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Regis Corporation |
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Letter FromTABLE OF CONTENTS
INCOMING BOARD CHAIR
Many independent board chairs write proxy-opening letters but rarely doRegis shareholders, recieve a letter fromemployees, franchise owners and
kinds of entrepreneurs who have made the US strong. We, too, were forced to furlough the independentmajority of our workforce and reduce pay for those of us who remained. My fellow board members of Regis Corporation’s board of directors really are fellow shareholders. We also represent you and seek your counsel in ways that make typical shareholder engagements seem perfunctory—indeed, we would be remiss if we didn’t open by thanking a substantial number of you for your thoughtful I increased our workload—meeting weekly—and detailed input intodecreased our like-no-other, designed-from-scratch compensation plan.
The compensation plan we are just rolling out tells you a lot aboutpay—to zero—through our willingness to be creative leaders. darkest months.
•Shareshave been steadily creating jobs and futures for a workforce the vast majority of whom are diverse by orientation, race, ethnicity, gender, or a combination of these and other protected categories. Not only that, people buy with their own money createour franchise model has always been the gateway that immigrants, minorities, women, and other entrepreneurs who have a hard time accessing traditional career paths, have used to build futures. As soon as it was legal for our salons to open, I got a haircut at one so I could personally thank our franchisees’ front-line stylists and reinforce our commitment to them—the economic front lines of diversity matter as much stronger alignment than shares that are awarded as part of an overall pay plan.
•Shares that can be quickly sold off after short vesting periods, and get replenished every year, do not align interests as strongly as shares that are awarded less often and come with longer measuring, vesting, and holding requirements.
Our new pay plan strongly encourages executive officersthe social.
Our governance profile is as exceptionalleadership. We elected Virginia Gambale as our compensation. Lead Independent Director to partner with me in my role as our newly elected independent board chair.
We hope you are pleased with the performance our team is delivering, encouragealso ask you to use the servicesvisit one of our salons and invitelet your stylists know you to provideare a shareholder. You can help us your thoughts via the means we describe in this proxy at any time: we cast a wide net for ideasshow our appreciation and take your investment in us seriously.
support.
  Daniel Beltzman Incoming Board Chair |  |  |  |
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The Annual Meeting of the Shareholders (the “Annual Meeting”) of Regis Corporation (referred to as “we,” “us,” “our,” “Regis” and the “Company”) will be held at our executive offices located at 7201 Metro Boulevard, Edina, Minnesota 55439, on October 23, 2018 commencing at 9:00 a.m., for the following purposes:
✓To elect the eight directors listed in the proxy statement to serve for a one-year term and until their successors are elected and qualified;
✓To approve, on an advisory basis, the compensation of our named executive officers (referred to as the “Say-on-Pay” proposal);
✓To approve our 2018 long-term incentive compensation plan;
✓To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal 2019; and
✓To transact such other business, if any, as may properly come before the Annual Meeting or any adjournment or postponement thereof.
Only holders of record of our common stock at the close of business on August 24, 2018 are entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof.
Whether or not you plan to attend the Annual Meeting in person, please submit your proxy by telephone or through the Internet in accordance with the voting instructions provided to you. If you requested a paper copy of the proxy card by mail, you may also date, sign and mail the proxy card in the postage-paid envelope that is provided with your proxy card. Should you nevertheless attend the Annual Meeting, you may revoke your proxy and vote in person.
If your shares are held in the name of a bank, broker or other holder of record, you will receive instructions from the record holder that you must follow in order for your shares to be voted. If you plan to attend the Annual Meeting and hold shares in your name, please be prepared to provide proper identification, such as a driver’s license. If you hold your shares through a bank or broker, you will need proof of ownership, such as a recent account statement or letter from your bank or broker, along with proper identification in order to attend the Annual Meeting. If you hold your shares through a bank or broker and intend to vote your shares at the Annual Meeting, you will need to provide a legal proxy from your broker.
The Annual Meeting of the Shareholders (the “Annual Meeting”) of Regis Corporation (referred to as “we,” “us,” “our,” “Regis” and the “Company”) will be held on October 27, 2020 commencing at 9:00 a.m. Central Time. The Annual Meeting will be conducted completely as a virtual meeting via the Internet at www.virtualshareholdermeeting.com/RGS2020. The purposes of the meeting are: | | |  | |||
✔ | | | To elect the seven directors listed in the proxy statement to serve for a one-year term and until their successors are elected and qualified; | | ||
✔ | | | To approve, on an advisory basis, the compensation of our named executive officers (referred to as the “Say-on-Pay” proposal); | | ||
✔ | | | To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal 2021; and | | ||
✔ | | | To transact such other business, if any, as may properly come before the Annual Meeting or any adjournment or postponement thereof. | | ||
Only holders of record of our common stock at the close of business on August 31, 2020 are entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof. We are providing our proxy materials, which include our Notice and Proxy Statement and Annual Report, to such holders of record of our common stock beginning on or about September 16, 2020. | | | ||||
Whether or not you plan to participate in the Annual Meeting, please submit your proxy by telephone or through the Internet in accordance with the voting instructions provided to you. If you requested a paper copy of the proxy card by mail, you may also date, sign and mail the proxy card in the postage-paid envelope that is provided with your proxy card. Should you nevertheless participate in the Annual Meeting, you may revoke your proxy and vote your shares electronically during the Annual Meeting. | | | ||||
If your shares are held in the name of a bank, broker or other holder of record, you will receive instructions from the record holder that you must follow in order for your shares to be voted. If you plan to vote your shares during the Annual Meeting, you will need the 16-digit control number included on your proxy card or your Notice of Internet Availability of Proxy Materials. We recommend that you log in at least fifteen minutes before the meeting to ensure that you are logged in when the meeting starts. | | | ||||
Notice of Annual Meeting of Shareholders
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Websites can’t give haircuts
Some consumer-facing companies are experiencing upheaval from shifts toward online purchasing and preferences for specialty or small-business brands over national ones.
Regis Corporation and our national brands enable both corporate and franchised owners to provide professional hair care that is attractive to customers in their local markets because it involves personal service: websites can’t give haircuts.
The best of being big and small
We at Regis are committed to using technology to leverage and differentiate our salons’ ability to engage in multi-channel product sales, attract and retain customers and stylists, provide ongoing educational opportunities for our stylists, and operate with state-of-the-art ‘back-office’ efficiencies otherwise not possible for small businesses.
We also strive to provide our salons, both corporate and franchised, with the expertise and efficiencies that come from being a part of a larger organization in order to enhance competitiveness and brand recognition. We aim toretain the strengths of a small localized business model, while leveraging the clout of being part of the largest Company in the hair salon industry.
Our sector
Demand for professional hair care has grown steadily in the US1. The potential for growth in our sector is enhanced by a number of drivers including a growing variety of competitive and ancillary service channels (such as blow dry bars, ponytail and braid bars, booth rental facilities, online bookings, in-home services and “glam squads”), growth in the male hair care sector, and continued evolution of services customers seek (eco-friendly products, Brazilian blowouts, select hair treatments, hair extensions and non-hair services like skin treatments, eyelash tinting and teeth whitening).
So who are we exactly?
Regis Corporation owns, franchises and operates beauty salons under trade names including Supercuts®, SmartStyle®, MasterCuts®, Regis Salons®, Sassoon®, Cost Cutters®, Roosters® and First Choice HairCutters®. As of June 30, 2018, we owned, franchised or held ownership interests in 8,168 salon locations, primarily in the US and Canada. We also maintain an ownership interest in Empire Education Group in the US, a leading provider of cosmetology education in North America.
REGIS CORPORATION:THE STORY
1According to IBIS World Industry Report OD4410, Hair Salons in the US, August 2017, the sector grew an average of 1.8% between 2012 and 2017.
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Election of Directors
The Board unanimously recommends that you vote FOR the election of each of these director nominees.
2018 Proxy Statement | 1
2020 PROXY STATEMENT | 1 |
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In this section, we, your Board of Directors, provide you information about who we are, how we are organized, how we operate, and what we are paid. We would like to open however, with a short summary of what we have been doing for you, our fellow shareholders. This important information is not always included in proxy statements and we believe we should provide it, since you are being asked to re-elect us.
Our Board working withhas shaped and governed, and our management team has taken, significant actions to drive our Company forward through a critical turnaround. In the 22 months starting as of October 2016 we have taken these governance and board strategy-level actions:
| ✔ | Conducted a comprehensive search for a successor CEO, resulting in the identification and appointment of Felipe Athayde as the Company’s next CEO as we transition to our next chapter of growth |
| ✔ | Sold 1,475 Company-owned salons to franchisees, generating $91.6M in net cash proceeds as part of our conversion to a fully franchised asset-light platform |
| ✔ | Opened over 45 new franchise locations |
| ✔ | Completed restructuring to improve financial performance and align costs with the Company’s franchise model, removed~$28 million of annualized general and administrative expenses during fiscal 2020 |
| ✔ | Developed of our new, proprietary back office salon management system, OpenSalon Pro™ |
| ✔ | Upgraded the Supercuts mobile app and launched the first Cost Cutters mobile app and mobile customer loyalty program |
| ✔ | Re-engineered the Company’s “Franchise Resource Center” materially upgrading this site and information source for franchisees |
| ✔ | Expanded and upgraded digital education for stylists and salon managers |
| ✔ | Launched our new private label haircare products under our Blossom brand and relaunched a repackaged and reformulated version of our successful Designline private label brand |
| ✔ | Agreed to sell our stake in the Empire Education Group while maintaining the value we derive from our relationship with Empire through a strategic partnership |
| ✔ | Invited shareholders to engage directly with members of our board of directors to discuss our prior year’s “say on pay” vote and other governance topics and held conversations with those who accepted the invitations |
| ✔ | Carefully managed the Company’s operations during the COVID-19 impairment, including temporary and on-going government-mandated salon closures and limits to protect the health and safety of the Company’s customers, employees, stylists and franchisees |
| ✔ | Executed a company-wide hibernation in May and June to preserve the Company’s cash position including furloughs and pay reductions for salaried employees |
| ✔ | Worked with infectious disease specialists at the University of Minnesota Medical School to enhance customer and stylist safety |
| ✔ | Initiated landlord negotiations through JLL, a real-estate brokerage firm, in response to the circumstances of the COVID-19 pandemic |
| ✔ | Amended our revolving credit facility to remove all prior financial covenants in lieu of a minimum liquidity covenant more aligned with our transition to a fully-franchised, asset-light business |
| ✔ | Supported our franchisees through the COVID-19 pandemic by, among other things, waiving cooperative advertising fees and refunding certain prior contributions, which also reduced our marketing spend |
| ✔ | Promoted Kersten D. Zupfer to Executive Vice President and Chief Financial Officer |
| ✔ | Sold our prior headquarters, resulting in a $4 million gain, and completed the relocation of our headquarters |
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We expect to continue our shareholder engagement and maintain our openness to ideas to enhance shareholder value, whatever the source. We encourage you to visit the User’s Guide section of this proxy statement to find ways to share your ideas with us.
Election of directors
2018 Proxy Statement |3
2020 PROXY STATEMENT | 3 |
EightAnnual Meeting,annual meeting of shareholders to be held on October 27, 2020 (the “Annual Meeting”), each to hold office for one year until the 2019 Annual Meeting2021 annual meeting of Shareholdersshareholders and until their successors are elected and qualified. Based upon the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated the eightseven persons named below for election as directors. Each of the Board’s nominees are standing for re-election by the shareholders at the Annual Meeting, except Virginia Gambale, who was identified as a candidate by a non-management director and appointed to the Board effective March 1, 2018, and each nominee has consented to serve if elected.SECSecurities and Exchange Commission (“SEC”) rules.
Who We Are | | | ||
  Felipe A. Athayde President, Americas, of Popeyes Louisiana Kitchen (through September 2020) Director Nominee (term commencing October 2020) Age: 41 Board committees None | | | Career Highlights | |
| | • President, Americas, of Popeyes Louisiana Kitchen, owned by Restaurant Brands International, a multinational quick-service restaurant holding company, from March 2019 to September 2020 • Various positions with Restaurant Brands International between July 2011 and September 2020, including President, Latin America and Caribbean for Burger King and President, US for Tim Hortons | |||
| | Skills / Experience | |||
| | • Leadership experience with franchise businesses, including expertise in strategy and brand development, finance, operations, marketing and sales • Implementation of business-wide technology upgrades | |||
| | Education | |||
| | BBA, Fundação Getulio Vargas in Sao Paulo, Brazil MBA, Northwestern University Kellogg School of Management | |||
| | Also... | |||
| | Before joining Burger King Corporation, Mr. Athayde worked as a Business Leader in the strategy department for Visa Inc. Latin America in Miami, FL, and as a bond trader for multiple financial institutions in the United States and Singapore. | |||
| | Other Public Boards | |||
| | None |
2020 PROXY STATEMENT | 5 |
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 Daniel G. Beltzman
Advisors, LP
Board committees •Compensation, Chair •Nominating and Corporate Governance •Technology | | | Career Highlights | |
| | •General Partner, Birch Run Capital Advisors, LP, an investment adviser, since May 2006 •Mergers and Acquisitions and Equity Research departments of Deutsche Bank Securities, Inc. and Bank of America Securities | |||
| | Skills / Experience | |||
| | •Financial experience and expertise •Represents a significant shareholder | |||
| | Education | |||
| | BBA, Accounting/Finance, University of Michigan MAcc, University of Michigan
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| | ALSO... | |||
| | Daniel cofounded Birch Run Capital Advisors when he was 31. Birch Run looks to invest in organizations that believe that value follows values. It looks for organizations whose people are willing to invest their time, resources, and reputations to support both. | |||
| | Other Public Boards | |||
| | Former | |||
| | •Ditech Holding Corp. f/k/a Walter Investment Management Corp. (2015 – 2019) | |||
| | Voting Support | |||
| | 2019: 97.0% | 2018: 97.5% |2017: 97.3%| 2016: 86.5% | 2015: 88.0% | 2014: 99.4% | 2013: 92.8% | 2012: 99.4% |
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ELECTION OF DIRECTORS
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  Virginia Gambale Managing Partner, Azimuth Partners LLC Independent Director since 2018 Independent Lead Director since August 2020 Age: Board committees • Compensation • Technology, | | | Career Highlights | |
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•Former head of Deutsche Bank Strategic Ventures and General Partner of Deutsche Bank Capital Partners •Board President, Newport Music Festival •Adjunct Faculty Member, Columbia University •Mentor, Columbia University’s Masters in Technology Leadership •Senior management positions at Merrill Lynch, Bankers Trust and Marsh McLennan | |
| | Skills / Experience | |||
| | •Technologist - focuses on growth and innovation strategies for technology and technology-driven services companies •Senior management positions (including CIO) at Merrill Lynch, Bankers Trust, Deutsche Bank and Marsh McLennan •Deal structuring for venture and growth capital funding; led numerous M&A transactions in the tech sector | |||
| | Education | |||
| | BS, Mathematics & Computer Science, minor in Business, New York Institute of Technology | |||
| | Also... | |||
| | Virginia has extensive expertise in transformative business technology. She is also a concert pianist. | |||
| | Other Public Boards | |||
| | •JetBlue Airways Corporation (since 2006); Compensation Committee Chair; tenure will end with her term limit on JetBlue board in May 2021 •First Derivatives plc (since March 2015) • Virtu Financial, Inc. (since January 2020)
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| | Voting support | |||
| | 2019: 99.5% | 2018: 99.1% |
2020 PROXY STATEMENT | 7 |
2018 Proxy Statement |5
ELECTION OF DIRECTORS
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•Audit, ACFE •Nominating and Corporate Governance, Chair •Technology | | | Career Highlights | |
| | •Joined Marriott International, Inc., a global operator of hotels and related lodging facilities, in 1986 with his most recent role being Group President, Americas since 2020 •Various positions at Marriott including Group President; Group President, Americas; President, Americas; Executive Vice President of the Eastern Region; Senior Vice President of the Mid-Atlantic Region and Senior Vice President of Finance and Business Development • Announced plans to retire from Marriott in the first quarter of 2021 after 36 years with the company | |||
| | Skills / Experience | |||
| | •Leadership experience with a complex organization that includes franchised, managed and owned operations •Building marketing platforms with multiple portfolio brands •Acquisitions and integration | |||
| | Education | |||
| | BA, Michigan State University MBA, Loyola University Chicago | |||
| | Also... | |||
| | David implemented the 4 Disciplines of Execution because he saw how employees understanding how their day-to-day activities relate to the company’s overall business results made them feel they were all working towards a common goal and they make a difference and have a voice. David, a long-time runner, served as Vice Chairman of Back On My Feet, a non-profit whose mission is helping the homeless via a structured running program. | |||
| | Other Public Boards | |||
| | Former | |||
| | •Good Times Restaurants Inc. (2005 – 2010) | |||
| | Voting Support | |||
| | 2019: 98.4% | 2018: 98.3% |2017: 99.0%| 2016: 89.0% | 2015: 89.3% | 2014: 99.5% | 2013: 98.1% |
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ELECTION OF DIRECTORS
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Board committees •Compensation •Nominating and Corporate Governance •Technology | | | Career Highlights | |
| | •In 1978 joined Signet Jewelers, the world’s largest retailer of diamond jewelry (with over 3,500 stores including Kay Jewelers, Zales, Jared The Galleria of Jewelry, H. Samuel, Ernest Jones, Peoples and Piercing Pagoda) operating in North America and the United Kingdom •Chief Executive Officer and Director of Signet Jewelers from November 2014 until his retirement in July 2017 •Various management positions including President and Chief Operating Officer, Executive Vice President of Operations and Division President while at Sterling Jewelers, Signet’s main US business | |||
| | Skills / Experience | |||
| | •Led an international sales team to deliver a superior customer experience •Led the development of start-up retail jewelry brand, Jared the Galleria of Jewelry to over $1 billion in annual revenue in 2017 •Led and managed many acquisitions while integrating synergies •Led in the acquisition and integration of a large diamond-cutting factory in Botswana, Africa •Led in the development of several exclusive international jewelry product brands such as Open Hearts by Jane Seymour, Neil Lane Bridal, and the Ever Us Two Stone collection to name a few | |||
| | Education | |||
| | Kent State University and Ohio University
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| | ALSO... | |||
| | When Mark became Head of Sterling, he oversaw a tripling of the unit’s sales. In his time at Signet, he oversaw a successful acquisition and integration of Zales, expanded its outlet channel by acquiring Ultra, made significant progress on the company’s OmniChannel strategy, realigned the organization structure and re- engineered and stabilized its ecommerce platform. Mark is the Chairman of the Board of Directors of Bedrock Manufacturing, which is the parent of two iconic American brands, Shinola and Filson. | |||
| | Other Public Boards | |||
| | Former •Signet Jewelers Limited (2014 – 2017) | |||
| | Voting Support | |||
| | 2019: 98.5% | 2018: 98.4% | 2017: 96.7% | 2016: 87.7% | 2015: 88.2% | 2014: 99.9% | 2013: 98.1% |
2020 PROXY STATEMENT | |
2018 Proxy Statement |7
ELECTION OF DIRECTORS
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Board committees •Audit, ACFE, Chair •Compensation | | | Career Highlights | |
| | •Operating Advisor at Resilience Capital Partners, LLC, a private equity firm (2008 – 2017) •Chief Executive Officer, The Lamson & Sessions Co. (November 2006 until sale November 2007) •SVP & Chief Financial Officer, American Greetings Corporation (September 2005 – November 2006) •President & CEO, Royal Appliance Mfg. Co. (1995 – 2004) •Chief Financial Officer, Royal Appliance Mfg. Co. (1992 – 1995) •Audit Partner, Arthur Anderson & Co.
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| | Skills / Experience | |||
| | •Public company CEO leadership experience •Consumer product sales and marketing direct to consumer, as well as to big box retailers including Walmart •M&A experience including the sale of both public and private companies •Public accounting experience
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| | EDUCATION | |||
| | BS, Business Administration, John Carroll University
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| | ALSO... | |||
| | Michael was named CEO of Royal Appliance Manufacturing at 39, after joining the company as CFO three years earlier. | |||
| | Other Public Boards | |||
| | •Nordson Corporation (since 2008), Chairman of the Board (since February 2018), Audit Committee Chair (until February 2018) | |||
| | Former | |||
| | •OMNOVA Solutions Inc. •Invacare Corporation (2014 – 2018) •American Greetings Corporation (2006 – 2013) •RC2 Corporation (2004 – 2011)
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| | VOTING SUPPORT | |||
| | 2019: 99.5% | 2018: 98.9% | 2017: 98.2% | 2016: 87.7% | 2015: 88.6% | 2014: 99.4% | 2013: 92.8% | 2012: 95.0% | 2011: 94.8% |
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ELECTION OF DIRECTORS
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  M. Ann Rhoades President, People Ink, Inc. Independent Age: Board committees •Audit •Compensation | | | Career Highlights | |
| | •President, People Ink, Inc., a human resources consulting firm, since 1999 •Executive Vice President, People, JetBlue Airways (1999 – 2002) •Executive Vice President, Team Services, Promus Hotel/DoubleTree Hotels Corporation (1995 – 1999) •Vice President, People, Southwest Airlines (1989 – 1995) | |||
| | Skills / Experience | |||
| | •Human resources experience •Consumer experience
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| | EDUCATION | |||
| | MBA, The University of New Mexico
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| | ALSO... | |||
| | Ann built a hiring model to get high-performance outcomes based in hiring according to values that helped create JetBlue and Southwest Airlines’ well-regarded cultures. Author of Built on Values, Creating an Enviable Culture That Outperforms the Flew in an F-16 at 9.1Gs. | |||
| | Other Public Boards | |||
| | • Nexphase Capital (since 2015) | |||
| | Former •JetBlue Airways (2001 – 2015), Compensation Committee Chair •
Restoration Hardware (1999 – 2001, 2005 – 2009) | |||
| | VOTING SUPPORT | |||
| | 2019: 99.5% | 2018: 99.0% | 2017: 98.9% | 2016: 98.8% | 2015: 99.2% |
2020 PROXY STATEMENT | |
2018 Proxy Statement |9
ELECTION OF DIRECTORS
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ELECTION OF DIRECTORS
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2018 Proxy Statement |11
OUR BOARD GOVERNANCE
We believe that how we govern ourselves is as important as the corporate governance that sets guidance and parameters for the Company more generally. This is a summary of some of our key board governance provisions. More information can be found on our website, www.regiscorp.com, and in the next section summarizing some of the key provisions that apply more broadly to the Company. Our compensation governance provisions can be found in our Compensation Discussion and Analysis.
Our board chair is an independent director.The Upon joining the Board believes that havingin connection with his commencement as CEO, Mr. Athayde will not be independent.
of the Company.
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Board’s Role in Risk Director Nomination All shareholder nominations must be accompanied by a candidate resume that addresses the extent to which the nominee meets the director qualification standards. Nominations will be considered only if we are currently seeking to fill an open director position. All nominations by shareholders should be sent to the Chair of the Nominating and Corporate Governance Committee, c/o the Corporate Secretary, Regis Corporation, Our corporate governance provisions that relate to our board of directors are summarized in the preceding section. Our compensation governance provisions are summarized in the Compensation Discussion and Analysis section of this proxy statement. Our corporate governance guidelines are posted on our website, Suite 500, Minneapolis, Minnesota 55416.Board. Board. Our directors provide means forvalue, and seek, input from a wide variety of sources to inform their work. Our directors especially value input from shareholders to communicate with the Board—which are describedwho have a financial stake in the User’s Guide at the endcaliber of this proxy.their input and who work in settings likely to provide them access to interesting insights. Our directors therefore provide a number of means to obtain shareholder input including in connection with our annual meeting and through our IR process and our engagement activities. Our directors have also made it a practice to proactively engage with shareholders.12 |OUR BOARD GOVERNANCEOversight. Oversight. One of the key responsibilities of the Board is to develop a strategic direction for the Company and provide management oversight for the execution of that strategy. The Board regularly reviews information regarding our financial, strategic and operational issues, as well as the risks associated with each. While the Board has overall responsibility for risk management, each of the Board committees has supporting responsibility for risk management and makes periodic updates to the full Board. Their specific areas of responsibility are:•The Audit Committee discusses and approves policies with respect to risk assessment and risk management. The Audit Committee oversees the management of financial risks and monitors management’s responsibility to identify, assess and manage risks.•The Compensation Committee is responsible for overseeing our executive compensation programs and reviewing risks relating to our overall compensation plans and arrangements.•The Nominating and Corporate Governance Committee manages risks associated with potential conflicts of interest pursuant to our Code of Business Conduct and Ethics and reviews governance and compliance issues with a view to managing associated risks.•The Technology Committee is responsible for reviewing risks associated with significant technology investment and/or deployment.•While each committee is responsible for regularly reviewing, evaluating and overseeing the management of such risks, the Board is regularly informed through committee reports about such risks. In addition, the Board and the committees receive regular reports from our Chief Financial Officer, General Counsel, Executive and Senior Vice Presidents and other Company officers and personnel with roles in managing risks. The Compensation Committee is also advised by its compensation consultant, which periodically reviews the riskrisks relating to the Company’s compensation practices. Our leadership team meets with our General Counsel and head of Internal Audit to discuss and evaluate risks applicable to our Company.Process. Process. The Nominating and Corporate Governance Committee is responsible for screening and recommending director candidates to the full Board for nomination. The Nominating and Corporate Governance Committee will consider nominations received from our shareholders, provided that proposed candidates meet the requisite director qualification standards discussed below. When appropriate, the Committee will also engage an independent third-party search firm. The Committee will then evaluate the resumes of any qualified candidates recommended by shareholders and search firms, as well as by members of the Board. Generally, in order to be considered for nomination, a candidate must have:••••••NYSENew York Stock Exchange (“NYSE”) and SEC regulations that at least a majority of the board consist of independent directors. In addition, when considering nominees to the Board and in evaluating the composition of the Board as a whole, the Nominating and Corporate Governance Committee considers the value of diversity. Although we dohave a specific policydiscriminate against anyone on diversity,the basis of race, color, gender, sexual orientation or identity, religion, age, national origin, disability or any other classification protected by law. The Code of Ethics explicitly extends these protections to customers as well. The Code of Ethics further provides that Regis strives to foster an environment of respect, inclusiveness, humanity and humility.gender, race, national originthe attributes covered in the Code of Ethics, as well as diverse skills and executive or professional experience, including skillsexperiences such as an understanding of the retail industry, the hair-care market, finance, accounting, marketing, technology and international experience, when considering nominees.experience. The Company believes thatNominating and Corporate Governance Committee expects every member of the principal qualification of a prospectiveBoard and every director is the abilitycandidate to be able to act effectively on behalf of all shareholders.shareholders and stakeholders.7201 Metro3701 Wayzata Boulevard, Edina,Suite 500, Minneapolis, Minnesota 55439.2018 Proxy Statement |13OUR CORPORATE GOVERNANCEwww.regiscorp.com.www.regiscorp.com. This information is also available in printed form free of charge to any shareholder who requests it by writing to our Corporate Secretary at Regis Corporation, 7201 Metro3701 Wayzata Boulevard, Edina, MN 55439.Ethics.Ethics. The Board has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to all of our employees, directors and officers, including our President and Chief Executive Officer, Chief Financial Officer, principal accounting officer or controller and other senior financial officers. The Code of Ethics, as applied to our principal financial officers, constitutes our “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act and is our “code of business conduct and ethics” within the meaning of the listing standards of the New York Stock Exchange (“NYSE”).NYSE. The Code of Ethics is posted on our website at www.regiscorp.com. You may request copies, which will be provided free of charge, by writing to our Corporate Secretary, Regis Corporation, 7201 Metro3701 Wayzata Boulevard, Edina,Suite 500, Minneapolis, Minnesota 55439.55416. We intend to promptly disclose future amendments to certain provisions of our Code of Ethics, and any waivers of provisions of the Code of Ethics that are required to be disclosed under the rules of the SEC or under the listing standards of the NYSE, at the same location on our website.Transactions. Transactions. Our Board has adopted a Related Party Transaction Approval Policy requiring approval of all related party transactions for amounts exceeding $10,000 for the fiscal year. We did not have any related party transactions during fiscal 2018.2020.procedures.procedures. The Company’s governance guidelinesAudit Committee Complaint Procedures, which are posted on our website at www.regiscorp.com, provide for the publication of a toll-free number and mailing address for complaints to be submitted to the Audit Committee.
below.
| | Director Name | | | Audit | | | Compensation | | | Nominating and Corporate Governance | | | Technology | |
| | Daniel G. Beltzman | | | | | ■ CHAIR | | | ■ | | | ■ | | |
| | Virginia Gambale | | | | | ■ | | | | | ■ CHAIR | | ||
| | David J. Grissen | | | ■1 | | | | | ■ CHAIR | | | ■ | | |
| | Mark S. Light | | | | | ■ | | | ■ | | | ■ | | |
| | Michael J. Merriman | | | ■1CHAIR | | | ■ | | | | | | ||
| | M. Ann Rhoades | | | ■ | | | ■ | | | | | | ||
| | Hugh E. Sawyer | | | | | | | | | ■ | | |||
| | David P. Williams | | | ■1 | | | | | ■ | | | | ||
| | Meetings during fiscal 2020 | | | 4 | | | 5 | | | 4 | | | 4 | |
| 1 | Denotes Audit Committee Financial Expert |
| |
OUR CORPORATE GOVERNANCE
In carrying out these duties, the Audit Committee maintains free and open communication between the Board, the independent auditor and our management. The Audit Committee meets with management and the independent auditor at least quarterly, generally prior to our earnings releases to discuss the results of the independent auditor’s quarterly reviews and fiscal year-end audit.
Our Board’s Committees | ||||
Director Name | Audit | Compensation | Nominating and | Technology |
Daniel G. Beltzman | | ■ CHAIR | ■ | ■ |
Virginia Gambale | ■ | ■ | | ■ CHAIR |
David J. Grissen | ■1 | | ■ CHAIR | ■ |
Mark S. Light | | ■ | ■ | ■ |
Michael J. Merriman | ■1 CHAIR | ■ | | |
M. Ann Rhoades | ■ | ■ | | |
Hugh E. Sawyer | | | | ■ |
David P. Williams | ■1 | | ■ | |
Meetings during fiscal 2018 | 4 | 8 | 4 | N/A2 |
1Denotes Audit Committee Financial Expert 2The Technology Committee was formed in July 2018. | ||||
Mr. Merriman and Mr. Grissen, all whom are independent directors, is an audit committee financial expert (ACFE) for purposes of the SEC rules and possesses accounting or related financial management expertise required by the NYSE. Members serving on the Audit Committee do not currently serve on the audit committees of more than three public companies.
2020 PROXY STATEMENT | 15 |
2018 Proxy Statement |15
OUR CORPORATE GOVERNANCE
Technology Committee
16 | | | |
We
•described below:
•$70,000 that is paid quarterly;
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Mr. Williams received the full value of this restricted stock unit for his service as independent Chair and then as our independent Lead Director during fiscal 2020. As described below, Mr. Beltzman will receive his independent Chair compensation in the form of cash, and there will be no additional cash or equity award for our independent Lead Director.
In August 2018, the Board reviewed our director compensation against market practices and determined to increase the value of the annual grant of restricted stock units to $110,000 effective with the grant made in connection with the 2018 Annual Meeting, and at For the same time, increasereasons, he will receive the value of the additional restricted stock units granted to our$90,000 annual payment for serving as independent Chair of the Board to $90,000. The Board also determined to increase, effective forin the quarterly payments made for our second quarterform of fiscal 2019, the annual cash retainers for the chairs of each Board committee by $5,000.
paid quarterly.
| 1 | In connection with certain actions taken by the Company to mitigate the impacts of COVID-19, including employee furloughs and reductions in employee compensation, the Board members waived the cash fees for the third quarter of fiscal 2020. |
2020 PROXY STATEMENT | 17 |
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Fiscal 20182020 Director Compensation Table
| | Director Name | | | Fees Earned or Paid in Cash ($)1 | | | Stock Awards2 ($) | | | Total($) | |
| | Daniel G. Beltzman | | | 146,250 | | | — | | | 146,250 | |
| | Virginia Gambale | | | 67,500 | | | 109,996 | | | 177,496 | |
| | David J. Grissen | | | 61,875 | | | 109,996 | | | 171,871 | |
| | Mark S. Light | | | 52,500 | | | 109,996 | | | 162,496 | |
| | Michael J. Merriman | | | 67,500 | | | 109,996 | | | 177,496 | |
| | M. Ann Rhoades | | | 52,500 | | | 109,996 | | | 162,496 | |
| | David P. Williams | | | 67,500 | | | 199,996 | | | 267,496 | |
| 1 | Cash fees earned or paid are less than the annual cash fees under our director compensation program due to directors waiving the fees for the third quarter of fiscal 2020 in connection with the Company’s actions to address the impacts of the COVID-19 pandemic. |
| 2 | Values expressed represent the aggregate grant date fair value of restricted stock units granted during fiscal 2020, as computed in accordance with FASB ASC Topic 718, based on the closing stock price on the grant date. See Note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 for a description of the assumptions used in calculating these amounts. |
Director Name | Fees Earned or Paid | Stock Awards1 ($) | Total($) |
Daniel G. Beltzman | 167,500 | — | 167,500 |
Virginia Gambale | 23,333 | 59,992 | 83,325 |
David J. Grissen | 77,500 | 89,993 | 167,493 |
Mark S. Light | 70,000 | 89,993 | 159,993 |
Michael J. Merriman | 83,750 | 89,993 | 173,743 |
M. Ann Rhoades | 70,000 | 89,993 | 159,993 |
Stephen E. Watson2 | 17,500 | — | 17,500 |
David P. Williams | 73,750 | 174,994 | 248,744 |
1Values expressed represent the aggregate grant date fair value of restricted stock units granted during fiscal 2018, as computed in accordance with FASB ASC Topic 718, based on the closing stock price on the grant date. See Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018 for a description of the assumptions used in calculating these amounts. 2Mr. Watson’s term expired on October 17, 2017, as he did not stand for re-election at the 2017 annual meeting of shareholders. | |||
The following table shows, for each of our current non-employee directors, the aggregate number of stock and option awards beneficially owned by them as of June 30, 2018:
| | ||||||||
| | | Aggregate Stock Awards Outstanding as of 06/30/ | | | Aggregate Option Awards Outstanding as of 06/30/ | | |
| Daniel G. Beltzman |
| | 17,535 | | | — | |
| Virginia Gambale |
| | 14,314 | | | — | |
| David J. Grissen |
| | 42,336 | | | — | |
| Mark S. Light |
| | 42,336 | | | — | |
| Michael J. Merriman |
| | 52,730 | | | — | |
| M. Ann Rhoades |
| | 30,840 | | | — | |
| David P. Williams |
| | 74,004 | | | — | |
18 | | | |
Upon the recommendation of the Compensation Committee of the Board, the Board unanimously recommends a vote FOR the approval of the compensation of our Named Executive Officers.
2018 Proxy Statement | 17
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As required by SEC rules, we are providing shareholders with an annual, non-binding advisory vote to approve the executive compensation as disclosed in the our Compensation Discussion and Analysis (“CD&A.&A”). At the Annual Meeting, shareholders will vote on the following advisory resolution regarding the compensation of our Named Executive Officers as described in this Proxy Statementproxy statement (commonly referred to as “Say-on-Pay”):
proxy statement.
time.
APPROVAL OF ADVISORY VOTEON COMPENSATION OF NAMEDEXECUTIVE OFFICERS
20 | | | |
2018 Proxy Statement|19
The Starting Point
In November 2015, Regis Corporation’s stock hit a multi-year highconditioning), and hair coloring, as well as selling hair care and other beauty products. You’ve probably heard of $18.04.In May 2017, just as our new CEO was joiningbrands, which include Supercuts, SmartStyle, Cost Cutters, Roosters, and First Choice Haircutters. As of June 30, 2020, the Company it hit a multi-year low of $9.13.
Our fiscal 2018 pay plans, which we describefranchised, owned or held ownership interests in this section, reflected our need to redirect the Company. Our pay focused on near-term, top-talent recruitment and retention, the rapid execution of key elements of our turnaround, and stock price improvement.
Our fiscal 2019 pay plans, which we also summarize in this section, reflect our belief that different plans are needed to propel the Company toward the future.
Our People
6,923 locations worldwide.
As required And that culture is also diverse and inclusive; more than 92.3% of our employees and affiliates identify as women, and 38% of our employees self-identify as racial and ethnic minorities.
| | Name | |||||||
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| | | Period of Employment | | ||
| Hugh E. Sawyer | | | Chair of the Board, President and Chief Executive Officer | | | April 2017 - present | |
| Kersten D. Zupfer | | | Executive Vice President and Chief Financial Officer |
| | February 2007 - present | |
| Eric A. Bakken | | | Executive Vice President and President - Franchise | | | January 1994 - present | |
| Chad Kapadia | | | Executive Vice President and Chief |
| | June 2018 - present | |
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James A. Townsend | | | Executive Vice President and Chief Marketing Officer |
| | April 2019 - present | |
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| | | Former |
| | July 2017 | |
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2020 PROXY STATEMENT | 21 |
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EXECUTIVE COMPENSATION Discussion and Analysis
Much
2019; this was by design•Promoted Eric Bakken to President - Franchise
•Appointed Andrew Lacko as EVP and CFO
•Promoted James Suarez to VP, Creative
•Appointed Kathryn Shawn Moren as SVP and CHRO
•Appointed Amanda P. Rusin as SVP, General Counsel and Corporate Secretary
•Promoted Kersten Zupfer to SVP and Chief Accounting Officer
•Appointed Chad Kapadia as EVP, Chief Technology Officer and Head of Product Engineering
•Promoted Laura Alexander to SVP, Merchandise
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Our fiscal 2018 pay plans were tailored to:
•Help us get the right people in the right positions
•Retain our leaders during the challenging restructuring period
•Incentivize achieving our key transactional and post-transactional implementation and performance goals
•Align interests to grow our franchise program and the restructuring of our non-performing Company-owned salons
•Create a platform for delivering sustainable shareholder value while working our way through a transformation
The following table lays out each major element of our fiscal 2018 pay plans.
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The members of the Compensation Committee focused on tying PSUs to share-price enhancements. We set performance goals based on achieving End-of-Period Share Price goals corresponding to a year-over-year Compound Annual Growth Rate (“CAGR”) measured against a baseline stock price over three years of 10% (at target) and 20% (at maximum). For purposes of these awards we defined an End-of-Period Share Price target asexample, our CEO’s total Summary Compensation Table pay fell by more than 85 percent. The reason for the volume-weighted average closing price
2018 Proxy Statement |21
EXECUTIVE COMPENSATION Discussion and Analysis
of our common stock across the 50 trading daysdrop is that end on July 31, 2020. This goal aligns with our focus on creating shareholder value, and we chose this metric largely in recognition that earnings per share goals, as used in fiscal 2017, would be challenging to set in the midst of a transformation.
When setting executive compensation for fiscal 2018, the Committee set challenging performance expectations related to Incentive EBITDA, The Beautiful Group Transaction progress and results, the SmartStyle Restructuring progress and results and stock price growth. Executive pay opportunities were, once again, delivered primarily through performance-based elements of pay.
At our 2017 annual meeting, over 98% of our shares voted were cast in favor of2019, our executive compensation program. We believe thatprogram was redesigned to encourage our continuing shareholder engagement and incorporation of shareholder feedback into our compensation program have been importantexecutives to our being able to design and present plans that receive strong shareholder support.
Summary of the Fiscal 2019 Plan
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What We Wanted
As we, the members of Regis Corporation’s Compensation Committee, began the process of creating our compensation plans for fiscal 2019, we recognized that the Company’s situation has evolved substantially during fiscal 2018.
We started out with some fundamental principles:
•We wanted Regis’s employees to do more than think like owners—we wanted them to be owners, and to invest their own funds to become owners.
•We wanted compensation to reward the achievement of financial goals as well as individual objectives tied to the achievement of the key elements oftake a long-term strategy.
•We wantedview and to engage with our shareholders before we adopted our plan to benefit from and incorporate their wisdom into our plan design.
The Journey was as Unusual as the Plan
Members of our compensation committee then set out to have individual conversations with senior stewardship/proxy voters at our large shareholders, human capital thought leaders, senior executives of highly regarded companies, and compensation experts at leading proxy advisors.
Our directors conducted these meetings without members of management present. Our directors asked shareholders to direct them to the best-designed plans and the most significant shareholder position papers, which they then read. Our directors collected and analyzed this input to create the framework of a new plan. As part of this effort, we also hired a new compensation consultant, who was willing to enable and support our creativity. They then worked closely with the board to shape a plan that suited our Company with its current set of risks and opportunities.strategic transformation.
What Changed
•
| |
EXECUTIVE COMPENSATION Discussion and Analysis
Under our matching share program, participants may elect to contribute up to half of their earned annual short-term cash incentive, net of normalized tax withholding (“bonus”) to purchase shares of our common stock; the Company will provide a matching grant of RSUs with a value equal to 200% of their contribution to the plan (before deducting any related or normalized tax withholding). These RSUs are subject to a five-year cliff vesting condition and participants are also required to hold their underlying purchased shares for the same five-year period. To help build executives’ ownership position at the outset of our new program, we implemented an “early participation program” where eligible executives can elect to use up to half of their target 2018 bonuses, net of normalized tax withholding, to purchase shares and receive a matching RSU grant valued at up to 100% of their contribution (before deducting any related or normalized tax withholding), subject to the same cliff vesting requirement.
The initialfiscal 2019 equity grant is targeted at being three and one-half times the value of the executives’ 2018 grant. Three-quarters of such grant will bewas in the form of performance shares (PSUs), which require the Company’sour achievement of a three-year stock price performance goal, after which award recipients must wait an additional two years (until the fifth anniversary of the grant) to achieve vesting. The remainderstock price goal is rigorous. The remaining 25% of the fiscal 2019 equity grant will bewas in the form of RSUsrestricted stock units (RSUs) that will cliff-vest after three years. The annualized valueonly equity awards granted in fiscal 2020 were related to promotions or to create particular incentives, and they are described in more detail below.
| | Element | | | Form | | | Metric | | | Performance Period | | | Objective | |
| | Base Salary | | | Cash | | | Fixed | | | N/A | | | Provide a base level of compensation for executive talent. | |
| | Annual Incentive (“AIC” or “Bonus”) | | | Cash | | | Annualized Run-Rate G&A Optimization (40%) | | | 1 year | | | Motivate executives to meet and exceed objectives aligned with our annual strategic plan; executives able to elect to contribute up to half of their earned fiscal 2020 Bonus to purchase shares of the Company’s common stock and have such purchase matched at a rate of up to 200%, dependent on the employee’s underlying contribution under our matching share program. | |
| | Franchise Openings Plus Closure or Sale of Underperforming Salons (40%) | | ||||||||||||
| | Individual NEO Performance Goals (20%) | |
Therefore, if executives do not participate in the matching share program, their five-year pay will be below what they would have received under the fiscal 2018 program. Executives who choosepandemic to make a personal investment in shares of our common stock through the matching share program may receive greater awards through stock price appreciation than was provided under our former program.
Our fiscal 2019 pay plan’s link to performance is enhanced by the factensure that maximum investments in the matching share program are tied to earned bonus payouts. Eligible executives who elect to contribute 25% of their earned bonus, net of normalized tax withholding, to purchase shares will receive a 100% match on their contribution (before deducting any related or normalized tax withholding); similarly executives who elect to contribute 50% of their earned bonus, net of normalized tax withholding, to share purchases will receive a 200% match on their contribution (before deducting any related or normalized tax withholding). The maximum matching grant opportunity will be lower in years of below-target payout, and higher in years of strong performance.
We believe it is also significant that our fiscal 2019 pay plan has a much longer-term focus than the plan it replaces. No equity will vest until three years after the date of the initial grant and the majority is subject to a relatively lengthy five-year cliff-vesting schedule. In contrast, under our fiscal 2018 plan, RSUs vested one-third per year over a three-year period, while performance awards were earned and vested at the end of three years. In addition, under the new 2019 plan, our CEO must hold all his shares that are granted to him pursuantimpacts to the new 2019 plan until he retires from service to Regis Corporation.
We believe our termination provisions are also aligned with shareholders’ interest: prior to the third anniversary of the grant date initial RSUsbusiness were well understood and PSUs will be forfeited in the event of voluntary termination, termination for cause, termination without cause (if the current CEO is CEO at the time of a participant’s termination and the terminated participant’s position has not been eliminated by the Company),or retirement. In other limited circumstances, and only if applicable performance goals are satisfied, awards may be prorated over the vesting period. Termination provisions for awardsrisks to our CEO align with these principles, but will be modified slightly to conform with the terms of his employment agreement.
In addition topeople, our short-term bonus paymentscommunities, and our company were being tied to the achievement of clear financial goals, and in addition to the effects that real ownership produces, we believe our fiscal 2019 equity-based plan focuses our leaders on sustainable, long-term performance in ways including these:
•A five-year time frame is long enough for managers to experience the effects of their decision making
•managed effectively. The extended duration of the plan means management will almost always have significant amounts of unvested equity, discouraging poaching, encouraging retention, and minimizingCommittee carefully considered the impact on shareholders if we part ways with non-performing executives.
•Management can only earn their up-front PSU grant if Regis’ stock price increasesthe business, as well as the executives’ response to the target.
The Committee believes that ourpandemic, when making decisions regarding fiscal 2018 compensation plan, that we will return to now, has put us in a position to be able to take this significant new step forward.
22 | | | |
2018 Proxy Statement |23
EXECUTIVE COMPENSATION DiscussionDISCUSSION AND ANALYSIS
Our
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2020 PROXY STATEMENT | 23 |
well as individual NEO performance goal achievement. Our ability to be flexible was crucial in our ability to navigate the impacts of the COVID-19 pandemic and retain and incentivize our management team through the unprecedented challenges they faced. the peer group regarding trailing twelve month revenue (Regis at $528 million compared to peer group median $487 million), and the 51st percentile regarding market capitalization (Regis at $351 million compared to peer group median $342 million).•For fiscal 2018, the Committee incentivized management to drive increases in Incentive EBITDA, as it believed EBITDA served as an important indicator of underlying operational performance and profitability. EBITDA received slightly less emphasis2018 relative to prior years, due to2019, the Committee’s focusfirst of the five-year period for our new pay program, are earned based on our business transformation.•For fiscal 2018, the Committee incentivized management to drive our business transformation, as it believed our business transformation initiatives will help advance our aspiration to build a high-performing business. As a result, the Committee replaced same-store sales metrics with business transformation metrics.•For fiscal 2018, the Committee continued its emphasisshare-price enhancements. We set performance goals based on performance awards and full-value awards in its long-term incentive program. Long-term awards continued to be made up of two components (60% PSUs and 40% RSUs).•For fiscal 2018, the Committee adopted a new performance measure for the PSUs. This performance measure isachieving an End-of-Period Share Price andtarget, defined as the volume-weighted average closing price of our common stock across the 50 trading days that end on July 1, 2021. This goal aligns with our focus on creating shareholder value.goals correspondingexpectations related to CAGR ranging from 10% to 20% per year over three years. The Committee determined to use End-of-Period Share Price, instead of earnings per shareoptimizing our annualized run-rate G&A expense and opening new franchise salons while closing or selling underperforming salons, as done in fiscal 2017, in part because of the challenges associated with setting earnings per share goals in the midst of our business transformation.The Committee considers compensationexternal market as one factorlong-term incentive program adopted in itsfiscal 2019, we also did not make any long-term equity awards to our executives. Accordingly, we did not benchmark our fiscal 2020 executive compensation decisions, examining both relevant broad retail industry dataagainst our peer group or the broader market. We view peer benchmarking as a valuable tool and data from a group of companies it considersplan to reassess its peers. At the beginning ofuse once our strategic transformation is substantially complete.2017,2021, with the assistance of its former independent compensation consultant, Willis Towers Watson,Pay Governance, the Committee reviewed and revised the listselected a new set of peer companies in itsto be used for compensation benchmarking purposes. That peer group set forth below, which was first selected in 2013. Boyd Gaming Corp.Brinker International, Inc.Buffalo Wild Wings, Inc.1Cracker Barrel Old Country Store 2Fossil Group, Inc.3Fred’s, Inc.Jack in the Box, Inc.Outerwall, Inc.4Panera Bread Co.5Penn National Gaming, Inc.Revlon, Inc.Ruby Tuesday, Inc.6Sally Beauty Holdings, Inc.Service Corporation InternationalThe Cheesecake Factory, Inc.Ulta Beauty, Inc.24 | EXECUTIVE COMPENSATION Discussion and Analysis1The Committee selected this peer group in the belief that it represents a balanced set of comparator companies, with Regis near the peer group median on key metrics. As of February 5, 2018, Buffalo Wild Wings, Inc. operates as a subsidiaryJune 15, 2020, the date on which the prospective peer group was reviewed and selected, Regis fell at the 62nd percentile of Arby’s Restaurant Group, Inc.2Formerly known as DineEquity, Inc.3Fossil Group, Inc. is excluded for purposes of benchmarking Chief Executive Officer compensation because its chief executive officer does not receive any annual compensation.4As of 2016, Outerwall, Inc. was acquired by Apollo Global Management LLC.5As of July 28, 2017, Panera Bread Co. operates as a subsidiary of Rye Parent Corp.6As of December 21, 2017, Ruby Tuesday, Inc. was taken private.it isthe bonus payments are generally reported as “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table. In developing our compensation programs, a basic objective for the Committee was that the total compensation awarded to the NEOs be fair, reasonable and competitive in relation to the median compensation for similar positions within our peer group, as identified above, as well as in the broader retail market. This objective is consistent with our executive pay philosophy.••
Elements of the Executive Compensation Base Salary Decisions for Fiscal 2020 Name Base Salary at June 30, 2017 ($) Base Salary at June 30, 2018 (Annualized) ($) Increase Hugh E. Sawyer 950,000 950,000 — Andrew H. Lacko — 1 495,000 N/A Eric A. Bakken 495,000 495,000 — Jim B. Lain 400,000 400,000 — Rachel Endrizzi 275,000 300,0002 9 Annette L. Miller 375,000 375,000 — Andrew W. Dulka 300,000 300,000 — 1Mr. Lacko was appointed Executive Vice President and Chief Financial Officer on July 1, 2017. 2Effective November 1, 2017.Throughout fiscal During fiscal 2018, CamberView Partners, LLC, a consulting firm, also assisted the Committee with shareholder outreach by among other things creating presentation materials. The Chair of the Committee worked directly with Pay Governance to determine the scope of the work needed to assist the Committee in its decision-making processes. Pay Governance worked with management, at the direction of the Committee, to fully understand the future business direction and the historical, current and desired future direction of our pay policies and practices, as well as to facilitate the development of our compensation strategies, including the approach to determining compensation levels.2018 Proxy Statement |25EXECUTIVE COMPENSATION Discussion and Analysis2018Target Compensation Mix for Fiscal 2018The Committee established the mix of base salary and incentive compensation by referencing market practices for total direct compensation and for each element, subject to adjustments in the Committee’s discretion based on Company-wide and individual performance factors. In developing the total direct compensation package for an NEO, the Committee considered the internal relationship of pay across all executive positions. To tie compensation to performance, the Committee structured annual non-equity incentive compensation and the performance-based element of long-term incentive compensation in a manner that provided the opportunity to earn above market compensation for results above target, and below market compensation when the target is not achieved. Target total compensation for Mr. Sawyer, our CEO, is not directly comparable to his compensation in 2017 or to the compensation of the other named executive officers due to the terms of his employment agreement (discussed below under “Compensatory Arrangements with Mr. Sawyer”), under which he was first eligible to receive an annual non-equity incentive award in 2018 and is first eligible to receive a long-term incentive award in fiscal 2019. Compared to fiscal 2017, target total compensation for the other NEOs remained relatively flat in fiscal 2018, as discussed below.
2018assisted by its independent compensation consultant, did not increasemodify our NEOs’ base salaries for fiscal 2018,2020, which were consistent with fiscal 2019 base salaries, except for the following base salary changes:Endrizzi. In fiscal 2017, the Committee increased the base salaries of most of our NEOs. Previously,Zupfer’s base salary was generally flat fromincreased in connection with her promotion to Chief Financial Officer to a pay level commensurate with her new role and her experience;2013 through fiscal 2016, absent promotions2020 to align with market compensation for Mr. Kapadia’s position; and newly hired executives.20182020 were as follows:
(Annualized)
(or Date of Termination, if earlier)
(%)
2020 PROXY STATEMENT | 25 |
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EXECUTIVE COMPENSATION Discussion and Analysis
20182020
Annual non-equity
| | Name | | | Target AIC (as a Percentage (%) of Salary)1 | | | Target AIC ($) | |
| | Hugh E. Sawyer | | | 115 | | | 1,092,500 | |
| | Kersten D. Zupfer2 | | | 60 | | | 218,750 | |
| | Eric A. Bakken | | | 75 | | | 371,250 | |
| | Chad Kapadia | | | 60 | | | 349,500 | |
| | James A. Townsend | | | 60 | | | 297,000 | |
| | Andrew H. Lacko | | | 60 | | | 297,000 | |
| 1 | Base salaries used to calculate target AIC and AIC payouts were based on base salary rates in effect during fiscal 2020, and were not reduced by the amount of base salary payment reduction in effect for a portion of fiscal 2020 in response to the COVID-19 pandemic. |
| 2 | Ms. Zupfer’s base salary and target AIC and Mr. Kapadia’s base salary increased during fiscal 2020. The Target AIC as a percentage of salary listed above was in effect for most of, and at the end of fiscal 2020. The Target AIC in dollars amounts were calculated by pro-rating the different base salary and bonus target percentages in effect for portions of the year. |
Name | Target AIC | Target AIC |
Hugh E. Sawyer | 115 | 1,092,500 |
Andrew H. Lacko | 60 | 297,000 |
Eric A. Bakken | 75 | 371,250 |
Jim B. Lain | 60 | 240,000 |
Rachel Endrizzi | 501 | 145,833 |
Annette L. Miller | 50 | 187,500 |
Andrew W. Dulka | 50 | 150,000 |
1Ms. Endrizzi’s target AIC as a percentage of base salary remained flat, but her base salary increased from $275,000 to $300,000 effective November 1, 2017, resulting in a pro-rated target AIC of $145,833. | ||
| | Performance Measure | | | Weighting | | | Performance Goal | | | Award Multiplier | | |||
| | G&A Reduction | | | 40% | | | Target / Funding Threshold | | | Fourth quarter of fiscal 2020 G&A of $32.6 million | �� | | 100% | |
| | Venditions and Closures | | | 40% | | | Maximum | | | 2,500 venditions + closures | | | 300% | |
| | Target | | | 2,000 venditions + closures | | | 175% | | ||||||
| | Threshold | | | 1,500 venditions + closures | | | 50% | | ||||||
| | Individual Performance Goals | | | 20% | | | | | Individual performance goals | | | As recommended by CEO | | |
| * | If the measured amount achieved is between two performance goals, the award multiplier will be determined through linear interpolation. |
Each year, the Committee evaluates our annual strategic plan to determine if the financial metrics are appropriate to measure achievement of our objectives and to motivate executives, and sets corresponding financial metrics to be included in the AIC awards. For fiscal 2018, the Committee established the following metrics:
Performance Measure | Weighting | Performance Goal | Award Multiplier | |
Incentive EBITDA | 60% | Maximum | $94.5 M | 200% |
Target | $82.5 M | 100% | ||
50% of Threshold | $79.9 M | 50% | ||
Threshold | $77.3 M | 0% | ||
The Beautiful Group Transaction | 20% | Maximum | Closing and Satisfaction of 2 SOWs (as defined below) | 200% |
150% of Target | Closing and Satisfaction of 1 SOW | 150% | ||
Threshold and Target | Closing of The Beautiful Group Transaction | 100% | ||
SmartStyle Restructuring | 20% | Maximum | Closing and increasing SmartStyle 4-wall EBITDA for fiscal 2018 by at least $4M compared to fiscal 2017 4-wall EBITDA | 200% |
Threshold and Target | Closing of SmartStyle Restructuring | 100% | ||
In fiscal 2018, the Committee determined to focus on our business transformation goals by replacing same-store sales metrics with business transformation metrics and slightly decreasing the emphasis on EBITDA, as described above. For The Beautiful Group Transaction, the Committee set goals based on closing on the sale of substantially all of our mall-based salons in North America and substantially all of our international business to a new, single franchisee, The Beautiful Group, in addition to goals related to the level of services the Company provides to The Beautiful Group for mall-based salons in North America for fiscal 2018. For the SmartStyle restructuring, the Committee set goals based on closing certain of our non-performing Company-owned SmartStyle salons, as well as goals related to SmartStyle EBITDA for fiscal 2018, reflecting an emphasis on incremental profitability of remaining SmartStyle operations.
In setting the metrics for fiscal 2018,2020, the Committee defined Incentive EBITDACommittee:
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2018 Proxy Statement |27
EXECUTIVE COMPENSATION Discussion and Analysis
amortization, adjusted
The Committee defined a “SOW” relatedsupport ongoing efforts to transition salons previously transferred to The Beautiful Group Transaction asto new owner or close all or a portion of the statements of work regarding (i) Human Resources and Payroll Services and (ii) Point of Sale Services contained inTBG salons
Fiscal 2018Committee evaluated performance against the metrics set forth (right)and determined that the G&A Reductions metric was achieved in excess of the target, resulting in payout at 100% of target for that metric. The Committee also determined that the 1,500 venditions and organic openings, plus the 270 closures, resulted in the executives earning AIC payouts1,770 venditions and closures in fiscal 2020, leading to a payout at 180%117.5% of target based onfor that metric. In each case, the following performance results,Committee’s determinations were subject to completion of the audit of the Company’s annual financial statements. The Committee also considered achievements of the management team during fiscal 2020, including:
•Incentive EBITDAUpgrading the Supercuts mobile app and engineering the first Cost Cutters mobile app;
•Closingmanagement’s ability to pivot their efforts to address unexpected issues arising out of the COVID-19 pandemic. Accordingly, the Committee determined that all executive officers earned a payout equal to at least 100% of target for the individual performance metrics. In connection with committing to a payout of each individual performance objective of at least 100% of target, the Committee determined that payouts would be deferred until December 2020 and satisfactions of 2 SOWs relatedwould be conditioned upon each executive remaining employed through the payment date, subject to The Beautiful Group Transaction — met maximum requirement
•Closing of SmartStyle Restructure — met target requirement
| | | | AIC Weightings - % of Total Target | | |||||||||||||
| | NEO | | | 40% G&A Reductions | | | 40% Venditions and Closures | | | 20% Individual Goals | | | Calculated AIC % | | | Total AIC Payout ($) | |
| | Kersten D. Zupfer | | | 100% | | | 117.5% | | | 100% | | | 107% | | | 234,062 | |
| | Eric A. Bakken | | | 100% | | | 117.5% | | | 100% | | | 107% | | | 397,238 | |
| | Chad Kapadia | | | 100% | | | 117.5% | | | 100% | | | 107% | | | 373,965 | |
| | James A. Townsend | | | 100% | | | 117.5% | | | 100% | | | 107% | | | 317,790 | |
| 2020 PROXY STATEMENT |
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Payout of PSUs for 2018-2020 Performance Period20182020Committee considers equity-based long-term incentive compensation (“LTI”) to be critical to the alignment of executive compensation with the creation of shareholder value. Therefore, LTI represented 34% of the NEOs’ compensation, on average, other than the CEO. Pursuant to his employment agreement, Mr. Sawyer received sign-on equity award grants in April 2017 and is first eligible to earn LTI under our 2016 Long-Term Incentive Plan (the “2016 Long-Term Plan”) in fiscal 2019.2018 PSUs performance measure was end-of-period share price. The Committee set the value of LTI awards to our then-current NEOs at the beginning of fiscal 2018 as follows:Target Value ofLong-Term Incentive($)Hugh E. Sawyer—Andrew H. Lacko400,000Eric A. Bakken500,000Jim B. Lain400,000Rachel Endrizzi200,000Annette L. Miller250,000Andrew W. Dulka250,000For fiscal year 2018, the Committee did not change the targeted long-term incentive mix for the NEOs, which remained at 60% PSUs and 40% RSUs, keeping the performance-based element of the program (PSUs) the majority of the weight, while recognizing that a time-based element will drive retention during the business transformation.We use the term performance stock units, or PSUs, to denote grants of stock units that are earnedgoals based on the achievement of the performance goals established by the Committee. PSUs granted in fiscal 2016 and earlier had a one-year performance period, after which any earned units had an additional two-year service-based vesting requirement, prior to settling in shares of stock. Beginning with PSUs granted in fiscal 2017, and continuing in fiscal 2018, the PSUs have a three-year performance period, at which time any earned units settle in shares of stock.All of our long-term equity incentive compensation awards since fiscal 2017 were granted pursuant to our 2016 Long-Term Plan. For our equity awards, the grant date for the awards is the date the grant becomes effective. The terms of these awards are described in more detail below in the narrative accompanying the Grants of Plan-Based Awards in 2018 table.
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EXECUTIVE COMPENSATION Discussion and Analysis
Upon grant, LTI awards to our NEOs for fiscal 2018 were as follows:
| 60% PSUs (# Granted) | 40% RSUs (#) | Total Value (at Target)1 ($) |
Hugh E. Sawyer2 | — | — | — |
Andrew H. Lacko | 18,072 | 12,048 | 400,000 |
Eric A. Bakken | 22,590 | 15,060 | 500,000 |
Jim B. Lain | 18,072 | 12,048 | 400,000 |
Rachel Endrizzi | 11,295 | 6,024 | 200,000 |
Annette L. Miller3 | 11,295 | 7,530 | 250,000 |
Andrew W. Dulka3 | 11,295 | 7,530 | 250,000 |
1Number of units was determined based on share value on August 31, 2017. 2Pursuant to his employment agreement Mr. Sawyer received sign-on equity award grants in April 2017 and is first eligible to earn LTI under our 2016 Long-Term Plan in fiscal 2019. 3The fiscal 2018 PSUs granted to Ms. Miller and Mr. Dulka were forfeited upon their termination of employment. | |||
For fiscal year 2018, the Committee changed the performance measure used in the PSUs to End-of-Period Share Price, meaning the volume-weighted average closing price of the Company’s common stock across the 50 trading days that end on July 31, 2020. The Committee made this change because this measure directly aligns with creating shareholder value and, when measured over a three-year period, will encourage sustained value creation and pay-for performance.
The fiscal 2018 PSUs have a three-year performance period with performance assessed as of July 31, 2020. After conclusion of the performance period, the number of PSUs earned will vest immediately upon certification by the Committee. The number of units earned will depend on the extent to which performance goals are attained, as follows (with interpolation between):
Performance Measure | Extent to which Performance Goal is Reached | End of Period Price | Award Multiplier to # of Units Earned |
End-of-Period Share Price | Maximum (20% CAGR) | $22.95 | 200% |
End-of-Period Share Price | Target (10% CAGR) | $17.68 | 100% |
The Committee established the target for the fiscal 2018 PSUs with reference to the CAGRcompound annual growth rate (CAGR) that would be achieved from a baseline of $13.28, which was the Company’s stock price.
price on August 31, 2017, and determined that an end-of-period share price of $17.68 would entitle participants to earn the target amount of PSUs (representing a three-year CAGR of 10%) and an end-of-period share price of $22.95 would entitle participants to earn the maximum amount of PSUs (representing a three-year CAGR of 20%). The actual end-of-period share price was below the target amount and, accordingly, the NEOs who were employed by the Company when the fiscal 2018 PSUs were granted, Ms. Zupfer, Mr. Bakken and Mr. Kapadia, did not earn any payout under the PSUs.
| | Name | | | % of Fiscal 2019 Bonus Payout Contributed | |
| | Kersten D. Zupfer | | | 25 | |
| | Andrew H. Lacko | | | 50 | |
During the past couple of years, our Company experienced numerous meaningful changes, which the Board2020
Changes to Severance Program
In January 2017, the Committee adopted a temporary policy under which employees who are terminated by the Company without cause (or resign for good reason) through August 31, 2018 are entitled to accelerated vesting of unvested RSUs and SARs. This includes acceleration or payment in cash for the value of any earned but unvested PSUs that would otherwise be forfeited upon an executive’s involuntary termination without cause, as they remained subject only to time-based vesting requirements. Leadership
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EXECUTIVE COMPENSATION Discussion and Analysis
At the same time, the Committee provided that any future severance payments would be paid in a lump sum upon termination, rather than as salary continuation (whenever feasible without adverse tax consequences to the employee), and that, for employees with employment agreements under which cash severance would be offset by earnings from other employment, the Committee provided that cash severance would no longer be offset by earnings from non-competitive employment (as determined according to the terms of their employment agreement). These changes were also adoptedSeptember 1, 2019 to incentivize executiveshim to remain with the Company through its transformation in spiteand continue his leadership of the uncertainty caused by strategic change.
These policy changes do not apply to Mr. Sawyer, as specified in his employment agreement.
Special Incentive Program Based on Franchise Goals
Company’s key technology initiatives. The Committee also adopted a supplemental performance-based cash retention program in fiscal 2017acknowledged the particularly competitive market for certain leaders below the CEO level, to align their compensationrecruiting and retaining talent with the strategic emphasis towards the growthtype of technology experience to execute on our franchise business and to maintain continuity during a critical 18-month period in our transformation.initiatives. The NEOs who are eligible, and the maximum amounts they may earn under this program, are as follows:
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The actual amount earned dependsaward will cliff vest on the achievement of certain objectives related to our franchise business during the 18-month period from January 1, 2017 to June 30, 2018. The achievement of these objectives would represent a more than five-fold increase in the pace of sales of Company-owned salons to franchisees.
If participants are involuntarily terminated without cause (including termination for Good Reason), whether or not in connection with a change in control, or due to a participant’s death or disability, they would receive a payout after the endthird anniversary of the performance period based on the Company’s actual results. Participants who voluntarily terminate employment forfeit their right to an award. Any bonus received under this program would be in addition to any amounts received pursuant to the Company’s annual incentive plan.
During the 18-month period, the Company completed the sale of more than 500 Company-owned salons to new or existing franchisees, exceeding the 500-salon requirement corresponding to the maximum level of payout. Accordingly, the awards were paid out at maximum in August to the NEOs employed at that time. For Ms. Miller and Mr. Dulka, the awards were forfeited pursuant to the terms of their separation agreements.
Other Outstanding Awards
From time to time, the Committee may also make equity grants in other circumstances, such as recruiting new executive talent, upon the promotion of an executive, and to retain key individuals. During the past three fiscal years, we have made the following special grants, whicha significant number of new hires to our executive team and granted these individuals sign-on equity awards as an inducement. The awards described below remained outstanding as of June 30, 2018. These2020 and are also reflected in the Outstanding Equity Awards table below.
•Promotion Equity Awards to Ms. Zupfer in November 2019, that were designed to align her level of equity incentives with her new position, with such awards having the same terms as the award granted to NEOs last year in connection with the first year of our new pay plan.
June 2018, and a Performance Recognition Award granted to Mr. Kapadia in June 2019 in connection with
•
Mr. Sawyer.”
Benefits
Benefits
2020 PROXY STATEMENT | 29 |
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EXECUTIVE COMPENSATION Discussion and Analysis
stock exchangeNYSE requirements to reflect emerging best practices. Compensation PracticeRegis Policy During fiscal 2017, we amended our so that it permits us to recover certain equity as well as cash incentive payments from executive officers whose misconduct or negligence resulted in a significant financial restatement. officers and directorsdesignees of the foregoing from purchasing financial instruments, including prepaid variable forward contracts, equity swaps, collars and exchange funds, or otherwise engaging in transactions, that “hedge” their investmentshedge or offset, or are designed to hedge or offset, any decrease in the market value of our stock.common stock, including shares held directly or indirectly (however, our policy does not prohibit general portfolio diversification transactions). duringsince fiscal 2018. •••
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EXECUTIVE COMPENSATION Discussion and Analysis
calculation, except that shares subject to performance-based vesting conditions and shares subject to unexercised stock options and SARs are not included. For purposes of the stock ownership calculation, the shares are valued at the greater of (i) the average closing price of a share of the Company’s common stock during the most recent fiscal year and (ii) the closing price on the last day of the most recent fiscal year.
As set forth in
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The Nominating and Corporate Governance Committee is responsible for measuring and monitoring compliance with these guidelines.
EachThree of the NEOs named in this Proxy Statement, is partyMr. Sawyer, Ms. Zupfer and Mr. Bakken, are parties to a written employment agreement with the Company, with the exception of Mr. Lacko.Company. Pursuant to their employment agreements, all of our eligible NEOs are entitled to certain compensation and other benefits if their employment terminates due to certain articulated reasons (including in connection with a change in control), as described below under “Summary of Executive Agreements.” The employment agreements with our NEOs contain covenants not to compete or solicit, as well as confidentiality provisions, that the Committee considers especially valuable in the event of an executive’s termination of employment. They provide for payment of post-termination payments, conditioned upon signing and not rescinding a release of claims and compliance with the restrictive covenants in the employment agreement.
The Committee and the Board recognize the importance to us and our shareholders of avoiding the distraction and loss of key management personnel that may occur in connection with any rumored or actual change in control of the Company. Accordingly, the Committee and Board have structured change in control provisions to incentivize executives to remain employed while a transaction is under consideration or pending, and not to favor one transaction structure over another merely because of the impact on the executive’s compensation. These provisions are discussed in the section captioned “Summary of Executive Agreements.”
DeductibilityOur NEOs who do not have employment agreements are entitled to severance benefits under a senior executive severance policy adopted by the Committee in May 2020. Under the severance policy, senior vice presidents and above who are not party to an employment agreement are entitled to receive certain severance benefits if the executive’s employment is terminated without cause. In order to receive severance benefits under the policy, the executive must sign and not rescind a release of claims and comply with a one-year non-competition and non-solicitation restriction. The terms of the policy are discussed in the section captioned “Senior Executive Compensation
Code Section 162(m) asChanges to Severance Program
Recent tax reform legislation retained the $1 million deduction limit, but repealed the performance-based compensation exemption from the deduction limit and expanded the definition of “covered employees,” effective for taxable years beginning after December 31, 2017, which will apply to the Company’s tax year beginning July 1, 2018. “Covered employees” will now also include any person who served as CEO or CFO at any time during a taxable year, as well as any person who was ever
2020 PROXY STATEMENT | 31 |
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EXECUTIVE COMPENSATION DiscussionDISCUSSION AND ANALYSIS
certain former employees identified as a covered employee in fiscal 2018 or any subsequent year. Consequently, compensation paid in fiscal 2019 and later years to our NEOs in excess of $1 million will not be deductible unless it qualifies for transitional relief applicable to certain binding, written performance-based compensation arrangements that were in place as of November 2, 2017.
The Committee generally intends to continue to comply with the requirements of Section 162(m) as it existed prior to the tax reform legislation with respect to performance-based compensation in excess of $1 million payable under outstanding awards granted before November 2, 2017, including incentive compensation that was awarded under our Short-Term Plan and SARs and PSUs awarded under our 2016 Long-Term Plan in order to qualify them for the transitional relief. However, no assurance can be given that the compensation associated with these awards will qualify for the transitional relief, due to ambiguities and uncertainties as to the application and interpretation of newly revised Section 162(m) and the related requirements for transitional relief and the Company reserves the right to take actions that may result in the loss of a deduction if it determines that doing so is advisable based on all relevant facts and circumstances.
year).
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2018 Proxy Statement|33
2018 Proxy Statement |33
the fiscal years ended June 30,
Name and Principal Position | Year | Salary ($) | Bonus2 ($) | Stock Awards3 ($) | Option ($) | Non-Equity Incentive Plan Compensation4 ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings5 ($) | All Other Compensation6 ($) | Total ($) |
Hugh E. Sawyer President and Chief | 2018 | 950,000 | — | — | — | 1,966,500 | — | 161,832 | 3,078,332 |
2017 | 197,917 | 585,000 | 730,044 | 3,680,000 | — | — | 4,682 | 5,197,643 | |
Andrew H. Lacko Executive Vice President | 2018 | 527,000 | 125,000 | 786,851 | — | 534,600 | — | 60,992 | 2,034,443 |
Eric A. Bakken Executive Vice President, President - Franchise, Former Interim Chief Financial Officer, General Counsel and Corporate Secretary | 2018 | 527,000 | — | 546,076 | — | 1,113,750 | — | 33,260 | 2,220,086 |
2017 | 519,500 | — | 399,990 | — | — | — | 31,625 | 951,115 | |
2016 | 482,000 | — | 239,997 | 160,000 | 334,341 | 142,940 | 73,375 | 1,432,653 | |
Jim B. Lain Executive Vice President and Chief Operating Officer | 2018 | 432,000 | — | 436,860 | — | 792,000 | — | 6,774 | 1,667,634 |
2017 | 432,000 | — | 399,990 | — | — | — | 10,465 | 842,455 | |
2016 | 432,000 | — | 209,993 | 140,000 | 297,192 | — | 13,820 | 1,093,005 | |
Rachel Endrizzi Senior Vice President and Chief Marketing Officer | 2018 | 323,667 | — | 253,038 | — | 393,799 | — | 3,277 | 973,781 |
Annette L. Miller Former Executive Vice President and Chief Merchandising Officer8 | 2018 | 203,500 | — | 273,037 | — | — | — | 954,062 | 1,430,599 |
2017 | 407,000 | — | 249,992 | — | — | — | 21,772 | 678,764 | |
Andrew W. Dulka Former Senior Vice President, Chief Information Officer9 | 2018 | 115,774 | — | 273,037 | — | — | — | 752,565 | 1,141,376 |
1Includes amounts provided to the NEOs (with the exception of Mr. Sawyer) in the form of a modest perquisite allowance of approximately $32,000 per NEO that primarily covers an automobile allowance. The entire allowance is paid to the NEOs regardless of whether they spend the entire amount on automobile expenses and, therefore, is reported as base salary; however, the allowance amount is not included as base salary for purposes of determining other compensation and benefits amounts. Ms. Miller and Mr. Dulka received a pro-rated portion of the perquisite allowance in fiscal 2018 as their employment terminated during the year. 2The amount for fiscal 2018 for Mr. Lacko represents a sign-on payment in connection with the commencement of his employment. The amount for fiscal 2017 for Mr. Sawyer represents a sign-on payment made in connection with the commencement of his employment. | |||||||||
| | Name and Principal Position | | | Fiscal Year | | | Salary1 ($) | | | Bonus2 ($) | | | Stock Awards3 ($) | | | Option Awards3 ($) | | | Non-Equity Incentive Plan Compensation4 ($) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings5 ($) | | | All Other Compensation6 ($) | | | Total ($) | |
| | Hugh E. Sawyer President and Chief Executive Officer | | | 2020 | | | 861,821 | | | — | | | — | | | — | | | — | | | — | | | 28,040 | | | 889,861 | |
| | 2019 | | | 950,000 | | | 145,802 | | | 6,588,878 | | | — | | | 715,431 | | | — | | | 26,946 | | | 8,427,057 | | |||
| | 2018 | | | 950,000 | | | — | | | — | | | — | | | 1,966,500 | | | — | | | 161,832 | | | 3,078,332 | | |||
| | Kersten D. Zupfer Executive Vice President and Chief Financial Officer7 | | | 2020 | | | 393,097 | | | 43,750 | | | 553,484 | | | — | | | 190,312 | | | — | | | 430 | | | 1,181,073 | |
| | Eric A. Bakken Executive Vice President and President - Franchise | | | 2020 | | | 507,279 | | | 74,250 | | | — | | | — | | | 322,988 | | | 196,421 | | | 21,608 | | | 1,122,546 | |
| | 2019 | | | 527,000 | | | 66,825 | | | 1,313,472 | | | — | | | 300,713 | | | 151,934 | | | 33,812 | | | 2,393,756 | | |||
| | 2018 | | | 527,000 | | | — | | | 546,076 | | | — | | | 1,113,750 | | | — | | | 33,260 | | | 2,220,086 | | |||
| | Chad Kapadia Executive Vice President and Chief Technology Officer8 | | | 2020 | | | 558,596 | | | 69,900 | | | 599,988 | | | — | | | 304,065 | | | — | | | 18,293 | | | 1,550,842 | |
| | 2019 | | | 495,000 | | | 42,768 | | | 1,262,125 | | | — | | | 204,930 | | | — | | | 13,040 | | | 2,017,863 | | |||
| | James A. Townsend Executive Vice President and Chief Marketing Officer9 | | | 2020 | | | 475,279 | | | 59,400 | | | — | | | — | | | 258,390 | | | — | | | 21,728 | | | 814,797 | |
| | Andrew H. Lacko Executive Vice President and Chief Financial Officer10 | | | 2020 | | | 197,625 | | | — | | | 294,035 | | | — | | | — | | | — | | | 9,201 | | | 284,442 | |
| | 2019 | | | 527,000 | | | 53,460 | | | 1,162,142 | | | — | | | 240,570 | | | — | | | 12,934 | | | 1,996,106 | | |||
| | 2018 | | | 527,000 | | | 125,000 | | | 786,851 | | | — | | | 534,600 | | | — | | | 60,992 | | | 2,034,443 | |
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Executive Compensation Tables
3Values expressed represent the aggregate grant date fair value of stock or option awards granted in each fiscal year, as computed in accordance with FASB ASC Topic 718, based on the closing stock price on the grant date for RSUs and PSUs with performance metrics other than market conditions, the Monte Carlo model for PSUs with market conditions and the Black-Scholes model for SARs. See Note 122 The amounts for fiscal 2020 and 2019 represent the portion of AIC awards attributed to individual performance goals as the Committee determined that each NEO would receive a payout equal to at least 100% of his or her individual performance metric as described under “Annual Incentive Decisions for Fiscal 2020” in the CD&A. The amount for fiscal 2018 for Mr. Lacko represents a sign-on payment in connection with the commencement of his employment. 3 Values expressed represent the aggregate grant date fair value of stock or option awards granted in each fiscal year, as computed in accordance with FASB ASC Topic 718, based on the closing stock price on the grant date for RSUs and PSUs with performance metrics other than market conditions, the Monte Carlo model for PSUs with market conditions and the Black-Scholes model for SARs. See Note 13 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 for a description of the assumptions used in calculating these amounts. 20182020 include:
2020 PROXY STATEMENT | 33 |
key technology initiative related to a mobile application and a new partnership —$99,983.
•
The grant date fair values for stock awards for the fiscal year ended June 30, 2017 include:
•PSUs that were granted in August 2016: Mr. Bakken—$239,999; Mr. Lain—$239,999; and Ms. Miller—$149,998.276,863. The grant date fair values of these awards assumed that the target level achievement would be attained. If the grant date fair values had been calculated assuming the maximum level of achievement, the grant date fair values would have been: Mr. Bakken—$479,998; Mr. Lain—$479,998; and Ms. Miller—$299,996. PSUs granted to Ms. Miller were forfeited in accordance with her separation agreement.
•A special sign-on grant of SARs and RSUs made to Mr. Sawyer in April 2017 valued at $3,680,000 and $730,044, respectively; these awards cliff vest after two years. In the case of the RSUs, they are also subject to the satisfaction of performance goals related to the Company’s stock price. Furthermore, the SARs will not become exercisable and the RSUs will not be settled until the third anniversary of the date of grant, and the SARs will be exercisable until the tenth anniversary of the date of grant.
The grant date fair values for stock awards for the fiscal year ended June 30, 2016 include:
•PSUs granted in August 2015 were earned during the performance period ended June 30, 2016 at the following amounts: Mr. Bakken—$198,126692,158 and Mr. Lain—$173,353. The grant date fair values of these awards assumed that the target level achievement would be attained.
4Amounts represent the values earned as compensation outside of our equity incentive plans, including:
Fiscal year ended June 30, 2018:
•AIC awards under the Short Term Plan for fiscal 2018 were earned as follows: Mr. Sawyer—$1,966,500, Mr. Lacko—$534,600, Mr. Bakken—$668,250, Mr. Lain—$432,000, Ms. Endrizzi—$262,499.
•Awards under the supplemental performance-based cash retention program adopted in fiscal 2017 to align compensation with the strategic emphasis towards the growth of the franchise business during a critical 18-month period in the Company’s transformation were earned in fiscal 2018 as follows: Mr. Bakken—$445,500, Mr. Lain—$360,000 and Ms. Endrizzi—$131,300.
Fiscal year ended June 30, 2016:
•AIC awards under the Short Term Plan for fiscal 2016 were earned as follows: Mr. Bakken—$334,341 and Mr. Lain—$297,192.
5Amounts represent the change in the present value of benefits under the pension plans. Mr. Bakken is the only NEO eligible for such plans. The pension value for Mr. Bakken decreased by $54,403 and $6,843 in fiscal 2018 and 2017, respectively.
6The following table sets forth All Other Compensation amounts by type:
Name | Company Match and Profit- ($) | Moving / Travel Expensesb ($) | Severancec ($) | Total All Other Compensationd ($) |
Hugh E. Sawyer | — | 148,541 | — | 161,832 |
Andrew H. Lacko | — | 56,075 | — | 60,992 |
Eric A. Bakken | 26,400 | — | — | 33,260 |
Jim B. Lain | 2,000 | — | — | 6,774 |
Rachel Endrizzi | — | — | — | 3,277 |
Annette L. Miller | — | — | 946,227 | 954,062 |
Andrew W. Dulka | 7,500 | — | 737,619 | 752,565 |
aThe Company matches our NEOs’ contributions into our retirement savings plans up to $25,000 per calendar year. Amounts greater than $25,000 are due to the difference between calendar and fiscal year compensation. bMr. Sawyer is entitled to reimbursement of temporary housing expenses for 18 months from his start date of April 17, 2017, up to $175,000 in total, pursuant to his employment agreement. Any unspent portion will be paid to him if he remains employed after 18 months. Mr. Lacko was reimbursed $6,075 in moving expenses and $50,000 in real estate commissions since he sold his previous residence during the first year of employment, pursuant to his employment offer letter. cMs. Miller’s severance includes one times her base salary ($375,000), an amount equal to her pro-rated fiscal 2018 AIC award under the Short Term Plan based on target ($93,750), accrued vacation time as of her last day of employment ($28,846), 12 months of medical and dental continuation (up to $9,539) and, pursuant to the Committee policy adopted in January 2017 as a retention measure, equity acceleration upon a termination without cause ($263,634) and the value of her fiscal year 2016 PSUs, which were earned but not yet vested at the date of termination, valued at the closing price on her last day of employment ($175,458). See “Other Compensatory Decisions Applicable to Fiscal 2018” in CD&A. Mr. Dulka’s severance includes one times his base salary ($300,000), an amount equal to his pro-rated fiscal 2018 AIC award under the Short Term Plan based on target ($52,950), accrued vacation time as of his last date of employment ($11,539), 12 months of medical and dental continuation (up to $9,538) and, pursuant to the Committee policy adopted in January 2017 as a retention measure, equity acceleration upon termination without cause ($231,274) and the value of his fiscal year 2016 PSUs, which were earned but not yet vested on the date of termination, valued at the closing price on his last date of employment ($132,318). See “Other Compensatory Decisions Applicable to Fiscal 2018” in CD&A. dTotal All Other Compensation for Mr. Sawyer, Mr. Lacko, Mr. Bakken, Mr. Lain, Ms. Endrizzi, Ms. Miller; and Mr. Dulka also includes $13,291, $4,917, $6,860, $4,774, $3,277, $7,835 and $7,446 of perquisites, respectively, which primarily relate to medical benefits, including the reimbursement of co-pay and other out-of-pocket expenses and the Company employee stock purchase program. | ||||
7Mr. Lacko commenced employment on July 1, 2017.
8Ms. Miller’s employment terminated effective December 31, 2017.
9Mr. Dulka’s employment terminated effective November 6, 2017.
| 4 | Amounts for fiscal 2020 represent amounts earned pursuant to AIC awards under the Short Term Plan. |
| 5 | Amounts represent the change in the present value of benefits under the pension plans. Mr. Bakken is the only NEO eligible for such plans. The pension value for Mr. Bakken decreased by $54,403 in fiscal 2018. |
| 6 | The following table sets forth All Other Compensation amounts by type: |
| | Name | | | Company Match and Profit- Sharing Contributiona ($) | | | Moving / Travel Expensesb ($) | | | Total All Other Compensationc ($) | |
| | Hugh E. Sawyer | | | — | | | 22,420 | | | 28,040 | |
| | Kersten D. Zupfer | | | — | | | — | | | 430 | |
| | Eric A. Bakken | | | 12,500 | | | — | | | 21,608 | |
| | Chad Kapadia | | | 11,365 | | | — | | | 18,293 | |
| | James A. Townsend | | | 4,687 | | | — | | | 21,728 | |
| | Andrew H. Lacko | | | — | | | — | | | 9,201 | |
| a | The Company matches the NEOs’ contributions into its retirement savings plans up to $25,000 per calendar year. Amounts greater than $25,000 are due to the difference between calendar and fiscal year compensation. |
| b | Amount reflects reimbursements of Mr. Sawyer’s relocation of his personal residence. |
| c | Total All Other Compensation includes the following perquisites, which primarily relate to medical benefits, including the reimbursement of co-pay and other out-of-pocket expenses: Mr. Sawyer for Mr. Sawyer—$5,619; Ms. Zupfer—$430; Mr. Bakken—$9,108; Mr. Kapadia—$6,928; Mr. Townsend—$17,041; and Mr. Lacko—$9,201. |
| 7 | Ms. Zupfer was promoted to CFO on November 11, 2019. |
| 8 | Mr. Kapadia’s employment commenced June 18, 2018. |
| 9 | Mr. Townsend’s employment commenced April 8, 2019. |
| 10 | Mr. Lacko’s employment commenced July 1, 2017 and terminated November 15, 2019. |
34 | | | |
2018 Proxy Statement |35
Executive Compensation Tables
| | | | | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards1 | | | Estimated Possible Payouts Under Equity Incentive Plan Awards2 | | | | | | |||||||||||||||||
| | Name | | | Grant Date | | | Approval Date | | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | All Other Stock Awards: Number of Shares of Stock or Units2 (#) | | | Grant Date Fair Value of Stock & Option Awards3 ($) | |
| | Hugh E. Sawyer | | | | | | | 546,250 | | | 1,092,500 | | | 2,185,000 | | | | | | | | | | | | |||||||
| | Kersten D. Zupfer | | | | | | | 109,375 | | | 218,750 | | | 437,500 | | | | | | | | | | | | |||||||
| | | | 8/30/2019 | | | 4 | | | | | | | | | | | | | | | 1,763 | | | 28,508 | | |||||||
| | | | 11/11/2019 | | | 11/7/19 | | | | | | | | | | | | | | | 7,5645 | | | 131,235 | | |||||||
| | | | 11/11/2019 | | | 11/7/19 | | | | | | | | | — | | | 22,6946 | | | — | | | | | 393,741 | | |||||
| | Eric A. Bakken | | | | | | | 185,625 | | | 371,250 | | | 742,500 | | | | | | | | | | | | |||||||
| | Chad Kapadia | | | | | | | 174,750 | | | 349,500 | | | 699,000 | | | | | | | | | | | | |||||||
| | | | 9/1/2019 | | | 8/12/19 | | | | | | | | | | | | | | | 37,1057 | | | 599,988 | | |||||||
| | James A. Townsend | | | | | | | 148,500 | | | 297,000 | | | 594,000 | | | | | | | | | | | | |||||||
| | Andrew H. Lacko8 | | | | | | | 148,500 | | | 297,000 | | | 594,000 | | | | | | | | | | | | |||||||
| | | | 8/30/2019 | | | 4 | | | | | | | | | | | | | | | 18,184 | | | 294,035 | | |||||||
| 1 | These amounts represent the threshold, target, and maximum non-equity incentive (bonus) amounts that could have been earned by our executives for fiscal 2020 under the Short Term Plan, as described under “Annual Incentive Decisions for Fiscal 2020” in the CD&A. The amounts for Ms. Zupfer and Mr. Kapadia were calculated by pro-rating the different base salary and bonus target percentages in effect for portions of the year. Based on fiscal 2020 results, bonus payments equal to 107% of target were earned as described in “Annual Incentive Decisions for Fiscal 2020” in the CD&A. |
| 2 | Annual grants for the fiscal year ended June 30, 2020 include: |
| | | Estimated Possible Payouts | Estimated Possible | | | | | ||||
Name | Grant Date | Approval Date | Threshold ($) | Target ($) | Maximum ($) | Threshold3 (#) | Target (#) | Maximum | All Other | All Other | Exercise | Grant Date |
Hugh E. Sawyer | | | 546,250 | 1,092,500 | 2,185,000 | | | | | | | |
| | | | | | | | | | | | |
Andrew H. Lacko | | | 148,500 | 297,000 | 594,000 | | | | | | | |
7/1/2017 | 6/15/2017 | | | | | | | 34,079 | | | 349,991 | |
8/31/2017 | 8/14/2017 | | | | | | | 12,048 | | | 159,997 | |
10/17/2017 | 10/17/2017 | | | | 18,0725 | 18,0725 | 36,1445 | | | | 276,863 | |
Eric A. Bakken | | | 185,625 | 371,250 | 742,500 | | | | | | | |
8/31/2017 | 8/14/2017 | | | | | | | 15,060 | | | 199,997 | |
10/17/2017 | 10/17/2017 | | | | 22,5905 | 22,5905 | 45,1805 | | | | 346,079 | |
Jim B. Lain | | | 120,000 | 240,000 | 480,000 | | | | | | | |
8/31/2017 | 8/14/2017 | | | | | | | 12,048 | | | 159,997 | |
10/17/2017 | 10/17/2017 | | | | 18,0725 | 18,0725 | 36,1445 | | | | 276,863 | |
Rachel Endrizzi | | | 72,917 | 145,833 | 291,666 | | | | | | | |
8/31/2017 | 8/14/2017 | | | | | | | 6,024 | | | 79,999 | |
10/17/2017 | 10/17/2017 | | | | 11,2955 | 11,2955 | 22,5905 | | | | 173,039 | |
Annette L. Miller | | | 93,7504 | 187,5004 | 375,0004 | | | | | | | |
8/31/2017 | 8/14/2017 | | | | | | | 7,530 | | | 99,998 | |
10/17/2017 | 10/17/2017 | | | | 11,2954 | 11,2954 | 22,5904 | | | | 173,039 | |
Andrew W. Dulka | | | 75,0004 | 150,0004 | 300,0004 | | | | | | | |
8/31/2017 | 8/14/2017 | | | | | | | 7,530 | | | 99,998 | |
10/17/2017 | 10/17/2017 | | | | 11,2954 | 11,2954 | 22,5904 | | | | 173,039 | |
1These amounts represent the threshold, target, and maximum non-equity incentive (bonus) amounts that could have been earned by our executives for fiscal 2018 under the Short Term Plan, as described under “Annual Incentive Decisions for Fiscal 2018” in CD&A. Based on fiscal 2018 results the non-equity incentive awards paid out at 180% of target. 2The option and stock awards were granted under the 2016 Long Term Plan. 3Amounts are computed in accordance with FASB ASC Topic 718. 4The amounts for Ms. Miller and Mr. Dulka represent the bonus opportunities they would have been eligible to receive if they had remained employed for the entire fiscal year. Pursuant to their separation agreements and the circumstances of their termination of employment, Ms. Miller and Mr. Dulka were entitled to receive a pro-rated payout of their target award based on the portion of the year during which they were employed. 5These amounts represent the threshold, target and maximum number of PSUs that were available to our executives with respect to the fiscal 2018 PSU awards for the performance period ended June 30, 2020 as described under “Long-Term Incentive Decisions for Fiscal 2018” in the CD&A. | ||||||||||||
| 3 | Amounts are computed in accordance with FASB ASC Topic 718. |
| 4 | Awards granted pursuant to terms of matching share program approved August 14, 2018. |
| 5 | Represents an award of RSUs to acquire 7,564 shares that were granted to Ms. Zupfer in November 2019 in connection with her promotion to CFO. This award will cliff vest on the third anniversary of the grant date. |
| 6 | These amounts represent an award of PSUs that were available to Ms. Zupfer as a result of her promotion to CFO. These awards will vest on the fifth anniversary of the grant date if she is still employed by the Company and the performance goal has been achieved. |
| 7 | Represents an award of RSUs to acquire 37,105 shares that was granted to Mr. Kapadia in September 2019 as a retention incentive. This award will cliff vest on the third anniversary of the grant date. |
| 8 | In connection with Mr. Lacko’s resignation and termination of employment on November 15, 2020, all of the awards granted to Mr. Lacko in fiscal 2020 were forfeited. |
2020 PROXY STATEMENT | 35 |
| EXECUTIVE COMPENSATION TABLES |
Executive Compensation Tables
Summary of Terms of Equity Awards
•
•Restricted Stock Units— The RSUs vest asare also subject to one-third of the shares on each of the first three anniversaries of the date of grant. Company’s clawback policy.
36 | | | |
2020 PROXY STATEMENT | 37 |
2018 Proxy Statement |37
Executive Compensation Tables
| Option Awards | Stock Awards1 | ||||||
Name | Number of | Number of | Option | Option | Number of Shares | Market Value of | Equity Incentive Plan | Equity Incentive |
Hugh E. Sawyer | — | 1,000,0004 | 11.15 | 4/17/2027 | | | | |
| | | | 89,6865 | 1,483,406 | | | |
Andrew H. Lacko | — | — | — | — | | | | |
| | | | 34,0796 | 563,667 | | | |
| | | | 12,0487 | 199,274 | | | |
| | | | | | 18,0728 | 298,911 | |
Eric A. Bakken | 15,500 | — | 19.14 | 4/30/2019 | | | | |
4,200 | — | 18.90 | 4/29/2020 | | | | | |
4,200 | — | 16.60 | 4/28/2021 | | | | | |
22,250 | — | 18.01 | 8/31/2022 | | | | | |
26,578 | — | 15.78 | 8/30/2023 | | | | | |
23,916 | — | 15.11 | 8/29/2024 | | | | | |
30,389 | 15,1959 | 10.84 | 8/31/2025 | | | | | |
| | | | 2,4609 | 40,688 | | | |
| | | | 8,48410 | 140,325 | | | |
| | | | 15,0607 | 249,092 | | | |
| | | | 18,27711 | 302,302 | | | |
| | | | | | 19,09312 | 315,798 | |
| | | | | | 22,5908 | 373,639 | |
Jim | 6,519 | — | 15.50 | 11/11/2023 | | |||||||||||||||||||||||||||||
20,926 | — | 15.11 | 8/29/2024 | | ||||||||||||||||||||||||||||||
26,590 | 13,2969 | 10.84 | 8/31/2025 | | ||||||||||||||||||||||||||||||
| 36,12913 | 597,574 | | |||||||||||||||||||||||||||||||
| 2,1529 | 35,594 | | |||||||||||||||||||||||||||||||
| 8,48410 | 140,325 | | |||||||||||||||||||||||||||||||
| 12,0487 | 199,274 | | |||||||||||||||||||||||||||||||
| 15,99211 | 264,508 | | |||||||||||||||||||||||||||||||
| 19,09312 | 315,798 | ||||||||||||||||||||||||||||||||
| 18,0728 | 298,911 | ||||||||||||||||||||||||||||||||
Rachel Endrizzi | 8,875 | — | 18.01 | 08/31/2022 | | |||||||||||||||||||||||||||||
6,644 | — | 15.78 | 08/30/2023 | | ||||||||||||||||||||||||||||||
5,979 | — | 15.11 | 08/29/2024 | | ||||||||||||||||||||||||||||||
7,597 | 3,7999 | 10.84 | 08/31/2025 | | ||||||||||||||||||||||||||||||
| 6159 | 10,172 | | |||||||||||||||||||||||||||||||
| 2,12010 | 35,065 | | |||||||||||||||||||||||||||||||
| 6,0247 | 99,637 | | |||||||||||||||||||||||||||||||
| 4,56911 | 75,571 | | |||||||||||||||||||||||||||||||
| 4,77312 | 78,945 | ||||||||||||||||||||||||||||||||
| 11,2958 | 186,819 | ||||||||||||||||||||||||||||||||
Annette | — | |||||||||||||||||||||||||||||||||
Andrew | — | |||||||||||||||||||||||||||||||||
| | | | Option Awards | | Stock Awards1 | | ||||||||||||||||||||||||||||
| | Name | | Number of Securities underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date2 | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested3 ($) | | Equity Incentive Plan Awards: Number of Unearned Shares or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or Other Rights That Have Not Vested3 ($) | | ||||||||||||||||
| | Hugh E. Sawyer | | | 1,000,0004 | | — | | 11.15 | | 4/17/2027 | | | | | | |||||||||||||||||||
| | | | | | 106,3585 | | 870,008 | | | | ||||||||||||||||||||||||
| | | | | | | | 319,0746 | | 2,610,025 | | ||||||||||||||||||||||||
| | Kersten D. Zupfer | | | 11,396 | | — | | 10.84 | | 8/31/2025 | | | | | | |||||||||||||||||||
| | | | | | 1,0047 | | 8,213 | | | | ||||||||||||||||||||||||
| | | | | | 10,2265 | | 83,649 | | | | ||||||||||||||||||||||||
| | | | | | 8328 | | 6,806 | | | | ||||||||||||||||||||||||
| | | | | | 1,7639 | | 14,421 | | | | ||||||||||||||||||||||||
| | | | | | 7,56410 | | 61,874 | | | | ||||||||||||||||||||||||
| | | | | | | | 4,51811 | | 36,957 | | ||||||||||||||||||||||||
| | | | | | | | 6,77712 | | 55,436 | | ||||||||||||||||||||||||
| | | | | | | | 30,6806 | | 250,962 | | ||||||||||||||||||||||||
| | | | | | | | 22,69413 | | 185,637 | | ||||||||||||||||||||||||
| | Eric A. Bakken | | | 4,200 | | — | | 16.60 | | 4/28/2021 | | | | | | |||||||||||||||||||
| | 22,250 | | — | | 18.01 | | 8/31/2022 | | | | | | ||||||||||||||||||||||
| | 26,578 | | — | | 15.78 | | 8/30/2023 | | | | | | ||||||||||||||||||||||
| | 23,916 | | — | | 15.11 | | 8/29/2024 | | | | | | ||||||||||||||||||||||
| | 45,584 | | — | | 10.84 | | 8/31/2025 | | | | | | ||||||||||||||||||||||
| | | | | | 5,0207 | | 41,064 | | | | ||||||||||||||||||||||||
| | | | | | 20,4535 | | 167,306 | | | | ||||||||||||||||||||||||
| | | | | | 2,1698 | | 17,742 | | | | ||||||||||||||||||||||||
| | | | | | | | 22,59011 | | 184,786 | | ||||||||||||||||||||||||
| | | | | | | | 61,3606 | | 501,925 | | ||||||||||||||||||||||||
| | Chad Kapadia | | | — | | — | | — | | — | | | | | | |||||||||||||||||||
| | | | | | 1,62014 | | 13,252 | | | | ||||||||||||||||||||||||
| | | | | | 16,3625 | | 133,841 | | | | ||||||||||||||||||||||||
| | | | | | 6,9428 | | 56,786 | | | | ||||||||||||||||||||||||
| | | | | | 5,36115 | | 43,853 | | | | ||||||||||||||||||||||||
| | | | | | 37,10516 | | 303,519 | | | | ||||||||||||||||||||||||
| | | | | | | | 12,27217 | | 100,385 | | ||||||||||||||||||||||||
| | | | | | | | 49,0886 | | 401,540 | | ||||||||||||||||||||||||
| | James A. Townsend | | | | | | | 16,90018 | | 138,242 | | | | |||||||||||||||||||||
| | | | | | | | 50,70019 | | 414,726 | | ||||||||||||||||||||||||
| | Andrew H. Lacko | | — | | — | | — | | — | | — | | — | | — | | — | | ||||||||||||||||
| 1 | Stock award numbers include accrued dividend equivalents where applicable. |
| 2 | All awards of stock options and SARs expire ten years after the date of grant or in the case of retirement, voluntary termination, or dismissal without cause, 90 days after the termination. |
| 3 | Value based on a share price of $8.18, which was the last reported sale price for a share of our common stock on the NYSE on June 30, 2020. |
| 4 | Award vested in full on April 17, 2019 and became exercisable on April 17, 2020. |
| 5 | Award cliff vests on the third anniversary of the date of grant, which was August 31, 2018. |
38 | | | |
| 6 | Amounts presented represent the number of shares that may be earned during the performance period ending June 30, 2021 with respect to the performance units granted on August 31, 2018. If the units are earned, they will be subject to an additional two-year service-based vesting requirement which will expire on August 31, 2023. |
| Award vests as to 33% of the shares covered by the award on each of the first three anniversaries of the date of grant, which was August 31, 2017. |
| 8 | Award cliff vests on the fifth anniversary of the date of grant, which was August 31, 2018. |
| 9 | Award cliff vests on the fifth anniversary of the date of grant, which was August 30, 2019. |
| 10 | Award cliff vests on the third anniversary of the date of grant, which was November 11, 2019. |
| 11 | Amounts presented represent the target number of shares that may be earned during the performance period ended June 30, 2020 with respect to the performance units granted on October 17, 2017. The performance condition was not satisfied and the awards were forfeited. |
| 12 | Amounts presented represent the target number of shares that may be earned during the performance period ended June 30, 2020 with respect to the performance units granted on December 5, 2017. The performance condition was not satisfied and the award was forfeited. |
| 13 | Awards presented represent the target number of shares that may be earned during the performance period ending November 11, 2022 with respect to the performance units granted on November 11, 2019. If the units are earned, they will be subject to an additional two-year service-based vesting requirement, which will expire on November 11, 2024. |
| 14 | Award vests as to 33% of the shares covered by the award on each of the first three anniversaries of the date of grant, which was June 18, 2018. |
| 15 | Award cliff vests on the third anniversary of the date of grant, which was June 5, 2019. |
| 16 | Award cliff vests on the third anniversary of the date of grant, which was September 1, 2019. |
| 17 | Amounts presented represent the target number of shares that may be earned during the performance period ended June 30, 2020 with respect to the performance units granted on June 18, 2018. The performance condition was not satisfied and the award was forfeited. |
| 18 | Award cliff vests on the third anniversary of the date of grant, which was April 8, 2019. |
| 19 | Amounts presented represent the target number of shares that may be earned during the performance period ending April 8, 2022 with respect to the performance units granted on April 8, 2019. If the units are earned, they will be subject to an additional two-year service-based vesting requirement which will expire on April 8, 2024. |
|
Executive Compensation Tables
1Stock award numbers include accrued dividend equivalents where applicable.
2All awards of stock options and SARs expire ten years after the date of grant or in the case of retirement, voluntary termination, or dismissal without cause, 90 days after the termination.
3Value based on a share price of $16.54, which was the last reported sale price for a share of our common stock on the NYSE on June 29, 2018.
4Award vests in full on April 17, 2019.
5Award vests in full on April 17, 2019 if certain performance goals related to the closing price of our common stock are met by April 17, 2019.
6Award vests as to 33% of the shares covered by the award on each of the first three anniversaries of the date of grant, which was July 1, 2017.
7Award vests as to 33% of the shares covered by the award on each of the first three anniversaries of the date of grant, which was August 31, 2017.
8Amounts presented represent the number of shares earned during the performance period ended June 30, 2020 with respect to the performance units granted on October 17, 2017. These units will cliff vest on August 31, 2020 if earned.
9Award vests as to 33% of the shares covered by the award on each of the first three anniversaries of the date of grant, which was August 31, 2015.
10Award vests as to 33% of the shares covered by the award on each of the first three anniversaries of the date of grant, which was August 31, 2016.
11Amounts presented represent the number of shares earned during the performance period ended June 30, 2016 with respect to the performance units granted on August 31, 2015. These units vested on August 31, 2018.
12Amounts presented represent the number of shares earned during the performance period ended June 30, 2019 with respect to the performance units granted on August 31, 2016. These units will cliff vest on August 31, 2019 if earned.
13Award vests in full on November 11, 2018.
14The employment of Ms. Miller and Mr. Dulka terminated before fiscal 2018 year-end, and their equity awards were forfeited.
| Option Awards | Stock Awards | ||
Name | Number of Shares Acquired on Exercise2(#) | Value Realized on Exercise1($) | Number of Shares Acquired on Vesting2(#) | Value Realized on Vesting1($) |
Hugh E. Sawyer | — | — | — | — |
Andrew H. Lacko | — | — | — | — |
Eric A. Bakken | — | — | 31,261 | 398,447 |
Jim B. Lain | — | — | 27,222 | 347,346 |
Rachel Endrizzi | — | — | 7,814 | 99,596 |
Annette L. Miller | 9,501 | 151,236 | 29,651 | 449,275 |
Andrew W. Dulka | 6,970 | 107,702 | 24,082 | 356,134 |
1Value realized on exercise is calculated as the difference between the market value of our common stock on the respective exercise date(s) and the exercise price of the option(s) on a pre-tax basis. Value realized on vesting is the market value of our common stock on the vesting date multiplied by the number of shares acquired, before taxes. 2The number of shares acquired on exercise or vesting of stock awards includes shares that were forfeited for withholding tax obligations. The number of shares forfeited for each Named Executive Officer is reported below: | ||||
| | | | Option Awards | | | Stock Awards | | |||||||
| | Name | | | Number of Shares Acquired on Exercise2(#) | | | Value Realized on Exercise1($) | | | Number of Shares Acquired on Vesting2(#) | | | Value Realized on Vesting1($) | |
| | Hugh E. Sawyer | | | — | | | — | | | — | | | — | |
| | Kersten D. Zupfer | | | — | | | — | | | 11,609 | | | 204,805 | |
| | Eric A. Bakken | | | — | | | — | | | 47,447 | | | 835,571 | |
| | Chad Kapadia | | | — | | | — | | | 1,620 | | | 15,050 | |
| | James A. Townsend | | | — | | | — | | | — | | | — | |
| | Andrew H. Lacko | | | — | | | — | | | 15,374 | | | 257,912 | |
| 1 | Value realized on exercise is calculated as the difference between the market value of our common stock on the respective exercise date(s) and the exercise price of the option(s) on a pre-tax basis. Value realized on vesting is the market value of our common stock on the vesting date multiplied by the number of shares acquired, before taxes. |
| The number of shares acquired on exercise or vesting of stock awards includes shares that were forfeited for withholding tax obligations. The number of shares forfeited for each Named Executive Officer is reported below. The shares reported for Mr. Sawyer relate to share withholding to pay taxes on a RSU that vested in April 2019 but did not settle, and thus become taxable, until April 2020. The RSU was reported as vesting in fiscal 2019 and therefore is not included in the table above. |
| | Name | | | Number of Shares Used to Pay Taxes on Exercised or Vested Awards (#) | |
| Hugh E. Sawyer |
| | 35,292 | |
| Kersten D. Zupfer | | | 5,836 | |
| | Eric A. Bakken | | | 24,138 | |
| | Chad Kapadia | | | 561 | |
| | James A. Townsend | | | — | |
| | Andrew H. Lacko |
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2018 Proxy Statement |39
Executive Compensation Tables
NEOs Currently Employed | |||
Name | Date of Employment Agreement | Base Salary as of June 30, 2018 ($) | FY18 Target Annual Incentive Award (% of Base Salary) |
Hugh E. Sawyer | 4/17/2017 | 950,000 | 115 |
Andrew H. Lacko1 | N/A | 495,000 | 60 |
Eric A. Bakken | 8/31/2012 | 495,000 | 75 |
Jim B. Lain | 11/11/2013 | 400,000 | 60 |
Rachel Endrizzi | 8/31/2012 | 300,000 | 50 |
1Mr. Lacko is not party to an employment agreement with the Company. | |||
| | Name | | | Date of Employment Agreement | | | Base Salary as of June 30, 2020 ($) | | | FY20 Target Annual Incentive Award (% of Base Salary) | |
| | Hugh E. Sawyer | | | 4/17/2017 | | | 950,000 | | | 115 | |
| | Kersten D. Zupfer | | | 12/1/2014 | | | 425,000 | | | 601 | |
| | Eric A. Bakken | | | 8/31/2012 | | | 495,000 | | | 75 | |
| | Chad Kapadia | | | N/A | | | 600,000 | | | 60 | |
| | James A. Townsend | | | N/A | | | 495,000 | | | 60 | |
| | Andrew H. Lacko | | | N/A | | | 495,000 | | | 60 | |
| 1 | Reflects the target percentage following Ms. Zupfer’s promotion to CFO in November 2019. Prior to that time, her target percentage was 50%. |
NEOs No Longer Employed | |||
Name | Date of Employment Agreement | Base Salary as of | FY18 Target Annual Incentive Award (% of Base Salary) |
Annette L. Miller | 12/16/2014 | 375,000 | 50 |
Andrew W. Dulka | 5/1/2015 | 300,000 | 50 |
Ongoing Compensation
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Executive Compensation Tables
•Dismissal without Cause or Resignation for Good Reason (Prior to or More than Twenty-Four Months Following a Change in Control). If an NEO is terminated without Cause or if he or she terminates for Good Reason, the NEO will receive an amount equal to one times (two times in the case of Mr. Sawyer if the triggering event occurs prior to April 17, 2020) his or her annual base salary plus a pro-rated portion of any bonus he or she would have earned for the year of termination (based on actual performance), plus 12 months (18 months in the case of Mr. Sawyer if the triggering event occurs prior to April 17, 2020) of benefits continuation coverage.
•
2020 PROXY STATEMENT | 41 |
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2018 Proxy Statement |41
Executive Compensation Tables
the fully vested benefit if his employment is terminated without Cause or if he terminates for Good Reason at any time, and his agreement provides he will be entitled to the fully vested benefit if his employment terminates for any reason other than for Cause within two years of a Change in Control. Additionally, upon any termination following a Change in Control (except for Cause), he receives (i) the same retirement benefits described below, except that the lump sum is equal to the sum of the payments due, determined as if he is fully vested, and (ii) a lump sum payment of any unpaid amounts described below under “Life Insurance.”
Under this arrangement, an executive officer has the option to elect to receive his or her retirement benefit in the form of 240 monthly payments rather than the lump sum, provided that such election is made in accordance with the requirements described in his or her employment agreement and consistent with Code Section 409A. In addition to the possibility for reduction based on (i) the vesting schedule and/or (ii) the present value discount for a lump sum payment, an executive’s retirement benefit is subject to further discount if paid prior to age 65 (an “Early Retirement”). If payment is made in connection with an Early Retirement, the hypothetical annuity of 240 monthly payments is discounted by first calculating the benefit as an annuity starting at age 65, and then converting it to an immediate commencement annuity using the yield to maturity of 30-year U.S. Treasury Notes as of June 30, 2012 (2.76%).
42 | | | |
Under the amended and restated employment agreement signed by Mr. Bakken effective August 31, 2012, we froze vesting in his retirement benefits as of June 30, 2012, subject to the continued right to full acceleration in the event of termination without Cause or termination for Good Reason, as described above. As indicated, we also limited the calculation of the monthly benefit to his five-year average monthly base salary as of June 30, 2012.
Of our NEOs, only Mr. Bakken is eligible for this benefit.
Life Insurance—We agreed to pay premiums for a total of ten years on the existing policies insuring the lives of certain of our executive officers who were entitled to such benefits and were employed by the Company as of June 30, 2012. As of June 30, 2018,2020, we have made all of the payments that we had agreed to pay on Mr. Bakken’s policies. As of June 30, 2018,2020, the aggregate face amount of Mr. Bakken’s policies is approximately $3.2 million.
Compensatory Arrangements with Mr. Sawyer
President and
| | | | Fiscal 2017 ($) | | | Fiscal 2018 ($) | | | Fiscal 2019 ($) | | | Fiscal 2020 ($) | | |
| | Base Salary1 | | | 950,000 | | | 950,000 | | | 950,000 | | | 950,000 | |
| | Annual Incentive Target1 | | | — | | | 1,092,500 | | | 1,092,500 | | | —3 | |
| | Long-Term Equity Incentive | | | — | | | — | | | 9,100,0002 | | | — | |
| | Sign-On Bonus | | | 585,000 | | | — | | | — | | | — | |
| | Initial Equity Awards | | | 5,000,000 | | | — | | | — | | | — | |
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| 2 | Amount of fiscal 2019 long-term equity incentive reflects the grant of a single, larger equity award at the outset of a five-year period as described above under |
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Executive Compensation Tables
The Committee believes that the sign-on equity grants toconsulting fee of $1,200,000. Mr. Sawyer were appropriatewill also receive reimbursement for the employer portion of COBRA premiums during the consulting term. Pursuant to the transition agreement, Mr. Sawyer agreed to extend the non-competition and non-solicitation
2020 PROXY STATEMENT | 43 |
•Immediately align Mr. Sawyer’s compensation withbreach of certain restrictive covenants in his employment agreement and the Company’s shareholders
•Give Mr. Sawyer an opportunity to share in value created by stock price appreciation since he joined the Company
•Reflect the market for CEO talent in our industry and among our peer group
•Represent a one-time grant that was not supplemented by an annual equity grant for fiscal 2018
The Committee, assisted by its former independent compensation consultant, Willis Towers Watson, structured Mr. Sawyer’s sign-on equity awards so that they have value only if the Company’s stock price increases within the next two years from the stock price prior to the date the Company announced Mr. Sawyer’s appointment. The equity awards consist primarily of SARs, which only provide the holder with value if the stock price increases. In addition, 20% of the value at grant was in performance-contingent RSUs, which include a performance condition that provides that they will vest only if the Company’s stock price reaches certain levels by the two-year anniversary of the date of grant.
transition agreement.
In June 2017,Athayde
Mr. Lacko’s initial restricted stock unit award will vest as to one-thirdpurchase 358,680 shares of the sharesCompany’s common stock, which are eligible to vest on the fourth anniversary of the commencement date, each of the first three anniversaries of the date of grant in accordance with the general terms of the restricted stock awards the Company grants to employees as part of their annual long-term incentive awards. The restricted stock unitswhich will be granted on the commencement date pursuant to the employment inducement exception of the NYSE rules.
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2018 Proxy Statement |43
Executive Compensation Tables
Separation Benefitscertain medical benefits for Ms. Miller
In connectionup to twelve months unless and until the executive is covered under the health and/or dental insurance policy of a new employer. The severance benefits are subject to the executive signing a release in favor of the Company and complying with Ms. Miller’sone-year non-competition and non-solicitation restrictions. Because Mr. Kapadia and Mr. Townsend do not have employment agreements, they are eligible for severance benefits under this policy if they have a qualifying termination, and Mr. Athayde’s letter agreement incorporates this policy in the event of a qualifying termination of employment effective December 31, 2017, she received the following separation benefits under her Separation and Non-Disparagement Agreement and General Release:
•A severance payment equal to $375,000, which is equivalent to one times base salary as of her date of termination;
•A pro rata portion of her bonus for fiscal 2018 (based on target);
•Acceleration of all unvested portions of her RSUs and SARs;
•Cash compensation for the value of the fiscal 2016 PSUs earned but not yet vested, based on the closing price of our common stock on December 29, 2017; and
•Benefits continuation coverage for 12 months.
Separation Benefits for Mr. Dulka
In connection with Mr. Dulka’s termination ofAthayde’s employment effective November 6, 2017, he received the following separation benefits under his Separation and Non-Disparagement Agreement and General Release:
•A severance payment equal to $300,000, which is equivalent to one times base salary as of his date of termination;
•A pro rata portion of his fiscal 2018 bonus (based on target);
•Acceleration of all unvested portions of his RSUs and SARs;
•Cash compensation for the value of the fiscal 2016 PSUs earned but not yet vested, based on the closing price of our common stock on November 6, 2017; and
•Benefits continuation coverage for 12 months.
letter agreement.
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Executive Compensation Tables
Disability—Physical or mental disability or health impairment that prevents the effective performance by the executive of his or her duties on a full-time basis.
2020 PROXY STATEMENT | 45 |
| | Name1 | | | Age at June 30, 2020 | | | Plan Name2 | | | Number of Years of Credited Service3 (#) | | | Present Value of Accumulated Benefit4 ($) | | | Payments During Last Fiscal Year ($) | |
| | Eric A. Bakken | | | 53 | | | Employment Agreement | | | 26.5 | | | 1,295,211 | | | — | |
| 1 | Mr. Bakken is the only NEO eligible for the Company’s pension benefits program, as it was frozen prior to the commencement of employment of all our other NEOs. |
| 2 | Retirement benefits provided under the applicable employment agreement for each Named Executive Officer are described above under “Summary of Executive Agreements.” |
| 3 | The number of years of credited service shown for Mr. Bakken represents his actual years of service; however, for purposes of determining the value of their accumulated benefit, his years of credited service was frozen at 18.5. |
| 4 | The present value of pension benefits for Mr. Bakken is calculated based on the following assumptions: (i) freezing of the pension benefits as described above under “Summary of Executive Agreements—Retirement Plans and Arrangements,” (ii) expected retirement age of the later of (A) June 30, 2020 or (B) age 65, which is the earliest time a participant may retire without any benefit reduction due to age, and (iii) discount rate of 1.87%. |
Name1 | Age at June 30, 2018 | Plan Name2 | Number of Years of Credited Service3 (#) | Present Value of Accumulated Benefit (#) | Payments During Last Fiscal Year (#) |
Eric A. Bakken | 51 | Employment Agreement | 24.5 | 946,856 | — |
1Mr. Bakken is the only NEO eligible for the Company’s pension benefits program, as it was frozen prior to the commencement of employment of all our other NEOs. 2Retirement benefits provided under the applicable employment agreement for each Named Executive Officer are described above under “Summary of Executive Agreements.” 3The number of years of credited service shown for Mr. Bakken represents his actual years of service; however, for purposes of determining the value of their accumulated benefit, his years of credited service was frozen at 18.5. 4The present value of pension benefits for Mr. Bakken is calculated based on the following assumptions: (i) freezing of the pension benefits as described above under “Summary of Executive Agreements—Retirement Plans and Arrangements,” (ii) expected retirement age of the later of (A) June 30, 2018 or (B) age 65, which is the earliest time a participant may retire without any benefit reduction due to age, and (iii) discount rate of 3.90%. | |||||
2018 Proxy Statement |45
Executive Compensation Tables
| | Name | | | Executive Contributions in Last FY1 ($) | | | Registrant Contributions in Last FY ($) | | | Aggregate Earnings in Last FY ($) | | | Aggregate Withdrawals/ Distributions2 ($) | | | Aggregate Balance at Last FYE3 ($) | |
| | Hugh E. Sawyer | | | — | | | — | | | (755,448) | | | 733,340 | | | — | |
| | Kersten D. Zupfer | | | — | | | — | | | 17,511 | | | 127,393 | | | 277,980 | |
| | Eric A. Bakken | | | 50,000 | | | 12,500 | | | 15,989 | | | 143,536 | | | 300,983 | |
| | Chad Kapadia | | | 45,460 | | | 11,365 | | | 6,591 | | | — | | | 92,609 | |
| | James A. Townsend | | | 18,750 | | | 4,687 | | | — | | | — | | | 23,437 | |
| | Andrew H. Lacko | | | — | | | — | | | — | | | — | | | — | |
| 1 | The Company matches deferred compensation contributions to our Executive Retirement Savings Plan at a rate of 25% of the amount contributed by the participant, up to $25,000 per calendar year. Amounts exceeding $25,000 are due to timing differences between the calendar and fiscal year. |
| 2 | For Mr. Sawyer, this value represents the value of shares he received upon settlement of his inducement award of restricted stock units that vested upon achieving certain stock price conditions on April 17, 2019 for which delivery of the underlying shares was deferred until April 17, 2020. The amount is calculated based on the closing price of the Company’s common stock on April 17, 2020. |
Name | Executive Contributions in Last FY1($) | Registrant ($) | Aggregate Earnings ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at ($) |
Hugh E. Sawyer | — | — | — | — | — |
Andrew H. Lacko | — | — | — | — | — |
Eric A. Bakken | 105,600 | 26,400 | 16,817 | (134,785) | 337,272 |
Jim B. Lain | — | — | — | — | — |
Rachel Endrizzi | — | — | — | — | — |
Annette L. Miller | — | — | 556 | (124,204) | 123,648 |
Andrew W. Dulka | — | — | — | — | — |
1The Company matches deferred compensation contributions at 25% of the amount contributed by the participant, up to $25,000 per calendar year. Amounts exceeding $25,000 are due to timing differences between the calendar and fiscal year. 2The following amounts of contributions and earnings reflected in the table above have been reported in the current year or prior years’ Summary Compensation Tables as follows: | |||||
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| Total Amount Reported in Current or Prior Summary Compensation Tables ($) | Current Year Summary Compensation Table | |||
Name | Salary ($) | Non-Equity ($) | Above-Market Earnings ($) | Company Match and Profit-Sharing Contribution in All | |
Hugh E. Sawyer | — | — | — | — | — |
Andrew H. Lacko | — | — | — | — | — |
Eric A. Bakken | 351,304 | 105,600 | — | — | 26,400 |
Jim B. Lain | — | — | — | — | — |
Rachel Endrizzi | — | — | — | — | — |
Annette L. Miller | — | — | — | — | — |
Andrew W. Dulka | — | — | — | — | — |
| 3 | The following amounts of contributions and earnings reflected in the table above have been reported in the current year or prior years’ Summary Compensation Tables as follows: |
| | | | | | Current Year Summary Compensation Table | | |||||||||||
| | Name | | | Total Amount Reported in Current or Prior Summary Compensation Tables ($) | | | Salary ($) | | | Non-Equity Incentive Plan ($) | | | Above-Market Earnings ($) | | | Company Match and Profit-Sharing Contribution in All Other Compensation ($) | |
| | Hugh E. Sawyer | | | 730,044 | | | — | | | — | | | — | | | — | |
| | Kersten D. Zupfer | | | — | | | — | | | — | | | — | | | — | |
| | Eric A. Bakken | | | 491,817 | | | 50,000 | | | — | | | — | | | 12,500 | |
| | Chad Kapadia | | | 54,688 | | | 12,500 | | | — | | | — | | | 6,591 | |
| | James A. Townsend | | | — | | | — | | | — | | | — | | | — | |
| | Andrew H. Lacko | | | — | | | — | | | — | | | — | | | — | |
Historically, the Company’s common stock was also available as a measurement fund, but it has subsequently been removed as an investment option.
2020 PROXY STATEMENT | 47 |
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Executive Compensation Tables
The tables that follow describe potential payments and benefits provided to our NEOs or their beneficiaries under the employment agreements, plans and arrangements in existence at June 30, 20182020 under various scenarios involving a termination of employment and/or a change in control, and assuming that the termination or change in control event(s) occurred on June 30, 2018.2020. The agreements are described in more detail under “Summary of Executive Agreements.”
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not related to a change in control;••••
after a change in control.
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2018 Proxy Statement |47
Executive Compensation Tables
Potential Payments to NEOs Currently Employed
| | Not Related to Change in Control | After a Change in Control | ||||
Name1 | Type of Payment or Benefit | Voluntary Termination($) | Involuntary Termination2($) | Death ($) | Disability ($) | Not Involving a Termination of Employment ($) | Involuntary Termination3 ($) |
Hugh E. Sawyer | Severance | — | 3,866,500 | — | — | — | 3,866,500 |
Medical and Dental Insurance Benefits4 | — | 19,527 | — | — | — | 19,527 | |
Accelerated Vesting of Equity5, 6 | — | 6,873,406 | 6,873,406 | 6,873,406 | 6,873,406 | 6,873,406 | |
Total | — | 10,759,433 | 6,873,406 | 6,873,406 | 6,873,406 | 10,759,433 | |
Andrew H. Lacko7 | Severance | — | — | — | — | — | — |
Medical and Dental Insurance Benefits4 | — | — | — | — | — | — | |
Accelerated Vesting of Equity6 | — | 762,941 | 862,393 | 862,393 | 862,393 | 862,393 | |
Total | — | 762,941 | 862,393 | 862,393 | 862,393 | 862,393 | |
Eric A. Bakken | Severance | — | 1,163,250 | — | — | — | 1,732,500 |
Supplemental Bonus8 | | 445,500 | 445,500 | 445,500 | — | 445,500 | |
Medical and Dental Insurance Benefits4 | — | 16,500 | — | — | — | 24,750 | |
Retirement Benefits9 | 1,099,922 | 1,294,026 | 1,903,176 | 2,463,075 | 1,294,026 | 1,294,026 | |
Accelerated Vesting of Equity6 | — | 819,039 | 1,153,789 | 1,153,789 | 1,153,789 | 1,153,789 | |
Total | 1,099,922 | 3,738,315 | 3,502,465 | 4,062,364 | 2,447,815 | 4,650,565 | |
Jim B. Lain | Severance | — | 832,000 | — | — | — | 1,280,000 |
Supplemental Bonus8 | — | 360,000 | 360,000 | 360,000 | — | 360,000 | |
Medical and Dental Insurance Benefits4 | — | 16,500 | — | — | — | 24,750 | |
Accelerated Vesting of Equity6 | | 1,313,086 | 1,622,973 | 1,622,973 | 1,622,973 | 1,622,973 | |
Total | — | 2,521,586 | 1,982,973 | 1,982,973 | 1,622,973 | 3,287,723 | |
Rachel Endrizzi10 | Severance | — | 570,000 | — | — | — | — |
Supplemental Bonus8 | — | 131,300 | 131,300 | 131,300 | — | 131,300 | |
Medical and Dental Insurance Benefits4 | — | 8,779 | — | — | — | — | |
Accelerated Vesting of Equity6 | | 242,120 | 356,883 | 356,883 | 356,883 | 356,883 | |
Total | — | 952,199 | 488,183 | 488,183 | 356,883 | 488,183 | |
1Each of the NEOs listed in this table is party to a writtenMr. Lacko voluntarily resigned his employment agreement with the Company with the exception of Mr. Lacko.
2Severance amounts in the event of involuntary termination not related to Change in Control represent a cash payment equal to two times annual base salary for Mr. Sawyereffective November 10, 2019 and one times annual base salary for the other NEOs, plus, for the other NEOs, a pro-rated portion of any bonus the executive officer would have earned for the year of termination, based on actual performance.
3In the event of an involuntary termination related to a Change in Control, Mr. Sawyer would receive the same severance as for any involuntary termination. Severance to the other NEOs represents a cash payment equal to two times annual base salary plus two times the target annual bonus for the year of termination.
Under Code Section 280G, executives will incur an excise tax on portions of these payments if the parachute value of payments exceeds a specified threshold. Under the 2004 Amended and Restated Long Term Incentive Plan (the “2004 Long Term Plan”), participants who first received awards prior to October 22, 2013 (which includes only Mr. Bakken and Ms. Endrizzi) are entitled to an excise tax gross-up if an award granted thereunder, either alone or together with other payments and benefits the participant receives or is entitled to receive would constitute a “parachute payment.” These grandfathered rights to tax gross-ups were waived by Mr. Bakken and Ms. Endrizzi effective in August 2018. The 2016 Long Term Plan does not provide for any excise tax gross-ups on parachute payments. Pursuant to Mr. Bakken’s employment agreement, the Company will determine whether he is better off receiving the full payment due and paying the excise tax, or receiving a reduced payment that falls just below the excise tax threshold, which is referred to as a “best of net” provision. For this hypothetical payment as of June 30, 2018, it has been estimated that Mr. Bakken would be better off receiving the full payment due. Ms. Endrizzi’s employment agreement does not include any parallel “best of net” 280G provisions, as she iswas not entitled to any enhanced severance benefits in connection with a change in control.
4The amount represents the estimated medical and dental insurance premiums for the applicable benefits continuation period following involuntary termination. The continuation periodor accelerated payments or benefits. Accordingly, Mr. Lacko is 18 months for Mr. Sawyer; for the other NEOs, it is 12 months if not related to a change in control and 18 months if related to a Change in Control.
5Mr. Sawyer is entitled to acceleration of his sign-on equity awards upon death, disability, a change in control, or termination without cause or for good reason, except thatincluded in the case of his sign-on RSUs, the Company’s stock price also must exceed a certain price threshold. For more information about these awards, see “Compensatory Arrangements with Mr. Sawyer” in CD&A.
6Amounts represent the intrinsic value of SARs, RSUs, and PSUs as of June 30, 2018 for which the vesting would be accelerated. The value entered for SARs is based on the number of units for which vesting would be accelerated times the excess of $16.54, the closing price of the Company’s common stock on June 30, 2018 on the NYSE, over the SAR exercise price. The value included for RSUs and PSUs is the product of the number of units for which vesting would be accelerated and $16.54.
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| | Name1 | | | Type of Payment or Benefit | | | Voluntary Termination ($) | | | Involuntary Termination2 ($) | | | Death ($) | | | Disability ($) | | | Not Involving a Termination of Employment ($) | | | Involuntary Termination3 ($) | |
| | Hugh E. Sawyer | | | Severance | | | — | | | 2,042,500 | | | — | | | — | | | — | | | 2,042,500 | |
| | Medical and Dental Insurance Benefits4 | | | — | | | 24,368 | | | — | | | — | | | — | | | 24,368 | | |||
| | Accelerated Vesting of Equity5 | | | — | | | 531,672 | | | 531,672 | | | 531,672 | | | — | | | 531,672 | | |||
| | Total | | | — | | | 2,598,540 | | | 531,672 | | | 531,672 | | | — | | | 2,598,540 | | |||
| | Kersten D. Zupfer | | | Severance | | | — | | | 680,000 | | | — | | | — | | | — | | | 680,000 | |
| | Medical and Dental Insurance Benefits4 | | | — | | | — | | | — | | | — | | | — | | | — | | |||
| | Accelerated Vesting of Equity5 | | | — | | | 64,361 | | | 85,546 | | | 85,546 | | | 8,213 | | | 85,546 | | |||
| | Total | | | — | | | 744,361 | | | 85,546 | | | 85,546 | | | 8,213 | | | 765,546 | | |||
| | Eric A. Bakken | | | Severance | | | — | | | 866,250 | | | — | | | — | | | — | | | 1,732,500 | |
| | Medical and Dental Insurance Benefits4 | | | — | | | 11,028 | | | — | | | — | | | — | | | 16,541 | | |||
| | Retirement Benefits6 | | | 1,162,345 | | | 1,367,465 | | | 1,903,176 | | | 2,555,922 | | | 1,367,465 | | | 1,367,465 | | |||
| | Accelerated Vesting of Equity5 | | | — | | | 102,242 | | | 154,148 | | | 154,148 | | | 41,064 | | | 154,148 | | |||
| | Total | | | 1,162,345 | | | 2,346,985 | | | 2,057,324 | | | 2,710,070 | | | 1,408,529 | | | 3,270,655 | | |||
| | Chad Kapadia8 | | | Severance | | | — | | | 960,000 | | | — | | | — | | | — | | | 960,000 | |
| | Medical and Dental Insurance Benefits4 | | | — | | | — | | | — | | | — | | | — | | | — | | |||
| | Accelerated Vesting of Equity5 | | | — | | | 181,454 | | | 229,411 | | | 229,411 | | | 13,254 | | | 229,411 | | |||
| | Total | | | — | | | 1,141,454 | | | 229,411 | | | 229,411 | | | 13,254 | | | 1,189,411 | | |||
| | James A. Townsend | | | Severance | | | — | | | 792,000 | | | — | | | — | | | — | | | 792,000 | |
| | Medical and Dental Insurance Benefits4 | | | — | | | 20,148 | | | — | | | — | | | — | | | 20,148 | | |||
| | Accelerated Vesting of Equity5 | | | — | | | 56,577 | | | 56,577 | | | 56,577 | | | — | | | 56,577 | | |||
| | Total | | | — | | | 868,725 | | | 56,577 | | | 56,577 | | | — | | | 868,725 | | |||
| 1 | Mr. Sawyer, Ms. Zupfer and Mr. Bakken are each party to a written employment agreement with the Company, which define their benefits in connection with the events described above. Messrs. Kapadia and Townsend are eligible for severance benefits under the Senior Executive Severance Policy. |
| 2 | Severance amounts in the event of involuntary termination not related to Change in Control represent a cash payment equal to one times annual base salary plus a pro-rated portion of any bonus the executive officer would have earned for the year of termination, based on actual performance. |
| 3 | In the event of an Involuntary Termination Related to a Change in Control, all NEOs other than Mr. Bakken would receive the same severance as for any involuntary termination. The severance for Mr. Bakken represents a cash payment equal to two times annual base salary plus two times the target annual bonus for the year of termination. Accelerated vesting of equity is as provided in grant agreements under the applicable long-term incentive plan. Under Code Section 280G, executives will incur an excise tax on portions of these payments if the parachute value of payments exceeds a specified threshold. Under the 2004 Amended and Restated Long Term Incentive Plan (the “2004 Long Term Plan”), participants who first received awards prior to October 22, 2013 (which includes only Mr. Bakken) are entitled to an excise tax gross-up if an award granted thereunder, either alone or together with other payments and benefits the participant receives or is entitled to receive would constitute a “parachute payment.” These grandfathered rights to tax gross-ups were waived by Mr. Bakken effective in August 2018. The 2016 Long Term Plan does not provide for any excise tax gross-ups on parachute payments. Pursuant to Mr. Bakken’s employment agreement, the Company will determine whether he is better off receiving the full payment due and paying the excise tax, or receiving a reduced payment that falls just below the excise tax threshold, which is referred to as a “best of net” provision. For this hypothetical payment as of June 30, 2020, it has been estimated that Mr. Bakken would be better off taking a reduced payment. |
| 4 | The amount represents the estimated medical and dental insurance premiums for the applicable benefits continuation period following involuntary termination. The continuation period is 18 months for Mr. Sawyer; for the other NEOs, it is 12 months (except for Mr. Bakken it is 18 months if related to a change in control). Ms. Zupfer and Mr. Kapadia are not currently enrolled in company health benefit programs. |
| 5 | Amounts represent the intrinsic value of RSUs and PSUs as of June 30, 2020 for which the vesting would be accelerated. The value included for RSUs and PSUs is the product of the number of units for which vesting would be accelerated and $8.18, the closing price of the Company’s common stock on June 30, 2020 on the NYSE. |
| 6 | The amounts represent a lump sum cash payment equal to the present value of a hypothetical annuity of monthly benefits. The annuity amount and payment period vary according to the termination scenario, as described under “Summary of Executive Agreements — Employment Agreements — Historical Retirement and Life Insurance Benefits.” |
2020 PROXY STATEMENT | 49 |
