ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
Set forth below are descriptions of the backgrounds of the directors of the Company, their principal occupations for the past five years, and the specific experience, qualifications and other attributes and skills that led the Board to determine that such persons should serve on the Board of Directors.
John Atkin, 69, has served on our Board since September 2022. Mr. Atkin served as Chief Operating Officer of Syngenta AG, a global leader in technology for agriculture and horticulture, from February 2011 until his retirement in December 2014, and prior to that had served as Chief Operating Officer of Syngenta Crop Protection since 2000. Mr. Atkin currently serves as Chairman of AgBiTech, an agricultural technology company, and as a member of the board of directors of Driscoll’s, a global fresh produce company. He also serves as non-executive board member of the Syngenta Foundation for Sustainable Agriculture and of 5Metis, a venture capital funded company innovating in crop protection chemicals, and as a member of the Paine Schwartz Partners Food Chain Advisory Board. Mr. Atkin graduated from the University of Newcastle upon Tyne with a PhD and a BSc degree in Agricultural Zoology.
The Board believes that Mr. Atkin is qualified to serve on our Board because of his substantial operational experience in the agricultural industry.
Robert J. Campbell, 74, has served on our Board since February 2014. Since November 2011, Mr. Campbell has served as the Chairman of the board of directors of Enstar Group Limited, an insurance run-off company, and has served as its independent director since November 2007. Mr. Campbell served as an independent director of Camden National Corporation, a public holding company, from 1999 to 2014. Mr. Campbell also served as a director of Boulevard Acquisition Corp. II, a publicly-traded special purpose acquisition company, from September 2015 until the consummation of its business combination with Estre Ambiental S.A. in December 2017. Since January 1991, Mr. Campbell has served as a partner at Beck, Mack & Oliver LLC, a private investment advisory firm. Mr. Campbell holds a Bachelor of Arts degree in Political Economy from Williams College.
The Board believes that Mr. Campbell is qualified to serve on our Board because of his private investment advisory experience and his board experience with private and public companies.
Alexander Corbacho, 34, has served on our Board since July 2020. Mr. Corbacho is a Managing Director at Paine Schwartz Partners. Mr. Corbacho joined Paine Schwartz Partners in 2012. He began his career at UBS Investment Bank in the firm’s Leveraged Finance Origination Group. While there, he worked to provide debt financing, capital structure solutions, and advisory services for a variety of companies and financial sponsors, including Paine Schwartz Partners. He currently serves as a director of the following private companies: SNFL Group, Verdesian Life Sciences, LLC, and Verisem. He is a graduate of Boston University.
The Board believes that Mr. Corbacho is qualified to serve on our Board because of his substantial investment and finance experience, particularly in the agricultural industry.
Denise L. Devine, 67, joined our Board in February 2018. Ms. Devine is the founder and since 2014 has served as the Chief Executive Officer of FNB Holdings, LLC, a company dedicated to initiatives in the health and wellness space. Ms. Devine was also founder and served for more than ten years as the Chief Executive Officer of Nutripharm, Inc., a company that has generated a portfolio of composition and process patents to create innovative natural food, beverage, pharmaceutical and nutraceutical products that facilitate nutrition and lifelong health. Ms. Devine, a certified public accountant, also previously served as Chief Financial Officer for Energy Solutions International and in financial management positions for Campbell Soup Company. Ms. Devine has served as Chair of the Pennsylvania State Board of Accountancy and on the Board of the American Institute of CPAs. Ms. Devine has served as a director of Fulton Bank since 2019 and Fulton Financial Corporation (Nasdaq: FULT) (“Fulton”) since 2012, and serves as a member and financial expert of Fulton’s Audit Committee and Vice Chair of Fulton’s Human Resources Committee. She has also served as a director of SelectQuote (NYSE: SLQT) since 2020, and from 2019 to 2021 she served as a director of Cubic Corporation (NYSE: CUB). Ms. Devine was a member of the Board of Trustees of Villanova University from 2005 to 2015, where she was the Chair of the Audit and Risk Committee. She has served on the Board of Ben Franklin Technology Partners of Southeastern Pennsylvania since 2016 and was appointed to the Board of Ben Franklin Technology Development Authority in 2018. Ms. Devine received a Master of Business Administration degree from
the Wharton School of the University of Pennsylvania, a Master of Science degree in Taxation from Villanova Law School, and a Bachelor of Science degree in Accounting from Villanova University.
The Board believes that Ms. Devine is qualified to serve on our Board because of her substantial management, business and finance experience.
Nance K. Dicciani, 75, joined our Board upon the consummation of our business combination with The Dow Chemical Company (“TDCC”) on July 31, 2015 (the “Business Combination”). She was appointed non-executive Chair of the Board on August 13, 2015. From March 2016 until October 2016, Ms. Dicciani served as a co-member of the Office of the Chair of the Company, in which capacity she assumed, with the other co-member, the duties and responsibilities of chief executive officer and president of the Company on an interim basis. Ms. Dicciani is the retired President and Chief Executive Officer of Honeywell International Specialty Materials (a diversified technology and manufacturing company), a position she held from 2001 to 2008. Ms. Dicciani has also served as a director of LyondellBasell Industries N.V. since 2013, where she is a member of the Finance Committee and Chair of the Compensation Committee. Ms. Dicciani also served as a director of Linde plc. from its business combination with Praxair, Inc. in 2018 until May 2022, and as a director of Halliburton Company from 2009 until May 2021. Additionally, Ms. Dicciani served as a director of Rockwood Holdings, Inc. from 2008 to 2014. Ms. Dicciani holds a Bachelor’s degree in Chemical Engineering from Villanova University, a Master’s degree from the University of Virginia, a Ph.D. degree from the University of Pennsylvania and a Master of Business Administration degree from the Wharton Business School of the University of Pennsylvania.
The Board believes that Ms. Dicciani is qualified to serve on our Board due to her technical expertise in the chemical industry, her international operations expertise, her executive experience as a chief executive officer of a multi-billion dollar strategic business group of a major multinational corporation and her board experience with private and public companies.
Kay Kuenker, 61, has served on our Board since April 2021. Ms. Kuenker has served as Chief Executive Officer of Advanced Agrilytics, LLC, an agronomic technology company, since March 2020. From October 2016 to March 2019, Ms. Kuenker served as Executive Vice President – Strategy Development for Cibus, LLC, a biotech company focused on gene editing in agriculture, and since January 2016 she has been a facilitator and coach at Leadership Trail, a business management and leadership consulting organization that she founded. From January 2016 to August 2016 she was Entrepreneur in Residence at Purdue University. Prior to that, she spent nearly 30 years at Dow AgroSciences (“DAS”), including nine years on the Corporate Management Team, from January 2007 to December 2015, and most recently served as Vice President: DAS Government Affairs, Public Affairs and Sustainability. Ms. Kuenker currently serves on the Advisory Board for Women in Agribusiness and has served on several boards including BioCrossRoads, AgriNovus IN, National FFA Sponsor Board, Food & Ag Governing Body of BIO (Biotechnology Innovation Organization), CropLife Canada and European Crop Protection Association. Ms. Kuenker holds a Bachelor of Science degree in Mathematics from the University of Michigan and a Master’s degree in Mathematics from Central Michigan University.
The Board believes that Ms. Kuenker is qualified to serve on the Board due to her extensive management experience in the agricultural industry.
Clinton A. Lewis, Jr., 56, has served as our Chief Executive Officer and a member of our Board since April 2021. Mr. Lewis has 30-plus years of experience in the life sciences space, having served in a number of national and international leadership roles at Pfizer Inc. (NYSE: PFE) and Zoetis Inc. (NYSE: ZTS), the world’s largest animal health company, that was spun off by Pfizer in 2013. Mr. Lewis most recently served as executive vice president and group president responsible for international operations, commercial development and global genetics at Zoetis. Prior to that role, Mr. Lewis served at Zoetis as president of international operations from 2015 to 2018 and as president of U.S. operations from 2013 to 2015. Prior to the formation of Zoetis, Mr. Lewis served as president of U.S. operations at Pfizer Animal Health, which he joined in 2007. Mr. Lewis first joined Pfizer in 1988 in the human health pharmaceutical segment and held positions of increasing responsibility in various commercial operations and general management roles. He formerly served as chairman of the board for the Animal Health Institute (AHI), an industry trade association in the U.S., and as treasurer for the International Federation for Animal Health (IFAH), the industry trade association in Europe. Mr. Lewis serves on the boards of directors of The International Paper Company (NYSE: IP), United Veterinary Care, a veterinary clinic company, Targan, a livestock automation company, and Covis Pharma, a human health specialty pharmaceutical company. Mr. Lewis holds a Bachelor of Science degree from Fairfield University and a Master of Business Administration degree from Fairleigh Dickinson University.
The Board believes that Mr. Lewis’ extensive experience in senior executive roles within the life sciences industry qualifies him to serve on the Board.
Kevin Schwartz, 48, has served on our Board since July 2020. Mr. Schwartz is Chief Executive Officer and a Founding Partner at Paine Schwartz Partners. Prior to co-founding Paine Schwartz Partners in 2006, Mr. Schwartz was a Managing Director at Fox Paine & Company, LLC, which he joined in 2002. Prior to joining Fox Paine & Company, LLC, he worked for the private equity firms Fremont Partners and American Industrial Partners. He began his professional career at Goldman, Sachs & Co. in the Investment Banking Division. He is currently a director of the following private companies: Advanced Agrilytics, Hendrix Genetics, Lyons Magnus, SNFL Group, Suja Life and UrbanFarmer LLC. He also previously served as a director of the following private companies: AgBiTech, Costa Group Holdings Pty Ltd., FoodChain ID, Prima Wawona, Sunrise Growers, Verisem, Verdesian Life Sciences, LLC, Advanta, Icicle Seafoods, Inc., Seminis, VCST Industrial Products and United American Energy. Mr. Schwartz holds a Bachelor of Science degree in Accountancy from the University of Illinois.
The Board believes that Mr. Schwartz is qualified to serve on our Board due to his extensive investment experience in the agricultural industry, as well as his experience serving on boards of directors.
David McInerney, 54, joined the Board on August 4, 2022. Until 2021, Mr. McInerney was the co-founder, Chief Executive Officer and a board member of FreshDirect, a leading online grocer. Mr. McInerney joined the founding team at FreshDirect in 2000 where he held various positions throughout his career, including Chief Merchandising Officer, Chief Operations Officer and Chief Food Adventurer, before being named Chief Executive Officer in 2018. He currently serves on the board of directors for the New York Common Pantry, and on the board of advisors of Lekka Burger, a plant-based burger restaurant. Mr. McInerney started his career as a chef alongside top restaurateurs. He attended the Culinary Institute of America. The Board believes that Mr. McInerney is qualified to serve on the Board due to his substantial expertise in the food industry, including the food retailing and restaurant industries.
The Board believes that Mr. McInerney is qualified to serve on the Board due to his substantial expertise in the food industry, including the food retailing and restaurant industries.
Each of Mr. Atkin, Mr. Corbacho, Ms. Kuenker and Mr. Schwartz was appointed to the Board pursuant to the terms of the Investment Agreement, dated June 13, 2020 (as may be amended or modified, the “Investment Agreement”), between the Company and PSP.
In addition to the directors listed above, pursuant to the terms of the certificate of designation of the one share of our Series A preferred stock (the “Series A Preferred Stock”) that was issued to TDCC, which is now a subsidiary of Dow Inc. (“Dow”), upon the consummation of the Business Combination, TDCC is entitled to appoint one director (the “Preferred Director”) to the Board for so long as TDCC beneficially holds 10% or more of the aggregate amount of the outstanding shares of our common stock and non-voting common stock. The Series A Preferred Stock does not have any other rights.
Peter Sykes, 62, joined the Board in June 2022. Mr. Sykes is the principal of Church Lane Advisory LLC, a corporate advisory and strategic investing company he founded in October 2021. In July 2021, Mr. Sykes retired from Dow, after a 40-year career during which he held various leadership roles. For the first 13 years of his career, Mr. Sykes completed multiple assignments in International Finance and Treasury Management across Europe and Asia. For the following 16 years, Sykes led several regional and global Dow businesses. His final role at Dow was Vice President of Mergers and Acquisitions, based at the company’s global headquarters, in Midland, Michigan from 2015 to 2021, during which time Dow completed its Merger with DuPont and subsequent spin-off. Mr. Sykes has previously served on the boards of several large joint venture companies. He is a recipient of the Magnolia Commemorative Award from the Shanghai Government for contribution to foreign relations, and served two terms on the Board of Governors of The American Chamber of Commerce in Shanghai. He was a member of the Conference Board’s Executive M&A Council from 2016 to 2021. Mr. Sykes holds a National Certificate in Business Studies from the Institute of Bankers U.K., a certification in financial post-graduate studies from Stanford University Graduate School of Business and was granted Alumnus of the University of Michigan Business School status following completion of their Executive Program.
Executive Officers
Our current executive officers are listed in the following table, and certain information concerning those officers follows the table.
| | | | | | | | | | | |
| Name | Age | Position |
| Clinton A. Lewis | 56 | Chief Executive Officer |
| Graham Miao | 58 | Executive Vice President and Chief Financial Officer |
| Thomas Ermi | 58 | Executive Vice President, Secretary and General Counsel |
The biographical information with respect to Mr. Lewis included above under the caption “Directors” is incorporated herein by reference.
Graham Miao has served as our Executive Vice President and Chief Financial Officer since August 2018. Mr. Miao has over two decades of experience in global financial and business operations, capital markets, M&A and business development, and R&D for large multi-national and small to mid-market public and private companies in the healthcare, specialty chemicals and financial services industries. Mr. Miao served as President and Chief Financial Officer of Pernix Therapeutics Holdings, Inc. from July 2016 through December 2017, and served as a member of its board of directors from November 2016 to November 2017. Prior to that, Mr. Miao served as a senior advisor to Pernix’s interim Chief Executive Officer and board of directors from May 2016 to July 2016. Before joining Pernix, Mr. Miao served as Executive Vice President and Chief Financial Officer of Interpace Diagnostics, Inc. (formerly known as PDI, Inc.), from October 2014 until March 2016. From September 2011 to September 2014, Mr. Miao served as Executive Vice President and Chief Financial Officer, and held the additional role as interim Co-President and interim Co-Chief Executive Officer from September 2013 to September 2014, of Delcath Systems, Inc. His career spanned financial, strategy and operational leadership positions including division CFO roles at Symrise, Schering-Plough and Pharmacia. Earlier in his career, Mr. Miao worked as a biotechnology equity analyst at JPMorgan and a research scientist at Roche. Mr. Miao earned an M.B.A. in Finance and General Management and a Ph.D. in Biological Sciences from Columbia University, an M.S. in Molecular Biology from Arizona State University, and a B.S. in Biology from Fudan University in Shanghai, China.
Thomas Ermi has served as our Executive Vice President, Secretary and General Counsel since July 2015. From 2009 until joining the Company, Mr. Ermi was a Managing Attorney in the Dow Legal Department, where he served as the Commercial Legal Director and member of the Management Team for Dow’s $2.2 billion global Electronic Materials Business. Mr. Ermi joined Rohm and Haas Company in 2000, serving as the Commercial Legal Director and member of the Management Team for the Electronic Materials business as well as the Powder Coatings and Automotive Coatings businesses. In the 15 years he was with Dow and Rohm and Haas, Mr. Ermi negotiated numerous M&A transactions in North America, Europe and Asia Pacific with an aggregate transaction value exceeding $4 billion. Mr. Ermi began his legal career in 1992 as an Associate at Duane Morris & Heckscher in Philadelphia, where he worked first as a commercial litigator and then as a commercial lawyer. Prior to that, Mr. Ermi was an auditor for Price Waterhouse in Philadelphia. Mr. Ermi holds a Bachelor of Science degree in Accounting from Villanova University, and a juris doctor degree from the University of Pennsylvania.
Corporate Governance Overview
Our Board is committed to maintaining strong corporate governance principles and practices. Our governance structure and processes are based upon a number of key governance documents, including our Corporate Governance Guidelines and policies described below. These Guidelines guide the Board and our executive management team in the execution of their responsibilities. Our Corporate Governance Guidelines are reviewed at least annually and are updated periodically in response to changing regulatory requirements, evolving practices, issues raised by our stockholders and other stakeholders and otherwise as circumstances warrant. As a result of this active engagement the Company and our Board embrace the following good-governance practices:
Board and Board Committee Practices
•Our Board is declassified, and the Company’s Bylaws require a majority voting standard for the election of directors;
•We have a director resignation policy for directors who fail to obtain a majority vote;
•Nine of our ten directors are currently independent, including the Chair of the Board;
•The role of Chair of the Board is a non-executive position, and the roles of Chair of the Board and Chief Executive Officer are split;
•The Audit, Compensation and Talent and Corporate Governance and Nominating Committees are comprised solely of independent directors;
•The Board and each of its Committees have authority to retain outside advisors;
•The Compensation and Talent Committee’s outside advisor does not perform any other services for the Company and confirms its independence annually;
•There are no interlocks among the Compensation and Talent Committee members; and
•The Board and each of its Committees perform annual self-assessments.
Company Policies and Practices
•The Company does not have a stockholder rights plan (a so-called “poison pill”);
•The Company has adopted a code of business conduct (the “Code of Conduct”), and every employee of the Company and member of our Board must annually submit a certificate attesting to (i) such individual’s compliance with the Code of Conduct and (ii) such individual’s knowledge of compliance with the Code of Conduct by other employees;
•The Company has adopted a whistleblower policy that encourages reporting by employees of any allegations of impropriety, and the Company has set up a third party hosted hotline where employees can anonymously make such reports;
•The Board has imposed stock ownership guidelines for directors and officers (discussed below);
•The Company has an executive “clawback” policy pursuant to which the Company may seek to reclaim previously awarded incentive-based compensation from executives if the Company determines it must prepare a material accounting restatement due to fraud, misconduct or gross negligence, as discussed below; and
•The Company has adopted an insider trading policy that restricts short selling, trading in derivatives, pledges, hedges and margin account use by our executives and directors.
Board Leadership Structure and Role in Risk Oversight
The roles of Chair of the Board and Chief Executive Officer are held by separate persons. Generally, the Chair of the Board is responsible for assisting in long-term strategic planning, overseeing and advising the Chief Executive Officer and presiding over meetings of the Board, and the Chief Executive Officer is responsible for leading our day-to-day performance. While we do not have a policy with respect to the separation of the roles of Chair of the Board and Chief Executive Officer, the Board believes that the separation of these roles provides several important advantages, including enhancing the accountability of the Chief Executive Officer to the Board, assisting the Board in reaching consensus on particular strategies and policies, and facilitating robust director, Board, and executive officer evaluation processes.
Our Board, as part of its overall responsibility to oversee the management of our business, considers risks generally when reviewing our strategic plan, financial results, business development activities, legal, and regulatory matters. The Board satisfies this responsibility through regular reports directly from our officers responsible for oversight of particular risks. The Board’s risk management oversight also includes full and open communications with management to review the adequacy and functionality of the risk management processes used by management. The Board’s role in risk oversight has no effect on the Board’s leadership structure. In addition, committees of the Board assist in its risk oversight responsibility, including:
•The Audit Committee assists the Board in its oversight of the integrity of the financial reporting and our compliance with applicable legal and regulatory requirements. It also oversees our internal controls and compliance activities, and meets privately with representatives from our independent registered public accounting firm.
•The Compensation and Talent Committee assists the Board in its oversight of risk relating to compensation policies and practices. The Compensation and Talent Committee annually reviews our compensation policies, programs, and procedures, including the incentives they create and mitigating factors that may reduce the likelihood of excessive risk taking, to determine whether they present a significant risk to our Company.
•The Corporate Governance and Nominating Committee, in addition to recommending individuals to be designated as nominees to the Board, develops and recommends to the Board our corporate governance guidelines.
Board Structure and Committee Membership
The following chart summarizes our current standing committee structure: | | | | | | | | | | | | | | |
|
Name |
Audit Committee | Compensation and Talent Committee | Corporate Governance and Nominating Committee |
| John Atkin | X | X | |
| Robert J. Campbell | X* | | X |
| Alexander Corbacho | | | X |
| Denise L. Devine | X | X* | |
| Nance K. Dicciani | | | |
| Peter Sykes | | X | X* |
| Kay Kuenker | X | | X |
| Kevin Schwartz | | | |
| David McInerney | X | X | |
| Clinton A. Lewis, Jr. | | | |
* Chair of applicable committee.
Audit Committee
Our Audit Committee consists of Mr. Atkin, Mr. Campbell, Ms. Devine, Ms. Kuenker and Mr. McInerney. Each is an independent director and, as required by the NASDAQ Stock Market listing standards and the rules and regulations of the SEC and the Internal Revenue Service, has not participated in the preparation of our financial statements at any time during the past three years and is able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement. In addition, we must certify to NASDAQ that the Audit Committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in such member’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. Our Board has determined that Mr. Campbell satisfies the definition of financial sophistication and also qualifies as an “audit committee financial expert,” as defined under rules and regulations of the SEC. The Audit Committee operates under a written charter adopted by the Board, a copy of which is available on the investor relations section of the Company’s website, www.agrofresh.com.
The Audit Committee’s duties include, among other things:
•reviewing and discussing with management and the independent registered public accountant our annual and quarterly financial statements;
•discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements;
•discussing with management major risk assessment and risk management policies;
•monitoring the independence of the independent auditor;
•verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law;
•reviewing and approving all transactions between us and related persons;
•inquiring and discussing with management our compliance with applicable laws and regulations and our code of ethics;
•pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed;
•appointing or replacing the independent auditor;
•determining the compensation and oversight of the work of the independent auditor including resolution of disagreements between management and the independent auditor regarding financial reporting for the purpose of preparing or issuing an audit report or related work;
•overseeing the internal audit function; and
•establishing procedures for the receipt, retention, and treatment of complaints received by us regarding accounting, internal accounting controls, or reports which raise material issues regarding our financial statements or accounting policies.
Code of Business Conduct
We have adopted a Code of Conduct applicable to the directors, officers and employees of the Company and its subsidiaries. We have also adopted corporate governance guidelines which address, among other things, director qualifications, responsibilities and compensation, director access to officers, employees and advisors, and determinations regarding executive officer compensation. A copy of the Code of Conduct and our corporate governance guidelines are both available in the Investor Relations section of our website, www.agrofresh.com.
Communicating with the Board
Our stockholders may send written communications directly to the Board of Directors or to specified individual directors, including the Chair of the Board or any non-management directors, by sending such communications to our corporate headquarters. Such communications will be reviewed by our legal counsel and, depending on the content, will be:
•forwarded to the addressee or distributed to the addressee at the next scheduled Board meeting;
•if they relate to financial or accounting matters, forwarded to the Audit Committee or distributed at the next scheduled Audit Committee meeting;
•if they relate to executive officer compensation matters, forwarded to the Compensation and Talent Committee or distributed at the next scheduled Compensation and Talent Committee meeting;
•if they relate to the recommendation of the nomination of an individual to our Board of Directors, forwarded to the Corporate Governance and Nominating Committee or distributed at the next scheduled Corporate Governance and Nominating Committee meeting; or
•if they relate to our operations, forwarded to the appropriate officers of our Company, and the response or other handling of such communications reported to the Board of Directors at the next scheduled Board meeting.
ITEM 11. EXECUTIVE COMPENSATION
Executive Summary
Our Performance in Fiscal 2022
Executive compensation in 2022, as in prior years, was largely tied to the overall financial performance of the Company. During 2022, the Company continued to execute on its business strategies of (i) leveraging its global footprint and service offerings to stabilize pricing and gross margins for its SmartFresh franchise, (ii) growing organically through the introduction of new products and services, and (iii) diversifying into new crops and geographic markets. The Company achieved the following key accomplishments in 2022:
•Net sales of approximately $161.9 million and Adjusted EBITDA1 of approximately $56.5 million
1 Adjusted EBITDA is a non-GAAP financial measure. Please see the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Measures” in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for more information, including a reconciliation of this Non-GAAP financial measure to GAAP results.
•A 7.9% increase in diversification revenue (i.e., excluding sales of SmartFresh for apples) for the full year 2022 compared to 2021;
Linkage of 2022 Performance to 2022 Compensation Outcomes
For 2022, AgroFresh bonus payouts for its named executive officers (as defined below) were 25.5% of target based on our financial performance for the year and non-financial considerations. The Compensation and Talent Committee felt that payouts were commensurate with achievements of the Company and the performance goals set at the beginning of the year, taking into account factors such as the COVID-19 global pandemic and the unprecedented impacts of foreign exchange translations. Awards based on total shareholder return and debt leverage ratio that had a performance period ending in 2022 were earned at a level of 128.25% of target, based on the applicable metrics, including a modifier based on the Company’s total shareholder return during the 3-year period ending in 2022, relative to its peer group.
Executive Compensation Objectives
AgroFresh is committed to providing a fair and market competitive executive compensation program that will attract, retain and reward high-performing employees. Our compensation package is tied to the contributions of the individual, the achievement of organizational goals, and the attainment of long-term financial results. Below are the objectives of our program:
•Attract, retain, and motivate superior executive talent;
•Provide incentives that reward the achievement of performance goals that directly correlate to the enhancement of shareholder value, as well as facilitate executive retention;
•Reinforce AgroFresh’s mission of recruiting and retaining a highly motivated workforce to support the overall growth and performance of the Company; and
•Utilize transparent communication to provide employees with information necessary to make informed choices and to better understand the total rewards package.
Good Governance Practices
The Compensation and Talent Committee continuously evaluates policies and practices to ensure that they are consistent with good governance principles. Below are highlights of our governance practices:
| | | | | | | | | | | | | | |
| What We Do | | | What We Don’t Do |
| | | | |
| ✓ | Provide the majority of compensation in performance-based pay | | x | Excise tax gross-ups on a change in control |
| | | | |
| ✓ | Maintain stock ownership guidelines for directors and executives | | x | Liberal change in control definition, or excessive severance in a change in control or termination |
| | | | |
| ✓ | Cap incentive plan at 2x target for bonus and LTI, with no payouts below threshold | | x | Excessive perquisites |
| | | | |
| ✓ | Maintain a clawback policy | | x | Permit hedging transactions or pledging securities |
| | | | |
| ✓ | Have change in control employment agreements with double-trigger severance provisions | | x | Liberal share counting |
| | | | |
| ✓ | Adhere to an insider trading policy | | x | Discounted stock options or SARs |
| | | | |
| ✓ | Use an independent compensation consultant engaged by and reporting directly to the Compensation and Talent Committee | | x | Stock option repricing, reloads, or cash buyouts |
| | | | |
| ✓ | Reflect multi-dimensional performance using earnings, sales, non-financial and market performance with a mix of relative and absolute goals | | | |
Executive Officer Compensation
The following provides, under the scaled reporting rules applicable to smaller reporting companies, an overview of our compensation policies and programs and identifies the elements of compensation for 2022 with respect to our “named executive officers,” which term is defined by Item 402 of the SEC’s Regulation S-K to include (i) all individuals serving as our principal executive officer at any time during 2022, (ii) our two most highly compensated executive officers other than the principal executive officer who were serving as executive officers at December 31, 2022 and whose total compensation (excluding nonqualified deferred compensation earnings) exceeded $100,000, and (iii) up to two additional individuals for whom disclosure would have been provided pursuant to the foregoing item (ii) but for the fact that the individual was not serving as an executive officer of the Company at December 31, 2022. Our named executive officers for 2022 were Clinton A. Lewis, who has served as our Chief Executive officer since April 2021, Graham Miao, our Executive Vice President and Chief Financial Officer, and Thomas Ermi, our Executive Vice President and General Counsel.
Summary Compensation Table
The following table sets forth the total compensation earned by each of our named executive officers in 2022 and 2021.
| | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Positions |
Year |
Salary | |
Stock Awards(1) |
Option Awards(1) | Non-Equity Incentive Plan Compensation |
All Other Compensation(2) |
Total |
Clinton Lewis | 2022 | $614,890 | | $1,544,999 | $— | $141,831 | $25,592 | $2,327,312 |
Chief Executive Officer(3) | 2021 | $428,054 | | $2,209,118 | $750,270 | $510,000 | $22,292 | $3,919,734 |
Graham Miao | 2022 | $489,534 | | $737,591 | $— | $78,996 | $25,362 | $1,331,483 |
Exec. V.P. and Chief Financial Officer | 2021 | $478,953 | | $696,588 | $— | $312,462 | $20,036 | $1,508,039 |
Thomas Ermi | 2022 | $374,309 | | $262,922 | $— | $47,890 | $20,354 | $705,475 |
Executive Vice President and General Counsel | 2021 | $366,213 | | $248,309 | $— | $170,481 | $13,351 | $798,354 |
| | | | | | | | |
| | | | | | | | |
(1) Amounts shown do not reflect compensation actually received by the named executive officers. Instead, the amounts shown in these columns represent the full grant date fair value of the restricted stock, performance-based restricted stock or option awards, as applicable, calculated in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. These amounts also include the incremental fair value, computed in accordance with FASB ASC 718 and SEC rules, of the December 2022 modifications to certain outstanding equity awards (see “—Modifications to Equity Awards” below). These amounts reflect the accounting expense that we will recognize over the vesting term for the award and does not correspond to the actual value that will be realized by the executive, if any. For a discussion of valuation assumptions and methodologies, see Note 16 of our audited financial statements included in our annual report on Form 10-K for the year ended December 31, 2022. Amounts shown for stock awards includes the full grant date fair value of performance-based restricted stock awards made in 2022 assuming the target level of performance conditions are achieved, equal to $1,544,999, $737,591 and $262,922 for Messrs. Lewis, Miao and Ermi, respectively. Assuming the highest level of performance conditions are achieved, the grant date fair values for performance-based restricted stock awards made in 2022 would be $3,089,999, $1,475,183 and $525,843 for Messrs. Lewis, Miao and Ermi, respectively.
(2) Amounts reported for 2022 represent the Company’s contributions to the named executive officers’ accounts in our 401(k) plan ($18,300 for Mr. Lewis, $18,300 for Mr. Miao and $18,300 for Mr. Ermi) and financial planning assistance ($7,292 for Mr. Lewis, $7,062 for Mr. Miao and $2,054 for Mr. Ermi). Amounts reported for 2021 represent the Company’s contributions to the named executive officers’ accounts in our 401(k) plan ($15,323 for Mr. Lewis, $17,400 for Mr. Miao and $11,228 for Mr. Ermi) and financial planning assistance ($6,969 for Mr. Lewis, $2,636 for Mr. Miao and $2,123 for Mr. Ermi).
(3) Mr. Lewis has served as our Chief Executive Officer since April 12, 2021.
Compensation Mix
Our compensation program is heavily weighted towards performance-based and shareholder aligned compensation, reflecting our philosophy of increasing our long-term value and supporting strategic initiatives. The charts below show the total target compensation mix of our CEO and our other named executive officers. These charts illustrate that a majority of named executive officers’ total target compensation is at risk, reflecting all elements except base salary (78% for our CEO and an average of 64% for our other named executive officers).
Narrative Disclosure to Summary Compensation Table
Our Compensation and Talent Committee determines, or recommends to the full Board of Directors for determination, the salaries and other compensation of our executive officers (including the named executive officers listed in the Summary Compensation Table above) and makes grants under, and administers, the 2015 Plan. The employment agreements and offer letters we have entered into with our named executive officers, discussed below, set forth minimum levels of annual base salary and annual incentive compensation. During the year ended December 31, 2022, the Compensation and Talent Committee engaged the firm of Meridian Compensation Partners, LLC (“Meridian”) to serve as compensation consultant to review our executive compensation program design and assess our executives’ compensation relative to a “peer group” of comparable companies. For purposes of our 2022 compensation decisions, our Compensation and Talent Committee used the peer group listed below, which was approved following a review that included input from Meridian, to assist with the determination of compensation for our executive officers. AgroFresh selected the peer group based on a focus on specialty chemicals (and related industries) companies with similar size (revenues < $1B) and/or business focus as AgroFresh.
| | | | | | | | |
Company | 2021 Revenue ($M) | GICS Sub-Industry |
Hawkins, Inc. | $715 | Commodity Chemicals |
American Vanguard Corporation | $539 | Fertilizers and Agricultural Chemicals |
CVR Partners, LP | $533 | Fertilizers and Agricultural Chemicals |
LSB Industries, Inc. | $455 | Diversified Chemicals |
Amyris, Inc. | $357 | Specialty Chemicals |
Oil-Dri Corporation of America | $311 | Household Products |
Chase Corporation | $301 | Specialty Chemicals |
FutureFuel Corp. | $264 | Specialty Chemicals |
Trecora Resources | $256 | Commodity Chemicals |
Intrepid Potash, Inc. | $199 | Fertilizers and Agricultural Chemicals |
Limoneira Company | $166 | Agricultural Products |
Alico, Inc. | $110 | Agricultural Products |
Advanced Emissions Solutions | $88 | Specialty Chemicals |
| Northern Technologies International | $62 | Specialty Chemicals |
| Danimer Scientific, Inc. | $53 | Specialty Chemicals |
Flotek Industries, Inc. | $43 | Specialty Chemicals |
| Marrone Bio Innovations, Inc. | $41 | Fertilizers and Agricultural Chemicals |
Total compensation for our named executive officers primarily consist of the following elements:
| | | | | | | | | | | |
| Element | 2022 Design / Context | Objectives |
| Base Salary | •Increase of 3% for continuing named executive officers for 2022 | •Manage fixed costs •Attract a strong, experienced talent pool •Provide a necessary element of financial stability to executives’ total compensation packages •Recognize individual performance, market value of the position and the incumbent’s tenure, experience, responsibilities and overall contribution •Targeted at competitive levels (range of +/- 10% around the 50th percentile) of market, although the Committee may deviate from this targeted philosophy as it sees fit |
| Bonus | •Adjusted EBITDA: 60% •Diversification Sales Growth: 30% •Total Sales Growth: 10% | •Focus executives on key annual business objectives •Recognize individual contribution to annual results •Attract, retain, motivate and reward key talent •Introduce a reliable, transparent approach for all Plan participants •Align the financial interests of senior management with AgroFresh’s shareholders •Offer a competitive range of +/- 15% around the 50th percentile of our peer group for short-term incentive opportunity such that target total cash compensation is competitive when supported by strong performance |
| LTI | •50% performance-based equity (3-year performance period based on growth in cash flow from operations (50%) and revenue (50%)) •50% restricted stock (3-year pro-rata vesting)
| •Align the financial interests of executives with shareholders by focusing executives on key drivers of value creation •Provide line of sight by assessing performance of metrics for which executives have control •Recognize current performance through the LTI target awards, and the expectation of future contributions through the growth of those awards’ value •Provide meaningful awards to support and encourage share ownership •Retain key employees •LTI grants consider the 50th percentile of market; higher/lower individual awards may be based on performance, potential, retention needs and dilution constraints |
In 2022, we paid base salaries of $614,890 to Mr. Lewis, $489,534 to Mr. Miao and $374,309 to Mr. Ermi.
Each year, each of our named executive officers has a target cash incentive payout amount, expressed as a percentage of that executive officer’s base salary, based on the achievement of goals established each year by the Compensation and Talent Committee. For 2022, the target amounts for these cash incentives were 100% for Mr. Lewis, 70% for Mr. Miao and 50% for Mr. Ermi, in each case based on the achievement of performance metrics as described in the table above.
Each year, we grant equity awards to our named executive officers under our 2015 Plan. In 2022, the target award values of these awards were allocated among the following components: 50% of the target value delivered as performance-based equity awards, assuming target level achievement of applicable performance goals, and 50% of the target value delivered as restricted stock awards. The restricted stock awards vest in equal installments on each of the first three anniversaries of the grant date, and the performance-based equity awards cliff vest at the end of the three-year performance period, in an amount equal to a percentage of the target number of shares determined in reference to the extent to which the Company has achieved specified performance goals. The performance criteria for the performance-based equity awards granted in 2022 is based on growth in cash flow from operations (50%) and growth in revenue (50%), over a three full calendar year performance period, starting with the calendar year in which the grant was made.
Modifications to Equity Awards
In connection with the Merger, and to mitigate the potential impact of Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), on the Company and the Named Executive Officers, on December 29, 2022, the Compensation and Talent Committee approved the following actions to mitigate the potential impact of Sections 280G and 4999 of the Code on the Company and the Named Executive Officers:
1.acceleration of the vesting and settlement of the 2020 Company Performance Awards granted to Messrs. Miao and Ermi, which otherwise would have vested on December 31, 2022 and been settled between January 1, 2023 and March 15, 2023, so that such 2020 Company Performance Awards vested and settled in December 2022 at 128.1% of the target level of performance, which for Messrs. Miao and Ermi equates to 276,681 shares of Company common stock and 98,681 shares of Company common stock, respectively. On March 10, 2023, based on a determination by the Compensation and Talent Committee that the 2020 Company Performance Awards were actually achieved at 128.25% of the target level of performance, Messrs. Miao and Ermi were issued the corresponding additional number of shares of the Company common stock provided for in their respective grant agreements;
2.acceleration of the vesting of the outstanding unvested restricted shares of Company common stock granted to Messrs. Miao and Ermi, which otherwise were scheduled to vest on the earlier to occur of their scheduled vesting date on April 14, 2023 and the closing of the Merger, so that such restricted shares of Company common stock vested on December 29, 2022, including 72,036 shares of Company common stock for Mr. Miao and 25,678 shares of Company common stock for Mr. Ermi; provided that if the recipient would have forfeited any of his applicable unvested restricted shares of Company common as a result of the recipient’s termination of employment before the earlier of April 14, 2023 and the closing of the Merger, the recipient must pay to the Company as soon as practical after such termination an amount in cash equal to the fair market value of the number of shares that vested that would not otherwise have vested but for the acceleration; and
3.acceleration of the vesting of the outstanding Company restricted stock units granted to the Named Executive Officers, which were scheduled to vest on the earlier to occur of their scheduled vesting dates in March, April and/or May of 2023, and the closing of the Merger, so that such restricted stock units vested on December 29, 2022, including 374,497 restricted stock units for Mr. Lewis, 121,129 restricted stock units for Mr. Miao and 43,178 restricted stock units for Mr. Ermi provided that if the recipient would have forfeited any of his applicable restricted stock units as a result of the recipient’s termination of employment before the earlier of the applicable scheduled vesting date in 2023 and the closing of the Merger, the recipient must pay to the Company as soon as practical after such termination an amount in cash equal to the fair market value of the number of shares issued in respect of his restricted stock units that would not otherwise have been issued but for the acceleration.
These actions were intended to mitigate the potential impacts of Sections 280G and 4999 of the Code on the Company and the Named Executive Officers, including to preserve potential compensation-related corporate income tax deductions for the Company that might otherwise be disallowed through the operation of Section 280G of the Code and to mitigate or eliminate the amount of excise tax that may be payable by a named executive officer pursuant to Section 4999 of the Code. The Company equity awards that were accelerated would have otherwise vested, if not earlier vested, upon the consummation of the Merger, assuming it is consummated.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information regarding unexercised options and unvested restricted stock awards for each of our named executive officers that were outstanding as of December 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | Stock Awards |
Name | Number of Securities Underlying Unexercised Options – Exercisable | Number of Securities Underlying Unexercised Options - Unexercisable | Option Exercise Price | Option Expiration Date |
Number of shares that have not vested | Market value of shares, units or other rights that have not vested (1) | Equity incentive plan awards: Number of unearned shares that have not vested(2) | Equity incentive plan awards: Market or payout value of unearned shares that have not vested (1) |
Clinton Lewis | - | 363,503(3) | $2.07 | 5/10/2032 | 120,773(4) | $ | 357,488 | | - | - |
| | | | | 117,482(5) | $ | 347,747 | | 264,333 | | $ | 782,426 | |
| - | - | - | - | 272,487(6) | $ | 806,562 | | 306,548 | | $ | 907,381 | |
Graham Miao | 59,435 | -(7) | $6.73 | 8/30/2028 | - | - | - | - |
| 83,250 | | -(8) | $3.34 | 3/28/2029 | 56,086(9) | $ | 166,015 | | 126,194 | | $ | 373,533 | |
| - | - | - | - | 130,087(10) | $ | 385,058 | | 146,348 | | $ | 433,189 | |
Thomas Ermi | 82,500 | -(11) | $12.00 | 8/13/2025 | - | - | - | - |
| 13,150 | -(12) | $4.37 | 3/31/2027 | - | - | - | - |
| 8,900 | -(13) | $7.35 | 3/29/2028 | 19,993(15) | $ | 59,179 | | 44,984 | | $ | 133,151 | |
| 25,450 | | -(14) | $3.34 | 3/28/2029 | 46,371(16) | $ | 137,258 | | 52,167 | | $ | 154,414 | |
(1) The market value of these stock awards is based on the closing price of our Common Stock on the NASDAQ Global Select Market on December 31, 2022, which was $2.96.
(2) The named executive officers received grants of performance share awards under the 2015 Plan in April of 2020, in May of 2021, and in April of 2022. The number of performance shares set forth in this column represents the projected number of performance shares, as of December 31, 2022, that each named executive officer could earn at the end of the three-year performance periods ending December 31, 2023 (for the 2021 grant), and December 31, 2024 (for the 2022 grant) based on actual performance during the elapsed portion of the applicable award period. The number of performance shares actually earned by the named executive officers will be determined based on our performance over the entire three-year award period for each of the grants, and such amount may differ significantly from the amounts shown in this column. See “—Modifications to Equity Awards” above for a description of the acceleration, on December 29, 2022, of the 2020 performance awards granted to Messrs. Miao and Ermi, and subsequent true-ups thereof.
(3) This option vests as to one-third of the shares subject thereto on each of the first three anniversaries of the date of grant (May 10, 2021).
(4) This award vests as to one-third of the 362,319 shares initially subject thereto on each of the first three anniversaries of the date of grant (May 10, 2021). The May 10, 2023 vesting has been accelerated, and was vested as of December 29, 2022.
(5) This award vests as to one-third of the 352,444 shares initially subject thereto on each of March 31, 2022, March 31, 2023, and March 31, 2024. The vesting on March 31, 2023 has been accelerated, and was vested as of December 29, 2022.
(6) This award vests as to one-third of the 408,730 shares initially subject thereto on each of March 31, 2023, March 31, 2024, and March 31, 2025. The vesting on March 31, 2023 has been accelerated, and was vested as of December 29, 2022.
(7) This option vested as to one-third of the shares subject thereto on each of the first three anniversaries of the date of grant (August 30, 2018).
(8) This option vested as to one-third of the shares subject thereto on each of the first three anniversaries of the date of grant (March 29, 2019).
(9) This award vests as to one-third of the 168,258 shares initially subject thereto on each of March 31, 2022, March 31, 2023 and March 31, 2024. Date of grant was May 10, 2021. The vesting on March 31, 2023 has been accelerated, and was vested as of December 29, 2022.
(10) This award vests as to one-third of the 195,130 shares initially subject thereto on each of the first three anniversaries of the date of grant (April 1, 2022). The vesting on April 1, 2023 has been accelerated, and was vested as of December 29, 2022.
(11) This option vested as to one-third of the shares subject thereto on each of the first three anniversaries of the date of grant (August 13, 2015).
(12) This option vested as to one-third of the shares subject thereto on each of the first three anniversaries of the date of grant (March 31, 2017).
(13) This option vested as to one-third of the shares subject thereto on each of the first three anniversaries of the date of grant (March 29, 2018).
(14) This option vests as to one-third of the shares subject thereto on each of the first three anniversaries of the date of grant (March 29, 2019).
(15) This award vests as to one-third of the 59,978 shares initially subject thereto on each of March 31, 2022, March 31, 2023, and March 31, 2024. The vesting on March 31, 2023 has been accelerated, and was vested as of December 29, 2022.
(16) This award vests as to one-third of the 69,556 shares initially subject thereto on each of the first three anniversaries of the date of grant (April 1, 2022). The vesting on April 1, 2023 has been accelerated, and was vested as of December 29, 2022.
Executive Stock Ownership Guidelines
A key element of our compensation philosophy is to align the interests of our executive officers with those of our stockholders by providing appropriate long-term incentives. To further this objective, since November 2017 we have maintained stock ownership guidelines applicable to each of our executive officers. Each executive is expected to own, by a date no later than five years after the person is appointed to his or her position as an executive officer, shares of our Common Stock with a value that on that date is equal to the following multiple of his or her annual base salary:
| | | | | | | | | | | |
| Position | | Base Salary Multiple Requirement |
| Chief Executive Officer | | 5x |
| Chief Financial Officer | | 3x |
| All other executive officers | | 2x |
Until the required stock ownership level is achieved, each officer is required to retain at least 50% of the net after-tax performance equity award shares that are earned, and 50% of the net after-tax restricted shares that vest.
Clawback Policy
The Board has adopted a formal policy to recover certain incentive-based income from our executive officers if we are required to materially restate our financial statements as a result of fraud, misconduct or gross negligence, not necessarily due to actions of the particular executive officer. In the event of a restatement, the Company will seek to recover, at the direction of the Board after it has reviewed the facts and circumstances that led to the requirement for the restatement and costs and benefits of seeking recovery, the amount of incentive-based income received by an officer during the three-year period immediately preceding the date on which the Company is required to prepare the restatement. The Board will determine in its discretion the amount, if any, the Company will seek to recover from such covered officer. The Company may offset the recovery amount against current or future incentive-based income. In addition, the Board may, to the extent permitted by law, take other remedial and recovery action, as determined by the Board. The recovery of incentive-based income under this policy is in addition to any other right or remedy available to the Company.
The 2015 Plan includes a clawback provision, pursuant to which we have the right to cause the cancellation or require reimbursement of any award under the 2015 Plan, or otherwise recoup equity or other compensation provided under the 2015 Plan, in accordance with Company policies in existence from time to time (including the policy described above) and/or applicable law. Such clawback provision is applicable if the Company is required to restate its financial statements or results as a result of noncompliance by the Company with any federal securities laws.
Employment and Severance Agreements
We have entered into employment agreements or offer letters, as well as change in control executive severance agreements, with each of our named executive officers, summarized below.
Clinton Lewis Employment Agreement
In connection with his appointment as Chief Executive Officer, Clinton A. Lewis, Jr. and the Company entered into an employment agreement, dated as of April 12, 2021 (the “Lewis Employment Agreement”). Pursuant to the Lewis Employment Agreement, Mr. Lewis serves as Chief Executive Officer of the Company, reporting to the Board, for an initial term of three years commencing on April 12, 2021, with automatic successive one-year renewal terms thereafter unless either party gives notice of non-renewal 30 days prior to the end of the then-current term. Mr. Lewis also serves on the Board pursuant to the Employment Agreement.
Mr. Lewis is entitled to receive an initial base salary of $600,000 per year, subject to annual reviews and potential increases, in the discretion of the Compensation and Talent Committee. Mr. Lewis will also be entitled to an annual bonus for each full fiscal year during his employment term, with a target bonus amount equal to 100% of his annual base salary, subject to the achievement of performance objectives to be established by the Compensation and Talent Committee each year. For calendar year 2021, Mr. Lewis’s annual bonus will not be pro-rated based on the portion of the year that Mr. Lewis is employed by the Company.
Pursuant to the Lewis Employment Agreement, Mr. Lewis received initial grants of equity awards under the 2015 Plan consisting of (i) 362,319 restricted stock units and (ii) nonqualified stock options to purchase 545,254 shares of the Company’s common stock, in each case subject to vesting in three equal annual installments. In addition, commencing in 2021 and in each successive year of Mr. Lewis’ employment, he is entitled to receive equity awards having a total target value of $1,500,000 on the date of grant, which for 2021 will be comprised 50% in time-vested restricted stock units and 50% in performance-based restricted stock units.
If Mr. Lewis’ employment under the Lewis Employment Agreement is terminated by the Company without “Cause” or by Mr. Lewis for “Good Reason” (as such terms are defined in the Lewis Employment Agreement), or if the Company elects not to extend the term of employment under the Lewis Employment Agreement beyond the then-current term, the Company will be obligated to pay to Mr. Lewis (i) all accrued but unpaid salary and benefits, (ii) an amount equal to 1.5 times his base salary then in effect, payable in equal installments over a 12-month period, (iii) a portion of any annual bonus payable to him on account of the calendar year in which his employment is terminated, if and when earned, pro-rated for the period of the year during which Mr. Lewis was employed by the Company, and (iv) the cost of his and his dependents’ coverage under COBRA for an 18-month period. The Company’s obligation to pay any of the foregoing severance obligations (other than salary and benefits accrued through the date of termination of employment) would be subject to Mr. Lewis’ execution of a release of all claims against the Company, and such release having become irrevocable.
The Lewis Employment Agreement contains customary confidentiality provisions, which apply both during and after the term of the Lewis Employment Agreement, and customary non-competition and non-solicitation provisions, which apply during the term of the Lewis Employment Agreement and for 12 months thereafter.
Graham Miao Offer Letter
In connection with his appointment as our Executive Vice President and Chief Financial Officer, Graham Miao entered into an offer letter, dated as of August 20, 2018 (the “Miao Offer Letter”), with the Company. Pursuant to the Miao Offer Letter, Mr. Miao is entitled to receive an initial base salary of $450,000 per year, subject to annual reviews and potential increases, in the discretion of the Compensation and Talent Committee. Mr. Miao received a signing bonus of $90,000, subject to repayment in part under certain circumstances. Mr. Miao is also entitled to an annual bonus for each full fiscal year during his employment term, with a target bonus amount equal to 70% of his annual base salary, subject to the achievement of performance objectives to be established by the Compensation and Talent Committee each year. For 2018, Mr. Miao’s annual bonus was pro-rated based on the portion of the year that Mr. Miao was employed by the Company.
Pursuant to the Miao Offer Letter, in connection with the commencement of his employment, Mr. Miao received grants of equity awards under the 2015 Plan consisting of (i) 59,435 shares of restricted stock and (ii) nonqualified stock options to purchase 59,435 shares of the Company’s common stock, in each case subject to vesting in three equal annual installments following the commencement of employment. In addition, commencing in 2019 and in each successive year of Mr. Miao’s employment, he is entitled to receive equity awards at the level of 125% of his annual base salary, calculated in the manner described in the Miao Offer Letter.
If Mr. Miao’s employment under the Miao Offer Letter is terminated by the Company without “Cause” or by Mr. Miao for “Good Reason” (as such terms are defined in the Miao Offer Letter), the Company will be obligated to pay to Mr. Miao (i) all accrued but unpaid salary and benefits, (ii) an amount equal to 1.5 times his base salary then in effect (unless termination occurs within 12 months of Mr. Miao’s start date, in which case the amount would be equal to 1.0 times his base salary then in effect), payable in equal installments over a 12-month period, and (iii) if Mr. Miao elects continued “COBRA” health care coverage for himself or his eligible dependents, an amount equal to the difference between the premium paid for such COBRA coverage and the premium charged by the Company to an active employee for comparable coverage, payable over an 18-month period (or such shorter period as Mr. Miao elects to receive COBRA coverage). The Company’s obligation to pay any of the foregoing severance obligations (other than salary and benefits accrued through the date of termination of employment) would be subject to (i) Mr. Miao’s execution of a release of all claims against the Company, and such release having become irrevocable, and (ii) Mr. Miao’s compliance with his continuing obligations (including regarding confidentiality, non-competition and non-solicitation) under the Company’s standard employment agreement for U.S. employees. Those confidentiality obligations apply both during and after the term of Mr. Miao’s employment, and those non-competition and non-solicitation provisions apply during the term of Mr. Miao’s employment and for 18 months thereafter.
Thomas Ermi Employment Agreement
On August 30, 2019, the Company entered into an amended and restated employment agreement with Mr. Ermi (the “Ermi Employment Agreement”). Pursuant to the Ermi Employment Agreement, Mr. Ermi serves as Executive Vice President and General Counsel of the Company, reporting to the Chief Executive Officer, for an initial term of three years commencing on August 30, 2019, with automatic successive one-year renewal terms thereafter unless either party gives notice of non-renewal 30 days prior to the end of the then-current term.
Mr. Ermi is entitled to receive a base salary of not less than $354,000 per year, subject to annual reviews and potential increases, in the Compensation and Talent Committee’s discretion. Mr. Ermi is also entitled to an annual bonus for each full fiscal year during his employment term, with a target bonus amount equal to 50% of his annual base salary, subject to the achievement of performance objectives to be established by the Compensation and Talent Committee each year. Mr. Ermi is also eligible to receive equity awards under the 2015 Plan pursuant to the terms of the Ermi Employment Agreement.
If Mr. Ermi’s employment under the Ermi Employment Agreement is terminated by the Company without “Cause” or by Mr. Ermi for “Good Reason” (as such terms are defined in the Ermi Employment Agreement), or if the Company elects not to extend the term of employment under the Ermi Employment Agreement beyond the then-current term, the Company will be obligated to pay to Mr. Ermi (i) all accrued but unpaid salary and benefits, (ii) an amount equal to 1.5 times his base salary then in effect, payable in equal installments over a 12-month period, (iii) a portion of any annual bonus payable to him for the remainder of the calendar year in which his employment is terminated, if and when earned, pro-rated for the period of the year during which Mr. Ermi was employed by the Company, and (iv) if Mr. Ermi elects continued “COBRA” health care coverage for himself or his eligible dependents, an amount equal to the difference between the premium paid for such COBRA coverage and the premium charged by the Company to an active employee for comparable coverage, payable over a 12-month period (or such shorter period as Mr. Ermi elects to receive COBRA coverage). The Company’s obligation to pay any of the foregoing severance obligations (other than salary and benefits accrued through the date of termination of employment) would be subject to Mr. Ermi’s execution of a release of all claims against the Company, and such release having become irrevocable.
The Ermi Employment Agreement contains customary confidentiality provisions, which apply both during and after the term of the Employment Agreement, and customary non-competition and non-solicitation provisions, which apply during the term of the Employment Agreement and for one year thereafter.
Change in Control Severance Agreements
On August 30, 2019, the Company entered into change in control executive severance agreements with each of Mr. Miao and Mr. Ermi, and on April 12, 2021, the Company entered into a change in control executive severance agreement with Mr. Lewis (collectively, the “Change in Control Agreements”). Each Change in Control Agreement provides that in the event the applicable executive’s employment is terminated other than for “cause” or if the executive resigns for “good reason” (each as defined in the applicable Change in Control Agreement) during the period commencing 60 days prior to and ending 24 months
following a change in control of the Company, the executive will be entitled to certain severance benefits, consisting of the following (in addition to any accrued salary and benefits through the date of termination): (i) an amount equal to (a) two and a half times with respect to Mr. Lewis and (b) two times with respect to Messrs. Miao and Ermi the sum of (l) the executive’s annual base salary then in effect and (2) the target bonus amount payable to the executive under the Company’s annual performance bonus program for the fiscal year of the Company in which the date of termination occurs (the “Annual Bonus Target”); (ii) a portion of the Annual Bonus Target for the calendar year in which the executive’s employment is terminated, pro-rated for the period of the year during which the executive was employed by the Company; and (iii) Company-paid continuation healthcare coverage for 18 months after the termination date. The term of each Change in Control Agreement is for a period of three years and will be automatically renewed for additional one-year periods unless either party gives notice of non-renewal 60 days prior to the end of the then-current term. The Merger will constitute a “change in control” for purposes of the Change in Control Agreements.
2023 Compensation Decisions and Beyond
For 2023, the Compensation and Talent Committee approved base salaries for each of Messrs. Lewis, Miao and Ermi equal to their 2022 base salaries. Long-term incentive awards for 2023 have not been approved, in light of the Company’s pending Merger with Paine Schwartz.
Director Compensation and Ownership Guidelines
Beginning in 2016, the Board, based on the recommendation of the Compensation and Talent Committee, approved a compensation plan for independent directors (the “Director Compensation Plan”), which sets forth the terms upon which non-employee directors (other than Mr. Kraef, who is not entitled to receive any compensation) were compensated for their service on the Board. Under the terms of the Director Compensation Plan, each participating non-employee director receives an annual cash retainer of $60,000 (or, in the Case of the Chair of the Board, $100,000), and the Chairs of the Audit Committee, Compensation and Talent Committee and Governance and Nominating Committee receive an additional cash retainer of $10,000, $7,500 and $5,000, respectively. Each participating non-employee director may elect to receive shares of our common stock in lieu of cash retainers. In addition, each participating non-employee director receives, effective the date of our annual meeting of stockholders, a grant, under the 2015 Plan, of shares of restricted stock having a value on the grant date equal to $75,000 (or, in the case of the Chair of the Board, $100,000), in each case subject to vesting on the first anniversary of the grant date. All such director compensation is pro-rated based on the portion of the year in which the individual served as a director. We also reimburse directors for reasonable travel and other expenses in connection with attending meetings of the Board.
The following table provides compensation information for our non-employee directors who earned compensation for service on our Board in 2022.
| | | | | | | | | | | | | | |
|
Name | Fees Earned or Paid in Cash | Stock Awards(1)(2) |
Total |
| John Atkin | $60,000 | $75,000 | $135,000 |
| Robert J. Campbell | $98,333 | $75,000 | $173,333 |
| Alexander Corbacho(3) | $60,000 | $75,000 | $135,000 |
| Denise L. Devine | $95,833 | $75,000 | $170,833 |
| Nance K. Dicciani | $156,667 | $100,000 | $256,667 |
| Kay Kuenker | $60,000 | $75,000 | $135,000 |
| David McInerney(4) | $9,620 | $75,000 | $84,620 |
| Kevin Schwartz(3) | $60,000 | $75,000 | $135,000 |
| Peter Sykes(5) | $21,667 | $86,697 | $108,364 |
| Macauley Whiting, Jr.(6) | $50,543 | $— | $50,543 |
(1) Amounts represent the full grant date fair value of the restricted stock awards (or, in the case of Mr. Atkin, a phantom stock award), calculated in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. These amounts reflect the accounting expense that we will recognize over the vesting term for these awards and do not correspond to the actual value that will be realized by the directors, if any. For a discussion of valuation assumptions and methodologies, see Note 16 of our audited financial statements included in this Annual Report.
(2) As of December 31, 2022, the aggregate number of restricted stock awards held by each director were as follows: Mr. Campbell, Ms. Devine, Mr. Kuenker, and Mr. McInerney, 40,322 shares each; Mr. Schwarz and Mr. Corbacho, no shares each (see footnote (3) below); Mr. Sykes, 47,587 shares and Ms. Dicciani, 53,763 shares.
(3) Pursuant to an assignment agreement between Paine Schwartz Partners Fund V Management, LLC, a wholly owned subsidiary of Paine Schwartz Partners, LLC, and both Mr. Schwartz Mr. Corbacho, effective as of July 27, 2020, each of Mr. Schwartz and Mr. Corbacho has assigned to Paine Schwartz Partners, LLC all of his right, title and interest in and to any compensation, including equity awards, he receives from AgroFresh for his services as a director of AgroFresh.
(4) Mr. McInerney was appointed to the Board effective August 3, 2022.
(5) Mr. Sykes was appointed to the Board effective June 1, 2022.
(6) Mr. Whiting served on the Board from January 1, 2022 to August 3, 2022.
Since May 2016 we have maintained stock ownership guidelines applicable to each of our non-employee directors. Each non-employee director is expected to own, by a date no later than five years after the person is elected or appointed to serve on the Board, shares of our Common Stock with a value that on that date equal to three times his or her annual cash retainer for service as a director (and, if a non-employee director’s annual cash retainer increases, he or she has a period of one year from the date of such increase to acquire any additional shares needed to achieve the increased ownership level).
Compensation Committee Interlocks and Insider Participation
Mr. Atkin, Ms. Devine, Mr. Sykes, and Mr. McInerney served on the Compensation and Talent Committee in 2022. No member of the committee has served as one of our officers or employees at any time. None of our executive officers serve, or in the past fiscal year has served, as a member of the board of directors or Compensation Committee of any entity that has one or more of its executive officers serving on our Board of Directors or Compensation and Talent Committee.
