GOVERNANCE OF THE COMPANY AND PRACTICES OF THE BOARD OF DIRECTORS
Board of Directors; Leadership Structure
As of the date hereof, the Board of Directors consists of eight directors: Gary D. Simon (Chair), Richard K. Atkinson, Darren R. Jamison, Noam Lotan, Gary J. Mayo, Eliot G. Protsch, Holly A. Van Deursen and Darrell J. Wilk. As noted above, Mr. Wilk will be retiring at the Annual Meeting. The Board of Directors has determined that all of the current members of the Board of Directors, other than Mr. Jamison, are “independent directors” as defined by Nasdaq rules. Further, the Board of Directors has determined that Paul DeWeese, the director nominee who is not currently a member of the Board of Directors, if elected to the Board of Directors at the Annual Meeting, will be an “independent director” under Nasdaq rules.
The Company expects that, following the Annual Meeting, and subject to the election or re-election, as the case may be, of each of the director nominees contemplated by this Proxy Statement, the Board of Directors will consist of eight directors: Holly A. Van Deursen (Chair), Richard K. Atkinson, Paul DeWeese, Darren R. Jamison, Noam Lotan, Gary J. Mayo, Eliot G. Protsch and Gary D. Simon.
The Board of Directors met fifteen (15) times during the fiscal year ended March 31, 2016 (the “2016 Fiscal Year”), and each of the directors attended or participated in more than 75% of the aggregate of (i) the total number of meetings of the Board of Directors and (ii) the total number of meetings held by all committees of the Board of Directors on which such director served. The Company strongly encourages each member of the Board of Directors to attend each annual meeting of stockholders. All of the directors serving on the Board of Directors at the time attended the 2015 Annual Meeting. The Company’s independent directors met in executive session, without members of the Company’s management present, at all of the in person meetings of the Board of Directors in the 2016 Fiscal Year.
The Board of Directors is committed to having a sound governance structure that promotes the best interests of all of the Company’s stockholders. To that end, the Board of Directors has evaluated and actively continues to examine emerging corporate governance trends and best practices. Stockholder perspectives play an important role in that process. The level of importance afforded to stockholder perspectives by the Board of Directors is evident upon a closer review of the Board of Directors’ governance structure. Some key points regarding that structure are as follows:
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The Board of Directors is predominantly independent. Of our eight directors, only one (our President and Chief Executive Officer) is an employee of the Company. Further, the Board of Directors has affirmatively determined that seven of our eight directors are independent under SEC and Nasdaq corporate governance rules, as applicable.
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All members of the Board of Directors are elected annually to one
‑year terms.
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Our board committees are comprised exclusively of independent directors.
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Our independent directors meet in executive session at every in
‑person board meeting.
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We have separated the roles of Chairman of the Board of Directors and Chief Executive Officer. Our Chairman focuses on board oversight responsibilities, strategic planning, setting board agendas and mentoring company officers, as well as facilitating communications between the Board of Directors and management.
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Our Board of Directors is very active. As noted above, each of our directors attended more than 75% of the 2016 Fiscal Year board meetings and meetings of the committees on which such director served.
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We believe our Board of Directors structure serves the interests of stockholders by balancing board continuity and the promotion of long
‑term thinking with the need for director accountability.
Board Committees
The Board of Directors has designated an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.
Audit Committee
The Audit Committee currently consists of Messrs. Atkinson (Chair), Lotan, Protsch and Simon. Each member of the Audit Committee is an “independent director” pursuant to Nasdaq rules and is “financially literate” within the meaning of Nasdaq rules. The Audit Committee is constituted to comply with Section 3(a)(58)(A) of the Exchange Act and is responsible, among other items, for: (i) monitoring the Company’s financial reporting and overseeing accounting practices; (ii) annually retaining the independent public
accountants as auditors of the books, records, financial statements and accounts of the Company; (iii) monitoring the scope of audits made by the independent public accountants and the audit reports submitted by the independent public accountants; (iv) overseeing the systems of internal control which management and the Board of Directors have established; and (v) discussing with management and the independent and internal auditors the Company’s major financial risk exposure and the steps taken to monitor and control such exposure. In addition, the Audit Committee has the duties of a “qualified legal compliance committee,” including monitoring and reviewing stockholder complaints, and also reviews and approves all related
‑party transactions. The Audit Committee operates under a written charter adopted by the Board of Directors, a copy of which is available on the Company’s website at
www.capstoneturbine.com.
Pursuant to its written charter, the Audit Committee reviews its charter on an annual basis for compliance, best practices and any other needed updates or changes. During the 2016 Fiscal Year, the Audit Committee held four (4) meetings. The Board of Directors has determined that each member of the Audit Committee is an “audit committee financial expert,” as that term is defined by applicable rules adopted by the SEC. The Board of Directors has further determined that each member of the Audit Committee is independent as defined by Nasdaq rules.
The Company expects that, following the Annual Meeting, and subject to the election or re-election, as the case may be, of each of the director nominees contemplated by this Proxy Statement, the Audit Committee will consist of Messrs. Protsch (Chair), Atkinson, Lotan and Simon.
Compensation Committee
The Compensation Committee currently consists of Messrs. Mayo (Chair) and Wilk and Ms. Van Deursen. The Compensation Committee is comprised solely of directors who qualify as independent for purposes of Nasdaq rules, SEC Rule 16b
‑3 and Section 162(m) of the Code in conformance with the Compensation Committee’s charter. The functions of the Compensation Committee include: (i) for the purposes of compensation, reviewing the performance and development of the Company’s senior management in achieving corporate goals and objectives; (ii) determining the salary, benefits and other compensation of the executive officers and reviewing the compensation programs for the Company; and (iii) administering the following benefit plans of Capstone: the 2000 Employee Stock Purchase Plan, the 2000 Equity Incentive Plan (the “Incentive Plan”) and the Executive Performance Incentive Plan (the “Executive Plan”). The Compensation Committee operates under a written charter adopted by the Board of Directors, a copy of which is available on the Company’s website at
www.capstoneturbine.com
. Pursuant to its written charter, the Compensation Committee reviews its charter on an annual basis for compliance, best practices and any other needed updates or changes. During the 2016 Fiscal Year, the Compensation Committee held eight (8) meetings. Processes and procedures for determining executive compensation are discussed elsewhere in this Proxy Statement in the section entitled “Compensation Discussion and Analysis.”
The Company expects that, following the Annual Meeting, and subject to the election or re-election, as the case may be, of each of the director nominees contemplated by this Proxy Statement, the Compensation Committee will consist of Messrs. Mayo (Chair) and Simon and Ms. Van Deursen.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee currently consists of Ms. Van Deursen (Chair) and Messrs. Mayo, Protsch and Wilk. The Nominating and Corporate Governance Committee is comprised solely of “independent directors” as defined by Nasdaq rules in conformance with the Nominating and Corporate Governance Committee’s charter. The Nominating and Corporate Governance Committee is responsible for, among other things, (i) monitoring corporate governance matters; (ii) recommending to the full Board of Directors candidates for election to the Board of Directors and committees of the Board of Directors; and (iii) coordinating the Board of Directors evaluation process. The Nominating and Corporate Governance Committee operates under a written charter adopted by the Board of Directors, a copy of which is available on the Company’s website at
www.capstoneturbine.com.
Pursuant to its written charter, the Nominating and Corporate Governance Committee reviews its charter on an annual basis for compliance, best practices and any other needed updates or changes. During the 2016 Fiscal Year, the Nominating and Corporate Governance Committee held five (5) meetings. The Nominating and Corporate Governance Committee met subsequent to the end of the 2016 Fiscal Year to recommend to the full Board of Directors each of the nominees for election to the Board of Directors as presented herein.
The Company expects that, following the Annual Meeting, and subject to the election or re-election, as the case may be, of each of the director nominees contemplated by this Proxy Statement, the Nominating and Corporate Governance Committee will consist of Messrs. DeWeese (Chair), Mayo and Protsch.
Risk Oversight
The Board of Directors oversees an enterprise
‑wide approach to risk management designed to support the achievement of organizational objectives, including strategic objectives, to improve long
‑term organizational performance and to enhance stockholder value. A fundamental part of risk management is not only understanding the risks the Company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the Company. The involvement of the full Board of Directors in setting the Company’s business strategy is a key part of its assessment of management’s appetite for risk and also a
determination of what constitutes an appropriate level of risk for the Company. The full Board of Directors participates in an annual enterprise risk management assessment.
While the Board of Directors has the ultimate oversight responsibility for the risk management process, various committees of the Board of Directors also have responsibility for risk management. In particular, the Audit Committee focuses on financial risk, including internal controls, and receives an annual risk assessment report from the Company’s internal auditors. In setting compensation, the Compensation Committee strives to create incentives that encourage a level of risk
‑taking behavior consistent with the Company’s business strategy and is responsible for oversight with respect to compensation and succession planning risks. Also, the Company’s Nominating and Corporate Governance Committee conducts an annual assessment of the risk management process and reports its findings to the full Board of Directors.
Board of Directors and Committee Performance Evaluations
The charter of each of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee requires an annual performance evaluation, and the Company’s Corporate Governance Principles also mandate an annual evaluation of the Board of Directors. Such performance evaluations are designed to assess whether the Board of Directors and its committees function effectively and make valuable contributions to the Company. In April 2016, all members of the Company’s Board of Directors were asked to assess the performance of the Board of Directors and each committee on which they serve and identify areas for improvement through the completion of a detailed questionnaire for each such committee and the Board of Directors. Counsel for the Company reviewed the completed questionnaires, consolidated the responses and delivered summaries of the responses to the Nominating and Corporate Governance Committee, which reviewed the summaries in consultation with counsel for the Company and reported findings to the Board of Directors in June 2016. The Nominating and Corporate Governance Committee and the Board of Directors discussed the results of the performance evaluations and asked each of the appropriate committees to discuss the consensus suggestions and put a follow
‑up process in place. The Nominating and Corporate Governance Committee has reviewed the results, identified the key areas for improvement and is developing a strategy for addressing the areas most in need of improvement. Each member of the Board of Directors was also asked to complete a peer review and assess, on a confidential basis, the service and contributions of each other member of the Board of Directors by completing a confidential board member evaluation form. Counsel for the Company reviewed and consolidated the responses to the confidential board member evaluation form. The Chairperson of the Nominating and Governance Committee presented the responses, on an anonymous basis, to the Board of Directors in June 2016.
Director Recommendation and Nomination Process
The Nominating and Corporate Governance Committee has a policy for the consideration of director candidates recommended by stockholders and will consider all bona fide recommended candidates for director if submitted in accordance with the policy. The policy provides that any stockholder recommendation must include the specific information required by the policy, must be submitted in writing to:
Capstone Turbine Corporation
21211 Nordhoff Street
Chatsworth, CA 91311
Attention: Chair of Nominating and Corporate Governance Committee
Care of: Clarice Hovsepian, Secretary
and must be received by the Nominating and Corporate Governance Committee at least 180 days prior to the annual meeting of stockholders. All such recommendations should include the following: (i) the name, age, business address and residence address of the prospective candidate and the name and record address of the stockholder submitting the recommendation, as well as the number of shares of stock of the Company which are owned of record or beneficially by that stockholder; (ii) a statement from the prospective candidate consenting to being named in the proxy and proxy card if selected as a nominee and to serving on the Board of Directors if elected; (iii) a statement explaining whether the prospective candidate is “independent” under applicable laws, Nasdaq rules and otherwise; (iv) biographical data of the prospective candidate, including former and current service on other boards of directors, business experience and current occupation, and any other information relating to the prospective candidate and the recommending stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors; (v) transactions and relationships between the recommended candidate and the recommending stockholder, on the one hand, and the Company or Company management, on the other hand, as well as a description of all arrangements or understandings between the recommending stockholder and the prospective candidate and any other person pursuant to which the nomination is being made by the stockholder; (vi) the prospective candidate’s Company stock trading history; (vii) any material proceedings to which the prospective candidate or his or her associates is a party that are adverse to the Company; (viii) the prospective candidate’s involvement in any past or present legal proceedings, including any involvement in legal proceedings involving the Company; (ix) information regarding whether the recommending stockholder or the recommended candidate, or affiliates of either of those parties, have any plans or proposals for the Company; (x) an explanation as to whether the recommending stockholder and the prospective candidate intend to use the nomination to redress personal claims or grievances against the Company or others or to further personal interests or special interests not shared by the
Company’s stockholders at large; (xi) whether the prospective candidate is proposed to be nominated at the annual meeting of stockholders or is provided solely as a recommendation for consideration by the Nominating and Corporate Governance Committee; and (xii) any other relevant information concerning the prospective candidate. The Nominating and Corporate Governance Committee reserves the right to request additional information as it deems appropriate.
In addition to stockholder recommendations as described above, the Company’s bylaws permit stockholders to nominate directors at a meeting of the stockholders. Any stockholder nomination must comply with the applicable provisions of the Company’s bylaws and the SEC’s proxy rules and will be handled in accordance with the Company’s bylaws and applicable laws.
The Nominating and Corporate Governance Committee reviews the composition and size of the Board of Directors and determines the criteria for Board of Directors membership. In addition, the Nominating and Corporate Governance Committee reviews the qualifications of prospective candidates to determine whether they will make good candidates for membership on the Company’s Board of Directors. This consideration includes, at a minimum, a review of each prospective candidate’s character, judgment, experience, expertise, age, diversity, independence under applicable law and freedom from other conflicts, as well as other factors that the Nominating and Corporate Governance Committee deems relevant in light of the needs of the Board of Directors and the Company and/or that are in the best interests of the Company, including relevant experience, the ability to dedicate sufficient time, energy and attention to performance of Board of Directors duties, financial expertise, experience with a company that has introduced a new, technologically advanced product or service to the marketplace and existing relationships within target industries or public policy institutions that may benefit the Company and whether the prospective candidate is a Nominating and Corporate Governance Committee
‑selected prospective candidate or a stockholder
‑recommended prospective candidate. The Nominating and Corporate Governance Committee selects qualified candidates and recommends those candidates to the Board of Directors, and the Board of Directors then decides if it will invite the candidates to be nominees for election to the Board of Directors.
The Nominating and Corporate Governance Committee also considers issues of diversity, such as diversity of education, professional experience and differences in viewpoints and skills. The Nominating and Corporate Governance Committee does not have a formal diversity policy in terms of considering nominees for directors, but it actively considers all relevant factors, including the factors outlined above, when evaluating potential nominees to the Board of Directors. The Nominating and Corporate Governance Committee developed a matrix of all relevant qualifications, skills and experience possessed by the incumbent members of the Board of Directors and identified certain areas where the Board of Directors needed additional attributes including, but not limited to, diversity. The Board of Directors and the Nominating and Corporate Governance Committee believe that it is essential that members of the Board of Directors represent diverse viewpoints.
The Nominating and Corporate Governance Committee uses the process described herein to identify prospective candidates for the Board of Directors and to evaluate all candidates, including candidates recommended by stockholders in accordance with the Company’s policy regarding stockholder recommendations and the director nominations process. The Nominating and Corporate Governance Committee: (i) reviews the composition and size of the Board of Directors and determines the criteria for Board of Directors membership; (ii) evaluates the Board of Directors for effectiveness and makes a verbal presentation of its findings to the Board of Directors; (iii) determines whether the current members of the Board of Directors who satisfy the criteria for Board of Directors membership are willing to continue in service; if the current members of the Board of Directors are willing to continue in service, the Nominating and Corporate Governance Committee evaluates the performance of such board members and considers those current members for re
‑nomination, and if the current members of the Board of Directors are not willing to continue in service or if there will be an increase in the number of directors on the Board of Directors, the Nominating and Corporate Governance Committee considers candidates who meet the criteria for Board of Directors membership; (iv) if necessary, engages a search firm to assist with the identification of potential candidates; (v) compiles a list of potential candidates; (vi) evaluates the prospective candidates, including candidates recommended by stockholders, to determine which of the prospective candidates, if any, will best represent the interests of all stockholders and determines whether any conflicts of interest exist; (vii) holds meetings to narrow the list of prospective candidates; (viii) along with the Chairman of the Board of Directors and management, interviews a select group of prospective candidates; (ix) approves the candidate or candidates who are most likely to advance the best interests of the stockholders; and (x) recommends the selected candidate or candidates to the Board of Directors and the stockholders for approval. The Nominating and Corporate Governance Committee, which may request the assistance of members of the Board of Directors who are not on the Nominating and Corporate Governance Committee in the execution of its duties, carefully documents the selection and evaluation process.
Stockholder Communications
The Company has a policy whereby stockholders may communicate directly with the Company’s Board of Directors, or individual members of the Board of Directors, by writing to the Company at:
Capstone Turbine Corporation
21211 Nordhoff Street
Chatsworth, CA 91311
Attention: Clarice Hovsepian, Secretary
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with management the “Compensation Discussion and Analysis” required by SEC Regulation S
‑K Item 402(b) beginning on page 18 of this Proxy Statement. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in the Company’s Annual Report on Form 10
‑K for the 2016 Fiscal Year.
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Compensation Committee
Gary J. Mayo,
Chairman
Holly A. Van Deursen
Darrell Wilk
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The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to Regulation 14A, other than as provided in SEC Regulation S
‑K, Item 407, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically requests that it be treated as soliciting material or specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
The Compensation Committee reviews and administers the process and substance of the Company’s executive compensation program, including compensation of the Named Executive Officers (i.e., those executive officers who appear in the Summary Compensation Table on page 28).
The 2016 Fiscal Year was a challenging year for the Company as it faced various internal and external challenges that caused management to take strategic measures to reposition the Company for future growth and profitability. In light of such challenges, the Company continued to execute its strategic plan during the 2016 Fiscal Year while maintaining its compensation policies to align performance incentives with the interests of the Company’s stockholders. Certain highlights from the 2016 Fiscal Year include the following:
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The Compensation Committee reviewed and maintained the peer group established for the 2016 Fiscal Year that the Company uses to benchmark the compensation of its Named Executive Officers;
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The Compensation Committee modified the executive annual incentive program to strengthen the link between executive pay and performance, and there were no cash incentive payments to Named Executive Officers for the 2016 Fiscal Year as a result of performance goals not being achieved;
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The Compensation Committee implemented the Apollo Program designed to incentivize continued efficiency, reliability and other improvements with respect to the Company’s 200 kilowatt and 1000 kilowatt microturbines; and
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The Compensation Committee maintained the PRSU Program to link executive compensation with Company performance.
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Compensation Philosophy
Executive Compensation Philosophy and Objectives
The Compensation Committee believes that the Company’s executive compensation program should:
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Attract and retain individuals of superior ability and managerial talent by offering total compensation that is competitive with a group of companies that are of comparable size within similar industries and other companies with which the Company competes for executive talent;
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Establish goals and objectives that link incentive compensation to achievement of specific key strategic and financial performance goals;
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Provide compensation that aligns the financial interests of executives with those of the Company’s stockholders through long
‑term equity incentives that take into account the Company’s performance;
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Comply with all applicable laws and Nasdaq rules and guidelines, and ensure that compensation is appropriate in light of reasonable and sensible standards of good corporate governance; and
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Be straightforward and easy to understand and administer.
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Goal Alignment and Performance
The Compensation Committee believes that the Company’s compensation program should encourage and reward outstanding financial and strategic performance. In the fiscal year ended March 31, 2009, the stockholders approved the Executive Plan pursuant to which the Compensation Committee may pay performance
‑based cash incentives to our executive officers upon the achievement of specific performance goals. The Compensation Committee also believes that the Named Executive Officers should receive a significant portion of their compensation in the form of equity, with a significant portion of grants conditioned on performance, thereby putting this portion of their compensation at risk and further aligning their long
‑term interests with the Company’s strategic objectives and stockholders’ interests. With this structure, the Company’s compensation program is designed to maintain a close correlation between the rewards to the Company’s executives and the strategic success of the Company and the performance of its stock price.
The Compensation Committee believes that a mix of stock options, performance
‑based restricted stock units (“PRSUs”) and time
‑based restricted stock units (“RSUs”) is most appropriate for aligning the goals of senior executives with those of the Company’s
stockholders. Stock options provide a financial reward only in the event that stockholder value is increased. The Compensation Committee further believes that the PRSU Program provides additional incentives to increase stockholder value. Time-based RSUs provide value upon completion of service or other performance requirements, are tied to stock price, and impose less dilution of stockholder value than do stock options.
The Compensation Committee reviews each component of compensation for each of our Named Executive Officers, but places more emphasis on the comparative value of each Named Executive Officer’s total direct compensation, rather than each compensation component. The Compensation Committee seeks to provide total direct compensation that is within the range of compensation of executives of comparable companies. The Compensation Committee believes that a significant portion of compensation should be at risk; therefore, the actual compensation realized by the Named Executive Officers depends on the level of performance achieved over both the short
‑term and long
‑term.
Peer Group
The Compensation Committee relies on compensation information about comparable companies in consultation with Willis Towers Watson, an independent international compensation consulting firm (the “Compensation Consultant”). For the 2016 Fiscal Year, the Compensation Consultant provided comprehensive compensation information to the Compensation Committee. The information provided by the Compensation Consultant is described below under “Role of Compensation Consultant.” The data included the levels of compensation paid at a peer group of comparable companies and published survey data. The Compensation Committee used this data for benchmarking to assess the competitiveness of our compensation arrangements for the Named Executive Officers.
In setting compensation, the Compensation Committee reviews information provided by the Compensation Consultant regarding comparative market data, including comprehensive analyses of total compensation and compensation components based on the peer group and published survey data appropriate to our annual revenue. The Compensation Committee used Radford’s Global Technology Survey as part of the executive assessment with a focus on companies with $50
‑ $200 million in revenue in addition to the peer group of 16 companies generally based on the following selection guide
:
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Industry focus—Heavy Electrical Equipment; Industrial Machinery; Electrical Components & Equipment;
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A target revenue range of 0.5x
‑ 2.0x the Company’s annual revenue; and
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A target market capitalization range of 0.5x
‑ 3.0x the Company’s current market capitalization.
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The resulting 16 peer group companies are listed below, and their data will be used by the Compensation Committee to supplement published survey data going forward:
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Fuel Systems Solutions, Inc.
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LSI Industries Inc.
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Vicor Corporation
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Enphase Energy, Inc.
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Power Solutions International, Inc.
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SL Industries, Inc.
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FuelCell Energy, Inc.
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Powersecure International, Inc.
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Maxwell Technologies, Inc.
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Westport Innovations Inc.
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Key Technology, Inc.
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PMFG, Inc.
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Magnetek, Inc.
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Allied Motion Technologies Inc.
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Active Power, Inc.
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Plug Power Inc.
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Components of Compensation
The basic components of compensation applicable to the executive officers are base salary, annual performance
‑based incentives and long
‑term incentives. The executive officers also receive employee benefits consistent with those offered to other employees of the Company. The Compensation Committee believes the Company is well served by a compensation structure that is easy to monitor, implement and disclose to its officers, employees and stockholders.
Base Salary
The base salary for each of the Named Executive Officers is based on historic long
‑term individual performance and is compared to base salaries for executives at comparable companies. The Compensation Committee believes that base salaries should also reflect other relevant factors, such as unique roles, responsibilities and experience.
Annual Performance
‑Based Cash Incentives
Performance
‑based cash incentive payments to Named Executive Officers can be awarded by the Compensation Committee based on performance, achievement of specific goals and other relevant factors determined in advance by the Compensation Committee. Cash incentive awards are generally made pursuant to our Executive Plan. Payments under the awards are based on performance goals that are
selected from the criteria described in the Executive Plan. Each objective is determined in reference to our financial statements and annual budget. The Compensation Committee retains discretion to reduce awards earned under the Executive Plan.
Long
‑Term Equity Incentives
Policy.
The Compensation Committee has a policy regarding the granting of equity
‑based compensation awards. The policy generally provides that the Company shall not backdate any equity grant or manipulate the timing of the public release of material information with the intent of benefiting a grantee under an equity award. Generally, grants of equity
‑based compensation awards are to be approved by the Compensation Committee on the date of a regularly scheduled quarterly meeting of the Compensation Committee. Inducement grants may be approved at a special meeting of the Compensation Committee and are generally effective as of the commencement of employment. The date the Compensation Committee acts to approve an award shall be the grant date of the award for purposes of the Company’s equity compensation plans, except that grants made after the close of business may be deemed to be granted on the following day. No grants may be made by action on written consent, except in extraordinary circumstances. In no event shall the exercise price or value of an award be determined by reference to the fair market value of the Company’s Common Stock on a day other than the grant date of the award. The Compensation Committee does not grant options with reload features and is prohibited from re
‑pricing stock options under the terms of the Incentive Plan.
In discharging its responsibility for administering the Company’s stock
‑based compensation programs, the Compensation Committee regularly monitors and evaluates the total cost of such programs, based on information provided annually by, and in consultation with, the Compensation Consultant. This information includes share utilization and annual grant levels. The Compensation Committee determines the appropriate award to each Named Executive Officer by assessing equity incentive awards made to officers of comparable companies and evaluating the level of equity incentives that have been previously awarded to each Named Executive Officer.
Options.
The Compensation Committee determined several years ago that equity based incentive compensation should include stock options. The inclusion of stock options in the equity grant mix was determined because they provide a financial reward only in the event that stockholder value is increased.
PRSU Program.
In May 2014, the Compensation Committee approved the PRSU Program that commenced effective as of the beginning of the 2015 Fiscal Year. Full details of the PRSU Program can be found later in this Compensation Discussion and Analysis. The PRSU Program was designed to:
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Focus on the long
‑term performance of the Company;
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Motivate participants to maximize the Company’s performance by aligning their compensation with the achievement of multi
‑year, long
‑term Company objectives and long
‑term Company growth;
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Incorporate performance metrics that link externally to Total Stockholder Return (TSR) measured over a three
‑year period, as well as internal financial performance metrics also measured over a three
‑year period; and
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Provide a vesting period for awards that extends beyond the end of the 3
‑year performance measurement period.
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RSUs.
The Compensation Committee determined several years ago that equity based incentive compensation should include RSU awards. The inclusion of RSUs in the equity grant mix was determined because they are less dilutive than stock options, provide retention incentive and are linked to the Company’s stock price.
Change of Control Benefits
The Company maintains the Capstone Turbine Corporation Change of Control Severance Plan (the “Change of Control Plan”), which provides certain payments and benefits to designated employees, including the Named Executive Officers. Severance benefits are provided to participants whose employment is terminated or otherwise adversely impacted within 12 months of a change of control of the Company. Upon becoming eligible, participants receive a lump sum cash payment under the Change of Control Plan that is equal to their annual base salary and continuation coverage in our medical and dental benefit plans at no cost for a period of 12 months. Mr. Jamison has an agreement that provides for a severance payment equal to his base compensation for a period of 18 months. The Board of Directors adopted the Change of Control Plan to increase the likelihood that key management personnel are retained during any pending transactions involving a change of control of the Company. In addition, certain awards under the Incentive Plan become fully vested in the event of a change of control. The Compensation Committee believes that these change of control benefits are similar to and consistent with those offered by the companies included in the peer industry group described above.
Employee Benefits
Executive officers are generally entitled only to benefits consistent with those offered to other employees of the Company. The Company offers group life, disability, medical, dental and vision insurance and an employee stock purchase program.
2016 Fiscal Year Performance and Compensation
Financial and Operating Environment
During the 2016 Fiscal Year, the Company faced a challenging economic environment that caused management to take several measures to reposition the Company for future growth and profitability. As a result of such conditions:
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Revenue decreased $30.3 million, or 26%, to $85.2 million from $115.5 million for the 2015 Fiscal Year.
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Revenue from our accessories, parts and service increased $0.7 million, or 3%, to $26.8 million from $26.1 million for the 2015 Fiscal Year.
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Cash used in operating activities decreased $0.5 million to $22.5 million from $23.0 million cash used during the 2015 Fiscal Year.
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The Company’s net loss decreased by 20% to $25.2 million and its net loss per share decreased by 28% to $1.39 compared to the prior year.
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The Company’s year
‑end backlog decreased 34% to $109.6 million compared to the prior year.
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The Company’s year
‑end comprehensive factory protection plan (FPP) backlog increased 9% to $66.5 million compared to the prior year.
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Named Executive Officer Compensation
CEO Compensation.
The Company intends that Mr. Jamison’s target total direct compensation (i.e., base salary, performance based cash incentive and long term incentives) be established, reviewed and adjusted by the Compensation Committee with market analysis provided by the Compensation Consultant. Mr. Jamison’s total direct compensation is targeted to be within the range of the compensation paid to chief executive officers by comparable companies reflected in the published survey data and the peer group data.
For the 2016 Fiscal Year, Mr. Jamison was eligible for a performance
‑based cash incentive equivalent to 100% of his base salary at target performance levels under the Executive Plan. However, the Company did not achieve the threshold performance objectives required by the executive annual incentive program and, therefore, no bonus was awarded.
A summary of Mr. Jamison’s compensation for the 2016 Fiscal Year follows:
|
·
|
|
Base salary was increased from $464,000 to $487,200, his first salary increase since April 2013.
|
|
·
|
|
The annual incentive target remained at 100% of base pay or $487,200.
|
|
·
|
|
Pursuant to the Apollo Program, $46,312 in cash awards and 37,280 RSUs were awarded in lieu of cash for meeting the Apollo Program’s July 2015 and December 2015 performance goals, respectively.
|
|
·
|
|
Long term equity incentive award mix of 7,690 stock options, 10,000 target PRSUs and 5,000 RSUs to be earned over a multi-year period (each, as adjusted for the 1-for-20 reverse stock split that became effective on November 6, 2015).
|
|
·
|
|
Target direct compensation value mix consisted of 63% cash and 37% equity, of which a substantial portion was tied to the PRSU Program.
|
*
Estimated LTI value for stock options using a Black
‑Scholes methodology and PRSUs and RSUs using a face value methodology.
|
(1)
|
|
Based on Company projections, it is unlikely that the performance criteria will be met for the applicable PRSU performance measurement period.
|
|
(2)
|
|
Calculated as fair market value on date of grant.
|
PRSU Program.
The PRSU Program focuses on two financial objectives with equal weighting: three
‑year cumulative gross margin as a percent of three
‑year cumulative revenue and total shareholder return (“TSR”) relative to the TSR performance of companies in the Ardour Global Alternative Energy Index North America. The PRSU Program has a three
‑year performance measurement period. The performance measurement period will begin on April 1 of the first fiscal year and end on March 31 of the third fiscal year. The program is intended to have overlapping performance measurement periods (e.g., a new three
‑year cycle begins each year on April 1), subject to Compensation Committee approval. The Chief Executive Officer was the only participant for the 2016 Fiscal Year. At the end of each performance measurement period, the Compensation Committee will determine the achievement against the performance objectives. Any earned PRSU awards will vest 50% after the end of the performance measurement period and 50% one year thereafter. Remaining eligible employees will be considered for participation in future years.
Compensation of the Other Named Executive Officers.
The Compensation Committee set the 2016 Fiscal Year compensation for the remaining Named Executive Officers based on information provided by, and in consultation with the Compensation Consultant. The Compensation Committee determined that target compensation for our Named Executive Officers is within the range of compensation paid to executive officers of comparable companies reflected in the competitive market data. Consideration was also given to internal pay equity with emphasis on long
‑term incentives to encourage the long
‑term success of the Company.
Base Salary.
The base salary for each of the Named Executive Officers is based on long
‑term individual performance and is compared to base salaries for executives at comparable companies. The Compensation Committee believes that base salaries should also reflect other relevant factors, such as unique roles, responsibilities and experience. Accordingly, the base salary of any particular individual may be above or below the median of the applicable range of base salaries paid by comparable companies.
Performance
‑Based Cash Incentives.
A target cash incentive equal to a stated percentage of annual base salary is established for each Named Executive Officer. In June 2015, the Compensation Committee approved performance goals based on revenue and cash and other terms of awards for our Named Executive Officers for the 2016 Fiscal Year under the Executive Plan. Both goals must be achieved above a threshold level of performance for a cash incentive to be paid under the plan. The actual performance objectives for the 2016 Fiscal Year are summarized in the table below (amounts in millions).
2016 Fiscal Year Executive Plan Performance Objectives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Objective
|
|
Threshold
|
|
Intermediate
|
|
Target
|
|
Maximum
|
|
Revenue
|
|
$
|
116.6
|
|
$
|
123.5
|
|
$
|
137.2
|
|
$
|
157.8
|
|
Cash(1)
|
|
$
|
19.7
|
|
$
|
20.8
|
|
$
|
23.2
|
|
$
|
26.6
|
|
|
(1)
|
|
Cash is calculated as of the end of the fiscal year.
|
Awards for Mr. Jamison, Mr. Crouse, Ms. Brooks and Mr. Lewis provided a target cash incentive that was similar to the target cash incentive for the prior fiscal year. Awards earned under the Executive Plan are based on a sliding scale formula that is weighted to emphasize the cash performance goal and is designed to reward performance that exceeds target. This incentive provides a moderate award for performance that is above the threshold level but below the intermediate level, an intermediate award of approximately 40% of the target cash incentive, and a maximum award of approximately 150% of the target cash incentive. The potential cash incentives that could be paid to each executive officer for the 2016 Fiscal Year are summarized in the table below. No cash incentive is paid for performance at the threshold level or below.
2016 Fiscal Year Executive Plan Incentive Opportunity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
Incentive Opportunity(1)
|
|
Executive Officer
|
|
of Salary
|
|
Intermediate
|
|
Target
|
|
Maximum
|
|
Darren R. Jamison
|
|
100
|
%
|
$
|
195,000
|
|
$
|
487,500
|
|
$
|
731,250
|
|
James Crouse
|
|
55
|
%
|
|
61,600
|
|
|
157,080
|
|
|
231,000
|
|
Jayme L. Brooks
|
|
45
|
%
|
|
44,550
|
|
|
113,603
|
|
|
167,063
|
|
Richard B. Lewis
|
|
45
|
%
|
|
39,870
|
|
|
101,669
|
|
|
149,513
|
|
Edward I. Reich(2)
|
|
—
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
Potential payouts are approximate because of interpolation.
|
|
(2)
|
|
Edward I. Reich, the Company’s former Executive Vice President and Chief Financial Officer, left the Company to pursue other opportunities effective April 10, 2015 and was not eligible to receive awards under the Executive Plan for the 2016 Fiscal Year.
|
The Compensation Committee met in June 2016 to determine if the performance objectives were met under the terms of the 2016 Fiscal Year awards and determined that we had achieved revenue of $85.2 million and cash of $16.7 million. Both performance objectives were below the threshold level. As a result, cash incentive payments pursuant to the Executive Plan were not authorized.
Apollo Program.
In the 2016 Fiscal Year, the Compensation Committee approved the Apollo Program to incentivize continued efficiency, reliability, power and noise improvements with respect to the Company’s 200 kilowatt and 1000 kilowatt microturbines. Target awards under the Apollo Program were based on ten specific milestones that were weighted equally, with 50% of the award opportunity payable in July 2015 and 50% of the award opportunity payable in December 2015.
The Compensation Committee met in July 2015 and determined that 95% of the Apollo Program’s July 2015 performance goals were met and approved awards to the Named Executive Officers as follows:
Mr. Jamison received a cash award of $46,312; Mr. Crouse received a cash award of $26,600; Ms. Brooks received a cash award of $23,513; and Mr. Lewis received a cash award of $21,043.
The Compensation Committee met in December 2015 and determined that 91% of the Apollo Program’s December 2015 performance goals were met. In light of the Company’s cash position, the Compensation Committee granted RSU awards in lieu of cash to the Named Executive Officers as follows: Mr. Jamison received 37,280 RSUs; Mr. Crouse received 21,412 RSUs; Ms. Brooks received 18,927 RSUs; and Mr. Lewis received 16,939 RSUs.
Long Term Equity Incentives
. During the 2016 Fiscal Year, the Compensation Committee granted long term equity incentives under the Incentive Plan as follows: Mr. Crouse received 2,000 RSUs and options to purchase 7,180 shares of Common Stock; Ms. Brooks received 2,000 RSUs and options to purchase 5,385 shares of Common Stock; and Mr. Lewis received 1,250 RSUs and options to purchase 4,485 shares of Common Stock. All options granted during the 2016 Fiscal Year to Named Executive Officers vest 25% on the first anniversary of the grant date and monthly thereafter on a pro rata basis over the next 36 months and expire ten years from the grant date. The RSUs vest in increments of 25% on each anniversary of the date of grant.
During the quarter ended March 31, 2016, Messrs. Jamison, Crouse and Lewis and Ms.Brooks voluntarily agreed to cancel and terminate a total of 136,348 unvested stock options that had been previously issued to them.
Stockholder Engagement; 2017 Fiscal Year Compensation
The Compensation Committee values the perspectives and concerns of our stockholders regarding executive compensation. The Compensation Committee has in the past and intends to continue to maintain in the future an open dialogue with stockholders to foster greater communication and transparency.
At the 2015 Annual Meeting, we sought an advisory vote on our executive compensation. This proposal, commonly known as the “say
‑on
‑pay” proposal, received more votes in favor than against, with 63% of votes cast approving the proposal. Following the 2015 Annual Meeting, the Compensation Committee reviewed the results of the say
‑on
‑pay vote and the feedback received from stockholders to assess whether any actions needed to be taken in response.
The Compensation Committee believes that the Company’s compensation program should encourage and reward outstanding financial and strategic performance. The compensation decisions we made with respect to the 2017 Fiscal Year, all of which we believe are reflective of our ongoing pay
‑for
‑performance philosophy, are outlined below.
Base Salary.
The base salaries of the Named Executive Officers for the 2017 Fiscal Year remain unchanged from the 2016 Fiscal Year.
Performance-Based Annual Incentives.
As of the date of this Proxy Statement, no formal executive annual incentive plan has been established for the 2017 Fiscal Year in order to allow the Company to focus on its strategic plan.
Long Term Equity Incentives.
As of the date of this Proxy Statement, no long-term equity incentive awards have been granted for the 2017 Fiscal Year.
Stock Ownership Guidelines
In 2012 the Board of Directors established stock ownership guidelines applicable to senior executives (including the Named Executive Officers) and non
‑employee directors in order to further align the interests of executives and directors with the interests of stockholders. These ownership guidelines provide that the subject persons should own Common Stock equal in value to a multiple of their annual salary (or, in the case of directors, their annual retainer) as follows:
|
|
|
|
Chief Executive Officer
|
|
4 times annual base salary
|
|
Executive Vice Presidents
|
|
2 times annual base salary
|
|
Senior Vice Presidents and other Named Executive Officers
|
|
1 times annual base salary
|
|
Non
‑employee members of the Board of Directors
|
|
4 times annual retainer
|
|
Covered persons will be expected to hold the specified amount of stock within five years from the later of June 6, 2012 or the date they become subject to the ownership guidelines. The Board of Directors considered implementing a stock retention or holding period requirement in connection with the ownership guidelines, but decided that such requirements were not necessary at this early stage of the program, given that subject persons would need to accumulate stock in compliance with the new guidelines. The Board of Directors will continue to monitor the need for stock retention or holding period requirements.
Role of Compensation Consultant
The Compensation Committee focuses on attracting, retaining and motivating a highly qualified group of executive officers. They believe that doing so is in the best interests of the Company, its stockholders and other constituencies. For the 2016 Fiscal Year, the Compensation Committee engaged Willis Towers Watson as its consultant in determining appropriate compensation for our executive officers, including our Named Executive Officers. As a part of its consulting services, the Compensation Consultant collects and analyzes competitive pay data, trends and market practices.
In setting compensation, the Compensation Committee reviews information from its Compensation Consultant regarding comparative market data, including comprehensive analyses of total compensation and compensation components based on published survey data sized to our annual revenue.
The Compensation Committee has determined that the competitive analysis provided by its Compensation Consultant includes a sufficiently large and relevant group of companies for purposes of comparing compensation data. The Compensation Committee considers all relevant information from compensation surveys and does not exclude data in determining compensation for our executive officers. The compensation reports provided by the Compensation Consultant include detailed information regarding base salary, target cash incentive, target total cash, actual total cash, estimated value of long
‑term incentive compensation and target total direct compensation for individuals deemed to be comparable to our executive officers in the peer group. The Compensation Committee uses this information to assess the levels of compensation that are appropriate for our executive officers, including the Named Executive Officers.
The Compensation Committee has determined that the Compensation Consultant’s work as our compensation consultant in the 2016 Fiscal Year did not raise any conflicts of interest.
Risk Assessment
To determine the level of risk arising from our compensation policies and practices, the Company conducted an executive compensation risk assessment during the 2016 Fiscal Year and at the start of the 2017 Fiscal Year under the oversight of the Compensation Committee. This assessment examined the Company’s compensation programs. Several areas of potential compensation risk were reviewed, including affordability of compensation packages; Board of Directors and Compensation Committee practices; compensation philosophy; the design of our compensation programs; elements of compensation and retention exposure. The Compensation Committee noted that the Company’s compensation programs contain many provisions designed to mitigate risk and protect stockholder interests, including, but not limited to, the following:
|
·
|
|
Long
‑term incentive awards are in the form of stock options and restricted stock units with no payout holdbacks or payment in cash in lieu of stock.
|
|
·
|
|
Under the performance
‑based cash incentive program discussed above, payments to the Named Executive Officers are predicated on achieving threshold performance on two predetermined metrics and are limited to a maximum total payout.
|
|
·
|
|
The performance
‑based cash incentive program for all executives is based on strategic financial and operational business objectives that are aligned with the Company’s long
‑term strategy and stockholder interests.
|
|
·
|
|
No employees are subject to an employment agreement other than Mr. Jamison’s change of control agreement.
|
|
·
|
|
The Compensation Committee reviews information from other publicly
‑traded technology and manufacturing industry companies of similar size and reviews the composition of the peer group annually.
|
|
·
|
|
Payments to Named Executive Officers may be subject to the Company’s clawback policy, which is described under the heading “Clawbacks” below.
|
|
·
|
|
Stock ownership guidelines are in place for senior executives (including the Named Executive Officers) and members of the Board of Directors in order to further align their interests with those of stockholders.
|
|
·
|
|
The provisions of the Company’s insider trading policy with respect to hedging transactions discussed below.
|
Based upon the assessment, the Compensation Committee concluded that the risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.
Clawbacks
Payments to our executive officers may be subject to clawback if it is determined after the payment of a cash incentive pursuant to an award that individual or Company performance upon which the payment was based was fraudulently represented, or was based on the Company’s non-compliance with applicable laws or listing standards or based on any other circumstances giving rise to a legal requirement that compensation be returned to the Company. Additionally, the Company has reserved the right to require the return of any award under the PRSU Program if it is determined after the payment of such award that the individual or department performance upon which the award was based was fraudulently represented. The Compensation Committee may reconsider these clawback policies or implement other similar clawback policies in connection with future rule making under the Dodd
‑Frank Wall Street Reform and Consumer Protection Act of 2010.
Anti
‑Hedging Policy
The Company’s insider trading policy directs officers and directors of the Company to obtain clearance from the Company’s Compliance Officer prior to engaging in short sales of the Company’s Common Stock prohibited by Section 16(c) of the Exchange Act, i.e., sales of shares which the insider does not own at the time of sale, or sales of Common Stock against which the insider does not deliver the shares within 20 days after the sale involving the Company’s securities, including the Company’s Common Stock, options or warrants. The insider trading policy further directs officers, directors, and employees designated by the Company’s executive officers as more likely to have access to material, nonpublic information (and their family members, including spouses, minor children, or any other family members living in the same household) not to directly or indirectly participate in transactions involving trading activities which by their aggressive or speculative nature may give rise to an appearance of impropriety (such as the purchase of put or call options or the writing of such options).
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code generally limits the corporate tax deduction for compensation in excess of $1 million that is paid to our Named Executive Officers. Qualifying performance
‑based compensation, however, is fully deductible without regard to the general Section 162(m) limits if certain requirements are met. Section 162(m) also permits full deductibility for certain employee benefit plan contributions, sales commissions and other payments. The Compensation Committee intends that our incentive compensation programs qualify for an exception to the limitations of Section 162(m) whenever possible so that we may fully deduct compensation paid to our Named Executive Officers under these programs. Cash incentive and stock option awards generally are granted under the Executive Plan or the Incentive Plan so that they may be fully deductible as “performance
‑based compensation” under Section 162(m). Payments to Named Executive Officers are limited under the Executive Plan to an aggregate $4 million under any award.
We have made equity incentive awards to certain of our Named Executive Officers as an inducement for them to commence employment with the Company that will not qualify as performance
‑based compensation under Section 162(m). If amounts realized under these awards exceed the Section 162(m) limitation, they may not be deductible from the Company’s taxable income, if any, at that time. Payments under these equity incentives are generally conditioned on long
‑term increases in stockholder value. In making these equity incentive awards, the Compensation Committee determined that the need to attract capable individuals to the Company through a meaningful inducement outweighed the potential inability to deduct a portion of the compensation for federal income tax purposes.
Compliance
The responsibilities and authority of the Compensation Committee are set forth in its charter, which is intended to set forth best practices for compensation. The members of the Compensation Committee are all “independent directors,” as defined under Nasdaq rules. Change of control equity incentive awards are granted by the Compensation Committee in a manner that is intended to satisfy SEC Rule 16b
‑3 under the Exchange Act. As further discussed below, incentive compensation is awarded in a manner that is intended to qualify the payments as “performance
‑based compensation” within the meaning of Section 162(m) of the Code.
Conclusion
The Compensation Committee believes that its decisions with respect to compensation paid to the Named Executive Officers for the 2016 Fiscal Year and the prospective compensation structure for the 2017 Fiscal Year and beyond are consistent with the goals outlined at the beginning of this Compensation Discussion and Analysis.
EXECUTIVE OFFICERS OF THE COMPANY
The following list identifies the name, age and position(s) of the executive officers of the Company:
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Darren R. Jamison
|
|
50
|
|
President & Chief Executive Officer
|
|
Jayme L. Brooks
|
|
45
|
|
Chief Financial Officer & Chief Accounting Officer
|
|
James D. Crouse
|
|
52
|
|
Executive Vice President of Sales & Marketing
|
|
Richard B. Lewis
|
|
58
|
|
Vice President of Operations
|
|
The term of each executive officer runs until his or her successor is elected and qualified, or until his or her earlier death, resignation or removal. The following is a biographical summary of the experience of the executive officers of the Company who are not members of the Company’s Board of Directors:
Jayme L. Brooks.
Ms. Brooks has served as our Chief Financial Officer and Chief Accounting Officer since April 2015. She served as Vice President of Finance and Chief Accounting Officer from November 2008 to April 2015. She previously served as Vice President of Financial Planning and Analysis, Interim Chief Accounting Officer and Director of Financial Reporting of the Company. Previously, she served as Vice President and Controller of Computer Patent Annuities North America LLC, a company providing solutions for intellectual property management needs, technology renewal services, software tools and portfolio management. Ms. Brooks holds a Bachelor of Arts degree in Business Economics from the University of California at Santa Barbara and a Master of Business Administration degree from the Fuqua School of Business at Duke University. Ms. Brooks is a Certified Public Accountant licensed in California and a member of Financial Executives International.
James D. Crouse.
Mr. Crouse joined us in February 2007 as Executive Vice President of Sales & Marketing. He leads Capstone’s Sales, Marketing and Product Development efforts globally. Since joining Capstone, Mr. Crouse has helped us bring several new clean energy and renewable microturbine products to market. Mr. Crouse is a member of the board of the World Alliance for Decentralized Energy (WADE), a business accelerator associated with the worldwide development of high efficiency cogeneration, onsite power and decentralized renewable energy systems that deliver substantial economic and environmental benefits. He served as the Chairman of the Board of WADE. WADE’s membership includes more than 200 corporate leaders in the decentralized
‑energy industry and national cogeneration and decentralized energy associations worldwide. In December 2010, U.S. Secretary of Commerce Gary Locke named Mr. Crouse to the Renewable Energy and Energy Efficiency Advisory Committee, a national advisory committee of leading U.S. renewable energy and energy efficiency companies. Mr. Crouse was re
‑appointed in 2012 and is one of 37 members on this committee which will advise the Secretary of Commerce on the development and implementation of programs and policies to help expand the global competitiveness of the U.S. renewable energy and energy efficiency industries. Mr. Crouse has testified before Congress on a number of issues. He testified on Capstone’s innovative technology and opportunities for combined heat and power in the energy efficiency sector. Prior to joining Capstone, Mr. Crouse was President of Navitas Consulting, where he specialized in assisting client companies with growing their businesses. Prior to his employment with Navitas Consulting, Mr. Crouse was General Manager of the Gas Engine Group for Valley Power Systems, the GE Jenbacher distributor. Additionally, Mr. Crouse served as President of JST Energy and Vice President of Crown Engineering & Construction. Mr. Crouse is a member of the California Association of Building Energy Consultants, and he is a licensed General Engineering Contractor “A” in California.
Richard B. Lewis.
Mr. Lewis has served as our Vice President, Operations since May 2014. Mr. Lewis served as Vice President of Operations of Meggitt Safety Systems, Inc. (“MSSI”), a producer of aircraft and industrial fire protection and safety systems, from 2012 to 2014. Prior to his employment with MSSI, Mr. Lewis was an independent global supply chain consultant from 2009 to 2012. Prior to his time as a consultant, Mr. Lewis spent 12 years with AeroVironment, Inc. (“AV”), a publicly
‑traded designer and manufacturer of energy systems, electric vehicle systems and unmanned aerial vehicles. Mr. Lewis held positions of increasing responsibility with AV, culminating with his appointment as Vice President of Global Supply Chain and Procurement. Mr. Lewis holds a Bachelor of Arts in Economics from the University of Massachusetts.
EXECUTIVE COMPENSATION
Summary Compensation Table
The table below sets forth the compensation of the Company’s principal executive officer, principal financial officer and the three other most highly compensated executive officers during the 2016 Fiscal Year. These individuals are referred to in this Proxy Statement as the “Named Executive Officers.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
All Other
|
|
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)(4)
|
|
($)
|
|
Darren R. Jamison
|
|
2016
|
|
$
|
487,200
|
|
$
|
46,312
|
|
$
|
108,364
|
|
$
|
52,600
|
|
$
|
—
|
|
$
|
58,262
|
(5)
|
$
|
752,738
|
|
President & Chief Executive
|
|
2015
|
|
|
464,000
|
|
|
—
|
|
|
140,000
|
|
|
141,604
|
|
|
—
|
|
|
5,626
|
|
|
751,230
|
|
Officer
|
|
2014
|
|
|
464,000
|
|
|
—
|
|
|
153,336
|
|
|
352,872
|
|
|
19,843
|
|
|
5,856
|
|
|
995,907
|
|
Jayme L. Brooks
|
|
2016
|
|
|
247,500
|
|
|
23,513
|
|
|
48,123
|
|
|
36,833
|
|
|
—
|
|
|
25,542
|
(5)
|
|
381,511
|
|
Chief Financial Officer &
|
|
2015
|
|
|
225,000
|
|
|
—
|
|
|
35,000
|
|
|
82,587
|
|
|
—
|
|
|
4,923
|
|
|
347,510
|
|
Chief Accounting Officer
|
|
2014
|
|
|
220,000
|
|
|
—
|
|
|
20,442
|
|
|
47,073
|
|
|
2,822
|
|
|
4,857
|
|
|
295,194
|
|
James D. Crouse
|
|
2016
|
|
|
280,000
|
|
|
26,600
|
|
|
51,080
|
|
|
49,111
|
|
|
—
|
|
|
17,560
|
(5)
|
|
424,351
|
|
Executive Vice President of
|
|
2015
|
|
|
250,000
|
|
|
—
|
|
|
56,000
|
|
|
132,213
|
|
|
—
|
|
|
64,280
|
(5)
|
|
502,493
|
|
Sales & Marketing
|
|
2014
|
|
|
245,000
|
|
|
—
|
|
|
61,336
|
|
|
141,161
|
|
|
55,725
|
|
|
69,170
|
(5)
|
|
572,392
|
|
Richard B. Lewis(6)
|
|
2016
|
|
|
221,450
|
|
|
21,043
|
|
|
36,157
|
|
|
30,677
|
|
|
—
|
|
|
7,548
|
(5)
|
|
316,875
|
|
Vice President of Operations
|
|
2015
|
|
|
215,000
|
|
|
—
|
|
|
95,000
|
|
|
250,325
|
|
|
—
|
|
|
4,176
|
(5)
|
|
564,501
|
|
Edward I. Reich(7)
|
|
2016
|
|
|
8,677
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
317,159
|
(8)
|
|
325,836
|
|
Former Executive Vice
|
|
2015
|
|
|
282,000
|
|
|
—
|
|
|
56,000
|
|
|
132,213
|
|
|
—
|
|
|
3,339
|
|
|
473,552
|
|
President & Chief Financial Officer
|
|
2014
|
|
|
275,000
|
|
|
—
|
|
|
61,336
|
|
|
141,161
|
|
|
6,468
|
|
|
1,908
|
|
|
485,873
|
|
|
(1)
|
|
This column represents the aggregate grant date fair value of RSUs granted in the years presented in accordance with SEC rules. For RSUs, fair value is calculated using the closing price of Capstone’s stock on the date of grant. For a discussion of the valuation assumptions, see Note 9 to the Company’s financial statements included in the Company’s Annual Report on Form 10
‑K for the 2016 Fiscal Year. The amounts shown exclude any estimate of future forfeitures and reflect the effect of any actual forfeitures.
|
|
(2)
|
|
This column represents the aggregate grant date fair value of stock options granted in the years presented in accordance with SEC rules. For a discussion of valuation assumptions, see Note 9 to the Company’s financial statements included in the Company’s Annual Report on Form 10
‑K for the 2016 Fiscal Year. The amounts shown exclude any estimate of future forfeitures and reflect the effect of any actual forfeitures.
|
During the quarter ended March 31, 2016, Messrs. Jamison, Crouse and Lewis and Ms.Brooks voluntarily agreed to cancel and terminate a total of 136,348 unvested stock options that had been previously issued to them.
|
(3)
|
|
This column represents bonuses paid pursuant to the Executive Plan.
|
|
(4)
|
|
This column represents Company contributions to the 401(k) plan and premiums paid by the Company for life insurance.
|
|
(5)
|
|
Includes cash disbursement in lieu of fringe benefit accruals.
|
|
(6)
|
|
Mr. Lewis was not an employee of the Company prior to the 2015 Fiscal Year.
|
|
(7)
|
|
Mr. Reich left the Company to pursue other opportunities effective April 10, 2015.
|
|
(8)
|
|
Includes $305,277 of severance payments made to Mr. Reich in connection with this April 10, 2015 separation from the Company.
|
Grants of Plan
‑Based Awards
Information about each grant of a plan
‑based award made to a Named Executive Officer during the 2016 Fiscal Year is set forth in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payouts
|
|
Stock
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under
|
|
Awards:
|
|
Awards:
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Estimated Possible Payouts
|
|
Equity
|
|
Number of
|
|
Number of
|
|
Exercise or
|
|
Fair Value
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
Incentive
|
|
Shares of
|
|
Securities
|
|
Base Price
|
|
of Stock
|
|
|
|
|
|
Plan Awards(1)
|
|
Plan
|
|
Stock or
|
|
Underlying
|
|
of Option
|
|
and Option
|
|
Name
|
|
Grant Date
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Awards(2)
|
|
Units(3)*
|
|
Options(4)*
|
|
Awards(5)
|
|
Awards(6)
|
|
Darren R. Jamison
|
|
N/A
|
|
$
|
—
|
|
$
|
487,500
|
|
$
|
731,250
|
|
|
|
—
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
04/12/2015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
7,690
|
|
|
12.80
|
|
|
52,600
|
|
|
|
04/12/2015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
5,000
|
|
—
|
|
|
—
|
|
|
64,000
|
|
|
|
04/12/2015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
10,000
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
12/18/2015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
37,280
|
|
—
|
|
|
—
|
|
|
44,364
|
|
Jayme L. Brooks
|
|
N/A
|
|
|
—
|
|
|
113,603
|
|
|
167,063
|
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
04/12/2015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
5,385
|
|
|
12.80
|
|
|
36,833
|
|
|
|
04/12/2015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
2,000
|
|
—
|
|
|
—
|
|
|
25,600
|
|
|
|
12/18/2015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
18,927
|
|
—
|
|
|
—
|
|
|
22,523
|
|
James D. Crouse
|
|
N/A
|
|
|
—
|
|
|
157,080
|
|
|
231,000
|
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
04/12/2015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
7,180
|
|
|
12.80
|
|
|
49,111
|
|
|
|
04/12/2015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
2,000
|
|
—
|
|
|
—
|
|
|
25,600
|
|
|
|
12/18/2015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
21,412
|
|
—
|
|
|
—
|
|
|
25,480
|
|
Richard B. Lewis
|
|
N/A
|
|
|
—
|
|
|
101,669
|
|
|
149,513
|
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
04/12/2015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
4,485
|
|
|
12.80
|
|
|
30,677
|
|
|
|
04/12/2015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
1,250
|
|
—
|
|
|
—
|
|
|
16,000
|
|
|
|
12/18/2015
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
16,939
|
|
—
|
|
|
—
|
|
|
20,157
|
|
Edward I. Reich(7)
|
|
N/A
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
*
All share totals have been adjusted to reflect the 1-for-20 reverse stock split of the Company’s Common Stock that was effective as of 4:30 p.m. Eastern Standard Time on November 6, 2015.
|
(1)
|
|
The estimated payouts shown reflect cash bonus awards granted under the Executive Plan, where receipt is contingent upon the achievement of specified performance goals. No amounts are payable if the minimum threshold performance levels are not achieved. See the section above entitled “COMPENSATION DISCUSSION AND ANALYSIS—Components of Compensation—Annual Performance
‑Based Cash Incentives” for more information about the awards.
|
|
(2)
|
|
Amount represents the potential payout under the PRSUs granted in 2015. Performance goals under the PSUs will be measured as of December 31, 2016. The vesting schedule of the PRSU award pursuant to which these units were issued for the first performance measurement period is 50% on March 31, 2017 and 50% on March 31, 2018. The second performance measurement period is 50% on March 31, 2018 and 50% on March 31, 2019. The number of units shown reflects the number of units that would vest based on achieving threshold performance goals. Based on Company projections, it is unlikely that the performance criteria will be met for the applicable PRSU performance measurement period.
|
|
(3)
|
|
Reflects shares of Common Stock underlying restricted stock units granted under the Incentive Plan, which vest in four equal installments on each anniversary of the grant date, conditioned on continued service to the Company as set forth in the Incentive Plan.
|
The
Compensation
Committee met in December 2015 and determined that 91% of the Apollo Program’s December 2015 performance goals were met. In light of the Company’s cash position, the Compensation Committee granted RSU awards in lieu of cash to the Named Executive Officers as follows: Mr. Jamison received 37,280 RSUs; Mr. Crouse received 21,412 RSUs; Ms. Brooks received 18,927 RSUs; and Mr. Lewis received 16,939 RSUs. These RSU awards became fully vested as of the date of grant.
|
(4)
|
|
Reflects shares of Common Stock underlying stock options granted under the Incentive Plan, which vested 25% on April 12, 2016 (the first anniversary of the Compensation Committee’s approval of the grant) and monthly thereafter on a pro rata basis over the next 36 months, conditioned on continued service to the Company as set forth in the Incentive Plan.
|
During the quarter ended March 31, 2016, Messrs. Jamison, Crouse and Lewis and Ms. Brooks voluntarily agreed to cancel and terminate a total of 136,348 unvested stock options that had been previously issued to them.
|
(5)
|
|
Reflects the fair market value of a share of Common Stock as the closing sales price of the Common Stock on the Nasdaq Capital Market on the date of grant.
|
|
(6)
|
|
Reflects the aggregate grant date fair value computed in accordance with ASC 718.
|
|
(7)
|
|
Mr. Reich left the Company to pursue other opportunities effective April 10, 2015.
|
Outstanding Equity Awards at Fiscal Year
‑End
Information about outstanding equity awards held by the Named Executive Officers as of the end of the 2016 Fiscal Year is set forth in the table below. The number of securities and values in this table and throughout this Proxy Statement have been adjusted for the reverse stock split effective November 6, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Market Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares or
|
|
of Shares or
|
|
|
|
Number of Securities
|
|
Option
|
|
Option
|
|
Units of Stock
|
|
Units of Stock
|
|
|
|
Underlying Unexercised Options
|
|
Exercise
|
|
Expiration
|
|
That Have
|
|
That Have
|
|
Name
|
|
Exercisable(1)
|
|
Unexercisable(1)
|
|
Price
|
|
Date(2)
|
|
Not Vested(3)
|
|
Not Vested(3)
|
|
Darren R. Jamison
|
|
3,525
|
|
—
|
|
$
|
28.00
|
|
05/14/2024
|
|
5,000
|
(4)
|
$
|
8,000
|
|
|
|
21,482
|
|
—
|
|
|
18.40
|
|
04/09/2023
|
|
3,750
|
(5)
|
|
6,000
|
|
|
|
27,344
|
|
—
|
|
|
20.20
|
|
08/30/2022
|
|
4,166
|
(6)
|
|
6,666
|
|
|
|
7,500
|
|
—
|
|
|
32.80
|
|
06/08/2021
|
|
1,823
|
(7)
|
|
2,917
|
|
|
|
18,000
|
|
—
|
|
|
21.00
|
|
06/09/2020
|
|
—
|
|
|
—
|
|
|
|
32,500
|
|
—
|
|
|
16.00
|
|
04/08/2019
|
|
—
|
|
|
—
|
|
|
|
17,500
|
|
—
|
|
|
17.40
|
|
12/10/2018
|
|
—
|
|
|
—
|
|
|
|
100,000
|
|
—
|
|
|
25.40
|
|
12/18/2016
|
|
—
|
|
|
—
|
|
Jayme L. Brooks
|
|
2,055
|
|
—
|
|
|
28.00
|
|
05/14/2024
|
|
2,000
|
(4)
|
|
3,200
|
|
|
|
2,865
|
|
—
|
|
|
18.40
|
|
04/09/2023
|
|
937
|
(5)
|
|
1,499
|
|
|
|
3,907
|
|
—
|
|
|
20.20
|
|
08/30/2022
|
|
555
|
(6)
|
|
888
|
|
|
|
2,165
|
|
—
|
|
|
34.00
|
|
06/13/2021
|
|
260
|
(7)
|
|
416
|
|
|
|
4,330
|
|
—
|
|
|
21.00
|
|
06/09/2020
|
|
—
|
|
|
—
|
|
|
|
6,250
|
|
—
|
|
|
17.00
|
|
11/25/2018
|
|
—
|
|
|
—
|
|
James D. Crouse
|
|
3,291
|
|
—
|
|
|
28.00
|
|
05/14/2024
|
|
2,000
|
(4)
|
|
3,200
|
|
|
|
11,719
|
|
—
|
|
|
20.20
|
|
04/09/2023
|
|
1,500
|
(5)
|
|
2,400
|
|
|
|
8,594
|
|
—
|
|
|
18.40
|
|
08/30/2022
|
|
1,666
|
(6)
|
|
2,666
|
|
|
|
3,750
|
|
—
|
|
|
32.80
|
|
06/08/2021
|
|
781
|
(7)
|
|
1,250
|
|
|
|
3,750
|
|
—
|
|
|
21.00
|
|
06/09/2020
|
|
—
|
|
|
—
|
|
|
|
3,750
|
|
—
|
|
|
17.40
|
|
12/10/2018
|
|
—
|
|
|
—
|
|
|
|
42,500
|
|
—
|
|
|
17.20
|
|
02/05/2017
|
|
—
|
|
|
—
|
|
Richard B. Lewis
|
|
5,729
|
|
—
|
|
|
30.40
|
|
05/12/2024
|
|
1,250
|
(4)
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
2,343
|
(8)
|
|
3,749
|
|
Edward I. Reich
|
|
7,180
|
|
—
|
|
|
28.00
|
|
05/14/2024
|
|
—
|
|
|
—
|
|
|
|
11,785
|
|
—
|
|
|
18.40
|
|
04/09/2023
|
|
1,500
|
(5)
|
|
2,400
|
|
|
|
12,500
|
|
—
|
|
|
20.20
|
|
08/30/2022
|
|
1,666
|
(6)
|
|
2,666
|
|
|
|
3,750
|
|
—
|
|
|
32.80
|
|
06/08/2021
|
|
781
|
(7)
|
|
1,250
|
|
|
|
7,500
|
|
—
|
|
|
21.00
|
|
06/09/2020
|
|
—
|
|
|
—
|
|
|
|
7,500
|
|
—
|
|
|
17.40
|
|
12/10/2018
|
|
—
|
|
|
—
|
|
|
|
37,500
|
|
—
|
|
|
30.40
|
|
01/15/2018
|
|
—
|
|
|
—
|
|
|
(1)
|
|
Options vest 25% on the first anniversary of the grant date and monthly thereafter on a pro rata basis over the next 36 months, conditioned on continued service to the Company. During the quarter ended March 31, 2016, Messrs. Jamison, Crouse and Lewis and Ms. Brooks voluntarily agreed to cancel and terminate a total of 136,348 unvested stock options that had been previously issued to them.
|
|
(2)
|
|
All options terminate, if not sooner, at the expiration of ten years following the grant date.
|
|
(3)
|
|
Based on the closing sales price of our Common Stock of $1.60 on the Nasdaq Capital Market on March 31, 2016.
|
|
(4)
|
|
Restricted stock units vest in four equal installments on each anniversary of April 12, 2015, conditioned on continued service to the Company.
|
|
(5)
|
|
Restricted stock units vest in four equal installments on each anniversary of May 14, 2014, conditioned on continued service to the Company.
|
|
(6)
|
|
Restricted stock units vest in four equal installments on each anniversary of April 9, 2013, conditioned on continued service to the Company.
|
|
(7)
|
|
Restricted stock units vest in four equal installments on each anniversary of June 6, 2012, conditioned on continued service to the Company.
|
|
(8)
|
|
Restricted stock units vest in four equal installments on each anniversary of May 12, 2014, conditioned on continued service to the Company.
|
Option Exercises and Stock Vested
Information about the exercise of stock options and vesting of restricted stock units during the 2016 Fiscal Year for each Named Executive Officer is set forth in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares Acquired
|
|
Value Realized
|
|
Shares Acquired
|
|
Value Realized
|
|
Name
|
|
on Exercise
|
|
on Exercise
|
|
on Vesting
|
|
on Vesting
|
|
Darren R. Jamison
|
|
—
|
|
$
|
—
|
|
562
|
(1)
|
$
|
6,182
|
(1)
|
|
|
—
|
|
|
—
|
|
1,823
|
(2)
|
|
20,053
|
(2)
|
|
|
—
|
|
|
—
|
|
1,250
|
(3)
|
|
13,750
|
(3)
|
|
|
—
|
|
|
—
|
|
2,084
|
(4)
|
|
25,842
|
(4)
|
Jayme L. Brooks
|
|
—
|
|
|
—
|
|
260
|
(2)
|
|
2,860
|
(2)
|
|
|
|
|
|
|
|
313
|
(3)
|
|
3,443
|
(3)
|
|
|
|
|
|
|
|
278
|
(4)
|
|
3,447
|
(4)
|
James D. Crouse
|
|
—
|
|
|
—
|
|
187
|
(1)
|
|
2,057
|
(1)
|
|
|
—
|
|
|
—
|
|
781
|
(2)
|
|
8,591
|
(2)
|
|
|
—
|
|
|
—
|
|
500
|
(3)
|
|
5,500
|
(3)
|
|
|
|
|
|
|
|
834
|
(4)
|
|
10,342
|
(4)
|
Richard B. Lewis
|
|
—
|
|
|
—
|
|
782
|
(5)
|
|
8,602
|
(5)
|
Edward I. Reich
|
|
—
|
|
|
—
|
|
834
|
(1)
|
|
10,342
|
(1)
|
|
|
—
|
|
|
—
|
|
500
|
(2)
|
|
5,500
|
(2)
|
|
|
—
|
|
|
—
|
|
187
|
(3)
|
|
2,057
|
(3)
|
|
|
—
|
|
|
—
|
|
781
|
(4)
|
|
8,591
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
On June 8, 2015, RSUs vested and the market value of the stock was $11.00 per share.
|
|
(2)
|
|
On June 6, 2015, RSUs vested and the market value of the stock was $11.00 per share.
|
|
(3)
|
|
On May 14, 2015, RSUs vested and the market value of the stock was $11.00 per share.
|
|
(4)
|
|
On April 9, 2015, RSUs vested and the market value of the stock was $12.40 per share.
|
|
(5)
|
|
On May 12, 2015, RSUs vested and the market value of the stock was $11.00 per share.
|
Potential Payments upon Termination or Change of Control
The Company has entered into certain agreements and maintains certain plans that will require the Company to provide compensation to Named Executive Officers in the event of a termination of employment or a change of control of the Company. In the event of termination of employment that is due to death or disability, the Named Executive Officers would have received full vesting of stock options and restricted stock units, as shown in the tables below upon a change in control; any other benefits payable in those circumstances would be made under nondiscriminatory insurance programs that are generally available to all employees. The amount of compensation payable to each Named Executive Officer (other than Mr. Reich) if each situation occurred on March 31, 2016 is listed in the tables below. As disclosed above, Mr. Reich left the Company to pursue other opportunities effective April 10, 2015. The amounts shown below reflect actual severance payments that were made under Mr. Reich’s separation agreement in accordance with the Company’s regular payroll practices.
Mr. Jamison
|
|
|
|
|
|
|
|
|
|
Involuntary Termination
|
|
Involuntary Termination
|
|
|
|
|
|
|
|
Related to
|
|
Executive Benefits and Payments upon Termination
|
|
without Cause
|
|
Change of Control
|
|
Cash Payments
|
|
$
|
487,200
|
(1)
|
$
|
730,800
|
(2)
|
Stock Options (unvested)
|
|
|
—
|
|
|
—
|
(3)
|
Restricted Stock Units (unvested)
|
|
|
—
|
|
|
23,582
|
(4)
|
Insurance Benefits
|
|
|
13,403
|
(5)
|
|
26,807
|
(6)
|
Total
|
|
$
|
500,603
|
|
$
|
781,189
|
|
|
(1)
|
|
Reflects a severance payment of Mr. Jamison’s annual base salary as of March 31, 2016 payable over a period of 12 months after termination, in accordance with a written agreement with Mr. Jamison dated December 18, 2006. This agreement was amended and restated effective June 14, 2012 to extend its term until June 14, 2015 and further amended effective June 14, 2015 to extend its term until June 14, 2018.
|
|
(2)
|
|
Reflects a lump sum severance payment equal to 18 months of Mr. Jamison’s base salary as of March 31, 2016, in accordance with a written agreement with Mr. Jamison dated December 18, 2006. This agreement was amended and restated effective June 14, 2012 to extend its term until June 14, 2015 and further amended effective June 14, 2015 to extend its term until June 14, 2018.
|
|
(3)
|
|
Reflects the value of the shares of Common Stock underlying outstanding, unvested stock options that become exercisable following a change in control, based on the market value of $1.60 per share on March 31, 2016, assuming exercise prices reported on the table “Outstanding Equity Awards at Fiscal Year
‑End.” Full vesting is triggered if the executive is involuntarily terminated (other than for misconduct) or resigns as a result of a reduction in responsibility or compensation or relocation within 12 months of a change of control of the Company. Full vesting is also triggered if the acquirer of the Company does not assume the awards issued under the Incentive Plan.
|
|
(4)
|
|
Reflects the value of the shares of Common Stock underlying outstanding, unvested restricted stock units that become vested following a change in control, based on the market value of $1.60 per share on March 31, 2016. Full vesting is triggered if the executive is involuntarily terminated (other than for misconduct) or resigns as a result of a reduction in responsibility or compensation or relocation within 12 months of a change of control of the Company. Full vesting is also triggered if the acquirer of the Company does not assume the awards issued under the Incentive Plan.
|
|
(5)
|
|
Reflects payment of health benefit premiums to be paid for a period of six months.
|
|
(6)
|
|
Reflects payment of health benefit premiums to be paid for a period of 12 months.
|
Ms. Brooks
|
|
|
|
|
|
|
|
|
|
Involuntary Termination
|
|
Involuntary Termination
|
|
|
|
|
|
|
|
Related to
|
|
Executive Benefits and Payments upon Termination
|
|
without Cause
|
|
Change of Control
|
|
Cash Payments
|
|
$
|
123,750
|
(1)
|
$
|
247,500
|
(2)
|
Stock Options (unvested)
|
|
|
—
|
|
|
—
|
|
Restricted Stock Units (unvested)
|
|
|
—
|
|
|
6,003
|
(3)
|
Insurance Benefits
|
|
|
13,243
|
(4)
|
|
26,486
|
(5)
|
Total
|
|
$
|
136,993
|
|
$
|
279,989
|
|
Mr. Crouse
|
|
|
|
|
|
|
|
|
|
Involuntary Termination
|
|
Involuntary Termination
|
|
|
|
|
|
|
|
Related to
|
|
Executive Benefits and Payments upon Termination
|
|
without Cause
|
|
Change of Control
|
|
Cash Payments
|
|
$
|
140,000
|
(1)
|
$
|
280,000
|
(2)
|
Stock Options (unvested)
|
|
|
—
|
|
|
—
|
|
Restricted Stock Units (unvested)
|
|
|
—
|
|
|
9,515
|
(3)
|
Insurance Benefits
|
|
|
13,259
|
(4)
|
|
26,518
|
(5)
|
Total
|
|
$
|
153,259
|
|
$
|
316,033
|
|
Mr. Lewis
|
|
|
|
|
|
|
|
|
|
Involuntary Termination
|
|
Involuntary Termination
|
|
|
|
|
|
|
|
Related to
|
|
Executive Benefits and Payments upon Termination
|
|
without Cause
|
|
Change of Control
|
|
Cash Payments
|
|
$
|
110,725
|
(1)
|
$
|
221,450
|
(2)
|
Stock Options (unvested)
|
|
|
—
|
|
|
—
|
|
Restricted Stock Units (unvested)
|
|
|
—
|
|
|
5,749
|
(3)
|
Insurance Benefits
|
|
|
8,109
|
(4)
|
|
16,218
|
(5)
|
Total
|
|
$
|
118,834
|
|
$
|
243,417
|
|
|
(1)
|
|
Reflects a severance payment of six months of the executive’s base salary as of March 31, 2016 under our Severance Plan (as defined below).
|
|
(2)
|
|
Reflects a lump sum severance payment equal to 12 months of the executive’s annual base salary plus cash incentive compensation for the year in which the effective date of the change in control occurs under our Change of Control Plan (as defined below).
|
|
(3)
|
|
Reflects the value of the shares of Common Stock underlying outstanding, unvested restricted stock units that become vested following a change in control, based on the market value of $1.60 per share on March 31, 2016. Full vesting is triggered if the executive is involuntarily terminated (other than for misconduct) or resigns as a result of a reduction in responsibility or compensation or relocation within 12 months of a change of control of the Company. Full vesting is also triggered if the acquirer of the Company does not assume the awards issued under the Incentive Plan.
|
|
(4)
|
|
Reflects payment of health benefit premiums to be paid for a period of six months.
|
|
(5)
|
|
Reflects payment of health benefit premiums to be paid for a period of 12 months.
|
Mr. Reich
|
|
|
|
|
|
|
|
|
|
|
|
April 10, 2015
|
|
Executive Benefits and Payments under Separation Agreement
|
|
Separation
|
|
Cash Payments
|
|
$
|
285,000
|
|
Insurance and Outplacement Benefits
|
|
|
20,277
|
|
Total
|
|
$
|
305,277
|
|
Employment Contracts, Termination of Employment and Change of Control Arrangements
The Board of Directors adopted the Change of Control Severance Plan (the “Change of Control Plan”) in April 2002. The Change of Control Plan is applicable to each member of management designated by the Board of Directors, including the Named Executive Officers. In the event that a participant is involuntarily terminated (other than for misconduct) or resigns as a result of a reduction in responsibility or compensation or relocation within 12 months of a change in control of the Company (as defined by the Change of Control Plan), the participant will receive a payment equal to his or her annual base salary plus the cash incentive compensation for the year in which the effective date of the change in control occurs, as well as continuation of health plan benefits for 12 months. However, Mr. Jamison is a party to an agreement that provides he will receive an enhanced payment equal to his base salary over a period of 18 months. This agreement was amended effective June 14, 2015 to extend its term until June 14, 2018.
Separate from the Change of Control Plan, the Company adopted the Capstone Turbine Corporation Severance Pay Plan (the “Severance Plan”) in May 2002. The Severance Plan provides that each member of management reporting to the Chief Executive Officer
and/or the President, including the Named Executive Officers, whose employment is involuntarily terminated without cause will receive, upon signing a release, a payment equal to such person’s salary for six months. However, Mr. Jamison is a party to an agreement that provides he will receive an enhanced payment equal to his base salary over a period of 12 months. This agreement was amended effective June 14, 2015 to extend its term until June 14, 2018. Payments under the Severance Plan are reduced by any benefits received under the Change of Control Plan or under any other severance agreement with the Company.
The Company has entered into indemnification agreements with its officers and directors containing provisions which may require the Company, among other things, to indemnify its officers and directors against certain liabilities that may arise by reason of their status or service as officers or directors (other than liabilities arising from willful misconduct of a culpable nature) and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified.
Stock awards or options to purchase Common Stock have been issued to Named Executive Officers as inducement grants or pursuant to the Incentive Plan that become fully vested or exercisable if a participant is involuntarily terminated (other than for misconduct) or resigns as a result of a reduction in responsibility or compensation or relocation within 12 months of a change of control of the Company. Full vesting is also triggered if the acquirer of the Company does not assume the awards issued under the Incentive Plan.