PROPOSAL FIVE: APPROVAL OF AN AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO ELIMINATE THE SUPERMAJORITY VOTING REQUIREMENTS

Background

Our Certificate of Incorporation provides that an amendment to the Certificate of Incorporation, as well as an amendment to our by-laws by stockholders, the removal of Directors, and the election of Directors to fill Board vacancies, require the affirmative vote of stockholders holding at least seventy five percent of the voting power of our then-outstanding shares of capital stock entitled to vote at an election of Directors. The Board has adopted and declared advisable, and recommends for your approval, an Amendment to Articles VI, IX, and X of our Certificate of Incorporation to eliminate the supermajority voting requirements.

Rationale for Eliminating Supermajority Voting Requirements

As part of the Board’s ongoing evaluation of our corporate governance structures and practices, the Board considered the advantages and disadvantages of this supermajority stockholder approval requirement. While this requirement was originally put in place to, among other things, protect our stockholders, including minority stockholders, by ensuring that amendments to our Certificate of Incorporation are not completed without the approval of a substantial majority of our stockholders, the Board believes that this supermajority requirement is no longer necessary in light of prevailing views regarding corporate governance best practices. Accordingly, the Board has determined that it is advisable and in the best interests of the Company and its stockholders to remove this supermajority approval requirement.

Proposed Amendment to Eliminate Supermajority Voting Requirements

If this proposal is adopted by our stockholders, amendments to our Certificate of Incorporation, amendments to the by-laws by our stockholders and removals of Directors will require, in all instances, the affirmative vote of holders of a majority of the voting power of our then-outstanding shares of capital stock entitled to vote at an election of directors.

If approved by the requisite number of stockholders, the amendment to our Certificate of Incorporation will be effective when the Company files a Certificate of Amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware.

If the amendment to our Certificate of Incorporation pertaining to the removal of supermajority voting requirements is not approved by stockholders, the supermajority requirements to amend the Certificate of Incorporation and by-laws and remove Directors will remain in place.

The approval of the amendment to our Certificate of Incorporation to eliminate the supermajority voting requirements requires the affirmative vote of the holders of at least 75% of the outstanding shares of capital stock entitled to vote thereon, voting together as a single class, and the affirmative vote of the holders of at least 75% of the outstanding shares of each class of capital stock entitled to vote thereon, as a separate class. With respect to Proposal Five, you may vote “for,” “against” or “abstain” from voting on this proposal.

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Proposal Five: approval of an Amendment to our Amended and Restated Certificate of Incorporation to Eliminate the Supermajority Voting Requirements

If you “abstain” from voting with respect to this proposal, your vote will have the effect of a vote “against” this proposal. Broker non-votes will have the effect of a vote “against” this proposal.

		RECOMMENDATION OF THE BOARD   The Board recommends that you vote “For” the proposed amendment to our Certificate of Incorporation to eliminate the supermajority voting requirements.

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TRANSACTION OF OTHER BUSINESS

The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, the persons appointed in the accompanying proxy intend to vote the shares represented thereby in accordance with their best judgment on such matters, under applicable laws.

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CORPORATE GOVERNANCE

The Board, which is elected by our stockholders, is responsible for directing and overseeing our business and affairs. In carrying out its responsibilities, the Board selects and monitors our top management, provides oversight of our financial reporting processes and determines and implements our corporate governance policies. A copy of our corporate governance guidelines can be found on our website at:

https://ir.tpicomposites.com/websites/tpicomposites/English/4300/governance-documents.html.

The Board and management are committed to good corporate governance to ensure that we are managed for the long-term benefit of our stockholders, and we have a variety of policies and procedures to promote such goals. To that end, during the past year, our management periodically reviewed our corporate governance policies and practices to ensure that they remain consistent with the requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), SEC rules and the listing standards of NASDAQ.

Besides verifying the independence of the members of the Board and committees (which is discussed in the section titled “Independence of the Board of Directors”), at the direction of the Board, we also:

In addition, we have adopted a set of corporate governance guidelines. The nominating and corporate governance committee is responsible for reviewing our corporate governance guidelines from time to time and reporting and making recommendations to the Board concerning corporate governance matters. Our corporate governance guidelines address such matters as:

Meetings of the Board of Directors

In 2022, the Board held seven formal board meetings and also held telephonic update calls with respect to various operational and strategic matters although no formal actions were taken during these calls. Each director attended at least 75% of all meetings of the Board and the committees on which they served that were held during fiscal year 2022, except for Mr. Moir who joined the Board in June 2022. Under our corporate governance guidelines, directors are expected to spend the time needed and meet as frequently as the Board deems necessary or appropriate to discharge their responsibilities. Directors are also expected to make efforts to attend our annual meeting of stockholders, all meetings of the Board and all meetings of the committees on which they serve. All of our directors attended our 2022 Annual Meeting of Stockholders, except for Mr. Moir, who was appointed to our Board in June 2022 after our 2022 Annual Meeting of Stockholders.

Code of Business Conduct and Ethics

The Board has adopted a code of business conduct and ethics that applies to all of our employees, officers, and directors, including our Chief Executive Officer, Chief Financial Officer, and other executive and senior financial officers. A copy of our code of business conduct and ethics is available on our website at https://ir.tpicomposites.com/websites/tpicomposites/English/4300/governance-documents.html and may also be obtained, without charge, by contacting our Secretary at TPI Composites, Inc., 8501 N. Scottsdale Rd., Gainey Center II, Suite 100, Scottsdale, AZ 85253. We intend to disclose any amendments to our code of business conduct and ethics, or waivers of its requirements, on our website or in filings under the Exchange Act, as required by the applicable rules and exchange requirements. During fiscal year 2022, no waivers were granted from any provision of the code of business conduct and ethics.

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Corporate Governance

Independence of the Board of Directors

The Board has undertaken a review of the independence of each director. Based on information provided by each director concerning his or her background, employment and affiliations, the Board has determined that Messrs. Giovacchini, Deutch, Hughes, Jordan, Moir, Lockard (as of May 20, 2023), Ms. Desai, Ms. Holloway, and Ms. Hudson do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable rules and regulations of the SEC, and the listing standards of NASDAQ. In making these determinations, the Board considered the current and prior relationships that each non-employee director has with the Company and all other facts and circumstances the Board deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.

Board’s Role in Risk Oversight

The Board’s role in overseeing the management of our risks is conducted primarily through committees of the Board, as disclosed in the descriptions of each of the committees below and in the charters of each of the committees. The full Board (or the appropriate board committee in the case of risks that are under the purview of a particular committee) discusses with management our major risk exposures, their potential impact on the Company, and the steps we take to manage them. When a board committee is responsible for evaluating and overseeing the management of a particular risk or risks, the chairperson of the relevant committee reports on the discussion to the full Board during the committee reports portion of the next Board meeting. This enables the Board and its committees to coordinate the risk oversight role, particularly with respect to risk interrelationships.

Board Leadership Structure

We believe that the structure of the Board and its committees provides strong overall management of the Company. The positions of Chairperson of the Board, Chief Executive Officer and lead independent director roles are held by separate individuals. This structure enables each person to focus on different aspects of company leadership. Our Chief Executive Officer is responsible for setting the strategic direction of the Company, the general management and operation of the business and the guidance and oversight of senior management. By contrast, the Chairperson of the Board oversees Board governance practices, monitors the content, quality and timeliness of information sent to the Board and is available for consultation with the Board regarding the oversight of our business affairs. Mr. Giovacchini has served as our lead independent director since May 2020. As lead independent director, Mr. Giovacchini presides over periodic meetings of our independent directors, will serve as a liaison between our Chairperson of the Board and the independent directors, and will perform such additional duties as the Board may otherwise determine and delegate.

We believe this structure of a separate Chairperson of the Board, Chief Executive Officer and lead independent director, reinforces the independence of our Board as a whole and results in an effective balancing of responsibilities, experience and independent perspective that meets the current corporate governance needs and oversight responsibilities of our Board.

Committees of the Board of Directors

The Board has established an audit committee, a compensation committee, and a nominating and corporate governance committee. The composition and responsibilities of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by the Board. Each of the audit, compensation, and nominating and corporate governance committees operates pursuant to a separate written charter adopted by the Board that is available on our website at https://ir.tpicomposites.com/websites/tpicomposites/English/4300/governance-documents.html.

Audit Committee

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Corporate Governance

Our audit committee operates under a written charter that satisfies the applicable rules of the SEC and the listing standards of NASDAQ. Our audit committee held four meetings during fiscal year 2022.

Compensation Committee

Our compensation committee operates under a written charter that satisfies the applicable rules of the SEC and the listing standards of NASDAQ. Our compensation committee held eight meetings during fiscal year 2022.

Nominating and Corporate Governance Committee

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Corporate Governance

The nominating and corporate governance committee operates under a written charter that satisfies the applicable listing requirements and rules of NASDAQ. Our nominating and corporate governance committee held three meetings during fiscal year 2022.

Identifying and Evaluating Director Nominees

The Board has delegated to the nominating and corporate governance committee the responsibility of identifying suitable candidates for nomination to the Board (including candidates to fill any vacancies that may occur) and assessing their qualifications in light of the policies and principles in our corporate governance guidelines and the committee’s charter. The nominating and corporate governance committee may gather information about the candidates through interviews, detailed questionnaires, comprehensive background checks or any other means that the nominating and corporate governance committee deems to be appropriate in the evaluation process. The nominating and corporate governance committee then meets as a group to discuss and evaluate the qualities and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of the Board. Based on the results of the evaluation process, the nominating and corporate governance committee recommends candidates for the Board’s approval as director nominees for election to the Board.

Minimum Qualifications and Board Diversity

Our nominating and corporate governance committee uses a variety of methods for identifying and evaluating director nominees and will consider all facts and circumstances that it deems appropriate or advisable. In its identification and evaluation of director candidates, our nominating and corporate governance committee will consider the current size and composition of the Board and the needs of the Board and the respective committees of the Board. Some of the qualifications that our nominating and corporate governance committee considers include, without limitation, issues of character, ethics, integrity, judgment, diversity, independence, skills, education, expertise, business acumen, length of service, understanding of our business and industry, potential conflicts of interest and other commitments. Nominees must also have proven achievement and competence in their field, the ability to offer advice and guidance to our management team, the ability to make significant contributions to our success, and an understanding of the fiduciary responsibilities that are required of a director. Director candidates must have sufficient time available in the judgment of our nominating and corporate governance committee to perform all board of director and committee responsibilities. Members of the Board are expected to prepare for, attend, and participate in all board of director and applicable committee meetings. Other than the foregoing, there are no stated minimum criteria for director nominees, although our nominating and corporate governance committee may also consider such other factors as it may deem, from time to time, are in our and our stockholders’ best interests.

Although the Board does not maintain a specific policy with respect to board diversity, the Board believes that it should be a diverse body. Currently, the Board consists of 10 directors, of which 30% are female and 30% are ethnically diverse. Our nominating and corporate governance committee considers a broad range of backgrounds and experiences. In making determinations regarding nominations of directors, our nominating and corporate governance committee takes into account the benefits of diverse viewpoints. Our nominating and corporate governance committee also considers these and other factors as it oversees the annual Board and committee evaluations. After completing its review and evaluation of director candidates, our nominating and corporate governance committee recommends to the full Board the director nominees for selection.

Stockholder Outreach and Engagement

We maintain an investor relations outreach program to solicit input and to communicate with stockholders on a variety of topics related to our business and strategy. Over the course of a year, our investor relations team, some of our named executive officers (“NEOs”) and other key employees typically speak with numerous investors through investor roadshows, conferences and virtual/telephonic conversations.

This dialogue provides an opportunity to discuss governance matters generally, including our board structure, our corporate governance documents and policies, directors’ skills and tenure, our Board’s oversight roles and responsibilities, our various social and environmental initiatives, and our approach to compensation matters, including the linkage between pay and performance and our compensation program’s alignment to our stockholders’ interests.

At our 2022 and 2021 Annual Meeting of Stockholders, certain of our directors received less than 55% of the total votes cast for them. Based on the foregoing as well as the feedback from several of our shareholders, the Board announced several corporate governance enhancements in 2022, including:

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Corporate Governance

Stockholder Recommendations

Stockholders may submit recommendations for director candidates to the nominating and corporate governance committee by sending the individual’s name and qualifications to our Secretary at TPI Composites, Inc., 8501 N. Scottsdale Rd., Gainey Center II, Suite 100, Scottsdale, AZ 85253, who will forward all recommendations to the nominating and corporate governance committee. The nominating and corporate governance committee will evaluate any candidates recommended by stockholders against the same criteria and pursuant to the same policies and procedures applicable to the evaluation of candidates proposed by directors or management.

Stockholder Communications

The Board provides to every stockholder the ability to communicate with the Board as a whole, the non-employee directors as a group, and with individual directors on the Board through an established process for stockholder communication. For a stockholder communication directed to the Board as a whole, stockholders and other interested parties may send such communication to our Chief Executive Officer at TPI Composites, Inc., 8501 N. Scottsdale Rd., Gainey Center II, Suite 100, Scottsdale, AZ 85253, Attn: Board of Directors, Attn: Chief Executive Officer.

For a stockholder communication directed to an individual director in his or her capacity as a member of the Board, stockholders and other interested parties may send such communication to the attention of the individual director to: TPI Composites, Inc., 8501 N. Scottsdale Rd., Gainey Center II, Suite 100, Scottsdale, AZ 85253, Attn: [Name of Individual Director].

The Company shall review all incoming communications and forward such communications to the appropriate member(s) of the Board as well as the Chairperson of the Board, in his or her capacity as a representative of the Board. The Chief Executive Officer will generally not forward communications that are unrelated to the duties and responsibilities of the Board, including communications that the Chief Executive Officer determines to be primarily commercial in nature, product complaints or inquires, and materials that are patently offensive or otherwise inappropriate.

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COMPENSATION DISCUSSION AND ANALYSIS

Overview

This Compensation Discussion and Analysis describes our executive compensation program as it relates to the following “named executive officers.”

The following discussion should be read together with the compensation tables and related disclosures set forth on the pages that follow.

Executive Appointments in 2022

We hired Ryan Miller as our Chief Financial Officer on May 23, 2022.

On January 1, 2022, Lance Marram assumed the role of Chief Commercial Officer, Wind and Ramesh Gopalakrishnan assumed the role of President – Wind in addition to the role of Chief Operating Officer – Wind.

Executive Summary

2022 Performance Overview

During 2022, we continued to grow our revenue and diversify our business.

Compensation Discussion and Analysis

Base Salary Adjustments: Our compensation committee approved an increase in the base salary of Mr. Siwek of 3%. Following review by the compensation committee, our management approved increases in the base salaries of Mr. Gossar and Mr. Lavine of 3.5% respectively, and also approved a salary increase of 15.29% for Mr. Marram in connection with his promotion to Chief Commercial Officer – Wind and a salary increase of 14.49% for Mr. Gopalakrishnan in connection with his promotion to President and Chief Operating Officer – Wind. Each of these increases became effective on January 1, 2022. In approving and/or reviewing these salary increases, the compensation committee considered competitive market data derived from the Company’s peer group described below.

Short Term Cash Incentive Compensation: Our executive compensation program includes short-term incentive compensation in the form of annual incentive cash bonuses that are contingent upon achievement of certain business and financial objectives, including targets relating to safety, sustainability, IDEA, quality, sales and business growth and profitability. In 2022, the compensation committee approved separate corporate, wind, and automotive bonus plans. Each plan had the same objective categories, but the targets differed for each division. Each of the plans achieved its respective safety and sustainability targets, as well as the maximum performance for sales and business growth targets. The corporate division achieved its profitability target, while the wind division achieved 94.2% of its profitability target and the automotive division did not achieve its profitability target. Each of the plans only met a percentage of its quality targets and IDEA targets, except for the corporate division, which met its IDEA target in full.

Considering these results, consistent with our pay for performance culture, our compensation committee approved a bonus payout of 90% for the current named executive officers subject to the corporate bonus plan, and 83.7% and 32.5% for the named executive officers subject to our wind and automotive bonus plans, respectively. None of our named executive officers received discretionary upward adjustments of their target bonus levels. With respect to our President and Chief Operating Officer – Wind, our compensation committee considered the operational challenges that we experienced at certain of our Mexico manufacturing facilities during 2022 and approved a bonus payout at 70.72% of his bonus target.

Long-Term Equity Incentive Compensation: Our compensation committee granted long-term incentive opportunities to our named executive officers, other than Mr. Miller, in the form of a combination of time-based restricted stock units subject to multi-year vesting based on continued service, and performance-based restricted stock units subject to multi-year vesting based on continued service and the achievement of pre-determined Adjusted EBITDA (on a billings basis) and stock price targets. Upon his appointment as Chief Financial Officer, Mr. Miller received a combination of time-based stock option and time-based restricted stock unit awards.

Special Equity Awards in 2022: In 2022, our compensation committee approved the grant of special retention restricted stock unit and stock option awards to key employees, including certain of our named executive officers. Given the increasingly competitive environment for highly skilled and talented employees, these special retention equity awards were designed to improve the retention of key employees and ensure that they remained focused on our Company’s business and future given the challenges that the wind industry has experienced during the last few years. The details of these awards are discussed below.

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Compensation Discussion and Analysis

The other elements of our executive compensation program are severance and change in control benefits, broad-based health and welfare benefits, a 401(k) plan available to all U.S. employees and limited perquisites, each of which are described in more detail below.

Pay for Performance Philosophy

We believe our executive compensation program is reasonable and competitive, and appropriately balances the goals of attracting, motivating, rewarding and retaining our executive officers with the goal of aligning their interests with those of our stockholders. The annual compensation of our executive officers, including our named executive officers, varies from year to year based on our corporate, financial and operational results and individual performance. While we do not determine either “variable” or “fixed” pay for each named executive officer with reference to a specific percentage of target total direct compensation, consistent with our “pay-for-performance” philosophy, our executive compensation program emphasizes “variable” pay over “fixed” pay.

In 2022, the majority of the target total annual direct compensation of our Chief Executive Officer consisted of variable pay in the form of long-term incentive compensation opportunities. Fixed pay, primarily consisting of base salary, made up approximately 30% of our Chief Executive Officer’s target total direct compensation, while contingent (“variable”) pay, consisting of short-term cash incentive bonus pay and long-term incentive compensation in the form of equity awards, made up approximately 70% of his target total direct compensation. Similarly, for our other named executive officers, variable pay was emphasized over fixed pay and delivered using the same vehicles as those that were used for our Chief Executive Officer. The following charts show the percentages of target annual pay for our Chief Executive Officer and our other named executive officers in 2022 and excludes the special equity awards described below.

We believe that this approach provides balanced incentives for our executive officers to drive our financial performance and long-term growth.

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Say-on-Pay Vote on Executive Compensation

Our compensation committee considered the results of the non-binding stockholder advisory votes on the compensation of our named executive officers conducted at the May 25, 2022 annual meeting of stockholders. As reported in our current report on Form 8-K, filed with the SEC on May 27, 2022, approximately 80% of the votes cast on the proposal expressed support for the compensation program offered to our named executive officers as disclosed in last year’s proxy statement (the “Say-on-Pay Vote”). Accordingly, our compensation committee made no material changes to our executive compensation program as a result of the Say-on-Pay Vote. Further, the Board has elected to conduct the Say-on-Pay Vote annually, thereby giving our stockholders the opportunity to provide feedback on the compensation of our named executive officers each year. We will be conducting our annual Say-on-Pay Vote as described in Proposal Three of this Proxy Statement at the Annual Meeting. The Board and our compensation committee will consider the outcome of the Say-on-Pay Vote, as well as feedback received throughout the year, when making compensation decisions for our named executive officers in the future.

Setting Executive Compensation

Role of the Compensation Committee

Our compensation committee is primarily responsible for developing and implementing our compensation policies. It establishes and approves the compensation for our chief executive officer and reviews and advises on the compensation of our other executive officers. Our compensation committee may establish and delegate authority to one or more subcommittees consisting of one or more of its members, when the compensation committee deems it appropriate to do so in order to carry out its responsibilities. In 2022, our compensation committee did not delegate such authority. Our compensation committee oversees our compensation and benefit plans and policies, administers our equity incentive plans and reviews and approves annually all compensation decisions relating to all of our executive officers, including our Chief Executive Officer. When formulating its recommendations for the amount of each compensation element and approving each compensation element and the target total direct compensation opportunity for our executive officers, our compensation committee considers the following factors:

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Compensation Discussion and Analysis

These factors provide the framework for compensation decision-making and final decisions regarding the compensation opportunity for each executive officer. No single factor is determinative in setting pay levels, nor was the impact of any factor on the determination of pay levels quantifiable. Our compensation committee reviews the base salary levels, cash incentive bonuses, and long-term incentive compensation opportunities of our executive officers, including our named executive officers, each fiscal year at the beginning of the year, or more frequently as warranted. Long-term incentive compensation is granted on a regularly-scheduled basis, as described in the “Individual Compensation Elements – Long Term Incentives” section below.

Role of the Chief Executive Officer

In discharging its responsibilities, our compensation committee works with members of our management, including our Chief Executive Officer. Our management team assists our compensation committee by providing information on corporate and individual performance, market compensation data and management’s perspective on compensation matters. Our compensation committee solicits and reviews our Chief Executive Officer’s recommendations and proposals with respect to adjustments to annual cash compensation, long-term incentive compensation opportunities, program structures and other compensation-related matters for our executive officers (other than with respect to his or her own compensation).

Our compensation committee reviews and discusses these recommendations and proposals with our Chief Executive Officer and considers them as one factor in advising on the compensation for our executive officers, including our other named executive officers. Our Chief Executive Officer recuses himself from all discussions and recommendations regarding his or her own compensation.

Role of the Compensation Consultants

Our compensation committee has the authority under its charter to engage the services of a consulting firm or other outside advisor to assist it in designing our compensation programs and in making compensation decisions. In 2022, the compensation committee retained Aon’s Human Capital Solutions practice, a division of Aon plc (“Aon”), as its independent third-party compensation consultant to advise on executive compensation matters including: overall compensation program design and the design of our performance-based equity award program, peer group development and updates, and benchmarking executive officer and board of director compensation programs. Aon did not provide any other services to us in 2022. Aon reports directly to our compensation committee. We do not believe the retention of, and the work performed by, Aon creates any conflict of interest.

Defining and Comparing Compensation to Market Benchmarks

In evaluating the total compensation of our named executive officers, our compensation committee, using information provided by Aon, establishes a peer group of publicly traded companies in the industrial machinery, aerospace and defense, and electrical components and equipment industries, among others, that is selected based on a balance of the following criteria:

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We believe that our 2022 peer group provided us with appropriate compensation data for evaluating the competitiveness of the compensation levels and practices of our named executive officers during 2022.

In 2022, the primary market reference point considered by our compensation committee in establishing target total compensation for our executive officers was the 50th percentile of our 2022 peer group. Although our compensation committee and the Board target compensation as described above, they also consider other criteria, including market factors, the experience level of the executive, organizational criticality and the executive’s performance against established goals of the Company, in determining variations to this general target.

Individual Compensation Elements

Base Salary

Base salary represents the fixed portion of the compensation of our executive officers, including our named executive officers, and is an important element of compensation intended to attract and retain high-performing individuals.

Using the competitive market data provided by Aon, as well as evaluating the executive officer’s responsibilities, experience and individual contributions, our compensation committee reviews and develops recommendations for adjusting the base salaries for each of our executive officers, including our named executive officers, as part of its annual executive compensation review. In addition, the base salaries of our executive officers may be adjusted by our compensation committee in the event of a promotion or significant change in responsibilities.

Generally, our compensation committee sets base salaries with reference to the 50th percentile of the competitive range of our compensation peer group and applicable executive compensation survey data. We have evaluated the base salaries of our executive officers in the context of establishing their total cash compensation at levels that are consistent with the target total cash compensation of executive officers holding comparable positions at other public companies in our peer group.

In March 2022, consistent with the recommendation of our Chief Executive Officer, our compensation committee determined to increase the base salaries of our executive officers, including our named executive officers (other than our Chief Executive Officer, whose base salary increase was determined solely by our compensation committee) and these increases became effective on January 1, 2022. In making these decisions, our compensation committee considered the current risks and challenges facing us, as well as the factors described in the “Setting Executive Compensation” section above.

In connection with Mr. Miller’s hiring in May 2022, his base salary was set based on arms’ length negotiations and recommendations based on considered competitive market data derived from the Company’s peer group described above.

The base salaries of our named executive officers for 2022 were adjusted as follows:

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Compensation Discussion and Analysis

The actual base salaries paid to our named executive officers in 2022 are set forth in the “Summary Compensation Table” section.

Short Term Cash Incentive Program

In April 2016, the Board adopted the Senior Executive Cash Incentive Bonus Plan (the “Bonus Plan”). The Bonus Plan provides for cash bonus payments based upon the attainment of performance targets established by our compensation committee. The payment targets may be related to financial and operational measures or objectives with respect to the Company, which we refer to as corporate performance goals or objectives, as well as individual performance objectives.

Each executive officer has a target bonus opportunity set for each performance period under the Bonus Plan. Our compensation committee took into account market data, relative levels of responsibility across the Company, and other relevant factors in order to set the target performance-based incentive for each named executive officer. The corporate performance goals will be measured at the end of each performance period after our financial reports have been published or such other appropriate time as our compensation committee determines. If the corporate performance goals and individual performance objectives are met, payments will be made as soon as practicable following the end of each performance period. Subject to the rights contained in any agreement between the executive officer and us, an executive officer must be employed by us on the bonus payment date to be eligible to receive a bonus payment. The Bonus Plan also permits our compensation committee to approve additional bonuses to executive officers in its sole discretion, which are described below.

In recognition of his service as the Interim Chief Financial Officer during a portion of 2021 and 2022, our compensation committee approved a one-time bonus for Mr. Gossar in 2022 of $50,000.

In connection with the terms and conditions of Mr. Lavine’s employment offer letter with the Company, the Company established a one-time bonus plan relating exclusively to the Company’s automotive business, in which Mr. Lavine could earn up to $250,000. This one-time bonus plan provided for a bonus of $50,000 upon Mr. Lavine developing a strategic plan for the Company’s automotive business that was approved by the Board and the remaining $200,000 of the bonus was tied to the Company’s automotive business achieving various operational, business development and financial objectives. In 2022, the compensation committee approved a total payout of $210,000 to Mr. Lavine relating to the various performance objectives tied to this one-time bonus plan.

2022 Annual Cash Incentive Program Performance Objectives

In considering performance objectives for the named executive officers for 2022, our compensation committee selected a combination of performance objectives that it believed would align with creating long term stockholder value. Our compensation committee also considered each named executive officer’s individual performance in determining the named executive officer’s bonus payout. Specifically, our compensation committee selected a combination of objectives relating to safety, sustainability, IDEA, quality, growth and profitability. In comparison to our 2021 objectives, we realigned our performance objectives by adding a performance objective for IDEA to emphasize the importance of meeting a key environmental, social and governance (“ESG”) goal and substantially increasing the weight given to the profitability objective from 25% to 65%. In 2022, the compensation committee approved separate corporate, wind, and automotive bonus plans. Each plan had the same objective categories, but the targets differed for each division.

With respect to each plan, the following tables include the weighting, the minimum performance threshold, target performance, maximum performance cap and maximum payout percentage, whether the performance objective had been achieved, and the actual payout percentage for each performance objective:

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Compensation Discussion and Analysis

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Compensation Discussion and Analysis

plan, so the achievement of this performance objective was 94.2% which resulted in a total payout percentage for the profitability performance objective of 61.2%.

The compensation committee determined that each named executive officer’s cash award payout would be calculated consistent with the actual payout percentage of the bonus plans set forth in the tables above and, as set forth in the table below, weighted amongst the three plans as follows:

Under the corporate bonus plan, our compensation committee determined that we achieved the safety, sustainability, and IDEA performance objectives. We achieved the maximum performance level of the growth target and 110% of the profitability target. We did not achieve the quality objective in full, and as a result, the actual payout performance was capped at the 100% level for each target. In light of such performance, our compensation committee approved a bonus payout for Mr. Siwek, Mr. Miller and Mr. Gossar at 90% of their respective bonus targets. Mr. Miller’s bonus payout was prorated based on his date of hire in May 2022.

Under the wind bonus plan, our compensation committee determined that we achieved the safety, sustainability, and one half of the IDEA performance objectives. We achieved the maximum performance level for the growth target, but because we did not achieve the quality objective in full, the actual payout performance of the growth target was capped at the 100% level. We achieved 94.2% of the profitability target. In light of such performance, our compensation committee approved a bonus payout for Mr. Marram at 83.7% of his bonus target. The percentage of Mr. Gopalakrishnan’s bonus target was 90% of the wind bonus plan’s 83.7% attainment and 10% of the automotive bonus plan’s 32.5% attainment for a weighted total of 78.6%; provided, that, the Compensation Committee considered the operational challenges that we experienced at certain of our Mexico manufacturing facilities during 2022 and approved a bonus payout at 70.7% of his bonus target.

Under the automotive bonus plan, our compensation committee determined that we achieved the safety, sustainability, and one half of the IDEA performance objectives. We did not achieve the minimum Billings AEBITDA performance threshold. We achieved the maximum performance level of the growth target, but because we did not achieve the profitability objective in full, the actual payout performance was capped at the 100% level for the growth target. In light of such performance, our compensation committee approved a bonus payout for Mr. Lavine at 37.6% of his bonus target, which reflects the weighted percentage of 10% of the wind division’s 83.7% bonus plan attainment and 90% of the automotive division’s 32.5% bonus plan attainment.

None of our named executive officers received discretionary upward adjustments to their target bonus levels under the bonus plans.

The following sets forth a more detailed description of each performance objective:

Safety (5%)

The first performance objective is related to promoting safety at our manufacturing facilities. Safety is our first core value, and our compensation committee believes it is imperative to promote a safer workplace for all our associates. Under the corporate, wind, and automotive bonus plans, the first two specific safety performance objectives were meeting or exceeding both our target lost time incident rate and our target recordable incident rate. The lost time incident rate calculates the number of incidents that result in time away from work and is calculated by multiplying the number of lost time cases by 200,000, and then dividing that number by the total number of labor hours performed by our associates. The recordable incident rate is calculated by multiplying the number of recordable cases by 200,000, and then dividing that number by the total number of labor hours performed by our associates. The third safety performance metric was for each division to record a target number of “good catches” in 2022. We define “good catches” as identifying potential safety hazards or conditions before an incident occurs. In 2022, we established a fourth criteria based on a global Behavior-Based Safety (“BBS”) program. Our global BBS program ensures that we provide coaching around at-risk behaviors and reinforcement of safe behaviors. The BBS data includes the number of observations made at the applicable facility(ies) of each plan by our trained observers and the categorization of the observations as safe or unsafe. To achieve this performance objective, each of the corporate, wind, and automotive divisions needed to satisfy all the specific safety objectives set forth above. For 2022, each of the corporate, wind, and automotive divisions achieved each of the sub-criteria described and achieved 100% of the safety performance objective.

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Compensation Discussion and Analysis

Sustainability (5%)

The second performance objective is related to key ESG goals. Under the corporate, wind, and automotive bonus plans, the first sustainability performance objective was a reduction of the annual waste rate by 5% in the manufacturing facility(ies) applicable to each plan on a year over year basis from 2021 to 2022. Our wind blade facilities calculated the reductions based on production waste and our automotive facilities calculated the reductions based on total waste. In 2022, each of the corporate, wind, and automotive bonus plans established energy reduction goals for the applicable facility(ies) that focus on the completion of energy reduction projects. For 2022, each of the corporate, wind, and automotive divisions achieved 100% of its sustainability performance objectives.

IDEA (5%)

The third performance objective is related to creating an environment that recognizes and celebrates the benefits that come with a diverse workforce and maximizing the positive impact that IDEA can bring to the Company.

Under the corporate bonus plan, the IDEA performance objective is related to our public ESG goal to increase the overall representation of women in our global leadership team and our overall racial and ethnic diversity of our U.S. leadership team to 25% by 2025. Our global and U.S. leadership, generally, includes leaders at the director level and above. The specific objective is progress towards the long-term goal. For 2022, our percentage of women in the global leadership team increased from 17% to 18%, which demonstrated progress towards long-term goals. As such, the corporate division achieved 100% of the IDEA performance objective.

Under the wind and automotive bonus plans, the first IDEA performance objective is related to increasing representation of under-represented populations, largely female but additionally racially and ethnically diverse associates in the U.S., across seven organizational levels. Both the wind and automotive divisions obtained 100% of this performance goal by increasing levels of under-represented populations in most of the levels on a year over year basis from 2021 to 2022. The second IDEA performance objective is related to the Company’s overall inclusion score as well as the overall inclusion score of our under-represented populations of each respective division, each as measured by an inclusion survey which is administered by a third party. For this inclusion criteria, the wind division improved its overall inclusion score on a year over year basis from 2021 to 2022 but did not meet or exceed its score for the under-represented population on a year over year basis, so the wind division did not achieve the inclusion criteria. The automotive division did not meet or exceed the overall inclusion score or the overall score for the under-represented populations on a year over year basis, so the automotive division did not achieve the inclusion criteria. As such, both the wind division and automotive division achieved 50% of the IDEA performance objective.

Quality (15% under the corporate and wind bonus plans; 10% under the automotive bonus plan)

The fourth performance objective is related to our goal of delivering high quality products to our customers and evolving from a reactive to predictive mindset. The first quality performance objective under the corporate, wind, and automotive bonus plans was a 5% reduction in the respective division’s manufacturing cost-of-poor-quality as a percentage of sales (“MCOPQ%”) on a year over year basis from 2021 to 2022. In 2022, the automotive division achieved the target reduction in the MCOPQ% performance objective, but the wind and corporate divisions did not achieve the target reduction. The second quality performance objective under the corporate, wind, and automotive bonus plans was achieving improvement targets in the identified critical-to-quality (“CTQ”) manufacturing process capabilities. Each of the corporate, wind and automotive divisions achieved the targets of the CTQ performance objective. Therefore, in 2022, the automotive division achieved 100% of its quality performance objective, and each of the corporate and wind divisions achieved 50% of its quality performance objective.

Growth (5% under the corporate and wind bonus plans; 10% under the automotive bonus plan)

The fifth performance objective is related to growth. Our compensation committee chose growth as a performance objective because it believes that the additional growth in our contract backlog creates long term value for our stockholders.

Under the corporate bonus plan, growth is measured by the following performance criteria: addition or contract extension of ten manufacturing lines (2%); $51 million of annual revenue from our field service inspection and repair business (1%); and six strategic automotive achievements (2%). The minimum performance criteria were as follows: addition or contract extension of six existing manufacturing lines, $46 million of annual revenue from our field service inspection and repair business and four strategic automotive achievements. The maximum performance criteria were as follows: addition or contract extension of fourteen existing manufacturing lines, $55 million of annual revenue from our field service inspection and repair business and eight strategic automotive achievements. The corporate division achieved greater than 200% of addition or contract extension of the manufacturing line objective, greater than 200% of the annual revenue objective, and 200% of the automotive strategic achievement objective. Based on the foregoing, the corporate division achieved 200% of the growth performance objective, but because it did not achieve the quality performance objectives in full, the actual payout percentage was capped at 100%.

Under the wind bonus plan, growth is measured by the following performance criteria: addition or contract extension of ten manufacturing lines (2.5%); and $51 million of annual revenue from our field service inspection and repair business (2.5%). The minimum performance criteria were as follows: addition or contract extension of six existing manufacturing lines; and

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$46 million of annual revenue from our field service inspection and repair business. The maximum performance criteria were as follows: addition or contract extension of fourteen existing manufacturing lines; and $55 million of annual revenue from our field service inspection and repair business. The wind division achieved greater than 200% of addition or contract extension of the manufacturing line objective and greater than 200% of the annual revenue objective. Based on the foregoing, the wind division achieved 200% of the growth performance objective, but because it did not achieve the quality performance objectives in full, the actual payout percentage was capped at 100%.

Under the automotive bonus plan, growth is measured by the attainment of six strategic automotive achievements (5%), which included objectives our compensation committee chose to measure, among other things, the addition of new customers, expansions of current customer relationships, new collaborations and products, and geographic expansions. The minimum performance criteria was four strategic automotive achievements and the maximum performance criteria was eight strategic automotive achievements. The automotive division attained 200% of the growth performance objective with eight strategic automotive achievements, but because it did not achieve the profitability performance objectives, the actual payout percentage was capped at 100%.

Profitability (65%)

The sixth performance objective is related to profitability as measured by Billings Adjusted EBITDA (“Billings AEBITDA”). We define EBITDA, a non-GAAP financial measure, as net income or loss plus interest expense (including losses on extinguishment of debt and net of interest income), income taxes and depreciation and amortization. We define Adjusted EBITDA, a non-GAAP financial measure, as EBITDA plus any share-based compensation expense, plus or minus any foreign currency losses or income, plus or minus any losses or gains from the sale of assets and asset impairments, plus any restructuring charges. We define Billings, a non-GAAP financial measure, as the total amounts we have invoiced our customers during the year for products and services for which we are entitled to payment under the terms of our long-term supply agreements or other contractual agreements. We define Billings AEBITDA, a non-GAAP financial measure, as Adjusted EBITDA minus net sales and cost of sales for services performed but unbilled. Our compensation committee chose Billings AEBITDA as a performance objective because it believes that top line growth must be achieved efficiently and with a long-term focus on achieving profitability and because the Billings AEBITDA metric more directly correlates to sales activity and operations based on the timing of actual transactions with our customers.

Under the corporate bonus plan, the specific Billings AEBITDA performance objective for 2022 was $50 million. The minimum threshold for satisfying this performance objective was $40 million of Billings AEBITDA and the maximum performance cap was $70 million of Billings AEBITDA. We achieved $52.1 million of Billings AEBITDA for the year ended December 31, 2022. As such, the corporate division exceeded the performance target and achieved 110% of the profitability performance objective, but because it did not achieve the Quality performance objectives in full, the actual payout percentage was capped at 100%.

Under the wind plan, the specific Billings AEBITDA performance objective for 2022 was $77 million. The minimum threshold for satisfying this performance objective was $69 million of Billings AEBITDA and the maximum performance cap was $111 million of Billings AEBITDA. We achieved $75.4 million of Billings AEBITDA for the year ended December 31, 2022. As such, the wind division achieved 94% of the profitability performance objective.

Under the automotive bonus plan, the specific Billings AEBITDA performance objective for 2022 was ($8.3) million. The minimum threshold for satisfying this performance objective was $(8.7) million of Billings AEBITDA and the maximum performance cap was $(4.2) million of Billings AEBITDA. The automotive division did not achieve the minimum Billings AEBITDA performance threshold and consequently the automotive division achieved 0% of the profitability performance objective.

EBITDA, Adjusted EBITDA, and Billings AEBITDA are non-GAAP financial measures. See Appendix B for a reconciliation of net loss, the most directly comparable GAAP financial measure, to EBITDA, Adjusted EBITDA, and Billings AEBITDA.

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Long-term Incentives

We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. The realized value of these equity awards bears a direct relationship to our stock price, and, therefore, these awards are an incentive for our executive officers, including our named executive officers, to create value for our stockholders. Equity awards also help us retain qualified executive officers in a competitive market.

Long-term incentive compensation opportunities in the form of equity awards are granted by our compensation committee in accordance with our Amended and Restated 2015 Stock Option and Incentive Plan (as amended from time to time, the “2015 Plan”). The amount and forms of such equity awards are determined by our compensation committee after considering the factors described in the “Setting Executive Compensation” section. The amounts of the equity awards are also intended to provide competitively-sized awards and resulting target total direct compensation opportunities that are competitive with the compensation opportunities offered by the companies in our compensation peer group for similar roles and positions for each of our executive officers, taking into consideration the factors described in the “Setting Executive Compensation” section.

Performance-Based Awards

Our compensation committee has granted performance-based restricted stock units to the named executive officers, other than Mr. Miller, which vest only if we meet specified objective performance criteria and remain in a continued service relationship with us through the applicable performance period. The goals of the Board and our compensation committee in selecting metrics for the performance-based component of the long-term incentive program include: alignment with business strategy; driving achievement of our development goals; and creating stockholder value.

In March 2022, as part of its annual executive compensation review, our compensation committee approved the grant of performance-based restricted stock unit awards to the named executive officers as described in the “Grant of Plan-Based Awards for Fiscal Year 2022” section below. These performance-based restricted stock unit awards represented approximately 60% of such named executive officers annual long term incentive award opportunity. These performance-based restricted stock units vest as follows:

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Compensation Discussion and Analysis

For a summary and discussion of the vesting provisions of the Stock Hurdle PSUs and Adjusted EBTIDA PSUs in the event of an executive’s termination of employment in connection with the executive’s death or disability or a change in control of the Company, please see the “Employment, Severance and Change of Control Agreements” section.

In connection with the terms and conditions of Mr. Lavine’s employment offer letter with the Company, the Company in January 2022 granted Mr. Lavine 49,781 performance-based restricted stock units. These performance-based restricted stock units will vest upon the Company’s automotive business achieving various operational, business development and financial objectives that were approved by the compensation committee. The Company designed this award to incentivize Mr. Lavine to advance the growth and financial and operational performance of the Company’s automotive business. Mr. Lavine also must be in a continuous service relationship with the Company or any of its subsidiaries for these performance-based restricted stock units to vest. In January 2023, the compensation committee determined that 90% of the various performance objectives set forth in Mr. Lavine’s performance-based restricted stock unit award had been achieved and 44,803 of these performance-based restricted stock units vested.

Time-Based Awards

We believe that issuing a combination of time-based restricted stock unit and stock option awards provides an appropriate balance of rewarding employees for potential growth in the market price of our common stock and providing a retention tool for our key executives.

Our compensation committee approved the grant of time-based restricted stock unit awards to the named executive officers as described in the “Grant of Plan-Based Awards for Fiscal Year 2022” section below. These time-based restricted stock unit awards represented 40% of such named executive officers’ long-term incentive award opportunity, except for Mr. Miller, who was appointed in May 2022. All the time-based restricted stock units vest on the third anniversary of the grant date, subject to the applicable named executive officer’s continued service with the Company through such date. We believe time-based restricted stock units with a three-year cliff vesting period provide a strong retention incentive for our executive officers and also provide a moderate reward for growth in the value of our common stock. In 2022, in connection with the appointment of Mr. Miller as our Chief Financial Officer, our compensation committee approved the grant of a time-based restricted stock unit award of 26,709 shares. This award vests in four equal installments on the first, second, third, and fourth anniversary of the date of the grant, subject to Mr. Miller’s continued employment through each applicable vesting date.

We may issue stock options to certain senior employees when they are first hired. Our stock options have a ten-year term and typically vest over four years with 25% vesting on the first anniversary date of the grant and 6.25% vests on each quarterly anniversary of the grant date over the remaining three years of the vesting period. In 2022, in connection with the appointment of Mr. Miller as our Chief Financial Officer, our compensation committee approved granting him a time-based stock option award of 45,510 shares with an exercise price of $14.04. We believe that time-based stock options provide a strong reward for growth in the market price of our common stock as their entire value depends on future stock price appreciation, as well as a strong incentive for our executive officers to remain employed with the Company as they require continued employment through the vesting period.

2022 Special Equity Awards

In 2022, our compensation committee elected to grant special retention restricted stock unit and stock option awards to key employees, including our named executive officers. Given the increasingly competitive environment for high performing and talented employees, these special retention equity awards were designed to improve the retention of key employees and ensure that they remained focused on our Company’s business and future given the challenges that the wind industry has experienced during the last few years. Many key employee’s stock option grants were under water and many of their performance-based restricted stock unit awards that were tied to the Company achieving stock price hurdles and cumulative AEBITDA targets were unlikely to be achieved, substantially reducing the retention and motivational value of previously granted equity awards during a time when many of our senior level employees are being actively recruited by other companies. Other than in connection with a new hire or promotion, this is the first time the compensation committee has granted special equity awards to reflect these challenging wind industry dynamics. With respect to our key employees, including named executive officers other than Mr. Siwek, our compensation committee structured these equity awards as restricted stock units, 50% of which vested on the first anniversary of the grant date and 50% of which vested on the second anniversary of the grant date.

With respect to Mr. Siwek, our compensation committee granted a premium-priced stock option award of 200,000 shares of our common stock with an exercise price of $18 per share, with one-third of the award vesting on March 10^th of 2024, 2025, and 2026, respectively. To motivate Mr. Siwek to drive shareholder value, and to ensure that Mr. Siwek would only realize

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Compensation Discussion and Analysis

value from this award if the Company’s stock price increased appreciably, the compensation committee structured this award as a premium-priced stock option such that the exercise price was approximately 20% higher than the closing price of our common stock on the grant date to minimize dilution to stockholders.

Benefits and Other Compensation

Other compensation to our executives consists primarily of the broad-based benefits we provide to all full-time employees, including medical, dental and vision insurance, medical and dependent care flexible spending accounts, group life and disability insurance and a 401(k) plan. In designing and structuring these benefit plans, we seek to provide an aggregate level of benefits that are comparable to those provided by similar companies.

We maintain a tax-qualified retirement plan that provides all regular U.S. employees with an opportunity to save for retirement on a tax-advantaged basis. Under our 401(k) plan, participants may elect to defer a portion of their compensation on a pre-tax basis and have it contributed to the plan subject to the applicable annual limits of the Internal Revenue Code of 1986, as amended (the “Code”). Employee elective deferrals are 100% vested at all times. The 401(k) plan allows for matching contributions to be made by us. Effective January 1, 2022, we matched up to 100% of the first 4% of employee contributions to the 401(k) plan.

We generally do not provide perquisites or personal benefits to our named executive officers, other than the payment for our executive officers to obtain an executive physical every two years. We believe offering executive physicals to our executives is beneficial because it ensures that our key executives remain in optimal health and can achieve early identification of potential health risks to our executives. We also provided tax preparation assistance services for Mr. Gopalakrishnan in 2022.

Severance and Other Termination Arrangements

We believe that having in place reasonable and competitive post-employment compensation arrangements are essential to attracting and retaining highly-qualified executive officers. We included certain provisions for payments and benefits in the event of a termination of employment, including an involuntary termination of employment in connection with a change in control of the Company, in employment agreements and equity award agreements with our named executive officers.

We believe that the severance payments and benefits provided to our executive officers under their employment agreements are appropriate in light of the post-employment compensation protections available to similarly-situated executive officers at companies in our compensation peer group and are an important component of each executive officer’s overall compensation as they help us to attract and retain our key executives who could have other job alternatives that may appear to them to be more attractive absent these protections.

We also believe that the occurrence or potential occurrence of a change in control transaction will create uncertainty regarding the continued employment of our executive officers. In order to encourage them to remain employed with us during an important time when their prospects for continued employment following a change in control transaction are often uncertain, we provide our executive officers with the opportunity to receive certain protections during a change in control protection period. We provide additional payment and benefit protections that have a double trigger. If a change of control occurs and an executive officer is involuntarily terminated by us without cause or if an executive officer voluntarily terminates employment with us for good reason in connection with a change in control of the Company, because we believe that a voluntary termination of employment for good reason is essentially equivalent to an involuntary termination of employment by us without cause. The primary purpose of these double trigger arrangements is to keep our executive officers focused on pursuing potential corporate transactions that are in the best interests of our stockholders regardless of whether those transactions may result in their own job loss.

We provide for the immediate acceleration of vesting and exercisability of all time-based restricted stock unit awards, as well as that portion of an executive’s Stock Hurdle PSUs, to the extent that the applicable performance target(s) have been achieved, and a pro-rata portion of Adjusted EBITDA PSUs, to the extent that the applicable performance target(s) have been achieved, upon his or her death and disability in order to assist the executive’s family during such difficult times, as such termination provisions allow the executive’s family to receive the benefits of the executive’s existing equity incentive arrangements.

To protect the Company’s interests, our executive officers are required to sign a standard form of release prior to receiving any severance payments or benefits under the terms and conditions of their employment agreements with us.

We do not provide excise tax payments (or “gross-ups”) relating to a change in control of the Company and have no such obligations in place with respect to any of our named executive officers.

For detailed descriptions of the post-employment compensation arrangements we maintain with our named executive officers, as well as an estimate of the potential payments and benefits payable to our named executive officers under their post-employment compensation arrangements, see the “Employment, Severance and Change of Control Agreements” section below.

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Compensation Discussion and Analysis

Tax and Accounting Considerations

Deductibility of Executive Compensation

Generally, Section 162(m) of the Code (“Section 162(m)”) disallows a federal income tax deduction for public corporations of remuneration in excess of $1 million paid in any fiscal year to certain specified executive officers. For taxable years beginning before January 1, 2018 (i) these executive officers consisted of a public corporation’s principal executive officer and up to three other executive officers (other than the principal financial officer) whose compensation is required to be disclosed to stockholders under the Exchange Act, because they are our most highly-compensated executive officers and (ii) qualifying “performance-based compensation” was not subject to this deduction limit if specified requirements are met.

Pursuant to the Tax Cuts and Jobs Act of 2017, for taxable years beginning after December 31, 2017, the remuneration of a public corporation’s principal financial officer is also subject to the deduction limit. In addition, subject to certain transition rules (which apply to remuneration provided pursuant to written binding contracts which were in effect on November 2, 2017 and which are not subsequently materially modified), for taxable years beginning after December 31, 2017, the exemption from the deduction limit for “performance-based compensation” is no longer available. Consequently, these changes will cause more of our compensation to be non-deductible under Section 162(m) for fiscal years beginning after December 31, 2017 and will eliminate the Company’s ability to structure performance-based awards to be exempt from Section 162(m).

In designing our executive compensation program and determining the compensation of our executive officers, including our named executive officers, the compensation committee considers a variety of factors, including the potential impact of the Section 162(m) deduction limit. However, our compensation committee will not necessarily limit executive compensation to that which is or may be deductible under Section 162(m). Our compensation committee will consider various alternatives to preserving the deductibility of compensation payments and benefits to the extent consistent with its compensation goals. Our compensation committee believes that our stockholders’ interests are best served if its discretion and flexibility in awarding compensation is not restricted, even though some compensation awards may result in non-deductible compensation expense.

Taxation of “Parachute” Payments

Sections 280G and 4999 of the Code provide that certain individuals who hold significant equity interests and certain executive officers and certain other service providers may be subject to significant additional taxes if they receive payments or benefits in connection with a change in control of the Company that exceeds certain prescribed limits, and that the Company (or a successor) may forfeit a deduction on the amounts subject to this additional tax. We have not agreed to provide any executive officer, including any named executive officers, with a “gross-up” or other reimbursement payment for any tax liability that the executive officer might owe as a result of the application of Sections 280G or 4999 of the Code.

Section 409A of the Internal Revenue Code

Section 409A of the Code imposes additional significant taxes in the event that an executive officer, director or service provider receives “deferred compensation” that does not satisfy the requirements of Section 409A of the Code. Although we do not maintain a nonqualified deferred compensation plan, Section 409A of the Code may apply to certain severance arrangements, bonus arrangements and equity awards. We aim to structure all of our severance arrangements, bonus arrangements and equity awards in a manner to either avoid the application of Section 409A or, to the extent doing so is not possible, to comply with the applicable requirements of Section 409A of the Code.

Accounting for Stock-Based Compensation

We follow the Financial Accounting Standards Board (“FASB”) ASC Topic 718 for our stock-based compensation awards. FASB ASC Topic 718 requires us to measure the compensation expense for all share-based payment awards made to our employees and non-employee members of the Board, including options to purchase shares of our common stock and other stock awards, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the executive compensation tables required by the federal securities laws, even though the recipient of the awards may never realize any value from their awards.

Compensation Risk Assessment

We believe that our executive compensation program does not encourage excessive or unnecessary risk taking. As described more fully above, we structure our pay to consist of both fixed and variable compensation, particularly in connection with our pay-for-performance compensation philosophy. We believe this structure motivates our executives to produce superior short-term and long-term results that are in the best interests of the Company and stockholders in order to attain our ultimate objective of increasing stockholder value, and we have established, and our compensation committee endorses, several controls to address and mitigate compensation-related risks. As a result, we do not believe that our compensation programs are reasonably likely to have a material adverse effect on us.

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Compensation Discussion and Analysis

Stock Ownership Policies

In addition to applying to our non-employee directors, we expanded stock ownership polices to apply to our Chief Executive Officer and our other executive officers. Our non-employee directors are expected to acquire and hold the lesser of (i) a number of shares of our common stock equal in value to five times the director’s annual cash retainer for regular service on the Board or (ii) 15,000 shares of our common stock, until such director’s service on the Board ceases. Our Chief Executive Officer is expected to acquire and maintain shares of our common stock equal to five times the Chief Executive Officer’s base salary and our other executive officers are expected to acquire and maintain shares of our common stock equal to three times their base salary. Under these stock ownership policies, executives and directors have five years from their date of hire or promotion, or appointment to the Board as applicable, to obtain the expected ownership levels. For our non-employee directors, we only count directly and beneficially owned shares, shares underlying unvested and vested restricted stock units (either held or deferred) and shares underlying vested and unexercised in-the-money stock options. For our executive officers, we only count directly owned shares, shares of common stock that are restricted with vesting subject only to time-based vesting, restricted stock units that are subject only to time-based vesting, and performance stock units for which performance goals have been achieved and that remain subject to only time-based vesting.

“Clawback” Policy

The Board has adopted a policy that gives the Board discretion to require that any of the Company’s executive officers, including the named executive officers, repay incentive-based compensation to the Company if the Board determines, in its sole discretion based on relevant facts and circumstances, that the executive officer’s intentional misconduct or fraud caused the Company to materially restate all or a portion of its financial statements. Our compensation committee believes that the clawback policy reflects good standards of corporate governance and reduces the potential for excessive risk taking by our executive officers.

Policy Prohibiting Hedging and Pledging of Equity Securities

We have an insider trading policy that prohibits our officers, directors, employees, and certain other persons from engaging in, among other things, short sales, hedging of stock ownership positions, and transactions involving derivative securities that provide the economic equivalent of ownership of any of the Company’s securities or an opportunity, direct or indirect, to profit from any change in the value of the Company’s securities unless such transactions are pre-approved by our audit committee. In addition, our insider trading policy prohibits our officers, directors, employees, and certain other persons from using the Company’s securities as collateral in a margin account or from pledging the Company’s securities as collateral for a loan unless such transactions are pre-approved by our audit committee. In 2022, no party requested a pre-approval under our insider trader policy. Our insider trading policy permits our officers, directors and employees to enter into trading plans complying with Rule 10b5-1 under the Exchange Act.

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