Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On November 11, 2016, the Company’s newly formed wholly owned subsidiary, Simia, entered into an employment agreement with Patrick F. Preece (the “Employment Agreement”). Under the Employment Agreement, Mr. Preece will serve as the Chief Executive Officer of Simia. Mr. Preece will be a named executive officer of the Company.
Under the Employment Agreement, Mr. Preece will receive an annual base salary of $250,000, subject to annual increase at the discretion of the compensation committee (the “Compensation Committee”) of the board of directors of the Company (the “Board”). Mr. Preece will be eligible to receive an annual cash or non-cash bonus in the sole and exclusive discretion of the Compensation Committee. Mr. Preece will also be eligible to receive a cash or non-cash profit bonus of an aggregate amount up to 15% of the profit of the business of Simia (the “Business”) for each fiscal year in which the Business achieves an internal rate of return of at least 18%. In the event that the Business is sold to a third-party solely for cash consideration during Mr. Preece’s employment period, he will be eligible to receive a cash or non-cash sale profit bonus of up to 15% of the closing consideration received by the Company.
He will also be entitled to participate in any other benefit plans established by the Company for management employees.
The Employment Agreement has a five year term. Under the Employment Agreement, Mr. Preece may be terminated with or without “cause” (as defined in the Employment Agreement) and may resign with or without “good reason” (as defined in the Employment Agreement). If Mr. Preece is terminated without “cause” or resigns for “good reason” he will receive severance equal to two years of his base salary. He will also be entitled to a pro-rata share of the profit bonus and his deferred compensation will vest immediately. Mr. Preece is also subject to a non-compete and non-solicitation provision during the term of his employment and, unless his employment is terminated without “cause” or he resigns for “good reason,” for two years thereafter.
The foregoing description of the Employment Agreement is not complete and is qualified in its entirety by reference to the Employment Agreement, which is attached as Exhibit 10.2 to this Current Report on Form 8-K and incorporated herein by reference.
In connection with the Employment Agreement, on November 15, 2016, the Board determined to increase the size of the Board from six to seven directors and appointed Mr. Preece to fill the resulting vacancy.
Mr. Preece has served in the last five years as the Chief Executive Officer of GWG MCA Capital, Inc., a subsidiary of a public company, SVP & Head of Alternative Assets at Esquire Bank, and was Chief Executive Officer at Walker Preston. In addition, Mr. Preece was Managing Director and Global Head of Asset Securitization for DZ Bank, managing Autobahn Funding, a $6 billion commercial paper conduit that specialized in alternative asset classes, from 2000 to 2011. Throughout his career Mr. Preece has focused on the origination and management of structured finance and asset-backed lending with an emphasis on litigation finance. Mr. Preece also serves on the board of directors of Saving Children, Building Families Foundation, the Wellington Group, Star Angel Network, Vital Neuro, LLC, IndicaTree, LLC, and Saratov Capital, LLC. Mr. Preece holds a Bachelor of Science in Mechanical Engineering and an MBA in Finance, both from the University of Michigan. Mr. Preece will not receive any additional compensation other than as provided in the Employment Agreement for serving on the Board. We expect to enter into our standard form of indemnification agreement for officers and directors with Mr. Preece.
Other than the Employment Agreement, there is no arrangement or understanding with any person pursuant to which Mr. Preece was appointed as a member of the Board. Mr. Preece is not a party to any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K. Mr. Preece is 51 years old and has no family relationship with any executive officer or member of the Board of the Company.