|
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|
Name
|
|
Fees Earned or
Paid in Cash
($)
|
|
Restricted
Stock Awards
($)(1)
|
|
Option
Awards
($)(2)
|
|
Total
($)
|
|
&zwsp;
|
&zwsp;
|
|
William J. Cadogan
|
|
80,000
|
|
72,136
|
|
85,702
|
|
237,838
|
|
&zwsp;
|
|
|
Charles E. Hoffman
|
|
67,500
|
|
72,136
|
|
85,702
|
|
225,338
|
|
|
&zwsp;
|
|
Thomas J. Hopkins
|
|
67,500
|
|
72,136
|
|
85,702
|
|
225,338
|
|
&zwsp;
|
|
|
James M. McCormick
|
|
50,000
|
|
72,136
|
|
85,702
|
|
207,838
|
|
|
&zwsp;
|
|
Donnie M. Moore
|
|
75,000
|
|
72,136
|
|
85,702
|
|
232,838
|
|
&zwsp;
|
-
(1)
-
The
amounts in this column reflect the aggregate grant date fair value of the stock awards computed in accordance with FASB ASC Topic No. 718. See
Footnote 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013 for a discussion of our assumptions in estimating the fair value of
our stock awards. As of December 31, 2013, each of Messrs. Cadogan, Hoffman, Hopkins, McCormick and Moore held 6,670 restricted shares of our Common Stock.
-
(2)
-
The
amounts in this column reflect the aggregate grant date fair value of the stock options computed in accordance with FASB ASC Topic No. 718. See
Footnote 2 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013 for a discussion of our assumptions in estimating the fair value of
our stock option awards. As of December 31, 2013, each of Messrs. Cadogan, Hoffman, Hopkins and McCormick held options to purchase 95,000 shares of our Common Stock having a weighted
average exercise price of $16.76 per share, of which 80,000 shares were vested, and Mr. Moore held options to purchase 85,000 shares of our Common Stock, having a weighted average exercise
price of $22.07 per share, of which 70,000 shares were vested.
DIRECTOR STOCK OWNERSHIP GUIDELINES
We have established stock ownership guidelines for our directors to retain an equity stake in the Company to more closely align their interests with
those of our stockholders. In 2013, our Board, in consultation with Deloitte, our compensation consultant engaged in July 2013, reviewed the share ownership guidelines for directors at our industry
peers as well as certain other publicly available market data, and determined that the then current guideline of one times the annual cash retainer was below competitive levels. In considering this
information, our Board agreed to increase the ownership guidelines for directors to a value equal to three times the annual cash retainer for our directors. Ownership is calculated annually based on
the closing sales price of our Common Stock on Nasdaq for the last trading day in the prior year. Each of the directors has three years from the date the stock
17
Table of Contents
ownership
guidelines were revised or, for future directors, three years from his election to our Board, to achieve the targeted equity ownership level. In 2013, each of our directors met these revised
guidelines.
LIMITATION OF LIABILITY AND INDEMNIFICATION
As permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws provide that we are authorized to
(i) enter into indemnification agreements with our directors and officers and (ii) purchase directors' and officers' liability insurance, which we currently maintain to cover our
directors and executive officers. The form of indemnification agreement with our directors provides that we will indemnify each of our directors against any and all expenses incurred by that director
because of his status as one of our directors, to the fullest extent permitted by Delaware law, our restated certificate of incorporation and amended and restated bylaws. In addition, the form
agreement provides that, to the fullest extent permitted by Delaware law, but subject to various exceptions, we will advance all expenses incurred by our directors in connection with a legal
proceeding. Our restated certificate of incorporation and bylaws contain provisions relating to the limitation of liability and indemnification of directors. The restated certificate of incorporation
provides that our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, except for liability:
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|
for any breach of a
director's duty in respect of unlawful (i) payments of dividends or (ii) stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law and the breach of a director's duty of loyalty to us or our
stockholders;
for acts or
omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; and
for any transaction from which the director derives any improper personal
benefit.
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|
Our
restated certificate of incorporation also provides that if Delaware law is amended, after the approval by our stockholders of our restated certificate of incorporation, to authorize corporate
action further eliminating or limiting the personal liability of directors, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law. The
foregoing provisions of the restated certificate of incorporation are not intended to limit the liability of directors or officers for any violation of applicable federal securities laws. As permitted
by Section 145 of the Delaware General Corporation Law, our restated certificate of incorporation provides that we may indemnify our directors to the fullest extent permitted by Delaware law
and the restated certificate of incorporation provisions relating to indemnity may not be retroactively repealed or modified so as to adversely affect the protection of our directors.
18
Table of Contents
RISK MANAGEMENT CONSIDERATIONS
Each year, our Compensation Committee reviews our compensation practices and policies for all employees, including our named
executive officers ("NEOs"), and assesses whether they have the potential to incentivize employees to take risks that are not reasonably likely to have a material adverse effect on our Company. Since
our annual performance-based bonus and equity programs are designed to align our employees' compensation with our long-term business objectives and performance, and therefore enhance stockholder
value, our Compensation Committee believes that our compensation practices and
policies discourage behavior that leads to excessive risk. Therefore, our Compensation Committee does not believe these practices and policies will have a material adverse effect on our Company. Set
forth below are the key risk-balancing elements of our compensation practices and policies:
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Financial
Performance
Measures
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The ranges set for financial performance measures are designed to reward success without encouraging excessive risk taking.
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&zwsp;
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Equity Vesting
Periods
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&zwsp;
|
|
Time-based and performance-based restricted shares typically vest over three years, while stock options typically vest over four years. The vesting of the equity awards are designed to reward tenure with us.
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&zwsp;
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Equity Retention
Guidelines
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|
Named executive officers are required to acquire within five years of becoming an executive officer, and hold while they are officers, shares (vested and unvested) having a value of at least three times their base salary,
or five times in the case of our CEO.
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&zwsp;
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No Hedging
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&zwsp;
|
|
NEOs are not permitted to enter into any transaction designed to hedge, or having the effect of hedging, the economic risk of owning our securities.
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|
&zwsp;
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Financial
Restatement and
Related Policies
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|
As part of our Ethics and Business Conduct Policy, we will investigate all reported instances of questionable or unethical behavior of a director, NEO or other employee and, where improper behavior is found to have
occurred, will take appropriate action up to and including termination. If an investigation uncovers that such individual commits fraud or other improper act which causes our financials to be restated or otherwise affected, we would take immediate
and appropriate disciplinary action with respect to such individual up to and including termination, We would also take whatever legal remedies are available to prosecute such individual to the fullest extent of the law and seek to recover any
amounts he or she inappropriately received as a result of such actions, including but not limited to any annual or long term incentives that he or she received to the extent the individual would not have received such amount had such act not be
taken.
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19
Table of Contents
Compensation of Executive Officers
Compensation Discussion and Analysis
This section discusses our compensation philosophy, summarizes our compensation programs and reviews compensation decisions for the
following named executive officers (NEOs):
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Named Executive Officer
|
|
Title
|
|
&zwsp;
|
&zwsp;
|
|
Stephen G. Waldis
|
|
Chairman of the Board of Directors and Chief Executive Officer
|
|
&zwsp;
|
|
|
Lawrence R. Irving
|
|
Former EVP, Chief Financial Officer and Treasurer
(1)
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|
|
&zwsp;
|
|
Robert E. Garcia
|
|
President and Chief Operating Officer
|
|
&zwsp;
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|
|
Nicholas Lazzaro
|
|
EVP and President of Emerging Markets
(2)
|
|
|
&zwsp;
|
|
Mark Mendes
|
|
EVP and President of North America
|
|
&zwsp;
|
(1) Mr. Irving resigned as our Chief Financial Officer and Treasurer, effective April 1, 2014. See "Recent Developments" below for additional
information.
(2) Mr. Lazzaro was hired as our EVP and President of North America in May 2013 and has since been appointed EVP and President of Emerging Markets.
Executive Summary
Our executive compensation philosophy and programs are designed to attract, retain and motivate high-quality executives who possess
diverse skills and talents required to help us achieve our short and long-term financial and strategic goals. We believe that the programs foster a performance-oriented culture that aligns our
executives' interests with those of our stockholders over the long term. We believe that the compensation of our NEOs is both appropriate for and responsive to the goal of improving stockholder value.
Specifically, in 2013,
we tied a significant portion of executive compensation to stockholder return in the form of at-risk or variable realizable compensation. As a result, even though our non-GAAP revenue was 28% higher
than in 2012 and our non-GAAP operating income margin was at 23%
*
, we failed to meet certain targeted financial objectives set by our Board. As a result, our NEOs received only 25% of
their annual target incentive bonus compensation for 2013 and received 55,173 less shares than the target performance shares that they were eligible to receive under the 2013 performance-based
restricted stock awards. When our Board established our 2013 internal annual operating plan, it placed expectations on our management greater than what was expected to be shared in our public
guidance. Our Compensation Committee had similar expectations when it established the 2013 corporate component that the objectives would be targets that pushed management and our Company to a higher
threshold than market expectations.
* These financial measures are non-GAAP measures and should not be reviewed in isolation or as substitutes for our financial results as reported in accordance
with GAAP. Please see Appendix A for an explanation of and reconciliation of these non-GAAP financial measures to the applicable GAAP financial measures.
20
Table of Contents
The following provides an overview of the key financial and strategic highlights for the year.
2013 Business Highlights
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|
|
Key Financial Metric
|
|
|
|
Fiscal 2013 Achievements
|
|
&zwsp;
|
&zwsp;
|
|
Non-GAAP Revenue*
|
|
$352.5 million, compared to $275.2 million in 2012, an increase of 28%
|
|
&zwsp;
|
|
|
Non-GAAP Gross Profit*
|
|
$212.0 million, representing a non-GAAP gross margin of 60%
|
|
|
&zwsp;
|
|
Non-GAAP Operating Income*
|
|
$81.5 million, representing a non-GAAP operating margin of 23%
|
|
&zwsp;
|
|
|
Diluted Non-GAAP EPS*
|
|
$1.33, compared to $1.10 in 2012, an increase of 21%
|
|
|
&zwsp;
|
|
Business Milestones
|
|
|
|
Executed three-year renewal agreement with AT&T and five year agreement with Verizon Wireless
|
|
&zwsp;
|
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|
|
Launched the Personal Cloud Solution deepening our solution to support connected consumer devices
|
|
&zwsp;
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|
|
Reached 10 million Personal Cloud Subscribers worldwide through the Personal Cloud Platform
|
|
&zwsp;
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|
Acquired Strumsoft, strengthening our front-end user experience application development for our cloud-based platforms
|
|
&zwsp;
|
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|
|
Strengthened our management team by hiring Nicholas Lazzaro, former SVP, Product Development and IT at Vonage Systems, Inc.
|
|
&zwsp;
|
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|
|
Enhanced our financial flexibility by entering into a $100 million credit agreement
|
|
&zwsp;
|
* These
financial measures are non-GAAP measures and should not be reviewed in isolation or as substitutes for our financial results as reported in accordance with GAAP. Please see
Appendix A for an explanation of and reconciliation of these non-GAAP financial measures to the applicable GAAP financial measures.
21
Table of Contents
2013 Compensation Program Highlights
We design our executive compensation program to attract, retain and motivate high-quality executives and drive the creation of long-term stockholder
value by providing a significant portion of compensation through programs tied to performance goals. We have adopted the following approach to achieve these objectives:
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Pay for
|
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|
Provide a strong relationship of pay for performance through:
|
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|
|
Performance
|
|
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|
|
Performance-based cash bonus tied to achievement of objective corporate financial and business goals and to individual performance
|
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|
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|
|
Equity awards that deliver value based on our stock performance and, in the case of performance-based stock awards, the actual number of shares granted depends on meeting performance targets.
|
|
|
&zwsp;
|
|
Emphasis on
Variable
|
|
&zwsp;
|
|
|
|
Total compensation is heavily weighted toward variable compensation (i.e., annual bonus and long-term incentives).
|
|
&zwsp;
|
&zwsp;
|
|
Compensation
|
|
&zwsp;
|
|
|
|
We use the annual performance-based cash bonuses to focus our named executive officers ("NEOs") on key short-term financial goals.
|
|
&zwsp;
|
&zwsp;
|
|
|
|
&zwsp;
|
|
|
|
We use stock options, time-based and performance-based restricted shares to incentivize our NEOs to focus on sustainable, long-term stockholder value creation. The value realized by our NEOs depends substantially on our long term performance,
achievement of our long-term goals and the value of our Common Stock, which we believe aligns our NEOs' interests with the long-term interests of our stockholders.
|
|
&zwsp;
|
|
|
Fixed
Compensation
Component
|
|
|
|
Provide base salary based on our Compensation Committee's general understanding of current competitive compensation practices, corporate achievement, the NEO's role and responsibilities, length of tenure, internal pay
equity and individual performance.
|
|
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|
The
following highlights some of the key components of our pay for performance policies and practices:
|
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|
|
|
|
|
|
|
|
|
At-Risk Compensation
|
|
&zwsp;
|
|
Tie a significant portion of executive compensation to stockholder return in the form of at-risk compensation
|
|
&zwsp;
|
|
|
Incentive Award Metrics
|
|
|
|
Approve objective incentive award metrics tied to key company performance metrics
|
|
|
&zwsp;
|
|
Total Shareholder Return
|
|
&zwsp;
|
|
Use the Company's stock performance compared to its peer group as one of the metrics for the NEO's long term incentive plan
|
|
&zwsp;
|
|
|
Equity Vesting
|
|
|
|
Vest equity awards over three or four years to promote retention
|
|
|
&zwsp;
|
|
Stock Ownership Guidelines
|
|
&zwsp;
|
|
Stock ownership guidelines based on compensation and role within our Company
|
|
&zwsp;
|
|
|
No Hedging
|
|
|
|
Prohibition of hedging exposure of, or interest in, our stock
|
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22
Table of Contents
Our Compensation Committee oversees our compensation program covering all our employees, with an enhanced focus on the compensation of our NEOs. It also oversees the
administration of our cash and equity-based incentive plans. Mr. Waldis, in his role as CEO, assesses the performance of our NEOs (other than himself), consults with other members of management
and makes recommendations to our Compensation Committee regarding the amount and the form of the compensation of the NEOs and other key employees, including the performance goals, weighting of goals,
and equity compensation awards of NEOs. Mr. Waldis is not present during discussions regarding his compensation.
|
Revisions for 2014 Executive Compensation Program
|
At
our 2013 Annual Meeting, although 77% of the shares voted were in favor of the advisory vote on executive compensation, it was not as high as we would have preferred. As
a result, our Compensation Committee performed a "clean slate" review of our executive compensation practices and policies. In addition, we instituted a stockholder outreach program, meeting with a
number of our largest stockholders, to ensure that our Board and Compensation Committee considered stockholder feedback in establishing our executive compensation programs. During these meetings, our
management was able to gain insight and perspective on our executive compensation programs and policies, including CEO compensation, compensation disclosures, equity awards and other non-compensation
corporate governance issues. In response, our Compensation Committee made certain changes to our executive compensation program. However, since 2013 executive compensation decisions were made prior to
our 2013 Annual Meeting, most of the following changes will first impact our 2014 executive compensation:
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|
|
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|
|
&zwsp;
|
|
New Compensation Consultant
|
|
&zwsp;
|
|
Retained Deloitte as our new compensation consultant
|
|
&zwsp;
|
|
|
Stockholder Outreach
|
|
|
|
Designed a formal stockholder outreach program to solicit feedback on our executive pay programs from major stockholders
|
|
|
&zwsp;
|
|
Compensation Philosophy
|
|
&zwsp;
|
|
Designed and approved a new, updated compensation philosophy for all our employees
|
|
&zwsp;
|
|
|
Higher Stock Ownership Guidelines
|
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|
|
Enhanced stock ownership guidelines for NEOs and directors to increase the required ownership level
|
|
|
&zwsp;
|
|
Fixed Weighting of Performance-based Components
|
|
&zwsp;
|
|
Effective for 2014, the weighting of each component of the cash bonus and long-term incentives will be fixed regardless of our non-GAAP revenue or operating income
|
|
&zwsp;
|
|
|
Strategic Performance Metric
|
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|
|
Added Cloud Revenue as an additional performance measure to the 2014 performance-based long-term incentive plan
|
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23
Table of Contents
Our Compensation Committee believes these changes are responsive to feedback from investors and enhance the alignment of our NEOs' interests with those of our stockholders. We
continuously strive to improve the level of stockholder support for our executive compensation program and plan to continue and expand our stockholder outreach program in future years. Our
Compensation Committee is regularly updated on our meetings with stockholders and several members may attend these meetings in the future to ensure that they understand the alignment of pay and
performance as well as the actual compensation paid to our NEOs, especially our CEO. Each year our Compensation Committee will consider the discussions held with stockholders and the outcome of the
stockholder advisory vote on executive compensation as it makes future compensation decisions. We encourage stockholders to take into account these significant changes to our executive compensation
program over the past year in considering the advisory vote presented below.
Our
Compensation Committee's compensation consultant generally attends regular Compensation Committee meetings and meets with our Compensation Committee without management
present. Our Compensation Committee considers various analyses prepared by its compensation consultant when making decisions with respect to compensation matters, along with information it receives
from management and its own judgment and experience in an effort to gain a better understanding of the competitive landscape. From 2009 to June 2013, our Compensation Committee had retained Radford as
its compensation consultant. In July 2013, our Compensation Committee retained Deloitte Consulting LLP to replace Radford as its compensation consultant as part of its decision to conduct a
"clean slate" review of our compensation practices and policies.
Our
Compensation Committee generally reviews executive compensation survey and proxy data from technology companies that have similar software/services business models or
operate in the mobile networking space, are of similar financial size and with whom we compete for our executive talent. Our Compensation Committee identified the following companies that fit some or
all of these criteria as our peer group for purposes of 2013 executive compensation decisions:
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Aruba Networks, Inc.
|
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Digital River, Inc.
|
|
OPNET Technologies, Inc.
|
|
&zwsp;
|
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|
Brightpoint, Inc.
|
|
Informatica Corporation
|
|
Smith Micro Software, Inc.
|
|
|
&zwsp;
|
|
CommVault Systems, Inc.
|
|
MicroStrategy Incorporated
|
|
Verifone Systems, Inc.
|
|
&zwsp;
|
|
|
Concur Technologies, Inc.
|
|
NeuStar, Inc.
|
|
VeriSign,Inc.
|
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|
&zwsp;
|
|
Comverse Technologies, Inc.
|
|
Nuance Communications, Inc.
|
|
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|
&zwsp;
|
Our
peer group was updated in 2013 to reflect that RightNow Technologies, Inc., SuccessFactors, Inc. and Taleo Corporation were acquired in 2012. VeriSign, Inc. was added to
offset the removal of these three companies. We believe the peer group utilized for purposes of 2013 compensation decisions was representative of companies that we compete with for talent. When making
compensation decisions for our NEOs, our Compensation Committee reviews publicly available survey and peer group compensation data for other software/services companies as part of its decision-making
process. As we continue to grow as a company, competitive market practices become an increasingly important factor in our Compensation Committee's decision-making process, although its decisions are
not primarily based upon these factors and it does not target specific compensation levels as derived from peer group data. Rather, our Compensation Committee reviews and considers the peer group and
24
Table of Contents
other
survey data to obtain a general understanding of current competitive compensation practices. Competitive market influences tend to be relatively more important in compensation decisions for
newly-hired executive officers than for tenured officers, for whom length of tenure, corporate achievement, internal pay equity and individual performance are more important. Utilization of the peer
group and survey data to gain a general understanding of competitive pay practices allows us to accomplish our Compensation Committee's goal of paying our NEOs what is appropriate to achieve our
corporate goals while conserving cash and equity.
Our
peer group is also utilized in connection with the determination of the actual number of shares issued with respect to our performance-based restricted shares, as discussed below. Following the
determination of the number of shares to be awarded based on the achievement of the applicable corporate goals, we issue up to 20% more shares or 10% less shares based on our total stockholder return
("TSR") relative to our peer group for the three-year period ending at the end of the applicable fiscal year.
Elements of Compensation
Our executive compensation program has the following principal elements: base salary, annual cash incentive bonus, equity awards and severance and
change in control protection. The following table sets forth these elements and the objectives of each element:
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|
&zwsp;
|
|
Base Salary
|
|
&zwsp;
|
|
Objective:
|
|
&zwsp;
|
&zwsp;
|
|
|
|
&zwsp;
|
|
Our Compensation Committee sets base salaries with the intent to attract and retain executives, reward satisfactory performance and provide a minimum, fixed level of cash compensation to compensate him or her for their day-to-day
responsibilities.
|
|
&zwsp;
|
|
|
|
|
&zwsp;
|
|
Key Features:
|
|
&zwsp;
|
&zwsp;
|
|
|
|
&zwsp;
|
|
|
|
Minimum, fixed level of cash compensation. Base salaries are initially determined as a result of negotiation between the executive and our management in consultation with and subject to the approval of our Compensation Committee.
|
|
&zwsp;
|
&zwsp;
|
|
|
|
&zwsp;
|
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|
|
Our Compensation Committee reviews base salaries annually and has discretion to provide increases based on our Compensation Committee's general understanding of current competitive pay practices, promotions, our CEO's recommendation (except his own
salary), changes in responsibilities and performance, annual budget for increases, our overall financial and operational results, the general economy, length of tenure and internal pay equity and other factors our Compensation Committee deems
appropriate.
|
|
&zwsp;
|
|
|
|
|
&zwsp;
|
|
Process:
|
|
&zwsp;
|
&zwsp;
|
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|
&zwsp;
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|
|
At the end of each calendar year, the CEO recommends salaries for executives other than himself for the following calendar year.
|
|
&zwsp;
|
&zwsp;
|
|
|
|
&zwsp;
|
|
|
|
Our Compensation Committee reviews proposed salary changes with input from its compensation consultant.
|
|
&zwsp;
|
&zwsp;
|
|
|
|
&zwsp;
|
|
|
|
Our Compensation Committee determines annual salaries for NEOs.
|
|
&zwsp;
|
&zwsp;
|
|
|
|
&zwsp;
|
|
|
|
Our Compensation Committee reports determinations to the full Board.
|
|
&zwsp;
|
25
Table of Contents
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Annual Cash
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Objective:
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Incentive Bonus
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The annual cash incentive bonus is a performance-based compensation program designed to align the interests of our NEOs and stockholders by providing compensation based on the achievement of pre-determined corporate and/or
business goals and individual performance.
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Key Features:
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The target bonus for each NEO is set by our Compensation Committee early in the year based on employment agreement provisions, our Compensation Committee's general understanding of current competitive pay practices, our
CEO's recommendation (except his own), internal pay equity and other factors our Compensation Committee deems appropriate.
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At least 90% of the target incentive is determined by performance against certain financial objectives established at the start of the year.
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If we achieve results that are below certain threshold levels, our NEOs receive no cash incentive bonus, while results that are above certain threshold levels result in larger cash incentive bonuses.
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Process:
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Our Compensation Committee participates in our Board of Director's review of our annual operating plan at the beginning of the year.
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Our CEO recommends bonus targets as a percentage of base salary for each executive other than himself.
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Our management recommends financial and other performance measures, weightings and ranges.
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Our Compensation Committee reviews proposed bonus targets, performance measures and ranges with input from its compensation consultant and determines bonus targets, performance measures and ranges that it believes
establish appropriate stretch goals.
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After the end of the fiscal year, our management presents financial results to our Compensation Committee.
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Our CEO recommends the individual component award for our NEOs other than himself.
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Our Compensation Committee reviews the results and determines whether to make any adjustments, and determines other performance factor multipliers and establishes the bonus award.
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Our Compensation Committee reports determinations to the full Board.
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&zwsp;
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Equity Awards
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&zwsp;
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Objectives:
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&zwsp;
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&zwsp;
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Generally
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&zwsp;
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Our Compensation Committee structures equity awards to retain NEOs, motivate them to achieve our financial, strategic and operational goals, and align their interests with those of our stockholders. Equity awards include stock options, time-based
and performance-based restricted shares.
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&zwsp;
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&zwsp;
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Key Features:
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&zwsp;
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&zwsp;
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&zwsp;
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Our Compensation Committee grants stock options, time-based and performance-based restricted shares to NEOs with the grant date value based on our Compensation Committee's general understanding of current competitive pay practices, our CEO's
recommendation (except his own), internal pay equity, evaluation of the executive's performance, and other factors our Compensation Committee deems appropriate.
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&zwsp;
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26
Table of Contents
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&zwsp;
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&zwsp;
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Long-term incentive awards are allocated as follows, based on grant date award value (with vesting terms that generally extend up to four years):
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&zwsp;
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&zwsp;
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&zwsp;
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o
One-third stock options
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&zwsp;
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&zwsp;
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&zwsp;
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o
One-third time-based restricted shares
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&zwsp;
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&zwsp;
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&zwsp;
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o
One-third performance-based restricted shares
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&zwsp;
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&zwsp;
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&zwsp;
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Our Compensation Committee believes this mix provides NEOs with a balance retention and performance opportunity, and serves to closely align their long-term objectives with those of our stockholders.
|
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&zwsp;
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&zwsp;
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&zwsp;
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Each performance-based restricted share award has a target number of shares to be issued following completion of a fiscal year based on the achievement of certain Company performance criteria.
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&zwsp;
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&zwsp;
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&zwsp;
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Performance-based restricted shares are issued following the completion of our fiscal year and can be up to 20% more or 10% less than target depending on our TSR relative to our peer group over a trailing three-year period.
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&zwsp;
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&zwsp;
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Process:
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&zwsp;
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&zwsp;
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&zwsp;
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In the first fiscal quarter, our CEO recommends grant date fair value of awards for executives other than himself.
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&zwsp;
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&zwsp;
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&zwsp;
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Our Compensation Committee reviews proposed award with input from its compensation consultant.
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&zwsp;
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&zwsp;
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&zwsp;
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Our Compensation Committee determines the number of stock options and restricted shares based on the price of our Common Stock.
|
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&zwsp;
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&zwsp;
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&zwsp;
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Our Compensation Committee reports determinations to the full Board.
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&zwsp;
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Severance and
|
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Objectives:
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Change in
Control
Benefits
|
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|
Severance and change in control benefits are included in each NEO's employment agreement in order to promote stability and continuity of our senior management team in the event of a potential change in control and/or any
involuntary termination. Our Compensation Committee believes these provisions help to appropriately align the NEO's interests with those of our stockholders in such scenarios.
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Key Features:
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Events triggering payment require a termination of the NEO's employment by us "without cause" or by the executive for "good reason". Executives are entitled to enhanced benefits if the foregoing occurs following a change
in control
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Our Compensation Committee has determined it appropriate to have these termination-related benefits in place to preserve morale and productivity and encourage retention in the face of potentially disruptive circumstances
that might cause an executive to be concerned that his employment is in jeopardy or that might involve an actual or rumored change in control of our Company.
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Each NEO will only be eligible to receive severance payments if he signs a general release of claims following an eligible termination.
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Each NEO's outstanding options and restricted shares will vest and become exercisable in full if his employment is involuntarily terminated within twelve (12) months following a change in control.
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27
Table of Contents
Chief Executive Officer Compensation
As our Chairman and CEO, Mr. Waldis' responsibilities are much greater than those of the other NEOs, as he is informed and involved, in a
detailed manner with each department's progress toward our shared Company goals. As such, his total base salary and his total compensation opportunity are greater than our other NEOs. In addition, his
equity holding requirements under our Executive Stock Ownership Guidelines are five times his base salary as opposed to three times for the other NEOs. In our industry, the CEO must be deeply aware of
a company's strengths and obstacles, and have sharp strategic vision for our future while
maintaining our ability to adapt to changing circumstances and prospects quickly and thoughtfully. The successful progress of our research and development programs and success of our customer
engagements brings value to our financial performance and our stockholders, and we believe Mr. Waldis' direction in the decisions and actions that drive this progress and merit the compensation
that he receives.
Pay Mix
In keeping with our results-driven culture, our Compensation Committee expects our NEOs to deliver superior performance in a sustained fashion and
believes that a substantial portion of their overall compensation should be at-risk and tied to our short-term and long-term performance. As shown below, 87% of our CEO's compensation and 78% of the
average compensation of our other NEOs varies with our Company's short-term or long-term performance.*
* We
have excluded from the above information the one-time special grant of restricted stock that our Compensation Committee granted to our CEO and each of our NEO's in early 2013. See
"Special 2013 Equity Awards".
28
Table of Contents
Target and Realized Pay
As discussed above, our Compensation Committee believes that a program weighted towards variable, performance-based compensation ensures that our
NEOs' interests are aligned with those of our stockholders. Furthermore, because the equity awards are also subject to time-based vesting, the compensation an NEO realizes in connection with equity
awards is spread over a number of years, which our Compensation Committee believes assists in motivating him to drive business growth over the long term. While the amounts shown in the Summary
Compensation Table reflect the grant-date value of equity awards received by a NEO (in accordance with FASB ASC Topic No. 718), they do not reflect the impact of stock price performance on
compensation actually realized by our NEOs. The compensation actually realized by the NEO varies based on actual performance.
The
chart below shows the difference between aggregate Target Annual Compensation and Realized Annual Compensation for our CEO for 2011, 2012 and 2013. As illustrated, actual realized
pay for each year is below the grant date value of compensation disclosed in the Summary Compensation table in accordance with FASB ASC Topic No. 718.
"Target
Compensation" represents the sum of base salary, target annual cash bonus, the grant-date value of stock options, time-vested restricted shares, and the target number of performance shares as
disclosed in the Summary Compensation Table, using the stock price on the date of grant.
"Realized
Compensation" represents the sum of base salary, actual annual cash bonus paid, the intrinsic value of stock option grants as of December 31, 2013, value of time-vested restricted
shares as of December 31, 2013 and actual number of performance shares issued, valued as of December 31, 2013.
29
Table of Contents
2013 Compensation Decisions
Base Salary
Base salaries for our named executive officers ("NEOs") are reviewed and adjusted annually. Base salary may also be adjusted during the year upon
promotion or based on internal equity or external market conditions. Our Compensation Committee makes these decisions after reviewing the recommendation of our CEO (except as it concerns his own
salary) and our Executive Vice President of Human Resources, and consultation with our compensation consultant when needed. Based on this review, in February 2013, our Compensation Committee
provided cost of living salary increases of approximately 3% (representing the expected median base salary increase) to each of our NEOs employed by us as of such date.
In
May 2013, Mr. Lazzaro entered into an employment agreement to serve as our President of North America pursuant to which we agreed to pay Mr. Lazzaro a base salary of $412,000
annually, subject to adjustment pursuant to our compensation policies in effect from time to time. Mr. Lazzaro's compensation was negotiated by our management in consultation with our
compensation consultant and subject to the approval of our Compensation Committee. Our Compensation Committee determined that this was an acceptable base salary for Mr. Lazzaro based, among
other things, on the advice of our compensation consultant, the base salary of our other executive officers, his expected senior role with us and its general understanding of competitive pay
practices.
The
table below sets forth our NEOs' 2013 base salary compared to their respective 2012 base salary:
|
|
|
|
|
|
|
Name
|
|
2012
Base Salary
|
|
2013
Base Salary
|
|
|
Stephen G. Waldis
|
|
$541,000
|
|
$557,230
|
|
|
Lawrence R. Irving
|
|
$375,000
|
|
$386,250
|
|
|
Robert E. Garcia
|
|
$400,000
|
|
$412,000
|
|
|
Nicholas Lazzaro
|
|
N/A
|
|
$412,000
|
|
|
Mark Mendes
|
|
$336,000
|
|
$350,000
|
|
|
30
Table of Contents
2013 Annual Cash Incentive Bonus Compensation
Our Annual Cash Incentive Bonus Compensation Program promotes our pay-for-performance philosophy by providing all executives and other
management-level corporate employees with direct financial incentives in the form of annual cash awards for achieving Company, business and individual performance goals.
Target Percentage.
Our Compensation Committee sets each NEO's individual target cash incentive percentage based on its general understanding of competitive pay
practices, our CEO's recommendation (except his own) and other factors it deems appropriate. Based on its review of these factors, in 2013 our Compensation Committee increased each of
Mr. Waldis', Mr. Irving's and Mr. Garcia's target cash percentage to 110%, 70% and 80%, respectively,. Mr. Lazzaro's target bonus was set at 80% of his base salary. Our
Compensation Committee determined that this was an appropriate target bonus for Mr. Lazzaro based, among other things, on advice from its compensation consultant, the target bonus incentive
percentage of our other executive officers, his expected senior role at our Company and its general understanding of competitive pay practices. As such, our NEO's 2013 target incentive bonus
percentages were as follows:
|
|
|
|
|
Name
|
|
Target Incentive
Bonus Percentage
|
|
|
Stephen G. Waldis
|
|
110% of base salary
|
|
|
Lawrence R. Irving
|
|
70% of base salary
|
|
|
Robert Garcia
|
|
80% of base salary
|
|
|
Nicholas Lazzaro
|
|
80% of base salary
|
|
|
Mark Mendes
|
|
60% of base salary
|
|
|
Each
of Messrs. Waldis, Irving, Garcia and Mendes may earn in excess of his annual target bonus in the event that corporate and individual objectives set by our Compensation Committee are
exceeded. Under our 2013 incentive compensation plan, the maximum amount each of Messrs. Waldis, Irving, Garcia, Lazzaro and Mendes could have received was 175% of the product of their
respective base salary and his target incentive bonus percentage if both their corporate and business, as applicable, goals are met and exceeded and, if applicable, their individual performance met or
exceeded expectations. Mr. Mendes could also have received up to an additional $100,000 if certain financial measures of our broadband business were met. Mr. Lazzaro's maximum was lower
due because he was not employed by us for the full year.
31
Table of Contents
Weighting of Components
Each of our NEOs has both (i) a corporate component and (ii) either (a) a discretionary individual performance component or
(b) an objective business component in determining his annual cash incentive bonus compensation as follows:
|
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|
|
|
|
|
|
|
Name
|
|
Corporate Component
Target Rate
|
|
Individual Component
Target Rate
|
|
Business Component
Target Rate
|
|
|
Stephen G. Waldis
|
|
100%
|
|
10%
|
|
|
|
|
Lawrence R. Irving
|
|
60%
|
|
10%
|
|
|
|
|
Robert E. Garcia
|
|
70%
|
|
10%
|
|
|
|
|
Nicholas Lazzaro
|
|
32%
|
|
|
|
48%
|
|
|
Mark Mendes
|
|
20%
|
|
|
|
40%
|
|
|
2013 Corporate Component
Our Compensation Committee established targeted (i) non-GAAP revenue and (ii) non-GAAP operating income as a percentage of non-GAAP
revenue under our 2013 internal annual operating plan as the corporate component of our NEO's 2013 annual cash incentive bonus compensation. We utilize these non-GAAP financial measures internally in
analyzing its financial results and in evaluating our ongoing operational performance because they exclude certain non-cash adjustments required under GAAP.
Our
2013 internal annual operating plan was developed by management and presented by Mr. Waldis, as Chairman and CEO, and Mr. Irving, as CFO, to our Board for its review and approval.
The target performance levels under the annual cash incentive our NEOs are expected to achieve are aligned with our annual internal operating plan to motivate performance goals in a manner
that we believe will increase our stockholder value. Our 2013 internal annual operating plan when it was set placed expectations greater than what was expected to be shared in our public guidance, and
our Compensation Committee had similar expectations when it established the 2013 corporate component that the objectives would be targets that pushed management and our Company to a higher threshold
than market expectations. In calculating non-GAAP revenue and non-GAAP operating income as a percentage of non-GAAP revenue we add back the fair value stock-based compensation expense, deferred
revenue, acquisition-related costs, restructuring charges, changes in the contingent consideration obligation, deferred compensation expense related to earn-outs and amortization of intangibles
associated with acquisitions.
The
corporate component of the 2013 cash incentive compensation plan is set forth below:
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Threshold
|
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Target
|
|
Maximum
|
|
&zwsp;
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|
Corporate Component
|
|
(weighting)
|
|
(weighting)
|
|
(weighting)
|
|
&zwsp;
|
|
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|
|
25% payout
|
|
100% payout
|
|
175% payout
|
|
&zwsp;
|
|
|
Non-GAAP Revenue
|
|
$345,000,000
|
|
(30%)
|
|
$360,000,000
|
|
(50%)
|
|
$375,000,000
|
|
(70%)
|
|
|
|
|
|
Non-GAAP Operating Income
(as percentage of non-GAAP Revenue)
|
|
23.5%
|
|
(70%)
|
|
23.5%
|
|
(50%)
|
|
22.0%
|
|
(30%)
|
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32
Table of Contents
Each
of the components was separately weighted at the "threshold," "target" and "maximum" levels. At the "threshold" level, our Compensation Committee believed that the focus should be on maximizing
operating income if our non-GAAP revenues were low and therefore weighted 70% of the annual cash incentive bonus on the non-GAAP operating income as a percentage of non-GAAP revenue component and 30%
on the non-GAAP revenue component. Conversely, at the "maximum" level, if our non-GAAP revenues were high we believe our stockholders would benefit, and therefore weighted 70% of the annual cash
incentive bonus for our executives on the non-GAAP revenue component and 30% on the non-GAAP operating income as a percentage of non-GAAP revenue component. As discussed above, beginning in 2014, as
part of the changes to our executive compensation program we are implementing as a result of stockholder feedback, the weighting of the components will be fixed each year regardless of the non-GAAP
revenue or operating income achieved.
In
2013, our non-GAAP revenue was $352,507,000. Our non-GAAP operating income as a percentage of non-GAAP revenue was 23.1%, which was below our minimum threshold at this level of revenue, and
therefore our NEOs received no credit for this component. Based on our non-GAAP revenue being above the "threshold" but below the "target", this represented 62.5% of target (halfway between 25%
threshold and 100% target) and as a result, the revenue component had a weighting of 40% based on linear interpolation (halfway between 30% and 50%). Thus, each NEO received 25%
(i.e., 62.5% × 40%) for the corporate component of their respective target bonus percentage as outlined in the table below (other than Mr. Lazzaro's whose
corporate component was pro-rated based on the time he was employed by us).
|
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|
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|
|
Corporate Component
|
|
Achievement
|
|
Plan Payout
|
|
&zwsp;
|
|
|
Non-GAAP Revenue*
|
|
$352,507,000
|
|
25%
|
|
|
|
|
|
Non-GAAP Operating Income*
(as percentage of Non-GAAP Revenue)
|
|
23.1%
|
|
0%
|
|
|
|
|
|
|
|
|
|
|
|
* These financial measures are non-GAAP measures and should not be reviewed in isolation or as substitutes for our
financial results as reported in accordance with GAAP. Please see Appendix A for an explanation of and reconciliation of these non-GAAP financial measures to the applicable GAAP financial
measures.
2013 Individual Component
In 2013, Messrs. Waldis, Irving and Garcia's individual component of his annual cash incentive bonus was based upon our Compensation
Committee's subjective assessment of his individual performance. Based on their assessment and Mr. Waldis' recommendations (other than his own), our Compensation Committee awarded each of
Messrs. Waldis, Irving and Garcia 70% of the 10% allocated to the individual component of their respective target cash incentive bonus. Our Compensation Committee awarded less than the target
amount because although we believe we made some excellent strides in 2013, our Compensation Committee felt that our overall performance could have been improved. Our Compensation Committee did not
distinguish any NEO's individual performance during 2013 in determining this percentage.
33
Table of Contents
2013 Business Component
The business component of Mr. Lazzaro's 2013 annual cash bonus was tied to certain financial objectives of specific accounts in North America.
Specifically, 48% of his target cash incentive bonus was based upon those accounts, equally divided between revenues and contribution margin objectives. Mr. Lazzaro's accounts did not achieve
the desired contribution margin and, as a result, he did not receive any incentive compensation for this component. However, he did receive $55,774 or 48% of his eligible cash incentive bonus for the
business component tied to revenue contribution, which was pro-rated for the portion of the year that Mr. Lazzaro was responsible for the accounts.
The
business component of Mr. Mendes' 2013 annual cash bonus was tied to certain financial objectives of our broadband business. Specifically, 40% of his target cash incentive compensation was
based upon the combination of revenue and contribution margin of our broadband business. Mr. Mendes had the ability to increase his incentive compensation for exceeding targets to various
tiers, not to exceed 85% of his base salary. The actual 2013 incentive compensation for the performance of our broadband business exceeded target and resulted in an actual payment of
$187,500 or 133% of his target. In addition, Mr. Mendes was also eligible to receive an additional $25,000 for each quarter in which our broadband business achieved target revenue and operating
margin. Mr. Mendes received an additional $75,000 for achieving these targets for three of the four quarters of 2013.
As
such, our NEOs were awarded the following amounts under the 2013 cash incentive bonus:
|
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|
|
Executive
|
|
|
Target
Bonus for
Corporate
Component
|
|
|
Percentage of
Corporate
Component
Target Awarded
|
|
|
Actual
Corporate
Component
Awarded
|
|
|
Target
Bonus for
Individual
Component
|
|
|
Individual
Component
Percentage of
Base Salary
|
|
|
Actual
Individual
Component
Awarded
|
|
|
Total Bonus
Awarded
|
|
&zwsp;
|
&zwsp;
|
|
Stephen G. Waldis
|
|
$
|
557,230
|
|
|
25
|
%
|
$
|
139,308
|
|
$
|
55,723
|
|
|
70.0
|
%
|
$
|
40,692
|
|
$
|
180,000
|
|
&zwsp;
|
|
|
Lawrence R. Irving
|
|
$
|
231,750
|
|
|
25
|
%
|
$
|
57,938
|
|
$
|
38,625
|
|
|
70.0
|
%
|
$
|
27,062
|
|
$
|
85,000
|
|
|
|
|
Robert E. Garcia
|
|
$
|
288,400
|
|
|
25
|
%
|
$
|
72,100
|
|
$
|
41,200
|
|
|
70.0
|
%
|
$
|
28,900
|
|
$
|
101,000
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
Executive
|
|
|
Target
Bonus for
Corporate
Component
|
|
|
Percentage of
Corporate
Component
Target Awarded
|
|
|
Actual
Corporate
Component
Awarded
|
|
|
Target Bonus
for Business
Component
|
|
|
Percentage
of Business
Target
Awarded
|
|
Actual
Business
Component
Awarded
|
|
|
Total
Bonus
Awarded
|
|
&zwsp;
|
&zwsp;
|
|
Nicholas Lazzaro
(1)
|
|
$
|
76,904
|
|
|
25
|
%
|
$
|
19,226
|
|
$
|
115,360
|
|
|
48
|
%
|
$55,774
|
|
$
|
75,000
|
|
&zwsp;
|
|
|
Mark Mendes
|
|
$
|
70,000
|
|
|
25
|
%
|
$
|
17,500
|
|
$
|
140,000
|
|
|
133
|
%
|
$187,500
|
|
$
|
280,000
|
(2)
|
|
|
(1)
Mr. Lazzaro's corporate and business component target bonus amounts were pro-rated based on his
start of employment with us after January 1, 2013.
(2)
Mr. Mendes' business bonus includes an additional $75,000, representing three payments of
$25,000 for each quarter in which his business achieved certain financial measures for the quarter.
34
Table of Contents
2013 Long-Term Incentive Compensation Plan
In 2013, our Compensation Committee expanded our executive compensation plan to include time-based restricted shares in addition to stock options and
performance-based restricted shares, targeting an annual mix of one-third for each of these equity awards (based on grant date fair value). The number of stock options, target number of performance
restricted shares and time-based restricted shares to be granted to our NEOs was based on our Compensation Committee's general understanding of competitive pay practices, our CEO's recommendation
(except his own) and other factors it deemed appropriate.
In
February 2013, our Compensation Committee awarded time-based restricted stock, determined the targets for the 2013 performance-based restricted share awards and granted options to purchase shares
of our Common Stock to our NEO's who we employed on such date. The grants were intended to provide incentives for our NEOs to achieve our 2013 goals and vest over up to three or four years to also tie
our NEO's variable realizable compensation to our performance and further align their interests with those of our stockholders. See Description of Awards Granted in 2013. The number of shares of
time-based restricted stock awarded and number of shares subject to the options granted were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
Number of Time-Based
Shares of Restricted Stock
|
|
|
Number of Shares
Subject to Options
|
|
|
&zwsp;
|
|
Stephen G. Waldis
|
|
|
30,560
|
|
|
76,400
|
|
&zwsp;
|
|
|
Lawrence R. Irving
|
|
|
9,880
|
|
|
24,700
|
|
|
&zwsp;
|
|
Robert Garcia
|
|
|
16,000
|
|
|
40,000
|
|
&zwsp;
|
|
|
Mark Mendes
|
|
|
3,880
|
|
|
9,700
|
|
|
The
actual number of performance-based restricted shares of Common Stock that could be issued pursuant to the 2013 performance-based restricted share awards was based upon our performance against the
same non-GAAP revenue and non-GAAP operating income as a percentage of non-GAAP revenue targets applicable to the 2013 annual incentive bonus compensation discussed under "2013 Annual Cash Incentive
Award".
In
2013, our non-GAAP operating income as a percentage of non-GAAP revenue was 23.10%, which was below our threshold, and therefore our NEOs received no credit for this component. Our non-GAAP revenue
was $352,507,000, which was halfway between the threshold revenue of $345,000,000 and the target revenue of $360,000,000. Please see Appendix A for an explanation of and reconciliation of these
non-GAAP financial measures to the applicable GAAP financial measures. As a result, the revenue component had a weighting of 40% based on linear interpolation (halfway between 30% and 50%). Since the
actual non-GAAP revenue was halfway between the threshold and target revenue, the actual number of restricted shares of Common Stock issued pursuant to the 2013 performance-based restricted share
awards to our NEOs in February 2014 was the threshold number of shares each NEO was entitled to receive based on the "revenue" component plus 20%
35
Table of Contents
(i.e., 50% × 40%)
of the difference between the target number of shares and the threshold number of shares above the threshold number of shares, as set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
Threshold
Revenue
Component
|
|
Additional
Shares Over
Minimum
|
|
Performance
Shares Awarded
|
|
|
&zwsp;
|
|
Stephen G. Waldis
|
|
32,250
|
|
|
43,000
|
|
|
53,750
|
|
12,903
|
|
2,153
|
|
15,056
|
|
&zwsp;
|
|
|
Lawrence R. Irving
|
|
10,425
|
|
|
13,900
|
|
|
17,375
|
|
4,171
|
|
696
|
|
4,867
|
|
|
&zwsp;
|
|
Robert E. Garcia
|
|
16,875
|
|
|
22,500
|
|
|
28,125
|
|
6,752
|
|
1,126
|
|
7,878
|
|
&zwsp;
|
|
|
Mark Mendes
|
|
4,125
|
|
|
5,500
|
|
|
6,875
|
|
1,650
|
|
276
|
|
1,926
|
|
|
Thus,
due to our failure to achieve the target on both of its financial measures, the NEOs received an aggregate of 55,173 less performance-based restricted shares than their targeted 84,900. The
number of shares issued was also subject to an adjustment based on our TSR compared to that of our peer group during the prior three-year period (2011-2013). If the TSR was below the
25
th
percentile, the actual number of performance-based shares for an NEO would be reduced by 10% and if the TSR was at or above the 75
th
percentile, the
actual number of performance-based shares would be increased by 20%. Thus, the actual number of performance-based shares that could be issued pursuant to the 2013 performance-based restricted share
awards could range from zero to one and one-half times the initial target amount. As our TSR was not in the bottom 25
th
nor the 75
th
percentile compared to
its peer group for such three-year period (2011-2013), no adjustment was made by our Compensation Committee to the above number of performance-based restricted shares each NEO was issued.
In
connection with his joining our Company in May 2013, our Compensation Committee (i) granted Mr. Lazzaro an option to purchase 60,000 shares of our Common Stock at an exercise price
equal to $30.56, the closing price per share of our Common Stock on the Nasdaq Global Market on the grant date, with 25% of the shares subject to the option becoming exercisable after 12 months
of continuous service and the balance becoming exercisable in equal monthly installments over the next 36 months of continuous service thereafter and (ii) awarded Mr. Lazzaro
50,000 restricted shares of our Common Stock, with 25% of the shares vesting after 12 months of continuous service and the balance vesting in equal installments each quarter over the next three
years of continuous service thereafter. Our Compensation Committee based the amount of Mr. Lazzaro's equity grant on, among other things, advice from its compensation consultant, the size of
the initial equity grants of our other executive officers, his expected senior role at our Company and its general understanding of competitive pay practices.
36
Table of Contents
Special 2013 Equity Awards
In 2012, our Compensation Committee changed the date for determining compensation for our executive officers from December of the prior year
(i.e., December 2012) to February of the following year (i.e., February 2013) to ensure that decisions were based on our audited financial results from the prior year. In
February 2013, our Compensation Committee determined 2013 compensation for our NEOs, at which time options were granted to our NEOs with an exercise price of $31.02. Since our Common Stock was
37% higher on the grant date compared to the price of our Common Stock on the date the equity awards were originally scheduled to be granted in December 2012, to make our NEOs whole and
compensate them for the loss of intrinsic value appreciation during that period, our Compensation Committee granted each NEO the following number of restricted shares of our Common Stock as a special
one-time grant equal to 37% of the number of stock options granted. One-half of such shares vest after one year and the remaining one-half of the shares vest after two years, provided such individual
is continuously employed by our Company during such period. Our Compensation Committee does not intend to make any similar grants in the future.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
|
Restricted Shares Granted
|
|
&zwsp;
|
&zwsp;
|
|
Stephen G. Waldis
|
|
|
28,264
|
|
&zwsp;
|
|
|
Lawrence R. Irving
|
|
|
9,138
|
|
|
&zwsp;
|
|
Robert Garcia
|
|
|
14,798
|
|
&zwsp;
|
|
|
Mark Mendes
|
|
|
3,589
|
|
|
|
|
|
|
|
|
|
|
Employment Agreements, Other Benefits and Perquisites
We have entered into three-year employment agreements with each of our NEOs that expire on December 31, 2014. Each employment agreement
includes a severance arrangement that provides enhanced benefits in the case of involuntary termination following a change in control which is designed to promote stability and continuity of our
senior management. For a description of the terms of the employment agreements, please see "Employment Agreements" on page 45. Our NEOs are eligible to participate in all of our employee
benefit plans (other than our employee stock purchase plan), such as medical, dental, vision, group life and disability insurance and our 401(k) plan, in each case on the same basis as our other
employees. We lease an automobile (and pay applicable insurance and gas) for Messrs. Waldis, Irving and Mendes and provide a car allowance to Mr. Garcia, each to be used primarily for
business purposes. We paid Mr. Lazzaro $200,000 to assist with his relocation to the Dallas, Texas vicinity in connection with his joining our Company. In the event Mr. Lazzaro resigns
or is terminated for cause within one year of his relocation to Texas, he is required to pay back this amount. There were no other special benefits or perquisites provided to any NEO in 2013.
Financial Restatement and Related Policies
Although we do not have a clawback policy currently in place, we have a comprehensive Ethics and Business Conduct Policy. As part of this policy, we
will investigate all reported instances of questionable or unethical behavior, and where improper behavior is found to have occurred, we will take appropriate action up to and including termination.
In the event that an investigation uncovers that one of our employees, officers or directors commits fraud or other improper act which causes our financials for any period to be restated or otherwise
affects such financials, we would take immediate and appropriate disciplinary action individual including but not limited to termination. In addition, we would take whatever legal remedies are
available to prosecute such individual to the fullest extent of
37
Table of Contents
the
law and recover any amounts he inappropriately received as a result of such fraudulent action, including but not limited to any annual or long-term incentives that he received but would not have
received had such act not be taken.
Executive Officer Stock Ownership Guidelines
In 2013, in consultation with Deloitte and as a result of the feedback we received during our stockholder outreach program, we revised the stock
ownership guidelines for our executive officers. The purpose of these guidelines is to increase and maintain our executive officers' equity stake in our Company to further align our executive
officers' interests with those of our stockholders. Each executive officer who is subject to Section 16 of the Securities Exchange Act or directly reports to our CEO (including all our NEOs) is
required to own, as of the later of January 1, 2019 or five years from the date such individual begins reporting to our CEO or becomes a Section 16 officer, is required to own a number
of vested shares of our Common Stock having a value equal to (a) five times the base salary for our CEO; (b) three times the base salary for our President and Chief Operating Officer,
Chief Financial Officer, and President of any division (i.e., North America, Emerging Markets, International) and (c) one and
one-half times the base salary for other executive officers. In the event an executive officer is not compliant at the end of such five year period, our Compensation Committee may reduce future equity
grants to such executive officer until he is compliant. Based on share holdings on April 11, 2014, each of our NEOs exceeded the minimum holding requirements on that date.
Tax Matters
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), places a $1,000,000 limit on the amount of compensation that we
may deduct in any one year with respect to our CEO and our three other most highly paid NEOs (other than our CFO). To maintain flexibility in compensating NEOs in a manner designed to promote varying
corporate goals, our Compensation Committee may, in its judgment, authorize compensation payments that are not deductible when it believes that such payments are appropriate, including to attract and
retain highly-qualified executive officers.
Recent Developments
Mr. Irving resigned as our Chief Financial Officer and Treasurer, effective April 1, 2014, and agreed to remain as an employee until
December 31, 2014 in an advisory role, working on several projects. Our Board has elected Karen Rosenberger to replace Mr. Irving as our Executive Vice President, Chief Financial Officer
and Treasurer, effective April 1, 2014. Ms. Rosenberger previously served as our Senior Vice President and Chief Accounting Officer.