COMPENSATION DISCUSSION AND ANALYSIS
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Introduction
This CD&A provides information about the compensation for the following current and former named executive officers “NEOs” in 2019, including an analysis of the overall objectives of the compensation program and each element of compensation provided. For 2019, the NEOs were:
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Name
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Title
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Harry H. Herington
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Chairman of the Board and Chief Executive Officer (“CEO”)
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Stephen M. Kovzan
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Chief Financial Officer (“CFO”)
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Jayne Friedland Holland
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Chief Security Officer (“CSO”)
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William A. Van Asselt
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General Counsel and Secretary
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Douglas L. Rogers
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Senior Vice President of Business Development
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Mr. Knapp stepped down as Chief Operating Officer of the Company on January 27, 2019. He is included as a NEO pursuant to Item 402(a)(3)(iv) of Regulation S-K.
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Name
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Title
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Robert W. Knapp, Jr.
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Former Chief Operating Officer (“COO”)
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Mr. Herington, in his role as CEO, has formally designated an Executive Leadership Team, comprised of the Company’s most experienced senior executives having the most knowledge about the Company and its operations. The Executive Leadership Team provides advice and counsel to Mr. Herington on a regular basis and assists in formulating strategy and tactics for furthering the Company’s business. Executive Leadership Team members for the full year of 2019 were Mr. Herington, Mr. Kovzan and Ms. Holland.
Mr. Herington has also formally designated a Senior Leadership Group to provide a forum for discussing risks and opportunities identified by the various NIC divisions that might affect the growth and stability of the Company. The Senior Leadership Group is comprised of the Executive Leadership Team, as well as the heads of each Corporate department and all vice president level employees Company-wide. Mr. Herington regularly consults with this broader group of senior management.
Philosophy and Objectives
The philosophy underlying the Company's executive compensation program is to link total compensation with both short- and long-term Company performance and increase stockholder value through profitable growth and the execution of specific strategies. Superior performance by our executive team is essential to these goals, so we have structured our executive pay programs to attract and retain talented, highly qualified executives, to reward performance through incentive compensation and to align the interests of executives and stockholders through longer-term equity-based compensation. The Company’s Compensation Committee (referred to in this CD&A as the “Committee”) has adopted a straightforward approach to executive compensation, whereby material components of pay are tied to elements of the Company’s financial performance. The Committee structures its compensation programs to align executive
and stockholder interests, by fostering a team-based environment that recognizes the Company’s entrepreneurial history and strong record of financial performance.
The Committee considers input from our CEO and CFO regarding the responsibilities and accomplishments of individual executive officers, and recommendations regarding salary, bonus, equity compensation, performance goals and overall compensation levels for executive officers. Our CEO, CFO and other executive officers attended portions of Committee meetings throughout the year in order to provide information and help explain data relating to matters considered by the Committee. Executive officers, however, were not present during deliberations or determination of their respective compensation or during executive sessions. All decisions regarding the compensation of executive officers ultimately were made solely by the Committee, which considered these recommendations and exercised its discretion to modify certain recommended adjustments or awards based on a number of factors considered by the Committee.
The Committee has the authority to retain outside consultants or advisors as it deems necessary to provide desired expertise and counsel. The Committee retains a compensation consultant from time to time to provide updated information and analysis to the Committee. The Committee has periodically engaged the services of Semler Brossy Consulting Group (“SBCG”) as its compensation consultant. SBCG reports directly and exclusively to the Committee and provides advice regarding current and emerging best practices about executive compensation.
Also, the Committee considers carefully the views and input of stockholders, including previous “say on pay” results, when determining executive pay. At last year’s annual meeting, stockholders voted strongly in favor of the Company’s approach to executive compensation – 96% of the votes cast on the advisory ‘say on pay’ resolution were voted in favor of the resolution. The Committee believes this affirms that our stockholders generally support the Company's approach to executive compensation. Accordingly, the Committee has taken no specific actions to modify our executive compensation program as a direct result of these non-binding, advisory votes but, rather, has continued to oversee the program in accordance with its best judgment and stated governing principles.
Peer Group
The peer group developed pursuant to the 2016 SBCG study consisted of 18 companies in similar businesses and of comparable size to NIC at the time. The 18 members of the peer group were as follows:
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ACI Worldwide, Inc. (ACIW)
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LogMeIn, Inc. (LOGM)
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Blackbaud Inc. (BLKB)
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Perficient Inc. (PRFT)
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Bottomline Technologies, Inc. (EPAY)
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Stamps.com, Inc. (STMP)
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CoStar Group Inc. (CSGP)
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Tyler Technologies Inc. (TYL)
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DHI Group, Inc. (DHX)
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VASCO Data Security International, Inc. (VDSI) **
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Ebix, Inc.(EBIX)
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XO Group Inc. (XOXO)*
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j2 Global, Inc. (JCOM)
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DealerTrack Holdings Inc. (TRAK)*
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Liquidity Services, Inc. (LQDT)
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EPIQ Systems Inc. (EPIQ)*
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LivePerson Inc. (LPSN)
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Higher One Holdings, Inc. (ONE)*
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* Since the 2016 study this company has been acquired or taken private.
** Since the 2016 study this company changed its name to OneSpan and now trades under the ticker symbol OSPN.
SBCG’s 2016 study indicated that total pay opportunities (cash, annual cash incentive and long-term equity incentives) for the four members of the Executive Leadership Team were generally at the low end of the competitive range compared to the peer group (“market”), with the largest shortcoming attributable to long-term equity-based incentives. At the Committee’s direction, SBCG looked to the 25th and 50th percentiles of market as key competitive pay boundaries for NIC, with the 25th percentile as the low end of the competitive range, and the 50th percentile as the high end, taking into consideration NIC’s overall size compared to many peer group members. To this end, SBCG’s study indicated that NIC’s annual revenue was somewhat below the median of peers, with other measures of company size and scope, such as market value and profitability above peer medians, and assets and employee count below peer medians. Specifically, the study indicated that:
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Base salaries were generally at the 25th percentile of market for the CEO, CFO and CSO, and below the 25th percentile for the COO;
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Target total annual cash compensation (i.e., base salary and annual cash incentive) was at the 25th percentile of market for the CEO and below the 25th percentile for the CFO, COO and CSO; and
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Target total annual compensation, inclusive of long-term, equity-based incentives, was below the 25th percentile for total pay for all four members of the Executive Leadership Team.
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In terms of mix of pay between cash and equity, SBCG’s study indicated that long-term equity incentive opportunities were light in the overall mix of pay relative to competitive practice. SBCG recommended long-term equity incentives as the most natural lever to ensure the overall competitiveness of the Company’s executive compensation program going forward, and in doing so, linking incremental pay to longer-term Company performance and shareholder value.
In 2016, the Committee approved certain changes to 2016 executive compensation as more fully described in the proxy statement for the 2017 annual meeting of stockholders filed with the SEC on March 17, 2017. The underlying intention of these changes was to increase total pay opportunities for the Executive Leadership Team, in the aggregate, to more closely align with the 25th percentile levels of market. Among the changes, the Committee increased base salaries of the Executive Leadership Team, made certain modifications to the annual cash incentive and long-term equity incentives components to increase target incentive percentages. In addition, the Committee adjusted certain performance levels used to evaluate Company performance to reflect past and expected future performance of the Company.
Components of Our Executive Compensation Program
The Committee has maintained a very consistent approach and structure for compensation of the specified members of the Executive Leadership Team since 2008, with modest adjustments from year to year, determined by the Committee, to maintain strong alignment with our business objectives and organizational context. The primary components of our executive compensation program are as follows:
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Type
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Component
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Objective
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Base Salary
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Fixed portion of compensation; reviewed annually.
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Provide competitive pay reflective of an executive’s role, responsibilities, tenure and individual performance in order to attract and retain top talent.
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Short-Term Incentive
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Annual cash incentive; performance-based cash opportunity; amount varies based on company performance.
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Drive achievement of annual corporate goals.
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Long-Term Incentive
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Service-based and performance-based restricted stock awards, subject to time-based vesting requirements and certain performance-conditions.
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Promote achievement of long-term corporate goals through operating performance objectives over a three-year period, encourage ownership stake, and promote retention.
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The Executive Compensation Program for Messrs. Herington and Kovzan and Ms. Holland
Base salary. The Committee annually reviews Executive Leadership Team base salaries, and annual salary increases are not automatic or guaranteed. When considering any adjustments, the Committee considers the most recent SBCG study, market data, job responsibilities, tenure and individual performance. Base salaries paid to the Executive Leadership Team in 2019 are presented in the 2019 Summary Compensation Table of this Proxy Statement. There were no changes to base salaries for the Executive Leadership Team in 2019, except for Ms. Holland, the CSO, who received an annual base salary increase to $325,000 (from $315,000) effective April 15, 2019, resulting in an annual salary of $322,046 for 2019.
Annual cash incentives. The 2019 annual cash incentive was granted under the Management Annual Incentive Plan for Senior Executives, or (“MAIPSE”). The MAIPSE establishes the criteria for awards based upon attainment of Company financial goals that will be used to determine actual award amounts. The Committee has discretion to vary the actual awards to take into consideration the particular events of the year in determining its final award for each executive officer.
The 2019 MAIPSE measures annual Company performance using the following key financial metrics as performance criteria (dollar amounts in millions):
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Performance Levels
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Performance Criteria
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Threshold
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Target
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Maximum
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Weighting
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Operating income
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$54.7
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$60.7
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$66.8
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60%
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Total revenues
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$326.0
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$343.1
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$360.3
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40%
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For 2019, the Committee retained “target” performance levels for the Company for operating income and total revenues based upon the Company’s 2019 annual budget approved by the Board of Directors. Threshold levels were set at 90% of the target level for operating income and 95% of the target level for total revenues. Superior levels were set at 110% of the target level for operating income and 105% of the target level for total revenues. Management and the Committee believe that these metrics drive stockholder
value in the near term and comprise a strong pay-for-performance relationship. The definitions of operating income and total revenues are consistent with those terms defined in generally accepted accounting principles and may be derived directly from the face of the consolidated statements of income included in the Company’s Annual Report on Form 10-K for the applicable annual period. For 2019, the Committee changed the relative weightings given to the performance criteria from 67% for operating income and 33% for total revenues as used in the prior year to 60% for operating income and 40% for total revenues to provide a more balanced weighting between the two criteria.
Performance of the Company at the target level is intended to result in an annual cash incentive at a specified percentage of the executive’s base salary. The Committee also determined a range of possible cash incentives above and below target performance for achieving “threshold” and “superior” performance. For amounts between the threshold and target levels or between the target and superior levels, straight line interpolation is to be used. No payments are to be awarded under the plan with respect to a performance criterion if threshold performance with respect to that criterion is not achieved, and no additional payments are to be awarded for performance in excess of the superior level. For 2019, the Committee maintained the 2018 percentage levels of base salary for determining potential payouts to be awarded to the members of the Executive Leadership Team. The percentage levels used by the Committee for the Executive Leadership Team members were as follows:
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Name
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Base Salary
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Threshold
Cash Incentive
as a %
of Base Salary
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Target Cash
Incentive
as a %
of Base Salary
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Superior Cash
Incentive
as a %
of Base Salary
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Harry H. Herington
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$500,000
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50%
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100%
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167%
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Stephen M. Kovzan
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$325,000
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32.5%
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65%
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108.6%
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Jayne Friedland Holland
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$325,000
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27.5%
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55%
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91.9%
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Threshold performance for incentive awards under each performance criterion was 0.5 times target in 2019 and for superior performance each criterion was 2 times target. However, the maximum total incentive payout for the two performance criteria when combined was capped at 1.67 times target, consistent with prior years.
For 2019, the Company achieved total operating income of $62.4 million and total revenues of $354.2 million, which resulted in annual cash incentive payments above target pay levels. Based on the Company’s 2019 actual financial performance in relation to the performance criteria and performance levels, the following annual cash incentive awards were paid in early 2020:
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Name
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2019 Annual Cash
Incentive Paid
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2019 % Annual Cash
Incentive
As a % of Base Salary
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Harry H. Herington
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$796,560
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159.3%
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Stephen M. Kovzan
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$336,547
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103.6%
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Jayne Friedland Holland
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$284,770
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87.6%
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Long-term, equity-based incentives. As determined by the Committee, the Company’s long-term, equity-based incentive for the specified members of the Executive Leadership Team included in the executive compensation program provides for annual restricted stock grants with a service-based component and a
Company performance component to compensate executives with regard to the Company’s long-term growth objectives.
Service-Based Component
Service-based restricted stock awards vest ratably over a four-year service period following the date of grant. There is no performance component tied to the service-based award. The members of the Executive Leadership Team are entitled to non-forfeitable cash dividends on shares of unvested service-based restricted stock in the same amount and at the same time as dividends are paid to other holders of the Company’s common stock. The Company believes that restricted shares further the alignment of executive interests with those of stockholders, foster share ownership and wealth creation and provide significant retention value. Further, restricted shares provide a degree of certainty in an otherwise performance-based equity portfolio.
For 2019, the Committee maintained the 2018 annual amount of service-based restricted stock to be awarded to the members of the Executive Leadership Team. The annual amount, as a percentage of base salary, was as follows: CEO (150%), CFO (75%), and CSO (75%). The amounts of service-based restricted stock awarded to each specified member of the Executive Leadership Team were consistent with the recommendations of management. The differences in percentage of base salary for each specified member of the Executive Leadership Team reflect differences in the scope of duties and responsibilities and, in part, the “gap to market” for total long-term equity incentive compensation determined in the 2016 SBCG study.
On February 21, 2019, the Committee granted the specified members of the Executive Leadership Team the following awards of service-based restricted stock for 2019 based upon the above percentages of base salary (the closing market price of the Company’s common stock on February 21, 2019 was $17.27 per share):
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Name
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Service-Based
Restricted Shares
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Harry H. Herington
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43,427 shares
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Stephen M. Kovzan
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14,114 shares
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Jayne Friedland Holland
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13,679 shares
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Performance-Based Component
The performance-based equity incentive provides for annual grants of restricted stock tied to three-year performance periods. A new three-year period is intended to begin each year. At the end of each three-year period, the members of the Executive Leadership Team receive a number of shares per a pre-defined schedule of threshold, target and superior Company performance. Each level of performance is associated with a pre-defined payout, expressed as a percentage of base salary.
Pursuant to the terms of the performance-based equity grant agreements, the members of the Executive Leadership Team can earn dividend equivalent shares for any cash dividends declared by the Company during the performance period and before any shares are paid under the agreement.
The 2019 performance component measures long-term Company performance using the following performance criteria:
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Performance Levels
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Performance Criteria
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Threshold
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Target
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Maximum
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Weighting
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Operating income growth (three-year compound annual growth rate (“CAGR”))
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5%
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10%
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15%
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50%
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Total revenue growth (three-year CAGR)
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5%
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10%
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15%
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50%
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All elements of the performance criteria definitions are derived directly from the Company’s audited consolidated financial statements. In 2019, the Committee removed the return on invested capital ("ROIC") performance criteria used in the 2018 performance-based awards in order to maintain a continued focus on earnings and revenue growth.
Performance levels in the table above were recommended by management and approved by the Committee based on the Company’s past and expected future performance and were unchanged from the levels used for the 2018 grants. The target performance level for operating income growth (10%) was higher than the Company’s performance for the three-year period ended December 31, 2018 (4%) and 2017 (8%). The target performance level for total revenue growth (10%) was higher than the Company’s performance for the three-year periods ended December 31, 2018 (6%) and 2017 (7%).
Performance of the Company at threshold, target or superior levels is intended to result in a share-based incentive at a specified percentage of the executive’s base salary. For each performance measure, no shares are awarded if threshold performance is not achieved, and no additional shares are awarded for performance in excess of the superior level. For amounts between the threshold and target levels or between the target and superior levels, straight line interpolation, rounded up to the next whole share, will be used to determine the portion of the award that becomes vested. The percentage levels used by the Committee for Executive Leadership Team members are as follows:
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Name
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Base Salary
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Threshold
Equity Incentive
as a %
of Base Salary
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Target
Equity Incentive
as a %
of Base Salary
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Superior Equity
Incentive
as a %
of Base Salary
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Harry H. Herington
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$500,000
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75%
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150%
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250%
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Stephen M. Kovzan
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$325,000
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37.5%
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75%
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125%
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Jayne Friedland Holland1
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$315,000
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25%
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50%
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83.5%
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1 Ms. Holland's performance-based award for 2019 was based on the base salary at the date of grant.
Threshold performance for incentive awards under each performance criterion remained at 0.5 times target in 2019, and for superior performance each criterion remained at 2 times. However, the maximum total incentive payout for all three performance criteria when combined was capped at 1.67 times target, consistent with prior years. These levels were consistent with the levels approved by the Committee for the annual cash incentive, as further discussed above.
2019 Performance-based Grants - On February 21, 2019, the Committee granted the specified members of the Executive Leadership Team the following awards of performance-based restricted stock for 2019 pursuant to the terms of the long-term equity incentive (the closing market price of the Company’s common stock on February 21, 2019 was $17.27 per share):
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Name
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Performance-Based Restricted Shares Granted (1)
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Harry H. Herington
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72,380 shares
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Stephen M. Kovzan
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23,524 shares
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Jayne Friedland Holland
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15,231 shares
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(1)
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Represents the maximum number of performance-based restricted shares able to be earned at the end of the three-year performance period ending December 31, 2021 pursuant to the terms of the long-term equity incentive plan. The actual number of shares earned will be based on the Company’s actual performance over the three-year period ending December 31, 2021. No shares will vest if threshold performance is not achieved, and no additional shares will vest for performance in excess of the superior level.
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Pursuant to the terms of the 2019 performance-based equity grant agreement, at the end of the three-year performance period, each specified member of the Executive Leadership Team may receive an additional number of shares (“Dividend Shares”) determined as follows: (1) as of each date (the “Dividend Payment Date”) that the Company would otherwise pay a declared cash dividend on the total number of shares set forth in the agreement, the Company credits a number of Dividend Shares to a notional account established for the benefit of each specified member of the Executive Leadership Team, and the number of Dividend Shares so credited is calculated by dividing the amount of such hypothetical cash dividend payment by the fair market value of the Company’s common stock on the Dividend Payment Date (rounded down to the nearest whole Dividend Share); and (2) on the date some or all of the shares are paid under the agreement, a pro rata number of notional Dividend Shares will be converted into an equivalent number of Dividend Shares earned and paid to each specified member of the Executive Leadership Team based upon the actual number of underlying shares vested during the performance period.
2019 Performance-based Payouts – The end of the 2019 fiscal year marked the completion of the three-year performance period for performance-based restricted stock awards granted in 2017. The following
table sets forth performance levels for the performance criteria included in the long-term equity incentive grant made to the Executive Leadership Team in 2017 and actual results for the three-year period ended December 31, 2019:
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Performance Levels
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Three-Year Actual Results
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Performance Criteria
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Threshold
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Target
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Superior
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Shares Earned
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Operating income (three-year CAGR)
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5%
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10%
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15%
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(7.1)%
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- 0 -
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Total revenue (three-year CAGR)
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5%
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10%
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15%
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3.7%
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- 0 -
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Cash flow return on invested capital, excluding income taxes paid (three-year average)
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30%
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35%
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40%
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28.4%
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- 0 -
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The Executive Compensation Program for Messrs. Van Asselt and Rogers
The compensation programs for Messrs. Van Asselt and Rogers differed from the Executive Leadership Team primarily because they did not participate in a performance-based equity incentive plan in 2019. The main components of the compensation programs for Messrs. Van Asselt and Rogers include base salary, a short-term annual incentive (i.e., annual cash bonus), and a long-term, service-based equity incentive, as described below.
Mr. Rogers' compensation program also reflects his unique job responsibilities as the primary officer responsible for the Company's national sales and business development efforts, for which he is eligible to receive performance-based sales commissions, as further discussed below.
Base salary. The Committee increased Mr. Van Asselt’s annual base salary by 6% in January 2019 to $310,000. For 2019, Mr. Rogers' annual base salary was $281,139.
Annual cash incentive. Under the terms of the Profit Sharing and Incentive Programs for Messrs. Van Asselt and Rogers, the annual cash incentive award is based on a pre-established Company annual operating income goal, and the award amount is calculated as a percentage of the executive’s base salary, which was recommended by the CEO to, and approved in its sole discretion by, the Committee. The annual cash incentive target was 25% of the executive's base salary for fiscal 2019. If the pre-established Company annual operating income goal had not been achieved, no annual cash incentive would have been paid, unless otherwise provided. Based on the achievement of the 2019 Company operating income goal, the Company paid the annual cash incentive payment of $77,500 and $70,284 to Messrs. Van Asselt and Rogers, respectively, in early 2020.
Long-term, service-based equity incentive. The long-term, equity-based incentive program is comprised of an annual service-based restricted stock grant, in the amount of a percentage of the executive's base salary, designed to strengthen his long-term commitment to the success of the Company, to promote ownership in the Company, and to motivate him to make significant contributions to the Company that increase stockholder value. Under the terms of the Profit Sharing and Incentive Programs for Messrs. Van Asselt and Rogers, the annual amount of service-based restricted stock to be awarded was a percentage of annual base salary recommended by the CEO to, and approved in its sole discretion by, the Committee. In 2019, the long-term, equity-based incentive target was 35% of the executive's base salary on the grant date of the award. Service-based restricted stock awards vest ratably over a four-year service period following the date of grant. On January 27, 2020, the Committee granted Messrs. Van Asselt and Rogers 4,902 shares
and 4,446 shares, respectively, of service-based restricted stock for 2019 pursuant to the terms of the long-term incentive plan (the closing market price of the Company’s common stock on January 27, 2020 was $22.13 per share).
Sales commissions. The Company pays sales commissions to fairly compensate employees who make significant contributions to secure new, profitable government contracts that advance the Company’s long-term growth. Mr. Rogers is eligible to receive sales commissions as the leader of the national sales and business development efforts. Sales commission payments are discretionary and are based, in part, on the achievement of an annual quota for operating income from new government contracts awarded to the Company during the year.
In 2019, Mr. Rogers was paid $120,254 in sales commissions.
Executive Compensation Severance Benefits for Mr. Knapp
Effective as of January 27, 2019, Mr. Knapp ceased being Chief Operating Officer and a member of the Executive Leadership Team. In accordance with the requirements set forth in his employment agreement, Mr. Knapp received the following:
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a severance payment equal to two times his base salary, plus an amount equal to two times the largest cash award received under the Annual Incentive Plan during the immediately preceding three annual incentive periods, plus an amount for accrued paid vacation time and medical and health benefits, in the total of $1,526,393.
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an annual incentive award for fiscal year 2018, in the total of $407,063.
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vesting of 44,507 unvested service-based restricted stock awards and 51,176 unvested performance-based awards granted under the long-term incentive plan.
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Mr. Knapp provided the Company with a release of claims and covenants required for receipt of severance amounts, in accordance with the terms of his employment agreement.
Executive Perquisites for 2019
Other components of executive compensation beyond base salary, annual cash incentives and long-term equity-based incentives include Company-paid executive life and disability insurance premiums for Messrs. Herington, Kovzan and Van Asselt, and Ms. Holland pursuant to the terms of their employment agreements. With respect to these perquisites, the Committee considered the cost of each perquisite and the total amount of compensation otherwise provided to each executive.
Summary of Certain Changes to Executive Compensation in 2020
The following is a brief summary of certain changes to the compensation of the members of the Executive Leadership Team for 2020, which is intended to provide additional information to stockholders in their review of the Company's 2019 executive compensation program. A more detailed description of compensation for 2020 will be included in the proxy statement for the 2021 annual meeting of stockholders.
In 2018, the Committee engaged SBCG to advise the Committee about executive compensation matters. Specifically, the Committee asked SBCG to review and update the peer group used to benchmark executive compensation levels and to perform a competitive assessment of target pay opportunities for the Executive Leadership Team against the peer group and broader market survey data. The Committee requested
the engagement in keeping with its past practice to assess the Company’s compensation program relative to market approximately once every three years. However, the Committee elected not to make any substantive changes to the existing executive compensation program in 2019.
2020 Executive Compensation Study. After four years of the Company operating under the current compensation program for the Executive Leadership Team, the Committee again engaged SBCG in November 2019 to update its assessment of the Company's compensation program. The purpose of the study was to assist the Committee in making compensation determinations for 2020. Specifically, the Committee asked SBCG to review and recommend updates to the peer group, if necessary, used to benchmark executive compensation levels and to perform a competitive assessment of target pay opportunities for the Executive Leadership Team against the peer group and broader market survey data.
The peer group approved by the Committee pursuant to the 2016 SBCG study consisted of 18 companies in similar businesses and of comparable size to NIC at the time. Since the 2016 study, four of the 18 peer group companies have been acquired or taken private and three others were no longer deemed comparable because of their scale, financial condition or growth trajectory, reducing to 11 the number of viable peers. The four companies that were acquired or taken private were DealerTrack Holdings Inc. (TRAK), EPIQ Systems Inc. (EPIQ), Higher One Holdings, Inc. (ONE) and XO Group Inc. (XOXO), and the three companies that were removed due to material shifts in scale, financial condition or growth trajectory were CoStar Group Inc. (CSGP), DHI Group, Inc. (DHX) and Liquidity Services (LQDT). To offset the loss of these seven companies, SBCG screened the broader market using several filters for additional peers and identified seven companies for possible inclusion with comparable size and similar business model, with scale and business focus similar to NIC (although not necessarily direct competitors). The following 18 members of the new peer group approved by the Committee are as follows (new members of the peer group denoted by *):
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ACI Worldwide, Inc. (ACIW)
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OneSpan Inc. (OSPN)
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Blackbaud Inc. (BLKB)
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Perficient Inc. (PRFT)
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Bottomline Technologies, Inc. (EPAY)
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QAD Inc. (QADA)*
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Carbonite, Inc. (CARB)*
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Qualys, Inc. (QLYS)*
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Ebix, Inc.(EBIX)
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SailPoint Technologies (SAIL)*
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Five9 Inc. (FIVN)*
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SPS Commerce, Inc. (SPSC)*
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j2 Global, Inc. (JCOM)
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Stamps.com, Inc. (STMP)
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LivePerson Inc. (LPSN)
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Tyler Technologies Inc. (TYL)
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LogMeIn, Inc. (LOGM)
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Verra Mobility Corporation (VRRM)*
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SBCG’s 2020 study indicated that total pay opportunities (cash, annual cash incentive and long-term equity incentives) for the three members of the Executive Leadership Team were well below the competitive range compared to market (being the 18-member peer group), with the largest shortcoming attributable to long-term, equity-based incentives. SBCG looked to the 25th and 50th percentiles of market as key competitive boundaries for NIC, with target competitive levels between 25th and 50th percentiles. To this end, SBCG’s study indicated that NIC’s annual revenues and market value were modestly lower than peer group median, with other measures, such as profitability and revenue per employee, well above peer group median, and total assets and employee count well below peer group medians. Specifically, the study indicated that:
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•
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Base salary was at the 50th percentile of market for the Chief Executive Officer, below the 25th percentile of market for the Chief Financial Officer and above 50th percentile of market for the Chief Security Officer;
|
|
|
•
|
Target total annual cash (i.e., base salary and annual cash incentive) was at median for the Chief Executive Officer, below the 25th percentile of market for the Chief Financial Officer and above the 50th percentile of market for the Chief Security Officer; and
|
|
|
•
|
Target total annual compensation, inclusive of long-term, equity-based incentives, was well below the 25th percentile for all three members of the Executive Leadership Team.
|
In terms of mix of pay between cash and equity, SBCG’s study indicated that long-term equity incentive opportunities were comparatively light in the overall mix of pay relative to competitive practice. The Committee considered and adopted SBCG's recommendation to use long-term equity incentives as the most natural lever to ensure the overall competitiveness of the Company’s executive compensation program going forward, and in doing so, linking incremental pay to longer-term Company performance and stockholder value creation.
Changes to executive compensation for 2020, in part stemming from SGCG’s recent study. Building from the results of the 2020 study, the Committee Chair, in consultation with SBCG, developed compensation recommendations for the Committee to consider in setting the compensation of each of the three members of the Executive Leadership Team. The Committee plans to increase target total compensation opportunities for the Executive Leadership Team to more closely align with the competitive range of market (between the 25th and 50th percentile levels of market) over a three-year period beginning in fiscal year 2020, in lieu of closing the gap to approximately the 25th percentile of market in one fiscal year. On February 20, 2020, the Committee approved executive compensation for 2020, based in part on SBCG’s recommendations. The increase for each of the three members of the Executive Leadership Team for fiscal year 2020 comprised approximately 40% of the difference needed to reach approximately the 25th percentile of market, driven in part by momentum from strong fiscal year 2019 performance and the intention to close a significant portion of the wide gap to market with more immediate action. The Committee intends to consider smaller increases in fiscal year 2021 and fiscal year 2022. For 2020, the Committee approved changes that increase target total compensation opportunities for the CEO by 25%, the CFO by 39% and the CSO by 31%, with over 70% of each increase coming in the form of equity-based compensation. These Committee made these changes after considering all of the factors noted above and that the Executive Leadership Team’s pay levels have not materially increased during the four years since 2016. The Committee made other relatively minor changes but it did not change the current structure of the compensation program for the Executive Leadership Team, which consists of base salary, an annual cash incentive, and a two-pronged, long-term equity based incentive that includes annual restricted stock grants with (i) a service-based component and (ii) a company performance-based component.
Stock Ownership Requirements for Executive Leadership Team Members and Non-Employee Directors
The Company has a stock ownership policy, which is administered by the Corporate Governance and Nominating Committee. Both the Board and management believe such a policy generally represents a progressive governance posture and can help underscore a principal objective of equity-based compensation by fostering alignment of Board and management interests with those of stockholders. The policy is based on a “multiple of” approach to stock ownership whereby ownership guidelines for the members of the Executive Leadership Team are based on a multiple of base salary and for non-employee directors are based
on a multiple of annual cash retainer. The policy’s stock ownership requirements for each participant are as follows:
|
|
•
|
Non-employee directors: four (4) times annual cash retainer
|
|
|
•
|
CEO: six (6) times annual base salary
|
|
|
•
|
The Company’s CFO and CSO: three (3) times annual base salary
|
NIC common stock that is vested and owned by the participant will count toward satisfaction of the policy’s requirements. Stock owned by the participant includes shares owned outright (i.e., held individually or as co-owner with a spouse) and shares beneficially owned but held in trust or in another entity for the benefit of the participant and his or her immediate family. Unvested equity awards do not count toward satisfaction of the policy’s requirements. During times that the minimum ownership requirement is not attained, the participant is required to retain at least 50% (or such other percentage as subsequently set by the Corporate Governance and Nominating Committee) of net shares of common stock delivered through the Company’s equity compensation plans. Net shares of common stock refer to those shares that remain after shares are forfeited, sold or netted to pay any withholding taxes with respect to the vesting of any restricted stock. The policy contains a hardship provision administered by the Corporate Governance and Nominating Committee.
All non-employee directors and members of the Executive Leadership Team subject to the stock ownership requirements described herein currently meet such requirements, except for Messrs. Scott and Vijayan, whom were appointed to the Board of Directors in June 2018. Mr. Scott and Mr. Vijayan are within the grace period allowed under the policy to come into compliance with the policy.
Prohibition of Hedging in Company Stock
All employees and non-employee directors of the Company are prohibited from trading in options, such as puts or calls, and from trading in collars, forward sale contracts, equity swaps or similar hedging options on the Company’s stock, or selling the Company’s stock “short,” as described in the Company’s Trading and Disclosure of Non-Public Information Policy.
Employment Agreements with Named Executive Officers
On February 5, 2013, the Company entered into employment agreements with each of Messrs. Herington, Kovzan, and Knapp. The employment agreements each have substantially the same terms, except with respect to job titles and responsibilities and the amount payable to each executive officer. Each of the employment agreements has a three-year term, and unless notice is provided at least six months prior to the end of the respective term, automatically renews for additional three-year terms. On May 5, 2015, the Company entered into an employment agreement with Ms. Holland, which included terms consistent with the employment agreements of the other executive officers, when she was promoted to the Executive Leadership Team.
On July 27, 2015, the Company entered into the first amendment to the employment agreements with each of Messrs. Herington, Kovzan and Knapp, and Ms. Holland. Each of the amendments is identical and makes the following changes to the employment agreements: (a) acknowledges the indemnification agreement previously entered into between the Company and the executive, clarifies that the executive shall be an officer covered by the indemnification agreement, and requires that such indemnification agreement
be maintained throughout the period of the employment agreement; and (b) clarifies that any notice to the executive from the Company intending to terminate the executive’s employment for cause must include the facts and circumstances that are the basis for the termination.
On July 29, 2018, the Company entered into an employment agreement with Mr. Van Asselt on terms substantially similar to the other executive officers, except that Mr. Van Asselt does not participate in a performance-based equity incentive plan.
The Committee believes that the employment agreements include certain provisions that reflect strong corporate governance practices, as well as protect stockholders’ interests in the event of a change of control of NIC or certain accounting restatements. The employment agreements include a “double trigger” severance right under which an executive would only be entitled to severance payments in connection with a change of control if the executive terminates his employment for “Good Reason” or NIC terminates the executive without “Cause” (as each of those terms are defined in the agreement). The Committee believes this provision protects stockholders’ interests in the event of a change of control by, among other things, ensuring continuity in management following the transaction. The employment agreements also contain a clawback provision under which NIC may recoup incentive compensation paid to the executive in the event of an accounting restatement under certain circumstances. The provision is based upon the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and will apply following the SEC’s adoption of final rules regarding the same.
The employment agreements also provide additional protections to executives for certain compensation and benefits in the event of termination. The Company has also included termination provisions in the various plans and award agreements relating to incentive compensation in which the named executive officers participate, which provisions will apply to the extent not covered by the employment agreements, such as in the case of death, disability or retirement. These provisions are described below under “Employment Agreements and Severance Payments.” The Committee believes these arrangements are reasonable and appropriate to retain and focus executives during periods of potential uncertainty.
The employment agreements also provide the executives with a contractual right to certain compensation and benefits consistent with NIC’s historical pay practices, such as rights to paid vacation and minimum target levels for incentive compensation based upon the executives’ base salaries. The Committee believes these additional rights are appropriate given NIC’s historical and anticipated future pay practices.
In addition, each named executive officer has entered into indemnification agreements with NIC, each in a form approved by the Company’s Board and previously disclosed by the Company. The Company has also entered into a form of the indemnification agreement with each of its directors. The Company’s Board has further authorized the Company to enter into the form of indemnification agreement with future directors and executive officers of the Company and other persons or categories of persons that may be designated from time to time by the Board. The indemnification agreement supplements and clarifies existing indemnification provisions of the Company’s Certificate of Incorporation and Bylaws and, in general, provides for indemnification to the fullest extent permitted by law, subject to the terms and conditions provided in the indemnification agreement. The indemnification agreement also establishes processes and procedures for indemnification claims, advancement of expenses and costs and other determinations with respect to indemnification.
For additional discussion of employment agreements with executive officers, refer to the discussion below set forth under “Employment Agreements and Severance Payments.”
Realized Equity Compensation
It is important to recognize the difference between the compensation reported in the Summary Compensation Table (“SCT”) on page 42 included in the Stock Awards column and compensation actually realized by our NEOs related to long-term equity awards. This supplemental information is important because a significant portion of equity compensation reported in the SCT is an incentive for future performance, which, with respect to the performance-based restricted stock awards, only provides an economic benefit if the applicable performance goals are achieved.
The Stock Awards column in the SCT includes the grant date fair value of equity awards granted to our NEOs in 2019. The value that may be potentially realized from these equity awards in the future may differ from the grant date fair value required to be reported in the SCT. The greatest drivers of differences in the reported and realized value for long-term equity awards include our stock price performance, the performance assumptions used on the grant date for performance-based grants and the vesting and dividend-equivalent shares earned based on the actual performance of the Company over the three-year performance period of the performance-based grant.
The pay of our CEO, as reported in the SCT, reflects the reported value of long-term equity awards at grant and not the value actually realized by him from these awards. Because a significant portion of the reported compensation of our CEO represents potential pay, we believe it is useful to supplement the information provided in the SCT by also looking at the pay that our CEO actually realized during the year.
The following table reports base salary, annual incentive earned, performance-based restricted stock awards vested in each respective year and the vesting of service-based restricted stock awards regardless of when they were granted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Principal Position
|
|
Year
|
|
Salary
($)
|
|
Annual Cash Incentive ($)
|
|
Long-term Equity Vesting
($)
|
|
All Other
Compensation
(Including
Perquisites)
($)
|
|
Total Realized Pay ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harry H. Herington
|
|
2019
|
|
500,000
|
|
|
796,560
|
|
|
1,324,636
|
|
|
137,496
|
|
|
2,758,692
|
|
CEO
|
|
2018
|
|
500,000
|
|
|
835,000
|
|
|
480,031
|
|
|
134,544
|
|
|
1,949,575
|
|
|
|
2017
|
|
500,000
|
|
|
783,781
|
|
|
1,637,921
|
|
|
117,741
|
|
|
3,039,443
|
|
The table below shows compensation actually realized by our CEO as compared to the compensation reported in the SCT totals.
|
|
•
|
Realized pay includes base salary, actual annual cash incentive earned in the applicable year and all other compensation, each as reported in the 2019 SCT on page 42 and the value of long-term equity awards vested in the applicable year.
|
|
|
•
|
Reported pay includes base salary, actual annual cash incentive earned in the applicable year, the grant date fair value of long-term equity awards granted in the applicable year and all other compensation, each as reported in the 2019 SCT on page 42.
|
The primary driver of the increase in realized pay in 2019 relates to the performance-based restricted stock award granted to our CEO in 2016. This award was eligible to vest in early 2019 based on certain Company financial performance criteria over the three-year performance period ended on December 31, 2018. Based on the Company's actual performance during this performance period, the value realized from this equity award was $574,965, which is reflected in the increase in the amount included in the "Long-term Equity Vesting ($)" column for 2019 in the table above. In 2018, the value realized for performance-based restricted stock was zero.
_________________
COMPENSATION TABLES AND RELATED DISCLOSURE
_________________
The following Summary Compensation Table summarizes the compensation of our NEOs in accordance with SEC rules.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUMMARY COMPENSATION TABLE (1)
|
Name and
Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock Awards
($)(2)
|
|
Non-Equity
Incentive Plan
Compensation
($)(3)
|
|
All Other
Compensation
(Including
Perquisites)
($)(4)
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harry H. Herington
|
|
2019
|
|
500,000
|
|
|
—
|
|
|
985,744
|
|
|
796,560
|
|
|
137,850
|
|
|
2,420,154
|
|
Chairman, Chief
|
|
2018
|
|
500,000
|
|
|
—
|
|
|
875,268
|
|
|
835,000
|
|
|
134,544
|
|
|
2,344,812
|
|
Executive Officer
|
|
2017
|
|
500,000
|
|
|
—
|
|
|
1,286,099
|
|
|
783,781
|
|
|
117,741
|
|
|
2,687,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Kovzan
|
|
2019
|
|
325,000
|
|
|
—
|
|
|
320,371
|
|
|
336,547
|
|
|
56,392
|
|
|
1,038,310
|
|
Chief Financial Officer
|
|
2018
|
|
325,000
|
|
|
—
|
|
|
284,451
|
|
|
352,788
|
|
|
54,230
|
|
|
1,016,469
|
|
|
|
2017
|
|
325,000
|
|
|
—
|
|
|
417,977
|
|
|
331,148
|
|
|
49,150
|
|
|
1,123,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jayne Friedland Holland
|
|
2019
|
|
322,046
|
|
|
—
|
|
|
290,697
|
|
|
284,770
|
|
|
51,037
|
|
|
948,550
|
|
Chief Security Officer
|
|
2018
|
|
315,000
|
|
|
—
|
|
|
262,551
|
|
|
289,328
|
|
|
45,947
|
|
|
912,826
|
|
|
|
2017
|
|
315,000
|
|
|
—
|
|
|
270,083
|
|
|
148,135
|
|
|
39,405
|
|
|
772,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William A. Van Asselt
|
|
2019
|
|
306,958
|
|
|
—
|
|
|
102,103
|
|
|
77,500
|
|
|
20,448
|
|
|
507,009
|
|
General Counsel
|
|
2018
|
|
291,750
|
|
|
—
|
|
|
99,127
|
|
|
72,938
|
|
|
14,716
|
|
|
478,531
|
|
|
|
2017
|
|
283,250
|
|
|
—
|
|
|
96,228
|
|
|
70,813
|
|
|
12,796
|
|
|
463,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas Rogers
|
|
2019
|
|
279,774
|
|
|
120,254
|
|
|
95,533
|
|
|
70,284
|
|
|
12,596
|
|
|
578,441
|
|
SVP, Business Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert W. Knapp, Jr.
|
|
2019
|
|
52,082
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,530,955
|
|
|
1,583,037
|
|
Former Chief Operating
|
|
2018
|
|
325,000
|
|
|
—
|
|
|
360,315
|
|
|
407,063
|
|
|
63,276
|
|
|
1,155,654
|
|
Officer
|
|
2017
|
|
325,000
|
|
|
—
|
|
|
529,450
|
|
|
382,093
|
|
|
54,434
|
|
|
1,290,977
|
|
|
|
(1)
|
The “Option Awards” and “Change in Pension Value and Non-qualified Deferred Compensation Earnings” columns have been omitted from the Summary Compensation Table because the Company did not grant any stock option awards to the named executive officers in the years presented and does not provide a pension program or other non-qualified deferred compensation.
|
|
|
(2)
|
Amounts reported in the Stock Awards column represent the aggregate grant date fair value of service-based restricted stock and performance-based restricted stock awards, computed in accordance with FASB ASC Topic 718. Pursuant to SEC rules, the amounts shown reflect the probable outcome of performance conditions that affect the vesting of awards granted to the named executive officers. For a discussion of valuation assumptions, see Note 12 in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. If the performance-based restricted stock awards were valued at the maximum number of shares able to be earned by the NEO at the end of the three-year performance period pursuant to the terms of the long-term equity incentives, the amounts shown in the column would be:
|
|
|
|
|
|
Name
|
2019 ($)
|
2018 ($)
|
2017 ($)
|
Herington
|
1,999,987
|
1,999,995
|
2,000,002
|
Kovzan
|
650,008
|
649,997
|
649,988
|
Holland
|
499,276
|
499,269
|
420,523
|
|
|
(3)
|
For 2019, for Messrs. Herington, Kovzan and Ms. Holland, amount consists of compensation earned in 2019, based on the Company’s fiscal 2019 financial performance, but paid in 2020 under the Company’s MAIPSE. For Messrs. Van Asselt and Rogers, the amount in 2019 consists of compensation earned in 2019, based on the Company’s fiscal 2019 performance, but paid in 2020 under the terms of their Profit Sharing and Incentive Program. For additional information regarding the Company’s annual cash incentive plans, refer to the “Annual cash incentive” section of the CD&A in this Proxy Statement beginning on page 34.
|
|
|
(4)
|
All other compensation (including perquisites) for 2019 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Executive Life
& Disability
Insurance ($)
|
Cash Dividends
Paid: Service-based
Equity Awards ($)(A)
|
Dividend Equivalents:
Performance-based
Equity
Awards ($)(B)
|
Employer
401(k
Match ($)
|
Severance ($) (C)
|
Total Other
Compensation ($)
|
Herington
|
21,914
|
|
35,895
|
|
70,541
|
|
9,500
|
|
—
|
|
137,850
|
|
Kovzan
|
12,300
|
|
11,666
|
|
22,926
|
|
9,500
|
|
—
|
|
56,392
|
|
Knapp
|
1,001
|
|
3,561
|
|
—
|
|
—
|
|
1,526,393
|
|
1,530,955
|
|
Holland
|
14,576
|
|
11,016
|
|
15,945
|
|
9,500
|
|
—
|
|
51,037
|
|
Van Asselt
|
5,967
|
|
4,981
|
|
—
|
|
9,500
|
|
—
|
|
20,448
|
|
Rogers
|
—
|
|
3,096
|
|
—
|
|
9,500
|
|
—
|
|
12,596
|
|
|
|
(A)
|
This column reflects non-forfeitable cash dividends paid in connection with unvested shares subject to service-based restricted stock awards during the year.
|
|
|
(B)
|
This column reflects dividend and dividend equivalents declared on shares subject to each outstanding performance-based restricted stock award during the year, based upon the maximum number of shares which may become vested under the performance-based restricted stock award; Under each award agreement relating to the performance-based restricted stock awards, the actual dividend is payable to the named executive officer in the form of shares of Company common stock at the end of the three-year performance period for each award, but only to the extent the underlying shares have vested. At the end of the three-year performance period and on the date some or all of the shares vest under the award, a pro rata number of notional dividend shares will be converted into an equivalent number of dividend shares earned and shall be paid based upon the actual number of underlying shares vested during the performance period. No cash dividends or dividend equivalents are paid on any performance-based restricted stock awards during the three-year performance period. The amounts shown do not reflect any forfeitures at the end of the respective performance period of dividends previously declared on shares of performance-based restricted stock.
|
|
|
(C)
|
Effective as of January 27, 2019, Mr. Knapp ceased being Chief Operating Officer and a member of the Executive Leadership Team. This column represents a lump-sum pay-out for severance, unused paid time-off and medical and health benefits.
|
GRANTS OF PLAN-BASED AWARDS IN FISCAL 2019
The following table sets forth information concerning grants of restricted stock awards and incentive plan awards to the named executive officers during the fiscal year ended December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
Name
|
Grant Date
|
Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards
|
Estimated Future Payouts Under
Equity Incentive Plan Awards
|
All Other Stock
Awards: Number of
Shares of Stock or
Units
(#)(3)
|
Grant Date Fair
Value of Stock
and Option
Awards
($)(4)
|
Threshold
($)(1)
|
Target
($)(1)
|
Maximum
($)(1)
|
Threshold
(#)(2)
|
Target
(#)(2)
|
Maximum
(#)(2)
|
|
|
|
|
|
|
|
|
|
|
Harry H.
Herington
|
2/21/19
|
250,000
|
500,000
|
835,000
|
—
|
—
|
—
|
—
|
—
|
|
2/21/19
|
—
|
—
|
—
|
21,714
|
43,427
|
72,380
|
—
|
235,759
|
|
2/21/19
|
—
|
—
|
—
|
—
|
—
|
—
|
43,427
|
749,984
|
|
|
|
|
|
|
|
|
|
|
Stephen M.
Kovzan
|
2/21/19
|
105,625
|
211,250
|
352,950
|
—
|
—
|
—
|
—
|
—
|
|
2/21/19
|
—
|
—
|
—
|
7,057
|
14,114
|
23,524
|
—
|
76,622
|
|
2/21/19
|
—
|
—
|
—
|
—
|
—
|
—
|
14,114
|
243,749
|
|
|
|
|
|
|
|
|
|
|
Jayne
Friedland
Holland
|
2/21/19
|
89,375
|
178,750
|
298,675
|
—
|
—
|
—
|
—
|
—
|
|
2/21/19
|
—
|
—
|
—
|
4,560
|
9,120
|
15,231
|
—
|
54,460
|
|
2/21/19
|
—
|
—
|
—
|
—
|
—
|
—
|
13,679
|
236,236
|
|
|
|
|
|
|
|
|
|
|
William A.
Van Asselt
|
2/21/19
|
—
|
77,500
|
—
|
—
|
—
|
—
|
—
|
—
|
|
1/28/19
|
—
|
—
|
—
|
—
|
—
|
—
|
7,226
|
102,103
|
|
|
|
|
|
|
|
|
|
|
Douglas Rogers
|
2/21/19
|
—
|
70,284
|
—
|
—
|
—
|
—
|
—
|
—
|
|
1/28/19
|
—
|
—
|
—
|
—
|
—
|
—
|
6,761
|
95,533
|
|
|
(1)
|
For Messrs. Herington and Kovzan and Ms. Holland, represents a grant pursuant to the Company’s 2019 MAIPSE. For Messrs. Van Asselt and Rogers, represents a grant pursuant to the terms of his Profit Sharing and Incentive Program. For additional information, refer to the “Annual cash incentives” section in the CD&A of this Proxy Statement.
|
|
|
(2)
|
For Messrs. Herington and Kovzan and Ms. Holland, represents a grant of performance-based restricted stock on February 21, 2019 that will vest in whole or in part on February 21, 2022 if certain Company financial performance criteria are satisfied. For additional information, refer to the “Long-term, equity-based incentives” section in the CD&A of this Proxy Statement.
|
|
|
(3)
|
For Messrs. Herington and Kovzan and Ms. Holland, includes a grant of service-based restricted stock on February 21, 2019. For Messrs. Van Asselt and Rogers, represents grants of service-based restricted stock on January 28, 2019.
|
|
|
(4)
|
Represents the aggregate grant date fair value of such awards, computed in accordance with FASB ASC Topic 718. Pursuant to SEC rules, the amounts shown reflect the probable outcome of performance conditions that affect the vesting of awards granted to the named executive officers. For assumptions used in determining these values, refer to Note 12 in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.
|
OUTSTANDING EQUITY AWARDS AT 2019 FISCAL YEAR-END
The following table sets forth information concerning outstanding restricted stock awards for the named executive officers at December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
Name
|
Grant Date
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
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
($)(1)
|
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units or
Other
Rights That
Have Not
Vested
(#)
|
Equity
Incentive Plan
Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Vested
($)(1)
|
Harry H. Herington
|
2/22/16
|
—
|
—
|
—
|
—
|
—
|
(2)
|
10,642
|
237,849
|
—
|
—
|
2/22/17
|
—
|
—
|
—
|
—
|
—
|
(2)
|
17,045
|
380,956
|
—
|
—
|
2/22/17
|
—
|
—
|
—
|
—
|
—
|
(3)
|
—
|
—
|
56,819
|
1,269,905
|
2/22/18
|
—
|
—
|
—
|
—
|
—
|
(2)
|
41,058
|
917,646
|
—
|
—
|
2/22/18
|
—
|
—
|
—
|
—
|
—
|
(4)
|
—
|
—
|
91,241
|
2,039,236
|
2/21/19
|
—
|
—
|
—
|
—
|
—
|
(2)
|
43,427
|
970,593
|
—
|
—
|
2/21/19
|
—
|
—
|
—
|
—
|
—
|
(5)
|
—
|
—
|
72,380
|
1,617,693
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Kovzan
|
2/22/16
|
—
|
—
|
—
|
—
|
—
|
(2)
|
3,459
|
77,309
|
—
|
—
|
2/22/17
|
—
|
—
|
—
|
—
|
—
|
(2)
|
5,540
|
123,819
|
—
|
—
|
2/22/17
|
—
|
—
|
—
|
—
|
—
|
(3)
|
—
|
—
|
18,466
|
412,715
|
2/22/18
|
—
|
—
|
—
|
—
|
—
|
(2)
|
13,344
|
298,238
|
—
|
—
|
2/22/18
|
—
|
—
|
—
|
—
|
—
|
(4)
|
—
|
—
|
29,654
|
662,767
|
2/21/19
|
—
|
—
|
—
|
—
|
—
|
(2)
|
14,114
|
315,448
|
—
|
—
|
2/21/19
|
—
|
—
|
—
|
—
|
—
|
(5)
|
—
|
—
|
23,524
|
525,761
|
|
|
|
|
|
|
|
|
|
|
|
|
Jayne Friedland Holland
|
1/20/16
|
—
|
—
|
—
|
—
|
—
|
(2)
|
1,298
|
29,010
|
—
|
—
|
2/22/16
|
—
|
—
|
—
|
—
|
—
|
(2)
|
2,235
|
49,952
|
—
|
—
|
2/22/17
|
—
|
—
|
—
|
—
|
—
|
(2)
|
3,580
|
80,013
|
—
|
—
|
2/22/17
|
—
|
—
|
—
|
—
|
—
|
(3)
|
—
|
—
|
11,956
|
267,217
|
2/22/18
|
—
|
—
|
—
|
—
|
—
|
(2)
|
12,933
|
289,053
|
—
|
—
|
2/22/18
|
—
|
—
|
—
|
—
|
—
|
(4)
|
—
|
—
|
19,199
|
429,098
|
2/21/19
|
—
|
—
|
—
|
—
|
—
|
(2)
|
13,679
|
305,726
|
—
|
—
|
2/21/19
|
—
|
—
|
—
|
—
|
—
|
(5)
|
—
|
—
|
15,231
|
340,413
|
|
|
|
|
|
|
|
|
|
|
|
|
William A. Van Asselt
|
1/20/16
|
—
|
—
|
—
|
—
|
—
|
(2)
|
1,000
|
22,350
|
—
|
—
|
2/22/16
|
—
|
—
|
—
|
—
|
—
|
(2)
|
958
|
21,411
|
—
|
—
|
1/30/17
|
—
|
—
|
—
|
—
|
—
|
(2)
|
1,944
|
43,448
|
—
|
—
|
1/28/18
|
—
|
—
|
—
|
—
|
—
|
(2)
|
4,439
|
99,212
|
—
|
—
|
1/28/19
|
—
|
—
|
—
|
—
|
—
|
(2)
|
7,226
|
161,501
|
—
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas Rogers
|
10/11/17
|
—
|
—
|
—
|
—
|
—
|
(2)
|
1,433
|
32,028
|
—
|
—
|
1/28/18
|
—
|
—
|
—
|
—
|
—
|
(2)
|
945
|
21,121
|
—
|
—
|
1/28/19
|
—
|
—
|
—
|
—
|
—
|
(2)
|
6,761
|
151,108
|
—
|
—
|
|
|
(1)
|
The closing sales price per share of the Company’s Common Stock on December 31, 2019, was $22.35.
|
|
|
(2)
|
Service-based restricted stock awards granted in 2016, 2017, 2018 and 2019. The award vests 25% on the first, second, third and fourth anniversaries of the grant date, contingent upon the NEO’s continued employment on the vesting dates.
|
|
|
(3)
|
Performance-based restricted stock award granted on February 22, 2017. The number represents the maximum number of shares which may vest based on the three-year performance period that began on January 1, 2017 and ended on December 31, 2019. The shares were forfeited in February 2020 because the Company did not meet the threshold performance criteria to vest in such awards.
|
|
|
(4)
|
Performance-based restricted stock award granted on February 22, 2018. The number represents the maximum number of shares which may vest based on the three-year performance period that began on January 1, 2018 and ending on December 31, 2020. If the performance criteria are met, awards are issued in stock in the first quarter following the end of the performance period and are subject to service-based vesting through February 22, 2021.
|
|
|
(5)
|
Performance-based restricted stock award granted on February 21, 2019. The number represents the maximum number of shares which may vest based on the three-year performance period that began on January 1, 2019 and end on December 31, 2021. If the performance criteria are met, awards are issued in stock in the first quarter following the end of the performance period and are subject to service-based vesting through February 22, 2022. Performance criteria and calculation of performance awards are described in CD&A of this Proxy Statement.
|
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2019
The following table sets forth information concerning shares of restricted stock acquired on vesting by the named executive officers during the fiscal year ended December 31, 2019.
|
|
|
|
|
|
|
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 (1)
($)
|
Harry H. Herington
|
—
|
—
|
76,746
|
1,324,636
|
Stephen M. Kovzan
|
—
|
—
|
24,889
|
429,584
|
Jayne Friedland Holland
|
—
|
—
|
19,699
|
330,828
|
William A. Van Asselt
|
—
|
—
|
5,285
|
80,130
|
Douglas Rogers
|
—
|
—
|
1,030
|
19,151
|
Robert W. Knapp, Jr. (2)
|
—
|
—
|
95,683
|
1,656,273
|
|
|
(1)
|
The “value realized” on vesting of a restricted stock award is calculated based on the per share closing market price for our common stock on the vesting dates of the awards multiplied by the number of shares vested.
|
|
|
(2)
|
Effective as of January 27, 2019, Mr. Knapp stepped down as Chief Operating Officer and a member of the Executive Leadership Team.
|
The “Pension Benefits” and “Non-qualified Deferred Compensation” tables have been omitted because NIC does not provide such compensation.
REQUIRED PAY RATIO DISCLOSURE
Pursuant to a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC adopted a rule requiring annual disclosure of the ratio of the total annual compensation of the Company's CEO to the median employee's annual total compensation. Set forth below for 2019 is a comparison of (i) the median of the annual total compensation of all employees of the Company and its consolidated subsidiaries (except the CEO of the Company) and (ii) the annual total compensation of the CEO. The median of the annual total compensation and the pay ratio described below are reasonable estimates calculated by the Company in a manner consistent with Item 402(u) of Regulation S-K.
We estimate that the median of the annual total compensation of all employees of the Company and its consolidated subsidiaries (except our CEO) was approximately $85,670 for 2019. The annual total compensation of Harry H. Herington, our CEO, as reported in the Summary Compensation Table included in this Proxy Statement, was $2,420,154 for 2019.
Based on this information, we estimate that the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 28 to 1 for 2019. This compares to a ratio of 29 to 1 for 2018.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee and our CEO, we used the following methodology and made the following material assumptions, adjustments, and estimates:
1. We determined that, as of December 31, 2019, our employee population consisted of approximately 965 individuals, all of whom are located in the United States. This population consisted of our full-time and part-time employees.
2. To identify the "median employee" from our employee population, we compared the amount of salary and wages of our employees as reflected in our payroll records as reported to the Internal Revenue Service for the safe harbor provision for 401(k) discrimination testing, annualized for employees who were employed on December 31, 2019 but did not work for us for all of 2019.
3. We did not make any cost-of-living adjustments in identifying the "median employee."
4. Once we identified our median employee, we included the elements of such employee’s compensation for 2019 determined in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $85,670. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2019 Summary Compensation Table included in this Proxy Statement, which was calculated in accordance with the same requirements of Item 402(c)(2)(x) of Regulation S-K.
_________________
EMPLOYMENT AGREEMENTS AND SEVERANCE PAYMENTS
_________________
Employment Agreements
On February 5, 2013, the Company entered into employment agreements with each of Messrs. Herington, Kovzan and Knapp. On July 27, 2015, the Company entered into the first amendment to the employment agreements with each of Messrs. Herington, Kovzan and Knapp. Ms. Holland, who was appointed an Executive Officer in May 2015, entered into an employment agreement with the Company on terms consistent with the employment agreements of the other executive officers. Ms. Holland also executed an amendment. On July 29, 2018, the Company and Mr. Van Asselt executed an employment agreement on terms consistent with the as-amended employment agreements of the other executive officers, except that Mr. Van Asselt did not participate in a performance-based equity incentive plan in 2018. The Compensation Committee determined that the employment agreements were appropriate and desirable for the reasons set forth under “CD&A – Employment Agreements with Named Executive Officers” in this Proxy Statement beginning on page 38.
The employment agreements each have substantially the same terms, except with respect to job titles and responsibilities, amounts paid to executives and certain performance-based incentive components. In connection with entering into the employment agreements, Messrs. Herington, Kovzan, Knapp and Van Asselt and Ms. Holland have each entered into a proprietary information and inventions agreement and a non-competition agreement, each of which are substantially similar to the prior forms of agreements entered into between each executive and the Company. If the executive’s employment with the Company terminates for any reason, the agreements provide collectively that the executive: (a) will not use any of the Company’s proprietary information without the Company’s prior written consent; (b) will not use any confidential information to compete against the Company or any of the Company’s employees; (c) will not, for three years following termination, solicit any of the Company’s employees or customers; and (d) will not, for two years following termination, own (whether in whole or part), aid, or render services to, directly or indirectly, or engage in certain activities with respect to, any competitor of NIC.
Under the employment agreements, Messrs. Herington, Kovzan and Van Asselt and Ms. Holland are entitled to a minimum annual base salary, which may be increased by the Compensation Committee, as well as other benefits that are generally available to NIC employees. Each executive is also entitled to: (a) paid vacation; (b) reimbursement of reasonable and necessary business expenses incurred by the executive in connection with his or her duties in accordance with the Company’s policies; and (c) participate in and receive benefits under executive life insurance and disability policies. Messrs. Herington, Kovzan and Van Asselt and Ms. Holland are also entitled to participate, at a level commensurate with his or her position, in the Company’s annual performance-based cash bonus plan and long-term equity incentive plan. For Mr. Herington, the minimum target amount payable under the annual performance-based cash bonus plan is 100% of the executive’s salary and the minimum target amounts under the service-based and performance-based components of the long-term equity incentive plan are 150% of the executive’s salary. For Mr. Kovzan, the minimum target amount payable under the annual performance-based cash bonus plan is 65% of the executive’s salary and the minimum target amounts under both the service-based and performance-based components of the long-term incentive plan are 75% of the executive’s salary. For Ms. Holland, the minimum target amount payable under the annual performance-based cash incentive plan is 55% of the executive’s salary and the minimum target amounts payable under both the service-based and performance-based components of the long-term equity incentive plan are 50% of the executive’s salary. For Mr. Van Asselt,
the minimum target amount payable under the service-based component of the long-term equity incentive plan is 35% of the executive's salary.
Each of the employment agreements has a three-year term, and unless notice is provided at least six months prior to the end of the respective term, automatically renews for additional three-year terms.
Mr. Rogers does not have an employment agreement with the Company.
Payments upon Termination of Employment or Change of Control
The following discussion summarizes each of the employment agreements and describes the payments and benefits that would be provided to each of the named executive officers if their employment was terminated, including termination in connection with a change of control of NIC, in each case, as of December 31, 2019.
Under the employment agreements, the Company may terminate the employment of the executive at any time, with or without “Cause,” or the executive may voluntarily terminate his employment for “Good Reason” or at any time and for any reason. “Cause” is defined in the employment agreements as the executive’s conviction of any felony or willful and deliberate failure to perform such executive’s customary duties in a manner consistent with the manner reasonably prescribed by the Board (other than any failure resulting from incapacity due to physical or mental illness, disability or death). “Good Reason” is defined in the employment agreements generally as: (a) any material reduction in the executive’s compensation; (b) requiring the executive to relocate more than 60 miles from the Company’s current location; or (c) any material breach of the employment agreement by the Company.
Cash Severance Payments – Employment Agreements. Under the employment agreements, upon the executive's termination for any reason, the executive will receive: (a) accrued and unpaid salary through the termination date; (b) any earned but unpaid annual bonus for a previously completed fiscal year (but not for the year in which the termination occurs); (c) reimbursement of reimbursable expenses; (d) COBRA continuation coverage benefits and other employee benefits through the termination date; (e) any other amounts and benefits that the executive is entitled to receive under any Company employee benefit plan or program in accordance with the terms and provisions of such plan or program, except to the extent such amounts and benefits are determined pursuant to the employment agreement; and (f) such other compensation, if any, which the Company’s Board of Directors may elect to pay or grant (collectively, the "Base Termination Benefits"). If the Company terminates the executive for Cause, or the executive voluntarily terminates his employment without Good Reason, the executive would only be entitled to the foregoing benefits.
Under the employment agreements, if the Company terminates the executive without Cause or if the executive resigns for Good Reason, the executive is entitled to receive, in addition to the Base Termination Benefits, the amounts described under “Severance”, “Life, Health and Other Benefits” and “Annual Incentive Plan” in Note 1 to the table below.
As described further below, the executive may also be entitled to certain severance pay if a “Change of Control” of the Company occurs, and within either the six-month period ending on the date of the “Change of Control” or the 18-month period beginning on the date of the “Change of Control,” the executive’s employment is terminated without Cause or the executive terminates employment for Good Reason. In such event, the executive is entitled to receive, in addition to the Base Termination Benefits, the amounts described under “Severance”, “Life, Health and Other Benefits” and “Annual Incentive Plan” in Note 6 to the table below. The employment agreements provide for reductions in the amounts payable to the extent the present
value of compensation would more likely than not be non-deductible under Section 280G of the Internal Revenue Code.
Under the employment agreements, a “Change of Control” will be deemed to have occurred if: (a) any person (other than a trustee or a fiduciary holding securities under the Company’s employee benefit plan) becomes the beneficial owner (as that term is defined in Rule 13d-3 under the Exchange Act) of 30% or more of the Company’s Common Stock; (b) a merger or consolidation of the Company is consummated with another company, other than a merger or consolidation in which the stockholders of the Company own 50% or more of the voting stock of the surviving corporation; (c) “Continuing Directors” (defined to include current Board members and future directors approved by a majority of continuing directors) no longer constitute at least a majority of the Company’s Board; (d) the sale of all or substantially all of the assets of the Company; or (e) the liquidation or dissolution of the Company.
Under the employment agreements, in the event of the executive’s death, the executive’s designated beneficiaries will be entitled to receive, in addition to the Base Termination Benefits, the amounts described under “Life, Health and Other Benefits” in Note 4 to the table below.
If the Company terminates the executive’s employment due to disability (as defined in the Company’s disability policies), the executive is entitled to receive under the employment agreement and the Company’s disability policies, in addition to the Base Termination Benefits, the amounts described under “Severance” and “Life, Health and Other Benefits” in Note 5 to the table below.
Cash Severance Payments – Annual Incentive Plan. Messrs. Herington, Kovzan and Van Asselt and Ms. Holland are each eligible participants under the Company’s annual cash incentive plans, which provide each executive with an annual cash incentive payment generally based on a percentage of his/her base salary if and to the extent pre-established Company performance goals are met for a given one-year performance period. The performance goals and potential payment amounts are established on an annual basis.
Under the plans, if the executive voluntarily terminates his/her employment prior to the end of the applicable performance period (other than for Good Reason, which is governed by his/her employment agreement, or retirement) or if the executive’s employment is terminated for “Cause” prior to the end of the applicable performance period, all amounts payable to the executive under the annual cash incentive plan are forfeited. The plan references the executive’s employment agreement for the definition of “Cause.” If the executive's employment is terminated prior to the end of the performance period due to retirement, death or disability, the executive will be entitled to the amounts described under “Annual Incentive Plan” in Notes 3, 4 and 5 to the table below, respectively. Under the employment agreements, payments of incentive cash compensation for the applicable year of a termination of employment relating to a “Change of Control” would be governed by the employment agreements rather than the annual cash incentive plan.
Restricted Stock. Messrs. Herington, Kovzan and Van Asselt and Ms. Holland have restricted stock agreements for each year awards are granted that govern the terms of each of the executive’s restricted stock awards granted under the Company’s 2014 Stock Compensation Plan. The executives have one form of agreement that requires no execution by the recipient, applies automatically upon award, and is the same for all Company recipients of service-based restricted stock awards granted under the 2014 Stock Compensation Plan. This agreement governs the terms of the executive’s service-based restricted stock awards (the “Service-Based Restricted Stock Agreement”). The service-based restricted stock awards do not contain a performance component and vest ratably over a four-year service period following the date of grant.
Messrs. Herington and Kovzan and Ms. Holland also have a separate form of agreement governs the terms of the executive’s performance-based restricted stock awards (the “Performance-Based Restricted Stock Agreement”) and a copy of the agreement is executed by the executive in connection with the grant of performance-based stock each year. The performance-based restricted stock awards are tied to a three-year performance period and the actual number of shares (including dividend shares payable for such awards), if any, vested at the end of the period is based on pre-established Company performance goals. The Performance-Based Restricted Stock Agreements entered into by Messrs. Herington and Kovzan and Ms. Holland are of substantially the same form, except for provisions regarding the number of shares to be awarded at the end of the performance period.
The treatment of restricted stock upon termination of employment is governed by the employment agreements and the Restricted Stock Agreements described above. Under the employment agreements, if the Company terminates the executive without Cause or if the executive resigns for Good Reason, the executive is entitled to receive, with respect to equity incentives, the amounts described under “Service-Based Restricted Stock” and “Performance-Based Restricted Stock” in Note 1 to the table below.
Under the employment agreements, if a Change of Control of the Company occurs, and within either the six-month period ending on the date of the Change of Control or the 18-month period beginning on the date of the Change of Control, the executive’s employment is terminated without Cause or the executive terminates employment for Good Reason, the executive will receive, with respect to equity incentives, the amounts described under “Service-Based Restricted Stock” and “Performance-Based Restricted Stock” in Note 6 to the table below. The employment agreements provide for reductions in the amounts payable to the extent the present value of compensation would more likely than not be non-deductible under Section 280G of the Internal Revenue Code.
The Service-Based Restricted Stock Agreements and Performance-Based Restricted Stock Agreements continue to apply to a Change of Control or termination of employment from and after February 5, 2013 only to the extent that the employment agreements are not applicable. Under the Service-Based Restricted Stock Agreements, if the executive’s employment is terminated for any reason, including retirement, death or disability, all outstanding unvested shares of restricted stock under the Service-Based Restricted Stock Agreement are forfeited. Under the Performance-Based Restricted Stock Agreements, if the executive’s employment is terminated for any reason, other than in the case of death, disability or a Change of Control (as described above), all undelivered shares of restricted stock under the Performance-Based Restricted Stock Agreement are forfeited (including dividend shares payable for such awards), provided that if the executive’s employment is terminated for death or disability, the executive is entitled to a pro rata portion of the undelivered shares (including dividend shares payable for such awards) based upon the number of months the executive was employed during the performance period and the Company’s actual performance (only if such performance levels were met).
The following table is a summary of the aforementioned payments and benefits that would be provided to each of the named executive officers if (i) their employment was terminated or (ii) their employment was terminated in connection with a change of control of NIC, in each case, as of December 31, 2019.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Form of
Payment
|
|
Involuntary
Termination w/o
Cause or Voluntary Termination w/
Good Reason
|
|
Involuntary
Termination
for Cause or
Voluntary
Termination
w/o Good
Reason
|
|
Retirement
|
|
Death
|
|
Disability
|
|
Involuntary
Termination in
Connection w/
Change of Control
|
|
|
(Note 1)
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|
(Note 2)
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(Note 3)
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(Note 4)
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(Note 5)
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|
(Note 6)
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Harry H. Herington
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|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
$
|
2,670,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,540,000
|
|
|
$
|
2,670,000
|
|
Life, Health & Other
Benefits
|
|
72,732
|
|
|
38,462
|
|
|
38,462
|
|
|
1,038,462
|
|
|
88,318
|
|
|
72,732
|
|
Annual Incentive Plan
|
|
796,560
|
|
|
796,560
|
|
|
796,560
|
|
|
796,560
|
|
|
796,560
|
|
|
500,000
|
|
Service-Based
Restricted Stock
|
|
2,507,044
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,507,044
|
|
Performance-Based
Restricted Stock
|
|
597,131
|
|
|
—
|
|
|
—
|
|
|
597,131
|
|
|
597,131
|
|
|
3,056,166
|
|
Total
|
|
$
|
6,643,467
|
|
|
$
|
835,022
|
|
|
$
|
835,022
|
|
|
$
|
2,432,153
|
|
|
$
|
3,022,009
|
|
|
$
|
8,805,942
|
|
Stephen M. Kovzan
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|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
$
|
1,355,576
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,526,200
|
|
|
$
|
1,355,576
|
|
Life, Health & Other
Benefits
|
|
53,646
|
|
|
19,375
|
|
|
19,375
|
|
|
669,375
|
|
|
59,257
|
|
|
53,646
|
|
Annual Incentive Plan
|
|
211,250
|
|
|
336,547
|
|
|
336,547
|
|
|
336,547
|
|
|
336,547
|
|
|
211,250
|
|
Service-Based
Restricted Stock
|
|
814,814
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
814,814
|
|
Performance-Based
Restricted Stock
|
|
193,990
|
|
|
—
|
|
|
—
|
|
|
193,990
|
|
|
193,990
|
|
|
993,142
|
|
Total
|
|
$
|
2,629,276
|
|
|
$
|
355,922
|
|
|
$
|
355,922
|
|
|
$
|
1,199,912
|
|
|
$
|
2,115,994
|
|
|
$
|
3,428,428
|
|
Jayne Friedland Holland
|
|
|
|
|
|
|
|
|
|
|
|
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Severance
|
|
$
|
1,228,656
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,313,800
|
|
|
$
|
1,228,656
|
|
Life, Health & Other
Benefits
|
|
59,271
|
|
|
25,000
|
|
|
25,000
|
|
|
675,000
|
|
|
67,518
|
|
|
59,271
|
|
Annual Incentive Plan
|
|
284,770
|
|
|
284,770
|
|
|
284,770
|
|
|
284,770
|
|
|
284,770
|
|
|
178,750
|
|
Service-Based
Restricted Stock
|
|
753,754
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
753,754
|
|
Performance-Based
Restricted Stock
|
|
130,218
|
|
|
—
|
|
|
—
|
|
|
130,218
|
|
|
130,218
|
|
|
668,407
|
|
Total
|
|
$
|
2,456,669
|
|
|
$
|
309,770
|
|
|
$
|
309,770
|
|
|
$
|
1,089,988
|
|
|
$
|
1,796,306
|
|
|
$
|
2,888,838
|
|
William Van Asselt
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
$
|
775,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
1,279,444
|
|
|
$
|
775,000
|
|
Life, Health & Other
Benefits
|
|
53,646
|
|
|
19,375
|
|
|
19,375
|
|
|
639,375
|
|
|
52,771
|
|
|
53,646
|
|
Annual Incentive Plan
|
|
77,500
|
|
|
77,500
|
|
|
77,500
|
|
|
77,500
|
|
|
77,500
|
|
|
77,500
|
|
Service-Based
Restricted Stock
|
|
347,922
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
347,922
|
|
Performance-Based
Restricted Stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
1,254,068
|
|
|
$
|
96,875
|
|
|
$
|
96,875
|
|
|
$
|
716,875
|
|
|
$
|
1,409,715
|
|
|
$
|
1,254,068
|
|
|
|
(1)
|
“Severance” amount includes a lump sum payment equal to the sum of: (i) two (2) times the executive’s base salary in effect on the date of termination; and (ii) two (2) times the largest cash award received by the executive under the Annual Incentive Plan during the immediately preceding three annual incentive periods. “Life, Health and Other Benefits” amount includes: (i) payment of accrued paid vacation time; and (ii) a lump sum payment equal to 150% of the Company’s portion of the annual costs (determined as of the date of termination) associated with providing the executive and eligible family members with medical and health benefits coverage under the Company’s group health plans. “Annual Incentive Plan” amount includes the amount of any cash
|
award under the Annual Incentive Plan payable for the year of the executive’s termination, which: (i) for Mr. Kovzan is payable based upon target performance; and (ii) for all other executives, is payable based solely upon actual performance. “Service-Based Restricted Stock” amount includes the market value of unvested service-based restricted stock subject to accelerated vesting. “Performance-Based Restricted Stock” amount includes the market value of unvested performance-based restricted stock subject to accelerated vesting, which vests and is payable based solely upon actual performance (which for current performance periods that have not yet been completed is estimated by extrapolating from the actual performance during the completed portion of such periods).
|
|
(2)
|
“Life, Health and Other Benefits” amount includes payment of accrued paid vacation time.
|
|
|
(3)
|
“Life, Health and Other Benefits” amount includes payment of accrued paid vacation time. “Annual Incentive Plan” amount includes the pro rata amount of any cash award under the Annual Incentive Plan payable for the year of the executive’s retirement (based on the number of days worked) based solely upon actual performance.
|
|
|
(4)
|
“Life, Health and Other Benefits” amount includes: (i) payment of accrued paid vacation time; and (ii) payment of the proceeds from the executive’s life insurance policy payable by the insurer, the proceeds of which are equal to two (2) times the executive’s base salary. “Annual Incentive Plan” amount includes the pro rata amount of any cash award under the Annual Incentive Plan payable for the year of the executive’s death (based on the number of days worked) based solely upon actual performance. “Performance-Based Restricted Stock” amount includes the market value of a pro rata portion of unvested performance-based restricted stock subject to accelerated vesting (based on the number of months worked during the performance period), which vests and is payable based solely upon actual performance.
|
|
|
(5)
|
“Severance” amount includes salary continuation benefits payable to the executives under their respective employment agreements and the Company’s disability policies. Under the employment agreements, each executive is entitled to salary continuation benefits for a period of one year following the date of disability consisting of a payment equal to such executive’s base salary then in effect, reduced by payments made to the executive under the Company’s disability policies. Following the one-year period, the executive is then to receive only payments under the Company’s disability policies. Under the Company’s disability policies, each executive is also entitled to a lump sum payment of $1,000,000 if the executive is disabled for more than 365 days. “Severance” amount reflects the amount which each executive would receive if such executive qualified as disabled for a one-year period and therefore reflects the payment of the salary continuation benefit for one year and the lump sum payment. For each executive, the entire amount of the salary continuation benefit would be paid under the Company’s disability policies because the amount payable under such policies would exceed their base salary, with amounts payable as follows: Mr. Herington ($540,000); Mr. Kovzan ($526,200); Ms. Holland ($313,800); and Mr. Van Asselt ($279,444). “Life, Health and Other Benefits” amount includes: (i) payment of accrued paid vacation time; and (ii) the value of medical, dental, supplemental life, life and disability insurance premiums paid by the Company for each executive for a period of one year following termination due to disability. “Annual Incentive Plan” amount includes the pro rata amount of any cash award under the Annual Incentive Plan payable for the year of the executive’s termination (based on the number of days worked) based solely upon actual performance. “Performance-Based Restricted Stock” amount includes the market value of a pro rata portion of unvested performance-based restricted stock subject to accelerated vesting (based on the number of months worked during the performance period), which vests and is payable based solely upon actual performance.
|
|
|
(6)
|
“Severance” amount includes a lump sum payment equal to the sum of: (i) two (2) times the executive’s base salary in effect on the date of termination; and (ii) two (2) times the largest cash award received by the executive under the Annual Incentive Plan during the immediately preceding three annual incentive periods. “Life, Health and Other Benefits” amount includes: (i) payment of accrued paid vacation time; and (ii) a lump sum payment equal to 150% of the Company’s portion of the annual costs (determined as of the date of termination) associated with providing the executive and eligible family members with medical and health benefits coverage under the Company’s group health plans. “Annual Incentive Plan” amount includes the amount of any cash award under the Annual Incentive Plan payable for the year of the executive’s termination as if target
|
performance had been achieved. “Service-Based Restricted Stock” amount includes the market value of unvested service-based restricted stock subject to accelerated vesting. “Performance-Based Restricted Stock” amount includes the market value of unvested performance-based restricted stock subject to accelerated vesting, which vests as if target performance for such awards had been achieved.
|
|
(7)
|
Market value is based on the closing sales price per share of the Company’s Common Stock on December 31, 2019 of $22.35 per share.
|
_________________
EXECUTIVE OFFICERS
_________________
Below is certain information as of December 31, 2019, regarding the executive officers of the Company who are not directors. Mr. Herington, Chief Executive Officer, is profiled under the "Election of Directors" section which begins on page 20, because he also serves as Chairman of the Board of Directors. Executive officers serve at the pleasure of the Board of Directors.
|
|
|
|
Name
|
Age
|
Positions with the Company
|
Harry H. Herington
|
59
|
Chief Executive Officer
|
Stephen M. Kovzan
|
51
|
Chief Financial Officer
|
Jayne Friedland Holland
|
56
|
Chief Security Officer
|
William A. Van Asselt
|
45
|
General Counsel and Secretary
|
Douglas L. Rogers
|
44
|
Senior Vice President of Business Development
|
Stephen M. Kovzan has served as the Company’s Chief Financial Officer since August 2007. Mr. Kovzan joined the Company in October 1999 and served as the Company’s Controller until September 2000, at which time he became the Company’s Vice President of Financial Operations and Chief Accounting Officer, serving as such until August 2007. Mr. Kovzan currently serves as a manager and officer of various subsidiaries of NICUSA, Inc. Prior to joining the Company, Mr. Kovzan served as a business assurance manager with PricewaterhouseCoopers LLP. Mr. Kovzan is a Certified Public Accountant and holds a B.S. in business administration from the University of Tulsa and an M.S. in business from the University of Kansas.
Jayne Friedland Holland was appointed to the position of Chief Security Officer in May 2015. From December 2006 until this appointment, she served as the Company’s Chief Security Officer and Associate General Counsel. Ms. Holland joined the Company in June 2005 as Associate General Counsel of the Company. In her role as Chief Security Officer, she oversees the Company’s security management program. Prior to joining the Company, Ms. Holland served as Vice President and General Counsel for ESI and began her career as a litigator in New Orleans with McGlinchey Stafford PLLC. Ms. Holland holds a B.A. degree in Political Science from Newcomb College of Tulane University and a J.D. degree from Tulane University School of Law.
William A. Van Asselt was appointed to the position of General Counsel in January 2016. From March 2014 until this appointment, he served as the Company’s Deputy General Counsel. Mr. Van Asselt joined the Company in June 2010 as Associate General Counsel. Prior to joining the Company, Mr. Van Asselt practiced law at Lathrop & Gage LLP, and previously at Hogan Lovells in Washington D.C. where his practice focused on contract negotiations, corporate mergers & acquisitions, telecommunications law and corporate governance. Prior to attending law school, Mr. Van Asselt served as the Executive Director for the Martin Luther King, Jr. National Memorial Project Foundation in Washington D.C. Mr. Van Asselt holds a B.A. degree in Political Science from the University of Missouri and a J.D. degree from Harvard Law School.
Douglas L. Rogers joined as the Company's Senior Vice President of Business Development in October 2017. Mr. Rogers leads the national sales and marketing team supporting federal, state and payment processing engagements focusing on expanding our relationships with new government partners. Prior to joining NIC, he was a Vice President at Cerner Corporation, a publicly traded company (Nasdaq: CERN) headquartered in North Kansas City, Mo., and supplier of health information technology solutions, services, devices, and hardware. Mr. Rogers spent thirteen years with Cerner Corporation in a variety of roles ranging from marketing, government relations, and sales. For the three years prior to joining NIC, he led the team that sold Cerner Corporation's Population Health Software-as-a-Service solutions across multiple markets, including federal and state government. Mr. Rogers holds a B.S. degree in Biology from the Centenary College of Louisiana.
_______________