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BALCHEM CORP filed this DEF 14A on April 26, 2024

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BALCHEM CORP - DEF 14A - 20240426 - PROPOSAL_3

PROPOSAL 3: ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Since our 2017 annual meeting, at which our shareholders last approved holding advisory or “Say-on-Pay” votes on executive compensation on an annual basis, the “Say-on-Pay” vote has been held every year. Last year, our shareholders approved our “Say-on-Pay” resolution by approximately 72% of the votes cast on the executive compensation described in our 2023 Proxy Statement. Details regarding our shareholder engagement and Say-on-Pay vote in 2023 are on pages 35-36 of this Proxy Statement.

The Company again seeks your advisory vote and asks that you approve the compensation of the Company’s Named Executive Officers (“NEOs”) as disclosed in this Proxy Statement by voting FOR the following resolution at the Annual Meeting:

“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the SEC (which disclosure includes the Compensation Discussion and Analysis, compensation tables and any related material disclosed in this proxy statement).”

Please refer to the section entitled “Compensation Discussion and Analysis”, and the tables and narratives in the Executive Compensation portion of this section for the discussion and summary of the policies of the Compensation Committee which form the basis for the compensation of our NEOs and information on the amounts paid. For reference, the pay versus performance disclosure is provided under the section titled “Pay versus Performance” of this Proxy Statement.

This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the policies and practices described in this Proxy Statement. Because this vote is advisory only, the vote is not binding; however, the Compensation Committee will consider the results of shareholder voting in making future compensation decisions regarding NEOs.

Assuming a quorum is present, the affirmative vote of a majority of all votes cast, by attendance at the Annual Meeting or represented by proxy, is required for approval of this proposal. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the vote.

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.

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Governance Principles

General

Balchem is committed to adhering to sound corporate governance practices.

•	Balchem’s Governance Guidelines:

○	Include corporate governance practices to guide and assist the Board in fulfilling its responsibilities to oversee management in the operation and results of Balchem’s business and affairs.

○	Are designed to enhance the necessary authority and practices for the Board to make decisions that are in the best interests of Balchem and independent of Balchem’s management.

○	Are intended to align the interests of directors and management with the long-term interests of Balchem’s shareholders.

○	The Governance Guidelines are available on the Leadership & Governance page in the Investor Relations section of the Company’s website, www.balchem.com.

•	Code of Business Conduct and Ethics (our “Code of Conduct”)

○	Our Code of Conduct applies to all Balchem employees, directors and officers.

○	Our Code of Conduct is the foundation of Balchem’s Compliance and Ethics Program and embodies the first of Balchem’s Core Values, which is “Always Doing the Right Thing.”

○	Our Code of Conduct promotes honest and ethical conduct, compliance with applicable laws, rules and regulations, prompt reporting of violations of the code and full, fair, accurate, timely and understandable disclosure in reports filed with the SEC.

○

Our Code of Conduct meets the requirements of a “code of ethics” as defined by Item 406 of Regulation S-K. The Code of Conduct covers topics including, but not limited to, avoiding conflicts of interest, maintaining confidentiality of information, working with suppliers, preventing bribery and corruption, avoiding insider trading, and compliance with laws and regulations.

○	Additionally, the Company has adopted a Code of Conduct for Senior Financial Officers that applies to the Company’s Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Treasurer and Corporate Controller.

○	Among other things, this code requires Senior Financial Officers to provide full, fair, accurate, timely, and understandable disclosure in reports and documents that the Corporation files with or submits to the Securities and Exchange Commission and in other public communications.

○	Amendments to, or 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.

○	Both codes are available on the Leadership & Governance page in the Investor Relations section of the Company’s website at www.balchem.com.

○	We also have a Supplier Code of Conduct which our suppliers are expected to adhere to. The Supplier Code of Conduct defines our commitment to protecting human rights and ensuring safe work environments throughout our supplier chain.

•	Board Committee Charters

○

Balchem’s Board Committees (Audit, Compensation and Governance) have each adopted a charter defining its respective purposes and responsibilities. These charters are reviewed by the Committees annually. The charters for the Audit, Compensation and Governance Committees are available on the Leadership & Governance page in the Investor Relations section of the Company’s website, www.balchem.com.

•	Director Independence

○	Each year, the Board conducts a survey to determine the independence of its members. The Board has determined that each of the Company’s directors, other than Mr. Harris, is independent, as defined under the Nasdaq Listing Rules.

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•	Evaluations

○	The Board conducts an annual self-evaluation (which includes a director self-assessment) and the Committees conduct a self-evaluation on a biennial basis.

Corporate Risk Oversight

The Board provides general oversight of the Company’s risk management program, focusing on the most significant and material risks facing the Company and helps to ensure that management develops and implements preventative controls and appropriate risk mitigation strategies.

At the direction of the Board, we have instituted an enterprise-wide risk management process that identifies potential exposure to risks that arise in the course of our business. The Board uses our enterprise-wide risk management system as a key tool for understanding the risks facing us as well as assessing whether management’s processes, procedures and practices for mitigating those risks are effective. Our Internal Audit function is primarily responsible for the planning, assessment and reporting of our risk profile and this risk management system.

Although most risk oversight activities are administered through the Audit Committee, each of our Board Committees has historically focused and continues to focus on specific risks within its respective area of responsibility and regularly reports to the full Board.

The Board and the Audit Committee regularly discuss the Company’s major risk exposures with management, their potential financial impact on the Company and the management thereof.

(1)

The Audit Committee receives, or arranges for the Board to receive, on a no less than annual basis, reports from management on areas of material risk to the Company, including financial, operational, legal, regulatory, information security and cybersecurity and strategic risks (the “Company Risk Reports”).

(2)	The Audit Committee receives the Company Risk Reports from members of management tasked with the responsibility to understand, manage and mitigate the risks (with the Company’s enterprise risk management effort being facilitated by its Internal Audit function).

(3)

The Chair of the Audit Committee reports on its discussion of the Company Risk Reports to the full Board during the Committee reports portion of the Board meeting following the receipt of said Company Risk Reports, which enables the Board and its Committees to coordinate the risk oversight role, particularly with respect to cross-discipline risks and interrelated risks.

The Compensation Committee also evaluates risk in relation to our compensation program. Please refer to the discussion in the Compensation Discussion and Analysis under the section “Risk Considerations in our Compensation Program.”

As part of its role in evaluating the Company’s corporate governance practices and procedures, including identifying best practices and reviewing and recommending to the Board for approval any changes to the documents, policies and procedures in the Company’s corporate governance framework, including its Articles of Incorporation and Bylaws, the Governance Committee evaluates the risks associated it with these practices and procedures.

Additionally, the Governance Committee plays a critical role in mitigating the risks associated with key employee departures via its role in succession planning for the Chief Executive Officer (“CEO”) and other executives. At least once per year, usually as part of the annual talent review process, the Governance Committee and the Board discuss and review the succession plans for the CEO and other key executives. The Board also becomes familiar with potential successors via various means, including annual talent reviews, presentations to the Board, and communications outside of meetings. Our succession planning process is an organization-wide practice designed to proactively identify, develop and retain the leadership talent that is critical for our future business success.

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The chart below sets forth the responsibilities of the Board and its Committees for risk oversight:

Sustainability

We are committed to running our business in a way that respects the overall environment in which we operate. Therefore, corporate responsibility and sustainability play an important role in our strategies and long-term value creation for our stakeholders. We believe that our sustainability practices require transparency and accountability. Our sustainability framework focuses on the most critical Environmental, Social, and Governance (“ESG”) topics relevant to our business and stakeholders, including monitoring climate risk and diversity and inclusion efforts. The Governance Committee periodically, and at least annually, reviews Balchem’s sustainability efforts, ESG strategy, initiatives, and policies.

The Company issues a sustainability report on an annual basis, which is the result of a process of engagement with Balchem’s stakeholders to understand their sustainability interests and concerns and capture Balchem’s efforts and achievements in key areas of sustainability. We are committed to reducing our greenhouse gas emissions by implementing new technologies, improving operational efficiencies, and expanding green energy usages. In addition, we are committed to reducing our global water use by reducing water usage, recycling, and investing in new technologies to improve water efficiency. For more information on our approach to sustainability, please see our sustainability report which is available on our Corporate Social Responsibility page at www.balchem.com. Our Governance Committee, in connection with its responsibility for reviewing the Company’s activities and practices regarding sustainability and ESG matters, maintains responsibility for oversight of our sustainability-related practices and monitors the Company’s progress in this area. Periodically, and at least annually, our entire Board receives information on our sustainability and ESG efforts, with a focus on the Company’s sustainability program, including performance against targets.

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Cybersecurity

Cybersecurity is a critical part of our enterprise risk management. The Board, through its Audit Committee, oversees enterprise risk management, including cybersecurity. To more effectively address cybersecurity threats, we have numerous security layers within our least privilege network approach which is managed by our Information Technology Department. Our cybersecurity programs align with numerous standards and continues to grow and develop as new technologies emerge. Further, we have regular user awareness testing and trainings in place which helps keep all end users and executive leadership up-to-date on the most current threats. The global head of Information Security, possessing credentials in both information technology (“IT”) and cybersecurity, provides regular updates to senior management. Additionally, they provide at least an annual update, or more frequently if necessary, to both the Audit Committee and the full Board regarding the current threat landscape at Balchem, cybersecurity technologies, mitigation strategies, industry trends and best practices that we follow, major cybersecurity incidents (if any), and other areas of importance. The global head of Information Security has responsibility over cybersecurity management globally and reports directly to the Chief Financial Officer. Additional activities to maintain and enhance information security are discussed below.

•	Reliable, Scalable Systems and Infrastructure

Our information security systems, infrastructure, and processes are built on and follow the U.S. National Institute of Standards and Technology (“NIST”) framework for information security, which is a set of guidelines, accepted standards, and best practices for mitigating organization cybersecurity risks published by NIST. We continue to make significant investments in industry-leading and advanced technologies as part of our strategy to strengthen our security posture, business continuity capabilities, and ability to protect and safeguard systems and stakeholder data. Our Information Security Program and systems are tested and assessed annually by an independent third party.

•	Automation and Artificial Intelligence

We have implemented automated systems to proactively test attack vectors by emulating inside and outside threats resulting in the validation of our ability to detect and defend against a cyber attack. Artificial intelligence is used as part of early warning systems designed to detect, alert, and respond to potential cyber threats.

•

Training

Recognizing that information security, stakeholder data, and privacy principles involve more than just systems and infrastructure, we provide semi-annual cybersecurity education and training to all users with access to IT systems, devices, or applications. Internal social engineering phishing campaigns are conducted regularly with the goal of building a culture of cybersecurity, as well as raising awareness and reinforcing best practices across the organization.

Third parties also play a role in our cybersecurity. We engage third-party services to conduct evaluations of our security controls, whether through penetration testing, independent audits or consulting on best practices to address new challenges. These evaluations include testing both the design and operational effectiveness of security controls.

We apply a risk-based approach to mitigate cybersecurity risks associated with our use of third-party service providers and cybersecurity considerations affect the selection and oversight of these third-party service providers. We perform due diligence on third parties that have access to our most critical systems, data or facilities that house such systems or data.

Corporate Strategy

At least once per year, the Board and senior management engage in an in-depth strategic review of our corporate strategy and our business units’ strategic plans. These plans are designed to create long-term shareholder value and serve as the foundation upon which goals are established. Throughout the year, the Board reviews our strategy and monitors management’s progress against such goals.

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Board Structure & Responsibilities

Role of the Board

The Board oversees the management and governance of the Company. The Board, acting directly or through its committees, monitors and oversees various matters, including, overall Company performance, the integrity of the Company’s financial controls, the Company’s strategic plan, the Company’s financial statements, the Company’s management succession plan, the Company’s enterprise risk management (including information technology and cybersecurity), the Company’s sustainability initiatives, and the Company’s ethical standards and legal compliance programs – while also selecting, evaluating and compensating a well-qualified Chief Executive Officer of high integrity, selecting individuals for Board membership and evaluating the performance of the Board and individual directors, reviewing and approving various compensation plans and executives’ compensation, and reviewing and approving the Company’s operating budget.

Committees of the Board of Directors

The Board has the following standing committees, each of which is comprised solely of independent directors:

(1)	Executive Committee;

(2)	Audit Committee;

(3)	Compensation Committee; and

(4)	Governance Committee.

The Board appoints the members of each Committee. The Governance Committee evaluates and recommends to the Board the responsibilities of the Board committees, including composition of committees, structure of committees, and operations. The table below represents the current committee composition.

Name

Audit

Compensation

Governance

Executive

David Fischer

Kathleen Fish

Chair

Daniel Knutson

Chair

Joyce Lee

Olivier Rigaud

Monica Vicente

Matthew Wineinger

Chair

Number of Committee Meetings Held in 2023

*	Includes one special meeting.

Audit Committee

The Audit Committee is directly responsible for appointing, compensating and overseeing the work of the Company’s independent registered public accounting firm. The Audit Committee also assists the Board in fulfilling its oversight responsibilities with respect to the Company’s financial reporting, internal controls and procedures, and audit functions.

The other primary duties and responsibilities of the Audit Committee are to:

(1)	monitor the integrity of the Company’s financial reporting process and systems of internal controls regarding finance, accounting, and legal compliance;

(2)	monitor the independence, qualifications, performance and compensation of the Company’s independent auditors;

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(3)	establish policies and procedures with respect to enterprise risk assessment and risk management;

(4)	review Company procedures for identifying, monitoring, and mitigating risk exposures, including cybersecurity risks; and

(5)	provide an avenue of communication among the independent auditors, internal audit, management and the Board.

The Audit Committee’s role with respect to the Company’s risk oversight is discussed under the section above entitled “Corporate Risk Oversight.” The Audit Committee also monitors and, if necessary, investigates reports made to the Company’s hotline. Responsibilities, activities and the independence of the Audit Committee are discussed in greater detail under the section below entitled “Audit Committee Report.”

The Board has determined that Mr. Knutson, Chair of the Audit Committee, Mr. Rigaud, and Ms. Vicente all meet the qualifications of an “audit committee financial expert” under the applicable SEC rules, and that Ms. Lee is at least financially literate in accordance with Nasdaq Listing Rules. Further, the Board has determined all members of the Audit Committee are “independent” under the Nasdaq Listing Rules and SEC independence requirements applicable to audit committee members.

Compensation Committee

The duties of the Compensation Committee are, among other things, to:

(1)	ensure that compensation and benefit plans are aligned with the interests of shareholders and meet the needs of the Company and its employees;

(2)	review, approve and recommend to the Board for approval various aspects of a compensation program, including incentives, for the CEO and senior executives of the Company (the CEO may not be present during deliberations or voting on his compensation);

(3)	recommend to the Board for approval the compensation of directors;

(4)	administer the Company’s equity compensation plans; and

(5)	interpret, construe, and administer the Company’s Incentive-Based Compensation Recovery Policy, including reviewing such policy from time to time and recommending any changes to the Board for adoption.

The Compensation Committee solicits input from our CEO with respect to the performance of our executive officers and their compensation levels no less frequently than annually, usually in the first quarter. The members of our Compensation Committee have extensive and varied experience with various public and private corporations - as investors and shareholders, as senior executives, and as directors charged with the oversight of management and the setting of executive compensation levels.

The Compensation Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee or, to the extent permitted by applicable law, to any other body or individual.

In particular, the Compensation Committee may delegate the approval of certain transactions to a subcommittee consisting solely of members of the Compensation Committee who are “non-employee directors” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended.

In setting 2023 director and executive compensation, the Compensation Committee engaged Mercer, LLC (“Mercer”) from January to October 2023 and Pearl Meyer & Partners, LLC (“Pearl Meyer”) from October 2023 onwards, as their independent executive compensation advisory firm, to provide survey data and advice on market trends on director and executive compensation. For fiscal year 2023, aggregate fees for executive and Non-Employee Director compensation consulting services were approximately $140,000 to Mercer relating to executive and Board compensation matters.

Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (“MMC”). In 2023, MMC and its affiliates (excluding Mercer) provided certain services to us and our affiliates unrelated to executive and Non-Employee Director compensation, primarily, insurance brokerage (from January through early March 2023) and healthcare benefits consulting services during 2023. For these services, MMC and its affiliates received compensation totaling approximately $260,000. The non-compensation-related services were recommended by management, and the services and fees are not subject to the Compensation Committee’s or the Board’s review or approval. The Mercer consultants providing services to the Compensation Committee and the Company do not market or sell to us, nor do they receive incentive or other compensation based on, these non-compensation-related services.

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Each year, the Compensation Committee evaluates the independence and quality of the services provided by its independent compensation consultant. The Compensation Committee considered the independence of Mercer under applicable SEC rules and regulations and Nasdaq listing standards. Based on its review, the Compensation Committee determined that the services provided by MMC and its affiliates and the engagement of Mercer (from January to October 2023) did not raise any conflict of interest or other issues that would adversely impact Mercer’s independence. The Compensation Committee also evaluated the independence of Pearl Meyer under applicable SEC rules and regulations and Nasdaq listing standards and determined that Pearl Meyer was independent and that there were no conflicts of interest with respect to Pearl Meyer’s work for the committee.

In early 2023, the Compensation Committee reviewed with senior management its recommendations and basis for Company performance goals for payouts of 2023 annual incentive awards and long-term compensation awards. Following this discussion, the Compensation Committee set the 2023 Company performance goals for annual incentive awards and long-term compensation awards and also approved the long-term compensation awards. For information regarding the Compensation Committee’s role, absence of conflicts and fees, among other matters, see “Compensation Discussion and Analysis.”

Corporate Governance and Nominating Committee

The duties of the Governance Committee are, among other things:

(1)	considering and making recommendations to the Board concerning the appropriate size, function and needs of the Board;

(2)	determining the criteria for Board membership, overseeing searches, and evaluating and recommending candidates for election to the Board;

(3)	evaluating and recommending to the Board responsibilities of the Board committees;

(4)	annually reviewing and assessing the adequacy of the Governance Guidelines and recommending any changes to the Board for adoption;

(5)	annually evaluating its own performance as well as overseeing an annual self-evaluation of the Board (which includes a director self-assessment) and other Board Committees;

(6)	overseeing compliance with the Company’s Stock Ownership Policies;

(7)

developing and recommending to the Board for approval a CEO and other key executive succession plan (the “Succession Plan”), reviewing the Succession Plan annually with the CEO and Board, developing and evaluating potential candidates for these positions and recommending to the Board any candidates or changes to previously identified candidates under the Succession Plan;

(8)

considering matters of corporate social responsibility, including reviewing the Company’s activities and practices regarding sustainability, including environmental, social, and governance (“ESG”) matters that are significant to the Company and periodically reviewing the Company’s sustainability strategy, initiatives and policies;

(9)	recruiting and evaluating new candidates for nomination by the full Board for election as directors;

(10)	preparing and updating an orientation program for new directors;

(11)	evaluating the performance of current directors in connection with the expiration of their term in office and providing advice to the full Board as to their nomination for reelection; and,

(12)	annually reviewing and recommending policies on director retirement age.

Executive Committee

The Executive Committee is authorized to exercise all the powers of the Board in the interim meetings of the Board, subject to the limitations imposed by Maryland law. The Executive Committee, convenes as needed, and is also responsible for:

(1)	the recruitment, evaluation and selection of suitable candidates for the position of CEO, for approval by the full Board; and,

(2)	the preparation, together with the Compensation Committee, of objective criteria for the evaluation of the performance of the CEO.

Executive Sessions of the Board of Directors

The Company’s independent directors meet regularly in executive sessions following each regularly scheduled meeting of the Board. These executive sessions are presided over by the Lead Director.

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Board Chair

The Board believes that establishing the right leadership structure is key to ensuring appropriate oversight of management and creating a strategic, forward-looking Board. The right leadership structure will vary depending on the needs of the Company and the Board’s assessment of the CEO. In evaluating its leadership structure, the Board considers a number of factors, including the CEO’s experience and leadership, the Board and Committee processes and procedures, shareholder feedback and best practices. Balchem’s Governance Committee continuously reviews the functioning of the Board and leadership structure and makes recommendations to the Board regarding the CEO, Chairman of the Board (the “Chairman”) and Lead Director.

•

Our Corporate Governance Guidelines do not require the Chairman to be an independent director and do not require separation of the Chairman and CEO positions. However, per our Corporate Governance Guidelines, the Board appoints a Lead Director who functions to reinforce the independence of the Board of Directors, and is appointed from the independent directors.

•

The Board and the Governance Committee regularly consider the appropriate leadership structure for the Company and have concluded that the Company and its shareholders are best served by the Board and the Governance Committee retaining discretion to determine whether the same individual should serve as both CEO and Chairman.

•	The Board and the Governance Committee believe it is important to retain the flexibility to make this determination based on what it believes will provide the best leadership structure for the Company at any given time.

Mr. Harris, our CEO and President, has been the Chairman since January 1, 2017. The Board and the Governance Committee currently believe the Company and its shareholders are best served by having Mr. Harris serve in both positions. The Board and the Governance Committee believe several factors support this decision. These include:

•	The combined Chairman and CEO structure promotes decisive leadership, ensures clear accountability and enhances our ability to communicate with a single and consistent voice to shareholders, employees and other stakeholders.

•

Mr. Harris has an extensive understanding and grasp of our business and operations, competitive pressures and the challenges the Company faces in the current environment, and has demonstrated leadership and management skills, and is best situated to lead and focus discussions on those critical matters affecting the Company, which increases the effectiveness of Board meetings.

•

Finally, the combination of the Chairman and the CEO position succeeds because of the engaged, knowledgeable involvement of our Board in combination with our culture of open communication with the CEO and senior management, enabling the CEO to be an effective conduit between management and the Board.

Lead Director

Our board leadership structure is supported by the active function of the Lead Director, who provides and confirms the necessary independence in the functioning of the Board.

Mr. Wineinger has served as Lead Director since February 2023. The Lead Director role reinforces the independence of the Board and is appointed from the independent directors.

The Lead Director serves at the pleasure of the Board and, in any event, only so long as that person is an independent director of the Company. The Governance Committee annually reviews the functions of the Lead Director and recommends to the Board any changes that it considers appropriate. The Lead Director provides a source of Board leadership complementary to that of the Chairman.

The Lead Director’s responsibilities include:

(1)	working with the Chairman and other directors to set agendas for Board meetings;

(2)	together with the Executive Committee, providing leadership in times of crisis;

(3)	reviewing the individual performance of each of the directors with the Chair of the Governance Committee;

(4)	chairing regular meetings of independent Board members without management present (executive sessions);

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(5)	acting as liaison between the independent directors and the Chairman; and

(6)	chairing Board meetings when the Chairman is not in attendance.

Compensation Committee Interlocks and Insider Participation

Mr. Fischer, Ms. Fish, Mr. Knutson and Mr. Wineinger, each of whom is an independent director of the Company, served as members of the Compensation Committee during 2023.

None of Mr. Fischer, Ms. Fish, Mr. Knutson nor Mr. Wineinger:

(i)	was, during the last completed fiscal year, an officer or employee of the Company,

(ii)	was formerly an officer of the Company, or

(iii)

had any relationship requiring disclosure by the Company under Item 404 of Regulation S-K under the Securities Act of 1933, as amended.

During 2023, there were no interlocking relationships between the Board or Compensation Committee, or the board of directors or compensation committee of any other company that are required to be disclosed under Item 407 of Regulation S-K.

Related Party Transactions Policy

See pages 54 of this proxy statement.

Director Retirement Policy

In accordance with the Company’s Corporate Governance Guidelines, directors must satisfy the Company’s age limit policy for directors, which require that a director retire at the conclusion of the term in which the director reaches the age of 70 (the “Director Retirement Policy”). Upon completion of their terms and in accordance with the Director Retirement Policy, Dr. John Televantos and Perry Premdas retired from the Board in June 2023.

Nominations of Directors

The Governance Committee considers recommending that the Board re-nominate incumbent directors who continue to satisfy the Company’s criteria for membership on the Board, particularly whether the director will continue to make meaningful contributions to the Board. When vacancies occur on the Board, the Governance Committee will solicit recommendations from Board members, members of management and others likely to be familiar with qualified candidates.

The Governance Committee typically engages a professional search firm to assist in identifying qualified candidates. The Company may also consider candidates recommended by one or more substantial, long-term shareholders. Generally, shareholders that individually or as a group hold 5% or more of our Common Stock for more than one year will be considered substantial, long-term shareholders. To be considered by the Governance Committee, the nomination must comply with Article II, Section 6 of our Bylaws and be properly submitted to the Secretary of the Company by the deadline for including shareholder proposals as set forth on page 66 in “Shareholder Proposals for 2025 Annual Meeting of Shareholders.” Shareholder nominations that comply with these procedures and meet the criteria outlined above and in our Bylaws will receive the same consideration as other candidates.

The Governance Committee considers the following criteria when evaluating candidates:

(1)	have experience and skills in areas critical to understanding the Company and its business;

(2)	possess certain personal characteristics, such as integrity and judgment;

(3)	have a diverse background of experience and perspectives (including business experience, geographic origin, age, gender, and ethnicity); and

(4)	have sufficient ability to commit the necessary time and effort required to serve on the Board.

Members of the Governance Committee (and/or the Board) also meet personally with each candidate to evaluate the candidate’s ability to work effectively with other members of the Board, while also exercising independent judgment. The Board believes that diversity within a Board promotes the inclusion of different perspectives and ideas and ensures that the Company benefits from all available talent. Therefore, the Board evaluates each candidate in the context of the Board as a whole, with the objective of recommending an individual that can best contribute to perpetuate the success of the Company and represent shareholder interests through the exercise of sound judgment based upon a diversity of background, experience and perspectives.