Item 11.
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Executive Compensation.
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Item 11 of this Amendment contains information regarding our compensation
programs and policies and, in particular, their application to a specific group of individuals that are referred to as our Named Executive Officers. Under applicable SEC rules, our Named Executive Officers for this Amendment, who are
also sometimes referred to as the NEOs or the executives, consist of Michael Castleman and Brian Short (current executives), as well as Scott Freidheim, Jill Albrinck and Hugo Malan (former executives).
Compensation Discussion and Analysis
Overview and Executive Summary
This Compensation
Discussion and Analysis focuses on the following:
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our executive compensation philosophy and guiding principles;
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paying for performance;
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how we make executive compensation decisions; and
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the principal components of our executive compensation program and an analysis of 2016 compensation.
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2016 Performance
CDI is going
through a time of significant change and our Board of Directors and management team are working diligently to transform the company and position CDI for success.
Throughout 2016, we enhanced our position to more effectively implement our strategy. We created the Energy Chemical & Infrastructure vertical and
the Specialty Talent & Technology Solutions segment, increasing our market focus. We improved our North America Staffing recruitment capabilities by shifting to skill-based practices, supported by offshore candidate sourcing and research.
We implemented improved quality management and work-sharing processes within our Engineering Solutions units. We streamlined our portfolio with the disposition of AndersElite. And, we maintained our financial strength and flexibility through active
expense and capital management, which contributed to positive cash flows, debt reduction, and a 5% decrease in shares outstanding. However, we are accelerating our transformation through more dramatic sales and operational execution discipline. Our
current transformation plan is differentiated from past efforts through its deep operational focus that is based upon bringing together the best of the companys capabilities, and engaging all members of the CDI team in a cohesive effort to
increase value for CDI, as a whole.
Our company has faced financial pressure because many of our customers are within the industrial and oil and gas
sectors that have experienced a downturn. As a result, the company is accelerating its transformation through the five enterprise-wide programs described above. This focus and discipline has been put in sharper focus with the executive management
changes announced during 2016.
9
Below is a summary of the companys financial results in 2016, as compared to the previous year:
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Revenue
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$864.4 million in 2016 versus $985.5 million in 2015 (excluding AndersElite, $805.1 million in 2016 vesrsus $880.5 million in 2015)
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Net Income/Loss
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Net loss of $31.6 million in 2016 versus net loss of $37 million in 2015
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Adjusted EBITDA
1
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Adjusted EBITDA loss of $2.1 million in 2016 versus Adjusted EBITDA of $13.2 million in 2015
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Earnings/Loss Per Share
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Net loss per share of $(1.66) in 2016 versus net loss per share of $(1.88) in 2015
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Adjusted Earnings Per Share
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Adjusted loss per diluted share of $(0.26) in 2016 versus adjusted earnings per share of $0.04 in 2015
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Despite the companys financial results, the company made progress in its transformation as described above. For example,
during 2016, the company simplified its business with the sale of the
UK-based
AndersElite business and the managed exit from the
non-core
CommTech service line within
the Energy, Chemical &Infrastructure vertical, which provided municipal 911 consulting services. In addition, the company grew its Government Services business by 6.4%, which exemplifies the potential of our new sales programs.
The companys executive compensation program is structured so that a significant percentage of compensation is tied to the achievement of challenging
levels of company performance both short-term and long-term. As a result of the companys financial results, no performance-based short-term or long-term incentive compensation was earned by executives participating in the short-term
incentive compensation program for 2016, the value creation contingent awards granted in 2014 or 2015 or the performance share grants made in prior years. This reflects the
pay-for-performance
nature of CDIs incentive compensation program.
Role of
Say-on
Pay and Shareholder Outreach
While the annual
say-on-pay
vote is not binding on the company, we believe that
it is important for our shareholders to have an opportunity to vote on this proposal on an annual basis as a means to express their views regarding our executive compensation philosophy, our compensation policies and programs, and our decisions
regarding executive compensation, all as disclosed in this Annual Report. Our Board of Directors and the Compensation Committee (referred to sometimes in this CD&A as the Committee) value the opinions of our shareholders.
At the 2016 annual meeting of shareholders, 84% of the votes cast on the advisory vote on our executive compensation proposal were in favor of our executive
compensation as disclosed in the 2016 proxy statement, and 16% were opposed, and as a result our executive compensation was approved in that advisory vote. Though the shareholders overwhelmingly approved the executive compensation, we are committed
to understanding the views of all the shareholders.
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Adjusted EBITDA excludes from net income (loss) attributable to CDI: interest, income taxes, depreciation and amortization expense, impairment charges, restructuring and other related costs, share-based compensation
expense, leadership transition costs, loss on disposition, certain acquisition and litigation items, gain from the sale of a
non-operating
corporate asset, impairment related costs and sales and use tax
recovery benefit. Adjusted Earnings Per Share excludes from diluted earnings per common share impairment charges, restructuring and other related costs, leadership transition costs, loss on disposition, certain acquisition and litigation items,
amortization of acquired intangibles, gain on sale of
non-operating
asset, impairment related costs, sales and use tax recovery benefit and the related income tax effect, including certain deferred tax
adjustments. See the financial tables in Appendix A for more information on
non-GAAP
financial measures and the reconciliation of these measures to GAAP measures.
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10
We believe that regular, transparent communication with our shareholders and other stakeholders is essential.
Accordingly, throughout 2016, our CEO, CFO, CAO and head of investor relations met with shareholders and discussed, among other things, our executive compensation. Our management team met
in-person
or via
telephone calls with shareholders holding over 40% of our common stock in 2016. Management takes the feedback from these investor meetings and shares it with the Board to understand investors views regarding executive compensation and other
matters. In addition, a director spoke directly with two shareholders regarding governance matters, among other things, and the feedback from these shareholders was shared with the entire Board.
In these discussions, some investors expressed concerns regarding the prior value creation contingent awards and their potential lack of incentive and
retention based on the companys financial performance and associated stock price performance over the last two years. With this feedback, the
say-on-pay
results
and other factors, the Committee continued to apply its
pay-for-performance
philosophy for 2016, but did not make any further value creation contingent awards in 2016.
Key Executive Compensation Actions Taken in 2016
Below are some of the key actions and decisions made regarding the companys executive compensation in 2016:
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Incentive and Retention
. Given the turnaround setting of the company, we structured bonuses across the company to balance retention and incentive elements. A portion of each employees bonus was guaranteed
as a retention tool 25% of target bonus payout for each bonus-eligible employee and paid in two tranches (March 2017 and March 2018). This was a special program for 2016 designed to encourage retention during a turnaround period.
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Incentive Plan Metrics for 2016
. For the annual cash incentive plan, the metrics were EBITDA and return on invested capital.
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Executive Management Changes in 2016
Scott Freidheim, the former CEO and President, left the company in September 2016. Hugo Malan, the former Executive Vice President and President, Talent and
Technology Solutions, left the company in November 2016. Jill Albrinck, the former Executive Vice President and President, MRI, left the company in February 2017. The section below titled
Former Officers
discusses the compensation
arrangements with Mr. Freidheim, Mr. Malan and Ms. Albrinck. As described above, these management changes were part of the companys transformation to heighten operational focus and bring together all of the companys
service offerings and support functions in a more efficient structure.
Our Compensation Philosophy and Guiding Principles
In support of our business and our strategic plan, CDIs compensation program is designed to attract, motivate, reward and retain the high quality
executives necessary to provide company leadership and create shareholder value. The companys executive compensation philosophy is reflected in the following design principles:
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There should be a strong link between pay and performance.
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The interests of executives should be aligned with the interests of our shareholders.
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Compensation programs should reinforce business strategies and drive long-term sustained shareholder value.
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Paying for Performance
There are three primary components of our executive compensation program: base salary, short-term (annual) incentives and long-term incentives. The
companys executive compensation program is structured so that a meaningful percentage of compensation is tied to the achievement of challenging levels of company performance. As illustrated in the chart below, 41% of Mr. Castlemans
(President and Interim CEO) target total direct compensation opportunity for 2016 was dependent upon company performance.
Percent of total direct compensation
at-risk
= 41%
Due to the companys financial performance in 2016, our Interim CEO did not earn any portion of his target bonus award and only earned the guaranteed
component (equal to 12.5% of his target payout) of his bonus that was retention focused and part of the broader program described above. In addition, Mr. Castleman received a significant long-term value creation contingent award (in the form of
a performance based award) upon his hiring. The value creation contingent award only vests if significant shareholder value is created through achieving share prices between two and three times the market price near the grant date. This award has
not vested and due to the companys stock price performance since the time of grant, the fair value of this award at the end of 2015 was $5,065 (the fair value has not been calculated as of 12/31/16, though we do not believe there has been a
material change in the value since the end of 2015). We believe this demonstrates that while we provide our executives with the opportunity to earn meaningful compensation if challenging results are achieved, failure to achieve those performance
levels will result in our executives not realizing those compensation opportunities.
How We Make Compensation Decisions
Role of the Compensation Committee
The Committee regularly reviews the alignment of our executive compensation program with the strategies and needs of our business, market trends, changes in
competitive practices, individual performance, company performance, and the interests of our shareholders. Based on these factors, the Committee approves the compensation of the NEOs, including base salary, short-term incentive awards (which are in
the form of an annual cash performance bonus), long-term equity awards, and benefits and perquisites.
Generally, compensation decisions, together with
individual performance reviews, are made at the first and second regularly-scheduled Committee meetings of the fiscal year. The short-term incentive goals and targets are also generally approved by the Committee at that time.
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Role of Management
The Committee combines input from senior management and the Committees and Boards own individual experiences and best judgment to arrive at the
proper alignment of compensation philosophy, objectives, and programs. During 2016, the CEO was the member of senior management who interacted most closely with the Committee. Management provides the Committee with their perspectives on the design
and administration of the executive compensation program and awards. In particular, the CEO worked with the Committee to enable the Committee to formulate the specific plan and award designs, performance measures, and performance levels (i.e.,
threshold and target) necessary to align the executive compensation program with CDIs business strategies and objectives.
The CEO reviewed with the
Committee performance evaluations for each of the other NEOs and his recommendations (except with respect to his own compensation) regarding base salary, short-term incentive awards, and long-term incentive awards for the other NEOs to ensure
alignment with the Committees design principles. However, all final decisions regarding the compensation of the NEOs are made by the Committee. The Committee conducts its own performance assessment of the CEO and no management recommendation
is made with regard to his compensation.
Components of the Executive Compensation Program
The table below provides an overview of the principal components of CDIs executive compensation program, including the objectives of each component. The
table illustrates that most of the components are tied (directly or indirectly) to either company or individual performance, in ways that we believe serve to enhance shareholder value. In designing our executive compensation program, the Committee
seeks to balance (a) cash and
non-cash
compensation, (b) compensation that is fixed and compensation that is contingent on performance, and (c) for contingent compensation, compensation that is
based on the companys short-term performance and compensation based on long-term performance. However, the Committee does not target any specific percentage of compensation to be cash versus
non-cash,
or
fixed versus contingent on performance, or short-term versus long-term. More information and analysis regarding each of these components is contained below in this CD&A.
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Component of
CDIs
Executive
Compensation
Program
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Key Features
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Performance Relationship
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Principal Purpose(s)
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Base Salary
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Fixed cash payments
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Salary levels are based on roles, responsibilities, experience, skill set and past performance by the executives
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Attract and retain executives; reward executives for level of responsibility, experience and sustained individual performance; provide income certainty for executives
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Short-Term
(Non-Equity)
Incentive
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Annual incentive program, paid in cash
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Align executives with annual goals and objectives; create direct link to annual financial and operational performance
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Motivate executives to achieve annual business goals
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Long-Term (Equity and
Non-Equity)
Incentive Awards
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Awards granted on a multi-year basis using a mix of stock options, TVDS and value creation contingent awards (performance units and
non-equity
awards)
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Accelerate growth and balance this growth with profitability; value creation contingent awards only have value with appreciable performance
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Align the interests of CDIs executives with those of shareholders; executive retention; promote stock ownership by executives
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Benefits
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Provide employee benefits
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We do not view this as a significant component of our executive compensation program
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Attract and retain executives by providing benefits consistent with our employees
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Competitive Compensation
To determine what comparable companies are paying their executives, the Committee has, in the past, retained independent outside compensation consulting firms
to do periodic studies. Consultant compensation studies looked at proxy statement data from peer group companies which are in businesses similar to CDI, as well as survey data of
similar-size
companies. The
Committee looks at the results of these periodic compensation studies to see whether CDIs executive compensation levels have remained competitive, taking into consideration the companys size relative to the peers. The Committee did not
retain a consulting firm or perform such a study in 2016. The Committees objective is to establish compensation packages for the executive officers that would be competitive with those offered by other employers, appropriately reflecting each
officers skill set and experience, and encouraging retention of top performers.
The Principal Components of CDIs Executive Compensation
Program
The principal components of our compensation packages are base salary, an annual cash incentive plan and long-term equity and
non-equity
incentives.
Base Salary
The Committee annually reviews the base salaries of the executive officers as part of the overall review and determination of our executive compensation
program for the relevant fiscal year. With respect to base salary, the Committees objective is to offer a level of fixed cash compensation, determined with reference to the factors described above, that will enable us to attract and retain top
talent. There were no changes to executive officers base salaries in 2016, except that pursuant to the letter agreement entered into between the company and Mr. Castleman in January 2017 (as described in more detail below in the section
titled Potential Payments Upon Termination of Employment or Change in Control) Mr. Castlemans base salary was retroactively adjusted to $500,000 from the date of his appointment as President and Interim CEO in September 2016.
The Short-Term Incentive Compensation Program
In addition to receiving a base salary, the NEOs participate in an annual incentive compensation program under which they can earn additional cash compensation
depending principally on the companys financial performance during the year and, to a lesser extent, on their individual performance. The short-term incentive compensation program is designed to reward short-term (one year) business results
whereas the long-term awards are tied to multi-year performance.
Under our short-term incentive compensation program, a percentage of each
executives salary is established as the target incentive compensation payout amount for that executive. The executive would earn this target amount for 100% achievement of the executives incentive compensation goals. The percentage of an
executives salary for his or her target payout amount is based on roles and responsibilities and internal equity, and higher percentages generally apply to executives at higher levels in the organization and for positions which have a greater
impact on and accountability for the companys financial results. Accordingly, these executives have a greater percentage of their total cash compensation at risk but also are given greater potential rewards under the short-term incentive
compensation program. For our CEOs in 2016, Mr. Freidheims target incentive compensation was 100% of his salary and Mr. Castlemans target incentive compensation was increased to 90% of his salary effective when he became our
President and Interim CEO.
Under CDIs short-term incentive compensation program, the Committee can decrease, in its discretion, the amounts to be
paid to executives. The Committee believes that having this discretion is important in order to take into account unexpected events that may occur after the incentive compensation criteria are set which could otherwise result in payouts that are too
high under the circumstances. In addition, the Committee retains the discretion to award bonuses outside the short-term incentive compensation program to recognize unique or special accomplishments by executives during a given year, take into
consideration market changes in executive compensation, discourage executives from taking unnecessary or excessive risks to achieve performance goals, and otherwise carry out the broad objectives of our compensation program.
In addition, in 2016, a portion of the short-term incentive award 25% of the target bonus award for each recipient was converted to a retention
award that was payable in two equal parts in 2017 and 2018. This was a special program for 2016 designed to encourage retention during a turnaround period.
The CDI Corp. Executive Bonus Plan, (the Executive Bonus Plan), approved by our shareholders in 2015, is structured to permit the payment of cash
bonuses that would not be subject to the deduction limitations of Section 162(m) of the Internal Revenue Code, and therefore permits negative discretion only. However, the company does not guarantee that amounts paid to the NEOs under such plan will
be exempt from the deduction limitations of Section 162(m) of the Internal Revenue Code, and the company has the discretion to pay bonuses that are not so exempt (such as the retention bonuses described above).
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The Portion of Short-Term Incentive Compensation Based on CDI Financial Results
Under our 2016 short-term incentive compensation program, 85% of an executives target incentive was based on the companys achievement of its
financial targets. The Committee chose EBITDA (earnings before interest, taxes, depreciation and amortization, and before bonus and stock compensation) and ROIC (return on invested capital) as the financial measures for the 2016 program, with EBITDA
given the greatest weight (80%). The Committee determined that EBITDA would have the most direct impact on increasing shareholder value. ROIC was selected because it is a valuable measure of the companys ability to efficiently use its capital.
For purposes of the incentive compensation program, ROIC was calculated as the EBITA (earnings before interest, taxes and amortization) for 2016 divided by the average amount of invested capital (total borrowings net of cash plus equity) at the end
of each quarter in 2016, expressed as a percentage.
To earn the target level of cash incentive compensation based on EBITDA and ROIC, the company needed
to exceed the target levels of EBITDA and ROIC in CDIs 2016 financial plan. The financial plan is developed by management, and reviewed and approved by the Finance Committee, which in turn recommends it for final approval by the Board. The
specific financial targets for a given year depend on a number of factors, including where CDI is in its business cycle and the size and strength of the pipeline of business with which CDI enters the year. We believe that if CDI consistently attains
or exceeds its target levels of EBITDA and ROIC, shareholder value will increase over the long term. Our targets are intended to be challenging, yet realistic and achievable at the time they are established.
Under our short-term cash incentive compensation program, we establish a payout scale for each financial measure for performance above and below the target.
Each scale sets a threshold level of performance (below which no cash incentive compensation would be earned). Additional amounts can be earned for performance which exceeds the target level. However, no annual payout may exceed 200% of the target
amount.
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The following table provides basic information about the payout levels established for CDIs 2016 corporate
short-term incentive compensation financial metrics.
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2016 EBITDA
(Before Bonus and Stock Compensation)
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2016 ROIC*
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$ in millions
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Achievement
Needed
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% of
Target
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Payout as a % of
Target
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Achievement
Needed
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% of
Target
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Payout as a % of
Target
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Threshold Payout Level
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$
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16.5
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70
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%
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35
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%
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2.3
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%
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70
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%
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35
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%
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Target Performance Level
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$
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23.6
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100
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%
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75
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%
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3.3
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%
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100
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%
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75
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%
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Target Payout Level
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$
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29.5
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125
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%
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100
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%
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4.1
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%
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125
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%
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100
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%
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Maximum Payout Level
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$
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40.2
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170
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%
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200
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%
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5.6
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%
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170
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%
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200
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%
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*
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ROIC target is an average of the quarterly ROIC calculation based on a rolling 12 months at each quarter point.
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As noted in the above table, target payout levels were set at performance levels exceeding the target financial performance levels. These stretch performance
goals reflected the turnaround nature of the business and the target performance amounts took into account the declining business results at the end of 2015.
CDIs EBITDA achievement for 2016, for purposes of the short-term incentive compensation program, was $2.2 million, which represented 14.4% of the
target level. The companys reported operating loss for 2016 was $31.6 million. EBITDA excludes interest ($1.1 million in 2016), income tax expense ($0.1 million), and depreciation and amortization ($10.3 million). In determining
CDIs EBITDA in 2016 for purposes of the short-term incentive compensation program, the following items were also excluded: a loss of $11.3 million on the sale of a UK business, bonuses and stock compensation of $6.3 million,
restructuring charges of $3.8 million, certain prior year project-related costs of $1.0 million and leadership transition costs of $0.5 million. In addition, a net positive $0.5 million of acquisition-related adjustments and a
favorable currency adjustment of $0.1 million were not taken into account. The Committee excluded these items so employees are not penalized for taking actions in the long-term best interests of the company and the shareholders and in order to
focus on core operating performance. The ROIC achieved by CDI for 2016 for purposes of the incentive compensation program was
-4.6%,
which was below the threshold payout level. See Appendix A for details
concerning the reconciliation of adjusted EBITDA to CDIs net loss in 2016.
The Portion of Short-Term Incentive Compensation
Based on Individual Performance
We include individual performance as a component of our cash incentive compensation program for executives because we
believe that each executive should demonstrate executive leadership behaviors and achieve individual objectives in any given year. An executives bonus amount is funded based on corporate and business unit results, and then 10% of that amount
is allocated based on performance relative to individual performance. Because the companys financial performance in 2016 was below the threshold levels, the executives did not earn short-term incentive compensation based on their individual
performance.
Summary of Bonuses Earned in 2016
Under our 2016 short-term incentive compensation program, the threshold level of performance was not achieved for either performance metric. Accordingly, there
were no performance bonuses earned in 2016 under our short-term incentive compensation program.
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As described above, the 2016 program included a retention component. Based on the foregoing, two of the NEOs
received the following 2016 bonuses:
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Name of Executive
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2016 Bonus
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Michael Castleman
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$
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41,198
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*
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Brian Short
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$
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28,125
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*
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* retention awards paid in March 2017
Mr. Castleman and Mr. Short are eligible to receive the second portion of this retention award if they remain with the company through the
pay-out
date in 2018 or are terminated without cause prior to such date. Retention bonuses were not paid to the other NEOs because they were not employed through the vesting date.
The Long-Term Incentive Compensation Program
We believe that ownership of CDI stock by our executives creates an important link between the financial interests of the executives and the interests of our
other shareholders. We also believe that long-term performance-based awards help our executives focus on the sustained success of the company and maximizing shareholder returns. Accordingly, we regard the stock-based and long-term award elements of
our executive compensation program as a critical part of the programs effectiveness.
A portion of CDIs executive compensation is in the form
of equity, the value of which is dependent upon the future value of CDI stock. In addition, our guidelines call for our executives to achieve a significant amount of CDI stock ownership. This helps to align the financial interests of our executives
with the financial interests of our other shareholders.
Prior to 2015, we granted annual equity awards to our executives under the CDI Corp. Amended and
Restated Omnibus Stock Plan (the Omnibus Stock Plan). With the hiring of our former CEO and certain other NEOs in 2014, we made special multi-year equity-based awards. The former CEOs awards consisted of stock options, TVDS and
value creation contingent awards (performance units). Each of these awards generally vest over a five-year period for performance and retention purposes.
In connection with her hiring, Ms. Albrinck received equity awards as part of her new hire compensation package. Upon her leaving the company in February
2017, those awards were forfeited by Ms. Albrinck. The other NEOs received significant awards in prior years consisting of TVDS and value creation contingent awards (performance units). These TVDS awards generally vest over a four-year period.
The value creation contingent awards for certain of the NEOs can vest as soon as three years after grant depending on achievement of performance hurdles and vesting elections.
Value creation contingent awards (in the form of performance units and
non-equity
based awards) were an integral piece
of CDIs incentive compensation. The form of the value creation contingent awards further increased managements alignment with shareholders. The awards do not compensate at all in the event of unattractive or modest performance. This
creates a model in which the awards deliver no compensation when there are not attractive shareholder returns, yet are designed to deliver sufficient levels of compensation to attract and motivate talented executives when there are attractive
shareholder returns.
All value creation contingent awards described above are ultimately cash settled.
The Committee has generally not considered previously-granted and vested equity awards when structuring the compensation arrangements of the executives
because the Committee focuses on the value of a persons job for the year or years to which a compensation arrangement relates and not on past earned and vested compensation arrangements. We seek to motivate the future performance of the
companys executives, while previously-granted and vested equity awards reflect their past performance. In determining the overall amount of equity-based awards to grant executives, the Committee considers CDIs stock overhang
(the potential dilution the awards would have on the ownership held by the companys shareholders), the number of shares available for grant under the Omnibus Stock Plan and the financial expense the company would incur in connection with the
awards.
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We believe that long-term incentive compensation programs provide CDI the ability to attract and fairly
compensate its executives and also helps us to retain our executives. Since these awards vest over a period of years, they are designed to encourage executives to remain with the company in order for them to realize the full potential value of their
awards.
Other than the grant to Ms. Albrinck described above, no other NEO received an equity-based award in 2016.
In January 2017, the company granted certain equity awards under the Omnibus Stock Plan to Messrs. Castleman and Short, which were structured in part to
promote retention. Messrs. Castleman and Short were granted 87,500 and 59,500 shares of TVDS, respectively, that vest 20% on October 1, 2017, 30% on each of October 1, 2018 and October 1, 2019, and 20% on October 1, 2020, subject
to continued employment on the applicable vesting date. No equity awards had been granted to them since March 2015 (in the case of Mr. Castleman) and May 2015 (in the case of Mr. Short). In the event of a sale of the company, a minimum of
the next two tranches then due to vest will become vested (and additional TVDS may vest depending on the value of CDI stock realized in the transaction) and the vesting dates of any remaining tranches will be accelerated by one year. The TVDS awards
also provide for vesting of a portion of the awards in connection with certain involuntary terminations of employment. Messrs. Castleman and Short also were granted a target number of 37,500 and 25,500 Performance Units, respectively, that are
earned based on the companys achievement of operating profit targets in 2018. Up to 150% of the Performance Units could be earned for the maximum level of operating profit. Any Performance Units that are earned will vest on March 31, 2019
subject to continued employment by CDI through that date. In the event of a sale of the company that occurs prior to December 31, 2018, all Performance Units will be immediately forfeited with no compensation due.
Personal Benefits and Perquisites (Perks)
Our basic philosophy is that executives should receive a minimal amount of perks in comparison to their total compensation. However, we believe that some
perks, such as relocation-related expenses and distance and transitional living expenses, are in certain circumstances part of a competitive executive compensation package and are necessary and appropriate in order to attract and retain highly
competent executives. See the Summary Compensation Table (and in particular the notes to the All Other Compensation column) for information regarding the NEOs perks in 2016.
Retirement Benefits and the Deferred Compensation Plan
Our philosophy with respect to retirement benefits is to have a basic
tax-qualified
retirement savings plan in place
a 401(k) plan which is available to all employees. The 401(k) plan provides CDIs employees with a savings program in which each employee can control how his or her savings are invested.
Federal tax rules impose a limit on employee contributions to a 401(k) plan (that limit was $18,000 in 2016, though participants over the age of 50 can
contribute more) and, due to the Internal Revenue Code nondiscrimination testing required of such plans, a lower limit typically applies to the companys highly-compensated employees (as defined by the Internal Revenue Code) such as the NEOs.
For this reason, we have also established a nonqualified Deferred Compensation Plan for our highly-compensated employees. This is a voluntary program under which the company does not make any contributions. It allows highly-compensated employees who
cant contribute the maximum allowable amount to their 401(k) plan account because of Internal Revenue Code limitations to save for retirement in a
tax-effective
way at minimal cost to the company. None
of our NEOs participated in the Deferred Compensation Plan for 2016.
18
Severance and Post-Employment Compensation
We seek to provide a generally competitive severance benefit to our senior management personnel, including the NEOs. As part of Mr. Castlemans
employment arrangements, we have agreed to a specified severance arrangement. Mr. Short is grandfathered under our former Executive Severance Program. As described in more detail below in the section titled Potential Payments Upon
Termination of Employment or Change in Control, the severance arrangements for Messrs. Castleman and Short were amended in 2017 in recognition of the additional roles and responsibilities taken on by these executives, in part due to the
executive management changes previously described. These arrangements are intended to assist executives in transition from employment by CDI when that employment is terminated by the company without cause. Additional details regarding the
post-termination benefits that our executives can receive can be found in the section titled Potential Payments Upon Termination of Employment or Change in Control.
In structuring a severance program, the Committee does not consider an executives accumulated wealth because the Committee does not believe it has
adequate insight into an executives overall individual financial condition and it believes that a severance program such as that offered by the company is needed to remain competitive in the market for executive talent.
Former Officers
Our former CEO and President,
Scott Freidheim, left the company in September 2016 and entered into a separation agreement with CDI pursuant to which, among other things, Mr. Freidheim agreed to a release and waiver of claims in order to receive severance-related
compensation as described in more detail in the section titled Potential Payments Upon Termination of Employment or Change in Control.
Our
former Executive Vice President and President, Talent and Technology Solutions, Hugo Malan, left the company in November 2016 and entered into a separation agreement with CDI pursuant to which, among other things, Mr. Malan agreed to a release
and waiver of claims in order to receive the severance provided under his employment arrangement, as described in more detail in the section titled Potential Payments Upon Termination of Employment or Change in Control.
Our former Executive Vice President and President, MRI, Jill Albrinck, left the company in February 2017 and entered into a separation agreement with CDI
pursuant to which, among other things, Ms. Albrinck agreed to a release and waiver of claims in order to receive severance provided under her employment arrangement, as described in more detail in the section titled Potential Payments
Upon Termination of Employment or Change in Control.
19
Other Important Programs, Policies and Factors Affecting Executive Compensation
Our Stock Ownership Guidelines
The
company has stock ownership guidelines based on accumulating and holding shares of CDI with a value equal to a specified multiple of base pay. The multiples for specific executive levels are shown below.
|
|
|
|
|
Target
|
CEO
|
|
5x base salary
|
Executive Vice Presidents
|
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3x base salary
|
Other Direct Reports to CEO
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2x base salary
|
Only shares owned by an NEO are counted towards meeting the guideline. Stock options, stock appreciation rights and unvested
TVDS awards are not included in determining whether an executive has achieved the ownership levels. Executives who have not met their ownership guidelines are required to retain 75% of shares earned from the equity compensation program until the
guideline is met. The current NEOs have not yet attained their ownership requirements.
The Executive Stock Purchase Opportunity
Program
The Executive Stock Purchase Opportunity Program is designed to offer executives an incentive to make a personal financial investment in
the future success of CDI, in order to further tie their interests to the companys shareholders. Only Ms. Albrinck was eligible to participate in this program for 2016, but she did not participate.
Under this program, which is typically a
one-time
opportunity for each executive upon their joining the company or
becoming an executive, for every share of CDI stock that the executive purchases within a specified
20-day
period, the company grants 0.4 shares of TVDS, which vest at the rate of 20% per year over five years
so long as all of the underlying purchased shares are retained by the executive. The TVDS is forfeited if the executive resigns or is terminated for cause prior to vesting. Executives at higher levels and with greater impact on the companys
financial performance are given a greater opportunity to purchase shares under this program.
The Timing and Pricing of Equity
Awards
In the past, the Committee generally made equity awards to executives once a year. The Committee normally met to approve the annual awards
to the NEOs shortly after the issuance of the companys earnings release for the previous year. The exercise price of stock options and the per share value of TVDS are equal to or greater than the closing market price of CDI stock on the award
date. We have typically scheduled the grants of annual equity awards to take place shortly after the release of our annual earnings so that this information is reflected in CDIs stock price at the time of the awards. In 2014 and 2015, the
Committee made special multi-year awards generally with five year performance periods while evaluating future awards in light of the companys performance against the targets during this period. In 2016, no equity awards were made to the NEOs
(except for Ms. Albrinck in connection with her hiring). However, equity awards were made to Mr. Castleman and Mr. Short on January 25, 2017, which were intended to cover both 2016 and 2017.
In addition, equity awards are sometimes made in the event of a significant new hire or a significant promotion. In order to allow the company to react
quickly, the authority to grant awards in these situations has been delegated by the Committee. For high-level managers who report directly to the CEO and may receive larger awards, the awards are typically recommended by the CEO and approved by the
Chair of the Committee, with notice given to the other members of the Committee.
20
For lower-level managers who typically receive smaller awards, the CEO has been delegated authority by the Committee to approve awards that adhere to the Committees guidelines and are
consistent with past practice in size and type. For new hires, the award date is the recipients first day of employment. In the case of significant promotions, the award date is on or around the time of the recipients promotion. However,
an award date may not be earlier than the date on which the grant was approved. In all cases, the exercise price of stock options and the per share value of performance shares or deferred stock is equal to or greater than the closing price of CDI
stock on the date of grant.
Our practices regarding the timing and pricing of equity awards are the same for executives as they are for awards made to
other employees. Our policies and procedures applicable to the timing of equity awards are designed to provide assurances that grant timing is not being manipulated to result in a price that is more favorable to employees.
Our Clawback Policy
CDI has a
clawback policy under which the company can cancel and recoup from any employee in the CDI organization any incentive compensation or equity awards that were based on incorrect information, whether the error in the information occurred
as a result of oversight, negligence or intentional misconduct (including fraud). The Committee has discretion to treat employees who received an award based on incorrect information differently depending on an employees degree of involvement
in causing the error, an employees assistance in discovering and/or correcting the error, and any other facts that the Committee determines to be relevant.
The Effect of the Compensation Program on Risk
We believe that our compensation program does not encourage excessive and unnecessary risk taking. In particular, although a substantial portion of the
compensation provided to our NEOs is performance-based, our executive compensation program is designed to balance risk. Among the reasons for this belief are the following:
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The existence of the clawback policy described above.
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Base salaries provide a fixed element of compensation at levels which we consider sufficient not to encourage undue risk taking.
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In the case of our NEOs, the design of our compensation program encourages CDIs executives to remain focused on both the short- and long-term operational and financial goals of the company, with substantial value
based on the long-term performance of CDI.
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|
Stock ownership guidelines for our NEOs result in executives maintaining levels of CDI stock ownership, which provides motivation for them to take into account CDIs long-term interests.
|
The Impact of Tax Deductibility Limitations on our Compensation Design and Decisions
The Committee evaluates the impact of Section 162(m) of the Internal Revenue Code on our executive compensation program. Section 162(m) limits the
deductibility by the company of certain compensation paid to our NEOs (other than to our CFO) in excess of $1 million per year. The Section 162(m) regulations provide an exemption for qualified performance-based compensation.
21
Over the years, the Committee has attempted to structure executive compensation arrangements to be deductible to
the extent consistent with the goals and objectives of our executive compensation program. However, the Committee believes that, in some circumstances and particularly for the CEO, factors other than tax deductibility may be more important in
determining the forms and levels of executive compensation that are most appropriate and in the best interests of CDI and its shareholders. Therefore, the Committee reserves the flexibility to approve executive compensation that may not be
deductible.
Use of Tally Sheets
The Committee annually reviews tally sheets prepared for each executive officer of CDI by the companys Human Resources department. The tally sheets are
designed to show the total compensation (broken down into each element of compensation) which has been paid to each executive and the compensation which would be paid to the executive following termination of his or her employment under various
scenarios. Committee members believe that tally sheets provide a comprehensive picture of an executives total compensation, give the Committee a better understanding of how the various components of an executives compensation package fit
together and provide a context for making pay decisions. In its February 2016 and February 2017 review of tally sheets, the Committee determined that the annual compensation amounts for the NEOs were consistent with the Committees expectations
and aligned with our objectives.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with CDIs management. Based on such review
and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Amendment No. 1 to Form
10-K.
|
COMPENSATION COMMITTEE:
|
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Michael J. Emmi, Chair
|
Ronald J. Kozich
|
Albert E. Smith
|
22
Summary Compensation Table
The first table below (the Summary Compensation Table, or SCT) summarizes the compensation during the past three years for CDIs Named Executive Officers
(NEOs), reported in accordance with SEC rules for the SCT. Only three of the NEOs (Michael Castleman, Brian Short and Jill Albrinck) were executive officers as of the end of 2016. Ms. Albrincks employment ended in February 2017. Of the
other two NEOs, Scott Freidheims employment ended in September 2016 and Hugo Malans employment ended in November 2016. Three of the NEOs (Michael Castleman, Scott Freidheim and Hugo Malan) joined CDI during 2014, so their 2014
compensation in the SCT reflects a partial year. Ms. Albrincks first year as an NEO was 2016, so only her 2016 compensation is reported in the SCT.
The second table below is a supplemental table showing the actual realized compensation for our CEOs, Mr. Freidheim (who served as CEO during part of
2016, all of 2015 and part of 2014) and Mr. Castleman (who served as Interim CEO for part of 2016). This supplemental table is not a substitute for the SCT. Total Actual Compensation Realized differs substantially from Total
Compensation as set forth in the SCT. The principal differences between the two tables is that the second table: (a) reports the actual value realized on equity-based compensation, including amounts associated with equity-based awards
granted in prior years, only during the year in which an equity-based award becomes vested or is exercised, rather than the grant date accounting value of the award in the year of grant; (b) does not include severance and other post-employment
compensation; and (c) does not include the 401(k) plan employer match generally available to CDI employees. As shown in the second table, the total actual compensation realized by Mr. Freidheim was 7.3% of his total compensation reflected
in the SCT for 2014, 16.4% of his SCT total for 2015, and 41.6% of his SCT total for 2016, while the total actual compensation realized by Mr. Castleman was 30.0% higher than his SCT total for 2016 (primarily because of the partial vesting of
an equity award Mr. Castleman received when he joined CDI in 2014).
Summary Compensation Table
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Name and
Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-
Equity
Incentive
Plan
Compen-
sation ($)
|
|
|
All Other
Compen-
sation
($)
|
|
|
Total
($)
|
|
Michael S. Castleman
President, Interim Chief Executive Officer, Chief Financial Officer
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|
2016
|
|
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429,241
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41,198
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|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
21,166
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|
|
|
491,605
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2015
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|
400,004
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|
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280,000
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28,400
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|
|
|
0
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|
|
|
0
|
|
|
|
107,595
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|
|
|
815,999
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|
|
|
2014
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|
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|
71,234
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|
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|
299,863
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|
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|
1,725,756
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0
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|
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0
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12,758
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2,109,611
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Brian D. Short
Executive Vice President, Chief Administrative Officer and General Counsel
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2016
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375,003
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|
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|
28,125
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|
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|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5,788
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|
|
|
408,916
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|
|
|
2015
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|
|
|
375,003
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|
|
0
|
|
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|
249,995
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|
|
|
0
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|
|
|
0
|
|
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|
11,811
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636,809
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2014
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|
375,003
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|
|
|
0
|
|
|
|
126,402
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|
|
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44,998
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|
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|
151,693
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|
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8,952
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|
|
|
707,048
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|
Scott J. Freidheim
Former President and Chief Executive Officer (his employment ended in September 2016)
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2016
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424,590
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|
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|
0
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|
|
|
0
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|
|
|
0
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|
0
|
|
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620,902
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1,045,492
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2015
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600,000
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0
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|
3,121,508
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0
|
|
|
|
0
|
|
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41,334
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3,762,842
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2014
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177,534
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177,534
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4,011,024
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272,045
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|
0
|
|
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211,252
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|
|
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4,849,389
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|
Jill M. Albrinck
Former Executive Vice President and President, Management Recruiters International (her employment ended in
February 2017)
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2016
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360,006
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|
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226,002
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|
|
|
200,000
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|
|
|
0
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|
|
|
0
|
|
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57,206
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843,214
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D. Hugo Malan
Former Executive Vice President and President, Talent and Technology Solutions (his employment ended in
November 2016)
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2016
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353,009
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0
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|
0
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|
0
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|
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|
0
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255,964
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|
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608,973
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2015
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|
|
400,004
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280,000
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|
|
0
|
|
|
|
0
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|
|
|
0
|
|
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|
52,561
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|
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732,565
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2014
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72,329
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300,630
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1,607,497
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0
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|
0
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|
12,134
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1,992,590
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|
23
Supplemental Table Actual Compensation Realized by CEOs
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|
Name and
Principal
Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Long-Term
Incentive
Plan
Performance
Awards ($)
|
|
|
Exercised
Option
Awards
($)
|
|
|
Vested
Stock
Awards,
including
Dividends
($)
|
|
|
Total Actual
Compensation
Realized ($)
|
|
|
Total
Reported in
SCT ($)
|
|
Michael S. Castleman
President, Interim Chief Executive Officer, Chief Financial Officer
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2016
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|
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|
429,241
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|
|
|
41,198
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|
|
|
0
|
|
|
|
0
|
|
|
|
168,842
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|
|
|
639,281
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|
|
|
491,605
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|
Scott J. Freidheim
Former President and Chief Executive Officer
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2016
|
|
|
|
424,590
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|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
10,014
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|
|
|
434,604
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|
|
|
1,045,492
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|
|
|
2015
|
|
|
|
600,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
15,716
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|
|
|
615,716
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|
|
|
3,762,842
|
|
|
|
2014
|
|
|
|
177,534
|
|
|
|
177,534
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|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
355,068
|
|
|
|
4,849,389
|
|
Notes to the Summary Compensation Table:
The Salary Column
This column
reflects the base salary earned by each executive in the given year. The amounts shown in the Salary column include amounts which the NEOs elected to defer in connection with CDIs 401(k) savings plan.
The Bonus Column
The amounts in this
column consist of: (a) for Mr. Castleman and Mr. Short, 12.5% of their 2016 target bonus, paid in March 2017 under a retention bonus arrangement; (b) for Ms. Albrinck, guaranteed bonuses of $226,002 paid in accordance with
her employment agreement; (c) guaranteed 2015 and 2014 bonuses for Mr. Castleman and Mr. Malan equal to 70% of the salary each of them earned in the respective year, in accordance with their employment agreements; (d) a 2014
bonus of $177,534 for Mr. Freidheim as determined by the Compensation Committee; and (e) $250,000
sign-on
bonuses to Mr. Castleman and to Mr. Malan in 2014 pursuant to their employment
agreements when they joined CDI that year. The amounts shown in the Bonus column include amounts which the NEOs elected to defer in connection with CDIs 401(k) savings plan.
24
The Stock Awards Column
The following Stock Awards granted to the NEOs are reflected in the Summary Compensation Table:
Time-Vested Deferred Stock (TVDS)
Shares of TVDS were awarded in 2016 to Ms. Albrinck, in 2015 to Messrs. Castleman and
Short, and in 2014 to Messrs. Castleman, Short, Freidheim and Malan. The shares of TVDS awarded to Ms. Albrinck in 2016 were scheduled to vest 40% on the second anniversary of the date of grant and 30% on each of the third and fourth
anniversaries of the date of grant. The shares of TVDS awarded to Mr. Short in 2015 vest in September 2019. The shares of TVDS awarded to Mr. Castleman in 2015, which were pursuant to the Executive Stock Purchase Opportunity Program, vest
20% per year on each of the first five anniversaries of the date of grant. The shares of TVDS awarded to the NEOs in 2014 vest over a period of four or five years. Upon vesting, the shares of TVDS convert into unrestricted shares of CDI stock.
Accrued dividends between the award date and the vesting date are payable in additional shares of CDI stock. During the vesting period the executive must remain employed by CDI, except in connection with certain terminations described below in the
Potential Payments Upon Termination of Employment or Change in Control section.
Performance Units (PUs) (also referred to
as value creation contingent awards)
An equal number of Performance Units were awarded to Mr. Freidheim in September 2014 and January 2015, as part of the equity compensation agreed to when he joined CDI in September 2014.
Performance Units were also awarded to Mr. Castleman and Mr. Malan in 2014 when they joined CDI. The Performance Units awards would become earned based on satisfying certain time-based vesting requirements and only if CDI achieves share
prices that are between two to three times the share price at or around the time of grant during a measurement period between the grant date and September 15, 2019, subject to such measurement period ending earlier upon the occurrence of
certain events, such as a sale of the company or a termination of employment. The Performance Units awarded to Mr. Freidheim and Mr. Malan, whose employment has ended, were not earned and have been forfeited. The amount payable with
respect to Mr. Castlemans Performance Units award is $2 million if the minimum share price performance requirement is attained and is $5 million if the maximum share price performance requirement is attained. The payout will be
pro-rated
for performance between the minimum and maximum share price requirements. Any earned portion of the Performance Units will be settled in cash within thirty days after September 15, 2019, subject to
earlier payment if his employment is terminated due to death, by CDI without cause or due to disability or by him for good reason following a sale of the company. Mr. Castleman also has the ability to make a special election after the second
anniversary of the grant date to freeze the value of the award then earned as of such date and vest in such amount one year after such election is made if he remains employed through such one year anniversary (subject to earlier vesting upon the
occurrence of certain events). Such election does not impact the time at which the award is settled. None of Mr. Castlemans Performance Units have yet been earned.
Performance Shares (PS)
In 2014, Mr. Short was awarded 7,389 Performance Shares, each of which represented a contingent
right to receive one share of CDI stock based on the companys achievement of a
60-day
moving average stock price of at least $30 per share. There was a payout scale that provided for a minimum payout
(60%) for a
60-day
moving average stock price
25
of $28 per share, and a maximum payout (150%) for a
60-day
moving average stock price of $40 per share. The Performance Shares were scheduled to vest three
years after the grant date if earned (based on CDIs achievement of the stock prices described in the preceding sentence). None of these Performance Shares have been earned, and they were forfeited on March 1, 2017.
The following is a breakdown of the amounts in the Stock Awards column among the various types of Equity-Based Awards:
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|
|
|
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|
|
|
|
|
|
|
Name of Executive
|
|
Year
|
|
Performance Units ($)
|
|
|
Performance
Shares ($)
|
|
|
TVDS ($)
|
|
|
|
Grant Date Fair
Value ($)
|
|
|
Fair Value at
12/31/16 ($)
|
|
|
|
Michael Castleman
|
|
2016
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
2015
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
28,400
|
|
|
2014
|
|
|
708,173
|
|
|
|
*
|
|
|
|
0
|
|
|
|
1,017,583
|
|
Brian Short
|
|
2016
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
2015
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
249,995
|
|
|
2014
|
|
|
0
|
|
|
|
0
|
|
|
|
81,403
|
|
|
|
44,999
|
|
Scott Freidheim
|
|
2016
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
2015
|
|
|
3,121,508
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
2014
|
|
|
3,124,784
|
|
|
|
0
|
|
|
|
0
|
|
|
|
886,240
|
|
Jill Albrinck
|
|
2016
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
200,000
|
|
Hugo Malan
|
|
2016
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
2015
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
2014
|
|
|
607,500
|
|
|
|
0
|
|
|
|
0
|
|
|
|
999,996
|
|
|
*
|
$5,065 was the fair value of this award as of 12/31/15. The fair value has not been calculated as of 12/31/16, though we do not believe there has been a material change in the value since the end of 2015.
|
The Stock Awards column represents the aggregate grant date fair value of TVDS, Performance Units and Performance Shares received by the
NEOs in a given year, calculated in accordance with FASB ASC Topic 718 (without any reduction for estimated forfeitures). For additional information regarding the valuation assumptions relating to CDIs Equity-Based Awards, see Note 8 to the
companys consolidated financial statements in the Form
10-K
filed on March 8, 2017. The amounts in the Stock Awards column reflect the grant date fair value for these awards under accounting
standards and do not necessarily correspond to the actual value that will be realized by the executives.
The grant date fair value of each Performance
Units award was calculated in accordance with FASB ASC Topic 718 using a Monte Carlo simulation model. The grant date fair value for each of the Performance Units awards to the NEOs set forth in the Summary Compensation Table were as follows:
|
|
|
|
|
|
|
|
|
Recipient
|
|
Date of Performance
Units Award
|
|
|
Grant Date Fair Value (for
each Performance Unit)
|
|
Scott Freidheim
|
|
|
01/02/15
|
|
|
|
$4.88
|
|
Scott Freidheim
|
|
|
09/15/14
|
|
|
|
$4.88
|
|
Michael Castleman
|
|
|
10/28/14
|
|
|
|
$4.99
|
|
Hugo Malan
|
|
|
10/27/14
|
|
|
|
$4.28
|
|
The only Performance Units award held by an NEO who was employed by CDI at the end of 2016, Mr. Castleman, was valued
under fair value accounting standards at the end of 2015 at $5,065, which is less than 1% of the grant date value shown in the Summary Compensation Table, due to CDIs stock price performance. The fair value of this award at the end of 2016 has
not been calculated, but we do not believe there has been a material change in the value since the end of 2015.
26
The grant date fair value of the PS awarded to Mr. Short in 2014, which was calculated in accordance with
FASB ASC Topic 718 using a Monte Carlo simulation model, was $11.02 per share. No amount has been earned by Mr. Short in connection with this PS award.
The grant date fair value of each TVDS award to the NEOs is equal to the market price of CDI stock on the date of grant (except that the award to
Ms. Albrinck was based on the market price of CDI stock on the date that her employment began, which was 12/30/15), multiplied by the number of shares of TVDS received on that date. The grant date fair value for each of the TVDS awards to the
NEOs set forth in the Summary Compensation Table were as follows:
|
|
|
|
|
|
|
|
|
Recipient
|
|
Date of TVDS
Award
|
|
|
Grant Date Fair Value
(per share of TVDS)
|
|
Jill Albrinck
|
|
|
02/15/16
|
|
|
|
$ 6.66
|
|
Michael Castleman
|
|
|
03/09/15
|
|
|
|
$14.20
|
|
Brian Short
|
|
|
05/19/15
|
|
|
|
$12.84
|
|
Scott Freidheim
|
|
|
09/15/14
|
|
|
|
$15.28
|
|
Hugo Malan
|
|
|
10/27/14
|
|
|
|
$15.79
|
|
Michael Castleman
|
|
|
10/28/14
|
|
|
|
$16.71
|
|
Michael Castleman
|
|
|
11/14/14
|
|
|
|
$17.59
|
|
Brian Short
|
|
|
02/28/14
|
|
|
|
$18.27
|
|
The Option Awards Column
For purposes of the SCT, Option Awards includes both Stock Options and Stock Appreciation Rights (SARs). No Option Awards were made to
the NEOs in 2016 or 2015.
Non-Qualified
Stock Options were awarded to Mr. Freidheim and Mr. Short in 2014. The exercise price of the Stock Options is the closing price of CDI stock on the date of
grant. The Stock Options awarded to Mr. Freidheim never vested and terminated after his employment ended. The Stock Options awarded to Mr. Short vest
one-third
after three years and
two-thirds
after four years and have a seven-year term. Vesting is generally subject to continued employment on the applicable vesting date.
The Option Awards column represents the aggregate grant date fair value of the Stock Options granted to the NEOs in a given year, calculated in accordance
with FASB ASC Topic 718 (without any reduction for estimated forfeitures). The following table sets forth the assumptions used to calculate the compensation expense of Option Awards in the Summary Compensation Table on a
grant-by-grant
basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date
|
|
NEO Receiving
Award
|
|
Grant Date
Fair Value
of Award
($/share)
|
|
Risk-Free
Interest
Rate (%)
|
|
Expected
Life of
Option or
SAR (years)
|
|
Expected
Volatility
(%)
|
|
Expected
Dividend
Yield (%)
|
09/15/2014
|
|
Scott Freidheim
|
|
5.44
|
|
2.03
|
|
6.00
|
|
49.91
|
|
3.40
|
02/28/2014
|
|
Brian Short
|
|
5.92
|
|
1.10
|
|
3.83
|
|
50.97
|
|
2.85
|
For additional information regarding the valuation assumptions relating to CDIs Stock Option Awards, see Note 8 to the
companys consolidated financial statements in the Form
10-K
filed on March 8, 2017. The amounts in this column reflect the grant date fair value for these awards under accounting standards and do
not necessarily correspond to the actual value that will be realized by the executives.
27
The
Non-Equity
Incentive Plan Compensation Column
The amounts of
Non-Equity
Incentive Plan Compensation reported in this column for a given year were earned
by the NEOs based on the companys and their individual performance that year and were paid in the following year. No
Non-Equity
Incentive Plan Compensation was earned by the NEOs for the three years
covered by this table except for Mr. Short in 2014. However, for retention purposes and as part of a broader program for CDI employees eligible to receive
non-equity
incentive compensation, 25% of the
target payout for 2016 is payable to executives over two tranches (half in March 2017 and half in March 2018), generally subject to the executive remaining employed by CDI at those times. Any amounts earned under this retention arrangement (and not
based on the companys or the individuals performance) is shown in the Summary Compensation Table in the Bonus column rather than in the
Non-Equity
Incentive Plan Compensation Column. For additional
information about CDIs annual cash incentive compensation plan, see The Short-Term Incentive Compensation Program section of the CD&A.
Mr. Short was granted a
non-equity
Long-Term Incentive Award in 2015, which was substantially identical to the
Performance Units awards described above, except (a) the share price targets are between two to three times the share price at around the time of his award, and (b) the share price measurement period began on the grant date of the award.
The amount payable with respect to this award is $1 million if the minimum share price performance requirement is attained and $2.5 million if the maximum share price performance requirement is attained. Nothing has yet been earned by
Mr. Short under this
non-equity
Long-Term Incentive Award, and no amount is reflected in the Summary Compensation Table relating to that award.
The All Other Compensation Column
All
Other Compensation consists of the following:
|
a.
|
Dividends
This represents the dollar value of additional shares of CDI stock received by each executive upon vesting of TVDS relating to accrued dividends. Upon vesting, the holders of TVDS receive
additional shares of CDI stock having a value equal to the total dividends paid on a corresponding number of shares of CDI stock during the period from the grant date to the vesting date.
|
The table below shows the value of CDI stock received by each NEO with respect to such dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
NEO
|
|
2016 ($)
|
|
|
2015 ($)
|
|
|
2014 ($)
|
|
Michael Castleman
|
|
|
15,867
|
|
|
|
75
|
|
|
|
0
|
|
Brian Short
|
|
|
3,288
|
|
|
|
8,300
|
|
|
|
5,786
|
|
Scott Freidheim
|
|
|
16,120
|
|
|
|
826
|
|
|
|
0
|
|
Jill Albrinck
|
|
|
0
|
|
|
|
|
|
|
|
|
|
Hugo Malan
|
|
|
31,308
|
|
|
|
0
|
|
|
|
0
|
|
|
b.
|
Company Contributions to 401(k) Plan
The table below shows the amount of the companys matching contributions to the 401(k) plan accounts of the NEOs for 2016, 2015 and 2014.
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
NEO
|
|
2016 ($)
|
|
|
2015 ($)
|
|
|
2014 ($)
|
|
Michael Castleman
|
|
|
5,299
|
|
|
|
4,000
|
|
|
|
0
|
|
Brian Short
|
|
|
2,500
|
|
|
|
3,511
|
|
|
|
3,166
|
|
Scott Freidheim
|
|
|
5,299
|
|
|
|
1,385
|
|
|
|
0
|
|
Jill Albrinck
|
|
|
3,205
|
|
|
|
|
|
|
|
|
|
Hugo Malan
|
|
|
5,299
|
|
|
|
461
|
|
|
|
0
|
|
|
c.
|
Severance Payments
Pursuant to the Separation Agreement which Mr. Freidheim signed when his employment ended on September 15, 2016, he received a lump sum payment of $318,000 plus severance
payments equal to three months of his base salary (totaling $150,000), each minus applicable taxes and other withholdings. In addition, Mr. Freidheim received accelerated vesting of some of his shares of TVDS. The total value of those vested
shares of TVDS was $131,483. All of these payments and vestings are included in the All Other Compensation column for Mr. Freidheim in 2016.
|
Pursuant to the Separation Agreement which Mr. Malan signed in November 2016, he received accelerated vesting of some of his shares of
TVDS. The total value of those vested shares of TVDS was $165,634, and this amount is included in the All Other Compensation column for Mr. Malan in 2016.
For more information regarding the Separation Agreements for Mr. Freidheim and Mr. Malan, see the section below titled
Potential Payments Upon Termination of Employment or Change in Control.
|
d.
|
Other
This represents personal benefits and perquisites received by an executive unless the total amount of such items received by the executive in a given year is less than $10,000. The NEOs who received
items in this category having a value of $10,000 or more in 2016 were Ms. Albrinck and Mr. Malan. The amounts indicated below were valued on the basis of the actual cost paid or reimbursed by CDI.
|
Ms. Albrincks total of personal benefits and perquisites in 2016 was $54,001, Of this total, $53,041 related to commuting costs
between her home in the Chicago metropolitan area and the companys headquarters in Philadelphia and lodging and certain living expenses while she was in Philadelphia. The remaining $960 was for a cell phone allowance.
Mr. Malans total of personal benefits and perquisites in 2016 was $53,723, which consisted primarily of the use of an apartment in
Philadelphia rented by the company ($18,000) and commuting costs between his home in the Chicago metropolitan area and the companys headquarters in Philadelphia and certain living expenses while in Philadelphia ($34,763). The remaining $960
was for a cell phone allowance.
Grants of Plan-Based Awards Table for 2016
The following table provides information about plan-based equity and
non-equity
awards granted to the NEOs in 2016. The
type of award is indicated at the beginning of each row in the table. The only equity-based award granted to the NEOs in 2016 was a TVDS award to Jill Albrinck, which was made under the Omnibus Stock Plan. The plan-based
non-equity
incentive awards were granted pursuant to the Executive Bonus Plan.
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Type of Award
|
|
Grant
Date
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards
|
|
|
Estimated Future Payouts Under
Equity Incentive Plan Awards
|
|
All Other
Stock Awards:
Number of
Shares of
Stock
or
Units
(#)
|
|
|
All Other
Option Awards:
Number
of
Securities
Underlying
Options
(#)
|
|
|
Exercise or
Base Price
of Option
Awards
($/Sh)
|
|
|
Grant Date
Fair
Value of Stock
and Option
Awards ($)
|
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
|
|
Michael S. Castleman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
Non-Equity
Incentive
|
|
|
07/18/16
|
|
|
|
115,354
|
|
|
|
329,584
|
|
|
|
659,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian D. Short
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
Non-Equity
Incentive
|
|
|
07/18/16
|
|
|
|
78,750
|
|
|
|
225,000
|
|
|
|
450,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott J. Freidheim
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
Non-Equity
Incentive
|
|
|
07/18/16
|
|
|
|
210,000
|
|
|
|
600,000
|
|
|
|
1,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jill M. Albrinck
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
Non-Equity
Incentive
|
|
|
07/18/16
|
|
|
|
88,200
|
|
|
|
252,000
|
|
|
|
504,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TVDS
|
|
|
02/15/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,030
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
D. Hugo Malan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
Non-Equity
Incentive
|
|
|
07/18/16
|
|
|
|
98,000
|
|
|
|
280,000
|
|
|
|
560,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
Notes to the Grants of Plan-Based Awards Table for 2016:
The Grant Date Column
In all cases, the Grant Date was the date that the award was approved by the Compensation Committee.
The Estimated Future Payouts Under
Non-Equity
Incentive Plan Awards Columns
These columns show the possible payouts to the NEOs under
non-equity
incentive compensation plan
awards made in 2016, at the threshold level of performance, at the target level of performance and at the level of performance that would result in the maximum payout.
For the companys 2016
non-equity
incentive compensation plan, to determine the threshold level we
used the thresholds that apply to the portion of the annual incentive compensation based on CDIs financial results and assumed that the executives individual goals were met. Upon achievement of the threshold levels of financial
performance, the minimum payouts were 35% of the target amount. The maximum payouts were 200% of the target amount. However, notwithstanding the financial results, the 2016
non-equity
incentive compensation
plan provided that, for retention purposes and as part of a broader program for CDI employees eligible to receive
non-equity
incentive compensation, 25% of the target payout would be payable to each executive
over two tranches (half in March 2017 and half in March 2018) subject to the executive remaining employed by CDI at those times and subject to any other provisions set forth in the executives employment agreements. The company did not attain
the threshold levels of financial performance in 2016 and, as a result, Mr. Castleman and Mr. Short received half of the retention amount in March 2017 and Ms. Albrinck received her guaranteed minimum payment of $126,002 (as well as
payment of a $100,000 Cash Incentive under her employment agreement). Those payments to Mr. Castleman, Mr. Short and Ms. Albrinck are included in the Summary Compensation Table, under Bonus for 2016. Mr. Freidheim and
Mr. Malan did not receive any payment with respect to 2016
non-equity
incentive compensation. For additional information about CDIs annual
non-equity
incentive compensation plan, see The Short-Term Incentive Compensation Program section of the CD&A.
The
Estimated Future Payouts Under Equity Incentive Plan Awards Columns
No Equity Incentive Plan Awards were granted to
the NEOs in 2016, so nothing is reported in these columns. For more information about the companys Performance Units and Performance Shares, see the Notes to the Summary Compensation Table for the Stock Awards column and The Long-Term
Incentive Compensation Program section of the CD&A.
The All Other Stock Awards Column
The only Stock Award granted to the NEOs in 2016 was a TVDS award to Jill Albrinck, which was made under the Omnibus Stock Plan. For more
information about the companys TVDS awards, see the Notes to the Summary Compensation Table for the Stock Awards column.
The
All Other Options Awards Column
No Option Awards were granted to the NEOs in 2016, so nothing is reported in this
column. For more information about the companys past Option Awards, see the Notes to the Summary Compensation Table for the Option Awards column.
31
The Exercise or Base Price of Option Awards Column
Since no Option Awards were granted to the NEOs in 2016, nothing is reported in this column.
The Grant Date Fair Value of Stock and Option Awards Column
The dollar amounts in this column were computed in accordance with FASB ASC Topic 718, without regard to estimates for forfeitures. The grant
date fair value of a TVDS award is equal to the market price of CDI stock on the date of grant multiplied by the number of shares of TVDS received on that date. The amounts in this column reflect the grant date fair value of these awards for
accounting purposes and do not correspond to the actual value that may be realized by the executives.
Outstanding Equity Awards at 2016 Fiscal
Year-End
Table
The following table provides information on the holdings of unexercised Stock Options and SARs
(Option Awards) and of unvested TVDS, Performance Units and PS (Stock Awards) for each of the NEOs as of December 31, 2016. Brian Short is the only NEO who had outstanding Option Awards at the end of 2016. Hugo Malan, whose employment at CDI
ended in November 2016, did not hold any Option Awards or Stock Awards at
year-end,
so he does not appear in the table below.
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Grant Date
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Grant Date
|
|
|
Award Type
|
|
|
Number of
Shares or
Units of
Stock
That Have
Not
Vested
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
|
|
|
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not
Vested (#)
|
|
|
Equity Incentive Plan
Awards: Market or Payout
Value of Unearned Shares,
Units or Other
Rights That
Have Not Vested ($)
|
|
Michael S. Castleman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/28/14
|
|
|
|
TVDS
|
|
|
|
35,907
|
|
|
|
265,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/28/14
|
|
|
|
PUs
|
|
|
|
|
|
|
|
|
|
|
|
63,331
|
|
|
|
468,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/14/14
|
|
|
|
TVDS
|
|
|
|
600
|
|
|
|
4,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
03/09/15
|
|
|
|
TVDS
|
|
|
|
1,600
|
|
|
|
11,840
|
|
|
|
|
|
|
|
|
|
Brian D. Short
|
|
|
02/25/10
|
|
|
|
10,000
|
|
|
|
0
|
|
|
|
14.74
|
|
|
|
02/25/17
|
|
|
|
02/28/14
|
|
|
|
TVDS
|
|
|
|
2,463
|
|
|
|
18,226
|
|
|
|
|
|
|
|
|
|
|
|
|
09/29/11
|
|
|
|
23,671
|
|
|
|
0
|
|
|
|
10.98
|
|
|
|
09/29/18
|
|
|
|
11/01/12
|
|
|
|
PS
|
|
|
|
|
|
|
|
|
|
|
|
259
|
|
|
|
1,917
|
|
|
|
|
11/01/12
|
|
|
|
9,715
|
|
|
|
2,429
|
|
|
|
17.36
|
|
|
|
11/01/19
|
|
|
|
02/28/14
|
|
|
|
PS
|
|
|
|
|
|
|
|
|
|
|
|
4,433
|
|
|
|
32,804
|
|
|
|
|
12/16/13
|
|
|
|
8,421
|
|
|
|
5,494
|
|
|
|
16.80
|
|
|
|
12/16/20
|
|
|
|
05/19/15
|
|
|
|
TVDS
|
|
|
|
19,470
|
|
|
|
144,078
|
|
|
|
|
|
|
|
|
|
|
|
|
02/28/14
|
|
|
|
0
|
|
|
|
7,598
|
|
|
|
18.27
|
|
|
|
02/28/21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott J. Freidheim
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
09/15/14
|
|
|
|
PUs
|
|
|
|
|
|
|
|
|
|
|
|
270,173
|
|
|
|
1,999,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01/02/15
|
|
|
|
PUs
|
|
|
|
|
|
|
|
|
|
|
|
270,173
|
|
|
|
1,999,280
|
|
Jill M. Albrinck
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/15/16
|
|
|
|
TVDS
|
|
|
|
30,030
|
|
|
|
222,222
|
|
|
|
|
|
|
|
|
|
33
Notes to the Outstanding Equity Awards at 2016 Fiscal
Year-End
Table:
All of the equity awards were granted under the Omnibus Stock Plan.
The Number of Securities Underlying Unexercised Options Columns
Awards of Stock Options which were not fully exercisable at 12/31/16 become exercisable in accordance with the vesting schedule below. Vesting
is generally subject to continued employment on the vesting date.
|
|
|
|
|
|
|
|
|
Grant
Date
|
|
Award
Type
|
|
Number of
Options in Award
|
|
|
Vesting
|
11/01/12
|
|
Options
|
|
|
12,144
|
|
|
20% on 03/01/13 and on each of the next four anniversaries of that date
|
|
|
|
|
12/16/13
|
|
Options
|
|
|
13,735
|
|
|
20% on 03/01/14 and on each of the next four anniversaries of that date
|
|
|
|
|
02/28/14
|
|
Options
|
|
|
7,598
|
|
|
One-third
on the third anniversary of the date of grant and
two-thirds
on the fourth anniversary of the date of grant
|
The Number of Shares or Units of Stock That Have Not Vested Column
Equity-based awards vest in accordance with the schedule below. Vesting is generally subject to continued employment on the vesting date.
|
|
|
|
|
|
|
|
|
Grant
Date
|
|
Award
Type
|
|
Number of
Shares in Award
|
|
|
Vesting
|
02/28/14
|
|
TVDS
|
|
|
2,463
|
|
|
100% on the third anniversary of the date of grant
|
|
|
|
|
10/28/14
|
|
TVDS
|
|
|
59,844
|
|
|
40% on the second anniversary of the date of grant, 30% on the third anniversary of the date of grant, and 30% on the fourth anniversary of the date of grant
|
|
|
|
|
11/14/14
|
|
TVDS
|
|
|
1,000
|
|
|
20% per year on each of the first five anniversaries of the date of grant
|
|
|
|
|
03/09/15
|
|
TVDS
|
|
|
2,000
|
|
|
20% per year on each of the first five anniversaries of the date of grant
|
|
|
|
|
05/19/15
|
|
TVDS
|
|
|
19,470
|
|
|
100% on 09/15/19
|
|
|
|
|
02/15/16
|
|
TVDS
|
|
|
30,030
|
|
|
40% on the second anniversary of 12/30/2015 and 30% on the third and fourth anniversaries of 12/30/2015.
|
The Market Value of Shares or Units of Stock That Have Not Vested Column
The market value of the Stock Awards, for purposes of this column in this table, is based on the closing price of CDI stock as of the end of
2016, which was $7.40 per share.
The Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have
Not Vested Column
This column shows the number of Performance Units and Performance Shares which would be earned by the NEOs
at the threshold level of performance.
For a detailed description of the Performance Units, see the Notes to the Summary Compensation
Table for the Stock Awards column.
34
The Performance Units awarded to Messrs. Freidheim and Castleman would be earned if certain
time-based vesting requirements are satisfied and certain share price performance requirements are achieved between the grant date and September 15, 2019, subject to such measurement period ending earlier upon the occurrence of certain events,
such as a sale of the company or a termination of employment. This column shows the number of Performance Units they would earn at the threshold level of share price performance. Any earned Performance Units are converted into their cash equivalent
and deferred until vesting and then settled in cash, with the aggregate amount payable being $15 million for Mr. Freidheim (the total for both of his awards) and $2 million for Mr. Castleman if the minimum share price performance
requirement is attained (a level which is double the share price at or around the time of the award), and the aggregate amount payable being $40 million for Mr. Freidheim (the total for both of his awards) and $5 million for
Mr. Castleman if the maximum share price performance requirement is attained (a level which is triple the share price at or around the time of the award). The payout would be
pro-rated
for performance
between the minimum and maximum stock value requirements. Any earned portion of the Performance Units would be paid within thirty days after September 15, 2019, subject to earlier payment if the applicable NEOs employment is terminated
due to death, by CDI without cause or due to disability or by the applicable NEO for good reason following a sale of the Company. Mr. Castleman also has the ability to make a special election after the second anniversary of the grant date to
freeze the value of the award then earned as of such date and vest in such amount one year after such election is made if he remains employed through such one year anniversary (subject to earlier vesting upon the occurrence of certain events). Such
election does not impact the time at which the award is settled.
The threshold share performance requirements in the Performance Units
held by Mr. Freidheim were not met and the Performance Units awards to Mr. Freidheim shown in this table terminated on March 15, 2017. The threshold share performance requirements in the Performance Units held by Mr. Castleman
have not yet been met.
For the Performance Shares awarded to Mr. Short in 2014, this column shows the number of Performance Shares
which he would earn if the threshold stock price for the measurement period was attained. The measurement period ended on February 28, 2017 and the threshold stock price was not achieved. Therefore, none of these Performance Shares were earned
or vested, and they were forfeited on March 1, 2017.
For the Performance Shares awarded to Mr. Short in 2012, this column shows
the number of Performance Shares which he would earn if the threshold operating income for 2016 was attained. The Performance Shares would vest in the following year after CDIs financial results for the year are approved. However, because the
company failed to achieve the 2016 performance threshold, none of these Performance Shares were earned or vested, and they were forfeited in March 2017.
For additional information regarding the Performance Shares awards, see the Notes to the Summary Compensation Table for the Stock Awards
column.
The Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not
Vested Column
The value of the Equity Incentive Plan Awards shown in this table is based on the closing price of CDI stock
as of the end of 2016, which was $7.40 per share.
However, (a) the Performance Units awards to Mr. Freidheim shown in this table were
never earned and terminated on March 15, 2017, (b) the Performance Shares awarded to Mr. Short in 2012 were not earned and terminated in March 2017, and (c) the Performance Units award to Mr. Castleman had a fair value at the end of 2015 of
$5,065 (which is approximately 1% of the value shown in this column in this table), and while the fair value has not been calculated as of 12/31/16, we do not believe there has been a material change in the value since the end of 2015.
35
Option Exercises and Stock Vested Table for 2016
The following table provides information regarding (a) all exercises of Stock Options or SARs by the NEOs in 2016 and (b) all vestings of Stock
Awards in 2016 on an aggregate basis for each of the NEOs. None of the NEOs exercised Stock Options or SARs in 2016. Each of the NEOs except for Ms. Albrinck vested in Stock Awards in 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
|
Value Realized
on Exercise
($)
|
|
|
Number of Shares
Acquired on Vesting
(#)
|
|
|
Value Realized
on Vesting
($)
|
|
Michael S. Castleman
|
|
|
0
|
|
|
|
0
|
|
|
|
27,083
|
|
|
|
168,842
|
|
Brian D. Short
|
|
|
0
|
|
|
|
0
|
|
|
|
2,054
|
|
|
|
11,934
|
|
Scott J. Freidheim
|
|
|
0
|
|
|
|
0
|
|
|
|
29,491
|
|
|
|
156,579
|
|
Jill M. Albrinck
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
D. Hugo Malan
|
|
|
0
|
|
|
|
0
|
|
|
|
52,814
|
|
|
|
358,053
|
|
Notes to the Option Exercises and Stock Vested Table for 2016:
The Number of Shares Acquired on Vesting Column
The shares reported in this column consist of shares of CDI stock received by the NEOs upon vesting of TVDS, including additional shares of CDI
stock which holders of TVDS received upon vesting as a result of dividends. The additional shares had a value (based on the market price of CDI stock on the date of vesting) equal to the total dividends paid on a corresponding number of shares of
CDI stock between the date that the TVDS was granted and the date that the TVDS vested.
The numbers of shares shown in this column have
not been reduced to reflect the shares which were withheld to satisfy the income tax obligations of the NEOs. Therefore, the actual number of shares acquired by each NEO was lower than the number shown in this column. The actual number of shares of
CDI stock which each NEO received is set forth in the table at the end of this section.
The Value Realized on Vesting
Column
The values shown in this column are based on the market value of CDI stock on the vesting date. The values realized on
vesting of TVDS units do not reflect the withholding of shares that was done to satisfy the income tax obligations of the NEOs. Therefore, as indicated in the table at the end of this section, the actual values realized by the NEOs on an
after-tax
basis are lower than the amounts shown in this column. The values shown in this column were received by the NEOs in shares of CDI stock, not in cash.
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Net Number of Shares
Acquired on Exercise of
Option Awards (#)
|
|
|
Value Realized Based on Net
Number of Shares Acquired
on Exercise of Option
Awards
($)
|
|
|
Net Number of Shares
Acquired on Vesting of Stock
Awards (#)
|
|
|
Value Realized Based on
Net Number of Shares
Acquired on Vesting of
Stock Awards
($)
|
|
Michael S. Castleman
|
|
|
0
|
|
|
|
0
|
|
|
|
17,860
|
|
|
|
111,365
|
|
Brian D. Short
|
|
|
0
|
|
|
|
0
|
|
|
|
1,356
|
|
|
|
7,878
|
|
Scott J. Freidheim
|
|
|
0
|
|
|
|
0
|
|
|
|
19,473
|
|
|
|
103,389
|
|
Jill M. Albrinck
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
D. Hugo Malan
|
|
|
0
|
|
|
|
0
|
|
|
|
34,876
|
|
|
|
236,442
|
|
Potential Payments Upon Termination of Employment or Change in Control
This section describes certain programs, plans and agreements that provide for the payment of benefits to the NEOs at, following or in connection with a
termination or separation from employment or a change in control of the company.
Employment Agreement with Michael Castleman
CDI entered into an employment agreement with Michael Castleman in October 2014, when he joined CDI as our Executive Vice President. On
March 6, 2015, Mr. Castleman assumed the role of Chief Financial Officer of CDI. On September 15, 2016, he also became CDIs President and Interim Chief Executive Officer. On January 25, 2017, he and the company executed a
letter agreement which amended certain provisions of his employment agreement. The description below of Mr. Castlemans employment agreement includes the terms in this letter agreement.
Under his employment agreement, if Mr. Castlemans employment is terminated by CDI without cause (and not due to his death or total disability), he
would be entitled to receive the following (subject to his execution and
non-revocation
of a release of claims):
Salary continuation
. CDI would continue to pay Mr. Castlemans base salary for twelve months. However, if such termination
without cause occurs within 30 days before, or within 12 months after, a sale of the company and he obtains new employment prior to the first anniversary of the termination of his employment with the company, then his salary continuation would cease
on (a) the three month anniversary of such new employment if such new employment is obtained prior to the six month anniversary of his termination of employment with the company, or (b) the earlier of the one month anniversary of such new
employment and the one year anniversary of his termination of employment with the company if such new employment is obtained more than six months after his employment with the company.
Non-equity
annual incentive compensation
. Mr. Castleman would be paid (a) any bonus
earned under the
non-equity
annual incentive compensation plan in a prior completed fiscal year that hadnt been paid as of his termination date, and (b) a prorated bonus under the
non-equity
annual incentive compensation plan for the year of termination based on the performance of CDI for that year.
Retention bonus
. With respect to Mr. Castlemans two $250,000 retention bonuses (one of which was paid in March 2017 and the
other is payable in early 2018), he would receive payment of any then unpaid retention bonus following the effective date of his release of claims (and in all events within 60 days after the date of such termination).
37
If Mr. Castleman becomes entitled to receive a prorated bonus under the
non-equity
annual incentive compensation plan in the year in which a sale of the company occurs, then his pro rata bonus would equal either (a) the bonus he would have received for such year had the
performance of CDI through the end of the fiscal quarter immediately preceding the fiscal quarter in which such sale occurred been annualized to be the performance for the year in which the sale occurred, but prorated based on the number of days
that elapsed in such year through the date of such termination of employment; provided, however, that such bonus would be zero if his employment is terminated in the first fiscal quarter of the fiscal year in which the sale occurs or (b) such
bonus as the Compensation Committee determines is appropriate based on his total performance during the relevant bonus period through such sale, including his contributions to the sale, then prorated based on the number of days that elapsed in such
year through the date of such termination of employment. Whether such pro rata bonus is determined under clause (a) or clause (b) will be determined by Mr. Castleman if he makes such election in writing at least twenty days before the
closing of the sale, and if he does not make such an election, his pro rata bonus will be determined under clause (b).
If a sale of the company were to
occur before Mr. Castlemans employment with CDI ended, he would receive any then unpaid retention bonus within five days after the closing of the sale.
If Mr. Castlemans employment were terminated as the result of his death or by the company due to his total disability, he would receive a pro rata
portion of any then unpaid retention bonus following the effective date of his (or his estates or legal representatives) release of claims (and in all events within 60 days after the date of such termination).
See the section below titled Accelerated Vesting of Equity Awards for a description of certain continued and accelerated vesting benefits with
respect to Mr. Castlemans TVDS and Performance Units awards.
Mr. Castlemans employment agreement provides that during his
employment with CDI and continuing through the first anniversary of the date of his termination of employment, he will not compete with CDI or solicit its employees, consultants, customers or prospective customers.
Letter Agreement with Brian Short
On January 25, 2017, Brian Short and the company executed a letter agreement which provides that if Mr. Shorts employment is terminated by CDI
without cause (and not due to his death or total disability), he would be entitled to receive the following (subject to his execution and
non-revocation
of a release of claims):
Salary continuation
. CDI would continue to pay Mr. Shorts base salary for twelve months, which payments would cease upon his
obtaining new employment prior to the end of the twelve-month period. However, if his termination of employment by CDI without cause occurs within thirty days before, or within twelve months after, a sale of the company, and in either case, he
obtains new employment prior to the first anniversary of the termination of his employment with CDI, then instead of his salary continuation ceasing on the date of such new employment, it will cease: (a) on the three month anniversary of such
new employment if such new employment is obtained prior to the six month anniversary of his termination of employment with CDI, or (b) on the earlier of the one month anniversary of such new employment and the one year anniversary of his
termination of employment with CDI if such new employment is obtained more than six months after his employment with CDI was terminated.
Retention bonus
. With respect to Mr. Shorts two retention bonuses (a $150,000 retention bonus which was paid in March 2017
and a $100,000 retention bonus payable to Mr. Short in March 2018), he would receive payment of any then unpaid retention bonus following the effective date of his release of claims (and in all events within 60 days after the date of such
termination).
38
If a sale of the company were to occur before Mr. Shorts employment with CDI ended, he would receive
any then unpaid retention bonus within five days after the closing of the sale.
If Mr. Shorts employment were terminated as the result of his
death or by the company due to his total disability, he would receive a pro rata portion of any then unpaid retention bonus following the effective date of his (or his estates or legal representatives) release of claims (and in all
events within 60 days after the date of such termination).
See the sections below titled
Non-Equity
Long-Term Incentive Award and Accelerated Vesting of Equity Awards for descriptions of certain continued and accelerated vesting benefits with respect to Mr. Shorts Long-Term Incentive, TVDS and Performance Shares
awards.
Mr. Shorts employment agreement provides that during his employment with CDI and continuing through the first anniversary of the date
of his termination of employment, he will not compete with CDI or solicit its employees, consultants, customers or prospective customers.
Separation Agreement with Scott Freidheim
CDI entered into an employment agreement with Scott Freidheim in September 2014, when he joined CDI as our President and CEO. On September 15, 2016, CDI
and Mr. Freidheim entered into a separation agreement regarding the termination of Mr. Freidheims employment with the company, which occurred on that date. Pursuant to the separation agreement, Mr. Freidheim received the
following: (a) three months of continued base salary; (b) a lump sum payment of $318,000; (c) prorated vesting of the shares of TVDS he received when he joined CDI, in accordance with the TVDS agreement signed in September 2014; and
(d) vesting of the remaining shares of TVDS he received in September 2014 in accordance with the terms of CDIs Executive Stock Purchase Opportunity Program. In addition, the Performance Units granted to Mr. Freidheim in September
2014 and January 2015 remained outstanding until March 15, 2017. However, none of the Performance Units were earned by March 15, 2017 and so were forfeited. As part of his separation agreement, Mr. Freidheim agreed to release CDI
from, and waive, any claims he had arising from his employment with CDI and his separation from the company. Mr. Freidheim is subject to the covenants contained in his employment agreement prohibiting competition with CDI and solicitation of
its employees, consultants, customers and prospective customers for a period of one year following the termination of his employment.
Separation Agreement with Jill Albrinck
CDI entered into an employment agreement with Jill Albrinck as of December 30, 2015, shortly before she joined CDI. On February 10, 2017, CDI and
Ms. Albrinck entered into a separation agreement regarding the termination of Ms. Albrincks employment with the company, which occurred on that date. Pursuant to the separation agreement, Ms. Albrinck received the following:
(a) six months of continued base salary, which payments will immediately cease if she obtains new employment or if she breaches any of the covenants in her employment agreement; (b) prorated vesting of any tranche of TVDS scheduled to vest
after her separation date; (c) her guaranteed minimum 2016 bonus of $126,002. As part of her separation agreement, Ms. Albrinck agreed to release CDI from, and waive, any claims she had arising from her employment with CDI and her
separation from the company. Ms. Albrinck is subject to the covenants contained in her employment agreement prohibiting competition with CDI and solicitation of its employees, consultants, customers and prospective customers for a period of one
year following the termination of her employment.
39
Separation Agreement with Hugo Malan
CDI entered into an employment agreement with Hugo Malan in October 2014, when he joined CDI. On November 7, 2016, CDI and Mr. Malan entered a
separation agreement regarding the termination of Mr. Malans employment with the company, which occurred on November 18, 2016. Pursuant to the separation agreement, Mr. Malan was entitled to the following: (a) six months of
continued base salary, which payments would cease if he obtains new employment (which he did immediately after his separation date, so no salary continuation was paid) or if he breached any of the covenants in his employment agreement; and
(b) prorated vesting of any tranche of TVDS scheduled to vest after his separation date. As part of his separation agreement, Mr. Malan agreed to release CDI from, and waive, any claims he had arising from his employment with CDI and his
separation from the company. Mr. Malan is subject to the covenants contained in his employment agreement prohibiting competition with CDI and solicitation of its employees, consultants, customers and prospective customers for a period of one
year following the termination of his employment.
Former Executive Severance Program
CDIs former Executive Severance Program provided severance and other related benefits to designated senior management employees who met a
one-year
service requirement and a performance rating of on target or better. Brian Short is the only current NEO designated and eligible to receive benefits under this program. He has been grandfathered
under the Program, but otherwise it has been suspended.
Under the former Executive Severance Program, an executive whose employment is terminated by the
company without cause is entitled to receive, for twelve months following the termination date, continuing payments of
bi-weekly
amounts equal to the base salary the executive was receiving before his or her
termination. These severance payments cease when the departed executive secures another job (or after twelve months, whichever comes first). Under the former Executive Severance Program, the company also pays up to $15,000 in outplacement services.
In addition, the executive has up to two months following termination of employment in which to exercise any stock options or SARs that vested prior to termination of employment (but not beyond the expiration date of the SAR or stock option). During
the twelve-month severance period, (a) if the executive elects to continue paying premiums under CDIs group medical, dental and vision insurance (referred to collectively as health insurance) plan pursuant to the plans
continuation coverage provisions, CDI would continue to pay the same portion of the executives health insurance premiums as it was previously paying, and (b) CDI would continue to provide basic life insurance coverage. In return for
receiving the benefits under the former Executive Severance Program, the executive must agree to (a) release the company from claims and (b) not compete with CDI or solicit its employees or customers during the severance period.
Under the terms of the former Executive Severance Program, if a participating executive is entitled to receive severance, notice or similar termination
payments in connection with the cessation of his or her employment under an employment agreement with CDI or under applicable law that equals or exceeds the value of the benefits under the Executive Severance Program, then no payments would be made
under this program. However, if such payments are less than the value of the benefits under the Executive Severance Program, the company would pay the difference to the executive.
Non-Equity
Annual Incentive Compensation Plan
Under CDIs
Non-Equity
Annual Incentive Compensation Plan, if an executive resigns or is terminated by the company
for cause prior to the date that payouts are made, the executive would not receive any payout. Unless provided otherwise in an employment agreement, if the executives employment is terminated due to long-term disability or death, the executive
would receive a prorated payout based on the months of the year that the executive was employed by CDI. Unless provided otherwise in an employment agreement, if the executives employment is terminated for any other reason (including
retirement), a payout to the executive may be considered at the discretion of the CEO and subject to the approval of the Compensation Committee. However, for retention purposes, a guarantee was added to the 2016
Non-Equity
Annual Incentive Compensation program, under which 25% of the target payout will be payable to each executive in two tranches (half in March 2017 and half in March 2018) subject to the executive
remaining employed by CDI at those times (however, if the executive is employed by CDI on the first payout date and his employment is terminated by the company without cause prior to the second payout date, he would be entitled to receive the second
portion of the guaranteed amount). Provisions contained in the employment and letter agreements entered into by Mr. Castleman regarding his right to receive a prorated portion of his
non-equity
annual
incentive compensation following termination of employment under certain circumstances are described above.
40
Non-Equity
Long-Term Incentive Award
Pursuant to the terms of the
non-equity
Long-Term Incentive Award granted to Mr. Short in 2015 (sometimes referred
to as a value creation contingent award), if his employment is terminated by the company without cause, then his Long-Term Incentive Award will remain outstanding for an additional period of six months following such termination of employment and
will continue to be earned in accordance with its terms (subject to his execution and
non-revocation
of a release of claims within sixty days after the date of termination). In addition, in the event of a
termination of his employment by the company without cause, by the company due to total disability, as the result of his death or by him for good reason following the occurrence of a sale of CDI, then subject to his execution and
non-revocation
of a release of claims within sixty days after the date of termination, the earned portion of his Long-Term Incentive Award will be paid within sixty days after the earlier of the six month
anniversary following such termination of employment and September 15, 2019 (or, in the case of a termination due to his death, within sixty days after the date of such death). Also, if any portion of the performance requirements for the
Long-Term Incentive Award has been satisfied on or after the second anniversary of the grant date of the award and prior to September 15, 2018, then Mr. Short may elect to freeze the payout amount of the award as of the date of such
election, and he will vest in such frozen payout amount on the earlier of (a) the first anniversary of the date on which such election is made, provided that he remains employed with the company through such first anniversary or (b) the
date on which his employment is terminated by the company without cause or due to disability, by him for good reason following a sale of CDI, or as the result of his death. If his employment with the company terminates prior to the first
anniversary of such election for any other reason, then the Long-Term Incentive Award will be forfeited. To the extent earned in connection with such an election, the payments under the Long-Term Incentive Award will be made on the same
schedule as described above. As of the end of 2016, nothing has been earned by Mr. Short under his Long-Term Incentive Award.
Accelerated Vesting of Equity-Based Awards
Stock Options
. Under CDIs standard form of stock option agreement, if the holders employment with CDI terminates as a result of death,
disability or retirement, any unvested stock options will vest as of the date of such event. If the holders employment with CDI terminates for any other reason, any unvested stock options will be forfeited. At the end of 2016,
Mr. Short was the only NEO who held stock options that were subject to this form of agreement.
41
SARs
. Under CDIs standard form of SARs agreement, if the holders employment with CDI
terminates as a result of death, disability or retirement, any unvested SARs will vest as of the date of such event. If the holders employment with CDI terminates for any other reason, any unvested SARs will be forfeited. At the end
of 2016, Mr. Short was the only NEO who held outstanding SARs, but all of his SARs had become vested by that date.
Time-Vested Deferred
Stock
. Under CDIs standard form of TVDS agreement, if the holders employment with CDI terminates as a result of death, disability or retirement, the shares which are scheduled to vest at the next succeeding anniversary of the grant
date will vest as of the date of such termination, and any other shares of TVDS which have not vested as of the date of such termination will be forfeited. If the holders employment with CDI is terminated for any reason other than the
reasons stated in the foregoing sentence, any unvested shares at the time of such termination will be forfeited. At the end of 2016, Mr. Short was the only NEO who held shares of TVDS that were subject to this provision.
With respect to any shares of TVDS received by an NEO pursuant to the Executive Stock Purchase Opportunity Program, if the NEOs employment is terminated
by CDI without cause or in the event of the death, disability or retirement of the NEO, then all unvested shares of TVDS will immediately vest. If the NEOs employment is terminated due to the NEOs resignation or for cause, the
unvested shares of TVDS will be forfeited. At the end of 2016, Mr. Castleman was the only NEO who held shares of TVDS acquired under the Executive Stock Purchase Opportunity Program. At the time his employment ended in September 2016,
Mr. Freidheim held shares of TVDS acquired under the Executive Stock Purchase Opportunity Program and all of his remaining shares of TVDS under that program became vested.
Pursuant to the terms of the employment agreement for Mr. Castleman, in the event that his employment is terminated by the company without cause prior to
the final vesting date of the initial hire TVDS awards granted to him in 2014, then a pro rata portion of the first tranche of the TVDS award scheduled to vest after the date of such termination of employment will become vested, with such portion to
equal the product of (a) the number of shares of CDI stock underlying such tranche, multiplied by (b) a fraction, the numerator of which is the number of days in the period commencing on the grant date and ending on the date of termination
of employment and the denominator of which is the number of days from the grant date and ending on the date on which such tranche was scheduled to vest. In the event of any other termination of employment, the unvested portion of the initial
hire TVDS awards granted to Mr. Castleman in 2014 will be forfeited.
On January 25, 2017, the company granted equity awards to Michael
Castleman and Brian Short, which were structured in part to promote retention. Messrs. Castleman and Short were granted 87,500 and 59,500 shares of TVDS, respectively, that vest 20% on October 1, 2017, 30% on each of October 1, 2018 and
October 1, 2019, and 20% on October 1, 2020, subject to continued employment on the applicable vesting date. In the event of a sale of the company, a minimum of the next two tranches then due to vest will become vested (and additional TVDS
may vest depending on the value of CDI stock realized in the transaction) and the vesting dates of any remaining tranches will be accelerated by one year. These TVDS awards also provide for vesting of a portion of the awards in connection with
certain involuntary terminations of employment. Also on January 25, 2017, Messrs. Castleman and Short were granted a target number of 37,500 and 25,500 Performance Units, respectively, that are earned based on CDIs achievement of
operating profit targets in 2018. Any Performance Units that are earned will vest on March 31, 2019 subject to the executives continued employment by CDI through that date. In the event of a sale of the company that occurs prior to
December 31, 2018, all of these Performance Units will be immediately forfeited with no compensation due. Because none of these awards were outstanding on December 31, 2016, they are not included in the table below.
42
See the descriptions above of the separation agreements with Mr. Freidheim, Ms. Albrinck and
Mr. Malan for the impact of their termination of employment on their unvested shares of TVDS.
Performance Shares
. Under CDIs form of
Performance Shares agreement, if the holders employment with CDI terminates as a result of death, disability or retirement, after the last day of a particular fiscal year but prior to the determination date in the following fiscal year, any
Performance Shares that would have vested on the determination date of the following fiscal year will immediately vest. Otherwise, all unvested Performance Shares will be forfeited upon termination of employment. At the end of 2016,
Mr. Short was the only NEO who held Performance Shares, though none of the Performance Shares awarded to him were earned as of December 31, 2016.
Performance Units (value creation contingent awards)
. Pursuant to the terms of the Performance Units awarded to Mr. Castleman in 2014, if his
employment is terminated by the company without cause or by him for good reason following a sale of the company, then his Performance Units will remain outstanding for an additional period of six months following such termination of employment and
will continue to be earned in accordance with the terms of the award (subject to his execution and
non-revocation
of a release of claims within sixty days after the date of termination). In addition, in
the event of a termination of his employment by the company without cause, by the company due to total disability, as the result of his death or by him for good reason following the occurrence of a sale of CDI, then subject to his execution and
non-revocation
of a release of claims within sixty days after the date of termination, the earned portion of Mr. Castlemans 2014 Performance Units award will become vested and will be settled within sixty
days after the earlier of the six month anniversary following such termination of employment and September 15, 2019 (or, in the case of a termination due to his death, within sixty days after the date of such death). In addition, if any portion
of the performance requirements for the 2014 Performance Units award to Mr. Castleman have been satisfied on or after the second anniversary of the grant date of the award and prior to September 15, 2018, then he may elect to freeze the
payout amount of the award as of the date of such election, and he will vest in such frozen payout amount on the earlier of (a) the first anniversary of the date on which such election is made, provided that he remains employed with the company
through such first anniversary or (b) the date on which his employment is terminated by the company without cause or due to disability, by him for good reason following a sale of CDI, or as the result of his death. If his employment with
the company terminates prior to the first anniversary of such election for any other reason, then the Performance Units will be forfeited. To the extent vested in connection with such an election, the Performance Units will be settled in the
same manner as described above.
As of the end of 2016, none of the performance goals for Mr. Castlemans Performance Units award were
satisfied.
Clawback Policy
The company can cancel and recoup (or claw back) from any employee in the CDI organization any incentive compensation or equity awards that were
based on incorrect information, whether the error in the information occurred as a result of oversight, negligence or intentional misconduct (including fraud). Therefore, certain payments and benefits described in this section regarding
Potential Payments Upon Termination of Employment or Change in Control may be subject to forfeiture and clawback under certain circumstances.
43
Tables for Potential Payments to the NEOs upon Termination of Employment or Change in Control
The first table below sets forth the benefits that Mr. Castleman and Mr. Short would have received if a termination or separation from employment or
a change in control of CDI had occurred on December 31, 2016. The second table below sets forth the actual severance benefits that Mr. Freidheim, Ms. Albrinck and Mr. Malan received or will receive in connection with their
separation from employment. The actual amounts paid to an executive can only be determined at the time of the executives separation from the company, and so the actual amounts paid to Mr. Castleman and Mr. Short upon a termination of
employment are likely to differ from the amounts set forth in the first table below.
The first table takes into account the increase in the number of
months of salary continuation (from six to twelve) for Mr. Castleman following a termination of his employment without cause, which increase was agreed to in his letter agreement in January 2017. However, the first table does not consider the
retention bonus arrangements for, and equity awards to, Messrs. Castleman and Short pursuant to their January 2017 letter agreements.
The first table
does not contain any columns for resignation or termination of employment by CDI for cause or for a change in control because, as of December 31, 2016, no benefits would be payable to the NEOs in those cases. Also, the first table contains no
column for retirement because none of the NEOs were retirement-eligible under the terms of CDIs executive compensation programs and agreements as of the end of 2016.
Certain benefits which are provided generally to all salaried employees of CDI (such as a payment for accrued but unused
time-off)
are excluded from these tables. Certain benefits are contingent upon the executive signing a release and waiver of claims in favor of CDI, including covenants which prohibit the executive from
disclosing proprietary or confidential information of CDI and from competing with the company or soliciting its employees, consultants, customers and prospective customers for a certain period after termination of their employment. Severance and
other deferred compensation payments to the NEOs may be subject to a
six-month
delay following the executives termination of employment, if necessary to avoid the imposition of an additional 20% tax on
such payments pursuant to Section 409A of the Internal Revenue Code.
44
|
|
|
|
|
|
|
|
|
Type of Payment or Benefit
|
|
Termination
Not for Cause
($)
|
|
|
Termination Due to
Death or Disability
($)
|
|
Michael S. Castleman
|
|
|
|
|
|
|
|
|
Salary continuation
(1)
|
|
|
500,000
|
|
|
|
0
|
|
Non-equity
annual incentive compensation
|
|
|
0
|
|
|
|
0
|
|
Accelerated vesting of TVDS
(2)
|
|
|
200,900
|
|
|
|
17,424
|
|
Accelerated vesting of Performance Units
(3)
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
700,900
|
|
|
|
17,424
|
|
|
|
|
|
|
|
|
|
|
Brian D. Short
|
|
|
|
|
|
|
|
|
Salary continuation
(1)
|
|
|
375,000
|
|
|
|
0
|
|
Non-equity
annual incentive compensation
|
|
|
0
|
|
|
|
0
|
|
Outplacement services
|
|
|
15,000
|
|
|
|
0
|
|
Life insurance coverage
(4)
|
|
|
491
|
|
|
|
0
|
|
COBRA reimbursements
|
|
|
0
|
|
|
|
0
|
|
Accelerated vesting of TVDS
|
|
|
0
|
|
|
|
20,788
|
|
Accelerated vesting of SARs
|
|
|
0
|
|
|
|
0
|
|
Accelerated vesting of Stock Options
(5)
|
|
|
0
|
|
|
|
0
|
|
Accelerated vesting of Performance Shares
(3)
|
|
|
0
|
|
|
|
0
|
|
Accelerated vesting of
Non-Equity
Long-Term Incentive
Award
(3)
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
390,491
|
|
|
|
20,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type of Payment or Benefit
|
|
Amounts Paid and Payable in
Connection with Termination of
Employment ($)
|
|
Scott J. Freidheim
|
|
|
|
|
Salary continuation
(1)
|
|
|
150,000
|
|
Severance payment
|
|
|
318,000
|
|
Non-equity
annual incentive compensation
|
|
|
0
|
|
Accelerated vesting of TVDS
(2)
|
|
|
146,565
|
|
Accelerated vesting of Stock Options
|
|
|
0
|
|
Accelerated vesting of Performance Units
(3)
|
|
|
0
|
|
|
|
|
|
|
Total
|
|
|
614,565
|
|
|
|
|
|
|
Jill M. Albrinck
|
|
|
|
|
Salary continuation
(1)
|
|
|
180,000
|
|
Bonus
(6)
|
|
|
126,002
|
|
Accelerated vesting of TVDS
(2)
|
|
|
108,008
|
|
Accelerated vesting of Performance Units
(3)
|
|
|
0
|
|
|
|
|
|
|
Total
|
|
|
414,010
|
|
|
|
|
|
|
D. Hugo Malan
|
|
|
|
|
Salary continuation
|
|
|
0
|
|
Non-equity
annual incentive compensation
|
|
|
0
|
|
Accelerated vesting of TVDS
(2)
|
|
|
180,482
|
|
Accelerated vesting of Performance Units
(3)
|
|
|
0
|
|
|
|
|
|
|
Total
|
|
|
180,482
|
|
|
|
|
|
|
Notes to the Tables for Potential Payments to the NEOs upon Termination of Employment or Change in Control:
(1)
|
These amounts represent twelve months of continued base salary for Mr. Castleman and Mr. Short, three months of continued base salary for Mr. Freidheim, and six months of continued base salary for
Ms. Albrinck. In the case of Mr. Castleman, this reflects the increase in the number of months of salary continuation provided under the letter agreement he and the company signed in January 2017.
|
45
(2)
|
These dollar amounts represent: (a) for Mr. Castleman, the value of 24,992 shares of TVDS which would vest on December 31, 2016 in the event his employment was terminated without cause, and the value
of 2,200 shares of TVDS which would vest on December 31, 2016 in the event of the termination of his employment due to his death or disability; (b) for Mr. Freidheim, the value of 24,855 shares of TVDS which vested in connection with
the termination of his employment in September 2016; (c) for Ms. Albrinck, the value of 11,740 shares of TVDS which vested in connection with the termination of her employment in February 2017 (had her employment been terminated by the company
without cause on December 31, 2016, she would have instead received 10,407 shares of TVDS); and (d) for Mr. Malan, the value of 22,846 shares of TVDS which vested in connection with the termination of his employment in November 2016.
In each of these cases except for Ms. Albrinck, the dollar amounts also include the value of any additional shares which the NEO received or would be entitled to receive upon vesting based on the aggregate dividends paid on CDI stock between
the date of grant and the date of vesting. In the case of Mr. Castleman, the value of shares of TVDS subject to accelerated vesting is based on the closing price of CDI stock on December 31, 2016, which was $7.40 per share. The value of
the shares of TVDS for the other NEOs is based on the closing price of CDI stock on the date of their termination of employment.
|
(3)
|
Because the minimum level of achievement of the performance goals for the Performance Units, Performance Shares and Long-Term Cash Awards was not satisfied as of December 31, 2016, no value is reported in this
row in connection with the accelerated vesting of such awards.
|
(4)
|
This amount represents the cost of twelve months of life insurance coverage paid by the company.
|
(5)
|
Mr. Shorts Stock Options which are subject to accelerated vesting have no value reflected in this table because the closing price of CDI stock on December 31, 2016 ($7.40 per share) is below the
exercise price of the Stock Options.
|
(6)
|
This represents Ms. Albrincks guaranteed minimum bonus for 2016 under her employment agreement.
|
Director Compensation
The
compensation paid to the companys
non-employee
directors is structured to attract and retain qualified
non-employee
directors and to further align their interests
with the interests of CDIs shareholders by linking a significant portion of their compensation to CDIs stock performance. Directors who are not employees of CDI or one of its subsidiaries receive the following as compensation for their
service on the Board and on committees of the Board:
|
|
Retainer Fee
. Each
non-employee
director receives a retainer fee of $55,000 per year. Under the compensation arrangements in effect during 2016, the director could elect to
be paid in any combination of: (a) cash; (b) CDI stock options; or (c) CDI stock on a deferred basis under the Omnibus Stock Plan. If a director elects to receive deferred stock for all or a portion of the retainer fee, the director would
receive shares of time-vested deferred stock (TVDS), each of which corresponds to a right to receive one share of CDI stock upon completion of the applicable vesting period (from three to ten years, as selected by the director). The number of shares
of TVDS is calculated by dividing the amount of the retainer fee which the director chooses to defer by the market value of CDI stock at the beginning of the directors fee year. A directors fee year is the period for which a director is
paid and runs from one annual meeting of shareholders to the next. The company would make a matching contribution of one share of TVDS for every three shares of TVDS acquired by the director. If a director elects to receive stock options for all or
a portion of the retainer fee, the number of options which the director receives is determined using a Black-Scholes valuation methodology.
|
46
|
|
Time-Vested Deferred Stock (TVDS)
. Each
non-employee
director receives, at the beginning of the directors fee year, an annual grant of shares of TVDS, which upon
vesting on the third anniversary of the date of grant, are converted into an equivalent number of shares of CDI stock. The number of shares of TVDS equals the lesser of (a) $100,000 divided by the market price of CDI stock on the date of grant and
(b) 10,000 shares. The limitation of the annual TVDS grant to 10,000 shares was adopted by the Board in May 2016 in recognition of the companys declining stock price. Upon vesting, holders of TVDS receive additional shares of CDI stock having
a value equal to the total dividends paid on CDI stock during the period from the grant date to the vesting date.
|
|
|
Committee Service Fees and Committee Chairman Fees
. For service on committees of the Board,
non-employee
directors receive an additional $5,000 per year for each committee
chaired ($10,000 in the case of the Audit Committee and the Compensation Committee) and $3,000 per year for each committee served on in excess of one.
|
|
|
Meeting Attendance Fees
.
Non-employee
directors are paid meeting attendance fees of $1,000 for each Board meeting and committee meeting attended.
|
|
|
Board Chairman Fees
. The Chairman of the Board is paid an additional fee of $60,000 per year, and also is entitled to receive reimbursement of up to $40,000 for administrative support services to assist in the
performance of the Chairmans duties.
|
|
|
Lead Director Fee
. The Lead Director is paid an additional fee of $10,000 per year.
|
The compensation
arrangements for
non-employee
directors are developed by the Governance and Nominating Committee and recommended to the Board for final approval. Neither that committee nor the Board retained a compensation
consultant during 2016 in connection with determining the amount or form of director compensation.
No consulting fees were paid in 2016 to any of
CDIs directors.
Directors who are also employees of CDI do not receive any compensation for their services as directors (other than reimbursements
for reasonable expenses incurred in connection with the performance of such services).
47
Director Compensation Table for 2016
The following table shows the 2016 compensation for our
non-employee
directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned or
Paid in Cash
($)
|
|
|
Stock
Awards
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Joseph L. Carlini
|
|
|
86,000
|
|
|
|
56,400
|
|
|
|
0
|
|
|
|
142,400
|
|
Michael J. Emmi
|
|
|
90,000
|
|
|
|
56,400
|
|
|
|
9,484
|
|
|
|
155,884
|
|
Walter R. Garrison
|
|
|
125,000
|
|
|
|
56,400
|
|
|
|
9,484
|
|
|
|
190,884
|
|
Lawrence C. Karlson
|
|
|
96,000
|
|
|
|
56,400
|
|
|
|
9,484
|
|
|
|
161,884
|
|
Ronald J. Kozich
|
|
|
93,000
|
|
|
|
56,400
|
|
|
|
9,484
|
|
|
|
158,884
|
|
Anna M. Seal
|
|
|
87,000
|
|
|
|
56,400
|
|
|
|
9,484
|
|
|
|
152,884
|
|
Albert E. Smith
|
|
|
90,044
|
|
|
|
56,400
|
|
|
|
9,484
|
|
|
|
155,928
|
|
Barton J. Winokur
|
|
|
84,000
|
|
|
|
56,400
|
|
|
|
9,484
|
|
|
|
149,884
|
|
Notes to the Director Compensation Table for 2016:
The Fees Earned or Paid in Cash Column
This column represents a total of the retainer fees, Board Chairman fees, Lead Director fees, committee chairman fees, fees for service on
more than one committee, Board meeting attendance fees and committee meeting attendance fees earned by the
non-employee
directors in 2016. The table below shows a breakdown of those fees for each director.
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Retainer
Fees
($)
|
|
|
Board Chairman
and Lead
Director Fees
($)
|
|
|
Committee
Chairman
Fees
($)
|
|
|
Additional
Committee
Service Fees
($)
|
|
|
Board
Meeting
Attendance
Fees
($)
|
|
|
Committee
Meeting
Attendance
Fees
($)
|
|
|
Total
($)
|
|
Joseph Carlini
|
|
|
55,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,000
|
|
|
|
8,000
|
|
|
|
20,000
|
|
|
|
86,000
|
|
Michael Emmi
|
|
|
55,000
|
|
|
|
0
|
|
|
|
10,000
|
|
|
|
3,000
|
|
|
|
9,000
|
|
|
|
13,000
|
|
|
|
90,000
|
|
Walter Garrison
|
|
|
55,000
|
|
|
|
60,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
10,000
|
|
|
|
0
|
|
|
|
125,000
|
|
Lawrence Karlson
|
|
|
55,000
|
|
|
|
0
|
|
|
|
10,000
|
|
|
|
3,000
|
|
|
|
9,000
|
|
|
|
19,000
|
|
|
|
96,000
|
|
Ronald Kozich
|
|
|
55,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
6,000
|
|
|
|
10,000
|
|
|
|
22,000
|
|
|
|
93,000
|
|
Anna Seal
|
|
|
55,000
|
|
|
|
0
|
|
|
|
5,000
|
|
|
|
3,000
|
|
|
|
10,000
|
|
|
|
14,000
|
|
|
|
87,000
|
|
Albert Smith
|
|
|
55,000
|
|
|
|
9,044
|
|
|
|
0
|
|
|
|
3,000
|
|
|
|
9,000
|
|
|
|
14,000
|
|
|
|
90,044
|
|
Barton Winokur
|
|
|
55,000
|
|
|
|
0
|
|
|
|
5,000
|
|
|
|
3,000
|
|
|
|
10,000
|
|
|
|
11,000
|
|
|
|
84,000
|
|
None of the directors elected to receive a portion of the 2016 retainer fees which are included in the
Fees Earned or Paid in Cash column in the form of TVDS or stock options.
The Stock Awards Column
The Stock Awards column represents the aggregate grant date fair value of shares of TVDS received by the directors in 2016, in accordance
with FASB ASC Topic 718, calculated without regard to any estimated forfeitures. The grant date fair value of the directors Stock Awards is equal to the market price of CDI stock on the date of grant multiplied by the number of Stock Awards
received on that date. For additional information regarding the valuation assumptions relating to CDIs Stock Awards, see Note 8 to the companys consolidated financial statements in the Original
10-K
Filing. The grant date fair value of the Stock Awards included in the Directors Compensation Table for 2016 was $5.64 for each share of TVDS received by all of the
non-employee
directors on May 17, 2016. The amounts in this column reflect the grant date fair value of these awards under fair value accounting standards and do not correspond to the actual value that
will be realized by the directors.
Each director held a total of 25,174 shares of TVDS at the end of 2016.
The All Other Compensation Column
For each director, the amounts in this column represent the dollar value of additional shares of CDI stock received by the director upon
vesting of TVDS relating to accrued dividends (upon vesting, holders of shares of TVDS receive additional shares of CDI stock having a value equal to the total dividends paid on CDI stock during the period from the grant date to the vesting
date).
49
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee is or has been an officer or employee of CDI or any of its subsidiaries. No executive officer of CDI
served on the compensation committee of another entity (or on any other committee of the board of directors of another entity performing similar functions) during 2016, where an executive officer of that other entity served on the Compensation
Committee or the Board of CDI. In addition, none of CDIs executive officers served as member of the board of directors or compensation committee of another entity that has one or more of its executive officers serving on CDIs
Compensation Committee.