I encourage all stockholders to read the Compensation Discussion & Analysis to further understand our executive compensation philosophy and program.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following Compensation Discussion and Analysis provides information that we believe is necessary to understand our executive compensation policies and decisions as they related to the compensation for fiscal 20182021 of our named executive officers.
The following “named executive officers” (“NEOs”) whose compensation information is presented in the tables and discussed in this report include:
•Andrew Rees, President and Chief Executive Officer
•Michelle Poole, President
•Anne Mehlman, Executive Vice President and Chief Financial Officer
•Daniel P. Hart, Executive Vice President, Chief Legal and Risk Officer
Carrie W. Teffner, former•Elaine Boltz, Executive Vice President, Chief Operations and Chief FinancialTransformations Officer
Ms. Mehlman became our Executive Vice President and Chief Financial Officer effective August 24, 2018. As of such date, Ms. Teffner stepped down as Executive Vice President and Chief Financial Officer but remained with the Company as Executive Vice President Finance and Strategic Projects until April 1, 2019.
20182021 Business and Financial Highlights
In evaluating our overall executive compensation program and decisions, including payouts under the 20182021 programs and plan designs for our 20192022 programs, the Compensation Committee (the “Committee”) considered a number of factors, including the strategic and financial performance and position of our company in 2018. We had an outstanding 2018 as2021. In 2021, we returnedachieved record profitability and finished the Company to top line growth. We grew revenuesyear with very strong brand momentum, despite the continued impact of the COVID-19 pandemic and other global supply chain disruptions, including the blockage in eachthe Suez Canal in the first quarter of 2021 and we expanded our gross margin by 100 basis points to 51.5%, our highest level since 2013. We successfully completed our SG&A reduction plan, eliminating approximately $75 millioncontainer costs, port congestion, and Vietnam factory closures in the third and fourth quarter of annualized expenses from our cost structure between 2017 and 2018. We are reinvesting some of those savings into marketing and our e-commerce business to further strengthen our brand and drive incremental sales growth.2021.
Some specific highlights and key accomplishments considered by the Committee in its decision-making process during 20182021 included:
Revenues•We delivered market-leading cumulative total shareholder return (“TSR”) in 2018 were $1,088.2 million, an increasethe top decile of 6.3%our compensation peer group as measured for the 1-, 3- and 5-year periods ended December 31, 2021.
•We had record revenues of $2.3 billion, which increased 66.9% over 2017. Our wholesale business grew 7.8%, our e-commerce business grew 22.5% and our retaillast year. Digital sales represented 36.7% of 2021 revenues, compared to 41.5% in 2020. Direct-to-consumer comparable store sales grew 10.8%.43.3% in 2021, compared to 2020.
•We sold 59.8103.0 million pairs of shoes worldwide, an increase of 3.4% from 57.969.1 million pairs in 2017. Clog relevance, sandal awareness, and visible comfort technology were central to 2018 growth.2020.
•Gross margin improved 100was 61.4% compared to 54.1% in 2020, an increase of 730 basis points, compared to 2017 to 51.5% for the year ended December 31, 2018. We drove this improvement by continuing to prioritize high-margin molded products, increasing prices on select products,primarily as a result of increased pricing and conducting fewer promotions in combination with better inventory management.and discounts, as well as favorable product and channel mix.
Selling, general and administrative (“•SG&A”) expenses were $495.0&A was $737.2 million, an increase of $0.4$222.4 million, or 0.1%43.2%, compared to 2017.2020, primarily as a result of increased investments in talent, marketing, and projects to fuel future growth. As a percent of revenues, SG&A improved 280520 basis points to 45.5%31.9% of revenues. This included $21.1 millionrevenues as a result of non-recurring charges associated withstrong sales growth and our previously announced SG&A reduction plan, the completioncontinued leveraging of the closure of all company-operated manufacturing and related distribution facilities, and some charges related to the relocation of our corporate headquarters, which is planned for early 2020.operating costs.
•Income from operations was $62.9$683.1 million for the year ended December 31, 20182021 compared to income from operations of $17.3$214.1 million for the year ended December 31, 2017. Income from operations as a percent of revenues2020. Our operating margin rose to 5.8%29.5%, compared to 1.7%15.4% in 2017.2020.
In December 2018, we completed a transaction with Blackstone to repurchase 100,000 shares of convertible preferred stock for $183.7 million and to convert the remaining 100,000 shares of convertible preferred stock into 6,896,548 shares of our common stock, which resulted in the elimination of $12 million in annual dividends and an overhang on our common stock. Crocs also agreed to pay Blackstone a $15 million inducement payment in connection with the transaction.
•Net loss attributable to common stockholdersincome was $69.2$725.7 million compared to a loss of $5.3$312.9 million in 2017, including the accounting treatment for charges incurred related to the repurchase and conversion of our convertible preferred stock. Basic
and diluted2020. Diluted net lossincome per common share was $1.01$11.39 for the year ended December 31, 2018,2021, compared to a basic and diluted net lossincome per common share of $0.07$4.56 for the year ended December 31, 2017.2020.
To continue improving the efficiency and profitability of our retail business we closed or transferred to distributors 68 stores in 2018, 42 of which were full-priced locations, for a net reduction of 64 company-operated retail stores. Since we began our store reduction program early in 2017, we have closed a net total of 175 stores and reduced our total company-operated store count to 383 from 558 at the end of 2016. The majority of these store closures occurred upon expiration of the leases. We have also placed greater priority on outlet stores, so that they now represent over 50% of our store base, up from 42% at the end of 2016.
We continued to focus on simplifying our product line and disciplined inventory management to allow investment in higher margin, faster-turning product. As a result, we reduced our inventory by $5.9 million, or 4.5%, from $130.3 million to $124.5 million.
•During 2018,2021, we repurchased 3.68.2 million shares of common stock at an aggregate cost of $63.1 million and eliminated the overhang of approximately 6.9$1.0 billion. This includes 0.5 million shares (on an as-converted basis) associated withdelivered in January 2021 at the repurchase of 100,000 sharesconclusion of the convertible preferred stock.purchase period for the accelerated share repurchase agreement entered into in November 2020.
•During 2021, we issued $700.0 million of senior notes.
•In 2021, we ranked #20 in Newsweek’s Most Loved Workplaces list, which featured the top 100 companies recognized for employee happiness and satisfaction at work.
In February 2022, we completed our acquisition of HEYDUDE™, a privately-owned casual footwear brand. The HEYDUDE acquisition further diversifies our product portfolio under two brands. HEYDUDE’s casual, comfortable, and lightweight products are aligned to long-term consumer trends. We intend to leverage our global presence, best-in-class marketing and scale infrastructure to build upon HEYDUDE’s strong foundation and create significant shareholder value.
Key Compensation Committee Actions in 20182021
The Committee took several actions which are consistent with our determination to pay for performance and align our incentive compensation metrics to key strategic initiatives.
•Emphasis on Pay-for-Performance: In 2018,2021, the Committee continued to use multiple performance metrics and focus on objective, performance-based and “at-risk” pay arrangements. We believe these performance metrics help align the interests of our named executive officers with those of stockholders by making a significant portion of their compensation contingent upon results beneficial to stockholders, and thereby incenting our named executive officers to create long-term value for stockholders. The Committee believes the performance metrics continued to be appropriately aligned with stockholder value as demonstrated by the over 100% increase in our stock price during 2021. The performance metrics used for our annual incentive plan are adjusted earnings before interest and taxesEBIT and adjusted free cash flow (each as defined below), along with strategic operativeoperating objectives relating to clogsandal and sandalcharms growth, e-commerce salesdigital growth, and outlet store performance.continued progress on our China Long-Term Growth Plan. The non-financial objectives were further refined in 2021 to reflect strategic priorities. The performance metrics used for our RSU awards arewere adjusted revenue and adjusted operating margin.margin, which we believe drive long-term shareholder value creation.
•None of our named executive officers received an increase in base salary in 2021, with the exception of Ms. Boltz, whose salary was increased 8.3% as a result of an annual evaluation of executive compensation relative to peer companies in the market.
•Rigorous Objective Performance Targets for 2018 Were Set Higher than 2017 Actual ResultsGoals: For 2018,2021, the Committee increased the target performance metrics for the annual incentive plan and performance-based RSU awards to levels higher than both 2020 actual results and 2020 targets, other than with respect to adjusted free cash flow, as follows:
| | Performance Metric | 2018 Target Goal as a % of 2017 Actual Results | | 2018 Target as a % of 2017 Target Goal | Performance Metric | | 2021 Target Goal as a % of 2020 Actual Results | | 2021 Target Goal as a % of 2020 Target Goal |
Adjusted earnings before interest and taxes (1) | 200% | | 187% | |
Adjusted EBIT (1) | | Adjusted EBIT (1) | | 134% | | 174% |
Adjusted free cash flow (2) | 109% | | 132% | Adjusted free cash flow (2) | | 95% | | 160% |
Adjusted revenue (3) | 101% | | 99% | Adjusted revenue (3) | | 132% | | 128% |
Adjusted operating margin (4) | 314% | | 293% | Adjusted operating margin (4) | | 102% | | 130% |
•Operating Performance Metrics for Short-Term Incentive ProgramProgram:: In addition to adjusted earnings before interest and taxesEBIT and adjusted free cash flow performance targets, the Committee weighted 25%33% of the target 20182021 annual incentive awards to objectives associated with clogsandal and sandal silhouettecharm growth, e-commercedigital performance, and outlet store comparable sales growth.continued progress on our China Long-Term Growth Plan. The operating objectives are measurable performance metrics, other than with respect to digital growth the continued execution of our China Long-Term Growth Plan, which was determined in the Committee’s discretion, and, in each case, contain rigorous and difficult to achieve goals. The Committee believes that these performance goals are key drivers in the Company’sour continued short- and long-term transformation,growth, which, if achieved, will ultimately help drive additional stockholder value over the long-term.
Performance Improvement Grant•January 2021 Grants of Performance-Based RSUs for Retention and Stockholder Value Alignment: In January 2021, the Committee awarded our Chief Executive Officer and the other NEOs performance-based RSUs that vest based on the performance of our stock price. The Committee believes the performance goals for these performance-based RSU awards were rigorous and provided a strong and enduring retention incentive for Mr. Rees: The Committee granted Mr. Rees a and the other senior executives during this important stage in our Company’s evolution. Further, these performance-based RSU award in 2018, after completion of his first full year as the Company’s Chief Executive Officer, to reinforce the importance of leading improved value creation forRSUs further aligned our stockholders over the long-term. The award is intended to align our Chief Executive Officer’sNEOs’ long-term interests with those of our stockholders, as well as to support longer-term stability of the Company’s leadership team. Importantly for our stockholders, this award is entirely contingent on sustained stock price improvement and will only be fully earned if our stock price doubles over the four years following the grant. Further, even if stock price improvement hurdles are met, Mr. Rees must continue to be employed by us for a specified period following this achievement. The Board views the stock price increase requirements in this award as appropriate and stockholder aligned.stockholders.
Successful CFO Transition
: We successfully transitioned our Chief Financial Officer during 2018. In August 2018, Ms. Mehlman rejoined the Company to replace Ms. Teffner as our Chief Financial Officer. The Committee approved what it believes to be a reasonable compensation package to both induce Ms. Mehlman to join us and motivate her to drive stockholder value over the short- and long-term.
Change in Control Plan Update: In 2018, our Board approved amendments to our change in control plan (“CIC Plan”). These amendments further aligned the CIC Plan with prevailing market practices and good governance such as, among other things, removing the right to certain continued health coverage benefits and expressly requiring participants to agree to certain restrictive covenants, including non-competition and non-solicitation, in order to receive benefits under the CIC Plan following a “change in control.”
Role of Compensation Committee, Chief Executive Officer and Compensation Consultant
The Committee has overall responsibility for evaluating and approving our executive officer compensation, benefits, severance, equity-based or other compensation plans, policies and programs. The Committee sets the Chief Executive Officer’s compensation, and those of the Company’sour other executive officers. The Committee generally considers the recommendations of the Chief Executive Officer with respect to the compensation of the other named executive officers.NEOs. During 2018,2021, the Committee worked withagain engaged Meridian anas their independent executive compensation consultant, forconsultant. Meridian provided the Committee with advice and perspective regarding executive compensation market trends and best practices.
Compensation Best Practices
In order to further align the long-term interests of management with those of our stockholders and align our compensation program with best practices, the Committee establishes and monitors specific policies, practices and processes.
Things We Do:
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ü Independent Compensation Committee. The Committee, comprised solely of independent directors, approves all compensation for our named executive officers. |
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ü Independent compensation consultant. The Committee retains an independent compensation consultant. |
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ü Assessment of compensation risk. The Committee assesses our compensation policies and programs and determined that we have no compensation policies and programs for our executives that give rise to excessive risks reasonably likely to have a material adverse effect on the Company. |
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ü Performance-based pay. The Committee focuses on paying our executives for performance against pre-established goals and stock price improvements. The Committee believes that the 20182021 payout above target for both the annual cash incentive and performance-based RSUs demonstrate the Committee’s alignment of pay with performance given the Company’s strong 20182021 financial performance and TSR. |
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ü Annual say-on-pay vote. We hold annual advisory say-on-pay votes to approve executive compensation and in 20182021 received support of 98%96% on such proposal. |
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ü Mix of CEO’s pay. 88%92% of the 20182021 total target compensation for Mr. Rees was performance-based or at-risk. |
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ü Weight of financial metrics. The Committee continued to weight 20182021 performance measures towards those impacting profitability and included strategic operating measures that it believed were key to the continued success of our ongoing business transformation strategies. |
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ü Use of multiple non-overlapping performance metrics. The Committee used multiple complementary performance measures for the 20182021 annual incentive and performanceperformance-based RSUs to align the executive compensation program to a broader perspective of Company performance. There is no overlap between the performance measures used in our annual incentive program and performanceperformance-based RSUs. |
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ü Double-trigger vesting and reasonable change in control protections. We maintain a reasonable change in control plan (“CIC Plan”), which we amended during 2018 to further align that aligns the CIC Plan with best practices and good governance. The CIC Plan provides for “double-trigger” vesting with a definition of “change in control” consistent with our stockholder-approved equity plans. In order to keep management focused on the best interests of our stockholders during potentially uncertain periods, the CIC Plan provides our named executive officers with reasonable compensation protections upon a change in control followed by a termination without cause or for good reason. |
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ü Stock ownership guidelines. Our Board adopted robust stock ownership guidelines that our executive officers and non-employee directors are expected to meet within five years. |
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ü Clawback. In the case of a financial restatement, annual and long-term incentive awards are subject to the Company’s Recovery of Executive Compensation Policy and any clawback or recoupment policy subsequently adopted by us pursuant to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act. |
Things We Don’t Do:
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û No excise tax gross-ups. We do not provide our management with “excise tax gross-ups” in the event of a change in control. |
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û Ban on hedging and pledging. We do not allow our management or directors to engage in hedging transactions on our stock or to pledge our stock to secure loans or other obligations. A description of our anti-hedging and anti-pledging policy can be found in “Corporate Governance—Anti-Hedging and Anti-Pledging Policy”. |
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û No repricing. Our equity plans do not allow repricing of stock option or stock appreciation rights (“SARs”) without stockholder approval. |
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û No excessive executive benefit programs. We do not provide our management with pensions or any other enhanced benefit programs beyond those that are typically available to all other employees other than a voluntary deferred compensation plan for senior executives and a limited supplemental retirement plan. |
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û No excessive perquisites. Our management receives minimal perquisites. |
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û No “single trigger” vesting. Our CIC Plan provides for “double-trigger” vesting uponof awards that are assumed in the event of a change in control. |
Say-on-Pay and Stockholder Outreach
At our annual meeting of stockholders in June 2018,2021, stockholders signaled their strong support for our executive compensation program where 98%96% of the votes cast approved our 20182021 say-on-pay proposal. These results were similar to the results at our 2011 through 20172020 annual meetings. The Committee has considered and will continue to consider the outcome of our say-on-paysay-on-
pay votes when reviewing the objectives of our program and making future compensation decisions for the named executive officers. In
addition, in connection with our regular outreach and discussion with stockholders, the Committee has not been made aware of any stockholder concerns regarding our executive compensation program.
Compensation Process and Methodology
The objectives of our executive compensation program are to:
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| Align our executives’ compensation with our stockholders’ interests
| | Hold our executives accountable to stockholders
| | Assure that our total compensation program aligns with good corporate governance and best practices
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| Attract and retain exemplary executive talent who are able to succeed in our fast-paced, rapidly evolving company | | Motivate our executives to achieve our financial and strategic business objectives by paying them for performance | |
Summary of Executive Compensation Elements, Practices and Policies
Our executive compensation objectives and principles are implemented through the use of the following principal elements of compensation:
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Compensation Element | Objective | Characteristics |
Base Salary: | Ÿ•Compensate executives for their level of experience, responsibility and individual performance
Ÿ •Help attract and retain strong leadership talent
| Ÿ •Fixed component; evaluated annually
Ÿ •Determined by factors such as executive’s job responsibilities, sustained performance in role/potential and internal equity
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Annual Cash Incentives: | Ÿ •Promote achieving our annual corporate financial goals, as well as other objectives deemed important to our long-term success
Ÿ •Align management and stockholder interests
| Ÿ •Variable, performance-based component
Ÿ •Target opportunity is set based on factors such as executive’s job responsibilities, sustained performance in role/potential, and internal equity, and competitive market practices
Ÿ •Actual payout depends on the Company’sour performance and individual contribution
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Long-Term Incentives: | Ÿ •Promote achieving our long-term corporate financial goals with the acquisition of common stock through RSUs
Ÿ •Align management with stockholder interests
Ÿ •Provide long-term retention incentives
| Ÿ •Variable, performance-based component
Ÿ •Annual equity grant is set based on factors such as executive’s job responsibilities, sustained performance in role/potential, and internal equity, and competitive market practices
Ÿ •3 year3-year vesting period (67% of the total value is granted in performance-based RSUs which are earned based on achievement of performance goals and 33% of the total value granted is in RSUs which vests based on continued service)
Ÿ •Actual value realized will vary based on actual Company performance and stock price
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Severance and Change in Control Programs: | Ÿ •Facilitate attraction and retention of high caliber executives in a competitive labor market in which formal severance plans are common
| Ÿ •Contingent component; only payable if the executive’s employment is terminated under certain circumstances and, in the case of a change in control, to help provide continuity of management through the transition
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Peer Group Companies
The Committee uses peer company and survey data to guide its review of the total compensation of our officers and executives to understand relevant market practices. The Committee focuses on ensuring that the performance-based elements of our executive compensation program are consistent with peer and industry trends, when appropriate for our business. The Committee does not benchmark compensation to a specific percentage of the compensation of peer companies.
The Committee approved a peer group based on analysis and recommendations from Meridian, anthe Committee’s independent compensation consultant. The peer group is selected based on the key industry criteria noted below, and takes into consideration each company’s revenue, market capitalization and other key financial metrics to assess the relative complexity of operations (e.g., international sales and direct to consumer sales). The peer group referenced for 20182021 pay decisions included 1517 companies. Vera Bradley, Inc. was added to our 2018 peer group because of its similar business complexity.
Our relative positioning within the peer group is taken into consideration by the Committee when reviewing the peer group data. We believe these companies are broadly comparable to us as they are made up of footwear and apparel companies with sophisticated and often international operations and represent our labor market for talent for key leadership positions. The Committee regularly reviews our peer group to determine if adjustments are necessary to ensure that it continues to be relevant or if additional peer companies are necessary to provide appropriate information on market practices and compensation levels.
The 20182021 peer companies are listed below:
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Acushnet Holdings Corp. | Caleres, Inc. | Genesco Inc. | Perry EllisCallaway Golf Company |
Columbia Sportswear Co.Company | G-III Apparel Group, Ltd. | Skechers U.S.A., Inc. |
Deckers Outdoor Corp.Corporation | Kate Spade & Co. | Steven Madden, Ltd. |
DSW Inc. | lululemon athletica inc. | Vera Bradley,Designer Brands Inc. |
Fossil Group, Inc. | G III Apparel Group, Ltd. | Genesco Inc. |
lululemon athletica inc. | Movado Group, Inc. | Oxford Industries, Inc. |
Skechers U.S.A., Inc. | Steven Madden, Ltd. | Vera Bradley, Inc. |
Wolverine Worldwide, Inc. | YETI Holdings, Inc. | |
There were no changes in 2021 from the 2020 peer companies.
The Committee does not utilize an exact calculation in determining the break-down or weighting of named executive officer compensation among base salary, annual cash incentive awards, and long-term equity awards. Rather, the Committee considers all forms of compensation in light of the market competition for executive talent, the risk to an executive inherent in employment with our fast-paced, rapidly evolving company, and our financial goals. Accordingly, the Committee believes that a significant majority of each named executive officer’s total target compensation should be in the form of annual cash performance-based awards and equity awards that are earned upon achievement of performance goals and aligned with our stock price.
For 2018, 12%2021, 8% of the total targeted compensation of our Chief Executive Officer was base salary and 88%92% was performance-based or at-risk consisting of our annual cash incentive and long-term equity incentive grants.grants, including the January 2021 performance based RSU grant. In 2018,2021, the Committee also continued to ensure that a significant proportion of the annual long-term incentive grants vest based on achievement of performance factors. Below are charts showing the fixed and performance-based and at-risk compensation for Mr. Rees and our other named executive officers based on the targeted 20182021 compensation amounts:
* Includes the performance-based RSU awardawards granted to Mr. Rees on June 11, 2018 that vests based on sustained improvementsour named executive officers in our stock price.January 2021, as discussed in more detail below.
20182021 Compensation Program
Base Salary. The Committee sets the base salary of the Chief Executive Officer. Base salary for other named executive officers is set by the Committee after considering the recommendation of the Chief Executive Officer.
Base salary is reviewed on an annual basis and at the time of hire or promotion. Annual adjustments are influenced by the results of our operations, revenue and profitability levels, individual performance, changes in responsibility, peer company comparisons and other factors (e.g., internal equity and succession planning). No adjustments were made to 2018 base salaries for our named executive officers, other than for Ms. Mehlman, who joined us during 2018.
The current base salaries of our named executive officers as of December 31, 20182021 are below:
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Named Executive Officer | | 2021 Base Salary ($) | | |
Andrew Rees | | 1,100,000 | | | |
Michelle Poole | | 700,000 | | | |
Anne Mehlman | | 575,000 | | | |
Daniel P. Hart | | 540,000 | | | |
Elaine Boltz | | 650,000 | | | |
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Named Executive Officer | | 2018 Base Salary |
Andrew Rees | | $ | 950,000 |
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Anne Mehlman | | 550,000 |
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Daniel P. Hart | | 523,688 |
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Carrie W. Teffner | | 682,500 |
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None of our named executive officers received an increase in base salary in 2021, with the exception of Ms. Boltz, whose salary was increased 8.3% as a result of an annual evaluation of executive compensation relative to peer companies in the market.
Annual Incentive Awards. The Committee believes that an annual cash incentive plan that offers significant awards to our named executive officers for meeting or exceeding Company performance goals provides our officers additional incentive to meet or exceed our strategic Company goals and ensures that we attract and retain talented named executive officers.
In 2018,2021, the Committee continued to weight 75%weighted 67% of the annual incentive program on financial metrics and 25%33% on strategic operating goals to provide focus and incentive to achieve key strategic non-financial objectives during the Company’s turnaround.continued growth. There was a change of the weighting of the metrics and objectives in 2021 to increase the weighting of the strategic initiatives due to their relative importance to the business. The non-financial objectives were further refined in 2021 to reflect strategic priorities.
Each year, the Committee establishes a target annual incentive award for each named executive officer expressed as a percentage of the executive’s base salary, based on factors such as: the estimated contribution and responsibility of the named executive officer, market practices, internal equity and the recommendation of the Chief Executive Officer (for all named executive officers excluding himself).
For 2018,2021, the targets for our named executive officers were:
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Named Executive Officer | | Annual Incentive Plan Target (as a percentage of Base Salary)
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Andrew Rees | | 120150 | % |
Michelle Poole | | 100 | % |
Anne Mehlman | | 75 | % |
Daniel P. Hart | | 75 | % |
Carrie W. TeffnerElaine Boltz | | 8575 | % |
The total annual incentive award actually paid to each named executive officer is determined based on the extent to which specified weighted objective performance goals are achieved with potential payouts ranging from 50% to 200% of the incentive plan target; there are no payouts for below-threshold performance.
For purposes of the 20182021 performance year, the Committee selected adjusted earnings before interest and taxes,EBIT, adjusted free cash flow, and key strategic objectives associated with clogsandal and sandal silhouettecharm growth, e-commerce performancedigital growth, and outlet store comparable sales growthcontinued progress on our China Long-Term Growth Plan as performance measures in the annual incentive program. The Committee continued to include adjusted earnings before interest and taxesEBIT and adjusted free cash flow to more closely align compensation with key performance metrics associated with profitability.
Based on 20182021 actual results, our named executive officers were eligible to be paid annual cash incentive awards at 175%167% of their respective target annual incentive award amounts. The Committee has discretion to depart from the formula in approving the annual incentive awards by decreasing, but not increasing, incentive awards after results are known. The Committee did not exercise that discretion in 2018.2021.
For 2018,2021, these goals and their applicable weightings and earned payouts were:
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2018 Performance Targets | | Weighting | | Actual Performance | | Weighted 2018 Actual Performance as a Percentage of Target |
Adjusted earnings before interest and taxes (1): $57.5 million | | 37.5% | | Exceeded Maximum Goal (200% payout) | | 75% |
Adjusted free cash flow (2): $75.0 million | | 37.5% | | Exceeded Maximum Goal (200% payout) | | 75% |
Objectives associated with (3): clog and sandal silhouette growth, e-commerce performance, and outlet comparable sales growth | | 25% | | All 3 Targets Achieved | | 25% |
TOTAL: | | | | | | 175% |
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2021 Performance Targets | | Weighting | | Actual Performance | | Weighted 2021 Actual Performance as a Percentage of Target |
Adjusted EBIT (1): $356.2 million | | 33.5% | | Exceeded Maximum Goal (200% payout) | | 67.0% |
Adjusted free cash flow (2): $228.0 million | | 33.5% | | Exceeded Maximum Goal (200% payout) | | 67.0% |
Objectives associated with (3): sandal and charm growth, digital growth, and continued progress on our China Long-Term Growth Plan | | 33.0% | | 2 of 3 Targets Achieved | | 33.0% |
TOTAL: | | | | | | 167.0% |
(1) Adjusted earnings before interest and taxesEBIT is calculated by excluding interest expenses, tax expense, foreign currency changes and non-recurring entries from generally accepted accounting principles (“GAAP”)GAAP net income (loss) attributable to common stockholders.
(2) Adjusted free cash flow is calculated by modifying adjusted earnings before interest and taxes (as defined in the footnote above)EBIT by: subtracting capital expenditures; adding year-over-year changes in inventory, accounts receivable and accounts payable; and adding depreciation, amortization and stock-based compensation expenses.
(3) The strategic operating performance targets requiredrequired: (1) clogsandal and sandal silhouettecharm growth of 3%25% and 15%100%, respectively, over 2017;2020; (2) global e-commercedigital sales improvement, of 16% over 2017;as determined by the Committee in its discretion; and (3) outlet store comparable sales growthprogress on our China Long-Term Growth Plan, as determined by the Committee in its discretion. Two of greater than 1% over 2017 with positive outlet comparable sales in all regions. Allthe three performance targets were achieved.fully achieved; the China Long-Term Growth Plan metric was achieved at 50%.
Long-Term Equity Awards. The Committee grants long-term equity awards annually to the named executive officers in order to provide long-term performance-based compensation, to encourage the named executive officers to continue their employment throughout the vesting periods of the awards, and to align management and stockholder interests. The awards vest over a three yearthree-year period, which also assists with long-term incentives and retention. We believe that a significant portion of each named executive officer’s compensation should be in the form of equity awards. For 2018,2021, the amount of long-term incentive awards granted to our named executive officers was based on a review of market practices by Meridian, ourthe Committee’s independent compensation consultant, the recommendations of the Chief Executive Officer (for executive officers other than himself), personal performance, internal equity, and expected future contributions, among other factors.
20182021 Long-Term Performance Incentive Program. In 2018,2021, all of our named executive officers received grants of RSUs, 67% of which are earned based on satisfaction of performance goals and 33% of which vest based on continued service. The material terms of these 20182021 RSU awards arewere as follows:
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Time-Based RSUs | | Performance-Based RSUs |
| Performance Goals | | Potential Awards | | Further Time Vesting |
Vest in three annual installments beginning one year after the date of grant | | Achievement of 20182021 adjusted revenue and adjusted operating margin targets | | Executive may earn from 50% to 200% of the target number of RSUs based on the level of achievement of the performance goal - no RSUs are earned if performance falls below established threshold goals | | Earned RSUs vest 33% upon satisfaction of performance goal and 33% in each of the next two years |
The Committee grants performance-based awards to support our pay-for-performance philosophy and better align the interests of our named executive officers with those of our stockholders. The Committee grants RSUs because it generally believes that full-value awards such as RSUs offer a stronger retention incentive than stock options while also providing alignment with stockholders. In addition, RSUs are less dilutive to our current stockholders as fewer RSUs are necessary to provide the same equity benefit compared to stock options.
The Committee retained adjusted revenue and adjusted operating margin as the performance metrics for the 20182021 RSU grant because it viewscontinues to view these metrics as primary drivers of enhanced stockholder value and appropriate measures of performance given the Company’s current transformation efforts.our continued, successful growth. The performance-based RSUs granted in 20182021 were earned at 129%200% of target because 20182021 adjusted revenue was approximately 121%200% of target and adjusted operating margin was approximately 137%200% of target.
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2018 Performance RSU Targets | | Actual Performance | | Weighting | | Weighted 2018 Actual Performance as a Percentage of Target |
Revenue (1): $1,028.5 million | | $1,092.3 million | | 50% | | 60.3% |
Adjusted operating margin (2): 8.8% | | 10.1% | | 50% | | 68.7% |
TOTAL: | | | | | | 129.0% |
| | | | | | | | | | | | | | | | | | | | |
2021 Performance-Based RSU Targets | | Actual Performance | | Weighting | | Weighted 2021 Actual Performance as a Percentage of Target |
Revenue (1): $1,838.6 million | | $2,301.7 million | | 50.0% | | 100.0% |
Adjusted operating margin (2): 21.4% | | 31.5% | | 50.0% | | 100.0% |
TOTAL: | | | | | | 200.0% |
(1) Adjusted revenue is calculated by adjusting GAAP revenue for non-recurring entries.
(2)Adjusted operating margin is calculated by modifying adjusted earnings before interest and taxes (as defined above on page 35, footnote (1))EBIT and dividing by adjusted revenue, as defined in footnote (1) above.revenue.
January 2021 Grants of Performance-Based RSU Vesting - 2013 through 2018
The Committee believes that the performance goals set byRSUs. In January 2021, the Committee are challenging, appropriate, drive executive performance and demonstrate the Committee’s pay-for-performance philosophy. To illustrate the challenging performance goals, the below chart reflects the percentage of performance-based RSU awards that were earned by our executives since 2013.
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| | | | |
| Grant Years | | Percent Earned | |
| 2013 | | —% | |
| 2014 | | 39% | |
| 2015 | | 25% | |
| 2016 | | 33% | |
| 2017 | | 91% | |
| 2018 | | 129% | |
In addition, the rigorous stock price performance thresholds were not achieved on the sign-on and inducement performance-based RSU grant made to Mr.awarded Andrew Rees, in 2014. Therefore, such awards expired during 2018 with no value. The 2014 grant could only be earned if the Company’s stock price increased significantly over the four-year performance period of the grant.
RSU Grant to Mr. Rees.
In 2018, the Committee granted Mr. Rees a performance-based RSU award. The purpose of the award was to drive performance, align our Chief Executive Officer’s interests with those of our stockholders and provide stability and retention to our leadership team. The 2018 award will only vest if Mr. Rees is able to achieve rigorous and sustained improvements in our stock price. Further, Mr. Rees must remain with the Company following achievement of such threshold in order for any earned shares to vest in full. The Committee views the stock price target as a true “stretch” goal that closely aligns Mr. Rees’ target RSU award with increased stockholder value and believes the continued employment requirement of the RSU award to be a significant retention toolOfficer, performance-based RSUs for a high performing chief executive officer.
Specifically, on June 11, 2018, the Committee granted performance-based RSUs to Mr. Rees with a target valuenumber of $3.5 million. Note that this value represents the target dollar value of the award granted. The value reflected in the Summary Compensation Table varies from this amount due to accounting requirements. The grant provides Mr. Rees the opportunity to earn up to 209,067108,510 shares of the Company’s common stock at target based on achievementunder the Company’s 2020 Equity Incentive Plan (the “Plan”). The award represented $7.0 million of certain stockgrant value divided by the 30 trading day average of the daily volume weighted average trading price levels during the four years after the grant date, subject to his continued employment. The number of shares Mr. Rees is eligible to earn is calculated based on the 30-day average closing priceper share of the common stock as of the grant date whichof $64.51 (the “January 2021 Starting Price”). Similar awards were granted to other senior executives, including Michelle Poole, President, Anne Mehlman, Executive Vice President and Chief Financial Officer, Daniel P. Hart, Executive Vice President, Chief Legal and Risk Officer, and Elaine Boltz, Executive Vice President and Chief Operations and Transformation Officer, for a target number of 54,255, 46,504, 31,002, and 54,255 shares with grant values of $3.5 million, $3.0 million, $2.0 million and $3.5 million, respectively. The grant values may differ from the Grants of Plan-Based Table below, as the amounts herein reflect the award values granted by the Compensation Committee; the amounts in the table reflect the aggregate grant date fair value of the grants computed in accordance with stock-based accounting rules (FASB ASC Topic 718-Stock Compensation).
The January 2021 performance-based RSU award was $16.74 perstructured with rigorous performance-goals as well as extended vesting to drive long-term share (the “Starting Price”).price appreciation, retention of a successful and sought after executive team and alignment with shareholders.
For Mr. Rees to earnMore specifically, the award was developed so that 100% of the target number of shares would be earned if, between the closing pricedate of our common stock during any consecutive 30-day trading period must meet or exceed 200%grant and the fourth anniversary of the date of grant, the 30 trading day average of the daily volume weighted average per share trading price met or exceeded 200% ($129.02) of the January 2021 Starting Price or $33.48 per share, during the four years after the grant date. For him to earn(the “January 2021 2x Performance Condition”), 50% of the target number of shares would be earned if the closing30 trading day average of the daily volume weighted average per share trading price of our common stock during any consecutive 30-day trading period must meetmet or exceedexceeded 175% of the January 2021 Starting Price or $29.295 per share, during(the “January 2021 1.75x Performance Condition”) of the four years after the grant date. For him to earnJanuary 2021 Starting Price and 25% of the target number of shares would be earned if the closing30 trading day average of the daily volume weighted average per share trading price of our common stock during any consecutive 30-day trading period must meetmet or exceedexceeded 150% of the January 2021 Starting Price or $25.11 per share, during the four years after the grant date.(the “January 2021 1.5x Performance Condition”).
The RSUs are also be subject to continued service with the Company. WhenIf and when a stock price performance hurdle iswas met or exceeded, one-third33% of the earned portion of both the RSUs willJanuary 2021 1.75x Performance and the January 2021 1.5x Performance Condition would vest immediately, and become payable, and the remaining one-thirds of the earned portion of the RSUs will67% would be subject to his continued employment, with one-third of the earned portion of the RSUs33% vesting one
year later and the remaining one-third of the earned portion of the RSUs33% vesting two years later, but in no case later than the fourth anniversary of the award.
2019The January 2021 1.5x Performance Condition was met in May 2021, the 1.75x Performance Condition was met in July 2021, and the January 2021 2x Performance Condition was met in August 2021. Because the January 2021 2x Performance Condition was met before the first anniversary of the date of grant, one-fourth of the earned units vested immediately and became payable immediately and one-fourth will vest and become payable on each of the first, second, and third anniversaries of the date the January 2021 2x Performance Condition was satisfied.
The Committee believes that the ability of the senior executives to drive such significant growth in our stock price in less than one year further demonstrates the value that our senior executives brings to the Company and validates the necessity of these performance-based retention incentives. The Committee further believes the performance goals for these performance-based RSU awards were rigorous and provided a strong and enduring retention incentive for Mr. Rees and the other senior executives during this important stage in our Company’s evolution, with parts of the award vesting through 2024 based on when the conditions of the award were met, as detailed above.
If an executive’s employment is terminated by the Company without “cause” or by the executive for “good reason” within two years after a “change in control,” earned but unvested and unearned performance-based RSUs that were converted into time-vested restricted stock units at the time of the change in control will become vested and payable as of the date of such termination of employment. If not assumed or substituted by the acquirer in connection with a change in control, such awards will vest on the date of the change in control. The terms “change in control,” “cause” and “good reason” are as defined in the
CIC Plan (as defined below). In the case of an executive’s involuntary termination without cause, retirement or, for Messrs. Rees and Hart, resignation for good reason, the earned but unvested performance-based RSUs will continue to vest and become payable in accordance with their terms, and a prorated number of unearned performance-based RSUs may vest if and when the applicable performance hurdle is met.
2022 Performance Metrics
For 2019,2022, the Committee has retained the financial metrics used in the 20182021 incentive programs, specifically adjusted revenue and adjusted operating margin for the long-term incentive program and adjusted earnings before interest and taxesEBIT and adjusted free cash flow for the annual cash incentive program. Similar to 2018,The long-term incentive program provides that 5% of the performance-based stock award will be determined based on progress towards discrete ESG initiatives, including bio-resin production readiness, and the annual cash incentive program provides that 25%20% of the annual cash award will be determined by threeperformance on strategic operating metrics.initiatives including the successful integration of HEYDUDE. The 20192022 non-financial metrics in the long-term and annual incentive planplans have been selected to reflect our current strategic priorities.
Other Benefits
We provide other benefits to our named executive officers in order to achieve a competitive pay package. The Committee believes that those benefits, which are detailed in the Summary Compensation Table under the heading “All Other Compensation,” are reasonable, competitive and consistent with our overall executive compensation program. Those benefits consist principally of employer-paid premiums on health insurance.insurance and annual executive physical examinations beyond those covered by our general health insurance programs.
Post-Employment Compensation
Change in Control Benefits. In 2013, we approved and adopted the Change in Control Plan, which was amended and restated in 2014, and further amended and restated in 2018 (“CIC Plan”), for eligible employees, including the named executive officers. The CIC Plan contains a “double-trigger” whereby if a “change in control” occurs and the participant’s employment is terminated by us without “cause” or the participant resigns for “good reason” within the two-year period following the “change in control,” the participants will be entitled to accelerated vesting of certain equity awards and a multiple of salary and bonus. The Committee believes that this approach will enhance stockholder value in the context of an acquisition, and align executives with the interests of our stockholders. The 2018 amendment and restatement of the CIC Plan made certain changes to further align the CIC Plan with market practices and good governance such as, among other things, removing the right to certain continued health coverage benefits and expressly requiring participants to agree to certain restrictive covenants, including non-competition and non-solicitation, in order to receive benefits under the CIC Plan following a “change in control.” For a more detailed discussion of the CIC Plan and definitions of “change in control,” “cause,” and “good reason” under the CIC Plan, see “Potential Payments on Termination or Change in Control” below.
Employment Agreement. We entered into an employment agreement with Mr. Hart concurrent with his appointment as an officer in 2009. The agreement provides for guaranteed payments and accelerated vesting of certain equity awards upon his involuntary termination of employment with us (other than for “cause”) or his resignation for “good reason.” For a more detailed discussion of the agreement and definitions of “cause” and “good reason,” see “Potential Payments on Termination or Change in Control” below.
Offer Letters. In connection with the appointment to their respective positions, we negotiated and entered into offer letters with each of Mr. Rees and Mses.Mss. Poole, Mehlman, and TeffnerBoltz setting forth, among other things, the initial terms of their base salary, target bonus, and long-term equity targets along with the terms of certain sign-on equity awards. The offer letters also provide that if the executive is terminated by us without “cause” (as defined in the offer letter) or if the executive resigns for “good reason” (as defined in the offer letter), subject to execution of a general release of claims, the executive will be entitled to receive a lump sum payment equal to the executive’s then-current base salary plus an amount equal to the then-current target annual bonus. If the executive is terminated by us without “cause,” resigns for “good reason” or in the event of death or “disability” (as defined in the Company’s equity incentive plan), the executive will be entitled to certain vesting of equity awards. The offer letters also provide that the executives are eligible to participate in the CIC Plan. The offer letters contain non-competition and non-solicitation covenants which restrict the executives from taking part in certain competitive activities for a period of one year following their termination of employment with us. For a more detailed discussion of the offer letters and definitions of “cause” and “good reason,” see “Potential Payments on Termination or Change in Control” below.
The post-employment benefits provided in the offer letters were negotiated between the Committee and each executive in advance of the executive accepting employment as an executive with us. The Committee believed that such severance benefits
were reasonable and necessary to induce each executive to accept employment with us.
Anne Mehlman Offer Letter
Ms. Mehlman was appointed as our Executive Vice President and Chief Financial Officer effective August 24, 2018. In connection with such appointment we negotiated and entered into an employment offer letter dated August 1, 2018 with Ms. Mehlman in order to induce her to accept employment with us. The Committee believes the cash sign on award and time-vesting RSU award described below were reasonable and necessary to induce Ms. Mehlman to accept employment with us.
The offer letter provides that Ms. Mehlman will receive an annual base salary of $550,000, subject to periodic review and adjustment in accordance with our policies. The offer letter also provides that she is eligible to participate in the Company’s annual bonus plan with a target bonus of 75% of her base salary. She is entitled to participate in all employee benefit plans and programs generally available to our executive officers. Ms. Mehlman was also awarded a $200,000 cash sign on award, which is subject to recoupment if Ms. Mehlman does not remain employed by the Company for two years.
Upon commencement of her employment, Ms. Mehlman was granted a sign-on time-vesting RSU award representing the right to receive shares of the Company’s common stock equal to $200,000. This time-based RSU award will vest in three annual installments beginning on the first anniversary of her start date, subject to her continued employment with us as of each vesting date. The offer letter also provides that Ms. Mehlman is eligible to participate in our long-term incentive plan, with a target equity award value of 75% of her base salary.
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| Additional Considerations | |
In addition to designing our compensation plans to achieve the objectives outlined above, the Committee seeks to implement corporate governance best practices to align the interests of our executive officers with the interests of our stockholders. A summary of some of those compensation policies is set forth below.
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Stock Ownership Guidelines
| The Company maintainsWe maintain our stock ownership guidelines to ensure that our executive officers have a meaningful stake in theour equity of the Company and to further align the interests of our executives with the long-term interests of our stockholders. The guidelines require that each of our named executive officers own shares of our common stock in an amount equal in value to a specified multiple (5x for our Chief Executive Officer and 3x for all other named executive officers) of such named executive officer’s base salary, to be achieved by the fifth anniversary of (i) the adoption of the modified guidelines (for our existing executive officers) or (ii) the date of hire for new executive officers. All of our executive officers are making progress towards their respective ownership multiples and are still within the five-year phase-in period for compliance.compliance, with the exception of our Chief Legal and Risk Officer, who is outside of this phase-in period and is in compliance with the stock ownership guidelines. |
Clawback Policy | Under our Recovery of Executive Compensation Policy, at the discretion of the Committee, executives may be required to repay awards to us if within two years of an award under our annual incentive plan and equity incentive plan: (i) we are required to restate our financial statements due to fraud or willful misconduct involving the executive; or (ii) the executive took part in any fraud, negligence or breach of fiduciary duty.
We have also adopted a policy whereby any annual and longer-term incentive compensation awards granted to management will be subject to any other clawback or recoupment policy adopted by us, including pursuant to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
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Prohibition on Hedging and Pledging | We do not allow our management or directors to engage in hedging transactions on our stock or to pledge our stock to secure loans or other obligations. A description of our anti-hedging and anti-pledging policy can be found in “Corporate Governance—Anti-Hedging and Anti-Pledging Policy”. |
No Tax Gross-Ups in our CIC Agreements | None of our change in control agreements with our executive officers contain excise tax gross-up provisions. |
Double Trigger Provisions in our CIC Agreements | We maintain a reasonable change in control plan. The CIC Plan provides for “double-trigger” vesting with a definition of “change in control” consistent with our stockholder-approved equity plans. In order to keep management focused on the best interests of our stockholders during potentially uncertain periods, the CIC Plan provides our named executive officers with reasonable compensation protections upon a change in control followed by a termination without cause or for good reason. |
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Equity Granting Practices | The Committee has generally determined to make our annual equity award grants at the regular meeting of the Committee held in the first quarter of each year. The Committee meeting date, or the next business day if the meeting falls on a day where the NASDAQNasdaq Global Select Market is closed for trading, is typically the effective grant date for the grants.
We also may grant equity awards (e.g., options, restricted stock) to recognize increased responsibilities or special contributions, attract new hires, retain executives or recognize certain other special circumstances that occur throughout the year. The effective date of these grants is determined based on the timing of the recognition or recruitment event and approved on or in advance of the effective date of the grant. The exercise/grant price is the fair market value of our common stock on the effective date. The Committee approves all equity grants to executive officers. We do not permit repricing of stock options without stockholder approval.
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Deductibility of Executive CompensationAccounting Considerations | Section 162(m) of the Internal Revenue Code limits the deductibility of certain compensationASC Topic 718, Compensation—Stock Compensation (referred to $1 million paidas ASC Topic 718), requires us to certain officers as a businessrecognize an expense in any tax year. For taxable years beginning after December 31, 2017, legislation signed into law in December 2017 (“Tax Reform”) expanded the number of individuals covered by the Section 162(m) deductibility limit and repealed the exception that qualified “performance-based” compensation as excluded from the $1 million deductibility limit if, among other requirements, the compensation is payable only upon attainment of pre-established, objective performance goals under a plan approved by our stockholders.
Long-term incentive compensation and annual incentive awards approved by the Committee prior to Tax Reform for our Chief Executive Officer and those executive officers whose overall compensation was likely to exceed $1 million was generally structured to meet the requirements for the “performance-based”fair value of equity-based compensation exceptionawards. Grants of stock options, restricted stock, RSUs and performance-based RSUs under Section 162(m). As a resultour equity incentive award plans will be accounted for under ASC Topic 718. We will consider the accounting implications of Tax Reform,significant compensation paiddecisions, especially in connection with decisions that relate to our covered executive officers in excessequity incentive award plans and programs. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of $1 million may not be deductible, unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. While the Committee considers the impact of Section 162(m) as well as other tax and accounting consequences when developing and implementing the Company’sour equity awards with our overall executive compensation programs, the Committee retains the flexibility to designphilosophy and administer compensation programs that are in the best interests of the Company and its stockholders.objectives.
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COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with our management. Based on such review and discussions, the Compensation Committee recommended to the Board that the foregoing Compensation Discussion and Analysis be included in this proxy statement.
THE COMPENSATION COMMITTEE
Doreen A. WrightTracy Gardner (Chairperson)
Ian M. BickleyRonald L. Frasch
Prakash A. MelwaniBeth J. Kaplan
COMPENSATION TABLES
Summary Compensation Table
The following table sets forth information regarding compensation earned for services rendered during fiscal years 2018, 20172021, 2020, and 20162019 for each of our named executive officers:
| | Name and Principal Position | | Year | | Salary ($) | | Bonus ($) (1) | | Stock Awards ($) (2) | | Option Awards ($) (3) | | Non-Equity Incentive Plan Compensation ($) | | All Other Compensation ($) (4) | | Total ($) | Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Stock Awards ($) (1) | | | Non-Equity Incentive Plan Compensation ($) | | All Other Compensation ($) (2) | | Total ($) |
Andrew Rees | | 2018 | | 950,000 |
| | — |
| | 6,132,539 |
| | — |
| | 1,995,000 |
| | 23,275 |
| | 9,100,814 |
| Andrew Rees | | 2021 | | 1,100,000 | | | — | | | 11,889,515 | | | | 2,755,500 | | | 40,905 | | | 15,785,920 | |
President and Chief Executive Officer | | 2017 | | 841,396 |
| | — |
| | 1,564,000 |
| | 474,800 |
| | 1,024,634 |
| | 19,480 |
| | 3,924,311 |
| |
| 2016 | | 700,000 |
| | — |
| | 1,500,002 |
| | — |
| | 175,000 |
| | 26,781 |
| | 2,401,783 |
| |
Anne Mehlman (5) | | 2018 | | 181,923 |
| | 200,000 |
| | 199,997 |
| | — |
| | 238,774 |
| | 56,398 |
| | 877,092 |
| |
Chief Executive Officer | | Chief Executive Officer | | 2020 | | 984,231 | | | — | | | 6,999,974 | | | | 2,044,740 | | | 50,925 | | | 10,079,870 | |
| | 2019 | | 950,000 | | | — | | | 3,409,982 | | | | 1,831,980 | | | 25,785 | | | 6,217,747 | |
Michelle Poole (3) | | Michelle Poole (3) | | 2021 | | 700,000 | | | — | | | 4,069,707 | | | | 1,169,000 | | | 25,496 | | | 5,964,203 | |
President | | President | | 2020 | | 585,769 | | | — | | | 2,349,886 | | | | 829,562 | | | 26,799 | | | 3,792,016 | |
Anne Mehlman | | Anne Mehlman | | 2021 | | 575,000 | | | — | | | 3,227,098 | | | | 720,188 | | | 25,268 | | | 4,547,554 | |
Executive Vice President and Chief Financial Officer | | 2017 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Executive Vice President and Chief Financial Officer | | 2020 | | 543,654 | | | — | | | 1,249,964 | | | | 677,665 | | | 25,260 | | | 2,496,543 | |
| 2016 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2019 | | 550,000 | | | — | | | 749,988 | | | | 662,888 | | | 31,294 | | | 1,994,170 | |
Daniel P. Hart | | 2018 | | 523,688 |
| | — |
| | 489,984 |
| | — |
| | 687,340 |
| | 28,513 |
| | 1,729,525 |
| Daniel P. Hart | | 2021 | | 540,000 | | | — | | | 2,284,454 | | | | 676,350 | | | 26,251 | | | 3,527,055 | |
Executive Vice President, Chief Legal and Risk Officer | | 2017 | | 523,688 |
| | — |
| | 476,000 |
| | — |
| | 415,939 |
| | 20,837 |
| | 1,436,463 |
| Executive Vice President, Chief Legal and Risk Officer | | 2020 | | 514,476 | | | — | | | 999,966 | | | | 641,294 | | | 31,889 | | | 2,187,625 | |
| 2016 | | 523,688 |
| | — |
| | 618,211 |
| | — |
| | 98,192 |
| | 26,619 |
| | 1,266,710 |
| | 2019 | | 523,688 | | | — | | | 499,967 | | | | 631,174 | | | 30,967 | | | 1,685,796 | |
Carrie W. Teffner (6) | | 2018 | | 682,500 |
| | — |
| | 979,996 |
| | — |
| | 1,015,219 |
| | 47,121 |
| | 2,724,836 |
| |
Former Executive Vice President and Chief Financial Officer | | 2017 | | 673,850 |
| | — |
| | 952,000 |
| | — |
| | 605,351 |
| | 50,457 |
| | 2,281,838 |
| |
| 2016 | | 650,000 |
| | — |
| | 951,090 |
| | — |
| | 138,125 |
| | 33,030 |
| | 1,772,245 |
| |
Elaine Boltz (3) | | Elaine Boltz (3) | | 2021 | | 638,462 | | | — | | | 3,744,676 | | | | 799,673 | | | 17,254 | | | 5,200,065 | |
Executive Vice President and Chief Operations and Transformation Officer | | Executive Vice President and Chief Operations and Transformation Officer | | 2020 | | 466,154 | | | — | | | 1,309,943 | | | | 581,061 | | | 67,757 | | | 2,424,915 | |
(1) Amount shown reflects the sign-on award granted to Ms. Mehlman when she commenced service as our Executive Vice President and Chief Financial Officer on August 24, 2018.
(2)(1) Amounts shown reflect the aggregate grant date fair value of grants made in each respective fiscal year computed in accordance with stock-based accounting rules (FASB ASC Topic 718-Stock Compensation), excluding the effect of estimated forfeitures. Assumptions used in the calculations of these amounts are included in Note 1112 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2018.2021. The grant date fair value of stock awards, which are comprised of time-based and performance-based RSUs, includes the grant date fair value for the performance-based RSUs calculated based on the target amount for the award period commencing in the year indicated. For 2018,2021, the total aggregate grant date fair value of stock awards, including the time-based RSUs granted in March 2021 and the performance-based RSUs granted in January 2021 and March 2021, assuming the highest level of payout for performance against assigned targets would be as follows: $7.6$15.6 million for Mr. Rees, $0.2$4.7 million for Ms. Poole, $3.6 million for Ms. Mehlman, $0.8$2.6 million for Mr. Hart, and $1.6$4.1 million for Ms. Teffner.Boltz.
(3) Amounts shown reflect the grant date fair value computed in accordance with ASC Topic 718 (without regard to estimates of forfeitures related to service-based vesting), rather than an amount paid to or realized by the named executive officer. The stock option awards were valued as of the grant date by multiplying the closing price of the common stock on the NASDAQ Global Select Market on that date by the number of shares subject to the awards, and applying a Black-Scholes-Merton value.
(4)(2) All other compensation for 20182021 represents the following for each of our named executive officers: (i) Company matches to employee 401(k) contributions in the amounts of $10,600 for Messrs. Rees and Hart and Ms. Teffner;Mss. Poole, Mehlman and Boltz; (ii) healthcare premiums paid by us in the amount of $10,605$13,797 for Mr. Rees $1,725and Hart and Mss. Poole and Mehlman and $5,555 for Ms. Mehlman, $10,590 for Mr. Hart, and $10,605 for Ms. Teffner;Boltz; (iii) group term life insurance premiums paid-in full by us in the amount of $2,070$1,450 for Mr. Rees, $316$1,099 for Ms. Mehlman, $7,322 for Mr. Hart,Mss. Poole and $2,070 for Ms. Teffner; (iv) relocation expenses of $39,458Boltz, $871 for Ms. Mehlman, and commuting expenses$1,853 for Mr. Hart; and (iv) Company-provided apartment of $23,801$15,058 for Ms. Teffner;Mr. Rees. Messrs. Rees and (v) deferred compensationHart and Mss. Poole, Mehlman, and Boltz also are provided the benefit of $14,850 to Ms. Mehlman.an annual physical examination.
(5)(3) Mr. MehlmanMs. Poole commenced service as our President in September 2020, and Ms. Boltz commenced service as our Executive Vice President and Chief FinancialOperations and Transformation Officer on August 24, 2018.in March 2020.
(6) Ms. Teffner served as our Executive Vice President and Chief Financial Officer from December 16, 2015 through August 24, 2018 and continued as our Executive Vice President Finance and Strategic Projects until April 1, 2019.
Grants of Plan-Based Awards Table
The following table provides information for each of our named executive officers regarding annual and long-term incentive award opportunities, including the range of potential payouts under our non-equity annual incentive plan and our performance-based RSUs granted during fiscal year 2018.2021.
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | Grant Date Fair Value of Stock and Option Awards ($) (2) |
Name | | Name | Type of Award | Grant Date | | Threshold ($) | Target ($) (1) | Maximum ($) | | Threshold (#) | Target (#) | Maximum (#) | |
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | Grant Date Fair Value of Stock Awards ($) (1) | |
Name | Type of Award | Grant Date | | Threshold ($) | Target ($) | Maximum ($) | | Threshold (#) | Target (#) | Maximum (#) | | |
| Andrew Rees | Annual Incentive Award | | — | 1,140,000 | 2,280,000 | | — | | — | | — | Andrew Rees | Annual Incentive Award | | | — | 1,650,000 | 3,300,000 | | — | | — | | — |
Time-Based RSUs | 3/8/18 | | — | | — | | 51,452 | | 725,988 | Performance-Based RSUs | 1/11/21 | | — | | 108,510 | — | | 6,389,604 |
Performance-Based RSUs | 3/8/18 | | — | | 52,233 | 104,465 | 208,930 | | — | | 1,474,001 | Time-Based RSUs | 3/3/21 | | — | | — | | 23,598 | | 1,831,441 |
Performance-Based RSUs | 6/11/18 | | — | | 52,267 | 209,067 | — | | — | | 3,932,550 | Performance-Based RSUs | 3/3/21 | | — | | 23,634 | 47,268 | 94,536 | | — | | 3,668,469 |
Anne Mehlman (2) | Annual Incentive Award | | — | 412,500 | 825,000 | | — | | — | | — | |
Time-Based RSUs | 9/20/18 | | — | | — | | 9,272 | | 199,997 | |
Michelle Poole | | Michelle Poole | Annual Incentive Award | | — | 700,000 | 1,400,000 | | — | | — | | — |
| Performance-Based RSUs | 1/11/21 | | — | | 54,255 | — | | — | | 3,194,809 |
| Time-Based RSUs | 3/3/21 | | — | | — | | 3,754 | | 291,348 |
| Performance-Based RSUs | 3/3/21 | | — | | 3,760 | 7,519 | 15,038 | | — | | 583,550 |
| Anne Mehlman | | Anne Mehlman | Annual Incentive Award | | — | 431,250 | 862,500 | | — | | — | | — |
| Performance-Based RSUs | 1/11/21 | | — | | 46,504 | — | | — | | 2,738,388 |
| Time-Based RSUs | 3/3/21 | | — | | — | | 2,097 | | 162,748 |
| Performance-Based RSUs | 3/3/21 | | — | | 2,100 | 4,200 | 8,400 | | — | | 325,962 |
Daniel P. Hart | Annual Incentive Award | | — | 392,766 | 785,531 | | — | | — | | — | Daniel P. Hart | Annual Incentive Award | | — | 405,000 | 810,000 | | — | | — | | — |
Time-Based RSUs | 3/8/18 | | — | | — | | 11,574 | | 163,309 | Performance-Based RSUs | 1/11/21 | | — | | 31,002 | — | | — | | 1,825,546 |
Performance-Based RSUs | 3/8/18 | | — | | 11,576 | 23,152 | 46,304 | | — | | 326,675 | Time-Based RSUs | 3/3/21 | | — | | — | | 1,969 | | 152,814 |
Carrie W. Teffner (3) | Annual Incentive Award | | — | 580,125 | 1,160,250 | | — | | — | | — | |
Time-Based RSUs | 3/8/18 | | — | | — | | 23,149 | | 326,632 | |
Performance-Based RSUs | 3/8/18 | | — | | 23,153 | 46,305 | 92,610 | | — | | 653,364 | |
Daniel P. Hart | | Daniel P. Hart | Performance-Based RSUs | 3/3/21 | | — | | 1,972 | 3,944 | 7,888 | | — | | 306,094 |
| Annual Incentive Award | | — | 478,846 | 957,692 | | — | | — | | — |
| Performance-Based RSUs | 1/11/21 | | — | | 54,255 | — | | — | | 3,194,809 |
| Time-Based RSUs | 3/3/21 | | — | | — | | 2,359 | | 183,082 |
Elaine Boltz | | Elaine Boltz | Performance-Based RSUs | 3/3/21 | | — | | 2,363 | 4,726 | 9,452 | | — | | 366,785 |
|
(1) This represents the target annual incentive award. The incentives awarded were based on the actual amount of salary received in 2021, as disclosed in the “Summary Compensation Table” (above).
(2) Amounts shown reflect the aggregate grant date fair value of grants made in each respective fiscal year computed in accordance with stock-based accounting rules (FASB ASC Topic 718-Stock Compensation), excluding the effect of estimated forfeitures. Assumptions used in the calculations of these amounts are included in Note 12 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. The grant date fair value of stock awards, which are comprised of time-based and performance-based RSUs, includes the grant date fair value for the performance-based RSUs for all named executive officers was calculated based on the target numberamount for the award period commencing in the year indicated. For 2021, the total aggregate grant date fair value of RSUs.stock awards, including the time-based RSUs granted in March 2021 and the performance-based RSUs granted in January 2021
and March 2021, assuming the highest level of payout for performance against assigned targets would be as follows: $15.6 million for Mr. Rees, $4.7 million for Ms. Poole, $3.6 million for Ms. Mehlman, commenced service as our Executive Vice President$2.6 million for Mr. Hart, and Chief Financial Officer on August 24, 2018.$4.1 million for Ms. Boltz.
(3)
Ms. Teffner served as our Executive Vice President and Chief Financial Officer from December 16, 2015 until August 24, 2018.
Annual Incentive Awards. In 2018,2021, annual incentive amounts were paid at 175%167% of target, as reflected in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” set forth above. The amounts shown for non-equity incentive plan awards represent the target and maximum amounts of annual cash incentive compensation that, depending on performance results, might have been paid to each executive for 20182021 performance contingent on achievement of specified levels of adjusted earnings before interest and taxes,EBIT, adjusted free cash flow, and certain non-financial metrics. The potential payments were contingent on achieving the target level of performance with ranges from zero to 200% of the executive’s annual incentive target. These awards are described in further detail under “Compensation Discussion and Analysis” above.
Restricted Stock Units (“RSUs”). The amounts shown for equity incentive plan awards represent the number of RSUs awarded to the named executive officers in 20182021 and the grant date fair values of the RSUs determined in accordance with FASB ASC 718. The amounts shown for RSUs granted to our named executive officers represent awards of RSUs as part of a performance incentive plan. Time-based RSUs vest in three equal annual installments beginning one year after the date of grant based on continued employment. Performance-based RSUs with the exception of the June 11 RSUs granted to Mr. Rees which are contingent on sustained stock price improvements, vest in three equal annual installments beginning one year after the grant date, pending certification of performance achievement by the Compensation Committee and subject to continued employment. The number of performance-based RSUs awarded may be earned between 50% and 200% of the target number of RSUs, contingent on the level of adjusted revenue and adjusted operating margin performance goals achieved. For more information regarding vesting and payouts with respect to the January 2021 performance-based RSU awards, please see “Executive Compensation—2021 Compensation Program—Long-Term Equity Awards—January 2021 Grants of Performance-Based RSUs.” These RSU awards are described in further detail under “Compensation Discussion and Analysis” above.
Offer Letters. We have entered into offer letters with Mr. Rees Ms.and Mss. Poole, Mehlman, and Ms. Teffner providingBoltz, which provide for certain initial compensation and other benefits. Ms. Mehlman’s is described under “Offer Letters” in “Compensation Discussion and Analysis” above.
Employment Agreement with Mr. Hart. In May 2009, we entered into an employment agreement with Mr. Hart governing the initial terms of his compensation arrangements and providing him certain other employment benefits.
Salary and Bonus in Proportion to Total Compensation. As noted in “Compensation Discussion and Analysis” above, we believe that a substantial portion of each named executive officer’s compensation should be in the form of performance-based annual incentive awards and equity awards. Base salary of the named executive officers is set at levels that the Compensation Committee believes are competitive with our peer companies, with the expectation that shortfalls in base pay, if any, will be recouped through performance bonuses. The Compensation Committee believes that our current program substantially aligns the compensation of our named executive officers with the compensation of executive officers of our peer companies, while also permitting the Compensation Committee to provide incentives to the named executive officers to pursue performance that increases stockholder value. Please see “Compensation Discussion and Analysis” for a description of the objectives of our compensation program and overall compensation philosophy.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information regarding outstanding options and unvested restricted stocktime- and performance-based RSU awards held by our named executive officers as of December 31, 2018.2021. Market values for outstanding stock awards are presented as of the end of 20182021 based on the closing price of our common stock on the NASDAQNasdaq Global Select Market on December 31, 20182021 of $25.98$128.22 per share.
| | | | Option Awards | | Stock Awards | | Option Awards | | Stock Awards |
Name | | Number of Securities Underlying Unexercised Options Exercisable | | Number of Securities Underlying Unexercised Options Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (1) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) (1) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($) |
Andrew Rees | | 66,667 |
| | 133,333 |
| | 6.98 |
| | 6/1/2027 | | 240,046 |
| (2) | 6,236,395 |
| (2) | 313,532 |
| | 8,145,561 |
| Andrew Rees | | 200,000 | | | — | | | 6.98 | | | 06/01/27 | | 333,909 | | (2) | 42,813,812 | | (2) | 47,268 | | | 6,060,703 | |
Michelle Poole | | Michelle Poole | | — | | | — | | | — | | | — | | | 99,963 | | (3) | 12,817,256 | | (3) | 7,519 | | | 964,086 | |
Anne Mehlman | | — |
| | — |
| | — |
| |
| | 9,272 |
| (3) | 240,887 |
| (3) | — |
| | — |
| Anne Mehlman | | — | | | — | | | — | | | — | | | 72,594 | | (4) | 9,308,003 | | (4) | 4,200 | | | 538,524 | |
Daniel P. Hart | | — |
| | — |
| | — |
| |
| | 73,274 |
| (4) | 1,903,659 |
| (4) | 23,152 |
| | 601,489 |
| Daniel P. Hart | | — | | | — | | | — | | | — | | | 51,999 | | (5) | 6,667,312 | | (5) | 3,944 | | | 505,700 | |
Carrie W. Teffner | | — |
| | — |
| | — |
| | 139,607 |
| (5) | 3,626,990 |
| (5) | 126,453 |
| | 3,285,249 |
| |
Elaine Boltz | | Elaine Boltz | | — | | | — | | | — | | | — | | | 70,073 | | (6) | 8,984,760 | | (6) | 4,726 | | | 605,968 | |
(1) The aggregate number of RSUs was calculated based on the achievement of target performance.
(2) Represents the unvested portion of foursix RSU grants for: (i) 159,067 134,410 RSUs awarded on March 8, 20167, 2019, of which 33% of the RSUs vest in three equal annual installments on March 8, 2017,7, 2020, March 8, 20187, 2021, and March 8, 20197, 2022 based on continued employment and up to 67% of the RSUs (up to 200%) based on achievement of performance metrics, of which 34,689109,638 shares were “earned”earned pursuant to the Compensation Committee certification on February 14, 201713, 2020 and will vest in three equal annual installments on March 1, 2017,7, 2020, March 1, 20187, 2021, and March 1, 20197, 2022 based on continued employment; (ii) 230,000 148,864 RSUs awarded on March 17, 20174, 2020, of which 33% of the RSUs vest in three equal annual installments on March 17, 2018,4, 2021, March 17, 20194, 2022, and March 17, 20204, 2023 based on continued employment and up to 67% of the RSUs (up to 200%) based on achievement of performance metrics, of which 140,072139,683 shares were “earned”earned pursuant to the Compensation Committee certification on February 9, 201819, 2021 and will vest in three equal annual installments on March 17, 2018,4, 2021, March 17, 20194, 2022, and March 17, 20204, 2023 based on continued employment; and (iii) 155,917 81,833 RSUs awarded on August 3, 2020, that will vest in three equal annual installments on August 3, 2021, August 3, 2022, and August 3, 2023 based on continued employment; (iv) 108,510 RSUs awarded January 11, 2021, of which 100% of the target number of shares would be earned if, between the date of grant and the fourth anniversary of the date of grant, the 30 trading day average of the daily volume weighted average per share trading price met or exceeded 200% (the “January 2021 2x Performance Condition”) of the starting price of $64.51 per share (the “January 2021 Starting Price”), 50% of the target number of shares would be earned if the 30 trading day average of the daily volume weighted average per share trading price met or exceeded 175% (the “January 2021 1.75x Performance Condition”) of the January 2021 Starting Price and 25% of the target number of shares would be earned if the 30 trading day average of the daily volume weighted average per share trading price met or exceeded 150% (the “January 2021 1.5x Performance Condition) of the January 2021 Starting Price, and once a performance hurdle was met or exceeded, 33% of the earned portion of the RSUs would vest immediately, and the remaining 67% will be subject to continued employment, with 33% vesting one year later and the remaining 33% vesting two years later, but in no case later than the fourth anniversary of the award. Because the January 2021 2x Performance Condition was met before the first anniversary of the date of grant, one-fourth of the earned units vested immediately and became payable immediately and one-fourth will vest and become payable on each of the first, second, and third anniversaries of the date the January 2021 2x Performance Condition was satisfied. On May 26, 2021, the January 2021 1.5x Performance Condition was met and 27,127 shares were earned. On July 22, 2021, the January 2021 1.75x Performance Condition was met and 27,127 shares were earned. On August 17, 2021, the January 2021 2x Performance Condition was met and 54,256 shares were earned; and (v) 70,866 RSUs awarded on March 8, 2018,3, 2021, of which 33% of the RSUs vest in three equal annual installments on March 8, 2019,3, 2022, March 8, 2020,3, 2023, and March 8, 20213, 2024 based on continued employment and up to 67% of the RSUs (up to 200%) based on achievement of performance metrics, of which 134,76094,536 shares were “earned”earned pursuant to the Compensation Committee certification on March 7, 2019 February 11, 2022and will vest in three equal annual installments on March 8, 2019,3, 2022, March 8, 2020,3, 2023, and March 8, 20213, 2024 based on continued employment; and (iv) employment. Additionally, (vi) 209,067 RSUs awarded on June 11, 2018, of which 100% of the target number of shares willwould be earned if the closing price of our common stock during any consecutive 30-day trading period meetsmet or exceedsexceeded 200% (the “2x Performance Condition”) of $16.74 per share (the “Starting Price”), 50% of the target number of shares willwould be earned if the closing price of our common stock during any consecutive 30-day trading period meetsmet or exceedsexceeded 175% (the “1.75x Performance Condition”) of the Starting Price and 25% of the target number of shares willwould be earned if the closing price of our common stock during any consecutive 30-day trading period meetsmet or exceedsexceeded 150% (the “1.5 Performance Condition”) of the Starting Price, and once a performance hurdle iswas met or exceeded, 33% of the “earned”earned portion of the RSUs willwould vest immediately, and the remaining 67% will be subject to his continued employment, with 33% vesting one year later and the remaining 33% vesting two years later, but in no case later than the fourth anniversary of the award. On February 7, 2019, the closing price of our common stock for a consecutive 30-day trading period exceeded1.5x Performance Condition was met and 52,267 shares were earned. On November 18, 2019, the Starting Price by 171%,1.75x Performance Condition was met and 17,42252,267 were earned On January 15, 2020, the 2x Performance Condition was met and 104,534 shares were earned.
(3) Represents the unvested portion of onesix RSU grantgrants for 9,272(i) 31,532 RSUs awarded on September 20, 2018March 7, 2019, of which 50% of the RSUs vest in three equal annual installments on March 7, 2020, March 7, 2021, and March 7, 2022 based on continued employment and up to 50% of the RSUs (up to 200%) based on achievement of performance metrics, of which 19,185 shares were earned pursuant to the Compensation Committee certification on February 13, 2020 and will vest in three equal annual installments on March 7, 2020, March 7, 2021, and March 7, 2022 based on continued employment; (ii) 31,632 RSUs awarded on March 4, 2020, of which 50% of the RSUs vest in three equal annual installments on March 4, 2021, March 4, 2022, and March 4, 2023 based
on continued employment and up to 50% of the RSUs (up to 200%) based on achievement of performance metrics, of which 22,257 shares were earned pursuant to the Compensation Committee certification on February 19, 2021 and will vest in three equal annual installments on March 4, 2021, March 4, 2022, and March 4, 2023 based on continued employment; (iii) 13,638 RSUs awarded on August 3, 2020, that will vest in three equal annual installments on August 3, 2021, August 3, 2022, and August 3, 2023 based on continued employment.
(4)employment; and Represents(iv) 25,627 RSUs awarded on September 10, 2020, that will vest in three equal annual installments on September 10, 2021, September 10, 2022, and September 10, 2023 based on continued employment; (v) 54,255 RSUs awarded January 11, 2021, of which 100% of the unvestedtarget number of shares would be earned if, between the date of grant and the fourth anniversary of the date of grant, the January 2021 2x Performance Condition was met, 50% of the target number of shares would be earned if the January 2021 1.75x Performance Condition was met and 25% of the target number of shares would be earned if the January 2021 1.5x Performance Condition was met, and once a performance hurdle was met or exceeded, 33% of the earned portion of three RSU grants for: (i) 67,638the RSUs would vest immediately, and the remaining 67% will be subject to continued employment, with 33% vesting one year later and the remaining 33% vesting two years later, but in no case later than the fourth anniversary of the award. Because the January 2021 2x Performance Condition was met before the first anniversary of the date of grant, one-fourth of the earned units vested immediately and became payable immediately and one-fourth will vest and become payable on each of the first, second, and third anniversaries of the date the January 2021 2x Performance Condition was satisfied. On May 26, 2021, the January 2021 1.5x Performance Condition was met and 13,564 shares were earned. On July 22, 2021, the January 2021 1.75x Performance Condition was met and 13,564 shares were earned. On August 17, 2021, the January 2021 2x Performance Condition was met and 27,127 shares were earned; and (vi) 18,792 RSUs awarded on March 1, 20163, 2021, of which 33% of the RSUs vest in three equal annual installments on March 1, 2017,3, 2022, March 1, 2018,3, 2023, and March 1, 20193, 2024 based on continued employment and up to 67% of the RSUs (up to 200%) based on achievement of performance metrics, of which 14,67615,038 shares were “earned”earned pursuant to the Compensation Committee certification on February 14, 201711, 2022 and will vest in three equal annual installments on March 1, 2017,3, 2022, March 1, 20183, 2023, and March 1, 20193, 2024 based on continued employment; and (ii) 70,000employment.
(4) Represents the unvested portion of five RSU grants for: (i) 29,562 RSUs awarded on March 17, 20177, 2019, of which 33% of the RSUs vest in three equal annual installments on March 17, 2018,7, 2020, March 17, 20197, 2021, and March 17, 20207, 2022 based on continued employment and up to 67% of the RSUs (up to 200%) based on achievement of performance metrics, of which 42,62823,988 shares were “earned”earned pursuant to the Compensation Committee certification on February 9, 201813, 2020 and will vest in three equal annual installments on March 17, 2018,7, 2020, March 17, 20197, 2021, and March 17, 20207, 2022 based on continued employment; and (iii) 34,726(ii) 27,912 RSUs awarded on March 8, 2018,4, 2020, of which 33% of the RSUs vest in three equal annual installments on March 8, 2019,4, 2021, March 8, 20204, 2022, and March 8, 20214, 2023 based on continued employment and up to 67% of the RSUs (up to 200%) based on achievement of performance metrics, of which 29,86626,187 shares were “earned”earned pursuant to the Compensation Committee certification on March 7, 2019February 19, 2021 and will vest in three equal annual installments on March 8, 2019,4, 2021, March 8, 20204, 2022, and March 8, 20214, 2023 based on continued employment.
(5)employment; and Represents the unvested portion of four RSU grants for: (i) 80,148(iii) 13,638 RSUs awarded on August 3, 2020, that will vest in three equal annual installments on August 3, 2021, August 3, 2022, and August 3, 2023 based on achievementcontinued employment; (iv) 46,504 RSUs awarded January 11, 2021, of certain stock price levels beforewhich 100% of the target number of shares would be earned if, between the date of grant and the fourth anniversary of Ms. Teffner’s startthe date of grant, the January 2021 2x Performance Condition was met, 50% of the target number of shares would be earned if the January 2021 1.75x Performance Condition was met and 25% of the target number of shares would be earned if the January 2021 1.5x Performance Condition was met, and once a performance hurdle was met or exceeded, 33% of the earned portion of the RSUs would vest immediately, and the remaining 67% will be subject to continued employment; (ii) 104,058employment, with 33% vesting one year later and the remaining 33% vesting two years later, but in no case later than the fourth anniversary of the award. Because the January 2021 2x Performance Condition was met before the first anniversary of the date of grant, one-fourth of the earned units vested immediately and became payable immediately and one-fourth will vest and become payable on each of the first, second, and third anniversaries of the date the January 2021 2x Performance Condition was satisfied. On May 26, 2021, the January 2021 1.5x Performance Condition was met and 11,626 shares were earned. On July 22, 2021, the January 2021 1.75x Performance Condition was met and 11,626 shares were earned. On August 17, 2021, the January 2021 2x Performance Condition was met and 23,252 shares were earned; and (v) 6,297 RSUs awarded on March 1, 2016,3, 2021, of which 33% of the RSUs vest in three equal annual installments on March 1, 2017,3, 2022, March 1, 20183, 2023, and March 1, 20193, 2024 based on continued employment and up to 67% of the RSUs (up to 200%) based on achievement of performance metrics, of which 22,5788,400 shares were “earned”earned pursuant to the Compensation Committee certification on February 14, 2017 and will vest in three equal installments on March 1, 2017, March 1, 2018 and March 1, 2019 based on continued employment; and (iii) 140,000 RSUs awarded on March 17, 2017, of which 85,262 shares were “earned” pursuant to the Compensation Committee certification on February 9, 201811, 2022 and will vest in three equal annual installments on March 17, 2018,3, 2022, March 17, 20193, 2023, and March 17, 20203, 2024 based uponon continued employment; and (iv) 69,454employment.
(5) Represents the unvested portion of five RSU grants for: (i) 19,707 RSUs awarded on March 8, 2018,7, 2019, of which 33% of the RSUs vest in three equal annual installments on March 8, 2019,7, 2020, March 8, 20207, 2021, and March 8, 20217, 2022 based on continued employment and up to 67% of the RSUs (up to 200%) based on achievement of performance metrics, of which 59,73315,990 shares were “earned”earned pursuant to the Compensation Committee certification on March 7, 2019February 13, 2020 and will vest in three equal annual installments on March 8, 2019,7, 2020, March 8, 20207, 2021, and March 8,7, 2022 based on continued employment; (ii) 18,608 RSUs awarded on March 4, 2020, of which 33% of the RSUs vest in three equal annual installments on March 4, 2021, March 4, 2022, and March 4, 2023 based on continued employment and up to 67% of the RSUs (up to 200%) based on achievement of performance metrics, of which 17,454 shares were earned pursuant to the Compensation Committee certification on February 19, 2021 and will vest in three equal annual installments on March 4, 2021, March 4, 2022, and March 4, 2023 based on continued employment; and (iii) 13,638 RSUs awarded on August 3, 2020, that will vest in three equal annual installments on August 3, 2021, August 3, 2022, and August 3, 2023 based on continued employment; (iv) 31,002 RSUs awarded January 11, 2021, of which 100% of the target number of shares would be earned if, between the date of grant and the fourth anniversary of the date of grant, the January 2021 2x Performance Condition was met, 50% of the target number of shares would be earned if the January 2021 1.75x Performance Condition was met and 25% of the target number of shares would be earned if the January 2021 1.5x Performance Condition was met, and once a performance hurdle was met or exceeded, 33% of the earned portion of the RSUs would vest immediately, and the remaining 67% will be subject to continued employment, with 33% vesting one year later and the remaining 33% vesting two years later, but in no case later than the fourth anniversary of the award. Because the 2x Performance Condition was met before the first anniversary of the date of grant, one-fourth of the earned units vested immediately and became payable immediately and one-fourth will vest and become payable on each of the first, second, and third anniversaries of the date the January 2021 2x Performance Condition was satisfied. On May 26, 2021, the January 2021 1.5x Performance Condition was met and 7,750 shares were earned. On July 22, 2021, the January 2021 1.75x Performance Condition was met and 7,750 shares were earned. On August 17, 2021, the January 2021 2x Performance Condition was met and 15,502 shares were earned; and (v) 5,913 RSUs awarded on March 3, 2021, of which 33% of the RSUs vest in three equal annual installments on March 3, 2022, March 3, 2023, and March 3, 2024 based on continued employment and up to 67% of the RSUs (up to 200%) based on achievement of performance metrics, of which 7,888 shares were earned pursuant to the Compensation Committee certification on February 11, 2022 and will vest in three equal annual installments on March 3, 2022, March 3, 2023, and March 3, 2024 based on continued employment.
(6) Represents the unvested portion of five RSU grants for: (i) 11,303 RSUs awarded on March 2, 2020, that will vest in three equal annual installments on March 2, 2021, March 2, 2022, and March 2, 2023 based on continued employment; (ii) 18,980 RSUs awarded on March 4, 2020, of which 33% of the RSUs vest in three equal annual installments on March 4, 2021, March 4, 2022, and March 4, 2023 based on continued employment and up to 67% of the RSUs (up to 200%) based on achievement of performance metrics, of which 17,808 shares were earned pursuant to the Compensation Committee certification on February 19, 2021 and will vest in three equal annual installments on March 4, 2021, March 4, 2022, and March 4, 2023 based on continued employment; and (iii) 13,638 RSUs awarded on August 3, 2020, that will vest in three equal annual installments on August 3, 2021, August 3, 2022, and August 3, 2023 based on continued employment; (iv) 54,255 RSUs awarded January 11, 2021, of which 100% of the target number of shares would be earned if, between the date of grant and the fourth anniversary of the date of grant, the January 2021 2x Performance Condition was met, 50% of the target number of shares would be earned if the January 2021 1.75x Performance Condition was met and 25% of the target number of shares would be earned if the January 2021 1.5x Performance Condition was met, and once a performance hurdle was met or exceeded, 33% of the earned portion of the RSUs would vest immediately, and the remaining 67% will be subject to continued employment, with 33% vesting one year later and the remaining 33% vesting two years later, but in no case later than the fourth anniversary of the award. Because the 2x Performance Condition was met before the first anniversary of the date of grant, one-fourth of the earned units vested immediately and became payable immediately and one-fourth will vest and become payable on each of the first, second, and third anniversaries of the date the January 2021 2x Performance Condition was satisfied. On May 26, 2021, the January 2021 1.5x Performance Condition was met and 13,564 shares were earned. On July 22, 2021, the January 2021 1.75x Performance Condition was met and 13,564 shares were earned. On August 17, 2021, the January 2021 2x Performance Condition was met and 27,127 shares were earned; and (v) 7,085 RSUs awarded on March 3, 2021, of which 33% of the RSUs vest in three equal annual installments on March 3, 2022, March 3, 2023, and March 3, 2024 based on continued employment and up to 67% of the RSUs (up to 200%) based on achievement of performance metrics, of which 9,452 shares
were earned pursuant to the Compensation Committee certification on February 11, 2022 and will vest in three equal annual installments on March 3, 2022, March 3, 2023, and March 3, 2024 based on continued employment.
Options Exercised and Stock Vested
The following table sets forth information for each of our named executive officers regarding stock options exercised and stock awards vested during 2018.2021:
| | | | Option Awards | | Stock Awards | | | Stock Awards |
Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) (1) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) (1) | Name | | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) (1) |
Andrew Rees | | — |
| | — |
| | 133,127 |
| | 1,881,203 |
| Andrew Rees | | | 305,114 | | | 28,142,426 | |
Michelle Poole | | Michelle Poole | | | 73,543 | | | 7,240,784 | |
Anne Mehlman | | — |
| | — |
| | — |
| | — |
| Anne Mehlman | | | 44,312 | | | 4,566,586 | |
Daniel P. Hart | | 20,831 |
| | 333,504 |
| | 42,898 |
| | 596,963 |
| Daniel P. Hart | | | 42,805 | | | 3,981,184 | |
Carrie W. Teffner | | — |
| | — |
| | 89,624 |
| | 1,576,540 |
| |
Elaine Boltz | | Elaine Boltz | | | 32,180 | | | 3,545,742 | |
The definition of “change in control” in the CIC Plan is consistent with the definition in our stockholder-approved equity plan. “Change in control” is generally defined in the CIC Plan to mean any one of the following: (i) any person becomes the beneficial owner of 35% or more of our common stock or voting securities, with certain exceptions; (ii) incumbent directors (including those nominees subsequently nominated or elected by incumbent directors) cease to constitute a majority of the members of the Board; (iii) consummation of a reorganization, merger, consolidation, sale or other disposition of all or substantially all of the assets of the Company, unless (a) after the transaction, the beneficial owners of our common stock and voting securities immediately prior to the transaction retain more than 50% of such common stock and voting securities of the entity resulting from the transaction, (b) no person immediately after the merger beneficially owns 35% or more of the voting power of the entity resulting from the transaction (except to the extent that such ownership existed with respect to the Company prior to the transaction), and (c) at least a majority of the members of the board of directors of the entity resulting from the transaction shall have been members of the incumbent board at the time of the execution of the initial agreement, or of the action of the Board, providing for such transaction; or (iv) stockholder approval of a complete liquidation or dissolution of the Company.
“Cause” is defined in the CIC Plan to mean, with respect to any participant: (i) the participant’s conviction, or guilty or no contest plea, to any felony; (ii) any act of fraud by the participant related to or connected with the participant’s employment by the Company; (iii) the participant’s material breach of his or her fiduciary duty to the Company; (iv) the participant’s gross negligence or gross misconduct in the performance of duties reasonably assigned to the participant which causes material harm to the Company; (v) any willful violation by the participant of the Company’s codes of conduct or other rules or policies of the Company; or (vi) any entry of any court order or other ruling that prevents the participant from performing his or her material duties and responsibilities.
“Good reason” is defined in the CIC Plan to mean the existence of any one or more of the following conditions without the written consent of the participant: (i) the Company’s assignment to the participant of any duties inconsistent in any material negative respect with the participant’s authority, duties or responsibilities immediately prior to the change in control or any other action by the Company that results in a material diminution in such authority, duties or responsibilities; (ii) a material reduction in the participant’s base salary, as in effect immediately prior to the change in control; (iii) a material reduction in the participant’s target bonus and/or target long-term incentive opportunity, as in effect immediately prior to the change in control; (iv) relocation of the participant’s office more than 50 miles from the Company’s principal office immediately prior to the change in control; or (v) a material breach by the Company of the CIC Plan. To resign for “good reason,” a participant must provide certain notice to the Company, and the Company must fail to remedy the condition believed to constitute “good reason” within a specified time period.
Mr. Rees Offer Letter
The offer letter for Mr. Rees provides that if he is terminated by us without “cause” (as defined in his offer letter) or if he resigns for “good reason” (as defined in his offer letter), he will be entitled to receive a lump sum payment equal to his then-current base salary plus his then-current target annual bonus. In addition, if he is terminated by us without cause, resigns for good reason, or as a result of his death or disability (each a “Qualifying Termination”) (i) his outstanding time-based equity awards that would otherwise have vested in the calendar year of the Qualifying Termination (and any performance-based equity awards for which the performance metrics have already been satisfied prior to the Qualifying Termination) will vest based on the number of full months that have elapsed since the later of (A) the grant date of the applicable equity award and (B) the most recent vesting date of such equity award divided by 12; and (ii) a pro-rated percentage of his performance-based equity awards for which the performance period remains open at the time of the Qualifying Termination will remain outstanding and eligible to vest if the applicable performance metrics are satisfied for such performance-based equity awards by the end of the applicable performance period, with such percentage equal to the number of full months that have elapsed between the grant date of such award and the Qualifying Termination divided by 24 months.
Ms. Mehlman Offer Letter
The offer letter for Ms. Mehlman provides that if she is terminated by us without “cause” (as defined in hisher offer letter) or if she resigns for “good reason” (as defined in her offer letter), she will be entitled to receive a lump sum payment equal to her then-current base salary, less applicable taxes and withholdings. In addition, she will be eligible for executive outplacement at the Executive Vice President Levellevel conditioned upon her signing the Company’s Separation Agreementseparation agreement and General Release.general release.
Mr. Hart Employment Agreement
Mr. Hart’s employment agreement provides certain benefits in the event of certain terminations of employment. Mr. Hart’s employment agreement was modified by the CIC Plan to provide that the terms of the CIC Plan supersede and replace the terms of the employment agreement with respect to a change in control. Mr. Hart’s employment agreement provides that if Mr. Hart is terminated by us involuntarily without “cause” (as defined in his employment agreement) or if he resigns for “good reason” (as defined in his employment agreement), he will receive: (i) a lump sum payment equal to one year of his base pay as of the termination date; (ii) a lump sum payment equal to 80% of his base pay in effect as of the termination date, pro-rated to equal the
proportion of the year that he was employed by us; (iii) a lump sum payment equal to 80% of his base pay as of the termination date; and (iv) immediate vesting of any unvested stock options or unvested stock awards then held by him that would have been vested had he remained employed for 24 months after the termination date. The agreement also provides that any stock options granted to Mr. Hart during his employment will remain exercisable for ten years after the date of grant, including if Mr. Hart ceases to be employed by us for any reason other than termination for cause.
Below is a summary of the potential payments that each of our named executive officers would have received upon the occurrence of the termination events specified below, assuming that each triggering event occurred on December 31, 2018. Ms. Teffner did not receive a severance payment in connection with her resignation as Executive Vice President and Chief Financial Officer during 2018.2021.