SNCR Synchronoss Technologies Inc

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.   )

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Soliciting Material under §240.14a-12

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SYNCHRONOSS TECHNOLOGIES, INC.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Dear Stockholder:

I am pleased to invite you to our 2020 Annual Meeting of Stockholders, which will be held on June 3, 2020, at 10:00 a.m. Eastern Time. The 2020 Annual Meeting will be held virtually via a live interactive audio webcast on the Internet. You will be able to vote and submit your questions at www.virtualshareholdermeeting.com/SNCR2020 during the meeting. We elected to use a virtual meeting given the current public health implications of COVID-19 (novel coronavirus) and our desire to promote the health and welfare of our stockholders.

At the meeting, we will be electing three members of our Board of Directors, ratifying the appointment of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending December 31, 2020, holding an advisory vote on executive compensation and acting upon such other matters as may properly come before the meeting or any adjournments or postponements thereof.

Details regarding the 2020 Annual Meeting and the business to be conducted are described in the accompanying proxy materials. Also included is a copy of our Annual Report on Form 10-K for the year ended December 31, 2019. We encourage you to read this information carefully.

It is important that your shares be represented and voted at the 2020 Annual Meeting. As discussed in the Proxy Statement, voting by proxy does not deprive you of your right to attend the Annual Meeting.

WHETHER OR NOT YOU PLAN TO ATTEND THE 2020 ANNUAL MEETING, WE HOPE YOU WILL VOTE AS SOON AS POSSIBLE. YOU MAY VOTE OVER THE INTERNET, BY TELEPHONE OR BY MAILING A PROXY CARD. VOTING OVER THE INTERNET, BY TELEPHONE OR BY WRITTEN PROXY WILL ENSURE YOUR REPRESENTATION AT THE 2020 ANNUAL MEETING REGARDLESS OF WHETHER OR NOT YOU ATTEND THE ANNUAL MEETING. PLEASE REVIEW THE INSTRUCTIONS ON THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS YOU RECEIVED IN THE MAIL REGARDING EACH OF THESE VOTING OPTIONS.

If you have any questions concerning the annual meeting or the proposals, please contact our Investor Relations department at (800) 575-7606. For questions regarding your stock ownership, you may contact our transfer agent, American Stock Transfer & Trust Co., by e-mail through their website at www.amstock.com or by phone at (800) 937-5449 (within the U.S. and Canada) or (718) 921-8124 (outside the U.S. and Canada).

On behalf of the Board of Directors, I would like to express our appreciation for your continued interest in the affairs of Synchronoss Technologies.

Sincerely,

Glenn Lurie
President and Chief Executive Officer
April 16, 2020

 

 

Synchronoss Technologies, Inc.
200 Crossing Boulevard
Bridgewater, New Jersey 08807

 

 

 

Proposals to be Voted On:

The following proposals will be voted on at the Annual Meeting of Stockholders.

If you are a stockholder of record, you may cast your vote in any of the following ways:

If you are a beneficial owner holding shares through a bank, broker or other nominee, please refer to your Notice or other information forwarded by your bank or broker to see which voting options are available to you.

This proxy statement (“Proxy Statement”) is furnished in connection with solicitation of proxies by our Board of Directors (“Board”) for use at the 2020 Annual Meeting of Stockholders (the “Annual Meeting”) to be held via a live interactive audio webcast on the Internet at 10:00 a.m. Eastern Time on Wednesday, June 3, 2020, and any postponements or adjournments thereof. Beginning on or about April 16, 2020, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our proxy materials. As used in this proxy statement, the terms “Synchronoss,” the “Company,” “we,” “us,” and “our” mean Synchronoss Technologies, Inc. and its subsidiaries unless the context indicates otherwise.

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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON JUNE 3, 2020.

The proxy statement and annual report to stockholders is available at
http://materials.proxyvote.com/87157B.

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Corporate Governance Guidelines

Synchronoss is committed to excellent corporate governance, which we believe helps us sustain our success and build long-term value for our stockholders. Our Board has adopted Corporate Governance Guidelines (the “Guidelines”) that set forth the framework within which our Board can effectively function and govern our affairs. The Guidelines address, among other things, the composition and responsibilities of our Board, director independence, management succession planning and evaluation, access to information, executive sessions, communication with stockholders, target ownership by, and remuneration of, our directors, Board committees and selection of new directors. We have also adopted a Code of Business Conduct (the “Code”) that applies to all of our employees, officers (including our principal executive officer, principal financial officer, principal accounting officer, or those serving similar functions) and directors. The Guidelines and Code are available on the Investor Relations section of our website at www.synchronoss.com.

Our Board regularly reviews legal and regulatory requirements, evolving best practices and other developments, and may modify, waive, suspend or repeal the Guidelines or Code from time to time as it deems necessary or appropriate in the exercise of our Board’s judgment or in the best interests of our stockholders. If our Board makes any substantive amendments to the Guidelines or the Code, we will promptly disclose the nature of the amendment or waiver on our website to the extent required by applicable law or regulations.

Board Leadership Structure

Consistent with the Guidelines, our Board believes it is important to retain its flexibility to allocate the responsibilities of our Chief Executive Officer (“CEO”) and Chairman of the Board in any way that is in the best interests of our Company based on the circumstances existing at a particular point in time. Our Board believes that it should periodically assess who should serve these roles and whether the offices should be served independently or jointly, and that our Board should not be restricted by any strict policy directive when making these decisions. In addition, our Board continually evaluates its leadership structure to ensure that the Board is structured to address the best interests of our Company and our stockholders as they evolve over time.

Our Board has determined that our Company and our stockholders are best served by having Mr. Waldis, one of our founders, serve as our Executive Chairman of the Board, and Mr. Lurie serve as our CEO and a member of our Board. As CEO, Mr. Lurie is the individual with primary responsibility for managing our day-to-day operations, setting our overall business strategy, and ensuring the successful growth of our business. Mr. Waldis’ in-depth experience as our founder and long-time CEO and Chairman of the Board position him well to serve now as our Executive Chairman of the Board, where he will remain on our Board, assisting on certain sales and business development activities, and providing other consultative support to the CEO, upon his request.

Independence of our Board of Directors

Each year, as part of our assessment of director independence, our Nominating/Corporate Governance Committee and our full Board conduct a review of the financial and other relationships between each director,

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or any of their immediate family members, and our Company, our senior management, companies with whom we have business dealings and our independent registered public accounting firm. Our Board also consults with our legal counsel to ensure that its determinations are consistent with all relevant laws and regulations regarding the definition of independence, including those set forth in pertinent listing standards of The Nasdaq Global Market (“Nasdaq”), as amended from time to time. Consistent with those considerations, after review of all relevant transactions or relationships, our Board has affirmatively determined that all of our directors are independent directors within the meaning of the applicable Nasdaq listing standards, except for Stephen G. Waldis, who serves as our Executive Chairman, and Glenn Lurie, who serves as our CEO. Our independent directors meet in regularly scheduled executive sessions where only independent directors are present. Mr. Cadogan presides over those sessions. There are no family relationships among any of our directors or executive officers.

Board of Directors Oversight of Risk Management

Risk is inherent with every business and how well a business manages risk can ultimately determine its success. We face a number of risks, including risks relating to our operations, strategic direction and intellectual property as more fully discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and our other SEC filings. Assessing and managing risk is the responsibility of our management. Our Board oversees management in the execution of its responsibilities and for assessment of our approach to risk management. An overall review and assessment of risk is inherent in our Board’s consideration of our business plans, strategies and other significant developments. Additionally, our Board regularly reviews various risks arising out of transactions and other matters that are presented to our Board and when making decisions impacting us. At least annually, our Board also reviews and analyzes the strategic and operational risks and opportunities that face our Company as a whole, as well as those related to specific areas of our business.

Our Board delegates the oversight of certain categories of risk affecting our Company to designated Board committees, who report their findings to our full Board. Our Audit Committee is responsible for overseeing our Board’s execution of its risk management oversight responsibility, including discussing guidelines and policies governing the process by which our management and other persons responsible for risk management assess and manage our exposure to major financial risk, and the steps management has taken to monitor and control such exposure, based on consultation with our management and independent auditors. Our Audit Committee also annually reviews the audit plan of management, our information technology and cybersecurity risks and mitigation strategies, the domestic and international tax function and treasury operations and conformity with ethics and compliance standards. In addition, our Board has delegated to other Board committees the oversight of risks within their areas of responsibility and expertise. For example, our Compensation Committee oversees the risks associated with our compensation practices, including an annual assessment of our compensation policies and practices for our employees.

Board Self-Evaluation

Our Nominating/Corporate Governance Committee oversees a biennial self-evaluation process to analyze and review our Board’s performance and the performance of each of the members of our Board. Our Nominating/Corporate Governance Committee reviews these results and discusses them with the full Board with the intention of utilizing them to enhance our Board’s effectiveness and, if necessary, develop action plans.

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Stockholder Communications with our Board of Directors

Stockholders may communicate with our management and independent directors by sending a letter to Synchronoss Technologies, Inc., 200 Crossing Boulevard, 8th Floor, Bridgewater, New Jersey 08807, Attention: Secretary. Each communication should set forth the (i) name and address of the stockholder as they appear on our books and, if the shares of our Common Stock are held by a broker, bank or other agent, the name and address of the beneficial owner of such shares, and (ii) number of shares of our Common Stock that are owned of record by such record holder and/or beneficially by such beneficial owner. Our Secretary will review all communications from stockholders and has the authority to disregard any inappropriate communications or take other appropriate actions with respect to any inappropriate communications. If deemed an appropriate communication, our Secretary will forward it, depending on the subject matter, to the chairperson of a committee of our Board or a particular director, as appropriate.

Board of Directors and Committee Duties

Our Board oversees, counsels and directs management in the long-term interests of our Company and our stockholders. Our Board, individually and through its committees, is responsible for:

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overseeing the conduct, assessment and other operational risks to evaluate whether our business is being properly managed;

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reviewing and approving our strategic, financial and operating plans and other significant actions;

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evaluating the performance of and reviewing and determining the compensation of our CEO and other executive officers;

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planning for succession for our CEO and monitoring management’s succession planning for other executive officers; and

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overseeing the processes for maintaining the integrity of our financial statements, public disclosures, and compliance with laws and ethics.

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Board Structure and Committees

During 2019, our Board met nine times and acted twice by unanimous written consent. Each director who was a director in 2019 (and Ms. Harris since she joined our Board in August 2019) attended at least 75% of the meetings of our Board and of each committee of which he or she served as a member. Messrs. Lurie, Waldis and Hopkins and Ms. Harris attended our 2019 Annual Meeting of Stockholders. Our Board has established an Audit Committee, a Compensation Committee, a Business Development Committee and a Nominating/​Corporate Governance Committee. Our Board has delegated various responsibilities and authority to its committees as generally described below. The following table provides membership, chair and number of meetings information for each of our Board committees during 2019:

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M

Member       C   Chair

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*

Each of Donnie Moore and James McCormick were directors of the Company until June 5, 2019.

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**

Mr. Berger also attends meetings of our Audit Committee as a non-voting observer. Mr. Waldis also attends meetings of our Compensation Committee as a non-voting observer.

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***

Ms. Harris joined our Board in August 2019 and became Chairperson of our Audit Committee on that date. Mr. Hopkins was Chairperson of our Audit Committee from January 2019 until Ms. Harris joined our Board in August 2019.

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Audit Committee

Our Audit Committee oversees the integrity of our financial statements, compliance with applicable legal and regulatory requirements, effectiveness of our internal controls and audit function, and the qualifications, independence, and performance of our independent registered public accounting firm. Our Audit Committee also discussed with our independent registered public accounting firm the overall scope and plans for their audit and met with them on a regular basis without members of management. Our Audit Committee consults with our management and our independent registered public accounting firm prior to the presentation of financial statements to stockholders and, as appropriate, initiates inquiries into aspects of our financial affairs. In addition, our Audit Committee:

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reviews our annual audited and quarterly financial statements and SEC reporting;

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reviews management’s assessment of risk pertaining to our reporting and disclosure controls and monitors our internal controls and audit functions, the results and scope of the annual audit and other services provided by our independent registered public accounting firm and our compliance with legal matters that have a significant impact on our financial statements;

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establishes procedures for the receipt and treatment of complaints regarding internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;

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appoints, compensates, reviews procedures to ensure the independence of and oversees the work of, our independent registered public accounting firm, including approving services and fee arrangements;

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reviews with senior members of our management our policies and practices regarding risk assessment and risk management;

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approves all related party transactions;

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reviews periodically the adequacy and effectiveness of our internal and disclosure controls, including our policies regarding compliance with legal, regulatory, code of conduct, ethical and internal auditing standards;

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reviews earnings press releases prior to issuance; and

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reviews findings and recommendations of our independent registered public accounting firm and management’s response to their recommendations.

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Our Audit Committee is comprised of the following three directors: Thomas J. Hopkins, Kristin S. Rinne and Laurie Harris (Chair). Mr. Berger also attends Audit Committee meetings in a non-voting observer capacity. Our Audit Committee met eight times during 2019. Our Board annually reviews the definition of independence for Audit Committee members set forth in the Nasdaq listing standards and has determined that all members of our Audit Committee are independent (as independence is currently defined in Rule 5605(a)(2) and 5605(c)(2) of the Nasdaq listing standards). In addition to qualifying as independent under the Nasdaq rules, each member of our Audit Committee can read and has a working understanding and comprehension of fundamental financial statements. Our Board has determined that each of Mr. Hopkins and Ms. Harris is an audit committee financial expert, as defined by Item 407(d) of Regulation S-K based on a qualitative assessment of each of their level of knowledge and experience based on a number of factors, including their respective formal education and experience. The designation does not impose on either Mr. Hopkins or Ms. Harris any duties, obligations or liability that are greater than are generally imposed on them as a member of our Audit Committee and our Board, and their respective designations as Audit Committee financial experts pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of our Audit Committee or Board. Our Audit Committee charter can be found on the Investor Relations section of our website at www.synchronoss.com.

Compensation Committee

Our Compensation Committee is comprised of the following four directors: William J. Cadogan (Chair), Thomas J. Hopkins, Mohan Gyani and Peter Berger, each of whom is independent, as currently defined in Rule 5605(a)(2) and 5605(d)(2) of the Nasdaq listing standards. Mr. Waldis also attends Compensation Committee meetings in a non-voting observer capacity but does not participate in discussions regarding his own compensation. Each member of our Compensation Committee is a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our Compensation Committee met three times during 2019. Our Compensation Committee is charged by our Board to:

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review and approve our compensation strategy and philosophy;

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review and approve our annual corporate goals and objectives related to executive compensation and evaluate performance in light of these goals;

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review and approve policies and all forms of compensation and other benefits to be provided to our employees (including our NEOs), including among other things the annual base salaries, bonus, stock options, restricted stock grants and other incentive compensation arrangements;

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evaluate the CEO’s performance and determine his salary and incentive compensation;

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in consultation with the CEO, determine the salaries and incentive compensation of our other executive officers;

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make recommendations from time to time to our Board regarding non-employee director compensation matters;

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recommend, for approval by the Board, the adoption or amendment of our equity and cash incentive plans;

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administer our stock purchase plan and equity incentive plans;

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oversee the administration of our other material employee benefit plans, including our 401(k) plan; and

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review and approve other aspects of our compensation policies and matters as they arise from time to time.

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A more detailed description of our Compensation Committee’s functions can be found in our Compensation Committee charter, which can be found on the Investor Relations section of our website at www.synchronoss.com.

Our Compensation Committee has also established a Key Employee Equity Awards Committee, with our CEO as the sole member, whose purpose is to approve equity awards to our newly hired and current employees, other than executive officers and subject to guidelines previously approved by our Compensation Committee. Our Key Employee Equity Awards Committee acted 12 times in 2019.

In accordance with Nasdaq listing standards, our Compensation Committee, under its charter, may select and retain, and is directly responsible for the appointment, compensation and oversight of, compensation consultants or any other third party to assist in the evaluation of director and officer compensation, as well as any other compensation matters. In addition, our Compensation Committee has the responsibility to consider the independence of these advisers in accordance with applicable law and/or Nasdaq listing standards. Our Compensation Committee has retained Deloitte Consulting LLP (“Deloitte”) as its compensation consultant. In 2019, Deloitte did not perform any services for us other than its services to our Compensation Committee and received no compensation from our Company other than its fees in connection with the firm’s retention as our Compensation Committee’s compensation consultant. Our Compensation Committee assessed the independence of Deloitte pursuant to applicable SEC rules and Nasdaq listing standards and concluded that the work of Deloitte has not raised any conflict of interest. Our Compensation Committee considers the information provided by Deloitte when making decisions with respect to compensation matters, along with information it receives from management and its own judgment and experience. Deloitte serves at the discretion of our Compensation Committee and our Compensation Committee approves the fees paid to Deloitte.

Compensation Committee Interlocks and Insider Participation

During the year ended December 31, 2019, William J. Cadogan (Chair), Thomas J. Hopkins, Peter Berger and Mohan Gyani served as members of our Compensation Committee. None of the members of our Compensation Committee was an officer or employee of our Company at any time during 2019 and none of the members of our Compensation Committee has ever served as an officer of our Company or had any relationship with us requiring disclosure herein. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee.

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Nominating/Corporate Governance Committee

The current members of our Nominating/Corporate Governance Committee are: Frank Baker, Peter Berger, William J. Cadogan (Chair) and Thomas J. Hopkins. Our Nominating/Corporate Governance Committee met three times in 2019. All members of our Nominating/Corporate Governance Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the Nasdaq listing standards). In addition, our Nominating/Corporate Governance Committee:

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reviews and reports to our Board on a periodic basis with regard to matters of corporate governance;

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recommends qualified candidates to our Board for election as our directors, including the directors our Board proposes for election by the stockholders at the Annual Meeting and directors nominated by our stockholders;

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reviews, assesses and makes recommendations on the effectiveness of our corporate governance policies and on matters relating to the practices of directors and the functions and duties of the various Board committees;

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develops and implements our Board’s biennial self-assessment process and works with our Board to implement improvements in their effectiveness;

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reviews succession plans periodically with our CEO relating to positions held by elected corporate officers;

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reviews and makes recommendations to our Board regarding the size and composition of our Board and the appropriate qualities and skills required of our directors in the context of the then current make-up of our Board and our business; and

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establishes and periodically reviews stock ownership guidelines for our executive officers and directors.

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Our Nominating/Corporate Governance Committee charter can be found on the Investor Relations section of our website at www.synchronoss.com.

Our Nominating/Corporate Governance Committee has established procedures for the nomination process and leads the search for, selects and recommends candidates for election to our Board. Consideration of new director candidates typically involves a series of committee discussions, the review of information concerning candidates and interviews with selected candidates. Candidates for nomination to our Board typically have been suggested by other members of our Board or by our executive officers. From time to time, our Nominating/Corporate Governance Committee may engage the services of a third-party search firm to identify director candidates. Our Nominating/Corporate Governance Committee also considers candidates proposed in writing by stockholders, provided those proposals meet the eligibility requirements for submitting stockholder proposals under our amended and restated bylaws, and are accompanied by certain required information about the candidate in accordance with our amended and restated bylaws and organizational documents. Candidates proposed by stockholders will be evaluated by our Nominating/​Corporate Governance Committee using the same criteria as for all other candidates. Stockholders may contact the Secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making stockholder nominations and proposals. For more information pertaining to stockholder proposal, see “Stockholder Proposals for the Next Annual Meeting.”

In considering nominees for our Board, our Nominating/Corporate Governance Committee considers each candidate’s independence, personal and professional integrity, financial literacy or other professional or

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business experience relevant to an understanding of our business, ability to think and act independently and with sound judgment and ability to serve our stockholders’ long-term interests. These factors, along with others considered useful by our Nominating/Corporate Governance Committee, are reviewed in the context of an assessment of the perceived needs of our Board at a particular point in time. As a result, the priorities and emphasis of our Nominating/Corporate Governance Committee and of our Board may change from time to time to take into account changes in our business and other trends and the portfolio of skills and experience of current and prospective directors. Our Nominating/Corporate Governance Committee has not adopted a formal policy regarding the consideration of diversity in identifying director nominees or in searching for new directors.

Business Development Committee

The current members of our Business Development Committee are: Thomas J. Hopkins (Chair), William J. Cadogan, Glenn Lurie, Mohan Gyani, Frank Baker, Kristin S. Rinne and Stephen G. Waldis. All members of our Business Development Committee other than Messrs. Waldis and Lurie are independent (as independence is currently defined in Rule 5605(a)(2) of the Nasdaq listing standards). Our Business Development Committee did not meet in 2019. Our Business Development Committee reviews certain strategic business development and growth opportunities and recommends those that it determines are in line with our short-term and long-term strategic goals. Our Business Development Committee charter can be found on the Investor Relations section of our website at www.synchronoss.com.

Director Compensation

This section provides information regarding the cash & equity compensation policies provided to our directors in 2019.

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:

(1)

Options and restricted shares vest one-third each year over three years from the grant date.

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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 in 2019. Mr. Waldis did receive an equity grant in 2019 as described below. In addition, in 2019, we leased an automobile (and paid applicable insurance and gas) for Mr. Waldis.

The following table sets forth the compensation awarded to, earned by, or paid to each person who served as a non-employee director during 2019. 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.

(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, 2019 for a discussion of our assumptions in estimating the fair value of our stock awards.

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(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, 2019 for a discussion of our assumptions in estimating the fair value of our stock option awards.

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(3)

Reflects amounts paid for automobile expenses.

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(4)

Each of Messrs. McCormick and Moore received a one-time equity grant in consideration of certain consulting services to be provided following such time that they ceased being directors.

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(5)

Each of Messrs. Baker and Berger assigned their compensation to Siris Capital Group.

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(6)

Includes $12,500 received by Ms. Harris as a consultant prior to joining our Board.

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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, 2019, each of our 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 or were within their 3-year accumulation period.

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 or her status as one of our directors, to the fullest extent permitted by Delaware law, our restated certificate of incorporation and amended and restated bylaws. In addition, the form agreement provides that, to the fullest extent permitted by Delaware law, but subject to various exceptions, we will advance all expenses incurred by our directors in connection with a legal proceeding. Our restated certificate of incorporation and bylaws contain provisions relating to the limitation of liability and indemnification of directors. The restated certificate of incorporation provides that our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, except for liability:

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for any breach of a director’s duty in respect of unlawful (i) payments of dividends or (ii) stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law and the breach of a director’s duty of loyalty to us or our stockholders;

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for any transaction from which the director derives any improper personal benefit; and

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for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law.

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Our restated certificate of incorporation also provides that if Delaware law is amended after the approval by our stockholders of our restated certificate of incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law. The foregoing provisions of the restated certificate of incorporation are not intended to limit the liability of directors or officers for any violation of applicable federal securities laws. As permitted by Section 145 of the Delaware General Corporation Law, our restated certificate of incorporation provides that we may indemnify our directors to the fullest extent permitted by Delaware law and the restated certificate of incorporation provisions relating to indemnity may not be retroactively repealed or modified so as to adversely affect the protection of our directors.

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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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Information about our Executive Officers

The following table sets forth the name, age and position of each of our executive officers as of April 6, 2020. Information as of April 6, 2020 about the number of shares of Common Stock 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.”

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. and serves on the APTIV PLC Advisory Council. 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 was Chief Financial Officer at Nutrisystem, Inc., a publicly-held company, from 2007 to 2013. Mr. Clark received a degree in accounting from Boston College.

Jeffrey 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

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a Senior Development Engineer at Agility Communications from 2000 to 2002, member 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.

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The following highlights some of the key components of our pay for performance policies and practices:

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 2019, 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, weighting of goals, and equity compensation awards of our NEOs. Our CEO was not present during discussions regarding his compensation.

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2019 Executive Compensation Program

Cash Incentive Compensation

For our NEOs’ Annual Cash Incentive Bonuses in 2019, our Compensation Committee approved the following metrics:

•

40% based on non-GAAP revenue for 2019;

​

•

30% based on non-GAAP EBITDA for 2019;

​

•

20% based on the number of new customer deals with a contribution margin of greater than 30% and a minimum total contract value (“TCV”) of  $1,000,000 for 2019; and

​

•

10% based on the specific performance of each NEO as determined by the CEO.

​

In addition, each NEO had the opportunity to earn another 10% of his or her annual bonus target if our Company entered into at least six new digital experience platform (“DXP”) deals with a combined TCV of $10,000,000 in 2019. Our Compensation Committee believes that non-GAAP revenue, non-GAAP EBITDA and entering into large strategic transactions with companies are metrics that 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, we believe our bonus goals for NEOs are 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 restricted shares, stock options and performance-based restricted cash units or shares to our NEOs as the long-term incentive compensation component of their compensation. The annual mix and number of stock options, target number of performance-based restricted cash units or shares and number of time-based restricted shares granted to our NEOs is based on our Compensation Committee’s general understanding of pay practices at our peer group, our CEO’s recommendations (except for his own equity grants) and other factors it deemed appropriate.

2019-2021 Performance Units

Our 2019 long-term equity incentive plan was designed to reward financial and strategic performance during a three-year period from 2019 through 2021, and the restricted cash units granted under the long-term incentive plan (the “2019-2021 Performance Units”) are earned and vest based on achievement of pre-determined performance criteria during that period. Our NEOs are required to remain employed by our Company through February 2022 in order to vest in the cash units. Our Compensation Committee approved the following performance metrics for the 2019-2021 Performance Units:

•

40% are earned based on the non-GAAP revenue in the three-year period of 2019 to 2021;

​

•

40% are earned based on the non-GAAP EBITDA in the three-year period of 2019 to 2021; and

​

•

20% are earned based on achievement of revenue diversity (as described below), the strategic initiative of the Company, for the three-year period of 2019 to 2021.

​

2019 Say on Pay Vote

At our 2019 Annual Meeting of Stockholders, approximately 96% 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 2019, met with several of our largest stockholders

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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 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.

Compensation Consultant

Upon request, our Compensation Committee’s compensation consultant, Deloitte Consulting LLP (“Deloitte”), generally attends regular Compensation Committee meetings and meets with our Compensation Committee without management present. Deloitte has been our compensation consultant since 2013. 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.

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 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 2019 executive compensation decisions:

Our Compensation Committee reviewed the companies in our 2018 peer group in early 2019 in connection with its determination of the companies in our peer group for 2019 executive compensation decisions and as a result eliminated Blackbaud, Inc., BroadSoft, Inc., Guidewire Software, Inc., J2 Global, Inc., LogMein, Inc., Medidate Solutions, Inc. and The Ultimate Software Group, Inc. and added Box, Inc., Carbonite, Inc., FireEye, Inc., Hubspot, Inc., Manhattan Associates, Inc., QAD, Inc., Twilio, Inc., Yext, Inc. and Zendesk, Inc. 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 2019 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 same space as our Company. Competitive market practices are an important factor in our Compensation Committee’s decision-making process, although its decisions are not entirely based upon these factors. Rather, our Compensation Committee reviews and considers the peer group

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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 and conserving cash and equity.

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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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, our 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 growth, and

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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- and long-term performance. As shown below, approximately 84% of our CEO’s targeted compensation and an average of approximately 75% of the targeted compensation of our other NEOs for 2019 was tied to long-term term incentives.

2019 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 revenue diversity 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, revenue diversity 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 salaries 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 approved cost of living or other increases to the base salaries of our NEOs in 2019.

The table below sets forth each of our NEOs’ 2019 base salary and the increase from his or her 2018 base salary:

2019 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 March 2019, our Compensation Committee kept the target bonus percentage of each of our NEOs at the same level as in 2018 except for Mr. Doran, whose target bonus percentage increased from 60% to 70%.

The target cash incentive and maximum bonus percentages for each of our NEOs for 2019 were as follows:

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2019 Objectives

For 2019, 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 10% of his or her annual bonus target if our Company entered into at least six new DXP deals with a combined TCV of  $10 million.

Our Compensation Committee established (i) non-GAAP revenue, (ii) non-GAAP EBITDA and (iii) the number of new deals with a contribution margin of 30% and a minimum TCV of  $1 million as the corporate components of our 2019 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.

The components of the 2019 cash incentive compensation plan are set forth below:

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revenue, and therefore, approved that our NEOs receive a 50% payout for this metric. As our non-GAAP EBITDA for 2019 was $27,584,000, below the minimum threshold as provided above, our NEOs received no payout for this metric. Our Company signed ten new deals with contribution margin of greater than 30% and minimum TCV of  $1,000,000, and therefore, our NEO’s received 50% payout for this metric.

In addition, as described above, each NEO was eligible to earn another 10% of his or her annual bonus target if our Company entered into at least six new DXP deals with a combined TCV of  $10 million. As we entered into eight new DXP deals with a combined TCV of over $11 million, our NEOs received 100% of the payout with respect to this strategic metric.

2019 Individual Component

In 2019, 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 establishing our short- and long-term strategy, leading our Company in to new markets with our messaging, DXP and cloud platforms, making key strategic decisions to enable our effective cost cutting measures, and improving our overall corporate environment.

​

•

Mr. Clark received 100% due to his efforts in improving our financial performance, remediating the prior material weaknesses as provided in our Form 10-K, leading significant cost cutting/controlling initiatives, and developing stronger investor relations.

​

•

Mr. Miller received 100% due to his ability to get acclimated to his responsibilities as Chief Commercial Officer during his short tenure with our Company, driving existing and new customer relationships, making key changes to the sales organization structure and personnel, and landing key deals for our Company.

​

•

Ms. Clark received 100% due to her strong performance in re-focusing our platforms and product portfolio, developing a new brand and brand definition through public relations and social media efforts, leading the building of our Mission and Vision, driving the GSMA and Women for Tech initiatives and improving our perception in the marketplace.

​

•

Mr. Doran received 100% due to his strong performance in re-organizing our entire engineering and IT infrastructure teams, implementing Crosslake’s actions to gain focused cost reductions, improving the efficiencies of our product delivery, leading the transition out of hosting and adapting to the changing business and product models of our Company.

​

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The level of plan payout that was applied to each of the performance components of the 2019 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:

Based on the results of the corporate and individual performance components of the annual cash incentive plan, our NEOs were awarded 50% of their respective target cash incentives, resulting in the following payout amounts under the 2019 cash incentive bonus plan for each of our NEOs:

2019 Long-Term Incentive Compensation Plan

Our Compensation Committee awarded time-based restricted shares, time-based stock options and performance-based cash units 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 time-based stock options, the target number of performance-based cash units and the number of time-based 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 Cash Units

In March 2019, in consultation with our compensation consultant, our Compensation Committee granted time-based restricted stock (35% of such NEO’s equity award), time-based options to purchase shares of our Common Stock (10% of such NEO’s equity award) and performance-based cash units (55% of such NEO’s equity award) to each of our NEOs. The time-based restricted shares vest one-third on each of the first, second and third anniversary of their grant date and the time-based 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. The performance-based restricted cash units vest upon the Compensation Committee

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approving the level of performance against pre-established metrics for such grants, and such approval is expected to occur about February 15, 2022. 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 2019,” below.

The following table sets forth the number of shares of time-based restricted stock and performance-based restricted cash units awarded, and the number of time-based stock options to purchase shares of our Common Stock granted to our NEOs in 2019.

Performance-Based Vesting Restricted Shares

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. Ms. Clark received performance-based shares as part of her new hire grant based on the same criteria to be used for the 2018-2020 Performance Units. The following table sets forth the 2018-2020 performance-based cash units or shares (collectively, the “2018-2020 Performance Units”) awarded to our NEO’s other than Messrs. Clark and Miller who did not receive any performance-based cash units or shares as part of their new hire compensation packages as they joined our Company in July and October 2018, respectively:

The 2018-2020 Performance Units provide the opportunity to earn the identified performance-based cash units based on the performance of our business during 2018, 2019 and 2020. Our NEOs are required to remain employed by our 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 and 2019, our Compensation Committee designated free cash flow as the strategic metric. In consultation with

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Deloitte, and to be consistent with many of our peer group of companies, our Compensation Committee has decided that for 2020 the strategic metric will be total shareholder return of our Company compared to the total shareholder return for the companies in the Russell 2000 index.

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.

As previously disclosed in last year’s CD&A, 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 through such date:

2019 Performance Period — One-third of the 2018-2020 Performance Shares

In April 2019, our Compensation Committee approved the following threshold, target and maximum performance goals for the 2019 portion of the 2018-2020 Performance Shares:

In 2019, using the same adjustments and calculations as described above under our 2019 Cash Incentive Compensation Plan, our NEOs did not receive any portion with respect to the 2019 financial performance of our Company because each of our Non-GAAP revenue, Non-GAAP EBITDA and Free Cash Flow for 2019 was below the threshold payout with respect to each metric.

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 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 restricted shares were based on our Company’s performance in 2018 and the remaining one-half were based on our Company’s performance in 2019, as discussed below, provided Mr. Lurie remains employed by our Company through such date.

Under the terms of Mr. Lurie’s performance-based shares, the metrics for obtaining such shares with respect to our Company’s financial performance are the same metrics as the long-term incentive plan for the 2018 and 2019 portion of the 2018-2020 Performance Units. In 2018, as described in last year’s CD&A,

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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 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:

With respect to our Company’s 2019 performance, for the same reasons stated above, Mr. Lurie did not receive any of the shares allocated to our Company’s 2019 financial performance under the 2018-2019 CEO New Hire LTI Plan and such shares have been forfeited.

2019-2021 Performance Cash Units

In April 2019, our Compensation Committee granted 2019-2021 performance-based cash units to our NEOs employed as of the grant date. The following table sets forth the 2019-2021 performance-based cash units (collectively, the “2019-2021 Performance Units”) awarded to our NEO’s:

The 2019-2021 Performance Units provide the opportunity to earn the identified performance-based cash units based on the performance of our business during 2019, 2020 and 2021. Our NEOs are required to remain employed by our Company through March 2022 in order to vest in the cash units. Our Compensation Committee will determine whether to settle the vested performance-based cash 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. For the 2019-2021 period, our Compensation Committee designated “revenue diversity” as the strategic metric which was defined as year-over-year revenue growth for DXP and the internet of things (“IoT”), with the target year-over-year revenue growth of 35%.

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.

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2019 Performance Period — One-third of the 2019-2021 Performance Units

In April 2019, our Compensation Committee approved the following threshold, target and maximum performance goals for the 2019 portion of the 2019-2021 Performance Shares:

In 2019, using the same adjustments and calculations as described above under our 2019 cash incentive compensation plan, our attainment under the Non-GAAP Revenue metric was $325,000,000, and therefore our NEOs received 50% payout for this metric and our attainment under the Non-GAAP EBITDA metric was $27,584,000, and therefore our NEOs received no payout for this metric. Our Company’s year-over-year revenue growth for DXP and IoT from 2018 to 2019 was below the minimum threshold and therefore our NEOs received no payout for this metric. As a result, each NEO received the following payout with respect to our Company’s 2019 performance:

As a result, our NEOs earned 20% of the target number of the 2019-2021 Performance Units allocable to 2019 based on our Company’s 2019 financial performance. The actual number of 2019-2021 Performance Units earned based on our 2019 performance is set forth below, which performance units shall vest in or about March 2022 provided the NEO remains employed by our Company through such date:

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 2019, we leased an automobile (and paid applicable insurance and gas) for Mr. Clark, to be used primarily for business purposes and provided Mr. Lurie with an allowance of  $17,000 per year to be used for his automobile lease. There were no other special benefits or perquisites provided to any NEO in 2019.

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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.

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 shareholdings on December 31, 2019, 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 only a portion of their restricted stock and options have vested and, therefore, have not had an opportunity to acquire our Common Stock as of December 31, 2019.

Tax Matters

For federal income taxes, compensation is an expense that is fully tax deductible for almost all of our U.S. employees. As a result of changes made by the 2017 Tax Cuts and Jobs Act, 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 generally is not deductible. 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. Our Compensation Committee considers tax and accounting implications in determining all elements of our compensation plans, programs and arrangements.

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(1)

The amounts set forth in this column represent the subjective individual component portion of our annual cash incentive bonus awards paid to the NEOs. See “Compensation Discussion and Analysis” above for further discussion of the subjective individual component.

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(2)

The amounts in this column reflect the grant date fair value, computed in accordance with FASB ASC Topic No. 718, of the performance share awards (with the grant date fair value determined using the probable outcome of the performance conditions) and the time-based restricted share award granted to our NEOs. See “Compensation Discussion and Analysis” above for further discussion of these share awards. See Footnote 2 to the Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of our assumptions in estimating the fair value of our share awards. Our executive officers will not realize any value for these awards until sold.

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(3)

Mr. Lurie was granted performance-based restricted cash units as 2019-2021 Performance Cash Units as described in greater detail in “Compensation Discussion and Analysis” above. The grant date value of the performance-based restricted cash units assuming the highest level of performance conditions is achieved was $4,789,870. Mr. Lurie was also granted time-based restricted stock award with a grant date value of  $1,524,044.

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(4)

Mr. Clark was granted performance-based restricted cash units as 2019-2021 Performance Cash Units as described in greater detail in “Compensation Discussion and Analysis” above. The grant date value of the performance-based restricted cash units assuming the highest level of performance conditions is achieved was $1,532,754. Mr. Clark was also granted time-based restricted stock award with a grant date value of  $487,696.

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(5)

Mr. Miller was granted performance-based restricted cash units as 2019-2021 Performance Cash Units as described in greater detail in “Compensation Discussion and Analysis” above. The grant date value of the performance-based restricted cash units assuming the highest level of performance conditions is achieved was $957,971. Mr. Miller was also granted time-based restricted stock award with a grant date value of  $304,805.

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41

 

 

(6)

Ms. Clark was granted performance-based restricted cash units as 2019-2021 Performance Cash Units as described in greater detail in “Compensation Discussion and Analysis” above. The grant date value of the performance-based restricted cash units assuming the highest level of performance conditions is achieved was $957,971. Ms. Clark was also granted time-based restricted stock award with a grant date value of  $304,805.

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(7)

Mr. Doran was granted performance-based restricted cash units as 2019-202` Performance Cash Units as described in greater detail in “Compensation Discussion and Analysis” above. The grant date value of the performance-based restricted cash units assuming the highest level of performance conditions is achieved was $957,971. Mr. Doran was also granted a time-based restricted share award with a grant date value of  $305,805.

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(8)

The amounts in this column reflect the grant date fair value, computed in accordance with FASB ASC Topic No. 718, of option awards granted to our NEOs. See Footnote 2 to the Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of our assumptions in estimating the fair value of our stock option awards. Our NEOs will not realize any value with respect to these awards until these awards are exercised or sold.

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(9)

The amounts under this column include amounts earned based on our Company’s annual cash incentive bonus compensation plan described under “Compensation Discussion and Analysis” above.

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(10)

Reflects amounts paid for (i) automobile expenses of  $29,270 and (ii) 401(k) company match of  $7,000, totaling $36,270.

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(11)

Reflects amounts paid for (i) automobile expenses of 11,881 and (ii) 401(k) company match of  $7,000, totaling $18,881.

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(12)

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