ITEM 11.
|
EXECU
TIVE COMPENSATION.
|
Compensation Discussion and Analysis
The Role of Stockholder Say-on-Pay Votes
In August 2017, we held a stockholder advisory vote to approve the compensation of our named executive officers (the “
say-on-pay proposal
”). Our stockholders overwhelmingly approved the compensation of our named executive officers, with approximately 89% of stockholder votes cast in favor of the say-on-pay proposal. The Compensation Committee believes this affirms the stockholders’ support of our approach to executive compensation, and did not change its approach in 2018.
The Compensation Committee will continue to consider the outcome of our say-on-pay votes when making future compensation decisions for the named executive officers.
Overview
We established an Office of the CEO in October 2016 which currently consists of Michael Arends and Russell C. Horowitz. The Office of the CEO performs the duties and responsibilities of the CEO. Our “named executive officers”, or “NEOs”, are:
Michael Arends
|
Chief Financial Officer and member of the Office of the CEO
|
Russell C. Horowitz
|
Executive Chairman and member of the Office of the CEO
|
Ethan Caldwell
|
Former Chief Administrative Officer, General Counsel, Secretary and former member of the Office of the CEO, who ceased serving as an executive officer of the Company in December 2018
|
You can find detailed information regarding the compensation we paid to our NEOs in the tables that begin on page 7.
Our executive compensation programs are intended to serve two related goals:
|
•
|
Long-Term Retention of our Strong Management Team
. We believe that our continued success depends on our ability to retain our experienced, complementary and dedicated management team. Although we always consider the ultimate interest of our stockholders in setting NEO compensation, we also must acknowledge that our executives face many career options and we therefore must provide strong incentives for them to continue to participate in our growth.
|
|
•
|
Long-Term Growth in Stockholder Value
. We believe that management compensation packages should reflect as much as possible the risk and opportunity experienced by our stockholders. As a result, we strongly emphasize performance-based compensation arrangements which reward NEOs for contributions to our long-term growth and overall corporate success.
|
We believe that this long-term focus will appropriately reward our management team for performance that will most benefit our Company and stockholders. We think that a focus on shorter-term results could inappropriately over- or under-compensate our executives due to short-term fluctuations that do not as accurately reflect our corporate growth and the corresponding benefit to our stockholders.
Our “long-term” emphasis results in NEO compensation packages that are weighted significantly towards long-term equity grants, with a relatively low proportion of NEO compensation derived from cash salaries. Annual cash bonuses to our NEOs are generally paid under our annual incentive plan, which ties such bonus payments directly to our annual corporate performance.
The Compensation Committee is responsible for setting the compensation and benefits for our executive officers, to determine distributions and grants of awards under our various stock and other incentive plans and to assume responsibility for all matters related to the foregoing. Meetings of the Compensation Committee are called by the chair of the committee and the chair sets the agenda for each committee meeting. In performing its responsibilities, the Compensation Committee typically invites, for all or a portion of each meeting, members of the Office of the CEO and other members of management to its meetings. Members of the Office of the CEO meet with the Compensation Committee on an ongoing basis to discuss the objectives and performance of Marchex’s NEOs. For compensation decisions relating to our executive officers, the Compensation Committee considers recommendations from members of the Office of the CEO, who utilize various industry compensation surveys as part of our company wide annual compensation review process. After receipt and discussion of such recommendations with members of the Office of CEO, the Compensation Committee meets to ultimately determine the compensation packages for each of our executive officers. Members of the Office of the CEO do not participate in deliberations regarding their individual compensation.
3
Role of a Compensation Consultant
The duties of any compensation consultant we engage are generally to evaluate executive compensation, perform an analysis on realized pay alignment with financial and stock performance, discuss general compensation trends, provide competitive market practice data and benchmarking, participate in the design and implementation of certain elements of the executive compensation program and assist our Office of the CEO in developing compensation recommendations to present to the Compensation Committee for the executive officers other than the members of the Office of the CEO. The Compensation Committee may accept, reject or modify any recommendations by compensation consultants or other outside advisors. The compensation consultant does not make specific recommendations on individual amounts for the executive officers or the independent directors, nor does the consultant determine the amount or form of executive and director compensation.
In February 2016, the Compensation Committee engaged Pearl Meyer & Partners, LLC (“
Pearl Meyer
”) as its independent compensation consultant. The Compensation Committee conducted an assessment of Pearl Meyer’s independence relative to standards prescribed by the SEC and determined that no conflicts existed. Historically, the Company has not used a compensation consultant for executive compensation matters and the Company did not use a compensation consultant for the 2017 and 2018 period.
NEO Compensation for 2018
Our Compensation Committee in reviewing our executive compensation packages assesses salary, salary history, the number and value of shares owned by our executives, prior equity grants and vesting and exercise history. The Compensation Committee also considers data regarding compensation paid at public media, internet and technology-based companies of comparable size to our Company and which could compete for the services of our NEOs. Although the compensation practices of our competitors instruct our review, we use that data only to gain perspective and do not “benchmark” our compensation to any particular level. The Compensation Committee consults with outside counsel in its review.
Competitive Positioning
The Compensation Committee periodically reviews competitive data regarding compensation at various comparable peer companies. We do not benchmark compensation levels to fall within specific ranges compared to selected peer groups in our industry. We use the information developed by management and counsel using proxy data for peer group companies to gain a general understanding of current compensation practices.
Base Salary
The 2018 salaries shown in the Summary Compensation Table on page 7 were set by our Compensation Committee based on the compensation review discussed above, as well as a consideration of each NEO’s total compensation package including prior equity grants, exercise history, and existing stock ownership. Base salaries are a necessary part of our compensation program and provide executives with a fixed portion of pay that is not performance-based. Our goal is to provide competitive base pay levels. Historically, the Compensation Committee considered our desire to maintain cash remuneration as a relatively small portion of overall compensation. In addition, the Compensation Committee considered each NEO’s skills, experience, level of responsibility, performance and contribution to our Company. The Compensation Committee also took into account in conjunction with the NEO’s specific areas of responsibilities and objectives, each NEO’s contribution to the Company’s overall success as a member of the management team. The Compensation Committee considers the relative compensation levels among all the members of the management team to ensure the Company’s executive compensation programs are internally consistent and equitable. All salaries are reviewed at least annually and subject to future adjustment by the Compensation Committee.
Equity Compensation
All of our employees and directors are eligible to receive options, shares of restricted stock, and/or restricted stock units under our 2012 Stock Incentive Plan (the “
2012 Stock Plan
”).
The Compensation Committee does not automatically grant equity to NEOs every year. The Compensation Committee takes into account the various factors outlined in the discussion of base salary above as well as the Company’s financial performance and its impact on stockholder value and also analyzes existing NEO equity holdings and prior equity awards to
4
take into account whether additional grants are appropriate and necessary to rec
alibrate the cash-equity balance of NEO compensation packages.
On August 21, 2018, the Compensation Committee granted stock options to Mr. Arends for our Class B common stock under the 2012 Stock Plan (with time-based vesting), based on the compensation review discussed above. The Compensation Committee determined the size of Mr. Arends’ equity grant based on a consideration of his existing stock ownership and outstanding equity grants awarded in prior years. Given its vesting schedule, we believe that this equity grant will help further motivate Mr. Arends to continue to focus on the long-term success of our business enterprise. You can find more information regarding this grant, including its vesting schedule, by referring to our Outstanding Equity Awards at 2018 Fiscal Year-End Table on pages 8-9.
Most equity awards for employees are tied to their annual performance reviews and are generally granted following the release of our fourth quarter financial results. We may occasionally make employee grants outside of that review process and such awards typically are granted as of the date the grant is approved. All new-hire awards have a grant date set to correspond to the date of hire. All options have an exercise price set at the closing market price of our Class B common stock on the grant date.
Annual Incentive Plan
The Compensation Committee originally adopted our annual incentive plan in 2006 and as amended to date (the “
Incentive Plan
”) to motivate and reward key employees for enabling our Company to achieve specified corporate objectives together, to increase the competitiveness of our management compensation packages without increasing our fixed costs, and to align management compensation with key measures of our financial performance.
The Compensation Committee in its discretion determines the maximum amount available for award, in the aggregate, to all plan participants in light of the number of participants and the Company’s resources. The Compensation Committee also determines the participants in the pool. Eligibility determinations are based upon the Compensation Committee’s assessment of the importance of a participant’s role, together with such participant’s overall cash and equity compensation level. Finally, the Compensation Committee determines the measures of performance on which bonus awards are based, using any of the following as it determines in its sole discretion:
•
revenues;
•
pre-tax income;
•
adjusted operating income before amortization;
•
operating income before amortization;
•
operating income;
•
net earnings;
•
net income;
•
cash flow or funds from operations;
•
adjusted earnings per share;
•
earnings per share;
•
appreciation in the fair market value of our stock;
•
cost reduction or savings;
•
implementation of cr
itical processes or projects; or
•
adjusted earnings before interest, taxes, depreciation and amortization, or adjusted earnings before any of them.
The Compensation Committee determined that for the 2018 fiscal period, a maximum aggregate bonus pool of $776,328 would be available for award to plan participants based upon the achievement of updated revenue and adjusted OIBA targets at the highest threshold. The participants for the 2018 fiscal period were Michael Arends, Ethan Caldwell and Russell Horowitz. The target bonus payout percentages were 25 to 175% based on the performance target category and were based on achieving specified revenue (new revenue and total revenue) and adjusted OIBA targets for the 2018 fiscal year with each target category weighted 33 1/3%.
The Compensation Committee elected to use these revenues and adjusted OIBA targets because it believes that such targets most accurately reflect our growth and improvements in our corporate performance without the impact of certain non-
5
cash
and non-recurring expenses which the Company does not regard as ongoing costs of doing business. The Compensation Committee set a range of specific revenue and adjusted OIBA targets based on a review of our actual revenue and adjusted OIBA for the fiscal y
ear ended December 31, 201
7
and our budgeted revenue and adjusted OIBA for the 201
8
fiscal year. At the low end of the range, the targets were intended to be difficult but realistic given our expectations regarding corporate performance. The high end of th
e range, intended to reflect “optimum” Company performance, were set
in consideration of
our projected financial results and were considered “stretch” goals.
The Compensation Committee also has absolute discretion to award no bonuses at all even if the highest target is achieved. It is our intention that any such bonus payments would still constitute a relatively small percentage of our NEO compensation so that the bulk of their compensation package will remain dependent on our long-term growth. For 2018, the Compensation Committee awarded cash bonuses under the Incentive Plan in the amount of $22,878 to Mr. Horowitz, $68,438 to Mr. Caldwell, and $377,825 to Mr. Arends.
Cash Bonuses
On August 21, 2017, the Compensation Committee separately approved the following performance cash bonus parameters applicable to Mr. Horowitz: performance cash bonuses subject to the execution of certain customer or partner contracts with each contract exceeding certain annualized minimum contract values and assuming continued employment at each such payment date (a) in the amount of $250,000 (the “
First Performance Payment
”) if such conditions are met on or before December 31, 2017, and (b) additional incremental performance cash bonuses in two tranches of $125,000 each, if such incremental performance conditions are met for one or both tranches on or before August 31, 2018 (collectively, the “
Second Performance Payments
”). The First Performance Payment and Second Performance Payment parameters were met and such amounts were paid to Mr. Horowitz in 2017 and 2018, respectively.
Risk Assessment of Compensation Policies and Practices
We believe our compensation policies and practices do not promote imprudent risk taking. In this regard, we note the following: (i) our annual incentive compensation is based on balanced performance metrics that promote disciplined progress towards longer-term Company goals; (ii) we do not offer short-term incentives that might drive high-risk investments at the expense of long-term Company value; and (iii) our compensation programs are weighted towards offering long-term incentives that reward sustainable performance, especially when considering our executive share ownership. Accordingly, we believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee during 2018, are or have been an officer or employee of the Company. No member of the Compensation Committee had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K. During fiscal year 2018, none of the Company’s executive officers served on the Compensation Committee (or its equivalent) or Board of Directors of another entity any of whose executive officers served on the Company’s Compensation Committee or Board of Directors.
6
Summary Compensation Table
(1)
The following table sets forth information concerning the compensation earned during the fiscal years ended December 31, 2017 and 2018, as applicable, by our NEOs:
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock Awards
($)
(2)
|
|
|
Option Awards
($)
(3)
|
|
|
Non-equity compensation
($)
|
|
|
All Other Compensation
($)
(4)
|
|
|
Total
($)
|
|
Michael Arends
|
|
2018
|
|
|
297,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
93,160
|
|
|
|
377,825
|
|
|
|
10,160
|
|
|
|
778,645
|
|
Chief Financial Officer and
|
|
2017
|
|
|
294,063
|
|
|
|
150,000
|
|
|
|
216,750
|
|
|
|
181,700
|
|
|
|
278,438
|
|
|
|
13,130
|
|
|
|
1,134,081
|
|
member of the Office of the CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell C. Horowitz
(5)
|
|
2018
|
|
|
255,000
|
|
|
|
250,000
|
|
|
|
41,250
|
|
|
|
21,000
|
|
|
|
22,878
|
|
|
|
—
|
|
|
|
590,128
|
|
Executive Chairman and member
|
|
2017
|
|
|
92,083
|
|
|
|
250,000
|
|
|
|
524,511
|
|
|
|
150,100
|
|
|
|
—
|
|
|
|
155,605
|
|
|
|
1,172,299
|
|
of the Office of the CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Executive Officer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ethan Caldwell
(6)
|
|
2018
|
|
|
292,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
68,438
|
|
|
|
—
|
|
|
|
360,938
|
|
Former Chief Administrative
|
|
2017
|
|
|
289,063
|
|
|
|
—
|
|
|
|
115,600
|
|
|
|
237,000
|
|
|
|
277,617
|
|
|
|
—
|
|
|
|
1,090,075
|
|
Officer, General Counsel, Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and former member of the Office
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of the CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes only those columns relating to compensation awarded to, earned by or paid to the NEOs in 2017 and 2018.
|
(2)
|
These amounts do not reflect whether the NEO has actually realized or will realize a financial benefit from the awards (such as by vesting of a restricted stock award). Amounts represent the aggregate grant date fair value of restricted stock each year computed in accordance with FASB ASC 718, excluding the effect of forfeitures. For a more detailed discussion on the valuation model and assumptions used to calculate the fair value of each stock award, refer to note 5 to the consolidated financial statements contained in our 2018 Annual Report on Form 10-K filed on March 18, 2019.
|
(3)
|
These amounts do not reflect whether the NEO has actually realized or will realize a financial benefit from the awards (such as by exercising stock options). Amounts represent the aggregate grant date fair value of option awards each year computed in accordance with FASB ASC 718, excluding the effect of forfeitures. The fair value of the shares underlying the option awards that vest based on time is estimated using the Black-Scholes option pricing model. For a more detailed discussion on the valuation model and assumptions used to calculate the fair value of each stock award, refer to note 5 to the consolidated financial statements contained in our 2018 Annual Report on Form 10-K filed on March 18, 2019.
|
(4)
|
Unless otherwise noted, the total of all perquisites and personal benefits of each NEO falls below the reportable amount for disclosure within this table. Mr. Arends’ amounts in 2017 and 2018 exceeded the reportable amount and includes the Company’s 401K matching contribution, auto allowance and life insurance premium.
|
(5)
|
Mr. Horowitz received an annual director restricted stock grant of 15,000 shares and 15,000 options under Marchex’s 2012 Stock Incentive Plan with fifty (50%) percent of such shares of restricted stock and options vesting on the first and second annual anniversary of September 27, 2018, respectively, and with vesting in full in the event of a Change in Control. Mr. Horowitz was paid a performance cash bonus of $250,000 in two tranches of $125,000 each in connection with the execution of certain customer or partner contracts prior to August 31, 2018.
|
(6)
|
Mr. Caldwell entered into an agreement with the Company on March 26, 2019 pursuant to which Mr. Caldwell terminated his employment effective March 27, 2019 (the “
Termination Date
”) and entered into a one (1) year consulting agreement commencing on the Termination Date pursuant to which Mr. Caldwell will receive an aggregate amount of $292,500 through the one (1) year anniversary of the Termination Date and the Company awarded Mr. Caldwell a restricted stock grant under the Company’s 2012 Stock Incentive Plan to purchase 40,000 shares of Marchex’s Class B common stock with vesting in equal quarterly amounts over the one (1) year period from the Termination Date.
|
7
Outstanding Equity Awards at 2018 Fiscal Year-End
(1)
The following table sets forth certain information with respect to the value of all unexercised options and unvested stock awards previously awarded to our NEOs as of December 31, 2018. Certain option and stock awards provide for accelerated vesting, in certain circumstances. For more information on these acceleration provisions, please refer to Potential Payments upon Termination or Change in Control at pages 9-10.
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Grant Date
|
|
Number of Securities Underlying Unexercised Options
Exercisable
(#)
|
|
|
Number of Securities Underlying Unexercised Options Unexercisable (#)
|
|
|
Option Exercise Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of Stock
That Have Not
Vested
(#)
|
|
|
Market Value of Shares or Units of Stock That Have Not Vested
(2)
($)
|
|
Michael Arends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
8/12/2009
|
|
|
21,601
|
|
|
|
—
|
|
|
|
4.63
|
|
|
8/12/2019
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
5/11/2010
|
|
|
13,167
|
|
|
|
—
|
|
|
|
4.89
|
|
|
5/11/2020
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
12/20/2010
|
|
|
98,000
|
|
|
|
—
|
|
|
|
8.77
|
|
|
12/20/2020
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
12/20/2011
|
|
|
100,000
|
|
|
|
—
|
|
|
|
6.35
|
|
|
12/20/2021
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
12/20/2012
|
|
|
70,090
|
|
|
|
—
|
|
|
|
4.41
|
|
|
12/20/2022
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
12/20/2013
|
|
|
140,000
|
|
|
|
—
|
|
|
|
8.94
|
|
|
12/20/2023
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
4/21/2016
|
(3)
|
|
81,250
|
|
|
|
48,750
|
|
|
|
4.26
|
|
|
4/21/2026
|
|
|
|
—
|
|
|
|
—
|
|
Restricted Stock
|
|
4/21/2016
|
(4)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
60,000
|
|
|
|
159,000
|
|
Stock Options
|
|
6/15/2017
|
(3)
|
|
43,125
|
|
|
|
71,875
|
|
|
|
2.90
|
|
|
6/15/2027
|
|
|
|
—
|
|
|
|
—
|
|
Restricted Stock
|
|
6/15/2017
|
(4)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
56,250
|
|
|
|
149,063
|
|
Stock Options
|
|
8/21/2018
|
(3)
|
|
—
|
|
|
|
68,000
|
|
|
|
2.69
|
|
|
8/21/2028
|
|
|
|
—
|
|
|
|
—
|
|
Russell C. Horowitz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
8/12/2009
|
|
|
150,000
|
|
|
|
—
|
|
|
|
4.63
|
|
|
8/12/2019
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
5/11/2010
|
|
|
182,500
|
|
|
|
—
|
|
|
|
4.89
|
|
|
5/11/2020
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
12/20/2010
|
|
|
137,000
|
|
|
|
—
|
|
|
|
8.77
|
|
|
12/20/2020
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
12/20/2011
|
|
|
116,000
|
|
|
|
—
|
|
|
|
6.35
|
|
|
12/20/2021
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
12/20/2012
|
|
|
117,500
|
|
|
|
—
|
|
|
|
4.41
|
|
|
12/20/2022
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
12/20/2013
|
|
|
75,000
|
|
|
|
—
|
|
|
|
8.94
|
|
|
12/20/2023
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
8/21/2017
|
(5)
|
|
—
|
|
|
|
95,000
|
|
|
|
2.94
|
|
|
8/21/2027
|
|
|
|
—
|
|
|
|
—
|
|
Restricted Stock
|
|
8/21/2017
|
(5)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
145,000
|
|
|
|
384,250
|
|
Stock Options
|
|
9/27/2018
|
(6)
|
|
—
|
|
|
|
15,000
|
|
|
|
2.76
|
|
|
|
47,023
|
|
|
|
—
|
|
|
|
—
|
|
Restricted Stock
|
|
9/27/2018
|
(6)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,000
|
|
|
|
39,750
|
|
Former Executive Officer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ethan Caldwell
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
8/12/2009
|
|
|
100,000
|
|
|
|
—
|
|
|
|
4.63
|
|
|
8/12/2019
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
5/11/2010
|
|
|
76,500
|
|
|
|
—
|
|
|
|
4.89
|
|
|
5/11/2020
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
12/20/2010
|
|
|
62,000
|
|
|
|
—
|
|
|
|
8.77
|
|
|
12/20/2020
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
12/20/2011
|
|
|
70,000
|
|
|
|
—
|
|
|
|
6.35
|
|
|
12/20/2021
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
12/20/2012
|
|
|
85,000
|
|
|
|
—
|
|
|
|
4.41
|
|
|
12/20/2022
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
12/20/2013
|
|
|
75,000
|
|
|
|
—
|
|
|
|
8.94
|
|
|
12/20/2023
|
|
|
|
—
|
|
|
|
—
|
|
Stock Options
|
|
4/21/2016
|
(3)
|
|
81,250
|
|
|
|
48,750
|
|
|
|
4.26
|
|
|
4/21/2026
|
|
|
|
—
|
|
|
|
—
|
|
Restricted Stock
|
|
4/21/2016
|
(7)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
60,000
|
|
|
|
159,000
|
|
Stock Options
|
|
6/15/2017
|
(3)
|
|
56,250
|
|
|
|
93,750
|
|
|
|
2.90
|
|
|
6/15/2027
|
|
|
|
—
|
|
|
|
—
|
|
Restricted Stock
|
|
6/15/2017
|
(8)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,000
|
|
|
|
79,500
|
|
(1)
|
Includes only those columns for which there are outstanding equity awards at December 31, 2018. All other columns have been omitted.
|
(2)
|
The market value of unvested stock awards is calculated by multiplying the number of unvested stock awards held by the applicable NEO by the closing price of $2.65 per share of our Class B common stock on the NASDAQ Global Select Market on December 31, 2018.
|
(3)
|
The option vests at the rate of 25% on the first anniversary of the grant date and 1/12 of the remainder vests quarterly thereafter in equal increments and with accelerated vesting in certain circumstances.
|
8
(4)
|
The shares of restricted stock vest at the rate of 25% on each of the first, second, third, and fourth anniversaries, respectively, of the grant date with
accelerated
vesting in
certain circumstances
.
|
(5)
|
The options and shares of restricted stock vest 100% on the third anniversary of the grant date assuming continued service as Executive Director on the vesting date with Double-Trigger Change in Control Acceleration and with accelerated vesting in full upon death or disability.
|
(6)
|
The annual director grant of option and shares of restricted stock vest 50% on the first and second anniversary of the grant date assuming continued service as Executive Director on the vesting date with vesting in the event of a Change in Control.
|
(7)
|
Mr. Caldwell’s 4/21/16 grant was modified in April 2017 to vest as follows: 60,000 shares on 12/20/2018, 30,000 shares each in 4/21/2019 and 4/21/2020 and in the event of termination for any reason prior to 12/20/2018, the 60,000 shares to vest on 12/20/18 will become immediately vested upon such termination with the remaining shares subject to vesting to the extent applicable as provided in Mr. Caldwell’s employment agreement with the Company.
|
(8)
|
Mr. Caldwell’s 6/15/2017 grant was modified in June 2018 to vest as follows: 10,000 shares on 12/20/2018, 10,000 shares each in 6/15/2019, 6/15/2020, and 6/15/2021 with vesting in full upon termination, to the extent vested based on the vesting schedule for such shares prior to such amendment.
|
(9)
|
Mr. Caldwell entered into an agreement with the Company on March 26, 2019 pursuant to which Mr. Caldwell terminated his employment effective March 27, 2019 (the “
Termination Date
”) and entered into a one (1) year consulting agreement commencing on the Termination Date, and in connection therewith, received a restricted stock grant to purchase 40,000 shares with vesting in equal quarterly amounts over the one (1) year period from the Termination Date. In connection with his employment termination, 90,000 shares of unvested restricted stock and 142,500 unvested stock options were forfeited. In addition, 606,000 of stock options vested as of December 31, 2018 must be exercised within 90 days of the Termination Date or will be forfeited.
|
Potential Payments upon Termination or Change in Control
Amended and Restated Executive Officer Employment Agreements
Effective on April 21, 2016, pursuant to the Compensation Committee’s review of long-term incentives and annual compensation for executive officers, we entered into Amended and Restated Executive Officer Employment Agreements with each of Messrs. Michael Arends and Ethan Caldwell
. Mr. Caldwell
ceased serving as an executive officer of the Company in December 2018.
The Amended and Restated Executive Officer Employment Agreements for each of Messrs. Arends and Caldwell provide for the following: (i) that the excise tax gross-up provision contained in the Retention Agreements shall terminate and have no further force and effect, and (ii) in the event the Company terminates executive’s employment for any reason other than Cause, or executive terminates his employment for Good Reason (regardless of a Change in Control) and subject to executive’s execution of a release of claims, executive will be eligible to receive the following severance and related post-termination benefits: (a) a lump sum payment equal to one (1) times executive’s then annual salary payable at the time of termination, unless the termination of executive’s employment occurs within 12 months following a Change in Control, in which case executive will receive the benefits under his Retention Agreement, (b) payment by the Company of its share of medical, dental and vision insurance premiums under COBRA (“
Health Benefits
”) for executive and executive’s dependents for the 12 month period following the separation date or such lesser period as executive remains eligible under COBRA, unless the termination of executive’s employment occurs within 12 months following a Change in Control, in which case executive will receive the benefits under executive’s Retention Agreement; and (c) and an additional one (1) year of time-based vesting on any unvested options, restricted stock and restricted stock units as of the separation date. In the event that executive’s employment terminates due to death or disability, and subject to execution of a release of claims, executive will be eligible to receive the following severance and related post-termination benefits: (i) payment by the Company of Health Benefits for the 18 month period following the separation date or such lesser period as executive remains eligible under COBRA, and (ii) one hundred percent (100%) of all performance and time-based unvested options, restricted stock and restricted stock units will immediately vest upon executive’s separation date. Additionally, one hundred percent (100%) of all performance and time based options, restricted stock and restricted stock units not already vested, shall become immediately vested upon the occurrence of both (a) a Change in Control, (b) followed by the first to occur of (i) a termination of executive’s employment by the Company or any successor thereto without Cause, (ii) a material diminution in the nature or scope of executive’s duties, responsibilities, authorities, powers or functions that constitutes Good Reason, or (iii) the twelve month anniversary of the occurrence of the Change in Control provided that executive then remains an employee of the Company or its successor (collectively, the “
Double-Trigger Change in Control Acceleration
”).
9
Restricted Stock and Restricted Stock Units Agreements
On June 15, 2017, we granted an aggregate of 115,000 shares of restricted stock under our 2012 Stock Plan to our current NEOs (excluding Mr. Horowitz) pursuant to a review by our Compensation Committee of equity incentive for NEOs. These shares of restricted equity are subject to certain conditions on vesting as well as the Double-Trigger Change in Control Acceleration.
On August 21, 2017 in connection with Mr. Horowitz’s appointment as Executive Director of the Board, we granted Mr. Horowitz 145,000 shares of restricted stock under our 2012 Stock Plan with 100% of such shares vesting on the third annual anniversary of the grant date assuming continued service as Executive Director on the vesting date with Double-Trigger Change in Control Acceleration and with accelerated vesting in full upon death or disability. Mr. Horowitz also received an annual director grant of 34,014 shares of restricted stock under our 2012 Stock Plan with 100% of such shares vesting on the earlier of August 21, 2018 or the date of the 2018 annual meeting of stockholders with accelerated vesting in full in the event of a Change in Control.
On June 13, 2018, the vesting of Mr. Caldwell’s unvested shares of restricted stock from his June 15, 2017 grant were modified to vest as follows: 10,000 shares shall become vested on December 20, 2018, 10,000 shares shall become vested on June 15, 2019, 10,000 shares shall become vested on June 15, 2020, and 10,000 shares shall become vested on June 15, 2021 and in the event termination for any reason prior to December 20, 2018, the 10,000 shares which shall vest on December 20, 2018 shall become immediately vested upon such termination to the extent vested based on the vesting schedule for such shares prior to this amendment and subject to additional vesting to the extent applicable as provided in Mr. Caldwell’s employment agreement with the Company.
On September 27, 2018, Mr. Horowitz received an annual director grant of 15,000 shares of restricted stock under our 2012 Stock Incentive Plan with 50% of such shares vesting on the first and second annual anniversary of the grant date, respectively, and with accelerated vesting in full in the event of a Change in Control.
Option Agreements
On June 15, 2017, we granted an aggregate of 265,000 options under our 2012 Stock Plan to our current NEOs (excluding Mr. Horowitz) pursuant to a review by our Compensation Committee of equity incentives for NEOs. These options are subject to certain conditions on vesting as well as Double-Trigger Change in Control Acceleration.
On August 21, 2017 in connection with Mr. Horowitz’s appointment as Executive Director of the Board, we granted Mr. Horowitz 95,000 options under our 2012 Stock Incentive Plan, with 100% of such options vesting on the third annual anniversary of the grant date assuming continued service as Executive Director on the vesting date with Double-Trigger Change in Control Acceleration and with accelerated vesting in full upon death or disability.
On August 21, 2018, we granted 68,000 options under our 2012 Stock Plan to Mr. Arends pursuant to a review by our Compensation Committee of equity incentive for NEOs. These options are subject to certain conditions on vesting as well as Double-Trigger Change in Control Acceleration.
On September 27, 2018, Mr. Horowitz received an annual director grant of 15,000 options under our 2012 Stock Incentive Plan with 50% of such options vesting on the first and second annual anniversary of the grant date, respectively, and with accelerated vesting in full in the event of a Change in Control.
Retention Agreements
On October 2, 2006, we entered into retention agreements with each of Messrs. Arends and Caldwell. Mr. Caldwell ceased serving as an executive officer of the Company in December 2018.
The retention agreements provide that in the event of a Change in Control, each of Messrs. Arends and Caldwell would be entitled to a lump sum payment equal to two times the amount calculated by adding (1) his annual salary at that time plus (2) the greater of (a) any bonus he earned with respect to the prior fiscal year, or (b) his pro rata portion of the aggregate bonus pool under our Incentive Plan for the current year assuming achievement under the Incentive Plan of the maximum performance targets for such year. With respect to Messrs. Arends and Caldwell, if within twelve (12) months following a Change in Control: (1) the Company shall terminate his employment with the Company without cause, or (2) he shall voluntarily terminate such employment for Good Reason, the Company shall provide reimbursement of health care premiums for him and his dependents, for a period of eighteen (18) months from the date of his termination, to the extent that he is eligible for and elects continuation coverage under COBRA (provided that such reimbursement shall terminate upon commencement of new employment by an employer that offers health care coverage to its employees). In consideration for the Company’s willingness to enter into amended and restated employment agreements with each of Messrs. Arends and Caldwell effective April 21, 2016, such executives relinquished the excise tax gross-up provision which was contained in the retention agreements.
10
Compensation of Directors
The Compensation Committee is responsible for periodically reviewing and recommending to the Board of Directors the compensation of our independent directors. The following table summarizes compensation earned during 2018 by each of our directors, except Mr. Horowitz, who served as our Executive Director since August 21, 2017 and as our Executive Chairman since April 9, 2019 and whose compensation is reflected in the Summary Compensation Table:
2018 Director Compensation
(1)
Name
|
|
Fees Earned
or Paid
in Cash
($)
|
|
|
Stock
Awards
(2)
($)
|
|
|
Total
($)
|
|
Dennis Cline
|
|
|
36,000
|
|
|
|
41,250
|
|
|
|
77,250
|
|
M. Wayne Wisehart
|
|
|
35,000
|
|
|
|
41,250
|
|
|
|
76,250
|
|
Former Director
(3)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Anne Devereux-Mills
|
|
|
31,000
|
|
|
|
41,250
|
|
|
|
72,250
|
|
(1)
|
Includes only those columns relating to compensation awarded to, earned by, or paid to non-employee directors for their services.
|
(2)
|
The amounts in the stock awards column reflect the aggregate grant fair value of stock awards granted to directors in 2018 in accordance with FASB ASC Topic 718. These amounts do not reflect whether the director has actually realized or will realize a financial benefit from the awards (such as by vesting in a restricted stock).
|
(3)
|
Effective April 9, 2019 (the “
Effective Date
”), Ms. Devereux-Mills retired from the Board. In connection with Ms. Devereux-Mills’ retirement, the Compensation Committee accelerated the vesting in full of her options and shares of restricted stock held by Ms. Devereux-Mills as of the Effective Date.
|
The aggregate number of equity awards outstanding as of December 31, 2018 were:
Name
|
|
Stock Awards
(#)
|
|
|
Option Awards (#)
|
|
|
Total
|
|
Dennis Cline
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
30,000
|
|
M. Wayne Wisehart
|
|
|
15,000
|
|
|
|
40,000
|
|
|
|
55,000
|
|
Former Director
(3)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Anne Devereux-Mills
|
|
|
52,500
|
|
|
|
15,000
|
|
|
|
67,500
|
|
In September 2018, based upon the elections of the individual directors at our 2018 annual meeting of stockholders and in accordance with Marchex’s previously announced director compensation policy: (i) the Company granted an aggregate of (i) 60,000 restricted shares of Class B common stock at a purchase price of $.01 per share; and (ii) 60,000 options at an exercise price of $2.76 per share, the exercise price being the closing price of the Company’s stock price on September 27, 2018, in each case under Marchex’s 2012 Stock Incentive Plan to each of Marchex’s directors as compensation for their annual board service. Fifty percent (50%) of such shares of restricted stock and options shall vest on the first and second annual anniversary of the grant date, respectively, and with vesting in full upon a Change in Control in each case assuming continued service on Marchex’s Board of Directors for such period. In addition, Marchex agreed to pay an aggregate of $75,000 in cash (subject to quarterly installments) for the independent directors’ annual director service.
Effective April 9, 2019 (the “
Effective Date
”), Ms. Devereux-Mills retired from the Board and in connection therewith,
Russell Horowitz, Executive Director and member of the Office of the CEO, was appointed Executive Chairman of the Board, and (i) Donald Cogsville was appointed to the Board and to the Audit, Compensation, and Nominating & Governance Committees thereof; and (ii) Mr. Cogsville will succeed Dennis Cline as Chairman of the Compensation Committee.
In connection with Mr. Cogsville’s appointment to the Board on the Effective Date, the Company granted Mr. Cogsville the following equity as compensation for Board service under Marchex’s 2012 Stock Incentive Plan: (i) 15,000 restricted shares of Class B common stock at a purchase price of $.01 per share; and (ii) 15,000 options at an exercise price of $4.84 per share, the exercise price being the closing price of Marchex’s stock price on April 9, 2019 (the “
Grant Date
”). Fifty percent (50%) of such shares of restricted stock and options shall vest on the first and second annual anniversary of the Grant Date, respectively (in each case assuming continued Board service on the applicable vesting date), and with vesting in full
11
upon a
C
hange in
C
ontrol. In addition, Marchex agreed to pay cash compensation for Board service to Mr. Cogsville of $6,250 per quarter prorated from the Effective Date.
12