REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee does not constitute soliciting material and the Report should not be deemed filed or incorporated by reference into any other previous or future filings by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.
ROLE OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors provides oversight on matters relating to the Company’s financial reporting process, seeks to ensure that the Company develops and maintains adequate financial controls and procedures, and monitors compliance with these processes. This includes responsibility for, among other things:
|
|
|
|
|
|
l
|
determination of qualifications, performance and independence of Deloitte, the Company’s independent registered public accounting firm;
|
l
|
the appointment, compensation, retention, audit and oversight work of Deloitte in preparing or issuing audit reports and related work;
|
l
|
review of financial reports and other financial information provided by the Company, its systems of internal accounting and financial controls, and the annual independent audit of the Company’s financial statements;
|
l
|
oversight and review of procedures developed for consideration of accounting, internal accounting controls and auditing-related complaints;
|
l
|
review of risk assessment and risk management processes on a Company-wide basis; and
|
l
|
adoption of and monitoring the implementation and compliance with the Company’s Audit Services, Audit-Related Services and Non-Audit Services Policy.
|
The Audit Committee has oversight responsibility for confirming the scope and monitoring the progress and results of internal audits conducted by the Company’s internal auditors. The Audit Committee discussed with the Company’s internal auditors and Deloitte the plans for their respective audits. The Audit Committee met with the internal auditors and Deloitte, with and without management present, and discussed results of their examinations, their evaluation of the Company’s internal controls, and the Company’s financial reporting.
The Company’s management has primary responsibility for the financial statements, including the Company’s system of disclosure and internal controls. The Audit Committee may investigate any matter brought to its attention. In that regard, the Audit Committee has full access to all books, records, facilities and personnel of the Company and the Audit Committee may retain outside counsel, auditors or other independent experts to assist the Committee in performing its responsibilities. Any individual may also bring matters to the Audit Committee
confidentially or on an anonymous basis, by submitting the matter in a sealed envelope addressed to the “Audit Committee” to the Corporate Secretary who then forwards the sealed envelope to the Audit Committee. Junk mail, advertisements, resumes, spam and surveys will not be forwarded. Abusive, threatening or otherwise inappropriate materials will also not be forwarded.
SARBANES-OXLEY ACT OF 2002 ("SOX") COMPLIANCE
The Audit Committee has responsibility for monitoring all elements of the Company’s compliance with Sections 302 and 404 of SOX relating to internal control over financial reporting.
AUDIT COMMITTEE CHARTER
The Board of Directors has adopted a written charter for the Audit Committee, which the Board of Directors and the Audit Committee review, and at least annually update and reaffirm. The Audit Committee Charter sets out the purpose, membership and organization, and key responsibilities of the Audit Committee.
COMPOSITION OF THE AUDIT COMMITTEE
The Audit Committee is composed of four members of the Company’s Board. The Board of Directors has determined that each Audit Committee member meets the independence standards set out in the requirements of the NYSE currently in effect, including the Audit Committee independence requirements of Rule 10A-3 of the Exchange Act. No member of the Audit Committee has any relationship with the Company that may interfere with the exercise of independence from management and the Company. All members of the Audit Committee, in the business judgment of the full Board of Directors, are financially literate and several have accounting or related financial management expertise.
REGULAR REVIEW OF FINANCIAL STATEMENTS
The Audit Committee reviewed and discussed the Company’s audited financial statements with management. The Audit Committee, management and Deloitte reviewed and discussed the Company’s unaudited financial statements before the release of each quarterly earnings report and filing of the Company's Form 10-Qs, and the Company’s audited financial statements before the annual earnings release and filing of the Company’s 2020 Annual Report on Form 10-K.
COMMUNICATIONS WITH DELOITTE
The Audit Committee has discussed with Deloitte the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. The Audit Committee met privately with Deloitte three times during 2020.
INDEPENDENCE OF DELOITTE
Deloitte is directly accountable to the Audit Committee and the Board of Directors. The Audit Committee has received the written disclosures and the letter from Deloitte required by applicable requirements of the PCAOB regarding Deloitte’s communications with the Audit Committee concerning independence and has discussed with Deloitte their independence from management and the Company, any disclosed relationships and the impact of those relationships on Deloitte’s independence.
RECOMMENDATION REGARDING ANNUAL REPORT ON FORM 10-K
In performing its oversight function with regard to the 2020 financial statements, the Audit Committee relied on financial statements and information prepared by the Company’s management. It also relied on information provided by the internal audit staff as well as Deloitte. The Audit Committee reviewed and discussed with management the Company’s audited financial statements as of and for the year ended December 31, 2020. Based on these discussions, and the information received and reviewed, the Audit Committee recommended to the Company’s Board of Directors and the Board of Directors has approved including the audited financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
The Audit Committee’s responsibility is to monitor and oversee the audit and financial reporting processes. However, the members of the Audit Committee are not practicing certified public accountants or professional auditors and rely, without independent verification, on the information provided to them and on the representations made by management, and the report issued by the independent registered public accounting firm.
This report is furnished by the members of the Audit Committee.
Stephen L. Waechter, Chair
Mary L. Howell
William F. Murdy
Phillip C. Widman
COMPENSATION COMMITTEE REPORT
The following Report of the Compensation Committee does not constitute soliciting material and the Report should not be deemed filed or incorporated by reference into any other previous or future filings by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.
The Compensation Committee of the Board of Directors approves and oversees administration of the Company’s executive compensation program and senior leadership
development and continuity programs. The Compensation Committee’s primary objective is to establish a competitive executive compensation program that clearly links executive compensation to business performance and shareholder return. The Compensation Committee considers appropriate risk factors in structuring compensation to discourage unnecessary or excessive risk-taking behaviors and encourage long-term value creation.
RECOMMENDATION REGARDING COMPENSATION DISCUSSION AND ANALYSIS
In performing its oversight function during 2020 with regard to the Compensation Discussion and Analysis prepared by management, the Compensation Committee relied on statements and information prepared by the Company’s management. It also relied on information provided by Pay Governance LLC, the independent compensation consultant to the Compensation Committee. The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement with management. Based on this review and discussion, the Compensation Committee recommended to the Company’s Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for 2020 and this Proxy Statement.
This report is furnished by the members of the Compensation Committee.
Bradford J. Boston, Chair
Melvin F. Parker
Eric M. Pillmore
Phillip C. Widman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPENSATION DISCUSSION AND ANALYSIS
|
INTRODUCTION
|
The Compensation Committee is responsible for our executive compensation philosophy and programs. The Compensation Committee reviews and approves the compensation to be paid to our Chief Executive Officer ("CEO") and a group of executive officers, including our Named Executive Officers ("NEOs"). At our 2020 Annual Meeting of Shareholders, our shareholders overwhelmingly approved our NEOs' compensation, with approximately 97.8% of the votes cast in favor of the proposal.
EXECUTIVE SUMMARY
VECTRUS' NAMED EXECUTIVE OFFICERS FOR 2020 WERE:
•Charles L. Prow, President and Chief Executive Officer
•Susan D. Lynch, Senior Vice President ("SVP") and Chief Financial Officer ("CFO")
•David A. Hathaway, SVP, Vectrus Programs
•Susan L. Deagle, SVP and Chief Growth Officer
•Kevin T. Boyle, SVP, Chief Legal Officer and General Counsel
2020 COMPANY HIGHLIGHTS
•Delivered high operational readiness for National Security missions and supported DoD critical infrastructures throughout the pandemic
•Generated strong 2020 cash flow, representing approximately 125% conversion
•Doubled backlog year-over-year to a record high of $5.1 billion
•Added key clients and capabilities while accelerating converged infrastructure strategy through two key acquisitions
•Improved long-term visibility with $882 million five-year OMDAC-SWACA recompete win
•Supported the U.S. Army's environmental sustainability goals by leading an initiative focused on building base resiliency and reducing waste on U.S. Army installations in Kuwait
•Continued to enhance our diversity and inclusion programs globally
COMPENSATION PHILOSOPHY
The Compensation Committee's compensation philosophy is to support Vectrus’ business strategy within the principles of competitiveness, full disclosure and consistent alignment with long-term value creation. Our philosophy encourages individual and group behaviors that balance risk and reward while supporting sustained growth and earnings performance. A substantial portion of executive compensation is tied to the Company’s internal business and financial performance and share price performance. If internal business and financial performance or share price performance falls below identified thresholds, at-risk incentive compensation is reduced or not paid at all. Our compensation philosophy is reflective of Vectrus’ industry and peers, and we will continue to seek alignment with market trends. The Compensation Committee has the flexibility to establish appropriate compensation policies to attract, motivate and retain our executives in the industry in which we operate.
PAY FOR PERFORMANCE
We link a large portion of our NEOs' compensation to performance. Pay components for our NEOs for 2020 included base salary, Annual Incentive Plan (“AIP”) awards, and long-term incentive awards, consisting of RSUs and Total Shareholder Return ("TSR") awards.
The 2020 AIP provides a cash payout if certain financial metrics, including adjusted revenue, adjusted diluted earnings per share, adjusted days sales outstanding, new business wins, as well as individual strategic goals for SVPs and above, were met. The approved 2020 AIP payouts reflected 97.7% of target. The 2020 AIP performance goals, targets, results and actual payouts are discussed in more detail in "Compensation Program Objectives - Primary Compensation Components" below.
The TSR awards represent 50% of the total long-term incentive awards. TSR awards align pay with performance by providing a cash long-term incentive linked to the Company's total shareholder return performance relative to the Aerospace and Defense companies in the S&P 1500 over a three-year performance period. The three-year performance period for the 2018 TSR awards concluded on December 31, 2020. Payment for the 2018 awards was made in January 2021 at 127.7% of target. This program and the performance results for the 2018 awards are discussed in more detail under the "Long-Term Incentive Program - 2020 Long-Term Incentive Awards" below.
|
|
|
|
|
|
KEY GOVERNANCE POLICIES AND PRACTICES RELATED TO COMPENSATION:
|
WE DO:
|
l
|
use an independent compensation consultant selected and hired by the Compensation Committee.
|
l
|
pay for both corporate and individual performance.
|
l
|
mitigate compensation risk through oversight, controls and appropriate incentives in our balanced compensation programs.
|
l
|
maintain equity award agreements that require both consummation of a change in control transaction and termination of employment for accelerated vesting ("double trigger").
|
l
|
use limited perquisites.
|
l
|
conduct an annual Say-on-Pay vote.
|
l
|
have a clawback policy that is also embedded in our equity incentive plan, our annual incentive plan and our award agreements.
|
l
|
have an anti-hedging and anti-pledging policy.
|
l
|
retain meaningful stock ownership guidelines for Vectrus corporate officers and directors.
|
l
|
provide in our equity incentive plan for a minimum vesting period of one year for employee equity grants, and generally provide in our employee award agreements for vesting in equal annual installments over a three-year period for our restricted stock unit and stock option awards.
|
|
|
WE DO NOT:
|
l
|
reprice stock options.
|
l
|
guarantee minimum bonus payments.
|
l
|
provide tax gross-ups for perquisites or in connection with payments made in the event of a change in control; however, tax protection may be provided for costs associated with relocation.
|
l
|
provide for automatic base salary increases.
|
l
|
have fixed-term employment arrangements with our NEOs; all of our NEOs are at-will employees.
|
l
|
provide a traditional pension plan or a supplemental executive retirement plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INDIVIDUAL EXECUTIVE POSITIONS
|
COMPENSATION COMPARISONS
|
Vectrus has been an independent, publicly-traded company since September 2014. We work towards setting total target compensation for our NEOs to the median of competitive practice, assuming continued performance of the Company and the executive, subject to cost and affordability. The Compensation Committee supports this approach, based on the individual NEO's experience in their roles, their strong performance and the business conditions impacting the Company. The Compensation Committee, along with its independent compensation consultant, annually reviews current market compensation data for determining the path forward in setting the compensation program.
The Compensation Committee reviewed and assessed the performance of the NEOs for 2020 and will continue to review and assess the performance of the President and Chief Executive Officer and the other officers and authorize compensation actions it believes are appropriate and commensurate with relevant competitive data, the Company's business environment and the approved compensation program.
INDIVIDUAL EXECUTIVE POSITIONS - 2020 COMPENSATION INFORMATION
For 2020, the Compensation Committee approved base salary increases, effective March 2020, for Messrs. Prow, Hathaway and Boyle, and Ms. Deagle, pursuant to external market data and an assessment of their performance as described below:
•Charles L. Prow: An annual base salary increase of 7.1% was approved, bringing his salary to $750,006. Mr. Prow's total target compensation remained below the median of the market.
•Susan D. Lynch: Ms. Lynch joined the Company in August 2019, and therefore, did not receive an annual base salary increase in 2020.
•David A. Hathaway: An annual base salary increase of 6.9% was approved, bringing his salary to $400,005. Mr. Hathaway's total target compensation remained below the median of the market.
•Susan L. Deagle: An annual base salary increase of 8.1% was approved, bringing her salary to $400,005. Ms. Deagle's total target compensation moved above the median of the market.
•Kevin T. Boyle: An annual base salary increase of 2.5% was approved, bringing his salary to $374,150. Mr. Boyle's total target compensation remained below the median of the market.
The base salary increases and total compensation, which were approved by the Compensation Committee, were determined following a review of market competitive survey data, as well as the individual's relevant experience, and to more closely align their compensation with the median of the competitive market and reflect their individual contributions to the Company.
The table below sets out the NEOs' 2020 target compensation for annual base salary, annual incentive and long-term incentive targets as determined by the Compensation Committee.
2020 BASE SALARY AND TARGET INCENTIVE COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
2020 Base Salary
($)
|
Target 2020 AIP Award (% of Base Salary)
(1)
|
Target 2020 Long-Term Incentive Award
($)
|
Charles L. Prow
President and Chief Executive Officer
|
750,006
|
105%
|
1,900,000
|
Susan D. Lynch
Senior Vice President and Chief Financial Officer
|
430,019
|
65%
|
450,000
|
David A. Hathaway
Senior Vice President, Vectrus Programs
|
400,005
|
60%
|
350,000
|
Susan L. Deagle
Senior Vice President and Chief Growth Officer
|
400,005
|
60%
|
350,000
|
Kevin T. Boyle
Senior Vice President, Chief Legal Officer and General Counsel
|
374,150
|
55%
|
300,000
|
|
|
|
|
(1)This column reflects the target percentage of base salary approved for each NEO for the 2020 AIP award. The approved AIP formula for 2020 was based on performance measures and goals that would pay 97.7% of target for 100% achievement of the approved goals.
VECTRUS COMPETITIVE COMPENSATION
In reviewing compensation for the NEOs for the 2020 compensation program, the Compensation Committee used the general industry market data reflected in the 2019 Willis Towers Watson General Industry Executive Compensation Survey - U.S. Report. Data reviewed included competitive market information for each compensation component and total compensation. The Compensation Committee evaluated and determined target and actual compensation provided to each of our NEOs based on a review of the general industry market data, which was adjusted via regression analysis to estimate the competitive market pay levels for a company of our revenue size. In determining executive compensation, the Compensation Committee also considered qualitative information discussed in "Qualitative Considerations" below, individual performance and business conditions in addition to recommendations from Vectrus' President and Chief Executive Officer and Senior Vice President and Chief Human Resources Officer.
INDEPENDENT COMPENSATION CONSULTANT
In 2020, the Compensation Committee continued to retain Pay Governance as its independent compensation consultant to assist the Committee in fulfilling its responsibilities under its Charter, the material terms of which are described in this Proxy Statement under "Compensation Committee Responsibilities." The Compensation Consultant’s engagement leader provided objective expert analyses, assessments, research and recommendations for executive compensation programs, incentives, perquisites and compensation standards. In this capacity, the Compensation Consultant provided services that related solely to work performed for and at the direction of the Compensation Committee, including analysis of material prepared by Vectrus’ human resources, finance and legal departments for the Compensation Committee’s review. The Compensation Consultant attended each of the eight meetings held by the Compensation Committee during 2020 and provided no other services to Vectrus during 2020 other than those for and at the direction of the Compensation Committee.
During 2020, Vectrus’ human resources, finance and legal functions supported the work of the Compensation Committee, provided information, answered questions and responded to requests from the Compensation Consultant.
The Compensation Committee is directly responsible for the appointment, compensation, and oversight of the Compensation Consultant. The Compensation Committee has the sole authority to retain and terminate the services of consultants, including Pay Governance, with respect to compensation matters.
In connection with the engagement of the Compensation Consultant, the Compensation Committee considered various factors bearing on the independence of the Compensation Consultant, including, but not limited to, the following:
|
|
|
|
|
|
l
|
Provision of other services to Vectrus by the Compensation Consultant;
|
l
|
Business or personal relationships of the Compensation Consultant with members of the Compensation Committee or with executive officers;
|
l
|
The Compensation Consultant’s policies and procedures to prevent conflicts of interest;
|
l
|
Ownership of Vectrus common stock by the Compensation Consultant’s engagement leader; and
|
l
|
The amount of fees received by the Compensation Consultant.
|
The Compensation Committee affirmatively determined the Compensation Consultant was independent and has no conflicts of interest with the Company or the Board of Directors.
OUR COMPENSATION CYCLE
The Compensation Committee reviews compensation in detail during the first quarter of each year. This review includes:
|
|
|
|
|
|
l
|
Annual performance reviews for the prior year;
|
l
|
Increases in base salary;
|
l
|
Annual Incentive Plan (bonus) awards for the prior year and target awards for the current year; and
|
l
|
Long-term incentive target awards, including RSUs and TSR awards.
|
The award date for long-term incentive awards is determined by the Compensation Committee and is typically in March, following the February meeting of the Compensation Committee. Meeting dates for the following year’s regular Board and Committee meetings are scheduled during the prior year. Target TSR awards reflect a three-year performance period beginning on January 1 of the year in which the Compensation Committee approves the award. Participants in the Long-Term Incentive Program receive notification of their awards as soon as reasonably practical after the grant date.
COMPENSATION PROGRAM OBJECTIVES
COMPENSATION OBJECTIVES, PRINCIPLES AND APPROACHES
The Vectrus compensation program objectives, principles and approaches reflect the Company's business needs and strategy, as detailed below:
|
|
|
|
|
|
|
|
|
OBJECTIVE
|
GENERAL PRINCIPLE
|
APPROACH
|
Attract, incentivize and retain talented and experienced leaders.
|
Design an executive compensation program to attract, incentivize and retain high performing executives.
|
Target total direct compensation approximating the 50th percentile of competitive practice. Review current competitive market compensation to structure movement of NEO compensation toward the competitive median of general industry companies, as adjusted for revenue size.
|
Align at-risk compensation with corporate and individual performance.
|
Align the measures of performance in our compensation programs with measures key to the success of our business. If our business succeeds, our shareholders will benefit.
|
Provide incentive opportunities based on corporate and individual performance to drive shareholder value.
|
Align at-risk compensation with levels of executive responsibility.
|
As executives advance in the Company, the leverage of at-risk pay relative to fixed pay increases.
|
Structure NEO compensation so that a substantial portion of compensation is at risk for executives with greater levels of responsibility.
|
PRIMARY COMPENSATION COMPONENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEO COMPENSATION
|
=
|
BASE SALARY
|
+
|
ANNUAL INCENTIVE
|
+
|
LONG-TERM INCENTIVES
|
BASE SALARY – Base salary comprises the fixed component of total compensation for Mr. Prow and the other NEOs. Salary is a competitive component of pay that is aligned with the NEO's position, experience and criticality of the required competencies. It is not a risk-based element of compensation.
ANNUAL INCENTIVE PLAN (AIP) AWARDS – The Compensation Committee determined that the four corporate metrics noted below would be most closely predictive of optimal operating performance in 2020 for Vectrus. For 2020, 80% of the awards were based on the achievement of these corporate metrics and 20% of the awards were based on the achievement of individual strategic goals.
EARNINGS PER SHARE (EPS): This is a market-based metric recognized as a standard by investors and analysts. For 2020 the Compensation Committee used a metric of Adjusted Diluted Earnings per Share, as discussed below.
TOTAL REVENUE: Revenue reflects successful recognition of contracted revenue, recompetes and emphasis on growth through new revenue streams. Revenue is defined as adjusted revenue as discussed below.
NEW BUSINESS WINS: Winning new business is a critical focus for our Company. New Business Wins includes any new business contract award notification during the calendar year, recompetes, contract extensions and add-on work to existing contracts.
DAYS SALES OUTSTANDING (DSO): DSO is an important operating efficiency metric that measures the number of days it takes to turn accounts receivable into cash. DSO is calculated using a five (5) point average of the DSO for Q4 of the prior year and each of the four quarters of the performance year. DSO is defined as adjusted DSO, as discussed below.
INDIVIDUAL STRATEGIC GOALS: The use of individual goals balances the executive's shared responsibility to achieve corporate goals with the desire to motivate the executives to achieve goals within the individual's specific area of responsibility. The individual goals also reinforce the importance of certain key objectives within the individual's specific
area of responsibility and allow the Compensation Committee to differentiate compensation among these executives based on their individual performance. It also strengthens the executive's accountability. See "Individual Strategic Goals and Results for 2020" below.
The Compensation Committee was responsible for the administration of the AIP for 2020. The Compensation Committee approved an annual incentive plan design for the business as described below.
|
|
|
|
|
|
2020 AIP METRICS
|
PERFORMANCE PERCENTAGE
|
Adjusted Diluted Earnings Per Share (EPS)
|
30%
|
Adjusted Revenue
|
10%
|
New Business Wins (NBW)
|
20%
|
Adjusted Days Sales Outstanding (DSO)
|
20%
|
Individual Strategic Goals *
|
20%
|
(*) The Compensation Committee did not assign a specific weighting to any of the individual goals, but reviewed each executive's performance against his or her individual goals in the aggregate.
AIP OPERATIONAL OBJECTIVES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Diluted Earnings Per Share (EPS)*
|
Adjusted Revenue*
|
New Business
Wins*
|
|
Adjusted Days Sales Outstanding (DSO)*
|
Individual Strategic Goals*
|
|
Thres-hold
|
Target
|
Maxi-mum
|
Thres-hold
|
Target
|
Maxi-mum
|
Thres-hold
|
Target
|
Maxi-mum
|
|
|
|
Thres-
hold
|
Target
|
Maxi-mum
|
Thres-hold
|
Target
|
Maxi-mum
|
Performance Percentage of Target
|
85%
|
100%
|
140%
|
90%
|
100%
|
120%
|
25%
|
100%
|
150%
|
|
|
|
84.6%
|
100%
|
115.4%
|
0%
|
100%
|
200%
|
Payout Percentage of Target
|
50%
|
100%
|
200%
|
50%
|
100%
|
200%
|
1%
|
100%
|
200%
|
|
|
|
25%
|
100%
|
200%
|
0%
|
20%
|
40%
|
(*) For performance results between the minimum and maximum thresholds, the performance percentage achieved for that metric is calculated on a non-linear slope pre-approved by the Compensation Committee for the performance year. Actual results may range from zero to 200% of target.
2020 AIP AWARDS PAID IN 2021 – In the face of the COVID-19 pandemic, the Vectrus leadership team took proactive steps to minimize the impact of the pandemic on its employees, customers and shareholders. In
conjunction with the Committee, Vectrus developed a resiliency framework that identified and evaluated proactive measures to both minimize the initial impact (human, financial and operational) of the pandemic, continue to make strides towards achieving its strategic goals, and then position the Company for a rapid return to normal operations in 2021. The actions of the resiliency framework spanned multiple functions across the business to include contracts, operations, finance, supply chain and environmental, safety and health. The actions taken - and results achieved - are summarized below:
•Contracts - Engaged with client to safeguard revenue
◦Established a corporate repository to capture all contract directives resulting from COVID-19 and filed appropriate notifications with the customer to minimize performance impact and maximize revenue recovery
◦Provided guidance for recovery options in accordance with the CARES Act
•Operations - Developed and executed COVID-19 specific safety and operating procedures to ensure continued mission service delivery
◦Problem solved with government clients to ensure start up missions and critical missions were supported while mitigating impacts of infections, government risk actions, and host nation restrictions
◦Developed response actions to COVID-19 cases within program teams, and developed and implemented contact tracing, notification, quarantine, and return to work procedures
•Finance - Optimized FY20 by managing costs, maintaining liquidity and engaging stakeholders
◦Optimized revenue, cash management/liquidity, while maintaining ability to make long-term strategic investments
◦Actively engaged analysts, investors and stakeholders communicating financial impact of directives
•Supply Chain - Ensured continuity and delivery of required supplies and services
◦Proactively collaborated with strategic suppliers to ensure business continuity (quality, volume & delivery) for operational, contingency, and pandemic related supplies
◦Mitigated counterfeit products and price gouging from supplier base
•Environmental Safety & Health - Deployed pandemic plan, minimized health risks to employees while ensuring continued service delivery
◦Executed Pandemic Plan to include robust reporting, tracking and contact tracing procedures
◦Implemented employee safety strategy and return-to-workplace procedures for all sites
◦Provided centralized leadership for COVID-19 responses to employees
In evaluating the discretionary element of the 2020 Annual Incentive Plan, the Committee first considered and evaluated Mr. Prow's self-assessment and his detailed assessment of the NEOs' performance against their individual discretionary goals. In addition, the Committee considered the significant efforts (highlighted above) on the part of the management team to address, mitigate and recover from the impacts of the COVID-19 global pandemic, while still working to achieve the Company's 2020 strategic goals. On February 24, 2021, the Committee used the results attained by the management team and the resiliency framework as the basis to approve 150% payout of the discretionary element of the bonus, which increased the component award from 20% to 30% of each NEO's target annual incentive award. During that session, the Committee approved the 2020 AIP awards for the NEOs for payment on March 12, 2021.
The approved payments reflect approximately $63.1M in COVID-19 related GAAP revenue adjustments. These adjustments are due to timing of new contract starts and delays in Government reimbursement of allowable CARES Act related claims. The delays also contributed to an adjustment to GAAP Net Income of $4.8M and GAAP Days Sales Outstanding of 1 day. The approved 2020 AIP awards for NEOs are included in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column.
|
|
|
|
|
|
|
|
|
PAY COMPONENT - 2020 ANNUAL INCENTIVE PLAN (AIP)
|
PERFORMANCE DURING 2020
|
ACTUAL PAYOUT
|
l
|
Adjusted Diluted Earnings Per Share = $3.09 (versus the Compensation Committee-approved target of $3.67) (weighted 30%)
|
The Compensation Committee approved an actual bonus payout of 97.7% of target. Achievement of financial goals was confirmed by our independent auditor.
|
l
|
Adjusted Revenue = $1,458.5 million (versus the Compensation Committee-approved target of $1,497.2 million) (weighted 10%)
|
l
|
New Business Wins = $585.9 million (versus the Compensation Committee-approved target of $200.0 million) (weighted 20%)
|
l
|
Adjusted Days Sales Outstanding (DSO) = 65.5 (versus the Compensation Committee-approved target of 65.0) (weighted 20%)
|
l
|
Individual Strategic Goals: As approved by the Compensation Committee (weighted 20%) for the Chief Executive Officer and SVPs.
|
The performance and payout percentages for each component of the AIP were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metric (all $ amounts in millions, except per share data and DSO)
|
Performance Target at 100.0% Payment and Weighting (1)
|
2020 Performance
|
Performance Percentage of Target
|
Payout Percentage of Target (1)
|
Weighted Attainment
|
Adjusted Diluted Earnings Per Share
|
$3.67
|
30.0%
|
$3.09
|
84.2%
|
0.0%
|
0.0%
|
Adjusted Revenue
|
$1,497.2
|
10.0%
|
$1,458.5
|
97.4%
|
87.0%
|
8.7%
|
New Business Wins
|
$200.0
|
20.0%
|
$585.9
|
292.9%
|
200.0%
|
40.0%
|
Adjusted Days Sales Outstanding
|
65.0
|
20.0%
|
65.5
|
99.2%
|
95.0%
|
19.0%
|
Individual Strategic Goals (discussed below)
|
|
20.0%
|
|
150.0%
|
|
30.0%
|
(1) Attainment of all of the 2020 AIP performance goals would result in a payout of 97.7% of target.
“Adjusted Net Income” is a non-GAAP measure and is defined as net income, adjusted to exclude items that may include, but not limited to, other income, significant charges or credits that impact the current results that are not related to our ongoing operations and unusual and infrequent non-operating items or adjustments, such as excluding the impact of acquisitions in the year of the acquisition, if unplanned and the exclusion of Merger and Acquisition costs, integration costs, and pre-operational legal costs.
“Adjusted Revenue” is a non-GAAP measure and is defined as GAAP Revenue, adjusted to exclude the impact of acquisitions in the year of the acquisition, if unplanned.
"Adjusted Days Sales Outstanding" is defined as reported DSO, adjusted to exclude the impact of acquisitions in the year of the acquisition, if unplanned.
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
(in millions)
|
Adjusted Revenue
|
Reported GAAP Revenue
|
$
|
1,395.5
|
|
Adjustments for the impact of:
|
|
- DCAA CSRSU
|
1.8
|
|
- COVID-19
|
63.1
|
|
- European Program
|
(1.9)
|
|
Comparable Non-GAAP Adjusted Revenue
|
$
|
1,458.5
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020
|
(in millions, except per share data)
|
Adjusted Diluted Earnings Per Share
|
Reported GAAP Net Income
|
$
|
37
|
|
Adjustments for the impact of, net of tax:
|
|
- DCAA CSRSU
|
1.5
|
|
- COVID-19
|
4.8
|
|
- FDII
|
(7.1)
|
|
- Mergers and Acquisitions
|
1.5
|
|
- LOGCAP Protest Costs
|
0.3
|
|
- European Program
|
(1.52)
|
|
Comparable Non-GAAP Adjusted Net Income
|
$
|
36.4
|
|
Reported GAAP Diluted Earnings Per Share
|
$
|
3.14
|
|
Comparable Non-GAAP Adjusted Diluted Earnings Per Share
|
$
|
3.09
|
|
Weighted average common shares outstanding - diluted
|
11.8
|
The following table illustrates the calculation of the 2020 AIP awards paid to the NEOs in 2021. (Sum of components may differ from actual award amounts due to rounding.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Base Salary
(a) ($)
|
Annual Incentive Target as a Percent of Base Salary
(b) (1)
|
Adjusted Diluted Earnings Per Share Percent Achieved
|
Adjusted Revenue Percent Achieved
|
New Business Wins Percent Achieved
|
Adjusted Days Sales Outstanding Percent Achieved
|
Individual Goals/Performance Percent Achieved
(2)
|
|
Approved Total Performance Percent Payout
(d)
|
Actual 2020 AIP Awards (a)x(b)x(d)
($) (3)
|
Charles L. Prow
|
750,006
|
105
|
84.2
|
97.4
|
292.9
|
99.2
|
150.0
|
|
97.7
|
769,400
|
Susan D. Lynch
|
430,019
|
65
|
84.2
|
97.4
|
292.9
|
99.2
|
150.0
|
|
97.7
|
273,100
|
David A. Hathaway
|
400,005
|
60
|
84.2
|
97.4
|
292.9
|
99.2
|
150.0
|
|
97.7
|
234,500
|
Susan L. Deagle
|
400,005
|
60
|
84.2
|
97.4
|
292.9
|
99.2
|
150.0
|
|
97.7
|
234,500
|
Kevin T. Boyle
|
374,150
|
55
|
84.2
|
97.4
|
292.9
|
99.2
|
150.0
|
|
97.7
|
201,000
|
(1) This column reflects the target percent of base salary approved for each NEO for his or her 2020 annual incentive award. The approved annual incentive plan formula for 2020 was based on performance measures and goals that would pay 97.7% of target for 100% achievement of the approved goals.
(2) The Compensation Committee evaluated the extent to which Messrs. Prow, Hathaway and Boyle and Mses. Lynch and Deagle achieved their individual strategic goals. See tables below.
Individual Strategic Goals and Results for 2020
|
|
|
Charles L. Prow
|
Goal Description
|
Drive the execution of the Company's strategic goals for our growth, programs and enterprise functions.
|
Develop the Company's organic and inorganic growth efforts, including diversifying existing portfolio and achieving inorganic growth synergies.
|
Drive client engagement, legal and operations to successfully phase-in and execute new business wins.
|
Strive to achieve the Company's long-term strategic profit model.
|
Lead talent management and development and employee engagement efforts.
|
Continue to evolve our culture in support of our values.
|
Individual Performance Assessment. In evaluating Mr. Prow's performance, the Compensation Committee considered the following key factors:
•Successfully implemented new systems that standardized and improved process timelines, improved DSO processes, and identified areas of improvement in quality and cost measures.
•Completed two acquisitions in 2020 and achieved positive win-rates for organic growth.
•Developed a detailed long-term profit roadmap with actions initiated in 2020 to expand margins.
•Began transition efforts on LOGCAP V in spite of COVID-19 pandemic-related delays.
•Recruited and promoted executive talent, and identified and assessed next generation and emerging talent, with continued focus on the Company's diversity and professional development initiatives.
•Led succession planning for key positions, created an executive position and promoted within to lead diversity initiatives, and strengthened employee engagement efforts.
•Improved injury frequency and severity rates, demonstrated a strong commitment to leaders in labor and life support programs, and executed COVID-19 response measures.
|
|
|
Susan D. Lynch
|
Goal Description
|
Strive to meet individual profit models without compromising integrity in the reporting structure.
|
Evolve the finance team to a more predictive and advisory orientation and continue to grow talent and bench strength in support of our strategy.
|
Transform finance processes to achieve shorter cycle times without compromising outcomes.
|
Solidify the finance and treasury processes to increase our capability to finance and execute our strategy and growth objectives.
|
Continue to evolve our culture in support of our values.
|
Individual Performance Assessment. In evaluating Ms. Lynch's performance, the Compensation Committee considered the following key factors:
•Improved the collaboration with Programs and Contracts, driving to better outcomes on profit
•Significantly increased the team's talent strength and continues to drive the team towards a more predictive and value adding partner
•Successfully prepared for and implemented our new enterprise systems
•Continues the drive towards improved finance processes and functions
•Sustained achievement of our goals related to culture overall
|
|
|
David A. Hathaway
|
Goal Description
|
Strive to meet individual profit models without compromising integrity.
|
Achieve financial goals relating to our Programs Vectrus initiatives.
|
Work with Enterprise Vectrus and Finance on improvement projects.
|
Complete the Work Control Management (WCM) roll-out and growth and future trajectory including synergies successes.
|
Continue to evolve our culture in support of our values.
|
Individual Performance Assessment. In evaluating Mr. Hathaway's performance, the Compensation Committee considered the following key factors:
•Improved on the program delivery that is more predictable and capable of achieving continuous performance improvement
•Enhanced the predictable margin on the vast majority of programs
•Continued working with Finance, Supply Chain, Contracts and Operations Leaders to improve monthly and quarterly business processes
•Completed the WCM roll-out to many locations in 2020, with two locations on track for 2021
•Sustained achievement of our goals related to culture overall
|
|
|
Susan L. Deagle
|
Goal Description
|
Strive to meet individual profit models without compromising integrity.
|
Develop outcome-oriented strategy for Client Engagement across the organization and continue to drive investor expansion with Investor Relations activities.
|
Drive operational technology portfolio and in one new market, demonstrate a measurably improved pipeline.
|
Develop and drive mergers and acquisitions activities.
|
Continue to evolve our culture in support of our values.
|
Individual Performance Assessment. In evaluating Ms. Deagle's performance, the Compensation Committee considered the following key factors:
•Completed new business wins and re-compete business wins in 2020
•Improved client engagement strategy, drove above average market win rates and continued to build relationships across investor base
•Significantly improved roll out time on last program start up
•Completed two major acquisitions during the year and continues to drive cost synergy
•Sustained achievement of our goals related to culture overall
|
|
|
Kevin T. Boyle
|
Goal Description
|
Implement a more robust and sustained engagement and awareness campaign to strengthen business relationships.
|
Complete company-wide ethics and compliance risk assessment.
|
Continue to solidify our global security and corporate real estate strategy.
|
Continue to evolve our culture in support of our values.
|
Individual Performance Assessment. In evaluating Mr. Boyle's performance, the Compensation Committee considered the following key factors:
•Expanded engagement and awareness of Vectrus' capabilities and activities across full end user customer set
•Continued execution of a supportive organization in delivering on our strategy
•Completed roll out of upgraded, scalable and proactive ethics and compliance program
•Successfully improved the integration of global security and corporate real estate functions in support of enterprise wide business advisory strategy
•Sustained achievement of our goals related to culture overall
Strategic Goals for 2021
Mr. Prow continues to refine the process of establishing and assessing goals for the leadership team, based on the needs of the business. In 2021, Mr. Prow envisions the leadership team executing on several multidisciplinary projects company wide. This approach is intended to generate better outcomes and accelerate the benefits.
LONG-TERM INCENTIVE PROGRAM
2020 LONG-TERM INCENTIVE AWARDS
Long-term incentive awards are intended to directly tie long-term compensation to long-term value creation and shareholder return. The 2020 long-term incentive program provided for a combination of TSR awards and RSUs to comprise the total long-term incentive award for each NEO. These components are incentives for absolute stock price performance and appreciation as well as TSR performance relative to the specific group of companies referenced below. The Compensation Committee set vesting terms for RSUs based on the Compensation Consultant's review and guidance regarding current competitive practice and its assessment of appropriate vesting terms and conditions for Vectrus. In determining the total long-term incentive award for each NEO, the Committee also considered individual performance.
The Compensation Committee weighted the 2020 long-term incentive awards as follows:
The 2020 long-term incentive awards for all NEOs were granted on March 5, 2020. A valuation based on the grant date was used to determine the number of RSUs granted pursuant to this allocation. The number of RSUs granted on March 5, 2020 was based on $53.05, the closing price of Vectrus common stock on the grant date.
The following table sets forth the value of 2020 long-term incentive award amounts for the NEOs granted during 2020, as determined by the Compensation Committee.
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Restricted Stock Unit
Award Value
($)
|
Restricted Stock Unit Awards
(# of Units)
|
Relative Total Shareholder Return Target Award
($)
|
Represents 50% of total award value
|
Represents 50% of total award value
|
Charles L. Prow
|
950,000
|
17,908
|
950,000
|
Susan D. Lynch
|
225,000
|
4,241
|
225,000
|
David A. Hathaway
|
175,000
|
3,299
|
175,000
|
Susan L. Deagle
|
175,000
|
3,299
|
175,000
|
Kevin T. Boyle
|
150,000
|
2,828
|
150,000
|
RESTRICTED STOCK UNIT COMPONENT
The Compensation Committee reviewed all proposed grants of RSUs to NEOs prior to their award, including awards based on performance, retention-based awards and awards contemplated for new employees as part of employment offers. Grants of RSUs provide executives with stock ownership of unrestricted shares after the restrictions lapse. NEOs were granted RSU awards because, in the judgment of the Compensation Committee and based on management’s recommendations, these individuals were in positions most likely to assist in the achievement of the Company’s long-term value creation goals and to create increased shareholder value over time. RSUs granted in 2020 vest in one-third annual installments on the first, second and third anniversaries of the grant date.
RELATIVE TOTAL SHAREHOLDER RETURN (TSR) AWARD COMPONENT
The TSR performance design for 2020 - 2022 compares the Company’s TSR performance relative to the TSR performance of the Aerospace and Defense companies in the S&P 1500 Index. In designing the program, the Compensation Committee determined that this would be an appropriate index for Vectrus to be measured against for relative total shareholder return performance. The Compensation Committee also determined to measure performance in a balanced manner with the following four performance periods weighted equally at 25%:
January 1, 2020 through December 31, 2020;
January 1, 2021 through December 31, 2021;
January 1, 2022 through December 31, 2022; and
January 1, 2020 through December 31, 2022.
The actual award payout factor will be determined based on the average of the payout factors for each of the four performance periods, determined as follows:
|
|
|
|
|
|
If the Company’s TSR performance relative to that of the Aerospace and Defense companies in the S&P 1500 Index is:
|
The Payout Factor is:
|
Less than the 35th percentile
|
0%
|
At the 35th percentile
|
50%
|
At the 50th percentile
|
100%
|
At the 80th percentile
|
200%
|
Actual results between the 35th percentile and the 80th percentile will be interpolated.
The potential award payout is capped at 200% of the target award as the Compensation Committee believes that having a cap helps mitigate excessive or inappropriate risk-taking.
VECTRUS TOTAL SHAREHOLDER RETURN AWARDS GRANTED IN 2018
The Compensation Committee approved and granted the 2018 TSR awards in March 2018. The awards were subject to a three-year performance period beginning January 1, 2018 through December 31, 2020 and measured in four individual periods, weighted equally, as follows: January 1, 2018 - December 31, 2018; January 1, 2019 - December 31, 2019; January 1, 2020 - December 31, 2020; and January 1, 2018 - December 31, 2020.
Following the end of the three-year performance period, Vectrus TSR performance was calculated for each of the four individual periods, relative to the Aerospace and Defense companies in the S&P 1500. Results are indicated below:
|
|
|
|
|
|
|
|
|
Individual Performance Period
|
Vectrus Percentile - Performance vs. Aerospace & Defense Companies in the S&P 1500 *
|
Payout Factor
|
January 1, 2018 - December 31, 2018
|
4.0 percentile
|
0.0%
|
January 1, 2019 - December 31, 2019
|
100.0 percentile
|
200.0%
|
January 1, 2020 - December 31, 2020
|
57.1 percentile
|
123.7%
|
January 1, 2018 - December 31, 2020
|
76.1 percentile
|
187.0%
|
Average Payout Factor:
|
|
127.7%
|
(*) Performance below the 35th percentile rank versus the Aerospace and Defense companies in the S&P 1500 Index results in a 0% Payout Factor for the applicable performance period. Payout percentages for performance between the 35th and 80th percentile rank are interpolated.
Following certification of Vectrus performance for the 2018 TSR awards, the Compensation Committee approved payouts in January 2021 at 127.7% of the target award. Payments in January 2021 to the NEOs were as follows:
|
|
|
|
|
|
|
|
|
Name
|
2018 Target Award
($)
|
Payout at 127.7%
($)
|
Charles L. Prow
|
800,000
|
1,021,600
|
David A. Hathaway
|
125,000
|
159,625
|
Susan L. Deagle
|
125,000
|
159,625
|
Kevin T. Boyle
|
125,000
|
159,625
|
Ms. Lynch did not receive a 2018 TSR award because she joined the Company in August 2019. TSR awards are discussed in more detail above at "Relative Total Shareholder Return (TSR) Award Component."
POST-EMPLOYMENT COMPENSATION
The Vectrus employer match contribution is 50% up to 8% of employee-elected deferrals based upon annual base compensation. All contributions are 100% vested.
Vectrus also established and maintains a non-qualified, unfunded Vectrus Systems Corporation Excess Savings Plan to provide key employees an opportunity to earn benefits in excess of the benefits that may be earned under the Vectrus 401(k) Plan. This plan is discussed in more detail in “Non-qualified Deferred Compensation for 2020” below.
SEVERANCE PLAN ARRANGEMENTS
The plans discussed below are described in more detail in "Payments Upon Termination or Change in Control." The severance plans apply to key Vectrus employees as defined by Section 409A. The Vectrus severance plan arrangements are not considered in determining other elements of compensation. All of the Vectrus NEOs were covered under the Senior Executive Severance Play Plan and the Special Senior Executive Severance Pay Plan.
SENIOR EXECUTIVE SEVERANCE PAY PLAN
The purpose of this plan is to provide a period of transition for senior executives. Senior executives who are U.S. citizens or who are employed in the United States are covered by this plan. The plan generally provides for severance payments if the Company terminates a senior executive’s employment without cause.
The exceptions to severance payments are:
|
|
|
|
|
|
l
|
the executive terminates his or her own employment;
|
l
|
the executive’s employment is terminated for cause; or
|
l
|
if the executive accepts employment or refuses comparable employment with a purchaser in a divestiture situation.
|
No severance is provided for termination for cause because the Company believes employees terminated for
cause should not receive additional compensation. No severance is provided where an executive accepts or refuses comparable employment in a divestiture situation because the executive had the opportunity to receive employment income from another party under comparable circumstances. All of the NEOs are covered under this plan. Effective October 2020, the Senior Executive Severance Pay Plan was amended to adjust the severance payable to the Company's President and Chief Executive Officer (CEO). The Plan provides that the CEO's severance pay shall be equal to the combination of the CEO's base salary and Target Annual Incentive Plan Bonus multiplied by the months of severance earned under the Plan.
SPECIAL SENIOR EXECUTIVE SEVERANCE PAY PLAN
The purpose of this plan is to provide compensation in the case of termination of employment in connection with an Acceleration Event (defined in "Payments Upon Termination or Change in Control"). The provisions of this plan are specifically designed to address the inability of senior executives to influence the Company's future performance after certain change in control events. The plan is structured to encourage executives to act in the best interests of shareholders by providing for certain compensation and retention benefits and payments, including change in control provisions, in the case of an Acceleration Event.
The purposes of these provisions are to:
|
|
|
|
|
|
l
|
provide for continuing cohesive operations as executives evaluate a transaction, which, without change in control protection, could be personally adverse to the executive;
|
l
|
keep executives focused on preserving value for shareholders;
|
l
|
retain key talent in the face of potential transactions; and
|
l
|
attract talented employees in the competitive marketplace.
|
As discussed above, this plan provides severance benefits for covered executives, including any NEO whose employment was terminated by the Company without cause, or where the covered executive terminated his or her employment for good reason within two years after the occurrence of an acceleration event as described below (including a termination due to death or disability) or if during the two-year period following an Acceleration Event, the covered executive had grounds to resign with good reason or the covered executive’s employment was terminated in contemplation of an Acceleration Event that ultimately occurred.
The plan is designed to put the executive in the same position, from a compensation and benefits standpoint, as he or she would have been in without the Acceleration Event. With respect to incentive plan awards, since the executive would no longer have the ability to influence the corporate objectives upon which the awards were based, the plan provides that any AIP awards be paid out at target.
CHANGE IN CONTROL ARRANGEMENTS
As described more fully in "Payments Upon Termination or Change in Control," the Compensation Committee has provided for treatment of short-term and long-term incentive plans, severance arrangements and the excess savings plan upon a change in control.
EMPLOYEE BENEFITS AND PERQUISITES
Vectrus executives are eligible to participate in Vectrus’ broad-based employee benefits programs, including medical, dental, vision coverage, and other specified benefit plans according to the plan documents.
PERQUISITES FOR THE NEOs
Vectrus provides only those perquisites that it considers to be reasonable and consistent with competitive practice. The Compensation Committee continues to review benefits and perquisites to assure they are reasonable and consistent with competitive practice.
OTHER CONSIDERATIONS AND POLICIES
CLAWBACK POLICY
The Board of Directors has adopted a clawback policy to provide for recoupment of performance-based
compensation if the Board of Directors determines that a senior executive has engaged in fraud or willful misconduct. This would include annual cash incentive and bonus awards and all forms of equity-based compensation to the extent such awards are performance-based. If, in the Board of Directors’ view, the compensation related to Vectrus’ financial performance would have been lower if it had been based on the restated results, the Board of Directors will, to the extent permitted by applicable law, seek recoupment from that senior executive of any portion of such compensation as it deems appropriate after a review of all relevant facts and circumstances. The NEOs, Senior Vice Presidents, Corporate Vice Presidents, executives who are direct reports to the President and CEO and their direct reports are covered by this policy.
EQUITY GRANT POLICY - CONSIDERATION OF MATERIAL NON-PUBLIC INFORMATION
Vectrus equity-based awards granted to NEOs, senior and other executives, and equity-based awards granted to Directors, are awarded and priced on the same date as the approval date or a subsequent date approved by the Compensation Committee for administrative reasons. Vectrus may also make equity-based grants in the case of the promotion of an existing employee or hiring of a new employee. These grants may be made at a time Vectrus is in possession of material non-public information related to the promotion or the hiring of a new employee or other matters. Vectrus does not time its release of material non-public information for the purpose of affecting the value of executive compensation, and executive compensation decisions are not timed to the release of material non-public information.
CONSIDERATION OF TAX AND ACCOUNTING IMPACTS
Section 162(m)- Section 162(m) of the Code as in effect prior to the enactment of the Tax Act in December 2017 placed a limit of $1,000,000 on the amount of compensation that Vectrus could deduct in any one year with respect to its "covered employees," which consisted of its Chief Executive Officer and the three other highest-paid named executive officers, other than the Chief Financial Officer. There was an exception to the $1,000,000 limitation for performance-based compensation meeting certain requirements.
The Tax Act retained the $1,000,000 deduction limit, but repealed the performance-based compensation exemption from the deduction limit and expanded the definition of “covered employees,” effective for taxable years beginning after December 31, 2017. Consequently, compensation paid in 2018 and later years to NEOs in excess of $1,000,000 is not deductible unless it qualifies for transitional relief applicable to certain binding, written performance-based compensation arrangements that were in place as of November 2, 2017.
The Compensation Committee generally intends to continue to comply with the requirements of Section
162(m) as it existed prior to the Tax Act with respect to performance-based compensation in excess of $1,000,000 payable under outstanding awards granted before November 2, 2017 under our 2014 Plan in order to qualify them for the transitional relief. However, no assurance can be given that the compensation associated with these awards will qualify for the transitional relief, due to ambiguities and uncertainties as to the application and interpretation of the revised Section 162(m) and the related requirements for transitional relief.
Section 409A - Vectrus plans are intended to comply with Section 409A of the Code, to the extent applicable. While Vectrus endeavors to comply with other applicable sections of the Code with respect to compensation, the Compensation Committee did not consider other tax implications when designing Vectrus’ compensation programs.
Excise Taxes - Vectrus provides “best-net” provisions with respect to any excise tax triggered by a change-in-control. Under these provisions, if payments triggered by a change-in-control would be subject to an excise tax, then either payments would be reduced by the amount needed to avoid triggering the tax, or no reduction of payments would occur, depending on which alternative left the executive in the better after-tax position.
POLICY AGAINST HEDGING, PLEDGING, SPECULATION IN COMPANY STOCK AND INSIDER TRADING
Vectrus has a policy that prohibits employees and Directors from taking advantage of, disclosing, or using any confidential information for the purpose of personal gain, including buying, selling, or trading in any Vectrus security. The policy includes prohibitions for Corporate Vice Presidents and above against hedging or pledging Vectrus securities, speculation or other investments where the shareowner’s economic interest is disassociated from share ownership. These prohibited transactions encompass the purchase of financial instruments, including short sales, forward contracts, equity swaps, collars, puts, calls or other derivative securities that are speculative in nature or designed to hedge or offset a decrease in market value of any Vectrus security (other than exercises of Company granted stock options). The Board of Directors has adopted a parallel policy that applies to Directors. In addition, Directors must receive specific written approval prior to entering into any transaction involving Vectrus securities. Directors and Corporate Vice Presidents and above also annually receive specific instructions with respect to trading in equity securities of Vectrus to ensure compliance with the Company's hedging, pledging, speculation and insider trading policies.
BUSINESS RISK AND COMPENSATION
Compensation across the enterprise is structured so that unnecessary or excessive risk-taking behavior is
discouraged. Total compensation for senior officers is heavily weighted toward long-term compensation consistent with the Vectrus compensation philosophy, which is focused on long-term value creation. This focus on long-term compensation discourages behaviors that encourage short-term risks. The President and Chief Executive Officer and the Senior Vice President and Chief Financial Officer attend those portions of the Compensation Committee meetings at which plan features and design configurations of annual and long-term incentive plans are considered and approved. Overall enterprise risk is reviewed and considered at the Committee and Board meetings, providing additional important information to the Compensation Committee.
Vectrus management recently conducted a risk assessment of our compensation policies and programs, including our executive compensation programs. This risk assessment is conducted annually. Vectrus management reviewed and discussed the findings of the assessment with the Compensation Committee and the full Board of Directors which concluded that our compensation programs are designed with an appropriate balance of risk and reward in relation to our overall business strategy and do not encourage excessive risk-taking behavior. As a result, we do not believe that risks relating to our compensation programs are reasonably likely to have a material adverse effect on the Company. The Compensation Committee reviewed management’s summary on the review and assessment of such compensation programs and approved these conclusions.
The Compensation Committee considered risk implications of our compensation programs during its deliberations on the design of our 2020 executive compensation programs, with the goal of appropriately balancing short-term and long-term performance.
The following table summarizes representative Vectrus compensation components or policies and relevant risk mitigation factors:
RISK ASSESSMENT ACROSS THE ENTERPRISE
|
|
|
|
|
|
|
|
|
VECTRUS COMPENSATION COMPONENT OR POLICY
|
RISK MITIGATION FACTOR
|
Base Salary
|
Based on market rates. Provides stability and minimizes risk-taking incentives.
|
Annual Incentive Plan
|
l
|
AIP design emphasizes overall performance and collaboration across the enterprise.
|
l
|
AIP components focus on metrics that encourage operating performance and that differ from those used for long-term incentive awards.
|
l
|
Individual AIP components and total AIP awards are capped.
|
l
|
Payments are made only after external audit review and Compensation Committee certification of performance to metrics and approval of the payments.
|
Long-Term Incentive Awards
-RSUs
|
RSUs vest annually in one-third increments over a three-year period.
|
-Total Shareholder Return Awards
|
TSR awards are based on relative share price performance over four separate periods (e.g., 2020, 2021, 2022 and 2020-2022) during a three-year cycle and encourage behaviors focused on long-term goals, while discouraging behaviors focused on short-term risks. Relative TSR is a different metric from those used for AIP awards.
|
Perquisites
|
Limited perquisites are based on competitive market data. (See "Employee Benefits and Perquisites - Perquisites for the NEOs.")
|
Severance
|
Severance plans are maintained by the Company in the event of termination without cause or in certain circumstances following a change in control of the Company.
|
Clawback Policy
|
Provides mechanism for senior executive compensation recapture in certain situations involving fraud or willful misconduct.
|
Officer Share Ownership Guidelines
|
Vectrus officers are required to own Vectrus shares or share equivalents up to 5 X base salary, depending on the level of the officer. In addition, the officers are required to hold shares until their guidelines are met. Share ownership guidelines align executive and shareholder interests and discourage executives from focusing on short-term results without regard for longer-term consequences.
|
Prohibition Against Pledging or Hedging or Speculation in Vectrus Securities
|
Vectrus policy prohibits Directors and Corporate Vice Presidents and above from pledging or hedging or speculative trading in and out of Vectrus securities, including short sales, forward contracts, equity swaps, collars, puts, calls or other derivative securities that are speculative in nature or designed to hedge or offset a decrease in market value of any Vectrus security (other than exercises of Company granted stock options).
|
Change in Control
|
Under the 2014 Plan and award agreements, a double trigger requires both consummation of the transaction and a qualifying termination for accelerated vesting of outstanding long-term incentive grants.
|
Pension Plans
|
Vectrus does not provide a traditional pension plan or supplemental executive retirement plan.
|
COMPENSATION TABLES
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation of our NEOs for 2018, 2019 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($) (a)
|
Stock
Awards ($) (b)
|
Option Awards ($) (c)
|
Non-equity Incentive Plan Compen-sation
($) (d)
|
Change in Pension Value and Non-Qualified Deferred Compen-sation Earnings
($) (e)
|
All Other Compen-sation
($) (f)
|
Total
($)
|
Charles L. Prow
President and Chief Executive Officer
|
2020
|
738,467
|
—
|
1,900,019
|
—
|
769,400
|
—
|
33,371
|
3,441,257
|
2019
|
700,003
|
—
|
1,599,994
|
—
|
645,300
|
—
|
102,766
|
3,048,063
|
2018
|
680,775
|
—
|
1,599,988
|
—
|
814,800
|
—
|
61,733
|
3,157,296
|
Susan D. Lynch
Senior Vice President and Chief Financial Officer (g)
|
2020
|
429,916
|
—
|
449,985
|
—
|
273,100
|
—
|
17,684
|
1,170,685
|
2019
|
168,700
|
—
|
450,001
|
—
|
93,000
|
—
|
819
|
712,520
|
David A. Hathaway Senior Vice President, Vectrus Programs
|
2020
|
394,038
|
—
|
350,012
|
—
|
234,500
|
—
|
15,124
|
993,674
|
2019
|
372,394
|
—
|
249,996
|
—
|
172,500
|
—
|
13,898
|
808,788
|
2018
|
365,019
|
25,000
|
249,999
|
—
|
233,700
|
—
|
13,598
|
887,316
|
Susan L. Deagle
Senior Vice President, Chief Growth Officer
|
2020
|
393,088
|
—
|
350,012
|
—
|
234,500
|
—
|
15,261
|
992,861
|
2019
|
362,336
|
—
|
249,996
|
—
|
195,000
|
—
|
13,656
|
820,988
|
2018
|
324,245
|
—
|
249,999
|
—
|
211,300
|
—
|
2,728
|
788,272
|
Kevin T. Boyle
Senior Vice President,
Chief Legal Officer and General Counsel (h)
|
2020
|
372,043
|
—
|
300,025
|
—
|
201,000
|
—
|
14,239
|
887,307
|
2019
|
365,019
|
—
|
249,996
|
—
|
184,300
|
—
|
11,012
|
810,327
|
(a)The amount in this column for 2018 represents a cash payment for Mr. Hathaway in connection with his offer of employment.
(b)Amounts in this column include the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for target TSR awards and RSUs. The assumptions used in calculating these amounts are incorporated herein by reference to Note 17 to the consolidated financial statements in the Vectrus Form 10-K for the year ended December 31, 2020. For the maximum value of TSR awards, see the table in "Grants of Plan-Based Awards in 2020".
(c)Amounts in this column represent the aggregate grant date fair value of option grants. No stock option grants were awarded in 2020.
(d)Amounts in this column reflect the AIP awards that were earned for the applicable performance year.
(e)Vectrus does not have a traditional pension plan; therefore, no values are reported.
(f)Amounts in this column represent items specified in the All Other Compensation table below.
(g)Ms. Lynch joined the Company in August 2019.
(h)Mr. Boyle was recognized as a named executive officer in 2019.
ALL OTHER COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Year
|
Perquisites
(a) ($)
|
Tax Reimburse-ments
(b) ($)
|
Excess Savings Plan Contributions
(c) ($)
|
401(k) Matching Contributions (d) ($)
|
Other
(e) ($)
|
Total All Other Compensation ($)
|
Charles L. Prow
|
2020
|
—
|
—
|
18,139
|
9,779
|
5,453
|
33,371
|
Susan D. Lynch
|
2020
|
—
|
—
|
5,797
|
9,921
|
1,966
|
17,684
|
David A. Hathaway
|
2020
|
—
|
—
|
4,362
|
9,851
|
911
|
15,124
|
Susan L. Deagle
|
2020
|
—
|
—
|
4,324
|
9,989
|
948
|
15,261
|
Kevin T. Boyle
|
2020
|
—
|
—
|
3,482
|
9,866
|
891
|
14,239
|
(a)The amounts in this column represent perquisite payments. No payments made to NEOs in 2020.
(b)The amounts in this column represent tax reimbursement payments. No payments made to NEOs in 2020.
(c)Contributions to the Vectrus Systems Corporation Excess Savings Plan are unfunded and earnings are credited at the same rate as the Stable Value Fund available to participants in the Vectrus 401(k) Plan.
(d)Amounts represent matching contributions during 2020 in the Vectrus 401(k) Plan, as follows: Mr. Prow (Company match $9,779, met IRS limit on employee deferral); Ms. Lynch (Company match $9,921, met IRS limit on employee deferral); Mr. Hathaway (Company match $9,851, met IRS limit on employee deferral); Ms. Deagle (Company match $9,989, met IRS limit on employee deferral); and Mr. Boyle (Company match $9,866, met IRS limit on employee deferral).
(e)Amounts represent taxable group term life insurance premiums paid for each NEO.
CEO PAY RATIO
In accordance with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are required to calculate and report an estimate of the ratio of the total compensation of our CEO to the total compensation of our median employee. The intended purpose of the disclosure is to provide a reasonable measure of the relationship of pay between the CEO and the median paid employee. His compensation is discussed in detail in "Individual Executive Positions - 2020 Compensation Information" earlier in this Proxy Statement. The Company believes its compensation philosophy and process represent a responsible approach toward CEO pay. The required disclosure is presented as follows:
|
|
|
|
|
|
Median Employee Total Annual Compensation:
|
$57,209
|
CEO Total Annual Compensation:
|
$3,441,257
|
Ratio of CEO Pay to Median Employee Compensation:
|
60.2 to 1.0
|
In determining the median employee, the Company prepared a listing of all employees as of October 31, 2020. This includes U.S. and non-U.S. employees who were full-time, part-time or temporary employees and those on an approved leave of absence. Approximately 6,000 subcontract employees were excluded from the analysis because their compensation is determined by unaffiliated third parties. The data examined were W-2 wages or foreign equivalent compensation paid from November 1, 2019 through October 31, 2020. The median was calculated directly from the arrayed data using taxable wages as the chosen consistently applied compensation measure ("CACM"). Once the median employee was determined, annual total compensation was calculated for that individual using the Summary Compensation Table rules for both the CEO and the median employee. As of October 31, 2020, the Company employed approximately 7,200 persons, excluding the CEO.
GRANTS OF PLAN-BASED AWARDS IN 2020
The following table summarizes awards made to our NEOs during the year ended December 31, 2020. Grants made to NEOs during 2020 were made under the 2014 Plan. The table includes the grant date for equity-based awards, the estimated future payouts under non-equity incentive plan awards (which consist of potential payouts for 2020 under the AIP), and estimated future payouts under the long-term incentive awards, which consist of potential payouts related to the TSR awards granted in 2020 for the 2020 - 2022 performance period. The table also provides the number of shares underlying all other stock awards, which consist of RSU awards, and the grant date fair value of each equity award computed under FASB ASC Topic 718.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Grant Date
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
(1)
|
Estimated Future Payouts Under Equity Incentive
Plan Awards
(2)
|
All Other Stock Awards: Number of Shares of Stock or Units (#) (3)
|
All Other Option Awards: Number of Securities Underlying Options
(#) (4)
|
Exercise or Base Price of Option Awards
($/Sh) (4)
|
Grant Date Fair Value of Stock and Option Awards
($) (5)
|
Threshold ($)
|
Target
($)
|
Maximum ($)
|
Threshold ($)
|
Target
($)
|
Maximum ($)
|
Charles L. Prow
|
|
393,753
|
787,506
|
1,575,012
|
|
|
|
|
|
|
|
1/1/2020
|
|
|
|
475,000
|
950,000
|
1,900,000
|
|
|
|
|
3/5/2020
|
|
|
|
|
|
|
17,908
|
|
|
950,019
|
Susan D. Lynch
|
|
139,756
|
279,512
|
559,024
|
|
|
|
|
|
|
|
1/1/2020
|
|
|
|
112,500
|
225,000
|
450,000
|
|
|
|
|
3/5/2020
|
|
|
|
|
|
|
4,241
|
|
|
224,985
|
David A. Hathaway
|
|
120,002
|
240,003
|
480,006
|
|
|
|
|
|
|
|
1/1/2020
|
|
|
|
87,500
|
175,000
|
350,000
|
|
|
|
|
3/5/2020
|
|
|
|
|
|
|
3,299
|
|
|
175,012
|
Susan L. Deagle
|
|
120,002
|
240,003
|
480,006
|
|
|
|
|
|
|
|
1/1/2020
|
|
|
|
87,500
|
175,000
|
350,000
|
|
|
|
|
3/5/2020
|
|
|
|
|
|
|
3,299
|
|
|
175,012
|
Kevin T. Boyle
|
|
102,892
|
205,783
|
411,566
|
|
|
|
|
|
|
|
1/1/2020
|
|
|
|
75,000
|
150,000
|
300,000
|
|
|
|
|
3/5/2020
|
|
|
|
|
|
|
2,828
|
|
|
150,025
|
(1)Amounts reflect the threshold, target, and maximum payment levels for commensurate performance under the AIP described above in “Compensation Discussion and Analysis - Compensation Program Objectives” if certain performance metrics are met. These potential payments are based on achievement of specific performance metrics and individual goals and are completely at risk. The target award is computed based upon the applicable range of net estimated payments denominated in dollars where the target award is equal to 100% of the award potential, the threshold is equal to 50% of target and the maximum is equal to 200% of target. The approved AIP formula for 2020 was based on performance measures and totals that would pay 97.7% of target for 100% achievement of the approved goals. Actual AIP awards for 2020 are shown in the Summary Compensation Table.
(2)Amounts reflect the threshold, target, and maximum payment levels, respectively, which are denominated in dollars, if an award payout is achieved under the Company's 2020 TSR awards. The 2020 TSR awards are subject to a three-year performance period from January 1, 2020 to December 31, 2022. The potential payments are based on achievement of specific approved performance as further described above in "Compensation Discussion and Analysis - Long-Term Incentive Program - Relative Total Shareholder Return (TSR) Award Component." TSR awards are completely at-risk compensation and payments, if any, are made in cash after the end of the performance period. The target amount shown is the grant date fair value.
(3)Amounts reflect the number of RSUs granted in 2020 to the NEOs. RSUs granted to NEOs vest in one-third annual installments on the first, second and third anniversaries of the grant date. The number of shares underlying the RSU awards granted on March 5, 2020 were determined based on $53.05, the closing price of Vectrus common stock on March 5, 2020. During the restriction period, holders of RSUs do not have voting rights.
(4)Stock options were not granted in 2020.
(5)Amounts in this column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for equity awards granted to the NEOs in 2020.
SPECIAL COMPENSATION ARRANGEMENTS
CHARLES L. PROW EMPLOYMENT LETTER AND OTHER MATTERS
On November 30, 2016, Vectrus and Charles L. Prow entered into an employment letter (the "Prow Employment Letter") setting forth the terms and conditions of his employment as President and Chief Executive Officer of the Company. The material terms of the Prow Employment Letter are set forth below.
1.Compensation and Benefits.
a.Annual Base Salary. Mr. Prow’s initial base salary was $600,000.
b.2017 Target Annual Incentive. Mr. Prow is eligible to participate in the Company’s Annual Incentive Plan with a target award of 100% of his annual base salary, starting in 2017.
c.Long-Term Incentives. Mr. Prow is eligible for annual long-term incentive awards with an aggregate long-term incentive target for 2017 of $900,000 under the Company’s Long-Term Incentive Program, subject to approval by the Compensation Committee. It was anticipated that fifty percent (50%) of his 2017 long-term incentive award would be in the form of a cash incentive opportunity tied to relative total shareholder return; thirty percent (30%) would be in the form of time-vesting RSUs; and twenty percent (20%) would be in the form of time-vesting non-qualified stock options. In addition, as a one-time incentive, on December 8, 2016, he received a special RSU grant valued at $600,000 with annual vesting over three years.
d.Other Benefit Programs. Mr. Prow is eligible to participate in the Company’s compensation and benefit plans, policies and arrangements that are applicable to other executives, including the Company’s Senior Executive Severance Pay Plan and Special Senior Executive Severance Pay Plan. Mr. Prow is an at-will employee.
Housing Costs. On February 24, 2017, the Compensation Committee approved a housing allowance for Mr. Prow in the amount of $3,000 per month. Mr. Prow, who was hired in December 2016 and worked primarily at the Company’s Reston, Virginia office until his recent relocation to Colorado Springs in January 2019, was expected to spend a substantial amount of time in Colorado Springs, Colorado (the location of the Company’s headquarters). The Committee approved the housing allowance, which was not grossed up for taxes, following the Company’s cost analysis that indicated that the allowance would be less expensive than estimated hotel costs for his visits to Colorado Springs. The Company previously paid a total of $2,827 in 2017 for short-term apartment rental costs in Colorado Springs. The housing allowance was discontinued effective March 2019.
Relocation Costs. In February 2019, the Compensation Committee approved reimbursement of Mr. Prow's
relocation costs (less the total amount of housing allowance previously paid, $72,000) in connection with his move to Colorado Springs, Colorado. Accordingly, Mr. Prow was reimbursed $65,310, which included a gross up for taxes of $28,724, on April 2, 2019.
SUSAN L. DEAGLE EMPLOYMENT LETTER
On March 13, 2017, Vectrus and Ms. Deagle entered into an employment letter (the "Deagle Employment Letter") setting forth the terms and conditions of her employment as Senior Vice President and Chief Growth Officer of the Company. Ms. Deagle joined the Company on May 1, 2017. The material terms of the Deagle Employment Letter are set forth below.
1.Compensation and Benefits.
a.Annual Base Salary. Ms. Deagle’s initial base salary was $300,019.
b.Cash Sign-on Payment. Ms. Deagle received a cash sign-on payment (for equity that she forfeited at her then-current employer) of $75,000, subject to repayment (net of taxes) if Ms. Deagle voluntarily terminated her employment within one year of her start date.
c.2017 Target Annual Incentive. Ms. Deagle is eligible to participate in the Company’s Annual Incentive Plan. She was eligible for a target award of 50% of her annual base salary in 2017, and the award was prorated based on the number of months worked in 2017.
d.Long-Term Incentives. Ms. Deagle is eligible to participate in the Company's Long-Term Incentive Program, subject to approval of her awards by the Compensation Committee. For 2017, she was recommended for a total target award of $250,000, comprised of 50% in the form of a cash target related to relative total shareholder return (subject to a three-year performance period beginning January 1, 2017 through December 31, 2019), 20% in non-qualified stock options and 30% in RSUs. The options and RSUs will vest in one-third installments on the first, second and third anniversaries of the grant date.
e.Other Benefit Programs. Ms. Deagle is eligible to participate in the Company’s benefit plans that are applicable to other employees.
DAVID A. HATHAWAY EMPLOYMENT LETTER AND OTHER MATTERS
On September 4, 2017, Vectrus and Mr. Hathaway (currently our Senior Vice President, Programs) entered into an employment letter (the "Hathaway Employment Letter") setting forth the terms and conditions of his employment as Senior Vice President, Information Technology & Network Communications Services of the Company. Mr. Hathaway joined the Company on October 10, 2017. The material terms of the Hathaway Employment Letter are set forth below.
1.Compensation and Benefits.
a.Annual Base Salary. Mr. Hathaway's initial base salary was $365,019.
b.Cash Sign-on Payment. Mr. Hathaway was eligible for and paid a cash sign-on payment of $130,000 as recognition of the annual bonus forfeited from his previous employer, subject to repayment (net of taxes) if Mr. Hathaway voluntarily terminated his employment within one year of his start date.
c.Restricted Stock Units. Mr. Hathaway received an award of RSUs valued at $60,000, which was intended to replace equity at his then-current employer, which was scheduled to vest in 2018. The RSUs were granted five business days following his date of hire and will vest in one-third annual installments on the first, second and third anniversaries of the grant date.
d.2017 Target Annual Incentive. Mr. Hathaway is eligible to participate in the Company’s Annual Incentive Plan. He was eligible for a target award of 55% of his annual base salary for 2017 and the award was prorated based on the number of months worked in 2017.
e.Additional Cash Payment. Mr. Hathaway received a lump sum payment of $50,000 structured over a two-year period. $25,000 was paid within one month of his date of hire and the remaining $25,000 was paid on or about his one year anniversary with the Company. The payment was subject to repayment (net of taxes) if Mr. Hathaway voluntarily terminated his employment within one year of his start date.
f.Long-Term Incentives. Mr. Hathaway is eligible to participate in the Company's Long-Term Incentive Program, subject to approval of his awards by the Compensation Committee. For 2017, he was recommended for a total target award of $250,000, comprised of 50% in the form of a cash target related to relative total shareholder return (subject to a three-year performance period beginning January 1, 2017 through December 31, 2019), 20% in non-qualified stock options and 30% in RSUs. The options and RSUs will vest in one-third installments on the first, second and third anniversaries of the grant date.
g.Benefit Programs. Mr. Hathaway is eligible to participate in the Company’s benefit plans that are applicable to other employees.
KEVIN T. BOYLE EMPLOYMENT LETTER AND OTHER MATTERS
On October 3, 2018, Vectrus and Mr. Boyle entered into an employment letter (the "Boyle Employment Letter") setting forth the terms and conditions of his employment as Senior Vice President, Chief Legal Officer and General Counsel of the Company. Mr. Boyle joined the Company on October 15, 2018. The material terms of the Boyle Employment Letter are set forth below.
1.Compensation and Benefits.
a.Annual Base Salary. Mr. Boyle's initial base salary was $365,019.
b.2018 Target Annual Incentive. Mr. Boyle is eligible to participate in the Company’s Annual Incentive Plan. He was eligible for a target award of 55% of his annual base salary for 2018 and the award was prorated based on the number of months worked in 2018.
c.Long-Term Incentives. Mr. Boyle is eligible to participate in the Company's Long-Term Incentive Program, subject to approval of his awards by the Compensation Committee. For 2018, he was recommended for a total target award of $250,000, comprised of 50% in the form of a cash target based on the Company's relative total shareholder return performance (subject to a three-year performance period beginning January 1, 2018 through December 31, 2020) and 50% in the form of restricted stock units that will vest in one third-installments on the first, second and third anniversaries of the grant date.
d.Benefit Programs. Mr. Boyle is eligible to participate in the Company’s benefit plans that are applicable to other employees.
SUSAN D. LYNCH EMPLOYMENT LETTER AND OTHER MATTERS
On July 7, 2019, Vectrus and Ms. Lynch entered into an employment letter (the "Lynch Employment Letter") setting forth the terms and conditions of her employment. Ms. Lynch was appointed Senior Vice President and Chief Financial Officer of the Company effective August 8, 2019. The material terms of the Lynch Employment Letter are set forth below.
1.Compensation and Benefits.
a.Annual Base Salary. Ms. Lynch's initial base salary was $430,019.
b.2019 Target Annual Incentive. Ms. Lynch is eligible to participate in the Company’s Annual Incentive Plan. She was eligible for a target award of 65% of her annual base salary for 2019 and the award was prorated based on the number of months worked in 2019.
c.Long-Term Incentives. Ms. Lynch is eligible to participate in the Company's Long-Term Incentive Program, subject to approval of her awards by the Compensation Committee. For 2019, she was recommended for a total target award of $450,000, comprised of 50% in the form of a cash target based on the Company's relative total shareholder return performance (subject to a three-year performance period beginning January 1, 2019 through December 31, 2021) and 50% in the form of restricted stock units that will vest in one third-installments on the first, second and third anniversaries of the grant date.
d.Benefit Programs. Ms. Lynch is eligible to participate in the Company’s benefit plans that are applicable to other employees.
OUTSTANDING EQUITY AWARDS AT 2020 FISCAL YEAR END
The following table sets forth summary information regarding the outstanding equity awards held by our NEOs at December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
Name
|
Grant Date
|
Number of Securities Underlying Unexercised Options Exercisable
(#)
|
Number of Securities Underlying Unexercised Options Unexercisable
(#) (1)
|
Option Exercise Price
($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not Vested
(#) (1)
|
Market Value of Shares or Units of Stock That Have Not Vested
($) (2)
|
Charles L. Prow
|
3/3/2017
|
21,898
|
—
|
21.98
|
3/3/2027
|
—
|
—
|
3/5/2018
|
—
|
—
|
—
|
—
|
7,931
|
394,329
|
3/4/2019
|
—
|
—
|
—
|
—
|
19,226
|
955,917
|
3/5/2020
|
—
|
—
|
—
|
—
|
17,908
|
890,386
|
Susan D. Lynch
|
8/8/2019
|
—
|
—
|
—
|
—
|
3,450
|
171,534
|
3/5/2020
|
—
|
—
|
—
|
—
|
4,241
|
210,863
|
David A. Hathaway
|
10/17/2017
|
4,026
|
—
|
32.49
|
10/17/2027
|
—
|
—
|
3/5/2018
|
—
|
—
|
—
|
—
|
1,239
|
61,603
|
3/4/2019
|
—
|
—
|
—
|
—
|
3,004
|
149,359
|
3/5/2020
|
—
|
—
|
—
|
—
|
3,299
|
164,026
|
Susan L. Deagle
|
5/8/2017
|
5,618
|
—
|
26.05
|
5/8/2027
|
—
|
—
|
3/5/2018
|
—
|
—
|
—
|
—
|
1,239
|
61,603
|
3/4/2019
|
—
|
—
|
—
|
—
|
3,004
|
149,359
|
3/5/2020
|
—
|
—
|
—
|
—
|
3,299
|
164,026
|
Kevin T. Boyle
|
10/22/2018
|
—
|
—
|
—
|
—
|
1,448
|
71,995
|
3/4/2019
|
—
|
—
|
—
|
—
|
3,004
|
149,359
|
3/5/2020
|
—
|
—
|
—
|
—
|
2,828
|
140,608
|
(1)These awards vest in one-third annual installments on the applicable anniversaries of the grant date.
(2)Reflects the Company's closing stock price of $49.72 per share on December 31, 2020.
OPTION VESTING SCHEDULE
Generally, stock options vest on the applicable anniversary of the grant date. Options vest in one-third cumulative annual installments on the first, second and third anniversaries of the grant date. Stock options were not granted in 2018, 2019 or 2020.
|
|
|
|
|
|
|
|
|
Name
|
Grant Date
|
Vesting Schedule
|
|
Charles L. Prow
|
—
|
—
|
Susan D. Lynch
|
—
|
—
|
David A. Hathaway
|
—
|
—
|
Susan L. Deagle
|
—
|
—
|
Kevin T. Boyle
|
—
|
—
|
RESTRICTED STOCK UNIT VESTING SCHEDULE
Generally, RSUs vest on the applicable anniversary of the grant date. Except as otherwise noted, RSUs vest in one-third annual installments on the first, second and third anniversaries of the grant date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Grant Date
|
Vesting Schedule
(#)
|
2021
|
2022
|
2023
|
Charles L. Prow
|
3/5/2018
|
7,931
|
|
|
|
3/4/2019
|
9,613
|
|
9,613
|
|
|
3/5/2020
|
5,970
|
|
5,969
|
|
5,969
|
|
Susan D. Lynch
|
8/8/2019
|
1,725
|
|
1,725
|
|
|
3/5/2020
|
1,414
|
|
1,414
|
|
1,413
|
|
David A. Hathaway
|
3/5/2018
|
1,239
|
|
|
|
3/4/2019
|
1,502
|
|
1,502
|
|
|
3/5/2020
|
1,100
|
|
1,100
|
|
1,099
|
|
Susan L. Deagle
|
3/5/2018
|
1,239
|
|
|
|
3/4/2019
|
1,502
|
|
1,502
|
|
|
3/5/2020
|
1,100
|
|
1,100
|
|
1,099
|
|
Kevin T. Boyle
|
10/22/2018
|
1,448
|
|
|
|
3/4/2019
|
1,502
|
|
1,502
|
|
|
3/5/2020
|
943
|
|
943
|
|
942
|
|
OPTION EXERCISES AND STOCK VESTED
The following table summarizes the option exercises and vesting of RSUs for each of our NEOs in 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
Name
|
Number of Shares Acquired on Exercise
(#)
|
Value Realized on Exercise
($) (1)
|
Number of Shares Acquired on Vesting
(#)
|
Value Realized on Vesting
($) (2)
|
Charles L. Prow
|
—
|
—
|
21,639
|
|
1,160,665
|
|
Susan D. Lynch
|
—
|
—
|
1,726
|
|
86,783
|
|
David A. Hathaway
|
—
|
—
|
4,125
|
|
203,365
|
|
Susan L. Deagle
|
—
|
—
|
3,700
|
|
193,649
|
|
Kevin T. Boyle
|
—
|
—
|
2,950
|
|
139,316
|
|
(1)Represents the difference between the market price of a share of Vectrus common stock on the date of exercise, and the exercise price per share, multiplied by the number of shares acquired upon exercise.
(2)The aggregate value realized on the date of vesting of the RSUs is based on the average of high and low prices of Vectrus common stock on the date of vesting, multiplied by the number of shares acquired upon vesting. The value realized for these NEOs is based on $53.83 per share on the vesting date of March 3, 2020, $53.43 per share on the vesting date of March 4, 2020, $53.79 per share on the vesting date of March 5, 2020, $48.75 per share on the vesting date of May 8, 2020, $50.28 per share on the vesting date of August 8, 2020, $40.80 per share on the vesting date of October 17, 2020 and $40.79 per share on the vesting date of October 22, 2020, as calculated below.
PENSION BENEFITS
Prior to the Spin-off, the NEOs participated in pension plans provided by Exelis. Vectrus has not adopted a pension plan, and does not provide pension benefits to the NEOs.
NON-QUALIFIED DEFERRED COMPENSATION FOR 2020
EXCESS SAVINGS PLAN
The Vectrus Systems Corporation Excess Savings Plan provides our key employees with an opportunity to earn retirement savings benefits in excess of the retirement benefits they may contribute under our 401(k) Plan. Section 415 of the Code limits the amount of compensation that can be used to determine employee and employer contribution amounts ($285,000 in 2020) to the 401(k) Plan. The benefit that is provided to an employee under an excess benefit plan generally amounts to the difference between what the employee
would have received under the employer's qualified retirement plan without applying the Section 415 limitations and what the employee actually receives under the qualified retirement plan.
The Vectrus Systems Corporation Excess Savings Plan is a non-qualified unfunded savings plan. All balances under this plan are maintained on the books of Vectrus. Vectrus contributes to the participant's excess savings account at 4% of eligible base compensation. Participant investment earnings are based on the Guaranteed Income Fund - Stable Value Fund in the Vectrus 401(k) Plan. Benefits will be paid to the NEO in a lump sum in the seventh month following the last day worked by such NEO.
DEFERRED COMPENSATION
The following table shows the activity within the Excess Savings Plan for the NEOs for 2020.
NON-QUALIFIED DEFERRED COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Executive Contributions in Last FY
($) (a)
|
Registrant Contributions in Last FY
($) (b) (1)
|
Aggregate Earnings in Last FY
($) (c)
|
Aggregate Withdrawals/ Distributions
($) (d)
|
Aggregate Balance at Last FYE
($) (e) (2)
|
Charles L. Prow
|
—
|
18,139
|
1,023
|
—
|
64,669
|
Susan D. Lynch
|
—
|
5,797
|
18
|
—
|
5,815
|
David A. Hathaway
|
—
|
4,362
|
161
|
—
|
11,919
|
Susan L. Deagle
|
—
|
4,324
|
118
|
—
|
9,760
|
Kevin T. Boyle
|
—
|
3,482
|
76
|
—
|
6,967
|
(1)The amounts in this column are also included in the Summary Compensation Table and in the All Other Compensation Table as Excess Savings Plan Contributions.
(2)The following amounts of the aggregate balance from the table were reported in previous summary compensation tables: Mr. Prow - $45,507, Mr. Hathaway - $7,396, Ms. Deagle - $5,318, and Mr. Boyle - $3,409.
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
In this section, we discuss the compensation payable (including accelerated vesting of equity awards) in the event of a change in control and employment termination under several different circumstances, including voluntary termination, termination for cause, death, disability, termination without cause and termination in connection with a change in control.
The amounts shown in the Potential Post-Employment Compensation table are estimates, assuming the triggering event occurred on December 31, 2020. Values attributed to accelerated vesting of equity-based awards are based on Vectrus’ closing stock price on December 31, 2020, which was $49.72.
PAYMENTS AND BENEFITS PROVIDED GENERALLY TO SALARIED EMPLOYEES
The amounts shown in the table below do not include payments and benefits to the extent these payments and benefits are provided on a non-discriminatory basis to salaried employees generally upon termination of employment. These include:
|
|
|
|
|
|
l
|
Accrued salary and paid time off; and
|
l
|
Amounts currently vested under the Vectrus Excess Savings Plan.
|
No perquisites are provided to the NEOs upon a change in control or in any of the post-employment circumstances shown in the table below.
SEVERANCE AND CHANGE IN CONTROL
SENIOR EXECUTIVE SEVERANCE PAY PLAN
The purpose of this plan is to provide a period of transition for senior executives. Senior executives who are U.S. citizens or who are employed in the United States are covered by this plan. The plan generally provides for severance payments if Vectrus terminates a senior executive’s employment without cause. The amount of severance pay under this plan depends on the executive’s base salary (and, in the case of Mr. Prow, target annual incentive opportunity) and years of service. The severance benefit begins at 12 months of pay for less than four years of service and increases to 18 months of pay for service of nine years or more. The executives are also eligible to continue receiving subsidized health and welfare benefits during the severance payment period. Vectrus considers these severance pay provisions appropriate given the job responsibilities and competitive market in which senior executives function. Vectrus’ obligation to continue severance payments stops if the executive does not comply with the Vectrus Code of Conduct or applicable Vectrus Corporate Policies. Vectrus considers this cessation provision to be critical to Vectrus’ emphasis on ethical behavior. Vectrus’ obligation to continue severance payments also ends if the executive engages in any activity inimical to the best interests of Vectrus, disparages Vectrus, induces employees to leave Vectrus without our consent or does not comply with non-competition provisions of this plan. These provisions protect the integrity of our business and are consistent with typical business arrangements. If a covered executive receives or is entitled to receive other severance or similar compensation under another Vectrus plan or agreement or under applicable law, the amount of that other compensation will reduce amounts otherwise payable under this plan, to the extent such offsetting would not violate Code Section 409A. The severance is paid in equal installments over the applicable severance period.
The exceptions to severance payments are:
|
|
|
|
|
|
l
|
the executive terminates his or her own employment;
|
l
|
the executive’s employment is terminated for cause, death or disability; or
|
l
|
the executive accepts employment or refuses comparable employment with a purchaser in a divestiture situation.
|
Assuming a termination by Vectrus without cause on December 31, 2020, Mr. Prow and Ms. Deagle would have been entitled to 13 months of severance, and Messrs. Hathaway and Boyle and Ms. Lynch would have been entitled to 12 months of severance.
SPECIAL SENIOR EXECUTIVE SEVERANCE PAY PLAN
The purpose of this plan is to provide compensation in the case of termination of employment in connection with an Acceleration Event (as defined below). The provisions of
this plan are specifically designed to address the inability of senior executives to influence the Company's future performance after certain change in control events. The plan is structured to encourage executives to act in the best interests of shareholders without regard to the potential impact a change in control transaction might have with respect to his or her employment by providing severance protections for terminations that arise in connection with a change in control transaction. The following describes the terms of the plan as in effect on December 31, 2020.
The purposes of these provisions are to:
|
|
|
|
|
|
l
|
provide for continuing cohesive operations as executives evaluate a transaction, which, without change in control protection, could be personally adverse to the executive;
|
l
|
keep executives focused on preserving value for shareholders;
|
l
|
retain key talent in the face of potential transactions; and
|
l
|
attract talented employees in the competitive marketplace.
|
As discussed above, this plan provides severance benefits for covered executives, including the NEOs, if their employment is terminated (i) by the Company without cause within two years after a change in control transaction or prior to a change in control transaction if the termination occurs after public announcement of the transaction (provided the transaction is consummated) or the termination is at the request of a party to the transaction, or (ii) where the covered executive terminates his or her employment for good reason (including a termination due to death or disability if at the time of such termination the executive could have resigned for good reason) within two years after a change in control transaction.
This plan provides four tiers of benefits for covered executives, based on their position within the Company and the criticality of their role in a change in control transaction. The Compensation Committee, working in concert with the independent Compensation Consultant, considered four tiers of benefits appropriate based on the relative ability of each tier of employee to influence future Company performance. In the event of a covered termination under this plan on December 31, 2020, the executive would have been entitled to:
|
|
|
|
|
|
l
|
any accrued but unpaid base salary and paid time off, any earned but unpaid bonus (AIP payment) relating to the preceding year, unreimbursed expenses and any amounts to which the executive is entitled under applicable employee benefit plans;
|
l
|
two and a half (2.5) (in the case of Mr. Prow), two (2.0) (in the case of Ms. Lynch and Mr. Boyle) and one and a half (1.5) (in the case of Mr. Hathaway and Ms. Deagle) times the executive’s annual base salary and target annual incentive opportunity at the time of the termination, paid in equal installments; and
|
l
|
continuation of health insurance benefits at the same levels for the length of the COBRA continuation period.
|
If payments triggered by a change in control transaction would constitute excess parachute payments for purposes of Code Section 280G, then either: (1) payments would be reduced by the amount needed to avoid triggering Code Section 280G, or (2) no reduction of payments would occur, depending on which alternative leaves the executive in a better after-tax position.
As of December 31, 2020, Mr. Prow is covered at the Tier 1 level of benefits of 2.5 times, Ms. Lynch and Mr. Boyle are covered at the Tier 2 level of benefits of 2.0 times, and Mr. Hathaway and Ms. Deagle are covered at the Tier 3 level of benefits of 1.5 times. Effective February 2021, the Compensation Committee approved an amendment to the Special Senior Executive Severance Pay Plan which increased the level of benefits for Mr. Hathaway and Ms. Deagle to the Tier 2 level of benefits of 2.0 times.
EFFECT OF A CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT ON ANNUAL INCENTIVE AWARDS, EQUITY AWARDS AND THE EXCESS SAVINGS PLAN
Annual Incentive Awards. Under the AIP, upon a change in control, the AIP awards for the year of the change in control would be paid at the greater of “target” or actual achievement as of the date of the change in control event. Since the AIP awards would have been earned as of December 31, 2020 based on continued employment through such date, and actual performance exceeded target, we have not reflected the 2020 AIP awards in the table below. The NEO’s AIP awards for 2020, including the target opportunities and the actual amounts earned, are discussed in the Compensation Discussion and Analysis section of this Proxy Statement.
Long-Term Incentive Awards. No outstanding long-term incentive awards accelerate solely upon a change in control transaction; however, vesting is accelerated in the event of certain termination of employment scenarios. Following is a description of how the awards are treated upon different termination events.
Stock Options. The stock options become fully vested upon termination due to death or disability. Upon termination due to retirement (termination at or after age 60 with at least 5 years of service, other than termination by the Company for cause or due to death or disability), a prorated portion of the option will continue to vest on the applicable vesting dates based on the number of full months of employment during the vesting period, and any remaining unvested portion will expire unless the option holder agrees to comply with the non-competition covenants contained in the stock option agreement, in which case the option will vest without proration on each subsequent vesting date as if employment had continued. If the option holder is not retirement eligible upon voluntary resignation or termination by the Company without cause, the unvested portions of the option expire immediately, except that if employment is terminated by the Company without cause or by the option holder for good reason within 24 months following a change in control transaction, the options become fully vested.
RSUs. The RSUs become fully vested upon termination due to death or disability. Upon termination due to retirement (termination at or after age 60 with at least 5 years of service, other than termination by the Company for cause or due to death or disability) or termination by the Company without cause, a prorated portion of the RSUs will continue to vest on the applicable vesting dates based on the number of full months of employment during the vesting period, and any remaining unvested portion will be forfeited unless the RSU holder agrees to comply with the non-competition covenants contained in the RSU agreement, in which case the RSUs will vest without proration on each subsequent vesting date as if employment had continued. If the RSU holder is not retirement eligible upon voluntary resignation, the unvested portions of the RSUs will be forfeited. If employment is terminated by the Company without cause or by the option holder for good reason within 24 months following a change in control transaction, the RSUs become fully vested.
TSR Awards. Upon termination due to death or disability, the TSR awards remain eligible to vest based on actual performance over the performance period (or as determined upon a change in control event as described below if such an event occurs during the performance period) as if the award holder had remained employed. Upon termination due to retirement (termination at or after age 60 with at least 5 years of service, other than termination by the Company for cause or due to death or disability) or termination by the Company without cause, a prorated portion of the TSR award will remain eligible to vest based on actual performance over the performance period (or as determined upon a change in control event as described below if such an event occurs during the performance period) as if employment had continued, and any remaining unvested portion will expire unless the termination was due to retirement and the award holder agrees to comply with the non-competition covenants contained in the TSR award agreement, in which case the
portion of the award that vests will not be prorated. If the award holder is not retirement eligible upon voluntary resignation, the unvested portions of the award will be forfeited. If employment is terminated by the Company without cause or by the award holder for good reason within 24 months following a change in control transaction, the award becomes fully vested, with a prorated portion of the award determined by calculating the average performance over any completed and open performance periods (based on actual performance through the date of the change in control event) and the remainder based on assumed target performance.
Each of the NEOs has accepted the terms and conditions with respect to their awards, including restrictive covenants. None of the NEOs were retirement eligible (age 60 with 5 years of service) for purposes of their long-term incentive awards on December 31, 2020.
Vectrus Systems Corporation Excess Savings Plan. Payment of the NEOs’ accounts under this plan would be triggered by a change in control or a termination of employment or death of the NEO. The definition of change in control under this plan is consistent with the corresponding definition under Code Section 409A. Since there is no accelerated vesting or other enhancement of benefits under the plan, we have not disclosed the NEOs’ accounts in the table below. For information regarding this plan and the NEOs’ aggregate balances as of December 31, 2020, see the “Non-Qualified Deferred Compensation” table above.
Additional Information. The change in control and employment termination provisions in these plans and agreements are intended to provide protections in the context of change in control transaction and certain termination events so that the executives can focus on preserving value for shareholders when evaluating situations that, without these provisions, could be personally adverse to the executive. Except for the Vectrus Systems Corporation Excess Savings Plan, which defines a change in control by reference to the corresponding definition under Code Section 409A, as of December 31, 2020, change in control was defined as one of the following acceleration events ("Acceleration Events") for purposes of these plans and agreements:
1.A report on Schedule 13D was filed with the SEC disclosing that any person, other than Vectrus or one of its subsidiaries or any employee benefit plan that is sponsored by Vectrus or a subsidiary, had become the beneficial owner of 30% or more of Vectrus’ outstanding stock;
2.A person other than Vectrus or one of its subsidiaries or any employee benefit plan that is sponsored by Vectrus or a subsidiary purchased Vectrus shares in connection with a tender or exchange offer, if after consummation of the offer the person purchasing the shares is the beneficial owner of 30% or more of Vectrus outstanding stock;
3.The consummation of:
(a)any consolidation, business combination or merger of Vectrus other than a consolidation, business combination or merger in which the shareholders of Vectrus immediately prior to the merger would hold 50% or more of the combined voting power of Vectrus or the surviving corporation of the merger and would have the same proportionate ownership of common stock of the surviving corporation that they held in Vectrus immediately prior to the merger; or
(b)any sale, lease, exchange or other transfer of all or substantially all of the assets of Vectrus;
4.A majority of the members of the Board of Directors of Vectrus changed within a 12-month period, unless the election or nomination for election of each of the new Directors by Vectrus’ shareholders had been approved by two-thirds of the Directors still in office who had been Directors at the beginning of the 12-month period or whose nomination for election or election was recommended or approved by a majority of Directors who were Directors at the beginning of the 12-month period; or
5.Any person other than Vectrus or one of its subsidiaries or any employee benefit plan sponsored by Vectrus or a subsidiary became the beneficial owner of 30% or more of Vectrus outstanding stock.
The Potential Post-Employment Compensation table on the following page provides additional information.
POTENTIAL POST-EMPLOYMENT COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive*
|
Resignation (a)($)
|
Termination for Cause
(b)($)
|
Death
(c)($)
|
Disability
(d)($)
|
Termination Not For Cause
(e)($)
|
Change in Control and Termination Not For Cause or With Good Reason
(f)($)
|
Charles L. Prow
|
|
|
|
|
|
|
Severance (1)
|
0
|
|
0
|
|
0
|
|
0
|
|
1,675,831
|
|
3,868,511
|
|
2019 - 2021 TSR Award (2)
|
0
|
|
0
|
|
1,047,400
|
|
1,047,400
|
|
698,302
|
|
1,197,888
|
|
2020 - 2022 TSR Award (2)
|
0
|
|
0
|
|
1,021,250
|
|
1,021,250
|
|
340,383
|
|
1,045,162
|
|
Unvested RSUs (3)
|
0
|
|
0
|
|
2,240,632
|
|
2,240,632
|
|
876,812
|
|
2,240,632
|
|
Total
|
0
|
|
0
|
|
4,309,282
|
|
4,309,282
|
|
3,591,328
|
|
8,352,193
|
|
Susan D. Lynch
|
|
|
|
|
|
|
Severance (1)
|
0
|
|
0
|
|
0
|
|
0
|
|
444,010
|
|
1,448,013
|
|
2019 - 2021 TSR Award (2)
|
0
|
|
0
|
|
294,581
|
|
294,581
|
|
196,397
|
|
336,906
|
|
2020 - 2022 TSR Award (2)
|
0
|
|
0
|
|
241,875
|
|
241,875
|
|
80,617
|
|
247,538
|
|
Unvested RSUs (3)
|
0
|
|
0
|
|
382,397
|
|
382,397
|
|
81,242
|
|
382,397
|
|
Total
|
0
|
|
0
|
|
918,853
|
|
918,853
|
|
802,266
|
|
2,414,854
|
|
David A. Hathaway
|
|
|
|
|
|
|
Severance (1)
|
0
|
|
0
|
|
0
|
|
0
|
|
413,996
|
|
981,483
|
|
2019 - 2021 TSR Award (2)
|
0
|
|
0
|
|
163,656
|
|
163,656
|
|
109,110
|
|
187,170
|
|
2020 - 2022 TSR Award (2)
|
0
|
|
0
|
|
188,125
|
|
188,125
|
|
62,702
|
|
192,530
|
|
Unvested RSUs (3)
|
0
|
|
0
|
|
374,988
|
|
374,988
|
|
143,194
|
|
374,988
|
|
Total
|
0
|
|
0
|
|
726,769
|
|
726,769
|
|
729,002
|
|
1,736,171
|
|
Susan L. Deagle
|
|
|
|
|
|
|
Severance (1)
|
0
|
|
0
|
|
0
|
|
0
|
|
442,530
|
|
972,962
|
|
2019 - 2021 TSR Award (2)
|
0
|
|
0
|
|
163,656
|
|
163,656
|
|
109,110
|
|
187,170
|
|
2020 - 2022 TSR Award (2)
|
0
|
|
0
|
|
188,125
|
|
188,125
|
|
62,702
|
|
192,530
|
|
Unvested RSUs (3)
|
0
|
|
0
|
|
374,988
|
|
374,988
|
|
143,194
|
|
374,988
|
|
Total
|
0
|
|
0
|
|
726,769
|
|
726,769
|
|
757,536
|
|
1,727,650
|
|
Kevin T. Boyle
|
|
|
|
|
|
|
Severance (1)
|
0
|
|
0
|
|
0
|
|
0
|
|
388,141
|
|
1,188,815
|
|
2019 - 2021 TSR Award (2)
|
0
|
|
0
|
|
163,656
|
|
163,656
|
|
109,110
|
|
187,170
|
|
2020 - 2022 TSR Award (2)
|
0
|
|
0
|
|
161,250
|
|
161,250
|
|
53,745
|
|
165,026
|
|
Unvested RSUs (3)
|
0
|
|
0
|
|
361,962
|
|
361,962
|
|
103,120
|
|
361,962
|
|
Total
|
0
|
|
0
|
|
686,868
|
|
686,868
|
|
654,116
|
|
1,902,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Amounts shown in column (e) reflect the cash severance and estimated cost to Vectrus of the continuation of benefits under the Senior Executive Severance Pay Plan, which would have been as follows: Mr. Prow ($1,665,638 the combination of the CEO's base salary and target annual incentive opportunity multiplied by the months of severance earned under the Plan and $10,193); Ms. Lynch ($430,019 and $13,991); Mr. Hathaway ($400,005 and $13,991); Ms. Deagle ($433,339 and $9,191); and Mr. Boyle ($374,150 and $13,991). Amounts shown in column (f) reflect the cash severance and estimated cost to Vectrus of the continuation of benefits under the Special Senior Executive Severance Pay Plan, which would have been as follows: Mr. Prow ($3,843,781 and $24,730); Ms. Lynch ($1,419,063 and $28,950); Mr. Hathaway ($960,012 and $21,471); Ms. Deagle ($960,012 and $12,950); and Mr. Boyle ($1,159,865 and $28,950).
(2)Amounts shown in columns (c), (d) and (e) for the 2019-2021 TSR awards are based on actual performance for the years ended December 31, 2019 and December 31, 2020 and target performance (100%) for the remaining two
measurement periods, with the amount in column (e) prorated to reflect the 2/3 of the performance period that would have been completed on December 31, 2020. Amounts in columns (c), (d) and (e) for the 2020-2022 TSR awards are based on actual performance for the year ended December 31, 2020 and target performance (100%) for the remaining three measurement periods, with the amount in column (e) prorated to reflect the 1/3 of the performance period that would have been completed on December 31, 2020. Amounts shown in column (f) for the 2019-2021 TSR awards were calculated in accordance with the award agreements by multiplying a prorated portion of the award (2/3) by an average payout factor based on actual performance results through December 31, 2020, and multiplying the remainder of the award (1/3) by a payout factor of 100%, reflecting target performance. Amounts shown in column (f) for the 2020-2022 TSR awards were calculated in accordance with the award agreements by multiplying a prorated portion of the award (1/3) by an average payout factor based on actual performance results through December 31, 2020, and multiplying the remainder of the award (2/3) by a payout factor of 100%, reflecting target performance. At December 31, 2020, none of the NEOs were eligible for retirement treatment (age 60 with 5 years of service) for purposes of their outstanding TSR awards.
(3)Amounts shown in columns (c), (d) and (f) reflect the market value of unvested RSUs based on a $49.72 per share value, the closing price of Vectrus common stock on December 31, 2020. Amounts shown in column (e) reflect the prorated portion of the unvested RSUs based on the number of full months of employment between the grant date and December 31, 2020. At December 31, 2020, none of the NEOs were eligible for retirement treatment (age 60 with 5 years of service) for purposes of their outstanding RSUs.
HOW TO ATTEND THE VIRTUAL 2021 ANNUAL MEETING OF SHAREHOLDERS
To be admitted to the 2021 Annual Meeting, please visit www.virtualshareholdermeeting.com/VEC2021. When prompted, you must enter the 16-digit control number found on your proxy card, voting instruction form or notice you receive with these proxy materials. You may vote or ask questions during the 2021 Annual Meeting by following the instructions available on www.virtualshareholdermeeting.com/VEC2021. Persons without a control number may attend the 2021 Annual Meeting as guests, but they will not have the option to vote shares or ask questions. Whether or not you plan to attend the 2021 Annual Meeting, we urge you to vote and submit your proxy in advance of the 2021 Annual Meeting by one of the methods described in these proxy materials.
You may begin to log into the virtual meeting platform at www.virtualshareholdermeeting.com/VEC2021 and enter your control number beginning at 7:45 a.m. Eastern Time on May 6, 2021. The meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong WiFi connection wherever they intend to participate in the Annual Meeting. Participants should also give themselves plenty of time to log in and ensure that they can hear streaming audio prior to the start of the meeting. A replay of the webcast will be available on the Investor Relations page of the Company’s website at www.vectrus.com/investors until May 8, 2022.
Vectrus (NYSE:VEC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Vectrus (NYSE:VEC)
Historical Stock Chart
From Apr 2023 to Apr 2024