Restricted Stock Units (RSU)

9 Months Ended

Sep. 30, 2022

Restricted Stock Units Abstract

Restricted Stock Units [Text Block]

Note 10 – Restricted Stock Units (RSU)

We have an Employee Incentive Plan for employees other than executive officers and a Management Incentive Plan for executive officers. Both plans were implemented in 2006. The Plan permits the issuance of up to 200,000 shares of our Common Stock in stock awards. Each qualified employee of the Company may elect to receive up to 50% of their incentive compensation in Company Common Stock in lieu of cash. Each of the Company’s Executive Officers are required to receive 50% of their incentive compensation earned in Company Common Stock in lieu of cash. As of September 30, 2022, 155,399 shares remain available to be issued under the Plan.

Our BOD adopted the 2017 Omnibus Stock Plan effective May 25, 2017. The shareholders of the Company approved the Plan at the May 25, 2017 Annual Meeting of Shareholders. The Plan enables the Company to grant stock incentive awards to current and new employees, including officers, and to Board members and service providers. The Plan permits stock incentive awards in the form of options (incentive and non-qualified), stock appreciation rights, restricted stock, restricted stock units (RSUs), performance stock, performance units, and other awards in stock or cash. The Plan permits the issuance of up to 625,000 shares of our Common Stock in any of the above stock awards. As of September 30, 2022, 416,002 shares remain available to be granted under the Plan.

Starting in 2017 and each subsequent year following 2017, our BOD and Compensation Committee granted awards to the Company’s executive officers under the Plan. We recognize share-based compensation expense for these RSUs over the vesting period of the RSUs which is determined by our BOD. Forfeitures of RSU’s are accounted for as they occur. Each executive officer received or may receive time-based RSUs and performance-based RSUs. The time-based RSUs are computed as a percentage of the executive officer’s base salary based on the closing price of Company common stock on a date set by the BOD, and will vest over a three-year period based on the executive officer being employed by the Company on the vesting date. The performance-based RSUs are also computed as a percentage of the executive officer’s base salary based on the closing price of Company common stock on a date set by the BOD, and will vest over a three-year period based on the Company attaining an average Return on Invested Capital (ROIC) over that three-year period. The ROIC target is set by the BOD. Executive officers may earn more or less performance-based RSU’s based on if the actual ROIC over the time period is more or less than target. Upon vesting of either time-based or performance-based RSUs, the executive officers will be able to receive Common Stock in the Company in exchange for the RSUs.

RSUs currently issued, exercised or forfeited is as follows:

	Time-Based RSU's	Targeted Performance-Based RSU's		Closing Stock Price	Vesting Date
Balance at December 31, 2020	7,638	9,611
Issued	3,364	5,247	$	21.90	12/31/2023
Exercised	-	(1,588)	$	23.67	12/31/2020
Exercised	(1,562)	-	$	21.75	12/31/2021
Balance at December 31, 2021	9,440	13,270
Forfeited	-	(2,637)
Balance at September 30, 2022	9,440	10,633

In 2022, after considerable study, discussion and interaction with our consultants, the Compensation Committee decided to replace RSUs with non-qualified stock options (Options). The Compensation Committee believes that grants of Options more directly align management long-term equity compensation with increased shareholder value creation at a time when the Company is engaged in significant investment and transformation as part of its long-term strategy. The Compensation Committee also determined to extend the grant of Options to Named Executive Officers, senior employee directors and other employee directors as key members of the Company leadership team and contributors of overall success.

In its definitive proxy statement dated April 4, 2022 for its 2022 annual meeting of shareholders to be held on May 26, 2022, filed with the SEC on April 6, 2022, Nuvera disclosed that on March 31, 2022, the Company’s BOD and Compensation Committee authorized the issuance of Options as Awards to Named Executive Officers, senior employee directors and other employee directors under the 2017 Omnibus Stock Plan, but had not yet finalized the Black-Scholes analysis determining the value of the Options to be granted and therefore the number of Options to granted. On April 11, 2022, the BOD and Compensation Committee completed its analysis. The following language supplements and updates the proxy statement disclosure:

The number of Options awarded was computed as a percentage of the employee’s base salary using a Black-Scholes formula using an exercise price equal to the closing price of Company common stock of $21.20 on April 11, 2022. These Options will vest one-third each on April 11, 2023, 2024 and 2025.

	Options		Closing Stock Price	Vesting Date
Balance at December 31, 2021	-
Issued	40,577	$	21.20	4/11/2023
Issued	40,583	$	21.20	4/11/2024
Issued	40,583	$	21.20	4/11/2025
Balance at September 30, 2022	121,743

Option Awards

The grant date fair value of employee stock option awards is determined using the Black Scholes option-pricing model. The following assumptions were used during the following periods:

	September 30, 2022¹
Exercise Price	$	21.20
Risk-Free Rate of Interest		1.515%
Expected Term (Years)		10
Expected Stock Price Volatility		18.1%
Dividend Yield		2.44%

The following table summarizes the Company’s employee stock option activity under the Plan for the following periods:

				Weighted Average Remaining Term (Years)	Aggregate Intrinsic Value (in Thousands)
		Weighted Average Exercise Price
	Number of Shares
Outstanding as of December 31, 2021	-	$	-	-	$	-
Granted	121,743		21.20	10		-
Outstanding as of June 30, 2022	121,743	$	21.20	9.8	$	-
Granted	-		-	-		-
Forfeited²	-		-	-		-
Outstanding as of September 30, 2022	121,743	$	21.20	9.5	$	-
Options Vested and Exercisable as of September 30, 2022	-	$	-	-	$	³

The weighted average grant date fair value per share for employee stock and non-employee option grants during the three, six, and nine months ended September 30, 2022, was $21.20⁴. The weighted average grant date fair value per share for employee stock and non-employee option grants during the three months ended, six months ended, and nine months ended September 30, 2022, was $3.24. At September 30, 2022, the total unrecognized compensation related to unvested employee and non-employee stock option awards granted, of which the Company expects to recognize $0.3 million⁵ over a weighted-average period of approximately 2.5⁶ years.

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¹ Populated pursuant to management’s 2022 Nuvera Options Black-Scholes calculations.

² No new options have been granted or forfeited during the period.

³ No intrinsic value as options are underwater as of June 30^th and September 30^th.

⁴ Pursuant to management’s 2022 Nuvera Options Black-Scholes calculations.

⁵ Calculated as $394,447 aggregate grant date fair value, less $61,903 expense recognized in April through September 2022.

⁶ Remaining time calculated as time period between grant date of 4/11/2022 and last vesting date of 4/11/2025.