ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Executive Officers
Executive officers are appointed by and serve at the discretion of the Company's Board of Directors (the “Board”). The names of our current executive officers, their ages as of February 25, 2021 and their positions with the Company are set forth below, followed by certain other information about them.
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Executive Officers
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Age
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Position
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James J. Cannon
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50
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President and Chief Executive Officer
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Carol P. Lowe
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55
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Executive Vice President and Chief Financial Officer
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Sonia Galindo
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52
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Senior Vice President, General Counsel, Secretary, and Chief Ethics and Compliance Officer
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Paula M. Cooney
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52
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Senior Vice President, Chief Human Resources Officer
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James J. Cannon
Mr. Cannon has served as President and Chief Executive Officer and a director of the Company since June 2017. Previously, Mr. Cannon was an employee of Stanley Black & Decker, Inc. since 2001, most recently as President, Stanley Security, North America & Emerging Markets, since October 2014. Previously, Mr. Cannon was President of Stanley Oil & Gas from August 2012 to October 2014, President of Stanley Industrial & Automotive Repair, Europe and Latin America, from July 2011 to August 2012, and President of Stanley Industrial and Automotive Repair, North America from February 2009 to July 2011. Prior to that, from 1989 to 1999, Mr. Cannon served in the United States Army in various locations around the world as an infantryman and armor officer, including Operations Desert Shield and Desert Storm in Iraq, where he was awarded a Combat Infantryman’s Badge. Mr. Cannon is a graduate of the University of Tennessee, Chattanooga, with a B.S. in Business Administration/Marketing. Mr. Cannon is a member of the Board of Directors of Lydall, Inc.
Mr. Cannon’s experience in the United States Army, prior executive experience and his position as Chief Executive Officer provide the knowledge and expertise to understand and offer guidance regarding the Company’s business operations, technologies and markets.
Carol P. Lowe
Ms. Lowe has been Executive Vice President and Chief Financial Officer since November 2017. Previously, Ms. Lowe served as Senior Vice President and Chief Financial Officer at Sealed Air Corporation (NYSE: SEE). Ms. Lowe also worked for Carlisle Companies Inc. for over ten years in numerous executive leadership positions, including President of two business units and Chief Financial Officer. Ms. Lowe also served as a board member of Cytec Industries, Inc. from 2007 to 2015, and currently serves on the board of EMCOR Group, Inc., where she is a member of the Audit Committee. She received her Bachelor of Science degree in accounting from the University of North Carolina Charlotte and an MBA from the Fuqua School of Business at Duke University.
Sonia Galindo
Ms. Galindo joined FLIR as the Senior Vice President, General Counsel, Secretary and Chief Ethics and Compliance Officer in July 2019 from Rosetta Stone Inc. (NYSE: RST), an education technology software company, where she served as General Counsel and Corporate Secretary since 2015. During her legal career, which started at the U.S. Securities & Exchange Commission and included private practice at a large national law firm, Ms. Galindo has spent the last 14 years providing legal counsel at multiple international publicly traded companies with increased responsibilities and capacity. From 2012-14 she worked at Keurig Green Mountain, Inc. as Vice President, Associate General Counsel-Corporate, and Secretary and from 2005-08 at McCormick & Company, Inc. as Associate Counsel & Assistant Secretary. In addition, Ms. Galindo served as Ethics & Employment Counsel at the Bill & Melinda Gates Foundation from 2008-11. Ms. Galindo earned a Juris Doctorate from the John Marshall Law School and both a Bachelor of Science degree in Economics and Bachelor of Arts degree in Finance at Hood College for Women.
Paula M. Cooney
Ms. Cooney joined FLIR as Senior Vice President, Chief Human Resources Officer in April 2020 from H.B. Fuller Company, where she most recently served as Vice President, Human Resources and Communications from 2016 to 2020, and prior to that served as Director, HR Strategic Programs from 2010 to 2016. Prior to H.B. Fuller, Ms. Cooney spent 13 years at Intel Corporation, where she held positions of increasing responsibility within the Human Resources department, including Director, Strategic Employee Relations from 2009 to 2010, and Director, Intel Learning & Development from 2006 to 2009. Before joining Intel, she held careers in IBEC, ITS Ltd. and the Irish Houses of Parliament. She earned a Master of Business Studies, Human Resources Management and Industrial Relations from University College Dublin, and a diploma in Personnel Management from the National College of Ireland.
Directors
Our Board of Directors currently consists of eleven directors. The names of our directors, their ages as of February 25, 2021 and their positions with the Company are set forth below, followed by certain other information about them. Information regarding Mr. Cannon, who serves as our Chief Executive Officer and as a director, is set forth above under “Executive Officers.”
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Directors
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Age
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Position
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James J. Cannon
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50
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Director and Chief Executive Officer
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John D. Carter
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75
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Director
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William W. Crouch
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79
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Director
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Catherine A. Halligan
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57
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Director
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Earl R. Lewis
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77
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Chairman of the Board of Directors
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Angus L. Macdonald
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66
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Director
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Michael T. Smith
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77
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Director
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Cathy A. Stauffer
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61
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Director
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Robert S. Tyrer
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63
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Director
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John W. Wood, Jr.
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77
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Director
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Steven E. Wynne
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68
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Director
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John D. Carter
Mr. Carter has served as a director of the Company since August 2003. From 2002 to 2005, Mr. Carter was a principal in the consulting firm of Imeson & Carter, which specialized in transportation and international business transactions. Mr. Carter served as President and Chief Executive Officer of Schnitzer Steel Industries Inc., a metals recycling company, from May 2005 to November 2008. From December 1, 2008 to April of 2020, Mr. Carter served as Chairman of the Board of Directors of Schnitzer Steel Industries, Inc. He subsequently served as Chairman Emeritus of Schnitzer until January 26, 2021. From 1982 to 2002, Mr. Carter served in a variety of senior management capacities at Bechtel Group, Inc., and President of Bechtel Enterprises, Inc. He served as a director of Jeld-Wen, Inc. until 2018. Mr. Carter is a member of the Board of Directors and has served as Chairman of the Audit Committee of Northwest Natural Gas Company. He was also on the Board of the Oregon chapter of the Nature Conservancy until 2019. He received his BA in History from Stanford University and his JD from Harvard Law School.
In addition to his legal experience gained while practicing law, Mr. Carter brings many years of senior executive management experience, most recently as president and chief executive officer of a multi-billion dollar public company. This combination of legal and management experience enables Mr. Carter to provide guidance to the Company in the areas of legal risk oversight, enterprise risk management, corporate governance, financial management and corporate strategic planning.
William W. Crouch
General Crouch has served as a director of the Company since May 2005. General Crouch retired from the United States Army in 1999 following a 36-year career during which he served in numerous roles including Commanding General-Eighth Army and Chief of Staff, United Nations Command and United States Forces Korea; Commander in Chief, United States Army, Europe; Commanding General, NATO Implementation (later Stabilization) Force, Bosnia/Herzegovina; and the United States Army’s 27th Vice Chief of Staff.
Until 2010, he served as one of five generals who oversaw the Army’s Battle Command Training Program. In October 2000, General Crouch was named co-chair of the USS COLE Commission, which was formed to examine the terrorist attack on the USS COLE. He has served as a Distinguished Senior Fellow with the Center for Civil Military Operations at the United States Naval Postgraduate School, and serves on the Board of the Keck Institute for International and Strategic Studies at Claremont McKenna College. He received a B.A. in Civil Government from Claremont McKenna College, and a M.A. in History from Texas Christian University. He holds an Executive Masters Professional Director Certification from the American College of Corporate Directors, a public company director education and credentialing organization.
General Crouch’s career as an Army officer and continuing interest in the United States military afford the Company significant insight into the Company’s important military customers in terms of strategic and tactical doctrines and how the Company’s products should be developed and adapted to facilitate the implementation of these doctrines and how the Company's products should be developed and adapted to facilitate the implementation of these doctrines. General Crouch also possesses an understanding of the political and military realities in certain global regions in which the Company’s products are employed. In addition, General Crouch’s experience in senior leadership roles in large Army commands enables him to offer guidance on the leadership of complex organizations such as the Company.
Catherine A. Halligan
Ms. Halligan has served as a director of the Company since March 2014. Ms. Halligan has served as Advisor to Narvar, a provider of supply chain and post purchase optimization SaaS technology, since 2013. Previously, Ms. Halligan was an Advisor to PowerReviews Inc., a leading social commerce network, from January to March 2012 and Senior Vice President Sales and Marketing from July 2010 to January 2012. Prior to joining PowerReviews Inc., Ms. Halligan held several executive level positions with prominent retailers. From 2005 to 2010, Ms. Halligan served in various executive positions with Walmart, a retailer, including as Vice President Market Development, Global eCommerce from 2009 to 2010 and as Chief Marketing Officer of Walmart.com from 2007 to 2009 along with other executive roles from 2005 to 2009. From 2000 to 2005, Ms. Halligan was an associate partner at Prophet, a management consulting firm. From 1996 to 1999, Ms. Halligan held retail management positions with Williams Sonoma Inc., including Vice President and General Manager, Internet and Vice President, Marketing. Ms. Halligan also has previous executive marketing retail experience with Blue Nile, Inc. and the Gymboree Corporation. Ms. Halligan began her career as a Marketing and Planning Analyst for Lands’ End from 1987 to 1991. Since January 2012, Ms. Halligan has served as an independent director at Ulta Beauty, where she chairs the Compensation Committee and is a member of the Nominating and Governance Committee, and previously served for two years on the Audit Committee. Since December 2020, Ms. Halligan has served as an independent director at Driven Brands Holdings Inc., where she chairs the Compensation Committee. Ms. Halligan is also on the board of Ferguson plc, a FTSE 100 company, and is a member of the Audit, Nomination and Remuneration Committees.
With over 20 years of experience in marketing, digital and e-commerce within the retail industry, Ms. Halligan provides significant expertise with respect to strategic marketing issues, Internet technology and omnichannel business capabilities.
Earl R. Lewis
Mr. Lewis served as Chairman, President and Chief Executive Officer of the Company from November 2000 until his retirement in May 2013 as President and Chief Executive Officer. He continues to serve as Chairman of the Board. Mr. Lewis was initially elected to the Board in June 1999 in connection with the acquisition of Spectra Physics AB (which at the time owned approximately 35% of the Company) by Thermo Instrument Systems, Inc. Prior to joining FLIR, Mr. Lewis served in various capacities at Thermo Instrument Systems, Inc., with his last role as President and Chief Executive Officer. Mr. Lewis is a member of the Board of Directors of Tecogen Inc. Mr. Lewis is a Trustee of Clarkson University and New Hampton School. Mr. Lewis holds a B.S. from Clarkson College of Technology and has attended post-graduate programs at the University of Buffalo, Northeastern University and Harvard University. Mr. Lewis holds a Masters Professional Director Certification from the American College of Corporate Directors, a public company director education and credentialing organization.
Mr. Lewis’ leadership of the Company in the past decade affords him a deep understanding of the Company’s technology and operations, as well as the markets in which the Company operates. Mr. Lewis’ prior service in executive management positions and his past and present service on other boards of directors, including public company boards, enable him to provide insight and guidance in an array of areas including global operations and strategic planning, enterprise risk management, and corporate governance. Mr. Lewis has played, and continues to play, an active role in the Company’s financial management and corporate development, including merger and acquisition activity.
Angus L. Macdonald
Mr. Macdonald has served as a director of the Company since April 2001. In 2000, Mr. Macdonald founded and is currently President of Venture Technology Merchants, LLC, an advisory and merchant banking firm to growth companies regarding capital formation, corporate development and strategy. From 1996 to 2000, Mr. Macdonald was Senior Vice President and headed Special Situations in the health care equities research group at Lehman Brothers, Inc. Prior to joining Lehman Brothers, Mr. Macdonald was a senior securities analyst at Fahnestock, Inc. (now Oppenheimer). He holds a B.A. from the University of Pennsylvania and an MBA from Cranfield University, U.K., and has attended post graduate courses at Harvard Business School including specific programs on Compensation Committee and also Audit Committee best practices. Mr. Macdonald holds an Advanced Professional Director Certification from the American College of Corporate Directors, a public company director education and credentialing organization.
Through his more than 30 years of experience in investment and merchant banking, Mr. Macdonald has developed extensive expertise in corporate development strategies for technology enterprises such as the Company as well as in financial structuring and strategy. Mr. Macdonald’s years of experience in the financial services sector benchmarking and comparing best practices operationally as well as from an executive management and compensation perspective, provide the Company with insight into the value creation impacts of various financial and operational strategies. These skills enable him to successfully serve as a member of the Company’s Audit and Compensation Committees and to provide insight to the Company in the development of its financial management, capital deployment, employee compensation and executive retention strategies.
Michael T. Smith
Mr. Smith has served as a director of the Company since July 2002. From 1997 until his retirement in May 2001, Mr. Smith was Chairman of the Board and Chief Executive Officer of Hughes Electronics Corporation. From 1985 until 1997, he served in a variety of capacities for Hughes, including Vice Chairman of Hughes Electronics, Chairman of Hughes Missile Systems and Chairman of Hughes Aircraft Company. Prior to joining Hughes in 1985, Mr. Smith spent nearly 20 years with General Motors in a variety of financial management positions. Mr. Smith is also a director of Teledyne Technologies Incorporated and Zero Gravity Solutions. He was previously a director of Ingram Micro. Mr. Smith holds a B.A. from Providence College and an MBA from Babson College. He also served as an officer in the United States Army.
Throughout his career, Mr. Smith has had extensive financial and general management experience, including service as the chief executive officer of a large public company. These skills and experiences qualify him to serve as the Company’s Audit Committee financial expert and also provide the Company with expertise in corporate governance, enterprise risk management and strategic planning as well as in the areas of global operations and corporate strategic development.
Cathy A. Stauffer
Ms. Stauffer has served as a director of the Company since March 2014. From September 2005 to 2016, Ms. Stauffer owned and operated Cathy Stauffer Consulting, providing strategic consulting to CEOs and public and private companies primarily focused on new technology and rapidly changing consumer and commercial markets. Over the course of her career, Ms. Stauffer has served in a variety of executive leadership and operating roles, including president and Chief Marketing Officer, focused on leveraging technology and talent to build strong brands and drive profitable growth across consumer, technology, retail, DTC and B2B businesses. Ms. Stauffer has served on a variety of private and public boards and currently serves on the board of The SWIG Company, a national commercial real estate investment firm; and on the Senior Advisory Board of Towerbrook Capital Partners.
Ms. Stauffer brings to the Board over 30 years of senior executive leadership, a broad knowledge of consumer and commercial technology markets and the rapidly evolving digital commerce landscape, with deep domain expertise in consumer products, retail, brand marketing, and corporate governance.
Robert S. Tyrer
Mr. Tyrer has served as a director of the Company since October 2017. Mr. Tyrer is currently the co-president of The Cohen Group, a business advisory firm providing strategic advice and assistance in business development, regulatory affairs, deal sourcing, and capital raising activities, a position he has held since 2001. Previously, he served as the Chief of Staff to the United States Secretary of Defense William Cohen from 1997-2001, where he provided strategic advice on all aspects of national security and acted as the primary liaison between the Department of Defense and Congress, the White House, other Federal agencies and private industry.
Prior to entering the Pentagon, Mr. Tyrer served 21 years on Capitol Hill in a variety of congressional staff roles, including Chief of Staff to then-Senator William Cohen of Maine from 1989-1996 and campaign manager for U.S. Senator Susan Collins in her successful 1996 U.S. Senate campaign. Mr. Tyrer is a graduate of the University of Maine and a member of the Advisory Board of the University of Maine’s School of Policy and International Affairs. He is a Senior Adviser at the Center for Strategic and International Studies in Washington, DC. He served as a member of the board of directors of EDO Corporation, a military and commercial products and professional services company, for four years until the company was purchased by ITT Corporation in 2007. Mr. Tyrer also served on the Board of Directors of Clean Air Power, a publicly-traded company based in the United Kingdom, from 2014 until it was acquired in 2015. He is also a member of the Advisory Board of the Public Diplomacy Collaborative at the John F. Kennedy School of Government at Harvard University.
Mr. Tyrer’s experience in government, politics, business and consulting makes him uniquely qualified to offer guidance regarding the Company’s business operations, technologies and markets, particularly as it relates to government procurement and defense.
John W. Wood, Jr.
Mr. Wood has served as a director of the Company since May 2009. Mr. Wood served as Chief Executive Officer of Analogic Corporation, a leading designer and manufacturer of medical imaging and security systems, from 2003 to 2006. Prior to joining Analogic, Mr. Wood held senior executive positions over a 22-year career at Thermo Electron Corporation. He served as President of Peek Ltd., a division of Thermo Electron Corporation, and as a Senior Vice President of the parent company. He previously served as President and Chief Executive Officer of Thermedics, a subsidiary of Thermo Electron Corporation. Mr. Wood also served as a member of the board of directors of American Superconductor Corporation from 2006 to 2019. Mr. Wood earned a Bachelor’s degree in Electrical Engineering from Louisiana Tech University and a Master’s degree in Electrical Engineering from Massachusetts Institute of Technology. Mr. Wood holds a Masters Professional Director Certification from the American College of Corporate Directors, a public company director education and credentialing organization.
Through his academic training and his extensive executive experience with companies in relevant industries, Mr. Wood possesses the knowledge and expertise to understand and offer guidance regarding the Company’s technologies and markets. In addition, as the former chief executive officer of a public company, Mr. Wood is qualified to provide leadership in the areas of corporate governance, operations and enterprise risk management.
Steven E. Wynne
Mr. Wynne has served as a director of the Company since November 1999. Since July 2012, Mr. Wynne has served as an Executive Vice President of Health Services Group, Inc., a diversified insurance and pharmacy company, where he previously served as Senior Vice President, from February 2010 to January 2011. From January 2011 through July 2012, he served as Executive Vice- President of JELD-WEN, Inc., an international manufacturer of doors and windows. From March 2004 through March 2007, Mr. Wynne was President and Chief Executive Officer of SBI International, Ltd., parent company of sports apparel and footwear company Fila. From August 2001 through March 2002, and from April 2003 through February 2004, Mr. Wynne was a partner in the Portland, Oregon law firm of Ater Wynne LLP. Mr. Wynne served as acting Senior Vice President and General Counsel of the Company from April 2002 through March 2003. Mr. Wynne was formerly Chairman and Chief Executive Officer of eteamz.com, an online community serving amateur athletics, from June 2000 until its sale to Active.com in January 2001. From February 1995 to March 2000, Mr. Wynne served as President and Chief Executive Officer of adidas America, Inc. Prior to that time, he was a partner in the law firm of Ater Wynne LLP. Mr. Wynne received an undergraduate degree and a J.D. from Willamette University. Mr. Wynne also serves on the boards of directors of JELD-WEN Holding, Inc., Pendleton Woolen Mills, Lone Rock Resources and Northwest Natural Gas Company (a subsidiary of Northwest Holdings).
Mr. Wynne has been associated with the Company in a variety of capacities since 1983, including prior service as its outside counsel. By virtue of this extensive relationship, Mr. Wynne has developed a high degree of familiarity with the Company’s operations, risks and opportunities. In addition, Mr. Wynne’s legal training and senior executive leadership experience with other companies qualify him to provide insight and guidance as a member of the Company’s Audit Committee, as well as in the areas of corporate governance, strategic planning and enterprise risk management.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s directors, officers, and beneficial owners of more than 10% of a registered class of the Company’s equity securities to file initial reports of ownership and reports of changes in ownership with the SEC. Such persons are also required to furnish the Company with copies of all Section 16(a) reports they file.
Based solely on the Company’s review of the copies of such reports received by it with respect to fiscal year 2020, or written representations from certain reporting persons, the Company believes that except as noted below, no director, officer or beneficial owner of more than 10% of the outstanding common stock of the Company failed to file on a timely basis the reports required under Section 16(a) of the Exchange Act during 2020 except for one late Forms 4 reporting one transaction for each of James J. Cannon and Jeffrey D. Frank.
Code of Ethics
FLIR has adopted a Code of Ethical Business Conduct that applies to our directors and employees, which ethics sets forth fundamental principles and key policies and procedures that govern the conduct of the Company’s business. The Company’s employees receive training on the Code of Ethical Business Conduct. In addition, the Company has adopted a Code of Ethics for Senior Financial Officers that applies to its Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer/Corporate Controller, Corporate Treasurer, and such other officers and employees identified therein. FLIR has a Chief Compliance Officer and a confidential Internet-based hotline monitored by EthicsPoint® that is available to all employees, and FLIR’s Audit Committee has procedures in place for the anonymous submission of employee complaints related to the Code of Ethical Business Conduct or other accounting, internal controls, auditing or compliance matters.
FLIR maintains a Governance page on its website that provides specific information about its corporate governance initiatives, including FLIR’s Corporate Governance Principles, Code of Ethical Business Conduct, Code of Ethics for Senior Financial Officers and charters for the committees of the Board of Directors. The Governance page can be found on our website at www.flir.com/about/investor-relations. To the extent mandated by legal requirements, we intend to disclose on our website any amendments or waivers to our Code of Ethical Business Conduct and Code of Ethics for Senior Financial Officers. You may obtain copies of the documents posted on FLIR’s Governance page on its website by writing to the Corporate Secretary, FLIR Systems, Inc., 1201 S Joyce St., Arlington, VA 22202.
Audit Committee
The Board of Directors has established a standing Audit Committee, which operates pursuant to a written charter that is reviewed annually. The Audit Committee's charter may be viewed online at www.flir.com/about/investor-relations. The current members of the Audit Committee are Ms. Halligan and Messrs. Macdonald (chairman), Smith, Tyrer and Wynne. The Board has determined that each member of the Audit Committee is “independent” as defined by applicable SEC and NASDAQ rules and also qualifies as an “audit committee financial expert” under applicable SEC regulations.
The Audit Committee is responsible for, among other things:
•overseeing the integrity of the Company’s financial statements and financial reporting process and related systems of disclosure controls and internal quality-control procedures;
•assisting the Board in oversight of the Company's compliance with legal and regulatory requirements;
•the independent registered public accounting firm’s qualifications, appointment and independence;
•the performance of the internal audit function;
•the review of all related-party transactions involving, directly or indirectly, the Company and any of its directors or officers; and
•the adequacy of the Company’s accounting and internal control systems.
During fiscal year 2020, the Audit Committee held six meetings. The performance of the committee is reviewed annually, and the committee may obtain advice and assistance from internal or external legal, accounting and other advisors.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
This Compensation Discussion and Analysis describes the principles and material elements of our executive compensation program, how we applied those principles in determining the material elements of the compensation for our Named Executive Officers (“NEOs”) for 2020 and how we use our executive compensation program to drive performance.
Our NEOs for 2020 are:
•James J. Cannon, our President, Chief Executive Officer (“CEO”), and Director;
•Carol P. Lowe, our Executive Vice President and Chief Financial Officer (“CFO”);
•Sonia Galindo, our Senior Vice President, General Counsel, Secretary, Chief Ethics & Compliance Officer;
•Paula M. Cooney, our Senior Vice President and Chief Human Resources Officer; and
•Jeffrey D. Frank, our former Senior Vice President, Global Product Strategy, who departed from FLIR in August 2020.
Executive Summary
Our executive compensation program in 2020 reflected our objective of establishing a foundation for consistent long-term revenue and earnings growth, operational efficiencies and improved capital management. The program was designed to align the interests of our executive officers with those of our shareholders by providing market-competitive compensation opportunities upon the achievement of a variety of short-term and long-term objectives. We believe the design of our 2020 compensation program effectively linked pay to performance. Throughout the year, we continued to advance the Company’s four key strategic priorities – sensor leadership, unmanned and autonomous solutions, airborne intelligence / surveillance / reconnaissance (ISR) and decision support – while delivering strong financial results and value to stockholders. Highlights of our 2020 financial performance include:
•$1,923.7 million in revenue;
•gross margin of 49.2 percent;
•gross profit of $947.0 million;
•completed $255.9 million of dividends and stock repurchases.
We believe our highly disciplined operations, exemplified by Project Be Ready (our strategy-driven restructuring program) and the continuing implementation of The FLIR Method, positioned FLIR to achieve these results notwithstanding the significant challenges posed by the COVID-19 pandemic. We are especially proud of our response to the pandemic, including adoption of stringent safety protocols to protect our employees while continuing to operate and serve our customers, as well as dramatically ramping production of EST solutions to help prevent the spread of the virus. Though our Industrial Technologies segment experienced lower volumes in certain commercial end markets and our Defense Technologies segment experienced administrative processing delays impacting the timing of bookings and revenue, we continued to grow consolidated revenue while preserving strong operating margins.
At the conclusion of 2020, the Company negotiated a definitive merger agreement to be acquired by Teledyne, which was executed on January 4, 2021. Under the terms of the agreement, subject to the receipt of required regulatory approvals, stockholder approvals and other customary closing conditions, our stockholders will receive $28.00 per share in cash and 0.0718 shares of Teledyne common stock for each FLIR share, which implies a total purchase price of approximately $56.00 per FLIR share based on Teledyne’s 5-day volume weighted average price as of December 31, 2020 and reflects a 40% premium over FLIR’s 30-day volume weighted average price as of December 31, 2020.
2020 Executive Compensation Program Highlights
Key Executive Compensation Program Changes
The Compensation Committee generally retained the executive compensation program design in place for 2019, with the following key updates made in 2020:
•Clawback Policy: To further mitigate any risk associated with our compensation programs and as a positive governance practice, the Compensation Committee approved amendments to the Company's clawback policy to, among other matters, permit recovery of equity-based compensation rather than limiting the policy's coverage only to cash incentive awards.
•Stock Ownership Guidelines: To align further the incentives of our executive officers and directors with the interests of our stockholders, the Compensation Committee determined to amend the Company's stock ownership guidelines effective in 2020 as follows: (1) the CEO's holding requirement increased from 3x to 5x base salary; (2) the CFO's holding requirement increased from 1x to 3x base salary; and (3) the directors' holding requirement increased from 4x to 5x annual board retainer. The holding requirement for other senior executives remained the same at 1x base salary.
•Long-Term Incentive Compensation Mix: In granting long-term incentive awards for fiscal 2020, the Compensation Committee determined that 75% of the grant date value should consist of time-based restricted stock unit awards ("RSUs") and 25% of the grant date value should consist of performance-based restricted stock unit awards ("PRSUs"), as opposed to the 50 / 50 mix of awards made in 2019. In making this determination, the Committee considered the significant business and market uncertainty arising from the COVID-19 pandemic, making realistic performance-based targets challenging to forecast at the time of grant, and the need to enhance the retentive value of the Company's long-term incentive awards for 2020. In 2021, the mix of long-term incentive awards will be subject to covenants under the Merger Agreement with Teledyne.
Continued Focus on Pay for Performance
We continued our strong commitment to pay for performance in 2020. Our executive compensation program is designed to limit fixed compensation and to provide an opportunity to earn incentive compensation only upon achievement of financial and operating goals approved by the Compensation Committee after a rigorous review and discussion of operating and financial plans. For our CEO and other executive officers, we seek to establish annual target total direct compensation (which includes both fixed and performance-based compensation) at or about the 50th percentile of our peer group (see below). Accordingly, because most of our executive officers' annual total direct compensation is at risk and subject to stringent performance criteria, our executive officers generally earn compensation at or above the 50th percentile of our peer group only if the Company achieves superior results. Failure to achieve our incentive metrics reduces the performance-based compensation earned, if any, which generally results in total realized compensation below the 50th percentile of our peer group. We believe this pay-for-performance philosophy incentivizes our executive officers to meet key Company short-term and long-term objectives.
Impact of 2020 Performance on Annual Incentive Compensation
Payouts under our 2020 annual incentive plan were based solely on performance against three predefined financial and operating metrics: Organic Revenue, Adjusted Operating Margin and Working Capital Turnover (see "Annual Incentive Compensation" for definitions). Our actual achievement versus target goals based on 2020 performance was:
•Organic Revenue (50% weighting): $1,928.9 million actual versus $1,925.7 million target (101.6% achievement)
•Adjusted Operating Margin (30% weighting): 22.52% actual versus 21.0% target (161.0% achievement)
•Working Capital Turnover (20% weighting): 3.10x actual versus 3.23x target (53.8% achievement)
This performance resulted in our NEOs' annual cash incentive being earned at 109.9% of target. FLIR's Organic Revenue performance was on target for 2020, as additional revenues from EST solutions largely offset the unanticipated headwinds faced by certain end markets served by our Industrial Technologies segment and administrative and timing delays experienced by our Defense Technologies segment due to COVID-19. We outperformed our operating margin target largely through disciplined cost management and successful execution on Project Be Ready, as well as favorable product mix. Our Working Capital Turnover was below target for the year, due to inventory growth to mitigate supply chain risk associated with the COVID-19 pandemic. See “AIP Award Decisions” for further discussion of the 2020 AIP award.
2018-2020 Long-Term Incentive Compensation Payouts
For the 2018-2020 performance period, payouts under our PRSUs were based on performance against two predefined financial measures: Organic Revenue compound annual growth rate ("CAGR") and Adjusted EBITDA CAGR, in each case over the three-year performance period. Our actual achievement versus target goals based on performance over the three-year period was:
•Organic Revenue CAGR (50% weighting): 2.7% actual versus 5% target (63.2% achievement)
•Adjusted EBITDA CAGR (50% weighting): 5.5% actual versus 6.5% target (88.6% achievement)
This performance resulted in our NEOs' performance-based restricted stock unit awards being earned at 75.9% of target. See “Long-Term Incentive Program — 2018-2020 Performance Restricted Stock Units” for further discussion of payouts under our 2018-2020 PRSUs.
Shareholder Outreach
In response to shareholder feedback on executive compensation during our shareholder outreach in 2018 and as part of our regular review of compensation program design to enhance business performance and align executive compensation with shareholder expectations, the Compensation Committee approved a number of significant changes to our executive compensation programs for 2018 through 2020. 2020 was our third year of a three-year strategy to focus on consistent core metrics that would increase shareholder value. These changes were responsive to shareholders and more closely aligned executive compensation with organizational changes, business strategy and implementation of The FLIR Method. The Compensation Committee generally believes that the Company's executive compensation program design remains appropriate for 2021, as we continue to drive performance while the Company's acquisition by Teledyne is pending.
Impact of 2020 Shareholder Advisory Vote on Executive Compensation Program
Our shareholders approved the Company's executive compensation program at the 2020 Annual Meeting of Shareholders with approximately 91% votes cast in favor. Based on shareholders' favorable views of our executive compensation program, as reflected in our shareholder outreach conversations and the most recent say-on-pay vote, the Compensation Committee determined that the compensation philosophy and general practices are sound and generally retained the current executive compensation program design for 2020, subject to certain modifications in light of the COVID-19 pandemic described above.
Other Key Compensation Practices
We believe we engage in best practice executive compensation policies and programs, including:
•Independent Compensation Committee. The Compensation Committee is made up of all independent directors.
•Independent Compensation Committee Advisor. The Compensation Committee engaged its own independent compensation consultant to provide advice on executive compensation matters.
•Annual Executive Compensation Review. The Compensation Committee conducts an annual review of compensation for our executive officers and a review of compensation-related risks.
•Compensation At-Risk. The executive compensation program is designed so that a significant portion of executive annual compensation is “at risk” to align the interests of our NEOs and our shareholders.
•Multiple Performance-Based Incentives and Incentive Caps. Our executive compensation program utilizes a mix of performance-based cash incentives (short-term) and time- and performance-based equity incentives (long-term) having different performance-based metrics. We also cap maximum annual performance-based cash and long-term equity incentives at 200% of the payout target and performance-based equity compensation at 200% of the payout target for the Performance Grant, as discussed below.
•Multi-Year Vesting Requirements. The performance-based equity awards granted to the executive officers vest or are earned over at least a three-year period, consistent with current market practice and our retention objectives.
•Clawback Policy. We adopted a clawback policy requiring that cash and equity incentive awards be repaid to the Company in the event of certain acts of misconduct or gross negligence.
•Stock Ownership Guidelines. We maintain stock ownership guidelines for our directors and our executive officers. Within five years of joining the Company, directors are required to hold shares of the Company’s common stock equal to or greater than five times the director’s annual board retainer. Within five years of joining the Company, senior executive officers are required to hold shares of the Company’s common stock equal to or greater than five times annual salary for the CEO, three times annual salary for the CFO and one times annual salary for other officers. In each case, the holding requirement may be satisfied by ownership of shares of common stock, unvested time-based restricted stock or RSUs, and in the money options.
•Limited Perquisites. We do not provide material perquisites nor other personal benefits to the NEOs.
•No “Golden Parachute” Tax Reimbursements. We do not provide any tax reimbursement payments (including “gross-ups”) on any tax liability that the NEOs might owe as a result of the application of Sections 280G or 4999 of the Internal Revenue Code (the “Code”).
•Hedging and Pledging Prohibited. Employees may not hedge or pledge Company securities as collateral.
•No Repricing of Underwater Options. Our plan prohibits the repricing of stock options or other downward adjustment in the option price of previously granted stock options.
•No Stock Options Granted with an Exercise Price Less Than Fair Market Value. All stock options are granted with an exercise price at the closing price on the date of grant. No stock options were granted to our NEOs in 2020.
Corporate Governance and Decision-Making
General Philosophy
Our executive compensation program is designed to:
•Attract and retain executive officers with the skills, experience and motivation to achieve stated Company objectives;
•Provide a mix of current, short-term and long-term compensation to achieve a balance between current income and long-term incentive opportunity and promote focus on both annual and multi-year business objectives;
•Align total compensation with the performance results we seek for our shareholders, including long-term growth in revenue and profitability;
•Allow executive officers who demonstrate consistent performance over a multi-year period to earn above-average compensation when we achieve above-average long-term performance;
•Be affordable and appropriate in light of our size, strategy and anticipated performance; and
•Be straightforward and transparent in its design, so that shareholders and other interested parties can clearly understand all elements of our executive compensation programs, individually and in the aggregate.
The Compensation Committee uses these principles to determine base salaries, annual cash incentives and long-term equity incentives. The Compensation Committee also considers our business objectives, the skills and experience of the executive, competitive practices and trends and corporate considerations, including the compensation level of an executive officer relative to our other executive officers and affordability of the compensation program. The Compensation Committee further considers the results of the annual advisory “say-on-pay” vote and shareholder feedback.
Role of the Compensation Committee
The Compensation Committee has a written charter approved by the Board that specifies the Compensation Committee’s duties and responsibilities, which is available on our website at: www.flir.com/about/investor-relations. Each member of the Compensation Committee has been determined to be independent under rules and regulations issued by NASDAQ, the SEC and the Internal Revenue Service.
As specified in its charter, the Compensation Committee is responsible for all compensation for our executive officers and oversees the development and administration of our executive compensation programs, including the underlying philosophy and related policies. The Compensation Committee’s responsibilities include:
•Overseeing the administration of the Company's executive and director compensation plans;
•Recommending to the full Board, as necessary, performance goals, compensation and objectives with respect to the compensation of our CEO and other executive officers;
•Overseeing the administration of the Company's equity plans;
•Reviewing an annual risk assessment of our executive compensation programs;
•Overseeing and evaluating the performance of the CEO;
•Overseeing the administration of the Company's talent and succession management process for the executive officers; and
•Assessing our executive compensation programs annually to ensure that they are well aligned with the Company's evolving business strategy and are effective in supporting its talent needs.
Role of the Compensation Consultant
Under its charter, the Compensation Committee has the authority to engage independent advisors to assist it in carrying out its responsibilities. As in prior years, the Compensation Committee engaged Pay Governance as its independent executive compensation consultant for 2020, to support the Committee in, among other matters, its annual review our compensation strategy and programs to ensure our executive officers are rewarded appropriately for their responsibilities and contributions to our growth and profitability. Pay Governance reported directly to the Compensation Committee and did not perform any work on behalf of management. The Compensation Committee assessed the independence of Pay Governance pursuant to NASDAQ and SEC rules and concluded that its engagement did not raise any conflict of interest.
Role of Management
The CEO, with the assistance of other members of our management and human resources teams, works closely with the Compensation Committee in determining the compensation of the other executive officers. Each year, the CEO, with the assistance of our human resources team, reviews the performance of the other executive officers for the previous year, shares these evaluations with the Compensation Committee and makes recommendations for each element of compensation (i.e. base salary, annual incentive compensation, and long-term equity incentives). These recommendations generally reflect our financial results in the prior fiscal year and each executive officer’s contribution to these results and the Company generally. The Compensation Committee determines each element of the executive officers' compensation based on these recommendations and the other factors described above. The CEO, in collaboration with our CFO and other members of management, also assists the Compensation Committee in establishing performance objectives for the AIP and long-term equity incentive program.
Certain executive officers attend Compensation Committee meetings at the invitation of the Compensation Committee. No executive officer attends an executive session in which that officer’s compensation is determined.
Role of Market Data and Our Peer Group
The Compensation Committee considers market data as one several inputs when determining executive pay levels and program design. For competitive executive pay level comparisons, market data consists of peer group data and/or survey data (for positions where peer group data is unavailable) from Radford's Global Technology Survey. The Compensation Committee reviews and approves the peer group annually. While FLIR has no true direct peers, the peer group consists of companies with similar operations that require similar executive talent and experience to FLIR. Current and potential peers are evaluated based on the following criteria:
•Company type and geography: Publicly-traded and based in the U.S.
•Industry: Primary focus on companies in the aerospace & defense, communications equipment, electrical components & equipment, electronic equipment & instruments, industrial conglomerates and life sciences tools & services industries
•Size and valuation: Revenues and market cap
•Qualitative factors: Business model, key competitor (for business and/or talent), financial performance and overall industry/sector representation
The Compensation Committee, with the support and advice of Pay Governance, conducted a thorough review of our peer group for fiscal 2019, which consisted of the companies shown in the table below. The Committee considered this peer group again for fiscal 2020 and determined that no changes were necessary based on the aforementioned evaluation criteria (the "2020 Peer Group").
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Fiscal 2020 Peer Group
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AMETEK
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Curtiss Wright Inc
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MSA Safety Incorporated
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TransDigm Group Inc.
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Bio-Rad Laboratories
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Garmin Ltd.
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OSI Systems, Inc.
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Trimble Inc.
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Bruker Corporation
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Heico Corporation
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PerkinElmer, Inc.
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Viavi Solutions Inc.
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Carlisle Companies Inc.
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Mettler-Toledo International Inc.
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Roper Technologies, Inc
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Waters Corporation
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Cognex Corporation
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Moog Inc.
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Teledyne Technologies Inc.
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Compensation Risk
Company management annually conducts an assessment of our compensation policies and practices, including our executive compensation programs, to evaluate the potential risks associated with these policies and practices. Management reviewed and discussed with the Compensation Committee an independent assessment conducted by Pay Governance in 2020, which concluded that our compensation programs reflect an appropriate balance of risk and reward and do not encourage excessive or unnecessary risk-taking. As a result, we do not believe that risks relating to our compensation policies and practices for our employees are reasonably likely to have a material adverse effect on the Company.
In conducting this review, management considered the following attributes of our programs:
•Mix of base salary, annual incentive opportunities, and long-term equity compensation;
•Balance between annual and longer-term performance opportunities;
•Alignment of annual and long-term incentives to ensure that the awards encourage consistent behaviors and achievable performance results over the long term;
•Use of equity awards (performance-based and time-based) that vest over time and in some cases attach additional holding periods after vesting;
•Grants to senior executives of long-term equity-based compensation on an annual basis, as accumulating equity over a period of time encourages executives to take actions that promote the long-term sustainability of our business;
•Stock ownership guidelines that are reasonable and designed to align the interests of our executive officers with those of our shareholders, which discourages executive officers from focusing on short-term results without regard for longer-term consequences; and
•Compensation decisions include subjective considerations, which limit the influence of strictly formulaic factors on excessive risk taking.
In addition, the independent assessment conducted by Pay Governance noted the following key risk mitigating features of FLIR's compensation programs:
•Incentive arrangements generally emphasize compensation earned over a multi-year period, employ balanced measures with reasonable levels of upside and downside leverage, and include payout caps with the opportunity for discretionary adjustments if needed to ensure that payouts are fair.
•Incentive plan designs and changes are subject to annual review.
•Performance goals reflect operating plans that are reviewed and approved by FLIR’s Board, and performance results are subject to multiple levels of review, including by the Board.
•Both cash and equity incentive compensation are subject to FLIR's clawback policy.
The Compensation Committee also considered compensation risk implications in its deliberations on the design of our 2021 executive compensation programs with the goal of appropriately balancing short-term incentives and long-term performance.
Components of our Executive Compensation Program
Our executive compensation program consists of the following four primary components:
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Compensation Component
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Purpose
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Base Salary
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To compensate our executive officers for their day-to-day efforts based on demonstrated experience, competencies, and performance.
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Annual Cash Incentives
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To motivate and reward achievement of our annual strategic goals and to be paid only if we achieve such goals, consistent with our pay for performance philosophy.
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Long-Term Equity Incentives
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To align our executive officers’ interests with the long-term interests of our shareholders and to achieve our retention objectives through multi-year vesting requirements and performance-based vesting requirements linked to our long-term strategic goals.
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Benefits (including post-employment compensation arrangements)
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To retain our executive officers and reduce the degree to which the possible loss of employment might affect our executives’ willingness to take risks or enter into strategic relationships and transactions that, while potentially beneficial to our shareholders, might result in the termination of the executive’s employment.
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We believe that each individual component is useful in achieving one or more of the objectives of our executive compensation program and that together, these components are effective in achieving our overall objectives, including attracting and retaining talented executives in a highly competitive market, while retaining flexibility to tailor compensation based on individual circumstances and to emphasize pay for performance.
Compensation Setting and Elements of Compensation
At the beginning of 2020, the Compensation Committee evaluated the annual target total direct compensation (annual base salary, annual cash incentives and long-term equity incentives) for each of our executive officers, including our NEOs, who was employed with us at the time. In determining our executives' target annual total direct compensation, the Compensation Committee considered, among other factors, each element of compensation, the compensation package as a whole and compensation levels at our peer companies for comparable positions, as well as the impact of our financial performance on executive compensation. The Compensation Committee generally targeted the 50th percentile of our 2020 Peer Group for each component of each executive’s target annual total direct compensation. However, the Compensation Committee may set any element of an NEO’s compensation outside the applicable target range based on such factors as it deems appropriate, including the NEO's experience and responsibilities, individual performance, expected future contribution, and overall mix of base salary and short-term and long-term incentives, as well as internal pay equity and retention considerations.
Base Salary
We provide base salary to compensate our executive officers, including our NEOs, for their day-to-day efforts based on demonstrated experience, competencies and performance. In the first quarter of 2020, the Compensation Committee evaluated the base salaries of our NEOs based on peer group market data provided by Pay Governance (targeting the 50th percentile), our CEO's recommendations (except with respect to his own salary), and the various objectives of our compensation programs. In light of this review, the Committee determined not to make any changes to our NEOs' base salaries for 2020.
The chart below summarizes our NEOs' 2020 base salaries:
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NEO
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2020 Salary
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James J. Cannon
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$
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920,000
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Carol P. Lowe
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667,900
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Sonia Galindo
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450,000
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Paula Cooney
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410,000
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(1)
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Jeffrey D. Frank
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357,600
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(2)
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(1) Ms. Cooney joined the Company in April 2020. The actual prorated amount of base salary earned in 2020 was $291,731.
(2) Mr. Frank departed the Company in August 2020. The actual amount of base salary paid in 2020 was $270,951.
The salaries actually paid to the NEOs in 2020 are set forth in the “Summary Compensation Table,” under “Compensation of Named Executive Officers.”
Annual Incentive Compensation
We provide our NEOs with an opportunity to earn performance-based cash incentives under the annual incentive plan (AIP), which covers all employees who are not eligible for sales incentives or profit sharing. Under the 2020 AIP, participants earn cash incentives based on the Company's achievement relative to predetermined financial objectives that support our strategic goals. We believe the program incentivizes management to drive strong operating performance, invest in innovation to drive future growth, and create shareholder value.
Target Cash Incentive Opportunities
Target cash incentive opportunities for our executive officers, including our NEOs, are expressed as a percentage of base salary. In the first quarter of 2020, the Compensation Committee reviewed each NEO's target cash incentive opportunity, taking into consideration peer group market data provided by Pay Governance, our CEO's recommendations (except with respect to his own incentive opportunity), and the various objectives of our compensation programs. In light of this review, the Compensation Committee determined not to increase the NEOs' target cash incentive opportunities for 2020. The Committee believes each NEO's incentive opportunity is established at a level that, when considered with his or her base salary, is market competitive and provides appropriate motivational and retention incentives to drive the Company's financial objectives.
The NEOs' 2020 target cash incentive opportunities and actual payments received are summarized below:
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NEO
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Percent of Base Salary
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AIP Target
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AIP Actual
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James J. Cannon
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110
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%
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$
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1,012,000
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$
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1,112,188
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Carol P. Lowe
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85
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%
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567,715
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623,919
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Sonia Galindo
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65
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%
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292,500
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321,458
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Paula Cooney
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60
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%
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246,000
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199,247
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(1)
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Jeffrey D. Frank
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60
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%
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214,560
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—
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(2)
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(1) Ms. Cooney joined the Company in April 2020. Actual payment shown above reflects proration for her actual period of service during 2020.
(2) Mr. Frank departed the Company in August 2020 and therefore was not entitled to a payment under the 2020 AIP.
The amounts paid to the NEOs under the 2020 AIP are also set forth in the “Summary Compensation Table,” under “Compensation of Named Executive Officers.”
The Compensation Committee, with input from management, approved the following performance metrics and relative weightings under the 2020 AIP applicable to our executive officers, including our NEOs: Organic Revenue (50%), Adjusted Operating Margin (30%) and Working Capital Turnover (20%) (each as defined below). We believe these performance metrics incentivized our executive officers, including the NEOs, to achieve the financial, business, and strategic objectives reflected in our 2020 operating plan and were appropriately linked to the interests of our shareholders. To enhance the connection between executive compensation and benefit to shareholders from stock price appreciation, growth in Organic Revenue was weighted most heavily. Operational efficiency metrics — Adjusted Operating Margin and Working Capital Turnover — were also included to promote long-term operational profitability improvement and accelerated cash flow generation for shareholders.
AIP Formula
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Performance Metric
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Description of Performance Metric
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Organic Revenue
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Organic Revenue means the Company’s total revenue as determined under GAAP and reported in the Company’s audited financial statements, excluding (1) the impact of current year acquisitions with purchase prices exceeding $15 million, (2) divestitures and (3) the translation impact of foreign currency rate changes. Revenue attributable to businesses acquired for less than $15 million is included in Organic Revenue if the aggregate revenue contribution of all such businesses is less than $10 million. Organic Revenue is a non-GAAP financial measure. The 2020 Organic Revenue target was $1,925.7 million, representing a 3.0% increase compared to the Company’s GAAP revenue for 2019. The threshold for any payment with respect to this metric was $1,733 million, with the maximum payout earned upon achievement of $2,118 million or more.
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Adjusted Operating Margin
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Adjusted Operating Margin means the Company's operating margin as determined under GAAP, adjusted for (1) discrete items excluded from the Company's externally reported non-GAAP results, (2) the impact of current year acquisitions with purchase prices exceeding $15 million, (3) divestitures, and (4) the translation impact of foreign currency rate changes. The impact of businesses acquired for less than $15 million is reflected in Adjusted Operating Margin if the aggregate revenue contribution of all such businesses is less than $10 million. Adjusted Operating Margin is a non-GAAP financial measure. The 2020 Adjusted Operating Margin target was 21%. The threshold for any payment with respect to this metric was 18.5%, with the maximum payout earned upon achievement of 23.5% or more.
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Working Capital Turnover
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Working Capital Turnover is calculated as revenue divided by the trailing five-quarter average of the Company’s net working capital balances comprised of accounts receivable, inventories, demonstration assets, and accounts payable, excluding the impact of current year acquisitions and dispositions and the translation impact of foreign currency rate changes. The 2020 Working Capital Turnover target was 3.23x. The threshold for any payment with respect to this metric was 2.94x, with the maximum payout earned upon achievement of 3.62x or better.
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The table below sets forth the threshold, target, and maximum levels of performance for each financial metric, as well as the multiplier applicable to the relevant portion of each executive's total cash incentive depending on achievement against such metric. Payouts between threshold and maximum are determined based on straight-line interpolation.
2020 Annual Incentive Plan Matrix
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Weighting
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Threshold 0% Funding
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Target 100% Funding
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Maximum 200% Funding (1)
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Organic Revenue
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50%
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$1,733 million or less
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$1,925.7 million
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$2,118 million or greater
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Adjusted Operating Margin
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30%
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18.5% or less
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21.0%
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23.5% or greater
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Working Capital Turnover
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20%
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2.94x or less
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3.23x
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3.62x or more
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(1) The multiplier for determining the maximum payout for Organic Revenue performance is capped at 150% in the event that Adjusted Operating Margin falls below the 21.0% target.
AIP Award Decisions
In February 2021, the Compensation Committee assessed the Company's performance relative to the 2020 AIP performance metrics described above and, based on such evaluation, made the following determinations:
•Organic Revenue: 2020 Organic Revenue was $1,928.9 million, representing 101.6% achievement relative to the 2020 Organic Revenue target.
•Adjusted Operating Margin: 2020 Adjusted Operating Margin was 22.52%, 112 basis points over the 2020 Adjusted Operating Margin target, representing achievement of 161.0% relative to such target.
•Working Capital Turnover: Working Capital Turnover was 3.10x in 2020, or 0.13x under the 2020 Working Capital Turnover target, representing achievement of 53.8% relative to such target.
The table below illustrates the formula for measuring achievement against each metric and our actual achievement under the AIP.
2020 Annual Incentive Plan Payouts
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Weighting
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Achievement
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Funding Percentage Achieved
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Weighted Payout
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Organic Revenue
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50%
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$1,928.9 million
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101.6%
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50.8%
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Adjusted Operating Margin
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30%
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22.5%
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161.0%
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48.3%
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Working Capital Turnover
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20%
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3.10x
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53.8%
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10.8%
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AIP Payout as a Percent of Target
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109.9%
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Long-Term Incentive Program
We use long-term incentives to motivate management to build long-term growth in our business, thereby linking the interests of management and our shareholders. Equity awards are an integral part of our executive compensation program and are the largest component of each executive officer’s annual total direct compensation. The Compensation Committee generally grants annual equity awards following our Annual Meeting of Shareholders. However, due to the significant uncertainty and business disruption associated with the COVID-19 pandemic, the Committee postponed the grants of the 2020 performance-based awards to August 2020.
Structure of 2020 Long-Term Equity Incentive Program
The Compensation Committee supports a long-term compensation program consisting of (1) time-based equity awards that vest annually over a multi-year period and (2) performance-based equity awards that cliff vest only upon Company achievement of predetermined financial results at the end of a multi-year performance period. For 2020, the long-term equity incentive program for our NEOs consisted of:
(1)Time-based RSUs weighted 75% that generally vest annually over three years; and
(2)PRSUs weighted 25% at target, of which 50% vest based on Adjusted EBITDA growth and 50% vest based on Organic Revenue growth, in each case over a three-year performance period.
The Compensation Committee believes that granting a mix of time-based and performance-based full-value awards that vest over multi-year periods is important to remain competitive with our peer group and other comparable high-growth technology companies with which we compete for top talent, most of which offer full-value awards as a central, or in some cases, exclusive piece of their executive equity compensation programs. For 2020, the Compensation Committee decided to weight time-based RSUs at 75% and PRSUs at 25% of the total grant date value of the awards (as opposed to the 50/50 mix of awards made in 2019). The decision to increase the relative portion of time-based RSUs was driven by the significant business and market uncertainty arising from the COVID-19 pandemic, making realistic performance-based targets challenging to forecast at the time of grant, and the need to enhance the retentive value of the Company's 2020 long-term incentive awards. In 2021, the mix of such awards will be governed by covenants under our Merger Agreement with Teledyne.
Notwithstanding the shift in mix, performance-based equity awards remained an integral component of our long-term equity incentive program in 2020. Consistent with our compensation philosophy, the Compensation Committee believes performance-based equity awards promote alignment of the interests of our shareholders and our executive officers, because the compensation each officer ultimately realizes from the award depends on the officer’s ability to contribute to the successful execution of the Company's long-term financial objectives. Further, achievement of those objectives ultimately should enhance the actual value of the shares earned under the award. The Committee believes this design is consistent with market practice and our pay-for-performance compensation philosophy and remains responsive to feedback solicited by the Committee from key shareholders.
Size of 2020 Long-Term Equity Incentives
In determining the size of each NEO's 2020 long-term equity incentive, the Compensation Committee considered peer group market data provided by Pay Governance (generally targeting the 50th percentile of the 2020 Peer Group), as well as our CEO's recommendations (except with respect to his own long-term incentive) and our compensation program objectives.
The values of the annual long-term equity incentive awards granted to the NEOs for 2020 were:
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NEO
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Target
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James J. Cannon
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$
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3,850,000
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Carol P. Lowe
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1,750,000
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Sonia Galindo
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800,000
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Paula M. Cooney
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675,000
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(1)
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Jeffrey D. Frank
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550,000
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(1) Amount determined in accordance with Ms. Cooney's new hire offer letter. In addition, in connection with her hiring, Ms. Cooney was granted a one-time award of time-based RSUs in April 2020 with a target grant date value of $450,000.
PRSUs. Consistent with 2019, the PRSUs consist of two components: (1) 50% vest based on our Adjusted EBITDA CAGR over the applicable performance period and (2) 50% vest based on our Organic Revenue CAGR over the performance period. The performance period is the three-year period beginning January 1, 2020 and ending on December 31, 2022. For this purpose, growth is calculated based on achievement of an increase in the applicable performance metric at a CAGR over the three-year performance period. We believe that these performance metrics incentivize management to drive both top-line and bottom-line sustainable, long-term growth in the business and, based shareholder feedback, that a three-year performance period (without payment for partial performance periods) provides appropriate long-term incentives.
Performance Formula. After the three-year performance period, the number of shares earned under each PRSU award is determined based on the Company's Adjusted EBITDA CAGR and Organic Revenue CAGR for the performance period. The number of shares equals: (1) the target number of shares subject to the Adjusted EBITDA component of the award multiplied by the payout percentage corresponding to the Company's Adjusted EBITDA CAGR achievement plus (2) the target number of shares subject to the Organic Revenue component of the award multiplied by the payout percentage corresponding to the Company's Organic Revenue CAGR achievement.
Performance Metrics. For this purpose, “Adjusted EBITDA” and “Organic Revenue” are defined as follows:
(1)“Adjusted EBITDA” means our net earnings, as determined under GAAP, adjusted for (1) discrete items excluded from the Company's externally reported non-GAAP results, (2) interest expense and income, (3) income tax expense, (4) depreciation expense, (5) amortization of intangibles, (6) the impact of acquisitions with purchase prices exceeding $15 million, (7) divestitures, and (8) the translation impact of foreign currency rate changes. Adjusted EBITDA attributable to businesses divested during the performance period is excluded for all purposes. Adjusted EBITDA attributable to businesses acquired for less than $15 million during the performance period is included in the base year and each year during the performance period, so long as the aggregate revenue contribution of all such businesses is less than $10 million in the year acquired.
(2)“Organic Revenue” means total revenue, as determined under GAAP and reported in our audited financial statements, excluding (1) the impact of acquisitions with purchase prices exceeding $15 million, (2) divestitures, and (3) the translation impact of foreign currency rates changes. Revenue attributed to businesses we divest during the performance period is excluded for all purposes. Revenue attributable to businesses acquired for less than $15 million during the performance period is included in the base year and each year during the performance period, so long as the aggregate revenue contribution of all such businesses is less than $10 million in the year acquired.
The chart below describes the formula for determining the number of shares that may vest at various levels of performance.
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Achievement Level
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Adjusted EBITDA CAGR (weighted 50%)
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Organic Revenue CAGR (weighted 50%)
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Payout
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Below Threshold
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Less than 3.40%
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Less than 1.65%
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0%
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Threshold
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3.40%
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1.65%
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60%
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Target
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6.80%
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3.30%
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100%
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Maximum
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10.20% or above
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4.95% or above
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200%
|
Annual Adjusted EBITDA and Organic Revenue performance for 2022 will be compared against the baseline levels established by 2019 performance for purposes of calculating the CAGR for each metric over the performance period. Except in the case of a corporate transaction, CAGR achievement during any interim period will not result in any shares becoming eligible to vest. For achievement between the performance levels in the table above, the payout percentage will be calculated by a linear interpolation between (1) the two identified CAGR achievement levels represented as a percentage of the CAGR target and (2) the two payout percentages set forth in the applicable “Payout” column that correspond to the two identified CAGR achievement levels. All calculations of CAGR and the relevant “Payout” percentages will be rounded to the nearest 0.01% with the final result rounded to the nearest 0.1% for determination of achievement.
If our acquisition by Teledyne is completed, then, subject to the terms and conditions of the Merger Agreement, at the effective time of the merger, each PRSU award granted prior to the effective time will automatically vest and be cancelled and converted into the right to receive $56.00 per share of FLIR common stock subject to such award. The number of shares of FLIR common stock underlying each such PRSU award will equal the greater of (i) the target number of shares set forth in the award agreement for such award and (ii) the number of shares that would be achieved based on the actual achievement of the applicable performance goals if the applicable performance period ended on the last day of FLIR’s calendar quarter immediately preceding the first public announcement of the transactions contemplated by the Merger Agreement.
Additional Restrictions for Performance Awards
Vesting Restrictions. In addition to the performance criteria described above, grantees generally must remain in continuous service as an employee or consultant of the Company or its subsidiaries through the third anniversary of the grant date to vest in the achieved portion(s) of the PRSUs. However, in the case of death or “qualifying disability,” a grantee (or his or her successors, as applicable) will vest in the same portion of the applicable PRSUs that would have vested had such grantee remained an employee or consultant through the third anniversary of the grant date. Grantees whose service terminates prior to such date due to “retirement” will vest in the portion of the applicable PRSUs earned based on achievement of the performance metrics during the performance period, but prorated to reflect the number of days that the grantee remained in service.
•“Qualifying Disability” means a total and permanent disability as defined in Section 22(e)(3) of the Code, which we determine is expected to prevent you from thereafter engaging in any gainful employment.
•“Retirement” means a voluntary termination of employment and consultancy by the grantee if the grantee is, on the effective date of such termination, at least 60 years of age and has worked for us or one of our subsidiaries for the preceding 5 years.
Additional vesting rules apply in the event of a corporate transaction. As described above, if a corporate transaction occurs before the end of the applicable three-year performance period, each PRSU grant will vest as to the greater of: (1) the target shares subject to such grant; and (2) the number of shares that would be achieved if the performance period ended on the last day of our fiscal quarter immediately preceding the first public announcement of the corporate transaction as if such day were the last day of the performance period for purposes of determining the number of achieved shares under the “Performance Formula” section above.
2018-2020 Performance Restricted Stock Units: In 2018, the Company granted PRSUs to select employees, including Mr. Cannon, Ms. Lowe and Mr. Frank. These PRSUs vested based on achievement of predefined Organic Revenue CAGR and Adjusted EBITDA CAGR goals (adjusted for mergers and acquisitions) over the three-year performance period (2018-2020). For purposes of these awards, the definitions of "Organic Revenue” and "Adjusted EBITDA" were consistent with the definitions set forth above under "Long-Term Incentive Program means — Performance Metrics," except that no exception was provided for acquisitions with purchase prices under $15 million. The performance result was calculated after the end of the performance period (December 31, 2020) as summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
Actual
|
Organic Revenue CAGR
|
5.0%
|
|
2.7% (63.2% of target)
|
Adjusted EBITDA CAGR
|
6.5%
|
|
5.5% (88.6% of target)
|
As a result of the foregoing, Mr. Cannon, Ms. Lowe and Mr. Frank earned 75.9% (on a blended basis) of the target number of shares subject to their respective 2018-2020 PRSU awards, as summarized below.
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|
|
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|
|
Name
|
|
Target
|
|
Actual
|
James J. Cannon (1)
|
|
75,324
|
|
57,170
|
Carol P. Lowe
|
|
16,651
|
|
12,638
|
Jeffrey D. Frank (2)
|
|
4,635
|
|
3,517
|
(1) The PRSUs granted to Mr. Cannon in 2018 included, in addition his regular annual LTIP award, a one-time leadership PRSU grant with a 38,692 target number of shares. The award is subject to a further vesting requirement of continued employment through the fourth anniversary of the grant date (April 27, 2022) for 50% of the shares earned and through the fifth anniversary of the grant date (April 27, 2023) for the remaining 50% of the shares earned.
(2) The shares in which Mr. Frank vested under his 2018-2020 PRSU award were prorated to reflect his departure from the Company in August 2020, as such departure qualifying as a retirement under the terms of the award.
Perquisites and Other Benefits
We generally minimize the value and number of perquisites provided to our executive officers, including our NEOs, to make our overall compensation program simpler, easier to understand, and more transparent to shareholders. The primary perquisite for our NEOs is an automobile allowance of $1,500 per month. We also agreed to reimburse our CFO for relocation-related expenses as a result of her required relocation to a Company location.
In addition, our NEOs have supplemental life insurance benefits beyond those provided to other United States-based employees. Our standard life insurance benefit equals two times an employee’s annual salary up to a maximum benefit of $500,000. The NEOs' supplemental life insurance benefit provides three times the NEO’s salary, up to a maximum benefit of $1,200,000. The values of all perquisites for our NEOs are presented in the "2020 All Other Compensation Table" below.
Our executive officers, including our NEOs, are also eligible to participate in our other benefit plans on the same terms as other employees. These plans include health plans, disability plans, retirement plans and an employee stock purchase plan.
Non-Qualified Deferred Compensation Plans
We have a non-qualified deferred compensation (“NQDC”) plan and a stock deferral plan. Participation by our employees, including our NEOs, is optional. The NQDC plan provides an additional pre-tax savings vehicle for our more highly compensated United States-based employees whose retirement savings opportunity is limited under our 401(k) plan. The stock deferral plan allows eligible employees to defer the receipt of vested RSUs. The NQDC plan does not allow for Company contributions to be made to the plan on behalf of any employee, including the NEOs.
Offer Letter with Ms. Cooney
The Company entered into an Offer Letter with Ms. Cooney, dated as of February 28, 2020, the provisions of which were negotiated in connection with her hiring as our Senior Vice President and Chief Human Resources Officer. Please see "Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table" for additional information about the Offer Letter.
Post-Termination Compensation
Severance Agreements
Our Executive Severance Benefit Plan covers our executive officers, other than the CEO and CFO (whose employment agreements include separate severance provisions), and certain other key employees. We believe our severance arrangements (1) secure the continued dedication of these employees to their work, notwithstanding the possibility of a termination of employment by us, (2) provide an incentive for such employees to continue their employment with us and (3) provide terms of protection consistent with current market practice.
The Executive Severance Benefit Plan provides for severance payments and benefits upon certain qualifying terminations of employment and the participant’s compliance with certain requirements, including entry into a release of claims in favor of the Company. The plan's term expires on October 2022, followed by automatic renewals for successive one-year terms unless the Company provides written notice of non-renewal to participants at least six months in advance of the expiration of the then-current term.
Change of Control Agreements
Our Change in Control Severance Benefit Plan covers our executive officers, other than the CEO (who has a separate Change of Control Agreement with us), and certain other key employees. We consider it essential to maintain a dedicated and talented management team, especially in the event of a potential change in control of the Company. We believe our executive change of control arrangements advance the best interests of the Company and our shareholders by providing security to key members of management if a potential change of control were to arise, reducing the possibility of their distraction or departure and encouraging their continued attention and dedication to their assigned duties. We believe that the severance payments and benefits provided under the plan are competitive relative to the protections provided to similarly situated employees at companies with which we compete for top talent.
The terms and amounts payable under the above-described severance and change of control arrangements are further described under "Potential Payments upon Termination or Change of Control" below.
Clawback Policy
The Company's clawback policy requires any current or former officer of the Company subject to Section 16 of the Exchange Act to repay certain cash-based and equity-based incentive compensation if the Compensation Committee finds that such officer’s material dishonesty, intentional misconduct or fraud caused or partially caused the Company to materially restate its financial statements. To further mitigate any risk associated with our compensation programs and as a positive governance practice, the Compensation Committee adopted amendments to the policy in 2020. Among other matters, the amendments strengthened the policy by permitting the recovery of equity-based incentive compensation, rather than limiting its coverage to cash incentive awards.
Insider Trading and Hedging Policy
The Company’s insider trading policy prohibits the Company's executive officers and directors from pledging Company securities or engaging in hedging transactions with respect to our securities. The Company prohibits all employees (including officers) and directors of the Company, as well as their designees, from purchasing financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of Company equity securities, unless such a transaction is approved in advance by the Legal Department and made in compliance with the Company's insider trading policy.
Impact of Tax on Compensation Decisions
As a general matter, the Compensation Committee considers the tax implications of the compensation vehicles employed by the Company, but it is not a determining factor in the Committee’s compensation decisions.
Deductibility of Executive Compensation
The Compensation Committee generally considers the tax deductibility of compensation as a factor in making compensation decisions, while retaining the flexibility to provide compensation consistent with the goals of our executive compensation program even if not fully tax deductible.
Before 2018, the Compensation Committee awarded certain compensation, such as annual cash incentives and PRSUs, intended to be “performance-based” and therefore fully tax-deductible by us under Section 162(m) of the Internal Revenue Code. After adoption of the 2017 Tax Reform Act, we may deduct under Section 162(m) only up to $1 million in any one year for compensation paid to certain current and former officers, except that “performance-based” compensation payable pursuant to a “written binding contract” made before November 2, 2017 and not subsequently modified may be excluded from the $1 million limit (i.e. it is "grandfathered"). Notwithstanding the change in the tax laws brought about by the 2017 Tax Reform Act, which generally eliminated the exclusion of performance-based compensation from the deduction limit, the Company expects to continue to place significant emphasis on pay for performance in the design of its executive compensation programs as a matter of sound corporate governance.
Accounting for Stock-Based Compensation
We follow Financial Accounting Standards Board’s Accounting Standards Codification Topic 718 (“ASC Topic 718”) in connection with the financial reporting of our stock options and other stock-based awards. Please refer to Note 1 to the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for additional information. When determining the types and amounts of equity compensation granted to the NEOs, the Compensation Committee considers the advantages and disadvantages of various equity vehicles. As part of this consideration, the Compensation Committee takes into account the overall program cost, which includes the associated compensation expense for financial reporting purposes.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is a present or former officer or employee of the Company. In addition, during fiscal year 2020, no executive officer of the Company had served on the compensation committee or any similar committee of any other entity or served as a director for any other entity whose executive officers served on the Company's Compensation Committee.
COMPENSATION COMMITTEE REPORT
We have reviewed and discussed the Compensation Discussion and Analysis with our management and, based on our review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
THE COMPENSATION COMMITTEE
Catherine A. Halligan, Chair
William W. Crouch
Angus L. Macdonald
Cathy A. Stauffer
Michael T. Smith
Compensation of Named Executive Officers
2020 Summary Compensation Table
The following table summarizes compensation for our CEO, CFO and our other NEOs for the years ended December 31, 2020, 2019 and 2018 to the extent required under the SEC executive compensation disclosure rules.
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
|
Name and Principal Position
|
|
Year
|
|
Salary ($)
|
|
Bonus ($)
|
|
Stock Awards(1) ($)
|
|
Non-Equity Incentive Plan Compensation(2) ($)
|
|
All Other Compensation(3) ($)
|
|
Total ($)
|
James J. Cannon
President and Chief Executive Officer
|
|
2020
|
|
$
|
920,000
|
|
|
$
|
—
|
|
|
$
|
3,895,217
|
|
|
$
|
1,112,188
|
|
|
$
|
71,627
|
|
|
$
|
5,999,032
|
|
|
2019
|
|
906,539
|
|
—
|
|
3,849,929
|
|
597,080
|
|
506,693
|
|
5,860,241
|
|
2018
|
|
850,000
|
|
—
|
|
5,849,988
|
|
1,119,600
|
|
140,258
|
|
7,959,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carol P. Lowe
Executive Vice President, and Chief Financial Officer
|
|
2020
|
|
667,900
|
|
—
|
|
1,770,549
|
|
623,919
|
|
74,509
|
|
3,136,877
|
|
2019
|
|
664,458
|
|
—
|
|
1,749,968
|
|
334,952
|
|
98,140
|
|
2,847,518
|
|
2018
|
|
650,000
|
|
2,500,000
|
(4)
|
1,750,018
|
|
661,600
|
|
21,174
|
|
5,582,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sonia Galindo
Senior Vice President, General Counsel, Secretary, and Chief Ethics & Compliance Officer
|
|
2020
|
|
450,000
|
|
—
|
|
809,352
|
|
321,458
|
|
39,630
|
|
1,620,440
|
|
2019
|
|
199,038
|
|
200,000
|
(5)
|
2,209,974
|
|
80,377
|
|
17,180
|
|
2,706,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paula M. Cooney
Chief Human Resources Officer
|
|
2020
|
|
291,731
|
|
200,000
|
(6)
|
1,138,573
|
|
199,247
|
|
29,247
|
|
1,858,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey D. Frank
Former Senior Vice President,
Global Product Strategy (7)
|
|
2020
|
|
270,951
|
|
—
|
|
554,274
|
|
—
|
|
30,746
|
|
855,971
|
|
2019
|
|
390,138
|
|
—
|
|
549,954
|
|
126,590
|
|
33,171
|
|
1,099,853
|
|
2018
|
|
346,569
|
|
—
|
|
549,992
|
|
250,000
|
|
35,048
|
|
1,181,609
|
(1) Represents the aggregate grant date fair value for time-based RSUs and PRSUs, as applicable, granted in 2020, 2019 and 2018. The amounts reported in this column are calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“FASB ASC Topic 718”). For additional information regarding the calculation of the grant date fair value of the awards, see Note 1 to the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
For the PRSUs granted in 2020, assuming that each NEO achieves the highest level of performance under the 2020 program, the values related to these awards in the 2020 Grants of Plan Based Awards Table would double to $1,942,197, $882,848, $403,505, and $340,420 for Mr. Cannon and Mses. Lowe, Galindo and Cooney, respectively, and increase the amounts in the 2020 Summary Compensation Table accordingly.
In connection with his departure from the Company in August 2020, Mr. Frank vested in a prorated portion of his outstanding PRSU awards, as his departure constituted a "retirement" under the terms of the applicable awards.
(2) Represents amounts earned under our AIP with respect to the specified year. The 2020 AIP and performance metrics are described in the Compensation Discussion and Analysis under “Annual Incentive Compensation.” Due to his departure from the Company in August 2020, Mr. Frank was not entitled to a payout under the 2020 AIP.
(3) Represents (1) actual cash expenses incurred by the Company and includes car allowances, Company matching contributions under our 401(k) plan, group life insurance premiums, and other personal benefits and (2) the dollar value of dividend equivalent units accrued on restricted stock units. Details are described in the All Other Compensation Table shown below.
(4) Ms. Lowe joined the Company on November 27, 2017 as the Company’s Chief Financial Officer. Her $2,500,000 bonus amount for 2018 represents a one-time cash payment to compensate her for loss of unvested stock options scheduled to vest over the short-term and other incentives forfeited because of her leaving her former employer.
(5) Ms. Galindo joined the Company on July 15, 2019. Her $200,000 bonus amount represents a one-time cash payment to compensate her for loss of cash bonus and unvested equity awards forfeited because of her leaving her former employer.
(6) Ms. Cooney joined the Company on April 6, 2020. Her $200,000 bonus amount represents a one-time cash payment to compensate her for loss of cash bonus and unvested equity awards forfeited because of her leaving her former employer.
(7) Mr. Frank ceased to be an executive officer and departed from the Company in August 2020.
2020 All Other Compensation Table
The following table presents the components of the amounts shown for 2020 in the “All Other Compensation” column of the 2020 Summary Compensation Table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Car Allowance ($)
|
|
Company Contributions under 401(k) Plan ($)
|
|
Group Life Insurance Premiums ($)
|
|
Other Personal Benefits ($)
|
|
Value of Dividend Equivalent Units ($)(1)
|
|
|
Total ($)
|
James J. Cannon
|
|
$
|
18,000
|
|
|
$
|
9,750
|
|
|
$
|
2,070
|
|
|
$
|
—
|
|
|
$
|
41,807
|
|
|
|
$
|
71,627
|
|
Carol P. Lowe(2)
|
|
18,000
|
|
|
9,750
|
|
|
5,934
|
|
|
21,780
|
|
|
19,045
|
|
|
|
74,509
|
|
Sonia Galindo
|
|
18,000
|
|
|
9,750
|
|
|
3,174
|
|
|
—
|
|
|
8,706
|
|
|
|
39,630
|
|
Paula M. Cooney
|
|
13,154
|
|
|
—
|
|
|
2,199
|
|
|
—
|
|
|
13,894
|
|
|
|
29,247
|
|
Jeffrey D. Frank(3)
|
|
11,769
|
|
|
9,750
|
|
|
5,298
|
|
|
—
|
|
|
3,929
|
|
|
|
30,746
|
|
(1) The value of dividend equivalent units are based on the fair market value on the dividend payable date multiplied by the quantity of dividend shares accumulated by the reporting person.
(2) Ms. Lowe received reimbursement for relocation-related expenses as a result of her required relocation to a Company location.
(3) Mr. Frank ceased to be an executive officer and departed from the Company in August 2020. He did not receive any severance benefits but vested in a prorated portion of his outstanding PRSU awards, as his departure constituted a "retirement" under the terms of the applicable awards.
2020 Grants of Plan-Based Awards
The following Grants of Plan-Based Awards table provides information regarding non-equity incentive plan awards and equity-based awards granted to our NEOs during the year ended December 31, 2020. The equity-based awards were granted under the FLIR Systems, Inc. 2011 Stock Incentive Plan, as amended (the “2011 Plan”), while the non-equity incentive plan awards (the 2020 AIP) were granted under the FLIR Systems, Inc. 2012 Executive Bonus Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts under
Non-Equity Incentive Plan
Awards(1)
|
Estimated Future Payouts
under Equity Incentive Plan
Awards (5)
|
All Other Stock Awards; Number of Shares of Stock or Units (5) (#)
|
Grant Date Fair Value of Stock and Option Awards ($)
|
Name
|
Grant Date
|
|
Approval Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
James J. Cannon
|
n/a
|
|
2/21/20
|
$
|
—
|
|
$
|
1,012,000
|
|
$
|
2,024,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
$
|
—
|
|
4/30/20
|
(3)
|
4/30/20
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
66,532
|
|
2,887,489
|
|
8/4/20
|
(4)
|
8/4/20
|
—
|
|
—
|
|
—
|
|
13,585
|
|
22,641
|
|
45,282
|
|
—
|
|
962,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carol P. Lowe
|
n/a
|
|
2/20/20
|
—
|
|
567,715
|
|
1,135,430
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4/30/20
|
(3)
|
4/29/20
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
30,241
|
|
1,312,459
|
|
8/4/20
|
(4)
|
8/3/20
|
—
|
|
—
|
|
—
|
|
6,175
|
|
10,291
|
|
20,582
|
|
—
|
|
437,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sonia Galindo
|
n/a
|
|
2/20/20
|
—
|
|
292,500
|
|
585,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4/30/20
|
(3)
|
4/29/20
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
13,824
|
|
599,962
|
|
8/4/20
|
(4)
|
8/3/20
|
—
|
|
—
|
|
—
|
|
2,822
|
|
4,704
|
|
9,408
|
|
—
|
|
199,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paula M. Cooney
|
n/a
|
|
2/28/20
|
—
|
|
246,000
|
|
492,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4/6/20
|
(2)
|
4/5/20
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
12,824
|
|
449,994
|
|
4/30/20
|
(3)
|
4/29/20
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
11,664
|
|
506,218
|
|
8/4/20
|
(4)
|
8/3/20
|
—
|
|
—
|
|
—
|
|
2,381
|
|
3,969
|
|
7,938
|
|
—
|
|
168,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey D. Frank
|
n/a
|
|
2/20/20
|
—
|
|
214,560
|
|
429,120
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4/30/20
|
(3)
|
4/29/20
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
9,504
|
|
412,474
|
|
8/4/20
|
(4)
|
8/3/20
|
—
|
|
—
|
|
—
|
|
1,940
|
|
3,234
|
|
6,468
|
|
—
|
|
137,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The Board approved the CEO's 2020 AIP target on February 21, 2020 based upon the Compensation Committee's recommendation. The Compensation Committee approved the other NEOs' 2020 AIP targets on February 20, 2020, except for Ms. Cooney's target which is set forth in her Offer Letter dated February 28, 2020. Payouts can range from 0-200% depending on performance. See the "Annual Incentive Compensation" section of Compensation Discussion and Analysis for details on the AIP.
(2) The Compensation Committee approved the time-based RSU grant on April 5, 2020. The time-based RSU grant was issued on April 6, 2020. This time-based RSU grant will vest over a three-year period, in three equal installments on April 6, 2021, 2022 and 2023. In accordance with FASB ASC Topic 718, the grant date fair value of these awards was determined based on the closing price of our common stock on the grant date $35.09.
(3) The Board approved the CEO's 2020 time-based RSU award on April 30, 2020 based on the Compensation Committee's recommendation, and the Compensation Committee approved the time-based RSU awards for the other NEOs on April 29, 2020. The grants vest over a three-year period, in three equal installments on April 30, 2021, 2022 and 2023. In accordance with FASB ASC Topic 718, the grant date fair value of these awards was determined based on the closing price of our common stock on the grant date $43.40. Mr. Frank forfeited his time-based RSU award in connection with his departure from the Company in August 2020.
(4) The Board approved the CEO's PRSU award on August 4, 2020 based upon the Compensation Committee's recommendation, and the Compensation Committee approved the PRSU awards for the other NEOs on August 3, 2020. The awards vest on April 30, 2023 based 50% on the Company’s Organic Revenue CAGR and 50% on its Adjusted EBITDA CAGR from January 1, 2020 through December 31, 2022. See the “Long-Term Incentive Program” section of the Compensation Discussion and Analysis for more information about these metrics and the other terms of the awards. The grant date fair value of $42.51 per PRSU was calculated in accordance with FASB ASC Topic 718 based on the probable satisfaction of the performance conditions, as described in Note 1 to the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K. Mr. Frank vested in a prorated portion of his PRSU award in connection with his departure from the Company in August 2020.
(5) The amounts reported in this column reflect the number of shares subject to each award as of the grant date, and therefore do not reflect any dividend equivalent units accrued on such awards thereafter. The number of shares subject to such accrued dividend equivalent units is reported in the Outstanding Equity Awards at Fiscal Year End 2020 Table, and the dollar value of such dividend equivalent units is under "All Other Compensation" in the Summary Compensation Table.
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
Employment Agreements
James J. Cannon
Mr. Cannon's Amended and Restated Employment Agreement with the Company, dated as of April 24, 2018, sets forth his base salary as CEO, his annual incentive target under the AIP (110% of base salary) and his eligibility to participate in the Company's long-term incentive program, a monthly car allowance of $1,500 and a right to reimbursement for relocation costs, among other terms. The agreement also includes provisions regarding various termination scenarios, which are described below under “Post-Termination Compensation.” The term of the agreement ends on April 24, 2022 and may be renewed by mutual agreement of the Company and Mr. Cannon.
Mr. Cannon is also party to a Change of Control Agreement with the Company dated June 19, 2017 as described below under “Post-Termination Compensation.”
Carol P. Lowe
Ms. Lowe's Offer Letter with the Company, dated as of October 16, 2017, establishes her minimum base salary as CFO, her annual incentive target under the AIP (85% of base salary), the initial target grant date value for her annual long-term incentive awards ($1,500,000), a monthly car allowance of $1,500 and a right to reimbursement for relocation costs, among other terms. The letter also includes provisions regarding various termination scenarios, and Ms. Lowe also participates in our Change in Control Severance Benefit Plan, in each case as described under “Post-Termination Compensation.”
Sonia Galindo
Ms. Galindo's Offer Letter with the Company, dated as of July 15, 2019, establishes her initial base salary, her annual incentive target under the AIP (65% of base salary), the initial target grant date value for her annual long-term incentive awards (150% of base salary), and a monthly car allowance of $1,500, among other terms. Ms. Galindo also participates in our Change in Control Severance Benefit Plan and Executive Severance Benefit Plan was described below under “Post-Termination Compensation.”
Paula M. Cooney
Ms. Cooney's Offer Letter with the Company, dated as of February 28, 2020, establishes her initial base salary, her annual incentive target under the AIP (60% of base salary), the initial target grant date value for her annual long-term incentive awards ($675,000), and a monthly car allowance of $1,500 and a right to reimbursement for relocation costs, among other terms. The letter also provides for a one-time signing bonus of $200,000 and a one-time equity award with a grant date value of $450,000, consisting of time-based RSUs vesting in three equal installments over the three year period following the grant date. Ms. Cooney also participates in our Change in Control Severance Benefit Plan and Executive Severance Benefit Plan was described below under “Post-Termination Compensation.”
Jeffrey D. Frank
Mr. Frank had no employment agreement with the Company. Mr. Frank received an annual incentive and long-term awards under our approved plans (i.e. AIP and long-term incentive program). Mr. Frank had an AIP target of 60% of his base salary and participated in our Change in Control Severance Benefit Plan and Executive Severance Benefit Plan, which are described under "Compensation Discussion and Analysis" and “Post-Termination Compensation."
Outstanding Equity Awards at Fiscal Year-End 2020
The following Outstanding Equity Awards at Fiscal Year-End 2020 table summarizes the equity awards we have made to our NEOs, which were outstanding as of December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards (16)
|
|
|
|
Equity Incentive Plan Awards:
|
Name
|
Number of Securities Underlying Unexercised Options Exercisable (#)
|
Number of Securities Underlying Unexercised Options Unexercisable (#)
|
|
Equity incentive plan awards: number of securities underlying unexercised unearned options (#)
|
Option Exercise Price ($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not Vested (#)
|
|
Market Value of Shares or Units of Stock That Have Not Vested(1) ($)
|
Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
|
|
Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(1) ($)
|
James J. Cannon
|
59,372
|
|
—
|
|
(2)
|
—
|
|
$
|
35.17
|
|
6/26/27
|
|
|
|
|
|
|
|
|
|
|
|
|
20,491
|
|
(3)
|
$
|
898,121
|
|
|
|
|
|
|
|
|
|
|
12,073
|
|
(4)
|
529,160
|
|
|
|
|
|
|
|
|
|
|
25,564
|
|
(5)
|
1,120,470
|
|
|
|
|
|
|
|
|
|
|
67,376
|
|
(6)
|
2,953,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,632
|
|
(7)
|
$
|
1,605,581
|
|
|
|
|
|
|
|
|
|
|
38,692
|
|
(8)
|
1,695,870
|
|
|
|
|
|
|
|
|
|
|
38,841
|
|
(9)
|
1,702,401
|
|
|
|
|
|
|
|
|
|
|
22,844
|
|
(10)
|
1,001,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carol P. Lowe
|
—
|
|
|
|
|
|
|
5,488
|
|
(4)
|
240,539
|
|
|
|
|
|
|
|
|
|
|
11,620
|
|
(5)
|
509,305
|
|
|
|
|
|
|
|
|
|
|
30,625
|
|
(6)
|
1,342,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,651
|
|
(7)
|
729,813
|
|
|
|
|
|
|
|
|
|
|
17,655
|
|
(9)
|
773,819
|
|
|
|
|
|
|
|
|
|
|
10,384
|
|
(10)
|
455,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sonia Galindo
|
—
|
|
|
|
|
|
|
14,707
|
|
(11)
|
644,608
|
|
|
|
|
|
|
|
|
|
|
14,000
|
|
(6)
|
613,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,278
|
|
(12)
|
976,445
|
|
|
|
|
|
|
|
|
|
|
4,746
|
|
(10)
|
208,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paula M. Cooney
|
—
|
|
|
|
|
|
|
12,986
|
|
(13)
|
569,176
|
|
|
|
|
|
|
|
|
|
|
11,813
|
|
(6)
|
517,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,004
|
|
(10)
|
175,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey D. Frank (15)
|
5,233
|
|
—
|
|
(14)
|
|
$
|
36.73
|
|
8/28/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,635
|
|
(7)
|
203,152
|
|
|
|
|
|
|
|
|
|
|
3,066
|
|
(9)
|
134,383
|
|
|
|
|
|
|
|
|
|
|
712
|
|
(10)
|
31,207
|
|
(1) Based on the closing price of our common stock as of December 31, 2020 of $43.83 as reported on NASDAQ.
(2) Time-based stock options granted on June 26, 2017, all of which are fully vested.
(3) Time-based RSUs granted on June 26, 2017 that vest on December 6, 2021.
(4) Time-based RSUs granted April 27, 2018 that vest on April 27, 2021.
(5) Time-based RSUs granted April 26, 2019 that vest in two equal installments on April 26, 2021, and 2022.
(6) Time based RSUs granted on April 30, 2020 that will vest in three equal installments on April 30, 2021, 2022 and 2023.
(7) PRSUs granted on April 27, 2018 that will vest on April 27, 2021 based 50% on the Company’s 3-year Organic Revenue CAGR and 50% on its 3-year Adjusted EBITDA CAGR. This amount represents the number of shares that would be earned if the applicable performance goals are achieved at the target level. The maximum number of shares that can be earned is 200% of target.
(8) PRSUs granted on April 27, 2018 to the CEO as a leadership performance grant, which may be earned based 50% on the Company’s 3-year Organic Revenue CAGR and 50% on its 3-year Adjusted EBITDA CAGR. The award is subject to a further vesting requirement of continued employment through the fourth anniversary of the grant date (April 27, 2022) for 50% of the shares earned and through the fifth anniversary of the grant date (April 27, 2023) for the remaining 50% of the shares earned. This amount represents the number of shares that would be earned if the applicable performance goals are achieved at the target level. The maximum number of shares that can be earned is 200% of target.
(9) PRSUs granted on April 26, 2019 that will vest on April 26, 2022 based 50% on the Company’s 3-year Organic Revenue CAGR and 50% on its 3-year Adjusted EBITDA CAGR. This amount represents the number of shares that would be earned if the applicable performance goals are achieved at the target performance level. The maximum number of shares that can be earned is 200% of target.
(10) PRSUs granted on April 30, 2020 that will vest on April 30, 2023 based 50% on the Company’s 3-year Organic Revenue CAGR and 50% on its 3-year Adjusted EBITDA CAGR. This amount represents the number of shares that would be earned if the applicable performance goals are achieved at the target performance level. The maximum number of shares that can be earned is 200% of target.
(11) Time based RSUs granted on July 26, 2019 that will vest in two equal installments on July 26, 2021 and 2022.
(12) PRSUs granted on July 26, 2019 that will vest on July 26, 2022 based 50% on the Company’s 3-year Organic Revenue CAGR and 50% on its 3-year Adjusted EBITDA CAGR. This amount represents the number of shares that would be earned if the applicable performance goals are achieved at the target performance level. The maximum number of shares that can be earned is 200% of target.
(13) Time based RSUs granted on April 6, 2020 that will vest in three equal installments on April 6, 2021, 2022 and 2023.
(14) Time-based stock options granted on April 28, 2017, all of which are fully vested.
(15) In connection with his departure from the Company in August 2020, Mr. Frank vested in a prorated portion of his outstanding PRSU awards, as his departure constituted a "retirement" under the terms of the applicable awards.
(16) Commencing in 2020, the Company modified the terms of its time-based RSUs and PRSUs to provide for such awards to accrue dividend equivalent units. Accordingly, the amounts reported in this column reflect dividend equivalent units accrued as of December 31, 2020 on such awards.
2020 Option Exercises and Stock Vested
Set forth below is additional information about the value realized by our NEOs upon the vesting of RSUs during the year ended December 31, 2020. None of our NEOs exercised stock options during the year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Stock Awards
|
|
Number of Shares Acquired on Vesting (#)
|
|
Value Realized on Vesting ($) (1)
|
James J. Cannon
|
|
107,547
|
|
|
$
|
4,516,576
|
|
Carol P. Lowe
|
|
29,454
|
|
|
1,176,487
|
|
Sonia Galindo
|
|
7,353
|
|
|
305,811
|
|
Paula M. Cooney
|
|
—
|
|
|
—
|
|
Jeffrey D. Frank
|
|
42,397
|
|
|
1,842,983
|
|
(1) The value realized on vesting represents the number of shares subject to the vesting RSUs multiplied by the per share closing price of our common stock reported on NASDAQ on the vesting date.
2020 Non-Qualified Deferred Compensation
Set forth below is information regarding the contributions made and aggregate earnings recognized in 2020 and the account balances as of December 31, 2020 for our NEOs under our NQDC plan and Stock Deferral Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive Contributions ($)
|
|
Registrant Contributions ($)
|
|
Aggregate Earnings (Loss)(1) ($)
|
|
Aggregate Withdrawals/ Distributions ($)
|
|
Aggregate Balance at December 31 ($)
|
James J. Cannon
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Carol P. Lowe
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Sonia Galindo
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Paula M. Cooney
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Jeffrey D. Frank
|
|
255,351.31
|
|
(2)
|
—
|
|
|
317,424.57
|
|
(3)
|
—
|
|
|
2,137,929.46
|
|
|
—
|
|
(4)
|
—
|
|
|
24,841
|
|
(5)
|
369,464
|
|
(6)
|
898,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) These amounts are not reported in the 2020 Summary Compensation Table.
(2) These amounts are reported as Salary or Non-Equity Incentive Plan Compensation in the 2020 Summary Compensation Table.
(3) Earnings from compensation deferred under the NQDC.
(4) Mr. Frank did not vest in any shares during 2020 for which distribution was deferred.
(5) Includes the value of the dividends for shares whose distribution was deferred under the Stock Deferral Plan.
(6) Includes the value of 2,823 shares that vested on April 29, 2016 and 2,824 shares that vested on April 29, 2017 and 2,824 shares that vested on April 29, 2018 for which distribution was deferred.
We established the NQDC plan to provide highly compensated employees with an additional savings option. NEOs can defer up to 50% of salary and up to 100% of AIP compensation. Participants elect the timing and method of distribution during an annual enrollment period. Distribution options include a lump sum or annual installments.
Deferred compensation and investment earnings are held as a Company asset in a rabbi trust. Participants may select from a menu of market-based investment options in which to invest their contributions.
In addition, we established a Stock Deferral Plan to provide highly compensated employees the ability to defer receipt of shares subject to RSUs after vesting. Participants may elect to defer the distribution for up to 10 years from the grant date and must make the election to defer in accordance with Section 409A of the Code.
Potential Payments upon Termination or Change of Control
We entered into certain agreements and maintain certain plans that require us to provide compensation to our NEOs in the event of certain terminations of employment, including in connection with a change of control of the Company. The following tables show potential payments to our NEOs in each such scenario, assuming a December 31, 2020 termination date and, where applicable, using the closing market price of our common stock as of December 31, 2020 of $43.83, as reported on NASDAQ.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. Cannon
|
Executive Benefits and Payments Upon Termination
|
|
Termination without cause or Resignation for Good Reason / Constructive Termination
|
|
Termination due to death or disability
|
|
Termination without cause or Resignation for Good Reason / Constructive Termination in connection with a Change of Control
|
Severance payment (1)
|
|
$
|
2,852,000
|
|
|
$
|
920,000
|
|
|
$
|
3,864,000
|
|
Continued health coverage (2)
|
|
27,184
|
|
|
—
|
|
|
42,135
|
|
Accelerated vesting (3)
|
|
10,710,255
|
|
|
10,710,255
|
|
|
10,710,255
|
|
Total
|
|
$
|
13,589,439
|
|
|
$
|
11,630,255
|
|
|
$
|
14,616,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carol P. Lowe
|
Executive Benefits and Payments Upon Termination
|
|
Termination without cause or Resignation for Good Reason / Constructive Termination
|
|
Termination due to death or disability
|
|
Termination without cause or Resignation for Good Reason / Constructive Termination in connection with a Change of Control
|
Severance payment (4)
|
|
$
|
1,235,615
|
|
|
$
|
—
|
|
|
$
|
3,038,945
|
|
Continued health coverage (2)
|
|
16,811
|
|
|
—
|
|
|
35,303
|
|
Accelerated vesting (3)
|
|
3,875,010
|
|
|
3,875,010
|
|
|
3,875,010
|
|
Total
|
|
$
|
5,127,436
|
|
|
$
|
3,875,010
|
|
|
$
|
6,949,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sonia Galindo
|
Executive Benefits and Payments Upon Termination
|
|
Termination without cause or Resignation for Good Reason / Constructive Termination
|
|
Termination due to death or disability
|
|
Termination without cause or Resignation for Good Reason / Constructive Termination in connection with a Change of Control
|
Severance payment (4)
|
|
$
|
1,063,958
|
|
|
$
|
—
|
|
|
$
|
1,777,500
|
|
Continued health coverage (2)
|
|
8,817
|
|
|
—
|
|
|
18,515
|
|
Accelerated vesting (3)
|
|
1,258,228
|
|
|
2,442,690
|
|
|
2,442,690
|
|
Total
|
|
$
|
2,331,003
|
|
|
$
|
2,442,690
|
|
|
$
|
4,238,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paula M. Cooney
|
Executive Benefits and Payments Upon Termination
|
|
Termination without cause or Resignation for Good Reason / Constructive Termination
|
|
Termination due to death or disability
|
|
Termination without cause or Resignation for Good Reason / Constructive Termination in connection with a Change of Control
|
Severance payment (4)
|
|
$
|
855,247
|
|
|
$
|
—
|
|
|
$
|
1,558,000
|
|
Continued health coverage (2)
|
|
8,769
|
|
|
—
|
|
|
18,415
|
|
Accelerated vesting (3)
|
|
1,086,940
|
|
|
1,262,435
|
|
|
1,262,435
|
|
Total
|
|
$
|
1,950,956
|
|
|
$
|
1,262,435
|
|
|
$
|
2,838,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey D. Frank (5)
|
Executive Benefits and Payments Upon Termination
|
|
Termination without cause or Resignation for Good Reason / Constructive Termination
|
|
Termination due to death or disability
|
|
Termination without cause or Resignation for Good Reason / Constructive Termination in connection with a Change of Control
|
Severance payment (4)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Continued health coverage (2)
|
|
—
|
|
|
—
|
|
|
—
|
|
Accelerated vesting (3)
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1) Severance Payment: If Mr. Cannon’s employment is involuntarily terminated by the Company without cause or he resigns for Good Reason/Constructive Termination, he will be entitled to continuation of base salary for two years and a lump sum payment equal to his AIP target. If Mr. Cannon’s employment is involuntarily terminated by the Company in connection with a change of control, he will be entitled to a lump sum payment equal to 200% of his base salary and target AIP. If Mr. Cannon’s employment terminates due to his death, his beneficiary is entitled to a lump sum payment equal to one year’s base salary. In the event of Mr. Cannon’s disability, he is entitled to be paid his base salary through the twelfth (12th) month of the period constituting a disability.
(2) Post-Termination Health Care Benefits: If the NEO’s employment is involuntarily terminated by the Company without cause or the NEO resigns for Good Reason/Constructive Termination, the NEO will be reimbursed for health coverage costs under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA), for a period of 12 months. If an NEO’s employment is involuntarily terminated by the Company in connection with a change of control, the NEO is entitled to health care benefits equal to what they received while the NEO was employed by the Company for, in Mr. Cannon's case, 18 months after termination and, for each other NEO, 24 months after termination. The calculations assume an annual increase in healthcare premiums of 10%.
(3) Stock Options and RSUs: If an NEO’s employment is involuntarily terminated by the Company without cause, or the NEO resigns for Good Reason/Constructive Termination, the NEO will be entitled to immediate vesting on all unvested time-based equity awards and performance-based equity awards that have achieved the performance measures as of the date of termination. In addition, solely for Mr. Cannon and Ms. Lowe, in the event his or her employment is involuntarily terminated by the Company without cause or he or she resigns for Good Reason/Constructive Termination, performance-based equity awards for any measurement period that has not yet closed shall vest at target. In the event of the NEO's death or if his or her employment is terminated due to a qualifying disability, such NEO shall (1) immediately vest in all of his or her time-based RSUs and (2) become entitled to receive such number of shares underlying his or her PRSUs as determined based on the Company’s actual performance during the applicable incentive periods. If an NEO’s employment is involuntarily terminated by the Company or by the employee for Good Reason/Constructive Termination in connection with a change of control, all unvested time-based equity awards will fully vest and all unvested performance-based equity-awards will vest at target (provided that any performance-based equity-awards for which the applicable performance goals previously were achieved but remain subject to time-based vesting will be treated as time-based awards). The values in the table assume that the target number of shares will be earned. See the “Outstanding Equity Awards at Fiscal Year-End 2020” table for additional details.
(4) Severance Payment: With the exception of Ms. Lowe, if the NEO’s employment is involuntarily terminated by the Company without cause or the NEO resigns for Good Reason/Constructive Termination, the NEO will be entitled to continued payments for one year of the NEO’s base salary, a lump sum payment of the NEO’s target bonus for the fiscal year of the Company in which the termination occurs, or, if greater, for the immediately preceding fiscal year, and a lump sum payment of the NEO’s earned bonus (if any) for the fiscal year of the Company in which the termination occurs (based on actual performance determined after fiscal year end and prorated for the portion of the fiscal year preceding the date of termination - not included in the table above), paid at the same time as other senior executives. In the event of involuntary termination by the Company without cause or resignation for Good Reason/Constructive Termination, Ms. Lowe will be entitled to continued payments for one year of her base salary and target bonus of not less than 85% of her base salary for the year in which such termination occurs. If the NEO’s employment is involuntarily terminated by the Company in connection with a change of control, the NEO will be entitled to a lump sum payment equal to 200% of the NEO’s base salary, a lump sum payment of 200% of the NEO's target bonus for the fiscal year in which the termination occurs or, if greater, for the immediately preceding fiscal year, and a lump sum payment of the NEO’s target bonus for the fiscal year in which the termination occurs or, if greater, for the immediately preceding fiscal year, and in all cases prorated for the portion of the fiscal year preceding the date of termination (prorated amount not included in table above).
(5) Mr. Frank voluntarily departed from the Company in August 2020, and such departure did not entitle him to severance payments or benefits of the type described in the above table. Because his departure constituted a "retirement" under the terms of his outstanding award agreements, Mr. Frank became vested in a prorated portion of such awards as described in the "Outstanding Equity Awards at Fiscal Year End 2020" table.
Termination or Change of Control Payments
We have a change of control agreement with our CEO and have adopted a Change in Control Severance Benefit Plan for the other NEOs.
Cannon Change of Control Agreement. In the event of a change in control, Mr. Cannon will receive any benefits to which he is entitled pursuant to and in accordance with the terms of a Company plan in effect and any existing contract between Mr. Cannon and the Company, and the following benefits:
•Unvested equity awards will immediately vest and become exercisable;
•A lump sum payment of 200% of the sum of base salary and target annual incentive in effect as of the day before the date of the change of control event; and
•Payment of COBRA premiums until the earlier of 18 months, such time Mr. Cannon obtains comparable benefits through employment or otherwise, or age 65.
Mr. Cannon shall not be eligible to receive any severance benefits from the Company under any other plan, policy or agreement, including his Amended and Restated Employment Agreement dated as of April 24, 2018, if he becomes eligible for the benefits described above.
If the payment would result in a “parachute payment” within the meaning of Section 280G under the Code, then benefits will be reduced so that the payment would be $1.00 less than the amount that would cause the payments to be subject to excise tax imposed by Section 4999 of the Code. The change of control benefits described above for Mr. Cannon are contingent on him signing and not revoking a release of claims in a form reasonably satisfactory to the Company.
Change in Control Severance Benefit Plan. For change of control benefits to be paid under our Change in Control Severance Plan, a change of control must have occurred and the NEO must be involuntarily terminated within a specific period of time prior to or following the change of control event (i.e., between 3 months prior to and 18 months after the event). In such circumstances, the Change in Control Severance Benefit Plan provides for the following benefits:
•Immediate vesting of any unvested equity awards that are outstanding but unvested and subject only to time-based vesting;
•Immediate vesting of all shares of the NEO’s performance-based equity compensation awards (meaning awards that remain subject to the achievement of performance goals) that are outstanding but unvested as of immediately prior to the termination of the NEO’s employment with the Company as to 100% of the target number of shares and at 100% of target performance;
•A lump sum payment of 200% of the NEO's annual base salary as in effect immediately prior to the NEO's termination date;
•A lump sum payment of the NEO's target bonus for the fiscal year of the Company in which the termination occurs, or if greater, for the immediately preceding fiscal year, and in all cases prorated for the portion of the fiscal year preceding the date of termination;
•A lump sum payment of 200% of the NEO’s target bonus for the fiscal year of the Company in which the termination occurs or, if greater, for the immediately preceding fiscal year; and
•Continuation of health benefits for a maximum period of 24 months.
If the payment would result in a “parachute payment” within the meaning of Section 280G under the Code, then benefits will be reduced to either (A) the largest portion of the payment that would result in no portion of the payment being subject to the excise tax imposed by Section 4999 of the Code, or (B) the largest portion, up to and including the total, of the payment, whichever amount, after taking into account all applicable federal, state, provincial, foreign and local employment taxes, income taxes, and the excise tax (all computed at the highest applicable marginal rate), results in the NEO’s receipt, on an after-tax basis, of the greatest economic benefit notwithstanding that all or some portion of the payment may be subject to the excise tax.
The change of control benefits described above are contingent on (i) the NEO’s timely execution and non-revocation of a general release of claims in favor of the Company; (ii) the NEO’s compliance with certain non-competition, non-solicitation and non-disparagement covenants that run for 24 months following the NEO’s termination of employment; (iii) the NEO’s return of all Company Property (as defined in the Change in Control Severance Benefit Plan), and (iv) the NEO’s compliance with his or her proprietary information agreement with the Company. The Change in Control Severance Benefit Plan provides for an initial three-year term that expires in October 2022, followed by automatic renewals of the plan for successive one-year terms unless the Company provides written notice of non-renewal to participants at least six months in advance of the expiration of the then-current term.
Termination without Cause and with Good Reason
Cannon Employment Agreement. Mr. Cannon's employment agreement provides for the following benefits in the event of the Company not renewing his employment agreement, an involuntary termination without cause or a termination for good reason, subject to his execution of a release and separation agreement:
•Continued payments of his base salary in effect at the time of such termination for 24 months;
•Payment or reimbursement for the premiums cost of any continued health coverage elected by Mr. Cannon under COBRA for a period of up to 12 months following the termination date;
•An annual bonus of not less than 110% of Mr. Cannon’s base salary for the year in which such termination occurs prorated from the termination date through the end of the year in which termination occurs; and
•Immediate vesting acceleration of all time-based equity awards granted to him and any performance-based equity awards subject to post-performance vesting that have achieved the applicable performance measures as of the date of termination, provided that performance-based equity awards for any measurement period that has not yet closed shall vest subject to proration as to the percentage of the awards that has achieved the performance measures as of the termination date.
In addition, if Mr. Cannon’s employment terminates because of his death or disability, Mr. Cannon’s employment agreement provides that his estate or designated beneficiary will be entitled to an amount equal to his annual base salary.
Lowe Employment Agreement. Ms. Lowe's offer letter provides for the following benefits due to an involuntary termination without cause or a termination for good reason, subject to execution of a release and separation agreement:
•Continued payments of base salary in effect at the time of such termination for a period of 12 months;
•An annual bonus payment for the year in which such termination occurs in an amount not less than 85% of base salary;
•Payment or reimbursement for the premiums cost of any continued health coverage under COBRA for a period of 12 months following the termination date; and
•Vesting acceleration for all equity awards.
Executive Severance Benefit Plan. The severance plan as it applies to other NEOs provides for the following benefits due to an involuntary termination without cause or a constructive termination, subject to execution of a release and separation agreement and compliance with the non-competition, non-solicitation, and non-disparagement restrictive covenants through the one-year anniversary of the termination date:
•Continued payments of base salary in effect at the time of such termination for a period of 12 months;
•An annual bonus payment for the year in which such termination occurs in an amount equal to the target bonus for the fiscal year of the Company in which the termination occurs, or, if greater, for the immediately preceding fiscal year;
•Payment or reimbursement for the premiums cost of any continued health coverage under COBRA for a period of 12 months following the termination date;
• A lump sum payment of the NEO’s earned bonus (if any) for the fiscal year of the Company in which the termination occurs (based on actual performance determined after fiscal year end and prorated for the portion of the fiscal year preceding the date of termination), paid at the same time as other senior executives; and
•Immediate vesting acceleration of all time-based equity awards and performance-based equity awards that have achieved the performance measures as of the date of termination.
In addition, the severance plan provides that, if any payment or benefits to a severance plan participant (including the payments and benefits under the severance plan) would constitute a “parachute payment” within the meaning of Section 280G of the Code and would therefore be subject to an excise tax under Section 4999 of the Code, then such payments and benefits will be either (1) reduced to the largest portion of the payments and benefits that would result in no portion of the payments and benefits being subject to the excise tax, or (2) not reduced, whichever, after taking into account all applicable federal, state and local income taxes and the excise tax, results in the participant’s receipt, on an after-tax basis, of the greater payments and benefits.
CEO Pay Ratio
Set forth below is certain information about the ratio between the median annual total compensation of our employees and the annual total compensation of our CEO, James J. Cannon. Such pay ratio disclosure represents the Company’s reasonable, good faith estimate calculated in accordance with the requirements of Item 402(u) of Regulation S-K and Section 953(b) of the Dodd-Frank Act. In 2020, there were no changes in the Company's employee population or employee compensation arrangements that the Company reasonably believes would result in a significant impact the pay ratio disclosure. Accordingly, the Company used the median employee identified for 2019 for purposes of the 2020 calculation.
For 2020, the median of the annual total compensation of all employees of the Company (other than the CEO) was $112,737, and the annual total compensation of our CEO was $5,999,032. The median employee's total compensation for 2020 increased over 2019 primarily due to increases in such employee's base salary and long-term incentive grant value. Each such amount was determined in a manner consistent with the calculation of the CEO’s total compensation reported in the “2020 Summary Compensation Table.” Based on the above, for 2020, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 53 to 1.
Director Compensation
For 2020, the Company's non-employee director compensation program generally consisted of the following:
•An annual RSU award under the Company’s 2011 Stock Incentive Plan, as amended, granted after the annual shareholders meeting with a grant date value of $160,000, which fully vests approximately one year from the date of grant subject to the non-employee director’s continued service.
•An annual retainer of $75,000, with an additional $100,000 retainer for the Chairman of the Board.
•Annual retainers for Board committee service in the amount of: (1) $20,000 for the Audit and Compensation Committee chairmen; (2) $15,000 for the Corporate Governance Committee chairman; (3) $10,000 for each Board committee member other than the chairman.
•Reimbursement for out-of-pocket and travel expenses incurred in attending Board meetings.
In lieu of the standard annual RSU award described above, the Compensation Committee determined to award to the Chairman of the Board a special grant of 80,000 RSUs on May 5, 2020, with a grant date value of $41.42, vesting as to (i) 30,000 shares on June 1, 2020, (ii) 20,000 shares on each of September 1, 2020 and December 1, 2020 and (iii) 10,000 shares on March 1, 2021. The award was made in recognition of the Chairman's enhanced role in the Company's strategic planning throughout 2020 in collaboration with the CEO.
The table below summarizes the compensation paid by us to our non-employee directors during the year ended December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned or Paid in Cash ($)
|
|
Stock Awards ($)(1)
|
|
|
|
|
|
Total ($)
|
Earl R. Lewis
|
|
$
|
175,000
|
|
|
$
|
3,313,600
|
|
|
|
|
|
|
$
|
3,488,600
|
|
John D. Carter
|
|
85,000
|
|
|
159,972
|
|
|
|
|
|
|
244,972
|
|
William W. Crouch
|
|
95,000
|
|
|
159,972
|
|
|
|
|
|
|
254,972
|
|
Catherin A. Halligan
|
|
105,000
|
|
|
159,972
|
|
|
|
|
|
|
264,972
|
|
Angus L. Macdonald
|
|
105,000
|
|
|
159,972
|
|
|
|
|
|
|
264,972
|
|
Michael T. Smith
|
|
95,000
|
|
|
159,972
|
|
|
|
|
|
|
254,972
|
|
Cathy A. Stauffer(2)
|
|
90,000
|
|
|
159,972
|
|
|
|
|
|
|
249,972
|
|
Robert S. Tyrer
|
|
85,000
|
|
|
159,972
|
|
|
|
|
|
|
244,972
|
|
John W. Wood
|
|
85,000
|
|
|
159,972
|
|
|
|
|
|
|
244,972
|
|
Steven E. Wynne
|
|
100,000
|
|
|
159,972
|
|
|
|
|
|
|
259,972
|
|
(1) Represents the grant date fair value for time-based RSUs granted in 2020. In accordance with FASB ASC Topic 718, the grant date fair value was calculated using the closing price of our common stock on the grant date. For additional information, see Note 1 to the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K. The number of unvested RSUs outstanding at December 31, 2020 is 10,000 for Mr. Lewis and 3,732 for each other director.
No options were issued to directors in 2020. The number of outstanding stock options held by each director as of December 31, 2020 is: Mr. Lewis - 561,506; Mr. Carter - 98,876; General Crouch - 34,470; Ms. Halligan - 49,306; Mr. Macdonald - 59,506; Mr. Smith - 98,876; Ms. Stauffer - 49,306; Mr. Tyrer - 0; Mr. Wood - 98,876; and Mr. Wynne - 77,576.
(2) In June 2020, Ms. Stauffer joined the Corporate Governance Committee, and her compensation was adjusted accordingly.
Stock Ownership Guidelines for Directors
Under our stock ownership guidelines, within five years of joining the Board, our independent directors are required to hold shares of our common stock, unvested time-based restricted stock or RSUs, or in the money stock options in an amount equal in value to no less than five times the average of the annual cash retainer for Board (but not committee) service during the immediately preceding five-year period. All of our independent directors are currently in compliance with this stock ownership policy. The Board amended the Company's stock ownership guidelines in 2020 to increase the ownership levels required both for directors and executive officers.