TiVo DEF 14A 2014
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14A INFORMATION
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2160 Gold Street
P.O. Box 2160
San Jose, CA 95002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, AUGUST 7, 2014
To our Stockholders:
The 2014 Annual Meeting of Stockholders of TiVo Inc., a Delaware corporation, will be held on Thursday, August 7, 2014, beginning at 10:30 a.m. local time at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 525 University Avenue, Suite 1400, Palo Alto, California. At the meeting, the holders of the Company's outstanding common stock will act on the following matters:
All holders of record of shares of TiVo common stock at the close of business on June 10, 2014 are entitled to vote at the meeting and any postponements or adjournments of the meeting. This notice and the accompanying proxy statement and proxy card are being first mailed to stockholders on or about June 27, 2014.
San Jose, California
June 2, 2014
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
2160 Gold Street
P.O. Box 2160
San Jose, CA 95002
This proxy statement is being solicited on behalf of the Board of Directors of TiVo Inc. for use at the Annual Meeting of Stockholders of TiVo Inc., including any postponements or adjournments, to be held on Thursday, August 7, 2014, beginning at 10:30 a.m. at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 525 University Avenue, Suite 1400, Palo Alto, California. This proxy statement and accompanying proxy card are being first mailed to stockholders on or about June 27, 2014.
ABOUT THE MEETING AND VOTING
What is the purpose of the Annual Meeting?
At our 2014 Annual Meeting, stockholders will act upon the matters outlined in the notice of meeting on the cover page of this proxy statement, including the election of two directors, ratification of the selection of the Company's independent auditors, approval of a two-year request to reserve an additional 7,500,000 shares of our common stock for issuance pursuant to the Amended & Restated 2008 Equity Incentive Award Plan; and approval on a non-binding, advisory basis of the compensation of our named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission (“Say-on-Pay”).
Who is entitled to vote at the meeting?
Only stockholders of record at the close of business on June 10, 2014, the record date for the meeting, are entitled to receive notice of and to participate in the 2014 Annual Meeting. If you were a stockholder of record as of the close of business on that date, you will be entitled to vote all of the shares that you held on that date at the meeting, or any postponements or adjournments of the meeting.
What are the voting rights of the holders of TiVo common stock?
Each outstanding share of TiVo common stock will be entitled to one vote on each matter considered at the meeting.
Who can attend the meeting?
Subject to space availability, all stockholders as of the record date, or their duly appointed proxies, may attend the meeting. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. Please also note that if you hold your shares in “street name” (that is, through a broker or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date. Please also see “How do I vote?” for instructions on voting at the Annual Meeting if you hold your shares in “street name.”
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a majority of the aggregate voting power of the common stock outstanding as of the close of business on the record date, which is June 10, 2014, will constitute a quorum, permitting the meeting to conduct its business. At the close of business on May 15, 2014, there were 114,851,470 shares of our common stock outstanding and entitled to vote. Proxies received but marked as abstentions and broker non-votes will be included in the calculation of the number of shares of common stock considered to be present at the meeting.
How do I vote?
If you complete and properly sign the accompanying proxy card and return it to the Company, it will be voted as you direct. If you are a registered stockholder and attend the meeting, you may deliver your completed proxy card in person. “Street name” stockholders who wish to vote at the meeting will need to obtain a proxy form from the institution that holds their shares.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may revoke or change your vote at any time before the proxy is exercised by filing with the Corporate Secretary of the Company at our principal executive office, 2160 Gold Street, P.O. Box 2160, San Jose, CA 95002, a written notice of revocation or a duly executed proxy bearing a later
date, or it may be revoked by attending the meeting and voting in person. Attendance at the meeting will not, by itself, revoke a proxy.
What are the Board of Director's recommendations?
Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board. The Board's recommendation is set forth together with the description of each item in this proxy statement. In summary, the Board recommends a vote:
With respect to any other business that properly comes before the meeting, the proxy holders will vote as recommended by the Board or, if no recommendation is given, in their own discretion.
What vote is required to approve each item?
All votes will be tabulated by the Inspector of Elections appointed for the meeting, who will separately tabulate affirmative and negative votes, abstentions, and broker non-votes. Any proxy which is returned using the form of proxy enclosed and which is not marked as to a particular item will be voted in accordance with the recommendations of the Board. With respect to any other business that properly comes before the meeting, the proxy holders will vote as recommended by the Board or, if no recommendation is given, in their own discretion, as the case may be with respect to the item not marked.
Election of Directors. In uncontested elections of directors, such as this election, the affirmative vote of a majority of the votes cast by the shares represented and entitled to vote on the proposal at the meeting is required for the election of directors. A “majority of the votes cast” means that the number of votes cast “for” a director candidate must exceed the number of votes cast “against” that candidate. In the past, if you held your shares in street name and you did not indicate how you wanted to vote those shares in the election of directors, your bank or broker was allowed to vote those shares on your behalf as they felt appropriate. However, your bank or broker no longer has the ability to vote your uninstructed shares in the election of directors on a discretionary basis. Any broker non-votes or abstentions will not be voted with respect to the director or directors indicated, although they will be counted for purposes of determining whether there is a quorum.
Ratification of the Selection of Independent Registered Public Accounting Firm. The affirmative vote of the majority of the shares of common stock entitled to vote and represented, in person or by proxy, at the meeting is necessary to ratify the section of KPMG LLP as the independent registered public accounting firm for TiVo for the fiscal year ending January 31, 2015. A properly executed proxy marked “Abstain” with respect to the ratification of the section of the independent registered public accounting firm will have the same effect as a vote against the proposal. Broker non-votes will not be counted as shares present and entitled to vote on the proposal, although they will be counted for purposes of determining whether there is a quorum.
Approval to Reserve Additional Shares Pursuant to the Amended & Restated 2008 Equity Incentive Award Plan. The affirmative vote of a majority of the shares of common stock entitled to vote and represented, in person or by proxy, at the meeting is required to approve the reservation of 7,500,000 additional shares of our common stock for issuance pursuant to the Amended & Restated 2008 Equity Incentive Award Plan (the “2008 Equity Incentive Award Plan”). A properly executed proxy marked “Abstain” with respect to the reservation of additional shares for the 2008 Equity Incentive Award Plan will have the same effect as a vote against the proposal. Broker non-votes will not be counted as shares present and entitled to vote on the proposal, although they will be counted for purposes of determining whether there is a quorum.
Advisory Vote on the Compensation of Named Executive Officers. The affirmative vote of a majority of the shares of common stock entitled to vote and represented, in person or by proxy, at the meeting is necessary to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities Exchange Commission ("Say-on-Pay").
Because your vote is advisory, it will not be binding on the Board, the Compensation Committee or the Company. However, the Board will review the voting results and take them into consideration when making future decisions about executive compensation. A properly executed proxy marked “Abstain” with respect to the Say-on-Pay proposal will have the same effect as a vote against the proposal. Broker non-votes will not be counted as shares present and entitled to vote on the proposal, although they will be counted for purposes of determining whether there is a quorum.
Other Items. For each other item, the affirmative vote of the holders of a majority of the shares of common stock entitled to vote on the item and represented, in person or by proxy, at the meeting will be required for approval at a meeting at which a quorum is present as required under Delaware law for approval of proposals presented to stockholders. A properly executed proxy marked “Abstain” with respect to such matter will have the same effect as a vote against the proposal. Broker non-votes will not be counted as shares present and entitled to vote on the proposal, although they will be counted for purposes of determining whether there is a quorum. If you hold your shares in “street name” through a broker or other nominee, your broker or nominee may not be permitted to exercise voting discretion with respect to some of the matters to be acted upon. Thus, if you do not give your broker or nominee specific instructions, your shares may not be voted on those matters and will not be counted in determining the number of shares necessary for approval. Shares represented by such “broker non-votes” will, however, be counted in determining whether there is a quorum.
There is no statutory or contractual right of appraisal or similar remedy available to those stockholders who dissent from any matter to be acted upon.
Who pays for the solicitation of proxies?
We will bear the entire cost of solicitation of proxies including preparation, assembly, printing, and mailing of this proxy statement, the proxy card, and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries, and custodians holding in their names shares of common stock beneficially owned by others to forward to such beneficial owners. We may reimburse persons representing beneficial owners of common stock for their costs of forwarding solicitation materials to such beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone, facsimile, e-mail, or personal solicitation by our directors, officers, or other regular employees. No additional compensation will be paid to our directors, officers, or other regular employees for such services.
In addition, we have retained MacKenzie Partners, Inc., 105 Madison Avenue, New York, NY, 10016, to aid in the solicitation of proxies by mail, telephone, facsimile, e-mail and personal solicitation and to contact brokerage houses and other nominees, fiduciaries and custodians to request that such entities forward soliciting materials to beneficial owners of our common stock. For these services, we will pay MacKenzie Partners, Inc. a fee of $30,000, plus expenses.
Is my vote confidential?
Proxies, ballots, and voting tabulations are handled on a confidential basis to protect your voting privacy. Information will not be disclosed except as required by law.
How do I find out the voting results?
Preliminary voting results will be announced at the meeting and final voting results will be published in our Current Report on Form 8-K within four business days following the Annual Meeting. We will file this current report with the Securities and Exchange Commission (“SEC”). After the Form 8-K is filed, you may obtain a copy by:
• visiting our website; or
• contacting our Investor Relations department at (408) 519-9677.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting To Be Held on August 7, 2014.
This Proxy Statement and the 2014 Form 10-K are available on the Internet at: http://www.tivo.com/2014proxy.
ELECTION OF CLASS III DIRECTORS
Our Amended & Restated Certificate of Incorporation and Amended and Restated Bylaws provide that the Board of Directors shall be divided into three classes, with each class having a three-year term. Unless the Board determines that vacancies or newly created directorships shall be filled by stockholders, vacancies and newly created directorships on the Board may be filled only by persons elected by a majority of the remaining directors. A director elected by the Board to fill a vacancy (including a vacancy created by an increase in the number of directors) shall serve for the remainder of the full term of the class of directors in which the vacancy occurred and until such director's successor is elected and qualified.
The Board has selected two Class III director nominees to be re-elected at the 2014 Annual Meeting of Stockholders. All of the nominees for election to this class are currently directors of TiVo. The term of office of each person elected as a director at this meeting will continue until the 2017 Annual Meeting or until the director's successor has been duly elected or appointed and qualified, or until such director's earlier death, resignation, or removal.
Ms. Heidi Roizen, a current member of the Board with a term expiring at the 2014 Annual Meeting, has elected not to seek re-election and will be retiring from the Board effective as of the date of the Annual Meeting, August 7, 2014. The Board has passed a resolution reducing the number of directors on the Board from eight to seven, which will become effective concurrent with the expiration of Ms. Roizen’s term.
Directors, in an uncontested election, such as this, are elected by the affirmative vote of a majority of the votes cast by the shares represented and entitled to vote on the proposal at the meeting. In the event that any nominee should be unavailable for election as a result of an unexpected occurrence, such shares will be voted for the election of such substitute nominee as the Board may propose. Each person nominated for election has agreed to serve if elected, and management and the Board have no reason to believe that any nominee will be unable to serve. There are no family relationships among any of the directors, director nominees, or executive officers of TiVo.
The names of the nominees, their ages as of May 1, 2014 and certain other information about them are set forth below:
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE IN PROPOSAL 1
DIRECTORS NOT STANDING FOR ELECTION WHOSE TERMS DO NOT EXPIRE IN 2014
The members of the Board whose terms do not expire at the 2014 Annual Meeting and who are not standing for election at this year's Annual Meeting are set forth below:
DIRECTOR NOT STANDING FOR RE-ELECTION WHOSE TERM EXPIRES IN 2014
Ms. Heidi Roizen has elected not to stand for re-election and her term expires as of the date of the 2014 Annual Meeting, August 7, 2014.
CORPORATE GOVERNANCE GUIDELINES; LEAD INDEPENDENT DIRECTOR
We have adopted corporate governance guidelines titled “Corporate Governance Guidelines of TiVo Inc.” which are available at www.tivo.com by first clicking “About us”, then “Investor Relations,” and then “Corporate governance.” These guidelines were adopted by the Board to best ensure that the Board is independent from management, that the Board adequately performs its function as the overseer of management, and to enhance the accountability of the Board to our stockholders. We updated our corporate governance guidelines in May 2011 to reflect the fact that the Board appointed Thomas Wolzien as Lead Independent Director in December 2010.
NO SHAREHOLDER RIGHTS PLAN
We currently have no Shareholder Rights Plan (the “Rights Plan”), as our Rights Plan expired on October 29, 2011.
The Board makes an annual determination of independence as to each Board member under the current standards for “independence” established by NASDAQ Global Market (“NASDAQ”). In May 2014, the Board determined that all of its directors, except Mr. Rogers, TiVo's Chief Executive Officer, are independent under these standards.
DIRECTOR NOMINATING PROCESS
The Nominating and Governance Committee considers candidates for director nominees proposed by directors and security holders. The Committee may also retain recruiting professionals to identify and evaluate candidates for director nominees.
The Committee evaluates all aspects of a candidate's qualifications in the context of the needs of the Company with a view to creating a Board with a diversity of experience and perspectives. In accordance with the Nominating and Governance Committee's charter, the same evaluating procedures apply to all candidates for director nomination, including candidates submitted by security holders. Among a candidate's qualifications and skills considered important are personal and professional integrity, ethics, and values; a commitment to representing the long-term interests of security holders; experience in corporate management, such as serving as an officer or former officer of a publicly held company; experience and/or academic expertise in the Company's industry and with relevant social policy concerns; experience as a board member of another publicly held company; and practical and mature business judgment. The Committee gives consideration to a wide range of diversity factors as a matter of practice when evaluating candidates to the Board and incumbent directors, but the Committee does not have a formal policy regarding Board diversity.
The Nominating and Governance Committee will consider prospective candidates nominated by security holders, in accordance with the Company's Amended & Restated Bylaws and its Amended & Restated Certificate of Incorporation, if the name(s) and supporting information are submitted by certified or registered mail to: Corporate Secretary, TiVo Inc., 2160 Gold St., P.O. Box 2160, San Jose, CA 95002. Any stockholder who desires to recommend a candidate for nomination to the Board who would be considered for election at the Company's 2015 Annual Meeting must do so no earlier than April 3, 2015 and no later than May 3, 2015 in accordance with the provisions of the Company's Amended & Restated Bylaws.
Majority Vote Standard
In 2012, our Board of Directors approved an amendment to our Amended & Restated Bylaws that changed the vote standard for the election of directors in uncontested elections from a plurality standard to a “majority of the votes cast” standard following the 2012 Annual Meeting of Stockholders. This means each director must be elected by the affirmative vote of a majority of the votes cast by the shares represented and entitled to vote. A “majority of the votes cast” means that the number of votes cast “for” a candidate for director must exceed the number of votes cast “against” that director. Any nominee for director in an uncontested election who fails to receive a greater number of votes cast “for” his or her election than votes cast “against” such director's election is expected to tender his or her resignation for consideration by the Nominating and Governance Committee, or, alternatively, a committee consisting solely of independent directors. Any nominee who fails to receive the requisite vote shall not participate in the deliberations or decisions of the Nominating and Governance Committee or committee of independent directors. The Nominating and Governance Committee or committee of independent directors will make a determination as to whether to accept or reject the resignation or whether other action should be taken (including whether to request that the subject director resign from the Board if the director has not tendered his or her resignation).
In a contested election (i.e., where the number of nominees exceeds the number of directors to be elected), the plurality vote standard remains in place.
SECURITY HOLDER COMMUNICATIONS WITH THE BOARD
Security holders may contact the Board regarding bona fide issues or questions about TiVo by mail, facsimile, or e-mail, addressed as follows: Board of Directors, or individual director, c/o Corporate Secretary, 2160 Gold St., P.O. Box 2160, San Jose, CA 95002; or by Fax: (408) 519-3304; or by e-mail: Board@tivo.com. The Corporate Secretary periodically will forward such communications or provide a summary to the Board or the relevant members of the Board.
CODE OF CONDUCT
We have adopted a code of conduct that applies to all our directors, officers, and employees, including our Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, as required by applicable securities laws, rules of the SEC, and the applicable NASDAQ listing standards. This code of conduct is posted on our
Website located at www.tivo.com. The code of conduct is available at www.tivo.com by first clicking “About us”, then “Investor Relations,” then “Corporate governance” and finally click on “Code of Conduct.”
BOARD LEADERSHIP STRUCTURE
In December 2010, the Board appointed Mr. Wolzien as Lead Independent Director to work with our Chief Executive Officer in setting the agenda of Board meetings and to focus on the development and maintenance of governance practices that support the Board in meeting a high level of performance with regards to the duties of the members of the Board, including leading executive sessions of the Board's independent directors. The Company's Corporate Governance Guidelines state that the Company has no fixed policy on whether the roles of chairman of the board and chief executive officer should be separate or combined, with this decision being made by the Board based on the best interests of the Company considering the circumstances at the time. Currently, the Board does not have a designated chairman although the roles are functionally combined with our Chief Executive Officer, Mr. Rogers, managing those duties, including Board agendas, schedules, and meetings. Mr. Rogers, who is responsible for the day-to-day operation of the Company, possesses a detailed and in-depth knowledge of the issues, opportunities and challenges facing the Company. Mr. Rogers is best positioned to efficiently manage the process for creating board agendas, with Board input through its lead independent director. Additionally, each Committee of the Board has a standing position on the Board's agendas to report its activities and its concerns, if any, to the full Board. The Committee chairs have regular contact with the CEO, directly and through regular meetings of the strategy committee, and there are frequent operational and strategy updates between Board members and management which ensure the kind of direct flow of information and input between the Board and management that keeps the Board's time and attention focused on the most critical matters impacting the efficient execution of the Company's strategic plans. The Board believes that its independent, non-management directors, which currently make-up seven of eight directors, provide a range of strong and independent views and opinions and sufficiently balance the governance needs of the Company. In addition, the Company's non-management directors meet in periodic executive sessions without any members of management present. The purpose of these executive sessions is to promote open and candid discussion among the non-management directors. While the Board believes this approach has functioned appropriately without a designated chairman of the Board, the Board may review the lack of a designated chairman in the future to evaluate alternative structures.
BOARD INVOLVEMENT IN RISK OVERSIGHT AND RISK ASSESSMENT OF COMPENSATION PRACTICES
Day-to-day management of risk is the direct responsibility of the Company's Chief Executive Officer and the senior leadership team. The Board has oversight responsibility for managing risk at the Company, focusing on the adequacy of the Company's risk management and risk mitigation processes. The Board recognizes that an important part of its responsibilities is to evaluate the Company's exposure to risk and to monitor the steps management has taken to assess and control risk. For example, at each Board meeting, management provides the Board with updates on the Company's strategic and operational plans for the year including its execution of operational and strategic priorities, such as research and development initiatives, on-going litigations, and potential business deals as well as risks presented by current business strategy, competition, evolving government regulations and legal compliance requirements, general industry trends including the disruptive impact of technological change, capital structure and allocation, mergers and acquisitions, information security risks, and disaster recovery preparedness. In addition to the discussion of risk at the Board level in connection with these strategic and operational areas, the Board's standing committees also focus on risk exposure as part of their on-going responsibilities. As such, our Audit Committee focuses on oversight of financial and enterprise risks relating to the Company, including financial reporting and disclosure risks. As part of the Audit Committee's duties, it receives reports, including quarterly updates, on our annual risk assessment performed by our internal audit team in connection with the development of a plan for an evaluation of the effectiveness of our internal control over financial reporting, which is subject to the review and approval of the Audit Committee. Our internal audit function prepares these risk assessments by conducting quantitative and qualitative risk assessment to identify individual process and enterprise-wide financial reporting risks. In addition, our Nominating & Governance Committee focuses on reputational and corporate governance risks relating to our Company; and our Compensation Committee focuses primarily on risks relating to remuneration of our officers and employees.
In setting compensation, the Compensation Committee regularly reviews with management the Company's compensation policies and practices for employees as they relate to risk management and, based upon this review, the Company believes that any risks arising from such policies and practices are not reasonably likely to have a material adverse effect on the Company in the future.
Specifically, the Company believes that the elements of the Company's compensation program do not encourage unnecessary or excessive risk-taking. Base salaries are fixed in amount and thus do not encourage risk
taking. While Company annual bonus program and sales commission plans focus on achievement of short-term or annual goals, and short-term or annual goals may encourage the taking of short-term risks at the expense of long-term results, given the sales employees' other compensation opportunities and the Company's internal control procedures, the Compensation Committee and management believe that the annual bonus program and sales commission plans appropriately balance risk and the desire to focus certain employees on specific short-term goals important to the Company's success.
A significant portion of the compensation provided to the Company's executives, and a material amount of the compensation provided to other employees, is in the form of long-term equity awards that are important to help further align employee interests with those of the Company's stockholders. The Company does not believe that these awards encourage unnecessary or excessive risk taking because the ultimate value of the awards is tied to the Company's stock price, and because awards are staggered and subject to long-term vesting schedules to help ensure that employees have significant value tied to long-term stock price performance.
This Proxy Statement, including the preceding paragraphs, contains forward-looking statements. The Company has based these forward-looking statements largely on the Company's current expectations and projections about future events. Forward-looking statements contained in this Proxy Statement should be considered in light of the many uncertainties that affect the Company's business and specifically those factors discussed from time to time in the Company's public reports filed with the SEC, such as those discussed under the heading, “Risk Factors,” in the Company's most recent Annual Report on Form 10-K, and as may be updated in subsequent SEC filings.
MEETINGS AND COMMITTEES OF THE BOARD
Each director is expected to devote sufficient time, energy and attention to ensure diligent performance of his or her duties and to attend all Board and applicable committee meetings. The Board met 9 times during the fiscal year ended January 31, 2014. Each director attended at least 75% of all Board and applicable committee meetings during the fiscal year ended January 31, 2014. One Board member attended our 2013 Annual Meeting.
The Board has the following four standing committees: (1) Audit; (2) Compensation; (3) Nominating and Governance; and (4) Strategy. The composition of the committees for fiscal year 2015 is presented in the table below. Each of these committees has a written charter approved by the Board. The Board has affirmatively determined that each director who currently serves on the Audit, Compensation, Nominating and Governance, and Strategy Committees is independent, as the term is defined by applicable NASDAQ listing standards and SEC rules. A copy of each of our written committee charters can be found at www.tivo.com by first clicking “About us”, then “Investor Relations,” and then “Corporate governance.”
Audit Committee. The Audit Committee is responsible for, among other things, making recommendations to the Board regarding the engagement of our independent registered public accounting firm, reviewing with the independent registered public accounting firm, the plans and results of the audit engagement, approving professional services provided by the independent registered public accounting firm, and reviewing the adequacy of our internal control and financial reporting. The Audit Committee is currently composed of three outside directors who are not our officers or employees. The Board has determined that each member of the Audit Committee meets the independence and financial experience requirements under both SEC and NASDAQ rules. In addition, the Board has determined that Mr. Hinson is an “audit committee financial expert” as defined by SEC rules.
Compensation Committee. The Compensation Committee is responsible for determining salaries and incentive compensation for our directors and executive officers and for administering our stock plans. The members of our Compensation Committee are “independent” as required by the listing requirements of NASDAQ. For further discussion of the process and procedures for the consideration and determination of executive and director compensation, see “Compensation Discussion & Analysis.”
Nominating and Governance Committee. The Nominating and Governance Committee was established by the Board in November 2002 for the purpose of, among other things, (i) making recommendations to the Board regarding candidates for membership on the Board and regarding the size and composition of the Board, (ii) establishing procedures for the nomination process, and (iii) reviewing matters related to our corporate governance. The members of our Nominating and Governance Committee are “independent” as required by the listing requirements of NASDAQ.
Strategy Committee. The Strategy Committee is authorized and directed by the Board to oversee the strategic planning process that management is responsible for, including the identification and setting of strategic multi-year
goals and expectations, material business and product initiatives of the Company, and strategic financial and capital market activities of the Company.
The following table sets forth the composition of the Board's standing committees for fiscal year 2015 as well as the number of meetings for each standing committee during fiscal year 2014:
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of our Compensation Committee are Messrs. Aquino and Cella and Ms. Roizen. None of the current members of our Compensation Committee is currently or has been, at any time since the Company's inception, an officer or employee. None of our executive officers currently serves or in the past year has served as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board or Compensation Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have adopted a written related party transaction policy. This policy covers, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Exchange Act of 1934, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, when the amount involved exceeds $120,000 and a related party had or will have a direct or indirect material interest. Under the policy, our executives and certain other employees are required to consult with our legal department upon learning of any proposed transaction that may constitute a related party transaction. If our legal department determines that the proposed transaction constitutes a related party transaction under applicable NASDAQ listing standards and SEC rules, in accordance with our Audit Committee Charter, such related-party transaction must be (i) approved by the Audit Committee or a majority of the independent and disinterested members of the Board, (ii) on terms no less favorable to TiVo than could be obtained from unaffiliated third parties, and (iii) in connection with bona fide business purposes. Our executive management, General Counsel, and Chairman of the Audit Committee will also confer with regard to any potential transactions that may not otherwise constitute a related party transaction under applicable NASDAQ listing standards and SEC rules in order to determine whether it may be appropriate to submit such transaction for review, approval, and/or ratification by the Audit Committee or a majority of the independent and disinterested members of the Board. For a discussion of other transactions with related parties described elsewhere, see the headings "Corporate Governance-Director Independence", “Executive Compensation and Other Information-Compensation Discussion and Analysis-
Severance and Change of Control Payments” and “Executive Compensation and Other Information-Employment, Severance, and Change of Control Agreements.”
Directors and Executive Officers.
We have entered into indemnity agreements with substantially all of our directors and officers that provide, among other things, that TiVo will indemnify each such persons, under circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings to which he or she is or may be a party by reason of his or her position as a director, officer or employee, and otherwise to the full extent permitted under Delaware law, TiVo's Amended & Restated Bylaws, and TiVo's Amended & Restated Certificate of Incorporation.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION DISCUSSION AND ANALYSIS The following discussion and analysis contains statements regarding individual and company performance targets and goals used in setting compensation for our named executive officers. These targets and goals are disclosed in the limited context of the Company's compensation programs and should not be understood to be statements of management's future expectations or estimates of future results or other guidance. The Company specifically cautions investors not to apply these statements to other contexts.
Say-on-Pay Vote, Shareholder Feedback, and Committee Responsiveness
Stockholder outreach is an integral part of our business practices, as stockholders provide feedback on a variety of topics, including our operations, governance, and compensation. Members of our executive management team talk to and receive feedback from our investors through continual conversations and outreach. In 2013, we sought input from our 25 largest investors (representing approximately 70% of our outstanding shares) as well as the various proxy advisory groups, in an effort to ensure that we understood and addressed, to the extent possible, our investors’ concerns and considerations in connection with our corporate governance and compensation policies. Our outreach efforts were specifically aimed at creating an ongoing dialog with our investors to address compensation and any other topics on their minds. This feedback was received during meetings attended by our Lead Independent Director, CEO, and/or members of the legal and investor relations staff leading up to and after our 2013 Annual Meeting.
Following our 2013 Annual Meeting, in recognition of the 60% support for our Say-on-Pay proposal, we presented this investor feedback to our Board of Directors (the “Board”) and our Board’s Compensation Committee (the “Committee”) to ensure our investor views were understood and incorporated into the formulation of future governance and compensation decisions. Following the meeting, our CFO and VP, Investor Relations have continued to maintain contact with our stockholders (including being joined by our Lead Independent Director in certain instances) to explain and solicit feedback regarding our business and compensation strategies. The Committee took action and approved several important changes to our executive compensation practices in response to the advisory vote and stockholder feedback received to date.
The following table highlights the most prevalent feedback from our stockholders and our Committee’s actions to address stockholders' concerns about our compensation program. Due to the fact that our executive compensation decisions are made at the beginning of each fiscal year and the timing of our Annual Meeting falls after such decisions have been made for a particular fiscal year, many of the compensation and governance actions taken by the Committee were made prospectively for our fiscal year ending January 31, 2015 following the outcome of our stockholder advisory vote in July of last year on our executive compensation program for the fiscal year ended January 31, 2013.
The following further highlights key features of our executive compensation program:
Highlights of our Compensation Programs
Alignment of Pay with Performance
•Increased Commitment to Performance-Based Compensation. From fiscal year 2013 through fiscal year 2014, the percentage of our Chief Executive Officer’s compensation that is performance based increased from 46% in FY13 to 60% in FY14 (based on the amount of our Chief Executive Officer’s compensation that is not attributable to his base salary or time-based equity awards, but instead is linked to his performance-based cash and equity compensation). Equity awards represented approximately 65% of our named executive officers' aggregate cash and equity compensation in fiscal year 2014. In fiscal year 2014, the Company introduced performance-based vesting conditions for all its named executive officers with respect to a portion of their annual fiscal year 2014 equity awards, whereas previously only the Chief Executive Officer had been granted performance-based vesting equity awards. For fiscal year 2014, approximately 60% of our Chief Executive Officer's and 40% of our other named executive officers' total compensation (as reported in the Summary Compensation Table) was paid in the form of cash and equity incentives that are tied to the Company's performance, emphasizing our focus on pay for performance. Further, 20% of our Chief Executive Officer’s total compensation in FY14 is attributable to the an
award for litigation success which requires previously granted shares to reach a stock price that is more than 50% above current levels (as of May 15, 2014) in order to vest. This places greater emphasis on long-term at-risk pay, offering exceptional alignment with stockholder interests and driving long-term performance and retention.
As part of this commitment to greater use of performance-based compensation, for fiscal year 2015 the Committee increased our Chief Executive Officer’s performance-based vesting portion of his equity award to 75% (from 50% in the prior fiscal year). In addition to increasing the percentage of our Chief Executive Officer’s compensation that is linked to performance for fiscal year 2015, the Committee continued to emphasize the long-term incentive nature of the performance (establishing performance targets that are based on a minimum three-year performance measurement period) and the introduction of a relative peer performance metric for fiscal year 2015 equity awards (using a comparison of Company stock price performance to the stock price performance of the Russell 2000 Index of companies that will not vest until at least the third anniversary of date of grant). We recognize that best practices is moving in the direction of using this approach to provide a stronger link between pay and performance and our shareholders echoed this sentiment when providing input on the design of our compensation program. In this regard, we intend to continue to monitor the trends of our competitors and to continue to solicit input from our shareholders, all to be evaluated in the context of what is appropriate for TiVo. Similar to the changes made to our Chief Executive Officer’s mix of performance- vs. time-based equity, we again increased the percentage of our equity awards tied to performance-based vesting conditions in fiscal year 2015 for our other named executive officers from as low as 25% in fiscal year 2014 to 50% in fiscal year 2015 for all our other named executive officers.
•Time-Based Vesting Added to Performance-Based Vesting Awards Granted to our Chief Executive Officer in FY14 and Multiyear Performance Measurement Period added to Performance-Based Vesting Awards in FY15. In fiscal year 2014, we added time-based vesting to all of our Chief Executive Officer's performance grants such that in the event early achievement of his performance targets is achieved, the performance-based restricted stock award will become subject to time-based vesting restrictions causing such grant to vest in equal annual installments similar to the time-based vesting awards granted in the same year. We eliminated this practice going forward for fiscal year 2015 because the Committee determined that increasing the percentage of equity subject to performance-based vesting was a more powerful incentivizing tool. Instead, the fiscal year 2015 performance-based criteria is structured such that it cannot be achieved until the fourth year. Our commitment to performance-vesting equity awards strengthens the link between our executives' pay and the Company's performance and thereby our stockholders’ interests.
•Increase in Rigor of FY14 Bonus Plan Goals Resulted in Lower Cash-Incentive Payout for our Chief Executive Officer. In fiscal year 2014, the Committee set rigorous targets for the payment of incentive performance-based cash compensation. For instance, specific performance targets related to service and technology revenues and ending fiscal year cash were increased significantly from the prior year. And it is important to highlight, as further detailed below, the Company achieved substantial awards in settlement of pending intellectual property litigation that were reflected in our actual results in FY13 and FY14. These settlements were by their nature singular, one-time events that were uncertain and not predictable at the time bonus plans were set and therefore not included in the annual goal-setting process. While our Chief Executive Officer’s performance and the Company’s performance remained strong, his percentage of out-performance against his target bonus goals decreased by 46% in fiscal year 2014 from fiscal year 2013 (even while the Company achieved significant operational, financial, and litigation milestones noted below).
Anti-Hedging and Anti-Pledging Policies. The Company’s insider trading policy has for many years prohibited the pledging of Company stock as collateral or security by employees, directors, and consultants. In fiscal year 2014, the Company amended its insider trading policy to further prohibit all employees, directors, and consultants from engaging in any transaction intended to hedge against a drop in the price of the Company’s stock.
Clawbacks: Recovery of Incentive Compensation Policy. In fiscal year 2014, the Company instituted an incentive compensation "clawback" policy with regard to incentive compensation, including cash performance bonuses and equity grants applicable to TiVo's executive officers. This policy authorizes TiVo's board of directors to recoup any cash and equity incentive compensation that the board determines was improperly paid to an executive officer in connection with such executive officer's improper acts or omissions and such acts or omissions ultimately related to a future restatement of the Company’s financial reports within 3 years, generally.
Executive Ownership Policy. Also in fiscal year 2014, the Company instituted an equity ownership policy effective February 1, 2014 for its senior executives. The policy requires that the Chief Executive Officer and senior executives hold Company stock with a value equal to three times and one times base salary, respectively.
For purposes of calculating ownership under the policy, we only count actual owned, vested shares, so that the policy requires our senior executives to hold Company stock beyond the service- and performance-based vesting schedules of their equity awards. We do not include unearned or unvested awards in our ownership calculation. The Committee believes this policy is more rigorous than a guideline set at a higher multiple of salary that counts unvested performance or restricted awards or unexercised stock options as ownership since the Committee believes actual owned, vested shares better aligns the interests of management and our stockholders. All of our named executive officers have met and currently exceed these ownership guidelines.
Strong Company Performance in Fiscal Year 2014
TiVo’s fiscal year 2014 marked the third consecutive year of record-setting performance by TiVo. We experienced significantly improved performance as a company on several fronts that factored into the Committee's determinations regarding overall cash and equity incentive compensation for the year. The most significant factors demonstrating our strong performance during the fiscal year were the following:
•Highest ever Service & Technology revenue of $304.5M in FY14, a 29% increase over FY13;
•Adjusted EBITDA of $159.6M, up 267% versus FY13;
•Increased cash position to $1.03B from $627M (up 80% from the prior year);
•An increase in service revenues from television service operators (MSOs) of 44% year-over-year in FY14;
•TiVo now has relationships with 18 of the top 25 television operators in the U.S. and with major international operator customers in U.K., Spain, Sweden, and elsewhere, including a number of MSOs signed during FY14, setting the groundwork for continued future growth;
•Launched TiVo Roamio with extremely positive reviews in the fall of 2013, leading to a 40% year-over-year increase in TiVo-Owned gross additions and the first positive subscription quarter for TiVo's retail service in approximately six years during Q4 of fiscal year 2014;
•Total subscriptions reached 4.2 million at the end of FY14, including an increase of over 177% in MSO subscriptions in two years; and
•Intellectual property litigation success in FY14 with $490 million in settlements from Cisco, Motorola and Google, achieving an aggregate amount of approximately $1.6 billion in guaranteed payments from intellectual property litigation.
In the nine years since our CEO took over management of TiVo, TiVo's financial performance, operating business, and balance sheet have been transformed from tens of millions in Adjusted EBITDA losses to tens of million in Adjusted EBITDA profitability that included cash balances (comprised of cash, cash equivalents and short-term investments) of approximately $1 billion at the end of FY14.
We have structured TiVo's compensation program to create a strong linkage between pay and performance. In FY12 and FY13, as the following summary table of selected goals and actual achievements under the Company's bonus programs previously disclosed in the Company's proxy statements indicates, TiVo experienced strong operating results relative to its internal targets. In FY 2014, the Company continued to experience strong results relative to its internal targets. Adjusted EBITDA and Ending Cash Balance goals exceeded target while Service & Technology Revenues achievement was below target.
While we achieved strong out-performance on several pre-established goals in FY14, we did not achieve target performance in all areas. As a result and as an indication of the both the rigor of our performance goals and the linkage of our pay practices to actual performance, our CEO's bonus cash payment decreased 29% year-over-year. Our target Adjusted EBITDA goal in FY14 of $4 million represented not only a $25 million improvement from the year prior's operating plan but was also above breakeven whereas the prior year's target Adjusted EBITDA reflected a loss. It is also worth pointing out that FY13 Adjusted EBITDA of $43.5 million included $78.1 million in non-recurring litigation proceeds relating to the Verizon settlement, leading to a lower Adjusted EBITDA target in FY14 versus FY13, while at the same time targeting operating plan improvement.
Executive Compensation Program
2014 Named Executive Officers
The Company's named executive officers, based on the Company's fiscal year ended January 31, 2014, also referred to as the Company's fiscal year 2014 or FY14, include:
Goals and Objectives of the Program
Our Committee designs and implements the executive compensation program to:
It is also designed to reinforce a sense of ownership, perseverance, and overall entrepreneurial spirit and to link rewards to measurable corporate and departmental performance. By structuring goals in this fashion, and deemphasizing individual performance per se (there is some use of individual goals for personal motivation as discussed below but it’s not the prevailing driver), the Committee believes will foster a common purpose, goal and objective. With all of our leaders working together to reach the same objectives within their departments and the firm as a whole, the Committee believes the Company will benefit and, therefore, shareholder value will be maximized. To that end, the Committee believes executive compensation packages provided by the Company to its executives, including the named executive officers, should include both short-term performance incentives in the form of cash and long-term performance incentives in the form of stock-based compensation.
The Committee has responsibility for establishing and monitoring adherence with the Company's compensation philosophy. The Committee reviews and recommends for approval by the Company's Board all compensation, both cash and equity, to be paid to our Chief Executive Officer and reviews and approves all compensation, both cash and equity, to be paid to our named executive officers. The Committee ensures that the total compensation paid to its named executive officers is fair as well as competitive. This section discusses the principles underlying the Company's executive compensation policies and decision-making processes of the Committee. It provides qualitative information regarding how compensation is awarded to and earned by the Company's named executive officers and places in context the data presented in the tables and narrative that follows.
Use of Independent Compensation Consultant
Based on the foregoing objectives, the Committee has structured the Company's annual performance-based cash compensation and long-term equity compensation to motivate executives to achieve the business goals set by the Board and reward the executives for achieving those goals. In furtherance of this, the Committee directly engaged Frederic W. Cook & Co. (“Frederic Cook”), an independent consulting firm providing executive compensation advisory services, for FY14 to conduct an annual review of the Company's total compensation program for the Company's executive officers, including the Company's named executive officers. For fiscal year 2014, Frederic Cook provided the following services on behalf of the Committee:
•Reviewed and advised upon the composition of the Company's compensation peer group;
•Reviewed and provided recommendations on the components of our compensation program and total compensation for all of the Company's executive officers, including the Chief Executive Officer;
•Provided assistance in the design of TiVo's equity compensation program, including analysis of the equity mix, aggregate share usage, burn rate, and target grant levels;
•Updated the Committee on best practices and emerging issues in the area of executive compensation; and
•Reviewed this Compensation Discussion and Analysis for inclusion in this proxy statement.
The Committee is satisfied with the qualifications, performance and independence of Frederic Cook. TiVo pays the cost for Frederic Cook's services. Frederic Cook does not provide any other services to TiVo, though it does work with management in developing equity compensation models for TiVo's non-executive employees and share usage metrics under the direction of the Chair of the Committee. After review and consultation with Frederic Cook, the Committee determined that Frederic Cook is independent and there is no conflict of interest resulting from retaining Frederic Cook currently or during the year ended January 31, 2014. In reaching these conclusions, the Committee considered the factors set forth in the SEC rules and the Nasdaq listing standards.
Comparison to Market Practices
During the process of compensation setting, Frederic Cook and the Committee reviewed relevant market data, including data from the public filings of the Company's select peer groups and from a Radford Executive Survey covering a broad set of high-technology companies. As part of its assessment, Frederic Cook reviewed alternatives to consider by the Committee when making compensation decisions including consideration of “market maker” peer group pay practices which are used for reference but not otherwise included as part of TiVo's overall compensation assessment.
In making compensation decisions, the Committee compares each element of total compensation against a select peer group of publicly-traded media and technology companies with which TiVo competes for talent. This select peer group, which is reviewed and approved by the Committee, consists of companies which the Committee believes represent our primary competitors for executive talent and operate in a similarly complex media/technology environment. For fiscal year 2014, our peer group included 28 technology and media companies within a reasonable size range of the Company. When evaluating the appropriateness of companies for inclusion in TiVo's peer group, market capitalization has been the preferred indicator for company size as opposed to revenues, which can vary markedly among those companies with which TiVo competes for talent. Although other bases for peer group selection were considered, the Committee believes market capitalization best reflects the value of TiVo's business because it reflects the market's value of both TiVo's advanced television business and its intellectual property (the latter of which may not be captured in comparisons based solely on annual revenue) and also reflects the competitive environment in which TiVo operates and competes for talent. The following represents the select peer group of technology and media companies used for FY14:
The companies in the peer group for 2014 have the following profile:
As of January 31, 2014, TiVo ranked significantly above the median of the peer group in terms of market capitalization, while ranking below the 50th percentile of the peer group in total revenues. We believe that it is important to include in our peer group companies that we compete with for engineering and executive talent as well as compete across different software, hardware, services and media industries, rather than only selecting peer companies on the basis of standardized industry classifications. The Committee believes it is appropriate to evaluate executive pay practices beyond our GICS industry because there are only a very select few companies that match our unique mix of software and hardware development, media, and intellectual property litigation.
Role of Executive Officers in Compensation Decisions
The Committee makes all recommendations to the Board regarding salary, bonus, and equity awards for the Chief Executive Officer and reviews and approves salary, bonus, and equity awards for all other executive officers of the Company, including the named executive officers. The Chief Executive Officer and the Senior Vice President of Human Resources annually review the performance of each named executive officer (other than the Chief Executive Officer, whose performance is reviewed by the Committee and the Board) with the Committee. The conclusions reached and recommendations made based on these reviews, including with respect to salary adjustments and annual cash incentive and equity award amounts, are presented to the Committee. The Committee can exercise its discretion in modifying any recommended adjustments or awards to the named executive officers other than with respect to the Chief Executive Officer for whom the Board retains the discretion to modify recommended adjustments or awards.
Executive Compensation Components
The components of compensation for named executive officers are:
•cash incentive compensation in the form of annual performance bonus;
•post-termination severance payments in connection with limited events; and
•benefit plan participation at the same levels provide to employees generally.
Base Salary Compensation
We provide our named executive officers and other employees with competitive base salaries to compensate them for services rendered during the fiscal year. The Committee has adopted a general approach of compensating the Company's named executive officers with base salaries reflective of individual role, experience, and performance. The Committee's foregoing approach reflects consideration of the Company's stockholders' interests in paying what is necessary, but not significantly more than necessary, to remain competitive with salaries paid by our peer companies and achieve the Company's corporate goals.
Base salary levels are typically reviewed annually as part of the Company's performance review process as well as upon a promotion or other change in job responsibility.
For fiscal year 2014, Mr. Zinn was the only named executive to receive a salary increase, which rose to $450,000 in light of peer compensation data and to reflect his continued strong performance.
Cash Incentive Compensation, Annual Performance Bonus Plan
Each year in the spring, upon the recommendation of the Committee, the Board approves a cash incentive compensation plan to motivate and reward superior performance by our named executive officers and other executives. The Board sets the incentive bonus opportunity for individuals to reflect the executive's level within the Company for the current fiscal year (e.g., Senior Vice President or Vice President).
Our named executive officers’ fiscal year 2014 target incentive opportunities remained at the same levels as 2013: 100% of base salary for Messrs. Rogers, Klugman, and Phillips and 50% of base salary for each other named executive officer. For fiscal year 2014, generally 50% of the executives' bonus opportunities were based on achievement of corporate goals and 50% were based on achievement of engineering and divisional goals, providing company-wide focus and alignment on strategic corporate and divisional objectives.
While we achieved strong out-performance on several pre-established goals in FY14, we did not achieve target performance in all areas. As a result and as an indication of the both the rigor of our performance goals and
the linkage of our pay practices to actual performance, our CEO's bonus cash payment decreased 29% year-over-year. Our target Adjusted EBITDA goal in FY14 of $4 million represented not only a $25 million improvement from the year prior's operating plan but was also above breakeven as prior year target was a loss. Additionally, when excluding the financial impact of the unanticipated Cisco and Motorola intellectual property settlements, where TiVo received $108.1 million in litigation proceeds and an additional $42 million as technology revenue, the fiscal year2014 Adjusted EBITDA maximum target was still exceeded. The target goal established by the Board for the Ending Year Cash Balance in FY14 represented an improvement in the FY14 operating plan of approximately $50 million from the prior year operating plan. Through improvements in our operating business and increases in technology revenue from intellectual property settlements prior to FY14, we were able to exceed the target. Our revenue target was slightly missed as we set rigorous internal revenue targets for our TiVo-Owned and Audience Research businesses ($43 million higher than the prior year), which we did not achieve. For example, with respect to our TiVo-Owned business, we grew gross subscription additions by 7% in FY14, reduced absolute churn by 5% in FY14, and had positive net subscription additions for the first time in six years in the fourth quarter of fiscal year 2014, but our internal target had anticipated an earlier launch of our fall marketing campaign and out-of-home streaming feature, which ultimately impacted our ability to meet our revenue target in FY14.
Cash Incentive Compensation - Chief Executive Officer
Our Chief Executive Officer's performance goals were comprised of a variety of performance measures that the Committee determined collectively would reflect the Company's overall performance. The Chief Executive Officer's target bonus was comprised of the same corporate performance goals as the Company's other named executive officers, though weighted differently to reflect his overall responsibility for the Company, and also included additional company-wide performance goals. Of the total annual cash incentive bonus opportunity, 75% was based primarily on pre-determined specified goals: with 35% based on financial metrics (Service and Technology Revenues (10%); Adjusted EBITDA (10%); and Ending Fiscal Year 2014 Cash (15%)) and 40% based on new operator arrangements and pre-established product development milestones (Transactions and deals in connection with the Company’s Corporate and Strategic Plan (20%), MSO Distribution (4.8%), Innovation: Consumer Facing Innovation (6.5%), Innovation: Key Projects/Programs (4.35%), and Operational Metrics (4.35%)).
The remaining 25% of the total annual cash incentive bonus opportunity was tied to discretionary goals related to the Committee’s and the Board's assessment of TiVo's progress in its overall intellectual property litigation (10%) and the Board's assessment of overall company growth and performance, including subscription growth (15%). This structure was chosen for key reasons: IP litigation is a multi-year process but a critical component of TiVo's business. Timing is unpredictable and it is difficult to set meaningful interim milestones, making an after-the-fact discretionary evaluation appropriate. In addition, the component related to overall company growth and performance allows the Committee to use judgment and incorporate factors when determining actual bonus amounts that were not anticipated at the beginning of the year. In fiscal year 2014, the Board approved 0% achievement of our Chief Executive Officer's Overall IP Litigation bonus goal in an effort to ensure there was not a duplication in compensation for any single achievement, which might have placed too much emphasis upon the attainment of the particular goal and created a danger of double-compensation for the same performance.
Year over year, the Board has increased the rigor of the performance goals. In fiscal year 2014, while our Chief Executive Officer's performance remained strong relative to our internal operating plan, out-performance relative to the goals set for fiscal year 2014 was comparatively lower than the degree of out- performance of the previous year’s results and this was reflected in the 46% drop in our Chief Executive Officer's bonus achievement to 119.7% of his target bonus, as compared to 165% in the prior year. This drop in target bonus achievement resulted in a $565,484 or a 29% reduction in the cash incentive compensation received by our Chief Executive Officer in fiscal year 2014 relative to fiscal year 2013. The table below reflects the actual achievement of the performance goals for fiscal year 2014 applicable to our Chief Executive Officer, calculated consistent with the methodology described above.
* Adjusted EBITDA is a non-GAAP metric and is defined as income before interest expense, provision for income taxes and depreciation, amortization, and stock-based compensation expense. The Committee reserved the right to further adjust this goal, but did not, for certain legal expenses and fiscal 2014 bonuses.
** Actual cash results were adjusted to exclude the effect of any acquisition activity but included litigation awards.
*** The Board determined that the following three commercial transactions were significant to the Company achieving its corporate and strategic plans: Atlantic Broadband, Blue Ridge, and Digitalsmiths.
**** Engineering Upside Goal related to achievement of presentation and approval of DVR Service Concept Gate Review.
Cash Incentive Compensation - Other Named Executive Officers
The other named executive officers' fiscal year 2014 performance goals were based on meeting corporate performance goals as well as engineering and departmental performance goals. For all named executive officers (excluding the Company's Chief Financial Officer and Chief Executive Officer), actual cash bonuses were based 50% on performance against corporate goals. The remaining 50% of the bonus payout was based on company-wide engineering objectives, and performance against specified departmental goals, as applicable. In addition, certain of the named executive officers were also eligible for additional milestone bonus payments for achievement of additional specified upside objectives, which are described below.
The Committee selected the corporate performance, engineering, and departmental goals for the Company's named executive officers because the Committee determined they are important indicators of furthering the Company's strategic objectives and translating them into increased stockholder value. In keeping with its past practices, the Committee established corporate and departmental objectives at levels which the Board believed required significant performance by executives, were not easily achieved, but if achieved would be the best indicator of stockholder value creation. The Board retains the discretion to exclude the effects of extraordinary, unusual or infrequently occurring events, changes in accounting principles or significant changes in the Company's strategic plan during the fiscal year.
The corporate goals component of bonuses were based on meeting the same specified goals with respect to the Company's financial performance as disclosed above for our Chief Executive Officer, including the service and technology revenue goal, Adjusted EBITDA goal, an end of fiscal year 2014 cash balance goal, as well as a
measure of management's overall performance relative to the Company's FY14 strategic priorities as assessed by the Board in its discretion. Although the Board of Directors determined in its discretion that the Chief Executive Officer and Chief Financial Officer would not receive an amount attributable to the litigation progress and results for FY14 as part of the FY14 cash bonus plan calculating, a component of the actual bonus amounts paid to the other named executive officers was attributable to such litigation progress and results. As disclosed above, the Company achieved these corporate goals as follows: the service and technology revenue goal at slightly below 77%, the measure of management's overall performance relative to the Company's FY14 strategic priorities at 100% and each of the Adjusted EBITDA goal and the end of fiscal year 2014 cash balance goal at 200%, resulting in an aggregate achievement of the corporate goals at 135.4%. The Company-wide engineering objectives, which were the same for our Chief Executive Officer, related to MSO distribution (domestic and international), innovation (consumer facing), innovations (key projects/programs) and operational metrics. The Company achieved these company-wide engineering goals at 108.1% of target.
The Committee and the Board established each named executive officer's departmental performance goals based on the objectives the Board determined would most effectively measure the contribution of the department supervised by each named executive officers' to the overall performance of the Company. Thus, while we don't use individual goals per se, the Committee believes this construct best captures both individual leadership excellence while still preserving departmental overall objectives and fostering commonality within each department of a shares goal, which by definition discourages individual grand standing and enhance team effort. While the exact numerical targets for each named executive officer's departmental objectives are not disclosed because the Company considers each of these individual targets to be confidential, competitively harmful if disclosed, and/or not material to an understanding of a particular named executive officer's overall compensation. The following is a detailed description of the nature of each named executive officer's departmental goal and such officer's achievement of them.
Naveen Chopra, Chief Financial Officer. A portion of Mr. Chopra's bonus opportunity was targeted at 50% of his bonus target and was weighted evenly between the company-wide corporate and engineering goals described above (plus the engineering upside goals). Based on the achievement of 27%, 31%, and 5% of his target bonus tied to the Company's achievement of the corporate performance goals at 27%, engineering goals at 31%, and an engineering upside goal at 5%, Mr. Chopra achieved 63% of his 50% bonus target. The rest of Mr. Chopra's bonus opportunity was determined based on achievement of individual milestone goals related to the corporate and business development and investor relations areas that he manages, including domestic and international distribution deals with qualifying operators, development deals, acquisitions, strategic financing transactions, litigation settlements, and the addition of new targeted blue chip institutional investors. Related to these goals, Mr. Chopra received a payout of $840,000 primarily based on the Motorola/Cisco litigation settlement, achievement of new distribution deals with Atlantic Broadband and Blue Ridge, and the acquisition of Digitalsmiths. Mr. Chopra's fiscal year 2014 bonus also consisted of a discretionary component based on the Committee's assessment of Mr. Chopra's performance in his new role and his contribution to the Company's overall performance for which the Committee awarded Mr. Chopra an additional $130,000. Mr. Chopra's total bonus in fiscal year 2014 was $1,088,857.
Jeffrey Klugman, EVP, General Manager Products and Revenue. The departmental/engineering portion of Mr. Klugman's bonus was weighted at 50% of his bonus, while the portion tied to corporate goals was weighted at 50%. Mr. Klugman achieved a payout of 52.7% of his target bonus with respect to his departmental/engineering goals which consisted of the same company-wide engineering goals described above. Based on achievement of 52.7% of his target bonus tied to his department/engineering goals, an additional 67.7% of his target bonus tied to the Company's achievement of the corporate performance goals, and 5% for an engineering upside goal, Mr. Klugman was awarded a bonus of 125.4% of his target bonus, which is 100% of his base salary, or 125.4% of his base salary. In addition, Mr. Klugman was awarded a discretionary bonus on March 7, 2014 in the amount of $15,000 in connection with his contribution to the successful resolution of the Motorola/Cisco litigation during fiscal year 2014.
Charles (Dan) Phillips, Chief Operating Officer. The departmental/engineering portion of Mr. Phillip's bonus was weighted at 50% of his bonus, while the portion tied to corporate goals was weighted at 50%. Mr. Phillips achieved a payout of 56.2% of his target bonus with respect to his departmental/engineering goals which consisted of the same company-wide engineering goals described above. Based on achievement of 56.2% of his target bonus tied to his department/engineering goals an additional 67.7% of his target bonus tied to the Company's achievement of the corporate performance goals, and 5% for an engineering upside goal, Mr. Phillips was awarded a bonus of 128.9% of his target bonus, which is 100% of his base salary, or 128.9% of his base salary. In connection with Mr. Phillips' previously disclosed promotion to Chief Operating Officer, he received a $500,000 retention bonus during fiscal year 2014 in November 2013.
Matthew Zinn, SVP, General Counsel, Corporate Secretary and Chief Privacy Officer. Mr. Zinn's department goals involved legal matters of the Company related to engineering objectives as well as litigation, intellectual property protection and enforcement and regulatory matters. The departmental portion of Mr. Zinn's bonus was weighted at 15% of his target bonus, while the corporate goals (weighted 50%) and engineering goals (weighted 35%), described above, comprised the remaining portion of his bonus opportunity. Mr. Zinn achieved a payout of 30% of his target bonus with respect to his departmental goals which related to the implementation and achievement of electronic billing system and legal spend management goal. Based on achievement of 30% of his target bonus tied to his department goals and an additional 62.7%, 37.8%, and 5% of his target bonus tied to the Company's achievement of the corporate, engineering, and an engineering upside goal, respectively, Mr. Zinn was entitled to 136% of his target bonus, which is 50% of his base salary, or 68% of his base salary. In addition, Mr. Zinn was also awarded a total of $2.1M in connection with previously established formulaic payouts related to the Motorola/Cisco settlement (of which $843K was paid out in March 2014 and $843K to be paid in March 2015) and $75K in connection to the acquisition of Digitalsmiths.
The Company provides its named executive officers and other employees equity awards grants as additional elements of an employee's total compensation. For equity compensation purposes, annual equity awards ranges are based solely on the technology company peer group data. The Committee utilizes technology company peer group data to review equity compensation to be in line with competitive pay practices in the Silicon Valley and to be consistent with the Committee's overall compensation strategy to emphasize equity compensation. The Committee focuses on the Silicon Valley since the Company competes with many of the largest Silicon Valley companies for talent in the cutting edge advanced television space. The Committee utilizes equity grants to ensure sufficient retention and future performance emphasis via specific equity award types or a mix of award types, as further described below. In this way, the Committee is able to both pay for performance and enhance the link between the creation of stockholder value and long-term executive incentive compensation. The Committee believes that equity grants allow executives to have the opportunity for increased ownership in the Company (further aligning executive's interests with those of stockholders) while maintaining competitive levels of total compensation. The Committee typically (with at least one exception above the range) targets an individual's opportunity to earn compensation through stock options and/or restricted stock generally between the technology company peer group 50th to 75th percentiles of the equity grant data.
We typically make annual awards of restricted stock, restricted stock units and/or stock options to our named executive officers, executives, and other continuing employees on an annual basis in the spring each year (generally in February, March, or April). The Committee's intent in making these awards is to meaningfully address near and longer term retention of named executive officers, stabilize the management team in the current uncertain market, and better align the interests of the Company's named executive officers with long-term stockholder value creation. With respect to equity compensation, the Committee also typically emphasizes internal pay equity between the Company's senior executive team to motivate and incentivize performance across the senior executive team while also encouraging collaboration and a shared responsibility for executing on the Company's strategic plan. We also typically make awards of restricted stock, restricted stock units and/or stock options to certain newly hired or promoted executives. Additionally, at other times during the year, we may periodically make grants to certain continuing employees for incentive or retention purposes. Newly hired or promoted executives and employees receive their equity awards typically on the 7th or 21st of the month following the later of their start date (for newly hired employees) or approval of the grant by the CEO for non-executive employees, by the Committee for executive-level employees other than the CEO, and by the Board for the CEO. Options are awarded at the NASDAQ's closing price of our common stock on the date of grant.
Fiscal Year 2014 Annual Equity Grants
In fiscal year 2014, the Committee increased the emphasis on performance-based compensation for both our Chief Executive Officer and our other senior executives in connection with the annual equity awards made to our senior executives. In fiscal year 2014, 50% of our Chief Executive Officer’s equity award of restricted stock will vest based on the achievement of performance conditions and 40% and 25% of our Chief Operating Officer’s and other named executive officers’ fiscal year 2014 restricted stock awards, respectively, will vest on the achievement of performance conditions. Our named executive officers’ performance shares will vest in the next four years upon appreciation of the Company's stock price to $14.664 on or before April 8, 2016 (for thirty (30) consecutive trading days) or $16.35 on or prior to March 31, 2017 or upon the attainment of Adjusted EBITDA growth targets (as reported by the Company in its SEC filings) of $40 million for the fiscal year ending January 31, 2015 or any prior full fiscal year period, $100 million for the fiscal year ending January 31, 2016 (as reported by the Company in its SEC filings), or $120 million for the fiscal year ending January 31, 2017 (as reported by the Company in its SEC
filings). The time-based vesting portions of our named executive officers’ restricted stock grants will vest annually in equal installments over the next three years. In addition, for our Chief Executive Officer, in the event of the early achievement of the performance goals, the performance-vesting portion of his equity award will convert to time-based vesting that will vest along the same vesting schedule as his other fiscal year 2014 time-based vesting equity award (other than accelerated vesting in connection with a change in control or qualifying termination of employment).
The Committee granted the fiscal year 2014 restricted stock awards in April 2013. The Committee awarded each named executive officer (other than the Chief Executive Officer) restricted stock awards between the 50th and 75th percentile grant values of the Company's peer group. In fiscal year 2014, our Chief Executive Officer received an annual grant of 550,000 shares of restricted stock. Our Chief Operating Officer, Mr. Phillips, received an annual grant of 125,000 shares of restricted stock. Our Chief Financial Officer, Mr. Chopra, received an annual grant of 100,250 shares of restricted stock. Our Executive Vice President, Mr. Klugman, received an annual grant of 100,250 shares of restricted stock. Our Senior Vice President, General Counsel, Matt Zinn, received an annual grant of 100,250 shares of restricted stock.
Fiscal Year 2014 Litigation and Promotional Awards
On March 28, 2013, in recognition of the Company's successful resolution of its litigation with Verizon Communications, Inc. which will result in proceeds to the Company exceeding $250 million, the Board approved an amendment to the Chief Executive Officer's fiscal year 2010 restricted stock unit grant and fiscal year 2012 restricted stock grant which cover 240,000 and 74,250 shares of Company common stock, respectively, that were originally subject to a risk of forfeiture unless the Company's per share closing trading price of our stock exceeded a specified stock price for 30 consecutive trading days prior to January 31, 2014 and January 31, 2015, respectively. The amendment revises the performance target for the fiscal year 2012 restricted stock grant to match the same pre-determined stock price as the fiscal year 2010 restricted stock unit grant that is more than 50% above current levels (as of May 15, 2014) (requiring our stock to trade for 30 consecutive days at $17.89 or above) and extends for both the 2010 and 2012 grants the time period within which the performance goal must be achieved to January 31, 2018.
The award amendment has an accounting cost of $2,080,275, but will deliver no compensation value to our Chief Executive Officer unless the Company achieves the share price target. This amendment was in lieu of a cash bonus or stock award as had been previously granted to our Chief Executive Officer in connection with prior significant favorable litigation settlements. The Committee determined that this award was an effective means of aligning our Chief Executive Officer’s interests and future performance with the interests of our stockholders while not “burning” additional shares under our equity plan and conserving cash. In addition, in the event of the early achievement of the performance goal for the vesting of these shares, these performance shares will convert to time-based vesting that will vest in four equal annual installments from January 31, 2015 through January 31, 2018 (other than accelerated vesting in connection with a change in control or qualifying termination of employment).
Separately in fiscal year 2014, in connection with Mr. Chopra's promotion and increased responsibilities as Chief Financial Officer, while retaining his existing responsibilities as our Senior Vice President, Corporate Strategy and Development, he was granted a promotional restricted stock award of 175,000 shares of restricted stock that is subject to time-based vesting and will vest in equal bi-annual installments over three years. The value of the shares subject to these awards for fiscal year 2014 to the named executive officers are reflected in the “Summary Compensation Table - FY14” below and further information about these grants is reflected in the “FY14 Grants of Plan-Based Awards” table below.
Fiscal Year 2015 Annual Equity Award Program Changes
For fiscal year 2015, the Committee continued its commitment to increases use of performance-based equity awards. Specifically, for fiscal year 2015, the Committee determined to grant our Chief Executive Officer a restricted stock award, 75% of which is subject to performance-based vesting and 25% of which is subject to time-based vesting, which was a change from the 50/50 mix between performance-based and time-based vesting in the year prior. The Committee also determined to grant restricted stock to our other named executive officers. For each of the other named executive officers, 50% of their respective award is subject to performance-based and 50% of which is subject to time-based vesting. For the performance-based fiscal year 2015 restricted stock awards, the performance metric provides for 100% vesting beginning after a minimum of 3 years if TiVo’s TSR is 20% above the cumulative TSR for the Russell 2000 Index.
Fiscal Year 2015 Litigation Awards
On April 29, 2014, in recognition of the Company's successful resolution of its litigation with Cisco, Motorola and Google, which resulted in a lump sum payment of $490,000,000 to TiVo in July 2013 and which brought total patent-settlement related-proceeds earned by the Company to over $1.6 billion, the Committee approved a grant of cash-settled restricted stock units to our Chief Executive Officer and our Chief Financial Officer for fiscal year 2015. The Committee determined that these extraordinary grants were appropriate in light of the tremendously successful result achieved by our Chief Executive Officer and our Chief Financial Officer in this most recent litigation, the resolution of which marks a new phase for the Company as it no longer has significant pending patent cases. The Committee determined these amounts were appropriate due to the important strategic leadership provided by our Chief Executive Officer and Chief Financial Officer during the litigation process and these awards tie the final realized amounts to actual stock price performance over the next three years. Each officer’s cash-settled restricted stock unit grant will vest annually over the next three years in equal annual installments. Our Chief Executive Officer received 178,419 units, which was equal to $2,100,000 divided by the closing share price of $11.77 on April 29, 2014, and our Chief Financial Officer received 42,480, which was equal to $500,000 divided by the closing share price of $11.77 on April 29, 2014. The actual amounts received by each executive will be subject to the future share performance of our stock at vesting.
Severance and Change of Control Payments
Each of the Company's named executive officers have executed a change of control severance agreement with us as discussed in this proxy under the section “Employment, Severance and Change of Control Agreements”. The Board determined to provide these change of control severance agreements in order to mitigate some of the risk that exists for executives working in a small technology company. These arrangements are intended to attract and retain qualified executives that have alternatives that may appear to them to be less risky absent these arrangements, and to mitigate any potential disincentive to consideration and execution of any acquisition, particularly where the services of these executives may not be required by the acquirer.
Our Chief Executive Officer's change in control agreement, which was originally entered into in 2007, has entitled him to a gross-up for any taxes owed by him under Section 280G of the Internal Revenue Code for payments made to him in connection with a covered change in control event. The Board determined that this benefit to the Chief Executive Officer was appropriate in order to preserve the intended benefit to the Chief Executive Officer of his existing employment arrangement and to avoid any conflict between the Chief Executive Officer's personal financial impact and pursuing any transaction as appropriate for the Company. In April 2012, our Chief Executive Officer agreed to eliminate any gross-ups for any taxes owed by him under Section 280G or Section 4999 of the Internal Revenue Code for equity awards granted to him after fiscal year 2015, which was the last fiscal year covered by the terms of his most recent amendment to his employment agreement.
The Chief Executive Officer also has a separate employment agreement with us that provides for severance payments in certain cases other than a change of control of the Company. Our other named executive officers would not be entitled to any severance benefits absent a change of control of the Company.
The named executive officers and other executives are eligible to participate in all of the Company's employee benefit plans, such as medical, dental, vision, group life, disability, and accidental death and dismemberment insurance, and the Company's 401(k) plan, in each case on the same basis as other employees.
Tax and Accounting Implications
Deductibility of Executive Compensation
The Company expects to achieve sustained profitability starting fiscal year ended January 31, 2014 and the availability to it of tax deduction for compensation expense is significant to the Company's financial position. The Company anticipates that any compensation deemed paid by the Company in connection with the release of performance-based restricted stock awards and disqualifying disposition of incentive stock option shares or the exercise of non-statutory options will qualify as performance-based compensation for purposes of Section 162(m) of the Code and will not have to be taken into account for purposes of the $1 million deduction limitation per covered individual (which includes the Chief Executive Officer or any of the three other most highly compensated executive officers, other than the Chief Financial Officer) on the deductibility of the compensation paid to certain of the Company’s executive officers. Accordingly, the compensation deemed paid with respect to performance based restricted stock awards and options granted under the 2008 Equity Incentive Plan will remain deductible by the Company without limitation under Section 162(m) of the Code. On the other hand, any compensation deemed paid by the Company towards base salary, restricted stock awards issued under the 2008 Equity Incentive Plan and cash incentive compensation for annual performance bonus plan will be subject to the $1 million deduction limitation.
Accounting for Stock-Based Compensation
Beginning on February 1, 2006, the Company began accounting for stock-based payments in accordance with the requirements of FASB Statement 123(R), which has been codified as FASB Accounting Standards Codification Topic 718 (“ASC Topic 718”). The Company's accounting for stock-based compensation is not a material factor in how we design the Company's executive compensation programs.
COMPENSATION COMMITTEE REPORT
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The information contained in this section shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act, except to the extent that we specifically incorporate it by reference into a document under the Securities Act or the Securities Exchange Act.
The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
Heidi Roizen (Chair)
1)The amounts included in column (e) represent the grant date fair value of restricted stock awards as calculated in accordance with ASC Topic 718. The valuation assumptions used in determining such amounts are described in Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2014. For all the named executive officers the amount in column (e) includes the grant date fair value of 400,186 shares of restricted stock granted in fiscal year 2014 and vesting in the next four years upon achievement of pre-determined stock price appreciation or Adjusted EBITDA growth targets, in each case, subject to the named executive officer's continued employment with the Company through each applicable vesting date. The fair value of the 400,186 shares of restricted stock subject to performance-conditions based on maximum achievement of the Adjusted EBITDA growth targets in accordance with ASC Topic 718 is $5.0 million. Additionally, with respect to Mr. Rogers, approximately $2.1 million is also included to reflect the incremental value of the Verizon litigation award modification approved in fiscal year 2014.
2)The amounts included in column (g) are composed entirely of cash bonuses awarded under each fiscal years executive incentive bonus plans with respect to performance during those periods. For fiscal years 2012, 2013, and 2014 the amounts also include additional incentives tied to, in the case of Mr. Chopra, operator distribution and development deals, mergers and acquisitions, and litigation settlements with operators and, in the case of Mr. Zinn, damages awarded at trial or agreed to in litigation settlements as well as other designated procedural litigation milestones. For additional information regarding these incentives, see Compensation Discussion and Analysis-Cash Incentive Compensation - Other Named Executive Officers.
1)These amounts represent the threshold, target, and maximum amounts that could have been earned for fiscal year 2014 pursuant to the cash incentive bonus awards provided under the Company's fiscal year 2014 incentive plan. In addition, Messrs. Chopra and Zinn were eligible to earn additional cash bonuses tied to, in the case of Mr. Chopra, operator distribution and development deals, mergers and acquisitions, and litigation settlements with operators and, in the case of Mr. Zinn, damages awarded at trial or agreed to in litigation settlements as well as other designated procedural litigation milestones. Actual amounts earned for fiscal year 2014 are included in the Summary Compensation Table above under Non-Equity Incentive Plan Compensation. For additional information regarding plan-based cash incentive awards granted to our named executive officers, see Compensation Discussion and Analysis above.
2)These stock awards vest based upon the achievement of certain market and/or performance based criteria. As further discussed in the Compensation Discussion and Analysis-Chief Executive Officer Equity Compensation section, these performance shares vest over the next four years upon the earlier of (a) the closing price per share of the Company’s common stock as quoted on the Nasdaq Stock Market being greater than or equal to (i) $14.664 for thirty (30) consecutive trading days on or prior to April 8, 2016 or (ii) $16.35 for thirty (30) consecutive trading days on or prior to March 31, 2017; or (b) achievement of Adjusted EBITDA growth targets of (i) $40 million Adjusted EBITDA (as reported by the Company in its SEC filings) in the year ending January 31, 2015 or any prior full fiscal year period; (ii) $100 million Adjusted EBITDA (as reported by the Company in its SEC filings) in the year ending January 31, 2016; or (iii) $120 million Adjusted EBITDA (as reported by the Company in its SEC filings) in the year ending January 31, 2017, in each case, generally subject to the Chief Executive Officer's continued employment with the Company through the vesting date (other than accelerated vesting in connection with a change in control or qualifying termination of employment). Any portion of the award that does not vest in accordance with this criteria on or prior to April 1, 2017 shall automatically be forfeited. Upon the achievement of the performance vesting criteria these shares vest 1/3 immediately, 1/3 on April 1, 2015 and 1/3 on April 1, 2016.
3)These stock awards vest based upon the achievement of certain market and/or performance based criteria. As further discussed in the Compensation Discussion and Analysis-Other Executive Officer Equity Compensation section, these performance shares shall become eligible for vesting upon the earlier of (a) the closing price per share of the Company’s common stock as quoted on the Nasdaq Stock Market is greater than or equal to (i) $14.664 for thirty (30) consecutive trading days on or prior to April 8, 2016 or (ii) $16.35 for thirty (30) consecutive trading days on or prior to March 31, 2017; or (b) achievement of Adjusted EBITDA growth targets of (i) $40 million Adjusted EBITDA (as reported by the Company in its SEC filings) in the year ending January 31, 2015 or any prior full fiscal year period; (ii) $100 million Adjusted EBITDA (as reported by the Company in its SEC filings) in the year ending January 31, 2016; or (iii) $120 million Adjusted EBITDA (as reported by the Company in its SEC filings) in the year ending January 31, 2017, in each case, generally subject to the executive's continued employment with the Company through the vesting date (other than accelerated vesting in connection with a change in control or qualifying termination of employment). Any portion that does not vest in accordance with this criteria on or prior to April 1, 2017 shall automatically be forfeited.
4) These restricted stock awards vest in three equal annual installments beginning on 4/1/2014.
5)These restricted stock awards vest in six equal semi-annual installments beginning on 10/1/2013.
6)These restricted stock awards vest in three equal installments on 4/1/2014, 4/1/2015, and 11/30/2015.
7)The amounts set forth in this column (with the exception of the CEO March 28, 2013 grant) are the full grant date fair value of the awards determined in accordance with ASC Topic 718. The valuation assumptions used in determining such amounts are described in Note 11 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 31, 2014. The amount shown for the CEO March 28, 2013 grant is the incremental fair value of the modified FY10 and FY13 equity awards.
Outstanding Equity Awards at Fiscal Year-End