UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
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| ☒ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material Pursuant to §240.14a-12 | |
Resideo Technologies, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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April 25, 201924, 2020
Dear Resideo Shareholders:
In our first full year as a public company, Resideo faced considerable challenges and took significant actions to improve performance. Through it all, our talented employees have worked tirelessly to deliver trusted and reliable products and technology, and premier brands, to millions of customers around the world.
To meaningfully enhance our financial and operational performance, we are undergoing a business transformation to strengthen Resideo’s competitive position and enable the company to achieve long-term success and value-creation. We are pleasedmaking changes to invite youreduce our operating costs, while simultaneously making critical investments to attendimprove our new product introductions, value engineering and product management.
In recent months, we have:
Launched a multi-year, multi-phase operational and financial review and program to grow revenue and gross margin, optimize SG&A, and improve efficiency and working capital management. Through this effort we have identified specific SG&A cost saving and direct and indirect spend reduction opportunities.
Formed a special committee of the 2019 Annual MeetingBoard, the Strategic & Operational Committee, to oversee the comprehensive operational and financial review underway at Resideo and provide guidance during the leadership transitions underway.
Appointed Sach Sankpal, an experienced operational leader, as president of Shareholdersthe Products & Solutions business to enhance our new product introduction process, accelerate our value engineering initiatives and augment our product management capabilities.
Strengthened the board of Resideo Technologies, Inc. (“Resideo” ordirectors with the “Company”) – our firstappointment of two new independent directors. Brian Kushner joined the board, bringing decades of experience leading corporate transformations, including more than a dozen assignments as an independent company – to be held via live virtual meeting on Wednesday, June 12, 2019, at 1:00 p.m. EDT. Resideo spun off from Honeywell on October 29, 2018,a transformational CEO, and isCynthia Hostetler joined the board, adding significant investment, financial and risk management expertise.
Engaged a leading global provider of residential securityindependent executive search firm to help identify the company’s next CEO and comfort solutions, andlow-voltage electronic and security distribution. We have a strong foundation in the home comfort, security and residential thermal solutions industries – nearly 130 years of history, innovation, and operational excellence, an installed base of 150 million homes and a prestigious network of 110,000 professional contractors.CFO.
We are executingwriting this letter to you at a time whenCOVID-19 is rapidly spreading across our country. We have assembled a cross-functional team, which includes our executive officers, for continuously monitoring the impact of theCOVID-19 outbreak on a clear visionour business operations and implementing measures to manage liquidity and other risks. The Board is actively engaged in overseeing these risk management strategies and initiatives, working closely with management during this unprecedented situation to maintain information flow and timely review of issues arising from the growing smart home market, with a focuspandemic.
We remain focused on providing whole-home connected solutions with recurring revenue streams. We finished 2018 with a 7% increase in net revenueResideo’s transformation, and we believe our outlook for the year, an improved cash positionfuture is promising. Resideo’s employees will continue to drive our success, and key new hiresthey are the foundation of our confidence in Resideo’s ability to completedeliver for our executive leadership team. We kicked off this year by announcing our strategic vision to expand our core capabilities and partnerships.customers. We are planning $90 millionexcited to unlock the value inherent in new growth investments this year that will capitalize on our strong installed base, deepen ties to our contractor network and equip professional installers to serve consumers as smart home experts. In addition, we are planning exciting new product introductions, including the next generation security and comfort platforms, with recurring services that integrate all dimensions of home wellness. We are actively seeking to identify and execute ontuck-in acquisitions and investments, such as our recently announced acquisition of Buoy Labs.
We believe strong governance, an executive compensation program that recruits the best talent and directly ties pay to our performance, and our proactive commitment to our people, environment and community provide a solid foundation for our success. The 2019 Proxy Statement describes this framework in more detail and aligns with our vision to drive long-term value creation for our shareholders.
You can participate in the annual meeting and vote your shares electronically during the live virtual meeting by visiting www.virtualshareholdermeeting.com/REZI2019 and entering the16-digit control number provided in your proxy materials. Additional details about the meeting, including the formal agenda, are contained in the accompanying Notice of 2019 Annual Meeting of Shareholders and Proxy Statement. For more information on accessing our virtual annual meeting and voting, please see the section entitled “Questions and Answers about the Annual Meeting and Voting” in the accompanying Proxy Statement. The meeting will include remarks from management and a period during which you will be able to submit questions. You may also submit questions in advance of the virtual meeting by visiting www.proxyvote.com.
At the virtual annual meeting, shareholders will vote on the matters set forth in the accompanying Notice of 2019 Annual Meeting of Shareholders and Proxy Statement. We have chosen to provide online access to our proxy materials under the U.S. Securities and Exchange Commission’s “notice and access” rules. We believe providing our proxy materials online makes it easier for our shareholders to access information regarding our annual meeting, while reducing our environmental impact. For these reasons, we are mailing many of our shareholders a Notice of Internet Availability rather than a paper copy of the Proxy Statement and our 2018 Annual Report on Form10-K. The notice contains instructions on how to access those documents online and how to receive a paper copy of those materials.
Your vote is important to usResideo, and we hope that you choose to join us and exerciseask for your vote. In advance of the meeting on June 12, please cast your vote online, by telephone, or by mail. Instructions on how to vote are found in the section entitled “Proxy Statement Summary – How to Cast Your Vote” and in the section entitled “Questions and Answers about the Annual Meeting and Voting” in the accompanying Proxy Statement.support.
At Resideo, we are committed to continued improvements in company performance and transparency for and accountability to our shareholders. Thank you for your investment and confidence in Resideo, and for the confidence you place in us as we are excitedwork to begin our journey together. We look forward to hearing from you at the annual meeting.ensure that Resideo achieves its full potential.
Sincerely,
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| Roger B. Fradin | Andrew C. Teich | |
| Chairman of the Board | Lead Independent Director |
MICHAEL NEFKENS901 E. 6th Street, Austin, TX 78702
PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
1985 Douglas Drive N., Golden Valley, MN 55422
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Notice of 20192020 Annual Meeting of Shareholders
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1:00 p.m. Eastern Daylight Time
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Our 20192020 annual meeting will be a live virtual meeting. There will be no physical location for the annual meeting. You will be able to participate in the annual meeting, vote your shares electronically and submit your questions during the live virtual meeting by visiting www.virtualshareholdermeeting.com/REZI2019REZI2020 and enteringthe 16-digit control number provided in your proxy materials. You may also submit questions in advance of the meeting by visiting www.proxyvote.com. For more information on accessing the virtual annual meeting, see Question 65 in the section entitled “Questions and Answers aboutAbout the Annual Meeting and Voting” on page 59.71.
Agenda:
  | Election of Class |
| Advisory vote to approve executive compensation |
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| Ratification of the appointment of independent registered public accounting firm |
| Approval of the Resideo Employee Stock Purchase Plan |
| Transact such other business as may properly come before the meeting |
How to Vote: Your vote is important to us. Unless you vote live at the virtual annual meeting, the deadline for receiving your vote is 11:59 p.m. Eastern Daylight Time, on June 11, 2019.7, 2020.
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VIA INTERNET
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BY PHONE
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BY MAIL
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VIA VIRTUAL MEETING
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Visit www.proxyvote.com to vote your shares via the internet. You will need the16-digit control number provided in your proxy materials when you access the web page.
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If your shares are held in the name of a bank, brokerage firm or similar organization, follow the telephone voting instructions, if any, provided on your voting instruction card. If your shares are registered in your name, call1-800-690-6903. You will need the16-digit control number provided in your proxy materials when you call.
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Complete and sign the proxy card or voting instruction form and return it in the enclosed postagepre-paid envelope.
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You may vote your shares live at the virtual annual meeting by visiting www.virtualshareholdermeeting.com/
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This Notice of 20192020 Annual Meeting of Shareholders and related proxy materials are being distributed or made available to shareholders beginning on April 25, 2019.24, 2020.
On behalf of Resideo’s Board of Directors,
JEANNINE LANE
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL, AND CORPORATE SECRETARY AND CHIEF COMPLIANCE OFFICER
Important Notice Regarding the Availability of Proxy Materials for the 20192020 Annual Meeting of Shareholders to be held on Wednesday,Monday, June 12, 2019:8, 2020: our Proxy Statement and 20182019 Annual Report are available free of charge on our Investor Relations website at investor.resideo.com.
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| Proxy Statement Summary | 1 | |||
| Proposal 1: Election of Class | 5 | |||
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| Our Governance Framework | 13 | |||
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| Our People, Our Environment and Our Community | ||||
| Related Party Transactions | ||||
| Beneficial Ownership | ||||
Delinquent Section 16(a) | ||||
| Executive Compensation | ||||
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| Proposal 4: Approval of the Resideo Employee Stock Purchase Plan | 67 | |||
| Questions and Answers About the Annual Meeting and Voting | ||||
| Appendix A: Resideo Employee Stock Purchase Plan | A-1 | |||
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Below are highlights of certain information in this Proxy Statement. As it is only a summary, it may not contain all of the information that is important to you. For more complete information, please refer to the complete Proxy Statement and Resideo’s 20182019 Annual Report before you vote. References to “Resideo,” the “Company,” “we,” “us” or “our” refer to Resideo Technologies, Inc.
20192020 Annual Meeting of Shareholders
Date and Time:
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June
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Place:
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Via the internet at www.virtualshareholdermeeting.com/
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Record Date:
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April 15,
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Voting: |
Shareholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on.
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Admission: |
To enter Resideo’s virtual annual meeting via www.virtualshareholdermeeting.com/
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How to Cast Your Vote
Your vote is important! Please cast your vote and play a part in the future of Resideo.
Shareholders of record on the Record Date can vote through any of the following ways:
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Visit www.proxyvote.com
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Call1-800-690-6903 toll-free from the U.S. or Canada
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Return the signed proxy card
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Vote your shares live at the virtual annual meeting
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The deadline for voting via the internet or by telephone is 11:59 p.m. EDT on June 11, 2019.7, 2020. If you vote by mail, your proxy card must be received before the virtual annual meeting. If you hold Resideo shares in a Honeywell International Inc. (“Honeywell”) savings plan, your voting instructions must be received by 11:59 p.m. EDT on June 9, 2019.
Beneficial owners who own shares through a bank, brokerage firm or similar organization can vote by returning the voting instruction form, or by following the instructions for voting via the internet or by telephone, as provided by the bank, brokerage firm or similar organization. If you own shares in different accounts or in more than one name, you may receive different voting instructions for each type of ownership. Please vote all of your shares.
If you are a shareholder of record or a beneficial owner, you may choose to vote at the virtual annual meeting.Even if you plan to attend our virtual annual meeting, please cast your vote as soon as possible. For more information on voting your shares, please see “Questions and Answers About the Annual Meeting and Voting” beginning on page 58.71.
About Resideo andtheSpin-Off
OnResideo is a leading global provider of critical comfort, residential thermal solutions and security solutions primarily in residential environments. We manage our business operations through two segments, Products & Solutions and ADI Global Distribution, which contributed 43.6% and 56.4%, respectively, of our net revenue for the year ended December 31, 2019. In addition, Products & Solutions sold $312 million to ADI Global Distribution for the year ended December 31, 2019. The Products & Solutions segment offerings consist of solutions in Comfort, Residential Thermal Solutions (“RTS”) and Security categories and include temperature and humidity control, thermal, water and air solutions as well as security panels, sensors, peripherals, wire and cable, communications devices, video cameras, awareness solutions, cloud infrastructure, installation and maintenance tools and related software. Our ADI Global Distribution business is the leading wholesale distributor of security andlow-voltage electronic and security products which include intrusion and smart home, fire, video surveillance, access control, power, audio and video, Pro AV, networking, communications, wire and cable, enterprise connectivity and structured wiring.
We were incorporated in Delaware on April 24, 2018. We separated from Honeywell International Inc. (“Honeywell”) on October 29, 2018, Resideo Technologies, Inc., a Delaware corporation, becamebecoming an independent publicly traded company as a result of a pro rata distribution of Resideo’sour common stock to shareholders of Honeywell (the“Spin-Off”). In theSpin-Off, Honeywell’s shareholders of record as of October 16, 2018 (the“Spin-Off Record Date”) received one share of Resideo’s common stock, par value $0.001 per share, for every six shares of Honeywell’s common stock, par value $1.00 per share, held as of theSpin-Off Record Date, and cash for any fractional shares of the Company’s common stock. Resideo began trading “regular way” under the ticker symbol “REZI” on the New York Stock Exchange (“NYSE”) on October 29, 2018. TheSpin-Off is further described in our Annual Report on Form10-K for the fiscal year ended December 31, 2018 (the “Annual Report”).
Voting Matters and Board Recommendations
VOTING MATTERS | BOARD RECOMMENDATIONS | PAGE REFERENCE (FOR MORE DETAIL) | ||||
Proposal 1. |
Election of Class
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Proposal 2. |
Advisory Vote to Approve
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Proposal 3. |
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Proposal 4. |
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Our Board of Directors
Name | Age | Independent | Board Committee Memberships | Other Public Company Board Service | ||||||
Roger Fradin (Chairman) |
| No | Finance Innovation and Technology | Juniper Industrial Holdings, Inc.
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Michael Nefkens
| No | None | None | |||||||
| Yes | Finance (Chair) Innovation and Technology | Iron Mountain Inc. | |||||||
Cynthia Hostetler | 57 | Yes | None | Vulcan Materials Company | ||||||
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Finance
Strategic & Operational | ||||||||
Mudrick Capital Acquisition Corporation Thryv, Inc. | ||||||||||
Jack Lazar | | Audit (Chair) Innovation and Technology Strategic & Operational |
| Mellanox Technologies
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Nina Richardson | | Compensation
Strategic & Operational | Silicon Laboratories, Inc. | |||||||
Cohu, Inc. | ||||||||||
Andrew Teich (Lead Independent Director) | | Compensation
Nominating and Governance Strategic & Operational (Chair) | Sensata Technologies Holding PLC | |||||||
Sharon Wienbar | | Audit
| Colfax Corporation | |||||||
Directors’ Skills and Attributes
As our business evolves and grows, our Board of Directors (the “Board”) must continue to remain aligned with our strategy and direction. Our Board consists of senior leaders with substantial experience in a variety of areas. Core qualifications and areas of expertise represented on our Board include:
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Corporate Governance Highlights
We are committed to strong corporate governance practices and policies, as described below, that support effective Board leadership and prudent management practices.
 | Annual election of all directors commencing in 2022, following an initial three-yearphase-out of our classified board |
| Majority voting for directors in uncontested elections |
| Lead Independent Director with specified duties and responsibilities |
| Robust risk oversight by full Board and Committees |
| Annual review of Committee charters and Corporate Governance Guidelines |
| Independent Audit, Compensation and Nominating and Governance Committees |
| Newly formed Strategic & Operational Committee that oversees the comprehensive operational and financial review underway at Resideo, provides guidance during the CEO transition period and oversees the Company’s management ofCOVID-19 pandemic related health and safety and business continuity concerns |
| Finance Committee that reviews and oversees Resideo’s capital structure and opportunities for maximizing shareholder value |
| Innovation and Technology Committee that oversees Resideo’s overall strategic direction and investment in technology initiatives |
| Rigorous risk oversight of “enterprise” as well as |
| 2020 PROXY STATEMENT | 3 |
| Annual Board and Committee evaluations |
| Proposed annual advisory vote to approve executive compensation |
| Meaningful stock ownership guidelines for directors and |
| Adoption of proxy access |
| Limits on memberships on other |
| A Board that is actively engaged in recruiting qualified, diverse director candidates |
| Commitment to health, safety and environmental sustainability |
| Pay parity oversight by the Compensation Committee |
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| Policies prohibiting short sales, hedging, margin accounts and pledging |
Executive Compensation Preview
Following ourSpin-Off in October 2018, our Compensation Committee developed a comprehensive executive compensation strategy to support our transition to stand-alone public company status and promote an innovative mindset to guide our future success. The Compensation Discussion and Analysis section of this Proxy Statement provides a focused discussion of our executive compensation philosophy and the pay programs applicable to our named executive officers. Our new compensation program design directly links compensation to the performance of our business and rewards fiscal year results through our annual incentive plan and long-term performance with equity.equity awards.
Our Named Executive Officers
Our leadership team includes the following Named Executive Officers (“NEOs”):
NAME | POSITION | |
Michael Nefkens | President and Chief Executive Officer | |
Robert Ryder |
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Robert Aarnes |
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Stephen Kelly | Executive Vice President, Chief Human Resources Officer | |
Niccolo de Masi | Former Chief Innovation Officer | |
Joseph Ragan | Former Executive Vice President, | |
Forward-Looking Statements
This Proxy Statement and the cover letter contains “forward-looking statements” regarding expectations about future business and financial results, which speak only as of the date of this Proxy Statement. Although we believe that the forward-looking statements contained in this Proxy Statement are based upon reasonable assumptions, such statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, those described under the headings “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements” in our Annual Reports on Form10-K for the year ended December 31, 2019. You are cautioned not to place undue reliance on these forward-looking statements, which are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements. Except as required by law, we undertake no obligation to update such statements to reflect events or circumstances arising after the date of this presentation, and we caution investors not to place undue reliance on any such forward-looking statements.
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Proposal 1: Election of Class III Directors
Our Board is divided into three classes with each class consisting, as nearly as may be possible, of one third of the total number of directors. The directors designated as Class III directors have terms expiring at this year’s Annual Meeting of Shareholders. The directors designated as Class II directors have terms expiring at the 2020 Annual Meeting of Shareholders, and the directors designated as Class III directors have terms expiring at the 2021 Annual Meeting of Shareholders. Directors elected to succeed those directors whose terms then expire will be elected for a term of office to expire at the 2022 Annual Meeting of Shareholders. Beginning at the 2022 Annual Meeting of Shareholders, all of our directors will stand for election each year for annual terms, and our Board will therefore no longer be divided into three classes. Our Board has nominated the Class III director nominees forre-election to the Board. We do not know of any reason why any nominee would be unable to serve as a director. If any nominee should become unavailable to serve prior to the Annual Meeting, the shares represented by proxy will be voted for the election of such other person as may be designated by the Board. The Board may also determine to leave the vacancy temporarily unfilled or reduce the authorized number of directors in accordance with theBy-Laws. Resideo’sBy-Laws provide that in any uncontested election of directors (an election in which the number of nominees does not exceed the number of directors to be elected), any nominee who receives a greater number of votes cast “FOR” his or her election than votes cast “AGAINST” his or her election will be elected to the Board.
Resideo’sBy-Laws provide a majority voting standard for election of directors in uncontested elections. Each director will be elected by the affirmative vote of a majority of the votes cast, meaning that the number of votes cast “FOR” a director nominee exceeds fifty percent (50%) of the number of votes cast with respect to that director’s election.
No incumbent director nominee shall qualify for service as a director unless he or she agrees to submit uponre-nomination to the Board an irrevocable resignation effective upon such director nominee’s failure to receive a majority of the votes case in an uncontested election. The Nominating and Governance Committee (excluding the nominee, if applicable) will make a recommendation to the Board as to whether to accept or reject the resignation, or whether other action should be taken. The Board, excluding the nominee, will act on the resignation and publicly disclose its decision in accordance with theBy-Laws.
An election of directors is considered to be contested if there are more nominees for election than positions on the Board to be filled by election at the meeting of shareholders. In a contested election, the required vote would be a plurality of votes cast.
The Board has affirmatively determined that each of the nominees qualifies for election under the Company’s criteria for evaluation of directors. See “Nominating Board Candidates – Procedures and Qualifications” on page 21 for more information on qualifications for director nominees. The Nominating and Governance Committee is responsible for nominating a slate of director nominees who collectively have the complementary experience, qualifications, skills and attributes to guide the Company and function effectively as a Board. The Committee believes that each of the nominees has key personal attributes that are important to an effective board, including integrity, industry background, contribution to the composition, diversity and culture of the Board, educational background, the ability and willingness to constructively challenge management and the ability and commitment to devote sufficient time to Board duties. Set forth below is biographical information about the director nominees and their specific experience, qualifications and skills that have led the Board and the Nominating and Governance Committee to conclude that they should continue to serve as directors of Resideo. In addition, the Board has determined that eachnon-employee director nominee qualifies as an independent director under NYSE corporate governance listing standards and the Company’s director independence standards as further described under “Director Independence” on page 16. In addition, the biographical information about the other members of the Board and their specific experience, qualifications and skills are included.
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The Board has established a director retirement policy whereby, unless the Board otherwise determines,non-employee directors shall serve only until the Annual Meeting of Shareholders immediately following their 75th birthday.
Director Qualifications and Skills
Our directors have a broad range of experience that spans different industries and encompasses the relevant business and technology sectors. Directors bring a variety of qualifications, skills and viewpoints to our Board that both strengthen their ability to carry out their oversight responsibilities on behalf of our shareholders and bring richness to Board deliberations. As described above and in the director biographies, our directors have key experiences, qualifications and skills that are relevant and important in light of our business, structure and growth strategy and include the following:
| DIRECTOR QUALIFICATIONS AND SKILLS CRITERIA |
Senior Leadership Experience
Experience serving as CEO or a senior executive that provides a practical understanding of how complex organizations function and is able to support our commercial strategy, growth and performance
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Consumer Products
Experience with the retail consumer industry,e-commerce, customer service and consumer dynamics that aligns with our business strategies and opportunities
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Manufacturing
Experience with the operations of manufacturing facilities that provide critical perspectives in understanding and evaluating operational planning, management and risk mitigation of our business
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Technology
Experience developing and adopting new technologies as well as leading innovation initiatives that support the execution of our vision in the smart home market
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Global Relations
International business strategy, operations and substantive expertise in international matters relevant to our global business
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Finance
Experience with finance and financial reporting processes, including monitoring and assessing a company’s operating performance to ensure accurate financial reporting and robust controls
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Public Company Board Service
Service on the boards and board committees of public companies that provides an understanding of corporate governance practices and risk management oversight as well as insights into board management and relations between the board, the CEO and senior management that will support our commitment to maintain a strong governance framework as an independent public company
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Marketing
Expertise in brand development, marketing and sales in local markets on a global scale relevant to our global business
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Operations
Managing the operations of a business and possessing a deep understanding of theend-markets we serve
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Strategy
Practical understanding of the development and implementation of strategic priorities and of the risks and opportunities that can impact a company’s operations and strategies which will serve to drive our long-term growth
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Mergers & Acquisitions
Experience in business development and mergers and acquisitions to support our initiatives to identify and execute ontuck-in acquisitions and investments
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The table below is a summary of the range of qualifications and skills that each director brings to the Board. The table does not include all of the qualifications that each director offers, and the fact that a particular experience, skill, or qualification is not checked for a specific director does not mean that the director does not possess it.
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Roger Fradin (Chairman) | |
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Michael Nefkens (President & CEO) | |
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The Board of Directors unanimously recommends a vote “FOR” Proposal 1 to elect
each of the following Class III director nominees.
Nominees for Election (Class III Directors)
Included in each biography are the key qualifications that led to the conclusion that such directors should serve on our Board.
| CYNTHIA HOSTETLER, Age 57 | ||
Independent Director Director since 2020 Committee Memberships: • None | Key Qualifications: • Broad investment, financial and risk management skills • Experienced public and investment company board member • Significant experience with investment management, including ESG and investor relations issues Other Current Public Company Directorships: • Vulcan Materials Company | |
Background Ms. Hostetler is a professional director of public companies and investment funds in the United States, and serves on several mutual fund boards, including as Trustee of Invesco Ltd., Atlanta, Georgia (international mutual funds) since 2017; Director of TriLinc Global Impact Fund, LLC, Los Angeles, California (international investment fund) since 2013; Trustee of Aberdeen International Funds, New York, New York (international mutual funds) from 2013 to 2017; Director of Artio Global Funds, New York, New York (international mutual funds) from 2010 to 2013; and Director of Edgen Group Inc., Baton Rouge, Louisiana (energy infrastructure) from 2012 to 2014. Ms. Hostetler served as the Head of Private Equity and Vice President of Investment Funds of Overseas Private Investment Corporation from 2001 to 2009 and as a board member and President of First Manhattan Bancorporation from 1991 to 2006. Ms. Hostetler began her career as a corporate lawyer with Simpson Thatcher & Bartlett in New York. Ms. Hostetler earned her bachelor’s degree from Southern Methodist University and holds a Juris Doctor from the University of Virginia School of Law. | ||
| 8 | 2020 PROXY STATEMENT | |
| BRIAN KUSHNER, Age 61 | ||
Independent Director Director since 2019 Committee Memberships: • Finance • Strategic & Operational | Key Qualifications: • Decades of experience leading corporate transformation efforts • Proven expertise in corporate performance • Served in roles that include chairman, director, chief executive officer and chief restructuring officer at more than 30 public and private companies Other Current Public Company Directorships: • Cumulus Media Inc. • Mudrick Capital Acquisition Corporation • Thryv, Inc. | |
Background Mr. Kushner has served as a Senior Managing Director at FTI Consulting, Inc., a global business advisory firm, since 2009, where he serves as leader of the Private Capital Advisory Services practice and as theco-leader of the Technology practice, the Aerospace, Defense and Government Contracting practice and the Activism and M&A Solutions practice. Prior to joining FTI, Mr. Kushner was theco-founder of CXO, L.L.C., a boutique interim and turnaround management consulting firm that was acquired by FTI at the end of 2008. Mr. Kushner periodically served as the chief executive officer (“CEO”), interim CEO, or the chief restructuring officer (“CRO”) of companies that elected to utilize bankruptcy proceedings as part of their financial restructuring process and, as such, he served as an executive officer of various companies that filed bankruptcy petitions under federal law, including, among others, Relativity Media LLC in 2015. Over the past three decades, Mr. Kushner has served as a director, CEO or CRO of over 30 public and private technology, manufacturing, telecom and defense companies, during which time he worked on the acquisition or disposition of more than 20 companies. Mr. Kushner received his B.S. degree in Applied and Engineering Physics from Cornell University, his M.S. degree in Applied and Engineering Physics from Cornell University and a PhD in Applied Physics with a minor in Electrical Engineering, also from Cornell University. He previously served as a director at Luxfer Holdings PLC (2016-2018). | ||
| JACK LAZAR, Age 54 | ||
Independent Director Director since 2018 Committee Memberships: • Audit (Chair) • Innovation and Technology • Strategic & Operational | Key Qualifications: • Strong financial, technological and operational expertise • Experienced technology company executive and consultant • Expertise in best practices for a public company on a global scale Other Current Public Company Directorships: • Box, Inc. • Casper Sleep Inc. • Mellanox Technologies, Ltd. • Silicon Laboratories Inc. | |
Background Mr. Lazar has been an independent business consultant since March 2016. From January 2014 to March 2016, he served as the chief financial officer of GoPro, Inc., a provider of wearable and mountable capture devices. From January 2013 to January 2014, he was an independent business consultant. From May 2011 to January 2013, Mr. Lazar served as senior vice president, corporate development and general manager of Qualcomm Atheros, Inc., a developer of communications semiconductor solutions. Mr. Lazar is a certified public accountant (inactive) and received his B.S. degree in commerce with an emphasis in accounting from Santa Clara University. He previously served as a director at TubeMogul, Inc. (2013-2016) and Quantenna Communications (2016-2019). | ||
| 2020 PROXY STATEMENT | 9 |
Continuing Directors
Class III Directors (with terms expiring at the 2021 Annual Meeting of Shareholders)
| ROGER FRADIN, Age 66 | ||
Non-Executive Chairman of the Board Independent Director Director since 2018 Committee Memberships: • Finance • Innovation and Technology | Key Qualifications: • Extensive experience as an executive at Honeywell • In-depth knowledge of the fire and security solutions and automation and control solutions industries • Significant operational and product development experience • Financial expertise and experience in capital markets • Broad experience in marketing, including international markets Other Current Public Company Directorships: • Juniper Industrial Holdings, Inc. • L3Harris Technologies, Inc. (formerly Harris Corporation) • Vertiv Holdings Co (formerly GS Acquisition Holdings) | |
Background Mr. Fradin joined Honeywell in 2000 when Honeywell acquired Pittway Corporation, where he served as president and chief executive officer of the Security and Fire Solutions segment. Mr. Fradin served as president and chief executive officer of Honeywell’s Automation and Control Solutions business from January 2004 to April 2014 and served as vice chairman of Honeywell from April 2014 to February 2017. Mr. Fradin served as an independent contractor to Honeywell from March 2018 to September 2018. He has also served as an operating executive with The Carlyle Group since 2016 and an advisor to Seal Rock Partners since 2014. Mr. Fradin received his M.B.A. and B.S. degrees from The Wharton School at the University of Pennsylvania. While a student at Wharton, Mr. Fradin also served as a member of its faculty from 1976 to 1977. He previously served as a director of MSC Industrial Direct (1998-January 2020) and Pitney Bowes (2012-2019). | ||
| NINA RICHARDSON, Age 61 | ||
Independent Director Director since 2018 Committee Memberships: • Compensation • Nominating and • Strategic & Operational | Key Qualifications: • Extensive global operational and leadership experience in the technology sector • Experience ranging fromstart-up environmental to multi-billion dollar corporations • In-depth knowledge of human resources Other Current Public Company Directorships: • Silicon Laboratories, Inc. • Cohu, Inc. | |
Background Ms. Richardson serves as managing director of Three Rivers Energy, Inc., a company sheco-founded in 2004, and has been an independent consultant since March 2015. From February 2013 to February 2015, Ms. Richardson served as chief operating officer of GoPro, Inc. She has also held several executive positions of increasing responsibility at Flextronics, Inc., a global electronics and manufacturing service provider. Ms. Richardson received her B.S. degree in industrial engineering from Purdue University and an executive M.B.A. from Pepperdine University. She previously served as a director at Zayo Group Holdings, Inc. (2015-2018), Callidus Software, Inc. (2017-2018) and Silicon Graphics International Corp. (2016). | ||
| 10 | 2020 PROXY STATEMENT | |
| ANDREW TEICH, Age 59 | ||
Lead Independent Director Director since 2018 Committee Memberships: • Compensation • Finance • Innovation and • Nominating and • Strategic & Operational (Chair) | Key Qualifications: • Seasoned executive with experience in acquisitions and operational integration • Extensive sales and marketing skills • Expertise in artificial intelligence technology Other Current Public Company Directorships: • Sensata Technologies Holding PLC | |
Background Mr. Teich has been a private technology consultant since June 2017. From May 2013 until June 2017, he served as the chief executive officer and president of FLIR Systems, Inc., a public multinational imaging and sensing company, and a director from July 2013 to June 2017. Mr. Teich joined FLIR Systems, Inc. in 1999 and held various positions of increasing responsibility within the company including president of the Commercial Systems, Commercial Vision Systems and Thermography divisions throughout his tenure. Mr. Teich received his B.S. degree in marketing from Arizona State University and is an alumnus of the Harvard Business School Advanced Management Program. | ||
Class I Directors (with terms expiring at the 2022 Annual Meeting of Shareholders)
| PAUL DENINGER, Age | ||
| 61 | ||
Independent Director
Director since 2018
Committee Memberships:
• Audit
• Finance (Chair)
• Innovation and |
Key Qualifications:
• Extensive senior management experience in operations and strategy
• Extensive experience in banking, capital markets and merger and acquisition strategies
• Deep knowledge of the technology sector
Other Current Public Company Directorships:
• EverQuote •Iron Mountain Inc.
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Background
Mr. Deninger | ||
| 2020 PROXY STATEMENT | 11 |
| MICHAEL NEFKENS, Age | ||
| 50 | ||
President, Chief Executive Officer and Director
Director since 2018
Committee Memberships:
• None
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Key Qualifications:
• Extensive experience running a complex, multi-national organization
• Expert on company transformation
• Extensive background in the technology sector
• Strong record of delivering innovative solutions and shareholder value
• Customer focused
Other Current Public Company Directorships:
• None
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Background
Prior to joining Resideo, Mr. Nefkens served as the president and chief executive officer of Honeywell’s Homes Business since May 2018 and has served as a member of the Board since theSpin-Off. Mr. Nefkens served as executive vice president and general manager of Regions & Industries at DXC Technology Company from April 2017 to February 2018. Mr. Nefkens served as executive vice president and general manager of Enterprise Services at Hewlett Packard Enterprise Company from November 2015 to April 2017. Prior to that, Mr. Nefkens performed a similar role at Hewlett-Packard Co. (“HP Co.”) from December 2012 to November 2015, having been appointed to the role in an acting capacity in August 2012. Previously, Mr. Nefkens served as senior vice president and general manager of Enterprise Services in the EMEA region at HP Co. from November 2009 to August 2012. Mr. Nefkens received his bachelor’s degree in finance from Texas Christian University and his M.B.A. from Duke University’s Fuqua School of Business. He served as a director of Riverbed Technology, Inc. from September 2014 to April 2015. | ||
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| SHARON WIENBAR, Age | ||
| 58 | ||
Independent Director
Director since 2018
Committee Memberships:
• Audit
• Compensation (Chair)
• Nominating and |
Key Qualifications:
• Extensive experience as an operating executive and strategist in the software and technology sectors
• Leadership in technology investments and partnerships
• Expertise instart-up operations and venture capital investing
Other Current Public Company Directorships:
• Colfax Corporation
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Background
Ms. Wienbar was chief executive officer of Hackbright Academy, a technology training firm, from 2015 to 2016. From 2007 to 2015, she served as a partner at Scale Venture Partners, a technology and healthcare venture capital firm. Ms. Wienbar received her A.B. and A.M. degrees in engineering from Harvard University and her M.B.A. from Stanford University. She previously served on Microsoft Inc.’s venture advisory committee and as a director of Everyday Health, Inc. (2007-2016) and Glu Mobile, Inc. (2004-2008). | ||
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Continuing Directors
Class II Directors (with terms expiring at the 2020 Annual Meeting of Shareholders)
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Continuing Directors
Class III Directors (with terms expiring at the 2021 Annual Meeting of Shareholders)
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| 12 | | |
Our corporate governance framework is a set of principles, guidelines and practices that support strong performance and long-term value creation for our shareholders. Our commitment to good corporate governance is integral to our business and reflects not only regulatory requirements, NYSE listing standards and broadly recognized governance practices, but also effective leadership by our senior management team and oversight by our Board.
Our Board is committed to maintaining the highest standards of corporate governance. Our Board is guided by our Corporate Governance Guidelines, which address director responsibilities, director skills and characteristics, memberships on other boards, director access to management and other employees, director orientation and continuing education, director retirement and the annual performance evaluations of the Board and Committees. Because corporate governance practices evolve over time, our Board will review and approve our Corporate Governance Guidelines, Committee charters and other governance policies at least once a year and update them as necessary and appropriate.
Our Board is deeply engaged, provides informed and meaningful guidance and feedback, and maintains an open dialogue with management based on a clear understanding of our strategic plans. At each Board meeting, we review components of our long-term strategy with our directors and engage in constructive dialogue which our leadership team embraces. Our directors have full and free access to our officers and employees to address questions, comments or concerns. Additionally, the Board and Committees have the power to hire independent legal, financial or other advisors without approval from, or consultation with, Resideo management.
Our Board also takes an active role in ensuring we embrace “best practices” in corporate governance. The partnership and oversight of a strong and multi-faceted Board with diverse perspectives rooted in deep experience in, technology,global business, finance, global businesstechnology and strategy are essential to creating long-term shareholder value.
Presented below are some highlights of our corporate governance program. You can find details about these and other corporate governance policies and practices within this Proxy Statement.
| KEY GOVERNANCE PRACTICES | ||
CORPORATE GOVERNANCE GUIDELINES
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• Our Corporate Governance Guidelines have been designed to assist the Board in the exercise of its duties and responsibilities to our Company. They reflect the Board’s commitment to monitor the effectiveness ofdecision-making at the Board and management levels with a view to achieving our strategic objectives.
• The guidelines are reviewed annually and subject to modification by the Board at any time. | |
INDEPENDENT
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•
• Mr. Fradin is a former employee of Honeywell. Mr. Nefkens | |
BOARD | • Currently, the Board has fixed the number of directors at
• The Board will regularly assess its performance and can adjust the number of directors according to the needs of the Board and the Company.
• As shown under “Director Qualifications and Skills” beginning on page 6 and in the biographies of the directors beginning on page 8, our Board has a diverse mix of skills, experience and backgrounds that support our growth and commercial strategy. | |
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| KEY GOVERNANCE PRACTICES | ||
LEAD INDEPENDENT | • The Board has appointed Mr. Teich as Lead Independent Director. Mr. Teich possesses the attributes that the Board believes will ensure independent oversight of management. See “Board Leadership Structure” on page 15 for additional information. | |
BOARD | • The Board consists of five
• Each of the Audit, Compensation,
• Each Board Committee has a written charter that will be reviewed andre-assessed annually. • Each Committee charter is posted and available on our Investor Relations website at investor.resideo.com. | |
MEMBERSHIPS ON | • Under our Corporate Governance Guidelines, directors who serve as chief executive officers of public companies should not serve on more than
• Other directors should not serve on more than five public company boards (including service on our Board). | |
BOARD DIVERSITY | • | |
ROBUST RISK OVERSIGHT | • Our full Board is responsible for risk oversight, and has designated Committees to have particular oversight of certain key risks. Our Board oversees management as it fulfills its responsibilities for the assessment and mitigation of risks and for taking appropriate risks. | |
BOARD AND COMMITTEE | • The Board | |
MAJORITY VOTING OF DIRECTORS | • OurBy-Laws provide for majority voting in uncontested elections of directors. Any directors standing forre-nomination to the Board shall agree to submit an irrevocable resignation effective upon that director’s failure to receive a majority vote and the acceptance of the resignation by the Board. | |
CODE OF BUSINESS | • Our Code of Business Conduct applies equally to all of our directors, officers and employees, as well as those of our subsidiaries, affiliates and joint ventures.
• Material amendments to, or waivers of, the Code of Business Conduct granted to any of our directors or executive officers will be posted on our website at www.resideo.com.
• To date, no such amendments have been made or waivers granted. | |
• Our Code of Business Conduct is drafted to provide guidance to our directors, officers, employees and others covered by the Code of Business Conduct as to what they should and should not do to comply with our policies. The statements contained therein are not representations and should not be relied upon as such by third parties, including shareholders. | ||
COMMITMENT TO HEALTH, SAFETY AND ENVIRONMENTAL SUSTAINABILITY | • | |
BOARD OVERSIGHT OF POLITICAL | • The Nominating and Governance Committee oversees our policies and practices relating to political contributions. | |
| 14 | 2020 PROXY STATEMENT | |
| KEY GOVERNANCE PRACTICES | ||
PROXY ACCESS | • Subject to certain terms and conditions, ourBy-Laws provide that shareholders who have maintained continuous qualifying ownership of at least 3% of our outstanding common stock for at least three years may use our annual meeting proxy statement to nominate a number of director candidates not to exceed the greater of two candidates or 20% of the number of directors then in office. | |
SUCCESSION | • Our Board oversees and annually reviews leadership development and assessment initiatives, as well as short- and long-term succession plans for the CEO and other senior management. | |
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HEDGING AND | • All of our directors, officers and employees are prohibited from engaging in short sales of Resideo securities and selling or purchasing puts or calls or otherwise trading in or writing options on Resideo securities and using certain financial instruments (including forward sale contracts, equity swaps, collars and exchange funds), holding securities in margin accounts or pledging Resideo securities as collateral, in each case, that are designed to hedge or offset any decrease in the market value of Resideo securities. | |
STOCK OWNERSHIP | • We have meaningful stock ownership guidelines:
• CEO: 6x base salary
• Other Executive Officers: 3x base salary
• Non-employee directors: 5x annual cash retainer
• Five year period to meet the ownership requirement | |
Our Certificate of Incorporation,By-Laws, Committee Charters, Corporate Governance Guidelines and Code of Business Conduct are available on our Investor Relations website at investor.resideo.com. Paper copies of these documents can be obtained by writing to Resideo Technologies, Inc.,
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The Company’s current Board leadership structure consists of anon-executive Chairman of the Board, and, because the Chairman is not independent due to his prior employment with Honeywell, a Lead Independent Director who was appointed by the independent directors of the Board. The Board believes the current structure of separating the roles of Chairman and CEO, as well as having a Lead Independent Director, allows for alignment of corporate governance with the interests of shareholders. The Board believes that this structure allows our CEO to focus on operating and managing the Company, leverages our Chairman’s experience in guidance and oversight, and ensures overall independence of the Board through clearly defined roles and responsibilities of the Lead Independent Director. While the Board believes that this structure currently is in the best interests of Resideo and its shareholders, it does not have a policy with respect to separating the roles of Chairman and CEO and appointing a Lead Independent Director if the Chairman is independent and could adjust the structure in the future as it deems appropriate.
Lead Independent Director
The Board has determined that Mr. Fradin, a former employee of Honeywell, ismay not currently notbe independent and has appointed Mr. Teich as the Lead Independent Director in accordance with our Corporate Governance Guidelines. In electing Mr. Teich, the independent directors of the Board considered Mr. Teich in light of the following selection criteria:
Qualifies as independent, in accordance with relevant listing standards;
Able to commit the time and level of engagement required to fulfill the substantial responsibilities of the role; and
Possesses effective communication skills to facilitate discussions among members of the Board, including among the independent directors, Mr. Nefkens and Mr. Fradin, and engage with key stakeholders.
| 2020 PROXY STATEMENT | 15 |
As the Lead Independent Director, Mr. Teich has the following duties and responsibilities:
Review Board meeting agendas and Board meeting schedules to ensure there is sufficient time for discussion of all agenda items;
Provide input regarding presentation materials and other written information provided to directors for Board meetings;
Preside at all meetings at which the Chairperson is not present including executive sessions of the independent directors;
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Be available for consultation and direct communications with the Company’s shareholders; and
Perform such other duties as the Board may determine from time to time.
Providing objective, independent judgment is at the core of the Board’s oversight function. The Nominating and Governance Committee conducts an annual review of the independence of the directors and reports its findings to the full Board. The Board has affirmatively determined that allnon-employee directors, other than Mr. Fradin who is a former employee of Honeywell, satisfy the independence criteria in the applicable NYSE listing standards and SEC rules (including the enhanced criteria with respect to members of the Audit Committee and the Compensation Committee). Regarding Mr. Fradin, the Board considered that more than three years have elapsed since Mr. Fradin was employed by Honeywell, but acknowledges that other relationships described in this Proxy Statement currently suggest that Mr. Fradin may not be fully independent.
For a director to be considered independent, the Board must determine that the director does not have any material relationships with Resideo, either directly or as a partner, shareholder or officer of an organization that has a relationship with Resideo, other than as a director and shareholder. Material relationships can include vendor, supplier, consulting, legal, banking, accounting, charitable and family relationships, among others. In addition to Mr. Fradin, Mr. Nefkens and Mr. de Masi, as employeesan employee of Resideo, dodoes not satisfy the independence criteria described below.
Criteria for Director Independence
The Board considered all relevant facts and circumstances in making its determination that all of our directors are independent other than Mr. Fradin Mr. Nefkens and Mr. de Masi,Nefkens, including the following:
No such director or nominee receives any direct compensation from Resideo other than under thenon-employee director compensation program described beginning on pages 24- 25.page 24.
No immediate family member (within the meaning of the NYSE listing standards) of any such director or nominee is an employee of Resideo or otherwise receives direct compensation from Resideo.
No such director or nominee is affiliated with Resideo or any of its subsidiaries or affiliates.
No such director or nominee is an employee of Resideo’s independent accountants and no such director or nominee (or any of their respective immediate family members) is a current partner of Resideo’s independent accountants, or was within the last three years, a partner or employee of Resideo’s independent accountants and personally worked on Resideo’s audit.
No such director or nominee is a member, partner or principal of any law firm, accounting firm or investment banking firm that receives any consulting, advisory or other fees from Resideo.
No Resideo executive officer is on the compensation committee of the board of directors of a company that employs any of ournon-employee directors or nominees (or any of their respective immediate family members) as an executive officer.
No such director or nominee (or any of their respective immediate family members) is indebted to Resideo, nor is Resideo indebted to any such director or nominee (or any of their respective immediate family members).
| 16 | 2020 PROXY STATEMENT | |
No such director or nominee serves as an executive officer of a charitable or othertax-exempt organization that received contributions from Resideo.
While anon-employee director’s or nominee’s service as an outside director of another company with which Resideo does business would generally not be expected to raise independence issues, the Board also considered those relationships and confirmed the absence of any material commercial relationships with any such company. Specifically, those commercial relationships were in the ordinary course of business for Resideo and the other companies involved and were on terms and conditions available to similarly situated customers and suppliers.
The above information was derived from Resideo’s books and records and responses to questionnaires completed by the directors in connection with the preparation of this Proxy Statement.
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Our Board consists of five standing Committees: Audit, Compensation, Nominating and Governance, Finance and Innovation and Technology.Technology, and one special committee: Strategic & Operational. The Board has adopted written charters for each Committee, which are available on our Investor Relations website at investor.resideo.com. All Board members are invited to attend the meetings of each Committee, except as restricted by independence standards.
The following table sets forth the Board Committees and the current members of each of the Committees:Committees.
| Age | Independent | Audit | Compensation | Nominating and Governance | Finance | Innovation and Technology | ||||||||||||||||||||||
| Independent | Audit | Compensation | Nominating and Governance | Finance | Innovation and Technology | Strategic & Operational | ||||||||||||||||||||||
Roger Fradin | 65 |
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Michael Nefkens | 49 |
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Niccolo de Masi | 38 | |||||||||||||||||||||||||||
Paul Deninger | 60 |
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Cynthia Hostetler | |
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Brian Kushner | |
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Jack Lazar | 53 |
| Chair |
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Nina Richardson | 60 |
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Andrew Teich | 58 |
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Sharon Wienbar | 57 |
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2018 Meetings | 1 | 2 | 2 | 2 | 2 | |||||||||||||||||||||||
2019 Meetings |
| 9 | 11 | 7 | 4 | 2 | 1 | |||||||||||||||||||||
| 2020 PROXY STATEMENT | 17 |
Each of the Audit, Compensation, and Nominating and Governance and Strategic & Operational Committees consists solely of directors who have been determined by the Board to be independent in accordance with SEC regulations, NYSE listing standards and the Company’s director independence standards (including the heightened independence standards and considerations for members of the Audit and Compensation Committees).
COMMITTEE | RESPONSIBILITIES | |
AUDIT COMMITTEE
Jack Lazar, Chair Paul Deninger Sharon Wienbar | • Appoint and recommend to the shareholders for approval the firm to be engaged as the Company’s independent auditor and be directly responsible for the compensation, retention and oversight of the independent auditor, including the resolution of disagreements between management and the independent auditor regarding financial reporting; • Review the results of each external audit and other matters related to the conduct of the audit and advise the Board on whether it recommends that the audited financial statements be included in the Annual Report on Form10-K; • Review with management and the independent auditors, prior to filing, the interim financial results to be included in quarterly reports on Form10-Q; • Evaluate the independent auditor’s performance at least annually; • Approve allnon-audit engagements with the independent auditor; • Review reports of the independent auditor and the chief internal auditor related to the adequacy of the Company’s internal accounting controls, disclosure processes and its procedures designed to ensure compliance with laws and regulations; • Consider and review, in consultation with the independent auditor and the chief internal auditor, the scope and plan for forthcoming external and internal audits; • Review annually the performance of the internal audit group; • Review management’s assessment of the effectiveness of the Company’s internal control over financial reporting; • Review, approve and establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, auditing matters and for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters or other legal, ethical, reputational or regulatory concerns; • Produce the annual Report of the Audit Committee • Together with the full Board, exercise oversight of management’s enterprise risk management (ERM) program. | |
Each member of the Audit Committee is an independent director under applicable SEC rules and NYSE listing standards and is “financially literate” under NYSE listing standards. The Board has determined that Mr. Lazar and Mr. Deninger each qualify as an “audit committee financial expert” under applicable SEC rules. In addition to Resideo, Mr. Lazar serves on the audit committee of three other public reporting companies. The Board has determined that Mr. Lazar’s simultaneous service on these other boards does not impair his ability to serve effectively on the Company’s Audit Committee.
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COMPENSATION COMMITTEE
Sharon Wienbar, Chair Nina Richardson Andrew Teich | • Review and approve the corporate goals and objectives relevant to the compensation of the CEO, evaluate the CEO’s performance relative to these goals and objectives and determine and approve the CEO’s compensation level; • Review and approve the individual goals and objectives of the other executive officers and set the annual salary and other remuneration of the executive officers; • Periodically review the operation and structure of the Company’s compensation programs, and consider the Company’s practices and programs related to internal pay equity; • Review proposals for and determine total share usage under the Company’s equity compensation programs; • Review the development of our senior executives, including succession plans, and make recommendations to the Board relating to the election of executive officers; • Review or take such action in connection with the bonus, stock, retirement and other benefit plans of the Company and its subsidiaries; • Establish and review annual stock ownership guidelines applicable to directors and senior management; • Review and discuss with management the Compensation Discussion and Analysis and other executive compensation disclosure included in the Proxy Statement; • Produce the annual Compensation Committee Report included in the Proxy Statement; and • Exercise sole authority to retain and terminate a compensation consultant, as well as to approve the consultant’s fees and other terms of engagement. See “Oversight of Compensation Consultant”on page 19 regarding the Compensation Committee’s engagement of a compensation consultant. | |||
The Compensation Committee may form and delegate its authority to subcommittees and management, when appropriate, including delegation to the CEO to determine and approve annual incentive and long-term incentive awards fornon-executive employees of the Company as prescribed by the Compensation Committee. For more information on the responsibilities and activities of the Compensation Committee, including its processes for determining executive compensation, see “Compensation Discussion and Analysis” beginning on page | ||||
| 18 | 2020 PROXY STATEMENT | |
COMMITTEE | RESPONSIBILITIES | |
NOMINATING AND GOVERNANCE COMMITTEE
Nina Richardson, Chair Andrew Teich Sharon Wienbar | • Make recommendations to the Board concerning size, composition and organization of the Board, qualifications and criteria for election to the Board, nominees to be proposed by the Company for election to the Board, retirement from the Board, whether to accept any resignation tendered by a director and Board Committee assignments; • Actively seek individuals qualified to become Board members and recommend them to the full Board for consideration, including evaluating all potential candidates, including those suggested or nominated by third parties; • Make recommendations to the Board on whether to include disclosures in the Proxy Statement on director independence, governance and director nomination matters; • Oversee the Company’s new director orientation program and continuing education program for incumbent directors; • Review and reassess the adequacy of the Company’s Corporate Governance Guidelines; • Review and report to the Board on the Company’s policies and programs relating to health, safety and environmental matters, equal employment opportunity, anti-harassment, political contributions, and such other matters, including the Company’s Code of Business Conduct, that impact the Company’s role as a responsible corporate citizen; and • Oversee the annual performance review of the Board and its Committees.
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FINANCE COMMITTEE
Paul Deninger, Chair Roger Fradin Brian Kushner Andrew Teich | • Review matters related to the Company’s capital structure and allocation, financial condition, leverage and financial strategies, interest rate risk, expense management, strategic investments and dispositions such as significant mergers, acquisitions, divestitures, joint ventures, real estate purchases and other debt and equity investments; • Consider, review and recommend to the Board any Company dividend and share repurchase policies and programs; • Approve the Company’s derivatives and hedging policies and strategies for managing interest rate and foreign exchange rate exposure; • Review the Company’s investment policies and practices, credit ratings and ratings strategy; • Review the Company’s investor relations strategy; and • Review the types of information to be disclosed in connection with earnings releases and earnings guidance provided to analysts and rating agencies.
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INNOVATION AND TECHNOLOGY COMMITTEE
Andrew Teich, Chair Paul Deninger Roger Fradin Jack Lazar | • Facilitate the Board’s oversight, review, discussion and understanding of the Company’s major technology and innovation strategies and plans in the following key areas: – investments in technology and software; – development and execution of technology strategies; – overall strategy, effectiveness and risk profile of its product technology and software cybersecurity program; – technology trends with significant impacts on our business; and – research and development operations.
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STRATEGIC & OPERATIONAL COMMITTEE
Andrew Teich, Chair Brian Kushner Jack Lazar Nina Richardson | • Facilitate the Board’s oversight of the Company’s operational and financial review, including the following: – review and evaluate the Company’s product and market strategy; – oversee gross margin improvement efforts and general and administrative expense simplification actions; and – review supply chain optimization and operational improvements; • Provide focus and insight to the management team, particularly during the CEO transition period; and • Oversee the Company’s management ofCOVID-19 pandemic related health and safety and business continuity matters. |
Compensation Committee Matters
Compensation Committee Interlocks and Insider Participation
No current member of the Compensation Committee has served as one of our officers or employees at any time. Mr. de Masi previously served as a member of the Compensation Committee and resigned from the Committee prior to accepting the position of President, Products and Solutions and Chief Innovation Officer. None of our executive officers serves as a member of the compensation committee of any other company that has an executive officer serving as a member of our Compensation Committee or Board.
Oversight of Compensation Consultant
The Compensation Committee has sole authority to retain a compensation consultant to assist the Compensation Committee in the evaluation of director, CEO or senior management compensation, but only after considering all factors relevant to the consultant’s independence from management. In addition, the Compensation Committee is directly responsible for approving the consultant’s compensation, evaluating its performance and terminating its engagement.
At the time of theSpin-Off, the
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The Compensation Committee has retained Frederic W. Cook & Co. (“FW Cook”) as its independent compensation consultant to assist the Compensation Committee with the design of our post-spin executive compensation programs as well as to provide objective advice on compensation practices and the competitive landscape for the compensation of Resideo’s executive officers. FW Cook reports to the Compensation Committee, has direct access to Compensation Committee members, interacts with Resideo management when necessary and appropriate and attends Compensation Committee meetings either in person or by telephone. FW Cook provides services only to the Compensation Committee as an independent consultant and does not have any other consulting engagements with, or provide any other services to, Resideo. The independence of FW Cook has been assessed according to factors stipulated by the SEC and the Compensation Committee concluded that no conflict of interest exists that would prevent FW Cook from independently advising the Compensation Committee.
FW Cook compiles information and provides advice regarding the components and mix (short-term/long-term; fixed/variable; cash/equity) of the executive compensation programs of Resideo and its peer group (see page 3839 for further details regarding the compensation peer group) and analyzes the relative performance of Resideo and the compensation peer group with respect to the financial metrics generally used in the programs. FW Cook also provides information regarding emerging trends and best practices in executive compensation. While theThe Compensation Committee reviews information provided byalso received general advice from FW Cook in 2019 and 2020 regarding compensation paid by the compensation peer group as a general indicatorterms of relevant market conditions, the Compensation Committee does not target a specific competitive position relative to the market in making its compensation determination.severance and transition agreements entered into with Resideo’s executive officers.
Compensation Input Fromfrom Senior Management
The Compensation Committee considers input from senior management in making determinations regarding the overall executive compensation program and the individual compensation of the executive officers. As part of Resideo’s annual planning process, the CEO, CFO, and Chief Human Resources Officer develop targets for Resideo’s incentive compensation programs and present them to the Compensation Committee. These targets are reviewed by the Compensation Committee to ensure alignment with our strategic and annual operating plans, taking into account the targeted year-over-year and multi-year improvements as well as identified opportunities and risks. The CEO does not provide recommendations on his own compensation. The CEO recommends base salary adjustments and cash and equity incentive award levels for Resideo’s other executive officers. The recommendations of the CEO are based on performance appraisals (including an assessment of the achievement ofpre-established financial andnon-financial management objectives) together with a review of supplemental performance measures and prior compensation levels relative to performance. The CEO presents to the Compensation Committee and the full Board his evaluation of each executive officer’s contribution and performance over the past year, strengths and development needs and actions and presents to the Nominating and Governance Committee and the full Board succession plans for each of the executive officers.
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The Board’s Role in Risk Oversight
The Board is actively engaged in overseeing and reviewing the Company’s strategic direction and objectives, taking into account (among other considerations) Resideo’s risk profile and exposures. It is management’s responsibility to manage risk as overseen and assessed by the Board. The Board receives regular updates on risk exposures and there is open communication between management and the directors. The Company has established processes to report and monitor for material risks applicable to the Company. The Board oversees these reporting processes and will review annually Resideo’s enterprise risk management programs.
The Boardas a whole has responsibility for risk oversight, including succession planning relating to the CEO and risks relating to the competitive landscape, strategy, business conditions and capital requirements of the Company. The Committees of the Board also oversee Resideo’s risk profile and exposures relating to matters within the scope of their authority. The Board regularly receives detailed reports from the Committees regarding risk oversight in their areas of responsibility.
The Audit Committeediscusses the Company’s risk profile, risk management, and exposure (and Resideo’s policies relating to the same) with management, the internal auditors and the independent auditors. Such discussions include the Company’s major financial risk exposures and the steps management has taken to monitor and control these exposures. The Audit Committee is also charged with oversight of Resideo’s enterprise risk management program, and risks relating to enterprise-wide cybersecurity, including review of the state of the Company’s cybersecurity program, emerging cybersecurity developments and threats and the Company’s strategy to mitigate cybersecurity risks.
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The Compensation Committeeconsiders risks related to the attraction and retention of talent and the design of compensation programs and incentive arrangements and the investment management of the Company’s principal retirement and savings plans.arrangements. The Compensation Committee periodically undertakes a review of Resideo’s incentive structure to avoid encouraging material risk taking through financial incentives.
The Nominating and Governance Committeeconsiders risks related to the Company’s reputation, environmental and sustainability matters, health and safety issues, equal employment opportunity, anti-harassment matters and community/government relations. The Nominating and Governance Committee also oversees succession planning for the Board and the appropriate assignment of directors to the Board Committees for risk oversight and other areas of responsibilities.
The Finance Committeeconsiders risks related to the Company’s capital structure, capital allocation decisions, financial condition, leverage and financial strategies, interest rate risk, expense management and strategic investments and dispositions.
The Innovation and Technology Committeeconsiders risks related to the Company’s overall technology and innovation strategies and its product technology and software cybersecurity program.
The Strategic & Operational Committee considers risks related to the Company’s product and market strategy and oversight related to the CEO transition period and the Company’s management ofCOVID-19 pandemic related health and safety and business continuity matters.
Enterprise Risk Management Program
As a part of its overall risk management strategy, the Company, with advice from the Audit Committee, has adopted an Enterprise Risk Management (“ERM”) framework consisting of enhancements to our ability to manage uncertainty and mitigate risk as we drive shareholder value creation. The ERM framework will be usedis being deployed to create a robust risk management program that is aligned with the Company’s strategic and business objectives. The ERM program will beis overseen and governed by the Audit Committee and will be managed by members of senior management. Working with the ERM program management team, the Board and the Audit Committee willregularly assess the overall risks applicable to the Company, its businesses and functions.
During our first full year as a stand-alone public company,In 2019, the Audit Committee, in conjunction with management, will utilizeutilized the ERM framework to establish the ERM program and introduce the program to Company leaders and stakeholders with the goal of completing thecompleted its first ERM assessment byyear-end. The ERM assessment will be based on an enterprise-wide “top down” and “bottom up” view of commercial, strategic, legal, compliance, cybersecurity and reputational risks. On an annual basis, the ERM assessment results, as well as management action plans to mitigate or minimize the risks identified, will beare presented to the Audit Committee and the full
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Board to provide visibility into the risks that impact us and the plans to mitigate them. Ultimately, we intend to integrate the ERM program into our existing risk management processes, strategic planning, budgeting, performance and our culture.
Nominating Board Candidates – Procedures and Qualifications
Minimum Qualifications for Director Nominees and Board Member Attributes
Board Composition, Characteristics and Skills
Collectively, the Board of Resideo must be capable of effectively overseeing risk management, capital allocation and leadership succession. In addition, the composition of the Board, as well as the perspective and skills of its individual members, needs to align with the Company’s growth and commercial strategy. Board composition and the members’ perspectives and skills should evolve at an appropriate pace to meet the challenges of the Company’s changing commercial and strategic goals. The identification and evaluation of director candidates is an essential part of this process.
The Nominating and Governance Committee has primary responsibility for reviewing with the Board, on an annual basis, the requisite skills and characteristics of Board members, as well as the composition of the Board as a whole. This assessment includes a consideration of director independence, procedures for shareholder suggestion or nomination of candidates for the Board and any requirements of applicable law or listing rules.
While the Company’s Corporate Governance Guidelines do not prescribe diversity standards, as a matter of practice, the Nominating and Governance Committee considers diversity in the context of the Board as a whole
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and takes into account the personal characteristics (gender, ethnicity, age) and experience (industry, professional, public service) of current and prospective directors to facilitate Board deliberations that reflect a broad range of perspectives. The Board believes that increased heterogeneity leads to better governance. The Nominating and Governance Committee is dedicated to actively seeking to recruit director candidates with diverse characteristics and attributes who satisfy the Board’s nomination criteria and will contribute to the collaborative culture of the Board.
Identifying and Recruiting New Members of the Board
The Nominating and Governance Committee shall actively seek individuals qualified to become directors. Through discussions with the Chairman, Lead Independent Director, CEO and other Board members, specific skill sets, experience and knowledge important for new Board members will be identified and prioritized in accordance with the procedures set forth in the Nominating and Governance Charter, the Company’s Corporate Governance Guidelines, organizational documents and applicable law. Potential candidates meeting these criteria then will be identified either by professional recruiting agencies, reputation or existing Board members. Candidates are interviewed by the Chairman, CEO, Chair of the Nominating and Governance Committee, and other members of the Board, as appropriate, to ensure that candidates not only possess the requisite skills and characteristics but also the personality, leadership traits, work ethic and independence to effectively contribute as a member of the Board. On successful completion of this process, the Nominating and Governance Committee will recommend the proposed candidate to the Board and the Board may nominate the successful candidate for election to the Board at the annual meeting of shareholders or such other time as the Board determines appropriate.
Resideo’s current Board members were either identified through a nationally-recognized search firm retained by Honeywell or were recommended by Resideo’s Chairman of the Board.
The Nominating and Governance Committee has the sole authority to retain and terminate any search firm to be used to identify director candidates, and has sole authority to approve the search firm’s fees and other retention terms. Search firms retained by the Nominating and Governance Committee shall be provided guidance as to the particular experience, skills or other characteristics that the Board is then seeking. Commencing in the fall of 2019, the Nominating and Governance Committee retained third-party search firms to identify potential director candidates, and directed the firms to ensure that the pool of candidates included women and other diverse candidates. The Nominating and Governance Committee may also retain other external advisors, including for the purposes of performing background reviews of potential candidates.
Except as described below, Resideo’s current Board members were either identified through a nationally-recognized search firm or were recommended by Resideo’s Chairman of the Board. Ms. Hostetler and Mr. Kushner joined the Board since the 2019 annual meeting of shareholders. Ms. Hostetler was identified as a potential director candidate by a search firm retained by the Nominating and Governance Committee to identify and assess potential director candidates. Mr. Kushner was identified as a potential director candidate by an independent member of the Board.
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General Criteria
In addition to the specific criteria and priorities developed collectively, director candidates are considered by the Nominating and Governance Committee in light of a range of more general criteria:
Exemplification of the highest standards of personal and professional integrity
Experience and industry background that align with the Company’s strategic and business objectives
Potential contribution to the composition, diversity and culture of the Board
Age, educational background and relative skills and characteristics
Ability and willingness to constructively challenge management through active participation in Board and Committee meetings and to otherwise devote sufficient time to Board duties
Shareholder Recommendations for Director Nominees
Any shareholder wishing to recommend a candidate for director should submit the recommendation in writing to Resideo Technologies, Inc., Nominating and Governance Committee, 1985 Douglas Drive North, Golden Valley, MN 55422,901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary. The written submission should comply with all requirements set forth in the Company’s Certificate of Incorporation andBy-Laws. The Nominating and Governance Committee will consider all candidates recommended by shareholders who comply with the foregoing procedures and satisfy the minimum qualifications for director nominees and Board member attributes.
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Advance Notice Director Nominations
Resideo’sBy-Laws provide that any shareholder entitled to vote at an annual meeting of shareholders may nominate one or more director candidates for election at that annual meeting by following certain prescribed procedures. To be timely, the shareholder must provide written notice of the shareholder’s intent to make such a nomination or nominations to Resideo’s Corporate Secretary not less than 90 days nor more than 120 days prior to the first anniversary date of the immediately preceding annual meeting, except as otherwise provided in ourBy-Laws. The notice must contain all of the information required in ourBy-Laws. Any such notice must be sent to Resideo Technologies, Inc., 1985 Douglas Drive North, Golden Valley, MN 55422,901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary. For the 20202021 annual meeting of shareholders, such notice must be delivered to the Corporate Secretary no earlier than February 13, 20208, 2021 and no later than March 14, 2020.10, 2021.
Proxy Access Director Nominations
In addition to advance notice procedures, ourBy-Laws also include provisions permitting, subject to certain terms and conditions set forth therein, shareholders who have maintained continuous qualifying ownership of at least 3% of our outstanding common stock for at least three years to nominate a number of director candidates not to exceed the greater of two candidates or 20% of the number of directors then in office who will be included in our annual meeting proxy statement. Shareholders who wish to nominate a proxy access candidate must follow the procedures described in ourBy-Laws. Proxy access candidates and the shareholder nominators meeting the qualifications and requirements set forth in ourBy-Laws will be included in the Company’s proxy statement and ballot. To be timely, a shareholder’s proxy access notice must be delivered to our principal executive offices, Resideo Technologies, Inc., 1985 Douglas Drive North, Golden Valley, MN 55422,901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary, no less than 120 days and no more than 150 days prior to the first anniversary date that we commenced mailing of our definitive proxy statement (as stated in such proxy statement) for the immediately preceding annual meeting, except as otherwise provided in theBy-Laws. For the 20202021 annual meeting, such notice must be delivered to our principal executive offices no earlier than November 27, 201925, 2020 and no later than December 27, 2019.25, 2020.
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Director Onboarding and Continuing Education
Under our Corporate Governance Guidelines, all new directors participate in an orientation program upon joining the Board. Orientation includes presentations by senior management to familiarize our new directors with Resideo’s strategic plans, financial statements and key issues, policies and practices and materials pertaining to the Board, its Committees, corporate governance policies and practices and the Company’s businesses, functions, initiatives and processes. Board members may attend, at the Company’s expense, seminars, conferences and other continuing education programs designed for directors of public companies.
The Board met twiceten times in 2018.2019. The directors attended allat least 75% of the meetings of the Board and Committees on which they served. Though we have no specific policy regarding director attendance at annual meetings of shareholders, our directors are expected to attend. All of the then-serving directors attended our 2019 annual meeting of shareholders, except Niccolo de Masi, who previously served as a director and executive officer until January 2020.
Board and Committee Evaluations
As part of the Board’s commitment to good governance, the Board will conductconducts an annual process to assess the effectiveness of the full Board and the operations of its Committees. The Nominating and Governance Committee will oversee the evaluation of the Board as a whole and its Committees and solicit feedback from directors as to whether the Board is continuing to evolve and to be refreshed in a manner that serves our business and strategic needs. After distribution of the self-evaluation materials to directors, the Nominating and Governance Committee will receive comments from all directors and report to the Board, identifying areas for improvement in the performance of the Board and its Committees. The Nominating and Governance Committee intends to retain an external third-party to facilitate the evaluation process at least once every three years.
The Nominating and Governance Committee will annually review the scope and content of the self-evaluation to ensure it is contemporary, appropriate for the needs of the Company and that actionable feedback is solicited on the operation and effectiveness of the Board and its Committees.
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Before recommending there-nomination of a slate of incumbent directors for an additional term, the Nominating and Governance Committee will evaluate whether incumbent directors possess the requisite skills and perspective, both individually and collectively, to continue to serve our business and strategic needs. This assessment will include members’ qualification as independent, strength of character, judgment and ability to devote sufficient time to attendance at, and preparation for, Board meetings.
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Non-Employee Director Compensation
Director Compensation
Prior to theSpin-Off, Honeywell approved the initial director compensation program for the Resideo Board intended to attract and retain highly qualified directors and to address the time, effort, expertise and accountability required of active Board membership. The program is described in further detail below. Our Compensation Committee, with assistance from the independent compensation consultant, to the Board, will periodically reviewreviews and makemakes recommendations to our Board regarding the form and amount of compensation fornon-employee directors. Directors who are also our employees receive no compensation for service on our Board.
We believe that annual compensation fornon-employee directors should consist of both a cash component, designed to compensate members for their service on the Board and its Committees, and an equity component, designed to align the interests of directors and shareholders. Ournon-employee directors generally receivepro-rated equity grants when they first join the Board.
The table below outlines the current annual compensation program for ournon-employee directors.
Board of Directors Annual Cash Compensation | Annual Retainer | |||||
| ($) | ||||||
Member of the Board of Directors | 90,000 | |||||
Chairman of Board—Additional Cash Retainer | 175,000 | |||||
Lead Director—Additional Cash Retainer | 25,000 | |||||
Board Committee Membership—Additional Cash Retainers*: | ||||||
Chair of the Audit Committee | 25,000 | |||||
Member of Audit Committee | 10,000 | |||||
Chair of the Compensation Committee | 15,000 | |||||
Member of the Compensation Committee | 7,500 | |||||
Chair of the Finance Committee | 10,000 | |||||
Member of the Finance Committee | 5,000 | |||||
Chair of the Nominating | 10,000 | |||||
Member of the Nominating | 5,000 | |||||
Chair of the Innovation and Technology Committee | 10,000 | |||||
Member of Innovation and Technology Committee | 5,000 | |||||
Chair of the Strategic & Operational Committee** | 360,000 | |||||
Member of the Strategic & Operational Committee | 10,000 | |||||
| * | Committee Chair retainers include the member retainer fees. |
| ** | Reflects significant time and travel commitment related to oversight of the Company’s comprehensive operational and financial review and CEO transition. |
Board of Directors Annual Equity Compensation | Annual Retainer | |
Annual Restricted Stock Unit (“RSU”) grants generally vest on the earliest of the first anniversary of the date of grant, the director’s death or disability, or removal from the Board coincident with the occurrence of a change in control. | Eachnon-employee director receives an RSU grant with a | |
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Cash elements are paid in quarterly installments in arears and prorated if necessary, including for changes in Committee service or for partial years of service. We do not separately compensate our directors for attending Board or Committee meetings.
Director Deferred Compensation Plan
In September 2019, the Compensation Committee approved the adoption of the Resideo Deferred Compensation Plan forNon-Employee Directors (the “Director Deferred Compensation Plan”). This plan encourages our directors to hold a portion of their compensation in the form of equity or deferred cash, which can only be monetized at the end of their tenure on the Board or in other limited circumstances. At the same time, the Compensation Committee also permittednon-employee directors to defer their annual equity award in accordance with the terms of our 2018 Stock Plan forNon-Employee Directors of Resideo Technologies, Inc. (the “Director Stock Plan”).
Prior to the first day of each calendar year beginning on or after January 1, 2020, eachnon-employee director may (i) elect to convert all of his or her annual cash retainer fees as well as any annual committee and chair fees other than reimbursements otherwise payable to him or her by the Company into deferred stock units or deferred cash pursuant to the Director Deferred Compensation Plan, and (ii) elect to defer payment of his or her annual equity grant of restricted stock units once the award has vested in accordance with its terms and conditions. Each deferred stock unit under the Director Deferred Compensation Plan and each vested restricted stock unit that anon-employee director has elected to defer under the terms of the Director Stock Plan represents the right to receive one share of our common stock generally on the first day of the seventh calendar month following the date thenon-employee director incurs a separation of service from us.
Other Benefits:Non-employee directors are also provided with $350,000 in business travel accident insurance.
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Director Compensation for 20182019
In 2018,2019, eachnon-employee director received fifty-percent (50%) of their normalhis or her annual cash retainers,retainer amount in addition to the full annual equity retainer award in the form of RSUs with a grant date fair value of approximately $120,000. Annual equity retainers generally vest forwith respect to 100% of the sharesRSUs awarded on the first anniversary of the grant date, generally subject to continued service on the Board. In addition, andBeginning in recognition2020, each of the significant contributions made by ournon-employee directors has the ability to help prepare us for a successfulSpin-Off, including identifying candidates for leadership roles in the new company, eachnon-employee director received a special equity award in November 2018 in the formelect to defer all of RSUs with a grant date value equal to twice their normalhis or her annual cash retainer as well as his or her annual equity retainer. Thisretainer award will vest in equal installments onpursuant to the thirdterms of our Director Deferred Compensation Plan and fourth anniversaries of the grant date.Director Stock Plan, respectively, as discussed above. The table below reflects the 20182019 compensation paid to ournon-employee directors.
Director Name | Fees Earned or Paid in Cash ($) | Stock Awards (1)($) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards (1)($) | Total ($) | ||||||||||||||||||||||||
Roger Fradin | 137,500 | 359,384 | 496,884 | 275,000 | 119,999 | 394,999 | ||||||||||||||||||||||||
Niccolo de Masi | 56,250 | 359,384 | 415,634 | |||||||||||||||||||||||||||
Niccolo de Masi(2) | 15,833 | 0 | 15,833 | |||||||||||||||||||||||||||
Paul Deninger | 57,500 | 359,384 | 416,884 | 115,000 | 119,999 | 234,999 | ||||||||||||||||||||||||
Brian Kushner(3) | 8,219 | 63,601 | 71,820 | |||||||||||||||||||||||||||
Jack Lazar | 60,000 | 359,384 | 419,384 | 120,822 | 119,999 | 240,821 | ||||||||||||||||||||||||
Nina Richardson | 53,750 | 359,384 | 413,134 | 108,322 | 119,999 | 228,321 | ||||||||||||||||||||||||
Andrew Teich | 55,000 | 359,384 | 414,384 | |||||||||||||||||||||||||||
Andrew Teich(4) | 172,089 | 252,817 | 424,906 | |||||||||||||||||||||||||||
Sharon Wienbar | 55,000 | 359,384 | 414,384 | 120,000 | 119,999 | 239,999 | ||||||||||||||||||||||||
| (1) | The stock award values set forth in the above |
| (2) | Mr. de Masi earned cash retainer fees as anon-employee director of the Resideo board through February 12, 2019 after which time he became President, Products & Solutions and Chief Innovation Officer of Resideo, effective February 13, 2019 and became ineligible to earn any additional cash retainer amounts or an annualnon-employee director equity retainer |
| (3) | Mr. Kushner received an RSU award for 6,704 shares with a fair value of $9.487 per share upon joining the Resideo board on December 2, 2019. This award will vest in full on |
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| (4) | In addition to the standard annual equity retainer grant of RSUs awarded on June 12, 2019 |
A more detailed discussion of the assumptions used in the valuation of stock awards made in fiscal year 2019 may be found in Note 18 of the Notes to the Financial Statements in the Company’s Form10-K for the year ended December 31, 2019.
Director Name | Outstanding Equity Awards as of 12/31/ | ||||
(#) | |||||
Roger Fradin | |||||
| 16,956 | |||||
Niccolo de | |||||
| 11,157 | |||||
Paul Deninger | |||||
Brian Kushner(2) | 6,704 | ||||
Jack Lazar | |||||
| 16,956 | |||||
Nina Richardson | |||||
| 16,956 | |||||
Andrew Teich | |||||
| 30,956 | |||||
Sharon Wienbar | |||||
| 16,956 | |||||
In February 2019,# Outstanding equity awards for all directors with the exception of Mr. Niccolo de Masi, who has been a memberKushner include an RSU award for 11,157 shares granted on November 16, 2018 which will vest for 50% of the Board since October 2018, acceptedshares on November 16, 2021 and the positionremaining shares will vest on November 16, 2022, plus 5,799 shares granted under the 2019 annual equity retainer on June 12, 2019 which will vest in full on June 12, 2020. Mr. Teich also received an RSU award for 14,000 shares in recognition of President, Products and Solutions and Chief Innovation Officer for Resideo. Because Mr. de Masi will remain a memberhis role as Chair of the Board, the Resideo equity awards he received while serviceStrategic & Operational Committee as a member of the Board will continue to vest per the terms of those awards.noted above.
| (1) | ||
| Mr. de Masi’s award will continue to vest pursuant to the terms of his award agreement, which was amended effective January 6, 2020. |
| (2) | Mr. Kushner’s award for 6,704 shares was granted on December 2, 2019 and will vest in full on June 12, 2020. |
Stock Ownership Guideline forNon-Employee Directors
To further align the interests of directors with the long-term interests of our shareholders,non-employee directors are required to own, until retirementtheir separation from service from the Board, at least five times the value of their annual cash retainer, or $450,000, in our common stock (including shares relatingby the fifth anniversary of their appointment to RSUs). Accordingly, whether a director holdsthe Board. For purposes of the guidelines, share ownership includes shares of Resideo common stock, restricted sharestock units orand deferred share units, directors havestock units. Accordingly, the sameguidelines align our directors’ economic interestinterests in the performance of the Company which further aligns directors’ interests with those of our shareholders.
As of December 31, 2019, Mr. Fradin and Mr. Teich have already met the minimum stock ownership required under our stock ownership guidelines. The other directors are still within the first five years of their service on the Board.
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In addition to Mr. Nefkens, and Mr. de Masi, whose biographical information is included on pages 8 and 10, respectively,page 12, the following is a list of individuals serving as executive officers of Resideo as of the date of this Proxy Statement. All of Resideo’s executive officers have been appointed annually by the Board and serve at the discretion of the Board and CEO. There are no family relationships among them.any of our executive officers.
NAME, AGE,
AN EXECUTIVE OFFICER |
POSITION |
BUSINESS EXPERIENCE | ||||
Robert Ryder, 60, 2019 | Interim Chief Financial Officer | Mr. Ryder currently serves as the President of Horsepower Advisors, LLC, a consulting firm through which his services have been retained by the Company. Immediately prior to that role, he served as the chief financial officer for Constellation Brands, a global beverage and alcohol company, from 2007 to 2015. Mr. Ryder has also held chief financial officer positions with IMG and American Greetings Corporation, as well accounting and finance positions of increasing responsibility at PepsiCo, Inc. Mr. Ryder started his career in public accounting at Price Waterhouse. He received a bachelor’s degree from the University of Scranton in Accounting and Finance. Mr. Ryder is also a Certified Public Accountant. | ||||
Robert Aarnes, | President, ADI Global Distribution | Prior to joining the Company, Mr. Aarnes served as president of Honeywell’s ADI Global Distribution business since January 2017. Mr. Aarnes served as vice president and general manager of Honeywell’s ADI North America business from November 2014 to January 2017. Mr. Aarnes served as vice president of operations of Honeywell’s ADI North America business from January 2013 to November 2014. Prior to joining Honeywell, Mr. Aarnes served as president and chief executive officer of GUNNAR Optiks, LLC, a company that specializes in developing and manufacturing digital eyewear, from September 2008 to November 2012. Mr. Aarnes received his bachelor’s degree in political science from the United States Naval Academy and his | ||||
Michael Flink, | Executive | Mr. Flink has served as the Company’s Executive Vice President of Transformation since January 2020, and previously served as the Company’s Executive Vice President and Chief Sales and Marketing | from October 2018 to January 2020. Prior to joining the Company, Mr. Flink served as president of Honeywell Homes Products since June 2018. Mr. Flink served as president of Honeywell’s Homes Business from January | |||
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NAME, AGE, YEAR FIRST APPOINTED AN EXECUTIVE OFFICER | POSITION | BUSINESS EXPERIENCE | ||
Stephen Kelly, | Executive | Prior to joining the Company, Mr. Kelly served as vice president of | ||
Jeannine Lane, | Executive Vice President, General Counsel, | Prior to joining the Company, Ms. Lane was the | ||
| Prior to joining the Company, Mr. | |||
| Dartmouth College. | ||||
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Our People, Our Environment and Our Community
Our Culture
As a new company, Resideo has a unique opportunity to definean aspirational vision called our culture. By listening intently to our Board, shareholders, employees and customers, we have definedPerformance Signature®, which defines who we want to be – this aspirational vision is called our Performance Signature.as a company. We will keep doing what works, get rid of what does not and start new elements that we will need to be successful in the smart home market.
For us to succeed, we need to buildWe promote a business with a clear purpose that we can all be proud of, we need to innovatethat innovates in new ways, we need to operateoperates with high velocity and agility to get the job done, and we need to beis vested in our people.
Our Performance Signature® contains four energies that are intricately woven together to guide us in shaping the culture of Resideo. Energies are clusters of mindsets and behaviors with a strong link to business performance. Each of these describes a different aspect of the culture we need in order to succeed; driven by purpose, high velocity operators, breakout innovators, vested in our people.
Vested in Our People
High Velocity Operators
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InclusionOur business grows and thrives by focusing on our customer, commitment, courage and knowing where we are going and why. Those who are Driven by Purpose demonstrate their commitment and passion by coming up with distinctive solutions that create true value for our customers, partners, people and shareholders.
Breakout Innovators
Those who are Breakout Innovators set the industry standard through boldness, curiosity, questioning and calibrated risk taking.
Diversity and Inclusion
Resideo is committed to establishingencouraging a diverse and inclusive environment that helps attract and retain the global talent needed to drive our business forward. With the creation of our Company, weWe have adopted a Code of Business Conduct (“Code”) that requires our employees to respect each other and promote a positive workplace. We regularly report the results of our efforts regarding diversity and inclusion and any reported allegations involving the Code to the Board.
In early 2020, we refreshed our Code, which continues to require that employees treat each other with dignity and respect, and links to our Global Harassment and Retaliation policy, prohibiting workplace harassment in any form. Per our Code, Resideo respectswe believe that our diverse, talented global workforce is the key to our success. In 2019, we launched BeingYou@Resideo, an initiative to establish discussion forums such as Women@Resideo and values thePride@Resideo, and we offered unconscious bias training to all our employees. We continue to require our businesses and regions to report to our executive leadership about progress with respect to our diversity reflected in our employees’ various backgrounds, experiences and ideas, and our workplace is one that reflects the diversity of the communities in which we operate.inclusion initiatives. Similarly, as part of our commitment to our communities and our world, Resideo respects a
| 2020 PROXY STATEMENT | 29 |
broad range of human rights. In 2019, we also implemented a Supplier Code of Conduct, available on our website, to communicate the expectation that suppliers treat their employees with dignity and respect. Per our Code,codes and policies, Resideo does not condone or employ child labor, trafficking in persons or forced labor in any form. In addition, a supplier code of business conduct is available on our website at www.resideo.com.
Employee Engagement through Total Rewards
Our compensation and benefits programs provide us with a solid foundation to attract, motivate and retain a technically-skilled workforce. As we transition to a balanced-growth technology company,our strategy focuses us on being the market leader in the connected homes space, we emphasize a strongpay-for-performance bias.culture. Our total rewards programs will provide incentives to drive “top line” growth profitably, efficiently generate the cash needed to invest in innovative solutions and reward achievement of near and long-term business performance targets. We will accomplish this in a manner consistent with good governance practices.
We have expanded the use of stock-based incentives to strengthen the alignment of manager interests with that of our shareholders and to encourage managers to think like owners of Resideo.
We provide comprehensive, competitive and contemporary benefits that recognize the diversity of our workforce. We provide benefits and services that help meet the varying needs of our employees and promote choice. Our package includes generous paid time off, flexible work schedules, education assistance programs and more. We believe the combination of our competitivepay-for-performance compensation programs and our comprehensive health and welfare benefits demonstrate our commitment to a compelling total rewards value proposition for our employees.
Environmental Sustainability and Health and Safety Overview
AsA focused approach to sustainability is a new, stand-alone public company, we are customizingpriority for us – our global health, safety and environmental (“HSE”) management system to reflect what is important to our business. We understand the external and internal issues that are relevant to our organization and continue to integrate HSE considerations in all aspects of our business and supporting management systems. Resideo’s HSE programs are managed by a global team of trained, experienced professionals. They are led by Resideo’s Global HSE Director, who has overall responsibility for all global HSE programs and initiatives and reports to the Company’s Executive Vice President, General Counsel and Corporate Secretary, who reports our progress to the Board.
Environmental Sustainability
Resideo’s leadership is committed to and accountable for our sustainability efforts to ensure that sufficient resources are deployed to manage our commitments and maintain appropriate controls. This commitment is documented in our Sustainability Opportunity policy endorsed by our CEO and publicly available on our website.
To support this sustainability focus, we have established a Corporatean Operational Sustainability Committee, led by our HSE team and consisting of representatives from leadership, government relations and product stewardship. The Committee’s purpose is to evaluate the holistic sustainability agenda of the company, including water, waste, energy and greenhouse gas emission. emissions and provide leadership with guidance on operational and strategic issues.
We communicate with internal and external stakeholders to promote awareness of their responsibilities and how they can contribute to improving sustainability performance.efforts. As part of our Supply Chain Management processes we make our Supplier Code of Conduct available for review on our website in a multitude of languages. We review all direct material suppliers against this and physically audit before approval. Further, we include a link to the Supplier Code of Conduct in our standard purchase order.
A primary areaIn 2019, as a new, stand-alone public company, we measured and analyzed our Health, Safety and Environmental Sustainability performance across a comprehensive set of focussustainability metrics. We used guidance issued by the Sustainability Accounting Standards Board (SASB) for our environmentalindustry and have used 2019 as our baseline year. We are using this data to target reductions and sustainability program isprojects for specific Resideo facilities in 2020.
We will continue to further improve Resideo’smonitor the SASB standards applicable to our industry and will seek to increase compliance and reporting. We will also monitor practices and disclosures by others in our industry.
Based on our risk analysis we are focusing on our facilities located in extremely high water-stressed regions and other facilities that have a low waste diversion rate (waste diverted from landfill) for hazardous andnon-hazardous waste, as well as general energy efficiency improvement projects across our portfolio.
Based on baseline year data analysis, we have set our sustainability goals on reducing energy and other resources and reducewater consumption, greenhouse gas generation. emissions, and increase waste recycling in our operations by 20% by 2025.
| 30 | 2020 PROXY STATEMENT | |
Environmental Sustainability
In 2018,2019, we implemented global environmental projects at our sites that saved energy and reduced our carbon footprint. For example, we implemented an LED lighting upgrade project in Nagykanizsa, Hungary that resulted in an
We reduced energy consumption by 53 BBTU (Billion British Thermal Units), which represents a 9%year-on-yearreduction of 1.15 BBTU (billion British thermal units) and alsofrom 2018.
We reduced our carbon footprintgreenhouse gas emissions by 933013 metric tons. Wetons of CO2e (CO2 equivalent), which represents a 5%year-on-year reduction from 2018.
Our Nagykanizsa site in Hungary received the “Energy Efficient Company” Award fromaward for the Virtual Powerhouse Programsecond time in 2019. The lighting projects at the site save a total of 298 Mwh (MegaWatt Hours) of electricity per annum.
Our Tijuana site in Mexico (a high water stressed area) implemented a water reuse project in 2019, saving 180 CuM (Cubic Meters) per annum.
Health and Safety
Our global Total Case Incident Rate or “TCIR” (the number of occupational injuries and illnesses per 100 employees) was 0.24 at the end of 2019, which is significantly lower than the North American Industry Classification System injury rate for this project.
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We regularly evaluate our existing sustainability goals performance to ensure company-wide environmental targets are appropriate for our business. We are currently evaluating our water and waste data to determine improvement targets for 2020. We continue to invest in conservation projects and measure our progress through periodic management review and make course corrections as necessary.
We monitor our safety through a balanced scorecard of key performance indicators. In addition to reactive incident management investigation and root cause analysis indicators, we measure and analyze the data generated from our hazard observation, designated HSE inspections by line managers and internal audit programs by accredited HSE lead auditors to provide insights and intelligence that help us proactively mitigate issues before they result in incidents. |  |
Social Responsibility
Committed to a Sustainable Future
Resideo is working to address some of the fundamental global challenges we face. We are starting at home – with our neighborhoods and communities – and committing to making a difference.
As a company, we provide people with tools to effortlessly manage their whole home to keep it more comfortable, safe, secure and healthy. We are currently seeking global and localnon-profit partners who align withencourage our Company’s safety and environmental goalsemployees to help develop programsparticipate in grass-roots efforts and initiatives that will drive continuous improvement in our communities and in the world.
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Certain Transactions with Related Parties
Our ADI Global Distribution business (“ADI”) leases its administrative office building in Melville, New York at a current rent of approximately $1,100,000 per year through 2023 and reimburses the landlord for certain real estate taxes and insurance premiums paid on the property, the future value of which cannot be determined through 2023. ADI has the right to prematurely terminate the lease after March 2022 for a termination fee of $150,000. After ADI entered into this lease, the property was acquired by a partnership known as “New Island Holdings.” There have been no material amendments to the lease since the property was acquired by New Island Holdings. Mr. Fradin, the Chairman of our Board, is a limited partner in New Island Holdings, holding a 12% ownership interest. The value of the aggregate payments allocable to Mr. Fradin’s share of New Island Holdings from January 1, 2018 through the expiration of the lease in March 2023 is approximately $706,000. The limited partners of New Island Holdings receive distributions based on total lease payments generated from the portfolio of buildings that the partnership owns, less applicable mortgage and other expenses.
In connection with theSpin-Off, Resideo and Honeywell entered into a Separation and Distribution Agreement, an Employee Matters Agreement, an Indemnification and Reimbursement Agreement, a Tax Matters Agreement, a Transaction Services Agreement, a Trademark License Agreement and a Patent Cross-License Agreement. These agreements govern the relationship between Resideo and Honeywell including the allocation of various assets, liabilities, rights and obligations as well as transition services to be provided by Honeywell to Resideo and by Resideo to Honeywell. For additional details regarding these agreements see Exhibit 99.1 to Amendment No. 2 to the Company’s Registration Statement on Form 10 as filed with the SEC on October 2, 2018 and our Form10-K for the year ended December 31, 2018.2019.
Review, Approval and Ratification of Transactions with Related Parties
The Company has a written Policy Concerning Related Party Transactions (the “Policy”) regarding the review, approval and ratification of transactions between the Company and related parties. The Policy applies to any transaction in which Resideo or its subsidiary is a participant, the amount involved exceeds $120,000 and a related party has a direct or indirect material interest. A related party means any director or executive officer of the Company, any nominee for director, any shareholder known to the Company to be the beneficial owner of more than 5% of any class of the Company’s voting securities and any immediate family member of any such persons.
Under the Policy, reviews are conducted by management to determine which transactions or relationships should be referred to the Audit Committee for consideration. The Audit Committee then reviews the material facts and circumstances regarding a transaction and determines whether or not the transaction is fair and reasonable and consistent with the Policy and whether the transaction should be ratified or approved. The Policy is in addition to the provisions addressing conflicts of interest in our Code of Business Conduct and any similar policies regarding conflicts of interest adopted by the Board. Our directors, executive officers and all other employees are expected to comply with the terms of the Code of Business Conduct.
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Delinquent Section 16(a) Beneficial Ownership Reporting ComplianceReports
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file initial reports of ownership and reports of changes in ownership of the Company’s common stock and other equity securities with the SEC within specified periods. Due to the complexity of the reporting rules, the Company undertakes to file such reports on behalf of its directors and executive officers and has instituted procedures to assist them with these obligations. Based solely on a review of filings with the SEC and written representations from the Company’s directors and executive officers, the Company believes that in 20182019 all of its directors and executive officers filed the required reports on a timely basis with respect to Resideo’s equity securities under Section 16(a)., except that Mr. Fradin’s Form 3 filed in October 2018 inadvertently omitted reporting the 2,622 shares he directly held and the 8 shares that he held indirectly through a limited liability company.
Stock Ownership of Certain Beneficial Owners
The following shareholders reported to the SEC that they beneficially owned more than 5% of Resideo common stock as of December 31, 2018.2019.
Name and Address of Beneficial Owner | Title of Class | Amount and Nature of Beneficial Ownership (#) | Percent of Class(1) | ||||||||||||
The Vanguard Group 100 Vanguard Boulevard Malvern, PA 19355 | Common Stock | ||||||||||||||
| 9.20% | |||||||||||||||
55 East 52nd Street, New York, NY 10055 | Common Stock | ||||||||||||||
Praesidium Investment Management Company, LLC 1411 Broadway – 29th Floor New York, NY 10018 | Common Stock | 7,781,233(4) | 6.30% | ||||||||||||
| (1) | Percentage ownership based on the Schedule 13G/A filings of The Vanguard Group and |
| (2) | According to Schedule 13G/A filed with the SEC on February 12, |
| (3) | According to Schedule 13G/A filed with the SEC on February |
| (4) | According to a Schedule 13D filed with the SEC on December 13, 2019, Praesidium Investment Management Company, LLC (“Praesidium”), in its capacity as investment manager to certain managed accounts and investment fund vehicles on behalf of investment advisory clients, is the beneficial owner of 7,781,233 shares (with sole voting power with respect to 7,331,691 shares and sole dispositive power with respect to 7,781,233 shares). As the managing members of Praesidium, Peter Uddo and Kevin Oram may be deemed to beneficially own such shares. |
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Stock Ownership of Directors and Executive Officers
The following table shows the ownership of Resideo common stock, as of April 15, 2019,2020, by each director, each of the NEOs, and all directors and executive officers (serving as of such date) as a group. The address of each director and executive officer shown in the table below is c/o Resideo Technologies, Inc., 1985 Douglas Drive North, Golden Valley, MN 55422.901 E. 6th Street, Austin, TX 78702. Executive officers and directors are subject to stock ownership guidelines. Please see the “Compensation Discussion and Analysis” for a discussion of executive stock ownership guidelines and the “Stock Ownership Guideline forNon-Employee Directors” for a discussion ofnon-employee stock ownership guidelines.
Name | Shares of Common Stock3 | Percentage of Class Beneficially Owned | Restricted Stock Units4 | Total including Shares and Units5 | Shares of Common Stock(4) | Rights to Acquire Shares of Common Stock(5) | Total(6) | Percentage of Class Beneficially Owned | ||||||||||||||||||||||||||||||||
Directors | ||||||||||||||||||||||||||||||||||||||||
Non-Employee Directors |
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Roger Fradin | 27,662 | * | — | 27,662 | 58,240 | 5,799 | 64,039 | * | ||||||||||||||||||||||||||||||||
Niccolo de Masi1 | 0 | * | — | 0 | ||||||||||||||||||||||||||||||||||||
Paul Deninger | 0 | * | — | 0 | 5,578 | 5,799 | 11,377 | * | ||||||||||||||||||||||||||||||||
Cynthia Hostetler | 0 | 6,143 | 6,143 | * | ||||||||||||||||||||||||||||||||||||
Brian Kushner | 0 | 6,704 | 6,704 | * | ||||||||||||||||||||||||||||||||||||
Jack Lazar | 9 | * | — | 9 | 30,587 | 5,799 | 36,386 | * | ||||||||||||||||||||||||||||||||
Nina Richardson | 0 | * | — | 0 | 10,498 | 5,799 | 16,297 | * | ||||||||||||||||||||||||||||||||
Andrew Teich | 0 | * | — | 0 | 60,242 | 8,133 | 68,375 | * | ||||||||||||||||||||||||||||||||
Sharon Wienbar | 0 | * | — | 0 | 10,478 | 5,799 | 16,277 | * | ||||||||||||||||||||||||||||||||
Named Executive Officers |
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Michael Nefkens(1) | 41,372 | 94,114 | 135,486 | * | ||||||||||||||||||||||||||||||||||||
Michael Nefkens2 | 11,392 | * | — | 11,392 | ||||||||||||||||||||||||||||||||||||
Robert Ryder | 22,900 | 0 | 22,900 | * | ||||||||||||||||||||||||||||||||||||
Joseph Ragan | 4,809 | * | — | 4,809 | ||||||||||||||||||||||||||||||||||||
Michael Flink | 22,242 | * | 9,200 | 31,442 | ||||||||||||||||||||||||||||||||||||
Robert Aarnes | 20,835 | 22,943 | 43,778 | * | ||||||||||||||||||||||||||||||||||||
Stephen Kelly | 20,523 | * | — | 20,523 | 45,887 | 12,684 | 58,571 | * | ||||||||||||||||||||||||||||||||
Niccolo de Masi(2) | 20,491 | 44,247 | 64,738 | * | ||||||||||||||||||||||||||||||||||||
Robert Aarnes | 6,401 | * | — | 6,401 | ||||||||||||||||||||||||||||||||||||
Joseph Ragan(3) | 0 | 13,222 | 13,222 | * | ||||||||||||||||||||||||||||||||||||
All Directors and Executive Officers as a Group (13 individuals) | 105,324 | * | 9,200 | 114,524 | ||||||||||||||||||||||||||||||||||||
All Current Directors and Executive Officers as a Group (16 individuals) | 402,526 | 251,134 | 653,660 | * | ||||||||||||||||||||||||||||||||||||
| * | Indicates that the percentage of beneficial ownership does not exceed 1%, based on |
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Mr. Nefkens is also a director of Resideo. |
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| (3) | Mr. Ragan served as |
| (4) | This column includes shares held of record, shares held by a bank, broker or nominee for the person’s account, shares held through family trust arrangements and shares held jointly with the named individuals’ |
| (5) | This column includes shares of Company common stock that may be acquired under employee stock options that are exercisable as of April 15, |
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This table does not include performance-based restricted share units or time-based |
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Proposal 2: Advisory Vote to Approve Executive Compensation
We seek aanannual non-binding advisory advisory vote from our shareholders to approve the compensation of our Named Executive Officers as described in the “Compensation Discussion and Analysis” section beginning on page 3536 and the accompanying compensation tables beginning on page 46.51. This vote is commonly knownas“Say-on-Pay” “Say-on-Pay”.
We encourage you to read the “Compensation Discussion and Analysis” and accompanying compensation tables to learn more about our executive compensation programs and policies. Our Board believes that its 20182019 compensation-related pay decisions and our executive compensation programs align the interests of shareholders and executives by emphasizing variable compensation tied to achieving measurable goals that drive value.
This vote is not intended to address a specific item of compensation, but rather our overall compensation policies and procedures related to the Named Executive Officers. BecausetheSay-on-Pay vote vote is advisory, it will not be binding upon our Board. However, our Board will take into account the outcome of the vote and discussions with investors when considering future executive compensation arrangements.
In addition, below in Proposal 3, our Board is recommending that shareholders have the ability to vote (on an advisory basis) on the compensation of our Named Executive Officers every year. Therefore, we expect to conduct the advisory vote at our 2020 annual meeting of shareholders.
Our Board recommends that shareholders vote in favor of the following resolution:
““RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed in the Company’s Proxy Statement for the 20192020 Annual Meeting of Shareholders pursuant to the executive compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 20182019 Summary Compensation Table and the other related tables and disclosure.”
The Board of Directors unanimously recommends a vote “FOR” Proposal 2, to approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, as stated in the above resolution.
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Proposal 3: Advisory Vote on the Frequency of Future Advisory Votes to Approve Executive Compensation
We seek anon-binding vote from our shareholders on the frequency with which shareholders should have an opportunity to provide an advisory approval of our executive compensation program. Under the Dodd-Frank Act, we are required every six years to seek anon-binding advisory shareholder vote regarding the frequency of the submission to shareholders of an advisory vote to approve executive compensation. The Dodd-Frank Act specifies that shareholders be given the opportunity to vote on executive compensation every one, two or three years or abstain. For the reasons described below, we recommend that our shareholders select a frequency of one year (i.e. annually).
Our Board believes that an annual advisory vote on executive compensation encourages a regular dialogue with our shareholders on corporate governance matters, including executive compensation. An annual shareholder vote allows our shareholders to provide us with direct and immediate feedback regarding the effectiveness of our compensation programs, and provides our Board and Compensation Committee with the opportunity to consider shareholder views as part of its regular compensation review.
We therefore request that our shareholders select the “1 Year” option when voting on the frequency of advisory votes on executive compensation. Although the advisory vote isnon-binding, our Board will review the results of the vote and take them into account in determining the frequency of advisory votes on executive compensation.
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COMPENSATION DISCUSSION AND ANALYSIS
Our first year as a publicly traded company is a foundational one, and we are committed to building a company with solid fundamentals – incorporating experienced leadership and an attractive financial profile with effective stewardship of our resources, and accountability to our shareholders and customers. With that in mind, following ourSpin-Off in October 2018 Resideo’s Compensation Committee developed a comprehensive executive compensation strategy to support our transition as a stand-alone public company and promote an innovative mindset to guide our future success. This Compensation Discussion and Analysis (“CD&A”) describes that strategy.
As a new, independentnewly public company, we have unique opportunities and challenges in attracting, retaining and appropriately incentivizing our key employees. We believe that thosethese challenges and opportunities are best addressed by a new compensation program directly linking compensation to the performance of our business and rewarding long-term performance with equity. Specifically, we sought to embed this objective into our compensation framework by clearly linking pay and performance under our annual and long-term incentive compensation program design for 2019. We adopted performance measures under these programs that align the key elements of our strategy with our objective of growing shareholder value, as described in detail below. We also established criticalmaintain meaningful compensation governance policies, including stock ownership guidelines, an incentive recoupment policy and a policy prohibiting hedging and pledging of our stock by executives.
The second half of 2019 and early 2020 were a time of leadership transition for us. In late 2019, we began a comprehensive operational and financial review of Resideo to enhance long-term shareholder value, guided by the newly formed Strategic & Operational Committee of the Board. The review is designed to create a more efficient and profitable Resideo, building on the strength of our franchise. The Board has implemented certain leadership transitions in connection with this stage in our company’s development.
On November 6, 2019, the Board terminated the employment of Joseph Ragan, our former Executive Vice President and Chief Financial Officer, and appointed Robert Ryder as our Interim Chief Financial Officer effective November 7, 2019 while the Board conducts a search for a permanent chief financial officer.
Subsequently on December 2, 2019, we announced that our Board is conducting a search for the Company’s next president and chief executive officer. Mr. Nefkens is assisting in the transition and continues to run the business during the search for his successor.
Effective January 7, 2020, Sach Sankpal was appointed our President, Products & Solutions. Niccolo de Masi, who previously served as our President, Products & Solutions and Chief Innovation Officer, continued as our Chief Innovation Officer, which was not an executive officer position, until his employment terminated on March 13, 2020. Mr. de Masi resigned from the Board on January 6, 2020 when he ceased serving as an executive officer.
Our Named Executive Officers
Our leadership team includes the following Named Executive Officers (“NEOs”):
NAME | POSITION | |
Michael Nefkens | President and Chief Executive Officer | |
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| ADI Global Distribution | ||
Stephen Kelly | Executive Vice President, Chief Human Resources Officer | |
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Joseph Ragan | Former Executive Vice President, Chief Financial Officer(2) | |
During 2018 and in connection with theSpin-Off, Mr. Nefkens and Mr. Ragan joined the Honeywell Homes Business as President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, respectively. Mr. Aarnes, Mr. Flink and Mr. Kelly had each been employed by Honeywell for many years prior to theSpin-Off.
| (1) | Mr. de Masi served as President, Products & Solutions and Chief Innovation Officer from February 13, 2019 to January 6, 2020. He continued serving as our Chief Innovation Officer, which was not an executive officer position, until his employment terminated on March 13, 2020. |
| (2) | Mr. Ragan’s employment was terminated effective November 6, 2019. |
Pre-Spin-Off Compensation Decisions
The 2018 compensation of our NEOs hired by Honeywell prior to ourSpin-Off was determined in most respects by Honeywell, as well as by the terms of the Separation and Distribution Agreement (“Separation Agreement”) and the Employee Matters Agreement (“Employee Matters Agreement”), each dated October 19, 2018, entered into between Resideo and Honeywell in connection with theSpin-Off.Because our NEOs who had been employed by Honeywell prior to theSpin-Off were not executive officers of Honeywell, their compensation for 2018 prior to theSpin-Off was determined primarily by Honeywell senior management. Further, because we do not maintain employment letter agreements with our NEOs, the material terms of their compensation and benefits are described throughout this CD&ACompensation Discussion and Analysis section and supporting tables.
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Our Executive Compensation Philosophy and Approach
We operate in a highly competitive and rapidly evolving market. Our ability to compete and succeed in this environment depends on our ability to recruit, incentivize and retain talented individuals.
Our goal is to createWe believe we have created a compensation program for our employees, including our executives, that provides a compelling and engaging opportunity. The program should be compelling by offeringoffers rewards for performance and it should be engagingengages our participants by requiring a dedicatedthem to focus on driving the business to generate long-term value for our shareholders. We believe this approach will buildis building a performance-driven leadership culture. Utilizing this philosophy, our executive compensation program has been designed to:
Be market competitive, targeting median pay levels for total annual compensation, as defined by our peer group;
Create sustained increases in shareholder value through incentives designed to drive high performance;
Reward achievement of near- and long-term business performance targets;
Make pay decisions based on an executive’s skills and responsibilities, individual performance, experience, importance to the organization, retention, affordability and internal pay equity;
Encourage employees to think like owners and align the interests of our leaders at all levels with those of our shareholders by granting equity awards tomid-level and senior leaders on a regular basis;leaders; and
Deliver compensation in accordance with good governance practices that do not encourage undue risk-taking by our employees.
These objectives played a critical role in the design of our executive compensation strategy as a newly formed growth technology company.independent company in 2019. As examples, our executive compensation program for 2019 will utilizeutilized revenue growth as a component of our annual incentive plan and grantgranted a portion of equity compensation in the form of stock options. These approaches reflect our transition from Honeywell and are key features that we believe will align our executives with Resideo’s vision and strategy for delivering shareholder value. At the same time, weWe remain committed to best practices in compensation governance for public companies, as described in more detail below, and will regularly review our executive compensation strategy to maintain alignment with our objectives.
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Our Commitment to Compensation Best Practices
As part of our executive compensation program, our Compensation Committee is committed to regularly review and consider best practices in governance and executive compensation. Following theSpin-Off, our Compensation Committee adopted or ratifiedwe implemented and maintain the following policies and practices.
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Peer Group and Market Data
Shortly after ourSpin-Off from Honeywell, and withWith the assistance of our independent compensation consultant, FW Cook, our Compensation Committee approved a compensationwe selected the companies below to include in our peer group of 18 companies inbased on similar industrial, distributionsize revenue and technology sectors that are representative of the market in which we compete for talent. We review key features of compensation programs among these companies to evaluate competitive market practices.
Criteria used to identify potential peer companies included:
Statuscapitalization as an independent, publicly traded company;
Revenue between approximately 0.33 times to 3.0 timeswell as alignment with our revenue on a trailing twelve-month basis;
Market capitalization between approximately 0.33 times to 3.0 times our market capitalization; and
Sector aligned with Resideo’s current profile, targeting industrial and distribution companies and internet and technology companies that align with our strategic vision and focusfocusing on the connected home.
Informed by the screening criteria above, we selected these companies to include in our This peer group was used to support 2019 compensation decisions.
• A.O. Smith Corp. • Acuity Brands, Inc. • ADT Inc. • Alarm.com Holdings, Inc. • Allegion plc • Anixter International, Inc. • Arlo Technologies Inc. • BlackBerry Limited • Fortune Brands Home & Sec.
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• Itron, Inc. • Juniper Networks, Inc. • Lennox International Inc. • NCR Corporation • NETGEAR, Inc. • Nuance Communications • Owens Corning • Pentair plc • Watsco, Inc. |
While our Compensation Committee considers peer group information provided by its independent consultant as part of its benchmarking analysis, it may also refer to other available resources including published compensation data from surveys to fully understand competitive compensation practices in the external marketplace for executive talent. While the Compensation Committee uses median benchmark data to guide its compensation decisions, actual compensation levels may vary based on the Compensation Committee’s consideration of other factors described below.
Overview
Our Compensation Committee has the primary authority to determine and approve the compensation of our NEOs. The Committee is charged with reviewing our executive compensation policies and practices annually to ensure that the total compensation paid to our NEOs is fair, reasonable, competitive to our peers and commensurate with the level of expertise and experience of our NEOs.
Our Compensation Committee reviews and approves the total amount of compensation for our NEOs and the allocation of total compensation among each of the components of compensation. Their decisions in 2018 and to date in 2019 were determined principally on the following factors:
Individual and Company performance;
Each executive’s scope of responsibility and experience;
The judgment and general industry knowledge obtained through years of service withcomparably-sized companies in our industry and other similar industries; and
Input about competitive market practices from our independent compensation consultant.
Our management team and human resources leadership workworked closely with the Compensation Committee to analyze competitive market practices and effectively design and implement our executive compensation program. Our CEO
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regularly participates in Compensation Committee meetings and develops and provides recommendations (except with respect to his own compensation) to the Compensation Committee regarding the compensation for our NEOs (excluding himself) and the design of our incentive compensation programs. Our CEO and other NEOs are not present when their own compensation arrangements are discussed.discussed by the Compensation Committee.
| 2020 PROXY STATEMENT | 39 |
Resideo’s 2019 Executive Compensation Program
Based on this collaboration between the Compensation Committee, management and our independent consultant to the Board, weWe have designed both near- and long-term incentive compensation packages that we believe are competitive and support the compensation objectives described above.
BASE SALARY | • Salaries are competitive with median market practice for the individual’s role, taking into consideration individual performance, experience, scope of role relative to market benchmarks and other factors | |
ANNUAL INCENTIVE PLAN
| • As a
• Financial metrics for 2019
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• Each metric | |
LONG-TERM INCENTIVES | • Target long-term incentive values
• Stock options vesting annually over three years in equal,one-third installments
• RSUs vesting annually over three years in equal,one-third installments
• Performance share units (“PSUs”) with a three-year performance period utilizing performance goals measuring revenue and adjusted EBITDA performance targets set at time of grant | |
The Compensation Committee approved a 2019 executive compensation program which reflects our business strategy and a strongpay-for-performance culture. Our Compensation Committee views stock options as an equity instrument that strongly aligns the compensation realized by our NEOs and the long-term returns generated for our shareholders, as no compensation is earned unless the Company’s stock price increases from the level at which the option is granted. In addition, PSUs provide for multi-year revenue and adjusted EBITDA performance measurement and reinforce the goals established through our long-range planning process and approved by our Board. Our RSU awards further align the interests of our NEOs with our shareholders and provide a meaningful retention vehicle. Lastly, our long-term incentive plan only offers share-settled awards for all long-term incentive awards, which differs fromfurther ensuring an alignment with thepre-spin legacy practice interests of cash-settled performance unit awards.our shareholders.
The charts below illustrate our NEOs’ compensation mix, which is heavily tied to variable compensation directly linked to company performance and aligned with our strongpay-for-performance compensation philosophy.
2019 CEO Total Target Direct Compensation | 2019 Avg. Other NEO Direct Compensation | |
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In determining the relative weight of our performance awards and the financial metrics used to set performance targets for our 2019 annual and long-term incentive compensation awards, our leadership team and Compensation Committee considered, among other factors, feedback received directly from certain shareholders and determined that revenue growth, profitability and cash flow measures were appropriate for our annual incentive program. The Compensation Committee also determined that revenue and profitability measures would be right for our long-term incentive plan for our first full year as an independent company. In coming to this decision, the Compensation Committee considered the fact that as a newly public company, we could not effectively establish measures which compare our performance against competitors or our executive compensation peer group.
The
| 40 | 2020 PROXY STATEMENT | |
Preview of 2020 Executive Compensation Design Changes
For the 2020 compensation program, the Compensation Committee intends that in future years we will have baseline-relative performance measuresadded relative total shareholder return (rTSR) to consider in setting goalsthe financial metrics used under our long-term performance compensation plan targetsPSUs and will be able to increaseincreased the weight of performance-based equity within the mix of awards offered to executives.
Summaryour executive officers to 50% of 2018the total long-term incentive mix. Specifically, the CompensationPre- Committee approved a long-term incentive (LTI) program consisting of 50% performance-based share units, 30% stock options, andPost-Spin-Off
The following discusses 20% time-based restricted stock units. All PSUs have a three year performance period and PSUs subject to the compensation paidrTSR metric will be earned by comparing our total shareholder return to our NEOs during 2018, a substantial portionthe total shareholder return of which was forother companies in the period prior to ourSpin-Off and was determined by Honeywell.S&P 400 Industrials Index as of the beginning of 2020.
Base Salary
The base salaries reported in the Summary Compensation Table below reflect actual salary paid only for the portion of the fiscal year following ourSpin-Off from Honeywell. Base salaries paid to our executives following ourSpin-Off were a continuation of the salary rates in effect during their tenure at Honeywell.
Our base salaries provide a competitive level of fixed compensation for our NEOs that is aligned with their role and accounts for additional factors such as their level of experience and individual performance. The Compensation Committee considers competitive fixed cash compensation to be an important foundation of a competitive total compensation program that will both retain and motivate our executives. At least annually, the Compensation Committee intends to reviewreviews the competitiveness of base salaries relative to external benchmarks and considerconsiders changes, as appropriate, taking into consideration market data as well as factors specific to our Company, including key elements of our compensation philosophy described above. During the 2019 compensation review, only Mr. Nefkens and Mr. Aarnes received salary adjustments of 2.3% and 12.5% respectively.
20182019 Annual Incentive Plan
For fiscal year 2018, theThe annual incentive opportunity for our NEOs was governed in part by a Honeywell annual incentive plan and performance metrics established by Honeywell. Payment for that portion of the annual incentive was determined by the Resideo Compensation Committee considering Honeywellincluded measuring Resideo’s performance for approximately 10 months of 2018. For the period following theSpin-Off, our Compensation Committee approved a bonus framework measuring Resideo performance. The post-spin plan weighted net incomeby weighting revenue at 40%, Adjusted EBITDA and freeoperating cash flow equally at 40%20% each and allocatedthe remaining 20% of the target award to the measurement ofmeasuring individual performance and achievements, as determined by the Resideo Compensation Committee. The revenue measure is based on the total value of the products and services sold to our customers net of discounts and returns. The adjusted EBITDA measure represents our earnings before interest, taxes, depreciation, and amortization and provides a reasonable measure of the profitability of our operations. The operating cash flow measure is calculated as adjusted EBITDA plus changes in working capital less adjusted capital expenditures during the year. The annual incentive award financial metrics for our NEOs, other than Mr. Aarnes and Mr. de Masi, were calculated solely based on overall Resideo results. The financial metrics used to determine Mr. Aarnes’ annual incentive payment were based solely on the results of ADI. The financial metrics used to determine Mr. de Masi’s annual incentive payment were calculated and weighted equally between overall Resideo results and the results for the Products & Solutions business.
The Compensation Committee awarded 100%performed a qualitative assessment of individual performance against the approved objectives specified for each officer for 2019 and their accomplishments against those objectives as summarized on pages 43 and 44 below.
In connection with our recent leadership transition, the Compensation Committee chose to pay each of Mr. Nefkens and our former executive officers, Mr. Ragan and Mr. de Masi, in accordance with the Company’s actual financial results with respect to the financial metric components of the award but reduced the individual performance component (20%) tofor each of their awards by 50%, resulting in the NEOs for 2018 as all the NEOs met their individual objectives, including those related to the planning and executionperformance component payment of spin-related activities.10% rather than 20%.
| 2020 PROXY STATEMENT | 41 |
The tables below summarize the plan goals and performance results for the post-spin period2019 for the Company overall, for ADI and for the ADI Global DistributionProducts & Solutions business. These measures were used to determine the bonus payments to the NEOs as shown on pages 41 - 42.page 45. Under the Plan,2019 annual incentive plan, our NEOs were eligible to receive a bonus ranging from a threshold payment of 50%20% to a maximum of 200% of theirthe target award.award allocated to achievement of the Revenue and Adjusted EBITDA goals, and ranging from a threshold payment of 16% to a maximum of 200% of the target award allocated to achievement of the Operating Cash Flow goal. With 100% target goal achievement, the resulting payment would be 100% of the target bonus for that performance metric.
Financial Performance (80% of bonus) | For the period October 29 - December 31, 2018 | For the period January 1 - December 31, 2019 | ||||||||||||||||||||||||||||||||||||
Total Company | Threshold (50%) | Goal ($M) | Maximum (200%) | Actual ($M) | Post-Spin Performance % | Threshold ($M) | Goal ($M) | Maximum ($M) | Actual ($M) | Financial % | ||||||||||||||||||||||||||||
Resideo Revenue (40%) | 4,613 | 5,014 | 5,515 | 4,986 | 99% | |||||||||||||||||||||||||||||||||
Resideo Net Income (50%) | 94.56 | 118.20 | 141.84 | 89.25 | 76% | |||||||||||||||||||||||||||||||||
Resideo Adjusted EBITDA (20%) | 353 | 420 | 504 | 360 | 86% | |||||||||||||||||||||||||||||||||
Resideo Free Cash Flow (50%) | 125.04 | 156.30 | 187.56 | 143.03 | 92% | |||||||||||||||||||||||||||||||||
Resideo Operating Cash Flow (20%) | 234 | 285 | 342 | 191 | 67% | |||||||||||||||||||||||||||||||||
Financial Performance (80% of bonus) | For the period January 1 - December 31, 2019 | |||||||||||||||||||
ADI Global Distribution | Threshold ($M) | Goal ($M) | Maximum ($M) | Actual ($M) | Financial % | |||||||||||||||
ADI Revenue (40%) | 2,583 | 2,808 | 3,089 | 2,813 | 100% | |||||||||||||||
ADI Adjusted EBITDA (20%) | 196 | 233 | 280 | 231 | 99% | |||||||||||||||
ADI Operating Cash Flow (20%) | 175 | 214 | 257 | 215 | 100% | |||||||||||||||
Financial Performance (80% of bonus) | For the period January 1 - December 31, 2019 | |||||||||||||||||||
Products and Solutions (P&S) | Threshold ($M) | Goal ($M) | Maximum ($M) | Actual ($M) | Financial % | |||||||||||||||
P&S Revenue (20%) | 2,101 | 2,284 | 2,512 | 2,173 | 95% | |||||||||||||||
P&S Adjusted EBITDA (10%) | 572 | 681 | 817 | 533 | 78% | |||||||||||||||
P&S Operating Cash Flow (10%) | 464 | 566 | 679 | 397 | 70% | |||||||||||||||
*For P&S, consolidated Resideo financial performance as reflected in the table above accounted for the remaining 40% of the financial component.
| 2019 Annual Incentive Award - Financial and Individual | For the period January 1 - December 31, 2019 | |||||
Performance Achievement | Financial Performance Result (80%) | Individual Performance (20%) | Total Award % | |||
Michael Nefkens | 42% | 10% | 52% | |||
Robert Ryder | — | — | — | |||
Robert Aarnes | 79% | 30% | 109% | |||
Stephen Kelly | 42% | 39% | 81% | |||
Niccolo de Masi | 31% | 10% | 41% | |||
Joseph Ragan | 42% | 10% | 52% | |||
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Financial Performance (80% of bonus) | For the period October 29 - December 31, 2018 | |||||||||||||||||||
ADI Global Distribution | Threshold (50%) | Goal ($M) | Maximum (200%) | Actual ($M) | Post-Spin Performance % | |||||||||||||||
Resideo Net Income (25%) | 94.56 | 118.20 | 141.84 | 89.25 | 76% | |||||||||||||||
Resideo Free Cash Flow (25%) | 125.04 | 156.30 | 187.56 | 143.03 | 92% | |||||||||||||||
ADI Net Income (25%) | 13.76 | 17.20 | 20.64 | 17.05 | 99% | |||||||||||||||
ADI Free Cash Flow (25%) | 19.36 | 24.20 | 29.04 | 41.06 | 170% | |||||||||||||||
| Full-year (January 1 - December 31, 2018) | ||||||
| 2018 Annual Incentive Award - Financial and Individual Performance Achievement | Financial Performance Result (80%) | Individual Performance | Total Award % | |||
Corporate Officers | 72% | 20% | 92% | |||
President, ADI Global Distribution | 79% | 20% | 99% | |||
In determining the actual 20182019 bonus awards paid to each executive, the following formula was applied, factoring in any required proration due to changes in salary during the performance period, as well as changes in bonus target percentage.applied.
| Annual Incentive Cash Bonus | = | Base Salary | × | Target Bonus Percentage | × | [ | Financial Performance Payout Percentage
| + | Individual Performance Payout Percentage | ] | ||||||||||||
2019 Annual Incentive Plan – Individual Performance Objectives (20% of target award)
The table below showsCompensation Committee conducted a qualitative assessment to determine the aggregate annual cash incentive awards paid to our NEOs under both the Honeywell annual bonus plan (for theindividual performance objectives portion of the 2018 fiscal year preceding theSpin-Off) and the Resideo bonus plan (for the portion2019 annual incentive award payout, which accounts for 20% of the fiscal year following theSpin-Off). Bonuses paidtarget award. The Committee first reviewed corporate performance for each business unit and functional area and noted general 2019 accomplishments that were significant to all the NEOs, except Mr. Aarnes, were based on total Resideo results. The bonus paid to Mr. Aarnes was based on theunderstanding individual NEO performance. Each NEO’s objectives and results for total Resideoagainst those objectives is discussed below:
Michael Nefkens, President and the Distribution division, equally-weighted, as shown in the table above.Chief Executive Officer
Michael Nefkens* | ||||
Bonus Target | $ | 1,100,000 | ||
Bonus Paid | $ | 998,977 | ||
* Mr. Nefkens’ bonus was determined as if employed for the entire calendar year pursuant to Mr. Nefkens’ offer of employment from Honeywell. |
| |||
Joseph Ragan** | ||||
Bonus Target | $ | 169,973 | ||
Bonus Paid | $ | 156,237 | ||
** Mr. Ragan’s bonus target waspro-rated based on his August 13 start date. | ||||
Michael Flink*** | ||||
Bonus Target | $ | 241,588 | ||
Bonus Paid | $ | 222,065 | ||
Stephen Kelly*** | ||||
Bonus Target | $ | 194,101 | ||
Bonus Paid | $ | 178,415 | ||
Objectives | Results | |
• Establish organizational effectiveness to reflect new organizational structure • Establish three-year strategy • Launch ADT Command portfolio, North American and EMEA general market release and next generation thermostat • Establish new corporate headquarters • Establish cybersecurity capabilities and governance • Establish corporate scorecard with targets • Establish budget and line of business targets | In connection with Mr. Nefkens’ transition, the Committee approved a payout of Mr. Nefkens’ personal performance component at 50% of target for this component (equal to 10% of total target incentive), in recognition of satisfaction of many of the objectives related to theSpin-Off and the Company’s first year of operations as an independent organization. In particular, the Committee considered Mr. Nefkens’ achievement of the following: ➣ Implemented an effective operating cadence with the leadership team that includes regular customer visits ➣ Completed analysis of organization spend and corporate cost structure and kicked off strategy development with lines of business. ➣ Completed the relocation of the corporate headquarters to Austin, Texas ➣ Completed the assessment of cyber capabilities | |
Robert Aarnes, President, ADI Global Distribution
Objectives | Results | |
• Develop3-5 year growth strategy • Develop EBITDA margin expansion plan andtwo-year financial plan • Execute ADI sales and marketing initiatives to deliver successful launches and growth objectives | Based on the results below, the Committee approved a payout of Mr. Aarnes’ personal performance component at 150% of target for this component (equal to 30% of total target incentive) ➣ Developed and successfully implemented strategy with significant results in revenue and EBITDA expansion ➣ EBITDA expansion targets, plans and required investments approved and in place ➣ Completed restructuring activities, including headcount realignment ➣ Coordinated 2020 regional and line of business budgets to reflect expansion goals ➣ Implemented supplier stratification goal and plan for 2020 ➣ Supported Super Connected platforms, including thermostat ➣ Implemented product launch pipeline | |
|
Robert Aarnes*** | ||||
Bonus Target | $ | 139,997 | ||
Bonus Paid | $ | 138,905 | ||
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In addition to the annual cash incentive bonus payments made to our NEOs, Mr. FlinkStephen Kelly, Executive Vice President and Mr. Aarnes were awarded $91,336 and $44,987, respectively, by Honeywell for their contributions to theSpin-Off. Following theSpin-Off, our Compensation Committee approved similar bonus payments for Mr. Nefkens, Mr. Ragan and Mr. Kelly in the amounts of $193,227, $44,090 and $67,898, respectively, to recognize their significant contributions to theSpin-Off.
Long-Term Incentives & 2018 Founder’s Grants
To ensure that Resideo management would be aligned with their new shareholders and to foster the management team’s engagement and motivation with the newly formed independent company, Honeywell granted “founders equity” to our officers. The new Resideo Compensation Committee elected to make the grant effective on the date of ourSpin-Off, when our CEO received restricted stock units (“RSUs”) with a target award value of $4.3 million and other NEOs were granted RSUs with target values between $800,000 and $1.1 million. The RSUs were granted using the final “when issued” trading price - the same basis at which shareholders received new Resideo shares. These RSUs vest in two equal installments on the third and fourth anniversaries of the grant date as reflected in the Summary Compensation Table of the Proxy Statement.
Treatment of Long-Term Incentives in theSpin-Off
All unvested Honeywell equity awards were converted to Resideo time-based RSUs that will continue to vest in accordance with their original vesting schedule, providing ongoing retention incentives. No outstanding Honeywell awards were accelerated atSpin-Off. Pursuant to the documents governing theSpin-Off, outstanding Honeywell long-term incentive awards held by our NEOs and other Resideo employees as of theSpin-Off were treated as follows:Chief Human Resources Officer
Objectives | Results | |
• Develop global benefits and compensation programs to compete with high-tech/consumer products companies and enable us to attract and retain top talent • Create and launch – diversity and social responsibility programs | Based on the results below, the Committee approved a payout of Mr. Kelly’s personal performance component at 195% of target for this component (equal to 39% of total target incentive) ➣ Implemented the Resideo Signature Awards, a contemporary recognition program that promotes Resideo values and Performance Signature ➣ Designed and implemented the Resideo Bonus Plan that establishes better alignment between our pay for performance philosophy and business results ➣ Completed implementation of Total Rewards proposals for recruiting and engaging high technology workforce in the Austin technology center—Resideo Named one of 100 Best Places to Work in Austin 2020 ➣ Completed the design of new employee stock purchase plan for launch in June 2020 ➣ Launched various diversity affinity organizations at Resideo | |
Niccolo de Masi, Former Chief Innovation Officer – Former President, Products & Solutions and Chief Innovation Officer
| ||||||
• Develop3-5 year growth strategy and begin execution • Develop a comprehensive, global manufacturing optimization strategy; begin review and execution • Drive acquisitions and strategic partnerships to take us into water, energy management, air, and electrical monitoring • Strengthen sales capability across segments | In connection with Mr. de Masi’s transition, the Committee approved a payout of Mr. de Masi’s personal performance component at 50% of target for this component (equal to 10% of total target incentive), in recognition of satisfying many of the objectives related to theSpin-Off and the Company’s first year of operations as an independent organization. In particular, the Committee considered Mr. de Masi’s achievement of the following: ➣ Established roadmaps for each line of business ➣ Hired applications team and drove new experience with gamification ➣ Made progress on new retail thermostat model ➣ Provided framework on channels to market for major businesses ➣ Improved manufacturing planning to reduce past dues and improvedon-time delivery, while maintaining world-class safety programs ➣ Completed three acquisitions, Buoy, Whisker Labs and LifeWhere, and negotiated key strategic partnerships ➣ Developed new sales incentive program to drive upside for sales leaders | |||||
Joseph Ragan, Former Executive Vice President and Chief Financial Officer
| ||||||
| Results | ||||||
|
• Establish a robust cybersecurity posture for Resideo by deploying security capabilities and governance in conjunction with Resideo’s exit from Honeywell | |||||
|
| |||||
| ||||||
| operations as an independent organization. In particular, the Committee considered Mr. Ragan’s achievement of the following: ➣ Completed 2019 operating plan ➣ Completed assessment of cyber capabilities and product security assessment | ||||||
|
Based on achievement of the financial and individual performance objectives as described above, the following table sets forth the target amount and actual annual incentive payout for each NEO for fiscal 2019:
Name | Target Bonus ($) | Actual Bonus ($) | ||||||||
Michael Nefkens | 1,260,000 | 655,200 | ||||||||
Robert Ryder(1) | N/A | N/A | ||||||||
Robert Aarnes | 450,000 | 490,500 | ||||||||
Stephen Kelly | 344,000 | 279,328 | ||||||||
Niccolo de Masi | 843,750 | 345,938 | ||||||||
Joseph Ragan(2) | 420,411 | 218,614 | ||||||||
| (1) | Mr. Ryder is not eligible for an annual incentive bonus per the terms of our engagement letter with Horsepower Advisors, LLC, the consulting firm through which we have retained his services. |
| (2) | Mr. Ragan’s target bonus reflected above ispro-rated based on the actual number of days he was employed during 2019. |
2019 Long-Term Incentives
The goal of our long-term incentive plan is to align the compensation of our executives with the interests of shareholders by encouraging sustained long-term improvement in operational and financial performance and long-term increase in shareholder value. Long-term incentives also serve as retention instruments and provide equity-building opportunities for executives. Equity awards to our employees are granted under the Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and its Affiliates (the “2018 Stock Incentive Plan”). Our first annual grants of LTI awards to the CEO and other NEOs as an independent, public company were issued on February 11, 2019, with the exception of Mr. de Masi, who joined Resideo as an executive officer on February 13, 2019. The Compensation Committee approved a mix of annual LTI awards in the form of performance stock units, stock options, and restricted stock units of equal value. The number of shares underlying the RSUs and PSUs was determined by dividingone-third of the total value of the LTI award by the average closing stock price of Resideo common stock on the three trading days leading up to and including the grant date. The number of stock options granted was calculated by dividingone-third of the total value of the annual LTI award by the Black-Scholes stock option value determined on the date of grant.
The table below provides a summary of the value and number of options and units granted to each NEO in 2019.
NAME | ROLE | Total Value of LTI Award ($) | Option Value (33%) ($) | TRSU Value (33%) ($) | PSU Value (33%) ($) | # of NQ Stock Options | # of TRSUs | # of PRSUs | Grant price of stock options ($) | |||||||||||||||||||||||
Michael Nefkens | President and CEO | 4,300,000 | 1,433,333 | 1,433,333 | 1,433,333 | 211,406 | 58,767 | 58,767 | 24.39 | |||||||||||||||||||||||
Robert Ryder* | Interim Chief Financial Officer | — | — | — | — | — | — | — | N/A | |||||||||||||||||||||||
Robert Aarnes | President, ADI Global Distribution | 1,400,000 | 466,666 | 466,666 | 466,666 | 68,829 | 19,133 | 19,133 | 24.39 | |||||||||||||||||||||||
Stephen Kelly | EVP, Chief Human Resources Officer | 774,000 | 257,999 | 257,999 | 257,999 | 38,053 | 10,578 | 10,578 | 24.39 | |||||||||||||||||||||||
Niccolo de Masi | Former President, Products & Solutions and Chief Innovation Officer | 2,700,000 | 900,000 | 900,000 | 900,000 | 132,743 | 36,101 | 36,101 | 25.04 | |||||||||||||||||||||||
Joseph Ragan | Former EVP, Chief Financial Officer | 1,100,000 | 366,666 | 366,666 | 366,666 | 54,080 | 15,033 | 15,033 | 24.39 | |||||||||||||||||||||||
| * | Mr. Ryder received no equity awards in his role as interim Chief Financial Officer. |
Note that Mr. de Masi became an officer on February 13, 2019, therefore his stock options were issued on that date based on the Black-Scholes value determined on that date and reflects a strike price based on the fair market value of Resideo stock on February 13, 2019. Similarly, the number of RSU and PSU shares awarded were determined using thethree-day average closing stock price through February 13, 2019.
| 2020 PROXY STATEMENT | 45 |
2019 Stock Options
The stock options awarded in 2019 will vest ratably over three-years with one third of the option shares vesting on each anniversary of the grant date until fully vested in February 2022, assuming the recipient is continually employed through each vesting date. The options will expire if unexercised prior to the seventh anniversary of the grant date. All of the stock options issued in 2019 wereout-of-the money as of the date of this Proxy Statement.
2019 Restricted Stock Units
The restricted stock units awarded in 2019 will vest ratably over three-years with one third of the shares vesting on each anniversary of the grant date until fully vested in February 2022, assuming the recipient is continually employed through each vesting date.
2019 Performance Stock Units
The performance stock units awarded in 2019 will vest based on achievement of Resideo’s financial results over three years from January 1, 2019 through December 31, 2021.
The performance metrics applicable to the 2019 PSU awards are revenue and adjusted EBITDA with each metric applied equally – 50% weight for each goal. The total shares which can be earned by an executive under these awards ranges from 20% of the target award to a maximum of 200% of target.One-third (1/3) of the total target PSUs will apply to the measures for each of the three years of the performance period covered by the 2019 PSU award and may be earned independently of PSUs applicable to the performance goals for the other two years. Once deemed to be earned, the PSUs for any year under the 2019 PSU award will no longer be subject to the performance measures for a subsequent year(s).
Other Compensatory Decisions Applicable to 2019
In connection with the management transitions described above, the Compensation Committee approved certain separation and engagement agreements, summarized below, to affect a smooth transition of leadership.
Separation Agreements
Mr. Nefkens. In connection with our CEO transition, Mr. Nefkens is entitled to receive severance benefits in accordance with and subject to the conditions of the Company’s Severance Plan (as defined below under “Other Components of Our Compensation Program—Severance”). In addition, subject to the conditions of the Severance Plan and other conditions set forth in his separation agreement, Mr. Nefkens is also entitled to receive continued vesting of the founder’s grant restricted stock units granted on October 29, 2018, and a payment equal to his 2020 target annual incentive award, which is equal to 140% of his base salary (with his base salary remaining unchanged from 2019),pro-rated for the portion of 2020 during which Mr. Nefkens remained employed. In addition, and subject to the same conditions, Mr. Nefkens is entitled to a long-term incentive grant for 2020 valued at $1.433 million that vests monthly during fiscal 2020 with a minimum vesting of three months. Following the severance period, Mr. Nefkens will be engaged to provide consulting services for twelve months for an annual fee of $200,000, as described below. The severance benefits above are conditioned on Mr. Nefkens’ execution of and compliance with the separation agreement, including a release in favor of the Company and strict adherence to the restrictive covenants, whichinclude one-year non-competition and two-yearnon-solicitation restrictions. If Mr. Nefkens exercises his right to terminate his employment on a date not selected by the Board of Directors, then he will receive only the severance benefits in accordance with the Company’s Severance Plan. Furthermore, in the event of a change in control prior to Mr. Nefkens’ last day of active employment, and if he experiences an involuntary termination (other than for cause) within two years after the change in control, then he will be entitled to a lump sum payment equal to twenty-four months of base pay plus two times his target annual incentive award.
The terms of Mr. Nefkens’ separation agreement were determined by the Compensation Committee in consideration of Mr. Nefkens’ significant contributions toward theSpin-Off and to facilitate a smooth transition of his responsibilities to a successor CEO, as described in more detail below:
Severance benefits. The Compensation Committee determined that Mr. Nefkens was entitled to severance benefits under the Company’s Severance Plan in connection with the Board’s decision that a different skill set was needed to lead the next stage of the Company’s evolution, which contributed to the mutual agreement of Mr. Nefkens and the Board to hire a new CEO.
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Continued vesting of founder’s grant. Upon his appointment as CEO, Mr. Nefkens did not receive a signing bonus or new hire equity grant. The award of a signing bonus and/or a special equity award often occurs when hiring a CEO to lead an organization. Mr. Nefkens’ October 29, 2018 founders grant was awarded in lieu of a signing bonus and new hire equity award. Therefore, the Compensation Committee determined that Mr. Nefkens should be entitled to continued vesting in this award to recognize the substantial efforts and work completed as part of the Company’sSpin-Off and launch as an independent public company, subject to the terms of his separation agreement.
Eligibility for 2020pro-rated target annual incentive award.It is expected that Mr. Nefkens will remain in the role as CEO until a new CEO has been identified and hired, which is expected to occur sometime in 2020. Mr. Nefkens’ continued eligibility for apro-rata payout of his target annual incentive award will recognize his continuing service as CEO and his efforts to facilitate a smooth transition of his responsibilities.
2020 equity incentive award with monthly vesting. Mr. Nefkens’ 2020 equity incentive award is intended to keep Mr. Nefkens’ interests aligned with the interests of shareholders during the transition period and keep him engaged and focused on both the immediate and long-term objectives of Resideo.
Post severance consulting agreement.The Board determined it was advisable to retain access to Mr. Nefkens over the medium-term beyond his employment given his deep knowledge of our business and legal matters related to theSpin-Off, particularly in light of multiple executive transitions occurring at the same time.
Mr. de Masi. In connection with Mr. de Masi’s continued employment as our Chief Innovation Officer following the Board’s decision to hire a new President of the Products and Solutions business unit, he continued to receive the same base salary and annual incentive compensation but was not eligible to receive any further equity awards. Mr. de Masi was terminated on March 13, 2020 and received severance benefits under our Severance Pay Plan for Designated Executive Employees (the “Executive Severance Plan”) with enhanced salary continuation payments of 18 months, in recognition of the benefit for which he had previously been eligible under the Officer Severance Plan. Under the terms of his separation agreement, Mr. de Masi is eligible for continued vesting of his November 18, 2018 restricted stock unit award that he received upon his election as a director and before he became an executive officer. In addition, Mr. de Masi will receive a payment equal to his 2020 target annual incentive award, which is equal to 125% of his base salary (with his base salary remaining unchanged from 2019),pro-rated for the portion of 2020 during which Mr. de Masi remained employed, which amount would only includeone-half of the amount tied to the individual performance component. All the severance benefits are subject to the conditions in the Executive Severance Plan, and the additional benefits are also subject to Mr. de Masi’s compliance with other covenants governing his separation, which includeone-yearnon-competition and two-yearnon-solicitation restrictions.
In designing the terms of the letter agreement providing for Mr. de Masi’s continued employment, the Compensation Committee considered the need to affect a smooth transition of Mr. de Masi’s responsibilities to Mr. Sankpal and ensure that Mr. de Masi’s interests remained aligned with the Company’s as he continued in hisnon-executive position as Chief Innovation Officer. The Compensation Committee particularly considered the need for steady leadership during this time of significant change within Resideo. Accordingly, the Compensation Committee agreed to the additional severance benefits in the event that Mr. de Masi’s employment was terminated without cause within the following twelve months. The Company later decided to terminate Mr. de Masi’s employment effective March 13, 2020, thereby entitling him to the severance benefits provided in his letter agreement.
Mr. Ragan. As provided in Mr. Ragan’s separation and release agreement, if he adheres to the terms and conditions of the separation agreement and complies with certain restrictive covenants, he is entitled to receive severance benefits under the Severance Plan. In addition, subject to the conditions of the Severance Plan and other conditions set forth in his separation agreement, Mr. Ragan received apro-rated payout of his fiscal 2019 annual incentive award based on the Company’s actual performance against the performance goals andone-half of the amount tied to individual performance, and is entitled to receive (i) continued vesting of apro-rated portion of his restricted stock units that were granted to him on October 29, 2018 and (ii) reimbursement of the cost of real estate commission fees on the sale of his home and shipment of household goods if Mr. Ragan relocates to the metropolitan area where he resided prior to his move to Austin, TX in thesix-month period following the termination of his employment. The restrictive covenants applicable to Mr. Ragan include aone-yearnon-competition and atwo-yearnon-solicitation restriction.
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| 2020 PROXY STATEMENT | 47 | ||||||
Mr. Ragan was entitled to severance benefits under the Severance Plan as the Board terminated his employment in connection with a search for a new chief financial officer with a different skill set. The Compensation Committee approved the additional severance benefits for Mr. Ragan in consideration of his significant efforts in connection with theSpin-Off and launch of Resideo as an independent public company. Based on these factors, the Compensation Committee provided Mr. Ragan with apro-rated payout of his fiscal 2019 annual incentive award (based on actual performance) and continued vesting of apro-rated portion of the founder’s grant he received on October 29, 2018, which was granted atSpin-Off and in lieu of any othersign-on compensation when he joined the Company.
Engagement Letter
Mr. Ryder. On October 22, 2019, the Board appointed Mr. Ryder as Interim Chief Financial Officer effective November 7, 2019. The terms of Mr. Ryder’s service to Resideo are set forth in an engagement letter with Horsepower Advisors, LLC (“Horsepower”), a consulting firm through which we obtained his services. Mr. Ryder currently serves as the President of Horsepower. Pursuant to the engagement letter, Resideo will pay Horsepower abi-weekly fee of $115,000 as compensation for Mr. Ryder’s services, as well as reimbursement of Mr. Ryder’s reasonable and authorized travel expenses related to performance of the services. Mr. Ryder shall not be eligible for an annual incentive award or any long-term incentive awards. The engagement will continue in effect for six months unless terminated earlier by either party upon 30 day’s written notice.
Other Components of Our Compensation Program
Severance
In November 2018, the Compensation Committee adopted the Resideo Technologies, Inc. Severance Plan for Designated Officers (the “Severance Plan”), which includes each of our NEOs.NEOs, other than Mr. de Masi. The terms of the Severance Plan were established following a review of the severance practices among companies in our approved compensation peer group.
The Severance Plan addresses severance for our NEOs upon a termination following a change in control (“CIC”), considered a “double trigger”, and is intended to ensure the continued attention of our NEOs to their roles and responsibilities without the distraction that may arise from the possibility of a job loss concurrent with a CIC of Resideo.
In addition, the Severance Plan provides for severance payments and benefits that become payable if the employment of one of our NEOs is terminated by us without “cause” (as defined in the Severance Plan) subject to such individual signing and not revoking a release of claims agreement.
The Compensation Committee has adopted the Severance Plan to provide competitive post-employment compensation arrangements that promote the continued attention, dedication and continuity of the members of our senior management team, including our NEOs, and enable us to continue to recruit talented senior executive officers. The Compensation Committee intends to periodically review the severance available to our NEOs under the Severance Plan to ensure ongoing competitiveness and alignment with our overall compensation philosophy.
The severance benefits provided to our NEOs are outlined in the Potential Payments Upon Termination or Change in Control Table found later in this Proxy Statement.
Nonqualified Deferred Compensation PlansPlan
Executive officers (including the NEOs) may choose to participate in certainthe Resideo Supplemental Savings Plan, a nonqualified deferred compensation plans to permitplan that permits additionaltax-deferred retirement savings in a tax-efficient manner.options. The Resideo Supplemental Savings Plan has two components, the Deferred Incentive Program (DIP) and the Supplemental Savings Program (SSP). Executive officers can elect to defer up to 100% of their annual bonus awardsincentive award under the Deferred Incentive Program.DIP component. In addition, under the SSP component, executive officers may also participate in the Resideo Supplemental Savings Programelect to defer base salaryeligible compensation that cannot be contributed to the Company’s 401(k) savings plan due to IRS limitations. TheseThe amounts are matched by the Company onlycontributed to the extent requiredSupplemental Savings Plan are eligible for company matching credits, not to make up for a shortfallexceed 87.5% of the first 8% contributed combined between the SSP and the Company’s 401(k) plan. The participant account balances in the available match under the 401(k) savings plan due to IRS limitations. Deferred compensation balancesSupplemental Savings Plan are subject to gains and losses, and are reflected inbased on the returns of the Fidelity® U.S. Bond Index Fund.
| 48 | 2020 PROXY STATEMENT | |
Benefits and Perquisites
Our NEOs are eligible to receive the same benefits as our salaried employees in the United States. Resideo and the Compensation Committee believe this approach is reasonable and consistent with the overall compensation objectives to attract and retain employees. These benefits include medical, dental, vision, disability insurance, a 401(k) plan and other plans and programs made available to other eligible employees in the United States. Employee benefits and perquisites are reviewed periodically to ensure that benefit levels remain competitive.
|
Effective with the 2019 calendar year, the Compensation Committee approved that all officers are required to have an annual executive physical and are eligible to participate in an executive annual physical program paid for by the Company. These physicals provide a morein-depth review of the health of those employees reporting to the President of the Company. Each of our NEOs participated in the annual physical exam program in 2019.
Executive Stock Ownership Guidelines
The Compensation Committee believes that the interests of our executives, including our NEOs, will be more aligned with those of our shareholders, and our NEOs will more effectively pursue strategies that promote our shareholders’ long-term interests, if our executives hold substantial amounts of our stock. Accordingly, in November 2018, our Compensation Committee adopted minimum stock ownership guidelines for all executive officers, including our NEOs.
Under these guidelines, our executive officers must hold shares of Resideo common stock equal in value to the following multiples of their current base salary:
CEO |
6x Base Salary | |
Other Executive Officers
| 3x Base Salary
| |
Our executive officers have five years from the date they become subject to the guidelines to meet the ownership requirement. Shares owned outright, unvested RSU awards and earned performance share awards are counted toward the ownership requirement. Shares may be sold during the accumulation period if satisfactory progress towards meeting the minimum requirement is demonstrated. As of December 31, 2018, Mr. Flink,2019, Mr. Kelly and Mr. Aarnes have met the minimum stock ownership requirement under the policy.
Incentive Recoupment Policy (“Clawback”)
In the event of a material restatement of our financial results (a “Restatement”), the Board will review all incentive compensation paid to senior executives on the basis of having met or exceeded specific performance targets for performance periods during the Restatement period. To the extent permitted by applicable law, the Board will seek to recoup incentive compensation, in all appropriate cases (taking into account all relevant factors, including whether the assertion of a recoupment claim may prejudice the interests of the Company in any related proceeding or investigation), paid to, or credited to a deferred compensation account of, any senior executive, if and to the extent that:
| (i) | the amount of incentive compensation was calculated based upon the achievement of certain financial results that were subsequently reduced due to a Restatement; |
| (ii) | the senior executive engaged in misconduct that caused the need for the Restatement; and |
| (iii) | the amount of incentive compensation that would have been awarded to the senior executive had the financial results been properly reported would have been lower than the amount actually awarded. |
| 2020 PROXY STATEMENT | 49 |
Hedging and Pledging Policy
It is our policy that all of our directors, officers and employees are prohibited from engaging in short sales of Resideo securities and selling or purchasing puts or calls or otherwise trading in or writing options on Resideo securities and using certain financial instruments (including forward sale contracts, equity swaps, collars and exchange funds), holding securities in margin accounts or pledging Resideo securities as collateral, in each case, that are designed to hedge or offset any decrease in the market value of Resideo securities.
Tax Deductibility of Executive Compensation
Prior to 2018, Section 162(m) of the Internal Revenue Code generally limited the tax deductibility of compensation paid to the CEO and each of the next three most highly compensated executive officers (excluding the CFO) that exceeded $1 million in any taxable year unless the compensation over $1 million qualified as “performance-based” within the meaning of Section 162(m).
The ability to rely on the “performance-based” compensation exception under Section 162(m) was eliminated in 2017 and the $1 million limitation on deductibility generally was expanded to include all NEOs (including the CFO). Thus, we generally will not be able to take a deduction for any compensation paid to our NEOs in excess of $1 million unless the compensation qualifies for transition relief applicable to certain arrangements in place on November 2, 2017. The rules and regulations promulgated under Section 162(m) are complicated, and may change from time to time, and the scope of the transition relief under the legislation repealing Section 162(m)’s performance-based exemption from the deduction limit is uncertain. The Compensation Committee will continue to monitor the effect of tax reform on our executive compensation program.
|
The Compensation Committee has reviewed and discussed with management the Company’s Compensation Discussion and Analysis included in this Proxy Statement. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’s Form10-K for the year ended December 31, 2018.2019.
This report is provided by the following independent members of the Board, who comprise the Compensation Committee:
Sharon Wienbar (Chair)
Nina Richardson
Andrew Teich
| |
The following table sets forth information concerning the compensation awarded to, earned by or paid to our NEOs during 2018. Because Resideo became an independent public company in October 2018 and none of these officers were NEOs prior to theSpin-Off, we have excluded compensation for prior years to the extent permitted by applicable SEC rules.2019.
Officer Name | Position | Year | Base ($)(1) | 2018 Bonus ($)(2) | Stock Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Changes in Pension Values and Non Qual. Deferred Comp Earnings ($)(5) | All Other Compensation ($)(6) | Total Compensation | Position | Year | Base ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Changes in Pension Values and Non Qual. Deferred Comp Earnings ($)(5) | All Other Compensation ($)(6) | Total Compensation ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael Nefkens | President & Chief Executive Officer | 2019 | 895,068 | — | 2,866,654 | 1,433,333 | 655,200 | — | 502,910 | 6,353,165 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
President & Chief Executive Officer | 2018 | $ | 135,385 | $ | 193,227 | $ | 4,104,724 | $ | 998,977 | — | $ | 1,645 | $ | 5,433,958 | 2018 | 135,385 | 193,227 | 4,104,724 | — | 998,977 | — | 1,645 | 5,433,958 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert Ryder | Interim Chief Financial Officer(7) | 2019 | — | — | — | — | — | — | 391,000 | 391,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert Aarnes | President, ADI Global Distribution | 2019 | 437,671 | — | 933,308 | 466,661 | 490,500 | 40,977 | 19,145 | 2,388,262 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2018 | 60,135 | 44,987 | 885,007 | — | 138,905 | 9,996 | 4,440 | 1,143,470 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stephen Kelly | EVP, Chief Officer | 2019 | 430,000 | — | 515,995 | 257,999 | 279,328 | 140,014 | 713,972 | 2,337,308 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2018 | 65,346 | 67,898 | 1,041,057 | — | 178,415 | 8,163 | 9,111 | 1,369,991 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Niccolo de Masi | Former Chief Innovation Officer(8) | 2019 | 589,931 | — | 1,807,938 | 903,980 | 345,938 | — | 363,149 | 4,010,936 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Joseph Ragan | EVP, Chief Financial Officer | 2018 | $ | 84,615 | $ | 44,090 | $ | 1,050,108 | $ | 156,237 | — | $ | 2,051 | $ | 1,337,101 | Former EVP, Chief Financial Officer(9) | 2019 | 492,885 | — | 733,310 | 366,662 | — | — | 365,444 | 1,958,301 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael Flink | EVP, Chief Marketing & Sales Officer | 2018 | $ | 72,154 | $ | 91,336 | $ | 1,067,381 | $ | 222,065 | $ | 70,855 | $ | 8,412 | $ | 1,532,202 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stephen Kelly | EVP, Chief Human Resources Officer | 2018 | $ | 65,346 | $ | 67,898 | $ | 1,041,057 | $ | 178,415 | $ | 8,163 | $ | 9,111 | $ | 1,369,991 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert Aarnes | President ADI Global Distribution | 2018 | $ | 60,135 | $ | 44,987 | $ | 885,007 | $ | 138,905 | $ | 9,996 | $ | 4,440 | $ | 1,143,470 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Joseph Ragan | Former EVP, Chief Financial Officer(9) | 2018 | 84,615 | 44,090 | 1,050,108 | — | 156,237 | — | 2,051 | 1,337,101 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) |
|
For 2018, our NEOs received a discretionary bonus payment for their significant contributions to our successfulSpin-Off from |
Stock awards in 2019 consisted of restricted stock unit (RSU) awards and performance stock unit (PSU) awards. The amounts reported in this column represent the aggregate grant date fair value of |
| PSUs | ||||||||||||
Name | RSUs ($) | Target ($) | Maximum ($) | |||||||||
Michael Nefkens | 1,433,327 | 1,433,327 | 2,866,654 | |||||||||
Robert Ryder | — | — | — | |||||||||
Robert Aarnes | 466,654 | 466,654 | 933,308 | |||||||||
Stephen Kelly | 257,997 | 257,997 | 515,995 | |||||||||
Niccolo de Masi | 903,969 | 903,969 | 1,807,938 | |||||||||
Joseph Ragan | 366,655 | 366,655 | 733,310 | |||||||||
| (3) | The amounts reported in this column represent the |
| (4) | The amounts in this column represent the total |
| (5) | The amounts in this column represent |
| (6) | The amounts reported in this column |
| 2020 PROXY STATEMENT | 51 |
| services and in the case of Mr. Ragan only, severance benefits. The amount for Mr. Ryder includes the payments made to Horsepower, which are described in more detail below in footnote 7. |
Name | 401k Company Contributions ($) | Deferred Compensation Plan Company Contributions ($) | Relocation Expenses ($)(a) | Relocation- Related Tax Gross-Up ($)(b) | All Other ($)(c) | |||||||||||||||
Michael Nefkens | 9,800 | — | 429,270 | 58,300 | 5,540 | |||||||||||||||
Robert Ryder | — | — | — | — | — | |||||||||||||||
Robert Aarnes | 16,625 | — | — | — | 2,520 | |||||||||||||||
Stephen Kelly | 16,625 | 13,475 | 533,953 | 144,379 | 5,540 | |||||||||||||||
Niccolo de Masi | — | — | 332,625 | 28,084 | 2,440 | |||||||||||||||
Joseph Ragan | — | — | 43,733 | 20,938 | 365,444 | |||||||||||||||
| (a) | The amounts shown relate to relocating our NEOs to Austin, Texas in connection with the relocation of our corporate headquarters following theSpin-Off. Eligible relocation expenses included: moving of household goods, travel expense reimbursement for home-finding trips and final journey to the destination, expense allowance, home sale assistance (including, potential payment of certain closing costs and reimbursement for certain losses on home sales), potential payment of certain closing costs in connection with a new home purchase temporary housing, reimbursement of lease cancellation expenses. |
| (b) | The amounts shown are for taxes related to the reimbursement of relocation expenses. |
| (c) | Includes costs for executive healthcare services and excess liability insurance premiums paid by the Company. In the case of Mr. Ragan only, includes severance benefits consisting of $78,269 of salary continuation following his termination date of November 6, 2019 through December 31, 2019 and $218,614 representing apro-rated payout of his fiscal 2019 annual incentive award provided pursuant to the terms of his separation agreement. |
| (7) | Mr. Ryder was appointed as Interim Chief Financial Officer effective November 7, 2019. Mr. Ryder is the President of Horsepower, a consulting firm through which his services have been retained under an engagement letter dated October 22, 2019. Pursuant to that engagement letter, the Company pays Horsepower abi-weekly fee of $115,000 for Mr. Ryder’s services, as well as reimbursement of reasonable and authorized travel expenses related to performance of the services. Mr. Ryder does not receive any equity compensation per the terms of the engagement letter. |
| (8) | Mr. de Masi served as President, Products & Solutions and Chief Innovation Officer, from February 13, 2019 through January 6, 2020. Mr. de Masi continued serving as Chief Innovation Officer, which was not an executive officer position, until his employment terminated on March 13, 2020. |
| (9) | Mr. Ragan’s employment terminated effective November 6, 2019. |
| 52 | 2020 PROXY STATEMENT | |
Grants of Plan-Based Awards - Fiscal Year 20182019
The following table summarizes the grants of plan-based awards made to our NEOs during the fiscal year ended December 31, 2019.
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | |||||||||||||||||||||||||||||||||||||
Officer Name | Award Type | Grant Date | Threshold ($)(A) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All Other (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/sh.) | Closing Price on Date of Grant of Option Awards ($/sh.) | Grant Date ($/sh.) | |||||||||||||||||||||||||
Michael Nefkens | Annual Incentive Plan(1) | $ | 220,000 | $ | 1,100,000 | $ | 2,200,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
| RSU(2) | 10/29/2018 | — | — | — | — | — | — | 154,400 | — | — | — | $ | 4,104,724 | |||||||||||||||||||||||||
| — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Joseph Ragan | Annual Incentive Plan(1) | $ | 33,995 | $ | 169,973 | $ | 339,946 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
| RSU(2) | 10/29/2018 | — | — | — | — | — | — | 39,500 | — | — | — | $ | 1,050,108 | |||||||||||||||||||||||||
| — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Michael Flink | Annual Incentive Plan(1) | $ | 48,318 | $ | 241,588 | $ | 483,176 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
| RSU(2) | 10/29/2018 | — | — | — | — | — | — | 33,690 | — | — | — | $ | 895,649 | |||||||||||||||||||||||||
| RSU(3) | 11/15/2018 | — | — | — | — | — | — | 7,874 | — | — | — | $ | 171,732 | |||||||||||||||||||||||||
Stephen Kelly | Annual Incentive Plan(1) | $ | 38,820 | $ | 194,101 | $ | 388,202 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
| RSU(2) | 10/29/2018 | — | — | — | — | — | — | 32,320 | — | — | — | $ | 859,227 | |||||||||||||||||||||||||
| RSU(3) | 11/15/2018 | — | — | — | — | — | — | 8,337 | — | — | — | $ | 181,830 | |||||||||||||||||||||||||
Robert Aarnes | Annual Incentive Plan(1) | $ | 27,999 | $ | 139,997 | $ | 279,994 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
| RSU(2) | 10/29/2018 | — | — | — | — | — | — | 28,730 | — | — | — | $ | 763,787 | |||||||||||||||||||||||||
| RSU(3) | 11/15/2018 | — | — | — | — | — | — | 5,558 | — | — | — | $ | 121,220 | |||||||||||||||||||||||||
Award Type:
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity | |||||||||||||||||||||||||||||||||||||
Officer Name | Award Type | Grant Date | Threshold ($)(A) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All Other (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/sh.) | Closing Price on Date of Grant of Option Awards ($/sh.) | Grant Date ($) | |||||||||||||||||||||||||
Michael Nefkens | Annual Incentive Plan(1) | 01/01/2019 | 191,520 | 1,260,000 | 2,520,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Stock Options(2) | 02/11/2019 | — | — | — | — | — | — | — | 211,406 | 24.39 | 24.70 | 1,433,333 | ||||||||||||||||||||||||||
| RSU(3) | 02/11/2019 | — | — | — | — | — | — | 58,767 | — | — | — | 1,433,327 | ||||||||||||||||||||||||||
| PSU(4) | 02/11/2019 | — | — | — | 11,753 | 58,767 | 117,534 | — | — | — | — | 1,433,327 | ||||||||||||||||||||||||||
Robert Ryder | — | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Robert Aarnes | Annual Incentive Plan(1) | 68,400 | 450,000 | 900,000 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Stock Options(2) | 02/11/2019 | — | — | — | — | — | — | — | 68,829 | 24.39 | 24.39 | 466,660 | ||||||||||||||||||||||||||
| RSU(3) | 02/11/2019 | — | — | — | — | — | — | 19,133 | — | — | — | 466,654 | ||||||||||||||||||||||||||
| PSU(4) | 02/11/2019 | — | — | — | 3,827 | 19,133 | 38,266 | — | — | — | — | 466,654 | ||||||||||||||||||||||||||
Stephen Kelly | Annual Incentive Plan(1) | 01/01/2019 | 52,288 | 344,000 | 688,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Stock Options(2) | 02/11/2019 | — | — | — | — | — | — | — | 38,053 | 24.39 | 24.70 | 257,999 | ||||||||||||||||||||||||||
| RSU(3) | 02/11/2019 | — | — | — | — | — | — | 10,578 | — | — | — | 257,997 | ||||||||||||||||||||||||||
| PSU(4) | 02/11/2019 | — | — | — | 2,116 | 10,578 | 21,156 | — | — | — | — | 257,997 | ||||||||||||||||||||||||||
Niccolo de Masi | Annual Incentive Plan(1) | 01/01/2019 | 128,250 | 843,750 | 1,687,500 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Stock Options(2) | 02/13/2019 | — | — | — | — | — | — | — | 132,743 | 25.04 | 25.17 | 903,980 | ||||||||||||||||||||||||||
| RSU(3) | 02/13/2019 | — | — | — | — | — | — | 36,101 | — | — | — | 903,969 | ||||||||||||||||||||||||||
| PSU(4) | 02/13/2019 | — | — | — | 7,220 | 36,101 | 72,202 | — | — | — | — | 903,969 | ||||||||||||||||||||||||||
Joseph Ragan(5) | Annual Incentive Plan(1) | 01/01/2019 | 75,240 | 495,000 | 990,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Stock Options(2) | 02/11/2019 | — | — | — | — | — | — | — | 54,080 | 24.39 | 24.39 | 366,662 | ||||||||||||||||||||||||||
| RSU(3) | 02/11/2019 | — | — | — | — | — | — | 15,033 | — | — | — | 366,655 | ||||||||||||||||||||||||||
| PSU(4) | 02/11/2019 | — | — | — | 3,007 | 15,033 | 30,066 | — | — | — | — | 366,655 | ||||||||||||||||||||||||||
| (A) | Represents the payment that would be received for the minimum level of performance required to achieve a payout under the plan for |
| (1) | Annual Incentive Compensation awarded under the Resideo Bonus Plan for the 2019 performance year. Amounts reflected are for the annual bonus payable in |
| (2) | Non-qualified stock options granted under the 2018 Stock Incentive Plan. The |
| (3) | Restricted stock units granted under the 2018 Stock Incentive Plan. The restricted stock units will vest ratably on February 11, 2020, 2021 and 2022 except for those granted to Mr. de Masi, which will vest ratably on February 13, 2020, 2021 and 2022. The grant date fair value of the RSUs reflected in the final column is equal to the average of the high and low price for Resideo on the date of grant. |
| (4) | The amounts in the Target column represents the number of shares earned at target (100%) level of performance. The amounts in the column labeled Threshold represent the total number of shares that would be earned at the minimum level of performance achievement for each the revenue and adjusted EBITDA goals for each of the three-years during the performance period. Actual awards may range from 0% to 200% of target. The grant date fair value reflected in the final column is equal to the average of the high and low price for Resideo on the date of grant. |
| (5) | Pursuant to the terms of the awards granted on February 11, 2019, upon his termination on November |
| 2020 PROXY STATEMENT | 53 |
| entitled to receive a |
Description of Grants of Plan Based Awards
The amounts shown in the “Estimated Future Payouts UnderNon-Equity Incentive Plan Awards” columns in the table above represent each NEO’s opportunity under the Company’s Annual Incentive Compensation Plan for 2018, including during the period of employment by Honeywell.2019. The target award is based on the individual’spro-rated base salary throughout the period of employment during the performance period, as well as changes in the individual’s bonus target that may have occurred.
The awards shown in the “Estimated Future Payouts Under Equity Incentive Plan Awards” column in the table above are PSU awards and are earned over three years if the Company achieves certain performance goals over a three-year performance period (2019 – 2021). The 2019 PSU metrics are the Company’s revenue (50%) and the Company’s Adjusted EBITDA (50%) results.One-third (1/3) of the total target PSUs will apply to the measures for each of the three years of the performance period covered by the 2019 PSU award and may be earned independently of PSUs applicable to the performance goals for the other two years covered by the awards. Once deemed to be earned, the PSUs for any year under the 2019 PSU award will no longer be subject to the performance measures for a subsequent year(s).
Dividend equivalents may be earned on the 2019 RSU and PSU awards, however they will be subject to the same vesting and forfeiture provisions that apply to the underlying award to which they relate.
The 2019 option, RSU and PSU awards are subject to double trigger accelerated vesting and payout upon a change in control only if the award is (1) assumed, replaced or continued by the successor entity and (2) the recipient’s employment is terminated without cause or, in the case of certain executives only, if the award recipient resigns for good reason, in each case, within 24 months after the change in control, or if the surviving entity in the change-in-control transaction refuses to continue, assume, or replace the awards. In such instance the 2019 options and RSU awards will vest in full immediately, and assuming the performance period has not been completed, the 2019 PSU awards will vest based on target performance during the truncated performance period and on a pro rata basis based on a target number of units for the year following the truncated performance period.
If an award recipient’s employment ends as a result of his or her death or disability, vesting of the options and RSU awards will accelerate in full while the 2019 PSU awards will vest on apro-rata basis, based on actual performance as measured at the end of the performance period. If an award recipient’s employment ends as a result of retirement and the participant accepts certain post-employment conditions, the RSU awards and options will continue to vest in accordance with the original vesting schedule and the 2019 PSU awards will vest in accordance with the previous sentence.
In the case of executive officers only, if an award recipient’s employment ends as a result of an involuntary termination without cause by the Company, the options and RSU awards will vest on a pro rata basis immediately and the 2019 PSU awards will vest on apro-rata basis, based on actual performance as measured at the end of the performance period.
If an award recipient’s employment ends for any other reason, unvested options, RSU and PSU awards will be forfeited. With respect to each of the option, RSU and PSU awards described above, if an award recipient breaches certainnon-competition ornon-solicitation obligations, the recipient’s unvested units will be forfeited, and certain shares issued in settlement of units that have already vested must be returned to Resideo or the recipient must pay Resideo the amount of the shares’ fair market value as of the date they were issued.
The impact of a termination of employment or change in control of our Company on option, RSU and PSU awards held by our NEOs is quantified in the “Potential Payments Upon Termination or Change in Control” section below.
All stock awards granted to the NEOs shown in the table above were granted under the Company’s 2018 Stock Incentive Plan and are governed by and subject to the terms and conditions of the 2018 Stock Incentive Planplan and the relevant award agreements. A detailed discussion of these long-term incentive awards can be found beginning on page 42. No performance-based stock awards were granted after theSpin-Off from Honeywell in 2018. Performance-based equity awards granted to several of our NEOs by Honeywell prior to theSpin-Off were converted to time-based RSUs effective on the date of our spinoff and are not included above as they relate to compensation awarded by Honeywell prior to the spinoff.
| |
Outstanding Equity Awards at 20182019 FiscalYear-End
The following table summarizes information regarding outstanding equity awards held by our NEOs as of December 31, 2019.
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Option Awards | Stock Awards | Equity Incentive Plan Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Officer Name | Grant Date | Notes | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Exercise Options (#) Unexercisable | Option Price ($) | Unexercised Option Expiration Date | Number of Shares or Units of Stock That Have Not (#) | Market Shares or Vested* ($) | Grant Date | Notes | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Exercise Options (#) Unexercisable | Option Price ($) | Unexercised Option Expiration Date | Number of Shares or of Stock Have Not (#) | Market Shares or Vested* ($) | Number of Unearned Shares or Other Rights That Have Not Vested (#)(18) | Market or Payout Value of Unearned Shares or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Michael Nefkens | 10/29/2018 | (1) | — | — | — | — | 154,400 | $ | 3,172,920 | 10/29/2018 | (1) | — | — | — | — | 154,400 | 1,841,992 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/11/2019 | (2) | — | 211,406 | 24.39 | 2/10/2026 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/11/2019 | (3) | — | — | — | — | 58,767 | 701,090 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Joseph Ragan | 10/29/2018 | (1) | — | — | — | — | 39,500 | $ | 811,725 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael Flink | 7/25/2014 | (2a) | — | — | — | — | 15,596 | $ | 320,498 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2015 | (3) | — | — | — | — | 2,403 | $ | 49,382 | 2/11/2019 | (4) | — | — | — | — | — | — | 11,753 | 140,213 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/25/2016 | (4) | — | — | — | — | 6,444 | $ | 132,424 | Total | 211,406 | 213,167 | 2,543,082 | 11,753 | 140,213 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert Ryder | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert Aarnes | 2/25/2016 | (5) | — | — | — | — | 1,611 | 19,219 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/25/2016 | (4a) | — | — | — | — | 7,563 | $ | 155,420 | 9/29/2016 | (6) | — | — | — | — | 7,450 | 88,879 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6/1/2016 | (5) | — | — | — | — | 27,902 | $ | 573,386 | 2/28/2017 | (7) | — | — | — | — | 4,313 | 51,454 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2017 | (8) | — | — | — | — | 6,109 | $ | 125,540 | 2/28/2017 | (8) | — | — | — | — | 2,241 | 26,735 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2017 | (8a) | — | — | — | — | 7,811 | $ | 160,516 | 2/28/2017 | (9) | — | — | — | — | 4,810 | 57,383 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2017 | (8b) | — | — | — | — | 8,607 | $ | 176,874 | 2/27/2018 | (10) | — | — | — | — | 4,394 | 52,420 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7/27/2017 | (9) | — | — | — | — | 20,641 | $ | 424,173 | 2/27/2018 | (11) | — | — | — | — | 3,631 | 43,318 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2018 | (10) | — | — | — | — | 6,794 | $ | 139,617 | 10/29/2018 | (1) | — | — | — | — | 28,730 | 342,749 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2018 | (10a) | — | — | — | — | 6,157 | $ | 126,526 | 11/15/2018 | (12) | — | — | — | — | 5,558 | 66,307 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10/29/2018 | (1) | — | — | — | — | 33,690 | $ | 692,330 | 2/11/2019 | (2) | — | 68,829 | 24.39 | 2/10/2026 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/15/2018 | (11) | — | — | — | — | 7,874 | $ | 161,811 | 2/11/2019 | (3) | — | — | — | — | 19,133 | 228,257 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/11/2019 | (4) | — | — | — | — | — | — | 3,827 | 45,656 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | 157,591 | $ | 3,238,495 | Total | 68,829 | 81,871 | 976,721 | 3,827 | 45,656 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stephen Kelly | 7/26/2013 | (2) | — | — | — | — | 10,094 | $ | 207,432 | 7/26/2013 | (13) | — | — | — | — | 10,094 | 120,421 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Stephen Kelly | 2/25/2016 | (5) | — | — | — | — | 4,833 | 57,658 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7/29/2016 | (14) | — | — | — | — | 13,096 | 156,235 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2017 | (7) | — | — | — | — | 8,626 | 102,908 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2017 | (8) | — | — | — | — | 4,480 | 53,446 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2017 | (9) | — | — | — | — | 10,596 | 126,410 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2018 | (10) | — | — | — | — | 6,533 | 77,939 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2018 | (11) | — | — | — | — | 5,415 | 64,601 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10/29/2018 | (1) | — | — | — | — | 32,320 | 385,578 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/15/2018 | (12) | — | — | — | — | 8,337 | 99,460 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/11/2019 | (2) | — | 38,053 | 24.39 | 2/10/2026 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/11/2019 | (3) | — | — | — | — | 10,578 | 126,196 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/11/2019 | (4) | — | — | — | — | — | — | 2,115 | 25,232 | (5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2015 | (3) | — | — | — | — | 4,008 | $ | 82,364 | Total | 38,053 | 125,468 | 1,497,048 | 2,115 | 25,232 | (5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Niccolo de Masi | 11/16/2018 | (15) | — | — | — | — | 11,157 | 133,103 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/13/2019 | (16) | — | 132,743 | 25.04 | 2/12/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/13/2019 | (17) | — | — | — | — | 36,101 | 430,685 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/13/2019 | (4) | — | — | — | — | — | — | 7,220 | 86,135 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/25/2016 | (4) | — | — | — | — | 9,665 | $ | 198,616 | Total | 132,743 | 47,258 | 563,788 | 7,220 | 86,135 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Joseph Ragan (19) | 10/29/2018 | (1) | — | — | — | — | 11,763 | 140,333 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/11/2019 | (2) | 13,222 | — | 24.39 | 11/5/2020 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/11/2019 | (4) | — | — | — | — | — | — | 2,542 | 30,326 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/25/2016 | (4a) | — | — | — | — | 11,283 | $ | 231,866 | Total | 13,222 | 11,763 | 140,333 | 2,542 | 30,326 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7/29/2016 | (6) | — | — | — | — | 19,536 | $ | 401,465 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2017 | (8) | — | — | — | — | 6,720 | $ | 138,096 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2017 | (8a) | — | — | — | — | 8,626 | $ | 177,264 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2017 | (8b) | — | — | — | — | 10,596 | $ | 217,748 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2018 | (10) | — | — | — | — | 7,219 | $ | 148,350 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2018 | (10a) | — | — | — | — | 6,533 | $ | 134,253 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10/29/2018 | (1) | — | — | — | — | 32,320 | $ | 664,176 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/15/2018 | (11) | — | — | — | — | 8,337 | $ | 171,325 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | 134,937 | $ | 2,772,955 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert Aarnes | 2/26/2015 | (3) | — | — | — | — | 1,601 | $ | 32,901 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/25/2016 | (4) | — | — | — | — | 3,220 | $ | 66,171 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/25/2016 | (4a) | — | — | — | — | 3,782 | $ | 77,720 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9/29/2016 | (7) | — | — | — | — | 11,106 | $ | 228,228 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2017 | (8) | — | — | — | — | 3,360 | $ | 69,048 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2017 | (8a) | — | — | — | — | 4,313 | $ | 88,632 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/28/2017 | (8b) | — | — | — | — | 4,810 | $ | 98,846 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2018 | (10) | — | — | — | — | 4,841 | $ | 99,483 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2018 | (10a) | — | — | — | — | 4,394 | $ | 90,297 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10/29/2018 | (1) | — | — | — | — | 28,730 | $ | 590,402 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/15/2018 | (11) | — | — | — | — | 5,558 | $ | 114,217 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | 75,715 | $ | 1,555,943 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 PROXY STATEMENT | 55 |
| * | Based on the closing stock price for Resideo stock on December 31, |
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| (1) | These Founder’s Grant RSU Awards granted on |
| (2) |
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| (3) |
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| (4) | The |
Adjusted EBITDA. For each NEO other than Mr. Ragan, the amount of PSUs shown is the threshold number of units that could be earned and paid out in shares. The |
| (5) | The remaining unvested |
| (6) | The remaining unvested |
| (7) | The remaining unvested |
| (8) | The remaining unvested |
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| (9) | The remaining unvested |
| (10) | The remaining unvested |
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| (11) |
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| (12) | The remaining unvested units under this converted Honeywell award will vest on March 15, 2021. |
| (13) | The remaining unvested units under this converted Honeywell award will vest on July 26, 2020. |
| (14) | The remaining unvested units under this converted Honeywell award will vest with respect to 6,446 shares on July 29, 2021 and 6,650 shares on July 29, 2023. |
| (15) | These RSUs were granted to Mr. de Masi while he was |
| (16) | Thesenon-qualified stock options will vest in equal annual installments on each of February 13, 2020, February 13, 2021 and February 13, 2022. |
| (17) | These RSUs will vest in equal annual installments on each of February 13, 2020, February 13, 2021 and February 13, 2022. |
| (18) | The PSUs reported in this column represent 2019 PSU awards that will vest at the end of the three-year performance period. The number of PSUs that the NEO will receive is dependent upon the achievement of certain financial metrics approved by the Compensation Committee measuring revenue and Adjusted EBITDA. The amount of PSU units shown is the threshold number of units that could be earned and paid out in shares. |
| (19) | Per the terms of his separation agreement, a pro rata portion of Mr. Ragan’s October 29, 2018 RSU grant will continue to vest in accordance with the original vesting schedule. Pursuant to the terms of the awards granted on |
| 56 | 2020 PROXY STATEMENT | |
Option Exercises and Stock Vested-Fiscal Year 20182019
The following table summarizes information regarding stock options exercised by the NEOs during the fiscal year ended December 31, 2019 and RSU awards held by the NEOs that vested during that same period.
| Option Awards | Stock Awards | |||||||
Officer Name | # of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#)(1) | Value Realized on Vesting ($) (2) | ||||
Michael Nefkens | — | — | — | — | ||||
Robert Ryder | — | — | — | — | ||||
Robert Aarnes | — | — | 12,977 | 293,435 | ||||
Stephen Kelly | — | — | 30,607 | 749,729 | ||||
Niccolo de Masi | — | — | 5,578 | 56,366 | ||||
Joseph Ragan | — | — | 3,675 | 37,228 | ||||
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Following ourSpin-Off from Honeywell, none of our NEOs held stock options in Resideo, nor did any shares of Resideo stock under RSU awards vest during the period following ourSpin-Off in 2018.
| (2) | Represents the total value of RSUs at the vesting date calculated at the average of the high and low share price of one share of Common Stock on the day of vesting multiplied by the total number of RSUs that vested. The individual totals may include multiple vesting transactions during the year. |
The following table provides summary information and related disclosures provide information regarding benefits under the Resideo Technologies Inc. Pension Plan (“RPP”) and the Resideo Supplemental Pension Plan (“SPP”) or Nonqualified Plan,, a nonqualified plan, for the executive officers named in the Summary Compensation Table above who are participating in such plans.
The following table provides summary information about the pension benefits that have been earned by our NEOs under two pension plans, the RPP and the SPP. The RPP and SPP benefits depend on the length of each NEO’s employment with usthe Company and certain predecessor companies. This information is provided in the table below
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under the column entitled “Number of Years of Credited Service.” A participant’s credited service is generally equal to his or her period of employment with the Company or an affiliate (or, for periods prior to October 29, 2018, Honeywell International Inc. or a Honeywell affiliate), excluding periods of employment when the participant was not eligible to participate in the RPP or thea predecessor Honeywell Retirement Earnings Plan.plan. The column in the table below entitled “Present Value of Accumulated Benefits” represents a financial calculation that estimates the cash value today of the full pension benefit that has been earned by each NEO. It is based on various assumptions, including assumptions about how long each NEO will live and future interest rates. Additional details about the pension benefits for each NEO follow the table.
Officer Name | Plan Names | Number of Years of Credited Service (#) | Present Value of Accumulated Benefits ($) | Payments During Last Fiscal Year ($) | Plan Names | Early Retirement Eligible? | Number of Years of Credited Service (#) | Present Value of Accumulated Benefits ($) | Payments During Last Fiscal Year ($) | ||||||||||||||||||||||||
Michael Nefkens | — | — | — | — | — | N/A | — | — | — | ||||||||||||||||||||||||
Joseph Ragan | — | — | — | — | |||||||||||||||||||||||||||||
Michael Flink | Resideo Technologies Inc. Pension Plan (Qualified component) | 15.8 | $ | 592,973 | — | ||||||||||||||||||||||||||||
| Resideo Technologies Inc. Supplemental Pension Plan(Non-Qualified component) | 15.8 | — | — | ||||||||||||||||||||||||||||||
Robert Ryder | — | N/A | — | — | — | ||||||||||||||||||||||||||||
Robert Aarnes | Resideo Technologies Inc. Pension Plan (Qualified component) | No | 7.0 | 73,879 | — | ||||||||||||||||||||||||||||
| Resideo Supplemental Pension Plan(Non-Qualified component) | 7.0 | 32,827 | — | ||||||||||||||||||||||||||||||
| Total | $ | 592,973 | — | ||||||||||||||||||||||||||||||
| Total |
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| 106,706 | — | |||||||||||||||||||||||||||||
Stephen Kelly | Resideo Technologies Inc. Pension Plan (Qualified component) | 10.4 | $ | 166,784 | — | Resideo Technologies Inc. Pension Plan (Qualified component) | No | 11.4 | 238,046 | — | |||||||||||||||||||||||
| Resideo Technologies Inc. Supplemental Pension Plan(Non-Qualified component) | 10.4 | $ | 165,403 | — | Resideo Supplemental Pension Plan(Non-Qualified component) | 11.4 | 230,304 | — | |||||||||||||||||||||||||
| Total | $ | 332,187 | — | Total | 468,350 | — | |||||||||||||||||||||||||||
Robert Aarnes | Resideo Technologies Inc. Pension Plan (Qualified component) | 6.0 | $ | 47,929 | — | ||||||||||||||||||||||||||||
Niccolo de Masi | — | N/A | — | — | — | ||||||||||||||||||||||||||||
| Resideo Technologies Inc. Supplemental Pension Plan(Non-Qualified component) | 6.0 | $ | 17,799 | — | |||||||||||||||||||||||||||||
| Total | $ | 65,728 | — | ||||||||||||||||||||||||||||||
Joseph Ragan | — | N/A | — | — | — | ||||||||||||||||||||||||||||
| 2020 PROXY STATEMENT | 57 |
Summary Information
The RPP is atax-qualified pension plan in which a significant portion of our U.S. employees participate.
The RPP complies with tax requirements applicable to broad-based pension plans, which impose dollar limits on the compensation that can be used to calculate benefits and on the amount of benefits that can be provided. As a result, the pensions that can be paid under the RPP for higher-paid employees represent a much smaller fraction of current income than the pensions that can be paid to less highly paid employees. We make up for this difference, in part, by providing supplemental pensions through the SPP.
Pension Benefit Calculation Formulas
Within the RPP and the SPP, a variety of formulas are used to determine pension benefits. Different benefit formulas apply for different groups of employees for historical reasons (e.g., past acquisitions by a predecessor company) and the differences in the benefit formulas for our NEOs reflect this history. The explanation below describes the formulas that areRetirement Earnings Plan (“REP”) Formula is used to determine the amount of pension benefits for each of our NEOs under the RPP and the SPP.
Retirement Earnings Plan (“REP”) Formula: Under this Formula, benefits are paid as a lump sum equal to (1) 3% or 6% of final average compensation (the average of a participant’s annual compensation for the five calendar years out of the previous ten calendar years that produces highest average) times (2) credited service.
Pittway (“PW”) Formula: annual annuity benefit equal to the sum of (1) for each of the first 35 years of service, 1.2% of annual compensation up to a social security breakpoint and 1.85% of annual compensation over the breakpoint and (2) for each year of service over 35, 1.2% of annual compensation. For years after 2015, a participant’s (A) social security breakpoint is determined as of December 31, 2015 and (B) compensation is the lesser of the participant’s 2015 compensation or compensation for the current year.
For each pension benefit calculation formula, compensation includes base pay, short-term incentive compensation, payroll basedpayroll-based rewards and recognition and lump sum incentives. The amount of compensation taken into account under the RPP is limited by tax rules. The amount of compensation taken into account under the SPP is not.
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The table below describes which formulas are applicable to each of our participating NEOs.
NAME/FORMULA | DESCRIPTION OF TOTAL PENSION BENEFITS | |
Mr. Aarnes REP formula 3% | • Mr. Aarnes’ pension benefits under the RPP and the SPP are determined under the REP formula. | |
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Mr. Kelly REP formula 6% | • Mr. Kelly’s pension benefits under the RPP and the SPP are determined under the REP formula. | |
Mr. Flink is the only NEO above who isNone of our NEOs are currently eligible for early retirement. Under the “Pittway” formula, Mr. Flink was eligible once he reached age 55 with 10 years of service. At early retirement, the monthly pension is computed on the same basis as at normal retirement, but the pension is reduced 6.67% per year for each of the first five years and 3.33% for each of the next five years by which commencement precedes normal retirement date.
Nonqualified Deferred Compensation
Officer Name | Executive Contributions since October 29, 2018 ($)(1) | Registrant Contributions in 2018 ($) | Aggregate Earnings since October 29, 2018 ($)(2) | Aggregate Withdrawals and Distributions in 2018 ($) | Aggregate Balance at the End of Fiscal Year 2018 ($) | Executive Contributions in 2019 ($)(1) | Registrant Contributions in 2019 ($)(2) | Aggregate Earnings ($)(3) | Aggregate Withdrawals and Distributions in 2019 ($) | Aggregate Balance at the End of Fiscal Year 2019 ($) | ||||||||||||||||||||||||||||||||||||||||
Michael Nefkens | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Robert Ryder | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Joseph Ragan | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Michael Flink | $ | 18,580 | $ | 3,103 | $ | 645,293 | ||||||||||||||||||||||||||||||||||||||||||||
Robert Aarnes | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Stephen Kelly | $ | 5,228 | $ | 550 | $ | 115,517 | 17,200 | 13,475 | 3,852 | — | 157,574 | (4) | ||||||||||||||||||||||||||||||||||||||
Niccolo de Masi | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Robert Aarnes | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Joseph Ragan | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
All deferred compensation amounts regardless of the plan, are unfunded and unsecured obligations of the Company and are subject to the same risks as any of the Company’s general obligations.
| (1) | The amounts in this column were contributed by the |
| (2) | Amounts in this column are contributions made to the NEOs account in 2020 for the 2019 calendar year. |
| 58 | 2020 PROXY STATEMENT | |
| (3) | The amounts in this column represent interest and dividends earned on balances held in the NEO’s account |
| (4) | Amount includes (i) $5,228 reported as Salary and |
Resideo Supplemental Savings ProgramPlan
The Resideo Supplemental Savings Program (SSP)(“RSSP”) is a nonqualified deferred compensation plan that allows eligible Resideo employees, including the NEOs, to save additional amounts in excess of what is allowed under the Company’stax-qualified 401(k) plan due to the annual deferral and compensation limits imposed by the Internal Revenue Code. UnderThe RSSP has two components, the SSP, participantsDeferred Incentive Program (DIP) and the Supplemental Savings Program (SSP). Executive officers can elect to defer up to 50%100% of their base annual salary forbonus awards under the plan year. ToDIP component. In addition, executive officers may also participate in the extent amounts have not already been matched on a similar basis underSSP component to defer eligible compensation that cannot be contributed to the Company’s 401(k) savings plan Resideo matches deferrals posteddue to IRS limitations. The amounts contributed to the SSP at the ratecomponent are eligible for matching contributions not to exceed 87.5% of 87.50% on the first 8% of eligible pay deferred.contributed combined between the SSP and the 401(k) plan. Matching contributions are always vested.
Interest Rate. Participant account balances were moved from the Honeywell SSPplans to the Resideo SSPRSSP on October 29, 2018. All funds are invested in the Fidelity U.S. Bond Index Fund and participant accounts are credited with interest based on the fund’s performance. Matching contributions are also treated as invested in Fidelity U.S. Bond Index Fund.
Distribution. Amounts transferred from the Honeywell Supplemental Savings Plan or Honeywell Deferred Incentive Plan to the SSPRSSP will follow the same distribution options as applied under the Honeywell plan. For deferrals to the SSPRSSP starting in 2019 or later years, payments will commence at the earlier of the participant’s separation from service, death or thein-service distribution date elected by the participant. Amounts will be paid to participants in a lump sum or installment payments, for payments triggered by separation from service or anin-service distribution at the election of the participant. Participant SSPRSSP accounts are distributed in cash only. Participants can make different payment elections under the SSP and the Resideo Deferred Incentive Compensation Program (“DICP”).
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Resideo Deferred Incentive Compensation Program
The DICP allows eligible Resideo employees, including the NEOs, to defer all or a portion of their annual cash incentive compensation. Participant balances were moved from the Honeywell Deferred Incentive Plan to the DICP on October 29, 2018.
Interest Rate. All funds are invested in the Fidelity U.S. Bond Index Fund and participant accounts are credited with interest based on the fund’s performance.
Distribution. Amounts transferred from the Honeywell Deferred Incentive Plan to the DICP will follow the same distribution options as applied under the Honeywell plan. For deferrals to the DICP starting in 2019 or later years, payments will commence at the earlierDIP components of the participant’s separation from service, death or thein-service distribution date elected by the participant. Amounts will be paid to participants in a lump sum or installment payments for payments triggered by separation from service or anin-service distribution at the election of the participant. Participant DICP accounts are distributed in cash only. Participants can make different payment elections under the SSP and the DICP.RSSP.
Potential Payments Upon Termination or Change in Control
Overview
This section describes the benefits payable to our NEOs in two circumstances:
Termination of employment
Change in Control (“CIC”)
Officer Severance Plan
These benefits are determined primarily under our Resideo Technologies, Inc. Severance Plan for Designated Officers, or Severance Plan, which our Compensation Committee approved in November 2018 and reflects their assessment of external market data on benefits commonly offered to senior executives in such circumstances. The Committee strongly believes that our severance benefits are generally in line with current market practices and are particularly important as we do not maintain employment agreements with our NEOs. Benefits provided under the Severance Plan are conditioned on the executive executing a full release of claims and compliance with certainnon-competition andnon-solicitation covenants in favor of the Company. The right to continued severance benefits under the plan thatceases in the event of a violation of such covenants. In addition, we referwould seek to as our “Officer Severance Plan.” recover certain severance benefits already paid to any executive who violates such restrictive covenants.
In addition to the Officer Severance Plan, several of our other benefits plans, such as our Annual Incentive Compensation Plan, also have provisions that impact these benefits. These benefits ensure that our executives are motivated primarily by the needs of the businesses for which they are responsible, rather than circumstances that are outside the ordinary course of business, i.e., circumstances that might lead to the termination of an executive’s employment or that might lead to a CIC of the Company. Generally, this is achieved by assuring our NEOs that they will receive a level of continued compensation if their employment is adversely affected in these circumstances, subject to certain conditions. We believe that these benefits help ensure that affected executives
| 2020 PROXY STATEMENT | 59 |
act in the best interests of our shareholders, even if such actions are otherwise contrary to their personal interests. This is critical because these are circumstances in which the actions of our NEOs may have a material impact upon our shareholders. Accordingly, we set the level and terms of these benefits in a way that we believe is necessary to obtain the desired results. The level of benefit and the rights to benefits are determined by the type of termination event, as described below.
In November 2018, the Compensation Committee approved the Resideo Technologies, Inc. Severance Plan for Designated Officers, which reflects their assessment of external market data on benefits commonly offered to senior executives in such circumstances. The Committee strongly believes that our severance benefits are generally in line with current market practices and are particularly important as we do not maintain employment agreements with our NEOs. Benefits provided under the Officer Severance Plan are conditioned on the executive executing a full release of claims and certainnon-competition and nonsolicitation covenants in favor of the Company. The right to continued severance benefits under the plan ceases in the event of a violation of such covenants. In addition, we would seek to recover severance benefits already paid to any executive who violates such restrictive covenants.
In the case of a CIC, severance benefits under the Severance Plan are payable only in the event that both parts of the “double trigger” are satisfied. That is, (i) there must be a CIC of our Company, and (ii)(A) the NEO must be involuntarily terminated other than for cause, or (ii)(B) the NEO must initiate the termination of his own employment for good reason. Similarly, our stock incentive plan2018 Stock Incentive Plan does not offer single-trigger vesting of equity awards that are assumed or replaced by an acquirer upon a CIC.
Equity Awards
Death and Disability –In the case of a recipient’s death or disability, vesting of options and restricted stock units accelerates in full and a pro rata portion of the PSUs will vest and settle if, and to the extent of, Resideo’s actual achievement of the performance measures during the performance period. The options remain exercisable until the earlier of three years after termination or the original expiration date.
Involuntary Termination Without Cause –If an executive officer is subject to an involuntary termination without cause by Resideo, a pro rata portion of his or her options and restricted stock units will vest immediately upon termination, and a pro rata portion of the PSUs will vest and settle if, and to the extent of, Resideo’s actual achievement of the performance measures during the performance period. The options will remain exercisable until the earlier of one year after termination or the original expiration date.
Voluntary Resignation –If a recipient resigns voluntarily from the Company, he or she will forfeit any unvested options, restricted stock units and PSUs, and will have 30 days to exercise any then-vested options.
Retirement –With respect to equity awards granted prior to February 2019,non-vested awards are generally forfeited upon any retirement. Equity awards granted in or after February 2019 generally provide that an award recipient is retirement eligible if he or she is age 55 years or older, has at least 10 years of service to Resideo and also has provided Resideo with at least 6 months’ prior notice that he or she is considering retirement. If an NEO is retirement eligible, his or her employment with Resideo ends as a result of retirement and he or she accepts certain post-employment conditions, the RSU awards and options granted in or after February 2019 will continue to vest in accordance with the original vesting schedule (and options shall remain exercisable until the earlier of their original expiration date and three (3) years after retirement) and the PSU awards granted in or after February 2019 will vest on apro-rata basis, based on actual performance as measured at the end of the performance period. None of our NEOs is currently retirement eligible.
Pension andNon-Qualified Deferred Compensation
Pension andnon-qualified deferred compensation benefits, which are described elsewhere in this Proxy Statement, are not included in the table below in accordance with the applicable proxy statement disclosure requirements, even though they may become payable at the times specified in the table. If an officer who participates in the RSSP terminates employment with Resideo, the balance of that executive’s SSP or DIP account will be paid to the executive in June of the year following his or her termination. Similarly, if an officer who is a participant in the RPP or the SPP described above terminates employment, the executive’s balance in the pension plan will be paid to the executive one hundred and five days after his or her termination date.
| 60 | 2020 PROXY STATEMENT | |
The following table summarizes estimated payments and benefits to which our NEOs would be entitled upon the hypothetical occurrence of various termination scenarios or a CIC. The information in the table below is based on
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the assumption, in each case, that the termination of employment occurred on December 31, 2018.2019. None of these termination benefits are payable to NEOs who voluntarily resign (other than voluntary resignations for good reason as specified)specified or certain qualifying retirements) or whose employment is terminated by us for cause. Pension andnon-qualified deferred compensation benefits, which are described elsewhere in this Proxy Statement, are not included in the table below in accordance with the applicable Proxy Statement disclosure requirements, even though they may become payable at the times specified in the table.
Payments and Benefits | Named Executive Officer | Termination by the Company Without Cause ($) | Death ($) | Disability ($) | Change-in-Control– No Termination | Change-in-Control– Termination of Employment by Company, Without Cause, by NEO for Good Reason or Due to Disability ($) | |||||||||||||||||||||
Cash Severance (Base Salary) | Michael Nefkens | $ | 1,760,000 | $ | — | $ | — | $ | — | $ | 1,760,000 | ||||||||||||||||
| Joseph Ragan | $ | 825,000 | $ | — | $ | — | $ | — | $ | 1,100,000 | |||||||||||||||||
| Michael Flink | $ | 703,500 | $ | — | $ | — | $ | — | $ | 938,000 | |||||||||||||||||
| Stephen Kelly | $ | 645,000 | $ | — | $ | — | $ | — | $ | 860,000 | |||||||||||||||||
| Robert Aarnes | $ | 600,000 | $ | — | $ | — | $ | — | $ | 800,000 | |||||||||||||||||
Annual Incentive–Compensation (1)– Year of Termination | Michael Nefkens | $ | — | $ | — | $ | — | $ | — | $ | 2,200,000 | ||||||||||||||||
| Joseph Ragan | $ | — | $ | — | $ | — | $ | — | $ | 880,000 | |||||||||||||||||
| Michael Flink | $ | — | $ | — | $ | — | $ | — | $ | 562,800 | |||||||||||||||||
| Stephen Kelly | $ | — | $ | — | $ | — | $ | — | $ | 602,000 | |||||||||||||||||
| Robert Aarnes | $ | — | $ | — | $ | — | $ | — | $ | 600,000 | |||||||||||||||||
Outstanding Equity Awards (2) | Michael Nefkens | $ | — | $ | 3,172,920 | $ | 3,172,920 | $ | — | $ | 3,172,920 | ||||||||||||||||
| Joseph Ragan | $ | — | $ | 811,725 | $ | 811,725 | $ | — | $ | 811,725 | |||||||||||||||||
| Michael Flink | $ | — | $ | 3,238,495 | $ | 3,238,495 | $ | — | $ | 3,238,495 | |||||||||||||||||
| Stephen Kelly | $ | — | $ | 2,772,955 | $ | 2,772,955 | $ | — | $ | 2,772,955 | |||||||||||||||||
| Robert Aarnes | $ | — | $ | 1,555,943 | $ | 1,555,943 | $ | — | $ | 1,555,943 | |||||||||||||||||
Benefits (3) | Michael Nefkens | $ | 14,676 | $ | — | $ | — | $ | — | $ | 14,676 | ||||||||||||||||
| Joseph Ragan | $ | 9,480 | $ | — | $ | — | $ | — | $ | 12,640 | |||||||||||||||||
| Michael Flink | $ | 8,327 | $ | — | $ | — | $ | — | $ | 11,102 | |||||||||||||||||
| Stephen Kelly | $ | 8,114 | $ | — | $ | — | $ | — | $ | 10,819 | |||||||||||||||||
| Robert Aarnes | $ | 2,160 | $ | — | $ | — | $ | — | $ | 2,880 | |||||||||||||||||
All Other–Payments/ Benefits | Michael Nefkens | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
| Joseph Ragan | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
| Michael Flink | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
| Stephen Kelly | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
| Robert Aarnes | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
Total | Michael Nefkens | $ | 1,774,676 | $ | 3,172,920 | $ | 3,172,920 | $ | — | $ | 7,147,596 | ||||||||||||||||
| Joseph Ragan | $ | 834,480 | $ | 811,725 | $ | 811,725 | $ | — | $ | 2,804,365 | |||||||||||||||||
| Michael Flink | $ | 711,827 | $ | 3,238,495 | $ | 3,238,495 | $ | — | $ | 4,750,397 | |||||||||||||||||
| Stephen Kelly | $ | 653,114 | $ | 2,772,955 | $ | 2,772,955 | $ | — | $ | 4,245,774 | |||||||||||||||||
| Robert Aarnes | $ | 602,160 | $ | 1,555,943 | $ | 1,555,943 | $ | — | $ | 2,958,823 | |||||||||||||||||
Payments and Benefits | Named Executive Officer | Termination by the Company Without Cause ($) | Death ($) | Disability ($) | Change-in-Control– No Termination | Change-in-Control– Termination of Employment by Company, Without Cause, by NEO for Good Reason or Due to Disability ($) | |||||||||||||||||||||
Cash Severance | Michael Nefkens | 1,800,000 | — | — | — | 1,800,000 | |||||||||||||||||||||
| Robert Ryder(5) | — | — | — | — | — | ||||||||||||||||||||||
| Robert Aarnes | 675,000 | — | — | — | 900,000 | ||||||||||||||||||||||
| Stephen Kelly | 645,000 | — | — | — | 860,000 | ||||||||||||||||||||||
| Niccolo de Masi | 1,012,500 | 1,350,000 | |||||||||||||||||||||||||
| Joseph Ragan(6) | 825,000 | — | — | — | — | ||||||||||||||||||||||
Annual Incentive–Compensation (2)– | Michael Nefkens | — | — | — | — | 2,520,000 | |||||||||||||||||||||
| Robert Ryder | — | — | — | — | — | ||||||||||||||||||||||
| Robert Aarnes | — | — | — | — | 900,000 | ||||||||||||||||||||||
| Stephen Kelly | — | — | — | — | 688,000 | ||||||||||||||||||||||
| Niccolo de Masi | — | — | — | — | 1,687,500 | ||||||||||||||||||||||
| Joseph Ragan(6) | 218,614 | — | — | — | — | ||||||||||||||||||||||
Outstanding Equity Awards (3) | Michael Nefkens | — | 3,244,173 | 3,244,173 | — | 3,244,173 | |||||||||||||||||||||
| Robert Ryder | — | — | — | — | — | ||||||||||||||||||||||
| Robert Aarnes | — | 1,204,978 | 1,204,978 | — | 1,204,978 | ||||||||||||||||||||||
| Stephen Kelly | — | 1,497,048 | 1,497,048 | — | 1,497,048 | ||||||||||||||||||||||
| Niccolo de Masi | — | 994,473 | 994,473 | 994,473 | |||||||||||||||||||||||
| Joseph Ragan(6) | 140,333 | — | — | — | — | ||||||||||||||||||||||
Benefits (4) | Michael Nefkens | 14,676 | — | — | — | 14,676 | |||||||||||||||||||||
| Robert Ryder | — | — | — | — | — | ||||||||||||||||||||||
| Robert Aarnes | 9,748 | — | — | — | 12,997 | ||||||||||||||||||||||
| Stephen Kelly | 8,114 | — | — | — | 10,819 | ||||||||||||||||||||||
| Niccolo de Masi | 8,492 | — | — | — | 11,323 | ||||||||||||||||||||||
| Joseph Ragan(6) | 9,480 | — | — | — | — | ||||||||||||||||||||||
All Other–Payments/ Benefits | Michael Nefkens | — | — | — | — | — | |||||||||||||||||||||
| Robert Ryder | — | — | — | — | — | ||||||||||||||||||||||
| Robert Aarnes | — | — | — | — | — | ||||||||||||||||||||||
| Stephen Kelly | — | — | — | — | — | ||||||||||||||||||||||
| Niccolo de Masi | — | — | — | — | — | ||||||||||||||||||||||
| Joseph Ragan | — | — | — | — | — | ||||||||||||||||||||||
Total | Michael Nefkens | 1,814,676 | 3,244,173 | 3,244,173 | — | 7,578,849 | |||||||||||||||||||||
| Robert Ryder | — | — | — | — | — | ||||||||||||||||||||||
| Robert Aarnes | 684,748 | 1,204,978 | 1,204,978 | — | 3,017,975 | ||||||||||||||||||||||
| Stephen Kelly | 653,114 | 1,497,048 | 1,497,048 | — | 3,055,867 | ||||||||||||||||||||||
| Niccolo de Masi | 1,020,992 | 994,473 | 994,473 | — | 4,043,296 | ||||||||||||||||||||||
| Joseph Ragan(6) | 1,193,426 | — | — | — | — | ||||||||||||||||||||||
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The amounts reflected in the first column related to involuntary termination unrelated to a CIC, as well as the final two columns specific to circumstances following a CIC are based on the provisions of the Resideo Technologies, Inc. Severance Plan, for Designated Officers, effective as of November 15, 2018, and the provisions of the Amended and Restated 2018 Stock Incentive Plan of Resideo Technologies, Inc. and Its Affiliates.Plan.
| (1) | Severance amounts in the event of involuntary termination not related to CIC represent a cash payment equal to 24 months of annual base salary for Mr. Nefkens and 18 months of annual base salary for the other NEOs. Severance amounts related to an involuntary termination or termination for good reason related to a CIC represent a cash payment equal to 24 months of annual base salary as well as two times the NEO’s target annual incentive compensation. |
| (2) | In addition to the amounts reflected in the final column, if an NEO is terminated without cause in situations following a CIC, the executive will also be entitled to apro-rated Annual Incentive Award for the period of employment during the year of termination. |
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The amounts reflected represent the Company’s cost for continuation of benefits, such as medical, dental, vision and life insurance, for the Salary Continuation Period as defined under the |
| (5) | Mr. Ryder is not eligible to participate in the Severance Plan and has not received any equity awards. His compensation is governed solely by the engagement letter between the Company and Horsepower dated October 22, 2019. |
| (6) | Mr. Ragan’s employment terminated effective November 6, 2019. The amounts reported for Mr. Ragan reflect amounts he is entitled to receive under the terms of his separation agreement. |
Mr. de Masi resigned from our board of directors effective January 6, 2020 and ceased serving as our President, Products & Solutions as of the same date. He continued serving as our Chief Innovation Officer, which was not an executive officer position, until his employment terminated on March 13, 2020. In connection with the termination of Mr. de Masi’s employment, he is eligible for severance under the Severance Plan, with eligibility for 18 months of salary continuation payments ($1,012,500). Mr. de Masi also will be eligible for a pro rata payout of his fiscal 2020 target annual incentive award based on the period during which he was employed, which amount, includingone-half of the amount tied to the individual performance component (for a payout of $151,457) and continued vesting of his November 18, 2018 RSU award. All of the severance benefits are subject to the conditions in the Severance Plan, and the additional benefits are also subject to Mr. de Masi’s compliance with other covenants governing his continued employment and compliance with his other agreements with Resideo, whichinclude one-year non-competition and two-year non-solicitation restrictions.
BecauseAs required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of RegulationS-K, we are a newly independent, public company,providing the SEC does not require us to performfollowing information about the relationship of the annual total compensation of the individual identified as our median paid employee and disclose the CEO pay ratio measurement in this initial Proxy Statement. We anticipate this disclosure will be provided inannual total compensation of Mr. Michael Nefkens, our next proxy statement in 2020.President and Chief Executive Officer (the CEO):
As we beginFor 2019, our first full year as an independent, public company, we are confident that last completed fiscal year:
the steps taken to establish effective governance and oversight of theannual total compensation of our executivesmedian employee was $25,569; and
the annual total compensation of our CEO as reported in the Summary Compensation Table of this proxy statement was $6,353,165.
Based on this information, for 2019, the ratio of the annual total compensation of Mr. Nefkens, our CEO, to the annual total compensation of the median employee was estimated to be 248 to 1. This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the alignmentmethodology described below.
To identify our median employee for 2019, we considered our global population as of such programs toOctober 1, 2019 (the “Measurement Date”). As of the interestsMeasurement Date, our total global employee population (excluding our CEO) consisted of our shareholders will prove effective. The Compensation Committee believes strongly that effective corporate governance and competitive, but reasonable, compensation are a cornerstone in delivering on their commitments to our shareholders and customers.approximately 13,121 individuals.
Total U.S. Employees | 2,906 | |||||
TotalNon-U.S. Employees | 10,215 | (no exemptions utilized) | ||||
Total Global Workforce | 13,121 |
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To identify the “median employee” from our total global employee population (excluding our CEO), we aggregated annual total base salary and actual incentive awards paid during 2019, including bonuses and commissions. We also annualized the compensation of all newly hired permanent employees who were employed on the measurement date, for the12-month period ending December 31, 2019, as permitted under SEC rules. Allnon-US pay components were converted to US dollars using the same currency exchange rates in effect in our financial records at October 1, 2019.
Once we identified the median employee, we determined the median employee’s total compensation by applying the same rules required to report NEO compensation on the Summary Compensation Table.
The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
| 2020 PROXY STATEMENT | 63 |
Ratification of the Appointment of Independent Registered Public Accounting Firm
Under its written charter, the Audit Committee of the Board has sole authority and is directly responsible for the appointment, compensation, retention, oversight, evaluation and termination of the independent registered public accounting firm retained to audit the Company’s financial statements.
The Audit Committee evaluated the qualifications, performance and independence of the Company’s independent auditors and based on its evaluation, has appointed Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accounting firm for 2019.2020. Deloitte served as the independent auditor of Resideo during 2018.2019. The Audit Committee and the Board believe that the retention of Deloitte to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders.
The Audit Committee is responsible for the approval of the engagement fees and terms associated with the retention of Deloitte. In addition to assuring the regular rotation of the lead audit partner as required by law, the Audit Committee will be involved in the selection and evaluation of the lead audit partner and considers whether, in order to assure continuing auditor independence, there should be a regular rotation of the independent registered public accounting firm.
Although theBy-Laws do not require that we seek shareholder ratification of the appointment of Deloitte as our independent registered public accounting firm, we are doing so as a matter of good corporate governance. If the shareholders do not ratify the appointment, the Audit Committee will reconsider whether or not to retain Deloitte.
Representatives of Deloitte are expected to be present at the annual meeting, will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions by shareholders.
The Board of Directors unanimously recommends a vote “FOR” Proposal 4,3, to ratify
the appointment of Deloitte & Touche LLP as the Company’s Company’ s
independent registered public accounting firm for 2019.2020.
The Audit Committee consists of the three directors named below. Each member of the Audit Committee is an independent director as defined by applicable SEC and NYSE listing standards. In addition, the Board has determined that Mr. Lazar and Mr. Deninger are “audit committee financial experts” as defined by applicable SEC rules and satisfy the “accounting or related financial management expertise” criteria established by the NYSE.
In accordance with its written charter, the Audit Committee of the Board is responsible for assisting the Board to fulfill its oversight of:
the integrity of the Company’s financial statements and internal controls;
the Company’s compliance with legal and regulatory requirements;
the independent auditors’ qualifications and independence; and
the performance of the Company’s internal audit function and independent auditors.
It is the responsibility of Resideo’s management to prepare the Company’s financial statements and to develop and maintain adequate systems of internal accounting and financial controls. The Company’s internal auditors are
| 64 | 2020 PROXY STATEMENT | |
responsible for conducting internal audits intended to evaluate the adequacy and effectiveness of the Company’s financial and operating internal control systems.
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Deloitte, the Company’s independent registered public accounting firm for 20192020 (the “independent auditor”), is responsible for performing an independent audit of the Company’s consolidated financial statements and issuing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States of America (“GAAP”). The independent auditor also review the Company’s interim financial statements in accordance with applicable auditing standards.
In evaluating the independence of Deloitte, the Audit Committee has (i) received the written disclosures and the letter from Deloitte required by applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) regarding the audit firm’s communications with the Audit Committee concerning independence, (ii) discussed with Deloitte the firm’s independence from the Company and management and (iii) considered whether Deloitte’s provision ofnon-audit services to the Company is compatible with the auditors’ independence. In addition, the Audit Committee assures that the lead audit partner is rotated at least every five years in accordance with SEC and PCAOB requirements, and considered whether there should be a regular rotation of the audit firm itself in order to assure the continuing independence of the outside auditors. The Audit Committee has concluded that Deloitte is independent from the Company and its management.
The Audit Committee has reviewed with the independent auditor and the Company’s internal auditors the overall scope and specific plans for their respective audits, and the Audit Committee is monitoring the progress of both in assessing the Company’s preparedness for future compliance with Section 404 of the Sarbanes-Oxley Act.
At every regular meeting, the Audit Committee meets separately, and without management present, with the independent auditor and the Company’s Vice President, Internal Audit to review the results of their examinations, their evaluations of the Company’s internal controls and the overall quality of the Company’s accounting and financial reporting. The Audit Committee also meets separately at its regular meetings with the Chief Financial Officer, the Controller, the General Counsel and the Chief Ethics and Compliance Officer.
The Audit Committee has met and discussed with management and the independent auditor the fair and complete presentation of the Company’s financial statements. The Audit Committee has also discussed and reviewed with the independent auditor all matters required to be discussed by PCAOB Auditing Standard No. 1301 (“Communications with Audit Committees”).applicable requirements of the Public Company Accounting Oversight Board and the SEC. The Audit Committee has discussed significant accounting policies applied in the financial statements, as well as alternative treatments. Management has represented that the consolidated financial statements have been prepared in accordance with GAAP, and the Audit Committee has reviewed and discussed the audited consolidated financial statements with both management and the independent auditor.
Relying on the foregoing reviews and discussions, the Audit Committee recommended to the Board, and the Board approved, inclusion of the audited consolidated financial statements in the Company’s Annual Report on Form10-K for the year ended December 31, 2018,2019, for filing with the SEC. In addition, the Audit Committee has approved, subject to shareholder ratification, the selection of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2019.2020.
The Audit Committee
Jack Lazar (Chair)
Paul Deninger
Sharon Wienbar
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Audit CommitteePre-Approval Policy
The Audit Committee has adopted policies and procedures forpre-approval of audit, audit-related, tax and other services, and forpre-approval of related fee estimates or fee arrangements. These procedures require that the terms and fees for the annual audit service engagement be approved by the Audit Committee. The Audit Committee is required topre-approve the audit andnon-audit services performed by the independent auditor in order to assure that the provision of such services does not impair the auditor’s independence. Unless a type of service to be provided by the independent auditor has received generalpre-approval under this policy, it will require specificpre-approval by the Audit Committee before the service is provided. In the event the invoice in respect of any covered service that is the subject of generalpre-approval is materially in excess of the estimated amount or range, the Audit Committee must approve such excess amount prior to payment of the invoice. Predictable and recurring covered services and their related fee estimates or fee arrangements may be considered for generalpre-approval by the full Audit Committee on an annual basis at or about the start of each fiscal year. Specificpre-approval of such services that have not received generalpre-approval may be given or effective up to one year prior to commencement of the services. Under the policy, the Audit Committee has delegated to the Chair the authority topre-approve audit-related andnon-audit services and associated fees, that are not otherwise prohibited by law, to be performed by the Company’s independent registered public accounting firm in an amount of up to $100,000 for any one service; the Chair is required to report anypre-approval decisions to the Audit Committee at its next scheduled meeting. All services set forth in the following table below were approved by the Audit Committee before being rendered.
The following table shows fees for professional services rendered by Deloitte & Touche LLP for the fiscal yearyears ended December 31, 2019 and 2018. Due to theSpin-Off from Honeywell on October 29, 2018, no fees are reflected for Resideo for the year ended December 31, 2017, as we did not pay any fees for professional services to Deloitte & Touche LLP.
| 2018 | ||||||||||||||||
| 2019 ($) | 2018 ($) | Description of Services | ||||||||||||||
Audit Fees | $ | 4,998,000 | Fees pertaining to the audit of the Company’s annual consolidated financial statements, audits of statutory financial statements of our subsidiaries and fees pertaining to the review of SEC filings. | 5,327,000 | 4,998,000 | Fees pertaining to the audit of the Company’s annual consolidated financial statements, audits of statutory financial statements of our subsidiaries and fees pertaining to the review of SEC filings. | ||||||||||
Audit-Related Fees | $ | 0 | 0 | 0 |
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Tax Fees | $ | 0 | 0 | 0 |
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All Other Fees | $ | 0 | 0 | 0 |
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Total | $ | 4,998,000 | 5,327,000 | 4,998,000 |
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Approval of the Resideo Employee Stock Purchase Plan
We are asking our shareholders to approve the Resideo Employee Stock Purchase Plan (the “Plan”), which is intended to be a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code (the “Code”). The Plan was approved by our Board on September 4, 2019 and, if approved by shareholders at the annual meeting, will become effective upon such shareholder approval.
The purpose of the Plan is to provide our employees with a convenient means of purchasing shares of our common stock at a discount to market prices through the use of payroll deductions. The full text of the Plan is contained in Appendix A to this proxy statement, and the material features of the Plan are summarized below.
Administration
The Compensation Committee of our Board (the “Committee”) is authorized to administer the Plan. The Committee has full authority to adopt rules and procedures to administer the Plan, interpret the provisions of the Plan, determine the terms and conditions of offerings under the Plan, designate which of our subsidiaries may participate in the Plan, and adopt rules, procedures andsub-plans to permit employees of foreign subsidiaries to participate in the Plan on a basis intended to achieve tax, securities law or other compliance objectives in locations outside of the United States. All costs and expenses incurred for Plan administration are paid by us.
Securities Subject to the Plan
Up to 3,000,000 shares of our common stock may be purchased by participants under the Plan. Any shares issued under the Plan will reduce, on aone-for-one basis, the number of shares available for subsequent issuance under the Plan. In the event of any change to our outstanding common stock, such as a recapitalization, stock dividend, stock split or similar event, appropriate adjustments will be made to the number and class of shares available under the Plan, the limit on the number of shares that a participant may purchase during any purchase period, and the number, class and purchase price of shares subject to purchase under any pending offering.
Eligibility and Participation
With one exception, any individual employed by our company or any participating subsidiary corporation is eligible to participate in the Plan. However, no employee who owns stock possessing 5% or more of the total combined voting power or value of all classes of our stock or the stock of any of our subsidiaries may participate in the Plan. The Committee may, consistent with the requirements of Section 423, impose additional eligibility requirements for individual offerings under the Plan. As of April 15, 2020, we estimate that approximately 3,000 employees, including six of our seven executive officers, were eligible to participate in the Plan.
Eligible employees may enroll in the Plan during an enrollment period prior to the purchase period determined by the Committee and will begin participating at the start of the purchase period.
Purchase Periods and Purchase Dates
Shares of common stock will be offered under the Plan through a series of offerings, each of which consists of a single purchase period of six months, or such other duration (up to 27 months) as the Committee may prescribe. If our shareholders approve this proposal, we expect that our shares will be offered under the Plan through a
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series of successivesix-month purchase periods that are expected to commence on August 15, 2020 and on February 15 and August 15 of each calendar year thereafter. Purchases under the Plan are expected to occur on August 14 and February 14, or the last trading day of each purchase period.
Purchase Price
Unless a different purchase price is established by the Committee, the purchase price of each share of our common stock sold pursuant to the Plan will be the lesser of (i) 90% of the fair market value of a share of our common stock on the offering date of the applicable purchase period, or (ii) 90% of the fair market value of a share of our common stock on the purchase date of the applicable purchase period. In no event will the purchase price be less than the lesser of (i) 85% of the fair market value of a share of our common stock on the offering date of the applicable purchase period, or (ii) 85% of the fair market value of a share of our common stock on the applicable purchase date.
The fair market value of a share of our common stock on any relevant date under the Plan will be deemed to be equal to the closing sale price per share on the New York Stock Exchange on the last preceding day on which any sale shall have been made. The closing sale price of our common stock on the New York Stock Exchange on April 15, 2020 was $5.04 per share.
Payroll Deductions and Stock Purchases
Each participant may elect to have a percentage of eligible compensation between 1% and 10% withheld as a payroll deduction per pay period. The accumulated deductions will automatically be applied on each purchase date (the last trading day of a purchase period) to the purchase of shares of our common stock at the purchase price in effect for that purchase date. In connection with specific offerings under the Plan, the Committee may permit participants to make additional contributions other than by payroll deductions during the applicable purchase period. For purposes of the Plan, eligible compensation generally includes cash compensation including wages, salary, commissions and overtime earnings, and excludes bonuses, company 401(k) contributions, amounts deferred to anon-qualified deferred compensation plan, expense reimbursements and allowances, and income with respect to equity-based awards.
Special Limitations
The Plan imposes certain limitations upon a participant’s right to purchase our common stock under the Plan, including the following:
A participant may not be granted rights to purchase more than $25,000 worth of our common stock (valued at the time each purchase right is granted) for each calendar year in which such purchase rights are outstanding.
No participant may purchase more than 5,000 shares of our common stock (or such other number of shares as the Committee may designate for a specific offering) on any one purchase date.
Changing Contribution Amounts; Withdrawal from Plan
A participant may, by written notice during an enrollment period, increase the amount of his or her payroll deduction contributions effective as of the first day of the next purchase period. A participant may also suspend the amount of his or her payroll deduction contributions during a purchase period by submitting written notice that complies with the rules set by the Committee. A participant may withdraw from the Plan at any time by complying with the rules set by the Committee, and his or her accumulated (but not yet invested) contributions to the Plan will be refunded.
Termination of Employment
A participant’s purchase right will immediately terminate upon his or her termination of employment for any reason. Any payroll deductions that the participant may have made for the purchase period in which such termination of employment occurs will be refunded and will not be applied to the purchase of common stock.
| 68 | 2020 PROXY STATEMENT | |
Shareholder Rights
No participant will have any shareholder rights with respect to the shares covered by his or her purchase rights under the Plan until the shares are actually purchased on the participant’s behalf through the Plan and issued and delivered.
Transferability of Purchase Rights
No purchase rights under the Plan will be assignable or transferable by the participant, except by will or the laws of inheritance following a participant’s death.
Withdrawal of Shares
A participant may direct the agent selected by Resideo to sell any or all of the participant’s shares of our common stock credited to the participant’s share subaccount and distribute the net proceeds of such sale to the participant. Except for such sales, a participant may not withdraw shares or otherwise transfer shares from the participant’s share subaccount.
Corporate Transactions
If Resideo is acquired by merger, consolidation or other reorganization, or sells all or substantially all its assets, each right to acquire shares on any purchase date scheduled to occur after the date of the consummation of the transaction shall be continued or assumed or an equivalent right shall be substituted by the surviving or successor corporation or its parent or subsidiary. If those rights are not continued, assumed or substituted, then our Board may terminate the Plan or shorten the purchase period then in progress by setting a new purchase date to occur prior to the transaction.
Share Proration
Should the total number of shares of common stock to be purchased pursuant to outstanding purchase rights on any particular purchase date exceed the number of shares remaining available for issuance under the Plan at that time, the Committee shall make to each participant a pro rata allocation in a uniform and nondiscriminatory manner of the available shares, and the payroll deductions of each participant not used to purchase shares will be refunded.
Amendment and Termination
The Plan may be terminated at any time by our Board, and will terminate upon the date on which all shares remaining available for issuance under the Plan are sold pursuant to exercised purchase rights.
The Committee may at any time amend or suspend the Plan. However, the Committee may not, without shareholder approval, amend the Plan to (i) increase the number of shares issuable under the Plan or (ii) effect any other change in the Plan that would require shareholder approval under applicable law, New York Stock Exchange rules or to maintain compliance with Code Section 423.
U.S. Federal Income Tax Consequences
The following is a summary of the principal United States federal income tax consequences to the Company and to participants subject to U.S. taxation with respect to participation in the Plan. This summary assumes the Plan qualifies as an “employee stock purchase plan” within the meaning of Code Section 423, is not intended to be exhaustive and does not discuss the income tax laws of any city, state or foreign jurisdiction in which a participant may reside.
Under a qualified Code Section 423 arrangement, no taxable income will be recognized by a participant, and no deductions will be allowed to the company, upon either the grant or the exercise of purchase rights under the
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Plan. Taxable income will not be recognized until either there is a sale or other disposition of the shares acquired under the Plan or in the event the participant should die while still owning the purchased shares.
If a participant sells or otherwise disposes of the purchased shares within two years after the first day of the purchase period in which such shares were acquired, or within one year after the actual purchase date of those shares, then the participant will recognize ordinary income in the year of sale or disposition equal to the amount by which the closing market price of the shares on the purchase date exceeded the purchase price paid for those shares, and the company will be entitled to an income tax deduction, for the taxable year in which such disposition occurs, equal in amount to such excess. The participant also will recognize a capital gain to the extent the amount realized upon the sale of the shares exceeds the sum of the aggregate purchase price for those shares and the ordinary income recognized in connection with their acquisition.
If a participant sells or otherwise disposes of the purchased shares more than two years after the first day of the purchase period in which the shares were acquired and more than one year after the actual purchase date of those shares, the participant will recognize ordinary income in the year of sale or disposition equal to the lower of (i) the amount by which the selling price of the shares on the sale or disposition date exceeded the purchase price paid for those shares or (ii) 10% of the closing market price of the shares on the first day of the purchase period in which the shares were acquired (or such purchase price discount provided by the Committee for the purchase period, not to exceed 15%). Any additional gain upon the disposition will be taxed as a long-term capital gain. Resideo will not be entitled to an income tax deduction with respect to such disposition.
If a participant still owns the purchased shares at the time of death, his or her estate will recognize ordinary income in the year of death equal to the lower of (i) the amount by which the closing market price of the shares on the date of death exceeds the purchase price or (ii) 10% of the closing market price of the shares on the first day of the purchase period in which those shares were acquired (or such purchase price discount provided by the Committee for the purchase period, not to exceed 15%).
Plan Benefits
The benefits to be received by our officers and employees under the Plan are not determinable because the amounts of future purchases by participants are based on elective participant contributions.
The Board of Directors unanimously recommends a vote “FOR” Proposal 4
to approve the Employee Stock Purchase Plan.
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About the Annual Meeting and Voting
| 1. | Who is entitled to vote and how many votes do I have? |
If you were a holder of record of Resideo common stock at the close of business on the record date, April 15, 2019,2020, you are eligible to vote at the annual meeting. For each matter presented for vote, you have one vote for each share you own.
| 2. | What is the difference between holding shares as a shareholder of record, a registered shareholder |
Shareholder of Record or Registered Shareholder. If your shares of common stock are registered directly in your name with our transfer agent, EQ Shareowner Services, you are considered a “shareholder of record” or a “registered shareholder” of those shares.
Beneficial Owner of Shares. If your shares are held in an account at a bank, brokerage firm or other similar organization, then you are a beneficial owner of shares held in “street name.” In that case, you will have received these proxy materials from the bank, brokerage firm or other similar organization holding your account and, as a beneficial owner, you have the right to direct your bank, brokerage firm or similar organization as to how to vote the shares held in your account.
Participants in Honeywell Savings Plans. Shareholders who own Resideo shares as participants in Honeywell savings plans as a result of the Spin-Off are considered the beneficial owners of shares held by the savings plans. The trustee of each savings plan is the shareholder of record for the shares held within the plans.
| 3. | How do I vote if I am a shareholder of record? |
By Internet.You may vote your shares by internet at www.proxyvote.com.
By Telephone. All shareholders of record can vote by touchtone telephone within the U.S., U.S. territories and Canada by calling1-800-690-6903. The telephone voting procedures are designed to authenticate shareholders’ identities, to allow shareholders to vote their shares and to confirm that their instructions have been recorded properly.
By Written Proxy. All shareholders of record can also vote by written proxy card. If you are a shareholder of record and receive a Notice of Internet Availability of Proxy Materials (“Notice”) received or requested from us, you may request a written proxy card by following the instructions included in the Notice. If you sign and return your proxy card but do not mark any selections giving specific voting instructions, your shares represented by that proxy will be voted as recommended by the Board.
Via the Virtual Meeting Website. You may vote your shares live at the virtual annual meeting. Even if you plan to attend and participate in our virtual annual meeting via www.virtualshareholdermeeting.com/REZI2019,REZI2020, we encourage you to vote by internet at www.proxyvote.com or by calling1-800-690-6903, or by returning a proxy card. This will ensure that your vote will be counted if you are unable to, or later decide not to, participate in the virtual annual meeting. Whether you are a shareholder of record or hold your shares in street name, you may vote online at the virtual annual meeting. You will need to enterthe 16-digit control number provided in your proxy materials to vote your shares at the virtual annual meeting. See Question 65 for further details on accessing and voting at the virtual annual meeting.
Unless you vote live at the virtual annual meeting, we must receive your vote by 11:59 p.m., Eastern Daylight Time, on June 11, 2019,7, 2020, the day before the virtual annual meeting, for your vote by proxy to be counted.
Whether or not you plan to attend the virtual annual meeting, we encourage you to vote by proxy as soon as possible. Your shares will be voted in accordance with your instructions.
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| 4. | How do I vote if I am a beneficial owner of shares? |
As a beneficial owner, you have the right to direct your broker, bank or other similar organization on how to vote via the internet or by telephone if the broker, bank or other similar organization offers these options or by
| 2020 PROXY STATEMENT | 71 |
signing and returning a voting instruction form. Your broker, bank or other similar organization will send you instructions for voting your shares.
Your broker is not permitted to vote on your behalf on“non-routine” matters unless you provide specific instructions by completing and returning the voting instruction form from your broker, bank or other similar organization or by following the instructions provided to you for voting your shares via telephone or the internet. A “brokernon-vote” occurs when a broker submits a proxy for the meeting with respect to a “routine” matter but does not have the authority to vote onnon-routine matters because the beneficial owner did not provide voting instructions on those matters. Under NYSE rules, the proposal to ratify the appointment of independent auditors (Proposal 4)3) is considered a routine item. This means that brokerage firms may vote in their discretion on behalf of clients (beneficial owners) who have not furnished voting instructions at least 15 days before the date of the annual meeting. In contrast, all of the other proposals set forth in this Proxy Statement are“non-routine” items. Brokerage firms that have not received voting instructions from their clients on these matters may not vote on these proposals.
| 5. | How do I |
You must provide the trustee of the relevant savings plan with your voting instructions in advance of the meeting. You may do so by returning your voting instructions by mail, or submitting them by calling1-800-690-6903 or via the internet at www.proxyvote.com. You cannot vote your shares during the virtual annual meeting; the trustee is the only one who can vote your shares. The trustee will vote your shares as you have instructed. If the trustee does not receive your instructions, your shares generally will be voted in proportion to the way the other plan participants in the relevant plan voted, unless contrary to the Employee Retirement Income Security Act of 1974 (ERISA). To allow sufficient time for voting by the trustee, your voting instructions must be received by 11:59 p.m., Eastern Daylight Time (EDT), on June 9, 2019.
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The annual meeting will be completely virtual and shareholders will be able to access the meeting live by visiting www.virtualshareholdermeeting.com/REZI2019.REZI2020. We are utilizing the virtual meeting format to enhance shareholder access and encourage participation and communication with our management.
We believe a virtual-only meeting provides expanded access, improved communication and cost savings for our shareholders. A virtual meeting will enable increased attendance because shareholders around the world will be able to attend and listen to the annual meeting live, submit questions and vote their shares electronically, at no cost.
Participating in the Virtual Annual Meeting.
Instructions on how to attend the virtual annual meeting are posted at www.virtualshareholdermeeting.com/REZI2019.REZI2020.
Shareholders will need to usethe 16-digit control number provided in their proxy materials to attend the virtual annual meeting and listen live at www.virtualshareholdermeeting.com/REZI2019.REZI2020.
Shareholders of record and beneficial owners as of the record date may vote their shares electronically live during the virtual annual meeting.
Shareholders with questions regarding how to attend and participate in the virtual meeting maycall 800-586-1548 (US) or303-562-9288 (International) on the date of the annual meeting.
Shareholders encountering any difficulties accessing the virtual meeting during thecheck-in or meeting time can call800-586-1548 (US) or303-562-9288 (International).
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Additional Information about the Virtual Annual Meeting.
Shareholders may submit questions during the live meeting at www.virtualshareholdermeeting.com/REZI2019REZI2020 or in advance of the meeting at www.proxyvote.com.
Management will answer questions on any matters on the agenda before voting is closed.
During the live Q&A session of the meeting, management will answer questions as they come in and address those asked in advance, as time permits.
In order to allow us to answer questions from as many shareholders as possible, we limit each shareholder to one question.
If there are matters of individual concern to a shareholder and not of general concern to all shareholders, or if a question posed was not otherwise answered, shareholders can contact Investor Relations after the meeting at InvestorRelations@resideo.com.
The Q&A session will be posted to our Investor Relations website investor.resideo.com as soon as practicable following the conclusion of the virtual annual meeting.
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Although the live virtual meeting is available only to shareholders at the time of the meeting, a replay of the meeting will be made publicly available on our Investor Relations website investor.resideo.com after the meeting concludes.
What constitutes a “quorum” for the meeting? |
A quorum is a majority of the outstanding shares that are entitled to vote as of the record date present at the meeting or represented by proxy. A quorum is necessary to conduct business at the annual meeting. Your shares will be counted as present at the annual meeting if you have properly voted by proxy. Abstentions and brokernon-votes count as present at the meeting for purposes of determining a quorum. If you vote to abstain on one or more proposals, your shares will be counted as present for purposes of determining the presence of a quorum.
What is the voting requirement to approve each of the proposals, and how are votes counted? |
At the close of business on April 15, 2019,2020, the record date for the meeting, Resideo had 122,690,293123,140,863 outstanding shares of common stock. Each share of common stock outstanding on the record date is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on.
Resideo is incorporated in the State of Delaware. As a result, the Delaware General Corporation Law (the “DGCL”) and the NYSE listing standards govern the voting standards applicable to actions taken by our shareholders. Under ourBy-Laws, when a quorum is present, in all matters other than the election of directors and frequency of future advisory votes approving the compensation of our NEOs, the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter shall be the act of the Company’s shareholders. Under the DGCL and theourBy-Laws, shares that abstain constitute shares that are present and entitled to vote. Shares abstaining have the practical effect of being voted “against” the matter, other than in the election of directors and the frequency of future advisory votes approving the compensation of our NEOs.directors.
With respect to the election of directors, Proposal 1, in order to be elected, each nominee must receive the affirmative vote of a majority of the votes cast at the meeting in respect of his or her election. Brokernon-votes and abstentions will have no impact, as they are not counted as votes cast for this purpose.
With respect to the frequency of future advisory votes approving the compensation of our NEOs, Proposal 3, because the advisory vote entails three choices (one, two or three years) in addition to shareholders’ option to abstain from voting, it is possible that none of these choices will receive a majority vote. In such a case, the Board nevertheless will consider the shareholder preferences indicated by the vote.
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A description of the voting requirements and related effect of abstentions and brokernon-votes on each item for shareholder proposal is as follows:
| VOTING OPTIONS | BOARD RECOMMENDATION | VOTE REQUIRED TO ADOPT THE PROPOSAL | EFFECT OF ABSTENTIONS AND | |||||
Proposal 1—Election of Class | For, Against | FOR each nominee | Majority of votes cast for such nominee | None. | ||||
Proposal 2—Advisory Vote to Approve Executive Compensation | For, Against | FOR | Majority of shares represented at the annual entitled to vote | Abstentions are treated as votes against. Broker have no | ||||
Proposal 3—
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Appointment of Independent Registered Public Accounting Firm | For, Against or Abstain | FOR | Majority of shares represented at the annual entitled to vote | Abstentions are treated as votes against. Brokers have discretion to vote on this item. | ||||
Proposal 4—Approval of Resideo | For, Against or Abstain | FOR | Majority of shares represented at the annual meeting and entitled to vote | Abstentions are treated as votes against. Broker non-votes have no effect. | ||||
Can I change my vote? |
There are several ways in which you may revoke your proxy or change your voting instructions before the time of voting at the meeting (please note that, in order to be counted, the revocation or change must be received by 11:59 p.m. EDT on June 11, 2019, or by 11:59 p.m. EDT on June 9, 2019 in the case of instructions to the trustee of a Honeywell savings plan)7, 2020):
Vote again by telephone or at www.proxyvote.com;
Transmit a revised proxy card or voting instruction form that is dated later than the prior one;
Shareholders of record and beneficial owners may vote electronically at the virtual annual meeting; or
Shareholders of record may notify Resideo’s Corporate Secretary in writing that a prior proxy is revoked; or
Honeywell savings plan participants may notify the plan trustee in writing that prior voting instructions are revoked or are changed.revoked.
The latest-dated, timely, properly completed proxy that you submit, whether by mail, telephone or the internet, will count as your vote. If a vote has been recorded for your shares and you subsequently submit a proxy card that is not properly signed and dated, then the previously recorded vote will stand.
Is my vote confidential? |
Yes. Proxy cards, ballots and voting tabulations that identify shareholders are kept confidential except:
As necessary to meet applicable legal requirements and to assert or defend claims for or against the Company;
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In the case of a contested proxy solicitation;
If a shareholder makes a written comment on the proxy card or otherwise communicates his or her vote to management; or
To allow the independent judge of election to certify the results of the vote.
Broadridge, the independent proxy tabulator used by Resideo, counts the votes and acts as the inspector of elections for the meeting.
How will the voting results be disclosed? |
We will announce preliminary voting results at the virtual annual meeting and publish them on our website www.resideo.com. Voting results will also be disclosed on a Form8-K filed with the SEC within four business days after the annual meeting, which will be available on our website.
What does it mean if I receive more than one Notice? |
If you are a shareholder of record, or own Resideo shares as a participant in Honeywell’s savings plans, you will receive one Notice (or if you are an employee with a Resideo email address, an email proxy form) for all shares of common stock held in or credited to your accounts as of the record date, if the account names are exactly the same. If your shares are registered differently and are in more than one account, you will receive more than one Notice or email proxy form, and in that case, you can and are urged to vote all of your shares, which will require you to vote more than once.
What is “householding”? |
Shareholders of record who have the same last name and address and who request paper copies of the proxy materials will receive only one copy unless one or more of them notifies us that they wish to receive individual copies. This method of delivery, known as “householding,” will help ensure that shareholder households do not receive multiple copies of the same document, helping to reduce our printing and postage costs, as well as saving natural resources.
We will deliver promptly upon written or oral request a separate copy of the 20182019 Annual Report and Proxy Statement or Notice of Internet Availability of Proxy Materials, as applicable, to a security holder at a shared address to which a single copy of the document was delivered. Please go to www.proxyvote.com to request a copy.
Shareholders of record may request to begin or to discontinue householding in the future by contacting Broadridge, either by calling (866)540-7095, or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Shareholders owning their shares through a bank, brokerage firm or other similar organization may request to begin or to discontinue householding by contacting their bank, brokerage firm or other similar organization.
Who pays for the solicitation of proxies? |
Resideo is making this solicitation and will pay the cost of soliciting proxies. Proxies will be solicited on behalf of the Board of Directors by mail, telephone other electronic means. We have retained Innisfree M&A Inc., 501 Madison Avenue, New York, NY 10022, to assist with the solicitation for an estimated fee of $10,000, plus expenses. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonableout-of-pocket expenses for sending proxy materials to shareholders and obtaining their votes. Our employees may also solicit proxies for no additional compensation.
How do I comment on Company business? |
You will have the opportunity to comment when you vote using the internet or you may write any comments on the proxy card if you vote by mailing a proxy card. You may also send your comments to us at Resideo Technologies, Inc., 1985 Douglas Drive North, Golden Valley, MN 55422,901 E. 6th Street, Austin, TX 78702, Attention: Investor Relations. Although it is not possible to respond to each shareholder, your comments are appreciated and help us to understand your concerns.
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When are the |
To be considered for inclusion in the Company’s 20202021 Proxy Statement, shareholder proposals submitted in accordance with SECRule14a-8 must be received in writing at our principal executive offices no later than December 27, 2019.25, 2020. Address all shareholder proposals to Resideo Technologies, Inc., 1985 Douglas Drive North, Golden Valley, MN 55422,901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary. For any proposal that is not submitted for inclusion in next year’s Proxy Statement, but is instead sought to be presented directly at the 20202021 annual meeting, notice of intention to present the proposal, including all information required to be provided by the shareholder in accordance with the Company’sBy-Laws, must be received in writing at our principal executive offices by March 14, 2020,10, 2021, and no earlier than February 13, 2020.8, 2021. Address all notices of intention to present proposals at the 20202021 annual meeting to Resideo Technologies, Inc., 1985 Douglas Drive North, Golden Valley, MN 55422,901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary. For information on nominating directors for the 2021 annual meeting, please see the information above under “Advance Notice Director Nominations” and “Proxy Access Director Nominations” on page 23.
How may I obtain a copy of Resideo’s |
If you would like to receive paper ore-mail copies of our 20182019 Annual Report and the Proxy Statement, free of charge, you may request them by internet at www.proxyvote.com, by telephone at1-800-579-1639 or bye-mail at sendmaterial@proxyvote.com. You will need your16-digit control number provided in your proxy materials to request paper copies. Requests for materials relating to the 20192020 annual meeting may be made by calling1-800-579-1639, and must be made by May 29, 201925, 2020 to facilitate timely delivery. Our Annual Report onForm 10-K, Quarterly Reports onForm 10-Q, Current Reports onForm 8-K, and any amendments to those reports, are available free of charge on our Investor Relations website at investor.resideo.com.
How do I contact the Company or the Board of Directors? |
Our Investor Relations department is the primary point of contact for shareholder interaction with Resideo. Shareholders can contact our Investor Relations department by email at InvestorRelations@resideo.com, by phone at 512-779-8646,512-726-3500, or by writing to Resideo Technologies, Inc., 1985 Douglas Drive North, Golden Valley, MN 55422,901 E. 6th Street, Austin, TX 78702, Attention: Investor Relations.
Shareholders, as well as other interested parties, may communicate directly with the Lead Independent Director, thenon-employee directors as a group, or individual directors by writing to Resideo Technologies, Inc., 1985 Douglas Drive North, Golden Valley, MN 55422,901 E. 6th Street, Austin, TX 78702, Attention: Corporate Secretary. Our Corporate Secretary reviews and promptly forwards communications to the directors as appropriate. Communication involving substantive accounting or auditing matters are forwarded to the Chair of the Audit Committee. Certain items that are unrelated to the duties and responsibilities of the Board will not be forwarded such as junk mail and mass mailings; product complaints and product inquiries; new product or technology suggestions; job inquiries and resumes; advertisements or solicitations; surveys; spam and overly hostile, threatening, potentially illegal or similarly unsuitable communications.
Can other business in addition to the items listed on the agenda be transacted at the meeting? |
The Company knows of no other business to be presented for consideration at the meeting. If other matters are properly presented at the meeting, the persons designated as authorized proxies on your proxy card may vote on such matters at their discretion.
By Order of the Board of Directors,
Jeannine Lane
Executive Vice President, General Counsel, and Corporate Secretary and Chief Compliance Officer
April 25, 201924, 2020
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RESIDEO EMPLOYEE STOCK PURCHASE PLAN
1. Purpose of the Plan. The purpose of this Resideo Employee Stock Purchase Plan (the “Plan”) is to provide the employees of Resideo Technologies, Inc. (“Resideo”) and its participating subsidiaries with a convenient means of purchasing shares of Resideo common stock from time to time at a discount to market prices through the use of payroll deductions. Resideo intends that the Plan shall qualify as an “employee stock purchase plan” under Code § 423. Accordingly, the Plan will be construed so as to extend and limit Plan participation in any Offering subject to Code § 423 in a uniform and nondiscriminatory basis consistent with the requirements of Code § 423.
2. Definitions.The terms defined in this section are used (and capitalized) elsewhere in this Plan.
2.1. “Affiliate” means each domestic or foreign entity that is a “parent corporation” or “subsidiary corporation” of Resideo, as defined in Code §§ 424(e) and 424(f) or any successor provisions.
2.2. “Board” means the Board of Directors of Resideo.
2.3. “Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time. For purposes of the Plan, references to sections of the Code shall be deemed to include any applicable regulations thereunder and any successor or similar statutory provisions.
2.4. “Committee” means the Compensation Committee of the Board (or such successor committee responsible for executive compensation matters).
2.5. “Common Stock” means the common stock, par value $0.001 per share, of Resideo.
2.6. “Corporate Transaction” means (i) a merger, consolidation or other reorganization of Resideo with or into another corporation, or (ii) the sale of all or substantially all of the assets of Resideo.
2.7. “Designated Affiliate” means any Affiliate which has been expressly designated by the Committee as a corporation whose Eligible Employees may participate in the Plan.
2.8. “Eligible Compensation” shall be defined from time to time by the Committee in its sole discretion with respect to any Offering and Purchase Period. Except as otherwise defined by the Committee from time to time in its sole discretion, (i) Eligible Compensation means the cash compensation (including wages, salary, commissions, and overtime earnings) paid by Resideo or any Designated Affiliate to a Participant in accordance with the Participant’s terms of employment, (ii) Eligible Compensation includes contributions made by the Participant by payroll deduction to any qualified cash or deferred arrangement that forms part of a plan maintained by Resideo or an Affiliate (while it is an Affiliate), or to a cafeteria plan maintained by Resideo or an Affiliate (while it is an Affiliate), or under any qualified transportation fringe benefit plan, and (iii) Eligible Compensation shall not include any bonuses, employer contributions to a 401(k) or other retirement plan, amounts deferred to anon-qualified deferred compensation plan, any expense reimbursements or allowances, vacation pay in lieu of time off, coverage provided or amounts paid under any welfare benefit plan (unless provided above), amounts paid by an insurance company, amounts paid in a form other than cash and other fringe benefits, or any income (whether paid in Shares or cash) realized by the Participant as a result of participation in any equity-based compensation plan of Resideo or an Affiliate.
2.9. “Eligible Employee” means any employee of Resideo or a Designated Affiliate, except for any employee who, immediately after a right to purchase is granted under the Plan, would be deemed, for purposes of Code § 423(b)(3), to own stock possessing 5% or more of the total combined voting power or value of all classes
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2.10. “Enrollment Period” means the period of time prior to a Purchase Period during which Eligible Employees may elect to participate in the Plan as determined by the Committee for an Offering.
2.11. “Fair Market Value” of a Share of Common Stock as of any date means the closing sale price for a Share on the principal securities market on which the Shares trade on the last preceding day on which any sale shall have been made.
2.12. “Offering” means the right provided to Participants to purchase Shares under the Plan with respect to a Purchase Period.
2.13. “Offering Date” means the first Trading Day of a Purchase Period.
2.14. “Participant” means an Eligible Employee who has elected to participate in the Plan in the manner set forth in Section 4 and whose participation has not ended pursuant to Section 8.1 or Section 9.
2.15. “Plan” means this Resideo Employee Stock Purchase Plan, as it may be amended from time to time.
2.16. “Purchase Date” means the last Trading Day of a Purchase Period.
2.17. “Purchase Period” means a period of time during which offers to purchase Common Stock are outstanding under the Plan. The Committee shall determine the length of each Purchase Period, which need not be uniform; provided that no Purchase Period shall exceed twenty-seven (27) months in length. A Purchase Period shall commence on such date as may be established by the Committee. Unless the Committee determines otherwise, the Purchase Period will be a period of six months beginning either (i) on February 15 of each calendar year and ending on the next August 14, or (ii) on August 15 in each calendar year and ending on the next February 14.
2.18. “Recordkeeping Account” means the account maintained in the books and records of Resideo (or its agent) recording the amount contributed to the Plan by each Participant through payroll deductions.
2.19. “Resideo” means Resideo Technologies, Inc., a Delaware corporation, or any successor corporation.
2.20. “Shares” means shares of Common Stock.
2.21. “Trading Day” means a day on which the national stock exchanges in the United States are open for trading.
3. Shares Available. Subject to adjustment as provided in Section 14.1, the maximum number of Shares that may be sold by Resideo to Eligible Employees under the Plan shall be 3,000,000 Shares. If the purchases by all Participants in an Offering would otherwise cause the aggregate number of Shares to be sold under the Plan to exceed the number specified in this Section 3, Resideo shall make to each Participant in that Offering a pro rata allocation in a uniform and nondiscriminatory manner of the remaining number of Shares which may be sold under the Plan.
4. Eligibility and Participation. To be eligible to participate in the Plan for a given Purchase Period, an employee must be an Eligible Employee on the first day of such Purchase Period. An Eligible Employee may elect to participate in the Plan by filing an election form with Resideo (or its agent) before the Offering Date for a Purchase Period that authorizes regular payroll deductions from Eligible Compensation beginning with the first payday in such Purchase Period and continuing until the Plan is terminated or the Eligible Employee withdraws from the Plan, modifies his or her authorization, or ceases to be an Eligible Employee, as hereinafter provided.
5. Amount of Common Stock Each Eligible Employee May Purchase.
5.1. Purchase Amounts and Limitations. Subject to the provisions of this Plan, each Participant shall be offered the right to purchase on the Purchase Date the maximum number of whole Shares that can be purchased
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with the balance in the Participant’s Recordkeeping Account at the per Share price specified in Section 5.2. Notwithstanding the foregoing, no Participant shall be entitled to:
(a) the right to purchase Shares under this Plan and all other employee stock purchase plans (within the meaning of Code § 423(b)), if any, of Resideo and its Affiliates that accrues at a rate which in the aggregate exceeds $25,000 of Fair Market Value (determined on the Offering Date of a Purchase Period when the right is granted) for each calendar year in which such right is outstanding at any time; or
(b) purchase Shares in excess of 5,000 Shares per Offering (or such other maximum Share limit as established by the Committee in its sole discretion), with such limit subject to adjustment from time to time as provided in Section 14.1.
5.2. Purchase Price. Unless a different purchase price is established by the Committee for an Offering prior to the commencement of the applicable Purchase Period, the purchase price of each Share sold pursuant to this Plan will be the lesser of (i) 90% of the Fair Market Value of such Share on the Offering Date of the applicable Purchase Period, or (ii) 90% of the Fair Market Value of such Share on the Purchase Date. In no event shall the purchase price be less than the lesser of (i) 85% of the Fair Market Value of such Share on the Offering Date of the applicable Purchase Period, or (ii) 85% of the Fair Market Value of such Share on the Purchase Date.
6. Method of Participation.
6.1. Notice and Date of Grant. Resideo shall give notice to each Eligible Employee of the opportunity to purchase Shares pursuant to this Plan and the terms and conditions of such Offering. Resideo contemplates that for tax purposes the Offering Date for a Purchase Period will be considered the date of the grant of the right to purchase such Shares.
6.2. Contribution Elections. Each Eligible Employee who desires to participate in the Plan for a Purchase Period shall signify his or her election to do so by completing an election with Resideo (or its agent) in a manner approved by the Committee. An Eligible Employee may elect to have any whole percent of Eligible Compensation (that is, 1%, 2%, 3%, etc.) withheld as a payroll deduction, but not exceeding 10% per pay period (or such other maximum percentage as the Committee may establish from time to time prior to the commencement of an Offering). An election to participate in the Plan and to authorize payroll deductions as described herein must be made prior to the Offering Date of a Purchase Period in accordance with the rules set by the Committee for the Purchase Period, and shall be effective beginning with the first payday in the Purchase Period immediately following the filing of such election. Any election submitted shall remain in effect until the Plan is terminated or such Participant withdraws from the Plan, modifies his or her authorization, or ceases to be an Eligible Employee, as hereinafter provided.
6.3 Additional Contributions. If specifically provided by the Committee in connection with an Offering (including for purposes of complying with applicable local law), in addition to or instead of making contributions by payroll deductions, a Participant may make additional contributions to his or her Recordkeeping Account through the payment by cash or check prior to a Purchase Date. A Participant may make such additional contributions into his or her Recordkeeping Account only if the Participant has not already had the maximum permitted amount withheld during the Offering through payroll deductions, subject to the limitations set forth in Section 5.1.
6.4. Offering Terms and Conditions. Each Offering shall consist of a single Purchase Period and shall be in such form and shall contain such terms and conditions as the Committee shall deem appropriate, consistent with the terms of the Plan. The Committee may provide for separate Offerings for different Designated Affiliates, and the terms and conditions of the separate Offerings, including the applicable Purchase Period, need not be consistent. Any Offering shall comply with the requirement of Code § 423 that all Participants shall have the same rights and privileges for such Offering. The terms and conditions of any Offering shall be incorporated by reference into the Plan and treated as part of the Plan.
7. Recordkeeping Accounts.
7.1. Crediting Payroll Deduction Contributions. Resideo (or its agent) shall maintain a Recordkeeping Account for each Participant. Payroll deductions pursuant to Section 6 will be credited to such Recordkeeping Accounts on or within a reasonable amount of time following each payday.
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7.3. No Segregation of Accounts. The Recordkeeping Account is established solely for accounting purposes, and all amounts credited to the Recordkeeping Account will remain part of the general assets of Resideo and need not be segregated from other corporate funds (unless required under local law).
7.4. Additional Contributions. A Participant may not make any separate cash payment into a Recordkeeping Account, except as may be permitted in accordance with Section 6.3, and any such additional contributions will be credited to the Recordkeeping Accounts within a reasonable amount of time following receipt by Resideo.
8. RESIDEO TECHNOLOGIES, INC.Right to Adjust Participation; Withdrawals from Recordkeeping Account.
8.1. Withdrawal from Plan. A Participant may at any time withdraw from the Plan by complying with the rules set by the Committee. If a Participant withdraws from the Plan, Resideo will pay to the Participant in cash the entire balance in such Participant’s Recordkeeping Account and no further deductions will be made from the Participant’s Eligible Compensation during such Purchase Period. A Participant who withdraws from the Plan will not be eligible to reenter the Plan until the next succeeding Purchase Period, and any such reentry shall be through the enrollment process described in Section 6.2.
8.2. Adjusting Level of Participation. A Participant may adjust his or her rate of payroll deduction contributions to the Plan as follows:
(a) A Participant may, by written notice during an Enrollment Period, direct Resideo to increase or decrease his or her rate of payroll deduction contributions, with such change to be effective as of the first day of the next Purchase Period.
(b) A Participant may, by written notice that complies with the rules set by the Committee, direct Resideo to decrease his or her rate of payroll deduction contributions during a Purchase Period to 0%, which shall be considered a suspension of contributions and shall become effective as soon as reasonably practicable. Any Participant who has decreased his or her rate of payroll deductions to 0% and does not increase such rate of payroll deductions from 0% to at least 1% in accordance with Section 8.2(a) during the next Enrollment Period will be withdrawn from the Plan effective as of the first day of that next Purchase Period.
8.3. Submission of Notices. Notification of a Participant’s election to withdraw from the Plan as provided in Section 8.1 or to change his or her rate of payroll deductions as provided in Section 8.2 shall be made by completing an updated election or notice with Resideo (or its agent) in a manner approved by the Committee. The Committee may promulgate rules regarding the time and manner for submitting any such updated election or notice, which may include a requirement that the election or notice be on file for a reasonable period before it will be effective.
8.4. Adjustments by Resideo. To the extent necessary to comply with Code § 423(b)(8) or Section 5.1, a Participant’s payroll deduction contributions to the Plan may be decreased by Resideo to 0% at any time during a Purchase Period.
9. 1985 DOUGLAS DRIVE NORTHTermination of Employment.
9.1. Refund of Recordkeeping Account. If the employment of a Participant is terminated for any reason, including death, disability, or retirement, the entire balance in the Participant’s Recordkeeping Account will be refunded in cash to the Participant within 30 days after the date of termination of employment. For purposes of the Plan, a Participant will not be deemed to have terminated employment while the Participant is on sick leave, military leave or other leave of absence approved by the Company. Where the period of leave exceeds 90 days and the Participant’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the ninety-first day of such leave. Unless determined otherwise by the Committee in a manner that is permitted by, and in compliance with Code § 423, a Participant whose employment transfers between entities through a termination with an immediate rehire (with no break in service) by Resideo or a Designated Affiliate shall not be treated as a termination under the Plan.
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9.2. Designation of Beneficiary. If permitted by the Committee, a Participant may file a beneficiary designation for who is to receive the Participant’s Recordkeeping Account or Share subaccount, if any, following the death of a Participant. If no beneficiary is named, the beneficiary shall be the Participant’s spouse, or if none, the Participant’s estate. All beneficiary designations will be in such form and manner as the Committee may designate from time to time.
10. GOLDEN VALLEY, MINNESOTA 55422Purchase of Shares.
10.1. Number of Shares Purchased. As of each Purchase Date, the balance in each Participant’s Recordkeeping Account will be used to purchase the maximum number of whole Shares (subject to the limitations of Section 5.1) at the purchase price determined in accordance with Section 5.2, unless the Participant has filed an appropriate form with Resideo in advance of that date to withdraw from the Plan in accordance with Section 8.1. Any amount remaining in a Participant’s Recordkeeping Account that represents the purchase price for any fractional share will be carried over in the Participant’s Recordkeeping Account to the next Purchase Period. Any amount remaining in a Participant’s Recordkeeping Account that represents the purchase price for any whole Shares that could not be purchased by reason of the limitations of Section 5.1 or under the circumstances described in Section 3 will be refunded to the Participant.
10.2. Conversion of Foreign Currency. In circumstances where payroll deductions have been taken from a Participant’s Eligible Compensation in a currency other than United States dollars, Shares shall be purchased by converting the balance in the Participant’s Recordkeeping Account to United States dollars at the exchange rate in effect for payroll purposes for the month in which the Purchase Date occurs as determined by Resideo’s finance department or at such other exchange rate determined by the Committee or its delegate for this purpose, and such dollar amount shall be used to purchase Shares as of the Purchase Date.
10.3. Crediting of Shares. Promptly after the end of each Purchase Period, the number of Shares purchased by all Participants as of the applicable Purchase Date shall be issued and delivered to an agent selected by Resideo. Delivery of the shares to the agent shall be effected by an appropriate book-entry in the stock register maintained by Resideo’s transfer agent or delivery of a certificate. The agent will hold the Shares for the benefit of all Participants who have purchased Shares and will maintain a Share subaccount for each Participant reflecting the number of Shares credited to each Participant. Each Participant will be entitled to direct the voting by the agent of all Shares credited to such Participant’s Share subaccount, and the agent may reinvest any dividends paid on Shares credited to a Participant’s Share subaccount in additional Shares in accordance with such rules as the Committee may prescribe. Each Participant may also direct the agent to sell any or all of the Shares credited to the Participant’s Share subaccount and distribute the net proceeds of such sale to the Participant.
10.4 Withdrawal of Shares From Share Subaccount. Except for sales through the agent as provided in Section 10.3, a Participant may not withdraw Shares or otherwise transfer Shares from the Participant’s Share subaccount.
11. Rights as a Shareholder. A Participant shall not be entitled to any of the rights or privileges of a shareholder of Resideo with respect to Shares offered for purchase under the Plan, including the right to vote or direct the voting or to receive any dividends that may be declared by Resideo, until (i) the Participant actually has paid the purchase price for such Shares and (ii) such Shares have been issued and delivered, as provided in Section 10.3.
12. Rights Not Transferable. A Participant’s rights under this Plan are exercisable only by the Participant during his or her lifetime, and may not be sold, pledged, assigned, transferred or disposed of in any manner other than by will or the laws of descent and distribution. Any attempt to sell, pledge, assign, transfer or dispose of the same shall be void and without effect. The amounts credited to a Recordkeeping Account may not be sold, pledged, assigned, transferred or disposed of in any way, and any attempted sale, pledge, assignment, transfer or other disposition of such amounts will be void and without effect.
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13. Administration of the Plan.
13.1. Authority of the Committee. This Plan shall be administered by the Committee. Subject to the express provisions of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority to:
(a) Determine when each Purchase Period under this Plan shall occur, and the terms and conditions of each related Offering (which need not be identical);
(b) Designate from time to time which Affiliates of Resideo shall be eligible to participate in the Plan;
(c) Construe and interpret the Plan and establish, amend and revoke rules, regulations and procedures for the administration of the Plan. The Committee may, in the exercise of this power, correct any defect, omission or inconsistency in the Plan, in such manner and to the extent it may deem necessary, desirable or appropriate to make the Plan fully effective;
(d) Exercise such powers and perform such acts as the Committee may deem necessary, desirable or appropriate to promote the best interests of Resideo and its Designated Affiliates and to carry out the intent that the Offerings made under the Plan are treated as qualifying under Code § 423(b);
(e) As more fully described in Section 18, to adopt such rules, procedures andsub-plans as may be necessary, desirable or appropriate to permit participation in the Plan by employees who are foreign nationals or employed outside the United States by anon-U.S. Designated Affiliate, and to achieve tax, securities law and other compliance objectives in particular locations outside the United States; and
(f) Adopt and amend, as the Committee deems appropriate, a Plan rule specifying that Shares purchased by a Participant during a Purchase Period may not be sold by the Participant for a specified period of time after the Purchase Date on which the Shares were purchased by the Participant, and establish such procedures as the Committee may deem necessary to implement such rule.
13.2. Interpretations and Decisions by the Committee. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all persons, including Resideo, any Affiliate, any Participant and any Eligible Employee.
13.3. Delegation by the Committee. Subject to the terms of the Plan and applicable law, the Committee may delegate ministerial duties associated with the administration of the Plan to such of Resideo’s officers, employees or agents as the Committee may determine.
13.4. Indemnification. No member of the Board or Committee shall be liable for any action taken or determination made in good faith with respect to the Plan. In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of Resideo or a Designated Affiliate, members of the Board and Committee and any officers or employees of the Resideo or Designated Affiliate to whom authority to act for the Committee is delegated shall be indemnified by Resideo from and against any and all liabilities, costs and expenses incurred by such persons as a result of any act or omission to act in connection with the performance of such person’s duties, responsibilities and obligations under the Plan if such person has acted in good faith and in a manner that he or she reasonably believes to be in, or not opposed to, the best interests of Resideo.
14. Changes in Capitalization and Corporate Transactions.
14.1. Adjustments. In the event of any change in the Common Stock of Resideo by reason of a stock dividend, stock split, reverse stock split, corporate separation, recapitalization, merger, consolidation, combination, exchange of shares and the like, the Committee shall make such equitable adjustments as it deems appropriate in the aggregate number and class of Shares or other securities available under this Plan, the Share limitation referred to in Section 5.1(b) of the Plan, and the number, class and purchase price of Shares or other securities subject to purchase under any pending Offering.
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14.2. Corporate Transactions. In the event of a Corporate Transaction, each right to acquire Shares on any Purchase Date that is scheduled to occur after the date of the consummation of the Corporate Transaction may be continued or assumed or an equivalent right may be substituted by the surviving or successor corporation or a parent or subsidiary of such corporation. If such surviving or successor corporation or parent or subsidiary thereof refuses to continue, assume or substitute for such outstanding rights, then the Board may, in its discretion, either terminate the Plan or shorten the Purchase Period then in progress by setting a new Purchase Date for a specified date before the date of the consummation of the Corporate Transaction. Each Participant shall be notified in writing, prior to any new Purchase Date, that the Purchase Date for the existing Offering has been changed to the new Purchase Date and that the Participant’s right to acquire Shares will be exercised automatically on the new Purchase Date unless prior to such date the Participant’s employment has been terminated or the Participant has withdrawn from the Plan. In the event of a dissolution or liquidation of Resideo, any Offering and Purchase Period then in progress will terminate immediately prior to the consummation of such action, unless otherwise provided by the Board.
15. Amendment or Suspension of Plan. The Committee, in its sole discretion, may at any time suspend this Plan or amend it in any respect, but no such amendment may, without shareholder approval, increase the number of shares reserved under this Plan, or effect any other change in the Plan that would require shareholder approval under applicable law or regulations or the rules of any securities exchange on which the Shares may then be listed, or to maintain compliance with Code § 423. No such amendment or suspension shall adversely affect the rights of Participants pursuant to Shares previously acquired under the Plan. During any suspension of the Plan, no new Offering or Purchase Period shall begin and no Eligible Employee shall be offered any new right to purchase Shares under the Plan or any opportunity to elect to participate in the Plan, and any existing payroll deduction authorizations shall be suspended, but any such right to purchase Shares previously granted for a Purchase Period that began prior to the Plan suspension shall remain subject to the other provisions of this Plan and the discretion of the Board and the Committee with respect thereto.
16. Effective Date and Term of Plan.The Plan will become effective on the date it is approved by the shareholders of Resideo, which approval must be within 12 months of the date the Plan is adopted by the Board. The Plan and all rights of Participants hereunder shall terminate (i) at any time, at the discretion of the Committee, or (ii) upon the completion of any Offering under which the limitation on the total number of Shares to be issued during the entire term of the Plan, as determined in accordance with Section 3, has been reached. Except as otherwise determined by the Board, upon termination of this Plan, Resideo shall pay to each Participant cash in an amount equal to the entire remaining balance in such Participant’s Recordkeeping Account.
17. Governmental Regulations and Listing. All rights granted or to be granted to Eligible Employees under this Plan are expressly subject to all applicable laws and regulations and to the approval of all governmental authorities required in connection with the authorization, issuance, sale or transfer of the Shares reserved for this Plan, including, without limitation, there being a current registration statement of Resideo under the Securities Act of 1933, as amended, covering the Shares purchasable on the Purchase Date applicable to such Shares. If applicable, all such rights hereunder are also similarly subject to effectiveness of an appropriate listing application to a national securities exchange covering the Shares issuable under the Plan upon official notice of issuance.
18. Rules for Foreign Jurisdictions. The Committee may adopt rules, procedures or subplans relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures. Without limiting the generality of the foregoing, the Committee is specifically authorized to adopt rules and procedures regarding handling of payroll deductions, payment of interest, conversion of local currency, payroll tax, the definition of Eligible Compensation, withholding procedures and handling of stock certificates that vary with local requirements.
19. Miscellaneous.
19.1. Effect on Employment Status. This Plan shall not be deemed to constitute a contract of employment between Resideo or any Designated Affiliate and any Participant, nor shall it interfere with the right of Resideo (or any Affiliate) to terminate the employment of any Participant and treat him or her without regard to the effect that such treatment might have upon him or her under this Plan.
19.2. Governing Law. This Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Delaware.
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19.3. Electronic Documentation and Signatures. Any reference in the Plan to election or enrollment forms, notices, authorizations or any other document to be provided in writing shall include the provision of any such form, notice, authorization or document by electronic means, including through Resideo’s intranet or with Resideo’s agent, and any reference in the Plan to the signing of any document shall include the authentication of any such document provided in electronic form, in each case in accordance with procedures established by the Committee.
19.4. Book-Entry and Electronic Transfer of Shares. Any reference in this Plan to the issuance or transfer of a stock certificate evidencing Shares shall be deemed to include, in the Committee’s discretion, the issuance or transfer of such Shares in book-entry or electronic form. Uncertificated Shares shall be deemed delivered for all purposes of this Plan when Resideo or its agent shall have provided to the recipient of the Shares a notice of issuance or transfer by electronic mail (with proof of receipt) or by United States mail, and have recorded the issuance or transfer in its records.
19.5. Registration of Share Accounts and Certificates. Any Share account contemplated by Section 10.3 and certificate to be issued to a Participant shall be registered in the name of the Participant, or jointly in the name of the Participant and another person, as the Participant may direct on an appropriate form filed with Resideo or the agent.
19.6. Code§ 409A. The Plan is exempt from the application of Code § 409A and any ambiguities herein will be interpreted to so be exempt from Code § 409A. In furtherance of the foregoing and notwithstanding any provision in the Plan to the contrary, if the Committee determines that an option granted under the Plan may be subject to Code § 409A or that any provision in the Plan would cause an option under the Plan to be subject to Code § 409A, the Committee may amend the terms of the Plan and/or of an outstanding Offering under the Plan, or take such other action as the Committee determines is necessary or appropriate, in each case, without the Participant’s consent, to exempt any outstanding option or future option that may be granted under the Plan from or to allow any such options to comply with Code § 409A, but only to the extent any such amendments or actions by the Committee would not violate Code § 409A. Notwithstanding the foregoing, Resideo and the Committee shall have no liability to a Participant or any other party if the option to purchase Shares under the Plan that is intended to be exempt from or compliant with Code § 409A is not exempt or compliant or for any action taken by the Committee with respect thereto. Resideo makes no representations that the option to purchase Shares under the Plan is compliant with Code § 409A.
19.7. Severability. If any provision of the Plan is or becomes or is deemed to be invalid, illegal, or unenforceable for any reason in any jurisdiction or as to any Participant, such invalidity, illegality or unenforceability shall not affect the remaining parts of the Plan and the Plan shall be construed and enforced as to such jurisdiction or Participant as if the invalid, illegal or unenforceable provision had not been included.
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VOTE BY INTERNET
Before The Meeting - Meeting—Go towww.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery RESIDEO TECHNOLOGIES, INC. of information up untilinformation. Vote by 11:59 p.m. Eastern Daylight Time on June 11, 2019. If you participate in the Honeywell Savings and Ownership Plan or the Honeywell Puerto Rico Savings and Ownership Plan, you must vote these shares no later than 11:59 p.m. EDT on June 9, 2019.7, 2020. Have 901 E. 6TH STREET your proxy card in hand when you access the websiteweb site and then follow the instructions AUSTIN, TEXAS 78702 to obtain your records and to create an electronic voting instruction form.
During The Meeting - Meeting—Go towww.virtualshareholdermeeting.com/REZI2019
REZI2020 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - PHONE—1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up untilinstructions. Vote by 11:59 p.m. Eastern Daylight Time on June 11, 2019. If you participate in the Honeywell Savings and Ownership Plan or the Honeywell Puerto Rico Savings and Ownership Plan, you must vote these shares no later than 11:59 p.m. EDT on June 9, 2019.7, 2020. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D11012-P37895 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY | ||||
RESIDEO TECHNOLOGIES, INC. The Board of Directors recommends you vote FOR the following nominees: 1. Election of Class II Directors For Against Abstain Nominees: 1a. Cynthia Hostetler ! ! ! 1b. Brian Kushner ! ! ! 1c. Jack Lazar ! ! ! The Board of Directors recommends you vote FOR the following proposals: For Against Abstain 2. Advisory Vote to Approve Executive Compensation ! ! ! 3. Ratification of the Appointment of Independent Registered Public Accounting Firm ! ! ! 4. Approval of the Resideo Employee Stock Purchase Plan ! ! ! NOTE: Such other business as may properly come before the meeting or any adjournment thereof. For address changes and/or comments, please check this box ! and write them on the back where indicated. Please indicate if you plan to attend this meeting. ! ! Yes No Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
The Board of Directors recommends you vote FOR the following proposal: | ||||||||||||||||||||||||
| 1. | Election of Class I Directors | For | Against | Abstain | ||||||||||||||||||||
| Nominees: | ||||||||||||||||||||||||
| 1a. Paul Deninger | ☐ | ☐ | ☐ | |||||||||||||||||||||
| 1b. Michael Nefkens | ☐ | ☐ | ☐ | |||||||||||||||||||||
| 1c. Sharon Wienbar | ☐ | ☐ | ☐ | |||||||||||||||||||||
| The Board of Directors recommends you vote FOR the following proposal: | For | Against | Abstain | The Board of Directors recommends you vote FOR the following proposal: | For | Against | Abstain | |||||||||||||||||
| 2. | Advisory Vote to Approve Executive Compensation | ☐ | ☐ | ☐ | 4. | Ratification of the Appointment of Independent Registered Public Accounting Firm | ☐ | ☐ | ☐ | |||||||||||||||
| The Board of Directors recommends you vote 1 year on the following proposal: | 1 year | 2 Years | 3 Years | Abstain | ||||||||||||||||||||
| 3. | Advisory Vote on the Frequency of Future Advisory Votes to Approve Executive Compensation | ☐ | ☐ | ☐ | ☐ | NOTE: Such other business as may properly come before the meeting or any adjournment thereof. | ||||||||||||||||||
| For address changes and/or comments, please check this box and write them on the back where indicated. | ☐ | |||||||||||||||||||||||
| Please indicate if you plan to attend this meeting. | ☐ | ☐ | ||||||||||||||||||||||
| Yes | No | |||||||||||||||||||||||
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
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| Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date | |||||||||||||||||||||
Important Notice Regarding Availability of Proxy Materials: The 20192020 Notice and Proxy Statement and 20182019 Annual Report are available at www.proxyvote.com.
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E71970-P19185
D11013-P37895 PROXY RESIDEO TECHNOLOGIES, INC. This Proxy
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Important proxy voting material is ready forSolicited on Behalf of the Board of Directors of Resideo Technologies, Inc. Annual Meeting of Shareholders—June 8, 2020 The undersigned hereby appoints Roger Fradin and Jeannine Lane as proxies (each with the power to act alone and with full power of substitution) to vote, as designated herein, all shares the undersigned is entitled to vote at the Annual Meeting of Shareholders of Resideo Technologies, Inc. to be held on June 8, 2020, live via the Internet at www.virtualshareholdermeeting.com/REZI2020, and at any and all adjournments thereof. The proxies are authorized to vote in their discretion upon such other business as may properly come before the Meeting and any and all adjournments thereof. Your vote on the election of Directors and the other proposals described in the accompanying Proxy Statement may be specified on the reverse side. IF PROPERLY SIGNED, DATED AND RETURNED, THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE OR, IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED “FOR” THE ELECTION OF ALL NOMINEES FOR DIRECTOR AND “FOR” PROPOSALS 2, 3 AND 4. PLEASE NOTE: PHONE AND INTERNET VOTING CUTOFF IS 11:59 PM EDT ON JUNE 7, 2020 Please date and sign your action.
This email representsProxy on the following share(s):
Three
Ways to Vote
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Control Number: 0123456789012345
Important
Materials
Annual Report
Attend the Virtual
Meeting
Attend the Meeting
For holders as of April 15, 2019
Implement
