Company’s executive compensation program, whether the program encourages unnecessary or excessive risk taking and has concluded that it does not. The base salaries of our employees, including the Named Executive Officers, are fixed in amount and thus do not encourage risk-taking. Short-term incentive opportunities for all employees, including the Named Executive Officers, are generally capped and are tied to overall corporate performance. The compensation provided to
12
key employees, including the Named Executive Officers, in the form of long-term equity awards helps further align key employees' interests with those of the Company’s stockholders.
The Compensation Committee has also reviewed the Company’s compensation programs for employees generally and has concluded that these programs do not create risks that are reasonably likely to have a material adverse effect on the Company. The Compensation Committee believes that the Company’s annual short-term and long-term equity incentives provide an effective and appropriate mix of incentives to help ensure that the Company’s performance is focused on long-term stockholder value creation and does not encourage the taking of short-term risks at the expense of long-term results. In general, bonus opportunities for Company employees are discretionary and management has the authority to reduce bonus payments (or pay no bonus) based on individual or Company performance and any other factors it may determine to be appropriate in the circumstances. As with the compensation of our executive officers, the Company intends to award a portion of the compensation of certain of its key employees in the form of equity awards that help further align the interests of employees with those of stockholders.
In addition, on May 20, 2015, the Compensation Committee adopted a Policy on Recoupment of Incentive Compensation (the "clawback policy"), pursuant to which, to the extent permitted by governing law, the Company may require the return, repayment or forfeiture of any annual or long-term incentive compensation payment or award made or granted to any current or former executive officer during the three-year period preceding the filing with the SEC of Company financial statements that were restated due to the material noncompliance of the Company with any financial reporting requirement under the securities laws to the extent that such incentive compensation was calculated based upon any financial result or performance metric impacted by such restatement. We believe that the adoption of the clawback policy will further enhance the risk management features of our executive compensation program in a way that does not encourage unnecessary or excessive risk-taking.
Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "DGCL") provides that a corporation may indemnify its directors and officers against liabilities actually and reasonably incurred in such capacities, including attorneys’ fees, judgments, fines and amounts paid in settlement, with respect to any matter in which the director or officer acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. Our Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation") provides that we shall indemnify our directors and officers to the fullest extent authorized by the DGCL. Our Certificate of Incorporation provides that this right to indemnification is a contract right, and we may, from time to time, and in the ordinary course of business, enter into contracts under which our directors and officers are provided with such rights of indemnification against liability that they may incur in their capacities as such and in connection with activities performed under the terms of such contracts. We have entered into indemnification agreements with each of our directors and certain officers which require us, among other things, to indemnify them against certain liabilities which may arise by reason of his status or service as a director or officer (other than liabilities arising from willful misconduct of a culpable nature).
Our Bylaws further provide that we shall indemnify and hold harmless, to the fullest extent permitted by law, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was one of our directors or officers or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture or other enterprise, against any and all liability and loss (including judgments, fines, penalties and amounts paid in settlement) suffered or incurred and expenses reasonably incurred by such person; provided, however, that we shall not be required to indemnify a person in connection with any action, suit or proceeding that is initiated by such person unless such action, suit or proceeding was authorized by our Board.
Our Certificate of Incorporation also eliminates the personal liability of our directors to the fullest extent permitted by Section 102 of the DGCL, which provides that a corporation may eliminate the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Section 102 does not, however, permit a corporation to eliminate or limit liability for (i) any breach of the duty of loyalty to the corporation or its stockholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) liability of directors for unlawful payment of dividend or unlawful stock purchase or redemption or (iv) any transaction from which the director derived an improper personal benefit.
13
We have purchased liability insurance covering our directors and officers and certain other management personnel.
Compensation Committee Interlocks and Insider Participation
In Fiscal 2015, our Compensation Committee consisted of Stephen A. Snider (Chair), Richard E. Goodrich, Kevin J. McGinty and Michael W. Press. On May 21, 2015, Mr. George was appointed as a member of the Compensation Committee. None of Messrs. Snider, George, Goodrich, McGinty or Press is or has been an employee or officer of the Company. None of our executive officers has served on the board of directors or compensation committee (or other committee serving an equivalent function) of any other entity that has one or more of its executive officers serving as a member of our Board.
DIRECTOR COMPENSATION
The Board determines the form and amount of non-employee director compensation after its review of recommendations made by the Nominating and Corporate Governance Committee.
At the beginning of Fiscal 2015, our non-employee director compensation program was as follows: (i) an annual cash retainer fee for serving as a member of the Board of $35,000; (ii) an annual cash retainer fee for serving as the chair of the Audit Committee of $10,000; (iii) an annual cash retainer fee for serving as the chair of the Compensation Committee of $7,500; (iv) an annual cash retainer fee for serving as the chair of the Nominating and Corporate Governance Committee of $7,500; (v) an additional annual cash retainer fee for serving as the independent Chairman of the Board of $52,500; and (vi) an annual equity grant with a grant date fair value equal to approximately $50,000 in the form of a restricted stock award, subject to a one-year vesting period. Non-employee directors also received: (i) $1,500 per meeting for attendance at in-person meetings of the Board and $750 per meeting for participation in telephonic meetings of the Board; and (ii) $1,000 per meeting for attendance at in-person meetings of the committees of the Board and $500 per meeting for participation in telephonic committee meetings and committee meetings held in connection with Board meetings. Other than the committee chairs, directors did not receive an additional retainer for serving as a committee member. All retainers were paid in quarterly installments in advance. Meeting attendance fees were paid quarterly in arrears. Actual reasonable out-of-pocket expenses were reimbursed upon presentation of documentation.
In July 2014, the Nominating and Corporate Governance Committee completed its annual review of the Company's director compensation and compared the Company's practices to that of the Company's Compensation Peer Group (as defined in the section entitled "Fiscal 2015 Executive Compensation"). Following such review, the Nominating and Corporate Governance Committee recommended that the Board adopt the following changes to its director compensation program: (i) eliminate the in-person and telephonic Board meeting attendance fees and instead increase the annual cash retainer for serving as a member of the Board from $35,000 to $45,000; (ii) eliminate the in-person and telephonic committee meeting attendance fees and instead implement an annual cash retainer for committee membership of $4,000 per committee for each of the Board's three standing committees; (iii) increase the annual equity grant date fair value from $50,000 to $55,000 to be awarded in four equal installments on each of the date of the annual meeting of stockholders, October 1, January 1 and April 1 (or, if such date is not a trading day, the next trading day), with each equity award being 100% vested on the grant date. The Nominating and Corporate Governance Committee recommended these structural changes and the elimination of meeting attendance fees to simplify the payment structure and administration of the director compensation program and to further align it with that of the Company's Compensation Peer Group. The Nominating and Corporate Governance Committee did not recommend any changes to the additional retainers for service as the chair of one of the Board's three standing committees or as the independent Chairman of the Board. The Board approved the changes described above, effective July 31, 2014.
The following table provides information regarding the compensation of our non-executive directors for Fiscal 2015. The compensation paid to Mr. Bingham is presented below under the section entitled "Fiscal 2015 Executive Compensation." Mr. Bingham did not receive any additional compensation for his service as a member of the Board.
14
|
Name
|
Fees Earned or
Paid In Cash ($) |
Stock Awards
($)(1)(2) |
Total
($) |
||||||
|
Marcus J. George
|
45,500
|
|
41,229
|
|
86,729
|
|
|||
|
Richard E. Goodrich
|
62,500
|
|
41,229
|
|
103,729
|
|
|||
|
Kevin J. McGinty
|
51,750
|
|
41,229
|
|
92,979
|
|
|||
|
John T. Nesser, III
|
52,500
|
|
41,229
|
|
93,729
|
|
|||
|
Michael W. Press
|
60,000
|
|
41,229
|
|
101,229
|
|
|||
|
Stephen A. Snider
|
60,000
|
|
41,229
|
|
101,229
|
|
|||
|
Charles A. Sorrentino (3)
|
105,000
|
|
41,229
|
|
146,229
|
|
|||
|
(1)
|
On each of July 31, 2014, October 1, 2014 and January 2, 2015, the Company granted a stock award to each of the non-executive directors equal to 564, 571, and 573 shares of the Company’s common stock, respectively. Each stock award was 100% vested on the grant date. The number of shares subject to each stock award was determined by dividing $13,750 by the per-share closing price of the Company’s common stock on the date of grant (rounded down to the nearest whole share). The per-share closing price on each of July 31, 2014, October 1, 2014 and January 2, 2015 was $24.38, $24.07 and $23.97, respectively.
|
(2) As of March 31, 2015, Mr. Sorrentino held 16,358 outstanding and unexercised stock options.
|
(3)
|
The fees received by Mr. Sorrentino include an additional retainer of $52,500 for his service as independent Chairman of the Board.
|
Stock Ownership Guidelines (Non-Employee Directors)
Our Board has adopted stock ownership guidelines for all of non-employee directors and delegated oversight of the guidelines to the Nominating and Corporate Governance Committee. The ownership guideline for non-employee directors is four times the director's annual cash retainer. Each non-employee director is required to meet such minimum guidelines within five years after November 1, 2011 or, if elected or appointed after November 1, 2011, within five years after the date of such election or appointment. For information on the stock ownership guidelines for the Company's executive officers, see the section entitled "Fiscal 2015 Executive Compensation—Compensation Discussion and Analysis—Stock Ownership Guidelines."
Each individual subject to the stock ownership guidelines must meet or exceed his or her requisite threshold immediately prior to any disposition of shares or share equivalents obtained through an equity grant (other than shares used to pay applicable withholding taxes and the exercise price of stock options). The 100% retention requirement applies during any time period during which the individual’s stock ownership threshold has not been achieved, including during the initial five-year period. If a non-employee director does not meet the requisite threshold or demonstrate sustained progress toward meeting the threshold, the Board has discretion to reduce future long-term incentive grants or pay future cash compensation in the form of equity.
In measuring stock ownership, the Nominating and Corporate Governance Committee will consider all shares beneficially owned and vested but unexercised stock options. For vested but unexercised stock options, the value counting toward the individual's threshold will be determined based on the excess of the market value of the stock over the exercise price of the stock option. Unvested performance units, unvested restricted stock or restricted stock units and unvested stock options are not considered in calculating each individual's stock ownership.
Though not yet required, Messrs. George, Goodrich, Nesser, Press, Snider and Sorrentino met these guidelines as of the Record Date. Mr. McGinty was appointed as a non-employee director in June 2012 and is on track to meet the requisite non-employee director guideline within the initial five-year period.
15
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our Board currently consists of eight directors with each term expiring at the 2015 Annual Meeting. The authorized number of directors is presently fixed at eight.
Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated each of Rodney L. Bingham, Marcus J. George, Richard E. Goodrich, Kevin J. McGinty, John T. Nesser, III, Michael W. Press, Stephen A. Snider and Charles A. Sorrentino for re-election at the 2015 Annual Meeting to serve a one-year term expiring at the 2016 Annual Meeting.
Each of the nominees has indicated his willingness to serve, if elected, but if any of the nominees should be unable or unwilling to serve, the Board may either reduce its size, or designate or not designate a substitute nominee. If the Board designates a substitute nominee, proxies that would have been cast for the original nominee will be cast for the substitute nominee unless instructions are given to the contrary.
The Board unanimously recommends that stockholders vote "FOR" the election of Messrs. Bingham, George, Goodrich, McGinty, Nesser, Press, Snider and Sorrentino.
16
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Board has adopted a Statement of Policy Regarding Transactions with Related Parties, which requires that each director and executive officer promptly advise the chairman of the Audit Committee of any Related Person Transaction, as defined therein, of which he or she becomes aware in which we are to be a participant, the amount involved exceeds $120,000 and the applicable Related Person had or will have a direct or indirect material interest, and all material facts with respect thereto. The Audit Committee (or, if determined by the Audit Committee as advisable, the disinterested members of our Board) shall then consider such Related Person Transaction for approval or ratification.
In considering whether to approve or ratify any Related Person Transaction, the Audit Committee or the disinterested members of our Board, as the case may be, shall consider all factors that are relevant to the Related Person Transaction, including, without limitation, the following:
|
•
|
the size of the transaction and the amount payable to a Related Person;
|
|
•
|
the nature of the interest of the Related Person in the transaction;
|
|
•
|
whether the transaction may involve a conflict of interest; and
|
|
•
|
whether the transaction involves the provision of goods or services to the Company that are available from unaffiliated third parties and, if so, whether the transaction is on terms and made under circumstances that are at least as favorable to the Company as would be available in comparable transactions with or involving unaffiliated third parties.
|
No Related Person Transaction will be consummated without the approval or ratification of the Audit Committee or the disinterested members of the Board as described above. It is our policy that no director shall participate in any discussion or approval of a Related Person Transaction for which he or she is a Related Person.
Related Party Transactions
CHS Transactions
On April 30, 2010, an investor group led by entities affiliated with certain of our former private equity sponsors acquired a controlling interest in us (the "CHS Transactions") from our predecessor, Thermon Holdings, LLC ("THLLC"). On March 5, 2015, we entered into a settlement agreement with THLLC (the "Settlement Agreement") pursuant to which THLLC agreed to pay us $1,700,000 (the "Settlement Amount") in full settlement of certain claims for indemnification for losses suffered or incurred (or likely to be incurred) by us under the stock purchase agreement governing the CHS Transactions (the "SPA") and to release both parties from all other potential claims under the SPA.
Pursuant to the SPA, we were required to pay to THLLC, within 30 days after each calendar quarter following the closing of the CHS Transactions, the net amount of cash released to us during such quarterly period that, as of April 30, 2010, had been posted or otherwise used to secure our performance bonds, bank guarantees, letters of credit or similar obligations. Immediately prior to the execution of the Settlement Agreement, the aggregate amount of the remaining restricted cash payments was approximately $567,117, which was subsequently offset against the Settlement Amount resulting in a net settlement amount of $1,132,883. The net settlement amount was paid to us out of the funds previously being held in escrow pursuant to that certain escrow agreement entered into in connection with the execution of the SPA. The remainder of the funds previously being held in escrow were released to THLLC. It is our understanding that the remaining funds in escrow released to THLLC were subsequently distributed on a pro-rata basis to the equity holders of THLLC, including Messrs. Bingham, Alexander and van der Salm. For additional information please see Note 10 to the consolidated financial statements included in our 2015 Annual Report.
Manager Equity Agreements
We have entered into manager equity agreements with certain of our current and former executive officers and employees (collectively, the "management investors") which set forth additional provisions relating to the ownership of our securities. Pursuant to the manager equity agreements, each management investor will maintain the confidentiality of our confidential or proprietary information obtained as a result of such management investor’s employment and is subject to non-competition and non-solicitation covenants during employment and for a period of two years thereafter. Upon the termination of a management investor’s employment for cause, we will have the option to repurchase certain of such management
17
investor’s securities at the lower of cost or the fair market value (as determined in good faith by our Board) of such securities. Messrs. Bingham, Alexander and van der Salm are among the management investors who are party to manager equity agreements.
Piggyback Registration Rights
Certain of our current and former executive officers, employees and directors are parties to an amended and restated securityholder agreement, as further amended (the "Securityholder Agreement"), that provides for certain "piggyback" registration rights. If, at any time, we determine to file a registration statement with the SEC covering any shares of our common stock, other than shares of common stock or other securities that are issuable in an offering to our officers or employees pursuant to an employee benefit plan or in connection with the acquisition of a business, each securityholder party to the Securityholder Agreement will have the right to request that we include their shares of common stock in any such registration statement, subject to specified limitations. We are required to pay the expenses associated with preparing and filing any registration statement in connection with the above piggyback registrations, other than any underwriting discounts and commissions applicable to the sale of shares.
Corporate Opportunity
Our Certificate of Incorporation provides that we renounce any interest or expectancy in, or in being offered an opportunity to participate in, any business opportunity that may be from time to time presented to our former private equity sponsors or any of their respective affiliates (other than us and our subsidiaries), subsidiaries, officers, directors, agents, stockholders, members, partners and employees and that may be a business opportunity for such former private equity sponsor, even if the opportunity is one that we or our subsidiaries might reasonably have pursued or had the ability or desire to pursue if granted the opportunity to do so. No such person will be liable to us for breach of any fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such person, acting in good faith, pursues or acquires any such business opportunity, or information regarding any such business opportunity, to us unless, in the case of any such person who is our director or officer, any such business opportunity is expressly offered to such director or officer solely in his or her capacity as our director or officer. None of our former private equity sponsors has any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as us or any of our subsidiaries.
Indemnification of Officers and Directors
We have entered into indemnification agreements with each of our directors and certain officers, including all of our Named Executive Officers. The indemnification agreements and indemnification provisions included in our Certificate of Incorporation and Bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law. For further information, see "Corporate Governance—Indemnification of Directors and Officers."
Other Compensation
Sarah Alexander, daughter of George Alexander, our former Executive Vice President, Global Sales and Marketing, was promoted from the position of Corporate Counsel to the position of General Counsel on August 15, 2014. Ms. Alexander also serves as our Director of Investor Relations. During Fiscal 2015, Ms. Alexander received compensation including a base salary of $126,860, bonuses totaling $5,562, and $4,176 in other employee benefits (including Company contributions to her 401(k) account and group life insurance benefits). On July 30, 2014, Ms. Alexander was granted an award of 820 restricted stock units with a grant date fair value of $19,992 under the Amended and Restated Thermon Group Holdings, Inc. 2011 Long-Term Incentive Plan, which will vest in equal annual installments over three years.
18
AUDIT COMMITTEE REPORT
The Audit Committee's primary responsibilities include assisting the Board in its oversight of the Company’s financial reporting process, appointing the independent registered public accounting firm and reviewing the services performed by the independent registered public accounting firm. The Audit Committee does not itself prepare financial statements or perform audits and its members are not auditors or certifiers of the Company's financial statements.
In performing its oversight responsibility, the Audit Committee has:
|
•
|
reviewed and discussed the audited year-end financial statements with management, which has primary responsibility for the financial statements;
|
|
•
|
discussed with KPMG, the Company’s independent registered public accounting firm for Fiscal 2015, the matters required to be discussed by Statement on Auditing Standards No. 114, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board ("PCAOB") in Rule 3200T; and
|
|
•
|
received the written disclosures and the letter from KPMG required by applicable requirements of the PCAOB regarding KPMG’s communications with the audit committee concerning independence and discussed with KPMG its independence.
|
The Audit Committee also discussed with the auditors matters related to our internal control over financial reporting. Based on these discussions and the written disclosures received from the independent auditors, the Audit Committee recommended to the Board inclusion of the audited year-end financial statements in the 2015 Annual Report.
|
Submitted by the Audit Committee of the Board of Directors
|
|
|
Richard E. Goodrich (Chair)
|
|
|
Kevin J. McGinty
|
|
|
John T. Nesser, III
|
|
|
Charles A. Sorrentino
|
|
19
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG LLP ("KPMG") has been our independent registered public accounting firm since June 14, 2013. The Audit Committee has appointed KPMG as our independent registered public accounting firm to audit our consolidated financial statements for Fiscal 2016. Our Board recommends the ratification of the Audit Committee's appointment of KPMG. If our stockholders do not ratify the selection of KPMG, the Audit Committee will reconsider the appointment. Even if the appointment is ratified, the Audit Committee may, in its discretion, select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.
We expect that one or more representatives of KPMG will attend the 2015 Annual Meeting and will be given an opportunity to make a statement if he or she so desires. The representatives will also be available to respond to appropriate questions from stockholders.
The Board unanimously recommends that stockholders vote "FOR" the ratification of the Audit Committee's appointment of KPMG as our independent registered public accounting firm for Fiscal 2016.
20
AUDIT AND NON-AUDIT FEES
The following sets forth fees billed for the audit and other services provided by KPMG for Fiscal 2014 and Fiscal 2015.
|
KPMG
|
KPMG
|
||||||
|
Year Ended
March 31, 2015 |
Year Ended
March 31, 2014 |
||||||
|
Audit Fees(1)
|
$
|
797,576
|
|
$
|
745,549
|
|
|
|
Audit-Related Fees(2)
|
—
|
|
—
|
|
|||
|
Tax Fees(3)
|
—
|
|
—
|
|
|||
|
All Other Fees(4)
|
1,850
|
|
1,800
|
|
|||
|
Total
|
$
|
799,426
|
|
$
|
747,349
|
|
|
|
(1)
|
Consists of fees and expenses for the integrated audit of annual financial statements, reviews of the related quarterly financial statements, and reviewing documents filed with the SEC.
|
|
(2)
|
Consists of fees and expenses for assurance and related services that are reasonably related to the performance of the audit or review of financial statements that are not "Audit Fees."
|
|
(3)
|
Consists of fees and expenses billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance and tax planning and structuring.
|
|
(4)
|
Consists of fees and expenses for products and services that are not "Audit Fees," "Audit-Related Fees" or "Tax Fees." The amount included in "All Other Fees" represents the use of KPMG's online accounting research tool.
|
Pre-Approval Policies and Procedures
All services rendered by KPMG were permissible under applicable laws and regulations and were pre-approved by our Audit Committee. Pursuant to its charter, the primary purposes of our Audit Committee include the following: (i) to select, appoint, engage, oversee, retain, evaluate and terminate our external auditors; (ii) to pre-approve all audit and non-audit services, including tax services, to be provided, consistent with all applicable laws, to us by our external auditors; and (iii) to establish the fees and other compensation to be paid to our external auditors. The Audit Committee has reviewed the external auditors’ fees for audit and non-audit services for Fiscal 2015. The Audit Committee has also considered whether such non-audit services are compatible with maintaining the external auditors’ independence and has concluded that they are compatible at this time.
The Audit Committee has adopted a policy requiring pre-approval by the Audit Committee of all services (audit and non-audit) to be provided to us by our independent registered public accounting firm. In accordance with that policy, the Audit Committee has given its pre-approval for the provision of all audit and review services to be performed by the independent registered public accounting firm for Fiscal 2016. All other services must be specifically pre-approved by the Audit Committee or by a member of the Audit Committee to whom the authority to pre-approve the provision of services has been delegated.
Furthermore, the Audit Committee will review the external auditors’ proposed audit scope and approach as well as the performance of the external auditors. It also has direct responsibility for and sole authority to resolve any disagreements between our management and our external auditors regarding financial reporting, will regularly review with the external auditors any problems or difficulties the auditors encountered in the course of their audit work and will, at least annually, use its reasonable efforts to obtain and review a report from the external auditors addressing the following (among other items): (i) the auditors’ internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the external auditors; (iii) the independence of the external auditors; and (iv) the aggregate fees billed by our external auditors for each of the previous two fiscal years.
21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record Date, unless otherwise indicated, with respect to the beneficial ownership of the Company’s common stock by (i) each person known to us to be the beneficial owner of more than 5% of the outstanding shares of the Company’s common stock based solely on the Company’s review of SEC filings; (ii) each director; (iii) each Named Executive Officer; and (iv) all directors and Named Executive Officers as a group.
Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC, which generally provide that a person is the beneficial owner of securities if such person has or shares voting or investment power with respect to the securities or has the right to acquire such powers within 60 days. Shares issuable pursuant to stock options exercisable as of the Record Date or within 60 days thereafter and restricted stock units ("RSUs") that are scheduled to vest within 60 days of the Record Date are deemed outstanding for computing the percentage of the respective person or group holding such options but are not outstanding for computing the percentage of any other person or group. The percentage of beneficial ownership for the following table is based on 32,133,629 shares of common stock outstanding as of the Record Date, plus options exercisable and RSUs vesting on or within 60 days of the Record Date held by any executive officer or director included in the group for which percentage ownership has been calculated. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock. Unless otherwise indicated, the address for each listed stockholder is: c/o Thermon Group Holdings, Inc., 100 Thermon Drive, San Marcos, Texas 78666.
|
Name of Beneficial Owner
|
Number of Shares
Beneficially Owned |
Percentage
|
||||
|
5% Stockholders:
|
||||||
|
Columbia Wanger Asset Management, LLC(1)
|
2,861,230
|
|
8.9
|
%
|
||
|
Eagle Asset Management, Inc.(2)
|
2,224,109
|
|
6.9
|
%
|
||
|
Van Berkom & Associates Inc.(3)
|
2,083,642
|
|
6.5
|
%
|
||
|
The Bank of New York Mellon Corporation (4)
|
1,950,509
|
|
6.1
|
%
|
||
|
The Vanguard Group(5)
|
1,837,488
|
|
5.7
|
%
|
||
|
Clearbridge Investments, LLC(6)
|
1,676,671
|
|
5.2
|
%
|
||
|
Vaughan Nelson Investment Management, L.P.(7)
|
1,665,446
|
|
5.2
|
%
|
||
|
Executive Officers and Directors:
|
||||||
|
George P. Alexander(8)
|
226,181
|
|
*
|
|
||
|
Rodney L. Bingham(9)
|
131,568
|
|
*
|
|
||
|
Jay C. Peterson(10)
|
26,353
|
|
*
|
|
||
|
Johannes (René) van der Salm(11)
|
177,136
|
|
*
|
|
||
|
Marcus J. George(12)
|
10,057
|
|
*
|
|
||
|
Richard E. Goodrich
|
12,641
|
|
*
|
|
||
|
Kevin J. McGinty
|
6,857
|
|
*
|
|
||
|
John T. Nesser, III
|
8,577
|
|
*
|
|
||
|
Michael W. Press
|
10,641
|
|
*
|
|
||
|
Stephen A. Snider
|
12,641
|
|
*
|
|
||
|
Charles A. Sorrentino(13)
|
44,868
|
|
*
|
|
||
|
All executive officers and directors as a group(11 persons)(14)
|
665,520
|
|
2.1
|
%
|
||
|
*
|
Less than 1% of our outstanding common stock.
|
|
(1)
|
According to a Schedule 13G amendment filed with the SEC on February 11, 2015, Columbia Wanger Asset Management, LLC reported beneficial ownership of an aggregate 2,861,230 shares, including sole voting power over 2,557,482 shares beneficially owned and sole dispositive power over all 2,861,230 shares beneficially owned. Columbia Wanger Asset Management, LLC lists its address as 227 West Monroe Street, Suite 3000, Chicago, IL 60606 in such filing. The Schedule 13G amendment may not reflect current holdings of our common stock.
|
|
(2)
|
According to a Schedule 13G amendment filed with the SEC on January 15, 2015, Eagle Asset Management, Inc. reported beneficial ownership of an aggregate 2,224,109 shares, including sole voting and dispositive power over all
|
22
shares beneficially owned. Eagle Asset Management, Inc. lists its address as 880 Carillon Parkway, Saint Petersburg, FL 33716 in such filing. The Schedule 13G amendment may not reflect current holdings of our common stock.
|
(3)
|
According to a Schedule 13G filed with the SEC on January 23, 2015, Van Berkom & Associates Inc. reported beneficial ownership of an aggregate 2,083,642 shares, including sole voting and dispositive power over all shares beneficially owned. Van Berkom & Associates Inc. lists its address as 1130 Sherbrooke Street West, Suite 1005, Montreal, Quebec H3A 2M8 in such filing. The Schedule 13G may not reflect current holdings of our common stock.
|
|
(4)
|
According to a Schedule 13G filed with the SEC on February 10, 2015, The Bank of New York Mellon Corporation reported beneficial ownership of an aggregate 1,950,509 shares, including sole voting power over 1,885,520 shares beneficially owned, sole dispositive power over 1,949,570 shares beneficially owned and shared voting and shared dispositive power with certain affiliated entities over 939 shares beneficially owned. The Bank of New York Mellon Corporation lists its address as One Wall Street, 31st Floor, New York, New York 10286 in such filing. The Schedule 13G may not reflect current holdings of our common stock.
|
|
(5)
|
According to a Schedule 13G amendment filed with the SEC on February 10, 2015, The Vanguard Group reported beneficial ownership of an aggregate 1,837,488 shares, including sole voting power over 40,328 shares beneficially owned, sole dispositive power over 1,800,160 shares beneficially owned and shared dispositive power with certain affiliated entities over 37,328 shares beneficially owned. The Vanguard Group lists its address as 100 Vanguard Blvd, Malvern, PA 19355 in such filing. The Schedule 13G amendment may not reflect current holdings of our common stock.
|
|
(6)
|
According to a Schedule 13G filed with the SEC on February 17, 2015, Clearbridge Investments, LLC reported beneficial ownership of an aggregate 1,676,671 shares, including sole voting and dispositive power over all shares beneficially owned. Clearbridge Investments, LLC lists its address as 620 8th Avenue, New York, New York 10018 in such filing. The Schedule 13G may not reflect current holdings of our common stock.
|
|
(7)
|
According to a Schedule 13G filed with the SEC on February 13, 2015, Vaughan Nelson Investment Management, L.P. reported beneficial ownership of an aggregate 1,665,446 shares, including sole voting power over 1,279,850 shares beneficially owned, sole dispositive power over 1,515,650 shares beneficially owned and shared dispositive power with certain affiliated entities over 149,796 shares beneficially owned. Vaughan Nelson Investment Management, L.P. lists its address as 600 Travis Street, Suite 6300, Houston, Texas 77002 in such filing. The Schedule 13G may not reflect current holdings of our common stock.
|
|
(8)
|
Includes 42,252 shares owned by the Bridget Alexander Trust, which is for the benefit of spouse Bridget Alexander, 54,981 shares owned by the George Alexander Trust, which is for the benefit of George Alexander, 42,252 shares owned by spouse Bridget Alexander, 4,563 RSUs vesting on August 1, 2015, 4,647 RSUs vesting on August 2, 2015 and 2,000 shares of our common stock issuable upon the exercise of stock options that are exercisable within 60 days of the Record Date. Excludes 7,070 unvested RSUs, 14,130 unvested performance units (measured at the target performance level) and 2,000 shares of common stock issuable upon the exercise of stock options that are not exercisable within 60 days of the Record Date.
|
|
(9)
|
Includes 91,917 shares owned by the R/S Bingham Family Limited Partnership, which is primarily owned by trusts that are for the benefit of Mr. Bingham's children, of which Mr. Bingham and his wife are the sole trustees as well as a limited liability company that is for the benefit of Mr. Bingham and his wife, of which Mr. Bingham is the general partner. Also includes 4,563 RSUs vesting on August 1, 2015, 4,647 RSUs vesting on August 2, 2015 and 4,000 shares of our common stock issuable upon the exercise of stock options that are exercisable within 60 days of the Record Date. Excludes 7,070 unvested RSUs, 14,130 unvested performance units (measured at the target performance level) and 2,000 shares of common stock issuable upon the exercise of stock options that are not exercisable within 60 days of the Record Date.
|
|
(10)
|
Includes 1,000 shares of our common stock issuable upon the exercise of stock options that are exercisable within 60 days of the Record Date, 2,696 RSUs vesting on August 1, 2015, 2,711 RSUs vesting on August 2, 2015 and 1,481 RSUs vesting on July 31, 2015. Excludes 5,660 unvested RSUs, 11,177 unvested performance units (measured at the target performance level) and 1,000 shares of common stock issuable upon the exercise of stock options that are not exercisable within 60 days of the Record Date.
|
23
|
(11)
|
Includes 4,000 shares of our common stock issuable upon the exercise of stock options that are exercisable within 60 days of the Record Date, 2,696 RSUs vesting on August 1, 2015, 2,711 RSUs vesting on August 2, 2015 and 1,481 RSUs vesting on July 31, 2015. Excludes 5,660 unvested RSUs, 11,177 unvested performance units (measured at the target performance level) and 1,000 shares of common stock issuable upon the exercise of stock options that are not exercisable within 60 days of the Record Date.
|
|
(12)
|
Includes 50 shares owned by minor children sharing Mr. George’s household. Mr. George disclaims beneficial ownership of shares held by his minor children, except to the extent of a pecuniary interest therein.
|
|
(13)
|
Includes 16,358 shares of our common stock issuable upon the exercise of stock options that are exercisable within 60 days of the Record Date.
|
|
(14)
|
Includes 25,358 shares of our common stock issuable upon the exercise of stock options held by executive officers or directors that are exercisable within 60 days of the Record Date and 32,194 RSUs vesting within 60 days of the Record Date held by executive officers. Excludes 25,460 unvested RSUs, 50614 unvested performance units (measured at the target performance level) and 6,000 unvested stock options held by executive officers.
|
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file reports of securities ownership and changes in such ownership with the SEC. Officers, directors and greater than ten percent stockholders also are required by SEC rules to furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to the Company or written representations that no Form 5 reports were required, the Company believes that all Section 16(a) filing requirements were timely met during Fiscal 2015, except for the following reports, which were filed late: one Form 4 was filed for Mr. Peterson on June 23, 2014 with respect to the exercise of 3,000 stock options and subsequent forfeiture of 1,804 shares of common stock on June 18, 2014; one Form 4 was filed for Mr. Sorrentino on September 9, 2014 with respect to the sale of 1,000 shares of common stock on August 12, 2014; one Form 4 was filed for Mr. Sorrentino on February 11, 2015 with respect to 1,000 shares of common stock on January 15, 2015; one Form 4 was filed for each of Messrs. George, Goodrich, Press, McGinty, Nesser, Snider and Sorrentino on November 12, 2014 with respect to the award of 571 shares on October 1, 2014. In addition, one Form 4 was filed for each of Messrs. Bingham, Alexander, Peterson and van der Salm on June 5, 2015 with respect to the award of 5,013, 5,013, 4,444 and 4,444 restricted stock units, respectively, 9,567, 9,567, 8,480 and 8,480 performance units, respectively, on July 31, 2014, the vesting of 4,647, 4,647, 2,711, and 2,711 restricted stock units, respectively, and subsequent forfeiture of 1,270 and 741 shares of common stock for each of Messrs. Bingham and Peterson, respectively on August 2, 2014, and the vesting of 4,563, 4,563, 2,696 and 2,696 restricted stock units, respectively, and subsequent forfeiture of 1,247 and 737 shares of common stock for each of Messrs. Bingham and Peterson, respectively on August 1, 2014. The Form 4 reports filed on June 5, 2015 for Messrs. Bingham and Alexander also reported the vesting of 2,506 and 2,506 restricted stock units, respectively, and subsequent forfeiture of 675 and 725 shares of common stock, respectively, on March 31, 2015. The Form 4 filed on June 5, 2015 for Mr. van der Salm also reported the sale of 9,000 shares of common stock on March 3, 2015. The Form 4 filed on June 5, 2015 for Mr. Alexander also reported the exercise of 2,000 stock options on October 9, 2014.
24
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the following Compensation Discussion and Analysis ("CD&A") with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in this Proxy Statement prepared in connection with the 2015 Annual Meeting and the Company’s 2015 Annual Report.
|
Submitted by the Compensation Committee of the Board of Directors
|
|
|
Stephen A. Snider (Chair)
|
|
|
Richard E. Goodrich
|
|
|
Kevin J. McGinty
|
|
|
Michael W. Press
|
|
25
FISCAL 2015 EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis ("CD&A") provides a discussion of the background and objectives of our compensation programs for our Named Executive Officers, listed in the table below. The CD&A should be read together with the compensation tables and related disclosures that follow this section.
|
Name
|
Title
|
|
|
Rodney L. Bingham
|
President and Chief Executive Officer
|
|
|
George P. Alexander
|
Special Advisor to the President and Chief Executive Officer,
Former Executive Vice President, Global Sales and Marketing(1)
|
|
|
Jay C. Peterson
|
Chief Financial Officer; Senior Vice President, Finance; Secretary; Treasurer
|
|
|
Johannes (René) van der Salm
|
Senior Vice President, Global Operations
|
|
(1) On April 1, 2015, Mr. Alexander transitioned from the role of Executive Vice President, Global Sales and Marketing into the role of Special Advisor to the President and Chief Executive Officer.
Executive Summary
We believe our business benefits from an exceptional management team that is responsible for maintaining our leadership position in the heat tracing industry. We have sought to establish a competitive executive compensation program that enables us to attract, retain and reward skillful, experienced and dedicated executives who can contribute both to our short- and long-term success. Our executive compensation program is designed to reward strong financial performance and a significant portion is tied to the achievement of measurable operational, strategic and market objectives, which we believe motivates management to maximize performance and build stockholder value.
Some of the key principles of our compensation program include (i) management’s interests should be closely aligned with the interests of our stockholders; (ii) compensation must be competitive with that offered by other companies that compete with us for executive talent and enable us to attract and retain highly-qualified executive leadership; (iii) differences in compensation should reflect differing levels of responsibilities; and (iv) performance-based compensation should focus on critical business objectives and align pay through performance-leveraged incentive opportunities.
Fiscal 2015 Highlights
The Company achieved record financial performance across many key financial metrics during Fiscal 2015. A brief summary of the Company's Fiscal 2015 financial performance is as follows:
|
•
|
The Company generated record revenue of $308.6 million, representing an 11% increase versus $277.3 million in Fiscal 2014.
|
|
•
|
Gross profit increased 14% from $135.2 million in Fiscal 2014 to $154.7 million in Fiscal 2015. As a percentage of revenue, gross profit increased from 48.7% in Fiscal 2014 to 50.1% in Fiscal 2015.
|
|
•
|
Income from operations increased 15% from $58.6 million in Fiscal 2014 to $67.1 million in Fiscal 2015.
|
|
•
|
The Company's cash balance increased 29% from $72.6 million at the end of Fiscal 2014 to $93.8 million at the end of Fiscal 2015.
|
The Company continually evaluates its compensation practices from a governance perspective and accordingly, in May 2015, the Compensation Committee adopted a clawback policy. Pursuant to the Company's clawback policy and to the
extent permitted by governing law, the Company may require the return, repayment or forfeiture of any annual or long-term incentive compensation payment or award made or granted to any current or former executive officer during the three-year period preceding the filing with the SEC of Company financial statements that were restated due to the material noncompliance of the Company with any financial reporting requirement under the securities laws to the extent that such incentive compensation was calculated based upon any financial result or performance metric impacted by such restatement.
The Compensation Committee continues to believe that equity should be a significant element of the Company's executive compensation program because it (i) is designed to further align the executive's interests with those of its
26
stockholders; (ii) is viewed as a critical retention tool; and (iii) is a necessary component to remain competitive with the companies that compete with us for executive talent. Therefore, in Fiscal 2015, equity accounted for approximately one-third of the total compensation paid or awarded to the Named Executive Officers, collectively, as reported in the "Summary Compensation Table" below. Further, two-thirds of the aggregate target grant date fair value of the Fiscal 2015 equity awards for each Named Executive Officer was in the form of performance-based restricted stock units (the "performance units"). The number of performance units that each executive may earn is tied directly to the Company's total shareholder return ("TSR")as compared to the companies included in the Standard & Poors Small Cap 600 Industrials Sector Index (the "S&P 600 Index"). See "Elements of Our Compensation Program—Long-Term Incentives" below for additional information.
The total compensation for our Named Executive Officers, collectively, as reported in the "Summary Compensation Table" below increased 47% in Fiscal 2015 as compared to Fiscal 2014. The increase was primarily attributable to the size of the short-term incentive awards paid in Fiscal 2015 versus Fiscal 2014. The Company's Fiscal 2015 financial performance met or exceeded the maximum short-term incentive payout levels for all of the pre-determined performance metrics established by the Compensation Committee and comparatively, the Company did not achieve the threshold payout level for certain of the pre-determined performance metrics established by the Compensation Committee in Fiscal 2014, resulting in zero payout for the two heaviest weighted metrics for Fiscal 2014. See "Elements of Our Compensation Program—Short-Term Incentives" below for additional information.
The increase in short-term incentive for Messrs. Bingham and Alexander was partially offset by a reduced grant date fair value of long-term incentive awards to $366,654 in Fiscal 2015 from $425,722 in Fiscal 2014 as reported in the "Summary Compensation Table." After evaluating the anticipated remaining tenures with the Company in connection with the Company's succession planning process, the Compensation Committee reduced the grant date fair value of the Fiscal 2015 equity awards to each of Messrs. Bingham and Alexander. The long-term incentive awards to Messrs. Peterson and van der Salm as reported in the "Summary Compensation Table" increased to $325,009 in Fiscal 2015 from $251,583 in Fiscal 2014. The primary reason for the increase was that the performance unit awards made in Fiscal 2014 were denominated in shares and, as a result of the manner in which the Monte Carlo simulation model valued the performance units in that year, the actual grant date fair value of the awards was lower than the Compensation Committee had originally estimated. In Fiscal 2015, the performance unit awards were denominated with a target grant date fair value approved by the Compensation Committee instead of a fixed number of shares. See "Elements of Our Compensation Program—Long-Term Incentives" below for additional information.
Elements of Our Compensation Program
The table below summarizes the primary elements of our executive compensation program:
|
Element of Compensation
|
Description
|
Value to Stockholder
|
||
|
Base Salary
|
Annual salary is fixed.
|
Competitive base compensation enables the Company to attract and retain key executive talent.
|
||
|
Short-Term Incentive
|
Annual cash incentive is variable and earned only to the extent certain pre-determined performance metrics are met or exceeded.
|
Motivates executives to achieve certain pre-determined financial and operating metrics.
|
||
|
Long-Term Incentive - Performance Units
|
Stock awards that vest if and to the extent the Company's total shareholder return relative to a comparable index meets or exceeds pre-approved targets. The number of shares actually issued to the recipient is variable based on the Company's relative total shareholder return during the performance period and the value of the shares issued to the recipient is variable based on the Company's stock price.
|
Aligns executive compensation with stockholder value creation. Retention feature embedded in award design.
|
||
|
Long-Term Incentive - Time-Based Restricted Stock Units
|
Stock awards that vest in equal annual installments over three years. The number of shares that vest each year is fixed, but the value of the shares issued to the recipient is variable based on the Company's stock price.
|
Aligns executive compensation with stockholder value creation. Retention feature embedded in award design.
|
||
27
Base Salaries
Base salaries are intended to provide a competitive foundation and a fixed rate of pay for the work being performed by each executive officer sufficient to attract and retain an effective management team, when considered in combination with the other components of our executive compensation program. The relative levels of base salary for our Named Executive Officers are designed to reflect each executive’s scope of responsibility and accountability with us, as well as the complexity of the applicable position. Compensation beyond those pay elements is at risk and must be earned through achievement of annual goals, which represent performance expectations of the Board and management and long-term value creation for our stockholders. The proportion of compensation designed to be delivered in base salary versus variable pay depends on the executive’s position and the ability of that position to influence overall Company performance. Furthermore, in setting target compensation, the Compensation Committee focuses on the total compensation opportunity for the executive.
Base salaries are generally reviewed annually and adjusted from time to time to reflect individual responsibilities, performance, experience, inflation, peer group data, the Company's operating budget and competitiveness within the market for the individual executive's talent and services. The Compensation Committee is responsible for setting the base salary of the Chief Executive Officer. Base salary decisions with respect to the other Named Executive Officers are approved by the Compensation Committee after considering the recommendation of the Chief Executive Officer.
In July 2014, each of Messrs. Bingham, Alexander, Peterson, and van der Salm received a 3% base salary increase from the base salary in effect during Fiscal 2014, as shown in the table below. This base salary increase was consistent with the Company's overall compensation practices and comparable to market practices. Further, none of the Named Executive Officers had received a base salary increase since Fiscal 2013.
|
Named Executive Officer
|
Fiscal 2014
Base Salary
($)
|
Fiscal 2015
Base Salary
(1)($)
|
Percent
Change (%)
|
||
|
Rodney L. Bingham
|
360,500
|
|
371,315
|
|
3%
|
|
George P. Alexander
|
303,850
|
|
312,966
|
|
3%
|
|
Jay C. Peterson
|
257,500
|
|
265,225
|
|
3%
|
|
Johannes (René) van der Salm
|
215,000
|
|
221,450
|
|
3%
|
(1) Effective July 2014.
On April 27, 2015, the Compensation Committee approved a new employment agreement with Mr. Bingham. The contract increased his base salary to $500,000, effective April 1, 2015. The new employment agreement and base salary were negotiated between the parties. Further, Mr. Bingham's base salary level has historically been near the 25th percentile of the Compensation Peer Group and the Compensation Committee determined that the increase in his base salary was necessary and appropriate. In making this determination, the Compensation Committee gave considerable weight to Mr. Bingham's tenure with the Company and his expected contributions to the Company's succession planning and executive transition process.
Short-Term Incentives
Historically, we have provided our Named Executive Officers and other worldwide employees with the opportunity to earn annual cash incentives based on overall Company performance. We believe that short-term incentives help create a "pay for performance" culture by providing an opportunity to earn competitive compensation that is linked to our annual performance as well as hold our executives accountable and reward them based on actual business results. Consistent with this culture, short-term incentives can represent a significant portion of total compensation.
In June 2014, the Compensation Committee established the performance metrics for each Named Executive Officer for the Fiscal 2015 executive short-term incentive program ("2015 STIP") as described in the table below. The Compensation Committee believes that these performance metrics incentivize our executive officers to focus on multiple performance drivers throughout our business. Historically, adjusted operating income has been a key metric in evaluating the short-term incentive opportunities available to the Named Executive Officers and the Compensation Committee continues to view this as a key metric in evaluating the Company's performance. In addition to profitability, the Compensation Committee believes
28
that management should be focused on top-line revenue growth opportunities. Accordingly, it increased the weighting of the revenue metric from 20% in Fiscal 2014 to 45% in Fiscal 2015 and also decreased the adjusted operating income metric weighting from 60% in Fiscal 2014 to 45% in Fiscal 2015. The Compensation Committee continues to believe that safety is an important metric that is required to run the business effectively and efficiently and assigned it a weighting of 10% (no change from Fiscal 2014). In evaluating the 2015 STIP, the Compensation Committee determined that the Company's management team had achieved significant improvements in its management of working capital over the last several years and therefore removed it as a performance metric for Fiscal 2015. In Fiscal 2014, working capital carried a weighting of 10%.
The following table and footnotes provide additional detail on the 2015 STIP, including each performance metric, its respective weighting, the pre-determined threshold, target, and maximum performance levels and the Company's actual performance in Fiscal 2015.
|
Fiscal 2015
|
||||||||||||||||||
|
Performance Metric
|
Weight
|
Fiscal 2014
Actual Performance
|
Threshold
Performance
Level
|
Target
Performance
Level
|
Maximum
Performance
Level
|
Fiscal 2015
Actual Performance
|
||||||||||||
|
Adjusted Operating Income($)(1)
(in thousands)
|
45
|
%
|
73,184
|
|
73,184
|
|
79,355
|
|
82,073
|
|
89,043
|
|
||||||
|
Revenue($)(2)
(in thousands)
|
45
|
%
|
277,323
|
|
277,323
|
|
297,311
|
|
305,055
|
|
308,659
|
|
||||||
|
Safety (TRIR)(3)
|
10
|
%
|
0.1
|
|
0.5
|
|
0.4
|
|
0.3
|
|
0.2
|
|
||||||
|
(1)
|
For purposes of the 2015 STIP, "adjusted operating income" is defined as gross profit, less operating expenses excluding incentive expense, stock-based compensation expense, plus amortization of intangible assets. Actual performance is pro-rated in between performance levels.
|
|
(2)
|
Actual performance is pro-rated in between performance levels.
|
|
(3)
|
For purposes of the 2015 STIP, "safety" is defined as the Company's total recordable incident rate ("TRIR"). TRIR is calculated as the Company's number of recordable injuries during Fiscal 2015 times 200,000 divided by the number of man hours worked during Fiscal 2015. Actual performance is not pro-rated in between performance levels.
|
Under the 2015 STIP, each of the threshold, target and maximum opportunities for each Named Executive Officer was set as a percentage of base salary, as summarized in the table below. If the Company's performance does not meet or exceed the pre-determined threshold performance level, there is zero payout with respect to such performance metric. During Fiscal 2015, the threshold, target and maximum opportunities for each Named Executive Officer were unchanged from Fiscal 2014.
|
Named Executive Officer
|
Base Salary (1)($)
|
Threshold
% of Base Salary |
Target
% of Base Salary |
Maximum
% of Base Salary |
Fiscal 2015
Actual
Payout ($)
|
||||||
|
Rodney L. Bingham
|
360,500
|
40%
|
100%
|
160%
|
576,800
|
|
|||||
|
George P. Alexander
|
303,850
|
40%
|
100%
|
160%
|
486,160
|
|
|||||
|
Jay C. Peterson
|
257,500
|
30%
|
75%
|
120%
|
309,000
|
|
|||||
|
Johannes (René) van der Salm
|
215,000
|
30%
|
75%
|
120%
|
258,000
|
|
|||||
(1) The base salaries utilized for purposes of the 2015 STIP were the base salaries in effect on April 1, 2014.
In May 2015, the Compensation Committee reviewed the Company’s Fiscal 2015 performance as well as the Company's actual result under each pre-determined performance metric. The Compensation Committee determined that the Company's performance exceeded the maximum level for each of the revenue, adjusted operating income and safety performance metrics. Accordingly, each executive received the maximum payout with respect to each of the three performance metrics. Based on the Company's actual Fiscal 2015 performance, the Compensation Committee approved payouts under the 2015 STIP to Messrs. Bingham, Alexander, Peterson and van der Salm as set forth in the column titled "Fiscal 2015 Actual Payout" in the table above.
29
Long-Term Incentives
The Amended and Restated Thermon Group Holdings, Inc. 2011 Long-Term Incentive Plan (the "LTIP") is designed to provide our officers, employees, non-employee directors and consultants with added incentive to remain employed by or perform services for us and aligns such individuals’ interests with those of our stockholders. Our Compensation Committee believes that equity-based awards are important in building an ownership mentality among our Named Executive Officers and key employees and aligning the long-term financial interests of our employees with those of our stockholders.
The Compensation Committee monitors and evaluates the performance of the Company's long-term incentive awards and Company performance under the terms of prior awards against the Committee's overall compensation philosophy and whether long-term incentive compensation awards are effectively serving the Company's compensation goals. After reviewing the long-term incentive awards granted to the Named Executive Officers and discussing with the Company's independent compensation consultant, Pearl Meyer and Partners ("PM&P"), the Committee made the following changes to the structure of the long-term incentive awards granted to the Named Executive Officers in Fiscal 2015 as compared to Fiscal 2014:
|
•
|
The Company increased the weighting of the performance units awarded to the Named Executive Officers to two-thirds of the aggregate grant date fair value. The remaining one-third was awarded in the form of time-based restricted stock units. Historically, the Company has targeted one-half of the aggregate grant date fair value in the form of performance units and one-half in the form of restricted stock units.
|
|
•
|
The Company eliminated the threshold performance level for payout under the performance units. The Fiscal 2015 performance units will require performance at the 50th percentile of the S&P 600 Index for 100% of the target number of performance units to be earned. There is no pay out for TSR performance below the 50th percentile under the Fiscal 2015 performance unit award agreements. Historically, the performance units would pay out 50% of the target number of shares for relative TSR performance at the 35th percentile of the predetermined peer group.
|
|
•
|
The performance period for the Fiscal 2015 performance units was extended to nearly three years and subjected the entire performance unit award to a single "cliff vest." The performance period began on the grant date and will end on March 31, 2017 (the "Performance Period"). Historically, the Company's performance units had been comprised of three different performance periods, consisting of separate one-year, two-year and three-year performance periods.
|
|
•
|
After extensive discussions and analysis and the assistance of PM&P, the Compensation Committee determined that a larger, broader selection of comparative entities would be more representative of industry performance for purposes of the relative TSR performance metric than a peer group of approximately 15 entities. Therefore, the Compensation Committee, with the assistance of PM&P, reviewed a selection of indices for use in connection with the relative total shareholder return performance metric of the Fiscal 2015 performance units and selected the S&P 600 Index. As of the Grant Date, the S&P 600 Index contained 89 entities.
|
|
•
|
After evaluating the anticipated remaining tenures with the Company in connection with the Company's succession planning process, the Compensation Committee reduced the aggregate grant date fair value of the Fiscal 2015 equity awards to each of Messrs. Bingham and Alexander and aligned the vesting schedule such that 100% of the Fiscal 2015 equity awards would be fully vested on or before March 31, 2016. One-third of the grant date fair value of the awards made to each of Messrs. Bingham and Alexander on July 31, 2014 was in the form of restricted stock units vesting in equal installments on March 31, 2015 and March 31, 2016. The remaining two-thirds of the grant date fair value was in the form of performance units. The performance units also vest in equal installments on March 31, 2015 and March 31, 2016, however, no shares will be earned or issued in settlement of the award until the conclusion of the Performance Period on March 31, 2017. The ultimate settlement of the Fiscal 2015 performance units is contingent upon the Company's relative TSR performance over the entire Performance Period.
|
Based on the advice of PM&P and the Company's Fiscal 2015 operating budget, effective July 31, 2014 (the "Grant Date"), the Compensation Committee approved equity awards to each of the Named Executive Officers in the form of restricted stock units and performance units as described in the table below. The Compensation Committee continues to
30
believe that a mixture of time-based restricted stock units and performance units best achieves its compensation objectives; however, as noted above, in Fiscal 2015 it increased the percentage of the aggregate grant date fair value of performance units from one-half in Fiscal 2014 to two-thirds in Fiscal 2015 and decreased the percentage of time-based restricted stock units from one-half in Fiscal 2014 to one-third in Fiscal 2015.
|
Named Executive Officer
|
Grant Date
|
Aggregate Grant Date Fair Value ($)(1)
|
Time-Based Restricted
Stock
Units (#)(2)
|
Performance Units
Target Shares (#)(3)
|
||||
|
Rodney L. Bingham
|
7/31/2014
|
366,666
|
5,013
|
9,567
|
||||
|
George P. Alexander
|
7/31/2014
|
366,666
|
5,013
|
9,567
|
||||
|
Jay C. Peterson
|
7/31/2014
|
325,000
|
4,444
|
8,480
|
||||
|
Johannes (René) van der Salm
|
7/31/2014
|
325,000
|
4,444
|
8,480
|
||||
|
(1)
|
The Compensation Committee approved Fiscal 2015 equity awards with an aggregate grant date fair value as set forth in this column for purposes of determining the number of shares subject to each award, with one-third of the target grant date fair value to be awarded in the form of time-based restricted stock units and the remaining two-thirds to be awarded in the form of performance units.
|
|
(2)
|
The number of time-based restricted stock units subject to each restricted stock unit award was calculated as one-third of the aggregate grant date fair value of the equity awards divided by $24.38, which was the market closing price per share of the Company's common stock as reported on the NYSE on the Grant Date. The restricted stock units awarded to Messrs. Bingham and Alexander will vest in two equal installments on March 31, 2015 and 2016. The restricted stock units awarded to Messrs. Peterson and van der Salm will vest in three equal annual installments, beginning on the first anniversary of the Grant Date.
|
|
(3)
|
The number of target shares subject to each performance unit award (the "Target Shares") was calculated as two-thirds of the estimated value of the equity awards divided by $25.55, which was the value per share based on the probable outcome of the market-based performance conditions and the application of a Monte Carlo simulation model. For additional details, please see Note 1 to the Summary Compensation Table and Note 13 to the consolidated financial statements included in our 2015 Annual Report. The awards are subject to a single "cliff vest" performance period ending on March 31, 2017.
|
For purposes of the performance units awarded in Fiscal 2015, the Compensation Committee established the performance metric as TSR relative to the S&P 600 Index. The S&P 600 Index will include all of the companies which are listed on the S&P 600 Index on the Grant Date and which remain listed on the S&P 600 Index on the last day of the Performance Period. Companies added or removed as a result of a subsequent reconstitution of the S&P 600 Index prior to the last day of the Performance Period will not be included in the final relative TSR calculation. In the event of the bankruptcy of a company included in the S&P 600 Index during the Performance Period, such company shall remain in the S&P 600 Index with a TSR of negative 100%.
The Compensation Committee selected TSR as the performance metric because it strives to reward long-term, sustainable growth and stockholder value creation. The Compensation Committee believes that TSR reflects the extent to which stockholders and the market consider that the Company's strategy is appropriate and is being implemented and articulated well by the Named Executive Officers. The TSR for the Company and each entity included in the S&P 600 Index will be calculated by using the 20 consecutive trading day average Closing Price (as defined below) prior to the first date of each Performance Period versus the 20 trading day average Closing Price (as defined below) ending on the last day of the Performance Period. The "Closing Price" is the dividend adjusted close price, as adjusted for stock splits, cash dividends, rights offerings and spin-offs.
The TSR of each company included in the S&P 600 Index will be calculated and ranked from highest to lowest (the "Ranked S&P 600 Index"). The Company's TSR for the Performance Period shall then be compared to the Ranked S&P 600 Index and the number of shares actually earned in settlement of the award will be based on the following table:
31
|
Level
|
Payout(1)
|
Relative TSR Rank
|
||
|
Zero Payout
|
0% of Target Shares
|
49th Percentile
|
||
|
Target
|
100% of Target Shares
|
50th Percentile
|
||
|
Maximum
|
200% of Target Shares
|
100th Percentile
|
||
|
(1)
|
Actual performance is pro-rated in between the target and maximum performance levels. If the Company's TSR during the Performance Period is below the target performance level, the participant will not earn any shares with respect to the Performance Period. If the Company's TSR during the Performance Period is negative, the payout will not exceed the target level (100%).
|
Long-Term Incentives From Prior Years
On May 20, 2015, the Compensation Committee calculated and reviewed the Company's TSR performance and the TSR performance of each of the entities in the Fiscal 2014 Compensation Peer Group for the second performance period (April 1, 2013 through March 31, 2015) for the performance units granted on August 1, 2013, as well as the third performance period (April 2, 2012 through March 31, 2015) for the performance units granted on August 2, 2012. Following such review, the Compensation Committee approved the issuance of the number of shares listed in the "Actual Shares Earned" column in the table below to each Named Executive Officer. The Company's actual TSR performance, relative TSR rank and the earned shares associated with such performance units during each respective performance period is summarized in the table below.
|
Executive
|
Grant
Date
|
Performance Period
|
Target
Shares
|
Company's
TSR |
Relative
TSR
Rank
|
Payout
(as a Percentage of Target Shares) |
Actual
Shares
Earned
|
|
Rodney L. Bingham
|
8/2/2012
|
April 2, 2012 - March 31, 2015
|
4,647
|
18.8%
|
6
out of
16
|
100.0%
|
4,647
|
|
Rodney L. Bingham
|
8/1/2013
|
April 1, 2013 - March 31, 2015
|
4,563
|
10.7%
|
7
out of
16
|
116.7%
|
5,325
|
|
George P. Alexander
|
8/2/2012
|
April 2, 2012 - March 31, 2015
|
4,647
|
18.8%
|
6
out of
16
|
100.0%
|
4,647
|
|
George P. Alexander
|
8/1/2013
|
April 1, 2013 - March 31, 2015
|
4,563
|
10.7%
|
7
out of
16
|
116.7%
|
5,325
|
|
Jay C. Peterson
|
8/2/2012
|
April 2, 2012 - March 31, 2015
|
2,711
|
18.8%
|
6
out of
16
|
100.0%
|
2,711
|
|
Jay C. Peterson
|
8/1/2013
|
April 1, 2013 - March 31, 2015
|
2,696
|
10.7%
|
7
out of
16
|
116.7%
|
3,146
|
|
Johannes (René) van der Salm
|
8/2/2012
|
April 2, 2012 - March 31, 2015
|
2,711
|
18.8%
|
6
out of
16
|
100.0%
|
2,711
|
|
Johannes (René) van der Salm
|
8/1/2013
|
April 1, 2013 - March 31, 2015
|
2,696
|
10.7%
|
7
out of
16
|
116.7%
|
3,146
|
Employee Benefits and Perquisites
We offer a very limited amount of perquisites and other personal benefits to our Named Executive Officers. The Compensation Committee believes that these perquisites and benefits are reasonable and consistent with prevailing market practices and the Company’s overall compensation program. Perquisites are not a material part of our compensation program. The Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to our Named Executive Officers.
Each of our Named Executive Officers is entitled to participate in our employee benefit plans (including 401(k) retirement savings, and medical, dental and life insurance benefits) on the same basis as our other full-time employees located in the United States. In addition, we lease a Company vehicle for Mr. Bingham’s use in traveling between our facilities in Houston and San Marcos, Texas. See "Summary Compensation Table—All Other Compensation."
32
Stock Ownership Guidelines
Our Board has adopted stock ownership guidelines for all of our Named Executive Officers and delegated oversight of the guidelines to the Compensation Committee. The ownership threshold for the Chief Executive Officer is five times annual base salary. The ownership threshold for all other Named Executive Officers is two times annual base salary. Each Named Executive Officer is required to meet such minimum guidelines within five years after November 1, 2011 or, if appointed after November 1, 2011, within five years after the date of such appointment.
Each individual subject to the stock ownership guidelines must meet or exceed his or her requisite threshold immediately prior to any disposition of shares or share equivalents obtained through an equity grant (other than shares used to pay applicable withholding taxes and the exercise price of stock options). The 100% retention requirement applies during any time period during which the individual’s stock ownership threshold has not been achieved, including during the initial five-year period. If a Named Executive Officer or director does not meet the requisite threshold or demonstrate sustained progress toward meeting the threshold, the Board has discretion to reduce future long-term incentive grants or pay future cash compensation in the form of equity.
In measuring stock ownership, the Compensation Committee will consider all shares beneficially owned and vested but unexercised stock options. For vested but unexercised stock options, the value counting toward the individual's threshold will be determined based on the excess of the market value of the stock over the exercise price of the stock option. Unvested performance units, unvested restricted stock, unvested restricted stock units and unvested stock options are not considered in calculating each individual's stock ownership.
Though not yet required, Messrs. Alexander, Bingham and van der Salm met these guidelines as of the Record Date. Following a Fiscal 2014 revision to the stock ownership guidelines no longer counting unvested restricted stock and unvested restricted stock units, Mr. Peterson no longer meets his requisite threshold, however, he is on track to meet the requisite guideline within the initial five-year period.
For information on the stock ownership guidelines for the Company's non-employee directors, see the section entitled "Director Compensation—Stock Ownership Guidelines (Non-Employee Directors)."
Employment Agreements
Fiscal 2015 Employment Agreements
At the beginning of Fiscal 2015, each of our Named Executive Officers was party to an employment agreement that was negotiated and entered into in connection with our IPO and expired pursuant to its original terms on April 30, 2014.
In connection with the expiration of those employment agreements, the Compensation Committee approved new employment agreements for each of the Named Executive Officers, effective May 1, 2014. The material terms of each new employment agreement, including the severance and change in control benefits provided to each Named Executive Officer upon a qualifying termination event, are described in the narrative following the "Fiscal 2015 Grants of Plan-Based Awards" table and the section entitled "Potential Payments Upon Termination or Change in Control." The terms of each agreement were determined based on competitive market pay practices, negotiations between the parties and the advice of PM&P.
Fiscal 2016 Employment Agreements
In connection with the Company's succession planning process, the Company made several changes to its executive leadership for Fiscal 2016:
|
•
|
Mr. Alexander transitioned into the newly created role of Special Advisor to the President and Chief Executive Officer effective April 1, 2015. The Compensation Committee approved a new employment agreement with Mr. Alexander, including severance benefits provided upon a qualifying termination event. The terms of Mr. Alexander's employment agreement were determined based on Mr. Alexander's tenure with the Company, negotiations between the parties, the Company's succession planning process and the advice of external compensation advisors.
|
33
|
•
|
On April 27, 2015, the Company entered into a new employment agreement with Mr. Bingham to continue as the Company's President and Chief Executive Officer through March 31, 2016. The terms of Mr. Bingham's employment agreement were determined based on competitive market pay practices, negotiations between the parties, the Company's succession planning process, the advice of PM&P and Mr. Bingham's tenure with the Company.
|
|
•
|
In June 2014, the Board established a search committee to identify a qualified external candidate for the newly created position of Executive Vice President and Chief Operating Officer. Following a comprehensive external search process, the Company appointed Mr. Thames to the position on April 27, 2015 and entered into an employment agreement with him in connection with the appointment. The terms of Mr. Thames' employment agreement were determined based on competitive market pay practices, negotiations between the parties and the advice of PM&P.
|
The material terms of the new employment agreements for each of Messrs. Alexander, Bingham and Thames are described in the narrative following the "Fiscal 2015 Grants of Plan-Based Awards" table and the section entitled "Potential Payments Upon Termination or Change in Control."
Certain Transactions in Company Securities
Our Insider Trading Policy prohibits our directors, officers and employees from engaging in various hedging activities with Company securities, including short sales and any transaction involving a publicly traded option, such as a put, call or other derivative security. Further, the policy prohibits holding Company securities in a margin account or pledging Company securities as collateral for a loan.
Executive Compensation Process
Role of the Compensation Committee and the Chief Executive Officer
The Compensation Committee determines all compensation for the Named Executive Officers. Each year, the Compensation Committee conducts an evaluation of the Chief Executive Officer to determine if a change in his compensation is appropriate after considering factors such as the Company’s performance and relative stockholder return, the compensation received by chief executive officers at comparable companies and historical compensation levels. Mr. Bingham did not participate in the Compensation Committee’s deliberations or decisions with regard to his own compensation. At the Compensation Committee’s request, the Chief Executive Officer conducts a performance evaluation of each of the other Named Executive Officers and reviews the results with the Compensation Committee to assist it in determining whether changes in their compensation are appropriate. The Compensation Committee gives considerable weight to the Chief Executive Officer’s evaluation of the other Named Executive Officers because of his direct knowledge of each executive officer’s performance and contributions.
Role of Outside Advisors
The Compensation Committee engaged PM&P to assist in evaluating Fiscal 2015 executive compensation decisions. As an independent compensation advisor, PM&P provides an additional objective perspective as to the reasonableness of our executive compensation program and practices and the effectiveness in supporting our business and compensation objectives. During Fiscal 2015, PM&P participated in Compensation Committee meetings and advised the Compensation Committee with respect to compensation trends and market practices, incentive plan design and competitive pay levels. While PM&P consulted with management in performing work requested by the Compensation Committee, it did not perform any separate services for management.
The Compensation Committee has considered the independence of PM&P in light of the SEC rules and NYSE listing standards. The Compensation Committee requested and received a letter from PM&P addressing PM&P's and the senior advisor involved in the engagement's independence, including the following factors: (1) other services provided to us by PM&P; (2) fees paid by us as a percentage of PM&P's total revenue; (3) policies or procedures maintained by PM&P that are designed to prevent a conflict of interest; (4) any business or personal relationships between the senior advisor and a member of the Compensation Committee; (5) any company stock owned by the senior advisor; and (6) any business or personal relationships between our executive officers and the senior advisor. The Compensation Committee discussed these considerations and concluded that the work performed by PM&P and PM&P's senior advisor involved in the engagement did not raise any conflict of interest, and that PM&P provides objective and competent advice. The following protocols are designed to help maintain objectivity:
34
|
•
|
The advisor reports directly to the Compensation Committee or, in the case of matters relating to director compensation, to the Nominating and Corporate Governance Committee;
|
|
•
|
Only the Compensation Committee or the Nominating and Corporate Governance Committee has the authority to retain or terminate the advisor with respect to services provided to the relevant committee; and
|
|
•
|
The advisor meets as needed with the Compensation Committee, without the presence of management.
|
Consideration of Say-on-Pay Vote Results
The Company provides its stockholders with the opportunity to cast an annual non-binding, advisory vote on the compensation paid to its Named Executive Officers (a "say-on-pay" vote). At our 2014 Annual Meeting, approximately 94% of the total shares represented and entitled to a say-on-pay vote were cast in favor of the proposal. Accordingly, the Compensation Committee believes these results affirmed broad stockholder support of our approach to executive compensation and did not believe it was necessary to make any changes to the executive compensation program directly in response to the say-on-pay vote held at the 2014 Annual Meeting. The Compensation Committee will continue to consider the results of say-on-pay votes when making future compensation decisions for the Named Executive Officers.
Peer Companies and Market Comparison
For Fiscal 2015, the Compensation Committee considered information regarding market pay practices to assist in making informed decisions on executive pay packages. The Compensation Committee did not target the specific compensation elements or total compensation against the market data. Instead, the Compensation Committee utilized the market data to assess the overall competitiveness and reasonableness of the Company’s executive compensation program. Market pay practices are based on peer group proxy data and published survey data. While the Compensation Committee considers relevant market pay practices when setting executive compensation, it did not rely on this information to target any specific pay percentile for our Named Executive Officers in Fiscal 2015. The Compensation Committee believes that compensation decisions are complex and the factors that influence the amount of compensation include the nature and responsibility of the position, market competition for the position, an individual’s experience and past performance and contributions, tenure with the Company and associated institutional knowledge, long-term potential with the Company, Company performance (including past and future performance objectives) as well as peer compensation levels.
Establishing a peer group to use to evaluate compensation decisions is difficult because we operate in a specialized industry in which there are few direct peers. In determining the peer group, the Compensation Committee selected publicly traded companies in the same or similar industries that, in its view, compete with the Company for talent and have revenue, assets, market capitalization and enterprise value that are generally comparable to the Company (the "Compensation Peer Group"). For Fiscal 2015 compensation decisions, the Compensation Committee directed PM&P to conduct a review of the Company's Compensation Peer Group. After analyzing the results of PM&P's review of the Compensation Peer Group used in making Fiscal 2014 compensation decisions, the Compensation Committee determined that certain of the companies previously included in the Compensation Peer Group had become too large, too small or were otherwise no longer the most appropriate entities for inclusion in the Compensation Peer Group. With the assistance of PM&P, the Compensation Committee revised the Compensation Peer Group for Fiscal 2015 compensation decisions as reflected in the table below.
Fiscal 2015 Compensation Peer Group(1)
|
AAON, Inc.
|
Flotek Industries, Inc.(2)
|
Powell Industries, Inc.
|
|
Advanced Energy Industries, Inc.
|
Graham Corporation(2)
|
Pulse Electronics Corporation(4)
|
|
Ampco-Pittsburgh Corporation(2)
|
The Gorman-Rupp Co(2)
|
Vicor Corporation
|
|
AZZ Incorporated
|
Measurement Specialties, Inc.(2)(3)
|
|
|
ESCO Technologies Inc.(2)
|
Methode Electronics, Inc.(2)
|
|
(1) As a result of PM&P's peer group review, the following companies were removed from the Company's historical peer group: American Superconductor Corporation, Chart Industries, Inc., Colfax Corporation, Dril-Quip, Inc., Generac Holdings Inc., II-VI Incorporated, Geospace Technologies Corporation, STR Holdings, Inc. and Ultralife Corporation.
35
(2) New addition to the Fiscal 2015 Compensation Peer Group.
(3) Measurement Specialties, Inc. was acquired by another entity and removed from the Compensation Peer Group on October 9, 2014.
(4) Pulse Electronics Corporation was acquired by another entity and removed from the Compensation Peer Group on April 13, 2015.
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation we paid to each Named Executive Officer for the fiscal years ended March 31, 2015, 2014 and 2013, respectively. In Fiscal 2015, our Named Executive Officers were our Chief Executive Officer, Chief Financial Officer and our two other most highly compensated executives serving as executive officers as of March 31, 2015.
|
Name and Principal Position
|
Fiscal
Year |
Salary
($) |
Bonus
($) |
Stock
Awards
($)(1)
|
Option
Awards ($) |
Non-Equity
Incentive Plan Compensation ($)(2) |
All Other
Compensation ($)(3) |
Total
($) |
|||||||||||||||
|
Rodney L. Bingham
|
2015
|
367,987
|
|
—
|
|
366,654
|
|
—
|
|
576,800
|
|
21,284
|
|
1,332,725
|
|
||||||||
|
President, Chief Executive Officer and Director
|
2014
|
360,500
|
|
—
|
|
425,722
|
|
—
|
|
115,360
|
|
26,937
|
|
928,519
|
|
||||||||
|
(principal executive officer)
|
2013
|
358,529
|
|
—
|
|
603,134
|
|
—
|
|
254,304
|
|
27,480
|
|
1,243,447
|
|
||||||||
|
George P. Alexander
|
2015
|
310,161
|
|
—
|
|
366,654
|
|
—
|
|
486,160
|
|
8,880
|
|
1,171,855
|
|
||||||||
|
Executive Vice President,
|
2014
|
303,850
|
|
—
|
|
425,722
|
|
—
|
|
97,232
|
|
8,730
|
|
835,534
|
|
||||||||
|
Global Sales and Marketing
|
2013
|
302,182
|
|
—
|
|
603,134
|
|
—
|
|
214,342
|
|
8,910
|
|
1,128,568
|
|
||||||||
|
Jay C. Peterson
|
2015
|
262,848
|
|
—
|
|
325,009
|
|
—
|
|
309,000
|
|
8,234
|
|
905,091
|
|
||||||||
|
Chief Financial Officer
|
2014
|
257,500
|
|
—
|
|
251,583
|
|
—
|
|
61,800
|
|
8,730
|
|
579,613
|
|
||||||||
|
(principal financial officer)
|
2013
|
256,087
|
|
—
|
|
351,818
|
|
—
|
|
136,234
|
|
8,910
|
|
753,049
|
|
||||||||
|
Johannes (René) van der Salm
|
2015
|
219,465
|
|
—
|
|
325,009
|
|
—
|
|
258,000
|
|
8,757
|
|
811,231
|
|
||||||||
|
Senior Vice President,
|
2014
|
215,000
|
|
—
|
|
251,583
|
|
—
|
|
51,600
|
|
8,581
|
|
526,764
|
|
||||||||
|
Global Operations
|
2013
|
215,000
|
|
—
|
|
351,818
|
|
—
|
|
113,749
|
|
8,715
|
|
689,282
|
|
||||||||
|
(1)
|
The amounts reported in this column for Fiscal 2015 represent the aggregate grant date fair value of restricted stock unit and performance unit awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation ("FASB ASC Topic 718"). The estimated fair value of the restricted stock unit awards was $24.38 per share, which was the market closing price of our common stock as reported by the NYSE on the grant date of each award. The estimated fair value of the performance unit awards was $25.55 per share, which was calculated based on the probable outcome of the market-based performance conditions and the application of a Monte Carlo simulation model. The performance units will vest if the TSR performance of the Company's common stock meets or exceeds the predetermined target or maximum performance levels as compared to the S&P 600 Index over the Performance Period. The grant date fair value of the performance units does not correspond to the actual value that may be recognized by each Named Executive Officer with respect to these awards, which may be higher or lower based on a number of factors, including the Company's performance, the performance of the S&P 600 Index and stock price fluctuations. Under FASB ASC Topic 718, the vesting condition related to the performance units is a market condition and not a performance condition. Accordingly, there is not a grant date fair value below or in excess of the amounts reflected in the table above that could be calculated and disclosed based on achievement of market conditions. For a discussion of the assumptions and methodologies used to value the awards, please see "Compensation Discussion and Analysis—Elements of Our Compensation Program—Long-Term Incentives" above and the discussion of equity awards contained in Note 13 to the consolidated financial statements included in our 2015 Annual Report.
|
36
|
(2)
|
The amounts reported in this column represent annual cash compensation earned under the 2015 STIP based on Fiscal 2015 performance. Please see "Compensation Discussion and Analysis—Elements of Our Compensation Program—Short-Term Incentives" for further information.
|
|
(3)
|
Amounts reported in this column for Fiscal 2015 are described in more detail in the following table:
|
|
Name
|
Company
Contribution
to 401(k)
($)
|
Group
Life Insurance ($) |
Company
Provided Vehicle ($)(a) |
All Other
Compensation Total ($) |
|||||
|
Rodney L. Bingham
|
7,800
|
1,080
|
12,404
|
|
21,284
|
||||
|
George P. Alexander
|
7,800
|
1,080
|
—
|
|
8,880
|
||||
|
Jay C. Peterson
|
7,154
|
1,080
|
—
|
|
8,234
|
||||
|
Johannes (René) van der Salm
|
7,800
|
957
|
—
|
|
8,757
|
||||
|
(a)
|
Mr. Bingham regularly travels by car, including between our facilities in Houston, Texas and our headquarters in San Marcos, Texas. Included in "All Other Compensation" for Mr. Bingham for Fiscal 2015 were payments for the cost of a Company leased vehicle and reimbursements for gas and maintenance on the vehicle. We value these benefits based on the actual cost incurred.
|
FISCAL 2015 GRANTS OF PLAN-BASED AWARDS
The following table summarizes awards made to our Named Executive Officers in Fiscal 2015.
|
Name
|
Grant
Date |
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards($)(1)
|
Estimated Future Payouts Under
Equity Incentive Plan Awards
(#)(2)
|
All Other
Stock
Awards:
Number of Shares of Stocks or Units (#)(3) |
Grant Date
Fair
Value
of Stock
Awards
($)(4) |
||||||||||||||||
|
Threshold
|
Target
|
Maximum
|
Target
|
Maximum
|
|||||||||||||||||
|
Rodney L. Bingham
|
—
|
|
144,200
|
|
360,500
|
|
576,800
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||
|
7/31/2014
|
|
—
|
|
—
|
|
—
|
|
9,567
|
|
19,134
|
|
—
|
|
244,437
|
|
||||||
|
7/31/2014
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,013
|
|
122,217
|
|
||||||
|
George P. Alexander
|
—
|
|
121,540
|
|
303,850
|
|
486,160
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||
|
7/31/2014
|
|
—
|
|
—
|
|
—
|
|
9,567
|
|
19,134
|
|
—
|
|
244,437
|
|
||||||
|
7/31/2014
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,013
|
|
122,217
|
|
||||||
|
Jay C. Peterson
|
—
|
|
77,250
|
|
193,125
|
|
309,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||
|
7/31/2014
|
|
—
|
|
—
|
|
—
|
|
8,480
|
|
16,960
|
|
—
|
|
216,664
|
|
||||||
|
7/31/2014
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,444
|
|
108,345
|
|
||||||
|
Johannes (René) van der Salm
|
—
|
|
64,500
|
|
161,250
|
|
258,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||
|
7/31/2014
|
|
—
|
|
—
|
|
—
|
|
8,480
|
|
16,960
|
|
—
|
|
216,664
|
|
||||||
|
7/31/2014
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4,444
|
|
108,345
|
|
||||||
|
(1)
|
The amounts reported in this column represent the threshold, target and maximum incentive opportunities for the 2015 STIP. The amount actually earned by each Named Executive Officer based on Fiscal 2015 performance is included in the "Non-Equity Incentive Plan Compensation" column in the Summary Compensation Table. See "Compensation Discussion and Analysis—Elements of Our Compensation Program—Short-Term Incentives" for further information.
|
|
(2)
|
The number of shares reported in this column represent the performance units granted to each Named Executive Officer under the LTIP on July 31, 2014. The performance units will vest on March 31, 2017 based upon the Company's achievement of predetermined total shareholder return goals relative to the S&P 600 Index. See "Compensation Discussion and Analysis—Elements of Our Compensation Program—Long-Term Incentives" for additional information.
|
|
(3)
|
The number of shares reported in this column represent the restricted stock unit awards granted to each Named Executive Officer under the LTIP on July 31, 2014. The restricted stock units awarded to Messrs. Bingham and
|
37
Alexander will vest in two equal installments on March 31, 2015 and 2016, subject to their continued employment through the applicable vesting date. The restricted stock units awarded to Messrs. Peterson and van der Salm will vest in three equal annual installments, beginning on the first anniversary of the date of grant, subject to their continued employment through the applicable vesting date. See "Compensation Discussion and Analysis—Elements of Our Compensation Program—Long-Term Incentives" for additional information.
|
(4)
|
For a discussion of the assumptions and methodologies used to calculate the grant date fair values presented in this column, please see Note 1 to the Summary Compensation Table above and Note 13 to the consolidated financial statements included in our 2015 Annual Report.
|
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Description of Employment Agreements
Fiscal 2015 Employment Agreements
In connection with the expiration of the existing employment agreements, the Company entered into new employment agreements with each of the Named Executive Officers on May 1, 2014. The material terms of each new employment agreement are as follows: (i) an initial term beginning May 1, 2014 and ending March 31, 2015, automatically renewing for subsequent one-year renewal terms unless the Named Executive Officer or the Company provides notice of non-renewal of the agreement at least thirty days prior to the expiration of the initial term or any subsequent renewal term; (ii) an initial base salary not to be reduced below $360,500, $303,850, $257,500 and $215,000 to each of Messrs. Bingham, Alexander, Peterson and van der Salm, respectively; (iii) each Named Executive Officer is eligible to receive an annual performance-based bonus if certain annual performance-based targets are met; (iv) each employment agreement contains certain restrictive covenants, including prohibiting the Named Executive Officer from competing with us during his employment and for a period of one year thereafter; and (v) certain termination and change of control benefits described in the "Potential Payments Upon Termination or Change in Control" section below.
Fiscal 2016 Employment Agreements
Mr. Alexander transitioned into the role of Special Advisor to the Chief Executive Officer on April 1, 2015 and entered into a new employment agreement in connection with the transition. The material terms of his new employment agreement are as follows: (i) a one-year term beginning on April 1, 2015 and ending March 31, 2016; (ii) a base salary of $312,966; (iii) Mr. Alexander is not eligible to participate in the Company's annual short-term incentive program or receive additional long-term incentive awards with respect to his service on or after April 1, 2015; (iv) Mr. Alexander's continued service to the Company following the end of the term will be on the basis of an independent contractor and such continued service will be subject to the terms and conditions of a subsequent consulting agreement to be mutually agreed upon by Mr. Alexander and the Company; and (v) certain termination benefits described in the "Potential Payments Upon Termination or Change in Control" section below.
Mr. Thames joined the Company on April 27, 2015 and was appointed Executive Vice President and Chief Operating Officer. He entered into an employment contract in connection with his appointment, the material terms of which are as follows: (i) a two-year term beginning on April 27, 2015 and ending on March 31, 2017, automatically renewing for subsequent one-year renewal terms unless sooner terminated by the Company or Mr. Thames in accordance with the agreement; (ii) a base salary not to be reduced below $420,000; (iii) Mr. Thames is eligible to receive an annual performance-based bonus with a target equal to 100% of his then-current base salary if certain annual performance-based targets are met; (iv) Mr. Thames is eligible to receive annual equity awards pursuant to the Company's long-term incentive program, with an aggregate target grant date fair value equal to 100% of his then-current base salary; (v) a one-time cash bonus in the amount of $200,000 paid upon the commencement of his employment; (vi) a one-time equity bonus consisting of restricted stock units with a grant date fair value equal to $420,000, which shall vest in full on the first anniversary of his employment; (vii) reimbursement for the premiums associated with obtaining COBRA or similar health care coverage until such time as he becomes eligible to participate in the Company's group health plans; (viii) reimbursement for reasonable moving expenses associated with his relocation to the Central Texas area in accordance with the Company's standard relocation policy, as well as expenses associated with the sale of his current home, up to 2% of the purchase price for closing and other costs associated with the purchase of a new home and tax reimbursements for such relocation expenses (the total amount of reimbursable relocation expenses shall not exceed $100,000 without the prior written approval of the Board); and (iv) for information on
38
the termination and change in control benefits contained in Mr. Thames' employment agreement, see the "Potential Payments Upon Termination or Change in Control" section below.
In connection with the Company's succession planning process, Mr. Bingham entered into a new employment agreement effective April 27, 2015. The material terms of his new employment agreement are as follows: (i) a one-year term beginning on April 1, 2015 and ending March 31, 2016; (ii) a base salary of $500,000; (iii) Mr. Bingham is eligible to receive an annual performance-based bonus if certain annual performance-based targets are met; (iv) Mr. Bingham's continued service to the Company following the end of the term will be on the basis of an independent contractor and such continued service will be subject to the terms and conditions of a subsequent consulting agreement to be mutually agreed upon by Mr. Bingham and the Company; and (vi) certain termination benefits described in the "Potential Payments Upon Termination or Change in Control" section below.
The Company did not make any changes to the employment agreements with Mr. Peterson or Mr. van der Salm for Fiscal 2016.
Outstanding Equity Awards at Fiscal 2015 Year-End
The following table provides information regarding the outstanding equity awards held by each Named Executive Officer as of March 31, 2015.
|
Option Awards
|
Stock Awards
|
|||||||||||||||||||||||
|
Named Executive Officer
|
Number of
Securities Underlying Unexercised Options (#) (1) Exercisable |
Number of
Securities Underlying Unexercised Options (#)(1) Unexercisable |
Option
Exercise Price ($/sh) |
Option
Expiration Date |
Number of Shares or Units of Stock That Have Not Vested
(#)(2)
|
Market Value of Shares or Units of Stock That Have Not Vested
($)(3)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)(4)
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)(3)
|
||||||||||||||||
|
Rodney L. Bingham
|
2,000
|
|
4,000
|
|
12.00
|
|
5/4/2021
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
|
—
|
|
—
|
|
—
|
|
—
|
|
16,280
|
|
391,715
|
|
—
|
|
—
|
|
|||||||||
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
14,130
|
|
340,109
|
|
|||||||||
|
George P. Alexander
|
—
|
|
4,000
|
|
12.00
|
|
5/4/2021
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
|
—
|
|
—
|
|
—
|
|
—
|
|
16,280
|
|
391,715
|
|
—
|
|
—
|
|
|||||||||
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
14,130
|
|
340,109
|
|
|||||||||
|
Jay C. Peterson
|
—
|
|
2,000
|
|
12.00
|
|
5/4/2021
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
|
—
|
|
—
|
|
—
|
|
—
|
|
12,548
|
|
302,030
|
|
—
|
|
—
|
|
|||||||||
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
11,177
|
|
269,030
|
|
|||||||||
|
Johannes (René) van der Salm
|
3,000
|
|
2,000
|
|
12.00
|
|
5/4/2021
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
|
—
|
|
—
|
|
—
|
|
—
|
|
12,548
|
|
302,030
|
|
—
|
|
—
|
|
|||||||||
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
11,177
|
|
269,030
|
|
|||||||||
|
(1)
|
Represents unvested stock options granted on May 4, 2011, in connection with our IPO, to each of Messrs. Bingham, Alexander, Peterson and van der Salm. The remaining stock options vest in equal annual installments on May 4, 2015 and 2016.
|
|
(2)
|
Represents 4,647, 4,647, 2,711 and 2,711 unvested restricted stock units granted on August 2, 2012, 9,126, 9,126, 5,393 and 5,393 unvested restricted stock units granted on August 1, 2013, and 2,507, 2,507, 4,444 and 4,444 unvested restricted stock units granted on July 31, 2014 pursuant to the LTIP to each of Messrs. Bingham, Alexander, Peterson and van der Salm, respectively. The August 2, 2012 unvested restricted stock unit awards vest on August 2, 2015. The August 1, 2013 unvested restricted stock unit awards vest in equal annual installments on August 1, 2015 and 2016. The July 31, 2014 unvested restricted stock unit awards vest on March 31, 2016 for Messrs. Bingham and Alexander and in equal annual installments on July 31, 2015, 2016 and 2017 for Messrs. Peterson and van der Salm.
|
|
(3)
|
The market value was calculated based on a market closing price of $24.07 per share of our common stock as reported on the NYSE on March 31, 2015.
|
39
|
(4)
|
Represents 4,563, 4,563, 2,697, and 2,697 unvested performance units granted on August 1, 2013, and 9,567, 9,567, 8,480 and 8,480 unvested performance units granted on July 31, 2014 pursuant to the LTIP to each of Messrs. Bingham, Alexander, Peterson and van der Salm, respectively. The unvested August 1, 2013 performance unit awards vest on March 31, 2016. The number of shares reported in this column for each of Messrs. Bingham and Alexander include 4,783 performance units that vested on March 31, 2015 and 4,784 shares that vest on March 31, 2016; however, pursuant to the performance unit award agreements, no shares will be earned in settlement of the award until the entire performance period ends on March 31, 2017. The July 31, 2014 performance units for each of Messrs. Peterson and van der Salm vest on March 31, 2017. In accordance with the SEC executive compensation disclosure rules, the amounts reported in these columns are based on achieving the target performance goals. The actual number of shares that may be earned in settlement of the performance unit awards is based on actual Company performance and may be higher or lower than the number of shares reported in this column.
|
Fiscal 2015 Option Exercises and Stock Vested
The following table sets forth information regarding the exercise of options by the Named Executive Officers and the vesting of restricted stock units and performance units during Fiscal 2015.
|
Option Awards
|
Stock Awards
|
|||||||||
|
Named Executive Officer
|
Number of Shares
Acquired on
Exercise
(#) |
Value Realized on Exercise
($)(1) |
Number of Shares Acquired on Vesting (#)(2)
|
Value Realized on Vesting
($)(3)
|
||||||
|
Rodney L. Bingham
|
—
|
|
—
|
|
21,687
|
525,887
|
||||
|
George P. Alexander
|
2,000
|
|
21,420
|
|
21,687
|
525,887
|
||||
|
Jay C. Peterson
|
9,882
|
|
152,407
|
|
11,264
|
273,373
|
||||
|
Johannes (René) van der Salm
|
—
|
|
—
|
|
11,264
|
273,373
|
||||
|
(1)
|
The value realized on exercise represents the market closing price per share as reported on the NYSE on the date of exercise less the exercise price per share, multiplied by the number of shares exercised.
|
|
(2)
|
Represents (i) 4,647, 4,647, 2,711 and 2,711 restricted stock units awarded on August 2, 2012 to each of Messrs. Bingham, Alexander, Peterson and van der Salm, respectively, that vested on August 2, 2014; (ii) 4,562, 4,562, 2,696 and 2,696 restricted stock units awarded on August 1, 2013 to each of Messrs. Bingham, Alexander, Peterson and van der Salm, respectively, that vested on August 1, 2014; (iii) 2,506 restricted stock units awarded on July 31, 2014 to each of Messrs. Bingham and Alexander that vested on March 31, 2015; (iv) 4,647, 4,647, 2,711 and 2,711 performance units earned by each of Messrs. Bingham, Alexander, Peterson and van der Salm, respectively, that vested on March 31, 2015 for the April 2, 2012 through March 31, 2015 performance period of the performance unit awards granted on August 2, 2012; and (v) 5,325, 5,325, 3,146 and 3,146 performance units earned by each of Messrs. Bingham, Alexander, Peterson and van der Salm, respectively, that vested on March 31, 2015 for the April 1, 2013 through March 31, 2015 performance period of the performance unit awards granted on August 1, 2013.
|
|
(3)
|
The value realized was determined by multiplying the number of shares that vested by the per-share closing price of the Company's common stock as reported by the NYSE on the date each award vested.
|
40
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The narrative description and table below summarize certain information related to the amount of compensation payable to each of the Named Executive Officers under certain qualifying termination or change in control events. Except as described below, we have no agreements, arrangements, or plans that entitle executive officers to severance, perquisites, acceleration of equity or other enhanced benefits upon termination of their employment. Payments or benefits other than described below would be at the discretion of the Compensation Committee and the Board.
Employment Agreements - Termination
Fiscal 2015 Employment Agreements
Pursuant to the terms of the employment agreements that were in effect at the end of Fiscal 2015, each Named Executive Officer was eligible to receive certain payments upon qualifying termination events. Each employment agreement provides for an initial term beginning May 1, 2014 through March 31, 2015 (the "initial term") and will renew automatically for subsequent one-year terms (each, a "renewal term") unless the executive or the Company provides notice of non-renewal of the agreement at least thirty days prior to the expiration of the initial term or any subsequent renewal term.
Under the employment agreements, the Named Executive Officers are entitled to the following termination benefits: (i) if the Named Executive Officer resigns his employment with “good reason” or if the Company terminates the executive’s employment other than for “cause,” death, or “disability” (as defined below) at any time during the initial term or any subsequent renewal term or if the Company provides the executive with a notice of non-renewal effective at the expiration of the initial term and should the Company terminate executive’s employment other than for "cause," death or "disability" or executive resigns his employment with "good reason" within twelve months following the expiration of the initial term, the executive is entitled to receive any unpaid base salary and accrued employment benefits through the date of termination, any bonus earned from a prior year but not yet paid, a bonus for the current fiscal year, subject to certain requirements, and continuation of executive’s base salary for twelve months; or (ii) if the Company provides the executive with a notice of non-renewal and should the Company terminate executive’s employment other than for cause, death or disability or executive resigns his employment with good reason within twelve months following the expiration of a renewal term, the executive is entitled to receive any unpaid base salary and accrued employment benefits through the date of termination, any bonus earned from a prior year but not yet paid, a bonus for the current fiscal year, subject to certain requirements, and continuation of executive’s base salary for six months.
Under each employment agreement, "cause" means: (i) the commission by the executive of a felony (or a crime involving moral turpitude); (ii) the theft, conversion, embezzlement or misappropriation by executive of funds or other assets of the Company or any of its affiliates or any other act of fraud or dishonesty with respect to the Company or any of its affiliates (including acceptance of any bribes or kickbacks or other acts of self-dealing); (iii) intentional, grossly negligent, or unlawful misconduct by executive which causes harm or embarrassment to the Company or any of its affiliates or exposes the Company or any of its affiliates to a substantial risk of harm or embarrassment; (iv) the violation by executive of any law regarding employment discrimination or sexual harassment; (v) the failure by executive to comply with any material policy generally applicable to Company employees, which failure is not cured within 30 days after notice to executive; (vi) the repeated failure by executive to follow the reasonable directives of any supervisor or the Board, which failure is not cured within 30 days after notice to executive; (vii) the unauthorized dissemination by executive of confidential information in violation of the employment agreement; (viii) any material misrepresentation or materially misleading omission in any resume or other information regarding executive (including executive’s work experience, academic credentials, professional affiliations or absence of criminal record) provided by or on behalf of executive; (ix) the Company’s discovery that, prior to executive’s employment with the Company, executive engaged in conduct of the type described in clauses (i) through (iv) above; or (x) any other material breach by executive of the employment agreement that is not cured within 30 days after notice to executive.
Under each Named Executive Officer’s employment agreement, "good reason" means any of the following without executive’s consent: (i) the assignment to executive of any duties or responsibilities materially inconsistent with executive’s position and title, or a material reduction in executive’s responsibilities and authority, except in connection with the termination of executive’s employment for cause, disability or death; (ii) a reduction by the Company in executive’s base salary below the initial base salary set forth in the employment agreement, except for a non-permanent reduction that is part of a program applied to other senior executives of the Company necessitated by economic or other financial conditions; or (iii) requiring the executive to relocate or perform services on a regular basis more than 25 miles from the principal place of
41
business as of the date of the agreement, or, in the event executive consents to any relocation, the failure by the Company to pay (or reimburse executive) for reasonable moving expenses under the Company relocation policy in effect at the time of the relocation.
Fiscal 2016 Employment Agreements
Mr. Alexander's new employment agreement, effective April 1, 2015, provides for a term beginning April 1, 2015 through March 31, 2016. Under the terms of Mr. Alexander's employment agreement, he will be entitled to the following termination benefits: (i) should Mr. Alexander's employment terminate prior to the end of the term for any reason other than the Company without cause or by reason of death or disability, then the Company shall pay Mr. Alexander any earned but unpaid base salary, accrued but unpaid benefits and unreimbursed business expenses; (ii) should Mr. Alexander's employment terminate prior to the end of the term by the Company without cause or by death or disability, the Company shall pay Mr. Alexander or Mr. Alexander's estate any earned but unpaid base salary, accrued but unpaid benefits, unreimbursed business expenses and Mr. Alexander's regular base salary in equal installments in accordance with the Company's normal payroll practice for the remainder of the term; and (iii) Mr. Alexander's outstanding equity award agreements will continue to vest in accordance with the terms and conditions of the original award agreements and the Thermon Group Holdings, Inc. 2011 Long-Term Incentive Plan, so long as Mr. Alexander remains employed by the Company and subject to his continued service as an independent contractor following the end of the term.
The Company appointed Bruce Thames to the newly created position of Executive Vice President and Chief Executive Officer on April 27, 2015 and entered into an employment agreement in connection with the appointment. The material terms of his employment agreement are as follows: (i) if at any time on or prior to March 31, 2017 Mr. Thames resigns his employment with good reason or the Company terminates his employment other than for cause, death or disability, then the Company will pay Mr. Thames (a) base salary and any accrued employment benefits as required by applicable law, pro-rated through the termination date, (b) any earned but unpaid annual bonus from a prior fiscal year and a prorated portion of the annual bonus from the current fiscal year based on actual Company performance (provided that Mr. Thames is employed for at least nine (9) months during such fiscal year), (c) any unreimbursed business expenses incurred through the termination date, and (d) severance in the form of a base salary continuation for a period of twenty-four (24) months following the termination date; (ii) if Mr. Thames resigns his employment with good reason or the Company terminates his employment other than for cause, death or disability after March 31, 2017, he will be entitled to the payments listed in (i) above, except that the severance period will be reduced to twelve (12) months; and (iii) should Mr. Thames' employment terminate for any reason other than by Mr. Thames with good reason, by the Company without cause or by reason of death or disability, then the Company shall pay Mr. Thames any earned but unpaid base salary, accrued but unpaid benefits and unreimbursed business expenses. For the purposes of Mr. Thames' employment agreement, the definition of "good reason" means any of the following without consent: (i) the assignment of any duties or responsibilities materially inconsistent with position and title, or a material reduction in responsibilities and authority, except in connection with the termination of employment for Cause, Disability or death; (ii) a reduction by the Company in base salary, except for a non-permanent reduction that is part of a program applied to other senior executives of the Company necessitated by economic or other financial conditions; (iii) the failure by the Company to promote on or before April 1, 2016 to Chief Executive Officer with his base salary being at or near the 50th percentile of the Company’s compensation peer group and benefits equal to or greater than that currently provided under the agreement; or (iv) requiring relocation or services to be performed on a regular basis more than 25 miles from the principal place of business as of the date hereof.
.
Mr. Bingham's new employment agreement, effective April 27, 2015, provides for a term beginning April 27, 2015 through March 31, 2016. Under the terms of Mr. Bingham's employment agreement he will be entitled to the following termination benefits: (i) should Mr. Bingham's employment terminate prior to the end of the term for any reason other than the Company without cause or by reason of death or disability, then the Company shall pay Mr. Bingham any earned but unpaid base salary, accrued but unpaid benefits and unreimbursed business expenses; (ii) should Mr. Bingham employment terminate prior to the end of the term by the Company without cause or by death or disability, the Company shall pay Mr. Bingham or Mr. Bingham's estate any earned but unpaid base salary, accrued but unpaid benefits, unreimbursed business expenses and Mr. Bingham's regular base salary in equal installments in accordance with the Company's normal payroll practice for the remainder of the term; and (iii) Mr. Bingham's outstanding equity award agreements will continue to vest in accordance with the terms and conditions of the original award agreements and the Thermon Group Holdings, Inc. 2011 Long-Term Incentive Plan, so long as Mr. Bingham remains employed by the Company and subject to his continued service as an independent contractor following the end of the term.
Equity Agreements - Termination
42
The definitions of "cause" and "disability" in each of the equity award agreements described below are substantially similar to the definitions in the employment agreements described above.
Stock Option Award Agreements dated May 4, 2011
The stock option award agreements dated May 4, 2011 provide that if the Company terminates the holder other than for cause, death or disability, then the option, to the extent vested as of the effective date of such termination, may thereafter be exercised for a period of ninety days after such termination of employment. If the Company terminates the holder by reason of death or disability, then the option, to the extent vested as of the effective date of such termination of employment, may thereafter be exercised by the holder's estate for a period of one year after the date of such termination. If the Company terminates the holder for cause or if the holder resigns for any reason, the option, whether or not vested, shall terminate immediately upon such termination of employment.
Restricted Stock Unit Award Agreements dated August 2, 2012
The restricted stock unit award agreements dated August 2, 2012 provide that if the Company terminates the holder other than for cause or due to death or disability, the portion of the award that was not vested immediately prior to such termination of employment shall be 100% vested upon such termination of employment. If the Company terminates the holder for cause or if the holder resigns for any reason, the portion of the award that was not vested immediately prior to such termination of employment shall be immediately forfeited and canceled by the Company.
Restricted Stock Unit Award Agreements dated August 1, 2013 and July 31, 2014
The restricted stock unit award agreements dated August 1, 2013 provide that if the Company terminates the holder other than for cause or due to death or disability, the portion of the award that was not vested immediately prior to such termination of employment shall immediately vest on a pro-rata basis as determined by the number of whole months that holder was employed during the vesting period. The remaining portion of the award shall be immediately forfeited by the holder and canceled by the Company. If the Company terminates the holder for cause or if the holder resigns for any reason, the portion of the award that was not vested immediately prior to such termination of employment shall be immediately forfeited and canceled by the Company.
Performance Unit Award Agreements dated August 1, 2013
The performance unit award agreements dated August 1, 2013 provide that if the Company terminates the holder other than for cause or due to death or disability, then the number of shares of stock subject to the award with respect to the performance period ending immediately following the holder's termination shall be earned if and to the extent that the shares would have been earned absent such termination of employment; provided, however, the number of shares of stock subject to the award that are earned and delivered to holder shall be prorated based on the number of whole months that holder was employed during such performance period. The holder shall not be eligible to receive any shares of stock for any performance period that ends after the fiscal year in which the holder's termination of employment occurs. If the Company terminates the holder for cause or if the holder resigns for any reason, the portion of the award that was not vested immediately prior to such termination of employment shall be immediately forfeited and canceled by the Company.
Performance Unit Award Agreements dated July 31, 2014
The performance unit award agreements dated July 31, 2014 provide that if the Company terminates the holder other than for cause or due to death or disability, then the award will be earned and settled in accordance with the original terms of the agreement, except that the number of shares of stock subject to the award that are earned and delivered shall be pro-rated based on the number of whole months of employment. If the Company terminates the holder for cause or if the holder resigns for any reason, the portion of the award that was not vested immediately prior to such termination of employment shall be immediately forfeited and canceled by the Company.
If, as of March 31, 2015, we terminated his employment other than for cause, death or disability, each Named Executive Officer would have been entitled to receive the following:
43
|
Named Executive Officer
|
Severance
(Continuation of Base Salary for Twelve Months)
($)(1)
|
Bonus for
Fiscal 2015
($)(1)
|
Acceleration
of
Stock
Options
($)
|
Acceleration
of Restricted
Stock Units
($)(2)
|
Acceleration
of
Performance
Units
($)(2)(3)
|
Total
($)
|
||||||||||||
|
Rodney L. Bingham
|
371,315
|
|
576,800
|
|
—
|
|
194,221
|
|
—
|
|
1,142,336
|
|
||||||
|
George P. Alexander
|
312,966
|
|
486,160
|
|
—
|
|
194,221
|
|
—
|
|
993,347
|
|
||||||
|
Jay C. Peterson
|
265,225
|
|
309,000
|
|
—
|
|
140,665
|
|
51,028
|
|
765,918
|
|
||||||
|
Johannes (René) van der Salm
|
221,450
|
|
258,000
|
|
—
|
|
140,665
|
|
51,028
|
|
671,143
|
|
||||||
|
(1)
|
If, as of March 31, 2015, a Named Executive Officer terminated his employment for good reason, he would have been entitled to receive the amount listed in this column.
|
|
(2)
|
For purposes of this calculation, the Company utilized a market closing price of $24.07 per share of our common stock as reported on the NYSE on March 31, 2015.
|
|
(3)
|
For purposes of this calculation, we assumed that the performance goal was deemed satisfied at the target level. Pursuant to the July 31, 2014 performance unit award agreements (i) the shares of stock will be earned only to the extent that they would have been earned absent the termination, (ii) the shares will be issued in settlement of the award at the conclusion of the performance period on March 31, 2017 and (iii) the shares will only be earned to the extent that the Company met or exceeded the performance goals under the original terms of the agreement.
|
Change In Control
The employment agreements entered into effective May 1, 2014 provide that if, within twelve months following a "change in control," the Named Executive Officer's employment is terminated by the Company other than for cause, death or disability or if the Named Executive Officer resigns his employment with good reason, then the Named Executive Officer is entitled to receive any unpaid base salary and accrued employment benefit through the date of termination, any bonus earned from a prior year but not yet paid, a bonus for the current fiscal year, subject to certain requirements, and continuation of base salary for eighteen months.
As of March 31, 2015, each of the Named Executive Officers held unvested stock options, restricted stock units and performance units granted under the LTIP. Under the LTIP, in the event of a "change in control," the Board, in its discretion may provide for the accelerated vesting of outstanding equity awards, including deeming the performance measure applicable to some or all outstanding awards to be satisfied at any level.
For purposes of both the employment agreements and the LTIP, a change in control is generally defined to include:
|
•
|
Acquisition by a person or entity of 50% or more of either the outstanding shares of the Company or the combined voting power of such shares, with certain exceptions;
|
|
•
|
Certain reorganizations, mergers, or consolidations; or
|
|
•
|
A complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company.
|
Assuming that a change in control occurred effective as of March 31, 2015 and the Board exercised its discretion to require that all outstanding options, restricted stock units and performance units be surrendered and for the holder to receive a cash payment equal to (i) the number of shares subject to the option multiplied by the excess, if any, of the fair market value per share over the exercise price, (ii) the number of shares of common stock subject to the restricted stock unit award multiplied by the fair market value per share, and (iii) the number of shares of common stock subject to the performance unit award (and assuming that the performance measures are deemed satisfied at the maximum performance level) multiplied by the fair market value per share, each of the Named Executive Officers would have received a cash payment as follows:
44
|
Named Executive Officer
|
Severance
(Continuation of Base Salary for Eighteen Months)($)
|
Acceleration
of
Stock
Options
($)(1)
|
Acceleration
of Restricted
Stock Units
($)(1)
|
Acceleration
of
Performance
Units
($)(1)(2)
|
Total
($)
|
||||
|
Rodney L. Bingham
|
556,973
|
48,280
|
391,860
|
680,218
|
1,677,331
|
||||
|
George P. Alexander
|
469,448
|
48,280
|
391,860
|
680,218
|
1,589,806
|
||||
|
Jay C. Peterson
|
397,838
|
24,140
|
302,030
|
538,061
|
1,262,069
|
||||
|
Johannes (René) van der Salm
|
332,175
|
24,140
|
302,030
|
538,061
|
1,196,406
|
||||
|
(1)
|
For purposes of this calculation, the Company utilized a market closing price of $24.07 per share of our common stock as reported on the NYSE on March 31, 2015.
|
|
(2)
|
For purposes of this calculation, we assumed that the performance measures associated with the performance units were deemed satisfied at the maximum level.
|
Fiscal 2016 Employment Agreements
The employment agreements entered into on April 1, 2015 and April 27, 2015 with Messrs. Alexander and Bingham, respectively, do not provide for any benefits upon a change in control. The employment agreement entered into on April 27, 2015 with Mr. Thames provides that if, within twelve months following a change in control, he resigns his employment with good reason or the Company terminates his employment other than for cause, death or disability, then the Company will pay (i) the base salary and any accrued employment benefits as required by applicable law, pro-rated through the termination date, (ii) any earned but unpaid annual bonus from a prior year and a prorated portion of the annual bonus from the current fiscal year based on actual Company performance (provided that the is employed for at least nine (9) months during such fiscal year), (iii) any unreimbursed business expenses incurred through the termination date, and (iv) severance in the form of a base salary continuation for a period of twenty-four (24) months following the termination date.
45
PROPOSAL NO. 3
APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE COMPENSATION
OF OUR EXECUTIVE OFFICERS
In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in 2010 (the "Dodd-Frank Act"), we are asking you to approve an advisory resolution on the compensation of our Named Executive Officers as described in the Compensation Discussion and Analysis, the compensation tables and related narrative discussion included in this Proxy Statement. This proposal, commonly known as a "say-on-pay" proposal, gives our stockholders the opportunity to approve, reject or abstain from voting with respect to our Fiscal 2015 executive compensation program and policies and the compensation paid to the 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 as described in this Proxy Statement. The Dodd-Frank Act requires the Company to hold the advisory vote on executive compensation at least once every three years. The Company's stockholders have expressed a preference for holding such a vote every year and the Company anticipates that it will continue to hold a say-on-pay vote each year for the foreseeable future.
This proposal allows our stockholders to express their opinions regarding the decisions of the Compensation Committee on the prior fiscal year’s compensation of the Named Executive Officers. Because your vote on this proposal is advisory, it will not be binding on us, the Compensation Committee, or the Board. However, the Compensation Committee and the Board will take into account the outcome of the vote when considering future executive compensation arrangements. Further, your advisory vote will serve as an additional tool to guide the Board and the Compensation Committee in continuing to improve the alignment of the Company’s executive compensation program with the interests of the Company and its stockholders and our commitment to high standards of corporate governance.
The Company’s executive compensation program is designed to attract, retain and reward talented executives who can contribute to both our short- and long-term success and is based on the following general principles:
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management’s interests should be closely aligned with the interests of our stockholders;
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compensation must be competitive with that offered by other companies that compete with us for executive talent and enable us to attract and retain highly-qualified executive leadership;
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differences in compensation should reflect differing levels of responsibilities; and
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performance-based compensation should focus on critical business objectives and align pay through performance-leveraged incentive opportunities.
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The Company believes that its executive compensation program is effective in promoting these general principles and is designed to closely align the interests of our management with the long-term interests of our stockholders. The Compensation Discussion and Analysis included in this Proxy Statement describes the Company’s executive compensation program and the decisions made by the Compensation Committee during Fiscal 2015 in more detail. You are encouraged to read the full details of our executive compensation program and policies as described the Compensation Discussion and Analysis, the tabular disclosure and accompanying narrative disclosure set forth in this Proxy Statement.
For the reasons outlined above, we believe that our executive compensation program is well-designed, appropriately aligns executive pay with Company performance and incentivizes desirable behavior. Accordingly, we are asking you to endorse our executive compensation program by voting for the following resolution:
"RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED."
The Board unanimously recommends that stockholders vote "FOR" the foregoing resolution for the reasons outlined above.
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OTHER MATTERS
The Board is not aware of any other business to be presented for a vote of the stockholders at the 2015 Annual Meeting. If any other matters are properly presented for a vote, the people named as proxies will have discretionary authority, to the extent permitted by law, to vote on such matters according to their best judgment.
The chairman of the 2015 Annual Meeting may refuse to allow presentation of a proposal or nominee for the Board if the proposal or nominee was not properly submitted.
REQUIREMENTS FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2016 ANNUAL MEETING
In order for a stockholder proposal to be considered for inclusion in the Company’s Proxy Statement for the 2016 Annual Meeting, our General Counsel must receive the proposal no later than February 12, 2016. Such proposals must be sent via registered, certified, or express mail (or other means that allows the stockholder to determine when the proposal was received) to: General Counsel, Thermon Group Holdings, Inc., 100 Thermon Drive, San Marcos, Texas 78666. Such proposals must comply with the SEC’s requirements in Rule 14a-8 under the Exchange Act regarding the inclusion of stockholder proposals in Company-sponsored proxy materials, such as the requirement that the stockholder continue to own a minimum number of shares until the 2016 Annual Meeting and appear in person or through an authorized representative at the 2016 Annual Meeting to present the proposal.
Alternatively, stockholders intending to present a proposal at the 2016 Annual Meeting without having it included in the Company’s Proxy Statement, as well as any director nominations, must comply with the requirements set forth in the Bylaws. Our Bylaws require, among other things, that our Corporate Secretary receive written notice with respect to each director nomination or other proposal that the stockholder intends to present at the 2016 Annual Meeting from the stockholder no earlier than February 12, 2016 and no later than March 13, 2016. The notice must contain the information required by our Bylaws.
Proposals received by the General Counsel or Corporate Secretary after the dates mentioned will not be included in the Proxy Statement or acted upon at next year’s Annual Meeting.
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Upon receipt of a written request from any stockholder entitled to vote at the forthcoming 2015 Annual Meeting, the Company will mail, at no charge to the stockholder, a copy of the 2015 Annual Report, including the financial statements and schedules required to be filed with the Commission pursuant to Rule 13a-1 under the Exchange Act for the Company’s most recent fiscal year. Requests from beneficial owners of the Company’s voting securities must set forth a good-faith representation that as of the Record Date, the person making the request was the beneficial owner of securities entitled to vote at the 2015 Annual Meeting. Written requests for the 2015 Annual Report should be directed to our General Counsel at Thermon Group Holdings, Inc., 100 Thermon Drive, San Marcos, Texas 78666. If you would like to receive a copy of any exhibits listed in the 2015 Annual Report, please call (512) 396-5801 or submit a request in writing to our General Counsel at the above address, and the Company will provide you with the exhibits upon the payment of a nominal fee (which fee will be limited to the expenses we incur in providing you with the requested exhibits). The 2015 Annual Report and these exhibits are also available in the "Investor Relations" section of our website located at http://ir.thermon.com.
It is important that your shares be voted at the 2015 Annual Meeting, regardless of the number of shares that you hold.
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TABLE OF CONTENTS
GENERAL INFORMATIONDIRECTORS AND EXECUTIVE OFFICERSCORPORATE GOVERNANCEDIRECTOR COMPENSATIONPROPOSAL NO. 1ELECTION OF DIRECTORSCERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONSAUDIT COMMITTEE REPORTPROPOSAL NO. 2RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMAUDIT AND NON-AUDIT FEESSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTSECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCECOMPENSATION COMMITTEE REPORTCOMPENSATION DISCUSSION AND ANALYSISSUMMARY COMPENSATION TABLEPOTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROLPROPOSAL NO. 3APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE COMPENSATION OF OUR EXECUTIVE OFFICERSOTHER MATTERSREQUIREMENTS FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2016 ANNUAL MEETING