UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934
Filed
by the Registrant ☑
Filed
by a Party other than the Registrant ☐
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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RBC
BEARINGS INCORPORATED
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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No
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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number of securities to which transaction applies:
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Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was determined):
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Fee
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One
Tribology Center
Oxford,
Connecticut 06478
July
24, 2020
To
our stockholders:
You
are cordially invited to attend the RBC Bearings Incorporated annual meeting of stockholders at 9:00 a.m., local time, on
Wednesday, September 9, 2020 at the offices of RBC Bearings Incorporated, Building B, 102 Willenbrock Road, One Tribology Center,
Oxford, CT 06478. The attached Notice of Annual Meeting and Proxy Statement describe all known items to be acted upon by stockholders
at the meeting.
It
is important that your shares are represented at the annual meeting, whether or not you plan to attend. To ensure your shares
will be represented, we ask that you vote your shares using the enclosed proxy form for registered stockholders or the proxy voting
instruction form for stockholders who hold shares through a broker or other nominee. If you vote by internet or telephone, it
is not necessary for you to return your proxy form or voting instruction form in the mail. Please vote your shares as soon as
possible.
If
you are a registered stockholder and plan to attend the annual meeting, you will be required to present the detachable bottom
portion of the enclosed proxy form to gain admission. If you hold shares through a broker or other nominee, you will be required
to present a current statement from that institution showing an RBC Bearings Incorporated stockholding. Please note that the document
used to gain entry to the meeting is non-transferable.
Please
vote your shares promptly and join us at the meeting.
Sincerely,
Dr.
Michael J. Hartnett
Chairman
and Chief Executive Officer
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
our stockholders:
The
2020 annual meeting of stockholders of RBC Bearings Incorporated will be held at Building B, 102 Willenbrock Road, One Tribology
Center, Oxford, CT 06478, on Wednesday, September 9, 2020, beginning at 9:00 a.m. local time. At the meeting, the holders
of the Company’s outstanding common stock will consider and vote on the following matters:
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(1)
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election
of two directors in Class III to serve a term of three years;
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(2)
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ratification
of the appointment of Ernst & Young LLP as our independent registered public accounting
firm for fiscal year 2021;
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(3)
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consideration
of a resolution regarding the stockholder advisory vote on named executive officer compensation;
and
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(4)
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any
other matter that may properly come before the meeting or any adjournment or postponement
thereof.
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Stockholders
of record at the close of business on July 13, 2020 are entitled to notice of and to vote at the annual meeting and at any postponements
or adjournments thereof. The directions to the meeting can be found in Appendix A of the attached proxy statement.
YOUR
VOTE IS IMPORTANT:
Whether
or not you expect to be present at the meeting, please vote your shares by following the instructions on the enclosed proxy card
or voting instruction card. If your shares are held in the name of a bank, broker or other record holder, you may be able
to vote by telephone or internet. Their procedures should be described in the voting form they send you. Any person voting by
proxy has the power to revoke it, at any time prior to its exercise at the meeting, in accordance with the procedures described
in the attached proxy statement.
IF
YOU PLAN TO ATTEND:
Please
note that space limitations make it necessary to limit attendance to stockholders and one guest. Admission to the meeting will
be on a first-come, first-served basis. Registration will begin at 8:00 a.m., and seating will begin at 8:30 a.m. Each
stockholder may be asked to present valid picture identification, such as a driver’s license or passport. Stockholders holding
stock in brokerage accounts (i.e., “street name” holders) will also need to bring a copy of a brokerage statement
reflecting RBC stock ownership as of the record date. Cameras (including cellular phones with photographic capabilities), recording
devices and other electronic devices will not be permitted at the meeting. Due to the COVID-19 pandemic, you may be required to
complete a COVID-19 screening form upon your arrival and/or wear a mask at the meeting. If you are required to wear a mask, one
will be provided at the door.
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By order of the Board of Directors,
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Dr. Michael J. Hartnett
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Chairman and Chief Executive Officer
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July
24, 2020
ONE
TRIBOLOGY CENTER
OXFORD,
CONNECTICUT 06478
ANNUAL
MEETING OF STOCKHOLDERS
To
Be Held September 9, 2020
PROXY
STATEMENT
The
Board of Directors of RBC Bearings Incorporated (the “Company”) is soliciting proxies from our stockholders to be
used at the annual meeting of stockholders to be held on Wednesday, September 9, 2020, beginning at 9:00 a.m., local time,
at Building B, 102 Willenbrock Road, One Tribology Center, Oxford, CT 06478, and at any postponements or adjournments thereof.
This proxy statement, a proxy card and the Company’s Annual Report on Form 10-K for the fiscal year ended March 28,
2020 are being mailed, or made available via the internet as described below, to stockholders on or about July 24, 2020.
The
fiscal years ended March 29, 2014, March 28, 2015, April 1, 2016, April 1, 2017, March 31, 2018, March 30, 2019 and March 28,
2020 are referred to as “fiscal 2014,” “fiscal 2015,” “fiscal 2016,” “fiscal 2017,”
“fiscal 2018,” “fiscal 2019” and “fiscal 2020,” respectively, and the fiscal year ending March
27, 2021 is referred to as “fiscal 2021,” in this proxy statement. As used in this proxy statement, the terms “we,”
“us,” “our,” “RBC” and “the Company” mean RBC Bearings Incorporated and its subsidiaries,
unless the context indicates another meaning.
The
Company is furnishing proxy materials to stockholders via the internet. If you received a Notice of Internet Availability of Proxy
Materials (the “Notice”) by mail, you will not receive a printed copy of the proxy materials unless you specifically
request one. The Notice instructs you on how to access and review all of the important information contained in this proxy statement
and our annual report as well as how to submit your proxy over the internet. If you received the Notice and would still like to
receive a printed copy of our proxy materials, you should follow the instructions for requesting these materials included in the
Notice. We plan to mail the Notice to stockholders on or about July 24, 2020. We will mail a printed copy of this proxy statement
and form of proxy to certain stockholders and we expect that mailing to also begin on or about July 24, 2020.
ABOUT
THE ANNUAL MEETING
Why
did I receive these materials?
We
are soliciting proxies for our 2020 annual meeting of stockholders. You are receiving a proxy statement because you owned shares
of our common stock on July 13, 2020 (the “Record Date”), which entitles you to vote at the meeting. By use of a proxy,
you can vote whether or not you attend the meeting. This proxy statement describes the matters on which you may vote and provides
information on those matters so that you can make an informed decision.
What
information is contained in this proxy statement?
The
information in this proxy statement relates to the proposals to be voted on at the annual meeting, the voting process, our Board
of Directors (the “Board”) and committees thereof, the compensation of directors and executive officers, and other
information that the Securities and Exchange Commission (SEC) requires us to provide annually to our stockholders.
How
may I obtain RBC Bearings’ 10-K and other financial information?
A
copy of our 2020 Annual Report on Form 10-K is enclosed and incorporated by reference herein. Stockholders may request another
free copy of our 2020 Form 10-K from the Corporate Secretary, RBC Bearings Incorporated, One Tribology Center, Oxford, CT 06478
We
will also furnish any exhibit to the 2020 Form 10-K if specifically requested. Stockholders may also find the 2020 Form 10-K and
our other filings with the SEC, as well as corporate governance and other information regarding the Company, including Environmental/Social/Governance
information, on the investor relations page of our website at http://investor.rbcbearings.com.
Who
is entitled to vote at the meeting?
Only
stockholders of record at the close of business on the Record Date are entitled to receive notice of and to vote at the annual
meeting. If you were a stockholder of record on the Record Date, you will be entitled to vote all of the shares that you held
on that date at the meeting, or any postponements or adjournments of the meeting.
How
many votes do I have?
You
will be entitled to one vote for each outstanding share of RBC Bearings Incorporated common stock you owned as of the Record Date
on each matter considered at the meeting. As of July 13, 2020, there were 24,806,633 shares of the Company’s common stock
outstanding and eligible to vote. There is no cumulative voting.
Who
can attend the meeting?
Subject
to space availability, all stockholders as of the Record Date, or their duly appointed proxies, may attend the meeting, and each
may be accompanied by one guest. Since seating is limited, admission to the meeting will be on a first-come, first-served basis.
Registration will begin at 8:00 a.m., and seating will begin at 8:30 a.m. If you attend, please note that you may be asked
to present valid picture identification, such as a driver’s license or passport. Cameras (including cell phones with photographic
capabilities), recording devices and other electronic devices will not be permitted at the meeting. Due to the COVID-19 pandemic,
you may be required to complete a COVID-19 screening form upon your arrival and/or wear a mask at the meeting. If you are required
to wear a mask, one will be provided at the door.
Please
also note that if you hold your shares in “street name” (that is, through a broker, bank or other nominee), you will
also need to bring a copy of a brokerage statement reflecting your RBC stock ownership as of the Record Date and check in at the
registration desk at the meeting.
Please
let us know if you plan to attend the meeting by marking the appropriate box on the enclosed proxy card or, if you vote by telephone
or internet, indicating your plans when prompted.
What
constitutes a quorum?
The
presence at the meeting, in person or by proxy, of the holders of a majority of the shares of our common stock outstanding on
the Record Date will constitute a quorum, permitting the conduct of business at the meeting. As of July 13, 2020, there
were 24,806,633 shares of common stock, representing the same number of votes, outstanding and eligible to vote. Thus, the
presence of the holders of common stock representing at least 12,403,317 votes will be required to establish a
quorum.
Proxies
received by the Company but marked as abstentions and broker non-votes will be included in the calculation of the number of votes
considered to be present at the meeting for purposes of determining if we have a quorum.
How
do I vote?
If
you are a holder of record (that is, your shares are registered in your own name with our transfer agent), you can vote either
in person at the annual meeting or by proxy without attending the annual meeting. We urge you to vote by proxy even if you plan
to attend the annual meeting so that we will know as soon as possible that enough votes will be present for us to hold the meeting.
If you attend the meeting in person, you may vote at the meeting and your proxy will not be counted. You can vote by proxy by
completing, dating and signing a proxy card and returning it in the enclosed postage-paid envelope.
If
you hold your shares in “street name,” you must either direct the bank, broker or other record holder of your shares
as to how to vote your shares, or obtain a proxy from the bank, broker or other record holder to vote at the meeting. Please refer
to the voter instruction cards used by your bank, broker or other record holder for specific instructions on methods of voting,
including by telephone or using the internet.
Your
shares will be voted as you indicate. If you return the proxy card but you do not indicate your voting preferences, then the individuals
named on the proxy card will vote your shares in accordance with the recommendations of the Board. The Board and management do
not intend to present any matters at the annual meeting other than those outlined in the Notice of the Annual Meeting of Stockholders.
Should any other matter requiring a vote of stockholders arise, stockholders returning the proxy card confer upon the individuals
named on the proxy card discretionary authority to vote the shares represented by such proxy on such other matter in the manner
the proxy holders consider appropriate.
If
you do not specify on your proxy card (or when giving your proxy over the internet or telephone) how you want to vote your shares,
the proxy holders will vote them FOR the election of all nominees for director as set forth under Item 1, FOR the ratification
of the appointment of the independent registered public accounting firm under Item 2, and FOR the approval of the resolution
regarding the stockholder advisory vote on named executive officer compensation under Item 3.
Can
I change my vote after I return my proxy card?
Yes.
If you are a stockholder of record, you may revoke or change your vote at any time before the proxy is exercised by filing with
the Secretary of the Company a notice of revocation or a duly executed proxy card bearing a later date, or by attending the annual
meeting and voting in person. For shares you hold beneficially in “street name,” you may change your vote by submitting
new voting instructions to your broker, bank or other nominee or, if you have obtained a legal proxy from your broker, bank or
other nominee giving you the right to vote your shares, by attending the meeting and voting in person. In either case, the powers
of the proxy holders will be suspended if you attend the meeting in person and so request, although attendance at the meeting
will not by itself revoke a previously granted proxy.
Who
counts the votes?
Votes
will be counted by employees of Broadridge Financial Solutions, Inc. and certified by the Inspector of Election present at the
meeting. If you are a stockholder of record, your signed proxy card is returned directly to Broadridge for tabulation. If you
hold your shares in “street name” through a broker, bank or other nominee, your broker, bank or other nominee will
return one proxy card to Broadridge on behalf of all of its clients.
What
are the Board’s recommendations?
The
Board’s recommendations are set forth in this proxy statement together with the description of each item to be voted upon.
In summary, the Board recommends a vote FOR each of the proposals. Unless you give other instructions on your proxy card, the
persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board.
Will
stockholders be asked to vote on any other matters?
To
the knowledge of the Company, stockholders will vote only on the matters described in this proxy statement. However, if any other
matters properly come before the meeting, the persons named as proxies for stockholders will vote on those matters in the manner
they consider appropriate.
What
vote is required to approve each item?
Election
of Directors (Item 1): Directors are elected by a majority of the votes cast. Each share of our common stock is entitled to
one vote for each of the director nominees. A properly executed proxy marked “withhold authority” with respect to
the election of one or more directors will not be voted with respect to the director or directors indicated, although it will
be counted for purposes of determining whether there is a quorum.
Approval
of Independent Registered Public Accounting Firm (Item 2): The ratification of the appointment of Ernst & Young LLP to
serve as the Company’s independent registered public accounting firm for fiscal 2021 requires the affirmative vote of a
majority of the votes cast.
Approval
of the “Say-on-Pay” proposal (Item 3): The approval of the resolution regarding the stockholder advisory vote
on named executive officer compensation in the “Say-on-Pay” proposal requires the affirmative vote of a majority of
the votes cast.
A
properly executed proxy marked “abstain” with respect to any matter will not be voted, although it will be counted
for purposes of determining whether there is a quorum. Accordingly, an abstention will have the effect of a negative vote.
How
are votes counted?
In
the election of directors (Item 1), you may vote FOR each nominee or your vote may be WITHHELD with respect to that nominee. You
may not cumulate your votes for the election of directors.
For
the ratification of Ernst & Young LLP to serve as the Company’s independent registered public accounting firm for fiscal
2021 (Item 2) and the stockholder advisory vote on named executive officer compensation in the “Say-on-Pay” proposal
(Item 3), you may vote FOR, AGAINST or ABSTAIN.
If
you elect to ABSTAIN, the abstention has the same effect as a vote AGAINST. If you provide specific instructions with regard to
certain items, your shares will be voted as you instruct on such items.
If
you hold your shares in “street name” through a broker, bank or other nominee rather than directly in your own name,
then your broker, bank or other nominee is considered the stockholder of record, and you are considered the beneficial owner of
your shares. The Company has supplied copies of its proxy materials for the 2020 annual meeting of stockholders to the broker,
bank or other nominee holding your shares of record, and they have the responsibility to send these proxy materials to you. As
the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares at the annual
meeting. The broker, bank or other nominee is obligated to provide you with a voting instruction card for you to use for this
purpose. If you are a beneficial owner and your broker, bank or other nominee holds your shares in its name, the broker, bank
or other nominee is permitted to vote your shares on the ratification of the appointment of Ernst & Young LLP as our independent
registered public accounting firm (Item 2), even if the broker, bank or other nominee does not receive voting instructions from
you.
If
the broker, bank or other nominee does not receive voting instructions from you, your shares may constitute “broker non-votes.”
Generally, broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from
the beneficial owner and instructions are not given. In tabulating the voting result for any particular proposal, shares that
constitute broker non-votes are not considered present and entitled to vote on that proposal. If a quorum is present at the annual
meeting, the persons receiving the affirmative vote of the majority of the shares of common stock present in person or represented
by proxy at the annual meeting will be elected to serve as directors. As a result, broker non-votes will not affect the outcome
of the voting on the election of directors (Item 1), and the stockholder advisory vote on named executive officer compensation
in the “Say-on-Pay” proposal (Item 3). Shares represented by broker non-votes will, however, be counted in determining
whether there is a quorum, but will not be considered voted with regard to or treated as present with respect to those proposals
to which the broker non-votes relate. The ratification of the appointment of the Company’s independent registered public
accounting firm (Item 2) requires the affirmative vote of the majority of the shares of common stock present in person or represented
by proxy at the annual meeting and entitled to vote on the proposal. Brokers are allowed to vote on behalf of beneficial owners
without instruction on Item 2, but are not permitted to vote on any other proposals without voting instructions from you.
Shares
represented by proxies that indicate that the stockholders ABSTAIN as to the election of directors or to other proposals will
be treated as being present for the purpose of determining the presence of a quorum and, other than for the election of directors,
the number of votes cast with respect to each proposal. Consequently, an abstention will have the effect of a vote against with
respect to proposals other than the election of directors.
What
should I do if I receive more than one set of voting materials?
You
may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards
or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate
voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares
are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy
card and voting instruction card that you receive.
Where
can I find the voting results of the annual meeting?
The
Company intends to announce the preliminary voting results at the annual meeting and publish the final results in a Current Report
on Form 8-K that will be filed with the SEC within four business days after the meeting.
What
is the deadline to propose actions for consideration at next year’s annual meeting of stockholders?
You
may submit proposals for consideration at future stockholder meetings. For a stockholder proposal to be considered for inclusion
in our proxy statement for the annual meeting next year, our Corporate Secretary must receive the written proposal at our principal
executive offices no later than March 26, 2021. Such proposals also must comply with Rule 14a-8 of the regulations under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding the inclusion of stockholder proposals
in company-sponsored proxy materials. Proposals should be addressed to:
Corporate
Secretary
RBC
Bearings Incorporated
One
Tribology Center
Oxford,
CT 06478
For
a stockholder proposal that is not intended to be included in our proxy statement, the stockholder must deliver a proxy statement
and form of proxy to holders of a sufficient number of shares of our common stock to approve the proposal and provide the information
required by our by-laws and give timely notice to the Corporate Secretary in accordance with our by-laws, which, in general, require
that the notice be received by the Corporate Secretary not less than 60 nor more than 90 days prior to the next meeting. In the
event that less than 70 days’ notice or prior public announcement of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be received not later than the close of business on the tenth day following the date
on which such notice of the date of the annual meeting was mailed or such public announcement was made.
How
may I recommend or nominate individuals to serve as directors?
You
may propose director candidates for consideration by the Board’s Nominating and Corporate Governance Committee. Any such
recommendations should include the nominee’s name and qualifications for Board membership and should be directed to the
Corporate Secretary at the address of our principal executive offices set forth above.
In
addition, our by-laws permit stockholders to nominate directors for election at an annual stockholder meeting. To nominate a director,
a stockholder must deliver timely written notice to the Corporate Secretary of such stockholder’s intent to make such nomination.
To be timely, a stockholder’s notice must be delivered to or mailed and received at our principal executive offices not
less than 60 nor more than 90 days prior to the date of the anniversary of the previous year’s annual meeting. In the event
that the date of the annual meeting is changed by more than 30 days from such anniversary date, notice by the stockholder to be
timely must be received not later than the close of business on the tenth day following the earlier of the day on which notice
of the date of the meeting was mailed or public disclosure of the meeting was made. To be in proper form, a stockholder’s
notice must set forth (i) as to each person whom the stockholder proposes to nominate for election as a director at such
meeting (1) the name, age, business address and residence address of the person, (2) the principal occupation or employment
of the person, (3) the number of shares of common stock of the Company that are owned beneficially or of record by the person,
and (4) any other information relating to the person 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 pursuant to Regulation 14A under
the Exchange Act, and (ii) as to the stockholder giving the notice (1) the name and record address of such stockholder,
(2) the number of shares of common stock of the Company that are owned beneficially or of record by such stockholder, (3) a
description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s) are to be made by such stockholder, (4) a representation that
such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice, and (5) any
other information relating to such 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 pursuant to Regulation 14A under the Exchange
Act. Such notice must be accompanied by each proposed nominee’s written consent to being named as a nominee and to serve
as a director if elected.
How
may I obtain a copy of RBC Bearings’ by-law provisions regarding stockholder proposals and director nominations?
You
may contact the Corporate Secretary at our principal executive offices for a copy of the relevant by-law provisions regarding
the requirements for making stockholder proposals and nominating director candidates.
Who
can help answer my questions?
If
you have any questions about the annual meeting or how to vote or revoke your proxy or if you need additional copies of this proxy
statement or voting materials, you should contact:
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Broadridge Financial Solutions, Inc.
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Attention: Elizabeth BeltranRivera
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Registered Client Services Department
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P: 631-257-4445
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51 Mercedes Way
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F: 631-274-2969
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Edgewood, NY 11717
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elizabeth.beltranrivera@broadridge.com
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PROPOSALS
SUBMITTED FOR STOCKHOLDER VOTE
Item
1: Election of Directors
The
Board currently is composed of eight directors serving staggered three-year terms and divided into three classes: Class I currently
consists of Michael H. Ambrose, Daniel A. Bergeron and Edward D. Stewart; Class II consists of Richard R. Crowell, Dr. Steven
H. Kaplan and Alan B. Levine; and Class III consists of Dr. Michael J. Hartnett and Dr. Amir Faghri. Class I, Class II and Class
III directors will serve until our annual meetings of stockholders in 2022, 2021 and 2020, respectively. Vacancies on the Board
may be filled only by persons elected by a majority of the remaining directors. A director elected by the Board to fill a vacancy
in a class (including vacancies created by an increase in the number of directors) will serve for the remainder of the full term
of that class and until the director’s successor is duly elected and qualified, or until the director’s resignation
or removal.
Our
Nominating and Corporate Governance Committee has nominated Dr. Michael J. Hartnett and Dolores J. Ennico for election as the
two Class III directors at the annual meeting. Dr. Hartnett is currently a Class III director and was first appointed to the Board
in 1993. Ms. Ennico is nominated to replace Dr. Amir Faghri, who is retiring from the Board as of the annual meeting. The Nominating
and Corporate Governance Committee reviewed the qualifications of the nominees for election to this class, and unanimously recommended
that these nominees be submitted for election to the Board. If elected at the meeting, each of Dr. Hartnett and Ms. Ennico would
serve until the 2023 annual meeting and until a successor is duly elected and qualified, or until their resignation or removal.
If
you sign your proxy or voting instruction card but do not give instructions with respect to voting for directors, your shares
will be voted for the persons recommended by the Board. If you wish to give specific instructions with respect to voting for directors,
you may do so by indicating your instructions on your proxy or voting instruction card.
If
either of Dr. Hartnett or Ms. Ennico should for any reason become unavailable to serve as a director prior to the annual meeting,
the Board will, prior to the annual meeting, (i) reduce the size of the Board to eliminate the position for which that person
was nominated, (ii) nominate a new candidate in place of such person and vote in favor of the new candidate all shares represented
by stockholder proxies received by the Board, unless authority to vote for all candidates nominated by the Board is withheld,
or (iii) leave the place vacant to be filled at a later time.
The
following paragraphs provide information as of the date of this proxy statement about each nominee for director. The information
presented includes information each director has provided us about their positions held, principal occupation and business experience
for the past five years, and the names of other publicly-held companies for which they serve or served as a director during the
past five years. We have also provided below information regarding additional experience, qualifications, attributes and skills
that lead the Board to the conclusion that each person should serve as a director. We believe that each of our director nominees
has a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and
ability to exercise sound judgment, as well as a commitment of service to the Company and the Board.
Dr.
Michael J. Hartnett has been the Company’s President and Chief Executive Officer since 1992 and Chairman of the
Board since 1993. Prior to that, Dr. Hartnett served as President and General Manager of our Industrial Tectonics Bearings Corporation,
or ITB, subsidiary from 1990, following 18 years at The Torrington Company, one of the largest bearings manufacturers in the U.S.
While at The Torrington Company, Dr. Hartnett held the position of Vice President and General Manager of the Aerospace Business
Unit and was, prior to that, Vice President of the Research and Development Division. Dr. Hartnett holds an undergraduate degree
from the University of New Haven, a Master’s degree from Worcester Polytechnic Institute and a Doctoral degree in Applied
Mechanics from the University of Connecticut. Dr. Hartnett has developed numerous patents, authored more than two dozen technical
papers and is well known for his contributions to the field of tribology, the study of friction. Dr. Hartnett served as a director
of ATC Technology Corporation, a publicly-owned third-party logistics and automotive aftermarket service provider, until 2010,
and served as a director of Process Fab Inc., a private company in the business of precision manufacturing and related services,
until 2014. Dr. Hartnett provides the Board with significant leadership and executive experience. His proven leadership capability
and his strong knowledge of the complex financial and operational issues facing mid-sized companies provides the Board with a
unique and necessary perspective.
Dolores
J. Ennico was Chief Human Resources Officer of Olin Corporation from 2009 to 2018 and prior to that served Olin in a variety
of capacities from 1974 including Vice President, Administration from 2004 to 2009, Director, Corporate Employee Relations from
2000 to 2004, and Director of Retail Marketing, Pool Chemicals from 1997 to 2000. Ms. Ennico is a member of the Board of Governors
of the University of New Haven, and chairs its Academic and Student Affairs Committee, is a member of the Advisory Council of
Sacred Heart Academy in Hamden, Connecticut, and is a member of the Board of the Girl Scouts of Connecticut. She earned a Bachelor
of Science degree in Microbiology and a Master of Science degree in Biochemistry from Southern Connecticut State University, and
a Master of Business Administration degree from the University of New Haven. Ms. Ennico’s vast experience in human capital
management, including executive compensation, and her C-suite experience with a Fortune 500 company makes her an excellent candidate
for the Board.
Directors
are elected by a majority of the votes cast at the meeting. Accordingly, Dr. Hartnett and Ms. Ennico will be elected if they receive
the affirmative vote of a majority of the votes cast.
The
Board recommends a vote FOR the election to the Board of Directors of the nominees listed above.
|
Item
2: The Ratification of the Appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting
Firm for Fiscal 2021
The
Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for fiscal 2021, and
has further directed that the Board submit the selection of Ernst & Young LLP for ratification by the stockholders at the
annual meeting. During fiscal 2020, Ernst & Young LLP served as the Company’s independent registered public accounting
firm. See “Principal Accountant Fees and Services” below.
This
proposal is put before the stockholders because the Audit Committee and the Board believe that it is good corporate practice to
seek stockholder ratification of the Audit Committee’s appointment of the independent registered public accounting firm.
If the appointment of Ernst & Young LLP is not ratified, the Audit Committee will consider the stockholders’ vote when
determining whether to continue the firm’s engagement, but may ultimately determine to continue the engagement of the firm
or another audit firm without re-submitting the matter to stockholders. Even if the appointment of Ernst & Young LLP is ratified,
the Audit Committee may in its sole discretion terminate the engagement of the firm and direct the appointment of another independent
registered public accounting firm at any time during the year if the Audit Committee determines that such an appointment would
be in the best interests of the Company and our stockholders.
Representatives
of Ernst & Young LLP are expected to attend the annual meeting, where they will be available to respond to appropriate questions
and, if they desire, make a statement.
Ratification
of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal 2021
requires the affirmative vote of a majority of the shares of the Company’s common stock present in person or represented
by proxy at the annual meeting and entitled to vote on the proposal.
The
Board recommends a vote FOR the ratification of the appointment of Ernst & Young LLP as the Company’s independent
registered public accounting firm for fiscal 2021.
|
Item
3: Non-Binding Vote on Executive Compensation
The
Exchange Act requires the Company to hold a separate non-binding advisory stockholder vote (commonly known as a “Say-on-Pay”
proposal) to approve the compensation of our named executive officers as disclosed in this proxy statement in accordance with
the SEC’s rules.
The
Company is committed to the interests of our stockholders and the delivery of long-term value through an executive compensation
program and governance actions that attract, motivate and retain a highly-qualified executive team. As part of this commitment,
we intend to continue to maintain a periodic dialogue with our stockholders to address any continued concerns they may have.
The
Company objective is to ensure its compensation program
|
●
|
Drives
outstanding Company performance,
|
|
●
|
Properly
aligns CEO pay to Company performance,
|
|
●
|
Ensures
that no problematic pay practices exist (such as excessive change-in-control or severance
packages, benchmarking compensation above peer medians, re-pricing or backdating of options,
excessive perquisites, or tax gross-ups), and
|
|
●
|
Reflects
appropriate communication with and responsiveness to stockholders.
|
Over
the last several years we have conducted an outreach program with and received feedback from our stockholders that have led us
to develop and implement the following compensation policies, practices and procedures:
|
●
|
Targeting
a 50th percentile market positioning: All elements of the Company’s executive
officer compensation are targeted to the 50th percentile of the Company’s selected
peer group.
|
|
●
|
Selecting
compensation peers based on a range of relevant factors: The Company’s selected
peer group is intended to ensure that the Company is not compared to other companies
on an arbitrary basis and is not inappropriately limited based on Global Industry Classification
Standard (GICS) industry classifications. The Company’s selected peer group takes
into consideration a number of relevant factors, such as membership in the highly-engineered
product/manufacturing industries, revenue ranges, market capitalization, and eight digit
GICS codes for Company-selected peers.
|
|
●
|
The
CEO’s employment agreement: The Company’s employment agreement with our
CEO, Dr. Hartnett, does not include a (i) guaranteed minimum annual increase in base
salary or (ii) discretionary performance bonus. Dr. Hartnett’s annual performance
bonus is determined by a formula based on the Company’s performance in relation
to an approved operating plan. Effective as of fiscal 2018, the employment agreement
was amended to provide for a targeted 20% reduction in total compensation. Accordingly,
his base salary was reduced by 20% and his target incentive bonus matrix and his target
restricted stock and stock option matrices were revised to target a corresponding 20%
reduction.
|
|
●
|
All
CEO long-term incentive awards are performance-based: All grants of stock options,
restricted stock, or restricted stock units to Dr. Hartnett are made pursuant to a pay-for-performance-based
program with no discretionary awards.
|
|
●
|
Stock
Ownership Guidelines: The Board maintains stock ownership guidelines for non-employee
directors and for the Company’s executive officers.
|
|
●
|
Prohibiting
share recycling and adopting share grant limits: The Company’s current stock
incentive plans prohibit share recycling, limit the number of shares that may be used
for restricted stock or restricted stock unit grants to 50% of the total authorized number
of shares pursuant to the plan, and limit the expiration date of any stock option to
no more than seven years from the date it is granted.
|
|
●
|
Clawback
policy: The Board maintains a “clawback” policy applicable to all executive
officers.
|
|
●
|
An
ROIC metric for our equity compensation program: The equity compensation program
for our CEO and COO includes a substantial portion of the potential restricted stock
and stock option grants based on return on invested capital (ROIC) as the measurement
metric.
|
As
discussed in the “Compensation Discussion and Analysis” section below, the Company’s compensation program is
designed to reward executives based on favorable performance and results. Compensation policies and plans (including benefits)
are designed to attract and retain top quality and experienced executives by providing the opportunity to earn competitive cash
compensation based on corporate, business unit and individual performance, plus the opportunity to accumulate stock-based wealth
commensurate with the long-term growth and value created for the Company’s stockholders.
Dr.
Hartnett is the Company’s founder and has served as our Chief Executive Officer since 1992. Dr. Hartnett is widely regarded
as a technology visionary and one of the industry’s most successful business executives. Under Dr. Hartnett’s leadership
the Company’s revenues have grown from $82 million in fiscal 1996 to $728 million in fiscal 2020. Dr. Hartnett is also one
of our significant stockholders, owning approximately 2% of the outstanding shares of our common stock, directly aligning his
interests with those of all our stockholders.
The
Compensation Committee approved Dr. Hartnett’s compensation in the amounts disclosed in this proxy statement because he
is not only our CEO with overall responsibility for our business strategy, operations and corporate vision, he is also our founder
who has guided the Company for more than 25 years, and the Compensation Committee believes he is extremely important to our success.
The Compensation Committee believes that given Dr. Hartnett’s role in our operations, strategy and growth, it is appropriate
for Dr. Hartnett to receive competitive compensation that performs both retentive and incentivizing functions.
The
Compensation Committee approved the specific compensation amounts for fiscal 2020 disclosed in this proxy statement based on our
executive compensation philosophy and the Compensation Committee’s subjective evaluation of Dr. Hartnett’s performance,
the unique contributions he makes to the Company as its founder, and the various other factors described above. Dr. Hartnett was
not present when the Compensation Committee deliberated or voted on his compensation.
The
Company seeks to attract executive talent by offering competitive base salaries and annual and long-term performance incentive
opportunities. The Company provides incentives that promote both the short-term and long-term financial and strategic objectives
of the Company. Achievement of short-term objectives is rewarded through base salary and annual performance incentives, while
long-term incentive grants (primarily stock options and restricted stock) encourage executives to focus on and align themselves
with the Company’s long-term goals as well. These incentives are based on financial objectives of importance to the Company,
including revenue and earnings growth and creation of stockholder value. The Company’s compensation program also accounts
for individual performance, which enables the Company to differentiate among executives and emphasize the link between personal
performance and compensation.
The
Board believes that our compensation program for our named executive officers is appropriately based upon our performance and
the individual performance and level of responsibility of the executive officers. We explain this in more detail in the “Executive
Compensation” section below.
We
are asking our stockholders to indicate their support for our named executive officers’ compensation. This proposal gives
our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not
intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and
the philosophy, policies and practices described in this proxy statement. Accordingly, we will ask our stockholders to vote FOR
the following resolution at the 2020 annual meeting:
“RESOLVED,
that the compensation paid to the Company’s named executive officers, as disclosed in the Company’s proxy statement
for the 2020 annual meeting of stockholders pursuant to Item 402 of SEC Regulation S-K (including the Compensation Discussion
and Analysis, the compensation tables and narrative discussion contained therein), is hereby APPROVED.”
The
“Say-on-Pay” vote is advisory, and therefore not binding on the Company, the Board or the Compensation Committee.
The Company, the Board and the Compensation Committee value the opinions of our stockholders and to the extent there is any significant
vote against the named executive officers’ compensation as disclosed in this proxy statement, we will consider our stockholders’
concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
After
our 2017 stockholder meeting, the Board adopted a policy providing for annual “Say-on-Pay” advisory votes. The next
“Say-on-Pay” advisory vote will be held at our 2021 annual meeting of stockholders.
The
Board of Directors recommends a vote FOR the approval of the compensation of our named executive officers.
|
Item
4: Other Matters
As
of the date of this proxy statement, the Company knows of no business that will be presented for consideration at the 2020 annual
meeting other than the three items referred to above. If any other matter is properly brought before the meeting for action by
stockholders, proxies in the enclosed form returned to the Company will be voted in accordance with the recommendation of the
Board or, in the absence of such a recommendation, in the manner the proxy holder considers appropriate.
BOARD
OF DIRECTORS AND CORPORATE GOVERNANCE
Number
of Meetings of the Board of Directors
The
Board held four meetings during fiscal 2020. The standing committees of the Board held an aggregate of seven meetings during fiscal
2020. Each director attended all of the meetings of the Board and the Board committees on which he served during fiscal 2020.
Attendance
at Annual Meetings of the Stockholders
All
directors are encouraged to attend the annual meeting of stockholders. All of the directors attended the 2019 annual meeting of
stockholders either in person or by teleconference.
Director
Independence
Certain
Nasdaq rules require that the Board be comprised of a majority of “independent” directors, and each of the Company’s
Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee be comprised solely of “independent”
directors as defined under Nasdaq rules.
Based
upon the information submitted by each of the directors, and following the recommendation of the Nominating and Corporate Governance
Committee, the Board has made a determination that all of our current directors, with the exception of Dr. Hartnett and Mr. Bergeron,
satisfy the “independence” requirements of Nasdaq, SEC regulations and the Company’s Corporate Governance Guidelines.
The standards for determining independence are those set forth in the Nasdaq listing standards and the Company’s Corporate
Governance Guidelines. The Company’s Corporate Governance Guidelines can be found on our website at http://investor.rbcbearings.com.
Executive
Sessions
The
Company’s Corporate Governance Guidelines require the non-employee directors to meet in executive sessions on a periodic
basis without management. The presiding director, for purposes of leading these meetings, will be the Chairman of the Audit Committee.
The non-employee members of the Board and the Audit Committee, respectively, met in executive session during one of the Board
meetings and four of the Audit Committee meetings held in fiscal 2020.
Communications
Between Stockholders and the Board
Stockholders
may send communications to the Company’s directors as a group or individually, by writing to those individuals or the group
at the following address: RBC Bearings Incorporated, c/o the Corporate Secretary, One Tribology Center, Oxford, CT 06478. The
Corporate Secretary will review all correspondence received and will forward all correspondence that is relevant to the duties
and responsibilities of the Board or the business of the Company to the intended director(s). Examples of inappropriate communication
include business solicitations, advertising, and communication that is frivolous in nature, relates to routine business matters
(such as product inquiries, complaints or suggestions), or raises grievances that are personal to the person submitting the communication.
Upon request, any director may review communication that is not forwarded to the directors pursuant to this policy.
The
Board has a policy for submitting concerns regarding the Company’s accounting or auditing matters. Reports may be sent to
the Audit Committee through either of the following means: (i) calling the Company’s Ethics Hotline at 1-866-247-5449
(which is available 24 hours per day, 365 days per year) and leaving a recorded message, or (ii) sending a written communication
marked “Private & Confidential” to the Audit Committee, RBC Bearings Incorporated, c/o the General Counsel, One
Tribology Center, Oxford, CT 06478. In each case, reports will be received by the Company’s General Counsel who will forward
the message to the Audit Committee. The confidentiality of all reports will be maintained to the extent consistent with applicable
law.
Committees
of the Board of Directors
The
Board currently has an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. The composition,
duties and responsibilities of these committees are described below. Committee members hold office for a term of one year. The
charters for each of the committees are available on the Company’s website at http://investor.rbcbearings.com.
Audit
Committee. The Audit Committee is responsible for (i) selecting our independent registered public accounting firm, (ii)
approving the overall scope of the audit, (iii) assisting the Board in monitoring the integrity of our financial statements, the
independent registered public accounting firm’s qualifications and independence, the performance of the independent registered
public accounting firm and our internal audit function, and our compliance with legal and regulatory requirements, (iv) annually
reviewing the independent registered public accounting firm’s report describing the auditing firms’ internal quality-control
procedures, and any material issues raised by the most recent internal quality-control review, or peer review, of the registered
public accounting firm, (v) discussing the annual audited financial and quarterly statements with management and the independent
registered public accounting firm, (vi) discussing earnings press releases, as well as financial information and earnings
guidance provided to analysts and rating agencies, (vii) discussing policies with respect to risk assessment and risk management,
(viii) meeting separately, periodically, with management and the independent registered public accounting firm, (ix) reviewing
with the independent registered public accounting firm any audit problems or difficulties and management’s response, (x) setting
clear hiring policies for employees or former employees of the independent registered public accounting firm, (xi) handling such
other matters that are specifically delegated to the Audit Committee by the Board from time to time, and (xii) reporting regularly
to the full Board. Our Audit Committee currently consists of Messrs. Ambrose, Levine and Stewart, each of whom satisfies the current
financial literacy requirements and independence requirements for audit committee members of Nasdaq and the SEC. The Board has
determined that each of Messrs. Levine and Stewart qualifies as an “audit committee financial expert,” as such term
is defined in the regulations under the Exchange Act. The Audit Committee held four meetings in fiscal 2020.
Compensation
Committee. The Compensation Committee is responsible for (i) reviewing key employee compensation goals, policies,
plans and programs, (ii) reviewing and approving the compensation of our directors, chief executive officer and other executive
officers, (iii) reviewing and approving employment contracts and other similar arrangements between the Company and our executive
officers, (iv) reviewing and consulting with the Board on the selection of the chief executive officer and evaluation of
such officer’s executive performance and other related matters, (v) administration of stock plans and other incentive
compensation plans, (vi) approving overall compensation policies for the Company, and (vii) handling such other matters
that are specifically delegated to the Compensation Committee by the Board from time to time. Our Compensation Committee currently
consists of Messrs. Crowell and Levine and Dr. Faghri (who is not standing for re-election), each of whom satisfies the independence
requirements of Nasdaq. The Board intends to appoint an independent director to replace Dr. Faghri on the Committee after the
2020 stockholders meeting; Ms. Ennico will be the replacement if she is elected at the annual meeting. The Compensation Committee
held one meeting in fiscal 2020.
Nominating
and Corporate Governance Committee. Our Nominating and Corporate Governance Committee is responsible for (i) evaluating
the composition, size and governance of the Board and its committees and making recommendations regarding future planning and
the appointment of directors to committees, (ii) establishing a policy for considering stockholder nominees for election
to the Board, (iii) evaluating and recommending candidates for election to the Board, (iv) overseeing the Board’s
performance and self-evaluation process and developing continuing education programs for our directors, (v) reviewing our
corporate governance principles and policies and providing recommendations to the Board regarding possible changes, and (vi) reviewing
and monitoring compliance with the Company’s Code of Business Conduct and Ethics and our Insider Trading Policy. Our Nominating
and Corporate Governance Committee consists of Dr. Faghri (who is not standing for re-election), Dr. Kaplan and Mr. Stewart, each
of whom satisfies the independence requirements of Nasdaq. The Board intends to appoint an independent director to replace Dr.
Faghri on the Committee after the 2020 stockholders meeting. The Nominating and Corporate Governance Committee held two meetings
during fiscal 2020.
The
Board seeks to have a diverse group of members who possess the background, skills and expertise to make a significant contribution
to the Board, the Company and our stockholders. Desired qualities include (i) high-level leadership experience in business or
administrative activities, and significant accomplishment, (ii) breadth of knowledge about issues affecting the Company, (iii)
proven ability and willingness to contribute special competencies to Board activities, (iv) personal integrity, (v) loyalty to
the Company and concern for its success and welfare, (vi) willingness to apply sound and independent business judgment, (vii)
awareness of a director’s vital role in assuring the Company’s good corporate citizenship and corporate image, (viii)
no present conflicts of interest, (ix) availability for meetings and consultation on Company matters, (x) enthusiasm about the
prospect of serving, (xi) willingness to assume broad fiduciary responsibility, and (xii) willingness to become a Company stockholder.
In
evaluating candidates, the Nominating and Corporate Governance Committee reviews all candidates in the same manner, regardless
of the source of the recommendation. The policy of the Committee is to consider individuals recommended by stockholders for nomination
as a director in accordance with the procedures described under “Director Nominations to be Considered by the Board.”
Corporate
Governance Guidelines
The
Board maintains Corporate Governance Guidelines, which, among other things, set forth the Company’s expectations and policies
with respect to the roles and responsibilities of the Board, director affiliations and conflicts, director compensation, standards
of director conduct, and the qualifications and other criteria for director nominees. The Nominating and Corporate Governance
Committee is responsible for periodically reviewing and reassessing the adequacy of these guidelines and recommending changes
to the Board for approval.
Code
of Business Conduct and Ethics
The
Company’s employees, officers and directors are required to abide by the Company’s Code of Business Conduct and Ethics
(the “Code of Ethics”), which is intended to ensure that the Company’s business is conducted in a consistently
legal and ethical manner. The Code of Ethics covers areas of professional conduct such as conflicts of interest, fair dealing,
the protection of confidential information, and compliance with laws, regulations and rules. Any waiver of the policies or procedures
set forth in the Code of Ethics in the case of officers or directors may be granted only by the Board and must be promptly disclosed
as required by applicable law or the rules and regulations of Nasdaq.
Board
Risk and Compensation Risk Oversight
The
Board has oversight responsibility of the processes established to report and monitor systems for material risks applicable to
the Company. The Board focuses on the Company’s general risk management strategy and the most significant risks facing the
Company and ensures that appropriate risk mitigation strategies are implemented by management. The Board has delegated to its
various committees the oversight of risk management practices for categories of risk relevant to their functions. For example,
the Audit Committee oversees risks associated with the Company’s systems of disclosure controls and internal controls over
financial reporting, compliance with legal and regulatory requirements, and risks associated with foreign exchange, insurance,
credit and debt. The Corporate Governance and Nominating Committee oversees risks associated with sustainability. The Compensation
Committee considers risks related to the attraction and retention of talent, and risks related to the design of the compensation
program. The full Board is responsible for considering strategic risks and succession planning and receives reports from each
Committee as to risk oversight within their areas of responsibility.
The
Company’s senior management periodically reports on risk management policies and practices to the relevant Board committee
or to the full Board so that any decisions can be made as to any required changes to the Company’s risk management and mitigation
strategies or to the Board’s oversight of these.
Finally,
as part of its oversight of the Company’s executive compensation program, the Compensation Committee considers the impact
of the Company’s executive compensation program, and the incentives created by the compensation awards that it administers,
on the Company’s risk profile. In addition, the Compensation Committee reviews all of the Company’s compensation policies
and procedures, including the incentives that they create and factors that may reduce the likelihood of excessive risk-taking,
to determine whether they present a significant risk to the Company. Based on this review, the Company has concluded that its
compensation policies and procedures are not reasonably likely to have a material adverse effect on the Company.
Board
Diversity
The
Company’s policy on Board diversity relates to the selection of nominees for the Board. In selecting a nominee for the Board,
the Nominating and Corporate Governance Committee considers the skills, expertise and background that would complement the existing
Board and ensure that its members are of sufficiently diverse and independent backgrounds, recognizing that the Company’s
businesses and operations are diverse and global in nature. The Nominating and Corporate Governance Committee does not have a
specific policy regarding diversity when assessing candidates for the Board, but may consider various kinds of diversity such
as diversity of professional background and capabilities, knowledge of specific industries and geographic experience, as well
as the more traditional diversity concepts of race, gender and national origin, when considering whether to nominate an individual
for Board membership. The Nominating and Corporate Governance Committee assesses the effectiveness of this objective when evaluating
new director candidates and when assessing the composition of the Board. The Board believes it is important that its members represent
diverse viewpoints and perspectives in their application of judgment to Company matters. The Board will consider diversity as
a key factor when considering future candidates for director when Board vacancies exist.
Board
Leadership Structure
The
Board has no formal policy with respect to the separation of the offices of the Chairman and the Chief Executive Officer, which
are currently combined. However, the Board understands that no single leadership model is right for all companies and at all times.
The Board believes that it should have the flexibility to make decisions as to the Chairman position from time to time in the
way that it believes will best provide effective leadership for the Company. Accordingly, the Board periodically reviews its leadership
structure, including whether these offices should be separate. The Board has determined that the current structure consisting
of combined roles of Chairman and Chief Executive Officer is an effective and appropriate leadership structure for the Company
at this time. All the current members of the Board are independent, except for the CEO and COO/CFO, and all of our Board committees
are composed entirely of independent directors.
To
promote open discussion among the independent directors, the independent directors routinely meet in executive session without
the participation of management. The Board does not have a lead independent director. The Chairman of the Audit Committee leads
the sessions of the Board in which management directors and other members of management are not present.
Environmental,
Social and Governance Values
We
know that caring about our impact on the environment and society and how we govern RBC are essential to generating long-term value
for the Company and our stakeholders, and we are constantly looking for ways to improve our performance in all three areas. More
information regarding our environmental, social and governance values is available at http://investor.rbcbearings.com/ESG
DIRECTOR
COMPENSATION
Non-employee
members of the Board receive $50,000 per year, payable quarterly, and are entitled to annual stock option and restricted stock
grants for their services at the discretion of the Compensation Committee and upon approval of the Board. During fiscal 2020,
each continuing director was granted stock options and shares of restricted stock. In addition, the Chairs of the Compensation
and Audit Committees receive an additional $5,000 per year. Directors are entitled to reimbursement for reasonable out-of-pocket
expenses incurred in connection with attendance at Board and committee meetings. The Compensation Committee reviews non-employee
director compensation annually and recommends changes to the Board for approval. During fiscal 2020 the non-employee directors
received the following compensation:
Name
|
|
Fees Earned or Paid in
Cash
($)
|
|
|
Stock Awards
($)(1)(2)
|
|
|
Option Awards
($)(1)(3)
|
|
|
Total
($)
|
|
Michael H. Ambrose (4)
|
|
|
37,500
|
|
|
|
244,905
|
|
|
|
44,360
|
|
|
|
326,765
|
|
Richard R. Crowell
|
|
|
55,000
|
|
|
|
237,720
|
|
|
|
42,180
|
|
|
|
334,900
|
|
Dr. Amir Faghri
|
|
|
50,000
|
|
|
|
237,720
|
|
|
|
42,180
|
|
|
|
329,900
|
|
Dr. Steven H. Kaplan
|
|
|
50,000
|
|
|
|
237,720
|
|
|
|
42,180
|
|
|
|
329,900
|
|
Alan B. Levine
|
|
|
55,000
|
|
|
|
237,720
|
|
|
|
42,180
|
|
|
|
334,900
|
|
Dr. Thomas J. O’Brien (5)
|
|
|
25,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,000
|
|
Edward D. Stewart
|
|
|
50,000
|
|
|
|
237,720
|
|
|
|
42,180
|
|
|
|
329,900
|
|
|
(1)
|
The
amounts represent the fair market value on the date of grant of restricted shares and
non-qualified stock options granted during the fiscal year. For additional information
on the valuation assumptions regarding the restricted stock and stock option awards,
refer to Note 16 to our financial statements for fiscal 2020 included in the Company’s
Annual Report on Form 10-K filed with the SEC on May 20, 2020.
|
|
(2)
|
The
amounts reflect a fair market value of $163.27 per share in the case of the grant to
Mr. Ambrose and a fair market value of $158.48 per share in the case of the grants to
the other directors. The total number of restricted shares held by each director as of
the end of fiscal 2020 was: Mr. Ambrose – 1,500; Mr. Crowell – 2,917; Dr.
Faghri – 2,917; Dr. Kaplan – 2,500; Mr. Levine – 2,917; Dr. O’Brien
– 0; Mr. Stewart – 2,917.
|
|
(3)
|
The
amounts reflect a fair market value of $44.36 per option in the case of the grant to
Mr. Ambrose and a fair market value of $42.18 per option in the case of the grants to
the other directors. The total number of stock options held by each director as of the
end of fiscal 2020 was: Mr. Ambrose – 1,000; Mr. Crowell – 5,600; Dr. Faghri
– 12,500; Dr. Kaplan – 1,800; Mr. Levine – 6,800; Dr. O’Brien
– 0; Mr. Stewart – 6,400.
|
|
(4)
|
Mr.
Ambrose became a director in September 2019.
|
|
(5)
|
Mr.
O’Brien ceased to be a director in September 2019.
|
In
response to the COVID-19 pandemic, in May 2020 the Compensation Committee recommended and the Board approved a 25% reduction in
the cash component of the non-employee directors’ fiscal 2021 compensation.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Since
March 31, 2019 we have not been a party to, nor have we currently proposed, any transaction or series of similar transactions
in which the amount exceeds $120,000 and in which any director, executive officer, holder of more than 5% of our common stock
or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest,
other than compensation agreements and other agreements that are described in the “Executive Compensation” section
of this proxy statement. The Company’s directors and executive officers are subject to annual related-party certifications
and the Code of Ethics, which requires that an employee or director avoid placing himself or herself in a position in which his
or her personal interests could interfere in any way with the interests of the Company.
We
have not made payments to directors other than the fees to which they are entitled as directors (described under the heading “Director
Compensation” above) and the reimbursement of expenses relating to their services as directors. We have not made any loans
to any director or officer nor have we purchased any shares of the Company from any director or officer, other than the repurchase
of shares from officers at fair market value to cover taxes relating to the vesting of shares of restricted stock.
PRINCIPAL
STOCKHOLDERS
The
following table sets forth information known to the Company regarding beneficial ownership of the Company’s common stock,
as of July 1, 2020, by each director and director nominee, each of the executive officers identified in the Summary Compensation
table in the “Executive Compensation” section of this proxy statement, and by all of our directors and executive officers
as a group (13 persons). Information in the table is derived from SEC filings made by such persons under Section 16(a) of
the Exchange Act and other information received by the Company.
Name of Beneficial Owner
|
|
Amount
and Nature of
Beneficial Ownership
(1)(2)
|
|
|
Percent of
Class (3)
|
|
Michael J. Hartnett
|
|
|
501,347
|
|
|
|
2.0
|
%
|
Michael H. Ambrose
|
|
|
3,000
|
|
|
|
*
|
|
Daniel A. Bergeron
|
|
|
201,492
|
|
|
|
*
|
|
Richard R. Crowell
|
|
|
30,070
|
|
|
|
*
|
|
Dolores J. Ennico
|
|
|
-
|
|
|
|
-
|
|
Dr. Amir Faghri
|
|
|
16,028
|
|
|
|
*
|
|
Dr. Steven H. Kaplan
|
|
|
6,340
|
|
|
|
*
|
|
Alan B. Levine
|
|
|
23,560
|
|
|
|
*
|
|
Edward D. Stewart
|
|
|
28,400
|
|
|
|
*
|
|
Patrick S. Bannon
|
|
|
38,709
|
|
|
|
*
|
|
Richard J. Edwards
|
|
|
22,532
|
|
|
|
*
|
|
Robert M. Sullivan
|
|
|
7,651
|
|
|
|
*
|
|
All directors and executive officers as a group (13 persons)
|
|
|
887,826
|
|
|
|
3.5
|
%
|
|
(1)
|
Each
person in this table has sole voting and dispositive power with respect to his or her
shares.
|
|
(2)
|
Includes
unissued shares that are subject to stock options that are exercisable within 60 days
of July 1, 2020.
|
|
(3)
|
Based
on 25,071,611 shares of common stock outstanding as of July 1, 2020 plus 267,200 unissued
option shares referred to in footnote (2).
|
The
following table sets forth each stockholder that, as of July 1, 2020, was known by us to be the beneficial owner of more than
5% of our common stock. Information in the table is derived from SEC filings made by such persons pursuant to Section 13 of the
Exchange Act.
Name and Address of Beneficial Owner
|
|
Amount and Nature
of
Beneficial Ownership
|
|
|
Percent of
Class (1)
|
|
Kayne Anderson Rudnick Inv. Mgmt. LLC
1800 Avenue of the Stars, 2nd floor, Los Angeles, CA 90067
|
|
|
2,541,890
|
(2)
|
|
|
10.1
|
%
|
|
|
|
|
|
|
|
|
|
The Vanguard Group
100 Vanguard Blvd., Malvern, PA 19355
|
|
|
2,199,834
|
(3)
|
|
|
8.8
|
%
|
|
|
|
|
|
|
|
|
|
BlackRock Inc.
55 East 52nd Street, New York, NY 10055
|
|
|
2,097,428
|
(4)
|
|
|
8.4
|
%
|
|
|
|
|
|
|
|
|
|
Wasatch Advisors, Inc.
505 Wakara Way, Salt Lake City, UT 84108
|
|
|
1,767,198
|
(5)
|
|
|
7.0
|
%
|
|
|
|
|
|
|
|
|
|
T. Rowe Price Associates, Inc.
100 East Pratt Street, Baltimore, MD 21202-1009
|
|
|
1,418,026
|
(6)
|
|
|
5.7
|
%
|
|
|
|
|
|
|
|
|
|
Neuberger Berman Group LLC
1290 Avenue of the Americas, New York, NY 10104
|
|
|
1,376,287
|
(7)
|
|
|
5.5
|
%
|
|
(1)
|
Based
on 25,071,611 shares of common stock outstanding as of July 1, 2020.
|
|
(2)
|
A
Form 13G/A filed February 14, 2020 indicates that it has (i) sole voting and dispositive
power over 2,032,186 shares, and (ii) shared voting and dispositive power over 509,704
shares.
|
|
(3)
|
A
Form 13G/A filed February 12, 2020 indicates that it has (i) sole voting power over 51,502
shares, (ii) shared voting power over 3,822 shares, (iii) sole dispositive power over
2,147,777 shares, and (iv) shared dispositive power over 52,057 shares.
|
|
(4)
|
A
Form 13G/A filed February 6, 2020 indicates that it has (i) sole voting power over 2,052,641
shares, (ii) sole dispositive power over 2,097,428 shares, and (iii) shared voting and
dispositive power over zero shares.
|
|
(5)
|
A
Form 13G/A filed February 10, 2020 indicates that it has (i) sole voting and dispositive
power over 1,767,198 shares, and (ii) shared voting and dispositive power over zero shares.
|
|
(6)
|
A
Form 13G/A filed February 14, 2020 indicates that it has (i) sole voting power over 330,457
shares, (ii) sole dispositive power over 1,418,026 shares, and (iii) shared voting and
dispositive power over zero shares.
|
|
(7)
|
A
Form 13G/A filed February 13, 2020 indicates that it has (i) sole voting and dispositive
power over zero shares, (ii) shared voting power over 1,364,777 shares, and (iii) shared
dispositive power over 1,376,287 shares.
|
Delinquent
Section 16(a) Reports
Section
16(a) of the Exchange Act requires that the Company’s executive officers, directors and greater than 10% stockholders file
reports of ownership and changes of ownership of the Company’s common stock with the SEC. Based on a review of ownership
reports filed during fiscal 2020, the Company believes that all Section 16(a) filing requirements were met during the year on
a timely basis except that the Form 3 of Michael Ambrose, a director of the Company, was due on September 21, 2019 but was inadvertently
filed late; the Form 3 when filed reported that Mr. Ambrose did not own any RBC securities.
EXECUTIVE OFFICERS AND DIRECTORS
The following table
sets forth information concerning our directors and executive officers as of July 1, 2020. Each director is elected for a term
specified in this proxy statement or until such person’s successor is duly elected and qualified.
Name
|
|
Age
|
|
Positions
|
Dr. Michael J. Hartnett
|
|
74
|
|
Chairman, President and Chief Executive Officer
|
Michael H. Ambrose
|
|
58
|
|
Director
|
Daniel A. Bergeron
|
|
60
|
|
Director, Vice President, Chief Operating Officer and Chief Financial Officer
|
Richard R. Crowell
|
|
65
|
|
Director
|
Dr. Amir Faghri
|
|
69
|
|
Director (not standing for re-election)
|
Dr. Steven H. Kaplan
|
|
67
|
|
Director
|
Alan B. Levine
|
|
76
|
|
Director
|
Edward D. Stewart
|
|
77
|
|
Director
|
Patrick S. Bannon
|
|
55
|
|
Vice President and General Manager
|
Richard J. Edwards
|
|
64
|
|
Vice President and General Manager
|
Ernest D. Hawkins
|
|
55
|
|
Vice President Finance and Chief Accounting Officer
|
Joseph Salamunovich
|
|
61
|
|
Vice President, General Counsel and Secretary
|
Robert M. Sullivan
|
|
36
|
|
Corporate Controller
|
Dr. Michael J.
Hartnett has been the Company’s President and Chief Executive Officer since 1992 and Chairman of the Board since
1993. Prior to that, Dr. Hartnett served as President and General Manager of our Industrial Tectonics Bearings Corporation, or
ITB, subsidiary from 1990, following 18 years at The Torrington Company, one of the three largest bearings manufacturers in the
U.S. While at The Torrington Company, Dr. Hartnett held the position of Vice President and General Manager of the Aerospace Business
Unit and was, prior to that, Vice President of the Research and Development Division. Dr. Hartnett holds an undergraduate degree
from the University of New Haven, a Master’s degree from Worcester Polytechnic Institute and a Doctoral degree in Applied
Mechanics from the University of Connecticut. Dr. Hartnett has developed numerous patents, authored more than two dozen technical
papers and is well known for his contributions to the field of tribology, the study of friction. Dr. Hartnett served as a director
of ATC Technology Corporation, a publicly-owned third-party logistics and automotive aftermarket service provider, until 2010,
and served as a director of Process Fab Inc., a private company in the business of precision manufacturing and related services,
until 2014. Dr. Hartnett provides the Board with significant leadership and executive experience. His proven leadership capability
and his strong knowledge of the complex financial and operational issues facing mid-sized companies provides the Board with a unique
and necessary perspective.
Daniel A. Bergeron
has been a director since 2013 and has been with the Company since 2003 when he joined us as Vice President, Finance and later
that same year was appointed Chief Financial Officer. In 2017, he was additionally appointed Chief Operating Officer. From 2002
until 2003, he served as Vice President and Chief Financial Officer of Allied Healthcare International, Inc., a publicly-held provider
of healthcare staffing services. Mr. Bergeron served as Vice President and Chief Financial Officer at Paragon Networks International,
Inc., a telecommunications company, from 2000 to 2002. From 1998 to 2000, he served as Vice President and Chief Financial Officer
of Tridex Corporation, a publicly-held software company. From 1987 to 1998, Mr. Bergeron held various financial reporting positions
with Dorr-Oliver Inc., an international engineering and manufacturing company, including Vice President and Chief Financial Officer.
Mr. Bergeron holds a Bachelor of Science degree in Finance from Northeastern University and a Master of Business Administration
degree from the University of New Haven. Mr. Bergeron provides the Board with significant financial leadership and executive experience.
His proven leadership capability and his strong knowledge of the complex financial and operational issues facing mid-sized companies
provides the Board with a unique and necessary perspective.
Michael H. Ambrose
has been a director since September 2019. He has served as Vice President of Engineering and Technology for Sikorsky Aircraft,
a Lockheed Martin Company, since 2017. From 2013 to 2017 he was Vice President of Aircraft Design and Manufacturing Engineering
for Sikorsky, and before that held executive positions in International Government Programs and Manufacturing Operations at Sikorsky.
Mr. Ambrose joined Sikorsky in 1984, working in all areas of complex aerospace design and manufacturing operations. He is currently
responsible for leading over 3,000 engineers in support of all aspects of design, research & development, manufacturing engineering,
and engineering customer support. Mr. Ambrose is also the co-chair of the Sikorsky senior safety board and has responsibility for
air worthiness at Sikorsky. He serves on the Board of Governors of the University of New Haven and the Board of Directors of the
Vertical Flight Society. Mr. Ambrose holds a Bachelor of Science degree in Mechanical Engineering from the University of New Haven
and a Master of Science degree in Engineering Management from the Massachusetts Institute of Technology. Mr. Ambrose’s many
years of experience in aerospace engineering and manufacturing operations is of tremendous value to the Board.
Richard R. Crowell
has been a director since 2002 and Chairman of the Compensation Committee since 2005. Mr. Crowell is a Managing Partner of Vance
Street Capital LLC, a private equity investment firm he founded in 2007. Previously he was the President of Aurora Capital Group,
a private equity investment firm he co-founded in 1991. Prior to establishing Aurora, Mr. Crowell was a Partner and President of
Acadia Partners, a New York-based investment fund. From 1983 to 1987, he was a Managing Director, Corporate Finance for Drexel
Burnham Lambert. He serves on the Executive Committee of the Board of Visitors of the University of California at Los Angeles Anderson
School of Management. Mr. Crowell is a director of Micronics, Inc., IAC Industries, RST Instruments Ltd. and Motion Dynamics Corporation,
all of which are private companies in the businesses of filtration products, precision manufacturing, engineered solutions, engineered
surgical products, precision wire components and related services. Mr. Crowell earned a Bachelor of Arts degree from the University
of California at Santa Cruz and a Master of Business Administration degree from UCLA’s Anderson School. Mr. Crowell brings
broad business, financial and executive leadership experience to the Board developed through his leadership roles at Vance Street
Capital LLC, Aurora Capital Group LLC, Acadia Partners and Drexel Burnham Lambert. He has extensive experience with a number of
precision manufacturing and aerospace companies. In addition, Mr. Crowell’s experience in private investment enables him
to bring a valuable investor’s view to the Board and his relationships across the financial community strengthen the Company’s
access to capital markets. His board memberships provide deep understanding of trends in the precision manufacturing and aerospace
sectors, both of which present ongoing challenges and opportunities for the Company.
Dr. Amir Faghri
has been a director since 2004. Dr. Faghri is currently Distinguished Professor of Engineering and Distinguished Dean Emeritus
at the University of Connecticut. He was the Dean of the School of Engineering at the University of Connecticut from 1998 to 2006,
and the Head of the Mechanical Engineering Department from 1994 to 1998. While holding such academic and administrative positions
as distinguished and chair professor, department head, and Dean, Dr. Faghri authored eight books and edited volumes, more than
310 archival technical publications (including 210 journal papers), and nine U.S. patents. He has served as a consultant to several
major research centers and corporations, including Los Alamos and Oak Ridge national laboratories, Exxon Mobil Corporation, and
Intel Corporation. Dr. Faghri's technical productivity is further complemented by his service on the editorial boards of eight
scientific journals. Dr. Faghri has received many honors and awards, including the American Institute of Aeronautics & Astronautics
(AIAA) Thermophysics Award in 1988, the American Society of Mechanical Engineering (ASME) Heat Transfer Memorial Award in 1988,
the ASME James Harry Potter Gold Medal in 2005, and the ASME/AIChE Max Jakob Memorial Award in 2010. Dr. Faghri received a Bachelor
of Science degree from Oregon State University and his Master of Science and Doctoral degrees from the University of California
at Berkeley. As former Dean of the School of Engineering at the University of Connecticut from 1998 to 2006, with financial oversight
responsibilities for all engineering departments and research centers, Dr. Faghri provides the Company with a wealth of valuable
executive and engineering experience. His association with U.S. companies and global academia provides the Company with valuable
state of the art engineering resources and workforce development.
Dr. Steven H.
Kaplan has been a director since 2018. He has been the president of the University of New Haven since 2004 and has led
the University through a period of remarkable growth and development. In 2015, in recognition of his contributions to transforming
the University, Dr. Kaplan was presented the Chief Executive Leadership Award by the Council for Advancement and Support of Education
(CASE) District I. He also was named "Businessman of the Year" by Business New Haven magazine in 2008. Dr. Kaplan was
awarded the 2011 William M. Burke Presidential Award for Experiential Education by the National Society for Experiential Education.
Previously, Dr. Kaplan was chancellor and professor of English at the University of Virginia's College at Wise. Dr. Kaplan began
his teaching career in 1982 as an Instructor of English at the University of Maryland, European Division. From 1985 to 1989, he
served as Visiting Lecturer in American Studies at Eberhard-Karls Universität, Tübingen, Germany, one of the oldest and
most highly regarded universities in Europe. After completing his doctoral studies at Eberhard-Karls Universität, he returned
to the U.S. to teach English at the University of Southern Colorado. Dr. Kaplan also served as Dean of Arts and Humanities at the
State University of New York at Buffalo and as Dean of the College of Liberal Arts and Sciences at Butler University. In addition
to earning his Ph.D. in Comparative Literature at Eberhard-Karls Universität, Dr. Kaplan holds a Master of Arts degree (with
a concentration in philosophy, German and English) from Eberhard-Karls Universität and a Bachelor of Arts degree from the
University of California at Los Angeles. This knowledge and chief executive experience allows Dr. Kaplan to provide the Company
with a wealth of valuable international executive experience and a perspective that provides the Board a critical resource for
management. His association with U.S. companies and global academia provides the Company with a valuable state of the art executive
management resource.
Alan B. Levine
has been a director and chairman of our Audit Committee since 2005. Mr. Levine served as Chief Financial Officer and Director of
Virtual Access Networks, Inc. from 2001 to 2002 and Chief Financial Officer and Treasurer of Marathon Technologies Corporation
from 1998 to 2001. From 2007 to 2011, he served as Vice President and Chief Financial Officer of the Graduate Management Admission
Council. Prior to this, Mr. Levine was with Ernst & Young LLP from 1974 to 1998, and was Partner from 1986 to 1998, where he
established and directed an Entrepreneurial Services practice. Previously, Mr. Levine served as a director, chairman of the audit
committee, and a member of the compensation and special committees of Dynasil Corporation of America, a director and chairman of
the audit committees of MCK Communications and Nextera Enterprises, Inc., and a director, chairman of the audit committee, and
a member of the compensation committee of Magnatek, Inc. Mr. Levine earned a Bachelor of Arts degree from the University of Vermont.
He also holds a Master of Accounting degree from the University of Arizona and was a certified public accountant. As chairman of
our Audit Committee Mr. Levine has demonstrated that he is valuable to the Audit Committee’s function. He is the Company’s
designated "audit committee financial expert" as defined by SEC regulations. Mr. Levine brings to the Board extensive
demonstrated expert knowledge and experience in accounting and finance from his Master of Accounting degree and as a former partner
with Ernst & Young LLP and a former chief financial officer. This knowledge and experience gives Mr. Levine a perspective that
he is able to use to help the Audit Committee and Board understand the highly technical issues management confronts on a daily
basis and to serve as a critical resource for management.
Edward D. Stewart
has been a director since 2013. Mr. Stewart is the former Chairman of the Board of ATC Technology Corporation and has served on
other company boards and audit committees. Mr. Stewart has many years of financial and operational experience with General Electric
Company including as Executive Vice President of GE Capital and Chief Financial Officer of a number of other GE businesses. Mr.
Stewart formerly served as a member of the Board of Directors of Nordstrom fsb, a formerly wholly-owned subsidiary of Nordstrom,
Inc., and a member of its Audit and Investment Committees. Mr. Stewart earned a Bachelor of Arts degree in Economics from Tufts
University. His extensive financial experience qualifies him as a "Financial Expert" for our Audit Committee. In addition,
his service as a director of other publicly-traded and private companies is a valuable resource to the Board.
Set forth below is
information concerning our executive officers who are not directors.
Patrick S. Bannon
has been with the Company since 1991. He was appointed Vice President and General Manager in
2017. He started his career as a manufacturing engineering manager with the Company’s
ITB business in 1991 and then transferred to the Heim Bearings business as a manufacturing manager in 1995, and was promoted to
plant manager of the Company’s ITB business in 1997. In 2002 he also assumed responsibility for the Company’s operations
in Mexico. He was promoted to plant manager of the Company’s Aircraft Products operations in 2004 maintaining responsibility
for Mexico and the Company’s engineered components business and was subsequently promoted to General Manager in 2008. In
2016 he also added General Manager responsibility for the Company’s AeroStructures and AeroComponents businesses. In 2017,
he added management responsibilities for the Company’s Heim Bearings business. Mr. Bannon has a Bachelor of Science degree
in Mechanical Engineering from Worcester Polytechnic Institute.
Richard J. Edwards
has been with the Company since 1990 when he joined us as Manufacturing Manager for the Hartsville, South Carolina facility. After
holding the positions of Plant Manager for the Hartsville Plant, and Director of Operations for the RBC Divisions, he was named
Vice President and General Manager for the RBC Divisions in 1996. Prior to joining us, Mr. Edwards spent six years with The Torrington
Company as Materials Manager, and later Plant Superintendent in the Tyger River plant. He holds a Bachelor of Science degree in
Management from Arizona State University.
Ernest D. Hawkins
has been with the Company since 2015. He was appointed Vice President Finance and Chief Accounting Officer in 2017. From 2014 to
2017 he was Corporate Controller of the Company’s Sargent Aerospace & Defense Division. From 2008 to 2014 he was Segment
Controller for the Dover Engineered Systems division of Dover Corporation. Mr. Hawkins holds a Bachelor of Science degree in Accounting
from Ball State University and was a licensed certified public accountant.
Joseph Salamunovich
joined the Company as General Counsel and Secretary in 2018 and was appointed Vice President in May 2019. Prior to joining the
Company Mr. Salamunovich was a partner at Strategic Law Partners, a boutique transactional law firm, from 2015 to 2018. From 1997
to 2010 he was Vice President, General Counsel and Secretary of ATC Technology Corporation, a publicly-owned third-party logistics
and automotive aftermarket service provider, and from 2010 to 2015 he was Executive Vice President, General Counsel and Secretary
of GENCO Product Lifecycle Logistics, a privately-owned third-party logistics service provider, which acquired ATC in 2010. Mr.
Salamunovich was with Gibson, Dunn & Crutcher, LLP from 1986 to 1997 where he was a partner in the Corporate Department. He
has a Bachelor of Arts degree in History from Loyola Marymount University and a Juris Doctor from Loyola Law School.
Robert M. Sullivan
joined the Company in 2016 as Assistant Corporate Controller and in 2017 was appointed Corporate Controller. From 2013 to 2016
he worked at Sikorsky Aircraft Corporation involved in business development, program finance and financial planning and analysis.
From 2007 until 2013 he was employed by Ernst & Young LLP as an Audit Manager. Mr. Sullivan holds a Bachelor of Science degree
in Accounting from Fairfield University, a Master of Science degree in Accounting and Taxation from the University of Hartford,
and a Master of Business Administration degree from the University of Connecticut. He is a licensed certified public accountant.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Overview
This Compensation Discussion
and Analysis provides a detailed description of our executive compensation philosophy and program, the compensation decisions the
Compensation Committee has made under this program, and the factors considered in making those decisions. This Compensation Discussion
and Analysis focuses on the compensation of our named executive officers (NEOs) for fiscal 2020, who were:
Name
|
|
Position
|
Dr. Michael J. Hartnett
|
|
Chairman, President and Chief Executive Officer (our principal executive officer)
|
Daniel A. Bergeron
|
|
Director, Vice President, Chief Operating Officer and Chief Financial Officer (our principal financial officer)
|
Patrick S. Bannon
|
|
Vice President and General Manager (one of our three most highly compensated executive officers as of the end of fiscal 2020 other than our principal executive and financial officers)
|
Richard J. Edwards
|
|
Vice President and General Manager (one of our three most highly compensated executive officers as of the end of fiscal 2020 other than our principal executive and financial officers)
|
Robert M. Sullivan
|
|
Corporate Controller (one of our three most highly compensated executive officers as of the end of fiscal 2020 other than our principal executive and financial officers)
|
Compensation Committee Report on Executive Compensation
The Compensation Committee
of the Board has reviewed and discussed with management the Compensation Discussion and Analysis. Based on that review and discussion,
the members of the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in
this proxy statement.
Respectfully submitted,
The Compensation Committee of the Board of RBC Bearings Incorporated
Richard R. Crowell (Chairman)
Alan B. Levine
Dr. Amir Faghri
Compensation Philosophy and Program
The Company’s
core focus is on the delivery of sustainable Company performance and long-term stockholder value. The Company’s compensation
program is designed to further and support this focus and to incentivize and reward executives for achieving outstanding performance
and generating value for the Company’s stockholders. During the period between our 2017 and 2018 annual meetings, the Company
conducted a thorough review of its compensation philosophy and program, as well as the Company’s performance and creation
of value for our stockholders. The objective of this review was to assess whether our existing compensation program was in fact
properly aligning executive compensation with stockholder interests and realizing the pay-for-performance philosophy that we embrace.
Our conclusion, as described in greater detail below, was that based on the Company’s outstanding performance relative to
our peers, our compensation program is properly incentivizing our executive leadership to drive the Company forward and generate
value for our stockholders. Based on this conclusion and taking into consideration the changes to the compensation program implemented
in fiscal 2014, we determined that substantive changes were not necessary at that time. At the 2019 annual meeting our stockholders
approved the compensation paid to the NEOs disclosed in our 2019 proxy statement; following the stockholder vote the Compensation
Committee determined that no changes to our executive compensation program were necessary.
Overview
of Our Compensation Program
|
●
|
Compensation
is delivered in the form of fixed pay, a cash incentive based on short-term performance
and a mix of long-term equity incentives.
|
|
●
|
All
elements of compensation are targeted against the 50th percentile of the Company
comparator group.
|
|
●
|
All
of the CEO’s variable compensation is performance-based.
|
|
●
|
All
NEO long-term incentives are stock-based, providing a direct tie to delivering sustainable
long-term stockholder value.
|
|
●
|
Long-term
incentive awards vest over a period of three to five years.
|
|
●
|
Corporate
performance assessment is primarily based on EBITDA.
|
|
●
|
Segment
performance assessment for certain NEOs is based on: (i) divisional sales plus depreciation
minus total factory costs for the fiscal year division target comprised of revenue plus
depreciation minus total factory cost; (ii) divisional revenue growth relative to U.S.
Gross Domestic Product; and (iii) non-financial and qualitative performance goals, such
as customer services levels, development of human resources, and overall Company and
individual performance.
|
|
●
|
Short-term
incentives for NEOs other than the CEO take account of individual performance.
|
Overview
of Governance Practices and Policies
|
●
|
An
annual stockholder “Say-on-Pay” vote.
|
|
●
|
A
pay-for-performance philosophy.
|
|
●
|
Use
of an appropriate comparator group, selected based on a range of factors.
|
|
●
|
Significant
stock ownership guidelines for the executive officers.
|
|
●
|
A
clawback policy that applies to all incentive compensation for the executive officers.
|
|
●
|
Double-trigger
provisions in the event of a change in control.
|
|
●
|
Prohibition
on share recycling under the long-term incentive plans.
|
|
●
|
Retention
of an independent external compensation consultant.
|
|
●
|
No
repricing or backdating of options.
|
|
●
|
No
employment agreements, other than for the CEO and COO/CFO.
|
For fiscal 2020, the
CEO’s total compensation was $12,465,105, of which $11,632,087 (or 93.3%) was pursuant to performance-based compensation
programs. The following pay mix graph for the CEO demonstrates the focus on performance-based pay.
Stockholder Engagement
The Company is committed
to maintaining a dialogue with our stockholders to understand any concerns they may have with our compensation program or otherwise.
Toward that end, from time to time the Company has reached out to a number of stockholders to discuss our compensation program,
explain the basis for our compensation decisions, and invite stockholder feedback regarding specific concerns with our compensation
program. The Compensation Committee has then used this feedback when evaluating our compensation program design.
Our discussions with
our stockholders generally focus on their process for evaluating “Say-on-Pay” and pay-for-performance issues. In certain
cases, stockholders have indicated they vote on compensation issues based on evaluations made by their internal staff, while others
indicated they vote on compensation issues taking into consideration the recommendations made
by whomever they use for proxy advisory services. Below we address the following primary issues raised in the past with respect
to our compensation program by proxy advisory service providers:
|
●
|
The
use of EBITDA as the primary incentive compensation metric with ROIC as a supplemental
metric.
|
|
●
|
Maintaining
our compensation comparator group.
|
|
●
|
Pay
for performance philosophy.
|
Following
this discussion, we set forth highlights of our fiscal year 2020 financial performance that demonstrate the effectiveness of our
executive compensation program.
During
2017, our Compensation Committee, working with management, undertook a review of our executive compensation program. This effort
included (i) discussions with 15 major institutional stockholders and their corporate governance groups regarding executive compensation,
(ii) analysis of market practices at peer companies, and (iii) retention by the Compensation Committee of an independent compensation
consultant. The objective of the investor outreach was to understand the factors our stockholders consider to be most important
when evaluating our executive compensation program. We learned that stockholders were not seeking major changes to our executive
compensation program, but rather that they had some ideas to refine and improve the program, often specific to CEO pay.
Major stockholders were not prescriptive about plan design. Instead, they were more interested to see that the results and outcomes
delivered by the plans were appropriately aligned with Company-wide and individual performance.
Key feedback we have
received from our stockholders and the actions we have taken in response are:
Feedback We Received
|
|
Action Taken by Compensation Committee
|
|
|
|
While our stockholders believed that the EBITDA measurement worked well for the Company given its financial performance, the stockholders recommended the Board consider adding one or two more metrics to the compensation plan, such as ROIC. The stockholders believed that management was in the best position to determine the best targets for how they manage the business. Certain stockholders indicated that total stockholder return (TSR) should not be used as a metric and do not follow the recommendations of the proxy advisor groups.
|
|
The Compensation Committee amended the Company’s equity compensation program for the CEO and COO/CFO so that approximately 33% of their total equity compensation is based on ROIC as the measurement base. This applies to stock option grants as well as restricted stock grants. The CEO’s and COO/CFO’s compensation is now based on a combination of EBITDA and ROIC, two measurement factors that management and the Compensation Committee believe fit very well with how the business is managed and align compensation with both the short-term and the long-term performance of the Company.
|
|
|
|
Our stockholders believed it was reasonable to expect that Dr. Hartnett's compensation should be higher than the peer group given that he is the Company founder, his length of service, and the Company’s superior long-term results.
|
|
Notwithstanding the stockholder’s belief as to the reasonableness of Dr. Hartnett’s compensation, Dr. Hartnett’s compensation was restructured with the effect that his base salary and incentive bonus were reduced by 20% based on compensation targets.
|
|
|
|
A few stockholders expressed concern over the staggered board with a possible solution being the ability for a stockholder to call a special meeting with a 20% to 25% threshold.
|
|
Following the 2018 stockholders meeting the Company sought additional feedback from a broader sampling of stockholders regarding the expressed concern and ultimately decided that no changes were warranted at that time.
|
|
|
|
Several stockholders expressed concern over the director majority vote issue.
|
|
The Company’s by-laws were amended in 2017 to require a majority vote for the election of each director.
|
The Use of EBITDA
EBITDA is the core
measure used to assess Company operating performance under the variable pay program applicable to our named executive officers.
EBITDA is defined as our consolidated operating income plus depreciation, amortization and incentive stock compensation, as adjusted
for various unusual or non-recurring items. The Company and Compensation Committee believe that EBITDA is the most appropriate
measure of operating performance for a number of reasons, and that, of the various performance metrics we could use under our
variable pay program, EBITDA most closely aligns with our stockholders’ best interests. The Compensation Committee uses
EBITDA performance to determine the variable compensation of the CEO. The CEO’s annual performance incentive is based solely
on EBITDA performance; the achievement of plan results in an annual incentive
of 150% of base salary, with no incentive earned for achieving less than 80% of plan. EBITDA is also used to determine the size
of awards under the long-term incentive program, requiring minimum performance of 75% of plan during the year to earn an award
of both stock options and restricted stock. We continue to believe quite strongly that EBITDA is the most appropriate metric and
that its use as the primary performance metric is a significant driver for our outstanding results and stock performance.
|
●
|
Our
sole motivation in selecting performance metrics is to choose the metric that most accurately
captures our performance as a company and the value that we are generating for our stockholders.
We strongly believe that EBITDA is that metric.
|
|
●
|
EBITDA
is the core foundation on which all of our business units run. Over the years we have
developed a strong focus and discipline around cash management and capital allocation
from the top of the organization to the bottom. We continue to apply this focus in operating
the Company today.
|
|
●
|
EBITDA
allows management, investors and others to evaluate and compare the Company’s core
operating results, including return on capital and operating efficiencies, from period
to period by removing the impact of the Company’s capital structure (interest expense
from our outstanding debt), asset base (depreciation and amortization), tax consequences,
changes in accounting reserves, other non-operating items, and share-based compensation.
|
|
●
|
EBITDA
is the measure that guides the Company, through managing cash flow, operating cost and
efficiency, and capital allocation, during periods of economic downturn and inhibits
the manipulation of operating performance through excessive leverage or capital expenditures,
the impact of which are more problematic during periods of economic downturn.
|
|
●
|
EBITDA
is a key driver for debt covenants.
|
|
●
|
We
use EBITDA for business planning purposes, to run the business, for capital allocation
decisions, and to evaluate and price potential acquisitions.
|
|
●
|
In
addition to its use by management, we also believe EBITDA is a measure widely used by
securities analysts, investors, and others to evaluate the financial performance of the
Company and other companies in our industry.
|
|
●
|
We
view EBITDA as the most reliable bellwether of how well we are converting the Company’s
revenue into value for our stockholders.
|
We
have considered alternatives to the continued use of EBITDA, such as TSR (i.e., total stockholder return). We recognize
that many companies use TSR as a performance metric under their compensation programs, and that its use is familiar to, and might
be welcomed by, some stockholders. However, the feedback we received from our stockholders recommended against using TSR, and
upon considering how TSR would apply to RBC, we identified a number of challenges, particularly relating to the selection of
an appropriate peer group with respect to TSR. Incorporating TSR as a performance metric would also be a major change internally
to our organization and could disrupt how we run the business and achieve the results we have over the last several years. We
have relied on EBITDA as our primary performance metric since our IPO in 2005, when our stock entered the market at $14.50 per
share. On July 1, 2020, our stock closed at $128.85 per share. We believe we are unique among our peers in achieving this result
for our stockholders.
Our adoption of the
ROIC metric for fiscal 2018 equity compensation was based on the belief that ROIC captures not just profitability but whether the
magnitude of profitability is appropriate for the investments made. ROIC can also be compared across companies and industries and
provides a closer link to key drivers of value creation. We also believe that ROIC works in close synergy with our primary EBITDA
metric.
Maintaining Our Compensation Comparator Group
The Compensation Committee
reviews the Company’s compensation comparator group (the “Comparator Group”) periodically to ensure it remains
appropriate for the purposes of establishing executive compensation. In assessing the composition of the Comparator Group, we use
a number of selection criteria, including industry focus, and company scope measured through revenue, market capitalization, headcount
and financial growth. The Compensation Committee, along with confirmation by our stockholders, believes that this customized approach
is preferable to an algorithmic GICS code approach to selecting a peer group, which lacks the precision and ability to take into
account unique circumstances that we believe are crucial to devising a fairly representative peer group, particularly for companies
like us that happen to be smaller than many of our competitors in the marketplace.
The Compensation Committee
believes that offering competitive compensation packages to our leadership team is critical to retaining the talent that has driven
the outstanding results we have achieved during the past several years. To be legitimately competitive, our compensation program
must be benchmarked against the full array of our competitors, not solely against our similarly sized competitors. Details regarding
the Comparator Group can be found below under “Compensation Governance and Policies – Policies.” Our executives’
compensation is targeted at the 50th percentile against the Comparator Group.
Pay-for-Performance Philosophy
The Company enthusiastically
embraces the pay-for-performance philosophy, and it was this philosophy that guided the Compensation Committee’s deliberations
regarding whether to modify our compensation program after fiscal 2017. As described in greater detail in the following section,
the Company achieved outstanding performance across numerous metrics during fiscal 2020 and we believe this outstanding performance
underscores the effectiveness of our compensation program. The program we have designed is incentivizing our executive team to
drive the results that create value for our stockholders, and motivating our executive team to sustain that value creation in future
fiscal years by rewarding the value created in fiscal 2020. We believe our compensation program exemplifies a properly functioning
pay-for-performance approach to compensation. We have constructed a compensation program that incentivizes our executive team to
outperform our peers, and they have delivered on that objective, thereby generating significant value for our stockholders. We
believe that maintaining our compensation program is a key component to sustaining this value creation for our stockholders through
future fiscal years.
Operating Performance Highlights and Stock Performance
The Company’s
operating results for fiscal 2020 demonstrated solid execution and continued strong operating performance. The amounts below are
in millions, except per share amounts:
|
|
Fiscal 2020
|
|
|
Fiscal 2019
|
|
|
Change
|
|
Net sales
|
|
$
|
727.5
|
|
|
$
|
702.5
|
|
|
|
3.6
|
%
|
Gross margin
|
|
|
289.1
|
|
|
|
276.7
|
|
|
|
4.5
|
%
|
Operating income
|
|
|
156.8
|
|
|
|
132.0
|
|
|
|
18.7
|
%
|
Net income
|
|
|
126.0
|
|
|
|
105.2
|
|
|
|
19.8
|
%
|
Diluted earnings per share
|
|
|
5.06
|
|
|
|
4.26
|
|
|
|
18.8
|
%
|
The following graph
shows the total return to our stockholders compared to the Russell 2000 Small Cap Index, Russell 3000 Index and Nasdaq Composite
Index over the period from March 28, 2015 to March 28, 2020. Each line on the graph assumes that $100 was invested in our common
stock on March 28, 2015 or in the respective indices at the closing price on March 28, 2015. The graph then presents the value
of these investments, assuming reinvestment of dividends, through the close of trading on March 28, 2020.
The cumulative total
return shown on the stock performance graph indicates historical results only and is not necessarily indicative of future results.
Compensation Governance and Policies
Objectives and Philosophy
The Company’s
compensation program is designed to reward executives based on favorable performance and results. Compensation policies and plans
(including benefits) are designed to attract and retain top quality and experienced executives by providing the opportunity to
earn competitive cash compensation based on corporate, business unit and individual performance, plus the opportunity to accumulate
stock-based wealth commensurate with the long-term growth and value created for the Company’s stockholders.
The Company seeks to
attract executive talent by offering competitive base salaries and annual and long-term performance incentive opportunities. The
Company provides incentives that promote both the short-term and long-term financial and strategic objectives of the Company. Achievement
of short-term objectives is rewarded through base salary and annual performance incentives, while long-term incentive grants (primarily
stock options and restricted stock) encourage executives to focus on and align themselves with the Company’s long-term goals
as well. These incentives are based on an approved operating plan based on EBITDA, which by its nature captures financial objectives
of importance to the Company including revenue and earnings growth, cash flow generation, and creation of stockholder value. The
Company’s compensation program also accounts for individual performance, which enables the Company to differentiate among
executives and emphasize the link between personal performance and compensation. In addition, an additional ROIC metric is used
for a portion of the CEO’s and COO/CFO’s equity compensation.
Compensation Process
Constituent
|
Roles
and Responsibilities
|
Compensation
Committee
(Comprised
of the following three independent directors for fiscal 2020: Richard R. Crowell (Chairperson), Alan B. Levine and Dr.
Amir Faghri)
|
● Oversees
the manner in which the Board discharges its responsibilities relating to the Company’s compensation policies and
plans.
● Reviews
and determines, as appropriate, the compensation of the Company’s executive officers.
● In
consultation with the Board, the CEO and senior management, develops and approves the Company’s executive compensation
philosophy.
● Reviews
and approves corporate goals and objectives related to the CEO’s compensation and evaluates the CEO’s performance.
● Determines
the CEO’s compensation and reviews and approves the CEO’s recommendations regarding the compensation of the
other executive officers.
● Sole
authority to retain and terminate executive compensation consultants engaged to provide advice to the Compensation Committee
in connection with its responsibilities and to retain other professional advisors when necessary or appropriate.
Details
of the Compensation Committee’s duties are summarized in the “Board of Directors and Corporate Governance”
section of this proxy statement, and are set out in full in the Compensation Committee Charter, which can be viewed at
http://investor.rbcbearings.com.
|
Advisors
to the Compensation Committee
|
● Assist
the Compensation Committee and senior management in their periodic review of the effectiveness and competitiveness of
the Company’s executive compensation structure.
● Generally
report directly to the Compensation Committee, although occasionally are engaged by senior management, subject to Compensation
Committee approval and oversight.
|
Company
Management
|
● The
CEO, who is in the best position to initially assess performance, makes recommendations to the Compensation Committee
regarding compensation decisions applicable to the other executive officers.
● Company
management provides input and feedback to the Compensation Committee regarding the Compensation Committee’s compensation
process.
● Company
management may be invited to attend Compensation Committee or Board meetings from time to time, or to contribute materials
for such meetings. No member of Company management is present when the Compensation Committee or Board discusses his or
her compensation.
|
Governance Policies
Interlocks and
Insider Participation. No member of the Compensation Committee has ever been an officer or employee of the Company,
or had any relationship with the Company requiring disclosure as a related-party transaction in the section “Certain Relationships
and Related Transactions” of this proxy statement. No executive officer of the Company has served on the board of directors
or compensation committee of any other entity that has or has had one or more executive officers who served as a member of the
Board or the Compensation Committee during fiscal 2020.
Executive Compensation
Clawback Policy. The Company maintains an Executive Compensation Clawback Policy to deter fraud and intentional
illegal conduct that materially contributes to a restatement of our financial statements. The policy provides that if it is found
that an executive officer engaged in fraud or intentional illegal conduct that materially contributed to the need to restate our
financial statements, and the amount of any performance-based compensation actually paid or awarded to such executive officer would
have been less had it been calculated based on such restated financial statements then, subject to certain exceptions set forth
in the Policy, the Compensation Committee can seek to recover the after-tax portion of the difference between the amount actually
paid and the amount that should have been paid. The full Executive Compensation Clawback Policy is filed as Exhibit 10.1 to our
Current Report on Form 8-K dated July 25, 2013.
Stock Ownership
Guidelines. We have stock ownership requirements for each of our executive officers and non-employee directors.
These stock ownership requirements are designed to encourage stock ownership by our executive officers and non-employee directors
and to further align their interests with our stockholders. Each executive officer and non-employee director must achieve and maintain
ownership of ordinary stock or ordinary stock equivalents at or above a prescribed level. The requirements are as follows:
Position
|
|
Value of Stock
|
Chief Executive Officer
|
|
6x base salary
|
All other executive officers
|
|
3x base salary
|
Non-employee directors
|
|
3x annual retainer fee
|
Our stock-ownership
program requires the accumulation of ordinary stock (or ordinary stock equivalents) over a five-year period following the date
the person becomes subject to stock-ownership requirements. Executive officers who experience a change in base salary have three
years from the date of such change to achieve the new level of ownership. Ownership credit is given for actual ordinary stock and
restricted stock owned, whether or not vested. Stock options do not count toward meeting the stock-ownership target. The Compensation
Committee reviews compliance with these guidelines on an annual basis.
The full text of the
Company’s Stock Ownership Guidelines is filed as Exhibit 10.1 to our Current Report on Form 8-K dated June 17, 2013.
Maintaining a
Compensation Comparator Group. The Compensation Committee compares the Company’s senior management compensation
levels with those of companies in industries related to the Company and similar-sized companies in the industrial machinery, aerospace
& defense, electronic equipment & instruments, electrical equipment, and semiconductor bearings industries. During 2016
the Compensation Committee undertook a review of our compensation peer group with the support of Radford, the Compensation Committee’s
independent advisor at the time. Given the significant impact the 2015 Sargent acquisition had on the Company, updating the peer
group was necessary due to our increased size and higher weighting within the aerospace sector. A number of criteria were identified
to inform the selection of appropriate peers, including industry focus, and company scope measured through revenue, market capitalization,
headcount and financial growth. As a result of the analysis, for 2016 six companies were removed from the previous peer group and
seven companies were added. No changes have been made to the peer group since then.
Fiscal 2020 Comparator Group
|
AAR
Astronics
Barnes Group
CIRCOR International
Crane
Cognex
|
Curtiss-Wright
Esterline Technologies
FARO Technologies
FLIR Systems
Franklin Electric
Graco
|
HEICO
Hexcel
Kulicke and Soffa Industries
Moog
MTS Systems
Teledyne Technologies
|
The Compensation Committee
targets all elements of compensation at the 50th percentile of the Comparator Group.
Compensation Program Components and Pay Outcome for Fiscal
2020
The Compensation Committee
regularly reviews and updates the Company’s compensation program for the executive officers to ensure that compensation levels
and benefits are competitive and reasonable, as measured against the Comparator Group and using the guidelines described above.
The NEOs’ core
compensation elements are base salary, an annual cash incentive, and a long-term equity incentive award in the form of restricted
stock and stock options. Details and outcomes for fiscal 2020 are described below.
Base Salaries
Base
salaries are reviewed annually by the Compensation Committee taking into account a number of factors including:
|
●
|
The
terms of his employment agreement in the case of the CEO;
|
|
●
|
The
CEO’s salary recommendations in the case of NEOs other than the CEO;
|
|
●
|
Competitive
positioning against market;
|
|
●
|
Value
to the Company and future potential;
|
|
●
|
Scope
of responsibility; and
|
In
fiscal 2021 the Compensation Committee decided not to increase the salaries of any of the NEOs in light of the economic uncertainty
caused by the COVID-19 pandemic. As a result, the NEOs’ base salaries remain at their fiscal 2020 levels:
Name and Position
|
|
Base Salary
|
|
Dr. Michael J. Hartnett
|
|
$
|
775,020
|
|
Daniel A. Bergeron
|
|
$
|
551,250
|
|
Patrick S. Bannon
|
|
$
|
270,000
|
|
Richard J. Edwards
|
|
$
|
335,000
|
|
Robert M. Sullivan
|
|
$
|
165,000
|
|
In
response to the COVID-19 pandemic the Company initiated a partial furlough program for the Company’s executive officers starting
in May 2020 and continuing through at least August 2020. As a result, the executive officers’ monthly base salaries during
the furlough period are being reduced by approximately 25%. The Company is evaluating whether additional furloughs after August
will be necessary.
Annual Incentive Compensation Plan
Under the Company’s
annual incentive compensation plan (the “Annual Incentive Plan”), the Company pays performance-based annual cash incentive
awards. The Annual Incentive Plan primarily assesses performance relative to stretching EBITDA goals on a formulaic and/or discretionary
basis. As explained above in “Stockholder Engagement – The Use of EBITDA,” EBITDA is the primary measure under
the Annual Incentive Plan.
CEO.
In accordance with the CEO’s employment agreement, the CEO is entitled to an annual performance incentive equal to a percentage
of his fiscal year-end base salary as follows:
Percentage of EBITDA to Plan
|
|
Amount of Bonus
|
80.0% to 89.9%
|
|
75% of Base Salary
|
90.0% to 99.9%
|
|
100% of Base Salary
|
100.0% to 109.9%
|
|
150% of Base Salary
|
110.0% to 119.9%
|
|
200% of Base Salary
|
120.0% or higher
|
|
250% of Base Salary
|
COO/CFO.
In accordance with his employment agreement, the Vice President, Chief Operating Officer and Chief Financial Officer is eligible
for an annual performance incentive equal to a percentage of his fiscal year-end base salary as follows:
Percentage of EBITDA to Plan
|
|
Amount of Bonus
|
80.0% to 89.9%
|
|
45% of Base Salary
|
90.0% to 99.9%
|
|
60% of Base Salary
|
100.0% to 109.9%
|
|
90% of Base Salary
|
110.0% to 119.9%
|
|
120% of Base Salary
|
120.0% or higher
|
|
150% of Base Salary
|
Other Executive
Officers. For executive officers other than the CEO and the COO/CFO, a broader range of performance measures, beyond EBITDA,
are taken into account when determining their payments under the Annual Incentive Plan in order to reflect the areas for which
they are directly accountable.
The Annual Incentive
Plan payments for executive officers who are in charge of operating segments are based on the following three-part performance
plan:
|
1.
|
Divisional sales plus depreciation minus total factory costs for the fiscal year. This component
is targeted at 50% of the total annual performance incentive (or 30% of their fiscal year-end base salary), subject to adjustment
based on level of achievement as noted below
|
Percentage of Achievement of Target Goal
|
|
Amount of Bonus as Percentage of Target
|
0.0% to 80.0%
|
|
No bonus
|
80.1% to 99.9%
|
|
Pro rata portion of 100%
|
100.0%
|
|
100%
|
100.1% to 119.9%
|
|
Pro rata portion of 200%
|
120.0% or higher
|
|
200%
|
|
2.
|
Divisional revenue growth relative to U.S. Gross Domestic Product. This component is equal to 25%
of the total target annual performance incentive (or 15% of their fiscal year-end base salary). This component is earned upon achievement
of divisional revenue growth that exceeds two times U.S. Gross Domestic Product.
|
|
3.
|
Non-financial and qualitative performance goals. This component is equal to 25% of the total target
annual performance incentive (or 15% of their fiscal year-end base salary) and is the only discretionary component of the annual
performance incentive. The CEO reviews non-financial performance in areas critical to the long-term success of the business.
|
The Annual Incentive
Plan payments for each executive officer who is not in charge of an operating segment (e.g., the Corporate Controller) is
equal to a percent of his fiscal year-end base salary, determined at the discretion of the CEO based on the Company’s overall
performance and the executive officer’s individual performance.
Based on the foregoing,
the NEOs other than the CEO and the COO/CFO are eligible for the following cash incentive awards under the Annual Incentive Plan
(expressed as percentages of fiscal year-end base salary):
Name
|
|
Target Bonus
(% of Base Salary)
|
|
|
Maximum Bonus
(% of Base Salary)
|
|
|
Performance
Measures
|
|
Patrick S. Bannon
|
|
|
60
|
%
|
|
|
90
|
%
|
|
|
|
(1)
|
Richard J. Edwards
|
|
|
60
|
%
|
|
|
90
|
%
|
|
|
|
(1)
|
Robert M. Sullivan
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
(2)
|
|
(1)
|
Divisional sales plus depreciation minus total factory
costs; Divisional revenue growth relative to U.S. Gross Domestic Product; non-financial and qualitative performance goals.
|
|
(2)
|
Overall Company and individual performance.
|
Discretionary
Bonuses. In addition to Annual Incentive Plan compensation, the Compensation Committee may approve additional discretionary
bonuses to the executive officers, other than the CEO, in the case of exceptional performance (which is determined based on the
CEO’s subjective evaluation of performance relative to a number of factors, including, but not limited to, “Cash Flow,”
“Cumulative Earnings Per Share Growth,” “Customer Service Levels” and “Debt (Net Debt) to Capital”).
Awards under the Annual
Incentive Plan are subject to the Executive Compensation Clawback Policy.
Annual Incentive
Plan Payments for Fiscal 2020. The EBITDA goal under the Annual Incentive Plan for fiscal 2020 was set at $210,683,000
in accordance with the operating plan. This stretching goal represented an increase of 7.8% over $195,504,000 of EBITDA achieved
in fiscal 2019. EBITDA achieved in fiscal 2020 was $210,660,000, which equated to 100.0% of the stretching goal in the operating
plan. Based on this performance, the Compensation Committee approved the following Annual Incentive Plan payments and discretionary
bonuses for fiscal 2020:
Name
|
|
Annual Incentive
|
|
|
Discretionary Bonus
|
|
|
Total Bonus
|
|
Dr. Michael J. Hartnett
|
|
$
|
1,162,530
|
|
|
$
|
-
|
|
|
$
|
1,162,530
|
|
Daniel A. Bergeron
|
|
$
|
496,125
|
|
|
$
|
-
|
|
|
$
|
496,125
|
|
Patrick S. Bannon
|
|
$
|
178,200
|
|
|
$
|
-
|
|
|
$
|
178,200
|
|
Richard J. Edwards
|
|
$
|
25,000
|
|
|
$
|
-
|
|
|
$
|
25,000
|
|
Robert M. Sullivan
|
|
$
|
70,000
|
|
|
$
|
-
|
|
|
$
|
70,000
|
|
Dr. Michael J. Hartnett.
Based on fiscal 2020 EBITDA being 100.0% of the operating plan, Dr. Hartnett received an annual incentive payment for fiscal 2020
equal to 150.0% of his base salary.
Daniel A. Bergeron.
Based on fiscal 2020 EBITDA being 100.0% of the operating plan, Mr. Bergeron received an annual incentive payment for fiscal 2020
equal to 90.0% of his base salary.
Patrick S. Bannon.
For fiscal 2020, Mr. Bannon achieved 104.1% of his goal under part 1 of his performance plan and therefore received a payment equal
to 120.0% of the targeted amount under that part, which target is 30.0% of his base salary of $270,000; this amounted to a payment
of $97,200 or 36.0% of his base salary. Mr. Bannon exceeded his goal under part 2 of his performance plan and therefore received
a payment equal to 100% of his targeted amount under that part, which target is 15.0% of his base salary; this amounted to a payment
of $40,500. Mr. Bannon received a payment under part 3 of his performance plan equal to 100% of the targeted amount under that
part, which target is 15.0% of his base salary; this amounted to a payment of $40,500. Mr. Bannon’s total Annual Incentive
Plan payment for fiscal 2020 was 66.0% of his base salary.
Richard J. Edwards.
For fiscal 2020, Mr. Edwards achieved 78.1% of his goal under part 1 of his performance plan and therefore did not receive a payment
under that part. Mr. Edwards did not achieve his goal under part 2 of his performance plan and therefore did not receive a payment
under that part. Mr. Edwards received a payment under part 3 of his operating plan representing 50% of the targeted amount under
that part, which target is 15.0% of his base salary; this amounted to a payment of $25,000 or 7.5% of his base salary.
Robert M. Sullivan.
Based on the CEO’s assessment of the Company’s overall performance and Mr. Sullivan’s individual performance
for fiscal 2020, he received an annual incentive payment of 42.4% of his base salary, or $70,000.
Long-Term Equity Incentive Program
The Company makes awards
under its 2013 Long-Term Incentive Plan and 2017 Long-Term Incentive Plan (the “Long-Term Incentive Plans”). These
plans provide for grants of stock options, restricted stock and other types of equity awards for executive officers and other key
managers.
In fiscal 2020, as
was the case in fiscal 2019, awards were made to the CEO and the other NEOs in the form of stock options and restricted stock.
The purpose of these awards is to align management and stockholder interests over the long term, by creating a strong and direct
long-term relationship between executive compensation, value creation and stockholder returns. Furthermore, any awards under the
Long-Term Incentive Plans provide the recipients with an incentive to maximize stockholder value and contribute to our success,
while simultaneously enabling us to attract, retain and reward the best available people to lead the Company.
The long-term incentive
awards have the following design features:
Restricted
Stock
|
Stock
Options
|
● Typically
vest over a three- to five-year period, in equal amounts each year
● Subject
to Executive Compensation Clawback Policy
● Taxed
at ordinary income tax rates (subject to withholding) when the stock vests, and the Company receives a corresponding tax
deduction
|
● Exercise
price equal to fair market value at grant date
● Typically
vest over a three- to five-year period, in equal amounts each year
● Expire
seven years after the date of grant
● Subject
to Executive Compensation Clawback Policy
● Taxed
at ordinary income tax rates (subject to withholding) on exercise, and the Company receives a corresponding tax deduction
(i.e., non-qualified stock options rather than incentive stock options)
|
CEO and COO/CFO.
Starting with fiscal 2018 the criteria for determining the award size for the CEO was changed to the following performance-based
matrix, with the intent to implement a 20% reduction based on achievement of 100.0% of target:
Percentage of EBITDA to Plan
|
|
Amount of Restricted Shares Awarded
|
|
|
Amount of Stock
Options Awarded
|
|
Less than 75.0%
|
|
|
None
|
|
|
|
None
|
|
75.0% to 84.9%
|
|
|
10,680
|
|
|
|
None
|
|
85.0% to 94.9%
|
|
|
16,020
|
|
|
|
26,000
|
|
95.0% to 104.9% (target)
|
|
|
21,360
|
|
|
|
52,000
|
|
105.0% to 114.9%
|
|
|
32,040
|
|
|
|
52,000
|
|
Over 114.9%
|
|
|
42,720
|
|
|
|
61,360
|
|
Starting with fiscal
2018 the criteria for determining the award size for the COO/CFO was changed from discretionary to the following performance-based
matrix:
Percentage of EBITDA to Plan
|
|
Amount of Restricted Shares Awarded
|
|
|
Amount of Stock
Options Awarded
|
|
Less than 75.0%
|
|
|
None
|
|
|
|
None
|
|
75.0% to 84.9%
|
|
|
5,000
|
|
|
|
None
|
|
85.0% to 94.9%
|
|
|
7,500
|
|
|
|
7,500
|
|
95.0% to 104.9% (target)
|
|
|
10,000
|
|
|
|
15,000
|
|
105.0% to 114.9%
|
|
|
15,000
|
|
|
|
15,000
|
|
Over 114.9%
|
|
|
20,000
|
|
|
|
17,700
|
|
In addition, based
on feedback from our outreach program with stockholders, an ROIC-Based Equity Compensation Award Plan (the “ROICAP”)
was put in place for the CEO and the COO/CFO starting in fiscal 2018. The CEO ROICAP provides target awards of 10,000 shares of
restricted stock and 12,000 stock options while the COO/CFO ROICAP provides target awards of 5,000 shares of restricted stock
and 10,000 stock options. The ROICAP is targeted to comprise approximately 1/3 of the CEO’s and/or the COO/CFO’s total
equity incentive compensation in a year where ROIC targets are achieved. The types of grants authorized
under the ROICAP are as follows:
|
●
|
Restricted
Shares - 1/3 of the award (if earned and granted) vests on each of the first, second
and third anniversary of the grant date.
|
|
●
|
Stock
Options - 1/5 of the award (if earned and granted) vests and becomes exercisable on each
of the first, second, third, fourth and fifth anniversary of the grant date. The exercise
price is the closing price of the Company’s common stock on the date of grant and
the options expire on the seventh anniversary of the date of grant.
|
Targets
for the ROICAP are established annually by the Compensation Committee. ROIC is defined as adjusted operating income (AOI) tax
effected divided by equity plus debt less cash. AOI is defined as operating income adjusted to eliminate the effects of asset
impairments, restructurings, acquisitions, divestitures, various unusual or non-recurring items, plant closing costs, and the
cumulative effect of tax or accounting changes, as determined in accordance with U.S. GAAP, as applicable. The number of performance-based
restricted shares or stock options earned under the ROICAP for a fiscal year is determined as follows:
|
|
ROIC as % of Plan
|
|
Award Multiple
|
Threshold
|
|
-0.75%
|
|
50%
|
Target
|
|
0%
|
|
100%
|
Maximum
|
|
+0.75%
|
|
200%
|
In Between
|
|
Straight Line
|
|
Straight Line
|
Weighting
|
|
1/3
|
|
|
(Award Multiple x (TARGET NUMBER)) = number
of shares / options actually granted.
For fiscal 2020, the
ROICAP target was equal to 13.50% and ROIC achieved was 12.87%.
Other Executive
Officers. When determining whether to make awards under the Long-Term Incentive Plans to the executive officers, other
than the CEO and the COO/CFO, and when determining the size of any such awards, the Compensation Committee
considers a number of factors:
|
●
|
Assessments
by the CEO and the Compensation Committee of the achievement of applicable performance
metrics;
|
|
●
|
The
perceived incentive that any grant would provide to generate long-term stockholder value;
and
|
|
●
|
The
contribution of the individual.
|
Long-Term
Equity Incentive Awards for Fiscal 2020. Based on the EBITDA achieved in fiscal 2020 equaling 100.0%
of the operating plan and the ROIC percentage achieved for fiscal 2020 equaling 12.87%, the Compensation Committee approved the
following awards under the Long-Term Incentive Plans in fiscal 2021:
Name
|
|
Restricted Stock
Fair Value
|
|
|
Stock Options
Fair Value
|
|
|
Grant Date Fair Value
(% of Base Salary)
|
|
Dr. Michael J. Hartnett
|
|
$
|
3,725,036
|
|
|
$
|
2,900,431
|
|
|
|
855
|
%
|
Daniel A. Bergeron
|
|
$
|
1,769,128
|
|
|
$
|
1,021,593
|
|
|
|
506
|
%
|
Patrick S. Bannon
|
|
$
|
687,200
|
|
|
$
|
738,750
|
|
|
|
528
|
%
|
Richard J. Edwards
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
Robert M. Sullivan
|
|
$
|
343,600
|
|
|
$
|
492,500
|
|
|
|
507
|
%
|
Based on the fiscal
2020 EBITDA component of the Long-Term Incentive Plans, Dr. Hartnett was awarded 21,360 shares of restricted stock and 52,000 stock
options, and Mr. Bergeron was awarded 10,000 shares of restricted stock and 15,000 stock options. Based on fiscal 2020 ROIC, Dr.
Hartnett was awarded 5,743 shares of restricted stock and 6,892 stock options, and Mr. Bergeron was awarded 2,872 shares of restricted
stock and 5,743 stock options.
For further information
regarding base salary, performance-based annual cash incentive awards under the Annual Incentive Plan, and equity awards under
the Long-Term Equity Incentive Plans for the NEOs, see ”Summary Compensation” below. Note however that the information
regarding Long-Term Equity Incentive Plan awards presented in the Summary Compensation table relates to awards made in fiscal 2020
based on fiscal 2019 performance, while the information provided above regarding the awards made in fiscal 2021 based on fiscal
2020 performance will be presented in the Summary Compensation table appearing in next year’s proxy statement.
Benefits and Perquisites
In addition to the
core elements of compensation explained in the previous section (i.e., base salary, performance-based annual cash incentive
awards under the Annual Incentive Plan, and equity awards under the Long-Term Equity Incentive Plans), NEOs are eligible for certain
additional benefits, perquisites and plans, as described below.
Retirement Plans
The executive officers
are entitled to participate in the Company’s 401(k) plan on the same terms and conditions as all other eligible employees
subject to a 5% of eligible employee compensation participation limit for highly compensated employees. The plan is funded by eligible
participants through employee contributions and by the Company through matching contributions equal to 50% of the first 3.5% of
eligible employee compensation.
Supplemental Executive Retirement Plan
To attract and retain
highly qualified senior executives, the Company maintains a Supplemental Executive Retirement Plan (SERP). The SERP is a non-qualified
supplemental pension plan for executives selected by the CEO that provides pension benefits in excess of those provided by the
Company’s 401(k) plan. The SERP allows eligible employees to elect to defer, until termination of their employment, the receipt
of up to 75% of their current salary and up to 100% of their bonus compensation. The Company has historically made contributions
equal to 25% of the deferral amount, up to the first 7% of the employees’ annual compensation, which vest in full after one
year of service, but in light of the COVID-19 pandemic the Company recently suspended these contributions.
Perquisite Programs
The Company’s
executive officers are eligible to participate in the Company’s broad-based benefit programs, which are generally available
to all employees, including health, disability and life insurance, and relocation programs.
The perquisites provided
to the CEO are set out in his employment agreement and include a leased vehicle, healthcare expense reimbursements, and reimbursement
of personal expenses of $50,000. The perquisites provided to the COO/CFO are set out in his employment agreement and include a
leased vehicle, and healthcare and disability insurance expense reimbursements.
Certain NEOs may also
receive certain Company-provided perquisites including reimbursement of certain personal expenses, or a leased vehicle or a vehicle
allowance. These items are intended to provide those executives with a competitive perquisite program.
For further information
regarding specific perquisites provided to the NEOs, see “Summary Compensation” below.
Employment Agreements
Dr. Hartnett’s
current employment agreement went into effect in 2017 with an initial term that ran through March 2020, at which time the agreement
automatically renewed for a 12-month term (and will automatically renew in the future for successive 12-month terms unless either
party gives 90 days’ notice of nonrenewal). The agreement provides, among other things, for a base salary of $775,020 and
that Dr. Hartnett is solely eligible for a formulaic annual performance bonus based on achievement of performance goals, with no
eligibility for any discretionary annual performance bonus, as discussed above under “Compensation Program Components.”
These provisions resulted in a 20% reduction in Dr. Hartnett’s base salary and formula-based annual incentive bonus compared
to the terms of his prior employment agreement. The current agreement also sets forth the terms under which Dr. Hartnett is to
receive awards under the Long-Term Incentive Plans and the various perquisites he is to receive. A copy of Dr. Hartnett’s
employment agreement is filed as Exhibit 10.1 to our Current Report on Form 8-K dated June 7, 2017.
Mr. Bergeron’s
current employment agreement went into effect in 2017 with an initial term that ran through March 2020, at which time the agreement
automatically renewed for a 12-month term (and will automatically renew in the future for successive 12-month terms unless either
party gives 90 days’ notice of nonrenewal). The agreement provides, among other things, that Mr. Bergeron is solely eligible
for a formulaic annual performance bonus based on achievement of performance goals, with no eligibility for any discretionary annual
performance bonus, as discussed above under “Compensation Program Components.” The agreement also sets forth the terms
under which Mr. Bergeron is to receive awards under the Long-Term Incentive Plans and the various perquisites he is to receive.
A copy of the agreement is filed as Exhibit 10.2 to our Current Report on Form 8-K dated June 7, 2017.
No other executive
officers have employment agreements and are employed “at will.”
Change-in-Control Compensation Agreements
Change-in-control compensation
agreements generally protect income for key executives who would likely be involved in decisions regarding and/or successful implementation
of merger/acquisition activity and who are at risk for job loss if a takeover occurs. We believe it is in the best interests of
the Company and our stockholders to have such an agreement with our CEO and other executive officers in order (i) for the
Board to be able to receive and rely upon the executive’s advice and counsel as to the best interests of the Company and
our stockholders without concern that they might be distracted or influenced by the personal uncertainties and risks created by
merger/acquisition proposals or threats, and (ii) to encourage them to remain with the Company and to continue to devote full attention
to the Company’s business.
Each of Dr. Hartnett’s
and Mr. Bergeron’s employment agreements provides that in the event of his termination of employment due to a change in control
of the Company, he will generally be entitled to a payment equal to 250% of his annual base salary plus 250% of his target incentive
compensation in effect at termination.
The Company has entered
into change-in-control letter agreements with each of Messrs. Edwards, Bannon, Hawkins and Salamunovich. Each letter agreement
entitles the executive officer to severance benefits if his employment with the Company is terminated under certain circumstances
within 24 months after a change in control of the Company. The amount of severance will generally be equal to 150% of the executive
officer’s annual base salary plus 150% of his target incentive compensation in effect at termination. In addition, the executive
officer will be entitled to a pro rata annual bonus for the year in which his termination of employment occurs and to continue
participating in the Company’s welfare benefit programs for up to 18 months following his termination of employment. The
letter agreement also commits the executive officer to remain employed with the Company in the event of a tender or exchange offer
and includes a non-compete covenant for 12 months following the executive’s termination of employment due to a change in
control. The form of the change-in-control letter agreement is filed as Exhibit 10.1 to our Form 10-Q filed February 1, 2010.
In addition, the restricted
stock grants and stock options held by the executive officers contain change-in-control provisions. The exact terms are set out
and defined in the Long-Term Incentive Plans but, in summary, if a holder of these restricted stock grants or stock options ceases
to be an employee because he or she is terminated without cause within 18 months after a change in control, all then unvested restricted
stock and stock options will vest on the date the holder ceases to be an employee. In addition, if there is a change in control
of the Company or similar event, the Compensation Committee may, in its discretion, provide for the lapsing of restrictions on
a participant’s restricted stock and the vesting of stock options on such terms and conditions as it deems appropriate.
Compensation Committee Policy Regarding Compliance with Section
162(m) of the Code
The Compensation Committee
considers the anticipated tax treatment to the Company and the executive officers in its review and establishment of the compensation
program and payments. The deductibility of some types of compensation payments can depend upon the timing of an executive’s
vesting or exercise of previously granted rights. Interpretations of and changes in applicable tax laws and regulations as well
as other factors beyond the Compensation Committee’s control also can affect deductibility of compensation.
Prior to 2018, Section
162(m) of the Internal Revenue Code (the “Tax Code”) precluded a public corporation from taking a deduction for compensation
in excess of $1 million in any taxable year for its chief executive officer or any of its four other highest paid executive officers,
unless certain specific and detailed criteria were satisfied, although compensation that qualified as “performance-based”
under Section 162(m) was deductible without regard to this $1 million limit.
In response to old
Section 162(m), the Company’s Executive Officer Performance-Based Compensation Plan (the “162(m) Plan”) was established
for executive officers selected by the Compensation Committee to receive an incentive bonus or a restricted stock grant based upon
the Company’s meeting certain financial performance goals. The 162(m) Plan is intended to constitute qualified "performance-based
compensation" for purposes of old Section 162(m). Dr. Hartnett was designated a participant under the 162(m) Plan by the Compensation
Committee for fiscal 2012 and subsequent fiscal years. Mr. Bergeron was designated as a participant under the 162(m) Plan by the
Compensation Committee for fiscal 2018 and subsequent fiscal years.
The Tax Cuts and Jobs
Act eliminated old Section 162(m)’s performance-based compensation exception effective January 1, 2018, subject to a special
rule that “grandfathers” certain awards and arrangements that were in effect on or before November 2, 2017, including
awards under the 162(m) Plan and the incentive arrangements provided in the employment agreements with our CEO and COO/CFO. However,
from and after January 1, 2018, compensation awarded in excess of $1 million to our other NEOs may not be deductible. While the
Tax Cuts and Jobs Act may limit the deductibility of compensation paid to some of our NEOs, the Compensation Committee will, consistent
with its past practice, design a compensation program that is in the best long-term interests of the Company and our stockholders,
with deductibility of compensation being one of a variety of considerations taken into account. However, the Compensation Committee
has determined that it will not necessarily seek to limit executive compensation to that deductible under Section 162(m).
The cost to the Company
of the incentive bonus amounts to be paid or restricted stock grants to participants cannot be determined at this time because
payout of incentive bonus amounts and restricted stock grants are based on the Company’s future financial performance, the
related performance measures set by the Committee and the number of participants named by the Compensation Committee. The Committee
envisions that future incentive bonus amounts to be paid or restricted stock grants to participants will be consistent with the
compensation program approved by the Committee from time to time and described in the Company’s annual proxy statement.
The Compensation Committee
will continue to monitor developments and assess alternatives for preserving the deductibility of compensation payments and benefits
to the extent reasonably practicable, consistent with its compensation policies and as determined to be in the best interests of
the Company and our stockholders.
SUMMARY COMPENSATION
|
Name and Principal
Position (1)
|
|
Fiscal
Year
|
|
Salary
($)(2)
|
|
|
Bonus
($)(3)
|
|
|
Stock
Awards
($)(4)
|
|
|
Option
Awards
($)(4)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)(5)
|
|
|
All Other Compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Hartnett
|
|
2020
|
|
|
775,020
|
|
|
|
-
|
|
|
|
7,489,597
|
|
|
|
2,979,960
|
|
|
|
1,162,530
|
|
|
|
57,998
|
(6)
|
|
|
12,465,105
|
|
|
|
2019
|
|
|
775,020
|
|
|
|
-
|
|
|
|
6,875,525
|
|
|
|
2,769,440
|
|
|
|
1,162,530
|
|
|
|
58,070
|
(6)
|
|
|
11,640,585
|
|
|
|
2018
|
|
|
775,020
|
|
|
|
-
|
|
|
|
3,905,888
|
|
|
|
1,988,000
|
|
|
|
1,162,530
|
|
|
|
56,805
|
(6)
|
|
|
7,888,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel A. Bergeron
|
|
2020
|
|
|
551,250
|
|
|
|
-
|
|
|
|
3,598,000
|
|
|
|
1,372,350
|
|
|
|
496,125
|
|
|
|
41,003
|
(7)
|
|
|
6,058,728
|
|
|
|
2019
|
|
|
525,000
|
|
|
|
-
|
|
|
|
3,303,000
|
|
|
|
1,275,400
|
|
|
|
472,500
|
|
|
|
35,630
|
(7)
|
|
|
5,611,530
|
|
|
|
2018
|
|
|
500,000
|
|
|
|
-
|
|
|
|
996,400
|
|
|
|
745,500
|
|
|
|
450,000
|
|
|
|
33,763
|
(7)
|
|
|
2,725,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick S. Bannon
|
|
2020
|
|
|
270,000
|
|
|
|
-
|
|
|
|
719,600
|
|
|
|
588,150
|
|
|
|
178,200
|
|
|
|
10,557
|
(8)
|
|
|
1,766,507
|
|
|
|
2019
|
|
|
250,000
|
|
|
|
97,500
|
|
|
|
660,600
|
|
|
|
364,400
|
|
|
|
127,500
|
|
|
|
9,013
|
(8)
|
|
|
1,509,013
|
|
|
|
2018
|
|
|
250,000
|
|
|
|
110,000
|
|
|
|
949,200
|
|
|
|
617,400
|
|
|
|
90,000
|
|
|
|
7,542
|
(8)
|
|
|
2,024,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Edwards
|
|
2020
|
|
|
335,000
|
|
|
|
-
|
|
|
|
287,840
|
|
|
|
392,100
|
|
|
|
25,000
|
|
|
|
28,513
|
(9)
|
|
|
1,068,453
|
|
|
|
2019
|
|
|
326,000
|
|
|
|
-
|
|
|
|
396,360
|
|
|
|
364,400
|
|
|
|
200,540
|
|
|
|
24,577
|
(9)
|
|
|
1,311,877
|
|
|
|
2018
|
|
|
318,000
|
|
|
|
-
|
|
|
|
199,280
|
|
|
|
497,000
|
|
|
|
250,000
|
|
|
|
23,799
|
(9)
|
|
|
1,288,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. Sullivan
|
|
2020
|
|
|
165,000
|
|
|
|
-
|
|
|
|
143,920
|
|
|
|
274,470
|
|
|
|
70,000
|
|
|
|
4,739
|
(10)
|
|
|
658,129
|
|
|
|
2019
|
|
|
150,000
|
|
|
|
-
|
|
|
|
66,060
|
|
|
|
182,200
|
|
|
|
45,000
|
|
|
|
3,731
|
(10)
|
|
|
446,991
|
|
|
|
2018
|
|
|
140,000
|
|
|
|
-
|
|
|
|
99,640
|
|
|
|
49,700
|
|
|
|
35,000
|
|
|
|
5,007
|
(10)
|
|
|
329,347
|
|
|
(1)
|
The principal positions of the NEOs are as follows: Dr.
Hartnett – Chairman, President and CEO; Mr. Bergeron – Vice President, COO and CFO; Mr. Bannon – Vice President
and General Manager; Mr. Edwards – Vice President and General Manager; Mr. Sullivan – Corporate Controller.
|
|
(2)
|
Column (c) includes amounts deferred by the officer pursuant
to the 401(k) Plan.
|
|
(3)
|
Bonuses for fiscal 2020, 2019 and 2018 were paid under
the Annual Incentive Plan and are reflected in column (g). Mr. Bannon received additional discretionary bonuses based on performance
for fiscal 2019 and fiscal 2018.
|
|
(4)
|
The amounts in columns (e) and (f) represent the fair market
value on the date of grant of restricted shares and non-qualified stock options granted during the fiscal year. For additional
information on the valuation assumptions regarding the restricted stock and stock option awards, refer to Note 16 to our financial
statements for fiscal 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on May 20, 2020.
|
|
(5)
|
The amounts in column
(g) consist of annual cash bonuses earned in fiscal 2020, 2019 and 2018 and paid in the
following fiscal year under the Annual Incentive Plan. See “Compensation Program
Components – Annual Incentive Compensation Plan” above.
|
|
●
|
For
fiscal 2020, Mr. Bannon (i) achieved 104.1% of his goal under part 1 of his performance
plan and therefore received a payment equal to 120.0% of the targeted amount under that
part, which payment was $97,200 or 36.0% of his base salary, (ii) exceeded his goal under
part 2 of his performance plan and therefore received a payment equal to 100.0% of his
targeted amount under that part, which payment was $40,500 or 15.0% of his base salary,
and (iii) received a payment under part 3 of his performance plan equal to 100.0% of
the targeted amount under that part, which payment was $40,500 or 15.0% of his base salary.
|
|
●
|
For
fiscal 2020, Mr. Edwards (i) achieved 78.1% of his goal under part 1 of his performance
plan and therefore did not receive a payment under that part, (ii) did not achieve his
goal under part 2 of his performance plan and therefore did not receive a payment under
that part, and (iii) received a payment under part 3 of his performance plan representing
50.0% of the targeted amount under that part, which payment was $25,000 or 7.5% of his
base salary.
|
|
●
|
For
fiscal 2020, Mr. Sullivan’s annual performance bonus was 42.4% of his base salary.
The annual performance bonus was based on the assessment and recommendation of the CEO
based on the Company’s overall performance and his assessment of Mr. Sullivan’s
performance.
|
|
●
|
For
fiscal 2019, Mr. Bannon (i) achieved 93.7% of his goal under part 1 of his performance
plan and therefore received a payment equal to 70.0% of the targeted amount under that
part, which payment was $52,500 or 21.0% of his base salary, (ii) exceeded his goal under
part 2 of his performance plan and therefore received a payment equal to 100.0% of his
targeted amount under that part, which payment was $37,500 or 15.0% of his base salary,
and (iii) received a payment under part 3 of his performance plan equal to 100.0% of
the targeted amount under that part, which payment was $37,500 or 15.0% of his base salary.
|
|
●
|
For
fiscal 2019, Mr. Edwards (i) achieved 106.0% of his goal under part 1 of his performance
plan and therefore received a payment equal to 130.0% of the targeted amount under that
part, which payment was $127,140 or 39.0% of his base salary, (ii) exceeded his goal
under part 2 of his performance plan and therefore received a payment equal to 100.0%
of his targeted amount under that part, which payment was $48,900 or 15.0% of his base
salary, and (iii) received a payment under part 3 of his performance plan representing
50.1% of the targeted amount under that part, which payment was $24,500 or 7.5% of his
base salary.
|
|
●
|
For
fiscal 2019, Mr. Sullivan’s annual performance bonus was 30.0% of his base salary.
The annual performance bonus was based on the assessment and recommendation of the CEO
based on the Company’s overall performance and his assessment of Mr. Sullivan’s
performance.
|
|
●
|
For
fiscal 2018, Mr. Bannon (i) achieved 84.0% of his goal under part 1 of his performance
plan and therefore received a payment equal to 20.0% of the targeted amount under that
part, which payment was $15,000 or 6.0% of his base salary, (ii) exceeded his goal under
part 2 of his performance plan and therefore received a payment equal to 100.0% of his
targeted amount under that part, which payment was $37,500 or 15.0% of his base salary,
and (iii) received a payment under part 3 of his performance plan equal to 100.0% of
the targeted amount under that part, which payment was $37,500 or 15.0% of his base salary.
|
|
●
|
For
fiscal 2018, Mr. Edwards (i) achieved 137.1% of his goal under part 1 of his performance
plan and therefore received a payment equal to 200.0% of the targeted amount under that
part, which payment was $190,800 or 60.0% of his base salary, (ii) exceeded his goal
under part 2 of his performance plan and therefore received a payment equal to 100.0%
of his targeted amount under that part, which payment was $47,700 or 15% of his base
salary, and (iii) received a payment under part 3 of his performance plan representing
24.1% of the targeted amount under that part, which payment was $11,500 or 3.6% of his
base salary.
|
|
●
|
For
fiscal 2018, Mr. Sullivan’s annual performance bonus represents 25.0% of his base
salary. The annual performance bonus was based on the assessment and recommendation of
the CEO based on the Company’s overall performance and his assessment of Mr. Sullivan’s
performance.
|
|
(6)
|
Consists
of a leased vehicle of $1,945 in fiscal 2020, $1,655 in fiscal 2019, and $2,376 in fiscal
2018: healthcare expense reimbursements of $3,793 in fiscal 2020, $6,415 in fiscal 2019,
and $3,193 in fiscal 2018; reimbursement of personal expenses per Dr. Hartnett’s
employment agreements of $50,000 in fiscal 2020, 2019 and 2018; employer match contributed
to Dr. Hartnett’s SERP account of $2,260 in fiscal 2020; and taxable costs of group-term
life insurance of $1,236 in fiscal 2018.
|
|
(7)
|
Consists of a leased vehicle of $10,334 in fiscal 2020, $8,200 in fiscal 2019, and $8,200 in fiscal
2018; healthcare expense reimbursements of $10,000 in fiscal 2020, $9,099 in fiscal 2019, and $9,938 in fiscal 2018; employer match
contributed to Mr. Bergeron’s SERP account of $17,341 in fiscal 2020, $16,989 in fiscal 2019, and $14,000 in fiscal 2018;
employer match contributions to Mr. Bergeron’s 401(k) account of $2,932 in fiscal 2020, $984 in fiscal 2019, and $980 in
fiscal 2018; and taxable costs of group-term life insurance of $396 in fiscal 2020, $358 in fiscal 2019, and $645 in fiscal 2018.
|
|
(8)
|
Consists of employer match contributed to Mr. Bannon’s SERP account of $8,523 in fiscal 2020,
$7,875 in fiscal 2019, and $6,293 in fiscal 2018; employer match contributions to Mr. Bannon’s 401(k) account of $1,868 in
fiscal 2020, $963 in fiscal 2019, and $909 in fiscal 2018; and taxable costs of group-term life insurance of $166 in fiscal 2020,
$175 in fiscal 2019, and $340 in fiscal 2018.
|
|
(9)
|
Consists of Company-paid life insurance premiums of $5,634 in fiscal 2020, $5,634 in fiscal 2019,
and $5,634 in fiscal 2018; a leased vehicle of $13,584 in fiscal 2020, $9,062 in fiscal 2019, and $11,010 in fiscal 2018; employer
match contributed to Mr. Edwards’ 401(k) account of $2,160 in fiscal 2020, $969 in fiscal 2019, and $903 in fiscal 2018;
employer match contributed to Mr. Edwards’ SERP account of $6,647 in fiscal 2020, $8,417 in fiscal 2019, and $5,263 in fiscal
2018; and taxable costs of group-term life insurance of $488 in fiscal 2020, $495 in fiscal 2019, and $989 in fiscal 2018.
|
|
(10)
|
Consists of an employer match contributed to Mr. Sullivan’s SERP account of $3,587 in fiscal
2020, $3,194 in fiscal 2019, and $4,325 in fiscal 2018; employer match contributions to Mr. Sullivan’s 401(k) account of
$1,098 in fiscal 2020, $475 in fiscal 2019, and $576 in fiscal 2018; and taxable costs of group-term life insurance of $54 in fiscal
2020, $62 in fiscal 2019, and $106 in fiscal 2018.
|
GRANTS OF PLAN-BASED AWARDS
|
|
|
|
|
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
|
|
|
All Other Stock Awards:
Number of Shares of Stock or
|
|
|
All Other Option Awards:
Number of Securities Underlying
|
|
|
Exercise or Base Price of Option
|
|
|
Grant Date Fair Value of Stock and Stock Option
|
|
Name
|
|
Grant Date
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Units
(#)(8)
|
|
|
Options
(#)
|
|
|
Awards
($/Sh)(9)
|
|
|
Awards
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Hartnett
|
|
-
|
|
|
|
(1)
|
|
|
1,162,530
|
(2)
|
|
|
1,937,550
|
(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6/3/2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52,040
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,489,597
|
|
|
|
6/3/2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
76,000
|
|
|
|
143.92
|
|
|
|
2,979,960
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel A. Bergeron
|
|
-
|
|
|
|
(4)
|
|
|
496,125
|
(5)
|
|
|
826,875
|
(6)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6/3/2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,598,000
|
|
|
|
6/3/2019
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,000
|
|
|
|
143.92
|
|
|
|
1,372,350
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick S. Bannon
|
|
-
|
|
|
-
|
|
|
|
162,000
|
(7)
|
|
|
243,000
|
(7)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6/3/2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
719,600
|
|
|
|
6/3/2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,000
|
|
|
|
143.92
|
|
|
|
588,150
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Edwards
|
|
-
|
|
|
-
|
|
|
|
201,000
|
(7)
|
|
|
301,500
|
(7)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6/3/2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
287,840
|
|
|
|
6/3/2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
143.92
|
|
|
|
392,100
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. Sullivan
|
|
-
|
|
|
-
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6/3/2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
143,920
|
|
|
|
6/3/2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,000
|
|
|
|
143.92
|
|
|
|
274,470
|
(9)
|
|
(1)
|
Under the Annual Incentive Compensation Plan, if the target is not met, the amount of the award
is at the discretion of the Board of Directors. For fiscal 2020 the Company’s EBITDA performance was equal to 100.0% of the
operating plan.
|
|
(2)
|
Equals 150% of base salary (100% to 109.9% of EBITDA to plan).
|
|
(3)
|
Equals 250% of base salary (120% or greater of EBITDA to plan).
|
|
(4)
|
If the target is not met, the amount of the award is at the discretion of the CEO.
|
|
(5)
|
Equals 90% of base salary (100% to 109.9% of EBITDA to plan).
|
|
(6)
|
Equals 150% of base salary (120% or higher of EBITDA to plan).
|
|
(7)
|
Target is 60% of base salary. The targeted percentage is made up of three parts: (1) 30% of base
salary upon achieving 100% of the established annual revenue and profit plan, with a minimum threshold of more than 80% of plan
and an opportunity to earn up to 60% of base salary if the achievement is equal to 120% of plan; (2) up to 15% of base salary based
on year to year revenue growth achievement in excess of that percentage equal to two times U.S. Gross Domestic Product; and (3)
up to 15% of base salary, at the discretion of the CEO, upon achievement of acceptable customer service levels, development of
human resources and the Company’s overall performance.
|
|
(8)
|
Awarded under the 2017 Long-Term Equity Incentive Program.
|
|
(9)
|
Awarded under the 2017 Long-Term Equity Incentive Program. The Grant Date Fair Value of restricted
stock awards is based on the grant date closing price of $143.92.
|
Dr. Hartnett Employment Agreement
Dr. Hartnett’s
current employment agreement provides for a base salary of $64,585 per month, which is subject to review by the Compensation Committee
not later than December 1 of each year, after which the Committee may increase (but not decrease) the base salary, at its sole
discretion. The Compensation Committee has not increased Dr. Hartnett’s base salary since his employment agreement was put
in place in 2017. Dr. Hartnett is also entitled to an annual performance bonus with respect to each fiscal year during which he
remains an employee in an amount determined as a percentage of Dr. Hartnett’s base salary, based on the amount by which our
performance exceeds (or fails to meet) EBITDA targets in an operating plan as explained above.
Dr. Hartnett’s
employment agreement also contains non-competition provisions prohibiting him from competing against us during the term of the
employment agreement and for two years thereafter without our prior written consent. Dr. Hartnett is also entitled to certain additional
benefits beyond those generally available to our employees including medical and hospitalization insurance and additional life
insurance. We are also required to maintain an apartment in Los Angeles for use by Dr. Hartnett while on business.
Daniel Bergeron Employment Agreement
Mr. Bergeron’s
current employment agreement provides a base salary that is subject to review by the Compensation Committee not later than December
1 of each year, after which the Committee may increase (but not decrease) the base salary, at its sole discretion. Mr. Bergeron’s
base salary when his employment agreement was put in place in 2017 was $41,666.67 per month and is now $45,937.50 per month. Mr.
Bergeron is also entitled to an annual performance bonus with respect to each fiscal year during which he remains an employee in
an amount determined as a percentage of Mr. Bergeron’s base salary, based on the amount by which our performance exceeds
(or fails to meet) EBITDA targets in an operating plan.
Mr. Bergeron’s
employment agreement also contains non-competition provisions prohibiting Mr. Bergeron from competing against us during the term
of the employment agreement and for two years thereafter without our prior written consent. Mr. Bergeron is also entitled to certain
additional benefits beyond those generally available to our employees including medical and hospitalization insurance and disability
insurance.
2013 and 2017 Long-Term Equity Incentive
Plans
2013 Plan
Our 2013 Long-Term
Incentive Plan was approved by our stockholders at the Company’s 2013 stockholder meeting. The plan provides for grants of
stock options, stock appreciation rights, restricted stock and performance awards. Our directors, officers and other employees
and persons who engage in services for us are eligible for grants under the plan. The purpose of the plan is to provide these individuals
with incentives to maximize stockholder value and otherwise contribute to our success and to enable us to attract, retain and reward
the best available persons for positions of responsibility.
Initially, 1,500,000
shares of our common stock were authorized for issuance under the plan, subject to adjustment in the event of a reorganization,
stock split, merger or similar change in our corporate structure or the outstanding shares of common stock. Not more than 50% of
the total authorized shares may be granted as restricted stock. During fiscal 2014, the Company issued 8,000 restricted stock grants.
During fiscal 2015, the Company issued 223,750 options and 73,100 restricted stock grants. During fiscal 2016 the Company issued
211,500 stock options and 142,450 restricted stock grants. During fiscal 2017, the Company issued 249,750 stock options and 157,500
restricted stock grants. During fiscal 2018, the Company issued 217,280 stock options and 116,273 restricted stock grants. During
fiscal 2019 the Company issued 2,750 stock options and 97,040 restricted stock grants. The Company issued no options or restricted
stock grants during fiscal 2020 or fiscal 2021 through July 1, 2020. As of July 1, 2020 there were 365,747 options and 105,169
restricted stock grants outstanding under the plan, and 607 shares remained available for future grants.
2017 Plan
Our 2017 Long-Term
Incentive Plan was approved by our stockholders at the Company’s 2017 stockholder meeting. The plan provides for grants of
stock options, stock appreciation rights, restricted stock and performance awards. Our directors, officers and other employees
and persons who engage in services for us are eligible for grants under the plan. The purpose of the plan is to provide these individuals
with incentives to maximize stockholder value and otherwise contribute to our success and to enable us to attract, retain and reward
the best available persons for positions of responsibility.
Initially, 1,500,000
shares of our common stock were authorized for issuance under the plan, subject to adjustment in the event of a reorganization,
stock split, merger or similar change in our corporate structure or the outstanding shares of common stock. Not more than 50% of
the total authorized shares may be granted as restricted stock. During fiscal 2018 the Company did not issue any stock options
or restricted stock. During fiscal 2019 the Company issued 198,565 stock options and 46,980 restricted stock grants. During fiscal
2020, the Company issued 154,200 options and 97,640 restricted stock grants. During fiscal 2021 through July 1, 2020 the Company
issued 110,635 stock options and 56,475 restricted stock grants. As of July 1, 2020 there were 454,483 options and 162,309 restricted
stock grants outstanding under the plan, and 835,505 shares remained available for future grants.
Administration of the
Plans
Our Compensation Committee
administers the 2013 and 2017 plans. The Board also has the authority to administer the plans and to take all actions that the
Compensation Committee is otherwise authorized to take under the plans. The terms and conditions of each award made under each
plan, including vesting requirements, are set forth consistent with the plan in a written agreement with the grantee.
Stock Options.
The Compensation Committee or the Board may award grants of incentive stock options and non-qualified stock options. The Compensation
Committee also has the authority to grant options that will become fully vested and exercisable automatically upon a change in
control. The Compensation Committee may not, however, award to any one person in any calendar year options to purchase common stock
equal to more than 10% of the total number of shares authorized under the plan, and it may not award incentive stock options first
exercisable in any calendar year whose underlying shares have a fair market value greater than $100,000 determined at the time
of grant. The Compensation Committee will determine the exercise price and term of any option in its discretion, provided that,
the exercise price may not be less than 100% of the fair market value of a share of common stock on the date of grant. In the case
of any incentive stock option, the option must be exercised within ten years of the date of grant. The exercise price of an incentive
stock option awarded to a person who owns stock constituting more than 10% of our voting power may not be less than 110% of fair
market value on the grant date and the option must be exercised within five years of the date of grant.
Restricted Stock.
The Compensation Committee may award restricted stock, subject to the conditions and restrictions, and for the duration that it
determines in its discretion.
Stock Appreciation
Rights. The Compensation Committee may grant stock appreciation rights (SARs), subject to the terms and conditions contained
in the relevant plan. The exercise price of an SAR must equal the fair market value of a share of our common stock on the date
the SAR is granted. Upon exercise of an SAR, the grantee will receive an amount in shares of our common stock equal to the difference
between the fair market value of a share of common stock on the date of exercise and the exercise price of the SAR, multiplied
by the number of shares as to which the SAR is exercised.
Performance Awards.
The Compensation Committee may grant performance awards contingent upon achievement of set goals and objectives regarding specified
performance criteria, over a specified performance cycle. Awards may include specific dollar-value target awards, performance units,
the value of which is established at the time of grant, and/or performance shares, the value of which is equal to the fair market
value of a share of common stock on the date of grant. The value of a performance award may be fixed or fluctuate on the basis
of specified performance criteria. A performance award may be paid out in cash and/or shares of common stock or other securities.
Amendment, Termination
and Expiration of the Plans. The Board may amend or terminate the 2013 or 2017 plan in its discretion, except that no amendment
will become effective without prior approval of our stockholders if such approval is necessary for continued compliance with the
performance-based compensation exception of Section 162(m) of the Tax Code or any Nasdaq listing requirements. If not previously
terminated by the Board, each plan will expire on the tenth anniversary of its adoption.
Except as set forth
above in “Compensation Components – Long Term Equity Incentive Program” with respect to the CEO and COO/CFO,
the Company does not have an established quantitative formula to determine the number of shares of stock options and/or restricted
shares granted to each executive officer. The grants are based on the Compensation Committee’s subjective evaluation based
on an understanding and assessment of each individual executive officer and a comparison to the competitive market for executive
compensation. The factors taken into consideration by the Compensation Committee with respect to grants of stock options and/or
restricted shares to executive officers include the officer’s responsibilities, experience level, retention risk, tenure,
job performance and achievement of short-term and long-term goals.
The Compensation Committee
typically reviews approval of equity grants on a fiscal year basis. The timing of the meeting is scheduled to allow the Compensation
Committee time to review prior year performance and assemble all necessary information. The date is not selected or changed to
increase the value of stock option. Grants are generally scheduled to follow the release of earnings for a quarter or fiscal year.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
OPTION AWARDS
|
|
STOCK AWARDS
|
|
Name
|
|
Number of Securities Underlying Unexercised Options
(#)
Exercisable
|
|
|
Number of Securities Underlying Unexercised Options
(#)
Unexercisable
|
|
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)
|
|
|
Option Exercise Price
($)
|
|
|
Option Expiration Date
|
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
|
|
Market Value of Shares or Units of Stock That Have Not Vested
($)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Hartnett
|
|
|
|
|
|
|
16,000
|
(2)
|
|
|
-
|
|
|
|
72.83
|
|
|
7/1/2022
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
40,000
|
(3)
|
|
|
-
|
|
|
|
72.94
|
|
|
7/8/2023
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
48,000
|
(6)
|
|
|
-
|
|
|
|
99.64
|
|
|
6/27/2024
|
|
|
-
|
|
|
|
-
|
|
|
|
|
15,200
|
|
|
|
60,800
|
(11)
|
|
|
-
|
|
|
|
132.12
|
|
|
6/7/2025
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
76,000
|
(15)
|
|
|
-
|
|
|
|
143.92
|
|
|
6/3/2026
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
13,067
|
(20)
|
|
|
1,437,370
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
34,693
|
(25)
|
|
|
3,816,230
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
52,040
|
(30)
|
|
|
5,724,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel A. Bergeron
|
|
|
20,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
64.15
|
|
|
7/1/2021
|
|
|
-
|
|
|
|
-
|
|
|
|
|
20,000
|
|
|
|
5,000
|
(2)
|
|
|
-
|
|
|
|
72.83
|
|
|
7/1/2022
|
|
|
-
|
|
|
|
-
|
|
|
|
|
24,000
|
|
|
|
16,000
|
(4)
|
|
|
-
|
|
|
|
72.94
|
|
|
7/8/2023
|
|
|
-
|
|
|
|
-
|
|
|
|
|
12,000
|
|
|
|
18,000
|
(7)
|
|
|
-
|
|
|
|
99.64
|
|
|
6/27/2024
|
|
|
-
|
|
|
|
-
|
|
|
|
|
7,000
|
|
|
|
28,000
|
(12)
|
|
|
-
|
|
|
|
132.12
|
|
|
6/7/2025
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
35,000
|
(16)
|
|
|
-
|
|
|
|
143.92
|
|
|
6/3/2026
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
3,333
|
(20)
|
|
|
366,630
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
16,667
|
(26)
|
|
|
1,833,370
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
25,000
|
(31)
|
|
|
2,750,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick S. Bannon
|
|
|
8,000
|
|
|
|
12,000
|
(10)
|
|
|
-
|
|
|
|
126.56
|
|
|
2/1/2025
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2,000
|
|
|
|
8,000
|
(13)
|
|
|
-
|
|
|
|
132.12
|
|
|
6/7/2025
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
15,000
|
(17)
|
|
|
-
|
|
|
|
143.92
|
|
|
6/3/2026
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
700
|
(21)
|
|
|
77,000
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
2,000
|
(22)
|
|
|
220,000
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
2,500
|
(23)
|
|
|
275,000
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
4,000
|
(27)
|
|
|
440,000
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
5,000
|
(32)
|
|
|
550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Edwards
|
|
|
-
|
|
|
|
4,000
|
(2)
|
|
|
-
|
|
|
|
72.83
|
|
|
7/1/2022
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
4,000
|
(5)
|
|
|
-
|
|
|
|
72.94
|
|
|
7/8/2023
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
12,000
|
(8)
|
|
|
-
|
|
|
|
99.64
|
|
|
6/27/2024
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
8,000
|
(13)
|
|
|
-
|
|
|
|
132.12
|
|
|
6/7/2025
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
10,000
|
(18)
|
|
|
-
|
|
|
|
143.92
|
|
|
6/3/2026
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
667
|
(20)
|
|
|
73,370
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
2,400
|
(28)
|
|
|
264,000
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
2,000
|
(33)
|
|
|
220,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. Sullivan
|
|
|
-
|
|
|
|
1,200
|
(9)
|
|
|
-
|
|
|
|
99.64
|
|
|
6/27/2024
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
4,000
|
(14)
|
|
|
-
|
|
|
|
132.12
|
|
|
6/7/2025
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
7,000
|
(19)
|
|
|
-
|
|
|
|
143.92
|
|
|
6/3/2026
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
200
|
(24)
|
|
|
22,000
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
333
|
(20)
|
|
|
36,630
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
400
|
(29)
|
|
|
44,000
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
1,000
|
(34)
|
|
|
110,000
|
|
|
(1)
|
These amounts are based on a price per share of $110.00, the closing sales price for a share of
our common stock on the last business day of fiscal 2020 (March 28, 2020) as quoted by the Nasdaq National Market.
|
|
(2)
|
These options vest on July 1, 2020.
|
|
(3)
|
These options vest as follows: 20,000 on July 8, 2020 and 20,000 on July 8, 2021.
|
|
(4)
|
These options vest as follows: 8,000 on July 8, 2020 and 8,000 on July 8, 2021.
|
|
(5)
|
These options vest as follows: 2,000 on July 8, 2020 and 2,000 on July 8, 2021.
|
|
(6)
|
These options vest as follows: 16,000 on June 27, 2020, 16,000 on June 27, 2021 and 16,000 on June
27, 2022.
|
|
(7)
|
These options vest as follows: 6,000 on June 27, 2020, 6,000 on June 27, 2021 and 6,000 on June
27, 2022.
|
|
(8)
|
These options vest as follows: 4,000 on June 27, 2020, 4,000 on June 27, 2021 and 4,000 on June
27, 2022.
|
|
(9)
|
These options vest as follows: 400 on June 27, 2020, 400 on June 27, 2021 and 400 on June 27, 2022.
|
|
(10)
|
These options vest as follows: 4,000 on February 1, 2021, 4,000 on February 1, 2022 and 4,000 on
February 1, 2023.
|
|
(11)
|
These options vest as follows: 15,200 on June 7, 2020, 15,200 on June 7, 2021, 15,200 on June 7,
2022 and 15,200 on June 7, 2023.
|
|
(12)
|
These options vest as follows: 7,000 on June 7, 2020, 7,000 on June 7, 2021, 7,000 on June 7, 2022
and 7,000 on June 7, 2023.
|
|
(13)
|
These options vest as follows: 2,000 on June 7, 2020, 2,000 on June 7, 2021, 2,000 on June 7, 2022
and 2,000 on June 7, 2023.
|
|
(14)
|
These options vest as follows: 1,000 on June 7, 2020, 1,000 on June 7, 2021, 1,000 on June 7, 2022
and 1,000 on June 7, 2023.
|
|
(15)
|
These options vest as follows: 15,200 on June 3, 2020, 15,200 on June 3, 2021, 15,200 on June 3,
2022, 15,200 on June 3, 2023 and 15,200 on June 3, 2024.
|
|
(16)
|
These options vest as follows: 7,000 on June 3, 2020, 7,000 on June 3, 2021, 7,000 on June 3, 2022,
7,000 on June 3, 2023 and 7,000 on June 3, 2024.
|
|
(17)
|
These options vest as follows: 3,000 on June 3, 2020, 3,000 on June 3, 2021, 3,000 on June 3, 2022,
3,000 on June 3, 2023 and 3,000 on June 3, 2024.
|
|
(18)
|
These options vest as follows: 2,000 on June 3, 2020, 2,000 on June 3, 2021, 2,000 on June 3, 2022,
2,000 on June 3, 2023 and 2,000 on June 3, 2024.
|
|
(19)
|
These options vest as follows: 1,400 on June 3, 2020, 1,400 on June 3, 2021, 1,400 on June 3, 2022,
1,400 on June 3, 2023 and 1,400 on June 3, 2024.
|
|
(20)
|
These restricted stock awards vest on June 27, 2020.
|
|
(21)
|
These restricted stock awards vest on December 4, 2020.
|
|
(22)
|
These restricted stock awards vest as follows: 1,000 on December 2, 2020 and 1,000 on December
2, 2021.
|
|
(23)
|
These restricted stock awards vest on February 1, 2021.
|
|
(24)
|
These restricted stock awards vest on March 29, 2021.
|
|
(25)
|
These restricted stock awards vest as follows: 17,346 on June 7, 2020 and 17,347 on June 7, 2021.
|
|
(26)
|
These restricted stock awards vest as follows: 8,334 on June 7, 2020 and 8,333 on June 7, 2021.
|
|
(27)
|
These restricted stock awards vest as follows: 1,000 on June 7, 2020, 1,000 on June 7, 2021, 1,000
on June 7, 2022 and 1,000 on June 7, 2023.
|
|
(28)
|
These restricted stock awards vest as follows: 600 on June 7, 2020, 600 on June 7, 2021, 600 on
June 7, 2022 and 600 on June 7, 2023.
|
|
(29)
|
These restricted stock awards vest as follows: 100 on June 7, 2020, 100 on June 7, 2021, 100 on
June 7, 2022 and 100 on June 7, 2023.
|
|
(30)
|
These restricted stock awards vest as follows: 17,347 on June 3, 2020, 17,346 on June 3, 2021 and
17,347 on June 3, 2022.
|
|
(31)
|
These restricted stock awards vest as follows: 8,333 on June 3, 2020, 8,334 on June 3, 2021 and
8,333 on June 3, 2022.
|
|
(32)
|
These restricted stock awards vest as follows: 1,000 on June 3, 2020, 1,000 on June 3, 2021, 1,000
on June 3, 2022, 1,000 on June 3, 2023 and 1,000 on June 3, 2024.
|
|
(33)
|
These restricted stock awards vest as follows: 400 on June 3, 2020, 400 on June 3, 2021, 400 on
June 3, 2022, 400 on June 3, 2023 and 400 on June 3, 2024.
|
|
(34)
|
These restricted stock awards vest as follows: 200 on June 3, 2020, 200 on June 3, 2021, 200 on
June 3, 2022, 200 on June 3, 2023 and 200 on June 3, 2024.
|
OPTION EXERCISES AND STOCK VESTED
|
|
|
OPTION AWARDS
|
|
|
STOCK AWARDS
|
|
Name
|
|
Number of Shares Acquired on Exercise
(#)
|
|
|
Value Realized on Exercise
($)
|
|
|
Number of Shares Acquired on Vesting
(#)
|
|
|
Value Realized on Vesting
($)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Hartnett
|
|
|
72,000
|
|
|
|
6,062,064
|
|
|
|
47,196
|
|
|
|
7,444,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel A. Bergeron
|
|
|
20,000
|
|
|
|
2,133,246
|
|
|
|
15,000
|
|
|
|
2,332,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick S. Bannon
|
|
|
-
|
|
|
|
-
|
|
|
|
5,200
|
|
|
|
818,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Edwards
|
|
|
16,000
|
|
|
|
1,172,644
|
|
|
|
1,599
|
|
|
|
251,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. Sullivan
|
|
|
1,800
|
|
|
|
113,968
|
|
|
|
434
|
|
|
|
68,742
|
|
|
(1)
|
The fair market value was based on the closing price of our common stock on the date of vesting.
|
NON-QUALIFIED DEFERRED COMPENSATION
|
Name
|
|
Executive Contributions in Last Fiscal Year
($)(1)
|
|
|
Registrant Contributions in Last Fiscal Year
($)(2)
|
|
|
Aggregate Earnings in Last Fiscal Year
($)(3)
|
|
|
Aggregate Withdrawals/
Distributions
($)
|
|
|
Aggregate Balance at Last Fiscal Year End
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Hartnett
|
|
|
12,917
|
|
|
|
2,260
|
|
|
|
10,958
|
|
|
|
-
|
|
|
|
429,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel A. Bergeron
|
|
|
139,234
|
|
|
|
17,341
|
|
|
|
(122,501
|
)
|
|
|
-
|
|
|
|
1,061,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick S. Bannon
|
|
|
42,419
|
|
|
|
8,523
|
|
|
|
3,042
|
|
|
|
(11,196
|
)
|
|
|
406,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Edwards
|
|
|
24,892
|
|
|
|
6,647
|
|
|
|
(11,206
|
)
|
|
|
-
|
|
|
|
301,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert M. Sullivan
|
|
|
16,981
|
|
|
|
3,587
|
|
|
|
(5,916
|
)
|
|
|
-
|
|
|
|
60,661
|
|
|
(1)
|
These amounts represent contributions made by each individual to the SERP. These amounts are included
in the “Salary” column for each individual in the Summary Compensation table.
|
|
(2)
|
These amounts represent contributions made by the Company to the SERP. These amounts are included
in the “All Other Compensation” column for each individual in the Summary Compensation table.
|
|
(3)
|
These amounts consist of appreciation (depreciation) and earnings (loss) on such individual’s
account under the SERP.
|
Supplemental Retirement Plan
The Company maintains
a non-qualified supplemental retirement plan, or SERP, for a select group of executive officers and management employees designated
by our CEO. The SERP allows eligible employees to defer up to 75% of their current salary and up to 100% of bonus compensation.
The Company has historically made contributions equal to 25% of the deferral amount, up to the first 7% of the employees’
annual compensation, which vest in full after one year of service, but in light of the COVID-19 pandemic the Company recently suspended
these contributions.
Accounts are paid,
either in a lump sum or installments, upon retirement, death or termination of employment. Accounts are generally payable from
our general assets. Employees’ rights to receive payments are subject to the rights of our creditors.
Potential Payments upon Change in Control or Termination
Change in Control
The table below summarizes
the executive benefits and payments that would have been due to the NEOs upon termination occurring on April 1, 2020 following
a change in control, which in the case of Dr. Hartnett and Mr. Bergeron are based on the provisions of their employment agreements,
and in the case of the other NEOs are based on their change-in-control letter agreements, except that Mr. Sullivan does not have
a change-in-control letter agreement.
CHANGE IN CONTROL PAYMENTS
|
|
|
Michael J. Hartnett
(1)(2)
|
|
|
Daniel A. Bergeron
(5)(6)
|
|
|
Patrick S. Bannon
(7)
|
|
|
Richard J. Edwards
(7)
|
|
|
Robert M. Sullivan
|
|
Bonus
|
|
$
|
1,937,550
|
|
|
$
|
826,875
|
|
|
$
|
243,000
|
|
|
$
|
301,500
|
|
|
$
|
-
|
|
Severance payments
|
|
|
20,565,475
|
|
|
|
9,515,938
|
|
|
|
648,001
|
|
|
|
804,000
|
|
|
|
-
|
|
Other payments
|
|
|
37,682
|
|
|
|
46,469
|
|
|
|
42,799
|
|
|
|
44,693
|
|
|
|
-
|
|
Stock options vested and value upon termination (3)
|
|
|
2,574,400
|
|
|
|
965,290
|
|
|
|
-
|
|
|
|
421,240
|
|
|
|
-
|
|
Restricted stock vested and value upon termination (4)
|
|
|
10,978,000
|
|
|
|
4,950,000
|
|
|
|
1,562,000
|
|
|
|
557,370
|
|
|
|
-
|
|
Total
|
|
$
|
36,093,107
|
|
|
$
|
16,304,572
|
|
|
$
|
2,495,800
|
|
|
$
|
2,128,803
|
|
|
$
|
-
|
|
|
(1)
|
Dr. Hartnett’s employment agreement provides that if a change in control occurs and if his
employment is either terminated by the Company without cause or by him for good reason within 24 months after the change in control,
he will generally be entitled to (i) payment of his base salary and pro rata bonus through the date of termination, (ii) a severance
payment of 250% of his base salary, annual bonus and annual equity awards, and (iii) the continuation of certain benefits set forth
in his employment agreement.
|
|
(2)
|
The actual amount of the incentive compensation plans payment is assumed to be equal to 250% of
base salary in accordance with the Dr. Hartnett’s employment agreement, as well as equity grants in accordance with his equity
compensation award plan.
|
|
(3)
|
All unvested stock options granted to the NEOs with change-in-control arrangements would vest upon
a change in control.
|
|
(4)
|
All restrictions associated with restricted stock grants to the NEOs with change-in-control arrangements
would lapse upon a change of control.
|
|
(5)
|
Mr. Bergeron’s employment agreement provides that if a change in control occurs and if his
employment is either terminated by the Company without cause or by him for good reason within 24 months after the change in control,
he will generally be entitled to (i) payment of his base salary and pro rata bonus through the date of termination, (ii) a severance
payment of 250% of his base salary, annual bonus and annual equity awards, and (iii) the continuation of certain benefits set forth
in his employment agreement.
|
|
(6)
|
The actual amount of the incentive compensation plans payment is assumed to be equal to 150% of
base salary in accordance with Mr. Bergeron’s employment agreement, as well as equity grants in accordance with his equity
compensation award plan.
|
|
(7)
|
The NEO’s change-in-control letter agreement provides that if a change in control occurs
and if his employment is terminated by the Company without cause within 24 months after the change in control, he will generally
be entitled to (i) payment of his base salary and pro rata bonus through the date of termination, (ii) a severance payment of 150%
of his base salary and annual bonus, and (iii) the continuation of certain benefits set forth in his change-in-control letter agreement.
|
Termination
The following summarizes
executive benefits and payments that would have been due the CEO and COO/CFO upon termination of employment occurring on April
1, 2020 other than following a change in control. No other executive officer has an employment agreement with the Company providing
for payments to them upon termination of employment other than following a change in control.
|
|
Michael J. Hartnett
|
|
|
Daniel A. Bergeron
|
|
Death or Disability/Termination Without Cause (1)
|
|
|
|
|
|
|
Base salary
|
|
$
|
775,020
|
|
|
$
|
551,250
|
|
Incentive bonus payments
|
|
|
1,937,550
|
|
|
|
826,875
|
|
Other payments
|
|
|
470,984
|
|
|
|
80,808
|
|
Stock options vested and value upon termination
|
|
|
2,574,400
|
|
|
|
965,290
|
|
Restricted stock vested and value upon termination
|
|
|
10,978,000
|
|
|
|
4,950,000
|
|
Total
|
|
$
|
16,735,954
|
|
|
$
|
7,374,223
|
|
Termination With Cause/Voluntary Resignation (2)
|
|
|
|
|
|
|
|
|
Base salary
|
|
$
|
387,510
|
|
|
$
|
-
|
|
Other payments
|
|
|
235,492
|
|
|
|
-
|
|
Total
|
|
$
|
623,002
|
|
|
$
|
-
|
|
|
(1)
|
The employment agreement provides that in the event of his termination of employment due to death
or disability, or without cause, (i) he will generally be entitled to (x) payment of base salary for the balance of the 12-month
renewal term of the agreement plus a pro rata portion of his annual bonus, and (y) the continuation of certain benefits for the
remainder of the renewal term, (ii) all his unvested stock options will vest, and (iii) all restrictions associated with his restricted
stock grants will lapse. The employment agreement also provides that if its term expires because either the Company or the employee
gives notice of nonrenewal at least 90 days prior to the date of the next automatic renewal of the agreement (a) all his unvested
stock options will vest, and (b) all restrictions associated with his restricted stock grants will lapse.
|
|
(2)
|
The employment agreement with Dr. Hartnett provides that in the event of his termination for cause
or his voluntary resignation, he will generally be entitled to payment of his base salary, and continuation of certain benefits
set forth in his employment agreement, for six months following the date of his termination. The employment agreement also provides
that if he voluntarily resigns then (i) all his unvested stock options will vest, and (ii) all restrictions associated with his
restricted stock grants will lapse.
|
Pay Ratio
As of March 28, 2020,
the Company had 3,890 employees located in nine countries around the world, of whom 2,523 were located in the United States. For
fiscal 2020, the estimated median of the annual total compensation of all those employees worldwide (excluding our CEO) was $50,057,
and the estimated median of the annual total compensation of all those employees located in the United States (excluding our CEO)
was $59,952. The total compensation of our CEO, Dr. Hartnett, in fiscal 2020 was $12,465,105 (see “Summary Compensation”
above), which was 249 times the compensation of the median employee worldwide, and 208 times the compensation of the median employee
in the United States. We used a sampling technique to identify the median employee, selecting 3,316 of our worldwide employees
and 2,260 of our United States employees. We then identified the individual in each of the two samples who received the median
compensation (using for this purpose salary (including base wages), bonus, equity compensation and overtime actually paid during
fiscal 2020). We then determined the annual total compensation of those two employees as shown above on substantially the same
basis as used for the CEO in the Summary Compensation table. The CEO pay ratio reported above is a reasonable estimate calculated
in a manner consistent with SEC rules based on the methodologies and assumptions described above. SEC rules for identifying the
median employee and determining the CEO pay ratio permit companies to use a wide range of methodologies, estimates and assumptions.
As a result, the CEO pay ratios reported by other companies, which may have employed other permitted methodologies or assumptions
and which may have a significantly different work force structure from ours, are likely not comparable to our CEO pay ratio.
401(k) Plan
We maintain the Roller
Bearing Company of America 401(k) Plan, established pursuant to Section 401(k) of the Tax Code, for the benefit of our non-union
employees. All non-union employees who have completed six months of service with us are entitled to participate. Subject to various
limits, employees are entitled to defer up to 25% of their annual salary on a pre-tax basis and up to an additional 10% of their
annual salary on an after-tax basis. The Company provides matching contributions to our 401(k) Plan equal to 50% of the first 3.5%
of eligible employee compensation.
We also maintain a
401(k) plan for non-exempt employees at some of our facilities. Subject to various limits, non-exempt employees are entitled to
defer up to 25% of their annual salary on a pre-tax basis. We make employer contributions (matching and, in some cases, non-elective
contributions) based on requirements in applicable collective bargaining agreements.
Equity Compensation Plan Information
The following table
provides information about the Company’s common stock that may be issued upon the exercise of options, warrants and rights
under all of our existing equity compensation plans as of July 1, 2020, consisting of the 2013 Long-Term Incentive Plan and 2017
Long-Term Incentive Plan.
Equity Compensation Plan Information
|
Plan Category
|
|
Number of securities
to be
issued upon
exercise of
outstanding
options, warrants and rights
|
|
|
Weighted-average exercise
price of
outstanding options,
warrants
and rights
|
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A)
|
|
Equity compensation plans approved by stockholders (1)
|
|
|
820,230
|
|
|
$
|
115.21
|
|
|
|
836,112
|
|
|
(1)
|
The Company does not have equity compensation plans that have not been approved by our stockholders.
|
The Company purchases
shares on the open market from time to time for issuance under our equity compensation plans to reduce the plans’ dilutive
effect.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table
presents fees for professional services rendered by Ernst & Young LLP for fiscal 2020 and fiscal 2019.
|
|
Fiscal Year Ended
|
|
Fee Category
|
|
March 28,
2020
|
|
|
March 30,
2019
|
|
Audit Fees
|
|
$
|
1,215,801
|
|
|
$
|
1,236,980
|
|
Audit-Related Fees
|
|
|
-
|
|
|
|
-
|
|
Tax Fees
|
|
|
-
|
|
|
|
-
|
|
Other
|
|
|
1,914
|
|
|
|
2,020
|
|
Total Fees
|
|
$
|
1,217,715
|
|
|
$
|
1,239,000
|
|
Audit Fees.
Consists of fees billed for professional services rendered for the audit of our consolidated financial statements and review of
the interim consolidated financial statements included in quarterly reports and services that are normally provided by Ernst &
Young LLP in connection with statutory and regulatory filings or engagements.
Audit-Related
Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the
audit or review of our consolidated financial statements and are not reported under “Audit Fees.”
Tax Fees.
Consists principally of fees for services provided in connection with worldwide tax planning and compliance services, expatriate
tax services, and assistance with tax audits and appeals.
Other.
Consists of subscription fees for an accounting research service.
All audit, audit-related
and tax services performed by Ernst & Young LLP in fiscal 2019 and fiscal 2020 were pre-approved by the Audit Committee, which
concluded that the provision of such services by Ernst & Young LLP was compatible with the maintenance of that firm’s
independence in the conduct of its auditing functions.
Pursuant to the Audit
Committee charter, the Audit Committee must approve all audit engagement fees and other significant compensation to be paid to
the independent registered public accounting firm and the terms of such engagement. The Audit Committee’s charter provides
that individual engagements must be separately approved. Additionally, the Audit Committee must pre-approve any non-audit services
to be provided to the Company by the independent registered public accounting firm. The Audit Committee policy also requires specific
approval by the Audit Committee if total fees for audit-related and tax services would exceed total fees for audit services in
any fiscal year. The Audit Committee charter authorizes the Audit Committee to delegate to one or more of its members pre-approval
authority with respect to permitted services.
MATTERS RELATING TO REGISTERED PUBLIC
ACCOUNTING FIRM
Audit Committee Report
The Audit Committee
has reviewed and discussed the audited financial statements with management, which has represented that the financial statements
were prepared in accordance with accounting principles generally accepted in the United States. The Audit Committee discussed with
management the quality and acceptability of the accounting principles employed, including all critical accounting policies used
in the preparation of the financial statements and related notes, the reasonableness of judgments made and the clarity of the disclosures
included in the statements.
The Audit Committee
also reviewed the consolidated financial statements of the Company for fiscal 2020 with Ernst & Young LLP, the Company’s
independent registered public accounting firm, who are responsible for expressing an opinion on the conformity of those audited
financial statements with accounting principles generally accepted in the United States. The Audit Committee has discussed with
Ernst & Young LLP the matters required to be discussed by applicable standards of the Public Company Accounting Oversight Board
(PCAOB) including matters related to the planning and results of audit of the Company’s consolidated financial statements.
The Audit Committee
also reviewed management’s report on its assessment of the effectiveness of the Company’s internal control over financial
reporting and the independent registered public accounting firm’s report on management’s assessment of and the effectiveness
of the Company’s internal control over financial reporting.
The Audit Committee
has received the written disclosures and the letter from Ernst & Young LLP required by the PCAOB relating to Ernst & Young
LLP’s communications with the Audit Committee concerning independence, and has discussed with Ernst & Young LLP its independence
and has considered whether the provision of non-audit services by Ernst & Young LLP to the Company is compatible with maintaining
Ernst & Young LLP’s independence.
In reliance on the
reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be
included in the Company’s Annual Report on Form 10-K for the year ended March 28, 2020 for filing with the SEC.
The Audit Committee
has selected Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal 2021.
Respectfully submitted,
The Audit Committee of the Board of RBC Bearings Incorporated
Alan B. Levine (Chairman)
Michael H. Ambrose
Edward D. Stewart
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
FOR 2020 MEETING
Stockholder proposals
intended for inclusion in the Company’s proxy statement relating to the next annual meeting in 2021 must be received by the
Company no later than March 26, 2021. Any such proposal must comply with Rule 14a-8 of Regulation 14A of the proxy rules of the
SEC.
Under the Company’s
by-laws, proposals of stockholders not intended for inclusion in the proxy statement, but intended to be raised at the Company’s
regularly scheduled annual meeting of stockholders to be held in 2021, must be received by the Company not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days’ notice or prior public
announcement of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received
not later than the close of business on the tenth day following the date on which such notice of the date of the annual meeting
was mailed or such public announcement was made. Such proposals must also comply with the procedures outlined in the Company’s
by-laws, a copy of which is available upon request from the Corporate Secretary, RBC Bearings Incorporated, One Tribology Center,
Oxford, CT 06478.
DIRECTOR NOMINATIONS TO BE CONSIDERED
BY THE BOARD
You may nominate director
candidates for consideration by the Board’s Nominating and Corporate Governance Committee. Any such nomination should include
the nominee’s name and qualifications for Board membership and should be directed to the Corporate Secretary at the address
of our principal executive offices set forth above. In addition, our by-laws permit stockholders to nominate directors for election
at an annual stockholder meeting. To nominate a director, a stockholder must deliver timely notice of such stockholder’s
intent to make such nomination in writing to the Corporate Secretary. To be timely, a stockholder’s notice must be delivered
to or mailed and received at our principal executive offices not less than 60 nor more than 90 days prior to the date of the first
anniversary of the previous year’s annual meeting. In the event that the date of the annual meeting is changed by more than
30 days from such anniversary date, notice by the stockholder to be timely must be received not later than the close of business
on the tenth day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure of
the meeting was made. To be in proper form, a stockholder’s notice must set forth (i) as to each person whom the stockholder
proposes to nominate for election as a director at such meeting (1) the name, age, business address and residence address
of the person, (2) the principal occupation or employment of the person, (3) the number of shares of capital stock of
the Company that are owned beneficially or of record by the person and (4) any other information relating to the person 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 pursuant to Regulation 14A under the Exchange Act, and (ii) as to the stockholder giving
the notice (1) the name and record address of such stockholder, (2) number of shares of capital stock of the Company
that are owned beneficially or of record by such stockholder, (3) a description of all arrangements or understandings between
such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s)
are to be made by such stockholder, (4) a representation that the stockholder intends to appear in person or by proxy at the
meeting to nominate the persons named in its notice and (5) any other information relating to such 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 pursuant to Regulation 14A under the Exchange Act. Such notice must be accompanied by each proposed nominee’s
written consent to being named as a nominee and to serve as a director if elected.
The Company evaluates
director nominees recommended by stockholders in the same manner in which it evaluates other director nominees. The Company has
established, through the Nominating and Corporate Governance Committee, selection criteria that identify desirable skills and experience
for prospective Board members, including consideration of the potential candidate’s qualification as independent, as well
as consideration of diversity, age, skills, expertise and experience in the context of the Board and other criteria determined
by the Nominating and Corporate Governance Committee from time to time.
ADDITIONAL INFORMATION
The Company will bear
the cost of the annual meeting and the cost of this proxy solicitation, including mailing costs. In addition to solicitation by
mail, directors, officers and employees of the Company may solicit proxies by telephone or otherwise, with no specific additional
compensation to be paid for such services. The Company has not retained any third party to assist in this solicitation, although
we may choose to do so in the future. The Company also will reimburse, upon request, all brokers and other persons holding shares
of common stock for the benefit of others for their reasonable expenses in forwarding the Company’s proxy materials and any
accompanying materials to the beneficial owners of the Company’s common stock and in obtaining authorization from beneficial
owners to give proxies.
The Board knows of
no matter to be brought before the annual meeting other than the matters identified in this proxy statement. If, however, any other
matter properly comes before the annual meeting, the individuals named in the proxy solicited by the Board intend to vote on it
on behalf of the stockholders they represent in the manner the proxy holders consider appropriate.
By order of the Board of Directors,
Joseph Salamunovich
Secretary
July 24, 2020
Appendix A
Directions To:
RBC Bearings Incorporated
Building B, 102 Willenbrock Road
One Tribology Center
Oxford, CT 06478.
Connecticut I-84 East or West to exit 16
Head south on CT-188 S/Strongtown
Road toward CT-67 N/Seymour Road
Turn left onto CT-188 S/CT-67 S/Seymour
Road
Continue straight to follow CT-67 S/Seymour
Road
Take the 1st left onto Hawley Road
Take the 2nd right onto Willenbrock
Road
Destination will be the third building on
the left
RBC BEARINGS INCORPORATED
ATTN: JOHN FEENEY
ONE TRIBOLOGY CENTER
OXFORD, CT 06478
|
VOTE BY INTERNET – www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create
an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY
MATERIALS
If you would like to reduce the costs incurred
by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instruction above to vote using
the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY MAIL
Mark, sign and date your proxy card and
return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood,
NY 11717.
|
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
KEEP THIS PORTION FOR YOUR RECORDS
|
____ ____ ____ ____ ____ ____
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ___ ___ ___
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED
AND DATED.
RBC BEARINGS INCORPORATED
|
|
|
|
|
The Board of Directors recommends a vote FOR the election to the Board of Directors of the nominees:
|
For
All
|
Withhold
All
|
For All
Except
|
To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.
|
1. Election of Class III Directors to serve a term of three years
|
¨
|
¨
|
¨
|
___________________________________
|
Nominees:
01) Dr.
Michael J. Hartnett
02) Dolores
J. Ennico
|
|
|
|
|
NOTE: Nominees 01, 02 and 03 for Election to Class III for a Three-year Term Expiring at our 2023 Annual Meeting
|
|
|
|
The Board of Directors recommends you vote FOR proposals 2 and 3:
|
2. To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year 2021.
|
For
☐
|
Against
☐
|
Abstain
☐
|
3. To consider a resolution regarding the stockholder advisory vote on named executive officer compensation.
|
For
☐
|
Against
☐
|
Abstain
☐
|
NOTE: Such other business as may properly come before the meeting or any adjournment thereof. This Proxy will be voted in the manner directed herein by the undersigned.
|
|
|
|
For address changes and/or comments, please check this box and write them on the back where indicated.
|
☐
|
Please indicate if you plan to attend this meeting.
|
☐
Yes
|
☐
No
|
Please sign exactly as your name(s) appear(s) hereon, When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
|
|
|
|
|
|
|
|
|
Signature [PLEASE SIGN WITHIN BOX]
|
Date
|
|
Signature [Joint Owner]
|
Date
|
|
Important Notice Regarding the Availability
of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____
____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ___ ___ ___
RBC BEARINGS INCORPORATED
PROXY FOR 2020 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned stockholder(s) of RBC
Bearings Incorporated, a Delaware corporation (the “Company”), hereby revoking any proxy heretofore given, do/does
hereby appoint Dr. Michael J. Hartnett, Daniel A. Bergeron and John Feeney, and each of them, with full power to act alone, the
true and lawful attorneys-in-fact and proxies of the undersigned, with full powers of substitution, and hereby authorize(s) them
and each of them, to represent the undersigned and to vote all shares of common stock of the Company that the undersigned is entitled
to vote at the 2020 Annual Meeting of Stockholders of the Company to be held on September 9, 2020 at 9:00 a.m., local time, at
One Tribology Center, 102 Willenbrock Road, Building B, Oxford, CT 06478 and any and all adjournments and postponements thereof,
with all powers the undersigned would possess if personally present, on the proposals, each as described more fully in the accompanying
proxy statement, and any other matters coming before said meeting.
IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED “FOR” THE ELECTION OF THE NOMINEES FOR DIRECTOR NAMED IN PROPOSAL 1, “FOR” PROPOSAL 2 AND
“FOR” PROPOSAL 3 AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF TO THE EXTENT PERMITTED UNDER APPLICABLE LAW.
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Continued and to be signed on reverse side
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