manh-def14a_20200514.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.)

 

 

Filed by the Registrant

Filed by a Party other than the Registrant

 

 

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

 

MANHATTAN ASSOCIATES, INC.

(Name of Registrant as Specified in Its Charter)

 

Not Applicable

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

No fee required.

 

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

 

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

(4)

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(5)

Total fee paid:

 

 

Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

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(3)

Filing Party:

 

 

 

 

(4)

Date File

 

 

 

 

 

 

 

 

 

 

 


 

 

 


 

 

Table of Contents

 


 

 

Notice of Annual Meeting of Shareholders

 

2

Proxy Statement Summary

4

Proxy Statement

 

11

Governance

12

 

 

Proposal 1 - Election of Directors

12

Board of Directors and Committees

12

Director Compensation

21

Share Ownership Guidelines

22

Related Party Transactions

22

Security Ownership

23

 

 

Security Ownership of Certain Beneficial Owners and Management

23

Executive Compensation

25

 

 

Proposal 2 – Resolution to Approve Named Executive Officers’ Compensation

25

Compensation Discussion and Analysis

26

Compensation Committee Report on Executive Compensation

37

Compensation Tables

38

Compensation Committee Interlocks and Insider Participation

42

CEO Pay Ratio Disclosure

43

Executive Officer Biographies

43

Equity Incentive Plan

45

 

 

Proposal 3 – Resolution to Approve the Manhattan Associates, Inc. 2020 Equity Incentive Plan

45

Audit Matters

53

 

 

Proposal 4 – Ratification of Appointment of Independent Registered Public Accounting Firm

53

Audit Committee Report

53

Additional Information

55

 

 

Additional Information about the Annual Meeting of Shareholders

55

Shareholder Proposals

56

Communication with Directors

56

Form 10-K

56

Other Matters

56

Forward-Looking Statements

56

Annex A – Manhattan Associates, Inc. 2020 Equity Incentive Plan

 

 

 

 

 

 


 

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 14, 2020

 

Manhattan Associates Corporate Headquarters

2300 Windy Ridge Parkway, Atlanta, Georgia 30339

(770) 955-7070

 

 

NOTICE IS HEREBY GIVEN that the 2020 Annual Meeting of Shareholders of Manhattan Associates, Inc. (the “Company,” “our,” “we” or “us”) will be held at 2300 Windy Ridge Parkway, Atlanta, Georgia 30339, at 9:00 a.m., Eastern time, on Thursday, May 14, 2020 (the “Annual Meeting”), to consider and act upon:

 

1.

the election of two Class I Directors to the Company’s Board of Directors;

 

2.

a nonbinding resolution to approve the compensation of the Company’s named executive officers;

 

3.

a proposal to approve the Manhattan Associates, Inc. 2020 Equity Incentive Plan;

 

4.

a proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020; and

 

5.

such other business as may properly come before the Annual Meeting or any adjournment of the meeting.

The Board of Directors has fixed the close of business on March 20, 2020, as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting. For instructions on voting, please refer to the notice you received in the mail or, if you requested a hard copy of the proxy materials, on your enclosed proxy card.

 

 

By Order of the Board of Directors,

 

 

 

 

Bruce S. Richards

 

Senior Vice President, Chief Legal Officer and Secretary

 

March 30, 2020

Atlanta, Georgia

 

 

We are actively monitoring the public health and travel safety concerns relating to the coronavirus (COVID-19) and the advisories or mandates that federal, state, and local governments, and related agencies, may issue. If it is not possible or advisable to hold our Annual Meeting as currently planned, we will announce our change of plan in a press release, post the details on our website, and file the details with the SEC as proxy material. If you plan to attend our Annual Meeting, please check our website the week of the meeting. As always, we encourage you to vote your shares prior to the meeting.

 

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SUBMIT YOUR VOTE THROUGH THE INTERNET OR BY TELEPHONE, OR IF YOU REQUESTED PAPER COPIES OF THE PROXY MATERIALS, YOU MAY VOTE BY MAIL BY FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD. NO POSTAGE IS REQUIRED

2  


 

FOR MAILING IN THE UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 14, 2020

This proxy statement, the form of proxy and annual report on Form 10-K for the fiscal year ended December 31, 2019 (“2019 Annual Report”) are being mailed to shareholders who have requested hard copies on or after March 30, 2020. Registered and beneficial shareholders may view and print this proxy statement and the Company’s 2019 Annual report at www.proxyvote.com or in the Investor Relations section of the Company’s web site at www.manh.com.

  3


 

Proxy Statement Summary

 

This summary highlights information contained elsewhere in this Proxy Statement. For more information, please read our Annual Report on Form 10-K for fiscal year 2019 and the entire Proxy Statement prior to voting.

 

ANNUAL MEETING OF SHAREHOLDERS

 

Date and Time:

 

May 14, 2020, 9:00 a.m., Eastern Time

 

 

 

Place:

 

Manhattan Associates Headquarters, 2300 Windy Ridge Parkway, Atlanta, GA 30339

 

 

 

Record Date:

 

March 20, 2020

 

How to Vote:

 

By Internet: Go to www.proxyvote.com;

 

By phone: Call 1-800-690-6903;

 

By mail: Call 1-800-579-1639 to request a paper copy of the materials and follow the instructions on your proxy materials; or

 

In person by attending the Annual Meeting of Shareholders.

To cast your vote by internet or phone, you will need the control number from your proxy card or the notice to our shareholders.

 

We are actively monitoring the public health and travel safety concerns relating to the coronavirus (COVID-19) and the advisories or mandates that federal, state, and local governments, and related agencies, may issue. If it is not possible or advisable to hold our Annual Meeting as currently planned, we will announce our change of plan in a press release, post the details on our website, and file the details with the SEC as proxy material. If you plan to attend our Annual Meeting, please check our website the week of the meeting. As always, we encourage you to vote your shares prior to the meeting.

 

 


4  


 

MEETING AGENDA AND VOTING MATTERS

 

Proposal

 

Recommendation of the Board

 

Voting Standard

 

Page Number (for more details)

1.

Election of two Class I Directors, each for a three-year term expiring in 2023.

 

FOR (each nominee)

 

Plurality of the votes cast, subject to policy requiring a nominee who is elected with less than a majority of the votes cast to offer to resign

 

12

2.

Advisory approval of the compensation of our named executive officers.

 

FOR

 

Votes cast in favor exceed votes cast against

 

25

3.

Approval of the Manhattan Associates, Inc. 2020 Equity Incentive Plan.

 

FOR

 

Votes cast in favor exceed votes cast against

 

45

4.

Ratification of appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020.

 

FOR

 

Votes cast in favor exceed votes cast against

 

53

 


  5


 

MEMBERS OF BOARD OF DIRECTORS (page 12)

 

 

 

 

 

 

 

 

 

 

Committee Memberships

Name, Primary Occupation

Age

Director Since

Current Term Expires

Expiration of Term For Which Nominated

Independent

Other Public Company Boards

 

Audit

Compensation

Nomination & Governance

Eddie Capel

President and Chief Executive Officer (“CEO”) of Manhattan Associates, Inc.

59

2012

2020

2023

No

1

 

 

 

 

Edmond I. Eger III

CEO of Rewards Network Establishment Services, Inc.

59

2015

2021

-

Yes

None

 

Linda T. Hollembaek

Senior Vice President, Integration Management Officer of Lexmark International, Inc. (Retired)

62

2018

2021

-

Yes

None

 

John J. Huntz, Jr. (Chairman)

Managing Director of Huntz & Co., LLC

69

1999

2022

-

Yes

None

 

Chair

Charles E. Moran

Chairman and CEO of Skillsoft Corporation (Retired)

65

2017

2020

2023

Yes

2

 

 

Thomas E. Noonan

General Partner of TechOperators, LLC

59

1999

2022

-

Yes

 

1

 

Chair

 

Deepak Raghavan

Adjunct Professor at Georgia State University

53

1998

2021

-

Yes

None

 

 

 

Chair

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BOARD COMMITTEES (page 18)

 

 

Number of Members

Independent

Number of Meetings During Fiscal Year

Full Board

7

86%

5

Audit Committee

3

100%

4

Compensation Committee

3

100%

5

Nomination & Governance Committee

3

100%

4

 

 


6  


 

2019 BUSINESS HIGHLIGHTS

 

As we transition to a cloud-first company, we believe 2019 was a year of substantial progress in positioning the Company for future long-term sustainable growth. Entering 2020, we remain focused on driving revenue growth and gaining market share. We note however our objectives for the year are subject to a number of risks and uncertainties, including the effects on global commerce of the spread of the novel coronavirus strain known as COVID-19 as well as the other factors set forth in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. We are confident in our long-term strategy driven by our market leadership in innovative supply chain and omnichannel solutions and services.

 

Our accomplishments include:

 

Aggressively investing in innovation and expanding total addressable market

 

We continued to deliver and expand upon our cloud-native architecture platform and full suite of Manhattan Active® Solutions launched in mid-2017.

 

Our Manhattan Active® Solutions are providing meaningfully differentiated innovation and opportunity for Manhattan in new markets including Omnichannel, Point of Sale, and Customer Engagement.

 

Our global pipelines are solid, and we see strong demand for cloud-based solutions. License pipeline activity is beginning to convert to cloud pipeline, and as a result we expect license revenue to continue to decline year-over-year as customers increasingly select our cloud offerings. We continue to be encouraged by new customer signings and by the concentration of potential new customers in the pipeline with about 50% of our deal opportunities representing net new customers.

 

We invested $88 million in R&D, up 22%, and plan to continue to increase our investment in 2020. Our investment in R&D is a strategic priority to deliver meaningfully differentiated cloud innovation. We expect that innovation to expand our addressable market while helping us achieve long-term sustainable organic revenue growth and top quartile operating margins compared to other enterprise application software providers.

 

Revenue and earnings performance was solid in the 2nd year of cloud transition

 

Total revenue was $618 million, up 11%, reflecting our transition to cloud.

 

Adjusted EPS were $1.74, down 3% versus 2018, reflecting investment in our cloud transition.

 

Customer retention rates were well above 90%; 30% of the combination of software license and cloud revenue were with net new customers.

 

Our Manhattan Active® Solutions continues to be well received and continues to gain traction with cloud revenue more than doubling over 2018 from $23.1 million to $46.8 million, up 103%, and increasing from 34% of total software revenue in 2018 to 49% in 2019. In the fourth quarter of 2019, cloud revenue surpassed software license revenue, representing 63% of the total software license and cloud revenue mix. Going forward, we expect cloud revenue to increase as a percentage of our total software as market demand for cloud solutions supplants legacy perpetual license demand.

 

Recurring revenue as a percentage of total revenue, excluding hardware sales, rose from 31% in 2018 to 32% in 2019.

 

Our full year 2019 global consulting services revenue was up 9% year-over-year.

 

2019 GAAP operating margin of 19% ranked 3rd best across publicly traded companies in our peer group.

 

Maintained capital discipline and financial capacity

 

We closed 2019 with $111 million in cash and cash equivalents and zero debt, self-funding all our growth through free cash flow generation; we have never borrowed in the history of the Company.

 

Operating cash flow was $147 million, up 7% versus 2018 primarily driven by our cloud transition. Our operating cash flow performance was our 2nd best year on record.

 

We invested $116 million in share repurchases, lowering our common shares outstanding (“CSO”) by 2% over the prior year. Over the last decade, we have invested over $1 billion in share buybacks, lowering CSO by 27%. As we have throughout our history, we continue to design the performance criteria under our performance-based incentive plans so that our named executive officers (“NEOs”) and other employees receive no compensation benefit from the impact of our share repurchases on EPS.

 

In 2019, we exceeded our target objectives (as defined on page 32) for our annual cash bonus program and the performance-based component of our long-term equity (restricted stock unit) program, resulting in a payout of 150% of target for our annual cash bonus program, including to our NEOs and earned performance-based equity under the performance-based component of our 2019 long-term equity program at 150% of target, including for our NEOs.

 

The Board of Directors believes the Company made substantial progress toward positioning the Company for long-term success, expanding its addressable market through meaningfully differentiated investment in innovation, and positioning Manhattan Associates for potential long-term sustainable growth.

  7


 

CORPORATE GOVERNANCE HIGHLIGHTS

 

Governance Matter

Summary Highlights

Board Independence

Independent Board of Directors, except Chief Executive Officer

 

Fully independent Board committees

 

Separate Chairman and Chief Executive Officer roles

Director Elections

Majority Vote Resignation Policy

Meeting Attendance

All Directors attended 100% of total number of Meetings of Board and Committees on which the Directors served in 2019

Evaluating and Improving Board

Commitment to Board Refreshment (two new directors in past three years)

Performance

Major Board assessments every three years

 

Annual self-assessments of Committees

Aligning Director and Shareholder

Non-executive Director minimum share ownership guidelines

Interests

Annual Director equity awards

Aligning Executive Officer and

Executive officer minimum share ownership guidelines

Shareholder Interests

Executive compensation driven by pay-for-performance philosophy

Other

Annual shareholder advisory ("say-on-pay") vote

 

Regular Board review of enterprise risk areas

 

Director Status Change Resignation Policy

 

Prohibition on pledging and hedging of Company securities


8  


 

2019 EXECUTIVE COMPENSATION ACTIONS

Base Salaries

 

The base salary of our President and CEO, Mr. Capel, increased by approximately 4% over 2018.

 

The base salaries of the remaining NEOs increased by approximately 3% over 2018.

Annual Cash Bonus

 

Our annual cash bonus program was based on three performance measures: Target Revenue, new annual contract value from cloud-based services (NACV) and adjusted operating income (AOI), all as defined on page 32. Based on our 2019 financial performance, the NEOs earned 150% of their 2019 annual cash bonus targets compared to 110% for 2018.

Long-term Incentive Compensation

 

Our 2019 long-term equity incentive program included grants to our NEO of RSUs comprising 50% service-based and 50% performance-based RSUs and were based on three performance measures: Target Revenue, NACV, and AOI. Based on our 2019 financial performance, the NEOs earned 150% of their 2019 performance-based RSUs compared to 110% for 2018.

 

In January 2019, our Compensation Committee approved a special retention grant of service-based RSUs to members of our executive team, including our NEOs. The Committee intended that grant, which vests over four years, to further motivate our outstanding, experienced executive team to remain with the Company throughout our transition to a cloud-first Company in order to maximize value creation for our shareholders.

 

 

2019 GOVERNANCE ACTIONS

 

 

Company proposal to approve the Manhattan Associates, Inc. 2020 Equity Incentive Plan (page 38 for more information).

 

 

 

2019 EXECUTIVE COMPENSATION (page 25)

Named Executive Officer Compensation

The following table sets forth the total compensation paid or earned by the Company’s NEOs in 2019 as determined under SEC rules. For more details, please see Compensation Discussion and Analysis starting on page 26 and the 2019 Summary Compensation Table and its accompanying notes on page 38.

 

Name and Principal Position

Salary

Stock Awards

 

Non-Equity Incentive Plan Compensation

 

All Other Compensation

Total

 

 

 

 

 

 

 

 

Eddie Capel

$600,000

$7,640,747

 

$900,000

 

$45,777

$9,186,524

President, Chief Executive

 

 

 

 

 

 

 

Officer, and Director

 

 

 

 

 

 

 

Dennis B. Story

415,000

4,121,992

 

465,000

 

31,588

5,033,580

Executive Vice President, Chief

 

 

 

 

 

 

 

Financial Officer, and Treasurer

 

 

 

 

 

 

 

Bruce S. Richards

328,000

1,186,330

 

329,500

 

18,350

1,862,180

Senior Vice President, Chief

 

 

 

 

 

 

 

Legal Officer, and Secretary

 

 

 

 

 

 

 

Robert G. Howell

333,000

3,267,444

 

568,500

 

31,133

4,200,077

Senior Vice President,

 

 

 

 

 

 

 

Americas Sales

 

 

 

 

 

 

 

Linda C. Pinne

259,715

502,672

 

150,539

 

8,400

921,326

Senior Vice President, Global Corporate

 

 

 

 

 

 

 

Controller, and Chief Accounting Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


  9


 

Components of Target Compensation for 2019

Our executives’ target compensation for 2019 consisted of the components described below (1).

 

 

(1)

The above chart includes base salary, target short-term incentive opportunities, and the grant date value of annual equity awards. The chart excludes the value of the special retention grant of service-based RSUs made in January 2019 as an enhancement to the long-term incentive compensation plan for our CEO and NEOs to further motivate our dedicated and experienced executive team to remain with the Company to best ensure continued execution of our transition to a cloud-first Company. The value of those special retention RSUs is included in the Summary Compensation Table, and the details of those special retention RSUs are included in the Grants of Plan Based Awards table.

With approximately 80% of performance-based pay, we believe our current executive compensation program directly links executive compensation to our financial performance and aligns the interests of our executive officers with those of our shareholders. We believe our executive compensation programs provide our executive officers with a balanced compensation package that includes a reasonable base salary along with annual and long-term incentive compensation opportunities based on our performance against pre-established financial performance objectives. This strong alignment between our financial results, shareholder returns, and executive compensation is the cornerstone of our executive compensation philosophy and program design. See page 31 for more information.

10  


 

 

2300 Windy Ridge Parkway, Tenth Floor

Atlanta, Georgia 30339

 

 

Proxy Statement

 

 

Annual Meeting of Shareholders

May 14, 2020

 

Information Concerning Solicitation and Voting

annual meeting of Shareholders

This Proxy Statement (“Proxy Statement”) is furnished on behalf of the Board of Directors (the “Board”) of Manhattan Associates, Inc., a Georgia corporation (the “Company,” “our,” “we” or “us”), to solicit proxies for use at the Annual Meeting of Shareholders to be held on Thursday, May 14, 2020, at 9:00 a.m., Eastern time (the “Annual Meeting”), or at any adjournment or postponement of the meeting, for the purposes set forth in this statement and in the accompanying Notice of Annual Meeting. The Annual Meeting will be held at 2300 Windy Ridge Parkway, Atlanta, Georgia 30339.

We are actively monitoring the public health and travel safety concerns relating to the coronavirus (COVID-19) and the advisories or mandates that federal, state, and local governments, and related agencies, may issue. If it is not possible or advisable to hold our Annual Meeting as currently planned, we will announce our change of plan in a press release, post the details on our website, and file the details with the SEC as proxy material. If you plan to attend our Annual Meeting, please check our website the week of the meeting. As always, we encourage you to vote your shares prior to the meeting.

Internet Availability of Proxy Materials

The Company is following the Securities and Exchange Commission (the “SEC”) “Notice and Access” rule that allows companies to furnish their proxy materials over the Internet. As a result, instead of mailing a paper copy of the proxy materials, which include this Proxy Statement, proxy card, and our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Annual Report”), the Company intends to mail, beginning on March 30, 2020, a notice to our shareholders (the “Notice”) notifying them that those materials are available on the Internet beginning March 30, 2020, how our shareholders may access them over the Internet, and how to request a paper or email copy. There is no charge for requesting a paper or email copy.

Registered and beneficial shareholders may view and print this Proxy Statement and the 2019 Annual Report at www.proxyvote.com or in the Investor Relations section of our web site at www.manh.com.

How to Vote

The Notice contains instructions on how to vote online, by mail (if you request a paper copy of proxy materials), or in person. You may also vote by calling 1-800-690-6903 or the number on the proxy card. You will need the control number from your proxy card or the Notice.

Shareholders Entitled to Vote

Only holders of record of the Company’s common stock, $0.01 par value per share (“Common Stock”), at the close of business on March 20, 2020 (the “Record Date”) will be entitled to notice of and to vote at the Annual Meeting. At the close of business on the Record Date, the Company had 63,533,428 shares of Common Stock outstanding and entitled to vote. Each holder of record of Common Stock on that date will be entitled to one vote for each share held on all matters to be voted on at the Annual Meeting.

  11


 

GOVERNANCE

Proposal 1 – Election of Class I Directors

The Board of Directors has seven members divided into three classes. The term of each Director is three years, and the terms of the Directors are staggered by class. The Board currently comprises two Class I Directors (Messrs. Capel and Moran), whose terms expire at the Annual Meeting, three Class II Directors (Messrs. Raghavan and Eger, and Ms. Hollembaek), whose terms expire in 2021, and two Class III Directors (Messrs. Huntz and Noonan), whose terms expire in 2022. On the Nomination and Governance Committee’s recommendation, the Board has nominated Messrs. Capel and Moran for re-election as Class I Directors, which will become effective at the Annual Meeting. There are no family relationships among our Directors or Director nominees.

Shares represented by executed proxies will be voted for the election of the nominees named below, unless the authority to do so is withheld. If any nominee unexpectedly becomes unavailable for election, the individuals named in the accompanying proxy card may exercise their discretion to vote for the election of the Board’s substitute nominee. The individuals nominated for election at the Annual Meeting have agreed to serve if elected, and the Board has no reason to believe that they will be unable to serve.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE NAMED NOMINEES.

Board of Directors and Committees

director Nominees

Set forth below are our nominees to serve as Class I Directors (terms expire in 2023).

Eddie Capel

 

Primary Occupation

Age

Director Since

Current Term Expires

Board Committees

Other Public Company Boards

Director Qualification Highlights

President and CEO of Manhattan Associates, Inc.

59

2012

2020

None

Skyline Champion Corporation

Business operations

Business development and corporate transactions

Insider's knowledge of day-to-day operations of the Company

Leadership - current CEO

Supply chain management

Technology and software industries

Biography

Eddie Capel, age 59, has served as our President and Chief Executive Officer since January 1, 2013. Prior to that, beginning in July 2012, Mr. Capel served as our President and Chief Operating Officer. Also, in July 2012, the Board elected Mr. Capel to the Board as a Class I director. Prior to becoming our President, Mr. Capel served as Executive Vice President and Chief Operating Officer since January 12, 2011. Previously, Mr. Capel served as our Executive Vice President—Global Operations from January 2009 to January 2011. In this capacity, Mr. Capel was responsible for the Company’s global product management, research and development, and customer support functions. From January 2008 through January 2009, Mr. Capel served as our Executive Vice President—Global Product Management and Customer Services. From January 2005 to January 2007, Mr. Capel served as our Senior Vice President—Global Product Management and Global Customer Services and from January 2004 through January 2005 as our Senior Vice President Product Management. Prior to January 2004, he held various other positions with the Company. Prior to joining Manhattan Associates in June 2000, Mr. Capel held various positions at Real Time Solutions, including chief operations officer and vice president, operations. He also served as director, operations, with Unarco Automation, an industrial automation/robotics systems integrator. Prior to joining Unarco, Mr. Capel worked as a project manager and system designer for ABB Robotics in the United Kingdom. Mr. Capel also serves on the Board of Skyline Champion Corporation (NYSE: SKY).

 

12  


 

Experience, Skills and Qualifications of Particular Relevance to Manhattan Associates

As our President and Chief Executive Officer, Mr. Capel’s insider and industry perspectives, and knowledge of the Company’s day-to-day operations, enable him to work with the Board and provide essential leadership in strategy development and implementation, allocation of company resources, and communication with the Company’s various stakeholders and audiences.

Charles E. Moran

 

Primary Occupation

Age

Director Since

Current Term Expires

Board Committees

Other Public Company Boards

Director Qualification Highlights

Chairman and CEO of Skillsoft Corporation (Retired)

65

2017

2020

Compensation

Clarivate Analytics, Plc.

Commvault Systems, Inc.

Accounting and finance

Business strategy and operations

Corporate governance

Leadership - former CEO

Technology and software industries

 

Biography

Charles E. Moran, age 65, has served as a member of our Board since May 2017. Mr. Moran retired as the Chairman and Chief Executive Officer of Skillsoft Corporation, a leading global provider of cloud-based learning and talent management solutions. Mr. Moran held those positions from 1998 to 2015 and remained on as the Chairman from 2015 to 2016. From 1995 to 1997, Mr. Moran served as the President and Chief Executive Officer of NETg, a subsidiary of National Education Corporation, and a provider of computer-based training for IT professionals. From 1993 to 1994, he served as the Chief Operating Officer and Chief Financial Officer of SoftDesk, a leading Architecture, Engineering and Construction/Computer-Aided Design software application company, which was acquired by Autodesk. From 1992 to 1993, he served as the President of Sytron Corp, a data management software subsidiary of Rexon, Inc. From 1989 to 1992, he was Vice President of Sales and Marketing at Insite Peripherals, a manufacturer of floppy disk drives. Prior to joining Insite Peripherals, his experience included various business management positions with Archive Corporation, Florida Data, and Hamilton-Avnet Corporation. From 2009 to 2014, Mr. Moran served on the Board of Directors at Higher One, Inc., a leading payment technology provider for higher education. From 1997 to 2001, he served on the Board of Directors at Workgroup Technology, a client/server product data management solution. Mr. Moran also serves on the Boards of Clarivate Analytics, Plc. (NYSE: CCC) and Commvault Systems, Inc. (NASDAQ: CVLT).

Experience, Skills and Qualifications of Particular Relevance to Manhattan Associates

Mr. Moran brings expertise to the Board on digital transformation, cloud and SaaS business models, and cybersecurity. A well-rounded executive, Mr. Moran grew up in sales, proved his financial acumen through his time as a Chief Financial Officer, and is recognized as an outstanding strategist and operator. We believe Mr. Moran’s extensive background and knowledge in technology and consulting, and his leadership experience as a corporate executive, make him well-suited to continue to add value to the Company’s Board.

 

 

 

 

 

 

  13


 

Continuing Directors        

The members of our Board continuing in office as Class II Directors, elected to serve until the 2021 Annual Meeting of Shareholders, are as follows:

Deepak Raghavan

 

Primary Occupation

Age

Director Since

Current Term Expires

Board Committees

Other Public Company Boards

Director Qualification Highlights

Adjunct Professor at Georgia State University

53

1998

2021

Nomination & Governance (Chair)

None

Business operations

Business development and corporate transformation

Corporate governance

Supply chain management

Technology and software industries

Biography

Deepak Raghavan, age 53, has served as a member of our Board since February 1998. Dr. Raghavan conceptualized, designed and developed the Company’s PkMS® solution—the industry's first "packaged" supply chain execution system. Dr. Raghavan served as our Senior Vice President—Product Strategy from January 2001 until June 2002, as Senior Vice President and Chief Technology Officer from August 1998 until January 2001, and as Chief Technology Officer from our inception in October 1990 until August 1998. From 1987 until 1990, Dr. Raghavan served as a Senior Software Engineer for Infosys Technologies Limited, a software development company, where he specialized in the design and implementation of information systems for the apparel manufacturing industry. Dr. Raghavan earned a Civil Engineering degree from the Indian Institute of Technology, New Delhi, in 1987, an executive MBA degree from Georgia State University in 1998, and a Ph. D. degree in Astronomy from Georgia State University in 2009, and is currently an adjunct professor at Georgia State University.

Experience, Skills and Qualifications of Particular Relevance to Manhattan Associates

Dr. Raghavan has been an officer of the Company or member of our Board since its inception, and during that time has helped guide the Company through its transformation from a small private software and services company to a growing public company. With over 20 years of experience with the Company, Dr. Raghavan brings deep institutional knowledge and perspective to our Board regarding our strengths, challenges, and opportunities, as well as significant industry experience. As chairman of our Nominations and Governance Committee, Dr. Raghavan’s principled leadership is reflected in numerous committee achievements, including recommending, and then establishing, a process for regular Board meeting presentations and discussions on material company risk areas; adoption of our Majority Voting Director Resignation Policy; adoption of our Director Status Change Resignation Policy; and championing the committee’s recent Board recruiting efforts yielding our first female Board nominee. Dr. Raghavan’s skills and perspectives also have best positioned him to oversee new Director onboarding and other Board transitions.

Edmond I. Eger III

 

Primary Occupation

Age

Director Since

Current Term Expires

Board Committees

Other Public Company Boards

Director Qualification Highlights

CEO of Rewards Network Establishment Services, Inc.

59

2015

2021

Audit

None

Business operations

Corporate governance

International operations

Leadership - current CEO

Financial industries

 

Biography

Edmond I. Eger III, age 59, has served as a member of our Board since October 2015. Since September 2017, Mr. Eger has served as the Chief Executive Officer and member of the Board of Directors of Rewards Network Establishment Services, Inc., which helps restaurants increase their revenue, traffic, and customer engagement through their innovative financial and marketing services. From December 2013 through January 2017, Mr. Eger served as the President and Chief Executive Officer of OANDA Corporation, a leader in online foreign exchange and over-the-counter commodities and indices trading services. From 2009 to 2013, he served as a Senior Vice President and General Manager for the Americas at PayPal, Inc., and as an

14  


 

advisor to the CEO at eBay Corporation. From 1999 to 2009, Mr. Eger held various management positions with Citigroup and last served as the CEO for its International Cards Business. Prior to joining Citigroup, his experience included various business management positions with Advanta, Standard Chartered Bank, Wells Fargo, and McKinsey & Company. From September 2013 to February 2015, he served on the Board of Directors at Digital River, Inc., a Nasdaq traded e-commerce and payment provider, which was sold to Siris Capital.

Experience, Skills and Qualifications of Particular Relevance to Manhattan Associates

Mr. Eger is a leader in the payments and consumer transactions sectors, with wide-ranging experience, and has extensive knowledge of international business. He is a seasoned international payments executive with deep financial services, management, branding, and risk management experience. We believe Mr. Eger’s extensive knowledge and leadership experience bring valuable perspective to the Board. Mr. Eger’s familiarity and experience with audit committee and finance matters at public companies qualify him to continue service on our Audit Committee.

Linda T. Hollembaek

 

Primary Occupation

Age

Director Since

Current Term Expires

Board Committees

Other Public Company Boards

Director Qualification Highlights

Senior Vice President, Integration Management Officer of Lexmark International, Inc. (Retired)

62

2018

2021

Nomination & Governance

None

Business operations

Corporate transformation

International operations

Leadership - former senior executive

Supply chain management

Biography

Linda T. Hollembaek, age 62, has served as a member of our Board since May 2018. Ms. Hollembaek retired as Senior Vice President, Integration Management Officer of Lexmark International, Inc., a multifaceted technology company that delivers innovative imaging solutions and services to business and consumers worldwide. Ms. Hollembaek served in that role from 2016 until 2017. From 1999 to 2016, Ms. Hollembaek served in other management positions with Lexmark, including Vice President, Global Supply Chain Operations, and Vice President, General Manager of World Wide Services Operations. From 1996 to 1999, she served as Vice President, Sales & Operations, North America, at Danka Services International, one of the world’s largest independent suppliers of office imaging equipment and related services, parts, and supplies. From 1980 to 1996, she held various management positions with Eastman Kodak Company and last served as Vice President, Sales and Operations, North America.

Experience, Skills and Qualifications of Particular Relevance to Manhattan Associates

Ms. Hollembaek brings expertise to the Board on supply chain management, corporate transformation, international operations, and Asia-Pacific markets. We believe her knowledge and leadership experience in these areas will enable her to contribute significant value to our Board.

The members of our Board continuing in office as Class III Directors, elected to serve until the 2022 Annual Meeting of Shareholders, are as follows:

John J. Huntz, Jr.

 

Primary Occupation

Age

Director Since

Current Term Expires

Board Committees

Other Public Company Boards

Director Qualification Highlights

Managing Director of Huntz & Co., LLC

69

1999

2022

Audit (Chair)

Compensation

Nomination & Governance

None

Accounting and finance

Business development and corporate transactions

Business operations

Corporate governance

Leadership - current Chairman

 

  15


 

Biography

John J. Huntz, Jr., age 69, has served as a member of our Board since January 1999 and as Chairman of our Board since May 2003. Mr. Huntz has more than 35 years of private equity, venture capital, and operational experience. Since 2013, Mr. Huntz has served as Managing Director of Huntz & Co., LLC, a venture advisory firm. He also serves on several early stage technology and healthcare ventures boards and is an Advisor to Balentine, an Atlanta based wealth management firm. From 2005 to 2013, Mr. Huntz served as Executive Director, Venture Capital Investments, of Arcapita, Inc., and from 2009 to 2013, served as its President. From 2006 until 2010, Mr. Huntz also served as a director and Chairman of the Audit Committee of CardioMEMS, Inc., and then until 2014, he served as its Chairman of the Board. CardioMEMS was acquired by St. Jude Medical in 2014. From 1994 through 2005, Mr. Huntz worked at the Fuqua Companies, most recently as Managing Director of Fuqua Ventures. Mr. Huntz also served as Executive Vice President and Chief Operating Officer of Fuqua Enterprises, Inc., (NYSE) a public company.

Mr. Huntz’ prior experience includes, from September 1989 to January 1994, serving as Managing Partner of Noble Ventures International, a private equity firm. From 1984 to 1989, Mr. Huntz provided financial and investment management consulting as Director of Capital Resources for Arthur Young & Company, and from 1979 to 1984, he was an investment professional at Harrison Capital, a private equity investment subsidiary of Texaco. Mr. Huntz has also served as a Board member for the National Venture Capital Association, and the SEC’s Small Business Capital Formation Task Force Executive Committee. He founded and leads the Southern Capital Forum and is an Advisory Board member of the Metro Atlanta Chamber of Commerce, past Chairman of the Georgia Logistics Innovation Council, and a member of the Board of Georgia Advanced Technology Ventures (Georgia Tech). He also is on the Piedmont Hospital Foundation Board and has served in numerous other business and community organizations.

Experience, Skills and Qualifications of Particular Relevance to Manhattan Associates

Mr. Huntz has over 40 years of both private and public company operating and leadership experience and has served on numerous boards. In addition, he has extensive financial industry experience through his private equity and venture capital work. We believe Mr. Huntz’s extensive experience, his operational, leadership and finance expertise, and his business and community prominence make him well suited to be our Chairman of the Board and our Audit Committee Chairman. Our Board has determined Mr. Huntz is an “audit committee financial expert” as defined in SEC rules.

Thomas E. Noonan

 

Primary Occupation

Age

Director Since

Current Term Expires

Board Committees

Other Public Company Boards

Director Qualification Highlights

General Partner of TechOperators, LLC

59

1999

2022

Audit

Compensation (Chair)

Intercontinental Exchange, Inc.

Accounting and finance

Business operations

Corporate governance

Leadership - current Partner

Technology and software industries

Biography

Thomas E. Noonan, age 59, has served as a member of our Board since January 1999. Since 2008, Mr. Noonan has served as a Partner of TechOperators, LLC, an early stage technology investment firm that he founded. Since 2013, he has served on the Board of Directors of Ionic Security Inc., a data security company funded by TechOperators. Mr. Noonan became Executive Chairman of Ionic Security in January 2016. He is also Chairman of TEN Holdings, LLC, a diversified family office investment company. From July 2013 until November 2015, Mr. Noonan served as Senior Director and General Manager for the EnergyWise product group at Cisco Systems, which in July 2013, had acquired JouleX, a company founded by Mr. Noonan, which was a leading innovator in network-based enterprise management. Since 2010, Mr. Noonan had served as President and Chief Executive Officer of JouleX. From November 2006 until February 2008, Mr. Noonan served as the General Manager of IBM Internet Security Systems, a division of IBM providing information technology system security products and services. Mr. Noonan served as the President and member of the Board of Directors of Internet Security Systems, Inc., since May 1995, and as its Chief Executive Officer and Chairman from November 1996 until its acquisition by IBM in November 2006. Prior to joining Internet Security Systems, Mr. Noonan served as Vice President, Sales and Marketing with TSI International, Inc., an electronic commerce company, from October 1994 until April 1995. From November 1989 until October 1994, Mr. Noonan held high-level sales and marketing positions at Dun & Bradstreet Software, a developer of enterprise business software. Mr. Noonan also serves on the boards of Intercontinental Exchange, Inc. (NYSE: ICE), Children’s Healthcare of Atlanta, and the Georgia Tech Foundation, and is on the National Infrastructure Advisory Council.

 

16  


 

Experience, Skills and Qualifications of Particular Relevance to Manhattan Associates

Mr. Noonan brings to the Company many years of experience in senior management in the software industry, including as co-founder, Chairman, President, and Chief Executive Officer of a public software company. We believe his entrepreneurial, executive management, and software industry experience is an indispensable resource to the Board. His executive experiences, in which he has dealt with public company compensation plan design and implementation, qualify him well to continue to chair our Compensation Committee. Mr. Noonan’s familiarity and experience with corporate accounting and finance matters at public companies qualify him to continue service on our Audit Committee. Our Board has determined he is an “audit committee financial expert” as defined in SEC rules.

 

Majority Vote Resignation Policy for Director Elections

The Company’s Bylaws provide that Directors are elected by a plurality of the votes cast. Although nominees who receive the most votes for the available positions will be duly elected, the Board has adopted a Majority Voting Director Resignation Policy (the “Resignation Policy”) applicable to nominees who fail to receive the affirmative vote of a majority of the votes cast in an uncontested election for Directors. The Resignation Policy requires that a nominee not receiving a majority affirmative vote in an uncontested election promptly tender to the Board or its Chair their resignation from the Board and committees on which that Director serves. The resignation may be conditioned upon Board acceptance. If it is not so conditioned, the resignation must specify that it is effective immediately on delivery.

A “majority affirmative vote” means that the votes cast “for” a nominee’s election exceed those “against,” with abstentions and broker non-votes not being considered “votes cast.”  You have been provided with options to vote “for” or “against” each Director nominee, and also to “abstain” from voting on a particular nominee.  However, neither a vote “against” a Director nominee, nor an abstention, affects whether a Director nominee in an uncontested election is legally elected under the plurality vote standard (provided such nominee receives at least one “for” vote).  But a vote “against” a Director is considered in determining whether a Director who is elected has received a “majority affirmative vote” for purposes of the Resignation Policy (as noted above, an abstention does not affect the Resignation Policy-related determination).  

If a Director nominee elected to the Board fails to receive a majority affirmative vote and tenders a conditional resignation to the Board, the Nomination and Governance Committee of the Board will consider their resignation, including any information provided by that Director, and within 60 days of the shareholder meeting at which that Director failed to receive a majority affirmative vote, will recommend to the full Board what action to take on the Director’s resignation. The Committee may recommend, among other things, acceptance or rejection of the resignation, delayed acceptance pending the recruitment and election of a new Director, or rejection of the resignation in order to address the underlying reasons for the Director’s failure to receive the majority affirmative vote of the shareholders. The policy provides for the Board to act on the Committee’s recommendation within 90 days following the shareholder meeting.

In considering a conditional resignation, the Committee and the Board may consider those factors they deem relevant, including but not limited to the underlying reasons for the failure of the Director to receive a majority affirmative vote, the tenure and qualifications of the Director, the Director’s past and expected future contributions, other policies, and the overall composition of the Board, including whether accepting the resignation would cause the Company to fail to meet legal or stock market requirements.

Following the Board’s decision, the Company will publicly announce the Board’s decision regarding any conditional resignation. A resigning Director cannot participate in Committee or Board decisions regarding their resignations, except in certain cases where multiple Directors have failed to receive majority affirmative votes, which circumstances are described in the full policy posted in the Investor Relations section of our web site at www.manh.com. The preceding summary of the policy is qualified in its entirety by reference to the full policy.

Board Independence and Meetings

The Board currently consists of seven members, all of whom, with the exception of Mr. Capel, our President and Chief Executive Officer, have been determined by the Board to be “independent” as that term is defined under the corporate governance rules of The Nasdaq Stock Market. In compliance with Nasdaq corporate governance rules, the independent Directors of the Company conduct regularly scheduled meetings without the presence of non-independent Directors or management. The Board’s standing independent committees also regularly meet without management present. During the fiscal year ended December 31, 2019, the Board held five meetings. All the incumbent Directors attended at least 75% of the aggregate total number of Board meetings and meetings of Committees on which they served that occurred during the portion of fiscal year 2019 during which each served as a Director. Our Directors are invited to the Annual Meeting of Shareholders, and two Directors attended our 2019 Annual Meeting.

  17


 

Board Committees

The Board maintains three permanent committees: Audit Committee, Compensation Committee, and Nomination and Governance Committee. The Board has adopted charters for the committees, which can be found in the Investor Relations section of our web site at www.manh.com.

The following table provides membership including independence and meeting information for each committee during 2019.

 

 

 

Committee Memberships

Name

Independent

Audit

Compensation

Nomination & Governance

Eddie Capel

No

 

 

 

Edmond I. Eger III

Yes

 

 

Linda T. Hollembaek

Yes

 

John J. Huntz, Jr.

Yes

Chair

Charles E. Moran

Yes

 

Thomas E. Noonan

Yes

Chair

 

Deepak Raghavan

Yes

 

 

Chair

2019 Meetings

 

4

5

4

Audit Committee

At the end of 2019, the Audit Committee consisted of Messrs. Huntz, Eger and Noonan. Mr. Huntz serves as Chairman of the Audit Committee. The Board has determined that each member of the Audit Committee meets the additional Nasdaq independence and financial literacy requirements for Audit Committee members, as well as the SEC’s Audit Committee independence standards. Further, the Board has determined that Messrs. Huntz and Noonan are “audit committee financial experts,” as defined by SEC rules. Among other responsibilities, the Audit Committee recommends to the Board the selection of our independent registered public accounting firm, reviews the scope and results of the audit, reviews with management our internal controls and periodic financial statements, and approves of the inclusion of our audited financial statements in our Annual Report on Form 10-K to be filed with the SEC. The Audit Committee also reviews and discusses with management and our auditors major financial risk exposures and those steps management has taken to monitor and control those exposures. During the fiscal year ended December 31, 2019, the Audit Committee met four times.

Compensation Committee

At the end of 2019, the Compensation Committee consisted of Messrs. Noonan, Huntz, and Moran. Mr. Noonan serves as Chairman of the Compensation Committee. The Board has determined that each member of the Compensation Committee meets the additional Nasdaq independence requirements for members of compensation committees. The Compensation Committee approves the compensation of our executive officers, including the Chief Executive Officer, reviews compensation plans for our non-employee Board members, officers, and other key executives, and makes recommendations concerning those matters to the Board. The Compensation Committee also administers our equity incentive programs and establishes the terms of our grants under these plans. During the fiscal year ended December 31, 2019, the Compensation Committee met five times.

Nomination and Governance Committee

At the end of 2019, the Nomination and Governance Committee (the “Governance Committee”) consisted of Messrs. Raghavan, and Huntz, and Ms. Hollembaek. Mr. Raghavan serves as Chairman of the Governance Committee. The Governance Committee recruits outstanding individuals to serve on our Board and recommends to our Board the slate of Director nominees to stand for election at our annual meetings of shareholders. The Governance Committee also recommends Directors for appointment to our Board Committees and oversees our periodic formal Board and Committee assessment process, including oversight of post-assessment improvements. During the fiscal year ended December 31, 2019, the Governance Committee met four times.

In accordance with the provisions of our Bylaws, our shareholders may directly nominate prospective Director candidates by delivering to our Corporate Secretary certain information about the nominee not less than 60 days prior to the meeting as originally scheduled, or if less than 70 days’ notice or prior public disclosure of the date of the scheduled meeting is given or made, delivery of notice to the Company not later than the tenth day following the earlier of the day on which notice of the date of the meeting is mailed to shareholders or public disclosure of the date of that meeting is made. Our Corporate Secretary’s address is Manhattan Associates, Inc., 2300 Windy Ridge Parkway, Tenth Floor, Atlanta, Georgia 30339.

18  


 

Shareholders may also recommend a director candidate for consideration by the Governance Committee by submitting the candidate’s name and qualifications to our Corporate Secretary. The Governance Committee will consider any candidate recommended (but not also directly nominated) by shareholders for inclusion in the Board’s slate in the same manner it considers other candidates in the candidate pool, as described below.

In identifying qualified individuals to become members of the Board, the Governance Committee selects candidates whose attributes it believes would be most beneficial to the Company. The Governance Committee (i) considers factors such as the individual’s experience, integrity, competence, skills, and dedication in the context of the needs of the Board, (ii) seeks to recruit from a diverse pool, considering diversity factors such as gender, race, ethnicity, age, and occupation, and (iii) takes reasonable steps to include meaningful representation in the candidate pool of women and minorities. The Governance Committee identifies Director candidates through their personal, business, and organizational contacts and those of management, through search firms, and from shareholder recommendations. The composition of our current Board reflects diversity in business and professional experience and skills.

Board Leadership Structure

Our Bylaws allow, but do not require, our Board to appoint an officer or a non-executive to the position of Chairman of our Board. Our Board has chosen to separate the positions of Chairman and Chief Executive Officer. Currently, John J. Huntz, Jr., a non-employee independent Director, serves as Chairman and Eddie Capel serves as our President and Chief Executive Officer. We believe separating these positions allows our Chief Executive Officer to focus more on our day-to-day business and other traditional CEO roles, while allowing the Chairman to lead our Board in its fundamental role of providing advice to and independent oversight of management. Our Board recognizes the time, effort, and energy that the Chief Executive Officer is required to devote to his position in the current business environment, as well as the commitment required to serve as our Chairman, particularly as our Board’s oversight responsibilities continue to grow. Although we do not have a policy mandating the separation of the roles of Chairman and Chief Executive Officer, our Board believes that having separate positions and having an independent outside Director serve as Chairman currently is the appropriate leadership structure for Manhattan Associates.

Code of Ethics

Our Board has adopted a Global Ethics and Compliance Code that is applicable to all members of our Board, our executive officers, and our employees. The Code appears in the Investor Relations section of our web site at www.manh.com. If, in the future, we amend, modify, or waive a provision in the Code, we may, rather than file a Form 8-K, satisfy the disclosure requirement under Item 5.05 of Form 8-K by posting that information on our web site.

Risk Management

While we believe risk management is the responsibility of every employee, senior management is ultimately accountable to our Board and shareholders for risk management. Senior management is responsible for the day-to-day management of our risks, while our Board, including through its Committees, oversees planning and responding to risks arising from changing business conditions or the initiation of new activities or products. Our Board also is responsible for overseeing compliance with laws and regulations, responding to recommendations from auditors and supervisory authorities, and overseeing management’s conformance with internal policies and controls addressing the operations and risks of significant activities.

Our Board believes that full and open communication between management and our Board is essential for effective risk management and oversight. Our Board receives regular reports from members of senior management on areas of material risk to the Company, including operational, financial, legal and regulatory, strategic, competitive, and reputational risks. Additionally, senior management is available to address any questions or concerns raised by our Board on risk management-related and any other matters.

While our Board is ultimately responsible for risk oversight at the Company, our three Board Committees assist our Board in fulfilling its oversight responsibilities in certain areas of risk. The Audit Committee assists our Board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls, cyber risk, data protection, business ethics and corporate compliance. The Governance Committee assists our Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for our Directors, corporate governance, social responsibility, and sustainability. The Compensation Committee assists our Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs, succession planning for our executive officers, and human capital and talent, including workforce diversity and inclusion.

  19


 

In keeping with its responsibilities, the Compensation Committee has evaluated potential risks arising from the Company’s compensation policies and practices for all employees and concluded that any such risks are not reasonably likely to have a material adverse effect on the Company. Among other possible risks, the Compensation Committee considered risks related to the three components of our 2019 incentive compensation plans. Those components are Target Revenue (consolidated revenue excluding revenue from cloud-based services, hardware sales and billed travel), new annual contract value from cloud-based services (NACV) and adjusted operating income (AOI) (see complete definitions on page 32). In reaching its conclusion, the Compensation Committee reviewed and considered various factors, including the following factors:

 

Our incentive compensation plans include a short-term annual cash bonus for all participants and long-term equity incentives for upper management;

 

Our long-term equity incentives include both performance-based and service-based awards;

 

Our short-term annual cash bonuses and our long-term performance-based equity incentives use Target Revenue, NACV, and AOI as performance measures, with minimum to maximum range criteria (minimum threshold, target, maximum) providing a pay-for-performance opportunity with zero payout potential below threshold and maximum payout opportunity above target capped at a specific level; and

 

Our Compensation Committee reviews and approves performance criteria and related target levels and performance payout amounts for actual results before incentives are paid.


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Director Compensation

The Company’s non-employee director compensation program for 2019 provided for the following annual cash and equity compensation:

Cash Compensation

 

 

 

Chairman

 

Non-Chairman

Board

 

$150,000

 

$50,000

Audit

 

20,000

 

10,000

Compensation

 

20,000

 

7,500

Nomination & Governance

 

10,000

 

5,000

We paid the cash compensation in quarterly installments, except for all cash compensation paid to the Chairman of the Board, which we paid in monthly installments.

Equity Compensation

During 2019, the Company granted each non-employee director an annual award of $200,000 of restricted stock units (“RSUs”). We granted the awards on the date of the 2019 Annual Meeting of Shareholders, and they vest on the earlier of the first anniversary of the grant date or the next Annual Meeting of Shareholders so long as the director remains in continuous service on the Board through that vesting date. We determined the number of RSUs granted based on the closing price of the Company’s Common Stock on the date immediately prior to the grant date ($63.70 per share on May 13, 2019), resulting in each non-employee director receiving 3,140 RSUs ($200,000 / $63.70 = 3,140). Upon vesting, we will settle each RSU with one share of Common Stock.

The following table sets forth, for the year ended December 31, 2019, the total compensation paid to our non-employee directors.

 

2019 Director Compensation Table

Name (1)

 

Fees Paid In Cash

 

Stock Awards(2)

 

Total

John J. Huntz, Jr.

 

$182,500

 

$200,960

 

$383,460

Thomas E. Noonan

 

80,000

 

200,960

 

280,960

Deepak Raghavan

 

60,000

 

200,960

 

260,960

Edmond I. Eger III

 

58,635

 

200,960

 

259,595

Charles E. Moran

 

56,135

 

200,960

 

257,095

Linda T. Hollembaek

 

53,516

 

200,960

 

254,476

John H. Heyman (3)

 

22,253

 

0

 

22,253

 

 

 

 

 

 

 

 

 

 

 

 

 

 

____________ 

(1)

Mr. Capel, our employee Director, does not receive any compensation for his service as a member of the Board of Directors. Mr. Capel’s compensation during 2019 is reflected in the Summary Compensation Table on page 38.

(2)

This column represents the aggregate grant date fair value of the RSUs awarded in 2019 in accordance with the stock compensation topic in the Financial Accounting Standard Board’s Accounting Standards Codification Topic 718 (“ASC Topic 718”). These award fair values have been determined based on the closing market price of the Company’s Common Stock on the grant date ($64.00 per share).

(3)

This table includes amounts paid to Mr. Heyman prior to the expiration of his term as a Class III Director on May 14, 2019.

 

 

Our Compensation Committee periodically has its independent compensation consultants review the compensation structure and levels for our non-employee directors, including by analyzing director compensation at the same peer companies used in evaluating executive compensation. In January 2020, the Board, on the recommendation of the Committee, and following consultation with the consultants, increased the annual equity award to the non-employee directors to $240,000. Based on their analysis, the Board considers the non-employee directors’ compensation to be appropriate and consistent with practices of comparable companies.

 

  21


 

The following table summarizes the equity awards made to the non-employee members of our Board that were outstanding and unvested as of December 31, 2019.

 

Non-Employee Directors' Outstanding Stock Awards as of December 31, 2019

 

Name

 

Number of Shares Subject to Restricted Stock Units

 

John J. Huntz, Jr.

 

 

3,140

 

Thomas E. Noonan

 

 

3,140

 

John H. Heyman

 

 

3,140

 

Deepak Raghavan

 

 

3,140

 

Edmond I. Eger III

 

 

3,140

 

Charles E. Moran

 

 

3,140

 

Linda T. Hollembaek

 

 

3,140

 

Share Ownership Guidelines

The Compensation Committee and the Board believe that each non-employee director and executive officer should have a meaningful personal investment in the Company, which is intended to further align the interests of our directors and executive officers with the long-term interests of our shareholders. Accordingly, in February 2018, the Company adopted share ownership guidelines for both non-employee directors and executive officers of the Company. Under the share ownership guidelines, each non-employee director is expected to own shares of Common Stock (not including unvested RSUs) with a market value equal to at least two times such director’s annual base cash retainer. This requirement must be met within five years of becoming a director or the adoption of the policy, whichever is later.

Further, for the Company’s executive officers, the stock ownership guidelines are a multiple of annual base salary, as follows:

 

Executive Officer Title

Salary Multiple

Chief Executive Officer

4x

Chief Financial Officer

2x

Senior Vice President, Americas

2x

Chief Legal Officer

1x

Chief Accounting Officer

1x

This requirement must be met within five years of becoming subject to the guidelines or the adoption of the policy, whichever is later.

Related Party Transactions

The Company’s Global Ethics and Compliance Code, which is available in the Investor Relations section of our web site at www.manh.com, and which includes our conflicts of interest policy, provides generally that the Company’s Directors, officers, and employees must avoid any personal, financial, or family interest that could keep that person from acting in our best interest. In general, the Chief Legal Officer, who serves as the Company’s Chief Compliance Officer, must approve of exceptions to the policy as written. In addition, the Company has an unwritten policy requiring approval by the Audit Committee or the independent members of the Board of exceptions for conflicts involving Directors or executive officers.

Since the beginning of fiscal year 2012, the Company has not been a participant in any related-party transaction requiring disclosure pursuant to Item 404 of the SEC’s Regulation S-K, and no such transaction is currently proposed.

22  


 

SECURITY OWNERSHIP

Security Ownership of Certain Beneficial Owners and Management

FIVE PERCENT BENEFICIAL OWNERS OF COMPANY STOCK

The following table sets forth the amount and percent of shares of Common Stock held by holders that are deemed under SEC rules to be “beneficial owners” of more than 5% of the outstanding shares of Common Stock as of March 5, 2020, unless a different date is noted below.

 

 

Common Stock Beneficially Owned (1)

Name of Beneficial Owner

Number of Shares of Common Stock

Percentage of Class

The Vanguard Group (2)

7,001,102

11%

BlackRock, Inc. (3)

6,424,819

10%

Brown Capital Management, LLC (4)

5,980,010

9%

Eaton Vance Management (5)

4,968,645

8%

Neuberger Berman Group LLC (6)

3,850,580

6%

 

_____________

(1) 

The percentage beneficially owned is based on 63,533,428 shares outstanding as of March 5, 2020.  

(2)

Based on a Schedule 13G/A filed with the SEC on February 12, 2020, by The Vanguard Group, Inc. Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 28,637 shares of the Company’s Common Stock as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 17,511 shares of the Company’s Common Stock as a result of its serving as investment manager of Australian investment offerings. The address of The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

(3)

Based on a Schedule 13G/A filed with the SEC on January 10, 2020, by BlackRock, Inc. Various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Common Stock of the Company. No one person’s interest in the Common Stock of the Company is more than five percent of the total outstanding common shares. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.

(4)

Based on a Schedule 13G/A filed with the SEC on February 14, 2020 by Brown Capital Management, LLC. All of these shares of Common Stock are owned by various investment advisory clients of Brown Capital Management, LLC, which is deemed to be a beneficial owner of those shares pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, due to its discretionary power to make investment decisions over such shares for its clients and/or its ability to vote such shares. In all cases, persons other than Brown Capital Management, LLC have the right to receive, or the power to direct the receipt of, dividends from, or the proceeds from the sale of the shares. No individual client holds more than five percent of the class, other than the Brown Capital Management Small Company Fund. The address of Brown Capital Management, LLC is 1201 N. Calvert Street, Baltimore, MD 21202.

(5)

Based on a Schedule 13G/A filed with the SEC on February 14, 2020, by Eaton Vance Management, an investment adviser. The address of Eaton Vance Management is 2 International Place, Boston, MA 02110.

(6)

Based on a Schedule 13G/A filed with the SEC on February 13, 2020 by Neuberger Berman Group LLC. Neuberger Berman Group LLC and its affiliates may be deemed to be beneficial owners of securities for purposes of Exchange Act Rule 13d-3 because they or certain affiliated persons have shared power to retain, dispose of or vote the securities of unrelated clients. Neuberger Berman Group LLC or its affiliated persons do not, however, have any economic interest in the securities of those clients. The clients have the sole right to receive and the power to direct the receipt of dividends from or proceeds from the sale of such securities. Other than named in the Schedule 13G/A filing, no one client has an interest of more than 5% of the issuer. With regard to 3,817,840 shares, Neuberger Berman Group LLC may be deemed to be the beneficial owner for purposes of Rule 13d-3 because certain affiliated persons have shared power to retain, dispose of and vote the securities. In addition to the holdings of individual advisory clients, Neuberger Berman Investment Advisers LLC serves as investment manager of Neuberger Berman Group LLC’s various registered mutual funds which hold such shares. The holdings belonging to clients of Neuberger Berman Trust Co N.A., Neuberger Berman Trust Co of Delaware N.A., Neuberger Berman Asia Ltd., Neuberger Berman Breton Hill ULC, NB Alternatives Advisers LLC and Neuberger Berman Investment Advisers LLC are also aggregated to comprise the holdings referenced herein. In addition, with regard to 3,850,580 shares from individual client accounts over which Neuberger Berman Investment Advisers LLC has shared power to dispose but does not have voting power over these shares. The holdings of Neuberger Berman Trust Co N.A., Neuberger Berman Trust Co of Delaware N.A., Neuberger Berman Asia Ltd., Neuberger Berman Breton Hill ULC, NB Alternatives Advisers LLC and Neuberger Berman Investment Advisers LLC, are also aggregated to comprise the holdings referenced herein.. The address of Neuberger Berman Group LLC is 1290 Avenue of the Americas, New York, NY 10104.

  23


 

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth the amount and percent of shares of Common Stock that, as of March 5, 2020, unless a different date is noted below, are deemed under SEC rules to be “beneficially owned” by (i) each member of the Board and each nominee to become a member of the Board, (ii) the Chief Executive Officer, the Chief Financial Officer, and the other executive officers identified as the “named executive officers” in the Summary Compensation Table appearing in this Proxy Statement, and (iii) all Directors and executive officers of the Company as a group.

 

Common Stock Beneficially Owned (1)

Name of Beneficial Owner

Number of Shares of Common Stock

Percentage of Class

Eddie Capel (2)

102,500

*

Edmond I. Eger III (3)

9,376

*

Linda T. Hollembaek (4)

3,837

*

John J. Huntz, Jr. (5)

52,470

*

Charles E. Moran (6)

7,437

*

Thomas E. Noonan (7)

129,387

*

Deepak Raghavan (8)

28,391

*

Dennis B. Story (9)

33,561

*

Bruce S. Richards (10)

11,588

*

Robert G. Howell (11)

76,907

*

Linda C. Pinne (12)

16,192

*

All executive officers and directors as a group (11 persons)

471,646

*

_____________

*

Less than 1% of the outstanding Common Stock.

(1)

The percentage beneficially owned is based on 63,533,428 shares outstanding as of March 5, 2020.  Unless otherwise noted, the address for each beneficial owner is the Company’s corporate headquarters located at 2300 Windy Ridge Parkway, Tenth Floor, Atlanta, Georgia 30339.

(2)

Does not include 145,002 shares represented by outstanding and unvested service-based RSUs and 68,371 shares represented by outstanding and unvested performance-based RSUs.

(3)

Does not include 3,140 shares represented by outstanding and unvested service-based RSUs.

(4)

Does not include 3,140 shares represented by outstanding and unvested service-based RSUs.

(5)

Does not include 3,140 shares represented by outstanding and unvested service-based RSUs.

(6)

Does not include 3,140 shares represented by outstanding and unvested service-based RSUs.

(7)

Does not include 3,140 shares represented by outstanding and unvested service-based RSUs.

(8)

Does not include 3,140 shares represented by outstanding and unvested service-based RSUs.

(9)

Does not include 77,663 shares represented by outstanding and unvested service-based RSUs and 26,885 shares represented by outstanding and unvested performance-based RSUs.

(10)

Does not include 22,768 shares represented by outstanding and unvested service-based RSUs and 9,747 shares represented by outstanding and unvested performance-based RSUs.

(11)

Does not include 62,014 shares represented by outstanding and unvested service-based RSUs and 21,004 shares represented by outstanding and unvested performance-based RSUs.

(12)

Does not include 9,405 shares represented by outstanding and unvested service-based RSUs and 3,125 shares represented by outstanding and unvested performance-based RSUs.


24  


 

EXECUTIVE COMPENSATION

Proposal 2 – Resolution to Approve Named Executive Officers’ Compensation

Prior to voting on proposal 2, the Board recommends our shareholders review and consider our executive compensation philosophy, policy, and practices, all of which are summarized below and discussed in more detail in the Compensation Discussion and Analysis section of this Proxy Statement beginning on page 26.

background

The Board believes our current executive compensation programs directly link executive compensation to our financial performance and align the interests of our executive officers with those of our shareholders. Our Board also believes our executive compensation programs provide our executive officers with a balanced compensation package that includes a reasonable base salary along with annual and long-term incentive compensation opportunities based on our performance against specified financial performance objectives.

While your vote is advisory and will not be binding on the Board, the Compensation Committee, or the Company, we strive to align our executive compensation programs with the interests of our long-term shareholders. As they do every year, the Board and the Compensation Committee will take into account the outcome of this year’s Say-on-Pay vote when considering future compensation actions and decisions.

say-on-pay proposal

The Board believes that our named executive officers’ (NEOs’) compensation is essential in attracting and retaining the high caliber of executive talent necessary to drive our business forward and build sustainable value for our shareholders. Accordingly, we are asking our shareholders to vote FOR the following resolution:

RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the named executive officers as disclosed in the Proxy Statement for the 2020 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the SEC (which disclosure includes the Compensation Discussion and Analysis, the 2019 Summary Compensation Table and the other related tables and disclosures).”

Effect of say-on-pay vote

As indicated above, the vote on Proposal 2 is advisory and will not be binding on the Board, the Compensation Committee, or the Company. However, the Board values your opinions as expressed through your votes and other communications, and our Compensation Committee will carefully review the 2020 Say-on-Pay voting results to better understand any issues or concerns you may have with our executive compensation. Shareholders who want to communicate with our Board on executive compensation or other matters should refer to “Communication with Directors” on page 56 of this Proxy Statement for additional information.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE EXECUTIVE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT, PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SECURITIES AND EXCHANGE COMMISSION.


  25


 

Compensation Discussion and Analysis

This Compensation Discussion and Analysis describes the compensation program for our Principal Executive Officer, our Principal Financial Officer, and the next three most highly compensated Executive Officers of the Company during 2019 (the “named executive officers” or “NEOs”). These individuals are listed in the following table.

 

Name

Title

Page Number for Biography

Eddie Capel

President and Chief Executive Officer ("CEO")

12

Dennis B. Story

Executive Vice President, Chief Financial Officer, and Treasurer (“CFO”)

43

Bruce S. Richards

Senior Vice President, Chief Legal Officer, and Secretary

43

Robert G. Howell

Senior Vice President, Americas Sales

44

Linda C. Pinne

Senior Vice President, Global Corporate Controller, and Chief Accounting Officer

44

This Compensation Discussion and Analysis describes the material elements of our 2019 executive compensation program. It also provides an overview of our executive compensation philosophy and objectives. Finally, it analyzes how and why our Compensation Committee arrived at the specific compensation decisions for our 2019 NEOs and other executive officers, including the key factors the Compensation Committee considered in determining their compensation.

EXECUTIVE SUMMARY

 

As we transition to a cloud-first company, we believe 2019 was a year of substantial progress in positioning the Company for future long-term sustainable growth. Entering 2020, we remain focused on driving revenue growth and gaining market share. We note however our objectives for the year are subject to a number of risks and uncertainties, including the effects on global commerce of the spread of the novel coronavirus strain known as COVID-19 as well as the other factors set forth in Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. We are confident in our long-term strategy driven by our market leadership in innovative supply chain and omnichannel solutions and services.

 

Our accomplishments include:

 

Aggressively investing in innovation and expanding total addressable market

 

We continued to deliver and expand upon our cloud-native architecture platform and full suite of Manhattan Active® solutions launched in mid-2017.

 

Our Manhattan Active® Solutions are providing meaningfully differentiated innovation and opportunity for Manhattan in new markets including Omnichannel, Point of Sale, and Customer Engagement.

 

Our global pipelines are solid, and we see strong demand for cloud-based solutions. License pipeline activity is beginning to convert to cloud pipeline, and as a result we expect license revenue to continue to decline year-over-year as customers increasingly select our cloud offerings. We continue to be encouraged by new customer signings and by the concentration of potential new customers in the pipeline with about 50% of our deal opportunities representing net new customers.

 

We invested $88 million in R&D, up 22%, and plan to continue to increase our investment in 2020. Our investment in R&D is a strategic priority to deliver meaningfully differentiated cloud innovation. We expect that innovation to expand our addressable market while helping us achieve long-term sustainable organic revenue growth and top quartile operating margins compared to other enterprise application software providers.

 

Revenue and earnings performance was solid in the 2nd year of cloud transition

 

Total revenue was $618 million, up 11%, reflecting our transition to cloud.

 

Adjusted EPS were $1.74, down 3% versus 2018, reflecting investment in our cloud transition.

 

Customer retention rates were well above 90%; 30% of the combination of software license and cloud revenue were with net new customers.

 

Our Manhattan Active® Solutions continues to be well received and continues to gain traction with cloud revenue more than doubling over 2018 from $23.1 million to $46.8 million, up 103%, and increasing from 34% of total software revenue in 2018 to 49% in 2019. In the fourth quarter of 2019, cloud revenue surpassed software license revenue, representing 63% of the total software license and cloud revenue mix. Going forward, we expect cloud revenue to increase as a percentage of our total software as market demand for cloud solutions supplants legacy perpetual license demand.

 

Recurring revenue as a percentage of total revenue, excluding hardware sales, rose from 31% in 2018 to 32% in 2019.

 

Our full year 2019 global consulting services revenue was up 9% year-over-year.

 

2019 GAAP operating margin of 19% ranked 3rd best across publicly traded companies in our peer group.

 

 

26  


 

Maintained capital discipline and financial capacity

 

We closed 2019 with $111 million in cash and cash equivalents and zero debt, self-funding all our growth through free cash flow generation; we have never borrowed in the history of the Company.

 

Operating cash flow was $147 million, up 7% versus 2018 primarily driven by our cloud transition. Our operating cash flow performance was our 2nd best year on record.

 

We invested $116 million in share repurchases, lowering our common shares outstanding (“CSO”) by 2% over the prior year. Over the last decade, we have invested over $1 billion in share buybacks, lowering CSO by 27%. As we have throughout our history, we continue to design the performance criteria under our performance-based incentive plans so that our NEOs and other employees receive no compensation benefit from the impact of our share repurchases on EPS.

 

In 2019, we exceeded our target objectives (as defined on page 32) for our annual cash bonus program and the performance-based component of our long-term equity (restricted stock unit) program, resulting in a payout of 150% of target for our annual cash bonus program, including to our NEOs and earned performance-based equity under the performance-based component of our 2019 long-term equity program at 150% of target, including for our NEOs.

 

Our total shareholder return (“TSR”) for 2019 was 88%. Based on the Company’s stock price at December 31, 2019, our CEO’s realizable compensation was 82% above the target value, and our other NEOs’ realizable compensation was collectively 68% above their targets. The Board of Directors believes the Company made substantial progress toward positioning the Company for long-term success, expanding its addressable market through investment in meaningfully differentiated innovation, and positioning Manhattan Associates for potential long-term sustainable growth.

CEO Target Versus Realizable Compensation

The “Target” bars represent Mr. Capel’s base salary, target annual cash bonus, and grant-date target value of long-term incentive awards for 2017, 2018, and 2019. The “Realizable” bars represent, as a percentage of target, the total of each year’s base salary paid, earned annual cash bonus, and the value of earned long-term incentive award (service-based and performance-based restricted stock unit (“RSU”) awards) based on the Company’s stock price at December 31, 2019.

 

 

(1)

TSR represents total shareholder return in 1 year (2019); 2 years (2018 and 2019); and 3 years (2017, 2018, and 2019), respectively.

 

(2)

This column represents realizable CEO compensation versus target over the comparable TSR period. The realizable CEO compensation represents the accumulation of each period’s base salary paid, annual cash bonus, and long-term incentive award value as of 2019.

 

Mr. Capel’s accumulated compensation for the past three years had an intended value of approximately $16.8 million (with equity awards valued at grant date). Based on the Company’s stock price at December 31, 2019, and the Company’s performance for the past three years, we estimate the realizable value of his compensation was approximately $25.2 million, or 50% above the intended value. By design, our executive compensation program is intended to align with creation of shareholder value, and the CEO’s realization of the intended value of his compensation is impacted both by the Company’s financial performance against its targets and by shareholder return.


  27


 

Our Compensation Philosophy

We are committed to a philosophy of pay-for-performance for our executives. Our executive compensation program is designed to achieve three primary objectives:

 

1.

Pay-for-Performance. Align actual compensation realized by our executive officers with achievement of our short-term and long-term business strategies, improving operational performance and stockholder return.

 

2.

Market Competitiveness. Provide market competitive compensation opportunities to attract and retain executive officers and motivate them to perform at their highest level.

 

3.

Shareholder Value Creation. Structure compensation through base salary, annual cash bonus opportunities, and a combination of service-based and performance-based equity awards, to promote increased shareholder value.

2019 Key Compensation Decisions

Our Compensation Committee’s key decisions for 2019 pertaining to our NEOs were as follows:

Base Salaries

 

The base salary of our President and CEO, Mr. Capel, increased by approximately 4% over 2018.

 

The base salaries of the remaining NEOs increased by approximately 3% over 2018.

Annual Cash Bonus

 

Our annual cash bonus program was based on three performance measures: Target Revenue, new annual contract value from cloud-based services (NACV) and adjusted operating income (AOI), all as defined on page 32. Based on our 2019 financial performance, the NEOs earned 150% of their 2019 annual cash bonus targets compared to 110% for 2018.

Long-term Incentive Compensation

 

Our 2019 long-term equity incentive program included grants to our NEO of RSUs comprising 50% service-based and 50% performance-based RSUs and were based on three performance measures: Target Revenue, NACV, and AOI. Based on our 2019 financial performance, the NEOs earned 150% of their 2019 performance-based RSUs compared to 110% for 2018.

 

In January 2019, our Compensation Committee approved a special retention grant of service-based RSUs to members of our executive team, including our NEOs. The Committee intended that grant, which vests over four years, to further motivate our dedicated and experienced executive team to remain with the Company to best ensure continued execution of our transition to a cloud-first Company.

Compensation Policies and Practices

Alignment between Company performance and executive compensation is the cornerstone of our executive compensation philosophy and program design. We also believe our overall governance of executive compensation is sound and reflects many best practices, including:

 

Separate CEO and Chairman of the Board

 

Compensation Committee comprised solely of independent directors

 

Compensation Committee engagement of external compensation consultant

 

Capped incentive opportunities to mitigate concerns regarding excessive risk-taking for all employee participants

 

Equity plan prohibition of stock option repricing and cash buyouts without shareholder approval for all employee participants

 

“Double-trigger” change-in-control arrangements

 

No excise tax gross-ups

 

Limited executive perquisites

 

Global Ethics and Compliance Code prohibits directors, officers, and employees from engaging in short sales of the Company’s securities, or hedging or monetization transactions with respect to our securities (such as purchasing or selling puts or call options, prepaid variable forward contracts, equity swaps, collars, exchange funds, or similar transactions).

In approving compensation arrangements for 2020, the Compensation Committee considered the pay-for-performance results and governance practices highlighted above, as well as the voting result on the 2019 “say on pay” proposal that was in favor of the Company’s executive compensation program.

 

28  


 

Compensation of our Chief Executive Officer

Our CEO participates in the same executive compensation programs as our other executive officers, including the other NEOs. In determining compensation for our CEO, the Compensation Committee considers the same information and factors used in determining compensation for the other NEOs, except that our CEO does not make a recommendation to the Compensation Committee for his own compensation.

For 2019, the Compensation Committee set Mr. Capel’s annual base salary at $600,000, with a target annual cash bonus opportunity equal to 100% of his base salary. The Company granted Mr. Capel a regular equity award of 105,133 RSUs (50% of which were service-based and 50% of which were subject to performance-based objectives), and a special service-based award of 51,536 RSUs (the special service-based award, granted in January 2019, is described in the subsection “Long-term Incentive Compensation” on page 34).

Based on our 2019 achievement against the performance measures under our short-term and long-term incentive programs (Targeted Revenue, NACV, and AOI, as defined on page 32, achieved at 150%), Mr. Capel earned a cash bonus of $900,000 and 150% of the performance-based component of his 2019 performance-based RSU award (which equaled 78,851 shares), which will vest over four years.

Mr. Capel’s accumulated compensation for 2019 had an intended grant-date value of approximately $8.8 million (annual salary, cash bonus and equity compensation). Based on the Company’s stock price at December 31, 2019, and the Company’s performance for the year, the earned value of his award was approximately $16.1 million, which was up 82% from total compensation target value (see chart on page 27).

Determining Executive Compensation

The Role of the Compensation Committee

The Compensation Committee is responsible for determining the compensation of our executive officers, including the NEOs, and for administering our Stock Incentive Plan. The Compensation Committee currently comprises three non-employee Directors: Messrs. Noonan (Chairman), Huntz, and Moran. The Compensation Committee’s overall objective is to establish a compensation policy that will (i) attract, retain, and reward executives who will and do contribute to achieving our business objectives, (ii) motivate our executive officers to achieve those objectives, and (iii) align the interests of our executive officers with those of our long-term shareholders.

The Role of Compensation Consultant

The Compensation Committee has the authority to retain compensation consultants and other advisors to assist it in performing its duties. In 2019, the Compensation Committee engaged Willis Towers Watson (through its subsidiary company Towers Watson Delaware Inc.) (“WTW”), as its compensation consultant. WTW reports to and is directed by the Compensation Committee. In general, the Compensation Committee directs WTW to provide periodic updates on market trends and developments, provide relevant and credible market data for assessing pay competitiveness, evaluate the alignment of the design of our executive compensation program with our business strategy, performance outcomes, and competitive pay practices, and WTW participates in Compensation Committee meetings where substantive executive compensation decisions are being made. The Company paid approximately $40,000 to WTW for those services provided in 2019.

 

In connection with its review of WTW’s independence, the Compensation Committee considered the six specific independence factors adopted by the SEC and the Nasdaq Stock Market and determined that WTW is independent. In conducting its review, the Committee considered that one or more WTW corporate affiliates provide the Company brokerage and other services related to the Company’s employee healthcare and other group benefits, and that the Company paid those affiliates for those services approximately $277,000 in 2018 and $169,000 in 2019, and anticipates paying similar amounts in 2020. In concluding that the provision to the Company of healthcare and other group benefits services by those WTW affiliates does not constitute a conflict of interest that would compromise WTW’s independence, the Committee considered the following WTW representations and other information obtained as part of its due diligence:

 

WTW has separated its compensation consulting services into a single, segregated business unit within WTW.

 

The Committee was solely responsible for the decision to engage WTW, the Committee made its decision independent of any influence from others at the Company, and the Committee conducted its independence review prior to finalizing the engagement.

 

WTW has represented that:

  29


 

 

o

WTW has in place safeguards between its executive compensation consultants serving our Compensation Committee and the brokerage services provided to the Company to prevent any compromise of the independence of WTW’s executive compensation services.

 

o

Neither WTW’s lead executive compensation advisor for our engagement nor any member of that lead advisor’s team participates in any activities related to the brokerage services provided by the WTW brokerage services affiliate to the Company.

 

o

Individuals who are not part of the executive compensation consulting team for our Compensation Committee (other than designated quality reviewers) are precluded from involvement in the development of recommendations regarding the compensation of the Company’s executive officers and directors.

 

o

WTW executive compensation consultants who advise our Compensation Committee on the compensation of executive officers and directors may not serve in broader relationship-management roles for our Company.

 

o

The compensation paid to WTW executive compensation consultants is not directly tied to the fees paid, or to the expansion of the fees paid, by the Company, and the WTW executive compensation advisors receive no direct incentives based on other WTW services to the Company.

 

WTW’s executive compensation associates are subject to their comprehensive Code of Business Conduct, which addresses conflicts of interest, and in that regard, WTW has represented that (i) the advice rendered by WTW to our Compensation Committee is not influenced by any other WTW work for the Company and (ii) the executive compensation consulting approaches that WTW follows and conclusions they reach are unaffected by the number or magnitude of any other services WTW provides to the Company.

 

Company management purchases the brokerage services from the WTW brokerage services affiliate in the ordinary course of business, and manages the relationship with that affiliate, without any involvement of or approval by our Compensation Committee.

The Role of Senior Management

Our CEO generally makes recommendations to the Compensation Committee regarding compensation for the NEOs other than himself. Our CFO and Senior Vice President, Human Resources provide support to our CEO with respect to data, analysis, and advice in formulating specific compensation recommendations. The Chief Legal Officer generally attends Compensation Committee meetings, prepares meeting minutes and resolutions, and is available for legal counsel as required.

Competitive Market Data

The Compensation Committee considers competitive market data when making pay determinations for our executive officers, including the NEOs. This is only one of many factors the Committee considers when making pay determinations, and the Committee does not benchmark or target a precise percentile or pay level relative to this information. Instead, the Compensation Committee uses this information as a general guide to determine if our executive compensation levels in the aggregate and by element are within a reasonable range compared with similar companies.

The precise nature of our competitive market analysis varies each year based on the needs of the Company and the Compensation Committee in making pay determinations. Generally, the Committee evaluates competitive market practices using data drawn from both a group of peer companies and published compensation survey data (Radford’s Global Technology Survey). For purposes of determining 2019 compensation, the Compensation Committee used a peer group comprising the following companies:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30  


 

 

 

Company Name

Company Ticker

Market Cap
September 2018
($ billion)

Manhattan Associates, Inc.

MANH

3.8

ACI Worldwide, Inc.

ACIW

3.3

Aspen Technology, Inc.

AZPN

8.1

Blackbaud, Inc.

BLKB

4.8

Bottomline Technologies

EPAY

2.8

Commvault Systems, Inc.

CVLT

3.1

Cornerstone OnDemand, Inc.

CSOD

3.4

Ellie Mae, Inc.

ELLI

3.5

FireEye, Inc.

FEYE

3.0

Guidewire Software, Inc.

GWRE

7.7

LogMeIn, Inc.

LOGM

4.4

Paycom Software, Inc.

PAYC

9.1

Paylocity Holding

PCTY

4.3

Pegasystems, Inc.

PEGA

5.0

Proofpoint, Inc.

PFPT

6.1

RingCentral

RNG

7.5

SPS Commerce

SPSC

1.7

Tableau Software, Inc.

DATA

9.4

Tyler Technologies, Inc.

TYL

9.5

Verint Systems Inc

VRNT

3.3

 

The Compensation Committee annually reviews pay and performance data from the compensation peer group as well as pay data from various compensation surveys. Both the peer group and survey data included companies that were comparable to the Company with respect to revenue level, market capitalization, industry segment, and competitive employment market. The specific peer companies, survey sources, and forms of analysis change from year to year based on the best available data and the key priorities of the Compensation Committee. The Committee considered this information along with other relevant information, such as the Company’s performance and that of each executive officer. Our CEO also presented recommendations to the Compensation Committee for our executive officers (other than himself). No other executive officer has direct input to the Compensation Committee regarding the compensation of the NEOs.

For the 2019 market analysis used in establishing target executive compensation for 2020, the Committee approved changes to the peer group, removing Ellie Mae, Inc., Paycom Software, Inc., Pegasystems, Inc., and Tableau Software, Inc., and adding 8X8, Inc., Coupa Software, Inc., Fair Isaac Corp., Five9, Inc., and Progress Software Corp.

Shareholder Advisory Vote on Named Executive Officers Compensation

Our Board values your opinions as expressed through votes and other communications with us, and our Compensation Committee carefully review our annual Say-on-Pay voting results to better understand any issues or concerns you may have with our executive compensation. In 2019, holders of approximately 95% of our shares of Common Stock voting on our 2019 Say-on-Pay proposal approved of our executive compensation program for our NEOs.

Principal Elements of Executive Compensation

We compensate our executive officers with a combination of base salary and short-term and long-term incentives designed to focus their efforts on maximizing both our short-term and long-term financial performance. The executive compensation program includes the following: (i) base salary, (ii) annual cash bonus, (iii) long-term incentive compensation in the form of equity awards, and (iv) other benefits. Each executive officer’s compensation package is designed to provide an appropriately weighted mix of these elements, which the Compensation Committee believes provides a level of compensation roughly equivalent to that paid by companies of similar size and complexity and that balances short-term and long-term performance and reward objectives.


  31


 

Base Salary

Minimum salaries for the NEOs are established in their employment agreements. The Compensation Committee annually reviews the base salaries of the NEOs for adjustment. When establishing base salaries of our executive officers for 2019, the Compensation Committee considered competitive market data (drawn from compensation survey data and the compensation peer group), as well as a variety of other factors, including global macro-economic conditions, market developments, our past financial performance and future expected performance, the performance of the executives, changes in the executives’ responsibilities, the CEO’s recommendations (other than for his own base salary) and cost-of-living and other local geographic considerations, where applicable. The actual base salaries paid to the NEOs in 2019 are disclosed in the Summary Compensation Table.

Annual Cash Bonus Program

The following table sets forth each NEO’s target annual cash bonus, payout amount, and payout percentage actually earned in 2019.

 

 

 

 

 

2019 Annual Cash Bonus Program Target vs. Payout

 

Name

 

Title

 

Target

 

Payout

 

Payout % (1)

 

Eddie Capel

 

President, Chief Executive Officer, and Director

 

$600,000

 

$900,000

 

150%

 

Dennis B. Story

 

EVP, Chief Financial Officer, and Treasurer

 

310,000

 

465,000

 

150%

 

Bruce S. Richards

 

SVP, Chief Legal Officer, and Secretary

 

219,667

 

329,500

 

150%

 

Robert G. Howell

 

SVP, Americas Sales

 

379,000

 

568,500

 

150%

 

Linda C. Pinne

 

SVP, Global Corporate Controller, and Chief Accounting Officer

 

100,359

 

150,539

 

150%

 

________________________________________________________________________________________

 

(1)

See the table entitled “Annual Cash Bonus Program Design for 2019” on page 33 to see how we calculate the 2019 annual bonus, which paid out at 150% of target.

The purpose of the Company’s annual cash bonus program is to align short-term incentive bonuses with the achievement of annual corporate performance. Each plan participant has a target bonus, which is expressed as a percentage of their base salary, and the actual bonus they receive is based on the Company’s level of achievement against three performance measures. For all the NEOs, as well as all other employee participants in the program during 2019, the Compensation Committee used Target Revenue, NACV, and AOI as the corporate performance measures to determine the bonus payouts (see definitions below). The Compensation Committee believes the combination of Target Revenue, NACV, and AOI creates the proper balance for motivating and rewarding profitable growth in the near-term that will translate into strong returns for shareholders over the long-term. The Compensation Committee excluded individual performance from the bonus measures for all program participants to focus and reward the team for collectively achieving our overall financial objectives.

For purposes of the 2019 bonus program, for all plan participants:

 

As defined in the program, “Target Revenue” is, in effect, consolidated revenue excluding cloud-based revenue (cloud-based sales performance is accounted for in the NACV performance measure), and also excluding revenue from hardware sales and billed travel, to minimize risk of low margin revenue lines skewing incentive plan payout percentages;

 

As defined in the program, NACV quantifies or credits new cloud-based subscription transactions. For bonus purposes, this measure is calculated as the average annual value of all new contracts for cloud-based solutions closed during the period;

 

As defined in the program, AOI excludes the following items from GAAP operating income: amortization of intangible assets, equity-based compensation expenses, restructuring charges, and asset impairment charges and related recoveries. For 2019, the exclusions necessary were amortization of intangible assets and equity-based compensation expenses;

 

Consistent with prior years, all results were determined on a constant currency basis (i.e., actual financial results are translated to U.S. dollars at budgeted U.S. dollar exchange rates).

Regarding our use of AOI, we use AOI to evaluate our overall business performance, and we believe AOI is useful for us, and for our investors, when assessing our performance versus other software companies. Our February 4, 2020, earnings press release, attached to our Current Report on Form 8-K of the same date, included a full reconciliation from 2019 GAAP operating income to 2019 AOI (non-GAAP operating income).

Regarding the establishment of the specific Target Revenue, NACV, and AOI performance measures for 2019, the Compensation Committee reviewed and considered senior management’s proposed 2019 budget and the critical assumptions underlying the final

32  


 

budget. In preparing the budget, senior management considered a variety of factors, including but not limited to: global economic trends, our business transition to cloud-based services, supply chain management information-technology investment and growth trends as published by leading industry analysts, the competitive position of our software products, the level of investment in product development needed to maintain sustainable competitive advantage, and historical financial performance. Senior management considers those factors in the context of the key objective of extending the Company’s position as a leading global supply chain commerce solutions provider. The Compensation Committee also considered the degree of difficulty and probability of achieving the performance levels with the Company’s business transition to cloud. The Committee set these levels so that the relative difficulty of achieving them were consistent with prior years.

For the 2019 cash bonus program, the Compensation Committee weighted the corporate performance measures as follows: Target Revenue – 25%;  NACV – 25%; AOI – 50%. For each measure, the Committee established performance ranges, with each range having a minimum performance threshold, target threshold, and performance maximum. For each performance measure, achievement at the target threshold pays out 100% of a target bonus payout for that measure, achievement at or below the minimum performance threshold pays out zero for that measure, and achievement at or above the performance maximum pays out 150% of the target payout for that measure. We determine the bonus payout percentage for achievement between the minimum performance threshold and target, or between target and the performance maximum, by linear interpolation. The annual total bonus payout percentage under the plan is the weighted average of the performance percentages for the three performance measures. For 2019, as in prior years, the Committee established quarterly minimum performance thresholds and targets adding up to the annual thresholds and targets, so that plan participants could earn and receive interim quarterly bonus installments, provided that those payments could not exceed the respective quarterly targets. Because of that, it was possible plan participants could receive some level of payout even if full-year minimum thresholds ultimately were not met, and it was possible that, if the annual target performance levels were achieved, the final quarterly bonus installment could exceed target for the final quarter.

The following table provides the 2019 annual cash bonus payout levels as a percentage of the performance targets for Target Revenue, NACV, and AOI.

 

Annual Cash Bonus Program Design for 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

Amount

 

Participant Bonus Payout % of Target

 

Actual Payout % Earned

 

Payout Weight

 

Weighted Actual Payout % Earned

Target Revenue ($ in millions) - Weighting 25%

Threshold goal

 

$492.3

 

0%

 

 

 

 

 

 

Target goal

 

507.4

 

100%

 

 

 

 

 

 

Maximum goal

 

528.5

 

150%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019 Bonus Revenue - Earned

 

$547.4

 

 

 

150%

 

25%

 

37.5%

 

 

 

 

 

 

 

 

 

 

 

New Annual Contract Value (NACV) - Weighting 25%

2019 Bonus NACV - Earned

 

      *

 

 

 

150%

 

25%

 

37.5%

 

 

 

 

 

 

 

 

 

 

 

Adjusted Operating Income (AOI) ($ in millions) - Weighting 50%

 

 

 

 

 

 

 

 

 

 

Threshold goal

 

$114.5

 

0%

 

 

 

 

 

 

Target goal

 

121.6

 

100%

 

 

 

 

 

 

Maximum goal

 

136.8

 

150%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2019 Bonus AOI - Earned

 

$151.3

 

 

 

150%

 

50%

 

75%

 

 

 

 

 

 

 

 

 

 

 

Total Combined Actual Payout % Earned

[(150% x 25%) + (150% x 25%) + (150% x 50%)] = 150%

 

 

 

 

 

 

 

 

 

150%

 

 * We do not disclose the NACV performance target and actual level achieved. We believe that disclosure would provide our competitors with insight into our operations, resulting in serious competitive harm. The Compensation Committee set the NACV target based on our historical results, growth rates, and expected future results, and intended for it to require significant effort to achieve.

 

    Payouts for Target Revenue, NACV, and AOI amounts achieved between the minimum performance threshold and the target threshold and between the target threshold and the performance maximum are determined by linear interpolation.

 

  33


 

The Compensation Committee retains the right to exercise discretion to either increase or decrease a participant’s annual cash bonus under the bonus program. As in recent years, the Compensation Committee did not exercise its discretion with regard to the cash bonuses to our executive officers in 2019, which were paid in accordance with the express terms of the plan. With respect to the cash bonuses paid under the plan, the Compensation Committee considered that the positive market reaction to the Company’s cloud-based solutions was a positive achievement.

 

Long-term Incentive Compensation

The following table sets forth each NEO’s target annual long-term incentive opportunity, earned amounts at December 31, 2019, and change in total value percentages in 2019. The closing market price of the Company’s Common Stock on December 31, 2019, was $79.75, representing an 88% increase in TSR over December 31, 2018. The RSU columns exclude the value of the special retention grant of service-based RSUs made in January 2019. The details of those special retention RSUs are included in the Grants of Plan Based Awards table.

 

2019 Long-Term Incentive Compensation Target vs. Payout

 

Target (1)

 

Earned Value at 12/31/2019 (2)

 

% Change

Name

RSU

PSU

Total

 

RSU

PSU

Total

 

Total

Eddie Capel

$2,563,644

$2,563,693

$5,127,336

 

$4,192,139

$6,288,327

$10,480,466

 

104%

Dennis B. Story

804,266

804,315

1,608,581

 

1,315,157

1,972,856

3,288,013

 

104%

Bruce S. Richards

291,547

291,547

583,094

 

476,746

715,118

1,191,864

 

104%

Robert G. Howell

628,353

628,353

1,256,705

 

1,027,499

1,541,249

2,568,748

 

104%

Linda C. Pinne

100,515

100,564

201,079

 

164,365

246,667

411,032

 

104%

______________ 

(1)

These columns represent the aggregate grant date fair value for service-based and performance-based RSU awards. We determined these award fair values based on a price of $48.77, the closing market price of the Company’s Common Stock on the date of grant.

(2)

These columns represent amounts earned, valued at $79.75, the closing market price of the Company’s Common Stock on December 31, 2019. We achieved a payout of 150% of the target for the performance-based component of our long-term equity program.

We use equity awards to provide incentives to improve our financial performance and to assist in the recruitment, retention, and motivation of professional, managerial, and other personnel. These long-term incentives are designed to align the interests of our executive officers and other employee plan participants with those of our shareholders to enhance our overall value, the market price of the Common Stock, and as a result, our shareholders’ return. In addition, the vesting of stock incentives over time is designed to create an incentive for our people to remain with us. We grant RSUs to our executive officers and other employee plan participants on an ongoing basis to provide continuing incentives to them to meet future performance goals and to remain with the Company.

Equity-based compensation is an important component of our executive compensation program. In setting the form and level of the equity awards for the NEOs, the Compensation Committee considers the CEO’s recommendations, the executive officer’s performance, and a variety of other factors including:

Market-competitive levels of total compensation, particularly for our peer group

Market-competitive levels and forms of equity-based compensation

Alignment with company performance and shareholder value

The retention strength provided by outstanding and unvested equity awards held by the executives

Global macro-economic conditions

Our recent performance and trends

The executive’s recent performance and potential future contribution

The resulting annual grant rate from aggregate awards

The availability of shares under our shareholder approved equity plans

Our cost and its alignment with participant value

There is no precise formula or weighting applied to these factors as changing business conditions, competitive market practices, and regulations necessitate differing priorities to maximize effectiveness while minimizing cost and dilution.

During 2019, the Company granted to the NEOs an aggregate of 342,817 RSUs (an annual grant of 179,963 RSUs and a special retention grant of 162,854 RSUs). In approving the individual award levels for the annual NEO grants, the Compensation Committee also reviewed aggregate grant levels for all recipients to ensure the annual grant rate was within competitive norms and sustainable

34  


 

over time. As a result of their review, the annual grants for the Mr. Capel, the President and CEO, and Ms. Pinne, the SVP, Global Corporate Controller, and Chief Accounting Officer, were increased significantly over 2018 so that they were more consistent with the compensation peer group.

The annual awards granted in 2019 are 50% service-based (89,980 shares) and 50% performance-based (89,983 shares) and generally vest in four equal annual increments starting on or about the first anniversary of the grant date, with the performance portion tied to the same Target Revenue, NACV, and AOI performance measures and ranges for fiscal year 2019 as established for the annual cash bonus plan discussed above. Our performance goals are focused on internal key financial metrics that drive long-term value creation, such as Target Revenue, NACV, and AOI. Our past financial performance demonstrates, and we fully expect, that meeting these metrics will over time translate into increased shareholder value. For equity-based awards, our share price ultimately should reflect whether we have executed this strategy successfully, and the four-year vesting schedule for equity grants is intended to ensure our officers maintain a long-term perspective. A look at our historical stock prices over the last 10 years shows a growth rate of 1227%, from a stock price of $6.01 on December 31, 2009, to $79.75 on December 31, 2019, after giving effect to stock splits during this period. This growth demonstrates the achievement of our performance goals over this period resulted in creation of long-term value for shareholders. Our long-term strategy emphasizes continued growth through a capital allocation approach coupling investment in innovation with a disciplined return of capital to shareholders self-funded through free cash flow.

In January 2019, our Compensation Committee approved a special retention grant of service-based RSUs to members of our executive team, including our NEOs. The Committee intended that grant, which vests over four years, to further motivate our dedicated and experienced executive team to remain with the Company to best ensure continued execution of our transition to a cloud-first Company. More specifically, those RSUs vest as follows, so long as the executive remains employed with the Company on the applicable vesting date: 10% in January 2020; 20% in January 2021; 30% in January 2022; and 40% in January 2023.

We intend the performance-based RSUs primarily to provide our executive officers with incentives to improve our performance, as they benefit from these awards only if we meet the pre-established financial goals specified in the awards in the year granted. The 2019 performance-based RSU awards were to be earned, in whole or in part, based on our attainment of the same annual Target Revenue, NACV, and AOI performance goals as established for the 2019 annual cash bonus program. For 2019, the Compensation Committee weighted the corporate performance measures as follows: Target Revenue – 25%; NACV – 25%; AOI – 50%. For each measure, the Committee established performance ranges, with each range having a minimum performance threshold, target threshold, and performance maximum. For each performance measure, achievement at the target threshold results in the executive earning 100% of the number of performance-based RSUs granted to them, achievement at or below the minimum performance threshold results in the executive earning zero performance-based RSUs for that measure, and achievement at or above the performance maximum results in the executive earning 150% of the number of performance-based RSUs granted. We determine the percentage of the performance-based RSUs earned for achievement between the minimum performance threshold and target, or between target and the performance maximum, by linear interpolation. The total percentage of performance-based RSUs earned is the weighted average of the performance percentages for the three performance measures. Under the 2019 program, for an executive to earn any of their performance-based RSUs, we were required to exceed one or more of the minimum performance thresholds.

Based on our financial performance in 2019, the named executive officers earned 150% of the granted performance-based RSUs. The minimum performance threshold, performance target, and performance maximum for the 2019 performance measures, as well as our actual performance, are the same as set forth in the table “Annual Cash Bonus Program Design for 2019.”

Perquisites and Other Personal Benefits.

Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide perquisites or other personal benefits to our executive officers, including the NEOs, except in situations where we believe it is appropriate to assist an individual in the performance of their duties, to make our executive officers more efficient and effective, and for recruitment and retention purposes.

If an executive officer qualifies to attend our annual sales-oriented Presidents’ Club event and incurs an income tax liability associated with their attendance and the attendance of their spouse, we provide a tax “gross-up” payment to offset that liability. During 2019, we provided a tax gross-up payment, with respect to this event, to Messrs. Capel, Howell and Story.

Health and Welfare Benefits.

We offer standard Company health and welfare benefits to the NEOs as a safety net against the financial catastrophes that can result from illness, disability, or death. The benefits offered to the NEOs are substantially the same as those offered to all our regular employees, except that certain of the NEOs have been provided an arrangement under which the Company pays the premiums on term

  35


 

life insurance on their lives during their continued employment with the Company. During 2019, we paid term life insurance premiums, including tax “gross-ups” with respect to those premiums, for Messrs. Capel, Story, Richards, and Howell.

Our tax-qualified deferred-compensation Section 401(k) Savings Plan covers all our eligible full-time employees. Under the plan, participants may elect to contribute, through salary deductions, up to 60% of their annual compensation, subject to a maximum of $19,000, or $25,000 for employees who are at least 50 years old. We provide 50% matching contributions up to the first 6% of salary contributed under the plan. The plan is designed to qualify under Section 401 of the Internal Revenue Code so that our employees’ and our contributions, and income earned on those contributions, are not taxable to employees until withdrawn from the plan, and so that the Company’s contributions are deductible when made.

Other considerations

Employment Agreements

In October 2018, each of our NEOs, Messrs. Capel, Story, Richards, and Howell, and Ms. Pinne, entered into a new employment agreement with the Company substantially the same in substance to their previous employment agreement, which had been amended earlier in the year to eliminate, as a constructive termination event, the Company’s insolvency or filing for bankruptcy following a change in control, consistent with good governance practices. The NEOs’ employment agreements are substantially identical, except for their job titles and their stated specific annual base salaries and bonus target amounts.  

Each agreement continues to provide that the NEO will be (i) paid an annual base salary, (ii) eligible for an annual performance-based bonus, (iii) eligible for equity awards that reflect their Company position, duties, and responsibilities, (iv) eligible to participate in all other benefit plans, programs, and arrangements generally available to executives of the Company, (v) provided an indemnification agreement, under which the Company will indemnify the executive to the full extent permitted by law with respect to any claim arising out of the executive’s service as an officer, director, or employee of the Company, and (vi) covered by a director and officers liability insurance policy. As set forth in the agreements, the minimum annual base salaries of Messrs. Capel, Story, Richards, and Howell, and Ms. Pinne, are $575,000, $402,000, $320,000, $323,000, and $252,150, respectively. Each NEO’s annual base salary is subject to increases at the discretion of the Board or Compensation Committee.

Each agreement further provides that the NEO or the Company may terminate that officer’s employment at any time. If the Company terminates the NEO’s employment for reasons other than death, disability, or “cause” (as defined in the agreement) or if there is a “constructive termination” of the executive officer’s employment (as defined in the agreement), the officer will be entitled to certain severance payments and benefits. Those payments and benefits are described below in the section entitled Potential Payments upon Termination, and that section also contains an estimate of the potential payments and benefits payable under these arrangements as of the end of 2019.

In general, severance payments to a NEO are limited such that they will not receive any “parachute payment” as described in Sections 280G and 4999 of the Internal Revenue Code. The NEO is required to provide the Company with a general release of all claims to receive any severance payments or benefits.

The agreements contain provisions requiring the NEO to protect the proprietary and confidential information of the Company. In addition, for a period of 12 months after termination of employment for any reason (or, if later, the last date any severance payments are due), the NEO agrees not to solicit the Company’s customers or solicit or hire away the Company’s employees and is prohibited from performing duties of the type performed for the Company for a competing business owned by any of a designated group of companies. The NEO also agrees to assign to the Company all patents, inventions, copyrights, and other intellectual property developed by them in the course of their employment.

Policy with Respect to Qualifying Compensation for Deductibility

For taxable years beginning before January 1, 2018, Section 162(m) of the Internal Revenue Code imposed a limit on federal income tax deductibility for annual compensation in excess of one million dollars paid by a public corporation to its Chief Executive Officer and its other three most highly compensated executive officers (other than the Chief Financial Officer). Compensation in excess of one million dollars could be deducted, however, if it qualified as “performance-based compensation” within the meaning of Section 162(m) or qualified for one of the other exemptions from the deductibility limit. We designed the Company’s compensation program to satisfy the exemption under Section 162(m).

Congress repealed the exemption for performance-based compensation in new tax legislation enacted December 22, 2017, effective for tax years beginning after December 31, 2017, and expanded the number of employees who will be considered “covered employees” subject to the Section 162(m) limit to include the Chief Financial Officer (who was previously excluded) and certain former NEOs. As a result of these changes, starting in 2018, compensation exceeding of $1 million paid to executive officers covered

36  


 

by Section 162(m)’s deduction limit is no longer deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. The Compensation Committee has taken steps it deemed appropriate intending to preserve the deductibility of certain awards granted prior to enactment of the legislation.

The Compensation Committee considers tax deductibility when making its decisions regarding executive compensation but reserves the right to award nondeductible compensation when appropriate to accomplish other compensation objectives.

Limitation of Liability and Indemnification of Officers and Directors

The Company’s Articles of Incorporation provide that the liability of the Directors to the shareholders for monetary damages will be limited to the fullest extent permissible under Georgia law. This limitation of liability does not affect the availability of injunctive relief or other equitable remedies.

The Company’s Bylaws provide that the Company will indemnify each of its officers, Directors, employees, and agents to the extent they are or were a party, or are threatened to be made a party, to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative because they are or were a Director, officer, employee, or agent of the Company, against reasonable expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement in connection with such action, suit, or proceeding; provided, however, that no indemnification will be made for:

 

any appropriation, in violation of their duties, of any business opportunity of the Company;

 

acts or omissions that involve intentional misconduct or a knowing violation of law;

 

any liability under Section 14-2-832 of the Georgia Business Corporation Code, which relates to unlawful payments of dividends and unlawful stock repurchases and redemptions; or

 

any transaction from which they derived an improper personal benefit.

The Company has entered into indemnification agreements with its Officers and Directors providing indemnification similar to that provided in the Bylaws.

Compensation Committee Report on Executive Compensation

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis section of the Company’s 2020 Proxy Statement. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s 2020 Proxy statement (and in the Company’s Annual Report on Form 10-K through incorporation by reference to the Proxy Statement).

 

Compensation Committee

 

Thomas E. Noonan, Chairman

John J. Huntz, Jr.

Charles E. Moran

 

The foregoing report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.

 


  37


 

Compensation Tables

2019 Summary Compensation Table

The following table sets forth, for the three years ended December 31, 2019, the total compensation paid to or earned by the named executive officers.

Name and Principal Position

Year

Salary

Stock Awards(1)

 

Non-Equity Incentive Plan Compensation(2)

 

All Other Compensation(3)

 

Total

 

 

 

 

 

 

 

 

 

 

 

Eddie Capel

2019

 

$600,000

$7,640,747

 

$900,000

 

$45,777

(4)

$9,186,524

President, Chief Executive

2018

 

575,000

3,237,708

 

632,501

 

41,314

 

4,486,523

Officer, and Director

2017

 

575,000

2,430,742

 

281,750

 

43,845

 

3,331,337

 

 

 

 

 

 

 

 

 

 

 

Dennis B. Story

2019

 

$415,000

$4,121,992

 

$465,000

 

$31,588

(5)

$5,033,580

Executive Vice President, Chief

2018

 

401,167

1,593,966

 

325,600

 

21,352

 

2,342,085

Financial Officer, and Treasurer

2017

 

391,167

875,085

 

140,140

 

21,856

 

1,428,248

 

 

 

 

 

 

 

 

 

 

 

Bruce S. Richards

2019

 

$328,000

$1,186,330

 

$329,500

 

$18,350

(6)

$1,862,180

Senior Vice President, Chief

2018

 

319,167

577,820

 

202,400

 

18,141

 

1,117,528

Legal Officer, and Secretary

2017

 

309,167

437,568

 

87,710

 

18,826

 

853,271

 

 

 

 

 

 

 

 

 

 

 

Robert G. Howell

2019

 

$333,000

$3,267,444

 

$568,500

 

$31,133

(7)

$4,200,077

Senior Vice President,

2018

 

321,917

1,245,252

 

343,200

 

27,301

 

1,937,670

Americas Sales

2017

 

308,250

875,085

 

147,000

 

30,902

 

1,361,237

 

 

 

 

 

 

 

 

 

 

 

Linda C. Pinne

2019

 

$259,715

$502,672

 

$150,539

 

$8,400

(8)

$921,326

Senior Vice President, Global Corporate

2018

 

251,638

159,386

 

92,692

 

8,250

 

511,966

Controller, and Chief Accounting Officer

2017

 

245,750

121,553

 

40,261

 

8,100

 

415,664

 

 

 

 

 

 

 

 

 

 

 

______________ 

 

(1)

The amounts in this column represent the aggregate grant date fair value for the stock awards (service-based and performance-based RSUs) granted in accordance with ASC Topic 718. We determined these fair values based on the assumptions set forth in the Company’s 2019 Annual Report on Form 10-K (Note 2, Equity-Based Compensation). Assuming the highest level of performance is achieved under the applicable performance conditions, the maximum grant date fair value of the performance-based RSUs granted to the NEOs in 2019 is: (i) in the case of Mr. Capel, $3,845,563; (ii) in the case of Mr. Story, $1,206,472; (iii) in the case of Mr. Richards, $437,321; (iv) in the case of Mr. Howell, $942,529; (v) and in the case of Ms. Pinne, $150,846.

 

(2)

Represent amounts earned in the applicable year, regardless of whether we paid those amounts prior to the end of such year.

 

(3)

The amounts in this column represent the Section 401(k) matching or similar Company contribution, tax “gross-up” payments on behalf of NEOs as discussed in the Compensation Discussion and Analysis section, and Company-paid term life insurance premiums for the benefit of Messrs. Capel, Story, Richards and Howell. 

 

(4)

This amount represents: (i) the Company’s contributions to Mr. Capel’s account under its Section 401(k) plan in the amount of $8,000; (ii) tax “gross-up” payments in the amount of $22,608; and (iii) Company-paid term life insurance premiums in the amount of $15,169.

 

(5)

This amount represents: (i) the Company’s contributions to Mr. Story’s account under its Section 401(k) plan in the amount of $8,400; (ii) tax “gross-up” payment in the amount of $16,028; and (iii) Company-paid term life insurance premiums in the amount of $7,160.

 

(6)

This amount represents: (i) the Company’s contributions to Mr. Richards’s account under its Section 401(k) plan in the amount of $8,123; (ii) tax “gross-up” payments in the amount of $3,078; and (iii) Company-paid term life insurance premiums in the amount of $7,149.

 

(7)

This amount represents: (i) the Company’s contributions to Mr. Howell’s account under its Section 401(k) plan in the amount of $8,400; (ii) tax “gross-up” payments in the amount of $15,823; and (iii) Company-paid term life insurance premiums in the amount of $6,910.

 

(8)

This amount represents the Company’s contributions to Ms. Pinne’s account under its Section 401(k) plan in the amount of $8,400.

38  


 

2019 Grants of Plan-Based Awards Table

The following table provides information about our 2019 annual cash bonus opportunities and the equity awards granted to our named executive officers during the year ended December 31, 2019.

 

Plan-Based Compensation