DEF 14A 1 def14a.htm DEF 14A proxy

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.           )

 

 

 

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Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a‑12

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DigitalGlobe, Inc.

(Name of Registrant as Specified In Its Charter)

 

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

 

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Dear Shareowner:

May 1, 2017

You are cordially invited to attend the 2017 Annual Meeting of Shareowners of DigitalGlobe, Inc., to be held at DigitalGlobe’s corporate headquarters located at 1300 West 120th Avenue, Westminster, Colorado  80234, on June 22, 2017, at 9:00 a.m. Mountain Time. The attached Notice of Annual Meeting and Proxy Statement describe the matters that we expect to act upon at the Annual Meeting.

Your vote is important. We hope that you will attend the meeting, but whether or not you attend, please submit your proxy or voting instructions as soon as possible to ensure your shares are voted at the Annual Meeting.  The accompanying Notice of Annual Meeting and Proxy Statement provide information about the matters on which you may vote. If you wish to attend the meeting in person, please follow the advance registration instructions in the Proxy Statement.

On behalf of the Board of Directors, thank you for your continued support of DigitalGlobe.

Sincerely,

C:\Users\mvangb\Desktop\Proxy\DigitaGlobe, Inc\04-12-2016\16-2055-1 C1.5\16-2055-1 C1.5\eps\jeffrey_r_tarr_k_sig.eps

Jeffrey R. Tarr

Director, President and Chief Executive Officer

DigitalGlobe, Inc.

1300 West 120th Avenue

Westminster, Colorado 80234

(303) 684‑4000

 

 


 

 

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NOTICE OF ANNUAL MEETING OF SHAREOWNERS TO BE HELD ON JUNE 22, 2017

Agenda:

 

Location:

• Elect three Class II director nominees named in the accompanying Proxy Statement, each for a three‑year term expiring at our 2020 Annual Meeting of Shareowners;

• approve, on an advisory basis, the compensation of our named executive officers;

• ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2017;

• approve, on an advisory basis, the frequency of future advisory votes on executive compensation; and

• transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

DigitalGlobe Corporate Headquarters

 

1300 West 120th Avenue
Westminster, Colorado  80234
 

 

Date and Time:

June 22, 2017, 9:00 a.m. Mountain Time

Record Date:

You can vote if you were a shareowner as of the close of business on April 24, 2017

We are providing this Proxy Statement to you in connection with the solicitation of proxies to be used at the 2017 Annual Meeting of Shareowners of DigitalGlobe, Inc. This Proxy Statement contains important information regarding our Annual Meeting, the proposals on which you are being asked to vote, information you may find useful in determining how to vote and information about voting procedures.

On or about May 10, 2017, we will send our shareowners entitled to notice of and to vote at the Annual Meeting either a Notice of Internet Availability of Proxy Materials containing instructions on how to access our Proxy Statement and 2016 Annual Report and how to vote shares at the Annual Meeting, or a complete copy of the proxy materials by mail (or by email for those shareowners who requested electronic delivery).

This notice of the 2017 Annual Meeting of Shareowners and Proxy Statement only relates to the proposals described in the Agenda above and does not relate to the pending merger with MacDonald, Dettwiler and Associates Ltd, as described below under “Proxy Summary-Pending Transaction with MDA.” Accordingly, no action will be taken at the 2017 Annual Meeting with respect to, and no proxy is being solicited by this proxy statement in connection with such merger or any matters related thereto.

Your vote is very important. Whether or not you expect to attend the Annual Meeting, please submit your proxy or voting instructions as promptly as possible by following the instructions in the proxy materials you received in order to ensure your representation at the Annual Meeting. Even if you have voted by proxy, you may still vote in person if you attend the Annual Meeting. Please note, however, that if your shares are held by a broker, bank or other nominee and you wish to vote at the Annual Meeting, you must obtain a proxy issued in your name from your broker, bank or nominee authorizing you to vote your shares at the Annual Meeting.

 

By Authorization of the Board of Directors,

 

 

C:\Users\mvangb\Desktop\Proxy\DigitaGlobe, Inc\04-12-2016\16-2055-1 C1.5\16-2055-1 C1.5\eps\daniel_l_jablonsky_k_sig.eps

 

Daniel L. Jablonsky
Senior Vice President, General Counsel and Corporate Secretary

 

 

 

DigitalGlobe, Inc.
1300 West 120th Avenue

Westminster, Colorado 80234

 

 

 

May 1, 2017

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on June 22, 2017: The 2017 Proxy Statement and 2016 Annual Report are available at http://www.proxyvote.com

 

 

 

 


 

 

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TABLE OF CONTENTS

 

PROXY SUMMARY 

 

2016 Business Highlights 

1

Our Board of Directors 

1

Executive Compensation Summary Results 

2

Meeting Agenda and Board Voting Recommendations 

2

Pending Transaction with MDA 

3

 

 

THE PROPOSALS 

 

Proposal 1 – Election of Directors 

3

Proposal 2 – Advisory Vote on Executive Compensation 

4

Proposal 3 – Ratification of Appointment of Independent Auditors 

5

Proposal 4 – Advisory Vote on Frequency of Advisory Vote on Executive Compensation 

6

 

 

CORPORATE GOVERNANCE 

 

Our Board Members 

7

Role of the Board of Directors 

13

Corporate Governance Guidelines 

13

Director Independence 

13

Board of Directors Leadership Structure 

13

Board of Directors Oversight of Risk 

13

Code of Ethics 

14

Succession Planning 

14

Director Evaluation Process 

14

Related-Party Transactions Policies and Procedures 

14

Certain Relationships and Related-Party Transactions 

14

Communications with the Board of Directors 

15

Board Committees 

16

Executive Leadership Team 

17

 

 

AUDIT RELATED MATTERS 

 

Audit Committee Report 

19

Audit and Non‑Audit Fees 

20

Pre‑Approval of Independent Auditor Services 

20

 

 

COMPENSATION DISCUSSION & ANALYSIS 

 

Executive Summary 

21

Compensation Philosophy and Objective 

21

2016 CEO Compensation Alignment with Shareowner Interests 

23

Executive Compensation Decision-Making Process 

24

Compensation Competitive Analysis 

25

2016 Executive Compensation 

27

Executive Policies, Provisions and Agreements 

31

Compensation Committee Report 

34

Compensation Committee Interlocks and Insider Participation 

34

 

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COMPENSATION TABLES 

 

Summary Compensation Table – 2016, 2015 and 2014 

35

2016 All Other Compensation 

36

2016 Grants of Plan-Based Awards 

36

2016 Outstanding Equity Awards at Fiscal Year-End 

37

2016 Option Exercises and Stock Vested 

38

 

 

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL 

 

Payments and Potential Payments Upon Termination or Change in Control 

39

 

 

2016 DIRECTOR COMPENSATION 

 

Philosophy 

40

2016 Director Compensation Structure 

40

2016 Non-Employee Director Compensation 

41

Other Director Compensation Considerations 

41

 

 

SHARE OWNERSHIP 

 

Security Ownership of Certain Beneficial Owners and Management 

42

Section 16(a) Beneficial Ownership Reporting Compliance 

43

 

 

EMPLOYEE BENEFIT AND STOCK PLANS 

 

1999 Equity Incentive Plan 

44

Amended and Restated 2007 Employee Stock Option Plan 

44

GeoEye 2010 Omnibus Incentive Plan 

44

 

 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING 

 

 

 

ADDITIONAL INFORMATION AND OTHER MATTERS 

 

 

 

 

 

 

 

 

 

 

 

 

 

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PROXY SUMMARY

2016 Business Highlights

 

 

 

DigitalGlobe, Inc. (“DigitalGlobe,” “we” or the “Company”) had a successful 2016.  Our share price increased nearly 83%, rising from $15.66 on December 31, 2015 to $28.65 on December 30, 2016.  We grew net income 13.7% and increased revenue by 3.2%.  We also achieved several key strategic objectives that we believe are important for long-term shareowner value creation, such as completing our acquisition of The Radiant Group, Inc, refinancing our outstanding debt, and successfully launching WorldView-4. 

Our Board of Directors

 

 

Our Board of Directors is comprised of highly skilled and experienced members from diverse commercial and government backgrounds, who collectively provide the depth, expertise and leadership to assist management and represent the interests of our shareowners.  Our Board of Directors’ top priorities are to represent the Company’s shareowners and create long-term value, and to oversee the development and execution of the Company’s strategy.  In realizing our purpose, our Board of Directors and our Company maintain the highest standards of ethical conduct and sound corporate governance, which are described in more detail below in our Corporate Governance section, beginning on page 7. 

 

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About Us

 

ü

 

Eighty-nine percent of our Board of Directors is independent.

Independence

ü

 

Our Board Committees are comprised entirely of independent members.

 

ü

 

The independent directors regularly meet in executive session, at which the Chairman presides.

Oversight of Risk Management

ü

 

The Board of Directors actively monitors DigitalGlobe’s risk profile, including through review of quarterly reports by the Risk Management Committee and, at least annually, review of the Company’s overall enterprise risk management program and mitigation strategies.

ü

 

The Risk Management Committee is charged with oversight of enterprise risks and oversight of the Company’s development and execution of its risk management program.

ü

 

The Audit Committee has shared responsibility for risk with specific responsibility for overseeing financial risk, including risks associated with preparation of financial statements.

Stock Ownership Guidelines

ü

 

The Chief Executive Officer must hold shares of the Company’s common stock valued at 6x base salary within five years of his hire.

ü

 

Non-Employee Directors must hold shares of the Company’s common stock valued at 5x annual cash retainer within five years of joining the Board of Directors.

 

Board Practices

ü

 

The Board of Directors is responsible for the development, planning, and implementation of succession plans for our Chief Executive Officer (“CEO”), and oversees and provides input to the CEO on succession planning for our other executive officers.

ü

 

The Board of Directors oversees development and execution of the Company’s strategy.

ü

 

The Board of Directors, and each Committee, annually conducts self-assessments.

ü

 

The Board of Directors is assessed by an independent third party every three years.

ü

 

The Board of Directors annually reviews and approves the charters of each Committee, the Corporate Governance Guidelines and the Code of Ethics and Business Conduct.

 

 

 

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Executive Compensation Summary Results

 

 

DigitalGlobe’s executive compensation philosophy is built on a commitment to link pay to performance and align incentives with shareowner interests.  We reward executives for pursuing and achieving our key strategic business goals, and likewise, we believe underachievement should be reflected in compensation as well.  In 2016, 77% of our CEO’s targeted compensation and 72%, on average, of targeted compensation for our other named executive officers (“NEOs”), was subject to performance-based vesting or payment conditions or had a value dependent upon our stock price.  The slight decrease in percentage for the CEO from 2015 is due to substantially lower stock-grant value in 2016, which resulted in a reduction in the weighting of time-based restricted stock units (“RSUs”) and performance share units (“PSUs”) in the overall package.

We encourage shareowners to review the Compensation Discussion & Analysis beginning on page 21 of this Proxy Statement, which describes our executive compensation philosophy and the design of our executive compensation program in greater detail.

We had strong stock performance in 2016, increasing our share price from $15.66 on December 31, 2015, to $28.65 on December 30, 2016.  We also outperformed our revenue and EBITDA targets for the year.  These results positively impacted realized pay for 2016:

·

Above-Target Annual Incentives for 2016: The Compensation Committee approved above-target payments for cash incentives under our short-term incentive plan (“STI Plan”) for all of our NEOs in 2016 based on performance under the STI Plan.

·

Above-Target Vesting of 2014-2016 Performance Share Unit Awards: The Compensation Committee certified a payout of PSUs awarded to our NEOs in 2014 and earned at a combined 128% of target for the 2014-2016 performance period based on performance under our long-term incentive (“LTI”) plan.

Meeting Agenda and Board Voting Recommendations

 

 

The following table summarizes the proposals to be considered at our Annual Meeting and the Board of Directors’ voting recommendation with respect to each proposal:

 

````

 

    

 

    

Proposal

    

Page

    

Board’s Voting
Recommendation

Proposal 1 - Election of three Class II director nominees (Gen. Howell M. Estes, III (USAF Ret.), Kimberly Till, and Eddy Zervigon) to serve for a three‑year term expiring at our 2020 Annual Meeting of Shareowners.

 

 

FOR

Proposal 2 - Approval, on an advisory basis, of the compensation of our named executive officers.

 

 

FOR

Proposal 3 - Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2017.

 

 

FOR

Proposal 4 - Approval, on an advisory basis, of an annual advisory vote on executive compensation.

 

 

1 YEAR

 

You Can Vote in the Following Ways:

 

 

 

 

 

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By Internet

By Telephone

By Mail

In Person

Visit
www.proxyvote.com

 

Call
1‑800‑690‑6903

Mark, date & sign your proxy card or voting instruction form and return it in the postage‑paid envelope provided.

Attend the meeting to vote
in person.

 

 

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Pending Transaction with MDA

 

 

 

On February 24, 2017, we entered into an Agreement and Plan of Merger (“Merger Agreement”) with MacDonald, Dettwiler and Associates Ltd., a corporation organized under the laws of British Columbia (“MDA”), SSL MDA Holdings, Inc., a Delaware corporation and wholly owned subsidiary of MDA (“SSL MDA Holdings”), and Merlin Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of SSL MDA Holdings (“Merger Sub”), pursuant to which, among other things, Merger Sub will merge with and into DigitalGlobe (“Merger”), with DigitalGlobe surviving as an indirect wholly owned subsidiary of MDA. Under the terms of the Merger Agreement, at the closing of the Merger, each outstanding share of our common stock will be converted into the right to receive US$17.50 in cash and 0.3132 of a common share of MDA (“Merger Consideration”), without interest and subject to any required withholding for taxes, and each outstanding share of our Series A convertible preferred stock will be converted into the right to receive the same Merger Consideration as if the holder thereof had converted such shares of Series A convertible preferred stock into our common stock immediately prior to the closing of the Merger. 

   

The closing of the Merger is subject to customary closing conditions, including required regulatory approvals, adoption of the Merger Agreement by our shareowners, and approval of the issuance of common shares of MDA in connection with the Merger by MDA’s shareholders. The closing of the Merger is not subject to a financing condition.

   

The Merger is expected to close in the second half of 2017. Following completion of the Merger, our common stock will be delisted from the NYSE and deregistered under the Securities Exchange Act of 1934, as amended, and as such, we will no longer file periodic reports with the SEC. In connection with the proposed Merger, MDA has filed with the U.S. Securities and Exchange Commission a registration statement on Form F-4, which includes a preliminary proxy statement of DigitalGlobe that also constitutes a preliminary prospectus of MDA. After the registration statement is declared effective, MDA and DigitalGlobe will mail the definitive proxy statement/prospectus to DigitalGlobe’s shareowners.  DigitalGlobe shareowners are advised to read the joint proxy statement/prospectus because it contains important information about the proposed Merger and the parties to the transaction. 

THE PROPOSALS

PROPOSAL 1 ‑ ELECTION OF DIRECTORS

Our Amended and Restated Certificate of Incorporation provides for a classified Board of Directors consisting of three classes of directors, each serving staggered three‑year terms. At this year’s Annual Meeting, we will be presenting three Class II directors for election, each to serve a term of three years expiring at our 2020 Annual Meeting of Shareowners and until their respective successors are duly elected and qualified.  The nominees are General Howell M. Estes, III (USAF Ret.), Kimberly Till, and Eddy Zervigon.  Approval of each of the director nominees named in this Proposal 1 requires the affirmative vote of a majority of the votes cast with respect to the nominee’s election at the 2017 Annual Meeting (i.e. the number of shares cast “FOR” a nominee’s election must exceed the number of votes cast “AGAINST” that nominee’s election).

Each of the nominees standing for election is presently a Class II member of the Board of Directors.  The Board of Directors, acting upon the recommendation of the Governance and Nominating Committee, recommends that the shareowners vote in favor of the election of the nominees named in this Proxy Statement to serve as members of the Board of Directors.  Each of the nominees has consented to be named in this Proxy Statement and to serve if elected.

As of April 24, 2017, the Board of Directors consists of nine directors. The six continuing directors whose terms do not expire at the Annual Meeting are expected to continue to serve after the Annual Meeting until such time as their respective terms of office expire and their successors are duly elected and qualified.

If, at the time of the Annual Meeting, any of the nominees should be unable or unwilling for good cause to serve, the persons named as proxy on the proxy card will vote for such substitute nominee or nominees as the Board of Directors recommends, or vote to allow the resulting vacancy to remain open until filled by the Board of Directors, as the Board of Directors recommends.

The following table provides certain summary information about each of our director nominees as of April 24, 2017:

 

 

 

 

 

 

 

 

 

 

 

Director
Nominee

    

Age

    

Principal
Occupation

    

Director
Since

    

Committee Membership

 

General Howell M. Estes, III (USAF Ret.)

 

75

 

President of Howell Estes & Associates, Inc.

 

2007

 

Governance and Nominating (Chair)

 

Kimberly Till

 

61

 

Retired Chief Executive Officer of Harris Interactive

 

2010

 

Audit

Risk Management

 

Eddy Zervigon

 

48

 

Riverside Management Group

 

2014

 

Audit

Compensation

 

 

Biographical information about each nominee and each other continuing director as of April 24, 2017 is set forth beginning on page 8 and summarizes the specific experiences, qualifications and skills that led to the conclusion that each of our directors should serve on the Board of Directors.

 

The Board of Directors unanimously recommends a vote “FOR” each of the nominees set forth above.

 

D of Directors unanimously recommends a vote “FOR” each of the nominees set forth above.

 

 

 

 

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PROPOSAL 2 ‑ ADVISORY VOTE ON EXECUTIVE COMPENSATION

In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (“Exchange Act”), we are providing our shareowners with the opportunity to approve, on an advisory basis, the Company’s executive compensation as disclosed in this Proxy Statement in accordance with rules promulgated by the Securities and Exchange Commission (“SEC”).  Approval of this Proposal 2 requires the affirmative vote of shareowners holding a majority of the shares present in person or by proxy at the Annual Meeting and entitled to vote on this proposal.

Compensation Philosophy and Objectives.  Our executive compensation philosophy is built on a commitment to link pay to performance and to enhance alignment with shareowner interests.  We reward executives for pursuing and achieving our key strategic business goals, and likewise, we believe underachievement should be reflected in pay as well.  Our executive compensation program is also designed to attract and retain executive talent in a competitive marketplace and to compensate executives at competitive but responsible levels.

The Compensation Committee has designed CEO and executive total compensation packages to drive actions that align with both the short-term and long-term interests of our shareowners.  We address these objectives by applying the following principles:

·

Pay at Risk Tied to Company Performance:  support the overall business objectives by aligning a substantial portion of executive total compensation to our financial and operating performance, with 77% of CEO targeted compensation and 72% of targeted compensation for our other NEOs, on average, tied to performance or the value of our common stock.

·

Shareowner Alignment:  enhance the linkage between our executives’ and our shareowners’ interests by issuing awards with payouts tied directly to the Company’s financial performance and the value of our common stock.

·

Peer Group Assessments:  review and consider executive compensation packages against a selected peer group and the Radford High Technology Survey, to ensure market competitive compensation levels.

·

Absolute and Relative Pay-for-Performance:  structure components of pay to align with key performance metrics, using both absolute and relative measures.

Governance Best Practices.    We do this by adopting the following measures, which we believe reflect governance best practices:

 

 

What We Do

What We Don’t Do

ü

 

We align pay and performance

X

 

We do not provide our executive officers with tax gross‑up provisions

 

 

ü

 

We conduct annual risk assessments of our compensation policies and practices

X

 

We do not grant equity awards with change-in-control single-trigger vesting

 

 

ü

 

We maintain a clawback policy

X

 

Our equity plan does not allow repricing of underwater options without shareowner approval

 

 

ü

 

We maintain stock ownership guidelines for directors and officers

X

 

We do not permit directors and officers to hedge our stock

 

 

ü

 

Our Compensation Committee retains an independent compensation consultant

X

 

We do not permit directors and officers to pledge our stock

 

 

ü

 

We cap incentive payout and PSU vesting levels

X

 

We do not provide significant executive perquisites

We encourage shareowners to review the Compensation Discussion & Analysis beginning on page 21 of this Proxy Statement, which describes our executive compensation philosophy and the design of our executive compensation program in greater detail.  Our Board of Directors believes our executive compensation program aligns compensation for our executives with performance and long-term shareowner interests.

Approval of this Proposal 2 requires the affirmative vote of a majority of the votes cast at the 2017 Annual Meeting.  We request shareowner approval of the compensation paid to our named executive officers as described in this Proxy Statement and we are asking shareowners to vote “FOR” the following resolution:

RESOLVED, that the compensation paid to DigitalGlobe’s named executive officers, as disclosed in this Proxy Statement pursuant to the Securities and Exchange Commission’s executive compensation disclosure rules (which disclosure includes the Compensation Discussion & Analysis, executive compensation tables and narrative discussion that accompanies the executive compensation tables), is hereby APPROVED.

The vote to approve the compensation of our named executive officers is advisory and, accordingly, the results are not binding on us, our Board of Directors or the Compensation Committee, and will not be construed as overruling a decision by, or creating or implying any additional fiduciary duty for DigitalGlobe, our Board of Directors or the Compensation Committee. Our Compensation Committee, however, values the input of our shareowners and will consider the results of the vote when making future compensation decisions for our named executive officers. We have determined that our shareowners should cast an advisory vote on the compensation of our named executive officers on an annual basis. Unless this policy changes, the next advisory vote on the compensation of our named executive officers will be at the 2018 annual meeting of shareowners.

 

The Board of Directors unanimously recommends a vote “FOR” the advisory approval of the Company’s executive compensation of its named executive officers.

 

 

 

 

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PROPOSAL 3 ‑ RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Audit Committee of the Board of Directors has appointed the accounting firm of PricewaterhouseCoopers LLP as the independent registered public accounting firm to conduct the 2017 annual audit of our financial statements.  This matter is nevertheless being submitted to the shareowners to afford them the opportunity to express their views.  If this proposal is not approved by shareowners at the Annual Meeting, the Audit Committee intends to reconsider its appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. PricewaterhouseCoopers LLP has served as the Company’s independent registered public accounting firm since 1996.

We expect that a representative of PricewaterhouseCoopers LLP will be present at the Annual Meeting to answer any questions concerning the independent registered public accounting firm’s areas of responsibility, and will have an opportunity to make a statement if he or she desires to do so.

Rationale for Selection of Independent Registered Public Accounting Firm

In making the decision to reappoint PricewaterhouseCoopers LLP as the Company’s independent auditor for 2017, the Audit Committee took into consideration a number of factors, including:

·

PricewaterhouseCoopers LLP’s historical and recent performance on the Company’s audit and its financial reviews;

·

the quality and candor of PricewaterhouseCoopers LLP’s communications with the Audit Committee and management;

·

the appropriateness of PricewaterhouseCoopers LLP’s fees;

·

PricewaterhouseCoopers LLP’s history as our independent auditor, its familiarity with our industry and the complexities of global operations, and its expertise in accounting policies and practices, and internal control over financial reporting; and

·

PricewaterhouseCoopers LLP’s continued independence.

Based on this evaluation, the Audit Committee believes that the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2017 is in the best interest of the Company and its shareowners, and should be ratified.

Approval of this Proposal 3 requires the affirmative vote of shareowners holding a majority of the shares present in person or by proxy at the Annual Meeting.

 

The Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent auditors for the year ended December 31, 2017.

 

 

 

 

 

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PROPOSAL 4 ‑ ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION

In accordance with Section 14A of the Exchange Act, we are providing our shareowners with the opportunity to select, on an advisory basis, the frequency of the advisory vote of the Company’s executive compensation as disclosed in this Proxy Statement in accordance with rules promulgated by the SEC.  Pursuant to the Dodd-Frank Act, this Proposal No. 4 gives the shareowners the ability to vote to have a “say-on-pay” vote every year, every two years or every three years. 

At our 2011 Annual Meeting, the shareowners recommended an annual approval of the Company’s executive compensation, and our Board of Directors determined that a vote on the Company’s executive compensation would be held annually.  The Company believes that regular communication with shareowners on the issue of executive compensation is important and helps ensure that compensation practices are aligned with shareowners’ interests. Accordingly, the Company believes that it is appropriate to solicit shareowners’ input on executive compensation on an annual basis.

 

Approval of this Proposal 4 requires the affirmative vote of shareowners holding a majority of the shares present in person or by proxy at the Annual Meeting and entitled to vote on this proposal.  However, if no frequency option receives the affirmative vote of at least a majority of the shares present in person or represented by proxy and entitled to vote on the proposal at the Annual Meeting, then the Board of Directors will consider the option receiving the highest number of votes as the preferred option of our shareowners.

 

The Board of Directors unanimously recommends a vote “FOR” the annual approval of the Company’s Executive Compensation.

 

The vote on the frequency of the “say-on-pay” vote is advisory and, accordingly, the results are not binding on the Company. Our Compensation Committee, however, values the input of our shareowners and will consider the results of the vote when making future compensation decisions for our named executive officers.

 

 

 

 

 

 

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CORPORATE GOVERNANCE

DigitalGlobe is committed to maintaining a program of corporate governance that promotes responsible corporate activity, the long‑term interests of shareowners, and accountability of our Board of Directors and management. Our Company has a culture dedicated to ethical behavior which is reflected in our Purpose, Vision, and Values. Our corporate Purpose is Seeing a Better Worldtm ‑ by giving our customers the power to see the Earth clearly and in new ways, we enable them to make our world a better place. We are relentlessly committed to helping our customers save lives, resources, and time and to achieving our Vision to “by 2020, be the indispensable source of information about our changing planet.” Our Values (integrity, respect, mission and team before self, curiosity and innovation, and results) guide our actions. Our Purpose, Vision, and Values unite us, creating a working environment that enables us to perform the best work of our careers. Our people are paramount to our continued success, and we seek to continue to attract and develop talent to embrace our Purpose, Vision and Values, achieve our strategy, and grow our business.

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Our Board Members

 

 

The following biographical information about each nominee and each other director continuing in office after the Annual Meeting summarizes the specific experiences, skills and qualifications that led to the conclusion that each of our directors should serve on the Board of Directors. Our Governance and Nominating Committee, composed entirely of independent directors, is responsible for making recommendations to the Board of Directors regarding candidates for directorships. The Governance and Nominating Committee evaluates and reviews with the Board of Directors, no less than annually, the appropriate qualifications, expertise and characteristics required of our Non-Employee Directors to ensure that the Board of Directors, as a whole, contains the diverse range of skills, characteristics, and experiences necessary to oversee the development and implementation of the Company’s long-term strategy and to represent the interests of our shareowners.  While our Corporate Governance Guidelines do not prescribe specific diversity standards, the Governance and Nominating Committee considers diversity in the context of our Board of Directors as a whole to ensure that a broad range of perspectives are represented on our Board of Directors.  Listed below are some of the skills, characteristics and experiences we look for in the members of our Board of Directors:

Senior Leadership Experience – The Board of Directors looks for individuals with experience serving in a senior executive position, including as chief executive officer. The Board of Directors believes that extensive senior executive-level experience provides a practical understanding of how organizations operate, and enables leadership in core management areas, including operations, human resources, financial planning, compliance, marketing and communications. The Board of Directors believes individuals with this experience is valuable to the Company’s ability to execute on its strategic vision and its Culture of Leadership.

Global Business Experience – The Board of Directors looks for individuals with international business experience, who are highly respected in business and financial communities and have extensive experience working with and for international companies and dealing with global issues. The Board of Directors believes that individuals with this experience provide the Board of Directors and management with a diverse understanding of the international issues facing the Company and create value for shareowners by better serving our international customers.

Financial Expertise – The Board of Directors looks for individuals with extensive financial-reporting and internal-controls experience, including experience serving as the chief financial officer or chief accounting officer of a large corporation. The Board of Directors believes that the financial and accounting skills and experience these individuals bring, particularly with regard to Audit Committee functions and risk management and financial oversight responsibilities, are valuable resources to the Board of Directors.

 

 

 

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7

 


 

Government and Department of Defense Experience – The Board of Directors looks for individuals with extensive knowledge of the defense and intelligence community, operations and systems integration as well as expertise in the geospatial intelligence and the satellite imagery industry. The Board of Directors also seeks individuals with national security clearances necessary to allow briefing on the Company’s classified business. The Board of Directors believe that specialized experience with the U.S. government, and in particular the Department of Defense and the Intelligence Community, are valuable to the Board of Directors and to the Company in serving our customers’ needs and helping them fulfill their mission requirements.

Strategy and Financial Markets Expertise – The Board of Directors seeks skilled individuals, notably from the investment banking and private equity world, with a deep understanding of capital markets and mergers and acquisitions (“M&A”). The Board of Directors believes that individuals with these backgrounds provide valuable perspectives for M&A initiatives, financing matters, and investor relations perspectives. 

The nominees standing for election at the Annual Meeting and the other continuing members of the Board of Directors demonstrate these attributes, key experiences, and qualifications which are valuable resources to the Board of Directors in carrying out our business strategy, the needs of the Company and our shareowners, and our Purpose, Vision, and Values.  Below is a more detailed list of specific attributes the Board of Directors considers in assessing the qualifications and skills of our Non-Employee Directors.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estes

Cyprus

Decyk

Hough

Jenson

Mason

Till

Zervigon

CEO Experience

 

 

 

ü

 

 

 

ü

 

 

Financial Expert

 

ü

 

 

ü

 

ü

 

 

 

ü

 

Global Business

 

ü

 

ü

 

ü

 

ü

 

 

ü

 

ü

 

Human Resources

ü

 

 

ü

 

ü

 

ü

 

ü

 

ü

 

 

Corporate Strategy

ü

 

 

ü

 

 

ü

 

ü

 

ü

 

ü

 

M&A

ü

ü

 

ü

 

ü

 

ü

 

 

ü

ü

 

Information Technology

 

 

 

 

ü

 

 

ü

 

 

Intel/DoD/Cybersecurity

ü

 

 

 

 

 

ü

 

 

 

Satellite/Space industry

ü

 

 

 

 

 

ü

 

 

 

 

Information Regarding Nominees Standing for Election at the Annual Meeting as Class II Board Members (as of April 24, 2017)

Below is a list of the director nominees standing for election at the Annual Meeting, as Class II members of the Board of Directors.

 Howell M. Estes, III

Committees:

Experience, Skills and Qualifications:

Picture 15

Governance and Nominating (Chair)

 

Government and Department of Defense Experience

Senior Leadership Experience

Extensive military and defense experience and general business experience, having retired as a four-star general from the U.S. Air Force.

Significant board experience, as well as key leadership and management experience gained from his military career.

Security clearances necessary to allow him to be briefed on the Company’s classified business.

Age 75
Director Since 2007
Chairman Since 2011

 

 

Gen. Estes has been the President of Howell Estes & Associates, Inc., a consulting firm, since 1998. Gen. Estes serves on the Boards of Directors of Analytical Graphics, Inc., a software development company focused on spaceflight and national security, and the Air Force Academy Foundation. From 1965 to 1998, he served in the U.S. Air Force. At the time of his retirement from the Air Force, he was Commander‑in‑Chief of the North American Aerospace Defense Command and the United States Space Command and also Commander of the Air Force Space Command. In addition to a Bachelor of Science Degree from the Air Force Academy, he holds a Master of Arts Degree in Public Administration from Auburn University and is a graduate of the Program for Senior Managers in Government at Harvard’s JFK School of Government. The Board of Directors approved a waiver for Gen. Estes of the retirement age for board members contained in the Company’s Governance Guidelines because of his unique business experience, including his extensive military and defense experience, and the valuable counsel and advice he provides to the Company’s CEO.

 

 

 

 

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8

 


 

Kimberly Till

Committees:

Experience, Skills and Qualifications:

Kimberly Till

Audit

Risk Management

Global Business Experience

Senior Leadership Experience

Significant experience in commercializing and delivering content.

Extensive experience doing business in Europe, Asia and Latin America.

Executive management and expertise in information and content markets.

Age 61
Director Since 2010

 

 

Ms. Till is an independent consultant and advisor to early-stage companies, including serving as Interim CEO then Chairman of the Board of Morf Media, a gamification and enterprise-learning company from September 2012 to March 2014. Prior to Morf Media, Ms. Till was a director and President and Chief Executive Officer of Harris Interactive, a publicly traded, global leader in custom-market research and publishers of The Harris Poll, from October 2008 through June 2011. Ms. Till was responsible for the global management of the company, which included operations in the U.S., Canada, Europe, and Asia. Earlier in her career, Ms. Till served as Chief Executive Officer of the TNS North America Custom business, and held senior roles at, Microsoft, Sony Corporation of America, and AOL International. Ms. Till also served as a director of Taunton, Inc. a privately held media company. Ms. Till holds a Bachelor of Arts in History from the University of Alabama, a Master of Business Administration from Harvard Business School, and a Juris Doctorate from Duke University Law School, and previously practiced corporate and securities and international trade law.

 

Eddy Zervigon

Committees:

Experience, Skills and Qualifications:

Eddy Zervigon

Audit

Compensation

 

Financial Expertise

Strategy and Financial Markets Expertise

Significant institutional knowledge regarding the Company, having served on the Board of Directors from 2004 to January 2013.

Extensive financial and transactional experience.

Extensive knowledge of capital markets.

Age 48
Director Since 2014
Previously served 2004- 2013

 

 

 

Mr. Zervigon is currently a Special Advisor at Riverside Management Group, a boutique merchant bank. Previously, from July 2012 until December 2015, he was a Managing Member of Alta Loma Energy and from August 1997 to June 2012, he worked for Morgan Stanley & Co. Incorporated, most recently as a Managing Director of its Principal Investments Group, and a Certified Public Accountant at Coopers and Lybrand. Mr. Zervigon is currently a director of Bloom Energy. Mr. Zervigon previously was a director of TVN Entertainment, MMC Theatres, Impsat Fiber Networks and Stadium Capital. Mr. Zervigon has a Bachelor of Accountancy degree and master's degree in Tax from Florida International University and a MBA from the Amos Tuck School of Business at Dartmouth College.

 

 

 

 

 

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9

 


 

Information Regarding Other Directors (as of April 24, 2017)

Below is a list of the members of the Board of Directors whose terms of office do not expire until after the Annual Meeting and who are therefore not standing for re‑election at the Annual Meeting. For each director below, we have outlined certain of their important skills and qualifications that the Board of Directors considered in determining that the Director’s continued service on the Company’s Board of Directors was in the best interest of shareowners.

Class III Directors with term expiring in 2018:

Roxanne J. Decyk

Committees:

Experience, Skills and Qualifications:

Roxanne Decyk

Risk Management (Chair)

Governance and Nominating

 

Global Business Experience

Senior Leadership Experience

Extensive senior executive and board member experience of several major multinational corporations.

Significant experience in corporate affairs, human resources and public company governance

Age 64
Director Since 2014

 

 

 

 

Ms. Decyk retired as Executive Vice President of Global Government Relations for Royal Dutch Shell, plc, an oil, gas, chemical and refined petroleum products company, in December 2010, after serving in that position since June 2009. From 2008 until June 2009, Ms. Decyk served as Corporate Affairs and Sustainable Development Director of Royal Dutch Shell plc and from July 2005 to 2008, she served as Corporate Affairs Director. Prior to this, Ms. Decyk was Director International of Shell International B.V., Senior Vice President Corporate Affairs and Human Resources of Shell Oil Company, and Vice President of Corporate Strategy of Shell International Limited. Ms. Decyk also serves as a director of Orbital ATK where she serves as chairperson of their Personnel and Compensation Committee, and as a director of Ensco PLC. Ms. Decyk earned a Bachelor of Arts degree from the University of Illinois at Urbana‑Champaign in English literature and a Juris Doctorate from Marquette University School of Law.

 

 

 

Lawrence A. Hough

Committees:

Experience, Skills and Qualifications:

C:\Users\pa003141\AppData\Local\Microsoft\Windows\Temporary Internet Files\Content.Outlook\3ELLAFK7\IMG_4333 (002).jpeg

Compensation

 

Global Business Experience

Senior Leadership Experience

Significant experience in leadership, operations and financial oversight

Extensive executive, operational and financial expertise.

Age 73
Director Since 2013

 

 

 

Since January 2007, Mr. Hough has been the managing director of Stuart Mill Venture Partners, L.P., a venture capital investment firm, and has served as President and Chief Executive Officer of Stuart Mill Capital, Inc. Earlier in his career, Mr. Hough worked for Sallie Mae for 25 years, most recently as its President and Chief Executive Officer.  He also previously served as the Chief Executive Officer of SatoTravel and SynXis Corporation. From 2008 to the present, he has served on the Board of Directors of Appistry, Inc., and from 2011 to present, he has served on the Board of Directors of Conferma Ltd., both privately held corporations. Mr. Hough holds a Bachelor of Science in Engineering from Stanford University and a Master of Science in Management from the MIT Sloan School of Management.

 

 

 

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10

 


 

Warren C. Jenson

Committees:

Experience, Skills and Qualifications:

Picture 21

Compensation (Chair)

Governance and Nominating

 

Financial Expertise

Senior Leadership Experience

Significant strategic, operational and financial reporting and internal controls experience.

Extensive experience in the media content business, having worked at the National Broadcasting Company, Amazon.com and Electronic Arts.

Significant experience in financial and operational roles.

Age 60
Director Since 2008

 

 

 

Since 2012, Mr. Jenson has been the Chief Financial Officer and head of technical operations of Acxiom Corporation, an enterprise data, analytics and software‑as‑a‑service company. He also serves as President of Acxiom International. From 2008 through 2011 he served as Chief Operating Officer and Chief Financial Officer for Silver Spring Networks, a networking platform and solutions provider for smart grid energy networks. Earlier in his career, Mr. Jenson served in executive-level positions with Electronic Arts, Inc., Amazon.com, Inc., Delta Air Lines and several positions as part of the General Electric Company and its affiliates. Mr. Jenson currently serves as the non-executive Chairman of TapJoy, Inc., a monetization and distribution services provider for mobile applications. Tapjoy is a privately held corporation.  He has a Bachelor of Science in Accounting and a Master of Accountancy ‑ Business Taxation from Brigham Young University.

Class I Directors with term expiring in 2019:

Nick S. Cyprus

Committees:

Experience, Skills and Qualifications:

Picture 19

Audit (Chair)

Governance and Nominating

Financial Expertise

Senior Leadership Experience

Extensive financial reporting and internal controls experience, having served as the Chief Accounting Officer for several large publicly traded companies, including his most recent position with General Motors Company.

Certified Public Accountant.

 

Extensive experience in execution of certain financial risk management and financial oversight responsibilities.

Age 63
Director Since 2009

 

 

Mr. Cyprus was Vice President, Controller and Chief Accounting Officer of General Motors Company, an automotive manufacturer, from December 2006 to July 2013. Prior to joining General Motors Company, from May 2004 to March 2006, Mr. Cyprus served as Senior Vice President, Controller, and Chief Accounting Officer of Interpublic Group of Companies. From 1999 to 2004, Mr. Cyprus was Vice President, Controller, and Chief Accounting Officer at AT&T Corporation. Mr. Cyprus currently sits on the Board of Directors of Trusted Media Brands, Inc. (f/k/a Reader’s Digest Association, Inc.) and is the Chairman of its Audit Committee. Mr. Cyprus also sits on the Board of Directors of Volt Information Sciences, Inc., and is the Chairman of its Audit Committee as well as a member of its Governance and Nominating Committee and Compensation Committee.  Mr. Cyprus holds a Master of Business Administration from New York University’s Stern School of Business and a Bachelor of Science Degree in Accounting from Fairleigh Dickinson University in New Jersey. Mr. Cyprus is a certified public accountant.

 

 

 

 

Picture 7

11

 


 

 

L. Roger Mason, Jr.

Committees:

Experience, Skills and Qualifications:

 

Roger Mason

Risk Management

 

Government and Department of Defense Experience

Senior Leadership Experience

Extensive knowledge of the intelligence community, operations research and systems integration, having served as Assistant Director of National Intelligence.

Service in a number of senior executive positions in the national security sector including Vice President at Noblis, Director at the Institute for Defense Analyses, and General Manager of the Advanced Systems Group at General Dynamics (formerly Veridian).

Technical background and professional experiences.

Age 52
Director Since 2015

 

 

Dr. Mason has been the Senior Vice President, Chief Security Officer of Noblis, a nonprofit science, technology, and strategy organization since January 2014. Prior to joining Noblis, from May 2009 to January 2014, Dr. Mason was the Assistant Director of National Intelligence for Systems and Resource Analyses (ADNI/SRA).  Dr. Mason also serves as a director of the Intelligence and National Security Alliance, a 501(c)6 organization, and also serves on its Audit and Compensation Committees.  Dr. Mason earned his doctorate and master’s degrees in engineering physics (nuclear) from the University of Virginia, a master’s degree in business administration from Northwestern University (Kellogg School), and a bachelor’s degree in physics from The George Washington University. 

 

 

Jeffrey R. Tarr

Committees:

Experience, Skills and Qualifications:

C:\Users\mvangb\Desktop\tarr2.jpg

None

 

 

Senior Leadership Experience

Strategy and Financial Markets Expertise

President and Chief Executive Officer of the Company.

Extensive knowledge of the Company’s strategic objectives, internal controls, risk assessment and management, and overall performance.

Significant senior executive experience with publicly traded information companies serving both commercial and government customers

Age 54
Director Since 2011

 

 

Mr. Tarr has been our President, Chief Executive Officer and Director since April 2011. Mr. Tarr previously served as the President and Chief Operating Officer (2008-2010) of IHS Inc., a provider of information and insight in energy, economics, geopolitical risk, environmental sustainability and supply chain management, as co-President and co-Chief Operating Officer (2007-2008) and as division president (2004-2007). Earlier in his career, Mr. Tarr served as Chief Executive Officer of Hoover’s Inc. and as President of the Hoover’s unit at Dun & Bradstreet subsequent to its acquisition of the business. He also previously served as a General Manager at US WEST, Inc., among other senior management positions.  Mr. Tarr began his career with Bain & Company. Mr. Tarr served on the Board of Directors of CEB, Inc., a provider of research and analysis focused on strategy, operations and general management issues, until the acquisition of the company by Gartner, Inc. in 2017. He also serves as a director of The U.S. Geospatial Intelligence Foundation and on the management board of the Stanford Graduate School of Business. Mr. Tarr holds a Master of Business Administration from Stanford University and a Bachelor of Arts from Princeton University’s Woodrow Wilson School of Public and International Affairs.

 

 

 

 

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12

 


 

Role of the Board of Directors

 

 

The Board of Directors plays an active role in overseeing management and representing the interests of shareowners. Directors regularly interact with management and are available to provide advice and counsel. The Board of Directors and the committees regularly schedule and hold executive sessions without any members of management present. Gen. Estes, our independent Chairman of the Board of Directors, presides at all executive sessions of the non‑management directors.  The Board of Directors also carefully considers feedback received from shareowners.

Directors are expected to attend Board of Directors meetings and the meetings of the committees on which they serve. In 2016, the Board of Directors met a total of ten times. All directors attended at least 75 percent of the total meetings of the Board of Directors and the committees on which he or she served during his or her tenure during 2016. Directors are invited to attend the Company’s annual meeting of shareowners, although such attendance is not mandatory. Gen. Estes and Mr. Tarr attended the 2016 annual meeting of shareowners.

Corporate Governance Guidelines

 

 

Our Board of Directors has adopted Corporate Governance Guidelines that provide for responsible oversight and governance of the Company and management, and which are reviewed at least annually. Our Corporate Governance Guidelines cover a wide range of subjects, including: the role of the Board of Directors; composition of the Board, director responsibilities, director nomination procedures and qualifications; director independence standards; director orientation and continuing education; procedures for annual performance evaluations of the Board of Directors and the committees; formal evaluation of our Chief Executive Officer, and succession planning and management development. The Governance and Nominating Committee regularly assesses our governance practices in light of market benchmarks and best practices. The Corporate Governance Guidelines are reviewed annually by the Board of Directors.

A copy of our Corporate Governance Guidelines can be found on the Company Information page of our website under Corporate Governance, Governance Documents at http://investor.digitalglobe.com.

Director Independence

 

 

As required by our Corporate Governance Guidelines and Governance and Nominating Committee charter, the Board of Directors has determined that each of Howell M. Estes, III, Nick S. Cyprus, Roxanne J. Decyk, Lawrence A. Hough, Warren C. Jenson, L. Roger Mason, Jr., Kimberly Till, and Eddy Zervigon is an “independent director” as defined under the applicable rules and regulations of the SEC and the New York Stock Exchange (“NYSE”). This represents 89% of our Board of Directors. In addition, the Board of Directors previously determined that Mr. James M. Whitehurst, who served on the Board of Directors for part of 2016, was also independent under applicable rules and regulations of the SEC and NYSE during the term of his service on the Board of Directors. In determining the independence of our directors, the Board of Directors considered all transactions in which we and any director had any interest. In making these determinations, the Board of Directors considered the relationships and transactions described under the caption “Certain Relationships and Related-Party Transactions” beginning on page 14.

Board of Directors Leadership Structure

 

 

Our Corporate Governance Guidelines do not require the separation of the offices of the Chairman of the Board of Directors and the Chief Executive Officer. Instead, the Board of Directors has the latitude to choose its Chairman of the Board in any way that it deems best for the Company at any given point in time. After careful consideration, the Board of Directors determined that it is in the best interest of the Company and its shareowners to separate the positions of Chairman of the Board of Directors and Chief Executive Officer. Gen. Estes, one of our independent directors, currently serves as our duly elected Chairman of the Board of Directors.

Our Board of Directors has a classified structure, meaning that directors are elected to three-year terms on a staggered basis.  The Board of Directors believes that this structure enhances long-term value creation and protects the Company against single-interest shareowner activists.  If all directors were subject to being replaced every year, they may be more susceptible to the potential influence of special and single-interest shareowner activists who might have short-term agendas to take actions that are not in the long-term best interests of the Company. The longer terms offered by our structure also allows our directors to function with greater independence and long-term perspective, which is critical to making decisions that are in the best long-term interests of the Company and its shareowners, and provides continuity and institutional knowledge on our Board of Directors.

Board of Directors Oversight of Risk

 

 

The Board of Directors actively monitors the Company’s risk profile, including through review of quarterly reports by its Risk Management Committee and, at least annually, review of the Company’s overall enterprise risk management program and mitigation strategies.  In December 2010, the Company established a standing Risk Management Committee of the Board of Directors. The Risk Management Committee is charged with oversight of enterprise risks, including performance under our EnhancedView (“EV”) contract, information technology and security risks, regulatory compliance risks, and oversight of the Company’s development and execution of its Risk Management Program. The Audit Committee has shared responsibility for risk with specific responsibility for overseeing financial risk, including risks associated with preparation of financial statements. The Audit Committee also serves as our Qualified Legal Compliance Committee. Members of management report to each committee on a quarterly basis concerning management of specific risks that may impact the Company. Both committees report to the full Board of Directors on all material risk considerations affecting the Company.

The day‑to‑day enterprise risk management responsibilities for the Company are overseen by an executive risk committee of the Company comprised of the Chief Financial Officer, the Chief Operations Officer, the General Counsel, the Director of Internal Audit, and other key

 

 

 

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13

 


 

executives and management of the Company, in accordance with the Company’s Enterprise Risk Management Policy. The Chief Financial Officer, the Chief Operations Officer, and the Director of Internal Audit have primary responsibility for reporting to the Risk Management Committee and the Audit Committee on enterprise risk matters, though other members of management may participate, as warranted by the matters to be discussed.

Our Board of Directors believes that the processes it has established for overseeing risk would be effective under a variety of leadership frameworks and therefore do not require the separation of the offices of the Chairman of the Board of Directors and the Chief Executive Officer, as described under “Board of Directors Leadership Structure” above.

Code of Ethics

 

 

We have adopted a Code of Ethics and Business Conduct that governs our Board of Directors, senior officers (including our Chief Executive Officer and Chief Financial Officer), and employees. Copies of our Code of Ethics and Business Conduct can be found on the Company Information page of our website under Corporate Governance, Governance Documents at http://investor.digitalglobe.com and may also be obtained upon request without charge by writing to the Corporate Secretary of the Company, DigitalGlobe, Inc., 1300 West 120th Avenue, Westminster, Colorado 80234. We will post to our website any amendments to the Code of Ethics and Business Conduct, and any waivers that are required to be disclosed by the rules of either the SEC or the NYSE.

Succession Planning

 

 

The Board of Directors is responsible for the development, implementation and regular review of a succession plan for the Chief Executive Officer, and oversees and provides input to the CEO on succession planning for our other executive officers. Board members are expected to have a thorough understanding of the characteristics necessary for a Chief Executive Officer to execute on a long-term strategy that optimizes operating performance, profitability, and shareowner value creation. As part of its responsibilities under its charter, the Governance and Nominating Committee of the Board of Directors oversees the succession planning process for the Chief Executive Officer and other key employees. The ongoing succession process is designed to reduce vacancy, readiness and transition risks and develop strong leadership quality and executive bench strength. The succession plan for the Chief Executive Officer and other key employees is reviewed not less than annually with the Board of Directors in executive session.

Director Evaluation Process

 

 

The Board of Directors, through the Governance and Nominating Committee, establishes criteria and processes for the annual self‑evaluation of the Board of Directors and each committee. The performance self‑evaluations focus on the contribution to the Company by the Board of Directors and each committee, and specifically focus on areas in which a better contribution could be made. Every three years, the Board of Directors engages an independent consultant to assist with its self‑evaluations. The Board of Directors believes that through its annual self‑evaluation and triennial third-party evaluation, the Board of Directors will continue to evolve to meet the Company’s long-term strategic needs and the interests of our shareowners.

Related-Party Transactions Policies and Procedures

 

 

Our Governance and Nominating Committee is responsible for reviewing all related-person transactions that are required to be disclosed under the SEC rules and, when appropriate, initially authorize or ratify all such transactions in accordance with written policies and procedures established by the committee from time to time. The policies and procedures provide that, in determining whether or not to recommend the initial approval or ratification of a related-person transaction, the Governance and Nominating Committee will consider all of the relevant facts and circumstances available, including (if applicable) but not limited to:

·

whether there is an appropriate business justification for the transaction;

·

the benefits that accrue to us as a result of the transaction;

·

the terms available to unrelated third parties entering into similar transactions;

·

the impact of the transaction on a director’s independence (in the event the related person is a director, an immediate family member of a director, or an entity in which a director is a partner, shareowner, or executive officer);

·

the availability of other sources for comparable products or services;

·

whether it is a single transaction or a series of ongoing, related transactions;

·

whether entering into the transaction would be consistent with our Code of Ethics and Business Conduct.

Certain Relationships and Related-Party Transactions

 

 

Since the beginning of our last fiscal year, there were no transactions, and there are currently no proposed transactions, in which: (i) the amounts involved exceeded or will exceed $120,000, and (ii) a director, executive officer, holder of more than 5% of our voting securities or any member of their immediate family had or will have a direct or indirect material interest.

 

 

 

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14

 


 

Communication with the Board of Directors

 

 

The Board of Directors encourages our shareowners and other interested parties who are interested in communicating with our Board of Directors, the Chairman of the Board of Directors, or the independent directors as a group to communicated by mail as follows:

Board of Directors of DigitalGlobe, Inc.

c/o Corporate Secretary

DigitalGlobe, Inc.

1300 West 120th Avenue

Westminster, Colorado 80234

Additionally, shareowners and other interested parties who are interested in communicating with the Chairman of the Board of Directors or the independent directors as a group may do so electronically by clicking on “Contact the Board” on the Company Information page of our website under Corporate Governance at http://investor.digitalglobe.com, or by emailing to independentdirector@digitalglobe.com.

Correspondence received will be reviewed by our General Counsel or designee, who will regularly forward to the appropriate directors all correspondence that, in the opinion of such person, deals with the functions of the Board of Directors or committees thereof or that the General Counsel otherwise determines requires their attention. Directors may at any time review a log of all correspondence received by the Company that is addressed to any director and request copies of any such correspondence. Concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of the Audit Committee and handled in accordance with procedures established by the Audit Committee with respect to such matters.

 

 

 

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15

 


 

Board Committees

 

 

The Board of Directors has four standing committees. The following table lists, as of the date of this Proxy Statement, the membership on each of the standing committees of the Board of Directors and the number of meetings each committee held in 2016:

 

 

 

 

 

Name

Audit

Compensation

Governance &
Nominating

Risk
Management

Howell M. Estes, IIIPicture 24

 

 

Picture 68

 

Nick S. CyprusPicture 48Picture 62

Picture 66

 

Picture 30

 

Roxanne J. DecykPicture 51

 

 

Picture 85

Picture 71

Lawrence A. HoughPicture 52

 

Picture 84

 

 

Warren C. JensonPicture 54

 

Picture 77

Picture 86

 

L. Roger Mason, Jr. Picture 55

 

 

 

Picture 92

Kimberly TillPicture 58Picture 63

Picture 80

 

 

Picture 93

Eddy ZervigonPicture 60Picture 64

Picture 87

Picture 88

 

 

Total Committee Meetings Held in 2016

8

5

4

4

Picture 95Chairperson

Picture 94 Member

Picture 61Independent Director

Picture 65Audit Committee Financial Expert

 

The Board of Directors annually reviews and approves the charter of each of the committees. All committee charters are available on the Company Information page of our website under Corporate Governance, Governance Documents at http://investor.digitalglobe.com.

Audit Committee

Our Audit Committee assists the Board of Directors in its oversight of the quality and integrity of our accounting, auditing, and reporting practices. Among its functions, the Audit Committee: (i) reviews our quarterly and annual financial statements, including any significant financial items and changes in accounting policies; (ii) reviews the audit plans and findings of our independent registered public accounting firm and our internal audit activities; (iii) reviews our financial risk and internal control procedures, including legal and compliance matters; and (iv) has the sole discretion to appoint annually our independent registered public accounting firm, and evaluate its independence and performance. The Audit Committee reviews and evaluates, at least annually, the adequacy of its charter.

The Board of Directors has determined that each of Mr. Cyprus, Ms. Till, and Mr. Zervigon qualifies as an audit committee financial expert as defined by applicable SEC rules. Each member of the Audit Committee qualifies as an independent director, as defined under the NYSE rules and Rule 10A‑3 of the Exchange Act applicable to the Audit Committee members.

Compensation Committee

Our Compensation Committee reviews and recommends policies relating to compensation and benefits of our officers and employees. The Compensation Committee reviews and approves corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives, and recommends for approval by the Board of Directors the compensation of these officers based on such evaluations. In making compensation decisions, the Compensation Committee may consider the recommendations of the Chief Executive Officer concerning the Company’s compensation and employment benefit plans and practices, including its executive compensation plans, incentive compensation and equity‑based plans with respect to executive officers (other than the Chief Executive Officer) and director compensation arrangements. The Compensation Committee also administers the issuance of awards under our equity award plans. The Compensation Committee engaged Radford, an Aon Hewitt company (“Radford”), as independent compensation consultants in 2016 to assist in fulfilling the Compensation Committee’s duties. Additional information regarding the Compensation Committee’s engagement of its independent compensation consultant is contained in this Proxy Statement on page 25. The Compensation Committee reviews and evaluates, at least annually, the adequacy of its charter and the performance of the Compensation Committee and its members, including compliance of the Compensation Committee with its charter. Each member of the Compensation Committee qualifies as an independent director, as defined under the applicable rules and regulations of the NYSE. In making its independence determination for each member of the Compensation Committee, the Board of Directors considered whether the director has a relationship with the Company that is material to the Director’s ability to be independent from management in connection with the duties of a Compensation Committee member.

Governance and Nominating Committee

In addition to reviewing Director nominees, the Governance and Nominating Committee is responsible for overseeing our Corporate Governance Guidelines, reporting and making recommendations to the Board of Directors concerning governance matters, and succession planning for our Chief Executive Officer and other key employees. The Governance and Nominating Committee reviews and evaluates, at least annually, the adequacy of its charter. Each member of the Governance and Nominating Committee qualifies as an independent director, as defined under the applicable rules and regulations of the NYSE.

 

 

 

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The Governance and Nominating Committee reviews all candidates for nomination to the Board of Directors, including those recommended by shareowners. To have a candidate considered by the Governance and Nominating Committee for selection or appointment to the Board of Directors, a shareowner must submit the recommendation in writing to our Corporate Secretary. Recommendation letters must include the following information: (i) the name of the shareowner submitting the recommendation and evidence of the shareowner’s ownership of Company stock, including the number of shares owned and the length of time of ownership; (ii) the reasons for the recommendation; and (iii) the full name and address of each recommended director candidate as well as brief biographical information setting forth past and present directorships, employments, occupations and civic activities. Any such recommendation should also be accompanied by a written statement from the proposed nominee consenting to be named as a candidate and, if nominated and elected, consenting to serve as a director. The Governance and Nominating Committee may request additional information concerning the director candidate as it deems reasonably necessary to determine the eligibility and qualification of the director candidate to serve as a member of our Board of Directors. For a candidate to be considered by the Governance and Nominating Committee for nomination to the Board of Directors at an upcoming annual meeting, a shareowner recommendation must be received by our Corporate Secretary not less than 120 days prior to the anniversary date of the Company’s most recent annual meeting of shareowners. Our Bylaws include additional requirements regarding nominations of persons at a shareowners’ meeting other than by the Board of Directors. The Board of Directors will evaluate director candidates recommended by shareowners in the same manner as director nominees recommended by any other source, including management or members of the Board of Directors.

In 2017 the Governance and Nominating Committee and the Board of Directors considered waivers of the retirement age in the Company’s Governance Guidelines for Gen. Estes and determined that it would be in the best interests of the Company and its shareowners to waive the retirement age for him.  The Board of Directors determined that his extensive defense and military experience, leadership skills, and his long history with the Company were vital to the Board of Directors.

Risk Management Committee

Our Risk Management Committee is responsible for overseeing enterprise risk management for the Company. Its responsibilities include reviewing the Company’s identification of risks and their mitigation in light of the Company’s risk tolerance profile and business strategy, periodically reviewing the adequacy of the Company’s resources to perform its risk management responsibilities and achieve its objectives, meeting with the Company’s executive risk oversight committee, reviewing the Company’s performance under material agreements such as the EnhancedView contract, reviewing the Company’s information technology and industrial security programs and reviewing the Company’s compliance with legal and regulatory requirements relating to business operations. The Risk Management Committee reviews and evaluates, at least annually, the adequacy of its charter. The Risk Management Committee charter requires that each member of the Risk Management Committee qualify as an independent director, that at least one member shall hold specified security clearances and one member also serve on the Company’s Audit Committee. Each member of the Risk Management Committee qualifies as an independent director, as defined under the applicable rules of the NYSE.

Executive Leadership Team

 

 

 

The following table lists the members of our executive leadership team as of April 24, 2017:

 

 

 

Name

    

Age

    

Title

Jeffrey R. Tarr

 

54

 

President and Chief Executive Officer

Gary W. Ferrera

 

54

 

Executive Vice President, Chief Financial Officer

Timothy M. Hascall

 

63

 

Executive Vice President, Chief Operations Officer and General Manager - Imagery

Walter S. Scott

 

59

 

Executive Vice President, Chief Technical Officer and General Manager - Platform & Services

Stephanie Georges

 

54

 

Senior Vice President, Corporate Strategy, Marketing and Communications

Daniel L. Jablonsky

 

47

 

Senior Vice President, General Counsel, Corporate Secretary and General Manager - International Defense & Intelligence

Jose A. Torres, Jr.

 

42

 

Senior Vice President, Chief Accounting Officer

Grover N Wray

 

56

 

Senior Vice President, Chief Human Resources Officer

Please see Corporate Governance – Our Board Members, for Mr. Tarr’s biography.

The role of our executive leadership team is to define our strategy and formalize clear objectives, including businesses and market segments. They also define our culture, which is reflected in DigitalGlobe’s stated Purpose, Vision and Values. One of our key strategic focus areas is our Culture of Leadership. Our Company’s success is dependent upon the right people, culture and organizational structure. The Board of Directors also recognizes the importance of effective executive leadership to our success. Each member of our executive leadership team serves at the pleasure of the Board of Directors:

Gary W. Ferrera joined DigitalGlobe in 2015 as our Executive Vice President and Chief Financial Officer (“CFO”). From January 2014 through January 2015, he was Executive Vice President, Chief Financial Officer and Treasurer of Intrawest Resorts. From March 2013 through January 2014, Mr. Ferrera was Executive Vice President and Chief Financial Officer of Great Wolf Resorts, Inc. Previously, he served as Executive Vice President and Chief Financial Officer of National CineMedia, L.L.C., a subsidiary of National CineMedia, Inc., from May 2007 through February 2013. Mr. Ferrera also currently serves as a director of Colorado Public Radio. Mr. Ferrera served in investment banking roles at CitiGroup and Bear Stearns and as an international tax consultant with Arthur Andersen. Additionally, Mr. Ferrera served in the U.S. Army Special Operations and U.S. Army Intelligence prior to earning his undergraduate and graduate degrees. Mr. Ferrera holds an M.B.A. from the Kellogg School of Management and a B.S. in Accounting from Bentley College, magna cum laude.

 

 

 

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Timothy M. Hascall joined DigitalGlobe in October 2011 and currently serves as our Executive Vice President, Chief Operations Officer (“COO”) and General Manager, Imagery. Prior to joining us, from 2004 to 2011, Mr. Hascall served as a senior executive at TriZetto Corporation, most recently as President, Blue Cross/Blue Shield Market. Additionally, Mr. Hascall’s prior experience includes General Manager, North America for Equitant, Inc. Mr. Hascall began his business career with Andersen Consulting, later Accenture, and was made partner in 1996. Mr. Hascall holds a B.S. in Business Administration from the University of Nebraska, and achieved the rank of Major in the United States Marine Corps, serving as an imagery intelligence officer.

Dr. Walter S. Scott is our founder and currently serves as our Executive Vice President, Chief Technical Officer (“CTO”) and General Manager, Platform & Services. From 1986 through 1992, Dr. Scott held a number of technical, program and department management positions at the Lawrence Livermore National Laboratory, including serving as the Assistant Associate Director of the Physics Department. Prior to this, Dr. Scott served as President of Scott Consulting, a Unix systems and applications consulting firm. Since April 2013, Dr. Scott has served on the Board of Directors of The Open Geospatial Consortium (OGC), an international industry consensus standards organization. Dr. Scott holds a B.A. in Applied Mathematics, magna cum laude, from Harvard College and a Doctorate and Master of Science in Computer Science from the University of California, Berkeley.

Stephanie Georges joined DigitalGlobe in May 2015 and currently serves as our Senior Vice President, Corporate Strategy, Marketing and Communications. Ms. Georges was an advisory partner with Genesis, Inc., a Denver-based consultancy since June 2013 where she provided strategy and investor relations consulting to companies in a broad range of industries. Prior to Genesis, she was Executive Vice President, Corporate Strategy and Development at CenturyLink. Serving in the same role at Qwest Communications International, she was one of four senior executives selected to join the CenturyLink Leadership Team, post-merger. During her ten years at both companies, Ms. Georges’ responsibilities included corporate strategy, product innovation, brand strategy, investor relations and mergers and acquisitions. Before joining Qwest, Ms. Georges held various management and analyst positions including 18 years covering the Telecommunications Services sector as a top-ranked sell-side analyst on Wall Street. Ms. Georges served as a director of Zayo Group Holdings, Inc. from July 2013 through November 2015. Ms. Georges holds an M.B.A. from The Wharton School of Business and a B.A. in Economics from Wellesley College.

Daniel L. Jablonsky joined DigitalGlobe in March 2012 and currently serves as our Senior Vice President, General Counsel and Corporate Secretary, and General Manager, International Defense & Intelligence. Prior to joining us, from 2011 to March 2012, Mr. Jablonsky was a shareholder at the law firm of Brownstein Hyatt Farber Schreck, LLP, where he practiced corporate and securities law. From 2010 to 2011, Mr. Jablonsky served as the Interim Co‑General Counsel of Flextronics International Ltd. and from 2007 to 2010, Mr. Jablonsky served as Senior Corporate Counsel, Securities and Mergers & Acquisitions at Flextronics. Mr. Jablonsky previously was in‑house counsel at UBS Financial Services, Inc., served in the enforcement division of the U.S. Securities and Exchange Commission, and practiced corporate and securities law with O’Melveny & Myers LLP. Mr. Jablonsky also served as an officer and nuclear engineer in the United States Navy prior to attending law school. Mr. Jablonsky holds a B.S. in Mechanical Engineering from the United States Naval Academy and a Juris Doctor degree from the University of Washington School of Law.

Jose A. Torres, Jr. joined DigitalGlobe in 2016 and currently serves as our Senior Vice President, Chief Accounting Officer.  Prior to joining DigitalGlobe, from 2012 through 2015, Mr. Torres was the Vice President of Accounting, Financial Reporting and MIS for the ADT Corporation. Prior to ADT, from 2008 through 2012 Mr. Torres held a number of roles with Tyco International, including North America Regional Assistant Controller, Corporate Controller for SimplexGrinnell (a Division of Tyco International), Controller for optical retailer Sterling Vision and Assistant Treasurer at Safety Components International. Mr. Torres started his career in New York as a public accountant with Arthur Andersen. Mr. Torres has a Bachelor of Science degree in accounting and business management from Boston College, and an MBA from Florida Atlantic University.

Grover N Wray joined DigitalGlobe in December 2011 and currently serves as our Senior Vice President, Chief Human Resources Officer. Prior to joining DigitalGlobe, from 2005 to 2011 Mr. Wray led professional, organizational and leadership development initiatives as Executive Vice President of Human Resources at Western Union, a Fortune 500 company based in Englewood, Colorado, and as Vice President, Leadership, Professional Development and Staffing at Janus Capital Group. Mr. Wray also led human resources at Heidrick & Struggles and at Arthur Andersen, where in addition to leading human resources, he also advised clients on change management. Mr. Wray holds a B.S. in Sociology and a Masters of Organizational Behavior, both from Brigham Young University.

 

 

 

 

 

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AUDIT RELATED MATTERS

Audit Committee Report

 

 

 

Audit Committee Report

The Audit Committee assists the Board of Directors in fulfilling its responsibilities by reviewing and overseeing the accounting, financial reporting, and internal controls processes of the Company. As of April 24, 2017, the Audit Committee consisted of three members, each of whom has been determined by the Board of Directors to be an audit committee financial expert (as defined by applicable SEC rules), and an independent director (as defined under the NYSE rules and Rule 10A-3 of the Exchange Act applicable to the Audit Committee members).

The Audit Committee operates pursuant to a written charter, as adopted by the Board of Directors, a copy of which is available on the Company Information page of our website under Governance Documents at http://investor.digitalglobe.com. As set forth in more detail in the Audit Committee’s charter, the Audit Committee’s primary responsibilities fall into three categories:

      overseeing the preparation and review of the quarterly and annual financial reports, including discussions with management and the Company’s independent registered public accounting firm regarding significant accounting and reporting matters;

      having responsibility for the appointment, compensation, retention and oversight of all of the work of our independent registered public accounting firm including selection of the lead audit engagement partner, as well as determining whether the independent registered public accounting firm is independent and qualified; and

      overseeing compliance with policies and regulatory requirements, including management’s implementation of effective systems of internal controls and financial risk management.

In connection with these responsibilities, the Audit Committee met a total of eight times during 2016. Audit Committee meetings are scheduled as necessary to ensure that adequate time and attention are devoted to all of the Audit Committee’s obligations. The Audit Committee utilizes the expertise and knowledge of management and the independent auditor, and meetings are structured to allow for full discussion and, where appropriate, separate sessions with the Company’s independent auditors and select management. In fulfilling its responsibilities and duties, in 2016 the Audit Committee, among other actions:

      reviewed and discussed with management and the independent auditor the Company’s quarterly earnings press releases, consolidated financial statements (including the presentation of non-U.S. GAAP financial information and review of significant accounting policies and judgments), and related periodic reports prior to their release;

      reviewed and discussed the effectiveness of the Company’s compliance programs and its internal controls over financial reporting;

      reviewed the scope of, and the overall plans for, the internal audit program and the annual audit with the internal auditor and the independent auditor;

      monitored management’s administration of processes and procedures, including the Company’s use of the Ethicspoint® reporting system, for anonymous submissions of employee concerns and complaints in accordance with the Company’s Code of Ethics and Business Conduct;

      reviewed significant legal developments and the Company’s processes for monitoring compliance with legal and regulatory requirements and Company policies;

      inquired about significant business and financial reporting risks, reviewed the Company’s policies for risk assessment and risk management, and assessed the steps management is taking to control these risks;

      reviewed the Company’s policy for the pre-approval of audit and permitted non-audit services by the independent auditor and discussed with the independent auditor matters relating to its independence; and

      met in periodic executive sessions with the internal auditor or the independent auditor, to discuss the results of their examinations, their evaluations of internal controls, and the overall quality of the Company’s financial reporting.

As part of its oversight of the Company’s financial statements, the Audit Committee reviewed and discussed with management and the Company’s independent registered public accountants all annual and quarterly financial statements, including the fiscal year 2016 audited annual financial statements, prior to their issuance. These reviews included discussion with the independent registered public accountants of matters required to be discussed pursuant to Public Company Accounting Oversight Board Auditing Standard No. 16 (Communication With Audit Committees). The Audit Committee also reviewed the written disclosures and letter from PricewaterhouseCoopers LLP pursuant to applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants’ communications with the Audit Committee concerning independence.

Based upon the foregoing review and discussions and the report of PricewaterhouseCoopers LLP, the Audit Committee recommended that the Board of Directors include the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for filing with the SEC.

The Audit Committee

Nick S. Cyprus, Chairman

Kimberly Till

Eddy Zervigon

 

 

 

 

 

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19

 


 

Audit and Non‑Audit Fees

 

 

 

The fees for professional services rendered by PricewaterhouseCoopers LLP for fiscal years 2016 and 2015 were as follows:

 

 

 

 

 

 

 

 

 

    

2016

    

2015

 

Audit Fees(1)

 

$

1,522,320

 

$

2,006,900

 

Tax Fees(2)

 

 

4,300

 

 

10,524

 

All Other Fees(3)

 

 

9,810

 

 

207,633

 

Total

 

 

1,536,430

 

 

2,225,057

 

(1)

Fees for the audit of our annual financial statements included in our annual report on Form 10‑K, the audit of our internal control over financial reporting, the review of the financial statements included in our Quarterly Reports on Form 10‑Q, and audit services provided in connection with other regulatory filings.

(2)

Tax fees consisted of fees for tax advisory services.

(3)

2016 consisted of research software subscription fees. 2015 consisted of due diligence services of $198,100 and research software subscription fees of $9,533.

Pre‑Approval of Independent Auditor Services

 

 

 

All services, audit and non‑audit, provided by the independent auditor must be pre‑approved by the Audit Committee or its delegate. As set forth in its charter, the Audit Committee has the sole authority to review in advance, and grant any appropriate pre‑approval of: (i) all auditing services to be provided by the independent registered public accounting firm and (ii) all non‑audit services to be provided by the independent registered public accounting firm as permitted by Section 10A of the Exchange Act, and in connection therewith to approve all fees and other terms of engagement. Such pre‑approval can be given as part of the Audit Committee’s approval of the scope of the engagement of the independent registered public accounting firm or on an individual basis. The Audit Committee may delegate responsibility for pre‑approval of non‑auditing services to one or more of its members, but the decision must be presented to the full Audit Committee. In 2016 and 2015, all services of PricewaterhouseCoopers LLP were pre‑approved by the Audit Committee. The Audit Committee concluded that the provision of non-audit services was compatible with maintaining the independence of PricewaterhouseCoopers LLP.

 

 

 

 

 

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COMPENSATION DISCUSSION & ANALYSIS

Executive Summary

 

 

 

DigitalGlobe’s executive compensation philosophy is built on a commitment to link pay to performance and align incentives with shareowner interests. Executives are rewarded for pursuing and achieving our key strategic business goals. Likewise, we believe underachievement is reflected in pay as well. To enhance alignment with shareowner interests, a substantial portion of each executive’s compensation opportunity is in the form of equity awards with value directly linked to our stock price. Our executive compensation program is also designed to attract and retain executive talent in a competitive marketplace and to compensate executives at competitive, but responsible, levels.

We maintain executive compensation and governance risk-mitigating best practices (such as clawback policies and executive and board stock ownership guidelines) to help ensure that our compensation programs do not encourage excessive risk taking. In addition, the majority of our compensation for our Board of Directors and executives is in the form of equity, which further ties their interests to those of our shareowners. We believe that our balanced, performance‑based approach best serves the interests of our shareowners.

Key Takeaways

In consideration of our 2015 results and share price, the Compensation Committee and the Board of Directors took several actions in early 2016 to reflect our ongoing commitment to aligning executive compensation with performance and shareowner interests. These decisions included:

·

No Base Salary Increases in 2016: No base salary increases were given to any NEOs in 2016.

·

No STI Opportunity Increases in 2016: Similarly, target short-term incentive opportunities were not increased in 2016.

·

Performance-Based Long-Term Incentives: The equity award values approved by the Compensation Committee for our NEOs in 2016 were at or below the 50th percentile for comparable positions at our peer group.

·

Higher percentage of PSUs for NEOs: In 2016 the Compensation Committee increased the percentage of target LTI value delivered as PSUs from 50% to 66%.

·

Significant reduction in CEO equity grant value: The CEO was awarded the same number of shares in 2016 as in 2015 which, based on the depressed stock price on the grant date of the 2016 awards, resulted in an approximate 50% reduction in the grant date fair value for the awards.

·

Lowered CEO Targeted Compensation: Targeted compensation for our CEO was lowered 35% from 2015 to 2016.

·

Increased Stock Ownership Guidelines for the CEO and Non-Employee Directors: In 2016 the Compensation Committee increased the Stock Ownership Guidelines for the CEO from 5x to 6x, and for Non-Employee Directors from 3x to 5x.

 

We believe these decisions were prudent and aligned to Company performance. Since the start of 2016, our share price performance has significantly improved and we finished 2016 at the 94th percentile of the Russell 2000. The Company grew net income 13.7%, increased revenue 3.2%, and grew adjusted EBITDA 7.6%. Our share price increased nearly 83%, rising from $15.66 on December 31, 2015 to $28.65 on December 30, 2016. We also achieved key strategic objectives we believe are important for long-term shareowner value creation, such as completing our acquisition of The Radiant Group, Inc., refinancing our outstanding debt and successfully launching WorldView-4.

These strong business results and share-price performance of the past year have been reflected in the pay outcomes of 2016. For example:

 

·

Above-Target Annual Incentives for 2016: The Compensation Committee approved above-target payments for cash incentives under our STI Plan for all of our NEOs in 2016 based on performance under the STI Plan.

·

Above-Target Vesting of 2014-2016 Performance Share Unit Awards: The Compensation Committee certified a payout of PSUs awarded to our NEOs in 2014 and earned at a combined 128% of target for the 2014-2016 performance period based on performance under our LTI plan.

 

Compensation Philosophy and Objectives

 

 

 

A key component of our business strategy is to provide appropriate incentives to attract, retain, and motivate top talent. The Compensation Committee has designed CEO and executive total compensation packages to drive actions that align with both the short-term and long-term interests of our shareowners. We meet these objectives by applying the following principles:

Compensation Tied to Company Performance: Support the overall business objectives by aligning a substantial portion of executive total compensation to our financial and operating performance with 77% of CEO targeted compensation and 72% of NEO targeted compensation, on average, tied to performance and/or our stock price.

 

Shareowner Alignment: Enhance the linkage between our executives’ and our shareowners’ interests by issuing awards with payouts tied directly to the Company’s financial performance and the value of our common stock.

 

Peer Group Assessments: Review and consider executive compensation packages against a selected peer group and the Radford High Technology Survey, to help ensure market competitive compensation levels.

 

 

 

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Absolute and Relative Pay-for-Performance: Structure components of pay to align with key performance metrics, using both absolute and relative measures.

 

Compensation Framework

Our compensation programs are designed to align compensation with the interests of shareowners, reward executives for producing sustainable growth in shareowner value, and attract, motivate and retain world‑class talent in order to develop and execute the Company’s strategic plans. The Compensation Committee strongly believes that executive compensation opportunities should be tied to Company performance in both the short-term and long-term. We carefully selected the framework in the following chart to achieve these objectives in our 2016 executive compensation program.  As described in the “Target Pay Mix” section below, these elements are allocated so that the majority of each named executive officer’s compensation opportunity is subject to performance-based vesting requirements.

Picture 2

Governance Highlights

Beyond the pay-for-performance alignment, we have implemented several governance best practices.  To further assure that we are aligning shareowner and management interests, the Compensation Committee routinely assesses the effectiveness of the performance of our compensation plans and practices, and reviews risk mitigation and governance matters.

 

 

 

 

 

 

What We Do

What We Don’t Do

 

 

ü

 

We align pay and performance

XWe do not provide our executive officers with tax gross‑up provisions

 

 

ü

 

We conduct annual risk assessments of our compensation policies and practices

XWe do not grant equity awards with single-trigger change-in-control vesting

 

 

ü

 

We maintain a clawback policy

XOur equity plan does not allow repricing of underwater options without shareowner approval

 

 

ü

 

We maintain stock ownership guidelines for both directors and officers

XWe do not permit directors and officers to hedge our stock

 

 

ü

 

Our Compensation Committee retains an independent compensation consultant

XWe do not permit directors and officers to pledge our stock

 

 

ü

 

We cap cash incentive payouts and PSU vesting levels

XWe do not provide significant executive perquisites

 

 

 

 

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2016 CEO Compensation Alignment with Shareowner Interests

 

 

 

To demonstrate how compensation plans are aligned with our compensation framework and shareowner interests, below are two snapshots: (1) 2016 target pay mix, and (2) a long-term graphic showing how the Compensation Committee has been responsive to share price and performance when setting target pay.

2016 Target Pay Mix

The following charts outline the breakdown of 2016 targeted compensation for our NEOs, specifically, base salary, target STI Plan, and LTI values (collectively, “Total Direct Compensation”).  LTI values are approved by the Compensation Committee and used to determine the number of shares subject to the RSU awards. Consistent with our objective of pay-for-performance, a substantial portion of Total Direct Compensation is variable in the form of annual incentives and equity awards, with significant performance-based metrics in STI Plan and PSUs.

 

In 2016, 77% of our CEO’s targeted compensation was tied to performance, and 72% of targeted compensation for our other NEOs on average, was performance-based. 

 

Picture 3

CEO Compensation Component
($ in thousands)

2016

 

Base Salary

$710

 

STI Plan: Annual Cash Incentive

$710

 

LTI: Time-Vested RSUs

$564

 

LTI: PSUs

$1,128

 

Variable Pay (STI and LTI)

$2,402

 

Fixed (Base Salary)

$710

 

Total

$3,112

 

 

 

 

 

Picture 9

Other NEO Compensation Component
($ in thousands)

2016

(Avg)

 

Base Salary

$375

 

STI Plan: Annual Cash Incentive

$254

 

LTI: Time-Vested RSUs

$239

 

LTI: PSUs

$485

 

Variable Pay (STI and LTI)

$979

 

Fixed (Base Salary)

$375

 

Total

$1,354

 

 

 

 

 

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Historical Stock Price vs. Target CEO Compensation

Our executive compensation practices are designed to tie pay with performance and align incentives with shareowner interests. Below is a graph demonstrating the correlation between our historical stock price and targeted compensation (calculated as described above) for our CEO for each year indicated. The Compensation Committee was responsive to share price and performance when setting CEO pay in 2016.

Picture 17

 

 

Say-on-Pay Results and Feedback

At our 2016 annual shareowner meeting, the advisory vote on our 2015 executive compensation program (our “say-on-pay” proposal) received the support of approximately 98% of the votes cast. The Compensation Committee believes this result demonstrates shareowner support for the performance-based executive compensation programs that we maintain. Although we appreciate the strong support, the Compensation Committee nevertheless continues to work to enhance our executive compensation program to align with shareowner interests and incorporate appropriate best practices. When making compensation decisions for our executive officers, the Compensation Committee will continue to consider the outcome of our say-on-pay votes and feedback from shareowners.

Executive Compensation Decision-Making Process

 

 

 

 

The Compensation Committee devotes significant time throughout the year to executive compensation matters in order to align executive pay with corporate performance and shareowner interests. In determining executive compensation, the Compensation Committee obtains input and advice from our independent compensation consultant, Radford, and reviews recommendations from our CEO with respect to the performance and compensation of our other NEOs. The Board of Directors, upon recommendation from the Compensation Committee, reviews and approves CEO and NEO compensation. 

The Compensation Committee reviews the feedback we receive from investors and considers financial and stock price performance to determine appropriate executive compensation parameters.  The Compensation Committee structures the executive compensation program to balance the goals of linking pay-to-performance and creating alignment with shareowner interests on the one hand, with the challenge of retaining and motivating a qualified executive team to provide business continuity and strategic leadership on the other.

Key Participants

The roles and responsibilities of all parties involved with executive compensation are outlined below:

 

 

ROLE

RESPONSIBILITIES

 

 

Shareowners

Cast advisory vote on executive compensation

Approve share pool increases or certain other changes to equity plans

Provide direct feedback and input to the Company and our Board of Directors

 

 

Board of
Directors

Evaluates CEO’s performance

Approves share pool increases or changes to equity plans (subject to shareowner approval in certain cases)

Reviews and approves executive compensation, with input and recommendation from the Compensation Committee

Reviews and approves the Proxy Statement and other statutory filings

 

 

 

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ROLE

RESPONSIBILITIES

 

 

Compensation
Committee

Approves:

performance-based vesting metrics and goals under STI Plan and PSUs

achievement of performance-based goals under STI Plan and PSUs

equity awards for non-executives

peer group used for executive compensation

Considers all factors and shareowner feedback to help align  our compensation programs with the interests of our shareowners and long-term value creation

•  Recommends to the Board of Directors any adjustments to executive base salary, target bonus, and equity compensation

•  Reviews and recommends inclusion of the Compensation Discussion & Analysis section in the Proxy

 

 

Independent
Compensation
Consultant

Provides advice and data to the Compensation Committee regarding our executive compensation program, including:

input on pay philosophy, best practices and market trends

selection of peer group

executive compensation practices and levels at peer group companies

design of STI Plan and equity compensation, and changes to equity plans

Reviews and provides an independent assessment of the data and materials presented by management to the Compensation Committee

Participates in Compensation Committee meetings as requested

Reviews and comments on the Compensation Discussion & Analysis portion of the Proxy Statement

 

 

CEO

Evaluates executive performance and recommends adjustments to executive base salary and STI and LTI compensation (for other NEOs)

Develops business goals, which are considered and approved by the Compensation Committee and Board of Directors in the design of our executive compensation program

 

Role of Independent Compensation Consultant

The Compensation Committee has retained Radford to provide advice on compensation of the Company’s executive officers and Non-Employee Directors. Radford provides no other services to the Company. The Compensation Committee has assessed the independence of Radford and concluded that its engagement of Radford does not raise any conflict of interest with the Company or any of its directors or executive officers.

Risk Considerations

While the Board of Directors has overall responsibility for risk oversight, each of the standing committees of the Board of Directors regularly assesses risk in connection with executing its responsibilities. As such, the Compensation Committee assesses the potential risks arising from our compensation policies and practices. The Compensation Committee coordinates with our legal, human resources and other departments, considers shareowner feedback and interests and consults with Radford. The Compensation Committee and its independent compensation consultant reviewed and discussed the assessment for fiscal 2016, including the governance components described earlier.  The Compensation Committee determined that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on our Company.

 

Compensation Competitive Analysis

 

 

 

The Compensation Committee considers data on the executive compensation programs and levels at peer companies. Radford and the Compensation Committee determined that the use of Radford’s High Tech Survey, along with the Company’s selected peer group, provided the appropriate companies against which DigitalGlobe competes for the specialized talent and experience required of our NEOs.

The Compensation Committee, with input from Radford, annually assesses the appropriateness of our peer group. In 2016 we used the following principal considerations when evaluating our peer group:

Industry Affiliation ‑ Companies in the satellite & geospatial, business information and defense industries

Revenues ‑ Revenues in the range of $300 Million to $2 Billion

Market Capitalization ‑ Market capitalization in the range of $500 Million to $6 Billion

 

 

 

 

 

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Peer Group for our 2016 Benchmarking: Current Peers

 

 

 

 

 

 

 

Peer

Revenue* ($)

Market

Capitalization

Geospatial/ Satellite

Business Information

Defense

Acxiom Corporation

804.9
1,629.0

 

X

 

comScore, Inc.

368.8
1,604.0

 

X

 

Corporate Executive Board Co.

928.4
2,032.0

 

X

 

Costar Group Inc.

711.8
6,715.0

 

X

 

Cubic Corporation

1,431.0
1,274.0

 

 

X

Exponent, Inc.

289.2
1,286.0

 

X

 

FactSet Research Systems Inc.

1,006.8
6,730.0

 

X

 

Fair Isaac Corporation

838.8
2,927.0

 

X

 

FLIR Systems, Inc.

1,557.1
3,877.0

 

 

X

Forrester Research Inc.

313.7
505.0

 

X

 

Gartner Inc.

2,163.1
7,515.0

 

X

 

IHS Inc.

2,184.3
8,074.0

 

X

 

Iridium Communications Inc.

411.4
799.0

X

 

 

Kratos Defense & Security Solutions

657.1
242.0

 

 

X

NeuStar, Inc.

1,050.0
1,284.0

 

X

 

Qlik Technologies, Inc.

612.7
2,945.0

 

X

 

The Advisory Board Company

768.3
2,078.0

 

X

 

The KEYW Holding Corporation

297.9
235.0

X

 

X

Trimble Navigation Limited

2,395.5
5,373.0

X

 

X

ViaSat Inc.

1,382.5
2,952.0

X

 

 

50th Percentile / % of Sector Type

821.8
2,055.0

 

 

 

DigitalGlobe

702.4
1,096.0

X

X

X

Rank

36%
19%

 

 

 

 

*Dollars are presented in millions. Revenue and market capitalization are as of December 31, 2015, reflecting the approximate data and considerations used when the Compensation Committee selected the peer group. 

Except as otherwise noted in the Compensation Discussion & Analysis, the Compensation Committee’s executive compensation determinations are subjective and the result of the Compensation Committee’s business judgment, which is informed by the experiences of the members of the Compensation Committee, the analysis and input from, and peer group data provided by, the Compensation Committee’s independent executive compensation consultant, as well as the Compensation Committee’s assessment of overall compensation trends.  However, executive compensation levels are not established at any particular level against peer group data. Rather, the Compensation Committee generally considers the following factors: the Company’s performance; the performance of each NEO; the contribution of each NEO to our overall results; each NEO’s experience, skill set and tenure; and compensation structure and levels for comparable positions at companies in our peer group.

 

 

 

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2016 Executive Compensation

 

 

 

 

The Total Direct Compensation of our NEOs is linked to corporate and individual performance as well as the interests of our shareowners. We believe this aligns our executives’ incentives with our objective of enhancing shareowner value over the longer term.

Named Executive Officers

Our NEOs and their titles are as follows:

 

 

 

 

Name

Title

 

Jeffrey R. Tarr

President and Chief Executive Officer

 

Gary W. Ferrera

Executive Vice President, Chief Financial Officer

 

Walter S. Scott

Executive Vice President, Chief Technical Officer and General Manager - Platform & Services

 

Timothy M. Hascall

Executive Vice President, Chief Operations Officer and General Manager - Imagery

 

Daniel L. Jablonsky

Senior Vice President, General Counsel and General Manager – International Defense and Intelligence

 

 

2016 Target Compensation

Our executive compensation programs are designed to effectively link our executives’ pay to Company performance and shareowner interests. Our overall disappointing performance of 2015, at least when measured by our challenging goals and targets, was reflected in certain Compensation Committee decisions regarding 2016 pay levels. In particular, and as reflected in the following section, the Compensation Committee held base salaries and target STI Plan incentives flat in 2016, and granted LTI at significantly lower levels in order to demonstrate alignment with shareowner value.

 

 

 

 

 

 

 

 

 

 

 

 

    

    

 

    

Name

Title

Salary
($)

Short-Term Incentive
Target

(%)

Long-Term Incentive
($)

Total Direct Compensation
($)

Jeffrey R. Tarr

President and Chief Executive Officer

710,000

100%

1,684,000

3,112,000

Gary W. Ferrera

EVP, Chief Financial Officer

425,000

70%

975,000

1,697,500

Walter S. Scott

EVP, CTO and General Manager – Platform & Svcs

370,000

70%

765,000

1,394,000

Timothy M. Hascall

EVP, COO and General Manager – Imagery

375,000

70%

795,000

1,433,000

Daniel L. Jablonsky

SVP, General Counsel and General Manager -  International Defense and Intelligence

355,000

60%

750,000

1,318,000

 

Base Salary

The table below shows annual base salary levels for our NEOs in 2015 and 2016. Our NEOs did not receive base salary increases for 2016.

 

 

 

 

Name

2015
($)

2016
($)

 

Jeffrey R. Tarr

710,000

710,000

 

Gary W. Ferrera

425,000

425,000

 

Walter S. Scott

370,000

370,000

 

Timothy M. Hascall

375,000

375,000

 

Daniel L. Jablonsky

355,000

355,000

 

 

2016 Short-Term Incentive Plan

The STI Plan incorporated the following performance measures and weightings in 2016:

 

 

 

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·

2016 Company Adjusted EBITDA (35%)

·

2016 Consolidated Company GAAP revenues (35%)

·

2016 Individual and Corporate Strategic Objectives (30%)

Each NEO’s target annual cash incentive (as expressed as a percentage of base salary) under the STI Plan for 2016 was the same in 2015: 100% for Mr. Tarr and 70% for Messrs. Ferrera, Scott and Hascall, and 60% for Mr. Jablonsky. Each NEO’s maximum annual cash incentive for 2016 is capped at 185% of his target amount.

Financial Metrics

The table below illustrates the financial metrics approved by the Compensation Committee for the 2016 STI Plan, the actual Company performance result for 2016, and the corresponding payout percentage of that component of the incentive opportunity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

    

    

    

    

    

    

    

    

    

    

Performance Metric

Weighting

Threshold

Target

Maximum

Actual

Payout

Adjusted EBITDA * (in millions)

35%

$320

$360

$400

$382.6

157%

Consolidated Revenue (in millions)

35%

$670

$705

$755

$713

116%

Payout (as a % of the corresponding portion)

 

25%

100%

200%

 

136.5%

 

*Adjusted EBITDA is a non‑U.S. GAAP financial measure. For purposes of the STI Plan, adjusted EBITDA represents net income before interest, taxes, and depreciation and amortization expense, and excludes restructuring charges, integration costs, acquisition costs, loss from early extinguishment of debt, and equity-method investment activity.

 

 

Individual Strategic Metrics

We determine 30% of the STI Plan target payouts based on DigitalGlobe’s performance against individual metrics for each executive. These objectives had specific measures tied to achievement at threshold, good, and great with each category being awarded respectively at 50%, 100% and 150%.  The max achievement for any measure was 150%.

Name

Individual Metrics (30% of compensation)

Threshold

Good

Great

Jeffrey R. Tarr

Guidance given in February 2016 relative to corporate performance (revenue and adjusted EBITDA)

 

 

X

Successful renewal of our EV and Global Enhanced GEOINT Delivery (“Global EGD”) contracts

 

X

 

Successful completion of one or more strategic opportunities

 

 

X

Build incremental Direct Access Program annual contract value of letters of intent and contracts

 

 

X

Company engagement score relative to technology peer group

 

 

X

Gary W. Ferrera

Quarterly forecast accuracy of revenue and adjusted EBITDA

 

X

 

Deliver on new procurement savings

 

 

X

Guidance given in February 2016 relative to corporate performance (revenue and adjusted EBITDA)

 

 

X

Investor perception of investor communications

 

X

 

Timothy M. Hascall

Imagery revenue

 

X

 

Successful renewal of our EV and Global EGD contracts

 

X

 

Engagement amongst Imagery team relative to technology peer group

 

 

X

Walter S. Scott

Platform revenue

 

 

X

Platform monthly recurring revenue

X

 

 

Successful renewal of our EV and Global EGD contracts

 

X

 

Daniel L. Jablonsky

International defense &intelligence revenue

 

X

 

Build incremental Direct Access Program annual contract value of leters of intent and contracts

 

 

X

Successful completion of a strategic opportunity

 

 

X

For 2016, our Compensation Committee determined that our executives achieved their individual metrics at an aggregate level of 132%.

 

 

 

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Payouts under the STI Plan

Individual payouts under the STI Plan resulted from quantitative achievement on the measures described in the table above and an assessment of the executive’s performance. Accordingly, individual payouts varied. The CEO’s individual payout was determined by the Compensation Committee and the Board of Directors. The individual payouts for the other NEOs were approved by the Board of Directors with input from the CEO. The table below details the payouts under the STI Plan for our CEO and NEOs:

 

 

 

 

 

 

 

 


Target)

 

Name

Base
Salary($)

Target
Annual
Cash
Incentive(%
of Base
Salary)

Target
Award ($)

Consolidated
Revenue
Component
Actual
Payout
Percentage
(35% of
target
opportunity)

Adjusted
EBITDA
Margin
Component
Actual
Payout
Percentage
(35% of
target
opportunity)

Individual
Strategic

Metric

Actual
Payout
Percentage
(30% of target
opportunity)

Results/
Payout($)
(1)

Overall
Payout of
STI Plan


(as a % of
Target)

Jeffrey R. Tarr

710,000

100%

710,000

116%

157%

140%

980,000

138.0%

Gary W. Ferrera

425,000

70%

297,500

116%

157%

131%

404,000

135.6%

Walter S. Scott

370,000

70%

259,000

116%

157%

120%

343,000

132.4%

Timothy M. Hascall

375,000

70%

262,500

116%

157%

120%

348,000

132.3%

Daniel L Jablonsky

355,000

60%

132,660

116%

157%

147%

299,000

140.4%

 

(1)

Represents 70% of the target award amount multiplied by the actual payout percentage for the financial components collectively, plus 30% of the target award amount multiplied by the actual payout percentage for the individual strategic metrics.

 

2016 Long-Term Incentive Awards

The structure of our LTI awards is summarized in the table below:

 

 

 

 

 

Long-Term Incentive Vehicle/
Metric

Rationale for Use of Metric

Percent of
LTI Mix*

Payout
Opportunity

Vesting
Cycle

Performance Share Units
(Absolute Stock Price “ABS”)

Aligns executive pay and shareowner interests, because it holds the executives accountable for stock price appreciation

33%

0‑100% of
Target Shares

3 Years
(2016-2018) performance period with additional 1-year holding period if earned in Year 1 or 2

Performance Share Units
(relative total shareholder return “TSR”)

Measures external performance using total shareholder return relative to companies in the Russell 2000

33%

0‑200% of
Target Shares

3 Years (2016-2018) performance period with cliff vesting

Restricted Share Units
(Time Vested)

Enhances retention while still aligning award value to the value of the Company’s stock

33%

0-100% of target shares

25% per year
over 4 Years

 

Based on the award values approved by the Compensation Committee.

 

 

 

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2016 Long-Term Incentive Award Values

In determining the appropriate level of equity award grants for 2016, the Compensation Committee took into consideration the market median long-term incentive targets for comparable positions in the peer group and the performance of our stock in 2015. The 2016 award values approved by the Compensation Committee for the named executive officers are reflected in the table below. These values were lower in 2016 due to the stock price performance.  The Compensation Committee determined that it was appropriate, and consistent with our performance-based compensation philosophy, to balance the enhanced retention objectives of the RSU component of the awards by granting an equal portion of the total award value for each tranche of PSUs in 2016.

 

(33%)

 

(33%)

 

(33%)

 

(100%)

 

 

Name

PSU (ABS)


(33%)

PSU (TSR)


(33%)

RSU


(33%)

Total


(100%)

 

Jeffrey R. Tarr

$
564,000
$
564,000
$
564,000
$
1,692,000

 

Gary W. Ferrera

$
325,000
$
325,000
$
325,000
$
975,000

 

Walter S. Scott

$
255,000
$
255,000
$
255,000
$
765,000

 

Timothy M. Hascall

$
265,000
$
265,000
$
265,000
$
795,000

 

Daniel L Jablonsky

$
250,000
$
250,000
$
250,000
$
750,000

 

 

* The differences between the award values approved by the Compensation Committee, as shown above, and the grant date fair value of the awards appearing in the Summary Compensation Table below is attributable to (i) rounding to the nearest whole share, and (ii) in the case of the PSUs, application of the valuation methodology described in footnote 1 to the Summary Compensation Table.

2016-2018 Performance Share Unit Awards

Absolute Stock Price PSUs

Thirty-three percent of the total 2016 LTI grant value approved by the Compensation Committee was awarded in PSUs with performance-based vesting requirements linked to DigitalGlobe’s achievement of absolute share price hurdles for the three-year performance period of 2016-2018. This metric was chosen to put a direct emphasis on stock price appreciation, which at time of grant was $15.66, with vesting based on achievement of sustained stock price trading average over a 45-day period. The following chart shows the metrics that are used to determine the performance-based vesting level of these awards:

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

 

 

  

First Hurdle

 

Second Hurdle

 

Third Hurdle

  

Absolute Stock Price

 

$20

 

$25

 

$30

 

Vesting (% of target for this portion of the PSUs)

 

20%

(20% cumulative)

 

40%

(60% cumulative)

 

40%

(100% cumulative)

 

 

Vesting of this award is based on the achievement of each stock price hurdle which must be maintained on average for 45 trading days. If earned prior to the end of the second year of the performance period, an additional one year time-based vesting applies.

 

Relative Total Shareholder Return PSUs

Thirty-three percent of the total 2016 LTI grant value approved by the Compensation Committee was awarded in PSUs with performance-based vesting requirements linked to DigitalGlobe’s relative TSR for the three-year performance period 2016‑2018. Relative TSR will be measured by comparing DigitalGlobe’s TSR for the three-year performance period to those companies that are included in the Russell 2000 index. To further enhance alignment with shareowner interests, the Compensation Committee provided for a vesting cap of 100% for this portion of the PSUs if DigitalGlobe’s TSR for the performance period is negative, regardless of TSR performance on a relative basis. The following chart shows the metrics that will be used to determine the performance-based vesting level of these awards:

 

 

 

 

 

 

 

 

TSR Performance

Vesting

 

(% of target)

Vesting if DigitalGlobe’s absolute TSR is Negative

 

(% of target)

 

25th Percentile

50%

50%

 

55th Percentile

100%

100%

 

75th Percentile

150%

100%

 

Above 90th Percentile

200%

100%

 

 

 

 

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For purposes of these awards, TSR will be calculated assuming dividend investment and using 20-day stock price averaging (the first and last 20 trading days) on both the front-end and back-end of the three-year performance period. The relative comparison will be based on those companies that are included in the Russell 2000 index for the entire performance period.

2014‑2016 Performance Share Unit Awards

In addition to new awards granted in 2016 described above, we finalized the three-year performance period for the 2014-2016 PSUs (“2014 PSUs”).  The 2014 PSUs were vested at a combined 108% as detailed below:

2014 PSUs - Return on Invested Capital

Fifty percent of the total 2014-2016 PSU grant value approved by the Compensation Committee was awarded in PSUs with performance-based vesting requirements linked to DigitalGlobe’s achievement of unlevered free cash flow (“UFCF”) to return on invested capital (“ROIC”) for the three-year performance period 2014-2016. The target level was set to be reasonably achievable with strong management performance, while the maximum level was designed to reflect exceptional performance. The following chart shows the metrics that will be used to determine the performance-based vesting level of these awards:

 

 

 

 

 

 

 

 

Below
Threshold

Threshold

Target

Maximum

Results/Final Vesting
Percentage

 

UFCF ROIC(1)

Less than 4%

3%

6%

9% or greater

7.9%

 

Vesting (% of target)

0%

50%

100%

200%

163%

 

 

(1) ROIC is a non‑U.S. GAAP financial measure. For purposes of 2014‑2016 PSUs, ROIC is defined as UFCF divided by invested capital.  UFCF is a non-U.S.GAAP financial measure defined as net cash flows provided by operating activities less net cash flows used in investing activities, excluding cash paid for interest, acquisitions of businesses, net of cash acquired, and certain other one-time costs.  Exclusions from UFCF are ultimately at the sole discretion of the Compensation Committee.  Invested capital is defined as total debt plus total shareowners’ equity, less cash and cash equivalents and marketable securities.

2014 PSUs – Relative Total Shareholder Return

Fifty percent of the 2014 PSUs were linked to DigitalGlobe’s relative TSR performance, as measured against companies in the Russell 2000 index in the same manner as described above with respect to the 2016-2018 PSU awards:

 

 

 

 

 

 

 

Below
Threshold

Threshold

Target

Maximum

Results/Final Vesting
Percentage

Relative TSR

Less than 25th Percentile

25th Percentile

50th Percentile

75th Percentile or greater

27th Percentile

Vesting (% of target)

0%

50%

100%

200%

53%

 

For the 2014 – 2016 performance period, DigitalGlobe’s relative TSR performance was at the 27th percentile. This resulted in vesting of 53% of target PSUs for this portion of the award. 

 

Executive Policies, Provisions and Agreements

 

 

 

 

Stock Ownership Guidelines

 

 

 

Position

Requirement

 

Chief Executive Officer

6x Base Salary

 

Executive Vice President

3x Base Salary