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.     )

 

 

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Filed by a Party other than the Registrant  ☐

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☐		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

EVOQUA WATER TECHNOLOGIES CORP.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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		January 7, 2019   To the Stockholders of Evoqua Water Technologies Corp.:   You are cordially invited to attend the Annual Meeting of Stockholders for the fiscal year ended September 30, 2018 (the “Annual Meeting”) of Evoqua Water Technologies Corp., on Thursday, February 14, 2019, at 9:00 a.m. (Eastern Time) at our offices at 2650 Tallevast Road, Sarasota, Florida 34243.   At the Annual Meeting, you will be asked to (i) elect three Class I directors, Nick Bhambri, Judd A. Gregg and Lynn C. Swann, to our Board of Directors, (ii) approve, on an advisory basis, the compensation of our named executive officers, (iii) determine, on an advisory basis, the frequency with which stockholders will participate in any advisory vote on executive compensation, (iv) approve the Evoqua Water Technologies Corp. 2018 Employee Stock Purchase Plan, (v) ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2019 and (vi) transact any other business that may properly come before the Annual Meeting, or any adjournment or postponement thereof.   It is important that your shares be represented and voted, whether or not you plan to attend the Annual Meeting in person. You may vote on the Internet, by telephone or by completing and mailing a proxy card. Voting over the Internet, by telephone or by written proxy will ensure your shares are represented at the Annual Meeting. If you attend the meeting, you may revoke your proxy if you wish, and vote in person.   We thank you for your continued support and interest in Evoqua Water Technologies Corp.
		Sincerely,   Ron C. Keating   President, Chief Executive Officer and Director

Pittsburgh, Pennsylvania

January 7, 2019

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

Date:		Thursday, February 14, 2019
Time:		9:00 a.m. (Eastern Time)
Place:		Evoqua Water Technologies 2650 Tallevast Road, Sarasota, Florida 34243

Proposals:

 

1:

To elect three Class I directors, Nick Bhambri, Judd A. Gregg and Lynn C. Swann, to our Board of Directors to hold office until the annual meeting of stockholders for the fiscal year ending September 30, 2021 or until their successors are duly elected and qualified;

2:

To approve, on an advisory basis, the compensation of our named executive officers;

3:

To determine, on an advisory basis, the frequency with which stockholders will participate in any advisory vote on executive compensation;

4:

To approve the Evoqua Water Technologies Corp. 2018 Employee Stock Purchase Plan;

5:

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2019; and

To transact any other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

Record Date:

Stockholders of record at the close of business on December 19, 2018 are entitled to receive notice of and to vote at the Annual Meeting and any adjournment or postponement thereof.

This Notice and the enclosed Proxy Statement and Proxy Card are first being made available to stockholders on or about January 8, 2019.

By Order of the Board of Directors,

 

Vincent Grieco

Executive Vice President,

Secretary and General Counsel

IMPORTANT INFORMATION REGARDING THE AVAILABILITY OF PROXY MATERIALS

The Notice of Meeting, Proxy Statement, Proxy Card and our fiscal year 2018 Annual Report, which includes our Annual Report on Form 10-K for the fiscal year ended September 30, 2018, are available at www.voteproxy.com.

YOUR VOTE IS VERY IMPORTANT. PLEASE CAREFULLY READ THE ATTACHED PROXY STATEMENT. EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE PROMPTLY COMPLETE, EXECUTE, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES. YOU MAY ALSO VOTE ELECTRONICALLY VIA THE INTERNET OR BY TELEPHONE BY FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD. IF YOU VOTE BY INTERNET OR TELEPHONE, THEN YOU NEED NOT RETURN A WRITTEN PROXY CARD BY MAIL. STOCKHOLDERS WHO ATTEND THE ANNUAL MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON IF THEY SO DESIRE.

Table of Contents

PROXY STATEMENT

 

Evoqua Water Technologies Corp.

PROXY STATEMENT

FOR THE ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON FEBRUARY 14, 2019

General

We are furnishing this Proxy Statement to you as part of a solicitation by the Board of Directors (the “Board”) of Evoqua Water Technologies Corp., a Delaware corporation, of proxies to be voted at our Annual Meeting of Stockholders for the fiscal year ended September 30, 2018 and at any reconvened meeting after an adjournment or postponement of the meeting (the “Annual Meeting”). We will hold the Annual Meeting at our offices at 2650 Tallevast Road, Sarasota, Florida 34243, on Thursday, February 14, 2019 at 9:00 a.m. (Eastern Time). Unless the context otherwise requires, all references in this Proxy Statement to “Evoqua,” “Company,” “we,” “us,” and “our” refer to Evoqua Water Technologies Corp. and its subsidiaries.

Our mailing address and principal executive office is 210 Sixth Avenue, Pittsburgh, Pennsylvania 15222. Our website is located at aqua.evoqua.com. The information contained on, or that can be accessed through, our website is not a part of this Proxy Statement.

As permitted by the rules of the Securities and Exchange Commission (the “SEC”), we have elected to send you this full set of proxy materials, including a proxy card, and additionally to notify you of the availability of these proxy materials on the Internet. The Notice of Meeting, Proxy Statement, Proxy Card, and our fiscal year 2018 Annual Report, which includes our annual report on Form 10-K for the fiscal year ended September 30, 2018 (the “Annual Report”), are available at www.voteproxy.com.

Matters to be Considered at the Annual Meeting

At the Annual Meeting, you will consider and vote upon:

 

Proposal		Description		Board’s Recommendation
Proposal 1		The election of our three Class I director nominees, Nick Bhambri, Judd A. Gregg and Lynn C. Swann		FOR
Proposal 2		The approval, on an advisory basis, of the compensation of our named executive officers		FOR
Proposal 3		The determination, on an advisory basis, of the frequency with which stockholders will participate in any advisory vote on executive compensation		EVERY ONE YEAR
Proposal 4		The approval of the Evoqua Water Technologies Corp. 2018 Employee Stock Purchase Plan		FOR
Proposal 5		The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2019		FOR

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  1

Questions and Answers About the Proxy Materials and the Annual Meeting

The information in the “question and answer” format below is for your convenience only and provides essential information about the proxy materials and how to cast your vote at the Annual Meeting. You should read this entire Proxy Statement carefully for information about the proposals to be presented at the Annual Meeting. Information contained on, or that can be accessed through, our website is not a part of this Proxy Statement.

What is a proxy?

The Board is asking for your proxy. This means you authorize persons selected by the Company to vote your shares at the Annual Meeting in the way that you instruct. All shares represented by valid proxies that are received and not revoked before the Annual Meeting will be voted at the Annual Meeting in accordance with the stockholder’s specific voting instructions.

Why am I receiving these materials?

You are receiving these materials because at the close of business on December 19, 2018 (the “Record Date”), you owned shares of the Company’s common stock, $0.01 par value per share. All stockholders of record on the Record Date are entitled to attend and vote at the Annual Meeting.

Each share of our common stock is entitled to vote at the Annual Meeting. As of the Record Date, we had 113,943,134 shares of common stock outstanding. With respect to all of the matters submitted for vote at the Annual Meeting, each share of common stock is entitled to one vote.

What information is contained in this Proxy Statement?

This Proxy Statement includes information about the nominees for Class I directors and other matters to be voted on at the Annual Meeting. It also explains the voting process and requirements; describes the compensation of our principal executive officer, principal financial officer and our three other most highly compensated executive officers (collectively referred to as our “named executive officers” or “NEOs”); describes the compensation of our directors; and provides certain other information that SEC rules require.

What should I do with these materials?

Please carefully read and consider the information contained in this Proxy Statement and then vote your shares as soon as possible to ensure that your shares will be represented at the Annual Meeting. You may vote your shares prior to the Annual Meeting even if you plan to attend the Annual Meeting in person.

What shares are included on my proxy card?

You will receive one proxy card for all the shares of the Company’s common stock that you hold as a stockholder of record (in certificate form or in book-entry form).

If you hold your shares in street name, you will receive voting instructions for each account you have with a broker, bank or other nominee.

 

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What matters am I voting on, how may I vote on each matter and how does the Board recommend that I vote on each matter?

The following table sets forth each of the proposals you are being asked to vote on, how you may vote on each proposal and how the Board recommends that you vote on each proposal:

 

Proposal		Description		How may I vote?		How does the Board recommend that I vote?
Proposal 1		The election of our three Class I director nominees, Nick Bhambri, Judd A. Gregg and Lynn C. Swann, each for a three-year term or until his successor is duly elected and qualified.		You may (i) vote FOR the election of all Class I director nominees named herein; (ii) WITHHOLD authority to vote for all such Class I director nominees; or (iii) vote FOR the election of all such Class I director nominees other than any nominees with respect to whom the vote is specifically WITHHELD by indicating in the space provided on the proxy.		The Board recommends that you vote FOR all three of the Class I director nominees.
Proposal 2		The approval, on an advisory basis, of the compensation of our named executive officers.		You may vote FOR or AGAINST the approval of the compensation of our named executive officers, or you may indicate that you wish to ABSTAIN from voting on the matter.		The Board recommends that you vote FOR the approval, on an advisory basis, of the Company’s executive compensation.
Proposal 3		The determination, on an advisory basis, of the frequency with which stockholders will participate in any advisory vote on executive compensation.		You may vote in favor of the Company seeking an advisory vote on executive compensation EVERY ONE YEAR, EVERY TWO YEARS or EVERY THREE YEARS, or you may indicate that you wish to ABSTAIN from voting on the matter.		The Board recommends that you vote in favor of the Company seeking an advisory vote on executive compensation EVERY ONE YEAR.
Proposal 4		The approval of the Evoqua Water Technologies Corp. 2018 Employee Stock Purchase Plan.		You may vote FOR or AGAINST the approval of the Evoqua Water Technologies Corp. 2018 Employee Stock Purchase Plan, or you may indicate that you wish to ABSTAIN from voting on the matter.		The Board recommends that you vote FOR the approval of the Evoqua Water Technologies Corp. 2018 Employee Stock Purchase Plan.
Proposal 5		The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending September 30, 2019.		You may vote FOR or AGAINST the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending September 30, 2019, or you may indicate that you wish to ABSTAIN from voting on the matter.		The Board recommends that you vote FOR the ratification of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending September 30, 2019.

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  3

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

If your shares are registered directly in your name with the Company’s transfer agent, American Stock Transfer & Trust Company, LLC, you are considered the “stockholder of record” with respect to those shares. The full set of proxy materials has been sent directly to you.

If your shares are held with a broker or in an account at a bank, you are considered the “beneficial owner” with respect to those shares. These shares are sometimes referred to as being held “in street name.” The full set of proxy materials would have been forwarded to you by your broker, bank or other holder of record who is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares by using the voting instruction card included in the mailing or by following the instructions on the enclosed proxy card for voting online or by telephone. You will not be able to vote these shares directly unless you obtain a signed legal proxy from your broker, bank or other nominee giving you the right to vote the shares.

How do I vote if I am a stockholder of record?

As a stockholder of record, you may vote your shares in any one of the following ways:

 

•

By Telephone: Call the toll-free number shown on the proxy card;

 

•

On the Internet: Vote on the Internet on the website shown on the proxy card;

 

•

By Mail: Mark, sign, date and return the enclosed proxy card in the postage-paid envelope; or

 

•

In Person: Vote in person at the Annual Meeting.

Whether or not you plan to attend the Annual Meeting, we urge you to vote. Returning the proxy card or voting by telephone or online will not affect your right to attend the Annual Meeting and vote in person.

How do I vote if I am a beneficial owner?

As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares by following the instructions that your broker, bank or other nominee sent to you. You will receive proxy materials and voting instructions for each account that you have with a broker, bank or other nominee. As a beneficial owner, if you wish to change the voting instructions that you have provided your broker, bank or other nominee, you should follow the instructions that your broker, bank or other nominee sent to you.

As a beneficial owner, you are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the meeting unless you obtain a signed legal proxy from your broker, bank or other nominee giving you the right to vote the shares.

How can I attend the Annual Meeting?

You are entitled to attend the Annual Meeting only if you were a stockholder of record as of the Record Date or you hold a valid proxy for the Annual Meeting as described in the previous question. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. You should be prepared to present photo identification for admittance. If you are not a stockholder of record but hold shares as a beneficial owner, you should provide proof of beneficial ownership as of the Record Date, such as your most recent account statement prior to December 19, 2018, a copy of the voting instruction card provided by your broker, bank or other nominee, or other similar evidence of ownership. You may contact us by telephone at (724) 772-0044 to obtain directions to vote in person at the Annual Meeting.

What can I do if I change my mind after I vote?

If you are a stockholder of record, you can revoke your proxy and/or change your vote any time before completion of voting at the Annual Meeting as follows:

 

•

Revoke your proxy: Mail written notice of revocation of your proxy to our General Counsel and Secretary at 210 Sixth Avenue, Pittsburgh, Pennsylvania 15222;

 

4  Evoqua Water Technologies Corp. 2019 Proxy Statement 

•

Change your vote by Internet or telephone: Vote again over the Internet or by telephone prior to 11:59 p.m. (Eastern Time) on February 13, 2019;

 

•

Change your vote by mail: Sign and mail on a timely basis another proxy card with a later date; or

 

•

Change your vote at the meeting: Attend the Annual Meeting and vote in person by ballot.

If you hold your shares through a bank, broker or other nominee, you can revoke your proxy and/or change your vote as follows:

 

•

Give new voting instructions: Submit new voting instructions in the manner provided by your bank, broker or other nominee; or

 

•

Change your vote at the Annual Meeting: Contact your bank, broker or other nominee to obtain a legal proxy, as described in the answer to the question “How do I vote if I am a beneficial owner?” above, so that you may vote your shares in person at the Annual Meeting.

All shares represented by valid proxies received and not revoked will be voted at the Annual Meeting in accordance with the stockholder’s specific voting instructions.

What if I return my proxy card or vote by Internet or telephone but do not specify how I want to vote?

If you are a stockholder of record and sign and return your proxy card or complete the online or telephone voting procedures, but do not specify how you want to vote your shares, we will vote them as follows:

 

•

FOR the election of our Class I director nominees, Nick Bhambri, Judd A. Gregg and Lynn C. Swann;

 

•

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

 

•

FOR the Company seeking an advisory vote on executive compensation EVERY ONE YEAR;

 

•

FOR the approval of the Evoqua Water Technologies Corp. 2018 Employee Stock Purchase Plan; and

 

•

FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2019.

How many shares must be present or represented to conduct business at the Annual Meeting?

Under our Third Amended and Restated Bylaws, a quorum will exist at the Annual Meeting if stockholders holding a majority of the shares entitled to vote at the Annual Meeting are present in person or by proxy. Stockholders of record who return a proxy or vote in person at the meeting will be considered part of the quorum. Abstentions are counted as “present” for determining a quorum. Uninstructed broker votes, also called “broker non-votes,” are also counted as “present” for determining a quorum so long as there is at least one matter that a broker may vote on without specific instructions from a beneficial owner. See “What is a ‘broker non-vote’?” below.

How are votes counted?

In the election of the Class I directors, your vote may be cast “FOR” all of the nominees or your vote may be “WITHHELD” with respect to one or more of the nominees. If you withhold your vote with respect to any nominee, your shares will not be considered to have been voted for or against the nominee.

In the advisory vote on the frequency of future advisory votes on executive compensation, your vote may be cast for “EVERY ONE YEAR,” “EVERY TWO YEARS” “EVERY THREE YEARS” or “ABSTAIN.” A vote to “ABSTAIN” will have no effect on the vote.

For all other proposals, your vote may be cast “FOR” or “AGAINST” or you may “ABSTAIN.” If you “ABSTAIN” it has the same effect as a vote “AGAINST.” If you sign your proxy card with no further instructions and you are a stockholder of

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  5

record, then your shares will be voted in accordance with the recommendations of our Board. If you sign your proxy card with no further instructions and you are a beneficial owner, then please see the response to the question immediately below, “What is a ‘broker non-vote’?”

What is a “broker non-vote”?

Under the rules of the New York Stock Exchange (the “NYSE”), if you are a beneficial owner, your broker, bank or other nominee has discretion to vote your shares on “routine” matters without receiving voting instructions from you. The proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm is considered a routine matter. However, the election of our Class I directors, the advisory vote to approve compensation for our named executive officers, the advisory vote on the frequency of future advisory votes on executive compensation and the approval of the Evoqua Water Technologies Corp. 2018 Employee Stock Purchase Plan are considered “non-routine” matters. Accordingly, if you hold your shares through a broker, bank or other nominee, your broker, bank or other nominee will not be permitted to vote your shares on the election of Class I directors, the advisory vote to approve compensation for our named executive officers, the advisory vote on the frequency of future advisory votes on executive compensation or the approval of the Evoqua Water Technologies Corp. 2018 Employee Stock Purchase Plan unless you provide proper voting instructions. Broker non-votes have no effect on the vote for any matter at the meeting.

 

6  Evoqua Water Technologies Corp. 2019 Proxy Statement 

What is the voting requirement to approve each of the proposals?

The following table sets forth the voting requirements with respect to each of the proposals. As advisory votes, Proposals 2 and 3 are not binding on the Company. However, the Compensation Committee and the Board value the opinions expressed by the Company’s stockholders on these issues and will consider the outcome of these votes when making future decisions.

 

Proposal		Description		Voting Requirement
Proposal 1		The election of our three Class I director nominees, Nick Bhambri, Judd A. Gregg and Lynn C. Swann, each for a three-year term or until his successor is duly elected and qualified.		Each Class I director must be elected by a plurality of the votes cast. A plurality means that the nominees with the largest number of votes are elected as directors up to the maximum number of directors to be elected at the Annual Meeting. A “WITHHOLD” vote will have no effect on the vote.
Proposal 2		The approval, on an advisory basis, of the compensation of our named executive officers.		To be approved, this non-binding vote must be approved by a majority of the votes cast by the stockholders present in person or by proxy, meaning that the votes cast by the stockholders “FOR” the approval of the proposal must exceed the number of votes cast “AGAINST” the approval of the proposal. If a stockholder votes to “ABSTAIN,” it has the same effect as a vote “AGAINST.”
Proposal 3		The determination, on an advisory basis, of the frequency with which stockholders will participate in any advisory vote on executive compensation.		For this non-binding proposal, the frequency of “EVERY ONE YEAR,” “EVERY TWO YEARS” or “EVERY THREE YEARS” receiving the most votes cast by the stockholders present in person or by proxy, will be deemed to be the frequency preferred by the stockholders. A vote to “ABSTAIN” will have no effect on the vote.
Proposal 4		The approval of the Evoqua Water Technologies Corp. 2018 Employee Stock Purchase Plan.		To be approved, this proposal must be approved by a majority of the votes cast by the stockholders present in person or by proxy, meaning that the votes cast by the stockholders “FOR” the approval of the proposal must exceed the number of votes cast “AGAINST” the approval of the proposal. If a stockholder votes to “ABSTAIN,” it has the same effect as a vote “AGAINST.”
Proposal 5		The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2019.		To be approved, this proposal must be approved by a majority of the votes cast by the stockholders present in person or by proxy, meaning that the votes cast by the stockholders “FOR” the approval of the proposal must exceed the number of votes cast “AGAINST” the approval of the proposal. If a stockholder votes to “ABSTAIN,” it has the same effect as a vote “AGAINST.” If you are a beneficial owner, your broker, bank or other nominee may vote your shares on this proposal without receiving voting instructions from you.

Other matters that may properly come before the Annual Meeting may require more than a majority vote under our Third Amended and Restated Bylaws, our Amended and Restated Certificate of Incorporation, the laws of Delaware or other applicable laws. We do not know of any such matters as of the date of this Proxy Statement.

Who will count the votes?

A representative of American Stock Transfer & Trust Company, LLC will act as the inspector of elections and count the votes.

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  7

Where can I find the voting results?

We will announce the preliminary voting results at the Annual Meeting. We will also publish voting results in a current report on Form 8-K that we will file with the SEC within four business days of the Annual Meeting. If on the date of this Form 8-K filing the inspector of elections for the Annual Meeting has not certified the voting results as final, we will note in the filing that the results are preliminary and publish the final results in a subsequent Form 8-K filing within four business days after the final voting results are known.

Who will pay the costs of soliciting these proxies?

We will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of this Proxy Statement, the proxy card and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokers and other nominees holding shares of voting stock beneficially owned by others to forward to such beneficial owners. We may reimburse banks, brokers and other nominees for their reasonable costs of forwarding proxy materials to beneficial owners. Original solicitation of proxies may be supplemented by electronic means, mail, facsimile, telephone or personal solicitation by our directors, officers or other employees. No additional compensation will be paid to our directors, officers or other employees for such services.

Are you “householding” for stockholders sharing the same address?

The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement or annual report, as applicable, addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies.

Evoqua has not instituted householding for stockholders of record. However, certain brokerage firms may have instituted householding for beneficial owners of shares of Evoqua’s common stock held through brokerage firms. If your household has multiple accounts holding shares of Evoqua’s common stock, you may have already received a householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of this Proxy Statement. The broker will arrange for delivery of a separate copy of this Proxy Statement promptly upon your request. Evoqua stockholders may decide at any time to revoke a decision to household, and thereby receive multiple copies.

What is the deadline for stockholders to propose actions for consideration at the annual meeting of stockholders for the fiscal year ending September 30, 2019?

Stockholders who wish to nominate persons for election to our Board or propose other matters to be considered at our annual meeting of stockholders for the fiscal year ending September 30, 2019 must provide us advance notice of the director nomination or stockholder proposal, as well as the information specified in our Third Amended and Restated Bylaws, no earlier than October 17, 2019 and no later than November 16, 2019. Stockholders are advised to review our Third Amended and Restated Bylaws, which contain the requirements for advance notice of director nominations and stockholder proposals. Notice of director nominations and stockholder proposals must be mailed to our General Counsel and Secretary at 210 Sixth Avenue, Pittsburgh, Pennsylvania 15222. The requirements for advance notice of stockholder proposals under our Third Amended and Restated Bylaws do not apply to proposals properly submitted under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as those stockholder proposals are governed by Rule 14a-8. We reserve the right to reject, rule out of order or take other appropriate action with respect to any director nomination or stockholder proposal that does not comply with our Third Amended and Restated Bylaws and other applicable requirements.

September 9, 2019 is the deadline for stockholders to submit proposals to be included in our proxy statement under Rule 14a-8 under the Exchange Act. However, if the date of the annual meeting of stockholders for the fiscal year ending September 30, 2019 is changed by more than 30 days from the anniversary of the date of the previous year’s meeting, then the deadline will be a reasonable time before we begin to print and send our proxy statement for the annual meeting of stockholders for the fiscal year ending September 30, 2019. Proposals by stockholders must comply with all requirements of applicable rules of the SEC, including Rule 14a-8, and be mailed to our General Counsel and Secretary at

 

8  Evoqua Water Technologies Corp. 2019 Proxy Statement 

210 Sixth Avenue, Pittsburgh, Pennsylvania 15222. We reserve the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with Rule 14a-8 and other applicable requirements.

Who should I call if I have any questions?

If you have any questions about the Annual Meeting or your ownership of Company voting stock, please contact our transfer agent at:

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

Telephone: (800) 937-5449

Website Address: www.astfinancial.com

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  9

Background of the Company

We are a leading provider of mission-critical water treatment solutions, offering services, systems and technologies to support our customers’ full water lifecycle needs. With more than 200,000 installations worldwide, we hold leading positions in the industrial, commercial and municipal water treatment markets in North America. We offer a comprehensive portfolio of differentiated, proprietary technology solutions sold under a number of market-leading and well-established brands. We deliver and maintain these mission-critical solutions through the largest service network in North America, assuring our customers continuous uptime with 87 branches as of September 30, 2018. We have an extensive service and support network and, as a result, a certified Evoqua Service Technician is no more than a two-hour drive from more than 90% of our customers’ sites.

Our solutions are designed to ensure that our customers have access to an uninterrupted quantity and level of quality of water that meets their unique product, process and recycle or reuse specifications. We enable our customers to achieve lower costs through greater uptime, throughput and efficiency in their operations and support their regulatory compliance and environmental sustainability. We have worked to protect water, the environment and our employees for more than 100 years. As a result, we have earned a reputation for quality, safety and reliability and are sought out by our customers to solve the full range of their water treatment needs, and maintaining our reputation is critical to the success of our business.

Our vision to be the world’s first choice for water solutions and our values of integrity, customers and performance foster a corporate culture that is focused on establishing a workforce that is enabled, empowered and accountable, which creates a highly entrepreneurial and dynamic work environment. Our purpose is “Transforming water. Enriching life.” We draw from a long legacy of water treatment innovations and industry firsts, supported by more than 1,250 granted or pending patents, which in aggregate are important to our business and solution set. Our core technologies are primarily focused on removing impurities from water, rather than neutralizing them through the addition of chemicals, and we are able to achieve purification levels which are 1,000 times greater than typical drinking water.

Our common stock began trading on the NYSE on November 2, 2017 under the ticker symbol “AQUA” and on November 6, 2017, we completed our initial public offering, or IPO.

We are a “controlled company” within the meaning of the corporate governance standards of the NYSE, by a control group, consisting of certain affiliates of AEA Investors LP (collectively, “AEA” or our “Sponsor”) and certain of our other stockholders, who control a majority of the voting power of our outstanding common stock. See “Corporate Governance and Board Matters” in this Proxy Statement for more information.

 

10  Evoqua Water Technologies Corp. 2019 Proxy Statement 

Proposal 1—Election of Class I Directors

Our Board is divided into three classes, Class I, Class II and Class III, each consisting of as near an equal number of directors as practicable. Under our certificate of incorporation, the total number of directors will be determined from time to time by our Board. At present, our Board consists of nine directors with three directors in each class. Our directors serve staggered terms according to class, so that only a single class of directors shall have terms expiring in any given year. Those who are elected as directors upon expiration of a term shall serve for a three-year term and until their successors have been duly elected and qualified, or until the director’s earlier death, resignation or removal.

The current terms of our three Class I directors, Nick Bhambri, Judd A. Gregg and Lynn C. Swann, will expire at the Annual Meeting. For the Annual Meeting, our Board fixed the total number of directors on our Board at nine. The Board also fixed the number of Class I directors to be elected at three, and nominated Messrs. Bhambri, Gregg and Swann for election as our Class I directors. We believe each of the nominees possesses the following qualifications, qualities, skills and other expertise that are necessary to serve on our Board:

 

•

High personal and professional integrity;

 

•

Broad business and social perspective and mature judgment;

 

•

Broad experience at the policy-making level in business, finance, accounting, government or education;

 

•

Expertise and experience useful to Evoqua in relevant disciplines, especially in financial, commercial, governmental, international, technical or scientific disciplines, and complementary to the background and experience of other Board members;

 

•

Willingness to devote the time necessary to carry out the duties and responsibilities of a director;

 

•

Commitment to serve on the Board for an extended period of time to ensure continuity and to develop knowledge about the Company’s business; and

 

•

Willingness to represent the best interests of our stockholders and objectively appraise Company performance.

See the section of this Proxy Statement entitled “Our Board of Directors” for the backgrounds, principal occupations and ages of the Class I director nominees and our other directors, as well as a description of the specific qualifications, qualities, skills and other expertise for which they were chosen to serve on our Board.

If elected by our stockholders, Messrs. Bhambri, Gregg and Swann will hold office until the annual meeting of stockholders for the fiscal year ending September 30, 2021, or until their successors have been duly elected and qualified, subject to the director’s earlier death or resignation or removal. Each of Messrs. Bhambri, Gregg and Swann has consented to be named in this Proxy Statement and has agreed to serve if elected. If for some reason any of the Board’s nominees is unable to serve or for good cause will not serve if elected, the persons named as proxies may vote for a substitute nominee recommended by the Board and, unless you indicate otherwise on the proxy card, your shares will be voted in favor of the Board’s remaining nominees.

 

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  11

Our Board of Directors

Our Board of Directors provides oversight, strategic direction and counsel to management regarding the business, affairs and long-term interests of our Company and our stockholders. An overview of our Board as of January 1, 2019 is provided in the table below. For more complete information regarding the professional experience, qualifications, attributes and skills of each director and nominee, see the biographical information on the pages that follow.

 

Committees

Directors

Age

Independent

Audit

Compensation

Nominating and Corporate   Governance

Experience, Qualifications, Attributes, Skills

Class I (Nominees)

Nick Bhambri

55

🌑

🌑

• Former CEO of global company • Financial experience as former CEO and investor • Engineering, technology and industrial expertise

Judd A. Gregg

71

🌑

🌑

• Former U.S. Senator and state governor • Policy experience at highest levels of state and federal government, especially on issues affecting commerce • Experienced member of public company boards

Lynn C. Swann

66

🌑

🌑

• Business, finance, marketing, political, civic engagement and philanthropic experience • Policy experience in government and education • Experienced member of public company boards and audit committees

Class II (Term Expires 2020)

Ron C. Keating

50

• Strategic perspective, management, leadership and finance experience, water industry and operational expertise as our President and Chief Executive Officer • Engineering, technology and industrial experience

Martin J. Lamb (Board Chairman)

58

🌑

🌑

• Former CEO of global company • Engineering, technology and industrial expertise • Experienced member of public company boards

Peter M. Wilver

59

🌑

Chair

• Former CFO of global company • Experience in strategic planning, M&A and leading financial, accounting and investor relations functions • Experienced member of public company boards and audit and compensation committees

Class III (Term Expires 2021)

Gary A. Cappeline

69

🌑

🌑

• Former executive of global company • Engineering, technology and industrial expertise • Chemicals and water industry experience • Financial experience as former executive and investor • Particular knowledge and experience in corporate finance, strategic planning and investments with respect to relevant industries

Brian R. Hoesterey

51

Chair

🌑

• Particular knowledge and experience in corporate finance, strategic planning and investments with respect to relevant industries

Vinay Kumar

40

🌑

Chair

• Particular knowledge and experience in corporate finance, strategic planning and investments with respect to relevant industries

 

12  Evoqua Water Technologies Corp. 2019 Proxy Statement 

Class I Directors/Nominees

 

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  13

 

14  Evoqua Water Technologies Corp. 2019 Proxy Statement 

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  15

 

16  Evoqua Water Technologies Corp. 2019 Proxy Statement 

Corporate Governance and Board Matters

Corporate Governance

We believe that good corporate governance helps ensure that the Company is managed for the long-term benefit of our stockholders. We have adopted the Evoqua Water Technologies Corp. Corporate Governance Guidelines (our “Corporate Governance Guidelines”), which provide a foundation for the governance of the Company as a whole and describe the principles and practices that the Board follows in carrying out its responsibilities. Our Corporate Governance Guidelines address, among other things:

 

•

the composition, structure and policies of the Board and its committees;

 

•

determination of director qualifications;

 

•

consideration of diversity in identifying potential director candidates;

 

•

expectations and responsibilities of directors;

 

•

management succession planning;

 

•

the evaluation of performance of the Board and each of its committees;

 

•

principles of Board compensation; and

 

•

communications with stockholders and non-management directors.

Our Corporate Governance Guidelines are posted on our website at aqua.evoqua.com/corporate-governance. Our Corporate Governance Guidelines will be reviewed by the Nominating and Corporate Governance Committee from time to time to ensure that they effectively promote the best interests of both the Company and the Company’s stockholders and that they comply with applicable laws, regulations and NYSE requirements. In October 2018, we amended our Corporate Governance Guidelines to formalize our policy that diverse candidates, including women and minorities, shall be included in the pool from which we select new director nominees.

Code of Ethics and Business Conduct

We have adopted a code of ethics applicable to all of our directors, officers (including our principal executive officer, principal financial officer and principal accounting officer) and employees, known as the Code of Ethics and Business Conduct. The Code of Ethics and Business Conduct is available on our website at aqua.evoqua.com/corporate-governance. In the event that we amend or waive certain provisions of the Code of Ethics and Business Conduct applicable to our principal executive officer, principal financial officer or principal accounting officer that require disclosure under applicable SEC rules, we will disclose the same on our website.

Board of Directors and Director Independence

Controlled Company

Our Board has determined that we are a “controlled company” under the rules of the NYSE, meaning a company of which more than 50% of the voting power is held by an individual, a group or another company. As disclosed in greater detail under “Certain Relationships and Related Party Transactions—Transactions with AEA—Stockholders’ Agreement and Voting Proxies,” AEA and certain of our other stockholders who own a majority of our outstanding common stock are party to a Stockholders’ Agreement or voting proxies under which AEA and those stockholders have agreed, among other things, to vote their shares of our common stock on certain matters presented to the stockholders in the same manner that the Board and a majority of our stockholders vote on such matters. As a controlled company we qualify for, and rely on, exemptions from certain corporate governance requirements of the NYSE, including:

 

•

the requirement that a majority of the board of directors consist of independent directors;

 

•

the requirement to have a nominating/corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  17

•

the requirement to have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

•

the requirement for an annual performance evaluation of the nominating/corporate governance committee and compensation committee.

The “controlled company” exception does not modify the independence requirements for the Audit Committee. All of the members of our Audit Committee meet applicable independence requirements.

While we currently have a majority of independent directors and conduct annual performance evaluations of our Nominating and Corporate Governance Committee and our Compensation Committee, our Nominating and Corporate Governance Committee and our Compensation Committee do not consist entirely of independent directors. Accordingly, you do not have all of the same protections afforded to stockholders of companies that are subject to all NYSE rules.

Director Independence and Independence Determinations

Under our Corporate Governance Guidelines and the NYSE listing standards, a director is not independent unless our Board affirmatively determines that he or she does not have a material relationship with us or any of our subsidiaries. Our Corporate Governance Guidelines define independence in accordance with the independence definition in the current NYSE corporate governance rules for listed companies. Our Corporate Governance Guidelines require our Board to review the independence of all directors at least annually. In the event a director has a relationship with the Company that is relevant to his or her independence and is not addressed by the objective tests set forth in the NYSE independence definition, our Board will determine, considering all relevant facts and circumstances, whether such relationship is material.

Our Board has affirmatively determined that Nick Bhambri, Judd A. Gregg, Martin J. Lamb, Lynn C. Swann and Peter M. Wilver are independent directors under the rules of the NYSE and independent directors as such term is defined in Rule 10A-3(b)(1) under the Exchange Act. Ron C. Keating, our President and Chief Executive Officer, is not independent because of his position as an executive officer. Our remaining directors, Gary A. Cappeline, Brian R. Hoesterey and Vinay Kumar, are not independent because of their affiliations with AEA. However, on December 31, 2018, Mr. Cappeline retired from AEA and, accordingly, we expect that our Board will determine that Mr. Cappeline is an independent director.

Board Leadership Structure

We currently separate the roles of Chief Executive Officer and Chairman of the Board. These positions are currently held by Ron C. Keating, as our Chief Executive Officer, and Martin J. Lamb, an independent director, as Chairman of our Board. We believe this leadership structure is appropriate for our Company due to the differences between the two roles. The Chief Executive Officer is responsible for setting our strategic direction, providing day-to-day leadership and managing our business, while the Chairman of the Board provides guidance to the Chief Executive Officer, chairs Board meetings, sets the agendas for meetings of our Board and provides information to the members of our Board in advance of such meetings. As a result of this Board leadership structure, our Chief Executive Officer is able to focus on developing and implementing our Company’s business strategies and objectives, and the Chairman is able to provide independent oversight of our Company and serve as an independent liaison between our management and the members of our Board. Due to Mr. Lamb’s significant prior experience as a chief executive and non-executive director, we believe Mr. Lamb is well-suited to serve in his leadership role as Chairman. The Board recognizes that there is no single, generally accepted approach to providing Board leadership and that the Board’s leadership structure may vary in the future as circumstances warrant. In October 2018, we amended our Corporate Governance Guidelines to require our non-management directors to designate a Lead Independent Director if the positions of Chairman of the Board and Chief Executive Officer are combined.

Board Oversight of Risk Management

Our full Board is engaged in risk oversight directly as well as by delegating responsibility for oversight of certain risk categories to its standing committees, based on the committee’s expertise. The risk areas identified by the Company

 

18  Evoqua Water Technologies Corp. 2019 Proxy Statement 

include, but are not limited to, competitive, economic, operational, financial (accounting, credit, liquidity and tax), legal, regulatory, compliance and reputational risks. To facilitate the Board’s and each committee’s oversight function, the Board and each committee meet in executive sessions with key management personnel and representatives of outside advisors to gather information in their respective principal areas of focus about how critical risks are identified, assessed and managed, and management’s risk mitigation strategies.

 

		Areas of Oversight
Full Board		Strategic risks and operating risks; has oversight of development of the Company’s strategic and operating plans and execution of those plans through regular review of the Company’s operating performance
Audit Committee		Auditing, accounting and financial reporting processes and systems of internal controls implemented by management, including the internal audit function; legal and regulatory risks
Compensation Committee		Executive compensation arrangements for executive officers including corporate goals and objectives that affect the amount of compensation earned by our Chief Executive Officer and executive leadership team, the specific relationship of corporate performance to executive officer compensation and performance targets; management of human capital; oversight of director compensation arrangements
Nominating and Corporate Governance Committee		Corporate governance policies, including oversight of the Company’s Code of Ethics and Business Conduct; monitoring the composition and effectiveness of our Board and each of its standing committees; succession planning for our Board, its standing committees and executive management

In addition, our Chief Executive Officer’s membership on, and collaboration with, the Board allows him to gauge whether management is providing adequate information for the Board to understand the interrelationship of our various business and financial risks. Mr. Keating is available to the Board to address any questions from other directors regarding executive management’s ability to identify and mitigate risks and weigh them against potential rewards. Management also conducts an enterprise-wide risk management program that is designed to bring to the Board’s attention the Company’s most material risks for evaluation, including strategic, operational, financial and reputational risks. The Board and its committees work with management, our independent and internal auditors, as well as other external advisors, to incorporate enterprise-wide risk management into corporate strategy and business operations.

Corporate Social Responsibility

Evoqua and our brands have been leaders in protecting water, preserving the environment and supporting our employees who bring our purpose and vision to life every day. We are committed to maintaining a best-in-class Anti-Corruption Program and strive to make continuous improvements, ensuring we have effective preventative and detective controls in place to address misconduct. Our values provide a framework for how we operate as a business and engage as individuals with our colleagues, customers, partners and communities. These shared values are intrinsically woven into the fabric of our corporate culture. They reflect Evoqua’s dedication to sustainability and inspire us to continue developing solutions for the world’s most complex water challenges. Below are examples of programs and practices that reflect our values and principles:

 

•

Our Environment, Health and Safety Program, designed to minimize production defects (and thereby decrease generation of wastes) and environmental impacts and to prevent unsafe conditions in our workplaces;

 

•

Resource conservation practices in our operations and the processes we manage for our customers;

 

•

Our Ethics and Compliance Program and Anti-Corruption Program, to safeguard the trust placed in us by our customers and the communities where we work and live;

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  19

•

Our Supply Chain Protocol, to help us select suppliers that conform to our Supplier Code of Conduct, i.e., share our commitment to comply with all applicable laws, prohibit corruption, respect basic human rights of employees, prohibit child labor, mitigate the risk of slavery and human trafficking in our supply chain, take responsibility for the health and safety of employees, and promote these standards down the supply chain to lower-tier contractors or suppliers; and

 

•

Employment practices that promote equal opportunities for, and treatment of, employees, irrespective of race, color, religion, sex, national origin, age, disability, genetic information, gender identity or expression or veteran status and that respect the personal dignity and rights of each individual, allowing for a safe, comfortable and professional work environment.

More information about our corporate social responsibility efforts is included in our 2018 Sustainability Report available on the “About Us—Sustainability” page of our website at http://www.evoqua.com.

Director Selection Process

The Nominating and Corporate Governance Committee is responsible for identifying and evaluating potential director candidates, reviewing the composition of the Board and committees of the Board and making recommendations to the full Board on these matters, subject to AEA’s right to nominate directors to the Board. Perrodically during the year, the Nominating and Corporate Governance Committee monitors the mix of specific experience, qualifications and skills of our directors in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure. Before recommending to the Board the nomination of incumbent directors for election by our stockholders, the Nominating and Corporate Governance Committee also considers:

 

•

The types of qualifications, qualities, skills and other expertise we seek in all of our directors, as generally described above under “Proposal 1—Election of Class I Directors”;

 

•

Suitability of the incumbent director for continued service as a director;

 

•

Input from Board and Nominating and Corporate Governance Committee discussions regarding the specific backgrounds, skills and experiences that would contribute to effectiveness of the Board overall or individual committees;

 

•

Attendance and preparedness of the incumbent directors at Board and committee meetings;

 

•

Changes in the incumbent directors’ primary employer or a change in the nature of the incumbent directors’ employment, and any circumstance that would create a conflict of interest with the Company;

 

•

Overall contributions to the Board;

 

•

Needs of the Company; and

 

•

Our Corporate Governance Guidelines and any applicable laws.

Over the past year, the Nominating and Corporate Governance Committee has retained a third-party leadership consulting firm to assist us with identifying and evaluating potential candidates to fill vacancies on our Board. As we seek to attract highly qualified director candidates having a diversity of strengths, experiences and viewpoints, we have adopted a formal policy to include diverse individuals, including women and minorities, in each pool of potential candidates. Notably, our most recent director search, which resulted in the appointment of Lynn C. Swann to our Board, focused on seeking out diverse candidates to include in the pool of director nominees.

Stockholders may also nominate directors for election at the Company’s annual meeting of stockholders by following the provisions set forth in the Company’s Third Amended and Restated Bylaws, whose qualifications the Nominating and Corporate Governance Committee will consider in the same manner. For information on recommending a candidate for nomination as a director at future annual meetings of stockholders, see “Questions and Answers About the Proxy Materials and the Annual Meeting—What is the deadline for stockholders to propose actions for consideration at the

 

20  Evoqua Water Technologies Corp. 2019 Proxy Statement 

annual meeting of stockholders for the fiscal year ending September 30, 2019?” in this Proxy Statement. Additionally, our bylaws permit candidates to be nominated in accordance with the stockholders’ agreement, dated as of December 11, 2014, entered into by the Company, AEA and certain stockholders (the “Stockholders’ Agreement”). Among other things, the Stockholders’ Agreement provides that for so long as certain affiliates of AEA hold an aggregate of at least 10% of our outstanding common stock, AEA shall be entitled to nominate at least one individual for election to our Board, and our Board and Nominating and Corporate Governance Committee shall nominate and recommend to our stockholders that such individual be elected to our Board, and certain of our stockholders have entered into voting proxies in which they have agreed to vote all of their shares to elect such individual to our Board. In general, these voting proxies will continue in effect for two years following the closing of our initial public offering, so long as certain affiliates of AEA hold an aggregate of at least 20% of our outstanding common stock. Certain of these stockholders have also agreed to irrevocably appoint AEA as its proxy to vote all of their shares of our common stock with respect to the election of any member of our Board, and in the aggregate, AEA and these other stockholders beneficially own more than 50% of our outstanding common stock. See “Certain Relationships and Related Party Transactions—Transactions with AEA—Stockholders’ Agreement and Voting Proxies” for a description of AEA’s right to nominate directors.

Annual Board and Committee Evaluations

As reflected in our Corporate Governance Guidelines and the charters of each of our standing committees, our Board believes it is important to strive to improve the effectiveness of our Board and each standing committee. Our Board and each Committee will conduct a self-evaluation at least annually under the supervision of our Nominating and Corporate Governance Committee. For our first year as a public company, the self-evaluations will be administered by soliciting feedback from directors through written questionnaires relating to the Board as a whole and to each Committee on which the director serves, and then discussing the feedback during a subsequent evaluation session. The Board questionnaire is designed to gather suggestions for improving Board effectiveness and to solicit input on a range of issues, including Board operations, Board and committee structure and dynamics, the flow of information from management and agenda topics, and the questionnaires for the standing committees are primarily designed to solicit input on the effectiveness of the committee in performing according to its charter.

Meetings of the Board and Committees

During the fiscal year ended September 30, 2018, the Board held seven telephonic and in-person meetings. All of the directors who served during the fiscal year ended September 30, 2018 attended at least 75% of the total meetings of the Board and each of the Board committees on which such directors served during their respective tenures. Directors are expected to make best efforts to attend all Board meetings, all meetings of the committee or committees of the Board of which they are a member and the annual meeting of stockholders.

Pursuant to our Corporate Governance Guidelines, our Board currently plans to hold at least four meetings each year, with additional meetings to occur (or action to be taken by unanimous consent, either in writing or by electronic transmission) at the discretion of the Board.

Executive Sessions of Non-Management Directors

Pursuant to our Corporate Governance Guidelines, in order to ensure free and open discussion and communication among the non-management directors of the Board, the non-management directors meet in executive session at most Board meetings with no members of management present. In accordance with our Corporate Governance Guidelines, the non-management directors have designated our Chairman of the Board, Martin J. Lamb, as the director who is responsible for presiding over executive sessions of non-management directors.

Communications with the Board

Any interested parties wishing to communicate with, or otherwise make his or her concerns known directly to the Board or chairperson of any of the Audit, Compensation, and Nominating and Corporate Governance Committees, or to the non-management or independent directors as a group, may do so by addressing such communications or concerns to the General Counsel and Secretary of the Company, 210 Sixth Avenue, Pittsburgh, Pennsylvania 15222. The General Counsel

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  21

and Secretary will forward such communications to the appropriate party as soon as practicable. Such communications may be done confidentially or anonymously.

Committees of the Board

The Board has an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, as described below. As permitted by the NYSE listing standards, because we qualify as a “controlled company,” our Compensation Committee and our Nominating and Corporate Governance Committee are currently not composed entirely of independent directors. Our Audit Committee consists entirely of independent directors. Each of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee operates under a written charter approved by the Board, copies of which are available on our website at aqua.evoqua.com/corporate-governance.

Audit Committee

The members of the Audit Committee are Peter M. Wilver, as Chairman, Nick Bhambri and Lynn C. Swann. Effective October 31, 2018, Gary A. Cappeline resigned from the Audit Committee due to his role at AEA and consideration of the requirement that the Audit Committee be composed solely of independent directors within one year after the Company’s IPO. Mr. Wilver qualifies as our “audit committee financial expert” within the meaning of regulations adopted by the SEC. The Audit Committee recommends the annual appointment of, and reviews the independence of, auditors and reviews the scope of audit and non-audit assignments and related fees, the results of the annual audit, accounting principles used in financial reporting, internal auditing procedures, the adequacy of our internal control procedures, related party transactions and investigations into matters related to audit functions. The Audit Committee is also responsible for overseeing risk management on behalf of our Board. See “—Board Oversight of Risk Management.” Our Audit Committee consists entirely of independent directors.

The charter of the Audit Committee permits the committee to, in its discretion, delegate its duties and responsibilities to one or more subcommittees as it deems appropriate and to the extent permitted by applicable law.

Our Audit Committee met eight times during the fiscal year ended September 30, 2018.

Compensation Committee

The members of the Compensation Committee are Brian R. Hoesterey, as Chairman, Gary A. Cappeline, Vinay Kumar and Martin J. Lamb. The principal responsibilities of the Compensation Committee are to review and approve matters involving executive and director compensation, recommend changes in employee benefit programs, authorize equity and other incentive arrangements, and authorize our Company to enter into employment and other employee related agreements. Because we are a “controlled company” within the meaning of the NYSE listing standards, our Compensation Committee is currently not composed entirely of independent directors.

The charter of the Compensation Committee permits the committee to, in its discretion, delegate its duties and responsibilities to a subcommittee of the Compensation Committee as it deems appropriate and to the extent permitted by applicable law. All proposed delegations of duties of must be adopted by a resolution of the Compensation Committee and reviewed for compliance with the corporate governance standards of the NYSE, the rules and regulations of the SEC and Delaware corporate law. During the fiscal year ended September 30, 2018, the Compensation Committee engaged Pearl Meyer & Partners LLC (“Pearl Meyer”) as its compensation consultant until July 2018, and thereafter engaged Meridian Compensation Partners, LLC (“Meridian”) in such capacity.

Our Compensation Committee met five times during the fiscal year ended September 30, 2018.

Nominating and Corporate Governance Committee

The members of the Nominating and Corporate Governance Committee are Vinay Kumar, as Chairman, Gary A. Cappeline, Judd A. Gregg and Brian R. Hoesterey. The Nominating and Corporate Governance Committee assists our

 

22  Evoqua Water Technologies Corp. 2019 Proxy Statement 

Board in identifying individuals qualified to become Board members, makes recommendations for nominees for committees and develops, recommends to the Board and reviews our corporate governance principles. Because we are a “controlled company” within the meaning of the NYSE listing standards, our Nominating and Corporate Governance Committee is currently not composed entirely of independent directors. The charter of the Nominating and Corporate Governance Committee permits the committee to, in its sole discretion, delegate its duties and responsibilities to one or more subcommittees as it deems appropriate and to the extent permitted by applicable law.

Our Nominating and Corporate Governance Committee met three times during the fiscal year ended September 30, 2018.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves, or in the past year has served, as a member of the board of directors or compensation committee (or other committee performing equivalent functions) of any entity that has one or more executive officers serving on our Board or Compensation Committee. No interlocking relationship exists between any member of our Compensation Committee (or other committee performing equivalent functions) and any executive, member of the board of directors or member of the compensation committee (or other committee performing equivalent functions) of any other company.

No Hedging Policy

The Company’s Securities Trading Policy prohibits all directors and executive officers of the Company from effecting short sales, put options, call options or transactions in other derivative securities, holding securities in a margin account or otherwise pledging securities as collateral for a loan or hedging or similar monetization transactions with respect to the Company’s common stock.

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  23

Director Compensation

The Company does not currently pay cash compensation to its directors who are employed by either the Company or AEA for their services as directors. On February 26, 2018, the Board adopted the Company’s Non-Employee Director Compensation Policy, pursuant to which each director who is not employed by either the Company or AEA (each such director, an “Outside Director”) receives an annual retainer of $70,000, paid quarterly in arrears. The chairperson of the Board receives an additional annual retainer of $60,000, paid quarterly in arrears. The chairpersons of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee receive additional annual retainers of $20,000, $15,000 and $10,000, respectively, in each case paid quarterly in arrears. Non-chairperson members of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee receive additional annual retainers of $10,000, $7,500 and $5,000, respectively, in each case paid quarterly in arrears. All annual retainers are paid on a calendar year basis. In addition, each Outside Director receives a fee of $1,000 for each meeting attended in excess of six per calendar year.

On the date of each annual stockholder meeting of the Company, subject to each Outside Director’s continued service on the Board following such annual stockholder meeting and approval by the Compensation Committee, such Outside Director is granted an equity award under the Equity Incentive Plan comprised of restricted stock units in respect of the Company’s common stock valued at approximately $100,000 and subject to one-year vesting, such that 100% of the restricted stock units vests on the first anniversary of the date of grant (the “Annual Equity Grant”). If an Outside Director joins the Board at a time other than effective as of the first day of the calendar year, the Annual Equity Grant is prorated based on the number of full calendar quarters served in the calendar year in which such Outside Director commences service on the Board.

The award agreement evidencing the Annual Equity Grant sets forth the terms and conditions applicable to such award upon termination of service, which shall be determined by the Board, in its discretion, at the time the award is granted or at any time thereafter. Upon termination of service due to death, disability or mandatory retirement, the Annual Equity Grant, to the extent not already vested, fully vests as of the date of such termination of service. For purposes of the Non-Employee Director Compensation Policy, “mandatory retirement” means a compulsory retirement defined to be effective as of the day prior to the date of the next occurring annual meeting of the stockholders of the Company following the date on which an Outside Director has attained 75 years of age.

Outside Directors are able to participate in a deferred compensation plan which provides them with an opportunity to defer up to 100% of their cash retainer and/or 100% of their equity retainer until the earliest of separation from the Board, death, a specified future date and a change in control of the Company.

We established stock ownership guidelines for all non-employee directors in December 2017. Under the guidelines, within five years of their appointment to the Board, each non-employee director is required to own shares of our stock with a value equal to five times the portion of the annual retainer that is paid in cash.

 

24  Evoqua Water Technologies Corp. 2019 Proxy Statement 

Shown below is information regarding the fiscal 2018 compensation for each member of the Board other than Mr. Keating, whose compensation is reported in the Summary Compensation Table. (See “Compensation of the Named Executive Officers—Summary Compensation Table” in this Proxy Statement.)

Fiscal 2018 Non-Management Director Compensation

 

Name		Fees Earned or Paid in Cash ($)				Option Awards ($)				Stock Awards ($)				Total ($)
Nick Bhambri			65,000				—(1)				99,994(2)				164,994
Gary A. Cappeline			—				—				—				—
Judd A. Gregg			58,250				—(3)				99,994(2)				158,244
Brian R. Hoesterey			—				—				—				—
Ron C. Keating			—				—				—				—
Vinay Kumar			—				—				—				—
Martin J. Lamb			106,125				—(4)				99,994(2)				206,119
Lynn C. Swann(5)			26,607				—				74,995(2)				101,602
Peter M. Wilver(6)			70,500				—				99,994(2)				170,494

 

 

(1)	Mr. Bhambri holds 179,807 options, which are fully vested.

(2)

Each of Messrs. Bhambri, Gregg, Lamb and Wilver holds 4,789 and Mr. Swann holds 3,968 restricted stock units, which will vest in full on February 28, 2019. Mr. Gregg elected to defer 100% of his equity retainer under the deferred compensation plan, and no above-market or preferential earnings were earned with respect to the value attributable to Mr. Gregg’s deferred restricted stock units.

(3)	Mr. Gregg was originally granted 179,807 options, of which 144,607, which are fully vested, remain outstanding.

(4)	Mr. Lamb was originally granted 359,614 options, of which 89,903, which are fully vested, remain outstanding.

(5)	Mr. Swann commenced services as a director on May 21, 2018.

(6)	Mr. Wilver commenced services as a director on January 9, 2018.

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  25

Executive Officers

We provide information below regarding our executive officers as of January 1, 2019:

 

Name		Age		Position
Executive Officers:
Ron C. Keating*		50		President, Chief Executive Officer and a Director
Benedict J. Stas		51		Executive Vice President, Chief Financial Officer & Treasurer
Rodney O. Aulick		51		Executive Vice President, Integrated Solutions & Services Segment President
Snehal A. Desai**		55		Executive Vice President, Chief Growth Officer and Applied Product Technologies Segment Interim President
Vincent Grieco		50		Executive Vice President, Secretary and General Counsel
James M. Kohosek		60		Executive Vice President, Chief Administrative Officer
Anthony J. Webster		50		Executive Vice President, Chief Human Resources Officer

 

 

*	For Mr. Keating’s biography, see “Our Board of Directors — Class II Directors (Terms Expiring in 2020).”

**	Effective December 5, 2018, Mr. Desai was appointed as Applied Product Technologies Segment Interim President.

Benedict J. Stas has served as our Executive Vice President, Chief Financial Officer and Treasurer since March 2015. Prior to joining Evoqua, Mr. Stas held a variety of senior financial and business roles at Kennametal Inc. (NYSE: KMT), a supplier of tooling and industrial materials, from 1997 to 2015, including roles as Vice President Finance of Business Groups from 2010 to 2013 and as Vice President of Manufacturing for the Industrial Segment from 2014 to 2015. While at Kennametal Inc., Mr. Stas also served as Chief Financial Officer of the Industrial Business Group, Chief Financial Officer of Kennametal Europe GmbH, Director of Global Manufacturing Finance, Controller of Metalworking Americas, and Senior Financial Analyst for Global Financial Sales and Marketing from 1997 to 1999. Prior to joining Kennametal Inc., Mr. Stas worked for DuPont Co., as a Plant Controller, Accountant and Team Leader, from 1991 to 1997. Mr. Stas received an M.B.A. from Duquesne University and received a B.S. in Business Administration from Drexel University.

Rodney O. Aulick became our Executive Vice President, Integrated Solutions & Services Segment President in October 2018 as a result of the reorganization of our business from a three-segment structure to a two-segment operating model. Prior to our segment realignment, Mr. Aulick served as our Executive Vice President, Industrial Segment President from October 2015 to October 2018, and as president of our former Products & Technologies Division from June 2014 to October 2015. Mr. Aulick began his career in the water treatment industry in 1997 at Chem-Aqua, a specialty chemical company in water treatment, where he held the position of regional manager. He subsequently joined USFilter Corporation, a predecessor of Evoqua, as a field services regional manager in 2001 and succeeded to positions of increasing responsibility at USFilter Corporation and its successor Siemens Water Technologies, including as Vice President of the Light Industry Segment from 2008 to 2011 and the Industrial Equipment Division from 2011 to 2014. Mr. Aulick attended Northwestern University, Kellogg School of Management’s Executive Management Program from 2001 to 2003.

Snehal A. Desai has served as our Executive Vice President, Chief Growth Officer since January 2018 and was appointed as Applied Product Technologies Segment Interim President as of December 5, 2018. Prior to joining Evoqua, Mr. Desai was the global business director for Dow Water & Process Solutions. Earlier in his career at Dow, where he worked for more than 20 years across two periods, Mr. Desai held various positions in sales, marketing, business development, and technical service and development. Prior to joining Dow, Mr. Desai led commercial and business development for Segetis, and was vice president and chief marketing officer of NatureWorks LLC. Mr. Desai currently serves on the board of directors of US Water Alliance. Mr. Desai received a B.A. in Chemistry and Chemical Engineering from the University of Michigan and an M.B.A. from the Kellogg Graduate School of Management at Northwestern University.

 

26  Evoqua Water Technologies Corp. 2019 Proxy Statement 

Vincent Grieco has served as our Executive Vice President, Secretary and General Counsel since January 2015. Mr. Grieco was appointed as acting General Counsel at the inception of our Company in January 2014 after working the majority of his career in the water treatment industry. He joined USFilter Corporation in January 2003 as Senior Counsel and, following the acquisition of USFilter Corporation by Siemens Corp. in 2004, continued as legal counsel to Siemens Water Technologies, the group of legal entities comprising the predecessor to Evoqua. Prior to joining USFilter Corporation, Mr. Grieco was a member of the business and finance section of Morgan Lewis & Bockius LLP from 1997 to 2002 and at Dickie, McCamey & Chilcote, P.C. from 1993 to 1997. Mr. Grieco received a J.D. from the University of Virginia School of Law and received a B.S. in Economics from St. Vincent College.

James M. Kohosek has served as our Executive Vice President, Chief Administrative Officer since January 2018. Since joining Evoqua in January 2016, Mr. Kohosek has held various leadership roles, including president of our former Products & Technologies Division and Business Operations (January 2017 to December 2017); Vice President and General Manager, Wallace & Tiernan^® Systems brand (June 2016 to December 2016); and Vice President, Strategy (January 2016 to May 2016). Prior to joining Evoqua, Mr. Kohosek was employed in senior management positions at global industrial and manufacturing companies. From 2008 to 2015, Mr. Kohosek was employed at Kennametal Inc. (NYSE: KMT) as VP of Kennametal and President, Infrastructure Division and as Vice President of the Transportation Business Unit and General Industrial Business Unit and as Chief Financial Officer of the Advanced Materials Group. Mr. Kohosek also was Vice President and Chief Financial Officer, Industrial Technologies Sector of Ingersoll Rand plc (NYSE: IR) from 2002 to 2007 and President of Westinghouse Communications from 1998 to 2001. Mr. Kohosek received a B.S.B.A. in Accounting and a B.S.B.A. in Finance, both from Shippensburg University.

Anthony J. Webster has served as our Executive Vice President, Chief Human Resources Officer since March 2016. Prior to joining Evoqua, Mr. Webster served as Vice President of Human Resources, Europe & Americas, for Glaxo Smith Kline Consumer Health, a joint venture between Novartis and Glaxo Smith Kline plc, from 2015 to 2016 and as Senior Vice President and Global Head of Human Resources for Novartis Consumer Health (NYSE: NVS) from 2011 to 2015. Mr. Webster has held senior human resources roles with numerous companies, including as Regional Vice President, Human Resources, EMEA for Bristol-Myers Squibb from 2008 to 2011; as Senior Director, Research & Development for Bristol-Myers Squibb from 2006 to 2008; as Director, Human Resources, Latin America & Canada for Bristol-Myers Squibb from 2004 to 2006; as Director, Global Business Support Functions for Mead Johnson Nutritionals from 2001 to 2004; in senior human resources and labor relations management capacities for Phelps Dodge Corporation from 1994 to 2001; and as Manager, Human Resources for Consolidation Coal Co. from 1992 to 1994. Mr. Webster received a B.S. in Business Administration and received an M.S. in Industrial and Labor Relations from West Virginia University.

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  27

Proposal 2—Advisory Vote on Executive Compensation

The Board is providing the Company’s stockholders with the opportunity to cast an advisory vote on our executive compensation program, as required by Section 14A of the Exchange Act. This proposal is commonly known as a “say on pay” proposal.

The section of this Proxy Statement entitled “Compensation Discussion and Analysis” describes the Company’s executive compensation program. Our executive compensation program is designed to provide opportunities for our named executive officers to earn incentive compensation based on the achievement of company performance goals balanced with compensation elements intended to retain our management talent over the long term. Having become a public company in November 2017, beginning in fiscal year 2018 we have been implementing certain changes to our named executive officers’ compensation packages to more closely align them with current public company market practices. As part of this strategy, we utilize an appropriate mix of fixed and variable compensation elements, including salary, short-term annual incentives and long-term incentives, to retain and motivate our named executive officers. We encourage you to review the section of this Proxy Statement entitled “Compensation Discussion and Analysis” for additional details.

Under our Third Amended and Restated Bylaws, the below resolution will be approved if the votes cast “FOR” its approval exceed the votes cast “AGAINST” its approval. Abstentions will have the same effect as a vote “AGAINST” the proposal. Non-votes by brokers, banks and other nominee holders of record will not be counted as votes “FOR” or “AGAINST” the below resolution.

The Board recommends that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers as follows:

RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including in the Compensation Discussion and Analysis, the compensation tables and related narrative disclosure, is hereby approved on an advisory basis.

As an advisory vote, this proposal is not binding on the Company. However, the Compensation Committee and the Board value the opinions expressed by the Company’s stockholders on this issue and will consider the outcome of this vote when making future compensation decisions for the named executive officers.

 

 

28  Evoqua Water Technologies Corp. 2019 Proxy Statement 

Proposal 3—Advisory Vote on the Frequency of Advisory Votes on Executive Compensation

As required by Section 14A of the Exchange Act, we are seeking our stockholders’ views on how frequently we should hold future advisory “say on pay” votes with regard to the compensation of our named executive officers, as demonstrated by Proposal 2 of this Proxy Statement. Section 14A of the Exchange Act provides that stockholders must be given the opportunity to vote, on a non-binding and advisory basis, to express their preference as to whether a “say on pay” advisory vote should occur every year, every two years or every three years. This Proposal 3 asks stockholders to submit their “say on pay” frequency preference (having a choice of: every one year, every two years or every three years), or stockholders may abstain from voting on the proposal.

Under our Third Amended and Restated Bylaws, the frequency of “EVERY ONE YEAR,” “EVERY TWO YEARS” or “EVERY THREE YEARS” that receives the greatest number of votes cast by the stockholders present in person or by proxy, will be deemed to be the frequency preferred by the stockholders. Abstentions will have no effect on the vote. Non-votes by brokers, banks and other nominee holders of record will not be counted as votes for or against the above resolution.

After careful consideration, including consideration of the recommendation of Meridian with respect to the frequency of future “say on pay” votes, it is the opinion of the Board that an advisory “say on pay” vote every year is the most appropriate option for us because it will allow our stockholders to provide more frequent, direct input on our compensation policies and practices, and the resulting compensation for our named executive officers. Stockholders will have the annual opportunity to consider the effectiveness of our overall compensation philosophy, policies and practices in the context of our pay for performance policy and focus on improving long-term business results, and to provide direct feedback to us in a timely way. An advisory “say on pay” vote every year will also provide the most effective time frame for the Company to respond to vote results and stockholder feedback. Finally, the Board believes an annual advisory stockholder vote promotes corporate transparency.

Accordingly, the Board has determined that an advisory “say on pay” vote shall be held every year, subject to approval by stockholders of such frequency. As an advisory vote, the result of the vote is not binding. However, the Board values the opinions of our stockholders in their vote on this matter, and therefore, if the frequency approved by our stockholders is not every year, the Board will again consider the appropriate frequency of the advisory “say on pay” vote, taking into account the outcome of the advisory stockholder vote.

 

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  29

Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Evoqua’s vision is to be the world’s first choice for water solutions. We recognize that investing in our talent is critical to enabling us to deliver value to our customers and stockholders, and that guides our executive compensation philosophy.

As we work to establish ourselves as a global leader in the water treatment space, we are equally focused on delivering strong operating results on behalf of our stockholders. In 2018, we experienced year-over-year growth in both revenues and adjusted earnings before interest, taxes, depreciation and amortization in the amounts of 7.4% and 4.4%, respectively. However, despite many positive outcomes, we did not meet our own high expectations for the year.

Executive compensation is based on our pay-for-performance philosophy, which emphasizes performance measures that correlate closely with the achievement of both shorter-term performance objectives and longer-term shareholder value creation. As we continue to focus on delivering profitable growth, we have taken steps within our compensation practices designed to further align the interests of our senior leadership with the interests of our stockholders. In 2018, we introduced an equity component into our short-term annual incentive program and implemented stock ownership guidelines, each discussed in further detail below. Additionally, for 2019, we have incorporated a free cash flow metric into management’s short-term annual incentive program, emphasizing the importance of free cash flow as a tool to allow us to reduce debt and invest in high return capital projects and tuck-in acquisition opportunities.

Executive Compensation Practices

 

			WHAT WE DO

		Pay for Performance. Approximately 63-79% of our executives’ compensation is dependent on Company performance.				Robust Stock Ownership Guidelines. We have stock ownership guidelines for executive officers.
		Annual “Say on Pay” Vote. We seek an annual non-binding advisory vote from our stockholders to approve compensation paid to our NEOs as disclosed in our proxy statement.				Independent Compensation Consultant. The Compensation Committee retains an independent compensation consultant and reassesses independence annually.

 

			WHAT WE DON’T DO

		Hedging/Pledging of Company Stock. We prohibit our officers, directors, and employees from hedging, margining, pledging, short-selling or publicly trading options in our stock.				Excessive Perquisites. We do not provide reimbursement to our NEOs for any perquisites beyond a prescribed limited cap.
		Dividends on Unvested Equity Awards. We do not pay dividends on unvested equity awards, including options, restricted stock and performance shares.				Repricing or Exchange of Underwater Options. We prohibit share repricing without stockholder approval.

 

30  Evoqua Water Technologies Corp. 2019 Proxy Statement 

The discussion that follows describes the fiscal 2018 executive compensation program for the named executive officers listed below:

 

Name		Title
Ron C. Keating		President, Chief Executive Officer and a Director
Benedict J. Stas		Executive Vice President, Chief Financial Officer & Treasurer
Anthony J. Webster		Executive Vice President, Chief Human Resources Officer
Rodney O. Aulick		Executive Vice President, Integrated Solutions & Services Segment President
Kenneth A. Rodi*		Executive Vice President, Applied Product Technologies Segment President

 

 

*	Effective December 31, 2018, Mr. Rodi resigned from Evoqua.

Compensation Philosophy and Objectives

Compensation Principles

Our executive compensation program is designed to attract and retain talent in our industry with the greatest potential to ensure we execute on the Company’s business goals to promote both short- and long-term profitable growth of the Company, and to create long-term stockholder value. To this end, our program is guided by the following principles:

 

Pay for Performance		A significant portion of an NEO’s total compensation should be at-risk and performance-based with metrics aligned to the Company’s short-term and long-term financial results and business strategy, reflecting the Company’s high-performance culture, accountability and high-growth trajectory.
Stockholder Alignment		NEOs should be compensated through pay elements designed to align directly with the long-term interests of our stockholders, and our executives should share with them in the performance and value of the Company, cultivating ownership of the Company’s vision and strategic direction.
Attraction and Retention		The executive compensation program should provide overall target compensation that is competitive and enables the Company to attract and retain high-caliber talent.
Simplified Approach		The executive compensation program should foster growth and motivation through a straightforward and clear approach to compensation design.

As set forth in Proposal 2 in this Proxy Statement, and as required following its initial public offering, the Company is seeking our stockholders’ view, on an advisory basis, of the compensation program for our NEOs for the first time. The Compensation Committee intends to consider the results of the advisory vote when making compensation design decisions in the future, as deemed appropriate.

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  31

Principal Components and Mix of Executive Compensation

The principal components of our executive program are: base salary, short-term annual incentives and long-term equity-based incentives.

 

Compensation Component		Overview		Objectives
Base Salary		Fixed compensation that is reviewed and established at least annually.		To provide our NEOs with a predictable, fixed compensation at a level that is in line with market practice.
Short-Term Annual Incentives		Variable compensation that is based on achievement of Company performance goals.		To reward the NEOs for achieving critical, short-term financial performance goals.
Long-Term Incentives		Variable compensation that is tied to the Company’s long-term growth.		To provide incentives for NEOs to execute on longer-term financial/strategic goals that drive stockholder value creation and support the Company’s retention strategy.

For each NEO, the appropriate mix and amount of compensation depend on the executive’s position and responsibilities. In determining the overall mix of fiscal 2018 compensation for our NEOs, our Compensation Committee considered the competitive market data assembled by Pearl Meyer, its compensation consultant at that time, in order to assess an appropriate allocation between fixed and variable compensation and determine the appropriate levels of each element of compensation.

Oversight of the Compensation Committee

The Compensation Committee is responsible for the oversight of the executive compensation arrangements in place for our executive officers, including our NEOs, and exercises these duties with the overall intent of structuring future compensation in a way that focuses executives on long-term Company growth and aligning the interests of our management team members, including the NEOs, with the interests of our stockholders.

The Compensation Committee has the authority to approve, adopt, administer, interpret, amend, suspend and terminate compensation plans applicable to our executive officers, and meets throughout the fiscal year to assess, revise as appropriate, and ultimately determine the compensation packages for our executive officers. At the request of the Compensation Committee, these meetings are also attended by the Chief Executive Officer, the Chief Human Resources Officer and, for meetings occurring prior to July 2018, a representative of Pearl Meyer or, for meetings occurring beginning in July 2018, a representative of Meridian.

Pearl Meyer was originally engaged by our Board in the third quarter of fiscal 2017, prior to the Company’s initial public offering, and had not previously provided services to the Company. Under its engagement, Pearl Meyer assisted the Board with certain compensation determinations made in connection with and immediately following our becoming a publicly-traded company. In July 2018, the Compensation Committee engaged Meridian as its independent compensation consultant to advise the Compensation Committee on all matters related to executive officer compensation. Specifically, Meridian provides relevant market data, current updates regarding trends in executive compensation, and advice with respect to program design, specific compensation recommendations for the Chief Executive Officer and compensation recommendations made by the Chief Executive Officer for executives other than the Chief Executive Officer. All of the services that Meridian performs for the Company are performed at the request of the Compensation Committee, are related to executive compensation and support the compensation decisions made by the Compensation Committee.

In connection with this engagement, the Compensation Committee considered the independence of Meridian and that of the Meridian senior advisor involved in the engagement in light of SEC rules and NYSE listing standards. In doing so, the Compensation Committee considered all relevant factors, including but not limited to: (1) other services provided to us by Meridian; (2) fees paid by us as a percentage of Meridian’s total revenue; (3) policies or procedures maintained by Meridian that are designed to prevent a conflict of interest; (4) any business or personal relationships between such

 

32  Evoqua Water Technologies Corp. 2019 Proxy Statement 

senior advisor and members of the Compensation Committee; (5) any Company stock owned by Meridian or such senior advisor; and (6) any business or personal relationships between our executive officers and Meridian or such senior advisor. The Compensation Committee discussed these considerations and concluded that the work performed by Meridian and the Meridian senior advisor involved in the engagement does not raise any conflict of interest.

Compensation Program Design Mitigates Risk

The Compensation Committee has reviewed our compensation program to determine if the elements encourage excessive or unnecessary risk-taking that is reasonably likely to have a material adverse effect on the Company. The Compensation Committee believes that the Company’s compensation program offers an appropriate mix of fixed compensation and short- and long-term variable compensation so as to mitigate the motivation to take high levels of business risk. In addition, the Compensation Committee believes that its discretion and authority in making decisions related to executive compensation, the imposition of caps on annual incentives and the implementation of stock ownership guidelines also serve to mitigate risk. As a result, the Compensation Committee believes that our compensation program does not encourage unreasonable risk-taking that is reasonably likely to have a material adverse effect on the Company. In addition, the Company intends to adopt a clawback policy in fiscal 2019 for the recovery of incentive-based compensation from the Company’s current and former executive officers under certain circumstances, which will be implemented in the future as part of applicable incentive-based compensation awards.

Compensation Programs and Fiscal 2018 Compensation Determination Process

Our NEOs receive three forms of compensation—base salary, short-term annual incentive and long-term incentive payments. For purposes of its review of the Company’s compensation program and establishing the appropriate mix and level of pay elements for fiscal 2018, the Compensation Committee worked with Pearl Meyer as its compensation consultant. In connection with this review, Pearl Meyer, while working with management, identified the peer group listed below which the Compensation Committee approved in November 2017 and subsequently referred to as a general comparator group for the purpose of making compensation decisions in fiscal 2018, though no formal benchmarking analysis was utilized.

Fiscal 2018 Peer Group

 

Advanced Drainage Systems, Inc.		Donaldson Company, Inc.		Mueller Water Products, Inc.
Badger Meter, Inc.		Franklin Electric Co., Inc.		Rexnord Corporation
Calgon Carbon Corporation		Itron, Inc.		SJW Group
Chart Industries, Inc.		ITT Inc.		SPX FLOW, Inc.
Crane Co.		Lindsay Corporation		Watts Water Technologies, Inc.

The Compensation Committee does not maintain any formal policy or formula for allocating the mix of compensation as it believes it is more important to remain flexible to respond to shifts in the marketplace in which the Company must compete to recruit and retain executive talent. Therefore, the Compensation Committee retains the authority to review our NEOs’ compensation periodically and to use its discretion to adjust the mix of compensation and the amount of any element of compensation as it deems appropriate for each NEO.

In fiscal 2018, the Compensation Committee demonstrated this flexibility and responsiveness to Company needs and market conditions by implementing a number of compensation-related programs designed to reflect the Company’s new public company status, increasing the linkage between the long-term interests of our executives and those of our stockholders and emphasizing the Company’s focus on tying meaningful portions of executive compensation to Company performance and increased stockholder value over time. These programs and other compensation-related actions, as described more fully below and elsewhere within this Proxy Statement, include making payment of annual bonus awards to executive officers, if earned, in the form of equity-based grants subject to additional service vesting conditions, implementing an annual long-term incentive award program to provide incentives for Company growth and increased value over the next several years, and establishing the executive stock ownership guidelines.

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  33

The charts below illustrate the allocation of the principal compensation components for our NEOs for fiscal 2018.

 

Base Salary

We believe that base salary plays an important role in attracting and retaining top executive talent by providing executives with a predictable level of income. Base salaries represent a fixed portion of our NEOs’ compensation and vary, principally based on job responsibility. The Compensation Committee reviews our NEOs’ base salaries annually, though it may also make periodic base salary adjustments in connection with an NEO’s promotion or change in job responsibility or when otherwise necessary for equitable reasons. In connection with its review and determination of base salaries, the Compensation Committee considers, among other factors it considers relevant, market data, the level of the executive’s compensation (individually and relative to the other executives), the length of the executive’s tenure, the level of the executive’s performance and, for the base salaries of executives other than our Chief Executive Officer, the recommendations of our Chief Executive Officer.

The following table sets forth our NEOs’ annual base salaries as of October 1, 2017 (the beginning of the Company’s fiscal 2018). The Compensation Committee’s annual review of base salary, as described above, generally occurs on a calendar-year cycle and, in December 2017, the Compensation Committee approved increases to base salary for each of the NEOs as set forth in the table below, which increases took effect on December 25, 2017.

 

Named Executive Officer		Base Salary as of October 1, 2017 ($)				Base Salary as of September 30, 2018 ($)
Ron C. Keating			787,969				827,367
Benedict J. Stas			390,000				410,000
Anthony J. Webster			358,750				367,719
Rodney O. Aulick			330,000				375,000
Kenneth A. Rodi			358,750				367,719

 

34  Evoqua Water Technologies Corp. 2019 Proxy Statement 

Short-Term Annual Incentives

The Company maintains the Evoqua Management Incentive Plan under the Evoqua Water Technologies Corp. Annual Incentive Plan (the “AIP”) to provide incentive compensation to the Company’s executives, including our NEOs, aimed at driving the Company’s annual performance by linking variable compensation to Company performance, with achievement measured against Company-wide Adjusted EBITDA goals (“Evoqua Global Adjusted EBITDA”), Company-wide sales goals (“Evoqua Global Sales”) and Segment Adjusted EBITDA goals as appropriate based on responsibility. These performance metrics were selected in combination to incentivize profitable growth and to support the goals of the AIP’s design to align executives’ interests with our strategic goals, promote the maximization of Company profitability and encourage teamwork. In fiscal 2018, each of our NEOs was eligible to earn an annual bonus under the AIP, subject to the conditions described below.

Under the AIP, an annual bonus pool is established and funded based solely on the Compensation Committee’s determination that at least 85% of the Evoqua Global Adjusted EBITDA goal for the relevant fiscal year has been achieved. For Messrs. Keating, Stas and Webster, the annual bonus payment for fiscal 2018 was based on achievement of the Evoqua Global Adjusted EBITDA goal (70%) and the Evoqua Global Sales goal (30%). For Messrs. Aulick and Rodi, the annual bonus payment for fiscal 2018 was based on achievement of Segment Adjusted EBITDA (for Mr. Aulick, 50% based on Industrial Adjusted EBITDA; for Mr. Rodi, 50% based on Products Adjusted EBITDA), the Evoqua Global Adjusted EBITDA goal (20%) and the Evoqua Global Sales goal (30%).

The table below sets forth payment amounts (expressed as a percentage of target bonus) that may be earned with respect to each of the performance metrics applicable to our NEOs.

 

Performance Metric		Actual Performance and Payment Amount
Evoqua Global   Adjusted EBITDA		•  If Evoqua Global Adjusted EBITDA is less than 85% of target Evoqua Global Adjusted EBITDA, no payment is earned for any metric. •  An achievement of 85% of Evoqua Global Adjusted EBITDA will earn 25% of target bonus for this metric. •  If Evoqua Global Adjusted EBITDA is between 85%-100% of target Evoqua Global Adjusted EBITDA, for every 1% increase in performance below target, an additional 5% of target bonus will be earned for this metric. •  If Evoqua Global Adjusted EBITDA is between 100%-120%, for every 1% increase in performance above target, 3% of target bonus will be earned for this metric. An achievement of 120% of Evoqua Global Adjusted EBITDA will earn 160% of target bonus, so long as Evoqua Global Sales performance achieves target (as referenced below).
Evoqua Global Sales		•  If Evoqua Global Sales is less than 95% of target Evoqua Global Sales, no payment is earned for this metric. •  An achievement of 95% of Evoqua Global Sales will earn 20% of target bonus for this metric. •  If Evoqua Global Sales is between 95%-100% of target Evoqua Global Sales, for every 1% increase in performance below target, an additional 16% of target bonus will be earned. •  If Evoqua Global Sales is greater than 100%, Evoqua Global Adjusted EBITDA and Segment Adjusted EBITDA metrics can earn above target payments if achieved.

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  35

Performance Metric		Actual Performance and Payment Amount
Segment Adjusted   EBITDA		•  If Segment Adjusted EBITDA is less than 85% of target Segment Adjusted EBITDA, no payment is earned for this metric. •  An achievement of 85% of Segment Adjusted EBITDA will earn 25% of target bonus. •  If Segment Adjusted EBITDA is between 85%-100% of target Segment Adjusted EBITDA, for every 1% increase in performance below target, an additional 5% of target bonus will be earned for this metric. •  If Segment Adjusted EBITDA is between 100%-120%, for every 1% increase in performance above target, 3% of target bonus will be earned for this metric. An achievement of 120% of Segment Adjusted EBITDA will earn 160% of target bonus, so long as Evoqua Global Sales performance achieves target (as referenced above).

The relevant threshold and target goals for fiscal 2018 were as follows:

 

Applicable to Messrs. Keating, Stas, Webster, Aulick and Rodi		Threshold				Target				Maximum
Evoqua Global Adjusted EBITDA(1) (in millions)		$	226.4			$	266.3			$	319.6
Evoqua Global Sales(1) (in millions)		$	1,296.1			$	1,364.3			$	—

 

In addition, applicable to Mr. Aulick		Threshold				Target				Maximum
Industrial Adjusted EBITDA(1) (in millions)		$	151.3			$	178.0			$	213.6

 

In addition, applicable to Mr. Rodi		Threshold				Target				Maximum
Products Adjusted EBITDA(1) (in millions)		$	84.3			$	99.2			$	119.0

 

 

(1)

None of Evoqua Global Adjusted EBITDA, Evoqua Global Sales, Industrial Adjusted EBITDA or Products Adjusted EBITDA is a presentation made in accordance with GAAP, and none are intended to present a measure of financial condition superior to those determined under GAAP. The Evoqua Global Adjusted EBITDA metric and goals correlate to Adjusted EBITDA used for financial reporting purposes, and the most directly comparable GAAP measure is Net Income, as referenced in “Management’s Discussion and Analysis—How We Assess the Performance of Our Business” included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018. The Evoqua Global Sales metric and goals correlate to the revenue from product sales and services line item used for financial reporting purposes (after being adjusted, for purposes of the AIP, on a pro forma basis for revenue attributable to acquisitions). The Industrial Adjusted EBITDA and Products Adjusted EBITDA metrics and goals correlate to Adjusted EBITDA for the Industrial Segment and for the Products Segment, respectively, in each case after being adjusted, for purposes of the AIP, on a pro forma basis for revenue attributable to acquisitions, and the most directly comparable GAAP measures are Operating Profit for the Industrial Segment and for the Products Segment as referenced in “Management’s Discussion and Analysis—Results of Operations—Years Ended September 30, 2018 and September 30, 2017—Segment Results” included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

For fiscal 2018, each of our NEOs was entitled to earn a target bonus equal to a percentage of his base salary, as set forth in the table below.

 

Name		Target
Ron C. Keating			100%
Benedict J. Stas			70%
Anthony J. Webster			50%
Rodney O. Aulick			60%
Kenneth A. Rodi			60%

 

36  Evoqua Water Technologies Corp. 2019 Proxy Statement 

The annual bonuses under the AIP for our NEOs (subject to funding of the annual bonus pool based on achievement of at least 85% of the Evoqua Global Adjusted EBITDA target) were subject to adjustment by the Compensation Committee, at its discretion, based on the executive’s individual performance and contribution to the Company during the year. In June 2018, as part of the Company’s overall objective of aligning the interests of its executive officers with the interests of stockholders, the Compensation Committee approved payment of the annual bonus award under the AIP for fiscal 2018 earned by each of the NEOs, if any, in the form of restricted stock units (“RSUs”) in lieu of a cash payment. Each NEO would have received RSUs with a value equal to 120% of the amount that would have otherwise been payable in cash to such individual under the AIP for fiscal 2018, subject to a time-vesting condition that would lapse on the one-year anniversary of the date of grant, assuming the recipient’s continued service through the applicable vesting date. Consistent with the Company’s pay-for-performance philosophy and based on Company results, no RSUs were granted (and no other AIP payments were made) because threshold goals under the AIP were not achieved for fiscal 2018. It is expected that in future fiscal years, the Compensation Committee will continue to approve portions of payment of any annual bonuses earned by our NEOs in the form of equity securities subject to time-vesting restrictions.

For fiscal 2019, the Compensation Committee has approved the addition of a new performance metric under the AIP—Free Cash Flow. This new metric has been added under the AIP in support of our focus to drive conversion of the Company’s net earnings into deployable cash. Free cash flow will be a significant focus as we balance investing in high-return projects, strengthening the capital structure and providing the capacity to invest and grow the business.

Long-Term Incentives

The main objectives of maintaining a long-term incentive program are to (1) directly link our executives to increasing stockholder value, (2) incentivize our executives to work towards the achievement of our long-term performance goals, (3) provide the Company a competitive means through which we may better attract able individuals to become executives and (4) retain executives for multiple-year periods by providing them with stock ownership opportunities.

Since 2014, and until our initial public offering, management team members were awarded equity compensation in the form of stock options under the Evoqua Water Technologies Corp. Stock Option Plan (the “Option Plan”). In connection with our initial public offering, the Board adopted the Evoqua Water Technologies Corp. 2017 Equity Incentive Plan (the “Equity Incentive Plan”) which was approved by the Company’s stockholders. Following the completion of our initial public offering, we have granted awards of options and RSUs under the Equity Incentive Plan to employees, including our NEOs, and no longer make new grants under the Option Plan. Grants may be made in the discretion of the Compensation Committee or the Board, upon hire or promotion or otherwise, and, in fiscal 2018, the Company implemented what is intended to be an annual long-term grant program.

As part of the implementation of the long-term incentive award program for fiscal 2018, on April 2, 2018, the NEOs received grants of stock options, as set forth below, that vest in four equal annual installments over a period of four years. As a newly public company, we awarded stock options in order to establish the new long-term incentive program as a mechanism to allow our key employees, including the NEOs, to become stockholders or increase their ownership stake over time with a form of equity-based compensation that is easy to understand and provides a straightforward incentive for employees to be motivated to work toward long-term, sustained Company growth since the potential value of the options increases as the value in the Company increases in the long term as the stock options vest. In this way, the interests of our NEOs align with our stockholders’ interest in stock price appreciation and our NEOs have the opportunity to share in that gain alongside stockholders. The table below sets forth the number of shares underlying options to each of the NEOs as part of the April 2018 grants.

 

Name		Shares Underlying Stock Option Grant
Ron C. Keating			294,864
Benedict J. Stas			78,739
Anthony J. Webster			33,279
Rodney O. Aulick			49,730
Kenneth A. Rodi			44,204

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  37

Additionally, in connection with our initial public offering, the Company entered into RSU award agreements (the “IPO RSU Agreements”) with each of our NEOs and certain other key members of management pursuant to which recipients received an award of stock-settled restricted stock units (the “IPO RSUs”). Pursuant to the IPO RSU Agreements, each grantee received a number of IPO RSUs equal to the quotient of (a) such grantee’s “Aggregate Grant Amount” (set forth in such grantee’s IPO RSU Agreement), divided by (b) $20.88 (the closing price of one share of Company common stock as reported on the NYSE on the first day of trading following the effectiveness of the Company’s registration statement). Pursuant to the IPO RSU Agreements, the IPO RSUs will vest and settle in full on the second anniversary of the IPO Date (as defined in the IPO RSU Agreement), generally subject to the grantee’s continued employment through such date with certain exceptions in the event of an involuntary termination of employment or a change in control. The aggregate value of all of the IPO RSUs granted was approximately equal to the value of the shares authorized but unissued under the Option Plan as of immediately prior to our initial public offering. In light of the efforts made by senior management and other employees in connection with our initial public offering and in recognition that grants had previously been made generally on hire or promotion only (rather than on an annual basis), the Compensation Committee determined it was appropriate to grant the IPO RSU awards to reward these employees for their efforts and service as well as to provide motivation for the employees to retain their employment with the Company. The table below sets forth the number of IPO RSUs granted in connection with our initial public offering to each of the NEOs.

 

Name		Number of IPO RSUs
Ron C. Keating			431,035
Benedict J. Stas			203,545
Anthony J. Webster			57,472
Rodney O. Aulick			95,786
Kenneth A. Rodi			47,893

In fiscal 2019, it is expected that the long-term incentive compensation award program for NEOs will include a combination of restricted stock units and stock options, weighted 50% and 50%, respectively. A restricted stock unit represents a right to receive a share of the Company’s common stock, subject to the recipient’s continued employment, upon the lapse of any applicable vesting restriction. The Compensation Committee believes that granting restricted stock units will bolster the retention value of the overall long-term incentive award program with respect to the Company’s executive officers and key employees.

Retirement Plans

The Company provides retirement benefits to the NEOs, including matching contributions, under the terms of its tax-qualified defined contribution plan (the “401(k) Plan”). The NEOs participate in the 401(k) Plan on the same terms as our other participating employees.

The Company also maintains a nonqualified deferred compensation plan (the “Deferred Compensation Plan”) in which the NEOs participate and under which they are eligible to receive matching contributions. Under the Deferred Compensation Plan, the NEOs may elect to defer portions of their compensation that are not otherwise available due to limitations on contributions to the 401(k) Plan under the Internal Revenue Code of 1986, as amended (the “Code”). For a further description of the Deferred Compensation Plan and the payments that were made in fiscal 2018, please see the section entitled “Nonqualified Deferred Compensation as of September 30, 2018” below.

We believe the retirement benefits provided under the 401(k) Plan and the Deferred Compensation Plan are comparable to those provided by comparable companies. The Company does not maintain any defined benefit plans for any of its executive officers.

 

38  Evoqua Water Technologies Corp. 2019 Proxy Statement 

Perquisites and Other Personal Benefits

The Company provides the NEOs with perquisites and other personal benefits, or an allowance for certain perquisites, that it believes are reasonable and consistent with its overall compensation program to better enable the Company to attract and retain superior employees for key positions. Through July 2018, the Company paid stipends to each of the NEOs for the purpose of covering, in the NEO’s sole discretion, costs associated with services such as an executive physical examination, lease of an automobile and/or financial planning services.

In July 2018, the Compensation Committee adopted a reimbursement plan pursuant to which the CEO, senior vice presidents and vice presidents may incur qualifying expenses related to executive physicals, financial planning, health club and/or social club dues and fees, personal automobile, parking and charitable donations, which will be reimbursed by the Company up to the applicable reimbursement limit, which limit is generally consistent with the allowance level that had applied prior to implementation of the reimbursement plan.

We believe these benefits enable our executives to focus on our business and enhance their commitment to us. In addition, each of our NEOs received Company matching contributions under the 401(k) Plan, and Messrs. Keating, Stas, Webster and Aulick received Company matching contributions under the Deferred Compensation Plan.

The Compensation Committee periodically reviews the levels of perquisites and other personal benefits that may be made available to our NEOs through the reimbursement program to confirm that such levels are reasonable and continue to serve their intended retentive purposes.

Internal Revenue Code Section 162(m)

Section 162(m) of the Code limits the Company’s deduction for compensation paid to the NEOs (and certain other “covered employees”) to $1 million during the tax year, subject to certain permitted exceptions. Prior to enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), this limitation did not generally apply to compensation paid to the chief financial officer or to qualifying performance-based compensation if certain requirements were met. The Equity Incentive Plan was structured so that in the future certain awards thereunder could have been granted in a manner that satisfied the exception under Section 162(m) for qualified performance-based compensation, and similarly, the AIP was structured so that in the future annual performance-based incentive awards made thereunder could have satisfied the exception under Section 162(m). Pursuant to the Tax Act, the exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our NEOs, including our Chief Financial Officer, in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.

Notwithstanding the repeal of the performance-based compensation exemption under the Tax Act, Section 162(m) also provides an exemption from the deductibility limitations in the form of a transition rule for newly public companies. Under this transition rule, a company that undergoes an initial public offering is generally not subject to the compensation deduction limitations for a period of approximately three years following the year of the initial public offering with respect to certain compensation arrangements that were entered into before such initial public offering, including, without limitation, awards under the AIP, the Option Plan and the Equity Incentive Plan and the IPO RSUs. Going forward, for compensation arrangements that are not covered by the exemption for newly public companies, and in light of the Tax Act changes to Section 162(m), although the Compensation Committee intends to consider the impact of Section 162(m) in making its compensation decisions, it believes the tax deduction is only one of several relevant considerations in setting compensation. Accordingly, to maintain flexibility in compensating our executives, the Compensation Committee reserves the right to use its judgment in approving compensation that may not be tax deductible in the future.

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  39

Stock Ownership Guidelines

The Compensation Committee also believes that it is in the best interests of stockholders for our officers to own a significant amount of Evoqua common stock, thereby aligning their interests with the interests of stockholders. Accordingly, in April 2018, the Compensation Committee implemented stock ownership guidelines applicable to all of our officers based on a multiple of base salary. Officers are expected to meet these ownership requirements within five years of election, appointment or promotion.

The current stock ownership requirements applicable to our executive officers are:

 

CEO		5X annual base salary
Executive Officers		3X annual base salary

Shares that count towards satisfaction of the stock ownership guidelines for our officers include the following:

 

•

Shares owned directly by the officer, or by his or her immediate family members residing in the same household (whether acquired through a Company-sponsored equity-based compensation plan or program of the Company, or otherwise);

 

•

Shares held in trust for the benefit of the officer, or his or her immediate family members;

 

•

Vested shares held in the officer’s retirement accounts;

 

•

Shares of restricted stock, restricted stock units, or deferred stock units that may only be settled in shares, whether vested or unvested;

 

•

Performance-vested stock or stock unit awards that have been earned; and

 

•

Any equity-based grants, other than stock options or not otherwise described above, made to an officer pursuant to any other plan, program or arrangement that may exist now or in the future (to the extent the Compensation Committee determines to treat such grants as equivalent of Company stock, at its discretion).

Securities Trading Policy

To ensure alignment of the interests of our stockholders and executive officers, including our NEOs, as well as compliance with applicable securities laws, the Company’s Securities Trading Policy (i) prohibits all employees from engaging in transactions involving the Company’s stock based on material non-public information and from communicating material non-public information to any person who uses that information to purchase or sell Company securities, and (ii) requires directors, executive officers (including the NEOs) and certain other designated employees (as identified in the Securities Trading Policy) to preclear any trading in Company securities, whether or not during an open trade window (except that such policies shall not apply to the exercise of options not involving a market sale to generate cash to pay the exercise price, the vesting of restricted stock or restricted stock unit awards or transactions in accordance with a previously established trading plan that meets SEC requirements).

The policy also prohibits the Company’s directors and executive officers from engaging in short sales of the Company’s stock and trading in options (puts and calls) or other hedging instruments related to the Company’s stock and from using the Company’s stock as collateral (pledging) for loans or in margin accounts.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD

The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Compensation Committee

Brian R. Hoesterey, Chairman

Gary A. Cappeline

Martin J. Lamb

Vinay Kumar

 

40  Evoqua Water Technologies Corp. 2019 Proxy Statement 

SUMMARY COMPENSATION TABLE FOR FISCAL 2018

The following table sets forth the cash and non-cash compensation paid to our NEOs for the fiscal year ended September 30, 2018, and fiscal years ended September 30, 2017 and September 30, 2016 for those individuals who were also considered NEOs in those years.

 

Name & Principal Position(1)		Fiscal Year				Salary ($)				Bonus ($)				Stock Awards ($)(2)				Option Awards ($)(2)				Non-Equity Incentive Plan Compensation ($)(3)				All Other Compensation ($)(4)				Total ($)
Ron C. Keating			2018				816,760				—				9,000,011				2,348,002				—				118,690				12,283,463
President, Chief Executive Officer			2017				783,534				—								67,277				783,139				267,540				1,901,490
and a Director(5)			2016				764,423				—								—				526,594				156,717				1,447,734
Benedict J. Stas			2018				404,615				—				4,250,020				626,999				—				58,944				5,340,578
Executive Vice President, Chief			2017				383,192				—								19,205				271,327				53,945				727,669
Financial Officer & Treasurer(6)			2016				358,077				—								—				148,166				55,537				561,780
Anthony J. Webster			2018				365,304				635,000				1,200,015				265,001				—				31,428				2,496,748
Executive Vice President, Chief			2017				356,731				—								—				178,275				40,391				575,397
Human Resources Officer(7)			2016				196,189				—								652,120				170,625				135,082				1,154,016
Rodney O. Aulick			2018				362,885				—				2,000,012				396,000				—				46,153				2,805,050
Executive Vice President,
Integrated Solutions & Services Segment President(8)
Kenneth A. Rodi			2018				365,304				—				1,000,006				351,996				—				32,667				1,749,973
Executive Vice President, Applied
Product Technologies Segment President(9)

 

 

(1)	Effective December 31, 2018, Mr. Rodi resigned from Evoqua.

(2)

The amounts in this column were calculated based on the grant date fair value of our common stock, in accordance with FASB ASC Topic 718. Assumptions used to determine the grant date fair value are set forth in Note 15 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

(3)	Performance targets under the AIP for fiscal 2018 were not achieved, and so no bonus amounts were paid.

(4)

As described above in the section entitled “Perquisites and Other Personal Benefits,” the amounts set forth under “All Other Compensation” include stipends paid to each of our NEOs for the purpose of covering the NEO’s costs associated with services such as an executive physical examination, lease of an automobile and/or financial planning services in the following amounts: $24,231 for Mr. Keating, $20,192 for Mr. Stas, $20,000 for Mr. Rodi and $16,154 for each of Messrs. Webster and Aulick.

(5)	For fiscal 2018, in addition to the items listed in footnote (4), the amount set forth under “All Other Compensation” includes (i) matching contributions made to the 401(k) Plan of approximately $16,500 and (ii) matching contributions made to the Deferred Compensation Plan of approximately $78,074.

(6)	For fiscal 2018, in addition to the items listed in footnote (4), the amount set forth under “All Other Compensation” includes (i) matching contributions made to the 401(k) Plan of approximately $15,971 and (ii) matching contributions made to the Deferred Compensation Plan of approximately $22,838.

(7)

For fiscal 2018, in addition to the items listed in footnote (4), the amount set forth under “Bonus” reflects the settlement of a bonus in June 2018 pursuant to a bonus agreement between Mr. Webster and the Company effective as of March 1, 2016, which bonus was settled in a combination of (i) cash in an amount equal to Mr. Webster’s withholding tax obligation and (ii) 21,164 shares. The amount set forth under “All Other Compensation” includes (i) matching contributions made to the 401(k) Plan of approximately $14,409 and (ii) matching contributions made to the Deferred Compensation Plan of approximately $916.

(8)

Mr. Aulick was not an NEO in prior fiscal years. The amount set forth under “All Other Compensation” includes, in addition to the items listed in footnote (4), (i) matching contributions made to the 401(k) Plan of approximately $13,543 and (ii) matching contributions made to the Deferred Compensation Plan of approximately $16,543.

(9)	Mr. Rodi was not an NEO in prior fiscal years. The amount set forth under “All Other Compensation” includes, in addition to the items listed in footnote (4), matching contributions made to the 401(k) Plan of approximately $12,667.

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  41

GRANTS OF PLAN-BASED AWARDS DURING FISCAL 2018

The table below sets forth information regarding all grants of plan-based awards made to the NEOs during the fiscal year ended September 30, 2018. For further information regarding the terms of certain of these grants, see “Compensation Discussion and Analysis” above.

 

		Date of Grant				Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)												All Other Stock Awards (#)				All Other Option Awards (#)				Exercise Price of Option Awards ($)				Grant Date Fair Value of Stock and Option Awards ($)
Name						Threshold ($)				Target ($)				Max ($)
Ron C. Keating			—				—				827,367				—				—				—				—				—
			11/1/17				—				—				—				431,035				—				—				9,000,011
			4/2/18				—				—				—				—				294,864				20.88				2,348,002
Benedict J. Stas			—				—				287,000				—				—				—				—				—
			11/1/17				—				—				—				203,545				—				—				4,250,020
			4/2/18				—				—				—				—				78,739				20.88				626,999
Anthony J. Webster			—				—				183,860				—				—				—				—				—
			11/1/17				—				—				—				57,472				—				—				1,200,015
			4/2/18				—				—				—				—				33,279				20.88				265,001
Rodney O. Aulick			—				—				225,000				—				—				—				—				—
			11/1/17				—				—				—				95,786				—				—				2,000,012
			4/2/18				—				—				—				—				49,730				20.88				396,000
Kenneth A. Rodi			—				—				220,631				—				—				—				—				—
			11/1/17				—				—				—				47,893				—				—				1,000,006
			4/2/18				—				—				—				—				44,204				20.88				351,996

 

 

(1)	These columns, where applicable, show the range of possible payouts which were targeted for fiscal 2018 performance under the AIP as described above under “—Short-Term Annual Incentives.”

Employment Agreements

We currently use employment agreements to attract and/or retain our NEOs, the material terms of which are described below. In June 2018, each of the NEOs entered into an amendment to his employment agreement providing that any annual bonus payment may be made in the form of cash or Company equity securities.

President, Chief Executive Officer and a Director (Ron C. Keating)

On September 8, 2014, the Company entered into an employment agreement with Mr. Keating, which agreement was amended on September 6, 2017 and June 22, 2018. Mr. Keating’s Employment Agreement provides that his initial employment term commenced on December 1, 2014 and expired on December 1, 2017, subject thereafter to automatic one-year extensions unless either the Company or Mr. Keating provides at least 30 days’ written notice to the other of intent not to renew the term. The Employment Agreement provides that Mr. Keating would receive an initial base salary of $750,000 per year, subject to increase at the discretion of the Board, and that he would be eligible to participate in all benefit programs for which other senior executives of the Company are generally eligible. Mr. Keating would also be eligible to earn a target annual bonus equal to 100% of his base salary, with the actual bonus amount, if any, to be based on the Company’s actual performance relative to the performance targets established by the Board or a committee thereof (and payable in cash or equity). In addition, Mr. Keating would be entitled to reimbursement for the following items, in each case in accordance with the expense reimbursement policy of the Company in effect from time to time: (a) reasonable out-of-pocket business expenses incurred in performing his duties, (b) commuting and temporary living expenses, on a grossed-up basis for taxes, related to his principal place of employment at the Company’s offices in Pittsburgh, Pennsylvania (including, without limitation, weekly flights between Cincinnati and Pittsburgh, hotel expenses or rental apartment expenses and a car) until Mr. Keating determines to relocate his residence to the location of the Company’s principal offices, at which time the Company will reimburse Mr. Keating for all reasonable relocation expenses on a grossed-up tax basis. Mr. Keating’s Employment Agreement also provides for severance upon certain

 

42  Evoqua Water Technologies Corp. 2019 Proxy Statement 

terminations of employment, as described below under “—Payments upon Certain Events of Termination or Change in Control.” The Employment Agreement includes restrictive covenants providing for non-competition, non-solicitation of employees and non-interference with business relationships, in each case during employment and for two years thereafter, mutual non-disparagement, and perpetual non-disclosure of confidential information.

Executive Vice President, Chief Financial Officer & Treasurer (Benedict J. Stas)

On February 26, 2015, the Company entered into an employment agreement with Mr. Stas, which agreement was amended effective as of September 6, 2017 and June 22, 2018. Mr. Stas’ Employment Agreement provides that his initial employment term commenced on March 30, 2015 and expired on March 30, 2018, subject thereafter to automatic one-year extensions unless either the Company or Mr. Stas provides at least 30 days’ written notice to the other of intent not to renew the term. The Employment Agreement provided that Mr. Stas would receive an initial annual base salary of $350,000, subject to increase at the discretion of the Board, and shall be eligible to receive an initial target annual bonus equal to 60% of his base salary, with the actual bonus amount, if any, to be based on the Company’s actual performance relative to the performance targets established by senior management of the Company (and payable in cash or equity). In addition, in accordance with the Company’s expense reimbursement policy in effect from time to time, Mr. Stas would be entitled to reimbursement for reasonable out-of-pocket business expenses incurred in performing his duties and is eligible to participate in all benefit programs for which other executives of the Company are generally eligible. Mr. Stas’ Employment Agreement also provides for severance upon certain terminations of employment, as described below under “—Payments upon Certain Events of Termination or Change in Control.” The Employment Agreement includes restrictive covenants providing for non-competition, non-solicitation of employees and non-interference with business relationships, in each case during employment and for one year thereafter, non-disparagement of the Company, and perpetual non-disclosure of confidential information.

Executive Vice President, Chief Human Resources Officer (Anthony J. Webster)

On January 20, 2016, the Company entered into an employment agreement with Mr. Webster, which agreement was amended effective as of September 6, 2017 and June 22, 2018. Mr. Webster’s Employment Agreement provides that his initial employment term commenced on February 22, 2016 and will expire on February 22, 2019, subject thereafter to automatic one-year extensions unless either the Company or Mr. Webster provides at least 30 days’ written notice to the other of intent not to renew the term. The Employment Agreement provides that Mr. Webster would receive an initial annual base salary of $350,000, subject to increase at the discretion of the Board, and shall be eligible to receive a target annual bonus equal to 50% of his base salary, with the actual bonus amount, if any, to be based on the Company’s actual performance relative to the performance targets established by senior management of the Company (and payable in cash or equity). In addition, Mr. Webster would be entitled to reimbursement for reasonable out-of-pocket business expenses incurred in performing his duties and is eligible to participate in all benefit programs for which other executives of the Company are generally eligible. Mr. Webster’s Employment Agreement also provides for severance upon certain terminations of employment, as described below under “—Payments upon Certain Events of Termination or Change in Control.” The Employment Agreement includes restrictive covenants providing for non-competition, non-solicitation of employees and non-interference with business relationships, in each case during employment and for one year thereafter, non-disparagement of the Company, and perpetual non-disclosure of confidential information.

On March 1, 2016, the Company entered into a bonus agreement with Mr. Webster (the “Webster Bonus Agreement”), which provides that subject to his continued employment with the Company through the first to occur of a Change in Control (as defined in the Option Plan) or an initial public offering of the common stock of the Company, Mr. Webster will be entitled to a bonus payment (the “Special Bonus”) equal to the product of 342,362 multiplied by the amount by which the Fair Market Value (as defined below) of a share of common stock of the Company exceeds $4.64, but only to the extent the Fair Market Value does not exceed $6.49. For purposes of the foregoing, “Fair Market Value” shall mean, as calculated by the Company in its reasonable good faith discretion, (i) in the case of a payment upon a Change in Control, the closing cash consideration per share of common stock of the Company, or (ii) in the case of a payment upon an initial public offering of the common stock of the Company, the closing price of a share of common stock of the Company as of the first trading day on which shares of common stock of the Company may be traded following any underwriter’s lockup entered into in connection with the initial public offering that is binding upon the Company’s senior

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  43

management (the “IPO Valuation Date”). In the case of a Change in Control, the Special Bonus shall be paid in cash within 30 days following a Change in Control. In the case of an initial public offering, the Special Bonus shall be paid in cash, shares or any combination thereof (as determined by the Company in its discretion) on the first payroll date following the IPO Valuation Date. The Company’s obligations under the Webster Bonus Agreement shall terminate upon the termination of Mr. Webster’s termination of employment with the Company for any reason (regardless of whether a Change in Control or initial public offering has occurred prior to such termination). In light of the Company’s initial public offering, Mr. Webster fulfilled the vesting requirements of the Special Bonus and payment was made to Mr. Webster in June 2018.

Executive Vice President, Integrated Solutions & Services Segment President (Rodney O. Aulick)

On April 14, 2014, the Company entered into an employment agreement with Mr. Aulick, which agreement was amended effective as of September 6, 2017 and June 22, 2018. Mr. Aulick’s Employment Agreement provides that his initial employment term commenced on April 14, 2014 and expired on April 14, 2017, subject thereafter to automatic one-year extensions unless either the Company or Mr. Aulick provides at least 30 days’ written notice to the other of intent not to renew the term. The Employment Agreement provided that Mr. Aulick would receive an initial annual base salary of $250,000, subject to increase at the discretion of the Board, and shall be eligible to receive an initial target annual bonus equal to 60% of his base salary, with the actual bonus amount, if any, to be based on the Company’s actual performance relative to the performance targets established by senior management of the Company (and payable in cash or equity). In addition, in accordance with the Company’s expense reimbursement policy in effect from time to time, Mr. Aulick would be entitled to reimbursement for reasonable out-of-pocket business expenses incurred in performing his duties and is eligible to participate in all benefit programs for which other senior executives of the Company are generally eligible. Mr. Aulick’s Employment Agreement also provides for severance upon certain terminations of employment, as described below under “—Payments upon Certain Events of Termination or Change in Control.” The Employment Agreement includes restrictive covenants providing for non-competition, non-solicitation of employees and non-interference with business relationships, in each case during employment and for one year thereafter, non-disparagement of the Company, and perpetual non-disclosure of confidential information.

Executive Vice President, Applied Product Technologies Segment President (Kenneth A. Rodi)

On March 14, 2016, the Company entered into an employment agreement with Mr. Rodi, which agreement was amended effective as of September 6, 2017 and June 22, 2018. Mr. Rodi’s Employment Agreement provides that his initial employment term commenced on April 15, 2016 and will expire on April 15, 2019, subject thereafter to automatic one-year extensions unless either the Company or Mr. Rodi provides at least 90 days’ written notice to the other of intent not to renew the term. The Employment Agreement provided that Mr. Rodi would receive an initial annual base salary of $350,000, subject to increase at the discretion of the Board. For fiscal 2016, performance targets were tied to Mr. Rodi’s previous employer’s bonus plan. Beginning on October 1, 2016, Mr. Rodi was eligible to receive a target annual bonus equal to 60% of his base salary, with the actual bonus amount, if any, to be based on the Company’s actual performance relative to the performance targets established by senior management of the Company (and payable in cash or equity). In addition, in accordance with the Company’s expense reimbursement policy in effect from time to time, Mr. Rodi would be entitled to reimbursement for reasonable out-of-pocket business expenses incurred in performing his duties and is eligible to participate in all benefit programs for which other executives of the Company are generally eligible. Mr. Rodi’s Employment Agreement also provides for severance upon certain terminations of employment, as described below under “—Payments upon Certain Events of Termination or Change in Control.” The Employment Agreement includes restrictive covenants providing for non-competition, non-solicitation of employees and non-interference with business relationships, in each case during employment and for one year thereafter, mutual non-disparagement, and perpetual non-disclosure of confidential information.

Effective December 31, 2018, Mr. Rodi resigned from Evoqua.

 

44  Evoqua Water Technologies Corp. 2019 Proxy Statement 

OUTSTANDING EQUITY AWARDS AS OF SEPTEMBER 30, 2018

The following table sets forth certain information with respect to outstanding options held by each of our NEOs on September 30, 2018.

 

Name		Option Awards																				Stock Awards
		Number of Securities Underlying Unexercised Options Exercisable				Number of Securities Underlying Unexercised Options Un-exercisable				Option Exercise Price ($)				Option Expiration Date								Number of Shares or Units of Stock that Have Not Vested				Market Value of Shares or Units of Stock that Have Not Vested ($) (1)
Ron C. Keating			1,440,185				623,396(2)				4.64				12/15/2024								431,035(3)				7,663,802
			29,653				—				7.42				10/28/2026
			—				294,864(4)				20.88				04/02/2028
Benedict J. Stas			445,388				207,796(5)				4.64				04/06/2025								203,545(3)				3,619,030
			8,464				—				7.42				10/28/2026
			—				78,739(4)				20.88				04/02/2028
Anthony J. Webster			133,180				171,181(6)				6.49				03/03/2026								57,472(3)				1,021,852
			—				33,279(4)				20.88				04/02/2028
Rodney O. Aulick			554,141				—				4.64				03/06/2024								95,786(3)				1,703,075
			—				49,730(4)				20.88				04/02/2028
Kenneth A. Rodi			134,788				134,788(7)				6.49				05/16/2026								47,893(3)				851,538
			—				44,204(4)				20.88				04/02/2028

 

 

(1)	Values in this column are calculated based upon the closing price of the Company’s common stock ($17.78) as of September 30, 2018.

(2)	These options vested on December 15, 2018.

(3)	These restricted stock units will vest in full on November 2, 2019 and settle promptly thereafter.

(4)	These options will vest in four substantially equal installments on January 1, 2019, January 1, 2020, January 1, 2021 and January 1, 2022.

(5)	These options will vest on March 30, 2019.

(6)	These options will vest in two remaining substantially equal installments on March 1, 2019 and March 1, 2020.

(7)	These options will vest in two remaining equal installments on April 18, 2019 and April 18, 2020.

OPTION EXERCISES DURING FISCAL 2018

The number of shares acquired on stock option exercise (inclusive of the number of shares surrendered to pay taxes associated with each NEO’s exercise) during the fiscal year ended September 30, 2018 is reported below. None of the RSUs held by our NEOs vested during the fiscal year ended September 30, 2018.

 

Name		Number of Shares Acquired on Exercise (#)				Value Realized on Exercise ($)
Ron C. Keating(1)			430,000				7,813,100
Benedict J. Stas(2)			178,000				3,234,260
Anthony J. Webster(3)			38,000				620,160
Rodney O. Aulick			—				—
Kenneth A. Rodi			—				—

 

 

(1)	Of the shares acquired on exercise of the options, 228,732 were withheld to cover withholding tax obligations.

(2)	Of the shares acquired on exercise of the options, 91,013 were withheld to cover withholding tax obligations.

(3)	Of the shares acquired on exercise of the options, 18,458 were withheld to cover withholding tax obligations.

 

Evoqua Water Technologies Corp. 2019 Proxy Statement  45

NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL 2018

The following table provides information with respect to the Deferred Compensation Plan.

 

Name		Executive Contributions in Last FY ($)(1)				Company Contributions in Last FY ($)(2)				Aggregate Earnings in Last FY ($)				Aggregate Withdrawals/ Distributions ($)				Aggregate Balance at Last FYE ($)
Ron C. Keating			95,994				78,074				93,899				0				695,013
Benedict J. Stas			56,240				22,838				12,741				0				186,656
Anthony J. Webster			15,274				916				602				0				16,793
Rodney O. Aulick			60,756				16,543				16,488				0				263,303
Kenneth A. Rodi			—				—				—				—				—

 

 

(1)	This amount reflects a portion of salary that the indicated executive elected to defer during fiscal 2018. This amount is included in the “Salary” column of the Summary Compensation Table above.

(2)	The full amounts reported as Company contributions have been reported in the “All Other Compensation” column in the Summary Compensation Table above.

Our NEOs are eligible to participate in the Deferred Compensation Plan, which benefits only a select group of United States management employees. The Deferred Compensation Plan uses a tracking account for each participant who elects to defer income.

The participant selects investment funds from a broad range of options. Earnings and losses on each account are determined based on the performance of the investment funds selected by the participant. A participant may elect to defer up to 50% of his annual base compensation and up to 90% of his bonus awarded pursuant to the AIP as compensation deferrals. The NEOs are 100% vested with respect to both employee contributions and their employer contributions. Distributions under the Deferred Compensation Plan may be made as a single lump sum, on a fixed date or schedule, or in equal installments over periods of (x) five, 10 or 15 years or (y) two, three, four or five years, depending on the distribution’s triggering event and the participant’s elections, in compliance with the election and timing rules of Code Section  409A.

PAYMENTS UPON CERTAIN EVENTS OF TERMINATION OR CHANGE IN CONTROL

In the event any NEO is terminated other than for cause, death or disability (including due to non-extension of the employment term) or resigns for good reason (as defined in the Employment Agreements), he is entitled to the following, in addition to accrued benefits, subject to the executive’s delivery of a release of claims against the Company: (i) base salary continuation for 12 months; (ii) a pro-rata portion of his actual annual bonus for the year in which termination occurs (except for Mr. Keating, who is entitled to a pro-rata portion of his target annual bonus opportunity for the year in which termination occurs); (iii) medical and dental benefits continuation for a maximum of 12 months; and (iv) reimbursement for outplacement assistance for six months up to a maximum of $15,000.

In the event any NEO’s employment is terminated by the Company for cause or on account of the NEO’s death, disability or voluntary termination without good reason, the Company is obligated to pay the NEO any accrued benefits through the date of termination.

 

46  Evoqua Water Technologies Corp. 2019 Proxy Statement