Non-Employee Director Compensation Program
Each member of our board of directors who is not an employee of our Company is entitled to the following compensation pursuant to our
non-employee director compensation program:
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Compensable Position / Event
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Compensation
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Initial Equity Grant
|
|
Non-qualified stock option to purchase 30,000 shares
(1)
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Annual Cash Retainer
|
|
$50,000
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Annual Equity Grant
|
|
Equity awards with an aggregate grant date fair value of $200,000
60% in restricted shares
(1)
40% in the form of a non-qualified stock option
(1)
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Committee Chairperson Retainer
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$20,000 (Audit)
$15,000 (Compensation)
$10,000 (Nominating/Corporate Governance)
$10,000 (Business Development)
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Committee Member Retainer
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|
$10,000 (Audit)
$7,500 (Compensation)
$5,000 (Nominating/Corporate Governance)
$5,000 (Business Development)
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-
(1)
-
Options
and restricted shares vest one-third each year over three years from the grant date.
Our
Compensation Committee annually reviews the amounts awarded under our non-employee director compensation program based on their analysis of the competitive range of the equity granted to directors
at our peer group companies and other publicly-available information. The actual number of restricted shares and shares underlying stock options is determined based on the grant date fair value of the
equity awards. The stock options have an exercise price equal to the closing price reported on Nasdaq of our Common Stock on the grant date. The annual retainer fees are paid to our directors
quarterly at the beginning of each quarter. In addition, we currently have a policy of reimbursing directors for travel, lodging and other reasonable expenses incurred in connection with their
attendance at our Board and Committee meetings.
Executive Chairman Compensation
As Executive Chairman, Stephen G. Waldis received a base salary of $300,000. Mr. Waldis did not receive any cash incentive bonus nor
did he participate in the Company's long term incentive plan in 2018. In addition, in 2018, we leased an automobile (and paid applicable insurance and gas) for Mr. Waldis. As Mr. Waldis
was our Chief Executive Officer in 2016, he did receive a grant of 2016-2018 Performance Shares. As described in "Compensation Discussion and Analysis" below, Mr. Waldis
18
Table of Contents
earned
the following 2016-2018 Performance Shares: (i) 93.3% of the target number of shares based on our 2016 financial performance and (ii) 51.4% of the target number of shares based on
our 2018 financial performance. There were no shares earned based on our 2017 financial performance. The actual number of 2016-2018 Performance Shares earned based on our 2016-2018 performance is set
forth below, all of which vested in March 2019:
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Name
|
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2016 -
2018
Target
Shares
|
|
2016
Target
Shares
|
|
2016
Attain
%
|
|
2016
Shares
Earned
|
|
2017
Target
Shares
|
|
2017
Attain
%
|
|
2017
Shares
Earned
|
|
2018
Target
Shares
|
|
2018
Attain
%
|
|
2018
Shares
Earned
|
|
Total
Shares
Earned
|
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|
|
|
Stephen Waldis
|
|
52,953
|
|
17,651
|
|
|
93.3
|
%
|
|
16,467
|
|
17,651
|
|
|
0
|
|
|
|
0
|
|
|
17,651
|
|
|
51.4
|
%
|
|
|
9,072
|
|
|
25,539
|
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|
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|
The
following table sets forth all of the compensation awarded to, earned by, or paid to each person who served as a non-employee director during 2018. Mr. Lurie, our Chief Executive Officer
and President, receives no compensation for his service as a director, and is not included in the table below.
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Name*
|
|
Fees
Earned or
Paid in
Cash
($)
|
|
All Other
Compensation
|
|
Stock
Awards
($)
(1)
|
|
Option
Awards
($)
(2)
|
|
Total
($)
|
|
|
|
|
Stephen G. Waldis
|
|
|
$
|
300,000
|
|
|
|
$
|
11,889
|
(3)
|
|
|
-0-
|
|
|
-0-
|
|
$
|
311,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
William J. Cadogan
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|
$
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88,750
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|
|
|
-0-
|
|
|
|
$
|
120,006
|
|
|
$
|
93,739
|
|
$
|
302,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Thomas Hopkins
(4)
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|
|
$
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131,250
|
|
|
|
-0-
|
|
|
|
$
|
120,006
|
|
|
$
|
93,739
|
|
$
|
344,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
James M. McCormick
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|
|
$
|
60,000
|
|
|
|
-0-
|
|
|
|
$
|
120,006
|
|
|
$
|
93,739
|
|
$
|
273,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donnie M. Moore
(4)
|
|
|
$
|
71,250
|
|
|
|
-0-
|
|
|
|
$
|
195,008
|
|
|
$
|
93,739
|
|
$
|
359,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kristin S. Rinne
|
|
|
$
|
21,000
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
$
|
87,292
|
|
$
|
108,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Aquilina
|
|
|
$
|
33,500
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
$
|
185,635
|
|
$
|
219,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Berger
(5)
|
|
|
$
|
46,875
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
$
|
115,157
|
|
$
|
162,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank Baker
(5)
|
|
|
$
|
45,000
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
$
|
115,157
|
|
$
|
160,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
amounts in this column reflect the aggregate grant date fair value of the stock awards computed in accordance with FASB ASC Topic No. 718. See Footnote 13
to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of our assumptions in estimating the fair value of our stock
awards.
-
(2)
-
The
amounts in this column reflect the aggregate grant date fair value of the stock options computed in accordance with FASB ASC Topic No. 718. See Footnote 2
to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of our assumptions in estimating the fair value of our stock
option awards.
-
(3)
-
Reflects
amounts paid for automobile expenses.
-
(4)
-
Each
of Messrs. Moore and Hopkins received a special bonus in connection with their assistance with the Company's restatement of its financial statements.
Mr. Hopkins opted to receive cash and Mr. Moore opted to receive shares of our Common Stock.
-
(5)
-
Each
of Messrs. Baker and Berger assigned their compensation to Siris Capital Group (as defined below).
-
*
-
Mr. Gyani
is excluded from this table as he joined the Board in January 2019.
19
Table of Contents
DIRECTOR STOCK OWNERSHIP GUIDELINES
|
We
have established stock ownership guidelines for our directors to retain an equity stake in the Company to more closely align their interests with those of our stockholders. Each
director is required to own the number of shares of our Common Stock with a value equal to three times the annual cash retainer for service on our Board. Ownership is calculated annually based on the
closing sales price of our Common Stock on Nasdaq for the last trading day in the prior year. Any newly elected director has three years from the date of his or her election to achieve the targeted
equity ownership level. As of December 31, 2018, each of our then serving directors owned at least the number of shares of our Common Stock required by these guidelines based on the price of
our Common Stock on such date.
LIMITATION OF LIABILITY AND INDEMNIFICATION
|
As
permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws provide that we are authorized to (i) enter into indemnification
agreements with our directors and officers and (ii) purchase directors' and officers' liability insurance, which we currently maintain to cover our directors and executive officers. The form of
indemnification agreement with our directors provides that we will indemnify each director against any and all expenses incurred by that director because of his status as one of our directors, to the
fullest extent permitted by Delaware law, our restated certificate of incorporation and amended and restated bylaws. In addition, the form agreement provides that, to the fullest extent permitted by
Delaware law, but subject to various exceptions, we will advance all expenses incurred by our directors in connection with a legal proceeding. Our restated certificate of incorporation and bylaws
contain provisions relating to the limitation of liability and indemnification of directors. The restated certificate of incorporation provides that our directors will not be personally liable to us
or our stockholders for monetary damages for any breach of fiduciary duty as a director, except for liability:
-
-
for any breach of a director's duty in respect of unlawful (i) payments of dividends or (ii) stock repurchases or redemptions as
provided in Section 174 of the Delaware General Corporation Law and the breach of a director's duty of loyalty to us or our stockholders;
-
-
for any transaction from which the director derives any improper personal benefit; and
-
-
for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law.
Our
restated certificate of incorporation also provides that if Delaware law is amended after the approval by our stockholders of our restated certificate of incorporation to authorize corporate
action further eliminating or limiting the personal liability of directors, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law. The
foregoing provisions of the restated certificate of incorporation are not intended to limit the liability of directors or officers for any violation of applicable federal securities laws. As permitted
by Section 145 of the Delaware General Corporation Law, our restated certificate of incorporation provides that we may indemnify our directors to the fullest extent permitted by Delaware law
and the restated certificate of incorporation provisions relating to indemnity may not be retroactively repealed or modified so as to adversely affect the protection of our directors.
20
Table of Contents
COMPENSATION RISK MANAGEMENT CONSIDERATIONS
|
Each
year, our Compensation Committee reviews our compensation practices and policies for all employees, including our NEOs, and assesses whether they have the potential to
incentivize employees without taking risks that are reasonably likely to have a material adverse effect on our Company. Since our annual performance-based bonus and equity programs are designed to
align our employees' compensation with both our short- and long-term business objectives and performance, and therefore enhance stockholder value, our Compensation Committee believes that our
compensation practices and policies discourage behavior that leads to excessive risk-taking. Therefore, our Compensation Committee believes our practices and policies will promote balanced risk
management and are not likely to have a material adverse effect on our Company. Set forth below are the key risk-balancing elements of our compensation practices and policies:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Performance
Measures
|
|
|
|
The ranges set for financial performance measures are designed to reward success without encouraging excessive risk taking. Pursuant to our performance-based equity plan, the number of performance-based restricted cash units or shares to be issued
is based on our financial performance over a specific period. There are maximum payouts under our cash incentive plan and the performance-based restricted cash units or shares, which help mitigate risk.
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|
|
|
|
|
|
|
|
|
|
|
|
Equity Vesting Periods
|
|
|
|
Time-based restricted shares typically vest over three years, while stock options typically vest over four years. The performance-based restricted cash units or shares are earned and vest upon determination of the achievement of our performance
metrics established for the performance period. The vesting of the equity awards is designed to reward continued service with us, increases in our stock price and achievement of corporate goals designed to enhance stockholder value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Retention Guidelines
|
|
|
|
NEOs are required to acquire within five years of becoming an executive officer, and hold while they are executive officers, shares (vested and unvested) having a value of at least three times, or five times in the case of our CEO, their respective
base salaries.
|
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|
|
|
|
|
|
|
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|
|
|
No Hedging
|
|
|
|
Our employees, including our NEOs, are not permitted to enter into any transaction designed to hedge, or having the effect of hedging, the economic risk of owning our securities.
|
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|
|
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|
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|
|
|
Financial Restatement, Recoupment and Related Policies
|
|
|
|
As part of our Code of Business Conduct, we will investigate all reported instances of questionable or unethical behavior of a director, NEO or other employee and, where improper behavior or failure to act is found to have occurred, will take
appropriate action up to and including termination. If an investigation uncovers that an individual has committed fraud or other improper acts that causes our financial statements to be restated or otherwise affected, our Board has discretion to take
immediate and appropriate disciplinary action with respect to that individual up to and including termination. Our Board also has discretion to pursue whatever legal remedies are available to prosecute that individual to the fullest extent of the law
and may seek to recoup or recover any amounts he or she inappropriately received as a result of his or her improper actions, including but not limited to any annual or long term incentives that he or she received to the extent the individual would
not have received that amount had the improper action not been taken.
|
|
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|
|
|
|
|
|
|
|
|
The
following table sets forth the name, age and position of each of our executive officers as of April 10, 2019. Information as of April 10, 2019 about the number of
shares of Common Stock
21
Table of Contents
beneficially
owned by each of the individuals designated as a NEO, whether held directly or indirectly, appears below under the heading "
Equity Security Ownership of Certain
Beneficial Owners and Management
."
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Current Positions
|
|
|
|
|
Glenn Lurie
|
|
53
|
|
President, Chief Executive Officer and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Clark
|
|
54
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Miller
|
|
55
|
|
Chief Commercial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary Clark
|
|
52
|
|
Chief Marketing Officer and Chief Products Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald J. Prague
|
|
55
|
|
Chief Legal Officer and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick J. Doran
|
|
46
|
|
Chief Technology Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin Hunsaker
|
|
54
|
|
Chief People Officer
|
|
|
|
|
|
|
|
|
|
|
|
Glenn Lurie
has served as our President and Chief Executive Officer and a Director since November 2017. Prior to joining Synchronoss, Mr. Lurie
held significant leadership and operations positions at AT&T, most recently serving as President and Chief Executive Officer of AT&T's Mobility and Consumer Operations until his retirement from AT&T
in September 2017. Prior to his promotion to President and Chief Executive Officer of AT&T's Mobility and Consumer Operations, Mr. Lurie served in a number of senior executive roles at AT&T and
led the team responsible for negotiating its exclusive U.S. agreement with Apple Inc. to launch the first iPhone in 2007. Mr. Lurie is active in industry associations and within the
community. He most recently served as chairman of the board for the Consumer Technology Industry Association in 2016. Mr. Lurie is a member of the Board of Directors of Avis Budget
Group, Inc. Mr. Lurie received a degree in business/marketing from Seattle Pacific University.
David Clark
joined Synchronoss as Executive Vice President, Finance in May 2018 and has served as our Chief Financial Officer since August 2018.
Mr. Clark was Chief Financial Officer of The Meet Group, a publicly-held company, from 2013 to 2018. Mr. Clark served as Executive Vice President, Chief Financial Officer and Treasurer
of Nutrisystem, Inc., a publicly-held company, from 2008 to 2013 and as Senior Vice President, Chief Financial Officer and Treasurer of Nutrisystem from 2007 to 2008. Mr. Clark received
a degree in accounting from Boston College.
Jeff Miller
has served as our Chief Commercial Officer since October 2018. Mr. Miller previously served as President of IDEAL Industries
Technology Group from December 2017 to October 2018. Prior to IDEAL, Mr. Miller held several senior sales and operations positions at Motorola during a 16-year tenure, most recently as
Corporate Vice President and General Manager of Operations in North America for Motorola Mobility, LLC. Mr. Miller received a degree in business from Miami University of Ohio and a
Master's Degree in Business Administration from The Ohio State University.
Mary Clark
joined Synchronoss in January 2018 as our Chief Marketing Officer and Chief Products Officer. Prior to joining Synchronoss, Ms. Clark
held various executive positions at Syniverse, Inc. from 2009 to January 2018, including Senior Vice President, Roaming Business Unit as well as Chief Marketing Officer. Ms. Clark
received a degree in communications from the University of Delaware.
Patrick J. Doran
has served as our Chief Technology Officer since January 2007. Prior to that position, Mr. Doran served in various positions,
including Vice President of Research and Development, Chief Architect and Senior Software Engineer, since joining Synchronoss in 2002. Before joining Synchronoss, Mr. Doran was a Senior
Development Engineer at Agility Communications from 2000 to 2002, member
22
Table of Contents
of
technical staff at AT&T/Lucent from 1996 to 2000 and a Software Engineer at General Dynamics from 1995 to 1996. Mr. Doran received a degree in computer and systems engineering from
Rensselaer Polytechnic Institute and a Master's Degree in Systems and Industrial Engineering from Purdue University.
Ronald J. Prague
has served as our Chief Legal Officer and Secretary since joining Synchronoss in 2006. Before joining Synchronoss, Mr. Prague
held various legal senior positions with Intel Corporation from 1998 to 2006, including as Group Counsel for Intel's Communications Infrastructure Group. Prior to joining Intel, Mr. Prague
practiced law with the law firms of Haythe & Curley (now Torys LLP) and Richards & O'Neil (now Morgan, Lewis & Bockius LLP). Mr. Prague received a Juris
Doctor from Northwestern Pritzker School of Law and received a degree in business administration and marketing from Cornell University.
Kevin Hunsaker
has served as our Chief People Officer since joining Synchronoss in March 2016 in connection with our acquisition of Openwave
Messaging, Inc. ("
Openwave
"). Prior to joining Synchronoss, Mr. Hunsaker was General Counsel and Vice President of Human Resources of
Openwave from July 2015 until Synchronoss' acquisition of Openwave. Prior to Openwave, Mr. Hunsaker was Vice President of Human Resources at Deem, Inc. from 2011 to 2015.
Mr. Hunsaker received a Juris Doctor from Golden Gate University and a degree in economics from the University of California, Davis.
23
Table of Contents
Compensation of Executive Officers
Compensation Discussion and Analysis
This section discusses our compensation philosophy, summarizes our compensation programs and reviews compensation decisions for our Named
Executive Officers (our "
NEOs
") for the fiscal year ended December 31, 2018. The table below sets forth our NEOs for 2018:
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Title as of December 31, 2018
|
|
|
|
|
Glenn Lurie
|
|
Chief Executive Officer, President and Director
|
|
|
|
|
|
|
|
|
|
|
|
David Clark
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
Lawrence Irving
(1)
|
|
Former Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
Mary Clark
|
|
Chief Marketing Officer and Chief Product Officer
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Miller
|
|
Chief Commercial Officer
|
|
|
|
|
|
|
|
|
|
|
|
Patrick Doran
|
|
Chief Technology Officer
|
|
|
|
|
|
|
|
|
|
|
|
Robert Garcia
(2)
|
|
Former Chief Commercial Officer
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Mr. Irving
retired as our Chief Financial Officer, effective August 15, 2018 and is no longer employed by our Company.
-
(2)
-
Mr. Garcia
resigned as our Chief Commercial Officer, effective October 31, 2018 and is no longer employed by our Company.
Executive Summary
Our executive compensation philosophy and programs are designed to attract, retain and motivate high-quality executives who possess diverse
skills and talents required to help us achieve our short and long-term financial and strategic goals. Our executive compensation programs are designed to foster a performance-oriented culture that
aligns our executives' interests with those of our stockholders over the long term. To provide for this alignment of interests, our compensation programs provide that 75.5% of our CEO's and 64.2% of
our NEOs' targeted compensation is tied to long-term, equity-based incentives. By tying a majority of our
NEOs' targeted compensation to equity-based incentives, our common stock's value needs to increase in order for our NEOs to realize any value related to our stock options or increase in value related
to our restricted shares and our Company needs to hit certain financial and strategic metrics in order for our NEOs to vest in the shares underlying our performance-based restricted shares or cash
units. In an effort to further provide for performance-based equity awards, approximately 67.5% of the total 2018 equity grants to each of our NEOs, other than our CEO, are either options to purchase
our common stock, restricted shares or cash units subject to performance-based vesting. Accordingly, we believe that the compensation of our NEOs is both appropriate for and responsive to the goal of
improving stockholder value, as the majority of each NEO's compensation is allocated to performance-based incentives.
2018 Compensation Program Highlights
Our executive compensation program is designed to attract, retain and motivate high-quality executives and drive the creation of long-term
stockholder value by tying a significant portion of our
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executives'
compensation to Company and individual performance. Our compensation philosophy and programs are designed to achieve the following objectives:
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Pay for
Performance
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Provide a strong relationship of pay to performance through:
Performance-based cash bonus tied primarily to achievement of corporate short-term financial goals and individual performance.
Long term incentive awards that deliver value based on the
performance of our Common Stock and the achievement of pre-determined, objective financial and business goals.
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Emphasis on
Variable
Compensation
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Total compensation is
heavily weighted toward incentive compensation (i.e., annual cash bonuses and long-term equity incentives).
Annual performance-based cash bonuses focus our NEOs on key short-term financial, strategic, and individual goals.
Long-term incentives focus our NEOs on sustainable, long-term
stockholder value creation. The value realized by our NEOs depends substantially on our long-term performance, achievement of our financial and strategic goals and the value of our Common Stock, which we believe aligns our NEOs' interests with the
long-term interests of our stockholders.
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Fixed
Compensation
Component
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Provide base salary
based on our Compensation Committee's general understanding of current competitive compensation practices, corporate achievement, our NEO's role and responsibilities, length of tenure, internal pay equity and individual performance.
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The
following highlights some of the key components of our pay for performance policies and practices:
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At-Risk Compensation
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A majority of the compensation of our CEO and our other NEOs is "at-risk" and tied to Company performance over the short- and/or long-term.
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Incentive Award Metrics
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Establish and approve objective incentive award metrics tied to key Company performance indicators.
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Performance Long-Term Incentives
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The number of performance-based restricted cash units or shares earned is based on our financial performance over a specified period, aligning our NEOs' interests with the long-term interests of our stockholders.
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Time-Based Equity Vesting
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Equity awards subject to time-based vesting vest ratably over three or four years to promote retention.
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Stock Ownership Guidelines
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Maintain stock ownership guidelines to support the alignment of interests between our NEOs and stockholders.
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No Hedging
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Prohibition of hedging exposure of, or interest in, our Common Stock.
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No Pledging
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Prohibition of pledging our Common Stock.
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Our
Compensation Committee oversees the design and administration of the compensation of our NEOs and certain other executive officers, with an enhanced focus on the individual compensation of our
NEOs. For 2018, our CEO assessed the performance of our NEOs (other than himself), consulted with other members of management, including our Executive Chairman and our compensation consultant, and
made recommendations to our Compensation Committee regarding the amount and the form of the compensation of our NEOs and other key employees, including the performance goals,
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weighting
of goals, and equity compensation awards of our NEOs. Our CEO was not present during discussions regarding his compensation.
2018 Executive Compensation Program
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Cash Incentive Compensation
For our NEOs' Annual Cash Incentive Bonuses in 2018, our Compensation Committee approved the following
metrics:
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40% based on non-GAAP revenue for 2018;
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30% based on non-GAAP EBITDA for 2018;
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20% based on free cash flow for 2018; and
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10% based on the specific performance of each NEO as determined by the CEO.
In
addition, each NEO had the opportunity to earn another (i) 10% of his or her annual bonus target if our Company entered into at least two Tier 1 partnership agreements with third
parties during 2018 and (ii) 10% of his or her annual bonus target if our Company entered into at least two new Cloud, Messaging or Digital customer agreements during 2018 with a guaranteed
contract value of at least $10 million. Our Compensation Committee believes that non-GAAP revenue, non-GAAP EBITDA, free cash flow and entering into large strategic transactions with companies
are metrics that accurately value our Company on both a short- and long-term basis and are targeted to emphasize strong growth on gross revenue and managing expenses. Based on the feedback received as
part of our stockholder outreach program, several of these are the key metrics many of our stockholders use in their valuation of our Company. As such, our bonus goals for NEOs are focused on growing
non-GAAP revenue, non-GAAP EBITDA and free cash flow and entering into large strategic transactions with companies, which we believe is aligned with our stockholders' perspective on our Company's
ability to grow and succeed in the short- and long-term.
Long-term Incentive Compensation
Our Compensation Committee awards time-based vesting restricted shares, stock options and performance-based vesting restricted cash units or
shares to our NEOs as the long-term incentive compensation component of their compensation, targeting an annual mix of one-third for each of these types of equity awards (based on grant date fair
value). The number
of stock options, target number of performance-based restricted cash units or shares and number of time-based vesting restricted shares granted to our NEOs is based on our Compensation Committee's
general understanding of competitive pay practices, our CEO's recommendations (except for his own equity grants) and other factors it deemed appropriate.
2018-2020 Performance Units
Our 2018 long-term equity incentive plan was designed to reward financial and strategic performance during a three-year period from 2018
through 2020, and the restricted cash units or shares granted under the long-term incentive plan (the "
2018-2020 Performance Units
") are earned and vest
based on achievement of pre-determined performance criteria during that period. Our NEOs are required to
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remain
employed by our Company through February 2021 in order to vest in the cash units or shares, as applicable. Our Compensation Committee approved the following performance metrics for the
2018-2020 Performance Units:
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40% are earned based on the non-GAAP revenue in the three-year period of 2018 to 2020;
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40% are earned based on the non-GAAP EBITDA in the three-year period of 2018 to 2020; and
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20% are earned based on the free cash flow in the three-year period of 2018 to 2020.
2018 Say on Pay Vote
At our 2018 Annual Meeting of Stockholders, approximately 90% of the shares voted were cast in favor of the advisory vote on executive
compensation. We continuously strive to improve the level of stockholder support for our executive compensation program and, in 2018, met with several of our largest stockholders and solicited their
feedback on our executive compensation policies. We have ongoing dialogue with our stockholders throughout the year on matters related to executive compensation, and our programs reflect feedback
provided through these discussions. Our Compensation Committee evaluates our executive compensation program each year with the goal of ensuring it is in line with our stockholders' interests. We
encourage stockholders to take into account the continuous changes to our executive compensation program over the last several years in considering the advisory vote presented below including adding
new metrics to both our short-term and long-term compensation plans, adding non-financial metrics to our short-term incentive plan and meeting with stockholders as part of our annual stockholder
outreach program.
Our
Compensation Committee's compensation consultant generally attends regular Compensation Committee meetings and meets with our Compensation Committee without management present.
When making decisions with respect to compensation matters and in an effort to gain a better understanding of the competitive landscape, our Compensation Committee considers various analyses prepared
by its compensation consultant, along with information it receives from management and its own judgment and experience. Since 2013, our compensation consultant has been Deloitte Consulting LLP
("
Deloitte
").
Peer Group
Our Compensation Committee generally reviews executive compensation survey and proxy data from technology companies that have similar
software/services business models or operate in the mobile networking space, are of similar financial size and are representative of the organizations with which we compete with for our executive
talent. Our Compensation Committee, based in part on advice from
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Deloitte,
identified and approved the following companies that fit some or all of these criteria as our peer group for purposes of assisting in benchmarking our 2018 executive compensation decisions:
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8x8 Inc.
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Guidewire Software Inc.
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PegaSystems, Inc.
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Blackbaud, Inc.
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Imperva, Inc.
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Progress Software Corp.
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Bottomline Technologies, Inc.
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J2 Global, Inc.
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Proofpoint Inc.
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Broadsoft, Inc.
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LogMein, Inc.
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RingCentral, Inc.
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CommVault Systems, Inc. OnDemand Inc.
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Medidata Solutions, Inc.
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Shutterstock Inc.
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Cornerstone OnDemand Inc.
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MicroStrategy, Inc.
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The Ultimate Software Group
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Our
peer group for 2018 executive compensation decisions was updated in 2017 to reflect the acquisition of Fleetmatics Group PLC, Infoblox, Inc., Interactive Intelligence
Group, Inc. and NeuStar, Inc. Our Compensation Committee added 8x8 Inc., Imperva, Inc., RingCentral, Inc. and Shutterstock Inc. as peer group companies based
on the similarities of their business offerings, financial profile, market capitalization and profitability with those of our Company. As a result of these changes, we believe the peer group utilized
for purposes of 2018 executive compensation decisions was representative of companies that we compete with for executive talent. When making compensation decisions for our NEOs, our Compensation
Committee also reviews published survey and peer group compensation data for other software/services companies or companies that operate in the mobile networking space. Competitive market practices is
an important factor in our Compensation Committee's decision-making process, although its decisions are not entirely based upon these factors and it is not bound by any target specific compensation
levels derived from peer group data. Rather, our Compensation Committee reviews and considers the peer group and other survey data to obtain a general understanding of current competitive compensation
practices. Additionally, reviewing the peer group and survey compensation data
enables our Compensation Committee to accomplish our goal of paying our NEOs what is appropriate and necessary to attract and retain qualified and committed executives while incentivizing achievement
of our corporate goals while conserving cash and equity.
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Principal Elements of Compensation
Our executive compensation program has the following principal elements: base salary, annual cash incentive bonuses, long-term incentive
awards and severance and change in control benefits. For base salary, annual cash bonuses and long-term incentive awards for our executive officers, our Company's compensation philosophy generally is
to evaluate individual experience and contribution, as well as corporate performance, and then consider competitive
market analysis. The markets we are serving are narrow and highly competitive for large-scale implementations leveraging unique technologies. With respect to all compensation components, we generally
use the median compensation of our peer group and the markets for which we compete for talent as the starting point for the compensation decision making process. We seek to drive our Company to
over-perform the market in the long term, and we believe that to ensure an appropriate pay-for-performance alignment, it may be appropriate for our Compensation Committee to approve compensation
levels for individual executives that may be above or below target pay for similar positions based on experience, individual contribution and corporate performance. Additionally, our Compensation
Committee may exercise discretion to issue one-time equity awards where appropriate to ensure alignment with key strategic business initiatives. The following table describes the primary compensation
elements used by our Company and the objectives of each element:
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Base Salary
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Objective:
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Our Compensation Committee sets base salaries with the intent to attract and retain NEO, reward satisfactory performance and provide a minimum, fixed level of cash compensation to compensate NEOs for their day-to-day responsibilities.
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Key Features:
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NEO base salaries are initially determined as a result of negotiation between the executive and our management in consultation with, and subject to the approval of, our Compensation Committee.
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Our Compensation Committee reviews base salaries annually and has discretion to provide increases based on our Compensation Committee's understanding of current competitive pay practices, promotions, our CEO's recommendation (except for his own
salary), changes in responsibilities and performance, annual budget for increases, our overall financial and operational results, the general economy, length of tenure, internal pay equity and other factors our Compensation Committee deems
appropriate.
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Process:
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At the end of each calendar year, our CEO recommends base salaries for NEOs other than himself for the following calendar year.
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Our Compensation Committee reviews proposed base salary changes with input from its compensation consultant.
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Our Compensation Committee approves annual base salaries for our NEOs.
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Our Compensation Committee reports base salary determinations to our full Board.
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Annual Cash
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Objective:
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Incentive Bonus
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Annual cash incentive bonuses are awarded under a performance-based compensation program and are designed to align the interests of our NEOs and stockholders by providing compensation based on the achievement of pre-determined corporate and/or
business goals and individual performance.
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Key Features:
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Each year, the target bonus for each NEO is set by our Compensation Committee based on each NEO's employment agreement provisions, our CEO's recommendation (except for his own target), internal pay equity, our Compensation Committee's general
understanding of current competitive pay practices and other factors it deems appropriate.
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The incentive compensation for our NEOs is based on achievement of certain objective corporate, financial, strategic and individual goals established and approved by our Compensation Committee at the start of the year.
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If we achieve results that are below certain threshold levels, these NEOs receive no cash incentive bonus, while results that are above certain threshold levels result in cash incentive bonuses above target levels.
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Process:
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Our Compensation Committee participates in our Board's review of our annual operating plan in the beginning of the year.
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Our CEO recommends bonus targets as a percentage of base salary for each NEO other than himself.
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Our management recommends financial and other performance measures, weightings and ranges.
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Our Compensation Committee reviews proposed bonus targets, performance measures and ranges provided by management and, with input from its compensation consultant, approves bonus targets, performance measures and ranges that it believes establish
appropriately challenging goals.
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After the end of the calendar year, our management presents the Company's financial results to our Board.
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Our CEO recommends the individual component award for our NEOs other than himself.
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Our Compensation Committee reviews the results and determines whether to make any adjustments to the recommendations and then approves each NEO's bonus award.
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Our Compensation Committee reports bonus award determinations to our full Board.
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Long-Term
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Objectives:
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Incentive Awards
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Our Compensation Committee structures long-term incentive awards to align our NEOs' interests with those of our stockholders, support retention and motivate NEOs to achieve our financial, strategic and operational goals. Long-term incentive awards
include stock options and time-based vesting and performance-based vesting restricted cash units or shares.
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Key Features:
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Our Compensation Committee grants stock options and time-based vesting and performance-based vesting restricted cash units or shares to our NEOs with the grant date fair value based on our Compensation Committee's general understanding of current
competitive pay practices, our CEO's recommendation (except for his own awards), input from our compensation consultant, internal pay equity, evaluation of each NEO's performance, and other factors our Compensation Committee deems
appropriate.
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Our Compensation Committee allocates long-term incentive awards among stock options, time-based vesting restricted shares and performance-based vesting shares or cash units based on grant date fair value (with vesting terms that generally extend up
to four years) with the intent to provide NEOs with a balanced retention and performance opportunity and serves to closely align our NEOs' long-term objectives with those of our stockholders.
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In 2018, our Compensation Committee decided to grant performance-based cash units rather than shares (other than to Ms. Clark who received performance-based shares in connection with her new hire grant and Messrs. Clark and Miller who were
not granted performance-based awards) and retained the discretion to settle the cash units in either cash or shares of our Common Stock at the time the cash units vest in an effort to protect against potential dilution. Each performance-based cash
unit has a target number of cash units to be earned following completion of a specific performance period based on the achievement of certain pre-established Company performance criteria. These performance-based cash units or shares will be earned
upon the completion of the specific performance period if the relevant performance criteria are achieved and typically vest based on continued service after a three-year period. At the time that each performance-based cash unit vests, our
Compensation Committee has discretion to either (i) pay cash equal to the product of the closing price of our Common Stock on the date the cash units vest or (ii) issue one share of our Common Stock for each performance-based cash unit.
Ms. Clark will not receive cash but, if earned, will receive shares of our Common Stock.
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Process:
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In the first fiscal quarter, our CEO recommends grant date fair values of awards for executives other than himself.
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Our Compensation Committee reviews proposed performance measures and ranges provided by management and competitive market data and, with input from its compensation consultant, approves performance measures and ranges that it believes establish
appropriately challenging goals.
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Our Compensation Committee approves the number of time-based shares underlying stock options and the target number of time-based restricted shares and performance-based shares or cash units granted to our NEOs.
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Our Compensation Committee reports equity award determinations to our full Board.
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At the end of the relevant performance period, our Compensation Committee reviews the financial performance of our Company for the relevant performance period and determines the amount of earned shares or cash units that are subject to
performance-based vesting.
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Severance and
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Objective:
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Change in
Control
Benefits
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Severance and change in control benefits are included in each NEO's employment agreement or employment plan in order to promote stability and continuity of our senior management team in the event of a potential change in control and/or an
involuntary termination. Our Compensation Committee believes these provisions help to align our NEO's interests appropriately with those of our stockholders in these scenarios.
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Key Features:
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Events triggering payment require a termination of our NEO's employment by our Company without cause or by our NEO for good reason. NEOs are entitled to enhanced benefits if the qualifying termination occurs during a specified period following a
change in control (i.e., double-trigger).
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Change in Control benefits do not include excise tax gross-ups.
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Our Compensation Committee has determined these termination-related benefits are appropriate to preserve productivity and encourage retention in the face of potentially disruptive circumstances. These arrangements also include restrictive covenants
that help protect our Company from competition and solicitation of employees and customers.
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Each NEO will only be eligible to receive severance payments if he or she signs a general release of claims following an eligible termination.
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Chief Executive Officer Compensation
In
November 2017, we hired Glenn Lurie, a long-term executive at AT&T, as our new CEO, replacing Stephen Waldis. At the time of hiring, Mr. Lurie had several alternative
career opportunities based on the competitive landscape and his unique skill set and, as a result, the Board approved a compensation package above the 50th percentile of CEOs at our peer group
companies, including a one-time special grant of 1,000,000 stock options with the intent to
increase our stockholder value. We believe hiring Mr. Lurie as our CEO was a key move towards moving the Company in the right direction for long-term
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growth,
and therefore we believe his compensation was commensurate with his experience and contributions he will make towards the Company's future.
Pay Mix
In keeping with our results-driven culture, our Compensation Committee expects our NEOs to deliver superior performance in a sustained fashion
and believes that a substantial portion of their overall compensation should be at-risk and tied to our short-term and long-term performance. As shown below, 75.5% of our CEO's targeted compensation
and an average of 64.2% of the average targeted compensation of our other NEOs for 2018 was tied to long-term incentives.
2018 Compensation Decisions
In determining the criteria for our NEOs' incentive compensation, our Compensation Committee considers a variety of factors, including alignment of our NEOs'
compensation with our stockholders' returns, and from time to time may adjust these factors or performance metrics based on our Company's transactions or the occurrence of unknown or unexpected events
during the applicable measurement period. On the corporate level, our Compensation Committee selected non-GAAP revenue, non-GAAP EBITDA and free cash flow and our entering into strategic agreements,
metrics that our Compensation Committee believes appropriately value our Company on both a short- and long-term basis and are targeted to emphasize strong growth on gross revenue while also managing
our earnings per share. Based on feedback received as part of our stockholder outreach program, several of these are also the key metrics we believe our stockholders use in their valuation of our
Company. As a result, our NEOs are focused on growing non-GAAP revenue, non-GAAP EBITDA and free cash flow and entering into strategic agreements, which we believe is aligned with our stockholders'
perspective on our Company's ability to grow and succeed on the short- and long-term.
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Base Salary
Base salaries for our NEOs are reviewed and may be adjusted annually. Base salary may also be adjusted during the year upon promotion or based
on internal equity or external market conditions. Our Compensation Committee makes these decisions after reviewing the recommendation of our CEO (except as it concerns his own salary) and our Chief
People Officer, and consulting with our compensation consultant. Based on this review, our Compensation
Committee did not approve any cost of living or other increases to the base salaries of any of our NEOs in 2018 except for Mr. Doran who received a 5% increase as his base salary was below the
50
th
percentile of base salaries of similar executives at our peer group companies. The base salaries for Ms. Clark and Messrs. Miller and Clark were negotiated with
such NEO's at the time they joined our Company in 2018.
The
table below sets forth each of our NEOs' 2018 base salary:
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Name
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2018
Base Salary
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Glenn Lurie
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$750,000
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David Clark
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$385,000
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Lawrence Irving(1)
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$425,000
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Jeffrey Miller
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$385,000
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|
|
|
|
|
Robert Garcia(2)
|
|
$475,000
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|
|
|
|
|
|
|
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|
Mary Clark
|
|
$350,000
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|
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|
Patrick Doran
|
|
$347,000
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Mr. Irving
retired as our Chief Financial Officer, effective August 15, 2018 and is no longer employed by our Company.
-
(2)
-
Mr. Garcia
resigned as our Chief Commercial Officer, effective October 31, 2018 and is no longer employed by our Company.
2018 Annual Cash Incentive Bonus Compensation
Our Annual Cash Incentive Bonus Compensation Program promotes our pay-for-performance philosophy by providing all executives and other management-level
corporate employees with direct financial incentives in the form of annual cash awards for achieving Company, business and individual performance goals.
Target Percentage
Our Compensation Committee sets each NEO's individual target cash incentive amount (expressed as a percentage of base salary) based on its
general understanding of competitive pay practices, our CEO's recommendation (except with respect to his own target), its consultation with our compensation consultant, and other factors it deems
appropriate. Based on its review of these factors, in April 2018, our Compensation Committee kept the target bonus percentage of each of our NEOs who were employed by us in 2017 at the same level as
in 2017. The 2018 target bonuses for Ms. Clark and Messrs. Miller and Clark were negotiated with such NEOs at the time they joined our Company in 2018.
34
Table of Contents
The
target cash incentive and maximum bonus percentages for each of our NEOs for 2018 who were employed by our Company as of December 31, 2018, were as follows:
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Name
|
|
Target Incentive
Bonus Percentage
|
|
Maximum
Bonus Percentage
|
|
|
|
|
Glenn Lurie
|
|
120% of base salary
|
|
210% of base salary
|
|
|
|
|
|
|
|
|
|
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|
David Clark
|
|
70% of base salary
|
|
122.5% of base salary
|
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|
Jeffrey Miller
|
|
100% of base salary
|
|
175% of base salary
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Mary Clark
|
|
100% of base salary
|
|
175% of base salary
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|
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|
Patrick Doran
|
|
60% of base salary
|
|
105% of base salary
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|
2018 Objectives
For 2018, the cash incentive bonus for each of our NEOs was determined as follows: (i) 90% based on certain corporate objectives and
(ii) 10% based on a discretionary individual performance component. In addition, each NEO had the opportunity to earn another (i) 10% of his or her annual bonus target if our Company
entered into at least two Tier 1 partnership agreements with third parties during 2018 and (ii) 10% of his or her annual bonus
target if our Company entered into at least two new Cloud, Messaging or Digital customer agreements during 2018 with a guaranteed contract value of at least $10 million.
Our
Compensation Committee established (i) non-GAAP revenue, (ii) non-GAAP EBITDA and (iii) free cash flow as the corporate components of our 2018 annual cash incentive bonus
program, with each of the components weighted as set forth below. We utilize these non-GAAP financial measures internally in analyzing our financial results and evaluating our ongoing operational
performance because they exclude certain non-cash adjustments and non-recurring charges required under GAAP. These metrics were also selected because they are several of the key performance metrics
stockholders use in evaluating our Company. In calculating both non-GAAP revenue and non-GAAP EBITDA, we add back the fair value stock-based compensation expense, deferred revenue, acquisition-related
costs, restructuring charges, changes in the contingent consideration obligation, deferred compensation expense related to earn-outs and amortization of intangibles associated with acquisitions.
Each
of the components was assigned a "threshold" level, which is the minimum achievement level that must be satisfied to receive a portion of the applicable bonus amounts, and a "maximum" level,
which, if achieved or exceeded, would result in our NEO's receiving up to 175% of the target amount attributed to that component.
35
Table of Contents
The
components of the 2018 cash incentive compensation plan are set forth below:
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|
Corporate Component
|
|
Weighting
|
|
Threshold
50% payout
|
|
100% payout
|
|
Maximum
175% payout
|
|
|
|
|
Non-GAAP Revenue
|
|
40%
|
|
$325,000,000
|
|
$375,000,000
|
|
$425,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP EBITDA
|
|
30%
|
|
$25,000,000
|
|
$75,000,000
|
|
$115,000,000
|
|
|
|
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|
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|
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|
|
|
|
|
Free Cash Flow
|
|
20%
|
|
$25,000,000
|
|
$75,000,000
|
|
$115,000,000
|
|
|
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|
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|
Individual Component
|
|
10%
|
|
N/A
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
2018 Corporate Component
In 2018, our non-GAAP revenue was $325,839,000, and therefore our NEOs received 50% payout for this metric. During 2018, we had two key events
that were not taken into account when the above non-GAAP EBIDTA metric was initially established by our Compensation Committee we were required to make certain financial
adjustments as a result of our restatement of our prior financial statements and we established a new product line, DXP, as a result of our Honeybee acquisition. Due to these key events, our
Compensation Committee, in consultation with our compensation consultant and after reviewing several alternative approaches, determined that it was appropriate to adjust the calculation of our 2018
non-GAAP EBITDA for purposes of determining bonuses to be awarded pursuant to our 2018 cash incentive compensation plan. Our Compensation Committee resolved to add the following to our actual 2018
non-GAAP EBITDA to calculate 2018 Adjusted non-GAAP EBITDA: (i) the financial adjustments made as a result of our restatement of prior financials and (ii) expenses incurred in
establishing the new DXP product line.
As
a result, following the adjustments approved by our Compensation Committee, Adjusted Non-GAAP EBITDA was $28.5 million (comprised of $14.0 million, plus $10.8 million of
financial adjustments relating to our restatement of our prior financial statements and $3.7 of expenses incurred in establishing the new DXP product line). As a result, each NEO received 53.5% of the
payout with respect to the non-GAAP EBITDA metric.
The
free cash flow component was defined under our 2018 cash incentive compensation plan as Non-GAAP EBITDA less any deferred revenue. Our Compensation Committee determined to utilize the Adjusted
Non-GAAP EBITDA of $28.5 million discussed above for purposes of calculating free cash flow which resulted in $25.5 million of free cash flow following the reduction of Adjusted Non-GAAP
EBITDA by $3 million of deferred revenue. As a result, each NEO received 50% of the payout with respect to the free cash flow metric.
In
addition, as described above, each NEO was eligible to earn another (i) 10% of his or her annual bonus target if our Company entered into at least two Tier 1 partnership agreements
with third parties during 2018 and (ii) 10% of his or her annual bonus target if our Company entered into at least two new Cloud, Messaging or Digital customer agreements during 2018 with a
guaranteed contract value of at least $10 million. In 2018, our Company entered into Tier 1 partnership agreements with more than two companies but did not enter into at least two Cloud,
Messaging or Digital customer agreements with a guaranteed value of at least $10 million. Accordingly, each NEO received 100% of the payout with respect to the partnership strategic metric and
0% with respect to the new customer agreement portion.
36
Table of Contents
2018 Individual Component
In 2018, the individual component of each NEO's annual cash incentive compensation was based upon our Compensation Committee's subjective
assessment of his or her individual performance.
Based
on its assessment and Mr. Lurie's recommendations (other than with respect to his own incentive compensation), our Compensation Committee awarded the following as the individual component
of their annual cash incentive compensation:
-
-
Mr. Lurie received 100% due to his integral role in leading our Company during the year by establishing our short- and long-term
strategy, adding key executives, becoming current on our periodic financial reporting with the SEC, getting reinstated for trading on Nasdaq and improving our overall corporate environment.
-
-
Mr. Clark received 100% due to his efforts in improving our financial performance, becoming current on our periodic financial reports
with the SEC, leading significant cutting of and controlling costs, and developing stronger investor relations.
-
-
Mr. Miller received 100% due to his ability to quickly get acclimated to his responsibilities as Chief Commercial Officer during his
short tenure with our Company, driving existing and new customer relationships and making key changes to the sales organization.
-
-
Ms. Clark received 100% due to her strong performance in re-focusing our product portfolio, developing a new brand and brand definition,
leading the building of our Mission and Vision, driving all public relations efforts and improving our perception in the market.
-
-
Mr. Doran received 100% due to his strong performance in re-organizing our engineering and IT infrastructure teams, focused cost
reductions, improving product delivery, leading the transition out of hosting and adapting to the changing business and product models of our Company.
The
level of plan payout that was applied to each of the performance components of the 2018 cash incentive compensation plan, which payout percentages were then applied to the cash incentive
compensation payments to our NEOs is set forth in the following table:
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|
|
Component
|
|
|
Weighting
|
|
|
Achievement
|
|
|
Bonus
Rate Payout
|
|
|
Bonus Payout
|
|
|
|
|
Non-GAAP Revenue
|
|
|
40
|
%
|
$
|
325,000,000
|
|
|
50
|
%
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP EBITDA
|
|
|
30
|
%
|
$
|
28,500,000
|
|
|
53.5
|
%
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
|
|
20
|
%
|
$
|
25,500,000
|
|
|
50
|
%
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Component
|
|
|
10
|
%
|
|
100
|
%
|
|
100
|
%
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic Agreements
|
|
|
10
|
%
|
|
100
|
%
|
|
100
|
%
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Agreements
|
|
|
10
|
%
|
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based
on the results of the corporate and individual performance components of the annual cash incentive plan, our NEOs were awarded 66% of each of their targets, resulting in the following payout
37
Table of Contents
amounts
under the 2018 cash incentive bonus plan for those NEO's who were employed by us at the end of 2018:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Target Bonus
|
|
Percentage of
Target Awarded
|
|
Actual Bonus
Awarded
|
|
|
|
|
Glenn Lurie
|
|
|
$
|
900,000
|
|
|
|
66
|
%
|
|
|
$
|
594,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Clark(1)
|
|
|
$
|
269,500
|
|
|
|
66
|
%
|
|
|
$
|
98,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Miller(1)
|
|
|
$
|
385,000
|
|
|
|
66
|
%
|
|
|
$
|
48,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary Clark
|
|
|
$
|
350,000
|
|
|
|
66
|
%
|
|
|
$
|
231,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick Doran
|
|
|
$
|
206,200
|
|
|
|
66
|
%
|
|
|
$
|
137,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Bonus
awarded to Messrs. Clark and Miller were prorated based on their respective start dates.
No
amounts were paid to Messrs. Irving or Garcia pursuant to the 2018 cash incentive bonus plan as they were not employed by our Company at the time bonuses were awarded and paid.
2018 Long-Term Incentive Compensation Plan
Our Compensation Committee awarded time-based vesting restricted shares, time-based vesting stock options and performance-based vesting cash
units (or shares) to our NEOs as the long-term equity incentive component of their compensation, targeting an annual mix with the intent to provide NEOs with a balanced retention and performance
opportunity and serve to closely align our NEOs' long-term objectives with those of our stockholders. The number of shares underlying vesting stock options, the target number of performance-based
vesting cash units or shares and the number of time-based vesting restricted shares granted to our NEOs is based on our Compensation Committee's general understanding of competitive pay practices, our
CEO's recommendation (except with respect to his own awards), consultation with our compensation consultant, and other factors that our Compensation Committee deems appropriate.
Time-Based Restricted Stock, Stock Options and Performance-Based Restricted Stock and Cash Units
In April 2018, in consultation with our compensation consultant, our Compensation Committee granted time-based vesting restricted stock (31.5%
of such NEO's equity award), time-based vesting options to purchase shares of our Common Stock (10.5% of such NEO's equity award) and performance-based vesting cash units (58% of such NEO's equity
award) to Messrs. Lurie and Doran. In connection with her joining our Company in January 2018, our Compensation Committee granted Ms. Clark time-based vesting restricted stock,
time-based vesting options to purchase shares of our Common Stock and performance-based vesting restricted shares, with each component being one-third of her equity award. In connection with their
joining our Company in 2018, our Compensation Committee granted each of Mr. Clark and Mr. Miller time-based vesting restricted stock (75% of such NEO's equity award) and time-based
vesting options to purchase shares of our Common Stock (25% of such NEO's equity award). Neither Mr. Clark nor Mr. Miller received any performance-based vesting restricted shares or cash
units.
38
Table of Contents
Except for the time-based vesting restricted shares granted to Ms. Clark, the time-based vesting restricted shares vest one-third on each of the first, second and third
anniversary of their grant date and the vesting stock options vest one-fourth on the first anniversary of their grant date and in equal monthly installments thereafter over the next thirty-six months.
With respect to Ms. Clark, the time-based vesting restricted shares vest 25% on the first anniversary of the grant date and 1/12
th
each quarter thereafter. The
performance-based vesting restricted shares and cash units vest upon the Compensation Committee approving the performance metrics for such grants, which is expected to be in or about
February 15, 2021. Each component is subject to the NEO remaining employed through each such vest date. The time-based vesting helps tie our NEOs' variable realizable compensation to our
performance and further align their interests with those of our stockholders. See "Description of Awards Granted in 2018," below.
The
following table sets forth the number of shares of time-based vesting restricted stock and performance-based vesting restricted cash units or shares awarded and the number of vesting stock options
to purchase shares of our Common Stock granted to our NEOs who were employed by us as of December 31, 2018. The equity awards granted to Mr. Garcia in 2018 expired at the time that he
ceased being our employee. The equity awards granted to Mr. Irving in 2018 will expire in August 2019 pursuant to his consulting agreement. Mr. Irving's performance-based restricted cash
units granted to him expired at the time he ceased being our employee.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Number of
Time-Based
Shares of
Restricted Stock
|
|
Number of Shares
Subject to Options
|
|
Number of
Performance-Based
Restricted Cash
Units or Shares
|
|
|
|
|
Glenn Lurie
|
|
148,306
|
|
112,352
|
|
273,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Clark
|
|
187,207
|
|
130,549
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Miller
|
|
120,968
|
|
84,357
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary Clark
|
|
30,000
|
|
80,000
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick Doran
|
|
29,662
|
|
22,470
|
|
54,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based Vesting Restricted Shares
2016-2018 Performance Shares
Our 2016-2018 long-term equity incentive plan was originally designed to reward financial and strategic performance during a three-year period
from 2016 through 2018, and the restricted shares granted under the 2016-2018 long-term incentive plan (the "
2016-2018 Performance Shares
") were
originally to be earned and vest based on achievement of pre-determined performance criteria during that period.
In
2016, our Compensation Committee granted our NEOs the 2016-2018 Performance Shares. The actual number of 2016-2018 Performance Shares earned were originally based on our Company's financial
performance over the three-year period commencing on January 1, 2016 based on the following criteria: 60% based on non-GAAP revenue, 30% based on non-GAAP EBITDA and 10% based on the non-GAAP
revenue from our Enterprise business. The specific target values for the 2016-2018 Performance Shares were set using aggressive three-year growth targets tied to key corporate financial metrics. In
late 2016 and throughout 2017, we experienced changes in our business strategy, including
39
Table of Contents
various
management changes, the acquisition of Intralinks Holdings Inc. and the divestiture of our activation exception handling business. Our Compensation Committee discussed alternative
methods of granting long-term incentives to our NEOs and measuring performance for open performance awards in light of these significant developments with its independent compensation consultant.
Accordingly, our Compensation Committee, with the input of our compensation consultant, agreed to modify the 2016-2018 long-term equity incentive plan by approving that (i) one-third of the
2016-2018 Performance Shares would be awarded based on our Company's performance in 2016 and (ii) two-thirds of the 2016-2018 Performance Shares would be awarded
based on our Company's future performance in 2017 and 2018. Our NEOs were required to remain employed by our Company through February 2019 in order to vest in the shares. Our Compensation Committee
approved the following revised performance metrics for the 2016-2018 Performance Shares:
For
2016, our Compensation Committee kept the metrics the same percentage as originally approved:
-
-
60% are earned based on the non-GAAP revenue of our Company in 2016;
-
-
30% are earned based on the non-GAAP EBITDA as a percentage of non-GAAP revenue of our Company in 2016; and
-
-
10% are earned based on the Enterprise Business Unit non-GAAP revenue in 2016.
For
2017 and 2018, our Compensation Committee revised the percentages as follows:
-
-
40% are earned based on the non-GAAP revenue of our Company in 2017 and 2018;
-
-
40% are earned based on the non-GAAP EBITDA as a percentage of non-GAAP revenue of our Company in 2017 and 2018; and
-
-
20% are earned based on the recurring revenue of the Company in 2017, and provided that the Compensation Committee had discretion to determine
an appropriate 2018 metric.
Mr. Doran,
the only NEO who was employed by us in 2016, was awarded 2016-2018 Performance Shares that provided the opportunity to earn the following restricted shares based on the performance
of our business during the 2016-2018 performance period:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
|
|
Patrick Doran
|
|
|
3,164
|
|
|
6,328
|
|
|
12,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
method used to calculate the 2016-2018 Performance Shares earned was based on actual performance compared to our Company's revised targets for the 2016-2018 Performance Shares, as shown below,
using straight-line interpolation between points. The determination of what number of shares (if any) were earned for the 2016, 2017 and 2018 performance periods is set forth below. The shares vested
upon issuance in March 2019.
40
Table of Contents
2016 Performance Period
One-third of the 2016-2018 Performance Shares
In
February 2016, our Compensation Committee approved the following threshold, target and maximum performance goals for the 2016 portion of the 2016-2018 Performance Shares:
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Component
|
|
Threshold
50% payout
|
|
Target
100% payout
|
|
Maximum
200% payout
|
|
Weighting
|
|
|
|
|
Non-GAAP Revenue
|
|
$667,000,000
|
|
$696,000,000
|
|
$725,000,000
|
|
60%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP EBITDA as % of Revenue
|
|
25%
|
|
35%
|
|
45%
|
|
30%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise Business Revenue (% of total revenue)
|
|
N/A
|
|
15%
|
|
N/A
|
|
10%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
2016, our attainment under the stated metrics was as follows:
-
-
our adjusted Non-GAAP revenue was $698.4 million, which was above the target attainment, resulting in a 108% payout with respect to this
component;
-
-
our adjusted Non-GAAP EBITDA was $237.2 million, or 34% of revenue, which was slightly below the target attainment, resulting in a 95%
payout with respect to this component; and
-
-
our non-GAAP Enterprise Business revenue was 3% of total revenue, which was significantly below the target payout, resulting in a 0% payout
with respect to this component.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Component
|
|
Achievement
|
|
Plan Payout
|
|
Weighting
|
|
|
|
|
Adjusted Non-GAAP Revenue
|
|
$698,400,000
|
|
165%
|
|
60%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Non-GAAP EBITDA
|
|
34%
|
|
95%
|
|
30%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise Business Revenue (% of total revenue)
|
|
3%
|
|
-0%-
|
|
10%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
a result, Mr. Doran earned 93.3% of the target number of the 2016-2018 Performance Shares allocable to 2016 based on our Company's 2016 financial performance. These Performance Shares
vested in March 2019. The actual number of 2016-2018 Performance Shares earned based on our 2016 performance is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
2016-2018
Target Shares
|
|
|
2016 Target
Shares
|
|
|
Attainment
%
|
|
|
Shares Earned
|
|
|
|
|
Patrick Doran
|
|
|
6,328
|
|
|
2,109
|
|
|
93.3
|
%
|
|
1,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Performance Period
One-third of the 2016-2018 Performance Shares
In
July of 2017, our Compensation Committee approved the following threshold, target and maximum performance goals for 2017 for the 2016-2018 Performance Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Component
|
|
Threshold
50% payout
|
|
Target
100% payout
|
|
Maximum
200% payout
|
|
Weighting
|
|
|
|
|
Non-GAAP Revenue
|
|
$781,000,000
|
|
$827,000,000
|
|
$872,000,000
|
|
40%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP EBITDA
|
|
$247,000,000
|
|
$279,000,000
|
|
$311,000,000
|
|
40%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Revenue
|
|
$559,000,000
|
|
$592,000,000
|
|
$625,000,000
|
|
20%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
Table of Contents
In the event our Company did not achieve the Non-GAAP revenue threshold, our NEOs would not be entitled to any payout under the recurring revenue component regardless of the
actual recurring revenue achieved. In 2017, our attainment under the stated metrics was as follows:
-
-
our Non-GAAP revenue was $407.3 million, which was below the threshold attainment, resulting in a 0% payout with respect to this
component;
-
-
our 2017 Non-GAAP EBITDA was $61.5 million, which was below the threshold attainment, resulting in a 0% payout with respect to this
component; and
-
-
because the Non-GAAP revenue was less than the $781.0 million threshold, our NEOs were not entitled to any payout under the recurring
revenue component regardless of what the 2017 Non-GAAP recurring revenue was, resulting in a 0% payout with respect to this component.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Component
|
|
Achievement
|
|
Plan Payout
|
|
Weighting
|
|
|
|
|
Non-GAAP Revenue
|
|
$407,300,000
|
|
0%
|
|
60%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP EBITDA
|
|
$61,500,000
|
|
0%
|
|
30%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Revenue
|
|
$307,300,000
|
|
0%
|
|
10%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
a result, Mr. Doran earned 0% of the target number of 2016-2018 Performance Shares allocable to 2017 based on our Company's 2017 financial performance. The actual number of 2016-2018
Performance Shares earned based on our 2017 performance is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2016-2018
Target Shares
|
|
2017 Target
Shares
|
|
Attainment
%
|
|
Performance
Shares
|
|
|
|
|
Patrick Doran
|
|
6,328
|
|
2,109
|
|
0%
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Performance Period
One-third of the 2016-2018 Performance Shares
In
February 2018, our Compensation Committee approved the following threshold, target and maximum performance goals for the 2018 portion of the 2016-2018 Performance Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Component
|
|
Weighting
|
|
Threshold
50% payout
|
|
Target
100% payout
|
|
Maximum
200% payout
|
|
|
|
|
Non-GAAP Revenue
|
|
40%
|
|
$325,000,000
|
|
$375,000,000
|
|
$425,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP EBITDA
|
|
40%
|
|
$25,000,000
|
|
$75,000,000
|
|
$115,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
|
20%
|
|
$25,000,000
|
|
$75,000,000
|
|
$115,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
2018, using the same adjustments and calculations as described above under our 2018 cash incentive compensation plan, our attainment under the stated metrics was as follows:
-
-
our Non-GAAP revenue was $325.8 million, which was at the threshold attainment, resulting in a 50% payout with respect to this
component;
-
-
our 2018 adjusted Non-GAAP EBITDA was $28.5 million, which was slightly above the target attainment, resulting in a 53.5% payout with
respect to this component; and
42
Table of Contents
-
-
our 2018 adjusted Free Cash Flow was $25.5 million, which was at the threshold attainment, resulting in a 50% payout with respect to
this component.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Component
|
|
Achievement
|
|
Plan Payout
|
|
Weighting
|
|
Payout
|
|
|
|
|
Non-GAAP Revenue
|
|
$325,800,000
|
|
50.0%
|
|
40%
|
|
20.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Non-GAAP EBITDA
|
|
$28,500,000
|
|
53.5%
|
|
40%
|
|
21.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow
|
|
$25,500,000
|
|
50.0%
|
|
20%
|
|
10.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
a result, Mr. Doran earned 51.4% of the target number of the 2016-2018 Performance Shares allocable to 2018 based on the Company's 2018 financial performance. The actual number of 2016-2018
Performance Shares earned based on our 2018 performance is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
2016 - 2018
Target Shares
|
|
|
2018
Target Shares
|
|
|
Attainment %
|
|
|
Shares Earned
|
|
|
|
|
Patrick Doran
|
|
|
6,238
|
|
|
2,110
|
|
|
51.4
|
%
|
|
1,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
actual number of 2016-2018 Performance Shares earned based on our 2016-2018 performance is set forth below, all of which vested in March 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
2016 -
2018
Target
Shares
|
|
|
2016
Target
Shares
|
|
|
2016
Attain %
|
|
|
2016
Shares
Earned
|
|
|
2017
Target
Shares
|
|
|
2017
Attain %
|
|
|
2017
Shares
Earned
|
|
|
2018
Target
Shares
|
|
|
2018
Attain %
|
|
|
2018
Shares
Earned
|
|
|
Total
Shares
Earned
|
|
|
|
|
Patrick Doran
|
|
|
6,328
|
|
|
2,109
|
|
|
93.3
|
%
|
|
1,967
|
|
|
2,110
|
|
|
0
|
|
|
0
|
|
|
2,100
|
|
|
51.4
|
|
|
1,079
|
|
|
3,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
neither Ms. Clark nor Messrs. Miller or Clark were with the Company in 2016, none of them were granted any 2016-2018 Performance Shares. The 2016-2018 Performance Shares granted to
Messrs. Irving and Garcia terminated when they ceased to be an employee of our Company.
2018-2020 Performance Cash Units and Shares
In April 2018, our Compensation Committee granted 2018-2020 performance-based cash units to our NEOs employed as of the grant date. As
discussed above, in 2018 our Compensation Committee transitioned to performance-based cash units rather than performance-based shares. Ms. Clark received performance-based shares as part of her
new hire grant. The following table sets forth the
43
Table of Contents
2018-2020
performance-based cash units or shares (collectively, the "
2018-2020 Performance Units
") awarded to our NEO's that were employed by us as of
December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
2018 - 2020
Target
Performance
Units
|
|
|
2018 Target
Performance
Units
|
|
|
2019 Target
Performance
Units
|
|
|
2020 Target
Performance
Units
|
|
|
|
|
Glenn Lurie
|
|
|
273,070
|
|
|
91,023
|
|
|
91,023
|
|
|
91,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary Clark
|
|
|
30,000
|
|
|
10,000
|
|
|
10,000
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick Doran
|
|
|
54,614
|
|
|
18,204
|
|
|
18,205
|
|
|
18,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
Mr. Clark joined our Company in July 2018 and Mr. Miller joined our Company in October 2018, neither of them were granted any 2018-2020 Performance Units. The 2018-2020 Performance
Cash Units granted to Messrs. Irving and Garcia terminated when each of them ceased to be an employee of our Company.
The
2018-2020 Performance Units provide the opportunity to earn the following performance-based cash units based on the performance of our business during 2018, 2019 and 2020. Our NEOs are required to
remain employed by the Company through March 2021 in order to vest in the cash units or shares. In the case of the performance-based cash units, our Compensation Committee will determine whether to
settle the vested units in cash or shares of our Common Stock at the time they vest.
The
following were the performance targets for the plan established by our Compensation Committee: 40% based on non-GAAP revenue, 40% based on non-GAAP EBITDA and 20% based on a strategic objective
established by our Compensation Committee each year during the three-year period. For 2018, our Compensation Committee designated free cash flow as the strategic metric.
Each
of the components was separately assigned a "threshold" level, which established the minimum achievement necessary to be satisfied to receive any portion of the applicable bonus amounts, and a
"maximum" level, which, if achieved or exceeded, would result in 200% of the target cash units being earned with respect to such component as described below.
In
February 2018, our Compensation Committee approved the following threshold, target and maximum performance goals for the 2018 portion of the 2018-2020 Performance Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Component
|
|
Weighting
|
|
Threshold
50% payout
|
|
Target
100% payout
|
|
Maximum
200% payout
|
|
|
|
|
Non-GAAP Revenue
|
|
40%
|
|
$325,000,000
|
|
$375,000,000
|
|
$425,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP EBITDA
|
|
40%
|
|
$25,000,000
|
|
$75,000,000
|
|
$115,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
|
20%
|
|
$25,000,000
|
|
$75,000,000
|
|
$115,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
Table of Contents
In 2018, using the same adjustments and calculations as described above under our 2018 Cash Incentive Compensation Plan, our attainment under the stated metrics was as
follows:
-
-
our Non-GAAP revenue was $325.8 million, which was at the threshold attainment, resulting in a 50% payout with respect to this
component;
-
-
our 2016 Adjusted Non-GAAP EBITDA was $28.5 million, which was slightly above the target attainment, resulting in a 53.5% payout with
respect to this component; and
-
-
our 2016 Adjusted Free Cash Flow was $25.5 million, which was at the threshold attainment, resulting in a 50% payout with respect to
this component.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Component
|
|
Achievement
|
|
Plan Payout
|
|
Weighting
|
|
Payout
|
|
|
|
|
Non-GAAP Revenue
|
|
$325,800,000
|
|
50.0%
|
|
40%
|
|
20.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Non-GAAP EBITDA
|
|
$28,500,000
|
|
53.5%
|
|
40%
|
|
21.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow
|
|
$25,500,000
|
|
50.0%
|
|
20%
|
|
10.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
a result, our NEOs earned 51.4% of the target number of the 2018-2020 Performance Units allocable to 2018 based on our Company's 2018 financial performance. The actual number of 2018-2020
Performance Units earned based on our 2018 performance is set forth below, which performance units shall vest in or about March 2021 provided the NEO remains employed by our Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2018 - 2020 Target
Performance Units
|
|
2018 Target
Performance Units
|
|
Attainment %
|
|
Units Earned
|
|
|
|
|
Glenn Lurie
|
|
273,070
|
|
91,023
|
|
51.4%
|
|
46,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary Clark
|
|
30,000
|
|
10,000
|
|
51.4%
|
|
5,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick Doran
|
|
54,614
|
|
18,204
|
|
51.4%
|
|
9,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018-2019 CEO New Hire LTI Plan
Upon joining our Company in November 2017, our Compensation Committee awarded Mr. Lurie a special grant of 180,528 performance-based
vesting restricted shares based on our Company's performance in 2018 and 2019 (the
"2018-2019 New Hire LTI Plan"
). One-half of the performance-based
vesting restricted shares are based on our Company's performance in
2018 and vested in March 2019 and the remaining one-half will vest in or about March 2020, subject to our Compensation Committee reviewing and approving the financial performance of our Company in
2019, provided
45
Table of Contents
Mr. Lurie
remains employed by our Company through such date. Accordingly, Mr. Lurie was awarded the following performance-based restricted shares under the 2018-2019 CEO New Hire LTI
Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2018 - 2019 Target
Performance Shares
|
|
2018 Target
Performance Shares
|
|
2019 Target
Performance Shares
|
|
|
|
|
Glenn Lurie
|
|
180,528
|
|
90,264
|
|
90,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under
the terms of Mr. Lurie's performance-based performance shares, the metrics for obtaining such shares are the same metrics as the long-term incentive plan for the 2018 portion of the
2018-2020 Performance Units. As discussed above, our Compensation Committee established the following as the performance targets for the plan: 40% based on non-GAAP revenue, 40% based on non-GAAP
EBITDA and 20% based on a strategic objective, which for 2018 was free cash flow. In February 2018, our Compensation Committee approved the following threshold, target and maximum performance goals
for the 2018 portion of the 2018-2019 CEO New Hire LTI Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Component
|
|
Weighting
|
|
Threshold
50% payout
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|
Target
100% payout
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|
Maximum
200% payout
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|
|
|
|
Non-GAAP Revenue
|
|
40%
|
|
$325,000,000
|
|
$375,000,000
|
|
$425,000,000
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP EBITDA
|
|
40%
|
|
$25,000,000
|
|
$75,000,000
|
|
$115,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
|
20%
|
|
$25,000,000
|
|
$75,000,000
|
|
$115,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
2018, using the same adjustments and calculations as described above under our 2018 Cash Incentive Compensation Plan, our attainment under the stated metrics was as follows:
-
-
our adjusted Non-GAAP revenue was $325 million, which was at the threshold attainment, resulting in a 50% payout with respect to this
component;
-
-
our adjusted Non-GAAP EBITDA was $28.5 million, which was slightly above the target attainment, resulting in a 53.5% payout with respect
to this component; and
-
-
our adjusted Free Cash Flow was $25.5 million, which was at the threshold attainment, resulting in a 50% payout with respect to this
component.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Component
|
|
Achievement
|
|
Plan Payout
|
|
Weighting
|
|
Payout
|
|
|
|
|
Non-GAAP Revenue
|
|
$325,800,000
|
|
50.0%
|
|
40%
|
|
20.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Non-GAAP EBITDA
|
|
$28,500,000
|
|
53.5%
|
|
40%
|
|
21.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow
|
|
$25,500,000
|
|
50.0%
|
|
20%
|
|
10.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
a result, Mr. Lurie earned 51.4% of the target number of the 2018-2019 CEO New Hire LTI Plan allocable to 2018 based on our Company's 2018 financial performance. The actual number of
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Table of Contents
performance-based
restricted shares earned by Mr. Lurie based on our 2018 performance under the 2018-2019 CEO New Hire LTI Plan is set forth below, which shares vested in March 2019:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2018 - 2019 Target
Performance Shares
|
|
2018 Target
Performance Shares
|
|
Attainment %
|
|
Performance
Shares Earned
|
|
|
|
|
Glenn Lurie
|
|
180,528
|
|
90,264
|
|
51.4%
|
|
46,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Benefits and Perquisites
Our NEOs are eligible to participate in all of our employee benefit plans (other than our employee stock purchase plan), such as medical,
dental, vision, group life and disability insurance and our 401(k) plan, in each case, on the same basis as our other employees. In 2018, we leased an automobile (and paid applicable insurance and
gas) for Messrs. Irving and Clark (during the time each of them was employed by our Company) and provided a car allowance to Mr. Garcia (during the time he was employed by our Company),
each to be used primarily for business purposes. Mr. Lurie is also entitled to the following fringe benefits during 2018: (1) a housing allowance of $72,000 per year for the first year
and half of employment with our Company; (2) the reimbursement of approximately $19,000 for relocation expenses; (3) an automobile lease and insurance allowance of $17,000 per year; and
(4) the reimbursement of the cost of airfare for Mr. Lurie and his family to and from Arizona and New Jersey up to six times per year, ending on or about December 15, 2018. There
were no other special benefits or perquisites provided to any NEO in 2018.
Financial Restatement, Recoupment and Related Policies
We have a comprehensive Code of Business Conduct and ensure that our employees comply with this policy. In accordance with this policy, we
investigate all reported instances of questionable or unethical behavior, and where improper behavior is found to have occurred, we take appropriate remedial action up to and including termination. If
the results of an investigation establish that one of our employees, officers or directors has committed fraud or engaged in some other improper act that has the result of causing our financial
statements for any period to be restated or that otherwise adversely affects those financial statements, our Board has discretion to take immediate and appropriate disciplinary action against the
individual, including but not limited to termination. In addition, our Board has discretion to pursue whatever legal remedies are available to prosecute the individual to the fullest extent of the law
and to clawback or recoup any amounts he or she inappropriately received as a result of the improper action or inaction, including but not limited to any annual or long-term incentives that he or she
received but would not have received had such act not be taken.
Executive Officer Stock Ownership Guidelines
We have instituted stock ownership guidelines for our executive officers with the purpose of ensuring they maintain a meaningful equity stake
in our Company to further align their interests with those of our stockholders. Each executive officer who is also subject to Section 16 of the Exchange Act or who directly reports to our CEO
(which includes all of our NEOs) is required to own, as of the later of January 1, 2020 or five years from the date on which the individual first began reporting to our CEO or first became a
Section 16 officer, a number of vested shares of our Common Stock having a value at least equal to (a) in the case of our CEO, five times his then current base salary; (b) for any
direct report of our CEO, three times that individual's then current base salary, and (c) for other executive officers subject to this policy, one and one-half times the individual's then
current base salary.
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Table of Contents
If
an executive officer is not compliant at the end of his or her phase-in period, our Compensation Committee may reduce future equity grants to that individual until he or she becomes compliant.
Based on share holdings on December 31, 2018, each of our NEOs exceeded his or her applicable minimum holding requirements on that date, other than Ms. Clark and Messrs. Clark and
Miller as each of them joined us in 2018 and have not begun vesting in their restricted stock and options and, therefore, have not had an opportunity to acquire our Common Stock as of
December 31, 2018.
Tax Matters
Section 162(m) of the Code generally denies a deduction to any publicly-held corporation for compensation paid in a taxable year to its
named executive officers exceeding $1 million. As a result of changes made by the 2017 Tax Cuts and Jobs Act, Section 162(m) will limit the Company from deducting compensation, including
performance-based compensation, in excess of $1 million paid to anyone who serves as the chief executive officer, chief financial officer or who is among the three most highly compensated
executive officers for any year beginning after December 31, 2016. The only exception to this rule is for compensation that is paid pursuant to a binding contract in effect on
November 2, 2017, that would have otherwise been deductible under the prior Section 162(m) rules. Prior to the enactment of the 2017 Tax Cuts and Jobs Act, Section 162(m) limited
us from deducting compensation paid in years prior to 2018, excluding performance-based compensation, in excess of $1 million paid to anyone who served as the chief executive officer or who was
one of the three most highly compensated executive officers for the applicable tax year, excluding the chief financial officer. Our Compensation Committee considers tax and accounting implications in
determining all elements of our compensation plans, programs and arrangements. Prior to the enactment of the 2017 Tax Cuts and Jobs Act, the Compensation Committee retained the discretion to make
awards of either bonuses or equity awards that did not satisfy Section 162(m) and, therefore, may not have been deductible. Base salaries, time-vested restricted stock units, time-vested
retention and transition payments, and discretionary or subjectively determined bonus awards generally did not qualify as performance-based compensation under the pre-2017 Tax Cuts and Jobs Act rules.
Management Changes-Named Executive Officer Separation Agreements
As disclosed on the Current Report on Form 8-K filed with the SEC on August 13, 2018, effective as of August 15, 2018,
Mr. Irving retired as our Chief Financial Officer and our Board appointed David Clark to serve as our Company's Chief Financial Officer. In connection with Mr. Irving's termination of
his employment with our Company, Mr. Irving executed a broad
release in favor of our Company, which provides for the following payments to Mr. Irving: (i) lump sum severance payment in the amount of $1,147,500 (less all applicable withholdings and
deductions) paid in accordance with his employment agreement; (ii) the gross amount of $19,850, which is intended to cover the employer portion of any COBRA payments for a period of twenty-four
months following his termination date; (iii) payment of $425,000 (less all applicable withholdings and deductions) in accordance with the terms of the Retention Plan; and (iv) vested in
32,700 retention restricted shares in accordance with the terms of the Retention Plan. The Company and Mr. Irving also entered into a standard consulting services agreement pursuant to which
Mr. Irving will provide transition assistance to the Company's executive team on an as needed basis through August 15, 2019 in return for the continued vesting of his outstanding
restricted stock awards (other than performance-based restricted cash units) and options to purchase shares of our Common Stock.
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Table of Contents
Our
Chief Commercial Officer, Robert Garcia, terminated his employment with the Company, effective as of October 31, 2018. In exchange for a broad release in favor of the Company, the Release
Agreement provides for the following payments to Mr. Garcia: (i) lump sum severance payment in the amount of $1,014,226 (less all applicable withholdings and deductions) paid in
accordance with his employment agreement; (ii) the gross amount of $27,875, which is intended to cover the employer portion of any COBRA payments for a period of eighteen months following the
Termination Date; (iii) payment of $475,000 (less all applicable withholdings and deductions) in accordance with the terms of the Retention Plan; and (iv) vested in 39,500 retention
restricted shares in accordance with the terms of the Retention Plan. All of Mr. Garcia's unvested equity terminated as of October 31, 2018.