BWEN Broadwind Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of 

the Securities Exchange Act of 1934 (Amendment No.           )

☐     Confidential, for Use of the Commission Only (as permitted by Rule 14a‑6(e)(2))

☐ Definitive Proxy Statement

☐    Definitive Additional Materials

☐    Soliciting Material under §240.14a‑12

☒   No fee required.

☐    Fee computed on table below per Exchange Act Rules 14a‑6(i)(1) and 0-11.

☐    Fee paid previously with preliminary materials.

☐    Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

3240 South Central Avenue

Cicero, IL 60804

Telephone: 708-780-4800

Dear Fellow Stockholder:

You are cordially invited to attend Broadwind’s Annual Meeting of Stockholders to be held on April 23, 2019, beginning at 8:00 a.m. local time, at Broadwind’s corporate office located at 3240 South Central Avenue, Cicero, Illinois 60804.

You are being asked to: (i) elect six (6) directors to hold office for a term of one year or until their successors are duly elected and qualified, (ii) cast a non-binding advisory vote to approve the compensation of our named executive officers (“ Say-on-Pay ” vote), (iii)  ratify the second amendment of our Section 382 Rights Agreement designed to preserve Broadwind's substantial amount of net operating loss carry forwards and other tax benefits (the “ Rights Plan ”), to extend the Rights Plan for another three-year term and adjust the purchase price related to the exercise of the rights thereunder, (iv) approve the adoption of the Amended and Restated Broadwind Energy, Inc. 2015 Equity Incentive Plan, and (v) ratify the appointment of RSM US LLP as our independent registered public accounting firm for 2019.

Our Board of Directors urges you to read the accompanying Proxy Statement and recommends that you vote FOR all of the proposed nominees for election to the Board, FOR the resolution approving, on a non-binding advisory basis, the compensation of our named executive officers as described in the Proxy Statement, FOR the ratification of the amendment of the Rights Plan, FOR the approval of the adoption of the Amended and Restated Broadwind Energy, Inc. 2015 Equity Incentive Plan, and FOR the ratification of the appointment of RSM US LLP as our independent registered public accounting firm for 2019.

We are again delivering our Proxy Statement and Annual Report under the Securities and Exchange Commission rules that allow companies to furnish proxy materials to their stockholders over the Internet. We will mail to our stockholders on or about March 11, 2019, a Notice of Internet Availability of Proxy Materials (the “ Notice ”) containing instructions on how to access our proxy materials. The Notice and the Proxy Statement include instructions on how you can receive a paper copy of the proxy materials.

We appreciate and encourage stockholder participation in Broadwind’s affairs. Whether or not you plan to attend the Annual Meeting of Stockholders, it is important that your shares be represented. You may vote your shares by telephone or over the Internet. If you received a paper copy of the proxy card by mail, you may vote by signing, dating and mailing the proxy card in the envelope provided. Instructions regarding these three methods of voting are contained on the Notice or proxy card.

Thank you for your cooperation.

Cicero, Illinois

March 11, 2019

BROADWIND ENERGY, INC.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 23, 2019:

The Notice of Annual Meeting of Stockholders, Proxy Statement and Annual Report on Form 10-K are available on our Internet website, www.bwen.com .

BROADWIND ENERGY, INC.

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

Who is entitled to attend and vote at the Annual Meeting?

Stockholders of record at the close of business on February 28, 2019 (the “ Record Date ”) are entitled to attend and vote at the Annual Meeting. Each share of common stock is entitled to one vote. The Notice you received (or proxy card if you received these materials by mail) indicates the number of shares of our common stock that you own and are entitled to vote.

What constitutes a quorum at the Annual Meeting?

The presence at the Annual 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 for purposes of the Annual Meeting. As of the Record Date, 16,124,006 shares of our common stock were issued and outstanding. Persons who were not stockholders on the Record Date will not be allowed to vote at the Annual Meeting. The common stock is the only outstanding class of our capital stock entitled to vote at the Annual Meeting. Each share of common stock is entitled to one vote on each matter to be voted upon at the Annual Meeting. No holders of any of our capital stock are entitled to cumulative voting rights. Proxies received but marked “withhold” or “abstain” and broker non-votes will be counted for purposes of determining whether a quorum exists at the Annual Meeting. A “broker non-vote” occurs when a broker does not vote on some matter on the proxy card because the broker does not have discretionary voting power for that particular item and has not received voting instructions from the beneficial owner. Please note that your bank or broker cannot vote on your behalf on “non-routine” proposals without your instructions. The ratification of the appointment of our independent registered public accounting firm is the only “routine” proposal on our agenda for the Annual Meeting. The election of directors, the non-binding advisory proposal on the compensation of our named executive officers (“ Say-on-Pay ” vote), the ratification of the second amendment of our Section 382 Rights Agreement (the “ Rights Plan ”) and the approval of the adoption of the Amended and Restated Broadwind, Inc. 2015 Equity Incentive Plan (the “ Plan ”) are each “non-routine” proposals.

How do I vote by proxy?

Stockholders can vote in person at the Annual Meeting or by proxy. There are three ways to vote by proxy:

If you vote by telephone or on the Internet by the applicable deadline, or properly fill in your proxy card if you received one by mail and we receive it in time to vote at the Annual Meeting, your “proxy” (the individual named on the Notice or proxy card) will vote your shares on your behalf as you have directed. If you sign and return a proxy card but do not make specific choices for the voting of your shares, then your proxy will vote your shares of common stock as recommended by the Board, as follows:

If any other matter is presented, your proxy will vote your shares in accordance with your proxy’s best judgment. At present, we know of no other business that is intended to be acted on at the Annual Meeting.

Can I vote by telephone or on the Internet?

Yes. Voting by telephone or on the Internet is fast, convenient and your vote is immediately confirmed and tabulated. If you choose to vote by telephone or on the Internet, instructions to do so are set forth on the Notice or proxy card. The telephone and Internet voting procedures are designed to authenticate votes cast by use of a control number, which appears in the marked area on the Notice or proxy card. These procedures, which comply with Delaware law, allow stockholders to appoint a proxy to vote their shares and to confirm that their instructions have been properly recorded. If you vote by telephone or on the Internet, your vote must be received by 11:59 p.m., Eastern Daylight Time, on April 22, 2019.

If you own your shares in your own name, you can vote by telephone or on the Internet in accordance with the instructions provided on the Notice or proxy card. If your shares are held by a bank, broker or other nominee, you can also vote by telephone or on the Internet. The instructions to vote by telephone or on the Internet will be provided on the voting form supplied by your bank or broker. You may need to contact your bank or broker to vote.

How do I vote if my shares are held by my broker?

If your shares are held by your broker in “street name,” you should instruct your broker concerning how to vote your shares in the manner provided by your broker.

How do I vote the shares I hold through the Company’s 401(k) plan?

If you are a participant in our 401(k) plan, you may vote the number of shares credited to your account as of the Record Date by instructing the plan’s trustee how to vote your shares pursuant to the instruction form being mailed to plan participants with the Notice or this Proxy Statement. Voting instructions must be received by the plan trustee by 12:00 p.m., Central Daylight Time, on April 22, 2019. If you do not provide clear voting instructions, or if you return voting instructions by mail and submit an unsigned voting form, the trustee will vote the shares in your account in accordance with the Board’s recommendations.

May I revoke my proxy and change my vote?

Yes. You may revoke your proxy and change your vote at any time before the Annual Meeting in one of four ways:

How do I vote in person?

If you plan to attend the Annual Meeting and vote in person, at your request, we will give you a ballot or a new proxy card when you arrive at the Annual Meeting. However, if your shares are held in the name of your broker, bank or other nominee, you must contact such entity with respect to the procedure for you to vote in person.

What vote is required to approve each proposal?

6. Other Matters .  At present, we know of no other matters to be presented for stockholder action at the Annual Meeting. If any other matter properly comes before the Annual Meeting, the appointees named in the proxies will vote the proxies in accordance with their best judgment.

Is the vote on the Say-on-Pay proposal binding on the Board?

Because the vote on the Say-on-Pay proposal is advisory, it will not be binding upon the Board. However, the Board values the opinions that our stockholders express in their votes and will take into account the outcome of the votes when considering future executive compensation arrangements.

Who pays for the proxy solicitation related to the Annual Meeting?

We will bear the cost of soliciting proxies, including the preparation, assembly and mailing of the Notice, proxies and soliciting material, as well as the cost of forwarding such material to beneficial owners of our common stock. Our directors, officers and regular employees may, without compensation other than their regular remuneration, solicit proxies personally or by telephone.

The Company may in its discretion engage, at its cost, a proxy solicitor to solicit proxies at the Annual Meeting.

How can I obtain additional information about the Company?

A copy of our Annual Report, without exhibits, is available as specified in the Notice or accompanies this Proxy Statement if you received it by mail. No portion of our Annual Report is incorporated herein and no part thereof is to be considered proxy soliciting material. We will furnish to any stockholder, upon written request, any exhibit described in the list accompanying our Annual Report, upon the payment, in advance, of reasonable fees related to us furnishing such

exhibit(s). Any such requests should include a representation that the stockholder was the beneficial owner of shares of our common stock on the Record Date, and should be directed to our Corporate Secretary at Broadwind Energy, Inc., 3240 South Central Avenue, Cicero, IL 60804. You may also access our SEC filings and their exhibits, including the exhibits described in our Annual Report through our website at www.bwen.com or though the SEC’s website at www.sec.gov .

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), which requires that we file reports, proxy statements and other information with the SEC. The SEC maintains a website on the Internet that contains reports, proxy and information statements, and other information regarding registrants, including the Company, that file electronically with the SEC. The SEC’s website address is www.sec.gov .  

Technology Fund, L.P., a Delaware limited partnership (“ Tech ”), and Special Situations Technology Fund II, L.P., a Delaware limited partnership (“ Tech 2 ”). As investment adviser, AWM holds sole voting and investment power over and is deemed to beneficially own 1,171,834 shares held by Cayman, QP, Tech and Tech 2. AWM is located at 527 Madison Avenue, Suite 2600, New York, NY 10022.

(3) Based solely on information contained in a Schedule 13 G/A filed on January 28, 2019 by Grace & White, Inc., a New York corporation, as investment adviser (“ Grace & White ”). Grace & White holds sole voting power with respect to 318,287 shares and sole dispositive power with respect to 1,818,742 shares. Grace & White is located at 515 Madison Avenue, Suite 1700, New York, NY 10022.

(4) Includes (i) 200,000 shares owned by Terence P. Fox and Paula L. Fox Irrevocable Trust 2005.

(5) Includes 56,862 vested but unexercised options to purchase our common stock.

David P. Reiland  has served as a member of the Board since April 16, 2008, and has been Chairman of the Board since May 17, 2010. He is Chairman of the Audit Committee and is designated as a financial expert, and is also a member of the Governance/Nominating Committee. Mr. Reiland was employed by Magnetek, Inc. (“ Magnetek ”) from August 1986 until January 2009, where he held numerous high-level positions, including Executive Vice President, Chief Financial Officer, Controller and Vice President of Finance, and served as Chief Executive Officer and President of Magnetek from October 2006 until October 2008. He also served on the Board of Directors of Magnetek from October 2006 to September 2015. Magnetek develops, manufactures and markets power and motion control systems and was a public company until its acquisition by Columbus McKinnon Corporation in September 2015. The Governance/Nominating Committee concluded that Mr. Reiland should serve as a director nominee as of the date of this Proxy Statement on the basis of his extensive leadership experience and financial expertise. Mr. Reiland is a Certified Public Accountant who holds an undergraduate degree in financial management from California State University, Long Beach, and a Master of Business Administration degree from the University of Southern California.

Philip J. Christman  has served as a member of the Board since October 22, 2018. He is a member of the Audit Committee and the Compensation Committee. Mr. Christman has served as the President, Operations of Navistar International Corporation (with its affiliates, “ Navistar ”), a leading manufacturer of commercial trucks, buses, defense vehicles and engines, since May 2017. Prior to holding this position, he held various positions with Navistar, including Vice President, Strategy from June 2015 to May 2017, Chief Procurement Officer from November 2014 to June 2015, Vice President, Engineering from July 2014 to November 2014, President, Global Business from November 2008 to July 2014, Vice President General Manager Vocational Trucks from June 2006 to November 2008. Earlier in his career Mr. Christman held various leadership roles in operations. The Governance/Nominating Committee concluded that Mr. Christmas should serve as a director nominee as of the date of this Proxy Statement on the basis of his extensive operation, business leadership and corporate growth strategy. Mr. Christman received a Bachelor of Science degree in Mechanical Engineering from Indiana Institute of Technology and a Master of Business Administration from Ball State University.”

Terence P. Fox  has served as a member of the Board since February 2006. He is Chairman of the Governance/Nominating Committee. Mr. Fox, along with three other individuals, founded Tower Tech Systems Inc., the company around which we were built through a series of acquisitions. He has been a partner in the law firm of Kummer, Lambert, Fox & Glandt, LLP, and its predecessor, Dewane, Dewane, Kummer, Lambert & Fox, LLP, located in Manitowoc, Wisconsin, since June 1987, where one of his primary areas of practice is business and commercial law. Mr. Fox graduated from the University of Wisconsin—Milwaukee and the Marquette University Law School. He has many business and real estate interests and sits on the boards of directors of several non-profit and for-profit organizations in the Manitowoc, Wisconsin area. The Governance/Nominating Committee concluded that Mr. Fox should serve as a director nominee as of the date of this Proxy Statement on the basis of his leadership and business experience, his legal expertise, and his extensive knowledge of our history and our growth and development over time.

Stephanie K. Kushner  has served as a member of the Board since February 23, 2016, and as our President and Chief Executive Officer since May 16, 2016, and as our Chief Financial Officer and Treasurer from August 15, 2009 to August 7, 2017. She served as our interim President and Chief Executive Officer from November 30, 2015 to May 16, 2016. Ms. Kushner has more than 30 years of accounting and finance experience, including serving as Chief Financial Officer for publicly traded global manufacturer Federal Signal Corporation (“ Federal Signal ”) from 2002 to 2008. She held several global finance leadership positions with FMC Corporation, and began her career with Amoco Corporation. From May 2011 to November 2014, Ms. Kushner served on the Board of Directors of Columbus McKinnon Corporation, a global manufacturer of material handling equipment. From February 2004 to May 2010, she served on the Board of Directors of Wabash National Corporation, a manufacturer of commercial fleet and consumer/retail transportation equipment. Ms. Kushner holds a bachelor’s degree in economics from Douglass College at Rutgers University and a Master of Business Administration degree from the Wharton School. The Governance/Nominating Committee concluded that Ms. Kushner should serve as a director nominee as of the date of this Proxy Statement on the basis of her knowledge of our operations in her role as our President and Chief Executive Officer and former Chief Financial Officer, as well as her more than 30 years of global industrial business leadership and more than 10 years of experience on the boards of multiple public companies.

Thomas A. Wagner  has served as a member of the Board since March 25, 2011. He is a member of the Compensation Committee and the Governance/Nominating Committee. From July 2012 until his retirement in October

2015, Mr. Wagner was the Chief Product Officer at Ogin, Inc., a wind turbine design and supply company. He is currently supporting various consulting assignments and working on products with potential to consume environmental carbon dioxide.  Mr. Wagner has worked in the diversified energy industry for more than 30 years. Mr. Wagner holds a Bachelor of Science degree in engineering from Cornell University and a Master of Science degree in mechanics from Rensselaer Polytechnic Institute. The Governance/Nominating Committee concluded that Mr. Wagner should serve as a director nominee as of the date of this Proxy Statement on the basis of his demonstrated technology leadership over the course of his career, as well as his strong technical background and understanding of the products that we provide and the industries in which we operate.

Cary B. Wood  has served as a member of the Board since May 18, 2016. He is Chairman of the Compensation Committee and is also a member of the Audit Committee, designated as a financial expert. Mr. Wood is the managing partner of Creekside Partners, LLC, a holding company with interests in real estate, service industry and industrial assets. Mr. Wood is a member of the Board of Directors of Westell Corporation (NASDAQ:WSTL) where he is the Compensation Committee Chairman and also sits on the Audit Committee. Mr. Wood also serves as the Chairman of the Board of Directors of M&G Duravent, Inc., a privately-held venting systems firm, since January 2017.  Mr. Wood received a Bachelor of Science degree in Technology from Purdue University in 1989, a Master of Science degree in Industrial Operations in the School of Management from Lawrence Technological University in 1995, and a Master of Business Administration degree in Finance from Loyola University-Chicago in 2014. The Governance/Nominating Committee concluded that Mr. Wood should serve as a director nominee as of the date of this Proxy Statement on the basis of his broad experience in executive management, operations, corporate turnarounds and corporate growth strategies.

None of our directors are a party to any agreement or arrangement that would require disclosure pursuant to NASDAQ Rule 5250(b)(3).

2018 Director Compensation

In light of our financial performance in 2017, the Compensation Committee and the Board determined that the compensation paid to non-employee directors for service on the Board and its committees shall remain unchanged. On January 22, 2016 upon the recommendation of the Compensation Committee, the Board approved the Amended and Restated Broadwind Energy, Inc. Board Compensation Program (the “ Board Compensation Program ”), that provides that each eligible non-employee director shall receive an annual equity grant of RSUs with a grant value of $35,000 and a cash fee of $10,000 per calendar quarter.

Pursuant to the Board Compensation Program, on May 2, 2018, each of Messrs. Fox, Reiland, Wagner and Wood was granted a RSU award representing the right to receive 13,435 shares of our common stock upon vesting. On October 22, 2018, Mr. Christman was granted a RSU award representing the right to receive 9,020 shares of our common stock upon vesting. The RSU awards vest one year after the date of grant.

All non-employee directors are subject to our stock ownership guidelines adopted in March 2011, which provide that each non-employee director shall own a number of shares of our common stock having a value equal to three times the annual cash retainer fees earned by the director in the immediately preceding calendar year. Please see the discussion below under the heading “ Stock Ownership Guidelines ” for more information.

Each non-employee director is eligible to participate in the Broadwind Energy, Inc. Deferred Compensation Plan (the “ Deferred Compensation Plan ”), which was adopted by the Board on October 24, 2007. The Deferred Compensation Plan is an unfunded arrangement subject to the provisions of Section 409A of the U.S. Internal Revenue Code of 1986, as amended (the “ IRC ”). The value of each participant’s account is deemed invested in shares of our common stock and is generally payable upon the director’s departure from the Board. There were no deferments in 2018.

2018 Director Compensation Table

The following table sets forth 2018 compensation information for our non-employee directors. Ms. Kushner, our President, Chief Executive Officer (“ CEO ”), received no additional compensation for her services as a director. The compensation received by Ms. Kushner as our employee is listed in the 2018 Summary Compensation Table set forth in this Proxy Statement.

The following sets forth compensation information for the Company’s Directors in 2018.

CORPORATE GOVERNANCE

Independence

The Board has determined that currently and at all times during the year ended December 31, 2018, all members other than Ms. Kushner, our President and CEO, are and have been “independent” as defined by the listing standards of the NASDAQ Stock Market (“ NASDAQ ”). Ms. Kushner is not independent since she also serves as an executive officer of the Company. The Board considers in its evaluation of independence information provided by the directors and any nominees in questionnaires and other certifications concerning their relationship to us and any existing related party transactions, which are discussed below in this Proxy Statement in the section entitled “Certain Transactions and Business Relationships.”

Code of Ethics and Business Conduct

We have a written Code of Ethics and Business Conduct (“ Code of Ethics ”) that applies to all of our employees, directors and officers, including our principal executive officer, principal financial officer, principal accounting officer or controller and persons performing similar functions. The Code of Ethics addresses such topics as protection and proper use of our assets, compliance with applicable laws and regulations, accuracy and preservation of records, accounting and financial reporting, conflicts of interest, and insider trading. The Code of Ethics is posted on our Internet website, www.bwen.com , and is available in print, free of charge, to any stockholder who sends a request for a paper copy to Broadwind Energy, Inc., Attn: Corporate Secretary, 3240 South Central Avenue, Cicero, IL 60804. We intend to include on our website any amendment to, or waiver from, a provision of our Code of Ethics that applies to any of our directors

or executive officers that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K under the Securities Act of 1933, as amended (the “ Securities Act ”).

Board Leadership Structure

The Board is led by an independent Chairman, Mr. Reiland. The Board believes that separating the roles of CEO and Chairman of the Board is the most appropriate structure for us at this time. Having an independent Chairman of the Board is a means to ensure that the CEO is accountable for managing us in the best interests of our stockholders while, at the same time, acknowledging that managing the Board is a separate and time intensive responsibility. The Board also believes that an independent Chairman of the Board can serve to avoid conflicts of interest, promote oversight of risk and manage the relationship between the Board and the CEO.

Risk Oversight

The Board and its Audit Committee play an active role in the oversight of risk and our risk management practices. The Audit Committee primarily is responsible for reviewing financial and compliance risks, with the full Board responsible for other risks. We conduct comprehensive Enterprise Risk Assessments on a periodic basis, and review the results with the Board at a regularly scheduled meeting. We update the Board regularly on actions taken as a result of the Enterprise Risk Assessments. Because of our size and available resources, we do not have a dedicated risk management function; rather, certain of our employees are charged with responsibility for specific risk areas, including operational risks, liquidity risks, legal risks and compliance risks. These individuals make periodic reports to the Board and the Audit Committee on their areas of risk oversight.

Stockholder Communications with the Board of Directors

Stockholders may communicate directly with the Board or any of its individual members. Any such communication should be directed to our Corporate Secretary at the address below and should prominently indicate on the outside of the envelope that it is intended for the Board or for non-employee directors, and our Corporate Secretary will forward the communication to all specified directors. If no director is specified, the communication will be forwarded to the entire Board. Stockholder communications to the Board should be sent to:

Director Attendance at Annual Meetings

Directors’ attendance at our Annual Meetings can provide our stockholders with an opportunity to communicate with directors about issues affecting us. Our Principles of Corporate Governance encourage our directors to attend the Annual Meetings. All of our then-current directors attended our 2018 Annual Meeting of Stockholders.

Committee and Board of Directors Meetings

During 2018, the Board met eight (8) times, including in-person and telephonic meetings. The directors also communicated informally to discuss our affairs and, when appropriate, took formal action by unanimous written consent of all directors, in accordance with our Certificate of Incorporation and Bylaws and Delaware law. Executive sessions of the independent directors are scheduled at least twice per year in conjunction with regularly scheduled Board meetings.

The Board has three standing committees: the Audit Committee, the Compensation Committee and the Governance/Nominating Committee.  In 2018, each director attended at least 95% of the meetings of the Board and of committees of which he or she was a member.

Audit Committee

The Board maintains an Audit Committee comprised of three independent directors, including two financial experts (as defined below). The current members of the Audit Committee are Messrs. Reiland (Chairman), Fox and Wood. The Board and the Audit Committee believe that the Audit Committee’s current member composition satisfies the NASDAQ requirements and the criteria of Section 10A(m)(3) and Rule 10A-3 of the Exchange Act.

Audit Committee Scope of Authority and Charter

The primary function of the Audit Committee is assisting the Board with oversight responsibilities, including with respect to the following: (a) the financial reports and other material financial information we provide to any governmental body or the public; (b) the relationship with our independent accountants (including appointment and compensation) who report directly to the Audit Committee; (c) pre-approval of all audit services and non-audit services to be performed by our independent accountants; (d) our systems of internal and external reporting processes and internal controls regarding finance, accounting, legal compliance and ethics; (e) oversight with respect to related party transactions and complaints received by us regarding accounting, internal accounting controls and auditing; (f) preparation of an annual Audit Committee Report to be presented to the Board; and (g) our auditing, accounting and financial reporting processes generally. The Audit Committee charter is posted on our Internet website, www.bwen.com , and may be amended by approval of the Board, upon recommendation by the Governance/Nominating Committee. The Audit Committee met five (5) times in 2018.

Audit Committee Financial Expert

The Board has determined that Messrs. Reiland and Wood are “audit committee financial experts” as defined in Item 407(d)(5)(ii) of Regulation S-K. The designation of Messrs. Reiland and Wood as audit committee financial experts do not impose on Messrs. Reiland and Wood any duties, obligations or liabilities that are greater than the duties, obligations and liability imposed on Messrs. Reiland and Wood as members of the Audit Committee and the Board in the absence of such designation or identification.

Compensation Committee

Responsibility for evaluating our compensation policies, oversight of management’s performance and recommendations regarding compensation of senior management has been delegated by the Board to the Compensation Committee. The Board believes that each member of the Compensation Committee satisfies the independence requirements of NASDAQ Rule 5605(d) and Rule 10C-1 under the Exchange Act.

Compensation Committee Scope of Authority and Charter

Under the Compensation Committee’s written charter, the primary duties and responsibilities of the Compensation Committee include the following: (a) periodically review with management our philosophy of compensation, taking into consideration enhancement of stockholder value from a short, intermediate and long-term perspective; (b) annually consider  strategic and operating plans and the various compensation plans for which the Compensation Committee is responsible; (c) review individual and Company performance goals and objectives of our CEO and other senior management, evaluate such officers’ performance in light of these goals, and determine and approve appropriate compensation levels and equity grants; (d) oversight with respect to compensation policies and plans, including incentive plans, equity plans, benefits and perquisites of senior management; (e) general oversight and risk assessment with respect to human resources policies, strategies and programs and employee benefit plans; (f) recommend compensation plans for members of the Board; and (g) assess potential conflicts of interest raised by the work of compensation consultants that are involved in determining or recommending executive or director compensation. The Compensation Committee’s charter is posted on our Internet website, www.bwen.com , and may be amended by approval of the Board, upon recommendation by the Governance/Nominating Committee. The Compensation Committee met six (6) times in 2018.

The Board and the Compensation Committee make compensation decisions regarding our executive officers. In making its compensation decisions and recommendations, the Compensation Committee may take into account the recommendations of our CEO and other senior management, which, as defined in the Compensation Committee charter, includes any officer who reports directly to our CEO and any other officer of the Company or our subsidiaries so designated by our CEO. Other than giving such recommendations, however, our CEO and other senior management have no formal role and no authority to determine the amount or form of executive and director compensation.

The Compensation Committee may, at our expense, retain legal counsel (which may be, but need not be, our regular corporate counsel) and other consultants and advisors to assist it with its functions. The Compensation Committee has authority to approve such consultants’ and advisors’ fees and other retention terms and to terminate its relationship with any such consultant or advisor. The Compensation Committee will assess the independence of any such legal counsel, consultants or advisors to the extent required by applicable SEC and NASDAQ rules. For additional information regarding these services, please see the discussion entitled “Role of Compensation Consultant” included in the Compensation Discussion and Analysis section of this Proxy Statement. In addition, the Compensation Committee has authority to delegate its responsibilities to subcommittees or individual Compensation Committee members.

Governance/Nominating Committee

The current members of the Governance/Nominating Committee are Messrs. Fox (Chairman), Reiland and Wagner. The Board believes that each member of the Governance/Nominating Committee satisfies the independence requirements of NASDAQ Rule 5605(e). The nominees for election to the Board at the Annual Meeting were recommended by the Governance/Nominating Committee. The Governance/Nominating Committee charter is posted on our Internet website, www.bwen.com , and may be amended by approval of the Board, upon recommendation by the Governance/Nominating Committee. The Governance/Nominating Committee met three (3) times in 2018.

The Governance/Nominating Committee reviews director nominees proposed by stockholders. A stockholder who wishes to recommend one or more director nominees must provide a written recommendation to our Corporate Secretary, at Broadwind Energy, Inc., 3240 South Central Avenue, Cicero, IL 60804. In order to recommend a nominee for director at an Annual Meeting pursuant to our Bylaws, our Corporate Secretary must receive the written nomination not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding Annual Meeting (or, if the Annual Meeting is called for a date that is not within 30 days before or after such anniversary date, the written nomination must be so received not later than the close of business on the 10th day following the day on which notice of the date of the Annual Meeting was mailed or public disclosure of the date of the Annual Meeting was made, whichever first occurs).

Our Bylaws require that a notice of a recommendation must include:

Such notice must be accompanied by a written consent of each proposed director nominee to being named as a nominee and to serve as a director if elected. No person shall be eligible for election as a director unless nominated in accordance with the procedures set forth in our Bylaws.

The Governance/Nominating Committee is responsible for matters relating to the selection of candidates for, and the tenure of the members of, the Board; for developing and recommending to the Board our Principles of Corporate Governance; and for overseeing and carrying out policies and processes that enhance the effective and efficient governance of the Company.

The Governance/Nominating Committee will consider candidates for the Board who are recommended by stockholders, directors, third party search firms engaged by us, and other sources. When selecting candidates for recommendation to the Board, the Governance/Nominating Committee will consider the attributes of the candidates and the needs of the Board and will review all candidates in the same manner, regardless of the source of the recommendation. In evaluating director nominees, a candidate should have certain minimum qualifications, including being able to read and understand basic financial statements, having familiarity with our business and industry, having high moral character and mature judgment, and being able to work collegially with others. In addition, factors such as the following shall be considered:

In February 2015, the Board amended our Principles of Corporate Governance to establish a mandatory retirement age of 72 years old for directors, provided that the Board may choose to make an exception to this policy when it determines that doing so would be in the best interests of us and our stockholders.

The Governance/Nominating Committee believes in an expansive definition of diversity that includes differences of experience, education and talents, among other things. The Broadwind Energy, Inc. Governance/Nominating Committee Policies for Director Nominations and Stockholder Proposals is available on our website, www.bwen.com .

Stephanie K. Kushner  has served as a member of the Board since February 23, 2016, and as our President and Chief Executive Officer since May 16, 2016. She served as our Interim President and Chief Executive Officer from November 30, 2015 to May 16, 2016 and as our Chief Financial Officer since August 15, 2009 until August 7, 2017. Ms. Kushner has more than 30 years of accounting and finance experience, including serving as Chief Financial Officer for Federal Signal from 2002 to 2008. She held several global finance leadership positions with FMC Corporation, and began her career with Amoco Corporation. From May 2011 to November 2014, Ms. Kushner served on the Board of Directors of Columbus McKinnon Corporation, a global manufacturer of material handling equipment. From February 2004 to May 2010, she served on the Board of Directors of Wabash National Corporation, a manufacturer of commercial fleet and consumer/retail transportation equipment. Ms. Kushner holds a bachelor’s degree in economics from Douglass College at Rutgers University and a Master of Business Administration degree from the Wharton School.

Eric B. Blashford  has served as our Chief Operating Officer since May 1, 2018 and as President of our wholly-owned subsidiary Broadwind Towers, Inc. since October 2014. From January 2012 to October 2014, he served as President of a group of companies owned by The Heico Companies, LLC (“ Heico ”), including Barko Hydraulics, LLC, Pettibone Traverse Lift, LLC and Tiffin Parts, LLC, all of which are manufacturers of heavy duty off road vehicles (and parts) for the forestry, material handling, oil and gas and construction industries. For the five years prior to joining Heico, Mr. Blashford served as President for a group of companies owned by The Scott Fetzer Co., serving the truck equipment, electrical fittings and industrial equipment markets. He started his career with Waltco Truck Equipment Company, where he served in various operations and accounting roles. Mr. Blashford holds a Bachelor of Science in Business Administration degree in Accounting from the University of Akron and a Master of Business Administration degree from Kent State University, and is a registered Certified Public Accountant (non-practicing) in the state of Ohio.

Jason L. Bonfigt  has served as our Chief Financial Officer since August 7, 2017 and as our Principal Accounting Officer since August 1, 2016. Mr. Bonfigt was our Vice President, Corporate Controller from August 1, 2016 until his appointment as CFO. Mr. Bonfigt was previously Vice President - Finance of our wholly-owned

subsidiary Brad Foote Gear Works, Inc. (“ BFGW ”), beginning in April 2014, and before that served as our Director, Treasury beginning in March 2011. He began his career working in business planning functions at Schneider National, a provider of truckload, intermodal and logistics services. Mr. Bonfigt is a Certified Public Accountant who holds a Bachelor of Science degree in Accounting and Finance from the University of Wisconsin - Green Bay, and holds a Master of Business Administration degree in Finance and Economics from the Kellogg School of Business - Northwestern University.

Erik W. Jensen  has served as our Vice President and Chief Human Capital Officer since July 2014.  Prior to joining us, he was Vice President of Human Resources of Pettibone, LLC (“ Pettibone ”), part of a privately-held group of manufacturing companies, starting in August 2011. For more than three years prior to joining Pettibone, Mr. Jensen was employed by ThyssenKrupp Crankshaft Company, a publicly-traded German company, where he held the position of Director of Human Resources. He began his career in the chemical industry with Stepan Company, a publicly-traded company, where during his 14 year career he transitioned from operations to human resources. Mr. Jensen earned his Bachelor of Science degree in Industrial Technology, with a concentration in Manufacturing Engineering from Eastern Illinois University, and holds a Master of Business Administration degree from Olivet Nazarene University.

Gilbert M. Mayo has served as President of the Company’s wholly-owned subsidiary, Red Wolf Company, LLC, since September 2018.  Mr. Mayo was our General Manager, Heavy Fabrications, at BWT from January 27, 2015 to October 1, 2017 until his appointment of President of Red Wolf. Prior to joining the BWT, Mr. Mayo spent over sixteen years in the Scott Fetzer Company, serving in various leadership roles, including President of the Halex Company, a leading national manufacturer of electrical fittings and accessories.  He held senior operations leadership positions in both the Fort James Company and Michelin Tire Corporation.  Mr. Mayo served as an officer in the United States Marine Corps for five years.  Mr. Mayo holds a Bachelor of Science degree from the United States Naval Academy, a Master of Arts degree from Webster University and a Master of Business Administration degree from Clemson University.   

Daniel E. Schueller has served as President of BFGW since May 2016.  He also served as President of BFGW from April 2010 to March 2013. In the interim period, Mr. Schueller was Vice President of Bronto Skylift (a subsidiary of Federal Signal) in Tampere, Finland, a manufacturer of truck mounted aerial equipment for fire protection and industrial applications. Prior to that assignment, he was Vice President/General Manager Parts and Service and Vice President/General Manager of Vactor Manufacturing, part of the Environmental Solutions Group of Federal Signal, from March 2003 to April 2010. Mr. Schueller previously held manufacturing positions at Tecumseh Engines and at Case New Holland. Mr. Schueller earned a Bachelor of Science Degree in Mechanical Engineering Technology from the Milwaukee School of Engineering, and a Master of Business Administration degree from St. Ambrose University. He currently serves on the Board of Directors of HCC Inc., a supplier of combine components to the agricultural industry, and was previously on the Advisory Board of the Illinois Manufacturing Excellence Center.

SEC Settlement Involving Chief Financial Officer

On February 11, 2015, a settlement was approved in connection with the SEC investigation previously disclosed in our SEC reports. The investigation related to certain accounting practices in 2009 - 2010 related to revenue recognition, cost accounting and intangible and fixed asset valuations concerning BFGW. In connection with the settlement, Ms. Kushner agreed to pay disgorgement and prejudgment interest of $23,109 and a penalty of $50,000 related solely to the intangible valuation issue. We subsequently reimbursed her for the disgorgement and prejudgment interest payment. For additional information regarding the investigation, please see Item 3 “Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed with the SEC.

COMPENSATION DISCUSSION AND ANALYSIS

Business Summary

We are a precision manufacturer of structures, equipment and components for clean tech and other specialized applications. We provide technologically advanced high value products to energy, mining and infrastructure sector customers, primarily in the U.S. Our most significant presence is within the U.S. wind energy industry, although we have diversified into other industrial markets in order to improve our capacity utilization and reduce our exposure to uncertainty related to favorable governmental policies currently supporting the U.S. wind energy industry. Within the U.S. wind energy industry, we provide products primarily to wind turbine manufacturers. Outside of the wind energy market, we provide precision gearing, heavy fabrications and assembly and kitting components to a broad range of customers for oil and gas, mining, steel and other industrial applications.

For a more detailed discussion of our business, please see Item 1, “Business”, of our Annual Report.

2018 Business Highlights

• Successful commercial efforts focused on diversifying our customer base resulted in booking $40 million of orders from diverse customers.  Orders for heavy fabrications more than doubled and gearing orders increased 13%, following a strong 2017. 

• The Towers and Heavy Fabrications segment was adversely impacted by low tower demand, compressed margins and steel plate shortages due to the U.S. steel price spike triggered by import tariffs. 

• Gearing segment achieved first profitable year, driven by consistent strong demand and strong operational performance.   

• Net debt declined 18% due to rise in customer deposits and extinguishment of New Markets Tax Credit.  Subsequent to year-end, credit line was extended and increased to $35 million to support sales increase in 2019. 

How We Make Compensation Decisions

Pay for Performance Alignment

Our executive compensation program is intended to align the interests of our executive officers with those of our stockholders using performance based incentives. The Compensation Committee designed the executive compensation program so that variable pay elements (performance based bonuses and long-term incentives) constitute a significant portion of the target compensation opportunity for each executive officer. 

Corporate Governance Framework

The Compensation Committee engages in an ongoing review of our executive compensation program to ensure that it supports our compensation policy and ultimately serves the interests of our stockholders. Following are highlights of our corporate governance framework, which the Compensation Committee believes reinforces our pay for performance philosophy:

• Significant Compensation at Risk : Variable pay comprises a significant portion of our executive compensation.

• No Excise Tax Gross-up Payments on Change in Control Benefits :  Our executive compensation arrangements do not include excise tax gross-up payments in the event of a change in control.

• Limited Perquisites and Other Benefits :  We do not provide our executive officers with perquisites such as Company vehicles, club memberships, financial planning assistance, tax preparation or other benefits. We do not offer a service based defined benefit pension plan to our employees.

• Stock Ownership Guidelines :  We require our executive officers and directors to meet stock ownership guidelines (ranging from one to five times annual base salary in the case of executive officers and three times annual cash retainer fees in the case of directors). The stock ownership guidelines are described in more detail below in the section entitled “Stock Ownership Guidelines.”

• Anti-Hedging and Anti-Pledging Policies : We have adopted policies whereby directors, officers and certain other key employees are prohibited from entering into hedging transactions or similar arrangements with respect to our securities and may not pledge our securities as collateral for a loan.

• Clawback Policy : We adopted a policy whereby the Compensation Committee may in its discretion and to the extent legally permitted, require the return, repayment or forfeiture of any annual or long-term incentive payment or award made or granted to any current or former executive officer during the 36-month period following the filing of financial statements that are later the subject of a material negative restatement.

• Use of Independent Compensation Consultant :  During 2018, the Compensation Committee retained Frederic W. Cook & Co., Inc. (“ FW Cook ”) as its independent compensation consultant.

Role of Compensation Consultant

Pursuant to the terms of its charter, the Compensation Committee has the authority to retain independent advisors to assist in carrying out its responsibilities. Beginning in 2011, the Compensation Committee engaged FW Cook, an independent compensation consultant, to advise the Compensation Committee on certain executive compensation matters, including with respect to benchmarking, compensation trends and retention practices. In 2018, FW Cook performed the following services for the Compensation Committee:

• Provided the Compensation Committee with updates on current trends, regulatory developments and best practices in executive compensation;  and

• Advised the Compensation Committee regarding various compensation design and reporting matters (with respect to both executive compensation and Board compensation), and attended two (2) Compensation Committee meetings held during the year;

FW Cook does not provide any other services to us or to management directly. Accordingly, its work on behalf of the Compensation Committee has not presented any conflict of interest.

Role of Senior Management in Compensation Decisions

The Board and the Compensation Committee make compensation decisions regarding our executive officers. However, in making executive compensation decisions, the Compensation Committee seeks and considers input from senior management. Senior management regularly participates in the Board’s and the Compensation Committee’s activities in the following specific respects:

• Our CEO reports to the Compensation Committee with respect to her evaluation of the performance of our other executive officers. Our CEO makes recommendations as to compensation decisions for these individuals, including base salary levels and the amount and mix of incentive awards. Our CEO is not present when the Compensation Committee deliberates and approves changes to her compensation.

• Our CEO, Chief Financial Officer and Chief Human Capital Officer develop and recommend for consideration by the Compensation Committee performance objectives and targets for our incentive compensation programs. The Compensation Committee makes final determinations of performance objectives and targets.

Consideration of Prior Year Say-on-Pay Vote

In the Compensation Committee’s 2018 compensation setting process, the Compensation Committee considered the results of the votes cast on the “say-on-pay” proposal at our 2017 Annual Meeting and determined that our executive compensation philosophy, objectives and elements continue to be appropriate and align with stockholder interests. In 2018, the Company received a 93% vote in favor of the “say-on-pay” advisory proposal. Accordingly, the Compensation Committee did not make any changes to our 2018 executive compensation program in response to the “say-on-pay” vote. 

Use of Peer Group

Since 2008, the Compensation Committee has used a customized peer group for benchmarking purposes. The peer group has been revised and/or updated periodically, following recommendations from the Compensation Committee’s independent compensation consultant. The Compensation Committee most recently considered the appropriate peer group in February 2019. At that time, five companies were removed from the 2018 peer group.  Two of these companies (Hardinge, Inc. and Key Technology, Inc.) had been acquired and no longer report publicly.  Three other companies (Ampco-Pittsburgh Corporation, Preformed Line Products Company and Thermon Group Holdings, Inc.) were removed because their revenues fall outside of the target revenue range. Four additions were made to the peer group (ASV Holdings, Inc., Capstone Turbine Corporation, FuelCell Energy, Inc. and Plug Power, Inc.). Following this review, the Compensation Committee approved the following custom peer group for 2019 executive compensation benchmarking purposes:

Elements of Compensation

Overview

The Compensation Committee has implemented a formalized compensation structure for our executive officers that includes base salary, an annual incentive opportunity and long-term incentives. In allocating compensation among these components, the Compensation Committee believes that each executive officer’s target compensation should include a significant performance based component. The Compensation Committee does not solely use a formulaic approach in determining the weighting of each component of total compensation. Rather, after setting each separate component of compensation, the Compensation Committee reviews the total compensation package of each executive officer relative to market and performance.

Components

Base Salary

We pay our executive officers fixed annual salaries, which provide a degree of financial stability and are intended to reflect the competitive marketplace, to attract and retain quality executive officers. The Compensation Committee reviews base salaries for all executive officers on an annual basis. In determining the base salary for each executive officer, the Compensation Committee assesses the responsibilities associated with the executive officer’s position, individual contributions and performance, skill set, prior experience, and the external market for the position. Although the median of peer group market data is used as a benchmark to set base salaries for our executive officers, actual base salaries may be higher or lower than the median based on the factors set forth above.

Annual Incentive Opportunity

We provide our executive officers with short-term incentive compensation through our annual cash bonus program, the Executive Short-Term Incentive Program (the “ STIP ”). The STIP is designed to reward our executive officers for achieving pre-established performance goals. The Compensation Committee administers the STIP, including setting annual incentive goals for performance against both financial targets and key business objectives, and then assessing actual performance against those targets at the end of the incentive period. Under the STIP, each executive officer has an annual target bonus opportunity equal to a fixed percentage of base salary, which takes into account peer group market data and the unique skills and contributions of each individual. The STIP target percentage ranges from a minimum of 30% of base salary for certain executive officers, up to 100% of base salary in the case of our chief executive officer. Actual STIP payouts may range from 0% to 150% of target depending on the level of performance achieved during the year. All payments under the STIP are subject to the discretion of the Compensation Committee.

Long-Term Incentives

We provide our executive officers with long-term incentive compensation through our Executive Long-Term Incentive Program (the “ LTIP ”), which is administered under the 2015 EIP. The LTIP is designed as a long-term incentive vehicle to retain key executive officers, promote higher levels of Company stock ownership by executive officers, and encourage long-term planning by the senior leadership team. The LTIP is intended to deliver market competitive long-term incentive opportunities that encourage the behaviors and long-term perspective necessary for creating stockholder value. The Compensation Committee administers the LTIP, including setting long-term incentive goals based upon corporate performance and determining the threshold, target and maximum payout levels for each plan year. Under the LTIP, each executive officer has a target bonus opportunity based on peer group market data and the unique skills and contributions of each individual.

The chart below shows the targeted  total compensation mix for our CEO for 2018:

2018 Compensation

Base Salary

Base salaries for executive officers are reviewed annually by the Compensation Committee, or when there is a significant change in responsibilities.  In 2018, Ms. Kushner’s base salary, which was near the bottom quartile for the peer group, was increased by 2.5%, in line with the general market.  In May 2018, Mr. Blashford was promoted to the position of Chief Operating Officer and his salary was adjusted 5% to reflect his added responsibilities and bring his salary closer to market.  Mr. Bonfigt’s salary was increased by 5% to move his compensation closer to market, reflecting his positive development in the position. The following table sets forth 2018 base salary information for our NEOs:

Annual Incentive Opportunity

2018 STIP Payout .  STIP targets for 2018 were based 50% on income targets, 25% on booking diverse orders and 25% on the Compensation Committee’s assessment of performance against individual goals. 

The following table shows the threshold, target and maximum 2018 operating income (“OI”) targets established for purposes of determining 2018 STIP award payouts for all executive officers, for both consolidated Company financial results and for Towers and Heavy Fabrications segment financial results:

For 2018, we reported a consolidated Loss from Continuing Operations of ($24,002,000), below the minimum Threshold amount, resulting in no award for the 50% financial performance component of the 2018 STIP.  For the Towers and Heavy Fabrications segment, we reported an Operating Loss of ($4,346,000), also below the minimum threshold amount.  Consequently, our NEOs received no payment with regard to the 50% financial performance component of the STIP. 

The following table shows the threshold, target and maximum 2018 Diverse Orders targets established for purposes of determining 2018 STIP award payouts for all executive officers, for both consolidated Company financial results and for Towers and Heavy Fabrications segment financial results:

For 2018, we booked Consolidated Diverse Orders of $40,005,000, an achievement above threshold but below target, resulting in a payout of 55.2% of target for this 25% of the 2018 STIP.  For Towers and Heavy Fabrications, we booked Diverse Orders of $15,492,000, which was below the minimum Threshold amount.  Consequently, there was no payment to our NEOs under this metric.

The Compensation Committee evaluated executives’ performance against individual objectives, noting progress made in many key areas, including liquidity management, the successful turn-around of the Gearing segment and the growth and diversification of the heavy fabrications product line.  However, because the minimum EBITDA threshold was not achieved, senior management  w as deemed ineligible for payouts related to individual performance goals.   

Based on these factors, total 2018 STIP payouts to the NEOs were as follows:

Long-Term Incentives

2018 LTIP Structure    Beginning with the 2017 grant and continuing into 2018, the Compensation Committee adopted a 3-year LTIP structure that (i) uses a performance index (as described below, the “ PI ”) formula as the metric for calculating performance-based LTIP payouts, (ii) shifts to a higher level of performance-based versus time-based awards, (iii) provides that the award will be paid completely in our common stock and (iv) provides that potential achievement ratings may range from 0% to 200% of target.

The 2017 and 2018 LTIP awards were allocated in the following manner: 45% time-based RSUs which vest in three equal annual tranches on the anniversary of the grant date; and 55% performance-based RSUs tied to successful growth in the PI over a three-year performance period, beginning at the start of the fiscal year during which the RSUs are granted.

The performance-based RSU awards are tied to our success at growing stockholder value over the three-year performance period, as calculated below:

PI is measured annually, as:  ( Consolidated EBITDA x Target Multiple) – Average Net Debt  

Average Shares Outstanding

Where :

Target Multiple : Is set annually by the Board to approximate market EBITDA multiples for peers

Average Net Debt :  Average of 12 monthly totals of Short-term debt + Long-term debt –Cash & Marketable Securities

Average Shares Outstanding : As presented in our external financial statements

For the 2018 grant, performance goals were set based on achieving targeted annual growth in fiscal years 2018 to 2020 PI from the 2017 base year.  Payout of the performance-based bonus for the three-year period is linked to achievement of cumulative total PI relative to the targeted PI for the three-year performance period. However, at the conclusion of each of years one and two, partial vesting up to a pro rata share of the targeted amount is available if the PI growth rate for the respective period is achieved.

The following table summarizes the awards granted in 2018 to the NEOs under the LTIP, as approved by the Compensation Committee at its February 2018 meeting:

Vesting of 2017 and 2018 Performance-Based RSUs .  Under the current LTIP structure, performance shares are earned based on year-over-year growth in PI against the base period.  Although the full performance period is 3 years, partial vesting of a pro-rated number of shares is available after each of years one and two of the three year period to the extent PI growth meets or exceeds the targeted percentage.  For the 2017 and 2018 plan years, no performance shares have vested for our NEOs because consolidated EBITDA and therefore the PI fell below target minimums. 

2019 Compensation

Base Salary

Pursuant to the Compensation Committee’s annual review of our executive officers’ base salaries, and taking into consideration peer data, Ms. Kushner’s base salary was not increased because it was deemed to be in line with peers.   Mr. Blashford’s base salary was increased 3.2% from $310,000 and Mr. Bonfigt’s salary was increased 6.3% from $225,750 to $240,000.  All salary increases will be effective April 1, 2019.  The following table sets forth 2019 base salary information for our NEOs:

Annual Incentive Opportunity

2019 STIP Structure

At its December 2018 meeting, the Compensation Committee modified the structure of the STIP for 2019, linking 50% of the potential bonus payment to earnings targets, 25% to targets for booking orders that will further diversify the Company’s customer base, and 25% based on achieving targeted reductions in the average Cash Conversion Cycle (CCC).  The Cash Conversion Cycle is defined as a 13-point month-end average of: a) the number of days sales tied up in accounts receivable net of customer deposits; plus b) the number of days cost of sales tied up in inventories; less c) the number of days cost of sales financed by accounts payable. The introduction of the CCC target reflects the desire to increase management’s focus on minimizing the CCC and thereby improving liquidity and reducing interest expense.

Other Compensation Practices and Policies

Severance and Change in Control Provisions

Our employment agreement with Ms. Kushner and our severance and non-competition agreements with our other named executive officers contain severance and change in control provisions. These are more fully described below under the heading “Potential Payments Upon Termination of Employment or Change in Control.” The severance provisions are intended to protect the executive officers from the loss of reasonably expected compensation and benefits (i) if we terminate the executive officer’s employment without cause or (ii) in the case of Ms. Kushner, if she terminates

her employment for good reason. We provide severance benefits to recruit and retain executive officers, and we believe this benefit enhances our ability to attract and retain executive officers during challenging economic circumstances and in a competitive job market for executive talent. We believe the change in control provisions are aligned with the interests of our stockholders, enabling us to retain the executive officers in the event of a pending, threatened or actual change in control. The provisions are also intended to provide our executive officers with incentives to obtain the highest possible value in the event of a future acquisition of the Company, despite the risk of losing employment.

Other Benefits

Our executive officers participate in our corporate-wide benefit programs and are provided benefits that are generally commensurate with the benefits provided to other full-time employees, which includes participation in our qualified defined contribution plan. We do not provide our executive officers with perquisites or other personal benefits such as Company vehicles, club memberships, financial planning assistance, tax preparation, or other benefits. Term life insurance is provided to Ms. Kushner and Messrs. Blashford and Bonfigt. These perquisites are disclosed in the “Details Behind All Other Compensation Column” table below.

Stock Ownership Guidelines

To further align the interests of our executive officers and directors with the interests of our stockholders, the Board adopted stock ownership guidelines for our executive officers and directors in March 2011. The required stock ownership levels are to be achieved within five years of first appointment or election as an executive officer or director, as applicable. The stock ownership guidelines require (i) each director to own a number of shares of our common stock having a value equal to three times the annual cash retainer fees earned in the immediately preceding calendar year, and (ii) each executive officer to own a number of shares of our common stock having a value equal to a multiple of the executive officer’s base salary then in effect, divided by the closing price of the stock, as follows:

If an executive officer fails to satisfy the requirements of the stock ownership guidelines, the executive officer may have 25% of his or her annual incentive bonus paid solely in shares of our common stock until the executive officer owns the requisite number of shares. If a director fails to satisfy the requirements of the stock ownership guidelines, the director may have 25% of his or her director fees paid solely in shares of our common stock until the director owns the requisite number of shares. The Board has the authority and discretion to administer, interpret, amend or modify the stock ownership guidelines and to make all determinations that may be necessary or advisable in connection therewith (e.g., to take into account market volatility and instances of individual hardship).   

Policies on Hedging and Pledging

Under our Policy Statement on Inside Information and Securities Trading (the “ Policy ”), all “Designated Persons” (as defined in the Policy to include our directors, officers and certain other key employees or representatives), are prohibited from entering into hedging or monetization transactions or similar arrangements with respect to our securities, including the purchase or sale of “puts” or “calls” or the use of any other derivative instruments. Additionally, under the Policy, Designated Persons (i) may not pledge our securities as collateral for a loan, and (ii) must obtain pre-clearance from a “Securities Trading Administrator” (as defined in the Policy) before engaging in any transaction involving our securities.   

Clawback Policy

The Compensation Committee periodically reviews the Policy on Recoupment of Incentive Compensation, which has been in place since 2014.  During 2017, the Compensation Committee revised the policy to extend the applicable time period subject to recapture from 12 to 36 months.  Under the revised policy, the Compensation Committee may in its discretion and to the extent legally permitted, require the return, repayment or forfeiture of any annual or long-term incentive payment or award made or granted to any current or former executive officer during the 36-month period following the filing with the SEC of financial statements that are later the subject of a material negative

restatement (a “ Restatement ”), if: (i) the payment or award was predicated upon achieving certain financial results that were subsequently the subject of the Restatement; (ii) the Compensation Committee determines that the executive officer engaged in intentional misconduct that caused the need for the Restatement; and (iii) a lower payment or award would have been made to the executive officer based upon the restated financial results. In each such instance, the amount required to be returned, repaid or forfeited shall be the amount by which the executive officer’s payment or award for the relevant period exceeded the lower payment or award that would have been made or granted based on the restated financial results.

In addition, the Compensation Committee may in its discretion and to the extent legally permitted, require the return or repayment of any profits realized by such executive officer on the sale of our securities received pursuant to any such award granted during such 36-month period following the filing with the SEC of financial statements that are later the subject of such a Restatement, if the Compensation Committee determines that the executive officer engaged in intentional misconduct that caused the need for the Restatement.

Tax Deductibility of Executive Compensation

Section 162(m) of the IRC (“ Section 162(m )”) limits to $1,000,000 per year the deduction that a publicly held corporation may take for compensation paid to each of its CEO, CFO and the three other most highly compensated employees. The exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed with the 2017 Tax Cuts and Jobs Act (the “Tax Act”) effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain written binding contracts in place as of November 2, 2017 and not materially modified on or after that date.  To the extent a contract was effective on November 2, 2017, any amount the Company would be obligated to pay pursuant to that contract under applicable law would not be subject to the performance-based compensation repeal with the Tax Act. The Compensation Committee recognizes the desirability of preserving the deductibility of payments made to our executive officers and will continue to assess the impact of Section 162(m) on our compensation practices. The Compensation Committee also believes that it must maintain flexibility in its approach in order to structure a program that is the most effective in attracting, motivating and retaining our key executive officers. Further, the Compensation Committee believes that 162(m) will have no material effect on the organization due to its significant amount of NOLs.  

(1) Represents the value of the 401(k) plan matching contributions made by us for 2018, which matching contribution was paid in full in Company stock.

(2) Represents the contributions by us to life insurance, long-term disability insurance and accidental death and dismemberment insurance premiums.

Outstanding Equity Awards at 2018 Year End  

The following table includes certain information with respect to the value of all unexercised options to purchase shares of our common stock and unvested shares of restricted stock and RSUs previously awarded to the NEOs as of December 31, 2018.