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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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

 

Smith & Wesson Brands, Inc.

(Name of Registrant as Specified in its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

 

Fee paid previously with preliminary materials.

 

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 

 

 

 

 

 

 

 

 


 

 

 

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MEETING AND PROXY STATEMENT 2022 NOTICE OF ANNUAL STOCKHOLDER MEETING AND PROXY STATEMENT

 

 

 

 


 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

img125872520_1.jpg 

Date:

Tuesday,

September 19, 2023

 

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Time:

10a.m. Eastern Time

 

img125872520_3.jpg 

Location:

www.virtualshareholder

meeting.com/SWBI2023

 

The Annual Meeting of Stockholders of Smith & Wesson Brands, Inc., a Nevada corporation, will be held at 10:00 a.m., Eastern Time, on Tuesday, September 19, 2023 (the “2023 Annual Meeting”). The 2023 Annual Meeting will be a virtual meeting of stockholders. You will be able to attend the 2023 Annual Meeting, vote, and submit your questions during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/SWBI2023 and entering the 16-digit control number included on your proxy card or in the instructions that accompanied your proxy materials.

 

The 2023 Annual Meeting will be held for the following purposes:

 

ITEMS OF BUSINESS

1

Election of directors

2

Advisory vote to approve executive compensation ("say-on-pay")

3

Advisory vote on the frequency of future say-on-pay votes

4

Ratification of appointment of independent registered public accounting firm

5

Advisory vote to call special stockholder meeting

6

Ratification of Nevada exclusive forum provision

7

Stockholder proposals, if properly presented

And such other business as may properly come before the 2023 Annual Meeting or any adjournment or postponement thereof.

 

Stockholders of record at the close of business on July 28, 2023 may vote at the 2023 Annual Meeting.

 

These proxy materials were first made available to our stockholders on the internet on August 10, 2023.

 

Sincerely,

 

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Kevin A. Maxwell

Senior Vice President,

General Counsel, Chief Compliance Officer, and Secretary

August 10, 2023

 

 


 

 

Table of Contents

 

Proxy Statement Summary

1

Board And Governance Matters

3

Proposal One – Election of Directors

3

Compensation Matters

16

Proposal Two – Advisory Vote on Executive Compensation

16

Proposal Three – Advisory Vote on Frequency of Future Say-on-Pay Votes

17

Compensation Discussion And Analysis

18

Executive Compensation

31

Audit Matters

44

Proposal Four – Ratification Of Appointment Of Independent Registered Public Accountant

44

Management Proposals

46

Proposal Five – Management Proposal (Advisory Vote to Call Special Stockholder Meeting)

46

Proposal Six – Management Proposal (Ratification of Nevada Exclusive Forum Provision)

48

Stockholder Proposals

50

Proposal Seven – Stockholder Proposal (Right to Call A Special Shareholder Meeting)

50

Proposal Eight – Stockholder Proposal (Human Rights Impact Assessment)

52

Other Important Information

57

Beneficial Ownership of Common Stock

57

Annual Report on Form 10-K

58

Delinquent Section 16(a) Reports

58

Frequently Asked Questions Regarding the 2023 Annual Meeting and Voting

58

 

 


 

PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. You should read this entire Proxy Statement carefully before voting.

 

 

 

MEETING INFORMATION

 

 

  Time and Date

10:00 a.m., Eastern Time, on Tuesday, September 19, 2023

 

 

  Location

Online via webcast at www.virtualshareholdermeeting.com/SWBI2023

 

 

  Record Date

July 28, 2023

 

 

 

 

 

MEETING AGENDA

 

 

 

Proposals

Board

Recommendation

Page

 

 

 

 

1.

Election of Seven Directors

FOR each nominee

3

2.

Advisory Vote to Approve Executive Compensation

FOR

16

3.

Advisory Vote on Frequency of Future Say-on-Pay Votes

 

ONE YEAR

 

17

4.

Ratification of Appointment of Deloitte & Touche, LLP

FOR

44

5.

Management Proposal - Advisory Vote to Call Special Stockholder Meeting

FOR

46

6.

Management Proposal - Ratification of Nevada Exclusive Forum Provision

 

FOR

 

48

7.

Stockholder Proposal - Right to Call Special Shareholder Meeting

 

AGAINST

 

50

8.

Stockholder Proposal - Human Rights Impact Assessment

 

AGAINST

 

52

 

Name

Age

Director

Since

Experience

Committee

Memberships

Other Public

Company Boards

Anita D. Britt *

60

2018

Former CFO of Perry Ellis International, Inc.

AC **, CC, ESG

3

Fred M. Diaz *

57

2021

Former President and CEO of Mitsubishi Motor North America, Inc.

CC, ESG**

3

Michelle J. Lohmeier*

60

2023

Former Strategic Advisor to CEO of Spirit AeroSystems, Inc.

CC, ESG

2

Barry M. Monheit *

76

2004

Former President of Financial Consulting

Division of FTI Consulting

CC **, NCG

1

Robert L. Scott

77

1999

Former President of a predecessor of Smith & Wesson Brands, Inc.

AC, NCG

0

Mark P. Smith

47

2020

President and CEO of Smith & Wesson Brands, Inc.

-

0

Denis G. Suggs *

57

2021

 

CEO of LCP Transportation LLC

 

AC, NCG**

1

* = Independent Nominee; ** = Committee Chair; § = Chairman

AC = Audit Committee; CC = Compensation Committee; ESG = Environmental, Social, and Governance Committee; NCG = Nominations and Corporate Governance Committee

 

 

 

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2023 Proxy Statement I 1

 


 

Proxy Statement Summary

 

 

 

 

KEY ACCOMPLISHMENTS

Our key accomplishments for the fiscal year ended April 30, 2023 (“fiscal 2023”) include:

 

Continued Investments in Our Business

In fiscal 2023, our capital allocation strategy continued to focus on investments in our business associated with the move of our headquarters and significant elements of our operations to Maryville, Tennessee (the “Relocation”). In fiscal 2023, we spent approximately $98 million in aggregate on the Relocation. Once the Relocation is completed, we will be positioned to deliver improved operating and financial performance, in part, due to the realization of certain distribution and manufacturing efficiencies.

GOVERNANCE HIGHLIGHTS

Board Refreshment

We recognize the importance of board refreshment. Over 70% of our director nominees have joined our board of directors (the "Board") since 2018. This demonstrates the Board’s commitment to refreshment, including with independent nominees who provide perspectives and experience to support our strategy. Of our seven director nominees, two are women, one is a racial minority, and one is an ethnic minority.

Risk Oversight

Given the nature of our business, the Board remains focused on overseeing risk management. In addition to the Audit Committee receiving periodic presentations on enterprise risk management, during fiscal 2023, the Environmental, Social, and Governance Committee (the “ESG Committee”) discussed the campaign against the firearm industry at each of its meetings, and the full Board reviewed an updated report prepared by a third-party media monitoring firm that we have worked with for several years. During fiscal 2023, we also formalized a process whereby our Audit Committee Chair communicates directly with our Chief Compliance Officer at least quarterly in between scheduled Audit Committee meetings.

Stockholder Engagement

We recognize the importance of stockholder engagement. In addition to our regular, year-round stockholder engagement initiatives, prior to our annual meeting of stockholders held on September 12, 2022 (the “2022 Annual Meeting”), we met with certain of our largest stockholders to discuss, among other things, two stockholder proposals. In early 2023, we again met with certain of our largest stockholders. We used these meetings to, among other things, solicit our stockholders’ views on the right of stockholders to call special meetings (see Proposals 5 and 7) and our exclusive forum bylaw provision (see Proposal 6). We also engaged in April 2023 with our social activist stockholders (see Proposal 8).

COMPENSATION HIGHLIGHTS

Pay for Performance

Our executive compensation program emphasizes our pay-for-performance philosophy. For fiscal 2023:

100% of our named executive officers’ (“NEOs”) annual cash incentive goals were tied to company performance (Net Sales and Adjusted EBITDAS); Adjusted EBITDAS also served as the threshold for which the failure to achieve this performance metric would result in no bonus payments regardless of the achievement of the other performance metric.
60% of our NEOs’ stock-based award value was tied to our performance, as reflected by relative total shareholder return value.
Our NEOs received no annual cash incentive payment for fiscal 2023 because we failed to achieve the threshold target for Adjusted EBITDAS.
Our NEOs who received a stock-based award in 2020 received none of the target shares of common stock for the performance-based restricted stock unit (“PSU”) portion of the award because we failed to meet the minimum performance requirements.

 

2 I 2023 Proxy Statement

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BOARD AND GOVERNANCE MATTERS

 

 

 

 

 

 

 

 

 

 

 

PROPOSAL One – election of directors

 

 

 

What Am I Voting On? Stockholders are being asked to elect each of the seven director nominees named in this Proxy Statement to hold office until the annual meeting of stockholders in 2024 (the “2024 Annual Meeting”) and until his or her successor is elected and qualified.

 

 

Voting Recommendation: FOR the election of each of the seven director nominees

 

 

Vote Required: A director will be elected if that director nominee receives a majority of the votes cast

 

Broker Discretionary Voting Allowed? No – broker non-votes have no effect

 

Abstentions: No effect

 

 

 

GOVERNANCE FRAMEWORK

Our business and affairs are managed under the direction of the Board, subject to limitations and other requirements in our charter documents or in applicable statutes, rules, and regulations, including those of the Securities and Exchange Commission (the "SEC") and the Nasdaq Stock Market (“Nasdaq”).

 

Our governance framework supports independent oversight and accountability.

 

 

 

 

 

Independent Oversight

 

 

Accountability

 

6 of 7 director nominees are independent

Non-Executive Chairman

All independent committees

Demonstrated commitment to Board

     refreshment – over 70% of the Board has joined since 2018

 

 

Majority voting in uncontested elections

Annual election of directors

Annual advisory say-on-pay vote

Robust over-boarding policy

Proxy access right

 

Our governance framework is based on our Amended and Restated Bylaws (our “Bylaws”), as well as the key governance documents listed below:

 

Code of Conduct and Ethics
Code of Ethics for CEO and Senior Financial Officers
Corporate Governance Guidelines (the “Guidelines”)
Charters of the Audit Committee, the Compensation Committee, the Nominations and Corporate Governance Committee (the “NCG Committee”) and the ESG Committee

Copies of these documents are available on our website, www.smith-wesson.com, or upon written request sent to our Corporate Secretary at our principal executive offices located at 2100 Roosevelt Avenue, Springfield, Massachusetts 01104. The information on our website is not part of this Proxy Statement.

 

 

 

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2023 Proxy Statement I 3

 


 

Board and Governance Matters

 

 

 

 

BOARD COMPOSITION

Director Skills and Qualifications

The NCG Committee, using a matrix of director skills and experiences that the Board believes are needed to address existing and emerging business and governance issues relevant to us (the “Skills Matrix”), reviews with the Board annually the desired experiences, mix of skills, and other qualities required for new Board members, as well as Board composition. The Board seeks director candidates who possess the requisite judgment, background, skill, expertise, and time to strengthen and increase the breadth of skills and qualifications of the Board. In particular, the Board may consider, among other things, the fit of the individual’s skills, background, qualifications, experience, and personality with those of other directors in maintaining an effective, collegial, and responsive Board and a mix of diversity in personal and professional experience, background, viewpoints, perspectives, knowledge, and abilities.

 

Diversity Considerations. The Board does not have a specific diversity policy; however, as noted above, diversity is among the factors the NCG Committee may consider in connection with its annual review of desired experiences, mix of skills, and other qualities required for new Board members. We have posted a board diversity matrix on our website, www.smith-wesson.com, to comply with a Nasdaq rule. The information on our website is not part of this Proxy Statement.

 

Governance Spotlight

Of our seven director nominees, two are women, one is a racial minority, and one is an ethnic minority.

 

Skills Matrix. The NCG Committee developed the Skills Matrix in fiscal 2023 in response to requests from certain of our investors for more detailed information concerning our directors’ qualifications. The NCG Committee adopted the Skills Matrix to facilitate the comparison of our directors’ skills and experiences to those that the Board believes are needed to address existing and emerging business and governance issues relevant to us. The table below lists those skills and experiences, along with the total number of director nominees who possess the particular skill or experience.

 

Skill/Experience

Description

# of Director Nominees

 Executive

Experience serving as a CEO or a senior executive provides a practical understanding of a complex business like ours.

7 of 7

 Public Company Board

Service on other public company boards facilitates an understanding of corporate governance practices and trends, and insights into board management.

5 of 7

 Regulated Industry /

  Government

 

Experience with regulated industries and government provides insight and perspective in working constructively and proactively with government agencies.

4 of 7

 Sales and Marketing

Experience in sales, brand management, marketing, and marketing strategy provides a perspective on how to better market our products.

3 of 7

 Risk Management

Given the importance of the Board’s role in risk oversight, we seek directors who can help identify, manage, and mitigate key risks.

6 of 7

 Financial

Understanding financial reporting and accounting processes enables monitoring and assessment of operating and strategic performance and facilitates accurate financial reporting and robust controls.

4 of 7

 Manufacturing

Functional experience in a senior operating position with a manufacturing company can help us drive operating performance.

6 of 7

 Environmental, Social,

  and Governance

Experience with ESG matters, including sustainability, human capital management and corporate ethics, enables management of ESG risks and opportunities.

3 of 7

 

 

4 I 2023 Proxy Statement

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Board and Governance Matters

 

 

 

 

Director Independence

Under the Guidelines and the Nasdaq listing standards, the Board must consist of a majority of independent directors. The Board annually reviews director independence and has determined that all director nominees, except for Mr. Smith (who is our President and CEO), are independent, as “independence” is defined by the SEC and the Nasdaq listing standards.

Board Refreshment

We recognize the importance of Board refreshment. Directors are elected each year at our annual meeting of stockholders to hold office until the next annual meeting of stockholders and until their successors are elected and qualified. The NCG Committee regularly considers Board composition and how Board composition changes over time.

 

The Board has not established a mandatory retirement age; however, pursuant to the Guidelines, the Board and the NCG Committee review, in connection with the process of selecting nominees for election at annual stockholder meetings, each director’s continuation on the Board.

 

Governance Spotlight

Michelle Lohmeier was appointed to the Board in July 2023, demonstrating the Board's commitment to refreshment.

 

Of our seven director nominees, five have joined the Board since 2018.

The Board has not established term limits; however, pursuant to the Guidelines, the NCG Committee reviews each director’s continuation on the Board at least every three years, which, among other things, allows the Board, through the NCG Committee, to consider the appropriateness of the director’s continued service.

Director Nomination Process

The NCG Committee is responsible for identifying and evaluating Board nominees. In identifying candidates, the NCG Committee may take into account all factors it considers appropriate, which may include personal qualities and characteristics, individual character and integrity, mature judgment, career specialization, relevant technical skills and accomplishments, and the extent to which the candidate would fill a present need on the Board.

Stockholder-Recommended Candidates. The NCG Committee will consider persons recommended by our stockholders for inclusion as Board nominees if the information required by our Bylaws is submitted in writing in a timely manner addressed and delivered to our Secretary.

Stockholder-Nominated Candidates. We have a “Proxy Access for Director Nominations” bylaw that permits a stockholder, or a group of up to 20 stockholders, owning 3% or more of our outstanding common stock continuously for at least three years to nominate and include in our proxy materials Board nominees constituting up to two individuals or 20% of the Board (whichever is greater), provided that the stockholder(s) and the nominee(s) satisfy the requirements specified in our Bylaws.

Majority Voting Standard

Our directors are elected by a majority of the votes cast for them in uncontested elections. If an incumbent director does not receive the requisite majority of votes cast, then the director is expected to submit his or her resignation to the Board. Based on the recommendation of the NCG Committee, the Board would determine whether to accept the resignation and would publicly disclose its decision and its rationale. A director who tenders his or her offer of resignation would abstain from any decision or recommendation regarding the offered resignation.

 

5 I 2023 Proxy Statement

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Board and Governance Matters

 

 

 

 

Over-Boarding Policy

Our directors may not serve on more than three other public company boards, unless it is determined, based on the individual facts, that such service will not interfere with service on the Board. In connection with the evaluation of these facts, the Chairman of the Board and Chair of the NCG Committee will consider the time commitment required by the director’s service, if any, in leadership positions (e.g., board chair, committee chair, lead independent director, etc.) on the Board and any other public company board of directors. None of our director nominees serves on more than three other public company boards and our CEO does not serve on any other public company board. The NCG reviews annually the time commitments of our independent directors.

 

Director Nominees

The Board currently has eight members. Pursuant to the recommendation of the NCG Committee, the Board has nominated each current director for election at the 2023 Annual Meeting, except for Mr. Furman, who, after many years of distinguished service to the Board, is retiring from the Board effective at the 2023 Annual Meeting. Ms. Lohmeier, who was appointed to the Board in July 2023, was first identified as a director candidate by a third-party search firm and will stand for stockholder election for the first time at the 2023 Annual Meeting. If elected, each director nominee will hold office until the 2024 Annual Meeting and until his or her successor is elected and qualified. If any director nominee is unable or declines to serve as a director at the time of the 2023 Annual Meeting, the proxies will be voted for any nominee designated by our current Board to fill the vacancy. We do not expect that any director nominee will be unable or will decline to serve as a director.

Set forth below is information about each director nominee, including a description of his or her qualifications to serve on the Board and a listing of certain key skills and experiences from the Skills Matrix possessed by each director nominee.

 

ANITA D. BRITT

Age: 60

Director since: 2018

Independent

Board committees:

• Audit

• Compensation

• ESG

Other public company boards:

• Delta Apparel, Inc.

• urban-gro, Inc.

• VSE Corporation

Other public company boards within five years:

• None

Background:

Ms. Britt served as CFO of Perry Ellis International, Inc. from 2009 to 2017 and held senior financial leadership positions at Jones Apparel Group, Inc. (1993 to 2006) and Urban Brands, Inc. (2006 to 2009). Ms. Britt is a CPA and a member of the American Institute of Certified Public Accountants. She is also a Board Leadership Fellow, as designated by the National Association of Corporate Directors. Ms. Britt holds a Carnegie Mellon Cybersecurity Oversight Certification and a Harvard Kennedy School Executive Education Certificate in Cybersecurity: The Intersection of Policy and Technology.

Key Qualifications and Skills Include:

   Financial. Extensive corporate finance, investor relations, and capital markets

 experience gained through service as a public company CFO and other senior

   financial roles; certified public accountant

   Public Company Board. Service on three other boards (see related caption)

   Risk Management. Certified public accountant; former public company

CFO; holds multiple cybersecurity certifications (see above)

 

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FRED M. DIAZ

Age: 57

Director since: 2021

Independent

Board committees:

• Compensation

• ESG

Other public company boards:

• Archer Aviation Inc.

• SiteOne Landscape Supply,
Inc.

• Valero Energy Corporation

Other public company boards within five years:

None

Background:

Mr. Diaz served as President and CEO of Mitsubishi Motor North America, Inc. from 2018 to 2020 and as General Manager, Performance Optimization Global Marketing and Sales of Mitsubishi Motors Corporation in Tokyo, Japan from 2017 to 2018. He served in various executive level positions with Nissan North America Inc. for four years and Chrysler Corporation LLC for 24 years, including as the President and CEO of the Ram Truck Brand and Chrysler of Mexico.

Key Qualifications and Skills Include:

   Executive. Former President and CEO of Mitsubishi Motor North America, the

Ram Truck Brand, and Chrysler of Mexico

   Manufacturing. Extensive operations experience gained through service as

executive of multinational manufacturers, including Mitsubishi and Chrysler

   Public Company Board. Service on three other boards (see related caption)

   Sales and Marketing. Former SVP, Sales & Marketing and Operations USA

for Nissan North America and Head of National Sales of Ram Truck Brand

MICHELLE J. LOHMEIER

Age: 60

Director since: 2023

Independent

Board committees:

• Compensation

• ESG

Other public company boards:

 Kaman Corp.

 Mistras Group, Inc.

Other public company boards within five years:

None

Background:

Ms. Lohmeier has been a director since July 2023. She is a former senior advisor to the CEO of Spirit AeroSystems Holdings, Inc. having served in that position from 2019 to 2021. Prior to that, she had served as SVP and General Manager of Airbus Programs at Spirit AeroSystems. Before joining Spirit AeroSystems, Ms. Lohmeier held senior positions at Raytheon Company, including VP of the Land Warfare Systems product line at Raytheon Missile Systems. Previously, she was the program director at Raytheon for the design, development, and production implementation of the Standard Missile-6 weapon system for the U.S. Navy. She began her career with Hughes Aircraft Company as a system test engineer in 1985.

Key Qualifications and Skills Include:

    Manufacturing. Extensive operations experience gained through roles with

    Spirit AeroSystems, Raytheon, and Hughes Aircraft

    Public Company Board. Service on two other boards (see related caption)

    Regulated Industry/Government. Extensive experience in the highly

    regulated aerospace and defense industries

  BARRY M. MONHEIT

Age: 76

Director since: 2004

Independent

Board committees:

• Compensation

• NCG

Other public company boards:

• American Outdoor Brands, Inc.

Other public company boards within five years:

• None

Background:

Mr. Monheit served as Chairman of the Board from 2004 until the completion (on August 24, 2020) of the spin-off of our former outdoor products and accessories business (the “Separation”). Since the Separation, he has served as Chairman of American Outdoor Brands, Inc. From 2020 to July 2023, Mr. Monheit served as a Senior Managing Director of J.S. Held, LLC, a consulting company providing services in forensic accounting, fraud investigations, receivership and restructuring, and lost profit exams. He formerly served as President and CEO of Quest Resource Holding Corp., a publicly traded company, as a Senior Managing Director of FTI Palladium Partners, in various capacities with FTI Consulting, Inc., including President of its Financial Consulting Division, and as a partner with Arthur Andersen & Co., where he served as partner-in-charge of its New York Consulting Division and its U.S. Bankruptcy and Reorganization Practice.

Key Qualifications and Skills Include:

    Executive. Former CEO of Quest Resource; Division President of FTI

Consulting; and partner of Arthur Andersen

    Financial. Retired certified public accountant; former partner of
    Arthur Andersen

    Public Company Board. Current Chairman of American Outdoor Brands, Inc.

 

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ROBERT L. SCOTT

Age: 77

Director since: 1999

Independent

Board committees:

• Audit

• NCG

Other public company boards:

• None

Other public company boards within five years:

• None

Background:

Mr. Scott has served as our Chairman since 2020. He also serves as Chairman of the National Shooting Sports Foundation, or NSSF, and served from 2005 to 2008 on the board of directors of the Sporting Arms and Ammunition Manufacturers' Institute, or SAAMI. Mr. Scott served as a consultant to us (2004 to 2006); our President (1999 to 2002); Chairman of our wholly owned subsidiary, Smith & Wesson Corp. (2003); and President of Smith & Wesson Corp. (2001 to 2002). From 1989 to 1999, he served as Vice President of Sales and Marketing and later as Vice President of Business Development of Smith & Wesson Corp. prior to its acquisition by us. Prior to that, Mr. Scott served in senior positions with Berkley & Company and Tasco Sales Inc., two leading companies in the outdoor industry. He previously served as a director of Primos Hunting, a leader in the hunting category, and OPT Holdings, a hunting accessories marketer.

Key Qualifications and Skills Include:

   Executive. Our former President, VP of Sales and Marketing, and

VP of Business Development

   Regulated Industry/Government. Extensive leadership experience in

firearm and outdoor industries through affiliations with us, NSSF, SAAMI,

   Primos Hunting, and OPT Holdings

   Sales and Marketing. Our former VP of Sales and Marketing;

previously served in senior sales roles with Berkley and Tasco Sales

MARK P. SMITH

Age: 47

Director since: 2020

Not Independent

Board committees:

• None

Other public company boards:

None

Other public company boards within five years:

None

Background:

Mr. Smith has served as our President and CEO and as a director since August 2020. Since joining us in 2010, he has served in a number of roles with increasing responsibility, including Vice President of Supply Chain Management (2010 to 2011), Vice President of Manufacturing and Supply Chain Management (2011 to 2016), President, Manufacturing Services (2016 to 2020), and Co-President and Co-Chief Executive Officer (January 2020 to August 2020). Prior to joining us, Mr. Smith served as Director Supply Chain Solutions for Alvarez & Marsal Business Consulting, LLC (2007 to 2010), in various positions with Ecolab, Inc. (2001 to 2007) and as a Production Supervisor for Bell Aromatics (1999 to 2001).

Key Qualifications and Skills Include:

    Executive. Our President and CEO

    Manufacturing. Extensive operations experience gained through roles with us,

  including as President, Manufacturing Services and VP of

    Manufacturing and Supply Chain Management, and Alvarez & Marsal

    Regulated Industry/Government. Extensive leadership experience in

  firearm industry through affiliation with us

 

 

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DENIS G. SUGGS

Age: 57

Director since: 2021

Independent

Board committees:

• Audit

• NCG

Other public company boards:

• Patrick Industries

Other public company boards within five years:

• None

Background:

Mr. Suggs has served as CEO of LCP Transportation LLC, a non-emergency medical transportation provider, since 2020. From 2014 to 2020, he served as President and CEO of Strategic Materials, Inc., a provider of environmental services. Mr. Suggs previously served in executive capacities with Belden, Inc., Danaher Corporation, and Public Storage Inc.

Key Qualifications and Skills Include:

   ESG. Experience as President and CEO of Strategic Materials, a leading glass

and plastics recycler, as well as through service on board of directors of Glass

   Packaging Institute, which focuses on sustainability issues

   Manufacturing. Extensive operations experience gained through service as

executive of Belden and Danaher

   Regulated Industry/Government. Experience as CEO of LCP Transportation,

which operates in a heavily regulated industry, as well as leading organizations

   that serve highly regulated sectors, such as aerospace and defense

 

BOARD AND COMMITTEE GOVERNANCE

Risk Oversight

The Board recognizes that risk is inherent in every business. As is the case in virtually all businesses, the Board recognizes that we face a number of risks, including operational, economic, financial, cybersecurity, legal, regulatory, and competitive risks. While our management is responsible for the day-to-day management of the risks we face, the Board, as a whole and through its committees, is responsible for the oversight of risk management.

 

The Board’s involvement in our business strategy and strategic plans plays a key role in its oversight of risk management, its assessment of management’s risk appetite, and its determination of the appropriate level of enterprise risk. The Board receives updates at least quarterly from senior management and periodically from outside advisors regarding the various risks we face, including operational, economic, financial, cybersecurity, legal, regulatory, and competitive risks. The Board also reviews the various risks we identify in our SEC filings, as well as risks relating to various specific developments, such as new product introductions. In addition, the Board regularly receives reports from senior members of our Internal Audit function and our General Counsel and Chief Compliance Officer.

 

See Part I, “Item 1A. Risk Factors,” in our annual report on Form 10-K for the fiscal year ended April 30, 2023 (the “Form 10-K”) to learn more about the risks we face. The risks described in the Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known or that may currently be deemed to be immaterial based on the information known to us also may materially and adversely affect our business, operating results, and financial condition.

 

Governance Spotlight

In fiscal 2023, we formalized a process whereby our Audit Committee Chair communicates directly with our Chief Compliance Officer at least quarterly in order to enhance the Board’s oversight of risk and the independence of our compliance function.

Given the nature of our business, the Board remains focused on overseeing risk management. During fiscal 2023, the ESG Committee discussed the campaign against the firearm industry at each of its meetings and the full Board reviewed an updated report prepared by a third-party media monitoring firm that we have worked with for several years.

 

 

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Board and Governance Matters

 

 

 

 

 

 

 

 

 

 

 

 

AUDIT COMMITTEE

COMPENSATION COMMITTEE

 

 

 

Oversees our financial and reporting processes and the audit of our financial statements

 

Assists the Board with respect to:

- the oversight and integrity of our financial statements

- our compliance with legal and regulatory matters

- our policies and practices related to information security, including cybersecurity

- the independent registered public accountant’s qualification and independence

- the performance of the independent registered public accountant

 

Meets separately on a regular basis with representatives of our independent registered public accountant and our internal audit function

 

Considers the risk that our compensation policies and practices may have in attracting, retaining, and motivating valued employees

 

Endeavors to ensure that it is not reasonably likely that our compensation plans and policies would have a material adverse effect on us

NCG COMMITTEE

 

Oversees governance-related risk, such as board independence, conflicts of interest, and management and succession planning

ESG COMMITTEE

 

Reviews emerging risks associated with ESG matters

 

 

 

Cybersecurity Risk Oversight. We recognize the importance of cybersecurity risk governance. The Audit Committee receives regular reports from management on, among other things, the emerging cybersecurity threat landscape and our cybersecurity risks and threats. The Audit Committee regularly briefs the full Board on these matters. We maintain a Cyber Incident Response Plan.

 

ESG Risk Oversight. We recognize the importance to our stakeholders of ESG matters. Since 2021, the ESG Committee has assisted the Board and its committees in fulfilling the Board’s oversight responsibilities with various environmental, social, health, safety, and governance policies and operational control matters relevant to us. In part, the ESG Committee reviews emerging risks and opportunities associated with ESG matters.

 

Board Leadership Structure

Our Corporate Governance Guidelines support flexibility in the structure of the Board by not requiring the separation of the roles of CEO and Chairman. We maintain separate roles between our CEO and Chairman in recognition of the differences between the responsibilities of these roles. The Board believes this leadership structure is the most effective for us at this time because it allows our CEO to focus on running our business and our Chairman to focus on pursuing sound governance practices that benefit the long-term interests of our stockholders.

 

Board Committees

The Board has four standing committees, each of which is comprised of independent directors: the Audit Committee, the Compensation Committee, the NCG Committee, and the ESG Committee.

 

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Board and Governance Matters

 

 

 

 

 

AUDIT COMMITTEE

 

Members:

Anita Britt (Chair)

John Furman (1)

Bob Scott

Denis Suggs

Meetings in Fiscal 2023: 5

 

Member Independence: 4 of 4

 

* All members meet the independence requirements of Nasdaq and Rule 10A-3 of the Exchange Act. The Board has determined that each member is an “audit committee financial expert” within the meaning of SEC regulations.

Purpose:

Overseeing our financial and reporting processes and the audits of our financial statements.

Providing assistance to the Board with respect to its oversight of:

- the integrity of our financial statements

- our compliance with legal and regulatory requirements

- the independent auditor’s qualifications and independence

- the performance of our internal audit function, if any, and independent auditor

- our policies and practices related to information security, including cyber security, protection of personally identifiable information, and training of employees around such items

Preparing the report that SEC rules require be included in our annual proxy statement.

 

Principal Responsibilities:

Appointing, retaining, compensating, evaluating, and terminating any accounting firm engaged to prepare or issue an audit report or performing other audit, review, or attest services, and overseeing the work of such firm.

Overseeing our accounting and financial reporting process and audits of our financial statements.

COMPENSATION COMMITTEE

 

Members:

Barry Monheit (Chair)

Anita Britt

Fred Diaz

John Furman (1)

Michelle Lohmeier(2)

 

Meetings in Fiscal 2023: 6

 

Member Independence: 5 of 5

 

* All members meet the independence requirements of Nasdaq and qualify as “non-employee directors” under Rule 16b-3(b)(3)(i) of the Exchange Act.

Purpose:

Determining, or recommending to the Board for determination, the compensation of our CEO and other executive officers.

Discharging the Board’s responsibilities relating to our compensation programs and compensation of our executives.

Producing an annual compensation committee report on executive compensation for inclusion in our annual proxy statement.

Principal Responsibilities:

Setting compensation for executive officers and directors.

Monitoring incentive- and equity-based compensation plans.

Appointing, compensating, and overseeing the work of any compensation consultant, legal counsel, and other retained advisor.

 

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Board and Governance Matters

 

 

 

 

NCG COMMITTEE

Members:

Denis Suggs (Chair)

John Furman (1)

Barry Monheit

Bob Scott

 

 

Meetings in Fiscal 2023: 6

 

Member Independence: 4 of 4

 

* All members meet the independence requirements of Nasdaq.

Purpose:

Selecting, or recommending to the Board for selection, the individuals to stand for election as directors at each election of directors.

Overseeing the selection and composition of Board committees and, as applicable, overseeing management continuity planning processes.

 

Principal Responsibilities:

Developing and recommending to the Board corporate governance principles applicable to us.

Overseeing the evaluation of the Board and management.

 Developing and maintaining the Skills Matrix

   ESG COMMITTEE

 

Members:

Fred Diaz (Chair)

Anita Britt

Michael F. Golden(3)

Michelle Lohmeier(2)

Meetings in Fiscal 2023: 4

 

Member Independence: 4 of 4

 

 

Purpose:

Assisting the Board and its committees in fulfilling the oversight responsibilities of the Board with various environmental, social, health, safety, and governance policies and operational control matters relevant to us.

Principal Responsibilities:

Reviewing the status and effectiveness of our ESG performance, metrics, and goals.

Reviewing emerging risks and opportunities associated with ESG.

Assessing whether to adopt ESG goals, metrics, and targets, and adopting such goals, metrics, and targets, if deemed appropriate.

(1)
Mr. Furman is a current director and member of the Audit Committee, the Compensation Committee, and the NCG Committee. He was not nominated for election at the 2023 Annual Meeting due to his anticipated retirement.
(2)
Ms. Lohmeier joined the Board in July 2023.
(3)
Mr. Golden passed away in June 2023. He served as Chair of the ESG Committee prior to his death.

 

Meeting Attendance in Fiscal 2023

In fiscal 2023, the Board held seven meetings and its committees held a combined total of 21 meetings. Each director attended 75% or more of the aggregate of all meetings of the Board and the committees on which he or she served. We encourage our directors to attend our annual meetings of stockholders. All directors attended the 2022 Annual Meeting.

Executive Sessions

We regularly schedule executive sessions in which independent directors meet without the presence or participation of management. Our Chairman serves as the presiding director of these executive sessions during Board meetings, and our committee chairs preside at the sessions held during committee meetings.

 

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Board and Governance Matters

 

 

 

 

Stockholder Engagement

We meet with investors throughout the year and consider investor feedback on emerging issues, which allows us to better understand their priorities and perspectives. This year-round engagement provides us with useful input and enables us to consider developments proactively. In addition, from time to time, we conduct stockholder outreach programs. Prior to the 2022 Annual Meeting, we requested meetings with the corporate governance teams at stockholders representing approximately 46% of our outstanding shares, as a result of which we engaged with teams at stockholders representing approximately 27% of our outstanding shares. We primarily discussed the stockholder proposals that were included in our proxy materials for the 2022 Annual Meeting. In early 2023, we requested meetings with the corporate governance teams at stockholders representing 44% of our outstanding shares, as a result of which we engaged with teams at stockholders representing 10% of our outstanding shares. We used these meetings to, among other things, discuss progress we had made on topics of importance to our stockholders, including Board refreshment, and solicit our investors’ views on the right of stockholders to call special meetings (see Proposals 5 and 7) and our exclusive forum bylaw provision (see Proposal 6).

 

Responding to Stockholder Engagement. We value the feedback that we receive from our investors and seek opportunities to respond to their feedback, when appropriate. For example, in response to feedback we received in recent years from many of our largest stockholders, we have expanded our public disclosures both in SEC-filed documents and through the publication of other relevant documents. In 2022, we published our first Firearm Market Factsheet, which was intended to increase transparency around our business practices by, among other things, describing our go-to-market approach to both domestic and international sales and highlighting our commitment to promoting responsible firearm ownership. In 2022, we also published our second Environmental Factsheet, which, among other things, highlighted our commitment to responsible environmental practices, described our approach to environmental management, and listed a number of environmental impact highlights. Copies of the Firearm Market Factsheet and the Environmental Factsheet are available on our website, www.smith-wesson.com. The information on our website is not part of this Proxy Statement.

 

In response to requests from certain of our stockholders for more detailed information concerning our directors’ qualifications, in fiscal 2023, the NCG Committee developed and adopted the Skills Matrix.

 

In addition to engaging with our largest stockholders, we have devoted significant resources in recent years engaging with the proponent for Proposal 8. We spoke directly to the proponent on three occasions in 2022 and once in 2023. Each discussion was conducted in a respectful manner, and we came away with a better understanding of the proponent’s positions regarding gun control generally and its stockholder proposal specifically. During fiscal 2023, we also met with a representative of the California State Teachers’ Retirement System.

 

Governance Spotlight

We spoke directly with the proponent for Proposal 8 on four occasions in the last two years in order to better understand the proponent’s views and objectives.

 

 

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ADDITIONAL GOVERNANCE MATTERS

Certain Relationships

Unless delegated to the Compensation Committee by the Board, the Audit Committee charter requires the Audit Committee to review and approve all related party transactions and to review and make recommendations to the full Board, or approve, any contracts or other transactions with any of our current or former executive officers, including consulting arrangements, employment agreements, change-in-control agreements, termination arrangements, and loans to employees made or guaranteed by us. We have a policy that we will not enter into any such transaction unless the transaction is determined by our disinterested directors to be fair to us or is approved by our disinterested directors or by our stockholders. Any determination by our disinterested directors is based on a review of the particular transaction, applicable laws and regulations, our policies, and the Nasdaq listing standards. As appropriate, the disinterested directors of the applicable committees of the Board will consult with our legal counsel or internal auditor. There was no transaction during fiscal 2023, and there are no currently proposed transactions, in which we were or are to be a participant in which an executive officer, director, director nominee, a beneficial owner of 5% or more of our common stock, or any immediate family members of such persons had or will have a direct material interest.

We have entered into indemnification agreements with each of our directors and executive officers that require us to indemnify such individuals, to the fullest extent permitted by Nevada law, for certain liabilities to which they may become subject as a result of their affiliation with us.

Clawback Policy

We maintain a compensation recovery, or clawback, policy. See “Compensation Matters – Compensation Discussion and Analysis – Additional Compensation Matters – Clawback Policy” for more information.

 

Communicating with the Board

Stockholders may communicate with the Board or specific directors, including our independent directors and the members of our board committees, by submitting a letter addressed to the Board of Directors of Smith & Wesson Brands, Inc., c/o any specified individual director or directors, at our principal executive offices.

Corporate Political Contributions and Expenditures

We have a policy to post on our website each fiscal year an annual report disclosing all political contributions or expenditures in the United States in excess of $50,000 that are not deductible as “ordinary and necessary” business expenses under Section 162(e) of the Internal Revenue Code, as amended (the "Code"). Non-deductible amounts generally include contributions to or expenditures in support of or opposition to political candidates, political parties, or political committees.

 

Corporate Stewardship Policy

We have a policy, pursuant to which, in order to meet our objective of being a good corporate steward, we consider, among other things, our responsibilities with respect to employee, safety, and governance risks, including the risks caused by the unlawful or improper use of firearms.

 

Director and Officer Derivative Trading and Hedging

We have a policy prohibiting our directors and officers, including our executive officers, and any family member residing in the same household, from engaging in derivatives trading and hedging involving our securities or pledging or margining our common stock.

 

Whistleblower Policy

We have a policy covering the policies and procedures for the receipt, retention, and treatment of complaints that we receive regarding accounting, internal controls, or auditing matters, and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.

 

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DIRECTOR COMPENSATION

The Compensation Committee, with advice from its independent compensation consultant, determines, or recommends to the Board for determination, the compensation of our directors. We pay each non-employee director an annual retainer in the amount of $70,000. We also pay additional sums to our Chairman, Vice Chairman, Chairs of our committees, and members of our committees as follows:

 

Chairman

 

$

62,500

 

 

Vice Chairman

 

$

23,000

 

(1)

Chair, Audit Committee

 

$

25,000

 

 

Chair, Compensation Committee

 

$

25,000

 

 

Chair, NCG Committee

 

$

25,000

 

 

Chair, ESG Committee

 

$

25,000

 

 

Non-Chair Audit Committee Members

 

$

8,000

 

 

Non-Chair Compensation Committee Members

 

$

5,000

 

 

Non-Chair NCG Committee Members

 

$

5,000

 

 

Non-Chair ESG Committee Members

 

$

5,000

 

 

 

 

 

 

 

 

(1) In June 2023, we eliminated the role of Vice Chairman.

 

Each committee member receives an additional $1,500 per committee meeting attended in excess of seven meetings per year (for the Audit Committee), in excess of six meetings per year (for the Compensation Committee), in excess of four meetings per year (for the NCG Committee), and in excess of four meetings per year (for the ESG Committee).

 

We reimburse directors for travel and related expenses incurred in connection with attending Board and committee meetings. Mr. Smith receives no additional compensation for his service as a director.

 

Each non-employee director receives a stock-based grant to acquire shares of our common stock on the date of his or her first appointment or election to the Board. Each non-employee director also receives a stock-based grant at the meeting of the Board held immediately following our annual meeting of stockholders for that year. Stock-based grants were in the form of restricted stock units (“RSUs”) for 8,071 shares of common stock in fiscal 2023. The RSUs vest one-twelfth each month after the grant.

 

The following table sets forth the compensation paid by us to each non-employee director for fiscal 2023.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees Earned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

or Paid in

 

 

Stock

 

 

 

All Other

 

 

 

 

 

Name (1)

 

Cash

 

 

Awards (2)

 

 

 

Compensation

 

 

 

Total

 

Anita D. Britt

 

$

105,000

 

 

$

100,000

 

 

 

$

2,352

 

(4)

 

$

207,352

 

Fred M. Diaz

 

$

77,211

 

 

$

100,000

 

 

 

$

2,513

 

(4)

 

$

179,724

 

John B. Furman (3)

 

$

96,333

 

 

$

100,000

 

 

 

$

 

 

 

$

196,333

 

Michael F. Golden (3)

 

$

118,000

 

 

$

100,000

 

 

 

$

337

 

(5)

 

$

218,337

 

Barry M. Monheit

 

$

100,000

 

 

$

100,000

 

 

 

$

1,525

 

(6)

 

$

201,525

 

Robert L. Scott

 

$

145,500

 

 

$

100,000

 

 

 

$

29,867

 

(6)

 

$

275,367

 

Mark P. Smith

 

$

 

 

$

 

 

 

$

 

 

 

$

 

Denis G. Suggs

 

$

94,667

 

 

$

100,000

 

 

 

$

 

 

 

$

194,667

 

 

(1)
As of April 30, 2023, each of the non-employee directors had the following number of stock awards outstanding, which represent undelivered shares underlying vested RSUs: Mr. Monheit 7,708; Mr. Scott 7,708; Ms. Britt 4,708; Mr. Furman 4,708; Mr. Golden 4,708; Mr. Diaz 4,708; and Mr. Suggs 4,708. As of April 30, 2023, there were no stock options outstanding for the directors.
(2)
The amounts shown in this column represent the grant date fair value for stock awards granted to the directors calculated in accordance with Accounting Standards Codification (“ASC”) Topic 718. The assumptions used in determining the grant date fair value of these awards are set forth in Note 13 to our consolidated financial statements, which are included in the Form 10-K.
(3)
Mr. Furman is retiring effective at the 2023 Annual Meeting. Mr. Golden passed away in June 2023.
(4)
Consists of costs for certain products provided without cost.
(5)
Consists of spousal travel.
(6)
Consists of costs for certain products provided without cost and spousal travel.
(7)
Consists of reimbursement of medical coverage costs, costs for certain products provided without cost and spousal travel.

We maintain stock ownership guidelines for our directors and executive officers. See “Compensation Matters — Compensation Discussion and Analysis — Additional Compensation Matters — Stock Ownership and Retention Requirements.”

 

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compensation matters

 

PROPOSAL TWO – ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

 

What Am I Voting On? The Board is asking our stockholders to approve, on an advisory basis, the compensation of our NEOs as disclosed in this Proxy Statement

 

Voting Recommendation: FOR the proposal

 

Vote Required: The affirmative vote of a majority of the votes cast is required to approve the proposal

 

Broker Discretionary Voting Allowed? No – broker non-votes have no effect

 

Abstentions: No effect

 

Pursuant to SEC rules, our stockholders are being asked to approve, on an advisory basis, the compensation of our NEOs as disclosed in this Proxy Statement. We have recently received high levels of support from our stockholders on advisory votes to approve executive compensation.

 

Recent Support for Say-on-Pay Proposal

2021: 97%

2022: 95%

As described in the Compensation Discussion and Analysis section, we believe our compensation policies and procedures are competitive, focused on pay-for-performance principles, and aligned with the long-term interests of our stockholders. Our executive compensation philosophy is to pay base salaries to our executive officers at levels that, in the context of unfavorable industry factors beyond the control of management, enable us to attract, motivate, and retain highly qualified executives. Our executive compensation program is designed to link annual performance-based cash incentive compensation to the achievement of pre-established performance objectives, based primarily on our financial results and achievement of other corporate goals.

 

Consistent with our pay-for-performance philosophy:

Our NEOs received no annual cash incentive payment for fiscal 2023 because we failed to achieve the threshold target for Adjusted EBITDAS.
Our NEOs who received a stock-based award in 2020 received none of the target shares of common stock for the PSU portion of the award because we failed to meet the minimum performance requirements.

The advisory vote on this resolution is not intended to address any specific element of compensation; rather, it relates to the overall compensation of our NEOs, as well as the compensation philosophy, policies, and practices described in this Proxy Statement. Our stockholders may vote for or against, or abstain from voting on, the following resolution:

RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Compensation Discussion and Analysis, executive compensation tables, and narrative discussion set forth in the Proxy Statement for the 2023 Annual Meeting of Stockholders.

This advisory vote will not be binding on the Board. The Compensation Committee will, however, take the outcome of the vote into account when considering future executive compensation decisions. We provide our stockholders with this advisory vote on an annual basis and expect that the next such vote will occur at the 2024 Annual Meeting.

 

 

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Compensation Matters

 

 

 

 

 

PROPOSAL THREE – ADVISORY VOTE ON FREQUENCY OF FUTURE SAY-ON-PAY VOTES

 

 

 

What Am I Voting On? The Board is asking our stockholders to approve, on an advisory basis, the frequency of future advisory votes on executive compensation

 

 

 

Voting Recommendation: FOR the option of every “1 year”

 

 

 

 

 

Vote Required: The option of every “1 year,” “2 years,” or “3 years” that receives the highest number of affirmative votes by those shares present in person or represented by proxy and entitled to vote

 

Broker Discretionary Voting Allowed? No – broker non-votes have no effect

 

Abstentions: No effect

 

 

 

In accordance with SEC rules, our stockholders may vote, on an advisory basis, on how frequently they would like to cast an advisory vote on the compensation of our NEOs. The Board believes conducting an advisory vote on executive compensation on an annual basis is currently appropriate for us and our stockholders.

Our stockholders may cast a vote on the preferred voting frequency by selecting the option of “1 year,” “2 years,” or “3 years,” or they may abstain from voting in response to the following resolution:

RESOLVED, that the Company’s stockholders wish the Company to include an advisory vote on the compensation of the Company’s named executive officers pursuant to Section 14(a) of the Securities Exchange Act every:

one year,

two years, or

three years.

Because the required vote is advisory, it will not be binding upon the Board. The Board will, however, take into account the outcome of the vote when considering the frequency with which we will provide our stockholders the opportunity to vote, on an advisory basis, to approve the compensation of our NEOs.

 

 

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COMPENSATION DISCUSSION AND ANALysis

EXECUTIVE SUMMARY

Named Executive Officers

This section describes our executive compensation program, outlines the core principles behind that program, and reviews the actions taken by the Compensation Committee concerning the fiscal 2023 compensation of the following NEOs:

 

Name

Title

Mark P. Smith

President and CEO

Deana L. McPherson

Executive Vice President, CFO, Treasurer, and Assistant

Secretary

Kevin A. Maxwell

Senior Vice President, General Counsel, Chief Compliance

Officer, and Secretary

Susan J. Cupero

Vice President, Sales

Program Emphasis

Our executive compensation program emphasizes our pay-for-performance philosophy and is designed to help us attract, motivate, and retain highly qualified executives.

Compensation Governance and Practices

Our executive compensation program demonstrates our ongoing commitment to good corporate governance practices and aligns our executive officers’ interests with those of our stockholders.

 

Risk Mitigation

 

Program Features

 

 

 

 

Clawback policy

Stock ownership guidelines

Derivatives trading and hedging policy

Annual review of compensation plans and policies

   includes risk assessment

 

Annual say-on-pay advisory vote

Independent compensation consultant

"Double trigger" vesting acceleration in the event
    of a change-in-control

No tax gross ups in connection with severance or

   change-in control payments

 

Say-on-Pay Results

At the 2022 Annual Meeting, 95% of the votes cast were in favor of the advisory vote to approve executive compensation. We have recently received high levels of support from our stockholders on advisory votes to approve executive compensation. Based on these high levels of support, the Compensation Committee determined not to make any material changes to our executive compensation program.

Recent Support for Say-on-Pay Proposal

2021: 97%

2022: 95%

 

 

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Summary of Fiscal 2023 Compensation Program

The following highlights aspects of our fiscal 2023 compensation program:

Base Salary — Consistent with past practice, in April 2022 the Compensation Committee, with advice from its independent compensation consultant, reviewed the base salaries of our executive officers and compared them with peer group and broad market data. The Compensation Committee adjusted base salary levels to more closely align with comparable positions at our peer group, to reflect additional experience, and to take into account cost-of-living factors. In fiscal 2023, base salary increases for our NEOs ranged from 2.9% to 3.0%.
Annual Cash Incentive Bonuses — Our executive annual cash incentive program for fiscal 2023 continued to focus on the achievement of objective annual financial goals; specifically, Net Sales and Adjusted EBITDAS. NEO annual target cash incentive compensation as a percentage of base salary was 100% in the case of our CEO, 75% in the case of our CFO, and 65% for our other NEOs. When setting the financial performance goals at the beginning of fiscal 2022, the Compensation Committee considered the difficult and unpredictable environment for our business and the relative lack of control that our management has over external, social, political, health, and economic factors that impact us. In accordance with our pay-for-performance philosophy, our NEOs received no bonus payment for fiscal 2023 because we failed to achieve the threshold target for Adjusted EBITDAS.
Long-Term Incentive Compensation — Consistent with past practice, the Compensation Committee granted stock-based awards to our executive officers in fiscal 2023, consisting of a mix of RSUs (40%) and PSUs (60%). The RSUs vest one-fourth following each of the first, second, third, and fourth anniversaries of the grant date. The number of shares of common stock, if any, to be delivered under PSUs depends on the relative performance of our common stock compared with the performance of the Russell 2000 Index (the “RUT”), with a target payout requiring our performance to be higher than the RUT over a three-year period.

Factors Affecting Fiscal 2023 Compensation

Historically, the firearm industry has been very cyclical, with past expansions and contractions driven, in large part, by unpredictable political, economic, social, legislative, and regulatory factors beyond the control of industry participants and their management teams. For example, we experienced historic levels of demand for our products in parts of fiscal 2021 and fiscal 2022, in part, as a result of the impact of COVID-19 and the social unrest experienced in the United States during the summer of 2020. Since then, demand for our products has returned to more normalized levels, which adversely impacted our year-over-year financial and operating results in fiscal 2023.

EXECUTIVE COMPENSATION PROGRAM OVERVIEW

Philosophy and Objectives

Our executive compensation philosophy is to pay base salaries to our executive officers at levels that, in the context of unfavorable industry factors beyond the control of management, enable us to attract, motivate, and retain highly qualified executives. Our executive compensation program is designed to link annual performance-based cash incentive compensation to the achievement of pre-established performance objectives, based primarily on our financial results. Similarly, our executive compensation program is designed so that stock-based compensation focuses our executive officers’ efforts on increasing stockholder value by aligning their economic interests with those of our stockholders.

Total compensation levels for our executive officers reflect corporate positions, responsibilities, and the achievement of performance objectives. Due to our pay-for-performance philosophy, realized compensation levels may vary significantly from year-to-year and among our executive officers.

 

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Goals

Our executive compensation program’s objectives include:

Attracting, motivating, and retaining highly qualified executives, especially in the context of challenging business conditions.
Reflecting our culture and approach to total rewards, which include health and welfare benefits, a safe work environment, and professional development opportunities.
Reflecting our “pay-for-performance” philosophy.
Providing a rational and consistent approach to compensation that is understood by senior leadership.
Aligning compensation with our interests, as well as those of our stockholders.
Recognizing corporate stewardship and fiscal responsibility.

ADMINISTRATION

The Board has appointed a Compensation Committee, consisting exclusively of independent directors. The charter of the Compensation Committee authorizes the Compensation Committee to determine and approve, or to make recommendations to the Board with respect to, the compensation of our CEO and other executive officers. The Board has authorized the Compensation Committee to make all decisions with respect to executive compensation. Among other things, the Compensation Committee is authorized to determine and approve the base salary of our CEO and other executive officers. Additionally, the Compensation Committee establishes annual cash and stock-based incentive compensation programs for our CEO and other executive officers and provides our executives with variable compensation opportunities, a majority of which is based on the achievement of key operating measures determined at the beginning of the fiscal year. Once the Compensation Committee determines key operating measures for the upcoming fiscal year, the measures generally are not subject to material changes during the fiscal year. The Compensation Committee, with advice from its independent compensation consultant, also determines the compensation of our directors.

Role of the Compensation Committee and our CEO

The Compensation Committee determines the compensation of our executive officers, including our CEO, at least annually in light of the goals and objectives of that fiscal year’s compensation program. Together with our CEO, the Compensation Committee annually assesses the performance of our other executive officers. After receiving recommendations from our CEO, the Compensation Committee, with input from its independent compensation consultant, determines the compensation of our other executive officers.

In determining executive officer compensation levels, the Compensation Committee periodically reviews compensation levels of executives of companies deemed to be generally similar to ours based on their size, industry, and competitive factors. The Compensation Committee uses this peer group information, as well as published executive compensation survey data from a broader group of companies with similar revenue to ours, as points of reference; however, the Compensation Committee does not benchmark or target our compensation levels to a specific percentile against this competitive information.

At the invitation of the Compensation Committee, our CEO may attend portions of Compensation Committee meetings, except those at which his compensation is discussed or determined. This enables the Compensation Committee to review with him the goals that he regards as important to achieving our success and to receive his assessment of the performance of, and goals for, our other executive officers. However, the Compensation Committee, with the assistance of its independent compensation consultant, rather than our CEO, determines goals, targets, and compensation for our other executives.

 

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Compensation Matters

 

 

 

 

Role of the Independent Compensation Consultant

The Compensation Committee has sole discretion to retain a compensation consultant and is directly responsible for the appointment, compensation, and oversight of the work of the compensation consultant. The Compensation Committee retains a compensation consultant to assist in setting the design and goals of the executive compensation program, to review trends in executive compensation, to identify relevant peer companies, and to conduct an assessment and analysis of executive market compensation. The compensation consultant reports directly to the Compensation Committee.

Compensia, Inc. served as the Compensation Committee’s independent compensation consultant for fiscal 2023. For fiscal 2023, the compensation consultant identified for the Compensation Committee peer group companies, provided a compensation assessment and analysis of those companies, determined the positioning of each executive officer’s compensation by element among the peer companies and the survey data, developed recommendations and guidelines for the structure of our executive compensation program, reviewed the overall compensation package, and advised the Compensation Committee regarding the appropriateness of our executive compensation program. In addressing Compensia’s independence in light of applicable SEC rules and Nasdaq standards, the Compensation Committee considered relevant factors and concluded that Compensia is independent and the engagement would not raise any conflicts of interest under the applicable rules and standards.

Peer Group for Fiscal 2023

The Compensation Committee’s independent compensation consultant identified for the Compensation Committee a peer group for fiscal 2023. In selecting peer companies for the Compensation Committee’s final review, the consultant identified companies deemed generally relevant to us with a focus on those involved in durables and apparel and consumer products companies, especially those with high dollar value products. The consultant then supplemented the list with companies involved in manufacturing. Within these industries, the consultant used a “rules-based” approach to select companies based on similar financial characteristics; specifically, it targeted companies with revenue from approximately $500 million to $2 billion and a market capitalization from approximately $300 million to $3 billion. The consultant proposed, and the Compensation Committee adopted, a number of changes to the peer group for fiscal 2023 in order to improve our alignment with the peer group’s median revenue and market capitalization selection criteria. Specifically, the Compensation Committee added three companies (Lifetime Brands, Inc., OneWater Marine Inc., and Quannex Building Products Corp.) to the peer group for fiscal 2023 and removed three other companies (Callaway Golf Company, National Presto Industries, and NN, Inc.).

 

Fiscal 2023 Peer Group

Ethan Allen Interiors, Inc.

Movado Group, Inc.

Go Pro, Inc.

OneWater Marine Inc.

Haverty Furniture Companies, Inc.

Quanex Building Products Corp.

Hooker Furniture Corporation

Standard Motor Products

iRobot Corporation

Standex International Corporation

Johnson Outdoors Inc.

Stoneridge, Inc.

  Lifetime Brands, Inc.

Sturm, Ruger & Company, Inc.

Malibu Boats, Inc.

Universal Electronics Inc.

MarineMax, Inc.

Vista Outdoor Inc.

MasterCraft Boat Holdings, Inc.

Wolverine World Wide, Inc.

Motorcar Parts of America, Inc.

 

 

 

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Compensation Matters

 

 

 

 

COMPENSATION ELEMENTS

Our executive compensation program consists primarily of base salary, annual performance-based cash incentive compensation opportunities, stock-based compensation, and severance benefits, together with health and welfare benefits generally available to most employees and our other executives, and limited perquisites. The Compensation Committee considers each element of compensation individually and collectively with other elements of compensation when establishing the various forms, elements, and levels of compensation for our executive officers.

Our fiscal 2023 executive compensation program included the following direct compensation components: base salary, annual performance-based cash incentives, and stock-based compensation.

 

Factors

Base Salary

Annual Performance

-Based

Cash Incentive

 

PSUs

 

RSUs

   Form of Compensation

Cash

Equity

Fixed

Performance-Based

Performance-Based

Time-Based

 

   Performance Timing

Short-Term

Emphasis

Long-Term

Emphasis

   Measurement Period

Annual and

Ongoing

1 year

Vests at end

of 3-year

period

Vests 25%

each year over

4-year

period

   Key Performance Metrics

   Applicable

Net Sales;

Adjusted EBITDAS

Relative TSR

Stock Price

   Determination of

   Performance-Based

   Payouts

Formulaic

Formulaic

 

Base Salaries

Base salaries are designed to provide competitive levels of compensation to our executives based on their position, responsibilities, skills, experience, performance, and contributions. The Compensation Committee also considers individual performance and contributions, future potential, competitive salary levels for comparable positions at other companies, salary levels relative to other internal positions, corporate needs, and the advice of its independent compensation consultant. The Compensation Committee’s evaluation of these factors is subjective, and it does not assign a particular weight to any one factor.

Given the high-profile nature of our industry, it has become increasingly difficult to attract, motivate, and retain highly qualified individuals willing to be associated with us and our industry. The Compensation Committee has become increasingly aware of the impact this factor has had not only on existing and potential future employees, but also the pressures this factor places on the families of these individuals.

 

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Compensation Matters

 

 

 

 

Fiscal 2023 Base Salaries. The Compensation Committee generally sets base salaries for our executive officers at the beginning of the fiscal year. Based on an evaluation of the factors listed above, the Compensation Committee’s desire to reward and retain our executive officers, the general industry range for base salary increases, and the competitiveness of our base salaries as measured against the peer and market data, the Compensation Committee set our NEOs’ annual base salaries for fiscal 2023 as follows:

 

Name and Position

 

Annualized
Fiscal 2022
Base Salary

 

 

 

 

Annualized
Fiscal 2023
Base Salary

 

 

 

Percentage
Change

Mark P. Smith

 

$

 

700,000

 

 

 

$

 

721,000

 

(1)

 

3.0%

Deana L. McPherson

 

$

 

400,000

 

 

 

$

 

412,000

 

(1)

 

3.0%

Kevin A. Maxwell

 

$

 

340,000

 

 

 

$

 

350,000

 

(1)

 

2.9%

Susan J. Cupero

 

$

 

300,000

 

 

 

$

 

309,000

 

(1)

 

3.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The increase took into account peer company comparisons and additional experience in the position.

 

Annual Performance-Based Cash Incentive Compensation

Annual performance-based cash incentive compensation is designed to motivate our executives and reward the achievement of specific performance goals that support our business strategy. In designing the cash incentive compensation plan for any particular year or period, the Compensation Committee establishes performance objectives, based primarily on our financial results and the achievement of other corporate goals. In limited cases, the Compensation Committee may consider individual objectives, responsibilities, and performance in determining the amounts payable, but it did not do so in fiscal 2023.

The Compensation Committee determines the target annual compensation opportunities for our executive officers, with these opportunities being subject to change from year to year based on its periodic review of economic, industry, and competitive data; changes in individual responsibilities; and our overall compensation philosophy. The Compensation Committee confirms, with its independent compensation consultant and our independent audit firm, the achievement of the objectives and approves the payment, if any, of annual cash incentive compensation in the first quarter of the following fiscal year.

Fiscal 2023 Executive Annual Cash Incentive Program. In April 2022, the Compensation Committee established the 2023 Executive Annual Bonus Plan, a performance-based cash incentive compensation plan for our executives, including our NEOs (the “2023 Bonus Plan”). The 2023 Bonus Plan provided each participant an opportunity to earn cash incentive compensation based on attaining pre-established objective financial performance metrics and, from time to time, individual performance goals. Each participant was assigned an incentive bonus opportunity expressed as a percentage of base pay and objective financial performance metrics were established with varying weightings totaling 100%. For each metric, threshold, budget, target, and maximum performance levels were set. Final cash incentive compensation was calculated by multiplying each participant’s target percentage by the weighted average percentage calculated for each metric. Cash incentive compensation could not exceed 200% of a participant’s target bonus opportunity, and eligibility for payment of any award was subject to the participant continuing to be employed by us through the end of the fiscal year.

Fiscal 2023 Performance Metrics. For fiscal 2023, the Compensation Committee established Net Sales and Adjusted EBITDAS as the performance metrics for our executives, with a weighting of 40% for Net Sales and 60% for Adjusted EBITDAS. Adjusted EBITDAS also served as the threshold for which the failure to achieve this performance metric would result in no bonus payments regardless of the achievement of the other performance metric.

The target award percentages for fiscal 2023 as a percentage of base pay were 100% for Mr. Smith, 75% for Ms. McPherson, and 65% for Mr. Maxwell and Ms. Cupero. There were no individual performance goals for fiscal 2023.

 

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Compensation Matters

 

 

 

 

For these purposes, “Adjusted EBITDAS” means our net income as reported in the Form 10-K adding back interest, taxes, depreciation, amortization, non-cash stock compensation expense and any nonrecurring expenses as determined by the Compensation Committee as set forth in the 2023 Bonus Plan or at any time thereafter. For fiscal 2023, the Compensation Committee determined to include the following nonrecurring expenses: (i) accelerated expenses related to the refinance of our credit facility, if any; (ii) fair value inventory step-up and backlog expense; (iii) all acquisition or merger related expenses associated with negotiating, conducting diligence, and closing for any acquired company or merger; (iv) any costs associated with the Relocation, including severance, relocation, recruiting, construction and duplication of costs; (v) changes in contingent consideration; (vi) impairment charges for goodwill, tangible, or intangible assets; (vii) costs incurred relating to shareholder activism; (viii) any gain or loss incurred on a sale or disposal of a product line, which sale or disposal is approved by the Board; (ix) costs directly related to inventory that cannot be sold or otherwise used by us, which unsaleable or unusable inventory is the result of a change in federal firearms law; and (x) any costs/impact related to the implementation of any new accounting pronouncements that become effective during the fiscal year. To the extent practicable, each amount was calculated based upon the numbers used in the audited financial statements and, if possible, in the same amount as reported in the Form 10-K.

The financial performance metrics established under the 2023 Bonus Plan were as follows:

 

Performance Metrics

 

 

Target
Performance
(in 000's)

 

 

Potential
Maximum
Payout of
Target
Bonus

 

 

Performance
Required
to Earn
Maximum
Payout
(as a % of
Target
Performance)

 

Net Sales

 

 $

 

864,126

 

 

 

200.0

%

 

 

115.0

%

Adjusted EBITDAS

 

 $

 

300,864

 

 

 

200.0

%

 

 

115.0

%

 

 

 

 

 

 

 

 

 

 

 

 

The failure to reach the threshold metric of at least $141,277, or 47.0% of target, for the Adjusted EBITDAS metric would result in no bonus payments regardless of the achievement of the Net Sales metric.

In fiscal 2023, Net Sales and Adjusted EBITDAS, for purposes of compensation, were $479.2 million and $95.2 million, respectively, compared with $864.0 million and $299.6 million, respectively, in fiscal 2022. We experienced historic levels of demand for our products in parts of fiscal 2021 and fiscal 2022, in part because of the impact of COVID-19 and the social unrest experienced in the U.S. during the summer of 2020. Since then, demand for our products has returned to more normalized levels, which adversely impacted our year-over-year financial and operating results in fiscal 2023.

The table below sets forth for each NEO the annual fiscal 2023 base salary, the target bonus percentage, the annualized target cash bonus opportunity, and the actual bonus paid for fiscal 2023 reflected as a percentage of target bonus opportunity and in cash:

 

Name

 

Annual
Fiscal 2023
Base Salary

 

 

Target
Bonus
Percentage

 

 

Annualized
Target Cash
Bonus
Opportunity

 

 

Actual Bonus
paid for
Fiscal 2023
(as a % of
Target
Bonus
Opportunity

 

Actual
Bonus
Paid for
Fiscal 2023

 

Mark P. Smith

 

$

 

721,000

 

 

100%

 

$

 

721,000

 

 

0.0%

 

$

 

Deana L. McPherson

 

$

 

412,000

 

 

75%

 

$

 

309,000

 

 

0.0%

 

$

 

Kevin A. Maxwell

 

$

 

350,000

 

 

65%

 

$

 

227,500

 

 

0.0%

 

$

 

Susan J. Cupero

 

$

 

309,000

 

 

65%

 

$

 

200,850

 

 

0.0%

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Stock-Based Compensation

Our stock-based compensation is composed of both RSUs and PSUs. We believe stock-based compensation is critical in aligning our executives’ and stockholders’ interests. Together, we believe that these incentives focus our executives on making decisions that will benefit our stockholders.

The Compensation Committee believes in tying executive rewards directly to our long-term success and focusing our executives’ efforts on increasing stockholder value by aligning their interests with those of our stockholders. Our stock-based compensation enables our executives to earn and maintain a significant stock ownership position in us. The amount of stock-based compensation granted takes into account our performance; the grant date value of awards; previous grants to an executive officer; an executive officer’s position; the performance, contributions, skills, experience, and responsibilities of the executive officer; the cost to us; the executive officer’s total compensation in relation to peers at our peer companies; and other factors that the Compensation Committee deems necessary or appropriate from time to time, including retention, overhang, and burn rate.

The Compensation Committee generally sets the vesting schedule for RSUs over multiple year periods to encourage executive retention. The Compensation Committee generally establishes multi-year performance requirements for the earning of PSUs to reward long-term Company performance. PSUs are earned only if the relative performance of our common stock achieves the then-applicable pre-established metric compared with the RUT’s performance. In addition, we generally maintain a value cap on PSUs.

Given the high-profile nature of our industry, it has become increasingly difficult to attract, motivate, and retain highly qualified individuals willing to be associated with us and our industry. The Compensation Committee continues to recognize the importance of long-term incentive stock-based compensation as a factor in executive compensation.

Timing of Stock-Based Awards. The Compensation Committee sets the value of RSUs and PSUs at the fair market value of our common stock, which, for annual awards, is the average closing price of our common stock on Nasdaq for the five-day period ending on the effective date of grant and, for new hires or special awards, is the closing price of our common stock on Nasdaq on the effective date of grant. The Compensation Committee generally grants stock-based compensation to our executive officers annually within the same time frame each year. In the case of new hires, grant prices generally are determined by the closing price of our common stock on the 15th day of the month following the date on which the employee reports for service.

Fiscal 2023 Stock-Based Compensation. During fiscal 2023, grants of annual stock-based compensation to our NEOs consisted of RSUs and PSUs, with a weighting of 40% for RSUs and 60% for PSUs. In determining the equity awards granted to each executive officer, the Compensation Committee considered the factors discussed above.

During fiscal 2023, we granted the following RSUs and PSUs to our NEOs:

 

Name

 

RSUs

 

 

PSUs at
Threshold

 

 

PSUs at
Target

 

 

PSUs at
Maximum

 

Mark P. Smith

 

 

41,834

 

 

 

23,845

 

 

 

62,750

 

 

 

125,500

 

Deana L. McPherson

 

 

12,894

 

 

 

7,349

 

 

 

19,340

 

 

 

38,680

 

Kevin A. Maxwell

 

 

8,883

 

 

 

5,062

 

 

 

13,323

 

 

 

26,646

 

Susan J. Cupero

 

 

8,883

 

 

 

5,062

 

 

 

13,323

 

 

 

26,646

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RSUs vest one-fourth following each of the first, second, third, and fourth anniversaries of the grant date.

PSUs are earned and vest based on the relative performance of our common stock against the RUT over the approximately three-year performance period following the date of grant. If the relative performance of our common stock (measured based on the average closing price of our common stock during the 90-calendar-day-period preceding approximately the third anniversary of the date of grant against the average

 

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Compensation Matters

 

 

 

 

closing price of our common stock during the 90-calendar-day-period immediately following the date of grant) does not equal or exceed the relative performance of the RUT (measured based on the average closing price of the RUT during the 90-calendar-day-period preceding approximately the third anniversary of the date of grant against the average closing price of the RUT during the 90-calendar-day-period immediately following the date of grant), then no PSUs subject to the awards will be earned and vest. If the relative performance of our common stock equals the relative performance of the RUT, then 38% of the PSUs subject to the awards (at target) will be earned and vest, or the threshold award. If the relative performance of our common stock exceeds the relative performance of the RUT by up to five points, then the PSUs subject to the awards will be earned and vest on a straight-line basis from the threshold award level up to the target award level, with 100% of the PSUs subject to the awards (the target number of PSUs) being earned and vesting if the relative performance of our common stock exceeds the relative performance of the RUT by five points. If the relative performance of our common stock exceeds the relative performance of the RUT by over five points up to a level of 10 points, then the PSUs subject to the awards will be earned and vest on a straight-line basis up to the maximum award, with 200% of the PSUs subject to the awards (the maximum number of PSUs) being earned and vesting if the relative performance of our common stock exceeds the relative performance of the RUT by 10 points or more.

The underlying shares of our common stock earned, if any, relating to PSUs will be delivered as soon as practical after the ending date of the performance period and confirmation by the Compensation Committee of the performance achievement. The maximum number of shares that can be delivered with respect to the fiscal 2023 PSU awards is limited to a dollar value, determined as of the vesting date, of 600% of the grant date value.

Upon a change in control of the Company prior to the three year anniversary of the date of any PSU grant, each PSU award recipient will earn a number of PSUs subject to the award in accordance with the formula described above, provided that (i) the relative performance of our common stock will be measured based on the consideration offered for one share of our common stock in the change in control to calculate our market capitalization (or in the event of a change in control that does not involve an acquisition of our stock, based on the trading price of our common stock on the date of the change in control to calculate our market capitalization) against the average closing price of our common stock during the 90-calendar-day period immediately following the date of grant; and (ii) the relative performance of the RUT will be measured based on the average closing price of the RUT during the 90-calendar-day-period immediately prior to the change in control against the average closing price of the RUT during the 90-calendar-day-period immediately following the date of grant. The PSUs earned pursuant to the formula described above will then be converted into RSUs that will vest upon the earlier of (i) a qualifying termination of employment or (ii) the original vesting date.

2020 PSU Payout. The PSUs granted in fiscal 2020 to our executive officers, which had a three-year performance period ending May 1, 2023, were not earned because our market capitalization combined with the market capitalization of AOUT did not meet the minimum performance requirements compared with the RUT. Over the three-year performance period, our market capitalization combined with the market capitalization of AOUT depreciated 29.0% while the RUT appreciated 31.0%. As a result, the Compensation Committee confirmed that this underperformance resulted in the PSUs granted in fiscal 2020 not being earned, and therefore, our NEOs who received the 2020 award received none of the target shares of common stock underlying the PSUs granted in fiscal 2020.

Adjustments for the Separation. In connection with the Separation, our outstanding stock-based awards were adjusted in a manner intended to maintain the intrinsic value of the RSUs and PSUs immediately prior to the Separation. The RSUs and PSUs held by our directors and executives generally were converted into RSUs or PSUs of us and AOUT, such that each such holder would (i) continue to hold the existing RSU or PSU in us covering the same number of shares of our common stock that were subject to the RSU or PSU prior to the Separation and (ii) receive an identical RSU or PSU covering one share of AOUT common stock for each four shares of our common stock covered by the RSU or PSU in us, resulting in the RSUs or PSUs for us, and AOUT, having a combined intrinsic value immediately after the Separation as before the Separation, taking into account any necessary adjustments to the exercise price to maintain

 

26 I 2023 Proxy Statement