ADT 2013 Annual Report Download - page 41

COMPENSATION OF EXECUTIVE OFFICERS—CONTINUED
The Compensation Committee (and, in the case of the CEO, the
independent members of the Board of Directors) approved award
payouts for each of our NEOs, other than Ms. Mikells, in November
2013 based on the percentage of Operating Income each NEO was
eligible to receive as a maximum bonus under the Officer Short-Term
Bonus Plan, as well as through the exercise of negative discretion by
the Committee based upon the achievement of the quantitative
performance measures shown in the Fiscal 2013 Annual Incentive
Compensation Design Summary table above.
Long-Term Incentive Program
The Company’s Long-Term Incentive Program is designed to provide
a significant portion of executives’ competitive compensation
opportunity in equity based instruments. In so doing, the LTIP is a key
component in aligning the long-term interests of executives with those
of stockholders, thus promoting value creation for both our executives
and stockholders. A majority of total equity granted under the LTIP is
awarded during our annual grant process. This process occurs in
conjunction with our annual assessment of individual performance
and potential, and also takes into account a review of the competitive
compensation landscape in the LTIP award target-setting process.
To align our executives’ interests and efforts with the interests of our
stockholders, we designed the PSU metrics for fiscal year 2013 to
focus on the importance of growing the business and generating
increased cash flows by utilizing Recurring Revenue Growth and
Adjusted Free Cash Flow Growth metrics.
For fiscal year 2013, in addition to our annual LTIP awards, we
granted to certain of our key employees, including the CEO and the
other NEOs, (other than Mr. Ferber) special one-time “Founders’
Awards.” These Founders’ Awards, which were not considered part
of our regular annual compensation program, were granted in
recognition of the efforts made by key employees in connection with
our separation into a stand-alone public company, as well as to
enhance retention of the management team and further align the
interests of these key employees with those of the Company’s
stockholders. The value of the Founders’ Awards was equal to 50%
of an employee’s fiscal year 2013 annual equity award. Mr. Ferber
was not employed by the company at the time the Founders’ Awards
were granted.
Awards of equity under the annual LTIP process are delivered to
employees utilizing a mix of Stock Options, RSUs and PSUs. The
weighting of the different components of the awards varies by
employee level. The Founders’ Awards granted in fiscal year 2013
were delivered utilizing Stock Options and RSUs, and the weighting
of each component was equal for all recipients. The table below
summarizes the weighting of the components of equity awards made
in fiscal year 2013 to our CEO and other NEOs:
Annual Awards Founders’ Awards
CEO 50% Stock Options
50% PSUs
50% Stock Options
50% RSUs
Other NEOs 40% Stock Options
40% PSUs
20% RSUs
50% Stock Options
50% RSUs
The following table describes the general terms and conditions applicable to each of the equity-based grant type:
Grant Type Vesting Other Terms & Conditions
Fiscal Year 2013
Annual Awards
Stock Options 25% per year •Granted with an exercise price equal to the
closing price of the Company’s common
stock on the date of grant.
•Expire on the 10th anniversary of the grant
unless forfeited earlier.
PSUs 100% on the 3rd anniversary of the grant date,
subject to satisfaction of performance conditions
•Vesting subject to performance against
Recurring Revenue Growth (60% weighting)
and Adjusted Free Cash Flow Growth (40%
weighting).
•Accumulate dividend equivalent units
(“DEUs”) with respect to dividends, which
vest only to the extent of vesting of the
underlying PSU award.
RSUs 25% per year •Accumulate DEUs with respect to dividends,
which vest in accordance with the vesting of
the underlying RSU award.
Founders’
Awards
Stock Options One-third per year See Fiscal Year 2013 Annual Grant above.
RSUs 100% on the 3rd anniversary of the grant date See Fiscal Year 2013 Annual Grant above.
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