The 2017 Omnibus Incentive Plan (the “2017 Plan”), as amended and restated in 2023 (the “Amended 2017 Plan”) provides for a variety of equity award vehicles to maintain flexibility. The Amended 2017 Plan permits the Company to grant Stock Options, Stock Appreciation Rights (“SARs”), restricted stock awards, dividend equivalents, performance awards, and other stock-based awards, and provides for the granting of cash performance awards. The Amended 2017 Plan is flexible and allows the Company to change equity grant practices from time to time.

After the adoption of the Amended 2017 Plan, no further awards were granted under the Second Amended and Restated 1999 Stock Plan (the “1999 Plan”), but outstanding awards granted under the 1999 Plan prior to the adoption of the Amended 2017 Plan continue in accordance with their terms.

Under the Amended 2017 Plan:

Generally, the exercise price per share of each Stock Option granted under the Amended 2017 Plan may not be less than the fair market value per share of Common Stock on the date of such grant and must have a term no longer than ten years. The Amended 2017 Plan expressly prohibits the repricing of stock options without shareholder approval.

Time-Based Restricted Shares vest in full three years from the date of grant. In the event the NEO’s employment with the Company is terminated prior to vesting in full, the Time-Based Restricted Shares are forfeited. In the event of death or disability, Time-Based Restricted Shares will vest based upon the amount of time remaining until the vesting date.

For grants in 2023, the Performance Shares are earned based on the Company’s achievement of certain performance criteria over a three year period. Performance Shares will vest based upon the amount of time remaining until the vesting date in the event of recipient’s prior death, disability or “retirement,” as such is defined in the applicable Performance Share Grant Agreement.

In addition, upon a change in control or in connection with a termination of employment of the NEO without cause, the Compensation Committee may accelerate the vesting and/or payment dates of awards in its discretion.

In the event of an executive officer’s retirement in accordance with the Officer Retiree Program which requires that at the time of voluntary termination of employment, the sum of the officer’s age and years of service is at least 70, the officer has at least ten years of service and has served at least three consecutive years as an officer, then, subject to the terms of the Officer Retiree Program: (1) the retiree officer and their spouse and any eligible dependents (who are eligible to be covered under the retiring officer’s medical plan) are eligible to receive the same coverage available to an active employee (under such plan) for the retiree officer and spouse’s life, or until Medicare is available, for a maximum of ten (10) years, and the retiree officer or his/her spouse will be charged the portion of the coverage premiums that the Company would have paid if the retiree officer were an active employee; (2) stock options granted shall continue to vest and become exercisable in accordance with their original vesting schedule; (3) restricted stock grants shall continue to vest in accordance with their original vesting schedule; and (4) performance share grants shall continue to vest in accordance with their original vesting schedule.

Upon a change in control or in connection with a termination of employment of the NEO without cause, the Compensation Committee may accelerate the vesting and/or payment dates of awards in its discretion. Except as provided in the Harris Agreement, the Amended 2017 Plan does not provide for automatic acceleration of outstanding awards upon the occurrence of a change in control.

The Company has adopted a related party transaction policy. Under the related party transaction policy, our Audit Committee reviews and approves proposed transactions or courses of dealings expected to exceed $120,000 in any fiscal year with respect to which holders of 5% or more of our stock, our officers, our directors, or members of their immediate families, have a direct or indirect material interest. Before entering into any transaction, arrangement or relationship constituting a related party transaction, other than certain pre-approved transactions, the related party must notify the Company’s General Counsel in writing of all material facts and circumstances of the proposed transaction. Proposed related party transactions must be reviewed by the Audit Committee, which has the authority to approve or disapprove the transaction based on appropriate factors, including whether the transaction is in the ordinary course of business, whether the transaction was initiated by the Company or the related party, whether the transaction is on terms no less favorable to the Company than terms generally available from an un-affiliated third party, the potential benefit to the Company, the amount of money involved, any impact on a director’s independence to serve on the board or any committees, the extent of the related person’s interest in the transaction, and any other information that would be material to investors.

An Audit Committee member who is the related party does not participate in the decision to approve or disapprove the transaction. If a related party transaction will be ongoing, the Audit Committee may establish guidelines for Company management to follow in its dealings with the related party and the Audit Committee will regularly review such transactions.

The Audit Committee has preapproved the following related party transactions: (a) employment of executive officers, (b) director compensation, (c) transactions with other companies where the related party’s only relationship is as a director or owner of less than 10% of that company’s outstanding equity, (d) charitable contributions not exceeding $120,000 where the related party’s only relationship is as an employee, (e) transactions where all shareholders receive proportional benefits, and (f) indemnification pursuant to the Company’s Certificate of Incorporation or Bylaws or other agreement.

In addition, the Company’s Code of Conduct, which sets forth standards applicable to all employees, officers and directors of the Company, requires that all employees, officers and directors must disclose outside business or financial interest which could influence the discharge of their responsibilities to the Company. Any waivers of the provisions of, the Code of Conduct, if any, made with respect to any of our directors or officers will be posted on our website at www.balchem.com. No such waivers were requested or granted in 2023.

During 2023, there were no Related Person Transactions in which any of our directors or officers or their immediate family members had a direct or indirect material interest. We have not made payments to our independent, non-employee directors other than the fees to which they are entitled as directors (described under the heading “Director Compensation” on page 31 of this Proxy Statement) and the reimbursement of expenses related to their services as directors. As an employee director, Mr. Harris does not receive any compensation for his services as Director and Chairman of the Board.

The following table provides information, as of December 31, 2023, with respect to shares of our Common Stock that may be issued pursuant to awards under the Amended 2017 Plan, 2017 Plan and the 1999 Plan (each described above). These plans are the Company’s only equity compensation plans approved by security holders, and there are no equity compensation plans that have not been approved by security holders. It should be noted that shares of our Common Stock may be allocated to, or purchased on behalf of, participants in the Company’s 401(k) retirement plan (described above). Consistent with SEC regulations governing equity compensation plans, information relating to shares issuable or purchased under the Company’s 401(k) retirement plan is not included in the table below.

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, set forth below is disclosure regarding the relationship of the annual total compensation of our employees and the total annual compensation of Mr. Harris, our Chairman, President and CEO.

Mr. Harris had 2023 annual total compensation of $5,889,707 as reflected in the Summary Compensation Table included in this Proxy Statement. Our median employee’s annual total compensation for 2023 was $63,793. Therefore, the ratio of Mr. Harris’ 2023 annual total compensation to that of our median employee is approximately 92 to 1.

We identified the median employee by examining the 2023 total cash compensation for all individuals, excluding our CEO, who were employed by us on December 31, 2023, the last day of our payroll year. We included all employees whether they were employed on a full-time, part-time or seasonal basis. We did not make any assumptions, adjustments, or estimates with respect to total cash compensation, and annualized the compensation for any full-time employees who were not employed by the Company for all of 2023. We believe the use of total cash compensation for all employees is a consistently applied compensation measure because we do not widely distribute annual equity awards to employees. Approximately four percent of our employees receive annual equity awards.

After identifying the median employee based on total cash compensation, we calculated annual total compensation for such employee using the same methodology that we use for our NEOs as set forth in the 2023 Summary Compensation Table. Given the different methodologies that various public companies will use to determine their pay ratio, the CEO Pay Ratio reported above should not be used as a basis for comparison between companies.

Pay versus Performance Disclosure

The following table sets forth the compensation for our Chief Executive Officer and the average compensation for our other named executive officers, both as reported in the Summary Compensation Table and with certain adjustments to reflect the “compensation actually paid” (“CAP”) to such individuals, as defined under SEC rules, for each of 2023, 2022, 2021 and 2020. The table also provides information on our cumulative total shareholder return (“TSR”), the cumulative TSR of our peer group, Net Income (which we refer to as “Net Earnings” in the Consolidated Statements of Earnings in our Form 10-K) and Adjusted EBITDA over such years in accordance with SEC rules.

Expected life of each stock option is based on the "simplified method" using an average of the remaining vest and remaining term, as of the vest/FYE date.

- Strike price is based on each grant date closing price and asset price is based on each vest/FYE closing price.

- Risk free rate is based on the Treasury Constant Maturity rate closest to the remaining expected life as of the vest/FYE date.

- Historical volatility is based on daily price history for each expected life (years) prior to each vest/FYE date. Closing prices provided by S&P Capital IQ are adjusted for dividends and splits.

- Represents annual dividend yield on each vest/FYE date.

2023: Martin Bengtsson, Martin Reid, Hatsuki Miyata, Frederic Boned

2022: Martin Bengtsson, Jim Hyde, Martin Reid, Jonathan Griffin, Hatsuki Miyata

2021: Martin Bengtsson, Jim Hyde, Mark Stach, William Backus, Martin Reid

2020: Martin Bengtsson, Jim Hyde, Mark Stach, William Backus, Scott Mason

Most Important Financial Performance Measures

The unranked list below represents the Company’s most important measures used to link compensation to performance:

Relationship between Compensation Actually Paid and Company Performance Measures

CAP vs. TSR

The following graph compares compensation actually paid to our PEO and the average compensation actually paid to our other NEOs to (i) our cumulative TSR, and (ii) Dow Jones U.S. Specialty Chemicals Index TSR, for the fiscal years ended December 31, 2020, 2021, 2022 and 2023.

 

CAP vs. GAAP Net Earnings

The following graph compares (i) compensation actually paid to our PEO and the average compensation actually paid to our other NEOs to (ii) our net earnings, for the fiscal years ended December 31, 2020, 2021, 2022 and 2023.

 

CAP vs. Company Selected Measure

The following graph compares (i) compensation actually paid to our PEO and the average compensation actually paid to our other NEOs to (ii) annual adjusted EBITDA, for the fiscal years ended December 31, 2020, 2021, 2022 and 2023.