exp-def14a_20210804.htm

 

 

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

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

 

 

 

 

 

1)

 

Title of each class of securities to which transaction applies:

 

 

 

 

 

 

 

2)

 

Aggregate number of securities to which transaction applies:

 

 

 

 

 

 

 

3)

 

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

 

 

 

 

 

 

 

4)

 

Proposed maximum aggregate value of transaction:

 

 

 

 

 

 

 

5)

 

Total fee paid:

 

 

 

 

 

 

 

 

Fee paid previously with preliminary materials.

 

 

 

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

 

 

 

 

 

1)

 

Amount Previously Paid:

 

 

 

 

 

 

 

2)

 

Form, Schedule or Registration Statement No.:

 

 

 

 

 

 

 

3)

 

Filing Party:

 

 

 

 

 

 

 

4)

 

Date Filed:

 

 

 

 

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

Proxy Statement and Notice of

Annual Meeting of Stockholders

 

 

 


 

 

 

 

5960 Berkshire Ln., Suite 900

Dallas, Texas 75225

June 24, 2021

Dear Fellow Stockholder:

It is my pleasure to invite you to our Annual Meeting of Stockholders, which will be held on Tuesday, August 3, 2021, at the Hilton Dallas Park Cities, 5954 Luther Lane, Dallas, TX 75225, at 8:00 a.m., local time. We hope that you will attend the meeting, but we encourage you to vote by proxy whether or not you plan to attend the meeting in person.

This year we are again taking advantage of the Securities and Exchange Commission rules that allow companies to furnish their proxy materials over the Internet. As a result, beginning on June 24, 2021, we are mailing to many of our stockholders a Notice Regarding the Availability of Proxy Materials, or Notice, instead of a paper copy of the materials for the Annual Meeting. The Notice contains instructions on how to access the proxy materials over the Internet and vote online, as well as how stockholders can elect to receive paper copies of the materials. We believe that this process expedites stockholders’ receipt of proxy materials and provides stockholders with the information they need, while also conserving natural resources and reducing the costs of printing and distributing our proxy materials.

If you attend the Annual Meeting and desire to vote your shares personally rather than by proxy, you may withdraw your proxy at any time before it is exercised. Your vote is very important, whether you own one share or many.

Thank you for your continued support and interest in Eagle.

 

 

 

 

Sincerely,

 

 

 

MICHAEL R. HAACK

 

 

 

President and Chief Executive Officer

 

 


 

EAGLE MATERIALS INC.

5960 Berkshire Ln., Suite 900

Dallas, Texas 75225

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held August 3, 2021

 

 

To the Stockholders of Eagle Materials Inc.:

The annual meeting of stockholders of Eagle Materials Inc., which we refer to as the “Company,” will be held at the Hilton Dallas Park Cities, 5954 Luther Lane, Dallas, TX 75225, at 8:00 a.m., local time, on Tuesday, August 3, 2021.

At the meeting, stockholders will vote on:

(1)

Election of the four Class III directors identified in the accompanying proxy statement, each to hold office for three years.

(2)

Approval of an advisory resolution regarding the compensation of our named executive officers.

(3)

Approval of the expected appointment of Ernst & Young LLP as the Company’s independent auditors for the fiscal year ending March 31, 2022.

(4)

Any other matters properly brought before the annual meeting, or any adjournment thereof.

The Company’s Board of Directors has fixed the close of business on June 8, 2021 as the record date for the determination of stockholders entitled to notice of and to vote at the meeting or any adjournment thereof. Only record holders of the Company’s common stock, par value $0.01 per share, which we refer to as our “Common Stock,” at the close of business on the record date are entitled to notice of and to vote at the annual meeting. A list of holders of Common Stock will be available for examination by any stockholder at the meeting and, during the ten-day period preceding the meeting date at the executive offices of the Company located at 5960 Berkshire Ln., Suite 900, Dallas, Texas 75225.

For further information regarding the matters to be acted upon at the annual meeting, I urge you to carefully read the accompanying proxy statement. If you have questions about these proposals or would like additional copies of the proxy statement, please contact: Eagle Materials Inc., Attention: James H. Graass, Secretary, 5960 Berkshire Ln., Suite 900, Dallas, Texas 75225 (telephone: (214) 432-2000).

You are cordially invited to attend the annual meeting. Your vote is important. Whether or not you expect to attend the annual meeting in person, please vote through the Internet (as described in the Notice) or by telephone or fill in, sign, date and promptly return the accompanying form of proxy in the enclosed postage-paid envelope so that your shares may be represented and voted at the annual meeting. This will not limit your right to attend or vote in person at the annual meeting. Your proxy will be returned to you if you choose to attend the annual meeting and request that it be returned. Shares will be voted in accordance with the instructions contained in your proxy, but if any proxies that are signed and returned to us do not specify a vote on any proposal, such proxies will be voted in the manner, if any, recommended by the Board.

 

 

By Order of the Board of Directors

 

 

 

 

 

JAMES H. GRAASS

 

 

 

 

 

Executive Vice President,

General Counsel and Secretary

 

 

 

Dallas, Texas

 

 

June 24, 2021

 

 

 

 

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 3, 2021.

Our proxy statement and 2021 annual report to stockholders are available

to you on the Internet at www.proxyvote.com.

 

 


 

 

TABLE OF CONTENTS

 

 

 

 

 

 

Page

Introduction

 

1

Date, Time and Place of the Annual Meeting

 

1

Purposes of the Annual Meeting and Recommendations of our Board of Directors

 

1

About the Meeting

 

2

Who Can Vote

 

2

How Proxies Will be Voted

 

2

How to Revoke Your Proxy

 

2

Quorum and Required Vote

 

2

Expenses of Soliciting Proxies

 

2

How You Can Vote

 

2

Proposal No. 1: Election of Directors and Related Matters

 

3

General

 

3

Director Independence

 

3

Nominees

 

4

Recommendation of the Board

 

4

Director Qualifications

 

5

Board Meetings and Attendance Records

 

8

Board Compensation

 

9

Non-Employee Director Compensation for Fiscal Year 2021

 

10

Board Leadership Structure and Role in Risk Oversight

 

11

Board Committees

 

12

Compensation Committee Interlocks and Insider Participation

 

14

How to Contact Our Board

 

15

Executive Officers Who Are Not Directors

 

16

Compensation Committee Report

 

17

Compensation Discussion and Analysis

 

18

Our Year in Review

 

18

Named Executive Officers

 

18

Compensation Philosophy

 

18

Determining Executive Compensation

 

20

Primary Elements of Executive Compensation

 

22

Other Elements of Executive Compensation

 

26

Other Compensation Policies and Practices

 

29

 

 

 

 

 

Page

Executive Compensation

 

30

Summary Compensation Table

 

30

Grants of Plan-Based Awards

 

32

Outstanding Equity Awards at Fiscal Year-End

 

33

Option Exercises and Stock Vested

 

35

Nonqualified Deferred Compensation in FY 2021

 

36

Potential Payments Upon Termination or Change
in Control

 

37

Change in Control Continuity Agreements

 

37

Payments Made Upon Any Termination

 

38

CEO Pay Ratio

 

40

Stock Ownership

 

41

Management

 

41

Certain Beneficial Owners

 

42

Related Party Transactions

 

42

Section 16(a) Beneficial Ownership Reporting Compliance

 

43

Employee, Officer and Director Hedging

 

43

Code of Conduct

 

43

Proposal No.  2: Advisory Vote on Compensation of Our Named Executive Officers

 

44

Recommendation of the Board

 

44

Proposal No.  3: Approval of Expected Appointment of Independent Auditors

 

45

Recommendation of the Board

 

45

Relationship with Independent Public Accountants

 

46

Audit Committee Report

 

47

Other Matters Which May be Presented for Action at the Meeting

 

48

Delivery of Documents to Stockholders

 

48

Deadline for Receipt of Stockholder Proposals

 

48

 

 

 

 


 

EAGLE MATERIALS INC.

5960 Berkshire Ln., Suite 900

Dallas, Texas 75225

PROXY STATEMENT

 

 

INTRODUCTION

The accompanying proxy, mailed or provided online, together with this proxy statement, is solicited by and on behalf of the Board of Directors of Eagle Materials Inc., which we refer to as the “Company,” for use at the annual meeting of stockholders of the Company and at any adjournment or postponement thereof. References in this proxy statement to “we,” “us,” “our” or like terms also refer to the Company. References to our “Board of Directors” or “Board” refer to the board of directors of the Company. The Notice Regarding the Availability of Proxy Materials, this proxy statement and accompanying proxy were first mailed to our stockholders on or about June 24, 2021.

Date, Time and Place of the Annual Meeting

The 2021 annual meeting of our stockholders will be held at the Hilton Dallas Park Cities, 5954 Luther Lane, Dallas, TX 75225, at 8:00 a.m., local time, on Wednesday, August 3, 2021.

Purposes of the Annual Meeting and Recommendations of our Board of Directors

At the meeting, action will be taken upon the following matters:

(1)

Election of Directors. Stockholders will be asked to elect the four Class III directors identified in this proxy statement, each to hold office for a term of three years.

Our Board of Directors recommends that you vote “FOR” the election of its four nominees for director named in this proxy statement.

(2)

Advisory Vote on Compensation of our Named Executive Officers. We are asking you to approve a non-binding advisory resolution regarding the compensation of our named executive officers as reported in this proxy statement.

Our Board of Directors recommends that you vote “FOR” the non-binding advisory resolution approving the compensation of our named executive officers.

 

(3)

Approval of the Expected Appointment of Ernst & Young LLP. We are asking you to approve the expected appointment by

our Audit Committee of Ernst & Young LLP as the Company’s independent auditors for the fiscal year ending March 31, 2022.

Our Board of Directors recommends that you vote “FOR” the approval of the expected appointment of Ernst & Young LLP as the Company’s independent auditors for the fiscal year ending March 31, 2022.

(4)

Other Business. In addition, you may be asked to vote upon such other matters, if any, as properly come before the annual meeting, or any adjournment thereof.

Our Board of Directors does not know of any matters to be acted upon at the meeting other than the matters set forth in items (1) through (3) above.

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON

AUGUST 3, 2021.

Our proxy statement and 2021 annual report to
stockholders are available to you on the Internet at www.proxyvote.com.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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ABOUT THE MEETING

 

 

 

Who Can Vote

The record date for the determination of holders of the Company’s Common Stock, par value $0.01 per share, which we refer to as our “Common Stock,” entitled to notice of and to vote at the meeting, or any adjournment or postponement of the meeting, is the close of business on June 8, 2021. In this proxy statement, we refer to this date as the “record date.” As of the record date, there were 42,301,482 shares of our Common Stock issued and outstanding and entitled to vote at the meeting. Our stock transfer books will not be closed in connection with the meeting. Our Common Stock is listed on the New York Stock Exchange, or “NYSE,” under the symbol “EXP.”

How Proxies Will be Voted

Shares represented by valid proxies will be voted at the meeting in accordance with the directions given. If the enclosed proxy card is signed and returned without any direction given, the shares will be voted in the manner, if any, recommended by the Board. The Board does not intend to present, and has no information indicating that others will present, any business at the annual meeting other than as set forth in the attached Notice of Annual Meeting of Stockholders. However, if other matters requiring the vote of our stockholders properly come before the meeting, it is the intention of the persons named in the accompanying form of proxy to vote

the proxies held by them in accordance with their best judgment in such matters.

 

How to Revoke Your Proxy

You have the unconditional right to revoke your proxy at any time prior to the voting thereof by submitting a later-dated proxy, by attending the meeting and voting in person, or by written notice to us addressed to: Eagle Materials Inc., Attention: James H. Graass, Secretary, 5960 Berkshire Ln., Suite 900, Dallas, Texas 75225. No such revocation shall be effective, however, unless and until received by the Company at or prior to the meeting.

Quorum and Required Vote

The presence at the meeting, in person or represented by proxy, of the holders of a majority of the voting power of the shares of our capital stock entitled to vote on any matter shall constitute a quorum for purposes of such matter. Abstentions and broker non-votes will be included in determining the presence of a quorum at the meeting. The holders of Common Stock will be entitled to one vote per share on each matter that may properly be brought before the meeting or any adjournment thereof. There is no cumulative voting.

 

 

 

 

 

Proposal

 

Required Vote

 

Effect of Abstentions and Broker Non-Votes

Election of Directors

 

Majority of votes cast by the shares present in person or represented by proxy at the meeting

 

No effect on outcome of vote

 

 

 

Advisory vote on compensation of our named executive officers

 

Majority of votes cast by the shares present in person or represented by proxy at the meeting

 

No effect on outcome of vote

 

 

 

Approval of the expected appointment of Ernst & Young LLP as our independent auditors for the fiscal year ending March 31, 2022

 

Affirmative vote of a majority of the shares present in person or represented by proxy at the meeting

 

Same effect as votes against proposal

 

 

 

 

Pursuant to the rules of the NYSE, brokers do not have discretionary authority to vote in the election of directors if they did not receive instructions from the beneficial owner because the election of directors is not considered a “routine” matter. The advisory vote regarding executive compensation is also not considered “routine,” and brokers may not vote your shares with respect to such matter without instructions from you.

Expenses of Soliciting Proxies

The cost of soliciting proxies for the meeting will be borne by the Company. Solicitations may be made on behalf of our Board by mail, personal interview, telephone or other electronic means by officers and other employees of the Company, who will receive no additional compensation therefor. To aid in the solicitation of proxies, we have retained the firm of Kingsdale Advisors, which will receive a fee of approximately $20,000, in addition to the reimbursement of out-of-pocket expenses.

We will request banks, brokers, custodians, nominees, fiduciaries and other record holders to forward copies of this proxy statement to persons on whose behalf they hold shares of Common Stock and to request authority for the exercise of proxies by the record holders on behalf of those persons. In compliance with the regulations of the Securities and Exchange Commission, or “SEC,” and the NYSE, we will reimburse such persons for reasonable expenses incurred by them in forwarding proxy materials to the beneficial owners of our Common Stock.

How You Can Vote

You can vote your shares at the meeting, by telephone, over the Internet or by completing, signing, dating and returning your proxy in the enclosed envelope. If you have any questions, or require assistance, please contact the Company’s shareholder advisor and proxy solicitation agent, Kingsdale Advisors, at 1-888-327-0821 (toll free in North America), or at 416-867-2272 (collect outside North America), or by email at contactus@kingsdaleadvisors.com.

 

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PROPOSAL NO. 1: ELECTION OF DIRECTORS AND RELATED MATTERS

 

 

General

Our Board of Directors is the ultimate decision-making body of the Company, except with respect to those matters reserved to our stockholders. The primary responsibilities of our Board include:

the selection, compensation and evaluation of our Chief Executive Officer and oversight over succession planning;

oversight of our strategic planning;

approval of all our material transactions and financings;

oversight of processes that are in place to promote compliance with law and high standards of business ethics;

advising management on major issues that may arise; and

evaluating the performance of the Board and its committees, and making appropriate changes where necessary.

 

Members of our Board of Directors are divided into three classes based on their term of office (Class I, II and III). The directors in each such class hold office for staggered terms of three years each. At

present, each class has four directors, except for Class I, which has three directors. The following table shows the composition of our Board after the annual meeting, assuming the election of the proposed slate of Class III director nominees:

 

Class

  

Term Expires

  

Directors

I

  

2022

  

George J. Damiris

Martin M. Ellen

David B. Powers

 

 

 

 

 

II

  

2023

  

Margot L. Carter

Michael R. Nicolais

Mary P. Ricciardello

Richard R. Stewart

 

 

 

 

 

III

  

2024

  

F. William Barnett

Richard Beckwitt

Ed H. Bowman

Michael R. Haack

 

 

 

 

 

 

 

 

 

 

 

Director Independence

NYSE corporate governance rules require that our Board of Directors be comprised of a majority of independent directors. Our

Board of Directors has determined, upon the recommendation of our Corporate Governance and Nominating Committee, which we refer to as our “Governance Committee,” that all members of our Board of Directors, other than Messrs. Haack and Powers, are

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“independent” within the meaning of the specific provisions of the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act,” and the corporate governance rules of the NYSE.

In determining that nine of our eleven directors are “independent,” our Board of Directors considered that Mses. Margot L. Carter and

Mary P. Ricciardello and Messrs. F. William Barnett, Richard Beckwitt, Ed H. Bowman, George J. Damiris, Martin M. Ellen, Michael R. Nicolais and Richard R. Stewart have no relationship with the Company that potentially affects their independence.

 

 

________________________________

 

Our Board includes a group of leaders with a diverse set of skills in their respective fields. The diagram below illustrates some of the key skills and qualifications that our directors bring to the Board:

 

 

 

 

 

Nominees

Each of the nominees listed below is currently a member of our Board of Directors. Each of these nominees has been recommended for nomination by our Governance Committee after considering the criteria described below under the heading “Corporate Governance and Nominating Committee.” We have no reason to believe that any of the listed nominees will become unavailable for election, but if for any reason that should be the case, proxies may be voted for substitute nominees.

Because this is an uncontested election of directors, a majority of votes cast by the holders of our Common Stock (number of shares voted “for” a director nominee must exceed the number of votes cast “against” the director nominee) will be required to elect the nominees for director in accordance with our Bylaws and our Corporate Governance Guidelines. (A plurality voting standard would apply in a contested election.) If an incumbent director is not re-elected, such director will promptly tender his or her resignation to the Chairman of the Board, and a special committee of independent directors will consider the resignation and make a recommendation to the Board as to whether to accept or reject such resignation. The Board will then publicly disclose its decision regarding the resignation and the rationale behind the decision.

Although each of the nominees is standing for election to a three-year term, Messrs. Barnett and Bowman may (if elected) retire from the Board before the completion of their full term in

accordance with the Company’s director retirement policy. Our Corporate Governance Guidelines generally require directors to retire at the first annual meeting that occurs after the director’s 75th birthday unless the Board (other than the affected director) waives the requirement upon the recommendation of the Governance Committee.

Recommendation of the Board

Our Board of Directors recommends that holders of Common Stock vote “FOR” the election of the four nominees listed below to serve as Class III directors for a three-year term ending at our 2024 annual meeting of stockholders:

F. William Barnett

Richard Beckwitt

Ed H. Bowman

Michael R. Haack

 

 

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Director Qualifications

Set forth below is information about the nominees standing for election at our 2021 annual meeting, as well as our continuing directors whose terms of office do not expire at such annual meeting. The biographical information appearing below regarding

the nominees for director and continuing directors has been furnished to us by the respective nominees and directors. Also included below is a brief description of how each individual’s experience qualifies him or her to serve as a director of the Company.

 

 

Nominees Whose Terms Expire at our 2021 Annual Meeting

(Class III Directors)

 

 

 

 

F. William Barnett Director Since: 2003Age: 74 Committees: Governance (Chair)

 

Career Highlights: Mr. Barnett retired in 2003 from his position as a Director in the Dallas office of McKinsey & Company, Inc., an international consulting firm, after 23 years of employment, where he led the firm’s Strategy Practice. Mr. Barnett has taught MBA students at the Yale School of Management and the Jesse H. Jones Graduate School of Business at Rice University. Mr. Barnett’s book, The Strategic Career: Let Business Principles Guide You, was released in 2015.

Skills and Qualifications: Mr. Barnett brings to the Board and the committee on which he serves his corporate governance and strategy development and implementation experience gained from his long career in management consulting.

 

 

Richard Beckwitt Director Since: 2014 Age: 62 Committees: Audit

Governance Other Public Boards: Lennar Corporation

 

Career Highlights: Mr. Beckwitt is the Co-Chief Executive Officer and Co-President of Lennar Corporation, positions he has held since November 2020. He also serves on the Lennar Board of Directors. He joined Lennar in March 2006 as an Executive Vice President, became President in April 2011 and was promoted to CEO in April 2018. Mr. Beckwitt served on the Board of Directors of D.R. Horton, Inc. from 1993 to November 2003. From 1993 to March 2000, he held various executive officer positions at D.R. Horton, including President of the Company. From March 2000 to April 2003, Mr. Beckwitt was the owner and principal of EVP Capital, L.P., a venture capital and real estate advisory company. From 1986 to 1993, Mr. Beckwitt worked in the Mergers and Acquisitions and Corporate Finance Departments at Lehman Brothers. Mr. Beckwitt also served as a director of Five Point Holdings from May 2016 to June 2020.

Skills and Qualifications: Mr. Beckwitt brings to the Board and the committees on which he serves his extensive executive experience gained through his service as the Chief Executive Officer and executive officer of public companies within the homebuilding industry, as well as finance-related experience with a major investment banking firm.

 

 

Ed H. Bowman Director Since: 2011 Age: 74 Committees: Compensation (Chair)

 

Career Highlights: Mr. Bowman served as Chief Executive Officer, President and a director of SOURCECORP from 1996 until 2011. Prior to 1996, Mr. Bowman was a senior executive at First Data Corporation. Mr. Bowman serves as an Executive Partner with Teakwood Capital and on the board of iiPay, LTD.

Skills and Experience: Mr. Bowman brings to the Board and the Compensation Committee his proven leadership and business experience as the retired CEO of an expanding company. Mr. Bowman also brings corporate governance, finance and compensation knowledge gained from his experience at other public companies.

 

 

Michael R. Haack Director Since: 2019  Age: 48 Committees: Executive

 

Career Highlights: Mr. Haack has been the Company’s President and Chief Executive Officer since July 1, 2019. Prior to that time, he has served as President and Chief Operating Officer since August 2018 and was Executive Vice President and Chief Operating Officer from December 2014 through August 2018. Mr. Haack was employed at Halliburton Energy Services for the 17 years prior to joining the Company, most recently as Global Operations Manager at Halliburton’s Sperry Drilling division.

Skills and Qualifications: Mr. Haack brings to the Board his extensive knowledge of the Company’s operations, as well as his executive and operations experience gained in heavy industry over the previous 20 years.

 

 

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Continuing Directors Whose Terms Expire at our 2022 Annual Meeting

(Class I Directors)

 

 

 

 

George J. Damiris Director Since: 2016 Age: 61 Committees: Compensation

 

Career Highlights: Mr. Damiris served as Chief Executive Officer and President of HollyFrontier Corporation from 2016 through 2019 and as a director from 2015 through 2019. He previously served as Executive Vice President and Chief Operating Officer from September 2014 to January 2016 and as Senior Vice President, Supply and Marketing from January 2008 until September 2014. Prior to his retirement, Mr. Damiris also served as a director of Holly Logistics Services, L.L.C., the general partner of the general partner of Holly Energy Partners, L.P., since February 2016, as CEO since November 2016 and as President since February 2017.

Skills and Qualifications: Mr. Damiris brings to the Board and the Compensation Committee his extensive management and operational experience gained from his time as a senior executive at a large, public industrial company.

 

 

Martin M. Ellen Director Since: 2013 Age: 67 Committees: Audit (Chair)

 

Career Highlights: Mr. Ellen retired as Chief Financial Officer and Executive Vice President at Dr Pepper Snapple Group, Inc. in July 2018, having served in that capacity since April 2010. Mr. Ellen also served as the Chief Financial Officer and Senior Vice President - Finance of Snap-on Inc. from November 2002 to March 2010.

Skills and Qualifications: Mr. Ellen brings to the Board and the Audit Committee his extensive management, finance and audit

experience gained from over 25 years serving as chief financial officer with public and private companies and prior experience with a major public accounting firm.

 

 

David B. Powers Director Since: 2016 Age: 71

 

Career Highlights: Mr. Powers served as the Company’s President and Chief Executive Officer from March 2016 until his retirement on July 1, 2019. Prior to his promotion to President and Chief Executive Officer of the Company, Mr. Powers served as Executive Vice President – Gypsum of the Company and as President of American Gypsum Company LLC, a subsidiary of the Company (“American Gypsum”), since January 2005. Mr. Powers previously served as Executive Vice President – Marketing, Sales and Distribution of American Gypsum, beginning in June 2002.

Skills and Qualifications: Mr. Powers brings to the Board his extensive executive and operations experience in the construction products industry, including over 35 years of experience in the gypsum industry.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6


 

Continuing Directors Whose Terms Expire at our 2023 Annual Meeting

(Class II Directors)

 

 

 

 

Margot L. Carter Director Since: 2017 Age: 53 Committees: Compensation Governance Other Public Boards: Installed Building Products, Inc.

 

Career Highlights: Ms. Carter has been a director of Installed Building Products, Inc., an installer of insulation and complementary building products, since 2014. She serves as IBP’s lead independent director, the Chair of its Nominating and Governance Committee and a member of the Audit Committee. From 2010 to 2015, Ms. Carter served as Executive Vice President, Chief Legal Officer and Secretary for RealPage, Inc. Since 1998, Ms. Carter has served as the President and founder of Living Mountain Capital, L.L.C., a business advisory firm. She also sits on the executive board of the NACD North Texas Chapter.

Skills and Qualifications: Ms. Carter brings to the Board and the committees on which she serves her proven leadership and business experience gained as a general counsel and director at other public companies. Ms. Carter also brings strategy, business development, M&A experience and corporate governance and finance knowledge gained from over 20 years of executive and board experience at other public companies.

 

 

Michael R. Nicolais (Chairman of the Board) Director Since: 2001 Age: 63 Committees: Executive Compensation

 

Career Highlights: In January 2020, Mr. Nicolais founded and is managing partner of Roble Drive Investment Company, a private investment firm, following his retirement as Vice Chairman and Chief Executive Officer of Highlander Partners L.P., an investment partnership—an office he held from January 2017 through December 2019. Previously, Mr. Nicolais served Highlander Partners as President from April 2004 through December 2016. From August 2002 until March 2004, Mr. Nicolais served as Managing Director of Stephens, Inc., an investment banking firm. Prior to joining Stephens, Inc., he was a partner in the private investment firm of Olivhan Investments, L.P. from March 2001 until August 2002. From August 1986 to December 2000, he was employed by Donaldson, Lufkin & Jenrette Securities Corporation’s Investment Banking Division, most recently in the position of Managing Director and co-head of that firm’s Dallas office.

Skills and Qualifications: Mr. Nicolais brings to the Board and the committees on which he serves his extensive knowledge of capital markets, mergers and acquisitions and financial analysis and

financial oversight experience gained through his work as an investment banker and investment manager.

 

 

Mary P. Ricciardello Director Since: 2020 Age: 65 Committees: Audit Governance

 

Career Highlights: In 2002, Ms. Ricciardello retired after a 20-year career with Reliant Energy Inc., a leading independent power producer and marketer. She served in various financial management positions with the company, including Comptroller, Vice President and most recently Senior Vice President and Chief Accounting Officer. Ms. Ricciardello served as a director of Devon Energy from 2007 to January 2021. She also served on the Noble Corporation board from 2003 until May 2020 and as a director of EnLink Midstream from 2014 until 2018. She served on the board of U.S. Concrete, Inc. from 2003 until 2010. Ms. Ricciardello currently sits on the advisory board of the NACD TriCities Chapter (Houston).

Skills and Qualifications: Ms. Ricciardello is a licensed Certified Public Accountant and a financial executive with over 30 years of experience. She brings to the Board her extensive experience with corporate finance, accounting and tax matters.

 

 

Richard R. Stewart Director Since: 2006 Age: 71 Committees: Other Public Boards: Audit Kirby Corporation

 

Career Highlights: From 1998 until 2006 Mr. Stewart served as President and CEO of GE Aero Energy, a division of GE Power Systems and as an officer of General Electric Company. Mr. Stewart retired from General Electric in 2006. Mr. Stewart’s career at General Electric began in 1998 as a result of General Electric’s acquisition of the gas turbine business of Stewart & Stevenson Services, Inc. Mr. Stewart began his career at Stewart & Stevenson in 1972 and while at Stewart & Stevenson served in various positions including as Group President and member of the board of directors. Mr. Stewart also served as a director of Plug Power Inc. from July of 2003 to March of 2006. Mr. Stewart was a director of Lufkin Industries, Inc. from 2009 until its acquisition by GE Oil & Gas in 2013 and served a director of Exterran Corp. from 2015 to 2018.

Skills and Qualifications: Mr. Stewart brings to the Board and the committee on which he serves his proven leadership and business experience as the former CEO of a manufacturing company. Mr. Stewart also brings corporate governance experience gained from membership on the boards of other public companies and as an officer with General Electric.


7


 

Board Meetings and Attendance Records

During the Company’s fiscal year ended March 31, 2021, our Board of Directors held four regularly scheduled meetings and one special meeting. During such fiscal year, all of the incumbent directors attended at least 75% of the meetings of the Board and the committees of the Board on which they served. In accordance with our informal policy, we anticipate that all continuing directors and nominees will attend our 2021 annual stockholders meeting. All of our then-current directors (other than Messrs. Barnett and Beckwitt) attended our 2020 annual meeting, which was held

virtually due to the COVID-19 pandemic. We strongly encourage all directors to attend our stockholder meetings. Our non-employee directors (which currently constitute all our directors, except for Mr. Haack) meet immediately after all Board meetings without management present. The Chairman presides at all executive sessions of the non-employee directors.

 

 

 

 

 

 

 

 

8


 

 

BOARD COMPENSATION

 

 

Board compensation for the 12-month period from August 2020 through July 2021 was approved by our Board of Directors in August 2020. The Board adopted a director compensation structure in which directors who are not employees of the Company or any of our subsidiaries received compensation for their services during the 12-month period from August 2020 through July 2021 by electing one of the following two compensation package alternatives:

(1)

total compensation valued at $230,000, of which $105,000 is paid in cash and the remainder is provided in the form of an equity grant valued at $125,000; or

(2)

an equity grant valued at $261,500.

The grant date value of the equity grant under either alternative is allocated between restricted stock and options to purchase Common Stock (based upon the recommendation of the Compensation Committee) with respect to each non-employee director.

In accordance with the terms of the Eagle Materials Inc. Amended and Restated Incentive Plan, which we refer to as our “Incentive Plan,” the exercise price of stock options is set at the closing price of the Common Stock on the NYSE on the date of grant. The number of option shares granted is determined as of the date of grant by using the Black-Scholes method. No stock options were granted as part of this year’s package.

The number of shares of restricted stock is determined as of the date of grant using the closing price of the Common Stock on the NYSE on the date of grant. The restricted stock granted to directors in August 2020 was earned at the time of grant; however, the shares did not become fully vested (unrestricted) until the earliest to occur of (i) February 5, 2021; (ii) the recipient’s retirement from the Board in accordance with the Company’s director retirement policy, or

under such circumstances as are approved by the Compensation Committee; or (iii) the recipient’s death. During the restriction period the director will have the right to vote the shares. In addition, the director will also be entitled to cash dividends as and when the Company issues a cash dividend on the Common Stock.

Non-employee directors who chair committees of the Board of Directors receive additional annual compensation. The chairs of the Audit Committee, Compensation Committee and Governance Committee each receive a fee of $20,000 per year. The Chairman of the Board received a fee of $170,000 during the past year. This amount reflects the enhanced level of the Chairman’s responsibilities during this period of uncertainty—including coordinating the Board’s strategic portfolio review, navigating the COVID-19 pandemic, and several M&A transactions—and it is anticipated that this fee will be reduced for the coming year. Chairpersons who choose compensation package alternative one (part equity and part cash) receive this additional compensation in the form of cash. Chairpersons who choose compensation package alternative two (all equity) receive this additional compensation in the form of equity, in which case a 30% premium is added to such fees when valuing the equity to be received by such chairperson.

If non-employee directors hold unvested restricted stock units, which we refer to as “RSUs,” granted as part of director compensation in prior fiscal years (which currently only includes Mr. Nicolais), these directors will receive dividend equivalent units as and when the Company pays a cash dividend on the Common Stock in accordance with the terms of the RSUs.

All directors are reimbursed for reasonable expenses of attending meetings.

 

 

9


 

 

Non-Employee Director Compensation for Fiscal Year 2021

The table below summarizes the compensation paid by the Company to our non-employee directors for the fiscal year ended March 31, 2021.

 

Name

 

Fees Earned

or

Paid in Cash

($)

 

 

Stock

Awards

($)(1)

 

 

Option

Awards

($)

 

 

Non-Equity

Incentive Plan

Compensation

($)

 

 

Change in Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)

 

 

All Other

Compensation

($)(2)

 

 

Total

($)

 

F. William Barnett(3)

 

 

 

 

$

287,500

 

 

 

 

 

 

 

 

 

 

 

$

1,041

 

 

$

288,541

 

Richard Beckwitt(4)

 

 

 

 

 

261,500

 

 

 

 

 

 

 

 

 

 

 

 

441

 

 

 

261,941

 

Ed H. Bowman(5)

 

$

90,000

 

 

 

125,000

 

 

 

 

 

 

 

 

 

 

 

 

1,049

 

 

 

216,049

 

Margot L. Carter(6)

 

 

105,000

 

 

 

125,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

230,000

 

George J. Damiris(4)(7)

 

 

 

 

 

261,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

261,500

 

Martin M. Ellen(7)(8)

 

 

125,000

 

 

 

125,000

 

 

 

 

 

 

 

 

 

 

 

 

186

 

 

 

250,186

 

Michael R. Nicolais(9)

 

 

 

 

 

482,500

 

 

 

 

 

 

 

 

 

 

 

 

607

 

 

 

483,107

 

David B. Powers(6)

 

 

105,000

 

 

 

125,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

230,000

 

Mary P. Ricciardello(4)

 

 

 

 

 

261,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

261,500

 

Richard R. Stewart(6)

 

 

105,000

 

 

 

125,000

 

 

 

 

 

 

 

 

 

 

 

 

355

 

 

 

230,355

 

 

 

 

(1)

The amounts in this column reflect the value of restricted stock awards made to the directors in the fiscal year ended March 31, 2021 and are consistent with the grant date fair value of the award computed in accordance with FASB ASC Topic 718. For assumptions used in determining these values, refer to footnote (L) to the Company’s audited financial statements for the fiscal year ended March 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on May 21, 2021, or “Fiscal 2021 Form 10-K.”

(2)

The amounts in this column represent dividend payments made in fiscal 2021 to the directors with respect to restricted stock held by such directors.

(3)

Mr. Barnett is the Chair of the Governance Committee. He elected to receive 100% of his director compensation in the form of equity (including his chairperson fee).

(4)

Messrs. Beckwitt and Damiris and Ms. Ricciardello elected to receive 100% of their director compensation in the form of equity.

(5)

Mr. Bowman is the Chair of the Compensation Committee. He selected the compensation package where he receives a portion of his director compensation in the form of equity and a portion in cash. Mr. Bowman received his chairperson fee in cash.

(6)

Ms. Carter and Messrs. Powers and Stewart selected the compensation package where they receive a portion of their director compensation in the form of equity and a portion in cash.

(7)

Mr. Ellen is Chair of the Audit Committee. He selected the compensation package where he receives a portion of his director compensation in the form of equity and a portion in cash. Mr. Ellen received his chairperson fee in cash.

(9)

Mr. Nicolais served as Chairman of the Board during fiscal 2021. He elected to receive 100% of his director compensation in the form of equity (including his chairperson fee).

 

 

10


 

The following chart shows the number of outstanding stock options, RSUs and shares of restricted stock held by each non-employee director as of March 31, 2021.

 

Name

 

Stock Options(1)

 

 

RSUs(2)

 

 

Restricted Stock(3)

 

F. William Barnett

 

 

 

 

 

 

 

 

10,405

 

Richard Beckwitt

 

 

2,070

 

 

 

 

 

 

4,405

 

Ed H. Bowman

 

 

 

 

 

 

 

 

10,485

 

Margot L. Carter

 

 

 

 

 

 

 

 

 

George J. Damiris

 

 

 

 

 

 

 

 

 

Martin M. Ellen

 

 

2,993

 

 

 

 

 

 

1,852

 

Michael R. Nicolais

 

 

17,267

 

 

 

3,883

 

 

 

5,368

 

David B. Powers

 

 

 

 

 

 

 

 

 

Mary P. Ricciardello

 

 

2,094

 

 

 

 

 

 

 

Richard R. Stewart

 

 

6,018

 

 

 

 

 

 

3,550

 

 

 

 

(1)

All of these stock options were fully exercisable as of March 31, 2021.

(2)

The RSUs granted to non-employee directors (and any accrued dividend equivalent RSUs) are not payable until the non-employee director’s service on the board terminates because of the director’s death or the director’s retirement in accordance with the Company’s director retirement policy, or under such circumstances as are approved by the Compensation Committee. The number of RSUs reflected in this column includes the following aggregate dividend equivalent units,

which are accrued by holders of our RSUs at any time we pay a cash dividend on our Common Stock: Mr. Nicolais – 583 RSUs.

(3)

The restrictions on these restricted stock awards will not lapse until the non-employee director’s service on the board terminates because of the director’s death or the director’s retirement in accordance with the Company’s director retirement policy, or under such circumstances as are approved by the Compensation Committee. Any cash dividends declared and paid by the Company during the restricted period are paid in cash with respect to such restricted stock.

 

 

 

 

Board Leadership Structure and Role in Risk Oversight

The positions of Chairman of the Board and Chief Executive Officer (“CEO”) are performed by two different individuals. Mr. Haack, our CEO, focuses on the day-to-day operation of the Company’s businesses and participates in both operational and long-term strategy and development. Mr. Nicolais, our Chairman, oversees the Company’s general strategic direction and leads and manages the Board.

As part of its primary risk management function, the Audit Committee oversees the preparation by management of a risk report on a quarterly basis. However, our entire Board of Directors is also charged with, and is actively involved in, identifying, evaluating and managing risks on behalf of the Company, and the Board undertakes to hold discussions on these topics with management and the Audit Committee throughout the year. Further, the independent directors address risk management in executive sessions without management present. As appropriate in the context of their chartered roles, the Board’s other committees also perform risk management and oversight activities during the year. For example, the Governance Committee is responsible for overseeing governance issues that may create governance risks, such as board composition, director selection and other governance

policies and practices that are critical to the success of the Company.

Risk Assessment in Compensation Programs

Consistent with SEC disclosure requirements, management, the Compensation Committee and the Board have assessed the Company’s compensation programs. Based upon all of the facts and circumstances available to the Company at the time of the filing of this Proxy Statement, the Board has concluded that risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company or encourage unnecessary and excessive risk-taking.

This assessment was overseen by the Compensation Committee, in consultation with management. The Board reviewed the compensation policies and practices in effect for our executive officers, senior management and other employees and assessed the features the Company has built into the compensation programs to discourage excessive risk-taking. These features include, among other things, a balance between different elements of compensation, use of different performance metrics for different elements of compensation, restrictions on pricing authority, review and approval of material contracts, and stock ownership guidelines for senior management.

 

 

 

 

11


 

Board Committees

The standing committees of our Board of Directors include the Audit Committee, the Compensation Committee, the Governance Committee and the Executive Committee. The following table lists

the chairperson and members of each committee as of March 31, 2021, and the number of meetings held by each committee during the fiscal year ended March 31, 2021:

 

 

 

Director

 

Audit

 

 

Compensation

 

 

Governance

 

 

Executive

 

F. William Barnett

 

 

 

 

 

 

 

 

 

Chair

 

 

 

 

 

Richard Beckwitt

 

 

 

 

 

 

 

 

 

 

 

 

Ed H. Bowman

 

 

 

 

 

Chair

 

 

 

 

 

 

 

 

 

Margot L. Carter

 

 

 

 

 

 

 

 

 

 

 

 

George J. Damiris

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Martin M. Ellen

 

Chair

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael R. Haack

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael R. Nicolais

 

 

 

 

 

 

 

 

 

 

 

Chair

 

David B. Powers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mary P. Ricciardello

 

 

 

 

 

 

 

 

 

 

 

 

Richard R. Stewart

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Meetings in Fiscal 2021

 

 

5

 

 

 

4

 

 

 

4

 

 

 

1

 

 

 

 

Audit Committee

Our Board has a standing Audit Committee, composed of at least three independent directors. Our Audit Committee assists the Board in fulfilling its responsibility to oversee the integrity of our financial statements, our compliance with legal and regulatory requirements, the qualifications and independence and appointment of our independent auditors and the performance of our internal audit function and independent auditors. Our Audit Committee is governed by an amended and restated Audit Committee charter, a copy of which may be viewed on our website at www.eaglematerials.com and will be provided free of charge upon written request to our Secretary at our principal executive office.

Our Board has determined that each member of our Audit Committee is independent within the meaning of applicable (1) corporate governance rules of the NYSE and (2) requirements set forth in the Exchange Act and the applicable SEC rules. In addition, our Board has determined that each member of our Audit Committee satisfies applicable NYSE standards for financial literacy and that, based on his auditing and financial experience, including over 25 years of experience as a chief financial officer with public and private companies and prior experience with a major public accounting firm, Mr. Ellen is an “audit committee financial expert” within the meaning of the rules of the SEC.

Unless otherwise determined by the Board, no member of our Audit Committee may serve as a member of an audit committee of more than two other public companies.

Certain key functions and responsibilities of our Audit Committee are to:

select, appoint, compensate, evaluate, retain and oversee the independent auditors engaged for purposes of preparing or issuing an audit report or related work or performing other audit, review, or attestation services for us;

obtain and review, at least annually, a formal written statement from our independent auditors describing all relationships between our auditors and the Company and engage in a dialogue with our auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditors and to recommend appropriate action in response to the reports to our Board;

pre-approve all audit engagement fees and terms and all permissible non-audit services provided to us by our independent auditors, in accordance with the committee’s policies and procedures for pre-approving audit and non-audit services;

establish procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters;

discuss our annual audited financial statements, quarterly financial statements and other significant financial disclosures with management and our independent auditors;

discuss with management the types of information to be disclosed and the types of presentations to be made in our earnings press releases, as well as the financial information and earnings guidance we provide to analysts and rating agencies;

annually review and assess the performance of the Audit Committee and the adequacy of its charter;

discuss policies with respect to risk assessment and risk management; and

prepare the report that is required to be included in our annual proxy statement regarding review of financial statements and auditor independence.

12


 

Our Audit Committee’s report on our financial statements for the fiscal year ended March 31, 2021 is presented below under the heading “Audit Committee Report.”

Our Audit Committee meets separately with our independent auditors and with members of our internal audit staff outside the presence of the Company’s management or other employees to discuss matters of concern, to receive recommendations or suggestions for change and to exchange relevant views and information.

Compensation Committee

Our Board’s Compensation Committee is composed of independent directors who meet the corporate governance standards of the NYSE including the enhanced NYSE independence requirements for directors serving on compensation committees, qualify as “non-employee directors” within the meaning of Rule 16b-3(b)(3) of the Exchange Act and as “outside directors” within the meaning of the Internal Revenue Code.

Under its amended and restated charter, which you may review on our web site at www.eaglematerials.com (and a copy of which will be provided to you free of charge upon written request to our Secretary at our principal executive office), the primary purposes of our Compensation Committee are to assist the Board in discharging its responsibilities relating to compensation of our Chief Executive Officer and other senior executives and to direct the preparation of the reports regarding executive compensation that the rules of the SEC require to be included in our annual proxy statement.

The Compensation Committee is authorized to hire outside advisers after considering all factors relevant to the adviser’s independence from management. For additional information regarding outside advisers engaged by the Compensation Committee, please see “Compensation Discussion and Analysis” beginning on page 20 of this proxy statement.

Certain key functions and responsibilities of our Compensation Committee are to:

periodically review and make recommendations to our Board as to our general compensation philosophy and structure, including reviewing the compensation programs for senior executives and all of our benefit plans to determine whether they are properly coordinated and achieve their intended purposes;

annually review and approve corporate goals and objectives relevant to the compensation of our Chief Executive Officer, evaluate his or her performance as measured against such goals and objectives and to set the salary and other cash and equity compensation for our Chief Executive Officer based on such evaluation;

review and, after the end of the fiscal year and in consultation with our Chief Executive Officer, approve the compensation of our senior executive officers who are required to make disclosures under Section 16 of the Exchange Act, who we refer to as our “senior executive officers”;

administer the Company’s compensation plans for which it is named as plan administrator, including our Incentive Plan;

report on compensation policies and practices with respect to our executive officers as required by SEC rules;

review and recommend to the Board the compensation of non-employee directors;

recommend stock ownership guidelines and monitor compliance therewith; and

review and assess the performance of the Compensation Committee and the adequacy of its charter annually and recommend any proposed changes to the Board.

In accordance with the terms of our Incentive Plan, the Compensation Committee has delegated to the Special Situation Stock Option Committee (whose sole member is our CEO) the authority to grant time-vesting stock options in special circumstances. Under this authorization, the Special Situation Stock Option Committee may grant stock options to newly-hired employees and newly-promoted employees, under terms set by the Compensation Committee. This authority for fiscal 2022, which expires on May 31, 2022, is limited to an aggregate of 60,000 option shares, no one individual may receive more than 15,000 option shares, and Section 16 reporting persons may not receive awards pursuant to this authority. Stock options granted under this delegation of authority vest 20% per year commencing on the first anniversary of the grant date. During fiscal 2021, 5,450 stock options were granted to employees under this authority out of a maximum of 60,000.

Our Compensation Committee’s report for the fiscal year ended March 31, 2021 is presented below under the heading “Compensation Committee Report” beginning on page 19 of this proxy statement.

Our Compensation Committee meets as often as it deems appropriate, but no less than twice per year.

Governance Committee

Our Board’s Governance Committee is composed of independent directors who meet the corporate governance standards of the NYSE. The primary purposes of this committee are: (1) to advise and counsel our Board and management regarding, and oversee, our governance, including our Board’s selection of directors; (2) to develop and recommend to the Board a set of corporate governance principles for the Company; and (3) to oversee the evaluation of our Board and management.

Our Governance Committee has adopted a written charter, and our Board has also adopted Corporate Governance Guidelines. Both the Governance Committee charter and the Corporate Governance Guidelines may be viewed on our web site at www.eaglematerials.com and will be provided free of charge upon written request to our Secretary at our principal executive office.

13


 

Certain key functions and responsibilities of our Governance Committee are to:

develop, periodically review and recommend a set of corporate governance guidelines for the Company to the Board;

periodically review corporate governance matters generally and recommend action to the Board where appropriate;

review and assess the adequacy of its charter annually and recommend any proposed changes to our Board for approval;

monitor the quality and sufficiency of information furnished by management to our Board;

actively seek, recruit, screen, and interview individuals qualified to become members of the Board, and consider management’s recommendations for director candidates;

evaluate the qualifications and performance of incumbent directors and determine whether to recommend them for re-election to the Board;

establish and periodically re-evaluate criteria for Board membership;

recommend to the Board the director nominees for each annual stockholders’ meeting; and

recommend to the Board nominees for each committee of the Board.

The Governance Committee initiates and oversees an annual evaluation of the effectiveness of the Board and each committee, as well as the composition, organization (including committee structure, membership and leadership) and practices of the Board. The format of this evaluation varies year-to-year, as determined by the Governance Committee each year. In some years, directors react to a series of questions with a score/ranking. In other years, discussion questions are circulated prior to a meeting for discussion at the meeting. In the most-recent year, the chair of the Governance Committee conducted one-on-one interviews with each director and synthesized the take-aways from those conversations at a meeting. Any director feedback gathered prior to a meeting that is delivered or discussed at the meeting is done in a way that it is not attributed to a particular director. Part of the Governance Committee’s self-evaluation process involves an assessment of the effectiveness of the Company’s corporate governance policies, which includes the Company’s policies surrounding diversity.

Among the criteria the Governance Committee uses in evaluating the suitability of individual nominees for director (whether such nominations are made by management, a stockholder or otherwise) are their integrity, experience, achievements, judgment, intelligence, personal character, ability to make independent analytical inquiries, willingness to devote adequate time to Board duties and the likelihood that he or she will be able to serve on the Board for a sustained period, giving due consideration to diversity in perspectives, backgrounds, business experiences, professional expertise, gender and ethnic background. Subject to its fiduciary duties and applicable laws and regulations, when searching for new directors, the Governance Committee is charged with endeavoring to identify highly qualified diverse candidates, including women and individuals from minority groups, to include in the pool of

candidates from which director nominees are chosen. The Governance Committee is proud of the Company’s progress with regard to gender diversity on the Board, having added two women as directors in the past four years.

Members of the Governance Committee, other members of the Board or executive officers may, from time to time, identify potential candidates for nomination to our Board. All proposed nominees, including candidates recommended for nomination by stockholders in accordance with the procedures described below, will be evaluated in light of the criteria described above and the projected needs of the Board at the time. As set forth in its charter, the Governance Committee may retain a search firm to assist in identifying potential candidates for nomination to the Board of Directors.

Our Governance Committee will consider candidates recommended by stockholders for election to our Board. A stockholder who wishes to recommend a candidate for evaluation by our Governance Committee should forward the candidate’s name, business or residence address, principal occupation or employment and a description of the candidate’s qualifications to the Chairman of the Governance Committee at the following address: Eagle Materials Inc., Attention: Secretary, 5960 Berkshire Ln., Suite 900, Dallas, Texas 75225.

Our Bylaws provide that, to be considered at the 2022 annual meeting, stockholder nominations for the Board of Directors must be submitted in writing and received by our Secretary at the executive offices of the Company during the period beginning on February 6, 2022 and ending May 7, 2022, and must contain the information specified by and otherwise comply with the terms of our Bylaws. Any stockholder wishing to receive a copy of our Bylaws should direct a written request to our Secretary at the Company’s principal executive offices.

No nominees for election to the Board at our 2021 annual meeting of stockholders were submitted by stockholders or groups of stockholders owning more than 5% of our Common Stock.

Executive Committee

The principal function of our Board’s Executive Committee is to exercise all of the powers of the Board to direct our business and affairs between meetings of the Board, except that the Executive Committee may not amend our Certificate of Incorporation or Bylaws, adopt an agreement of merger or consolidation under Delaware law, recommend the sale of all or substantially all of our assets or recommend the dissolution of the Company or the revocation of a dissolution. In addition, unless authorized by resolution of our Board of Directors, the Executive Committee may not declare a dividend, authorize the issuance of stock or adopt a certificate of ownership and merger under Delaware law.

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee had a relationship during the fiscal year ended March 31, 2021 that requires disclosure as a Compensation Committee interlock.

14


 

How to Contact Our Board

Shareholders and other interested parties can communicate directly with our Board, a committee of our Board, our independent directors as a group, our Chairman of the Board or any other individual member of our Board by sending the communication to Eagle Materials Inc., 5960 Berkshire Ln., Suite 900, Dallas, Texas

75225, to the attention of the director or directors of your choice (e.g., “Attention: Chairman of the Board of Directors” or “Attention: All Independent Directors,” etc.). We will relay communications addressed in this manner as appropriate. Communications addressed to the attention of the entire Board are forwarded to the Chairman of the Board for review and further handling.

 

15


 

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

 

 

The following list sets forth the names, ages as of the date of this proxy statement and principal occupations of each person who was an executive officer of the Company during the fiscal year ended March 31, 2021 and who is not also a member of our Board. All of these persons have been elected to serve until the next annual meeting of our Board or until their earlier resignation or removal.

D. Craig Kesler

Age: 45

Position: Executive Vice President – Finance and Administration and Chief Financial Officer (has held current office since August 2009; Vice President – Investor Relations and Corporate Development from March 2005 through August 2009; Audit Manager with Ernst & Young LLP from April 2002 through September 2004).

Robert S. Stewart

Age: 67

Position: Executive Vice President – Strategy, Corporate Development and Communications (has held current office since August 2009; Senior Vice President of Centex from 2000 through August 2009).

James H. Graass

Age: 63

Position: Executive Vice President, General Counsel and Secretary (Executive Vice President and General Counsel since November 2000; Mr. Graass was named Secretary of the Company in July 2001).

Steven L. Wentzel

Age: 60

Position: President – American Gypsum Company LLC (has held current office since June 2020; Vice President Manufacturing of American Gypsum from July 2012 through May 2020).

William R. Devlin

Age: 55

Position: Senior Vice President, Controller and Chief Accounting Officer (has held current office since August 2009; Vice President and Controller from October 2005 through August 2009; Director of Internal Audit from September 2004 through September 2005; Senior Manager with PricewaterhouseCoopers LLP from July 1999 through August 2004).

 

 

 

16


 

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management, which has the responsibility for preparing the Compensation Discussion and Analysis. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

Compensation Committee

Ed H. Bowman, Chairman

Margot L. Carter

George J. Damiris

Michael R. Nicolais

This report of the Compensation Committee does not constitute “soliciting material” and should not be deemed “filed” or incorporated by reference into any of the other Company filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically requests that the information be treated as soliciting material or specifically incorporates this report by reference therein.

 

17


 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

 

Our Year in Review

Our Strong Performance

In fiscal 2021, we successfully navigated the COVID-19 pandemic to generate record revenue of $1.6 billion and record net earnings of $339.4 million, resulting in diluted earnings per share of $8.12—a testament to the operating strength of our businesses and the focus of our talented people. During the year, we demonstrated our financial discipline and our operational and strategic execution. We successfully integrated the Kosmos Cement business, the largest acquisition in our history, acquired at the end of fiscal 2020, and quickly paid down the debt financing of that acquisition. We also streamlined our business portfolio, including the divestiture of our oil and gas proppants business and other non-core assets, providing us with additional liquidity and increased financial flexibility.

Throughout this challenging time, the Compensation Committee’s long-standing principles continued to guide its decision-making process. As noted elsewhere in this proxy statement, these guiding principles include aligning pay with performance; driving business results and long-term shareholder value; and paying competitively, while mitigating compensation-related risk and supporting effective succession planning. As we emerge from the COVID-19 pandemic, these principles have proven their appropriateness and durability in good times and bad.

Named Executive Officers

This Compensation Discussion and Analysis is intended to provide investors with a more complete understanding of our compensation policies and decisions during fiscal 2021 for the following persons who were “Named Executive Officers” during such fiscal year:

 

Michael R. Haack

 

President and Chief Executive Officer

 

D. Craig Kesler

 

Executive Vice President – Finance and Administration and Chief Financial Officer

 

Robert S. Stewart

 

Executive Vice President – Strategy, Corporate Development and Communications

 

James H. Graass

 

 

Steven L. Wentzel

 

Executive Vice President, General Counsel and Secretary

 

President, American Gypsum Company

 

Compensation Philosophy

Our Core Tenet: Pay for Performance

Our compensation philosophy is based on the principles that executive compensation should:

Align the interests of our executives with those of our stockholders,

Reflect the Company’s performance as well as the executive’s individual performance,

Motivate management to achieve the Company’s operational and strategic goals,

Reward performance by both our executives and the Company relative to our peers’ performance in light of business conditions, and

Be designed to attract, retain and motivate highly qualified and talented executives over time.

 

Our performance-based compensation philosophy is evidenced by the charts below showing that 54% of our Chief Executive Officer’s target compensation opportunity for fiscal 2021 and 59% of our other Named Executive Officers’ target compensation opportunity for fiscal 2021 was performance-based or at-risk.

 

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We believe that a significant portion of an executive’s compensation should be “at risk” – that is, dependent upon our operational and financial performance and the individual’s performance. The key features of our executive compensation program include the following:    

 

(1)  We seek to align the interests of executives with those of our stockholders by:

     Creating a direct and substantial link between the executive’s annual cash incentive bonus and our annual operating earnings,

     Structuring long-term compensation as equity awards, so that executives have an appropriate incentive to contribute to the creation of long-term stockholder value, and

     Requiring executives to meet stock ownership guidelines that will result in each executive holding a meaningful equity stake in the Company.

(2)  We seek to encourage improved performance by:

     Establishing our annual incentive bonus maximums based on our operating earnings, with the ability for the Committee to reduce the bonus based on individual performance goals, and

     Tying the ability to earn a substantial portion of our equity-based awards to the achievement of financial goals.

 

To achieve our compensation objectives for fiscal 2021, our executive compensation program used a combination of short-term and long-term elements: (1) annual salary, (2) annual incentive bonus, and (3) long-term incentive compensation in the form of stock options and restricted stock, both with time and performance

vesting conditions. Each element of long-term and short-term compensation is discussed more fully below under the heading “Primary Elements of Executive Compensation” on page 24 of this proxy statement.

Our Compensation Practices

Pay-for-performance is a longstanding core tenet of our compensation philosophy and one of the keys to Eagle’s long-term success. For years, our executive compensation programs have incorporated pay-for-performance and many other compensation best practices, including the following:

 

Things We Don’t Do

No employment agreements currently in effect with our executives.

No tax gross-up agreements with our executives.

No defined benefit plans are provided to our executives.

Our incentive plan prohibits the re-pricing of options.

Under our insider trading policy, employees and executives are prohibited from speculating in our securities or engaging in transactions designed to hedge their ownership interests.

Things We Do

A substantial portion of our annual long-term compensation awards are performance-based.

Our executives are provided very limited perquisites.

The benefits provided to our executives under the defined contribution Retirement Plan are determined on the same basis as the benefits provided to all salaried employees.

Our stock ownership guidelines require management to align their long-term interests with those of our stockholders.

Our recoupment (clawback) policy allows the Company to pursue reimbursement or forfeiture of incentive-based compensation if there is an accounting restatement of our financial statements due to the material noncompliance of the Company with any financial reporting requirement under the securities laws.

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Determining Executive Compensation

Advisory Vote on Executive Compensation; Central Role of Stockholder Engagement

We value feedback from our stockholders and regularly engage in a dialogue with a significant portion of our stockholders throughout the fiscal year to better understand their opinions on our business strategy and objectives and to obtain feedback regarding other matters of investor interest, such as executive compensation.

At the 2020 Annual Meeting of Stockholders, the Company’s stockholders voted to approve a non-binding advisory resolution approving the compensation paid to our Named Executive Officers as disclosed in the proxy statement for the 2020 Annual Meeting of Stockholders. This “say-on-pay” proposal received the approval of 77.9% of the votes cast.

In light of the stockholder support of the executive compensation program (reflected through the 2020 say-on-pay vote results), no substantive changes were made to the executive compensation program for fiscal 2021; however, in reviewing the issues raised by stockholders and proxy advisory firms during the course of the fiscal 2021 engagement process, the Board adopted a recoupment (clawback) policy as described on page 31 of this proxy statement.

The Compensation Committee is firmly committed to providing our executives with compensation opportunities that are tied to Company performance and stockholder value creation. We encourage our stockholders to review the complete description of the Company’s executive compensation program prior to casting a vote on this year’s say-on-pay advisory vote proposal (Proposal No. 2).

Authority of the Compensation Committee

Our Compensation Committee meets regularly (four times in fiscal 2021) to oversee and administer the compensation program of the CEO and the other senior executive officers. See “Board Committees — Compensation Committee” on page 15 of this proxy statement. The senior executive officers include all of the Named Executive Officers. In particular, the Compensation Committee is charged with the responsibility to:

Review and make recommendations regarding our general compensation philosophy and structure;

Annually review and approve corporate goals and objectives relevant to the compensation of our CEO;

Evaluate our CEO’s performance in light of such goals and objectives;

Set the salary and other cash and equity compensation for our CEO based on such evaluation;

Review and approve the compensation of our other senior executive officers;

Administer each of our plans for which our Compensation Committee has administrative responsibility;

Grant cash awards (including annual incentive bonuses) under our annual bonus programs and equity awards (including options, restricted stock and restricted stock units) under our long-term Incentive Plan to our officers and other key employees;

Review and recommend to the Board the compensation of our non-employee directors; and

Recommend to the Board stock ownership guidelines for our executive officers and non-employee directors and monitor compliance therewith.

The Compensation Committee consists solely of directors who are independent under the NYSE listing standards (including the enhanced independence requirements for compensation committee members), and who are “non-employee directors” under Rule 16b-3 of the Exchange Act. The Compensation Committee is authorized to hire such outside advisors as it deems appropriate. The Compensation Committee’s charter may be found in the “Investor Relations/Corporate Governance” section of our website www.eaglematerials.com.

The Compensation Committee sets compensation for the Named Executive Officers on an annual basis. In general, the process for setting compensation involves the following steps:

As early as practicable after the beginning of each fiscal year, the Compensation Committee determines:

 

(1)   the salary of each Named Executive Officer for such fiscal year;

(2)   the overall size of the annual incentive bonus pools based on a percentage of our operating earnings in which the Named Executive Officers will have the opportunity to participate during such year and the percentage of the pool assigned to each Named Executive Officer;

(3)   whether the Compensation Committee will make any long-term incentive compensation awards in such fiscal year;

(4)   if the Compensation Committee decides to make long-term compensation awards for such fiscal year, the amount, nature of and terms applicable to such awards, including the form any such awards will take (e.g., options, restricted stock, restricted stock units and/or cash), the individual grant date fair value for awards to be made to each Named Executive Officer, the performance- or time-vesting criteria (or both) that will apply to any such awards, and the exercisability or payment schedules that will apply to any such awards if the performance criteria are satisfied; and

(5)   the Eagle Materials Special Situation Program for such fiscal year and the overall funding levels for such program based on operating earnings.

For fiscal 2021, the Compensation Committee made these determinations at two meetings held early in the fiscal year, in May 2020.

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After the end of the fiscal year, the Compensation Committee then:

 

(1)   reviews and approves the annual incentive bonus pools;

(2)   determines the extent to which the performance criteria for the prior fiscal year applicable to any long-term incentive awards were satisfied;

(3)   determines the amount of the downward adjustment, if any, to be made to the annual incentive bonus payment to each Named Executive Officer based on individual performance; and

(4)   if applicable, makes awards under the Eagle Materials Special Situation Program.

The Compensation Committee made these determinations for fiscal 2021 at two meetings held after the completion of the fiscal year, in May 2021.

Role of Management

Our CEO participates to a limited extent in the administration of our compensation program for Named Executive Officers, other than himself. Following the end of each fiscal year, the CEO provides input to the Compensation Committee on the performance of each of the other Named Executive Officers during the fiscal year and recommends compensation adjustments (salary adjustments for the upcoming fiscal year, any downward adjustments to annual incentive bonus levels for the recently completed fiscal year, and annual incentive bonus levels for the upcoming fiscal year) and, if applicable, long-term incentive award levels for such Named Executive Officers. The CEO also provides input on the structure of our long-term incentive awards (if any) for such Named Executive Officers, including the long-term incentive award levels and the performance or other criteria that determine vesting and other terms and conditions applicable to the awards. The Compensation Committee considers the CEO’s input, along with other information presented by its independent compensation consultants or otherwise available to it, in making its final compensation decisions with respect to the Named Executive Officers.

Engagement of an Independent Compensation Consultant

 

Late in fiscal 2020 (January 2020), the Compensation Committee again retained Longnecker & Associates (“L&A”), an independent compensation consulting firm based in Houston, Texas, to review levels and incentive components of our executives’ compensation in an effort to align the compensation of our officers competitively with the market for fiscal 2021. The primary role of L&A was to provide the Compensation Committee with market data and information regarding compensation trends in our industry and to make recommendations regarding base salaries, the design of our incentive programs and executive compensation levels. Our management did not direct or oversee the retention or activities of L&A with respect to our executive compensation program. The Compensation Committee has assessed the independence of L&A pursuant to SEC and NYSE rules and concluded that no conflict of interest exists that would prevent L&A from independently advising the Compensation Committee.

Compensation Peers

The data used by L&A in its survey of compensation, which we refer to as the “compensation study,” was weighted so that 50% was from published surveys from Economic Research Institute, Mercer, Pay Factors, Kenexa and WorldatWork and 50% was from compensation disclosures included in the proxy statements of members of our peer group. At the beginning of fiscal 2021 (spring 2020), L&A reviewed the Company’s current peer group for appropriateness and provided the Compensation Committee with recommendations for any additional peers to be included. L&A analyzed the Company’s peer group and potential modifications based on (1) other similar companies within similar industries, (2) revenue, (3) asset size, (4) market capitalization, and (5) enterprise value.

Based on this analysis, L&A recommended removal of one peer used in fiscal 2020: USG Corporation, which had been acquired. Additionally, L&A recommended the addition of one company to the peer group: Minerals Technologies Inc. Based on L&A’s recommendation, the Compensation Committee utilized the following 15-company peer group in analyzing fiscal 2021 compensation (“compensation peer group”):

 

Armstrong Worldwide Industries, Inc. Continental Building Products, Inc. EnPro Industries, Inc. Granite Construction Incorporated James Hardie Industries plc Lennox International Inc. Louisiana-Pacific Corp. Martin Marietta Materials Inc. Masonite International Corporation Minerals Technologies Inc. Silgan Holdings, Inc. Summit Materials, Inc. U.S. Concrete, Inc. U.S. Silica Holdings, Inc.Vulcan Materials Company

 

We are aware that institutional shareholder advisors, such as Institutional Shareholder Services, Glass Lewis and others, utilize methodologies to determine “peer groups” that may differ from our process. We believe that the methodologies they use may result in a peer group that does not provide a close “fit” for Eagle. For example, if the institutional shareholder advisor relies upon GICS codes to identify potential peers, the resulting peer group would include many companies whose operations we view as sufficiently dissimilar to ours as to make comparisons significantly less meaningful. Additionally, if the institutional shareholder advisor constructs a peer group based solely on revenues, the resulting peer group can create a poor fit for two reasons. First, because of accounting rules we are unable to include our 50/50 Texas Lehigh joint venture’s revenues in our revenue line item—we instead account for that entity in a separate line item valuing the equity interest in an unconsolidated joint venture. As a result, in our view, our revenue is, in effect, understated. Second, in our industry, with

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large up-front capital projects, we believe that cash flow and operating earnings are more important than revenues when evaluating peers.

For these reasons and in light of the peer analysis described above, we believe that the compensation peer group identified by our Compensation Committee for fiscal 2021 provides a more appropriate and meaningful basis for assessing our executive compensation.

Primary Elements of Executive Compensation

The primary elements of our executive compensation program are the following:

 

Base salary

 

Annual incentive bonus

 

Long-term incentive compensation

Base Salary

Salaries of the Named Executive Officers are reviewed annually as well as at the time of a promotion or significant change in responsibilities. As described above, the Compensation Committee engaged L&A to conduct the compensation study at the beginning of fiscal 2021. L&A’s compensation study was delivered to the Compensation Committee in May 2020.

In light of the COVID-19 pandemic, the Compensation Committee initially decided to freeze salaries for fiscal 2021; however, in light of the Company’s strong performance and healthy balance sheet, during the second quarter of fiscal 2021, the Compensation Committee approved salary adjustments retroactive to the beginning of the fiscal year. The fiscal 2021 base salaries for the Named Executive Officers were set as follows:

 

Name

 

Base

Salary

 

 

Percent

Increase

 

Michael R. Haack

 

$

824,000

 

 

 

3.0

 

D. Craig Kesler

 

$

500,035

 

 

 

3.1

 

Robert S. Stewart

 

$

480,420

 

 

 

2.0

 

James H. Graass

 

$

451,000

 

 

 

2.5

 

Steven L. Wentzel

 

$

330,002

 

 

 

21.0

 

Considerations that may influence the salary level for a Named Executive Officer include individual performance, the Named Executive Officer’s skills or experience, our operating performance and the nature and responsibilities of the position. (Mr. Wentzel’s increase was made in connection with his promotion to President of American Gypsum Company.)

Annual Incentive Bonus

The Compensation Committee is responsible for approving the annual incentive bonus for our CEO and the other Named Executive Officers. Annual incentive bonuses paid to our Named Executive Officers for fiscal 2021 (other than Mr. Wentzel) were made under the Eagle Materials Inc. Salaried Incentive Compensation Program for Fiscal Year 2021, which we refer to as the “Eagle Annual

Incentive Program.” The Eagle Annual Incentive Program and the Company’s other incentive programs for fiscal 2021 were structured to create financial incentives and rewards that are directly related to corporate performance and the participating Named Executive Officer’s individual performance during the fiscal year.

The Compensation Committee believes these programs are consistent with our pay-for-performance compensation philosophy in that they place a significant portion of the executive’s compensation “at risk.” Generally, under these programs, a significant portion of the executive’s total compensation is dependent upon the performance of the Company as well as the individual’s performance. The Company’s annual incentive bonus programs also reflect the Committee’s philosophy of aligning the interests of our executives with those of the stockholders. These programs create this alignment by providing that an officer’s annual bonus potential varies directly with our operating earnings. Although individual performance and achievement of goals (as discussed in more detail below under “Approving the Annual Incentive Bonus”) may affect the actual incentive bonus amount, our programs are structured in such a way that the executive officer’s incentive bonus potential can vary considerably as operating earnings change from year to year. The Committee believes that operating earnings is an appropriate metric for annual incentive bonuses because it is tied closely to operations, can be directly impacted by the efforts of the pool participants, and is a measure that our stockholders have indicated they track and value.

Eagle Annual Incentive Program

For fiscal 2021, Messrs. Haack, Kesler, Stewart and Graass were participants in the Eagle Annual Incentive Program. Under this program, during the first quarter of the fiscal year, a percentage of our operating earnings is designated by the Compensation Committee as a pool for bonuses, and each participating Named Executive Officer is assigned a share of such pool, representing the executive’s maximum bonus opportunity. At the end of the fiscal year, the size of the pool is determined, based on the amount of operating earnings generated during such fiscal year, and annual incentive bonuses are paid to each participating executive in the form of a lump sum cash payment reflecting each executive’s share of the pool, subject to the exercise of “negative discretion” by the Compensation Committee to reduce (but not increase) the amount of the cash payment based on the executive’s individual performance during the fiscal year. The amount of the annual incentive bonus paid to an executive is based on the level of our operating earnings, the share of the pool designated for such executive, and an assessment of such executive’s individual performance.

The Eagle Annual Incentive Program for Fiscal 2021 was adopted by the Compensation Committee in May 2020, and it mirrored the structure of the fiscal 2020 program. The program was to be funded with 1.2% of the Company’s operating earnings for fiscal 2021, the same percentage used in the prior year.

The bonus pool itself is not subject to a separate cap or maximum, but is merely a function of multiplying the pre-determined percentage by our operating earnings for the applicable fiscal year;

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however, our Incentive Plan does provide an absolute cap on cash that any employee may receive in any fiscal year under such programs ($5 million). In setting the percentage of operating earnings which would fund the pool for the Eagle Annual Incentive Program, the Compensation Committee considered several factors, including our compensation philosophy that a significant portion of the executive’s compensation should be “at risk” and subject to the Company’s success (level of operating earnings), as well as the anticipated operating earnings for fiscal 2021.

 

In allocating each Named Executive Officer’s opportunity under the pool, the Compensation Committee considered the amount of annual incentive bonus compensation opportunities of executives in other companies who fulfill similar roles as illustrated in the compensation study prepared by L&A, the share of the pool historically allocated to officers in such roles by the Company, the recommendation of Mr. Haack for each participant (other than himself), as well as the Compensation Committee’s assessment of the executive’s importance and contribution to the organization, the executive’s importance in driving the achievement of Company goals and profitability, the executive’s level of responsibility, and the anticipated operating earnings for fiscal 2021. The Compensation Committee set the bonus potential for the Named Executive Officers as follows:

Name

 

Annual

Incentive Bonus

Potential

(% of Pool)

 

Michael R. Haack

 

 

28.0

 

D. Craig Kesler

 

 

21.5

 

Robert S. Stewart

 

 

18.5

 

James H. Graass

 

 

18.5

 

 

Also at the beginning of fiscal 2021, the Compensation Committee worked with Mr. Haack to develop individual annual incentive goal categories by plan and position throughout the Company, including with respect to the Named Executive Officers (other than himself). For participants in the Eagle Annual Incentive Program, the participants’ individual performance against the goals would be evaluated by the Committee in the exercise of “negative discretion” to reduce (but not increase) the amount of the portion of the pool that would be paid to the participant at the end of the fiscal year.

At the end of fiscal 2021, the Compensation Committee determined that the aggregate amount available for the Eagle Annual Incentive Program pool for fiscal 2021 was $4,969,320, based on the Company’s operating earnings of $414,109,984, as adjusted for certain extraordinary items that the Committee believes are not reflective of operating performance, including downward adjustment from the gain from the sale of non-core businesses.

This pool amount was not quantifiable until the end of fiscal 2021. For comparison purposes, the equivalent pool amount in fiscal 2020 was $3,845,353, based on the Company’s operating earnings of $320,446,048 (as adjusted).

Divisional Annual Incentive Program

For certain employees who do not participate in the Eagle Annual Incentive Program, the Company maintains divisional annual incentive plans, which the Committee believes better tie such employees’ annual incentive compensation to metrics that they can directly influence than a Company-wide program. For fiscal 2021, Mr. Wentzel participated in a Divisional Annual Incentive Bonus Program. Under these programs, a percentage of a division’s operating earnings is allocated to the bonus pool and each participating employee is assigned a share of the pool, representing the employee’s maximum bonus opportunity. At the end of the fiscal year, the size of the pool is determined and annual bonuses are paid to participating employees in the form of a lump sum cash payment in accordance with their shares of the pool, subject to the exercise of negative discretion by our CEO (or, in the case of bonuses paid to Named Executive Officers, the Compensation Committee) based on the employee’s individual performance during the fiscal year.

Mr. Wentzel participated in the Eagle Materials Inc. American Gypsum Company Salaried Incentive Compensation Program for Fiscal Year 2021. Under this program, the bonus pool equaled 2.0% of the EBITDA of American Gypsum, which is the same percentage the Compensation Committee has set for the past several years. In deciding to keep the percentage of EBITDA which would fund this bonus pool the same as the prior year, the Compensation Committee considered several factors, including our compensation philosophy that a significant portion of the executive’s compensation should be “at risk” and subject to the Company’s success (level of earnings).

 

The divisional bonus pools are not subject to a separate cap or maximum, but are merely a function of multiplying the pre-determined percentage by the applicable operating earnings for the applicable fiscal year; however, our Incentive Plan does provide an absolute cap on cash that any employee may receive in any fiscal year under such programs ($5 million). The aggregate amounts available for the American Gypsum program for fiscal 2021 was $4,190,052, which was not quantifiable until the end of fiscal 2021 and includes amounts available for payment to officers and employees other than the Named Executive Officers. For comparison purposes, the equivalent amount in fiscal 2020 was $3,540,382.

In May 2020, the Compensation Committee set the annual incentive bonus potential for Mr. Wentzel under the American Gypsum program. In determining Mr. Wentzel’s allocation of the pool, the Compensation Committee considered the recommendation of Mr. Haack, the amount of annual incentive bonus compensation payable to executives in other companies who fulfill similar roles as illustrated in the compensation study prepared by L&A, the portion of the pool historically allocated to his position and the Compensation Committee’s assessment of his importance and contribution to his division’s performance, his importance as an officer within his division in driving the achievement of divisional goals and profitability and his level of responsibility. The Compensation Committee set Mr. Wentzel’s incentive bonus potential at 16.0% of his divisional bonus pool.

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Fiscal 2021 Special Situation Program

In the first quarter of fiscal 2021 (May 2020), the Compensation Committee approved the Eagle Materials Inc. Special Situation Program for Fiscal Year 2021, which we refer to as the “SSP,” which is a special annual incentive program intended to recognize outstanding individual performance during the fiscal year. The SSP also provides flexibility to reward performance when special circumstances arise in which our CEO determines that an individual has performed well but not been adequately compensated pursuant to other components of compensation, including without limitation instances where an individual’s compensation has been adversely affected by market conditions such as a cyclical downturn or in recognition of transactions and events not contemplated at the time the Compensation Committee set compensation for the applicable year.

SSP awards are made by our CEO, except that awards to executive officers require Compensation Committee approval (and our CEO does not have a role in the determination of any SSP award to himself). Awards under the SSP are not predetermined for any individuals at the beginning of the fiscal year. All full-time employees of Eagle Materials Inc. or any of our subsidiaries are eligible to receive awards under this program. At the beginning of fiscal 2021, the Compensation Committee determined that 0.20% of the Company’s EBITDA for the ensuing fiscal year would fund the SSP, along with the portions of the Eagle and divisional incentive compensation plans and divisional long-term cash compensation plans not paid out. In setting the percentage of EBITDA which would fund the SSP, the Compensation Committee considered several factors, including the anticipated EBITDA for fiscal 2021. All of our Named Executive Officers are eligible to participate in the SSP.

Approving the Annual Incentive Bonus

In May 2021, the Compensation Committee approved the incentive bonus pool for fiscal 2021 for the Company. In addition, at the end of fiscal 2021, Mr. Haack provided performance evaluations of each Named Executive Officer (other than himself) to the Compensation Committee, which evaluations included an assessment of the achievement of their individual goals and objectives, along with his recommendation for the annual incentive bonus for each such Named Executive Officer. With respect to Mr. Haack, the Compensation Committee performed its own evaluation of his performance and the extent to which the goals and objectives established for him for fiscal 2021 had been achieved.

Mr. Haack

At the end of fiscal 2021, the Compensation Committee conducted its performance evaluation of Mr. Haack after receiving input from the entire Board. Mr. Haack also provided information used by the Compensation Committee to evaluate the achievement of his goals and objectives for fiscal 2021 under the Eagle Annual Incentive Program. Based on this evaluation, which included both quantitative as well as discretionary factors, the Compensation Committee believes Mr. Haack performed at a high level during fiscal 2021 and his goals and objectives were substantially met. That evaluation resulted in Mr. Haack receiving 97% of his bonus potential for fiscal 2021. The Compensation Committee approved an annual incentive bonus for Mr. Haack under the Eagle Annual Incentive Program of

$1,350,000. In making this determination, the Compensation Committee used its judgment to determine the appropriate award level after consideration of several factors, including his achievement of his goals related to the following areas (among others) over the past fiscal year:

 

promotion of a safety performance culture and results achieved at the Company’s operating units;

 

leadership in driving talent and organizational development at both the corporate and divisional levels;

 

results achieved on a number of important capital projects and internal operating improvements;

 

overall financial performance versus plan;

 

leadership on ESG initiatives, including reporting, monitoring and communications;

 

acquisition and integration of Kosmos Cement;

 

divestiture of non-strategic assets;

 

leadership of the Company’s special actions during the COVID-19 pandemic.

Mr. Kesler

At the end of fiscal 2021, Mr. Haack reviewed Mr. Kesler’s performance. Based in part on this review, the Compensation Committee determined that Mr. Kesler had substantially met his goals and awarded Mr. Kesler 97% of his incentive bonus potential, approving an annual incentive bonus for Mr. Kesler under the Eagle Annual Incentive Program of $1,036,352. In making this determination, the Compensation Committee used its judgment to determine the appropriate award level after consideration of several factors, including the input of Mr. Haack regarding Mr. Kesler’s performance and his achievement of his goals related to his areas of responsibility, including: Mr. Kesler’s work on the Company’s divestiture of non-core assets, integration of Kosmos Cement into the Company’s financial and IT systems, and management of capital allocation priorities.

Mr. Stewart

At the end of fiscal 2021, Mr. Haack reviewed Mr. Stewart’s performance. Based in part on this review, the Compensation Committee determined that Mr. Stewart had substantially met his goals and awarded Mr. Stewart 97% of his incentive bonus potential, approving an annual incentive bonus for Mr. Stewart under the Eagle Annual Incentive Program of $891,744. In making this determination, the Compensation Committee used its judgment to determine the appropriate award level after consideration of several factors, including his achievement of his goals related to his areas of responsibility, the input of Mr. Haack regarding Mr. Stewart’s performance, and the following areas (among others) over the past fiscal year: Mr. Stewart’s work on Company-wide succession planning, coordination of production of the Company’s environmental and social report, and his involvement in the Company’s strategic budgeting process.

 

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Mr. Graass

At the end of fiscal 2021, Mr. Haack reviewed the performance of Mr. Graass. Based in part on this review, the Compensation Committee determined that Mr. Graass had substantially met his goals and awarded Mr. Graass 97% of his incentive bonus potential, approving an annual incentive bonus for Mr. Graass under the Eagle Annual Incentive Program of $891,744. In making this determination, the Compensation Committee used its judgment to determine the appropriate award level after consideration of several factors, including his achievement of his goals related to his areas of responsibility, the input of Mr. Haack regarding the performance of Mr. Graass, and the following areas (among others) over the past fiscal year: Mr. Graass’s work on the Company’s divestiture of non-core assets, development of policies and procedures around the COVID-19 pandemic, and oversight of the Company’s process for negotiating and entering into material contracts.

Mr. Wentzel

At the end of fiscal 2021, Mr. Haack reviewed the performance of Mr. Wentzel. Based in part on this review, the Compensation Committee determined that Mr. Wentzel had met his goals and awarded Mr. Wentzel 98% of his incentive bonus potential, approving an annual incentive bonus for Mr. Wentzel under the Eagle Materials Inc. American Gypsum Company Salaried Incentive Compensation Program for Fiscal Year 2021 of $606,038. In making this determination, the Compensation Committee used its judgment to determine the appropriate award level after consideration of several factors, including his achievement of his goals related to his areas of responsibility, the input of Mr. Haack regarding the performance of Mr. Wentzel, and the following areas (among others) over the past fiscal year: Mr. Wentzel’s management of American Gypsum’s response to the COVID-19 pandemic, work on succession planning, and superior safety focus and performance.

Long-Term Incentive Compensation

Consistent with the Compensation Committee’s philosophy of linking compensation to our performance, a significant portion of our long-term incentive compensation program for fiscal 2021 has been structured to tie the ability to earn equity awards to the achievement by the Company of specific performance levels. To enhance retention of key employees, once earned, the performance awards contain a further time-vesting component. Also, a portion of our long-term compensation program has been structured as purely time-vesting, which the Compensation Committee believes, based on the input of L&A, is in-line with the practice of our peers. A more detailed description of the fiscal 2021 awards is found below.

Burn Rate

The Compensation Committee has been a good steward of the equity available to it for award under our Incentive Plan. Our three-year average burn rate (a measure of historical dilution) is well below our industry norms. The Company’s three-year average burn rate (which is based on the number of awards granted—or, in the case of performance awards, awards earned—in each fiscal year, divided by the weighted-average common shares outstanding for

such fiscal year) is 1.13%. The 2021 benchmark for our industry published by ISS is 2.87%.

Grant Practice

All of the Named Executive Officers participate in our long-term incentive compensation program. In fiscal 2021, the Compensation Committee approved equity grants as described below. The date on which an equity award is granted is the date specified in the resolutions of the Compensation Committee authorizing the grant. The grant date must fall on or after the date on which the resolutions are adopted by the Committee. As provided in the Incentive Plan, for stock options, the exercise price is the closing price of our Common Stock on the grant date, as reported by the NYSE.

 

Fiscal 2021 Grants

In structuring the long-term incentive program for fiscal 2021, the Compensation Committee worked with Mr. Haack to establish a mix of performance-based and time-vesting awards. Consistent with prior years, the performance metric selected was return on equity, or “ROE,” which represents our earnings as a percentage of our stockholders’ equity, a performance metric that our stockholders have told us they find meaningful and that the Committee views as a measure of the Company’s prudent deployment of capital.

Target award amounts were allocated equally between performance-vesting and time-vesting awards, and the Committee allocated such awards between restricted stock and stock options based in part on the stated preference of the recipient. With respect to performance-based equity awards, the Committee determined a target award value that would be received upon the achievement of a strong ROE, with up to 120% of the target value received if exceptional ROE were achieved and 80% of the target value received if acceptable ROE were achieved. None of the performance-based equity awards would be earned if the return on equity were below this acceptable level. Both performance-based and time-vesting equity awards would vest over a four-year period to enhance the retention of these key employees.

Effective May 19, 2020, the Compensation Committee approved equity awards under the Incentive Plan to a group of key employees, including the Named Executive Officers, in alignment with the above structure. As part of the compensation study delivered to the Compensation Committee in May 2020, L&A had provided information regarding long-term compensation as well as total direct compensation paid to the compensation peer group. In determining the value of the equity to be granted, the Compensation Committee took into consideration the L&A compensation study, the input of Mr. Haack, the Compensation Committee’s assessment of the executive’s importance and contribution to the organization, and the executive’s level of responsibility. The target grant date fair value was allocated 50% to performance-based equity (with a Company ROE financial metric) and 50% to time-vesting equity. In general, recipients of equity awards had their target grant date fair value allocated between restricted stock and stock options as determined by the Compensation Committee after taking into consideration the stated preference of the recipient.

25


 

The following table shows the stock options and restricted stock granted to each of the Company’s Named Executive Officers effective May 19, 2020:

 

 

Name

 

Number of

Performance

Vesting

Stock Options

 

 

Shares of

Performance

Vesting

Restricted Stock

 

 

Number of

Time Vesting

Stock Options

 

 

Shares of

Time Vesting

Restricted

Stock

 

Michael Haack

 

 

47,550

 

 

 

17,439

 

 

 

39,625

 

 

 

14,533

 

D. Craig Kesler

 

 

13,586

 

 

 

4,983

 

 

 

11,322

 

 

 

4,153

 

Robert S. Stewart

 

 

 

 

 

8,969

 

 

 

 

 

 

7,474

 

James H. Graass

 

 

 

 

 

7,973

 

 

 

 

 

 

6,644

 

Steven L. Wentzel

 

 

 

 

 

5,980

 

 

 

 

 

 

4,983

 

 

 

The Committee believes that the structure of the fiscal 2021 long-term compensation program is consistent with the Compensation Committee’s philosophy of linking compensation to our performance.

Performance-Based Equity Awards

These awards are comprised of shares of restricted stock and stock options which are earned based upon the achievement by the Company of a certain level of average ROE for the fiscal year ended March 31, 2021, with 100% of the awarded stock/options (that is, 120% of the target award value) being earned if such ROE measure was 20.0% or higher, 83.3% of the awarded stock/options (that is, 100% of the target award value) being earned if such ROE measure was 15.0%, and 66.7% of the awarded stock/options (that is, 80% of the target award value) being earned if such ROE measure was at least 10.0% (with the exact percentage of shares earned being calculated based on straight-line interpolation between the points specified above with fractional points rounded to the nearest tenth of a percent). If the Company achieved a ROE measure of less than 10.0%, then none of the performance-based equity awards would be earned. The earned performance-based equity was to become fully vested one-fourth promptly after the certification date and one-fourth on March 31 for each of the following three years (in each case assuming continued service through such dates).

The terms and conditions of the performance-based equity are substantially the same as prior performance-based awards, except that the performance criterion is as described above. Any performance-based equity that was not earned at the end of fiscal 2021 was to be forfeited. In accordance with the terms of the Incentive Plan, the exercise price of the stock options is the closing price of the Company’s Common Stock on the date of grant, May 19, 2020 ($60.21).

 

In May 2021, the Compensation Committee certified that the Company’s 20.0% average ROE for the fiscal year ended March 31, 2021 satisfied the Company’s performance goal such that 100% of the performance-based equity granted (or 120% of the target number of shares/options) was earned. In calculating the average ROE, in accordance with the award agreement, the Committee excluded the impact of certain extraordinary items not related to operating performance, including downward adjustment from the gain from the sale of non-core businesses.

Time-Vesting Equity Awards

These awards are comprised of shares of restricted stock and stock options which vest ratably over four years on March 31, 2021; March 31, 2022; March 31, 2023; and March 31, 2024 (in each case assuming continued service through such dates). The Compensation Committee believes that including time-vesting equity as part of long-term compensation is consistent with competitive pay practices, preserves the Company’s philosophy that a significant portion of an executive’s pay should be at risk, enhances the retention of key employees, while at the same time creating a strong incentive for management to operate the business in a manner that creates additional value for stockholders.

The terms and conditions of the time-vesting equity are substantially the same as prior time-vesting awards. As in the case of prior equity awards, the time-vesting equity will also vest upon a change in control of the Company. See “Change in Control Benefits” below. In accordance with the terms of the Incentive Plan, the exercise price of the stock options is the closing price of the Company’s Common Stock on the date of grant, May 19, 2020 ($60.21).

Other Elements of Executive Compensation

Retirement Plan

Our Named Executive Officers, along with substantially all salaried and hourly employees of the Company and our subsidiaries are covered under our Retirement Plan, a qualified defined contribution plan under sections 401(a) and 401(k) of the Internal Revenue Code of 1986 (the “Code”).

Salaried participants, including our Named Executive Officers, covered under our Retirement Plan may elect to make pre-tax contributions and/or, after December 31, 2018, after-tax Roth 401(k) contributions of up to 70% of their base salary subject to the limit under Code Section 402(g) ($19,500 for calendar year 2020 and 2021), employee after-tax contributions of up to 10% of base salary and, if the participant is at least age 50, pre-tax “catch-up contributions” up to the statutory limit under Code Section 414(v) ($6,500 for calendar year 2020 and 2021). In addition, our Retirement Plan provides for a discretionary employer profit sharing contribution for our salaried employees, including our Named Executive Officers, that is a percentage of base salary for the year.

 

26


 

Participants are fully vested to the extent of their pre-tax, after-tax Roth 401(k), and after-tax contributions. Through December 31, 2018, our salaried participants become vested in the employer profit sharing contribution over a six-year period (i.e., 20% per year beginning with the second year of service); beginning January 1, 2019, our salaried participants become vested in the employer profit sharing contribution over a four-year-period (i.e., 25% per year beginning with the first year of service). All of the Named Executive Officers have been employed by the Company or our affiliates long enough to be fully vested. Participants are entitled to direct the investment of contributions made to the Retirement Plan on their behalf in various investment funds, including up to 15% in an Eagle Common Stock fund. Upon a participant’s termination of employment, disability or death, such amounts may remain in the Company plan or they are payable in the form of a lump sum, installments or direct rollover to an eligible retirement plan, as elected by the participant. At the participant’s election, amounts invested in the Common Stock fund are distributable in shares of our Common Stock.

Employer profit sharing contributions made to the Retirement Plan on behalf of our Named Executive Officers in fiscal 2021 are reflected under the “All Other Compensation” column in the Summary Compensation Table located on page 32 of this proxy statement. A list of the investment funds provided under the Retirement Plan is provided in the footnotes to the Nonqualified Deferred Compensation Table located on page 38 of this proxy statement.

SERP

In fiscal 1995, the Board approved our Supplemental Executive Retirement Program, which we will refer to as our “SERP,” for certain employees participating in the Retirement Plan. Internal Revenue Code Section 401(a)(17) limits the amount of annual compensation ($285,000 for calendar year 2020 and $290,000 for calendar year 2021) that may be considered in determining our contribution to the Retirement Plan for the account of an eligible participant.

The SERP was established to eliminate the adverse treatment that higher-salaried employees receive as a result of such limit by making a contribution for each participant in an amount substantially equal to the additional employer profit sharing contribution that he or she would have received under the Retirement Plan had 100% of his or her base salary been eligible for a profit-sharing contribution. As in the case of the Retirement Plan, annual incentive bonuses paid to participants are not included when determining the amount of contributions to the SERP. The Compensation Committee believes that the SERP therefore allows us to confer the full intended benefit of the employer profit sharing contribution under the Retirement Plan without the arbitrary limitation of the Internal Revenue Code rules noted above.

Contributions accrued under the SERP for the benefit of the higher-salaried employees vest under the same terms and conditions as under the Retirement Plan and may be invested by the participant in several of the same investment options as offered under the Retirement Plan. Benefits under the SERP are payable upon the participant’s termination of employment in a lump sum or installments as elected by the participant in accordance with the

terms of the SERP. As with the Retirement Plan, all of the Named Executive Officers have been employed by the Company or our affiliates long enough to be fully vested.

Employer contributions under the SERP to our Named Executive Officers in fiscal 2021 are reflected under the “All Other Compensation” column in the Summary Compensation Table located on page 32 of this proxy statement. A list of the investment funds provided under the Retirement Plan is provided in the footnotes to the Nonqualified Deferred Compensation Table located on page 38 of this proxy statement.

Salary Continuation Plan

The Named Executive Officers, along with other officers and key employees, are participants in our Salary Continuation Plan, which we refer to as the “SCP.” Under this plan, in the event of the death of a participating employee, we will pay such employee’s beneficiaries one full year of base salary in the first year following death and 50% of base salary each year thereafter until the date such employee would have reached normal Social Security retirement age, subject to a maximum amount of $1.5 million. Payments are made to the employee’s beneficiary on a semi-monthly basis.

 

The purpose of the plan is to provide some financial security for the families of the participating employees, which assists the Company in attracting and retaining key employees. Benefit amounts under the plan are intended to provide a basic level of support for beneficiaries. To cover these potential obligations, we pay the premiums on life insurance policies covering the life of each participating employee. Such policies are owned by the Company and proceeds from such policies would be initially paid to the Company.

Premiums paid on policies covering our Named Executive Officers in fiscal 2021 are reflected under the “All Other Compensation” column in the Summary Compensation Table located on page 32 of this proxy statement. Amounts potentially payable to the beneficiaries of our Named Executive Officers pursuant to the SCP are described in “Potential Payments Upon Termination or Change in Control” beginning on page 39 of this proxy statement.

Change in Control Benefits

During fiscal 2021, in order to better ensure the retention of our employees in the event of a potentially disruptive corporate transaction, we provided our employees, including our Named Executive Officers, with certain change-in-control protections. We believe that such protections, which are consistent with the practices of our peer companies, are in the best interest of our stockholders because they enable our executive leadership team to fully focus on the benefits of a corporate transaction for stockholders, rather than the potential adverse consequences of the transaction on their careers.

27


 

Change in Control Continuity Agreements

To better ensure the retention of our executive leadership team in the event of a potentially disruptive corporate transaction, the Board has approved change in control continuity agreements with Messrs. Haack, Kesler, Stewart and Graass. The change in control continuity agreements provide that, in the event of a change in control during the term, a two-year protection period will commence during which the relevant executive will be entitled to compensation and benefits on terms that are generally no less favorable than those that applied prior to the change in control. We believe that such protections, which are consistent with the practices of our peer companies, are in the best interest of our stockholders because they enable our executive leadership team to fully focus on the benefits of a corporate transaction for stockholders, rather than the potential adverse consequences of the transaction on their careers and compensation.

In the event of the executive’s involuntary termination of employment without cause or resignation for good reason during the two-year protection period, subject to the execution of a release of claims, he would be entitled to (a) cash severance equal to the product of (i) a severance multiple of 3 (for Mr. Haack), 2.5 (for Mr. Kesler) or 2 (for Messrs. Stewart and Graass), multiplied by (ii) the sum of his annual base salary and target annual bonus; (b) a prorated annual bonus for the year of termination; (c) a payment in lieu of employer retirement savings plan contributions that he would have received had his employment continued for 18 months (for Mr. Haack), 15 months (for Mr. Kesler) or 12 months (for Messrs. Stewart and Graass) post-termination; (d) a payment equal to the premium for continued participation in health insurance plans for 18 months (for Mr. Haack), 15 months (for Mr. Kesler) or 12 months (for Messrs. Stewart and Graass) post-termination; and (e) outplacement benefits of up to $30,000.

The change in control continuity agreements subject the executives to a perpetual confidentiality covenant and noncompetition covenants for 18 months (for Mr. Haack), 15 months (for Mr. Kesler) or 12 months (for Messrs. Stewart and Graass) post-termination. If any payments or benefits under the change in control continuity agreements would be subject to Sections 280G and 4999 of the Internal Revenue Code, such payments or benefits would be reduced to the extent that such reduction would place the executive in a better after-tax position. The initial term of the change in control continuity agreements is three years from the effective date of June 20, 2019, subject to automatic renewal for an additional year on each anniversary of the effective date.

 

All of our change in control continuity agreements have a “double-trigger” termination right (requiring both a change in control and a qualifying termination of employment in order to receive the change in control severance payments), and they do not include the long-term incentive values in the severance calculation or have tax gross-ups.

Under our change in control continuity agreements a “change in control” is defined generally as (i) the acquisition by any person or entity of 35% or more of our outstanding Common Stock or the voting power of outstanding securities entitled to vote in the election of directors; (ii) a change in the composition of our Board

such that the current members of the Board cease to constitute a majority of the Board; (iii) the consummation of a merger, asset disposition, share exchange or similar transaction, unless (1) more than 50% of the stock following such transaction is owned by persons or entities who were stockholders of the Company prior to such transaction, (2) following such transaction, no person or entity owns 35% or more of the common stock of the entity resulting from such transaction, and (3) at least a majority of the members of the resulting corporation’s board of directors were members of our Board; or (iv) our stockholders approve a complete liquidation or dissolution of the Company

See “Potential Payments Upon Termination or Change in Control” beginning on page 39 of this proxy statement.

Equity Awards

Awards granted in fiscal 2021 under our Incentive Plan are subject to accelerated vesting upon the occurrence of a “change in control” as defined in the applicable award agreement if they are not assumed or replaced with equivalent awards in connection with such change in control. Under the award agreements or incentive program documents, a “change in control” is defined generally as:

(i) the acquisition by any person or entity of 50% or more of the outstanding shares of any single class of our Common Stock or 40% or more of outstanding shares of all classes of our Common Stock;

(ii) a change in the composition of our Board such that the current members of the Board cease to constitute a majority of the Board; or

(iii) the consummation of a merger, dissolution, asset disposition, consolidation or share exchange, unless (a) more than 50% of the stock following such transaction is owned by persons or entities who were stockholders of the Company prior to such transaction, (b) following such transaction, no person or entity owns 40% or more of the common stock of the corporation resulting from such transaction, and (c) at least a majority of the members of the resulting corporation’s board of directors were members of our Board.

If a change in control occurs, any unvested outstanding stock options, restricted stock, restricted stock units would generally become immediately fully vested, and, in the case of stock options, exercisable or, in the case of restricted stock or RSUs, payable, unless the transaction resulting in the change in control provides that the award is to be replaced with an award of equivalent shares of the surviving parent corporation. See “Potential Payments Upon Termination or Change in Control” beginning on page 39 of this proxy statement.

We believe the provision of these change in control benefits is generally consistent with market practice among our peers, is a valuable executive talent retention incentive and is consistent with the objectives of our overall executive compensation program.

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No Discriminatory Perquisites, Post-retirement Welfare Or Tax Gross-Ups

The Company does not provide perquisites or post-retirement welfare benefits to the Named Executive Officers. During employment, the Named Executive Officers participate in the broad-based employee health insurance plans available to employees of the Company generally. Further, the Company does not provide for gross-ups of excise taxes under Section 4999 of the Code to any of the Named Executive Officers.

 

Other Compensation Policies and Practices

Stock Ownership Guidelines

In order to align the interests of the Named Executive Officers with our stockholders, and to promote a long-term focus for the officers, the Board of Directors has adopted executive stock ownership guidelines for the Company’s executive officers. The ownership goal for each Named Executive Officer is expressed as a dollar amount equal to a multiple of base salary. The CEO’s goal is higher than the other executive officers (as detailed below).

Name

 

Multiple of

Salary

Ownership

Guidelines

Michael R. Haack

 

5X

D. Craig Kesler

 

3X

Robert S. Stewart

 

3X

James H. Graass

 

3X

Steven L. Wentzel

 

3X

The goal is met when the officer’s current share value meets or exceeds the goal. The current share value is calculated in one of three ways: (i) the sum of the grant date fair value of stock held by the officer; (ii) the current shares valued at the current market price; or (iii) the current shares valued at an average stock price (the average of the prior three management equity incentive grant prices).

Until an officer has achieved the goal, he or she is required to retain all net shares received from the Company.

Once an officer has achieved the goal, he or she may sell shares of Common Stock to the extent the value of post-sale share holdings (valued at the greater of current price and average price) exceeds the goal.

 

Types of ownership counted toward the goal include the following:

 

Direct holdings;

 

Shares represented by earned restricted stock or RSUs;

 

Stock holdings in our Retirement Plan; and

 

Indirect holdings, such as shares owned by a family member residing in the same household.

 

The Compensation Committee reviews compliance with the ownership guidelines on an annual basis. Newly elected officers

have five years to meet the applicable ownership requirement. As of the record date for the 2021 annual meeting, all Named Executive Officers are in compliance with the guidelines.

Recoupment (Clawback) Policy

We have adopted a recoupment (clawback) policy. We can recoup incentive-based compensation from executive officers if there is an accounting restatement of our financial statements due to the material noncompliance of the Company with any financial reporting requirement under the securities laws. The policy applies to compensation received by any current or former executive officer during the three-year period preceding the restatement.

No Hedging

Under our insider trading policy, all of our directors and employees (including our Named Executive Officers) are prohibited from speculating in our securities or engaging in transactions designed to hedge their ownership interests.

Consideration of the Tax Deductibility of Compensation

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction for public corporations for compensation over $1,000,000 paid in any fiscal year to the corporation’s chief executive officer and certain other executive officers. Historically, Section 162(m) exempted performance-based compensation from the deduction limit if certain requirements were met; however, legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 eliminated the “performance-based compensation” exemption to Section 162(m).

Despite the change in law, the Compensation Committee intends to continue to implement compensation programs that it believes are competitive and in the best interests of the Company and its stockholders. Accordingly, the Committee may approve compensatory arrangements that provide for non-deductible payments or benefits when it determines that such arrangements are consistent with the Company's business needs and in the best interest of the Company and its stockholders.

Compensation Risk

Although a significant portion of potential compensation to our executive officers is performance-based, we do not believe that our compensation policies, principles, objectives and practices are structured to promote inappropriate risk taking by our executives. We believe that the focus of our overall compensation program encourages management to take a balanced approach that focuses on increasing and sustaining our profitability. See “Board Leadership Structure and Role in Risk Oversight — Risk Assessment in Compensation Programs” on page 14 of this proxy statement.

 

 

 

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following table summarizes all fiscal 2019, 2020 and 2021 compensation earned by or paid to our Named Executive Officers, who consist of our Chief Executive Officer, our Chief Financial Officer and the three most highly compensated executive officers (other than the Chief Executive Officer and Chief Financial Officer) who were serving as executive officers at fiscal year-end.

 

Name and Principal

Position

 

Fiscal

Year

Ended

March

31,

 

Salary(1)

($)

 

 

Bonus(2)

($)

 

 

Stock

Awards(3)

($)

 

 

Option

Awards(4)

($)

 

 

Non-Equity

Incentive

Plan

Compensation(5)

($)

 

 

All Other

Compensation(6)

($)

 

 

Total

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael R. Haack (7)

 

2021

 

$

824,000

 

 

 

 

 

$

1,750,000

 

 

$

1,750,000

 

 

$

1,350,000

 

 

$

87,074

 

 

$

5,761,074

 

President and Chief

 

2020

 

 

800,000

 

 

$

275,000

 

 

 

1,450,000

 

 

 

1,450,000

 

 

 

969,029

 

 

 

80,046

 

 

 

5,024,075

 

Executive Officer

 

2019

 

 

575,000

 

 

 

100,000

 

 

 

550,000

 

 

 

550,000

 

 

 

726,823

 

 

 

62,214

 

 

 

2,564,037

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

D. Craig Kesler

 

2021

 

 

500,035

 

 

 

 

 

 

500,000

 

 

 

500,000

 

 

 

1,036,352

 

 

 

54,902

 

 

 

2,591,289

 

Executive Vice

 

2020

 

 

485,000

 

 

 

206,000

 

 

 

500,000

 

 

 

500,000

 

 

 

793,681

 

 

 

53,678

 

 

 

2,538,359

 

President – Finance and

 

2019

 

 

460,000

 

 

 

50,000

 

 

 

450,000

 

 

 

450,000

 

 

 

675,518

 

 

 

51,284

 

 

 

2,136,802

 

Administration & CFO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert S. Stewart

 

2021

 

 

480,420

 

 

 

 

 

 

900,000

 

 

 

 

 

 

891,744

 

 

 

47,807

 

 

 

2,319,971

 

Executive Vice

 

2020

 

 

471,000

 

 

 

75,000

 

 

 

900,000

 

 

 

 

 

 

675,821

 

 

 

47,229

 

 

 

2,169,050

 

President – Strategy,

 

2019

 

 

455,000

 

 

 

 

 

 

900,000

 

 

 

 

 

 

675,518

 

 

 

46,162

 

 

 

2,076,680

 

Corporate Development and

Communications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James H. Graass

 

2021

 

 

451,000

 

 

 

 

 

 

800,000

 

 

 

 

 

 

891,744

 

 

 

47,087

 

 

 

2,189,831

 

Executive Vice President

 

2020

 

 

440,000

 

 

 

125,000

 

 

 

800,000

 

 

 

 

 

 

675,821

 

 

 

46,836

 

 

 

2,087,657

 

General Counsel and

 

2019

 

 

425,000

 

 

 

 

 

 

800,000

 

 

 

 

 

 

675,518

 

 

 

45,056

 

 

 

1,945,574

 

Secretary