PRE 14A 1 novt-pre14a_20210513.htm PRE 14A novt-pre14a_20210513.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14a

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

The Securities Exchange Act of 1934

Filed by the Registrant    

Filed by a Party other than the Registrant    

Check the appropriate box:

Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

Novanta Inc.

 

(Name of registrant as specified in its charter)

  

 

(Name of person(s) filing proxy statement, if other than Registrant)

Payment of Filing Fee (check the appropriate box):

No fee required

Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

(5)

Total fee paid:

 

Fee paid previously with preliminary materials.

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

 

(1)

Amount Previously Paid:

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

(3)

Filing Party:

 

 

(4)

Date Filed:

 

 

 

 

 

 

 

 

 


 

 

 

 

 

 


Novanta Inc.

125 Middlesex Turnpike
Bedford, Massachusetts 01730
(781) 266-5700

April [], 2021

 

Dear Shareholder:

It is my pleasure to invite you to the annual and special meeting of shareholders of Novanta Inc. to be held virtually at 3:00 p.m. Eastern Time on Thursday, May 13, 2021. In light of the ongoing COVID-19 pandemic, we strongly encourage all shareholders to attend the annual meeting online by visiting www.virtualshareholdermeeting.com/NOVT2021. You will be able to vote and ask questions online as you would if you were to attend the meeting in person.

The purposes of the meeting are to: (i) elect the Board of Directors; (ii) approve, on an advisory basis, the Company’s executive compensation; (iii) approve the amended and restated Novanta Inc. 2010 Incentive Award Plan; (iv) appoint PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm; (v) confirm the Company’s Amended and Restated By-Law Number 1 and; (vi) amend the articles of the Company to authorize an unlimited number of blank check preferred shares.

Information regarding the above matters is contained in the formal notice of meeting and management proxy circular on the following pages. The Novanta Inc. Annual Report for the fiscal year ended December 31, 2020 accompanies this management proxy circular. We urge you to read the proxy materials in their entirety and to consider them carefully.

It is important that your shares be represented at the annual meeting, regardless of the size of your holdings. Accordingly, whether or not you expect to attend the meeting, we urge you to vote promptly by returning the enclosed proxy form or by submitting your proxy via telephone or online as soon as possible. You may revoke your proxy at any time before it has been voted.

On behalf of the Board of Directors, I thank you for your participation.

 

Very truly yours,


Stephen W. Bershad
Chairperson of the Board of Directors

 

 

 

 

 

 

 

 

 

 

 


 

Novanta Inc.

125 Middlesex Turnpike
Bedford, Massachusetts 01730
(781) 266-5700

 

Notice of Annual and Special Meeting of Shareholders to be held on Thursday,
May 13, 2021

NOTICE IS HEREBY GIVEN that the annual and special meeting of shareholders (the “2021 Annual Meeting”) of Novanta Inc., a New Brunswick corporation, which we refer to in this notice and in the attached management proxy circular as the Company, will be held at 3:00 p.m. Eastern Time on Thursday, May 13, 2021, online at www.virtualshareholdermeeting.com/NOVT2021. Certain members of the Company’s management may also participate in the meeting at the Company’s executive offices located at 125 Middlesex Turnpike, Bedford, Massachusetts 01730. In light of the ongoing COVID-19 pandemic, all shareholders and any other persons entitled to attend the 2021 Annual Meeting are asked to attend online at www.virtualshareholdermeeting.com/NOVT2021 and to dial into the toll-free conference call line at 1-833-722-0216 (Canada and U.S.) or 1-929-517-0280 (international). You will be able to vote and ask questions online as you would if you were to attend the meeting in person.

The 2021 Annual Meeting will be held for the following purposes:

 

1.

To elect Lonny J. Carpenter, Deborah DiSanzo, Matthijs Glastra, Brian D. King, Ira J. Lamel, Maxine L. Mauricio, Katherine A. Owen, Thomas N. Secor, and Frank A. Wilson to our Board of Directors until the next annual meeting of shareholders, until his or her successor is elected or appointed, or until his or her earlier death, resignation or removal;

 

2.

To approve, on an advisory basis, the Company’s executive compensation;

 

3.

To approve the amended and restated Novanta Inc. 2010 Incentive Award Plan;

 

4.

To appoint PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm to serve until the 2022 annual meeting of shareholders;

 

5.

To confirm the Company’s Amended and Restated By-Law Number 1;

 

6.

To amend the articles of the Company to authorize an unlimited number of blank check preferred shares; and

 

7.

To transact such other business as may properly come before the meeting or any postponement, continuation or adjournment thereof.


Only shareholders of record as of the close of business on Wednesday, March 31, 2021 will be entitled to attend and vote at the meeting and at any postponement, continuation or adjournment thereof, provided that a subsequent transferee of shares may vote at the meeting if the transferee establishes ownership of the shares and requests not later than ten (10) days before the meeting to be added to the list of shareholders entitled to vote at the meeting.

 

 


 

All shareholders are requested to complete, sign, date and return the form of proxy in the enclosed envelope to Broadridge Financial Solutions Inc., Data Processing Centre, P.O. Box 3700, STN Industrial Park, Markham, ON L3R 9Z9, Canada before 3:00 p.m. Eastern Time on Tuesday, May 11, 2021, or, if the meeting is postponed, continued or adjourned, prior to 3:00 p.m. Eastern Time on the last business day prior to the date fixed for the postponed, continued or adjourned meeting. If you are a shareholder of record, you may also vote by telephone or on the Internet by following the instructions on the enclosed proxy form, no later than 3:00 p.m. Eastern Time on Tuesday, May 11, 2021, or, if the meeting is postponed, continued or adjourned, prior to 3:00 p.m. Eastern Time on the last business day prior to the date fixed for the postponed, continued or adjourned meeting. Shareholders who vote by telephone or the Internet should not return a proxy form.

A copy of the management proxy circular and a proxy form accompany this notice. This notice, the management proxy circular, the proxy form and the Company’s 2020 Annual Report will be forwarded on or about Friday, April 16, 2021 to the holders of the Company’s common shares as of the close of business on Wednesday, March 31, 2021.

All monetary amounts listed in the proxy circular are in U.S. dollars, unless otherwise indicated.

DATED at Bedford, Massachusetts this [  ] day of [  ], 2021.

By Order of the Board of Directors


Matthijs Glastra
Chief Executive Officer


 

 

 

 

 


 

Table of Contents

 

Information Concerning Voting and Solicitation

1

Item 1–Election of Directors

8

Item 2–Advisory Vote on the Company’s Executive Compensation

14

Item 3–Approval of the Amended and Restated Novanta Inc. 2010 Incentive Award Plan

17

Item 4–Appointment of Independent Registered Public Accounting Firm

27

Item 5–Confirmation of the Company’s Amended and Restated By-Law Number 1

30

Item 6–Amendment to the Company’s Articles to Authorize Blank Check Preferred Shares

31

Executive Officers

33

Corporate Governance

34

Director Compensation

44

Compensation Discussion and Analysis

48

Executive Compensation

60

Security Ownership of Certain Beneficial Owners and Management

77

Certain Relationships

81

Other Matters

82

Schedule A – Amended and Restated Novanta Inc. 2010 Incentive Award Plan

85

Schedule B – Amended and Restated By-Law Number 1

110

Schedule C – Amended and Restated By-Law Number 1, redlined to show changes

125

Schedule D – Articles of Amendment

146

Schedule E – Special Resolution

148

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Novanta Inc.

125 Middlesex Turnpike

Bedford, Massachusetts 01730

(781) 266-5700


 

Management Proxy Circular

Information concerning voting and solicitation

 

 

Novanta Inc., a New Brunswick corporation, which, together with its subsidiaries, we refer to in this management proxy circular as the Company, will hold its annual and special meeting of shareholders (the “2021 Annual Meeting”) at 3:00 p.m. Eastern Time on Thursday, May 13, 2021 online at www.virtualshareholdermeeting.com/NOVT2021. You will be able to attend the 2021 Annual Meeting by visiting www.virtualshareholdermeeting.com/NOVT2021 and log in by using the 16-digit control number included in your proxy card or on the instructions that accompanied your proxy materials. Certain members of the Company’s management may also participate in the meeting at the Company’s executive offices located at 125 Middlesex Turnpike, Bedford, Massachusetts 01730. In light of the ongoing COVID-19 pandemic, all shareholders and any other persons entitled to attend the 2021 Annual Meeting are asked to attend online at www.virtualshareholdermeeting.com/NOVT2021 and to dial into the toll-free conference call line at 1-833-722-0216 (Canada and U.S.) or 1-929-517-0280 (international). You will be able to vote and ask questions online as you would if you were to attend the meeting in person.

 

This management proxy circular and the enclosed proxy form are furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of the Company for use at the meeting. The solicitation will be made by mail, but proxies may also be solicited personally, by telephone or by email or other electronic means by directors, officers or other employees of the Company. The cost of solicitation has been or will be borne by the Company. The Company may also pay brokers or nominees holding common shares of the Company in their names or in the names of their principals for their reasonable expenses in sending solicitation material to their principals.

 

The notice of the meeting, this management proxy circular, the proxy form and a copy of the Company’s annual report for the fiscal year ended December 31, 2020 (the “2020 Annual Report”) will be forwarded on or about Friday, April 16, 2021 to the holders of the Company’s common shares as of the close of business on Wednesday, March 31, 2021 (the “Record Date”).

 

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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 13, 2021

 

The Company’s Management Proxy Circular and 2020 Annual Report
are available at https://investors.novanta.com/financials/annual-reports

The following proxy materials are available for review at: https://investors.novanta.com/financials/annual-reports

the management proxy circular;

the Company’s 2020 Annual Report; and

any amendments to the foregoing materials that are required to be furnished to shareholders.

 

Matters to Be Voted On

At the meeting, you will be entitled to vote on the following proposals:

 

1.

To elect Lonny J. Carpenter, Deborah DiSanzo, Matthijs Glastra, Brian D. King, Ira J. Lamel, Maxine L. Mauricio, Katherine A. Owen, Thomas N. Secor and Frank A. Wilson to our Board of Directors until the next annual meeting of shareholders, until his or her successor is elected or appointed, or until his or her earlier death, resignation or removal (see page 8);

 

2.

To approve, on an advisory (non-binding) basis, the Company’s executive compensation (see page 14);

 

3.

To approve the amended and restated Novanta Inc. 2010 Incentive Award Plan (see page 17);

 

4.

To appoint PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm to serve until the 2022 annual meeting of shareholders (see page 27);

 

5.

To confirm the Company’s Amended and Restated By-Law Number 1 (see page 30);

 

6.

To amend the articles of the Company to authorize an unlimited number of blank check preferred shares (see page 31); and

 

7.

To transact such other business as may properly come before the meeting, or any postponement, continuation or adjournment thereof.


We are not aware of any other business to be brought before the meeting. If any additional business is properly brought before the meeting, the designated officers serving as proxies will vote in accordance with their best judgment.

 

Board Recommendations

The Board recommends that you vote your shares as follows:

FOR” the election of each of the nominees for director named in this management proxy circular;

FOR” the approval, on an advisory basis, of the Company’s executive compensation;

FOR” the approval of the amended and restated Novanta Inc. 2010 Incentive Award Plan;

“FOR” the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm to serve until the 2022 annual meeting of shareholders;

 

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FOR” the confirmation of the Company’s Amended and Restated By-Law Number 1; and

“FOR” the amendment to the Company’s articles to authorize an unlimited number of blank check preferred shares.

 

Attending the 2021 Annual Meeting

As part of our effort to maintain a safe and healthy environment for our directors, members of management and shareholders who wish to attend the 2021 Annual Meeting, in light of the ongoing COVID-19 pandemic, we are asking all shareholders and any other persons who are entitled to attend the 2021 Annual Meeting to attend online by visiting www.virtualshareholdermeeting.com/NOVT2021 and log in using the 16-digit control number included either on your proxy form or on the instructions that accompanied your proxy materials. Novanta is also providing a toll-free conference call line for shareholders that do not have internet access or that prefer that method, either to verbally ask a question at the 2021 Annual Meeting or to listen in as an alternative to the webcast. Using your control number included either on your proxy form or voting instruction form, as applicable, you will be able to listen to the meeting proceedings and submit your question verbally during the meeting; however, you will not be able to vote your shares on the phone during the meeting and will have to use the online webcast for that purpose if you have not done so in advance of the meeting. To join the conference call, you must call 1-833-722-0216 (Canada and U.S.) or 1-929-517-0280 (international). If your shares are held in “street name,” as described below, you should contact your broker or other nominee to obtain your 16-digit control number or otherwise vote through the broker or other nominee. The 2021 Annual Meeting platform is fully supported across browsers and devices running the most updated version of applicable software plug-ins. You should ensure you have a strong, preferably high-speed, internet connection wherever you intend to participate in the 2021 Annual Meeting. The webcast 2021 Annual Meeting allows you to attend the meeting live, submit questions and, if you are a shareholder of record, submit your vote while the 2021 Annual Meeting is being held if you have not done so in advance of the 2021 Annual Meeting. Please note that only holders of record will be able to vote during the 2021 Annual Meeting. If you lose your 16-digit control number, you may join the 2021 Annual Meeting as a “Guest”. Guests will be able to attend the 2021 Annual Meeting through the live webcast only, by joining the webcast as a guest at www.virtualshareholdermeeting.com/NOVT2021. Guests will not be able to submit questions or vote. The meeting webcast will begin promptly at 3:00 p.m. Eastern Time. We encourage you to access the meeting prior to the start time. Online check-in will begin at 2:50 p.m. Eastern Time on May 13, 2021, and you should allow ample time for check-in procedures.

 

Appointment and Revocation of Proxies

The persons named in the enclosed proxy form are officers of the Company. A shareholder may appoint a person to represent him or her at the meeting, other than the persons already named in the enclosed proxy form, by inserting the name of such other person in the blank space provided in the proxy form, online at www.proxyvote.com or by completing another proper form of proxy. Such person need not be a shareholder. The completed proxy form must be mailed in the enclosed business reply envelope to and deposited with Broadridge Financial Solutions, Inc., Data Processing Centre, P.O. Box 3700, STN Industrial Park, Markham, ON L3R 9Z9, Canada no later than 3:00 p.m. Eastern Time on Tuesday, May 11, 2021, or, if the meeting is postponed, continued or adjourned, prior to 3:00 p.m. Eastern Time on the last business day prior to the date fixed for the postponed, continued or adjourned meeting. Note that, in light of possible disruptions in mail service, we encourage shareholders to submit their proxy via telephone or on the Internet, as described below.


If you are a shareholder of record, you may also vote by telephone or on the Internet by following the instructions on the enclosed proxy form, no later than 3:00 p.m. Eastern Time on Tuesday, May 11, 2021, or, if the meeting

 

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is postponed, continued or adjourned, prior to 3:00 p.m. Eastern Time on the last business day prior to the date fixed for the postponed, continued or adjourned meeting. You will need your 16digit control number located on the form of proxy/voting instruction form. Shareholders who vote by telephone or the Internet should not return a proxy form.


The shareholder executing the proxy form may revoke it as to any matter on which a vote has not already been cast pursuant to the authority conferred by such proxy: (a) by delivering another properly executed proxy form bearing a later date and depositing it in the manner and by the deadline described above; (b) by delivering an instrument in writing revoking the proxy, executed by the shareholder or by the shareholder’s attorney authorized in writing at the registered office of the Company, at any time up to and including the last business day preceding the date of the meeting, or at any reconvened meeting following its postponement, continuation or adjournment; (c) by voting during the 2021 Annual Meeting, if you are a shareholder of record; or (d) in any other manner permitted by law.

 

Voting of Proxies

The officers named in the proxy form enclosed with this management proxy circular will vote or withhold from voting the common shares of the Company in respect of which they are appointed proxy in accordance with the directions of the shareholder appointing them and, if a shareholder specifies a choice with respect to any matter to be acted upon, the shares will be voted accordingly. In the absence of such direction, the shares will be voted:

FOR” the election of each of the nominees for director named in this management proxy circular;

FOR” the approval, on an advisory basis, of the Company’s executive compensation;

FOR” the approval of the amended and restated Novanta Inc. 2010 Incentive Award Plan;

“FOR” the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm to serve until the 2022 annual meeting of shareholders;

“FOR” the confirmation of the Company’s Amended and Restated By-Law Number 1; and

“FOR” the amendment to the Company’s articles authorizing an unlimited number of blank check preferred shares.

 

Voting and Ownership of Shares

At the close of business on the Record Date, the Company had [] common shares outstanding and entitled to vote. Each share is entitled to one vote. The failure of any shareholder to receive a notice of meeting of shareholders does not deprive the shareholder of a vote at the meeting.


The following votes are required to approve each of the proposals at the meeting.

Election of Directors. The nominees for director named in this management proxy circular will be elected by a majority of the votes cast.

Advisory Vote on the Company’s Executive Compensation. The proposal regarding the approval, on an advisory basis, of the Company’s executive compensation requires the approval of a majority of the votes cast in respect of such matter.

 

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Approval of the amended and restated Novanta Inc. 2010 Incentive Award Plan. The proposal regarding the approval of the amended and restated Novanta Inc. 2010 Incentive Award Plan requires the approval of a majority of the votes cast in respect of such matter.

Appointment of Independent Registered Public Accounting Firm. The proposal regarding the approval of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm requires the approval of a majority of the votes cast in respect of such matter.

Confirmation of the Company’s Amended and Restated By-Law Number 1. The proposal regarding the confirmation of the Company’s amended and restated By-Law Number 1 requires the approval of a majority of the votes cast in respect of such matter.

Amendment to the Company’s articles. The proposal regarding the amendment to the Company’s articles requires the approval not less than two-thirds of the votes cast in respect of such matter.

 

No votes may be taken at the meeting, other than a vote to adjourn, unless a quorum has been constituted consisting of the representation of at least thirty-three and one-third percent (33 1/3%) of the outstanding shares as of the Record Date. Votes will be tabulated by a representative of Broadridge Financial Solutions, Inc., which is also serving as the inspector of election or scrutineer for the meeting.

The enclosed form of proxy confers discretionary authority on the persons named therein with respect to amendments to or variations of matters identified in the notice of meeting and such other matters that may properly come before the meeting or any postponement, continuation or adjournment thereof. As of the date of this management proxy circular, the management of the Company knows of no such amendments, variations or other matters to be presented at the meeting.

 

Voting for the Election of Directors

Section 65(1) of the Business Corporations Act (New Brunswick) provides for cumulative voting for the election of directors so that each shareholder entitled to vote at an election of directors has the right to cast an aggregate number of votes equal to the number of votes attached to the shares held by such shareholder multiplied by the number of directors to be elected, and may cast all such votes in favor of a single candidate or distribute them among the candidates in any manner the shareholder decides. The statute further provides, in section 65(2), that a separate vote of shareholders shall be taken with respect to each candidate nominated for director unless a resolution of the shareholders is passed unanimously permitting two or more persons to be elected by a single resolution. Where a shareholder has voted for more than one candidate without specifying the distribution of votes among such candidates, the shareholder shall be deemed to have divided the votes equally among the candidates for whom such shareholder voted. If a shareholder desires to distribute votes otherwise than equally among the nominees for whom such shareholder has directed the persons in the enclosed form of proxy to vote, such shareholder must do so personally at the meeting or by another form of proxy. On any ballot for the election of directors, the persons named in the proxy will be deemed to have cast their votes equally among all the proposed nominees, unless: (a) any nominee is excluded by the shareholder in their proxy; or (b) the shareholder has directed that the shares be withheld from voting for the election of directors.

 

Directors will be elected by a majority of the votes cast in the manner described above in an uncontested election. If the number of candidates nominated for director exceeds the number of positions to be filled, the candidates who receive the least number of votes shall be eliminated until the number of candidates remaining equals the number of positions to be filled.

 

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Counting of Votes

For purposes of determining the presence or absence of a quorum, abstentions and broker non-votes will be counted as present. With respect to the approval of any particular proposal, abstentions and broker non-votes will not be counted in determining the number of votes cast. A broker non-vote occurs when a broker submits a proxy form with respect to common shares held in a fiduciary capacity (typically referred to as being held in “street name”), but declines to vote on a particular matter because the broker has not received voting instructions from the beneficial owner. Brokers will return your proxy as a broker non-vote if the broker does not receive voting instructions from you and if, under applicable stock exchange or other rules, the broker does not have the discretion to vote those shares on the applicable matter(s) that come before the meeting.

 

Virtual Meeting Considerations

As part of our efforts to maintain a safe and healthy environment for our directors, members of management and shareholders who wish to attend the 2021 Annual Meeting, in light of the COVID-19 pandemic, we believe that offering shareholders the opportunity to attend and participate in the 2021 Annual Meeting via remote participation again this year is in the best interest of the Company and its shareholders. A virtual meeting also enables increased shareholder attendance and participation because shareholders can participate from any location around the world. You will be able to attend the 2021 Annual Meeting online and submit your questions by visiting www.virtualshareholdermeeting.com/NOVT2021. If you are a shareholder of record, you also will be able to vote your shares electronically at the 2021 Annual Meeting by following the instructions above.


As part of the 2021 Annual Meeting, we will hold a live Q&A session, during which we intend to answer appropriate questions submitted by shareholders during the meeting that are pertinent to the Company and the meeting matters, for 30 minutes after the completion of the 2021 Annual Meeting. Only shareholders that have accessed the 2021 Annual Meeting as a shareholder (rather than a “Guest”) by following the procedures outlined above in “Attending the 2021 Annual Meeting” will be permitted to submit questions during the 2021 Annual Meeting. Each shareholder is limited to no more than two questions. Questions should be succinct and only cover a single topic. We will not address questions that are, among other things:

 

irrelevant to the business of the Company or to the business of the 2021 Annual Meeting;

 

related to material non-public information of the Company, including the status or results of our business since our last Quarterly Report on Form 10-Q;

 

related to any pending, threatened or ongoing litigation;

 

related to personal grievances;

 

derogatory references to individuals or that are otherwise in bad taste;

 

substantially repetitious of questions already made by another stockholder;

 

in excess of the two question limit;

 

in furtherance of the stockholder’s personal or business interests; or

 

out of order or not otherwise suitable for the conduct of the 2021 Annual Meeting as determined by the Chair or acting secretary of the meeting in their reasonable judgment.

Additional information regarding the Q&A session will be available in the “Rules of Conduct” available on the 2021 Annual Meeting webpage for shareholders that have accessed the 2021 Annual Meeting as a shareholder

 

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(rather than a “Guest”) by following the procedures outlined above in “Attending the 2021 Annual Meeting.

We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting website, and the information for assistance will be located on www.virtualshareholdermeeting.com/NOVT2021.

 

 

 

 

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Item 1–Election of Directors

The Articles of the Company provide that our Board is to be comprised of a minimum of five (5) and a maximum of fifteen (15) directors, as determined from time to time by resolution of the Board. The Board has resolved that the entire Board shall consist of nine (9) directors. Mr. Bershad is retiring from the Board and will not be standing for re-election at the 2021 Annual Meeting. The Board has nominated Frank A. Wilson to fill the vacancy that will be created by Mr. Bershad’s retirement.

Each nominee presented below, if elected, will serve as a director until the next annual meeting of shareholders, until his or her successor is elected or appointed, or until his or her earlier death, resignation or removal. All of the nominees listed below have given their consent to be named as nominees for election and have indicated their intention to serve if they are elected. The Board does not anticipate that any of the nominees will be unable to serve as a director, but in the event that a nominee is unable to serve or for good cause will not serve, the Board may either propose an alternate nominee, in which case the proxies will be voted for the alternative nominee unless directed to withhold from voting, or elect to reduce the size of the Board.

The names of the nominees presented for election as directors at the 2021 Annual Meeting are listed below, along with information regarding when they joined the Board (to the extent applicable), their present principal occupation, recent business experience and their service on other companies’ boards of directors.

 

All of the nominees, except for Frank A. Wilson, currently serve on the Board. There are no family relationships between any of the nominees or between the nominees and any of the Company’s officers.


 

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Director Nominees

THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” ALL OF THE NOMINEES NAMED BELOW.

Name, Principal Occupation and Municipality of Primary Residence

Director Since

Age

 

Independent?

Lonny J. Carpenter

Former Group President, Stryker Corporation

Richland, Michigan, U.S.A.

2018

 

59

 

Yes

Deborah DiSanzo

President of Best Buy Health, Best Buy Co., Inc.

Andover, Massachusetts, U.S.A.

2019

 

61

 

Yes

Matthijs Glastra

Chief Executive Officer, Novanta Inc.

Newton, Massachusetts, U.S.A.

2016

 

52

 

No

Brian D. King

Former President and Chief Executive Officer, Viant Medical, LLC

Duxbury, Massachusetts, U.S.A.

2017

 

54

 

Yes

Ira J. Lamel

Former Executive Vice President and Chief Financial Officer, The Hain Celestial Group, Inc.

Westhampton Beach, New York, U.S.A.

2010

 

73

 

Yes

Maxine L. Mauricio

Executive Vice President, General Counsel and Secretary, EMCOR Group, Inc.

Greenwich, Connecticut, U.S.A.

2020

 

50

 

Yes

Katherine A. Owen

Vice President and Advisor to the CEO, Stryker Corporation

Hingham, Massachusetts, U.S.A.

2021

 

50

 

Yes

Thomas N. Secor

Managing Director, Morningside Heights Capital

New York, New York, U.S.A.

2012

 

50

 

Yes

Frank A. Wilson

Former Chief Financial Officer and Senior Vice President, PerkinElmer, Inc.

Wellesley Hills, Massachusetts, U.S.A.

-

 

62

 

Yes

 


 

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Lonny J. Carpenter
Director

 

Mr. Carpenter has been a Director of the Company since May 10, 2018. Mr. Carpenter served as the Group President, Global Quality and Business Operations for Stryker Corporation (“Stryker”), a medical devices and equipment manufacturing company, from January 2016 to March 2019. In this role, Mr. Carpenter was responsible for setting company-wide direction for quality, manufacturing, procurement and logistics strategies, as well as oversight of Stryker’s commercial business operations in Europe, Canada, Eastern Europe, Middle East, Latin America and Africa. Mr. Carpenter served at Stryker as the Group President, Global Quality and Operations from 2011 to 2016, as the Group President, Instruments and Medical from 2008 to 2011, and as the President, Medical Division from 2006 to 2008. Mr. Carpenter began his career with Stryker in 1989, including serving as the Vice President, Global Operations. Mr. Carpenter currently serves on the board of directors of The Boler Company, Merit Medical and Orchid Orthopedics Solutions. Mr. Carpenter holds a Bachelor of Science degree from the United States Military Academy at West Point. Mr. Carpenter’s significant executive operating and commercial experience in the medical technology industry, as well as his broad business background in global manufacturing, engineering, supply chain, quality assurance, and regulatory affairs, provides the Board with greater insight into the healthcare industry.


Deborah DiSanzo
Director

 

Ms. DiSanzo has been a Director of the Company since May 9, 2019. Ms. DiSanzo has served as President of Best Buy Health at Best Buy Co., Inc., an electronics retailer, since September 2020. Ms. DiSanzo also has served as an instructor at the Harvard T.H. Chan School of Public Health since December 2018. From September 2015 to December 2018, Ms. DiSanzo served as General Manager of IBM Watson Health at International Business Machines Corporation, a global technology company. From 2001 to December 2014, Ms. DiSanzo held various roles at Koninklijke Philips N.V. (“Philips”), most recently as Chief Executive Officer of Philips Healthcare from April 2012 to December 2014. Prior to Philips Healthcare, Ms. DiSanzo held senior roles at Agilent and Hewlett-Packard Company. Ms. DiSanzo currently serves on the board of directors of AstraZeneca PLC (where she is a member of the audit committee) as well as Project Hope. Ms. DiSanzo previously served on the board of directors of ReWalk Robotics Ltd. from 2015 to 2018. Ms. DiSanzo is an innovative, strategic leader with more than 30 years of experience at the intersection of healthcare and technology. Ms. DiSanzo brings to the Company’s Board of Directors thought leadership in artificial intelligence and big data, deep experience in running businesses known for their innovation in healthcare and demonstrated ability to drive growth both organically and through acquisitions. Ms. DiSanzo earned an MBA from Babson College and a BS from Merrimack College.

 

 

 

 

 

 

 

 

 

 

 

 

 

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Matthijs Glastra
Chief Executive Officer, Director

 

Mr. Glastra was appointed the Company’s Chief Executive Officer on September 1, 2016. Mr. Glastra joined Novanta Inc. in 2012 as a Group President and was appointed the Company’s Chief Operating Officer in February 2015. Prior to Novanta, Mr. Glastra led and grew global technology businesses in advanced industrial and medical end markets during an 18-year career with Philips, both in Europe and in Silicon Valley. At Philips, Mr. Glastra served as Chief Executive Officer of Philips Entertainment Lighting in 2012 and as Chief Operating Officer of Philips Lumileds from 2007 to 2012. Prior to that, Mr. Glastra held multiple General Manager and Vice President positions at the Philips Healthcare, Semiconductor and Lighting divisions from 1994 to 2007. Mr. Glastra also served as Director of Corporate Strategy in the Philips corporate headquarters. Mr. Glastra, a Dutch citizen, holds a Master of Science degree in Applied Physics from Delft University of Technology in Delft, Netherlands, an Advanced Engineering Degree from ESPCI in Paris, France, and an MBA from INSEAD in Fontainebleau, France. Mr. Glastra’s more than 25 years of leadership and executive operating experience in Original Equipment Manufacturer based technology businesses in advanced industrial and medical end markets, and his intimate knowledge of the Company’s businesses provide valuable insight to the Board in formulating and executing the Company’s strategy.

 

Brian D. King
Director

 

Mr. King has been a Director of the Company since May 10, 2017. Mr. King is a senior advisor to Viant Medical, LLC, a private global services provider to the medical device industry, where he served as the President and Chief Executive Officer from May 2017 to July 2019. From June 2015 to March 2017, Mr. King served as an Operating Advisor for Thomas H Lee Partners, a private equity firm. From June 2014 to June 2015, Mr. King served as Chief Transformation Officer and Chief Operating Officer at DePuy Synthes, a Johnson & Johnson company, which designs and manufactures orthopedic and neurological devices and supplies. From 2004 to 2014, Mr. King served in various executive positions at Covidien, formerly Tyco Healthcare, a global healthcare products company and manufacturer of medical devices and supplies, which was later acquired by Medtronic. At Covidien, Mr. King served as Group President, Emerging Markets (2010-2014), President, Covidien Asia (2008-2010), Senior Vice President, Global Operations and Quality (2005-2008), and Vice President, Operational Excellence (2004-2005). Mr. King currently serves on the board of directors of FrontRunnerHC. He previously served on the board of directors of PCI Pharma Services, Houston Street Exchange, Inc., and B&C Research Corporation, all privately held entities. Mr. King holds an MBA from Harvard Business School, Master of Science from the Pennsylvania State University, and Bachelor of Science from the United States Naval Academy. Mr. King’s 25 years of executive operating experience, the majority of which was spent in the healthcare industry, as well as his broad business background in global manufacturing, engineering, supply chain, quality assurance, and regulatory affairs, provides the Board with greater insight into the healthcare industry.

 

 

 

 

 

 

 

 

 

 

 

 

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Ira J. Lamel
Director

 

Mr. Lamel has been a Director of the Company since July 23, 2010. Mr. Lamel served as Chief Financial Officer of Act II Global Acquisition Corp. (“Act II”), a special purpose acquisition company, from December 2018 to June 2020. Mr. Lamel was Senior Advisor to the CEO (from September 2013 to August 2014) and Executive Vice President and Chief Financial Officer (from October 2001 to August 2013) of The Hain Celestial Group, Inc. (“Hain”), a leading natural and organic food and personal care products company operating in North America and Europe. Prior to joining Hain in October 2001, Mr. Lamel was an audit partner in the New York area practice of Ernst & Young LLP. He retired from Ernst & Young LLP after a 29-year career. Mr. Lamel currently serves on the board of directors of Whole Earth Brands, Inc. (Nasdaq – FREE), successor to Act II, where he is the chair of the audit committee and a member of the compensation committee, and GP-Act III Acquisition Corp., a special purpose acquisition company co-sponsored by GP Investments and Irwin Simon. Mr. Lamel brings to the Company’s Board of Directors extensive financial, accounting and auditing expertise, including an understanding of accounting principles, internal controls, financial reporting rules and regulations and financial reporting processes acquired over the course of his career.

 

Maxine L. Mauricio
Director

 

Ms. Mauricio has been a Director of the Company since May 26, 2020. Ms. Mauricio has served as General Counsel and Secretary of EMCOR Group Inc., a provider of facilities construction and industrial services, since January 2016. Ms. Mauricio has been an Executive Vice President of EMCOR since February 2021 and was a Senior Vice President from January 2016 to February 2021. From January 2012 to December 2015, Ms. Mauricio was Vice President and Deputy General Counsel of EMCOR, and from May 2002 to December 2011, she served as EMCOR’s Assistant General Counsel. Prior to joining EMCOR, Ms. Mauricio was an associate at Ropes & Gray LLP. Ms. Mauricio received her bachelor’s degree summa cum laude from Dartmouth College, which awarded her the Charles Woodbury Law Prize. She graduated cum laude from Harvard Law School. Currently, Ms. Mauricio is a board member of the Native American Alumni Association of Dartmouth College. In 2016, Dartmouth awarded Ms. Mauricio the Jonathan Clarkson Gibbs Leader of the Year Award. Ms. Mauricio brings to the Company’s Board of Directors extensive corporate governance, legal, cybersecurity leadership and compliance expertise acquired at a global Fortune 500 company. Ms. Mauricio’s presence on the Board also enhances the Board’s gender and ethnic diversity.

Katherine A. Owen
Director

 

Ms. Owen has been a Director of the Company since February 24, 2021. Ms. Owen has served as Vice President and Advisor to the Chief Executive Officer of Stryker Corporation, a medical technologies company, since June 2020. Ms. Owen served as Vice President of Strategy and Investor Relations at Stryker from 2007 to 2020, where she was responsible for overseeing the strategic planning and business development processes, as well as investor relations. Prior to that, Ms. Owen served as a medical technology analyst at Merrill Lynch. She previously served as a medical technology analyst at Cowen & Co./SG Cowen. Ms. Owen also worked as a corporate lending analyst at State Street Bank and an underwriter at Chubb Insurance Corporation. Ms. Owen holds a Bachelor of Arts in economics from the University of Massachusetts at Amherst and an MBA from Boston College. Ms. Owen brings to the Company’s Board of Directors extensive experience and valuable insights on corporate development, strategy, and investor relations.

 

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Thomas N. Secor
Director

 

Mr. Secor has been a Director of the Company since June 14, 2012. Mr. Secor has been Managing Director of Morningside Heights Capital, an investment firm, since March 2012. From April 2007 until March 2012, Mr. Secor was employed by Goldman Sachs & Co, where he worked with Liberty Harbor, an absolute-return investment fund. While at Liberty Harbor, Mr. Secor focused on the fund’s fundamental investment strategies, including debt and equity transactions. From 2005 until March 2007, Mr. Secor was a Director and member of the legal group at Amaranth Advisors, an investment advisor. From 1998 until 2005, Mr. Secor was an attorney with Cleary, Gottlieb, Steen & Hamilton where he specialized in corporate and securities law. Mr. Secor received his Bachelor of Arts degree, cum laude, from Pomona College and his Juris Doctorate, cum laude, from the University of Chicago Law School. Mr. Secor brings to the Company’s Board of Directors more than 20 years of experience in strategic transactions, corporate finance and profit management across a wide range of industries, as well as extensive corporate governance experience.

 

Frank A. Wilson

Nominee for Director

 

Mr. Wilson is a nominee for election as Director of the Company. Mr. Wilson served most recently as Chief Financial Officer and Senior Vice President of PerkinElmer, Inc., a life sciences diagnostics, discovery and analytical solutions company, from 2009 until his retirement in 2018. Prior to joining PerkinElmer, Mr. Wilson held key business development and finance roles for over 12 years at Danaher Corporation, a global science and technology conglomerate, including the position of Corporate Vice President of Investor Relations. Earlier in his career, Mr. Wilson worked for several years at AlliedSignal, Inc., now Honeywell International Inc., where he served as Vice President of Finance and Chief Financial Officer for the Commercial Avionics Systems division. Prior to Allied Signal, he held financial and controllership positions of increasing responsibility at PepsiCo Inc., as well as roles at E.F. Hutton and Company and KPMG Peat Marwick. Mr. Wilson is a member of the board of directors of Alkermes plc, a public fully integrated, global biopharmaceutical company, and Cabot Corporation, a public global specialty chemicals and performance materials company. From 2015 to early 2019, Mr. Wilson served as a member of the board of directors of Sparton Corporation, a provider of complex and sophisticated electromechanical devices, where he also served as the chair of the audit committee and chairperson of the board. Mr. Wilson is a Certified Public Accountant. Mr. Wilson will bring to the Company’s Board of Directors extensive experience and expertise in financial management and business growth strategy from a variety of global industries.  


 

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Item 2–Advisory Vote on the

Company’s Executive Compensation

Background

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 provides our shareholders with the opportunity to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers (which currently consist of our Chief Executive Officer, Chief Financial Officer and Chief Human Resources Officer), as disclosed in this management proxy circular in accordance with the SEC’s rules. The Company has held a “say-on-pay” advisory vote every year since 2013 and following the advisory vote regarding the frequency of future “say-on-pay” votes held in 2019, the Company has determined to continue to hold the “say-on-pay” advisory vote every year until the next such advisory “say-on-pay” frequency advisory vote. The next “say-on-pay” advisory vote following this one will occur at the 2022 annual meeting of shareholders.

Summary

In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are asking our shareholders to provide advisory approval of the compensation of our named executive officers as such compensation is described in the “Compensation Discussion and Analysis” section, the tabular disclosure regarding such compensation and the accompanying narrative disclosure set forth in this management proxy circular, beginning on page 48.

Our executive compensation programs are designed to provide a compensation package that incentivizes and retains a highly qualified executive team and rewards both short-term and long-term sustainable performance as measured against established goals. Our executive compensation program seeks to promote this philosophy primarily through a combination of the following types of compensation: base salary, cash incentive awards and long-term equity-based incentive awards in the form of both service-based vesting restricted stock units (“restricted stock units” or “RSUs”) and performance-based vesting restricted stock units (“performance stock units” or “PSUs”). Note that forward-looking performance targets are not disclosed due to competitive reasons. The following is a summary of some of the key points of our executive compensation program. We urge our shareholders to review the “Compensation Discussion and Analysis” section of this management proxy circular and the tabular disclosures following such section for more information.

 


 

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Compensation Best Practices. We employ the following policies and practices that are designed to ensure our executive compensation programs are well-governed, reflect market-based best practices and do not promote inappropriate risk taking:

 

 Independent Compensation Committee

Yes

 Independent Compensation Advisor

Yes

 Stock Ownership Guidelines

Yes

 Elimination of Section 280G Excise Tax Gross-Ups 

Yes

 Elimination of Single-Trigger Equity Vesting upon Change of Control

Yes

 No Stock Option Repricing without Shareholder Approval

Yes

 Recoupment Provision in Short-Term Incentive Plan

Yes

 Anti-Hedging and Anti-Pledging Policies

Yes

 Compensation Risk Assessment

Annual

 Shareholder Vote to Approve Executive Compensation on an Advisory Basis

Annual

 

Pay-for-Performance. We aim to align our executive compensation with both annual and long-term performance goals of the Company. Our Senior Management Incentive Plan (“SMIP”) provides cash incentive awards based on Adjusted EBITDA, Organic Revenue Growth, and Net Working Capital (“NWC”) as a percentage of revenue (“NWC Ratio”). The Adjusted EBITDA, Organic Revenue Growth, and NWC Ratio target levels of performance are correlated with the Company’s annual revenue, income growth and NWC goals. However, as part of a company-wide cost reduction initiative in response to economic uncertainties caused by the COVID-19 pandemic, the Compensation Committee, with the consent of the NEOs, decided to eliminate the short-term cash incentives under the SMIP for 2020.

Long-Term Compensation. In 2020, our long-term compensation program included a mix of restricted stock units that vest ratably over four years and performance stock units that cliff vest in three years on January 1, 2023, subject to continued employment through the date of vesting, achievement of applicable performance thresholds and accelerated vesting upon certain termination of employment or change in control. Our long-term compensation program is intended to align the interests of executives with those of our shareholders, encourage retention and focus the executives on long-term profitable growth and shareholder value creation.

Prudent Corporate Governance. We are committed to maintaining a prudent corporate governance model and to continually improving our compensation practices and policies. Key practices in this regard include annual review of the Company’s compensation program by the Compensation Committee and maintenance of a Compensation Committee composed entirely of independent, non-employee directors who satisfy applicable independence requirements.

Independent Compensation Consultation. The Compensation Committee uses an independent global executive compensation consulting firm, Korn Ferry, to advise the Compensation Committee on matters related to executive compensation.

Input from Shareholders. The Company has determined to hold a “say-on-pay” advisory vote every year to regularly receive and review input from shareholders on our compensation programs and practices.

 

 

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The Compensation Committee believes that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving the Company’s goals and that the compensation of the Company’s named executive officers reported in this management proxy circular reflects and supports these compensation policies and objectives. We encourage shareholders to review the “Compensation Discussion and Analysis” beginning on page 48 of this management proxy circular.

Recommendation

Our Board of Directors believes that the information provided above and within the “Compensation Discussion and Analysis” section of this management proxy circular demonstrates that our executive compensation program was designed appropriately and is working to ensure that management’s interests are aligned with our shareholders’ interests to support long-term value creation.

The following resolution will be submitted for a shareholder vote at the 2021 Annual Meeting:

RESOLVED, that the shareholders of Novanta Inc. approve, on an advisory basis, the compensation of our named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission (“SEC”), including the “Compensation Discussion and Analysis”, compensation tables and narrative discussion set forth in the management proxy circular.

This vote on our executive compensation is advisory, and therefore not binding on the Company, the Compensation Committee or the Board of Directors. However, the Compensation Committee will consider the outcome of the vote when making future compensation decisions for the named executive officers.

Required Vote

The affirmative vote of a majority of the votes cast in respect of this matter at the 2021 Annual Meeting is required to approve, on an advisory (non-binding) basis, the compensation of our named executive officers. Abstentions and broker non-votes will not be counted in determining the number of votes cast, and thus will not affect the voting results of this proposal.

THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE ADOPTION OF THE RESOLUTION APPROVING THE COMPANY’S COMPENSATION OF THE NAMED EXECUTIVE OFFICERS.

 

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Item 3–Approval of the Amended and Restated

Novanta Inc. 2010 Incentive Award Plan

Our Board is submitting for shareholder approval the Novanta Inc. 2010 Incentive Award Plan (Amended and Restated Effective February 24, 2021) (the “Amended and Restated Incentive Award Plan”). On October 13, 2010, the Board first adopted the Novanta Inc. 2010 Incentive Award Plan, which was subsequently approved by our shareholders on November 23, 2010, and later amended and restated effective July 27, 2016 (the “Incentive Award Plan”). On February 24, 2021, our Board approved the Amended and Restated Incentive Award Plan, an amendment and restatement of the 2010 Incentive Award Plan, subject to shareholder approval. The Board is requesting that the Amended and Restated Incentive Award Plan be approved by shareholders so that:

The number of shares of our common stock reserved for issuance under the Amended and Restated Incentive Award Plan is increased from 4,398,613 shares to 6,148,613 shares, subject to adjustment as described below;

The term of the Amended and Restated Incentive Award Plan will be extended through the tenth anniversary of the date this Amended and Restated Incentive Award Plan is approved by the shareholders;

The performance-based compensation provisions in our Amended and Restated Incentive Award Plan will be generally streamlined in a manner that is intended to appropriately address changes made to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) under the U.S. tax reform law that went into effect in 2017; and

Certain provisions intended to reflect good corporate governance practices and provide for our continuing flexibility to grant awards to eligible participants will be added to the Amended and Restated Incentive Award Plan.

The Amended and Restated Incentive Award Plan provides the Company with the ability to continue to grant or issue equity and other incentive compensation to our board of directors, employees and consultants. We believe such ability is appropriate to maintain competitive compensation practices and to align the interests of our board of directors, officers, employees and consultants with those of our shareholders.

In its determination to approve the Amended and Restated Incentive Award Plan, the Board was presented with the results of a report prepared by Korn Ferry, an independent compensation consultant, which included an analysis of certain equity burn rate, dilution and overhang metrics, and peer group trends. Specifically, the Board considered the following factors:

The Company has had a conservative equity burn rate historically. Equity burn rate is calculated by dividing (i) the number of shares subject to equity awards granted during the fiscal year (assuming PSUs at target) by (ii) the number of weighted average basic shares outstanding for the year. In 2020, 2019 and 2018, we granted equity (assuming PSUs at target) representing a total of approximately 345,000, 186,000 and 178,000 shares, respectively. This level of equity awards represents a three-year average equity burn rate of 0.7% of our weighted average basic shares outstanding for the same period. Our 3-year average equity burn rate is below the 25th percentile of our peer group.

If we do not increase the shares available for issuance under our equity plan, we would expect to, based on historical usage rates of shares under our equity plan, exhaust the share limit under the current equity plan

 

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in approximately two years, at which time we would lose an important compensation tool aligned with shareholder interests to attract, motivate and retain highly qualified talent.

As of December 31, 2020, we had a 4.2% equity overhang rate, which is calculated by dividing (i) the number of shares subject to equity awards outstanding at the end of the fiscal year (assuming maximum payout of outstanding PSUs) plus the number of shares remaining available for issuance under our existing equity plan by (ii) the number of our weighted average diluted common shares outstanding for the fiscal year. If the Amended and Restated Incentive Award Plan is approved, our equity overhang rate at the end of December 31, 2020 would be 8.4% (including the additional shares that will be reserved for issuance under the Amended and Restated Incentive Award Plan).

In light of the factors described above, coupled with the fact that our ability to continue to grant equity compensation is vital to attracting and retaining employees in the competitive labor markets and our utilization of equity grants as a component of our acquisition strategy, the Board has determined that the size of the share reserve under the Amended and Restated Incentive Award Plan is reasonable and appropriate for the Company at this time. The Board did not deem it necessary to create a subcommittee to evaluate the risks and benefits for issuing the additional authorized shares requested.

In addition, we believe that the Amended and Restated Incentive Award Plan properly balances its compensatory design with shareholder interests by having the following characteristics:

Grants of options or stock appreciation rights (“SARs”) with an exercise price that is less than fair market value on the grant date are generally prohibited;

Repricing of options or SARs to reduce the excise price per share is prohibited without prior shareholder approval;

No dividends or dividend equivalents are paid on unvested performance awards;

Shares used to pay option exercise prices or to satisfy tax withholdings on options and SARs are not added back to shares available for future issuance under the Amended and Restated Incentive Award Plan, as it would be considered “liberal share counting” practices by Institutional Shareholder Services; and

The Compensation Committee, which consists of only independent directors, will be responsible for the general administration of the Amended and Restated Incentive Award Plan with respect to awards granted to employees and consultants. The full Board will administer the Amended and Restated Incentive Award Plan with respect to awards made to non-employee directors.

If the Amended and Restated Incentive Award Plan is not approved, (a) the Amended and Restated Incentive Award Plan will not become effective and we will not make any awards pursuant to the terms of the Amended and Restated Incentive Award Plan, and (b) the Novanta Inc. 2010 Incentive Award Plan (as Amended and Restated Effective July 27, 2016) will remain in effect and we may continue to grant awards under such plan until its expiration (but in no event in excess of the shares reserved for issuance under such plan).

The principal features of the Amended and Restated Incentive Award Plan are summarized below, but the summary is qualified in its entirety by reference to the Amended and Restated Incentive Award Plan itself, which is included in this management proxy circular as Schedule A.

 

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Shares Subject to the Amended and Restated Incentive Award Plan

Under the Amended and Restated Incentive Award Plan, the aggregate number of common shares that may be granted is increased from 4,398,613 shares to 6,148,613 shares, subject to adjustment as described below.

 

Administration

Generally, the Compensation Committee will act as Administrator and, to the extent necessary to comply with applicable law, the Compensation Committee will consist of at least two members of the board of directors who are “non-employee” directors for purposes of Section 16(b) of the Exchange Act and “independent directors” under the rules of any securities exchange or automated quotation system on which the shares are listed. The Administrator has the authority to, among other things:

select the individuals who will receive awards;

determine the type or types of awards to be granted;

determine the number of awards to be granted and the number of shares to which the award relates;

determine the terms and conditions of any award, including the exercise price and vesting term;

determine the terms of settlement of any award;

prescribe the form of award agreement;

establish, adopt or revise rules for administration of the Amended and Restated Incentive Award Plan;

interpret the terms of, and any matters arising pursuant to, the Amended and Restated Incentive Award Plan, any award and any related programs;

make all other decisions and determinations that may be required pursuant to the Amended and Restated Incentive Award Plan or as the Administrator deems necessary or advisable to administer the Amended and Restated Incentive Award Plan; and

accelerate wholly or partially the vesting or lapse of restrictions of any award (or portions thereof).

The Committee may delegate to a committee of one or more board members or one or more officers its authority to grant or amend awards with respect to participants other than individuals who are subject to Section 16 of the Exchange Act or the officers to whom the authority to grant or amend awards has been delegated, subject to any limitations under applicable law. In addition, the Board, acting by majority, will conduct the general administration of the Amended and Restated Incentive Award Plan with respect to awards granted to directors who are not employees of the Company. Further, the Board may exercise the rights and duties of the Compensation Committee as Administrator, except with respect to matters which are required to be determined in the sole discretion of the Compensation Committee under Rule 16b-3 of the Exchange Act or the rules of any securities exchange or automated quotation system on which the shares are listed, quoted or traded. The Committee or the Board may also amend the Amended and Restated Incentive Award Plan. However, the following plan amendments or plan-related actions require approval by our shareholders:

increases in the number of shares reserved for issuance under the Amended and Restated Incentive Award Plan;

reduction in the price per share of any outstanding option or stock appreciation right; and

 

Page 19


 

cancellation of any option or stock appreciation right in exchange for cash or another award when such option or stock appreciation right has a price per share exceeding the fair market value of the underlying shares.

 

In other respects, the Amended and Restated Incentive Award Plan may be wholly or partially amended, modified, suspended or terminated at the discretion of the Board or Compensation Committee. However, except as permitted in the Amended and Restated Incentive Award Plan or the applicable award agreement, amendments to the Amended and Restated Incentive Award Plan may not impair an awardee’s rights under a previously granted award without the awardee’s consent.

 

Eligibility

Awards under the Amended and Restated Incentive Award Plan may be granted to individuals who are our employees or employees of our affiliates, our non-employee directors, our consultants or consultants of our affiliates, and owners or employees of acquired businesses. However, options which are intended to qualify as incentive stock options may only be granted to qualifying employees.

 

Awards

The following will briefly describe the principal features of the various awards that may be granted under the Amended and Restated Incentive Award Plan.

Options. Options provide for the right to purchase common shares at a specified price, and usually will become exercisable in the discretion of the Administrator in one or more installments after the grant date. The option exercise price may be paid in cash, by check, shares of common shares which have been held by the option holder for such period of time as may be required by the Administrator to avoid adverse accounting consequences, through a broker-assisted cash-less exercise, or such other methods as the Administrator may accept from time to time.

Options may be granted for any term specified by the Administrator, but shall not exceed ten years. Options may not be granted at an exercise price that is less than the fair market value of our common shares on the date of grant (other than in connection with substitute awards). Additionally, the Administrator may not, without shareholder approval, re-price any options, including the cancellation of options in exchange for options with a lower exercise price.

Options may take two forms, non-qualified stock options (“NSOs”) and incentive stock options (“ISOs”).

ISOs will be designed to comply with the provisions of the Code and will be subject to certain restrictions contained in the Code in order to qualify as ISOs. Among such restrictions, ISOs must:

have an exercise price not less than the fair market value of common stock (or, if granted to certain individuals who own or are deemed to own at least 10% of the total combined voting power of all of our classes of stock (“10% shareholders”), 110% of the fair market value of common stock) on the date of grant;

be granted only to our employees and employees of any subsidiaries of the Company (as defined in Section 424(f) of the Code);

expire within a specified time following the option holder’s termination of employment;

 

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be exercised within ten years (or, with respect to 10% shareholders, five years) after the date of grant; and

not be first exercisable for more than $100,000 worth of value, determined based on the exercise price, during any calendar year. If an award purported to be an ISO fails to meet the requirements of the Code, then the award will instead be considered to be an NSO.

Restricted Stock. A restricted stock award is the grant of common shares at a price determined by the Administrator (which price may be zero), is generally nontransferable and, unless otherwise determined by the Administrator at the time of award, may be forfeited upon termination of employment or service during a restricted period. Unless otherwise determined by the Administrator, and subject to any restrictions in the award agreement or the applicable award program, the participant will generally be entitled to vote the shares of restricted stock and/or receive dividends on such shares (other than dividends with respect to shares subject to performance vesting).

Stock Appreciation Rights. SARs provide for the payment to the holder based upon increases in the price of common shares over a set base price, which may not be less than the fair market value of a common share on the date of grant (other than with respect to substitute awards). Payment for SARs may be made in cash, common shares or any combination of the two. The Administrator may not without shareholder approval re-price any SARs, including the cancellation of SARs in exchange for options or SARs with a lower exercise price. SARs become exercisable in the discretion of the Administrator. SARs may be granted for any term specified by the Administrator, but shall not exceed ten years.

Restricted Stock Units. Restricted stock units represent the right to receive common shares (or the fair market value of such shares in cash) at a specified date in the future, subject to forfeiture of such right under certain conditions. Administrator will specify the purchase price, if any, to be paid by the holder of the restricted stock units for the underlying common shares. If the restricted stock unit has not been forfeited, then on the vesting date specified in the restricted stock unit award, the Company shall deliver to the holder of the restricted stock unit unrestricted common shares, which will be freely transferable, or the fair market value of such common shares in cash.

Dividend Equivalents. Dividend equivalents represent the value of the dividends per common share paid by the Company, calculated with reference to the number of shares covered by the dividend equivalent award. No dividend equivalent awards will be paid on unvested performance awards. No dividend equivalents shall be payable with respect to options or SARs.

 

Stock Payments. Payments in lieu of bonuses or other compensation may be made in the form of common shares under the Amended and Restated Incentive Award Plan. The number of shares will be determined by the Administrator, and may be based upon specified performance criteria.

Deferred Stock. Deferred stock typically is awarded without payment of consideration and may be subject to vesting or other conditions, including satisfaction of performance criteria. Like restricted stock, deferred stock generally may not be sold or otherwise transferred until the vesting and/or other conditions are removed or expire. Unlike restricted stock, deferred stock is not actually issued until the deferred stock award (or portion thereof) has vested and is no longer subject to any other conditions, as applicable. Unless otherwise determined by the Administrator, recipients of deferred stock have no voting or dividend rights prior to the time when the vesting or other conditions are met and the deferred stock is delivered.

 

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Deferred Stock Units. Deferred stock units typically are awarded without payment of consideration and may be subject to vesting or other conditions, including satisfaction of specified performance criteria. A deferred stock unit shall entitle the recipient thereof to receive one share of common stock on the date such deferred stock unit becomes vested (and other conditions are removed or expire, if applicable) or upon a specified settlement date thereafter (which settlement date may, but is not required to, be the date of the termination of service at the Company or its affiliates). Deferred stock units generally may not be sold or otherwise transferred until the vesting and/or other conditions are removed or expire and/or following a specified settlement date thereafter. Unless otherwise determined by the Administrator, recipients of deferred stock units have no voting or dividend rights prior to the time when the vesting and/or other conditions are met and the shares of common stock are delivered.

Performance Award. Performance awards are payable in cash, stock or a combination of both, and may be linked to satisfaction of specified performance criteria.

Adjustments Upon Certain Events

The number and kind of securities that may be issued under the Amended and Restated Incentive Award Plan, the number and kind of securities subject to outstanding awards, terms and conditions (including performance targets or criteria) and the grant or exercise price of outstanding awards and the number and kind of securities for which automatic grants are subsequently to be made to non-employee directors pursuant to any non-employee director equity compensation policy will be proportionately adjusted as the Administrator deems appropriate, in its discretion, to reflect any stock dividends, stock split, combination or exchange of shares, merger, consolidation, or other distribution (other than normal cash dividends) of Company assets to shareholders, or any other change affecting the common shares or the share price of the common shares other than an equity restructuring.

In the event of any transaction or event described in the preceding paragraph, the Administrator is authorized to, among other things, provide that the awards granted under the Amended and Restated Incentive Award Plan (a) are terminated in exchange for cash or replaced with other rights or property, (b) are assumed by a successor or surviving corporation or substituted from similar rights of a successor or surviving corporation, (c) are exercisable or payable or fully vested with respect to all shares covered thereby, or (d) cannot vest, be exercised or become payable after such transaction or event.

In the event of an equity restructuring, the number and type of securities subject to outstanding awards and the exercise or grant price thereof will be equitably adjusted and the Administrator will make equitable adjustments, if any, as the Administrator deems appropriate to reflect the equity restructuring with respect to the number and kind of shares that may be issued under the plan (including, without limitation, any applicable award limits).

In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to shareholders, or any other change affecting the shares or share price of common shares, including an equity restructuring, the Company may in its sole discretion refuse to permit the exercise of any award for a period of up to 30 days prior to the consummation of any such transaction.

 

 

 

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Awards Not Transferable

Generally, the awards may not be pledged, assigned or otherwise transferred, other than by will or by laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a domestic relations order, unless and until such award has been exercised, or the shares underlying such award have been issued, and all restrictions applicable to such shares have lapsed. The Administrator may allow awards other than ISOs to be transferred for estate or tax planning purposes to members of the holder’s family or trusts for the benefit of family members. Further, award holders may, in the manner determined by the Administrator, designate a beneficiary to exercise his or her rights and receive any distributions with respect to awards after his or her death.

Claw-back Provisions

All awards will be subject to the provisions of any claw-back policy implemented by the Company to the extent set forth in such claw-back policy and/or in the applicable award agreement. 

Miscellaneous

As a condition to the issuance or delivery of stock or payment of other compensation pursuant to the exercise or lapse of restrictions on any award, the Company requires participants to discharge all applicable withholding tax obligations. Shares held by or to be issued to a participant may be used to discharge minimum statutory tax withholding obligations (or such higher rate as determined by the Administrator, which shall in no event exceed the applicable maximum statutory tax withholding rate).


The Amended and Restated Incentive Award Plan will expire and no further awards may be granted after the tenth anniversary of its approval by the shareholders.

Certain United States Federal Income Tax Consequences

The United States federal income tax consequences of the Amended and Restated Incentive Award Plan under current federal income tax law are summarized in the following discussion which deals with the general tax principles applicable to the Amended and Restated Incentive Award Plan, and is intended for general information only. Alternative minimum tax and other federal taxes and foreign, state and local income taxes are not discussed, and may vary depending on individual circumstances and from locality to locality.

Section 162(m) of the Code denies a deduction to any publicly-held corporation for compensation paid to certain “covered employees” in a taxable year to the extent that compensation to such covered employee exceeds $1 million. It is possible that compensation attributable to awards under the Amended and Restated Incentive Award Plan, when combined with all other types of compensation received by a covered employee from us, may cause this limitation to be exceeded in any particular year.

 

Non-Qualified Stock Options. For federal income tax purposes, the recipient of NSOs granted under the Amended and Restated Incentive Award Plan will not have taxable income upon the grant of the option, nor will the Company be entitled to any deduction. Generally, upon exercise of NSOs, the optionee will realize ordinary income and the Company will be entitled to a deduction in an amount equal to the difference between the option exercise price and the fair market value of the common shares at the date of exercise.

 

 

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Incentive Stock Options. An optionee generally will not recognize taxable income upon either the grant or exercise of an ISO. However, the amount by which the fair market value of the shares at the time of exercise exceeds the exercise price will be an “item of tax preference” for the optionee. Generally, upon the sale or other taxable disposition of the common shares acquired upon exercise of an ISO, the optionee will recognize income taxable as capital gains in an amount equal to the excess, if any, of the amount realized in such disposition over the option exercise price, provided that no disposition of the shares has taken place within either (a) two years from the date of grant of the ISO or (b) one year from the date of exercise. If the common shares are sold or otherwise disposed of before the end of the one-year and two-year periods specified above, the difference between the award exercise price and the fair market value of the shares on the date of exercise generally will be taxable as ordinary income; the balance of the amount realized from such disposition, if any, generally will be taxed as capital gain. If the common shares are disposed of before the expiration of the one-year and two-year periods and the amount realized is less than the fair market value of the shares at the date of exercise, the optionee’s ordinary income generally is limited to the excess, if any, of the amount realized in such disposition over the option exercise price paid. The Company (or other employer corporation) generally will be entitled to a tax deduction only to the extent the optionee has ordinary income upon sale or other disposition of the common shares.

 

Restricted Stock. Generally, a participant will not be taxed upon the grant or purchase of restricted stock that is subject to a “substantial risk of forfeiture,” within the meaning of Section 83 of the Code, until such time as the restricted stock is no longer subject to the substantial risk of forfeiture. At that time, the participant will be taxed on the difference between the fair market value of the common shares and the amount the participant paid, if any, for such restricted stock. However, the recipient of restricted stock under the Amended and Restated Incentive Award Plan may make an election under Section 83(b) of the Code to be taxed with respect to the restricted stock as of the date of transfer of the restricted stock rather than the date or dates upon which the restricted stock is no longer subject to a substantial risk of forfeiture. The Company generally will be entitled to a compensation deduction for the same amount which the recipient recognizes ordinary income.

 

Stock Appreciation Rights. No taxable income is generally recognized upon the receipt of a SAR. Upon exercise of a SAR, the cash or the fair market value of the shares received generally will be taxable as ordinary income in the year of such exercise. The Company generally will be entitled to a compensation deduction for the same amount which the recipient recognizes as ordinary income.

 

Restricted Stock Units. A participant will generally not recognize taxable income upon grant of a restricted stock unit. However, when the shares (or the fair market value of such shares in cash) are delivered to the participant upon vesting, then the excess of value of such shares (or cash) at that time over the amount paid by the participant will be taxable to the participant as ordinary income. Generally, the Company will be entitled to a deduction for an amount equal to the amount of ordinary income recognized by the participant.

 

Dividend Equivalents. A participant will recognize taxable ordinary income on dividend equivalents as they are paid and the Company generally will be entitled a corresponding deduction.

 

Stock Payments. A participant will recognize taxable ordinary income on the fair market value of the common shares delivered as payment of bonuses or other compensation under the Amended and Restated Incentive Award Plan and the Company generally will be entitled to a corresponding deduction.

 

Deferred Stock. A participant will recognize taxable ordinary income on the fair market value of the shares on the date when shares are delivered under a deferred stock award. The Company generally will be entitled to a corresponding deduction.

 

 

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Deferred Stock Units. A participant will recognize taxable ordinary income on the fair market value of the shares on the date when shares are delivered under a deferred stock unit award. The Company generally will be entitled to a corresponding deduction.

 

Performance Awards. A participant will recognize taxable ordinary income on the amount of cash paid (or value of stock received) under the performance award. The Company generally will be entitled to a corresponding deduction.

 

Section 409A of the Code. Certain awards under the Amended and Restated Incentive Award Plan, depending in part on particular award terms and conditions, may be considered non-qualified deferred compensation subject to the requirements of Section 409A of the Code. If the terms of such awards do not meet the requirements of Section 409A of the Code, the violation may result in an additional 20% tax obligation, plus penalties and interest for such participant.

New Plan Benefits

Except with respect to annual equity awards to which certain employees (including Mr. Glastra and Mr. Buckley) are entitled under their employment agreements or offer letters, and certain equity awards which our non-employee directors are entitled to receive under our non-employee director compensation policy, which are shown in the table below, the number of awards that our named executive officers, directors, other executive officers and other employees may receive under the Amended and Restated Incentive Award Plan will be determined in the discretion of the Administrator in the future, and the Administrator has not made any determination to make future grants to any such persons under the Amended and Restated Incentive Award Plan as of the date of this proxy statement. Therefore, it is not possible to determine the benefits that will be received in the future by participants in the Amended and Restated Incentive Award Plan or the benefits that would have been received by participants (other than as set forth below) if the Amended and Restated Incentive Award Plan (as amended and restated) had been in effect in the year ended December 31, 2020.

 

Name and Position

Dollar Value ($) (1)

 

Matthijs Glastra

Chief Executive Officer

 

$1,332,508

 

Robert Buckley

Chief Financial Officer

 

668,282

 

All current executive officers as a group

 

$2,000,790

 

All current non-employee directors as a group

 

$1,080,000

 

 

 

1.)

Under their respective employment agreements, Mr. Glastra and Mr. Buckley are entitled to annual equity awards with a value equal to a specified percentage of base salary or, at the discretion of the Board or the Compensation Committee, a higher amount as determined by market based benchmarks (based on the fair market value of the Company’s common stock on the date of grant). In addition, our non-employee directors are entitled to annual equity awards with a value specified in our non-employee director compensation policy. As a result, the actual dollar value of future annual grants to such employees (the next of which is expected to occur in 2022) and the future number of units to be granted to such persons are not determinable. The amounts set forth in this table reflect the minimum or guaranteed dollar value that will be received annually in the future, subject to increases in base salary in the case of Mr. Glastra and Mr. Buckley.

 

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Interest of Certain Persons in the Amended and Restated Incentive Award Plan

Stockholders should understand that our executive officers and non-employee directors may be considered to have an interest in the approval of the Amended and Restated Incentive Award Plan because they may in the future receive awards under it. Nevertheless, our Board of Directors believes that it is important to provide incentives and rewards for superior performance and the retention of experienced directors by implementing the Amended and Restated Incentive Award Plan.

 

Required Vote

The affirmative vote of a majority of the votes cast in respect of this matter at the 2021 Annual Meeting is required to approve the Amended and Restated Incentive Award Plan. Abstentions and broker non-votes will not be counted in determining the number of votes cast, and thus will not affect the voting results of this proposal.

THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE AMENDED AND RESTATED INCENTIVE AWARD PLAN.

 

 

 

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Item 4–Appointment of Independent

Registered Public Accounting Firm

At the 2021 Annual Meeting, the shareholders will be asked to approve the appointment of PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as the Company’s independent registered public accounting firm and to authorize the Audit Committee to fix the remuneration for PricewaterhouseCoopers. PricewaterhouseCoopers has served as the Company’s independent registered public accounting firm since 2013.

We expect a representative of PricewaterhouseCoopers to be present telephonically at the meeting to answer appropriate questions and to have an opportunity to make a statement if desired.

Required Vote

The affirmative vote of a majority of the votes cast in respect of this matter at the 2021 Annual Meeting is required to approve the appointment of PricewaterhouseCoopers as the Company’s independent registered public accounting firm to serve until the 2022 annual meeting of shareholders. Abstentions will not be counted in determining the number of votes cast, and thus will not affect the voting results of this proposal. Because brokers have discretionary authority to vote on the appointment of PricewaterhouseCoopers, we do not expect any broker non-votes in connection with this proposal.

 

THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THIS APPOINTMENT.

 

Independent Registered Public Accounting Firm Fees and Services

Set forth below are the fees paid by the Company to its independent registered public accounting firm, PricewaterhouseCoopers, for the fiscal years ended December 31, 2020 and 2019.

 

 

2020

 

2019

 

Audit Fees (1)

$

2,017,300

 

$

2,171,000

 

Audit-Related Fees (2)

 

 

 

329,000

 

Tax Fees (3)

 

163,000

 

 

166,500

 

All Other Fees (4)

 

2,800

 

 

2,800

 

Total

$

2,183,100

 

$

2,669,300

 

 

 

1.)

Consist of fees billed for professional services rendered for the audit of the Company’s annual consolidated financial statements and internal control over financial reporting, review of the Company’s interim consolidated financial statements included in quarterly reports, and services that are normally provided in connection with statutory and regulatory filings or engagements.

 

2.)

Consist principally of fees for services related to financial due diligence associated with acquisition targets.

 

3.)

Consist of fees billed for professional services rendered for tax compliance, tax advice and tax planning.

 

4.)

Consist of fees billed for online accounting and disclosure research tools.

 

 

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Pre-approval Policies and Procedures

The Audit Committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by the Company’s independent registered public accounting firm. This policy generally provides that the Company will not engage its independent registered public accounting firm to render audit or non-audit services unless the Audit Committee specifically approves the service in advance, or the engagement is entered into pursuant to the pre-approval procedure described below.

Pursuant to the Audit Committee Charter, the Audit Committee may delegate pre-approval authority to an individual member of the Audit Committee. The decisions of any individual Audit Committee member to whom pre-approval authority is delegated must be presented to the full Audit Committee at its next scheduled meeting. The Audit Committee has delegated to the Chairperson of the committee the authority to pre-approve any audit, non-audit or other services provided to the Company by the Company’s independent registered public accounting firm, except for the annual audit engagement and fees, which must be approved by the full Audit Committee. The prior approval of the Audit Committee or the pre-approval of the Chairperson of the Audit Committee was obtained for all services provided by PricewaterhouseCoopers in fiscal year 2020.

Report of the Audit Committee

The primary purpose of the Audit Committee is to assist the Board of Directors in its oversight of the accounting and financial reporting processes of the Company and the audits of the consolidated financial statements of the Company.

In conjunction with the specific activities performed by the Audit Committee in its oversight role, it issued the following report:

 

1.

The Audit Committee has reviewed and discussed the audited consolidated financial statements as of and for the year ended December 31, 2020 with the Company’s management.

 

2.

The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC.

 

3.

The Audit Committee has received from the independent registered public accounting firm the written disclosures and the letters required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accounting firm’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with the independent registered public accounting firm their independence from the Company.


 

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Based on the review and discussions referred to in paragraphs (1) through (3) above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for filing with the SEC.


Mr. Ira J. Lamel (Chairperson)

Mr. Stephen W. Bershad

Mr. Thomas N. Secor


The foregoing Report is not soliciting material, is not deemed filed with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

 

 


 

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Item 5–Confirmation of the Company’s Amended and Restated By-Law Number 1

 

At the 2021 Annual Meeting, the shareholders will be asked to confirm the Company’s Amended and Restated By-Law Number 1. On February 25, 2021, the Company’s Board of Directors (the “Board”) amended and restated the Company’s By-Law Number 1 (as amended and restated, the “Amended and Restated By-Laws”) to make the following changes:

 

Updated the name of the Company from GSI Lumonics Inc. to Novanta Inc;

Added provisions to permit notices and other Company documents to be delivered electronically;

Added provisions to permit shareholders, directors, officers or any other person to sign Company documents using an electronic signature;

Added provisions to permit any meeting required under the Business Corporations Act of New Brunswick, the Amended and Restated By-Laws, or any other law applicable to the Company, to be held as a virtual meeting or a hybrid meeting;

Amended a provision to permit meetings of directors or committees of directors to be convened as virtual meetings or hybrid meetings, including any participation through electronic means where all persons participating can hear each other;

Removed references to “unanimous shareholder agreement” throughout the Amended and Restated By-Laws;

Enumerated additional potential officers that may be appointed by the Board, including a chief financial officer and a chief accounting officer, and enumerated the duties and powers of the chief financial officer;

Removed a requirement that voting at a meeting of shareholders be conducted by a show of hands;

Amended a provision to allow the Company’s listed securities to be eligible to be recorded and maintained on the books of its transfer agent without the issuance of a physical stock certificate;

Removed a provision requiring the payment of cash dividends by check; and

Other immaterial or non-substantive administrative or clarifying changes.

 

The principal changes to Company’s Amended and Restated By-Laws are summarized above, but the summary is qualified in its entirety by reference to the Amended and Restated By-Laws itself, which is included as Schedule B. A copy marked to show the changes from the prior version of the Company’s By-Law Number 1, as amended, is included as Schedule C for informational purposes.

Required Vote

The affirmative vote of a majority of the votes cast in respect of this matter at the 2021 Annual Meeting is required to confirm the Company’s Amended and Restated By-Law Number 1. Abstentions and broker non-votes will not be counted in determining the number of votes cast, and thus will not affect the voting results of this proposal

 

THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE CONFIRMATION OF THE COMPANY’S AMENDED AND RESTATED BY-LAW NUMBER 1.

 

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Item 6 – Amendment to the Company’s Articles to Authorize Blank Check Preferred Shares

At the 2021 Annual Meeting, the Company’s shareholders will be asked to approve a special resolution included in Schedule E that approves an amendment to the Company’s articles to authorize an unlimited number of blank check preferred shares (the “Proposed Amendment”).  As of the Record Date, the Board of Directors is not authorized to issue preferred shares. The Proposed Amendment to the articles is included as Schedule D.

 

Basis for Proposed Amendment

 

The Board of Directors believes that approval of the Proposed Amendment will provide the flexibility to take advantage of financing and acquisition opportunities as they arise and will improve the Company’s ability to attract investment capital as various series of preferred shares, including mandatory convertible preferred, may be customized to meet the needs of any particular transaction or market conditions. The Company expects to utilize such preferred shares, if any, for general corporate purposes, including, without limitation, capital raising, merger and acquisition opportunities, the issuance of stock dividends or stock splits, and other general corporate purposes. The Proposed Amendment, in and of itself, will not affect any shareholder’s percentage ownership interests in the Company.

 

Effect of Proposed Amendment on Common Shareholders

 

The effect of the adoption of the Proposed Amendment would be to grant the Board of Directors the authority to issue preferred shares, including mandatory convertible preferred, in one or more series, with such rights, preferences and designations, as it deems necessary or advisable without any additional action by the Company’s shareholders, unless otherwise required by law or by the rules and policies of Nasdaq or any other quotation system or exchange upon which the common shares of the Company are listed and trade. With regard to such Proposed Amendment, the authority of the Board of Directors to determine the terms of any such preferred shares would include, but not be limited to: (i) the designation of each series and the number of shares that will constitute each such series; (ii) the dividend rate for each series; (iii) the price at which, and the terms and conditions on which, the shares of each series may be redeemed, if such shares are redeemable; (iv) the terms and conditions, if any, upon which shares of each series may be converted into shares of other classes or series of shares of the Company, or other securities; (v) the voting rights for each series; (vi) any sinking fund provisions; (vii) liquidation rights; (viii) any preemption rights; and (ix) any other relative, participating, optional or other special rights, preferences, powers, qualifications, limitations or restrictions.

 

If the Proposed Amendment is approved, the availability of undesignated preferred shares may have certain negative effects on the rights of holders of the Company’s common shares. The actual effect of the issuance of any series of preferred shares upon the rights of holders of common shares cannot be stated until the Board of Directors determines the specific rights of the holders of such preferred shares. The Proposed Amendment will permit the Board of Directors, without future shareholder approval, to issue preferred shares with dividend, liquidation, conversion, voting or other rights, which are superior to and could adversely affect the voting power or other rights of the holders of our common shares. Specifically, the Board will be in a position to issue securities which could provide, to the holders thereof, preferences or priorities over the holders of common shares with respect to, among other things, liquidation, dividends and voting. This could result in holders of common shares receiving less in the event of a liquidation, dissolution or other winding up of the Company,

 

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reduce the amount of funds, if any, available for dividends on common shares, and dilute the voting power of the holders of our common shares.

 

Anti-takeover Effects

Release No. 34-15230 of the staff of the SEC requires disclosure and discussion of the effects of any proposal that may be used as an anti-takeover device. The preferred shares could be used, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. For example, the Board of Directors could designate and issue a series of preferred shares, including mandatory convertible preferred, in an amount that sufficiently increases the number of outstanding shares to overcome a vote by the holders of the common shares or with rights and preferences that include special voting rights to veto a change in control. The effect of such provisions could delay or frustrate a merger, tender offer or proxy contest, the removal of incumbent directors, or the assumption of control by shareholders. Please note that the creation of the preferred shares has not been proposed by the Board of Director for an anti-takeover related purpose and the Board of Directors has no knowledge of any current efforts to obtain control of the Company or to effect large accumulations of our voting shares. The Company does not currently have any plans to issue any preferred shares.

Required Vote

A special resolution approved by the affirmative vote of two-thirds of the votes cast in respect of this matter at the 2021 Annual Meeting is required to give effect to the Proposed Amendment. Abstentions and broker non-votes will not be counted in determining the number of votes cast, and thus will not affect the voting results of this proposal.

THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE SPECIAL RESOLUTION APPROVING THE PROPOSED AMENDMENT.

 

 

 

 

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Executive Officers  

Set forth below is information regarding the Company’s current executive officers who are not also directors. Information concerning Matthijs Glastra, our Chief Executive Officer, may be found above in the section entitled “Item 1–Election of Directors” on page 8 of this management proxy circular.

 

 

Robert J. Buckley

Chief Financial Officer

Age: 46

Executive Officer since March 2011

Mr. Buckley was appointed the Company’s Chief Financial Officer on March 31, 2011. Prior to joining the Company in February 2011, Mr. Buckley had a ten-year career with PerkinElmer, Inc. (“PerkinElmer”), a provider of technology and services to the diagnostics, research, environmental, safety and security, industrial and laboratory services markets, where he served in several financial positions of increasing responsibilities. From September 2008 to February 2011, Mr. Buckley served as Vice President and Chief Financial Officer of PerkinElmer’s Environmental Health business. From September 2005 to September 2008, Mr. Buckley was Chief Financial Officer of PerkinElmer’s Asian operations. From April 2001 to August 2005, Mr. Buckley served in various financial management roles at PerkinElmer. Prior to joining PerkinElmer, Mr. Buckley held management positions with Honeywell International, Inc., a diversified technology and manufacturing company that services customers globally, and Georgeson & Company, Inc. Mr. Buckley holds a Bachelor of Arts degree in Finance from Manhattanville College and an M.B.A. from University of California at Los Angeles (U.C.L.A.).

 

 

Brian S. Young

Chief Human Resources Officer  

Age: 52

Executive Officer since December 2016

Mr. Young joined the Company in April 2015 as Vice President of Human Resources and was appointed Chief Human Resources Officer by the Board of Directors in December 2016. Mr. Young brings more than 20 years of human resources leadership experience in both public and private companies serving Original Equipment Manufacturers (“OEMs”) of Class I, II & III medical devices, industrial control technologies and advanced materials. From July 2014 to March 2015, Mr. Young served as Global Human Resource Leader for Hollingsworth & Vose Company, a global manufacturing company. From September 2011 to November 2013, Mr. Young served as Vice President & Human Resource Officer for CIRCOR International, Inc. (“CIRCOR”), a global environmental products manufacturing company. From September 2010 to August 2011, Mr. Young served as Director of Total Rewards for CIRCOR. In addition, from June 2003 to August 2010, Mr. Young served in various leadership roles with Lake Region Medical (formerly Accellent, Inc.), a medical device manufacturing company. Mr. Young’s early career experience was in General Human Resource Management with a specialization in training and development. Mr. Young holds a Bachelor of Science degree in Administration of Justice from Pennsylvania State University.


 

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Corporate Governance  

The Board of Directors

The Board is elected annually and each of our directors stands for election every year. The Board is currently comprised of nine directors, and all except Mr. Glastra have been determined by the Board to be independent under the rules of The Nasdaq Stock Market LLC (“Nasdaq”). In making this determination, the Board has affirmed that each of the independent directors meets the objective requirements for independence set forth by Nasdaq. The independent directors are Stephen W. Bershad, Lonny J. Carpenter, Deborah DiSanzo, Brian D. King, Ira J. Lamel, Maxine L. Mauricio, Katherine A. Owen and Thomas N. Secor. Mr. Glastra is not independent because he is the Company’s Chief Executive Officer. In addition, the Board has determined that director nominee Frank A. Wilson is independent under the rules of Nasdaq. The Board previously determined that Dominic A. Romeo was independent during the period he served on the Board.

 

In evaluating and determining the independence of the directors, the Board considered that in the ordinary course of business, transactions may occur between the Company and entities with which some of the directors are or have been affiliated and that the Company may have other relationships with its directors. The Company engages in ordinary course business transactions with Ms. Owen’s current employer. In 2020, Ms. Owen’s current employer purchased products from the Company, which constituted approximately 11% of the Company’s revenues for the year ended December 31, 2020. The Board determined that this relationship did not impair Ms. Owen’s independence as she does not serve as an executive officer of her employer.

 

Please see the biography of each director under the section entitled “Item 1–Election of Directors” for the public company boards on which each director serves.

 

Board Leadership Structure

The Board is responsible for the overall stewardship of the Company. The Board discharges this responsibility directly and through delegation of specific responsibilities to its committees, the Chairperson of the Board and officers of the Company. The Board has established three standing committees to assist with its responsibilities: the Audit Committee, the Compensation Committee and the Environmental, Social and Governance Committee. Each of the Audit Committee, Compensation Committee and Environmental, Social and Governance Committee has a charter defining its responsibilities. The Board of Directors does not have an executive committee.

 

The Company’s By-Laws require the Chairperson of the Board to be a director and provide the Board with the ability to appoint the Chief Executive Officer of the Company as the Chairperson of the Board. This approach gives the Board the necessary flexibility to determine whether these positions should be held by the same person or by separate persons based on the leadership needs of the Company at any particular time. We recognize that different board leadership structures may be appropriate for companies in different situations. Mr. Bershad currently serves as Chairperson of the Board and Mr. Glastra serves as our Chief Executive Officer.

 

However, in connection with Mr. Bershad’s upcoming retirement from the Board, the Environmental, Social and Governance Committee and the Board reevaluated the Board’s leadership structure and determined that it would be in the best interests of the Company and its shareholders to combine the Chairperson of the Board and Chief Executive Officer roles, effective upon the conclusion of the 2021 Annual Meeting and subject to Mr. Glastra’s re-election to the Board. At the same time, the Environmental, Social and Governance Committee and the Board recognize the importance of providing additional, independent oversight of the Board and are

 

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committed to upholding the strongest principles in corporate governance for the benefit of all shareholders. Accordingly, effective upon the conclusion of the 2021 Annual Meeting and subject to Mr. Carpenter’s re-election to the Board, the independent directors of the Board have appointed Mr. Carpenter as the Company’s independent Lead Director.

 

The Environmental, Social and Governance Committee and the Board believe that the combination of the roles of Chairperson of the Board and Chief Executive Officer is appropriate at this time because Mr. Glastra has gained a deep understanding of the Company’s business since his appointment as Chief Executive Officer in 2016. In light of Mr. Bershad’s retirement, the Environmental, Social and Governance Committee and the Board believe that Mr. Glastra is best positioned to lead the Company and provide strategic direction to the Company and the Board. This change will also facilitate the flow of information and communications between the Board and the Company’s senior management, while providing for effective oversight by an independent board through a strong independent Lead Director acting in accordance with the Company’s robust corporate governance practices and policies.

 

Our Lead Director’s responsibilities will include, but are not limited to:

 

presiding over all meetings of the Board at which the Chairperson is not present, including any executive sessions of the independent directors;

calling meetings or separate sessions of the independent directors;

approving Board meeting schedules and agendas;

approving information sent to the Board;

acting as the liaison between the independent directors and the CEO and Chairperson; and

when appropriate, meeting or otherwise communicating with major shareholders or other constituencies that are involved with the Company.

 

At such times in the future as the Chairperson of the Board is an independent director, the Chairperson will serve as Lead Director. The Board may modify its leadership structure in the future as it deems appropriate.


 

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Corporate Governance Highlights

The following table summarizes our current board structure and key elements of our corporate governance framework:

 

 

Size of Board

Nine Directors (including the director nominee)

 

Number of Independent Directors

Eight Directors (including the director nominee)

 

Percentage of Independent Directors

89%

 

Percentage of Directors that are Women and/or in Underrepresented Groups

33%

 

Number of Directors that are Women

3

 

Board Leadership Structure

Separate Chairperson & CEO

 

Board Self-Evaluation

Annual

 

Review of Independence of Board

At Least Annually

 

Independent Directors Meet Without Management Present

Yes

 

All Directors Elected Annually

Yes

 

Voting Standard for Election of Directors

Cumulative

 

Corporate Governance Guidelines

Yes

 

Diversity (as to background, experience and skills)

Yes

 

Prohibition on Hedging Company Stock

Yes

 

 

Board Committees and Meetings

The Board has a responsibility for establishing broad corporate policies and for reviewing overall performance, rather than day-to-day operations of the Company. The Board’s primary responsibility is to oversee the management of the Company and, in so doing, the Board serves the best interests of the Company and its shareholders. The Board selects, evaluates and provides for the succession of our executive officers. It reviews and approves corporate objectives and strategies and evaluates significant policies and major proposed commitments of corporate resources. It participates in decisions that have a potential major economic impact on the Company. Management keeps the directors informed of the Company’s business activities through regular written reports and presentations at Board and committee meetings.

 

 

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The Board maintains three standing committees whose functions are described below. All members of the Audit Committee, Compensation Committee and Environmental, Social and Governance Committee are independent directors. The following table sets forth the membership of the Board’s standing committees:

 

Name

Audit

Committee

Compensation

Committee

Environmental,

Social and

Governance

Committee

Stephen W. Bershad

X

X

 

Brian D. King

 

 

X

Ira J. Lamel

CHAIR

X

 

Deborah DiSanzo

 

 

X

Lonny J. Carpenter

 

CHAIR

 

Thomas N. Secor

X

 

CHAIR

 

Each standing committee maintains a written charter detailing its authority and responsibilities. These charters are reviewed and updated periodically as legislative and regulatory developments and business circumstances warrant. The committee charters are available in their entirety on our website at https://investors.novanta.com on the Investors page, under the Governance tab.

Meetings

The Board and standing committees met as follows during the year ended December 31, 2020:

 

Name

Number of Meetings

 

Board of Directors

 

7

 

Audit Committee

 

4

 

Compensation Committee

 

5

 

Environmental, Social and Governance Committee

 

5

 

 

 

The independent directors also meet routinely in executive sessions in connection with regular meetings of the Board. Mr. Bershad currently presides over all executive sessions at which he is present. Following the 2021 Annual Meeting, we expect Mr. Carpenter to preside over all executive sessions at which he is present.

 

During 2020, each director attended all meetings of the Board and all meetings of the committees on which the director served. Members of the Board of Directors are strongly encouraged to attend the Company’s annual meeting of shareholders. In 2020, all of the directors attended the annual meeting of shareholders.

 

 


 

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The Audit Committee

The Audit Committee consists of Mr. Bershad, Mr. Lamel, and Mr. Secor, with Mr. Lamel serving as Chairperson. All members of the Audit Committee meet the membership requirements of Nasdaq, including the requirements regarding financial literacy and financial sophistication, and the Board has determined that each member of the Audit Committee is independent under the listing standards of Nasdaq and the rules of the SEC regarding audit committee membership. The Board has further determined that Mr. Lamel is an “audit committee financial expert” as defined by the SEC.

 

The Audit Committee is directly responsible for the appointment, compensation and oversight of the work of the independent registered public accounting firm, and is responsible for reviewing and discussing with management and the independent registered public accounting firm the Company’s audited annual consolidated financial statements and unaudited interim consolidated financial statements. The Audit Committee also reviews the independence and quality control procedures of the independent registered public accounting firm, reviews management’s assessment of the effectiveness of internal controls, and discusses with management the Company’s policies with respect to risk assessment and risk management.

 

The Compensation Committee  

The Compensation Committee consists of Mr. Bershad, Mr. Carpenter, and Mr. Lamel, with Mr. Carpenter serving as Chairperson. All members of the Compensation Committee meet the membership requirements of Nasdaq, and each member of the Compensation Committee is independent under the listing standards of Nasdaq regarding compensation committee membership.

 

The Compensation Committee is responsible for assisting the Board in fulfilling its fiduciary duties with respect to the oversight of the Company’s compensation plans, policies and programs, including assessing the overall compensation structure, reviewing all executive compensation programs, incentive compensation plans and equity-based plans and determining executive compensation. Specifically, the Compensation Committee reviews and approves the compensation and benefits of the Chief Executive Officer and the other officers, oversees the performance evaluation of the Chief Executive Officer and other officers, and reviews and approves the Senior Management Incentive Plan (including grants of equity compensation and annual cash incentive compensation for the officers and certain other key employees).

 

The Compensation Committee has the authority under its charter to directly retain and cause the Company to pay reasonable compensation for compensation consultants, legal counsel and other advisors as it deems necessary or appropriate. In 2020, the Compensation Committee retained Korn Ferry as its independent compensation consultant to assist the Compensation Committee with its responsibilities related to the Company’s executive compensation programs.

 

Finally, the Company sought to maintain the strong governance of its executive compensation program. In particular, during the fiscal year 2020, the Compensation Committee:

Convened five times;

Reviewed the performance of the Chief Executive Officer (the “CEO”);

Reviewed the performance of the other officers; and

 

Page 38


 

Considered the results of the Company’s fiscal year 2019 say-on-pay voting results.

In addition, the Compensation Committee continually evaluates the Company’s compensation policies and practices to ensure that they are consistent with good governance principles. Below are highlights of what we do and what we do not do:

 

What We Do

What We Do Not Do

Pay for Performance. We place significant weight on performance-based, at-risk, long-term compensation.

No Excise Tax Gross-Ups. We do not provide any compensation-related tax gross-ups (except in connection with relocation expenses).

Robust Performance Goals. We deliver rewards that are based on the achievement of long-term objectives and the creation of shareholder value.

No Excessive Perks. We do not provide significant perquisites.

Focus on Affordable Executive Talent. We attract and retain executive talent with the capability to lead within a global company, while remaining affordable for the Company.

No Excessive Risks. We avoid excessive risk-taking in respect to the impact on earnings and cash flow.

Clawback Practices. We maintain a clawback policy with respect to incentive-based cash and equity compensation.

No Hedging Policy. We do not allow employees, officers or directors to hedge Company stock.

Robust Stock Ownership Requirements. We maintain stock ownership guidelines for our CEO and other Named Executive Officers (“NEOs”).

No Replacement Awards. We do not reprice or replace out-of-the-money stock options.

Double Trigger in the Event of a Change-in-Control. We have double-trigger vesting of cash severance payments and equity awards upon a change of control.

No Guaranteed Employment. We do not have contracts that guarantee employment with any executives (all employment is terminable at will).

Maximum Payout Caps for Incentive Plans. We have a cap on cash incentive compensation and performance-based equity incentive compensation at 200% of target.

No Dividends on Unvested Awards. We do not pay dividends on unvested stock awards.

 

 

For a discussion of the Compensation Committee’s processes and procedures for considering and determining compensation for our officers, please see the “Compensation Discussion and Analysis” section.

 


 

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The Environmental, Social and Governance Committee

The Environmental, Social and Governance Committee (the “ESG Committee”) consists of Ms. DiSanzo, Mr. King, and Mr. Secor, with Mr. Secor serving as Chairperson. All members of the ESG Committee meet the membership requirements of Nasdaq.

 

The ESG Committee is responsible for: (a) identifying individuals qualified to become Board members and recommending such individuals to the Board as director nominees; (b) overseeing the Company’s corporate governance policies and practices, including a set of corporate governance principles applicable to the Company; (c) reviewing the qualifications of directors eligible to become members of the different committees of the Board and recommending to the Board director nominees for each committee; (d) overseeing periodic performance reviews of the Board; (e) overseeing the Company’s sustainability strategy, initiatives, policies and risks, including regarding climate change, environmental stewardship and social issues; (f) overseeing the Company’s programs and policies regarding diversity and inclusion; and (g) evaluating and making recommendations to the Board regarding director compensation.

 

In accordance with the Company’s Corporate Governance Guidelines, the ESG Committee considered that the Board and ESG Committee are committed to improving the diversity of the Board by actively seeking out highly qualified women and minority candidates, as well as candidates with diverse backgrounds, skills and experiences as part of each Board search the Company undertakes. Following a search process, the ESG Committee recommended to the Board that Katherine A. Owen be elected as director of the Company in light of her significant financial, business development and strategic experience at a global Fortune 500 company. The ESG Committee also considered that Ms. Owen’s presence on the Board would enhance the Board’s gender diversity. Following a separate search process, the ESG Committee recommended to the Board that Frank A. Wilson be nominated as a director of the Company in light of his significant experience as a public company chief financial officer at a global company in the technology and medical industry.

 

Selection and Evaluation of Director Candidates

In searching for qualified director candidates for election to the Board and to fill vacancies on the Board, the ESG Committee solicits current directors for the names of potentially qualified candidates and may ask directors to pursue their own business contacts for the names of potentially qualified candidates and to conduct due diligence on director candidates. In addition, the ESG Committee may from time to time retain an outside search firm to assist in the search for qualified candidates. Director Katherine A. Owen was recommended to the ESG Committee by an independent director. Director nominee Frank A. Wilson was identified through an outside search firm. The outside search firm was retained to assist the ESG Committee in identifying and evaluating director nominees. In the event there is or will be a vacancy on the Board, the ESG Committee will consider suggestions from shareholders for nominees for election as directors and evaluate such suggested nominees on the same terms as candidates identified by directors, officers, outside advisors or search firms selected by the ESG Committee.

 

The criteria that the ESG Committee has established for selecting members of the Board are contained in the Corporate Governance Guidelines, which are available on the Company’s website at https://investors.novanta.com, on the Investors page, under the Governance tab. The criteria include a consideration of the candidate’s independence, demonstrated ethical standards, experience at the policy-making level, ability to work constructively with the other directors and the Chief Executive Officer, capacity to evaluate strategy and reach sound conclusions, motivation and time to devote themselves to Company matters and ability to take into account and balance the legitimate needs of all shareholders and other stakeholders in reaching

 

Page 40


 

decisions. In addition, the Board is committed to seeking out highly qualified women and minority candidates as well as candidates with diverse backgrounds, skills and experiences as part of each Board search the Company undertakes.

 

The ESG Committee assesses the effectiveness of this policy as part of its annual self-evaluation.

 

Once potential candidates are identified, the ESG Committee reviews the backgrounds of those candidates, conducts interviews of candidates and establishes a list of final candidates. To the extent practicable, final candidates are then interviewed by each member of the ESG Committee, the Chairperson of the Board and the Chief Executive Officer. Reasonable efforts are made to have all remaining directors interview the final candidate or candidates.

 

The ESG Committee and the Board have not established a formal policy with regard to the consideration of director candidates recommended by shareholders. This is due to the following factors: (i) the limited number of such recommendations, (ii) the need to evaluate such recommendations on a case-by-case basis, and (iii) the expectation that recommendations from shareholders would be considered in the same manner as recommendations by directors, officers, outside advisors or search firms in the event of a vacancy on the Board.

 

Any shareholder who intends to recommend a candidate to the ESG Committee for nomination as a director should deliver a written notice to the Company with the following information: (a) the suggested candidate’s biographical data (including business experience, service on other boards, and academic credentials); (b) all transactions and relationships, if any, between the recommending shareholder or such candidate, on the one hand, and the Company or its management, on the other hand, as well as any relationships or arrangements, if any, between the recommending shareholder and the candidate and any other transactions or relationships of which the Board should be aware in order to evaluate such candidate’s potential independence as a director; (c) details of whether the candidate or the recommending shareholder is involved in any on-going litigation adverse to the Company or is associated with an entity which is engaged in such litigation; and (d) whether the candidate or any company for which the candidate serves or has served as an officer or director is, or has been, the subject of any bankruptcy, SEC or criminal proceedings or investigations, any civil proceedings or investigations related to fraud, accounting or financial misconduct, or any other material civil proceedings or investigations. The notice must also contain a written consent confirming the candidate’s (a) consent to be nominated and named in the Company’s management proxy circular and, if elected, to serve as a director of the Company and (b) agreement to be interviewed by the ESG Committee and submit additional information if requested to do so. Any such notice should be delivered to the Company sufficiently in advance of the Company’s annual meeting to permit the ESG Committee, in the event that there is or will be a vacancy on the Board, to complete its review in a timely fashion.

 

Under the Company’s Articles, a shareholder may propose a director candidate for inclusion in the Company’s notice of meeting if the proposal is signed by one or more holders of shares representing in the aggregate not less than 5% of the common shares of the Company entitled to vote at the shareholders’ meeting at which the nomination is to be presented. Any shareholder, as described in the preceding sentence, wishing to propose a director candidate for inclusion in the Company’s notice of meeting must provide notice to the Company by February 12, 2022 and include the information about such nominee as discussed above with respect to director candidates recommended by such shareholder(s).

 


 

Page 41


 

Communications with the Board

The Board has not established a formal process for shareholders to send communications to the Board and/or individual directors due to the limited number of such communications historically. However, the Board will give appropriate attention to written communications on issues that are submitted by shareholders and other interested parties and will respond if and as appropriate. The names of all directors are available to shareholders in this management proxy circular and on the Company’s website. If the Company receives any shareholder communication intended for the full Board or any individual director, the Company will forward all such communications to the full Board or such individual director, unless the communication is clearly of a marketing nature or is unduly hostile, threatening, illegal or similarly inappropriate. Any shareholder communications should be sent to: Novanta Inc., Attention: Lead Director, 125 Middlesex Turnpike, Bedford, Massachusetts 01730, USA.

 

Board of Directors’ Role in Risk Oversight

The Board recognizes the importance of appropriate oversight of potential business risks in running a successful operation and meeting its fiduciary obligations to our business, our shareholders, and our other stakeholders. While our senior executives, including the Chief Executive Officer, the Chief Financial Officer, and the Chief Human Resources Officer, have the responsibility for the day-to-day assessment and management of business risks, the Board maintains a responsibility for creating an appropriate culture of risk management and setting a proper “tone at the top.” The Board has taken an active role in overseeing risks that could affect the Company, including operational, financial, legal and regulatory, cybersecurity, and strategic and reputational risks. The oversight of these risks is conducted primarily through the Audit Committee, which has been assigned the oversight responsibility for enterprise risk management and reports regularly to the Board on such matters. Senior management, with the assistance of the Company’s outsourced Internal Audit service provider, carries out enterprise risk management activities. This process includes periodic reporting by management to the Audit Committee in order to systematically identify, analyze, prioritize and document potential business risks, their potential impact on the Company’s performance, and the Company’s ability to detect, manage, control and prevent these risks. When the Audit Committee receives a report from senior management, the Chair of the Audit Committee reports on the discussion to the full Board during the next Board meeting to the extent that all of the directors were not present at the Audit Committee meeting. This enables the Board and its committees to coordinate the overall risk oversight role, particularly with respect to risk areas that may potentially impact more than one committee of the Board.

 

In addition to the role the Audit Committee plays in overseeing enterprise risk management activities, the Compensation Committee monitors the design and implementation of our compensation programs to ensure that these programs include the elements needed to motivate employees to take a long-term view of the business and to avoid encouraging unnecessary risk taking. Based on a functional review of our compensation policies and practices as performed by senior management in consultation with the Company’s independent compensation consultant and the Compensation Committee, the Company does not believe that any risks arising from its employee compensation programs are likely to have a material adverse effect on the Company.

 

In addition, the ESG Committee oversees risks related to sustainability and social issues, including climate change, environmental stewardship, diversity and inclusion, as well as the Company’s governance framework. This oversight includes periodic reporting by management to the ESG Committee on potential ESG risks and their potential impact on the Company’s performance. The ESG Committee will periodically report to the Board on these matters.

 

The Board does not believe that its role in the oversight of the Company’s risks affects the Board’s leadership structure.

 

Page 42


 

Code of Ethics and Business Conduct

All of the Company’s directors, officers and employees must act in accordance with the Code of Ethics and Business Conduct, which has been adopted by the Company’s Board of Directors. A copy of the Code of Ethics and Business Conduct is available on the Company’s website at https://investors.novanta.com on the Investors page, under the Governance tab, with the title “Code of Business Conduct - English”. The Company intends to satisfy the disclosure requirement under Nasdaq rules regarding waivers for directors or executive officers or under Item 5.05 of Form 8-K regarding disclosure of an amendment to, or waiver from, any provision of this Code of Ethics and Business Conduct with respect to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on the Company’s website discussed above, unless a Form 8-K is otherwise required by law or applicable listing rules.

 

Anti-Hedging Policy

Our Board of Directors has adopted an Insider Trading Policy, which applies to all of our directors, officers and employees. The policy prohibits our directors, officers and employees and their family members from buying or selling put or call options or entering into other derivative contracts or hedging transactions with respect to the Company’s securities. This includes options trading on any of the stock exchanges or futures exchanges, as well as customized derivative or hedging transactions with third parties.

 

Orientation and Continuing Education

The Company’s Corporate Governance Guidelines provide that directors are expected to participate in an orientation program within six months of the annual meeting at which new directors are elected or the date on which new directors are appointed. In addition, the Company may periodically make available to its directors continuing educational opportunities designed to assist them in performing their Board and committee functions.

 

Assessments

The ESG Committee is responsible for annually overseeing a review of the performance of the Board, and each of the ESG Committee, Audit Committee and Compensation Committee is responsible for annually reviewing such committee’s own performance. In February 2021, the ESG Committee adopted a self-evaluation questionnaire for the Board and each of the Board’s standing committees. Each director completed a questionnaire evaluating the performance of the Board as a whole and each committee on which such director served, and a summary of the results of these self-evaluations was discussed by the Board at its February 25, 2021 meeting.

 

Additional Governance Matters

The Board of Directors (acting on the recommendation of the ESG Committee) has approved the Company's Corporate Governance Guidelines, which include, among other items (in addition to those items described elsewhere in this proxy):

 

The independent directors meet regularly in executive session without the presence of management;

The Compensation Committee is responsible for reviewing the Company's succession planning and senior management development and reports to the Board on the Company’s plans.

 

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Director Compensation

In general, the Company uses a combination of cash and equity-based compensation to attract and retain candidates to serve on the Company’s Board of Directors. The Company does not compensate directors who are also employees for their service on the Board of Directors. Accordingly, during the year ended December 31, 2020, Mr. Glastra, who served as the Company’s Chief Executive Officer and as a Director on the Board, did not receive any compensation for his service on the Board of Directors. Compensation for the Board of Directors is overseen by the Environmental, Social and Governance Committee rather than the Compensation Committee, which focuses on employee compensation. The Environmental, Social and Governance Committee periodically reviews the cash and equity-based compensation for non-employee directors and makes recommendations to the Board of Directors for any adjustments.

Effective on January 1, 2019, the Board of Directors approved the Non-Employee Director Compensation Policy, which provides for the compensation of the non-employee directors. Under the policy, the non-employee directors receive the following compensation:

An annual retainer in the amount of $125,000 for each non-employee member of the Board of Directors;

An additional annual retainer in the amount of $15,000 for the Chairperson of the Audit Committee;

An additional annual retainer in the amount of $10,000 for the Chairperson of each of the Compensation Committee and the Environmental, Social and Governance Committee (unless such Chairperson is also serving as non-executive Chairperson of the Board of Directors);

An additional retainer in the amount of $125,000 for the non-executive Chairperson of the Board of Directors; and

A grant of restricted stock units with a grant-date fair value of $62,500 to each non-employee member of the Board of Directors.

 

Fifty percent of the annual retainer for non-employee directors are paid in the form of cash. The remaining fifty percent of such retainers are paid in the form of deferred stock units, which are convertible into shares of the Company’s common stock upon retirement, resignation or termination of directorship of the non-employee directors.  The restricted stock units vest upon grant and are settled in common shares on the first anniversary of the date of grant.

 

Any non-employee director who is initially elected to the Board on any date other than the first business day of an applicable calendar year receives a pro-rated annual retainer and grant of restricted stock units based on their date of election to the Board.

 

In June 2020, our Board of Directors determined to forgo the cash retainers payable to our non-employee directors for the third quarter of 2020 as a result of the COVID-19 pandemic.

As of December 31, 2020, each director was also a party to an indemnification agreement with the Company. Such indemnification agreements generally provide, among other things, that each director shall be indemnified to the fullest extent permitted by applicable law against all expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such director in connection with any proceeding by reason of his or her relationship with the Company. In addition, such indemnification agreements provide for the advancement of expenses incurred by such director in connection with any proceeding covered by such indemnification

 

Page 44


 

agreements, subject to the conditions set forth therein and to the extent such advancement is not prohibited by law.

Director Compensation Table

The following table sets forth information regarding the compensation earned during the fiscal year ended December 31, 2020 by the Company’s non-employee directors. 

 

Name

Fees Earned or Paid in Cash

($)(2)

 

Stock

Awards

($)(3)(4)(5)

 

Total

($)

 

Stephen W. Bershad

 

$93,750

 

 

$187,341

 

 

$281,091

 

Lonny J. Carpenter

 

$48,125

 

 

$127,263

 

 

$175,388

 

Deborah DiSanzo

 

$46,875

 

 

$124,833

 

 

$171,708

 

Brian D. King

 

$46,875

 

 

$124,833

 

 

$171,708

 

Ira J. Lamel

 

$52,500

 

 

$132,338

 

 

$184,838

 

Maxine L. Mauricio

 

$15,625

 

 

$75,054

 

 

$90,679

 

Dominic A. Romeo (1)

 

$31,250

 

 

$124,833

 

 

$156,083

 

Thomas N. Secor

 

$50,625

 

 

$129,867

 

 

$180,492

 


 

1.)

Dominic Romeo resigned as a Board of Director on June 22, 2020.

 

2.)

All fees payable in cash and earned by the Company’s Board of Directors during the year ended December 31, 2020 were paid in full prior to December 31, 2020.

 

3.)

Amounts shown do not reflect compensation actually received. Rather, amounts shown represent the aggregate grant date fair value (based on the closing price of the Company’s common stock on the date of grant) of each director’s deferred stock unit award and restricted stock unit award determined in accordance with Accounting Standards Codification (“ASC”) 718, “Compensation-Stock Compensation”. The deferred stock units granted by the Company were fully vested upon grant and the associated expense was recognized in full on the grant date in accordance with ASC 718.  The restricted stock units granted by the Company were fully vested upon grant but would settle in common shares on the first anniversary of the date of grant. The associated expense was recognized in full on the grant date in accordance with ASC 718.

 

4.)

The amounts represent the aggregate grant date fair value associated with the respective annual deferred stock unit award and restricted stock unit award granted to each director on January 2, 2020, except for Ms. Mauricio, whose awards were granted on May 26, 2020. In addition to the January 2, 2020 grant, Mr. Carpenter was also granted 23 shares of deferred stock units as a result of his appointment to chair of the Compensation Committee on July 1, 2020. In accordance with the compensation arrangement with the Board of Directors, the number of deferred stock units and restricted stock units granted on January 2, 2020 were determined based on the closing price of the Company’s common stock of $91.52 per share as of the grant date. The number of deferred stock units and restricted stock units granted on May 26, 2020 were determined based on the closing price of the Company’s common stock of $100.34 per share as of the grant date. The number of deferred stock units

 

Page 45


 

 

granted on July 1, 2020 were determined based on the closing price of the Company’s common stock of $105.64 per share as of the grant date.

 

5.)

The following table sets forth the aggregate outstanding stock unit awards held by each director as of December 31, 2020:

 

Name

Deferred Stock

Units(1)

(#)

 

Restricted Stock

Units(2)

(#)

 

Total

(#)

 

Stephen W. Bershad

 

102,211

 

 

682

 

 

102,893

 

Lonny J. Carpenter

 

2,332

 

 

682

 

 

3,014

 

Deborah DiSanzo

 

1,174

 

 

682

 

 

1,856

 

Brian D. King

 

4,227

 

 

682

 

 

4,909

 

Ira J. Lamel

 

57,240

 

 

682

 

 

57,922

 

Maxine L. Mauricio

 

374

 

 

374

 

 

748

 

Thomas N. Secor

 

30,652

 

 

682

 

 

31,334

 

Total

 

198,210

 

 

4,466

 

 

202,676

 

 

1.)

Deferred stock units granted to the directors were fully vested on the date of grant and will convert into an equal number of shares of the Company’s common stock as of the date the respective director ceases to be a member of the Board of Directors. The following table presents the number of deferred stock units granted to each director, separated by grant date:

Grant Date

Mr. Bershad

 

Mr. Carpenter

 

Ms. DiSanzo

 

Mr. King

 

Mr. Lamel

 

Ms. Mauricio

 

Mr. Secor

 

September 2, 2010

 

23,149

 

 

 

 

 

 

 

 

12,963

 

 

 

 

 

February 15, 2011

 

11,815

 

 

 

 

 

 

 

 

6,617

 

 

 

 

 

January 1, 2012

 

12,219

 

 

 

 

 

 

 

 

6,843

 

 

 

 

 

July 2, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

2,982

 

January 1, 2013

 

14,435

 

 

 

 

 

 

 

 

8,084

 

 

 

 

7,218

 

January 1, 2014

 

11,121

 

 

 

 

 

 

 

 

6,228

 

 

 

 

5,561

 

January 1, 2015

 

8,492

 

 

 

 

 

 

 

 

4,756

 

 

 

 

4,246

 

January 1, 2016

 

9,178

 

 

 

 

 

 

 

 

5,140

 

 

 

 

4,589

 

January 1, 2017

 

5,953

 

 

 

 

 

 

 

 

3,334

 

 

 

 

2,977

 

May 10, 2017

 

 

 

 

 

 

 

1,303

 

 

 

 

 

 

 

January 1, 2018

 

2,500

 

 

 

 

 

 

1,250

 

 

1,400

 

 

 

 

1,250

 

May 10, 2018

 

 

 

635

 

 

 

 

 

 

 

 

 

 

 

October 1, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

21

 

January 2, 2019

 

1,984

 

 

992

 

 

 

 

992

 

 

1,111

 

 

 

 

1,071

 

May 9, 2019

 

 

 

 

 

492

 

 

 

 

 

 

 

 

 

January 2, 2020

 

1,365

 

 

682

 

 

682

 

 

682

 

 

764

 

 

 

 

737

 

May 26, 2020

 

 

 

 

 

 

 

 

 

 

 

374

 

 

 

July 1, 2020

 

 

 

23

 

 

 

 

 

 

 

 

 

 

 

Total

 

102,211

 

 

2,332

 

 

1,174

 

 

4,227

 

 

57,240

 

 

374

 

 

30,652

 

 

 

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2.)

Restricted stock units granted to the directors vest upon grant and settle in common shares on the first anniversary of the date of the grant. The following table presents the number of restricted stock units granted to each director, separated by grant date:

 

Grant Date

Mr. Bershad

 

Mr. Carpenter

 

Ms. DiSanzo

 

Mr. King

 

Mr. Lamel

 

Ms. Mauricio

 

Mr. Secor

 

January 2, 2020

 

682

 

 

682

 

 

682

 

 

682

 

 

682

 

 

 

 

682

 

May 26, 2020

 

 

 

 

 

 

 

 

 

 

 

374

 

 

 

Total

 

682

 

 

682

 

 

682

 

 

682

 

 

682

 

 

374

 

 

682

 

 

 

 

 

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Compensation Discussion and Analysis

The following discussion and analysis contains statements regarding individual and Company performance targets and goals. These targets and goals are disclosed in the limited context of the Company’s compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. The Company specifically cautions investors not to apply these statements to other contexts.

The following discussion and analysis details the Company’s philosophy and policies regarding executive compensation, the process that is used to set executive compensation within the Company, the elements of the executive compensation program, and the role of the Compensation Committee of the Board of Directors of Novanta Inc. and the executive staff in setting executive compensation. In this section, the terms, “we”, “our”, and “us” refer to the Company, and the “Board” and “Board of Directors” refer to the Board of Directors of Novanta Inc., unless otherwise specified.

The Company uses certain non-GAAP financial measures, such as Organic Revenue Growth, Adjusted EBITDA and Adjusted EPS, to evaluate its operating performance, communicate financial results to the Board of Directors, benchmark results against historical performance and the performance of peers, and to determine incentive compensation for senior management and employees.  Non-GAAP financial measures should not be considered as substitutes for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material effect on the Company’s reported results and, therefore, should not be relied upon as the sole financial measures to evaluate the Company’s financial results. Investors are encouraged to review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables at the end of the Company’s annual report for the fiscal year 2020.

The following table shows the Company’s named executive officers (collectively, the “named executive officers” or “NEOs”) for the fiscal year 2020:

Executive

Current Title

Officer Since

Matthijs Glastra

Chief Executive Officer

2012

Robert J. Buckley

Chief Financial Officer

2011

Brian S. Young

Chief Human Resources Officer

2016

 

EXECUTIVE SUMMARY

Creating Shareholder Value

The creation of shareholder value is the foundation and driver of the Company’s executive compensation program. The compensation of the named executive officers is closely aligned with the long-term interests of the shareholders.

Returns for Novanta Shareholders

The following graph compares the cumulative total return to shareholders for the Company’s common shares for the period from December 31, 2015 through December 31, 2020 with the Nasdaq Composite Index and Russell 2000 Index. The comparison assumes an investment of $100 is made on December 31, 2015 in the Company’s common shares and, in the case of each of the indices, it also assumes reinvestment of all dividends. The past

 

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performance shown is not necessarily indicative of future performance.

 

December 31,

2015

 

December 31,

2016

 

December 31,

2017

 

December 31,

2018

 

December 31,

2019

 

December 31,

2020

 

Novanta Inc.

$

100

 

$

154.19

 

$

367.11

 

$

462.56

 

$

649.34

 

$

867.99

 

NASDAQ Composite Index

$

100

 

$

108.87

 

$

141.13

 

$

137.12

 

$

191.91

 

$

271.64

 

Russell 2000 Index

$

100

 

$

121.31

 

$

139.12

 

$

123.76

 

$

155.35

 

$

186.36

 

 

 

 

2020 Business and Compensation Highlights

The year 2020 was an unprecedented year, with the global pandemic causing a significant economic downturn.  Despite this very difficult macro environment, Novanta delivered a solid performance.  Full year reported revenue was $591 million, a decline of (6%) from the prior year. Despite this decline, we maintained strong profitability and generated record cash flows from operating activities. Our mission critical technologies are embedded into diagnostic and antibody test equipment used in detecting COVID-19 infections, into ICU and patient monitoring equipment used in hospitals to help in the fight against the pandemic, and into DNA sequencing equipment helping to detect and monitor new COVID-19 virus variants. Our operations teams remained agile in this environment, and our research and development teams are finding creative ways to bring innovations to market. We accomplished all these while maintaining a relentless focus on keeping our teams safe.

 

Financial Highlights (in millions)

2020

 

2019

 

Revenue

$

590.6

 

$

626.1

 

Consolidated Net Income

$

44.5

 

$

40.8

 

Adjusted EBITDA

$

121.0

 

$

120.7

 

Operating Cash Flow

$

140.2

 

$

63.2

 

 

 

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Total Shareholder Return

2020

 

2019

 

Novanta Inc.

 

34

%

 

40

%

Russell 2000 Index

 

20

%

 

26

%

                

 

The Compensation Committee approved the 2020 compensation plans for our NEOs in February 2020, which included increases to base salaries, short-term cash incentive plan and long-term equity compensation. However, as part of a company-wide cost reduction initiative in response to economic uncertainties caused by the COVID-19 pandemic, the Compensation Committee, with the consent of the NEOs, decided to defer base salary increases to January 1, 2021 and eliminate the short-term cash incentive plan for 2020. Further, the NEOs did not receive the special one-time restricted stock unit grant issued to the rest of the employees in the Company.

 

Compensation Philosophy

The Company is a global supplier of core technology solutions that give medical and advanced industrial OEMs a competitive advantage. The Company operates in an ever-evolving and fast-paced environment and is moving aggressively to position itself as a leading supplier to OEMs in high-growth medical and advanced industrial markets. Our ability to compete in this environment depends, to a large extent, on our success in identifying, recruiting, developing and retaining management talent.

In support of our goals, we have designed an executive compensation program that is robust, highly performance-driven, and intended to generate both long-term sustainable shareholder value and near-term focus on financial performance, operational excellence, quality and innovation.

 

The following graphs depict the average target pay mix of base salary, short-term cash incentives, and long-term equity-based incentives for our Chief Executive Officer and for our other named executive officers.

 

 

 

 

1.)

Based on annual base salary, short term cash incentives, and annual equity grant (based on grant-date fair value) as stated in the 2020 compensation package for our Chief Executive Officer.

 

2.)

Based on annual base salary, short term cash incentives, and annual equity grant (based on grant-date fair value) as stated in the 2020 compensation packages for our Chief Financial Officer and Chief Human Resources Officer.

 

 

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The Executive Compensation Decision Making Process

Compensation Committee Members and Independence

The Compensation Committee is comprised of Messrs. Bershad, Carpenter, and Lamel. None of the current members were, at any time, officers or employees of the Company or its subsidiaries. The Board has determined that each member of the Compensation Committee is an independent director under the applicable rules of Nasdaq.

 

Role of the Compensation Committee, Management and Outside Advisors

The Compensation Committee is responsible for designing, implementing and evaluating the Company’s executive compensation plans and policies. Among its responsibilities, the Compensation Committee:

Reviews the Compensation Committee Charter annually and amends it as appropriate;

Establishes the Company’s compensation philosophy and the framework for determining the compensation of the NEOs;

Reviews, evaluates and approves base salaries, cash-based incentives, long-term equity-based incentives and all other forms of compensation for the NEOs;

Evaluates the performance of the CEO and receives performance evaluations of the other named executive officers as reported by the CEO, which will impact the following year’s compensation decisions;

Reviews and approves the performance objectives, including the target financial objectives for both cash-based incentives and performance based stock awards, applicable to each of the NEOs;

Certifies performance at the end of each year and approves annual cash incentive payouts; and

Certifies performance and vesting at the end of each three-year performance period for the performance stock unit awards.

In performing the responsibilities above, the Compensation Committee receives advice and input, as applicable, from the Board of Directors, the Chief Executive Officer, the Chief Human Resources Officer, outside compensation consultants, and the Company’s outside legal counsel on compensation issues and regarding general compensation policies, including the appropriate level and mix of the compensation for executive officers.

The Compensation Committee meets in executive sessions and, where appropriate, with members of management, including the CEO and Chief Human Resources Officer, outside consultants, and the Company’s outside legal counsel. Although the CEO is generally present during the non-executive sessions of the Compensation Committee meetings and provides input to the Compensation Committee with regard to compensation for his direct reports, the Compensation Committee makes all decisions with regard to CEO compensation in executive sessions and the CEO has no vote in the actual approval of compensation for any executive officer.

Pursuant to its charter, the Compensation Committee may form and delegate authority to subcommittees of the Compensation Committee, to the extent consistent with the Company’s Articles of Continuance, Bylaws,

 

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Corporate Governance Guidelines, applicable law and Nasdaq rules, except that it may not delegate its responsibilities for any matters that involve executive compensation or any matters where it has determined such compensation is intended to comply with the grandfather provisions of Section 162(m) of the Internal Revenue Code (“the Code”), by virtue of being approved by a committee of “outside directors” or is intended to be exempt from Section 16(b) under the Exchange Act pursuant to Rule 16b-3 by virtue of being approved by a committee of “non-employee directors.”

Executive Compensation and Comparable Company Data

Generally, the Compensation Committee reviews each named executive officer’s total compensation each year and, in connection therewith, considers market data for similar positions at other public companies and other relevant sources. The Compensation Committee may retain the services of advisors and has the budgetary authority to hire such advisors as it deems necessary for its compensation review. In 2020, the Compensation Committee worked directly with Korn Ferry to design the fiscal year 2020 executive compensation plans. Korn Ferry helped the Compensation Committee assess whether the total compensation paid to the NEOs is fair, reasonable and competitive. The Company has assessed the independence of Korn Ferry and its representatives and has determined that no conflicts of interest exist. In order to avoid any conflict of interest, Korn Ferry did not provide consulting services other than services related to executive and director compensation to the Company during 2020.

Generally, the types of compensation and benefits provided to the NEOs are intended to be similar to those provided to executive officers at other public companies. While the Compensation Committee does not believe it is appropriate to set executive compensation levels based exclusively on compensation surveys and comparable company data, the Compensation Committee uses publicly available surveys and comparable company data as tools for internally assessing whether the Company’s executive compensation program is, in the aggregate, reasonable in scope, market-competitive, and consistent from year to year.

In early 2020, Korn Ferry was asked to develop a compensation report that identifies market-based compensation structures, pay practices and rates of compensation for targeted positions at the Company as compared to the Company’s peer group. The peer group is selected based on relevant factors, including industry, fiscal year or trailing twelve-month revenue, market capitalization, total shareholder return and EBITDA. The peer group used in this compensation report prepared by Korn Ferry in January 2020, which was used in establishing the 2020 compensation of our NEOs, was comprised of the following companies:

 

     II-VI Incorporated

     Globus Medical, Inc.

     AngioDynamics, Inc.

     Integra LifeSciences

     Brooks Automation, Inc.

     IPG Photonics Corporation

     Cantel Medical Group

     Masimo Corporation

     Cognex Corporation

     Mercury System, Inc.

     CONMED Corporation

     Merit Medical Systems, Inc.

     FARO Technologies, Inc

     Natus Medical Incorporated

 

     OSI Systems, Inc.

 

 

 

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Korn Ferry also provided compensation data from market survey results published by third parties regarding companies outside of the peer group, for use as a general indicator of relevant market conditions and pay practices and as a broader reference point.

Outside of survey and peer group information, other important factors that drive compensation decisions include individual qualifications and expertise, responsibilities, particular industry and market conditions, complexity of position and specific market factors in the locations in which the NEOs are employed. The Compensation Committee also considers the performance of the Company’s NEOs, the individual’s historical compensation and any retention concerns, and the CEO’s recommendations (in the case of named executive officers other than the CEO) before determining the compensation arrangement for each of them.

Shareholder Say-On-Pay Vote

At the 2020 annual meeting of shareholders, the Company provided the shareholders with the opportunity to cast an annual advisory vote to approve the Company’s executive compensation. Over 99% of the votes cast on the “2020 say-on-pay vote” were voted in favor of the proposal. We have considered the 2020 say-on-pay vote and we believe that the overwhelming support of our shareholders for 2020 say-on-pay vote indicates that our shareholders are generally supportive of our approach to executive compensation. The Company considered the outcome of the say-on-pay votes when making compensation decisions regarding its named executive officers for 2021,and plans to continue to consider input from shareholders in future years. The following chart presents the voting results for the say-on-pay for the last three years:


Executive Compensation Program Elements

Executive compensation at the Company includes base salary, short-term cash incentives, long-term equity-based incentives, employee benefits and, in certain situations, severance and other compensation. These elements (and the amounts of compensation and benefits thereunder) were selected because the Compensation Committee believes they are necessary to help us attract and retain executive talent which is fundamental to our success. The elements of compensation may vary among executives based on the Compensation Committee’s

 

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determination as to what is appropriate under the policies set forth above. Below is a summary of the current executive compensation programs as they relate to our named executive officers.

 

Base Salary

Base salary levels for the named executive officers are generally determined based on the Compensation Committee’s evaluation of the named executive officer’s position, experience, qualifications, prior employment (including historical compensation), current and individual performance, industry knowledge, quality of leadership, scope of responsibilities (including potential growth in responsibilities), internal pay equity, tax deductibility, cost of living, and competitive external market data (which includes peer group information as described above). No specific weighting is applied to the factors. Generally, the Compensation Committee refers to the median of the relevant competitive market for the position as part of the base salary evaluation, but any individual named executive officer may have a base salary above or below the median of the market. The Compensation Committee’s philosophy is that base salaries are the minimum payment for satisfactory performance and should meet the objective of attracting and retaining the executive talent needed to run a complex business.

As part of a company-wide cost reduction initiative in response to economic uncertainties caused by the COVID-19 pandemic, the NEOs agreed to the deferral, until January 1, 2021, of base salary increases previously approved by the Compensation Committee and a temporary unpaid furlough for two weeks in 2020. The annual base salaries for each of our named executive officers remained unchanged from 2019 (effective date March 31, 2019) through December 31, 2020 and are listed below:

 

 

2019

 

2020

 

Mr. Glastra

$

650,004

 

$

650,004

 

Mr. Buckley

$

434,655

 

$

434,655

 

Mr. Young

$

291,596

 

$

291,596

 


Short Term Cash Incentives

The Senior Management Incentive Plan (“SMIP”) included cash incentives that were designed to motivate and reward the Company’s key management team members for driving short-term performance within their respective organizations and across the Company. In February 2020, the Compensation Committee approved the performance metrics for the 2020 cash incentives under the SMIP based on achievement against Adjusted EBITDA, Organic Revenue Growth, and NWC Ratio targets (the “Financial Objectives”). As part of a company-wide cost reduction initiative in response to economic uncertainties caused by the COVID-19 pandemic, the Compensation Committee determined, and our NEOs agreed, to cancel the cash incentive compensation under the SMIP for all participants with respect to fiscal year 2020. Although the target amounts of such cash incentives under the SMIP plan were granted in the form of a special restricted stock unit grant to all other participants as a talent retention incentive, our NEOs agreed to not receive such special restricted stock unit grants.  

 

Following the end of fiscal year 2020, the Compensation Committee determined to pay the NEOs a discretionary bonus in recognition of their extraordinary efforts during the COVID-19 pandemic, which amounts are set forth below in the column titled “Bonus” in the Summary Compensation Table.

Each of the NEOs had an established bonus incentive target, which is based on a percentage of current annual base salary. Pursuant to the SMIP, the target bonus would be payable upon 100% achievement of each of the

 

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applicable Financial Objectives. The table below summarizes what the cash incentive bonus would have been for each NEO under the SMIP, including the annual target as a percentage of base salary and the annual bonus target in dollars.

 

 

Cash Incentive

Annual Target (% of base salary)

 

Cash Incentive

Annual Target

 

Cash Incentive

Minimum Payout ($)

 

Cash Incentive

Maximum Payout

 

Mr. Glastra

120%

 

$

799,505

 

 

 

$

1,599,010