ITEM
10.
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DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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The
Board of Directors and Executive Officers
The following table provides information about
our directors and executive officers as of January 27, 2021. Directors are elected to serve for a term of one year until
their successors are duly elected and qualified or until their earlier death, disqualification, resignation or removal from office.
Name
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Age
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Position
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David J. Anderson
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73
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Chairman of the Board of
Directors
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Randy J. Martinez(1)
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65
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Director, President and Chief Executive
Officer
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Nancy A. Altobello(2)(3)(4)
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63
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Director
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David D. Johnson(2)(3)
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64
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Director
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Michael V. Schrock(3)(4)
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67
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Director
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Chun Hung (Kenneth)
Yu(3)(4)
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71
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Director
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Linda K. Zukauckas(2)(4)
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59
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Director
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Steven B. Harrison
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54
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Executive Vice President and President,
Test & Simulation
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David T. Hore
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55
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Executive Vice President and President,
Sensors
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Brian T. Ross
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44
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Executive Vice President and Chief Financial
Officer
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Todd J. Klemmensen
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47
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Senior Vice President, General Counsel
and Corporate Secretary
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(1)
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Mr.
Martinez was appointed President and Chief Executive Officer effective December 17, 2020,
after serving as Interim President and Chief Executive Officer from May 23, 2020
to December 16, 2020.
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(2)
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Member,
Audit Committee
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(3)
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Member,
Compensation and Leadership Development Committee
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(4)
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Member,
Nominating and Governance Committee
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Directors
David
J. Anderson, a director since 2009, is the Chairman of our Board of Directors, a position he has held since 2011. Mr. Anderson
previously served as the Co-Vice Chairman of Sauer-Danfoss, Inc. (developer and manufacturer of fluid power and electronic components
and systems for mobile equipment applications) from 2008 until his retirement in June 2009. Mr. Anderson was the President, Chief
Executive Officer and a director of Sauer-Danfoss, Inc. from 2002 until June 2009 and had previously held various senior management
positions with Sauer-Danfoss, Inc. beginning in 1984. Prior to 1984, he held various positions in business development, strategic
planning, sales, and marketing at several industrial manufacturing and distribution businesses. Mr. Anderson also previously served
as a director of Schnitzer Steel Industries, Inc. (a steel manufacturing and scrap metal recycling company) from 2009 to January
2018 and a member of its Audit Committee, Compensation Committee and Nominating & Corporate Governance Committee at various
times during that period and as a director of Modine Manufacturing Company (developer and manufacturer of thermal management systems
and components) from 2010 to July 2020 and a member of is Corporate Governance and Nominating Committee, Audit Committee, and
Technology Committee at various times during that period.
Mr.
Anderson’s qualifications to serve on our Board and to serve as the Chair of the Board include his more than 40 years of
international, industrial business experience and his chief executive officer and operations experience. He also has technology
and engineering experience, the ability to formulate and execute strategy and financial expertise.
Randy
J. Martinez, a director since March 2014, was appointed our President and Chief Executive Officer on December 17, 2020, after
serving as our Interim President and Chief Executive Office from May 23, 2020 to December 16, 2020. Prior to joining
MTS, Mr. Martinez served in several leadership roles at AAR Corporation, a provider of aviation services to the worldwide
commercial aviation and aerospace & defense industries from 2009 until his retirement in 2017, most notably as
President & CEO of the Airlift Group and Group Vice President, Aviation Services. Before joining AAR Corporation, Mr.
Martinez was the CEO and a director at World Air Holdings, Inc. As a graduate of the United States Air Force Academy, Mr.
Martinez served with distinction in the U.S. Air Force for 21 years, retiring as a Colonel and Command Pilot and having held a
wide variety of leadership roles, including command and senior staff positions.
Mr.
Martinez’s qualifications to serve on our Board include his experience as a chief executive officer at a public company
and his particular knowledge of the aviation and defense industries. His diverse industry experience assists us and the Board
in helping to understand our customers who are also diverse by industry and geography.
Nancy
A. Altobello, a director since 2019, was most recently Global Vice Chair, Talent of Ernst & Young (EY), a professional
services firm, where she was responsible for EY’s talent and people strategy worldwide from July 2014 until her retirement
in June 2018. Previously, Ms. Altobello held a number of senior positions at EY, including Americas Vice Chair, Talent from 2008
to 2014; Managing Partner, Northeast Region Audit and Advisory Practices from 2003 to 2008; and Managing Partner, North American
Audit Practice from 1999 to 2003. Throughout this time, Ms. Altobello also served as an audit partner for a number of leading
global organizations. Ms. Altobello is currently a trustee of the Fidelity Charitable board of trustees. She also served on the
board of directors of CA, Inc., a global leader in software development, from August 2018 until it was acquired by Broadcom in
November 2018. She has served on the board of directors of MarketAxess Holdings, Inc. since April 2019 and currently serves as
Chair of its Audit Committee and on its Compensation Committee, and she has served on the board of directors of Cornerstone
OnDemand, Inc. since December 2020.
Ms.
Altobello’s qualifications include extensive executive leadership experience at a large, complex, global firm; deep understanding
of accounting, auditing, financial reporting, and compliance and regulatory matters; and extensive experience with human resources
matters and diversity initiatives.
David
D. Johnson, a director since 2013, also served as a director of Nuvectra Corporation (a neurostimulation medical device company)
from March 2016 to May 2020 and served as Chair of its Audit Committee. He previously served as Executive Vice President, Treasurer
and Chief Financial Officer of Molex LLC (a manufacturer of electronic connectors and components) from 2005 to February
2016; Vice President, Treasurer and Chief Financial Officer of Sypris Solutions, Inc., from 1996 to 2005; Regional Controller
for Molex’s Far East Region; Financial Director for New Ventures and Acquisitions; and Financial Director for the Far East
South Region from 1984 to 1996. From 1978 to 1984, Mr. Johnson worked for the public accounting firm KPMG LLP.
Mr.
Johnson’s qualifications to serve on our Board include his chief financial officer experience for a global industrial company.
Mr. Johnson has had executive-level responsibility for financial and accounting matters in a number of settings, including international
contexts.
Michael
V. Schrock, a director since 2014, has been an advisor for Oak Hill Capital Partners (a private equity investment firm) since
March 2014. He also served as the President and Chief Operating Officer of Pentair LLC (a global water, fluid, thermal management
and equipment protection company) from 2006 through 2013. Prior to that role, Mr. Schrock held several leadership positions at
Pentair LLC over his 16-year career, including President of Water Technologies Americas, President of the Pump and Pool
Group and President/COO of Pentair Technical Products. Before joining Pentair LLC, Mr. Schrock held numerous senior leadership
roles in both the US and Europe at Honeywell International, Inc. Mr. Schrock has served on the board of directors of Plexus Corporation
since 2006 and as its lead director since 2013, and has served on the board of directors of Atkore International Group, Inc. since
May 2018 and as its Chairman since August 2018.
Mr.
Schrock’s experience includes more than 35 years in senior roles at major industrial companies. His deep management and
operating experience both domestically and internationally and strong track record leading and integrating strategic acquisitions
give our Board valuable insight into global business and acquisition matters.
Chun
Hung (Kenneth) Yu, a director since 2013, is retired. Prior to Mr. Yu’s retirement, he was Vice President, Global Channel
Services, International Operations for 3M Company (diversified manufacturer of consumer, industrial and health products) from
May 2013 to December 2013; President, China Region and 3M China from 2000 to May 2013; and President, 3M Taiwan from 1999 to 2000.
He also served in several director and leadership roles within the 3M organization from 1969 to 1999, located in St. Paul, Minnesota
and the Asian-Pacific region.
Mr.
Yu’s qualifications to serve on our Board include his extensive operations experience in the Asian-Pacific region, a market
we have identified as a growth opportunity for our Company’s products and services. Mr. Yu also contributes significant
leadership, planning and management skills developed during his long tenure with a successful and growing global manufacturing
company.
Linda
K. Zukauckas, a director since 2019, has served as the Chief Financial Officer for Nielsen Holdings plc (a global measurement
and data analytics company) since February 2020. Prior to joining Nielsen Holdings plc, she was the Executive Vice President
and Deputy Chief Financial Officer for American Express from February 2018 to January 2020. She had previously served as EVP/Controller
and Chief Accounting Officer of American Express since November 2011. From 2000 to 2011, Ms. Zukauckas held various senior finance
roles at Ally Financial, including strategy/M&A, divisional CFO, head of corporate planning, global controller and global
auditor. From 1997 to 2000, Ms. Zukauckas held various positions at Deutsche Bank, where she rose to the position of chief auditor
for the Global Investment Bank. She began her career with PricewaterhouseCoopers LLP in 1984 and held progressive leadership roles
there.
Ms.
Zukauckas’s qualifications to serve on our Board include her financial expertise and demonstrated ability to create and
lead high performance, diverse global organizations.
Executive
Officers
Randy
J. Martinez’s biography is set forth under the heading “Directors” above.
Steven B. Harrison has served as Executive
Vice President and President, Test & Simulation since February 2017. Prior to joining MTS in 2017, Mr. Harrison served as
President (August 2015 to December 2016) and Chief Commercial Officer (August 2012 to August 2015) of AAR Airlift Group,
Inc., a NYSE-listed provider of products and services to the worldwide aviation and government and defense markets, as
well as President and CEO of National Air Cargo, Inc., an international provider of on demand cargo and passenger services,
from September 2010 through July 2012. During a distinguished 22-year career in the United States Air Force, Mr. Harrison
commanded at the wing, group, and squadron level, including three deployed commands. He also held senior staff positions at Headquarters
US Air Force, the Joint Staff and US Transportation Command. Mr. Harrison is a command pilot with more than 3,400 flight hours
in the C-32A, C-5B, C-17A, KC-10A, T-38A, and T-37B. A Rhodes Scholar, he holds Masters Degrees in Engineering Science as well
as Politics, Philosophy, and Economics, from Oxford University, England. He also earned a Bachelor of Science in Aeronautical
Engineering from the United States Air Force Academy and a Masters of National Security Strategy from the United States Air War
College.
David
T. Hore has served as Executive Vice President and President, Sensors since July 2016. Mr. Hore
joined MTS through the acquisition of PCB Group, Inc. (PCB). Mr. Hore initially led PCB, a manufacturer of piezoelectric quartz
sensors, accelerometers, and associated electronics for the measurement of dynamic pressure, force, and vibration, as its
Co-President and later its President, from 2003 to 2016. Prior to joining PCB, Mr. Hore was Founder and Managing Partner
of the CPA firm Tronconi Segarra & Hore LLP, where he served as strategic consultant and outsourced CFO for PCB from 1995-2003.
Prior to that, Mr. Hore was a CPA at Price Waterhouse from 1987-1994. Mr. Hore holds a bachelor’s degree in business administration
with a concentration in accounting from the State University of New York at Buffalo.
Brian
T. Ross has served as Executive Vice President and Chief Financial Officer since May 2017. Prior to joining MTS as Corporate
Controller in 2014, Mr. Ross was the Director of Financial Planning and Analysis at Digi International Inc. (NASDAQ: DGII), where
he gained valuable global experience ranging from strategic planning and acquisitions to operational execution and internal control.
Earlier in his career, Mr. Ross served as Controller at Restore Medical, following a seven-year tenure at PricewaterhouseCoopers
LLP. Mr. Ross holds a BA in Accounting from the University of Northern Iowa and is a licensed CPA (inactive) in Minnesota.
Todd
J. Klemmensen has served as Senior Vice President, General Counsel and Secretary since July 2018.
Mr. Klemmensen directs MTS’s global legal affairs, including corporate governance, commercial and strategic agreements,
U.S. Government contracting, litigation, and intellectual property. Previously, Mr. Klemmensen served within MTS as Acting General
Counsel (April 2017 to July 2018), Associate General Counsel (November 2015 to March 2017) and Director of Contracts
& Senior Counsel (January 2012 to October 2015). Mr. Klemmensen served in various roles at Alliant Techsystems, Inc., including Sr. Manager – Contracts and providing legal counsel within its Armament Systems Group. Prior to transitioning
into industry, Mr. Klemmensen practiced business and corporate law in Minneapolis, MN. He holds a Bachelor of Arts degree from
Gustavus Adolphus College and a Juris Doctor degree from Hamline University School of Law. Mr. Klemmensen is a former board member
of the National Contract Management Association (NCMA) Twin Cities Chapter and a graduate of the NCMA – Leadership Development
Program.
Other
Information
Relationships and Arrangements. Executive
officers serve at the discretion of and are elected by our Board. There are no family relationships amongst any of the directors
or executive officers named. There are no undisclosed arrangements or understandings pursuant to which any person was selected
as a director or an officer.
Audit
Committee. During fiscal year 2020, the Audit Committee of the Board was composed of Mr. Johnson
(Chair), Ms. Altobello, Mr. Martinez, Ms. Steinel and Ms. Zukauckas. Ms. Steinel’s term on the Board expired on February
11, 2020. On May 22, 2020, Mr. Martinez stepped down from the Audit Committee in connection with his appointment as Interim CEO.
The Audit Committee held ten meetings during fiscal year 2020. All members of the Audit Committee during fiscal year 2020 satisfied
the Nasdaq Stock Market listing standards for Audit Committee membership at the time each member served on the Audit Committee.
The Board determined that Ms. Altobello, Mr. Johnson and Ms. Zukauckas are each an “audit committee financial expert”
under the Sarbanes-Oxley Act of 2002. The Nominating and Governance Committee of the Board determined that each of Ms. Altobello,
Mr. Johnson and Ms. Zukauckas satisfies applicable Nasdaq rules regarding the independence of audit committee members. Among
other duties, the Audit Committee:
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selects
our independent registered public accounting firm;
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reviews
and evaluates significant matters relating to our internal controls;
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reviews
the scope and results of the audits by, and the recommendations of, our independent registered public accounting firm;
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is
responsible for monitoring risks related to financial assets, accounting, legal and corporate compliance, discusses legal
and compliance matters and assesses the adequacy of Company risk-related internal controls;
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pre-approves,
in accordance with its pre-approval policy, all audit and permissible non-audit services and fees provided by our independent
registered public accounting firm;
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reviews
our audited consolidated financial statements and meets prior to public release of quarterly and annual financial information;
and
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meets
with our management prior to filing our quarterly and annual reports containing financial statements with the SEC.
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The
Audit Committee operates under a written charter adopted by the Board. This charter is available to shareholders on our website
at www.mts.com (select “Investor Relations” and click on “Corporate Governance”).
Code
of Conduct. We adhere to a code of ethics, known as the “MTS Code of Conduct.” It applies to our directors, officers,
employees and contractors. The MTS Code of Conduct sets forth guidelines for ensuring that all personnel act in accordance with
the highest standards of integrity. The MTS Code of Conduct, as well as any waivers from and amendments to it, are posted on our
website at www.mts.com (select “Investor Relations” and click on “Corporate Governance”).
Delinquent
Section 16(a) Filings. The rules of the SEC require us to disclose the identity of directors, executive officers and beneficial
owners of more than 10% of our common stock who did not file on a timely basis reports required by Section 16(a) of the Exchange
Act. Based solely on a review of copies of such reports and written representations from reporting persons, we believe that all
directors and executive officers complied with all filing requirements applicable to them during fiscal year 2020, with the exception
of a late Form 4 filing in December 2019 covering one transaction for each of Dr. Graves, Mr. Harrison, Mr. Hore, Mr. Klemmensen,
Mr. Ross, and Ms. Zukauckas.
ITEM
11.
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EXECUTIVE
COMPENSATION
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Compensation
Discussion and Analysis
Overview and Impact of Merger Agreement
As previously disclosed, on December 8,
2020, the Company, Amphenol Corporation, a Delaware corporation (Parent) and Moon Merger Sub Corporation, a Minnesota corporation
and a wholly-owned subsidiary of Parent (Sub), entered into an Agreement and Plan of Merger (as may be amended from time to time
and including the plan of merger attached as Exhibit A thereto, the merger agreement). On the terms and subject to the conditions
of the merger agreement, Sub will be merged with and into the Company (the merger), with the Company surviving the merger as a
wholly-owned subsidiary of Parent. Following the completion of the merger, the Company will cease to be a publicly traded company.
The merger agreement provides that, as of immediately prior to the effective time and contingent upon the merger:
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each
outstanding option to purchase shares granted under a stock plan of the Company (other than any option granted
under the Company’s 2012 Employee Stock Purchase Plan) will be fully vested and
cancelled in exchange for an amount in cash equal to the product of (i) the total number of shares of Company common stock
subject to such cancelled Company option multiplied by (ii) the excess, if any, of (a) the merger consideration over (b) the
exercise price per share of the Company common stock subject to such cancelled Company option, without interest and
less any required tax withholdings;
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any
Company option with an exercise price per share equal to or greater than the merger consideration will be cancelled in exchange
for no consideration; and
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each
outstanding restricted stock unit award (including each restricted stock unit award that is subject to a deferral election)
granted under a stock plan of the Company will be fully vested, with each restricted stock unit award that is subject to performance-based
vesting conditions deemed to be vested at the greater of (i) actual performance determined as of immediately prior to the
effective time of the merger and (ii) target level, and will be cancelled in exchange for an amount in cash equal to the product
obtained by multiplying (a) the aggregate number of vested restricted stock units subject to such award by (b) the merger
consideration, without interest and less any required tax withholdings
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Because this Compensation Discussion
and Analysis (CD&A) explains the compensation programs for our Named Executive Officers (NEOs) and the role of the Compensation
and Leadership Development Committee (for purposes of this CD&A, the Committee) in setting executive pay for fiscal year 2020,
it does not address the compensation that may be paid or become payable to the Company’s NEOs and that is based on, or otherwise
relates to, the merger of Sub with and into the Company, as contemplated by the merger agreement (the merger). Additionally, this
CD&A does not address any potential changes to our compensation programs or other plans that may occur upon consummation of
the merger. This CD&A should be read together with the compensation tables and related disclosures that follow this CD&A.
Our
fiscal year 2020 NEOs are:
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Randy
J. Martinez, President and Chief Executive Officer;
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Jeffrey
A. Graves, Former President and Chief Executive Officer;
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Brian
T. Ross, Executive Vice President and Chief Financial Officer;
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Steven
B. Harrison, Executive Vice President and President, Test & Simulation;
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David
T. Hore, Executive Vice President and President, Sensors; and
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Todd
J. Klemmensen, Senior Vice President, General Counsel and Corporate Secretary.
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Dr.
Graves resigned from the Company effective May 22, 2020. Mr. Martinez was appointed as Interim President and Chief Executive Officer
effective May 23, 2020 and was appointed President and Chief Executive Officer effective December 17, 2020.
This
CD&A is organized into the following sections:
CD&A
Section
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Summary
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Page
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Executive
Summary
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Highlights
our philosophy, governance practices, and the fiscal year 2020 executive compensation program
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8
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Say-on-Pay
Results
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Recaps
previous results and existing processes
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11
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Our
Compensation Process
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Details
how the Committee governs the executive pay program
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11
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Components
of Pay
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Provides
the key components of fiscal year 2020 executive pay
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12
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Changes
Subsequent to Year-End
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Discusses
certain compensation changes put in place after the end of fiscal year 2020
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17
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Other
Compensation and Policies
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Discusses
other aspects of our executive pay
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17
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Executive
Summary
We
consider our executive pay program to be instrumental in helping us achieve our business objectives and effective in rewarding
our overall financial and operational performance.
Our
overarching philosophy is that we should structure executive pay to be consistent with market competitive practices and to align
the long-term interests of our executive officers, shareholders, and customers so that pay appropriately reflects the executive
officers’ performance. We believe that a significant portion of an executive officer’s pay should be at risk in the
form of performance-based incentive awards.
The
Committee leverages the following commonly viewed best practices in designing, administering and governing our executive
compensation programs:
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We
Do
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We
Don’t
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Target
executive pay around the market median, while also considering retention, tenure, experience, and other factors
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Provide
single trigger change-in-control cash severance payments
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Emphasize
the majority of our program in variable pay
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Allow
stock option repricing or discounted stock option granting
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Require
executive officers to hold MTS stock through stock ownership guidelines
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Offer
tax gross-ups related to 280G parachute payments upon change-in-control
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Mitigate risk associated with compensation by
using multiple performance metrics, caps on potential incentive payments, and a clawback
policy
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Pay
accumulated dividends on unearned equity-based compensation until and unless shares are earned
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Allow
our executive officers or directors to hedge or pledge MTS stock
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The
primary components of our fiscal year 2020 executive compensation program were base salary, short-term incentives, and long-term
incentives, as summarized in the following table, along with the Committee’s decisions for fiscal year 2020:
Element
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Key
Features
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Decisions
for Fiscal Year 2020
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Base
Salary
Purpose:
Attract and retain executive officers, reward talent development
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Fixed
pay that changes only as a result of the Committee’s annual process for assessing market and executive talent
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Our
former CEO received a 4.75% increase in base salary, Mr. Ross received a 12.5% increase in base salary, and Mr. Klemmensen
received a 10.9% increase in base salary. Mr. Harrison and Mr. Hore did not receive a base salary increase.
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Effective
April 12, 2020 through October 10, 2020, all NEO base salaries were temporarily reduced by at least 10% as a part of our
response to the COVID-19 pandemic.
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Mr.
Martinez’s base salary as Interim CEO was set at $720,000.
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Short-Term
Incentives
Purpose:
Provide formulaic incentives to achieve or exceed annual operating objectives; encourage a balanced approach to profitability,
growth, and strengthening of balance sheet
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Executive
Variable Compensation Plan (EVC Plan)
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Three
performance metrics were utilized for fiscal year 2020: Adjusted EBITDA, Adjusted Revenue, and Leverage Ratio or Working
Capital Rate to Revenue (depending on the individual executive officer) (1)
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Incentive
payouts range from threshold to maximum levels, depending on level of performance
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Fiscal
year 2020 target incentives were increased for all NEOs, other than our former CEO, based
on a review of market competitive pay, and ranged from 50%-65% of base
salary.
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Performance
below the threshold level will result in zero payout
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As
Interim CEO, Mr. Martinez did not participate in the EVC Plan.
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Long-Term
Incentives (LTI)
Purpose:
Create alignment to shareholders via a longer-term shareholder return perspective; retain top talent
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Stock
options with three-year graded vesting and a seven-year term
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There
were no changes to the LTI design for fiscal year 2020
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Time-based
restricted stock units with three-year graded vesting
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The
total LTI grant values for our then-serving NEOs were increased based on
a review of market competitive pay.
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Performance-based
restricted stock units that vest based on average Adjusted ROIC for LTIs measured over a three-year period
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Upon appointment
as Interim CEO, Mr. Martinez was initially granted time-based restricted stock units
with a value of $450,000, effective June 15, 2020, and, from September 15, 2020 through
December 15, 2020, he received additional monthly grants of time-based restricted
stock units with a value of $150,000 per monthly grant.
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(1)
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Adjusted
EBITDA, Adjusted Revenue, and Leverage Ratio are each a non-GAAP financial measure. For more information on how these non-GAAP
financial measures are derived from our audited financial statements, see page 18 of this Amendment.
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The
following chart shows the relative weighting of target pay (for Mr. Martinez, as Interim CEO, and for Mr. Ross, Mr. Harrison,
Mr. Hore and Mr. Klemmensen, collectively, as the other continuing NEOs) across these three components for fiscal year
2020:
Say-on-Pay
Results
At
our annual shareholder meeting in February 2020, our shareholders continued to show strong support of our executive pay program,
with 98.4 percent of the votes cast approving the say-on-pay resolution.
The Committee believes this result affirms
our shareholders’ continuing support of the Committee’s approach to executive pay and the Committee did
not make any changes to the Company’s executive compensation program in response to the 2020 say-on-pay
vote. We continue to solicit and accept shareholder feedback regarding our compensation programs, and we take this input into
consideration along with market trends and our business environment, both internal and external.
Our
Compensation Process
Independent
Compensation Consultant
Under
the Committee’s charter, the Committee has the authority to select, retain and compensate executive compensation consultants
and other advisors as it deems necessary to carry out its responsibilities. For fiscal year 2020, the Committee engaged Willis
Towers Watson to provide information regarding compensation of our executive officers. Specifically, Willis Towers Watson was
asked by the Committee to:
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Review
and provide information on our compensation peers;
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Provide
market competitive data on executive compensation for base salary, short-term incentives, and long-term incentives; and
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Provide
market competitive data on incentive design structures and performance measures.
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Determining
Competitive Compensation
The
Committee works with Willis Towers Watson to analyze competitive market data to determine appropriate base salary levels, short-term
incentive target pay, and long-term incentive grant values for all our executive officers. When making comparisons to the market
data, the Committee generally seeks to establish compensation levels that approximate the market median.
With
respect to our former CEO’s pay, the Committee conducted an annual performance assessment of our former CEO and determined
appropriate adjustments to all elements of his pay based on his individual performance and the Company’s performance. The
Committee then recommended his pay to the Board for approval. The former CEO did not participate in these Committee or Board deliberations
and did not vote on matters concerning his pay. For our Interim CEO, the Committee and the Board set his base salary to be comparable
with the amount payable to our former CEO, while taking into account the interim nature of his appointment in the other aspects
of his compensation.
For
other executive officers, the CEO makes recommendations to the Committee for all elements
of pay based on individual and Company performance and market data. The Committee reviews, discusses, modifies, and approves the
recommendations, as appropriate.
Market
Data Sources and Analysis
The
Committee annually assesses “competitive market” compensation for each element of executive compensation using a number
of sources. A primary source is our peer group and the related data provided by Willis Towers Watson. In determining our peer
group, we recognize that many of our direct competitors are either privately-owned companies, or divisions of much larger, more
diversified, public companies. However, by considering relevant industries (e.g., industrial, manufacturing, engineering and electrical
components) and size parameters (e.g., revenue, earnings and market capitalization), we developed the following list of peer companies,
which was the same peer group as used to evaluate fiscal 2019 compensation decisions:
Badger
Meter Inc.
|
KEMET
Corporation
|
Brooks
Automation Inc.
|
Kimball
Electronics, Inc.
|
Cognex
Corporation
|
Littelfuse,
Inc.
|
Coherent
Inc.
|
Methode
Electronics, Inc.
|
CTS
Corporation
|
MKS
Instruments, Inc.
|
Daktronics
Inc.
|
National
Instruments Corporation
|
ESCO
Technologies Inc.
|
Novanta
Inc.
|
Fabrinet
|
OSI
Systems, Inc.
|
FARO
Technologies Inc.
|
RBC
Bearings Inc.
|
HEICO
Corporation
|
Rogers
Corporation
|
John
Bean Technologies Corporation
|
Standex
International Corporation
|
In
addition to the data from these peer companies, market competitive data was obtained from the 2019 Willis Towers Watson General
Industry Executive Compensation Survey.
The
Committee does not have a set policy or formula for weighting the elements of compensation (i.e., base salary, short-term incentives,
and long-term incentives) for each executive officer. Instead, the Committee considers market factors relevant to each executive
officer and their tenure, role within the Company and contributions to the Company’s performance. In general, as executive
officers assume greater responsibility, a larger portion of their total cash compensation is payable as short-term cash incentive,
which is variable based on performance, as opposed to base salary, and a larger portion of their total direct compensation comes
in the form of long-term equity incentives.
Components
of Pay
Fiscal
Year 2020 Base Salaries
The
Committee reviews executive officer base salaries annually and may choose to make adjustments. The following table outlines fiscal
year 2020 base salary increases for our NEOs as approved by the Committee:
Named Executive Officer
|
|
Fiscal Year 2020
Base Salary (1)
|
|
|
Fiscal Year 2019
Base Salary
|
|
|
Increase
Percentage
|
|
Randy J. Martinez
|
|
$
|
720,000
|
|
|
|
N/A
|
|
|
|
-
|
(2)
|
Jeffrey A. Graves
|
|
$
|
750,000
|
|
|
$
|
716,000
|
|
|
|
4.75
|
%
|
Brian T. Ross
|
|
$
|
450,000
|
|
|
$
|
400,000
|
|
|
|
12.5
|
%(3)
|
Steven B. Harrison
|
|
$
|
480,000
|
|
|
$
|
480,000
|
|
|
|
-
|
|
David T. Hore
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
|
|
-
|
|
Todd J. Klemmensen
|
|
$
|
355,000
|
|
|
|
N/A
|
|
|
|
-
|
(4)
|
|
(1)
|
Effective
April 12, 2020, each of the Company’s NEOs took a temporary reduction in their base salaries of at least 10%. On October
5, 2020, the Board approved base salaries of the Company’s NEOs at the levels previously in effect, to be effective
on October 10, 2020. The amounts reported in this column do not reflect the temporary reductions in base salaries.
|
|
(2)
|
Mr.
Martinez was appointed Interim President and Chief Executive Officer effective May 23, 2020 and was appointed President and
Chief Executive Officer effective December 17, 2020. His initial base salary level was determined based on the competitive
market and consideration the compensation paid to our former CEO. In connection with his appointment as President and Chief
Executive Officer, we entered into a new offer letter with Mr. Martinez, which provides for his base salary to remain at $720,000.
|
|
(3)
|
Mr.
Ross’s increase takes into account alignment with market data for his position
and internal parity with other Company NEOs.
|
|
(4)
|
Mr.
Klemmensen was not a NEO for fiscal year 2019. His fiscal year 2020 base salary represents
a 10.9% increase from his base salary prior to becoming a NEO and takes into account
alignment with market data for his position and internal parity with other Company NEOs.
|
Fiscal
Year 2020 Short-Term Incentives
Under
the EVC Plan, all the NEOs, other than Mr. Martinez, employed by the Company at the end of fiscal year 2020 were eligible for
cash payments as determined based upon our financial performance as compared to set performance standards. As Interim CEO, Mr.
Martinez did not participate in the EVC Plan. As a part of our response to the COVID-19 pandemic for fiscal year 2020, the Committee
cancelled all opportunities for a payout under the EVC Plan.
The
following table shows the fiscal year 2020 target incentive opportunity for the EVC Plan:
Named Executive Officer
|
|
2020 EVC Plan Target
Incentive
(% of Base Salary)
|
|
Randy J. Martinez (1)
|
|
|
N/A
|
|
Jeffrey A. Graves (2)
|
|
|
100
|
%
|
Brian T. Ross
|
|
|
65
|
%
|
Steven B. Harrison
|
|
|
60
|
%
|
David T. Hore
|
|
|
60
|
%
|
Todd J. Klemmensen
|
|
|
50
|
%
|
|
(1)
|
As
Interim CEO, Mr. Martinez did not participate in the EVC Plan.
|
|
(2)
|
Dr.
Graves resigned from the Company effective May 22, 2020 and ceased to be a participant in the EVC Plan as of such date.
|
The
following diagram shows the fiscal year 2020 EVC Plan Metrics and Weightings for our NEOs:
2020
EVC Plan Metrics and Weightings for NEOs
For
Dr. Graves, Mr. Ross and Mr. Klemmensen, the Adjusted EBITDA, Adjusted Revenue, and Leverage Ratio performance metrics were based
on total Company performance. For Mr. Harrison and Mr. Hore, the Adjusted EBITDA, Adjusted Revenue, and Working Capital Rate to
Revenue (WCRR) performance metrics were based upon achievement of financial targets for their respective business segments,
with slightly different weightings for Mr. Hore as described below. The Committee established these Adjusted EBITDA, Adjusted
Revenue and WCRR metrics based on segment (rather than total Company) performance for these executive officers to reflect their
accountability for the performance of that segment. The Committee believes that the leader of the segment has a meaningful opportunity
to directly impact the achievement of the performance goals through his individual performance as the leader of that segment.
The
Committee established minimum, target and maximum levels of achievement for each of the performance metrics, as shown in the following
table:
Corporate Goal (1)
|
|
Weight (2)
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Result
|
|
|
Percent of Target
Performance Achieved
|
|
Adjusted EBITDA (000s) (3)
|
|
|
50
|
%
|
|
$
|
113,925
|
|
|
$
|
142,406
|
|
|
$
|
170,887
|
|
|
$
|
111,401
|
|
|
|
78
|
%
|
Adjusted Revenue (000s) (3)
|
|
|
30
|
%
|
|
$
|
792,912
|
|
|
$
|
932,838
|
|
|
$
|
1,072,764
|
|
|
$
|
781,000
|
|
|
|
84
|
%
|
Leverage Ratio (3)
|
|
|
20
|
%
|
|
|
4.1
|
|
|
|
3.5
|
|
|
|
3.0
|
|
|
|
4.9
|
|
|
|
71
|
%
|
Payout as % of Target Incentive
|
|
|
—
|
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
200
|
%
|
|
|
—
|
|
|
|
0
|
%
|
|
(1)
|
Specific
Adjusted EBITDA, Adjusted Revenue and WCRR performance metrics for the Test & Simulation and Sensors segments and the
corresponding minimum, target and maximum amounts are not disclosed due to the potential competitive harm of such disclosure.
For fiscal year 2020, the Committee followed the same pattern in setting segment-specific performance levels as for setting
the corporate performance levels: for Adjusted EBITDA, minimum is equal to 80% of the expected results under the applicable
segment’s annual plan, target is equal to expected results, and maximum is equal to 115% of expected results; for Adjusted
Revenue, minimum is equal to 85% of the expected results under the applicable segment’s annual plan, target is equal
to expected results, and maximum is equal to 120% of expected results; and for WCRR, minimum is equal to 90% of the expected
results under the applicable segment’s annual plan, target is equal to expected results, and maximum is equal to 110%
of expected results. Other than as noted below for Adjusted EBITDA in the Sensors segment, no performance metrics were achieved
at threshold level for fiscal year 2020.
|
|
(2)
|
For
Mr. Hore, the Adjusted EBITDA performance metric was weighted at 30% and the Adjusted Revenue performance metric was weighted
at 50%.
|
|
(3)
|
Adjusted
EBITDA, Adjusted Revenue, Leverage Ratio and WCRR are each a non-GAAP financial measure. For more information on how these
non-GAAP financial measures are derived from our audited financial statements, see page 18 of this Amendment.
|
In
addition to the performance metrics set forth above, the Committee believes that Earnings Per Share (EPS) provides a strong link
between the EVC Plan and shareholder value, and therefore, if the target level of EPS is not met, participants are limited to
target payouts under the EVC Plan regardless of the results of other performance goals. This year’s EPS target level was
$2.23, and the achieved level was $2.03. As a result, any payouts under the EVC Plan in excess of target level based on achievement
of performance metrics would have been limited to target level. As target level was not achieved for any performance metrics this
year, this EPS limit had no impact.
As
noted above, the Committee cancelled all opportunities for a payout under the EVC Plan for fiscal year 2020, so no payouts were
made. Even if the EVC Plan had not been cancelled, no NEOs other than Mr. Hore would have received a payout for fiscal year 2020.
Mr. Hore would have received a payout of $34,736 based on achievement of 69% of the target incentive for the Adjusted EBITDA performance
metric in the Sensors segment.
Fiscal
Year 2020 Long-Term Incentives
The
LTIs granted to each NEO in fiscal year 2020 consisted of stock options, time-based restricted stock units (RSUs), and
performance-based restricted stock units (PRSUs), according to the following mix:
2020
LTI Type Mix
(%
of total grant dollar value)
LTI
Type
|
|
|
|
Key
Features
|
Stock
Options
|
|
●
|
|
Non-qualified
stock options
|
|
|
|
|
|
|
|
●
|
|
Vest
one-third per year commencing on the first anniversary of the date of grant
|
|
|
|
|
|
|
|
●
|
|
Seven-year
term
|
|
|
|
|
|
RSUs
|
|
●
|
|
Restricted
stock units
|
|
|
|
|
|
|
|
●
|
|
Vest
one-third per year commencing on the first anniversary of the date of grant(1)
|
|
|
|
|
|
PRSUs
|
|
●
|
|
Performance-based
restricted stock units
|
|
|
|
|
|
|
|
●
|
|
Adjusted
ROIC for LTIs over a three-year performance period is the performance measure, emphasizing profitability with a longer-term
view, with the goal designed to be challenging but achievable with strong Company performance
|
|
|
|
|
|
|
|
●
|
|
The
performance range has threshold, target and maximum performance expectations for each three-year cycle
|
|
|
|
|
|
|
|
●
|
|
Payouts
are 50%, 100%, and 200% at threshold, target, and maximum performance, respectively
|
|
(1)
|
Mr.
Martinez received time-based RSUs in June 2020 and September 2020 in connection with
his appointment as Interim CEO, which RSUs were scheduled to vest on the earlier of May
23, 2021 (the first anniversary of his appointment as Interim CEO) or upon appointment
of a full-time, permanent President and CEO. These RSUs vested on December 17, 2020 in
connection with Mr. Martinez’s appointment as our Chief Executive Officer.
|
The
fiscal year 2020 LTIs are summarized for each NEO in the following table (except as noted below, all LTIs were granted in December
2019):
Named Executive
Officer
|
|
Number of
Stock Options
|
|
|
Number of
RSUs
|
|
|
Number
of
PRSUs
|
|
|
Aggregate Value
of
Awards
|
|
Randy J. Martinez (1)
|
|
|
-
|
|
|
|
24,168
|
|
|
|
-
|
|
|
$
|
450,000
|
|
Randy J. Martinez (1)
|
|
|
-
|
|
|
|
6,897
|
|
|
|
-
|
|
|
$
|
150,000
|
|
Jeffrey A. Graves
|
|
|
48,418
|
|
|
|
11,505
|
|
|
|
23,010
|
|
|
$
|
2,142,000
|
|
Brian T. Ross
|
|
|
13,562
|
|
|
|
3,223
|
|
|
|
6,445
|
|
|
$
|
600,000
|
|
Steven B. Harrison
|
|
|
11,302
|
|
|
|
2,686
|
|
|
|
5,371
|
|
|
$
|
500,000
|
|
Steven B. Harrison (2)
|
|
|
4,521
|
|
|
|
1,986
|
|
|
|
3,973
|
|
|
$
|
200,000
|
|
David T. Hore
|
|
|
11,302
|
|
|
|
2,686
|
|
|
|
5,371
|
|
|
$
|
500,000
|
|
Todd J. Klemmensen
|
|
|
8,024
|
|
|
|
1,907
|
|
|
|
3,814
|
|
|
$
|
355,000
|
|
|
(1)
|
Amounts
for Mr. Martinez do not include any compensation paid to him for his service as a director
prior to his appointment as Interim CEO. In connection with his appointment as Interim
CEO, Mr. Martinez received an initial time-based RSU grant with a value of $450,000
in June 2020 and monthly time-based RSU grants with a monthly value of $150,000
beginning in September 2020 and ending in December 2020.
|
|
(2)
|
Reflects
awards granted in March 2020.
|
In
determining the number of stock options to grant, 25% of the aggregate value of the award is divided by the average of the Black
Scholes values over the 90 days prior to the end of the fiscal year. We believe that this methodology, versus determining
the number of stock options to grant based on the closing price of the Company’s common stock on the date of grant, better
represents the value of the Company’s equity over a period of time prior to the date of the award and signals that pay realized
from stock option grants will be more sensitive to future stock price appreciation and less sensitive to past stock price volatility.
In determining the number of RSUs and PRSUs to grant, 25% and 50%, respectively, of the aggregate value of the award is divided
by the closing price of the Company’s common stock on the date of grant.
The
table below sets forth the threshold, target and maximum levels for the three-year average Adjusted ROIC for LTIs performance
goal for the performance period of fiscal year 2018 through fiscal year 2020 as well as the actual achievement of that performance
goal and the percentage of the target level of that achievement.
Performance Goal
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Result
|
|
|
Percent of Target
Performance Achieved
|
|
|
Percent of Target
Payout Achieved
|
|
Adjusted ROIC for LTIs*
|
|
|
7.0
|
%
|
|
|
8.8
|
%
|
|
|
10.6
|
%
|
|
|
8.0
|
%
|
|
|
91
|
%
|
|
|
77
|
%
|
*
|
Represents
a non-GAAP financial measure. For more information on how this non-GAAP financial measure is derived from our audited financial
statements, see page 18 of this Amendment.
|
The
payout for the PRSUs granted on April 17, 2018 was calculated as follows based upon fiscal years 2018 through 2020 performance.
|
|
|
|
|
|
Target PRSUs
|
|
|
Actual PRSUs
|
|
Named Executive Officer
|
|
Performance
Period
|
|
Vesting and
Payout Date
|
|
Number of
Shares
Awarded
(#)
|
|
|
Grant Date
Fair Value (1)
($)
|
|
|
Number of
Shares
Acquired (2)
(#)
|
|
|
Value
Realized at
Vest (3)
($)
|
|
Jeffrey A. Graves (4)
|
|
Fiscal Years 2018-2020
|
|
12/15/2020
|
|
|
16,616
|
|
|
$
|
869,017
|
|
|
|
-
|
|
|
|
-
|
|
Brian T. Ross
|
|
Fiscal Years 2018-2020
|
|
12/15/2020
|
|
|
2,390
|
|
|
$
|
124,997
|
|
|
|
1,837
|
|
|
$
|
107,262
|
|
Steven B. Harrison
|
|
Fiscal Years 2018-2020
|
|
12/15/2020
|
|
|
2,151
|
|
|
$
|
112,497
|
|
|
|
1,653
|
|
|
$
|
96,519
|
|
David T. Hore
|
|
Fiscal Years 2018-2020
|
|
12/15/2020
|
|
|
2,151
|
|
|
$
|
112,497
|
|
|
|
1,653
|
|
|
$
|
96,519
|
|
|
(1)
|
Target
PRSU value represents number of shares granted multiplied by the share price of $52.30 on the date of the grant (April 17,
2018).
|
|
(2)
|
The
number of shares acquired includes the number of shares of stock withheld by the Company
to cover tax obligations. The number of shares delivered to each NEO following such withholding
was: Mr. Ross 1,274; Mr. Harrison 1,147; and Mr. Hore 1,091. Mr. Klemmensen
did not participate in the 2018-2020 PRSU program.
|
|
(3)
|
The
value realized on the vesting of the PRSUs is the fair market value of our common stock at the time of vesting (December 15,
2020).
|
|
(4)
|
Dr.
Graves resigned from the Company effective May 22, 2020 and, as a result, forfeited all unvested PRSUs as of such date.
|
Changes Subsequent to Year-End
Chief Executive
Officer Offer Letter
On December 13,
2020, in connection with Mr. Martinez’s appointment as President and Chief Executive Officer, the Committee approved a one-time
equity award to Mr. Martinez equal in value to approximately $2,000,000 on the date of grant, which was granted as 50% RSUs and
50% PRSUs. Mr. Martinez’s base salary will remain at $720,000. On December 17, 2020, in connection with his appointment
as President and Chief Executive Officer, we entered into an offer letter with Mr. Martinez, as previously approved by the Committee,
reflecting such terms. As noted above in connection with Mr. Martinez’s appointment as our Chief Executive Officer, Mr.
Martinez vested in the 2020 RSU grants that he received as an employee, which RSUs were scheduled to vest on the earlier of May
23, 2021 (the first anniversary of his appointment as Interim CEO) or upon appointment of a full-time permanent President and
CEO.
Retention Agreements
On December 18,
2020, each of the then-serving NEOs entered into a retention agreement with us regarding a grant under a retention bonus pool
relating to the contemplated merger that was previously approved by the Committee with allocations of awards under such bonus
pool in the following amounts: Mr. Martinez, $1,440,000; Mr. Ross, $500,000; Mr. Harrison, $500,000; Mr. Hore, $500,000; and Mr.
Klemmensen, $375,000. Each retention bonus is subject to the terms and conditions of the retention agreement, including: (i) 50%
of the retention bonus was paid in December 2020, but is subject to a clawback obligation in the event the executive resigns without
“good reason” or is terminated for “cause”, but no clawback will be required if the merger does not occur,
and (ii) 50% of the retention bonus will be payable on or around the first anniversary of the closing of the merger, subject to
the executive’s continued employment through such anniversary or, in the case of Mr. Martinez, an earlier qualifying termination
(including resignation for “good reason” or termination “without cause”) on or after the closing of the
merger. Mr. Martinez’s retention agreement also includes a requirement for the execution and non-revocation of a release
of claims in favor of the Company on certain terminations of employment.
Other
Compensation and Policies
Benefits
and Perquisites
Our
executive officers are provided retirement and health benefits that are generally available to our other salaried employees, including:
|
●
|
Retirement
savings plan with a Company match (not available to Mr. Martinez or Mr. Hore);
|
|
●
|
Disability
and life insurance (not available to Mr. Martinez); and
|
|
●
|
Medical,
vision and dental insurance (not available to Mr. Hore).
|
Our
executive officers, other than Mr. Martinez and Mr. Hore, are eligible to participate in our Executive Deferred Compensation Plan,
which allows us to provide non-qualified retirement benefits that are identical to the tax-qualified benefits but on income above
the allowable level under the Internal Revenue Code for qualified plans.
We
provide limited executive perquisites, based upon competitive market data and, in the case of physical examinations, to promote
vitality and succession in the executive team, including:
|
●
|
A
car allowance, except for Mr. Hore, who has use of a Company-owned vehicle, and Mr. Martinez;
|
|
●
|
A
club membership for Mr. Hore; and
|
|
●
|
Reimbursement
for an executive physical examination for amounts not covered by insurance, up to $3,000 (not available to Mr. Martinez or
Mr. Hore).
|
Additionally,
starting upon his appointment as Interim CEO, we cover the housing and transportation expenses for Mr. Martinez because his home
is not in Minnesota where his office is located. We expect this arrangement to continue during Mr. Martinez’s service as
President and Chief Executive Officer.
Executive
Compensation Clawback Policy
The
EVC Plan, the 2011 Stock Incentive Plan (the 2011 Plan) and the 2017 Stock Incentive Plan (the 2017 Plan) include clawback provisions.
The provisions require an executive officer to forfeit and allow us to recoup from the executive officer any payments or benefits
received by the executive officer under the EVC Plan, the 2011 Plan or the 2017 Plan under certain circumstances, such as certain
restatements of our financial statements, termination of employment for cause, violation of the MTS Code of Conduct and breach
of an agreement between us and the executive officer.
Stock
Ownership Guidelines
To
align our executive officers’ and directors’ interests with our shareholders’ interests, the Committee expects
our executive officers and directors to acquire significant equity ownership in the Company. Accordingly, we have adopted stock
ownership guidelines requiring each executive officer and independent director to achieve an equity ownership level equal to a
specified multiple of his or her base salary or annual cash retainer, respectively, within five years of being appointed as an
executive officer, within five years of a change in executive officer status resulting in an increased required level of ownership,
or within five years of being elected as a director, as applicable.
The
current minimum equity ownership levels as a multiple of base pay or annual cash retainer, as applicable, are as follows:
|
●
|
Five
times for the Chief Executive Officer and all independent directors;
|
|
●
|
Four
times for the Chief Financial Officer; and
|
|
●
|
A
multiple equal to their executive salary grade level for any other President, Executive Vice President, and Senior Vice President
(ranging from one time to four times) and one-half time for a senior level executive.
|
The
policy requires that our executive officers and independent directors hold equity acquired through our equity compensation plans
in a minimum amount of 75% of the net shares acquired (net of taxes) until ownership levels are met. The policy also provides
that failure by a participant to meet the required ownership level within the time period established will result in a requirement
that such participant retain 100% of the net shares acquired (net of taxes) through our equity compensation programs until ownership
levels are met.
The
Committee reviews the progress of our executive officers and independent directors toward the ownership guidelines on a regular
basis. Mr. Graves and Mr. Hore met the ownership guideline requirement. All of our continuing NEOs are within
the initial five-year compliance period for meeting the ownership guidelines and we expect that they will each meet the ownership
guidelines within the established timeframes with the exception of Mr. Ross. Mr. Ross’s ability to reach the ownership guideline
was hindered by a combination of base salary times the guideline multiple in relation to the annual equity grant size and the
timing and value of equity settlements. All our independent directors have either met the ownership guidelines or are within the
initial five-year compliance period for meeting the ownership guidelines. For those within the initial five-year compliance period,
we expect that they will each meet the ownership guidelines within the established timeframes.
Non-GAAP
Financial Measures and Performance Metrics
Below
is information on how we calculate target levels and actual results for certain metrics discussed above:
|
●
|
Adjusted
Revenue: Adjusted Revenue is a non-GAAP financial measure and is calculated by excluding the impact of business acquisitions
completed during fiscal year 2020 from GAAP revenue. For Messrs. Harrison and Hore, Adjusted Revenue is calculated using financial
information for their respective business segments according to the definition described above.
|
|
|
|
|
●
|
Adjusted
EBITDA: Adjusted EBITDA is a non-GAAP financial measure. We calculate EBITDA by adding back interest, taxes, depreciation
and amortization expense to GAAP net income. Adjusted EBITDA is calculated by adding back stock-based compensation, impairment
of assets, acquisition-related expenses, acquisition inventory fair value adjustment, the contingent consideration fair value
adjustment, and restructuring / other expenses to EBITDA. In addition, we exclude the EBITDA from business acquisitions completed
during fiscal year 2020. For Messrs. Harrison and Hore, Adjusted EBITDA is calculated using financial information for their
respective business segments according to the definition described above.
|
|
|
|
|
●
|
Adjusted
ROIC for LTIs: Adjusted ROIC for LTIs is a non-GAAP financial measure and is calculated by dividing Adjusted Performance Net
Income (as defined below) by Average Adjusted Invested Capital (as defined below) over a three-year time period. Adjusted
Performance Net Income is a non-GAAP financial measure and is calculated by excluding the following from net income: after-tax
interest expense and the estimated impact to net income from business acquisitions completed during fiscal year 2020 and fiscal
year 2019. Average Adjusted Invested Capital is a non-GAAP financial measure and is defined as the aggregate of average interest-bearing
debt, excluding interest-bearing debt incurred as a result of business acquisitions completed during fiscal year 2020 and
fiscal year 2019, and average shareholders’ equity, excluding equity incurred as a result of the business acquisitions
completed during fiscal year 2020 and fiscal year 2019, and is calculated as the sum of current and prior year ending amounts
divided by two.
|
|
|
|
|
●
|
Leverage
Ratio: Leverage Ratio is a non-GAAP financial measure and is calculated as the ratio of our Adjusted Total Interest-Bearing
debt for Leverage Ratio (as defined below) to our Adjusted EBITDA.
|
|
|
|
|
●
|
Adjusted
Total Interest-Bearing Debt for Leverage Ratio: Adjusted Total Interest-Bearing Debt for Leverage Ratio is a non-GAAP financial
measure. We calculate Adjusted Total Interest-Bearing Debt for Leverage Ratio by excluding interest-bearing debt incurred
as a result of business acquisitions completed during fiscal year 2020.
|
|
|
|
|
●
|
Working
Capital Rate to Revenue (WCRR): WCRR is a non-GAAP financial measure and is calculated by dividing the Average Working Capital
(as defined below) by revenue. We calculate working capital at the end of each quarter by adding together net inventory, accounts
receivable and net unbilled accounts receivable; and then subtracting accounts payable and advance payments from customers
using GAAP results. Average Working Capital is calculated by adding the total working capital from each quarter and then dividing
this sum by four. WCRR and Average Working Capital both exclude the impact of business acquisitions completed during fiscal
year 2020. For Messrs. Harrison and Hore, WCCR is calculated using financial information for their respective business segments
according to the definition described above.
|
Compensation
and Leadership Development Committee Report
The
Compensation and Leadership Development Committee has discussed and reviewed the Compensation Discussion and Analysis set forth
above with management. Based upon this review and discussion, the Compensation and Leadership Development Committee recommended
to the Board that the Compensation Discussion and Analysis be included in this Amendment.
SUBMITTED
BY THE COMPENSATION AND LEADERSHIP DEVELOPMENT
COMMITTEE
OF THE COMPANY’S BOARD OF DIRECTORS
Michael
V. Schrock (Chair)
Nancy
Altobello
David
D. Johnson
Chun
Hung (Kenneth) Yu
Risk
Considerations in Our Compensation Programs
In
fiscal year 2020, management and the Compensation and Leadership Development Committee continued to focus on responsible pay practices
designed to produce positive results for the Company and its shareholders without encouraging excessive or inappropriate risk-taking.
The Compensation and Leadership Development Committee’s analysis identified the following components of our compensation
programs that it believes effectively reduce risk without reducing incentives:
|
●
|
Our
use of different types of compensation (cash salary, cash incentive compensation and equity) provides an appropriate balance
of short-term and long-term incentives with fixed and variable components;
|
|
●
|
Our
compensation plan design and the governance processes work together to minimize exposure to excessive risk, while creating
a focus on operational activities that contribute to long-term shareholder value creation;
|
|
●
|
Our
metrics used to determine the amount of a participant’s incentive compensation under our short-term incentive plans
focus on a combination of Company-wide and business unit performance using a balance of top and bottom-line growth measures;
|
|
●
|
Our
metric used to determine the amount of a participant’s award under our long-term incentive plan focuses on our ability
to create value for investors from our operating activities;
|
|
●
|
Our
incentive compensation plans impose threshold and maximum payout levels on awards to ensure that we are rewarding desired
performance and limiting windfalls;
|
|
●
|
Our
commission-based plans are aligned to drive business growth and support achievement of short- and long-term strategic objectives;
|
|
●
|
Our
incentive programs include clawback provisions and allow the use of negative discretion for NEOs;
|
|
●
|
Our
stock ownership guidelines encourage prudent contribution to shareholder value and discourage excessive risk taking; and
|
|
●
|
Our
system of internal controls places a strong focus on avoiding undue financial risk through well-developed design and administrative
review processes.
|
Based
on the Company’s use of these programmatic safeguards and on the Compensation and Leadership Development Committee’s
continued review of the Company’s incentive compensation policies and practices for all of the Company’s worldwide
locations, the Compensation and Leadership Development Committee concluded in fiscal year 2020 that any risks arising from the
Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.
Conflict
of Interest Analysis
Our
Compensation and Leadership Development Committee has considered the relationships that its independent compensation consultants
have had with the Company, the members of the Compensation and Leadership Development Committee and our executive officers, as
well as the policies that the consultants have in place to maintain their independence and objectivity and has determined that
the work performed by its compensation consultants has raised no conflicts of interest.
Fiscal
Year 2020 Summary Compensation Table
The
following table sets forth the cash and non-cash compensation with respect to each NEO during the prior three fiscal years,
as applicable.
Name
and Principal
Position
|
|
Year
|
|
Salary
(1)
($)
|
|
|
Bonus
(2)
($)
|
|
|
Stock
Awards (3)
($)
|
|
|
Option
Awards (3)
($)
|
|
|
Non-
Equity
Incentive
Plan
Compensation (4)
($)
|
|
|
All
Other
Compensation (5)
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Randy
J. Martinez (6)
President
and Chief Executive Officer
|
|
2020
|
|
|
199,383
|
|
|
|
—
|
|
|
|
720,053
|
|
|
|
—
|
|
|
|
—
|
|
|
|
84,178
|
|
|
|
1,003,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
A. Graves (7)
Former
President and Chief Executive Officer
|
|
2020
2019
2018
|
|
|
541,540
712,006
691,348
|
|
|
|
—
—
—
|
|
|
|
1,606,673
1,396,510
1,303,525
|
|
|
|
535,503
465,501
431,988
|
|
|
|
—
597,544
415,683
|
|
|
|
18,253
21,117
20,892
|
|
|
|
2,701,969
3,192,678
2,863,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
T. Ross
Executive
Vice President and Chief Financial Officer
|
|
2020
2019
2018
|
|
|
426,539
391,349
351,415
|
|
|
|
—
—
—
|
|
|
|
449,997
367,464
237,518
|
|
|
|
149,996
122,502
62,133
|
|
|
|
—
180,640
116,124
|
|
|
|
22,012
21,117
20,892
|
|
|
|
1,048,544
1,083,072
788,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
B. Harrison
Executive
Vice President and President, Test & Simulation
|
|
2020
2019
2018
|
|
|
465,228
379,430
335,005
|
|
|
|
—
—
—
|
|
|
|
525,001
887,524
168,772
|
|
|
|
175,002
62,494
55,921
|
|
|
|
—
184,993
25,752
|
|
|
|
22,012
46,117
21,685
|
|
|
|
1,187,243
1,560,558
607,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
T. Hore
Executive
Vice President and President, Sensors
|
|
2020
2019
2018
|
|
|
290,409
500,000
500,000
|
|
|
|
—
—
107,100
|
|
|
|
375,013
206,278
268,763
|
|
|
|
125,000
68,754
55,921
|
|
|
|
—
103,514
—
|
|
|
|
32,417
34,329
35,813
|
|
|
|
822,839
912,874
967,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Todd
J. Klemmensen (8)
Senior
Vice President, General Counsel and Corporate Secretary
|
|
2020
|
|
|
345,541
|
|
|
|
—
|
|
|
|
266,284
|
|
|
|
88,745
|
|
|
|
—
|
|
|
|
22,012
|
|
|
|
722,582
|
|
|
(1)
|
Reflects
the temporary reduction in base salaries that was effective from April 12, 2020 through October 10, 2020.
|
|
(2)
|
Amount
for Mr. Hore represents a discretionary cash bonus.
|
|
(3)
|
Amounts
represent the aggregate grant date fair value of RSUs and stock options that were granted in each fiscal year as computed
in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 utilizing
the assumptions discussed in Note 10 to our Notes to Consolidated Financial Statements for the fiscal year ended October 3,
2020 included in our Annual Report on Form 10-K for fiscal year 2020. Assuming that maximum performance is achieved for PRSUs,
total amounts under “Stock Awards” for fiscal year 2020 would be as follows: Dr. Graves, $2,677,789; Mr.
Ross, $749,980; Mr. Harrison, $874,995; Mr. Hore, $625,006; and Mr. Klemmensen, $443,807.
|
|
(4)
|
As
a part of our response to the COVID-19 pandemic for fiscal year 2020, the Committee cancelled all opportunities for a payout
under the EVC Plan.
|
|
(5)
|
The
supplemental table below describes the fiscal year 2020 amounts in the “All Other Compensation” column above.
|
|
(6)
|
Mr.
Martinez was appointed Interim President and Chief Executive Officer effective May 23,
2020 and was appointed President and Chief Executive Officer effective December 17, 2020.
Cash compensation he received for service as a director prior to his appointment
as Interim CEO is reflected in the “All Other Compensation” column of
this table. Stock awards granted to Mr. Martinez for service as a director prior to his
appointment as Interim CEO is reflected in the “Stock Awards” column of this
table. Mr. Martinez was not a NEO for fiscal years 2019 or 2018.
|
|
(7)
|
Dr.
Graves resigned from the Company effective May 22, 2020.
|
|
(8)
|
Mr.
Klemmensen was not a NEO for fiscal years 2019 or 2018.
|
Supplemental
Table to the “All Other Compensation” Column for Fiscal Year 2020
|
|
Retirement Plan
|
|
|
|
|
|
|
|
|
Life Insurance
Premiums, Executive
Physical and Health
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Match
($)
|
|
|
Fiscal Year
Contribution (1)
($)
|
|
|
Car
($)
|
|
|
Memberships
($)
|
|
|
Saving Account
Contributions
($)
|
|
|
Living Expenses (2)
($)
|
|
|
Director Compensation (3)
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Randy J. Martinez
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
405
|
|
|
|
—
|
|
|
|
42,272
|
|
|
|
41,501
|
|
|
|
84,178
|
|
Jeffrey A. Graves
|
|
|
12,600
|
|
|
|
—
|
|
|
|
5,360
|
|
|
|
—
|
|
|
|
293
|
|
|
|
—
|
|
|
|
—
|
|
|
|
18,253
|
|
Brian T. Ross
|
|
|
12,600
|
|
|
|
—
|
|
|
|
8,710
|
|
|
|
—
|
|
|
|
702
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,012
|
|
Steven B. Harrison
|
|
|
12,600
|
|
|
|
—
|
|
|
|
8,710
|
|
|
|
—
|
|
|
|
702
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,012
|
|
David T. Hore
|
|
|
—
|
|
|
|
—
|
|
|
|
23,898
|
|
|
|
7,529
|
|
|
|
990
|
|
|
|
—
|
|
|
|
—
|
|
|
|
32,417
|
|
Todd J. Klemmensen
|
|
|
12,600
|
|
|
|
—
|
|
|
|
8,710
|
|
|
|
—
|
|
|
|
702
|
|
|
|
—
|
|
|
|
—
|
|
|
|
22,012
|
|
|
(1)
|
No
discretionary Fiscal Year Contribution was made in fiscal year 2020 given overall Company performance.
|
|
(2)
|
Includes
expenses for Mr. Martinez related to housing, meals, and transportation starting upon his appointment as Interim CEO because
his home is not in Minnesota where his office is located. The amounts reflected are based on the aggregate incremental
cost to the Company and represent amounts directly reimbursed to Mr. Martinez or the service provider, as applicable.
|
|
(3)
|
Includes
cash compensation paid to Mr. Martinez for his service as a director prior to his appointment as Interim CEO. See “Non-Employee
Director Compensation” on page 30 of this Amendment for more information.
|
Grants
of Plan-Based Awards in Fiscal Year 2020
As
reflected in the table below, the NEOs generally received four types of plan-based awards for their service in fiscal year
2020: a cash award under the EVC Plan, payable in the first quarter of fiscal year 2021; stock options granted on December 4,
2019 under the 2017 Plan; RSUs granted on December 4, 2019 under the 2017 Plan; and PRSUs granted on December 4, 2019 under the
2017 Plan. In addition, Mr. Harrison received stock options granted on March 15, 2020 under the 2017 Plan; RSUs granted on March
15, 2020 under the 2017 Plan; and PRSUs granted on March 15, 2020 under the 2017 Plan. Mr. Martinez also received grants of RSUs
on June 15 and September 15, 2020, in connection with his service as Interim CEO.
EVC
Awards
Under
our EVC Plan, the NEOs may receive cash payouts after the completion of each fiscal year if specified performance goals established
at the beginning of the fiscal year are attained. For each NEO, a cash incentive amount, expressed as a percentage of base salary,
is established for performance at each of the target and maximum levels. The EVC Plan awards for fiscal year 2020 were structured
so that the cash incentive paid to each NEO would be 0% to 200% of the payout level established for performance at the target
level for each goal.
Information about the potential payout levels
established for each NEO and the nature and weighting of the goals selected for fiscal year 2020 can be found under “Compensation
Discussion and Analysis.” As a part of our response to the COVID-19 pandemic for fiscal year 2020, the Committee cancelled
all opportunities for a payout under the EVC Plan, so no amounts were paid pursuant to the EVC Plan for fiscal year 2020 performance.
Stock
Options
Unless
an option holder is terminated for cause, vested stock options are exercisable for 90 days after the termination of the option
holder’s employment, or 180 days upon death, disability or retirement. If an option holder’s employment is terminated
for “Cause,” as such term is defined in our 2011 Plan or 2017 Plan, as applicable, all unexercised options will immediately
terminate. The Committee may, at any time after the award is granted, accelerate the vesting of some or all the unvested options
as it deems appropriate.
Stock
options become fully exercisable upon the occurrence of a “Change in Control,” as such term is defined in our 2011
Plan or 2017 Plan, as applicable, unless the acquiring entity assumes or provides a substitute for the award. The Committee may
require options be exercised prior to the Change in Control and may pay cash or other securities to cancel awards in connection
with the Change in Control. Please see the “Overview and Impact of Merger Agreement” section in the “Compensation
Discussion and Analysis” for further information regarding the impact of the merger on outstanding stock options.
Restricted
Stock Units
If
a unit holder’s employment is terminated, the unvested units will be forfeited. The Committee may, at any time after the
award is granted, accelerate the vesting of some or all the unvested units as it deems appropriate. All unvested RSUs will fully
vest upon the occurrence of a “Change in Control,” as such term is defined in our 2017 Plan unless the acquiring entity
assumes or provides a substitute for the award. The Committee may pay cash or other securities to cancel awards in connection
with the Change in Control. Please see the “Overview and Impact of Merger Agreement” section in the “Compensation
Discussion and Analysis” for further information regarding the impact of the merger on outstanding RSUs.
Performance
Restricted Stock Units
If
a unit holder’s employment is terminated, the unvested units will be forfeited. The Committee may, at any time after the
award is granted, accelerate the vesting of some or all the unvested units as it deems appropriate. Under our 2017 Plan, unless
the Committee determines otherwise at or prior to the “Change in Control,” as such term is defined in our 2017 Plan,
any unvested PRSUs will vest based upon actual results at or immediately prior to the Change in Control and/or based upon pro-rated
performance goals based on the time elapsed in the performance period as of the date of the Change in Control, unless the acquiring
entity assumes or provides a substitute for the award. The Committee may pay cash or other securities to cancel awards in connection
with the Change in Control. Please see the “Overview and Impact of Merger Agreement” section in the “Compensation
Discussion and Analysis” for further information regarding the impact of the merger on outstanding PRSUs.
Grants
to NEOs of plan-based awards in fiscal year 2020 are set forth in the table below.
|
|
|
|
|
|
|
|
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards (2)
|
|
|
Estimated
Future Payouts Under Equity Incentive Plan Awards
|
|
|
All
Other
Stock
Awards:
Number
of
Shares
of
Stock
|
|
|
All
Other
Options
Awards:
Number
of
Securities
|
|
|
Exercise
or
Base
Price of
Options
|
|
|
Grant
Date Fair
Value of
Stock
and
Option
|
|
Name
|
|
Grant
Date
|
|
Approval
Date
|
|
Award
Type (1)
|
|
Threshold
(3)
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(4)
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
or
Units
(#)
|
|
|
Underlying
Options (5)
(#)
|
|
|
Awards
(5)
($/Sh)
|
|
|
Awards
(6)
($)
|
|
Randy A.
Martinez
|
|
2/11/2020
|
|
2/10/2020
|
|
RSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,695
|
|
|
|
—
|
|
|
|
—
|
|
|
|
120,035
|
|
|
|
6/15/2020
|
|
5/12/2020
|
|
RSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,168
|
|
|
|
—
|
|
|
|
—
|
|
|
|
450,008
|
|
|
|
9/15/2020
|
|
5/12/2020
|
|
RSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,897
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey A. Graves (7)
|
|
|
|
|
|
Cash
|
|
|
75,000
|
|
|
|
750,000
|
|
|
|
1,500,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
Options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
48,418
|
|
|
$
|
46.55
|
|
|
|
535,503
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
PRSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,505
|
|
|
|
23,010
|
|
|
|
46,020
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,071,115
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
RSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,505
|
|
|
|
—
|
|
|
|
—
|
|
|
|
535,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian T. Ross
|
|
|
|
|
|
Cash
|
|
|
29,250
|
|
|
|
292,500
|
|
|
|
585,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
Options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,562
|
|
|
$
|
46.55
|
|
|
|
149,996
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
PRSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,222
|
|
|
|
6,445
|
|
|
|
12,890
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
299,983
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
RSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,223
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven B. Harrison
|
|
|
|
|
|
Cash
|
|
|
28,800
|
|
|
|
288,000
|
|
|
|
576,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
Options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,302
|
|
|
$
|
46.55
|
|
|
|
125,000
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
PRSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,685
|
|
|
|
5,371
|
|
|
|
10,742
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
249,993
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
RSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,686
|
|
|
|
—
|
|
|
|
—
|
|
|
|
125,020
|
|
|
|
3/15/2020
|
|
2/10/2020
|
|
Options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,521
|
|
|
$
|
25.17
|
|
|
|
50,002
|
|
|
|
3/15/2020
|
|
2/10/2020
|
|
PRSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,986
|
|
|
|
3,973
|
|
|
|
7,946
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
3/15/2020
|
|
2/10/2020
|
|
RSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,986
|
|
|
|
—
|
|
|
|
—
|
|
|
|
49,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David T. Hore
|
|
|
|
|
|
Cash
|
|
|
30,000
|
|
|
|
300,000
|
|
|
|
600,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
Options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,302
|
|
|
$
|
46.55
|
|
|
|
125,000
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
PRSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,685
|
|
|
|
5,371
|
|
|
|
10,742
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
249,993
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
RSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,686
|
|
|
|
—
|
|
|
|
—
|
|
|
|
125,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Todd J. Klemmensen
|
|
|
|
|
|
Cash
|
|
|
17,750
|
|
|
|
177,500
|
|
|
|
355,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
Options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,024
|
|
|
$
|
46.55
|
|
|
|
88,745
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
PRSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,907
|
|
|
|
3,814
|
|
|
|
7,628
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
177,523
|
|
|
|
12/4/2019
|
|
11/11/2019
|
|
RSUs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,907
|
|
|
|
—
|
|
|
|
—
|
|
|
|
88,761
|
|
|
(1)
|
The
cash awards are made pursuant to the EVC Plan. The grants of stock options, RSUs and PRSUs were made pursuant to the 2017
Plan. Stock options are exercisable in three equal installments each year beginning on the first anniversary of the grant
date and have a seven-year term. Other than the RSUs held by Mr. Martinez, the RSUs vest in three equal annual installments
beginning on the first anniversary of the grant date. The RSUs granted to Mr. Martinez on February 11, 2020 vest in one installment
on February 11, 2021. The remaining RSUs held by Mr. Martinez vested on December 17, 2020 in connection with his appointment
as our Chief Executive Officer. The PRSUs vest in December 2022 (for those granted in December 2019 and March 2020).
|
|
(2)
|
The
EVC Plan performance goals for fiscal year 2020 are described under “Compensation Discussion and Analysis – 2020
Short-Term Incentives.” Mr. Martinez was not a participant in the EVC Plan. As a part of our response to the
COVID-19 pandemic for fiscal year 2020, the Compensation and Leadership Development Committee cancelled all opportunities
for a payout under the EVC Plan, so no amounts were paid pursuant to the EVC Plan for fiscal year 2020 performance.
|
|
(3)
|
Threshold
amounts can be calculated for each individual performance measure, and in each case are equal to 50% of the target amount
payable with respect to that measure. The amounts reported as threshold amounts in the table represent the payout that would
have been made if threshold performance were achieved for the performance measure assigned the lowest weight for the respective
NEO, assuming that threshold performance was not achieved for any other performance measure.
|
|
(4)
|
Threshold
amounts represent minimum number of PRSUs, equal to 50% of the target number of PRSUs available if threshold performance is
achieved.
|
|
(5)
|
Equal
to the closing market value of shares of our common stock on the Nasdaq Stock Market (Nasdaq) on the grant date.
|
|
(6)
|
The
grant date fair value of options is calculated using a multiple option form of the Black-Scholes option valuation model with
assumptions for interest rate, expected life, share price volatility and dividend yield. The grant date fair value of RSUs
is calculated with reference to the fair market value of the underlying shares (the closing market value of shares of our
common stock on Nasdaq on the grant date). The grant date fair value of PRSUs is calculated at the target level of performance
with reference to the fair market value of the underlying shares (the closing market value of shares of our common stock on
Nasdaq on the grant date). See Note 10 to our Notes to Consolidated Financial Statements for the fiscal year ended October
3, 2020 included in Item 8 of Part II of our Annual Report on Form 10-K for fiscal year 2020.
|
|
(7)
|
Dr.
Graves resigned from the Company effective May 22, 2020. Upon his resignation, Dr. Graves forfeited all unvested options,
RSUs, and PRSUs.
|
Outstanding
Equity Awards at 2020 Fiscal Year-End
|
|
|
|
Option
Awards
|
|
|
|
|
Stock
Awards
|
|
|
|
|
|
Number
of Securities
Underlying
Unexercised
|
|
|
|
|
|
|
|
Number
of
Shares or
Units of
Stock
|
|
|
Market
Value
of Shares or
Units of
Stock
|
|
|
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights
|
|
|
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares,
Unites or
Other Rights
|
|
|
|
|
|
Options
(1)
|
|
|
|
|
|
|
|
That
|
|
|
That
|
|
|
That
|
|
|
That
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
|
Have
|
|
|
Have
|
|
|
Have
|
|
|
Have
|
|
|
|
|
|
|
|
|
Un-
|
|
|
Exercise
|
|
|
Option
|
|
Not
|
|
|
Not
|
|
|
Not
|
|
|
Not
|
|
|
|
Grant
|
|
Exercisable
|
|
|
Exercisable
|
|
|
Price
|
|
|
Expiration
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
Name
|
|
Date
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
(#)
(2)
|
|
|
($)
(2)
|
|
|
(#)
(3)
|
|
|
($)
(3)
|
|
Randy
J. Martinez
|
|
2/11/2020
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
2,695
|
|
|
|
53,873
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6/15/2020
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
24,168
|
|
|
|
483,118
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9/15/2020
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
6,897
|
|
|
|
137,871
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
A. Graves (4)
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
T. Ross
|
|
1/15/2015
|
|
|
1,898
|
|
|
|
—
|
|
|
|
71.52
|
|
|
1/15/2022
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/9/2015
|
|
|
4,425
|
|
|
|
—
|
|
|
|
61.74
|
|
|
12/9/2022
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4/17/2017
|
|
|
4,673
|
|
|
|
—
|
|
|
|
46.25
|
|
|
4/17/2024
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5/15/2017
|
|
|
4,367
|
|
|
|
—
|
|
|
|
52.65
|
|
|
5/15/2024
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4/17/2018
|
|
|
3,734
|
|
|
|
1,866
|
|
|
|
52.30
|
|
|
4/17/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/5/2018
|
|
|
3,236
|
|
|
|
6,471
|
|
|
|
48.80
|
|
|
12/5/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/4/2019
|
|
|
—
|
|
|
|
13,562
|
|
|
|
46.55
|
|
|
12/4/2026
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/15/2017
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
305
|
|
|
|
6,097
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4/17/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
398
|
|
|
|
7,956
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4/17/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
2,390
|
|
|
|
47,776
|
|
|
|
12/5/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
1,673
|
|
|
|
33,443
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/5/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
5,020
|
|
|
|
100,350
|
|
|
|
12/4/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
3,223
|
|
|
|
64,428
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/4/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
6,445
|
|
|
|
128,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
P. Harrison
|
|
4/17/2017
|
|
|
4,543
|
|
|
|
—
|
|
|
|
46.25
|
|
|
4/17/2024
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4/17/2018
|
|
|
3,360
|
|
|
|
1,680
|
|
|
|
52.30
|
|
|
4/17/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/5/2018
|
|
|
1,651
|
|
|
|
3,301
|
|
|
|
48.80
|
|
|
12/5/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/4/2019
|
|
|
—
|
|
|
|
11,302
|
|
|
|
46.55
|
|
|
12/4/2026
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3/15/2020
|
|
|
—
|
|
|
|
4,521
|
|
|
|
25.17
|
|
|
12/4/2026
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4/17/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
358
|
|
|
|
7,156
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4/17/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
2,151
|
|
|
|
42,998
|
|
|
|
12/5/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
854
|
|
|
|
17,071
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/5/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
2,561
|
|
|
|
51,194
|
|
|
|
7/15/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
8,323
|
|
|
|
166,377
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/4/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
2,686
|
|
|
|
53,693
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/4/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
5,371
|
|
|
|
107,366
|
|
|
|
3/15/2020
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
1,986
|
|
|
|
39,700
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3/15/2020
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
3,973
|
|
|
|
79,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
T. Hore
|
|
4/17/2017
|
|
|
7,139
|
|
|
|
—
|
|
|
|
46.25
|
|
|
4/17/2024
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4/17/2018
|
|
|
3,360
|
|
|
|
1,680
|
|
|
|
52.30
|
|
|
4/17/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/5/2018
|
|
|
1,816
|
|
|
|
3,632
|
|
|
|
48.80
|
|
|
12/5/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/4/2019
|
|
|
—
|
|
|
|
11,302
|
|
|
|
46.55
|
|
|
12/4/2026
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2/15/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
683
|
|
|
|
13,653
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4/17/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
358
|
|
|
|
7,156
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4/17/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
2,151
|
|
|
|
42,998
|
|
|
|
12/5/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
939
|
|
|
|
18,771
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/5/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
2,818
|
|
|
|
56,332
|
|
|
|
12/4/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
2,686
|
|
|
|
53,693
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/4/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
5,371
|
|
|
|
107,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Todd
J. Klemmensen
|
|
12/4/2013
|
|
|
2,673
|
|
|
|
—
|
|
|
|
64.90
|
|
|
12/4/2020
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/3/2014
|
|
|
1,072
|
|
|
|
—
|
|
|
|
66.98
|
|
|
12/3/2021
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/9/2015
|
|
|
2,601
|
|
|
|
—
|
|
|
|
61.74
|
|
|
12/9/2022
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4/17/2017
|
|
|
3,167
|
|
|
|
—
|
|
|
|
46.25
|
|
|
4/17/2024
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4/17/2018
|
|
|
2,163
|
|
|
|
1,081
|
|
|
|
52.30
|
|
|
4/17/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/5/2018
|
|
|
1,981
|
|
|
|
3,962
|
|
|
|
48.80
|
|
|
12/5/2025
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/4/2019
|
|
|
—
|
|
|
|
8,024
|
|
|
|
46.55
|
|
|
12/4/2026
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4/17/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
230
|
|
|
|
4,598
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9/15/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
606
|
|
|
|
12,114
|
|
|
|
—
|
|
|
|
|
|
|
|
12/5/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
1,024
|
|
|
|
20,470
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/5/2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
3,074
|
|
|
|
61,449
|
|
|
|
12/4/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
1,907
|
|
|
|
38,121
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12/4/2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
3,814
|
|
|
|
76,242
|
|
|
(1)
|
Stock
options granted are exercisable in three equal installments each year beginning on the first anniversary of the grant date
and have a seven-year term.
|
|
(2)
|
The
market value of unvested RSUs equals the closing price of our common stock on Nasdaq at the end of fiscal year 2020 ($19.99)
multiplied by the number of shares or units. Other than the RSUs held by Mr. Martinez, the RSUs vest in three equal annual
installments beginning on the first anniversary of the grant date. The RSUs granted to Mr. Martinez on February 11, 2020 vest
in one installment on February 11, 2021. The remaining RSUs held by Mr. Martinez vested on December 17, 2020 in connection
with his appointment as our Chief Executive Officer.
|
|
(3)
|
The
number of PRSUs reported in this column is based on achieving target payouts for future equity performance. The market value
of unvested PRSUs equals the closing price of our common stock on Nasdaq at the end of fiscal year 2020 ($19.99) multiplied
by the target number of shares or units. The PRSUs vest in December 2020 (for those granted in April 2018), December
2021 (for those granted in December 2018), and December 2022 (for those granted in December 2019 and March 2020).
|
|
(4)
|
Dr.
Graves resigned from the Company effective May 22, 2020. Upon his resignation, Dr. Graves forfeited all unvested options,
RSUs, and PRSUs. All vested options expired three months following his resignation.
|
Option
Exercises and Stock Vested in Fiscal Year 2020
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares
Acquired
on Exercise
(#)
|
|
|
Value
Realized
on Exercise
($)
|
|
|
Number of
Shares
Acquired
on Vest (1)
(#)
|
|
|
Value
Realized
on Vest (2)
($)
|
|
Randy J. Martinez
|
|
|
—
|
|
|
|
—
|
|
|
|
2,307
|
|
|
|
104,346
|
|
Jeffrey A. Graves
|
|
|
—
|
|
|
|
—
|
|
|
|
14,570
|
|
|
|
525,280
|
|
Brian T. Ross
|
|
|
—
|
|
|
|
—
|
|
|
|
3,027
|
|
|
|
112,117
|
|
Steven B. Harrison
|
|
|
—
|
|
|
|
—
|
|
|
|
6,685
|
|
|
|
166,746
|
|
David T. Hore
|
|
|
—
|
|
|
|
—
|
|
|
|
3,675
|
|
|
|
146,225
|
|
Todd J. Klemmensen
|
|
|
—
|
|
|
|
—
|
|
|
|
1,708
|
|
|
|
48,893
|
|
(1)
|
The
number of shares acquired includes the number of shares of stock withheld by the Company
to cover tax obligations. The number of shares delivered to each NEO following any
withholding was: Mr. Martinez 2,307; Dr. Graves 7,590; Mr. Ross 2,105;
Mr. Harrison 4,647; Mr. Hore 2,395, and Mr. Klemmensen 1,160.
|
|
|
(2)
|
The
value realized on the vesting of the RSUs and PRSUs is the fair market value of our common stock at the time of vesting.
|
Non-Qualified
Deferred Compensation
Our
Executive Deferred Compensation Plan is a non-qualified plan that provides a select group of employees, including all the NEOs,
except Mr. Martinez and Mr. Hore, with the option to defer up to 90% of base salary or short-term cash incentive. Independent
directors are also eligible to participate in the Executive Deferred Compensation Plan and may elect to defer up to 100% of the
director’s fees we pay.
Participants’ deferred compensation accounts
earn a monthly rate of return based on an established interest rate. The interest rate is approved by the Committee in November
of each year for the following calendar year. Historically, the ten-year government treasury note rate as of the first business
day of the calendar year has been used. As such, the interest rate for calendar year 2020 was 1.88%.
At
the time of the deferral election, participants must also select a distribution date and form of distribution. Participants may
elect to receive distribution in a single payment, installments, or combination thereof. Distribution elections cannot change
unless the election is to postpone payment until the fifth anniversary of separation from service or, if later, age 60 and the
election must be made at least 12 months before separation from service. In no case can an earlier distribution election be allowed.
None
of our NEOs elected to participate in the Executive Deferred Compensation Plan during fiscal year 2020 and none of our NEOs
have prior balances in the Executive Deferred Compensation Plan.
Potential
Payments Upon Termination or Change in Control
Payments
and benefits receivable by the NEOs upon termination of employment or a change in control of our Company are governed by the arrangements
described below. As Interim CEO, Mr. Martinez did not participate in the Executive Change in Control Severance Plan or the Executive
Severance Plan. Additionally, this section does not address the compensation that may be paid or become payable to the NEOs and
that is based on, or otherwise relates to, the merger. Only those plans that were in place as of October 3, 2020 are discussed
below.
Executive
Change in Control Severance Plan
We maintain the Executive Change in Control
Severance Plan (the Change in Control Severance Plan), which provides severance benefits, subject to executing and not rescinding
a release, to each of our executive officers other than Mr. Martinez upon a termination by the Company (other than for “cause”
or due to death or disability) or resignation by the executive officer for “good reason” within two years following
a “change in control,” each as defined in the Change in Control Severance Plan (each, a qualifying termination of
employment). The contemplated merger will be a “change in control” as defined under the Change in Control Severance
Plan. Under the Change in Control Severance Plan, upon a qualifying termination of employment, the Company will pay the executive
officer a cash severance benefit equal to 200% times the executive officer’s “annual compensation.” Under the
Change in Control Severance Plan, “annual compensation” is defined as the sum of the following: (i) annual base salary;
(ii) average annual amounts paid under the EVC Plan for the preceding three years (or the actual number of years of receipt of
such incentive compensation if less than three years); and (iii) any other form of compensation paid to the participant and included
in such individual’s gross income during the 12-month period immediately prior to the date of termination (but excluding
(a) any amount actually paid to the participant as a target bonus (regardless of whether all or any portion of such Company bonus
was contributed to a deferred compensation plan); (b) compensation income recognized as a result of the exercise of stock options
or sale of the stock so acquired, the vesting of restricted stock or distribution of restricted stock units; and (c) any payments
actually or constructively received from a plan or arrangement of deferred compensation). The cash severance benefit will be paid
in a lump sum within 60 days following the executive officer’s qualifying termination of employment. In addition, under
the terms of the Change in Control Severance Plan, for the 18-month period following the qualifying termination of employment,
the Company will provide life, disability, accident and health insurance benefits substantially similar to those that the executive
officer received or was entitled to receive immediately prior to the notice of termination with respect to such qualifying termination
of employment; provided, however, that if the Company’s pre-tax subsidy of providing such benefits would result in discrimination
under applicable tax laws, then the Company will pay an amount equal to 200% of such monthly premiums as additional compensation
to the executive officer in lieu of such continued coverage. The executive officer will be responsible for the payment of his
or her portion of the premiums for such benefits at the same relative percentage of total premiums as the executive officer paid
before the executive officer’s termination and following the end of such 18-month period, the executive officer will be
eligible for continued health coverage as required by Section 4980B of the Internal Revenue Code or other applicable law as if
the executive officer’s qualifying event occurred as of the end of such period.
For purposes of the Change in Control Severance
Plan, “cause” generally means any of the following: (i) the willful and continued failure by the executive officer
to perform substantially the duties and responsibilities of his or her position; (ii) the conviction by a court of competent
jurisdiction for felony criminal conduct which, in the good faith opinion of the Company, would impair the executive officer’s
ability to perform his or her duties or impair the business reputation of the Company; (iii) the executive officer’s
willful engagement in fraud or dishonesty that is demonstrably and materially injurious to the Company, monetarily or otherwise;
or (iv) a material violation by the executive officer of the Company’s policies or codes of conduct.
For purposes of the Change in Control Severance
Plan, “good reason” generally means, without an executive officer’s express written consent, any of the following:
(i) the assignment to the executive officer of duties materially inconsistent with such executive officer’s authority, duties
or responsibilities with respect to his or her position, or any action by the Company that results in a diminution in such authority,
duties or responsibilities; (ii) a material reduction in the executive officer’s total target compensation (including
base salary, cash incentive and equity); (iii) a material reduction in the budget over which the executive officer retains
authority; (iv) a change in the geographic location at which the executive officer must perform services for the Company
greater than 25 miles from the prior location; and (v) any material violation of the Change in Control Severance Plan by
the Company, including but not limited to, any purported termination of the executive officer’s employment that is not made
pursuant to a notice of termination satisfying the requirements of the Change in Control Severance Plan. The executive officer
will be entitled to terminate employment for “good reason” only if: (a) the executive officer provides written notice
to the chief executive officer (or in the case of the chief executive officer, the chair of the compensation committee of the
Board) of the Company stating the existence of the good reason condition within 90 days of the initial existence of the condition;
(b) the Company does not remedy such condition within 30 days of the date of such notice; and (c) the executive officer terminates
employment within 90 days following the last day of the 30-day remedial period.
In the event that the vesting, acceleration
and payment of any equity awards or other compensation or benefits, together with all other payments and the value of any benefits
received or to be received by the executive officer under the Change in Control Severance Plan, would result in all or a portion
of such payment being subject to the excise tax under Section 4999 of the Code, then the benefits to be received by the executive
officer under the Change in Control Severance Plan will be either (i) the full payment or (ii) such lesser amount determined by
the Company in accordance with the terms of the Change in Control Severance Plan that would result in no portion of the payment
being subject to the excise tax if such lesser amount would result in the executive officer receiving a higher net after-tax amount
than receiving the full payment without any reduction.
As a condition to the receipt of benefits
under the Change in Control Severance Plan, the executive officer may not render services to any entity offering any competing
product of the Company for a period of two years following the date of termination. If the executive officer breaches this non-competition
covenant, all benefits under the Change in Control Severance Plan will cease immediately, other than insurance benefits, which
the executive officer may continue to the extent permitted under federal and state law at the executive officer’s own expense.
Executive
Severance Plan
We
adopted the Executive Severance Plan on September 30, 2013 (the Severance Plan), so that the treatment of all eligible
NEOs would be consistent if such executive’s employment with the Company or an affiliate was terminated without Cause or
for Good Reason, each as defined in the Severance Plan. In the event of such termination, the Severance Plan provides that the
eligible participant would receive as benefits a sum equal to 100% of his or her annualized basic cash remuneration in effect
during the then current year and certain life, accident and health insurance coverage. The cash severance benefit would be paid
in equal installments on each payroll pay date during the 12-month period beginning no later than 60 days following the date of
termination. As a condition of the receipt of these benefits, the executive may not render services to any entity offering any
competing product for a period of one year following the date of termination. In addition, payments to be paid under the Severance
Plan can be forfeited, and certain payments already made can be recaptured, if the executive engaged or engages in conduct detrimental
to the Company while employed by the Company or violates the Severance Plan’s non-compete provisions.
Equity
Incentives
The 2011 Plan and the 2017 Plan provide that,
if any awards have not been assumed or substituted by an acquiring entity, any stock incentives accelerate upon a change in control.
If awards have been assumed or substituted by an acquiring entity, the stock incentives will not accelerate upon a change in control.
Notwithstanding the foregoing, unless the Committee determines at or prior to the Change in Control, with respect to a stock incentive
that is subject to a performance goal for which the performance period has not expired, the stock incentive will only accelerate
as to the number of shares that is determined by measuring the applicable performance goal based upon actual results at or immediately
prior to the Change in Control and/or based upon performance goals pro-rated based on the time elapsed in the performance period
as of the Change in Control. Please see the “Overview and Impact of Merger Agreement” section in the “Compensation
Discussion and Analysis” for further information regarding the impact of the merger on outstanding stock options.
Short-Term
Cash Incentives
Under
the terms of the awards made pursuant to the EVC Plan, if a NEO’s employment with the Company is terminated for any reason
other than death before the end of the fiscal year on which the performance goals are based, the officer will not receive any
payout under the EVC Plan. If a NEO dies during the fiscal year on which the performance goals are based, a prorated payout based
on actual achievement of the performance goals at the end of the fiscal year will be made to such officer’s estate. Such
a payout will be proportionately reduced based upon the time such NEO was employed during the fiscal year.
Estimated
Payments for Named Executive Officers
Assuming
that a termination of employment and/or change in control occurred on October 3, 2020, the total compensation payable to the following
NEOs in accordance with the Executive Change in Control Severance and Executive Severance Plans that were in place at that time
is as set forth in the table below.
|
|
Termination of Employment in Conjunction
with a Change in Control
|
|
|
Change in
Control
(without
Termination
of
Employment)
|
|
|
Termination
(without Change in Control)
|
|
Name
|
|
Cash Payment
($) (1)
|
|
|
Accelerated Vesting
($) (2)
|
|
|
Benefits
($) (3)
|
|
|
Total Value
($)
|
|
|
Accelerated Vesting
($) (2)
|
|
|
Cash Payment
($) (4)
|
|
|
Benefits
($) (5)
|
|
|
Total Value
($)
|
|
Randy J. Martinez (6)
|
|
|
-
|
|
|
|
674,862
|
|
|
|
-
|
|
|
|
674,862
|
|
|
|
674,862
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Jeffrey A. Graves (7)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Brian T. Ross
|
|
|
1,115,262
|
|
|
|
388,885
|
|
|
|
11,725
|
|
|
|
1,515,872
|
|
|
|
388,885
|
|
|
|
450,000
|
|
|
|
7,240
|
|
|
|
457,240
|
|
Steven B. Harrison
|
|
|
1,117,917
|
|
|
|
564,977
|
|
|
|
2,776
|
|
|
|
1,685,670
|
|
|
|
564,977
|
|
|
|
480,000
|
|
|
|
1,275
|
|
|
|
481,275
|
|
David T. Hore
|
|
|
1,131,864
|
|
|
|
299,970
|
|
|
|
30,834
|
|
|
|
1,462,668
|
|
|
|
299,970
|
|
|
|
500,000
|
|
|
|
20,112
|
|
|
|
520,112
|
|
Todd J. Klemmensen
|
|
|
832,720
|
|
|
|
212,993
|
|
|
|
1,593
|
|
|
|
1,047,306
|
|
|
|
212,993
|
|
|
|
355,000
|
|
|
|
486
|
|
|
|
355,486
|
|
|
(1)
|
Pursuant
to the Change in Control Severance Plan, represents two times each NEO’s respective annual compensation, which consists
of annual base salary, the average of the cash incentive payment made pursuant to the EVC Plan for each of the prior three
fiscal years, excluding any payments made with respect to a partial fiscal year, and other non-EVC Plan based payments during
the previous 12-month period prior to the date of termination.
|
|
(2)
|
Represents
the aggregate value of stock options and restricted stock units held by each NEO that were not vested as of October 3, 2020
but whose vesting and exercisability would have been accelerated under the terms of the 2011 Plan and 2017 Plan (assuming
that the awards were not assumed or substituted by an acquiring entity). If the awards were assumed or substituted by an acquiring
entity, the vesting and exercisability would not accelerate upon a change in control. The value of accelerating each unvested
stock option is equal to the difference between the stock price and the exercise price of such option. The value of accelerating
each unvested restricted stock unit is equal in each case to the stock price.
|
|
(3)
|
Pursuant
to the Change in Control Severance Plan, represents payments made to each NEO for life, disability, and accident and health
insurance benefits for 18 months following termination.
|
|
(4)
|
Pursuant
to the Severance Plan, represents each NEO’s annualized basic cash remuneration.
|
|
(5)
|
Pursuant
to the Severance Plan, represents payments made for each NEO’s life, accident and health insurance benefits for 12 months
following termination.
|
|
(6)
|
As
Interim CEO, Mr. Martinez was not eligible to receive benefits under either the Change in Control Severance Plan or the Severance
Plan.
|
|
(7)
|
Dr.
Graves resigned from the Company effective May 22, 2020. He did not receive any severance benefits in connection with his
resignation.
|
CEO
Pay Ratio
As
required by Item 402(u) of Regulation S-K, we are providing the following information regarding the ratio of the median of the
annual total compensation of our employees and the annualized total compensation of Randy J. Martinez. Mr. Martinez was appointed
as Interim President and Chief Executive Officer effective May 23, 2020 and was appointed President and Chief Executive Officer
effective December 17, 2020. Because Mr. Martinez was appointed Interim CEO mid-year, in accordance with SEC rules, we annualized
his compensation for the entire year for purposes of this calculation. As a result, Mr. Martinez’s annualized total compensation
shown below does not match his annual total compensation for fiscal year 2020 as set forth in the Fiscal Year 2020 Summary
Compensation Table above.
For
fiscal year 2020:
|
●
|
The
median of the annual total compensation of all employees of our company (excluding Mr. Martinez) was reasonably estimated
to be $56,543;
|
|
|
|
|
●
|
The
annual total compensation of Mr. Martinez was $2,606,101.
|
|
|
|
|
●
|
Based
on this information, the ratio of the annual total compensation of our chief executive officer to the median of the annual
total compensation of all other employees is estimated to be 46.1 to 1.
|
Under
the SEC’s rules, a company is required to identify its median employee only once every three years so long as there have
been minimal changes to its employee population or employee compensation arrangements that the company reasonably believes would
not have a meaningful impact on its pay ratio. We believe that we have not had any such changes in fiscal year 2020 that would
have impacted our pay ratio. As such, we continue to use the median employee originally identified in fiscal year 2018. To identify
such median employee, we began by considering each individual employed by us worldwide on July 1, 2018, which included approximately
3,500 total employees. We then calculated total cash compensation for each employee including both current base salary (or annual
wage rate) and bonuses paid during the prior 12 months. To calculate total cash compensation for any employee that we paid in
currency other than U.S. Dollars, we applied the applicable foreign currency exchange rate in effect on July 1, 2018 to determine
the amount in U.S. Dollars. Once compiled into a single database, we analyzed the compensation amounts for all our employees (excluding
our chief executive officer) to determine our median employee. Using this median employee, we added together all the elements
of such employee’s compensation for fiscal year 2020 in the same way that we calculate the annual total compensation of
our NEOs in the Fiscal Year 2020 Summary Compensation Table, which resulted in the number reported above as the median
of the annual total compensation of all employees of our company (excluding Mr. Martinez).
To
determine the annualized total compensation for Mr. Martinez, we annualized his base salary from $199,383 to $681,229, his long-term
incentive compensation from $600,000 (reflecting four months of equity grants at $150,000 per month) to $1,800,000 (reflecting
a full year of equity grants at $150,000 per month), and his travel and hotel reimbursement from $42,272 to $124,468. We did not
annualize certain other amounts that appear as all other compensation in the Fiscal Year 2020 Summary Compensation Table
above as those were one-time payments or payments for Mr. Martinez’s services as a director prior to his appointment as
Interim CEO. To calculate our ratio, we divided Mr. Martinez’s annualized total compensation by the median employee’s
annual total compensation.
Compensation
Committee Interlocks and Insider Participation
No member of our Compensation Committee has
been an officer or employee of our Company or any of our subsidiaries and affiliates or has had any relationship with our Company
requiring disclosure in this Amendment other than service as a director. None of our executive officers served on the
board of directors or on the compensation committee of any entity at the same time that an officer of such entity served either
on our Board of Directors or on our Compensation and Leadership Development Committee.
Non-Employee
Director Compensation
The
table below reflects the cash compensation for annual service during fiscal year 2020 to our non-employee directors:
Role
|
|
Fiscal
Year
2020 Annual Cash Retainer (1)
|
|
Chairman of the Board
|
|
$
|
120,000
|
|
All other non-employee directors
|
|
$
|
60,000
|
|
Audit Committee
|
|
|
|
|
Chair
|
|
$
|
25,000
|
|
All other committee
members
|
|
$
|
10,000
|
|
Compensation Committee
|
|
|
|
|
Chair
|
|
$
|
17,500
|
|
All other committee
members
|
|
$
|
7,500
|
|
Nominating and Governance Committee
|
|
|
|
|
Chair
|
|
$
|
12,500
|
|
All other committee
members
|
|
$
|
5,000
|
|
Special Finance and Operations Committee
|
|
|
|
|
All committee members
|
|
$
|
25,000
|
|
|
(1)
|
Effective
April 16, 2020 through October 4, 2020, all members of the Board took a temporary 20%
reduction of their cash compensation.
|
Upon
election or re-election to the Board at each of our annual meetings of shareholders, the directors receive an annual grant of
restricted stock units under our 2017 Stock Incentive Plan with the number of shares equal to the amounts set forth in the table
below. The annual restricted stock unit award will vest on the one-year anniversary of the date of grant. Please see the “Overview
and Impact of Merger Agreement” section in the “Compensation Discussion and Analysis” for further information
regarding the impact of the merger on outstanding equity awards.
Role
|
|
Fiscal
Year 2020 Award Amount
|
|
|
Fiscal
Year 2020 RSU Grant (#) (1)
|
|
David J. Anderson
|
|
$
|
154,000
|
|
|
|
3,458
|
|
Nancy A. Altobello
|
|
$
|
120,000
|
|
|
|
2,695
|
|
David D. Johnson
|
|
$
|
120,000
|
|
|
|
2,695
|
|
Randy J. Martinez
|
|
$
|
120,000
|
|
|
|
2,695
|
|
Michael V. Schrock
|
|
$
|
120,000
|
|
|
|
2,695
|
|
Kenneth Yu
|
|
$
|
120,000
|
|
|
|
2,695
|
|
Linda K. Zukauckas
|
|
$
|
120,000
|
|
|
|
2,695
|
|
|
(1)
|
Calculated
as award amount divided by the grant date stock price rounded down to the next whole
number.
|
If
a non-employee director is appointed to the Board prior to the annual meeting of shareholders, the non-employee director may receive
a pro-rated restricted stock unit award depending upon, among other factors, the length of time until the next annual meeting
of shareholders. If a non-employee director resigns, retires or otherwise terminates his or her service as a director, a pro-rata
portion of any restricted stock units held by such director shall vest prior to the date that the restrictions would otherwise
lapse. Non-employee directors are also reimbursed for travel expenses to Board meetings.
Non-employee
directors are also eligible to participate in the Executive Deferred Compensation Plan and may elect to defer up to 100% of the
director’s fees we pay in cash and to defer the settlement of up to 100% of the restricted stock unit awards that they are
eligible to receive. At the time of the deferral election, participants must select a distribution date and form of distribution.
The plan provides for the crediting of dividend equivalents on such deferred settlement restricted stock units and for the crediting
of interest on cash amounts (deferred director fees and dividend equivalents amounts) that are credited to a participant’s
deferred account. The interest rate utilized is approved by the Compensation and Leadership Development Committee in November
of each year for the following calendar year. Historically, the ten-year government treasury note rate as of the first business
day of the calendar year has been used. The interest rate for calendar year 2020 was 1.88%. For fiscal year 2020, Ms. Altobello
elected to defer settlement of 100% of her restricted stock unit grant and associated dividend equivalents paid on such grant.
Earnings on the deferred compensation accounts (dividend equivalents and interest credits) do not represent above-market or preferential
earnings.
The
table below shows cash compensation earned by non-employee directors for fiscal year 2020 and either paid in cash or deferred
at the election of the director as described above. The table also shows the dollar amounts recognized by us for financial statement
reporting purposes during fiscal year 2020 for restricted stock unit awards granted for service during fiscal year 2020.
Director
Compensation for Fiscal Year 2020
Name
|
|
Fees
Earned or Paid in Cash
($)
(1)
|
|
|
Stock
Awards ($) (2)(3)
|
|
|
All
Other Compensation ($) (4)
|
|
|
Total
($)
|
|
David J. Anderson
|
|
|
111,758
|
|
|
|
154,019
|
|
|
|
5,317
|
|
|
|
271,094
|
|
Nancy A. Altobello
|
|
|
84,235
|
|
|
|
120,035
|
|
|
|
1,945
|
|
|
|
206,215
|
|
David D. Johnson
|
|
|
97,439
|
|
|
|
120,035
|
|
|
|
13,155
|
|
|
|
230,629
|
|
Randy J. Martinez (5)
|
|
|
40,000
|
|
|
|
120,035
|
|
|
|
1,501
|
|
|
|
161,536
|
|
Michael V. Schrock
|
|
|
83,500
|
|
|
|
120,035
|
|
|
|
1,501
|
|
|
|
205,036
|
|
Gail P. Steinel
|
|
|
20,625
|
|
|
|
-
|
|
|
|
2,970
|
|
|
|
23,595
|
|
Kenneth Yu
|
|
|
65,646
|
|
|
|
120,035
|
|
|
|
1,501
|
|
|
|
187,182
|
|
Linda K. Zukauckas
|
|
|
69,849
|
|
|
|
120,035
|
|
|
|
1,898
|
|
|
|
191,782
|
|
|
(1)
|
Includes
annual retainer and committee meeting fees paid in cash.
|
|
(2)
|
Amounts
represent aggregate grant date fair value during fiscal year 2020 under Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) Topic 718 based on the valuation and utilizing the assumptions discussed
in Note 10 to our Notes to Consolidated Financial Statements for the fiscal year ended October 3, 2020 included in our Annual
Report on Form 10-K for fiscal year 2020. Mr. Anderson was awarded 3,458 restricted stock units and each of Ms. Altobello,
Mr. Johnson, Mr. Martinez, Mr. Schrock, Mr. Yu and Ms. Zukauckas were awarded 2,695 restricted stock units during fiscal year
2020 with a grant date fair value of $44.54 per share.
|
|
(3)
|
As
of October 3, 2020, the directors held the following number of restricted stock units: Mr. Anderson – 3,458; Ms. Altobello
– 2,695; Mr. Johnson – 2,695; Mr. Martinez – 40,089; Mr. Schrock – 2,695; Ms. Steinel – 0; Mr.
Yu – 2,695; and Ms. Zukauckas – 2,695.
|
|
(4)
|
Reflects
cash dividends paid on unvested restricted stock units or dividend equivalents credited on deferred restricted stock units
in fiscal year 2020.
|
|
(5)
|
Does
not include compensation paid to Mr. Martinez for his service as Interim CEO, which is reflected on the Fiscal Year 2020
Summary Compensation Table on page 20 of this Amendment. Upon his appointment as Interim CEO, Mr. Martinez no longer
receives separate compensation for his services as a director.
|