UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant þ
Filed by a Party other than the Registrant ¨
Check the appropriate box:
| ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, For Use of the Commission Only (As Permitted by Rule 14a-6(e)(2)) |
| þ | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material under Rule 14a-12 |
Lumber Liquidators Holdings, Inc. |
(Name of Registrant as Specified In Its Charter) |
|
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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| (3) | Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it
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2021
Notice of Annual Meeting
of
Stockholders and Proxy Statement
May
19, 2021
[THIS
PAGE INTENTIONALLY LEFT BLANK]
|
Notice
of Annual Meeting of Stockholders |
Annual
Meeting Information |
Company: |
Lumber
Liquidators Holdings, Inc. (“LL Flooring”) |
Date: |
May
19, 2021 |
Time: |
10:00
a.m. EDT |
Place: |
www.virtualshareholdermeeting.com/LL2021 |
|
There
will be no physical location for this year’s meeting. |
Record
Date: |
March
22, 2021 |
Agenda
1. | To
elect two director nominees named in the Proxy Statement to hold office until the 2024
Annual Meeting of Stockholders, one director to hold office until the 2022 Annual Meeting
of Stockholders, and one director to hold office until the 2023 Annual Meeting of Stockholders,
or until their successors are elected and qualified; |
2. | To
approve a non-binding advisory resolution approving the compensation of our named executive
officers; |
3. | To
ratify the selection of Ernst & Young LLP as our independent registered public accounting
firm for the fiscal year ending December 31, 2021; and |
4. | To
transact such other business as may properly come before the Annual Meeting. |
Admission
to the Meeting
Only
stockholders of record at the close of business on March 22, 2021 are entitled to notice of, and to vote at, the Annual Meeting.
As
part of our ongoing precautions regarding COVID-19, we are holding a virtual meeting. The virtual meeting will provide stockholders
the ability to participate, vote their shares and ask questions during the meeting. To attend and participate in the Annual Meeting
and examine our list of stockholders, stockholders must register in advance at www.virtualshareholdermeeting.com/LL2021 prior
to the deadline of 11:59 p.m. ET on May 18, 2021. Upon completing registration, eligible participants will receive further instructions
via e-mail, including unique links to access the meeting. Please refer to the “Questions and Answers About the Annual Meeting”
section for additional information on how to participate in the Annual Meeting.
Alice
G. Givens
Corporate
Secretary
April
7, 2021
Your
vote is important
Stockholders
of record at the close of business on March 22, 2021, the record date for the Annual Meeting, are entitled to notice of and to
vote at the annual meeting and any postponements or adjournments thereof.
Even
if you plan to attend the virtual annual meeting, we ask that you please promptly vote on the Internet, by phone or by mail. Voting
early will help avoid additional solicitation costs and will not prevent you from voting in person at the annual meeting if you
wish to do so.
How
to vote:
| Online:
www.proxyvote.com |
| Phone
(Toll Free): 1-800-690-6903 |
| Mail:
Sign, date and return your proxy card in the enclosed envelope. |
| Live
at Meeting: If you attend our virtual meeting, you may vote live at the meeting. |
Additional
voting instructions are provided in the Proxy Statement and on your proxy card.
Important
Notice Regarding the Availability of Proxy Materials for the
2021
Annual Meeting of Stockholders to Be Held on May 19, 2021
This
Proxy Statement and our 2020 Annual Report to Stockholders are available at www.proxyvote.com
| 1 |
TABLE
OF CONTENTS
| 3 |
Proxy
Statement Summary
This
summary highlights information contained elsewhere in this Proxy Statement and does not contain all of the information you should
consider. Please carefully read the entire Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December
31, 2020 before voting.
2020
Annual Meeting of Stockholders
Date
and Time |
|
Record
Date |
|
Place |
|
Who
Can Attend and Vote |
May
19, 2021
10:00
a.m. EDT |
|
March
22, 2021 |
|
www.virtualshareholdermeeting.com/LL2021 |
|
Stockholders
of record at the close of business on March 22, 2021 |
Proposals
and Board Recommendations
Item |
|
Proposals |
|
Board
Recommendations |
|
Page |
1 |
|
Election
of four directors |
|
✓
FOR each nominee |
|
8 |
2 |
|
Approval
of a non-binding advisory resolution approving the compensation of our named executive officers |
|
✓
FOR |
|
27 |
3 |
|
Ratification
of Ernst & Young LLP as our independent registered public accounting firm |
|
✓
FOR |
|
55 |
2020
Financial and Operating Highlights
For
fiscal year 2020, we delivered $1.1 billion of net sales, demonstrating resilience as we navigated the COVID-19 shutdown in the
spring to grow comparable sales 10.8% in the second half. Our merchant and sourcing teams continued to drive our alternative
country sourcing strategies, secure lower costs, and leverage selective retail price increases to improve gross margin.
In addition, our marketing teams deployed more efficient and effective digital marketing spend, and our overall organization maintained
disciplined expense management. These profitability initiatives drove a $40 million increase in operating income and a 360
basis point increase in operating margin on similar net sales versus 2019.
In
addition to delivering strong profitability growth, we’re excited about the progress we made on our strategic transformation
initiatives in 2020 that will position us for long-term sustainable growth. We strive to become the customers’ first
choice in hard-surface flooring by providing the best experience from start to finish, and plan to differentiate ourselves by
offering the high-quality selection, expertise and high-touch service of a local store combined with the scale, omnichannel convenience
and value of a national brand. We see substantial opportunity ahead to continue to evolve our Company and increase stockholder
value over the long term.
Our
Director Nominees
You
are being asked to vote on the election of the following four director nominees. Detailed information about each director can
be found beginning on page nine.
Name
and Principal Occupation |
|
Age |
|
Director
Since |
|
Independent |
|
AC |
|
CARA |
|
CC |
|
NCG |
|
Other
Public Company
Boards |
Douglas
T. Moore
Chief
Executive Officer, 1847 Goedeker Inc. |
|
64 |
|
2006 |
|
✓ |
|
|
|
✓ |
|
|
|
✓ |
|
1 |
Nancy
M. Taylor
Former
President and CEO, Tredegar Corporation |
|
61 |
|
2014 |
|
IC |
|
|
|
✓ |
|
|
|
✓ |
|
2 |
Joseph
M. Nowicki
Former
Executive Vice President & CFO, Beacon Roofing Supply, Inc. |
|
59 |
|
2020 |
|
✓ |
|
✓ |
|
✓ |
|
|
|
|
|
0 |
Charles
E. Tyson
President
& CEO, LL Flooring |
|
59 |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
0 |
AC
= Audit Committee
CARA
= Compliance and Regulatory Affairs Committee
CC
= Compensation Committee
NCG
= Nominating and Corporate Governance Committee |
C
= Committee Chairperson
F
= Financial Expert
IC
= Independent Chairperson of the Board |
Our
Board of Directors
Our
Board of Directors (the “Board”) embodies a diverse range of viewpoints, backgrounds and skills that are vital to
its effectiveness.
See
page nine for individual details for each director, including experience and qualifications.
Corporate
Governance Highlights
Strong
corporate governance practices are key to achieving our performance goals while maintaining the trust and confidence of our stockholders,
associates, customers and stakeholders. Our corporate governance practices are described in more detail beginning on page 13 and
in our Corporate Governance Guidelines, which can be found at https://investors.llflooring.com/corporate-governance.
| 5 |
Director Independence |
89% Independent |
• | Eight of our nine directors are independent. |
|
• | Our Chief Executive Officer is the only management director. |
|
• | All of our Board committees are composed exclusively of independent
directors. |
|
Board Leadership |
Independent Chairperson |
• | We have an independent Chairperson with prescribed duties. |
|
• | The independent Chairperson serves as a liaison between management
and the independent directors on Board-wide issues. |
|
Board Oversight of Strategy and Enterprise Risk |
Active Oversight of Strategy and Enterprise Risk |
• | The Board is actively engaged in the Company’s strategic
planning through an integrated, risk-informed approach that supports the long-term growth of the Company, including oversight of the
Company’s long-term financial plan, innovation and workforce development initiatives. |
|
• | The Audit Committee meets regularly with members of management
to review and discuss implementation of risk-assessment and risk management policies and procedures. |
|
Stock Ownership Requirements |
Robust Director and Officer Stock Ownership Guidelines |
• | Within five years of their election to the Board, our non-employee
directors are expected to hold an amount of the Company’s common stock equal in value to two and one-half times their annual cash
and stock retainer combined. |
|
• | Our Chief Executive Officer is expected to hold shares with
a value of five times his salary. Our Chief Financial Officer is expected to hold shares with a value of two times her salary, and our
other executive officers are expected to hold shares with a value equal to their annual salary. |
|
• | We do not allow our executive officers or directors to pledge
shares as collateral or hedge the economic risk of owning shares. |
|
Governance Matters |
Strong Corporate Governance |
• | We have a comprehensive orientation program for new directors. |
|
• | The Board and its committees conduct annual self-assessments. |
|
• | The independent directors regularly meet in executive session
without management present. Our independent Chairperson presides over these non-management and executive sessions. |
|
• | Our independent directors have complete access to management. |
|
Executive
Compensation Highlights
You
are being asked to vote on an advisory basis on the compensation paid to the Company’s named executive officers as described
in this Proxy Statement, including the Compensation Discussion and Analysis, compensation tables and narrative discussion beginning
on page 29.
In
December 2019, the Compensation Committee and Board of Directors approved changes to the Executive Long-Term Incentive Plan that
were intended to further strengthen the alignment of pay and performance, as well as focus executives on creating long-term stockholder
value. These changes included:
2020
Compensation Highlights |
• Lengthened the performance measurement period of the long-term incentive plan from two years to three years to better align
with market practice |
• Awards are earned and vest based on performance after the end of three years |
Philosophy
and Objectives
Our
executive compensation program is designed to:
✓
Link pay to performance
✓
Attract, develop and retain an experienced and highly qualified executive officer team
✓
Encourage long-term commitment and align the interests of executive officers with those of our stockholders, customers
and other stakeholders by placing a substantial portion of pay at risk through performance goals that, if achieved, are expected
to increase total stockholder return and enhance customer service |
✓ Motivate and reward superior performance that supports our business and strategic plans and contributes to the long-term
success of the Company
✓
Promote internal pay equity
✓
Reinforce our core values of thinking like our customers, acting like owners, succeeding as a team, expecting continuous
improvement and acting with integrity |
We
meet these objectives through the appropriate mix of compensation, including base salary, short-term incentives and long-term
incentives.
Compensation
Governance Features |
✓ Balance of short-term and long-term incentives
✓ Substantial
portion of executive compensation is at risk and tied to enhanced stockholder value
✓ Different performance measures used for short-term and long-term incentive programs
✓ Robust share ownership guidelines
✓ Clawback provisions incorporated into incentive compensation
✓ Annual Say-on-Pay votes conducted
✓ Two triggers required for the payment of most change in control benefits |
û No payout of short-term or long-term awards greater than 200% of target
û
No long-term or indefinite employment agreements
û No hedging or pledging of shares as collateral
û No excessive perquisites
û No issuance of excessive equity compensation that would dilute stockholder value
û No excessive change in control severance benefits |
| 7 |
Proposal
1 |
Election
of Directors |
The
size of the Board is currently fixed by resolution of the Board at nine members divided into three classes. The three-year terms
of each class are staggered so that the term of one class expires at each annual meeting. The term of office of our Class III
directors will end at this year’s Annual Meeting of Stockholders. Our Class I directors’ terms will end at the Annual
Meeting of Stockholders in 2022. Our Class II directors’ terms will end at the Annual Meeting of Stockholders in 2023. Each
director serves a three-year term and will continue in office until a successor has been elected and qualified, subject to earlier
resignation, retirement or removal from office. Effective September 1, 2020, the Board appointed Joseph M. Nowicki to serve as
a Class I director. Effective May 26, 2020, the Board appointed Charles E. Tyson to serve as a Class II director. Because Mr.
Nowicki and Mr. Tyson were appointed in 2020, the Board has determined to nominate each of them for election as a Class I and
Class II director, respectively, to serve the remainder of such terms. Jimmie L. Wade is not standing for re-election. The size
of the Board will be reduced to eight directors, and the number of Class III directors will be reduced to two upon the end of
Mr. Wade’s term at the Annual Meeting.
The
following pages set forth information concerning the nominees and the directors whose terms of office will continue after the
Annual Meeting including certain experiences, qualifications, attributes and/or skills that led the Board to conclude that each
of them should serve as a director.
If
any nominee is unable to serve as a director, the persons named in the enclosed proxy reserve the right to vote for a lesser number
of directors or for a substitute nominee designated by the Board, to the extent consistent with our Certificate of Incorporation
and our Bylaws. All of the nominees listed below have consented to be nominated and to serve if elected. We do not expect that
any nominee will be unable to serve.
Should
all the Class III director nominees be elected to our Board, the director classes after the 2021 Annual Meeting of Stockholders
will be as follows:
Class
I
Terms
expiring at
2022
Annual Meeting |
|
Class
II
Terms
expiring at
2023
Annual Meeting |
|
Class
III
Terms
expiring at
2024
Annual Meeting |
Terri
Funk Graham
Famous
P. Rhodes
Joseph
M. Nowicki |
|
David
A. Levin
Martin
F. Roper
Charles
E. Tyson |
|
Douglas
T. Moore
Nancy
M. Taylor |
The
Board, upon the recommendation of the Nominating and Corporate Governance Committee, has nominated Douglas T. Moore and Nancy
M. Taylor for re-election to the Board as Class III directors for three-year terms ending in 2024, Joseph M. Nowicki for election
to the Board as a Class I director for a one-year term ending in 2022, and Charles E. Tyson for election to the Board as a Class
II director for a two-year term ending in 2023.
Nominees for Election for Terms Expiring in 2024 (Class III) |
Douglas
T. Moore
Chief
Executive Officer
1847
Goedeker, Inc.
Director
since: 2006
Age:
64
Committees:
• Nominating and Corporate Governance
•
Compliance and Regulatory Affairs |
Mr.
Moore currently serves as the Chief Executive Officer of 1847 Goedeker, Inc., an industry-leading
direct-to-consumer appliance and furniture e-tailer, which went public in 2020. Prior
to that time, Mr. Moore was Chief Executive Officer of Goedeker’s, an operating
subsidiary of 1847 Holdings, LLC, beginning in August 2019. Prior to that, he was President
and Chief Executive Officer of Med-Air Homecare, a home healthcare equipment and service
provider, from November 2013 until May 2019, principal of First Street Consulting, LLC,
a retail consulting firm, from January 2011 until October 2017, and Senior Vice President
of FirstSTREET for Boomers and Beyond, Inc., a leading direct marketer of products for
baby boomers, from October 2017 until August 2019. From February 2012 through June 2012,
Mr. Moore served as the Chief Merchandising and Marketing Officer at hhgregg, Inc., a
consumer electronics retail chain. Mr. Moore is a director of 1847 Goedeker, Inc.
Qualifications:
Through his more than 25 years of retail experience, Mr. Moore has developed an understanding of strategic and tactical business
issues that include store operations, merchandising, supply chain, sourcing and human resource planning. He also possesses senior
management, marketing, risk assessment and retail knowledge. He has been a member of our Nominating and Corporate Governance Committee
since our initial public offering and a member of our Compliance and Regulatory and Affairs Committee since May 2016. Mr. Moore
also served as a member of our Audit Committee from our IPO until May 2016 and as Chairperson of our Nominating and Corporate
Governance Committee from our initial public offering until May 2019. Through his service as a director, Mr. Moore has gained
insight, perspective and knowledge regarding our business, growth, operations and personnel.
|
Nancy
M. Taylor
Former
President and Chief Executive Officer, Tredegar Corporation
Director
since: 2014
Age:
61
Committees:
• Nominating
and Corporate Governance
• Compliance and Regulatory Affairs |
Ms.
Taylor is the former President and Chief Executive Officer of Tredegar Corporation, a
manufacturing company, serving in such role from January 2010 to June 2015, and was a
member of Tredegar’s board of directors from early 2010 until June 2015. Ms. Taylor
is a director of TopBuild Corp. and Verso Corporation.
Qualifications:
Ms. Taylor has significant
experience as a chief executive officer of a publicly traded international manufacturer. Through her experience, she has gained
and developed extensive business, finance and leadership skills. Further, she possesses an understanding of strategic planning,
risk assessment and international operations. In addition, she has experience serving as a director of a public company and brings
strong corporate governance knowledge to the Board. Ms. Taylor has been a member of our Nominating and Corporate Governance Committee
since January 2015 and a member of our Compliance and Regulatory Affairs Committee since May 2019. Ms. Taylor also served as a
member of our Compensation Committee from May 2014 until May 2019. Additionally, Ms. Taylor was appointed Chairperson of our Board
in November 2015. Through her service as a director, Ms. Taylor has gained insight, perspective and knowledge regarding our business,
growth, operations and personnel.
|
|
|
The Board of Directors recommends a vote FOR the election of Mr. Moore and Ms. Taylor for a three-year term expiring in 2024. |
| 9 |
Nominee
for Election for Terms Expiring in 2022 (Class I) |
Joseph
M. Nowicki
Former
Executive Vice President and Chief Financial Officer, Beacon Roofing Supply, Inc.
Director
since: 2020
Age:
59
Committees:
• Audit
• Compliance and Regulatory Affairs |
Mr.
Nowicki served as Executive Vice President and Chief Financial Officer of Beacon Roofing
Supply, Inc., a distributor of commercial and residential roofing products and related
building materials, from 2013 until June 2020. Prior to assuming that position,
he was Chief Financial Officer, Chief Compliance Officer and Treasurer of Spartan Motors,
Inc., a specialty chassis, vehicle, truck body and aftermarket parts manufacturer for
RV and emergency response customers. Mr. Nowicki previously served as a director
of Diversified
Restaurant Holdings, Inc. from 2010 to 2020 and ASV Holdings, Inc. from 2017 to 2019.
Qualifications:
Mr. Nowicki brings significant financial, retail and information technology experience to the Board. As the former chief financial
officer of a public retail corporation and having held other senior executive roles with other retail companies, Mr. Nowicki has
developed operational and leadership aptitude in addition to his significant capability in the areas of strategic business planning,
risk assessment and store operations. Mr. Nowicki has been a member of our Audit Committee since September 2020. Mr. Nowicki also
has served as a member of our Compliance and Regulatory Affairs Committee since September 2020.
|
|
|
The Board of Directors recommends a vote FOR the election of Mr. Nowicki for a one-year term expiring in 2022.
|
Nominee
for Election for Terms Expiring in 2023 (Class II) |
Charles
E. Tyson
President
and Chief Executive Officer, Lumber Liquidators Holdings, Inc.
Director
since: 2020
Age:
59
Committees:
None |
Mr.
Tyson was appointed President and Chief Executive Officer in May 2020 and concurrently
joined Lumber Liquidators’ Board of Directors. Mr. Tyson previously served as Interim
President from February 2020 until May 2020 and served as Chief Customer Experience Officer
from June 2018 until May 2020. From 2008 to 2017, Mr. Tyson held various roles at Advance
Auto Parts, Inc., an automotive aftermarket parts provider, including Executive Vice
President, Merchandising, Marketing and Supply Chain from 2013 to 2017 and Senior Vice
President, Merchandising and Replenishment from 2008 to 2013. Prior to that, Mr. Tyson
served in a variety of Senior Vice President roles at Office Max and Office Depot.
Qualifications:
Mr. Tyson has been with Lumber Liquidators for three years, including two years as Chief Customer Experience Officer.
He currently serves as Lumber Liquidators’ President and Chief Executive Officer. He has deep retail and commercial
experience and has served in senior leadership roles at multiple publicly traded companies. The Board benefits from
his broad operating, supply chain, retail, merchandising, marketing, customer insights and strategic planning experience.
|
|
|
The
Board of Directors recommends a vote FOR the election of Mr. Tyson for a two-year term expiring in 2023. |
Incumbent
Directors Whose Terms Expire in 2022 (Class I) |
Terri
Funk Graham
Former
Senior Vice President & Chief Marketing Officer, Jack In the Box, Inc.
Director
since: 2018
Age:
55
Committees:
•
Compensation
•
Nominating and Corporate Governance (Chairperson)
|
Ms.
Graham previously served as Chief Marketing Officer – Red Envelope for Provide
Commerce, Inc., an e-commerce gifting company, from July 2013 to September 2014. Prior
to that position, Ms. Graham, joined Jack in the Box Inc., a restaurant company that
operates and franchises Jack in the Box and Qdoba Mexican Grill restaurants, in 1990,
and most recently served as its Senior Vice President and Chief Marketing Officer from
September 2007 to December 2012. Ms. Graham serves as a director of Sprouts Farmers Market,
Inc. and CV Sciences, Inc. and previously served as a director of 1-800 Contacts between
2015 to 2016 and Hot Topic, Inc. from June 2012 to June 2013.
Qualifications:
Ms. Graham has over 30 years of branding and marketing experience in the retail industry, including extensive knowledge
of digital and e-commerce business. Ms. Graham brings her public company board experience to our Board, including a strong
corporate governance background. Ms. Graham has been a member of our Compensation Committee and Nominating and Corporate
Governance Committee since September 2018. Ms. Graham became Chairperson of the Nominating and Corporate Governance Committee
in May 2019.
|
Famous
P. Rhodes
Vice
President, Chief Marketing and Technical Officer, RV Retailer, LLC
Director
since: 2017
Age:
46
Committees:
• Audit
• Compensation |
Mr.
Rhodes currently serves as corporate Vice President, Chief Marketing and Technical Officer
of RV Retailer, LLC, a recreational vehicle retail company, serving in such role since
November 2019. Prior to assuming his current position, Mr. Rhodes was Executive Vice
President and Chief Marketing Officer of Bluegreen Vacations Corporation, a vacation
ownership company, from August 2017 to September 2019, Vice President of Digital Marketing
and Customer Experience for AutoNation, Inc., an automotive retailer, from 2015 to 2017,
and Vice President of eCommerce for AutoNation, Inc. from 2012 to 2015.
Qualifications:
Mr. Rhodes brings significant marketing and omnichannel retail experience to the Board. Currently serving as the chief
marketing officer of a large retail corporation and having held other senior executive roles with other retail companies,
Mr. Rhodes has developed operational and leadership aptitude in addition to his significant capability in the areas of
digital technology and customer-experience. Mr. Rhodes has been a member of our Audit Committee and Compensation Committee
since May 2018.
|
| 11 |
Incumbent
Directors Whose Terms Expire in 2023 (Class II) |
David
A. Levin
Former
President and Chief Executive Officer, Destination XL Group, Inc.
Director
since: 2017
Age:
69
Committees:
•
Audit
•
Compensation (Chairperson)
|
Mr.
Levin served as the President and Chief Executive Officer and Director of Destination
XL Group, Inc., a specialty apparel retailer, from April 2000 to December 2018. From
January 2019 to April 2019, Mr. Levin served as acting Chief Executive Officer of Destination
XL Group, Inc. Mr. Levin previously served as a director of Christopher & Banks Corporation
from 2012 to 2016.
Qualifications:
Mr. Levin brings to the Board more than 30 years of retail experience and extensive experience as the president and
chief executive officer of a public retail company. Mr. Levin has developed wide-ranging business and leadership skills
in addition to significant experience in the areas of merchandising, marketing and operational issues. Further, he has
experience serving on the boards of public companies. Mr. Levin has been a member of our Compensation Committee since
May 2017, and its Chairperson since May 2019, and a member of our Audit Committee since May 2019. Mr. Levin also served
as a member of our Compliance and Regulatory Affairs Committee from May 2017 until May 2019.
|
Martin
F. Roper
President,
All Market, Inc.
Director
since: 2006
Age:
58
Committees:
•
Audit
•
Compliance and Regulatory Affairs (Chairperson) |
In
January 2021, Mr. Roper was appointed Co-Chief Executive Officer of All Market, Inc.,
a healthy branded beverage and coconut water supplier. Prior to that time, Mr. Roper
was President of All Market, Inc., beginning in September 2019. Mr. Roper became a Director
of All Market, Inc. in January 2021. From January 2001 until April 2018, Mr. Roper served
as the President and Chief Executive Officer of The Boston Beer Company, Inc., a craft
brewer, where he had worked as an employee since 1994. Mr. Roper served on the board
of directors of Boston Beer from 1999 until his retirement in April 2018. Since November
2018, Mr. Roper has served on the board of Financial Information Technologies, LLC (Fintech),
a private company providing solutions to alcohol beverage distributors and retailers.
Since September 2019, Mr. Roper has served on the board of directors of Bio-Nutritional
Research Group, Inc., the producer and marketer of Power Crunch energy bars.
Qualifications:
As a former director and chief executive officer of a publicly traded company, Mr. Roper has senior management, strategic
development and financial skills. In addition, Mr. Roper possesses experience in public relations, consumer marketing,
investor relations, product development and risk management. Mr. Roper has been a member of the Audit Committee since
our initial public offering and Chairperson of the Compliance and Regulatory Affairs Committee since May 2019. Mr. Roper
also served as Chairperson of the Compensation Committee from our initial public offering until May 2019. His experience
as a director has provided him with insight, perspective and knowledge regarding our business, growth, operations and
personnel.
|
Incumbent Director Not Standing for Re-election (Class III) |
Jimmie
L. Wade
Former
President, Advance Auto Parts, Inc.
Director
since: 2011
Age:
67
Committees:
•
Nominating and Corporate Governance
•
Audit (Chairperson) |
Mr.
Wade served on the board of directors and finance committee of Advance Auto Parts, Inc.
from September 2011 through May 2016. Mr. Wade joined Advance in February 1994 and served
as President from October 1999 through May 2005 and from January 2009 until December
2011. Mr. Wade previously served as a director of Tuesday Morning Corporation between
2014 and 2017.
Qualifications:
Mr. Wade has extensive experience as a senior executive and director of a leading publicly traded specialty retailer
that achieved significant growth during his tenure. Through his experience, he has gained and developed extensive business,
finance, distribution, marketing and leadership skills. Further, he possesses an understanding of strategic business planning,
risk assessment and store operations. Mr. Wade has been a member of our Audit Committee since November 2011 and has served
as Chairperson of our Audit Committee and as an “audit committee financial expert” since November 2015. Mr.
Wade also has served as a member of our Nominating and Corporate Governance Committee since May 2016. Through his service
as a director, Mr. Wade has gained insight, perspective and knowledge regarding our business, growth, operations and personnel.
|
Corporate
Governance
We
are committed to having sound corporate governance principles. Our Code of Business Conduct and Ethics, which applies to our directors,
officers and associates, our Corporate Governance Guidelines and the charters of the Audit, Compensation, Nominating and Corporate
Governance and Compliance and Regulatory Affairs Committees are available on our website, https://investors.llflooring.com/corporate-governance,
and are also available in print, free of charge, to any stockholder who requests them. Such requests should be directed to Corporate
Secretary, Lumber Liquidators Holdings, Inc., 4901 Bakers Mill Lane, Richmond, Virginia 23230.
Independence
All
of our directors, other than our Chief Executive Officer, are independent. The Board, in its business judgment, has affirmatively
determined that eight of its nine current members are independent, including under the applicable independence standards contained
in rules of NYSE: Terri Funk Graham, David A. Levin, Douglas T. Moore, Joseph M. Nowicki, Famous P. Rhodes, Martin F. Roper, Nancy
M. Taylor and Jimmie L. Wade. In reaching its conclusion regarding director independence, the Board considered whether we conduct
business and have other relationships with organizations of which certain members of the Board or members of their immediate families
are or were directors or officers. None of our non-management directors had any transactions, arrangements or relationships with
us, other than as directors and stockholders.
Board
Leadership Structure – Independent Chairperson
The
Board regularly evaluates relevant factors to determine the best leadership structure for our operating and governance environment
at the time. Our Bylaws currently require that we separate the offices of the Chief
| 13 |
Executive Officer and Chairperson of the Board.
Specifically, our Bylaws, among other things, require that we have a Chairperson of the Board who is (i) not employed in an executive
capacity, and (ii) deemed independent as defined by the NYSE requirements. As set forth in our Bylaws, on an annual basis, the
Board will elect one of its members to the office of Chairperson of the Board. In the event of the Chairperson’s temporary
absence or incapacity, the Board will appoint, by resolution, another independent director to preside as Chairperson at meetings
of stockholders and of the Board. In the case of the Chairperson’s death or permanent inability to act, the Board will elect
a Chairperson who is independent from among current directors or appoint a new director to serve as Chairperson, with any such
appointment being subject to the provisions of our Certificate of Incorporation.
We
believe having separate Chief Executive Officer and Chairperson of the Board positions is the most appropriate structure for our
Company. Ms. Taylor, who is an independent director, was first appointed Chairperson on November 16, 2015 and continues in that
role. Beginning in February 2020, Mr. Tyson served as Interim President and Principal Executive Officer until his appointment
in May 2020 as President and Chief Executive Officer and a director of the Company. We believe it is most effective for Mr. Tyson
to be able to focus his efforts on serving as our Chief Executive Officer while working closely with our Chairperson of the Board,
Ms. Taylor.
In
addition to any other duties that may be prescribed to her by the Board, Ms. Taylor, as Chairperson of our Board, is responsible
for the following functions: (i) timing and agendas for Board meetings; (ii) nature, quantity and timing of information provided
to the independent directors by our management; (iii) retention of counsel or consultants who report directly to the Board; (iv)
implementation of corporate governance policies and procedures, including assisting the chairpersons of the various Board committees
as requested; (v) receiving reports from the Nominating and Corporate Governance Committee regarding compliance with and implementation
of corporate governance policies; (vi) evaluating, along with the Compensation Committee, the performance of the Chief Executive
Officer; and (vii) presiding at all meetings of the Board, including executive sessions of the non-management directors and the
independent directors.
Committees
of the Board
The
Board has established four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate
Governance Committee, and the Compliance and Regulatory Affairs Committee, each composed entirely of directors the Board has affirmatively
determined to be independent. Each committee operates pursuant to a written charter adopted by the Board that sets forth its roles
and responsibilities and provides for an annual evaluation of its performance. The charters of all four standing committees are
available at the investor relations page of our website at https://investors.llflooring.com/committee-charters and will be provided
to any stockholder without charge upon the stockholder’s written request to our Corporate Secretary. Each year, committee
and committee chair assignments are made at the Board meeting immediately following the Annual Meeting of Stockholders. The current
composition of each committee is as follows:
Audit
Committee |
|
Compensation
Committee |
Jimmie
L. Wade (Chairperson)
David
A. Levin
Joseph
M. Nowicki
Famous
P. Rhodes
Martin
F. Roper |
David
A. Levin (Chairperson)
Terri
Funk Graham
Famous
P. Rhodes |
Nominating
and
Corporate
Governance Committee |
|
Compliance
and
Regulatory
Affairs Committee |
Terri
Funk Graham (Chairperson)
Douglas
T. Moore
Nancy
M. Taylor
Jimmie
L. Wade |
Martin
F. Roper (Chairperson)
Douglas
T. Moore
Joseph
M. Nowicki
Nancy
M. Taylor |
The
Board may establish such other committees as it deems appropriate, in accordance with applicable law and regulations and our Certificate
of Incorporation and Bylaws.
Audit
Committee. The Audit Committee assists the Board in fulfilling the oversight responsibility of the Board relating to:
(i) the integrity of our financial statements and financial reporting process and our systems of internal accounting and financial
controls; (ii) the performance of the internal audit function; (iii) the annual independent audit of our financial statements;
(iv) the engagement of our independent auditor and the evaluation of the independent auditor’s qualifications, independence
and performance; (v) our compliance with legal and regulatory requirements as it relates to accounting, auditing and financial
reporting matters; (vi) the implementation and effectiveness of our disclosure controls and procedures and internal control over
financial reporting; (vii) the framework for identification of enterprise risks; and (viii) other matters set forth in the charter
of the Audit Committee. The Audit Committee has the sole authority to appoint, retain, compensate, evaluate and terminate the
independent auditor. The Audit Committee approves procedures for the pre-approval of the engagement of the independent auditor
to provide audit and non-audit services. It is also responsible for establishing, publishing, and maintaining and overseeing our
“whistleblower” procedures.
The
Board, in its business judgment, has determined that all of the current members of the Audit Committee are, and each member who
served on the Audit Committee during 2020 was, during the period in which he served, independent, as determined in accordance
with the rules of the NYSE and relevant federal securities laws and regulations. The Board also has determined that all of the
Audit Committee members are financially literate as defined by the rules of the NYSE and that Mr. Wade qualifies as an “audit
committee financial expert” as defined by regulations of the Securities and Exchange Commission (“SEC”). For
additional information regarding the Audit Committee, please see the Audit Committee Report that is included in this Proxy Statement.
Compensation
Committee. The purpose of the Compensation Committee is to oversee the policy and programs relating to the compensation
of our executive officers, including policies governing salaries, incentive compensation and terms and condition of employment
(with the Board having final approval for the compensation of the Chief Executive Officer). The Compensation Committee may, in
its discretion, engage outside consultants to assist in evaluating and determining appropriate compensation levels for our executives.
The Compensation Committee has produced an annual report on executive compensation that is included in this Proxy Statement. Refer
to the section titled “Executive Compensation” for additional information.
The
Board, in its business judgment, has determined that all of the current members of the Compensation Committee are independent,
as determined in accordance with the rules of the NYSE and any relevant federal securities laws and regulations.
Nominating
and Corporate Governance Committee. The purpose of the Nominating and Corporate Governance Committee is to identify individuals
qualified to become members of the Board consistent with the criteria approved by the Board, to recommend director-nominees for
election at each annual meeting of stockholders, to fill any vacancies on the Board, and to address related matters. The Nominating
and Corporate Governance
| 15 |
Committee also develops and recommends to the Board applicable corporate governance principles, determines
the form and amount of director compensation and perquisites and leads and oversees the annual review of the Board and its standing
committees’ performance. In performing these duties, the Nominating and Corporate Governance Committee uses its network
of contacts to compile potential candidates, but may also engage, if it deems appropriate, a professional search firm.
The
Board, in its business judgment, has affirmatively determined that all of the current members of the Nominating and Corporate
Governance Committee are independent, as determined in accordance with the rules of the NYSE.
The
Nominating and Corporate Governance Committee will consider stockholder recommendations for candidates to serve on the Board in
accordance with the Company’s Bylaws. Stockholders may submit such recommendations to the Nominating and Corporate Governance
Committee through the method set forth under “Communications to the Board.” In addition, in accordance with the Bylaws,
any stockholder of record entitled to vote for the election of directors at a stockholder meeting may nominate persons for election
to the Board if such stockholder complies with the advance notice provisions of the Bylaws. Such a nomination must be sent to
our corporate secretary and include, among other items: (i) the name, age, business address and residence address of each nominee
proposed in such notice; (ii) the principal occupation or employment of each such nominee; (iii) the number of shares of capital
stock of the Company which are owned of record and beneficially by each such nominee and any affiliates or associates of such
nominee (if any); (iv) a description of any agreement, arrangement or understanding of the type described in Article II, Section
17, clause (a)(iii)(B)(iv) or (a)(iii)(B)(v) of the Bylaws, but as it relates to each such nominee rather than the proposing stockholder;
(v) if any such nominee is a party to any compensatory, payment or other financial agreement, arrangement or understanding with
any person or entity other than the Company, or has received any compensation or other payment from any person or entity other
than the Company, in each case in connection with candidacy or service as a director of the Company, a detailed description of
such agreement, arrangement or understanding and its terms or of any such compensation received; (vi) such other information concerning
each such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee
as a director in an election contest (even if an election contest is not involved) or that is otherwise required to be disclosed,
under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations
promulgated thereunder; and (vii) the consent of the nominee to being named in the proxy statement as a nominee and to serving
as a director if elected and a representation by the nominee to the effect that, if elected, the nominee will agree to and abide
by all policies of the Board as may be in place at any time and from time to time. If the nomination is not timely and in proper
form, the nominee will not be considered by the Nominating and Corporate Governance Committee. To be timely for the 2022 Annual
Meeting, the nomination must be received within the time frame set forth in “Deadlines for Submission of Stockholder Proposals
and Director Nominations” on page 59. Nominees for director are selected in the context of an assessment of the perceived
needs of the Board at the time and on the basis of, among other things, the following:
•
strength of character
•
judgment
•
skill
•
education
•
business experience |
•
specific areas of expertise
•
understanding of our business
•
principles of diversity
•
reputation
•
other personal attributes or special talents |
Nominees
must also be willing to spend the time necessary to discharge their responsibilities appropriately and to ensure that other existing
or future commitments do not materially interfere with their responsibilities as members of the Board.
In
determining the composition of the Board, the Nominating and Corporate Governance Committee seeks to include a diverse and complementary
range of skills and experience among our directors. Although it does not have a formal diversity policy, the Nominating and Corporate
Governance Committee believes that the presence of differing viewpoints on the Board is a benefit to us. Accordingly, the Nominating
and Corporate Governance Committee considers principles of diversity, which include, among other things, diversity in backgrounds,
perspectives, expertise and qualifications, when assessing the Board as a whole, and individual director candidates. Our directors
represent a range of backgrounds and overall experience. Approximately 22% of our directors are female. Additionally, when considering
a director standing for re-election as a director nominee, in addition to the above attributes, the Nominating and Corporate Governance
Committee considers such individual’s past contribution and future commitment to the Company. Our directors have a varied
tenure, providing for a range of perspectives, fresh ideas and ensuring the transition of knowledge and experience from longer-serving
members. The Nominating and Corporate Governance Committee evaluates the totality of the attributes of each director nominee that
it considers and does not have established minimum qualifications or attributes. After evaluating any potential director nominee,
the Nominating and Corporate Governance Committee makes its recommendations to the full Board, and the Board then determines the
director nominees for election. The evaluation process for prospective director nominees is the same for all director nominees,
regardless of the source from which the nominee was first identified.
Compliance
and Regulatory Affairs Committee. The Compliance and Regulatory Affairs Committee has overall responsibility for assisting
the Board in discharging its oversight of significant regulatory and compliance matters and to oversee the processes by which
we conduct our business to ensure we do so in a manner that complies with applicable laws and regulations and reflects our high
standards of integrity. The Compliance and Regulatory Affairs Committee may, in its discretion, engage outside consultants to
advise the Compliance and Regulatory Affairs Committee. The Board, in its business judgment, has determined that all of the current
members of the Compliance and Regulatory Affairs Committee are independent, as determined in accordance with the rules of the
NYSE and any relevant federal securities laws and regulations.
Risk
Management
We
have developed and implemented processes designed to manage risk in our business. The Board’s role in risk management is
primarily one of oversight with the day-to-day responsibility for risk management being with our management team. The Board regularly
reviews information provided by management regarding our business strategy, financial position and operations, and considers associated
risks. In addition, the Board executes its oversight role through its committees, which report regularly to the Board on their
activities, and various presentations by management to the Board.
While
the Board has principal oversight responsibility for enterprise risk management, the Audit Committee reviews management’s
identification of the key risks that we face, including the main controls upon which we rely to mitigate those risks. In particular,
the Audit Committee focuses on financial risk, including internal controls and cybersecurity, and assesses our risk profile with
management and our internal and external auditors. The internal control risk profile drives our internal audit plan. The Audit
Committee also handles violations of our Code of Ethics and related corporate policies. The Nominating and Corporate Governance
Committee assists in risk management by overseeing our risks relating to our governance structure. The
| 17 |
Compensation Committee
reviews risks relating to our incentive compensation policies and practices. The Compliance and Regulatory Affairs Committee assists
in the oversight of risks related to significant regulatory and compliance matters. Further, the Board has the ability to create
additional committees.
Compensation
Risk Assessment. Among other things, the Compensation Committee reviews our compensation policies and practices to determine
whether they subject us to unnecessary or excessive risk. In so doing, the Compensation Committee considers whether such policies
and practices are appropriately structured to promote the achievement of goals without encouraging the taking of unwarranted or
undue risk. Additionally, the Compensation Committee reviews the relationship between our risk management policies and practices
and compensation, and evaluates compensation policies and practices that could mitigate risks relating to our compensation program.
We
believe that our compensation programs discussed herein are designed with the appropriate balance of risk and reward in relation
to our overall business strategy and do not incent executive officers or other associates to engage in conduct that creates unnecessary
or unjustifiable risks. Specifically, our mix of rewards for short-term performance through base salary and annual cash bonus
awards, and for long-term performance through equity incentive awards supports these compensation objectives. Moreover, we believe
that our utilization of these different compensation components allows us to manage the risks inherent with performance-based
compensation. Additionally, our use of mitigation tools such as claw back provisions, caps on our incentive plans, oversight by
an independent committee of non-employee directors and significant vesting periods for equity awards, provide additional risk
protection.
Based
upon the review of our compensation policies and practices, we have concluded that they do not create risks that are reasonably
likely to have a materially adverse effect on the Company.
Board
and Standing Committee Attendance and Executive Sessions
|
|
Members |
|
Independence |
|
Meetings
Held During
2020 |
Board
of Directors |
|
9 |
|
8
of 9 |
|
19 |
Audit
Committee |
|
5 |
|
100% |
|
10 |
Compliance
and Regulatory Affairs Committee |
|
4 |
|
100% |
|
7 |
Compensation
Committee |
|
3 |
|
100% |
|
8 |
Nominating
and Corporate Governance Committee |
|
4 |
|
100% |
|
7 |
Each
member of the Board is expected to attend Annual Meetings of Stockholders in person. All of our directors serving at the time
attended the 2020 Annual Meeting of Stockholders.
At
the regularly scheduled meetings of the Board, it is the practice of the Board to hold an executive session without management
present, as well as a separate executive session with just the independent directors. At each of these sessions, the Chairperson
of the Board presides over each of these sessions.
During
fiscal year 2020, each incumbent director attended at least 75% of the meetings of the Board and committees on which he or she
served (held during the period for which he or she has been a director).
Communications
to the Board
Stockholders,
associates and other interested parties may contact an individual director, the Board as a group, the Chairperson of the Board,
or a specified Board committee or group, including the non-employee directors as a group, at the following address: Corporate
Secretary, Lumber Liquidators Holdings, Inc., 4901 Bakers Mill Lane, Richmond, Virginia 23230, Attn: Board of Directors. We will
receive and process communications before forwarding them to the addressee. Directors generally will not be forwarded communications
that are primarily commercial in nature, relate to improper or irrelevant topics, or request general information about us, including
inquiries regarding employment opportunities.
Political
Contributions Policy
Our
Bylaws provide that the Board will ensure that any lobbying or political activity is conducted solely for promoting our commercial
interests and is in the interest of our stockholders. As part of this oversight, the Board will ensure that lobbying and political
spending do not reflect narrow political preferences or the political preferences of our executives that have little or no bearing
on our own commercial performance. In fiscal year 2020, we did not engage in any lobbying or political activities.
Certain
Relationships and Related Transactions
We
have a formal written policy concerning related person transactions, a copy of which is available on our website. Under that policy,
a related person transaction is a transaction, arrangement or relationship involving us, on the one hand, and (i) our director
or executive officer, his or her immediate family members or any entity that any of them controls or in which any of them has
a substantial beneficial ownership interest; or (ii) any person who is the beneficial owner of more than 5% of our voting securities
or a member of the immediate family of such person. Related person transactions do not include (i) any employee benefit plan,
policy, program, agreement or other arrangement that has been approved by the Board, the Compensation Committee or recommended
by the Compensation Committee for approval by the Board, or (ii) any transaction (other than consulting or employment) in the
ordinary course of business and/or in compliance with approved Company policy, if applicable, that does not involve an amount
exceeding $100,000 in aggregate.
The
Audit Committee evaluates each related person transaction for the purpose of recommending to the disinterested members of the
Board whether the transaction is fair, reasonable and within our policy, and should be ratified and approved by the Board. Relevant
factors considered by the Audit Committee include:
| • | the
benefits of the transaction to the Company or any of its consolidated subsidiaries; |
| • | the
terms of the transaction and whether they are arm’s-length and in the ordinary
course of the Company’s or any of its consolidated subsidiary’s business; |
| • | the
direct or indirect nature of the related person’s interest in the transaction; |
| • | the
size and expected term of the transaction; and |
| • | other
facts and circumstances that bear on the materiality of the related person transaction
under applicable law and listing standard. |
At
least annually, management will provide the Audit Committee with information pertaining to related person transactions. Related
person transactions entered into, but not approved or ratified as required by the policy
| 19 |
concerning related person transactions,
will be subject to termination by us or the relevant subsidiary, if so directed by the Audit Committee, taking into account factors
as it deems appropriate and relevant.
In
2020, there were no related party transactions to report pursuant to the relevant SEC rules.
Environmental,
Social And Governance (“ESG”)
We
are committed to ESG matters and being a responsible corporate citizen. The following areas are the focus of our corporate responsibility
program. We are working toward developing additional information about our ESG efforts that can be shared with our stakeholders
and establishing goals and objectives related to progress on these initiatives.
Our
Company |
|
Culture
|
In
2020 we engaged the organization in reviewing the Company’s current mission, vision and values and assessing how well they
are serving us today. We formalized our Company’s vision: to be the customer’s first choice in hard-surface flooring
by providing the best experience, from start to finish. We also identified the following six guiding values as the foundation
of our culture:
•
Customer Obsessed
•
Embrace Diversity
•
Act with Integrity
•
Seize Opportunities
•
Be Resilient
•
Own Our Outcomes
During
2020 we added more regional and store managers in training to build our bench of future store leadership. Our field leadership
has also focused on developing a more robust store and regional manager training program that promotes both diverse and inclusive
leadership as well as drives greater internal career advancement. |
|
|
Ethics
& Compliance |
We
have a high-level of commitment and engagement to Ethics and Integrity. This commitment
begins with our Board of Directors, Chief Executive Officer, and senior leadership team
and is reflected in policies and processes throughout all levels of the organization
including all vendor partners. We maintain a Code of Business Conduct and Ethics (“Code”),
which is available on our website, https://investors.llflooring.com/corporate-governance.
This Code is the foundation of our high-level commitment to operating in an ethical
manner and with integrity. All associates and our Board of Directors certify and are
trained on the Code annually. In addition to the Code, our ethics and compliance program
includes:
• enterprise-wide
comprehensive, written policies and procedures related to applicable laws, regulations, industry standards and the Company’s
requirements to ensure high standards of integrity;
• procedures
for reporting, tracking and investigating concerns and allegations through our hotline, loss prevention, human resources and compliance
teams;
• robust
training requirements and policy sign-offs to reinforce key areas of compliance;
• disciplinary
procedures to remedy and prevent instances of misconduct and ensure the overall compliance program is effective; and
• oversight
of the Code and regulatory compliance matters through the Compliance and Regulatory Affairs Committee. |
| 21 |
Our
Associates |
|
Human
Capital Management |
Our
people are the core of our business and we commit to deliver them an inclusive, diverse team and culture that understands
and adapts to the varying needs of our customers. We seek to provide an engaging work experience that excites and
motivate our team members to deliver their best every day. We also aim to provide opportunities for learning and
growth, to ensure our team is always the best in the business. |
|
|
Safety
& Health |
Our
commitment to the safety of our associates is an essential and ongoing part of our business. We require careful
attention to safety with respect to handling product in our warehouses, stores, installation and delivery processes. In
response to COVID-19, we prioritized the safety of our associates and customers and followed rigorous standards for mask wearing,
social distance and cleaning protocols. We have implemented remote work for all corporate support associates including
senior management. We have significantly reduced travel and contact to help protect not only our associates but
also the communities in which we live. We also provided emergency relief pay to our associates affected by COVID-19
exposure or related facility closures. |
|
|
Diversity,
Equity & Inclusion |
As
part of our multi-year business transformation, we are working on driving diversity, equity and inclusion across our Company. This
commitment will be supported by training and awareness programs as well as focused efforts to recruit, retain, develop and
promote a diverse workforce. In 2020, we formed a Diversity, Equity and Inclusion taskforce, comprised of a cross-functional
team of associates from across the Company to begin this important work. This team has been discussing the Company’s
culture survey results, sharing ideas on what diversity, equity and inclusion should look like in our Company, formulating
goals and establishing priorities for 2021 and beyond. We are also working with external consultants to connect
our work with best practices and insights related to diversity, equity and inclusion. |
|
|
Our
Stewardship |
|
Responsible
Sourcing |
As
part of our commitment to responsible sourcing, we expect our vendor partners to comply with our written Standards for Vendor
Partner Conduct. In addition, we follow rigorous procedures to validate and approve vendor partners for production as well as
tracing products in our supply chain to ensure they are sourced responsibly. These processes include:
•
maintaining Standards for Vendor Partner Conduct;
•
prohibiting vendors from engaging in child labor, forced labor or other human rights issues;
•
engaging in due diligence on vendors to prohibit sourcing of lumber that has been illegally logged;
•
conducting risk assessment protocols for all new and existing vendors;
• performing
audits on vendors to ensure compliance with laws, regulations, industry standards and our requirement to ensure safe working environments;
• robust
Lacey Act chain-of-custody program, including maintaining an unbroken and verified chain of custody for internationally and domestically |
|
sourced wood products, using documentation down to the plantation and forest level;
•
prohibiting the use of any “conflict minerals” as defined under Section 1502 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010; and
•
communication and training for internal and external partners to increase awareness of our compliance program and supply chain
risk. |
|
|
Product
Safety |
As
part of our global quality assurance and compliance program, we have rigorous procedures to monitor product safety and quality
issues throughout the supply chain. This is accomplished through:
•
quality management factory audits;
•
pre-production and production product testing;
•
review of manufacturing and packaging processes;
•
communication and training to internal and external partners to increase awareness of our quality assurance and compliance program;
and
•
monitoring and investigating customer complaints. |
|
|
Our
Communities |
|
Charitable
Giving |
We
recognize our role and responsibility as a good steward to our communities. Through our Lay It Forward charitable
giving program, we contribute to charities that represent areas such as human services, community development, education,
physical and mental health, civics, arts, culture, humanities and disaster response. |
| 23 |
Director
Compensation
Non-Employee
Director Compensation
The
Board, at the recommendation of the Nominating and Corporate Governance Committee, approves the compensation of our non-employee
directors. Directors who are employed by us do not receive compensation for their service on the Board or any Board committee.
The following table sets forth the compensation for our non-employee directors in 2020.
Element of Compensation | |
2020 Compensation Amount(1) |
Annual Retainer | |
$140,000 |
Board Chairperson additional retainer | |
$100,000 |
Audit Committee Chairperson additional retainer | |
$20,000 |
Compliance and Regulatory Affairs Committee Chairperson additional retainer | |
$15,000 |
Compensation Committee Chairperson additional retainer | |
$15,000 |
Nominating and Corporate Governance Committee Chairperson additional retainer | |
$10,000 |
Audit Committee member additional retainer | |
$10,000 |
Compliance and Regulatory Affairs Committee member additional retainer | |
$10,000 |
Compensation Committee member additional retainer | |
$7,500 |
Nominating and Corporate Governance Committee member additional retainer | |
$7,500 |
(1) | Non-employee
directors will receive $60,000 of the annual retainer in cash and $80,000 of the annual
retainer in shares of restricted stock. In addition, the Chairperson will receive 100%
of the additional chair retainer in cash. Committee retainers will be paid in cash. The
cash component of the retainers will be paid quarterly in arrears. The shares of restricted
stock will vest at the next annual stockholders’ meeting, provided, however,
if a director leaves the Board for any reason, the Compensation Committee may permit
a pro rata portion of the shares of restricted stock to vest as of the date of termination
from the Board. Any fractional shares will be paid in cash. We also reimburse our non-employee
directors for reasonable out-of-pocket expenses incurred in connection with attending
our Board and committee meetings. |
2020
Non-Employee Director Compensation
As
set forth above, in 2020, our non-employee directors received a portion of the payment for the retainers in restricted stock and
a portion in cash. The restricted stock portion of the retainer was granted three business days after the release of first quarter
2020 earnings and vests on the date of the 2021 Annual Meeting. In calculating the number of shares of restricted stock reflecting
the value of the retainers for our non-employee directors, we used the closing price of our common stock on the date of the grant.
Furthermore, our equity award agreements for our directors contain clawback provisions, so that any such awards are subject to
such deductions, repayment and clawback as may be required by any applicable law, government regulation or stock exchange listing
requirement (or any policy adopted by us pursuant to any such law, government regulation or stock exchange listing requirement).
We reimburse non-employee directors for reasonable out-of-pocket expenses incurred in connection with their service as directors,
including travel expenses for meeting attendance. We also permit our directors to participate in employee-discount programs available
to all our associates.
During
2020, the Company and the broader retail industry were significantly impacted by COVID-19 and the related disruptions caused by
stay-at-home orders and restrictions on business operations. In light of the disruptions caused by COVID-19, the Company temporarily
reduced the quarterly cash compensation paid to the members of the Board and the Board Committees by 30% from April 20, 2020 until
July 1, 2020.
Our
non-employee directors are subject to stock ownership guidelines, as described on page 36.
Director
Compensation Table
The
following table sets forth compensation earned by our directors who are not named executive officers in the fiscal year ended
December 31, 2020:
Name | |
Fees Earned or
Paid in Cash(1) ($) | | |
Stock
Awards(2) ($) | | |
Total ($) | |
Terri Funk Graham(3) | |
| 71,688 | | |
| 80,000 | | |
| 151,688 | |
David A. Levin(4) | |
| 77,563 | | |
| 80,000 | | |
| 157,563 | |
Douglas T. Moore(3) | |
| 70,625 | | |
| 80,000 | | |
| 150,625 | |
Joseph M. Nowicki(5) | |
| 20,003 | | |
| 59,997 | | |
| 80,000 | |
Famous P. Rhodes(3) | |
| 71,688 | | |
| 80,000 | | |
| 151,688 | |
Martin F. Roper(6) | |
| 78,625 | | |
| 80,000 | | |
| 158,625 | |
Nancy M. Taylor(3) | |
| 141,875 | | |
| 80,000 | | |
| 221,875 | |
Jimmie L. Wade(3) | |
| 79,875 | | |
| 80,000 | | |
| 159,875 | |
| (1) | $60,000
of the $140,000 non-employee director’s annual retainer is received in cash. |
| (2) | The
amounts in this column reflect the aggregate grant date fair value of awards granted
during the year computed in accordance with ASC 718, Compensation-Stock Compensation.
Stock awards granted on June 1, 2020 had a grant date fair value of $10.00 per share.
Mr. Nowicki’s stock award, which was granted on September 1, 2020, had a grant
date fair value of $24.68 per share and was prorated based upon the date on which he
joined the Board of Directors. For a discussion of the assumptions relating to these
valuations, see Note 7 – Stock-Based Compensation to our audited financial statements
included in Item 8 of the Form 10-K filed with the SEC on March 2, 2021. |
| (3) | Stock
awards include 8,000 shares of restricted stock that were outstanding as of December
31, 2020. |
| (4) | Stock
awards include 8,000 shares of restricted stock that were outstanding as of December
31, 2020, which were deferred under the Deferral Plan. For the column “Fees Earned
or Paid in Cash,” this amount includes $77,563 of cash earned in connection with
service on the Board that was deferred under the Deferral Plan. |
| (5) | Stock
awards include 2,431 shares of restricted stock that were outstanding as of December
31, 2020. |
| (6) | Stock
awards include 8,000 shares of restricted stock that were outstanding as of December
31, 2020, which were deferred under the Deferral Plan. For the column “Fees Earned
or Paid in Cash,” this amount includes $78,625 of cash earned in connection with
service on the Board that was deferred under the Deferral Plan. |
| 25 |
Outside
Directors Deferral Plan
On
November 21, 2008, the Board adopted the Deferral Plan under which each of our non-employee directors can defer receipt of all
or a portion of his or her fees until such director’s departure from the Board. In so doing, the Board intended to provide
an incentive to the non-employee directors to own shares of our common stock, thereby aligning their interests more closely with
the interests of our stockholders. Deferral elections must be made by December 31 for the deferral of fees in the next calendar
year.
Under
the Deferral Plan, a non-employee director may elect to defer up to 100% of his or her compensation in 25% increments and have
such compensation invested in deferred stock units. Deferred stock units attributable to the deferral of cash compensation are
credited as of the day on which such compensation is otherwise payable in accordance with our then applicable director compensation
policies (the “Payment Date”), and the number of deferred stock units is determined by dividing the deferred compensation
payable on the Payment Date by the closing price of our common stock as of the Payment Date with partial shares being disregarded.
Deferred stock units credited with respect to restricted stock awards are determined using the closing price as of the grant date
of the award of such shares of common stock. Deferred stock units must be settled in common stock upon the director’s departure
from the Board. There was an aggregate of 183,851 deferred stock units outstanding at December 31, 2020.
Proposal 2 |
Advisory
(Non-Binding) Vote on Named Executive Officer Compensation |
The
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and subsequent rules and regulations promulgated by the SEC
require that we provide our stockholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation
of our named executive officers as disclosed in this proxy statement in accordance with Item 402 of the Securities and Exchange
Commission’s Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.
This vote will not create or imply any change to our fiduciary duties or create or imply any additional fiduciary duties for the
Board or us. However, we value the opinions that our stockholders express in their votes and will consider the outcome of the
vote when making future decisions on executive compensation, as we deem appropriate, and we intend to engage with stockholders
this year on the outcome of this year’s vote. We have elected to conduct this “say-on-pay” non-binding advisory
vote annually. The next non-binding advisory vote to approve the compensation of our named executive officers will occur at the
2022 Annual Meeting of Stockholders.
Accordingly,
we ask our stockholders to vote on the following resolution at the Annual Meeting:
“RESOLVED,
that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K,
including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
As
discussed in the Compensation Discussion and Analysis section that follows, we believe that the compensation structure for our
named executive officers is appropriate, flexible and effective in attracting and retaining talented personnel. In our judgment,
the compensation paid to our named executive officers includes a healthy balance between fixed and performance-based compensation,
short- versus long-term incentives, as well as a blend between cash and equity components. Furthermore, we maintain that the compensation
for our named executive officers is aligned with the interests of our stockholders through incentives driving stockholder value.
Finally, we believe that our compensation programs maintain an appropriate balance of risk and reward in relation to our business
strategies and objectives.
The
vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the compensation
of our named executive officers, as described in this Proxy Statement. The vote is advisory, which means that the vote is not
binding on the Company, our Board or the Compensation Committee of the Board and will not be construed as overruling a decision
by the Compensation Committee, the Board or the Company. To the extent there is any significant vote against our named executive
officer compensation as disclosed in this Proxy Statement, the Compensation Committee will evaluate whether any actions are necessary
to address the concerns of stockholders.
The
Board of Directors recommends a vote FOR the proposed resolution approving the compensation of our named executive officers,
as disclosed in this Proxy Statement. |
| 27 |
Executive
Officers
The
following sets forth biographical information for our executive officers (as defined by Rule 3b-7 of the Exchange Act) and certain
other significant associates. Such information with respect to our President and Chief Executive Officer, Charles E. Tyson, is
set forth above in the “Proposal One – Election of Class II Directors” section.
Matthew
T. Argano, 48, has been our Chief Human Resources Officer since April 2020. Prior to
joining the Company, Dr. Argano was Senior Vice President, Chief People Officer of Altar’d State, Inc., a women’s fashion
retailer from 2016 to 2020. From 2012 to 2016, Dr. Argano was Senior Vice President, Human Resources of The Fresh Market, Inc.,
a specialty grocery retailer.
Jennifer
S. Bohaty, 51, has been our Chief Ethics and Compliance Officer since April 2018. Prior to joining the Company, Ms. Bohaty
was the founder of Strategic Compliance Advisors, LLC, a consulting company, beginning in 2017. From 2009 to 2017, Ms. Bohaty
held various roles at Toys ‘R’ Us, Inc., a toy and baby retailer, including Executive Director, Global Product Safety,
Quality and Compliance from 2012 to 2017.
Alice
G. Givens, 48, has been our Senior Vice President, Chief Legal Officer and Corporate Secretary since September 2020. Prior
to joining the Company, Ms. Givens was Senior Vice President, General Counsel, Chief Compliance Officer and Secretary of Ruth’s
Hospitality Group, Inc. (“RHGI”), a fine dining restaurant company, from 2019 to 2020 and Vice President, General
Counsel, Chief Compliance Officer & Secretary of RHGI from 2016 to 2019. From 2007 to 2016, Ms. Givens served as a legal officer
at J. Crew Group, Inc., an omnichannel retailer of apparel, shoes and accessories, where she most recently was Vice President
and Associate General Counsel from 2012 to 2016.
Christopher
N. Thomsen, 45, has been our Senior Vice President, Chief Information Officer since August 2016. Prior to joining the Company,
Mr. Thomsen served as Vice President and Chief Information Officer of Hibbett Sports, Inc., a sporting goods retailer, from 2013
to 2016. From 2006 to 2013, Mr. Thomsen held various IT roles of increasing responsibility at Lowe’s Companies, Inc. where
he most recently served as Vice President, IT Planning and Business Intelligence from 2012 to 2013.
Nancy
A. Walsh, 60, has been our Chief Financial Officer since September 2019. Prior to joining the Company, Ms. Walsh most recently
served as Executive Vice President and Chief Financial Officer of Pier 1 Imports, Inc., a home furnishing and décor retailer,
from January 2018 until April 2019 and Executive Vice President and Chief Financial Officer of The Bon-Ton Stores, Inc., a department
store chain, from November 2015 until January 2018. Pier 1 Imports, Inc. filed for Chapter 11 bankruptcy protection in February
2020 and The Bon-Ton Stores, Inc. filed for Chapter 11 bankruptcy protection in February 2018. Prior to that, Ms. Walsh served
in various positions with Tapestry, Inc., formerly known as Coach, Inc., a fashion holding company, from 1999 to December 2013.
Executive
Compensation
Compensation
Discussion and Analysis
Our
compensation philosophy is to maintain effective compensation programs that are as practical and flexible as possible and permit
us to make responsive adjustments to changing market conditions and other internal and external factors. We strive to provide
our executives with compensation that is competitive within our industry. In doing so, we seek to attract and retain the key associates
necessary to achieve the continued growth and success of our business while remaining mindful of our desire to control costs.
Further, it is our intent to align executive officer pay with stockholders’ interests, recognize individual accomplishments,
align executive management behind common objectives and strike a balance between risk and reward in designing our executive compensation
programs.
The
Compensation Committee of the Board is responsible for implementing and administering our executive compensation plans and
programs. In that role, the Compensation Committee reviews our executive officer compensation program every year to review
the appropriateness, rationale and continued viability of our compensation philosophies, including the extent to which our
programs might encourage associates to take unnecessary or excessive risks that could result in material adverse risk to the
Company. To assist in that analysis, the Compensation Committee may conduct market analyses of executive officer compensation
as it determines necessary to ensure that our compensation programs meet our objectives. The Compensation Committee has
engaged Pearl Meyer (“PM”), a nationally recognized compensation consulting firm, as its compensation consultant
and periodically requests PM to provide peer group and industry compensation data and analysis. Decisions relating to the
compensation of our executive officers are made by the Compensation Committee. These decisions are also reported to and, in
the case of the President and Chief Executive Officer, approved by the independent directors of the Board. The Compensation
Committee consults, and expects to continue to consult, with the President and Chief Executive Officer and other members of
management in the exercise of its duties. Notwithstanding such consultation, the Compensation Committee retains absolute
discretion over all compensation decisions with respect to the executive officers, except with respect to the President and
Chief Executive Officer, in which the independent directors of the Board retain final approval. In determining the
compensation of our executive officers, the Compensation Committee evaluates total overall compensation, as well as the mix
of salary, cash bonus incentives, equity incentives and other components, using a number of factors including the
following:
| • | our
financial and operating performance, measured by attainment of strategic objectives and
operating results; |
| • | the
duties, responsibilities and performance of each executive officer, including the achievements
of the areas of our operations for which the executive officer is personally responsible
and accountable; |
| • | historical
cash and equity compensation levels; and |
| • | compensation
competitiveness, internal equity factors and retention considerations. |
Compensation
levels for executive officers are differentiated based on the principle that total compensation should increase with an executive
officer’s position and responsibilities, while at the same time, a greater percentage of total compensation should be tied
to corporate and individual performance as position and responsibilities increase.
| 29 |
Compensation
Governance Features
We
believe the following practices and policies promote sound compensation governance and are in the best interests of our stockholders
and executives:
Compensation
Governance Features |
WHAT
WE DO |
|
WHAT
WE DON’T DO |
✓
Balance of short-term and long-term incentives
✓ Substantial portion of executive compensation is at risk and tied to enhanced stockholder value
✓ Different performance measures used for short-term and long-term incentive programs
✓ Robust share ownership guidelines
✓ Clawback provisions incorporated into incentive compensation
✓ Annual Say-on-Pay votes conducted
✓ Two triggers required for the payment of most change in control benefits |
|
û No payout of short-term or long-term awards greater than 200% of target
û No long-term or indefinite employment agreements
û No hedging or pledging of shares as collateral
û No excessive perquisites
û No issuance of excessive equity compensation that would dilute stockholder value
û No excessive change in control severance benefits |
What
Guides Our Program
Compensation
Philosophy & Objectives
Our
executive compensation program is designed to:
✓ Link pay to performance
✓
Attract, develop and retain an experienced and highly qualified executive officer team
✓ Encourage long-term commitment and align the interests of executive officers with those of our stockholders,
customers and other stakeholders by placing a substantial portion of pay at risk through performance goals that, if achieved,
are expected to increase total stockholder return and enhance customer service |
|
✓
Motivate and reward superior performance that supports our business and strategic plans and contributes to the long-term success
of the Company
✓ Promote internal pay equity
✓ Reinforce our core values of thinking like our customers, acting like owners, succeeding as a team, expecting continuous improvement
and acting with integrity |
Elements
of Pay
The
Company’s compensation philosophy is supported by the following principal elements of pay:
Pay Element | |
How Paid | |
What It Does |
Base Salary | |
Cash (Fixed) | |
Provides a competitive rate relative to comparable jobs at similar companies and enables the Company to attract and retain critical executive talent. |
Annual Cash Incentive Awards | |
Cash (Variable) | |
Rewards individuals for performance if they attain pre-established financial and strategic targets that are set by the Compensation Committee at the beginning of the year. |
Long-Term Incentive Awards | |
Equity (Variable) | |
Promotes a balanced focus on driving performance, retaining talent, and aligning the interests of the Company’s executives with those of its stockholders. |
Pay
Mix
We
meet our objectives through the appropriate mix of compensation, including base salary, short-term incentives and long-term incentives.
The
Decision-Making Process
The
Role of the Compensation Committee. Details of the Compensation Committee’s authority and responsibilities are specified
in its charter, a copy of which is available at https://investors.llflooring.com/committee-charters.
The
Role of the Independent Compensation Consultant. Additionally, PM provides information about market trends in director
pay practices and advises the Nominating and Corporate Governance Committee and the Board on director compensation program design.
The
Compensation Committee, after considering the SEC and NYSE standards, including the six factors set forth in Section 10C-1(b)(4)(i)
through (vi) under the Exchange Act, and other factors, determined that PM was independent and that its engagement did not present
any conflicts of interest. PM also determined that it was
|
31 |
independent and free from conflict with respect to the engagement and
confirmed this in a written statement delivered to the Chairperson of the Compensation Committee.
PM
reports directly to the Compensation Committee on all work assigned by the Compensation Committee. PM also interacts with management
when necessary and appropriate to carry out its assignments. PM, in its discretion, from time to time, seeks confirmation from
management regarding the accuracy of information that is included in materials presented to the Compensation Committee.
The
Role of Peer Group Companies. In 2019, the Compensation Committee engaged PM to review and assess the Company’s
executive officer compensation program for purposes of assisting compensation components and levels for 2020. In making decisions
for 2020, the Compensation Committee used benchmarking prepared by PM in the fall of 2019 (the “2019 Compensation Report”).
The 2019 Compensation Report compared the compensation paid to the Company’s top executives to the compensation paid to
their counterparts at the peer companies. The peer group included publicly traded discretionary retailers with revenues and market
capitalizations that fell both above and below the Company. In its analysis, PM also referenced nationally recognized survey data
using annual revenue of $1.1 billion as a target for the scope of the data set.
In
order to increase the statistical reliability of the peer group and to allow the group to withstand further industry consolidation,
the Committee added Floor & Décor Holdings, Inc., La-Z-Boy Incorporated, At Home Group, Inc., Big 5 Sporting Goods
Corporation, and Citi Trends, Inc. Two companies, hhgregg, Inc. and West Marine, Inc., were removed from the peer group because
they ceased as independent public companies. Select Comfort Corp. was renamed Sleep Number Corporation and remained in the peer
group. Two companies, Pier 1 Imports, Inc. and Monro Muffler Brake, Inc., were removed from the peer group. The following is a
list of companies included in the peer group used for 2020 compensation decisions:
2020 Peer Group Companies |
Floor & Décor Holdings, Inc. | |
Shoe Carnival, Inc. |
La-Z-Boy Incorporated | |
Hibbett Sports, Inc. |
Sleep Number Corporation | |
Big 5 Sporting Goods Corporation |
Conn’s, Inc. | |
Zumiez Inc. |
Knoll, Inc. | |
The Container Store Group, Inc. |
At Home Group Inc. | |
Haverty Furniture Companies, Inc. |
Monro, Inc. | |
Ethan Allen Interiors Inc. |
Vitamin Shoppe, Inc. | |
Citi Trends, Inc. |
Kirklands, Inc. | |
|
2020
Executive Compensation Program in Detail
Base
Salary
Base
salary levels for our named executive officers are reviewed each year and adjusted based upon a variety of factors including the
named executive officer’s tenure with us, scope of responsibility and influence on our operations, individual performance
and accomplishments, internal equity, experience and changes in the competitive marketplace, as well as the economic environment
and expense considerations. The factors impacting base salary levels are not independently assigned specific weights.
NEO | |
2019 Base Salary | | |
2020 Base Salary | |
Charles E. Tyson | |
| $515,000 | | |
| $700,000 | |
Nancy A. Walsh | |
| $500,000 | | |
| $515,000 | |
Christopher N. Thomsen | |
| $318,270 | | |
| $327,818 | |
Jennifer S. Bohaty | |
| $309,000 | | |
| $318,270 | |
Matthew T. Argano | |
| Not applicable* | | |
| $350,000 | |
| |
| | | |
| | |
*Dr. Argano joined the Company in 2020. |
| | |
In
connection with Mr. Tyson’s appointment as Interim President and Chief Customer Experience Officer on February 6, 2020,
Mr. Tyson’s base salary was increased on an interim basis by $12,000 per month. On May 26, 2020, Mr. Tyson was appointed
by the Board as President and Chief Executive Officer. At that time, his annual base salary was increased to $700,000, subject
to a temporary 25% salary reduction in place until July 1, 2020 with respect to cost reduction actions following COVID-19.
Ms.
Walsh’s duties were expanded on February 6, 2020 following the resignation of the prior Chief Executive Officer. In connection
with those expanded duties, Ms. Walsh’s base salary was increased on an interim basis by $8,000 per month. On May 26, 2020,
following Mr. Tyson’s appointment by the Board as President and Chief Executive Officer, Ms. Walsh’s interim base
salary increase was discontinued and her regular base salary was increased to $515,000, subject to a temporary 25% salary reduction
in place until July 1, 2020 due to COVID-19.
In
early 2020, as part of the Company’s regular review process, Mr. Thomsen received a merit increase of 3% in his annual base
salary, which increased his annual base salary to $327,818.
In
early 2020, as part of the Company’s regular review process described above, Ms. Bohaty received a merit increase of 3%
in her annual base salary, which increased her annual base salary to $318,270.
Dr.
Argano was appointed as our Chief Human Resources Officer pursuant to the terms of an offer letter, effective as of April 20,
2020, which provided for an annual base salary of $350,000.
Annual
Cash Bonus Awards
In
2020, our named executive officers had the opportunity to earn an annual cash bonus award under our Annual Bonus Plan for Executive
Management (the “Bonus Plan”). The amounts payable under the Bonus Plan are expressed as a percentage of annual base
salary for each participant (the “Target Bonus”). The Target Bonuses are reviewed annually and vary among the Bonus
Plan participants based upon, among other things, their responsibilities, ability to influence operations and performance, internal
equity considerations, and position. The maximum potential annual cash bonus award that our Chief Executive Officer and Chief
Financial Officer could achieve was 200% of their Target Bonus. The maximum potential annual cash bonus award that our other named
executive officers could achieve was 175% of their Target Bonus. Cash bonus awards are based on the achievement of an Adjusted
Operating Income goal. The amount of the Target Bonus payable at the threshold level of performance was 25%. The threshold target
level was set at 80% of the Company’s plan for Adjusted Operating Income. Results below the threshold level would result
in no cash bonus being paid. Named executive officers that were hired during the year had the opportunity to earn a prorated bonus
under the Bonus Plan based upon the duration of their service during the year. The cash bonus awards for Mr. Tyson and Ms. Walsh
were adjusted proportionately to account for adjustments to their respective base salaries during 2020.
|
33 |
For
the 2020 Bonus Plan, the Compensation Committee determined that the Target Bonuses for each named executive officer would be based
solely on Adjusted Operating Income performance. The performance targets for the 2020 Bonus Plan are set forth as follows:
| |
Adjusted Operating Income | |
Percent
of Adjusted Operating Income Target
Bonus Awarded for Associates
Eligible for Maximum Payout* |
| |
Less than $39,000,000 | |
0% |
Threshold | |
$39,000,000 | |
25% |
Target | |
$49,010,000 | |
100% |
Maximum | |
$73,500,000 | |
175% - 200% |
|
*Payouts for performance between Threshold and Target or Target and Maximum are calculated using straight-line interpolation. |
The
term “Adjusted Operating Income” is the Company’s operating income adjusted for anticipated and unanticipated
unusual expenses. The Compensation Committee retained the discretion to determine those adjustments appropriate for calculating
Adjusted Operating Income to fairly react to unknown future events. In determining 2020 Bonus Plan performance, the Compensation
Committee did permit certain adjustments in determining Adjusted Operating Income that the Committee felt were extraordinary or
unusual amounts that it felt would be unfair and unmotivating to include in the calculations, including certain additional legal
costs, settlements, tariffs and exit costs related to store closures.
Based
on our 2020 results, our Company achieved $62 million in Adjusted Operating Income, which is 153% of our Adjusted Operating Income
target and translates to a payout of 153% of target bonus for Mr. Tyson and Ms. Walsh and 140% of target bonus for our other named
executive officers, in each case before applicable service period and base salary adjustments. Accordingly, each named executive
officer was awarded the following under the Bonus Plan, which amounts for Mr. Tyson, Ms. Walsh and Dr. Argano have been prorated
to account for the duration of their service and adjustments to their base salaries during fiscal 2020, as applicable:
| |
| | |
Actual
Award Earned |
NEO | |
Target
Award Opportunity (as a % of Base Salary) | | |
As
a % of Prorated
Annual Base Salary | | |
$
Value | |
Charles
E. Tyson | |
| 100 | %(1) | |
| 139 | % | |
| $936,700 | |
Nancy
A. Walsh | |
| 60 | % | |
| 92 | % | |
| $490,358 | |
Christopher
N. Thomsen | |
| 50 | % | |
| 70 | % | |
| $231,349 | |
Jennifer
S. Bohaty | |
| 50 | % | |
| 70 | % | |
| $222,451 | |
Matthew
T. Argano | |
| 50 | % | |
| 70 | % | |
| $183,471 | |
(1) | Mr.
Tyson’s Target Award Opportunity was 70% of his base salary until his promotion
to Chief Executive Officer on May 26, 2020. |
Long-Term
Equity Incentive Awards
The
long-term component of our compensation program consists of the grant of equity awards that are intended to create a mutuality
of interest with stockholders by motivating our named executive officers to manage our business so that our stockholders’
investment will grow in value over time. The equity awards are also intended to promote retention because the benefit received
depends upon our performance over the term of the equity incentive award.
We
currently provide equity awards pursuant to the 2011 Equity Compensation Plan, as Amended & Restated March 7, 2019 (the “2011
Plan”), from which we may, among other things, grant stock options, restricted stock awards and other equity awards. We
intend equity awards to be a meaningful portion of our named executive officers’ total compensation in order to align their
interests with our long-term growth and the creation of stockholder value.
In
early 2020, Mr. Tyson and Ms. Walsh provided the Compensation Committee with recommendations regarding equity awards to the named
executive officers who reported to them at such time, excluding themselves. In determining the amounts of the equity awards for
named executive officers, with the exception of Mr. Tyson and Ms. Walsh, the Compensation Committee considered the recommendations
submitted by Mr. Tyson and Ms. Walsh and an evaluation of the fair value of the equity award in relation to the individual’s
total compensation. Additionally, these equity awards were based upon their respective responsibilities and performance as well
as retention considerations and compensation levels among our other executive officers.
In
2020, for our named executive officers at that time, we issued annual equity grants with a mix of 50% performance-based restricted
stock, 25% time-based restricted stock (which vest ratably over four years), and 25% stock options (which vest ratably over four
years) with the exception of non-annual equity grants made in connection with the hiring or promotion of named executive officers.
The
performance-based restricted stock granted in 2020 vest based on obtaining an adjusted EBITDA goal with a relative total shareholder
return (“TSR”) modifier based on the S&P 600 Retailing Industry Index. Relative TSR was intended to further strengthen
the pay for performance alignment. None of these shares of performance-based restricted stock will vest unless the performance
objectives are at least at the 80% payout target threshold, and the amount earned will range from 0 to 200% of the target award,
depending on the actual performance against the performance targets. The 2020 performance-based restricted stock awards were structured
as a three-year performance period plus time-based vesting with 100% of any shares earned vesting at the end of the three-year
performance period.
2020
Target Long-Term Incentive Award Grants
The
table below shows the target annual long-term incentive award values granted for fiscal 2020 for each of the named executive officers:
NEO | |
Performance-Based Restricted Stock | |
Time-Based Restricted Stock | |
Stock Options | |
Total Value |
Charles E. Tyson (1) | |
$450,000 | |
$225,000 | |
$225,000 | |
$900,000 |
Nancy A. Walsh (2) | |
$157,500 | |
$203,750 | |
$78,750 | |
$440,000 |
Christopher N. Thomsen | |
$100,000 | |
$50,000 | |
$50,000 | |
$200,000 |
Jennifer S. Bohaty | |
$100,000 | |
$50,000 | |
$50,000 | |
$200,000 |
Matthew T. Argano(3) | |
– | |
$125,000 | |
$125,000 | |
$250,000 |
| (1) | Includes
supplemental equity award granted on June 1, 2020 in connection with Mr. Tyson’s
promotion to CEO, consisting of $275,000 in performance-based restricted stock units,
$137,500 in time-based restricted stock units and $137,500 in stock options. |
| (2) | Includes
supplemental equity award granted on June 1, 2020 in connection with Ms. Walsh’s
assistance during the CEO transition, consisting of $125,000 in time-based restricted
stock. |
| (3) | Dr.
Argano joined the Company in April 2020 and was granted time-based restricted stock units
and stock options in connection with his offer letter. |
|
35 |
The
long-term incentive awards were granted in February 2020 and, for each executive officer, were comprised 50% of performance-based
restricted stock units, 25% time-based restricted stock units and 25% stock options.
Other
Practices, Policies & Guidelines
Stock
Ownership Guidelines
We
have a stock ownership guidelines policy (the “Ownership Guidelines”) for our non-employee directors and certain of
our executive officers (as designated by the Board) in order to align the financial interests of such executive officers and non-employee
directors with those of the Company’s stockholders and to further promote the Company’s commitment to sound corporate
governance. The stock ownership requirements are as follows:
Position | |
Value of Shares |
Chief Executive Officer | |
5 times base salary |
Chief Financial Officer | |
2 times base salary |
Executive Officers (other than the Chief Executive Officer and the Chief Financial Officer) | |
1 times base salary |
Non-Employee Directors | |
2.5 times annual board retainer (exclusive of committee compensation, but inclusive of supplemental base
retainer for the Board Chairperson) |
The
participants in the Ownership Guidelines are expected to meet the applicable guideline no more than five years after first becoming
subject to them and are expected to continuously own sufficient shares to meet the applicable guideline once attained. Although
having five years after first becoming subject to the Ownership Guidelines to meet the applicable guideline, as of December 31,
2020, Messrs. Moore, Roper and Wade and Ms. Taylor already meet the guideline applicable to each of them. All of our executive
officers and directors were in compliance with the holding guidelines in the Ownership Guidelines in 2020. Stock that may be considered
in determining compliance with the Ownership Guidelines includes:
| • | Shares
owned directly by the participant or indirectly by the participant through (i) his or
her immediate family members (as defined in the Ownership Guidelines) residing in the
same household or (ii) trusts for the benefit of the participant or his or her immediate
family members; |
| • | Vested
shares of restricted stock held by the participant; |
| • | Shares
underlying vested stock options held by the participant that are “in the money”;
and |
| • | Shares
held pursuant to the Lumber Liquidators Holdings, Inc. Outside Director Deferral Plan
(the “Deferral Plan”) (i.e., deferred stock units). |
The
Compensation Committee is responsible for monitoring the application of the Ownership Guidelines as it pertains to our executive
officers, and the Nominating and Corporate Governance Committee is responsible for monitoring the application of the Ownership
Guidelines as it pertains to our non-employee directors.
Clawback
Provisions
The
directors and executive officers are subject to a Clawback Policy. Under the Clawback Policy, in the event of a restatement of
the Company’s financial results (other than a restatement caused by a change in applicable
accounting rules or interpretation),
a committee consisting of the non-management members of the Board (the “Independent Director Committee”) will review
and determine whether any bonus incentive payment, equity award or other compensation awarded or received by an executive officer
of the Company, as defined by Rule 16a-1(f) of the Exchange Act, was based on any financial results or operating metrics that
were satisfied as a result of such officer’s knowing or intentional fraudulent or illegal conduct. If the Independent Director
Committee determines that such executive officer received any bonus, incentive payment, equity award or compensation based on
any financial results or operating metrics that were satisfied as a result of such officer’s knowing or intentional fraudulent
or illegal conduct, then the Independent Director Committee will recover from such executive officer such compensation (in whole
or in part) as it deems appropriate under the circumstances.
In
determining whether to seek recovery, the Independent Director Committee may take into consideration whether (i) to do so would
be unreasonable or (ii) if it would be better for the Company not to do so. In making such determination, the Independent Director
Committee will take into account such considerations as it deems appropriate, including (A) the likelihood of success under governing
law versus the cost and effort involved, (B) whether the assertion of a claim that may prejudice the interest of the Company,
including in any related proceeding or investigation, (C) the passage of time since the occurrence of the act in respect of the
applicable fraud or intentional illegal conduct and (D) any pending legal proceeding relating to the applicable fraud or intentional
illegal conduct. Notwithstanding anything to the contrary in the Clawback Policy, following a restatement of our financial statements,
we will recover from the President and Chief Executive Officer and the Chief Financial Officer that which is required to be recovered
by Section 304 of the Sarbanes-Oxley Act of 2002.
Additionally,
under our equity award agreements, in the event the Compensation Committee determines that an executive officer willfully engaged
in conduct harmful to us, the equity award may be forfeited and/or the executive officer may be required to repay any stock acquired
or received as a result of the award or any sums realized as a result of the sale of stock acquired or received as a result of
the award. Likewise, under the Bonus Plan, the Compensation Committee may require an executive officer to repay all or any portion
of an award issued under the Bonus Plan if the Compensation Committee determines that the award was earned based on inaccurate
financial objectives, performance data, metrics or other information or that the participant willfully engaged in conduct harmful
to us. Furthermore, our equity award agreements with our executive officers and our Bonus Plan contain clawback provisions that
are intended to comply with Section 954 of Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and all regulations
and rulemaking thereunder. Specifically, if, as a result of material non-compliance with any financial information required to
be reported under securities laws, the Company is required to prepare a restatement of its financial statements and the Compensation
Committee determines that such amounts are to be repaid, then any awards or payments made to executives will be forfeited or repaid
with the amount of such forfeiture or repayment to be equal to the difference between the award or payment received and the amount,
if any, of the award or payment that would have been granted or issued based on the restated financial statements.
Prohibition
on Pledging or Hedging Company Stock
Our
Insider Trading Policy provides that no insider may pledge the Company’s securities or hold the Company’s securities
in a margined account. Further, our policy prohibits our insiders and associates from buying or selling options, warrants, puts
and calls or similar instruments on the Company’s securities, selling the Company’s securities short or entering into
hedging or monetization transactions or similar arrangements with respect to the Company’s securities. For purposes of our
Insider Trading Policy, a copy of which can be found on our website, insiders include, among others, our officers and directors.
|
37 |
Retirement,
Deferred Compensation and Pension Plans
Our
executive officers who are eligible may participate at their election in our 401(k) retirement savings plan that provides all
associates with an opportunity to contribute up to 50% of their eligible compensation, subject to Internal Revenue Service limitations,
to the plan on a tax-deferred basis to be invested in specified investment options and distributed upon their retirement. In addition,
a Roth feature allows all associates to contribute up to 50% of their eligible compensation on an after-tax basis. Consistent
with the 401(k) plan, we match 100% of the first 3% of employee contributions and 50% of the next 2% of employee contributions.
This matching contribution is allocated to both traditional 401(k) deferrals and Roth contributions. Associates are immediately
100% vested in the Company’s matching contributions. In 2020, Messrs. Knowles, Reeves, Thomsen and Tyson and Ms. Walsh contributed
to the 401(k) plan and received matching contributions consistent with our Company-wide program described above.
Severance
Agreements
We
have entered into Severance Agreements with each of the named executive officers, as well as other members of the executive team.
The Severance Agreements provide for a fixed term and certain severance payments and benefits to these executives upon termination
of their employment under defined circumstances, including in connection with a change in control. In addition, in connection
with the execution of the Severance Agreements, the Company and each of these executives entered into Confidentiality, Non-Solicitation
and Non-Competition Agreements (the “Non-Compete Agreements”). For further discussion of the Severance Agreements,
see the “Potential Payments Upon Termination or Change of Control” herein.
Tax
Deductibility Under Section 162(m)
Section
162(m) of the Internal Revenue Code generally sets a limit of $1 million on the amount of compensation that we may deduct for
federal income tax purposes in any given year with respect to the compensation of each of our named executive officers. For years
beginning prior to January 1, 2018, the $1 million deduction limit under Section 162(m) of the Internal Revenue Code did not apply
to qualified performance-based compensation that satisfied certain requirements, including, among others, approval of by our stockholders
of the material terms of the plan under which the compensation was awarded. Effective for the years beginning on or after January
1, 2018, there is no exception under Section 162(m) for qualified performance-based compensation; although a transition rule applies
in some circumstances for awards and binding contracts in effect on November 2, 2017 and not materially modified thereafter. Significant
aspects of our executive compensation programs were designed previously to permit (but not require) certain compensation paid
to our named executive officers to qualify as performance-based compensation exempt from the Section 162(m) limitation. Now that
the performance-based exception is no longer available (except as to certain grandfathered arrangements), no assurances can be
given that compensation paid to our named executive officers will be fully deductible.
While
we intend to continue to consider the impact of the deduction limit under Section 162(m) when developing and implementing our
executive compensation programs, we believe the primary purpose of our executive compensation arrangements is to support our business
strategy and the long-term interests of our stockholders. Therefore, we believe that it is important that we maintain the flexibility
to award compensation that may not be tax deductible to promote our various corporate goals. Accordingly, we have not adopted
a policy that all compensation must qualify as deductible under Section 162(m) of the Internal Revenue Code, and amounts paid
under our compensation programs may not be deductible as the result of Section 162(m). To the extent we determine it to be consistent
with our best interests and the interests of our stockholders, we intend to preserve, to the extent practicable, the applicability
of the transition rule to existing awards. However, there
is no guaranty that such transition status can or will be applicable.
Despite the limits on deductibility, however, we continue to believe, and intend to continue to structure our compensation programs
such that a significant portion of our executive compensation programs is tied to corporate performance.
The
Board has not adopted any plans for the deferral of executive compensation or for the payment of defined benefits or pensions
based on an executive officer’s salary and/or years of service. In addition, we have not adopted a supplemental executive
retirement plan or other “excess plan” that pays benefits to highly compensated executives whose salaries exceed the
Internal Revenue Service’s maximum allowable salary for qualified plans.
Advisory
Votes on Executive Compensation
As
required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the subsequent rules and regulations promulgated
by the SEC, we are including a non-binding advisory resolution approving the compensation of our named executive officers. The
vote on this proposal will be non-binding on the Board and us and will not be construed as overruling a decision by the Board
or us. This vote will not create or imply any change to our fiduciary duties or create or imply any additional fiduciary duties
for the Board or us. However, the Compensation Committee values the opinions that our stockholders express in their votes and
will consider the outcome of the vote when making future decisions on executive compensation, as it deems appropriate.
Compensation
Committee Interlocks and Insider Participation
None
of the members of our Compensation Committee will be or has ever been one of our officers or associates. None of our executive
officers serves or has served as a member of the board of directors or compensation committee, or similar committee, of any other
company whose executive officer(s) served as a member of our Board or our Compensation Committee.
Compensation
Committee Report
The
Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy
Statement. Based upon that review and discussion, the Compensation Committee recommends to the Board that the Compensation Discussion
and Analysis be included in this Proxy Statement and incorporated by reference in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2020, for filing with the Securities and Exchange Commission.
COMPENSATION
COMMITTEE
David
A. Levin, Chairperson
Terri
Funk Graham
Famous
P. Rhodes
|
39 |
Annual
Compensation of Named Executive Officers
Summary
Compensation Table
The
following table and descriptions set forth information concerning compensation paid to or earned by the two president and chief
executive officers and the one chief financial officer who served during 2020, the three other most highly compensated individuals
who were serving as our executive officers at the end of the 2020 fiscal year and one former executive officer who served as an
executive officer during 2020. We refer to these individuals throughout this Proxy Statement as our “Named Executive Officers.”
Name
and Principal Occupation | |
Year | |
Salary ($) | |
Bonus ($) | |
Stock Awards ($)(1) | |
Option Awards ($)(1) | |
Non-Equity
Incentive Plan Compensation ($)(2) | |
All
Other
Compensation
($) | |
Total |
Charles
E. Tyson(3) President
& Chief Executive
Officer | |
2020
2019
2018 | |
644,141
512,477
278,913 | |
-
-
- | |
674,993
314,990
- | |
224,996 - 999,996 | |
936,700
230,616
94,268 | |
32,635
50,173
69,039 | |
2,513,465
1,108,256
1,442,216 |
Nancy
A. Walsh(4) Chief
Financial Officer | |
2020
2019 | |
520,128
144,248 | |
-
50,000 | |
361,239
374,996 | |
78,749
374,996 | |
490,358
63,971 | |
322,270
97,752 | |
1,772,744
1,105,963 |
Christopher
N. Thomsen(5) Chief
Information Officer | |
2020
2019 | |
318,123
316,691 | |
-
- | |
149,999
342,990 | |
49,996
- | |
231,349
101,801 | |
11,605
23,907 | |
761,072
785,389 |
Jennifer
S. Bohaty(6) Chief
Ethics & Compliance Officer | |
2020 | |
306,516 | |
- | |
149,999 | |
49,996 | |
222,451 | |
1,314 | |
730,276 |
Matthew
T. Argano(7) Chief
Human Resources Officer | |
2020 | |
224,808 | |
- | |
124,988 | |
124,991 | |
183,471 | |
47,062 | |
705,320 |
Dennis
R. Knowles(8) Former
President & Chief
Executive Officer | |
2020
2019
2018 | |
215,409
742,772
715,825 | |
-
-
- | |
-
1,125,00
937,482 | |
-
-
312,498 | |
-
477,705
334,747 | |
1,347,425
24,156
22,141 | |
1,562,834
2,369,633
2,322,693 |
M.
Lee Reeves(9) Former
Chief Legal Officer &
Corporate Secretary | |
2020
2019
2018 | |
172,400
391,341
385,122 | |
-
-
- | |
187,494
266,990
- | |
62,498
-
- | |
-
125,607
88,881 | |
580,298
31,749
199,468 | |
1,002,690
815,687
673,471 |
| (1) | The
amounts in this column reflect the aggregate grant date fair value of stock or option
awards, as applicable, granted during the year computed in accordance with ASC 718, Compensation-Stock
Compensation. For a discussion of the assumptions relating to these valuations, see
Note 7 – Stock-Based Compensation to our audited financial statements included
in Item 8 of the Form 10-K filed with the SEC on March 2, 2021. The amounts for the performance-based
restricted stock included in the stock awards column reflect the grant date fair value
computed in accordance with FASB ASC Topic 718 based upon the probable outcome of the
performance conditions as of the grant date. Assuming the highest level of performance
achievement as of the grant date, the aggregate grant date fair value of the performance-based
restricted stock granted in 2020 would have been: Mr. Tyson — $899,997; Ms. Walsh
— $314,992; Mr. Thomsen — $199,998; Ms. Bohaty — $199,998; and Mr.
Reeves — $249,998. |
| (2) | The
amounts in the column reflect annual cash bonus awards through our non-equity incentive
plan, referred to as our “Bonus Plan,” earned in the year noted but typically
paid in the first quarter of the following year. |
| (3) | All
other compensation in 2020 includes $205 in identity theft insurance premiums, $21,030
in financial planning and tax assistance and $11,400 in matching contributions to our
401(k) plan. On February 6, 2020, Mr. Tyson was appointed Interim President and Chief
Customer Experience Officer and, on May 28, 2020, he was appointed President and Chief
Executive Officer. |
| (4) | Ms.
Walsh was not a named executive officer in 2018. All other compensation in 2020 includes
$205 in identity theft insurance premiums, $9,099 in financial planning and tax assistance,
$1,597 for an executive physical, $11,400 in matching contributions to our 401(k) plan
and $299,968 in relocation assistance, which includes $131,498 in gross-up for taxable
relocation benefits. |
| (5) | Mr.
Thomsen was not a named executive officer in 2018. All other compensation in 2020 includes
$205 in identity theft insurance premiums and $11,400 in matching contributions to our
401(k) plan. |
| (6) | Ms.
Bohaty was not a named executive officer in 2019 or 2018. All other compensation in 2020
includes $205 in identity theft insurance premiums and $1,109 in financial planning and
tax assistance. |
| (7) | Dr.
Argano joined the Company effective April 20, 2020. All other compensation in 2020 includes
$67 in identity theft insurance premiums and $46,995 in relocation assistance, which
includes $22,310 in gross-up for taxable relocation benefits. |
| (8) | All
other compensation in 2020 includes $52 in identity theft insurance premiums, $3,791
in matching contributions to our 401(k) plan and $1,343,582 in severance benefits. In
connection with Mr. Knowles resignation on February 5, 2020 and in consideration of Mr.
Knowles’ execution of the Waiver and Release Agreement, we paid Mr. Knowles the
severance benefits provided for in the Severance Agreement, dated July 26, 2018, between
us and Mr. Knowles, and accelerated the vesting of portions of certain equity awards.
See “Potential Payments Upon Termination or Change of Control” beginning
on page 46, for a discussion of Mr. Knowles’ aggregate severance benefit. |
| (9) | All
other compensation in 2020 includes $52 in identity theft insurance premiums, $17,787
in financial planning and tax assistance, $9,056 in matching contributions to our 401(k)
plan and $553,403 in severance benefits. In connection with Mr. Reeves’ resignation
on May 27, 2020 and in consideration of Mr. Reeves’ execution of the Waiver and
Release Agreement, we paid Mr. Reeves the severance benefits provided for in the Severance
Agreement, dated July 26, 2018, between us and Mr. Reeves. See “Potential Payments
Upon Termination or Change of Control” beginning on page 46, for a discussion of
Mr. Reeves’ aggregate severance benefit. |
|
41 |
Grants
of Plan-Based Awards
The
following table provides information on grants of plan-based awards made to our named executive officers during fiscal 2020:
| |
| |
| |
Estimated
Possible Payouts Under
Non-Equity Incentive Plan Awards(1) | |
Estimated
Future Payouts Under
Equity Incentive Plan Awards(4) | |
All
Other
Stock
Awards:
Number
of
Shares | |
All
Other
Option
Awards:
Number of Securities | |
Exercise
Price of | |
Grant
Date
Fair
Value of
Stock and |
Name/Award
Type | |
Grant
Date | |
Award
Approval
Date | |
Threshold
($)(2) | |
Target
($) | |
Maximum
($)(3) | |
Threshold (#) | |
Target (#) | |
Maximum (#) | |
of
Stock
or Units (#) | |
Underlying
Options (#) | |
Option
Awards ($) | |
Option
Awards
($) |
Charles
E. Tyson | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Annual
Bonus | |
| |
| |
175,000 | |
700,000 | |
1,400,000 | |
| |
| |
| |
| |
| |
| |
|
Stock
Options | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
| |
| |
| |
| |
17,930(5) | |
9.80 | |
87,498 |
Restricted
Stock | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
| |
| |
| |
8,928(5) | |
| |
| |
87,494 |
Perf
Rest Stock | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
8,929 | |
17,857 | |
35,714 | |
| |
| |
| |
174,999 |
Stock
Options | |
6/1/20 | |
5/26/20 | |
| |
| |
| |
| |
| |
| |
| |
27,610(6) | |
10.00 | |
137,498 |
Restricted
Stock | |
6/1/20 | |
5/26/20 | |
| |
| |
| |
| |
| |
| |
13,750(6) | |
| |
| |
137,500 |
Perf
Rest Stock | |
6/1/20 | |
5/26/20 | |
| |
| |
| |
13,750 | |
27,500 | |
55,000 | |
| |
| |
| |
275,000 |
Nancy
A. Walsh | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Annual Bonus | |
| |
| |
77,250 | |
309,000 | |
618,000 | |
| |
| |
| |
| |
| |
| |
|
Stock Options | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
| |
| |
| |
| |
16,137(5) | |
9.80 | |
78,743 |
Restricted Stock | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
| |
| |
| |
8,035(5) | |
| |
| |
78,743 |
Perf Rest Stock | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
8,036 | |
16,071 | |
32,142 | |
| |
| |
| |
157,496 |
Restricted
Stock | |
6/1/20 | |
5/26/20 | |
| |
| |
| |
| |
| |
| |
12,500(6) | |
| |
| |
125,000 |
Christopher
N. Thomsen | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Annual
Bonus | |
| |
| |
40,977 | |
163,909 | |
286,841 | |
| |
| |
| |
| |
| |
| |
|
Stock
Options | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
| |
| |
| |
| |
10,245(5) | |
9.80 | |
49,996 |
Restricted
Stock | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
| |
| |
| |
5,102(5) | |
| |
| |
50,000 |
Perf
Rest Stock | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
5,102 | |
10,204 | |
17,857 | |
| |
| |
| |
99,999 |
Jennifer
S. Bohaty | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Annual Bonus | |
| |
| |
39,784 | |
159,135 | |
278,486 | |
| |
| |
| |
| |
| |
| |
|
Stock Options | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
| |
| |
| |
| |
10,245(5) | |
9.80 | |
49,996 |
Restricted Stock | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
| |
| |
| |
5,102(5) | |
| |
| |
50,000 |
Perf
Rest Stock | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
5,102 | |
10,204 | |
17,857 | |
| |
| |
| |
99,999 |
Matthew
T. Argano | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Annual
Bonus | |
| |
| |
43,750 | |
175,000 | |
306,250 | |
| |
| |
| |
| |
| |
| |
|
Stock
Options | |
8/7/20 | |
5/20/20 | |
| |
| |
| |
| |
| |
| |
| |
10,530(7) | |
21.30 | |
124,991 |
Restricted
Stock | |
8/7/20 | |
5/20/20 | |
| |
| |
| |
| |
| |
| |
5,868(7) | |
| |
| |
124,988 |
Dennis
R. Knowles | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Annual
Bonus(8) | |
| |
| |
186,688 | |
746,750 | |
1,493,500 | |
| |
| |
| |
| |
| |
| |
|
M.
Lee Reeves | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Annual
Bonus(9) | |
| |
| |
49,088 | |
196,350 | |
392,700 | |
| |
| |
| |
| |
| |
| |
|
Stock
Options | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
| |
| |
| |
| |
12,807(5) | |
9.80 | |
62,498 |
Restricted
Stock | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
| |
| |
| |
6,377(5) | |
| |
| |
62,495 |
Perf
Rest Stock | |
2/28/20 | |
2/24/20 | |
| |
| |
| |
6,378 | |
12,755 | |
25,510 | |
| |
| |
| |
124,999 |
(1) | These
amounts reflect the potential range of payments for 2020 under the Bonus Plan. The actual
payments are reflected in the Non-Equity Incentive Plan Compensation column of the Summary
Compensation Table. |
(2) | The
amounts reflect the threshold payments under the Bonus Plan, which are 25% of the Target
Bonus. |
(3) | The
amounts reflect the greatest potential payments under the Bonus Plan, which are 200%
of the Target Bonus for Mr. Tyson and Ms. Walsh and 175% of the Target Bonus for Mr.
Thomsen, Ms. Bohaty and Dr. Argano. |
(4) | The
amounts reflect a range of performance-based restricted stock that vests, if at all,
based on achievement of performance targets with a three-year performance period with
any shares earned vesting three years from the date of grant of February 28, 2020. The
amounts under Threshold reflect the threshold award under the restricted stock awards,
which are 50% of the target amount. The amounts under Maximum reflect the greatest potential
award under |
| | the restricted stock awards, which are 175% - 200% of the target amount.
The Compensation Committee will determine the performance against pre-established targets
to determine payout of performance stock awards, if any, at the end of the vesting period. |
(5) | The
grants provided for vesting in equal annual amounts on the first four-year anniversary
dates following the date of grant of February 28, 2020. |
(6) | The
grants provided for vesting in equal annual amounts on the first four-year anniversary
dates following the date of grant of June 1, 2020. |
(7) | The
grants provided for vesting in equal annual amounts on the first four-year anniversary
dates following the date of grant of August 7, 2020. |
(8) | Mr.
Knowles was no longer an employee of the Company as of February 5, 2020. In connection
therewith, the Board approved the accelerated vesting of portions of equity awards that
would otherwise have vested in March 2020, consisting of restricted stock awards relating
to 16,605 shares of Company common stock and stock options relating to 25,000 shares
of Company common stock. The stock options have an exercise price of $12.01 per share
and, in accordance with the Company’s equity compensation plan, were exercisable
for 90 days following Mr. Knowles termination of employment. |
(9) | Mr.
Reeves was no longer an employee of the Company as of May 27, 2020 and, as a result,
the awards listed in the table were forfeited. |
Discussion
of the Summary Compensation Table and Grants of Plan-Based Awards Table
The
named executive officers have certain employment or other arrangements discussed below and also may have certain severance arrangements
that are discussed in more detail under “Potential Payments Upon Termination or Change of Control” beginning on page
46.
Agreements
with Charles E. Tyson. At the time of his hire as Chief Customer Experience Officer, we entered into an offer letter agreement
with Mr. Tyson, which set forth his base starting salary, other compensation matters in connection with his hire and certain initial
terms relating to his employment. In May 2020, in connection with his promotion to President & Chief Executive Officer, we
increased Mr. Tyson’s base salary and other elements of his compensation and we entered into a new severance agreement with
Mr. Tyson, which is discussed in more detail under “Potential Payments Upon Termination or Change of Control,” that,
among other things, set forth Mr. Tyson’s severance arrangements.
Agreements
with Nancy A. Walsh. At the time of her hire, we entered into an offer letter agreement with Ms. Walsh, which set forth her
base starting salary, other compensation matters in connection with her hire and certain initial terms relating to her employment.
We also entered into a Severance Agreement with Ms. Walsh, which is discussed in more detail under “Potential Payments Upon
Termination or Change of Control.”
Agreements
with Christopher N. Thomsen. At the time of his hire, we entered into an offer letter agreement with Mr. Thomsen which set
forth his starting base salary, other compensation matters in connection with his hire and certain initial terms relating to his
employment. In addition, in 2018, we entered into a Severance Agreement with Mr. Thomsen, which is discussed in more detail under
“Potential Payments Upon Termination or Change of Control,” that, among other things, changed Mr. Thomsen’s
severance arrangements from what was in his offer letter agreement.
Agreements
with Jennifer S. Bohaty. At the time of her hire, we entered into an offer letter agreement with Ms. Bohaty which set forth
her starting base salary, other compensation matters in connection with her hire and certain initial terms relating to her employment.
In addition, in 2018, we entered into a Severance Agreement with Ms. Bohaty, which is discussed in more detail under “Potential
Payments Upon Termination or Change of
|
43 |
Control,” that, among other things, changed Ms. Bohaty’s severance arrangements
from what was in her offer letter agreement.
Agreements
with Matthew T. Argano. At the time of his hire, we entered into an offer letter agreement with Dr. Argano which set forth
his starting base salary, other compensation matters in connection with his hire and certain initial terms relating to his employment.
We also entered into a Severance Agreement with Dr. Argano, which is discussed in more detail under “Potential Payments
Upon Termination or Change of Control.”
Agreements
with Dennis R. Knowles. At the time of his hire as Chief Operating Officer, we entered into an offer letter agreement with
Mr. Knowles, which was subsequently amended in November 2016 in connection with his appointment to President and Chief Executive
Officer, which set forth his base starting salary (which was increased in November 2016 in connection with his appointment to
President and Chief Executive Officer and, as discussed above, again in April 2017), other compensation matters in connection
with his hire and certain initial terms relating to his employment. In addition, in 2018, we entered into the Knowles Severance
Agreement. In connection with Mr. Knowles’ resignation on February 5, 2020 and in consideration of Mr. Knowles’ execution
of the Waiver and Release Agreement, we paid Mr. Knowles the severance benefits provided for in the Knowles Severance Agreement
and accelerated the vesting of portions of certain equity awards. See “Potential Payments Upon Termination or Change of
Control” beginning on page 46, for a discussion of Mr. Knowles aggregate severance benefit.
Agreements
with M. Lee Reeves. At the time of his hire, we entered into an offer letter agreement with Mr. Reeves, which set forth his
starting base salary, other compensation matters in connection with his hire and certain initial terms relating to his employment.
In addition, in 2018, we entered into the Reeves Severance Agreement. In connection with Mr. Reeves resignation on May 27, 2020
and in consideration of Mr. Reeves’ execution of the Waiver and Release Agreement, we paid Mr. Reeves the severance benefits
provided for in the Reeves Severance Agreement. See “Potential Payments Upon Termination or Change of Control” beginning
on page 46, for a discussion of Mr. Reeves aggregate severance benefit.
For
additional information concerning our executive compensation policies, see “Compensation Discussion and Analysis”
above.
Outstanding
Equity Awards at Fiscal Year-End 2020
The
following table sets forth the outstanding equity awards as of the end of the 2020 fiscal year for each of our named executive
officers:
| |
Option
Awards | | |
Stock Awards | |
Name | |
Number
of Securities Underlying Unexercised Options
Exercisable (#) | | |
Number
of Securities Underlying Unexercisable Options Unexercised (#) | | |
Option
Exercise
Price ($) | | |
Option
Expiration
Date | | |
Number
of Shares
or Units
of Stock
that
Have
Not
Vested (#) | | |
Market
Value of
Shares or
Units of
Stock that
Have Not
Vested ($) | | |
Equity
Incentive
Plan
Awards:
Number of Unearned
Shares,
Units or
Other
Rights that
have Not
Vested (#) | | |
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
that have
Not
Vested ($) | |
Charles E. Tyson | |
65,552 | (1) | |
32,776 | (1) | |
19.49 | | |
8/3/28 | | |
11,133 | (3) | |
342,228 | | |
14,844 | (2) | |
457,534 | |
| |
| | |
17,930 | (4) | |
9.80 | | |
2/28/30 | | |
8,928 | (4) | |
274,447 | | |
17,857 | (5) | |
548,924 | |
| |
| | |
27,610 | (6) | |
10.00 | | |
6/1/30 | | |
13,750 | (6) | |
422,675 | | |
27,500 | (7) | |
845,350 | |
Nancy A. Walsh | |
21,551 | (8) | |
64,655 | (8) | |
8.59 | | |
11/11/29 | | |
32,742 | (8) | |
1,006,489 | | |
| | |
| |
| |
| | |
16,137 | (4) | |
9.80 | | |
| | |
8,035 | (4) | |
246,996 | | |
16,071 | (5) | |
494,023 | |
| |
| | |
| | |
| | |
| | |
12,500 | (6) | |
384,250 | | |
| | |
| |
Christopher N. Thomsen | |
16,666 | (9) | |
| | |
15.02 | | |
11/3/26 | | |
| | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| | |
8,589 | (3) | |
264,026 | | |
11,451 | (2) | |
352,004 | |
| |
| | |
| | |
| | |
| | |
7,576 | (10) | |
232,886 | | |
| | |
| |
| |
| | |
10,245 | (4) | |
9.80 | | |
2/28/30 | | |
5,102 | (4) | |
156,835 | | |
10,204 | (5) | |
313,671 | |
Jennifer S. Bohaty | |
6,892 | (11) | |
6,894 | (11) | |
20.87 | | |
5/4/28 | | |
3,594 | (11) | |
110,480 | | |
8,388 | (2) | |
257,847 | |
| |
| | |
| | |
| | |
| | |
6,241 | (3) | |
191,848 | | |
| | |
| |
| |
| | |
10,245 | (4) | |
9.80 | | |
2/28/30 | | |
5,102 | (4) | |
156,835 | | |
10,204 | (5) | |
313,671 | |
Matthew T. Argano | |
- | | |
10,530 | (12) | |
21.30 | | |
8/7/30 | | |
5,868 | (12) | |
180,382 | | |
- | | |
- | |
Dennis
R. Knowles(13) | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | |
M.
Lee Reeves(13) | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | |
| (1) | The
grants provided for vesting in equal amounts on the first three anniversary dates following
the date of grant of August 3, 2018. |
| (2) | The
grants are performance-based grants that, subject to meeting the applicable two-year
performance targets set forth in the grant agreement, 50% of which will vest upon certification
of meeting the performance targets and 50% will vest on December 31, 2021. |
| (3) | The
grants provided for vesting in equal amounts on the first four anniversary dates following
the date of grant of March 21, 2019. |
| (4) | The
grants provided for vesting in equal amounts on the first four anniversary dates following
the date of grant of February 28, 2020. |
| (5) | The
grants are performance-based grants that, subject to meeting the applicable three-year
performance targets set forth in the grant agreement, 100% of which will vest on the
third anniversary of the grant date of February 28, 2020. |
| (6) | The
grants provided for vesting in equal amounts on the first four anniversary dates following
the date of grant of June 1, 2020. |
|
45 |
| (7) | The
grants are performance-based grants that, subject to meeting the applicable three-year
performance targets set forth in the grant agreement, 100% of which will vest on the
third anniversary of the grant date of June 1, 2020. |
| (8) | The
grants provided for vesting in equal amounts on the first four anniversary dates following
the date of grant of November 11, 2019. |
| (9) | The
grants provided for vesting in equal amounts on the first four anniversary dates following
the date of grant of November 3, 2016. |
| (10) | The
grants provided for vesting in equal amounts on the first four anniversary dates following
the date of grant of December 17, 2019. |
| (11) | The
grants provided for vesting in equal amounts on the first four anniversary dates following
the date of grant of May 4, 2018. |
| (12) | The
grants provided for vesting in equal amounts on the first four anniversary dates following
the date of grant of August 7, 2020. |
| (13) | Mr.
Knowles and Mr. Reeves were no longer employees of the Company on the last day of the
fiscal year and no grants were outstanding. |
Option
Exercises and Stock Vested for 2020
The
following table provides information concerning the exercises of stock options and the vesting of restricted stock during the
fiscal year 2020 on an aggregated basis for each of our named executive officers:
| |
Option Awards | | |
Stock Awards | |
Name | |
Number
of
Shares
Acquired on
Exercise (#) | | |
Value
Realized
on Exercise ($) | | |
Number
of
Shares
Acquired
on Vesting (#) | | |
Value
Realized on
Vesting ($) | |
Charles E. Tyson | |
- | | |
- | | |
3,711 | | |
15,438 | |
Nancy A. Walsh | |
- | | |
- | | |
10,913 | | |
276,535 | |
Christopher N. Thomsen | |
- | | |
- | | |
7,468 | | |
148,839 | |
Jennifer S. Bohaty | |
- | | |
- | | |
3,894 | | |
20,674 | |
Matthew T. Argano | |
- | | |
- | | |
- | | |
- | |
Dennis R. Knowles | |
- | | |
- | | |
16,605 | | |
127,692 | |
M. Lee Reeves | |
- | | |
- | | |
3,145 | | |
13,083 | |
Potential
Payments Upon Termination or Change of Control
We
have agreed to provide payments or other benefits to our named executive officers under certain scenarios related to a termination
of employment. This section describes those payments and benefits and events that trigger them.
Severance
Agreements with Charles E. Tyson, Nancy A. Walsh, Christopher N. Thomsen, Jennifer S. Bohaty and Matthew T. Argano. As
previously discussed, we have entered into Severance Agreements with Messrs. Tyson, Thomsen and Argano and Ms. Walsh and Ms. Bohaty.
Under the terms of the Severance Agreements, if we terminate the executive’s employment other than for cause (as defined
in the Severance Agreements), death, or disability (as defined in the Severance Agreements), or the executive terminates employment
for good reason (as defined in the Severance Agreements), in either case during the term of the Severance Agreement and outside
of a change in control period (as defined in the Severance Agreements) or, if inside a change in control period, where the change
in control is not consummated, the executive will be entitled to the following:
(i) | the
executive’s annualized base salary as of the date of termination in the form of
salary continuation for the twelve (12) months beginning on the date of termination; |
(ii) | any
accrued and unpaid bonus for any prior completed fiscal year in a single lump sum on
the date the bonus would have been paid to the executive had the executive continued
employment with us; |
(iii) | the
greater of the target bonus or the actual bonus for the year the executive’s employment
is terminated (prorated based on the number of days the executive remained employed with
us during the year of termination) in a single lump sum on the date the bonus would have
been paid to the executive had the executive continued employment with us; |
(iv) | any
vested accrued amounts that the executive is entitled to receive upon termination of
the executive’s employment under any Company benefit policy, plan or other arrangement
in which the executive participated prior to termination in accordance with the terms
of such benefit policy, plan or other arrangement; and |
(v) | continued
medical insurance coverage for the executive and the executive’s dependents under
such medical insurance plans and programs for twelve (12) months following the date of
termination and, during such period, payment by us of the portion, if any, of such medical
insurance premiums that we pay for our active associates each month. |
Under
the terms of the Severance Agreements, if we terminate the executive’s employment other than for cause, death or disability,
or the executive terminates employment for good reason, in either case during the term of the Severance Agreement and inside a
change in control period and the relevant change in control occurs, the executive will be entitled to the benefits outlined in
(ii)-(v) above and to the following:
(i) | the
executive’s annualized base salary as of the date of termination in the form of
salary continuation for the twenty-four (24) months in case of Mr. Tyson and eighteen
(18) months in case of Messrs. Thomsen and Argano and Ms. Walsh and Ms. Bohaty beginning
on the date of termination; |
(ii) | continued
medical insurance coverage for the executive and the executive’s dependents for
twenty-four (24) months in case of Mr. Tyson and eighteen (18) months in case of Messrs.
Thomsen and Argano and Ms. Walsh and Ms. Bohaty following the date of termination and,
during such period, payment by us of the portion, if any, of such medical insurance premiums
that we pay for our active associates each month (provided, however, if such coverage
cannot be extended, we may either provide comparable coverage or pay monthly premiums
to the executive equal to the cost of such coverage); and |
(iii) | accelerated
vesting of all unvested stock options, stock appreciation rights, restricted stock, restricted
stock units and other equity awards previously granted to the executive by us or our
subsidiaries (at target to the extent vesting would be based on the achievement of performance
conditions other than continued employment or service) and such stock options and stock
appreciation rights shall remain outstanding and exercisable, to the extent vested, until
the earlier of (i) the original expiration date of such stock options and stock appreciation
rights or (ii) the one-year anniversary of the later of the termination date or the date
such stock option or stock appreciation right becomes vested and exercisable. |
As
a condition to the receipt of any compensation and other benefits under the Severance Agreements, the executive is required to
enter into a confidential waiver and release agreement. Any breach by the executive of the terms of the executive’s Non-Compete
Agreement will constitute a material breach of the Severance Agreement, resulting in the waiver or forfeiture of all rights to
future payments and benefits under the Severance Agreement and the requirement that the executive reimburse us for any compensation
and benefits previously received by the executive under the Severance Agreement.
|
47 |
The
original term of the Severance Agreements expires on December 31, 2021 and will automatically renew for successive one-year periods
unless notice of non-renewal is previously given by either party to the other; provided, however, that the Severance Agreements
will be extended automatically during any change in control period.
In
addition to the payments and benefits described above, the agreements pursuant to which equity awards have been granted to the
named executive officers contain provisions for accelerated vesting (i) upon a change in control of the Company or (ii) upon a
change in control of the Company and the termination of the named executive officer’s employment with the Company (or any
related company) for “good reason” or such termination is not a “termination for cause”, depending on
the award agreement applicable to a particular equity award.
The
following table shows the value to our named executive officers of benefits provided assuming termination inside a change in control
period as of December 31, 2020.
Name | |
Cash
Severance ($)(1) | | |
Health
and
Welfare Benefits ($) | | |
Benefit
Policy
($)(2) | | |
Total
Value of
Stock Options or
Award that may
Accelerate Upon
Change in Control ($)(3) | | |
Total
Value of
Benefits Provided
Upon Termination
and Change of
Control ($) | |
Charles E. Tyson | |
| 2,100,000 | | |
| 16,586 | | |
| 67,308 | | |
| 4,206,744 | | |
| 6,390,638 | |
Nancy A. Walsh | |
| 1,081,500 | | |
| 17,938 | | |
| 49,519 | | |
| 3,901,775 | | |
| 5,050,732 | |
Christopher N. Thomsen | |
| 662,000 | | |
| 17,938 | | |
| 31,827 | | |
| 1,533,953 | | |
| 2,245,718 | |
Jennifer S. Bohaty | |
| 636,540 | | |
| 12,228 | | |
| 30,603 | | |
| 1,314,793 | | |
| 1,994,164 | |
Matthew T. Argano | |
| 700,000 | | |
| 21,843 | | |
| 33,654 | | |
| 279,786 | | |
| 1,035,283 | |
(1) | Represents
(i) annualized base salary as of the date of termination in the form of salary continuation
for the twenty-four (24) months in case of Mr. Tyson and eighteen (18) months in case
of Messrs. Thomsen and Argano and Ms. Walsh and Ms. Bohaty beginning on the date of termination,
(ii) any accrued and unpaid bonus for any prior completed fiscal year in a single lump
sum on the date the bonus would have been paid to the executive had the executive continued
employment and (iii) the greater of the target bonus or the actual bonus for the year
the executive’s employment is terminated (prorated based on the number of days
the executive remained employed with us during the year of termination) in a single lump
sum on the date the bonus would have been paid to the executive had the executive continued
employment. |
(2) | Amount
represents accrued but unused PTO and assumes payout of maximum days allowable. |
(3) | Upon
change in control and the termination of the named executive officer’s employment
with the Company (or any related company) for “good reason” or such termination
is not a “termination for cause,” 100% of the unvested options or awards
vest. Represents the value of unvested stock options and awards based on the closing
price of our common stock on December 31, 2020, which was $30.74. |
The
following table shows the value to our named executive officers of benefits provided assuming termination outside a change in
control period as of December 31, 2020 (or, if inside a change in control period, where the
change in control is not consummated):
Name | |
Cash
Severance ($)(1) | | |
Health
and
Welfare Benefits ($) | | |
Benefit
Policy
($)(2) | | |
Total
Value of
Benefits Provided
Upon Termination
Outside a Change
of Control ($) | |
Charles E. Tyson | |
| 1,400,000 | | |
| 8,293 | | |
| 67,308 | | |
| 1,475,601 | |
Nancy A. Walsh | |
| 824,000 | | |
| 11,959 | | |
| 49,519 | | |
| 885,478 | |
Christopher N. Thomsen | |
| 496,500 | | |
| 11,959 | | |
| 31,827 | | |
| 540,286 | |
Jennifer S. Bohaty | |
| 477,405 | | |
| 8,152 | | |
| 30,603 | | |
| 516,160 | |
Matthew T. Argano | |
| 525,000 | | |
| 14,562 | | |
| 33,654 | | |
| 573,216 | |
(1) | Represents
(i) annualized base salary as of the date of termination in the form of salary continuation
for twelve (12) months beginning on the date of termination, (ii) any accrued and unpaid
bonus for any prior completed fiscal year in a single lump sum on the date the bonus
would have been paid to the executive had the executive continued employment and (iii)
the greater of the target bonus or the actual bonus for the year the executive’s
employment is terminated (prorated based on the number of days the executive remained
employed with us during the year of termination) in a single lump sum on the date the
bonus would have been paid to the executive had the executive continued employment. |
(2) | Amount
represents accrued but unused PTO and assumes payout of maximum days allowable. |
Terms
of Severance for Messrs. Knowles and Reeves. In connection with Mr. Knowles’ resignation
on February 5, 2020 and in consideration of Mr. Knowles’ execution of the Waiver and Release Agreement, we paid Mr. Knowles
the severance benefits provided for in the Knowles Severance Agreement and accelerated the vesting of portions of certain equity
awards. The aggregate severance benefits paid to Mr. Knowles included (i) annualized base salary as of the resignation date in
the form of salary continuation for 12 months beginning on the resignation date ($617,505), (ii) the accrued and unpaid bonus
for the 2019 fiscal year in a single lump sum on the date the bonus would have been paid to Mr. Knowles had he continued employment
($477,705), and (iii) the greater of the target bonus or the actual bonus for fiscal year 2020 (prorated based on the number of
days Mr. Knowles remained employed with us during 2020) in a single lump sum on the date the bonus would have been paid to Mr.
Knowles had he continued employment ($112,417). The aggregate severance includes health and welfare benefits ($8,263). The Board
also approved the accelerated vesting of portions of equity awards that would otherwise have vested in March 2020, consisting
of restricted stock awards relating to 16,605 shares of Company common stock and stock options relating to 25,000 shares of Company
common stock. The stock options had an exercise price of $12.01 per share and, in accordance with the Company’s compensation
plan, were exercisable for 90 days following Mr. Knowles’ termination of employment.
In
connection with Mr. Reeves’ resignation on May 27, 2020 and in consideration of Mr. Reeves’ execution of the Waiver
and Release Agreement, we paid Mr. Reeves the severance benefits provided for in the Reeves Severance Agreement. The aggregate
severance benefits paid to Mr. Reeves included (i) annualized base salary as of the resignation date in the form of salary continuation
for 12 months beginning on the resignation date ($404,481), and (ii) the greater of the target bonus or the actual bonus for fiscal
year 2020 (prorated based on the number of days Mr. Reeves remained employed with us during 2020) in a single lump sum on the
date the bonus would have been paid to Mr. Reeves had he continued employment ($125,165). The aggregate severance also includes
health and welfare benefits ($11,965) and payout of accrued vacation ($11,792).
|
49 |
Pay
Ratio
As
required by Item 402(u) of Regulation S-K, we are providing the following information regarding pay ratios. Our pay ratio is a
reasonable estimate and has been calculated in a manner consistent with SEC rules based on the methodology described below. For
the year ended December 31, 2020:
| • | The
median of the annual total compensation of all of our associates (other than Mr. Tyson,
our President and Chief Executive Officer) was $46,440; |
| • | The
annual total compensation of Mr. Tyson was $2,525,465(1); and |
| • | Based
on the information above, the ratio of the annual total compensation of our President
and Chief Executive Officer to the median of the annual total compensation of all associates
is 54 to 1. |
(1)
The total compensation reported in the Summary Compensation Table for Mr. Tyson has been annualized for purposes of calculating
our pay ratio by adding $12,000 to the total amount reported in the Summary Compensation Table. This additional amount adjusts
Mr. Tyson’s salary for January 2020 and is the additional monthly amount we began paying to Mr. Tyson when he was promoted
and began serving as our Interim President and Principal Executive Officer in February 2020.
The
methodology that we used and the material assumptions, adjustments and estimates that we used to identify the median employee
and then determine annual total compensation for 2020 were as follows:
Employee
population. As of December 29, 2020, our employee population consisted of approximately 2,275 individuals, with 2,230 associates,
representing approximately 98% of our total employee population located in the United States and 45 associates, representing approximately
2% of our total employee population, located outside of the United States. Our employee population for purposes of identifying
our median employee on December 29, 2020 was 2,230, after taking into consideration the de minimis adjustment permitted
by the SEC rules. We excluded approximately 20 individuals that were located in Canada and approximately 25 individuals that were
located in China under the de minimis exception because these non-U.S. associates account for less than 2% of our total associates.
Identification
of Median. To identify the median of the annual total compensation of all of our associates (other than Mr. Tyson), we reviewed
the annual wages of each of our associates as reported on box 5 of their W-2 tax forms (the “reported compensation”).
In making this calculation, we annualized the reported compensation of all permanent associates who were hired in the year ended
December 31, 2020, but did not work for us for the entire year. We did not make any cost of living adjustments to the reported
compensation in identifying the median employee. Using this methodology, we determined that our median employee was a full-time,
hourly employee located in the U.S. With respect to this median employee, we then identified and calculated the elements of such
employee’s compensation for the year ended December 31, 2020 in accordance with the requirements of Item 402(c)(2)(x) of
Regulation S-K, resulting in annual total compensation in the amount of $46,440.
Identification
of Annual Total Compensation for our President and Chief Executive Officer. With respect to the annual total compensation
of our President and Chief Executive Officer, we used the amount reported in the “Total” column of our 2020 Summary
Compensation Table included in this Proxy Statement for Mr. Tyson who was serving as our President and Chief Executive Officer
on December 27, 2020 when we identified our median employee and who was compensated as an executive officer of the Company for
all of 2020.
Given
the different methodologies that various public companies will use to determine an estimate of their pay ratio, the estimated
ratio reported above should not be used as a basis for comparison between companies.
Equity
Compensation Plan Information
The
following table sets forth information as of December 31, 2020, with respect to compensation plans under which shares of our common
stock are authorized for issuance:
Plan
Category | |
Number
of Securities
to be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights (#) | | |
Weighted-average
Exercise Price of
Outstanding
Options, Warrants
and Rights ($) | | |
Number
of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (#) | |
Equity
Compensation Plans Approved by Security Holders | |
| | | |
| | | |
| | |
2007
Equity Compensation Plan(1)(2) | |
| 12,051 | (3) | |
| 23.49 | (4) | |
| — | |
Amended
and Restated 2011 Equity Compensation Plan(1)(5) | |
| 567,554 | (6) | |
| 18.07 | (4) | |
| 2,493,573 | |
Equity
Compensation Plans Not Approved by Security Holders | |
| — | | |
| — | | |
| — | |
Total | |
| 579,605 | | |
| 18.18 | (4) | |
| 2,493,573 | |
(1) | In
2019, the Board adopted, and the stockholders approved, the 2011 Plan to amend and restate
the previous version of the 2011 Plan, as amended and restated (the “Previous 2011
Plan”). In 2016, the Board adopted, and the stockholders approved, the Previous
2011 Plan to amend and restate the original version of the 2011 Plan (the “Original
2011 Plan”). In 2011, the Board adopted, and the stockholders approved, the Original
2011 Plan to succeed the 2007 Equity Compensation Plan (the “2007 Plan”).
As a result, no further awards will be granted under the 2007 Plan. |
(2) | The
2007 Plan permitted the grant of non-qualified and incentive stock options and other
stock-based awards to our associates, non-employee directors and other service providers. |
(3) | Includes
stock options to purchase 694 shares and 11,357 unvested shares of restricted stock. |
(4) | Weighted
average exercise price of outstanding options; excludes restricted stock awards. |
(5) | The
2011 Plan permits the grant of non-qualified and incentive stock options and other stock-based
awards, including, without limitation, restricted stock, restricted stock units, unrestricted
stock awards and stock appreciation rights, to our associates, non-employee directors
and other service providers. Award grants prior to November 2, 2017 may have been made
with the intention of qualifying such awards under the requirements of Section 162(m)
of the Internal Revenue Code for performance-based compensation exempt from the $1 million
deduction limit (prior to its repeal by the Tax Cuts and Jobs Act of 2017 (the “Tax
Act”)). The 2011 Plan is administered by our Compensation Committee. There are
7,800,000 shares of our common stock authorized for issuance, subject to adjustment and
reduced by (i) any shares that have been issued under the 2007 Plan, the Previous 2011
Plan, and the Original 2011 Plan, and (ii) any shares that are subject to outstanding
awards under the 2007 Plan, the Previous 2011 Plan and the Original 2011 Plan that have
not been forfeited or cancelled. The maximum aggregate number of shares of Common Stock
that may be issued under the 2011 Plan is 1,750,000 shares of Common Stock, plus the
number of shares of Common Stock available for grant under the Previous 2011 Plan immediately
prior to the 2011 Plan’s approval. |
(6) | Includes
stock options to purchase 553,262 shares and 14,292 unvested shares of restricted stock. |
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51 |
Securities
Ownership
Securities
Ownership of Certain Beneficial Owners
The
following table sets forth information regarding ownership of our common stock by each person (or group of affiliated persons)
known to us to be the beneficial owner of more than 5% of the outstanding shares of our common stock and the shares of common
stock owned by each director, by each named executive officer, and all of our directors and executive officers as a group as of
March 22, 2021. Unless otherwise indicated below, the address of each beneficial owner listed below is c/o Lumber Liquidators
Holdings, Inc., 4901 Bakers Mill Lane, Richmond, Virginia 23230.
Name of Beneficial Owner | |
Amount and Nature of Beneficial
Ownership(1) | |
Percent
of Class(2) |
|
5% or Greater Owners | |
| |
|
Blackrock, Inc.(3) 55 East 52nd Street New York, NY 10022 | |
4,522,360 | |
15.60 |
% |
T. Rowe Price Associates(4) 100 E. Pratt Street Baltimore, MD 21202 | |
3,454,364 | |
11.92 |
% |
The Vanguard Group(5) 100 Vanguard Boulevard Malvern, PA 19355 | |
1,898,118 | |
6.55 |
% |
Neil Gagnon(6) 1370 Avenue of the Americas, 24th Floor New York, NY 10019 | |
1,597,277 | |
5.51 |
% |
Directors and Executive Officers | |
| |
|
Matthew T. Argano | |
7,991 | |
|
* |
Jennifer S. Bohaty(7) | |
36,467 | |
|
* |
Alice G. Givens | |
7,622 | |
|
* |
Terri Funk Graham | |
18,187 | |
|
* |
Dennis R. Knowles(8) | |
102,241 | |
|
* |
David A. Levin | |
31,978 | |
|
* |
Douglas T. Moore | |
32,728 | |
|
* |
Joseph M. Nowicki | |
2,431 | |
|
* |
M. Lee Reeves(9) | |
50,062 | |
|
* |
Famous P. Rhodes | |
15,313 | |
|
* |
Martin F. Roper | |
132,570 | |
|
* |
Nancy M. Taylor | |
65,849 | |
|
* |
Christopher N. Thomsen(10) | |
55,676 | |
|
* |
Charles E. Tyson(11) | |
136,088 | |
|
* |
Jimmie L. Wade | |
46,773 | |
|
* |
Nancy A. Walsh(12) | |
89,496 | |
|
* |
All executive officers and directors as a group (16 persons) | |
831,472 | |
2.87 |
% |
*
Represents beneficial ownership of less than 1%.
(1) | Under
the rules of the SEC, a person is deemed to be the beneficial owner of a security if
that person, directly or indirectly, has or shares the power to direct the voting of
the security or the power to dispose or direct the disposition of the security. Accordingly,
more than one person may be deemed to be a beneficial owner of the same security. A person
is also deemed to be a beneficial owner of any securities if that person has the right
to acquire beneficial ownership within 60 days of the relevant date. Unless otherwise
indicated by footnote, the named individuals have sole voting and investment power with
respect to beneficially owned shares of stock. |
(2) | Based
on 28,986,413 shares of the Company’s common stock outstanding as of March 22,
2021. In accordance with SEC rules, percent of class as of March 22, 2021 is calculated
for each person and group by dividing the number of shares beneficially owned by the
sum of the total shares outstanding plus the number of shares over which that person
has the right to acquire beneficial ownership within 60 days of March 22, 2021. |
(3) | According
to a Schedule 13G/A filed with the SEC on January 25, 2021, BlackRock, Inc., through
certain of its subsidiaries, has sole power to vote or direct the vote of 4,479,430 shares
and sole power to dispose or to direct the disposition of 4,522,360 shares of the Company’s
common stock. Relevant subsidiaries of BlackRock, Inc. that are persons described in
Rule 13d-1(b) include: (i) BlackRock Advisors, LLC; (ii) BlackRock Asset Management Canada
Limited; (iii) Black Rock Fund Advisors; (iv) BlackRock Asset Management Ireland Limited;
(v) BlackRock Institutional Trust Company, National Association; (vi) BlackRock Financial
Management, Inc.; (vii) BlackRock Asset Management Schweiz AG; and (viii) BlackRock Investment
Management, LLC. |
(4) | According
to a Schedule 13G/A filed with the SEC on February 16, 2021 by T. Rowe Price Associates,
Inc. (“T. Rowe Price”). T. Rowe Price has sole voting power over 1,161,190
shares and sole power to dispose or to direct the disposition of 3,454,364 shares. T.
Rowe Price Small-Cap Value Fund, Inc. has sole voting power over 2,214,005 shares. |
(5) | According
to a Schedule 13G/A filed with the SEC on February 8, 2021, The Vanguard Group (“Vanguard”),
including through certain of its subsidiaries, has sole power to dispose or to direct
the disposition of 1,841,950 shares, shared power to vote or direct the vote of 34,165
shares, and shared power to dispose or to direct the disposition of 56,168 shares of
the Company’s common stock. Relevant subsidiaries of The Vanguard Group that are
persons described in Rule 13d-1(b) include: (i) Vanguard Asset Management, Limited; (ii)
Vanguard Fiduciary Trust Company; (iii) Vanguard Global Advisors, LLC; (iv) Vanguard
Group (Ireland) Limited; (v) Vanguard Investments Australia Ltd; (vi) Vanguard Investments
Canada Inc.; (vii) Vanguard Investments Hong Kong Limited; and (viii) Vanguard Investments
UK, Limited. |
(6) | According
to a Schedule 13G filed with the SEC on February 9, 2021, Neil Gagnon has sole voting
and dispositive power over 99,825 shares of the Company’s common stock, he has
shared voting power of 1,340,537 shares of the Company’s common stock and shared
dispositive power over 1,497,452 shares of the Company’s common stock. Mr. Gagnon
is the managing member and principal owner of Gagnon Securities LLC (“GS”)
and the Chief Executive Officer of Gagnon Advisors, LLC (“Gagnon Advisors”).
GS and Mr. Gagnon share voting over 998,686 shares and dispositive power over 1,148,747
shares. Gagnon Advisors and Mr. Gagnon share voting and dispositive power over 287,619
shares. |
(7) | Including
12,900 shares not currently owned but issuable upon the exercise of stock options awarded
under our equity compensation plans that are currently exercisable or will become exercisable
within 60 days. |
(8) | Includes
shares based on Mr. Knowles last Form 4 filing on August 12, 2019. |
(9) | Includes
shares based on Mr. Reeves last Form 4 filing on March 24, 2020. |
(10) | Including
19,227 shares not currently owned but issuable upon the exercise of stock options awarded
under our equity compensation plans that are currently exercisable or will become exercisable
within 60 days of March 22, 2021. |
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53 |
(11) | Including
70,034 shares not currently owned but issuable upon the exercise of stock options awarded
under our equity compensation plans that are currently exercisable or will become exercisable
within 60 days of March 22, 2021. |
(12) | Including
25,585 shares not currently owned but issuable upon the exercise of stock options awarded
under our equity compensation plans that are currently exercisable or will become exercisable
within 60 days of March 22, 2021. |
Delinquent
Section 16(a) Reports
Section
16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class
of our equity securities, to file with the Securities and Exchange Commission initial reports of beneficial ownership and reports
of changes in beneficial ownership of our equity securities. To facilitate compliance, we have undertaken the responsibility to
prepare and file these reports on behalf of our officers and directors. Based on a review of the SEC-filed ownership reports during
2020 and written representations of our directors and officers, we believe that all Section 16(a) filing requirements were met
during 2020, except that one report was filed one business day late on behalf of Ms. Givens.
Proposal
3 |
Ratification
of the Selection of Independent Registered Public Accounting Firm |
The
Audit Committee has selected Ernst & Young LLP to serve as our independent registered public accounting firm for the year
ending December 31, 2021. We are asking the stockholders to ratify this selection.
Under
its charter, the Audit Committee is responsible for the appointment, retention, compensation, evaluation and termination of our
independent registered public accounting firm. To execute this responsibility, the Audit Committee engages in an annual evaluation
of the external auditor’s qualifications, performance and independence. In accordance with SEC rules, audit partners are subject
to rotation requirements to limit the number of consecutive years an individual partner may provide service to the Company. For
lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. Under its
charter, the Audit Committee assures the regular rotation of the lead audit partner as required by law.
If
our stockholders fail to ratify the selection of Ernst & Young, the Audit Committee and our Board will consider whether to
retain Ernst & Young and may retain that firm or another firm without resubmitting the matter to our stockholders. Even if
the selection is ratified, the Audit Committee, in its discretion, may select a different independent registered accounting firm
at any time during the year if it determines that such a change would be in our and our stockholders’ best interest.
The
affirmative vote of the holders of shares representing a majority of the votes cast at the Annual Meeting, in person or by proxy,
is required to ratify the selection of the independent registered public accounting firm.
The
Board of Directors recommends a vote FOR the ratification of the selection by the Audit Committee of Ernst & Young LLP
as our independent registered public accounting firm for the fiscal year ending December 31, 2021. |
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55 |
AUDIT
INFORMATION
Ernst
& Young served as our independent registered public accounting firm for the years ended December 31, 2020 and 2019. Representatives
of Ernst & Young are expected to attend the Annual Meeting, be available to respond to appropriate questions from stockholders
and have the opportunity to make a statement if they desire to do so.
Fees
Paid to Independent Registered Public Accounting Firm
The
following information is furnished with respect to the fees billed by our independent registered public accounting firm for each
of the last two fiscal years:
| |
2020 | | |
2019 | |
Audit Fees | |
| $1,145,000 | | |
| $1,485,550 | |
Audit-Related Fees | |
| $14,290 | | |
| $3,600 | |
Tax Fees | |
| $15,450 | | |
| $77,776 | |
All Other Fees | |
| - | | |
| - | |
Total Fees | |
| $1,174,740 | | |
| $1,566,926 | |
Audit
fees
The
aggregate amount of fees billed to us by Ernst & Young for professional services rendered in connection with the audits of
our annual consolidated financial statements and our international subsidiaries, the reviews of the consolidated financial statements
for the fiscal quarters during the year and accounting consultations that relate to the audited consolidated financial statements
and are necessary to comply with auditing standards.
Audit-Related
fees
The
aggregate amount of fees billed to us by Ernst & Young for professional services rendered in connection with accounting consultations,
principally related to SEC filing and reporting matters, and an accounting research tool.
Tax
fees
The
aggregate amount of fees billed to us by Ernst & Young for professional services related to federal, state and international
tax return preparation, tax planning services and consultations on tax matters.
Audit
Committee Pre-Approval Policies and Procedures
The
Audit Committee has determined that Ernst & Young’s rendering of all other non-audit services is compatible with maintaining
auditor independence. The Audit Committee has adopted a policy for the pre-approval of services provided by the independent registered
public accounting firm. Under the policy, pre-approval is generally provided for particular services or categories of services,
including planned services, project-based services and routine consultations projects. Each category is approved subject to a
specific budget or quarterly dollar amount. In addition, the Audit Committee may also pre-approve particular services on a case-by-case
basis. For each proposed service, the independent registered public accounting firm is required to provide detailed back-up documentation
at the time of approval. The Audit Committee has delegated certain pre-approval authority to its Chairperson. The Chairperson
must report any decisions to the Audit Committee at its next scheduled meeting. All services provided by Ernst & Young during
2019 and 2020 were pre-approved.
Audit
Committee Report
The
Audit Committee operates under a written charter adopted by the Board. The charter reflects the applicable requirements of the
Sarbanes-Oxley Act of 2002, the SEC and the NYSE. Each member of the Audit Committee is independent in accordance with the applicable
rules of the NYSE, the SEC and our corporate governance guidelines.
The
Audit Committee reviews and discusses the following matters with management and our independent registered public accounting firm,
Ernst & Young LLP:
| • | Quarterly
and year-end results reflected in consolidated financial statements and reports, prior
to public disclosure. |
| • | Our
disclosure controls and procedures, including internal control over financial reporting. |
| • | The
independence of our registered public accounting firm. |
| • | Management’s
report and the independent registered public accounting firm’s report and attestation
on internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley
Act of 2002. |
The
Audit Committee routinely meets with our internal auditors and independent registered public accounting firm, with and without
management present.
The
Audit Committee has oversight responsibilities only, and it is not acting as an expert in accounting or auditing. The Audit Committee
relies without independent verification on the information provided to its members and on the representations made by management
and the independent auditors. Accordingly, the Audit Committee’s oversight does not provide an independent basis to determine
that our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States or that the audit of our consolidated financial statements by the independent auditors has been carried out in accordance
with auditing standards set forth by the Public Company Accounting Oversight Board (“PCAOB”).
Management
has the primary responsibility for the preparation of our consolidated financial statements and the overall reporting process,
including the systems of internal control over financial reporting, and has represented to the Audit Committee that our 2020 consolidated
financial statements were prepared in accordance with accounting principles generally accepted in the United States. The Audit
Committee reviewed and discussed the audited consolidated financial statements with management and the independent registered
public accounting firm. The Audit Committee has discussed with the independent registered public accounting firm the matters required
to be discussed by the applicable requirements established by the PCAOB and the SEC, including PCAOB Auditing Standard No. 1301,
“Communications with Audit Committees,” which included, among other things, a review of significant accounting
policies, their application and estimates, and the independent registered public accounting firm’s judgment about our internal
controls and the quality of our accounting practices.
The
Audit Committee has received from the independent registered public accounting firm written disclosures required by applicable
requirements of the PCAOB regarding the auditors’ independence, and has discussed with the independent registered public
accounting firm, the independent registered public accounting firm’s independence.
|
57 |
Relying
on these reviews and discussions, the Audit Committee recommended to the Board that the audited consolidated financial statements
be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, for filing with the SEC.
AUDIT
COMMITTEE
Jimmie
L. Wade, Chairperson
David
A. Levin
Joseph
M. Nowicki
Famous
P. Rhodes
Martin
F. Roper
ADDITIONAL
INFORMATION
Deadlines
for Submission of Stockholder Proposals & Director Nominations
Stockholders
interested in submitting a proposal for inclusion in the proxy materials for the Annual Meeting of Stockholders to be held in
2022 may do so by following the procedures set forth in Rule 14a-8 of the Exchange Act. To be eligible for inclusion, stockholder
proposals must be received at our principal executive offices on or before December 8, 2021 (unless the date of the Annual Meeting
of Stockholders to be held in 2022 is advanced by more than 30 days or delayed by more than 30 days from the anniversary date
of the 2021 Annual Meeting of Stockholders, in which case the proposal must be received a reasonable time before we begin to print
and mail our proxy materials for the Annual Meeting of Stockholders to be held in 2022).
If
a stockholder wishes to present a proposal at the Annual Meeting of Stockholders to be held in 2022 but does not wish to have
it included in our proxy materials for that meeting, the stockholder may follow the procedures in our Bylaws. In that instance,
the proposal: (1) must be received by us no later than December 8, 2021 (unless the date of the Annual Meeting of Stockholders
to be held in 2022 is changed by more than 30 days from the anniversary date of the 2021 Annual Meeting of Stockholders, in which
case the proposal must be received not later than the later of the close of business on the 90th day prior to such annual meeting
or the tenth day following the day on which notice of the date of the annual meeting was mailed or public disclosure of such date
was made), (2) must present a proper matter for stockholder action under Delaware General Corporation Law, (3) must present a
proper matter for consideration at such meeting under our Certificate of Incorporation and Bylaws, and (4) must be submitted in
a manner that is consistent with the submission requirements provided in our Bylaws.
If
a stockholder wishes to nominate a person for election to our Board at the Annual Meeting of Stockholders to be held in 2022,
the stockholder may follow the procedures in our Bylaws. In that instance, the nomination must be received by us no later than
December 8, 2021 (unless the date of the Annual Meeting of Stockholders to be held in 2022 is changed by more than 30 days from
the anniversary date of the 2021 Annual Meeting of Stockholders, in which case the proposal must be received not later than the
later of the close of business on the 90th day prior to such annual meeting or the tenth day following the day on which notice
of the date of the annual meeting was mailed or public disclosure of such date was made) and must include the information required
by our Bylaws as summarized above under “Corporate Governance—Committees of the Board—Nominating and Corporate
Governance Committee.”
Any
such nominations or proposals should be sent to Corporate Secretary, Lumber Liquidators Holdings, Inc., 4901 Bakers Mill Lane,
Richmond, Virginia 23230.
Availability
of Annual Report on Form 10-K
A
copy of an Annual Report on Form 10-K, including the financial statements and schedules thereto, required to be filed with the
SEC for our most recent fiscal year, may be found on our website, https://investors.llflooring.com. In addition, we will
provide each beneficial owner of our securities with a copy of the Annual Report without charge, upon receipt of a written request
from such person. Such request should
|
59 |
be sent to the Corporate Secretary, Lumber Liquidators Holdings, Inc., 4901 Bakers Mill
Lane, Richmond, Virginia 23230.
Incorporation
by Reference
In
accordance with SEC rules, notwithstanding anything to the contrary set forth in any of our previous or future filings under the
Securities Act of 1933, as amended, or the Exchange Act that might incorporate this proxy statement or future filings made by
the Company under those statutes, the information included under the section entitled “Compensation Committee Report”
and those portions of the information included under the section entitled “Audit Committee Report” required by the
SEC’s rules to be included therein, shall not be deemed to be “soliciting material” nor be “filed” with
the SEC or be deemed incorporated by reference into any of those prior filings or into any future filings made by the Company
under those statutes, except to the extent we specifically incorporate these items by reference. Web links throughout this document
are provided for convenience only, and the content on the referenced websites does not constitute a part of this proxy statement.
Questions
and Answers About the Annual Meeting
Why
did I receive these materials?
Our
Board of Directors is soliciting proxies for the 2021 Annual Meeting of Stockholders. You are receiving a proxy statement because
you owned shares of our common stock on March 22, 2021 and that entitles you to vote at the meeting. By use of a proxy, you can
vote whether or not you attend the meeting. This proxy statement describes the matters on which we would like you to vote and
provides information on those matters so that you can make an informed decision.
Who
is entitled to vote at the Annual Meeting?
Only
stockholders of record at the close of business on March 22, 2021 are entitled to notice of and to vote at the Annual Meeting.
On that date, we had outstanding and entitled to vote 28,986,413 shares of common stock, $0.001 par value per share. Each outstanding
share of our common stock entitles the record holder to one (1) vote on each matter.
How
many votes do I have?
Each
outstanding share of our common stock you owned as of the record date will be entitled to one vote for each matter considered
at the meeting. There is no cumulative voting.
What
is the difference between a stockholder of record and a beneficial owner of shares held in street name?
Stockholder
of Record. If your shares are registered directly in your name with our transfer agent, Computershare, you are considered
the stockholder of record with respect to those shares.
Beneficial
Owner of Shares Held in Street Name. If your shares are held in an account at a bank, broker or other similar organization,
you are the beneficial owner of shares held in “street name.” The organization holding your
account is considered
the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct
that organization on how to vote the shares held in your account.
How
do I vote?
Stockholders
may vote in any of the following four ways – by Internet, by telephone, live at the virtual Annual Meeting or, if you requested
printed copies of the proxy materials, by signing, dating and mailing the proxy card you receive in the envelope provided. You
need only vote in one way (e.g., if you vote by Internet or telephone, you need not return the proxy card). We encourage you to
vote in advance to ensure your vote will be represented at the Annual Meeting.
Voting
by Mail. If you are a stockholder of record that received a printed copy of the proxy card, you may vote by signing, dating
and returning your proxy card in the enclosed prepaid envelope. The proxy holders will vote your shares in accordance with your
directions. If you sign and return your proxy card, but do not properly direct how your shares should be voted on a proposal,
the proxy holders will vote your shares “for” the election of each director nominee on Proposal 1 and “for”
Proposals 2 and 3. If you sign and return your proxy card, the proxy holders will vote your shares according to their discretion
on any other proposals and other matters that may be brought before the Annual Meeting.
If
you hold shares in street name, you should complete, sign and date the voting instruction card provided to you by your bank, broker
or other nominee.
Voting
on the Internet or by Telephone. If you are a stockholder of record, detailed instructions for Internet and telephone voting
are attached to your proxy card. Your Internet or telephone vote authorizes the proxy holders to vote your shares in the same
manner as if you signed and returned your proxy card by mail. Except as noted below, if you are a stockholder of record and you
vote on the Internet or by telephone, your vote must be received by 11:59 p.m. EDT on May 18, 2021. If you hold shares in street
name, you may be able to vote on the Internet or by telephone as permitted by your bank, broker or other nominee.
Voting
Live. All stockholders may vote live at the Annual Meeting. To attend and participate in the Annual Meeting, visit www.virtualshareholdermeeting.com/LL2021
and enter the 16-digit control number included on your proxy card or voting instruction form.
What
happens if I hold shares in street name and I do not give voting instructions?
If
you hold shares in street name and do not provide your broker with specific voting instructions, under the rules of the New York
Stock Exchange (“NYSE”), your bank, broker or other nominee may vote your shares of common stock in its discretion
on “routine” matters. However, NYSE rules do not permit your bank, broker or other nominees to vote your shares of
common stock on proposals that are not considered routine. Proposals 1 and 2 are considered non-routine matters. Therefore, if
you do not instruct your bank, broker or other nominees how to vote on Proposals 1 and 2, your bank, broker or other nominee does
not have the authority to vote on those proposals. This is generally referred to as a “broker non-vote.” Proposal
3 is considered a routine matter
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61 |
and, therefore, your bank, broker or other nominees may vote your shares on this proposal according
to its discretion.
Who
tabulates the votes?
Our
inspector of elections will tabulate the votes cast by each proxy and in person at the Annual Meeting.
What
constitutes a quorum for the Annual Meeting?
A
quorum is necessary for the transaction of business at the Annual Meeting. A quorum exists when a majority of the outstanding
shares of common stock entitled to vote at the Annual Meeting is present either in person or represented by proxy at the Annual
Meeting. Abstentions, broker non-votes and votes withheld for director nominees will count as “shares present” at
the Annual Meeting for purposes of determining whether a quorum exists.
What
vote is required to approve each proposal?
Election
of Directors (Proposal 1). For the election of directors, votes may be cast in favor or withheld. If a quorum is present,
such election will be decided by plurality of the votes cast at the Annual Meeting, either in person or by proxy; provided, however,
that any director so elected who does not receive an affirmative vote of the majority of the votes cast by shares entitled to
vote in the election shall submit his/her resignation to the Board. The Board is not legally obligated to accept such resignation,
can take other factors into consideration, including but not limited to, the individual’s history on the Board, relevant
outside work experience, knowledge of industry, and knowledge of regulatory requirements, and choose to retain the director if
the director otherwise received the highest number of shares voted. Therefore, broker non-votes, votes cast against and withheld
shares will have no effect on the outcome of the election of directors. Brokers may not vote on the election of directors without
instructions from the beneficial owners of the shares. Subject to the limitation set forth above, the three nominees for Class
III director receiving the highest number of votes cast in person or by proxy at the Annual Meeting will be elected.
Approval
of a non-binding advisory resolution approving the compensation of our named executive officers (Proposal 2). For approval of the
advisory vote on executive compensation, votes may be cast for or against or you may abstain from voting. If a quorum is present, the
votes cast at the Annual Meeting for this proposal, either in person or by proxy, must exceed the votes cast against the proposal. Abstentions
and broker non-votes will have no effect on the outcome of this proposal. Brokers may not vote on the non-binding advisory resolution
approving the compensation of our named executive officers without instructions from the beneficial owners of the shares.
Ratification
of Ernst & Young LLP as our independent registered public accounting firm (Proposal 3). For approval of the ratification
of auditors, votes may be cast for or against or you may abstain from voting. If a quorum is present, the votes cast at the Annual
Meeting for this proposal, either in person or by proxy, must
exceed
the votes cast against the proposal. Abstentions and broker non-votes will have no effect on the outcome of this proposal.
Other
Items. Approval of all other proposals and other business as may properly come before the Annual Meeting requires the affirmative
vote of a majority of the votes cast, except as otherwise required by statute or our Certificate of Incorporation.
Can
I revoke or change my vote after I submit my proxy?
Yes.
You can revoke or change your vote at any time before the proxy is exercised by filing a written notice of revocation with Corporate
Secretary before the Annual Meeting begins, returning a later signed and dated proxy card, entering a new vote on the Internet
or by telephone, or by voting in person at the Annual Meeting.
Please
note, however, that if your shares are held of record by a broker, bank or nominee and you wish to vote at the Annual Meeting,
you will not be permitted to vote in person unless you first obtain a legal proxy issued in your name from the record holder.
How
can I attend the Annual Meeting?
As
part of our ongoing precautions regarding COVID-19, we are holding a virtual meeting. The virtual meeting will provide stockholders
the ability to participate, vote their shares and ask questions during the meeting. To attend and participate in the Annual Meeting,
visit www.virtualshareholdermeeting.com/LL2021 and enter the 16-digit control number included on your proxy card or voting instruction
form. Only one stockholder per control number can access the meeting. The Annual Meeting will begin promptly at 10:00 a.m.ET.
Online check-in will begin at 9:45 a.m. ET, and you should allow ample time for the online check-in procedures.
What
if I lose my control number?
Those
without a control number may also attend the Annual Meeting as guests by visiting www.virtualshareholdermeeting.com/LL2021 and
following the instructions on the website for guest access. Guests will not have the option to vote shares or ask questions at
the Annual Meeting.
Can
I ask questions at the Annual Meeting?
Stockholders
as of our record date who attend and participate in our virtual Annual Meeting at www.virtualshareholdermeeting.com/LL2021 will
have an opportunity to submit questions live via the Internet during a designated portion of the meeting. These stockholders may
also submit a question in advance of the Annual Meeting at www.proxyvote.com. In both cases, stockholders must have available
their control number provided on their proxy card or voting instruction form and must provide their name (see more information
in “How will questions be handled at the Annual Meeting?”). We are committed to active engagement with our
stockholders. If at any time you would like to speak with us, please contact our Investor Relations team at ir@lumberliquidators.com.
How
will questions be handled at the Annual Meeting?
During
the meeting we will answer as many questions that comply with our rules of conduct and are submitted online by stockholders as
time permits. We will endeavor to answer questions using the text submitted by our stockholders, however, in all cases we reserve
the right to edit inappropriate language, or to exclude questions
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63 |
that are not pertinent to meeting matters or that are otherwise
inappropriate. If we receive substantially similar questions, we may group such questions and provide a single response to avoid
repetition.
Consistent
with our rules of conduct for physical meetings, and for the benefit of all stockholders to know who is asking a question, when
logging in or submitting a question for the Annual Meeting (whether in advance of or at the meeting), you will be required to
include your name and organization (if applicable). Questions submitted anonymously will not be recognized at the meeting. Stockholders
may be limited to two questions each to allow us the opportunity to answer other questions received. If applicable, please also
indicate whether your question relates to a specific proposal being presented.
What
if I don’t have Internet access?
Please
call (833) 756-0862 toll-free or (412) 317-5752 internationally to listen to the Annual Meeting via telephone. If you participate
via telephone, you will not be able to vote your shares or ask questions during the Annual Meeting.
What
if I have technical or logistical difficulties?
We
will have technicians ready to assist you with any technical difficulties you may have accessing the Annual Meeting. If you encounter
any difficulties accessing the Annual Meeting during the check-in or meeting time, please call (844) 986-0822 for assistance.
If you are calling from outside the United States, please call (303) 562-9302.
Where
will I be able to find voting results of the Annual Meeting?
We
intend to announce preliminary voting results at the Annual Meeting and publish final voting results in a Current Report on Form
8-K to be filed with the SEC within four business days following the Annual Meeting.
Who
pays the cost of this proxy solicitation?
We
are soliciting this proxy on behalf of our Board of Directors and will pay all expenses associated with this solicitation. We
have retained Saratoga Proxy Consulting LLC to assist in the solicitation of proxies at an estimated cost of $8,000 plus expenses.
In addition to mailing the proxy materials to stockholders, we have asked banks and brokers to forward copies to persons who hold
our stock and request authority for execution of the proxies. We will reimburse the banks and brokers for their reasonable out-of-pocket
expenses in doing so. Our officers and regular associates, without being additionally compensated, may solicit proxies by mail,
telephone, electronic mail or personal contact. All reasonable proxy soliciting expenses will be paid by us in connection with
the solicitation of votes for the Annual Meeting.
Will
stockholders be asked to vote on any other matters?
To
our knowledge, stockholders will vote on the matters described in this proxy statement. However, if any other matters properly
come before the meeting, the individuals designated as proxies for stockholders will vote on those matters, in the manner they
consider appropriate.
Are
the Proxy Statement and 2020 Annual Report available on the Internet?
Yes.
This Proxy Statement and our 2020 Annual Report are available at https://investors.llflooring.com.
LUMBER LIQUIDATORS HOLDINGS,
INC. ATTN: ALICE G. GIVENS 4901 BAKERS MILL LANE RICHMOND, VA 23230 VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use
the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on May
18, 2021. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create
an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/LL2021 You may attend the meeting
via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow
the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m.
Eastern Time on May 18, 2021. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and
date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51
Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY D46595-P51887 LUMBER LIQUIDATORS HOLDINGS, INC. The
Board of Directors recommends you vote FOR the ollowing: For All Withhold All For All Except For Against Abstain To withhold authority
to vote for any individual nominee(s), mark "For All Except" and write the number(s) of the nominee(s) on the line below. 1.
Election of Directors for terms expiring in 2024 Nominees: Nominee: Nominee: 01) Douglas T. Moore 02) Nancy M. Taylor 3. Proposal to
ratify the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending
December 31, 2021. NOTE: Such other business as may properly come before the meeting or any adjournment thereof. 03) Joseph M. Nowicki
04) Charles E. Tyson 2. Proposal to approve a non-binding advisory resolution approving the compensation of the Company's named executive
officers. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary,
please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please
sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
2021 Annual Meeting May
19, 2021, 10:00 AM EDT Lumber Liquidators Holdings, Inc. www.virtualshareholdermeeting.com/LL2021 Important Notice Regarding the Availability
of Proxy Materials for the Annual Meeting to be held on May 19, 2021: The Notice and Proxy Statement and Annual Report are available
at www.proxyvote.com. D46596-P51887 LUMBER LIQUIDATORS HOLDINGS, INC. Annual Meeting of Stockholders May 19, 2021, 10:00 AM EDT This
proxy is solicited by the Board of Directors Proxy- Lumber Liquidators Holdings, Inc. Notice of 2021 Annual Meeting of Stockholders Proxy
Solicited by Board of Directors for Annual Meeting - May 19, 2021 Nancy A. Walsh and Alice G. Givens, or either of them, each with the
power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned
would possess if personally present, at the Annual Meeting of Stockholders of Lumber Liquidators Holdings, Inc. to be held on May 19,
2021. Shares represented by this proxy will be voted by the stockholder. If no such directions are indicated, the Proxies will have authority
to vote FOR all nominees listed in Proposals 1 and FOR Proposals 2 and 3. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting. Continued and to be signed on reverse side
This regulatory filing also includes additional resources:
tm2111615d2_14a.pdf
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