Item 11. Executive Compensation
Compensation Committee Report
The Compensation Committee has discussed and reviewed
the following Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation Committee
recommended to the Board that the Compensation Discussion and Analysis be included in this Amendment No. 1 to the Annual Report on Form
10-K for the year ended December 31, 2020.
Submitted by the Compensation Committee of the Board of Directors:
|
Linda
S. Grais, M.D., Chairperson
|
|
James
C. Momtazee
|
|
Matthew
P. Young
|
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Introduction
Our executive compensation plan is designed to
attract and retain individuals with qualifications to manage and lead our Company, as well as to motivate them to contribute to the achievement
of our financial goals and ultimately create and grow our equity value. Compensation of our executives is structured around the achievement
of individual performance and near-term corporate targets as well as long-term business objectives.
Our named executive officers (the “NEOs”)
for 2020 are:
Officer
|
|
Title
|
Colin Shannon
|
|
President and Chief Executive
Officer (“CEO”)
|
Michael J. Bonello
|
|
Executive Vice President
and Chief Financial Officer (“CFO”)
|
Christopher L. Gaenzle
|
|
Executive Vice President, Chief Administrative Officer ("CAO"), and General Counsel
|
COVID-19 Impact on Business and Compensation
We entered 2020 with a continued focus on sustaining
our significant revenue and earnings growth. However, the COVID-19 pandemic had a significant impact on our business, including a significant
decrease in clinical activities, lack of access to investigator sites and an inability to screen and enroll patients due to stay at home
orders and travel restrictions. As a result, we suspended our quarterly and annual earnings guidance for the second quarter, and reinstated
revised guidance beginning in the third quarter.
Our early 2020 compensation program and incentive
plan targets reflected our initial expectations of continued top and bottom line growth. However, as the impact of COVID-19 on our business
became clear, the Compensation Committee took several actions impacting compensation for our NEOs in response, including:
|
·
|
Cancelling the previously
approved 2020 base salary increases for our NEOs; and
|
|
·
|
Reviewing our initial
2020 Adjusted EPS performance targets for the newly developed Leadership Bonus Plan (LBP),
and determining to make 2020 payouts on a discretionary basis similar to prior years. Despite
achieving actual Adjusted EPS results above the target of our newly reset guidance, the Compensation
Committee approved 2020 payouts that were 81.5% of target levels for our NEOs.
|
Executive Compensation Objectives and Philosophy
Our primary executive compensation objectives
are to:
|
·
|
attract, retain and
motivate senior management leaders who are capable of advancing our mission and strategy,
who engage in a collaborative approach and who possess the ability to execute our business
strategy in an industry characterized by competitiveness, growth and a challenging business
environment;
|
|
·
|
create and maintain
our long-term equity value;
|
|
·
|
reward senior management
in a manner aligned with our financial performance; and
|
|
·
|
align senior management’s
interests with our equity owners’ long-term interests through equity participation
and ownership.
|
To achieve our objectives, we deliver executive
compensation through a combination of the following components:
|
·
|
bonuses
that are tied to Company financial performance and individual contributions;
|
|
·
|
long-term
incentive compensation;
|
|
·
|
broad-based
employee benefits;
|
|
·
|
executive
medical benefits; and
|
Our total executive compensation plan is inclusive
of base salaries and other benefits and perquisites, including severance benefits, which are designed to attract and retain senior management
talent. We also use annual cash incentive compensation and long-term equity incentives to ensure a performance-based delivery
of pay that aligns, as closely as possible, the rewards of our NEOs with the long-term interests of our equity-owners while enhancing
executive retention.
Compensation Governance and Decision Making Process
Roles of the Compensation Committee, Management
and the Compensation Consultant
Role
of the Compensation Committee
|
|
Role
of Management
|
|
Role
of the Compensation Consultant
|
·
Determining CEO compensation
·
Review and approval of other officer compensation
·
Ensuring compensation programs align with financial objective
·
Oversee alignment to stockholder interest
·
Monitor and mitigate material risk
|
|
·
Make recommendations to the Compensation Committee regarding compensation for executives (other than themselves
· Provide
insights to the Compensation Committee regarding compensation programs and the impact on attraction and retention of
talent
|
|
· Provide
external perspectives on executive compensation practices such as short and long-term incentive plan design
· Assist
in reviewing executive and non-employee director compensation program
· Recommend
a compensation peer group to use in various compensation review
|
In 2020, Pearl Meyer also provided the Compensation
Committee with (1) market data regarding the Company’s short and long-term incentive plans to assist with plan design reviews,
particularly with respect to the 2020 Plan, (2) an analysis of pay-for-performance alignment, and (3) a market assessment of compensation
levels for our NEOs.
Peer Group
We use a comparator group to assist us in making
certain compensation decisions. In August 2020, our compensation consultant, Pearl Meyer, provided a review of our prior year peer group
and made recommendations for changes to ensure we were considering including companies of an appropriate size and similarity. Generally,
we target to evaluate between 10 and 20 companies that have between one-third to three times our revenue. Other companies may be
included that do not meet this criteria if they are directly aligned to our industry. Based on the review, it was determined that the
peer group continued to be appropriate given the market. Medidata Solutions, Inc. was removed from our previously disclosed peer group
due to merger and acquisition activity. The Compensation Committee approved the following peer group (the “Peer Group”) in
based on the review:
Agilent Technologies, Inc.
|
Cerner Corporation
|
Laboratory Corporation of America
Holdings
|
Bio-Rad Laboratories, Inc.
|
Charles River Laboratories International, Inc.
|
PerkinElmer, Inc.
|
Bruker Corporation
|
ICON Public Limited Company
|
Quest Diagnostics Incorporated
|
Catalent, Inc.
|
IQVIA Holdings Inc.
|
Syneos Health, Inc.
|
Following is a summary of the revenues, market
capitalization and number of employees for the Peer Group companies at the time of the review:
|
|
Revenue(1)
($
in millions)
|
|
|
Market
Capitalization(2)
($ in millions)
|
|
|
Total
Employees(2)
|
|
Peer Group 25th Percentile
|
|
$
|
2,815
|
|
|
$
|
8,879
|
|
|
|
12,825
|
|
Peer Group 50th Percentile
|
|
$
|
3,804
|
|
|
$
|
13,240
|
|
|
|
16,700
|
|
Peer Group 75th Percentile
|
|
$
|
6,200
|
|
|
$
|
18,328
|
|
|
|
32,300
|
|
PRA Health Sciences
|
|
$
|
3,128
|
|
|
$
|
6,595
|
|
|
|
17,500
|
|
PRA Health Sciences Percentile Rank
|
|
|
47
|
%
|
|
|
7
|
%
|
|
|
55
|
%
|
(1) Reflects
trailing 12 months based on information that was publicly-available as of May 29, 2020.
(2) As of
May 29, 2020.
Compensation Practices
When making any compensation decisions, the Compensation
Committee also evaluates how those decisions align to our compensation policies and practices.
We do:
|
We do not:
|
·
Align pay and performance
·
Ensure that compensation decisions are aligned with shareholder interests
·
Place significant weighting on variable, non-guaranteed compensation
·
Have a clawback policy in place for equity grants
·
Include double-trigger provisions in our change-in-control policy
·
Require a one-year vesting minimum on all equity grants made to executives
|
·
Permit hedging of our common stock
·
Permit pledging of our common stock unless specifically approved by our legal department
·
Allow repricing of outstanding stock options
·
Offer excessive perquisites
·
Provide supplemental retirement benefits to executives
·
Include excise tax gross-ups in our change-in-control provision
|
Say-on-Pay
At our annual meeting of stockholders in May
2020, the compensation of our named executive officers reported in our 2020 proxy statement was approved by 95.7% of the votes present in person or represented by proxy and entitled to vote. The
Compensation Committee believes this affirms our stockholders’ support of our approach to executive compensation and that
significant changes were not warranted. The Compensation Committee will continue to consider the outcome of our say-on-pay
votes when making future compensation decisions for our NEOs. The Company currently intends to hold such votes annually.
Compensation Elements
The following is a discussion and analysis of
each component of our executive compensation program. The Compensation Committee reviews each component of our executive
compensation program on an annual basis. Multiple resources are considered when making compensation decisions, including but not
limited to external market data, Peer Group data, each participating executive’s experience in her or his role with us, and
the level of responsibility held by each executive. Generally, total compensation levels at target are aligned to market median for
each respective role, which is based on the median compensation of our Peer Group and additional compensation survey data.
Historically, these reviews have been completed in July; however, in 2020, the review cycle was moved to February to ensure that
compensation changes are made earlier in the start of our fiscal year and in alignment with our talent reviews and performance
management processes.
Base Salary
Annual base salaries compensate our executive
officers for fulfilling the requirements of their respective positions and provide them with a level of cash income predictability and
stability with respect to a portion of their total compensation. We believe that the level of an executive officer’s base salary
should reflect such executive’s performance, experience and breadth of responsibilities, salaries for similar positions within
our industry and any other factors relevant to that particular job.
Base salaries may be adjusted from time to time
based upon the Compensation Committee’s assessment of each executive officer’s individual performance and the Company’s
overall budgetary guidelines. In addition, base salaries may be adjusted in connection with promotions or increased responsibilities
or to maintain competitiveness within the market.
In February 2020, the Compensation Committee approved
salary increases for our NEOs; however, after further review and discussion in April 2020 it was determined that, due to the financial
implications of COVID-19, no salary increases would be provided to NEOs for the 2020 fiscal year:
Officer
|
|
2019 Salary
|
|
|
2020 Salary
|
|
Colin Shannon
|
|
$
|
1,100,000
|
|
|
$
|
1,100,000
|
|
Michael J. Bonello
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
Christopher L. Gaenzle
|
|
$
|
525,000
|
|
|
$
|
525,000
|
|
Bonuses
Terms and Conditions of Discretionary Annual
Bonuses Under the Management Incentive Plan
We maintain the Management Incentive Plan (the
“MIP”) pursuant to which we award annual bonuses to our executive officers, including our NEOs, and other employees who are
eligible to participate in the MIP. Our Board, together with the Compensation Committee, directly links the amount of the annual cash
bonuses we pay to our corporate financial performance for the particular year. For each of the NEOs, their target bonus opportunity was
originally set forth in his or her employment agreement, although such targets may be adjusted from time to time by the Compensation
Committee. The actual amount of each bonus is determined by the Compensation Committee in its sole discretion and may be higher or lower
than the target amount.
In February 2020, target bonus opportunities for
the NEOs were reviewed in the context of competitive alignment to market and continuing to ensure that the majority of our executive
compensation is variable and performance-based. It was determined, taking into consideration Peer Group data and additional compensation
survey data provided by Pearl Meyer, that the bonus targets approved in 2019 continued to be appropriate for the 2020 fiscal year.
Officer
|
|
2019
Target Bonus
|
|
2020
Target Bonus
|
Colin Shannon
|
|
100% of Salary
|
|
100% of Salary
|
Michael J. Bonello
|
|
70% of Salary
|
|
70% of Salary
|
Christopher L. Gaenzle
|
|
70% of Salary
|
|
70% of Salary
|
For fiscal year 2020, the Compensation
Committee approved a change to our approach for short-term incentive compensation for our NEOs and other senior executive
management. The Compensation Committee approved a Leadership Bonus Program (LBP) that was intended to apply to our NEOs and all
other executive vice presidents, senior vice presidents and vice presidents. The LBP approved is formulaic in nature, and payouts
were to be determined based on Company performance against adjusted earnings per share targets established in early 2020. The
original Adjusted EPS targets reflected double-digit increase over 2019, reflecting robust targeted earnings growth. Adjusted EPS is
our adjusted net income per share, which is GAAP net income per share, adjusted to exclude stock-based compensation expense, loss
(gain) on disposal of fixed assets, loss on modification or extinguishment of debt, foreign currency losses (gains), other non
operating expense (income), transaction-related costs, acquisition related costs, severance costs and restructuring charges, lease
termination expense, noncash rent adjustment, amounts attributable to noncontrolling interest, amortization of intangible assets,
amortization of terminated interest rate swaps, amortization of deferred financing costs, and other charges. The payout percentages
that were approved were as follows:
|
|
|
Attainment
vs. Target
|
|
|
Payout
under LBP
|
|
Maximum
|
|
|
|
115
|
%
|
|
|
200
|
%
|
Target
|
|
|
|
100
|
%
|
|
|
100
|
%
|
Threshold
|
|
|
|
90
|
%
|
|
|
25
|
%
|
However, in the first quarter of 2020, due to
the uncertainty of the financial implications of COVID-19, we reset our Adjusted EPS guidance. As such, while it was intended that
we would move forward with the newly designed incentive program for 2020 it was determined in August 2020 that we would determine
2020 payments using a discretionary approach similar to prior years. Based on our Adjusted EPS results in comparison to the newly
reset guidance, the Committee approved a payout of 81.5% of target for each NEO. This resulted in payouts of $896,500 for Mr.
Shannon, $285,250 for Mr. Bonello and $299,513 for Mr. Gaenzle.
Long-Term Incentive Compensation
We believe that the NEO’s long-term
compensation should be directly linked to the value we deliver to our stockholders. Equity awards to the NEOs are designed to provide
long-term incentive opportunities over a period of several years and promote long-term retention of key executives. In 2020,
the Company granted our NEOs a combination of stock options and restricted stock units.
Equity Award Grants
For 2020, our annual equity program consisted
of a combination of non-qualified stock options and restricted stock units, weighted in equal halves. Under the 2020 program, both
non-qualified stock options and restricted stock will vest in equal thirds over three years, assuming continued employment on each
of the respective vesting dates.
In February 2020, in connection
with the Company’s 2020 annual equity grant program and upon the recommendation of the Compensation Committee, the Board approved
the grant of the following equity awards to our NEOs (effective June 1, 2020):
Officer
|
|
Non-qualified
stock options
|
|
|
Restricted
stock units
|
|
Colin
Shannon
|
|
|
95,340
|
(1)
|
|
|
31,460
|
(1)
|
Michael J. Bonello
|
|
|
25,670
|
(2)
|
|
|
8,470
|
(2)
|
Christopher L. Gaenzle
|
|
|
25,670
|
(2)
|
|
|
8,470
|
(2)
|
(1) Represents a total approved grant of $6.5 million, with 50% of such award consisting of stock options and 50% consisting of restricted
stock units.
(2) Represents a total approved grant of $1.75 million, with 50% of such award consisting of stock options and 50% consisting
of restricted stock units.
In addition to the awards approved under the
annual equity grant program, the Committee approved (effective June 1, 2020) an additional award of 8,000 restricted stock units to
Mr. Shannon and 4,000 restricted stock units to Mr. Bonello to recognize their significant contributions to the Company in 2019.
These awards vest 50% each year over two years, assuming continued employment on the respective vesting dates. For all such equity grants, the exercise price of the options and number of shares underlying the restricted stock units were based on
the closing market price of our common stock on June 1, 2020.
The table below entitled “—Outstanding
Equity Awards at 2020 Fiscal Year End” describes the material terms of these awards and other equity awards made in past fiscal
years to our NEOs.
Clawback
Pursuant to award agreements issued under the
PRA Health Sciences, Inc. 2014 Omnibus Incentive Plan (the “2014 Plan”) and the PRA Health Sciences, Inc. 2018 Stock Incentive
Plan (the "2018 Plan"), the Company may recoup and/or cancel any equity-based compensation awarded to a recipient, including
our NEOs, under the following circumstances:
|
·
|
unauthorized
disclosure of confidential or proprietary information;
|
|
·
|
engaging
in activity that would be grounds for termination of employment for cause; or
|
|
·
|
breach
of any restrictive covenant.
|
Additionally, under the 2014
Plan, the Company may recoup and/or cancel any equity-based compensation awarded to a recipient that commits fraud or engages in conduct
contributing to any financial restatements or irregularities.
Subject to the discretion and approval of the
Board of Directors, the Company will, to the extent permitted by law, seek to recover the amount of equity-based compensation paid or
payable to a recipient in excess of the amount that would have been paid based on a financial restatement, mistake in calculations or
other administrative error.
Broad-Based Employee Benefits
We provide to all our U.S.-based employees, including
our NEOs, broad-based benefits that are intended to attract and retain employees while providing them with retirement and health and
welfare security. Broad-based employee benefits include:
|
·
|
a
401(k) savings plan; and
|
|
·
|
medical,
dental, vision, life and accident insurance, disability coverage, dependent care and healthcare
flexible spending accounts.
|
Terms and Conditions of 401(k) Plan
Our U.S. eligible employees, including our NEOs,
participate in our 401(k) plan. Enrollment in the 401(k) plan is automatic for employees who meet eligibility requirements unless they
decline participation. Under the 401(k) plan, we match a maximum of 50% of the first 6% of a participant’s salary contributions
to the 401(k) plan beginning six months from the participant’s date of hire. Matching contributions vest progressively over an
initial five year period, after which all prior and future matching contributions are fully vested. The maximum contribution to the 401(k)
plan is 100% of an employee’s annual eligible compensation, subject to regulatory and plan limitations.
Perquisites
We provide our NEOs with modest perquisites consistent
with competitive practices. In 2020, the NEOs were eligible for participation in a supplemental executive medical reimbursement plan,
which provides reimbursement for medical, dental, vision, prescription and other eligible expenses not covered by our standard insurance
plans. Our NEOs also participated in a group life insurance plan for our executives for which we paid for the NEOs’ respective
premiums. We also provide our NEOs with access to a group variable universal life and accidental death and dismemberment program that
provides coverage to our NEOs at no cost to them through individual policies.
We provide these limited perquisites and personal
benefits in order to further our goal of attracting and retaining our executive officers. These benefits and perquisites are reflected
in the All Other Compensation column of the “Summary Compensation Table” and the accompanying footnote in accordance with
SEC rules.
Severance Arrangements
Our Board believes that severance protections
can play a valuable role in attracting and retaining the talent necessary for our long-term success. Severance payments and other
termination benefits are an effective way to offer executives financial security to offset the risk of foregoing an opportunity with
another company. Consistent with our objective of using severance payments and benefits to attract and retain executives, we generally
provide each NEO with amounts and types of severance payments and benefits that we believe will permit us to attract and/or continue
to employ the individual NEO.
Under the terms of their employment agreements,
each NEO is entitled to severance benefits if his or her employment is terminated without “cause” by the Company or if the
NEO resigns with “good reason” (each as defined in the employment agreements). The severance payments are contingent upon
the affected executive’s execution of a release and waiver of claims and continued compliance with non-competition, non-solicitation
and confidentiality provisions. See the narrative section entitled “Severance Arrangements and Restrictive Covenants” following
the “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control” table for descriptions
of these arrangements.
Anti-Hedging Policy
Our policies prohibit the hedging of our common
stock by all executives, employees and non-employee directors.
Pledging Policy
Our policies require all executives, employees
and non-employee directors to submit requests to pledge our common stock as collateral for a loan to the PRA legal department for
review and consideration at least two weeks prior to the execution of the documents evidencing the proposed pledge. Approvals of such
pledges will be based on the particular facts and circumstances of each request and PRA is under no obligation to approve any such request.
Employment Agreements
For retention purposes, we have entered into employment
agreements with our NEOs. A full description of the material terms of these agreements is presented below in the sections entitled “Narrative
Disclosure to Summary Compensation Table and Grants of Plan-Based Awards” and “Severance Arrangements and Restrictive Covenants.”
Summary Compensation Table
The following table sets forth all compensation
paid to or accrued by our NEOs for services rendered for the fiscal years indicated.
Name and Principal Position
|
|
Year
|
|
|
Salary
($)(1)
|
|
|
Bonus
($)(2)
|
|
|
Stock
Awards
($)(3)
|
|
|
Option
Awards
($)(4)
|
|
|
All
other
Compensation
($)(5)
|
|
|
Total
($)
|
|
Colin Shannon
|
|
|
2020
|
|
|
|
1,100,000
|
|
|
|
896,500
|
|
|
|
4,076,218
|
|
|
|
3,474,190
|
|
|
|
29,805
|
|
|
|
9,576,713
|
|
President and
|
|
|
2019
|
|
|
|
1,018,750
|
|
|
|
—
|
|
|
|
3,166,020
|
|
|
|
2,949,960
|
|
|
|
25,486
|
|
|
|
7,160,216
|
|
Chief Executive Officer
|
|
|
2018
|
|
|
|
930,000
|
|
|
|
570,000
|
|
|
|
3,073,200
|
|
|
|
3,277,975
|
|
|
|
26,808
|
|
|
|
7,877,983
|
|
Michael J. Bonello
|
|
|
2020
|
|
|
|
500,000
|
|
|
|
285,250
|
|
|
|
1,288,151
|
|
|
|
935,415
|
|
|
|
24,166
|
|
|
|
3,032,982
|
|
Executive Vice President
|
|
|
2019
|
|
|
|
459,375
|
|
|
|
—
|
|
|
|
863,460
|
|
|
|
793,000
|
|
|
|
21,160
|
|
|
|
2,136,995
|
|
and Chief Financial Officer
|
|
|
2018
|
|
|
|
390,000
|
|
|
|
250,000
|
|
|
|
1,525,680
|
|
|
|
2,295,180
|
|
|
|
20,615
|
|
|
|
4,481,475
|
|
Christopher L. Gaenzle
|
|
|
2020
|
|
|
|
525,000
|
|
|
|
299,513
|
|
|
|
874,951
|
|
|
|
935,415
|
|
|
|
29,459
|
|
|
|
2,664,338
|
|
Executive Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Administrative Officer and General
Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts in this column reflect actual salary
earned during fiscal year presented.
(2) Amounts represent discretionary cash bonuses
paid to our NEOs pursuant to our MIP in consideration of the services they performed in each of the years presented.
(3) For 2020, amounts included in this column reflect
the aggregate grant date fair value of restricted stock unit awards calculated in accordance with Topic 718. The assumptions applied
in determining the fair value of the awards are discussed in Note 13 to our audited consolidated financial statements for the year ended
December 31, 2020. See “Compensation Discussion and Analysis—Compensation Elements—Long-Term Incentive Compensation.”
(4) For 2020, amounts included in this column reflect
the aggregate grant date fair value of option awards calculated in accordance with Topic 718. The assumptions applied in determining
the fair value of the awards are discussed in Note 13 to our audited consolidated financial statements for the year ended December 31,
2020. See “Compensation Discussion and Analysis—Compensation Elements—Long-Term Incentive Compensation.”
(5) For 2020, amounts represent (i) the value of
matching contributions to each NEO’s 401(k) plan account in the amount of $6,083, $6,000 and $8,550 for each of Messrs.
Shannon, Bonello and Gaenzle respectively (ii) the premiums paid for the supplemental executive medical reimbursement plan for each
NEO in the amount of $6,672 for Mr. Shannon, $10,800 for Mr. Bonello and $11,940 for Mr. Gaenzle (iii) premiums paid for the
Executive Life Insurance Plan for each NEO in the amount of $9,000 for Mr. Shannon, $2,134 for Mr. Bonello and $3,317 for Mr.
Gaenzle and (iv) disability premiums paid for each NEO in the amount of $8,050 for Mr. Shannon, $5,232 for Mr. Bonello and $5,652
for Mr. Gaenzle.
Grants of Plan-Based Awards in 2020
The following table sets forth information regarding
the grants of plan-based awards to our NEOs in 2020.
Name
|
|
Grant
Date
|
|
Approval Date
|
|
All
Other
Stock Awards:
Number of
Shares of
Stock (#)
|
|
|
All
Other
Option
Awards:
Number of
Securities
Underlying
Options (#)
|
|
|
Exercise
Price
of Option
Awards ($/Sh)
|
|
|
Grant
Date
Fair Value of
Stock and
Option Awards
($)
|
|
Colin Shannon
|
|
6/1/20
|
|
2/14/20
|
|
|
31,460
|
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
3,249,818
|
(2)
|
|
|
6/1/20
|
|
2/14/20
|
|
|
—
|
|
|
|
95,340
|
(1)
|
|
|
103.30
|
|
|
|
3,474,190
|
(2)
|
|
|
6/1/20
|
|
2/14/20
|
|
|
8,000
|
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
826,400
|
(2)
|
Michael J. Bonello
|
|
6/1/20
|
|
2/14/20
|
|
|
8,470
|
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
874,951
|
(2)
|
|
|
6/1/20
|
|
2/14/20
|
|
|
—
|
|
|
|
25,670
|
(1)
|
|
|
103.30
|
|
|
|
935,415
|
(2)
|
|
|
6/1/20
|
|
2/14/20
|
|
|
4,000
|
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
413,200
|
(2)
|
Christopher L. Gaenzle
|
|
6/1/20
|
|
2/14/20
|
|
|
8,470
|
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
874,951
|
(2)
|
|
|
6/1/20
|
|
2/14/20
|
|
|
—
|
|
|
|
25,670
|
(1)
|
|
|
103.30
|
|
|
|
935,415
|
(2)
|
(1) Amounts shown reflect grants of stock options
and restricted stock units in 2020. For information regarding awards of stock options and restricted stock units made to our NEOs, see
“Compensation Discussion and Analysis—Compensation Elements—Long-Term Incentive Compensation.”
(2) Reflects the aggregate grant date fair value
of equity awards granted in 2020 determined in accordance with Topic 718, utilizing the assumptions discussed in Note 13 to our audited
consolidated financial statements for the year ended December 31, 2020.
Narrative Disclosure to Summary Compensation
Table and Grants of Plan-Based Awards
This section describes the employment agreements
in effect for our NEOs as of the end of fiscal year 2020. Under the terms of their employment agreements, each NEO is entitled to severance
benefits following certain terminations of employment. See the narrative section entitled “Severance Arrangements and Restrictive
Covenants” following the “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control”
table for descriptions of these arrangements.
Terms and Conditions of Employment Agreement
for Colin Shannon
In connection with the expiration of Mr. Shannon’s
prior employment agreement, we entered into a new employment agreement with Mr. Shannon, effective as of July 1, 2018 (the “Shannon
Agreement”), to continue to serve as our President and CEO and to nominate him for re-election as a member of our Board of Directors
during the term of the Shannon Agreement. The Shannon Agreement provided for an initial annual base salary and an initial annual target
bonus based upon achievement of specific performance goals and objectives to be established by the Compensation Committee. Mr. Shannon’s
base salary is subject to annual review for possible merit increases, as our Compensation Committee deems appropriate.
Terms and Conditions of Employment Agreement
for Michael J. Bonello
In connection with his promotion to serve as our
Executive Vice President and Chief Financial Officer, we entered into an employment agreement with Mr. Bonello, effective as of May 1,
2018 (the “Bonello Agreement”). The Bonello Agreement provided for an initial annual base salary and an initial annual target
bonus based upon achievement of specific performance goals and objectives to be established by the Compensation Committee. Mr. Bonello’s
base salary and target bonus are subject to periodic review for possible merit increases, as our Compensation Committee deems appropriate.
Terms and Conditions of Employment Agreement
for Christopher Gaenzle
In connection with his hire to serve as our Executive
Vice President, Chief Administrative Officer, and General Counsel, we entered into an employment agreement with Mr. Gaenzle, effective
as of August 10, 2018 (the “Gaenzle Agreement”). The Gaenzle Agreement provided for an initial annual base salary of $525,000
and an initial annual target bonus of $225,000. Mr. Gaenzle’s base salary and target bonus are subject to periodic review for possible
merit increases, as our Compensation Committee deems appropriate.
Outstanding Equity Awards at 2020 Fiscal Year
End
The following table sets forth information concerning
outstanding equity awards for each of our NEOs at December 31, 2020:
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
|
|
|
|
|
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of
Shares of
Restricted
Stock or RSUs
That Have Not
Yet Vested (#)
|
|
|
Market
Value
of Shares of
Restricted
Stock or RSUs
That Have Not
Yet Vested
($) (1)
|
|
Colin Shannon
|
|
|
166,036
|
(2)
|
|
|
—
|
|
|
|
11.73
|
|
|
|
12/20/2023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
298,456
|
(3)
|
|
|
—
|
|
|
|
11.73
|
|
|
|
12/20/2023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
91,000
|
(4)
|
|
|
39,000
|
(5)
|
|
|
75.81
|
|
|
|
8/29/2027
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
45,000
|
(6)
|
|
|
45,000
|
(7)
|
|
|
102.44
|
|
|
|
8/16/2028
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,000
|
(8)
|
|
|
3,763,200
|
|
|
|
|
31,000
|
(9)
|
|
|
62,000
|
(10)
|
|
|
95.94
|
|
|
|
8/13/2029
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,500
|
(11)
|
|
|
2,069,760
|
|
|
|
|
—
|
|
|
|
95,340
|
(12)
|
|
|
103.30
|
|
|
|
6/01/2030
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
31,460
|
(13)
|
|
|
3,946,342
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,000
|
(14)
|
|
|
1,003,520
|
|
Michael J. Bonello
|
|
|
14,000
|
(4)
|
|
|
6,000
|
(5)
|
|
|
75.81
|
|
|
|
8/29/2027
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
40,000
|
(15)
|
|
|
40,000
|
(16)
|
|
|
81.61
|
|
|
|
4/26/2028
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,000
|
(17)
|
|
|
752,640
|
|
|
|
|
8,334
|
(9)
|
|
|
16,666
|
(10)
|
|
|
95.94
|
|
|
|
8/13/2029
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,500
|
(11)
|
|
|
564,480
|
|
|
|
|
—
|
|
|
|
25,670
|
(12)
|
|
|
103.30
|
|
|
|
6/01/2030
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,470
|
(13)
|
|
|
1,062,477
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,000
|
(14)
|
|
|
501,760
|
|
Christopher L. Gaenzle
|
|
|
37,500
|
(18)
|
|
|
37,500
|
(19)
|
|
|
101.42
|
|
|
|
8/10/2028
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,000
|
(20)
|
|
|
3,763,200
|
|
|
|
|
8,334
|
(9)
|
|
|
16,666
|
(10)
|
|
|
95.94
|
|
|
|
8/13/2029
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,500
|
(11)
|
|
|
564,480
|
|
|
|
|
—
|
|
|
|
25,670
|
(12)
|
|
|
103.30
|
|
|
|
6/01/2030
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,470
|
(13)
|
|
|
1,062,477
|
|
(1) Calculations
are based on the closing price of our common stock on December 31, 2020, the last trading day of 2020 ($125.44), multiplied by the number
of outstanding shares.
(2) These
time based option awards were granted on December 20, 2013 and vested 20% (of the total grant) per year on each anniversary of September
23, 2013.
(3) These
performance vesting options were granted on December 20, 2013 and 50% of such options vested on each of March 2, 2016 and November 16,
2016.
(4) These
options were granted on August 29, 2017 and were scheduled to vest 20% (of the total grant amount) on each of the first and second anniversary
of the date of grant, and 30% (of the total grant amount) on each of the third and fourth anniversary of the date of grant. The number
shown is the portion of the award that had vested as of December 31, 2020.
(5) Reflects
unvested outstanding time vesting options awards that were granted on August 29, 2017 that will vest on the fourth anniversary of the
date of grant, subject to the holder continuing to provide services to us through such vesting date and subject to certain accelerated
vesting provisions, which are described in the “Potential Payments to Named Executive Officers Upon Termination of Employment or
Change in Control” section below.
(6) These
options were granted on August 16, 2018 and were scheduled to vest in equal installments over a four-year period ending on August 16,
2022. The number shown is the portion of the award that had vested as of December 31, 2020.
(7) These
options were granted on August 16, 2018 and were scheduled to vest in equal installments over a four-year period ending in August 16,
2022, subject to Mr. Shannon continuing to provide services to us through such vesting date and subject to certain accelerated vesting
provisions, which are described in the “Potential Payments to Named Executive Officers Upon Termination of Employment or Change
in Control” section below. The number shown is the portion of the award that had not vested as of December 31, 2020.
(8) These
shares of restricted stock were granted on August 16, 2018 and will cliff vest on the third anniversary of the grant date, subject to
Mr. Shannon continuing to provide services to us through such vesting date and subject to certain accelerated vesting provisions, which
are described in the “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control”
section below.
(9) These
options were granted on August 13, 2019 and were scheduled to vest in equal installments over a three-year period ending August 13, 2022.
The number shown is the portion of the award that had vested as of December 31, 2020.
(10) These
options were granted on August 13, 2019 and were scheduled to vest in equal installments over a three-year period ending August 13, 2022,
subject to the holder continuing to provide services to us through such vesting date and subject to certain accelerated vesting provisions,
which are described in the “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control”
section below. The number shown is the portion of the award that had not vested as of December 31, 2020.
(11) These
shares of restricted stock were granted on August 13, 2019 and were scheduled to vest in equal installments over a two-year period ending
August 13, 2021, subject to the holder continuing to provide services to us through such vesting date and subject to certain accelerated
vesting provisions, which are described in the “Potential Payments to Named Executive Officers Upon Termination of Employment or
Change in Control” section below. The number shown is the portion of the award that had not vested as of December 31, 2020.
(12) These
options were granted on June 1, 2020 and will vest 33% on each of the first, second, and third anniversary of the date of grant, subject
to the holder continuing to provide services to us through such vesting date and subject to certain accelerated vesting provisions, which
are described in the “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control”
section below.
(13) These
restricted stock units were granted on June 1, 2020 and will vest 33% on each of the first, second, and third anniversary of the grant
date, subject to the holder continuing to provide services to us through such vesting date and subject to certain accelerated vesting
provisions, which are described in the “Potential Payments to Named Executive Officers Upon Termination of Employment or Change
in Control” section below.
(14) These
restricted stock units were granted on June 1, 2020 and will vest 50% on each anniversary of the grant date, subject to the holder continuing
to provide services to us through such vesting date and subject to certain accelerated vesting provisions, which are described in the
“Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control” section below.
(15) These
options were granted on April 26, 2018 and were scheduled to vest in equal installments over a four-year period ending April 26, 2022.
The number shown is the portion of the award that had vested as of December 31, 2020.
(16) These
options were granted on April 26, 2018 and were scheduled to vest in equal installments over a four-year period ending April 26, 2022,
subject to Mr. Bonello continuing to provide services to us through such vesting date and subject to certain accelerated vesting provisions,
which are described in the “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control”
section below. The number shown is the portion of the award that had not vested as of December 31, 2020.
(17) These
shares of restricted stock were granted on April 26, 2018 and will vest on the third anniversary of the grant date, subject to Mr. Bonello
continuing to provide services to us through such vesting date and subject to certain accelerated vesting provisions, which are described
in the “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control” section below.
(18) These
options were granted on August 10, 2018 and were scheduled to vested in equal installments over a four-year period ending August 10,
2022. The number shown is the portion of the award that had vested as of December 31, 2020.
(19) These
options were granted on August 10, 2018 and were scheduled to vest in equal installments over a four-year period ending August 10, 2022,
subject to Mr. Gaenzle continuing to provide services to us through such vesting date and subject to certain accelerated vesting provisions,
which are described in the “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control”
section below. The number shown is the portion of the award that had not vested as of December 31, 2020.
(20) These
shares of restricted stock were granted on August 10, 2018 and will cliff vest on the third anniversary of the grant date, subject to
Mr. Gaenzle continuing to provide services to us through such vesting date and subject to certain accelerated vesting provisions, which
are described in the “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control”
section below.
Option Exercises and
Stock Vested in 2020
The following table sets forth information concerning
the exercise of stock options and the vesting of restricted stock awards held by our NEOs during 2020:
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number
of shares
acquired on
exercise (#)
|
|
|
Value
realized on
exercise ($)(1)
|
|
|
Number
of shares
acquired on
vesting (#)
|
|
|
Value
realized on
vesting ($)(2)
|
|
Colin Shannon
|
|
|
—
|
|
|
|
—
|
|
|
|
16,500
|
|
|
|
1,718,475
|
|
Michael J. Bonello
|
|
|
—
|
|
|
|
—
|
|
|
|
12,000
|
|
|
|
1,072,680
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,500
|
|
|
|
468,675
|
|
|
|
|
12,636
|
|
|
|
1,369,616
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
20,736
|
|
|
|
2,247,575
|
|
|
|
—
|
|
|
|
—
|
|
Christopher L. Gaenzle
|
|
|
—
|
|
|
|
—
|
|
|
|
4,500
|
|
|
|
468,675
|
|
(1)
Value realized on exercise is determined by multiplying the number of stock options by the difference between the exercise price of the
option and the closing price of our common stock on the date of exercise.
(2)
Value realized on vesting is determined by multiplying the number of stock awards that vested by the closing price of our common stock
on the vesting date.
Pension Benefits
We have no pension benefits
for our NEOs.
Nonqualified Deferred
Compensation for 2020
We have no nonqualified defined
contribution or other nonqualified deferred compensation plans for our NEOs.
Potential Payments to
Named Executive Officers Upon Termination of Employment
or Change in Control
The following table describes
the potential payments and benefits that would have been payable to our NEOs under existing plans and arrangements assuming a termination
of their employment for reasons other than willful misconduct or a voluntary resignation on December 31, 2020.
The amounts shown in the table
do not include payments and benefits to the extent they are provided generally to all salaried employees upon termination of employment
and do not discriminate in scope, terms or operation in favor of the NEOs. These include accrued but unpaid salary and distributions
of plan balances under our 401(k) savings plan. The Company has a policy that executive officers cannot carry over any accrued but unused
vacation days. Therefore, the following table assumes no payment for a NEO’s unused vacation days since, as of December 31, 2020,
any of such NEO’s accrued but unused vacation days would be forfeited. However, if a NEO’s employment was to terminate mid-year,
such NEO would be entitled to payment for his or her accrued but unused vacation days as of such date.
Name
|
|
Cash
Severance
Payment
($)(1)
|
|
|
Continuation
of
Group
Health Plans
($)(2)
|
|
|
Value of
Accelerated
Vesting of
Stock
Options ($)(3)
|
|
|
Value of
Accelerated
Vesting of
Restricted
Stock and
Restricted
Stock Units ($)(4)
|
|
|
Total ($)
|
|
Colin Shannon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without
Cause or Voluntary Termination for Good Reason
|
|
|
2,200,000
|
|
|
|
14,810
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,214,810
|
|
Termination for Death or Disability
|
|
|
—
|
|
|
|
—
|
|
|
|
4,071,091
|
|
|
|
10,782,822
|
|
|
|
14,853,913
|
|
Involuntary Termination Without Cause or Voluntary
Termination for Good Reason Following a Change in Control
|
|
|
4,400,000
|
|
|
|
29,620
|
|
|
|
6,910,398
|
|
|
|
10,782,822
|
|
|
|
22,122,840
|
|
Change in Control without Termination
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Michael J. Bonello
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause or Voluntary Termination
for Good Reason
|
|
|
500,000
|
|
|
|
21,132
|
|
|
|
—
|
|
|
|
—
|
|
|
|
521,132
|
|
Termination for Death or Disability
|
|
|
—
|
|
|
|
—
|
|
|
|
1,609,611
|
|
|
|
2,881,357
|
|
|
|
4,490,968
|
|
Involuntary Termination Without Cause or Voluntary
Termination for Good Reason Following a Change in Control
|
|
|
1,000,000
|
|
|
|
42,264
|
|
|
|
3,110,961
|
|
|
|
2,881,357
|
|
|
|
7,034,582
|
|
Change in Control without Termination
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Christopher L. Gaenzle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination Without Cause or Voluntary
Termination for Good Reason
|
|
|
892,500
|
|
|
|
20,064
|
|
|
|
—
|
|
|
|
—
|
|
|
|
912,564
|
|
Termination for Death or Disability
|
|
|
—
|
|
|
|
—
|
|
|
|
696,199
|
|
|
|
5,390,157
|
|
|
|
6,086,356
|
|
Involuntary Termination Without Cause or Voluntary Termination
for Good Reason Following a Change in Control
|
|
|
1,785,000
|
|
|
|
40,128
|
|
|
|
1,771,323
|
|
|
|
5,390,157
|
|
|
|
8,986,608
|
|
Change in Control without Termination
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(1) Cash severance payment for an involuntary termination
without cause or a voluntary termination for good reason includes the following:
|
•
|
Mr.
Shannon—the sum of his annual base salary ($1,100,000) plus his target bonus amount
for the calendar year immediately preceding the date of the termination of employment ($1,100,000)
payable over 12 months; and
|
|
•
|
Mr.
Bonello—the sum of his annual base salary ($500,000) plus an amount equal to his actual
bonus for the calendar year immediately preceding the date of the termination of employment
($0) payable over 12 months.
|
|
•
|
Mr.
Gaenzle—the sum of his annual base salary ($525,000) plus an amount equal to his target
bonus for the calendar year immediately preceding the date of the termination of employment
($367,500) payable over 12 months.
|
Cash severance payment for an involuntary termination
without cause or a voluntary termination for good reason following a change in control includes the following:
|
•
|
Mr.
Shannon—two times the sum of his annual base salary ($1,100,000) plus his target bonus
amount for the calendar year immediately preceding the date of the termination of employment
($1,100,000) payable in a lump sum cash payment;
|
|
•
|
Mr.
Bonello—two times the sum of his annual base salary ($500,000) plus an amount equal
to his actual bonus for the calendar year immediately preceding the date of the termination
of employment ($0) payable in a lump sum cash payment; and
|
|
•
|
Mr.
Gaenzle—two times the sum of his annual base salary ($525,000) plus his target bonus
amount for the calendar year immediately preceding the date of the termination of employment
($367,500) payable in a lump sum cash payment.
|
(2) Reflects the cost of providing the executive
officer and his family with continued medical, dental, and other health benefit coverage as enrolled at the time of his termination for
a period of (i) twelve months for an involuntary termination without cause or a voluntary termination for good reason, and (ii) 24 months
for an involuntary termination without cause or a voluntary termination for good reason following a change in control.
(3) Represents the value of the acceleration of
certain unvested time vesting options (as set forth below), valued as the difference between the closing price of Company shares on December
31, 2020 ($125.44) and the exercise price for each such option.
With respect to the options granted to our NEOs,
(i) upon a termination for death or disability, the amount that would become vested and exercisable includes that portion of a NEO’s
unvested time vesting options that would have become exercisable on the next scheduled vesting date for each option grant after the date
of such termination, assuming such NEO had remained employed with the Company through such date and (ii) upon a “qualifying termination”
(as defined in the PRA Health Sciences, Inc. 2020 Stock Incentive Plan (the “2020 Plan”) and applicable award agreements),
all unvested options will fully vest on the date of termination and remain exercisable for one (1) year.
A “qualifying termination” under the
2020 Plan for purposes of the NEOs’ outstanding equity-based awards generally includes (i) a termination without “cause”
(as defined in the applicable NEO’s employment agreement), (ii) a termination by the NEO due to a material diminution in compensation,
a material reduction in duties or responsibilities, or a relocation of the NEO’s principal place of employment by more than fifty
miles from the current location, or (iii) a termination due to the NEO’s death or disability, in each case that occurs during the
three months prior to or the 18 months following a change in control.
(4) Represents the value of the acceleration of
unvested shares of restricted stock and unvested restricted stock units (as set forth below), based on the closing price of Company shares
on December 31, 2020 ($125.44).
With respect to the shares of restricted stock and
restricted stock units granted to our NEOs, upon (i) a termination for death or disability or (ii) a “qualifying termination”
(as defined in the 2020 Plan and applicable award agreements), all unvested shares of restricted stock and unvested restricted stock
units will fully vest on the date of termination.
Severance Arrangements and Restrictive Covenants
The Shannon Agreement
Pursuant to the Shannon Agreement,
in the event Mr. Shannon’s employment is terminated by us without “cause” or by the executive for “good reason”
(each as defined below) and Mr. Shannon executes and does not revoke a general release of claims in favor of us, then Mr. Shannon will
receive (i) a severance payment equal to the sum of his base salary plus his target bonus amount for the calendar year immediately preceding
the date of the termination of employment, payable over 12 months, (ii) 12 months of continued medical, dental and other health benefit
coverage with the same employee cost-sharing as is provided to employees generally and (iii) all accrued but unpaid obligations.
In the event Mr. Shannon’s
employment is terminated by us without cause or by Mr. Shannon for good reason on or prior to the expiration of the one-year period immediately
following a “change in control” (as defined below), then Mr. Shannon will receive in lieu of the severance set forth in the
preceding paragraph: (i) a severance payment equal to two times the sum of his base salary plus his target bonus amount for the calendar
year immediately preceding the date of the termination of employment, payable in a lump-sum cash payment, (ii) 24 months of continued
medical, dental and other health benefit coverage with the same employee cost-sharing as is provided to employees generally and (iii)
all accrued but unpaid obligations.
Under the Shannon Agreement,
termination payments and benefits will be delivered to Mr. Shannon either in full or to such lesser extent as would result in no portion
of such termination payments and benefits being subject to the excise tax imposed by the golden parachute rules of Section 4999 of the
Code, whichever of the foregoing amounts, after taking into account all applicable taxes, results in the greatest amount of such termination
payments and benefits to Mr. Shannon on an after-tax basis.
In consideration for these benefits,
Mr. Shannon is also subject to certain restrictive covenants, including confidential information and non-disparagement covenants, each
for the term of his employment with us and thereafter, and covenants not to compete and not to solicit, each for the term of his employment
with us and for 12 months following his termination date.
For purposes of the Shannon
Agreement, “cause” means the occurrence of the following: (i) a material breach of the Shannon Agreement by Mr. Shannon (where
he fails to cure such breach within ten business days after being notified in writing by us of such breach); (ii) Mr. Shannon’s
failure (except where due to a physical or mental incapacity) to substantially perform his material duties which continues beyond ten
days after a written demand for substantial performance is delivered to him; (iii) Mr. Shannon engaging in or causing an act of willful
misconduct that has a material adverse impact on our reputation, business, business relationships or financial condition; (iv) Mr. Shannon’s
conviction of, or plea of guilty or nolo contendere to, a felony, or any crime involving moral turpitude not involving a traffic offense;
and (v) Mr. Shannon’s willful refusal to perform the specific lawful directives of our Board of Directors which are consistent
with the scope of his duties and responsibilities under the Shannon Agreement; provided, however, that no action taken by Mr. Shannon
in the reasonable, good faith belief that it was in the best interest of the Company shall be treated as a basis for termination of his
employment for cause under clause (i) above, and no failure of Mr. Shannon or the Company to achieve performance goals, alone, shall
be treated as a basis for termination of his employment for cause under clause (ii) or (v) above.
For purposes of the Shannon
Agreement, “good reason” means: (i) any material breach of the Shannon Agreement by us (where we fail to cure such breach
within ten business days after being notified in writing by Mr. Shannon of such breach); (ii) the material diminution, without Mr. Shannon’s
written consent, of his position, title, authority, duties or responsibilities as indicated in the Shannon Agreement, including the failure
to be reelected to the Board, or the appointment of any other person, without Mr. Shannon’s written consent, to perform any material
part of such duties, including, without limitation, the failure of Mr. Shannon to have such duties and responsibilities with respect
to the acquiring entity following a “change in control”; (iii) the involuntary material relocation of Mr. Shannon’s
then current principal place of business to a location more than 50 miles from his current principal place of business; and (iv) the
failure by us to obtain the assumption in writing of our obligation to perform under the Shannon Agreement by any successor to all or
substantially all of our assets. Mr. Shannon may terminate his employment for good reason by providing us with 30 days’ written
notice setting forth in reasonable specificity the event that constitutes good reason, within 90 days of the occurrence of such event.
During such 30 days’ notice period, we have the opportunity to cure the event that constitutes good reason, and if not cured within
such period, Mr. Shannon’s termination will be effective upon the expiration of such cure period.
For purposes of the Shannon
Agreement, “change in control” is defined under the Prior Plan on the date of the change in control or as defined under the
Prior Plan on the effective date of the Shannon Agreement, whichever is more favorable to Mr. Shannon
.
The Bonello Agreement
Pursuant to the Bonello Agreement,
in the event Mr. Bonello’s employment is terminated by us without “cause” or by the executive for “good reason”
(each as defined below) and Mr. Bonello executes and does not revoke a general release of claims in favor of us, then Mr. Bonello will
receive (i) a severance payment equal to the sum of his base salary plus an amount equal to his annual bonus for the calendar year immediately
preceding the date of the termination of employment, payable over 12 months, (ii) 12 months of continued medical, dental and other health
benefit coverage with the same employee cost-sharing as is provided to employees generally and (iii) all accrued but unpaid obligations.
In the event Mr. Bonello’s
employment is terminated by us without cause or by Mr. Bonello for good reason on or prior to the expiration of the one-year period immediately
following a “change in control” (as defined below), then Mr. Bonello will receive in lieu of the severance set forth in the
preceding paragraph: (i) a severance payment equal to two times the sum of his base salary plus an amount equal to his annual bonus for
the calendar year immediately preceding the date of the termination of employment, payable in a lump-sum cash payment, (ii) 24 months
of continued medical, dental and other health benefit coverage with the same employee cost-sharing as is provided to employees generally
and (iii) all accrued but unpaid obligations.
Under the Bonello Agreement,
termination payments and benefits will be delivered to Mr. Bonello either in full or to such lesser extent as would result in no portion
of such termination payments and benefits being subject to the excise tax imposed by the golden parachute rules of Section 4999 of the
Code, whichever of the foregoing amounts, after taking into account all applicable taxes, results in the greatest amount of such termination
payments and benefits to Mr. Bonello on an after-tax basis.
In consideration for these benefits,
Mr. Bonello is also subject to certain restrictive covenants, including confidential information and non-disparagement covenants, each
for the term of his employment with us and thereafter, and covenants not to compete and not to solicit, each for the term of his employment
with us and for 12 months following his termination date.
For purposes of the Bonello
Agreement, “cause” means the occurrence of the following: (i) a material breach of the Bonello Agreement by Mr. Bonello (where
he fails to cure such breach within ten business days after being notified in writing by us of such breach); (ii) Mr. Bonello’s
failure (except where due to a physical or mental incapacity) to substantially perform his material duties which continues beyond ten
days after a written demand for substantial performance is delivered to him; (iii) Mr. Bonello engaging in or causing an act of willful
misconduct that has a material adverse impact on our reputation, business, business relationships or financial condition; (iv) Mr. Bonello’s
conviction of, or plea of guilty or nolo contendere to, a felony, or any crime involving moral turpitude not involving a traffic offense;
and (v) Mr. Bonello’s willful refusal to perform the specific lawful directives of our Board of Directors which are consistent
with the scope of his duties and responsibilities under the Bonello Agreement; provided, however, that no action taken by Mr. Bonello
in the reasonable, good faith belief that it was in the best interest of the Company shall be treated as a basis for termination of his
employment for cause under clause (i) above, and no failure of Mr. Bonello or the Company to achieve performance goals, alone, shall
be treated as a basis for termination of his employment for cause under clause (ii) or (v) above.
For purposes of the Bonello
Agreement, “good reason” means: (i) any material breach of the Bonello Agreement by us; (ii) the material diminution, without
Mr. Bonello’s written consent, of his position, authority, duties or responsibilities as indicated in the Bonello Agreement, or
the appointment of any other person, without Mr. Bonello’s written consent, to perform any material part of such duties, including,
without limitation, the failure of Mr. Bonello to have such duties and responsibilities with respect to the acquiring entity following
a “change in control”; and (iii) the failure by us to obtain the assumption in writing of our obligation to perform under
the Bonello Agreement by any successor to all or substantially all of our assets. Mr. Bonello may terminate his employment for good reason
by providing us with 30 days’ written notice setting forth in reasonable specificity the event that constitutes good reason, within
90 days of the occurrence of such event. During such 30 days’ notice period, we have the opportunity to cure the event that constitutes
good reason, and if not cured within such period, Mr. Bonello’s termination will be effective upon the expiration of such cure
period.
For purposes of the Bonello
Agreement, “change in control” is defined under the 2014 Plan on the date of the change in control or as defined under the
2014 Plan on the effective date of the Bonello Agreement, whichever is more favorable to Mr. Bonello.
The Gaenzle Agreement
Pursuant to the Gaenzle Agreement,
in the event Mr. Gaenzle’s employment is terminated by us without “cause” or by the executive for “good reason”
(each as defined below), then Mr. Gaenzle will receive (i) a severance payment equal to the sum of his base salary plus an amount equal
to his target annual bonus for the calendar year immediately preceding the date of the termination of employment, payable over 12 months,
(ii) 12 months of continued medical, dental and other health benefit coverage with the same employee cost-sharing as is provided to employees
generally and (iii) all accrued but unpaid obligations.
In the event Mr. Gaenzle’s
employment is terminated by us without cause or by Mr. Gaenzle for good reason on or prior to the expiration of the one-year period immediately
following a “change in control” (as defined below), then Mr. Gaenzle will receive in lieu of the severance set forth in the
preceding paragraph: (i) a severance payment equal to two times the sum of his base salary plus an amount equal to his target annual
bonus for the calendar year immediately preceding the date of the termination of employment, payable in a lump-sum cash payment, (ii)
24 months of continued medical, dental and other health benefit coverage with the same employee cost-sharing as is provided to employees
generally and (iii) all accrued but unpaid obligations.
Under the Gaenzle Agreement,
termination payments and benefits will be delivered to Mr. Gaenzle either in full or to such lesser extent as would result in no portion
of such termination payments and benefits being subject to the excise tax imposed by the golden parachute rules of Section 4999 of the
Code, whichever of the foregoing amounts, after taking into account all applicable taxes, results in the greatest amount of such termination
payments and benefits to Mr. Gaenzle on an after-tax basis.
In consideration for these benefits,
Mr. Gaenzle is also subject to certain restrictive covenants, including confidential information and non-disparagement covenants, each
for the term of his employment with us and thereafter, and covenants not to compete and not to solicit, each for the term of his employment
with us and for 12 months following his termination date.
For purposes of the Gaenzle
Agreement, “cause” means the occurrence of the following: (i) a material breach of the Gaenzle Agreement by Mr. Gaenzle (where
he fails to cure such breach within ten business days after being notified in writing by us of such breach); (ii) Mr. Gaenzle’s
willful refusal (except where due to a physical or mental incapacity) to substantially perform his material duties which continues beyond
ten days after a written demand for substantial performance is delivered to him; (iii) Mr. Gaenzle engaging in or causing an act of willful
misconduct that has a material adverse impact on our reputation, business, business relationships or financial condition; (iv) Mr. Gaenzle’s
conviction of, or plea of guilty or nolo contendere to, a felony, or any crime involving moral turpitude not involving a traffic offense;
and (v) Mr. Gaenzle’s willful refusal to perform the specific lawful directives of our Board of Directors which are consistent
with the scope of his duties and responsibilities under the Bonello Agreement; provided, however, that no action taken by Mr. Gaenzle
in the reasonable, good faith belief that it was in the best interest of the Company shall be treated as a basis for termination of his
employment for cause under clause (i) above, and no failure of Mr. Gaenzle or the Company to achieve performance goals, alone, shall
be treated as a basis for termination of his employment for cause under clause (ii) or (v) above.
For purposes of the Gaenzle
Agreement, “good reason” means: (i) any material breach of the Gaenzle Agreement by us; (ii) the material diminution, without
Mr. Gaenzle’s written consent, of his position, authority, duties or responsibilities as indicated in the Gaenzle Agreement, or
the appointment of any other person, without Mr. Gaenzle’s written consent, to perform any material part of such duties, including,
without limitation, the failure of Mr. Gaenzle to have such duties and responsibilities with respect to the acquiring entity following
a “change in control”; (iii) any required relocation of Mr. Gaenzle’s principal place of employment by more than 50
miles; and (iv) the failure by us to obtain the assumption in writing of our obligation to perform under the Gaenzle Agreement by any
successor to all or substantially all of our assets. Mr. Gaenzle may terminate his employment for good reason by providing us with 30
days’ written notice setting forth in reasonable specificity the event that constitutes good reason, within 90 days of the occurrence
of such event. During such 30 days’ notice period, we have the opportunity to cure the event that constitutes good reason, and
if not cured within such period, Mr. Gaenzle’s termination will be effective upon the expiration of such cure period.
For purposes of the Gaenzle
Agreement, “change in control” is defined under the 2018 Plan on the date of the change in control or as defined under the
2018 Plan on the effective date of the Gaenzle Agreement, whichever is more favorable to Mr. Gaenzle.
Director Compensation
In June 2018, the Board adopted
a non-employee director compensation policy. The objectives of the policy are to attract and retain highly qualified directors and
to compensate them in a manner that closely aligns their interests with those of our stockholders. Pursuant to our non-employee director
compensation policy, each director who is not employed by us is entitled to compensation as follows:
• $60,000
in cash, paid quarterly in arrears for membership on our Board;
• $35,000
in cash, paid quarterly in arrears for the chairperson of our Audit Committee;
•
$15,000 in cash, paid quarterly in arrears for membership on our Audit Committee (other than the chairperson);
• $20,000
in cash, paid quarterly in arrears for the chairperson of our Compensation Committee;
•
$10,000 in cash, paid quarterly in arrears for membership on our Compensation Committee (other than the chairperson);
• $15,000
in cash, paid quarterly in arrears for the chairperson of our Nominating Committee;
•
$7,500 in cash, paid quarterly in arrears for membership on our Nominating Committee (other than the chairperson);
•
an annual equity award in the form of restricted stock valued at approximately $125,000 (prorated for any partial year of service in
connection with an initial grant), which will vest on the first anniversary of the grant date; and
•
an annual lead director retainer of $40,000, granted in the form of restricted stock that vests on the first anniversary of the grant
date.
With respect to any restricted
stock grants made to a director, (i) if the director’s service on our Board is terminated on the date of a regularly scheduled
annual meeting of the stockholders of the Company that is prior to such restricted stock’s vesting date as a result of the director
not being reelected for another term, the restricted stock will vest in full and (ii) within one year following a change in control,
if a director’s service on our Board is terminated without “cause,” the restricted stock award will vest in full.
In addition, we provide reimbursement
to our non-employee directors for their reasonable expenses related to their services as a member of the Board of Directors and any
committees thereof.
In May 2020, Pearl Meyer provided
the Compensation Committee with a review of our non-employee director compensation relative to our Peer Group. While the results of the
review indicated that our non-employee director compensation levels were significantly below market relative to the Peer Group, the Compensation
Committee postponed consideration of any changes due to the financial implications of COVID-19.
The following table sets forth
information concerning the compensation of our non-employee directors during the fiscal year ended December 31, 2020. Our CEO did
not receive compensation for serving on the Board of Directors. For information concerning the compensation of our CEO during the fiscal
year ended December 31, 2020, see the Summary Compensation Table above.
Name
|
|
Fees
Earned or
Paid in Cash ($)
|
|
|
Stock
Awards
($)(1)
|
|
|
Total
($)
|
|
Jeffrey T. Barber
|
|
|
95,000
|
|
|
|
125,000
|
|
|
|
220,000
|
|
Alexander G. Dickinson
|
|
|
75,000
|
|
|
|
125,000
|
|
|
|
200,000
|
|
Linda S. Grais, M.D
|
|
|
102,500
|
|
|
|
125,000
|
|
|
|
227,500
|
|
James C. Momtazee
|
|
|
70,000
|
|
|
|
165,000
|
|
|
|
235,000
|
|
Glen D. Stettin, M.D. (2)
|
|
|
17,772
|
|
|
|
84,722
|
|
|
|
102,494
|
|
Matthew P. Young
|
|
|
85,000
|
|
|
|
125,000
|
|
|
|
210,000
|
|
(1) Amounts
represent the grant date fair value of these restricted stock awards in accordance with Topic 718 and are based on the closing market
price of our common stock on the date of grant. As of December 31, 2020, Messrs. Barber and Young and Drs. Dickinson and Grais each held
1,324 unvested restricted stock awards, Mr. Momtazee held 1,748 unvested restricted stock awards, and Dr. Stettin held 799 unvested restricted
stock awards, all subject to time-vesting criteria.
(2) Dr.
Stettin joined our Board on September 14, 2020.
Compensation Committee Interlocks and Insider
Participation
During the 2020 fiscal year,
the Compensation Committee consisted of Dr. Grais and Messrs. Momtazee and Young, none of whom were an officer or employee of the Company
during the fiscal year and none of whom were formerly an officer of the Company. During 2020, none of our executive officers served as
a director or member of the Compensation Committee (or other committee serving an equivalent function) of any other entity whose executive
officers served on our Compensation Committee or our Board.
PAY RATIO DISCLOSURE
Pursuant to Item 402(u) of Regulation
S-K promulgated by the SEC and Section 953(b) of the Dodd—Frank Wall Street Reform and Consumer Protection Act, presented below
is the ratio of annual total compensation of our CEO to the annual total compensation of our median employee (excluding our CEO).
The 2020 annual total compensation
as determined under Item 402 of Regulation S-K for our CEO was $9,352,568, as reported in the Summary Compensation Table above. The 2020 annual total compensation as determined under Item 402 of Regulation S-K for our median employee (excluding our CEO)
was $69,311. The ratio of our CEO’s annual total compensation to our median employee’s total compensation for fiscal year
2020 is 135 to 1. To identify, and to determine the annual total compensation of, the median employee, we used the methodology set forth
below.
Under the SEC’s pay ratio
rule, a company is required to identify its median employee only once every three years so long as during the last prior fiscal year
there has been no change to its employee population or employee compensation arrangements that it reasonably believes would result in
a significant change in its pay ratio disclosure. Because we did not experience any meaningful changes to our employee population, or
changes in employee compensation arrangements, during 2019 and 2020, we believe it is reasonable to use the median employee identified
and reported in 2018 for purposes of calculating the pay ratio disclosure with respect to 2020 and that using this median employee would
not significantly affect our pay ratio disclosure.
Our diverse employee population
includes employees located in the United States, Europe, Canada, Africa, Latin America and Asia Pacific, some of whom are represented
by workers councils and labor unions, and varies in areas such as experience, education and specialized training. For purposes of our
pay ratio analysis in 2018, we selected the median employee based on the approximately 15,000 individuals who were employed by the Company
and our consolidated subsidiaries (whether as full-time, part-time, temporary or seasonal workers) as of October 31, 2018. For
full-time and part-time employees that were hired in 2018 but did not work the full year, we annualized their compensation, but
did not make any full-time equivalent adjustments.
In identifying such median employee,
we calculated and annualized the gross year-to-date payroll earnings of each such employee as of October 31, 2018, using such measure
as our consistently applied compensation measure. Gross payroll earnings consist of all compensation elements appearing in payroll records
for each individual, including base salary, bonuses and other cash components. We converted gross payroll earnings for non-U.S. employees
to U.S. dollars using applicable foreign exchange rates as of October 31, 2018 and did not make any cost-of-living adjustments for non-U.S.
employees.
The ratio presented above is
a reasonable estimate calculated in a manner consistent with Item 402(u) based on our payroll and employment records and the methodology
described herein. The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s
annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates
and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies
may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices
and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.