Key Business, Leadership and Executive Compensation Milestones
Year
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Milestones
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2017
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Completed the merger with DigitalGlobe forming the new Maxar.
Introduced new short-term incentive plan (“STIP”) aligned with stockholder interests, based principally on financial measures – revenue and EBITDA performance.
Implemented a new omnibus equity plan to support various types of equity-based long-term incentive (“LTIP”) compensation.
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2018
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Hired a seasoned Chief Financial Officer with experience in related industries and complex financial environments.
Added cash flow as a performance measure in the STIP.
Began work on a new LTIP design focused on performance-vested equity. No equity-based awards were made to executives in 2018 while this design work was underway, except as required to recruit new executives.
Adopted new share ownership guidelines for senior leaders and Board members which were more in line with typical U.S. public company practices.
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2019
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Completed U.S. Domestication on January 1.
Transitioned CEOs in January 2019, as the Board of Directors accepted the resignation of Howard Lance. Mr. Lance was succeeded by Mr. Jablonsky, who had been serving as the President of the DigitalGlobe business unit.
Made first awards under a new long term incentive design to senior executives, who received performance share units (“PSUs”) that must be earned based on Maxar’s Adjusted Cash Leverage and relative Total Shareholder Return (“TSR”) performance in order to vest.
Increased the weighting of cash flow in the 2019 STIP to strengthen our focus on a key metric for stockholders and more directly aligning with our strategy of increasing cash flow.
Changed the operating model of the Company, to focus on Space Infrastructure and Earth Intelligence segments, MDA remained as a vertically integrated business, driving integration and streamlining operations.
Completed a $1.0 billion senior secured notes offering.
Completed a sale and lease-back of a portion of the real estate in Palo Alto, California.
Announced the sale of the Canada business, known as MDA, to Northern Private Capital. The transaction is expected to close in 2020, subject to regulatory approvals.
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* Adjusted Cash Leverage is a non-GAAP measure and is described in more detail below in the section entitled “2019 Long-Term Incentive Plan (LTIP)”.
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38
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Summary of 2019 Performance and Strategic Initiatives
The Company generated $1.7B in revenue and $416 million in Adjusted EBITDA from continuing operations in 2019 and management focused on the following five key priorities to stabilize the Company and drive improved performance given the lingering effects of a decline in commercial satellite orders in 2017 and 2018 and the loss of the Company’s WorldView-4 satellite in early January 2019.
Reducing debt and leverage: We announced actions during 2019 to reduce debt by roughly $1 billion, including the sale / leaseback of facilities in Palo Alto and the divestiture of the MDA business. We also re-financed nearer-term maturities through a $1 billion bond offering. Combined, these moves better align future debt maturities with the positive cash flow streams we expect after the launch of our WorldView Legion constellation.
Re-engineering Space Infrastructure business: In addition to reducing the cost structure of the business, re-engineering it for increased flexibility going forward, and winning two geosynchronous communications satellite (GEO Comsat) awards, we deployed a growth strategy to reduce our historic dependence on the commercial market. We are now keenly focused on diversifying into the civil government and military / classified markets, particularly here in the United States. As a positive proof point, we garnered key new wins with NASA in support of the agency’s missions to return to the moon and to monitor the environment here on Earth. We expect this initiative to result in less cyclicality and improved financial performance in the future.
Positioning MDA for long-term growth: We won several awards during 2019 that better position this business for growth over the next several years, including the initial design phase work on both the Canadian Surface Combatant and Canadarm-3, manufacturing work to provide flight ready repeaters to be launched on the US Air Force’s GPS 3 satellites, design work with the Canadian Space Agency for a wildfire monitoring satellite, and manufacturing work with Airbus for advanced navigation antennas. Please note that the MDA is now a part of discontinued operations in our financial statements given the announcement to divest the business.
Positioning Imagery and Services for long-term growth: Despite the loss of WorldView-4, our Imagery and Services businesses, which we have now designated as a reporting segment called Earth Intelligence (EI), performed well during the year as we booked several notable awards including new contracts with several sovereign countries for our data and platform offerings, a four-year contract with the US government for access to our Global – Enhanced Geospatial Delivery (Global-EGD) platform, a GEOINT cloud architecture contract with the US Air Force, a study contract with the National Reconnaissance Office that will enable the US government to gain a greater understanding of Maxar’s current and future commercial imagery capabilities, and a contract with the US Army, through a joint venture company called Vricon, to support the branch’s One World Terrain capability. We also continued to expand our installed base of customers using our SecureWatch data access platform and signed contracts with NGOs such as Vulcan, who will use our imagery in part to help reduce illegal fishing. Finally, we signed renewal contracts with commercial customers such as HERE and ESRI, and a contract with Toyota Research Institute Advanced Development Inc. and NTT Data Corporation to develop a proof of concept to build automated high-definition (HD) maps for autonomous vehicles using high-resolution satellite imagery. These business development successes better position Earth Intelligence for the future and they will be enhanced in the years to come by additional imagery capacity from the WorldView Legion constellation, which is due to be launched in 2021.
Reducing cost structure and deploying a new operating model: We made progress in our efforts to reshape and restructure the business and saw good traction with the deployment of a new operating model. Our product teams worked across the Company, and our global field operations team began building and executing on a robust pipeline. We also saw good market reaction as we rolled out our positioning of the one Maxar brand, and our finance and operations staffs worked on consolidation and streamlining efforts. We expect these initiatives to save money, improve our time to market with new products and services, and improve collaboration across the organization – all of which are beginning to unlock growth and improve team member engagement.
2019 Say on Pay Vote Results, Stockholder Outreach and What We Heard √
In 2019, we held a non-binding advisory vote of our stockholders on executive compensation (“Say on Pay”). Stockholders representing approximately 75% of our common stock in person or by proxy and entitled to vote on the proposal voted in favor of the Say on Pay proposal, an increase of 28% over 2018. We continue to drive alignment of our executive compensation with stockholder interests and with this result, we continued our outreach efforts to: (1) listen to any stockholder concerns; (2) solicit feedback on our executive pay programs and potential changes; (3) answer any questions about Maxar’s executive pay strategy, or other governance related questions, and (4) reinforce that Maxar’s business and compensation programs will continue to evolve in 2020 and future years.
This effort included highlighting Company actions and decisions through individual investor calls with management in April and November 2019, at analyst conferences, and Investor conferences. More specifically, a concerted outreach effort involved contacting Maxar’s largest thirty investors, who collectively represented approximately 60% of the Company’s voting stock, as our stockholder base evolved over 2019 due to our domestication as a U.S. public company.
The outreach efforts were led by the Chair of the Compensation Committee, with support from Maxar’s Chief Human Resources Officer and others. The focus of these conversations were to:
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Provide overview of business and strategy; discuss rationale for past decisions;
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Link business strategy and incentive plans (e.g., metrics);
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Discuss compensation philosophy and commitment to pay for performance;
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Discuss 2019 program design and ask for feedback;
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Highlight Board governance practices; discuss other governance/pay policy changes, as appropriate; and
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Listen to concerns and perspectives on pay programs.
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An outline of our outreach efforts:
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Our largest stockholders (representing nearly 60% of our voting stock) were contacted to provide feedback. Several attempts were made to schedule feedback sessions as follows: (1) initial email invitations were sent to stockholders, (2) follow-up emails were sent, and (3) then phone calls and messages were left for those stockholders who did not respond. A robust tracking mechanism was implemented to track outreach activities and stockholder feedback.
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78% of investors contacted either responded indicating that they did not need to meet on the subject of executive pay, or did not respond to our request.
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The remaining stockholders provided the following feedback:
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What Was Heard
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Company Actions
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Ensure that executives and directors have more equity ownership in the Company.
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Maxar’s new long-term incentive plan (“LTIP”) design is primarily comprised of grants of full share-based awards (not stock options or stock appreciation rights), to senior leaders and Board members.
Increased stock ownership guidelines for executives and the Board for 2019. (See page 45 for details.)
Awarded grants of performance-vested PSUs, and time-vested restricted stock units (“RSUs”) to executives. Eliminated the use of option vehicles.
Implemented an Employee Stock Purchase Plan (ESPP) in 2019.
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Performance metrics should address Company and stockholder priorities.
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Our stockholders appreciated our use of an Adjusted Cash Leverage** debt metric in our 2019 PSUs, because it supports the Company’s efforts to de-leverage.
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Pay programs should reward cash flow generation.
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Cash flow goals represented 30% of the short-term incentive plan performance metrics for executives in 2019, an increase from 20% in 2018.
The 2019 PSU program used cash leverage as a metric, in order to drive management’s focus on our cash and balance sheet over the long-term.
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Pay programs should align with Maxar’s stock performance.
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2019 PSU award payouts were aligned to stockholder interests and 50% of the PSUs are based on relative Total Stockholder Return (TSR) performance.
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** Adjusted Cash Leverage is a non-GAAP measure and is described in more detail below in the section entitled “2019 Long-Term Incentive Plan (LTIP)”.
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We will continue outreach efforts in 2020 so that we stay informed of stockholder perspectives and views on executive compensation.
2019 Compensation-Related Actions √
For 2019, the Board made the following compensation determinations and adopted changes to certain policies and programs to demonstrate responsiveness to stockholders, continue to maintain pay practices aligned with U.S. market expectations and further align our executives with stockholders.
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Maintained incentive compensation programs that tie payouts directly to Company and individual performance.
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Awarded only promotion-based salary increases for NEOs in 2019.
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Approved payouts under our 2019 short-term incentive plan of 129.9% of target for our NEOs who were eligible for a 2019 bonus and were employed through the payment date in March 2020.
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Implemented a new equity program, with 50% of awards issued as PSUs, and 50% as RSUs.
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40
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The Compensation Committee and the Board approved grants of PSUs to our NEOs in Q1 and Q2 of 2019. These PSUs require Maxar to achieve certain multi-year performance goals tied to adjusted cash leverage and relative TSR, and will not be earned unless certain minimum performance thresholds are met. The 2019 PSUs comprise 50% of our NEO’s 2019 target LTIP value, with the remaining LTIP value comprised of service-vested RSUs.
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Refined our peer group in consultation with our compensation consultants for the purpose of benchmarking NEO compensation data and market practices. The process to establish this peer group is described on page 44.
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Continued to conduct compensation risk assessments to determine the appropriateness of our incentive plans and governance policies.
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Engaged with stockholders during 2019.
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Objectives and Elements of our Compensation Program √
The overall objectives of our compensation program allow us to:
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Attract and retain highly qualified executives committed to our values;
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Motivate our executives to advance our business; and
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Align the interests of our executives with the interest of stockholders.
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Element of Compensation
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Purpose
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Key Characteristics
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Fixed
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Base Salary
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Compensate competitively to attract and retain highly qualified executives in a challenging business environment
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Determined by role, experience of the individual, and competitive market data
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At Risk
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Short-Term Incentive Plan (“STIP”)
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Reward executives for achieving critical annual financial and business and personal objectives
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Earned based on annual financial performance criteria, including Revenue, Free Cash Flow, Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)*, and achievement against Personal Objectives
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Long-Term Incentive Plan (“LTIP”)
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Link the interests of executives with stockholders, make decisions in the long-term interests of stockholders, retain and reward executives for achieving longer-term objectives
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Combination of performance-vested and time-vested awards
Performance-vested awards only vest upon the achievement of one, two, and three-year goals
Time-vested awards vest ratably over three years
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* EBITDA and Free Cash Flow are non-GAAP measures that are discussed in more detail below under the section entitled “2019 Short-Term Incentive Plan (STIP)”.
Executives are generally eligible for programs aligned with all employees within their country of employment. Maxar offers minimal perquisites, primarily an executive physical program. In the United States we do not offer pension or other retirement plans, other than a 401(k) retirement plan that is offered to our US employees generally.
Compensation Principles and Governance Highlights √
The Compensation Committee has designed CEO and executive total compensation packages to drive actions that align with both the short-term and long-term interests of our stockholders, through application of the following principles:
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Pay at Risk Tied to Company Performance: We support our overall business objectives by aligning a substantial portion of executive total compensation to our financial and operating performance, with 79% of Mr. Jablonsky’s targeted total direct compensation (consisting of base
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41
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salary, target cash incentive opportunity and the fair value of equity awards) and 78% of targeted total direct compensation for our other NEOs, on average, tied to Company performance or the value of our common stock.
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Stockholder Alignment: We link our executives’ and our stockholders’ interests by issuing awards with payouts tied directly to the Company’s financial performance and the value of our common stock.
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Compensation Informed by Market Data: We annually review and consider executive compensation packages against market compensation data, including from a peer group of companies selected specifically for that purpose.
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Absolute and Relative Pay-for-Performance: We structure components of pay to align with key performance metrics, using both absolute and relative measures.
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Incorporate Governance Best Practices: Our executive compensation practices are informed by best practices in governance, including:
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What We Do
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What We Don’t Do
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√
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Align short- and long-term incentive programs to stockholder interests
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X
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We do not provide our executive officers with tax gross ups on severance or change-in-control benefits
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Engage with and seek feedback from our stockholders regarding our executive compensation program
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X
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We do not provide “single trigger” severance or equity award vesting in connection with a change in control
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Conduct annual risk assessments of our compensation policies and practices
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Our equity plan does not allow repricing of underwater options without stockholder approval
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Maintain a clawback policy
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We do not permit directors and officers to hedge our stock
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Maintain rigorous stock ownership guidelines to support the alignment of executive and Board interests with those of our stockholders
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We do not permit directors and officers to pledge our stock
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Compensation Committee retains an independent compensation consultant
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We do not provide significant executive perquisites or supplemental benefits
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Cap cash incentive and performance share unit payouts
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We do not pay dividend equivalents to executive officers on unvested restricted stock unit or performance share unit awards
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Compensation Philosophy and Objectives √
Maxar’s executive compensation philosophy is built on a commitment to link pay to performance and align our compensation incentives with stockholder interests. Executives are rewarded for achieving our key strategic business goals, and a substantial portion of each executive’s compensation opportunity is in the form of equity awards with value directly linked to our stock price. Our executive compensation program is also designed to attract and retain executive talent in a competitive marketplace and challenging business environment and to compensate executives at competitive, but responsible, levels. We maintain executive compensation and governance risk-mitigating best practices (such as clawback policies, and executive and board stock ownership guidelines) to help ensure that our compensation programs do not encourage excessive risk taking. In addition, the majority of our compensation for our executives is in the form of equity, which further ties their interests to those of our stockholders. We believe that our balanced, performance‑based approach best serves the interests of our stockholders.
A key component of our business strategy is to provide appropriate incentives to attract, retain, and motivate top talent. The Compensation Committee has designed CEO and executive total compensation packages to drive actions that align with both the short-term and long-term interests of our stockholders and to provide value as the business continues to de-lever and profitably grow.
Executive Compensation Decision-Making Process √
The Compensation Committee devotes significant time throughout the year to executive compensation matters in order to align executive pay with corporate performance and stockholder interests. In determining executive compensation, the Compensation Committee obtains input and advice from our independent compensation consultants, and reviews recommendations from our CEO with respect to the performance and compensation of our other NEOs. Annually the Board of Directors, upon recommendation from the Compensation Committee, reviews and approves CEO compensation.
In determining appropriate executive compensation levels and design parameters, the Compensation Committee reviews the feedback we receive from investors and considers Maxar’s financial and stock price performance. The Compensation Committee structures the executive compensation program to: (1) link pay and performance; (2) align compensation with stockholder interests; (3) drive and support our business strategy; (4) attract and retain a qualified senior executive team to provide business continuity and strategic leadership; and (5) incorporate market and best practices with respect to compensation-related governance.
With the unprecedented uncertainty driven by the global impacts of COVID-19, the Compensation Committee retains discretion to review and modify metrics to ensure appropriate alignment of business objectives with incentive programs.
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42
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Key Participants and Their Roles √
The key roles and responsibilities of parties involved with executive compensation include the following:
ROLE
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RESPONSIBILITIES
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Board of Directors
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Approves the CEO’s compensation with input and recommendation from the Compensation Committee
Approves share pool increases under equity plans (subject to stockholder approval)
If requested by the Compensation Committee, reviews and approves executive compensation, with input and recommendation from the Compensation Committee
Reviews and approves our annual proxy statement and other statutory filings
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Compensation
Committee
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Reviews and approves:
performance metrics and goals under compensatory plans and arrangements
the peer group used for executive compensation
Reviews and approves the corporate goals and objectives with respect to the CEO’s compensation, and evaluates the CEO’s performance and makes recommendations to the Board of Directors regarding the CEO’s compensation
Reviews and approves the compensation of all executives other than the CEO
Reviews and approves the Company’s executive incentive compensation and equity-based plans, arrangements and awards
Considers stockholder feedback, business situation and market practices, among other factors, to help align our compensation programs with the interests of our stockholders and long-term value creation
Reviews and recommends to the Board of Directors that the Compensation Discussion & Analysis section be included in the appropriate filing
Oversees executive succession planning and senior leadership development
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Independent
Compensation
Consultant
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Provides advice and data to the Compensation Committee regarding our executive compensation program, including:
input on pay philosophy, best practices and market trends
selection of peer group
executive compensation practices and pay levels at peer group companies
design of short- and long-term cash and equity compensation, and changes to equity plans
Reviews and provides an independent assessment of the compensatory data and materials presented by management to the Compensation Committee
Independently meets in executive session with the Compensation Committee at each quarterly meeting of that Committee.
Reviews and comments on the Compensation Discussion & Analysis portion of our annual proxy statement (or annual report)
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Chief Executive
Officer
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Evaluates executive performance and recommends adjustments to executive base salary and short- and long-term compensation (for other executives)
Develops business strategy and goals, which are considered and approved by the Compensation Committee and Board of Directors in the design of our executive compensation program
Recommends performance metrics and goals under the short- and long-term plans
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Engagement of Independent Compensation Consultant √
The Compensation Committee again engaged Meridian Compensation Partners in 2019 to provide advice on compensation of the Company’s executive officers and non-employee directors. Meridian did not provide any other services to the Company in 2019. Pursuant to SEC rules, the Compensation Committee has assessed the independence of the consultants engaged in 2019, and concluded that Meridian did not have any conflict of interest with the Company or any of its directors or executive officers.
Risk Considerations √
While the Board of Directors has overall responsibility for risk oversight, each of the standing committees of the Board of Directors regularly assesses risk in connection with executing its responsibilities. As such, the Compensation Committee assesses the potential risks arising from our compensation policies and practices. The Compensation Committee and its independent compensation consultant reviewed and discussed the Compensation Committee’s risk assessment for 2019 including the governance components and roles and decision-making described earlier. The Compensation Committee determined that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on our Company.
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43
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Compensation Competitive Analysis and Market Data √
The Compensation Committee’s decision-making on executive pay levels and executive compensation program design is informed by benchmark compensation market data. Executive compensation levels are not targeted to any particular reference point against peer group or other market data; instead the Compensation Committee reviews each individual’s compensation against available data, the executive’s background and experience, past performance where known, span and scope of the role and other factors as appropriate.
Executive compensation determinations are based on various factors, some of which include (1) the results of the competitive market analysis and peer practices; (2) input from the Compensation Committee’s independent consultant; (3) the Company’s performance; (4) the performance of each NEO and their contribution to our overall results; (5) each NEO’s experience, skill set, span of responsibilities and tenure, and (6) internal equity. The weight of each factor is likely to vary from year to year and from executive to executive.
Peer Group √
The Compensation Committee and Meridian established an initial peer group in November 2018. However, given that the changes to NEO compensation targets were limited during 2019, as changes were made to NEO compensation only in response to promotions and increased responsibilities for Mr. Jablonsky, Mr. Frazier, and Mr. Robertson, the use of this initial peer group was limited.
In the third quarter of 2019 the Compensation Committee, management, and Meridian worked together to refine the Company’s peer group of public companies for executive compensation benchmarking. Following consideration of the business performance, the Company’s market capitalization, and other changes occurring at the Company, the Compensation Committee determined that the peer group previously approved in 2018 needed to be adjusted to ensure appropriate benchmarking of executive compensation pay levels, pay structure, and policies, in support of Company decision-making.
Maxar has few natural peers due to the Company’s unique mix of business offerings and operations, therefore companies were sought to represent the complexity of the Company and the markets in which Maxar competes for executive talent. The peer screening criteria included the following:
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Publicly-listed U.S. and Canadian companies;
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Generally in the Aerospace & Defense and Information Technology industries; and
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Corporate revenues generally within a range of 1/3x to 3x Maxar’s corporate revenues, and market cap of $1 billion to $20 billion. The revenue variable was selected as the primary screening criterion, because it is seen as a better overall proxy for organizational size and complexity, for purpose of benchmarking compensation opportunities. Market cap is inherently more volatile, and is more closely correlated with changes in actual realized pay outcomes, but less suitable as the basis for a benchmarking peer group focused on evaluating pay opportunities.
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Additional considerations included: (1) key competitors for executive and non-executive talent; (2) investor peers (and peers of those peers); and (3) other qualitative factors about peer candidate degree of business similarity to Maxar.
Some of Maxar’s closest business peers and competitors for talent from the list below exceeded the higher end of the revenue range, but the Compensation Committee determined to include them in the peer group given their similarities to Maxar otherwise.
The final 2019 benchmark peer group includes companies from a cross-section of industries to help mirror Maxar’s business and operations. At the time of the competitive benchmarking analysis, the median revenue of the peer group was $2.5 billion compared to Maxar’s $2.1 billion revenue. The Compensation Committee viewed this positioning as appropriate while also taking this relative positioning into account when evaluating market data results. Market data results are just one factor among many that influence pay decisions at Maxar.
Given the changes in Maxar’s business size and strategy, as well as ongoing industry consolidation, the Compensation Committee will continue to review the peer group and criteria for alignment with the size and complexity of the Company on a regular basis.
Aerojet Rocketdyne Holdings, Inc.
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Booz Allen Hamilton Holding Corporation
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CACI International Inc.
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CAE Inc.
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Cubic Corporation
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Curtiss-Wright Corporation (1)
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FLIR Systems, Inc.
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Fortinet, Inc.
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Harris Corporation (2)
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Kratos Defense & Security Solutions, Inc (1)
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L3 Technologies, Inc. (2)
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Leidos Holdings, Inc.
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ManTech International Corporation
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Mercury Systems, Inc. (1)
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Moog Inc. (1)
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OSI Systems, Inc.
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Science Applications Int’l Corp.
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Teledyne Technologies Incorporated
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Trimble Inc.
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Viasat, Inc.
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The companies removed from the peer group in 2019 were: Engility Holdings, Inc., IHS Markit Ltd., Nielsen Holdings plc, and Palo Alto Networks, Inc.
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(1)
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Added to peer group in 2019
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(2)
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L3 Technologies, Inc. and Harris Corporation merged in 2019.
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44
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Executive Compensation Policies, Provisions and Agreements
In addition to regular governance and risk reviews, the Compensation Committee and Company maintain a number of policies and approaches relative to Executive Compensation. These are described as follows:
Stock Ownership Guidelines √
Position
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Requirement
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Chief Executive Officer
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5x Base Salary
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Executive Vice President or Business Unit President
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3x Base Salary
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Other Eligible Executives at the Senior Vice President level
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2x Base Salary
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Non‑Employee Directors
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5x Annual Cash Retainer
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We maintain stock ownership guidelines that apply to the CEO, other executive officers including the NEOs, and our non‑employee directors, which we increased in November 2018. The Stock Ownership Guidelines require our directors and officers to hold shares of our common stock at the levels listed above. Shares include shares of common stock: (i) held directly or indirectly (either individually or in a brokerage account) or by or for the benefit of immediate family members; (ii) by trusts for the benefit of such person or such person’s immediate family members; (iii) in a retirement plan, or employee equity purchase or deferred compensation plan; and (iv) shares underlying service-vesting restricted stock or restricted stock units awards that vest solely based on the passage of time; provided that shares that would need to be withheld for taxes for employees shall be deducted.
Participants have until the later of the fifth anniversary of: (i) the original effective date of the policy of November 1, 2018; or (ii) their date of hire, promotion or appointment, as applicable, to come into compliance with the policy. With recent changes in stock price and newly increased ownership guidelines, the Compensation Committee is monitoring the compliance of NEOs and Board members with the enhanced guidelines. Please refer to the section titled “Share Ownership” for a presentation of the equity holdings of our directors and NEOs.
Clawback Policy √
We maintain a clawback policy. This policy provides that in the event the Company must restate its financial statements due to its material noncompliance with any financial reporting requirement, within three years of the date of the first public filing of such financial statements, the Company may seek to recover, in its sole discretion, at the direction of the Compensation Committee, after it has reviewed the facts and circumstances that led to the requirement for the restatement and the costs and benefits of seeking recovery, any variable cash compensation and any incentive equity awards awarded or paid to the Company’s executive officers. In addition, if the Compensation Committee determines that the amount of any such variable compensation actually paid or awarded to the executive officer would have been lower had it been calculated based on such restated financial statements then the Compensation Committee may cancel or retract any variable compensation that has not yet been paid or settled and/or seek to recover from such executive officer the after-tax portion of the difference between the awarded compensation and the actual compensation that has been paid or settled. This clawback policy does not limit any other remedies the Company may have available to it in the circumstances, which may include, without limitation, dismissing an employee or initiating other disciplinary procedures. The provisions of this clawback policy are in addition to (and not in lieu of) any rights to repayment the Company may have under Section 304 of the Sarbanes‑Oxley Act of 2002 (applicable to the Chief Executive Officer and Chief Financial Officer only) and other applicable laws.
Anti‑Hedging and Pledging Policy √
The Company’s Insider Trading Policy prohibits the Company’s directors, officers, employees, consultants and agents from engaging in hedging transactions or pledging the Company’s securities as collateral for a loan.
Employment Agreements and Severance Protections
We have entered into employment and severance agreements with certain of our NEOs, and our equity awards provide for continued or accelerated vesting in certain circumstances in connection with a termination of the award holder’s employment. We believe that these arrangements help to ensure the day-to-day stability and focus of our management team and are consistent with competitive practices.
For a description of the employment agreements and severance protections with our NEOs, please see the section “Employment Agreements and Severance Protections” below.
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Benefits and Perquisites √
The Company offers an elective annual executive medical evaluation, in coordination with our health insurance, as a perquisite to our NEOs. The Company believes that perquisites should not represent a significant portion of compensation to our NEOs.
Share Matching Program
Historically the Company offered a share matching program pursuant to the MacDonald, Dettwiler and Associates Ltd. Share Ownership Plan (the “Matching Program”), whereby senior executives are granted one share of common stock for every three shares held for a consecutive period of three years. Once a participant holds shares equal to 1.5x his or her salary (or 3x his or her salary in the case of our CEO), the Company no longer has an obligation to match shares under the Matching Program. Shares of our common stock are purchased on the open market to satisfy obligations under the Matching Program. Because the NEOs only receive shares under the Matching Program after they have held shares for three years, subject to their continued employment (other than in the event of death or disability), the Matching Program promotes retention of those executives and their alignment with the interests of our stockholders.
In conjunction with our U.S. Domestication, the Board of Directors froze this program effective December 1, 2018. Qualifying purchases up to that date will remain eligible for matching, as long as the executive meets the service and holding period requirements under the plan. No new matching benefits will be provided in respect of Company shares acquired after December 1, 2018.
As of December 31, 2019, 13 current and former senior executives, including Messrs. Jablonsky, Lance, Porter, Scott, Frazier and Robertson, had grandfathered matching benefits under the Matching Program. This program will sunset in late 2021.
Pension Benefits
None of our NEOs participate in or have an account balance in qualified or non‑qualified defined benefit pension plans maintained by the Company.
Tax and Accounting Considerations
The financial reporting and income tax consequences of individual compensation elements are important considerations for the Compensation Committee when it is analyzing the overall level of compensation and the mix of compensation paid to our executive officers. The Compensation Committee considers the tax and accounting consequences of utilizing various forms of compensation. However, the Compensation Committee believes that it is important to preserve flexibility in administering compensation programs in a manner designed to promote varying corporate goals. Accordingly, we have not adopted a policy regarding financial reporting and income tax consequences of our executive compensation programs.
2019 Executive Compensation Program
The compensation of our NEOs is linked to corporate and individual performance as well as the interests of our stockholders. We believe this aligns our executives’ incentives with our objective of enhancing stockholder value over the longer term.
Maxar’s executive compensation program elements and metrics are summarized below:
Component
|
2019 Metrics and Weighting
|
Key Changes and Observations
|
Base Salary - Cash
|
N/A
|
Fixed compensation for role and responsibilities.
|
Short-Term Incentive Program (STIP) - Cash
|
Revenue (20%)
EBITDA (30%)*
Free Cash Flow (30%)*
Personal Objectives (20%)
|
Recognize and drive the achievement of annual financial and non-financial objectives aligned with the Company’s Board-approved annual operating plan (AOP).
Increase focus on cash generation and retention to de-lever the Company.
Hold executives accountable for individual performance.
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Long-Term Incentive Program (LTIP) - Equity
|
Granted in the form of 50% performance share units (PSUs), and 50% RSUs.
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Align pay to attainment of longer-term performance goals associated with Maxar’s business strategy.
Align compensation with stockholder value creation.
Encourage retention of executives with vesting requirements and overlapping performance periods.
2019 PSU metrics include relative Total Stockholder Return (“TSR”) (weighted 50%), and Adjusted Cash Leverage (weighted 50%). The PSU awards are described in more detail below.
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* EBITDA and Free Cash Flow are non-GAAP measures that are discussed in more detail below under the section entitled “2019 Short-Term Incentive Plan (STIP)”.
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Elements of Pay and 2019 Target Compensation
Utilizing both peer group and third-party published market data, as well as consideration for each NEO’s experience, critical skills, and performance among other factors, the Compensation Committee established the following target total direct compensation mix for 2019. Because Mr. Lance resigned in January 2019, the Compensation Committee did not establish 2019 target total direct compensation for him. With several leadership changes occurring in early 2019, changes were made only to the total target direct compensation of Mr. Jablonsky, Mr. Frazier and Mr. Robertson in connection with promotions or increased job responsibilities. The numbers below for Mr. Jablonsky, Mr. Frazier and Mr. Robertson reflect their final targeted compensation following all such changes.
Name
|
Title
|
Salary
($)
|
Short - Term
Incentive
Target
(%)
|
Long - Term Incentive Target
($)
|
Total Target Direct Compensation
($)
|
Daniel L. Jablonsky
|
President and Chief Executive Officer
|
700,000
|
100%
|
2,000,000
|
3,400,000
|
Biggs C. Porter
|
Executive Vice President, Chief Financial Officer
|
600,000
|
75%
|
1,950,000
|
3,000,000
|
Walter S. Scott
|
Executive Vice President, Chief Technology Officer
|
470,000
|
70%
|
1,500,000
|
2,299,000
|
Leon Anthony Frazier
|
Executive Vice President, Global Field Operations
|
450,000
|
80%
|
1,200,000
|
2,010,000
|
E. Jeff Robertson III
|
Senior Vice President, Operations and IT
|
430,000
|
60%
|
750,000
|
1,438,000
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2019 Target Pay Mix √
The following charts outline the breakdown of 2019 targeted compensation for our NEOs, specifically, base salary, target STIP, and target LTIP values (collectively, “Total Direct Compensation”). Consistent with our objective of pay-for-performance, a substantial portion of Total Direct Compensation is variable in the form of annual incentives and equity awards, with a significant amount of compensation to be earned based on performance-based metrics in the STIP and PSUs.
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In 2019, 79% of our CEO’s Target Total Direct Compensation was tied to performance, and 78% of Target Total Direct Compensation for our other NEOs on average, was performance-based. Target Direct Compensation includes base salary, target short-term cash incentive, and the target grant date fair value of equity awards. The data below highlights the compensation of the current CEO, who assumed the role on January 14, 2019.
|
CEO Target Compensation Component
($ in thousands)
|
2019
|
Base Salary
|
$700
|
Short-Term Variable Pay (STIP)
|
$700
|
Long-Term Variable Pay (LTIP)
|
$2,000
|
Variable Pay (STIP and LTIP)
|
$2,700
|
Fixed (Base Salary)
|
$700
|
Total
|
$3,400
|
|
|
|
|
Other NEO Target Compensation Component
($ in thousands)
|
2019
(Avg)
|
Base Salary
|
$487
|
Short-Term Variable Pay (STIP)
|
$349
|
Long-Term Variable Pay (LTIP)
|
$1,350
|
Variable Pay (STIP and LTIP)
|
$1,699
|
Fixed (Base Salary)
|
$487
|
Total
|
$2,186
|
Base Salary
The table below shows annual base salary levels for our NEOs in 2019 and 2018. In February 2019, following consideration of on-going business changes, the Compensation Committee determined to maintain each of our then-employed NEOs’ base salaries at the same levels as in 2018, with the exception of Mr. Jablonsky in January 2019 in reflection of his promotion to CEO, and Mr. Frazier in February 2019 as part of an annual compensation review, and reflecting his expanded role as Executive Vice President, Global Field Operations. In January 2019, the Compensation Committee approved
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increasing Mr. Robertson’s base salary from $370,000 to $400,000 with an expansion of his role upon the retirement of another executive, and again from $400,000 to $430,000 in May 2019 in connection with his promotion to Senior Vice President, Operations and IT.
Name
|
2019
($)
|
2018
($)
|
Daniel L. Jablonsky
|
$ 700,000
|
$ 430,000
|
Biggs C. Porter
|
$ 600,000
|
$ 600,000
|
Walter S. Scott
|
$ 470,000
|
$ 470,000
|
Leon Anthony Frazier
|
$ 450,000
|
$ 395,000
|
E. Jeff Robertson III
|
$ 430,000
|
$ 370,000
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2019 Short-Term Incentive Plan (STIP)
Maxar’s STIP is designed to motivate executives to achieve specified Board-approved financial performance goals that are established at the beginning of each year and that are aligned with the Company’s strategy and operating plan. Corporate performance goals are measured quantitatively and represented 80% of each NEO’s target bonus opportunity in 2019. Individual personal objectives, as described below, represented 20% of each NEO’s target annual bonus opportunity and are an important factor in aligning expectations for culture, responsibility and engagement.
For 2019, the individual personal objectives component for each NEO was based upon the NEO’s personal achievement of (a) Leadership, (b) Collaboration, and (c) Talent Development. These individual personal objectives were devoted to reinforcing effective leadership and employee engagement for each NEO, specifically how the NEO supports and drives the Company culture and values, and the NEO’s effectiveness as a leader. Participants who do not demonstrate effectiveness in these areas achieve a reduced amount of the portion of their STIP bonus payment tied to achievement of individual personal objectives. Payout on personal objectives cannot exceed 100% of the target percentage.
The STIP incorporated the following performance measures and weightings in 2019.
|
Maxar
|
Personal
Objectives
|
Executive
|
EBITDA
|
Cash Flow
|
Revenue
|
Daniel L. Jablonsky
|
30%
|
30%
|
20%
|
20%
|
Biggs C. Porter
|
30%
|
30%
|
20%
|
20%
|
Walter S. Scott
|
30%
|
30%
|
20%
|
20%
|
Leon Anthony Frazier
|
30%
|
30%
|
20%
|
20%
|
E. Jeff Robertson III
|
30%
|
30%
|
20%
|
20%
|
Each NEO’s target annual cash incentive (as expressed as a percentage of base salary) under the STIP for 2019 was: 100% for Mr. Jablonsky, 75% for Mr. Porter, 70% for Mr. Scott, 80% for Mr. Frazier, and 60% for Mr. Robertson. Each NEO’s maximum annual cash incentive for 2019 was capped at 200% of the target amount. Mr. Frazier’s target cash incentive was increased in February 2019 from 70% of base salary to 80% of base salary, in recognition of his expanded role. Mr. Lance was not eligible to participate in the STIP for 2019, as he terminated in January 2019.
Performance goals for the 2019 performance measures were discussed with the Compensation Committee in December 2018 in conjunction with a review by the Board of the Company’s 2019 AOP and budget, and approved in March 2019. The approved performance goals included performance targets and weightings to achieve threshold, target and maximum levels for the Company. Performance goals were established for 2019 at a level lower than in 2018, due to a decrease in expected revenues due to the impact of reduced volume in our GeoComm business and expected revenue reductions due to the loss of the WorldView-4 satellite.
The table below illustrates the financial performance goals approved by the Compensation Committee for the 2019 STIP, the actual Company performance result for 2019, and the corresponding payout percentage of that component of the incentive opportunity. At the threshold level of performance, which is 90% of the target goal for Revenue and EBITDA, and 80% for Free Cash Flow, 25% of the incentive can be earned, and at the maximum level, which is approximately 110% of the goal for Revenue and EBITDA and 120% for Free Cash Flow, the maximum possible achievement
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is 200% of target. Achievement between threshold and target, and target and maximum, is determined based on liner interpolation. The maximum potential achievement for individual personal objectives was 100%.
NEO Performance Metrics
|
Weighting
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Actual (1)
|
Weighted
Payout
|
Corporate Adjusted EBITDA (2) (in millions)
|
30%
|
503.1
|
559.0
|
614.9
|
555.0
|
27.9%
|
Corporate Free Cash Flow (3) (in millions)
|
30%
|
(433.2)
|
(361.0)
|
(288.8)
|
(186.0)
|
60.0%
|
Consolidated Revenue (in millions)
|
20%
|
1,747.8
|
1,942.0
|
2,136.2
|
1,952.0
|
22.0%
|
Personal Objectives
|
20%
|
0.0%
|
100.0%
|
100.0%
|
100.0%
|
20.0%
|
Payout (as a % of the corresponding portion)
|
|
|
|
|
|
129.9%
|
|
(1)
|
|
Actual results adjusted to recognize changes in accounting, integration-related expenses, and proceeds from sale of property.
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(2)
|
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Adjusted EBITDA is a non-U.S. GAAP financial measure. Adjusted EBITDA represents EBITDA, net income before interest, taxes, depreciation and amortization expense, adjusted for certain items affecting comparability including restructuring, impairments, satellite insurance recovery, gain on sale of assets, CEO severance and transaction and integration related expense. Transaction and integration related expense includes costs associated with de-leveraging activities, acquisitions and dispositions and the integration of acquisitions. For STIP purposes, 2019 Adjusted EBITDA in the table above also reflects results before the consideration of discontinued operations with adjustments for certain items excluded for purposes of the bonus calculation such as stock-based compensation, retention, foreign exchange and a change in accounting during 2019 for a leased property not anticipated in established targets.
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(3)
|
|
Free Cash Flow is defined as GAAP Cash Flow from Operations, adjusted for capital expenditures and other non-operational items by exception, with approval of the Compensation Committee.
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Individual payouts under the STIP resulted from quantitative achievement on the measures described in the table above and an assessment of the executive’s performance. The CEO’s individual payout was recommended by the Compensation Committee and determined by the Board of Directors. The individual payouts for the other NEOs were determined by the Board of Directors with input from the CEO. For 2019, our Compensation Committee determined that our executives achieved their individual personal objectives at 100% of target. The table below details the actual payouts under the STIP for our NEOs:
Name
|
Title
|
Cash Incentive
($)
|
Percent Achievement of Target (%)
|
Daniel L. Jablonsky
|
President and Chief Executive Officer
|
909,300
|
129.9%
|
Biggs C. Porter
|
Executive Vice President, Chief Financial Officer
|
584,550
|
129.9%
|
Walter S. Scott
|
Executive Vice President, Chief Technology Officer
|
427,371
|
129.9%
|
Leon Anthony Frazier
|
Executive Vice President, Global Field Operations
|
467,640
|
129.9%
|
E. Jeff Robertson III
|
Senior Vice President, Operations and IT
|
335,142
|
129.9%
|
2019 Long-Term Incentive Plan (LTIP)
As discussed in this CD&A, the Compensation Committee gathered feedback from stockholders and worked with their external compensation consultants, Meridian, to redesign the Company’s equity award program design for 2019 going forward. Beginning in 2019, annual equity awards to NEOs are comprised of a mix of performance stock unit (PSU) and restricted stock unit (RSU) awards. For 2019, the equity mix was comprised of 50% PSUs and 50% RSUs.
The PSUs will be earned based on Maxar’s performance against goals for Adjusted Cash Leverage relative Total Shareholder Return (TSR) performance against the companies in the Russell 2000 index over each of three consecutive performance periods: April 1, 2019 through March 31, 2020, April 1, 2020 through March 31, 2021, and April 1, 2021 through March 31, 2022.
Adjusted Cash Leverage is a measure designed to track a reduction in our overall debt position, with sustained improvement over time. The executive team is best positioned to make decisions regarding usage of cash and debt to improve this metric.
During our stockholder outreach, we heard from some stockholders that relative TSR is an important metric to them in long-term incentive plans. Because of changes and consolidation in the Aerospace and Defense industry, as well as our unique and unmatched product mix and few-to-no true performance peers, the Compensation Committee determined that using the companies of a broader market index would be an effective benchmark for TSR.
If minimum performance goals are not met for either performance metric, then that portion of the award will not be earned. Of the total PSUs awarded to each recipient, 25%, 25% and 50% of the PSUs are allocated to the first, second and third performance periods, respectively. The number of shares of common stock earned in respect of each performance period is determined by multiplying the target number of PSUs allocated to such performance
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50
|
period by the average of the TSR achievement factor and ACL achievement factor for such performance period, determined as follows, with achievement between levels determined using linear interpolation:
TSR Achievement Factor
Performance Level
|
Relative TSR Percentile for Performance
Period
|
TSR Achievement Factor
|
Maximum
|
75th or above
|
2.0
|
Target
|
50th
|
1.0
|
Threshold
|
25th
|
0.5
|
Below Threshold
|
below 25th
|
0.0
|
Adjusted Cash Leverage Achievement Factor
Performance Level
|
Adjusted Cash Leverage for Performance Period (1)
|
Adjusted Cash Leverage
Achievement Factor (2)
|
|
Maximum
|
7.0 or below
|
2.0
|
Target
|
7.8
|
1.0
|
Threshold
|
10.3
|
0.5
|
Below Threshold
|
above 10.3
|
0.0
|
(1) Adjusted Cash Leverage is calculated as the Company’s adjusted EBITDA divided by the Company’s gross combined long- and short-term debt. Adjusted EBITDA is the Company’s earnings before interest, taxes, depreciation and amortization, excluding non-cash deferred revenue, impairment losses, inventory valuation adjustments, legal settlements/provisions, restructuring charges and restructuring-related retention arrangements, acquisition/disposition and integration related expenses, foreign exchange gains and losses, unusual gains and losses and stock compensation expenses.
(2) If the Board determines that the Company has violated its debt covenants at any time during a performance period, the Adjusted Cash Leverage Achievement Factor will equal 0 for such performance period.
The NEOs must continue their service through the end of the each performance period to be eligible to receive any amounts earned in respect of the PSUs for that performance period. The PSUs will be settled in shares of our common stock for any performance achieved up to the target level, and to the extent our performance exceeds the target level for a performance period, such portion will be settled in cash (subject to the maximum performance level cap of 200%). This is a unique design for 2019, intended to help transition equity awards into rolling three-year PSU awards for at least 50% of the total annual equity award. The Company expects to transition to a PSU design by 2021 where the grants vest fully at the end of a three-year performance period, but given the 18 month gap in grants between 2018-2019, and the desire to increase the stockholdings of our executives, the Compensation Committee approved this transitional vesting design. Stock Ownership requirements apply to shares vested through PSU and RSU grants.
All time-vested RSUs vest over three years, 33% in year 1, 33% in year 2, and 34% in year 3, subject to the recipient’s continued service with the Company through such vesting date.
The 2019 annual equity awards were granted in two tranches in 2019.
Effective April 1, 2019, the first tranche of PSUs was granted, utilizing the remaining shares available under the Omnibus Plan. Following stockholder approval of the 2019 Incentive Award Plan in May 2019, the remainder of the annual grants were made to executives on May 14, 2019, to fulfill the total PSU grant value to 50% of each executive’s equity target, and grant the remaining 50% in RSUs.
In April and May 2019, the Compensation Committee awarded our NEOs the performance-vested PSUs and time-vested RSUs based on the aggregate target values, as outlined in the table below. The Compensation Committee set the aggregate target values based on its consideration of peer and market compensation data, individual performance, and the fact that no equity awards were made to our NEOs in 2018. In addition, Mr. Jablonsky’s
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51
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employment agreement dated February 27, 2019, which sets forth the terms and conditions of his employment as our President and Chief Executive Officer, provides that he would be granted equity awards in 2019 with an aggregate grant value of $2,000,000.
Name
|
Title
|
Performance-
Vested PSUs
(#)
|
Time-Vested
RSUs
(#)
|
Aggregate Target
Value
($)
|
Daniel L. Jablonsky
|
President and Chief Executive Officer
|
198,677
|
117,508
|
2,000,000
|
Biggs C. Porter
|
Executive Vice President, Chief Financial Officer
|
183,569
|
114,571
|
1,950,000
|
Walter S. Scott
|
Executive Vice President, Chief Technology Officer
|
149,012
|
88,131
|
1,500,000
|
Leon Anthony Frazier
|
Executive Vice President, Global Field Operations
|
119,206
|
70,505
|
1,200,000
|
E. Jeff Robertson III
|
Senior Vice President, Operations and IT
|
70,443
|
44,065
|
750,000
|
The Committee retains the discretion to change the mix of awards and metrics in future years, but will remain committed to the use of performance-based equity.
Employment Agreements and Severance Protections
Daniel Jablonsky. On January 14, 2019, the Company announced that Mr. Jablonsky was appointed to the position of President and Chief Executive Officer of the Company and to the Board of Directors of the Company, in each case, effective as of January 13, 2019. On February 27, 2019, we entered into an employment agreement with Mr. Jablonsky. The agreement provides that Mr. Jablonsky’s employment with us is at-will, and that during his employment he will be paid an initial annual base salary of $700,000 and be eligible to receive an annual performance bonus targeted at 100% of his base salary, as determined by our Board of Directors or our Compensation Committee. The agreement provides that Mr. Jablonsky will be granted equity awards in 2019 with an aggregate grant value of $2,000,000, and that such awards will be delivered in the form of service- and/or performance-vesting restricted stock units or other equity-linked awards, with terms determined by our Board of Directors and/or our Compensation Committee. The target grant value is subject to reduction if the 2019 equity award target grant value for other of our executives is reduced due to insufficient share reserves under our equity plan, and if such a reduction occurs, Mr. Jablonsky and other of our executives may be eligible to receive a cash award or future equity award to offset the reduction in the discretion of our Board of Directors and/or our Compensation Committee.
Pursuant to his employment agreement with us, Mr. Jablonsky will be entitled to severance if he is terminated by the Company without “cause” or for “good reason” (each as defined in the agreement) (in either case a “covered termination”). If he experiences a covered termination that is not in connection with a change in control of the Company, then he will be entitled to the following: (i) 18 months of salary continuation; (ii) an amount equal to 1.5 times his target annual bonus, payable in installments over the 18‑month salary continuation period; (iii) a prorated annual bonus for the year of termination, paid at the same time annual bonuses are paid to our other executives; (iv) continued vesting of his outstanding equity awards over the 12‑month period following his termination; and (v) up to 18 months of continued coverage under our group health plan (or reimbursement for such costs).
If Mr. Jablonsky experiences a covered termination that occurs during the period beginning three months before and ending 12 months after a change in control of Maxar, then he will be entitled to the following: (i) a payment equal to 2.5 times the sum of his then-current base salary plus his target annual bonus for the year of termination, generally payable in a lump sum unless the covered termination occurs before the change in control; (ii) full vesting acceleration of his outstanding equity awards, with any performance conditions calculated based on the higher of actual achievement and prorated target achievement; and (iii) up to 24 months of continued coverage under our group health plan (or reimbursement for such costs).
Additionally, if Mr. Jablonsky’s employment with us terminates due to his death or disability, he (or his estate) will be entitled to a prorated annual bonus for the year of termination, paid at the same time annual bonuses are paid to our other executives and continued vesting of his outstanding equity awards over the 12‑month period following his termination.
Mr. Jablonsky’s (or his estate’s) receipt of any severance benefits under the agreement is subject to Mr. Jablonsky (or his estate) signing a general release of claims in favor of the Company.
Howard Lance. On January 14, 2019, the Company announced that Mr. Lance resigned from his position as President and Chief Executive Officer of the Company and resigned from the Board of Directors of the Company, in each case, effective as of January 13, 2019. Mr. Lance’s resignation from the Company was treated as a termination without “cause” for purposes of his employment letter agreement with the Company dated April 13, 2016 (the “employment letter”) and all other compensation plans and arrangements of the Company. Under the employment letter, upon Mr. Lance’s termination of employment without “cause,” among other benefits, following his execution and non-revocation of a release of claims against the Company, he became entitled to receive severance pay at a rate equal to his current base salary for a period of 36 months and to receive his 2018 bonus, earned based on actual performance, at the time 2018 bonuses were paid to actively employed executive officers. The outstanding equity awards (including awards under the Company’s Share Ownership Plan) held by Mr. Lance will also continue to vest for the 36 month period following his termination, and will remain exercisable through their applicable dates of maturity. In addition, on January 13, 2019, the Company and Mr. Lance entered into a consulting agreement, pursuant to which Mr. Lance was available to provide consulting services to the Company upon request for 12 months, with the option of a one year renewal by mutual agreement and which agreement could be terminated by the Company if Mr. Lance breached his obligations under the consulting agreement or any of his obligations under the employment letter (which obligations include certain post-termination restrictive covenants). In exchange for his consulting services, Mr. Lance received a consulting fee of $100,000.
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Biggs Porter. Pursuant to his employment term sheet with the Company dated July 6, 2018, if Mr. Porter’s employment is terminated by us without “cause” or he resigns his employment for “good reason” (each as defined therein), he will be eligible to receive 12 months’ salary continuation. Additionally, if (i) Mr. Porter’s employment is terminated by us without cause or he resigns his employment for good reason or (ii) if Mr. Porter’s employment ends for any reason other than cause after the third anniversary of his employment start date, all of his outstanding SAR, RSU or PSU awards will continue to vest in accordance with their terms and his outstanding stock options and SARs will remain outstanding and exercisable until their expiration dates. Mr. Porter’s right to receive these payments and benefits is subject to him signing a general release of claims in favor of the Company and abiding by the restrictive covenants and other provisions of his employment term sheet. Mr. Porter’s rights under his employment term sheet were superceded by his new severance agreement entered into in March 2020.
Walter Scott. Pursuant to his Severance Protection Agreement (“SPA”), originally executed with DigitalGlobe, Inc. dated April 13, 2015, and subsequently adopted and amended by his employment term sheet with Maxar Technologies Holdings Inc., dated October 5, 2017, if Mr. Scott’s employment is involuntarily terminated by the Company not for cause nor due to death or disability, or he resigns for “good reason” (each, as defined in the agreement), and prior to a change in control, Mr. Scott will be eligible to receive 1.5x the sum of his annual base salary plus bonus. In the event of his involuntary termination following a change in control, not for cause or due to death or disability, or for good reason, Mr. Scott will be eligible to receive 2.0x the sum of his annual base salary plus bonus. Base salary is defined as the highest level of Mr. Scott’s gross annualized base salary in effect at any time within the one year period prior to termination, and bonus is defined as (i) for a termination prior to a change in control, the average of actual bonuses payable to Mr. Scott under the STIP program for the two fiscal years immediately preceding the date of termination and (ii) for a termination following a change in control, his target bonus. In the event Mr. Scott becomes entitled to severance under his SPA, he Maxar will also pay or reimburse him for continued COBRA premiums for up to 12 months.
Additionally, if the applicable equity plan or award agreement governing Mr. Scott’s outstanding equity awards provides for accelerated vesting of equity in connection with a qualifying termination following a change in control, such accelerated vesting protection shall apply for 24 months following a change in control.
Mr. Scott’s right to receive these payments and benefits is subject to him signing a general release of claims in favor of the Company and abiding by the restrictive covenants and other provisions of his SPA and employment term sheet.
Upon Mr. Scott’s retirement from the Company, his outstanding equity awards will continue to vest pursuant to the normal vesting schedule provided in each applicable award agreement as if he had remained continuously employed through each applicable vesting date, subject to his abiding by the restrictive covenants and other provisions of his SPA and employment term sheet.
Mr. Scott’s rights under the SPA were superceded by his new severance agreement entered into in March 2020.
New Employment and Severance Arrangements
In March 2020, the Company entered into an amended and restated employment agreement with Mr. Jablonsky, and with respect to the other executive officers, entered into an executive change in control and severance agreements. Maxar believes that reasonable severance payments and benefits provide for stability and focus, by reinforcing and encouraging the continued attention and dedication of our key executive officers to their duties of acting in the best interests of shareholders, by removing the distractions or uncertainty in circumstances which could arise from the occurrence of a change in control.
Dan Jablonsky. In March 2020, we entered into an amended and restated employment agreement with Mr. Jablonsky, pursuant to which in the event of a covered termination not in connection with a change in control of the Company, he will be entitled to the following: (i) 24 months of salary continuation; (ii) an amount equal to 2 times his target annual bonus, payable in installments over the 24‑month salary continuation period; (iii) a prorated annual bonus for the year of termination, paid at the same time annual bonuses are paid to our other executives; (iv) continued vesting of his outstanding equity awards over the 12‑month period following his termination; (v) up to 24 months of continued coverage under our group health plan (or reimbursement for such costs); and (vi) outplacement services at the Company’s cost.
Under the amended and restated employment agreement, if Mr. Jablonsky experiences a covered termination that occurs during the period beginning three months before and ending 12 months after a change in control of Maxar, then he will be entitled to the following: (i) a payment equal to 2.99 times the sum of his then-current base salary plus his target annual bonus for the year of termination, generally payable in a lump sum unless the covered termination occurs before the change in control; (ii) full vesting acceleration of his outstanding equity awards, with any performance conditions calculated based on the higher of actual achievement and prorated target achievement; (iii) up to 36 months of continued coverage under our group health plan (or reimbursement for such costs) and (iv) outplacement services at the Company’s cost.
Under the amended and restated employment agreement, Mr. Jablonsky remains eligible to receive the same severance benefits upon a termination due to death or disability as under his prior employment agreement, and as under his prior employment agreement, Mr. Jablonsky’s (or his estate’s) receipt of any severance benefits is subject to Mr. Jablonsky (or his estate) signing a general release of claims in favor of the Company.
Other NEOs. In March 2020, we entered into executive change in control and severance agreements with each of Messrs. Porter, Scott, Frazier and Robertson. These agreements supercede the rights Mr. Porter had under his employment term sheet and Mr. Scott had under the SPA. Pursuant to the agreement, in the event the executive’s employment is terminated by the Company other than for “cause” or if he resigns for “good reason” (each, as defined in the applicable agreement) not in connection with a change in control of the Company, he will be entitled to the following: (i) 18 months of base salary, payable in installments; (ii) a lump sum payment equal to 18 months of continued COBRA premiums; and (iii) outplacement services at the Company’s cost.
In the event the executive is terminated by the Company other than for cause or if he resigns for good reason during the period beginning three months before and ending 24 months following a change in control of Maxar (or, in the case of Messrs. Porter and Scott, on or during 12 months following a
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change in control), then he will be entitled to the following: (i) a payment equal to 2 times the sum of his then-current base salary plus his target annual bonus for the year of termination generally payable in a lump sum unless, in the case of Messrs. Frazier and Robertson, the covered termination occurs before the change in control; (ii) a lump sum payment equal to 24 months of continued COBRA premiums; (iii) outplacement services at the Company’s cost; and (iv) full vesting acceleration of his outstanding equity awards, with any performance conditions calculated based on the higher of actual achievement and prorated target achievement unless otherwise set forth in the applicable award agreement.
Under Mr. Porter’s agreement, Mr. Porter also remains eligible to receive continued vesting of his outstanding equity awards granted prior to fiscal year 2022 and extended exercisability of his options and SARs through their expiration dates in the event of a termination without cause or for good reason or if his employment ends for any reason other than cause after the third anniversary of his employment start date, as under his employment term sheet, or in the case of a termination due to death or disability. In addition, under Mr. Scott’s agreement, Mr. Scott remains eligible to receive continued vesting of his equity awards upon his retirement, as under his employment term sheet.
The executive’s receipt of any severance benefits is subject to the executive signing a general release of claims in favor of the Company.
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2019 Option Exercises and Stock Vested
The following table sets forth summary information concerning the exercise of stock options and the vesting of stock awards for our NEOs during the fiscal year ended December 31, 2019. None of our NEOs exercised any stock options during the fiscal year ended December 31, 2019.
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Stock Awards
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Name
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Number of Shares
Acquired on Vesting
(#)
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Value Realized
on Vesting
($)
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Daniel L. Jablonsky
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7,806
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122,320
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Howard L. Lance
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—
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—
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Biggs C. Porter
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13,780
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215,933
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Walter S. Scott
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15,459
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242,243
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Leon Anthony Frazier
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6,858
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107,465
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E. Jeff Robertson III
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6,414
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100,507
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The “Value Realized on Vesting” is determined by multiplying the number of shares or units, as applicable, that vested by the per share closing price of our common stock on the vesting date (or the immediately preceding trading day, if the vesting date is not a trading day).
2019 Nonqualified Deferred Compensation
Our NEOs did not participate in any nonqualified deferred compensation arrangements in 2019.
CEO Pay Ratio
As is permitted under the SEC rules, to determine our median employee, we chose “base salary as our consistently applied compensation measure. We annualized the base salaries of permanent employees who commenced work during 2019. Using a determination date of October 1, 2019, we started out with approximately 5,790 employees. 94 employees from 17 countries (1.62% of the total workforce) were then excluded under the 5% de minimis exemption, with employee counts as follows: Brazil (4), China (3), Colombia (1), Germany (2), India (5), Isle of Man (1), Italy (2), Japan (3), Luxembourg (1), Mexico (2), Romania (1), Russian Federation (1), Singapore (24), South Africa (1), Spain (3), United Arab Emirates (1) and United Kingdom (39).
From the remaining 5,696 employees a valid statistical sampling methodology was applied to estimate the median base salary. We then produced a sample of employees who were paid within a 5% range of that median, and selected the median employee of such sample as our overall median employee. We determined the median employee’s annual total compensation for 2019 was $107,628, which includes the value of nondiscriminatory health care benefits. Our CEO’s annual total compensation for 2019 was $3,954,024, including the estimated value of nondiscriminatory health care benefits. Our estimate of the ratio of CEO pay to median worker pay is therefore 27:1.
This ratio is a reasonable estimate calculated using a methodology consistent with the SEC rules, as described above. As the SEC rules allow for companies to adopt a wide range of methodologies, to apply country exclusions and to make reasonable estimates and assumptions that reflect their compensation practices to identify the median employee and calculate the CEO pay ratio, the pay ratios reported by other companies may not be comparable to the pay ratio reported above.
Payments and Potential Payments upon Termination or Change in Control
A description of the employment and severance arrangements of our NEOs is contained in the Compensation Discussion & Analysis under the heading “Employment Agreements and Severance Protections.” In addition, under the terms of our Omnibus Plan and 2019 Plan, outstanding awards will accelerate in the event the successor does not assume or substitute the awards, or, if the successor assumes or substitutes the awards, in the event of a termination without “cause” or resignation for “good reason” (each, as defined in the applicable plan) during the one-year period following the change in control. Under the terms of the PSUs, for the purposes of such acceleration, the PSUs will vest based on the greater of (i) actual performance through the date of the change in control or termination, as applicable, or (ii) prorated target performance.
The table below reflects the estimated payments and benefits to each of the NEOs under the terms of their employment arrangements in effect as of December 31, 2019 (and do not reflect the new arrangements described under Employment Agreements and Severance Protections above), assuming that a qualifying triggering event on December 31, 2019, the last business day of fiscal year 2019 (or, in the case of Mr. Lance, the actual amounts received upon his termination of employment). The equity award values shown below are based on a per share value of $15.67, the closing trading price of our common stock on December 31, 2019, in the case of SARs, less the applicable exercise price. The actual amounts to be paid out can only be determined at the time of such officer’s separation. The equity award values under “Termination Without Cause or for Good Reason in Connection with
QUESTIONS & ANSWERS ABOUT THE ANNUAL MEETING
References in this Proxy Statement and accompanying materials to Internet websites are for the convenience of readers. Information available at or through these websites is not incorporated by reference in this Proxy Statement.
Who can attend the Annual Meeting?
All stockholders as of the close of business on March 19, 2020, the record date, are eligible to vote at the Annual Meeting.
Preregistration and Rules for Admission
Due to space constraints and other security considerations, only stockholders or their legal proxy holders that have preregistered and been issued an admission letter may attend the Annual Meeting. We are not able to admit the guests of either stockholders or their legal proxy holders. Stockholders holding shares in a joint account may request letters to the meeting if they provide proof of joint ownership and both stockholders follow the admission requirements described below.
To preregister for and receive an admission letter to the Annual Meeting, please send your request to:
Maxar Corporate Secretary
Maxar Technologies Inc.
1300 W. 120th Avenue
Westminster, CO 80234
Requests for preregistration and an admission letter must be received no later than 5:00 p.m. MT on Thursday, April 30, 2020.
Your request must include your name, mailing address, telephone number (in case we need to contact you regarding your request), and one of the following:
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If you are a stockholder of record (i.e., you hold your shares through Maxar’s transfer agent, Computershare), your request must include one of the following items: (i) a copy of your proxy card delivered as part of your Proxy Materials, (ii) a copy of your Computershare account statement indicating your ownership of Maxar common stock as of the record date, or (iii) the Notice Regarding the Availability of Proxy Materials, if you received one.
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If you are a street name stockholder (i.e., you hold your shares through an intermediary, such as a bank or broker), your request must include one of the following items: (i) a copy of the voting instruction form provided by your broker or other holder of record as part of your Proxy Materials, (ii) a copy of a recent bank or brokerage account statement indicating your ownership of Maxar common stock as of the record date, or (iii) the Notice Regarding the Availability of Proxy Materials, if you received one.
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If you are not a stockholder, but are attending as proxy for a stockholder, your request must include a valid legal proxy. If you plan to attend as proxy for a stockholder of record, you must present a valid legal proxy from the stockholder of record to you. If you plan to attend as proxy for a street name stockholder, you must present a valid legal proxy from the stockholder of record (i.e., the bank, broker, or other holder of record) to the street name stockholder that is assignable and a valid legal proxy from the street name stockholder to you. Stockholders may appoint only one proxy holder to attend on their behalf.
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Preregistration requests will be filled on a first-come, first-served basis. If space is available, you will receive an admission letter by mail. On the day of the Annual Meeting, you will be required to present a form of government-issued photo identification, along with your admission letter, at the meeting registration desk. Failure to present the required materials will result in the denial of your admission to the Annual Meeting.
As part of our effort to maintain a safe and healthy environment at our Annual Meeting, we are closely monitoring statements issued by the World Health Organization (who.int) and the Centers for Disease Control and Prevention (cdc.gov) regarding the novel coronavirus disease, COVID-19. For that reason, we reserve the right to reconsider the date, time, and/or means of convening the Annual Meeting. If we take this step, we will announce the decision to do so in advance, and details on how to participate will be issued by press release, posted on our website, and filed with the SEC as additional proxy material. We also encourage attendees to review guidance from public health authorities on this issue.
How many shares can vote?
Each share of our common stock outstanding, including each unvested share of restricted stock with voting rights, on the record date is entitled to one vote on each of the director nominees and one vote on each other matter that may be presented for consideration and action by the stockholders at the Annual Meeting. As of the close of business on the record date, of March 19, 2020, 60,143,178 shares of our common stock were outstanding and entitled to vote.
If I hold shares in street name, how can I vote my shares?
If your shares are registered in your name with our transfer agent, Computershare Trust Company, N.A., you are the "stockholder of record" of those shares. If you are the beneficial owner of shares held in “street name” by a broker, bank or nominee, your broker, bank or nominee is required to vote those shares in accordance with your instructions. In order to vote your shares, you will need to follow the instructions provided to you by your broker,
bank or nominee. If you desire to attend in person and vote shares held in “street name” at the Annual Meeting, you must obtain a legal proxy from your broker, bank or nominee.
Who will count the vote?
The Chair of the Annual Meeting will appoint an inspector of election at the Annual Meeting who will count the votes.
How will my shares be voted if I do not provide specific voting instructions in the proxy card or voting instruction form that I submit?
If you vote by mail, sign your proxy card or voting instruction form, and do not indicate specific instructions with respect to one or more of the matters to be voted on at the Annual Meeting, your shares will be voted in accordance with the recommendation of the Company’s Board of Directors on such matters, as follows: “FOR” the election of each of the ten director nominees under Proposal 1, “FOR” approval, on a non-binding advisory basis, of the executive compensation of our NEOs under Proposal 2, “FOR” approval of the Amendment to the Company’s 2019 Incentive Award Plan under Proposal 3, and “FOR” ratification of the appointment of KPMG LLP under Proposal 4.
May I revoke my proxy?
You have the right to change or revoke your proxy at any time before your shares are actually voted at the Annual Meeting. If you are a stockholder of record, you may change or revoke your proxy by any of the following:
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notifying our Corporate Secretary in writing at 1300 West 120th Avenue, Westminster, Colorado 80234;
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signing and returning a later‑dated proxy card;
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submitting a new proxy electronically via the Internet or by telephone; or
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voting in person at the Annual Meeting (please note that attendance at the Annual Meeting will not by itself constitute revocation of a proxy).
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If you are the beneficial owner of shares held in “street name” by a broker, bank or nominee, you may change your vote by submitting new voting instructions to your broker, bank or nominee, or, if you have obtained a legal proxy from your broker, bank or nominee giving you the right to vote your shares in person at the Annual Meeting, by attending the Annual Meeting and voting in person.
How will voting on any other business be conducted?
Other than the proposals described in this Proxy Statement, we know of no other business to be considered at the Annual Meeting. However, if any other matters are properly presented at the meeting or any postponement or adjournment thereof, your proxy, if properly submitted, authorizes Daniel L. Jablonsky, our President and Chief Executive Officer, Howell M. Estes III, our Chair of the Board, and James C. Lee, our SVP, General Counsel and Corporate Secretary, and each of them, to vote in his discretion on those matters.
Who will bear the cost of soliciting votes?
The Company will bear all attendant costs of the solicitations of proxies. These costs include the expense of preparing and mailing the Notice of Internet Availability, any paper proxy solicitation materials and reimbursements paid to brokerage firms and others for their expenses incurred in forwarding solicitation materials to beneficial owners of our common stock. We may conduct further solicitation personally, telephonically, through the Internet or by facsimile through our officers, directors and employees, none of whom will receive additional compensation for assisting with the solicitation. We may generate other expenses in connection with the solicitation of proxies. We have engaged Innisfree M&A Incorporated to assist us in the solicitation of proxies. We expect to pay Innisfree approximately $15,000 for these services, plus expenses.
What does it mean if I receive more than one Notice of Internet Availability or set of proxy materials?
If you receive more than one Notice of Internet Availability or set of proxy materials, it probably means your shares are registered differently (for instance, under different names) or are held in more than one account. Please follow the voting instructions on each Notice of Internet Availability, proxy card or voting instruction form you receive. You may also submit your proxy or voting instructions electronically or by telephone by following the instructions set forth on each Notice of Internet Availability, proxy card or voting instruction form to ensure that all your shares are voted.
What constitutes a quorum?
The holders of a majority of the shares of our common stock outstanding and entitled to vote on the record date present in person or represented by proxy will constitute a quorum at the Annual Meeting. Because there were 60,143,178 shares of Common Stock outstanding and entitled to vote as of the record date, we will need holders of at least 30,071,590 shares present in person or by proxy at the Annual Meeting to achieve a quorum.